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European Goldfields (EGU) – 2009 Results – Part 2
RNS Number : 7640I
European Goldfields Ltd
18 March 2010
European Goldfields Limited
Consolidated Financial Statements
(Audited)
31 December 2009 and 2008
Management's Responsibility for Consolidated Financial Statements
The accompanying consolidated financial statements of European Goldfields Limited are the responsibility of management and have been approved by the Board of Directors of the Company. The consolidated financial statements include some amounts that are based on management's best estimate using reasonable judgment.
The consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles.
Management maintains an appropriate system of internal controls to provide reasonable assurance that transactions are authorised, assets safeguarded and proper records are maintained.
The Audit Committee of the Board of Directors has met with the Company's external auditors to review the scope and results of the annual audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval.
The consolidated financial statements have been audited by Ernst and Young LLP, Chartered Accountants, and their report follows.
(s) Martyn Konig (s) Timothy Morgan-Wynne
Martyn Konig Timothy Morgan-Wynne
Executive Chairman Chief Financial Officer
Auditors' Report to the Shareholders of European Goldfields Limited
We have audited the consolidated balance sheet of European Goldfields Limited as at 31 December 2009and the consolidated statements of profit and loss, other comprehensive income/(loss), shareholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether these consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in these consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2009 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
The consolidated financial statements as at 31 December 2008 and for the year then ended were audited by other auditors who expressed an opinion without resolution on these statements in their report dated 18 March, 2009.
(s) Ernst and Young
Chartered Accountants, Licensed Public Accountants
London, United Kingdom
March 18, 2010
| Consolidated Balance Sheets As at 31 December 2009 and 2008 (in thousands of US Dollars, except per share amounts) |
Note | 2009 $ |
2008 $ |
|
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 17 | 113,642 | 170,296 | |
| Accounts receivable | 5 | 26,813 | 20,057 | |
| Derivative financial asset | 17 | – | 10,282 | |
| Current taxes receivable | 3,954 | 3,820 | ||
| Future tax assets | 11 | 119 | 2,004 | |
| Prepaid expenses | 13,794 | 1,414 | ||
| Inventory | 6 | 4,993 | 3,069 | |
| 163,315 | 210,942 | |||
| Non-current assets | ||||
| Property, plant and equipment | 7 | 96,100 | 74,401 | |
| Deferred exploration and development costs | 8 | |||
| Greek production stage mineral properties | 24,051 | 26,652 | ||
| Greek development stage mineral properties | 405,146 | 403,907 | ||
| 429,197 | 430,559 | |||
| Romanian development stage mineral properties | 50,173 | 45,187 | ||
| Turkish exploration stage mineral properties | 1,625 | 456 | ||
| 480,995 | 476,202 | |||
| Investment in associates | 9 | 711 | 2,075 | |
| Investment other | 10 | 1,490 | – | |
| Future tax assets | 11 | 1,489 | 2,475 | |
| 744,100 | 766,095 | |||
| Liabilities | ||||
| Current liabilities | ||||
| Accounts payable and accrued liabilities | 12 | 12,684 | 16,263 | |
| Derivative financial liability | 17 | 1,064 | – | |
| Deferred revenue | 14 | 4,549 | – | |
| Future tax liabilities | 11 | – | 3,496 | |
| 18,297 | 19,759 | |||
| Non-current liabilities | ||||
| Future tax liabilities | 11 | 90,083 | 90,294 | |
| Asset retirement obligation | 13 | 7,068 | 6,937 | |
| Deferred revenue | 14 | 48,412 | 58,496 | |
| 145,563 | 155,727 | |||
| Non-controlling interest | 2,930 | 2,874 | ||
| Shareholders' equity | ||||
| Capital stock | 15 | 545,180 | 538,316 | |
| Contributed surplus | 15 | 10,047 | 7,788 | |
| Accumulated other comprehensive income | 15 | 35,911 | 43,676 | |
| Deficit | (13,828) | (2,045) | ||
| 577,310 | 587,735 | |||
| 744,100 | 766,095 |
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors
(s) Timothy Morgan-Wynne (s) Bruce Burrows
Timothy Morgan-Wynne, Director Bruce Burrows, Director
| Consolidated Statements of Profit and Loss For the years ended 31 December 2009 and 2008 (in thousands of US Dollars, except per share amounts) |
2009 | 2008 | ||
| Note | $ | $ | ||
| Income | ||||
| Sales | 62,712 | 60,044 | ||
| Cost of sales | 6 | (44,030) | (48,424) | |
| Depreciation and depletion | (7,012) | (5,973) | ||
| Gross profit | 11,670 | 5,647 | ||
| Other income | ||||
| Hedge contract profit | 5,621 | 4,918 | ||
| Interest income | 625 | 5,729 | ||
| Foreign exchange loss | (1,576) | (6,406) | ||
| Loss in dilution of interest in associates | 9 | (36) | – | |
| Share of loss of associate | 9 | (76) | (105) | |
| 4,558 | 4,136 | |||
| Expenses | ||||
| Corporate administrative and overhead expenses | 7,295 | 4,859 | ||
| Equity-based compensation expense | 6,530 | 2,900 | ||
| Hellas Gold administrative and overhead expenses | 5,401 | 7,620 | ||
| Hellas Gold water treatment expenses (non-operating mines) | 3,390 | 5,189 | ||
| Accretion of asset retirement obligation | 13 | 131 | 132 | |
| Depreciation | 661 | 682 | ||
| Write-down of mineral property | 8 | 1,171 | – | |
| 24,579 | 21,382 | |||
| Loss for the year before income taxes | (8,351) | (11,599) | ||
| Income taxes | 11 | |||
| Current taxes | 848 | (1,454) | ||
| Future taxes | 2,528 | (15,185) | ||
| 3,376 | (16,639) | |||
| (Loss)/Profit for the year after income taxes | (11,727) | 5,040 | ||
| Non-controlling interest | (56) | 479 | ||
| (Loss)/Profit for the year | (11,783) | 5,519 | ||
| Deficit – Beginning of year | (2,045) | (7,564) | ||
| Deficit – End of year | (13,828) | (2,045) | ||
| (Loss)/Earnings per share | 24 | |||
| Basic | (0.07) | 0.03 | ||
| Diluted | (0.07) | 0.03 | ||
| Weighted average number of shares (in thousands) | ||||
| Basic | 179,825 | 179,566 | ||
| Diluted | 179,825 | 181,223 |
The accompanying notes are an integral part of these consolidated financial statements.
| Consolidated Statements of Shareholders' Equity As at 31 December 2009 and 2008 (in thousands of US Dollars, except per share amounts) |
Capital Stock $ |
Contributed Surplus $ |
Accumulated Other Comprehensive Income $ |
Deficit $ |
Total $ |
||||
| Balance – 31 December 2007 | 537,275 | 5,997 | 38,295 | (7,564) | 574,003 | ||||
| Equity-based compensation expense | – | 2,788 | – | – | 2,788 | ||||
| Share issue costs | (10) | – | – | – | (10) | ||||
| Restricted share units vested | 973 | (973) | – | – | – | ||||
| Share options exercised or exchanged | 78 | (24) | – | – | 54 | ||||
| Change in fair value of cash flow hedge | – | – | 5,904 | – | 5,904 | ||||
| Movement in cumulative translation adjustment | – | – | (523) | – | (523) | ||||
| Profit for the year | – | – | – | 5,519 | 5,519 | ||||
| 1,041 | 1,791 | 5,381 | 5,519 | 13,732 | |||||
| Balance – 31 December 2008 | 538,316 | 7,788 | 43,676 | (2,045) | 587,735 | ||||
| Equity-based compensation expense | – | 6,820 | – | – | 6,820 | ||||
| Share issue costs | (29) | – | – | – | (29) | ||||
| Restricted share units vested | 3,317 | (3,317) | – | – | – | ||||
| Share options exercised or exchanged | 3,576 | (1,244) | – | – | 2,332 | ||||
| Change in fair value of cash flow hedge | – | – | (7,850) | – | (7,850) | ||||
| Revaluation of available-for-sale asset | – | – | 157 | – | 157 | ||||
| Movement in cumulative translation adjustment | – | – | (72) | – | (72) | ||||
| Loss for the year | – | – | – | (11,783) | (11,783) | ||||
| 6,864 | 2,259 | (7,765) | (11,783) | (10,425) | |||||
| Balance – 31 December 2009 | 545,180 | 10,047 | 35,911 | (13,828) | 577,310 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| Consolidated Statements of Cash Flows For the years ended 31 December 2009 and 2008 (in thousands of US Dollars, except per share amounts) |
2009 | 2008 | ||
| Note | $ | $ | ||
| Cash flows from operating activities | ||||
| (Loss)/Profit for the year | (11,783) | 5,519 | ||
| Foreign exchange loss | 213 | 6,368 | ||
| Share of loss in equity investment | 76 | 105 | ||
| Loss on change of interest in associates | 36 | – | ||
| Depreciation | 4,046 | 3,336 | ||
| Equity-based compensation expense | 6,530 | 3,001 | ||
| Accretion of asset retirement obligation | 13 | 131 | 133 | |
| Future tax asset recognised | 2,528 | (15,185) | ||
| Non-controlling interest | 56 | (479) | ||
| Deferred revenue recognised | 14 | (5,535) | (6,399) | |
| Depletion of mineral properties | 3,816 | 3,398 | ||
| Write-down of mineral property | 1,171 | – | ||
| 1,285 | (203) | |||
| Net changes in non-cash working capital | 19 | (13,665) | (9,776) | |
| (12,380) | (9,979) | |||
| Cash flows from investing activities | ||||
| Deferred exploration and development costs – Romania | (5,478) | (6,096) | ||
| Property, plant and equipment – Greece | (25,288) | (26,181) | ||
| Deferred development costs – Greece | (2,096) | (2,489) | ||
| Deferred exploration costs – Turkey | (1,084) | (429) | ||
| Purchase of land | (88) | (2,705) | ||
| Purchase of equipment | (443) | (173) | ||
| Prepayments – equipment | (11,865) | – | ||
| Restricted investment | – | 4,900 | ||
| Investment in subsidiary | – | (14) | ||
| Investment in associates | (143) | (2,694) | ||
| (46,485) | (35,881) | |||
| Cash flows from financing activities | ||||
| Deferred revenue | – | 3,563 | ||
| Proceeds from exercise of share options | 2,332 | 54 | ||
| Share issue costs | – | (10) | ||
| 2,332 | 3,607 | |||
| Effect of foreign currency translation on cash | (121) | (6,290) | ||
| Decrease in cash and cash equivalents | (56,654) | (48,543) | ||
| Cash and cash equivalents – Beginning of year | 170,296 | 218,839 | ||
| Cash and cash equivalents – End of year | 113,642 | 170,296 |
The accompanying notes are an integral part of these consolidated financial statements.
| Consolidated Statements of Other Comprehensive Income/(Loss) For the years ended 31 December 2009 and 2008 (in thousands of US Dollars, except per share amounts) |
2009 $ |
2008 $ |
|
| (Loss)/Profit for the year | (11,783) | 5,519 | |
| Other comprehensive income/(loss) in the year | |||
| Currency translation adjustment | (72) | (523) | |
| Gains and losses on derivative designated as cash flow hedges | (2,229) | 10,822 | |
| Gains and losses on derivative designated as cash flow hedges in prior periods transferred to profit in the current year | (5,621) | (4,918) | |
| Unrealised gain on available-for-sale financial asset | 157 | – | |
| Comprehensive income/(loss) | (19,548) | 10,900 | |
Notes to Consolidated Financial Statements
For the years ended 31 December 2009 and 2008
(in thousands of US Dollars, except per share amounts)
The accompanying notes are not part of these consolidated financial statements.
1. Nature of operations
European Goldfields Limited (the "Company"), a company incorporated under the Yukon Business Corporations Act, is a resource company involved in the acquisition, exploration and development of mineral properties in Greece, Romania and South-East Europe.
The Company's common shares are listed on the AIM Market of the London Stock Exchange and on the Toronto Stock Exchange (TSX) under the symbol "EGU".
The Company is a developer-producer with globally significant gold reserves located within the European Union. The Company generates cash flow from its 95% owned Stratoni operation, a high grade lead/zinc/silver mine in North-Eastern Greece and the sale of gold concentrates from Olympias. European Goldfields will evolve into a mid tier producer through responsible development of its project pipeline of gold and base metal deposits at Skouries and Olympias in Greece and Certej in Romania. The Company plans future growth through development of its highly prospective exploration portfolio in Greece, Romania and Turkey.
The underlying value of the deferred exploration and development costs for mineral properties is dependent upon the existence and economic recovery of reserves in the future, and the ability to fund the development of the properties.
For the coming year, the Company believes it has adequate funds available to meet its corporate and administrative obligations and its planned expenditures on its mineral properties.
2. Basis of Presentation
These consolidated financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"), which assumes the Company will be able to realise assets and discharge liabilities in the normal course of business for the foreseeable future. These consolidated financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern.
3. Significant accounting policies
These consolidated financial statements reflect the following significant accounting policies.
Basis of consolidation–Business acquisitions are accounted for under the purchase method and the results of operations of these businesses are included in these consolidated financial statements from the acquisition date. Investments in associates over which the Company has significant influence are accounted for using the equity method.
These consolidated financial statements include the accounts of the Company and the following subsidiaries:
| Company | Country of incorporation | Ownership |
| Deva Gold (Barbados) Ltd | Barbados | 100% owned |
| European Goldfields (Services) Limited | England | 100% owned |
| European Goldfields Mining (Netherlands) B.V. | Netherlands | 100% owned |
| European Goldfields (Greece) B.V. | Netherlands | 100% owned |
| Hellas Gold B.V. | Netherlands | 100% owned |
| European Goldfields Deva SRL | Romania | 100% owned |
| Hellas Gold S.A. | Greece | 95% owned |
| Deva Gold S.A. | Romania | 80% owned |
| Greater Pontides Exploration B.V. | Netherlands | 51% owned |
| Pontid Madencilik San. ve Ltd | Turkey | 51% owned |
| Pontid Altin Madencilik Ltd. Sti. | Turkey | 51% owned |
| Greek Nurseries SA | Greece | 50% owned |
| Macedonian Copper Mines SA | Greece | 100% owned |
The 20% minority interest held in the Company's 80% owned subsidiary, Deva Gold S.A. ("Deva Gold"), is accounted for in these consolidated financial statements. The Company is required to fund 100% of all costs related to the exploration and development of the mineral properties held by Deva Gold. As a result, the Company is entitled to the refund of such costs (plus interest) out of future cash flows generated by Deva Gold, prior to any dividends being distributed to shareholders.
Associates – Associates are those entities in which the Company has a material long term interest and in respect of which the group exercises significant influence over operational and financial policies, normally owning between 20% and 50% of the voting equity, but which it does not control.
Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Company's share of its associates' post-acquisition profits or losses is recognised in the statement of profit and loss. Cumulative post-acquisition movements are adjusted against the carrying amount of investment. When the Company's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has unsecured obligations or made payments on behalf of the associate.
When the group no longer has significant influence over an associate, accounting for the investment as an associate ceases. The carrying value of the investment in the associate at the date it ceases to be an associate is transferred to the new designated class of financial asset. The investment is then accounted for under the requirements of the new financial asset designation.
Investments – Available-for-sale financial assets are those non-derivative financial assets, principally equity securities, that are designated as available-for-sale or are not classified in any other investment category. After initial recognition available-for sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.
The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date.
Inventory –Inventories of ore mined and metal concentrates are valued at the lower of combined production cost and net realisable value. Production costs include the costs directly related to bringing the inventory to its current condition and location, such as materials, labour, mine site overheads, related depreciation of mining and processing facilities and related depletion of mineral properties and deferred exploration and development costs. Exploration materials and supplies are valued at the lower of cost and net realisable value and on a weighted average basis.
Property, plant and equipment– Property,plant and equipment are recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis based on a useful life of 3 years for office equipment, 6 years for vehicles, 10 years for leasehold improvements, at rates varying between 3 and 5 years for exploration equipment and at rates varying between 4 and 20 years for buildings. Depreciation for equipment used for exploration and development are capitalised to mineral properties.
Deferred exploration and development costs– Acquisition costs of resource properties, together with direct exploration and development costs incurred thereon, are deferred and capitalised. Upon reaching commercial production, these capitalised costs are transferred from exploration properties to producing properties on the consolidated balance sheets and are amortised into operations using the unit-of-production method over the estimated useful life of the estimated related ore reserves.
Based on annual impairment reviews made by management, in the event that the long-term expectation is that the net carrying amount of these capitalisedexploration and development costs will not be recovered such as would be indicated where:
– Producing properties:
· the carrying amounts of the capitalised costs exceed the related undiscounted net cash flows of reserves;
– Exploration properties:
· exploration activities have ceased;
· exploration results are not promising such that exploration will not be planned for the foreseeable future;
· lease ownership rights expire; or
· insufficient funding is available to complete the exploration program;
then the carrying amount is written down to fair value accordingly and the write-down amount charged to operations.
Impairment of long-lived assets– All long-lived assets and intangibles held and used by the Company are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If changes in circumstances indicate that the carrying amount of an asset that an entity expects to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition must be estimated. If the undiscounted value of the future cash flows is less than the carrying amount of the asset, impairment is recognised based on the fair value of the assets.
Asset retirement obligation– The fair value of the liability of an asset retirement obligation is recorded when it is legally incurred and the corresponding increase to the mineral property is depreciated over the life of the mineral property. The liability is adjusted over time to reflect an accretion element considered in the initial measurement at fair value and revisions to the timing or amount of original estimates and for drawdowns as asset retirement expenditures are incurred. As at 31 December 2009 and 2008, the Company had an asset retirement obligation relating to its Stratoni property in Greece.
Deferred revenue – The Company receives prepayments for the sale of all of the silver metal to be produced from ore extracted during the mine-life within an area of some 7 km² around its zinc-lead-silver Stratoni mine as well as for sale of gold pyrite concentrate in northern Greece. The prepayment, which is accounted for as deferred revenue, is recognised as sales revenue on the basis of the proportion of the settlements during the period expected to the total settlements.
Revenue recognition – Revenues from the sale of concentrates are recognised and are measured at market prices when the rights and obligations of ownership pass to the customer. A number of the Company's concentrate products are sold under pricing arrangements where final prices are determined by quoted market prices in a period subsequent to the date of sale. These concentrates are provisionally priced at the time of sale based on forward prices for the expected date of the final settlement. The terms of the contracts result in non-hedge derivatives that do not qualify for hedge accounting treatment, because of the difference between the provisional price and the final settlement price. These embedded derivatives are adjusted to fair value through revenue each period until the date of final price determination. Subsequent variations in the price are recognised as revenue adjustments as they occur until the price is finalised.
Income taxes– Income taxes are calculated using the asset and liability method of tax accounting. Under this method, current income taxes are recognised for the estimated income taxes payable for the current period. Future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. The benefit of the temporary differences is not recognised to the extent the recoverability of future income tax assets is not considered more likely than not.
Equity-based compensation– The Company operates a share option plan and a restricted share unit plan. The Company accounts for equity-based compensation granted under such plans using the fair value method of accounting. Under such method, the cost of equity-based compensation is estimated at fair value and is recognised in the profit and loss statement as an expense, or recognised as deferred exploration and development costs when the compensation can be attributed to mineral properties. This cost is recognised over the relevant vesting period for grants to directors, officers and employees, and measured in full at the earlier of performance completed or vesting for grants to non-employees. Any consideration received by the Company on exercise of share options is credited to share capital.
Cash settled awards – The Company operates a deferred phantom unit plan. The Company accounts for the compensation using the fair value method. The cost of each unit is recognised at the date of grant and is marked-to-market based on the Company's share price at the end of every reporting period.
Earnings per share ("EPS")– EPS is calculated based on the weighted average number of common shares issued and outstanding. Diluted per share amounts are calculated using the treasury stock method whereby proceeds deemed to be received on the exercise or exchange of share options and warrants and on the granting of restricted share units in the per share calculation are applied to reacquire common shares at the average market price during the period.
Foreign currency translation– The Company's functional currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities and revenue and expenses arising from foreign currency transactions are translated at the exchange rate in effect at the date of the transaction. Exchange gains or losses arising from the translation are included in operations.
Integrated foreign subsidiaries and associates are accounted for under the temporal method. Under this method, monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenue and expenses are translated at actual or average rates for the period. Exchange gains or losses arising from the translation are included in operations except for those related to mineral properties which are capitalised.
Self-sustaining foreign subsidiaries and associates are accounted for under the current rate method. Under this method, all assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated at actual or average rates for the period. Exchange gains or losses arising from the translation are recorded in equity in the cumulative translation adjustment component of other comprehensive income.
Estimates, risks and uncertainties– The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Significant estimates and assumptions include those related to the recoverability of deferred exploration, development costs for mineral properties, asset retirement obligations and equity-based compensation. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.
Financial instruments – The Company'sinvestments and investments in marketable securities have been classified as available-for-sale and are recorded at fair value on the balance sheet. Fair values are determined directly by reference to published price quotations in an active market. Changes in the fair value of these instruments are reflected in other comprehensive income and included in shareholders' equity on the balance sheet.
All derivatives are recorded on the balance sheet at fair value. Marked-to-market adjustments on these instruments are included in net profit, unless the instruments are designated as part of a cash flow hedge relationship.
All other financial instruments are recorded at cost or amortised cost, subject to impairment reviews. Transaction costs incurred to acquire financial instruments are included in the underlying balance.
Cash and cash equivalents– Cash and cash equivalents include cash and deposits with original maturities of three months or less.
Hedges – The Company uses derivative and non-derivative financial instruments to manage changes in commodity prices. Hedge accounting is optional and it requires the Company to document the hedging relationship and test the hedging item's effectiveness in offsetting changes in fair values or cash flows of the underlying hedged item on an ongoing basis.
The Company uses cash flow hedges to manage base metal commodity prices. The effective portion of the change in fair value of a cash flow hedging instrument is recorded in other comprehensive income and is reclassified to earnings when the hedge item impacts profit. Any ineffectiveness is recorded in net profit.
If a derivative instrument designated as a cash flow hedge ceases to be effective or is terminated, hedge accounting is discontinued and the gain or loss at that date is deferred in other comprehensive income and recognised concurrently with the settlement of the related transaction. If a hedged anticipated transaction is no longer probable, the gain or loss is recognised immediately in profit. Subsequent gains and losses from ineffective derivative instruments are recognised in profit in the period they occur.
Comprehensive income – Comprehensive income includes both net profit and other comprehensive income. Other comprehensive income includes holding gains and losses on available-for-sale investments, gains and losses on certain derivative instruments and foreign currency gains and losses relating to self-sustaining foreign operations, all of which are not included in the calculation of net earnings until realised.
Capital disclosure –Effective 1 January 2008, the Company adopted CICA Handbook, Section 1535, Capital disclosures. The new standard requires disclosures of qualitative and quantitative information that enables users of financial statements to evaluate the Company's objectives, policies and processes for managing capital.
4. Significant changes in accounting policies
Goodwill and intangible assets – In February 2008, the Canadian Institute of Chartered Accountants ("CICA") issued Section 3064 Goodwill and intangible assets, replacing Section 3062, Goodwill and other intangible assets. It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The Company adopted the new standards on 1 January 2009. The adoption of this new Section had no impact on the consolidated financial statements.
Credit Risk and the Fair Value of Financial Assets and Financial Liabilities (EIC 173) – In January 2009, the CICA issued EIC 173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". The EIC requires the Company to take into account the Company's own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments. This EIC applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after 1 January 2009. The adoption of this new accounting policy did not have any impact on the Company's consolidated financial statements.
Mining Exploration Costs (EIC 174) – In March 2009, the CICA issued EIC Abstract 174, "Mining Exploration Costs". The EIC provides guidance on the accounting and the impairment review of exploration costs. This EIC applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after 1 January 2009. The adoption of this new accounting policy did not have any material impact on the Company's consolidated financial statements.
5. Accounts receivable
This balance comprises the following:
| 2009 | 2008 | ||
| $ | $ | ||
| Value added taxes recoverable | 18,360 | 11,780 | |
| Accounts receivable | 8,453 | 8,277 | |
| 26,813 | 20,057 |
6. Inventory
This balance comprises the following:
| 2009 | 2008 | ||
| $ | $ | ||
| Ore mined | 102 | 397 | |
| Metal concentrates | 2,195 | 767 | |
| Material and supplies | 2,696 | 1,905 | |
| 4,993 | 3,069 |
The components of cost of sales were as follows:
| 2009 | 2008 | ||
| $ | $ | ||
| Mining cost | 24,907 | 28,313 | |
| Direct labour | 4,611 | 4,991 | |
| Indirect labour | 520 | 964 | |
| Other overhead costs | 6,162 | 7,259 | |
| Increase in gross inventories | (1,311) | (1,100) | |
| Freight charges | 9,141 | 7,044 | |
| Write-down of inventory to net realisable value | – | 953 | |
| 44,030 | 48,424 |
As at 31 December 2009, the value of total inventory carried at net realisable value amounted to Nil (2008 – $767), which includes a write-down of Nil (2008 – $953).
7. Property, plant and equipment
|
Plant and equipment |
Vehicles |
Mine development land and buildings $ |
Total $ |
||||
| Cost – 2008 | |||||||
| At 31 December 2007 | 31,701 | 1,932 | 21,523 | 55,156 | |||
| Additions | 14,674 | 138 | 14,215 | 29,027 | |||
| Disposals | (21) | (8) | – | (29) | |||
| At 31 December 2008 | 46,354 | 2,062 | 35,738 | 84,154 | |||
| Accumulated depreciation – 2008 | |||||||
| At 31 December 2007 | 3,151 | 1,076 | 2,153 | 6,380 | |||
| Provision for the year | 1,527 | 215 | 1,648 | 3,390 | |||
| Disposals | (10) | (7) | – | (17) | |||
| At 31 December 2008 | 4,668 | 1,284 | 3,801 | 9,753 | |||
| Net book value at 31 December 2008 | 41,686 | 778 | 31,937 | 74,401 |
| Cost – 2009 | |||||||
| At 31 December 2008 | 46,354 | 2,062 | 35,738 | 84,154 | |||
| Additions | 17,886 | 143 | 7,726 | 25,755 | |||
| Disposals | – | (98) | – | (98) | |||
| At 31 December 2009 | 64,240 | 2,107 | 43,464 | 109,811 | |||
| Accumulated depreciation – 2009 | |||||||
| At 31 December 2008 | 4,668 | 1,284 | 3,801 | 9,753 | |||
| Provision for the year | 1,601 | 204 | 2,251 | 4,056 | |||
| Disposals | – | (98) | – | (98) | |||
| At 31 December 2009 | 6,269 | 1,390 | 6,052 | 13,711 | |||
| Net book value at 31 December 2009 | 57,971 | 717 | 37,412 | 96,100 | |||
During 2009, the total depreciation charge amounted to $4,056 (2008 – $3,390) and the net book value amount of property, plant and equipment not amortised amounted to $75,499 (2008 – $43,098).
8. Deferred exploration and development costs
Greek mineral properties:
| Stratoni $ |
Olympias $ |
Skouries $ |
Other exploration $ |
Total $ |
|||||
| Balance – 31 December 2007 | 29,199 | 237,356 | 164,641 | 158 | 431,354 | ||||
| Acquisition of mineral properties | – | – | 78 | – | 78 | ||||
| Deferred development costs | 502 | 369 | 1,573 | 95 | 2,539 | ||||
| Depletion of mineral properties | (3,049) | (363) | – | – | (3,412) | ||||
| (2,547) | 6 | 1,651 | 95 | (795) | |||||
| Balance – 31 December 2008 | 26,652 | 237,362 | 166,292 | 253 | 430,559 | ||||
| Acquisition of mineral properties | – | – | – | – | – | ||||
| Deferred development costs | 636 | 606 | 1,257 | 33 | 2,532 | ||||
| Depletion of mineral properties | (3,237) | (657) | – | – | (3,894) | ||||
| (2,601) | (51) | 1,257 | 33 | (1,362) | |||||
| Balance – 31 December 2009 | 24,051 | 237,311 | 167,549 | 286 | 429,197 |
The Stratoni, Skouries and Olympias properties are held by the Company's 95% owned subsidiary, Hellas Gold. In September 2005, the Stratoni property commenced production.
Romanian mineral properties:
| Certej $ |
Other exploration $ |
Total $ |
|||
| Balance – 31 December 2007 | 32,915 | 5,370 | 38,285 | ||
| Project development and exploration | 2,158 | 420 | 2,578 | ||
| Project management | 1,894 | 376 | 2,270 | ||
| Project overhead | 1,795 | 170 | 1,965 | ||
| Depreciation | 70 | 19 | 89 | ||
| 5,917 | 985 | 6,902 | |||
| Balance – 31 December 2008 | 38,832 | 6,355 | 45,187 |
| Project development and exploration | 3,672 | 547 | 4,219 | ||
| Permit acquisition | 157 | – | 157 | ||
| Write-down of mineral property | – | (1,171) | (1,171) | ||
| Project overhead | 1,551 | 159 | 1,710 | ||
| Depreciation | 58 | 13 | 71 | ||
| 5,438 | (452) | 4,986 | |||
| Balance – 31 December 2009 | 44,270 | 5,903 | 50,173 |
The Certej exploitation licence and the Baita-Craciunesti exploration licence are held by the Company's 80%-owned subsidiary, Deva Gold. Minvest S.A. (a Romanian state owned mining company), together with three private Romanian companies, hold the remaining 20% interest in Deva Gold. The Company is required to fund 100% of all costs related to the exploration and development of these properties. As a result, the Company is entitled to the refund of such costs (plus interest) out of future cash flows generated by Deva Gold, prior to any dividends being distributed to shareholders. The Voia and Cainel exploration licences are held by the Company's wholly-owned subsidiary, European Goldfields Deva SRL.
Since the award of the Cainel Exploration Licence in 2005, the Company conducted an extensive programme of mapping, surface sampling, investigation of historic workings and dumps, drilling and geological interpretation on the property. This work concluded that the main mineralised structures had been mined out to practical mining depths and that there were no indications of significant extensions to the known mineralisation. Permit wide soil sampling was completed in 2009 which identified no other near surface resources and therefore the decision was made by the Company to relinquish the licence. A total of $1,171 was written down being historic costs capitalised relating to Cainel.
As at the 31 December 2009, the following cost had been incurred on the remaining Romanian mineral properties:
| 2009 $ |
2008 $ |
||
| Baita-Craciunesti | 3,334 | 3,312 | |
| Voia | 1,847 | 1,741 | |
| Magura Tebii | 181 | 136 | |
| Exploration projects | 541 | 44 | |
| Cainel | – | 1,122 | |
| 5,903 | 6,355 |
Turkish Mineral Properties:
| Ardala $ |
Other exploration $ |
Total $ |
|||
| Balance – 31 December 2007 | – | – | – |
| Exploration | 30 | 2 | 32 | ||
| Project overhead | 402 | 5 | 407 | ||
| Permit acquisition | 6 | – | 6 | ||
| Depreciation | 11 | – | 11 | ||
| 449 | 7 | 456 | |||
| Balance – 31 December 2008 | 449 | 7 | 456 | ||
| Exploration | 225 | 40 | 265 | ||
| Project overhead | 695 | 108 | 803 | ||
| Permit acquisition | 86 | – | 86 | ||
| Depreciation | 13 | 2 | 15 | ||
| 1,019 | 150 | 1,169 | |||
| Balance – 31 December 2009 | 1,468 | 157 | 1,625 |
In April 2008, the Company entered into a Joint Venture ("JV") with Ariana Resources plc ("Ariana") which became effective in May 2008 after the transfer of Ariana's properties was confirmed by the General Directorate of Mining Affairs in Turkey. The JV involves the development of Ariana's current properties in an Area of Intent ("AOI") in the Greater Pontides region of north-eastern Turkey, which include the Ardala copper-gold porphyry and fifteen otherlicencescovering a total area of 229km², and a Strategic Partnership within the AOI to define new opportunities for the JV.
The Turkish licences are held by the JV through a Turkish Company, Pontid Madencilik. Currently the Company has a 51% interest in all the properties within the JV and the Company will fund 100% of all costs related to the development of these properties. Ownership of the Ardala property may be increased to 80% by funding to completion of a Bankable Feasibility Study. All other concessions within the JV funded to a Bankable Feasibility Study will be 90% owned by the Company. The owner of the remaining 49% of the properties is Ariana Resources plc.
9. Investment in associates
| 2009 | 2008 | ||
| $ | $ | ||
| Balance – Beginning of year | 2,075 | – | |
| Shares acquired | 141 | 2,692 | |
| Share of loss of associate | (76) | (105) | |
| Cumulative translation adjustment | (32) | (517) | |
| Equity-based compensation expense | – | 5 | |
| Share issue cost | (28) | – | |
| Loss in dilution of interest in associates | (36) | – | |
| Reclassification as investment available-for-sale | (1,333) | – | |
| Balance – End of year | 711 | 2,075 | |
In January 2008, Hellas Gold acquired a 50% share of Greek Nurseries SA for a consideration of $834(€530), at the date of acquisition the Company had no net assets.
In May 2008, the Company subscribed for 20.13% of the issued share capital of Ariana through a $1,858 (£929) private placement of shares. The difference between the cost of the investment of $1,830 and the underlying net book value of Ariana was $132 at the date of acquisition. This excess represents additional fair value assigned to mineral properties of Ariana and will be depleted upon commencement of mining operations of Ariana.
In January 2009, Ariana performed a share issue which the Company took part in, however this resulted in a dilution of ownership as the Company did not subscribe to 20.13% of the new shares being issued. After the share issue the Company held 19.87% interest in Ariana. During September 2009, Ariana carried out a further share placement in which the Company did not subscribe and as at 31 December 2009, the Company held 16.58% of the issued share capital. Since October 2009, the Company no longer has a representative on the board of Ariana and therefore no longer has significant influence and therefore accounted for its investment in Ariana as an investment available-for-sale.
10. Investment other
| 2009 | 2008 | ||
| $ | $ | ||
| Balance – Beginning of year | – | – | |
| Reclassification from investment in associate | 1,333 | – | |
| Fair value adjustment | 157 | – | |
| Balance – End of year | 1,490 | – | |
The above investment is accounted for as an available-for-sale asset.
11. Income taxes
The following table reconciles the expected income tax recovery at the Canadian statutory income tax rate to the amounts recognised in the consolidated statements of profit and loss:
| 2009 | 2008 | ||
| $ | |
$ | |
| Income tax rate | 34.00% | 34.50% | |
| Income taxes at statutory rates | (2,839) | 4,002 | |
| Tax rate difference from foreign jurisdictions | 323 | 1,205 | |
| Permanent differences | (391) | 3,149 | |
| Under provision prior year | 654 | – | |
| Change in tax rate | (60) | (18,434) | |
| Change in valuation allowance | 5,689 | 1,443 | |
| 3,376 | (16,639) |
The following table reflects future income tax assets:
| 2009 | 2008 | ||
| $ | $ | ||
| Loss carry forwards | 10,091 | 8,693 | |
| Intangibles | – | 2 | |
| Plant and equipment | 45 | – | |
| Retirement obligation | 1,396 | 1,323 | |
| Inventory | – | 3 | |
| Personal indemnities | 47 | 39 | |
| Capital raising costs | 853 | 1,108 | |
| Valuation allowance | (10,824) | (6,689) | |
| 1,608 | 4,479 | ||
| Less: Current portion | (119) | (2,004) | |
| Future income tax assets recognised | 1,489 | 2,475 |
The following table reflects future income tax liabilities:
| 2009 | 2008 | ||
| $ | $ | ||
| Mineral properties | 84,491 | 85,167 | |
| Plant and equipment | 1,329 | 882 | |
| Exploration and development expenditure | 3,187 | 2,709 | |
| Accrued expenses & other | 286 | – | |
| Inventory | 10 | – | |
| Retirement obligation | 780 | 873 | |
| Hedge contract | – | 3,496 | |
| Foreign exchange | – | 663 | |
| 90,083 | 93,790 | ||
| Less: Current portion | – | (3,496) | |
| Future income tax liabilities recognised | 90,083 | 90,294 |
The tax liability arises as a result of the increase in value placed on the mineral properties held by Hellas Gold on acquisition by the Company. This future tax liability will reverse as the corresponding mineral properties are amortised.
As at 31 December 2009, the Company has available tax losses for income tax purposes of $36,258 (2008 – $29,656) which may be carried forward to reduce taxable income derived in future years.
The non-capital losses expire as follows:
| 2009 | |
| $ | |
| 2016 | 4,254 |
| Non expiring losses | 32,004 |
| 36,258 |
In addition, the Company incurred share issue costs and other deductible temporary differences, which have not yet been claimed for income tax purposes, totalling as at 31 December 2009 $1,357 (2008 – $2,828).
A valuation allowance has been provided as a portion of the potential income tax benefits of these carry-forward non-capital losses and deductible temporary differences and the realisation thereof is not considered more likely than not.
12. Accounts payable and accrued liabilities
The balance principally comprises amounts outstanding for normal operations and ongoing costs. The average credit period taken during the financial year ended 31 December 2009 was 30 days
(2008 – 30 days).
13. Asset retirement obligation
Management has estimated the total future asset retirement obligation based on the Company's ownership interest in the Stratoni mines and facilities. This includes all estimated costs to dismantle, remove, reclaim and abandon the facilities at the Stratoni property, and the estimated time period during which these costs will be incurred in the future. The following table reconciles the asset retirement obligation for the financial years ended 31 December 2009 and 2008:
| 2009 | 2008 | ||
| $ | $ | ||
| Asset retirement obligation – Beginning of year | 6,937 | 6,805 | |
| Accretion expense | 131 | 132 | |
| Asset retirement obligation – End of year | 7,068 | 6,937 |
As at 31 December 2009, the undiscounted amount of estimated cash flows required to settle the obligation is $7,805 (2008 – $7,805). The estimated cash flow has been discounted using a credit adjusted risk free rate of 5.04% (2008 – 5.04%). The expected period until settlement is five years.
14. Deferred revenue
In April 2007, Hellas Gold agreed to sell to Silver Wheaton (Caymans) Ltd. ("Silver Wheaton") all of the silver metal to be produced from ore extracted during the mine-life within an area of some 7 km² around its zinc-lead-silver Stratoni mine in northern Greece (the "Silver Wheaton Transaction"). The sale was made in consideration of a prepayment to Hellas Gold of $57.5 million in cash, plus a fee per ounce of payable silver to be delivered to Silver Wheaton of the lesser of $3.90 (subject to an inflationary adjustment beginning after year three) and the prevailing market price per ounce. During the year ended 31 December 2009, Hellas Gold delivered concentrate containing ounces 772,865 (2008 – 1,038,762 ounces) of silver for credit to Silver Wheaton.
In April 2007, Hellas Gold entered in an agreement with MRI Trading AG ("MRI") for the sale of 25,000 wet metric tonnes of gold bearing pyrite concentrate. Hellas Gold received a prepayment of $2.18 million in cash. A further agreement with MRI was entered into in March 2008, for the sale of a further 23,372 dry metric tonnes, for which Hellas Gold received a prepayment of $3.56 million in cash. The remaining balances relating to MRI prepayments were transferred to current liabilities reflecting the repayment of all prepaid amounts to MRI in February 2009. In September 2007, Hellas Gold entered into an agreement with a subsidiary of Celtic Resources Holdings ("Celtic") Plc for the sale of 50,000 wet metric tonnes of gold bearing pyrite concentrate, for which Hellas Gold received a prepayment of $4.71 million in cash. During the year a total of 24,680 wmt (2008 – 3,000 wmt) of concentrate was delivered to Celtic.
The following table reconciles movements on deferred revenue associated with the MRI, Celtic and the Silver Wheaton transaction:
| 2009 | 2008 | ||
| $ | $ | ||
| Deferred revenue – Beginning of year | 58,496 | 65,344 | |
| Additions | – | 3,564 | |
| Revenue recognised | (5,535) | (6,399) | |
| Transferred to current liabilities | – | (4,013) | |
| 52,961 | 58,496 | ||
| Less: Current portion | (4,549) | – | |
| Deferred revenue – End of year | 48,412 | 58,496 |
15. Capital stock
Authorised:
– Unlimited number of common shares, without par value
– Unlimited number of preferred shares, issuable in series, without par value
Issued and outstanding (common shares – all fully paid)
| Number of Shares |
Amount $ |
||
| Balance – 31 December 2007 | 179,162,381 | 537,275 | |
| Restricted share units vested | 195,000 | 973 | |
| Share options exercised or exchanged | 25,000 | 77 | |
| Share issue costs, net of tax | – | (9) | |
| 220,000 | 1,041 | ||
| Balance – 31 December 2008 | 179,382,381 | 538,316 |
| Restricted share units vested | 947,925 | 3,317 | |
| Share options exercised or exchanged | 1,009,507 | 3,576 | |
| Share issue costs, net of tax | – | (29) | |
| 1,957,432 | 6,864 | ||
| Balance – 31 December 2009 | 181,339,813 | 545,180 |
Contributed surplus
| 2009 | 2008 | ||
| $ | $ | ||
| Equity-based compensation expense | 9,469 | 7,210 | |
| Broker warrants | 578 | 578 | |
| 10,047 | 7,788 |
Accumulated other comprehensive income
The components of accumulated other comprehensive income were as follows:
| 2009 | 2008 | ||
| $ | $ | ||
| Cumulative translation adjustment | 36,818 | 36,890 | |
| Fair value of cash flow hedge (net of tax) | (1,064) | 6,786 | |
| Available-for-sale asset | 157 | – | |
| 35,911 | 43,676 |
16. Share options, restricted share units and deferred phantom units
Share Option Plan
The Company operates a Share Option Plan (together with its predecessor, the "Share Option Plan") authorising the directors to grant options with a maximum term of 5 years, to acquire common shares of the Company to the directors, officers, employees and consultants of the Company and its subsidiaries, on terms that the Board of Directors may determine, within the limitations of the Share Option Plan. The maximum number of common shares of the Company which may be reserved for issuance for all purposes under the Share Option Plan shall not exceed 15% of the common shares issued and outstanding from time to time (27,200,927 shares as at 31 December 2009).
An option holder under the Share Option Plan may elect to dispose of its rights under all or part of its options (the "Exchanged Rights") in exchange for the following number of common shares of the Company (or at the Company's option for cash) in settlement thereof (the "Settlement Common Shares"):
| Number of Settlement Common Shares | = | Number of Optioned Shares issuable on exercise of the Exchanged Rights | X | (Current Price – Exercise Price) Current Price |
As at 31 December 2009, the following share options were outstanding:
| Expiry date | Number of Options |
Exercise price C$ |
|
| 2010 | 60,000 | 2.00 | |
| 2011 | 66,666 | 3.25 | |
| 2011 | 600,000 | 3.85 | |
| 2011 | 50,000 | 4.10 | |
| 2012 | 250,000 | 5.66 | |
| 2012 | 150,000 | 5.71 | |
| 2012 | 256,666 | 5.87 | |
| 2013 | 50,000 | 1.99 | |
| 2013 | 360,000 | 3.54 | |
| 2013 | 135,000 | 5.07 | |
| 2013 | 78,333 | 6.80 | |
| 2014 | 1,300,000 | 6.00 | |
| 2014 | 50,000 | 7.00 | |
| 3,406,665 | 5.10 |
During the years ended 31 December 2009 and 2008, share options were granted, exercised, exchanged and forfeited as follows:
| Number of Options |
Weighted average exercise price C$ |
||
| Balance – 31 December 2007 | 3,006,665 | 3.80 | |
| Options granted | 1,010,000 | 4.64 | |
| Options exercised | (25,000) | 2.11 | |
| Options exchanged for shares | – | – | |
| Options forfeited | (500,000) | 4.14 | |
| Balance – 31 December 2008 | 3,491,665 | 4.01 |
| Options granted | 1,350,000 | 6.04 | |
| Options exercised | (960,000) | 2.72 | |
| Options exchanged for shares | (125,000) | 4.46 | |
| Options forfeited | (50,000) | 6.80 | |
| Options expired | (300,000) | 4.18 | |
| Balance – 31 December 2009 | 3,406,665 | 5.10 |
Of the 3,406,665 (2008 – 3,491,665) share options outstanding as at 31 December 2009, 1,855,001 (2008 – 2,421,667) were fully vested and had a weighted average exercise price of C$4.57 (2008 – C$3.53) per share. The share options outstanding as at 31 December 2009, had a weighted average remaining contractual life of years 3.38 (2008- 3.18 years).
The weighted average grant date fair value cost of the 1,350,000 share options granted during the financial year ended 31 December 2009 (2008 – 1,010,000) was $3,221 (2008 – $1,659). For outstanding share options, including options granted during the year and those which were not fully vested during the year ended 31 December 2009, the Company incurred a total equity-based compensation cost of $2,039 (2008 – $1,384) of which $1,901 (2008 – $1,057) has been recognised as an expense in the statement of profit and loss and $138 (2008 – $327) has been capitalised to deferred exploration and development costs.
The fair value of the share options granted has been estimated at the date of grant using a Black-Scholes and Parisian option pricing model with the following assumptions: weighted average risk free interest rate of 0.05% (2008 – 2.05% to 3.05%); volatility factor of the expected market price of the Company's shares of 68.03% (2008 – 32.86% to 89.59%); a weighted average expected life of the share options of 5 years (2008 – 5 years), maximum term of 5 years and a dividend yield of Nil (2008 –Nil).
In 2009, Nil (2008 – 500,000) options forfeited during the year represent options cancelled and were replaced with DPUs. These have been accounted for as a stock modification.
Restricted Share Unit Plan
The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorising the directors, based on recommendations received from the Compensation Committee, to grant Restricted Share Units ("RSUs") to designated directors, officers, employees and consultants. The RSUs are "phantom" shares that rise and fall in value based on the value of the Company's common shares and are redeemed for actual common shares on the vesting dates determined by the Board of Directors when the RSUs are granted. The RSUs vest on the dates below; however, upon a change of control of the Company they would typically become 100% vested. The maximum number of common shares of the Company which may be reserved for issuance for all purposes under the RSU Plan shall not exceed 2.5% of the common shares issued and outstanding from time to time (4,533,495 shares as at 31 December 2009).
As at 31 December 2009, the following RSUs were outstanding:
|
Vesting date |
Number of RSUs |
Grant date fair value of underlying shares C$ |
|
| 04 January 2010 | 187,911 | 2.65 | |
| 04 January 2010 | 187,910 | 2.65 | |
| 04 January 2010 | 50,000 | 6.99 | |
| 31 March 2010 | 200,000 | 6.02 | |
| 31 March 2010 | 165,411 | 6.18 | |
| 08 December 2010 | 70,102 | 6.18 | |
| 31 December 2010 | 200,000 | 6.02 | |
| 31 December 2011 | 200,000 | 6.02 | |
| 1,216,334 | 5.09 |
During the years ended 31 December 2009 and 2008, RSUs were granted, vested and forfeited as follows:
|
Number of |
Weighted average grant date fair value of underlying shares C$ |
||
| Balance – 31 December 2007 | 185,000 | 4.86 | |
| RSUs granted | 365,000 | 5.26 | |
| RSUs vested | (195,000) | 5.08 | |
| RSUs forfeited | (150,000) | 6.59 | |
| Balance – 31 December 2008 | 205,000 | 4.09 |
| RSUs granted | 2,104,259 | 4.52 | |
| RSUs vested | (947,925) | 3.86 | |
| RSUs forfeited | (100,000) | 2.74 | |
| Balance – 31 December 2009 | 1,261,334 | 5.09 |
The weighted average grant date fair value cost of underlying shares of the 2,104,259 RSUs granted during the financial year ended 31 December 2009 (2008 – 365,000) was C$4.52 (2008 – C$5.26). For outstanding RSUs which were not fully vested, including RSU's granted during the year ended 31 December 2009, the Company incurred a total equity-based compensation cost of $4,781 (2008 – $1,399) of which $3,793 (2008 – $889) has been recognised as an expense in the statement of profit and loss and $988 (2008 – $510) has been capitalised to deferred exploration and development costs.
Deferred Phantom Unit Plan
The company operates a Deferred Phantom Unit plan (the "DPU Plan") authorising the directors based on recommendation by the Human Capital Management Committee to grant Deferred Phantom Units ("DPUs") to independent eligible directors. The DPU are units which give rise to a right to receive a cash payment the value of which, on a particular date should be the market value of the equivalent number of shares at that date. The market value at 31 December 2009 has been included in current liabilities.
As at 31 December 2009, the following DPUs were outstanding:
|
Grant date |
Number of DPUs |
Grant date Fair Value of DPUs C$ |
|
| 05 December 2008 | 271,000 | 504,060 | |
| 23 March 2009 | 6,184 | 22,448 | |
| 15 May 2009 | 7,712 | 22,365 | |
| 18 August 2009 | 6,918 | 22,690 | |
| 07 October 2009 | 55,000 | 331,650 | |
| 15 November 2009 | 4,596 | 32,906 | |
| 351,410 | 936,119 |
During the years ended 31 December 2009 and 2008, DPUs were granted and forfeited as follows:
| Number of DPUs |
Fair Value of DPUs C$ |
||
| Balance – 31 December 2007 | – | – | |
| DPUs granted and vested | 406,500 | 1.86 | |
| DPUs forfeited | – | – | |
| Balance – 31 December 2008 | 406,500 | 1.86 | |
| DPUs granted and vested | 90,817 | 5.13 | |
| DPUs forfeited | – | – | |
| DPUs converted to RSU | (145,907) | 1.96 | |
| Balance – 31 December 2009 | 351,410 | 2.66 |
Of the 90,817 (2008 – 416,500) DPU's granted during the year, 90,817 (2008 – 406,500) were fully vested.
The weighted average grant date fair value cost of the 90,817 DPUs granted during the financial year ended 31 December 2009 (2008 – 406,500) was $409 (2008 – $760). The weighted average fair value cost of the
351,410 DPUs as at the 31 December 2009, based on the year end share price, amounted to $2,046
(2008 – $1,054).
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