Financials
Auditor's Declaration
Auditor’s Independence Declaration
Under Section 307c of the Corporations Act 2001
To the Directors of Morning Star Gold N.L.
I declare that, to the best of my knowledge and belief, during the year ended June 2007 there have been:
1. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
2. no contraventions of any applicable code of professional conduct in relation to the audit.
Graham Abbott Associates
Chartered Accountants
GRAHAM ABBOTT
Partner
10 Crown Street Sydney
Dated this 27th day of September 2007
Income Statement
for the year ended 30th June, 2007
The accompanying notes form part of these Financial Statements
Balance Sheet
as at 30th June, 2007
The accompanying notes form part of these Financial Statements
Statement of Changes in Equity
for the year ended 30th June,2007
The accompanying notes form part of these Financial Statements
Cash Flow Statement
for the year ended 30th June,2007
The accompanying notes form part of these Financial Statements
Notes to Financial Statements
for the year ended 30th June,2007
1. Basis of Preparation
The financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.
The financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards (IFRS).
The financial report is prepared on the historical cost basis except for financial instruments which have been stated at their fair value.
(a) Income Tax
The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
(b) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.
Buildings, Plant and Equipment
Buildings, plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of buildings, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.
Depreciation
The depreciable amount of all fixed assets including buildings, is depreciated over their useful lives to the economic entity commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.
(c) Exploration and Development Expenditure
Mining Exploration Expenditure consists of expenditure on prospects still at an exploratory stage. These costs include costs of acquisition, exploration, determination of recoverable reserves, economic feasibility studies and all technical and administrative overheads directly associated with those projects. Recoupment of exploration costs is dependent upon the successful development and commercial exploitation of each area of interest. The company adopts the “area of interest” method of accounting whereby all exploration costs relating to areas of interest are written off as incurred.
(d) Mining and Development Leases
Mining and Development leases are carried at cost less, where applicable, impairment losses.
When production commences, the cost of the relevant lease will be amortised over the life of the mine according to the rate of depletion of the economically recoverable reserves.
Estimated costs of site restoration, where material, are provided over the life of the mine from when the lease is acquired.
Security deposits have been lodged with the Department of Mineral Resources in relation to potential site restoration costs.
(e) Financial Instruments
Recognition Financial instruments are initially measured at fair value. Subsequent to initial
recognition these instruments are measured as set out below.
Financial assets at fair value through profit and loss
Financial assets in this category are stated at fair value. Realised and unrealised gains and losses arising from changes in fair value are included in the income statement in the period in which they arise.
Fair Value
Fair value is determined based on current bid prices for all quoted investments.
(f) Impairment of Assets
At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over it recoverable amount is expensed to the income statement.
(g) Interests in Joint Ventures
The economic entity’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the income statement and balance sheet.
(h) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.
(i) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the assets or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
2. Income Tax Expense:
No Income Tax is payable is respect of either this year or the previous year.
The Company has residual deductible exploration expenditure and losses for Income Tax purposes unrecouped at 30th June, 2007 as shown below, subject to confirmation by the Australian Taxation office.
The future Income Tax benefit which may be derived from this expenditure and tax losses has not been carried forward as an asset in the balance sheet and will only be obtained if the Company;
i) derives future assessable income of a nature and sufficient amount to enable the benefit to be realised;
ii) continues to comply with the legal conditions for deductibility; and
iii) no changes in legislation adversely affects the ability of the Company to realise the benefit.
3. Franking Account:
4. Revenue:
5. Cash an Cash Equivalents:
6. Receivables:
7. Financial Assets: at fair value through profit and loss
8.Property, Plant and Equipment:
9. Other Non-Current Assets:
Ultimate recoupment of mining exploration expenditure carried forward is dependentupon successful development and exploitation or sale of the respective areas.
10. Payables
11. Issued capital:
Paid up capital:
During the year the following changes were made to the share capital:
25.10.2006 Placement of 7,911,012 shares at 20c
19.12.2006 Exercise of options 6,500,000 at 15c.
17.04.2007 Exercise of options 21,646 at 25c
Partly Paid Shares
During the previous year 2,000,000 shares were issued to directors at a price of 10c per share, paid to 1c on issue and the unpaid amount to be called by the Company not later than 10 years after the issue date.
12.12.06 calls of 9c per share received on 1,500,000 shares
Options
01.02.2007 53,249,289 options excercisable at 25c and expiring 31.12.08 were issued on a pro-rata basis at the issue price of 1c per option. The options have been granted listing on the Australian Stock Exchange Limited.
The unissued ordinary shares of the Company under option at 30th June, 2007 are as follows – 53,227,643 options exercisable at 25c and expiring on 31.12.08.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number
of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Options do not carry a right to vote.
Partly paid shares have no voting rights nor rights to dividends or any other distributions while they are partly paid.
12. Reserves:
Expired 1992 Option Premium Reserve
The Expired 1992 Option Premium Reserve records the total amount received from the issue of options during the financial year ended 30th June, 1992.
Option Reserve
The Option Reserve records the total amount received from the issue of options during the financial year ended 30th June, 2007.
13. Segments:
In the year ended 30th June, 2007 the Company operated entirely within Australia and the principal activity was the exploration for minerals.
14. Earning per Share:
Diluted Earnings Per Share has the same value as Basic Earnings Per Share for both years.
15. Commitments for Expenditure:
Exploration Commitments
In order to maintain current rights of tenure to exploration tenements, the Company is required to meet the minimum expenditure requirements of the Victorian Mines Department. These obligations are not provided for in the accounts and are payable:
16. Related Parties:
Directors and Director-related entities.
The Directors named in the attached Directors’ Report each held offi ce as a Director of the Company during the year ended 30th June, 2007 (except for N.M. Garling who held office from 20th March, 2007).
Remuneration received or receivable by the Directors of the Company is disclosed in the Directors’ Report.
The aggregate number of shares and options for shares of Morning Star Gold N.L. acquired or disposed of by the Directors or their Director-related entities during the year is as follows:-
Aggregate numbers of shares and options for shares of Morning Star Gold N.L. held directly, indirectly or beneficially by Directors or their Director - related entities at balance date are as follows:-
Transactions including G.S.T. entered into during the year with Directors of the Company or their Director-related entities are as follows:-
1. Mr. M. Bird received consulting fees of $22,778 in the normal course of business in respect of the Company’s exploration program. Mr. M. Bird is a director and shareholder of Silver Mines Ltd. During the year the board of Morning Star Gold N.L. sold the Company’s various silver holdings to Silver Mines Ltd. for a consideration of 2,500,000 shares in Silver Mines Ltd.
2. Taveflame Pty Limited, a company controlled by Mr M. Bird, received consulting fees of $5,700 in the normal course of business in respect of the Company’s exploration program.
17. Interests in Joint Ventures:
• This Company, together with Central West Gold N.L, was the registered holder of E.L.4067 Bobadah. Through a number of JV agreements the Company’s interest in this licence has been diluted to a 15% interest in 18.75% of E.L. 5878 being the area of the former E.L. 4067. Pro rata entitlements to the 18.75% part of the licence maybe retained or relinquished by the Company in proportion to its contribution to future expenditure in this area.
• This Company was the initial registered holder of E.L.’s 2727 & 4766, Boona.
A JV agreement over these Licences was formulated with Triako Resources Ltd on 7th February 2000 and subsequently E.L. 5757 was added to the JV holdings.
By spending $271,000 on exploration Triako earned an 80% interest in these Licences, at which stage Morning Star Gold had the right to contribute pro rata to further exploration or to dilute.
In June 2005, when the Company’s interest had diluted to 13.96% the Licences were consolidated as E.L. 6437.
The interest of Triako is now to be transferred to GBH Resources Ltd.
18. Contingent Liabilities:
As a condition for the granting of Exploration Licences the Company was obliged to lodge with the Department of Mineral Resources security deposits in the form of Bankers Certifi cates in the total sum of $37,500 (2006 $40,000). In the event of the Company failing to fulfil any of its obligations in relation to the grant of the Exploration Licences the security deposits may be applied at the discretion of the Minister for Minerals Resources & Energy towards the costs of fulfilling such obligations.
As a condition for the issuing of the Banker’s Certificates the Company was obliged to set aside the total sum of $37,500 (2006 $40,000) which was placed on Term Deposit with its bankers as collateral.
In the event that the bankers are obliged to pay the Minister under the terms of the Banker’s Certificates they would have full recourse to the Company for compensation.
The Directors are not aware of any events that have occurred either before or since 30th June, 2007 which may result in the forfeiture of any of the above-mentioned funds.
19. Reconciliation of Cash:
For the purposes of the cash fl ow statement, cash includes cash on hand and “at call” deposits with financial institutions. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:
20. Reconciliation of Net Increase (Decrease) in Cash from Operating Activities to
Operating Profit (loss) after Income Tax:
21. Since Balance Date
Since Balance Date the Company has issued 1,000 shares at 25 cents per share as a result of the exercise of options.
No other significant changes have occurred since balance date.
Directors' Declaration
The directors of Morning Star Gold N.L declare that:
1. the financial statements and notes are in accordance with the Corporations Act 2001 and;
a) comply with Accounting Standards and the Corporations Regulations 2001; and
b) give a true and fair view of the fi nancial position of the Company as at 30th June 2007 and its performance for the year ended on that date;
2. the Chief Executive Offi cer and Chief Financial Offi cer have each declared that:
a) the financial records of the Company for the fi nancial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
b) the financial statements and notes for the fi nancial year comply with the Accounting Standards; and
c) the financial statements and notes for the fi nancial year give a true and fair view.
3. in the directors’ opinions there are reasonable grounds to believe that the company
will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the board of directors.
M. H. BIRD M. GARLING
Dated this 27th day of September, 2007
