DIRECTORS' REPORT
Your directors submit the annual financial report of the consolidated entity for the financial year ended 30 June 2007. In order to comply with the provisions of the Corporations Act, the directors report as follows:
DIRECTORS
The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.
NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
Mal Randall Dip Applied Chem. MAICD, Non-Executive Chairman, Age 62
Mr Randall has extensive experience in corporate, management and marketing in the resources sector, including more than 20 years with the Rio Tinto group of companies. His experience extends over a broad range of commodities, including iron ore, diamonds, base metals, coal, uranium and industrial minerals both in Australia and internationally.
Mr Randall currently holds directorships with the following listed companies: Iron Ore Holdings Ltd (appointed 24/2/05), United Minerals Corporation NL (appointed 18/10/04), Thundelarra Exploration Ltd (appointed 9/10/01), Royal Resources Ltd (appointed 4/10/06), Northern Mining Ltd (appointed 12/3/07) and Summit Resources Ltd (appointed 30/5/07).
Mr Randall has been a Director and Chairman of the Board since 14 February 2006.
Peter Gazzard B Sc (Hons), Grad Dip Mgt, Managing Director, Age 55
Mr Gazzard has more than twenty five years experience in the mineral sands industry in Western Australia, in both technical and managerial roles with Cable Sands, Westralian Sands and most recently, Iluka Resources. Over many years Mr Gazzard has been responsible for interpreting mineralogical data, predicting product quality and designing mining and processing plant to suit individual orebody characteristics. Mr Gazzard has implemented two mineral sands mine start-ups, one at Eneabba and one in the Southwest of WA. He has also managed mineral sands mines, separation plants and synthetic rutile plants.
Mr Gazzard has no directorships in any other listed companies as at the reporting date or in the past 3 years.
Mr Gazzard has been a Director since 8 March 2005 and is a current member of the Executive Committee.
Alan Lockett Non-Executive Director, Age 53
Mr Lockett is a corporate adviser and financier with twenty five years commercial experience both in Australia and overseas. Since 1988, he has been primarily involved in the development of resource projects in Western Australia. Mr Lockett has been involved with the Company from inception. He was instrumental in the acquisition of the Company’s tenements and is a major Shareholder of the Company. Mr Lockett has a strong understanding of the garnet and mineral sands industries.
Mr Lockett is currently Executive Chairman of Northern Mining Limited which listed on the ASX on 11 September 2006.
Mr Lockett has been a Director of the Company since 1997 and is a current member of the Executive Committee.
John Baxter BSc (Hons), MSc, RPGeo, CPGeo, SEG, MAIG, MIMM, MSEG, MGSA, Non-Executive Director, Age 64
Mr Baxter has 35 years experience in the mineral industry as a geologist and consultant, carrying out numerous resource assessments of mining and exploration properties. Mr Baxter has had more than 20 years experience in assessing heavy mineral sands (HMS) exploration and in excess of 15 years in the estimation of mineral resources. He has published papers on HMS deposits in Western Australia as well as resource calculation and valuation methodologies. On completion of academic training John was employed by Geological Survey of WA for 15 years, he lectured in economic and structural geology at Curtin University for five years and began consulting in the mining industry in 1985.
Mr Baxter has no directorships in any other listed companies as at the reporting date or in the past 3 years.
Mr Baxter has been a Director since 2001 and is a current member of the Executive Committee and Audit Committee.
Mr Michael Walters BEng (Hons), Non-Executive Director, Age 57
Mr Walters is has over 25 years experience in the global resources sector including marketing and trading industrial minerals, line management of mining operations, and strategic planning and project development. Mr Walters has worked for leading mining companies, and out of marketing offices in Europe, the UK, Singapore, the Middle East and Australia. These companies include Shell, Billiton, WMC Resources and Consolidated Minerals.
DIRECTORS' REPORT
Mr Walters has no directorships in any other listed companies as at the reporting date or in the past 3 years.
Mr Walters was appointed as a Director of the Company on 21 June 2007 and is a current member of the Executive Committee and Audit Committee.
Christopher Davies Non-Executive Director
Resigned on 31 July 2007.
COMPANY SECRETARY
Ross Kestel B.Bus (Acctg) CA FCPA, Age 52
Mr Kestel is both a Chartered Accountant and Certified Practising Accountant and has been a director of the accounting practice Nissen Kestel Harford since July 1980.
Mr Kestel has acted as a director and company secretary of a number of public companies involved in mineral exploration, mining, mine services, property development, manufacturing and technology industries.
Mr Kestel is a Registered Company Auditor and a member of the Institute of Company Directors.
DIRECTORS’ INTERESTS
| Director | Ordinary Shares | Options |
| Mr M Randall | 90,000 | 1,520,000 |
| Mr P Gazzard | 642,858 | 871,429 |
| Mr A Lockett | 5,594,920 | 1,656 |
| Mr J Baxter | 1,868,254 | 268,200 |
| Mr Michael Walters | - | - |
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows:
| Director | Full Meeting of Directors | Audit Committee | ||
| Attended | Eligible to Attend | Attended | Eligible to Attend | |
| Mr M Randall | 11 | 12 | ||
| Mr P Gazzard | 12 | 12 | ||
| Mr A Lockett | 11 | 12 | ||
| Mr J Baxter | 11 | 12 | 2 | 2 |
| Mr C Davies | 12 | 12 | 2 | 2 |
| Mr M Walters | - | - | - | - |
The Company has an executive committee that attends to the matters normally attended to by a remuneration committee and a nomination committee. The executive committee did not meet during the year and remuneration matters were dealt with by the full board.
PRINCIPAL ACTIVITIES
The principal activity of the Company during the year was minerals exploration.
REVIEW OF OPERATIONS
The Company’s operations for the 2007 financial year are reviewed from pages 3 to 8 of the Annual Report.
DIRECTORS' REPORT
OPERATING RESULTS FOR THE YEAR
The consolidated operating loss of the group for the financial year after providing for income tax and eliminating minority equity interests was $1,790,668.
DIVIDENDS
No dividends have been paid or declared since the start of the financial year and/or the directors do not recommend the payment of a dividend in respect of the financial year.
REVIEW OF FINANCIAL CONDITION
The net assets of the Group have increased by $4,306,561 to $13,530,447 in 2007. This increase has largely resulted from share issues raising $6,515,796.
The Group’s working capital, being current assets less current liabilities, has improved from $2,012,773 in 2006 to $2,362,655 in 2007.
During the past two financial years the Company has invested $8,393,987 in deferred tenement acquisition, evaluation and development expenditure. In particular, investment has been focused on progressing the Harts range abrasives, the Keysbrook mineral sands and Kalimantan zircon projects towards production.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Company during the financial year were as follows:
During the year, the Company issued 52,832,270 shares under a Prospectus and Information Memorandum to raise $6,515,796 (before costs). The funds provided additional working capital to progress the mineral sands and abrasive mineral projects and additional resources for the continued exploration of tenements.
FUTURE DEVELOPMENTS
Likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations have been discussed, where appropriate, in the Review of Operations section of the Annual Report contained in pages 3 to 8.
EVENTS SUBSEQUENT TO BALANCE DATE
Other than the matters disclosed in Note 24 to the financial statements, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect substantially the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years.
SHARE OPTIONS
| At the date of this report, there were 39,917,850 unissued shares under option as follows: | |||
| No. of Options | |||
| Exercisable at 25c, on or before 31 December 2007 | 13,207,908 | ||
| Exercisable at 25c, on or before 31 December 2009 | 300,000 | ||
| Exercisable at 35c, on or before 31 December 2009 | 10,265,182 | ||
| Exercisable at 20c, on or before 30 June 2010 | 16,144,760 | ||
| 39,917,850 | |||
ENVIRONMENTAL LEGISLATION
The consolidated entity’s operations are subject to environmental regulation under the laws of the Commonwealth, States and Local Authorities of Australia and Indonesia. The consolidated entity aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The Board is not aware of any breach of environmental legislation for the financial year under review.
DIRECTORS' REPORT
REMUNERATION REPORT
This report details the nature and amount of remuneration for each Director of the Company and for the executives receiving the highest remuneration.
Remuneration Policy
The remuneration policy of the Company has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and long term incentives based on key performance areas affecting the Company’s financial results. The board of Olympia Resources Ltd believe the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Company, as well as create goal congruence between directors, executives and shareholders.
The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the Company is as follows:
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the board. All executives receive a base salary (which is based on factors such as length of service, experience and qualifications) and superannuation. The board reviews executive packages annually by reference to the Company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.
The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long term growth in shareholder wealth.
Executives are entitled to participate in employee share option plan.
The executive directors and executives receive a superannuation guarantee contribution as required by the government, which is currently 9% and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the Company and expensed. Options are valued using the binomial tree methodology.
The board policy is to remunerate non executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non executive directors is subject to approval by shareholders at the Annual General Meeting (currently $300,000). Fees for non executive directors are not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in employee share option plans.
Performanced Based Remuneraton
Performance based remuneration includes short-term incentives and long-term incentives and is designed to reward executive directors’ and senior executives’ for meeting or exceeding their financial and personal objectives. The short-term incentve (STI) is an “at risk” bonus provided in the form of cash, while the long-term incentive (LTI) is provided in the form of options and/or shares of the Company.
Short-Term Incentive Bonuses
No STI bonuses were paid to any executive directors or executives during the financial year. It is the intention of the board to consider including STI bonuses as part of remuneration packages when production commences.
Long-Term Incentive Bonuses
In November 2004, shareholder approval was obtained for the introduction of the employee share option plan. Long-term incentives are offered by the board to executive directors and executives under the employee share option plan. The options are not issued based on performance criteria, but are issued to directors and executives to increase goal congruence between executives, directors and shareholders.
DIRECTORS' REPORT
DETAILS OF REMUNERATION
Remuneration of directors (audited) The remuneration of directors and specified executives in office at any time during the year was:
| Primary | Primary | Post-Employment | Equity | Total | Total Remuneration Represented by Options | ||
| Salary, Fees & Commissions | Non-cash Benefits | Superannuation Contributions | Share Options | ||||
| Directors’ remuneration | |||||||
| Mr M Randall | 2006 | 10,694 | - | 962 | 153,300 | 164,956 | 92.9% |
| 2007 | 50,000 | - | 4,500 | - | 54,500 | - | |
| Mr P Gazzard | 2006 | 163,048 | 16,713 | 14,674 | - | 194,435 | - |
| 2007 | 188,250 | 14,293 | 16,943 | - | 219,486 | - | |
| Mr A Lockett | 2006 | 40,000 | 1,973 | 3,600 | - | 45,573 | - |
| 2007 | 40,000 | - | 3,600 | - | 43,600 | - | |
| Mr J Baxter | 2006 | 40,000 | - | 3,600 | - | 43,600 | - |
| 2007 | 40,000 | - | 3,600 | - | 43,600 | - | |
| Mr C Davies | 2006 | 40,000 | - | 3,600 | - | 43,600 | - |
| 2007 | 40,000 | - | 3,600 | - | 43,600 | - | |
| Mr M Walters | 2006 | - | - | - | - | - | - |
| 2007 | 1,205 | - | 108 | - | 1,313 | - | |
| Mr J Hudleston | 2006 | 37,500 | - | 506 | - | 38,006 | - |
| 2007 | - | - | - | - | - | - |
| Primary | Primary | Post-Employment | Equity | Total | Total Remuneration Represented by Options | ||
| Executives’ remuneration | |||||||
| Mr A Beigel | 2006 | 72,404 | - | 6,516 | - | 78,920 | - |
| 2007 | 82,500 | - | 7,425 | - | 89,925 | - |
The Company’s policy for determining the nature and amount of emoluments of Board members and senior executives of the Company is as follows:
The remuneration structure for executive officers, including Executive Directors, is based on a number of factors, including length of service, qualifications, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and specified Directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future.
Employment Contracts of Directors and Executives
Mr P Gazzard was appointed Managing Director on 8 March 2005. On 1 July 2006 his gross salary was $176,500 per annum plus 9% superannuation with a fully maintained motor vehicle provided. On 23 December 2006 his gross salary was increased to $200,000 per annum and is reviewed on an annual basis. The termination notice period is four weeks written notice or payment in lieu thereof.
Mr A Beigel was appointed as Finance Manager on 29 November 2004. On 1 July 2006 his gross salary was $75,000 per annum plus 9% superannuation. On 23 December 2006 his gross salary was increased to $90,000 per annum and is reviewed on an annual basis. The termination notice period is four weeks written notice or payment in lieu thereof.
DIRECTORS' REPORT
AUDITOR INDEPENDENCE
Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 19 and forms part of this directors’ report for the year ended 30 June 2007.
NON AUDIT SERVICES
The Company’s auditors, HLB Mann Judd, did not provide any non-audit services during the year ended 30 June 2007.
Signed in accordance with a resolution of the Directors:
Peter Gazzard
Managing Director
Perth, Western Australia
30 September 2007
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Olympia Resources Limited (“Olympia” or “the Company”) is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Olympia on behalf of the shareholders by whom they are elected and to whom they are accountable.
To ensure that 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 Board should comprise at least three directors and it intends to establish a majority of non-executive directors;
• the Board should comprise directors with an appropriate range of qualifications and expertise; and
• the Board shall meet at regular intervals and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.
When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the service of a new director with particular skills, the Board selects a candidate or panel of candidates with the appropriate expertise.
The Board then appoints the most suitable candidate, who must stand for election at the next general meeting of shareholders. The Company does not have a formal Nomination Committee.
REMUNERATION COMMITTEE
The Company does not have a formal Remuneration Committee. The Company has established an Executive Committee which attends to the matters normally attended to by a Remuneration Committee. Remuneration levels are set by the Company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives.
AUDIT COMMITTEE
An Audit Committee was established on 15 September 2004. The Audit Committee is currently comprised of Mr John Baxter, Mr Michael Walters, both non executive directors and Mr Ross Kestel, Company Secretary. The Committee operates under a charter adopted by the Board of Directors to ensure that an effective system of financial reporting, internal control and risk management is in place to present a true and factual statement of the Company’s financial position. Each of the members has the relevant financial and industry experience required to perform Audit Committee functions. Detail regarding the relevant qualifications and experience of each director and the Company Secretary who is a member of the Audit Committee is set out in the Directors’ Report.
The Audit Committee met on 2 occasions during the financial year and each meeting was attended by all members of the Committee.
BOARD RESPONSIBILITIES
As the Board acts on behalf of and is accountable to the shareholders, it 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 business 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 Managing Director. The Board ensures that the Managing Director is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants.
The Board has established an Executive Committee comprising the Managing Director, Mr Peter Gazzard, Mr Alan Lockett, Mr John Baxter and Mr Michael Walters. The Executive Committee primary function is to provide management with support in achieving the strategic plan. It is also responsible for the duties which would normally be performed by the Remuneration Committee and the Nominations Committee.
The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved, including the following: • Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
• implementation of operating plans and budgets by management and Board monitoring progress against budget;
• procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.
CORPORATE GOVERNANCE STATEMENT
MONITORING OF THE BOARD’S PERFORMANCE
In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is to be reviewed annually by the chairperson. Directors whose performance is unsatisfactory are asked to retire.
BEST PRACTICE RECOMMENDATION
Outlined below are the 10 Principles of Good Corporate Governance and Best Practice Recommendations as outlined by the ASX and the Corporate Governance Council. The Company has complied with the Corporate Governance Best Practice Recommendations except as identified below. Details about the Company’s corporate governance policies are set out on the Company’s website at www.olympiaresources.com
| Principle | Action taken and reasons if not adopted |
| Recognise and publish the respective roles and responsibilities of the board and management Principle 1: Lay solid foundation for management and oversight 1.1 Formalise and disclose the functions reserved to the Board and those delegated to management |
Adopted |
| Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties Principle 2: Structure the board to add value 2.1 A majority of the Board should be independent 2.2 The chairperson should be an independent director 2.3 The roles of chairperson and chief executive officer should not be exercised by the same individual 2.4 The board should establish a nomination committee 2.5 Provide the information indicated in 'Guide to reporting on Principle 2" |
Adopted except as follow:- 2.4 The Company is not of a size that justifies having a separate Nomination Committee. However, matters typically dealt with by such a committee are dealt with by the Executive Committee. |
| Actively promote ethical and responsible decision-making Principle 3: Promote ethical and responsible decision-making 3.1 Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: 3.1.1 the practices necessary to maintain confidence in the Company's integrity 3.1.2 the responsibility and accountability of individuals for reporting or investigating reports of unethical practices |
Adopted |
| 3.2 Disclose the policy concerning trading in Company securities by directors, officers and employees | |
| 3.3 Provide the information indicated in 'Guide to Reporting on Principle 3 |
CORPORATE GOVERNANCE STATEMENT
| Principle | Action taken and reasons if not adopted |
| Have a structure in place to independently verify and safeguard the integrity of the Company's financial reporting Principle 4: Safeguard integrity in financial reporting 4.1 Require the chief executive officer (or equivalent) and the chief financial officer (or equivalent) to state in writing to the Board that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results and are in accordance with relevant accounting standards. |
Adopted |
| 4.2 The Board should establish an audit committee | |
|
4.3 Structure the audit committee so that it consists of: |
|
| 4.4 The audit committee should have a formal operating charter | |
| 4.5 Provide the information indicated in the 'Guide to reporting on Principle 4' | |
| Promote timely and balanced disclosure of all material matters concerning the Company Principle 5: Make timely and balanced disclosure 5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance |
Adopted |
| 5.2 Provide the information indicated in the 'Guide to reporting on Principle 5' | |
| Respect the rights of shareholders and facilitate the effectiveness of those rights Principle 6: Respect the rights of shareholders 6.1 Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings. 6.2 Request the external audit to attend the annual general meeting and be available to answer shareholder questions about the audit and the preparation and content of the auditor's report |
Adopted |
| Establish a sound system of risk oversight and management and internal control Principle 7: Recognise and manage risk 7.1 The Board or appropriate Board committee should establish policies on risk oversight and management 7.2 The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the Board in writing that: |
Adopted |
| 7.2.1 the statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board 7.2.2 the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects. |
|
| Provide the information indicated in the 'Guide to reporting on Principle |
CORPORATE GOVERNANCE STATEMENT
| Principle | Action taken and reasons if not adopted |
| Fairly review and actively encourage enhanced board and management effectiveness Principle 8: Encourage enhanced performance 8.1 Disclose the process for performance evaluation of the Board, its committees and individual directors, and key executives |
Adopted |
| Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined Principle 9: Remunerate fairly and responsibly 9.1 Provide disclosure in relation to the Company's remuneration policies to enable investors to understand (i) the cost and benefits of these policies and (ii) the link between remuneration paid to directors and key executives and corporate performance. |
Adopted except as follows:- |
| 9.2 The Board should establish a remuneration committee 9.3 Clearly distinguish the structure of non-executive directors' remuneration from that of executives 9.4 Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders |
9.2 The Company is not of a size that justifies having a separate Remuneration Committee. However, matters typically dealt with by such committee are dealt with by the Executive Committee. |
| Recognise the legal and other obligations of all legitimate stakeholders Principle 10: Recognise the legitimate interest of stakeholders 10.1 Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders |
Adopted |
Auditor’s Independence Declaration
As lead auditor for the audit of the financial report of Olympia Resources Limited for the year ended 30 June 2007,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Olympia Resources Limited.
Perth, Western Australia
30 September 2007