Gold Mines of Sardinia Limited
A.C.N. 009 234 851
The directors present their report on the results for the year ended 31 December 2000.
The names and details of the directors of the Company in office during the financial year and until the date of this report are:
NAMES, QUALIFICATION, EXPERIENCE AND SPECIAL RESPONSIBILITIES OF DIRECTORS
1. JON PITHER (Non Executive Chairman - appointed 21 December 2000)
2. JOHN C MORRIS (Managing Director - appointed 17 July 1987)
3. JOHN CHAPPELL (Non-Executive -appointed 1 May 1996)
4. GARRY M. JOHNSTON (Executive - appointed 16 January 1998)
7. VITTORIO GORI (resigned December 12, 2000)
8. RUDOLPH AGNEW (resigned 12 December 2000)
As of the date of this report, the interests of the directors in the shares and options of the Company were:
The principal continuing activity of entities within the consolidated entity is investing in mineral resource projects, primarily gold in Italy. There have been no significant changes in the nature of those activities during the year.
The consolidated operating loss was attributable to the following:
The consolidated operating loss is primarily attributable to non-cash provisions relating to depreciation of plant and equipment of A$2,865m (1999: A$4,046m), amortisation of development costs of A$2,164m (1999: A$5,314m) and exploration costs written off of A$2,338m (1999: $531).
The directors recommend that no dividend be paid for the year ended 31 December 2000. No dividends have been paid or declared during the year.
At the date of this report the Company has an issued share capital of 237,069,404 ordinary fully paid shares.
The Company also has on issue 8,960,000 Employee Incentive Options, full details of which are disclosed in Note 12 of the financial statements.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There are no other significant changes in the state of affairs of the Company that have not already been referred to in this Annual Report.
SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
The Corporate Overdraft Facility from NM Rothschild & Sons Australia Ltd, entered into on 28 January 1999, has been used to retire Sardinia Gold Mining SpA’s (SGM) debt to NM Rothschild & Sons Limited amounting to US$3.65m and to provide working capital for the Group. The Facility, which was due to expire on 31 December 2000, was extended and is now due to expire on 30 April 2001 and is secured by:
On 13 March 2001, GMS sold 1 million of the 6,500,000 ordinary shares that it holds in Navan Mining (refer note 12). The shares were sold at 98 pence each.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The consolidated entity holds exploration licences issued by the Sardinian Authorities which specify full exploration programs, including drilling, trenching and trial mining.
A summary of all licences in place is set out in the Tenement Schedule included in the review of the Company's operations commencing on page 15.
There have been no significant known breaches of the consolidated entity's licence conditions.
REVIEW OF OPERATIONS
A review of the Company's Sardinia operations commences on page 15.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the opinion of the directors there are no matters or events that would affect the future operations and expected results of the consolidated entity that have not already been referred to in this Annual Report, other than sustained volatility in the international financial markets and continuing low prices for the commodities produced by the consolidated entity.
The Company’s principal investment is its 90% interest in Sardinia Gold Mining S.p.A and details relating to its activities are set out in this report.
The number of formal directors’ meetings held during the year and number of meetings attended by each of the directors of the Company during the financial year were:
There were 16 circular resolutions passed during the financial year as a consequence of prior discussions between the directors.
There were no committee meetings held during the year.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
During the financial year under review, the Company procured a Directors and Officers Liability/Corporate Reimbursement Insurance Policy at a premium of $30,232.00, viz:
(A) Directors and Officers Liability Insurance -
The Insurer will pay on behalf of the directors and officers any loss for which the directors and officers may not be legally indemnified by the Company arising out of any claim, by reason of any wrongful act committed by them in their capacity as a director or officer, first made against them jointly or severally during the period of insurance and notified to the insurer during the indemnity period.
(B) Corporate Reimbursement Insurance -
The insurer will pay on behalf of the Company any loss payment which it is legally permitted to make arising out of any claim, by reason of any wrongful act, committed by any director or officer in their capacity as a director of officer, first made against the director or officer during the period of insurance and notified to the insurer during the Indemnity period.
The total amount payable in respect of all claims under A or B shall not in the aggregate exceed the limit of aggregate liability, i.e.; $15,000,000.
This aforementioned premium has been included as part of Directors’ Remuneration in Note 15.
DIRECTORS’ AND OTHER OFFICERS' EMOLUMENTS
The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the directors, the chief executive officer and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.
To assist in achieving these objectives, the Remuneration Committee links the nature and amount of executive directors’ and officers’ emoluments to the Company’s financial and operational performance. All senior executives have the opportunity to qualify for participation in the Employee Option Plan which currently provides share option incentives to executives. Details regarding the issue of share options under this plan are provided in Note 12 to the financial statements.
Details of the nature and amount of each element of the emolument of each director of the Company and each of the executive officers of the Company and the consolidated entity receiving the highest emolument for the financial year are as follows:
Emoluments of directors of Company and the consolidated entity
Mr. Johnston is a director and has a financial interest in Davidson Management Pty Ltd which received a total of $222,291 (1999: $166,717) for management services provided throughout the year.
Mr. Chappell is a director and has a financial interest in Nalmor Pty Ltd which received a total of $13,500 (1999: $17,626) for geological services provided throughout the year.
Mr. Hambro was a director and has a financial interest in Peter Hambro Plc which received a total of $197,972 (1999: Nil) for services provided since becoming a director of the Company and until year end.
Options issued in the current year were valued using the Black-Scholes option pricing model.
Emoluments of the five most highly paid executives/officers of the Company and the consolidated entity.
The term ‘director’ and ‘officer’ have been treated as mutually exclusive for the purposes of this disclosure. There were no officers of the Company during the year. Executives are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity.
Options granted to directors and any of the five most highly paid officers.
Details of options granted over unissued shares in Gold Mines of Sardinia Limited during or since the end of the year to any director and any of the five most highly remunerated officers of the Company as part of their remuneration are as follows:
DEEDS OF INDEMNITY
During the financial period ended 30 June 1996 the Board of Directors agreed to Messrs Morris, Franks and Chappell entering into a Deed of Indemnity with the Company and its controlled entities whereby the Company and its controlled entities has agreed to indemnify the directors in connection with their appointments as directors of the Italian registered Company Sardinia Gold Mining S.p.A.
The amounts contained in the report and in the financial statements have been rounded to the nearest thousand dollars under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the Class Order applies.
CORPORATE GOVERNANCE STATEMENT
The Board of directors of the Company is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. To ensure the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board.
Composition of the Board
The Composition of the Board is determined in accordance with the following principles and guidelines:
The directors in office at the date of this statement are:
As the Company develops its investment in Sardinia and as it shifts its corporate profile increasingly towards the capital markets of Europe, to ensure that the Board is well equipped to continue to discharge its responsibilities and into the future, the Board is establishing guidelines for the future nomination and selection of potential new directors and for the operation of the Board. To this end a Nomination Committee has been formed to canvas future candidates for the position of director, to ensure that the Company continues to be governed by appropriately qualified people. The nomination committee is comprised of the following members:
The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the chief executive officer and the executive management. The Board has established a remuneration committee, comprising two non-executive directors. The remuneration committee is comprised of the following members:
As at the date of this report, the Company has an Audit Committee. The members of the audit committee are:
The Board is also responsible for:
nomination of the external auditor and reviewing the adequacy of the scope and quality of the annual statutory audit and half year statutory audit review.
As the Board acts on behalf of the shareholders and is accountable to the shareholders, the Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and
obligations. In addition the Board is responsible for identifying areas of significant risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.
The responsibility for the operation and administration of the consolidated entity is delegated by the Board to the chief executive officer and the executive management. The Board ensures that the executive management is appropriately experienced and qualified to discharge their responsibilities and constantly monitors the performance of the chief executive and the executive management.
The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved. These mechanisms include the following:
Monitoring of the Board’s Performance and Communication to Shareholders
In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is constantly reviewed by the Chairman.
The Board of directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the directors. Information is communicated to the shareholders through:
Signed in accordance with a resolution of the directors.
J C MORRIS
Perth, 30 March, 2001