Table of Contents

01Cover page

02Corporate Directory

03 Chairman's letter

04Managing director's report on operations

16Directors' report

30Auditor's independence declaration

31Corporate governance statement

39Financial report for the year ended 30.06.2008

40Income Statement

41 Balance Sheet

42 Cash Flow Statement

43 Statement of Changes in Equity

44Notes to the Financial Statements

68Directors' declaration

69Independent Auditors' report

71Asx additional information

FULL ANNUAL REPORT

Annual Report.pdf

Website

http://www.swickmining.com.au

Corporate Governance Statement

The Board of Directors of Swick Mining Services Ltd (Board) is committed to delivering the highest possible standards of corporate governance.  For the financial year ended 30 June 2008, the Board adopted a set of corporate governance policies consistent with the “Principles of Good Corporate Governance and Best Practice Recommendations” released by the ASX Corporate Governance Council in 2003, to the extent that such recommendations were consistent with the structure and objectives of the Company.  A summary of the corporate governance policies adopted is set out below.

Board Charter

The Board is responsible for guiding and monitoring the Company on behalf of shareholders.  The Board’s primary focus is to oversee the Company’s business activities, management and strategic direction for the benefit of the Company’s shareholders.

The key responsibilities of the Board include:

• appointment, evaluation, rewarding and if necessary the removal of the Managing Director, Chief Financial Officer (or equivalent) and the Company Secretary;
• in conjunction with management, development of corporate objectives, strategy and operations plans and approving and appropriately monitoring plans, new investments, major capital and operating expenditures, capital management, acquisitions, divestitures and major funding activities;
• monitoring actual versus forecast performance, including financial and operational performance, and approving and reviewing budgets;
• understanding areas of significant business risk and ensuring that the Company is appropriately positioned to manage those risks;
• satisfying itself that the financial statements of the Company fairly and accurately set out the financial position and financial performance of the Company for the period under review;
• satisfying itself that there are appropriate reporting systems and controls in place to assure the Board that operational, financial, compliance and internal control processes are in place and functioning appropriately; and
• reporting to shareholders.

The responsibility for the day-to-day operation and administration of the Company is delegated by the Board to the Managing Director.  The Board ensures that the Managing Director and the management team is appropriately qualified and experienced to discharge their responsibilities.

Procedures for Selection & Appointment of Directors

The Board shall ensure that it has the appropriate range and expertise of skills for a Company operating in the mineral drilling industry to properly fulfil its responsibilities.  The Chairman regularly reviews the composition of the Board to ensure that the Board continues to have the mix of skills and experience necessary for the conduct of the Company’s activities.

In the circumstances where the Board believes there is a need to appoint another director, the Board will determine the skills and experience appropriate for the appointee having regard to those of the existing directors and agree the process and timetable for seeking such a person.

New Board appointments are approved and ratified by the Board and are made pursuant to the rules of the Company’s constitution.  At present, the Board has decided not to establish a nomination committee, as the Board itself has assumed the responsibilities that would ordinarily be assigned to a nomination committee with respect to the nomination, appointment, retention and removal of directors.

Board Structure

The Board is currently comprised of six directors:  two Executive Directors, being Kent Swick (Managing Director) and Michael Fry (Finance Director), and four Non-Executive Directors, being Andrew Simpson (Chairman), David Nixon, Joe Ariti and Phillip Lockyer.  Two Non-Executive Directors resigned during the year, being Randal Swick and Mark McAuliffe.  All four current Non-Executive Directors are considered independent directors.  Details of the qualifications, experience, responsibilities and tenure of the current directors are set out in the Directors’ Report.

The Board shall strive at all times to ensure that the majority of its members are independent directors.  The Board shall strive at all times endeavour to ensure that the Chairman is an independent director and that the role of Chairman and Managing Director not be exercised by the same individual.

Each director has the right to seek independent professional advice on matters relating to his position as a director of the Company at the Company’s expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.

Code of Conduct

The Company has adopted a code of conduct that aims to encourage appropriate standards of conduct and behaviour of the directors, officers, employees and contractors of the Company.  All such persons are expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

The Company views breaches of this code as serious misconduct.  Any person who has become aware of any breach of the code of conduct must report the matter immediately to their line manager or the Company Secretary.  The line manager or Company Secretary has the responsibility to report the breach to the appropriate senior management and to advise the relevant person of the outcome and actions implemented.  Any person who breaches the policies outlined in the code may be subject to disciplinary action, including in the case of serious breaches, dismissal.

The code of conduct extends further to the directors, ensuring the directors have a clear understanding of the Company’s expectations of their conduct, including their fiduciary duties, director duties, managing conflicts of interest and insider trading.

Securities Trading Policy

The Company’s securities trading policy regulates dealings by directors, officers and employees in securities issued by the Company, imposing basic trading restrictions on those who possess inside information of a price sensitive nature.  Additional restrictions on trading in the Company’s securities apply to directors of the Company, all executives reporting directly to the Managing Director and any other employees of the Company considered appropriate by the Managing Director and Company Secretary from time to time (Restricted Persons).

Before trading in the Company’s securities, a director must notify the Chairman of his intention to trade, confirm that he does not hold any inside information and have been advised by the Chairman that there is no reason to preclude him from trading in the Company’s securities as notified.  The director must also comply with any conditions on trading imposed by the Chairman.  In the case of the Chairman intending to trade in the Company’s securities, he must notify and obtain clearance from the Managing Director before trading.  In the case of any other Restricted Person, he or she must notify and obtain clearance from the Company Secretary before trading.

Directors, officers and employees also have a duty of confidentiality to the Company and must not reveal any confidential information concerning the Company to any other person to gain an advantage for themselves or anyone else or use that information in any way which may cause loss to the Company.

Continuous Disclosure Policy

The Company is committed to complying with the general and continuous disclosure requirements of the Corporations Act 2001 and the ASX Listing Rules, with a focus on:

• preventing the selective or inadvertent disclosure of material price sensitive information;
• ensuring shareholders and the market are provided with full and timely information with respect to activities of the Company which may have a material impact on the Company’s share price; and
• ensuring that all market participants have equal opportunity to receive externally available information issued by the Company.

 

The Managing Director and the Company Secretary (the Disclosure Officers) are responsible for implementing and administering this policy, including all communication with the ASX and for making decisions on what should be disclosed publicly.  The Disclosure Officers will review all communications to the market to ensure that they are full and accurate and comply with the Company’s obligations.

The Company must lodge in a timely manner all ASX releases, shareholder notifications, presentations, media and analyst briefings and other general information useful to investors.  All information disclosed to the ASX in compliance with this policy must be promptly placed on the Company’s website.

The Company’s authorised spokespersons are the Managing Director, Chairman, Finance Director and Company Secretary.  In appropriate circumstances, the Managing Director may from time to time authorise other spokespersons on particular issues.

Shareholder Communication Policy

The Company recognises the value of providing current and relevant information to its shareholders.  The Managing Director and Company Secretary have the primary responsibility for communication with shareholders.  Information is communicated to shareholders through continuous disclosure to relevant stock markets of all material information, periodic disclosure (ie, annual and half year reports), general meetings and the Company’s website.  The Company is committed to the promotion of investor confidence by ensuring that trading in the Company’s securities takes place in an efficient, competitive and informed market.  Shareholders are encouraged to use their attendance at general meetings to ask questions on any relevant matter, with time being specifically set aside for shareholder questions.

Risk Management & Internal Compliance and Control

Management assesses and determines the Company’s risk profile and is responsible for the development of risk management strategy and policies, internal compliance and internal control.  The Company’s process of risk management and internal compliance and control includes:

• establishing the Company’s goals and objectives, and implementing and monitoring strategies and policies to achieve these goals and objectives;
• continuously identifying and reacting to risks that might impact upon the achievement of the Company’s goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks;
• formulating risk management strategies to manage identified risks and designing and implementing appropriate risk management policies and internal controls; and
• monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an ongoing assessment of the effectiveness of risk management and internal compliance and control.

The Board oversees the ongoing assessment of the effectiveness of risk management and internal compliance and control.  Management is responsible for undertaking and assessing risk management and internal control effectiveness and is required by the Board to report back on these matters.

Performance Evaluation Practices

The Board has established formal processes to review its own performance and the performance of individual directors, the committees of the Board and the senior management group.

The annual review of the Board’s performance includes consideration of a number of factors, including a comparison of performance against the requirements of the Board charter, an assessment of the effect and outcomes of corporate strategies, operating plans and the annual budget, a review the Board’s interaction with management and the identification of any particular goals and objectives of the Board for the next year.  The method and scope of the performance evaluation will be set by the Board and may include a self-assessment checklist to be completed by each director.  The Board may also use an independent adviser to assist in the review.

Similar procedures to those for the Board review are applied to evaluate the performance of each of the Board committees.  An assessment will be made of the performance of each committee against each committee’s charter to identify where improvements can be made.

The Chairman has the primary responsibility for conducting performance appraisals of Non-Executive Directors, having particular regard to contribution to Board discussion and function, degree of independence, contribution to Company strategy and suitability to Board structure and composition.  The performance of the Chairman is evaluated by two independent Non-Executive Directors, including the Committee Chairman of the Audit & Corporate Governance Committee.  Performance is measured on at least an annual basis.

The Board reviews the performance of the Managing Director.  At the commencement of each financial year, the Board and the Managing Director will agree a set of generally Company specific performance measures to be used in the review of the Managing Director for the forthcoming year, including financial and operational measures of performance.  The Managing Director is responsible for assessing the performance of the key executives within the Company against agreed performance measures.  Performance is measured on at least an annual basis.

 

Audit & Corporate Governance Committee

The Audit & Corporate Governance Committee was established by the Board to assist the Board in fulfilling its responsibilities in relation to financial reporting, internal controls, risk management and corporate governance.  The key responsibilities of the Audit & Corporate Governance Committee include:

• reviewing the integrity and quality of the Company’s financial statements and disclosures;
• reviewing the systems, processes and controls that the Board and Management have established to identify and manage areas of significant financial risk;
• reviewing the Company’s auditing, accounting and financial reporting processes;
• making recommendations to the Board on the appointment, reappointment and replacement of the external audit firm;
• reviewing the scope of the external audit with the external auditor including identified risk areas;
• monitoring the performance of the external auditor including an assessment of the quality and rigour of the audit, quality of the service provided and the external auditor’s own internal quality control procedures;
• reviewing and monitoring Management’s responsiveness to the external audit findings;
• reviewing and reporting to the Board on Corporate Governance regulatory or compliance issues; and
• providing recommendations to the Board on Corporate Governance practices and policies after assessment and review.

The Audit & Corporate Governance Committee Charter states that committee membership should comprise a minimum of three non-executive members of the Board and at least two of the members must be independent; and that the committee shall be chaired by an independent Chairman who is not Chair of the Board.  The membership of the committee, which was restructured during the year, is as follows:

• Joe Ariti (Committee Chairman) - independent director, Non-Executive Director.
• Andrew Simpson - independent director, Non-Executive Chairman.
• David Nixon - independent director, Non-Executive Director.

Mark McAuliffe, upon resigning as a director of the Company during the year, also resigned as Committee Chairman.  Michael Fry, Finance Director of the Company, resigned as a member of the committee during the year as part of the restructure.  The Audit & Corporate Governance Committee met four times during the financial year, details of which are disclosed in the Directors’ Report. 

The qualifications of the members of the committee are also set out in the Directors’ Report.
The Audit & Corporate Governance Committee will ensure that the Managing Director and Chief Financial Officer (or equivalent) prepare a written statement to the Board certifying that the Company’s annual financial report and half yearly financial report present a true and fair view, in all material respects, of the financial condition of the Company and its operational performance and are in accordance with relevant accounting standards.  The statement is to be presented to the Board prior to the approval and sign-off of the respective annual and half yearly financial reports.

The Managing Director and the Chief Financial Officer (or equivalent) are also required to represent in writing to the board that the above statement made by the Managing Director and the Chief Financial Officer (or equivalent) pertaining to the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the polices adopted by the board and the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material aspects.

Remuneration Committee
The Remuneration Committee was established by the Board to assist the Board in fulfilling its responsibilities in relation to developing and assessing the Company’s remuneration policies to ensure that remuneration is sufficient and reasonable and that its relationship to performance is clear.  The key responsibilities of the Remuneration Committee include:

• undertaking an annual review of market conditions, economic factors, industry trends, remuneration statistics and trends, and peer remuneration practices to set the framework for the determination of organisational wide remuneration policies;
• ensuring that a formalised annual performance appraisal and remuneration review process is in place and carried out each year across the Company;
• reviewing the remuneration of Senior Executives on at least an annual basis and putting remuneration recommendations to the Board for approval;
• reviewing the remuneration of Non-Executive Directors on at least an annual basis and putting remuneration recommendations to the Board for approval;
• reviewing remuneration recommendations for Management put forward by their immediate supervisors and putting those remuneration recommendations to the Board for approval;
• making recommendations to the Board with respect to the Company’s equity based performance incentive plans and cash based performance incentive plans; and
• reviewing the operation and effectiveness of the Company’s equity based performance incentive plans and cash based performance incentive plans and making recommendations to the Board with respect to the modification of existing plans or the introduction of new plans.

Further details of the Company’s remuneration practices are set out in the Remuneration Report contained in the Directors’ Report.
 
The Remuneration Committee Charter states that committee membership should comprise a majority of independent directors and a minimum of three members; and that the committee shall be chaired by an independent director.  The membership of the committee, which was restructured during the year, is as follows:

• Andrew Simpson (Committee Chairman) - independent director, Non-Executive Chairman.
• Joe Ariti - independent director, Non-Executive Director.
• Jason Giltay - Company Secretary.

Mark McAuliffe, upon resigning as a director of the Company during the year, also resigned as Committee Chairman.  David Nixon, a Non-Executive Director of the Company, resigned as a member of the committee during the year as part of the restructure.  The Remuneration Committee met two times during the financial year, details of which are disclosed in the Directors’ Report.

Engineering Committee

The Engineering Committee was established by the Board to assist the Board in fulfilling its responsibilities in relation to assessing and managing the performance and risks associated with the Company’s engineering activities through the Engineering Department.  The primary objective of the committee is to review the performance of the Engineering Department, assist Management to identify issues that may affect both current and future performance of the Engineering Department and develop action plans to address any such issues identified.

The Engineering Committee Charter states that committee membership should comprise a minimum of one non-executive member of the Board, as well as the Managing Director and the Engineering Manager; and that the committee shall be chaired by an independent Chairman who is not Chair of the Board.  The membership of the committee, which was restructured during the year, is as follows:

• David Nixon (Committee Chairman) - independent director, Non-Executive Director.
• Kent Swick - Managing Director.
• Leon Naude - Engineering Manager.

Randal Swick, upon resigning as a director of the Company during the year, also resigned as a member of the committee.  The Engineering Committee met ten times during the financial year, details of which are disclosed in the Directors’ Report.

Business Development & Marketing Committee

The Business Development & Marketing Committee was established by the Board to assist the Board in fulfilling its responsibilities in relation to assessing and managing the Company’s business development and marketing strategies and activities.  The primary function of the committee is to review and provide guidance on the Company’s business development and marketing strategies proposed by Management with the aim of ensuring that the Company is appropriately targeting and effectively taking advantage of opportunities that exist in the marketplace for mineral drilling services.

The Business Development & Marketing Committee Charter states that committee membership should comprise a minimum of one non-executive member of the Board, as well as the Managing Director, Finance Director, Company Secretary and Business Development Manager.  The membership of the committee, which was restructured during the year, is as follows:

• Andrew Simpson (Committee Chairman) - independent director, Non-Executive Chairman.
• Kent Swick - Managing Director.
• Michael Fry - Finance Director.
• Jason Giltay - Company Secretary.
• Geoff Muir - Business Development Manager.

Randal Swick, upon resigning as a director of the Company during the year, also resigned as a member of the committee.  The Business Development & Marketing Committee met four times during the financial year, details of which are disclosed in the Directors’ Report.

Operations Committee

Subsequent to the end of the financial year, the Board established an Operations Committee to assist the Board in fulfilling its responsibilities in relation to assessing and managing operational performance and risk.  The primary function of the committee is to review current operational performance, assist Management to identify issues that may affect both current and future performance and develop action plans to address any such issues identified.

The Operations Committee Charter states that committee membership should comprise a minimum of two non-executive members of the Board, as well as the Managing Director and the Chief Operating Officer; and that the committee shall be chaired by an independent Chairman who is not Chair of the Board.  The membership of the committee is as follows:

• Phil Lockyer (Committee Chairman) - independent director, Non-Executive Director.
• Joe Ariti - independent director, Non-Executive Director.
• Kent Swick - Managing Director.
• Brian Praetz - Chief Operating Officer.

Continuous Improvement Committee

Subsequent to the end of the financial year, the Board established a Continuous Improvement Committee to assist the Board to improve business effectiveness by reducing inefficiencies and waste, to eliminate those activities that add little or no value, and to improve the quality of the Company’s service offering and the level of customer service provided.  The primary function of the committee is to identify, consider and oversee the implementation of continuous improvement initiatives.

The Continuous Improvement Committee Charter states that committee membership should comprise a minimum of two non-executive members of the Board of Directors, as well as representatives from the Operations, Administration and Corporate areas of the organisation.  The membership of the committee is as follows:

• Phil Lockyer (Committee Chairman) - independent director, Non-Executive Director.
• Joe Ariti - independent director, Non-Executive Director.
• Michael Fry - Finance Director.
• Brian Praetz - Chief Operating Officer.
• Kathryn Crockett - Contracts Administration Manager.
• David Rankin - Continuous Improvement Manager.
• Serena Fitzpatrick – Training & Development Manager.
• Chris Glenn - Underground Diamond Drilling Supervisor.

Adherence to the Best Practice Recommendations

The Company is committed to adhering to the “Principles of Good Corporate Governance and Best Practice Recommendations” released by the ASX Corporate Governance Council in 2003, to the extent that such recommendations are consistent with the structure and objectives of the Company.  The Company has however departed from the following best practice recommendations:

•  Recommendation 2.4 - The board should establish a nomination committee - The Board has decided not to establish a nomination committee.  The Board itself has assumed the responsibilities that would ordinarily be assigned to a nomination committee and believes that this structure is operating effectively for the Company.
• Recommendation 9.3 - Structure of the remuneration of Non-Executive Directors - The Board may allow Non-Executive Directors to participate in equity based remuneration arrangements, including issues of options and performance rights, subject to the necessary shareholder approvals being sought.  The Board considers that the participation of Non-Executive Directors in equity based remuneration arrangements is appropriate in the circumstances, given the competitive market for experienced and qualified Non-Executive Directors, the growing risks associated with public company directorships and the need to align the interests of Non-Executive Directors with shareholders whilst preserving the Company’s cash position.

Revised Corporate Governance Policies

For the 2009 financial year, the Company has adopted a revised set of corporate governance policies to ensure consistency with the second edition of “Corporate Governance Principles and Recommendations” released by the ASX Corporate Governance Council in 2007.  A copy of the revised policies can be found on the Company’s website at www.swickmining.com.au.