NORTHERN IRON LIMITED
ABN 71 125 264 575
ANNUAL REPORT
31 DECEMBER 2013
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE DIRECTORY
Directors
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
PS Larsen
Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Alternate Director for FH Tschudi
Company Secretary
AJ Neuling
Auditors
HLB Mann Judd (WA Partnership)
Level 4
130 Stirling Street
Perth WA 6000
Bankers
DNB Bank ASA
Innovasjon Norge
Westpac Banking Group Limited
Registered Office and Principal Place of Business in Australia
Level 1
44 Ord Street
West Perth WA 6005
Telephone:
Facsimile:
Email:
Website:
+61 8 9321 9334
+61 8 9321 9335
info@northerniron.com.au
www.northerniron.com.au
Principal Place of Business
Sydvaranger Gruve AS
Post box 412
Sydvaranger Industriområde
N-9900 KIRKENES Norway
Telephone:
Facsimile:
+47 928 09 900
+47 78 97 78 00
Share Registry
Computershare Investor Services Pty Limited
Level 2
45 St Georges Terrace
Perth, WA 6000 Australia
Investor Enquiries:
Investor Enquiries:
Facsimile:
1300 557 010 (within Australia)
+61 3 9415 4000 (outside Australia)
+61 8 9323 2033
Stock Exchange Listing
Securities of Northern Iron Limited are listed on ASX Limited.
ASX Code:
NFE - ordinary shares
Solicitors
Clifford Chance
Level 7
190 St Georges Terrace
Perth WA 6000
1
CONTENTS
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
Chairman’s Review
Operating and Financial Review
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Additional Shareholder Information
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4
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27
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29
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NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CHAIRMAN’S REVIEW
Dear Shareholder,
On behalf of the Board of Northern Iron Limited, I am pleased to present the annual report for the year ending 31 December
2013. I would like to thank our stakeholders, including the local Kirkenes community, employees, customers and business
partners for their continuing support as we strive to build a sustainable and truly great Norwegian mining operation.
Since the restart of operations we have seen steady improvements in mine production, product quality and tonnage of iron ore
concentrate. In 2013, the Company continued its focus on steadily increasing production by improving operational competency
and maintenance management, managing and reducing costs and maximising our product price, with considerable progress
made towards these aims.
Key operational highlights that demonstrate improvement include record tonnes mined and the achievement of successive
monthly concentrate production records in February, March, July and December 2013, with a record quarterly result achieved in
the fourth quarter of 2013. Throughout the year the premium grade quality of the iron ore concentrate was maintained.
These improvements are very encouraging, however, during the year the Company experienced periods where the operations
were unable to sustain the improved levels of production due to one-off events which resulted in unscheduled downtime or
abnormally slower production rates. While these interruptions are very frustrating our operations team have been carefully and
systematically analysing the issues that arose and documenting how these interruptions can be avoided or minimised. External
experts have been frequently used to ensure that preventative measures are correctly identified and captured for future
planning.
During the year, the operation has demonstrated that it has the capacity to produce at higher rates and our goal now is to work
together to systematically improve the operating and maintenance practices, continue to reduce unplanned downtime and
further improve production and costs in 2014.
Significant accomplishments in 2013 included:
15% increase year-on-year in total tonnes mined;
Consistent production of approximately 2.0 Mt of iron ore concentrate across two consecutive annual periods (2012 and
2013);
A record quarterly production result of 545 kt of dry concentrate during the December 2013 quarter;
Diversifying sales of Sydvaranger concentrate amongst a variety of customers including trial cargoes for sinter feed use in
Record monthly production in excess of 200kt of dry concentrate production in July and December 2013;
the European steel market.
Safety performance improved year-on-year with 9 Lost Time Injuries being experienced versus 16 in 2012. Whilst we are pleased
with the improving trend, a continued and unrelenting focus on safety remains our goal. Good safety performance will also
result in improving our reliability and assist in meeting our business targets. Significant time and resources have already been
spent to investigate root causes of safety incidents in order to identify gaps in training and risk awareness. Continuing with the
strategies and efforts required to demonstrate an improved performance requires our continued commitment and focus during
the year ahead.
The financial results of the Company continue to be influenced by market price fluctuations over which we have little control.
Whilst some hedging of the iron ore price has been undertaken throughout the year in order to minimise the potential short-
term impact of extreme price volatility, the challenge remains to optimise all aspects of our operation. Only by doing this and by
continued improvement in reliability and efficiency can we ensure a long-term healthy operation. In this regard we are pleased
to notice the increasing community support for the proposed expansion project which, if approved and implemented, could
contribute to securing a long term sustainable operation to the benefit of all stakeholders.
Sincerely
Peter Bilbe
Chairman
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NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
OPERATING REVIEW
The 2013 year demonstrated improved operational capability with various monthly and annual record results being set for
quantities mined, blasted, crushed, milled and iron ore concentrate produced at Northern Iron’s Sydvaranger project. Whilst
some one-off downtime events were experienced particularly in the first half of the year, the operations were able to recover
strongly and make further progress and gains during the second half. These achievements are encouraging as we plan work
towards further improvements in 2014.
Safety Performance
Safety performance challenges from 2012 have improved significantly in 2013. The number of personnel injuries has decreased
and Sydvaranger Gruve AS (﴾“SVG”)﴿ has a good understanding of the underlying aspects of the injuries. Table 1 summarises the
number of injuries experienced in 2013 versus 2012.
Lost Time Injury (LTI)
Restricted work cases (RWC)
Medical Treatments (MTC)
First Aid (FAC)
TRIFR (ii)
2013
9
1
5
24
15
2012
16
12 (DI) (i)
11
25
41 (iii)
(i) Disabling Injuries (DI) have been treated as restricted work cases and are comparable to RWC.
(ii) TRIFR: Total Recordable Injuries Frequency Rate is the TRI divided per million annual actual work hours. TRI includes LTI, RWC and MTC
Table 1
(excludes FAC).
(iii) TRI rate of 41 is an approximate calculation for 2012.
In 2013 the Company implemented several proactive tools and measurements in order to follow the advice from the Safe Map
survey. For example, the introduction of Walk Observe and Communicate (WOC) has been very helpful for changing the safety
culture. Toolbox safety meetings and the implementation of a non-conformity system have also proven to be successful tools to
improve underlying safety performance. Safety walks performed by safety representatives and line management have been
enforced and corrective actions are coordinated in an active and acceptable way. Safety representatives have also contributed
significantly to the safety improvement becoming important and active partners for the 24/7 safety in the business.
The Company introduced the TRIFR measuring in order to align with Scandinavian and European standards and set a target for
2013 to be less than 15 TRIFR for the year. The TRIFR improved substantially from 41 at the end of 2012 to 15 at the end of 2013.
TRIFR rate improvement was positive in 2013 but it is still far from best practice. The Company will continue efforts to improve
the rate with a new TRIFR target for 2014 of less than 10.
The Company undertakes root cause analysis for all personnel injuries and tripping/slipping has been identified as a major cause
of LTI’s and thus will continue to be a focus area. Near miss reporting is also encouraged by the Company with a “no name, no
blame” approach. This is a proactive measure aimed at identifying safety hazards before incidents occur with follow up
investigations and remediating actions. Over the course of 2013 it is pleasing to note there has been a decrease in the number
of near misses reported.
In 2013 the Company established emergency response teams at all shifts both in Bjørnevatn and Kirkenes. The cooperation with
the local fire brigade has been valuable and has extended to include rehearsals of potential emergency response events.
Working Environment Committee (WEC) meetings have been held regularly and the WEC continues to improve its function as
the mandatory Health, Safety and Environment part of the business.
The cooperation with the local occupational health service has improved and several surveys have been performed according to
the internal control regulations.
New targets have been set for 2014, one being to continue work with the “Critical 6” which is the most common causes of
accidents that leads to fatality or major injuries world-wide. Mandatory certified and documented training as well as technical
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NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
improvements have been performed in 2013 which will continue in order to minimise the risk within the “Critical 6”. Awareness
training for operators will also be enforced in 2014.
Environmental Performance
The Company continued to work towards and fulfil the ambitions of its environmental policy:
Sydvaranger Gruve will build a sustainable future for our employees, community, shareholders and business partners.
Environmental sustainability will be achieved by fostering internal and external environmental awareness and exercising
rigorous control and compliance over our business activities. This will only be possible by working closely with the local
community, our employees, and by drawing on relevant knowledge gained by measuring and monitoring the world
around us.
SVG’s environmental policy focuses on the three main goals of: awareness, monitoring and control.
Awareness
The community liaison group which meets quarterly, had a total of four meetings in 2013. Key topics of interest were:
environmental monitoring; the toxicity testing of the flocculants; noise generation; dust from the mining operation; backfilling of
Hyttemalmen, and the plans for expanding production. Three new members joined the group: a representative for the reindeer
herders in the area; a local representative for the Norwegian Food Safety Authority and Tschudi Kirkenes AS.
Monitoring
The Company’s permanent monitoring program for discharges and runoff from the mining areas revealed no breaches of the
criteria for operation specified in the emission permit given by the Norwegian Environmental Protection Agency (EPA).
Monitoring of Langfjorden in April revealed elevated levels of nitrogen where the water from the Bjørnevatn pits enters the fjord.
Samples taken in May showed that the levels had dropped significantly and all were within the range of the environment
classification “good” or “very good”. This trend was confirmed by results from late August.
In 2013 noise maps for the areas of operation were recalculated to include backfilling of Hyttemalmen and that mining activities
had shifted more to the north. The new maps did not reveal any breaches of noise limits to the public.
Warm weather and wind from the south contributed to increased dust problems in Bjørnevatn during spring and summer. It was
necessary to intensify the watering of rock piles when loading stone and roads, especially near the community in Bjørnevatn.
In 2012 control measurements of the tailings pipeline in the fjord revealed a minor non-conformance relating to the length of
the pipeline. The pipeline was prolonged during the summer period to ensure it was of the required length. Sonar mapping of
the tailings deposit area in Bøkfjorden shows that the tailings are flowing downwards away from the emission point, following
the thalweg.
The investigation into the long-term toxicity on marine organisms from flocculants as well as degradation and leaching of
flocculants in sediments, according to requirements in the emission permit, commenced in 2013. The studies are carried out by
two Norwegian research institutions: Norwegian Institute for Water Research (NIVA), and The Foundation for Scientific and
Industrial Research SINTEF. Results are expected later this year.
A plan to establish a fund to finance post-closure monitoring of re-established marine life in the tailings deposit area of the fjord
was accepted by the EPA and contributions to this fund have commenced.
Together with several other Norwegian mines the Company has been taking part in a research program, ImpTail – Improved
Submarine Tailings Placement in Norwegian Fjords. The aim of this research program was to identify innovative strategies to
improve and accelerate the rehabilitation of subsea areas impacted by tailing disposal in Norway. Surveys were completed in late
2013 and final reports and results are expected in 2014.
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NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
Control
In 2013, the Company worked on further strengthening of internal control systems. An online Non-Conformity Management
System was implemented to report, record, treat and close non-conformities. Opportunities to improve are also included in the
system.
Internal audit is part of a program to keep the internal control system up to date and in line with laws and regulations. In
November the Company conducted an internal audit of all aspects of chemical handling in the company. The audit found
considerable and visible progress in many aspects of the Company’s performance, however work programmes continue to be
ongoing and target further improvement.
Due to warm weather and lack of rain during 2013, the Company’s allocated fresh water reserves were very low at the end of the
summer period. An application was sent to the Norwegian Water Resources and Energy Directorate (NVE) to obtain a temporary
permit to lower water levels in the Kirkenes lakes. The Company was granted a limited license to drain Første and Andrevann
down 0.75 m below the pre-existing limit up until 15 April 2014.
Norwegian law requires that companies continuously seek to substitute current chemical use with less occupational hazardous
and more environmentally friendly alternatives. The Company has an ongoing test program for substitution of chemicals and
during 2013 several process chemicals were tested in bench trials. Of those one was found suitable for a full-scale plant trial,
however it was revealed that the tested chemical was not a sufficient alternative to the current flocculant to enable a
substitution.
In December 2013 the Company was granted a temporary permit from the Norwegian EPA to use up to an additional 2.5 tonnes
of the water treatment chemical PolyDADMAC. The Company applied for this extension as a precaution because of the changes
in ore blend due to the wall slip at the Bjørnevatn pit in September (refer to Mining section on page 7 for further details).
Nevertheless, due to careful monitoring of the process and chemical dosing the Company managed to stay under the original
emission limit of 10 tonnes for 2013.
Community Relations
In May 2013, the Sør-Varanger municipality approved the scope of work for the Environmental and Social Impact Assessment
(ESIA) which clears the way for the Company to complete the necessary works and submit applications for permits required for
expanding the production capacity at Sydvaranger. This is an indication that the relationship between the Company and the
local community continues to develop. This is also illustrated by annual polls pointing in the same direction. A good and
mutually beneficial relationship is in many ways our licence to operate in an industry which is highly visible in all aspects.
The percentage of Company employees who live in the Sør-Varanger municipality exceeded 70% by the year-end. The
Company’s objective is to build a long term sustainable business and this goal is supported by ensuring an adequate proportion
of the workforce employed is locally based skilled employees. It is however, made challenging by a very low unemployment rate
in the municipality, and strong growth in other types of business such as oil and gas activities. A good cooperation with the local
community and municipality is a pre-requisite to succeed and the Company is continuing to focus on this.
Presently the Company is still relying on many commuting employees to meet its requirement for skilled people of all categories,
including technicians. To source more of these skills locally, during the year the Company continued its policy to engage local
apprentices in what is a long term commitment to develop these skills in the local workforce. To date the program has been
successful and the Company has been fortunate to have some of Norway’s best apprentices graduate and continue working for
Sydvaranger. The Company will continue to renew its ability to expand this program further in the coming years. The Company
also supports and participates in a number of local projects to stimulate new housing and educational programs for the region.
The Company was active in supporting local and regional cultural development and sporting events in 2013. In February the
Company sponsored the annual arts festival, the Barents Spektakel, by providing accommodation to performers and festival
workers in Company barracks. The Company also provided support for the annual Kirkenes conference. During the year the
Company entered into a new sponsor agreement with Bjørnevatn IL, the local sports and football club, and the agreement is
such that particular focus will be given to work with children and youth. The Company also continued its cooperation with
“Finnmarksløpet” which is one of the largest dog sled events in the world.
A number of minor sporting and cultural events were also supported by the Company during the year. The Company is also
participating actively in Kirkenes Næringshage and other corner stone events and forums in the municipality, regionally and at a
national level. The Company will endeavour to continue to support various cultural, business and other events taking place in the
region in the years to come.
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NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
Mining
Mining during the year remained focused on the Bjørnevatn deposit. The mine was able to demonstrate flexibility in managing
unplanned events during the year, including downtime events in the processing plant during quarter 2 and the wall failure event
that occurred in Bjørnevatn in early September, which resulted in operations in that area of the mine being suspended until such
time as the failure can be remediated. The wall has remained stable during the December quarter and continues to be
monitored for any further movement. In coordination with its geotechnical advisors the Company commenced extensive
investigations into evaluating remediation alternatives available. This work will continue with a decision on remediation to follow
thereafter. The current short to medium mine plan is not dependent on swift remediation and indicates there is sufficient ore
available to meet the concentrator requirements.
Following the wall failure and in order to maintain safe and continuous ore supply, the production teams were able to change
the mining schedule and continue ore production from Fisketind East, whilst increasing the production rate at Kjellmannsåsen
and continuing to mine at the northern pit of Bjørnevatn. This effort resulted in the continuation of mining without a material
impact on ore production or waste movement during the third quarter. Total material mined from the three pits in the period
2010-2013 is summarised in Table 2:
Ore Mined (kt)
Waste Mined (kt)
Total Mined (kt)
Actual 2013
Actual 2012
Actual 2011
Actual 2010
5,288
13,138
18,426
4,239
11,833
16,071
4,214
8,230
12,444
3,722
8,067
11,789
Table 2
Bjørnevatn supplied 82% of the ore feed from for the year, mainly from the Western wall ore zone. Ore was mined also from the
saddle area, the southern tunnels area and the north end of West pit at the end of the year. The longer-term infrastructure
development work in the pit was also progressed with the realignment of the Bjørnevatn main access ramp which was moved to
the East side of the saddle area. Percentage of ore feed supplied by pit is summarised in Table 3:
Ore Blend
Bjørnevatn
Kjellmannsåsen
Fisketind
Actual 2013 (%)
82
14
4
Table 3
Graph 1 below shows production levels by quarter since commencing mine operations:
Ex-pit Production
s
e
n
n
o
T
d
n
a
s
u
o
h
T
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Q
2
2
0
0
9
Q
3
2
0
0
9
Q
4
2
0
0
9
Q
1
2
0
1
0
Q
2
2
0
1
0
Q
3
2
0
1
0
Q
4
2
0
1
0
Q
1
2
0
1
1
Q
2
2
0
1
1
Q
3
2
0
1
1
Q
4
2
0
1
1
Q
1
2
0
1
2
Q
2
2
0
1
2
Q
3
2
0
1
2
Q
4
2
0
1
2
Q
1
2
0
1
3
Q
2
2
0
1
3
Q
3
2
0
1
3
Q
4
2
0
1
3
Graph 1
The mine improvement strategy is an ongoing program aimed at delivering continuous improvement in operational efficiency.
The success of the program to date is demonstrated by the increased and sustained production levels shown in Graph 1.
7
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
Resource and Reserve Statement
During 2013 the Company continued the work of verifying historical data, chiefly consisting of re-assaying historical pulps. This
work was completed for Bjørnevatn and Tverdalen and the results will be used for future mineral resource updates. In 2013 the
resource models for Fisketind Øst, Bjørnfjell and Oskarsmalmen were updated with Fe (Mag)(Magnetic iron content).
To achieve a better understanding of Sulfide content in final concentrate from different ore sources, the resource models were
also updated with S-DTR (Sulfide in Davis tube concentrate). This work has been carried out by employees of the Company and
GeoVista AB. In 2014 the plan is to update the block models for Bjørnevatn, Oskarsmalmen and others, based on additional
drilling as well as on verification of historical data.
A life of mine study carried out by Mining Engineering Consultants Pty Ltd, in 2013, indicates a + 25 year mine life at consistent
production of 2.5 Mtpa concentrate product. The life of mine study contains an economic assessment that is preliminary in
nature and includes inferred mineral resources that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorised as mineral reserves, and there is no certainty that the
preliminary assessment will ever be realised, in whole or in part.
The ore reserves have been depleted by mining during the year and the reported reserves have been adjusted for this by
subtracting material down to the surveyed pit floors. The areas where mining has been carried out are Bjørnevatn,
Kjellmannsåsen and Fisketind Øst. A total of 5.4 Mt has been weighted in at the crusher during the year. Mining takes place
principally in material that have been classified as mineral reserves, however, some material derives from inferred resources, or
even outside of the modelled volumes, which have thus not been reported as reserves earlier.
Total project Mineral Resources as of 1 February 2014 are shown in Table 4 below:
Mineral Resource Summary as at 1 February 2014
(at 15% Fe total cut-off grade)
Prospect
Indicated
(Mt)
Fe(Tot) % Fe(Mag) %
Bjørnevatn
140.6
31.9
Kjellmannsåsen
Tverdalen
Fisketind Øst
Oskarsmalmen
Bjørnefjell
Jerntoppen
Søstervann
Grundtjern
9.6
20.4
29.2
18.2
17.7
-
-
-
33
32
31
33
30
29.2
27.5
23.0
21
30
25
Inferred
(Mt)
136.7
2.9
26.4
22
14.1
4.2
17
4.7
2.9
Fe(Tot) % Fe(Mag) %
30
31
31
30
31
30
31
37
34
27
25
20
22
28
N/A
24
31
32
Total
Tonnes
(Mt)
277.4
12.6
46.8
51.4
32.2
21.9
17
4.7
2.9
Fe(Tot) % Fe(Mag) %
31
33
31
31
32
30
31
37
34
28
27
21
21
29
N/A
24
31
32
Total
235.7
230.9
Table 4
The mineral resources are reported inclusive of the ore reserves. During the period from February 1, 2013 to February 1, 2014,
the total mineral resources have been depleted from 474.4 Mton at 31% Fe(tot) to 466.9 Mton with 31% Fe(tot).
466.9
31
27
32
25
30
25
Ore reserve summary as at 1 February 2014 are shown in Table 5 below:
Prospect
Bjørnevatn
Tverrdalen
Fisketind Øst (*)
Kjellmannsåsen
Total
Ore Reserve Summary as at 1 February 2014
(at 15% Fe total cut-off grade)
Probable Reserve
Fe(Tot)
(Mt)
130.8
11.2
6.2
6.9
155.1
Table 5
%
32
31
31
35
32
(*) These reserves are based on a mineral resource estimate from 2008 and do not reflect the update reported in 2012.
8
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
During the period from February 1, 2013 to February 1, 2014, the total ore reserves have been depleted, from 162.8 Mton with
32% Fe(tot) down to 151.5 Mton with 32% Fe(tot).
Note:
The information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Thomas Lindholm, who is a
Fellow of the Australasian Institute of Mining and Metallurgy. Thomas Lindholm is employed full time by GeoVista AB. Thomas Lindholm has
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Thomas Lindholm consents to the inclusion in the report of the matters based on his information in the form and
context in which it appears.
Concentrate Production
The 2013 production result was a modest improvement over the prior year as shown in Table 6 despite the unplanned
production interruptions experienced during the second quarter:
Ore Milled (kt)
Concentrate Produced (Dry kt)
Tonnes Shipped (Dry kt)
Actual 2013
Actual 2012
4,791
1,992
1,917
Table 6
4,725
1,980
1,928
The focus during 2013 on continuing to improve plant reliability and stabilise operations at increased volumes was rewarded
with several record production achievements during 2013. Notably, the production performance in December 2013 resulted in
new daily, monthly, quarterly, half-yearly and annual production records being set. Concentrate production for the December
quarter was 545 dry kt and this record quarterly result followed the September 2013 quarter result of 515 dry kt which was the
highest production quarter in which a planned primary mill relines occurs. The stability of the operations across the second half
of 2013 supported increased crushing and milling volumes, yielding a 14% increase in concentrate production over the first half
of 2013. The improved production performance across the second half of the year demonstrates the steady improvement that
continues to be delivered and reinforces the embedded improvements in the operational systems and equipment reliability that
have been achieved.
Table 7 below shows the sustained product quality that continued to be delivered during 2013 in conjunction with steady and
increased production volumes.
Iron (%)
Silica (%)
Alumina (%)
Phos (%)
Sulphur (%) Manganese (%)
2013
2012
2011
2010
68.15
68.01
66.90
62.92
4.77
4.78
5.75
10.74
0.20
0.21
0.22
0.45
Table 7
0.01
0.01
0.01
0.01
0.03
0.01
0.01
0.02
0.06
0.06
0.05
0.05
Sales and Marketing
The Company shipped a total amount of 1,917,000 tonnes of dry concentrate during the year with 1,797,000 tonnes shipped to
Europe and 120,000 tonnes shipped to Bahrain. The average sale price achieved for the year was US$103 per dry metric tonne,
FOB Kirkenes.
During the second half of 2013 the Company successfully diversified its sales amongst a variety of customers. New customers
included ThyssenKrupp Steel and ArcelorMittal, while previous customer Bahrain Steel (formerly GIIC) resumed purchases of
concentrate. An important development has been the trialling of Sydvaranger concentrate at a number of sinter plants
throughout Europe. The Company will monitor the results and feedback from these trial cargoes and will seek to further its
discussions with the various offtake parties, focusing on the potential for a longer-term offtake agreement. Sales to Europe
during 2013 resulted in optimal FOB pricing due to the lower freight costs associated with shipping from Norway to Europe
compared to more distant markets.
9
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
OPERATING AND FINANCIAL REVIEW
Expansion Study
The expansion project to increase production at Sydvaranger, is expected to significantly help secure a competitive and long
term sustainable operation to the benefit of all stakeholders.
In 2012 the Company completed the scoping study for the expansion project including updated assumptions regarding the
required processing flow-sheet, construction and operating costs in a Nordic environment, and to examine alternative options
for tailings disposal. The engineering scoping study was done by two experienced magnetite engineering and processing firms
Noramco Engineering Corporation and Barr Engineering, both located in USA. Second opinions on local cost and concept was
provided by major Norwegian engineering consultancy firm Multiconsult and SRK Consulting (UK). The study examined three
possible plant concepts to double the Company’s total concentrate production as well as three different tailings disposal
options.
The cost of the expansion was estimated between US$280 million to US$360 million depending upon the final option chosen
and subject to the usual caveats about early stage cost estimates.
The most critical path for the expansion project continues to be the permitting process. The Company requires two key authority
approvals to proceed with the expansion, a land use approval from the local Sør-Varanger municipality, and a permit for
increased waste emissions from Miljødirektoratet (The Directorate for the Environment). In order to obtain both approvals an
Environmental and Social Impact Assessment study (ESIA) must be completed. During 2013 the Company finalised the scope of
work for the study in close cooperation with the major Norwegian consulting company Norconsult, the Sør-Varanger
municipality and other key stake holders both at a local, regional and national level. A final public hearing was done in the spring
of 2013, and Sør-Varanger municipality approved the scope of work in late May.
The approved scope of work is quite comprehensive, and particularly some of the marine monitoring activities require an all
season approach to monitor and collect sufficient data. Some of these activities that are considered to be on the critical time line
were initiated in the fall of 2013 following approval of the budget by the Company Board of Directors. All the remaining activities
will be initiated in the early part of 2014 together with a separate work stream for the technical expansion study.
The Company is targeting completion of the ESIA fieldwork in 2014. The applications to the local and national regulators will be
submitted in the second quarter of 2015, and on this basis the approvals should be received before the end of 2015. There is
significant uncertainty related to the timing of the approval process however the Company still considers it realistic to assume
that an investment proposal study on the expansion could be submitted at the end of 2015, enabling the construction to
commence early in 2016, subject to assuming an acceptable funding solution is being identified.
In addition to the expansion project as described, during 2014 the Company will investigate opportunities for debottlenecking
and incremental expansions to add value to the project for more modest capital outlays.
FINANCIAL REVIEW
The consolidated loss from continuing operations for the year net of tax of US$1,654,000 (2012: US$11,337,000 loss) reflects:
US$204,554,000 of sales revenue
US$204,962,000 of operational and administration expenses
US$4,705,000 interest expense
US$6,687,000 income tax benefits arising on the recognition of a net deferred tax asset.
10
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
The directors present the annual report of the Group consisting of the Company and the entities it controlled during the period
for the financial year ended 31 December 2013. In order to comply with the provisions of the Corporations Act, the directors
report as follows.
Directors
The names and details of the Company’s directors in office at any time during or since the end of the financial year are as
follows. Directors were in office for this entire period unless otherwise stated.
Current Directors
Peter R Bilbe
Chairman
BE (Mining) (Hons), MAusIMM
Appointed a director on 5 November 2007
Peter has over 36 years’ experience in senior operational and corporate roles in the resources sector both in Australia and
overseas and previously was the Managing Director and Chief Executive Officer of Aztec Resources Limited which successfully
developed the Koolan Island iron ore project.
Peter has significant experience as a mining engineer, and prior to his role with Aztec Resources Limited was General Manager of
Operations for Portman Limited, managing the Koolyanobbing and Cockatoo Island iron ore projects.
Mr Bilbe is a member of the Audit Committee and the Remuneration, Nomination, and Governance Committee.
During the past three years Mr Bilbe has held the following listed company directorships:
Sihayo Gold Limited (Chairman)
Independence Group NL (Chairman)
Norseman Gold Plc
From June 2010 to November 2013
Since March 2009
From July 2009 to December 2011
Antony Beckmand
Managing Director and Chief Executive Officer
CPA, BCom (Acc & Fin), GradDip AFI SIA
Appointed as Managing Director and Chief Executive Officer on 8 July 2013
Tony joined the Company in October 2008 and was appointed as Managing Director of Northern Iron Limited in July 2013, prior
to which he held the role of Chief Financial Officer of NFE since October 2009. Tony is a qualified CPA with a B.Com from the
University of Western Australia and a Grad. Dip in Applied Finance and Investment from the Securities Institute of Australia. Tony
has more than 17 years’ experience within the mining industry across a range of operations including iron ore, minerals sands,
base metals and gold. During his career he has held a variety of corporate and site based finance and accounting roles with
resources companies including Exxaro Resources, Perilya Ltd and Robe River Iron Associates.
During the past three years Mr Beckmand has not been a director of any other listed entity.
Ashwath Mehra
Non-Executive Director
BSc (Econ)
Appointed a director on 22 May 2007
Ashwath is an economist and founded the MRI Group, a commodities group with annual turnover of approximately $3 billion.
He is currently CEO of Astor Management AG, a holding company with interests in natural resources businesses. He has worked
11
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
in the minerals industry for 28 years, starting his career with Philipp Brothers after which he spent 10 years with Glencore, where
he was a senior partner and ran the Nickel and Cobalt Divisions. He has substantial experience in projects and project finance
and has worked on equity and bond issues.
Mr Mehra is Chairman of the Audit Committee and a member of the Remuneration, Nomination and Governance Committee.
During the past three years Mr Mehra has held the following listed company directorships:
EMED Mining Limited
Champion Minerals Inc.
Fancamp Eploration Limited
Felix H Tschudi
Non-Executive Director
BSc (Econ), MBA
Appointed a director on 13 December 2007
Since October 2008
From October 2010 to April 2013
Since September 2013
Felix is the Chairman and owner of Tschudi Shipping Company AS, the holding company of the Tschudi Group. Tschudi Mining
AS, a member company of the Tschudi Group, is the registered holder of 67,133,728 shares in the Company (13.86%).
Felix attended the Royal Norwegian Naval Academy and served as Sub-Lieutenant in the Royal Norwegian Navy. He earned a
Second Mate’s certificate from merchant navy colleges in the UK, a BSc (﴾Econ)﴿ from London School of Economics, and an MBA
from INSEAD, France.
Before joining the family shipping company Tschudi & Eitzen in 1989, Felix worked for the Vienna-based trading and finance
house AWT specialising in trade structures in Eastern Europe and the former Soviet Union. Felix was the joint managing director
of Tschudi & Eitzen from 1992 until 2002. He worked as the managing director of the Oslo stock exchange listed company
Tschudi & Eitzen Shipping ASA from 1995 until 1997.
Felix is the Chairman of the Centre for High North Logistics, a non-profit organisation focusing on transportation solutions in the
Arctic and a member of the World Economic Forum’s Global Agenda Council on the Arctic. He is Chairman of the the board of
Maritimt Forum Oslofjorden, a member of the Committee of the P&I Club Skuld, the board of the Norwegian publishing house
Aschehoug & Co., and a former president of the Oslo Shipowners’ Association.
Mr Tschudi is Chairman of the Remuneration, Nomination, Audit and Governance Committee and a member of the Audit
Committee.
During the past three years Mr Tschudi has not been a director of any other listed entity.
Peter S Larsen
Alternate Director for Felix Tschudi
MSc (Econ)
Appointed a director on 13 December 2007 and resigned as a director on 30 November 2010.
Peter, an economist, is currently the Chief Financial Officer of Tschudi Shipping Company AS. He has worked in the shipping and
energy industries for 23 years, starting his career with Burmeister & Wain Shipyard, followed by 10 years in the European energy
sector with a focus on project development and financing. He has considerable experience in risk management within the power
and commodity sectors.
During the past three years he has not been a director of any other listed entity, however Mr Larsen is Chairman of the
Company’s unlisted subsidiary, Sydvaranger Gruve AS.
12
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Former Directors
David C Griffiths
Former Chairman
BEc (Hons), MEc, Hon.Dec. FAICD
Appointed a director on 5 November 2007, resigned 10 June 2013
David has over 31 years’ experience in senior financial and executive roles in a wide range of industries, and is a former Division
Director of Macquarie Bank. Prior to this role, David was Executive Chairman of Perth stockbroking firm Porter Western.
David holds an Honours Degree in Economics and an Honorary Doctor of Economics from The University of Western Australia, a
Masters Degree in Economics from Australian National University and is a Fellow of the Australian Institute of Company
Directors. David also sits on the Board of the Perth International Arts Festival.
Mr Griffiths was a member of the Remuneration, Nomination, and Governance and Audit Committees.
During the past three years Mr Griffiths has held the following listed company directorships:
Automotive Holdings Group Limited (Chairman)
Thinksmart Limited (Deputy Chairman)
Since February 2007
Since November 2000
John S Sanderson
Former Managing Director
BEng (Hons) Geological, MAICD
Appointed as Managing Director on 17 February 2010, resigned as a director on 8 July 2013
John was the Chief Executive Officer of the Company from 1 November 2009 to 8 July 2013, prior to which he held the roles of
Chief Operating Officer and Manager of Mining within the Company. Mr Sanderson is a mining engineer with over 20 years’
experience and his previous positions include that of Manager, Mine Operations for Rio Tinto’s Brockman iron ore mine and
Manager Technical Services East Pilbara for Rio Tinto.
During the past three years Mr Sanderson has not been a director of any other listed entity.
Company Secretary
Alex J Neuling
BSc FCA (ICAEW) AGIA
Mr Alex Neuling was appointed company secretary on 1 January 2010. Alex is a Chartered Accountant and Chartered Secretary
with more than 15 years professional and corporate experience including significant experience in the provision of company
secretarial and financial management consultancy services to ASX listed companies.
Directors’ shareholdings
At the date of this report, the relevant interests of the directors in ordinary shares and options of the Company are as follows:
Name
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
Ordinary shares
Options over ordinary shares
215,288
-
15,702,792
67,133,728
-
-
-
-
13
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Dividends
No dividends were paid during the year and the directors do not recommend payment of a dividend in respect of the current
financial year.
Principal activities
The principal activities of the Group are included in the operating and financial review as set out on pages 4 to 10.
Operating and financial review
An operating and financial review of the Group for the financial year ended 31 December 2013 is set out on pages 4 to 10 and
forms part of this report.
Significant changes in state of affairs
There were no significant changes in the state of affairs in the year under review.
Events subsequent to reporting date
On 25 March 2014, the Company entered into a 6 year agreement with Orica for the provision of rock on ground (ROG) services
at the mine. ROG services include the activities of blast design, drilling, charging and detonating the blast to provide broken rock
on the ground ready to be loaded into haul trucks. This is a complete outsourcing of the Drill and Blast activities that are
currently performed by the Company, Atlas Copco and EPC. Management expects this agreement to deliver improvement in the
integration and accountability of mining processes whilst maintaining delivery of required outcomes in terms of quality, quantity
and safety.
On 24 March 2014 the Company announced that 50,000 performance rights issued under the Company’s Performance Rights
Plan have lapsed in accordance with their terms of issue.
Other than this, no matter or circumstance has arisen since 31 December 2013 that in the opinion of the directors has
significantly affected, or may significantly affect in future financial years:
(i)
(ii)
(iii)
the Group’s operations;
the results of those operations; or
the Group’s state of affairs.
Likely developments
The likely developments for the 2014 financial year are contained in the operating and financial review as set out on pages 4 to
10.
The directors are of the opinion that further information as to the likely developments in the operations of the Group would
prejudice the interests of the Company and the Group and it has accordingly not been included.
Environmental regulation and performance
The environmental regulation and performance of the Company for the financial year ended 31 December 2013 is set out on
pages 5 and 6 and forms part of this report.
Indemnification and insurance of directors and officers
During the financial year, the Company paid a premium to insure the directors and officers of the Company and its controlled
entities. The policy prohibits the disclosure of the nature of the liabilities covered and the amount of the premium paid.
14
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Deeds of Access and Indemnity have been executed by the Company with each of the directors and the Company Secretary. The
deeds require the Company to indemnify each director and the Company Secretary against any legal proceedings, to the extent
permitted by law, made against, suffered, paid or incurred by the director or the Company Secretary pursuant to, or arising from
or in any way connected with the director or the Company Secretary being an officer of the Company.
Remuneration report
The Remuneration Report is set out on pages 16 to 21 and forms part of this Directors’ Report.
15
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Remuneration Report (Audited)
(all amounts in US$ unless otherwise stated)
Directors’ and executive officers’ remuneration
The remuneration report as set out on pages 16 to 21 outlines the remuneration arrangements in place for the key management
personnel of Northern Iron for the financial year ended 31 December 2013. The information contained in the remuneration
report has been audited as required by Section 308(3C) of the Corporations Act. The remuneration report details the
remuneration arrangements for key management personnel (﴾“KMP”)﴿ who are defined as those having authority and
responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly,
including any director (whether executive or otherwise) of the parent company.
Total remuneration paid or payable to Directors & Key Management Personnel during the year was $3,530,270 (2012:
$3,015,742). Significant items driving the observed increase in reported remuneration included:
Retention bonus payments of an amount of $898,634 (2012: $nil) relating to the retention scheme implemented following
the announcement of the Strategic Review in November 2011.
The Remuneration, Nomination, and Governance Committee determines remuneration policies and practices, evaluates the
performance of senior management, and considers remuneration for those senior managers. This Committee assesses the
appropriateness of the nature and amount of remuneration on an annual basis by reference to industry and market conditions,
and with regard to the Company’s financial and operational performance.
Total non-executive directors’ fees are approved by shareholders and the Board is responsible for the allocation of those fees
amongst the individual members of the Board.
The value of remuneration is determined on the basis of cost to the Company and Group.
Principles of compensation
Remuneration of directors and other KMP is referred to as compensation, as defined in AASB 124.
Compensation levels for KMP of the Company and Group are competitively set to attract and retain appropriately qualified and
experienced directors and senior executives. Compensation arrangements include a mix of fixed and performance based
compensation. Short Term Incentive payments are made against predetermined metrics which included safety, production and
cost targets with an adjustment to take into account movements in the iron ore price. A component of share-based
compensation is awarded at the discretion of the Board, subject to shareholder approval when required.
Following the announcement of the Strategic Review in November 2011, the Company implemented a scheme for the retention
of some key executives through this process which coincided with the planned ramp up in production. The scheme covered 5
key executives and allowed for the payment equivalent to 50% of their base salary should they still be employed by the
Company in July 2013 or terminated without cause prior to that date.
Compensation structures take into account the overall level of compensation for each director and executive officer, the
capability and experience of the directors and executive officers, the executive officers’ ability to control the financial
performance of the relative business segment, the Group’s performance (including earnings and the growth in share price), and
the amount of any incentives within each executive officer’s remuneration.
The Company was incorporated in May 2007 and listed on ASX in December 2007 at an Initial Public Offer price of A$2.15 per
share. Historical share price, earnings, and dividends were considered in determining remuneration during the reporting period.
Share price
31/12/13
31/12/12
31/12/11
A$0.22
A$0.54
A$0.64
Consolidated net (loss) / profit after tax from continuing operations (US$000)
(1,654)
(11,337)
2,871
16
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Fixed compensation
Fixed compensation consists of base compensation as well as any employer contributions to superannuation funds. Base
compensation may be supplemented by an element of equity based compensation.
Equity-based compensation is set out in the Equity Instruments section of this Remuneration Report.
Non-executive directors
Total remuneration for all non-executive directors, last voted upon by shareholders at a General Meeting in November 2007, is
not to exceed A$500,000 per annum.
A non-executive director’s fee is currently A$50,000 per annum. The Chairman’s fee is A$125,000. Non-executive directors do not
receive any performance related remuneration. Directors’ fees cover all main Board activities and membership of Board
committees. The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.
Non-executive directors may receive share-based compensation at the discretion of the Board, and subject to approval by
shareholders.
Service contracts
The contract duration, period of notice and termination conditions for directors and executive officers are as follows:
(i)
John Sanderson, General Manager of Northern Iron Marketing AG (formerly Managing Director of Northern Iron Limited).
Commenced employment with the Group on 7 December 2009 appointed Chief Executive Officer on 1 November 2009 and
appointed to the Board as Managing Director on 17 February 2010. Mr Sanderson resigned as Managing Director effective
8 July 2013, and subsequently represented the Company as General Manager of Northern Iron Marketing AG until 28
February 2014 on a part-time basis. The total remuneration package was CHF224,250 pa of base salary plus pension as
required under the Swiss Code of Obligations in Switzerland. Termination by either party was with 1 months’ notice. The
Company may terminate the contract at any time without notice if serious misconduct has occurred. A long-term incentive
scheme was provided, being a retention bonus of 50% of base salary if still employed with SVG/NFE on 1 July 2013, which
was paid after the end of the reporting period. A second long term incentive scheme was provided under Mr Sanderson’s
contract as Managing Director of Northern Iron Limited, being equity participation in the shares of Northern Iron Limited,
equivalent to:
The options vested on 24 August 2012 and expired on 24 August 2013.
500,000 options with an exercise price of A$2.06
500,000 options with an exercise price of A$2.41
500,000 options with an exercise price of A$2.91
(ii) Antony Beckmand, Managing Director and Chief Executive Officer of Northern Iron Limited. Commenced employment with
the Group in October 2008, appointed Chief Financial Officer of Northern Iron Limited on 30 September 2009, and
appointed Managing Director and Chief Executive Officer on 8 July 2013 with no set term. Mr Beckmand will be paid a base
salary of A$415,000 pa plus superannuation. Termination by the employee is with 6 months’ notice and by the Company is
with 1 months’ notice with a payment equal to 6 months’ base salary plus superannuation. The Company may terminate
the contract at any time without notice if serious misconduct has occurred. A short-term incentive bonus is provided. The
Board shall determine the KPIs and the bonus that the employee will be paid if his KPIs are achieved. Such a bonus will be
set at a rate of no more than 50% of the base salary. A retention bonus of 50% of base salary was paid during the reporting
period as Mr Beckmand was still employed with SVG/NFE on 1 July 2013. A long-term incentive scheme is provided, being
equity participation in the Company’s Performance Rights Plan, subject to achievement of KPIs during the vesting period.
The maximum number of shares is set at 150,000, vesting over a 3.5 year period. The Company may, at its discretion, make
a cash-payment in lieu of issuing shares based on the 5 day VWAP market value of those shares.
(iii) Sissel Bækø, General Manager of Production Services of Sydvaranger Gruve AS. Commenced in this role 1 March 2012 with
no set term. Termination by the Company or the employee is with three months’ notice. The Company may terminate the
contract at any time without notice if serious misconduct has occurred. Ms Bækø will be paid a base salary of NOK
1,400,000 pa plus statutory pension contributions as required under Norwegian law and the minimum National Insurance
Scheme payable in Norway. A short-term incentive bonus is provided. The Board shall determine the KPIs and the bonus
that the employee will be paid if her KPIs are achieved. Such a bonus will be set at a rate of no more than 50% of the base
salary. A retention bonus of 50% of base salary was paid during the reporting period as Ms Bækø was still employed with
SVG/NFE on 1 July 2013. A long-term incentive scheme is provided, being equity participation in the Company’s
17
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Performance Rights Plan, subject to achievement of KPIs during the vesting period. The maximum number of shares is set
at 150,000, vesting over a 3.5 year period. The parent Company may, at its discretion, make a cash-payment in lieu of
issuing shares based on the 5 day VWAP market value of those shares. Pension is to be paid as required under Norwegian
law.
(iv) Rob Brown, General Manager of Operations of Sydvaranger Gruve AS. Commenced 5 July 2011 with no set term. Mr Brown
will be paid a base salary of A$275,000 pa plus pension as required under Norwegian law and the minimum National
Insurance Scheme payable in Norway. Termination by the Company or the employee is with three months’ notice. The
Company may terminate the contract at any time without notice if serious misconduct has occurred. A short-term incentive
bonus is provided. The Board shall determine the KPIs and the bonus that the employee will be paid if his KPIs are
achieved. Such a bonus will be set at a rate of no more than 50% of the base salary. A retention bonus of 50% of base
salary was paid during the reporting period as Mr Brown was still employed with SVG/NFE on 5 July 2013, which will
continue annually at a rate of 25% of base salary if employed on subsequent anniversaries. A long-term incentive scheme is
provided, being equity participation in the Company’s Performance Rights Plan, subject to achievement of KPIs during the
vesting period. The maximum number of shares is set at 150,000, vesting over a 3.5 year period. The Company may, at its
discretion, make a cash-payment in lieu of issuing shares based on the 5 day VWAP market value of those shares. Mr Brown
resigned as per 1 March 2014.
(v) Harald Martinsen, Chief Development Officer of Sydvaranger Gruve AS. Commenced 28 August 2011 with no set term. Mr
Martinsen will be paid a base salary of NOK 1,800,000 pa plus pension as required under Norwegian law and the minimum
National Insurance Scheme payable in Norway. Termination by the Company or the employee is with three months’ notice.
The Company may terminate the contract at any time without notice if serious misconduct has occurred. A short-term
incentive bonus is provided. The Board shall determine the KPIs and the bonus that the employee will be paid if his KPIs are
achieved. Such a bonus will be set at a rate of no more than 50% of the base salary. A retention bonus of 50% of base
salary was paid during the reporting period as Mr Martinsen was still employed with SVG/NFE on 1 July 2013. A long-term
incentive scheme is provided, being equity participation in the Company’s Performance Rights Plan, subject to achievement
of KPIs during the vesting period. The maximum number of shares is set at 150,000, vesting over a 3.5 year period. The
Company may, at its discretion, make a cash-payment in lieu of issuing shares based on the 5 day VWAP market value of
those shares.
(vi)
Ismo Haaparanta, Chief Executive Officer of Sydvaranger Gruve AS. Commenced 1 May 2012 with no set term. Mr
Haaparanta will be paid a base salary of NOK 2,000,000 pa plus pension as required under Norwegian law and the
minimum National Insurance Scheme payable in Norway. Termination by the Company or the employee is with six months’
notice. The Company may terminate the contract at any time without notice if serious misconduct has occurred. A short-
term incentive bonus is provided. The Board shall determine the KPIs and the bonus that the employee will be paid if his
KPIs are achieved. Such a bonus will be set at a rate of no more than 50% of the base salary. A retention bonus of 25% of
base salary was paid during the reporting period as Mr Haaparanta was still employed with SVG/NFE on 1 May 2013, and is
payable again on 1 May 2014 if still employed with NFE/SVG, and may continue depending on negotiation with the
Managing Director of NFE. A long-term incentive schemeis provided, being equity participation in the Company’s
Performance Rights Plan, subject to achievement of KPIs during the vesting period. The maximum number of shares is set
at 150,000, vesting over a 3.5 year period. The Company may, at its discretion, make a cash-payment in lieu of issuing
shares based on the 5 day VWAP market value of those shares.
18
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Directors’ and executive officers’ remuneration
2013
Short Term
Post-employment
Share Based Payments
Name
Salary and fees
($)
Other
($)
($)
Cash bonus (ii)
Superannuation
Options
Performance
contributions
Rights
Directors
Non-Executive
Mr PR Bilbe (Chairman)
Mr A Mehra
Mr FH Tschudi
Mr DC Griffiths (Former Chairman)
(resigned 10 June 2013)
Executive
Mr A Beckmand
(MD & CEO – Northern Iron Limited)
(appointed 8 July 2013) (i)
Mr JS Sanderson
(Former Managing Director)
(resigned 8 July 2013)
Executive Officers
81,196
48,290
48,290
48,930
-
-
-
-
-
-
-
-
($)
7,446
-
-
4,404
326,175
16,708
160,657
41,734
352,152
-
275,604
56,900
Ms S Bækø
(GM of Production Services - Sydvaranger Gruve AS)
Mr R Brown
(GM of Operations – Sydvaranger Gruve AS)
244,654
9,803
143,746
10,595
280,029
98,283
161,005
8,205
Mr H Martinsen
(CDO – Sydvaranger Gruve AS)
Mr I Haaparanta
(CEO – Sydvaranger Gruve AS)
311,794
41,143
188,335
9,014
345,731
76,707
124,181
8,559
2,087,241
242,644
1,053,528
146,857
($)
-
-
-
-
-
-
-
-
-
-
-
($)
-
-
-
-
-
-
-
-
-
-
-
% of
remuneration
Total
performance
related
($)
Value of options
and rights as a
proportion of
remuneration (%)
88,642
48,290
48,290
53,334
545,274
684,656
408,798
547,522
550,286
555,178
3,530,270
-
-
-
-
6%
-
6%
4%
6%
7%
-
-
-
-
-
-
-
-
-
-
(i) Prior to 8 July 2013, previous role was Chief Financial Officer
(ii)
In accordance with the Short Term Incentive Scheme, cash bonus payments totalling US$154,894 were made in respect of predetermined metrics which included safety, production and cost targets
with an adjustment to take into account movements in the iron ore price. In addition, retention bonus payments totalling US$898,634 were made to six employees under the terms of their service
contracts.
19
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Directors’ and executive officers’ remuneration (continued)
2012
Short Term
Post-employment
Share Based Payments
Name
Salary and fees
($)
Other
($)
($)
Cash bonus (i)
Superannuation
Options
Performance
contributions
Rights
($)
($)
($)
Total
% of remuneration
performance related
($)
Value of options
and rights as a
proportion of
remuneration
(%)
Directors
Non-Executive
Mr DC Griffiths (Chairman)
Mr PR Bilbe
Mr A Mehra
Mr FH Tschudi
Executive
118,784
47,514
51,790
51,790
-
-
-
-
-
-
-
-
10,691
4,276
-
-
-
-
-
-
Mr JS Sanderson (Managing Director)
465,281
27,120
75,356
17,148
194,595
Executive Officers
Mr A Beckmand
(CFO – Northern Iron Limited)
Ms S Bækø
(GM of Production Services - Sydvaranger Gruve AS)
Mr R Brown
(GM of Operations – Sydvaranger Gruve AS)
Mr H Martinsen
(CDO – Sydvaranger Gruve AS)
Mr I Haaparanta
(CEO – Sydvaranger Gruve AS)
(appointed 1 May 2012)
284,059
18,334
66,291
31,532
262,479
8,870
10,308
9,695
300,681
100,897
103,228
7,964
291,861
42,659
14,602
8,371
227,166
50,911
-
5,313
-
-
-
-
-
-
-
-
-
-
-
129,475
51,790
51,790
51,790
-
-
-
-
-
-
-
-
779,500
10%
25%
400,216
17%
-
53,088
344,440
3%
15%
-
-
512,770
20%
357,493
4%
-
-
53,088
336,478
-
16%
(i)
In accordance with the Short Term Incentive Scheme, cash bonus payments were made in respect of improvements relating to safety and an improved production result across quarter 4 2011 and
quarter 1 2012. In addition, the Company at its discretion made a cash bonus payment in lieu of issuing shares in accordance with the terms of the Long Term Incentive Scheme.
2,101,405
248,791
269,785
94,990
194,595
106,176
3,015,742
20
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Equity instruments
(i)
Shares
There were no shares in the Company granted as compensation to directors and executive officers during the reporting period.
(ii)
Share based payments
During the financial year, the following share-based payment arrangements were in existence.
Option series
Grant date
J Sanderson
14/05/2010
J Sanderson
14/05/2010
J Sanderson
14/05/2010
Number of
Options
500,000
500,000
500,000
Vesting Dates
Expiry Date
Exercise
Price
Revised Exercise
Price (i)
Fair value at
grant date
24/08/2012
24/08/2013
24/08/2012
24/08/2013
24/08/2012
24/08/2013
A$2.15
A$2.50
A$3.00
A$2.06
A$2.41
A$2.91
A$0.50
A$0.44
A$0.38
(i) In accordance with Listing Rule 6.22.2 the exercise price of unlisted options were changed as a result of a non-renounceable
pro-rata entitlement offer.
No options have been granted since the end of the financial year, nor have any options been exercised during or since the end
of the reporting period. During the reporting period, there was no forfeiture of options granted in previous periods.
In the event that the option holder ceases to be an employee, director or consultant of the Company, the Board may at its sole
discretion resolve that all vested options held by that employee, director or consultant must be exercised within 21 days of that
employee, director or consultant ceasing to be an employee, director or consultant (as applicable) of the Company. Any
unvested options held by that employee, director or consultant will lapse.
Further details of share-based payments are set out in Notes 3(r) and 21.
(iii) Options over equity instruments granted as compensation
There were no options granted during the 2013 or 2012 year.
Options are recognised as an expense over their vesting period. No monies will be payable for the issue of the options.
No options have been granted since the end of the financial year, nor have any options been exercised during or since the end
of the reporting period. During the reporting period there was no forfeiture of options granted in previous periods.
In the event that the option holder ceases to be an employee, director or consultant of the Company, the Board may at its sole
discretion resolve that all vested options held by that employee, director or consultant be exercised within 21 days of that
employee, director or consultant ceasing to be an employee, director or consultant (as applicable) of the Company. Any
unvested options held by that employee, director or consultant will lapse.
(iv) Analysis of movements in options
There were no options granted during the 2013 or 2012 financial years.
The value of options granted in the year is the fair value of the options at grant date using the Black-Scholes Option Pricing
Model. The total value of options granted is included in the table above, however this amount is allocated to expense over the
vesting period.
(v) Analysis of options granted as compensation
Details of vesting profiles of the options granted as remuneration to directors and executive officers are detailed below:
Director
Number of options
granted
Grant date
% vested in current
year
Financial year in which
grant vests
Value to vest
minimum ($)
Value to vest
maximum ($)
JS Sanderson
1,500,000
14/05/10
nil
2012
-
-
These options expired on 24 August 2013 unexercised. As at report date there were no unvested options on issue and no
options were forfeited during the year.
End of remuneration report
21
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Directors’ and committee meetings
The number of directors’ and committee meetings and the number of those meetings attended by each of the directors of the
Company during the year are as follows:
Board
Audit Committee
Remuneration, Nomination and
Governance Committee (i)
(a)
6
13
13
13
13
6
6
(b)
6
13
13
12
13
5
6
(a)
(b)
(a)
(b)
-
4
4
2
-
2
-
-
4
4
-
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
A Beckmand
PR Bilbe
A Mehra
FH Tschudi
PS Larsen (ii)
DC Griffiths
JS Sanderson
(a) Number of meetings held during period of office
(b) Number of meetings attended
(i) The Remuneration, Nomination, and Governance Committee matters were dealt with at meetings of the full Board.
(ii)
Includes attendance as alternate for Mr Tschudi and as a non-voting invitee in his capacity as Chairman of SVG.
Remuneration, Nomination, and Governance Committee
The committee considers remuneration packages and policies applicable to the executive directors, senior executives, and non-
executive directors. It is also responsible for share option schemes, Employee Share Plans, incentive performance packages, and
retirement and termination entitlements. Many of these matters are also considered by the full Board rather than the Committee.
Members of the committee are Mr Felix Tschudi (Chairman), Mr Peter Bilbe and Mr Ashwath Mehra.
The independent directors are identified in the Corporate Governance Statement section of this Annual Report as set out on
pages 78 to 92.
Names and qualifications of Audit Committee members
The committee is to include at least three members. Current members of the committee are Mr Ashwath Mehra (Chair), Mr Peter
Bilbe and Mr Felix Tschudi (with Mr Peter Larsen as his alternate). Qualifications of Audit Committee members are provided in
the directors section of this Directors’ Report.
Proceedings on behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to any such proceedings during the year.
Rounding of amounts
The Company is a company of the kind referred to in Class Order 98/100 issued by the Australian Securities and Investments
Commission relating to the rounding off of amounts in the Directors’ Report and financial report.
22
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ REPORT
Amounts in the Directors’ Report and financial report have been rounded-off to the nearest thousand dollars in accordance with
that Class Order, unless otherwise indicated.
Non-audit services
Details of amounts paid or payable to the auditors for non-audit services provided during the year by the auditors are outlined
in Note 5 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditors (or by persons or firms on the
auditor’s behalf)﴿ is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services disclosed in Note 5 to the financial statements do not compromise the external
auditor’s independence, based on advice received from the audit committee, for the following reasons:
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditors, and
none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting
as advocate for the Company or jointly sharing economic risks and rewards.
Lead auditor’s independence declaration
The lead auditor’s independence declaration, as required under Section 307C of the Corporations Act, is set out on page 24 and
forms part of the Directors’ Report for the financial year ended 31 December 2013.
The directors’ report is signed in accordance with a resolution of the directors made pursuant to S.292(2) of the Corporations Act
2001.
Antony Beckmand
Managing Director and Chief Executive Officer
Peter Bilbe
Chairman
Stockholm, 28 March 2014
Perth, 28 March 2014
23
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Northern Iron Limited for the year
ended 31 December 2013, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b)
any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
28 March 2014
N G NEILL
Partner, HLB Mann Judd
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
24
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
Continuing operations
Revenue
Other operating income
Operating expenses
Administration expenses
Foreign exchange gain / (loss)
Hedging loss
Share-based payments expense
Results from operating activities
Finance income
Finance expense
Net finance expense
Loss before income tax
Income tax benefit / (expense)
Loss from continuing operations
Other comprehensive income
Items which may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations
Exchange differences arising on translation of foreign loan
Income tax on other comprehensive income
Other comprehensive (loss) / income for the year net of income tax
Total comprehensive loss for the year net of tax
Notes
4
4
4
4
4
4
4
7
2013
US$000
204,554
478
2012
US$000
205,701
-
(197,590)
(199,679)
(7,372)
3,162
(6,702)
-
(3,470)
174
(4,705)
(4,531)
(8,001)
6,347
(1,654)
(37,243)
36,231
-
(1,012)
(2,666)
(7,565)
(509)
(1,388)
(301)
(3,741)
343
(5,992)
(5,649)
(9,390)
(1,947)
(11,337)
4,714
(3,965)
-
749
(10,588)
Basic loss per share from continuing operations
(cents per share)
6
(0.34)
(2.75)
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes to the financial
statements.
25
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2013
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial assets
Inventory
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Mine properties
Property, plant and equipment
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial liabilities
Provisions
Current tax liabilities
Interest bearing loans and borrowings
Total current liabilities
Non-current liabilities
Provisions
Interest bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Notes
19(b)
9
10
11
9
12
13
8
14
15
16
7
17
16
17
18
2013
US$000
2012
US$000
19,446
33,842
534
28,177
332
82,331
1,181
60,071
230,066
31,309
322,627
32,379
36,345
-
22,471
921
92,116
916
64,285
244,618
24,622
334,441
404,958
426,557
31,437
7,063
365
340
50,248
89,453
1,847
36,970
38,817
37,710
558
2,020
-
50,462
90,750
2,189
54,264
56,453
128,270
147,203
276,688
279,354
380,761
16,813
380,761
17,825
(120,886)
(119,232)
276,688
279,354
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes to the financial
statements.
26
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
Balance at 1 January 2012
(Loss) from continuing operations
Other comprehensive income
Total comprehensive income
Shares issued for cash, net of transaction costs
Share based payments
Issued capital
Foreign currency
translation reserve
Share based
payments reserve
Accumulated losses
US$000
330,747
-
-
-
50,014
-
US$000
13,029
US$000
4,220
-
749
749
-
-
-
-
-
-
(173)
US$000
(107,895)
(11,337)
-
(11,337)
-
-
Total
US$000
240,101
(11,337)
749
(10,588)
50,014
(173)
Balance at 31 December 2012
380,761
13,778
4,047
(119,232)
279,354
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Shares issued for cash, net of transaction costs
Share based payments
-
-
-
-
-
-
(1,012)
(1,012)
-
-
-
-
-
-
-
(1,654)
-
(1,654)
-
-
(1,654)
(1,012)
(2,666)
-
-
Balance at 31 December 2013
380,761
12,766
4,047
(120,886)
276,688
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements.
27
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2013
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Finance income
Finance expense
Notes
Net cash flows provided by operating activities
19(a)
Cash flows from investing activities
Payments for mine property
Payments for exploration and evaluation
Payments for deferred waste
Payments for property, plant and equipment
Disposal of property, plant and equipment
Net security deposits lodged
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Payment of share issue costs
Payment on cancellation of shares
Proceeds from interest bearing loans and borrowings
Payment of interest bearing loans and borrowings
Net cash flows (used in) / provided by financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effect of foreign exchange on the balances of cash and cash equivalents held
in foreign currencies at the beginning of the year
Cash and cash equivalents at the end of the year
19(b)
2013
US$000
207,688
(183,969)
-
174
(5,336)
18,557
(2,703)
(35)
(7,987)
(6,369)
-
(712)
2012
US$000
191,134
(167,505)
(11)
555
(5,434)
18,739
(9,652)
(1,389)
(6,539)
(37,086)
7,682
(126)
(17,806)
(47,110)
-
-
-
3,772
(18,504)
(14,732)
(13,981)
32,379
1,048
19,446
57,022
(2,916)
(4,092)
9,651
(26,900)
32,765
4,394
28,618
(633)
32,379
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the financial statements.
28
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1
REPORTING ENTITY
The consolidated financial report of the Company for the financial year ended 31 December 2013 comprises the Company and
its subsidiaries (﴾the “Group”).
The financial report was authorised for issue by the directors on 28 March 2014.
NOTE 2
BASIS OF PREPARATION OF THE FINANCIAL REPORT
The financial report is a general purpose financial report prepared in accordance with Australian Accounting Standards (﴾“AASBs”)﴿
(﴾including Australian Accounting Interpretations)﴿, as adopted by the Australian Accounting Standards Board (﴾“AASB”)﴿, and the
Corporations Act 2001.
The financial report has also been prepared on a historical cost basis, except for derivative financial instruments which have been
measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets.
The financial report is presented in United States dollars and all values are rounded to the nearest thousand dollars (﴾$’000)﴿
unless otherwise stated under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to
which the class order applies.
The Company is a listed public company, incorporated in Australia and operating in Norway and Switzerland. The entity’s
principal activities are included in the operating and financial review as set out on pages 4 to 10.
Statement of compliance
The financial report was authorised for issue on 28 March 2014.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International
Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial
statements and notes thereto, complies with International Financial Reporting Standards (IFRS).
Going concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business
activity and the realisation of assets and the settlement of liabilities in the ordinary course of business.
As at 31 December 2013, the Group had cash reserves of US$19,446,000 and a net working capital deficit of US$7,122,000,
having recorded a net loss after tax of US$1,654,000 and net cash inflows from operating activities of US$18,557,000 for the year
ended 31 December 2013. Net loss after tax has been calculated after deducting non-cash items totalling US$30,967,000 (see
also Note 19) including depreciation of property, plant and equipment and other non-current assets of US$20,954,000.
The financial report has been prepared on a going concern basis, which the directors consider to be appropriate based on:
The expected continued generation of positive operating cash flows from production / sales;
The reversal of timing differences on sales which had impacted the reported year-end working capital position
Expected improvements in cash flows based upon expected prices (risk mitigated by structured hedging), sustained
improvements in production complemented by lower production costs and strong demand for the Company’s high quality
concentrate; and
An anticipated broadening of customer sales mix during 2014 on more favourable credit terms; and
Agreement with DNB to extend by one year the leasing periods for the mining fleet equipment and the expectation that
current debt facilities are maintained on current terms.
During 2014, the Company will continue a targeted capital works program and further develop the operational capability which
is expected to improve reliability and throughput, enabling the process plant to improve on the demonstrated maximum rates of
operation as set in 2013. The sustained improvement to product quality is expected to support the continuation of strong prices
being achieved for the product. Considering this, the directors consider the equity situation of the Company acceptable.
As at the date of this report and having considered the above factors, the directors are confident that the Group will be able to
continue as a going concern for the foreseeable future.
29
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Basis of measurement
The financial report is prepared on a historical cost basis, except for derivative financial instruments that have been measured at
fair value.
Functional and presentation currency
The consolidated financial statements are presented in United States dollars (US$), which is the Company’s presentation currency.
Use of estimates and judgements
The preparation of the financial report requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and 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 estimate is revised and in any future periods affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year and judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognised in the financial statements, are as follows:
(i)
Impairment
The recoverability of the carrying amount of property, plant and equipment and mineral interests has been reviewed by the
Company. In conducting the review, the recoverable amount has been assessed by reference to the higher of ‘fair value less costs
to sell’ and ‘value in use’. In determining value in use, future cash flows are based on estimates of:
Quantities of ore reserves and mineral resources;
Future production levels and sales;
Timing of future production;
Future exchange rates;
Future commodity prices; and
Future cash costs of production and capital expenditure.
The recoverable amount is sensitive to the discount rate used in the discounted cash flow model as well as the expected cash
inflows. Additionally the recoverability of the Company’s investments in its subsidiaries has been reviewed. Variations to the
expected future cash flows, and timing thereof, could result in significant changes to the impairment test results, which could in
turn impact future financial results.
The Company has prepared a budget for the life of the mine which indicates that existing cash reserves will be sufficient to meet
relevant financial covenants and to pay expenses as and when they fall due. This budget assumes that production targets will be
met and that the concentrate tonnage produced will be sold. The Company cannot guarantee by what percentage the
benchmark price may rise or fall or that the concentrate tonnage will be produced and sold as contemplated under the sales
arrangements in place. In the event that production targets were not met or prices were to fall significantly and/or customers
were unable to take the committed tonnage, the Company may need to raise additional funding to be a going concern.
(ii) Deferred tax asset
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning
strategies. The Group’s carrying value of recognised deferred tax assets at 31 December 2013 was US$31,309,000 (2012:
US$24,622,000). The estimated value of Group unrecognised deferred tax assets at 31 December 2013 was US$14,763,000 (2012
US$27,026,000).
(iii) Provisions
The Group has recognised provisions for environmental restoration and an agreed compensation to a counterparty to an offtake
sales contract due to non-delivery of product to meet contract quality specifications. These provisions are measured based on
the management’s estimates of:
30
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
probable amount of resources that will be required to settle the obligation; and
timing of settlement.
Such estimates are subjective and there may be a need to correct the book value of the provisions as a result of changes in
estimates.
(iv) Exploration for, evaluation of and development of mineral resources
Expenses for exploration, evaluation and development of mineral resources are capitalised in accordance with the accounting
policy in Notes 3(g) and 3(i). Determining the amount to be capitalised requires management to estimate in which phase the
project is and make assumptions regarding the expected future cash generation of the assets, discount rates to be applied and
the expected period of benefits. At 31 December 2013, the Group’s carrying amount of capitalised mine properties was
US$60,071,000 (2012: US$64,285,000).
(v)
Functional currency
Companies in the Group have to determine their functional currencies based on the primary economic environment in which
each entity operates. In order to do that, the management has to analyse several factors, including which currency mainly
influences sales prices of product sold by the entity, which currency influences the main expenses of providing services, in which
currency the entity has received financing, and in which currency it keeps its receipts from operating activities.
For Sydvaranger Gruve AS, the above indicators are mixed and the functional currency is not obvious. Management used its
judgment to determine which factors are most important and concluded the US$ is the functional currency for that company.
For Northern Iron Marketing AG, management have determined that the US$ is the functional currency for that company given
that its revenue will mostly be in US$ and it has very few expenses in other currencies.
For Northern Iron Limited, management have determined that the Australian dollar is the functional currency for that company
given that its revenue and expenses will mostly be in A$.
The presentation currency of Northern Iron Limited and the Group is US$.
(vi) Deferred waste
The Group has adopted a policy of deferring all waste development costs and amortising them in accordance with the
accounting policy in Note 2(vii) below. Significant judgement is required in determining the amortisation rate. Factors that are
considered include:
Any proposed changes in the design of the mine;
Estimates of the quantities of ore reserve and mineral resources for which there is a high degree of confidence of economic
extraction;
Future production levels;
Future commodity prices; and
Future cash costs of production and capital expenditure.
(vii) Unit of production method of depreciation
The Group applies the units of production method of depreciation to its mine assets based on ore tonnes mined. These
calculations require the use of estimates and assumptions. Significant judgement is required in assessing the available reserves
and resources and the production capacity of the operations to be depreciated under this method. Factors that are considered in
determining reserves and resources and production capacity are the Group’s history of converting resources to reserves and the
relevant time frames, the complexity of metallurgy, markets, and future developments. The Group uses economically recoverable
mineral resources (comprising proven and probable reserves plus, where appropriate, a portion of measured resources) to
depreciate assets on a unit of production basis. However, where a mineral interest has been acquired, and an amount has been
attributed to the fair value of resources not yet designated as reserves, the additional resources have been taken into account.
When these factors change or become known in the future, such differences will impact pre-tax profit and carrying values of
assets.
31
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(viii) Leased assets and finance lease liability
Sydvaranger Gruve AS has a finance lease agreement with a related company, Tschudi Bulk Terminal AS, regarding concentrate
storage, handling and ship loading facilities. These assets were initially recorded in the financial statements with an amount of
US$37,300,000 together with an equivalent finance lease liability. Payments of principal and interest amounting to US$5,136,000
were made toward the lease obligation during 2013. The lease payment ends in December 2017. However, the lease will be in
effect until 31 December 2034 with the option to extend for two periods each of ten years. Repayments on the facility are in
NOK, payable monthly and include interest at a rate of 8.42% per annum.
NOTE 3
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial
report. The accounting policies have been applied consistently by all entities in the Group.
Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
Basis of consolidation
(a) Subsidiaries
The consolidated financial report comprises the financial statements of the Company and its controlled entities. A controlled
entity is any entity controlled by the Company whereby the parent entity has the power to control the financial and operating
policies of an entity so as to obtain benefits from its activities.
All inter-company balances and transactions between entities in the Group, including any unrealised profits or losses, have been
eliminated on consolidation.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those applied by the parent
entity.
Where a subsidiary enters or leaves the Group during the year, its operating results are included or excluded from the date
control was obtained or until the date control ceased.
Investments in subsidiaries are carried at cost in the Company’s financial statements.
Northern Iron Marketing AG was established in April 2009 for the purpose of sales and marketing of iron ore concentrate from
the Sydvaranger iron project.
In July 2012 Sydvaranger Gruve AS registered a new subsidiary, Sydvaranger Malmtransport AS (SMT) to manage and operate
the railway between Kirkenes and Bjørnevatn. Due to Sydvaranger Gruve’s 100% ownership of SMT and itself being owned 100%
by the parent company, Northern Iron Limited, the Company was successful in its application to the tax authorities
(Skattedirektoratet) to avoid consolidation at the SVG/SMT level. SMT has remained mostly inactive during the 2013 year with
mainly accounting fees and taxation assistance being expensed during the period. Therefore the carrying amount of the
investment in the subsidiary of US$21,000 remains unchanged from inception.
(b) Business combinations
All business combinations are accounted for by applying the purchase method which includes the reverse acquisition method.
Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange
plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable
net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group’s share of the fair value of the
32
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
identifiable net assets of the subsidiary acquired, the difference is recognised directly in the Statement of Comprehensive
Income, but only after a reassessment of the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange using the entity’s incremental borrowing rate.
Goodwill on business combination
Goodwill represents the differences between the cost of the acquisition and the fair value of the identifiable net assets acquired.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is not amortised but is allocated to cash generating units and tested annually for impairment.
(c) Income tax
The charge for current income tax expense is based on the result for the year adjusted for any non-assessable or disallowed
items. It is calculated using tax rates that have been enacted or are substantively enacted by balance date.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable
profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is recognised in the Statement of Comprehensive Income except where it relates to items recognised directly in
equity, in which case it is recognised in equity. Deferred income tax assets are recognised for deductible temporary differences
and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences
and tax losses. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The
carrying amount of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future
assessable income is expected to be obtained.
(d) Recoverable amount of assets and impairment testing
Assets that have an indefinite useful life are not subject to depreciation and are tested annually for impairment by estimating
their recoverable amount.
Assets that are subject to depreciation are reviewed annually to determine whether there is any indication of impairment. Where
such an indicator exists, a formal assessment of recoverable amount is then made. Where this is in excess of carrying amount,
the asset is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future
cash flows expected to be derived from the asset or cash generating unit. In estimating value in use, a pre-tax discount rate is
used which reflects the current market assessments of the time value of money and the risks specific to the asset. Any resulting
impairment loss is recognised immediately in the Statement of Comprehensive Income.
(e) Trade receivables
Trade receivables are stated at fair value and subsequently measured at amortised cost, less impairment losses. Impairment
testing is carried out in accordance with Note 3(d).
(f) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business less any estimated selling costs. Cost includes those costs incurred in bringing each component of
inventory to its present location and condition.
33
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(g) Mine properties
Mine property and development assets include costs transferred from exploration and evaluation assets once technical feasibility
and commercial viability of an area of interest are demonstrable, together with subsequent costs to develop the asset to the
production phase. Where the directors decide that specific costs will not be recovered from future development, those costs are
charged to the Statement of Comprehensive Income during the financial period in which the decision is made.
Depreciation of mining property and development costs is calculated on a unit of production basis so as to write off the costs in
proportion to the depletion of the estimated recoverable reserves.
(h) Property, plant and equipment
Recognition and measurement
All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item
also includes the initial estimate of the costs of dismantling and removing an item and restoring the site on which it is located.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in
which they are incurred.
Impairment
The carrying amount of property, plant and equipment is reviewed at each balance date to determine whether there are any
objective indicators of impairment that may indicate the carrying values may not be recoverable in whole or in part. Impairment
testing is carried out in accordance with Note 3(d). Where an asset does not generate cash flows that are largely independent it
is assigned to a cash generating unit and the recoverable amount test applied to the cash generating unit as a whole.
If the carrying value of the asset is determined to be in excess of its recoverable amount, the asset or cash generating unit is
written down to its recoverable amount.
Depreciation
Depreciation on plant and equipment is calculated on a straight line basis over expected useful life to the Group commencing
from the time the asset is held ready for use. The following useful lives are used in the calculation of depreciation:
Buildings
Plant and equipment
Railway and rolling stock
Mobile fleet
Furniture, fixtures and office equipment
Licenses
20 years
15 to 20 years
15 to 20 years
4 to 10 years
3 to 10 years
5 years
Assets held under a finance lease are depreciated over their expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at least annually.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
included in the Statement of Comprehensive Income.
(i)
Intangible assets
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are
only carried forward to the extent that the Group’s rights of tenure to the area are current and that the costs are expected to be
34
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
recouped through the successful development of the area, or where activities in the area have not yet reached a stage that
permits reasonable assessment of the existence of economically recoverable reserves.
Each area of interest is assessed for impairment to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. Impairment testing is carried out in accordance with Note 3(d). Accumulated costs in relation to an
abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then
reclassified from intangible assets to mine properties.
(j) Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is
probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are determined
by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
Restoration costs
The amount of the provision for future restoration and rehabilitation costs is capitalised and depreciated in accordance with the
policy set out in Note 3(g). The unwinding of the effect of discounting on the provision is recognised as an interest cost.
(k) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different to those of other business segments. A geographical segment is engaged in providing products or
services within a particular economic environment and is subject to risks and returns that are different from those of segments
that are operating in other economic environments.
(l) Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset. Leases which transfer to a lessee substantially all the risks and benefits incidental
to ownership of the leased asset are classified as finance leases. Other lease agreements are treated as operating leases.
Finance leases are capitalised at the inception of the lease at the fair value of the leased assets or, if lower, at the present value of
the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against
income except for borrowing costs related to the financing of the assets constructed for own use (during the construction
period). Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if
there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the Statement of Comprehensive Income on a straight-line basis over
the lease term.
(m) Investments and other financial assets
The Group determines the classification of its financial instruments at initial recognition and re-evaluates this designation at each
reporting date.
Fair value is the measurement basis, with the exception of held-to-maturity investments and loans and receivables which are
measured at amortised cost. Fair value is inclusive of transaction costs. Changes in fair value are either taken to the Statement of
Comprehensive Income or to an equity reserve (refer below).
Fair value is determined based on current bid prices for all quoted investments. If there is not an active market for a financial
asset fair value is measured using established valuation techniques.
35
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets
are impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of
a security below its cost is considered in determining whether the security is impaired. If any such evidence exists, the cumulative
loss is removed from equity and recognised in the Statement of Comprehensive Income.
(i)
Financial assets at fair value through profit and loss
A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated
by management. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in
the Statement of Comprehensive Income in the period in which they arise.
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are stated at amortised cost using the effective interest rate method, less any impairment losses.
(iii) Held-to-maturity investments
These investments have fixed maturities, and it is the Group’s intention to hold these investments to maturity. Held-to-maturity
investments are stated at amortised cost using the effective interest rate method.
(iv) Available-for-sale financial assets
Available for sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not included in any of the above categories. Available-for-sale financial assets are reflected at fair
value. Unrealised gains and losses arising from changes in fair value are taken directly to equity in an available-for-sale
investments revaluation reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments are included in the Statement of Comprehensive Income as gains and losses from investment securities.
(v)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset, or, where appropriate, a shorter period.
(n) Foreign currency
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in
which that entity operates (﴾the “functional” currency)﴿. The consolidated financial statements are presented in US$ which is the
parent entity’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate at Statement of Financial
Position date. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the
transaction.
Exchange differences arising on the translation of monetary items are recognised in the Statement of Comprehensive Income,
except where deferred in equity as a qualifying cash flow or net investment hedge.
Translation differences arising on non-monetary items, such as equities held at fair value through profit and loss, are reported as
part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale
financial assets, are included in the fair value reserve in equity.
Foreign operations
The financial performance and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:
assets and liabilities are translated at exchange rates prevailing at Statement of Financial Position date.
36
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency
translation reserve as a separate component of equity. These differences are recognised in the Statement of Comprehensive
Income upon disposal of the foreign operation.
(o) Share capital
Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any recognised
income tax benefit.
(p) Earnings per share
The Group presents basic and diluted earnings per share (﴾“EPS”)﴿ for its ordinary shares.
Basic EPS is calculated by dividing the result attributable to equity holders of the Company by the weighted number of shares
outstanding during the period.
Diluted EPS is determined by adjusting the result attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of all potential ordinary shares, which comprise share options granted.
(q) Employee benefits
Wages and salaries, annual leave
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date.
Employee benefits that are expected to be settled wholly within one year have been measured at the undiscounted amounts
expected to be paid when the liability is settled, plus related on-costs.
(r) Share based payments – shares, options and performance rights
The fair value of shares, share options and performance rights granted is recognised as an expense with a corresponding
increase in equity. Fair value is measured at grant date and recognised over the period during which the grantees become
unconditionally entitled to the shares or share options.
The fair value of share grants at grant date is determined by the share price at that time.
The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, any vesting and performance criteria, the share price at grant date, the expected price
volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. Upon the exercise
of the option, the balance of the share-based payments reserve relating to the option is transferred to share capital.
The fair value of performance rights at grant date is calculated on assumptions in respect of market based vesting conditions,
probabilities of achieving non-market based performance hurdles, and volatility in Northern Iron’s share price.
(s) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid
investments.
(t) Goods and services tax
Revenues, expenses, and assets are recognised net of the amount of Australian goods and services tax (﴾“GST”)﴿ and Norwegian
value added tax (﴾“VAT”)﴿, except where the amount of GST or VAT incurred is not recoverable from the taxation authorities. In
these circumstances the GST or VAT is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables in the Statement of Financial Position are shown inclusive of GST and VAT.
Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST or VAT components of investing
and financing activities, which are disclosed as operating cash flows.
37
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(u) Trade and other payables
Trade and other payables are stated at amortised cost. The amounts are unsecured and usually paid within 45 days of
recognition.
(v) Financial liabilities
Financial liabilities within the scope of AASB 39 are classified as financial liabilities at fair value through the profit or loss,
borrowings, or as derivatives as hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value and in the case of borrowings, plus directly attributable transaction
costs.
The Group’s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depend of their classification as follows:
Financial liabilities at fair value through the profit or loss
Financial liabilities at fair value through the profit or loss includes financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category
includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge
relationships as defined by AASB 39. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Comprehensive Income.
Borrowings
After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains
and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised as well as through
the Effective Interest Rate method (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral
part of the EIR. The EIR is included in finance expense in the Statement of Comprehensive Income.
The EIR is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of
the financial liability, or, where appropriate, a shorter period.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or expired.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
quoted market prices or dealer price quotations.
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
Such techniques may include recent arm’s length market transactions, references to the current fair value of another instrument
that is substantially the same, discounted cash flow analysis or other valuation models.
(w) Interest expenses
Interest expenses comprise interest expense on borrowings and the unwinding of the discount on provisions.
38
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(x) Derivative financial instruments
The Group may use foreign currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative
financial instruments are initially recognised at fair value on the date the derivative contract is entered into and are subsequently
remeasured to fair value.
Any gains and losses arising from changes in the fair value of derivatives, except those that relate to the effective portion of cash
flow hedges, are taken directly to the profit or loss for the year.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with
similar maturity profiles.
For the purpose of hedge accounting, hedges are classified as either fair value hedges when they hedge exposure to changes in
the fair value of a recognised asset or liability; or cash flow hedges where they hedge exposure to variability in cash flows that is
either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.
Cash flow hedges – forward foreign currency contracts
In relation to cash flow hedges (forward foreign currency contracts) to hedge firm commitments which meet the conditions for
hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is
recognised directly in other comprehensive income and the ineffective portion is recognised directly in profit or loss.
When the hedged firm commitment results in the recognition of an asset or liability, then at the time the asset or liability is
recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement
of the acquisition cost or other carrying amount of the asset or liability.
For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the Statement of
Comprehensive Income in the same year in which the hedged firm commitment affects the net profit and loss, for example,
when the sale occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
qualifies for hedge accounting.
At that point in time, any accumulated gain or loss on the hedging instrument recognised in equity is kept in equity until the
forecast transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the
Statement of Comprehensive Income.
(y) Revenue
Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria
must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be
measured reliably.
Interest
Revenue is recognised as interest accrues using the effective interest rate method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of the financial asset.
(z) Contingent liabilities
Contingent liabilities are defined as:
possible obligations resulting from past events whose existence depends on future events;
39
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
obligations that are not recognised because it is not probable that they will lead to an outflow of resources; or
obligations that cannot be measured with sufficient reliability.
Contingent liabilities are not recognised in the Statement of Financial Position, but are disclosed in the notes to the financial
statements, with the exception of contingent liabilities where the probability of the liability occurring is remote.
(aa) Adoption of new and revised standards
For the year ended 31 December 2013, the directors have reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January
2013.
It has been determined by the directors that there is no impact, material or otherwise, of the new and revised Standards and
Interpretations on its business and, therefore, no change is necessary to Group accounting policies.
The directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the
year ended 31 December 2013. As a result of this review, the directors have determined that there is no impact, material or
otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group
accounting policies.
40
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4
REVENUE AND EXPENSES
Notes
2013
US$000
2012
US$000
Revenue and expenses from continuing operations has been arrived at after
(charging) / crediting:
Revenue
Sale of ore (i)
Other operating income
Operating expenses
Depreciation of property, plant and equipment
Amortisation expensed
Net ore inventory movement
Operational expenses of mining and production activities
13
12
11
Freight costs
Utilities, maintenance
Real estate expenses
Personnel expenses
Other expenses
Administration expenses
Advisory services and other similar fees
Directors’ fees
Travel and accommodation
Other
Depreciation of non-current assets
13
Hedging loss (ii)
Finance income
Interest - external parties
Finance and borrowing costs
Interest - external parties
Finance charges - environmental restoration provision
16
Total finance and borrowing costs
Operating expenses above includes
Operating lease rental – minimum lease payments
204,554
205,701
478
-
(20,946)
(1,342)
913
(83,875)
(5,149)
(39,249)
(4,014)
(43,609)
(319)
(21,373)
(5,431)
(2,146)
(80,390)
(17,851)
(24,432)
(3,825)
(42,017)
(2,214)
(197,590)
(199,679)
(3,099)
(289)
(471)
(3,505)
(8)
(7,372)
(6,702)
(3,511)
(344)
(543)
(3,161)
(6)
(7,565)
(1,388)
174
343
(4,600)
(105)
(4,705)
(5,906)
(86)
(5,992)
(4,103)
(4,003)
(i) Sale of ore includes revenues from spot sales of iron ore concentrate that are shipped based on “Cost and Freight” (﴾CFR)﴿
where the Company must pay the marine freight.
(ii) Hedging losses for the 2013 year of US$6,702,000 (2012: US$1,388,000) consists of realised losses of US$nil (2012:
US$398,000) and unrealised of US$1,267,000 (2012: US$134,000) on electricity hedging contracts, as well as realised losses
of US$948,000 (2012: US$432,000) and unrealised losses of US$5,300,000 (2012: US$424,000) on iron ore price hedging
contracts partly offset by realised gains of US$273,000 on electricity hedging contracts and unrealised gains of US$540,000
on foreign exchange contracts.
41
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5
AUDITORS’ REMUNERATION
Audit services
Auditors of the Company (HLB Mann Judd)
for an audit or review of the financial report
Other auditors (Ernst & Young AS)
for an audit or review of subsidiary Sydvaranger Gruve AS in Norway
Other auditors (Ernst & Young Ltd)
for an audit or review of subsidiary Northern Iron Marketing AG in Switzerland
Other services
Auditors of the Company
capital raising report, due diligence services and advice regarding Accounting
Standards
taxation services
Other Auditors (Ernst & Young AS)
taxation services
Other Auditors (Ernst & Young Ltd)
taxation services
NOTE 6
EARNINGS PER SHARE
2013
US$
2012
US$
83,300
87,266
125,746
280,584
38,935
49,213
-
4,056
13,279
6,526
25,787
19,337
-
277,824
24,023
480,228
2013
2012
US$000
US$000
The earnings and weighted average number of ordinary shares used in the calculation of
basic and diluted earnings per share are as follows:
Basic loss per share from continuing operations (cents per share)
(0.34)
(2.75)
Loss used in calculating basic and diluted earnings per share
(1,654)
(11,337)
Weighted average number of ordinary shares used in calculating the basic earnings per
share (i)
Number of shares
484,405,314
412,222,411
(i) Options on issue are not considered dilutive in the current and prior year as they are anti-dilutive.
42
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7
INCOME TAX EXPENSE
Income tax expense / (benefit) recognised in profit or loss
The major components of the tax expense / (benefit) are:
Current tax payable
Movement in deferred tax
Income tax (benefit) / expense
Notes
2013
US$000
2012
US$000
340
(6,687)
(6,347)
-
1,947
1,947
The prima facie income tax benefit on pre-tax accounting profit from operations reconciles to the income tax (benefit) / expense
in the financial statements as follows:
Loss before income tax
Income tax benefit calculated at 30%
Tax effect of:
Expenses that are not deductible in determining taxable profit
Changes in recorded tax losses / temporary differences
Change in tax rate of subsidiaries operating in other jurisdictions
Assets and liabilities not recognised as deferred tax assets
Different tax rates of subsidiaries operating in other jurisdictions
Foreign exchange adjustment
Income tax (benefit) / expense
Unrecognised net deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Statement of Financial Position
Deductible temporary differences
Tax losses
Accrued income
Statement of changes in equity
Share issue costs
2
(8,001)
(9,390)
(2,400)
(2,817)
48
(7,606)
1,159
138
(130)
2,444
449
3,806
-
487
115
(93)
(6,347)
1,947
2013
US$000
2012
US$000
8,026
6,737
-
14,763
20,999
6,027
(4)
27,027
10
7,581
43
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8 DEFERRED TAX
Recognised net deferred tax assets
Deferred tax assets and liabilities have been recognised in respect of the
following items:
Notes
2013
US$000
2012
US$000
Deferred tax assets, comprising:
Deductible temporary differences
Tax losses
Deferred tax liabilities, comprising:
Property, plant and equipment
Finance lease
502
68,335
68,837
33,214
4,313
37,527
541
67,848
68,389
39,119
4,648
43,767
Net deferred tax asset recognised
2
31,309
24,622
Change in deferred income tax relates to the following:
Balance at beginning of the year
Provisions
Losses carried forward
Others
Property, plant and equipment
Finance lease - concentrate storage, handling and ship loading facility
Balance at end of the year
24,622
(36)
486
(4)
5,906
335
31,309
26,568
58
1,558
(2)
(1,449)
(2,111)
24,622
Deferred tax assets are recognised for the carry-forward of unused tax losses and unused tax credits to the extent that it is
probable taxable profits will be available against which the unused tax losses/credits can be utilised.
The Group has recognised deferred tax assets amounting to US$31,309,000 as of 31 December 2013 (2012: US$24,622,000). The
tax losses and credits, from which deferred tax assets arise, relate to Norwegian tax regulations under which tax losses are
available indefinitely for offset against future taxable profits.
The Group has recognised deferred income tax of carried forward tax losses on the basis that the recoverability of these losses is
probable. During 2013 the Company sustained its improvements, made in 2012, to both quality and throughput. During 2014,
the Company will continue a targeted capital works program and further develop the operational capability which is expected to
improve reliability and throughput, enabling the process plant to improve on the demonstrated maximum rates of operation as
set in 2013. The sustained improvement to product quality is expected to support the continuation of strong prices being
achieved for the product. The directors are confident that production volumes will improve throughout 2014 and that the
Company will be in a position where carried forward tax losses will be recovered in approximately five to seven years.
44
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 9
TRADE AND OTHER RECEIVABLES
Current
Trade and other receivables (i)
VAT Refundable
Security deposit (ii)
Other receivable (iii)
Accrued income (iv)
Non-Current
Other receivable (iii)
Security deposits (v)
2013
US$000
2012
US$000
28,455
4,500
262
247
378
31,297
4,348
282
418
-
33,842
36,345
2013
US$000
2012
US$000
-
1,181
1,181
371
545
916
(i) The average credit period on sales of iron ore is 44 days, and is interest free. No allowance for unrecoverable trade
receivables has been made, determined by reference to past default experience.
(ii) Guarantee for operational payments
(iii) The receivable is from EPC Norge AS and due over the next year.
(iv) Accrued income relates to carbon dioxide compensation for increased electricity prices as a result of the European Union’s
emissions trading system. The Company has applied for the compensation in 2013 and expects to receive payment in
quarter two 2014.
(v) Security deposits consist of accommodation rent agreement deposits and long-term deposits that can only be used for
restoration works of mineral properties and post-closure monitoring of re-established marine life in the tailings deposit area
of the fjord.
NOTE 10
DERIVATIVE FINANCIAL ASSETS
Current
Derivatives that are carried at fair value
Currency forward contracts
2013
US$000
2012
US$000
534
-
45
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11
INVENTORY
Production supplies
Work-in-progress
Finished goods
2013
US$000
10,449
6,094
11,634
28,177
2012
US$000
10,639
4,017
7,815
22,471
Inventories are stated at the lower of cost and net realisable value. At 31 December 2013 production supplies, work-in-progress
and finished goods were stated at cost. At 31 December 2012 production supplies and finished goods are stated at cost while
work-in-progress is stated at net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of
variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realisable
value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale.
Write downs of inventories to net realisable value recognised as an expense during the period to 31 December 2013 amounted
to US$nil (2012 US$615,000)﴿ and are included in Note 4 “Net ore inventory movement”.
DNB Bank and Innovasjon Norge share a fixed and floating charge over all inventories.
NOTE 12
MINE PROPERTIES
Non-Current
Exploration and evaluation (i)
Mine property (ii)
Deferred waste (iii)
Balance at the end of the year
(i) Exploration and evaluation
Non-Current
Exploration and evaluation
Balance at beginning of the year
Additions
Amortisation
Balance at the end of the year
2013
2012
US$000
US$000
17
56,055
3,999
60,071
14
54,662
9,609
64,285
2013
US$000
2012
US$000
14
35
(32)
17
21
1,389
(1,396)
14
The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on
the successful development and commercial exploitation or sale of the respective areas.
46
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(ii) Mine property
Non-Current
Mine property
Balance at beginning of the year
Additions
Amortisation
Balance at the end of the year
(iii) Deferred waste
Non-Current
Deferred waste
Balance at beginning of the year
Additions
Amortisation – included in net ore inventory movement
Balance at the end of the year
2013
US$000
2012
US$000
54,662
2,703
(1,310)
56,055
45,575
9,725
(638)
54,662
2013
US$000
2012
US$000
9,609
745
(6,355)
3,999
6,466
6,540
(3,397)
9,609
47
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13
PROPERTY, PLANT AND EQUIPMENT
Land &
Buildings
Plant &
Equipment
(Owned)
Plant &
Equipment
(Finance
Lease)
Railway &
rolling stock
Mobile
Equipment
(Owned)
Mobile
Equipment
(Finance
Lease)
Furniture
fixtures &
office
equipment
Other items
(Licenses)
PPE under
construction
Prepayments
Total
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
Gross carrying amount - at cost
As of 1 January 2012
24,028
153,210
33,090
4,688
Additions
Disposals/Transfers
4,963
406
2,153
78
-
-
-
-
As of 31 December 2012
29,397
155,441
33,090
4,688
As of 1 January 2013
29,397
155,441
33,090
4,688
Additions
Disposals/Transfers
180
-
2,221
(30)
-
-
397
-
As of 31 December 2013
29,577
157,632
33,090
5,085
668
90
(172)
586
586
185
-
771
52,394
-
-
52,394
52,394
-
-
52,394
Accumulated depreciation
As of 1 January 2012
Depreciation expense
(2,441)
(1,192)
(16,641)
(8,860)
(3,283)
(1,681)
As of 31 December 2012
(3,633)
(25,501)
(4,964)
As of 1 January 2013
Depreciation expense
(3,633)
(1,442)
(25,501)
(9,047)
(4,964)
(1,646)
(547)
(315)
(862)
(862)
(231)
(320)
(147)
(20,886)
(8,735)
(467)
(29,621)
(467)
(51)
(29,621)
(8,066)
As of 31 December 2013
(5,075)
(34,548)
(6,610)
(1,093)
(518)
(37,687)
751
175
-
926
926
71
(1)
996
(418)
(138)
(556)
(556)
(163)
(719)
1,010
541
-
12,822
27,713
(7,922)
1,551
32,613
1,551
9
-
32,613
6,618
(3,050)
1,560
36,181
(351)
(311)
(662)
(662)
(308)
(970)
-
-
-
-
-
-
270
-
(72)
198
198
-
(198)
-
-
-
-
-
-
-
282,931
35,635
(7,682)
310,884
310,884
9,681
(3,279)
317,286
(44,887)
(21,379)
(66,266)
(66,266)
(20,954)
(87,220)
Net book value
As of 31 December 2012
As of 31 December 2013
25,764
24,502
129,940
123,084
28,126
26,480
3,826
3,992
119
253
22,773
14,707
370
277
889
590
32,613
36,181
198
-
244,618
230,066
48
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
The increase in the value of PPE under construction for the year ended 31 December 2013 reflects activities developing the
mining and processing facilities.
The amount of acquisitions in the cash flow statement has also been influenced by the changes in payables for property, plant
and equipment in the amount of US3,312,000 (2012: US$(1,451,000)).
The Company also has approximately 20 million square meters of land with an acquisition cost of zero.
At the end of December 2013, the balance of property, plant and equipment includes US$14,707,000 (2012: US$22,773,000) of
mining equipment under the DNB equipment financing facility and US$26,480,000 (2012: US$28,100,000) of goods storage and
handling equipment under Tschudi Bulk Terminal AS finance lease.
Refer Note 17(g) for details of assets used as security against borrowings.
NOTE 14
TRADE AND OTHER PAYABLES
Current
Trade payables – third parties
Trade payables – related parties
Non-trade payables and accrued expenses – third parties
2013
US$000
2012
US$000
18,149
1,138
12,150
31,437
24,198
1,800
11,712
37,710
(i)
(ii)
Trade payables are non-interest bearing and are normally settled on 30-day terms.
Information regarding the effective interest rate and credit risk of current payables is set out in Note 27.
NOTE 15
DERIVATIVE FINANCIAL LIABILITIES
Current
Derivatives that are carried at fair value
Iron ore contracts
Electricity contracts
NOTE 16
PROVISIONS
Current
Concentrate offtake agreement provision (i)
Other (iii)
Long service leave and bonus provision (iv)
Balance at end of the year
Non-Current
Concentrate offtake agreement provision (i)
Environmental restoration provision (ii)
Long service leave and bonus provision (iv)
Post-closure tailings monitoring provision (v)
Balance at end of the year
2013
US$000
2012
US$000
5,717
1,346
7,063
424
134
558
2013
US$000
2012
US$000
-
89
276
365
1,575
445
-
2,020
2013
US$000
2012
US$000
-
1,805
25
17
1,847
-
1,879
310
-
2,189
49
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(i) Provision for costs – offtake agreement
Current
Provision for concentrate offtake agreement
Balance at the beginning of the year
Reclassified as current
Utilised
Interest
Balance at the end of the year
Non-Current
Provision for concentrate offtake agreement
Balance at the beginning of the year
Reclassified as current
Balance at the end of the year
2013
US$000
2012
US$000
1,575
-
(1,575)
-
-
-
-
-
8,943
3,732
(11,790)
690
1,575
3,732
(3,732)
-
In 2010 the Group recognised a provision for the settlement agreed with TATA, due to non-delivery of product meeting contract
quality specifications. A final agreement was signed in June 2011 resulting in a repayment schedule based upon tonnes shipped
under the contract. The final settlement of the provision occurred upon final invoicing for the December quarter shipments
during January 2013. The estimate was denominated in US$ and discounted to present value.
(ii) Environmental Restoration Provision
Non-current
Site restoration:
Balance at beginning of the year
Effects of movements in foreign exchange
Interest
Balance at end of the year
2013
US$000
2012
US$000
1,879
(162)
88
1,805
1,662
131
86
1,879
The Company has recognised provisions regarding environmental restoration obligation due to current and previous mining
activities and mining assets used then. The probable timing of the settlement of the obligation is 2040 based on an annual
production rate of 2.7 million tonnes. The estimate for the environmental restoration provision has been reviewed for adequacy
by the Group as at the reporting date and no material adjustment to the estimate was identified. The estimate is denominated in
NOK and discounted to present value.
(iii) Other
Current
Other:
Balance at the beginning of the year
Provision recognised
Utilised
Balance at the end of the year
2013
US$000
2012
US$000
445
89
(445)
89
-
445
445
Other provisions mainly comprise provisions for retention bonuses for senior management, green certificates for power usage
introduced as a joint Norwegian/Swedish support system for renewable energy and mine contractor costs.
50
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(iv) Long service leave and bonus provision
Current
Long service leave and bonus provision:
Balance at the beginning of the year
Provision recognised
Balance at the end of the year
Non-Current
Long service leave and bonus provision:
Balance at the beginning of the year
Provision recognised
Utilised
Reclassified as current
Balance at the end of the year
(v) Post-closure tailings monitoring provision
Non-Current
Post-closure tailings monitoring provision:
Balance at the beginning of the year
Interest
Balance at the end of the year
2013
US$000
2012
US$000
-
276
276
310
168
(177)
(276)
25
-
-
-
6
304
-
-
310
2013
US$000
2012
US$000
-
17
17
-
-
-
During 2013, the Company has recognised provisions regarding post-closure monitoring of re-established marine life in the
tailings deposit area of the fjord. The provision is according to a proposal submitted to and approved by the Norwegian Climate
and Pollution Agency (KLIF) which is aligned with European Union Mineral Directive requirements. The estimate is denominated
in NOK and discounted to present value.
51
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17
INTEREST BEARING LIABILITIES AND BORROWINGS
2013
US$000
Notes
Current
Non-Current
Borrowings in
total
Financing
arrangements
credit lines
Facilities utilised
at balance date
Facilities not
utilised /
(overdrawn) at
balance date
Innovasjon Norge financing facility (b)
Finance lease - concentrate storage, handling
and ship loading facility (a) & (c)
Equipment lease financing facility (a) & (d)
DNB working capital facility (e)
DNB US$ loan (f)
(b)
(c)
(d)
(e)
(f)
2,466
3,671
5,463
33,648
5,000
50,248
7,555
13,056
4,051
-
12,308
36,970
10,021
16,727
9,514
33,648
17,308
14,794
34,085
52,394
35,000
30,000
14,794
34,085
52,394
33,648
30,000
87,218
166,273
164,921
-
-
-
1,352
-
1,352
2012
US$000
Notes
Current
Non-Current
Borrowings in
total
Financing
arrangements
credit lines
Facilities utilised
at balance date
Facilities not
utilised /
(overdrawn) at
balance date
Innovasjon Norge financing facility
Finance lease - concentrate storage, handling
and ship loading facility
Equipment lease financing facility
DNB working capital facility
DNB US$ loan
(b)
(c)
(d)
(e)
(f)
1,156
3,690
10,718
29,898
5,000
50,462
10,946
18,282
7,784
-
17,252
54,264
12,102
21,972
18,502
29,898
22,252
16,168
37,253
52,394
35,000
30,000
16,168
37,253
52,394
29,898
30,000
104,726
170,815
165,713
-
-
-
5,102
-
5,102
52
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(a) Financing lease commitments in respect of finance leases – concentrate storage, handling and ship loading and
equipment lease finance
Finance lease commitments
Minimum lease payments
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Total future minimum lease payments
Less future finance charges
Present value of future minimum lease payments
2013
US$000
10,626
18,948
-
29,574
(3,333)
26,241
2012
US$000
16,477
29,299
-
45,776
(5,302)
40,474
Amounts repaid against the finance facilities are not able to be re-drawn except for the DNB working capital facility.
(b) Innovasjon Norge financing facility
In July 2009, Sydvaranger Gruve AS signed agreements with Innovasjon Norge for three separate loans with seven year terms for
a total loan facility of NOK 90 million (being equivalent to US$15.0 million). There was initially a repayment grace period of 12
months ending June 2010, subsequently extended by a further 12 months. During the second quarter of 2011 Innovasjon Norge
agreed to vary the security terms of the facility with Sydvaranger Gruve AS to enable the establishment of the DNB US$ loan and
DNB working capital facility to occur. In June 2012, Innovasjon Norge further agreed to amend the security terms of the facility
for a period until 31 August 2012, to allow Sydvaranger Gruve AS to increase its DNB working capital facility for that period.
Another amendment to the agreement was made in September 2012, to allow the company to extend the increase in the DNB
working capital facility to 31 December 2012 and to provide repayment holidays on principal amounts due December 2012,
February 2013, June 2013 and August 2013 which effectively added a year to the terms of the loans. In March 2013, Innovasjon
Norge further agreed to amend the security terms of the facility for a period until 31 May 2014, to allow Sydvaranger Gruve AS
to increase its DNB working capital facility by US$10 million for that period. Subsequently in September 2013, Innovasjon Norge
again agreed to amend the security terms of the facility for the period 15 September to 1 November 2013, to allow Sydvaranger
Gruve AS to increase its DNB working capital facility by additionally US$5 million for that period. The facility is guaranteed by
the parent entity, Northern Iron Limited. The facility is not able to be re-drawn. Payments of dividends and changes to secured
indebtedness require written approval from Innovasjon Norge. The facility incurs a fixed weighted nominal interest rate of 5.16%
(2012: 5.19%).
(c) Finance lease - concentrate storage, handling and ship loading facility
Sydvaranger Gruve AS has a finance lease agreement with a related company, Tschudi Bulk Terminal AS, regarding goods storage
and handling assets. These assets were initially recorded in the financial statements with an amount of US$37.3 million together
with an equivalent finance lease liability. Payments of principal and interest amounting to US$5,136,000 were made toward the
lease obligation during 2013. The lease payment ends in December 2017. However, the lease will be in effect until 31 December
2034 with the option to extend for two periods each of ten years. Repayments on the facility are in NOK, payable monthly, and
include principal and interest at a fixed rate of 8.42% per annum. Amounts paid toward the facility are not available to be re-
drawn and there are no restrictions on dividends, or further leasing, or borrowings.
(d) Equipment lease financing facility
Sydvaranger Gruve AS established in October 2008 a finance lease facility with DNB for the purpose of financing mining fleet
equipment. In April 2009, the facility was converted from being denominated in NOK, to being denominated in US$. The total
facility is US$52.4 million and has the ability to be drawn in a number of currencies. At inception of the lease, US$52.4 million of
equipment had been accepted under the facility and included in property, plant and equipment. The period of each lease was
initially 5 years however in September 2013, DNB agreed to extend the lease periods by one year. Interest on the facility is
payable quarterly at a floating rate based on the 3 month LIBOR rate plus 2.90% (2012: 1.9%). As at 31 December 2013, the rate
applied to drawings on the facility was 3.14% per annum (2012: 2.222% per annum). The finance leasefacility is guaranteed by
the parent entity, Northern Iron Limited. Under the terms of the agreement, interest cannot be charged on intercompany
53
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
borrowings. The finance lease facility is not able to be re-drawn and there are no restrictions on dividends, further leasing or
further borrowings.
(e) DNB working capital facility
During the second quarter of 2011, Sydvaranger Gruve AS signed an agreement with DNB for a US$25 million working capital
facility which is to be renewed yearly. Effective from 1 May 2012 the applicable interest rate on drawn amounts for this facility
was LIBOR plus 2.50% per annum (previously 3.50%), for the committed amount the commitment fee was 0.20% per quarter
(previously 0.33%), both are payable quarterly in arrears. Also in May 2012, the Company secured an increase of US$10 million
on the DNB working capital facility for the period 6 June to 31 August 2012. During September 2012, DNB agreed to extend the
working capital facility at the US$35 million limit until 31 December 2012. DNB waived the EBITDA covenant for twelve months
which is then to be re-established in increments of US$7 million per quarter from quarter four 2013. During March 2013,
Sydvaranger Gruve AS again secured an increase of US$10 million on the DNB working capital facility for the period 1 March
2013 to 31 May 2014 and increased the borrowing base to 85% of accounts receivable (previously 80%) and 70% of the value of
inventory (previously 60%) for that period. Subsequently in September 2013, Sydvaranger Gruve AS secured a temporary
increase of US$5 million on the DNB working capital facility for the period 15 September to 1 November 2013. The applicable
interest rate on drawn amounts for this facility is now the USD Federal Funds effective rate plus 2.75% per annum, for the
committed amount the commitment fee is 0.25% per quarter, both are payable quarterly in arrears. The facility can be redrawn
on an ongoing basis up to the approved limit. Payments of dividends require approval from DNB.
(f) DNB US$ loan
During the second quarter of 2011, Sydvaranger Gruve AS signed an agreement for a US$30 million US$ loan with DNB. The
facility was partly drawn (with US$21 million) in 30 June 2011 and was used to repay the Credit Suisse and a short term US$5
million DNB financing facilities. The second tranche of the loan (US$9 million) was made available in November 2011. This loan
has a term of 6 years with semi-annual repayments with the first on 30 September 2011. Effective from 1 May 2012 the
applicable interest rate is LIBOR plus 2.75% (previously 3.75%) per annum. The facility is not able to be re-drawn. Payments of
dividends require approval from DNB.
(g) Assets pledged as security
DNB and Innovasjon Norge share a fixed and floating charge over all the assets and undertakings of Sydvaranger Gruve AS with
the exception of the assets under finance lease and cash at bank consisting of withheld employee tax.
Tschudi Bulk Terminal AS is the legal owner and has security over the concentrate storage, handling and ship loading facility
assets under the finance leases.
DNB is the legal owner and has security over the mining fleet equipment assets under the finance lease.
NOTE 18
CAPITAL AND RESERVES
Issued capital
2013
2013
2012
2012
Number
US$000
Number
US$000
Balance at beginning of the year
484,405,314
380,761
369,980,113
330,747
Entitlement offer at A$0.45 per share
Entitlement offer at A$0.45 per share
Shares cancelled
Share issue costs
-
-
-
-
-
-
-
-
105,991,094
17,096,246
(8,662,139)
-
49,002
8,020
(4,092)
(2,916)
Balance at end of the year
484,405,314
380,761
484,405,314
380,761
Ordinary shares have the right to one vote per share at meetings of the Company, to receive dividends as declared and, in the
event of a winding-up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the
number of, and amounts paid up on, shares held.
The Company does not have an authorised capital or par value in respect of its issued shares.
54
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Translation reserve
Movements in the translation reserve are set out in the Statement of Changes in Equity on page 27. The translation reserve
comprises all foreign exchange differences arising from the translation of non US$ denominated monetary assets and liabilities.
Share based payments reserve
Movements in the share based payments reserve are set out in the Statement of Changes in Equity on page 27. This reserve
accumulates the fair value as at grant date of share options and performance rights issued. The fair value is recognised as an
expense over the vesting period.
NOTE 19
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
(a) Cash flows from operating activities
Loss from continuing operations
Adjustments for:
Share-based payments expense
Accrued income
Accrued expenses
Prepayments
Foreign exchange loss / (gain)
Derivative financial asset
Derivative financial liability
Depreciation of property, plant and equipment
Amortisation expensed
Depreciation of non-current assets
Deferred tax assets and liabilities
Inflow before changes in working capital and provisions:
Changes in assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in inventory
Increase / (decrease) in trade and other payables
Increase / (decrease) in provisions
2013
US$000
2012
US$000
(1,654)
(11,337)
-
(379)
758
(67)
2,380
(534)
6,505
20,946
7,697
8
(6,347)
29,313
2,650
(5,706)
(5,978)
(1,722)
(10,756)
301
(14)
(876)
(82)
(2,823)
-
528
21,373
5,431
6
1,947
14,454
(6,551)
2,243
7,627
966
4,285
Net cash flows provided by operating activities
18,557
18,739
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
19,446
32,379
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods
of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
In addition to these cash balances the Group has US$262,000 in lodged cash security deposits classified under trade and other
receivables (2012: US$282,000).
55
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 20
OPERATING LEASES
Non-cancellable operating lease commitments
The future minimum lease payments under non-cancellable operating leases are as follows:
Within 1 year
Between 2 and 5 years
More than 5 years
NOTE 21
SHARE-BASED PAYMENTS
Employee share option plan
2013
US$000
2012
US$000
2,841
3,764
-
6,605
3,378
2,785
-
6,163
The following share-based payment arrangements were in existence during the current and prior reporting periods:
Option series
No. of options
Grant date
Expiry Date
Exercise Price
Revised Exercise
Price (ii)
Fair value at
grant date
J Sanderson
J Sanderson
J Sanderson
500,000
(i)
14/05/2010
24/08/2013
500,000
(i)
14/05/2010
24/08/2013
500,000
(i)
14/05/2010
24/08/2013
A$2.15
A$2.50
A$3.00
A$2.06
A$2.41
A$2.91
A$0.50
A$0.44
A$0.38
(i)
(ii)
In accordance with the terms of the share based arrangement, options vest over the period of employment
In accordance with Listing Rule 6.22.2 the exercise price of unlisted options were changed as a result of a non-renounceable
pro-rata entitlement offer.
(a) Fair value of options granted in the year
There were no options granted during the 2013 and 2012 financial years.
(b) Movements in options during the period
The following table reconciles the number of options outstanding and the weighted average exercise price at the beginning and
end of the year:
Balance at beginning of the year
Expired during the year
Balance at end of the year
Exercisable at end of the year
2013
2012
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
1,500,000
(1,500,000)
-
-
A$2.55
A$2.55
-
-
1,500,000
-
1,500,000
A$2.55
-
A$2.55
1,500,000
A$2.55
(c) Share options exercised during the year.
There were no options were exercised during the 2013 and 2012 financial years.
(d) Share options outstanding at the end of the year
The share options outstanding at the end of the year had an exercise price of A$nil (2012: A$2.06 - A$2.91), and a weighted
average remaining contractual life of nil days.
56
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Further details of shares and options issued to directors are set out in Note 26, and in the Remuneration Report set out on pages
16 to 21.
Performance rights
At the Company’s 2010 Annual General Meeting shareholders approved the establishment of the Northern Iron Limited
Employee Performance Rights Plan, to provide ongoing incentives to executives, key employees and consultants of the Company
to deliver long–term shareholder returns. Under the plan, participants are issued performance rights which only vest should
certain performance and vesting conditions be achieved. Participation in the plan is at the discretion of the Board of Northern
Iron Limited and no individual has a contractual right to participate in the plan.
The number of shares issued at the end of the vesting periods depend on three key performance indicators (﴾“KPI”)﴿. They are a
share price KPI, a total shareholder return (%) KPI, and a production KPI. Once vested the performance rights will expire after a
period of three months. The Performance Rights shall vest according to the following schedule:
Vesting Date
A$1.50
A$2.00
Hurdle Price
15/12/2013
28/02/2014
28/02/2015
1/09/2014
1/9/2015
1/9/2014
1/9/2015
TOTAL
Weighted average fair value
per performance right
(i)
Performance rights lapsed
-
-
-
50,000
-
50,000
-
100,000
A$0.35
-
-
-
-
50,000
-
50,000
100,000
A$0.29
A$3.00
50,000
50,000
-
-
-
-
-
100,000
A$0.94
A$3.50
TOTAL
-
-
50,000
-
-
-
-
50,000
A$0.57
50,000 (i)
50,000
50,000
50,000
50,000
50,000
50,000
350,000
The fair value of performance rights was calculated based on the assumptions below:
Fair value at measurement date (cents)
Share price at date of issue
Exercise prices
Performance right life
Share-based payments expense recognised
2013
2012
A$0.29 to A$00.94
A$0.29 to A$3.50
A$0.89 to A$2.02
A$0.89 to A$2.02
A$1.50 to A$3.50
A$1.25 to A$3.50
0.4 to 3.6 years
0.4 to 3.6 years
-
$301,000
For the year ended 31 December 2013 the total value of share-based payments expensed in the financial statements is US$nil
(2012: US$301,000). There were no shares issued or payments made during the year under the performance rights plan (2012:
US$nil).
NOTE 22
CAPITAL AND OTHER COMMITMENTS
Property, plant and equipment commitments
Commitments contracted at balance date but not recognised as liabilities:
Property, plant and equipment
Not later than 1 year
Later than 1 year but not later than 5 years
2013
US$000
2012
US$000
-
-
-
466
-
466
57
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Lease commitments
Finance lease commitments and non-cancellable operating lease commitments are disclosed in Note 17 and Note 20
respectively.
NOTE 23
RELATED PARTY DISCLOSURES
Identity of related parties
The Company has a related party relationship with its legal subsidiaries (see below), as well as:
Tschudi Mining Company AS, Tschudi Shipping Company AS and Tschudi Bulk Terminal AS which are controlled by Mr Felix
Tschudi, a Director.
The consolidated financial statements include the financial statements of Northern Iron Limited and the subsidiaries listed in the
following table:
Group Companies
Legal parent
Northern Iron Limited
Legal subsidiaries
Sydvaranger Gruve AS
Northern Iron Marketing AG
Legal subsidiary of Sydvaranger Gruve AS
Sydvaranger Malmtransport AS
Transactions within the wholly owned Group
Sydvaranger Gruve AS
Country of Incorporation
2013
2012
Ownership interest
Australia
Norway
Switzerland
100%
100%
100%
100%
Norway
100%
100%
During the reporting period loans from the Company to the subsidiary totalled US$16,219,000 (2012: US$42,735,000). The
carrying value of the Company’s loans at 31 December 2013 was US$239,097,000 (2012: US$222,878,000). Advances were made
in NOK, US$, EUR and A$.
The loans are secured by a second ranking fixed and floating charge over Sydvaranger Gruve AS’s assets and are repayable by 31
December 2014 in accordance with the terms of a loan agreement. Under the terms of the loan agreement, borrowings are
repayable after senior debt of the subsidiary is fully repaid.
The Group does not presently charge interest on the loan amount, being a restriction of the lease financing facility with DNB.
During the reporting period, goods and services were purchased, or paid for on behalf of Sydvaranger Gruve AS, in the amount
of US$919,000 (2012: US$630,000). During the reporting period, goods and services were purchased, or paid for by Sydvaranger
Gruve AS on behalf of the Company in the amount of US$nil (2012: US$178,000).
During the reporting period Sydvaranger Gruve AS recorded sales of ore concentrate to Northern Iron Marketing AG in the
amount of US$36,897,000 (2012: US$317,000), and purchased services from Northern Iron Marketing AG in the amount of
US$1,667,000 (2012: US$577,000). Intercompany sales amounts during 2013 have been recorded at the realised sales price to
final customers of the Group.
Northern Iron Marketing AG
During the reporting period, loans from the Company to the subsidiary totalled US$nil (2012: US$900,000). The carrying value of
the Company’s loans to Northern Iron Marketing AG at 31 December 2013 was US$808,000 (2012: US$1,158,000).
58
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Sydvaranger Malmtransport AS
In July 2012 Sydvaranger Gruve AS registered a new subsidiary, Sydvaranger Malmtransport AS (SMT) to manage and operate
the railway between Kirkenes and Bjørnevatn. Due to SVG’s 100% ownership of SMT and itself being owned 100% by the parent
company, Northern Iron Limited, SVG was successful in its application to the tax authorities (Skattedirektoratet) to avoid
consolidation at the SVG/SMT level. SMT has remained mostly inactive during the 2013 year with only business registration and
accounting fees being expensed during the period. Therefore the carrying amount of the investment in the subsidiary of
US$21,000 remains unchanged from inception.
Transactions with key management personnel
During the reporting period, the Group paid US$147,000 (2012: US$54,000) to companies which are associated with Mr Ashwath
Mehra, a Director, for services to provide marketing, office space, administration and ancillary support services for the sale of
products. Services provided are on a basis of cost plus a 15% margin. At balance date one quarter amounting to US$17,600 is
payable.
During thereporting period services were purchased from PSL Invest AS, which is 100% owned by alternate director Mr Peter
Steiness Larsen, for support in connection with securing financing for the Company and assisting with various treasury activities
in the amount of US$30,000 (2012: US$26,000).
Transactions with other related parties
Sydvaranger Gruve AS had transactions in the following amounts with companies which are ultimately controlled by Tschudi
Shipping Company AS. These transactions are in the normal course of business and on normal terms and conditions:
services purchased in the amount of US$6,514,000 (2012: US$4,094,000) which includes leases for land and properties,
contract labour services, freight, tugboat and harbour services and production of aggregate from waste rockrock;
capitalised expenses and assets purchased in the amount of US$48,000 (2012: US$374,000), primarily being for contract
labour services utilised on construction and capital installation projects; and
repayments of principal and interest under the finance lease from Tschudi Bulk Terminal AS in the amount of US$5,136,000
(2012: US$6,780,000). This lease represents an agreement for handling, storage and loading of iron ore concentrate
(included in the balance of borrowings – see Note 17). This facility was fully utilised in 2010 and therefore had no additional
drawdowns in 2012 or 2013.
As a result of the transactions described above the Group has trade payables and accruals owing to subsidiaries of Tschudi
Shipping Company AS for the amount of US$1,144,000 (2012: US$1,764,000).
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made in arm's length transactions both at normal market prices and on normal
commercial terms.
With the exception of the loan to Sydvaranger Gruve AS, outstanding balances are unsecured, interest free and settlement occurs
in cash.
59
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 24
SEGMENT INFORMATION
For management purposes, the Board of Directors of Northern Iron Limited has been defined as the Chief Operating Decision Maker. Segment information is presented in respect of the
Group’s business segments based on the Group’s management and internal reporting structure.
The Group has three reporting segments, being Sydvaranger Iron Ore Project, marketing of ore concentrate and corporate office. Intersegment pricing is determined on an arm’s length basis.
Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The following table presents the financial information regarding these segments provided to the Board of Directors for the year ended 31 December 2013 and 31 December 2012.
Information on business segments
2013
Business Segments
External revenue
Inter segment revenue (i)
Segment (loss) / profit before income tax
Segment assets
Segment liabilities
Other segment information:
Segment result before tax includes:
Finance income
Finance expense
Depreciation and amortisation
Acquisition of property, plant and equipment
Sydvaranger Iron Ore
Marketing
Corporate
Inter-segment
Consolidated
Project
(US$000)
(US$000)
(US$000)
eliminations
(US$000)
239,065
(36,897)
202,168
(9,587)
396,137
2,386
36,897
39,283
2,219
17,678
(128,388)
(15,641)
121
(4,828)
(20,946)
9,669
-
-
-
-
-
-
-
35,751
7,811
(356)
53
(1)
(8)
12
(36,897)
-
(36,897)
(36,384)
(16,668)
16,115
-
124
-
-
(US$000)
204,554
-
204,554
(8,001)
404,958
(128,270)
174
(4,705)
(20,954)
9,681
(i)
Intersegment revenue is recorded at amounts equal to competitive market prices charges to external customers for similar goods and services and is eliminated on consolidation.
60
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
2012
Business Segments
External revenue (excludes other income)
Inter segment revenue (i)
Segment profit / (loss) before income tax
Segment assets
Segment liabilities
Other segment information:
Segment result before tax includes:
Finance income
Finance expense
Depreciation and amortisation
Acquisition of property, plant and equipment
Sydvaranger Iron Ore
Marketing
Corporate
Project
(US$000)
(US$000)
(US$000)
Inter-segment
eliminations (US$000)
206,018
(317)
205,701
(6,559)
400,987
(146,208)
131
(6,090)
(21,373)
35,635
-
317
317
27
1,796
(1,635)
-
-
-
-
-
-
-
(6,801)
26,059
(1,243)
212
-
(6)
-
(317)
-
(317)
3,943
(2,285)
1,883
-
98
-
-
Consolidated
(US$000)
205,701
-
205,701
(9,390)
426,557
(147,203)
343
(5,992)
(21,379)
35,635
(i)
Intersegment revenue is recorded at amounts equal to competitive market prices charges to external customers for similar goods and services and is eliminated on consolidation.
61
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 25
PARENT ENTITY DISCLOSURES
Financial position
As at 31 December 2013
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Reserves
Share-based payments reserve
Foreign currency translation reserve
Total equity
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
2013
US$000
2012
US$000
7,800
515,136
522,936
(331)
(25)
(356)
26,035
499,280
525,315
(933)
(310)
(1,243)
(541,135)
(541,135)
26,666
62,417
(4,047)
(4,064)
(4,047)
(41,307)
(522,580)
(524,072)
(35,751)
-
(35,751)
6,801
-
6,801
Guarantees entered into by the parent in relation to debts of its subsidiaries
Northern Iron Limited has signed a letter of financial support with Sydvaranger Gruve AS.
Northern Iron Limited has provided a guarantee for the Innovasjon Norge financing facility (Note 17(b)) and equipment lease
finance facility (Note 17(d)).
62
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 26
KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Key management personnel compensation
Key management personnel compensation is as follows:
Short term benefits
Post-employment benefits
Share based payments
2013
US$
3,383,413
146,857
-
2012
US$
2,619,981
94,990
300,771
3,530,270
3,015,742
Information regarding individual directors and executive officers compensation is provided in the Remuneration Report as set
out on pages 16 to 21.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
(b) Other key management personnel transactions
At 31 December 2013 an amount of US$nil (2012: US$nil) is included in Group trade and other payables for outstanding director
and executive officers’ personnel fees and expenses.
(c) Shares
The movement during the current and prior reporting periods in the number of ordinary shares in Northern Iron Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
2013
Directors
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
PS Larsen
DC Griffiths
JS Sanderson
(i) Balance when ceased being a director
Held at
01/01/13
Net
acquired / (sold)
215,288
-
15,702,792
67,133,728
32,000
612,090
360,000
-
-
-
-
-
-
-
Held at
31/12/13
215,288
-
15,702,792
67,133,728
32,000
612,090(i)
360,000(i)
63
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
2012
Directors
A Mehra
FH Tschudi
PS Larsen
JS Sanderson
DC Griffiths
(d) Share options
Held at
01/01/12
Net
acquired / (sold)
11,777,093
89,137,931
24,000
180,000
459,067
3,925,699
(22,004,203)
8,000
180,000
153,023
Held at
31/12/12
15,702,792
67,133,728
32,000
360,000
612,090
The movement during the reporting period in the number of options in Northern Iron Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
2013
Directors
Held at
01/01/13
Granted as
compensation
Expired
Vested in year
Held at
31/12/13
Vested and
exercisable at
31/12/13
JS Sanderson
1,500,000
-
(1,500,000)
-
-
-
2012
Directors
Held at
01/01/12
Granted as
compensation
Expired
Vested in year
Held at
31/12/12
Vested and
exercisable at
31/12/12
JS Sanderson
1,500,000
-
-
1,500,000
1,500,000
1,500,000
All share options issued to key management personnel were in accordance with the provisions of the employee share option
plan.
There were no options granted during the 2013 and 2012 years. Further details of the employee share option plan and the
number of options granted during the 2013 and 2012 financial years are contained in Note 21 and the Remuneration Report.
There were no options exercised during the 2013 and 2012 years.
64
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(e) Performance rights
The movement during the reporting period in the number of performance rights in Northern iron Limited, held by each member
of key management personnel is as follows:
2013
Directors
A Beckmand
Executive officers
S Bӕkø
R Brown
H Martinsen
I Haaparanta
2012
Directors
Held at
01/01/13
Granted as
compensation
Expired /
Lapsed
Vested in year
Held at
31/12/13
Vested and
exercisable at
31/12/13
50,000
150,000
100,000
150,000
150,000
-
-
-
-
-
(50,000)
(50,000)
(50,000)
(50,000)
(50,000)
-
-
-
-
-
-
100,000
50,000
100,000
100,000
-
-
-
-
-
Held at
01/01/12
Granted as
compensation
Expired /
Lapsed
Vested in year
A Beckmand
100,000
-
(50,000)
Executive officers
S Bӕkø
R Brown
H Martinsen
I Haaparanta
D Ekmark
-
150,000
150,000
150,000
-
-
-
150,000
-
(50,000)
-
-
100,000
-
(100,000)
-
-
-
-
-
-
Held at
31/12/12
Vested and
exercisable at
31/12/12
50,000
12,500
150,000
100,000
150,000
150,000
-
-
-
-
-
-
NOTE 27
FINANCIAL INSTRUMENTS
(a) Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity balance.
The Group’s overall strategy remains unchanged from 2012.
The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings.
Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax,
dividends, and general administrative outgoings.
Gearing levels are reviewed by the Board on a regular basis in line with its target gearing ratio, the cost of capital and the risks
associated with each class of capital.
65
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(b) Financial risk management objectives
The Group’s activities expose it to market risk (﴾including foreign currency risk, commodity price risk and interest rate risk), credit
risk, and liquidity risk.
This note presents qualitative and quantitative information about the Group’s exposure to each of the above risks, their
objectives, policies, and procedures for managing risk, and the management of capital. The Board of Directors has overall
responsibility for the establishment and oversight of the risk management framework.
The Group’s overall risk management approach focuses on the unpredictability of financial markets and seeks to minimise the
potential adverse effects on the financial performance of the Group. The Group currently has a natural hedge from sales receipts
in relation to certain foreign currency borrowings however it is generally exposed elsewhere to daily movements in exchange
rates and interest rates.
The Group uses various methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange, and commodity price risk and ageing analysis for credit risk.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain
future development of the business. Given the stage of the Group’s development there are no formal targets set for return on
capital. There were no changes to the Group’s approach to capital management during the year.
During 2008, Sydvaranger Gruve AS entered into an equipment finance lease facility with DNB Finans (refer Note 17). Under the
terms of the facility, the subsidiary is required to maintain a minimum equity ratio of 50%, being equity divided by total assets.
Equity, for this purpose includes the loan payable to the parent entity. Total assets, for this purpose, exclude unrestricted cash
and the concentrate, storage, handling and ship-loading facility leased assets. The subsidiary was in compliance with this
requirement throughout the reporting period. Covenants under other financing arrangements relate to financial results, for
which the Group was in compliance except for the EBITDA covenant. The EBITDA covenant stipulates that the Company shall
have an EBITDA greater than US$27.5 million on a yearly basis. However, the Company obtained a waiver from this covenant for
a period of twelve months, until the 30 September 2013. After this date the EBITDA debt covenant is to be re-established in
increments of US$7 million per quarter from quarter four 20134.
(c) Market risk
(i)
Foreign currency risk management
Currency risk currently arises from purchases, assets and liabilities that are denominated in a currency other than the functional
currencies of the entities within the Group, and from purchases in currencies other than those in which cash balances are held.
The Group operates predominantly in Norway and is exposed to currency risk arising from various foreign currency exposures,
primarily with respect to the US$ and Norwegian Kroner (﴾“NOK”)﴿. The functional currency of its Norwegian operations is US$.
It is the Group’s policy that management may hedge foreign currency exposure on capital purchases as they become known by
purchasing the currency in which the exposure arises. The majority of the Group’s capital expenditure is denominated in US$, A$,
NOK, SEK and Euro.
The sale of iron ore is denominated in US$. The Group’s management of currency risk will be monitored during the stabilising of
operations as the denomination of expenditures becomes increasingly more consistent and known.
66
-
-
-
-
-
-
-
-
505
19,446
18
35,023
(40)
(31,437)
-
-
(340)
(87,218)
483
(64,526)
584
32,379
28
37,261
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
The Group’s exposure to foreign currency risk at balance date was as follows, based on carrying amounts.
NOK
SEK
US$
Euro
CHF
GBP
DKK
CAD
A$
Totals
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
US$000
2013
Cash and cash
equivalents
Trade and other
receivables
Trade and other
payables
11,023
7,775
-
1
7,853
27,174
41
-
24
-
-
55
-
-
(28,353)
(1,226)
(418)
(1,303)
(18)
(34)
(45)
Tax liability
-
Borrowings
(26,748)
-
-
-
(60,470)
-
-
(340)
-
-
-
-
-
Gross exposure
(36,303)
(1,225)
(25,861)
(1,262)
(334)
21
(45)
2012
Cash and cash
equivalents
Trade and other
receivables
Trade and other
payables
11,379
11,482
-
-
20,333
25,682
77
-
6
14
-
55
-
-
(35,548)
(1,620)
791
(88)
(165)
(38)
(69)
(26)
(947)
(37,710)
Tax liability
-
Borrowings
(34,074)
-
-
-
(70,652)
-
-
-
-
-
-
-
-
-
-
-
-
-
(104,726)
Gross exposure
(46,761)
(1,620)
(23,846)
(11)
(145)
17
(69)
(26)
(335)
(72,796)
The following significant exchange rates applied during the year:
US$ to:
1 Norwegian Kroner
1 AUD
1 Euro
Average rate
Reporting date spot rate
2013
0.170
0.966
1.329
2012
0.172
1.036
1.284
2013
0.164
0.892
1.378
2012
0.180
1.038
1.319
67
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Sensitivity analysis
A 5% strengthening of the following currencies at 31 December would have changed equity and post-tax profit and loss by the
amounts shown below. This analysis assumes that all other variables, in particular interest rates and the exchange rate between
other currencies, remain constant. The analysis is performed on the same basis for 2012:
31 December 2013
US$ to NOK
A$ to US$
31 December 2012
US$ to NOK
A$ to US$
Equity
Profit and loss
US$000
US$000
(104)
372
(508)
1,241
(104)
(21)
(508)
(103)
A 5% weakening of the following currencies at 31 December would have changed equity and post-tax profit and loss by the
amounts shown below. This analysis assumes that all other variables, in particular interest rates and the exchange rate between
other currencies, remain constant. The analysis is performed on the same basis for 2012:
31 December 2013
US$ to NOK
A$ to US$
31 December 2012
US$ to NOK
A$ to US$
Equity
Profit and loss
US$000
US$000
(626)
(373)
459
(1,241)
(626)
21
459
103
Forward foreign exchange contracts
Forward foreign exchange contracts are valued at fair value through profit and loss. At 31 December 2013, the Company had
forward exchange contracts in place (2012: Nil) with the purpose of minimising the effect on the Company of fluctuations in
exchange rates, the details of which were:
Period
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Contract
Amount
US$000
Average contract
rate
USD/NOK
Month end rate
USD/NOK
Change in fair
value
US$000
23,000
19,000
15,000
15,000
6.11
6.15
6.13
6.13
6.08
6.08
6.08
6.08
93
213
114
114
534
68
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(ii)
Interest rate risk management
The significance and management of this risk on investments to the Group is dependent on a number of factors including:
interest rates (current and forward) and the currencies that are held;
level of cash and liquid investments and their term;
maturity dates of investments; and
proportion of investments that are fixed rate or floating rate.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate investments.
The Group is exposed to interest rate risk under its various borrowings outlined in Note 17 and continues to monitor
opportunities to mitigate this interest rate risk.
At the reporting date, the effective interest rates of variable rate interest bearing assets and liabilities of the Group were as
follows.
Carrying amount
Financial assets
Financial liabilities
Weighted average interest rate (%)
Financial assets
Financial liabilities
2013
US$000
20,868
87,218
2012
US$000
33,116
104,726
0.87%
4.26%
0.66%
4.24%
Sensitivity analysis
An increase in 50 basis points from the weighted average year-end interest rates at 31 December would have
increased/(decreased) equity and post-tax profit and loss by the amounts shown below. This analysis assumes that all other
variables remain constant. The analysis is performed on the same basis for 2012:
31 December 2013
31 December 2012
Equity
Profit and loss
US$000
US$000
(124)
(148)
(124)
(148)
A decrease in 50 basis points from the weighted average year-end interest rates at 31 December would have increased/
(decreased) equity and post-tax profit and loss by the amounts shown below. This analysis assumes that all other variables
remain constant. The analysis is performed on the same basis for 2012:
31 December 2013
31 December 2012
(iii) Commodity price risk management
Equity
Profit and loss
US$000
US$000
124
148
124
148
Commodity price risk is the risk of financial loss resulting from movements in the price of the Group’s commodity output, being
iron ore, which is denominated in US$ and not widely traded in derivative markets. The Group recorded sales of iron ore
concentrate for the year of US$204,554,000. In 2012, there were sales of approximately US$205,701,000.
69
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
The Group’s marketing strategy is to focus on long-term sales agreements with pellet producers in Europe and the Middle East
for the majority of its production with the balance being sold into the spot market.
The Group has entered into a 5 year offtake agreement for up to approximately 50% of its nameplate production with TATA Steel
Europe, primarily for use in their European steel operations. The product is primarily used at the Ijmuiden Pellet Plant.. The
contract runs until the end of March 2016, and TATA have the right to extend the contract by a further two years. The agreement
provides TATA a minimum of 1.0 Mtpa per year from 2012-2015, and TATA have agreed to increase its off-take volume during the
contract year ending 31 March 2013 by 275,000 wet tonnes. This means the total offtake quantity is a minimum of 5.2 Mt over
the 5 year life of the contract. There also exists the potential for TATA to take up to 7.7 Mt over the 5 year period if product
quality improves further. The pricing mechanism is in line with Vale’s mechanism for iron ore fines (﴾which is the prevailing market
mechanism in the Atlantic basin) and the FOB price reflects the proximity of Sydvaranger to Tata Steel in Europe and the quality
in terms of silica content. In quarter four 2011, TATA Steel requested that the pricing mechanism be moved to current quarter
pricing in line with changes implemented by other iron ore producers. The Company agreed to this request.
The Group has entered into an exclusive agency agreement with OMH Ltd subsidiary OMS Pte Ltd, for sales into the Asian region
(inclusive of India, but excluding the Middle East and CIS countries). No offtake quantities are guaranteed under this agreement,
and so far all sales to Asia (100% to China) have been on a spot basis. The Agency agreement with OMS may be terminated if
OMH Ltd’s ownership of NFE falls below 10%.
During the second half of 2013 the Company successfully diversified its sales amongst a variety of customers. New customers
included ThyssenKrupp Steel and Arcelor-Mittal, while previous customer Bahrain Steel resumed purchases of concentrate. An
important development has been the trialling of Sydvaranger concentrate at a number of sinter plants throughout Europe. The
Company will monitor the results and feedback from these trial cargoes and will seek to further its discussions with the various
offtake parties, focusing on the potential for a longer-term offtake agreement. Sales to Europe are expected to result in optimal
FOB pricing due to the lower freight costs associated with shipping from Norway to Europe compared to more distant markets.
Sensitivity analysis
An increase in 50 basis points from the change in fair value would have (decreased)/increased equity and post-tax profit and loss
by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the
same basis for 2012:
31 December 2013
31 December 2012
Equity
Profit and loss
US$000
US$000
(229)
(20)
229
20
An decrease in 50 basis points from the change in fair value would have increased/(decreased) equity and post-tax profit and
loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on
the same basis for 2012:
31 December 2013
31 December 2012
Equity
Profit and loss
US$000
US$000
229
20
(229)
(20)
70
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
Forward iron ore price contracts
Forward iron ore price contracts are valued at fair value through profit or loss. As at 31 December 2013, the Company had 25
(2012: 8) forward iron ore price contracts in place with the purpose of minimising the fluctuations in iron ore price, the details of
which were:
2013
No. of Contracts
Period
Expiry
Tonnes
Average Contract
Rate
US$
Change in Fair
Value
US$000
7
11
5
2
Quarter 4 2013
8 January 2014
Quarter 1 2014
7 April 2014
Quarter 2 2014
7 July 2014
Quarter 3 2014
7 October 2014
210,000
210,000
135,000
60,000
121
120
123
120
(3,008)
(2,375)
(274)
(60)
(5,717)
2012
No. of Contracts
Period
Expiry
Tonnes
Average Contract
Rate
US$
Change in Fair
Value
US$000
6
2
Quarter 2 2014
8 April 2013
Quarter 3 2014
5 July 2013
111,000
60,000
138
133
(284)
(140)
(424)
Electricity price risk contracts
The Group is exposed to electricity price risk. As at 31 December 2013, the Group had 14 (2012: 11) electricity price contracts in
place with the purpose of minimising the fluctuations in electricity price, the details of which are:
2013
No. of Contracts
Period
Expiry
5
5
4
2014 year
2015 year
2016 year
31 December 2014
31 December 2015
31 December 2016
2012
No. of Contracts
Period
Expiry
4
4
2
1
2013 year
2014 year
2015 year
2016 year
31 December 2013
31 December 2014
31 December 2015
31 December 2016
Quantity
(MWh)
87,600
61,320
43,920
Quantity
(MWh)
87,600
70,080
26,280
8,784
Average Contract
Rate
(EUR/NO4)
Change in Fair
Value
US$000
38.47
36.53
35.40
(732)
(378)
(236)
(1,346)
Average Contract
Rate
(EUR/NO4)
Change in Fair
Value
US$000
37.75
39.10
38.70
39.90
86
(143)
(56)
(21)
(134)
71
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(d) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the
Group. The Group has not had any instances of uncollectable trade receivables during the current or prior reporting periods and
credit risk arising from security deposits and receivables from taxation authorities is considered to be low.
Credit risk is reduced through diversification and through accepting counterparties with good credit rating. Exposure to credit
risk is considered minimal though continues to be monitored on an ongoing basis. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the Statement of Financial Position. The Group’s maximum
exposure to credit risk at the reporting date was:
Carrying amount:
Cash and cash equivalents
Trade and other receivables
(e) Liquidity risk management
2013
US$000
19,446
35,023
54,469
2012
US$000
32,379
37,261
69,640
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group’s
approach to managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due under a range of financial conditions.
The Group’s borrowing facilities are set out in Note 17. The following are the contractual maturities of financial liabilities. These
have been drawn up based on undiscounted contractual maturities of financial liabilities including interest that will be payable:
Carrying
amount
US$000
Contractual
cash flows
6 months
or less
6 to 12
months
1 to 5
years
Over 5
years
US$000
US$000
US$000
US$000
US$000
2013
Non-derivative financial liabilities
Trade and other payables
31,437
31,437
31,437
Current tax liability
340
340
Interest bearing loans and borrowings
87,218
59,230
340
9,551
118,995
91,007
41,328
-
-
9,483
9,483
-
-
40,196
40,196
-
-
-
-
Carrying
amount
US$000
Contractual
cash flows
6 months
or less
6 to 12
months
1 to 5
years
Over 5
years
US$000
US$000
US$000
US$000
US$000
2012
Non-derivative financial liabilities
Trade and other payables
Current tax liability
Interest bearing loans and borrowings
37,710
37,710
37,710
-
104,726
142,436
-
83,903
121,613
-
11,379
49,089
-
-
-
-
12,501
12,501
60,022
60,022
-
-
-
-
72
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
(f) Fair value of financial instruments
This note provides information about how the Group determines fair values of various financial assets and liabilities.
Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis
Some of the group’s financial assets and liabilities are measured at fair value at the end of each reporting period. The following
table gives information about how the fair values of these financial assets and liabilities are determined.
Fair value at
Fair value
hierarchy
Valuation
technique(s) and
key input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to fair
value
2013
USD$000
2012
USD$000
Foreign currency
forward contracts
Assets - 534;
and
Liabilities - nil
Assets - nil;
and
Liabilities - nil
Level 2
Forward iron ore price
contracts
Liabilities -
5,717
Liabilities -
424
Level 2
Electricity price risk
contracts
Liabilities -
1,346
Liabilities -
134
Level 2
There were no transfers between Level 1 and Level 2 during the year
Marked-to-market
based on published
closing spot rate
Marked-to-market
based on published
CFR 62% Fe prices
Marked-to-market
based on published
NO4 region closing
prices
N/A
N/A
N/A
N/A
N/A
N/A
Fair value of the Group’s financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair
value disclosures are required)
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated
financial statements approximate their fair values.
NOTE 28
DEFINED CONTRIBUTION PLAN
SVG is obliged to have a defined contribution plan for its employees and has fulfilled its obligations under the Norwegian
mandatory occupational pension law.
SVG has a defined contribution plan, where SVG each year pays a fixed contribution into a separate entity/fund, and has no
further obligations to pay contributions. The employees have the risk and benefit of return on the investments. The contribution
by SVG during the reporting period is US$1,011,325 (2012: US$902,230).
SVG also has a mandatory agreement for early retirement with The Norwegian Confederation of Trade Unions and The
Confederation of Norwegian Business and Industry. The contribution by SVG during the reporting period is US$660,529 (2012:
US$568,074).
NOTE 29
CONTINGENCIES
The Company is currently in discussions regarding the use of the water treatment chemical PolyDADMAC in 2010 which is
argued to be outside of its permit in place at that time. The Company denies any wrongdoing. If a dispute resolution process
occurs and the breach is upheld, a penalty of NOK 300,000 plus legal fees will be payable.
Apart from the above, in the opinion of the directors, there are no contingent liabilities as at 31 December 2013 and no
contingent liabilities were incurred in the interval between balance date and the date of this financial report.
73
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
NOTES TO THE FINANCIAL STATEMENTS
NOTE 30
SUBSEQUENT EVENTS
On 25 March 2014, the Company entered into a 6 year agreement with Orica for the provision of rock on ground (ROG) services
at the mine. ROG services include the activities of blast design, drilling, charging and detonating the blast to provide broken rock
on the ground ready to be loaded into haul trucks. This is a complete outsourcing of the Drill and Blast activities that are
currently performed by the Company, Atlas Copco and EPC. Management expects this agreement to deliver improvement in the
integration and accountability of mining processes whilst maintaining delivery of required outcomes in terms of quality, quantity
and safety.
On 24 March 2014 the Company announced that 50,000 performance rights issued under the Company’s Performance Rights
Plan have lapsed in accordance with their terms of issue.
Other than this, no matter or circumstance has arisen since 31 December 2013 that in the opinion of the directors has
significantly affected, or may significantly affect in future financial years:
(i)
(ii)
(iii)
the Group’s operations;
the results of those operations; or
the Group’s state of affairs.
74
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
DIRECTORS’ DECLARATION
1.
In the opinion of the directors of Northern Iron Limited (the Company):
(a) the accompanying financial statements and notes set out on pages 25 to 74 are in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 31 December 2013 and of its performance for the
financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ended 31 December 2013.
Signed in accordance with a resolution of the Board of directors.
Antony Beckmand
Managing Director and Chief Executive Officer
Peter Bilbe
Chairman
Stockholm, 28 March 2014
Perth, 28 March 2014
75
INDEPENDENT AUDITOR’S REPORT
To the members of Northern Iron Limited
Report on the Financial Report
We have audited the accompanying financial report of Northern Iron Limited (“the company”), which
comprises the consolidated statement of financial position as at 31 December 2013, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors’ declaration for the consolidated
entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error.
In Note 2, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of
Financial Statements, that the financial report complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the company’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
76
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Northern Iron Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 31 December
2013 and of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Report on the Remuneration Report
We have audited the remuneration report included in the directors’ report for the year ended 31
December 2013. The directors of the company are responsible for the preparation and presentation of
the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditor’s opinion
In our opinion the remuneration report of Northern Iron Limited for the year ended 31 December 2013
complies with section 300A of the Corporations Act 2001.
HLB Mann Judd
Chartered Accountants
N G Neill
Partner
Perth, Western Australia
28 March 2014
77
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
Introduction
Northern Iron has in place corporate governance practices that are formally embodied in corporate governance policies and
codes adopted by the Board (the Policies). The aim of the Policies is to ensure that the Company is effectively directed and
managed, that risks are identified, monitored, and assessed and that appropriate disclosures are made.
In preparing the Policies, the directors considered the ASX Corporate Governance Council’s “Corporate Governance Principles
and Recommendations” (﴾ASX Principles). The Board has adopted these ASX Principles, subject to the departures noted below.
The directors incorporated the ASX Principles into the Policies to the extent that they were appropriate, taking into account the
Company’s size, the structure of the Board, its resources, and its proposed activities. The Board has adopted the following
policies and procedures.
Statement and Charters
-
-
-
-
Corporate Governance Statement
Board Charter
Audit Committee Charter
Remuneration, Nomination and Governance Committee Charter
Policies and Procedures
-
-
-
-
-
-
Code of Conduct
Trading in Company Securities
Risk Management Policy (within the Board and Audit Committee Charters)
Shareholder Communication Strategy
Continuous Disclosure Policy
Board Diversity Policy
As the Company and its activities grow, the Board may implement additional corporate governance structures and committees.
The Company’s corporate governance Policies are available on the Company’s website at www.northerniron.com.au.
Number of Audit Committee meetings, names, and qualification of members
The number of Audit Committee meetings and the names of attendees are set out in the directors' report together with their
qualifications.
Number of Remuneration, Nomination and Governance Committee meetings, names, and qualification of members
The number of Remuneration, Nomination and Governance Committee meetings and the names of attendees is set out in the
directors' report together with their qualifications.
Remuneration, Nomination and Governance Committee matters may also, at the discretion of the Board, be dealt with at
meetings of the full Board. Where this is the case voting is reserved for those members of the Board who are on the relevant
committees.
Performance evaluation of the board, its committees, and senior executives
The Board reviews and evaluates the performance of the Board and its committees, which involves consideration of all the
Board’s key areas of responsibility.
A performance evaluation of senior executives was undertaken during the year. Evaluation of executives reporting to the
Managing Director was undertaken by the Managing Director and subsequently approved by the Remuneration Committee and
by the full Board. Evaluation of the performance of the Managing Director was undertaken by the Remuneration, Nomination
and Governance Committee, reporting to the Chairman.
78
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
Skills, experience, expertise, and term of office of each director
A profile of each director containing the applicable information is set out in the directors' report.
Explanations for departures from best practice recommendations
From 1 January 2012 to 31 December 2013 (﴾the Reporting Period”)﴿, the Company complied in all material respects with each of
the Corporate Governance Principles and the corresponding Recommendations as published by the ASX Corporate Governance
Council ("ASX Principles and Recommendations") except as noted below:
Principle
Recommendation
Description
Explanation for departure
2
2.1
A majority of the Board was not
comprised of independent
directors for the whole of the
Reporting Period.
3
3.3
The entity has not disclosed in
its annual report progress
towards achieving its
measurable objectives for
achieving gender diversity.
During the period from 1 January 2013 until the
retirement of the Company’s former Chairman, Mr
David Griffiths on 10 June 2013 the Board comprised
five (5) directors, of whom three (3) were considered
by the Board to be independent. During the period
from 10 June 2013 until 31 December 2013, the
Board has comprised four (4) directors, of whom two
(2) are considered by the Board to be independent.
The Board (and Remuneration, Nomination and
Governance Committee) continues to monitor its
composition and
the Company.
Additional independent non-executive directors may
be appointed in future.
the needs of
The Company has a Diversity Policy endorsed by the
Board and is committed to providing a diverse and
inclusive work environment in which everyone is
treated fairly and with respect.
Measurable objectives have now been established for
achieving gender diversity, which are to be reviewed
annually. The Remuneration, Nomination and
Governance Committee has the responsibility of
assessing and reporting to the Board on progress
towards achieving the measurable objectives on an
annual basis. The Remuneration, Nomination and
Governance Committee has the responsibility of
recommending to the Board the extent to which the
achievement of measurable diversity objectives may
be linked to the key performance indicators for the
Board, Chief Executive Officer and senior executives.
The measurable objectives relating to gender
diversity, set by the Board are as follows:
Ensure recruitment policies and procedures
reflect NFE’s policy on diversity.
Human Resources Manager to provide an
initial status report, and then to report on a
periodic basis including recommendations
for future workplace participation rates;
Implement diversity education and training
for all employees and contractors, and
conduct awareness sessions on issues
relating to equal opportunities in the
79
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
workplace; and
Issue guidance notes on the Company’s
commitment to diversity to all external
agencies engaged to provide recruitment
services.
The Company will report on NFE’s progress towards
achieving these measurable objectives in its 2014
Annual Report.
Statement concerning availability of independent professional advice
If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his
office as a director then, provided the director first obtains approval for incurring such expense from the Chairman, the
Company will pay reasonable expenses associated with obtaining such advice.
Existence and terms of any schemes for retirement benefits for non-executive directors
The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.
Company’s remuneration policies
The Company’s remuneration policies are set out in the Remuneration Report on pages 16 to 21 and in the Company’s
Remuneration, Nomination & Governance Committee Charter, as available on its website. The Company has separate
remuneration policies for executive and non-executive directors.
Non-executive directors receive a fixed fee and, when appropriate may also be eligible to receive share options. Executive
directors receive a salary or fee and, when appropriate, performance based remuneration and share options.
Identification of independent directors
The Company’s independent directors are considered to be Mr Peter Bilbe and Mr Ashwath Mehra.
None of these directors was considered to have a material relationship with the Company or another group member (other than
their directorships) during the Reporting Period as professional advisor, consultant, supplier, customer, or through any other
contractual relationship, nor did they have any business or other relationship which could, or could reasonably be perceived to,
materially interfere with the director’s ability to act in the best interests of the Company.
The Board considers “material” in this context to be where any director related business relationship represents the lesser of at
least 5% of the Company’s or the director-related business’s revenue.
Material business risks
Risk Management is a standing agenda item for consideration at Board meetings. Management of the Company is responsible
for the preparation and maintenance of a register of material business risks and responses and is required also to report to the
Board as to the effectiveness of the Company’s management of its material business risks.
Commitment to Diversity
The Company is committed to workplace diversity and to ensuring a diverse mix of skills and talent exists amongst its directors,
officers and employees, to enhance Company performance. The Board has adopted a Diversity Policy which addresses equal
opportunities in the hiring, training and career advancement of directors, officers and employees. The Policy outlines the
strategies and process according to which the Board, Nomination and Remuneration Committees will set measurable objectives
to achieve the aims of its Diversity Policy, with particular focus on gender diversity within the Company and supporting the
representation of women at senior levels. The Board is responsible for monitoring Company performance in meeting the
Diversity Policy requirements, including the achievement of diversity objectives.
80
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
The Board and Remuneration Committee have now established appropriate measurable objectives and intend to report progress
against them in the Company’s 2014 Annual Report.
Information relating to the current representation of women employees in the Northern Iron Group, holding senior executive
positions and on the Board is as follows:
Number of Women Employees
Northern Iron Limited Group
Senior Executives
Board representation (Group companies)
Board representation (Parent Company)
57
1
1
0
%
13.4
20
10
-
81
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation
Compliance (Yes/No)
Explanation
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
ASX Recommendation 1.1: Companies should establish the
functions reserved to the board and those delegated to senior
executives and disclose those functions.
ASX Recommendation 1.2: Companies should disclose the process
for evaluating the performance of senior executives.
Yes
Yes
The Board has adopted a formal charter that details the respective board and
management functions and responsibilities. A copy of the board charter is
available in the governance section of the Company's website at
www.northerniron.com.au.
The Board has adopted a performance evaluation policy, which provides that
the Remuneration, Nomination Committee and Governance Committee will
carry out performance evaluation of senior executives of the Company and that
an independent adviser may be used.
This evaluation will be based on specific criteria, including the business
performance of the Company and its subsidiaries, whether strategic objectives
are being achieved and the development of management and personnel. Each
senior executive's performance will be assessed against his or her designated
roles and responsibilities.
ASX Recommendation 1.3: Companies should provide the
information indicated in the Guide to reporting on Principle 1.
Yes
The Company has provided the information indicated in the Guide to reporting
on Principle 1 in its annual report and on the Company’s website.
82
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
ASX Recommendation 2.1: A majority of the board should be
independent directors.
No
ASX Recommendation 2.2: The chair should be an independent
director.
ASX Recommendation 2.3: The roles of chair and chief executive
officer should not be exercised by the same individual.
ASX Recommendation 2.4: The board should establish a nomination
committee.
Yes
Yes
Yes
During the period from 1 January 2013 until the retirement of the Company’s
former Chairman, Mr David Griffiths on 10 June 2013 the Board comprised five
(5) directors, of whom three (3) were considered by the Board to be
independent. During the period from 10 June 2013 until 31 December 2013,
the Board has comprised four (4) directors, of whom two (2) are considered by
the Board to be independent.
The Board (and Remuneration, Nomination and Governance Committee)
continues to monitor its composition and the needs of the Company.
Additional independent non-executive directors may be appointed in future.
The Chairman of the Company, Mr Peter Bilbe, is considered to be an
independent director by the Board.
The role of chair of the Board is exercised by Mr Peter Bilbe. The role of Chief
Executive Officer is exercised by Mr Antony Beckmand.
The Board has established a Remuneration, Nomination & Governance
Committee and adopted a charter that sets out the committee’s role and
responsibilities, composition and membership requirements.
A copy of the committee charter is available in the governance section of the
Company's website.
83
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation 2.5: Companies should disclose the process
for evaluating the performance of the board, its committees and
individual directors.
Yes
The Company’s board charter outlines the process for evaluating the
performance of the Board, its committees and individual directors. The Board
may decide to engage an independent adviser to undertake this review.
A performance evaluation took place during the year to 31 December 2013 and
was carried out by the Chairman.
Copies of the board charter and the charter of the Remuneration, Nomination
and Governance Committee are available in the governance section of the
Company's website.
ASX Recommendation 2.6: Companies should provide the
information indicated in the Guide to reporting on Principle 2.
Yes
The Company includes in its annual reports and on its website the information
indicated in the Guide to reporting on Principle 2.
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
ASX Recommendation 3.1: Companies should establish a code of
conduct and disclose the code or a summary of the code as to:
Yes
The Company has established a code of conduct and a copy of the code is
available in the governance section of the Company's website.
the practices necessary to maintain confidence in the
company’s integrity;
the practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders; and
the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
ASX Recommendation 3.2: Companies should establish a policy
concerning diversity and disclose the policy or a summary of that
policy. The policy should include requirements for the board to
establish measurable objectives for achieving gender diversity for the
board to assess annually both the objectives and progress in
Yes
The Company has established a diversity policy which addresses ASX
Recommendation 3.2. A copy of the policy is available in the governance
section of the Company’s website.
84
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
achieving them.
ASX Recommendation 3.3: Companies should disclose in each
annual report the measurable objectives for achieving gender
diversity set by the board in accordance with the diversity policy and
progress towards achieving them.
No (expect to comply in
2014)
The Company has a Diversity Policy endorsed by the Board and is committed to
providing a diverse and inclusive work environment in which everyone is
treated fairly and with respect.
Measurable objectives have now been established for achieving gender
diversity, which are to be reviewed annually. The Remuneration, Nomination
and Governance Committee has the responsibility of assessing and reporting to
the Board on progress towards achieving the measurable objectives on an
annual basis. The Remuneration, Nomination and Governance Committee has
the responsibility of recommending to the Board the extent to which the
achievement of measurable diversity objectives may be linked to the key
performance indicators for the Board, Chief Executive Officer and senior
executives.
The measurable objectives relating to gender diversity, set by the Board are as
follows:
Ensure recruitment policies and procedures reflect NFE’s policy on
diversity.
Human Resources Manager to provide an initial status report, and
then to report on a periodic basis including recommendations for
future workplace participation rates;
Implement diversity education and training for all employees and
contractors, and conduct awareness sessions on issues relating to
equal opportunities in the workplace; and
Issue guidance notes on the Company’s commitment to diversity to all
external agencies engaged to provide recruitment services.
The Company will report on NFE’s progress towards achieving these
measurable objectives in its 2014 Annual Report.
85
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation 3.4: Companies should disclose in each
annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the
board.
ASX Recommendation 3.5: Companies should provide the
information indicated in the Guide to reporting on Principle 3.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
ASX Recommendation 4.1: The Board should establish an audit
committee.
ASX Recommendation 4.2: The audit committee should be
structured so that it:
consists only of non-executive directors;
consists of a majority of independent directors;
is chaired by an independent chair, who is not chair of the
board; and
has at least three members.
Yes
Yes
Yes
Yes
The Company has disclosed this information in the governance section of its
annual report.
The Company discloses in the corporate governance statement in its annual
reports an explanation of any departure from ASX Recommendations 3.1, 3.2,
3.3, 3.4 or 3.5 (see above).
Copies of the Company’s diversity policy are available in the governance
section of the Company's website.
The Board has established an Audit Committee and adopted a charter that sets
out the Audit Committee's purpose, composition, duties and responsibilities.
The role of the Audit Committee is to assist the Board in monitoring and
reviewing any matters of significance affecting financial reporting and
compliance.
A copy of the charter of the Audit Committee is available in the governance
section of the Company's website.
The structure of the Company's Audit Committee meets the requirements of
Recommendation 4.2. The members of the committee are set out in the
directors' report together with their qualifications.
86
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation 4.3: The audit committee should have a
formal charter.
ASX Recommendation 4.4: Companies should provide the
information indicated in the Guide to reporting on Principle 4.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
ASX Recommendation 5.1: Companies should establish written
policies designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior
executive level for that compliance and disclose those policies or a
summary of those policies.
Yes
Yes
Yes
The Board has adopted a formal charter that details the Audit Committee's
purpose, composition, duties and responsibilities. A copy of the charter of the
Audit Committee is available in the governance section of the Company's
website.
The Company has disclosed in the Directors’ Report the names and
qualifications of those appointed to its audit committee, their attendance at
meetings and the number of meetings of the audit committee.
The Company has disclosed in this Corporate Governance section of its Annual
Report an explanation of departures from Recommendations 4.1, 4.2, 4.3 and
4.4 (none).
The Board has adopted a formal charter of the Audit Committee, which
provides information on procedures for the selection and appointment of the
external auditor, and for the rotation of external audit engagement partners. A
copy of this charter is available in the governance section of the Company's
website.
The Company has established a continuous disclosure policy which is designed
to guide compliance with ASX Listing Rule disclosure requirements and to
ensure that all directors, senior executives and employees of the Company
understand their responsibilities under the policy. The Board has designated
the Managing Director and the Company Secretary as the persons responsible
for ensuring that this policy is implemented and enforced and that all required
price sensitive information is disclosed to the ASX as required.
In accordance with the Company's continuous disclosure policy, all information
provided to ASX for release to the market will be posted to the Company’s
website once ASX has confirmed that an announcement has been released to
the market.
A copy of the continuous disclosure policy is available in the governance
section of the Company's website.
87
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation 5.2: Companies should provide the
information indicated in the Guide to reporting on Principle 5.
Yes
The Company includes in its annual reports an explanation of any departure
from ASX Recommendations 5.1 or 5.2 (none).
A copy of the Company’s continuous disclosure policy is available in the
governance section of the Company's website.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
ASX Recommendation 6.1: Companies should design a
communications policy for promoting effective communication with
shareholders and encouraging their participation at general meetings
and disclose their policy or a summary of that policy.
Yes
The Company respects the rights of its shareholders and to facilitate the
effective exercise of those rights the Company has designed a shareholder
communication policy which outlines the Company's commitment to:
communicating effectively with shareholders through releases to the
market via ASX, information mailed to shareholders and the general
meetings of the Company;
giving shareholders ready access to balanced and understandable
information about the Company and corporate proposals;
encouraging shareholders to participate in general meetings of the
Company; and
requesting the external auditor to attend the annual general meeting
and be available to answer shareholder questions about the conduct
of the audit and the preparation and content of the auditor's report.
A copy of the shareholder communication policy is available in the governance
section of the Company's website.
ASX Recommendation 6.2: Companies should provide the
information indicated in the Guide to reporting on Principle 6.
Yes
The Company includes in its annual reports an explanation of any departure
from ASX Recommendations 6.1 or 6.2 (none) and a description of how it will
communicate with its shareholders publicly.
88
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
The Company has provided information about the Company generally for the
benefit of its shareholders and market participants (among others) on the
Company's website and all information provided to ASX for release to the
market is posted to its website once ASX has confirmed that an announcement
has been released.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
ASX Recommendation 7.1: Companies should establish policies for
the oversight and management of material business risks and disclose
a summary of those policies.
Yes
The Company is committed to the identification, monitoring and management
of risks associated with its business activities and has established policies in
relation to the implementation of practical and effective control systems.
Risk Management is a standing agenda item for consideration at Board
meetings. Management of the Company is responsible for the preparation and
maintenance of a register of material business risks and responses and is
required also to report to the Board as to the effectiveness of the Company’s
management of its material business risks.
ASX Recommendation 7.2: The board should require management
to design and implement the risk management and internal control
system to manage the company's material business risks and report
to it on whether those risks are being managed effectively. The board
should disclose that management has reported to it as to the
effectiveness of the company's management of its material business
risks.
Yes
Under the Company's risk management policy, the responsibility for
undertaking and assessing risk management and internal control effectiveness
is delegated to management. Management is required to assess risk
management and associated internal compliance and control procedures and
report back to the Board on whether those risks are being managed effectively.
The Board has received the reports from management required by ASX
Recommendation 7.2.
89
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
ASX Recommendation 7.3: The Board should disclose whether it has
received assurance from the chief executive officer (or equivalent) and
the chief financial officer (or equivalent) that the declaration provided
in accordance with section 295A of the Corporations Act is founded
on a sound system of risk management and internal control and that
the system is operating effectively in all material respects in relation
to financial reporting risks.
Yes
The Board has received the assurances required by ASX Recommendation 7.3
in respect of its 2012 annual report.
ASX Recommendation 7.4: Companies should provide the
information indicated in the Guide to reporting on Principle 7.
Yes
The Company includes in the corporate governance statement in its annual
reports an explanation of any departure from ASX Recommendations 7.1, 7.2,
7.3 or 7.4 (none), whether the Board has received the report from management
under ASX Recommendation 7.2, and whether the Board has received
assurance from Managing Director and the Chief Financial Officer under ASX
Recommendation 7.3.
Risk Management is a standing agenda item for consideration at Board
meetings. Management of the Company is responsible for the preparation and
maintenance of a register of material business risks and responses and is
required also to report to the Board as to the effectiveness of the Company’s
management of its material business risks.
90
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
ASX Recommendation 8.1: The board should establish a
remuneration committee.
Yes
The Board has established a Remuneration, Nomination & Governance
Committee to support and advise the Board in fulfilling its responsibilities to
shareholders. The role of the committee includes attending to matters related
to the Company's remuneration policy to enable the Company to attract and
retain executives who will create value for shareholders and to arrange
performance evaluations of those executives. The committee also attends to
matters relating to succession planning and recommends candidates for
election or re-election to the Board.
The Board has adopted a charter that defines the committee's purpose,
composition, duties and responsibilities. A copy of this charter is available in
the governance section of the Company's website.
ASX Recommendation 8.2: The remuneration committee should be
structured so that it:
consists of a majority of independent directors;
is chaired by an independent chair; and
has at least three members.
Yes
The structure of the Company's Remuneration, Nomination and Governance
Committee meets the requirements of ASX Recommendation 8.2.
ASX Recommendation 8.3: Companies should clearly distinguish the
structure of non-executive directors’ remuneration from that of
executive directors and senior executives.
Yes
Non-executive directors receive a fixed fee and, when appropriate may also be
eligible to receive share options. Executive directors receive a salary or fee and,
when appropriate, performance based remuneration and share options.
ASX Recommendation 8.4: Companies should provide the
information indicated in the Guide to reporting on Principle 8.
Yes
The Company includes in its annual reports:
an explanation of any departure from ASX Recommendations 8.1, 8.2,
8.3 or 8.4 (none);
the existence and terms of any schemes for retirement benefits, other
than superannuation, for non-executive directors; and
91
NORTHERN IRON LIMITED
ANNUAL REPORT 31 DECEMBER 2013
CORPORATE GOVERNANCE STATEMENT
the names of the members of the remuneration committee and their
attendance at meetings of the committee, or where a company does
not have a remuneration committee, how the functions of a
remuneration committee are carried out.
The Board has adopted a formal charter of the Remuneration, Nomination and
Governance Committee, which defines the committee's purpose, composition,
duties and responsibilities. A copy of this charter is available in the governance
section of the Company's website.
The Company will determine, and then intends to make publically available on
the Company's website a summary of, the Company's policy on prohibiting
executives entering into transactions in associated products that limit the
economic risk of participating in unvested entitlements under any equity-based
remuneration schemes made available by the Company.
92
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Additional information required by the ASX Limited (﴾“ASX”)﴿ Listing Rules and not disclosed elsewhere in this report is set out
below.
Shareholdings as at 14 March 2014
Substantial shareholders
Set out below is an extract from the Company’s register of last substantial shareholder notices as received by the company
and/or lodged at the ASX. Shareholdings and percentages reported in the table are as reported in the most recent notifications
received, however these may differ from current holdings as substantial holders are required to notify the Company only in
respect of changes which act to increase or decrease their percentage holding by at least 1% of total voting rights:
Name of Shareholder
Date of notice
Number of Shares
% held
Dalnor Assets Ltd
Tschudi Mining Company AS
OM Holdings Limited
Prominvest AG
Voting Rights
10/02/14
14/10/13
15/10/12
25/02/14
80,410,215
67,133,728
52,482,500
24,329,939
16.60%
13.86%
11.03%
5.02%
The voting rights attaching to Ordinary Shares are governed by the Constitution. On a show of hands, every person present who
is a member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by
attorney or duly authorised representative shall have one vote for each share held. No options have any voting rights.
Twenty Largest Shareholders (as at 14 March 2014)
Rank
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
JP MORGAN NOMINEES AUSTRALIA LIMITED
TSCHUDI MINING COMPANY AS
OM HOLDINGS LIMITED
DNU NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
ZERO NOMINEES PTY LTD
ASHWATH MEHRA
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
INKESE PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MR JAY EVAN DALE HUGHES
PAN AUSTRALIAN NOMINEES PTY LIMITED
MR MARCUS JAMES TAYLOR
MR JAY HUGHES + MRS LINDA HUGHES
MR MICHAEL JEFFERIES + MRS JULIE JEFFERIES
URACCO PTY LIMITED
SUB-TOTAL - TOP 20 SHAREHOLDERS
OTHER SHAREHOLDERS
No.
174,672,352
67,133,728
52,482,500
20,200,000
19,072,608
17,730,243
15,702,792
13,928,588
13,512,726
13,244,725
11,521,934
10,201,109
6,800,000
2,601,376
2,000,000
1,110,805
1,100,000
1,000,000
1,000,000
1,000,000
446,015,486
38,389,828
%
36.06%
13.86%
10.83%
4.17%
3.94%
3.66%
3.24%
2.88%
2.79%
2.73%
2.38%
2.11%
1.40%
0.54%
0.41%
0.23%
0.23%
0.21%
0.21%
0.21%
92.07%
7.93%
93
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Distribution of equity security holders (as at 14 March 2014)
Size of Holding
Number of shareholders
Number of fully paid shares
1
1,001
5,001
10,001
To
To
To
To
100,001 and over
1,000
5,000
10,000
100,000
230
215
159
386
95
1,085
38,422
656,661
1,223,710
13,261,489
469,225,032
484,405,314
The number of shareholders holding less than a marketable parcel of ordinary shares is 310.
On-market buyback
There is no current on-market buyback.
Restricted securities
As at the date of this report, none of the Company’s securities are subject to escrow restrictions.
94
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Schedule of permits
Tenement Name Tenement Number
Tenement Type
Area (m2)
Grant Date
Registered Holder
Andehatten
Annahatten
FU -1/2009-FB
G.UTV. 6/2011
Annahatten N
0784/2009-FB
Annahatten Ø
0783/2009-FB
Bjørnefjell
G.UTV.0006-1/2013
Bjørnefjell 6
0023/2009-FB
Bjørnevann 10
Bjørnevann 11
785/2008-FB
786/2008-FB
Bjørnevann 12
0015/2009-FB
Bjørnevann 13
0016/2009-FB
Bjørnevann 14
0017/2009-FB
Bjørnevann 15
0018/2009-FB
Bjørnevann 16
0019/2009-FB
Bjørnevann 7
Bjørnevann 8
Bjørnevann 9
Bjørnevatn 1
3311/2007-FB
3312/2007-FB
3313/2007-FB
1664/2006-FB
Bjørnevatn 100
1672/2006-FB
Bjørnevatn 101
1673/2006-FB
Bjørnevatn 17
0798/2009-FB
Bjørnevatn 18
0799/2009-FB
Bjørnevatn 19
0800/2009-FB
Bjørnevatn 2
1665/2006-FB
Bjørnevatn 20
0801/2009-FB
Bjørnevatn 3
Bjørnevatn 4
Bjørnevatn 5
Bjørnevatn 6
Bjørnevatn Ø
Bjørnevatn Ø
Bjørnevatn Ø
Bjørnevatn Ø
Bjørnevatn Ø
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Bjørnevatn V
Boris Gleb 1
Boris Gleb 1
1666/2006-FB
1667/2006-FB
1668/2006-FB
1669/2006-FB
NU 11/1974
NU 12/1974
NU 13/1974
NU 14/1974
NU 15/1974
NU 1/1974
NU 10/1974
NU 2/1974
NU 3/1974
NU 4/1974
NU 5/1974
NU 6/1974
NU 7/1974
NU 8/1974
NU 9/1974
Claim
Claim
Preclaim
Preclaim
Claim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Preclaim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
Claim
0687/2001-FB
FU -8/2009-FB
Preclaim
Claim
62,500
175,000
250,000
175,000
910,000
280,000
80,000
190,000
225,000
180,000
245,000
280,000
245,000
297,600
240,000
225,000
300,000
250,000
280,000
200,000
50,000
150,000
300,000
300,000
300,000
250,000
250,000
250,000
56,000
112,000
84,000
84,000
81,000
140,000
56000
140,000
140,000
140,000
140,000
112,000
84000
84000
84000
117,500
182,500
22/08/2001
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
3/03/2010
3/03/2010
2/12/2013
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
22/10/2008
Sydvaranger Gruve AS
22/10/2008
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
18/03/2009
Sydvaranger Gruve AS
7/10/2007
7/10/2007
7/10/2007
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
3/03/2010
3/03/2010
3/03/2010
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
3/03/2010
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
23/08/2001
Sydvaranger Gruve AS
95
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Tenement Name Tenement Number
Tenement Type
Area (m2)
Grant Date
Registered Holder
Boris Gleb 2
Boris Gleb 2
Boris Gleb 3
Boris Gleb 3
Brattli 1
Brattli 2
Brattli 3
Brattli 4
0688/2001-FB
FU -9/2009-FB
FU -10/2009-FB
0689/2001-FB
3138/2007-FB
3139/2007-FB
0771/2009-FB
0772/2009-FB
Fisketd. S/Jernt. N
FU -4/2009-FB
Fisketind
Fisketind
Fisketind
Fisketind
Fisketind
Fisketind 1
Fisketind 10
Fisketind 11
Fisketind 3
Fisketind 4
Fisketind 5
Fisketind 6
Fisketind 7
Fisketind 8
Fisketind 9
NU 31/1974
NU 32/1974
NU 33/1974
NU 34/1974
NU 35/1974
0785/2009-FB
0790/2009-FB
0791/2009-FB
0028/2009-FB
0029/2009-FB
0030/2009-FB
0786/2009-FB
0787/2009-FB
0788/2009-FB
0789/2009-FB
Fisketind Syd 2
1662/2006-FB
Grunntjern
Grunntjern
Grunntjern
Grunntjern
Grunntjern
Grunntjern
Grunntjern 1
Grunntjern 2
Hyttemalmen
Hyttemalmen
Jernhatten
Jernhatten
Jerntoppen 1
Jerntoppen 2
Jerntoppen 3
Jerntoppen 4
Kjellmannsåsen
Kjellmannsåsen
Kjellmannsåsen
Kjellmannsåsen
NU 40/1974
NU 41/1974
NU 42/1974
NU 43/1974
NU 44/1974
NU 45/1974
0794/2009-FB
0795/2009-FB
NU 81/1974
NU 82/1974
NU 77/1974
NU 78/1974
787/2008-FB
0766/2009-FB
0781/2009-FB
0782/2009-FB
LU 101/1903
LU 102/1903
LU 105/1903
LU 106/1903
Kjellmannsåsen 1
1658/2006-FB
Kjellmannsåsen 2
1659/2006-FB
Kjellmannsåsen 3
1660/2006-FB
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Claim
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Claim
Claim
Claim
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163,150
136,850
49,000
191,000
140,000
120,000
32,400
60,000
45,000
112,000
112,000
112,000
112,000
112,000
200,000
250,000
175,000
102,400
235,000
9,900
280,000
35,100
240,000
138,000
300,000
84,000
84,000
84,000
84,000
84,000
84,000
220,000
299,750
56,000
56,000
140,000
140,000
250,000
25,000
100,000
120,000
lengdeutmål
lengdeutmål
lengdeutmål
lengdeutmål
250000
250000
250000
24/08/2001
Sydvaranger Gruve AS
25/08/2001
Sydvaranger Gruve AS
26/08/2001
Sydvaranger Gruve AS
27/08/2001
Sydvaranger Gruve AS
7/10/2007
7/10/2007
3/03/2010
3/03/2010
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
3/03/2010
3/03/2010
3/03/2010
2/04/2009
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
2/04/2009
2/04/2009
3/03/2010
3/03/2010
3/03/2010
3/03/2010
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
3/03/2010
3/03/2010
6/12/2002
6/12/2002
6/12/2002
6/12/2002
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/10/2008
Sydvaranger Gruve AS
3/03/2010
3/03/2010
3/03/2010
6/12/2002
6/12/2002
6/12/2002
6/12/2002
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
19/01/2007
Sydvaranger Gruve AS
96
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Tenement Name Tenement Number
Tenement Type
Area (m2)
Grant Date
Registered Holder
Kjellmannsåsen 5
3135/2007-FB
Kjellmannsåsen 6
3136/2007-FB
Kjellmannsåsen 7
3137/2007-FB
Mattilamalmen 1
FU -6/2009-FB
Mattilamalmen 1
0685/2001-FB
Mattilamalmen 2
0686/2001-FB
Ørnåsen
Ørnåsen 1
Ørnåsen 2
Ørnevann
Ørnevann
Ørnevann
Ørnevann
FU -5/2009-FB
0779/2009-FB
0780/2009-FB
NU 63/1974
NU 64/1974
NU 65/1974
NU 66/1974
Ørnevannet 1
0773/2009-FB
Ørnevannet 2
0774/2009-FB
Ørnevannet 3
0775/2009-FB
Ørnevannet 4
0776/2009-FB
Reitan 3
Reitan 4
Reitan 5
Reitan 6
Reitan 7
Reitan 8
3298/2007-FB
3299/2007-FB
3300/2007-FB
3301/2007-FB
3302/2007-FB
3303/2007-FB
Reitanmalmen 1
FU -2/2009-FB
Reitanmalmen 2
FU -3/2009-FB
Søstervann
Søstervann
Søstervann
Søstervann
Søstervatn 1
Søstervatn 2
Teltbukt 1
Teltbukt 2
NU 46/1974
NU 47/1974
NU 48/1974
NU 49/1974
0796/2009-FB
0797/2009-FB
0777/2009-FB
0778/2009-FB
Teltbuktmalmen
FU-7/2009-FB
Tverrdalen
Tverrdalen
Tverrdalen
Tverrdalen
Tverrdalen
Tverrdalen
Tverrdalen
NU 24/1974
NU 25/1974
NU 26/1974
NU 27/1974
NU 28/1974
NU 29/1974
NU 30/1974
Tverrdalen 1
Tverrdalen 2
0792/2009-FB
0793/2009-FB
Vakkeråsen 1
0690/2001-FB
Vakkeråsen 2
Vakkeråsen 3
Vakkeråsen 4
0691/2001-FB
0692/2001-FB
0693/2001-FB
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78,750
275,000
200,000
88,150
104,350
280,000
252,000
90,000
250,000
84,000
84,000
84,000
84,000
230,000
297,000
261,000
299,750
145,000
266,000
266,000
280,000
175,000
250,000
150,000
137,500
112,000
112,000
112,000
112,000
247,500
247,500
240,000
200,000
6,615
112,000
112,000
112,000
112,000
112,000
168,000
168,000
299,750
299,750
160,000
240,000
240,000
175,000
7/10/2007
7/10/2007
7/10/2007
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
23/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
3/03/2010
3/03/2010
6/12/2002
6/12/2002
6/12/2002
6/12/2002
3/03/2010
3/03/2010
3/03/2010
3/03/2010
7/10/2007
7/10/2007
7/10/2007
7/10/2007
7/10/2007
7/10/2007
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
6/12/2002
6/12/2002
6/12/2002
6/12/2002
3/03/2010
3/03/2010
3/03/2010
3/03/2010
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
6/12/2002
3/03/2010
3/03/2010
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
97
NORTHERN IRON LIMITED
FINANCIAL REPORT 31 DECEMBER 2013
ADDITIONAL SHAREHOLDER INFORMATION
Tenement Name Tenement Number
Tenement Type
Area (m2)
Grant Date
Registered Holder
Vakkeråsen 5
Vakkeråsen 6
Vakkeråsen 7
Vakkeråsen 8
Vakkeråsen 9
Varrevann 1
Varrevann 2
Varrevann 3
Varrevann 4
Varrevann 5
Varrevann 6
3304/2007-FB
3305/2007-FB
3306/2007-FB
3307/2007-FB
3308/2007-FB
0694/2001-FB
0695/2001-FB
0696/2001-FB
0697/2001-FB
3296/2007-FB
3297/2007-FB
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90,000
90,000
150,000
150,000
120,000
250,000
250,000
250,000
60,000
170,000
280,000
7/10/2007
7/10/2007
7/10/2007
7/10/2007
7/10/2007
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
22/08/2001
Sydvaranger Gruve AS
7/10/2007
7/10/2007
Sydvaranger Gruve AS
Sydvaranger Gruve AS
98