Annual Report - Part 2

Centamin Egypt Limited 22 September 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006 1. Summary of Significant Accounting Policies Statement of Compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with the A-IFRS ensures that the consolidated financial statements and notes of the consolidated entity comply with International Financial Reporting Standards ('IFRS'). The parent entity financial statements and notes also comply with IFRS except for the disclosure requirements in IAS 132 'Financial Instruments: Disclosure and Presentation' as the Australian equivalent accounting standard, AASB 132 'Financial Instruments: Disclosure and Presentation' does not require such disclosures to be presented by the parent entity where its separate financial statements are presented together with the consolidated financial statements of the consolidated entity. The financial statements were authorised for issue by the directors on 21 September 2006. (A) BASIS OF PREPARATION This financial report is denominated in Australian Dollars. The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may different from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of A-IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The consolidated entity changed its accounting policies on 1 January 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 'First-time Adoption of Australian Equivalents to International Financial Reporting Standards', with 1 July 2004 as the date of transition. An explanation of how the transition from superseded policies to A-IFRS has affected the company's and consolidated entity's financial position, financial performance and cash flows is discussed in Note 33. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2006, the comparative information presented in these financial statements for the year ended 30 June 2005 (as disclosed in Note 33), the consolidated entity's date of transition, except for the accounting policies in respect of financial instruments. The consolidated entity has not restated comparative information for financial instruments as permitted under the first-time adoption transitional provisions. The accounting policies for financial instruments applicable to the comparative information and the impact of changes in these accounting policies on 1 July 2005, the date of transition for financial instruments is discussed further in Note 32. The following significant policies have been adopted in the preparation and presentation of the financial report: (B) ACCOUNTS PAYABLE Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services. (C) DEBT AND EQUITY INSTRUMENTS ISSUED BY THE COMPANY Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. (D) EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE Exploration and evaluation expenditures in relation to each separate areas of interest, are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: i) the rights to tenure of the area of interest are current; and ii) at least one of the following conditions is also met: a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale: or b) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in AASB 6 'Exploration for and Evaluation of Mineral Resources') suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash-generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment, reclassified to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced. (E) FOREIGN CURRENCY All foreign currency transactions during the period have been brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at balance date are translated at the exchange rate existing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. All exchange differences are brought to account in the consolidated income statement in the financial period in which they arise. (F) GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. (G) IMPAIRMENT OF ASSETS (OTHER THAN EXPLORATION AND EVALUATION) At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset for which the estimates of future flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Each cash generated unit is determined on an area of interest basis. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years. (H) INVESTMENTS Investments in subsidiaries are carried in the company's separate financial statements at cost less impairment. (I) LOANS AND RECEIVABLES Trade receivables, loans, and other receivables are recorded at amounts due less any allowance for doubtful debts. (J) PLANT AND EQUIPMENT Plant and equipment, and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Plant and equipment will include capitalised development expenditure. Cost includes expenditure that is directly attributable to the acquisition of the item as well as the estimated cost of abandonment. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation is provided on property, plant and equipment. Depreciation of capitalised development expenditure will be provided on a unit of production basis over recoverable reserves, whilst on other fixed assets are calculated on a straight line basis so as to write off the net cost or other re-valued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. The following estimated useful lives are used in the calculation of depreciation: Plant & Equipment & Office Furniture - 4-10 years Motor Vehicles - 2 -8 years (K) PRINCIPLES OF CONSOLIDATION The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 'Consolidated and Separate Financial Statements'. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. The consolidated financial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity. In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full. (L) REVENUE RECOGNITION Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (M) SHARE-BASED PAYMENTS Employee share options that vested before 1 January 2005 have not been expensed. The shares are recognised when the options are exercised and the proceeds are allocated to share capital. Equity-settled share-based payments granted after 7 November 2002 that were vested on or after 01 January 2005, are measured at fair value at the date of grant. Fair value is measured under the Black and Scholes model. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity's estimate of shares that will eventually vest. (N) SUPERANNUATION FUND The Company contributes to, but does not participate in, compulsory superannuation funds on behalf of the Employees and Directors in respect of salaries and directors' fees paid. Contributions are charged against income as they are made. (O) TAXATION Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess. Tax Consolidation The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Centamin Egypt Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the 'separate taxpayer within group' approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as the head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 3 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution to (or distribution to) equity participants. Consolidated Company 2. Profit/(Loss) Before Income Tax 2006 2005 2006 2005 $ $ $ $ Profit/(Loss) has been arrived at after including: OPERATING REVENUE Interest revenue 1,140,700 1,046,309 1,110,710 1,046,137 Administration & management fees - Other entities in the wholly-owned group - - 1,196,597 538,934 Other income - 102,351 - - -------- -------- -------- -------- 1,140,700 1,148,660 2,307,307 1,585,071 Foreign exchange rate gain/(loss) 2,011,921 (543,942) 2,065,253 (562,767) -------- -------- -------- -------- 3,152,621 604,718 4,372,560 1,022,304 -------- -------- -------- -------- OPERATING EXPENSES Total employee benefit expense 1,461,487 1,405,155 410,941 75,560 Depreciation of non-current assets 622,592 88,870 23,482 22,260 Office lease payments 73,269 51,212 53,055 51,212 Allowance for doubtful debts - - 4,500 3,870 Loss on deconsolidation of PGML* - 102,351 - - * On 30 May 2005, Centamin Limited sold the shares in Pharaoh Gold Mines Limited ('PGML') to a third party for US$120.00 cash. The Consolidated entity recognised a loss of $102,341 on deconsolidation. PGML had only one asset at the date of sale, a bank account with a cash balance of US$1,345.30. Consolidated Company 3. Taxation 2006 2005 2006 2005 $ $ $ $ (a) Income tax expense Current tax expense/(income) (155,971) (89,233) (173,022) (136,310) Deferred tax expense/(income) relating to the origination and reversal of temporary differences (458,030) 180,351 (792,321) 112,525 Benefits arising from previously unrecognised tax losses, tax credits or temporary differences not recognised 614,001 (91,118) 965,343 23,785 -------- -------- -------- -------- Total tax expense/(income) - - - - -------- -------- -------- -------- Income tax expense/(income) - - - - attributable to loss from -------- -------- -------- -------- continuing operations Consolidated Company 2006 2005 2006 2005 $ $ $ $ The prima facie income tax expense/(benefit) on the profit/ loss before income tax reconciles to the income tax in the financial statements as follows: Profit/(Loss) before income tax 1,010,830 (870,412) 2,255,163 (494,301) -------- -------- -------- -------- Tax expense/(income) calculated at 30% of Profit/(Loss) before income tax (2005 30%) 303,249 (261,124) 676,549 (148,290) Tax effect of amounts which are not deductible/taxable in calculating taxable income: Non-deductible expenses 310,752 170,006 288,794 172,075 Unused tax losses and tax offsets not recognised as deferred tax assets (614,001) 91,118 (965,343) (23,785) -------- -------- -------- -------- Tax (expense)/income - - - - -------- -------- -------- -------- The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under the Australian tax law. There has been no change in the corporate tax rate when compared to the previous reporting period. Consolidated Company 2006 2005 2006 2005 $ $ $ $ (b) Income tax recognised directly in equity Current and deferred amounts were - - - - charged directly to equity during the -------- -------- -------- -------- period (c) Current tax liabilities Current tax payable to parent entity - - - - -------- -------- -------- -------- Total - - - - -------- -------- -------- -------- Unrecognised deferred tax Consolidated Company balances 2006 2005 2006 2005 $ $ $ $ The following deferred tax assets have not been brought to account as assets: Tax Losses - revenue 6,287,519 5,767,703 6,287,519 5,767,703 Tax Losses - capital 600,000 600,000 600,000 600,000 Temporary Differences 6,415,865 3,718,117 6,410,865 3,763,117 -------- -------- -------- -------- 13,303,384 10,085,820 13,298,384 10,130,820 -------- -------- -------- -------- TAX CONSOLIDATION Relevance of tax consolidation to the consolidated entity The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2003. The head entity within the tax-consolidated group is Centamin Egypt Limited. The members of the tax-consolidated group are identified at note 20. Nature of tax funding arrangements and tax sharing agreements Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding agreement, Centamin Egypt Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. 4. Segment Reporting Primary reporting - Business Segments The economic entity is engaged in the business of exploration for precious and base metals only, which is characterised as one business segment only. As the economic entity has only one business segment, all the necessary reporting disclosures are disclosed elsewhere in the notes to the financial statements. Secondary reporting - Geographical Segments The principal activity of the economic entity during the year was the exploration for precious and base metals in Egypt. Consolidated Company 5. Trade and other receivables 2006 2005 2006 2005 $ $ $ $ CURRENT Other Receivables 104,401 280,748 100,982 202 GST receivable 78,603 17,370 13,261 8,754 -------- -------- -------- -------- 183,004 298,118 114,243 8,956 -------- -------- -------- -------- NON-CURRENT Loans and advances to - - 43,775,219 30,547,129 subsidiaries Less: Allowance for doubtful - - (3,040,239) (3,035,739) debts -------- -------- -------- -------- - - 40,734,980 27,511,390 -------- -------- -------- -------- The loans to controlled entities are amounts that have been advanced for expenditure on exploration, prospecting and development activities. Consolidated Company 6. Prepayments 2006 2005 2006 2005 $ $ $ $ CURRENT Other 113,399 114,527 28,206 22,206 -------- -------- -------- -------- 7. Plant and Equipment CONSOLIDATED Plant, Equipment & Office Motor Total Furniture Vehicles $ $ $ Gross Carrying Amount Balance at 30 June 2005 1,846,037 284,943 2,130,980 Additions 193,825 320,788 514,613 Disposals - - - ----------- ----------- ---------- Balance at 30 June 2006 2,039,862 605,731 2,645,593 ----------- ----------- ---------- Accumulated Depreciation Balance at 30 June 2005 (822,381) (130,520) (952,901) Depreciation expense (472,448) (150,143) (622,591) Disposals - - - ----------- ----------- ---------- Balance at 30 June 2006 (1,294,829) (280,663) (1,575,492) ----------- ----------- ---------- Net Book Value ----------- ----------- ---------- As at 30 June 2005 1,023,656 154,423 1,178,079 ----------- ----------- ---------- As at 30 June 2006 745,033 325,068 1,070,101 ----------- ----------- ---------- COMPANY Plant, Equipment & Office Motor Total Furniture Vehicles $ $ $ Gross Carrying Amount Balance at 30 June 2005 441,695 32,727 474,422 Additions 49,835 - 49,835 Disposals - - - ----------- ----------- ---------- Balance at 30 June 2006 491,530 32,727 524,257 ----------- ----------- ---------- Accumulated Depreciation Balance at 30 June 2005 (411,495) (5,692) (417,187) Depreciation expense (16,118) (7,364) (23,482) Disposals - - - ----------- ----------- ---------- Balance at 30 June 2006 (427,613) (13,056) (440,669) ----------- ----------- ---------- Net Book Value ----------- ----------- ---------- As at 30 June 2005 30,200 27,035 57,235 ----------- ----------- ---------- As at 30 June 2006 63,917 19,671 83,588 ----------- ----------- ---------- Consolidated Company 2006 2005 2006 2005 $ $ $ $ Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year: Plant, equipment and office furniture 472,448 61,227 16,118 16,568 Motor vehicles 150,143 27,643 7,364 5,692 -------- -------- -------- -------- 622,591 88,870 23,482 22,260 -------- -------- -------- -------- Included above, the following amounts were capitalised within exploration expenditure: 413,029 - - - -------- -------- -------- -------- 8. Investments Consolidated Company NON CURRENT Note 2006 2005 2006 2005 $ $ $ $ Shares in subsidiaries - - 5,959,455 5,959,455 Recoverable amount write - - (448,286) (448,286) down -------- -------- -------- -------- - - 5,511,169 5,511,169 -------- -------- -------- -------- 9. Exploration and Evaluation Expenditure Exploration and evaluation Consolidated Company expenditure (a) - At Cost Note 2006 2005 2006 2005 $ $ $ $ Balance at the beginning of the year 28,715,883 26,662,812 - - Expenditure for the year 12,341,933 1,722,250 - - Take up joint venture 330,821 330,821 330,821 330,821 assets -------- -------- -------- -------- Balance at the end of the year 41,388,637 28,715,883 330,821 330,821 -------- -------- -------- -------- (b) Included within the cost amount of assets is $5,311,744 being the excess of consideration over the net tangible assets acquired on the acquisition of Pharaoh Gold Mines NL in January 1999. This amount has been treated as part of the cost of exploration and evaluation. Management believe that the recovery of these amounts will satisfactorily be made through the exploitation of the project in due course. 10. Trade and Other Accounts Payable Consolidated Company 2006 2005 2006 2005 $ $ $ $ CURRENT Trade payables 216,087 214,151 43,763 7,094 Other creditors and accruals - - - - - director personally related entities Other creditors and accruals 645,172 18,398 97,888 62,654 -------- -------- -------- -------- 861,259 232,549 141,651 69,748 -------- -------- -------- -------- NON-CURRENT Other creditors and accruals * 205,448 196,850 - - -------- -------- -------- -------- 205,448 196,850 - - -------- -------- -------- -------- * This represents a loan of US$150,000 payable 14 days after commencement of commercial production. There is no interest payable. 11. Current Provisions Consolidated Company CURRENT 2006 2005 2006 2005 Employee Benefits $ $ $ $ Balance at 1 July 2005 234,092 168,869 166,049 84,945 Additional provision recognised 275,387 130,986 59,222 135,686 Reductions due to payment* (183,550) (65,763) (182,824) (54,582) --------- -------- -------- -------- Balance at 30 June 2006 325,929 234,092 42,447 166,049 --------- -------- -------- -------- * Note that J El-Raghy's annual and sick leave entitlements were transferred from Centamin to PGM during the year. 12. Contributed Equity Consolidated Company 2006 2005 2006 2005 $ $ $ $ Balance at beginning 68,602,890 68,568,240 68,602,890 68,568,240 of financial year Exercise of options issued under the Employee Share Option Plan - 150,000 @ 23.10 cents - 34,650 - 34,650 - 640,000 @ 23.10 cents 147,840 - 147,840 - 250,000 @ 29.00 cents 72,500 - 72,500 - 50,000 @ 35.00 cents 17,500 - 17,500 - 45,000 @ 28.04 cents 12,618 - 12,618 - 250,000 @ 35.49 cents 88,725 - 88,725 Placement of 75,000,000 shares @ 27.5p 46,401,973 - 46,401,973 --------- -------- --------- -------- Balance at end of financial year 115,344,046 68,602,890 115,344,046 68,602,890 --------- -------- --------- -------- 2006 2005 No. $ No. $ Fully Paid Ordinary Shares Balance at beginning 502,060,369 68,602,890 501,910,369 68,568,240 of financial year Exercise of options issued under the Employee Share Option Plan - @ 23.10 cents 640,000 147,840 150,000 34,650 - @ 29.00 cents 250,000 72,500 - - - @ 35.00 cents 50,000 17,500 - - - @ 28.04 cents 45,000 12,618 - - - @ 35.49 cents 250,000 88,725 - - Placement of 75,000,000 shares @ 27.5p 75,000,000 46,401,973 - - --------- -------- --------- -------- Balance at end of financial year 578,295,369 115,344,046 502,060,369 68,602,890 --------- -------- --------- -------- Fully paid ordinary shares carry one vote per share and carry the right to dividends. Unlisted Employee Options 2006 Unlisted Employee Options 2005 Options No. No. Balance at beginning of year 3,325,000 5,290,000 Issued during the year 5,750,000 1,185,000 Exercised during the year (1,235,000) (150,000) Lapsed/Expired during the year - (3,000,000) ---------------- ---------------- Balance at end of year 7,840,000 3,325,000 ---------------- ---------------- The details of these options are as follows:- i) Balance at beginning of the financial year Options - Series Number Grant Date Expiry/ Exercise Price Exercise Date $ Issued 11 November 250,000 11 November 2003 11 November 2005 0.2900 2003 Issued 12 November 1,010,000 12 November 2003 12 November 2006 0.2310 2003 Issued 17 November 130,000 17 November 2003 17 November 2006 0.2310 2003 Issued 15 December 750,000 15 December 2003 15 December 2006 0.3549 2003 Issued 04 February 775,000 04 February 2005 04 February 2008 0.2804 2005 Issued 17 February 410,000 17 February 2005 17 February 2008 0.2804 2005 Total number of options 3,325,000 ii) Granted during the financial year Options - Series Number Grant Date Expiry/ Exercise Price Exercise Date $ Issued 31 October 4,250,000 31 October 2005 31 October 2010 0.3500 2005 Issued 08 December 1,500,000 08 December 2005 08 December 2008 0.4355 2005 Total 5,750,000 The options have been received for nil consideration and are unvested at the end of the year. iii) Lapsed during the financial year There were no options that lapsed or expired during the financial year. iv) Exercised during the financial year Options - Series Number Grant Date Expiry/ Exercise Price Exercise Date $ Issued 11 November 250,000 11 November 11 November 0.2900 2003 2003 2005 Issued 12 November 510,000 12 November 12 November 0.2310 2003 2003 2006 Issued 17 November 130,000 17 November 17 November 0.2310 2003 2003 2006 Issued 15 December 250,000 15 December 15 December 0.3549 2003 2003 2006 Issued 17 February 45,000 17 February 17 February 0.2804 2005 2005 2008 Issued 31 October 50,000 31 October 2005 31 October 2010 0.3500 2005 Total 1,235,000 The weighted average share price during the financial year was $0.5392. v) Balance at 30 June 2006 Options - Series Number Grant Date Expiry/ Exercise Price Exercise Date $ Issued 12 November 500,000 12 November 2003 12 November 2006 23.10 2003 (1) Issued 15 December 500,000 15 December 2003 15 December 2006 35.49 2003 (1) Issued 04 February 775,000 04 February 2005 04 February 2008 28.04 2005 (1) Issued 17 February 365,000 17 February 2005 17 February 2008 28.04 2005 (1) Issued 31 October 4,200,000 31 October 2005 31 October 2010 35.00 2005 (2) Issued 08 December 1,500,000 08 December 2005 08 December 2008 43.55 2005 (1) Total number of options 7,840,000 (1) These options vest and are exercisable over a period of 12 months, with 50% vesting and exercisable after 6 months and the other 50% vesting and exercisable after 12 months of issue. These options have a term of 3 years. (2) i) 2,500,000 of these options are subject to performance based hurdles. 500,000 of the 2,500,000 options may only be exercised after the completion of the bankable feasibility study and subsequent bank finance approval. A further 1,000,000 options may be exercised on completion of construction and the remaining 1,000,000 options may be exercised following the first gold pour from the Sukari Gold Project. The options have a term of 5 years. ii) 1,000,000 of these options vest and are exercisable over a period of two years, with 50% vesting and exercisable after 12 months and the other 50% vesting and exercisable after 24 months of issue. These options have a term of 5 years. iii) 700,000 of these options vest and are exercisable immediately. These have a term of 5 years. 13. Reserves Consolidated Company 2006 2005 2006 2005 $ $ $ $ --------- -------- -------- -------- Option reserve 2,273,713 2,273,713 2,273,713 2,273,713 --------- -------- -------- -------- Reserve created from the issuing of options for consideration. Balance at the end of the year --------- -------- -------- -------- Asset realisation reserve 535,574 535,574 535,574 535,574 --------- -------- -------- -------- Reserve created from the realisation of particular assets. --------- -------- -------- -------- Capital reserve - - 600,000 600,000 Reserve created from the cancellation of shares in the Company held by Pharaoh Gold Mines NL. Share option reserve Balance at beginning of financial year 63,504 - 63,504 - Cost of share based payments 475,858 63,504 475,858 63,504 Transfer to retained earnings (9,048) - (9,048) - --------- -------- -------- -------- Balance at end of financial year 530,314 63,504 530,314 63,504 --------- -------- -------- -------- Reserve created on the granting of share options to employees.* 3,339,601 2,872,791 3,939,601 3,472,791 --------- -------- -------- -------- * The share option reserve arises on the grant of share options to employees under the employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. There is currently no formal policy for realisation of the reserves. 14. Accumulated Losses Consolidated Company 2006 2005 2006 2005 $ $ $ $ Balance at the beginning of the year 23,847,593 22,977,181 20,962,493 20,468,192 Current year's (profit)/loss (1,010,830) 870,412 (2,255,163) 494,301 Transfer from share option (9,048) - (9,048) - reserve -------- -------- --------- -------- Balance at the end of the 22,827,715 23,847,593 18,698,282 20,962,493 year -------- -------- --------- -------- 15. Employee Benefits Consolidated Company 2006 2005 2006 2005 $ $ $ $ --------- -------- -------- -------- The aggregate employee benefit liability recognised and included in the financial statements is as 325,929 234,092 42,447 166,049 follows: Provision for employee benefits: Current (note 11) --------- -------- -------- -------- 16. Number of Employees Consolidated Company 2006 2005 2006 2005 No. No. No. No. Number of Employees 92 93 3 5 -------- -------- -------- -------- 17. Contingent Liabilities There are no contingent liabilities to report as at 30 June 2006. 18. Commitments for Expenditure Consolidated Company 2006 2005 2006 2005 $ $ $ $ Lease of office premises Not longer than 1 year 53,580 52,005 53,580 52,005 Longer than 1 year and not longer than 5 years 22,325 73,674 22,325 73,674 Longer than 5 years - - - - -------- -------- -------- -------- Total 75,905 125,679 75,905 125,679 -------- -------- -------- -------- On 05 July 2004, the Company exercised its option to extend the Term of the office lease for an additional 3 years expiring on 22 November 2007. The rent is increased by CPI annually on the anniversary of the original lease (22 November 2001). 19. Net Assets of the Group The net asset position of the group is lower than that of the Company. This position is a result of fees being charged to the subsidiary through the inter-company account which are expensed within the subsidiary. Management believe that it would be misleading to impair the inter-company receivable. Management believe that the recovery of these amounts will satisfactorily be made through the exploitation of the project in due course. 20. Particulars in Relation to Subsidiaries Ownership Interest Country of Incorporation 2006 2005 PARENT ENTITY % % Centamin Egypt Limited Australia SUBSIDIARIES Viking Resources Limited Australia 100 100 North African Resources NL Australia 100 100 Pharaoh Gold Mines NL Australia 100 100 Centamin Limited Bermuda 100 100 21. Notes to the Statements of Cash Flows (a) RECONCILIATION OF CASH AND CASH EQUIVALENTS For the purposes of the Cash Flow Statement, cash includes cash on hand and at bank and deposits. Cash and cash equivalents as at the end of the financial year as shown in the Cash Flow Statement is reconciled to the related item in the balance sheet as follows: Consolidated Company 2006 2005 2006 2005 $ $ $ $ Cash and cash equivalents 54,493,427 17,984,972 53,966,456 17,907,208 -------- -------- -------- -------- (b) RECONCILIATION OF PROFIT/ (LOSS) FROM ORDINARY ACTIVITIES TO NET CASH GENERATED BY/(USED IN) OPERATING ACTIVITIES Profit/(Loss) from ordinary activities before income tax 1,010,830 (870,412) 2,255,163 (494,301) Add/(less) non-cash items: Depreciation of non-current assets 622,592 88,870 23,482 22,260 Foreign exchange rate (gain)/loss (2,011,921) 543,942 (2,065,253) 562,767 Changes in assets and liabilities during the year: Decrease/(increase) in receivables 115,061 (267,860) (105,340) 19,949 Decrease/(increase) in prepayments 1,128 36,873 (6,000) 223 Increase/(decrease) in trade creditors & accruals 729,048 (29,342) 50,596 54,932 -------- -------- -------- -------- Net cash generated by/(used in) operating activities 466,738 (497,929) 152,648 165,830 -------- -------- -------- -------- 22. Related Parties a) Equity interests in related parties Equity interests in subsidiaries Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 20 to the financial statements. Equity interests in associates and joint ventures Details of interests in associates and joint ventures are disclosed in note 28 to the financial statements. b) Key management personnel compensation Details of key management personnel compensation are disclosed in note 23 to the financial statements. c) Key management personnel equity holdings The details of the movement in key management personnel equity holdings during the financial year are as follows:- Key Balance at Granted as Received Net Balance at Balance Management 01 July 05 remuneration on exercise other 30 June 06 held Personnel of options change nominally S El-Raghy 78,235,754 - - - *78,235,754 - Chairman C Cowden 273,026 - 250,000 - 523,026 - Non-executive Director J El-Raghy 79,185,754 - - - *79,185,754 - Managing Director/CEO H Bottomley 2,800,000 - - - 2,800,000 200,000 Non-executive Director H Brown - - 100,000 - 100,000 - Company Secretary *The total shares held by Mr S El-Raghy and Mr J El-Raghy arise due to them both being directors/trustees of the following personally related entities: - Nordana Pty Ltd 4,990,668 shares - Nordana Pty Ltd 17,595,714 shares - El-Raghy Kriewaldt Pty Ltd 55,299,372 shares - S & M El-Raghy 350,000 shares The balance of 950,000 shares are held by Mr J El-Raghy being a director of Montana Realty Pty Ltd Key Balance at Granted Received Net other Balance at Balance Management 01 July 04 as on change 30 June 05 held Personnel remuneration exercise nominally of options S El-Raghy 78,235,754 - - - *78,235,754 - Chairman C Cowden 223,026 - - 50,000 273,026 - Non-executive Director J El-Raghy 79,185,754 - - - *79,185,754 - Managing Director/CEO M Lynch 505,000 - - - 505,000 50,000 Office Manager M Kriewaldt 1,963,333 - - - 1,963,333 - Exploration *The total shares held by Mr S El-Raghy and Mr J El-Raghy arise due to them both being directors/trustees of the following personally related entities: - Nordana Pty Ltd 4,990,668 shares - Nordana Pty Ltd 17,595,714 shares - El-Raghy Kriewaldt Pty Ltd 55,299,372 shares - S & M El-Raghy 350,000 shares The balance of 950,000 shares are held by Mr J El-Raghy being a director of Montana Realty Pty Ltd The details of the movement in key management personnel options to acquire ordinary shares are as follows:- 2006 Key Balance at Granted Exercised Other Balance at Balance Management 01 July 05 as changes 30 June 06 Vested at Personnel remuneration -lapsed 30 June 2006 S El-Raghy - - - - - - C Cowden 250,000 500,000 250,000 - 500,000 250,000 G Speechly 250,000 - - - 250,000 250,000 T Elder 250,000 500,000 - - 750,000 500,000 J El-Raghy - - - - - H 500,000 - - 500,000 250,000 Bottomley H Brown 300,000 - 100,000 - 200,000 200,000 W Foote - 2,500,000 - - 2,500,000 - Total 1,050,000 4,000,000 350,000 - 4,700,000 1,450,000 2005 Key Balance at Granted Exercised Other Balance at Balance Management 01 July 04 as changes 30 June 05 Vested at Personnel remuneration -lapsed 30 June 2005 S El-Raghy - - - - - - C Cowden 250,000 - - - 250,000 250,000 G Speechly 250,000 - - - 250,000 250,000 T Elder 250,000 - - - 250,000 250,000 J El-Raghy - - - - - - H Michael 3,000,000 - - (3,000,000) - - M Lynch 250,000 100,000 - - 350,000 250,000 D Franks 100,000 100,000 - - 200,000 100,000 H Brown 100,000 200,000 - - 300,000 100,000 C Tyndall 100,000 - - - 100,000 100,000 Total 4,300,000 400,000 - (3,000,000) 1,700,000 1,300,000 Apart from the details disclosed in this note, no key management personnel has entered into a material contract with the Company or the economic entity since the end of the previous financial year and there were no material contracts involving key management personnel interests at year-end. During the financial year, 350,000 options (2005: Nil) were exercised by key management personnel. C Cowden exercised 250,000 options at a price of $0.3549 per share for 250,000 ordinary shares in Centamin Egypt Limited and H Brown exercised 100,000 options at a price of $0.2310 per share for 100,000 ordinary shares in Centamin Egypt Limited. No amounts remain unpaid on the options exercised during the financial year at year end. Further details of share options granted during the financial year are contained in Notes 24-26 of the financial statements. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Mr S El-Raghy and Mr J El-Raghy are also directors and shareholders of El-Raghy Kriewaldt Pty Ltd ('El-Raghy Kriewaldt'). El-Raghy Kriewaldt provides office premises to the Company. All dealings with El-Raghy Kriewaldt are in the ordinary course of business and on normal terms and conditions. Rent and office outgoings paid to El-Raghy Kriewaldt during the year were $53,055 (2005: $51,612). Refer to Note 18 for commitments for expenditure and leasing arrangements. Mr S El-Raghy provides office premises in Alexandria, Egypt to the Company. All dealings with Mr S El-Raghy are in the ordinary course of business and on normal terms and conditions. Rent and office outgoings paid to Mr S El-Raghy during the year were $20,214 (2005: $Nil). A director of the Company, Mr C Cowden has an interest as a director and controlling shareholder of Cowden Limited, Insurance Brokers. This Company provides insurance broking services to the Company. All dealings with this Company are in the ordinary course of business and on normal terms and conditions. Premiums paid to Cowden Limited during the year were $73,212 (2005: $36,397), of which $7,567 was brokerage (2005: $5,357). TRANSACTIONS WITH OTHER RELATED PARTIES During the year the Company provided funds to and received funding from subsidiaries. Refer to Notes 5 and 10 for details. 23. KEY MANAGEMENT PERSONNEL COMPENSATION The key management personnel of Centamin Egypt Limited during the financial year were: - Mr Sami El-Raghy (Chairman), appointed 29 April 1993; - Mr Josef El-Raghy (Managing Director/CEO), appointed 26 August 2002; - Dr Thomas G Elder (Non-Executive Director) appointed 08 May 2002; - Mr Colin Cowden (Non-Executive Director) appointed 08 March 1982; - Mr G Brian Speechly (Non-Executive Director), appointed 15 August 2000; - Mr H Stuart Bottomley (Non-Executive Director), appointed 26 September 2005; - Mrs Heidi Brown (Company Secretary), appointed 21 July 2004; and - Mr Wayne Foote (Project Manager), appointed 13 October 2005. (a) Key Management Personnel Compensation The Board reviews the remuneration packages of all key management personnel on an annual basis. Compensation packages are reviewed and determined with due regard to current market rates and are benchmarked against comparable industry salaries, adjusted by a performance factor to reflect changes in the performance of the Company. Options are issued to key management personnel under the Employee Share Option Plan 2002 as part of their remuneration. Options are offered to key management personnel at the discretion of the Directors, having regard, among other things, to the length of service with the Group, the past and potential contribution of the person to the Group and in some cases, performance. During the financial year, W Foote was issued 2,500,000 options at an exercise price of $0.3500. These options are subject to performance based hurdles. 500,000 of the 2,500,000 options may only be exercised after the completion of the bankable feasibility study and subsequent bank finance approval. A further 1,000,000 options may be exercised on completion of construction and the remaining 1,000,000 options may be exercised following the first gold pour from the Sukari Gold Project. The options have a term of five years. These performance conditions were chosen as they reflect the key objectives of W Foote's role as project manager. The aggregate compensation of the key management personnel of the consolidated entity and the company is set out below:- Consolidated Company 2006 2005 2006 2005 $ $ $ $ Short-term employee benefits 1,245,091 1,261,636 283,861 735,209 Post-employment benefits 44,538 67,959 15,190 67,959 Other long-term benefits - - - - Termination benefits - - - - Share-based payments 171,858 75,560 111,890 75,560 Total 1,461,487 1,405,155 410,941 878,728 The compensation of each member of the key management personnel of the consolidated entity is set out below:- Short-term employee benefits Post-employment Other long- Share-based pament benefits term Equity settled** Salary Non- Super- employee Termination Shares Options Cash & Fees Bonus monetary Other annuation Other benefits benefits & units & rights settled Other Total $ $ $ $ $ $ $ $ $ $ $ $ $ S 357,353 - - - - - - - - - - - 357,353 El-Raghy* J 303,609 - 24,978 - 2,860 - - - - - - - 331,447 El-Raghy* T Elder* 49,167 - - - - - - - - 31,868 - - 81,035 (1) C Cowden 25,000 - - - 2,250 - - - - 31,868 - - 59,118 (1) G B 25,000 - - - 2,250 - - - - - - - 27,250 Speechly H 44,107 - - - - - - - - 31,868 - - 75,975 Bottomley *(1) W Foote 326,087 - 2,790 - 29,348 - - - - 59,968 - - 418,193 (2) H Brown** 67,000 20,000 - - 7,830 - - - - 16,286 - - 111,116 * Total 1,197,323 20,000 27,768 - 44,538 - - - - 171,858 - - 1,461,487 * Non-resident directors ** Options value as per Black Scholes pricing method. Refer to Notes 12, 24 and 25 for further details of options granted. *** Bonus paid in respect to added responsibilities and represents 18% of total remuneration. (1) The total value of options issued during the year to Mr T Elder, Mr C Cowden and Mr G B Speechly is $74,768 each. See Note 12 for terms and conditions. (2) The total value of the options granted to W Foote during the financial year totalled $437,159. See Note 12 for terms and conditions. Short-term employee benefits Post-employment Other long- Share-based pament benefits term Equity settled** Salary Bonus Non- Super- employee Termination Shares Options Cash & Fees *** monetary Other annuation Other benefits benefits & units & rights settled Other Total 2005 $ $ $ $ $ $ $ $ $ $ $ $ $ S 376,283 150,000 144 - - - - - - - - - 526,427 El-Raghy* J 224,808 - 20,449 - 22,481 - - - - - - - 267,738 El-Raghy T Elder* 49,580 - - - - - - - - 9,573 - - 59,153 C Cowden 25,000 - - - 2,250 - - - - 9,573 - - 36,823 G B 25,000 - - - 2,250 - - - - 9,573 - - 36,823 Speechly H Michael 89,856 - - - 8,986 - - - - - - - 98,842 **** M J Lynch 74,489 - - - 10,571 - - - - 16,851 - - 101,911 (1) D Franks 87,599 - - - 16,588 - - - - 9,997 - - 114,184 (1) M 69,000 - - - - - - - - - - - 69,000 Kriewaldt H Brown 51,596 - - - 4,644 - - - - 15,425 - - 71,665 (1) C Tyndall 17,832 - - - 189 - - - - 4,568 - - 22,589 ***** Total 1,091,043 150,000 20,593 - 67,959 - - - - 75,560 - - 1,405,155 * Non-resident directors ** Options value as per Black Scholes pricing method. Refer to Notes 12, 24 and 25 for further details of options granted. *** Bonus paid in respect to performance and represents 28.5% of total remuneration. **** Mr Michael ceased employment with the Company on 26 November 2004. ***** Mrs Tyndall ceased employment with the Company on 19 July 2004. (1) The total value of options granted to key management personnel during the year ending 30 June 2005 totalled $54,287. The total value of M J Lynch's options was $13,572, D W Franks' was $13,572 and H Brown's was $27,143. The share options granted to key management personnel have been valued internally by the Company using the Black-Scholes option pricing method. Options are offered to key management personnel at the discretion of the Directors, having regard, among other things, to the length of service with the Group, and to the past and potential contribution of the person to the Group, and the number of options granted is at the Directors discretion. The weighted average closing price of the shares in Centamin Egypt Limited for the financial year was $0.5392. The volatility input into the model was 60% and the government rate similar to the term of the option used was 5.25%. The Employee Share Option Plan 2002 was approved by shareholders on 29 November 2002. Each option converts into one ordinary share of Centamin Egypt Limited on exercise. No amounts are paid or payable by the recipient of the option until exercise and options may be exercised at any time from the date of vesting to the date of their expiry. (b) Contracts for services of key management personnel The Board reviews the remuneration packages of all key management personnel on an annual basis. Compensation packages are reviewed and determined with due regard to current market rates and are benchmarked against comparable industry salaries, adjusted by a performance factor to reflect changes in the performance of the Company. S El-Raghy, J El-Raghy, W Foote and H Brown are employed under formal employment contracts. S El-Raghy's current contract does not specify a term, J El-Raghy's current contract specifies a term of 3 years (expiring 01 September 2008), and W Foote's current contract specifies a term of 1 year (expiring 13 October 2006). These 3 contracts require a period of 3 months notice to terminate the contract. H Brown's contract has no specified term, and a period of 1 months notice is required to terminate the contract. No key management personnel is entitled to any termination payments apart from remuneration payable up to and including the date of termination and all payments due by way of accrued leave. 24. Options granted to Directors The unquoted options granted to Directors during the financial year were:- Name Issue Date Number of Unquoted Exercise Expiry Date Options Price Dr T 08 December 2005 500,000 $0.4355 08 December 2008 Elder Mr C 08 December 2005 500,000 $0.4355 08 December 2008 Mr H S Bottomley 08 December 2005 500,000 $0.4355 08 December 2008 25. Options granted to Executives The unquoted options granted to Executives during the financial year were:- Name Issue Date Number of Unquoted Exercise Price Expiry Date Options Mr W Foote 31 October 205 2,500,000 $0.3500 31 October 2010 26. Options granted to Employees At the Annual General Meeting on 29 November 2002, shareholders approved the Employee Option Plan 2002. To date, the following unquoted options have been issued under the Employee Option Plan:- Number of Unquoted Issue Date Exercise Expiry Date Number of Options Price Employees 1,160,000 12 November 23.10 cents 12 November 18 2003 2006 130,000 17 November 23.10 cents 17 November 3 2003 2006 750,000 15 December 35.49 cents 15 December 3 2003 2006 775,000 04 February 28.04 cents 04 February 10 2005 2008 410,000 17 February 28.04 cents 17 February 10 2005 2008 1,500,000 08 December 43.55 cents 08 December 3 2005 2008 4,250,000 31 October 35.00 cents 31 October 3 2005 2010 250,000 30 August 65.66 cents 30 August 1 2006 2009 Further details are contained in Note 12. Consolidated Company 2006 2005 2006 2005 $ $ $ $ 27. Auditors' Remuneration Auditing the financial report 36,800 32,000 31,000 27,000 Other services - Tax 4,700 - 4,700 - Other auditors 4,056 - - - -------- -------- -------- -------- 45,556 32,000 35,700 27,000 -------- -------- -------- -------- The auditor of Centamin Egypt Limited is Deloitte Touche Tohmatsu. The Egyptian expenditure is audited by Mostafa Shawki & Co in Egypt. Mostafa Shawki & Co do not provide any other services to the Company or its subsidiaries. 28. Interests in Joint Ventures The consolidated entity has material interests in the following unincorporated venture:- JOINTLY CONTROLLED ASSETS Principal Activities Percentage Interest 2006 2005 % % Egyptian Pharaoh Investments Exploration 50 50 Sukari Gold Mines Exploration 50 - --------------- -------- -------- The following amount represents the economic entity's interest in assets employed in the Egyptian Pharaoh Investments joint venture. The amount is included in the consolidated financial statements under the respective category. Consolidated & Company 2006 2005 $ $ Non Current Assets Exploration expenditure 330,821 330,821 The following amount represents the economic entity's interest in assets employed in the Sukari Gold Mines joint venture. The amount is included in the consolidated financial statements under the respective category. Consolidated & Company 2006 2005 $ $ Non Current Assets Exploration expenditure 24,151 - 29. Superannuation The Company contributes to, but does not participate in, compulsory superannuation funds on behalf of its employees and Directors. Contributions are charged against income as they are made. 30. Earnings Per Share Consolidated 2006 2005 Cents Per Cents Per Share Share Basic earnings per share 0.194 (0.16) Diluted earnings per share 0.192 (0.16) Basic Earnings per Share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: 2006 2005 $ $ -------- -------- Profit/(Loss) (a) 1,010,830 (806,908) -------- -------- 2006 2005 No. No. -------- -------- Weighted average number of ordinary shares (b) 520,213,903 501,961,547 -------- -------- (a) The Profit/(Loss) used in the calculation of basic earnings per share equates to the Net Profit/(Loss) in the Income Statement. (b) The options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share. Diluted Earnings per Share The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: 2006 2005 $ $ -------- -------- Profit/(Loss) (a) 1,010,830 (806,908) -------- -------- 2006 2005 No. No. -------- -------- Weighted average number of ordinary shares and potential ordinary shares (b) 525,611,917 501,961,547 -------- -------- (a) The Profit/(Loss) used in the calculation of diluted earnings per share equates to the Net Profit/(Loss) in the Income Statement. (b) Weighted average number of ordinary shares for the purpose of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:- 2006 2005 No. No. Weighted average number of ordinary shares used in the calculation of basic EPS 520,213,903 501,961,547 Shares deemed to be issued for no consideration in respect of employee options 5,398,014 - -------- -------- Weighted average number of ordinary shares used in the calculation of diluted EPS 525,611,917 501,961,547 -------- -------- 2006 2005 (c) The following potential ordinary shares are No. No. not dilutive and are therefore excluded from the -------- -------- weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share: Options - 3,325,000 -------- -------- 31. Events Subsequent to Balance Date In July, the company announced that it is considering the purchase of used process plant items in an effort to reduce both the procurement time and the cost for major plant items. The search has identified a recently closed operation that contains most of the process plant items that Centamin will require for the Sukari project. The potential purchase of this plant represents an opportunity to materially reduce the cost of development and also accelerate the construction timetable. Testing of the structural integrity of key plant items has been arranged and negotiations with the plant owner are at an advanced stage. Consequently the completion of the Bankable Feasibility Study (BFS) will be delayed while a thorough review of this process plant is completed. 32. Financial Instruments a) Interest Rate Risk The following table details the consolidated entity's exposure to interest rate risk as at reporting date: Average Variable Fixed Non Interest Total Interest Interest Interest Rate Bearing Rate Rate (< 1 yr) 2006 % $ $ $ $ FINANCIAL ASSETS Cash 5.04 3,344,983 50,632,885 480,787 54,458,655 Receivables - - 183,057 183,057 -------- -------- -------- -------- 3,344,983 50,632,885 663,844 54,641,712 -------- -------- -------- -------- FINANCIAL LIABILITIES Accounts - - 861,836 861,836 payable Employee - - 325,929 325,929 benefits -------- -------- -------- -------- - - 1,187,765 1,187,765 -------- -------- -------- -------- 2005 FINANCIAL ASSETS Cash 5.36 1,663,921 16,270,838 50,213 17,984,972 Receivables - - 298,118 298,118 -------- -------- -------- -------- 1,663,921 16,270,838 348,331 18,283,090 -------- -------- -------- -------- FINANCIAL LIABILITIES Accounts - - 429,399 429,399 payable Employee - - 234,092 234,092 benefits -------- -------- -------- -------- - - 663,491 663,491 -------- -------- -------- -------- b) Credit Risk Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the economic entity. The economic entity has adopted a policy of only dealing with credit-worthy counter-parties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The economic entity measures credit risk on a fair value basis. The economic entity does not have any significant credit risk exposure to any single counter-party or any group counter-parties having similar characteristics. The carrying amount of financial assets recorded in the financial statements represents the economic entity's maximum exposure to credit risk without taking account of the value of collateral or other security obtained. c) Net Fair Value The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in note 1 to the financial statements. d) Currency Risk The economic entity holds the majority of its funds in an Australian bank and periodically forwards British Pounds and Australian Dollars to its office in Egypt. The majority of transactions performed in Egypt are conducted in British Pounds or US dollars however a small reserve of Egyptian Pounds is maintained to meet day to day administration expenses. The economic entity has not entered into any forward foreign exchange contracts to hedge the exchange rate risk arising from any anticipated future transactions. As at 30 June 2006, Egyptian £2,869 (2005: £1,036), US$1,923,642 (2005: US$2,403) and GBP £20,308,719 (2005: £1,585,294), Euro €14 (2005: €14) bank balances were unhedged. 33. Impact of adopting the Australian equivalents to International Financial Reporting Standards ('A-IFRS') Effect of A-IFRS on the Balance Sheet as at 01 July 2004 Consolidated Company N Superseded Effect of A-IFRS Superseded Effect of A-IFRS O policies * transition policies * transition T to A-IFRS to A-IFRS E $ $ $ $ $ $ Current assets Cash 21,133,460 - 21,133,460 21,101,548 - 21,101,548 Trade and other receivables 30,258 - 30,258 28,905 - 28,905 Prepayments 151,400 - 151,400 22,429 - 22,429 Total current 21,315,118 - 21,315,118 21,152,882 - 21,152,882 assets Non-current assets Receivables - - - 24,631,961 24,631,961 Plant & equipment 1,012,896 - 1,012,896 63,363 - 63,363 Investments - - - 5,511,169 5,511,169 Exploration expenditure 26,662,812 - 26,662,812 330,821 - 330,821 Total non-current assets 27,675,708 - 27,675,708 30,537,314 - 30,537,314 Total 48,990,826 - 48,990,826 51,690,196 - 51,690,196 assets Current liabilities Accounts payables 204,314 - 204,314 95,916 - 95,916 Provisions 168,869 - 168,869 84,945 - 84,945 Total current 373,183 - 373,183 180,861 - 180,861 liabilities Non-current liabilities Accounts payable 217,297 - 217,297 - - - Total non-current liabilities 217,297 - 217,297 - - - Total liabilities 590,480 - 590,480 180,861 - 180,861 Net assets 48,400,346 - 48,400,346 51,509,335 - 51,509,335 Equity Contributed equity 68,568,240 - 68,568,240 68,568,240 - 68,568,240 General 2,809,287 - 2,809,287 3,409,287 - 3,409,287 Reserve Share (a) - - - - - - Option Reserve Accumulated losses (22,977,181) - (22,977,181) (20,468,192) - (20,468,192) Total 48,400,346 - 48,400,346 51,509,335 - 51,509,335 equity * Reported financial position for the financial year ended 33. Impact of adopting the Australian equivalents to International Financial Reporting Standards ('A-IFRS') continued. Effect of A-IFRS on the Income Statement for the financial year ended 30 June 2005 Consolidated Company N Superseded Effect of A-IFRS Superseded Effect of A-IFRS O policies* transition policies* transition T to A-IFRS to A-IFRS E $ $ $ $ $ $ Revenue 1,046,309 - 1,046,309 1,046,137 - 1,046,137 Other income 102,351 - 102,351 538,934 - 538,934 Administration expenses (1,132,327) (63,504) (1,195,831) (1,200,686) (63,504) (1,264,190) Foreign exchange gain/(loss) (543,942) - (543,942) (562,767) - (562,767) Marketing expenses (145,044) - (145,044) (144,044) - (144,044) Travelling expenses (108,371) - (108,371) (108,371) - (108,371) Other expenses (25,884) - (25,884) - - - Profit/(Loss) before income tax (a) (806,908) (63,504) (870,412) (430,797) (63,504) (494,301) Tax (expense)/ - - - - - - income Net profit/(loss) for the period (806,908) (63,504) (870,412) (430,797) (63,504) (494,301) * Reported financial results under previous Australian GAAP. 33. Impact of adopting the Australian equivalents to International Financial Reporting Standards ('A-IFRS') continued. Effect of A-IFRS on the Consolidated Balance Sheet as at 30 June 2005. Consolidated Company N Superseded Superseded Effect of A-IFRS Effect of A-IFRS O policies* policies* transition to transition T A-IFRS to A-IFRS E $ $ $ $ $ $ Current assets Cash 17,984,972 - 17,984,972 17,907,208 - 17,907,208 Trade and other receivables 298,118 - 298,118 8,956 - 8,956 Prepayments 114,527 - 114,527 22,429 - 22,429 Total current 18,397,617 - 18,397,617 17,938,370 - 17,938,370 assets Non-current assets Trade and other receivables - - - 27,511,390 - 27,511,390 Plant & equipment 1,178,079 - 1,178,079 57,235 - 57,235 Investments - - - 5,511,169 5,511,169 Exploration expenditure 28,715,883 - 28,715,883 330,821 - 330,821 Total non-current assets 29,893,962 - 29,893,962 33,410,615 - 33,410,615 Total 48,291,579 - 48,291,579 51,348,985 - 51,348,985 assets Current liabilities Accounts payable 232,549 - 232,549 69,748 - 69,748 Provisions 234,092 - 234,092 166,049 - 166,049 Total current 466,641 - 466,641 235,797 - 235,797 liabilities Non-current liabilities Accounts payable 196,850 - 196,850 - - - Total non-current liabilities 196,850 - 196,850 - - - Total liabilities 663,491 - 663,491 235,797 - 235,797 Net assets 47,628,088 - 47,628,088 51,113,188 - 51,113,188 Equity Contributed equity 68,602,890 - 68,602,890 68,602,890 - 68,602,890 General 2,809,287 - 2,809,287 3,409,287 - 3,409,287 Reserve Share Option (a) - 63,504 63,504 - 63,504 63,504 Reserve Accumulated losses (f) (23,784,089) (63,504) (23,847,593) (20,898,989) (63,504) (20,962,493) Total 47,628,088 - 47,628,088 51,113,188 - 51,113,188 equity * Reported financial position under previous Australian GAAP. (a) Share-based payments Under AASB 2 Share Based Payments, the Company has determined the fair value of options issued to employees as remuneration and recognised an expense in the Consolidated Income Statement over the vesting period. At the date of transition no adjustment was made as there were no options issued from the commencement date of 7 November 2002 that had not vested at 1 January 2005. For the year ended 30 June 2006 and the financial year ended 30 June 2005 share-based payments of $63,504 (included in employee benefit expenses) which were not recognised under the superseded policies were recognised under A-IRFS, with a corresponding increase in equity. (b) Property, plant and equipment On transition to A-IFRS, the entity had several options in the determination of the cost of each tangible asset and could also elect to use the cost or fair value basis for the measurement of each class of property, plant and equipment after transition. The Consolidated Entity has elected to continue to measure property, plant and equipment on the historical cost option. The treatment of depreciation and the estimated useful life have also remained the same. There has not been any adjustment under A-IFRS in the consolidated entity either at transition or comparative period balance date. (c) Restoration provisions Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the Company is required to recognise the full provision for rehabilitation, based on discounted future cash flows, at the date of transition to A-IFRS. A corresponding asset net of depreciation to the date of transition may qualify for recognition as part of development costs and be amortised together with development assets. The Company, via its wholly owned subsidiary, Pharaoh Gold Mines NL (Pharaoh), is a party to a Concession Agreement with the Government of the Arab Republic of Egypt, whereby Pharaoh is exploring for gold and associated minerals in the Eastern Desert of Egypt. Pharaoh has progressed the Sukari Project to the stage where a feasibility study is presently being carried out to a bankable standard into the development of a 4 to 5 million tonne per annum processing facility. If the Sukari Project goes into production, then under the terms of Concession Agreement, Pharaoh or the Operating Company, (which will be owned equally by Pharaoh and the Government), as the case may be, shall be responsible for the reasonable restoration and rehabilitation of the project area, in a manner consistent with good international practice in the mining industry. As the Company is not yet in production, there is no obligation for a rehabilitation provision at this stage. There are therefore no adjustments for rehabilitation provisions at this stage. (d) Impairment of assets Under A-IFRS, both current and non-current assets are tested for impairment, including property plant and equipment. The entity has determined that no asset impairment provisions are required on transition to A-IFRS at 01 July 2004, 30 June 2005 or 30 June 2006. (e) Income tax Under superseded policies, the consolidated entity adopted tax-effect accounting principles whereby income tax expenses were calculated on pre-tax accounting profits after adjustment for permanent differences. The tax-effect of timing differences, which occur when items are included or allowed for income tax purposes in a period different to that for accounting, were recognised at current taxation rates as deferred tax assets and deferred tax liabilities, as applicable. Under A-IFRS, deferred tax is determined using the balance sheet liability method in respect of temporary differences arising from differences between the carrying account to assets and liabilities in the financial statements and their corresponding tax bases. There is no impact on the cumulative financial position at 30 June 2006 or at transition to A-IFRS. This is because:- Tax Losses A deferred tax asset will not be recognised for carry forward tax losses because it is not probable that future taxable profits will be available against which the unused tax losses can be utilised. (f) Accumulated losses The effect of the above adjustments on retained earnings is as follows: Consolidated ----------------------- 1 Jul 04 30 Jun 05 $ $ ------------- ------------ Expensing share-based payments - 63,504 ------------- ------------ Total adjustment to accumulated losses - 63,504 ------------- ------------ (g) Cash flows The transition to A-IFRS has had no effect on the consolidated entity's cash flows. ADDITIONAL ASX INFORMATION Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is as follows. The information is as at 01 September 2006. SUBSTANTIAL SHAREHOLDERS (holding more than 5%) Fully Paid Ordinary Shares Shareholder Ordinary Shares Percentage Willbro Nominees Limited 60,829,816 10.51% El-Raghy Kriewaldt Pty Ltd 55,299,372 9.56% BBHISL Nominees Limited 46,495,849 8.03% Chase Nominees Limited 36,545,128 6.32% Euroclear Nominees Limited 32,165,000 5.56% TOP 20 SHAREHOLDERS (a) Fully Paid Ordinary Shares Quoted Shares Number % Held Willbro Nominees Limited 60,829,816 10.51% El-Raghy Kriewaldt Pty Ltd 55,299,372 9.56% BBHISL Nominees Limited 46,495,849 8.03% Chase Nominees Limited 36,545,128 6.32% Euroclear Nominees Limited 32,165,000 5.56% Vidacos Nominees Limited 24,377,100 4.21% Goldman Sachs Securities (Nominees) Limited 21,300,500 3.68% State Street Nominees Limited 19,358,772 3.35% Nordana Pty Ltd 17,595,714 3.04% Nortrust Nominees Limited 16,093,898 2.78% Morstan Nominees Limited 15,679,400 2.71% Goldman Sachs International 15,383,084 2.66% HSBC Global Custody Nominee (UK) Limited 13,209,684 2.28% Barclayshare Nominees Limited 11,854,991 2.05% Pershing Keen Nominees Limited 10,267,842 1.77% TD Waterhouse Nominees (Europe) Limited 10,151,976 1.75% Mellon Nominees (UK) Limited 7,903,500 1.37% L R Nominees Limited 6,912,131 1.19% DRKWS Nominees Limited 6,467,000 1.12% National Nominees Limited 6,188,870 1.07% 434,079,627 75.01% At 01 September 2006, there were 578,668,369 fully paid ordinary shares held by 1,921 individual shareholders. All issued ordinary shares carry one vote per share. (b) Options Unquoted Options Number % Held Issued under Employee Share Option Plan 2002 7,717,000 100.00% Other - - Total 7,717,000 100.00% DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES Holding Range Ordinary Shares Unquoted Options 1 - 1,000 138 - 1,001 - 5,000 660 - 5,001 - 10,000 376 - 10,001 - 100,000 588 16 100,001 and over 159 11 Total 1921 27 As at 01 September 2006, there were 60 shareholders with less than marketable parcel. CLASS OF SHARES AND VOTING RIGHTS The voting rights attaching to the ordinary shares, set out in Clause 12.8 of the Company's Constitution are: 'Subject to any rights or restrictions for the time being attached to any class or classes of shares - (a) at meetings of members or classes of members each member entitled to vote may vote in person or by proxy or attorney; and; (b) on a show of hands every person present who is a member has one vote for each ordinary share held and on a poll every person present or by proxy or attorney has one vote for each ordinary share held.' VENDOR SHARES There are no vendor securities on issue at the date of this report. This information is provided by RNS The company news service from the London Stock Exchange ATBPF

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