Page 37 - Axiom Mining Limited 2012 Annual Report

Basic HTML Version

2012 Annual Report
Sovereign Risk and Foreign Operations
There are risks associated with operating internationally.
There can be no guarantee that the government
regulations in Australia, Hong Kong, Vietnam or Solomon
Islands, in particular in relation to foreign investment,
repatriation of foreign currency, taxation and the
regulation of the mineral exploration and mining industry,
will not be amended in the future to the detriment of the
Company’s business. Costs of compliance with laws and
regulations in Australia, Hong Kong, Vietnam and Solomon
Islands may vary from current estimates.
The Company undertakes its activities in Vietnam and in
Solomon Islands in conjunction with other local partners.
There can be no guarantee that the Company will be able
to enter into commercially satisfactory arrangements with
other local partners for any future operations in Vietnam
and/or Solomon Islands.
The Company is incorporated in Hong Kong: changes in
Hong Kong laws may have an adverse effect on non-Hong
Kong holders of shares. Reporting requirements of the
Company in Hong Kong may impose onerous obligations
on the Company.
The Company also currently operates in Vietnam.
Vietnam’s economy is undergoing a transition from a
planned to a more market-oriented economy. Although
in recent years the Vietnamese government has
implemented economic reforms and reduced state
ownership, a substantial portion of productive assets
in Vietnam are still owned by the government. In
addition, the Vietnamese government continues to
exercise significant control over Vietnam’s economic
growth through allocation of resources, control of foreign
currency denominated obligations, setting of monetary
policy and providing preferential treatment to particular
industries or companies. The Company’s future earnings
could be affected if the Vietnamese government was
to reverse recent trends and impose restrictions on
the Company’s business.
The Solomon Islands economy and political environment
remains fragile. The Company is currently involved
in litigation in respect of the Prospecting Licence it
was granted on Isabel Island and whilst the Company
is confident that its rights will be upheld, this cannot
be guaranteed.
Currency and Exchange Rate Risk
Movements in currency exchange rates can be volatile.
The Company’s expenditure obligations for exploration
in Vietnam are incurred predominantly in US dollars
(USD) and Vietnamese dong (VND), in the Solomon
Islands in Solomon Bolona dollars (SBD) and in Australia
in Australian dollars (AUD). Currency risk may result in
an exchange rate loss or gain to the Company, depending
on the value movement between currencies.
The Company has prepared its accounts denominated in
AUD. For ASX reporting purposes, quarterly statements
and accounts are provided in AUD.
The return on equity and any dividends for Australian
Shareholders may be exposed to fluctuations and volatility
of the exchange rates among USD, AUD, SBD, and VND.
General Risks
Economic Conditions
General economic conditions may affect interest rates,
inflation rates and other economic variables. Movements in
these factors may benefit or adversely affect the Company.
Movement in general economic conditions may also affect
companies with which the Company conducts its business,
which may also affect the Company’s earnings.
Changes to Laws and Regulations
The introduction of new policies, legislation or
amendments to existing policies or legislation by
governments or the interpretation of those laws as noted
above could impact adversely on the assets, operations
and ultimately financial performance of the Company.