Page 26 - Bauxite Resources Annual Report 2013

Directors’ Report cont.
OPERATING AND FINANCIAL REVIEW
OPERATING REVIEW
The Company continues to focus primarily on the exploration and evaluation of bauxite prospectivity in the Company’s extensive
tenement holding in WA’s Darling Range, the largest bauxite and alumina producing region in the world. Currently the Company
holds 17,710 km2 (9,355 km2 granted). The Company undertakes this exploration and evaluation both in its own right and
through participation in three joint ventures.
Two of these joint ventures are carrying out exploration for bauxite, while the third joint venture was formed to examine the
feasibility of building and operating an alumina refinery in Western Australia through which to process bauxite sourced from the
Darling Range region. Note 17 of this financial report provides more detail of these joint venture arrangements.
The Company’s exploration efforts during the 12 months to 30 June 2013 yielded a 96% increase in JORC compliant bauxite
resources. Total quoted resource at 30 June 2013 stood at 243.7 million tonnes. Of this total resource, 26.8 million tonnes are
held by the Company in its own right, 188.2 million tonnes are held in the Bauxite Resources Joint Venture (“BRJV”), and 28.7
million tonnes are held in the BRL-HD Mining joint venture (“HDMI”).
By comparison, total quoted JORC resource at 30 June 2012 stood at 124.5 million tonnes of which 110.8 million tonnes were
held in the BRJV, and 13.7 million tonnes were held in the HDMI joint venture.
There was no significant change in the nature of the Group’s activities during the year.
FINANCIAL REVIEW
The Group has recorded an operating loss after income tax for the year ended 30 June 2013 of $5,302,983 (2012: $6,836,597 loss).
Included in the operating loss was expenditure on exploration totalling $3,554,226 compared to $4,795,995 in the year ended 30
June 2012. The group does not capitalise exploration expenditure, but writes off the full amount of expenditure incurred each year.
Employment Benefits expense declined from $3,034,057 in 2012 to $2,342,911 in the 2013 year. This is a reflection of reduced
staff numbers, as the Company moved to ensure costs were properly contained in line with activity levels during the year.
Also included in the loss was a one-off charge for asset impairment, totalling $636,959 (2012: nil). This charged relates to items
of plant and equipment acquired by the Company in 2010 to undertake mining operations. The directors have determined that
the items could no longer be carried at their written down value, but needed to be written down to their estimated realisable
value, resulting in the impairment charge.
The Group earned $2,137,740 in interest revenue in the year compared to $2,906,731 in 2012, a 26% decline that is largely
reflective of the general decline in interest rates over the course of the past two financial years. The average rate earned
on investments during the year was 4.7%, compared to an average rate of 5.8% in 2012. The Group’s cash balances also
diminished by $4,419,937 over the course of the year.
The Company received $667,239 in Research and Development grant funds during the year under the Federal Government’s
R&D Incentive Scheme (2012: nil). This related to research and development undertaken in both the 2010/11 and 2011/12
financial years. The amount is shown in the Statement of Profit or Loss and Other Comprehensive Income as Other Income.
The Group ended the financial year with cash reserves of $43,881,153 (2012: $48,031,090).
The Cash Flow Statement on page 41 of this Annual Financial Report sets out details of the use of these cash funds. However
a small part of the decline in cash reserves was due to the Company’s decision to acquire a limited number of its own shares
from the market. To 30 June 2013, $238,880 had been expended in acquiring shares in on-market transactions. The decision
to undertake this share buy-back was taken by the Board as the Board considered that Company’s current share price did not
accurately reflect the strong underlying cash position and value within the Company’s assets and the share buyback represented
an opportunity to add value to the remaining shares on issue. The buy-back scheme will remain active until the earlier of 28 May
2014, or until up to 10% of the Company’s issued shares have been acquired.
Note 8 of this Annual Financial Report also shows that in 2012, the Group had Trade Debtors outstanding totaling $1,150,172.
In 2013 this amount decreased to $95,549. This decrease is worthy of highlighting, as a large proportion of the Trade Debtors
balance in 2012 (89.7%) was outstanding from one client, and represented a significant risk to the Group’s balance sheet. The
Company is pleased to note that this large outstanding debt was paid in full during the course of the year.
24 Bauxite Resources Annual Report 2013