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SciDev LimitedAnnual Report 2014Year ended 31 December 2014 Chairman’s Review 03Operating Review 05Significant Accomplishments 14Financial Report 15Directors’ Report 16Auditor’s Independence Declaration 29Consolidated Statement of Comprehensive Income 30Consolidated Statement of Financial Position 31Consolidated Statement of Changes in Equity 32Consolidated Statement of Cash Flows 33Notes to the Financial Statements 34Directors’ Declaration 75Independent Auditor’s Report 76Corporate Governance Statement 78Additional Shareholder Information 90Corporate Directory 97ContentsNorthern Iron is an Australian listed company which is the 100% owner of Sydvaranger Gruve AS, a producer of high quality magnetite iron concentrate in Northern Norway. Sydvaranger uses world class mining, rail, processing and port assets to produce and export high quality iron ore concentrate to steel industry customers worldwide.Northern Iron Limited Level 1, 44 Ord Street West Perth, WA 6005Northern Iron Annual Report 2014 Significant
accomplishments
in 2014 included:
Sales of 2,385,000 dry metric tonnes of iron ore
concentrate, a 24% increase over the prior year
Production of 2,342,000 dry metric tonnes of iron
ore concentrate, an 18% increase over the prior year
Unit cash operating costs (C1) of approximately
US$72/dmt, an improvement of 20% over the prior
year result of US$90/dmt
production result of 623kt of dry concentrate during
Record monthly production
the June 2014 quarter
of 222kt of dry concentrate production in May 2014
Improved processing and fine crushing reliability
with increased run time due to the implementation
of planned shutdowns in quarter four of 2013.
A record quarterly
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increase in ore minedcompared to 201314%02Northern Iron Annual Report 2014 Chairman’s Review
The Company continued to improve
the reliability, stability and productivity
of its operations over the course of
the year.
Dear Shareholder,
The market conditions during the 2014 year were
extremely volatile, with an oversupply situation
in the iron ore market developing dramatically in
the second half of the year. As a consequence, the
market price for iron ore has collapsed both quickly
and precipitously, falling by more than 50% across
the year. Further, due to the recent strengthening of
the US$ to NOK there has been a material negative
influence on the 2014 result for the Company
due to a mark-to-market loss on foreign currency
transactions maturing during 2015 and 2016.
Significant effort has been applied towards
preserving cash, reducing costs and securing
financial support. Progress has been achieved on
these measures and the Company continues to
actively work with key stakeholders to restructure
and improve the working capital and overall
operating position of the Company for the longer
term to ensure the operations continue as a going
concern. The support received from the Company’s
financiers and main offtake partner, as announced by
the Company on 25 March 2015, is an endorsement
of the strong backing enjoyed from key stakeholders.
The Company continued to improve the reliability,
stability and productivity of its operations over the
course of the year, with a strong focus on safety
and improvements to operational competency and
particularly cost reduction. This planned approach
has been developed with the acknowledgement that
our business is our people and that people get things
done. These achievements are closely aligned to our
values and engaged behaviours.
Significant accomplishments in 2014 included:
– Sales of 2,385,000 dry metric tonnes of iron ore
concentrate, a 24% increase over the prior year
– Production of 2,342,000 dry metric tonnes of
iron ore concentrate, an 18% increase over the
prior year
– Unit cash operating costs (C1) of approximately
US$72/dmt, an improvement of 20% over the
prior year result of US$90/dmt
– A record quarterly production result of 623kt
of dry concentrate during the June 2014 quarter
– Record monthly production of 222kt of dry
concentrate production in May 2014
– Improved processing and fine crushing
reliability with increased run time due to the
implementation of planned shutdowns in quarter
four of 2013.
Safety performance improved year-on-year with
7 Lost Time Injuries being experienced versus 9 in
2013. We remain committed to further improvement
in safety during the coming year which is a key
business driver of reliability, productivity and overall
operational success.
Looking ahead, the Company will continue to actively
institute measures toward further cost reductions,
improvements in efficiency as well as furthering
the discussions with stakeholders with the aim of
strengthening the Company’s financial position and
delivering a long term sustainable solution.
I would like to thank our stakeholders, including
the local Kirkenes community, employees, customers
and business partners for their continuing support
during what has been a year that has seen both
operational success and financial challenges, with
further price falls during the first quarter 2015
and the iron ore price now at 6 year lows.
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Peter Bilbe
Chairman
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increase in concentrate productioncompared to 201318%04Northern Iron Annual Report 2014 Operating Review
Substantial progress has been made
over the last 2 years to stabilise
operations and align daily activities
to strategic business drivers.
This approach has been fundamental to the
demonstrated success of the Company during
this period. During 2014 new quarterly and annual
records were set for total ore mined, crushed tonnes,
ore milled and both concentrate produced and
shipped. In the current price environment challenges
remain and the company continues to focus and
work hard on improving the operational cost profile
whilst maintaining a stable and safe operation.
Safety Performance
Safety performance challenges from 2013 have
improved in 2014. The number of Total Recordable
Injuries (“TRI”) 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 2014 versus 2013.
Table 1
Lost Time Injury (LTI)
Restricted work cases (RWC)
Medical Treatments (MTC)
First Aid (FAC)
TRIFR(i)
2014
2013
7
1
6
30
14
9
1
5
24
15
(i)
TRIFR: Total Recordable Injuries Frequency Rate is the TRI
divided per million annual actual work hours. TRI includes LTI,
RWC and MTC (excludes FAC).
In 2014 the Company updated the Health, Safety,
Environment and Quality (“HSEQ”) policies.
The updated policy is signed by the CEO Ismo
Haaparanta. The new policy focuses on zero harm
and that tasks will not be performed unless all risk
controls are active. The policies were reviewed and
approved by the SVG and NFE boards.
The Company set a TRIFR target for 2014 of
less than 10. The result is 14 incidents which sets
the incident rate at 13.25. None of the incidents
involved serious injury. A considerable number
of the incidents, especially the LTIs, involved
subcontractors. An immediate action is to involve
subcontractors more in HSE work to improve the
safety performance.
A focus has been set up to reinforce the Health,
Safety and Environment (“HSE”) programs. The
Walk, Observe, Communicate (“WOC”) procedure
has been changed to assist the focus on creating
a HSE culture through conversation and observing
positive aspects in the HSE work. Regular toolbox
meetings have been introduced at the plant and
mine areas. The general reaction is positive among
the workforce. The safety walk program run by the
safety representatives has been followed up more
closely resulting in almost 100% execution of the
program. The quality of the safety walks has also
improved along with the closure of findings.
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. A cooperation agreement
has been made for the year 2015. A survey on
underlying causes of sick leave was conducted by
the service. The service interviewed a selection of
the workforce in the mine to perform the survey.
A report was made with recommendations. The
major recommendation is to introduce consistent
leader-employee dialog meetings in order to improve
the working environment which greatly affects the
sick leave rate.
A HSEQ steering committee was established in
the year 2014. The purpose of the committee is to
review safety performance and provide strategic
guidance on improving the performance. A major
conclusion from this first meeting was to analyse the
functionality of the incident and non-conformance
reporting system.
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Operating Review
Continued
This year the Company has updated
its Environmental Policy, and worked
continuously towards fulfilling the
objectives of the Policy.
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Environmental Performance
This year the Company has updated its
Environmental Policy, and worked continuously
towards fulfilling the objectives of the Policy:
The Company will build a sustainable future by
preventing or otherwise minimising harmful effects
on the environment at all levels in its business.
Environmental sustainability will be achieved by
complying with laws, regulations and permits,
developing and implementing internationally
recognised environmental management systems.
It is our aim to enhance environmental
performance by working closely with our
community in the Sør-Varanger municipality, our
business partners and employees, by increasing
environmental awareness and by establishing
monitoring and controls.
Awareness
The community liaison group established in 2010 had
a total of 3 meetings in 2014. Key topics of interest
were; environmental monitoring; the toxicity testing
of the flocculants; noise generation; dust from the
mining operation, water levels in the Kirkenes lakes,
plans for expanding production and the application
for amended emission permit.
Monitoring
The Company’s permanent monitoring program
for discharges and runoff from the mining areas
revealed no breaches of the relevant permits.
In response to several noise complaints from
residents in Kirkenes, new noise measurements were
conducted this summer. The measures confirmed
that the source of the noise had been correctly
identified and that the actions taken to mitigate the
noise were effective.
In 2014, dust from the mining operation continued
to be an issue in Bjørnevatn, even with intensified
watering of roads and rock piles. The legal limit
for mineral fall out dust from mining in Norway is
5g/m2/30 days, measured at the nearest home.
The company started measuring fall out dust at
four locations in March. The dust measurements are
done by NTNU (Norwegian University of Science
and Technology) and will continue for 12 months.
Measuring station 1 which was initially located by
06
Northern Iron Annual Report 2014
the ship loading facilities is now moved to the town
centre resident area; station 2 is the nearest home in
Kirkenes; station 3 is the nearest home in Bjørnevatn
and station 4 is another home in Bjørnevatn
considered to be a potential problem area. Station
3 stands out as the most dust exposed location.
For 6 months of the 10 month period the measured
value at station 3 was above 5g/m2/30 days. NTNU
have also estimated values for particulate matter
(PM10). For 5 of the 10 months, it is estimated that
PM10 values for station 3 has been above the daily
average limit of 50µg/m3. Fall out dust is considered
a nuisance, but particulate matter can be harmful
to people’s health. The prevention methods for
particulate matter are the same as for fall out dust.
The Company will take further actions to reduce
dust to the exposed areas.
In order to recycle the process water, SVG uses the
flocculants; polyacrylamide and polyDADMAC. An
investigation into the long-term toxicity on marine
organisms of polyDADMAC, as well as degradation
and leaching of flocculants in sediments, according
to requirements in the emission permit, was
finished in 2014 and the reports submitted to
Miljødirektoratet (the Norwegian Environmental
Agency). The studies were carried out by two
Norwegian research institutions: Norwegian Institute
for Water Research (NIVA) and SINTEF.
There was no observable indication that the addition
of polyDADMAC at normal usage concentration
and at 100 times higher concentrations affects
growth of turbot or reproduction of the copepod
Tisbe Battagliai. The highest concentration tested
did not give observable effects on test organisms.
The results of the leaching tests suggest a slight
leaching of polyacrylamide, and possibly also
of polyDADMAC in normal seawater pH is not
significant. However, the uncertainty of the study
also implies that one cannot completely rule out the
possibility that some minute leaching might take
place. In a situation where polyDADMAC has a very
low toxicity, both in the short and long term, the use
of the chemical will probably at worst represent a
minor environmental problem. If polyDADMAC is
dosed in the process before polyacrylamide this will
help to bind Magnafloc 10 to the tailings. SINTEF,
which investigated the degradation of polyDADMAC
concluded that polyDADMAC bound to the mineral
particles are not readily microbially degradable.
On 1 October 2014, a proposal for a new monitoring
program for all water bodies potentially influenced
by the Company’s activities was submitted to the
environmental authorities. All companies with
emission permits to water have received identical
requirements to meet new Water Regulations,
i.e. the implementation of the EU Water Framework
Directive, in Norway. The monitoring program is
planned to be completed by 31 December 2015
and the results submitted to the authorities by
1 March 2016. Based on these results, the Company
will later submit a proposal for the frequency of
future monitoring.
Together with other mines in Norway, the Company
has decided to take part in the NYKOS project,
New Knowledge on Sea Deposits, a collaboration
between several research institutions, The Research
Council of Norway and Norwegian Mines. The two
main objectives of the project are:
– To increase knowledge about environmental
effect of submarine tailings deposits in
Norwegian fjords.
– To enable the development of new
environmentally sound criteria and monitoring
technologies for sub-marine tailings deposits to
facilitate a future-oriented and more sustainable
minerals industry in Norway.
The Company took part in another 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. The main study was completed in late 2013,
however, to get more results, the work on artificial
reefs on old tailings deposits in Bøkfjorden has
been extended.
Control
In 2014 the Company worked on further
strengthening of internal control systems.
Internal audits are part of a program to keep the
Company’s Internal Control system up to date and
in line with laws and regulations. In December, the
Company conducted an overall audit to review
how the company meets the requirements of the
Norwegian Internal Control Act. The report from the
audit is not yet completed; however, the audit did not
find any major non-conformities. Work has already
started to continue improving our performance
and closing the non-conformities found in the
internal audit.
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Norwegian law requires that companies continuously
seek to substitute current chemical use with less
occupational hazardous and more environmentally
friendly alternatives. The Company has a permanent
program for substitution of chemicals and also
during 2014 several process chemicals were tested in
bench trails. There was also one full-scale plant trial;
however, the tested chemical was not a sufficient
alternative to justify a substitution.
Warm weather and lack of rain in 2013 drained the
Company’s fresh water reserves in the Kirkenes
lakes and precipitation in 2014 was insufficient to
refill the reserves to normal levels. Therefore, the
Company was required to apply 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 Førstevann and Andrevann
down 0.75 m below the normal limit, valid until
August 2015.
To secure adequate water supply to meet current
and future production, the Company has been
working in parallel on two solutions:
1. To reopen the license to take process water from
the Svartaksla Lake across the fjord to the east;
and
2. Investigate the possibility to get water from the
nearby Pasvik River.
An application to reopen the Svartaksla concession
has been submitted to the NVE. The second
solution, the Pasvik River, which also is the border
between Norway and Russia, could give the
Company unlimited volumes of water. There is an
old agreement between Norway and Russia that
gives the mine access to the water. This agreement
is still recognised by both countries, however the
process of accessing that water may prove to be
more difficult.
Due to the increase in production and changes
in ore blend an application for increased use of
the water treatment chemical PolyDADMAC was
submitted to Miljødirektoratet. The application
was based on results of the studies of long-term
toxicity of polyDADMAC and degradation and
leaching of flocculants in sediments conducted
by NIVA and SINTEF. The application was twofold;
first an application for a temporary permit to use
up to 15 tons of polyDADMAC in 2014. Secondly,
an application for a permanent amendment of
the permit to increase the limit to 22 tons of
polyDADMAC per year. The temporary permit
was granted in October and Miljødirektoratet is
still processing the application for permanent
amendment of the Company’s emission
permit. The deadline for the public hearing was
20 December 2014. A decision is expected during
the first half of 2015.
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Operating Review
Continued
Community Relations
2014 has been a very challenging year for
the Company, and this was also reflected in
community relations. It is however encouraging
to observe the strong support by all key local
stakeholders which emphasise the sound position
the Company has established in the region. The
strong operational performance has contributed
to our improved standing.
The Company also had an extensive dialogue
with the Ministry of Trade and Fisheries (NFD),
and have in general become more visible on the
national scene.
The global development has hit the region hard.
Bilateral trade with Russia has dropped dramatically
as a consequence of sanctions, and the strong drop
in prices for oil and iron ore have made the industrial
future more insecure.
The percentage of Company employees who live
in the Sør-Varanger municipality have continued to
increase throughout 2014. The Company’s stated
objective was to reach 80% by the end of 2014,
which was very nearly reached.
The efforts will continue as it is in the best interest
of both the municipality and the company to
minimise the number of commuters. The biggest
challenge is the very low unemployment rate in
the municipality, and strong growth in other types
of business such as oil and gas activities, hence
making it difficult to find both skilled and non-skilled
labour. This challenge is shared by all industries in
the region. To meet the challenge and to source
more of these skills locally, the Company continued
its policy to engage local apprentices in what is
a long term commitment to develop these skills
in the local workforce. The cooperation with the
key schools in the municipality was stepped up,
and a reward program for exceptional students
was institutionalised with strong support from the
local community.
Due to the financial challenges facing the Company
all year, the support to community cultural,
development and sporting events in 2014 was
reduced from previous years. The Company is
actively participating in local business working
groups such as Kirkenes Næringshage as well as
participating in events organised by Finnmark
Fylkeskommune to develop a mining and mineral
strategy for the region.
Mining
Our mining strategy for 2014 comprised a very
different path compared to 2013 and there was also
a requirement to change strategies between the
first half of the year and the last half. The strategies
adopted in 2014 enabled a significant reduction in
the stripping ratio while maintaining the ore feed
requirements along with preserving the long-term
integrity of the life of mine plan.
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Northern Iron Annual Report 2014
Throughout the entire year the focus was an increased
reliance on the satellite pits Fisketind, Bjørnfell and
Kjellmannsåsen to optimise recovery of the resource
and blend with the main pit Bjørnevatn. This strategy
allowed for increased flexibility of ore sources
while selectively mining smaller and deeper pits
and providing sufficient productive working areas.
A strategic decision was made to defer rehabilitation
of the Bjørnevatn West wall failure until later in the life
of mine, with work practices adjusted to accommodate
smaller working conditions to the North and South of
Bjørnevatn with the support of the satellite pits.
During the second half of the year the significant
Eastern ramp cut back in Bjørnevatn was also
strategically delayed until later in 2015 to reduce
stripping ratio and costs associated with this material
movement. This volume was redirected into the
Bjørnfell pit which has a much lower strip ratio
compared to the natural strip ratio of the mine and
allowed the business to plan this large stripping
requirement to align with the cost innovations being
identified and delivered. Figure 1 below highlights
the outcome of the planned strategy to bring lower
stripping ratio pits into the plan earlier than budget.
Ore production has increased 14% compared to 2013
to meet the stability and performance of the plant and
the increased production targets resulted in the yearly
record of more than 6Mt (Table 2). Ore supply from
Bjørnevatn was reduced as mentioned above (65%
of the ore feed for the year, coming from the North
western ore zone, the saddle area and the Southern
tunnel area) and partially substituted with material from
satellite pits which became more active in 2014. The
overall relative participation of pits in the ore supply to
the Primary Crusher has significantly changed since
previous years. Satellite pits increased their input in the
ore supply to de-stress Bjørnevatn since the West wall
failure occurred in September 2013 and the result of
the new Blend Strategy is represented in the Table 3:
Figure 1
Waste mined % per pit and overall S/Ratio
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
3.00
2.50
2.00
1.50
1.00
0.50
–
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Total – S/Radio
2.4 MILLION TONNES OF DRY CONCENTRATE SHIPPED IN 2014.2.4Mt09NORTHERN IRON ANNUAL REPORT 2014 Operating Review
Continued
Table 2
Figure 2 below shows production levels by quarter
since commencing mine operations:
Actual
2014
Actual
2013
Actual
2012
Actual
2011
Figure 2
Ore Mined (kt)
6,042
5,288
4,239
4,214
Ex-pit Production
Waste Mined (kt) 10,020
13,138
11,833
8,230
Total Mined (kt)
16,062 18,426
16,071
12,444
Table 3
Ore Blend
Bjørnevatn
Kjellmannsåsen
Fisketind
Bjørnefjell
Actual
2014 (%)
Actual
2013 (%)
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Northern Iron Annual Report 2014
Resource and Reserve Statement
Total project Mineral Resources as of 1 February 2015 are shown in Table 4 below:
Table 4
Mineral Resource Summary as at 1 February 2014 (at 15% Fe total cut-off grade)
Prospect
Bjørnevatn
Kjellmansåsen
Tverrdalen
Fisketind Øst (*)
Bjørnefjell
Oskarsmalmen/
Blixmalmen (*)(**)
Jerntoppen (*)
Søstervatn
Grundtjern
Total
Indicated
(Mt)
Fe
(Tot)%
Fe
(Mag)%
Inferred
(Mt)
Fe
(Tot)%
Fe
(Mag)%
32
32
32
28
31
31
30
136.7
10.2
20.4
26.1
16.3
52.2
21.5
–
–
29
27
23
19
23
27
22
136.7
4.2
26.4
23.3
9.3
15.7
–
4.7
2.9
283.4
31
26
223.2
30
30
31
29
32
31
37
34
30
27
24
20
20
25
26
31
32
26
Total
Tonnes
(Mt)
273.4
14.4
46.8
49.4
25.6
67.9
21.5
4.7
2.9
506.6
Fe
(Tot)%
Fe
(Mag)%
31
32
31
29
31
31
30
37
34
31
28
26
21
20
24
27
22
31
32
26
(*) The mineral resources for Fisketind Øst, Jerntoppen and Oskarsmalmen/Blixmalmen were updated during 2012 and 2014.
(**) The portion of this resource that belongs to Blixmalmen has not been reported previously.
The mineral resources are reported inclusive of the ore reserves. During the period from 1 February 2014 to 1 February
2015, the total mineral resources have been increased from 466.9 Mton with 31% FeTot to 506.6 Mton with 31% FeTot.
Ore reserve summary as at 1 February 2015 are shown in Table 5 below:
Table 5
Ore Reserve Summary as at 1 February 2015 (at 15% Fe total cut-off grade)
Prospect
Bjørnevatn
Tverrdalen
Fisketind Øst (***)
Kjellmannsåsen (****)
Total
Probable Reserve
(Mt)
Fe
(Tot)%
Fe
(Mag)%
128.1
11.2
5.5
9.0
153.8
30
31
30
31
30.4
28
22
22
26
27.1
(***) These reserves are based on a mineral resource estimate from 2008 and do not reflect the update reported in 2012.
(****) The 1 February 2014 reserves for Kjellmannsåsen were erroneously reported to be 6.9 Mton due to the use of an older version of the
pit shell.
During the period from 1 February 2014 to 1 February 2015, the total ore reserves have been depleted, from 155.1 Mt
with 32% FeTot down to 153.8 Mt with 30% FeTot. Total ore production during the year was 6.2 Mt with 33.3% FeTot.
The Company’s estimates of mineral resources and ore reserves are subject to internal controls and governance
arrangements which require that independent consultants with expert staff experienced in best practice modelling
and estimation techniques are involved in the preparation and review of material estimates, underlying assumptions
and methodologies.
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.
11
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Operating Review
Continued
Operational improvements were realised with
a very minor capital commitment, with gains
achieved through improved planning, practices
and productivity of operational personnel.
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Concentrate Production
The 2014 production result was a significant improvement over previous years representing an annualised
increase of over 15% for both milled and concentrate volumes, as shown in Table 6:
Table 6
Ore Milled (kt)
Concentrate Produced (Dry kt)
Tonnes Shipped (Dry kt)
Actual 2014
Actual 2013
Actual 2012
5,555
2,342
2,385
4,791
1,992
1,917
4,725
1,980
1,928
The results for 2014 were achieved through focus on integrated operations from mine pit through to logistics and
processing, underpinning plant circuit stability and allowing significantly improved maintenance practices to be
implemented. The implementation of regular, planned shutdowns resulted in increased run hours to be achieved
in crushing, milling and filtration unit operations, which further allowed a clearer focus and improvement in unit
operating rates.
Fine crushing rates were boosted through the introduction of mobile crushing by a third party contractor,
ensuring an adequate and consistent supply of mill feed stocks. An increase to the milling rate was achieved with
the resultant circuit stability and through a targeted optimisation program to revise operating parameters, along
with implementation of minor design changes. Filtration unit rates were not significantly boosted, but the overall
circuit and maintenance efficiency was significantly improved by simplifying to two standard filter types.
It is noteworthy that the operational improvements were realised with a very minor capital commitment, with
gains achieved through improved planning, practices and productivity of operational personnel. These efforts
were rewarded with several production records being set during 2014. Notably, two consecutive quarters above
600kt concentrate were achieved, with 626kt achieved in the quarter ending in June and 600kt achieved in the
quarter ending September. In addition, a monthly record of 222kt concentrate was achieved in May.
Table 7 below shows the sustained product quality that continued to be delivered during 2014 in conjunction
with steady and increased production volumes. During the last half of 2014, an increased focus was placed on
control of sulphur and silica quality resulting from the ore blend available relative to the constrained mining path.
Table 7
2014
2013
2012
2011
2010
Iron
(%)
68.01
68.15
68.01
66.90
62.92
Silica
(%)
4.84
4.77
4.78
5.75
10.74
Alumina
(%)
Phosphorus
(%)
Sulphur
(%)
Manganese
(%)
0.21
0.20
0.21
0.22
0.45
0.01
0.01
0.01
0.01
0.01
0.03
0.03
0.01
0.01
0.02
0.05
0.06
0.06
0.05
0.05
12
Northern Iron Annual Report 2014
Sales and Marketing
The Company shipped a total amount of 2,385,000
tonnes of dry concentrate during the year with
2,193,000 tonnes shipped to Europe and 192,000
tonnes shipped to Bahrain. The average sale price
achieved for the year was US$84 per dry metric
tonne FOB Kirkenes.
Given the downward trend of the iron ore price
this year, the Company announced during quarter
three that it had reached an agreement with its
largest customer to amend its offtake contract.
Under the terms of the agreement the Company
will supply additional volumes with the pricing
applied to tonnage sold during the period from
July 2014 to March 2015 being similar to spot pricing
arrangements. The deferral of the previous contract
pricing arrangement will be repayable should the
market pricing environment improve materially,
or else at the end of the contract term (31 March
2018). At year-end, the deferred liability owing to
the customer as a result of the contract amendment
is approximately US$5.8 million.
Expansion Study
Since 2010, SVG has been working on an expansion
project which scope was to add an additional
production line to the existing one. One of the
assumptions behind this project was that the existing
facilities would enable a production of 2.8 million
tons per annum (“Mtpa”) of iron ore concentrate.
The expansion project was hence defined to double
existing capacity to 5.6 Mtpa.
In parallel to the significant operational
improvements over the last 18 months, it has become
clear that the original expansion project would
not be feasible for a number of reasons. Firstly
the redefined capacity of the existing facilities is
now estimated at 2.5 Mtpa, and the increase up to
2.8 Mtpa would require further investment. Secondly,
given the current market situation and outlook for
iron ore concentrate, it would be unrealistic to raise
US$300 million to undertake a major expansion.
During the first months of 2014, management
worked to change the scope and develop a more
sustainable model for the necessary increase in
production capacity over the coming years. This
new approach, called Roadmap, was approved
by the Company’s board and is subject to further
refinement. This concept calls for a step approach
to expansion and is based on identifying the
key bottlenecks at any stage. One of the major
advantages is a totally different financial profile and
hence also risk profile as any cash generated from
the previous step change could be utilised to finance
the next.
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The Environmental and Social Impact Assessment
study (ESIA) has not been affected by the changed
scope and this process aimed to secure the
necessary permits remains the most critical path
for any expansion. The Company requires two key
authority approvals to proceed with an 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 ESIA must be completed.
During 2014 the Company continued this work
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. The scope of work
is quite comprehensive, and particularly some of the
marine activities require an all season approach to
monitor and collect sufficient data. Some of these
activities on the critical time line, were initiated in
2013 and continued throughout 2014, and will be
completed in the first quarter of 2015.
Due to the difficult financial situation, the majority
of other activities have been postponed, and it is
unclear as to when the Company will be able to
restart this work. As a consequence of this delay,
the overall time schedule has been postponed. The
Company is targeting completion of the ESIA field
work in 2015 with the applications to the local and
national regulators to be submitted in the fourth
quarter. If this timeline is kept, the approvals should
be issued in the first part of 2016. There is however,
significant uncertainty related to the approval
process, but the Company considers it realistic
to assume that following the approval, it would
be possible to commence construction activities
promptly thereafter. This is however, under the
proviso that improved market conditions will enable
restarting the ceased work.
Financial Review
The consolidated loss from continuing operations
for the year net of tax of US$180,695,000 (2013:
US$1,654,000 loss) reflects:
– US$182,042,000 of sales revenue
– US$280,900,000 of operational and
administration expenses, including
US$23,337,000 of depreciation and amortisation
expenses and US$71,300,000 of impairment
write-downs
– US$4,041,000 interest expense and
US$10,094,000 of finance charges relating
to changes in provisions
– US$33,435,000 hedging loss
– US$31,445,000 income tax expense arising on
the derecognition of a net deferred tax asset.
13
Significant accomplishments
in 2014, compared to the
prior year include:
Record achievements in monthly
and quarterly operational results
14%
increase in
ore mined
18%
increase in
concentrate
production
24%
increase in
concentrate
sales
20%
decrease in
unit cash
operating
costs (C1)
Looking ahead, the Company will continue to actively institute measures toward further
cost reductions, improvements in efficiency as well as furthering the discussions with
stakeholders with the aim of strengthening the Company’s financial position and
delivering a long term sustainable solution.
14 Northern Iron Annual Report 2014
Directors’ Report 16Auditor’s Independence Declaration 29Consolidated Statement of Comprehensive Income 30Consolidated Statement of Financial Position 31Consolidated Statement of Changes in Equity 32Consolidated Statement of Cash Flows 33Notes to the Financial Statements 34Directors’ Declaration 75Independent Auditor’s Report 76Corporate Governance Statement 78Additional Shareholder Information 90Corporate Directory 97ContentsFinancial Report15 Directors’ Report
For the year ended 31 December 2014
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 2014. In order to comply with the
provisions of the Corporations Act 2001, the directors
report as follows.
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.
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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 40 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)
From June 2010 to
November 2013
Since March 2009
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 18 years’
experience within the mining industry across a range
of operations including iron ore, minerals sands, base
metals and gold.
16 Northern Iron Annual Report 2014
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 in
the minerals industry for 29 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
Since October 2008
Champion Minerals Inc.
From October 2010
to April 2013
Fancamp Exploration Limited Since September 2013
Felix H Tschudi
Non-Executive Director
BSc (Econ), MBA
Appointed a director on 13 December 2007
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.
Peter S Larsen
Alternate Director for Felix Tschudi
MSc (Econ)
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 board
of Maritime 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 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 Campbell Church OAM FAICD
Non-Executive Director
B.Com (UNSW), LLB (University of Sydney), LLM
(University of London)
Appointed a director on 1 April 2014
Mr Church is an Australian commercial lawyer who
resides in Singapore. Mr Church has had a career
spanning more than 30 years encompassing significant
experience throughout South East Asia and India,
including providing legal and corporate services on
numerous regional projects including many in the
resources sector. Mr Church was a senior partner with
the leading Australian and regional law firm now known
as Herbert Smith Freehills, and was its Asian Regional
Managing Partner at the time he retired from the firm.
In 1994 Mr Church was awarded the Medal of the Order
of Australia (OAM) by the Australian Government for
his promotion of business between Australia and South
East Asia.
In addition to his directorship of our Company,
Mr Church’s roles include non-executive director
of OM Holdings Limited, Chairman of AFG Venture
Group, Special Counsel to the English law firm of
Stephenson Harwood, a non-executive director of
the Singapore International Chamber of Commerce
and a non-executive director of Elara Capital PLC.
Mr Church is a Fellow of the Australian Institute of
Company Directors. During the past three years
Mr Church has been a director of the listed entity,
OM Holdings Limited.
Appointed alternate 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
24 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.
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 16 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:
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Name
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
PC Church
PS Larsen
Ordinary
shares
215,288
–
15,702,792
67,133,728
–
32,000
Options
over
ordinary
shares
–
–
–
–
–
–
17
Directors’ Report
For the year ended 31 December 2014
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.
Other than this, no matter or circumstance has
arisen since 31 December 2014 that in the opinion
of the directors has significantly affected, or may
significantly affect in future financial years:
(i) the Group’s operations;
(ii) the results of those operations; or
(iii) the Group’s state of affairs.
Likely Developments
The likely developments for the 2015 financial year
are contained in the operating and financial review as
set out on pages 5 to 14.
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
2014 is contained in the operating and financial
review as set out on pages 6 and 7 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.
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 19 to 26
and forms part of this Directors’ Report.
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Principal Activities
The principal activities of the Group are included
in the operating and financial review as set out on
pages 5 to 14.
Operating and Financial Review
An operating and financial review of the Group for
the financial year ended 31 December 2014 is set out
on pages 5 to 14 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
In January 2015, a new working capital facility in
the amount of US$10.0 million from DNB was made
available to the Company, subsequently increased
to US$11.2 million during March 2015, of which the
majority of the funding was reserved to cover foreign
exchange hedging losses realised in the March 2015
quarter due to the weakness in the US$:NOK rate.
This facility is available for the period 1 January 2015
to 31 March 2015.
In January 2015, the Company reached agreements
with DNB, Innovasjon Norge and Tschudi Bulk
Terminals for the deferral of interest payments
associated with its debt facilities and lease payments
for the period from 1 January 2015 to 31 March 2015.
Subsequent agreements were reached in March 2015
where the deferral of payments has been extended
up until 30 June 2015. Financial covenants associated
with loan agreements were waived for the same
period.
In March 2015, the Company reached an agreement
with its main offtake partner according to which
sales will be similar to spot pricing arrangements
and improved payment terms will be applied for the
period 1 April 2015 until 30 June 2015.
In March 2015, the Company reached an agreement
with DNB on restructuring its debt facilities until
30 June 2015 which included an adjustment to the
borrowing base mechanism of the working capital
facility, to enable the Company to effectively manage
its liquidity position.
In March 2015, DNB closed out the exposure on
foreign exchange hedge contracts remaining in the
2015 year and provided funding to the Company of
this position with the result that the close out of these
hedging contracts will have no liquidity effect for the
Company for the next 12 months.
18 Northern Iron Annual Report 2014
Remuneration Report (Audited)
(all amounts in US$ unless otherwise stated)
Directors’ and Executive Officers’ Remuneration
The remuneration report as set out on pages 19 to 26
outlines the remuneration arrangements in place
for the key management personnel of Northern Iron
for the financial year ended 31 December 2014. 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 $2,897,758 (2013: $3,547,287). Significant
items driving the observed decrease in reported
remuneration included a reduction in the number of
key management personnel and the phasing out of
retention payments which were previously introduced
in 2011/12 at the time of the Company announced a
Strategic Review process. Retention payments in the
amount of $79,342 were incurred in the current year
(2013: $623,030).
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.
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
A$0.03 A$0.22 A$0.54
31/12/14 31/12/13 31/12/12
Consolidated net (loss)/
profit after tax from
continuing operations
(US$000)
(109,396)
(1,654)
(11,337)
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.
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19
Directors’ Report
For the year ended 31 December 2014
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.
ii.
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A non-executive director’s fee is currently
A$42,500 per annum, having been reduced from
$50,000 per annum towards the end of 2014. The
Chairman’s fee is currently A$106,250, having
been reduced from A$125,000 towards the end of
2014. 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.
In November 2014 the Board agreed to a 15%
reduction in the Directors’ fees for a 6 month period
commencing November 2014.
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.
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 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 1,000,000, vesting over a 3 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. In
October 2014, Mr Beckmand volunteered a 10%
reduction in salary for an initial period of 6 months.
20 Northern Iron Annual Report 2014
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 previous 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 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. In October 2014, Ms Bækø volunteered a 5%
reduction in salary for an initial period of 6 months.
iii. Aaron Maurer, General Manager of Operations
of Sydvaranger Gruve AS. Commenced in this
role 1 February 2014 with no set term. Mr Maurer
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 six months’ notice. The
Company may terminate the contract at any time
without notice if serious misconduct has occurred.
Mr Maurer resigned during January 2015.
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 previous reporting
period as Mr Brown was still employed with SVG/
NFE on 5 July 2013, which will continue annually
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. In October 2014,
Mr Haaparanta volunteered a 10% reduction in
salary for an initial period of 6 months.
vii. Eric Evanson, General Manager of Business
Improvement and Commercial. Commenced in this
role 20 August 2014 with no set term. Mr Evanson
will be paid a base salary of NOK 1,300,000 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.
In October 2014, Mr Evanson volunteered a 5%
reduction in salary for an initial period of 6 months.
viii. Rod Lovelady, General Manager of Commercial
and Technical Services. Commenced in this role
1 January 2014 with no set term. Mr Lovelady
will be paid a base salary of NOK 1,560,000 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.
Mr Lovelady resigned 29 June 2014.
ix. Adrian Mills, General Manager of Finance and
IT. Commenced in this role 1 January 2014 with
no set term. Mr Mills will be paid a base salary
of NOK 1,300,000 pa plus superannuation.
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. In
October 2014, Mr Mills volunteered a 5% reduction
in salary for an initial period of 6 months.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
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
31 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 previous 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. Mr Martinsen resigned
31 October 2014.
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 2,400,000 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
12.5% of base salary was paid during the reporting
period as Mr Haaparanta was still employed with
SVG/NFE on 1 May 2014. A long-term incentive
scheme is provided, being equity participation in
the Company’s Performance Rights Plan, subject
21
Directors’ Report
For the year ended 31 December 2014
Directors’ and Executive Officers’ Remuneration
2014
Name
Short Term
Post-
employment
Share Based Payments
Salary
and
fees
($)
Other
($)
Cash
bonus(i)
($)
Super-
annuation
contributions
($)
Options
($)
Performance
Rights
($)
% of
remuneration
performance
related
Total
($)
Value of
options and
rights as
a proportion
of remune-
ration (%)
Directors
Non-Executive
Mr PR Bilbe (Chairman)
Mr A Mehra
Mr FH Tschudi
Mr PC Church
100,411
43,929
43,929
(appointed 1 April 2014)
32,665
15,472
–
–
–
–
–
–
–
–
–
–
9,410
–
–
–
–
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Mr PS Larsen
(Alternate Director)
Executive
Mr A Beckmand
(MD & CEO – Northern
Iron Limited)
Executive Officers
Ms S Bækø
(GM of Production
Services – Sydvaranger
Gruve AS)
Mr A Maurer
(GM of Operations –
Sydvaranger Gruve AS)
(appointed 1 February
2014; resigned
15 June 2015)
Mr R Brown
(former GM of Operations
– Sydvaranger Gruve AS)
(resigned 31 March 2014)
Mr H Martinsen
(CDO – Sydvaranger Gruve
AS)
(resigned 31 October
2014)
Mr I Haaparanta
(CEO – Sydvaranger Gruve
AS)
Mr E Evanson
(GM Business
Improvement and
Commercial – Sydvaranger
Gruve AS) (appointed
20 August 2014)
Mr R Lovelady
(former GM Business
Improvement and
Commercial –
Sydvaranger Gruve AS)
(appointed 1 January 2014;
resigned 29 June 2014)
365,542
17,752 46,745
34,259
238,202
10,759
13,885
10,655
275,791
50,213
19,042
7,975
53,759
9,294
–
1,914
303,758
32,024
3,570
7,005
444,193
61,916
39,671
8,429
78,877
16,233
137,858
10,102
–
–
3,368
–
Mr A Mills
(GM Finance and IT –
Sydvaranger Gruve AS)
(appointed 1 January
2014)
209,088
41,256
9,521
2,343,474 249,549 132,434
19,350
102,365
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
109,821
43,929
43,929
32,665
15,472
–
–
–
–
–
–
–
–
–
–
69,936
534,234
9%
13%
–
273,501
–
–
353,021
5%
–
64,967
–
–
346,357
–
554,209
–
98,478
–
147,960
1%
7%
–
–
–
279,215
3%
69,936 2,897,758
–
–
–
–
–
–
–
–
(i)
In accordance with the Short Term Incentive Scheme, cash bonus payments totalling US$132,435 were made early in 2014, relating to the
2013 year, 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. No payments have occurred related to performance in the 2014 year. In addition, retention bonus payments
totalling US$79,342 were made to one employee under the terms of their service contract.
22 Northern Iron Annual Report 2014
Value of
options and
rights as
a proportion
of remune-
ration (%)
Directors’ and Executive Officers’ Remuneration (continued)
2013
Short Term
Post-
employment
Share Based Payments
Name
Directors
Non-Executive
Mr PR Bilbe
(Chairman)
Mr A Mehra
Mr FH Tschudi
Mr DC Griffiths
(Former Chairman)
(resigned 10 June 2013)
Mr PS Larsen
(Alternate Director)
Executive
Mr A Beckmand
(MD & CEO – Northern
Iron Limited)
(appointed 8 July 2013)(i)
Mr JS Sanderson (Former
Managing Director)
(resigned 8 July 2013)
Executive Officers
Ms S Bækø
(GM of Production
Services – Sydvaranger
Gruve AS)
Mr R Brown
(GM of Operations –
Sydvaranger Gruve AS)
Mr H Martinsen
(CDO – Sydvaranger Gruve
AS)
Mr I Haaparanta
(CEO – Sydvaranger Gruve
AS)
Salary
and
fees
($)
Other
($)
Cash
bonus(ii)
($)
Super-
annuation
contributions
($)
Options
($)
Performance
Rights
($)
% of
remuneration
performance
related
Total
($)
81,196
48,290
48,290
48,930
17,016
–
–
–
–
–
–
–
–
–
–
7,446
–
–
4,404
–
454,653
16,708
32,179
41,734
352,152
– 275,604
56,900
363,767
9,803 24,633
10,595
417,243
98,283 23,790
8,205
464,939
41,143
35,191
9,014
430,812
76,707
39,101
8,559
2,727,288 242,644 430,498
146,857
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88,642
48,290
48,290
53,334
17,016
545,274
684,656
408,798
547,522
550,286
555,178
– 3,547,286
–
–
–
–
–
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$623,030 were made to six employees under the terms of their service contracts.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
–
–
–
–
–
–
–
–
–
–
–
23
Directors’ Report
For the year ended 31 December 2014
Equity Instruments and Share-Based Payments
Granted as Compensation for the Current
Financial Year
(i) Shares
There were no shares in the Company granted as
compensation to directors and executive officers
during the reporting period.
(iii) Options over equity instruments granted as
compensation
There were no options granted during the 2014 or
2013 year.
Options are recognised as an expense over their
vesting period. No monies will be payable for the
issue of the options.
No options have been granted since the end of the
financial year, nor have any options been exercised
during or since the end of the reporting period.
During the reporting period there was no forfeiture of
options granted in previous periods.
In the event that the option holder ceases to be an
employee, director or consultant of the Company, the
Board may at its sole discretion resolve that all vested
options held by that employee, director or consultant
be exercised within 21 days of that employee, director
or consultant ceasing to be an employee, director
or consultant (as applicable) of the Company. Any
unvested options held by that employee, director or
consultant will lapse.
(iv) Analysis of movements in options
There were no options granted during the 2014 or
2013 financial years.
The value of options granted in the year is the fair
value of the options at grant date using the Black-
Scholes Option Pricing Model. The total value of
options granted is included in the table above,
however this amount is allocated to expense over the
vesting period.
(v) Analysis of options granted as compensation
There were no options granted as remuneration to
directors and executive officers during the 2014 or
2013 years.
Loans to Key Management Personnel
At 31 December 2014 an amount of US$nil
(2013: US$nil) is included in Group trade and other
payables for outstanding director and executive
officers’ personnel fees and expenses.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
(ii) Share based payments
Options
During the 2014 or 2013 year no share-based
payment arrangements were in existence.
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 22.
Performance rights
During the 2014 year 1,000,000 performance rights
were issued (2013: Nil).
No performance rights have been granted since the
end of the financial year, nor have any performance
rights been exercised during or since the end of the
reporting period.
During the reporting period 250,000 (2013: 250,000)
performance rights expired/lapsed.
In the event that the performance right holder
ceases to be an employee, director or consultant of
the Company, the Board may at its sole discretion
resolve that all vested performance rights 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 performance rights held by that employee,
director or consultant will lapse.
Further details of share-based payments are set out
in Notes 3(r) and 22.
24 Northern Iron Annual Report 2014
Key Management Personnel Equity Holdings
(i) 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:
2014
Directors
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
PS Larsen
PC Church
2013
Directors
PR Bilbe
A Beckmand
A Mehra
FH Tschudi
PS Larsen
DC Griffiths
JS Sanderson
Held at
01/01/14
Net
acquired/
(sold)
Held at
31/12/14
215,288
–
15,702,792
67,133,728
32,000
–
–
–
–
–
–
–
215,288
–
15,702,792
67,133,728
32,000
–
Held at
01/01/13
Net
acquired/
(sold)
Held at
31/12/13
215,288
–
15,702,792
67,133,728
32,000
612,090
360,000
–
–
–
–
–
–
–
215,288
–
15,702,792
67,133,728
32,000
612,090*
360,000*
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
* Balance when ceased being a director
(ii) Share options
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:
2014
There were no options held during the 2014 year.
2013
Directors
JS Sanderson
Held at
01/01/13
Granted as
compen-
sation
Expired
Vested in
year
Held at
31/12/13
Vested and
exercisable
at 31/12/13
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 2014 and 2013 years. Further details of the employee share option plan
are contained in Note 22 and the Remuneration Report.
There were no options exercised during the 2014 and 2013 years.
25
Directors’ Report
For the year ended 31 December 2014
(iii) 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:
2014
Directors
A Beckmand
Executive officers
S Bækø
R Brown
H Martinsen
I Haaparanta
(i) Balance when ceased being an employee
2013
Directors
A Beckmand
Executive officers
S Bækø
R Brown
H Martinsen
I Haaparanta
Held at
01/01/14
Granted as
compen-
sation
Expired/
Lapsed
Vested in
year
Held at
31/12/14
Vested and
exercisable
at 31/12/14
–
1,000,000
–
–
1,000,000
100,000
50,000
100,000
100,000
–
–
–
–
(50,000)
(50,000)
(100,000)
(50,000)
–
–
–
–
50,000
–
–(i)
50,000
–
–
–
–
–
Held at
01/01/13
Granted as
compen-
sation
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
–
–
–
–
–
Other Key Management Personnel Transactions
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.
End of Remuneration Report
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
26 Northern Iron Annual Report 2014
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
(a)
Audit Committee
Remuneration, Nomination
and Governance Committee(i)
(b)
(a)
(b)
(a)
(b)
14
14
14
14
1
9
14
14
14
13
1
8
–
4
4
4
1
–
–
4
4
3
1
–
–
1
1
1
–
–
–
1
1
1
–
–
A Beckmand
PR Bilbe
A Mehra
FH Tschudi
PS Larsen(i)
PC Church
(a) Number of meetings held during period of office
(b) Number of meetings attended
(i) As alternate for Mr Tschudi.
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.
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.
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.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
27
Directors’ Report
For the year ended 31 December 2014
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 29 and forms part of the Directors’ Report for the financial year ended 31 December 2014.
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
Kirkenes, 31 March 2015
Perth, 31 March 2015
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
28 Northern Iron Annual Report 2014
Auditor’s Independence Declaration
For the year ended 31 December 2014
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 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:
a)
b)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
31 March 2015
N G Neill
Partner, HLB Mann Judd
4
1
0
2
T
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O
P
E
R
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A
U
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N
A
N
O
R
I
N
R
E
H
T
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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.
27
29
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Continuing operations
Revenue
Other operating income
Mining and processing expenses
Depreciation and amortisation
Impairment losses
Administration expenses
Foreign exchange (loss)/gain
Hedging loss
Share-based payments expense
Results from operating activities
Finance income
Finance expense
Net finance expense
Loss before income tax
Income tax (expense)/benefit
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 for the year net of income tax
Total comprehensive loss for the year net of tax
Basic loss per share from continuing operations
(cents per share)
4
1
0
2
T
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L
A
U
N
N
A
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O
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Notes
2014
US$000
2013
US$000
4
4
4
4
4
4
4
7
182,042
204,554
689
478
(180,908)
(175,302)
(23,337)
(22,288)
(71,300)
(5,430)
(3,493)
–
(7,372)
3,162
(33,435)
(6,702)
(70)
–
(135,242)
(3,470)
127
(14,135)
(14,008)
174
(4,705)
(4,531)
(149,250)
(8,001)
(31,445)
6,347
(180,695)
(1,654)
(14,352)
(37,243)
14,191
36,231
–
(161)
–
(1,012)
(180,856)
(2,666)
6
(37.30)
(0.34)
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes to the financial statements.
30 Northern Iron Annual Report 2014
Consolidated Statement of Financial Position
As at 31 December 2014
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
2014
US$000
2013
US$000
20(b)
9
10
11
9
12
13
8
15
16
17
7
18
17
18
6,618
20,655
–
19,768
249
19,446
33,842
534
28,177
332
47,290
82,331
1,505
39,537
1,181
60,071
157,411
230,066
3
31,309
198,456
322,627
245,746
404,958
24,928
40,612
5,739
129
37,949
109,357
12,096
28,391
40,487
31,437
7,063
365
340
50,248
89,453
1,847
36,970
38,817
149,844
128,270
95,902
276,688
19
380,761
380,761
16,722
16,813
(301,581)
(120,886)
95,902
276,688
4
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The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes to the financial statements.
31
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
Foreign
currency
translation
reserve
US$000
Share
based
payments
reserve
US$000
Issued
capital
US$000
Accumulated
losses
US$000
Total
US$000
Balance at 1 January 2013
380,761
13,778
4,047
(119,232)
279,354
Profit from continuing operations
Other comprehensive income
Total comprehensive income
–
–
–
–
(1,012)
(1,012)
–
–
–
(1,654)
–
(1,654)
(1,012)
(1,654)
(2,666)
Balance at 31 December 2013
380,761
12,766
4,047
(120,886)
276,688
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Share based payments
–
–
–
–
–
(161)
(161)
–
–
–
–
70
(180,695)
(180,695)
–
(161)
(180,695)
(180,856)
–
70
Balance at 31 December 2014
380,761
12,605
4,117
(301,581)
95,902
4
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0
2
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A
U
N
N
A
N
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I
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N
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements.
32 Northern Iron Annual Report 2014
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Finance income
Finance expense
Notes
2014
US$000
2013
US$000
192,508
207,688
(176,463)
(183,969)
(320)
127
–
174
(3,856)
(5,336)
Net cash flows provided by operating activities
20(a)
11,996
18,557
Cash flows from investing activities
Payments for mine property
Payments for exploration and evaluation
Payments for deferred waste
Payments for property, plant and equipment
Net security deposits lodged
Net cash flows used in investing activities
Cash flows from financing activities
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
(2,637)
(2,703)
–
–
(2,847)
(632)
(35)
(7,987)
(6,369)
(712)
(6,116)
(17,806)
–
3,772
(16,658)
(18,504)
(16,658)
(14,732)
(10,778)
(13,981)
19,446
32,379
(2,050)
1,048
4
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Cash and cash equivalents at the end of the year
20(b)
6,618
19,446
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the financial statements.
33
Notes to the Financial Statements
For the year ended 31 December 2014
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Note 1. Reporting Entity
The consolidated financial report of the Company for
the financial year ended 31 December 2014 comprises
the Company and its subsidiaries (the “Group”).
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 5 to 14.
Statement of compliance
The financial report was authorised for issue on
31 March 2015.
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.
The current economic environment is difficult and
the Company has recorded a net loss after tax of
US$180,695,000 for the year. As at 31 December 2014,
the Group had cash reserves of US$6,618,000 and a
net working capital deficit of US$62,067,000. Net loss
after tax has been calculated after deducting non-cash
items totalling US$128,072,000 (see also Note 20)
including impairment losses of US$71,300,000 and
unrealised hedging losses of US$33,435,000 as well
as depreciation of property, plant and equipment and
other non-current assets of US$23,337,000.
Whilst the Directors have instituted measures to
preserve cash, reduce costs and secure additional
finance, material uncertainties over future results and
cash flows exist. At the time of issuing the financial
statements, the Group has yet to negotiate a long-
term extension of the maturity of its debts and
further negotiation with the Group’s major offtake
partner are also considered necessary. A temporary
extension until the end of June 2015 has been agreed
with all financiers.
Significant efforts have been made to engage with
stakeholders to provide additional working capital for
the business. In the third quarter of 2014, the Group
agreed with its main offtake customer a variation to
the existing long-term agreement resulting in higher
prices being realised. Negotiations with financiers and
the Group’s main offtake partner continued towards
the end of the calendar year, with the aim of further
bolstering the Group’s financial position.
Subsequent to year-end the Group received further
support from its financiers with a new working
capital facility being established in the amount of
US$10 million, largely to cover anticipated losses
under foreign exchange hedge contracts, as well as
granting a repayment and interest holiday initially to
the end of March 2015. During March 2015 the Group
agreed with its financiers to extend the repayment
and interest holiday until 30 June 2015. In addition,
the financiers of the Group, granted additional
working capital funding and an undertaking to fund
anticipated future losses under foreign exchange
hedge contracts for the year 2015.
On 25 March 2015 the Group signed an addendum
with its major offtake partner, according to which the
pricing support agreed in the third quarter of 2014
has been extended until 30 June 2015. In addition
to this extension of the pricing support, improved
payment terms have been agreed until 30 June 2015.
In addition, specific actions taken by the Group to
improve liquidity include:
– Termination of certain major contracts and
insourcing of work, which is expected to offer
significant savings for the Group materialising over
the coming months.
– Identification of low cost improvements to increase
output.
– Optimising the mine plan to reduce short to
medium term stripping requirements.
– Working closely with key suppliers to deliver
further cost savings.
– Voluntary payroll reduction across all levels of the
Group.
34 Northern Iron Annual Report 2014
The Group is implementing continuous restructuring
and working actively on both structural and
operational measures. This work is in co-operation
with the Group’s financiers and major offtake partner.
Discussions between the Group and stakeholders
are underway with the aim of finding a long term
sustainable solution ensuring the continued operation
of the Group. Based on negotiations conducted and
agreements reached to date, the Directors have a
reasonable expectation that a successful solution
can be achieved. This work will continue, and is in
line with the stated aim and continued support from
stakeholders, as demonstrated by the additional
funding and liquidity support received in the first
quarter of 2015.
In summary, the Group is actively working to
streamline operations, cut costs further where
possible, achieving prolongation on the maturity of its
debt, while working actively with potential strategic
investors.
The main liquidity risk facing the Group is that
it may be unable to find a lasting solution to the
Group’s debt maturing 30 June 2015 or to conclude
a long term solution with potential investors and its
major offtake partner. Other factors, including the
potential for further weakness in the iron-ore price
environment and/or operational factors affecting
the Group’s ability to maintain and build upon recent
improvements in production and performance also
have the potential to impact negatively on the ability
of the Group to continue as a going concern.
Notwithstanding this, the financial statements have
been prepared on a going concern basis, which
contemplates the continuity of normal business
activities and the realisation of assets and liabilities in
the ordinary course of business.
After considering the circumstances described
above, and given the continuing efforts to secure
new funding and a strategic long-term solution, the
Directors continue to adopt the going concern basis
of accounting. However, should such solution not be
found, the Directors will need to reassess the Group’s
ability to continue as a going concern.
The Directors consider the Group is a going concern,
recognising that the Group will require additional
funding, and the successful completion of the
initiatives stated above to enable the Group to
continue to fund its operations during the twelve
month period from the date of signing this Financial
Report. If the Group is unable to successfully secure
additional funding and complete these initiatives
there is a material uncertainty that may cast doubt
on the Group’s ability to continue as a going
concern, and therefore it may be unable to realise
its assets and discharge its liabilities in the normal
course of business and at the amounts stated in 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.
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35
Notes to the Financial Statements
For the year ended 31 December 2014
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 2014, the Group’s
carrying amount of capitalised mine properties was
US$39,537,000 (2013: US$60,071,000).
(v) Functional currency
Companies in the Group have to determine their
functional currencies based on the primary economic
environment in which each entity operates. In order
to do that, the management has to analyse several
factors, including which currency mainly influences
sales prices of product sold by the entity, which
currency influences the main expenses of providing
services, in which currency the entity has received
financing, and in which currency it keeps its receipts
from operating activities.
For Sydvaranger Gruve AS, the above indicators are
mixed and the functional currency is not obvious.
Management used its judgment to determine which
factors are most important and concluded the US$ 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.
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Note 2. Basis Of Preparation Of The Financial
Report (continued)
The Company has prepared a budget for the life
of the mine which indicates that the impairment
loss recorded in the financial statements as at
31 December 2014 is sufficient based on the internal
assumptions, estimates and judgements. This budget
assumes that production targets will be met and
iron ore prices will be in line with market prices of
quarter 4 2014 and that the concentrate tonnage
produced will be sold. The Company cannot foresee
developments in prices 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 further 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 2014 was US$nil (2013: US$31,309,000).
The estimated value of Group unrecognised deferred
tax assets at 31 December 2014 was US$86,672,000
(2013: US$14,763,000). For reasons of prudency, the
deferred tax asset has been derecognised as a direct
consequence of the falling iron ore prices and the
comprehensive requirements in IAS 12 for recognition
of tax assets.
(iii) Provisions
The Group has recognised provisions for an onerous
sales contract, environmental restoration, post-
closure tailings monitoring, and mining fleet and
automobile insurance. These provisions are measured
based on the management’s estimates of:
– 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
36 Northern Iron Annual Report 2014
(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.
(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$27,900,000 together with an equivalent finance
lease liability. Payments of principal and interest
amounting to US$3,115,000 were made toward the
lease obligation during 2014. The lease payment ends
in December 2018. 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 2014 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$19,000 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
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.
37
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Notes to the Financial Statements
For the year ended 31 December 2014
(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.
(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.
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Note 3. Significant Accounting Policies
(continued)
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.
38 Northern Iron Annual Report 2014
(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
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.
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39
Notes to the Financial Statements
For the year ended 31 December 2014
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Note 3. Significant Accounting Policies
(continued)
(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.
40 Northern Iron Annual Report 2014
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.
– 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.
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41
Notes to the Financial Statements
For the year ended 31 December 2014
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Note 3. Significant Accounting Policies
(continued)
(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.
(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.
42 Northern Iron Annual Report 2014
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.
(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;
– 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 2014, 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 2014.
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
2014. 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.
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43
Notes to the Financial Statements
For the year ended 31 December 2014
Note 4. Revenue and Expenses
Revenue and expenses from continuing operations has been arrived at after
(charging)/crediting:
Revenue
Sale of ore
Other operating income
Mining and processing expenses
Net ore inventory movement
Operational expenses of mining and production activities
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Freight costs
Utilities, maintenance
Real estate expenses
Personnel expenses
Other expenses
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation expensed
Impairment losses
Impairment of property, plant and equipment
Impairment of mine properties
Administration expenses
Advisory services and other similar fees
Directors’ fees
Travel and accommodation
Other
Depreciation of non-current assets
Hedging loss(i)
Finance income
Interest – external parties
Finance and borrowing costs
Interest – external parties
Finance charges – changes in provisions
Total finance and borrowing costs
Operating expenses above includes
Notes
2014
US$000
2013
US$000
182,042
204,554
689
478
11
(10,245)
913
(81,368)
(83,875)
(5,893)
(5,149)
(35,305)
(39,249)
(4,060)
(4,014)
(42,435)
(43,609)
(1,602)
(319)
(180,908)
(175,302)
(19,589)
(20,946)
(3,748)
(1,342)
(23,337)
(22,288)
(56,972)
(14,328)
(71,300)
–
–
–
(1,949)
(3,099)
(244)
(462)
(289)
(471)
(2,768)
(3,505)
(7)
(5,430)
(33,435)
(8)
(7,372)
(6,702)
127
174
13
12
14
14
13
(4,041)
(4,600)
17
(10,094)
(105)
(14,135)
(4,705)
Operating lease rental – minimum lease payments
(4,356)
(4,103)
(i)
Hedging losses for the 2014 year of US$33,435,000 (2013: US$6,702,000) consists of realised gains of US$121,000 (2013: US$nil) and
unrealised losses of US$876,000 (2013: US$1,267,000) on electricity hedging contracts, a net gain of US$7,246,000 (2013: US$5,300,000) on
iron ore price hedging contracts, and realised losses of US$132,000 and unrealised losses of US$39,794,000 on foreign exchange contracts.
44 Northern Iron Annual Report 2014
Note 5. Auditors’ Remuneration
Audit services
Auditors of the Company (HLB Mann Judd)
– for an audit or review of the financial report
Other auditors (Ernst & Young AS)
– for an audit or review of subsidiary Sydvaranger Gruve AS in Norway
Other auditors (Ernst & Young Ltd)
– for an audit or review of subsidiary Northern Iron Marketing AG in Switzerland
Other services
Auditors of the Company
– other services
– taxation services
Other Auditors (Ernst & Young AS)
– taxation services
2014
US$
2013
US$
78,396
83,300
146,677
125,746
42,286
38,935
3,852
4,686
–
4,056
18,334
25,787
294,231
277,824
Note 6. Earnings Per Share
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)
Loss used in calculating basic and diluted earnings per share
2014
US$000
2013
US$000
(37.30)
(180,695)
(0.34)
(1,654)
Number of shares
Weighted average number of ordinary shares used in calculating the basic
earnings per share(i)
484,405,314 484,405,314
(i) Options on issue are not considered dilutive in the current and prior year as they are anti-dilutive.
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45
Notes to the Financial Statements
For the year ended 31 December 2014
Note 7. Income Tax Expense
Notes
2014
US$000
2013
US$000
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
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
Unrealised derivative loss, representation, gifts and union membership fees
Unrealised permanent difference due to taxable income from currency
gain/(loss) on interest bearing borrowings (unrealised)
Change in tax rate of subsidiaries operating in other jurisdictions
Derecognition of net deferred tax asset
Unrecognised deferred tax assets
Share-based payments expense
Different tax rates of subsidiaries operating in other jurisdictions
Under provision for income tax
Income tax (benefit)/expense
Unrecognised net deferred tax assets
Deferred tax assets have not been recognised in respect of the following
items:
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Statement of Financial Position
Deductible temporary differences
Tax losses
Accrued income
Statement of changes in equity
Share issue costs
46 Northern Iron Annual Report 2014
129
31,316
31,445
340
(6,687)
(6,347)
(149,250)
(8,001)
(44,775)
(2,400)
4,231
11,671
375
8
(9,716)
(5,497)
–
31,309
34,376
18
4,323
8
1,159
–
138
–
(130)
–
31,445
(6,347)
5,866
80,806
–
8,026
6,737
–
2
86,672
14,763
–
10
Note 8. Deferred Tax
Recognised net deferred tax assets
Deferred tax assets and liabilities have been recognised in respect of the
following items:
Notes
2014
US$000
2013
US$000
Deferred tax assets, comprising:
Deductible temporary differences
Tax losses
Deferred tax liabilities, comprising:
Property, plant and equipment
Finance lease
Net deferred tax asset recognised
2
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
Change in tax rate
Balance at end of the year
3
–
3
–
–
–
3
501
68,335
68,837
33,214
4,313
37,527
31,309
31,309
24,622
(493)
(17)
(68,335)
3,018
(5)
33,214
4,313
–
3
(3)
4,674
175
(1,160)
31,309
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
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. For reasons of prudency, the deferred tax asset has been derecognised as a direct consequence of the
falling iron ore prices and the comprehensive requirements in IAS 12 for recognition of tax assets.
The Group has recognised deferred tax assets amounting to US$3,000 as of 31 December 2014
(2013: US$31,309,000). 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.
47
Notes to the Financial Statements
For the year ended 31 December 2014
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
Security deposits(v)
2014
US$000
2013
US$000
14,886
1,092
218
–
4,459
28,455
4,500
262
247
378
20,655
33,842
1,505
1,505
1,181
1,181
(i)
The average credit period on sales of iron ore is 43 days, and is interest free. No allowance for unrecoverable trade receivables has been
made, determined by reference to past experience.
(ii) Guarantee for operational payments.
(iii) The receivable from EPC Norge AS in 2013 was received during 2014.
(iv) Accrued income relates to carbon dioxide compensation for increased electricity prices as a result of the European Union’s emissions trading
system. Also included is income from sales of ore concentrate.
(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
2014
US$000
2013
US$000
–
534
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
48 Northern Iron Annual Report 2014
Note 11. Inventory
Production supplies
Balance at the beginning of the year
Increase/(Decrease) in Production supplies
Balance at the end of the year
Work in progress
Balance at the beginning of the year
Increase/(Decrease) in Inventory volume
Increase/(Decrease) in Inventory valuation
Balance at the end of the year
Finished goods
Balance at the beginning of the year
Increase/(Decrease) in Inventory volume
Increase/(Decrease) in Inventory valuation
Balance at the end of the year
Total inventory
Balance at the beginning of the year
Increase/(Decrease) in Production supplies
Increase/(Decrease) in Inventory volume
Increase/(Decrease) in Inventory valuation
Balance at the end of the year
2014
US$000
2013
US$000
10,449
10,639
367
(190)
10,816
10,449
6,094
471
(2,289)
4,276
11,634
(4,104)
(2,854)
4,676
28,177
367
(3,632)
(5,144)
19,768
4,017
2,170
(93)
6,094
7,815
4,603
(784)
11,634
22,471
(190)
6,773
(877)
28,177
Inventories are stated at the lower of cost and net realisable value. At 31 December 2014 production supplies,
were stated at cost whilst work-in-progress and finished goods were stated at net realisable value. At
31 December 2013 production supplies, work-in-progress and finished goods were stated at cost. 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
2014 amounted to US$5,144,000 (2013: US$nil) and are included in Note 4 “Net ore inventory movement”.
DNB Bank and Innovasjon Norge share a fixed and floating charge over all inventories.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
49
Notes to the Financial Statements
For the year ended 31 December 2014
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
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.
(ii) Mine property
Non-Current
Mine property
Balance at beginning of the year
Additions
Write-offs(i)
Amortisation
Impairment(ii)
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
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
2014
US$000
2013
US$000
–
17
39,537
56,055
–
39,537
3,999
60,071
17
–
(17)
–
14
35
(32)
17
56,055
54,662
1,541
2,703
(1,906)
(1,825)
(14,328)
–
(1,310)
–
39,537
56,055
3,998
1,098
9,609
745
(5,096)
(6,355)
–
3,999
(i)
Mine property write-offs relates to a project for which the outcome of the work is uncertain, and to have economic benefit would likely
require significant further capital investment.
(ii) Refer to Note 14 for details of impairment.
50 Northern Iron Annual Report 2014
Note 13. Property, Plant and Equipment
Land &
Buildings
US$000
Plant &
Equipment
(Owned)
US$000
Plant &
Equipment
(Finance
Lease)
US$000
Railway &
rolling
stock
US$000
Mobile
Equipment
(Owned)
US$000
Mobile
Equipment
(Finance
Lease)
US$000
Furniture
fixtures
& office
equipment
US$000
Other
items
(Licenses)
US$000
PPE under
construction
US$000
Pre-
payments
US$000
Total
US$000
Gross carrying
amount - at
cost
As of
1 January 2013 29,397
155,441
33,090
4,688
586
52,394
926
1,551
32,613
198 310,884
Additions
180
2,221
–
(30)
–
–
397
185
–
–
–
–
71
(1)
9
–
6,618
–
9,681
(3,050)
(198)
(3,279)
29,577
157,632
33,090
5,085
771
52,394
996
1,560
36,181
–
317,286
29,577
157,632
33,090
5,085
Additions
1,023
28,388
–
–
–
–
771
63
–
52,394
996
1,560
36,181
–
–
3
–
1,398
1,426
–
(28,388)
–
–
–
317,286
32,301
(28,388)
–
–
30,600 186,020
33,090
5,085
834
52,394
999
2,958
9,219
–
321,199
As of
1 January 2013 (3,633)
(25,501)
(4,964)
(862)
(467)
(29,621)
(556)
(662)
(1,442)
(9,047)
(1,646)
(231)
(51)
(8,066)
(163)
(308)
(5,075) (34,548)
(6,610)
(1,093)
(518)
(37,687)
(719)
(970)
(5,075) (34,548)
(6,610)
(1,093)
(518)
(37,687)
(719)
(970)
(1,462)
(10,439)
(1,655)
(255)
(37)
(5,220)
(115)
(413)
(6,394)
(37,480)
(6,597)
(993)
(74)
(2,521)
(44)
(419)
(2,450)
–
–
–
–
–
–
–
(66,266)
(20,954)
–
(87,220)
–
–
–
(87,220)
(19,597)
(56,972)
(12,931) (82,467)
(14,862)
(2,341)
(629) (45,428)
(878)
(1,802)
(2,450)
– (163,788)
24,502
123,084
26,480
3,992
253
14,707
277
590
36,181
– 230,066
17,669
103,553
18,228
2,744
205
6,966
121
1,156
6,769
–
157,411
The decrease in the value of PPE under construction for the year ended 31 December 2014 reflects activities
developing the mining and processing facilities being completed and reclassified.
51
Disposals/
Transfers
As of
31 December
2013
As of
1 January
2014
Disposals/
Transfers
As of
31 December
2014
Accumulated
depreciation
Depreciation
expense
As of
31 December
2013
As of
1 January
2014
Depreciation
expense
Impairment
write–off
As of
31 December
2014
Net book
value
As of
31 December
2013
As of
31 December
2014
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Notes to the Financial Statements
For the year ended 31 December 2014
Note 13. Property, Plant and Equipment (continued)
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 US$1,067,000 (2013: US$3,312,000).
The Company also has approximately 20 million square meters of land with an acquisition cost of zero.
At the end of December 2014, the balance of property, plant and equipment includes US$9,487,000 (2013:
US$14,707,000) of mining equipment under the DNB equipment financing facility and US$24,828,000
(2013: US$26,480,000) of goods storage and handling equipment under Tschudi Bulk Terminal AS finance lease.
Refer Note 18 (g) for details of assets used as security against borrowings. Refer Note 14 for details of
impairment.
Note 14. Impairment of Assets
The Group reviews the carrying amount of its assets at each balance date. During the year ended 31 December
2014 the following material events occurred which were considered indicators for impairment:
– The benchmark China CFR 62% price of iron ore (which is an indicator of the Company’s realisable price)
significantly decreased in value from US$135 per dry metric tonne (dmt) as at 31 December 2013 to US$72/dmt
as at 31 December 2014 - a reduction of 47%
Accordingly, the Group has performed an impairment test and based on this assessment, the following
impairment amounts have been proportionately recognised on the following non-current assets.
Mine properties
Property, plant and equipment
Total impairment of non-current assets
2014
US$000
2013
US$000
14,328
56,972
71,300
–
–
–
The Group assessed the recoverable amount of the Cash Generating Unit (“CGU”) as at 31 December 2014 using
the Value in Use (“VIU”) method, where VIU is assessed as the present value of future cash flows expected to be
derived from the CGU.
The following assumptions were used when determining the VIU for the CGU:
– Cash flow forecasts for the life of mine were based on recent actual performance, forecasts and anticipated
revenues and estimated operating and sustainable capital costs
– Cash flows are presented in nominal pre-tax form with a 12% discount rate applied
– Inflation estimate of 2% per annum
– CFR China 62% price (in real terms) of 2015 at US$64, trending towards a long-term price of US$80
– Exchange rates used are 2015: 7.88 NOK/US$ trending towards a long term rate of 7.12 NOK/US$.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Note 15. Trade and Other Payables
Current
Trade payables – third parties
Trade payables – related parties
Non-trade payables and accrued expenses – third parties
(i) Trade payables are non-interest bearing and are normally settled on 30-day terms.
(ii) Information regarding the effective interest rate and credit risk of current payables is set out in Note 28.
2014
US$000
2013
US$000
13,603
18,149
922
1,138
10,403
24,928
12,150
31,437
52 Northern Iron Annual Report 2014
Note 16. Derivative Financial Liabilities
Current
Derivatives that are carried at fair value
Iron ore contracts
Electricity contracts
Currency forward contracts
Note 17. Provisions
Current
Other(iii)
Long service leave and bonus provision(iv)
Provision for onerous contract(vi)
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)
Provision for onerous contract(vi)
Balance at end of the year
(i) Concentrate offtake agreement provision
Current
Provision for concentrate offtake agreement
Balance at the beginning of the year
Utilised
Balance at the end of the year
Non-Current
Provision for concentrate offtake agreement
Balance at the beginning of the year
Provision recognised
Balance at the end of the year
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
2014
US$000
2013
US$000
–
818
39,794
40,612
5,717
1,346
–
7,063
2014
US$000
2013
US$000
103
–
5,636
5,739
5,786
1,893
30
80
4,307
12,096
89
276
–
365
–
1,805
25
17
–
1,847
2014
US$000
2013
US$000
–
–
–
–
5,786
5,786
1,575
(1,575)
–
–
–
In 2010 the Group recognised a provision for the settlement agreed with Tata, due to non-delivery of product
meeting contract quality specifications. A final agreement was signed in June 2011 resulting in a repayment
schedule based upon tonnes shipped under the contract. The final settlement of the provision occurred upon
final invoicing for the December quarter shipments during January 2013. The estimate was denominated in US$
and discounted to present value.
53
Notes to the Financial Statements
For the year ended 31 December 2014
Note 17. Provisions (continued)
During the September 2014 quarter, the Company announced it had reached an agreement with its largest
customer to amend its offtake contract. Under the terms of the agreement, the Company will supply additional
volumes with the pricing applied to tonnage sold during the period from July 2014 to March 2015 being similar
to spot pricing arrangements. The deferral of the previous contract pricing arrangement will be repayable
should the market pricing environment improve materially, or else following the end of the contract term in
March 2018. For the year ended 31 December 2014, the deferred liability owing to the customer is approximately
US$5.8 million.
(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
2014
US$000
2013
US$000
1,805
–
88
1,893
1,879
(162)
88
1,805
The Company has recognised provisions regarding environmental restoration obligations due to current and
previous mining activities and mining assets used. The probable timing of the settlement of the obligation is
2042 based on an annual production rate of 2.3 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
2014
US$000
2013
US$000
89
14
–
103
445
89
(445)
89
Other provisions mainly comprise provisions for bank and legal fees, as well as mining fleet and automobile
insurance.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
54 Northern Iron Annual Report 2014
(iv) Long service leave and bonus provision
Current
Long service leave and bonus provision:
Balance at the beginning of the year
Provision recognised
Utilised
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
2014
US$000
2013
US$000
276
–
(276)
–
25
5
–
–
30
–
276
276
310
168
(177)
(276)
25
2014
US$000
2013
US$000
17
63
80
–
17
17
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
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.
(vi) Provision for onerous contract
Current
Provision for onerous contract:
Balance at the beginning of the year
Provision recognised
Balance at the end of the year
Non-Current
Provision for onerous contract:
Balance at the beginning of the year
Provision recognised
Balance at the end of the year
2014
US$000
2013
US$000
–
5,636
5,636
–
4,307
4,307
–
–
–
–
–
–
During 2014, the Company has recognised a provision for potential future losses occurring under a contract for
iron ore sales.
55
Notes to the Financial Statements
For the year ended 31 December 2014
Note 18. Interest Bearing Liabilities and Borrowings
2014
US$000
Innovasjon Norge
financing facility (b)
Finance lease –
concentrate storage,
handling and ship
loading facility (a) & (c)
Equipment lease
financing facility
(a) & (d)
DNB working capital
facility (e)
DNB US$ loan (f)
2013
US$000
Innovasjon Norge
financing facility (b)
Finance lease –
concentrate storage,
handling and ship
loading facility (a) & (c)
Equipment lease
financing facility
(a) & (d)
DNB working capital
facility (e)
DNB US$ loan (f)
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Notes
Current
Non-
Current
Borrowings
in total
Financing
arrangements
credit lines
Facilities
utilised at
balance
date
Facilities
not utilised
at balance
date
(b)
1,875
5,188
7,063
12,108
12,108
(c)
1,534
10,686
12,220
27,897
27,897
(d)
(e)
(f)
4,003
28,037
17
–
2,500
12,500
4,020
52,394
52,394
28,037
15,000
35,000
28,037
6,963
30,000
30,000
–
37,949
28,391
66,340
157,399
150,436
6,963
Notes
Current
Non-
Current
Borrowings
in total
Financing
arrangements
credit lines
Facilities
utilised at
balance
date
Facilities
not utilised
at balance
date
(b)
2,466
7,555
10,021
14,794
14,794
(c)
3,671
13,056
16,727
34,085
34,085
(d)
(e)
(f)
5,463
4,051
9,514
52,394
52,394
33,648
–
33,648
35,000
33,648
5,000
12,308
50,248
36,970
17,308
87,218
30,000
30,000
166,273
164,921
1,352
–
1,352
–
–
–
–
–
–
56 Northern Iron Annual Report 2014
(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
2014
US$000
2013
US$000
6,651
12,130
–
10,626
18,948
–
18,781
29,574
(2,540)
(3,333)
16,241
26,241
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
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, and a total value of NOK 90 million. The repayment grace period which has been granted for
the period September 2014 to June 2015 after which, repayments on each loan will resume and will be made
biannually, with loan 1 and 2 expiring June 2018, and loan 3 expiring August 2018.
In April 2014, Innovation Norge agreed to amend the security terms of the facility to enable the Company to
extend its increase on the DNB working capital facility for the period to 31 May 2015.
In December 2014, the Company accepted an offer to defer interest payments for the period 1 January 2015 to
31 March 2015.
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%.
(c) Finance lease – concentrate storage, handling and ship loading facility
Sydvaranger Gruve AS has a NOK denominated finance lease agreement with a related company, Tschudi Bulk
Terminal AS regarding goods storage and handling assets, initially established in the financial statements with
an amount of US$33.7 million. The lease payment ends in December 2017. However, the lease will be in effect
until 31 December 2034 with the option to extend for two periods each of ten years (without any further lease
payments). Principal and interest on the facility is payable monthly at a rate of 8.42% per annum. The facility is
not able to be re-drawn and there are no restrictions on dividends, further leasing or further borrowings.
In September 2014, the Company accepted an offer to defer lease repayments for 12 months effective from
1 July 2014 and to extent the lease period by the same length of time. The lease payment period now ends
on 31 December 2018. In December 2014 the two parties agreed to defer interest repayments for the period
1 January 2015 to 31 March 2015.
(d) Equipment lease financing facility
Sydvaranger Gruve AS established in October 2008 a finance lease facility with DNB for the purpose of
financing mining fleet equipment. In April 2009, the facility was converted from being denominated in NOK, to
being denominated in US$. The total facility is US$52.4 million (31.12.2013: US$52.4 million) and has the ability
to be drawn in a number of currencies. As at 31 December 2014, US$52.4 million (31.12.2013: 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 five years however in September 2013, DNB agreed to extend the lease periods by
one year and in December 2014, agreed to defer lease and interest payments for the period 1 January 2015
to 31 March 2015. Interest on the facility is payable quarterly at a floating rate based on the 3 month LIBOR
rate plus 2.90%. As at 31 December 2014, the rate applied to drawings on the facility was 3.13% per annum
(31.12.2013: 3.14% per annum). Under the terms of the agreement, interest cannot be charged on intercompany
borrowings. The facility is not able to be re-drawn and there are no restrictions on dividends, further leasing or
further borrowings.
57
Notes to the Financial Statements
For the year ended 31 December 2014
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Note 18. Interest Bearing Liabilities and Borrowings (continued)
(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. The borrowing base constituted 80% of receivables and
60% of inventory value. Effective from 1 May 2012 the current interest rate on drawn amounts for this facility was
LIBOR plus 2.85% 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.
The Company has in the past secured increases and extensions to the DNB working capital facility. As of April
2014, the Company has renewed the DNB working capital facility at a limit of US$35 million until 31 May 2015,
with the borrowing base constituting 85% of receivables and 70% of inventory value.
Due to the impact from falling iron ore prices through quarter two 2014, a waiver on the financial covenants was
granted by DNB and Innovasjon Norge for the quarter ending June 2014 and further extended in September
2014 until 30 September 2015.
The applicable interest rate on drawn amounts for the facility is currently the US$ Federal Funds effective rate
plus 2.75% per annum, with a commitment fee of 0.25% per quarter on the committed amount. 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 with DNB for a US$30 million
US$ loan. 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 six years with semi-annual repayments with the first on
30 September 2011. Effective from 1 May 2012 the current 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.
In September 2014, the Company and DNB agreed to defer loan repayments for twelve months effective from
1 July 2014 and to extent the loan period by the same length of time, with the final due date then being 27 March
2018. In December 2014, the Company accepted an offer to defer interest payments for the period 1 January
2015 to 31 March 2015.
(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 19. Capital and Reserves
Issued capital
2014
Number
2014
US$000
2013
Number
2013
US$000
Balance at beginning of the year
484,405,314
380,761 484,405,314
380,761
Shares cancelled
Share issue costs
–
–
–
–
–
–
–
–
Balance at end of the year
484,405,314
380,761 484,405,314
380,761
Ordinary shares have the right to one vote per share at meetings of the Company, to receive dividends as
declared and, in the event of a winding-up of the Company, to participate in the proceeds from the sale of all
surplus assets in proportion to the number of, and amounts paid up on, shares held.
The Company does not have an authorised capital or par value in respect of its issued shares.
58 Northern Iron Annual Report 2014
Translation reserve
Movements in the translation reserve are set out in the Statement of Changes in Equity on page 32. The
translation reserve comprises all foreign exchange differences arising from the translation of non US$
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 32.
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 20. Reconciliation of Cash Flows from Operating Activities
(a) Cash flows from operating activities
Loss from continuing operations
Adjustments for:
Share-based payments expense
Foreign exchange loss/(gain)
Depreciation of property, plant and equipment
Amortisation expensed
Depreciation of non-current assets
Impairment of property, plant and equipment
Impairment of mine properties
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
Accrued income
Accrued expenses
Prepayments
Derivative financial asset
Derivative financial liability
Deferred tax assets and liabilities
Net cash flows provided by operating activities
(b) Reconciliation of cash and cash equivalents
Cash at bank and at call
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
2014
US$000
2013
US$000
(180,695)
(1,654)
70
1,449
19,590
3,998
7
56,972
14,328
17,299
8,409
(5,037)
15,622
(4,081)
(1,375)
51
534
33,549
31,306
11,996
–
2,380
20,946
7,697
8
–
–
2,650
(5,706)
(5,978)
(1,722)
(379)
758
(67)
(534)
6,505
(6,347)
18,557
6,618
19,446
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$218,000 in lodged cash security deposits classified under
trade and other receivables (2013: US$262,000) and US$1,505,000 (2013: US$1,181,000) included in non-current
receivables.
59
Notes to the Financial Statements
For the year ended 31 December 2014
Note 21. 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
2014
US$000
2013
US$000
2,596
1,324
–
2,841
3,764
–
3,920
6,605
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Note 22. Share-Based Payments
Employee share option plan
There were no share-based payment arrangements in existence during the current reporting period.
The following share-based payment arrangements were in existence during the prior reporting period:
Option series
J Sanderson
J Sanderson
J Sanderson
No. of
options
Grant date Expiry Date
Exercise
Price
Revised
Exercise
Price(ii)
Fair value
at grant
date
500,000(i)
14/05/2010 24/08/2013
A$2.15
A$2.06
A$0.50
500,000(i)
14/05/2010 24/08/2013
A$2.50
A$2.41
A$0.44
500,000(i)
14/05/2010 24/08/2013
A$3.00
A$2.91
A$0.38
(i)
In accordance with the terms of the share based arrangement, options vest over the period of employment.
(ii) 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 2014 and 2013 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
2014
Weighted
average
exercise
price
Number of
options
2013
Weighted
average
exercise
price
Number of
options
–
–
–
–
–
–
–
–
1,500,000
(1,500,000)
A$2.55
A$2.55
–
–
–
–
(c) Share options exercised during the year
There were no options were exercised during the 2014 and 2013 financial years.
(d) Share options outstanding at the end of the year
The share options outstanding at the end of the prior year had an exercise price of A$nil, and a weighted average
remaining contractual life of nil days.
Further details of shares and options issued to directors are set out in the Remuneration Report set out on
pages 19 to 26.
60 Northern Iron Annual Report 2014
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
01/09/2015
01/09/2015
31/12/2016
TOTAL
Hurdle Price
A$1.25
A$2.00
Total
–
–
50,000
50,000
50,000
50,000
1,000,000
–
1,000,000
1,000,000
100,000
1,100,000
Weighted average fair value per performance right
A$0.07
A$0.29
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
2014
2013
A$0.07 to A$0.29
A$0.29 to A$0.94
A$0.18 to A$0.89
A$0.89 to A$2.02
A$1.25 to A$2.00
A$1.50 to A$3.50
0.9 to 2.2 years
0.4 to 3.6 years
Share-based payments expense recognised
$70,000
–
For the year ended 31 December 2014 the total value of share-based payments expensed in the financial
statements is US$70,000 (2013: US$nil). There were no shares issued or payments made during the year under
the performance rights plan (2013: US$nil).
Note 23. Capital And Other Commitments
Property, plant and equipment commitments
There are no commitments contracted at balance date not recognised as liabilities.
Lease commitments
Finance lease commitments and non-cancellable operating lease commitments are disclosed in Note 18 and
Note 21 respectively.
Note 24. 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.
4
1
0
2
T
R
O
P
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R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
61
Notes to the Financial Statements
For the year ended 31 December 2014
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Note 24. Related Party Disclosures (continued)
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
Country of
Incorporation
Ownership interest
2014
2013
Australia
Norway
Switzerland
100%
100%
100%
100%
Norway
100%
100%
Sydvaranger Gruve AS
During the reporting period loans from the Company to the subsidiary totalled US$5,650,000 (2013:
US$16,219,000). The carrying value of the Company’s loans at 31 December 2014 was US$196,275,000
(2013: US$239,097,000). Advances were made in NOK, US$, 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 2023 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$622,000 (2013: US$919,000). 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$62,000
(2013: US$nil).
During the reporting period Sydvaranger Gruve AS recorded sales of ore concentrate to Northern Iron Marketing
AG in the amount of US$44,503,000 (2013: US$36,897,000), and purchased services from Northern Iron
Marketing AG in the amount of US$222,000 (2013: US$1,667,000).
Northern Iron Marketing AG
During the reporting period, loans from the Company to the subsidiary totalled US$nil (2013: US$nil). The
carrying value of the Company’s loans to Northern Iron Marketing AG at 31 December 2014 was US$nil
(2013: US$808,000).
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 2014 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$19,000 remains unchanged
from inception. There were no purchases or sales between SVG and SMT during the year.
62 Northern Iron Annual Report 2014
Transactions with key management personnel
During the reporting period, the Group paid US$57,000 (2013: US$147,000) to companies which are associated
with Mr Ashwath Mehra, a Director, for services to provide office space, administration and ancillary support
services. At balance date one quarter amounting to US$16,000 is payable.
During the reporting 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$31,000 (2013: US$30,000).
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$4,660,000 (2013: US$6,514,000) which includes leases for land and
properties, contract labour services, freight, tugboat and harbour services and production of aggregate from
waste rock;
– capitalised expenses and assets purchased in the amount of US$nil (2013: US$48,000), 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$3,115,000 (2013: US$5,136,000). This lease represents an agreement for handling, storage and loading of
iron ore concentrate (included in the balance of borrowings – see Note 18). This facility was fully utilised in 2010
and therefore had no additional drawdowns in 2013 or 2014.
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$776,000 (2013: US$1,144,000).
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.
Note 25. 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 2014 and 31 December 2013.
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
63
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Notes to the Financial Statements
For the year ended 31 December 2014
Note 25. Segment Information (continued)
Information on business segments
2014
Business Segments
External revenue
Inter segment revenue(i)
Segment assets
Segment liabilities
Segment (loss)/profit before income tax
(149,550)
Sydvaranger
Iron Ore
Project
(US$000)
Marketing
(US$000)
Corporate
(US$000)
Inter-
segment
eliminations
(US$000)
Consolidated
(US$000)
131,344
49,213
51,387
5,298
180,557
56,685
974
3,578
241,763
(346,286)
(704)
–
91
91
–
182,731
(54,602)
–
(54,602)
182,731
13,472
(14,147)
(149,250)
2,139
(355)
(1,734)
245,746
197,501
(149,844)
Other segment information:
Segment result before tax includes:
Finance income
Finance expense
Depreciation and amortisation
Depreciation and amortisation – included in
administration
107
(14,133)
(23,337)
–
Acquisition of property, plant and equipment
32,302
–
–
–
–
–
20
(2)
–
(7)
–
–
–
–
–
–
127
(14,135)
(23,337)
(7)
32,302
(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.
Sydvaranger
Iron Ore
Project
(US$000)
Marketing
(US$000)
Corporate
(US$000)
Inter-
segment
eliminations
(US$000)
Consolidated
(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)
–
–
–
(36,897)
204,554
–
–
(36,897)
204,554
35,751
(36,384)
(8,001)
7,811
(356)
(16,668)
404,958
16,115
(128,270)
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
121
(4,828)
(20,946)
–
–
–
–
53
(1)
(8)
12
–
124
–
–
174
(4,705)
(20,954)
9,681
Acquisition of property, plant and equipment
9,669
(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.
64 Northern Iron Annual Report 2014
Note 26. Parent Entity Disclosures
Financial position
As at 31 December 2014
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
2014
US$000
2013
US$000
2,155
7,800
193,089
515,136
195,244
522,936
(324)
(30)
(354)
(331)
(25)
(356)
(541,135)
(541,135)
340,074
26,666
(4,117)
(4,047)
10,288
(4,064)
(194,890)
(522,580)
313,408
(35,751)
–
–
313,408
(35,751)
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
As result of the impairment of the mine properties and carrying value of assets, a provision for impairment has
been made against the loan to and investment in subsidiaries.
Guarantees entered into by the parent in relation to debts of its subsidiaries
Northern Iron Limited has signed a letter of financial support with Sydvaranger Gruve AS.
Northern Iron Limited has provided a guarantee for the Innovasjon Norge financing facility (Note 18 (b)) and
equipment lease finance facility (Note 18 (d)).
65
Notes to the Financial Statements
For the year ended 31 December 2014
Note 27. Key Management Personnel Disclosures
Key management personnel compensation
Key management personnel compensation is as follows:
Short term benefits
Post-employment benefits
Share based payments
2014
US$
2013
US$
2,725,457
3,400,429
102,365
146,857
69,936
–
2,897,758
3,547,286
4
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
Information regarding individual directors and executive officers compensation is provided in the Remuneration
Report as set out on pages 19 to 26.
Note 28. 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 2013.
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.
(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 (refer Note 18).
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. A further waiver on the EBITDA covenant was granted by DNB and
66 Northern Iron Annual Report 2014
Innovasjon Norge for the quarter ending June 2014 and extended in September 2014 until 30 September 2015.
After this date the EBITDA debt covenant is to be re-established in increments of US$7 million per quarter from
quarter four 2015.
(c) Market risk
(i) Foreign currency risk management
Currency risk currently arises from purchases, assets and liabilities that are denominated in a currency other than
the functional currencies of the entities within the Group, and from purchases in currencies other than those in
which cash balances are held.
The Group operates predominantly in Norway and is exposed to currency risk arising from various foreign
currency exposures, primarily with respect to the US$ 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.
The Group’s exposure to foreign currency risk at balance date was as follows, based on carrying amounts.
NOK
US$000
SEK
US$000
US$
US$000
Euro
US$000
CHF
US$000
GBP
US$000
DKK
US$000
A$
US$000
Totals
US$000
2014
Cash and cash
equivalents
Trade and other
receivables
Trade and other
payables
5,546
2,822
–
–
587
19,326
22
–
(23,799)
(730)
326
(1,695)
Tax liability
–
Borrowings
(19,283)
–
–
–
(47,058)
–
–
56
–
(16)
(129)
–
–
–
–
–
407
6,618
12
22,160
(19)
(33)
1,038
(24,928)
–
–
–
–
–
–
(129)
(66,341)
Gross exposure
(34,714)
(730)
(26,819)
(1,673)
(89)
(19)
(33)
1,458
(62,619)
2013
Cash and cash
equivalents
Trade and other
receivables
Trade and other
payables
11,023
7,775
–
1
7,853
27,174
41
–
24
–
–
55
–
–
505
19,446
18
35,023
(28,353)
(1,226)
(418)
(1,303)
(18)
(34)
(45)
(40)
(31,437)
Tax liability
–
Borrowings
(26,748)
–
–
–
(60,470)
–
–
(340)
–
Gross exposure
(36,303)
(1,225)
(25,861)
(1,262)
(334)
–
–
21
–
–
–
–
(340)
(87,218)
(45)
483
(64,526)
4
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N
A
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67
Notes to the Financial Statements
For the year ended 31 December 2014
Note 28. Financial Instruments (continued)
The following significant exchange rates applied during the year:
US$ to:
1 Norwegian Kroner
1 AUD
1 Euro
1 Swedish Kroner
Average rate
Reporting date spot rate
2014
0.159
0.901
1.326
0.146
2013
0.170
0.966
1.329
0.154
2014
0.135
0.819
1.216
0.129
2013
0.164
0.892
1.378
0.156
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 2013:
31 December 2014
US$ to NOK
A$ to US$
31 December 2013
US$ to NOK
A$ to US$
Equity
US$000
Profit and
loss
US$000
(1,417)
90
(104)
372
(1,417)
(84)
(104)
(21)
A 5% weakening of the following currencies at 31 December would have changed equity and post-tax profit and
loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates and the
exchange rate between other currencies, remain constant. The analysis is performed on the same basis for 2013:
4
1
0
2
T
R
O
P
E
R
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A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
31 December 2014
US$ to NOK
A$ to US$
31 December 2013
US$ to NOK
A$ to US$
Equity
US$000
Profit and
loss
US$000
4,293
(90)
4,293
84
(626)
(373)
(626)
21
Forward foreign exchange contracts
Forward foreign exchange contracts are valued at fair value through profit and loss. At 31 December 2014, the
Company had 10 forward exchange contracts in place (2013: 18), the details of which were:
Period
2015
2016
68 Northern Iron Annual Report 2014
Contract
Amount
US$000
168,000
96,000
Average
contract
rate
US$/NOK
Reporting
date spot
rate
US$/NOK
Change in
fair value
US$000
6.30
6.41
7.43
7.43
(26,289)
(13,505)
(39,794)
(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 18 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
2014
US$000
2013
US$000
8,341
20,889
66,340
87,218
0.75%
4.23%
0.87%
4.26%
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 2013:
31 December 2014
31 December 2013
Equity
US$000
Profit or
loss
US$000
60
(124)
(60)
(124)
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 2013:
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A
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I
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T
R
O
N
31 December 2014
31 December 2013
Equity
US$000
Profit or
loss
US$000
60
124
60
124
69
Notes to the Financial Statements
For the year ended 31 December 2014
Note 28. Financial Instruments (continued)
(iii) Commodity price risk management
Commodity price risk is the risk of financial loss resulting from movements in the price of the Group’s commodity
output, being iron ore, which is denominated in US$ and not widely traded in derivative markets. The Group
recorded sales of iron ore concentrate for the year of US$182,042,000. In 2013, there were sales of approximately
US$204,554,000.
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 Company has entered into a five 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 2018 after TATA exercised their 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 1.5 Mtpa from 2015 to 2018. TATA agreed to increase its offtake volume during the contract year
ending 31 March 2013 by 275,000 wet tonnes and by six shipments (approximately 420,000 wet tonnes) during
the period 1 July 2014 to 31 March 2015. 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
the Company 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 Company 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 with
no sales taking place in 2014. 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 ArcelorMittal, 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 2013:
4
1
0
2
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O
P
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R
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A
U
N
N
A
N
O
R
I
N
R
E
H
T
R
O
N
31 December 2014
31 December 2013
Equity
US$000
Profit and
loss
US$000
(1,421)
(229)
1,421
229
A 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 2013:
31 December 2014
31 December 2013
70 Northern Iron Annual Report 2014
Equity
US$000
Profit and
loss
US$000
1,421
229
(1,421)
(229)
Forward iron ore price contracts
Forward iron ore price contracts are valued at fair value through profit or loss. As at 31 December 2014, the
Company had nil (2013: 25) forward iron ore price contracts in place with the purpose of minimising the
fluctuations in iron ore price, the details of which were:
2014
Nil
2013
No. of Contracts
Period
Expiry
Tonnes
Average
Contract Rate
US$
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)
Electricity price risk contracts
The Group is exposed to electricity price risk. As at 31 December 2014, the Group had 16 (2013: 14) electricity
price contracts in place with the purpose of minimising the fluctuations in electricity price, the details of which
are:
2014
No. of Contracts
Period
Expiry
Quantity
(MWh)
Average
Contract Rate
(EUR/NO4)
Change in Fair
Value
US$000
7
6
2
1
2013
2015 year
31 December 2015
2016 year
31 December 2016
2017 year
31 December 2017
2018 year
31 December 2018
78,843
61,489
17,569
8,784
35.63
34.34
30.62
30.37
(498)
(302)
(13)
(5)
(818)
No. of Contracts
Period
Expiry
5
5
4
2014 year
31 December 2014
2015 year
31 December 2015
2016 year
31 December 2016
Quantity
(MWh)
87,600
61,320
43,920
Average
Contract Rate
(EUR/NO4)
Change in Fair
Value
US$000
38.47
36.53
35.40
(732)
(378)
(236)
(1,346)
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A
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71
Notes to the Financial Statements
For the year ended 31 December 2014
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A
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N
A
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O
N
Note 28. Financial Instruments (continued)
(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
2014
US$000
2013
US$000
6,618
22,369
28,987
19,446
35,023
54,469
(e) Liquidity risk management
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 18. 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(i)
US$000
6 months
or less
US$000
6 to 12
months
US$000
1 to 5 years
US$000
Over 5
years
US$000
2014
Non-derivative financial liabilities
Trade and other payables
24,928
24,928
24,928
Current tax liability
129
129
129
–
–
–
–
–
–
Interest bearing loans and
borrowings
2013
Non-derivative financial liabilities
66,341
91,398
70,712
95,769
6,394
31,451
8,450
8,450
31,868
31,868
24,000
24,000
Carrying
amount
US$000
Contractual
cash flows(i)
US$000
6 months or
less
US$000
6 to 12
months
US$000
1 to 5 years
US$000
Over 5
years
US$000
Trade and other payables
31,437
31,437
31,437
Current tax liability
340
340
340
–
–
–
–
–
–
Interest bearing loans and
borrowings
87,218
92,878
118,995
124,655
9,551
41,328
15,094
15,094
40,196
40,196
28,037
28,037
(i)
Repayments towards the DNB Working Capital Facility are included in the contractual cash flows, however the facility has no specified
requirements as to making regular fixed repayments. The expected year end closing balance is shown in the Over 5 years column.
72 Northern Iron Annual Report 2014
(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
2014
US$000
2013
US$000
Fair value
hierarchy
Valuation
technique(s)
and key input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to fair
value
Foreign currency
forward contracts
Forward iron ore
price contracts
Assets –
nil; and
Liabilities
– 39,794
Liabilities
– nil
Assets –
534; and
Liabilities
– nil
Liabilities
– 5,717
Electricity price risk
contracts
Liabilities
– 818
Liabilities
– 1,346
Level 2
Level 2
Marked-to-market
based on published
closing spot rate
N/A
N/A
Level 2
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
There were no transfers between Level 1 and Level 2 during the year
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 29. 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$996,297 (2013: US$1,011,325).
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$632,871 (2013: US$660,529).
Note 30. Contingencies
The Company is in discussions with insurer AIG over the quantum payable under the confirmed coverage
of business interruption due to the collision of two haul trucks in January 2014. AIG have valued the loss
at US$1,906,000 and the Company values the loss at approximately US$8,000,000. The policy has a
US$1,000,000 deductible amount.
Apart from the above, in the opinion of the directors, there are no contingent liabilities as at 31 December
2014 and no contingent liabilities were incurred in the interval between balance date and the date of this
financial report.
73
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O
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A
U
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A
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I
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H
T
R
O
N
Notes to the Financial Statements
For the year ended 31 December 2014
Note 31. Subsequent Events
In January 2015, DNB made available a new working capital facility for the Company in the amount of
US$10.0 million, subsequently increased to US$11.2 million during March 2015, of which the majority of the
funding was reserved to cover foreign exchange hedging losses realised in the March 2015 quarter due to
the weakness in the US$:NOK rate. This facility is available for the period 01.01.2015 to 31.03.2015.
In January 2015, the company reached agreements with DNB, Innovasjon Norge and Tschudi Bulk Terminals
for the deferral of interest payments associated with its debt facilities and lease payments for the period from
1 January 2015 to 31 March 2015. Subsequent agreements were reached in March 2015 where the deferral of
payments has been extended up until 30 June 2015. Financial covenants associated with loan agreements were
waived for the same period.
In March 2015, the Company reached an agreement with its main offtake partner according to which, sales will be
similar to spot pricing arrangements and improved payment terms will be applied for the period 1 April 2015 until
30 June 2015.
In March 2015, the Company reached an agreement with DNB on restructuring its debt facilities until 30 June
2015 which included an adjustment to the borrowing base mechanism of the working capital facility, to enable
the Company to effectively manage its liquidity position.
In March 2015, DNB closed out the exposure on foreign exchange hedge contracts remaining in the 2015 year
and provided funding to the Company of this position with the result that the close out of these hedging
contracts will have no liquidity effect for the Company for the next 12 months.
Other than this, no matter or circumstance has arisen since 31 December 2014 that in the opinion of the directors
has significantly affected, or may significantly affect in future financial years:
(i) the Group’s operations;
(ii) the results of those operations; or
(iii) the Group’s state of affairs.
4
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74 Northern Iron Annual Report 2014
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 30 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 2014 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 2014.
Signed in accordance with a resolution of the Board of directors.
Antony Beckmand
Managing Director and Chief Executive Officer
Peter Bilbe
Chairman
Kirkenes, 31 March 2015
Perth, 31 March 2015
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75
Independent Auditor’s Report
To the members of Northern Iron Limited
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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 2014, 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.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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 Northern Iron Annual Report 2014
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 2014 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.
Emphasis of matter
Without qualifying our opinion, we draw attention to Note 2 to the financial statements, which indicates that the
Group will require additional funding, and the successful completion of the initiatives listed in Note 2 to enable the
Group to continue to fund its operations. If the Group is unable to successfully secure additional funding and
complete these initiatives, there is a material uncertainty that may cast doubt on the Group’s ability to continue as a
going concern, and therefore it may be unable to realise its assets and discharge its liabilities in the normal course
of business and at the amounts stated in the financial statements.
Report on the Remuneration Report
We have audited the remuneration report included in the directors’ report for the year ended 31 December 2014.
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 2014 complies
with section 300A of the Corporations Act 2001.
4
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HLB Mann Judd
Chartered Accountants
Perth, Western Australia
31 March 2015
N G Neill
Partner
77
Corporate Governance Statement
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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.
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.
78 Northern Iron Annual Report 2014
Explanations for departures from best practice recommendations
From 1 January 2014 to 31 December 2014 (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.
During the period from 1 January 2014 until
1 April 2014 the Board comprised four (4)
directors, of whom two (2) were considered by
the Board to be independent. On 1 April 2014,
Mr Peter Campbell Church OAM was appointed
as a non-executive director in accordance with
the share subscription agreement dated 19
January 2010 between the Company and OM
Holdings Ltd (OMH), which permits OMH to
appoint a nominee to the Company’s Board
subject to maintaining a shareholding in excess
of 10%. During the period from 1 April 2014 until
31 December 2014, the Board has comprised five
(5) 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.
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 19 to 26 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.
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79
Corporate Governance Statement
Continued
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.
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)
56
1
1
–
%
13.3
20
10
–
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80 Northern Iron Annual Report 2014
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.
ASX Recommendation 1.3: Companies
should provide the information
indicated in the Guide to reporting on
Principle 1.
Yes
Yes
Yes
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.
Yes
Yes
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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.
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.
During the period from 1 January 2014 until
1 April 2014 the Board comprised four (4)
directors, of whom two (2) were considered
by the Board to be independent. On 1 April
2014, Mr Peter Campbell Church OAM was
appointed as a non-executive director in
accordance with the share subscription
agreement dated 19 January 2010 between
the Company and OM Holdings Ltd (OMH),
which permits OMH to appoint a nominee to
the Company’s Board subject to maintaining
a shareholding in excess of 10%. During the
period from 1 April 2014 until 31 December
2014, the Board has comprised five (5)
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.
81
Corporate Governance Statement
Continued
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ASX Recommendation
Compliance (Yes/No)
Explanation
ASX Recommendation 2.4: The
board should establish a nomination
committee.
ASX Recommendation 2.5: Companies
should disclose the process for
evaluating the performance of the
board, its committees and individual
directors.
ASX Recommendation 2.6: Companies
should provide the information
indicated in the Guide to reporting on
Principle 2.
Yes
Yes
Yes
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.
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.
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
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 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.
Yes
Yes
ASX Recommendation 3.1: Companies
should establish a code of conduct and
disclose the code or a summary of the
code as to:
– 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 achieving them.
82 Northern Iron Annual Report 2014
ASX Recommendation
Compliance (Yes/No)
Explanation
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.
Yes
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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 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.
Complete
– Human Resources Manager to provide
an initial status report, and then to
report on a periodic basis including
recommendations for future workplace
participation rates.
Partially complete, initial status report
and periodic reporting has been
implemented, recommendations for
future participation rates expected
during 2015.
– Implement diversity education and
training for all employees and contractors,
and conduct awareness sessions on issues
relating to equal opportunities in the
workplace.
In progress. Discussions were held
among all employees based on
employee survey results during 2014.
Specific diversity education and
training was not initiated during the
year. Subject to budget allocation it is
expected that this will be completed
during 2015.
– Issue guidance notes on the Company’s
commitment to diversity to all external
agencies engaged to provide recruitment
services.
In progress. External agencies currently
work in line with the Company’s
diversity policies and commitments.
Formalisation of guidance is expected
to be implemented during 2015.
83
Corporate Governance Statement
Continued
ASX Recommendation
Compliance (Yes/No)
Explanation
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.
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.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
ASX Recommendation 4.1: The Board
should establish an audit committee.
Yes
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.
ASX Recommendation 4.3: The audit
committee should have a formal
charter.
Yes
Yes
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.
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.
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84 Northern Iron Annual Report 2014
ASX Recommendation
Compliance (Yes/No)
Explanation
ASX Recommendation 4.4: Companies
should provide the information
indicated in the Guide to reporting on
Principle 4.
Yes
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Yes
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.
ASX Recommendation 5.2: Companies
should provide the information
indicated in the Guide to reporting on
Principle 5.
Yes
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.
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.
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85
Corporate Governance Statement
Continued
ASX Recommendation
Compliance (Yes/No)
Explanation
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
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ASX Recommendation 6.2: Companies
should provide the information
indicated in the Guide to reporting on
Principle 6.
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.
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.
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.
86 Northern Iron Annual Report 2014
ASX Recommendation
Compliance (Yes/No)
Explanation
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.
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.
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.
ASX Recommendation 7.4: Companies
should provide the information
indicated in the Guide to reporting on
Principle 7.
Yes
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.
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.
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.
Yes
The Board has received the assurances
required by ASX Recommendation 7.3 in
respect of its 2014 annual report.
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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.
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.
87
Corporate Governance Statement
Continued
ASX Recommendation
Compliance (Yes/No)
Explanation
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
ASX Recommendation 8.1: The board
should establish a remuneration
committee.
Yes
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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.
ASX Recommendation 8.3: Companies
should clearly distinguish the
structure of non-executive directors’
remuneration from that of executive
directors and senior executives.
Yes
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.
The structure of the Company’s
Remuneration, Nomination and Governance
Committee meets the requirements of ASX
Recommendation 8.2.
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.
88 Northern Iron Annual Report 2014
ASX Recommendation
Compliance (Yes/No)
Explanation
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
– 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.
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89
Additional Shareholder Information
4
1
0
2
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R
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Additional information required by the ASX Limited (“ASX”) Listing Rules and not disclosed elsewhere in this
report is set out below.
Shareholdings as at: 8 April 2015
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
Dalnor Assets Ltd
Tschudi Mining Company AS
OM Holdings Limited
Prominvest AG
Date of
notice
Number of
Shares
24/06/14
96,637,800
14/ 1 0/13
67,1 3 3 ,7 2 8
15/ 1 0/12
52,482,500
16/ 1 2/14
28,329,939
% held
19.95%
13.86%
1 1 .03%
5.85%
Voting Rights
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 8 April 2015)
Rank Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
J P MORGAN NOMINEES AUSTRALIA LIMITED
TSCHUDI MINING COMPANY AS
OM HOLDINGS LIMITED
CITICORP NOMINEES PTY LIMITED
DNU NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
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