GALAXY RESOURCES LIMITED
ANNUAL FINANCIAL REPORT DECEMBER 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Australian dollars unless otherwise indicated) 1. REPORTING ENTITY Galaxy Resources Limited (the “Company”) is a company domiciled in Australia. The address of the Company’s registered office is at level 2, 16 Ord Street, West Perth, Australia. The consolidated financial statements of the Company as at and for the year ended December 31, 2011 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). 2. BASIS OF PREPARATION a. Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on March 20, 2012. b. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: c.
Derivative financial instruments are measured at fair value. Available-for-sale financial assets are measured at fair value. Liabilities for cash-settled share-based payment arrangements are measured at fair value. Convertible bonds issued are designated at fair value through profit or loss.
Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
d. Use of estimates and judgments The preparation of financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the consolidated financial statements are described in Note 31. e. Financial Position The principal activities of the Group are the development of the Mt Cattlin spodumene mine, development of the Jiangsu lithium carbonate plant, and exploration for minerals. The plan of the Group is to mine and process the hard rock lithium minerals at Mt Cattlin situated in Western Australia which is further processed into spodumene concentrate. The spodumene concentrate is then delivered to Jiangsu plant situated in the People Republic of China (the “PRC”) for conversion into lithium compounds and chemicals, including lithium carbonate. Currently, the Group is in the process of mining and processing hard rock lithium minerals at Mt Cattlin and has constructed the Jiangsu plant (the “Project”). In order to finalise the commissioning and ramp up of the Project over the coming twelve months, the Project activities have been funded through equity contributions together with loans from China Construction Bank (CCB) and Convertible Bonds. In February 2011 the Group finalised a $61.5 million raising with the issuance of 615 convertible bonds at a face value of $100,000 per bond (refer to note 22). In addition, in February 2011, the Group issued 21.5 million shares at $1.39 to raise $30 million and in April and May 2011, the Group completed a $120 million equity placement to sophisticated and institutional investors, issuing 109 million shares at $1.10 each. Funds raised were used to repay the Syndicated Facility together with funding capital costs and working capital needs for the Group.
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