Exhibit 15.4
 
 EMPEROR MINES LIMITED
 
 Unaudited Financial Report for the period ended 6 April 2006 and
 years ended 30 June 2005 and 30 June 2004
 
 (Presented in Australian Dollars)
 
 Contents
 
 Page
 
 
 Statements of financial performance
 2
 
 
 Statements of financial position
 3
 
 
 Statements of cash flows
 4
 
 
 Notes to the financial statements
 5-37


2
 Emperor Mines Limited Unaudited Statement of Financial Performance For the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars)
 
 Period
 ended 6
 April
 
 
 Notes
 2006
 $'000
 2005
 $'000
 2004
 $'000
 
 
 
 Revenue from operating activities
 
 38,952
 66,345   66,716
 Provision for hedging redesignation
 22
 (1,157)
 (1,524)   (2,155)
 
 
 37,795
 64,821   64,561
 Revenue from outside operating activities
 
 157
 473    866
 Revenue from ordinary activities
 3
 37,952
 65,294    65,427
 Changes in inventories of finished goods and work in progress
 
 832
 (4,295)    3,923
 Raw materials and consumables used
 
 (31,651)
 (39,188)    (33,217)
 Employee expenses
 
 (16,385)
 (22,340)    (22,301)
 Exploration 4
 (88)
 (318)    (159)
 Administrative expenses
 
 (2,433)
 (1,792)    (1,888)
 Other expenses from ordinary activities
 
 (7,325)
 (4,664)    (5,181)
 Earnings/(loss) before interest expense, tax, depreciation and amortisation
 
 (19,098)
 
 (7,303)    6,604
 Borrowing costs
 4
 (2,536)
 (103)    (166)
 Depreciation, amortisation and rehabilitation expense
 4
 (6,191)
 (10,909)    (11,350)
 Loss on derivative instruments
 
 (44,809)
 -    -
 Impairment of mine assets
 4
 (1,900)
 (15,248)      -
 (Loss) from ordinary activities before income tax
 
 (74,534)
 (33,563)    (4,912)
 Income tax (expense)
 5
 (753)
 (171)    (18)
 (Loss) from ordinary activities after tax expense
 
 (75,287)
 
 (33,734)    (4,930)
 Net exchange differences on translation of financial report of foreign controlled entity
 
 -
 (1,811)    63
 Total changes in equity other than those resulting from transactions with owners as owners
 
 25
 (75,287)
 
 (35,545)    (4,867)
 
 
 $    $
 Basic loss per share
 35
 (0.45)
 (0.23)    (0.04)
 Diluted loss per share
 35
 (0.45)
 (0.23)    (0.04)
 The above UnauditedStatements of Financial Performance should be read in conjunction with the accompanying Notes.


Emperor Mines Limited
 
 Unaudited Statement of Financial Position As at 30 June 2005 and 30 June 2004 (In Australian Dollars)
  Notes
 2005
 $'000
    
    
    3,733
    3,210
    7,413
    643
    183
    15,182
       3,195
    140
    49,066
    398
    417
    4,388
    57,604
    72,786
       11,278
    16,318
    204
    1,459
    29,259
       500
    152
    7
    2,127
    8,542
    4,388
    15,716
  Total liabilities
  44,975
   
  Net assets
  27,811
  Contributed Equity
   163,011
    (22,243)
    (112,957)
  Total equity
  27,811
     The above Unaudited
 
 Statements of Financial Position should be read in conjunction with the accompanying Notes.


Emperor Mines LimitedUnaudited Statement of Cash Flows For the period ended 6 April 2006 and the years ended 30 June 2005 and 30 June 2004 (In Australian Dollars)
  
   Notes
 2006
 $'000
    
 Receipts from customers (inclusive of goods and services tax)
  39,857
  Payments to suppliers and employees (inclusive of goods and services tax)
  (54,700)
       146
    -
    (2,536)
    (587)
  Net cash (outflow)/inflow from operating activities
  (17,820)
    (10,573)
   -
    -
  Net cash (outflow) from investing activities
  (10,573)
  14,647
   -
   (100)
    -
    12,249
    -
  Net cash inflow from financing activities
  26,796
  Net (decrease)/ increase in cash held
  (1,597)
    3,733
     Cash at the end of the period
  2,136
  The above Unaudited
 
 Statements of Cash Flows should be read in conjunction with the accompanying Notes.


Emperor Mines Limited Unaudited Notes to the Financial Statements for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
  1.
 Summary of significant accounting policies
 This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Consensus Views.  All amounts in this financial report are presented in Australian dollars unless otherwise specifically noted.
 
 It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.   The financial report has been prepared on a going concern basis but at the date of this report there remains a significant uncertainty about the Consolidated entity’s ability to continue as a going concern. This matter is discussed in Note 1(w). (a)   
  Principles of consolidationThe consolidated financial statements incorporate the assets and liabilities of all entities controlled by Emperor Mines Limited ("Company" or "parent entity") as at 30 June 2005 and 30 June 2004, and the results of all controlled entities for the period ended 6 April 2006 and years ended 30 June 2005 and 2004. Emperor Mines Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full.
  Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. (b)   
  Income taxThe consolidated entity adopts the income statement liability method of tax effect accounting. Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and accounting income.  The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax.  Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt, or if relating to tax losses when realisation is virtually certain. To the extent that dividends are proposed by controlled entities incorporated overseas, the consolidated entity has provided for withholding tax.  A provision is also made for the withholding tax on the balance of unremitted profits that eventually will be remitted to the Company. Capital gains tax, if applicable, is provided for in establishing period income tax expense when as asset is sold.  As of 1 July 2003 Emperor Mines Limited and its wholly-owned Australian controlled entities are part of a tax consolidation group. (c)   
  Foreign currency translation(i)TransactionsForeign currency transactions are initially translated into Australian currency at the rate of exchange ruling at the dates of the transactions. At balance sheet date amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date and resulting exchange differences are brought to account in the statement of financial performance in the year in which the exchange rates change. (ii) Foreign controlled entities As the foreign controlled entities are self sustaining, their assets and liabilities are translated into Australian currency at rates of exchange ruling at balance date, while revenues and expenses are translated at the average of rates ruling during the year and equity items at historical rates. Exchange differences arising on translation are taken directly to the foreign currency translation reserve.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   1.     
  Summary of significant accounting policies (continued) (d)   
  DerivativesThe consolidated entity is exposed to changes in interest rates, foreign exchange rates and community prices from its activities.  The consolidated entity uses the following derivative financial instruments to hedge these risks:  interest rate swaps and futures commodity price contracts.  Derivative financial instruments are not held for speculative purposes. (i)Anticipated transactions When anticipated purchase or sale transactions have been hedged, actual purchases or sales which occur during the designated hedged period are accounted for as having been hedged until the amounts of those transactions in the designated period are fully allocated against the hedged amounts. If the hedged transaction is not expected to occur as originally designated, or if the hedge is no longer expected to be effective, any previously deferred gains or losses are recognised as revenue or expense immediately. If the hedging transaction is terminated prior to its maturity date and the hedge transaction is still expected to occur as designated, deferral of any gains and losses which appear prior to termination continue to be deferred and are included in the measurement of the hedge transaction when it occurs. In circumstances where a hedging transaction is terminated prior to maturity because the hedged transaction is no longer expected to occur as designated, any previously deferred gains and losses are recognised in the statement of financial performance on the date of termination. Where a hedge is redesignated as a hedge of another transaction, gains or losses arising on the hedge prior to its redesignation are only deferred where the original anticipated transaction is still expected to occur as designated.  When the original anticipated transaction is no longer expected to occur as designated, any gains or losses relating to the hedge instrument are included in the statement of financial performance for the period. Gains or losses that arise prior to and upon maturity of transactions entered into under hedge rollover strategies are deferred and included in the measurement of the hedged transaction if the transaction is still expected to occur as designated.  If the transaction is no longer expected to occur as designated, the gains or losses are recognised immediately in the statement of financial performance. (ii)Commodity price  hedging Hedging is undertaken in order to minimise the potential for erosion of margin from unfavourable movements in commodity prices. Gains or costs arising at the time of entering into such hedging transactions are brought to account in the statement of financial performance over the life of the hedge.The net amounts receivable or payable under commodity contracts and the associated deferred gains or losses are recorded in the statement of financial position from the date of inception of the hedge transaction.  Refer Note 26. (iii) Interest rates swaps The amounts receivable or payable under interest rate swaps are not recorded in the statement of financial position until the hedge transaction occurs.


Emperor Mines Limited Unaudited Notes to the Financial Statements  for the period ended 6 April
  2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   1.   
  Summary of significant accounting policies (continued) (e)  
  Revenue recognitionAmounts are recognised as sales revenue when, there has been a passing of risk to the customer, and:
  (i)
            Other revenues earned by the Consolidated entity are recognised on the following basis: (i)
       
 (f)  
  Trade and other receivablesTrade and other receivables are carried at amounts due less an estimate made for doubtful receivables based on a review of all outstanding amounts at year end. (g)  
  Inventories(i)
      convert them to bullion, and is valued at the lower of cost and net realisable value.  The cost of GIC and ore stock pile is measured on a First in First out (FIFO) basis and includes raw materials, direct labour, depreciation, amortisation and other direct costs.  Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.
 At the year end the GIC and ore stock pile was valued at net realisable value. (h)  
  Recoverable amount of non-current assetsThe carrying amounts of non-current assets other than exploration and evaluation expenditure carried forward are reviewed to determine whether they are in excess of their recoverable amount at reporting date. The recoverable amount of non-current asset is the net amount expected to be recovered through the net cash inflows and outflows arising from its continued use and subsequent disposal.  Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in the net profit or loss in the reporting period in which the recoverable amount write-down occurs.  The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values using a market-determined, risk-adjusted discount rate.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   1.    
  Summary of significant accounting policies (continued) (i)    
  Property, plant and equipmentAll assets acquired are initially recorded at their cost of acquisition at the date of acquisition, being fair value of consideration provided plus incidental costs directly attributable to the acquisition. All property, plant and equipment assets have limited useful lives and are depreciated, with the exception of freehold land.  Depreciation is on a straight line basis over their estimated useful lives, taking into account estimated residual values, with the exception of plant and equipment with a deemed useful life equal to the life of the mine.  In this case depreciation uses a units of production basis, charged proportional to current delineated mineable product of the operation.  Estimates of remaining useful lives used for depreciation of assets which are not expected to last the life of the mine are as follows: Mine Buildings   Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate.(j)     Mine properties and developmentMine properties and development represent the accumulation of all exploration, evaluation and development expenditure incurred by or on behalf of the entity in relation to areas of interest in which mining of a mineral resource has commenced or expected to be commenced. Mine development expenditure incurred by or on behalf of the entity is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the directors.  Such expenditure comprises net direct costs and appropriate portion of related overhead expenditure having a specific nexus with the development property. When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production. No amortisation is provided until they are reclassified as “Mine properties and development” following a decision to commence mining. Amortisation of costs is provided on the unit-of-production method with separate calculations being made for each mineral resource.  The unit-of-production basis results in an amortisation charge proportional to depletion over the expected life of the operations.   The net carrying value of each mine property and development is reviewed regularly and, to the extent to which this value exceeds its recoverable amount that excess is either fully provided against or written off in the financial year in which this is determined. Depreciation cost associated with heavy vehicles working on capital development is included in mine properties and development expenditure. Revision of accounting estimatesFrom 1 July 2004, the estimated total life of the mine for the purpose of amortisation and depreciation calculation has been extended from 10 to 15 years. The net effect of the change in the 2005 financial year was a decrease the amortisation and depreciation expense of the consolidated entity of $1,150,000. The amortisation and depreciation to be expensed in the future years will be calculated based on a 15 year mine life.


Emperor Mines Limited Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   1.    
  Summary of significant accounting policies (continued) (k)  
  ExplorationExploration and evaluation expenditure is accumulated separately for each area of interest.  Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest. Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation.  Exploration expenditure for each area of interest, other than that acquired from the purchase of another mining company, is carried forward as an asset provided that one of the following conditions is met:
  (i)   (ii) reasonable assessment of the existence or otherwise of recoverable mineral resources, and active and
                
  significant operations in relation to the area are continuing.
 Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Exploration expenditure on areas of interest outside of the Vatukoula region are fully provided for. Expenditure is not carried forward in respect of any area of interest/mineral resource unless the consolidated entity’s rights of tenure to that area of interest is current. (l)   Leased non-current assetsA distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised.  A lease asset and liability are established at the present value of minimum lease payments.  Lease payments are allocated between the principal component of the lease liability and the interest expense. The lease asset is depreciated on a straight line basis over the shorter of the lease term or the life of the asset.  Lease assets held at the reporting date are being depreciated over a period not exceeding 5 years. (m)  
  CashCash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, and investments in money market instruments, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current liabilities. (n)  
  Trade and other creditorsThese amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid.   (o)  
  Interest bearing liabilitiesLoans are carried at their principal amounts which represent the value of future cash flows associated with servicing debt.  Interest expense is accrued at the contracted rate. (p)  
  Deferred costsDeferred costs relate to ancillary costs incurred in connection with arrangement of ANZ Bank loan facility. The deferred costs are amortised from the commencement of the first loan drawdown (February 2003) over the life of the loan (final repayment due October 2008). The amortisation of deferred cost is recognised as borrowing costs. (q)  
  Maintenance and repairsThe costs of maintenance, repair costs and minor renewals are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in accordance with Note 1(k).


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 10
 1.  Summary of significant accounting policies (continued) (r)  Employee entitlements(i)
 Wages and salaries, annual leave and sick leave
 Liabilities for wages, salaries, annual leave and sick leave and other employee benefits are measured at their nominal amounts, using the remuneration rates expected to be paid when these liabilities are settled. (ii)
 Long service leave
 A liability for long service leave is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iii)  SuperannuationSuperannuation contributions are provided on the basis as described in Note 31. (s)  Borrowing costsBorrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the cost of qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale.  In these circumstances, borrowing costs are capitalised to the cost of the assets.  Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those incurred in relation to that borrowing.  Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate. Exploration and evaluation expenditure carried forward relating to areas of interest which have not reached a stage permitting reliable assessment of economic benefits are not qualifying assets. Borrowing costs includes:
 •  interest;
 •  foreign exchange differences, net of the effect of hedges of borrowings;
 •  amortisation of ancillary costs incurred in connection with arrangement of the borrowing; and
 •  finance lease charges.  Where interest rates are hedged or swapped, the borrowing costs are recognised net of any effect of the hedge or swap. (t)  Earnings per shareBasic earnings per share is determined by dividing net profit after income tax attributable to members of the Company by the weighted average number of ordinary shares outstanding during the financial year, adjusted for the bonus element in the Company’s rights issue. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares adjusted for the bonus element in the Company’s rights issue.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended
  6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 11
 1.  Summary of significant accounting policies (continued) (u)  Rehabilitation and restoration costsExpenditures relating to ongoing rehabilitation and restoration programs, including for exploration areas on non-freehold land, are provided for or charged to costs of production as incurred. A provision for future rehabilitation and restoration relating to mine closure is accrued based on the estimated mine life. (v)  Royalties and other mining impostsAd valorem royalties and other mining imposts are accrued and charged against earnings when the liability from production or sale of the mineral crystallises.   (w)  Going concernThe financial report has been prepared on the basis of going concern.  This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities will occur in the normal course of business.  Despite the consolidated entity suffering recurring losses from operations and having a working capital deficit of $14,077,000 as at 30 June 2005 the directors believe that the consolidated entity will be able to fund future operations through revised strategic plans and additional funding sourced from DRD Gold Limited (“DRD Gold”), ANZ bank and intended share placements. Revised strategic plansThe revised strategic plan has been approved by the Emperor Board with the intention to return Emperor to positive cashflows from operations.  This plan includes the following initiatives: •  Changes to work practices and shift rosters which are expected to reduce problems associated with   absenteeism, increase fleet utilisation and reduce power consumption;
  •  Increase development expenditure and reduce dilution of ore grades by better control of mining heights; and •  Acceleration of the heavy vehicle rebuild program. Additional fundingSubsequent to 30 June 2005 Emperor finalised a $10,000,000 convertible loan facility with its major shareholder, DRD Gold.  As at 13 December 2005 Emperor has fully drawn down the $10,000,000 facility (refer Note 37(a) for more information regarding this facility). As a part of the proposed transaction between Emperor and DRD (Offshore) Limited (“DRD Offshore”), as described in Note 37(c), and in addition to the current loan arrangements ANZ Bank has provided Emperor with a term sheet to establish a new US$42,000,000 loan facility.  This facility is expected to fund the cash consideration payable to DRD Offshore and provide additional working capital.  Details of the proposed terms included in ANZ Bank’s term sheet are described in Note 37(f). On 5 December 2005 Emperor placed $8,800,000 of new shares with institutional investors and private shareholders.  This placement forms part of Emperor’s intention to raise US$15,000,000 through the placement of new shares following relevant approvals of the sale and purchase transaction with DRD Offshore as described in Note 37(c). On 12 December 2005 the ANZ Bank and Emperor concluded a standstill agreement that has deferred repayment of Emperor’s existing loan to 30 November 2006.  The terms and conditions of this standstill are detailed in Note 19. The Board acknowledges that until such time as the sale and purchase transaction with DRD Offshore receives unconditional approval from all relevant parties, the new ANZ Bank loan facility is negotiated, the placement of new Emperor shares is completed and Emperor satisfies all conditions of the ANZ standstill agreement there remains uncertainty as to whether Emperor will continue as a going concern and, therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report has been prepared on the basis of going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended
  6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   2.   
  Segment information
 The consolidated entity operates primarily in one business segment being gold mining.  The consolidated entity’s business segment operates in Fiji, with Australia being the home country of the parent company:
 
 
 Fiji* Australia
 
 Other
 countries  TOTAL
 
 
 
 
 
 6 April 2006 ($’000)
 
 
 
 
    37,952
     75,287
 
 
 
 
 
 2005 ($'000)
        65,294
     (33,734)
     72,786
     44,975
     12,171
    
 2004 ($'000)
    
    65,427
     (4,930)
     96,567
     53,022
    22,556
    
 
   
 *includes unrealised (loss)provision for hedging re-structure of $1,157,000 (2005:($1,524,000), 2004: ($2,155,000))
 With the exception of Fiji no other individual country contributed more than 10% of consolidated revenues and consolidated assets.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 13
 
 
 Period
 ended 6
 April
 
 
 
 2006
 $'000
 2005
 $'000
 2004
 $'000
 3. Revenue
 
 
 Revenue from operating activities
 
 
 Gold sales
 38,952
 66,345  66,716
 Less Provision for hedge redesignation
 (1,157)
 (1,524)  (2,155)
 37,795
 64,821  64,561
 Revenue from outside the operating activities
 
 
 Interest received
 145
 409  324
 Sale of non-current assets
 12
 38  50
 Sub-lease rentals
 -
 26  60
 Settlement of legal action
 -
 -  432
 
 157
 473  866
 Revenue from ordinary activities
 37,952
 65,294  65,427
 
 
 4.  Loss from ordinary activities
 
 Loss from ordinary activities before income tax expense includes the following specific net gains and expenses:
 
 
 (a) Net gains and expenses
 
 
 
 Net gains on disposal of property, plant and equipment
 -
 -  6
 
 Other foreign exchange gain
 2
 -  4
 (b) Expenses
 
 
 
 Cost of goods sold
 65,145
 81,264  68,125
 Depreciation
 
 
 
 
 Buildings
 65
 136  141
 
 Plant and equipment
 3,850
 4,926  4,780
 Insurance spares
 32
 37  53
 Total  depreciation
 3,947
 5,099  4,974
 Amortisation
 
 
 
 Mine property and development
 2,318
 5,924  7,096
 
 Plant and equipment under finance leases
 42
 32  58
 Total  amortisation
 2,360
 5,956  7,154
 
 
 
 
 Total depreciation and amortisation
 6,307
 11,055  12,128
 Less depreciation capitalised (Note 40)
 (177)
 (279)  (778)
 Total depreciation and amortisation
 6,130
 10,776  11,350
 Mine Rehabilitation
 61
 133  -
 Total Depreciation, amortisation and rehabilitation expense
 6,191
 10,909  11,350
 
 
 
 Exploration and evaluation expenditure written off
 
 
 Vatukoula
 54
 281  117
 Tuvatu
 34
 37  42
 
 88
 318  159
 Write down of inventories to net realisable value
 -
 1,843  -
 
 
 
 Borrowing costs
 
 
 Interest on ANZ working capital facility
 -
 51
 30
 Interest and finance charges paid/payable
 892
 952  883
 Deferred borrowing cost amortisation
 136
 166  187
 Exchange loss/(gain) on foreign currency borrowings
 1,024
 (1,066)  (834)
 DRD Gold Convertible note loan
 484
 -  -
 Amount capitalised
 -
 -  (100)
 Borrowing cost expensed
 2,536
 103  166


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 14
 
 
 Period
 ended 6
 April
 2006
 $'000
 2005
 $'000
 
 2004
 $'000
 4.  Profit/(loss) from ordinary activities
 (continued)
 
 Net loss on disposal of property, plant and equipment
 -
 47  190
 Provisions
 
 
 
 Employee entitlements
 1,620
 2,460  2,094
 
 
 
 
 Government taxes
 
 
 
 Gold tax
 1,191
 1,768  1,949
 Import duty on fuel
 -
 333  2,013
 Total government taxes
 1,191
 2,101  3,962
 
 
 
 
 Rental expense relating to operating leases
 
 
 
 
 Minimum lease payments
 329
 104  32
 Sub-lease
 -
 (26)  (15)
 Total rental expense relating to operating leases
 329
 78  17
 (c)  Individually significant expenses included
 in profit from ordinary activities
 During the nine months the consolidated entity has written down its mining asset (Mine properties and development) associated with Smith shaft ($5,800,000) following decision to stop mining due to non-economic grades. Philip shaft’s portion of impairment change made during the June 2005, was reversed out for $3,900,000 following the consolidated entity’s decision to increase production at Philip shaft.
 5.  Income  tax
 
 (a) The aggregate amount of income tax attributable to the financial year differs from the amount calculated on the operating (loss). The differences are reconciled as follows:
 
 (Loss) from ordinary activities before income tax expense
 (74,537)
 (33,563)  (4,912)
 Income tax calculated @  30%
 (22,361)
 (10,069)
 (1,474)
 Tax effect of permanent differences:
 
 Non deductible expenses
 2,364
 61
 75
 Export profit deductions
 -
 -
 (83)
 Equity raising costs
 (52)
 (78)
 (43)
 Sundry items
 149
 308
 66
 Deferred tax assets not brought to account (valuation allowance)
 20,838
 10,328
 1,647
 Effect of different tax rates on overseas income
 (185)
 (378)
 (107)
 Under/(over) provision in previous year
 -
 (1)
 (63)
 Aggregate income tax expense
 753
 171
 18


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 15
 
 
 Period
 ended 6
 April
 
 
 2006
 $'000
 2005
 $'000
 2004
 $'000
 5.
 Income tax (continued)
 
 (b) The directors estimate that the potential future income tax benefit at 6 April 2006 in respect of tax losses and timing differences not brought to account is
 65,486
 56,795
 47,404
 Gross tax losses of $119,599,000 as at 6 April 2006 expire as follows
 Year of expiry
 Gross tax loss
 $’000
 2010  40,172 2011  44,974 2013  10,201  24,252 TOTAL  119,599
 This benefit for tax losses will only be obtained if: (i)
 the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised, and
 (ii)
 the consolidated entity continues to comply with the conditions for deductibility  imposed by tax legislation, and
 (iii)
 no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for the losses.
 
 6.  Cash  assets
 2005
 $'000
 2004
 $'000
 Cash at bank and on hand – current
 3,733
 3,658
 
 
 Restricted cash at bank – non-current
 3,195
 3,594
 
 
 Cash at the end of the financial year as shown in the statement of cash flows is as follows:
 
 
 Cash at bank and on hand
 3,733
 3,658
 Less: Bank overdraft (Note 16)
 -
 (2,331)
 Balances per statement of cash flows
 3,733
 1,327
 Restricted cash at bank  The funds held as restricted cash include the following:  (i)
 An amount of US$1,700,000 was held at balance date as insurance reserve account with ANZ Bank where
 the Bank can make withdrawals from the funds to meet reparation costs in the event of loss or damage to mine assets which are subject to the consolidated entity’s self insurance policy.
 (ii)
 Cash deposits held as security.
 The deposits are bearing floating interest rates between 1.00% and 5.70% (2004 –1.00% and 5.48%).
 7.
 Current assets – Receivables
 2005
 $'000
 2004
 $'000
 Trade debtors
 742
 1,480
 Other debtors
 2,542
 2,003
 Less: Provision for doubtful debts
 (74)
 (87)
 Total Receivables
 3,210
 3,396


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   Other debtors are carried at notional amounts and are normally settled on 30 days terms. Other debtors, net of provisions, approximate net fair value.  Other debtors are non interest bearing.
  2005
 $'000
   8.
 Current assets – Inventories
  4,542
   -
   2,871
   7,413
  
 9.
 Current assets – Other
  643
  10.          
  Current assets-Deferred  costs
  183
  11.          
  Non-current assets Inventories
  140
  12.
 Non-current assets – Property, plant  and equipment
 Land and buildingFreehold land-at cost
 1,833
   1,906
   (563)
   1,343
   3,176
  Plant and equipmentPlant and equipment-at cost
 45,866
   (12,944)
   32,922
   348
   (88)
   260
   33,182
   36,358
  Mine properties and developmentMine properties and development-  at cost
 -
   -
     12,708
   -
  Total mine properties and development, property, plant and equipment 49,066


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 17
 12. Non-current assets – Property, plant and equipment (continued)
 Reconciliation - 2005Reconciliation of the carrying value for each class of property, plant and equipment is set out below:
 
 Freehold
 Land
 
 $'000
 Mine
 buildings
 
 $'000
 Plant and
 equipment
 
 $'000
 Leased
 plant and
 equipment
 $’000
 Mine prop.
 and dev.
 
 $'000
 Exploration
 
 $’000
 Total
 
 $'000
  1,909
 1,013
 35,911
 105
 26,190
 237
 65,365
  -
 509
 3,387
 191
 8,166
 155
 12,408
  -
 (3)
 (102)
 -
 -
 -
 (105)
  -
 -
 -
 -
 227
 (227)
 -
 Expenditure Written off/ Impairment
 -
 -
 -
 -  (15,248)
 (155)  (15,403)
 Depreciation/ Amortisation  (Note 4)
 -
 (136)
 (4,926)
 (32)
 (5,924)
 -  (11,018)
 Exchange differences on translation of self sustaining foreign operation
 (76)
 (40)
 (1,348)
 (4)
 (703)
 (10)  (2,181)
 Carrying amount at 30 June 2005
 
 1,833
 1,343
 32,922
 260
 12,708
 
 -
 
 49,066
 Reconciliation - 2004Reconciliation of the carrying value for each class of property, plant and equipment is set out below:
 
 Freehold
 Land
 
 $'000
 Mine
 buildings
 
 $'000
 Plant and
 equipment
 
 $'000
 Leased
 plant and
 equipment
 $’000
 Mine prop.
 and dev.
 
 $'000
 Exploration
 
 $’000
 Total
 
 $'000
  1,909
 1,125
 30,925
 273
 20,837
 -
 55,069
  -
 39
 9,972
 -
 12,545
 254
 22,810
  -
 (7)
 (214)
 (13)
 -
 -
 (234)
  -
 -
 94
 (94)
 17
 (17)
 -
 Depreciation/Amortisation  (Note 4)
 -
 (141)
 (4,780)
 (58)
 (7,096)
 -  (12,075)
 Exchange differences on translation of self sustaining foreign operation
 -
 (3)
 (86)
 (3)
 (113)
 -
 (205)
 Carrying amount at 30 June 2004
 1,909
 1,013
 35,911
 105
 26,190
 237
 65,365


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 18
 
 
 2005
 $'000
 2004
 $'000
 13.
 Non-current assets – Deferred tax assets
 Future income tax benefit of parent
 398
 340
 14.  Non-current assets – Deferred cost
 Deferred borrowing costs
 417
 624
 15.  Current liabilities – Payables
 Trade creditors
 9,786
 11,553
 Other creditors and accruals
 1,492
 1,948
 
 11,278
 13,501
 16.  Current liabilities – Interest bearing
 liabilities Secured
 Bank overdraft
 -
 2,331
 Bank loan  (Note 19)
 16,231
 2,694
 Lease liabilities (Note 30)
 87
 42
 
 16,318
 5,067
 Details of the security relating to each of the secured liabilities are set out in Note 19. 17.  Current liabilities – Provisions
 Employee entitlements (Note 31)
 1,166
 1,350
 Other
 293
 250
 
 1,459
 1,600
 
 18.
 Non- current liabilities - Payables
 Loan restructure fees
 500
 -
 Relates to restructure fees payable in September 2006 to ANZ Bank. 19.
 Non-current liabilities – Interest bearing liabilities (secured)
 SecuredBank loan
 -
 16,942
 Lease liabilities (Note 30)
 152
 53
 Total secured non-current interest bearing liabilities
 152
 16,995
 Financing arrangements
 Unrestricted access was available at balance   date to the following lines of credit: Bank overdraft
 -
 3,603
 Bank loan
 -
 21,032
 Total facilities
 -
 24,635
 Used at balance date
 16,231
 21,967
 Unused at balance date
 -
 2,668
 
 16,231
 24,635


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   19.
 Non-current liabilities – Interest bearing liabilities (secured) (continued)
 The loan from ANZ Banking Group Limited (“ANZ Bank”), used by the consolidated entity to fund its Phase 2 Capital Expansion Project relating to infrastructure, development and underground fleet replacement, is secured by Emperor Gold Mining Company Limited as follows:
  (i)           a first registered deed of charge over all present and future assets and undertakings of the controlled entity              
  other than excluded assets (SPL’s 1283, 1296, 1418, 1360, 1411 and CX 626 and all the shares in Tuvatu              
  Gold Mining Company Limited);   a first registered mortgage over Special Site Rights (SSR)  6, 7, 8 and Special Mining Leases (SPL 54, 55              
  and 56); and
 The interest rate relating to the loan is based on the London Inter Bank Offered Rate (LIBOR) plus a margin of 2.5% and the principle covenants include the requirement for:  (i)
 The consolidated entity to retain an Insurance Buffer Amount of $5,000,000 (2004: $5,000,000) in immediately available cash (including an Insurance Reserve Amount of US$1,700,000); and
  Emperor Mines Limited to unconditionally and irrevocably guarantee the obligations of Emperor Gold Mining Company (Fiji), a controlled entity, until completion of the Phase 2 Capital Expansion Project.  On completion, additional financial covenants would be implemented.  As at 12 December 2005 Emperor had not achieved completion and the guarantee over Emperor Gold Mine Limited’s (Fiji) obligations remains in place.
 In relation to the existing financial arrangements and original loan covenants Emperor has entered a Standstill agreement with ANZ Bank that postpones all principal repayments until 30 November 2006.   This standstill is conditional on the transaction with DRD Offshore Limited (as described on Note 37 (c) ) proceeding in accordance with a predetermined timetable that will include shareholder approval by 14 February 2006, regulatory approval by 28 February 2006 and completion by 6 April 2006.  In addition, ANZ must be provided with reports in May 2006, July 2006 and September 2006 that satisfy ANZ that Emperor is moving towards obtaining additional fundraising from share placements.  The standstill agreement also allows ANZ Bank to conduct a formal review of all Vatukoula loan facilities on 30 November 2006 and if it is not satisfied with the results of that review those facilities shall be repayable within 90 days.   Due to the conditional nature of the waivers granted in the standstill agreement by the ANZ Bank the non-current portion of the ANZ Bank debt amounting to $11,600,000 has been reclassified as a current liability rather than non-current, resulting in the total loan balance of $16,231,000 being classified as current.  The overdraft facility negotiated with the ANZ Bank in 2004 of FJD$8,000,000 ($6,400,000) was available as a general overdraft facility. Upon completion of the Company’s rights issue in November 2004, the amounts drawn down against the facility of $2,800,000 were repaid and the facility extinguished. Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
     2005
 $'000
   20.
 Non-current liabilities – Deferred tax liabilities
  7
  21.
 Non-current liabilities – Provisions
 
  861
   1,135
   131
   2,127
  22.
 Provision for hedging redesignation
 Provision for hedging redesignation
 8,542
  Following Emperor’s hedge book redesignation during the June 2003 year, in accordance with the consolidated entity’s accounting policy a provision for hedging redesignation was recorded in relation to each of the financial years upon which the redesignation has an impact. The provision for hedging redesignation reflected in the Consolidated Statement of Financial Performance in the amount of $1,524,000 is a non cash unrealised loss in respect of 18,800 ounces (18,800 x $81 dollars per ounce) that were originally planned for delivery during the 2005 financial year which were rescheduled for delivery in later periods in line with loan facility requirements. The provision for hedging redesignation reflected in the Consolidated Statement of Financial Position in the amount of $8,543,000 represents an unrealised loss in respect of 105,390 ounces at $81 per ounce had the gold price remained at $627/oz. As this provision relates to an unrealised loss, it will be reversed over a 7 year period corresponding to the period of the redesignation. The table below shows the net movement in ounces as a result of the redesignation and the corresponding provisions recorded and reversed in future years. Over a 7 year period this adjustment has a net zero effect.
                 2005 (18,800)
 (1,524)
 (8,543)


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   
 
 
 
 2005$000
 2004 $000
  23.     
  Contributed equity
 
   (a)     
  Share capital
 
   
 Ordinary Shares Fully paid
 163,011
   (b)  Movements in ordinary share capital
 Date              
  Details
 Notes
 Number of
 shares
 Issue price
 $'000
 1 July 02
        
       
           Less: Transaction cost arising on share issues
     
           
                                         157,765,579
 163,011
      (c)  Ordinary shares
 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.  On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. At 30 June 2005 all ordinary shares were fully paid. (d)  Share optionsDuring the period 924,999 (2004:50,000) shares were issued by the Company as a result of exercise of options.   Outstanding options are detailed in Note 27. (e)  Share placementIn July 2002, the Company arranged a placement of 12,500,000 shares at 81cents per share raising $10,125,000.  The shares were placed with institutional clients of BNP Paribas Equities, both overseas and in Australia. (f)  Share purchase planIn July 2002 the Company undertook a Share Purchase Plan (“SPP”) to provide eligible shareholders with the opportunity to participate in a further capital raising associated with the Phase 2 expansion plan.  The price for the SPP was set at 77 cents, representing a 15% discount to the weighted average traded price of the Company’s shares for the 5 trading days ended 21 June 2002.  As a result, the Company was successful in raising some $960,000.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
    
 2005
 $'000
   24.
 Reserves and Accumulated losses
 (a)     
  Reserves
 
  (22,243)
 Movements:
 
 Foreign currency translation reserve Balance at beginning of year
 (20,432)
 Net exchange differences on translation of foreign controlled entity
 (1,811)
  Balance at end of year
 (22,243)
 (b)
 Accumulated losses
 Accumulated losses at beginning of year
 (79,223)
 Net (loss) attributable to members of Emperor Mines Limited
 (33,734)
  Accumulated losses at end of year
 (112,957)
 (c)
 Nature and purpose of reserves
 Foreign currency translation reserve
 Exchange differences arising on translation of the foreign controlled entity, Emperor Gold Mining Company Limited, Jubilee Mining Company Limited, Koula Mining Company Limited are taken to the foreign currency translation reserve, as described in accounting policy Note 1(c)(ii).
 
 
 2005
 $'000
   25. EquityTotal equity at the beginning of the financial year
 43,545
  Total changes in equity recognised in the statement of financial performance
 (35,545)
   Contribution of equity, net of transaction fees
  19,811
  Total equity at the end of the financial year
 27,811


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   26.       
  Financial instruments
 The consolidated entity is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuation in interest rates and gold price.(i)  Interest rate swap
 Bank loans of the consolidated entity currently bear an average variable rate of 4.93%. In order to minimise fluctuation in interest rates, 70% of the loan has been hedged by entering into interest rate swap contracts under which the Company is obliged to receive interest at variable rates and pay interest at fixed rates until October 2008.  The contracts are settled on a net basis and the net amount receivable or payable at the reporting date is included in the term loan. The following table sets out the fair values of interest rate swaps.
 
 2005
 $'000
   Fair value of interest rate swap-(payable)
 (302)
  The fixed interest rate payable on the hedged 70% of the loan was 4.34% (2004: 2.18%) and the average variable rate received was 2.32% (2004: 1.11%).   (ii)Commodity contracts
 As part of the loan facility requirements, the consolidated entity’s forward gold under sales contracts was redesignation to align with the period of loan facility. At 30 June 2005 the consolidated entity was committed to delivering 221,815 ounces of gold under forward sales contracts at an average price of $599 per ounce by 31 December 2008.
 Maturity Date
 Ounces to be delivered
 Exercise price
 2005  2004  2005
 $
 2004
 $
 2005-2006  66,120  66,120  599  599 2006-2007  66,440  66,440  599  599 2007-2008  66,380  66,380  599  599 2008-2009  12,875  12,875  599  599  211,815
   Mark-to-market position of Commodity contracts
 
 
 2005
 $'000
    
  4,388
  Unrealised commodity loss payable to counter party
 4,388
  At 30 June 2005, the net unrealised mark-to-market loss on the total open commodity position of 211,815 ounces was $4,388,000 based on an A$ gold price of $573 per ounce (June 2004: $7,192,000 loss based on A$ gold price of $569).  (iii)Credit risk
 The credit exposure of derivatives is represented by the net fair values of the contracts disclosed. The consolidated entity has a credit risk in relation to derivative financial instruments in the event of non-performance by counter parties. To counter this risk, financial instruments are only entered into with counter parties with high credit ratings. Emperor delivers its gold to AGR Matthey (Australia), who refines the gold and then sells the gold on to third parties.  All proceeds are received within a week of delivery.  The concentration of credit risk in Australia is mitigated by the reputable nature of the sales agent and their customers and the settlement of proceeds within 6 days.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   26.
 Financial instruments (continued)
 (iv)  Interest rate risk exposure
 The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out in the table below.
 
 Fixed  Interest
 Maturing in:
 
 
 Floating
 Interest
 rate 1
 Year
 or less
 1 Year to
 5 years
 Non-
 Interest Bearing
 Total
 
 Notes
 $’000           
  $’000           $’000            
  $’000              
  $’000
 2005 Financial assets
 
 
 
 
 
 Cash 6
 6,884
 -
 -
 44
 
 6,928
 Receivables 7
 -
 -
 -
 3,210
 3,210
 
 6,884
 -
 -
 3,254
 
 10,138
 Weighted average interest rate
 4.71%
 
 
 
 Financial liabilities
 
 
 
 
 
 Bank
 loan
 16
 16,231
 -
  -
  -
 16,231
 Payables 15,
 18
 -
 -
 -
 11,778
 11,778
 Lease liabilities
 16, 19
 -
 87
 152
 -
 239
 Interest Rate Swap*
 (11,393)
 3,255
 8,138 -
 -
 
 4,838
 3,342
 8,290
 11,778
 28,248
 Weighted average interest rate
 4.93%
 4.43%
 4.43%
 
 
 
 2004 Financial assets
 
 
 
 
 
 Cash 6
 7,247
 -
 -
 5
 
 7,252
 Receivables 7
 -
 -
 -
 3,396
 3,396
 
 7,247
 -
 -
 3,401
 
 10,648
 Weighted average interest rate
 4.14%
 
 
 
 Financial liabilities
 
 
 
 
 
 Bank
 overdraft 16
 2,331
 -
  -
  -
 2,331
 Bank loan
 16, 19
 19,636
 -
 -
 -
 19,636
 Payables 15,
 18
 -
 -
 -
 13,501
 13,501
 Lease liabilities
 16, 19
 -
 42
 53
 -
 95
 Interest Rate Swap*
 (16,773)
 4,233
 12,540
  -
 -
 
 
 5,194
  4,275 12,593 13,501 35,563
 Weighted average interest rate
 4.72%
 2.36%
 2.36%
 
 
 *Notional principal amount
 The net fair value of monetary financial assets and financial liabilities of the consolidated entity approximates their carrying values.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   27.        
  Contingent liabilities
 At 30 June 2005, the consolidated entity had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business amounted to $718,000 (2004 $659,000) to third parties. The consolidated entity is a defendant in various legal actions and the outcome of such actions are not expected to give rise to any significant loss not already provided for in the financial statements. 28. Commitments for expenditure
 Capital Commitments
 2005
 $'000
   Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities payable: Within 1 year
 799
  Exploration CommitmentsIn order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the following discretionary exploration expenditure requirements up until expiry of the leases.  These obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the financial statements and are payable:
   165
   Finance LeasesCommitments in relation to finance leases are payable as follows: Within 1 year
 100
   166
   266
   (27)
   239
   Representing lease liabilities: Current (Note 16)
 87
   152
   239
  
  Operating leasesCommitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year
 83
   309
  Commitments not recognised in the financial statements
 392
  Future minimum lease payments expected to be received in relation to non-cancellable sub-leases of operating leases not recognised in the financial statements
 78


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 26
 29.  Employee  benefits
 Superannuation FundThe consolidated entity has a legal obligation to contribute to relevant superannuation plans. In Fiji, the funds are remitted to the Fiji National Provident Fund (a defined contribution retirement fund), a National regulatory body and a trustee managed employee super fund for expatriate employees.  In Australia, Superannuation Guarantee (SG) contributions are made to employee nominated trustee-administrated funds. These plans are generally funded by contributions from employees and by the consolidated entity, taking account of the statutory requirements of the relevant countries. 30.  Related  parties
 Directors and specified executives
 Disclosures relating to directors and specified executives are set out in Note 27. Other related partiesSince becoming a major shareholder in July 2004, DRD Gold have provided Emperor with mining and technical support on cost plus 10% relocation allowance. The aggregate amounts included in determination of loss from ordinary activities before income tax that resulted from transaction with each class of other related parties:
 
 
   
 2006  $000
 2005 $000
 2004 $000
 Professional services
 -  150  -
 Mine-Technical Services
 -  177  -
 Reimbursement of Expenses
 -  220
 -
 
 Sublease Income
 -  10
 -
 The aggregate amounts payable to each  class of other related parties:
 
 
 
 
 2005 $000
 2004 $000
 DRD Gold
 169
 -
 I Murray  and R Johnson, non executive directors of the Company are Chief Financial and Corporate Development officer of DRD Gold and Divisional Director DRD Gold Australasia respectively, are not compensated by the Company or any of its subsidiaries.
 
 31.
 Investments in controlled entities
 Name of entity
 Country of
 incorporation
 Equity holding
 
 
 
 
 
 
 2005
 2004
 
 
 %
 %
 Emperor Gold Mining Company Limited
 
 Fiji
 
 100
 
 100
 Jubilee Mining Company Limited
 Fiji
 100
 100
 Koula Mining Company Limited
 Fiji
 100
 100
 Tuvatu Gold Mining Company Limited
 
 Fiji
 
 100
 
 100
 Sovereign Insurance Company Limited
 
 Vanuatu
 
 100
 
 100
 Emperor Finance Limited
 Australia
 100
 100
 Emperor Australia Pty Limited
 Australia
 100
 100
 
 
 
 
 (i)
 All holdings are in the ordinary share capital of the undertaking concerned.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 27
 32.
 Interest in joint venture
 The consolidated entity’s 49% interest in a joint venture of South Pacific Infrastructure Pty Limited, incorporated on 5 January 2000, for the purpose of pursuing the development of infrastructure projects in the South Pacific was disposed of during the 2005 year. There has been no financial implication as a result of this disposal 33.  Reconciliation of operating loss from ordinary activities after income tax to net cashflows from
  operating activities
 
 
 
 
 
 2006
 2005  2004
 
 $000
 $000
 $000
 Operating loss after income tax
 (75,287)  (33,734)
 (4,930)
 Depreciation and amortisation
 8,414
 10,739
 11,297
 Exploration and evaluation expenditure written off against
 -
 318
 159
 Net loss on sale of non-current assets
 -
 47
 184
 Non Cash borrowing cost
 -
 (157)
 37
 Impairment of mine assets
 1,900
 15,248
 -
 Net exchange rate difference
 6,105
 43
 (237)
 Deferred tax provision
 3
 (60)
 (235)
 Change in operating assets and liabilities:- Decrease/(increase) in receivables
 2,509
 186
 (802)
 - (Increase)/decrease in inventories
 (1.231)
 4,355
 (3,466)
 - (Increase)/decrease in other operating
 assets
 -
 (129)
 77
 - Increase/(decrease)/ in trade creditors
 40,021
 (2,222)
 1,990
 - (Decrease)/increase in other operating
 liabilities
 (254)
 2,576
 2,282
 - Decrease in provision for income tax
 -
 (2)
 (182)
 Net cash flow provided by/(used in)   operating activities
 (17,820)
 (2,792)
 6,174
 
 34.  Non-cash financing and investing activities
 
 
 
 
 
 
 
 
 
 2005
 2004
 
 $000
 $000
 
 Acquisition of light vehicles by means of finance lease
 191
 -


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   35.    
  Earnings per  share
 
  
 
   2006
 $
      (0.45)
 
  (0.45)
 
   
 
 
  2006
 Shares
  
   Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share.
 168,076,690
 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share.
 168,076,690
   
 
   2006
 $'000
     
 
    (75,287)
 
  (75,287)




Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   
 36.
 U.S. Generally Accepted Accounting Principles disclosures
 
  
 
 The consolidated financial statements of Emperor Mines limited are prepared in accordance with Australia’s Generally Accepted Accounting Principles (“AGAAP”). Certain significant differences exist between AGAAP and U.S. generally accepted accounting principles (“U.S. GAAP”).  The significant differences between AGAAP and U.S. GAAP as they relate to the consolidated entity are presented throughout this note.
 
 
 
 Reconciliation to U.S. GAAP
 
 
 
 The following is a summary of the adjustments to net loss for the years ended 30 June 2005 and 2004  that would be required if U.S. GAAP had been applied instead of AGAAP.
 
 
 
   2006$000
 2005$000
 2004$000
 Reconciliation of net loss – U.S. GAAP
       (75,287)
 (33,734)
  (deduct)/add
  
   Adjustments required to accord with U.S. GAAP:
  
    (a)
 -
    (b)
 (1,322)
    (c)
 (891)
    (d)
 (2,547)
    (e)
    (g)
 174
    (h)
 2,253
    (i)
 (262)
    (k)
 (296)
     (2,891)
     (78,178)
   
  
 Consolidated Income Statement – U.S. GAAP
 2006            
  2005                
  2004
  $’000           
  $'000               
  $'000
  38,602
 
 
 
    
    58,719
 
  2,538
 
  10,281
 
  43,372
 
  -
 
  114,910
 
  (76,308)
 
 
 
    4,411
 
  -
 
  (5,266)
 
  9,677
 
  (77,163)
 
  (1,105)
 
  (78,178)


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   
  36.
 U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  Consolidated Income Statement – U.S. GAAP
 2006                   
  2005                
  2004
  Dollars           
  Dollars            
  Dollars
 Earnings per share – U.S. GAAP
 
  (a)
 (0.47)
 (0.11)
   (b)
 (0.47)                 
  (0.11)
 
 (a)  Based on the weighted average number of shares on issue for the period (refer note 35).  (b)  Based on the weighted average number of shares on issue for the period, adjusted to reflect the
 In accordance with FAS 128, the number of common shares used in computing EPS has been adjusted retroactively for the bonus element of the Emperor rights issue in 2005.  This adjustment affects both 2005 and all prior periods presented. The following reconciliation of comprehensive income reports changes in shareholders’ equity excluding those resulting from investments by shareholders and distributions to shareholders.
 
 
 
  2005$000
 2004$000
 Reconciliation of comprehensive income – U.S. GAAP
   Total changes in equity other than those resulting from transactions with owners under AGAAP
   Adjustments to reflect comprehensive income in accordance with U.S. GAAP, net of income tax:     Total U.S. GAAP adjustments to net loss per above
 
        The following is a summary of the adjustments to shareholders’ equity as at 30 June 2005 and 30 June 2004 that would be required if U.S. GAAP had been applied instead of AGAAP.
 
 
  2005$000
 2004 $000
 Reconciliation of shareholders’ equity
      add/(deduct)
   Adjustment required to accord with U.S. GAAP:
                                    The following are the variations in the balance sheet as at 30 June 2005  and 30 June 2004 that would be required if U.S. GAAP had been applied instead of AGAAP.
 
 
 
 The column headed ‘Unadjusted’ represents a U.S. GAAP format presentation of the assets, liabilities and shareholders’ equity which have been measured in accordance with AGAAP. The column headed ‘Adjustments’ represents the allocation of those measurement differences (presented in the ‘Reconciliation of shareholders’ equity’), which are required to derive a balance sheet in accordance with U.S. GAAP.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
   AGAAP 30
 June 2005
 Adjustments
 30 June 2005
   30
 June 2005
  AGAAP 30
 June 2004
 Adjustments
 30 June 2004
   30
 June 2004
   $'000                  
  $'000                
  $'000                  
  $'000 $'000                 
  $'000
  
       3,733
    3,210
    7,413
    643
    183
       -
    15,182
    
      
      140
    49,066
   398
   417
    3,195
    4,388
     57,604
    
      72,786
    
      11,278
    16,318
    204
    1,459
    29,259
    
      500
    152
     7
    2,127
  Provision for hedging redesignation
 8,542
     
   Unrealised commodity loss payable to counter party
 4,388
     15,716
  Total liabilities
 44,975
  Net assets
 27,811 8,874 36,685 43,545 (9,365) 34,180
  163,011
    (22,243)
    (112,957)
  Total equity
 27,811


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  The Emperor Mines Limited Statement of Consolidated Cash Flows has been prepared in accordance with AGAAP accounting standard AASB1026, the objectives and principles of which are similar to those set out in U.S. GAAP accounting standard SFAS 95 ‘Statement of Cash Flows’. The principal differences between the standards relate to the classification of items within the cash flow statement as well as the definition of cash and cash equivalents.
 
 
 
 The statement below shows the adjustments to be made to the AGAAP cash flow statement to reclassify it to comply with U.S. GAAP for the two years ended 30 June 2005:
 
 
     
   Reconciliation of Cash Flows – U.S. GAAP
    Net cash (outflow)/inflow from operating activities in accordance with AGAAP
 
   
 Net cash (used in) provided by operating activities in accordance with U.S. GAAP
 (17,820)            
  (3,110)               
  5,762
   
     Net cash used in investing activities in accordance with U.S. GAAP
 (10,573)           
  (12,133)           (21,423)
                   Net cash provided by financing activities in accordance with U.S. GAAP
  15,361               
  8,771
     Net increase in cash and cash equivalents in accordance with U.S. GAAP
  75           
  (6,653)
     Cash and cash equivalents at end of year
  3,733              
  3,658


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  US GAAP adjustments
 
 
 (a) Exploration expenditure
 
 
 Under AGAAP, Emperor Mines Limited capitalises exploration expenditure provided that one of the following conditions is met: (iii)
     reasonable assessment of the existence or otherwise of recoverable mineral resources, and active and significant operations in relation to the area are continuing.
 Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Exploration expenditure on areas of interest outside of the Vatukoula region is fully provided for. Expenditure is not carried forward in respect of any area of interest/mineral resource unless the consolidated entity’s rights of tenure to that area of interest are current. Under U.S. GAAP, exploration costs are expensed as incurred, unless a final feasibility study indicates the existence of commercially recoverable reserves. Exploration balances capitalised by the consolidated entity under AGAAP have been expensed for U.S. GAAP.  (b)  Mine properties development – capitalisation and amortisation Under AGAAP, mine development expenditure incurred by or on behalf of the entity is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the directors.  Such expenditure comprises net direct costs and appropriate portion of related overhead expenditure having a specific nexus with the development property.  When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production. Under U.S. GAAP, development costs incurred to develop or expand the capacity of operating mines are capitalised to the extent the costs are specific to an area containing proven and probable reserves as defined by SEC’s Industry Guide 7 definitions.  The costs related to areas not associated with proven or probable reserves are expensed as incurred. Under AGAAP, Emperor Mines Limited amortises mine properties on the unit-of-production method which includes future capital expenditure and is based on the total number of ounces included in the Board approved mine plan at any point in time. The total number of ounces included in the mine plan is generally in excess of proven and probable reserves but less than available resources.  The units-of-production basis under AGAAP results in an amortization charge proportional to depletion over the mine plan. U.S. GAAP requires mine properties and development to be amortised over proven and probable reserves as determined by reference to SEC’s Industry Guide 7, and does not allow the use of future capital expenditure in the calculation of the amortisation of development expenditure.  The units-of-production basis under U.S. GAAP results in an amortization charge proportional to depletion over the proven and probable reserves.Emperor Mines Limited has prepared its capitalisation and amortisation for U.S. GAAP as follows:    stope pillars, mineralised stope pillars and tailings reserves) determined in accordance with the SEC Industry  Guide 7 based on independent review performed by a geologist specialist.    has been based on the number of tonnes mined from an IR area verses a NIR area. This data is readily available  as it is reported annually in the statement of reserves which is prepared under the SEC Industry Guide 7.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
 
 34
 36.  U.S. Generally Accepted Accounting Principles disclosures (continued)
 
 
 •  The balance of development expenditure allocated to the IR area is amortised based on units-of-production over
 proven and probable reserves only. Only ounces produced from IR areas are used in this calculation; and
 •  The balance of development expenditure allocated to the NIR area does not have any proven and probable
 reserves attached to it.  Thus these NIR costs are expensed as incurred, except for the current developed face existing at period end.
 (c)  Plant and equipment – unit-of-production amortisation Emperor Mines Limited under AGAAP depreciates life of mine assets, included in plant and equipment, on a unit-of-production basis based on the total number of ounces included in the Board approved mine plan at any point in time. The total number of ounces included in the mine plan is generally in excess of proven and probable reserves but less than available resources.  The units-of-production basis under AGAAP results in an amortisation charge proportional to depletion over the mine plan. U.S. GAAP requires life of mine assets to be amortised over proven and probable reserves and determined by reference to SEC’s Industry Guide 7.  The units-of-production basis under U.S. GAAP results in an amortisation charge proportional to depletion over the proven and probable reserves.   The calculation of the US GAAP adjustment is based on proven and probable reserves (excluding remnant stope pillars, mineralised stope pillars and tailings reserves) determined in accordance with SEC’s Industry Guide 7.  (d)  I mpairment of mine assets Emperor Mines Limited recognised an asset impairment write down under AGAAP of $15.2 million for the 30 June 2005 financial year to the recoverable amount of its mining assets. Under AGAAP to the extent to which the net carrying value of non-current assets exceeds its recoverable amount that excess is recognised in the statement of financial performance as an impairment in the financial year in which this is determined.  Based on Emperor Mines Limited’s accounting policy, the expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values.  Under U.S. GAAP when an impairment test is undertaken, the carrying amount of an asset is first measured by reference to undiscounted cash-flows to assess if it is recoverable. Only if the asset is not recoverable on an undiscounted basis, must the entity measure impairment by comparing the asset’s carrying value to its fair value.  An impairment loss must be recognised in the income statement when an asset’s carrying amount is not recoverable and exceeds fair value. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. The mining assets under U.S. GAAP have lower carrying values due to accelerated amortization over proven and probable reserves and due to more restrictive expense treatment for exploration and development expenditure compared to AGAAP.  Under U.S. GAAP, the consolidated entity has determined the carrying amount of long-lived assets to be recoverable on an undiscounted basis.  Thus the write down recorded in the AGAAP accounts for the period ended 30 June 2005 has been reversed for U.S. GAAP.
 
 (e)  Borrowing costs Under AGAAP borrowing costs capitalised for the construction of qualifying assets includes a portion of interest expense, amortisation of ancillary costs incurred in connection with arrangement of borrowings, and foreign currency exchange gains or losses on foreign denominated borrowings specifically related to funding a project’s construction.  Under U.S. GAAP, foreign currency exchange gains or losses are not considered in determining the capitalisation of borrowing costs.  The adjustment for U.S. GAAP includes the reversal of exchange gains and losses capitalised under AGAAP.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  (f)  Revenue recognition Under AGAAP revenue is recognised as sales revenue when, there has been a passing of risk to the customer, and:(i)  the product is in a form suitable for delivery and no further processing is required by, or on behalf, of the  (ii)  the quantity and quality of the product can be determined with reasonable accuracy;
  (iii)  the product has been dispatched to the customer and is no longer under the physical control of the producer (or
 
 U.S. GAAP requires the following four criteria to be met before revenue is realised or realisable and earned: (i)  Persuasive evidence of an arrangement exists (ii)  Delivery has occurred (iii) Sellers price is fixed and determinable (iv) Collection is reasonably assured Based on the refining agreement with the consolidated entity’s single customer, the criteria is met upon customer acceptance.  This presumes that such contractual customer acceptance provisions are substantive, bargained-for terms of an arrangement and pricing occurs upon customer acceptance.  The outturn generally occurs within 2-4 business days after the delivery of the dore and it is at this point in time that the gold revenue is recognised under U.S. GAAP. Although the timing of revenue recognition can differ between U.S. GAAP and AGAAP, no differences existed as of 30 June 2005 and 30 June 2004.  However, at 30 June 2003 the revenue recognition cut-off results in a U.S. GAAP adjustment to record $910,000 of revenue and cost of sales in financial year ended 30 June 2004 instead of financial year ended 30 June 2003.(g)  Restoration and rehabilitation costsEmperor Mines Limited under AGAAP did not provide for restoration and rehabilitation until the year ended 30 June 2005. Under AGAAP (pre-AIFRS), provisions are recorded for mine site rehabilitation on an incremental basis during the course of mine life.  Provisions, which are determined on an undiscounted basis, include the following costs: reclamation, plant closure, waste site closure and monitoring activities.  These costs have been determined on the basis of current costs, current legal requirements and current technology.  The provision recorded was based on the incremental approach which is not consistent with the approach taken under U.S. GAAP. U.S. GAAP principally requires that the asset retirement obligation (“ARO”) be determined when the obligation first occurred and requires an entity to create an asset and a liability at that date. U.S. GAAP only allows the accrual of ARO for which there are existing legal obligations associated with the retirement of a tangible long-lived asset and the amount of liability can be reasonably estimated.  Existing legal obligations can be established by an agreement between two or more parties, imposed by governmental units, or assumed through the legal doctrine of promissory estoppels.  Emperor’s mining lease contains a provision to have a deposit with the Directors of Mines for good performance under the Mining Act. The relevant section of the Mining Act in respect of rehabilitation indicates that “when any mining tenement is terminated or abandoned for any reason whatsoever, the person whose tenement has been terminated or abandoned shall, not later than 30 days from the termination or abandonment of the tenements, fill up all shafts, pits, holes and other excavations or otherwise secure them in a permanent manner so as to prevent persons or livestock inadvertently entering therein, and shall remove all posts marking out the land the subject of the tenement”. The U.S. GAAP adjustment made assumes that the provisions of the Mining Act create a legal obligation to restore and rehabilitate the mine properties and therefore a provision has been recognised.  The adjustment for U.S. GAAP reflects the accretion of the ARO liability and for differences in application under the incremental approach under AGAAP (pre-AIFRS).


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  (h)     Fair value accounting for derivatives
 
 Under AGAAP (pre-AIFRS) the consolidated entity deferred the gains and losses from derivatives until the derivatives were settled or the hedging relationships transpired.  The hedge accounting requirements under AGAAP (pre-AIFRS) are less rigorous than those required under U.S. GAAP.   Due to the extensive record-keeping required to designate and monitor derivative transactions as hedges for U.S. GAAP, the consolidated entity marks to market its derivatives to the income statement.  Management continues to believe its derivatives are economic hedges although they do not qualify as hedges for U.S. GAAP.   The consolidated entity has undergone a process to identify all derivatives, including potential embedded derivatives.  The consolidated entity’s interest rate swaps and the gold forward contracts meet the definition of a derivative under U.S. GAAP.   The U.S. GAAP adjustment reflects the reversal of all derivative balances recognised under AGAAP, including the reversal of the ‘provision for hedging redesignation’.  Had U.S. GAAP been applied to derivatives retrospectively, the ‘provision for hedging redesignation’ would not have been recorded.  Additionally, the U.S. GAAP adjustment reflects the fair values of the consolidated entity’s interest rate swaps and the gold forward contracts at fair value on the balance sheet with changes recorded in the income statement. (i)  Deferred taxes Accounting for income taxes under U.S. GAAP is based on a balance sheet approach whereas AGAAP (pre-AIFRS) focuses on an income statement approach relative to deferred taxes.  The U.S. GAAP term “temporary difference” is more comprehensive than the AGAAP term “timing difference.”  U.S. GAAP considers all differences between financial statement carrying amounts and tax written-down values (referred to as “tax basis” in U.S. GAAP) to be temporary differences, and deferred tax assets and liabilities are required to be recorded for all temporary differences (“comprehensive recognition”) with certain defined exceptions.  The concept of a timing difference under AGAAP focuses on current period (that is, income statement) differences arising that impact the calculation of deferred income tax expense. Under U.S. GAAP, deferred tax assets and liabilities shall be classified as current or non-current based on the classification of the related asset or liability for financial reporting purposes.  A deferred tax liability or asset that is not related to an asset or liability for financial reporting (i.e. loss carryforwards), shall be classified according to the expected utilization of the tax loss carryforward.  All current deferred tax assets and liabilities are netted and reported as either an asset or liability and all non-current deferred tax assets and liabilities are offset and reported as either a non-current asset or long-term liability, depending on the net result. The resulting U.S. GAAP tax adjustments reflects an increase income tax expense by $77,000 and $43,000 for the years ended 30 June 2005 and 30 June 2004, respectively.  Shareholders’ equity is increased (credited) by $251,000 and $154,000 as at 30 June 2005 and 30 June 2004, respectively. (j)  Foreign currency translation reserve The adjustments recorded under U.S GAAP in the foreign controlled entities, when translated to reporting currency result in an adjustment to the foreign currency translation reserve.  The ‘foreign currency translation reserve’ is more commonly referred to as the currency translation adjustment under U.S GAAP.


Emperor Mines Limited
 
 
 
 
 Unaudited Notes to the Financial Statements  for the period ended 6 April 2006 and years ended 30 June 2005 and 30 June 2004 (In Australian Dollars unless otherwise stated)
   36. U.S. Generally Accepted Accounting Principles disclosures (continued)
 
  (k)  Impact of recently issued U.S. accounting standards In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.151 ‘Inventory Costs, an amendment of ARB No. 43, Chapter 4’ (SFAS 151). SFAS 151 requires abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) to be excluded from the costs of inventory and expensed as incurred. As such, the allocation of fixed production overheads to inventory is to be based on normal capacity of the production facilities. SFAS 151 is applicable for inventory costs incurred during the financial year beginning after 15 June 2005.  The consolidated entity is currently assessing the impact of the adoption of this standard on its financial statement. In December 2004, the FASB issued SFAS No. 153 ‘Exchange of Non-monetary Assets – An Amendment of APB Opinion No.29’ (SFAS 153). SFAS 153 eliminates the exception from fair value measurement for non-monetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. The standard specifies that an exchange of non-monetary assets has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non-monetary exchanges occurring in the financial year beginning after 15 June 2005.  The consolidated entity is currently assessing the impact of the adoption of this standard on its financial statements. In December 2004, the FASB also issued SFAS No. 123 (revised 2004) ‘Share-Based Payment’ (SFAS 123R), which requires all share-based payments to employees to be measured based on their fair value at grant date. The cost is to be recognised over the period during which an employee is required to provide service in exchange for the awards or the requisite service period. SFAS 123R is applicable for the financial year beginning after 15 June 2005.  The consolidated entity will be required to apply SFAS 123R as of 1 July 2005 and intends to use the modified prospective method, as defined therein.  SFAS 123R replaces SFAS 123 and supersedes APB Opinion 25.  The consolidated entity is currently assessing the impact of the adoption of this standard on its financial statements. In March 2005, the Emerging Issues Task Force of the FASB reached a consensus in Issue No. 04-6 ‘Accounting for Stripping Costs Incurred During Production in the Mining Industry’ (EITF 04-6) that stripping costs incurred during the production phase of a mine are variable production costs. As such, stripping costs incurred during the production phase are treated differently to stripping costs incurred during the development phase, and should be included in the cost of the inventory produced during the period that the stripping costs are incurred. This consensus is applicable for the financial year beginning after 15 December 2005. The consolidated entity is currently assessing the impact of adopting EITF 04-6 on its financial statements. In March 2005, FASB Interpretation No. 47 'Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143' (FIN 47) was issued. FIN 47 states that a conditional asset retirement obligation represents an unconditional obligation to perform an asset retirement activity where the timing or method of settlement are conditional on a future event that may or may not be within the control of the entity. The interpretation clarifies that an entity is required to recognise a liability for the fair value of a conditional asset retirement obligation, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation is factored into the measurement of the liability when sufficient information exists. SFAS 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. FIN 47 also clarifies the conditions when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for periods ending after 15 December 2005. The consolidated entity is currently assessing the impact of adopting FIN 47 on its financial statements. In May 2005, the FASB issued SFAS No. 154 ‘Accounting Changes and Error Corrections’ (SFAS 154) which replaced APB No.20 ‘Accounting Changes’ and SFAS No. 3 ‘Reporting Accounting Changes in Interim Financial Statements’. The standard changes the requirements in accounting and disclosure for a change in accounting principle. Under SFAS 154, voluntary changes in accounting principles are to be reported using retrospective application unless it is impracticable to do so. The standard is effective for accounting changes and corrections of errors made in the period beginning after 15 December 2005.