Era Group Inc Annual Report 2014

Plain-text annual report

E N E R G Y R E S O U R C E S O F A U S T R A L I A L T D A N N U A L R E P O R T 2 0 1 4 Surrounding environment remained protected, as conﬁrmed by the Supervising Scientist Ranger 3 Deeps Exploration Decline completed Produced 1,165 tonnes of uranium oxide Strong cash position maintained Reduction in employee numbers with end of Pit 3 initial backﬁll Implemented process safety improvement action plan Powering tomorrowANNUAL REPORT 2014 THE YEAR IN REVIEW 2014 2014 – Year in Review Surrounding environment remains protected, as conﬁrmed by the Supervising Scientist, Commonwealth Department of the Environment Ranger 3 Deeps Exploration Decline project completed on schedule and on budget Refer to page 14 for further detail Refer to page 17 for further detail Major activities of the $57 million Prefeasibility Study into underground mining substantially completed Draft Environment Impact Statement for proposed underground mining operation submitted to regulators Brine Concentrator processed 844 megalitres of water in ﬁrst full year of operations Processing operations resumed following recovery from Leach Tank 1 failure. No impact on the surrounding environment Refer to page 14 for further detail More than $23 million in additional cost savings in 2014 as part of ERA’s ongoing Business Review Refer to page 18 for further detail Refer to page 19 for further detail Refer to page 14 for further detail Refer to page 13 for further detail Produced 1,165 tonnes and sold 3,148 tonnes of uranium oxide Refer to page 14 for further detail Ahead of schedule on the rehabilitation of Pit 3, with 33.7 million tonnes backﬁlled, and brine injection infrastructure installed 69 female employees (18 per cent of employees) and 47 Indigenous employees (12 per cent of employees) Net loss after tax – $188 million. $293 million in cash on hand Refer to page 48 for further detail Refer to page 12 for further detail Capping in Pit 1 rehabilitation nearing completion Revegetation of Jabiluka pond rehabilitation site completed with additional 4,679 native tubestock planted Refer to page 15 for further detail Refer to page 15 for further detail Refer to page 15 for further detail ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 1 THE YEAR IN REVIEW 2014 Sales Revenue ($M) Drummed Production Tonnes (t) . 4 1 5 6 . 3 2 7 5 . 6 9 6 3 . 1 6 5 3 . 2 9 7 3 3 7 9 3 , 0 1 7 3 , 0 6 9 2 , 1 4 6 2 , 5 6 1 1 , 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Net Proﬁt After Tax ($M) Indigenous Employees (FTE’s) 9 9 3 0 1 7 4 1 8 9 7 6 . 3 5 1 - 8 . 8 1 2 - 8 . 5 3 1 - 8 . 7 8 1 - 7 4 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Operating Cashﬂow ($M) All Injury Frequency Rate (per 200,000 hrs worked) 9 . 4 5 1 . 2 4 7 2 . 1 1 9 . 0 3 . 3 - 9 . 7 1 - 0 . 4 5 - 3 7 . 0 7 5 . 0 2 5 . 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 2 SUBSECTION Navigate our Annual Report to see how we’re Powering Tomorrow. Throughout the report these icons are used to highlight key areas of our activity Safety Environment Communities and Government People Operations Business performance ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 3 CONTENTS Contents 2014 Annual Report 2014 – Year in Review .......................................................................... Inside front cover Company Proﬁle ........................................................................................................... 5 Chairman’s Report ........................................................................................................ 6 Chief Executive’s Report ............................................................................................... 8 2015 Objectives .......................................................................................................... 10 Operating and Financial Review .................................................................................. 12 Financial Performance ........................................................................................... 12 Operations ............................................................................................................ 14 Business Strategy .................................................................................................. 16 Future supply .............................................................................................................. 22 Ranger Ore Reserves ............................................................................................. 23 Markets and customers ............................................................................................... 26 Health and safety........................................................................................................ 30 Radiation monitoring .................................................................................................. 32 Regulatory framework ................................................................................................ 36 Sustainable Development Report Overview .................................................................................................................... 40 Environment ............................................................................................................... 41 Land ........................................................................................................................... 45 Employment ............................................................................................................... 48 Community ................................................................................................................. 51 Financial Report............................................................................................. 56 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 4 COMPANY PROFILE ERA is demonstrating strong environmental management practices as it continues to make progress on the rehabilitation of the exhausted Pit 1 and Pit 3 open cut mines. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 5 COMPANY PROFILE Company Proﬁle Energy Resources of Australia Ltd (ERA) operates the Ranger uranium mine in the Northern Territory of Australia. As Australia’s longest continually operating uranium producer, ERA has been reliably supplying customers in Asia, Europe and North America for more than three decades. ERA sells its product to international power utilities under strict international and Australian Government safeguards and non- proliferation conditions to ensure that Australian uranium is only used for peaceful purposes. Ranger is one of only three mines in the world to have produced in excess of 110,000 tonnes of uranium oxide (U3O8). ERA is currently processing stockpiled ore following the completion of open cut mining in 2012 and has been conducting underground exploration of the Ranger 3 Deeps mineral resource as it prepares for a potential transition to underground mining. ERA is demonstrating strong environmental management practices as it continues to make progress on the rehabilitation of the exhausted Pit 1 and Pit 3 open cut mines. Located eight kilometres east of Jabiru and 260 kilometres east of Darwin, in Australia’s Northern Territory, the Ranger mine lies within the 79 square kilometre Ranger Project Area. In addition, ERA holds the world-class Jabiluka Mineral Lease. In accordance with the Jabiluka Long Term Care and Maintenance Agreement, Jabiluka will not be developed by ERA without the approval of the Mirarr Traditional Owners. The Ranger Project Area and the Jabiluka Mineral Lease are located on Aboriginal land and are surrounded by, but separate from, the World Heritage-listed Kakadu National Park. ERA’s uranium mining activities are regulated through Commonwealth and Northern Territory legislation. Additional operating agreements have been entered into by the Northern Land Council on behalf of the Traditional Owners under the Commonwealth Aboriginal Land Rights (Northern Territory) Act 1976. Further agreements covering the Ranger Project Area were reached in January 2013 by the Gundjeihmi Aboriginal Corporation, on behalf of the Mirarr Traditional Owners, the Northern Land Council, ERA and the Commonwealth Government. The Company’s shares are publicly held and traded on the Australian Securities Exchange, with Rio Tinto, a diversiﬁed resources group, holding 68.4 per cent of ERA shares. Acknowledgement ERA acknowledges the Mirarr people, Traditional Owners of the land on which ERA operates. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 6 CHAIRMAN’S REPORT Chairman’s Report In last year’s annual report, I outlined the key areas of strategic focus for the Company during 2014. These included recovering momentum and regaining community and stakeholder conﬁdence following the leach tank failure and paving the way for a future as an underground miner with a signiﬁcantly smaller environmental footprint that can contribute to the global energy market and local economy. PETER MCMAHON CHAIRMAN I can report that during 2014 the Company’s key developments reﬂected the strategic focus set by the Board. The Supervising Scientist, Commonwealth Department of the Environment, conﬁrmed there was no detrimental impact to the surrounding environment or to the Kakadu National Park as a result of the leach tank failure. Although our protective spill containment systems worked as designed, we do recognise that the failure caused concern among our stakeholders and the community. Both the Board and management understand the importance of ensuring the safety and environmental performance of the Ranger mine and the need to maintain stakeholder conﬁdence in the operations at Ranger. Following the leach tank failure, the Company worked closely and openly with stakeholders on detailed investigations and reviews into the cause of the failure and on ensuring the integrity of other key assets. Most importantly, ERA management introduced permanent changes to process safety to help prevent any recurrence. Momentum was recovered during the year with Ranger achieving a safe and successful restart of processing operations. Ahead of receiving regulatory approvals, the Board agreed a scope of work in April to be undertaken to bring the plant to readiness for restart. By year end 2014 Ranger production was within our market guidance. The completion of the Ranger 3 Deeps Exploration Decline and the associated underground exploration drilling program has helped pave the way to a potential underground mine. In 2011 the Board approved the $57 million Prefeasibility Study into the Ranger 3 Deeps project. The major activities contributing to the Prefeasibility Study were substantially completed in 2014. Following the public comment period on the Ranger 3 Deeps draft Environmental Impact Statement, a supplementary Environmental Impact Statement will be lodged to allow for a government determination on the project later in 2015. The Company is committed to meeting its rehabilitation obligations. Our credentials in this regard were demonstrated in 2014 with substantial progress in major rehabilitation projects. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 7 CHAIRMAN’S REPORT ERA continues to make appropriate provision for the completion of rehabilitation. In addition, we maintain with the Commonwealth Government the Ranger Rehabilitation Trust Fund to provide security against the estimated costs of closing and rehabilitating the mine immediately. This is independently assessed and the Trust is made up of cash and bank guarantees. We have also continued to work with the Gundjeihmi Aboriginal Corporation, representing the Mirarr Traditional Owners. In particular the Relationship Committee, established under the Mining Agreement, met regularly in 2014 and is helping promote information sharing and collaboration. The committee is important in providing an opportunity to discuss issues of importance to the relationship, overseeing compliance with the Mining Agreement and allowing collaboration on issues such as the future of Jabiru, local housing needs, water management and local employment. We are at a critical juncture in ERA’s 30 year history and it comes at a time when global concern about climate change continues to reinforce the key role to be played by nuclear power in generating reliable, low emissions base load power. This discussion is taking place in Australia and overseas, and is reﬂected in new commitments to nuclear energy, ranging from the approval for restart of Japanese reactors to China’s nuclear expansion program. The majority of the growth in nuclear generation capacity is expected to come from Asia, including India. While in the short term the market will remain characterised by oversupply and softer demand, which contribute to weakness in spot prices, the spot price recovery from lows of US$28.23 per pound in mid-2014 to a year- end price of US$35.50 per pound is a positive trend. It is forecast to strengthen in the medium to long term. Japan’s decision to give ﬁnal approval for the restart of two reactors for Kyushu Electric Power Co. in November helped mark a shift in market sentiment. This was supported by China’s commitment to cap its carbon emissions by 2030 and increase the share of non-fossil fuels in its energy production. It has also been reinforced by commentary on the importance of nuclear power in addressing climate change. For example, in December 75 leading conservation scientists from around the world argued in an open letter to environmentalists that nuclear power generation needed to be part of the future global energy mix to reduce greenhouse gas emissions and protect biodiversity. World-wide there are currently 436 operating reactors, with 71 under construction, and a further 174 planned. In this context Ranger 3 Deeps is an important part of positioning the Company to take advantage of the projected recovery in uranium prices and to support the demand for low emissions power generation. ERA remains focused on managing its operations responsibly and meeting its commitments under the current Mining Agreement, while continuing to progress the Ranger 3 Deeps underground mine project. In closing I would like to express my appreciation to all the ERA team for their efforts during a demanding year. Peter McMahon Chairman ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 8 CHIEF EXECUTIVE’S REPORT Chief Executive’s Report ERA made a strong return to full operations in 2014 after receiving all regulatory and stakeholder approvals in June for a progressive restart of processing activities following the failure of Leach Tank 1 in December 2013. ANDREA SUTTON CHIEF EXECUTIVE There has been a necessary reduction in workforce size associated with the completion of open cut mining operations and the fact that we are processing stockpiled, lower grade ore. ERA’s Ranger 3 Deeps underground mine project is progressing, with a draft Environmental Impact Statement submitted to the Northern Territory and Commonwealth governments in October. The draft Environmental Impact Statement was open for public comment for 10 weeks. Feedback will be incorporated into a supplementary Environmental Impact Statement. The major activities contributing to the Prefeasibility Study into Ranger 3 Deeps were substantially completed by year end. The Prefeasibility Study assesses the technical, operational, economic, environmental and social impacts of underground mining. An independent Social Impact Assessment which formed part of the draft Environmental Impact Statement found that proceeding with the underground mine would deliver signiﬁcant and sustainable beneﬁts to the local community. 2014 also saw the completion of the underground Exploration Decline and associated infrastructure. Completion of the underground exploration drilling program and a cross-cut into the main ore body to obtain further data to optimise the underground mine design were also achieved during the year. Throughout a safe recovery operation, ERA also delivered on key strategic projects, continued structural changes towards a leaner and more agile business and worked to rebuild and strengthen relations with our key stakeholders. During the year ERA milled 1.3 million tonnes of stockpiled ore and produced 1,165 tonnes of uranium oxide, secured sales of drummed uranium of $379 million and reported a net loss after tax of $188 million. The business also achieved savings of more than $23 million and exceeded the $150 million target set for the end of 2014. This continues to be a focus for the business and further initiatives are underway. Delivery of cash generation initiatives and cost reductions is a key part of structural and operational changes necessary to create a leaner and more agile organisation for the transition to underground mining. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 9 CHIEF EXECUTIVE’S REPORT The drilling results show high grade intersections and as announced on 17 September 2014, an increase in the resource model estimate to 34,761 tonnes of uranium oxide. A total of 47,000 metres of underground exploration drilling was completed. Both the Exploration Decline and the exploration drilling occurred on time and within budget. A key focus of activities for ERA in the ﬁrst half of 2014 was recovery from the failure of Leach Tank 1 on 7 December 2013. A taskforce was established by the Commonwealth and Northern Territory governments to provide a coordinated regulatory response to the recovery works and investigations. The taskforce included representatives from the Commonwealth Department of Industry (now the Department of Industry and Science), the Northern Territory Department of Mines and Energy, NT Worksafe, the Supervising Scientist, Commonwealth Department of the Environment, the Gundjeihmi Aboriginal Corporation and the Northern Land Council. Restart was approved by regulators on 5 June 2014 following independent inspection and certiﬁcation of critical assets as being ﬁt for service. A key outcome of the investigations and recovery works was the development of the ERA Process Safety Improvement Action Plan, which will be reviewed on a quarterly basis by the Commonwealth and Northern Territory governments. The plan has introduced improvements to ERA’s Process Safety systems and imposed tighter governance of critical asset surveillance and maintenance regimes. ERA’s safety performance in 2014 showed a decline compared with 2013. The All Injury Frequency Rate (AIFR) was 1.27 (2013: 0.91). There were eight lost time injuries and one medical treatment case. In response we have undertaken a range of measures including increased safety training and prestart safety planning for maintenance crews. We also developed 17 critical control management plans for identiﬁed critical risks. ERA’s progressive rehabilitation program reached signiﬁcant milestones in 2014. In effect, the 2014/15 wet season represents “peak storage” for the Tailings Storage Facility and marks a key turning point for ERA as tailings are progressively transferred into Pit 3 following the initial backﬁlling and installation of drainage in the Pit and as the Brine Concentrator reduces the volume of process water in the Tailings Storage Facility. In Pit 1, ERA completed the pre- load rock capping to compress the tailings. A clay barrier is also being placed over the pre-load layer to allow the Pit 1 rainwater catchment to be formally reclassiﬁed from process water to pond water, signiﬁcantly reducing inputs to the Tailings Storage Facility. From 2017 the ﬁnal rock backﬁll will be placed ahead of shaping the ﬁnal landform and preparing for revegetation. In addition, ERA continued to work with Gundjeihmi Aboriginal Corporation and the Mirarr Traditional Owners on a range of issues, including the rehabilitation and revegetation of the site of the former Interim Water Management Pond at Jabiluka. Working and collaborating with the Mirarr Traditional Owners and other community stakeholders continues to be a central focus of our business. ERA and the Gundjeihmi Aboriginal Corporation are represented on and contribute to the new Kakadu West Arnhem Social Trust, which administers funding for cultural, educational and other social programs in the region. ERA and the Gundjeihmi Aboriginal Corporation also continue to engage through a number of formal structures that support regular meetings and sharing of information. More broadly in the community, ERA continued support for local festivals, engaged with local schools and students through the Education Partnership with the West Arnhem College which entered its ﬁfth year, funded the ﬁfth and ﬁnal year of the $28,000 Chaloupka Foundation Fellowship for Aboriginal rock art and raised funds for CareFlight through the Jabiru Triathlon. 2014 has been a challenging and rewarding year, in which we have successfully and safely achieved full mill throughput, identiﬁed and acted on opportunities for improvement, demonstrated industry leading expertise in rehabilitation, and readied the organisation for the potential transition to underground mining. These achievements are testament to the quality, dedication and expertise of our people and the continued support of our key stakeholders. I look forward to working with the ERA team again in 2015. Andrea Sutton Chief Executive ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 10 10 2015 OBJECTIVES 2015 Objectives The Company’s objective is to prepare for a future as an underground miner with a signiﬁcantly smaller environmental footprint, generating shareholder value and contributing to the local economy. AREA OBJECTIVES Health, Safety and Environment Implement the recommendations of the Process Safety Improvement Action Plan Committed to the goal of zero harm • • Focus on strong safety leadership with extensive employee and contractor engagement • Demonstrate a sound understanding of critical risk proﬁles within the organisation and monitor using Critical Control Management Plans • Fully integrate underground health and safety standards into existing management system in preparation for the potential transition to Ranger 3 Deeps mining operation • Continue to protect the surrounding environment and ensure ERA’s operations do not impact on the values of the World Heritage-listed Kakadu National Park through risk assessment and effective environmental management plans Financial Maximise cash generation and shareholder value • Optimise the business to adapt to lower production levels and market conditions • Maximise value from potential development options, including Ranger 3 Deeps • Continue to identify further opportunities for operational efﬁciencies and cost savings • Work with suppliers to improve delivery of goods and services in a cost effective way Ranger 3 Deeps Evaluate and identify the optimal development pathway for Ranger 3 Deeps • Submit supplementary Environmental Impact Statement • Engage and work collaboratively with the Gundjeihmi Aboriginal Corporation and other key stakeholders to gain support for the project • Secure statutory approvals for the project • Execution of the optimal development option for Ranger 3 Deeps commences Operations Economically produce uranium from stockpiled ore while integrating rehabilitation activities • Maximise production of uranium oxide • Optimise Brine Concentrator operations for a consistent production rate of 1.8 gigalitres of clean water per annum Rehabilitation Continue progressive rehabilitation of the Ranger Project Area • Successfully convert Pit 1 into a pond water catchment • Commission Pit 3 tailings and brine management infrastructure and commence transfer of dredged tailings from the Tailings Storage Facility to Pit 3 • Progress deﬁnition of closure criteria through the closure criteria working group Communities and Government Develop a shared understanding and strengthen relationships with key stakeholders • Actively engage, through effective dialogue and information sharing, with the Gundjeihmi Aboriginal Corporation on behalf of the Mirarr Traditional Owners, to achieve mutually beneﬁcial outcomes for the business and Traditional Owners People • Secure appropriate approvals to ensure ongoing business operations through engagement with governments, government agencies, Traditional Owners and other key stakeholders • Engage with governments, government agencies and other key stakeholders to ensure timely outcomes on development projects and operations • Continue to develop a long term vision for Jabiru with Traditional Owners, governments and stakeholders • Ongoing implementation of the objectives of the Ranger Mining Agreement, including business development, training and land management Foster a diverse, committed and capable workforce • Manage opportunities for employees in the transition to a potential underground mining operation • Continue to grow the diversity of the ERA workforce • Continue to support and develop ERA’s leaders through leadership programs and individual development plans • Continue to use ﬂexible people management strategies to ensure a committed and capable workforce • Continue to grow our regional training and development plan ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 11 2015 OBJECTIVES … prepare for a future as an underground miner with a signiﬁcantly smaller environmental footprint, generating shareholder value and contributing to the local economy. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 12 OPERATING AND FINANCIAL REVIEW Operating and Financial Review A new assessment of opportunities for improving efﬁciency as part of preparations for underground mining is now underway. Financial Performance CASH FLOW Operating cash ﬂow was negative $54 million for the 12 months ending 31 December 2014 (2013: negative $18 million). The absence of production in the ﬁrst half of the year was offset by cash generated from sales from inventories, a sustained focus on cash preservation and delivery of business improvement initiatives. Total cash ﬂow result for the year is inclusive of expenditure of $83 million for exploration and evaluation, $12 million for capital expenditure and $57 million for rehabilitation projects. The cash balance for the year decreased from $357 million at 31 December 2013 to $293 million at 31 December 2014. EARNINGS ERA recorded a net loss after tax of $188 million for the 12 months ending 31 December 2014 (2013: loss of $136 million). REVENUE In the delivery of reliable, long term supply of uranium oxide to customers, ERA principally focusses on sales into long term contracts. Earnings were impacted by a draw down in inventory associated with the plant suspension, the purchase of uranium oxide and exploration and evaluation expenditure relating to the Ranger 3 Deeps Exploration Decline and Prefeasibility Study. This was partially offset by reduced non-cash costs and increased sales revenue. ERA began a progressive restart of operations in June and returned to full mill throughput in the September quarter. In 2014 ERA’s revenue from the sale of uranium oxide was $379 million (2013: $356 million). Sales of uranium oxide were 3,148 tonnes (2013: 2,815 tonnes). Sales in the ﬁrst half of 2014 were supplied by existing levels of ﬁnished goods inventory on hand. ERA purchased uranium oxide to meet committed sales in the third quarter of 2014. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 13 OPERATING AND FINANCIAL REVIEW In 2014, weakness in both the spot and long term uranium oxide indicators continued, adversely affecting ERA’s average realised sale price. The average realised sale price of uranium oxide achieved by ERA in 2014 was US$49.50 per pound (2013: US$53.92). Sales of uranium oxide are denominated in US dollars. In 2014, the Australia dollar continued to fall relative to the strengthening US dollar, exerting a positive inﬂuence on ERA’s revenue, particularly in the fourth quarter of the year. COSTS All operating costs incurred (excluding the purchase of uranium oxide) while the plant was suspended were allocated to the Statement of Financial Performance rather than absorbed into inventories. Expenditure on contractors increased due to progress on the Ranger 3 Deeps Exploration Decline and Prefeasibility Study along with costs associated with the leach tank recovery works. Raw materials and consumable costs were lower due to the suspension of processing operations. Further savings have been achieved through improved procurement practices, reduction in the directly employed workforce and contractors, and continued focus on driving down corporate and overhead costs. A lower asset cost base combined with reduced production in 2014 associated with the plant shutdown delivered a further decrease in non-cash costs (depreciation). Depreciation is largely calculated on a units of production basis. With the construction of the Brine Concentrator in 2013 and no signiﬁcant new capital development projects, capital expenditure in 2014 decreased to $12 million (2013: $91 million). DIVIDENDS ERA Directors have determined that a dividend for 2014 will not be paid. No dividend was paid in 2013. FINANCIAL POSITION Net assets have decreased during the year by approximately $188 million. Impacting this was a decrease in cash, property, plant and equipment along with lower inventory holdings. These were partially offset by an increased deferred tax asset. Total liabilities have decreased primarily due to a reduction in the rehabilitation provision. ERA maintains approximately $293 million of cash on hand. REHABILITATION PROVISION ERA’s Integrated Tailings, Water and Closure Study has continued to optimise the rehabilitation plan for the Ranger Project Area. This review resulted in a decrease to the provision of $74 million. The provision for rehabilitation represents the net present cost for rehabilitation as at 31 December 2014 and stands at $512 million (2013: $603 million). The key changes related to the use of more efﬁcient technology in thickening tailings transferred from the existing Tailings Storage Facility to Pit 3. The overall rehabilitation strategy remains unchanged. BUSINESS REVIEW ERA’s Business Review identiﬁed opportunities to operate more efﬁciently and reduce costs. Introduced in 2011, the Business Review established cumulative operating cost saving targets of $150 million by the end of 2014. During 2014, the review achieved cost savings of more than $23 million, and exceeded the cumulative cost saving target of $150 million. A new assessment of opportunities for improving efﬁciency as part of preparations for underground mining is now underway. Further savings have been achieved through improved procurement practices, reduction in the directly employed workforce and contractors, and continued focus on driving down corporate and overhead costs. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 14 OPERATING AND FINANCIAL REVIEW Operations During 2014 the restart of the Ranger processing operations involved a progressive ramp up as processing facilities were returned to service. In line with production guidance, ERA produced 1,165 tonnes of uranium oxide in 2014 (2013: 2,960 tonnes). PLANT PERFORMANCE Following the progressive ramp up of operations, both of the main mills and the laterite mill performed at capacity and were fed with stockpiled ore. The volume of ore treated during the year was 1.3 million tonnes (2013: 2.3 million tonnes). Average mill head grade was 0.11 per cent (2013: 0.15). Milling rates of 305 tonnes per hour reﬂected strong milling plant performance associated with ERA’s preventative maintenance program. The processing shutdown in the ﬁrst half of 2014 also provided an opportunity to conduct maintenance on the mills and associated equipment. LEACH TANK RECOVERY Following the failure of Leach Tank 1 in December 2013, ERA immediately suspended processing operations and fully cooperated with a range of investigations by the Commonwealth Department of Industry (now the Department of Industry and Science), the Northern Territory Department of Mines and Energy, the Commonwealth Supervising Scientist and NT WorkSafe. ERA also commissioned an independent investigation into the root cause of the failure and an independent review of the integrity of the processing plant. (cid:83) Preparation work in Pit 3 A government appointed taskforce comprising representatives from the Commonwealth Department of Industry (now the Department of Industry and Science), the Northern Territory Department of Mines and Energy, NT WorkSafe, the Supervising Scientist, the Gundjeihmi Aboriginal Corporation and the Northern Land Council was established to provide a coordinated regulatory response to the leach tank failure. The taskforce provided input and oversight of recovery works and investigations. On behalf of the Northern Territory and Australian Governments, independent experts Noetic Risk Solutions and HRL Technology conducted an intensive investigation of the leach tank circuit and other critical infrastructure and ERA’s restart plans and plant integrity monitoring program. Their ﬁnal report was delivered to the Northern Territory and Commonwealth governments in October. In August the Supervising Scientist conﬁrmed there has been no impact to the surrounding environment as a result of the leach tank failure. In response to the learnings from the leach tank recovery, ERA has produced a detailed plan for the improvement of process safety management and governance at Ranger, the Process Safety Improvement Action Plan. BRINE CONCENTRATOR 2014 was the ﬁrst full year of operation for the Brine Concentrator (See Environment, page 43). The Brine Concentrator uses scientiﬁcally proven technology to treat process water stored in the Tailings Storage Facility. During 2014 ERA worked with manufacturer HPD, a subsidiary of Veolia Water Solutions and Technologies, on optimisation of throughput and treatment settings to maximise output. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 15 OPERATING AND FINANCIAL REVIEW During 2014 the Brine Concentrator produced a total volume of 844 megalitres of distillate. PROGRESSIVE REHABILITATION – PIT 3 The initial backﬁll of Pit 3 was successfully completed in August, with a total of 33.7 million tonnes of waste rock placed into the pit. ERA also completed installation of ﬁve brine injection wells, and a drain and extraction pump system which will enable injection of the waste brine from the Brine Concentrator into the pit and the transfer of dredged tailings from the Tailings Storage Facility. A dredge has been designed and constructed to operate within the Tailings Storage Facility and will facilitate the transfer and pumping of tailings to Pit 3. This work means that in 2015 ERA will have reached a signiﬁcant rehabilitation milestone and tailings currently held in the Tailings Storage Facility will be progressively transferred to Pit 3, and the water in the Tailings Storage Facility will be progressively drawn down and treated. The in-pit drainage and extraction pumping system installed in Pit 3 at the end of 2014 enables the removal of water associated with the tailings slurry mixture and water within the backﬁlled rock. This water returns to the Tailings Storage Facility from where it can be treated by the Brine Concentrator. The injection wells allow brines produced by the Brine Concentrator to be safely stored within the backﬁlled rock. Transfer of tailings to Pit 3 will begin in 2015, ahead of the eventual rock capping, landforming and revegetation with locally sourced native plant species. Final Pit 3 rehabilitation is to be completed by 2026. PROGRESSIVE REHABILITATION – PIT 1 Both Pit 1 and Pit 3 are intended to encapsulate all mill tailings. Pit 1 is the most advanced with tailings having previously been placed in the pit as required by the Ranger Authority. That meant that rainwater run-off from the Pit 1 catchment had to be managed as process water and transferred to the Tailings Storage Facility. Current activities are associated with dewatering of the tailings to allow for ﬁnal capping and conversion of the pit from a process water catchment to a pond water catchment. During the year ERA made signiﬁcant progress on the rehabilitation of Pit 1, which involved installing drainage wicks and compressing the tailings mass with a pre-load rock layer placed over geotextile fabric. The rock pre-load activates the drainage wicks, forcing the water in Pit 1 to travel to the surface where it is collected and pumped to the Tailings Storage Facility. Removal of the water promotes consolidation of the tailings and allows the placement of ﬁnal capping and rehabilitation to occur. ERA had completed the placement of the pre-load rock layer by year end and a trial plot constructed within Pit 1 demonstrated the effectiveness of an impervious clay liner placed over the rock layer for water management. Analysis of rainwater run-off from the clay liner demonstrates that when completed the capped Pit 1 will be able to be managed as a pond water rain catchment area. Completion of the clay liner will allow the ﬁnal bulk rock ﬁll to be placed from 2017 ahead of landforming and revegetation. A critical outcome of this change in water management for the Pit 1 water catchment area is a further and signiﬁcant reduction in process water entering the Tailings Storage Facility. REHABILITATION – JABILUKA POND The other principal rehabilitation activity undertaken in 2014 was the continued work to revegetate the former site of the Jabiluka Interim Water Management Pond. In conjunction with the Gundjeihmi Aboriginal Corporation and Mirarr Traditional Owners, ERA has worked to rehabilitate and revegetate disturbed areas of the Jabiluka lease, including the site of the now dismantled pond. During 2014 the planting at Jabiluka was completed with an additional 4,679 local native tubestock trees planted at the landformed pond site (see Environment page 45). ERA’s overall approach is informed by outcomes from the large-scale trial landform project (see Land, page 45). This project identiﬁes effective strategies for surface landform design, erosion control and revegetation techniques for plant species. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 16 OPERATING AND FINANCIAL REVIEW JABIRU AIRPORT The Jabiru Airport is located on the Ranger Project Area. The airport provides a critical regional air transport service for mining operations, tourism, emergency services and local communities. In October ERA completed asphalt resealing works on the airport runway and turning apron. The reseal covered an estimated 38,000 square metres to a depth of 25 millimetres. The airport was also recertiﬁed by the Civil Aviation Safety Authority. JABIRU HOUSING AND ACCOMMODATION ERA currently manages 279 houses in Jabiru. During 2014 ERA continued discussions with the Gundjeihmi Aboriginal Corporation relating to the future use of houses previously used to accommodate Ranger employees. Sixty houses were renovated and painted as part of routine maintenance. Business Strategy ERA is undergoing a business transition as it prepares for the proposed Ranger 3 Deeps underground mine. This transition is in line with ERA’s vision to be a world-class uranium supplier that contributes to environmental sustainability and is trusted by Traditional Owners, the community and its people. ERA’s key business objectives are to: • develop a long term resource base on the Ranger Project Area; • continue to operate effectively and safely; • build and maintain strong stakeholder relationships; and • demonstrate excellence in rehabilitation practices. ERA considers that the implementation of these objectives will maximise shareholder value and beneﬁt its stakeholders. With the completion of open cut mining at Ranger, the future for ERA is focused on the potential development of a low impact underground mining operation. The Ranger 3 Deeps underground mine is scheduled to progress in parallel with progressive rehabilitation of disturbed surface areas and continued management of water inventories. Should the proposal for the development of the Ranger 3 Deeps underground mining operation proceed, ERA will continue to provide the world’s nuclear utilities with reliable, high quality and competitive uranium supply. In addition, the scheduled development of the Ranger 3 Deeps underground mine will position ERA to take advantage of an expected medium-term recovery in demand and prices for uranium. (cid:83) Kevin Horace at the ball mill, which is part of the ore grinding circuit of the Ranger processing plant ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 17 OPERATING AND FINANCIAL REVIEW (cid:83) The Ranger 3 Deeps Exploration Decline was completed in 2014 ERA’s operations are located on Aboriginal land and are surrounded by, but separate from, the World Heritage-listed Kakadu National Park. Respecting the culture and aspirations of Indigenous people in our community, particularly the Mirarr Traditional Owners, is a central element of ERA’s overall strategy. This respect is closely linked with our commitment to protect the environment. ERA continues to invest in water management infrastructure and progressive rehabilitation of the Ranger Project Area. In addition to Ranger 3 Deeps, the Jabiluka Mineral Lease remains one of ERA’s key assets. ERA has entered into a Long Term Care and Maintenance Agreement with the Mirarr Traditional Owners in relation to Jabiluka. Future mining developments at Jabiluka will not occur without the consent of the Mirarr Traditional Owners. RANGER 3 DEEPS EXPLORATION DECLINE The Exploration Decline project, which was completed in 2014, comprised a three-phase construction program and an underground drilling program. The ﬁrst phase of development, completed in April 2014, involved construction of a 185 metre entrance portal and 1,900 metres of tunnel development. The second phase of development involved construction of a low- proﬁle ventilation shaft and an extension to the decline to a distance of 2,710 metres. The third phase involved a 40 metre cross-cut through the ore body. The cross-cut was designed to gather further data to validate mine design assumptions. The exploration drilling program occurred in parallel with the decline construction and comprised a total of 47,000 metres of close spaced drilling. The main objectives of the Ranger 3 Deeps underground drilling program were to: • increase conﬁdence in the known mineralisation to allow conversion to a mineral resource; • understand the distribution and abundance of deleterious minerals such as carbonate; • support the development of prefeasibility level mine plans; and • explore those prospective areas with less historical drilling, particularly at the northern end of the deposit. … the scheduled development of the Ranger 3 Deeps underground mine will position ERA to take advantage of an expected medium-term recovery in demand and prices for uranium. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 18 OPERATING AND FINANCIAL REVIEW (cid:83) The 185 metre long entrance portal for the Ranger 3 Deeps Exploration Decline Analysis of drilling results has signiﬁcantly enhanced the resolution of the geological model and helped deﬁne the extent of the Ranger 3 Deeps mineralised zone (see Future Supply, page 22). VENTILATION SHAFT The six metre high and 5.5 metre wide Exploration Decline tunnel is continuously ventilated with fresh air pumped to the working areas. During 2014 work was completed on the three metre diameter vertical ventilation shaft extending 280 metres below the surface. The ventilation shaft excavation encountered unstable ground near the surface in May and required a modiﬁcation in construction techniques. A corrugated steel cylinder – similar to the material used to create the decline entrance portal – was placed vertically within the upper portion of the ventilation shaft while the surrounding ground was reinforced with a mixture of cement and rock. The ventilation shaft was successfully commissioned in October. RANGER 3 DEEPS PREFEASIBILITY STUDY The $57 million Prefeasibility Study into the potential development of the Ranger 3 Deeps underground mine assessed the economic viability of the proposed mine, including the preferred mining method and the expected metallurgical performance and production rates. This work also included designs for associated surface infrastructure such as the power plant, cooling facilities for underground air supply, a paste plant for backﬁll operations, and additional low-proﬁle ventilation shafts. Environmental studies were also undertaken in support of the environmental assessment process to address both Northern Territory and Commonwealth environmental requirements. These studies examined a range of factors associated with the proposed underground mine across all operational phases (construction, operation and closure) including: • radiation health and safety; • water management; • ﬂora and fauna surveys; • air quality; • noise and vibration; • hydrogeological assessment; • cultural heritage; • socio-economic assessment; • transport; and • closure planning. As part of preparations for the proposed underground mine ERA’s core sorting plant has been recommissioned to treat ore that contains high carbonate content. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 19 OPERATING AND FINANCIAL REVIEW The Prefeasibility Study has identiﬁed long-haul open stope mining with paste backﬁll as the preferred mining technique. This will require the construction of a paste plant at the surface. The study has also developed a cost effective approach involving reuse of processed tailings material for the paste backﬁll operations required as part of the preferred stope and backﬁll mining technique. The addition of cement to the wet tailings mix provides the necessary structural strength for use as paste backﬁll. Reusing tailings in this manner saves on backﬁll material costs, returns the tailings to their original underground location and reduces the volume of tailings to be placed in Pit 3. The major activities contributing to the Ranger 3 Deeps Prefeasibility Study have been substantially completed, on schedule and on budget. ERA will undertake further work to review key technical assumptions and optimise the development pathway. Subject to satisfactory completion of this additional work, it is expected that the Board will consider progressing to Feasibility Study in 2015. REGULATORY APPROVAL Regulatory approval for the Ranger 3 Deeps underground mine is being pursued in accordance with the Northern Territory Environmental Assessment Act and the Commonwealth Environment Protection and Biodiversity Conservation Act 1999. The Northern Territory Environmental Protection Agency and the Commonwealth Department of Environment have determined that the proposed underground mine requires assessment at the level of Environmental Impact Statement through a single assessment process. The draft Environmental Impact Statement for the Ranger 3 Deeps underground mine was submitted to the assessment agencies and the public comment period commenced on 3 October. During the following ten-week review period members of the public and interested parties were invited to comment on the project. A series of public meetings and information sessions were held in Jabiru, Gunbalanya and Darwin during the review period to raise awareness of the project. In addition, ERA held four community information days from June to September, and conducted bus tours of the Ranger mine site, at which information was provided about the proposed mine. During the public review phase, hard copies of the draft Environmental Impact Statement were made available in Jabiru at the ERA community ofﬁce, the ofﬁces of the Gundjeihmi Aboriginal Corporation and the Northern Land Council, and the West Arnhem Regional Council. Hard copies were also available in Darwin at the Northern Territory Library, the Northern Territory Environment Centre, the Mines and Energy Information Centre, and ofﬁces of the Northern Territory Environment Protection Authority and Commonwealth Department of the Environment. Consideration of the submissions received will form part of the process for developing a supplementary Environmental Impact Statement, which is expected to be submitted to the Northern Territory Environment Protection Authority and the Commonwealth Department of the Environment in the ﬁrst half of 2015. More information about the draft Environmental Impact Statement approval process can be found at the Department of Environment website: www.environment.gov.au BUSINESS RISKS The business risks that could adversely affect the achievement of the ﬁnancial performance or ﬁnancial outcomes set out in this section are described below. Exploration and project development risks Exploration activities are inherently uncertain. There is a risk that the exploration activities undertaken by ERA may not be successful in delineating economically mineable reserves and resources. There is also a risk that the development of the Ranger 3 Deeps resource may not be economically viable within the time constraints of the Ranger Section 41 Authority. If the Ranger 3 Deeps resource is not economically viable within the current Ranger Section 41 Authority, an extension may be sought. There is no guarantee that an extension could be obtained. Rehabilitation ERA currently has authority to produce uranium oxide at the Ranger Project Area until January 2021 and must fully rehabilitate the site by January 2026. The ultimate cost of rehabilitation is uncertain and while ERA has used its best estimate, costs may vary in response to factors such as legal requirements, technological change and market conditions. In addition, if the Ranger 3 Deeps mine is not developed, in the absence of any other successful development, ERA may require an additional source of funding to fully fund the rehabilitation of the Ranger Project Area. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 20 OPERATING AND FINANCIAL REVIEW Any inability to obtain additional capital or to monetise assets would have a material impact on ERA’s business and ﬁnancial performance. Water management Management of water on the Ranger Project Area is critical to the ongoing operation of the Ranger mine and rehabilitation activities. ERA has a number of procedures and initiatives underway in respect to water management, including the Brine Concentrator. To the extent that these initiatives cost more than expected or ERA is required to implement further initiatives, ERA’s ﬁnancial and operational performance and position may be impacted. Uranium market demand, price and foreign exchange risks ERA’s business relates primarily to the production and subsequent sale of uranium oxide to a variety of customers. Demand for, and pricing of, uranium oxide remains sensitive to external economic and political factors, many of which are beyond ERA’s control. Global uranium and foreign exchange market ﬂuctuations may materially affect ERA’s ﬁnancial performance. General regulatory risks Uranium mining in Australia is extensively regulated by Commonwealth, State and Territory Governments. In particular, the approval processes for uranium mining are more onerous, and therefore more costly, than for the mining of other minerals. Government actions in Australia and other jurisdictions in which ERA has interests, including new or amended legislation, guidelines and regulations in relation to the environment, uranium or nuclear power sectors, competition policy, native title, and cultural heritage could impact ERA’s operations. Operational aspects that may be affected include, among other things, land access rights, the granting of licences and other tenements, the extension of mine life and the approval of developments. Capital and liquidity risks The future liquidity and capital requirements of ERA will depend on many factors, including foreign exchange rate, prices, costs, resource and mining techniques. In particular, if ERA wishes to develop the Ranger 3 Deeps underground mine, based on current assumptions, ERA is likely to require capital at that time. Any inability to obtain sufﬁcient capital would have a material impact on ERA’s business and ﬁnancial performance. Each year, the Company is required to prepare and submit to the Commonwealth Government an Annual Plan of Rehabilitation. Once accepted by the Commonwealth Government, the annual plan is then independently assessed and costed and the amount to be provided by the Company into the Ranger Rehabilitation Trust Fund is then delivered. The Trust Fund includes both cash and ﬁnancial guarantees. The Company’s ability to access bank guarantees can be inﬂuenced by many factors including, cash balance, future cash ﬂows and shareholder support. Guarantees are generally renewed annually. Should renewal not occur, additional cash would be required to be deposited into the Trust Fund. Regulators and stakeholders Regulatory approvals will be required to commence any production from the proposed Ranger 3 Deeps mine or on any other parts of the Ranger Project Area. If regulatory approvals are not obtained in the proposed timeframe, or are obtained on unsatisfactory conditions, ERA will not be able to proceed with those developments. Jabiluka In relation to Jabiluka, ERA has agreed that future mining development will not occur without the consent of the Mirarr Traditional Owners. There is no guarantee that this consent will be forthcoming and, by extension, that the Jabiluka deposit will be developed. (cid:87) ERA General Manager Operations, Tim Eckersley ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 21 OPERATING AND FINANCIAL REVIEW ERA’s planning and operational activities are built on a comprehensive water management strategy based on industry leading monitoring systems. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 22 FUTURE SUPPLY Future supply (cid:83) Underground Construction Supervisor, Ross Howard, at one of the refuge chambers in the Ranger 3 Deeps Exploration Decline EVALUATION AND EXPLORATION During 2014 ERA completed work on the $120 million Exploration Decline to enable close spaced underground drilling of the Ranger 3 Deeps mineral resource to be undertaken. The major activities contributing to the $57 million Prefeasibility Study into the proposed Ranger 3 Deeps underground mine were also substantially completed (see Operating and Financial Review, page 18). ERA has reviewed the Ranger 3 Deeps resource model and has made appropriate adjustments to the mineral resource statement. The updated resource model estimate is 12.2 million tonnes at 0.285% U3O8 equating to 34,761 tonnes of uranium oxide. This compares to the previously reported estimate of 11.9 million tonnes at 0.274% U3O8 equating to 32,620 tonnes of contained uranium oxide. During 2014, ERA also conducted surface exploration drilling on the Ranger Project Area at a cost of $5.8 million (2013: $10.5 million). This exploration targeted deep structurally complex areas generated by analysis and interpretations of geology, geochemistry and geophysics to deﬁne and determine potential additional resources on the Ranger Project Area. No signiﬁcant intersections were encountered. RANGER PROJECT AREA RESERVES AND RESOURCES During 2014, ERA processed 1,444 tonnes of uranium oxide. Consequently, the Probable Ore Reserves for Ranger decreased from 6,756 tonnes of uranium oxide to 6,206 tonnes of uranium oxide. The depletion was partially offset by a variance in the recovery of uranium oxide (894 tonnes) from stockpiled ores relative to the uranium oxide predicted by the stockpile resource model. During the reporting period, all processed ore was sourced from either run of mine stocks or low grade stockpiles. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 23 FUTURE SUPPLY For the same period, Ranger Mineral Resources decreased by 3,623 tonnes of uranium oxide, from 56,334 tonnes to 52,711 tonnes. The decrease was mainly due to the placement of low grade ores in Pit 3 as part of the initial backﬁll process. The table below sets out the reconciliation of Ranger Ore Reserves. Ranger Ore Reserves JABILUKA RESERVES AND RESOURCES The Jabiluka Mineral Lease (MLN1) remains under long term care and maintenance. In accordance with the Long Term Care and Maintenance Agreement, development by ERA will not proceed without the approval of the Mirarr Traditional Owners. RANGER ORE RESERVES RECONCILIATION ORE RESERVES Ranger Ore Reserves as at 1 January 2014 Depletion by processing (primary and laterite ores) Favourable Stockpile model variance in Primary Stockpile Favourable Stockpile model variance in Laterites Ranger Ore Reserves as at 31 December 2014 *Rounding differences may occur GOVERNANCE ARRANGEMENTS AND INTERNAL CONTROLS As a member of the Rio Tinto Group, ERA applies the standards of the Rio Tinto Ore Reserves Steering Committee (ORSC) in the generation and publication of Mineral Resources and Ore Reserves. Rio Tinto has established governance arrangements, in which ERA participates, to support this process. The ORSC meets at least quarterly and is chaired by the Rio Tinto Group executive, Technology and Innovation. It comprises senior representatives from technical, ﬁnancial and business groups within the Rio Tinto Group. The ORSC’s role includes setting the standards and qualiﬁcations for Competent Persons in accordance with the JORC Code 2012 which form the basis of Competent Person appointment by ERA. Rio Tinto’s Resource and Reserve internal audit program is conducted by independent external consulting personnel in a program managed by Rio Tinto Group Audit and Assurance with the assistance of the ORSC. Rio Tinto has continued the development of internal systems and controls to ensure compliance with the JORC Code 2012 in all external reporting including the preparation of reported data by ERA’s Competent Persons. As well as the establishment of an enhanced governance process, there have been a number of process improvements and training initiatives introduced by the ORSC over recent years, including a web-based reporting and sign-off database, annual internal Competent Person reports and Competent Person development and training. The reserves and resources at Jabiluka remained unchanged during the year at 67,700 tonnes (reserves) and 73,940 tonnes (resources) of contained uranium oxide. URANIUM OXIDE (U3O8 TONNES)* 6,756 (1,444) 736 158 6,206 Internal sign-off of Mineral Resources and Ore Reserves for ERA is the responsibility of the Chief Executive and estimates are carried out by Competent Persons as deﬁned by the JORC Code 2012. ERA’s Competent Persons are all full time employees of ERA. In addition to the arrangements and internal controls established by the ORSC, the ERA Board oversees the governance of resources and reserves. This includes the annual review and approval of the publicly reported Ore Reserves and Mineral Resources Statement. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 24 FUTURE SUPPLY Ore Reserves and Mineral Resources Statement for 2014 ERA 2014 ORE RESERVES & MINERAL RESOURCES CUT-OFF GRADE – STOCKPILE ORE 0.08% U3O8 CUT-OFF GRADE – STOCKPILE ORE 0.08% U3O8 AS AT 31 DECEMBER 2014 AS AT 31 DECEMBER 2013 ORE (MT) % U3O8 t U3O8 ORE (MT) % U3O8 t U3O8 RANGER ORE RESERVES Current Stockpiles 5.05 0.123 6,206 5.47 0.123 6,756 Ranger No. 3 Pit In situ Proved Probable – – – – – – – – – – – – Sub-total Proved and Probable Reserves 5.05 0.123 6,206 5.47 0.123 6,756 Total Ranger No. 3 Stockpiles, Proved and Probable Reserves RANGER MINERAL RESOURCES In Addition To The Above Reserve 5.05 0.123 6,206 5.47 0.123 6,756 CUT-OFF GRADE – STOCKPILE RESOURCE 0.02% U3O8 UNDERGROUND INSITU RESOURCE 0.15% U3O8 CUT-OFF GRADE – OPEN PIT IN SITU RESOURCE 0.02% U3O8 UNDERGROUND INSITU RESOURCE 0.15% U3O8 Current Mineralised Stockpiles 38.29 0.05 17,844 49.89 0.05 23,037 In situ resource (R3 Deeps) Measured Indicated Sub-total Measured and Indicated Resources Inferred Resources Total Resources 2.78 6.30 47.37 3.50 50.87 0.32 0.28 0.09 0.25 0.10 8,922 17,366 44,128 – 9.49 59.38 8,579 0.65 52,711 60.03 – 0.32 0.09 0.38 0.09 – 30,820 53,857 2,477 56,334 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 25 FUTURE SUPPLY AS AT 31 DECEMBER 2014 CUT-OFF GRADE 0.20% U3O8 AS AT 31 DECEMBER 2013 CUT-OFF GRADE 0.20% U3O8 ORE (MT) % U3O8 t U3O8 ORE (MT) % U3O8 t U3O8 JABILUKA ORE RESERVES Proved Probable – 13.80 Total Proved and Probable Reserves 13.80 JABILUKA MINERAL RESOURCES In Addition To The Above Reserve Measured Indicated Sub-total Measured and Indicated Inferred Resources Total Resources Note: Ranger Ore Reserves and Mineral Resources are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition (JORC Code 2012). In 2013, Jabiluka Ore Reserves and Mineral Resources were reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2004 Edition (JORC Code 2004). On the basis that there was no new data or information available in 2014 that would require the estimates to be updated, Jabiluka Ore Reserves and Mineral Resources continue to be reported under the JORC Code 2004. Each of the JORC Code 2012 and the JORC Code 2004 envisage the use of reasonable investment assumptions, including the use of projected long-term commodity prices, in calculating reserve estimates. As required by the Australian Securities Exchange (ASX), the above tables also contain details of other mineralisation that has a reasonable prospect of being economically extracted in the future but which is not yet classiﬁed as Proven or Probable Reserves. This material is deﬁned as Mineral Resources under the JORC Code 2012 and the JORC Code 2004. – 0.49 0.49 0.48 0.36 0.36 0.53 0.48 – 67,700 67,700 1,140 15,330 16,440 57,500 73,940 – 13.80 13.80 0.24 4.30 4.54 10.90 15.44 – 0.49 0.49 0.48 0.36 0.36 0.53 0.48 – 67,700 67,700 1,140 15,300 16,440 57,500 73,940 0.24 4.30 4.54 10.90 15.44 Estimates of such material are based largely on geological information with only preliminary consideration of mining, economic and other factors. While in the judgment of the Competent Person there are realistic expectations that all or part of the Mineral Resources will eventually become Proven or Probable Reserves, there is no guarantee that this will occur as the result depends on further technical and economic studies and prevailing economic conditions in the future. The information in the above table is sourced from the Energy Resources of Australia Ltd (ERA) 2014 Annual Statement of Reserves and Resources which was released to ASX on 6 February 2014 and can be found at: www.asx.com.au/asxpdf/20150206/ pdf/42wg9j5tpg0ksw.pdf. Neither the information that relates to Ranger and Jabiluka Mineral Resources or Ore Reserves, nor the underlying resource models, has changed since the ERA 2014 Annual Statement of Reserves and Resources was disclosed to ASX. ERA is not aware of any new information or data beyond the updates already provided to the market that materially affects the Ore Reserves and Mineral Resources estimate. All assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. The information in this report that relates to Ranger and Jabiluka Mineral Resources is based on information compiled by geologists Stephen Pevely (a full time employee of ERA) and Greg Rogers (a full time employee of ERA). The information in this report that relates to Ranger and Jabiluka Ore Reserves is based on information compiled by mining engineer John Murphy (a full time employee of ERA). Stephen Pevely, Greg Rogers and John Murphy are all members of the Australasian Institute of Mining & Metallurgy and have sufﬁcient experience which is relevant to the style of mineralisation and the type of deposit under consideration, and to the activity which they are undertaking, to qualify as Competent Persons as deﬁned in the JORC Code 2012 and the JORC Code 2004. Stephen Pevely, Greg Rogers and John Murphy consent to the inclusion in this report of the matters based on their information in the form and context in which it appears. Summary data for year end 2013 are shown for comparison. Metric units are used throughout. The ﬁgures used to calculate reserves and resources are often more precise than the rounded numbers shown in the tables, hence small differences might result if the calculations are repeated using the tabulated ﬁgures. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 26 MARKETS AND CUSTOMERS Markets and customers (cid:83) Plant Technician Brett Warhurst in the processing control room at Ranger ERA sells its product – drummed uranium oxide – to electric utilities in Asia, Europe and North America. These exports are subject to strict safeguards and non-proliferation conditions to ensure that Australian uranium is only used for peaceful purposes. In April ERA and Rio Tinto Uranium executed a new sales and marketing agreement which has seen production from ERA and Rössing Uranium Limited (a subsidiary of Rio Tinto plc) combined to create a multi-sourced marketing pool. The agreement is now in effect and operating successfully. Under the agreement, Rio Tinto Uranium purchases all uranium oxide produced by ERA and Rössing Uranium Limited to market and sell to nuclear utility customers around the world. The price received by ERA for sales into the combined pool reﬂects the price received from customers by Rio Tinto Uranium less an arms- length marketing fee. Previously, Rio Tinto Uranium provided marketing services to ERA under an agency- based arrangement with sales contracts being entered into directly between ERA and the customer. Should the Ranger 3 Deeps underground mine be developed as planned, ERA’s long production history and strong relationship with its customer base will create a platform for continuity of supply and operations. In 2014 ERA produced 1,165 tonnes of uranium oxide (2013: 2,960 tonnes) and sold a total of 3,148 tonnes of uranium oxide (2013: 2,815 tonnes). ERA’s average realised price in 2014 was $US49.50 per pound (2013: $US53.92 per pound), which was signiﬁcantly higher than the spot price over the course of the year. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 27 MARKETS AND CUSTOMERS ERA focusses on long term contracting with a variety of pricing mechanisms in order to capture the highest market value for its product, and to reduce its exposure to the spot price, which historically lags long term prices India also has an ambitious program to expand its nuclear power generation, and this year saw positive developments with regard to the Australian Government concluding a nuclear cooperation agreement with India. While this requires additional administrative agreements to be negotiated and concluded, it is a promising ﬁrst step towards ERA being able to export uranium to India for use in commercial reactors. At Ranger, ERA’s current work to develop the Ranger 3 Deeps underground mine will position the Company to take advantage of expected future nuclear power growth. ERA focusses on long term contracting with a variety of pricing mechanisms in order to capture the highest market value for its product, and to reduce its exposure to the spot price, which historically lags long term prices. Since the March 2011 tsunami and accident at Fukushima, the global uranium market continues to suffer from reduced demand and excess supply, resulting in depressed prices. The spot price reached a low of US$28.23 per pound in mid-2014, and later recovered to the US$35.50 per pound by year-end, which represents only a modest recovery above 2006 price levels. While the Japanese reactor ﬂeet of 54 units remains closed due to the accident at Fukushima, the Japanese Government and regulatory bodies continue to work on a program to restart reactors. It is expected that three to four reactors will be back on line in the ﬁrst half of 2015, and ﬁve to 10 restarted each year after that. Continued production expansion from existing mines, along with secondary-supply disposition from a variety of sources, has created a substantial increase in supply during a period of reduced demand. Although these factors are dampening price strength in the short term, the medium and longer term outlook for uranium remains positive. New reactor growth in China and the planned restart of the Japanese reactor ﬂeet is expected to drive growth from 2015 to 2025 which is forecast to be higher than at any period since the 1970s. China will likely become the world’s largest user of nuclear energy, surpassing the United States of America in the early part of the next decade. Mainland China has 21 nuclear power reactors in operation and 27 under construction. Planned additional reactors include some of the world’s most advanced, and will give China more than a three-fold increase in nuclear capacity to at least 58 gigawatts by 2020. This is expected to increase to around 150 gigawatts by 2030. World-wide there are 436 operating reactors, with 71 under construction, and a further 174 planned. The majority of reactor growth is occurring in Asia, including India. This growth is being driven by energy security concerns and the rapidly expanding power requirements needed to sustain regional economic growth, as well as continued action on managing air pollution associated with coal ﬁred power and reducing greenhouse gas emissions. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 28 FUTURE SUPPLY (cid:83) Pit 3 mining operations prior to closure of the mine at the end of 2012 (cid:88) Installation of the drainage system in Pit 3, December 2014, to convert the pit to receive tailings as part of Tailings and Brine Management program ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 29 FUTURE SUPPLY Delivering on rehabilitation, ERA invested a further $57 million on rehabilitation in 2014, including the initial backfilling of Pit 3 with more than 33 million tonnes of material. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 30 HEALTH AND SAFETY Health and safety Safety is a core value for ERA. The team at ERA is committed to zero harm. To achieve the goal of zero harm, ERA has established clear accountabilities and systems, designed to help employees, contractors and managers take personal responsibility for safe behaviour. ERA has a range of programs and strategic approaches designed to help new arrivals and experienced workers alike maintain focus on safe behaviour. These programs and strategies are supported by systems and processes which provide a framework for translating corporate goals into safe work practices at business unit, work team and individual levels. ERA measures safety by the All Injury Frequency Rate (AIFR). This is a measure of all reportable injuries – lost time injuries, restricted work injuries and medical treatment cases – per 200,000 hours worked. Disappointingly, during 2014 there was a decline in ERA’s safety performance compared to the strong performance of 2013. The AIFR was 1.27 (2013: 0.91). ERA’s Lost Time Injury Frequency Rate (LTIFR) per 200,000 hours for 2014 was 1.13 compared with 0.52 in 2013. (cid:83) Emergency Services Ofﬁcer Matthew Lynch Medical treatment cases Operator fell to the ground requiring treatment Lost Time Injuries Operator suffered injury to head when excavator rolled on its side Maintainer fractured bone in hand while operating a drill Operator injured hand in operating conveyor Maintainer fractured thumb following impact from hammer Field assistant rolled ankle while exiting caravan steps Maintainer injured ﬁnger caught between belt and pulley Operator injured elbow when metal lid fell onto arm Contractor injured hand caught in container door ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 31 HEALTH AND SAFETY AUDITS ERA’s Health, Safety and Environment Management System includes the Water Management and Radiation Management Systems. ERA’s integrated Health, Safety and Environment Management System provides certiﬁcation to both ISO 14001 (the international standard for environmental management systems) and AS4801 (the Australian standard for occupational health and safety management systems). During 2014 the Health, Safety and Environment Management System was subject to independent audit for the purpose of ensuring compliance and recertiﬁcation to the relevant standards. As a result, the Health, Safety and Environment Management System was recertiﬁed as compliant with ISO 14001 and AS4801. In addition to a series of investigations and reviews associated with the failure of Leach Tank 1 in December 2013 (see Operations page 14) ERA participated in range of routine audits. ERA participated in the annual Government and Stakeholder Audit, which monitors compliance with government regulations and also completed 13 government and stakeholder inspections which take place every four weeks throughout the year. SAFETY LEADERSHIP Safety leadership is a core element of ERA’s safety culture and involves ongoing engagement with leaders, employees and contractors on safety issues, awareness and training. Safety leadership was a central part of planning and delivery of ERA’s operational activities in 2014, including the clean-up and recovery operation associated with the failure of Leach Tank 1, the successful completion of the underground Exploration Decline, the initial backﬁll of Pit 3, and the rock capping of Pit 1. During 2014 ERA continued a range of targeted safety campaigns designed to raise awareness and encourage safe behaviours in relation to driving between Darwin and Jabiru, prestart safety planning for maintenance crews and hydration and heat stress management, particularly in the lead up to the end of year wet season. The non-routine nature of work associated with the demolition of the damaged Leach Tank 1 and the associated clean-up activities required close attention to safety inductions and management for contractors. During the year ten Critical Control Management Plans (CCMPs) were developed for the high and critical risks in the ERA Health, Safety and Environment Risk Register. CCMPs systematically document and address control measures to manage risks including classiﬁed plant, crane and electrical competency of contractors, high voltage switching, road travel and working at heights. PROCESS SAFETY The introduction of the Process Safety Improvement Action Plan in 2014 provides a strong focus on the integrity of key assets and the culture of asset safety awareness. The action plan and its implementation are to be reviewed on a quarterly basis by the Commonwealth and Northern Territory regulators. The action plan builds on ERA’s previous process safety review activities, which include the identiﬁcation and analysis of process safety hazards and a focus on the effectiveness of critical controls to prevent and mitigate process safety incidents. To achieve the goal of zero harm, ERA has established clear accountabilities and systems, designed to help employees, contractors and managers take personal responsibility for safe behaviour. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 32 RADIATION MONITORING Radiation monitoring (cid:83) ERA Radiation Safety Advisor, Andrew Walcott, undertakes a radiation check ERA’s Ranger mine radiation monitoring program helps ensure that radiation exposure to workers, the public and the environment is as low as reasonably achievable (ALARA). The radiation monitoring program is supported by the ERA Radiation Policy and a comprehensive Radiation Management Plan. These are designed to achieve the responsibilities and performance outcomes speciﬁed in ERA’s overarching Health, Safety and Environment Management System. ERA’s Health, Safety and Environment Management System is certiﬁed to Australian (AS4801) and international (ISO14001) standards and was independently audited and successfully recertiﬁed in 2014. ERA uses a variety of ﬁxed and personal monitoring systems to assess radiation exposure. Results from this monitoring program for the ﬁrst three quarters of 2014 demonstrate that workers, the public and the environment were not exposed to unacceptable levels of ionising radiation and all results were well below regulatory dose limits. Results for the fourth quarter will not be known until early in 2015. The International Commission on Radiological Protection (ICRP) recommends limits for uranium industry workers as adopted into Australian legislation. The ICRP sets two levels of radiation exposure, other than from natural and medical sources, to distinguish between two types of people: members of the public and radiation workers. The associated radiation exposure limits (above natural background and medical exposures) are: • Members of the public: 1 millisievert (mSv) per annum; and • Radiation workers: 20 mSv per year over ﬁve years with a maximum of 50 mSv in any one year. Results from ERA’s monitoring activities are compared with these ICRP limits. Workers at ERA whose occupational exposure to radiation may exceed 5 mSv per year are declared ‘designated’ workers and their exposure is more stringently monitored. In 2014, the designated workgroups included Mine Production, Mine Maintenance, Process Production, Process Maintenance and Electrical Maintenance. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 33 RADIATION MONITORING Continual monitoring throughout the year helps ERA ensure that doses remain at the lower end of the spectrum for uranium workers, as set out in the ICRP principles of Justiﬁcation, Optimisation and Limitation. Doses are calculated using the methodology required by the Code of Practice on Radiation Protection and Radioactive Waste Management in Mining and Mineral Processing and approved in the Ranger Section 41 Authority. The total effective dose is the sum of doses from three exposure pathways: external gamma radiation, inhalation of radon decay products and inhalation of long lived alpha activity in dust. ERA provides occupational radiation dose data for workers at Ranger mine to the Australian Government’s Australian National Radiation Dose Register (ANRDR) on a quarterly basis. The ANRDR collects, stores, manages and distributes radiation dose records received by workers in the course of their employment. The register reﬂects the Australian Government’s commitment to strengthen occupational health and safety requirements for individuals working at uranium mining and milling sites. On an annual basis, ERA also provides a copy of personal dose records to each designated worker. This is in addition to designated workers being able to obtain this data from the ANRDR. RESULTS To ensure highest possible quality control on radiation doses, the results are reviewed internally by ERA and externally by the appropriate regulatory authorities. The maximum and mean annual radiation doses received by designated workers and the maximum radiation doses received by non-designated workers during 2014 will be reported in the 2014 Annual Radiation Protection and Atmospheric Monitoring Report. The 2014 report will be submitted to stakeholders in March 2015 in accordance with the Ranger Section 41 Authority. Accordingly, only preliminary data for 2014 is presented in this report. The maximum and mean annual radiation doses received thus far in 2014 by designated and non- designated workers are summarised in the table below. The lower doses in the third quarter for designated workers are in line with the return to normal operating conditions after the plant-wide shutdown that followed the leach tank failure in December 2013. The potential exposures to Jabiru residents from the Ranger mine activities are also monitored throughout the year and are calculated annually. The resulting contribution from Ranger mine remains very low in comparison to both the public dose limit and the natural background radiation level. Historically the contribution from Ranger mine has been, on average, approximately 0.02 mSv (or 2 per cent) of the 1.0 mSv member of public dose limit and less than 1 per cent of the natural background in Australia of 2 – 3 mSv, (which varies according to location). RADIOLOGICAL ASSESSMENT FOLLOWING LEACH TANK FAILURE On 7 December 2013, Leach Tank 1 at Ranger mine failed, spilling approximately 1,400 cubic metres of slurry containing ground uranium ore, water and sulphuric acid into the processing plant area. Following the leach tank failure and throughout the subsequent recovery and clean-up operations, a series of investigations and reviews were conducted. This included a radiological assessment by the Supervising Scientist. RADIATION DOSE DESIGNATED WORKERS NON-DESIGNATED WORKERS Q1 – Maximum (mSv) Q1 – Mean (mSv) Q2 – Maximum (mSv) Q2 – Mean (mSv) Q3 – Maximum (mSv) Q3 – Mean (mSv) 1.74 0.52 1.47 0.37 1.09 0.23 0.84 0.41 0.51 0.09 0.40 0.15 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 34 RADIATION MONITORING The Supervising Scientist’s assessment was conﬁned to the potential impacts on human health and the offsite environment, including Kakadu National Park, as a result of the tank failure. The Supervising Scientist’s August 2014 report stated: “Radiological assessment of both the spill site and personal dosimeters show that additional radiation doses to workers involved in the clean-up activities were low and assessed to be of no concern to human health. “No increase in airborne radionuclide concentrations as a result of the incident was detected at the Supervising Scientist monitoring stations in Jabiru town or at Jabiru East.” (cid:83) Construction activities at Ranger (cid:88) Jai Nadjamerrek entered an ERA traineeship during 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 35 RADIATION MONITORING ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 36 REGULATORY FRAMEWORK Regulatory framework Uranium mining activities in Australia are strictly regulated by the Commonwealth and State or Territory Governments. The purpose of these regulations is to ensure uranium mining performance and compliance in a range of critical areas, including health and safety, mine safety, safe management of toxic and radioactive substances, waste disposal, transport safety, export controls, protection and rehabilitation of the environment, native title, exploration, development, taxes and royalties, labour standards and mine reclamation. International agreements designed to prevent nuclear proliferation also govern the mining and export of uranium. Exports are subject to strict safeguards and non- proliferation conditions to ensure that Australian uranium is only used for peaceful purposes. REGULATION OF ERA’S OPERATIONS Commonwealth and Northern Territory legislation provides the regulatory framework for ERA’s uranium mining activities. ERA’s operations are closely supervised and monitored by key statutory bodies including: • Commonwealth Department of Industry and Science; • Northern Territory Department of Mines and Energy; • Commonwealth Government’s Supervising Scientist; • Northern Land Council; • Alligator Rivers Region Advisory Committee (including non- government organisation representatives); and, • Alligator Rivers Region Technical Committee (including non- government organisation representatives). The Ranger and Jabiluka Minesite Technical Committees are the key forums for consideration of environmental matters relating to Ranger and Jabiluka. Committee members include representatives of the Gundjeihmi Aboriginal Corporation, the Northern Land Council, the Northern Territory Department of Mines and Energy, the Commonwealth Department of Industry and Science, and the Commonwealth Supervising Scientist. The Alligator Rivers Region Advisory Committee (ARRAC) provides a formal forum for consultation on matters relating to the effects of uranium mining on the environment in the region. Committee members include representatives of the Northern Territory Government, the Commonwealth Government, the Northern Land Council, Aboriginal associations, mining companies (including ERA), West Arnhem Shire, the Northern Territory Environment Centre and other members who may be appointed by the Commonwealth Minister for the Environment. Further information on ARRAC can be obtained at: http://www.environment.gov.au/ ssd/communication/committees/ arrac/index The Alligator Rivers Region Technical Committee (ARRTC) oversees the nature and extent of research being undertaken to protect and restore the environment in the Alligator Rivers Region from any effects of uranium mining. The 14 ARRTC members include seven independent scientists nominated by the Federation of Australian Scientists and Technological Societies with the remaining representatives being from the Commonwealth Government’s Supervising Scientist, Northern Territory Government, ERA, Uranium Equities Ltd, Northern Land Council, Parks Australia and a non-government environment organisation. Further information on ARRTC can be contained at: http://www.environment.gov.au/ ssd/communication/committees/ arrtc/index.html In January 2013, the Gundjeihmi Aboriginal Corporation on behalf of the Mirarr Traditional Owners, the Northern Land Council, ERA and the Commonwealth Government ﬁnalised a suite of agreements to join others that govern operations at the Ranger Project Area, including a new Mining Agreement. INTERNATIONAL AND AUSTRALIAN CERTIFICATION ERA maintains international certiﬁcation (ISO 14001) of its Health, Safety and Environmental Management System, which includes the Company’s Water Management System. ERA also maintains Australian certiﬁcation (AS4801) of its Health, Safety and Environment Management System, including the Ranger Radiation Management System, and the new Process Safety Improvement System. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 37 OVERVIEW Sustainable Development Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD SUSTAINABLE DEVELOPMENT REPORT 2014 38 CONTENTS Contents Overview .................................................................................................................... 40 Environment ............................................................................................................... 41 Land ........................................................................................................................... 45 Employment ............................................................................................................... 48 Community ................................................................................................................. 51 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 39 Due to the sensitive nature of the surrounding environment, ERA strives for safety leadership, environmental protection and strong and enduring relationships with all stakeholders. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 40 OVERVIEW Overview The area surrounding ERA’s operations is internationally recognised for unique ecosystems and biodiversity, signiﬁcant environmental and cultural heritage values, and a long tradition of human habitation. Due to the sensitive nature of the surrounding environment, ERA strives for safety leadership, environmental protection and strong and enduring relationships with all stakeholders. ERA’s commitment to protect the environment in 2014 was conﬁrmed by the Australian Government’s Supervising Scientist, which conducts extensive monitoring and research programs. ERA will continue to engage with the Mirarr Traditional Owners, local communities and all levels of government to protect the natural environment on which it operates and maintain Jabiru as an important regional centre, creating educational, cultural, social and economic development opportunities for local people and future generations. THE MIRARR The Mirarr are Traditional Owners of the lands on which ERA operates. Mirarr country encompasses the Ranger Project Area and the Jabiluka Mineral Lease, the town of Jabiru and parts of Kakadu National Park, including the wetlands of the Jabiluka billabong country and the sandstone escarpment of Mount Brockman. The Mirarr hold beneﬁcial freehold title to traditional country via the Kakadu and Jabiluka Land Trusts and in accordance with the Aboriginal Land Rights (Northern Territory) Act (1976). In 1995, the Mirarr established the Gundjeihmi Aboriginal Corporation, an incorporated body, to assist them to manage a balance between sustainable development and traditional practice on their land, and to direct income from mining royalties across a wide range of ﬁelds and activities that cover heritage, economic and community development, education, training and employment. ERA recognises that the support of Traditional Owners is critically important to its current operations, future projects and successful rehabilitation. (cid:84) Onsite water catchment ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 41 ENVIRONMENT Environment ERA is committed to protecting the unique environment in which it operates. Measures to protect the environment include a wide range of preventative and monitoring activities. ERA has a particular focus on water management and monitoring which reﬂects the potential for extreme rainfall associated with the top end climate. The Australian Government’s Supervising Scientist monitors the impact of uranium mining on the environment and people in the Alligator Rivers Region, including water quality and aquatic biology indicators in Magela Creek and other waterways adjacent to the Ranger mine. (cid:84) Superintendent Water Management, Ben McTavish, undertakes onsite testing The Supervising Scientist uses a structured program of audits and inspections, in conjunction with the Northern Territory Department of Mines and Energy, the Northern Land Council and the Gundjeihmi Aboriginal Corporation, to supervise regional uranium mining operations. ERA’s monitoring results and the results from the Supervising Scientist are made available to the public. During 2014, results from statutory monitoring programs showed that ERA continued to protect the surrounding environment. LEACH TANK INVESTIGATION The Supervising Scientist conducted an investigation into the environmental impacts of the December 2013 failure of Leach Tank 1. Ranger mine’s containment management systems fully captured the slurry material from the failed leach tank and the environment surrounding Ranger mine, including Kakadu National Park, remained protected during and following this event. ERA’s containment systems are in place to safeguard Kakadu National Park in the event of plant or equipment failure and the systems operated as designed during the event. The Supervising Scientist’s investigation was one of four investigations co-ordinated by a government- appointed taskforce. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 42 ENVIRONMENT The Water Management Plan sets out the operational activities for the full range of water management activities across the Ranger mine site, including water capture, storage, supply, distribution, sampling, use, treatment and disposal. To ensure currency and to reﬂect any changes to conditions on site, the Water Management Plan is updated every year and submitted to regulatory authorities for approval. Every two years ERA’s Health, Safety and Environment Management System is subject to independent audit and certiﬁcation to Australian (AS4801) and international (ISO 14001) standards. WATER IS MANAGED ACCORDING TO QUALITY There are a number of different classes of water within the Ranger mine site: process water, pond water, release water, potable water and water including treatment plant permeate or Brine Concentrator distillate. Each class of water requires a different management approach: • process water has been in contact with uranium ore during processing operations and must be managed within a closed system, and stored in the Tailing Storage Facility prior to treatment via the Brine Concentrator; The Supervising Scientist’s report Investigation into the environmental impacts of the leach tank failure at Ranger uranium mine, December 2013 found that: “the leach tank failure has not resulted in any adverse impacts to human health or the surrounding environment, including Kakadu National Park.” This Supervising Scientist’s investigation also found that: • radiation doses to workers involved in the clean-up activities were low and of no concern to human health; • there was no increase in airborne radionuclide concentrations; and • chemical and biological monitoring in Magela Creek did not detect any effects related to the leach tank failure. WATER Water management is critical to the success of ERA’s business and environmental protection objectives. ERA operates in a tropical climate that is characterised by extended dry periods and high rainfall. These extreme conditions pose challenges for effective management of water on the Ranger Project Area. A key aspect of ERA’s approach to water management is having the ﬂexibility and operational capability to store and treat large volumes of differing types of water based on the quality of that water. As a result, ERA’s operational and planning activities are built on a comprehensive water management strategy based on industry leading monitoring systems and signiﬁcant investment in infrastructure for the storage, transfer and treatment of water. Over the past four years ERA has successfully completed a range of water management projects including: • construction of the $220 million Brine Concentrator; • a process water contingency transfer pumping system from the Tailings Storage Facility to Pit 3; • surface water and seepage interception trenches around stockpiles; • increasing capacity of the Tailings Storage Facility; • the construction and commissioning of a one gigalitre capacity Retention Pond; • use of continuous real-time water quality monitoring stations; • increasing the network of ground water monitoring bores to over 200; and • installation of over 7,000 prefabricated vertical drains (wicks) across the Pit 1 tailings area. In addition, ERA continued with water management works associated with progressive rehabilitation of Pit 1 and Pit 3 (see Operations page 15). MANAGEMENT OF WATER ERA’s water management operations and planning activities are governed by an overarching Health, Safety and Environment Management System. The objectives for water management described in the Health, Safety and Environment Management System are achieved in practical terms through ERA’s Water Management Plan. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 43 ENVIRONMENT • pond water has been in contact with stockpiled mineralised material and operational areas of the site, other than those contained within the process water system. Pond water is held in the pond water system comprising a series of sumps and holding ponds prior to being put through treatment plants; • potable water is high quality bore water used for drinking and ablution. Water used in ablutions is treated via septic tanks and disposed of via transpiration trenches; • release water comprises clean site run-off water collected in purpose built storages, and water that has been treated by the Brine Concentrator or water treatment plants to a quality suitable for release; • water treatment plant permeate is pond water that has been treated via ERA’s micro ﬁltration and reverse osmosis treatment plants. Permeate is release quality water and is either irrigated on designated land application areas during the dry season, or released during the wet season; and • Brine Concentrator distillate is process water which has been treated by the Brine Concentrator. This distillate is of extremely high quality and like water treatment plant permeate is considered release quality water. BRINE CONCENTRATOR Construction of the $220 million Brine Concentrator was completed in 2013. Process water is heated to high temperatures in the Brine Concentrator and water that evaporates is cooled, condensed and discharged as high quality, clean distilled water (see Operations, page 14). Waste heat from the cooling circuit is used to pre-heat process water entering the Brine Concentrator to reduce energy consumption. With a potential maximum production of up to 1.83 billion litres of distillate per year, the Brine Concentrator provides ERA with the ability to manage the process water inventories and manage the impacts of heavy rainfall events. This ﬂexibility and control in process water management will play a key role in ERA’s progressive rehabilitation activities. During 2014 all distillate produced met with the design speciﬁcations for the Brine Concentrator. Veolia Water Australia operates the Brine Concentrator on an “operate and maintain” basis on behalf of ERA. The distillate is either discharged to ERA’s constructed wetlands, or irrigated onto land application areas. WATER MONITORING ERA’s comprehensive water monitoring system comprises over 200 groundwater bores across the Ranger operational area and 13 continuous real-time water quality sensing stations within local waterways. The water monitoring system helps ensure that water is managed in accordance with ERA’s Water Management Plan, meets regulatory requirements and provides assurance to stakeholders through the provision of accurate data. The continuous real-time water quality sensing stations are located within the Magela and Gulungul creek systems, upstream and downstream of the Ranger mine. In addition, there is an extensive network of continuous real-time monitoring stations throughout ERA’s operational areas, which assists with day-to-day management of water inventories and treatment processes. Data from the water monitoring system provides accurate details of composition and ﬂow rate changes in surface water, ground water and waterways. This data is shared with members of the Minesite Technical Committee, including the Supervising Scientist, and results are also available to the public on ERA’s website www.energyres.com.au. The Supervising Scientist also conducts independent monitoring of waters upstream and downstream of the Ranger mine site. The results are published on its website: www.environment.gov.au/ ssd/index.htm. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 44 ENVIRONMENT The monitoring stations are equipped with auto samplers that collect water samples triggered by in-stream events. The Supervising Scientist Annual Report 2013-2014 states that the “water qualities measured in Magela and Gulungul Creeks for the 2013–14 wet season were comparable with previous wet seasons, with the results indicating that the aquatic environment in the creek has remained protected from mining activities”. INDEPENDENT SURFACE WATER WORKING GROUP In 2012 an Independent Surface Water Working Group (ISWWG) was established by ERA and the Gundjeihmi Aboriginal Corporation to undertake an independent expert review of the surface water management, monitoring, and compliance systems associated with release of water from the Ranger mine site. The ISWWG consisted of representatives from ERA, the Gundjeihmi Aboriginal Corporation, the Supervising Scientist and the Northern Land Council (NLC). Professor Barry Hart (Water Science Pty Ltd and Monash University) was appointed as the Independent Chair and Professor Mark Taylor (Macquarie University) as an Independent Science Advisor. The ISWWG considered: • surface water management and releases; • existing monitoring practices, compliance framework and management responses in relation to surface waters; • downstream monitoring to provide conﬁdence that the environment is being protected; and • the integrity, reporting, and access to relevant data. The outcome of the report and the consensus agreed between the parties delivered a watershed agreement. The main ﬁndings of the ISWWG were that the current Ranger mine surface water management and regulatory systems are of a very high standard, and that an agreed action plan was desirable to ensure that the existing standard was maintained. A technical working group was established as a sub-group of the Ranger Minesite Technical Committee in February 2013 to review and implement the technical and regulatory aspects of relevant recommendations. This group is also the forum for reporting to stakeholders on the progress in addressing the ISWWG recommendations. Of the 15 recommendations: • Nine have been addressed and those that are ongoing are being embedded into management plans or existing review processes. These are the recommendations on ERA water monitoring, reporting and management and staff training, as well as two recommendations on the Supervising Scientist’s monitoring program. • Five recommendations are in progress. Three recommendations relating to the updating of the compliance monitoring program are nearing completion and two recommendations regarding the review and reintroduction of past sediment and bushtucker monitoring are advanced and in ﬁnal discussions. • One recommendation regarding the updating of the Ranger Authorisation is awaiting completion of other recommendations. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 45 LAND Land REHABILITATION PROGRESSING AT JABILUKA The rehabilitation of the land on the Jabiluka Mineral Lease previously occupied by the Interim Water Management Pond continued throughout 2014. Following the dismantling of the pond and the removal of the pond liner in 2013, the pond location and surrounding areas have been revegetated with species endemic to the surrounding environment. These works are part of ERA’s ongoing rehabilitation program and have involved input from the Mirarr Traditional Owners to ensure that the land is rehabilitated in a culturally appropriate manner. During 2014 visits to the site were undertaken by representatives of Gundjeihmi Aboriginal Corporation and the Northern Land Council with video and photographs taken at each visit to share with the Mirarr Traditional Owners who provide cultural advice on different aspects of the project. Site surveys conﬁrm that around 48 per cent of the 3,585 locally native tubestock seedlings planted in 2013 survived the dry season and are now well established. Given the harsh conditions experienced through the dry season this is regarded as a satisfactory survival rate. This year a further 4,679 tubestock seedlings were planted on the site in November and December to complete the revegetation, with weed management activities undertaken to ensure recently disturbed areas remain weed-free. Plants selected for the revegetation program are propagated by the Indigenous owned and operated Kakadu Native Plants nursery, and grown from hand collected seeds. Revegetation techniques used at the Jabiluka site are based on successful management strategies developed through ERA’s long term trial landform project which covers an eight hectare site at Ranger. WEED MANAGEMENT ERA carries out regular weed control activities on the Ranger Project Area and Jabiluka Mineral Lease. Activities are guided by ERA’s weed management program which targets 13 priority species including Annual Pennisetum, Mission Grass and Rattlepod. The weed season runs from October to May. During the 2013-2014 weed season new initiatives included the use of residual herbicide which eliminates the surface weed and binds to soil particles to prevent weed germination over an extended period. Annual weed monitoring shows that ERA’s program has resulted in a reduction of 29 hectares of weed infestation in 2013-2014, which is a 42 per cent reduction over the Ranger Project Area. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 46 LAND (cid:83) The Jabiluka Interim Water Management Pond (cid:88) The site at completion of the revegetation program ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 47 LAND The revegetation program at Jabiluka was completed with more than 8,000 native seedlings planted. The plants were grown from hand collected seeds. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 48 EMPLOYMENT Employment ERA’s preparation for proposed underground mining operations saw a further 25 per cent reduction in workforce numbers during 2014. The completion of the Pit 3 initial backﬁll has reduced mining operational requirements and the continuation of the ERA Business Review cost saving program continued to rationalise contractor use. A highly successful redeployment programme over the last two years has helped over 70 affected employees successfully ﬁnd employment elsewhere in Rio Tinto Group operations. As at 31 December 2014, ERA’s total workforce was 415 people, comprising 390 staff and 25 contractor positions across a range of full-time, part-time and secondment arrangements. This compares with 519 full-time equivalent positions at the same time last year, and 639 at the end of 2012. A signiﬁcant portion of workforce reductions was associated with the mining workforce, which reduced from 140 to 55 in 2014. ERA also directly employed nine apprentices, three school-based apprentices, and three Indigenous trainees. At year end Indigenous employment was approximately 12 per cent of employees (2013: 16 per cent). ERA has a target of 20 per cent Indigenous employment, however the closure of Pit 3 and the completion of the initial backﬁll project has contributed to a decline in employment opportunities associated with mining activities. (cid:84) Members of the Ranger 3 Deeps Exploration Decline team ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 49 EMPLOYMENT ERA’s female employment participation also remained steady during 2014 at 18 per cent of employees (2013: 18 per cent). ERA also provides ﬂexible work arrangements for employees to help balance work and life commitments. The average rolling staff turnover in 2014 was 38.61 per cent (2013: 29.25 per cent), in part reﬂecting changes to mining workforce needs. INDIGENOUS EMPLOYMENT As a major employer in Jabiru and the West Arnhem region ERA has a strong focus on Indigenous employment. ERA’s Indigenous employees are employed in positions at many levels within the Company, from operations to human resources to leadership roles. At 31 December 2014, there were a total of 47 Indigenous employees, representing 12 per cent of employees (2013: 16 per cent). ERA employed three Indigenous trainees in 2014. Indigenous trainees are paired with workplace mentors. The Mentoring Program for Indigenous trainees is part of ERA’s Indigenous Employment Strategy. It includes ﬂexible work arrangements, workplace literacy and numeracy training and support for students from local communities in work experience and school- based apprenticeships. Looking ahead, ERA’s Indigenous employment focus will continue to be on retention. INDIGENOUS ENTERPRISE DEVELOPMENT During 2014 ERA continued to work with the Gundjeihmi Aboriginal Corporation and local businesses as part of a new Indigenous Enterprise Development Scheme introduced in 2013. The program also identiﬁes potential employment needs among local businesses. This year’s participants successfully completed the program and gained nationally recognised accreditation through a Certiﬁcate II in Resource Infrastructure: Work Preparation. The scheme seeks to identify and develop employment and training opportunities for members of local Indigenous communities. As an example, local people have an opportunity to participate in an Indigenous Revegetation Workforce, which can be engaged to carry out regional revegetation activities, such as progressive rehabilitation activities at ERA, weed management, and ﬁre monitoring. As part of Indigenous Revegetation Workforce training, the trainees will be working towards nationally recognised skills accreditation through a Certiﬁcate III in Land Management. PRE-EMPLOYMENT PROGRAM Local businesses, training providers and ERA continued to support the Pre-employment Program, designed to assist school leavers and other local people seeking to enter the workforce or ﬁnd new employment. In 2014 eight women participated in the Pre-employment Program, seeking to develop skills to support plans to work within Kakadu National Park or the local tourism and hospitality industry. The program helps local people develop additional skills needed to get a job, such as getting a driver’s licence, learning ﬁrst aid, or developing experience with common work-related equipment. EDUCATION PARTNERSHIP In 2014 ERA continued working with the West Arnhem College on the award winning Education Partnership. West Arnhem College was established in 2010 and is made up of two school communities – Jabiru Area School, which is located on Mirarr land in Kakadu National Park, and Gunbalanya School, located in West Arnhem Land across the East Alligator River in the Northern Territory. The Education Partnership provides quality education and training opportunities which lead to real employment and career options for students and families in the West Arnhem region. It provides an integrated program of activities to build capacity in the local economy, support sustainable regional development, and improve education and employment outcomes for local community members. This includes opportunities for work experience placements and school-based apprentices at ERA, visits to ERA by teachers and students, school presentations from ERA employees, and support for school-based education programs involving resource industry development. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 50 EMPLOYMENT In 2014 the partnership focused on two main areas of cooperation which were supporting the curriculum outcomes at the schools and providing opportunities for applied learning. Highlights have included a total of seven tailored school-based apprenticeships and traineeships and the largest number of indigenous students to date. The program has enabled students to obtain Certiﬁcate II qualiﬁcations while still enrolled in school at the West Arnhem College. (cid:84) School-based apprentices Brock Hope, Daniel De Vreede and Blake Hughes CULTURAL AWARENESS New employees and contractors working at ERA are introduced to the unique cultural, environmental and historical vales of the Kakadu region and the Mirarr Traditional Owners through ERA’s Cultural Awareness Program. The program is an important element of ERA’s induction processes and ensures that new arrivals to the business are able to develop a greater understanding of the context and culture in which they operate, and to develop understanding and respect for local communities and culture. This program is particularly important with the anticipated increase in the use of contract ﬂy-in ﬂy-out workers associated with the proposed underground mining operation. The program is delivered in partnership with the Gundjeihmi Aboriginal Corporation representing the Mirarr Traditional Owners. During the year 46 new employees and long-term contractors participated in cultural awareness training. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 51 COMMUNITY Community ERA is an important and active part of the local community, and makes a signiﬁcant contribution to the regional and Northern Territory economies. In particular, ERA makes a major contribution to Jabiru, one of the largest regional centres within the Northern Territory. Through its community relations program ERA engages with a wide range of organisations, community groups and government agencies across a broad range of issues, including cultural heritage, education, employment and funding opportunities. In 2014, ERA spent more than $120,000 on partnerships and sponsorships, providing support for local schools and students, sport, the arts, regional festivals, local business, and community health and child care. RELATIONSHIP WITH MIRARR TRADITIONAL OWNERS The Gundjeihmi Aboriginal Corporation represents the Mirarr Traditional Owners in discussions and negotiations with ERA on a range of matters of interest to both parties. These discussions and negotiations encompass matters such as water management, cultural heritage and environmental protection, employment and training, housing and town planning, involvement in decision making processes, royalties, and the future of mining at Ranger. The Mirarr Traditional Owners were represented via the Gundjeihmi Aboriginal Corporation on the taskforce established by Northern Territory and Australian Governments to oversee the regulatory response to the failure of Leach Tank 1 (see Operations, page 14). ERA recognises that the failure of the leach tank in December 2013 was of great concern to the Mirarr Traditional Owners and appreciates their continued dialogue, participation and input into the clean-up and recovery operation. (cid:84) ERA continued its sponsorship of the Kakadu Triathlon in 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 52 A number of formal structures are in place to ensure that the Gundjeihmi Aboriginal Corporation and ERA are able to meet regularly, share information and create opportunities for ongoing engagement and collaboration. During 2014, the newly formed Relationship Committee met on a regular basis to promote information sharing and collaboration, and reach agreement on opportunities for increasing local Aboriginal participation in business development, training and employment. In addition, the Gundjeihmi Aboriginal Corporation and ERA are represented on the Kakadu West Arnhem Social Trust (KWAST) and contribute funds on an annual basis. KWAST was founded in February 2013 as a charitable trust by Yvonne Margarula, senior Mirarr Traditional Owner, to share some of the royalty payments ﬂowing from the Ranger mine to address the disadvantage of Indigenous people in the Kakadu region. A particular focus is on achieving a long-term reduction in systemic intergenerational disadvantage. The multi-million dollar trust is supporting initiatives that deliver long-term, positive beneﬁt to the local community, such as Children’s Ground, which is delivering culturally appropriate education, health and allied support services in Jabiru and outstations across Kakadu. Other projects supported by KWAST include the Culture First Program at Jabiru Area School which engages students with culturally sensitive learning and the continuation of support for the Gunbang Action Group’s alcohol management coordination program. The Mirarr Traditional Owners are also represented via the Gundjeihmi Aboriginal Corporation on the Closure Criteria Committee Working Group and the Ranger Minesite Technical Committee, and are participating in rehabilitation planning, including the rehabilitation and revegetation of the site of the former Jabiluka Interim Water Management Pond (see Land, page 45). ERA and the Gundjeihmi Aboriginal Corporation continue to collaborate on town governance, housing, local and Northern Territory Government engagement, infrastructure and local business development. ROYALTY PAYMENTS ERA’s royalty payments are a major source of income for the Indigenous community and the Northern Territory Government. ERA makes royalty payments of 5.5 per cent of net sales revenue from Ranger mine production. The equivalent of 4.25 per cent of Ranger sales revenue is paid to Northern Territory based Aboriginal organisations, including the Gundjeihmi Aboriginal Corporation. A further 1.25 per cent of Ranger sales revenue is paid to the Commonwealth and distributed to the Northern Territory Government. In 2014, ERA’s royalties totalled $15.4 million (2013: $18.4 million). As ERA is now processing low grade ore stockpile, under the current operating agreements and legislative framework, royalty payments will continue to decline in line with forecast production rates, unless the Ranger 3 Deeps underground mine is developed. COLLABORATION ON FUTURE OF JABIRU ERA supports efforts to recognise the Mirarr as traditional landowners of the long-running Jabiru native title claim area, which includes the land on which the town of Jabiru is located. Legislation that allows for the inclusion of Jabiru and surrounding lands in Schedule 1 of the Land Rights Act (Northern Territory) 1976 has been introduced into the Commonwealth Parliament. This is a signiﬁcant step towards formal recognition of Mirarr title to land, which is central to the governance arrangements and long term future for Jabiru. ERA will continue to support the ﬁnalisation of arrangements required to transfer these lands from the Commonwealth to the Kakadu Aboriginal Lands Trust. This includes agreement on the detail of a new town lease between the Gundjeihmi Aboriginal Corporation and the Northern Territory Government. While the legislative framework is in place, the detail of the lease arrangement between the Northern Territory Government and the Traditional Owners is still being negotiated. (cid:88) Superintendent Water Management, Ben McTavish, is part of ERA’s Health Safety and Environment team ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 53 COMMUNITY ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 54 SUSTAINABLE DEVELOPMENT COMMUNITY COMMUNITY ENGAGEMENT ERA engages with a wide range of stakeholders and community groups within the local Jabiru community and in other parts of the Northern Territory. This engagement is designed to provide members of the public, community groups and other stakeholders with an opportunity to learn about and understand ERA’s operations. In addition ERA’s community engagement provides support to help protect and promote cultural heritage, community health, small business development, including indigenous business, and educational and sporting opportunities for young people. During 2014 ERA maintained a local presence at the ERA Community Ofﬁce in Jabiru, provided formal quarterly business updates with key stakeholders and community groups in Jabiru and held four community information days. RANGER 3 DEEPS SOCIAL IMPACT ASSESSMENT The Ranger 3 Deeps Social Impact Assessment (SIA) examined the ﬂow-on effects of an underground mining operation on stakeholders in the local Jabiru community, and in the wider Alligator Rivers Region. It also assessed impacts across the Northern Territory and at the national level. As part of the draft Environmental Impact Statement (see Future Supply, page 22), the assessment identiﬁed potential positive and negative social impacts of the proposed underground mine. Areas considered included governance, equity in beneﬁts, future planning and cultural heritage. The SIA found that the proposed underground mining operation “has the potential for both positive and negative impacts, but overall, has greater potential to realise positive social outcomes”. Beneﬁts included: • 180 – 280 new jobs; • maintaining economic contribution (directly and indirectly); • supplementary production delivering additional revenue; • support to local and regional business; and • maintaining Jabiru population, maintaining services infrastructure and community programs. Risks included: • additional ﬂy in ﬂy out employees creating further demand on health services; • perceptions of health and well- being impacts leading to stress, such as from concerns over water management or worker health; and • continuation or worsening of existing negative impacts such as issues linked to mine revenue (royalties) and social cohesion, and the well-being of Mirarr Traditional Owners. ERA proposes to maximise the opportunities presented and manage potential risks through a Social Impact Management Plan. The SIA has been provided to the Commonwealth and Northern Territory governments, and made publicly available as part of the draft Environmental Impact Statement documents seeking approval for the proposed underground mine. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 55 SUSTAINABLE DEVELOPMENT COMMUNITY COMMUNITY PARTNERSHIPS ERA’s community partnership and sponsorship program provides support for local community-based events, schools and students, sport, the arts and regional festivals. The Mahbilil Festival celebrates the diversity of the region through music, dance, art and entertainment. ERA was involved as a major sponsor and also through its community information stall. COMMUNITY SUPPORT In 2014 ERA supported the Kakadu Triathlon in Jabiru in May and continued its sponsorship of the National Indigenous Music Awards in August. A feature of community information provided this year included details about ERA’s proposals for an underground mine, including the promotion of opportunity to comment on the draft Environmental Impact Statement. The National Indigenous Music Awards celebrate traditional and contemporary artists from around the country, with female artist Jessica Mauboy taking out consecutive National Artist of the Year awards. Over 107 people took part in the successful Kakadu Triathlon, organised by ERA and Darwin Triathlon as a fundraiser for CareFlight. Raising more than $8,000, the triathlon involved a 10 kilometre bike ride, a 2.5 kilometre run, and a 250 metre swim in the Jabiru town pool. The Kakadu Triathlon was named as Community Event of the Year in the 2014 Australia Day Awards. ERA was one of 27 triathlon sponsors, along with West Arnhem Regional Council, West Arnhem College, Veolia Water, Spotless, Jabiru Fire Station and Northern Territory Police. COMMUNITY INFORMATION DAYS AND MINE TOURS During 2014 ERA held four Community Information Days and a series of organised site visits, providing an opportunity for over 600 local community members, tourists and other groups to visit Ranger mine. The information days involve setting up a free barbecue and information stall in Jabiru for the day, and running regular tours out to the mine site. ERA staff explained the mine’s operations, work being done to protect the environment, and also discussed ERA’s underground mining proposals and opportunities to have input into the draft Environmental Impact Statement. The positive response, particularly in relation to ERA’s operations, revealed a genuine interest among many members of the public to learn about ERA. This support is delivered in a variety of ways including direct funding, community partnerships, in-kind support and donations of equipment and resources. ERA sponsors the George Chaloupka Fellowship program, which supports research and conservation of Aboriginal rock art located in Arnhem Land Plateau region in the Northern Territory, with the ﬁfth Fellow recently commencing. The $28,000 Fellowship was awarded to Australian National University PhD graduate, Dr Ian Moffat, whose research project involves use of geophysical analysis techniques to locate, record and date rock art. The George Chaloupka Fellowship is run by the Museum and Art Gallery of the Northern Territory Foundation. Previous recipients have increased knowledge and understanding of signiﬁcant Aboriginal rock art sites across the Arnhem Land Plateau, including the Jawoyn site Little Barra, the East Alligator River, and the Main Gallery of Deaf Adder Creek, near Nourlangie Rock. ERA continued its long-running support for the principal community and cultural event for Jabiru and the West Arnhem region, the popular Mahbilil Festival held in Jabiru in September. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 56 Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 57 CONTENTS Contents Director’s Report ........................................................................................................ 58 Auditor’s Independence Declaration ........................................................................... 84 Corporate Governance Statement ............................................................................... 85 Statement of Comprehensive Income .......................................................................... 90 Balance Sheet ............................................................................................................. 91 Statement of Changes in Equity .................................................................................. 92 Cash Flow Statement .................................................................................................. 93 Notes to the Financial Statements ............................................................................... 94 Directors’ Declaration ............................................................................................... 127 Independent Auditor’s Report ................................................................................... 128 Shareholder Information ........................................................................................... 130 2014 ASX Announcements ....................................................................................... 132 Ten Year Performance ............................................................................................... 133 Index ........................................................................................................................ 134 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 58 DIRECTORS Director’s Report Directors Mr Peter McMahon CHAIRMAN BEcon(Hons), MEcon, MSc Ms Andrea Sutton CHIEF EXECUTIVE BE (Hons) Chemical, GradDipEcon, GAICD Mr Bruce Cox NON-EXECUTIVE DIRECTOR BCom, CPA, MBA, GAICD Appointed as a Director in November 2012 and Chairman in January 2013. Member of the Audit and Risk Committee and Remuneration Committee. Mr McMahon has been the principal of an independent advisory business, McMahon Advisory Pty Ltd, since 2010. Prior to this time, Mr McMahon spent 30 years with the Rio Tinto Group in senior commercial roles with emphasis on business and project development in Australia, UK, USA and Europe. Mr McMahon was a non-executive Director and Chairman of Inova Resources Limited until November 2013. Appointed as Managing Director in September 2013 and Chief Executive in September 2013. Ms Sutton brings extensive operational, technical and corporate experience to ERA from her 20 years with Rio Tinto. Ms Sutton was previously Managing Director with the Rio Tinto Support Strategy Review team. Prior to that, Ms Sutton held various roles within the Rio Tinto Group including General Manager Operations at the Bengalla Mine and General Manager Infrastructure with Rio Tinto Iron Ore. Appointed as a Director in November 2014. Mr Cox is currently the President and Chief Executive Ofﬁcer of Paciﬁc Aluminium and is a member of Rio Tinto Alcan’s Executive Committee. Mr Cox has more than 33 years’ experience with Rio Tinto and BHP, and prior to his current role was Managing Director of Rio Tinto Diamonds. Mr Cox’s career has spanned the steel, platinum, copper, iron ore and diamond commodity sectors and he has lived in Australia, Zimbabwe, Chile, the United Kingdom and the United States. Mr Cox is a CPA, Graduate of the Australian Institute of Company Directors and has a Bachelor of Commerce and Masters of Business Administration. Ms Joanne Farrell NON-EXECUTIVE DIRECTOR BSc, Grad Dip Business Management Appointed as a Director in June 2014. Ms Farrell is currently the Global Head of Health, Safety, Environment and Communities (HSEC) for Rio Tinto and is responsible for leading the team that provides policy, standards guidance and governance of HSEC matters for the Rio Tinto group of companies. Ms Farrell has held a number of roles in 27 years with Rio Tinto, including in the Iron Ore, Aluminium, Diamonds, Exploration and Energy groups. She brings extensive experience in HSEC, human resources, organisational effectiveness, communications and external relations. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 59 DIRECTORS Directors Dr Helen Garnett INDEPENDENT NON- EXECUTIVE DIRECTOR BSc(Hons), PhD, PSM, FTSE, FAICD Mr Peter Taylor NON-EXECUTIVE DIRECTOR BA, BSc, LLB, LLM, FAICD Mr John Pegler INDEPENDENT NON- EXECUTIVE DIRECTOR BE (Mining), MAusIMM, MAICD Mrs Helen Newell NON-EXECUTIVE DIRECTOR BCom (Hons), MBA, GAICD Appointed as a Director in November 2012. Mrs Newell resigned as a Director in June 2014. Mrs Newell is currently Global Head of Risk, Rio Tinto, having previously held the role of Vice President Infrastructure and Transformation, Rio Tinto Energy. Prior to joining the Rio Tinto Group in May 2011, Mrs Newell spent 20 years in the transport and infrastructure industry in Australia and North America, with Booz Allen & Hamilton, the Toll Group and Asciano. Appointed as a Director in February 2007. A lawyer in private practice before joining Rio Tinto, Mr Taylor has held a number of executive and management positions in the exploration, project development, commercial and legal operations of the Rio Tinto Group. Mr Taylor has served as Managing Director and Chairman of Bougainville Copper Limited since 21 October 2003, having been a Director since April 1997. Mr Taylor is also a director of a number of unlisted Rio Tinto Group companies. Appointed as a Director in July 2009. Member of the Audit and Risk Committee and Chair of Remuneration Committee. Mr Pegler also is a non-executive Director of WDS Ltd and CS Energy Limited. He is a former Director and Chairman of Bandanna Energy Limited, a Past President and a Life Member of the Queensland Resources Council and a past Chairman and Director of the Australian Coal Association Ltd. Mr Pegler formerly was Chief Executive Ofﬁcer of Ensham Resources Pty Limited and previously has held operational roles within BP Australia Limited and the Rio Tinto Group including President Director of major gold producer PT Kelian Equatorial Mining in Indonesia and Managing Director Group Procurement Eastern Hemisphere. Appointed as a Director in January 2005. Chair of the Audit and Risk Committee and member of Remuneration Committee. From 2003 to 2008, Dr Garnett was Vice Chancellor of Charles Darwin University in the Northern Territory. Between 1994 and 2003, Dr Garnett served as the Executive Director of the Australian Nuclear Science and Technology Organisation (ANSTO) and as an Australian representative to the United Nations International Atomic Energy Agency. Dr Garnett is an Emeritus Professor of the University of Wollongong and of Charles Darwin University, a Fellow of the Academy of Technological Sciences and Engineering and a Fellow of the Australian Institute of Company Directors. Dr Garnett is currently the Chair of Delta Electricity, a non-executive Director of Carbon Energy Limited, a non-executive director of ABM Resources NL, Chair of the Australian Centre for Plant Functional Genomics, Chair of the Museum and Art Gallery, NT Foundation, and Director of Sugar Research Australia. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 60 EXECUTIVE COMMITTEE Executive Committee Ms Andrea Sutton CHIEF EXECUTIVE BE (Hons) Chemical, GradDipEcon, GAICD Mr James May CHIEF FINANCIAL OFFICER BA (Hons) FCA Mr Steeve Thibeault CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY BA (Accounting, Finance) Mr Tim Eckersley GENERAL MANAGER, OPERATIONS B.Sc. Agric (Hons) Appointed as Managing Director in September 2013 and Chief Executive in September 2013. Ms Sutton brings extensive operational, technical and corporate experience to ERA from her 20 years with Rio Tinto. Ms Sutton was previously Managing Director with the Rio Tinto Support Strategy Review team. Prior to that, Ms Sutton held various roles within the Rio Tinto Group including General Manager Operations at the Bengalla Mine and General Manager Infrastructure with Rio Tinto Iron Ore. Mr May was appointed as Chief Financial Ofﬁcer in June 2014 and brings ﬁnancial, accounting and business development experience to ERA. Mr May has over 14 years’ experience in ﬁnance roles in the energy and extractive resources sector. Prior to joining ERA, Mr May held various ﬁnance and corporate roles within Rio Tinto. Mr May is a Chartered Accountant through the Institute of Chartered Accountants in England and Wales. Mr Thibeault was appointed as Chief Financial Ofﬁcer in July 2009 and Company Secretary in 2009. He resigned from both positions on 30 May 2014. Mr Thibeault has over 32 years’ experience in the mining and manufacturing industries and previously held diverse senior ﬁnance roles with Rio Tinto Alcan and Alcan Aluminium Limited. Mr Eckersley was appointed as General Manager Operations in September 2012. Over the last 21 years Mr Eckersley has held various leadership roles in the mining industry including in bauxite, alumina, gold, mineral sands and iron ore. Prior to joining ERA, Mr Eckersley was General Manager within Rio Tinto Iron Ore Expansion Projects business unit. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 61 EXECUTIVE COMMITTEE Executive Committee Dr Greg Sinclair GENERAL MANAGER, TECHNICAL AND MAJOR STUDIES BAppSc (Chemistry), PhD, FAusIMM Dr Sinclair was appointed as General Manager Technical and Major Studies in May 2007. Dr Sinclair has over 29 years’ experience in the resources sector and has formerly held roles with the Iron Ore Company of Canada, Rio Tinto Technical Services & HSE Groups, North Limited and the Australian Nuclear Science & Technology Organisation. Mr Alan Tietzel CHIEF ADVISOR AGREEMENTS BA, BCom, Dip Ed MBA Mr Thomas Wilcox COMPANY SECRETARY AND LEGAL COUNSEL LLB, BCom Mr Wilcox was appointed as joint Company Secretary and Legal Counsel in November 2013. Mr Wilcox joined Rio Tinto in 2009 and previously served as legal counsel in London and Melbourne with Rio Tinto Exploration. Prior to joining the Rio Tinto Group, Mr Wilcox was employed in private legal practice since 2003. Mr Tietzel was appointed as General Manager External Relations in July 2010 and subsequently Chief Advisor Agreements in September 2012. He has a background in Aboriginal land agreements, regional development, government relations, human resources and organisation development. Mr Tietzel joined Rio Tinto in 1990. He has worked in the diamonds, salt, bauxite and alumina sectors, and in various corporate functions. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 62 DIRECTORS’ REPORT Meetings of Directors The number of Directors’ and committee meetings held and the number of meetings attended by each of the Directors of the Company during the financial year is shown below: DIRECTORS MEETINGS AUDIT AND RISK COMMITTEE MEETINGS REMUNERATION COMMITTEE MEETINGS OTHER COMMITTEE MEETINGS HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED 13 13 13 13 13 6 7 1 13 12 13 11 13 5 7 1 4 4 - - 4 - - - 4 4 - - 4 - - - 3 3 - - 3 - - - 3 3 - - 3 - - - 2 2 1 - 1 - - - 2 2 1 - 1 - - - DIRECTOR P McMahon H Garnett A Sutton P Taylor J Pegler H Newell1 J Farrell2 B Cox3 Note 1 Note 2 Note 3 Resigned as a Director on 11 June 2014. Appointed as a Director on 11 June 2014. Appointed as a Director on 27 November 2014. Ms Sutton was invited to Audit and Risk Committee meetings and attended all such meetings held during the year. Interests of Directors The interests of each Director in the share capital of the Company and its related body corporates as at 31 January 2015 are shown below: ENERGY RESOURCES OF AUSTRALIA LTD ORDINARY SHARES 42,500 - - - - - - - RIO TINTO LIMITED ORDINARY SHARES RIO TINTO LIMITED OPTIONS IN ORDINARY SHARES RIO TINTO LIMITED CONDITIONAL INTERESTS IN ORDINARY SHARES 18,405 - 9,211 35,007 6,331 19,430 5,395 33,078 - - 2,888 7,343 - 8,090 8,111 - - - 9,731 12,939 - 29,302 39,189 - DIRECTORS P McMahon H Garnett A Sutton P Taylor J Pegler J Farrell B Cox D Smith1 Note 1 Appointed as a Director on 27 January 2015. 62 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 63 DIRECTORS’ REPORT Remuneration report The Remuneration Report is set out under the following main headings: A. (cid:37). C. D. (cid:40). (cid:41). (cid:42). (cid:37)oard oversight of remuneration (cid:51)rinciples used to determine non(cid:16)e(cid:91)ecutive Directors(cid:182) remuneration (cid:51)rinciples used to determine e(cid:91)ecutive remuneration Details of remuneration (cid:40)(cid:91)ecutive service agreements Share based compensation Additional information The information provided in the Remuneration Report has been audited by the Company’s independent auditor as required by section 308(3C) of the Corporations Act 2001. A (cid:37)oard oversight of remuneration The Remuneration Committee has responsibility to review: (cid:135) remuneration framework and policies (cid:11)including key performance indicators) for the Company’s senior e(cid:91)ecutives(cid:30) remuneration and performance of the Company’s senior e(cid:91)ecutives(cid:30) remuneration of the Company(cid:182)s non(cid:16)e(cid:91)ecutive directors(cid:30) and remuneration disclosures made by the Company. (cid:135) (cid:135) (cid:135) The Remuneration Committee Charter is available at the Corporate (cid:42)overnance section of (cid:40)RA(cid:182)s website. B Principles used to determine non- e(cid:91)ecutive Directors(cid:182) remuneration (cid:41)ees and payments to non(cid:16)e(cid:91)ecutive Directors re(cid:192)ect the demands which are made on(cid:15) and the responsibilities of(cid:15) the non(cid:16)e(cid:91)ecutive Directors. The Remuneration Committee will review and make recommendations to the (cid:37)oard regarding non(cid:16) e(cid:91)ecutive Directors(cid:182) remuneration. These fees are comprised of a base fee and any fees payable to non(cid:16)e(cid:91)ecutive Directors for their membership on established committees of the (cid:37)oard. (cid:40)RA does not pay retirement or post(cid:16)employment benefits to non(cid:16)e(cid:91)ecutive Directors(cid:15) however(cid:15) statutory superannuation contributions are paid to non(cid:16)e(cid:91)ecutive Directors. (cid:44)n addition(cid:15) from time to time(cid:15) the (cid:37)oard may approve that non(cid:16)e(cid:91)ecutive Directors receive additional fees for services provided outside the established committee processes. The following principles are applied in determining the remuneration of non(cid:16)e(cid:91)ecutive Directors: (cid:135) (cid:135) (cid:135) the responsibilities of and time spent by the non(cid:16)e(cid:91)ecutive Directors on the affairs of (cid:40)RA(cid:15) including preparation time(cid:30) acknowledgement of the personal risk borne as a Director(cid:30) comparison with professional market rates of remuneration to remain competitive with the market having regard to (cid:135) companies of similar si(cid:93)e and comple(cid:91)ity(cid:30) and the desire to attract Directors of a high calibre with appropriate levels of e(cid:91)pertise and e(cid:91)perience. At the 200(cid:27) Annual (cid:42)eneral Meeting(cid:15) shareholders resolved to amend the Constitution of the Company to provide that the aggregate remuneration for non(cid:16)e(cid:91)ecutive Directors of (cid:40)RA would be not more than (cid:7)(cid:27)00(cid:15)000 per annum. At the 201(cid:23) Annual (cid:42)eneral Meeting(cid:15) the 2013 Remuneration Report was approved with (cid:28)1.2(cid:26) per cent of shareholders who cast a vote(cid:15) voting in favour (cid:11)voting comprised 3(cid:25)3(cid:15)(cid:27)3(cid:26)(cid:15)(cid:26)(cid:25)5 votes (cid:181)for(cid:182) the resolution and 3(cid:23)(cid:15)(cid:27)1(cid:25)(cid:15)512 votes (cid:181)against(cid:182) the resolution(cid:12). North (cid:47)imited and (cid:51)eko(cid:16)(cid:58)allsend (cid:51)ty (cid:47)td(cid:15) which are both Rio Tinto entities(cid:15) voted a combined total of 35(cid:23)(cid:15)0(cid:26)(cid:27)(cid:15)(cid:27)5(cid:23) votes (cid:181)for(cid:182) the resolution. The aggregate amount of non(cid:16)e(cid:91)ecutive Directors(cid:182) remuneration paid in 201(cid:23) was appro(cid:91)imately (cid:7)(cid:25)1(cid:27)(cid:15)000 inclusive of statutory superannuation. The non(cid:16)e(cid:91)ecutive Directors(cid:182) fees were reviewed by the (cid:37)oard in January 201(cid:23). The (cid:37)oard resolved that there would be no increase in non(cid:16)e(cid:91)ecutive Directors(cid:182) fees or committee fees in 201(cid:23). The annual fees for non(cid:16)e(cid:91)ecutive Directors for 201(cid:23) (cid:11)e(cid:91)cluding superannuation(cid:12) are as follows: Chairman (cid:7)1(cid:25)2(cid:15)000 (cid:7)1(cid:25)2(cid:15)000 Non(cid:16)e(cid:91)ecutive Director (cid:7)(cid:28)0(cid:15)000 (cid:7)(cid:28)0(cid:15)000 2014 2013 Audit and Risk Committee Chair* Audit and Risk Committee Member* Remuneration Committee Chair* (cid:7)20(cid:15)000 (cid:7)20(cid:15)000 (cid:7)13(cid:15)000 (cid:7)13(cid:15)000 (cid:7)5(cid:15)000 (cid:7)5(cid:15)000 * Fees are payable in addition to Chairman and non-executive Director fees. The (cid:37)oard has resolved that no additional committee fees are payable to members of the Remuneration Committee (cid:11)other than the Remuneration Committee Chair(cid:12). C (cid:51)rinciples used to determine e(cid:91)ecutive remuneration The Remuneration Committee is responsible for the review of(cid:15) and where appropriate will make recommendations to the (cid:37)oard in respect of(cid:15) e(cid:91)ecutive remuneration. As the Company is a member company of the Rio Tinto (cid:42)roup(cid:15) the Company generally implements the remuneration policies and procedures determined by the Rio Tinto Remuneration Committee and applied to senior management personnel across the wider Rio Tinto (cid:42)roup(cid:15) to determine the remuneration of the Chief (cid:40)(cid:91)ecutive and other key management personnel of the Company (cid:11)together(cid:15) (cid:181)senior e(cid:91)ecutives(cid:182)(cid:12). As a member of the Rio Tinto (cid:42)roup of companies(cid:15) (cid:40)RA(cid:182)s Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 63 64 DIRECTORS’ REPORT senior e(cid:91)ecutives are seconded from Rio Tinto and are hence drawn from the talented pool of e(cid:91)ecutives in the wider Rio Tinto (cid:42)roup. (cid:44)t is the view of the Remuneration Committee (cid:11)which has been endorsed by the (cid:37)oard(cid:12) that a company of (cid:40)RA(cid:182)s si(cid:93)e(cid:15) scope and remote location would have significant difficulty in attracting e(cid:91)ecutives of the calibre necessary to ensure superior performance or in retaining them for significant periods if this arrangement was not in place. (cid:56)nder these circumstances(cid:15) the (cid:37)oard believes that the general application of the Rio Tinto remuneration framework to (cid:40)RA(cid:182)s senior e(cid:91)ecutives(cid:15) with appropriate review by the Company(cid:182)s Remuneration Committee(cid:15) is of benefit to (cid:40)RA. (cid:41)or the purposes of assessing the appropriate level of remuneration, the Australian resources sector is considered the most relevant comparator group. Additional references are also made to other relevant supplementary comparator groups comprising companies primarily from the AS(cid:59) 200. Typically(cid:15) base salaries are positioned at the median of these comparator groups(cid:15) while incentive plans are designed with the potential to deliver total remuneration outcomes across the full market range according to business and individual performance. The related costs of these programmes are recognised in the Company(cid:182)s financial statements. (cid:41)or the purpose of disclosure under the Corporations Act 2001 and relevant Accounting Standards(cid:15) the (cid:179)key management personnel(cid:180) of the Company apart from the Chief (cid:40)(cid:91)ecutive and the non(cid:16)e(cid:91)ecutive Directors(cid:15) have been determined to be the permanent (cid:42)eneral Managers of the Company (cid:11)including the Chief Advisor Agreements(cid:12) reporting directly to the Chief (cid:40)(cid:91)ecutive. (cid:40)(cid:91)ecutive remuneration(cid:15) including base salary and short and long term incentive plan awards(cid:15) and other terms of employment are reviewed annually having regard to the evaluation of individual and business performance against goals set at the start of the year(cid:15) global economic conditions and relevant comparative information. As well as base salary(cid:15) remuneration packages may include fringe benefits such as medical insurance(cid:15) car(cid:15) rent and other allowances(cid:15) superannuation(cid:15) retirement entitlements and short and long term incentives. The annual performance evaluation and management process includes formal consultation between the Chairman (cid:11)based on the Remuneration Committee(cid:182)s review and recommendations(cid:12) and the Chief (cid:40)(cid:91)ecutive of the Rio Tinto (cid:40)nergy (cid:51)roduct (cid:42)roup regarding the Chief (cid:40)(cid:91)ecutive of the Company(cid:15) and between the Remuneration Committee and the Chief (cid:40)(cid:91)ecutive of the Company regarding the other senior e(cid:91)ecutives. The e(cid:91)ecutive pay and reward framework is designed to provide a total remuneration package which is competitive in the market(cid:30) aligns total remuneration with delivered individual and short and long term business performance(cid:30) strikes an appropriate balance between fi(cid:91)ed and variable components(cid:30) links variable components to the achievement of challenging individual and business performance targets, and ensures the attraction, motivation and retention of the high calibre senior e(cid:91)ecutives re(cid:84)uired to lead the Company. The Company Secretary of the Company is subject to the same e(cid:91)ecutive remuneration pay and reward framework. The e(cid:91)ecutive pay and reward framework has four components: (cid:135) (cid:135) (cid:135) (cid:135) base salary and benefits(cid:30) short term incentive plans(cid:30) long term incentive plans through participation in the Rio Tinto (cid:51)erformance Share (cid:51)lan (cid:11)(cid:51)S(cid:51)(cid:12) and Rio Tinto Management Share (cid:51)lan (cid:11)MS(cid:51)(cid:12)(cid:30) and other remuneration such as superannuation. Performance and non-performance related remuneration Total remuneration is a combination of the fi(cid:91)ed(cid:15) performance and service related elements described in this report. The short and long term incentive plans (cid:11)other than the Rio Tinto MS(cid:51)(cid:12) are the variable components of the total remuneration package and are therefore (cid:179)at risk(cid:180). They are tied to achievement of specific business measures(cid:15) individual performance and service. The other components are referred to as (cid:179)fi(cid:91)ed(cid:180) as they are not at risk. The long term incentive plan is designed to provide a target e(cid:91)pected value of between 22.5 and (cid:23)5 per cent of base salary for the senior e(cid:91)ecutives and the Chief (cid:40)(cid:91)ecutive(cid:15) delivered in any one year through a blend of (cid:51)S(cid:51) and MS(cid:51) awards. (cid:44)n 201(cid:23)(cid:15) awards were made under the MS(cid:51). (cid:40)(cid:91)cluding post employment and non(cid:16)monetary benefits(cid:15) the proportion of total direct remuneration, assuming maximum award levels and ma(cid:91)imum levels of performance(cid:15) provided by way of variable at risk components as at 31 December 201(cid:23) for the Chief (cid:40)(cid:91)ecutive and other senior e(cid:91)ecutives was between (cid:23)(cid:27) and (cid:25)(cid:27) per cent. The actual proportion of total direct remuneration provided by way of variable performance related components will differ from these percentages depending on measured Company and individual performance and the current blend of share plans. Base salary (cid:37)ase salary is set at a level consistent with market e(cid:91)pectations within the wider Rio Tinto remuneration framework and may be delivered as a mi(cid:91) of cash and prescribed non(cid:16)financial benefits. (cid:44)t is targeted broadly at the median of companies of similar size, global reach and complexity, including other large natural resource companies. (cid:37)ase salary is reviewed annually and ad(cid:77)usted taking into account the individual and Company performance, global economic conditions, role responsibilities, an assessment against comparator groups(cid:15) internal relativities and base salary budgets applying to the broader employee population. Short term incentive plan The short term incentive plan provides a bonus opportunity and is designed to support the overall remuneration policy by focusing 64 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 65 DIRECTORS’ REPORT management personnel on calendar year performance against challenging individual and business targets. Short term incentive performance conditions (cid:44)ndividual performance is reviewed against relevant targets and ob(cid:77)ectives annually. All senior e(cid:91)ecutives of the Company have between (cid:23)0 and (cid:26)0 per cent of their performance based bonus based on business measures with the remainder based on individual measures. The short term incentive plan bonus payments disclosed in this report are amounts paid in 2014 relating to performance in 2013, as 201(cid:23) calculations are not finalised at the date of this report. The Company’s business performance measures for 2013 used in the determination of short term incentive plan payments were: (cid:135) (cid:135) (cid:135) (cid:41)inancial (cid:16) (cid:40)RA net earnings and cash (cid:192)ow. Health and safety (cid:16) (cid:40)RA All (cid:44)n(cid:77)ury (cid:41)re(cid:84)uency Rate(cid:15) Semi (cid:52)uantitative Risk Assessments and closure rates of Significant (cid:51)otential (cid:44)ncidents. (cid:37)usiness (cid:16) (cid:40)RA drummed production(cid:15) cost of material milled(cid:15) volume and cost of material moved for the rehabilitation of (cid:51)it 3(cid:15) commissioning of the (cid:37)rine Concentrator and Ranger 3 Deeps (cid:40)(cid:91)ploration Decline pro(cid:77)ect. Bonus Deferral Plan (cid:44)n 201(cid:23)(cid:15) 25 per cent of the Chief (cid:40)(cid:91)ecutive(cid:182)s (cid:11)Ms Sutton(cid:12) short term incentive plan bonus pay was satisfied through the deferred award of shares in Rio Tinto (cid:47)imited under the terms of the Rio Tinto (cid:37)onus Deferral (cid:51)lan (cid:11)(cid:37)D(cid:51)(cid:12). The same percentage will be satisfied in 2015 through the deferred award of shares in Rio Tinto (cid:47)imited under the terms of the Rio Tinto (cid:37)D(cid:51). Long term incentive plans (cid:44)n 201(cid:23)(cid:15) the Company(cid:182)s Remuneration Committee considered the application of the Rio Tinto long term incentive plan to the Company(cid:182)s senior e(cid:91)ecutives. As previously outlined(cid:15) the Remuneration Committee believes that the general application of the Rio Tinto remuneration framework (cid:11)including the Rio Tinto long term incentive plans(cid:12) to (cid:40)RA(cid:182)s senior e(cid:91)ecutives with appropriate review by the Remuneration Committee(cid:15) is of benefit to the Company. As such the Remuneration Committee recommended that the Company(cid:182)s long term incentive plans remain unchanged for 201(cid:23). During 2015(cid:15) the Remuneration Committee will review the position for future years. Share based remuneration dependent on performance Performance Share Plan The Rio Tinto (cid:51)S(cid:51) provides a conditional right to Rio Tinto shares to eligible senior management personnel within the Rio Tinto (cid:42)roup(cid:15) including the senior e(cid:91)ecutives of the Company. The conditional awards only vest if the performance condition set by the Rio Tinto Remuneration Committee is satisfied by Rio Tinto(cid:15) although the Rio Tinto Remuneration Committee retains discretion to satisfy itself that satisfaction of the performance condition is a genuine re(cid:192)ection of the underlying performance of the business. (cid:51)rior to the vesting of conditional awards(cid:15) Rio Tinto(cid:182)s Total Shareholder Return (cid:11)TSR(cid:12) performance against the performance condition is calculated independently by Towers (cid:58)atson. Sub(cid:77)ect to Rio Tinto Remuneration Committee approval(cid:15) awards vest based on the Rio Tinto (cid:42)roup(cid:182)s TSR performance against the Morgan Stanley Capital (cid:58)orld (cid:44)nde(cid:91) (cid:11)one third(cid:12) and the HS(cid:37)C (cid:42)lobal Mining (cid:44)nde(cid:91) (cid:11)one third(cid:12)(cid:15) along with improvement in Rio Tinto (cid:40)(cid:37)(cid:44)T margin (cid:11)one third(cid:12) relative to global mining comparators. This is reviewed at 31 December of the fifth year of the grant. The level of vesting depends on performance against the indices. (cid:44)f Rio Tinto was sub(cid:77)ect to a change of control or a company restructuring(cid:15) the conditional awards would only vest sub(cid:77)ect to the satisfaction of the performance condition measured at the time of the change of control or restructuring. Should this occur within the first 3(cid:25) months from date of grant of the award(cid:15) the number of shares that can vest will be reduced pro(cid:16)rata over the 3(cid:25) month period. The Rio Tinto Remuneration Committee has discretion to adjust the performance condition to ensure a fair measure of performance. Rio Tinto releases awards to participants as either Rio Tinto plc or Rio Tinto (cid:47)imited shares. Awards may(cid:15) upon vesting(cid:15) be satisfied by Rio Tinto through the transfer of treasury shares(cid:15) the issue of new shares or the purchase of shares in the market. Chief Executive’s long term incentive plan (cid:44)n 201(cid:23) the Remuneration Committee recommended that the Chief (cid:40)(cid:91)ecutive(cid:182)s long term incentive award be delivered in Rio Tinto shares under the Rio Tinto MS(cid:51) and under an (cid:40)RA long term incentive plan (cid:11)(cid:40)RA (cid:47)T(cid:44)(cid:51)(cid:12). The Chief (cid:40)(cid:91)ecutive is the only e(cid:91)ecutive who participates in this plan. The amount of the Chief (cid:40)(cid:91)ecutive(cid:182)s long term incentive award that would otherwise have been provided under the Rio Tinto (cid:51)S(cid:51) has been provided under the (cid:40)RA (cid:47)T(cid:44)(cid:51). The (cid:40)RA (cid:47)T(cid:44)(cid:51) is an award of rights that have a value calculated by reference to the Company(cid:182)s share price (cid:11)ie phantom shares(cid:12). (cid:58)hether or not the rights vest depends on the e(cid:91)tent to which the relevant performance conditions have been satisfied over the performance period. Awards have a three year performance period commencing on 1 January of the year of grant. (cid:41)or the 201(cid:23) award(cid:15) the performance conditions will be measured over a three year period (cid:11)from 1 January 201(cid:23) to 31 December 201(cid:25)(cid:12). The two performance conditions are a relative TSR condition and the achievement of (cid:40)RA strategic measures. (cid:40)ach condition will be assessed independently. Strategic performance conditions have been chosen to ensure that the long term incentive award is assessed against both the Company(cid:182)s relative performance against other uranium producers and the achievement of (cid:40)RA strategic measures. The (cid:37)oard considers that this re(cid:192)ects the Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 65 the change of control(cid:15) but the award may be reduced pro rata to re(cid:192)ect the acceleration of vesting. (cid:51)rior to the change of control(cid:15) and with the consent of the ac(cid:84)uiring company(cid:15) the shares can be converted to shares in the ac(cid:84)uirer. After a change of control(cid:15) this can only be achieved with the consent of the employee. Other Share Plans The senior e(cid:91)ecutives of the Company(cid:15) together with all employees of the Company(cid:15) may participate in Rio Tinto share savings and share option plans applicable at particular locations. (cid:56)p to and including 2011(cid:15) these include the Rio Tinto (cid:47)imited share savings plan for senior e(cid:91)ecutives employed from the Rio Tinto (cid:47)imited group of companies and the Rio Tinto plc share savings plan for senior e(cid:91)ecutives employed from the Rio Tinto plc group of companies. (cid:44)n 2012(cid:15) the Rio Tinto Remuneration Committee approved and implemented a new global employee share purchase plan(cid:15) myShare. The new plan is offered to eligible employees. (cid:56)nder the plan(cid:15) employees may ac(cid:84)uire shares up to the value of (cid:56)S(cid:7)5(cid:15)000 per year capped at 10 per cent of their base salary. (cid:40)ach share purchased will be matched by the Company providing the participant holds the shares and remains employed at the end of the three year vesting period. (cid:41)urther details are at Note 30 to the (cid:41)inancial Statements. Share dealing policy The participation of senior e(cid:91)ecutives in the Rio Tinto share plans involving the awarding of Rio Tinto securities at a future date(cid:15) and any grants of shares and options under these plans, is subject to and conditional upon compliance with the terms of the (cid:181)Rules for dealing in securities of Rio Tinto(cid:182) (cid:11)(cid:179)Rules for dealing(cid:180)(cid:12). The Rules for dealing e(cid:91)pressly prohibit the limiting of e(cid:91)posure to economic risk in relation to such securities(cid:15) and are available on the Rio Tinto website at www.riotinto.com. 66 DIRECTORS’ REPORT Director’s Report appropriate mi(cid:91) of incentives to achieve an improvement in (cid:40)RA(cid:182)s performance over the long term. (cid:41)or the TSR performance condition(cid:15) rights vest based on (cid:40)RA(cid:182)s TSR performance against Areva SA(cid:15) Cameco Corp(cid:15) Denison Mines Corp(cid:15) (cid:40)nergy (cid:41)uels (cid:44)nc(cid:15) (cid:41)ission (cid:56)ranium Corp(cid:15) (cid:51)aladin (cid:40)nergy (cid:47)imited(cid:15) Summit Resources (cid:47)imited(cid:15) (cid:56)ranium (cid:40)nergy Corp and (cid:56)r(cid:16)(cid:40)nergy (cid:44)nc over the performance period. (cid:57)esting will be sub(cid:77)ect to (cid:40)RA(cid:182)s ranked position using the following schedule: Equal or greater to 2nd ranked company 100 per cent of the rights sub- (cid:77)ect to the TSR condition vest (cid:37)etween the 5th and 2nd ranked companies Above the 5th ranked company (cid:37)etween 22.5 per cent and 100 per cent of the rights subject to the TSR condition vest(cid:15) on a pro rata basis 22.5 per cent of the rights sub(cid:77)ect to the TSR condition vest (cid:40)(cid:84)ual to the (cid:25)th ranked company or below Nil vesting (cid:41)or the (cid:40)RA strategic measures(cid:15) an assessment of the level of vesting applicable to this portion of the award is to be assessed by the Remuneration Committee(cid:15) with the final outcome to be recommended to the (cid:40)RA (cid:37)oard by the (cid:40)RA Chairman at the end of the three year performance period. The elements to be considered in respect of (cid:40)RA strategic measures include financial performance, organisational and personnel related performance, relations with stakeholders and progress in respect of the Ranger 3 Deeps underground mine pro(cid:77)ect. (cid:41)or outstanding performance, the Board may determine to permit a number of rights to vest that is e(cid:84)ual to 150 per cent of the initial number of rights awarded that were sub(cid:77)ect to (cid:40)RA strategic measures condition. (cid:56)pon vesting(cid:15) the value of the (cid:40)RA (cid:47)T(cid:44)(cid:51) award will be converted into Rio Tinto MS(cid:51) shares. The number of Rio Tinto MS(cid:51) shares to be awarded will be calculated based on the five day average Rio Tinto (cid:47)imited share price prior to the Rio Tinto MS(cid:51) grant date in March of the year of vesting. Any Rio Tinto MS(cid:51) shares provided will vest after a further 2 year period in (cid:41)ebruary 201(cid:28). There are no further performance conditions(cid:15) however(cid:15) the Rio Tinto MSP shares can be forfeited in certain circumstances related to cessation of employment. Share based remuneration not dependent on performance (cid:56)nder the Rio Tinto MS(cid:51)(cid:15) conditional grants of Rio Tinto shares may be awarded to eligible senior e(cid:91)ecutives of the Company which will vest(cid:15) wholly or partly(cid:15) upon e(cid:91)piry of a three year vesting period. Rio Tinto shares to satisfy the vesting are purchased by Rio Tinto in the market. Award levels under the Rio Tinto MS(cid:51) are at the discretion of Rio Tinto. (cid:44)n the case of a change of control(cid:15) awards vest on the date of 66 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 67 DIRECTORS’ REPORT Details of remuneration D Details of the remuneration of each non(cid:16)e(cid:91)ecutive and e(cid:91)ecutive Director and each of the other senior e(cid:91)ecutives in respect of their services to the Company are set out in the following tables. Non-executive directors of Energy Resources of Australia Ltd SHORT TERM BENEFITS POST EMPLOYMENT BENEFITS DIRECTORS FEES ($000) CASH BONUS ($000) NON- CASH BENEFITS ($000) SUPER- ANNUATION ($000) TOTAL ($000) P McMahon D Klingner1 H Garnett P Taylor2 J Pegler H Newell2,3 Joanne Farrell2,4 Bruce Cox2,5 Total 2014 Total 2013 2014 2013 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2014 175 167 20 110 110 90 90 108 108 40 90 50 9 582 585 Note 1 Note 2 Note 3 Note 4 Note 5 Resigned as a Director and Chairman on 8 February 2013. Amounts paid directly to Rio Tinto Limited. Resigned as a Director on 11 June 2014. Appointed as a Director on 11 June 2014. Appointed as a Director on 27 November 2014. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16 15 2 10 10 - - 10 10 - - - - 36 37 191 182 22 120 120 90 90 118 118 40 90 50 9 618 622 (cid:40)(cid:91)ecutive Director and other key management personnel of the consolidated entity Set out below is an overview of the remuneration paid to the e(cid:91)ecutive Director and other key management personnel in 201(cid:23). This includes details of the key elements of remuneration and a summary of total remuneration for 201(cid:23). Andrea Sutton (Chief Executive from 23 September 2013) Base salary Ms Sutton was appointed as Chief (cid:40)(cid:91)ecutive and Managing Director on 23 September 2013. Ms Sutton(cid:182)s base salary is reviewed annually(cid:15) with reference to the underlying performance of (cid:40)RA(cid:15) the Rio Tinto (cid:42)roup and Ms Sutton(cid:15) global economic conditions(cid:15) role responsibility(cid:15) an assessment against relevant comparator groups(cid:15) internal relativities and base salary budgets applying to the broader employee population. (cid:50)n 1 March 201(cid:23)(cid:15) Ms Sutton(cid:182)s base salary was (cid:7)3(cid:28)1(cid:15)000. ST(cid:44)(cid:51) ob(cid:77)ectives The ST(cid:44)(cid:51) cash payment made to Ms Sutton and other key management personnel in 201(cid:23) was determined by assessing individual and business performance against ob(cid:77)ectives set for 2013. Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 67 68 DIRECTORS’ REPORT The following individual ob(cid:77)ectives were set for Ms Sutton for 2013: (cid:135) Continue to improve employee engagement and safety during a time of significant change and uncertainty (cid:135) Meet or exceed 2013 production target (cid:135) Continue to implement the progressive rehabilitation program for the Ranger (cid:51)ro(cid:77)ect Area on schedule and on budget(cid:15) including the backfilling of (cid:51)it 3(cid:15) and dewatering of Pit 1 Advancement of the Ranger 3 Deeps (cid:40)(cid:91)ploration Decline(cid:15) underground exploration drilling program and Prefeasibility Study in accordance with plan and budget Demonstrate progress on the rehabilitation of Jabiluka (cid:44)nterim (cid:58)ater Management (cid:51)ond (cid:40)nhance the Company(cid:182)s relationship with Mirarr Traditional (cid:50)wners and the (cid:42)und(cid:77)eihmi Aboriginal Corporation (cid:135) (cid:135) (cid:135) ST(cid:44)(cid:51) outcomes Ms Sutton(cid:182)s achievement against her 2013 personal ob(cid:77)ectives was assessed as good. (cid:44)n particular: (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:40)RA had a strong safety performance(cid:15) with a new record of 1(cid:27)(cid:27) in(cid:77)ury free days and an All (cid:44)n(cid:77)ury (cid:41)re(cid:84)uency Rate of 0.(cid:28)1 (cid:40)RA produced 2(cid:15)(cid:28)(cid:25)0 tonnes and sold 2(cid:15)(cid:27)15 tonnes of uranium oxide (cid:40)RA achieved (cid:7)52 million of additional cost savings as part of the ongoing (cid:37)usiness Review and ended the year with (cid:7)35(cid:26) million in cash on hand The rehabilitation of (cid:51)it 3 progressed ahead of schedule with 22.(cid:27) million tonnes backfilled at the end of 2013 The rehabilitation of (cid:51)it 1 progressed on schedule(cid:15) with dewatering wicks installed and the first part of a rock layer to compress the tailings mass and activate the wicks laid The Ranger 3 Deeps (cid:40)(cid:91)ploration Decline pro(cid:77)ect(cid:15) underground exploration drilling program and Prefeasibility Study progressed on schedule and on budget The Jabiluka (cid:44)nterim (cid:58)ater Management (cid:51)ond was safely dismantled(cid:15) with rehabilitation of the site well advanced (cid:44)mproved engagement with Mirarr Traditional (cid:50)wners and the (cid:42)und(cid:77)eihmi Aboriginal Corporation through leach tank recovery operation(cid:15) Relationship Committee and related activities (cid:40)RA(cid:182)s strong record of employee diversity continued(cid:15) with (cid:28)1 female employees (cid:11)1(cid:27) per cent of the total workforce(cid:12) and (cid:26)(cid:28) (cid:44)ndigenous employees (cid:11)1(cid:25) per cent of the total workforce (cid:47)T(cid:44)(cid:51) awards granted Award levels are set so as to incentivise e(cid:91)ecutives to provide sufficient retention for the e(cid:91)ecutive team and to contribute to the competitiveness of the overall remuneration package. The value of the awards granted to Ms Sutton in 201(cid:23)(cid:15) based on the fair value calculations performed by individual advisors(cid:15) was 5(cid:25) per cent of base salary. The eventual value of the award will depend on performance during the period 201(cid:23) to 201(cid:25). 68 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 69 DIRECTORS’ REPORT Total remuneration The table below provides a summary of Ms Sutton(cid:182)s total remuneration disclosed for 2013 (cid:11)for services rendered to (cid:40)RA(cid:12) and 201(cid:23). The purpose of this table is to enable shareholders to better understand the actual remuneration received and to provide an overview of the actual outcomes of the Company(cid:182)s remuneration arrangements. The remuneration details set out on page (cid:26)3 include theoretical accounting values relating to various parts of the remuneration packages(cid:15) most notably long term incentive plan arrangements. Accordingly(cid:15) the numbers below are not compatible with those in the table on page (cid:26)3. (STATED IN $’000) Base salary paid1 ST(cid:44)(cid:51) cash bonus2 ST(cid:44)(cid:51) deferred shares3 (cid:47)T(cid:44)(cid:51) share based payments Superannuation (cid:50)ther benefits4 Total remuneration (cid:8) change from previous year (cid:8) of ma(cid:91)imum ST(cid:44)(cid:51) cash bonus awarded (cid:8) of ma(cid:91)imum ST(cid:44)(cid:51) cash bonus forfeited 2014 389 175 57 143 98 84 946 - 61 39 2013 105 - - 34 21 53 213 - - - Note 1 Note 2 Note 3 Note 4 2013 salary paid in financial year from 23 September 2013 to 31 December 2013. Salaries are reviewed with effect from 1 March. Bonus payment relates to prior year performance. No cash bonus is disclosed for 2013 as payments made were in respect to services rendered to another Rio Tinto entity in 2012. Value of deferred share awards granted under Bonus Deferral Plan. No deferred share awards are disclosed for 2013 as awards made were in respect to services rendered to another Rio Tinto entity in 2012. Other benefits include accommodation, vehicle and other allowances. Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 69 70 DIRECTORS’ REPORT Rob Atkinson Base salary Mr Atkinson resigned as Chief (cid:40)(cid:91)ecutive and Managing Director on 23 September 2013. At the time of his resignation(cid:15) Mr Atkinson(cid:182)s base salary was (cid:7)3(cid:28)(cid:28)(cid:15)0(cid:28)(cid:23). Total remuneration (cid:41)or comparison purposes(cid:15) the table below provides a summary of Mr Atkinson(cid:182)s total remuneration disclosed for the years of 2012 and 2013. Mr Atkinson received no remuneration from (cid:40)RA in 201(cid:23). The purpose of this table is to enable shareholders to better understand the actual remuneration received and to provide an overview of the actual outcomes of the Company(cid:182)s remuneration arrangements. The remuneration details set out on page (cid:26)3 include theoretical accounting values relating to various parts of the remuneration packages(cid:15) most notably long term incentive plan arrangements. Accordingly(cid:15) the numbers below are not compatible with those in the table on page (cid:26)3. (STATED IN $’000) Base salary paid1 ST(cid:44)(cid:51) cash bonus2 ST(cid:44)(cid:51) deferred shares3 (cid:47)T(cid:44)(cid:51) share based payments Superannuation (cid:50)ther benefits4 Total remuneration (cid:8) change from previous year5 (cid:8) of ma(cid:91)imum ST(cid:44)(cid:51) cash bonus awarded (cid:8) of ma(cid:91)imum ST(cid:44)(cid:51) cash bonus forfeited 2014 2013 2012 - - - - - - - - - - 287 198 66 181 88 87 907 (4%) 66% 34% 396 189 63 223 92 84 1,047 5% 67% 33% Note 1 Note 2 Note 3 Note 4 Note 5 2013 salary paid in financial year from 1 (cid:45)anuary 2013 to 23 September 2013. Salaries are reviewed with effect from 1 March. Bonus payment relates to prior year performance. Value of deferred share awards granted under Bonus Deferral Plan. Other benefits include accommodation, vehicle and other allowances. 2013 salary annualised for comparison. Key management personnel (other than the Chief Executive) Base salary (cid:37)ase salaries are reviewed annually(cid:15) with reference to the underlying performance of (cid:40)RA(cid:15) the Rio Tinto (cid:42)roup and the individual(cid:15) global economic conditions(cid:15) role responsibility(cid:15) an assessment against relevant comparator groups and base salary budgets applying to the broader employee population. At the end of 2013 and 201(cid:23)(cid:15) the base salaries of the Company(cid:182)s key management personnel (cid:11)other than the Chief (cid:40)(cid:91)ecutive(cid:12) were: BASE SALARY A’$000 (UNLESS OTHERWISE SPECIFIED) Tim (cid:40)ckersley James May1 Greg Sinclair Steeve Thibeault2 Alan Tietzel Note 1 Note 2 Employment with ERA commenced on 5 May 2014. (cid:40)mployment with (cid:40)(cid:53)(cid:36) ceased on 30 May 2014. Salary is re(cid:192)ected at time of resi(cid:74)nation. 2014 315 235 297 316 349 % CHANGE 3% - 2% 1% 2% 2013 305 - 290 312 341 70 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 71 DIRECTORS’ REPORT ST(cid:44)(cid:51) ob(cid:77)ectives and outcomes Tim (cid:40)ckersley SUMMARY OF INDIVIDUAL OBJECTIVES* (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:47)ead and deliver on the Company(cid:182)s health and safety ob(cid:77)ectives to achieve (cid:93)ero harm Deliver the Ranger operations cost budget to plan Deliver total material movement for mining operations to plan Deliver plant throughput to plan (cid:44)ntegrate (cid:37)rine Concentrator into Ranger operations Right(cid:16)si(cid:93)e the Ranger workforce for future operations and maintain diversity Continued improved relations with local and regulatory stakeholders James May (cid:135) Mr May (cid:77)oined (cid:40)RA in May 201(cid:23)(cid:15) and as such no ST(cid:44)(cid:51) payment was made in 201(cid:23) for services Greg Sinclair Steeve Thibeault Alan Tietzel to (cid:40)RA (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:47)ead and deliver on the Company(cid:182)s health and safety ob(cid:77)ectives to achieve (cid:93)ero harm Delivery of the (cid:44)ntegrated Tailings(cid:15) (cid:58)ater and Closure (cid:51)refeasibility Study(cid:15) strategy and cost estimate Delivery of the Tailings and (cid:37)rine Management (cid:41)easibility Study Delivery of the 2013 ob(cid:77)ectives of the Ranger 3 Deeps (cid:51)refeasibility Study and (cid:40)nvironmental (cid:44)mpact Statement Development(cid:15) approval and handover of progressive rehabilitation plans for (cid:51)it 1 initial backfill and the Jabiluka (cid:44)nterim (cid:58)ater Management (cid:51)ond Safely e(cid:91)ecute the surface e(cid:91)ploration program to target high grade deposits on the Ranger Project Area Demonstrate leadership in health(cid:15) safety and environment and Company values (cid:44)mplement the ob(cid:77)ectives of the 2013 (cid:37)usiness (cid:51)lan and develop a comprehensive and detailed Business Plan for 2014 and 2015 (cid:44)mplement rigorous cost review throughout (cid:40)RA(cid:182)s operations (cid:40)nsure that cash(cid:192)ow planning and management is at a high level(cid:15) with a view to ma(cid:91)imising cash(cid:192)ow at end of 2015 Develop optimised cash(cid:192)ow generation options(cid:15) including production(cid:15) sales and inventory for the period of 2013 to 2016 Deliver and improve procurement initiatives in line with (cid:37)usiness Review ob(cid:77)ectives Demonstrate leadership in health(cid:15) safety(cid:15) environment and Company values (cid:44)mplement specific aspects of Section (cid:23)(cid:23) Agreement and Mining Agreement including establishment of (cid:46)akadu (cid:58)est Arnhem Social Trust (cid:41)oster Traditional (cid:50)wner and key stakeholder support for a Ranger 3 Deeps undergound mine Develop tenure and e(cid:91)ternal relations plan to support the long term future of Ranger operations Develop and drive strategies which will underpin a viable future for Jabiru(cid:15) including scheduling of the town under A(cid:47)RA in the name of Mirarr Traditional (cid:50)wners Support development of long term strategic options for (cid:40)RA (cid:13)(cid:44)ndividual ob(cid:77)ectives relate to the 2013 financial year. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 71 72 DIRECTORS’ REPORT A summary of the individual targets and performance for each of the Company(cid:182)s key management personnel (cid:11)other than the Chief (cid:40)(cid:91)ecutive(cid:12) for the 2013 financial year (cid:11)ST(cid:44)(cid:51) paid in 201(cid:23)(cid:12) is set out in the table below. MEASURES Tim Eckersley Financial performance Business performance Health and Safety (cid:44)ndividual Total Greg Sinclair Financial performance Business performance Health and Safety (cid:44)ndividual Total Steeve Thibeault Financial performance Business performance Health and Safety (cid:44)ndividual Total Alan Tietzel Financial performance Business performance Health and Safety (cid:44)ndividual Total WEIGHT (%) SCORE (OUT OF 200%) WEIGHTED SCORE (%) 10.0 15.0 15.0 (cid:25)0.0 100.0 10.0 15.0 15.0 (cid:25)0.0 100.0 10.0 15.0 15.0 (cid:25)0.0 100.0 10.0 15.0 15.0 (cid:25)0.0 100.0 121.(cid:28) 133.(cid:23) 13(cid:26).0 12(cid:23).(cid:27) - 121.(cid:28) 133.(cid:23) 13(cid:26).0 11(cid:26).5 - 121.(cid:28) 133.(cid:23) 13(cid:26).0 113.5 - 121.(cid:28) 133.(cid:23) 13(cid:26).0 111.(cid:26) - 12.2 20.0 20.(cid:25) (cid:26)(cid:23).(cid:28) 127.7 12.2 20.0 20.(cid:25) (cid:26)0.5 123.3 12.2 20.0 20.(cid:25) (cid:25)(cid:27).1 120.9 12.2 20.0 20.(cid:25) (cid:25)(cid:26).0 119.8 (cid:47)T(cid:44)(cid:51) awards Award levels are set so as to incentivise e(cid:91)ecutives to provide sufficient retention for the e(cid:91)ecutive team and to contribute to the competitiveness of the overall remuneration package. The value of the awards granted in 201(cid:23)(cid:15) based on the fair value calculations performed by independent advisors(cid:15) was between 22.5 per cent and 30 per cent of base salary. 72 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 73 DIRECTORS’ REPORT Executive directors and other key management personnel total remuneration SHORT TERM BENEFITS CASH SALARY ($000) CASH BONUS9 ($000) OTHER8 ($000) TERMINATION PAYMENTS ($000) POST EMPLOY- MENT BENEFITS SUPER- ANNUA- TION PENSION ($000) SHARE BASED PAY- MENTS9 CASH & EQUITY SETTLED ($000) Executive directors A Sutton1 R Atkinson2 Other senior executives T (cid:40)ckersley3 J May4 G Sinclair5 S Thibeault6 A Tietzel7 Total 2014 Total 2013 2014 2013 2013 2014 2013 2014 2014 2013 2014 2013 2014 2013 389 105 287 360 363 137 296 299 131 321 397 401 1,710 1,776 175 - 198 117 125 - 89 99 94 100 122 124 597 646 84 53 87 33 32 38 38 41 31 82 38 80 262 375 - - - - - - - - - - 98 21 88 72 70 27 66 64 34 61 30 22 327 326 169 34 209 88 75 17 63 65 34 83 107 108 478 574 TOTAL ($000) 915 213 869 670 665 219 552 568 324 647 694 735 3,374 3,697 Note 1 Note 2 Note 3 Note 4 Note (cid:24) Note (cid:25) Note (cid:26) Note (cid:27) Note (cid:28) (cid:51)erformance related cash bonus(cid:29) (cid:25)1 per cent awarded in 2014, 3(cid:28) per cent forfeited. No cash bonus is disclosed for 2013 as payments made were in respect to services rendered to another Rio Tinto entity in 2012. (cid:53)esi(cid:74)ned as (cid:38)hief (cid:40)(cid:91)ecutive on 23 September 2013. (cid:51)erformance related cash bonus(cid:29) (cid:25)(cid:25) per cent awarded in 2013, 34 per cent forfeited. (cid:51)erformance related cash bonus(cid:29) (cid:25)4 per cent awarded in 2014, 3(cid:25) per cent forfeited. (cid:25)(cid:27) per cent awarded in 2013, 32 per cent forfeited. Salary paid in financial year from (cid:24) May 2014 to 31 December 2014. No cash bonus is disclosed for 2014 as payments made were in respect to services rendered to another Rio Tinto entity in 2013. (cid:51)erformance related cash bonus(cid:29) (cid:25)2 per cent awarded in 2014, 3(cid:27) per cent forfeited. (cid:25)(cid:27) per cent awarded in 2013, 32 per cent forfeited. Salary paid in financial year from 1 (cid:45)anuary 2014 to 30 May 2014. (cid:51)erformance related cash bonus(cid:29) (cid:25)0 per cent awarded in 2014, 40 per cent forfeited. (cid:25)4 per cent awarded in 2013, 3(cid:25) per cent forfeited. (cid:51)erformance related cash bonus (cid:25)0 per cent awarded in 2014, 40 per cent forfeited. (cid:25)1 per cent awarded in 2013, 3(cid:28) per cent forfeited. Other benefits includes relocation, accommodation, travel, vehicle and other allowances and other employment related benefits. (cid:51)erformance related bonuses paid in 2014 relate to services in 2013 (cid:11)e(cid:84)ually bonuses paid in 2013 relate to services in 2012(cid:12). The value of share based awards has been determined in accordance with the recognition and measurement re(cid:84)uirements of AAS(cid:37)2 (cid:179)Share(cid:16)based (cid:51)ayment(cid:180). The fair value of awards granted under the Rio Tinto Management Share (cid:51)lan (cid:11)MS(cid:51)(cid:12)(cid:15) (cid:37)onus Deferral (cid:51)lan (cid:11)(cid:37)D(cid:51)(cid:12)(cid:15) (cid:51)erformance Share (cid:51)lan (cid:11)(cid:51)S(cid:51)(cid:12) and Share Savings (cid:51)lan (cid:11)SS(cid:51)(cid:12) have been calculated at their dates of grant using valuation models provided by e(cid:91)ternal consultants (cid:47)ane Clark and (cid:51)eacock (cid:47)(cid:47)(cid:51)(cid:15) including an independent lattice(cid:16)based option valuation model and a Monte Carlo valuation model which takes into account the constraints on vesting and e(cid:91)ercise attached to these awards. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 73 74 DIRECTORS’ REPORT (cid:40)(cid:91)ecutive service agreements (cid:40) Remuneration and other terms of employment for key management personnel are formalised in service agreements. These agreements provide for participation in the Rio Tinto short and long term incentive plans upon achieving performance and service goals. The agreements may also provide for other benefits(cid:15) including: medical insurance(cid:30) vehicle and accommodation allowances(cid:30) relocation allowances and e(cid:91)penses and travel allowances. (cid:46)ey management personnel will also be entitled to a range of pre(cid:16)e(cid:91)isting redundancy entitlements(cid:15) depending on the business and region from where they were originally employed within the Rio Tinto (cid:42)roup. These include: (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) notice may be worked or fully or partly paid in lieu(cid:15) at (cid:40)RA(cid:182)s discretion(cid:30) additional capped service related payments may apply(cid:30) pro rata short term incentive plan payments may be paid based on the proportion of the performance period worked(cid:30) conditional share awards granted and held for less than three years at the date of termination are reduced pro(cid:16)rata(cid:30) share options or conditional share awards held for less than 12 months at date of termination may be reduced pro(cid:16)rata(cid:30) there is no contractual entitlement to payments in the event of a change of control(cid:30) and other ma(cid:77)or provisions of the agreements relating to remuneration as set out below. A Sutton - Chief Executive Term of agreement - Open, commenced 23 September 2013 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 31 December 201(cid:23) of (cid:7)3(cid:28)1(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is 100 per cent of base salary. (cid:37)ase salary and short term incentive targets are to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. (cid:44)n addition to Ms Sutton(cid:182)s service agreement(cid:15) (cid:40)RA has entered into a secondment agreement with Rio Tinto in relation to Ms Sutton(cid:182)s services to (cid:40)RA. The secondment agreement provides that (cid:40)RA can end Ms Sutton(cid:182)s secondment by giving Rio Tinto si(cid:91) months(cid:182) notice at any time. Rio Tinto can end Ms Sutton(cid:182)s secondment by giving si(cid:91) months(cid:182) notice to (cid:40)RA(cid:15) provided such notice can be given no earlier than 23 March 201(cid:25). T Eckersley - General Manager Operations Term of agreement - Open, commenced 10 September 2012 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 31 December 201(cid:23) of (cid:7)315(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is (cid:25)0 per cent of base salary. (cid:37)ase salary and short term incentive targets to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. (cid:45) May (cid:16) (cid:38)hief (cid:41)inancial Officer Term of agreement - Open, commenced 5 May 2014 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 31 December 201(cid:23) of (cid:7)235(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is 50 per cent of base salary. (cid:37)ase salary and short term incentive targets to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. G Sinclair - General Manager Technical Projects Term of agreement (cid:16) (cid:50)pen(cid:15) commenced 1 May 200(cid:26). (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 31 December 201(cid:23) of (cid:7)2(cid:28)(cid:26)(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is 50 per cent of base salary. (cid:37)ase salary and short term incentive targets to be reviewed annually. Termination by the employee is one month notice in writing or by the employer giving three months notice or e(cid:84)uivalent payment in lieu of notice. 74 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 75 DIRECTORS’ REPORT A Tietzel - Chief Advisor Agreements Term of agreement - Open, commenced 1 October 2010 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 31 December 201(cid:23) of (cid:7)3(cid:23)(cid:28)(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is (cid:25)0 per cent of base salary. (cid:37)ase salary and short term incentive targets to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. S (cid:55)hibeault (cid:16) (cid:38)hief (cid:41)inancial Officer Term of agreement - commenced 1 December 2012 and resigned 30 May 2014 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 30 May 201(cid:23) of (cid:7)31(cid:25)(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is 50 per cent of base salary. (cid:37)ase salary and short term incentive targets to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. Mr Thibeault commenced employment with the Company in July 200(cid:28) but entered into a new service agreement on 1 December 2012. R Atkinson - Chief Executive Term of agreement - commenced 8 September 2008 and resigned 23 September 2013 (cid:37)ase salary (cid:11)e(cid:91)cluding superannuation(cid:15) allowances and other benefits(cid:12) as at 23 September 2013 of (cid:7)3(cid:28)(cid:28)(cid:15)000 per annum. Ma(cid:91)imum short term incentive bonus upon meeting performance criteria is 120 per cent of base salary. (cid:37)ase salary and short term incentive targets are to be reviewed annually. Termination by the employee is three months notice in writing or by the employer giving si(cid:91) months notice or e(cid:84)uivalent payment in lieu of notice. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 75 76 DIRECTORS’ REPORT F Share based compensation Rio Tinto Share Option Plan (cid:44)n 2013 the Rio Tinto Share (cid:50)ption (cid:51)lan was discontinued. No options were granted in 201(cid:23). Details of the costs of the share based payment plans applied by the Company are provided at Note 30 of the (cid:41)inancial Statements. The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows: GRANT DATE Rio Tinto Limited 9/03/2005 7/03/2006 17/03/2009 Rio Tinto plc 17/03/2009 EXERCISE PRICE (PRE RIGHTS ISSUE) EXERCISE PRICE (POST RIGHTS ISSUE) VALUE PER OPTION AT GRANT DATE VALUE PER OPTION POST RIGHTS ISSUE EXPIRY DATE 9/03/2015 7/03/2016 17/03/2019 17/03/2019 $ (cid:23)(cid:26).0(cid:23) (cid:26)1.0(cid:25) (cid:23)(cid:28).5(cid:25) £ 20.01 $ 30.(cid:28)3 5(cid:23).(cid:28)5 33.(cid:23)5 £ 1(cid:25).53 $ (cid:27).(cid:28)3 1(cid:26).0(cid:28) 13.3(cid:25) £ (cid:25).(cid:25)2 $ (cid:27).(cid:28)3 1(cid:26).0(cid:28) 13.3(cid:25) £ (cid:27).2(cid:28) EARLIEST EXERCISE DATE 9/03/2008 7/03/2009 17/03/2012 17/03/2012 76 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 77 DIRECTORS’ REPORT Rio Tinto Performance Share Plan Share awards under the Rio Tinto (cid:51)erformance Share (cid:51)lan (cid:11)(cid:51)S(cid:51)(cid:12) are granted at the discretion of the Rio Tinto Remuneration Committee in line with Rio Tinto guidelines. (cid:44)n 2013 the (cid:51)S(cid:51) was revised(cid:15) and as a transitional provision(cid:15) 50 per cent potentially vest after four years and 50 per cent potentially vest after five years. No (cid:51)S(cid:51) was granted as remuneration during 201(cid:23). The terms and conditions of each right to Rio Tinto (cid:47)imited or Rio Tinto plc shares affecting remuneration in this or future reporting periods are as follows: AWARD DATE Rio Tinto Limited 21 March 2011 19 March 2012 27 May 2013 27 May 2013 Rio Tinto plc 21 March 2011 19 March 2012 MARKET PRICE AT AWARD PERFORMANCE PERIOD ENDS* MARKET PRICE AT 31 DECEMBER 2014 (cid:7)(cid:27)1.00 (cid:7)(cid:25)5.(cid:27)5 (cid:7)53.11 (cid:7)53.11 (cid:133)(cid:23)0.5(cid:27) (cid:133)3(cid:25).1(cid:23) 31 December 2014 31 December 2015 31 December 2016 31 December 2017 31 December 2014 31 December 2015 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:133)30.00 (cid:133)30.00 Note * Vesting dependent upon continued employment with a Rio Tinto Group company. Rio Tinto Management Share Plan Share awards under the Rio Tinto Management Share (cid:51)lan (cid:11)MS(cid:51)(cid:12) are granted at the discretion of the Rio Tinto Remuneration Committee in line with Rio Tinto guidelines. The terms and conditions of each right to Rio Tinto (cid:47)imited or Rio Tinto plc shares affecting remuneration in this or future reporting periods are as follows: AWARD DATE Rio Tinto Limited 19 March 2012 27 May 2013 17 March 2014 Rio Tinto plc 19 March 2012 MARKET PRICE AT AWARD PERFORMANCE PERIOD ENDS* PRICE AT 31 DECEMBER 2013 (cid:7)(cid:25)5.(cid:27)5 (cid:7)53.11 (cid:7)(cid:25)0.2(cid:27) 31 December 2014 31 December 2015 31 December 2016 (cid:133)3(cid:25).1(cid:23) 31 December 2014 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:133)30.00 Note * Vesting dependent upon continued employment with a Rio Tinto Group company. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 77 78 DIRECTORS’ REPORT Rio Tinto Bonus Deferral Plan Share awards under the Rio Tinto (cid:37)onus Deferral (cid:51)lan are granted at the discretion of the Rio Tinto Remuneration Committee in line with Rio Tinto guidelines. The terms and conditions of each right to Rio Tinto (cid:47)imited shares affecting remuneration in this or future reporting periods are as follows: AWARD DATE Rio Tinto Limited 21 March 2011 19 March 2012 27 May 2013 17 March 2014 MARKET PRICE AT AWARD VESTING DATE* PRICE AT 31 DECEMBER 2014 (cid:7)(cid:27)1.00 (cid:7)(cid:25)5.(cid:27)5 (cid:7)53.11 (cid:7)(cid:25)0.35 100% 1 December 2013 100% 1 December 2014 100% 1 December 2015 100% 1 December 2016 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 (cid:7)5(cid:27).00 Note * Vesting dependent upon continued employment with a Rio Tinto Group company. Share based compensation – Rio Tinto employee share schemes The Directors and key management personnel of the Company who elected to participate in the Rio Tinto employee share schemes as at 31 December 201(cid:23) are set out below: P Taylor J Farrell B Cox T (cid:40)ckersley G Sinclair A Tietzel Rio Tinto myShare Savings (cid:51)lan Rio Tinto myShare Savings (cid:51)lan Rio Tinto myShare Savings (cid:51)lan Rio Tinto Share Savings (cid:51)lan Rio Tinto myShare Savings (cid:51)lan Rio Tinto myShare Savings (cid:51)lan Rio Tinto myShare Savings (cid:51)lan 78 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 79 DIRECTORS’ REPORT (cid:40)(cid:84)uity instrument disclosures relatin(cid:74) to Directors and (cid:78)ey mana(cid:74)ement personnel (cid:50)ptions provided as remuneration Details of options over ordinary shares in Rio Tinto (cid:47)imited and Rio Tinto plc held during the year and provided as remuneration to key management personnel in respect of their service to (cid:40)RA are set out below. (cid:58)hen e(cid:91)ercisable(cid:15) each option is convertible into one ordinary share of Rio Tinto (cid:47)imited or Rio Tinto plc. BALANCE AT START OF THE YEAR OR ON JOINING1 BALANCE AT END OF THE YEAR3 GRANTED AS REMUN- ERATION EXERCISED DURING THE YEAR OTHER CHANGES2 VESTED & EXER- CISABLE UN–VESTED Rio Tinto plc Key management personnel S Thibeault Rio Tinto Limited Executive directors R Atkinson A Sutton 2014 2013 2013 2014 2013 Key management personnel A Tietzel 2014 2013 Non-executive directors4 P Taylor J Farrell B Cox 2014 2013 2014 2014 1,186 1,186 2,168 2,888 2,888 4,495 4,495 9,368 12,987 8,090 8,425 - - - - - - - - - - - - - - - - (2,487) - (2,025) (3,619) - (314) - - - - - - - - - - - 1,186 1,186 2,168 2,888 2,888 2,008 4,495 7,343 9,368 8,090 8,111 - - - - - - - - - - - Note 1 Note 2 Note 3 Note 4 (cid:58)here a (cid:78)ey mana(cid:74)ement personnel (cid:77)oined durin(cid:74) the year, balance at start of the year re(cid:192)ects holdin(cid:74)s at time of commencement with (cid:40)(cid:53)(cid:36). Other chan(cid:74)es and end of year balance include chan(cid:74)es made in relation to awards for service within the wider (cid:53)io (cid:55)into (cid:42)roup, includin(cid:74) before (cid:77)oinin(cid:74) or after ceasin(cid:74) with (cid:40)(cid:53)(cid:36), and forfeited options where conditions were not met. (cid:58)here a (cid:78)ey mana(cid:74)ement personnel left prior to the end of the year, the balance re(cid:192)ects the holdin(cid:74) at the time of resi(cid:74)nation. Changes to balances for non-executive Directors do not relate to remuneration for services provided to the Company. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 79 80 DIRECTORS’ REPORT Conditional awards provided as remuneration (cid:51)erformance Share (cid:51)lan(cid:30) Management Share (cid:51)lan(cid:30) (cid:37)onus Deferral (cid:51)lan No conditional awards of ordinary shares of either (cid:40)RA or of Rio Tinto (cid:47)imited or Rio Tinto plc were provided during the year as remuneration for services provided to (cid:40)RA to any of the non(cid:16)e(cid:91)ecutive Directors. Details of conditional awards of ordinary shares in Rio Tinto (cid:47)imited and Rio Tinto plc held during the year and provided as remuneration to each of the key management personnel of (cid:40)RA in respect of their duties as officers of (cid:40)RA are set out below. (cid:58)hen e(cid:91)ercisable(cid:15) each award converts into one ordinary share of Rio Tinto (cid:47)imited or Rio Tinto plc. BALANCE AT START OF THE YEAR OR ON JOINING1 GRANTED AS REMU- NERATION VESTED LAPSED AWARDS CAN- CELLED OTHER CHANGES2 BALANCE AT END OF YEAR3 2014 2013 2014 2013 2013 2014 2013 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2014 2,039 3,523 78 85 (1,568) (1,569) 8,953 8,953 2,438 (1,564) - - 13,881 11,236 (2,310) 4,796 3,176 1,799 3,576 3,300 2,845 1,339 6,498 5,242 13,926 11,067 13,482 6,296 32,374 42,849 1,581 2.322 - (899) (702) - 1,128 (1,033) 1,125 1,486 1,506 (849) - - 1,770 (1,644) 2,621 (1,365) - - - - - - (4,069) (1,786) (1,188) - (1,515) (1,479) - - - - - - - - - - - - - - - - - - - - (144) - (197) - - (107) - - (129) - - - (207) - - - - - - - - - - - - - - - - - - - - - 405 2,039 9,630 8,953 22,807 5,371 4,796 1,799 3,542 3,576 4,331 2,845 6,417 6,498 4,143 4,645 14,000 13,926 10,688 22,982 7,186 13,482 158 114 31,017 41,484 Rio Tinto plc Key management personnel S Thibeault Rio Tinto Limited Executive directors A Sutton R Atkinson Key management personnel T (cid:40)ckersley J May G Sinclair S Thibeault A Tietzel Non-executive directors4 P Taylor H Newell J Farrell B Cox Note 1 Note 2 Note 3 Note 4 (cid:58)here a (cid:78)ey mana(cid:74)ement personnel (cid:77)oined durin(cid:74) the year, balance at start of the year re(cid:192)ects holdin(cid:74)s at time of commencement with (cid:40)(cid:53)(cid:36). Other chan(cid:74)es and end of year balance include chan(cid:74)es made in relation to awards for service within the wider (cid:53)io (cid:55)into (cid:42)roup, includin(cid:74) before (cid:77)oinin(cid:74) or after ceasin(cid:74) with (cid:40)(cid:53)(cid:36), and (cid:53)io (cid:55)into (cid:53)i(cid:74)hts (cid:44)ssue ad(cid:77)ustments to accrued balances. (cid:58)hen a (cid:78)ey mana(cid:74)ement personnel left prior to the end of the year, the balance re(cid:192)ects holdin(cid:74)s at the date of resi(cid:74)nation. Changes to balances for non-executive Directors do not relate to remuneration for services provided to the Company. 80 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 81 DIRECTORS’ REPORT Shareholdings The number of shares held in (cid:40)RA or Rio Tinto (cid:47)imited during the financial year by each Director of (cid:40)RA are set out below. Energy Resources of Australia Ltd P McMahon R Atkinson H Newell Rio Tinto Limited P McMahon R Atkinson A Sutton D Klingner P Taylor J Pegler J Farrell B Cox BALANCE AT START OF THE YEAR1 RECEIVED DURING THE YEAR OTHER CHANGES DURING THE YEAR BALANCE AT END OF THE YEAR2 2014 2013 2013 2014 2013 2014 2013 2013 2014 2013 2013 2014 2013 2014 2013 2014 2014 42,500 - - 161 161 18,405 18,405 888 8,895 8,895 29,787 28,121 23,528 6,331 6,331 19,131 5,395 - - - - - - - 2,001 1,880 - - 5,683 5,405 - - 1,788 1,476 - 42,500 22,958 - - - - (2,001) (1,564) - - - (812) - - (1,515) (1,476) 42,500 42,500 22,958 161 161 18,405 18,405 888 9,211 8,895 29,787 33,804 28,121 6,331 6,331 19,404 5,395 Note 1 Note 2 (cid:58)here a Director was appointed durin(cid:74) the year, balance re(cid:192)ects holdin(cid:74)s at the time of commencement with the (cid:38)ompany. (cid:58)here a Director resi(cid:74)ned durin(cid:74) the year, balance re(cid:192)ects holdin(cid:74)s at time of resi(cid:74)nation as a Director of the (cid:38)ompany. G Additional information Further details relating to options Value of options exercised during the year 2014 2013 VALUE OF OPTIONS EXERCISED DURING THE YEAR MARKET PRICE AT DATE OF EXERCISE (cid:7)(cid:25)(cid:25)(cid:15)1(cid:28)(cid:28) - (cid:7)5(cid:27).(cid:26)(cid:27) - Loans and other transactions with Directors and other key management personnel There are no loans with Directors and other key management personnel. (cid:50)ther transactions with Director related entities are disclosed in Note 2(cid:23) (cid:177) related parties. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 81 82 DIRECTORS’ REPORT (cid:51)rincipal activities The principal activities of the Company during the course of the year consisted of the mining, processing and sale of uranium o(cid:91)ide. Dividends No dividends have been paid by (cid:40)RA to members in respect of the 201(cid:23) financial year. (cid:50)perating and financial review Details of (cid:40)RA(cid:182)s review and results of operations are included in the Chairman(cid:182)s Report on page (cid:25)(cid:15) the Chief (cid:40)(cid:91)ecutive(cid:182)s Report on page (cid:27) and the (cid:50)perating and (cid:41)inancial Review section on page 12. Significant changes to the state of affairs (cid:44)n the opinion of the Directors(cid:15) other than matters reported in the Directors(cid:182) Report(cid:15) the Chairman(cid:182)s Report and the Chief (cid:40)(cid:91)ecutive(cid:182)s Report(cid:15) there were no significant changes in the state of affairs of the consolidated entity during the year ended 31 December 201(cid:23). Matters subse(cid:84)uent to the end of the financial year There has not arisen in the interval between the end of the year and the date of this report any item(cid:15) transaction or event of a material nature that has significantly affected or may significantly affect: (cid:11)i(cid:12) (cid:11)ii(cid:12) (iii) the operations of the consolidated entity(cid:30) the results of those operations(cid:30) or the state of affairs of the consolidated entity subsequent to the financial year ended 31 December 201(cid:23). (cid:47)ikely developments (cid:44)n the opinion of the Directors(cid:15) any other likely developments in the operations of the consolidated entity known at the date of this report have been covered within the Annual Report and Notes to the financial statements. A general review of developments for (cid:40)RA is presented in the (cid:50)perating and (cid:41)inancial Review section on page 12. Annual General Meeting The 201(cid:23) Annual (cid:42)eneral Meeting will be held on 1(cid:23) April 2015 in Darwin(cid:15) in the Northern Territory of Australia. Notices of the 2015 Annual General Meeting are set out in separate letters to the shareholders of the Company. (cid:44)ndemnification Clause 11 of the Company(cid:182)s constitution provides that every Director(cid:15) manager(cid:15) officer or employee of the Company shall be indemnified out of the funds of the Company against all liability incurred by them in defending any proceedings in which they are successful. The Corporations Act 2001 prohibits a company from indemnifying Directors(cid:15) secretaries(cid:15) e(cid:91)ecutive officers and auditors from liability except for liability to a party, other than the Company or a related body corporate(cid:15) where the liability does not arise out of conduct involving a lack of good faith and e(cid:91)cept for liability for costs and expenses incurred in defending proceedings in which the officer or auditor is successful. An indemnity for officers or employees who are not Directors(cid:15) secretaries or e(cid:91)ecutive officers(cid:15) is not e(cid:91)pressly prohibited by the Corporations Act 2001. The Directors and Company Secretary of the Company, and all former Directors and Company Secretaries(cid:15) have the benefit of the indemnity in Clause 11 of the Company(cid:182)s constitution. The indemnity also applies to e(cid:91)ecutive officers of the Company (cid:11)being the Chief (cid:41)inancial (cid:50)fficer and (cid:42)eneral Managers and other key management personnel and managers who are concerned with(cid:15) or take part in the management of the Company(cid:12) as well as other employees. Insurance Since the end of the previous financial year(cid:15) the Company has paid insurance premiums in respect of a Directors(cid:182) and officers(cid:182) liability policy of insurance. The policy indemnifies all Directors and officers of (cid:40)RA and its controlled entities (including the Directors, Company Secretaries, and e(cid:91)ecutive officers referred to above(cid:12) against certain liabilities. (cid:44)n accordance with common commercial practice(cid:15) the insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. (cid:40)nvironmental regulation and policy (cid:40)RA strives to be at the forefront of environmental management in the uranium industry. (cid:44)t operates in accordance with relevant Commonwealth and Northern Territory environmental legislation as well as site specific environmental licences(cid:15) permits and statutory authorisations. (cid:40)RA(cid:182)s environmental management system is (cid:44)S(cid:50)1(cid:23)001 compliant. (cid:40)RA is re(cid:84)uired to report any incident that is a divergence from strict compliance with statutory re(cid:84)uirements(cid:15) even if the incident has no detrimental environmental impact(cid:15) and reports are made to the Department of Mines and (cid:40)nergy (cid:11)Northern Territory(cid:12)(cid:30) the Supervising Scientist of the Commonwealth Department of (cid:40)nvironment(cid:30) the Northern (cid:47)and Council(cid:30) the Commonwealth Department of (cid:44)ndustry and Science and the (cid:42)und(cid:77)eihmi Aboriginal Corporation (cid:11)representatives of the Mirarr Traditional (cid:50)wners(cid:12). (cid:40)RA(cid:182)s commitment to protect the environment in 201(cid:23) was confirmed by the Supervising Scientist(cid:15) which conducts e(cid:91)tensive monitoring and research programs. There were no reported incidents that resulted in any environmental impact off the immediate mine site. The environment remained protected through the period. 82 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 83 DIRECTORS’ REPORT There were no prosecutions commenced or fines incurred in respect of (cid:40)RA(cid:182)s environmental performance during 201(cid:23). (cid:41)urther details of (cid:40)RA(cid:182)s environmental performance are included in the (cid:179)(cid:40)nvironment(cid:180) section of the Annual Report on page (cid:23)1. Corporate governance The (cid:37)oard of (cid:40)RA considers high standards of corporate governance to be critical to business integrity and performance. The corporate governance structures and practices in place at (cid:40)RA are substantially in compliance with the Corporate (cid:42)overnance (cid:51)rinciples and Recommendations (cid:177) Second (cid:40)dition developed by the Australian Securities (cid:40)(cid:91)change Corporate (cid:42)overnance Council (cid:11)(cid:179)Council(cid:180)(cid:12). Areas where the corporate governance practices of (cid:40)RA do not follow the Council(cid:182)s recommendations arise due to Rio Tinto(cid:182)s (cid:25)(cid:27).(cid:23) per cent ownership of the Company and the management direction(cid:15) services and support this provides. The e(cid:91)tent to which the Company does not comply is detailed in the Corporate (cid:42)overnance Statement on pages (cid:27)5 to (cid:27)(cid:28). Rounding of amounts The Company is of a kind referred to in AS(cid:44)C Class (cid:50)rder (cid:28)(cid:27)(cid:18)0100 and in accordance with that Class (cid:50)rder amounts in the financial statements and Directors(cid:182) Report have been rounded to the nearest thousand dollars(cid:15) unless otherwise indicated. Auditors (cid:51)ricewaterhouseCoopers are the auditors of the Company. No person who was an officer of the Company during the year was a former partner or director of the auditors. (cid:40)ach of the Directors at the time this report was approved has confirmed that: (cid:135) (cid:135) so far as he or she is aware(cid:15) there is no relevant audit information (ie information needed by the auditors in connection with preparing their report(cid:12) of which the auditors are unaware(cid:30) and he or she has taken all steps that they ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the auditors are aware of that information. Non audit services The Company may decide to employ the auditors on assignments additional to their statutory audit duties where the auditor(cid:182)s e(cid:91)pertise and e(cid:91)perience with the Company are important. Details of the amount paid or payable to the auditors for audit services are set out below. The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Committee(cid:15) is satisfied that the provision of non(cid:16)audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. All non(cid:16)audit services are reviewed by the Audit and Risk Committee to ensure they do not impact on the impartiality and ob(cid:77)ectivity of the auditors and do not undermine the general principles relating to auditors’ independence as set out in Professional Statement (cid:41)1(cid:15) including reviewing or auditing the auditors(cid:182) own work(cid:15) acting in a management or decision making capacity for the Company(cid:15) acting as advocate for the Company or (cid:77)ointly sharing economic risks and rewards. Accordingly(cid:15) the Directors have satisfied themselves that the provision of non(cid:16)audit services by the auditors does not compromise the auditor independence requirements of the Corporations Act 2001. During the year(cid:15) the following fees were paid or payable for services provided by the auditors of the Company(cid:15) its related practices and non(cid:16)audit related firms. 2014 $000 2013 $000 AUDIT SERVICES (cid:51)ricewaterhouseCoopers Audit and review of financial reports 310 230 Audit and review of financial reports (additional 2013 fees) 40 - Total Remuneration for audit services Ta(cid:91)ation services Non(cid:16)audit services Total Remuneration 350 230 - - - - 350 230 (cid:44)nformation on Auditor (cid:51)ricewaterhouseCoopers continues in office in accordance with Section 327 of the Corporations Act 2001. A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page (cid:27)(cid:23). Signed at (cid:37)risbane this 12 (cid:41)ebruary 2015 in accordance with a resolution of the Directors. P McMahon Director Brisbane 12 February 2015 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 83 84 AUDITOR’S INDEPENDENCE DECLARATION Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Energy Resources of Australia Ltd for the year ended 31 December 2014, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. John O'Donoghue Partner PricewaterhouseCoopers Melbourne 12 February 2015 PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 85 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Corporate Governance Statement The (cid:37)oard of (cid:40)RA considers high standards of corporate governance to be critical to business integrity and performance and to ma(cid:91)imise the overall long term return to shareholders. The (cid:37)oard seeks to ensure that (cid:40)RA meets the ob(cid:77)ectives of its shareholders(cid:15) while paying proper regard to the interests of employees and e(cid:91)ternal stakeholders. The corporate governance structures and practices in place at (cid:40)RA are substantially in compliance with the 2nd (cid:40)dition of the Corporate (cid:42)overnance (cid:51)rinciples and Recommendations with 2010 Amendments (cid:11)(cid:179)(cid:51)rinciples(cid:180)(cid:12) developed by the Australian Securities (cid:40)(cid:91)change (cid:11)(cid:179)AS(cid:59)(cid:180)(cid:12) Corporate (cid:42)overnance Council (cid:11)(cid:179)Council(cid:180)(cid:12). The (cid:37)oard has considered the Council(cid:182)s (cid:51)rinciples(cid:15) and (cid:40)RA did not comply with the following recommendations for the whole of the reporting period: (cid:135) (cid:135) Recommendation 2.1 (cid:177) there was not a ma(cid:77)ority of independent Directors(cid:30) and Recommendation 2.(cid:23) (cid:177) there was no established nominations committee. Areas where the corporate governance practices in place at (cid:40)RA do not follow the recommendations set out in the Council(cid:182)s (cid:51)rinciples arise due to Rio Tinto(cid:182)s ownership of (cid:25)(cid:27).(cid:23) per cent of the shares of the Company and the management direction, services and support provided by Rio Tinto. As e(cid:91)plained further below(cid:15) the (cid:37)oard considers that in each case this is appropriate. The Corporate (cid:42)overnance section of the Company(cid:182)s website (www.energyres.com.au) sets out the further information re(cid:84)uired by the Council(cid:182)s (cid:51)rinciples. The Board Responsibilities and charter (cid:44)n carrying out its responsibilities and powers(cid:15) the (cid:37)oard at all times recognises its overriding responsibility to act honestly(cid:15) fairly(cid:15) diligently and in accordance with the law in serving the interests of the (cid:40)RA(cid:182)s shareholders and employees and the community. The Board Charter underpins the strategic guidance and effective management oversight provided by the (cid:37)oard(cid:15) and defines the division of responsibility between (cid:37)oard and management by formal delegation and a system of Board reserve powers. The (cid:37)oard approves strategy and business plans and monitors the performance of (cid:40)RA against these plans. The (cid:37)oard also monitors compliance with policies prescribed by the (cid:37)oard in areas such as health and safety(cid:15) environment(cid:15) business ethics(cid:15) internal control and risk management. These policies are designed to ensure that (cid:40)RA meets or e(cid:91)ceeds the regulatory re(cid:84)uirements governing its operations. (cid:44)n addition to the matters e(cid:91)pressly re(cid:84)uired by law to be approved by the (cid:37)oard(cid:15) the powers specifically reserved for the (cid:37)oard are as follows: (cid:11)a(cid:12) (cid:11)b(cid:12) (c) (d) (cid:11)e(cid:12) confirming the appointment and removal of a Chief (cid:40)(cid:91)ecutive proposed by Rio Tinto and the terms and conditions of the Chief (cid:40)(cid:91)ecutive(cid:182)s employment(cid:30) appointment and removal of a Company Secretary(cid:30) appointment of the Chair of the Board and members of (cid:37)oard Committees(cid:30) any matters set out in the Schedule of Matters Reserved for Decision or Consideration by the (cid:37)oard(cid:30) and approval(cid:15) sub(cid:77)ect to the Constitution(cid:15) the Corporations Act 2001 and the AS(cid:59) (cid:47)isting Rules(cid:15) of each of the following: (cid:11)i(cid:12) (ii) (cid:11)iii(cid:12) (cid:11)v(cid:12) (cid:11)vi(cid:12) (cid:11)vii(cid:12) (cid:11)viii(cid:12) (ix) the issue of new shares or other securities in the Company(cid:30) incurring of debt (other than trade creditors incurred in the normal course of business) capital e(cid:91)penditure in e(cid:91)cess of (cid:7)5(cid:15)000(cid:15)000(cid:30) the ac(cid:84)uisition(cid:15) divestment or establishment of any significant business assets(cid:30) changes to the discretions delegated from the (cid:37)oard(cid:30) the annual operating budget plan(cid:30) changes to the capital and operating approval limits of senior management(cid:30) and the annual report and interim and preliminary final reports. Composition (cid:41)rom 1 January 201(cid:23) to 2(cid:26) November 201(cid:23)(cid:15) the (cid:37)oard of (cid:40)RA consisted of si(cid:91) Directors(cid:15) five of whom were non(cid:16)e(cid:91)ecutive. (cid:50)n 2(cid:26) November 201(cid:23)(cid:15) the number of Directors was increased to seven with the addition of Mr Co(cid:91) as a non(cid:16)e(cid:91)ecutive Director. During 201(cid:23)(cid:15) Mr McMahon was the Chairman and an independent(cid:15) non(cid:16)e(cid:91)ecutive Director. Dr (cid:42)arnett and Mr (cid:51)egler served as independent(cid:15) non(cid:16)e(cid:91)ecutive Directors. Mr Taylor(cid:15) Ms Newell(cid:15) Ms (cid:41)arrell and Mr Co(cid:91)(cid:15) who are e(cid:91)ecutives of Rio Tinto(cid:15) also served as non(cid:16)e(cid:91)ecutive Directors. Ms Sutton is an e(cid:91)ecutive Director and holds the position of Chief (cid:40)(cid:91)ecutive. (cid:50)n 11 June 201(cid:23)(cid:15) Ms Newell resigned as a Director. Ms (cid:41)arrell was appointed as a Director on the same date. The (cid:37)oard strives to achieve a diversity of skills(cid:15) e(cid:91)perience and perspective among its Directors. Details of the Directors(cid:15) their e(cid:91)perience(cid:15) (cid:84)ualifications and other appointments are set out on pages 5(cid:27) to 5(cid:28). Details of the independent status of Directors is outlined in the (cid:44)ndependence section below. (cid:52)ualification for (cid:37)oard membership is driven by the principle that the (cid:37)oard(cid:182)s composition should re(cid:192)ect the right balance of skills(cid:15) knowledge and diversity that the (cid:37)oard considers will best serve the interests of (cid:40)RA and all of its shareholders. Decisions relating to appointment of Directors are made by the full (cid:37)oard. Directors Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 85 86 CORPORATE GOVERNANCE STATEMENT appointed by the (cid:37)oard are re(cid:84)uired by (cid:40)RA(cid:182)s Constitution to submit themselves for election by shareholders at the Annual (cid:42)eneral Meeting following their appointment. There is no share ownership (cid:84)ualification for appointment as a Director. The (cid:37)oard has not established a nominations committee. The (cid:37)oard recognises that this does not follow Recommendation 2.(cid:23) of the Council(cid:182)s (cid:51)rinciples. The (cid:37)oard considers that its e(cid:91)isting practices in reviewing director competencies(cid:15) (cid:37)oard succession planning(cid:15) (cid:37)oard performance evaluation and Director selection and nomination carried out in accordance with the (cid:37)oard Charter(cid:15) are satisfactory and appropriate given the si(cid:93)e of the (cid:37)oard and (cid:40)RA(cid:182)s current ownership structure. Mr McMahon was nominated to the (cid:37)oard by Rio Tinto in November 2012. Mr McMahon was previously an e(cid:91)ecutive of Rio Tinto(cid:15) however(cid:15) a sufficient period of time (cid:11)three years(cid:12) had elapsed since he ceased employment with Rio Tinto. The (cid:37)oard is satisfied that Mr McMahon has no continuing relationship with Rio Tinto that would interfere with his independent e(cid:91)ercise of (cid:77)udgement and that he is an independent director. For the reporting period, the Board of Directors did not consist of a ma(cid:77)ority of independent Directors. This does not follow Recommendation 2.1 of the Council(cid:182)s (cid:51)rinciples. The (cid:37)oard considered it was appropriate that the composition of the (cid:37)oard recognised Rio Tinto(cid:182)s (cid:25)(cid:27).(cid:23) per cent shareholding. Non(cid:16)e(cid:91)ecutive Directors are re(cid:84)uired to retire at least every three years in accordance with (cid:40)RA(cid:182)s Constitution(cid:15) but may offer themselves for re(cid:16)election. All Directors are required to, and do, bring an independent (cid:77)udgment to bear on (cid:37)oard decisions and act in accordance with their statutory duties of good faith and for a proper purpose, and in the interests of all shareholders. (cid:44)ndependence For the purposes of determining Director independence, the (cid:37)oard considers any material business relationship which could interfere(cid:15) or be perceived to interfere(cid:15) with the Director(cid:182)s independence of (cid:77)udgement(cid:15) ability to provide a strong(cid:15) valuable contribution to the Board’s deliberations and the Director’s ability to act in the best interests of (cid:40)RA and all shareholders. (cid:58)here contracts in the ordinary course of business e(cid:91)ist between (cid:40)RA and a company in which a Director has declared an interest(cid:15) these are reviewed for materiality to both (cid:40)RA and the other party to the contract. The following may be taken into account in considering such material business relationships: (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) whether(cid:15) within the last three years(cid:15) the Director or a close family member has been a member of e(cid:91)ecutive management of (cid:40)RA(cid:15) employed in a senior position with a member of the Rio Tinto (cid:42)roup or has received additional remuneration from the Company or a member of the Rio Tinto (cid:42)roup(cid:30) whether the Director or a close family member is(cid:15) or is associated with(cid:15) a substantial shareholder (cid:11)more than 5 per cent of the voting shares(cid:12) in the Company or in a member of the Rio Tinto (cid:42)roup(cid:30) the Director(cid:182)s cross directorships of or significant links with or involvement in other companies(cid:30) the Director(cid:182)s length of service on the (cid:37)oard(cid:30) and whether(cid:15) within the last three years(cid:15) the Director or a close family member has had, either directly or indirectly and whether as principal(cid:15) employee or consultant(cid:15) a material business relationship with (cid:40)RA or with a member of the Rio Tinto (cid:42)roup(cid:15) whether as an auditor(cid:15) professional adviser(cid:15) supplier(cid:15) or customer (cid:11)(cid:179)material(cid:180) being more than five per cent of (cid:40)RA(cid:182)s or the counterparty(cid:182)s consolidated gross revenue per annum(cid:12). Dr (cid:42)arnett and Mr (cid:51)egler are independent non(cid:16)e(cid:91)ecutive Directors. All related party transactions(cid:15) including those with Rio Tinto(cid:15) have been determined by the independent Directors to be on arm’s length terms and in the interests of (cid:40)RA. Chairman and Chief (cid:40)(cid:91)ecutive The Chairman(cid:15) Mr McMahon(cid:15) is an independent non(cid:16)e(cid:91)ecutive Director. Mr McMahon(cid:182)s other appointments are set out on page 5(cid:27). The (cid:37)oard considers that none of his other commitments interfere with the discharge of his duties to (cid:40)RA. The Chief (cid:40)(cid:91)ecutive is Ms Sutton(cid:15) who is also a Director. This is consistent with Recommendation 2.3 of the Council(cid:182)s (cid:51)rinciples that the Chief (cid:40)(cid:91)ecutive and Chairman be different people. Board meetings The (cid:37)oard held si(cid:91) scheduled meetings and seven e(cid:91)traordinary meetings during 201(cid:23). (cid:44)n addition(cid:15) there were nine meetings held in 201(cid:23) of subcommittees established by the (cid:37)oard. The (cid:37)oard meeting attendance details for Directors in 2014 are set out on page (cid:25)2. Performance self assessment (cid:44)n 201(cid:23)(cid:15) the (cid:37)oard performed an evaluation of itself that: (a) considered the performance of the Directors and the Board and the adequacy of the Board’s structures and processes, including the (cid:37)oard Charter(cid:30) (cid:11)b(cid:12) set out goals and ob(cid:77)ectives of the (cid:37)oard for the upcoming year(cid:30) and (cid:11)c(cid:12) considered whether any improvements or changes to the Board structures and processes, including the Board Charter and Audit and Risk Committee Charter(cid:15) were necessary or desirable. The process of evaluation and self assessment took the form of a questionnaire completed by each of the Directors and the Company Secretary. (cid:41)ollowing collation by an e(cid:91)ternal 86 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 87 CORPORATE GOVERNANCE STATEMENT consultant, the results and the adequacy and appropriateness of the self assessment process were compiled. A report outlining the results was circulated to all Directors and discussed at the following (cid:37)oard meeting(cid:15) where actions arising were agreed. financial statements(cid:15) accounting policies(cid:15) control systems(cid:15) risk management practices and ta(cid:91)ation issues(cid:15) and for liaison with the e(cid:91)ternal and internal auditors. The Committee also reviews the ade(cid:84)uacy of internal and e(cid:91)ternal audit arrangements. (cid:44)ndependent professional advice The (cid:37)oard has adopted a procedure for Directors wishing to seek independent professional advice(cid:15) at the Company(cid:182)s e(cid:91)pense(cid:15) in the furtherance of their duties. The (cid:37)oard recognises that there may be circumstances in which individual Directors are entitled to independent professional advice(cid:15) at the Company(cid:182)s e(cid:91)pense(cid:15) in the furtherance of their duties, and any Director may do so by arrangement with the Company Secretary. The Audit and Risk Committee advises the (cid:37)oard of any matters that might have a significant impact on the financial condition of (cid:40)RA and has the authority to investigate any matters within its terms of reference(cid:15) having full access to the information and resources of (cid:40)RA to fulfil its function. Related party transactions are considered by the Audit and Risk Committee. The Audit and Risk Committee reviews compliance with the Corporations Act 2001, and the requirements of the ASX and other regulatory re(cid:84)uirements. Remuneration (cid:40)RA(cid:182)s Constitution provides that the aggregate remuneration paid to non(cid:16)e(cid:91)ecutive Directors of (cid:40)RA in any one year will not e(cid:91)ceed (cid:7)(cid:27)00(cid:15)000 or such other amount as may be approved by shareholders from time to time. At the 201(cid:23) Annual (cid:42)eneral Meeting(cid:15) the 2013 Remuneration Report was approved with (cid:28)1.2(cid:26) per cent of shareholders who cast a vote voting in favour (cid:11)voting comprised 3(cid:25)3(cid:15)(cid:27)3(cid:26)(cid:15)(cid:26)(cid:25)5 votes (cid:181)for(cid:182) the resolution and 3(cid:23)(cid:15)(cid:27)1(cid:25)(cid:15)512 votes (cid:181)against(cid:182) the resolution(cid:12). North (cid:47)imited and (cid:51)eko(cid:16)(cid:58)allsend (cid:51)ty (cid:47)td(cid:15) which are both Rio Tinto entities(cid:15) voted a combined total of 35(cid:23)(cid:15)0(cid:26)(cid:27)(cid:15)(cid:27)5(cid:23) votes (cid:181)for(cid:182) the resolution. (cid:44)n 2012(cid:15) the (cid:37)oard established a Remuneration Committee. At 31 December 201(cid:23)(cid:15) the Remuneration Committee comprised three non(cid:16)e(cid:91)ecutive independent Directors(cid:15) being Mr (cid:51)egler (cid:11)Chair(cid:12)(cid:15) Dr (cid:42)arnett and Mr McMahon. A ma(cid:77)ority of members constitutes a (cid:84)uorum for a meeting. The Chief (cid:40)(cid:91)ecutive may be invited to attend Remuneration Committee meetings. (cid:50)ther e(cid:91)ecutives may also be invited to discuss or report on particular agenda items. The Remuneration Committee Charter sets out the role and ob(cid:77)ectives of the Remuneration Committee. A summary of the ob(cid:77)ectives of the Remuneration Committee is set out on page (cid:25)3 of the Remuneration Report. The complete Remuneration Committee Charter is available at the Corporate (cid:42)overnance section of (cid:40)RA(cid:182)s website. Audit and Risk committee The Audit and Risk Committee is appointed by the (cid:37)oard and at 31 December 201(cid:23) comprised three non(cid:16)e(cid:91)ecutive independent Directors. Two Directors constitute a (cid:84)uorum. The present members of the Audit and Risk Committee are Dr (cid:42)arnett (cid:11)Chair(cid:12)(cid:15) Mr (cid:51)egler and Mr McMahon. The Company(cid:182)s Chief (cid:41)inancial (cid:50)fficer(cid:15) Chief (cid:40)(cid:91)ecutive and (cid:47)egal Counsel (cid:9) Company Secretary, the external auditor and the internal auditors are invited to attend all meetings. The Audit and Risk Committee Charter sets out the role and terms of reference of the Audit and Risk Committee and is reviewed regularly. The Audit and Risk Committee Charter is available at the Corporate (cid:42)overnance section of (cid:40)RA(cid:182)s website. The Committee provides a formal structure for reviewing (cid:40)RA(cid:182)s The Audit and Risk Committee held three scheduled meetings during 201(cid:23) and one e(cid:91)traordinary meeting. Attendance details of the 201(cid:23) meetings of the Audit and Risk Committee(cid:15) and the (cid:84)ualifications and e(cid:91)perience of the members(cid:15) are set out in the Directors(cid:182) Report on pages (cid:25)2 and 5(cid:27) to 5(cid:28) respectively. Each year the external auditor submits a schedule of audit services and fee estimate to the Audit and Risk Committee for consideration and approval. (cid:51)ricewaterhouseCoopers has been (cid:40)RA(cid:182)s e(cid:91)ternal auditor for a number of years. (cid:40)ach year(cid:15) the Audit and Risk Committee reviews the effectiveness of the e(cid:91)ternal audit process and the independence of the auditor. (cid:37)ased on its 201(cid:23) review(cid:15) the Audit and Risk Committee was satisfied with the e(cid:91)ternal audit process and that the e(cid:91)ternal auditor remained independent. Any work to be conducted by the e(cid:91)ternal auditor other than the audit is approved by the Audit and Risk Committee. Details of the fees paid to (cid:51)ricewaterhouseCoopers during 201(cid:23) are outlined on page (cid:27)3. Diversity (cid:40)RA acknowledges the benefits that (cid:192)ow from advancing (cid:37)oard and employee diversity(cid:15) in particular gender and (cid:44)ndigenous diversity. These benefits include identification and rectification of gaps in the skills and e(cid:91)perience of Directors and employees(cid:15) enhanced employee retention(cid:15) greater innovation and ma(cid:91)imisation of available talent to achieve corporate goals and increased financial performance. Diversity in the conte(cid:91)t of the Company primarily refers to groups which are under represented in its workforce. (cid:40)RA has a particular focus on the representation of women and (cid:44)ndigenous people in its workforce. (cid:40)RA(cid:182)s policy on diversity can be found on the Company(cid:182)s website at www.energyres.com.au. (cid:44)n accordance with the Company(cid:182)s diversity policy(cid:15) (cid:40)RA has set measurable ob(cid:77)ectives to achieve diversity. The ob(cid:77)ectives and the Company(cid:182)s progress in achieving each ob(cid:77)ective is set out below: ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 87 Energy Resources of Australia Ltd Financial Report 2014 88 CORPORATE GOVERNANCE STATEMENT OBJECTIVE OUTCOME (cid:58)omen to represent 20 per cent of the management (cid:11)being manager level and above(cid:12) and the (cid:37)oard by end of 201(cid:23). Target of 33 per cent (cid:44)ndigenous people and 25 per cent female participation in new apprenticeships by end of 201(cid:23). As at 31 December 2014 female participation at manager, general manager and (cid:37)oard level is 1(cid:27) per cent. (cid:58)omen comprise (cid:23)3 per cent of Directors. Total female participation is 18 per cent. As at 31 December 201(cid:23)(cid:15) (cid:40)RA has nine full time apprentices, three of whom are (cid:44)ndigenous (cid:11)33 percent(cid:12). (cid:44)n addition(cid:15) (cid:40)RA has three school based apprentices. Target (cid:44)ndigenous employment of 20 per cent by the end of 201(cid:23). (cid:40)RA ended 201(cid:23) with an (cid:44)ndigenous employment rate of 12 per cent. As at 31 December 201(cid:23)(cid:15) the proportion of women employed by (cid:40)RA was as follows: (cid:11)(cid:179)Rules for dealing(cid:180)(cid:12) apply to the participation of (cid:40)RA e(cid:91)ecutives in the Rio Tinto long term incentive plans involving the awarding of Rio Tinto securities at a future date. Any such grants of shares and options under the Rio Tinto plans are sub(cid:77)ect to and conditional upon compliance with the terms of the Rules for dealing, including an express prohibition on hedging or limiting of e(cid:91)posure to economic risk in relation to such securities. (cid:56)nder the (cid:40)RA Share Trading (cid:51)olicy: (cid:135) Directors and senior managers must advise the Chairman in writing(cid:15) and receive approval in writing from the Chairman(cid:15) if they intend to purchase or sell (cid:40)RA securities. (cid:44)n regard to his own dealings(cid:15) the Chairman is re(cid:84)uired to notify the Chair of the Audit and Risk Committee. No dealings in (cid:40)RA securities may take place for the period from the end of any relevant financial period to the trading day following announcement of (cid:40)RA(cid:182)s annual results or half year results. (cid:135) Particulars of the interests held by Directors are outlined on page (cid:25)2 of the Remuneration Report. Board of directors (cid:40)(cid:91)ecutive committee and managers Company 43% 18% 18% Risk identification and management (cid:40)RA has in place a range of policies and procedures to manage the risks associated with its operating activities. These policies and procedures have been adopted by the (cid:37)oard(cid:15) with primary oversight by the Audit and Risk Committee(cid:15) to ensure that potential business risks are identified and appropriate action taken. Code of business conduct (cid:40)RA has a Code of (cid:37)usiness Conduct to be met by all employees and Directors. All employees are re(cid:84)uired to maintain high standards of ethical behaviour in the e(cid:91)ecution of their duties and comply with all applicable laws and regulations in Australia and in every other country in which the Company engages in business. The Code of (cid:37)usiness Conduct is reviewed to ensure it adequately addresses the issues facing the Company and is available for inspection on the Corporate (cid:42)overnance section of the Company(cid:182)s website at www.energyres.com.au. (cid:44)n addition to the Company(cid:182)s Code of (cid:37)usiness Conduct(cid:15) the Company(cid:182)s employees are re(cid:84)uired to comply with Rio Tinto(cid:182)s statement of business practice The Way We Work(cid:15) available at Rio Tinto(cid:182)s website at www.riotinto.com. The Company has a confidential whistleblower programme known as (cid:181)Speak(cid:16)(cid:50)(cid:56)T(cid:182). (cid:40)mployees are encouraged to report any suspicion of unethical or illegal practices. Purchase and sale of Company securities (cid:40)RA has in place a formal policy that reinforces to all Directors(cid:15) officers and employees the prohibitions against insider trading. The Share Trading (cid:51)olicy is available for inspection at the Corporate (cid:42)overnance section of the Company(cid:182)s website at www.energyres.com.au. (cid:44)n addition(cid:15) the (cid:179)Rules for dealing in securities of Rio Tinto(cid:180) (cid:135) (cid:135) (cid:135) The management of risk is an integral part of the responsibility of both the Board and management and is carried out through an integrated risk management assurance process including an internal audit programme delivered by the Company(cid:182)s internal auditors and a detailed internal control process covering all of (cid:40)RA(cid:182)s material business risks. (cid:40)RA benefits from the Rio Tinto (cid:42)roup(cid:182)s knowledge(cid:15) policies and practices on risk management and corporate assurance(cid:15) developed to manage Rio Tinto(cid:182)s diverse business activities covering a variety of commodities and operational locations. Together(cid:15) these make up a comprehensive framework and approach to risk analysis and risk management. The (cid:37)oard has in place a number of systems to identify and manage business risks. These include: (cid:135) the identification and review of all of the business risks known to be facing the Company(cid:30) the provision of reports and information by management to the (cid:37)oard(cid:15) on a periodic basis(cid:15) confirming the status and effectiveness of the plans(cid:15) controls(cid:15) policies and procedures implemented to manage business risks(cid:30) guidelines for ensuring that capital e(cid:91)penditure and revenue commitments e(cid:91)ceeding certain approved limits are placed before the (cid:37)oard for approval(cid:30) limits and controls for all financial e(cid:91)posures(cid:15) including the use of derivatives(cid:30) 88 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 89 CORPORATE GOVERNANCE STATEMENT (cid:135) (cid:135) a regulatory compliance programme(cid:30) and safety(cid:15) health and environmental policies which are supported by a set of standards and management systems which recognise the Company(cid:182)s commitment to achieving high standards of performance in all its activities in these areas. (cid:44)n 201(cid:23)(cid:15) the (cid:37)oard undertook an assessment of the strategic risks to the Company(cid:182)s business and the mitigation strategies to be implemented by management. The strategic risks identified through this assessment were management of water(cid:30) cash(cid:192)ow over the period 2015 to 201(cid:27)(cid:30) e(cid:91)ploration and the potential development of the Ranger 3 Deeps resource(cid:30) stakeholder support of the Company(cid:182)s strategic initiatives(cid:30) rehabilitation of the Ranger (cid:51)ro(cid:77)ect Area(cid:30) internal controls relating to the Company(cid:182)s license to operate(cid:30) e(cid:91)ternal events relating to the Company(cid:182)s license to operate(cid:30) and access to future tenure and long term development options. These strategic risks are in addition to risks inherent to the mining industry generally which include economic conditions (cid:11)(cid:192)uctuations in commodity pricing and e(cid:91)change rates(cid:12)(cid:15) international regulation of greenhouse gas emissions and impact of climatic conditions. The Chief (cid:40)(cid:91)ecutive and Chief (cid:41)inancial (cid:50)fficer give statements(cid:15) in writing(cid:15) to the (cid:37)oard regarding the financial reporting and operational results being founded on a sound system of internal compliance and control and the financial statements giving a true and fair view of the Company(cid:182)s position and of the results of the Company(cid:182)s operations. These statements rely on (cid:40)RA(cid:182)s sound system of risk management and internal compliance and control which implements the policies adopted by the (cid:37)oard(cid:15) and confirm that (cid:40)RA(cid:182)s risk management and internal compliance and control system is operating efficiently and effectively in all material respects. (cid:44)n 201(cid:23)(cid:15) all (cid:42)eneral Managers of the Company made a declaration that they: (cid:135) understood the key re(cid:84)uirements of each business integrity element of the Rio Tinto(cid:182)s The Way We Work(cid:30) and had actively engaged with their direct reports to: (cid:135) Shareholder communication (cid:40)RA recognises the importance of effective communication with shareholders and the general investment community. Apart from (cid:40)RA(cid:182)s compliance with its mandatory continuous disclosure obligations(cid:15) (cid:40)RA takes steps to ensure that its shareholders and other stakeholders are kept informed. (cid:41)ull advantage is taken of the Annual (cid:42)eneral Meeting to inform shareholders of current developments and to give shareholders the opportunity to ask (cid:84)uestions. As recommended by the Council(cid:182)s (cid:51)rinciples(cid:15) (cid:51)ricewaterhouseCoopers(cid:15) (cid:40)RA(cid:182)s e(cid:91)ternal auditor attends the Annual (cid:42)eneral Meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor(cid:182)s report. (cid:40)RA shareholders are also able to submit written (cid:84)uestions regarding the statutory audit report to the auditor via the Company. Any (cid:84)uestions received and answers provided will be made available to members at the Annual (cid:42)eneral Meeting. Shareholders who are unable to attend meetings are encouraged to appoint a pro(cid:91)y to vote either as they direct or at their discretion. (cid:40)RA believes that investor seminars(cid:15) presentations and briefings on financial and operational issues(cid:15) including social and environmental performance(cid:15) are valuable ways of communicating with relevant professionals(cid:15) employees and other interested persons. The Chief (cid:40)(cid:91)ecutive and Chief (cid:41)inancial (cid:50)fficer conduct regular meetings with the Company(cid:182)s ma(cid:77)or investors and analysts(cid:15) and the Company organises investor briefings to coincide with the release of half year and full year financial results. (cid:40)RA gives e(cid:84)ual access to information disclosed in investor seminars(cid:15) presentations and briefings. (cid:44)f any such event is used to disclose new material(cid:15) it will(cid:15) in advance or simultaneously(cid:15) be disclosed to the AS(cid:59) and available on (cid:40)RA(cid:182)s website. (cid:16) promote awareness of the business integrity values(cid:30) and (cid:16) ensure compliance with the Company(cid:182)s e(cid:91)pectations around each value. Public statements and disclosure matters (cid:40)RA makes full and immediate disclosures to its shareholders and the market as re(cid:84)uired by(cid:15) and in accordance with(cid:15) its legal and regulatory obligations. (cid:40)stablished systems are in place to ensure compliance and matters that may have a material impact on the price or value of (cid:40)RA(cid:182)s securities are reported to the market in accordance with the AS(cid:59) (cid:47)isting Rules and the Corporations Act 2001. (cid:40)RA(cid:182)s Continuous Disclosure (cid:51)olicy is available on the Company(cid:182)s website at www.energyres.com.au. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 89 90 STATEMENT OF COMPREHENSIVE INCOME Statement of Comprehensive Income Statement of Comprehensive Income For the year ended 31 December 2014 FOR THE YEAR ENDED 31 DECEMBER 2014 Revenue from continuing operations Changes in inventories Purchased materials (uranium oxide) Materials and consumables used (cid:40)mployee benefits and contractor e(cid:91)penses (cid:42)overnment and other royalties Commission and shipping expenses Depreciation and amortisation expenses Financing costs Statutory and corporate expenses Other expenses Profit/(loss) before income tax (cid:44)ncome ta(cid:91) (cid:11)e(cid:91)pense(cid:12)(cid:18)benefit Profit/(loss) for the year (cid:50)ther comprehensive income for the year(cid:15) net of ta(cid:91) Total comprehensive income for the year Profit/(loss) is attributable to: (cid:50)wners of (cid:40)nergy Resources of Australia (cid:47)td Total comprehensive income for the year is attributable to: (cid:50)wners of (cid:40)nergy Resources of Australia (cid:47)td Earnings per share for profit/(loss) attributable to the ordinary equity holders of the Company: Basic earnings per share (cents) Diluted earnings per share (cents) NOTES 2014 $’000 2013 $’000 3 401,798 370,144 4 4 4 4 5 (124,876) 14,140 (66,933) (85,300) - (88,459) (215,816) (172,512) (15,423) (2,333) (18,407) (10,371) (119,977) (232,169) (29,301) (11,247) (4,194) (32,402) (10,761) (5,744) (273,602) (186,541) 85,802 50,712 (187,800) (135,829) - - (187,800) (135,829) (187,800) (135,829) (187,800) (135,829) 27 27 (cid:11)3(cid:25).3(cid:12) (cid:11)3(cid:25).3(cid:12) (cid:11)2(cid:25).2(cid:12) (cid:11)2(cid:25).2(cid:12) The above statement of comprehensive income should be read in con(cid:77)unction with the accompanying notes. 90 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 91 BALANCE SHEET Balance Sheet Balance Sheet As at 31 December 2014 AS AT 31 DECEMBER 2014 ASSETS Current assets Cash and cash e(cid:84)uivalents Trade and other receivables (cid:44)nventories Other Total current assets Non-current assets (cid:44)nventories (cid:56)ndeveloped properties Property, plant and equipment Deferred tax assets (cid:44)nvestment in trust fund Total non-current assets Total assets LIABILITIES Current liabilities Payables (cid:44)ncome received in advance (cid:51)rovisions Total current liabilities Non-current liabilities (cid:51)rovisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Total equity The above balance sheet should be read in con(cid:77)unction with the accompanying notes. NOTES 2014 $’000 2013 $’000 7 8 9 10 11 12 13 14 15 16 17 18 19 20 20 293,318 357,208 11,232 20,107 146,559 248,522 1,392 2,305 452,501 628,142 85,728 203,632 358,485 174,627 66,751 112,584 203,632 530,346 88,897 63,960 889,223 999,419 1,341,724 1,627,561 55,621 14,911 40,552 72,512 - 91,223 111,084 163,735 485,033 485,033 596,117 745,607 529,804 529,804 693,539 934,022 706,485 389,918 706,485 390,533 (350,796) (162,996) 745,607 934,022 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 91 92 STATEMENT OF CHANGES IN EQUITY Statement of Changes in Equity Statement of Changes in Equity FOR THE YEAR ENDED 31 DECEMBER 2014 For the year ended 31 December 2014 Balance at 1 January 2013 (cid:51)rofit(cid:18)(cid:11)loss(cid:12) for the year (cid:50)ther comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: (cid:40)mployee share options (cid:177) value of employee services 20 Balance at 31 December 2013 (cid:51)rofit(cid:18)(cid:11)loss(cid:12) for the year (cid:50)ther comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: (cid:40)mployee share options (cid:177) value of employee services 20 CONTRIBUTED EQUITY $’000 RESERVES $’000 RETAINED EARNINGS $’000 NOTES TOTAL $’000 706,485 390,301 (27,167) 1,069,619 - - - - - - 232 232 (135,829) (135,829) - - (135,829) (135,829) - - 232 232 706,485 390,533 (162,996) 934,022 - - - - - - - - (187,800) (187,800) - - (187,800) (187,800) (615) (615) - - (615) (615) Balance at 31 December 2014 706,485 389,918 (350,796) 745,607 The above statement of changes in e(cid:84)uity should be read in con(cid:77)unction with the accompanying notes. 92 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 93 CASH FLOW STATEMENT Cash Flow Statement Cash Flow Statement FOR THE YEAR ENDED 31 DECEMBER 2014 For the year ended 31 December 2014 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (cid:11)inclusive of (cid:42)oods and Services Ta(cid:91)(cid:12) Payments to suppliers and employees (cid:11)inclusive of (cid:42)oods and Services Ta(cid:91)(cid:12) (cid:51)ayments for e(cid:91)ploration and evaluation Payments for rehabilitation (cid:44)nterest received Financing costs paid (cid:44)ncome ta(cid:91)es (cid:11)paid(cid:12)(cid:18)refunded NOTES 2014 $’000 2013 $’000 448,514 406,432 (368,975) (294,468) 79,539 (83,205) (56,977) 7,871 (1,219) - 111,964 (66,186) (73,327) 11,161 (1,465) (29) (cid:49)et cash (out(cid:192)o(cid:90))/in(cid:192)o(cid:90) from operating activities 26 (53,991) (17,882) CASH FLOW FROM INVESTING ACTIVITIES Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Net cash (cid:11)out(cid:192)ow(cid:12)(cid:18)in(cid:192)ow from investing activities CASH FLOW FROM FINANCING ACTIVITIES Employee share option payments (cid:49)et cash (out(cid:192)o(cid:90))/in(cid:192)o(cid:90) from financing activities Net increase(cid:18)(cid:11)decrease(cid:12) in cash and cash e(cid:84)uivalents Cash and cash e(cid:84)uivalents at the beginning of the financial year (cid:40)ffects of e(cid:91)change rate changes on cash and cash e(cid:84)uivalents (11,590) (91,133) 2,652 (8,938) - (91,133) (962) (962) (1,106) (1,106) (63,891) 357,208 1 (110,121) 467,345 (16) Cash and cash equivalents at end of year 7 293,318 357,208 The above cash (cid:192)ow statement should be read in con(cid:77)unction with the accompanying notes. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 93 94 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements Notes to the Financial Statements 1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented(cid:15) unless otherwise stated. The financial statements are for the consolidated entity consisting of (cid:40)nergy Resources of Australia (cid:47)td (cid:11)(cid:40)RA(cid:12) and its subsidiaries. (a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board, and the Corporations Act 2001. (i) Compliance with IFRS The financial statements of the Company also comply with (cid:44)nternational (cid:41)inancial Reporting Standards (cid:11)(cid:44)(cid:41)RS(cid:12) as issued by the (cid:44)nternational Accounting Standards (cid:37)oard (cid:11)(cid:44)AS(cid:37)(cid:12). (ii) Historical cost convention These financial statements have been prepared under the historical cost convention. (iii) Critical accounting estimates The presentation of financial statements re(cid:84)uires the use of certain critical accounting estimates. (cid:44)t also re(cid:84)uires management to exercise its judgement in the process of applying the account- ing policies of the Company. The areas involving a higher degree of (cid:77)udgement or comple(cid:91)ity(cid:15) or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2. (b) Principles of consolidation (i) Subsidiaries (cid:50)n 11 September 2013(cid:15) (cid:40)(cid:58)(cid:47) Science (cid:51)ty (cid:47)td was deregistered. At the time it was (cid:40)RA(cid:182)s only subsidiary. (cid:40)RA has no other subsidiaries and is referred to in the financial report as the Company. Subsidiaries are all those entities (including special purpose entities(cid:12) over which the Company has the power to govern the financial and operating policies(cid:15) generally accompanying a shareholding of more than one half of the voting rights. The e(cid:91)istence and effect of potential voting rights that are currently e(cid:91)ercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de(cid:16)consolidated from the date that control ceases. (cid:44)ntercompany transactions(cid:15) balances and unrealised gains on transactions between (cid:42)roup companies are eliminated. (cid:56)nrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. (cid:11)c(cid:12) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns(cid:15) trade allowances(cid:15) rebates and amounts collected on behalf of third parties. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will (cid:192)ow to the entity and specific criteria have been met for the Company(cid:182)s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results(cid:15) taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) Sale of goods Sales are brought to account when the products pass from the physical control of the Company pursuant to an enforceable contract(cid:15) when selling prices are known or can be reasonably estimated and when the products are in a form that re(cid:84)uires no further treatment by the Company. (cid:44)n the case where a sale occurs and immediately after which (cid:11)part of(cid:12) the goods are borrowed back by the Company under a separate agreement(cid:15) the revenue is deferred until repayment of the borrowed goods occurs. (ii) Rendering of services Revenue from the rendering of services is recognised when the service is provided. (iii) Other revenue/income (cid:50)ther revenue(cid:18)income recognised by the Company includes: (cid:135) interest income(cid:15) which is recognised on a time proportion basis using the effective interest rate method(cid:30) rental income(cid:15) which is recognised on a straight line basis(cid:30) net gains on disposal of assets(cid:15) which is recognised at the date control of the asset passes to the ac(cid:84)uirer(cid:30) foreign e(cid:91)change gains(cid:30) and insurance recoveries(cid:15) which is recognised on confirmation from the insurer that the claim payment has been approved. (cid:135) (cid:135) (cid:135) (cid:135) (d) Foreign currency translation (i) Functional and presentation currency (cid:44)tems included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (cid:11)(cid:179)the functional currency(cid:180)(cid:12). The financial statements are presented in Australian dollars(cid:15) which is the Company(cid:182)s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional 94 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 95 NOTES TO THE FINANCIAL STATEMENTS currency using the e(cid:91)change rates prevailing at the dates of the transactions. (cid:41)oreign e(cid:91)change gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income(cid:15) e(cid:91)cept when they are deferred in e(cid:84)uity as (cid:84)ualifying cash (cid:192)ow hedges and (cid:84)ualifying net investment hedges or are attributable to part of the net investment in a foreign operation. establishing the net present value of provisions is charged to the statement of comprehensive income in each accounting period. The amortisation of the discount is shown as a financing cost. (cid:50)ther movements in the provision for closure and restoration costs(cid:15) including those resulting from new disturbance(cid:15) updated cost estimates(cid:15) changes to lives of operations and revisions to discount rates are capitalised within fi(cid:91)ed assets. These costs are then depreciated on a unit of production basis over the life of the reserves. (e) Financing costs Financing costs (including interest) are included in the statement of comprehensive income in the period during which they are incurred(cid:15) e(cid:91)cept where they are included in the cost of non(cid:16) current assets that are currently being developed and will take a substantial period of time to complete. The borrowing costs included in the cost of such developments are those costs that would have been avoided if the e(cid:91)penditure on the development had not been made. (cid:50)nce the asset is ready for use(cid:15) the capitalised borrowing costs are depreciated as a part of the carrying amount of the related asset. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the Company(cid:182)s outstanding borrowings during the year. (cid:11)f(cid:12) (cid:51)rovisions (cid:51)rovisions are recognised when the Company has a present legal or constructive obligation as a result of past events(cid:15) it is probable that an out(cid:192)ow of resources will be re(cid:84)uired to settle the obligation and the amount has been reliably estimated. (cid:51)rovisions are not recognised for future operating losses. (cid:51)rovisions are measured at the present value of management(cid:182)s best estimate of the e(cid:91)penditure(cid:15) ad(cid:77)usted for risk(cid:15) re(cid:84)uired to settle the present obligation at the balance sheet date. The discount rate used to determine the present value re(cid:192)ects current market assessments of the time value of money. The increase in the provision due to the passage of time is recognised as interest e(cid:91)pense. (i) Rehabilitation The Company is re(cid:84)uired to rehabilitate the Ranger (cid:51)ro(cid:77)ect Area upon cessation of mining operations. The costs are estimated on the basis of a closure model(cid:15) taking into consideration the technical closure options available to meet the Company(cid:182)s obligations and applying a probability weighting to each option based on the likelihood of e(cid:91)ecuting each option. (cid:58)hen it is deemed only one option is available it is assigned a 100 per cent probability. The cost estimates are calculated annually during the life of the operation to re(cid:192)ect known developments(cid:15) and are sub(cid:77)ect to regular reviews. The amortisation or unwinding of the discount applied in (cid:58)here rehabilitation is conducted systematically over the life of the operation(cid:15) rather than at the time of closure(cid:15) provision is made for the outstanding continuous rehabilitation work at each balance date. All costs of continuous rehabilitation work are charged to the provision as incurred. Separately(cid:15) the Company is re(cid:84)uired to maintain with the Commonwealth (cid:42)overnment the Ranger Rehabilitation Trust (cid:41)und (cid:11)(cid:179)Trust (cid:41)und(cid:180)(cid:12)(cid:15) to provide security against the estimated costs of closing and rehabilitating the mine immediately (rather than upon the planned cessation of mining operations(cid:12). (cid:40)ach year, the Company is required to prepare and submit to the Commonwealth (cid:42)overnment an Annual (cid:51)lan of Rehabilitation. (cid:50)nce accepted by the Commonwealth (cid:42)overnment(cid:15) the annual plan is then independently assessed and costed and the amount to be provided by the Company in the Trust (cid:41)und(cid:15) is then determined. The Trust (cid:41)und includes both cash and financial guarantees. The cash portion is shown as an investment on the balance sheet (cid:11)note 15(cid:12)(cid:15) and interest received by the Trust (cid:41)und is shown as interest income. The Company is re(cid:84)uired to rehabilitate the Jabiluka mineral lease upon cessation of operations to a standard specified by the Authorisation to operate issued by the Northern Territory (cid:42)overnment. The estimated cost of rehabilitation is currently secured by a bank guarantee and fully provided for in the financial statements. (cid:11)g(cid:12) (cid:44)ncome ta(cid:91) (cid:44)ncome ta(cid:91) e(cid:91)pense for the period is the ta(cid:91) payable on the current period’s taxable income based on the applicable income ta(cid:91) rate ad(cid:77)usted by temporary differences between the ta(cid:91) bases of assets and liabilities and their carrying amounts in the financial statements(cid:15) and to unused ta(cid:91) losses. The current income tax charge is calculated on the basis of the ta(cid:91) laws enacted or substantively enacted at the end of the reporting period in the country where the Company generates ta(cid:91)able income (cid:11)Australia(cid:12). Deferred income ta(cid:91) is provided in full(cid:15) using the liability method(cid:15) on temporary differences arising between the ta(cid:91) bases of assets and liabilities and their carrying amounts in the financial statements. However(cid:15) the deferred income ta(cid:91) is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor ta(cid:91)able profit Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 95 96 NOTES TO THE FINANCIAL STATEMENTS or loss. Deferred income ta(cid:91) is determined using ta(cid:91) rates (cid:11)and laws(cid:12) that have been enacted or substantially enacted by the reporting date and are e(cid:91)pected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future ta(cid:91)able amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and ta(cid:91) bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred ta(cid:91) assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred ta(cid:91) balances relate to the same ta(cid:91)ation authority. Current ta(cid:91) assets and ta(cid:91) liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in e(cid:84)uity are also recognised directly in e(cid:84)uity. (cid:11)h(cid:12) Trade and other receivables Trade receivables are recognised initially at fair value and subse(cid:84)uently measured at amortised cost using the effective interest method less provision for impairment. Trade receivables are normally settled within (cid:23)5 days and are carried at amounts due. The collectability of trade receivables is reviewed on an ongoing basis and specific provisions are made for any doubtful amounts. Receivables which are known to be uncollectible are written off. (cid:50)ther receivables relate to transactions outside the usual operating activities of the Company and are predominately concerned with rental receipts from employees and businesses located within the Jabiru township. These ongoing activities are expected to be settled during the 12 months subsequent to balance date but are assessed regularly and impaired accordingly. (cid:11)i(cid:12) (cid:44)nventories (cid:44)nventories(cid:15) other than stores(cid:15) are carried at the lower of cost and net realisable value. Net realisable value is determined based on estimated future sales prices, exchange rates and capital and production costs(cid:15) including transport. (cid:44)nventory is valued using the weighted average cost method and includes both fi(cid:91)ed and variable production costs as well as cash and non(cid:16)cash charges. Stockpiles represent ore that has been e(cid:91)tracted and is available for further processing. (cid:44)f there is significant uncertainty as to when the stockpiled ore will be processed it is e(cid:91)pensed as incurred. (cid:58)here the future processing of this ore can be predicted with confidence(cid:15) for e(cid:91)ample because it e(cid:91)ceeds the mine(cid:182)s cut off grade(cid:15) it is valued at the lower of cost and net realisable value. Stockpiled ore(cid:182)s net realisable value is calculated on a discounted cash (cid:192)ow basis. (cid:44)f the ore will not be processed within 12 months after the balance sheet date it is included within non(cid:16)current assets. (cid:58)ork in progress inventory includes ore stockpiles and other partly processed material. (cid:52)uantities are assessed primarily through surveys and assays. Stores are valued at cost or net realisable value where applicable and are impaired accordingly to take into account obsolescence. (cid:41)or inventory management purposes the Company may enter into uranium loans as a lending or receiving party. These loans are entered into for logistical purposes and loans received are repaid from the Company(cid:182)s inventory. The uranium loans do not meet the definition of a financial liability and are recorded net of inventory. (cid:11)(cid:77)(cid:12) (cid:44)mpairment of assets Assets that have an indefinite useful life and intangible assets that are not yet available for use are tested annually for impairment or more fre(cid:84)uently if events or changes in circumstances indicate that they might be impaired. (cid:50)ther assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset(cid:182)s carrying amount e(cid:91)ceeds its recoverable amount. The recoverable amount is the higher of an asset(cid:182)s fair value less cost to sell and value in use. (cid:41)or the purposes of assessing impairment(cid:15) assets are grouped at the lowest levels for which there are separately identifiable cash (cid:192)ows (cid:11)cash generating units(cid:12). (cid:41)air value is determined as the amount that would be obtained from the sale of the asset in an arm(cid:182)s length transaction. The value in use is determined using the present value of the future cash(cid:192)ow e(cid:91)pected to be derived from an asset or cash generating unit. (cid:11)k(cid:12) (cid:51)roperty(cid:15) plant and e(cid:84)uipment (cid:11)i(cid:12) (cid:36)c(cid:84)uisition (cid:44)tems of property(cid:15) plant and e(cid:84)uipment are recorded at historical cost and(cid:15) e(cid:91)cept for land(cid:15) are depreciated as outlined below. Historical cost includes expenditure that is directly attributable to the ac(cid:84)uisition of the items. Subse(cid:84)uent costs are included in the asset’s carrying amount or recognised as a separate asset, 96 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 97 NOTES TO THE FINANCIAL STATEMENTS as appropriate(cid:15) only when it is probable that future economic benefits associated with the item will (cid:192)ow to the Company and the cost of the item can be measured reliably. Repairs and maintenance are charged to the statement of comprehensive income during the period in which they are incurred. (ii) Depreciation and amortisation Depreciation of plant and e(cid:84)uipment is provided for as follows: (cid:11)a(cid:12) (cid:11)b(cid:12) individual assets that have a life e(cid:84)ual to or longer than the estimated remaining life of the Ranger mine are depreciated on a unit of production basis over the life of the reserves(cid:30) and each other asset is depreciated over its estimated operating life on a straight line basis. The following indicates the depreciation method for buildings and plant and e(cid:84)uipment on which the depreciation charges are based: (cid:135) (cid:135) buildings (cid:177) units of production over the life of reserves(cid:30) plant and e(cid:84)uipment(cid:13) (cid:177) units of production over the life of reserves. *Some of these assets are depreciated on a straight line basis over their useful operating life which is less than the life of the Ranger mine. See below for the estimated useful lives. (cid:135) (cid:50)ffice e(cid:84)uipment: computers (cid:16) three years (cid:135) (cid:50)ffice e(cid:84)uipment: general (cid:16) five years (cid:51)lant and e(cid:84)uipment (cid:16) five years (cid:135) (cid:135) (cid:41)urniture (cid:9) fittings (cid:16) ten years (cid:135) Motor vehicles (cid:16) five years (cid:135) (cid:135) Tailings Storage Facility - three years (cid:37)rine Concentrator (cid:16) seven years Assets are depreciated from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. (iii) Leases (cid:47)eases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases (cid:11)Note 22(cid:12). (cid:51)ayments made under operating leases (cid:11)net of any incentives received from the lessor(cid:12) are charged to the statement of comprehensive income on a straight(cid:16)line basis over the period of the lease. (iv) Mine properties Mine properties(cid:15) consisting principally of Ranger (cid:51)ro(cid:77)ect Area mining rights(cid:15) are amortised on a unit of production basis over the life of the economically recoverable reserves of Ranger. (v) Deferred stripping costs Stripping costs incurred in the development of a mine before production commences are capitalised as part of the cost of constructing the mine and subse(cid:84)uently amortised over the life of the mine on a units of production basis. Stripping costs incurred during the production stage of mining operations are deferred where they are separately identifiable and do not form part of normal mining activities. These costs are deferred and amortised over the period in which the associated ore is produced. (cid:11)l(cid:12) (cid:40)(cid:91)ploration and evaluation e(cid:91)penditure (cid:40)(cid:91)ploration and evaluation e(cid:91)penditure comprises costs which are directly attributable to: (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) researching and analysing e(cid:91)isting e(cid:91)ploration data(cid:30) conducting geological studies, exploratory drilling and sampling(cid:30) construction of underground tunnels(cid:15) where necessary for e(cid:91)ploration drilling(cid:30) e(cid:91)amining and testing e(cid:91)traction and treatment methods(cid:30) and compiling prefeasibility and feasibility studies. (cid:40)(cid:91)ploration and evaluation e(cid:91)penditure also includes the costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to ac(cid:84)uire interests in e(cid:91)isting pro(cid:77)ects. Capitalisation of e(cid:91)ploration e(cid:91)penditure commences when there is a high degree of confidence in the pro(cid:77)ect(cid:182)s viability and hence it is probable that future economic benefits will (cid:192)ow to the Company. Capitalised e(cid:91)ploration e(cid:91)penditure is reviewed for impairment at each balance sheet date. Subse(cid:84)uent recovery of the resulting carrying value depends on successful development of the area of interest or sale of the pro(cid:77)ect. (cid:44)f a pro(cid:77)ect does not prove viable(cid:15) all unrecoverable costs associated with the pro(cid:77)ect and the related impairment provisions are written off. Any impairment provisions raised in previous years are reassessed if there is a change in circumstances which indicates that they may no longer be required, for example if it is decided to proceed with development. (cid:44)f the pro(cid:77)ect proceeds to development(cid:15) the amounts included within intangible assets are transferred to property(cid:15) plant and e(cid:84)uipment. (i) Undeveloped properties (cid:56)ndeveloped properties are mineral concessions where the intention is to develop and go into production in due course. The carrying values of these assets are reviewed annually by management and the results of these reviews are reported to the (cid:37)oard and Audit and Risk Committee. (cid:44)mpairment is assessed based on a status report regarding (cid:40)RA(cid:182)s intentions for development of the undeveloped property and is reviewed using the fair value less cost to sell method. (cid:11)m(cid:12) (cid:42)oods and Services Ta(cid:91) (cid:11)(cid:42)ST(cid:12) Revenues(cid:15) e(cid:91)penses and assets are recognised net of the Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 97 98 NOTES TO THE FINANCIAL STATEMENTS amount of associated GST, unless the GST incurred is not recoverable from the ta(cid:91)ation authority. (cid:44)n this case it is recognised as part of the cost of acquisition of the asset or as part of the e(cid:91)pense. Receivables and payables are stated inclusive of the amount of (cid:42)ST receivable or payable. The net amount of (cid:42)ST recoverable from(cid:15) or payable to(cid:15) the ta(cid:91)ation authority is included with other receivables or payables in the balance sheet. Cash (cid:192)ows are presented on a gross basis. The (cid:42)ST components of cash (cid:192)ows arising from investing or financing activities which are recoverable from(cid:15) or payable to the ta(cid:91)ation authority(cid:15) are presented as operating cash (cid:192)ows. comprehensive income. Amounts accumulated in equity are recycled in the statement of comprehensive income in the periods when the hedged item will affect profit or loss (cid:11)for instance when the forecast sale that is hedged takes place(cid:12). (cid:58)hen a forecast transaction is no longer e(cid:91)pected to occur the cumulative gain or loss that was reported in equity is immediately transferred to the statement of comprehensive income. Derivative financial instruments are not held for speculative purposes. (n) Trade and other payables Liabilities are recognised for amounts to be paid in the future for goods and services received prior to the end of the financial year(cid:15) whether or not billed to the Company. Trade accounts payable are normally settled within (cid:25)0 days. These are recognised initially at their fair value and subse(cid:84)uently measured at amortised cost using the effective interest rate method. (cid:11)o(cid:12) (cid:37)orrowings (cid:37)orrowings are initially recognised at fair value(cid:15) net of transaction costs incurred. (cid:37)orrowings are subse(cid:84)uently measured at amortised cost. Any difference between the proceeds (cid:11)net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. (cid:37)orrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (cid:11)p(cid:12) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subse(cid:84)uently re(cid:16) measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates derivatives as hedges against highly probable forecast transactions (cid:11)cash (cid:192)ow hedges(cid:12). The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items(cid:15) as well as its risk management ob(cid:77)ective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis(cid:15) of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective. The effective portion of changes in the fair value is recognised in e(cid:84)uity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the statement of (q) Employee entitlements (cid:11)i(cid:12) (cid:58)a(cid:74)es and salaries, annual leave and sic(cid:78) leave The liability for employee entitlements to wages and salaries represents the amount which the Company has a present obligation to pay resulting from employees(cid:182) services provided up to the reporting date. A provision e(cid:91)ists for annual leave and accumulating sick leave as it is earned by employees and is measured at the amount e(cid:91)pected to be paid when it is settled and includes all related on costs. (cid:47)iabilities for non(cid:16)accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. (ii) Long service leave The liability for long service leave e(cid:91)pected to be settled within 12 months of the reporting date is recognised in the provision of employee benefits and is measured in accordance with (cid:11)i(cid:12) above. The liability for long service leave e(cid:91)pected to be settled more than 12 months from the reporting date is measured as the present value of e(cid:91)pected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the e(cid:91)pected future wage and salary levels(cid:15) e(cid:91)perience of employee departures and periods of service. Expected future payments are discounted using the rates attaching to Commonwealth (cid:42)overnment securities at the reporting date(cid:15) which most closely match the terms of maturity of the related liabilities. (iii) Superannuation plan (cid:40)mployees of the Company are entitled to benefits on retirement(cid:15) disability or death from their membership of the Rio Tinto Staff Superannuation (cid:41)und (cid:11)(cid:179)The (cid:41)und(cid:180)(cid:12). The (cid:41)und has both a defined benefit and a defined contribution section. Contributions to the defined contribution superannuation plans are e(cid:91)pensed in the income statement when incurred. The defined benefits section currently has only one member from the Company and as such any surplus or deficit of plan assets are disclosed in the financial statements of the sponsoring entity(cid:15) Rio Tinto Services (cid:47)imited. 98 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 99 NOTES TO THE FINANCIAL STATEMENTS (cid:11)iv(cid:12) (cid:55)ermination benefits Termination benefits are payable when employment is terminated before the normal retirement date(cid:15) or when an employee accepts voluntary redundancy in e(cid:91)change for these benefits. The Company recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary redundancy. (cid:37)enefits falling due more than 12 months after the end of the reporting period are discounted to present value. (r) Segment reporting Management has determined the operating segments based on the reports reviewed by the Chief (cid:40)(cid:91)ecutive(cid:15) used to make strategic decisions. The Chief (cid:40)(cid:91)ecutive considers the business from a product perspective. (cid:11)s(cid:12) Cash and cash e(cid:84)uivalents (cid:41)or the purposes of the statement of cash (cid:192)ows(cid:15) cash includes cash on hand and deposits held at call(cid:15) net of any bank overdrafts. (t) Contributed equity (cid:50)rdinary shares are classified as e(cid:84)uity. (cid:44)ncremental costs directly attributable to the issue of new shares or options are shown in e(cid:84)uity as a deduction(cid:15) net of ta(cid:91)(cid:15) from the proceeds. (cid:44)ncremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the ac(cid:84)uisition as part of the purchase consideration. (u) Earnings per share (i) Basic earnings per share (cid:37)asic earnings per share is determined by dividing net profit after income tax attributable to members of the Company, excluding any costs of servicing e(cid:84)uity other than ordinary shares(cid:15) by the weighted average number of ordinary shares outstanding during the financial year(cid:15) ad(cid:77)usted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share ad(cid:77)usts the figures used in the determination of basic earnings per share to take into account the after income ta(cid:91) effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (cid:11)v(cid:12) Rounding of amounts The Company is of a kind referred to in Class (cid:50)rder (cid:28)(cid:27)(cid:18)0100(cid:15) issued by the Australian Securities and (cid:44)nvestments Commission(cid:15) relating to the (cid:181)rounding off(cid:182) of amounts in the financial report. Amounts in the financial report have been (cid:181)rounded off(cid:182) in accordance with that Class (cid:50)rder to the nearest thousand dollars(cid:15) or in certain cases(cid:15) to the nearest dollar. (cid:11)w(cid:12) Share based payments The fair value of cash settled share plans is recognised as a liability over the vesting period of the awards. Movements in that liability between accounting dates are recognised as an e(cid:91)pense. The grant date fair value of the awards is taken to be the market value of the shares at the date of award reduced by a factor for anticipated relative Total Shareholder Return (cid:11)(cid:181)TSR(cid:182)(cid:12) performance. (cid:41)air values are subse(cid:84)uently re(cid:16)measured at each accounting date to re(cid:192)ect the number of awards e(cid:91)pected to vest based on the current and anticipated TSR performance. (cid:44)f any awards are ultimately settled in shares(cid:15) the liability is transferred direct to equity as the consideration for the equity instruments issued. Equity settled share plans are settled either by the issue of shares by the relevant parent Company(cid:15) by the purchase of shares on market or by the use of shares previously ac(cid:84)uired as part of a share buyback. The fair value of the share plans is recognised as an e(cid:91)pense over the e(cid:91)pected vesting period with a corresponding entry to other reserves. (cid:44)f the cost of shares acquired to satisfy the plans exceeds the expense charged, the e(cid:91)cess is taken to the appropriate reserve. The fair value of the share plans is determined at the date of grant(cid:15) taking into account any market based vesting conditions attached to the award (cid:11)e.g. Total Shareholder Return(cid:12). The Company uses fair values provided by independent actuaries calculated using a lattice based option valuation model. Non(cid:16)market based vesting conditions (cid:11)e.g. earnings per share targets(cid:12) are taken into account in estimating the number of awards likely to vest. The estimate of the number of awards likely to vest is reviewed at each balance sheet date up to the vesting date(cid:15) at which point the estimate is ad(cid:77)usted to re(cid:192)ect the actual awards issued. No ad(cid:77)ustment is made after the vesting date even if the awards are forfeited or not e(cid:91)ercised. (cid:41)urther information about the treatment of individual share based payment plans is provided in Note 30. (cid:11)(cid:91)(cid:12) Dividends (cid:51)rovision is made for the amount of any dividend declared(cid:15) determined or publicly recommended by the Directors on or before the end of the financial year but not distributed at balance date. (cid:11)y(cid:12) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2014 reporting periods. The Company(cid:182)s assessment of the impact of these new standards and interpretations is set out below. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 99 100 NOTES TO THE FINANCIAL STATEMENTS (cid:11)i(cid:12) (cid:36)(cid:36)S(cid:37) (cid:28) (cid:41)inancial (cid:44)nstruments, (cid:36)(cid:36)S(cid:37) 200(cid:28)(cid:16)11 (cid:36)mendments to (cid:36)ustralian (cid:36)ccountin(cid:74) Standards arisin(cid:74) from (cid:36)(cid:36)S(cid:37) (cid:28), (cid:36)(cid:36)S(cid:37) 2010-7 Amendments to Australian Accounting Standards arising from (cid:36)(cid:36)S(cid:37) (cid:28) (cid:11)December 2010(cid:12) and (cid:36)(cid:36)S(cid:37) 2012(cid:16)(cid:25) (cid:36)mendments to Australian Accounting Standards – Mandatory Effective Date of (cid:36)(cid:36)S(cid:37) (cid:28) and (cid:55)ransition Disclosures (cid:11)effective from 1 (cid:45)anuary 2015). AAS(cid:37) (cid:28) (cid:41)inancial (cid:44)nstruments addresses the classification(cid:15) measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. The derecognition rules have been transferred from AAS(cid:37) 13(cid:28) (cid:41)inancial (cid:44)nstruments: Recognition and Measurement and have not been changed. There will be no impact on the Company(cid:182)s accounting for financial liabilities(cid:15) as the new re(cid:84)uirements only affect the accounting for financial li- abilities that are designated at fair value through profit or loss and the Company does not have any such liabilities. (ii) AASB 15 Revenue from Contracts with Customers AAS(cid:37) 15 (cid:181)Revenue from contracts with customers(cid:182) establishes principles for reporting the nature, amount, timing and uncertainty of revenue and cash (cid:192)ows arising from an entity(cid:182)s contracts with customers. The standard is not applicable until 1 January 201(cid:26) but is available for early adoption. (cid:40)RA has not yet determined the e(cid:91)tent of the impact(cid:15) if any. There are no other standards that are not yet effective and that are e(cid:91)pected to have an impact on the entity in the current or future reporting periods and in forecast transactions. 2 Critical accounting estimates and judgements (cid:40)stimates and (cid:77)udgements are continually evaluated and are based on historical experience and other factors, including e(cid:91)pectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will(cid:15) by definition(cid:15) seldom e(cid:84)ual the related actual results. The estimates and assumptions that have a significant risk of causing a material ad(cid:77)ustment to the carrying amounts of assets and liabilities within the ne(cid:91)t financial year are discussed below. (cid:11)a(cid:12) Rehabilitation provision The calculation of the rehabilitation provision relies on estimates of costs and their timing required to rehabilitate and restore disturbed land to establish an environment similar to ad(cid:77)acent areas of (cid:46)akadu National (cid:51)ark. The costs are estimated on the basis of a rehabilitation model, taking into account consideration to the preferred options available to meet the Company(cid:182)s obligations. The provision for rehabilitation represents the net present cost at 31 December, based on current disturbance(cid:15) of the preferred plan within the re(cid:84)uirements of the Ranger Authority. The cost estimates are reviewed annually during the life of the operation to re(cid:192)ect known developments. (cid:44)n 201(cid:23) this review resulted in a decrease to the provision of (cid:7)(cid:26)(cid:23) million. The change in estimate considered updated technology and learnings from work conducted to date(cid:15) both on the Ranger (cid:51)ro(cid:77)ect Area and other operations. The key change related to the use of more efficient technology in thickening tailings transferred from the e(cid:91)isting Tailings Storage (cid:41)acility to (cid:51)it 3. The overall rehabilitation strategy remains unchanged. The ultimate cost of rehabilitation is uncertain and can vary in response to many factor. (cid:44)t is reasonably possible that outcomes within the ne(cid:91)t financial year that are different from the current cost estimate could require material adjustment (increase or decrease(cid:12) to the rehabilitation provision for the Ranger (cid:51)ro(cid:77)ect Area. A key sensitivity in estimating the rehabilitation provision is the discount rate applied to the underlying cash (cid:192)ows. The Company has maintained a real discount rate of 2.5 per cent. (b) Taxation The Company has recognised certain deferred tax assets for deductible temporary differences and recoverable losses carried forward. (cid:44)n recognising these deferred ta(cid:91) assets assumptions have been made regarding the Company(cid:182)s ability to generate future ta(cid:91)able profits. A key assumption is the approval and development of Ranger 3 Deeps mine(cid:15) should this not occur it is unlikely ta(cid:91) assets would remain recoverable. Judgement is required in regard to the application of income tax legislation. There is an inherent risk and uncertainty in applying these (cid:77)udgements and a possibility that changes in legislation will impact the carrying amount of deferred tax assets and deferred ta(cid:91) liabilities recognised on the balance sheet. (cid:41)urther details on deferred ta(cid:91) assets are included in note 1(cid:23). (cid:11)c(cid:12) Determination of ore reserves and resources The Company estimates its ore reserves and resources based on information compiled by Competent (cid:51)ersons as defined in accordance with the Australasian Code for Reporting of (cid:40)(cid:91)ploration Results(cid:15) Mineral Resources and (cid:50)re Reserves of December 2012 (cid:11)the J(cid:50)RC code(cid:12). There are numerous uncertainties inherent in estimating ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may(cid:15) ultimately(cid:15) result in the reserves being restated. Such changes in reserves could impact on depreciation and amortisation rates(cid:15) asset carrying values and 100 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 amount. At 31 December 201(cid:23)(cid:15) a (cid:7)(cid:23)2.(cid:25) million (cid:11)pre(cid:16)ta(cid:91)(cid:12) ad(cid:77)ustment was made to finished goods inventory and a (cid:7)5.0 million (cid:11)preta(cid:91)(cid:12) ad(cid:77)ustment to work in progress inventory to record it at its net realisable value. This was due to high non(cid:16)cash costs and low 201(cid:23) production(cid:15) which drove the total unit cost of inventory above the e(cid:91)pected sales price. The net realisable value ad(cid:77)ustment has been included in (cid:181)Changes in inventories(cid:182) in the statement of comprehensive income. 101 NOTES TO THE FINANCIAL STATEMENTS provisions for rehabilitation. The Company(cid:182)s (cid:50)re Reserves and Mineral Resources Statement as at 31 December 201(cid:23) is on pages 2(cid:23) and 25. (cid:11)d(cid:12) Asset carrying value The Company has two cash generating units (cid:11)C(cid:42)(cid:56)(cid:12)(cid:15) the Ranger (cid:51)ro(cid:77)ect Area (cid:11)R(cid:51)A(cid:12) and the Jabiluka mineral lease. The Ranger C(cid:42)(cid:56) includes all assets and liabilities related to activities on the R(cid:51)A(cid:15) including the rehabilitation provision and the associated asset capitalised within property(cid:15) plant and e(cid:84)uipment. The Jabiluka C(cid:42)(cid:56) relates to the Jabiluka mineral lease which is currently under a long term care and maintenance agreement. The Company(cid:182)s balance sheet contains items that have been sub(cid:77)ect to impairment testing during the year. (cid:58)hen the Company assesses C(cid:42)(cid:56)s for recoverability(cid:15) the Company uses the greater of fair value less costs of disposal or value in use. The Company has used the fair value less costs of disposal method for the Ranger (cid:51)ro(cid:77)ect Area(cid:15) it has been determined based on discounted cash (cid:192)ow modelling of a set of probability weighted strategic outcomes. The Company has concluded through detailed impairment testing that Ranger C(cid:42)(cid:56) is not impaired. (cid:44)t is reasonably possible that outcomes within the ne(cid:91)t financial year that are different from the current assumptions around future market prices(cid:15) resource and development potential(cid:15) discount rate, rehabilitation, capital and production costs could require a material adjustment (increase or decrease) to the carrying amount of the Ranger (cid:51)ro(cid:77)ect Area. Market consensus uranium price and e(cid:91)change rate are determined by surveying a sample of brokers and financial institutions to gather their estimation of both the long term uranium price and A(cid:56)D(cid:18)(cid:56)SD e(cid:91)change rate. The Company(cid:182)s financial modelling also includes the development of Ranger 3 Deeps mine within and beyond the term of the current Authority(cid:15) which remains sub(cid:77)ect to stakeholder(cid:15) regulatory and (cid:40)RA (cid:37)oard approvals(cid:15) and to which the Company has assigned a high probability. Should the development of Ranger 3 Deeps not occur(cid:15) the Ranger C(cid:42)(cid:56) would likely face significant impairment. (cid:40)stimates and (cid:77)udgements associated with the Jabiluka undeveloped property are disclosed in Note 12. (cid:11)e(cid:12) (cid:44)nventory net realisable value The calculation of net realisable value is sensitive to key assumptions about the future including: uranium price(cid:15) A(cid:56)D(cid:18)(cid:56)SD e(cid:91)change rate and where applicable costs to complete. The sales price of uranium o(cid:91)ide is denominated in (cid:56)S dollars(cid:15) so (cid:192)uctuations in the A(cid:56)D(cid:18)(cid:56)SD e(cid:91)change rate will affect the proceeds received from sales and conse(cid:84)uently the recoverable Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 101 102 NOTES TO THE FINANCIAL STATEMENTS 3 Revenue REVENUE FROM CONTINUING OPERATIONS Sales revenue Sale of goods Rendering of services Total sales revenue Other revenue (cid:44)nterest received(cid:18)receivable(cid:15) other parties Rent received Compensation uranium o(cid:91)ide received Net gain on sale of property, plant and equipment Total other revenue Total revenue from continuing operations 2014 $’000 2013 $’000 378,955 355,868 211 271 379,166 356,139 10,662 13,073 862 9,415 1,693 932 - - 22,632 14,005 401,798 370,144 102 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 103 NOTES TO THE FINANCIAL STATEMENTS 4 Expenses LOSS BEFORE INCOME TAX INCLUDES T(cid:43)E (cid:41)(cid:50)(cid:47)(cid:47)(cid:50)(cid:58)(cid:44)(cid:49)(cid:42) (cid:54)PEC(cid:44)(cid:41)(cid:44)C E(cid:59)PE(cid:49)(cid:54)E(cid:54): Cost of sales Produced product (uranium oxide) Purchased product (uranium oxide) Total cost of sales Depreciation Mine land and buildings Plant and equipment Total depreciation Amortisation Mine properties Rehabilitation asset Total amortisation NOTES 2014 $’000 2013 $’000 247,912 66,933 294,247 5,166 314,845 299,413 2,176 82,165 84,341 4,766 30,870 35,636 4,790 139,029 143,819 14,073 74,277 88,350 Total depreciation and amortisation expenses 119,977 232,169 Government and other royalties Royalty payments (cid:51)ayments to (cid:44)ndigenous interests Total Government and other royalties Financing costs Other parties (cid:56)nwinding of discount (cid:11)rehabilitation provision(cid:12) Total Financing Costs Doubtful debts expense Net loss on disposal of property(cid:15) plant (cid:9) e(cid:84)uipment Net foreign exchange loss/(gain) Rental e(cid:91)pense relating to operating leases Research and development e(cid:91)penditure Total e(cid:91)ploration and evaluation e(cid:91)penditure (cid:11)including Ranger 3 Deeps e(cid:91)ploration decline(cid:12) Expenditure related to plant recommissioning Defined contribution superannuation e(cid:91)pense 22 22 3,505 11,918 15,423 1,219 28,082 29,301 (43) - 58 7,097 22,790 83,205 14,227 5,795 4,184 14,223 18,407 1,465 30,937 32,402 (91) 783 (146) 7,667 28,013 66,186 - 6,240 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 103 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 104 NOTES TO THE FINANCIAL STATEMENTS 5 (cid:44)ncome ta(cid:91) e(cid:91)pense(cid:18)(cid:11)benefit(cid:12) (cid:44)(cid:49)C(cid:50)(cid:48)E T(cid:36)(cid:59) E(cid:59)PE(cid:49)(cid:54)E/((cid:37)E(cid:49)E(cid:41)(cid:44)T) Current tax Deferred tax (cid:56)nder(cid:18)(cid:11)over(cid:12) provided in prior years (cid:44)ncome tax expense/(benefit) Deferred income ta(cid:91) (cid:11)revenue(cid:12)(cid:18)e(cid:91)pense included in income ta(cid:91) e(cid:91)pense comprises: Decrease/(increase) in deferred tax assets (Note 14B) (Decrease)/increase in deferred tax liabilities (Note 14A) Deferred tax RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Operating loss before income tax Tax at the Australian tax rate of 30% (2013 – 30%) Ta(cid:91) effect of amounts which are not deductible(cid:18)(cid:11)ta(cid:91)able(cid:12) in calculating ta(cid:91)able income: R(cid:9)D ta(cid:91) concession Amortisation Rehabilitation e(cid:91)penditure Other items (cid:44)ncome ta(cid:91) under(cid:18)(cid:11)over(cid:12) provided in prior years (cid:44)ncome tax expense/(benefit) AMOUNTS RECOGNISED DIRECTLY IN EQUITY Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or (credited) to equity Net deferred tax asset (Note 14B) 2014 $’000 2013 $’000 - - (85,814) (50,937) 12 225 (85,802) (50,712) (70,641) (15,173) (85,814) (48,197) (2,740) (50,937) (273,602) (186,541) (82,081) (55,962) (2,278) 9,261 (2,801) 22,283 (10,721) (14,464) 5 12 7 225 (85,802) (50,712) 72 (29) 104 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 105 NOTES TO THE FINANCIAL STATEMENTS (cid:25) Dividends Dividends paid or declared No dividends have been paid or declared for the year ended 31 December 201(cid:23) (cid:11)2013: nil(cid:12). Dividends franking account (cid:41)ranking credits available for subse(cid:84)uent financial years based on a tax rate of 30% (2013 – 30%) 2014 $’000 2013 $’000 234,095 234,095 The above amounts represent the balance of the franking account as at the end of the financial year(cid:15) ad(cid:77)usted for franking credits that will arise from the payment of the amount of the provision for income ta(cid:91) as applicable. The ability to utilise the franking account credits is dependent upon there being sufficient available profits to declare dividends. (cid:26) Cash and cash e(cid:84)uivalents CURRENT Cash at bank and in hand Deposits at call Cash and cash equivalents 2014 $’000 2013 $’000 6,188 287,130 293,318 3,294 353,914 357,208 Cash at bank(cid:18)Deposits at call Cash assets and deposits bear (cid:192)oating interest rates between 0.0 per cent and 2.(cid:27) per cent (cid:11)2013 (cid:177) 0.0 per cent and 3.3 per cent(cid:12). (cid:44)nterest rate risk e(cid:91)posure The Company(cid:182)s e(cid:91)posure to interest rate risk is discussed in Note 2(cid:27). (cid:27) Trade and other receivables CURRENT Trade debtors Other debtors (cid:51)rovision for impairment Net other debtors Trade and other receivables 2014 $’000 2013 $’000 9,222 12,188 2,016 (6) 2,010 11,232 7,968 (49) 7,919 20,107 (cid:44)mpairment of receivables No trade receivables are past due. There is no impairment of trade receivables. (cid:50)ther receivables relate to transactions outside the usual operating activities of the Company and are predominately concerned with receipts from employees and businesses operating within the Jabiru township. These ongoing activities are e(cid:91)pected to be settled during the 12 months subse(cid:84)uent to balance date. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 105 106 NOTES TO THE FINANCIAL STATEMENTS (cid:41)oreign e(cid:91)change and interest rate risk The Company operates internationally but is primarily e(cid:91)posed to foreign e(cid:91)change risk arising from currency e(cid:91)posures with respect to the (cid:56)S dollar. A summarised analysis of the sensitivity of trade and other receivables to foreign e(cid:91)change and interest rate risk can be found in Note 2(cid:27). (cid:41)air value and credit risk Due to the short(cid:16)term nature of trade and other receivables(cid:15) their carrying amount appro(cid:91)imates their fair value. The ma(cid:91)imum e(cid:91)posure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. The Company does not hold any collateral as security. Refer to Note 2(cid:27) for more information on the financial risk management policy of the Company. (cid:28) (cid:44)nventories (cid:177) current Stores and spares (cid:50)re stockpiles at cost (cid:58)ork in progress at cost (cid:58)ork in progress at net realisable value (cid:41)inished product (cid:56)3O8 at net realisable value Total current Inventory 2014 $’000 19,787 35,835 - 710 2013 $’000 23,730 27,721 2,602 - 90,227 146,559 194,469 248,522 (cid:44)nventory e(cid:91)pense (cid:50)bsolescence of inventory provided for and recognised as an e(cid:91)pense during the year ended 31 December 201(cid:23) amounted to nil (cid:11)2013: (cid:7)(cid:23)2(cid:25)(cid:15)(cid:23)2(cid:26)(cid:12). (cid:58)rite(cid:16)downs of inventories to net realisable value recognised as an e(cid:91)pense during the year ended 31 December 201(cid:23) amounted to (cid:7)(cid:23)(cid:26)(cid:15)(cid:25)05(cid:15)(cid:28)31 (cid:11)2013 (cid:16) (cid:7)21(cid:15)331(cid:15)(cid:25)(cid:26)(cid:28)(cid:12). This resulted from high non(cid:16)cash costs and low 201(cid:23) production. The e(cid:91)pense has been included in (cid:181)Changes in inventories(cid:182) in the statement of comprehensive income. 10 Other assets Prepayments 11 (cid:44)nventories (cid:177) non(cid:16)current (cid:50)re stockpiles at cost 2014 $’000 1,392 2013 $’000 2,305 2014 $’000 2013 $’000 85,728 112,584 106 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 107 NOTES TO THE FINANCIAL STATEMENTS 12 (cid:56)ndeveloped properties (cid:45)abilu(cid:78)a: (cid:47)ong(cid:16)term care and maintenance development pro(cid:77)ect (cid:37)alance brought forward Amount capitalised during the year Total undeveloped properties 2014 $’000 2013 $’000 203,632 203,632 - - 203,632 203,632 (cid:56)ndeveloped properties are considered an asset not yet ready for use. The recoverable amount of the undeveloped properties is determined using the fair value less cost to sell method. (cid:41)air value less cost to sell has been determined using a discounted cash (cid:192)ow model. (cid:46)ey assumptions to which the model is most sensitive include: (cid:135) (cid:135) (cid:135) (cid:135) (cid:135) uranium prices(cid:30) foreign e(cid:91)change rates(cid:30) production and capital costs(cid:30) discount rate(cid:30) and ore reserves and mineral resources. (cid:44)n determining the value assigned to each key assumption(cid:15) management has used e(cid:91)ternal sources of information and has utilised the e(cid:91)pertise of e(cid:91)ternal consultants to validate entity(cid:16)specific assumptions such as costs(cid:15) production techni(cid:84)ues and mineral reserves. (cid:41)urther(cid:15) the Company(cid:182)s cash (cid:192)ow forecasts are based on estimates of future uranium prices(cid:15) which assume market prices will revert to the Company(cid:182)s assessment of the long term average price(cid:15) generally over a period of three to five years. The recoverable amount is dependent on the development and life of the ore body together with the term and continuity of the mining lease. (cid:44)t re(cid:192)ects e(cid:91)pected future cash(cid:192)ows contained in the long term asset plan with an ad(cid:77)ustment of cash(cid:192)ows e(cid:91)pected to take into account pro(cid:77)ect development risk. The Company has pro(cid:77)ected cash(cid:192)ows for the period of the current mining lease(cid:15) together with a ten year renewal period. The Jabiluka Mineral (cid:47)ease is currently in long(cid:16)term care and maintenance. The Company has agreed that future mining development will not occur without the consent of the Mirarr Traditional (cid:50)wners. There is no guarantee that this consent will be forthcoming and(cid:15) by e(cid:91)tension(cid:15) that the Jabiluka deposit will be developed. The discount rate applied to the future cash (cid:192)ow forecasts represent an estimate of the rate the market would apply having regard to the time value of money and the risks specific to the asset for which the future cash (cid:192)ow estimates have not been ad(cid:77)usted. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 107 108 NOTES TO THE FINANCIAL STATEMENTS 13 Property, plant and equipment MINE LAND AND BUILDINGS $’000 PLANT AND EQUIPMENT $’000 MINE PROPERTIES $’000 REHABILITATION $’000 TOTAL $’000 YEAR ENDED 31 DECEMBER 2014 (cid:50)pening net book amount Additions Disposals Change in estimate Transfers Depreciation/amortisation charge Closing net book amount Cost 9,994 - (324) - - (2,176) 7,494 110,845 Accumulated depreciation/amortisation (103,351) Net book amount YEAR ENDED 31 DECEMBER 2013 (cid:50)pening net book amount Additions Disposals Change in estimate Transfers Depreciation/amortisation charge Closing net book amount Cost 7,494 14,699 - - - 85 (4,790) 9,994 111,169 Accumulated depreciation/amortisation (101,175) Net book amount 9,994 367,884 11,590 (635) - - (82,165) 296,674 1,150,001 (853,327) 296,674 416,648 91,133 (783) - (85) (139,029) 367,884 1,139,046 (771,162) 367,884 21,234 131,234 530,346 - - - - (4,766) 16,468 421,700 (405,232) 16,468 - - 11,590 (959) (62,515) (62,515) - - (30,870) (119,977) 37,849 358,485 334,396 2,016,942 (296,547) (1,658,457) 37,849 358,485 35,307 199,513 - - - - (14,073) 21,234 421,700 (400,466) 21,234 - - 5,998 - (74,277) 131,234 396,911 666,167 91,133 (783) 5,998 - (232,169) 530,346 2,068,826 (265,677) (1,538,480) 131,234 530,346 Assets under construction The carrying amounts of the assets disclosed above include the following e(cid:91)penditure recognised in relation to property(cid:15) plant and e(cid:84)uipment which is in the course of construction: Plant and equipment 2014 $’000 5,969 2013 $’000 3,130 108 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 109 NOTES TO THE FINANCIAL STATEMENTS 14 Deferred tax assets (A) DEFERRED TAX LIABILITY The balance comprises temporary differences attributable to: (cid:36)mounts recognised in profit and loss (cid:44)nvestment in trust fund (cid:56)ndeveloped properties (cid:44)nventories Receivables Other Total deferred tax liabilities (cid:50)ff(cid:16)set of deferred ta(cid:91) asset pursuant to set(cid:16)off provisions (cid:11)Note 1(cid:23)(cid:37)(cid:12) Net deferred tax liabilities Movements Opening balance at 1 January (Credited)/debited to the income statement (Note 5) (cid:56)nder provided in prior years credited to the income statement Closing balance at 31 December (B) DEFERRED TAX ASSETS The balance comprises temporary differences attributable to: (cid:36)mounts recognised in profit and loss Tax losses Research and development ta(cid:91) offset Property, plant and equipment Rehabilitation (cid:40)mployee provisions Other Amount recognised directly in equity Transaction costs Share benefits Total deferred tax assets Set(cid:16)off of deferred ta(cid:91) liabilities pursuant to set(cid:16)off provisions (cid:11)Note 1(cid:23)A(cid:12) Net deferred tax assets Movements Opening balance at 1 January Credited to the income statement (Note 5) (cid:11)(cid:56)nder(cid:12)(cid:18)over provided in prior years credited to the income statement Credited to equity (Note 5) Closing balance at 31 December 2014 $’000 2013 $’000 20,025 23,405 22,175 1,014 - 19,188 23,405 39,639 858 122 66,619 83,212 (66,619) (83,212) - - 83,212 (15,173) (1,420) 66,619 127,222 33,915 4,119 69,736 4,060 1,919 86,175 (2,740) (223) 83,212 70,944 25,003 914 67,683 4,407 2,092 240,971 171,043 719 (444) 1,438 (372) 241,246 172,109 (66,619) (83,212) 174,627 88,897 172,109 124,330 70,641 (1,432) (72) 48,197 (447) 29 241,246 172,109 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 109 110 NOTES TO THE FINANCIAL STATEMENTS 15 (cid:44)nvestment in Trust (cid:41)und NON-CURRENT Trust Fund 2014 $’000 2013 $’000 66,751 63,960 Trust Fund The Ranger Rehabilitation Trust (cid:41)und holds a restricted fi(cid:91)ed term investment in the form of bank bills which mature and are reinvested periodically. The applicable weighted average interest rate for the year ended 31 December 201(cid:23) was 3.33 per cent (cid:11)2013: 3.(cid:26)0 per cent(cid:12). 16 Payables CURRENT Trade payables Amounts due to related parties Other payables Total payables 1(cid:26) (cid:51)rovisions (cid:177) current CURRENT (cid:40)mployee benefits (cid:47)each tank remediation Rehabilitation Total current provisions 2014 $’000 2013 $’000 48,870 5,833 918 55,621 66,271 4,433 1,808 72,512 2014 $’000 2013 $’000 9,345 - 31,207 40,552 11,535 1,300 78,388 91,223 (cid:47)each tank remediation (cid:41)ollowing the failure of (cid:47)each Tank 1 on (cid:26) December 2013(cid:15) a provision for (cid:7)1(cid:15)300(cid:15)000 was raised to cover the remaining investigation and deconstruction costs. These costs were incurred early in 201(cid:23). Movements in provisions Movements in the rehabilitation provision during the financial year is set out below: 2014 Carrying amount at the start of the year Payments Transfer from non(cid:16)current provision Carrying amount at the end of the year REHABILITATION $’000 78,388 (56,977) 9,796 31,207 110 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 111 NOTES TO THE FINANCIAL STATEMENTS 2013 Carrying amount at the start of the year Payments Transfer from non(cid:16)current provision Carrying amount at the end of the year 18 (cid:51)rovisions (cid:177) non(cid:16)current NON-CURRENT (cid:40)mployee benefits Rehabilitation Carrying amount at the end of the year Movements in provisions Movements in the rehabilitation provision during the financial year is set out below: 2014 Carrying amount at the start of the year Change in estimate (cid:56)nwinding of discount Additional provisions recognised Transfer to current provision Carrying amount at the end of the year 2013 Carrying amount at the start of the year Change in estimate (cid:56)nwinding of discount Additional provisions recognised Transfer to current provision Carrying amount at the end of the year REHABILITATION $’000 66,227 (73,327) 85,488 78,388 2014 $’000 2013 $’000 4,188 480,845 485,033 4,728 525,076 529,804 REHABILITATION $’000 525,076 (74,242) 28,082 11,725 (9,796) 480,845 REHABILITATION $’000 573,629 127 30,937 5,871 (85,488) 525,076 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 111 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 112 NOTES TO THE FINANCIAL STATEMENTS 19 Share capital SHARE CAPITAL A Class shares fully paid Total contributed equity 2014 SHARES 2013 SHARES 517,725,062 517,725,062 2014 $’000 706,485 706,485 2013 $’000 706,485 706,485 (cid:50)rdinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. (cid:50)n a show of hands every holder of ordinary shares present at a shareholders(cid:182) meeting in person or by pro(cid:91)y(cid:15) is entitled to one vote(cid:15) and upon a poll each share is entitled to one vote. Capital risk management Details of the Company(cid:182)s e(cid:91)posure to risks when managing capital are set out in Note 2(cid:27). 20 Reserves and retained profits RESERVES Share(cid:16)based payments reserve Capital reconstruction Total Reserves Movements Share-based payments reserve Balance 1 January Option expense Balance 31 December Capital reconstruction Balance 1 January Movements Balance 31 December RETAINED PROFITS (cid:48)ovements in retained profits (cid:90)ere as follo(cid:90)s: Opening retained earnings – 1 January Net loss for the year Dividends paid Closing retained earnings/(accumulated losses) (cid:177) (cid:22)(cid:20) (cid:39)ecember 2014 $’000 2013 $’000 418 389,500 389,918 1,033 389,500 390,533 1,033 (615) 418 801 232 1,033 389,500 389,500 - - 389,500 389,500 (162,996) (27,167) (187,800) (135,829) - - (350,796) (162,996) Nature and purpose of reserves The share based payments reserve is used to recognise the fair value of e(cid:84)uity instruments issued to employees but not e(cid:91)ercised. 112 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 113 NOTES TO THE FINANCIAL STATEMENTS Capital reconstruction reserve (cid:44)n June 1(cid:28)(cid:28)5(cid:15) the Company reduced its share capital by cancelling (cid:7)0.(cid:28)5 of the capital paid up on each issued share and reducing the par value of each issued share from (cid:7)1.00 to (cid:7)0.05. The cancelled capital (cid:11)comprising (cid:7)3(cid:27)(cid:28)(cid:15)500(cid:15)000 in total(cid:12) was credited to a Capital Reconstruction Reserve. The Company has the ability to distribute capital to shareholders from this reserve. 21 Contingencies Contingent liabilities (cid:47)egal actions against the Company. The remaining argument in the action listed in the (cid:41)ederal Court against the former Commonwealth Minister for Resources and the Company claiming that due process was not followed in granting approvals for the Jabiluka Mill Alternative is dormant. Should the Company proceed with the Jabiluka Mill Alternative(cid:15) notice will be given to the applicant who may or may not wish to pursue the argument further. No material losses are anticipated in respect of the contingent liabilities disclosed above. 22 Commitments Capital commitments Capital e(cid:91)penditure contracted for at the reporting date is as follows: (cid:58)ithin one year Lease commitments (cid:41)uture operating lease rentals not provided for in the financial statements and payable: Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable (cid:58)ithin one year (cid:47)ater than one year but not later than five years Total operating leases 2014 $’000 2013 $’000 50,051 83,242 2014 $’000 2013 $’000 1,753 4,821 6,574 2,882 4,928 7,810 The Company leases property(cid:15) plant and e(cid:84)uipment under operating leases e(cid:91)piring between one and four years. Some leases provide the Company with a right of renewal at which time all terms are renegotiated. Mineral tenement leases (cid:41)uture mineral tenement lease payments not provided for in the financial statements and payable: (cid:58)ithin one year (cid:47)ater than one year but not later than five years (cid:47)ater than five years Total mineral tenement leases 2014 $’000 152 609 711 2013 $’000 138 554 784 1,472 1,476 (cid:44)n order to maintain current rights of tenure to mining tenements(cid:15) the Company will be re(cid:84)uired to outlay an amount of (cid:7)152(cid:15)2(cid:28)2 in the year ending 31 December 2015 in respect of tenement lease rentals. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 113 Energy Resources of Australia Ltd Financial Report 2014 114 NOTES TO THE FINANCIAL STATEMENTS The Company is liable to make payments to the Commonwealth as listed below: (cid:11)i(cid:12) (cid:11)ii(cid:12) (cid:11)iii(cid:12) An annual amount e(cid:84)ual to the sum payable by the Commonwealth to the Northern (cid:47)and Council pursuant to the Section (cid:23)(cid:23) Agreement for rent for the duration of the agreement. This amounts to (cid:7)(cid:28)32(cid:15)(cid:28)00 for 201(cid:23) and is inde(cid:91)ed for future years. Amounts e(cid:84)ual to the sums payable by the Commonwealth to the Aboriginal (cid:37)enefits Reserve pursuant to a determination under Section 63(5) (b) of the (cid:36)bori(cid:74)inal (cid:47)and (cid:53)i(cid:74)hts (cid:11)Northern (cid:55)erritory(cid:12) (cid:36)ct 1(cid:28)(cid:26)(cid:25). The Company is re(cid:84)uired to pay 2.5 per cent of Ranger net sales revenue to the Commonwealth and 1.(cid:26)5 per cent of Ranger net sales revenue to the Northern (cid:47)and Council or an entity representing the Mirarr Traditional (cid:50)wners as directed by the Northern (cid:47)and Council (cid:11)amounts paid during 201(cid:23): (cid:7)11(cid:15)(cid:28)1(cid:27)(cid:15)12(cid:28)(cid:30) 2013: (cid:7)1(cid:23)(cid:15)223(cid:15)3(cid:25)(cid:27)(cid:12). Amounts e(cid:84)ual to sums payable by the Commonwealth to the Northern Territory pursuant to an understanding in respect of financial arrangements between the Commonwealth and the (cid:42)overnment of the Northern Territory. These amounts are also calculated as though they were royalties and the relevant rate is 1.25 per cent of Ranger net sales revenue (cid:11)amounts paid during 201(cid:23): (cid:7)3(cid:15)505(cid:15)332(cid:30) 2013: (cid:7)(cid:23)(cid:15)1(cid:27)3(cid:15)3(cid:23)(cid:23)(cid:12). The Company is liable to make payments to the Northern (cid:47)and Council pursuant to the Section (cid:23)3 Agreement between (cid:51)ancontinental Mining (cid:47)imited and (cid:42)etty (cid:50)il Development Company (cid:47)imited and the Northern (cid:47)and Council dated 21 July 1(cid:28)(cid:27)2(cid:15) which was assigned to the Company with the consent of the Northern (cid:47)and Council(cid:15) as listed below: (cid:11)i(cid:12) (cid:11)ii(cid:12) (cid:56)p front payment of (cid:7)3(cid:15)(cid:23)00(cid:15)000 on the commencement of production at Jabiluka. Annual royalty payments calculated at (cid:23).5 per cent of net sales revenue less (cid:7)500(cid:15)000 less any amounts paid to the Aboriginal (cid:37)enefits Reserve by the Commonwealth under the conditions specified in the mineral lease for the first 10 years and thereafter at 5 per cent of net sales revenue less any amounts paid to the Aboriginal (cid:37)enefits Reserve by the Commonwealth under the conditions specified in the mineral lease (cid:11)refer commitment below(cid:12). The Company is liable to make payments to the Commonwealth in respect of the Jabiluka pro(cid:77)ect pursuant to the conditions attached to the mineral lease. The amount payable was(cid:15) until 30 June 1(cid:28)(cid:28)0(cid:15) calculated at the rate of 5.25 per cent of net sales revenue from the Jabiluka pro(cid:77)ect. The Jabiluka pro(cid:77)ect is now under long term care and maintenance and will not be developed without the approval of the Mirarr Traditional (cid:50)wners. 23 Auditor’s remuneration During the year the auditor of the parent entity and its related practices earned the following remuneration: AUDIT SERVICES Price(cid:90)aterhouseCoopers (cid:36)ustralian firm Audit and review of financial reports Audit and review of financial reports (cid:11)additiional 2013 fees(cid:12) (cid:50)ther services Total remuneration of Price(cid:90)aterhouseCoopers (cid:36)ustralia 2014 $’000 2013 $’000 310 40 - 350 230 - - 230 114 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 115 NOTES TO THE FINANCIAL STATEMENTS 2(cid:23) Related parties Directors The names of persons who were Directors of the Company at any time during the financial period are as follows: (cid:51)eter McMahon(cid:15) Helen (cid:42)arnett(cid:15) Andrea Sutton(cid:15) (cid:51)eter Taylor(cid:15) John (cid:51)egler(cid:15) Helen Newell (cid:11)resigned 11 June 201(cid:23)(cid:12)(cid:15) Joanne (cid:41)arrell (cid:11)appointed 11 June 201(cid:23)(cid:12) and (cid:37)ruce Co(cid:91) (cid:11)appointed 2(cid:26) November 201(cid:23)(cid:12). (cid:44)nformation relating to Directors(cid:182) compensation(cid:15) shareholdings and retirement benefits is set out in the Remuneration Report in the Directors(cid:182) Report. Key management personnel Key management personnel compensation Short(cid:16)term employee benefits (cid:51)ost(cid:16)employment benefits Share-based payments 2014 $’000 3,151 363 478 2013 $’000 3,382 363 574 3,992 4,319 (cid:44)n compliance with Corporations Regulations 2001 2M.3.03 the Company has provided detailed remuneration disclosures in the Directors report. The relevant information can be found in the Remuneration Report on pages (cid:25)3 to (cid:27)1. (cid:47)oans with Directors and key management personnel There were no loans with Directors or key management personnel during 201(cid:23) (cid:11)2013: nil(cid:12). Transactions with Directors and Director(cid:16)related entities There were no transactions with Directors or Director(cid:16)related entities other than Rio Tinto (cid:47)imited during 201(cid:23) (cid:11)2013: Nil(cid:12). Details of transactions with Rio Tinto (cid:47)imited are outlined below. (cid:56)ltimate parent entity The ultimate parent entity is Rio Tinto (cid:47)imited. This interest is held through North (cid:47)imited (cid:11)incorporated in (cid:57)ictoria(cid:15) Australia(cid:12) which has beneficial ownership of (cid:25)(cid:27).(cid:23) per cent of the issued ordinary shares of the Company. North (cid:47)td owns 3(cid:23).1 per cent directly and the remaining 3(cid:23).3 per cent through its subsidiary(cid:15) (cid:51)eko(cid:16)(cid:58)allsend (cid:51)ty (cid:47)td. (cid:44)nterest income (cid:44)nterest income is received from Rio Tinto (cid:41)inance (cid:47)td which holds cash on behalf of the Company. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 115 116 NOTES TO THE FINANCIAL STATEMENTS Transactions with related parties The following transactions occurred with related parties: (cid:48)anagement services fees paid to ultimate parent entity: Rio Tinto (cid:42)roup Companies Consulting fees paid to: Rio Tinto (cid:42)roup Companies (cid:50)ther reimbursements for commercial services: Rio Tinto (cid:42)roup Companies (cid:36)mounts received from related parties: Rio Tinto (cid:42)roup Companies (cid:177) other Rio Tinto (cid:42)roup Companies (cid:177) interest (cid:39)ividends paid to: Related parties (cid:177) North (cid:47)td Related parties (cid:177) (cid:51)eko(cid:16)(cid:58)allsend (cid:51)ty (cid:47)td 2014 $’000 2013 $’000 1,600 1,600 9,153 12,787 85,718 14,669 245,118 1,827 49,774 2,925 - - - - Consulting fees paid to Rio Tinto (cid:42)roup Companies relate to technical services for ma(cid:77)or pro(cid:77)ects. (cid:50)ther reimbursements for commercial services include the purchase of uranium o(cid:91)ide at market price (cid:11)201(cid:23): (cid:7)(cid:25)(cid:25)(cid:15)(cid:28)33(cid:15)2(cid:26)(cid:25) and 2013: Nil(cid:12). Amounts received from related parties include sales of uranium o(cid:91)ide at market price. (cid:44)n April 201(cid:23)(cid:15) the Company entered into a marketing agreement with Rio Tinto (cid:56)ranium on the basis that it represents superior value to the Company(cid:182)s e(cid:91)isting marketing agreements and the alternative marketing agreements considered. (cid:56)nder the new marketing agreement(cid:15) uranium o(cid:91)ide produced by the Company is sold to Rio Tinto (cid:56)ranium and pooled with uranium o(cid:91)ide produced from the Namibian operation of R(cid:124)ssing (cid:56)ranium (cid:47)imited(cid:15) a related party of Rio Tinto plc. (cid:50)utstanding balances arising from sales(cid:18)purchases of goods and services The following balances are outstanding at the reporting date in relation to transactions with related parties: Aggregate amounts received from and payable to each class of other related parties at balance date (cid:90)ere as follo(cid:90)s: 2014 $’000 2013 $’000 Current assets - cash assets Related parties (cid:16) Rio Tinto (cid:41)inance (cid:47)td Current assets - receivables Related parties (cid:16) Rio Tinto (cid:42)roup Companies Current liabilities - creditors Related parties (cid:16) Rio Tinto (cid:42)roup Companies 102,531 87,060 6,066 2,992 5,833 4,433 All related party transactions were conducted on arm(cid:182)s length terms and conditions and at market rates. 116 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 117 NOTES TO THE FINANCIAL STATEMENTS 25 Segment information Description of segments Management has determined the operating segment based on the reports reviewed by the Chief (cid:40)(cid:91)ecutive that are used to make strategic decisions. The Chief (cid:40)(cid:91)ecutive considers the business from a product prospective and has identified only one reportable segment in the year ended 31 December 201(cid:23)(cid:15) being the mining(cid:15) processing and selling of uranium. There are no other unallocated operations. Primary reporting – business segments The segment information provided to the Chief (cid:40)(cid:91)ecutive for the reportable segment is as follows: Revenue from e(cid:91)ternal customers (cid:50)ther revenue Total segment revenue Segment result (cid:44)ncome tax benefit Profit for the year Segment assets Total assets Segment liabilities Total liabilities Acquisitions of non-current assets Depreciation and amortisation expense Net (gain) loss on sale of property, plant and equipment URANIUM 2014 $’000 2013 $’000 379,166 356,139 22,632 14,005 401,798 370,144 (273,602) (186,541) 85,802 50,712 (187,800) (135,829) 1,341,724 1,627,561 1,341,724 1,627,561 596,117 596,117 11,590 693,539 693,539 91,133 119,977 232,169 (1,693) 783 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 117 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 118 NOTES TO THE FINANCIAL STATEMENTS Other segment information Segment revenue The revenue from e(cid:91)ternal parties reported to the Chief (cid:40)(cid:91)ecutive is measured in a manner consistent with that in the income statement. Revenues from e(cid:91)ternal customers are derived from the sale of uranium. A breakdown of revenue and results is provided in the tables above. Segment revenue reconciles to total revenue from continuing operations as disclosed in Note 3. The Company is domiciled in Australia. The result of its revenue from e(cid:91)ternal customers in other countries is outlined in the table below: Asia (cid:56)nited States Europe Africa Total revenue SEGMENT REVENUES FROM SALES TO EXTERNAL CUSTOMERS 2014 $’000 260,549 108,569 8,461 1,376 378,955 2013 $’000 63,044 227,215 65,609 - 355,868 Segment revenues are allocated based on the country in which the customer is located. During 201(cid:23) the Company entered into a new marketing agreement with Rio Tinto (cid:56)ranium based in Asia. Details are disclosed in Note 2(cid:23). Segment assets The amounts provided to the Chief (cid:40)(cid:91)ecutive with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Segment assets include all assets used by a segment and consist primarily of operating cash(cid:15) receivables(cid:15) inventories(cid:15) property(cid:15) plant and e(cid:84)uipment and other assets(cid:15) net of provisions. All assets of the Company as at 31 December 201(cid:23) are in Australia with the e(cid:91)ception of inventories in transit or at converters of (cid:7)(cid:25)0(cid:15)0(cid:27)(cid:23)(cid:15)(cid:26)20 (cid:11)2013: (cid:7)(cid:25)(cid:28)(cid:15)(cid:26)2(cid:26)(cid:15)00(cid:27)(cid:12). All ac(cid:84)uisitions of property(cid:15) plant and e(cid:84)uipment and other non(cid:16)current assets occurred in Australia. Segment liabilities The amounts provided to the Chief (cid:40)(cid:91)ecutive with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. Segment liabilities consist primarily of trade and other creditors(cid:15) employee entitlements and provisions. The Company does not have any borrowings or derivative financial instruments as at 31 December 201(cid:23). 118 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 119 NOTES TO THE FINANCIAL STATEMENTS 2(cid:25) Reconciliation of loss after income ta(cid:91) to net cash in(cid:192)ow(cid:18)(cid:11)out(cid:192)ow(cid:12) from operating activities Loss for the year Add(cid:18)(cid:11)less(cid:12) items classified as investing(cid:18)financing activities: 2014 $’000 2013 $’000 (187,800) (135,829) Net (gain)/loss on sale of non-current assets (1,693) 783 Add(cid:18)(cid:11)less(cid:12) non(cid:16)cash items: Depreciation and amortisation Non cash impairment charge Rehabilitation provision: unwinding of discount (cid:40)mployee benefits: share based payments Net exchange differences Change in operating assets and liabilities (cid:11)(cid:44)ncrease(cid:12)(cid:18)decrease in trade and other receivables (cid:11)(cid:44)ncrease(cid:12)(cid:18)decrease in inventories (cid:11)(cid:44)ncrease(cid:12)(cid:18)decrease in other assets (cid:11)(cid:44)ncrease(cid:12)(cid:18)decrease in investment in trust fund (Decrease)/increase in payables (cid:11)(cid:44)ncrease(cid:12)(cid:18)decrease in net provision for deferred ta(cid:91) assets (cid:11)Decrease(cid:12)(cid:18)increase in provisions (cid:49)et cash in(cid:192)o(cid:90)/(out(cid:192)o(cid:90)) provided from operating activities 27 Earnings per share Basic earnings per share Diluted earnings per share 119,977 232,169 - 28,082 346 (1) - 30,937 1,338 16 8,875 22,047 128,819 (14,848) 913 (2,791) (1,981) (85,730) (61,007) (53,991) (1,789) (1,912) (27,730) (50,742) (72,322) (17,882) 2014 CENTS (cid:11)3(cid:25).3(cid:12) (cid:11)3(cid:25).3(cid:12) 2013 CENTS (cid:11)2(cid:25).2(cid:12) (cid:11)2(cid:25).2(cid:12) (cid:40)arnings used in the calculation of basic and diluted earnings per share: 201(cid:23): (cid:7)(cid:11)187,799,509(cid:12) (cid:11)2013: (cid:7)(cid:11)135(cid:15)(cid:27)2(cid:27)(cid:15)(cid:27)5(cid:27)(cid:12)(cid:12). (cid:58)eighted average number of ordinary shares on issue used in calculation of basic earnings per share: 201(cid:23): 51(cid:26)(cid:15)(cid:26)25(cid:15)0(cid:25)2 shares (cid:11)2013: 51(cid:26)(cid:15)(cid:26)25(cid:15)0(cid:25)2(cid:12). Options (cid:50)ptions granted to employees under the share(cid:16)based payment plans are for options in Rio Tinto plc and Rio Tinto (cid:47)imited. Therefore(cid:15) the options have not been included in the determination of diluted earnings per share. Details relating to the options are set out in Note 30. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 119 120 NOTES TO THE FINANCIAL STATEMENTS 2(cid:27) (cid:41)inancial risk management The Company carries out risk management under policies approved by the (cid:37)oard of Directors. The (cid:37)oard provides principles for overall risk management(cid:15) as well as written policies covering specific areas(cid:15) such as mitigating interest rate and other risks(cid:15) use of derivative and non(cid:16)derivative financial instruments. The Company(cid:182)s business is mining and not trading. Accordingly(cid:15) the Company only contracts to sell uranium that it plans to produce(cid:15) however purchasing uranium for resale may be re(cid:84)uired in circumstances where actual production falls short of contractual sales volumes. The Company operates entirely in Australia and is e(cid:91)posed primarily to Australian dollar denominated costs. Sales are denominated in (cid:56)S dollars. Market risk Foreign exchange risk The Company markets its products internationally and is e(cid:91)posed to foreign e(cid:91)change risk arising from various currency e(cid:91)posures(cid:15) primarily with respect to the (cid:56)S dollar. (cid:41)oreign e(cid:91)change risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity(cid:182)s functional currency. The risk is measured using sensitivity analysis and cash (cid:192)ow forecasting. (cid:44)t is not Company policy to hedge against foreign e(cid:91)change risk. The Company(cid:182)s e(cid:91)posure to foreign currency risk at the reporting date was as follows: Trade receivables Trade payables 2014 USD $’000 5,259 466 2013 USD $’000 10,873 283 (cid:42)roup sensitivity At 31 December 201(cid:23)(cid:15) had the Australian Dollar weakened(cid:18)strengthened by 10 per cent against the (cid:56)S Dollar with all other variables held constant(cid:15) the change in trade receivables would have effected post(cid:16)ta(cid:91) profit for the year by (cid:7)(cid:23)(cid:28)(cid:28)(cid:15)0(cid:28)(cid:27) higher(cid:18)lower (cid:11)2013: (cid:7)(cid:27)53(cid:15)1(cid:27)5 higher(cid:18)lower(cid:12). At 31 December 201(cid:23)(cid:15) had the Australian Dollar weakened(cid:18)strengthened by 10 per cent against the (cid:56)S Dollar with all other variables held constant(cid:15) the change in trade payables would have effected post(cid:16)ta(cid:91) profit for the year by (cid:7)3(cid:28)(cid:15)(cid:27)05 higher(cid:18)lower (cid:11)2013: (cid:7)20(cid:15)(cid:25)3(cid:23) higher(cid:18)lower(cid:12). Commodity price risk (cid:44)n the absence of uranium being traded on global futures e(cid:91)changes(cid:15) the Company uses a combination of both fi(cid:91)ed and market price related contracts for future sales to manage this e(cid:91)posure. No financial instruments are used by the Company to manage commodity price risk. (cid:44)nterest rate risk The Company(cid:182)s main interest rate risk arises from cash on deposit. (cid:58)hen cash is surplus to operational and investing re(cid:84)uirements it is invested in lump sum deposits to ma(cid:91)imise interest received. (cid:44)n addition(cid:15) the Company is e(cid:91)posed to interest rate risk on cash in the Ranger Rehabilitation Trust (cid:41)und. Credit risk The Company has no significant concentrations of credit risk. The Company has policies in place to ensure that sales of products are made to customers with an appropriate credit history. (cid:58)here customers are rated by an independent credit rating agency(cid:15) these ratings are used to set credit limits. (cid:44)f no independent rating e(cid:91)ists(cid:15) the credit (cid:84)uality of the customer is sub(cid:77)ect to e(cid:91)tensive assessment. (cid:47)etters of credit and other forms of credit insurance are also used as re(cid:84)uired. Derivative counterparties(cid:15) cash transactions and cash invested through the Ranger Rehabilitation Trust (cid:41)und are limited to high credit (cid:84)uality financial institutions. The Company has policies that limit the amount of credit e(cid:91)posure to any one financial institution. 120 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 121 NOTES TO THE FINANCIAL STATEMENTS TRADE RECEIVABLES AA A BBB Other 2014 $’000 - 9,222 - - 2013 $’000 - - 12,188 - (cid:47)i(cid:84)uidity and capital risk The Company(cid:182)s ob(cid:77)ectives when managing capital are to safeguard the Company(cid:182)s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company does not have a target debt to e(cid:84)uity ratio(cid:15) but has a policy of maintaining a (cid:192)e(cid:91)ible financing structure to be able to fund capital e(cid:91)penditure programmes(cid:15) pay dividends and fund e(cid:91)pansion opportunities as they arise. This policy is balanced against the desire to ensure efficiency in the debt(cid:18)e(cid:84)uity structure of the Company(cid:182)s balance sheet in the longer term through pro(cid:16)active capital management programmes. The future li(cid:84)uidity and capital re(cid:84)uirements of the Company will depend on many factors. (cid:37)ased on current assumptions(cid:15) including foreign e(cid:91)change rate(cid:15) prices(cid:15) costs(cid:15) resource and mining techni(cid:84)ues(cid:15) (cid:40)RA is likely to re(cid:84)uire capital at a future date for the development of Ranger 3 Deeps. (cid:47)ikewise(cid:15) if Ranger 3 Deeps mine is not developed(cid:15) in the absence of any other successful developments(cid:15) the Company may re(cid:84)uire an additional source of funding to fully fund the rehabilitation of the Ranger (cid:51)ro(cid:77)ect Area. Any inability to obtain sufficient capital would have a material impact on the Company(cid:182)s business and financial performance. (cid:40)ach year(cid:15) the Company is re(cid:84)uired to prepare and submit to the Commonwealth (cid:42)overnment an Annual (cid:51)lan of Rehabilitation. (cid:50)nce accepted by the Commonwealth (cid:42)overnment(cid:15) the annual plan is then independently assessed and costed and the amount to be provided by the Company into the Ranger Rehabilitation Trust (cid:41)und is then delivered. The Trust (cid:41)und includes both cash and financial guarantees. The Company(cid:182)s ability to access financial guarantees can be in(cid:192)uenced by many factors including(cid:15) future cash balance(cid:15) cash (cid:192)ows and shareholder support. (cid:42)uarantees are generally renewed annually. Should renewal not occur(cid:15) additional cash would be re(cid:84)uired to be deposited into the Trust (cid:41)und. The Company has plans in place to address these risks. The Company currently has no debt and (cid:7)2(cid:28)3(cid:15)31(cid:26)(cid:15)(cid:26)(cid:26)(cid:25) of cash on hand or at call (cid:11)Note (cid:26)(cid:12). No debt covenants e(cid:91)ist. (cid:41)air value estimation The carrying value less impairment provision of trade receivables and payables is a reasonable appro(cid:91)imation of their fair values due to the short(cid:16)term nature of these amounts. Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 121 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 122 NOTES TO THE FINANCIAL STATEMENTS 2(cid:28) (cid:40)vents occurring after the reporting period No matters or circumstances have arisen since the end of the financial year that have significantly affected(cid:15) or may significantly affect the operations or state of affairs of the Company in subse(cid:84)uent financial years. 30 Share-based payments (cid:40)RA participates in a number of share(cid:16)based payment plans administered by Rio Tinto plc and Rio Tinto (cid:47)imited(cid:15) which are described in detail in the Remuneration Report. These plans have been accounted for in accordance with the fair value recognition provisions of AAS(cid:37)2(cid:15) (cid:181)Share(cid:16)based (cid:51)ayment(cid:182)(cid:15) which means that AAS(cid:37)2 has been applied to all grants of employee share(cid:16)based payments that had not vested as at 1 January 200(cid:23). Performance Share Plan The (cid:51)erformance Share (cid:51)lan (cid:11)(cid:51)S(cid:51)(cid:12) was revised in 2013 with details listed in the Remuneration Report. The fair value awards granted under the (cid:51)S(cid:51) have been calculated at their dates of grant using a Monte Carlo valuation model which takes into account the Total Shareholder Returns (cid:11)TSR(cid:12) performance conditions. No forfeitures are assumed. The awards are accounted for in accordance with the re(cid:84)uirements applying to e(cid:84)uity(cid:16)settled sharebased payments transactions. A summary of the status of shares granted under the share plan at 31 December 2014, and changes during the year, is presented below: BALANCE AT START OF THE YEAR 11,843 (cid:7)52.3(cid:25) 979 (cid:133)3(cid:23).25 2014 Rio Tinto Limited (cid:58)eighted average fair value at grant date Rio Tinto plc (cid:58)eighted average fair value at grant date 2013 GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED AND EXER- CISABLE AT END OF THE YEAR 49 (2,473) (827) 8,592 1,816 - - - - (cid:7)3(cid:28).13 (405) (cid:7)(cid:26)5.(cid:27)1 (430) (cid:7)(cid:26)5.(cid:27)1 (144) (cid:133)31.2(cid:27) (cid:133)3(cid:25).35 (cid:133)3(cid:25).35 Rio Tinto Limited 14,536 9,613 (12,306) (cid:58)eighted average fair value at grant date Rio Tinto plc (cid:58)eighted average fair value at grant date (cid:7)(cid:25)2.(cid:28)(cid:28) (cid:7)3(cid:23).52 (cid:7)50.(cid:28)0 979 (cid:133)3(cid:23).25 - - - - - - - - - - - - (cid:7)(cid:23)3.00 (cid:7)(cid:25)2.2(cid:25) - - - - 11,843 3,300 (cid:7)52.3(cid:25) (cid:7)(cid:26)5.(cid:27)1 979 574 (cid:133)3(cid:23).25 (cid:133)3(cid:25).35 The weighted average share price at the date of e(cid:91)ercise of rights to shares e(cid:91)ercised during the year ended 31 December 201(cid:23) was (cid:7)(cid:25)5.(cid:28)1 (cid:11)2013: Nil(cid:12). The weighted average remaining contractual life of rights to shares outstanding at the end of the period was 3 years (cid:11)2013: 3 years(cid:12). (cid:58)here shares are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these shares. 122 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 123 NOTES TO THE FINANCIAL STATEMENTS Share Option Plan The Share (cid:50)ption (cid:51)lan was discontinued in 2013 and as such no awards were made. (cid:44)t is policy to settle these awards in e(cid:84)uity(cid:15) although the participants at their discretion can be offered a cash alternative. The awards are accounted for in accordance with the re(cid:84)uirements applying to e(cid:84)uity(cid:16)settled share(cid:16)based payment transactions. The performance conditions in relation to Total Shareholder Return (cid:11)TSR(cid:12) have been incorporated in the measurement of fair value for these awards by modelling the correlation between Rio Tinto(cid:181)s TSR and that of the inde(cid:91). The relationship between Rio Tinto(cid:181)s TSR and the inde(cid:91) was simulated many thousands of times to derive a distribution which(cid:15) in con(cid:77)unction with the lattice(cid:16)based option valuation model(cid:15) was used to determine the fair value of the options. (cid:40)(cid:91)pected volatilities are based on the historical volatility of Rio Tinto(cid:182)s share return. A summary of the status of options granted under the plan at 31 December 201(cid:23)(cid:15) and changes during the year(cid:15) is presented below: BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED AND EXERCIS- ABLE AT END OF THE YEAR 7,383 (cid:7)(cid:23)3.(cid:28)0 1,186 (cid:133)1(cid:25).53 10,789 (cid:7)(cid:23)0.01 1,186 (cid:133)1(cid:25).53 - - - - - - - - - - (2,487) (cid:7)32.1(cid:26) (1,186) (cid:133)1(cid:25).53 - - 324 (3,730) (cid:7)(cid:23)0.(cid:27)1 (cid:7)(cid:23)1.(cid:26)0 - - - - - - - - - - - - 4,896 4,896 (cid:7)(cid:23)(cid:28).(cid:27)(cid:26) (cid:7)(cid:23)(cid:28).(cid:27)(cid:26) - - - - 7,383 7,383 (cid:7)(cid:23)3.(cid:28)0 (cid:7)(cid:23)3.(cid:28)0 1,186 1,186 (cid:133)1(cid:25).53 (cid:133)1(cid:25).53 2014 Rio Tinto Limited (cid:58)eighted average exercise price Rio Tinto plc (cid:58)eighted average exercise price 2013 Rio Tinto Limited (cid:58)eighted average exercise price Rio Tinto plc (cid:58)eighted average exercise price The weighted average share price at the date of e(cid:91)ercise of options e(cid:91)ercised during the year ended 31 December 201(cid:23) was (cid:7)5(cid:27).(cid:26)(cid:27) (cid:11)2013: (cid:7)(cid:25)5.21(cid:12). The weighted average remaining contractual life of share options outstanding at the end of the period was 0 years (cid:11)2013: 0 years(cid:12). (cid:58)here options are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these options. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 123 124 NOTES TO THE FINANCIAL STATEMENTS Share Savings (cid:51)lan The Share Savings (cid:51)lan was replaced with the myShare Savings (cid:51)lan in 2013(cid:15) and as such no awards were made in 201(cid:23). Awards under these plans are settled in e(cid:84)uity and accounted for accordingly. The fair value of each award on the day of grant was estimated using a lattice(cid:16)based option valuation model(cid:15) including allowance for the e(cid:91)ercise price being at a discount to market price. A summary of the status of options granted under the plan at 31 December 201(cid:23)(cid:15) and changes during the year(cid:15) is presented below: BALANCE AT START OF THE YEAR 20,345 (cid:7)5(cid:23).(cid:25)2 38,446 (cid:7)5(cid:23).55 GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED AND EXER- CISABLE AT END OF THE YEAR - - - - (2,689) (2,371) (1,508) 13,777 4,514 (cid:7)50.1(cid:27) (cid:7)5(cid:28).2(cid:25) (cid:7)5(cid:27).0(cid:27) (cid:7)53.3(cid:25) (cid:7)(cid:23)(cid:27).(cid:26)3 (1,355) (9,082) (7,664) 20,345 3,434 (cid:7)5(cid:23).(cid:23)0 (cid:7)(cid:23)(cid:27).(cid:26)3 (cid:7)(cid:25)1.25 (cid:7)5(cid:23).(cid:25)2 (cid:7)5(cid:28).2(cid:25) 2014 Rio Tinto Limited (cid:58)eighted average exercise price 2013 Rio Tinto Limited (cid:58)eighted average exercise price The weighted average share price at the date of e(cid:91)ercise of conditional grants of shares e(cid:91)ercised during the year ended 31 December 201(cid:23) was (cid:7)(cid:25)1.(cid:27)1 (cid:11)2013: (cid:7)(cid:25)0.(cid:27)5(cid:12). The weighted average remaining contractual life of share options outstanding at the end of the period was 2 years (cid:11)2013: 2 years(cid:12). (cid:58)here shares are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these shares. myShare Savings (cid:51)lan The myShare plan was introduced to all eligible staff members in 2013 and is described in the Remuneration Report. Awards under this plan are settled in e(cid:84)uity and accounted for accordingly. The fair value of each award on the day of grant is set e(cid:84)ual to the share price on the day of grant. A summary of the status of options granted under the plan at 31 December 201(cid:23)(cid:15) and changes during the year(cid:15) is presented below: BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED AND EXER- CISABLE AT END OF THE YEAR 7,850 8,233 (1,120) (cid:7)5(cid:25).3(cid:26) (cid:7)5(cid:28).(cid:25)3 (cid:7)5(cid:25).0(cid:23) - - 7,901 (cid:7)5(cid:25)(cid:15)3(cid:28) - - - - - - (582) 14,381 (cid:7)5(cid:25).3(cid:23) (cid:7)5(cid:27).25 (51) 7,850 (cid:7)5(cid:28).0(cid:25) (cid:7)5(cid:25).3(cid:26) - - - - 2014 Rio Tinto Limited (cid:58)eighted average exercise price 2013 Rio Tinto Limited (cid:58)eighted average exercise price The weighted average share price at the date of e(cid:91)ercise of conditional grants of shares e(cid:91)ercised regularly during the year ended 31 December 201(cid:23) was nil (cid:11)2013: Nil(cid:12). The weighted average remaining contractual life of share options outstanding at the end of the period was 3 years (cid:11)2013: 3 years(cid:12). (cid:58)here shares are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these shares. 124 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 125 NOTES TO THE FINANCIAL STATEMENTS Management Share Plan The Management Share (cid:51)lan was introduced in 200(cid:26) and is described in the Remuneration Report. The awards will be settled in e(cid:84)uity including the dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the re(cid:84)uirements applying to e(cid:84)uity(cid:16)settled share(cid:16)based payment transactions. The fair value of each award on the day of grant is set e(cid:84)ual to share price on the day of grant. No forfeitures were assumed. A summary of the status of shares granted under the share plan at 31 December 201(cid:23)(cid:15) and changes during the year(cid:15) is presented below: BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END OF THE YEAR VESTED AND EXER- CISABLE AT END OF THE YEAR 2014 Rio Tinto Limited 16,001 7,460 (2,581) (4,402) (cid:58)eighted average fair value at grant date Rio Tinto plc (cid:58)eighted average fair value at grant date 2013 (cid:58)eighted average fair value at grant date Rio Tinto plc (cid:58)eighted average fair value at grant date (cid:7)(cid:25)1.(cid:25)(cid:27) 1,060 (cid:7)(cid:26)1.01 2,544 (cid:7)(cid:25)1.0(cid:23) (cid:7)5(cid:26).31 (cid:133)(cid:23)0.5(cid:27) (cid:133)31.1(cid:26) (cid:7)53.(cid:26)2 (cid:7)(cid:25)3.(cid:23)5 (cid:133)3(cid:27).(cid:25)(cid:26) (cid:133)3(cid:26).30 78 85 (cid:7)(cid:26)(cid:28).(cid:23)1 (1,138) (cid:133)3(cid:28).(cid:28)(cid:23) (cid:7)(cid:26)5.03 (1,569) (cid:133)3(cid:26).30 - - - - Rio Tinto Limited 14,939 8,048 (2,069) (4,917) - - - - - - - - 16,478 (cid:7)5(cid:26).35 - - 16,001 (cid:7)(cid:25)1.(cid:25)(cid:27) 1,060 (cid:133)(cid:23)0.5(cid:27) - - - - - - - - The weighted average share price at the date of e(cid:91)ercise of conditional grants of shares e(cid:91)ercised regularly during the year ended 31 December 201(cid:23) was (cid:7)(cid:25)2.53 (cid:11)2013: (cid:7)(cid:25)(cid:27).0(cid:26)(cid:12). The weighted average remaining contractual life of conditional grants of shares outstanding at the end of the period was 2 years (cid:11)2013: 3 years(cid:12). The model inputs for conditional rights granted during the year ended 31 December 201(cid:23) included: (cid:11)a(cid:12) (cid:11)b(cid:12) (cid:11)c(cid:12) (cid:11)d(cid:12) (cid:11)e(cid:12) rights are granted for no consideration and have a three year life(cid:30) e(cid:91)ercise price: nil (cid:11)2013: nil(cid:12)(cid:30) grant date: 1(cid:26) March 201(cid:23) (cid:11)2013: 2(cid:26) March 2013(cid:12)(cid:30) e(cid:91)piry date: 20 (cid:41)ebruary 201(cid:26) (cid:11)2013: 1(cid:23) (cid:41)ebruary 201(cid:25)(cid:12)(cid:30) and share price at grant date: (cid:7)(cid:25)1.0(cid:23) (cid:11)2013: (cid:7)53.11(cid:12). (cid:58)here shares are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these shares. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 125 126 NOTES TO THE FINANCIAL STATEMENTS Bonus Deferral Plan The (cid:37)onus Deferral Award was established for the mandatory deferral of a specific percentage of the Chief (cid:40)(cid:91)ecutive(cid:182)s Short Term (cid:44)ncentive (cid:51)lan bonus payment into Rio Tinto shares. The vesting of these awards is dependent only on service conditions being met. The awards will be settled in e(cid:84)uity including the dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the re(cid:84)uirements applying to e(cid:84)uity(cid:16)settled share based payment transactions. The fair value of each award on the day of grant is e(cid:84)ual to share price on the day of grant less a small ad(cid:77)ustment for the timing of dividends vesting. No forfeitures are assumed. BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR TRANSFERS (cid:44)(cid:49)/((cid:50)(cid:56)T) EXERCISED DURING THE YEAR FORFEITED DURING THE YEAR BALANCE AT END of THE YEAR VESTED AND EXER- CISABLE AT END OF THE YEAR 2014 Rio Tinto Limited (cid:58)eighted average fair value at grant date 2013 746 943 (cid:7)53.11 (cid:7)(cid:25)0.35 Rio Tinto Limited 1,265 1,149 (1,359) (309) (cid:58)eighted average fair value at grant date (cid:7)(cid:25)(cid:28).35 (cid:7)53.11 (cid:7)55.5(cid:26) (cid:7)(cid:27)1.00 - - - - 1,689 (cid:7)5(cid:26).15 746 (cid:7)53.11 - - - - The weighted average share price at the date of e(cid:91)ercise of conditional grants of shares e(cid:91)ercised during the year ended 31 December 201(cid:23) was nil (cid:11)2013: (cid:7)(cid:25)5.1(cid:23)(cid:12). The weighted average remaining contractual life of share options outstanding at the end of the period was (cid:23) years (cid:11)2013: (cid:23) years(cid:12). (cid:58)here shares are issued to employees of subsidiaries within the Rio Tinto (cid:42)roup(cid:15) the subsidiaries compensate the parent for the amount recognised as e(cid:91)pense in relation to these shares. Expenses arising from share-based payment transactions Total e(cid:91)penses arising from share(cid:16)based payment transactions recognised during the period as part of employee benefit e(cid:91)pense were as follows: Share based payment expense 2014 $’000 418 2013 $’000 1,338 126 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 127 DIRECTORS’ DECLARATION Directors’ Declaration Directors’ Declaration (cid:44)n the Directors(cid:182) opinion: (cid:11)a(cid:12) the financial statements and notes set out on pages (cid:28)0 to 12(cid:25) are in accordance with the Corporations Act 2001 (Cth), including: (cid:11)i(cid:12) (cid:11)ii(cid:12) complying with Accounting Standards(cid:15) the Corporations Regulations 2001 and other mandatory professional reporting re(cid:84)uirements(cid:30) and giving a true and fair view of the Company(cid:182)s financial position as at 31 December 201(cid:23) and of its performance for the financial year ended on that date(cid:30) and (cid:11)b(cid:12) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Note 1 (cid:11)a(cid:12) confirms that the financial statements also comply with (cid:44)nternational (cid:41)inancial Reporting Standards as issued by the (cid:44)nternational Accounting Standards (cid:37)oard. The Directors have been given the declarations by the Chief (cid:40)(cid:91)ecutive and the Chief (cid:41)inancial (cid:50)fficer re(cid:84)uired by section 2(cid:28)5A of the Corporations Act 2001 (cid:11)Cth(cid:12). This declaration is made in accordance with a resolution of the directors. P McMahon Brisbane 12 February 2015 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 127 128 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report Independent auditor’s report to the members of Energy Resources of Australia Ltd Report on the financial report We have audited the accompanying financial report of Energy Resources of Australia Ltd (the company), which comprises the balance sheet as at 31 December 2014, the statement of comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration. 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 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply 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 entity’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 the entity’s 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. 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. PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 129 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report Auditor’s opinion In our opinion: 1. the financial report of Energy Resources of Australia Ltd is in accordance with the Corporations Act 2001, including: 2. 3. giving a true and fair view of the company's financial position as at 31 December 2014 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. 4. the company's financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the remuneration report included in pages 63 to 81 of 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 Energy Resources of Australia Ltd for the year ended 31 December 2014 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers John O’Donoghue Partner Melbourne 12 February 2015 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 130 SHAREHOLDER INFORMATION Shareholder Information Shareholder Information (cid:40)nergy Resources of Australia (cid:47)td is a for(cid:16)profit company limited by shares(cid:15) incorporated and domiciled in Australia. The financial statements were authorised by Directors on 12 (cid:41)ebruary 2015. The Directors have the power to amend and reissue the financial statements. The shareholder information set out below was applicable as at 31 January 201(cid:23). Distribution of equity securities Analysis of numbers of registered e(cid:84)uity security holders by si(cid:93)e of holding: 1 – 1000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100(cid:15)001 and over ORDINARY SHARES NUMBER OF SHARE- HOLDERS % OF SHARE- HOLDERS 7,592 4,117 1,411 1,369 80 52.11 2(cid:27).2(cid:25) (cid:28).(cid:25)(cid:27) (cid:28).(cid:23)0 0.55 NUMBER OF SHARES 2,734,358 10,768,889 10,429,701 35,156,484 458,635,630 14,569 There were (cid:23)(cid:15)(cid:25)13 holders of less than a marketable parcel of ordinary shares. 100.00 517,725,062 Equity security holders The names of the twenty largest registered holders of (cid:84)uoted e(cid:84)uity securities are listed below: (cid:51)eko (cid:58)allsend (cid:47)td North Limited HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited JP Morgan Nominees Australia Limited HSBC Custody Nominees (Australia) Limited (cid:52)(cid:44)C (cid:47)imited National Nominees Limited (cid:37)oda (cid:44)nvestments (cid:51)ty (cid:47)td BNP Paribas Noms Pty Ltd Ganra Pty Ltd John E Gill Trading Pty Ltd Ariki (cid:44)nvestments (cid:51)ty (cid:47)imited Burleigh Heads Holdings Pty Ltd Ariki (cid:44)nvestments (cid:51)ty (cid:47)imited Pages Super Pty Ltd (cid:56)(cid:37)S Nominees (cid:51)ty (cid:47)td ABN Amro Clearing Sydney Nominees Pty Ltd CS Fourth Nominees Pty Ltd NUMBER OF SHARES 177,535,718 176,543,136 52,414,925 12,986,956 9,358,479 8,853,218 2,632,600 1,597,449 1,092,899 868,572 739,753 651,429 531,000 500,000 475,000 400,000 400,000 393,890 328,073 310,297 % OF ISSUED SHARES 0.53 2.0(cid:27) 2.01 (cid:25).(cid:26)(cid:28) (cid:27)(cid:27).5(cid:28) 100.00 % OF ISSUED SHARES 3(cid:23).2(cid:28) 3(cid:23).10 10.12 2.51 1.(cid:27)1 1.(cid:26)1 0.51 0.31 0.21 0.1(cid:26) 0.1(cid:23) 0.13 0.10 0.10 0.0(cid:28) 0.0(cid:27) 0.0(cid:27) 0.0(cid:27) 0.0(cid:25) 0.0(cid:25) 130 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 131 SHAREHOLDER INFORMATION (cid:40)ntitlements to vote Sub(cid:77)ect to any rights or restrictions for the time being attached to any shares on a show of hands(cid:15) every member present in person or by pro(cid:91)y or by attorney or by representative and entitled to vote at a shareholders(cid:182) meeting shall have one vote. (cid:50)n a poll(cid:15) every member present in person or by pro(cid:91)y or by attorney or by representative shall have one vote for each share held by him(cid:18)her. Annual General Meeting The ne(cid:91)t Annual (cid:42)eneral Meeting will be held at (cid:28):30am on Tuesday 1(cid:23) April 2015 in Darwin(cid:15) Northern Territory(cid:15) Australia. Ta(cid:91) file numbers Ta(cid:91) file numbers or e(cid:91)emption details are recorded from shareholders who wish to provide the information. Dividend advice statements(cid:15) when issued to shareholders(cid:15) indicate whether or not a shareholder(cid:182)s ta(cid:91) file number has been recorded. (cid:40)RA normally pays fully franked dividends. (cid:44)n the event of an unfranked dividend being paid(cid:15) (cid:40)RA will be re(cid:84)uired to deduct ta(cid:91) at the top marginal rate from the dividend paid to shareholders resident in Australia who have not supplied a ta(cid:91) file number or e(cid:91)emption form. (cid:44)nformation on shareholding Shareholders who re(cid:84)uire information about their shareholding or dividend payment should contact (cid:40)RA(cid:182)s principal registry. Shareholders who have changed their address should advise the change in writing to: (cid:40)RA Share Registry Computershare Investor Services Pty Ltd 11(cid:26) (cid:57)ictoria Street (cid:58)est (cid:40)nd (cid:52)(cid:47)D (cid:23)101 Telephone: (cid:14)(cid:25)1 (cid:11)0(cid:12) 3 (cid:28)(cid:23)(cid:26)3 2500 (cid:41)acsimile: (cid:14)(cid:25)1 (cid:11)0(cid:12) 3 (cid:28)(cid:23)15 (cid:23)000 Sponsored shareholders should note(cid:15) however(cid:15) that they should contact their sponsored broker to initiate a change of address. Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 131 132 2014 ASX ANNOUNCEMENTS 2014 ASX Announcements 2014 ASX Announcements 2(cid:26) Nov 201(cid:23) Appointment of Director 31 Jan 2014 (cid:40)RA (cid:41)ull (cid:60)ear Results (cid:51)resentation 30 Jan 2014 Annual Statement of Reserves and Resources 30 Jan 2014 (cid:51)reliminary (cid:41)inal Report (cid:16) Appendi(cid:91) (cid:23)(cid:40) 30 Jan 2014 (cid:40)RA (cid:41)ull (cid:60)ear Results 2013 09 Jan 2014 December 2013 (cid:52)uarter (cid:50)perations Review 1(cid:28) Nov 201(cid:23) Ranger 3 Deeps (cid:40)ighth (cid:40)(cid:91)ploration Result 22 Oct 2014 (cid:41)inal Report into Ranger (cid:47)each Tank 16 Oct 2014 (cid:41)urther (cid:56)nderground Drilling Results 09 Oct 2014 September 201(cid:23) (cid:52)uarter (cid:50)perations Review 03 Oct 2014 (cid:40)RA (cid:51)rogresses Ranger 3 Deeps Approvals 02 Oct 2014 Ranger 3 Deeps (cid:41)urther (cid:56)nderground Drilling Results 17 Sep 2014 Ranger 3 Deeps (cid:56)pdated Resource Model 18 Aug 2014 Carbon Tax Substantiation Statement 13 Aug 2014 Ranger 3 Deeps (cid:40)(cid:91)ploration Drilling Results 01 Aug 2014 (cid:40)RA (cid:41)inancial Community (cid:51)resentation 31 Jul 2014 (cid:44)nterim Report 30 June 201(cid:23) 31 Jul 2014 June 201(cid:23) Half (cid:60)ear Results 31 Jul 2014 Continuous Disclosure Policy 10 Jul 2014 June 201(cid:23) (cid:52)uarter (cid:50)perations Review 20 Jun 2014 Ranger 3 Deeps Resource (cid:56)pdate 11 Jun 2014 Resignation and Appointment of Directors 05 Jun 2014 Ranger (cid:51)rocessing (cid:51)lant Restart Approved 05 Jun 2014 (cid:56)pdate on Restart of (cid:51)rocessing (cid:50)perations 27 May 2014 Change of Company Secretary 25 May 2014 May 201(cid:23) (cid:44)nvestor (cid:51)resentation 16 May 2014 Ranger 3 Deeps (cid:41)ourth (cid:40)(cid:91)ploration Results 10 May 2014 (cid:58)ork on (cid:56)nderground (cid:57)entilation Shaft Temporarily Halted 30 Apr 2014 New Marketing Agreement 30 Apr 2014 CFO Announcement 09 Apr 2014 09 Apr 2014 09 Apr 2014 09 Apr 2014 201(cid:23) Annual (cid:42)eneral Meeting Results of (cid:57)oting 2014 Annual General Meeting Chief (cid:40)(cid:91)ecutive(cid:182)s Address 2014 Annual General Meeting Chairman’s Address Ranger (cid:47)each Tank Recovery (cid:56)pdate on Restart of (cid:51)rocessing (cid:50)perations 08 Apr 2014 March 201(cid:23) (cid:52)uarterly (cid:50)perations Review 27 Mar 2014 Ranger (cid:47)each Tank Recovery (cid:56)pdate 20 Mar 2014 (cid:44)ndependent Surface (cid:58)ater (cid:58)orking (cid:42)roup Review of Surface (cid:58)ater Management 17 Mar 2014 Resignation of C(cid:41)(cid:50) and Company Secretary 04 Mar 2014 Drilling Results Addendum 21 Feb 2014 (cid:40)RA (cid:58)ater Management Schematics 31 Jan 2014 (cid:41)inancial (cid:51)resentation (cid:41)ull (cid:60)ear Results Details of these announcements are available at www.energyres.com.au. 132 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 133 TEN YEAR PERFORMANCE Ten Year Performance Ten Year Performance YEAR ENDED 31 DECEMBER Sales Revenue (cid:11)(cid:7)000(cid:12) (cid:40)arnings (cid:37)efore (cid:44)nterest and Ta(cid:91) (cid:11)(cid:7)000(cid:12) (cid:51)rofit(cid:18)(cid:11)(cid:47)oss(cid:12) (cid:37)efore Ta(cid:91) (cid:11)(cid:7)000(cid:12) (cid:44)ncome Ta(cid:91) (cid:40)(cid:91)pense(cid:18) (cid:11)(cid:37)enefit(cid:12) (cid:11)(cid:7)000(cid:12) (cid:51)rofit(cid:18)(cid:11)(cid:47)oss(cid:12) After Ta(cid:91) (cid:11)(cid:7)000(cid:12) Total Assets (cid:11)(cid:7)000(cid:12) Shareholders(cid:182) (cid:40)(cid:84)uity (cid:11)(cid:7)000(cid:12) (cid:47)ong Term Debt (cid:11)(cid:7)000(cid:12) Current Ratio (cid:47)i(cid:84)uid Ratio (cid:42)earing Ratio (cid:11)(cid:8)(cid:12) (cid:44)nterest Cover (cid:11)times(cid:12) Return on Shareholders(cid:182) Equity (%) Earnings Per Share (cents) Dividends (cid:51)er Share (cid:11)cents(cid:12) (cid:51)ayout Ratio (cid:11)(cid:8)(cid:12) Share (cid:51)rice (cid:11)(cid:7)(cid:12) closing (cid:51)rice(cid:16)(cid:40)arning Ratio Dividend (cid:60)ield (cid:11)(cid:8)(cid:12) Net Tangible Assets per Share (cid:11)(cid:7)(cid:12) No. of (cid:40)mployees (cid:51)rofit After Ta(cid:91) per (cid:40)mployee (cid:11)(cid:7)000(cid:12) Ore Mined (million tonnes) Ore Milled (million tonnes) Mill Head (cid:42)rade (cid:11)(cid:8) (cid:56)3O8) Mill Recovery (cid:11)(cid:8)(cid:12) (cid:51)roduction (cid:11)tonnes (cid:56)3O8) – Drummed Sales (cid:177) Ranger Concen- trates (cid:11)tonnes (cid:56)3O8) Sales – Other Concentrates (cid:11)tonnes (cid:56)3O8) Sales (cid:177) Total (cid:11)tonnes (cid:56)3O8) Note 1 Post rights issue 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 379,166 356,139 396,629 651,381 572,283 768,297 496,359 357,080 312,698 262,036 (284,274) (199,431) (278,266) (220,633) 47,726 374,737 317,957 108,012 68,745 65,452 (273,602) (186,541) (254,785) (206,340) 59,427 382,053 312,569 98,366 62,247 59,620 (85,802) (50,712) (36,026) (52,741) 12,423 109,479 90,784 22,277 18,640 18,554 47,004 272,574 221,785 (187,800) (135,829) (218,759) (153,599) 41,066 1,341,724 1,627,561 1,826,275 1,948,972 1,423,396 1,359,131 1,170,409 985,353 869,350 864,162 745,607 934,022 1,069,619 1,288,536 951,076 966,574 758,926 606,021 552,491 539,764 - 3.(cid:27) 2.3 - (cid:25).5 - (cid:26).1 (cid:25).0 - (cid:11)1(cid:26)(cid:26).(cid:28)(cid:12) - (cid:23).0 2.(cid:28) - (cid:11)15(cid:25).(cid:26)(cid:12) - 1.(cid:27) 1.0 - (cid:26).(cid:26)(cid:28) - 3.(cid:23) 2.1 - (cid:23)(cid:26).(cid:27) - 3.1 2.2 - 33.5 - (cid:23).1 2.(cid:26) - - - 3.(cid:27) 2.3 - - - 1.5 0.(cid:27) - 5.(cid:25) - 3.(cid:25) 2.1 - (cid:25).3 76,089 43,607 (cid:11)25.2(cid:12) (cid:11)3(cid:25).3(cid:12) - - 1.30 (cid:11)3.5(cid:27)(cid:12) - (cid:11)1(cid:23).5(cid:12) (cid:11)2(cid:25).2(cid:12) - - 1.2(cid:25) (cid:11)(cid:23).(cid:27)1(cid:12) - 1.(cid:23)(cid:23) 389 1.(cid:27)0 519 (cid:11)20.5(cid:12) (cid:11)(cid:23)2.3(cid:12) - - 1.2(cid:26) (cid:11)3.00(cid:12) - 2.0(cid:26) 594 (cid:11)(cid:23)(cid:27)2.(cid:27)(cid:12) - 1.3 0.11 (cid:27)1.5 (cid:11)2(cid:25)(cid:23).(cid:27)(cid:12) - 2.3 0.15 (cid:27)(cid:23).(cid:27) (cid:11)3(cid:26)(cid:23).5(cid:12) 3.(cid:27) 2.(cid:25) 0.1(cid:26) (cid:27)(cid:25).2 (cid:11)11.(cid:28)(cid:12) (cid:11)2(cid:28).(cid:26)(cid:12)1 - - 1.23 (cid:11)2.5(cid:23)(cid:12) - 2.(cid:23)(cid:28) 567 (cid:11)2(cid:26)0.(cid:28)(cid:12) 1.2 1.(cid:25) 0.1(cid:27) (cid:27)(cid:26).(cid:28) (cid:23).(cid:28) 2(cid:23).(cid:25) (cid:27).0 32 11.13 (cid:23)5.2(cid:23) 2.(cid:28)(cid:25) (cid:23).(cid:28)(cid:28) 523 (cid:27)(cid:28).(cid:27)(cid:26) 1.(cid:23) 2.(cid:23) 0.1(cid:28) (cid:27)(cid:26).2 31.(cid:25) 1(cid:23)2.(cid:28) 3(cid:28).0 27 23.(cid:27)(cid:28) 1(cid:25).(cid:26)2 1.(cid:23)2 5.0(cid:26) 521 2(cid:28).2 11(cid:25).3 2(cid:27).0 24 1(cid:28).00 1(cid:25).3(cid:23) 1.(cid:23)(cid:26) 3.(cid:28)(cid:27) 519 523.1(cid:26) 2.2 2.3 0.2(cid:25) (cid:27)(cid:27).3 (cid:23)2(cid:26).33 3.5 2.0 0.30 (cid:27)(cid:27).2 13.1 3(cid:28).(cid:28) 20.0 28 1(cid:28).50 (cid:23)(cid:27).(cid:27)(cid:27) 1.03 3.20 419 1(cid:27)1.(cid:25) 2.(cid:28) 1.(cid:28) 0.31 (cid:27)(cid:27).2 (cid:27).0 22.(cid:28) 1(cid:26).0 74 20.(cid:27)0 (cid:28)0.(cid:28)(cid:27) 0.(cid:27)2 2.(cid:28)0 385 113.3 3.3 2.0 0.2(cid:25) (cid:27)(cid:26).5 (cid:26).(cid:25) 21.5 1(cid:26).0 80 10.02 (cid:23)(cid:26).(cid:26)0 1.(cid:26)0 2.(cid:27)0 354 11(cid:25).0 2.2 2.3 0.2(cid:28) (cid:27)(cid:27).3 1,165 2,960 3,710 2,641 3,793 5,240 5,339 5,412 4,748 5,910 2,164 2,767 2,665 3,258 4,373 5,497 5,272 5,324 5,760 5,552 984 48 558 3,148 2,815 3,223 1,908 5,167 653 – – – – 136 5,026 5,497 5,272 5,324 5,760 5,688 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 133 Definition of statistical ratios Current Ratio (cid:47)i(cid:84)uid Ratio foreign exchange (cid:42)earing Ratio (cid:44)nterest Cover Return on Shareholders(cid:182) (cid:40)(cid:84)uity (cid:40)arnings per Share (cid:32) (cid:32) (cid:32) (cid:32) (cid:32) (cid:32) current assets(cid:18)current liabilities (cid:11)current assets(cid:16)inventory(cid:16)prepayments(cid:16)foreign e(cid:91)change hedge asset on borrowings(cid:12)(cid:18)(cid:11)current liabilities(cid:16)bank overdraft (cid:177) hedge liability) (cid:11)long term debt (cid:14) term creditors(cid:12)(cid:18)(cid:11)shareholders(cid:182) e(cid:84)uity (cid:14) long term debt (cid:14) term creditors(cid:12) earnings before interest and ta(cid:91)(cid:18)interest e(cid:91)pense profit after ta(cid:91)(cid:18)average shareholders(cid:182) e(cid:84)uity profit after ta(cid:91)(cid:18)weighted average number of shares issued 134 INDEX Index Index 2014 Announcements 2015 (cid:50)b(cid:77)ectives Auditor(cid:182)s (cid:44)ndependence Declaration Balance Sheet Business Strategy Cash (cid:41)low Statement Chairman(cid:182)s Report Chief (cid:40)(cid:91)ecutive(cid:182)s Report Community Company (cid:51)rofile Corporate (cid:42)overnance Statement Director’s Declaration Director(cid:182)s Report Employment (cid:40)nvironment Financial Performance Future Supply Health and Safety (cid:44)ndependent Auditor(cid:182)s Report Land Market and Customers Notes to the Financial Statements (cid:50)perating and (cid:41)inancial Review Operations (cid:50)verview Radiation monitoring Ranger 3 Dedps Social (cid:44)mpact Assessment Ranger (cid:50)re Reserves Regulatory (cid:41)ramework Shareholder (cid:44)nformation Statement of Changes in Equity Statement of Comprehensive (cid:44)ncome Sustainable Development Ten Year Performance 132 10 84 91 16 93 6 8 51 5 85 127 66 48 41 12 22 30 128 45 26 94 12 14 40 32 54 23 36 130 92 90 40 133 134 Energy Resources of Australia Ltd Financial Report 2014 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 135 INDEX (cid:43)ead Office (cid:47)evel 3(cid:15) (cid:40)nergy House 1(cid:27)(cid:16)20 Cavenagh Street GPO Box 2394 Darwin NT 0(cid:27)01 Tel: (cid:14)(cid:25)1 (cid:11)0(cid:12) (cid:27) (cid:27)(cid:28)2(cid:23) 3500 (cid:41)a(cid:91): (cid:14)(cid:25)1 (cid:11)0(cid:12) (cid:27) (cid:27)(cid:28)2(cid:23) 3555 www.energyres.com.au Ranger Mine (cid:47)ocked (cid:37)ag 1 Jabiru NT 0886 (cid:53)e(cid:74)istered Office (cid:40)nergy Resources of Australia (cid:47)td c/ Mallesons Stephen Jacques (cid:47)evel 5(cid:15) N(cid:44)CTA (cid:37)uilding (cid:37) 7 London Circuit Canberra City ACT 2601 Energy Resources of Australia Ltd Financial Report 2014 ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 Energy Resources of Australia Ltd Financial Report 2014 135 136 INDEX This page has been left blank intentionally ENERGY RESOURCES OF AUSTRALIA LTD ANNUAL REPORT 2014 E N E R G Y R E S O U R C E S O F A U S T R A L I A L T D A N N U A L R E P O R T 2 0 1 4 Surrounding environment remained protected, as conﬁrmed by the Supervising Scientist Ranger 3 Deeps Exploration Decline completed Produced 1,165 tonnes of uranium oxide Strong cash position maintained Reduction in employee numbers with end of Pit 3 initial backﬁll Implemented process safety improvement action plan

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