ANNUAL
REPORT
2019
Aidan’s family, Jess,
Mahla & Elsy
Jabiru residents
for 2 years
Daniel’s family,
Sharon & Ezra
Jabiru residents
for 8 years
In recognition of the contribution
ERA families make to Jabiru we
have featured our people and
their families, including multiple
generations, who make Jabiru
the wonderful community that it
is today.
Our people and their partners
contribute to Jabiru in a
multitude of ways through their
volunteering, local businesses
and social contributions.
Lesley’s family,
Roger, Ryan,
Chantelle, Josh,
Ava, Ellie &
Sonny
Jabiru residents
for 14 years
Andrew’s family,
Dimity, Clementine
& Rupert
Jabiru residents
for 1.5 years
Steve’s family, Joy,
Jakob & Krystal
Jabiru residents
for 5 years
Sioux & Peter
Jabiru residents
for 6 years
Contents
1
2019 AnnUAL RePoRt
27
FInAnCIAL RePoRt
CHAIRMAN’S REPORT
CHIEF EXECUTIVE’S REPORT
COMPANY OVERVIEW
FINANCIAL PERFORMANCE
OPERATIONS AND REHABILITATION
BUSINESS STRATEGY
CURRENT OPERATIONS AND RESOURCES
BUSINESS RISKS
FUTURE SUPPLY
SALES AND MARKETING
HEALTH AND SAFETY
REGULATORY FRAMEWORK
4
5
6
7
9
12
13
14
20
23
24
26
DIRECTOR’S REPORT
28
AUDITOR’S INDEPENDENCE DECLARATION
51
CORPORATE GOVERNANCE STATEMENT
52
STATEMENT OF COMPREHENSIVE INCOME
58
BALANCE SHEET
STATEMENT OF CHANGES IN EQUITY
CASH FLOW STATEMENT
NOTES TO THE FINANCIAL STATEMENTS
DIRECTOR’S DECLARATION
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER INFORMATION
2019 ASX ANNOUNCEMENTS
TEN YEAR PERFORMANCE
INDEX
59
60
61
62
94
95
101
103
104
105
1
ENERGY RESOURCES OF AUSTRALIA LTD SALES REVENUE ($M)
DRUMMED PRODUCTION TONNES (T)
2015
2016
2017
2018
2019
332.8
267.8
211.2
201.2
209.6
NET PROFIT AFTER TAX ($M)
2015
2016
2017
2018
2019
-275.5
-271.1
-43.5
-435.3
6.3
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2,005
2,351
2,294
1,999
1,751
INDIGENOUS EMPLOYEES (FTEs)
49
46
43
44
41
OPERATING CASHFLOW ($M)
ALL INJURY FREQUENCY RATE
(PER 200,000 HRS WORKED)
2015
2016
2017
2018
2019
-99.5
-76.3
34.0
7.8
84.6
2015
0.67
2016 0.19
2017
2018
2019
0.56
1.17
1.07
2
ENERGY RESOURCES OF AUSTRALIA LTD JABILUKA
MINERAL
LEASE
(73 sq km)
RAnGeR MIne
Locked Bag 1
Jabiru NT 0886u
ReGI steReD oFFIC e
Energy Resources of Australia Ltd
c/ Mallesons Stephen Jacques
Level 5 NICTA Building B
7 London Circuit
Canberra City ACT 2601
HeAD oFFIC e
Level 3, Energy House
18-20 Cavenagh Street
GPO Box 2394
Darwin NT 0801
Telephone:
+61 (0) 8 8924 3500
Fax:
+61 (0) 8 8924 3555
https://www.energyres.com.au
ABN 71 008 550 865
3
ENERGY RESOURCES OF AUSTRALIA LTD CHAIRMAn's RePoRt
This year will mark the
final year of current
operations at Ranger,
with processing due to
end by 8 January 2021,
as required by the
Ranger Authority.
ERA can celebrate,
with considerable pride,
almost 40 years of safe
and reliable supply of uranium oxide to customers around
the world for nuclear power generation. This is a very
significant contribution to clean energy, of which all who
have worked with the Company can be justifiably proud.
It is well overdue for the international energy debate to
include the role that nuclear energy should play in the
inevitable move to the cleaner generation of energy.
The main focus over the next five years will clearly be
on rehabilitating the Ranger Project Area in accordance
with our regulatory obligations. Rehabilitation is not
something new at ERA. We have been progressively
rehabilitating the Ranger Project Area since mining in
Pit 1 was completed in1996. Throughout this time we
have worked closely with regulators and key stakeholders
on closure planning and approvals, as well as developing
a deep understanding and experience in best-in-class
rehabilitation practices.
The Ranger Closure Feasibility Study, completed in
February 2019, and the subsequent update to the Ranger
Mine Closure Plan provide the community with further
confidence in ERA’s capability to rehabilitate the Ranger
Project Area on schedule and in accordance with agreed
closure criteria.
The Company’s ongoing rehabilitation achievements
and the planned closure outcomes at Ranger are at the
forefront of industry practice as is appropriate for the
region in which we operate. This reflects our commitment
to care for country and to create a positive reputational
legacy, which is vital to our social license to operate.
The continued strong operating performance of our
business in 2019, with production of uranium oxide toward
the higher end of projections for the year, is a credit to our
people and a commendable performance in the context
of diminishing stockpile grades and an aging plant.
While the longer term outlook for the uranium oxide spot
market is positive, the market remained depressed in
2019 and is likely to continue so for some time yet.
4
This has placed pressure on ERA to optimise productivity
across the business. The efforts of the ERA workforce
to create value through the “Safely Transforming ERA
Together” business transformation program has been an
extraordinary achievement and exceeded expectations.
In a challenging business context and with the end of
Ranger operations drawing closer, it would be easy
for the operations workforce to lose enthusiasm and to
become distracted. Instead we have seen an engaged,
creative and hard-working team that has contributed
enthusiastically. This has been demonstrated not only
in the business performance, but also in the positive
employee scores in the last two half-yearly staff surveys.
I am also pleased to note the high level of participation in
the Company’s “My Future Plan” program which supports
employees to plan their career beyond cessation of
Ranger operations.
While our safety performance slipped in the early part
of 2019, it is to the credit of the workforce that, with
concerted effort, this was turned around in the second
half of the year. Safety remains our highest priority at ERA.
In November 2019 the Company launched an Entitlement
Offer to ensure the Company is able to fully fund the
rehabilitation of Ranger, including the annual lodgement
of a closure security as required by the Commonwealth
Government. After careful consideration over a number
of months, it was concluded that this was the only viable
funding solution following the increase in the provision for
Ranger rehabilitation as a result of the outcomes of the
Ranger Closure Feasibility Study.
We were pleased to successfully close the Entitlement
Offer in February earlier this year. I thank all of our
investors, the Mirarr Traditional Owners and other key
stakeholders for their support and understanding as
we worked to deliver this funding solution.
I would also like to thank members of the Board, the
senior management team and workforce at ERA and
all have supported ERA during what has been, at times,
a trying year.
PeteR MA nseLL
CHAIRMAn
ENERGY RESOURCES OF AUSTRALIA LTD CHIeF exeCUtIve's RePoRt
On behalf of the
dedicated team at ERA,
I am pleased to report
on the Company’s
achievements in 2019.
As always, our first priority
is caring for people.
The Company All Injury
Frequency Rate (AIFR)
for 2019 was 1.07, with
six of our team members injured during the year. This was
disappointing given our goal of zero injuries. Many of the
injuries occurred in the first half of 2019. With a concerted
improvement focus and continued removing of risks
through critical control processes, it was pleasing to note a
significant reduction in injuries in the second half.
While 2019 was not without its challenges, it also saw
a range of successes. ERA produced 1,751 tonnes of
uranium oxide which was toward the upper end of our
guidance of 1,400 to 1,800 tonnes. This excellent result
was achieved through outstanding equipment utilisation
and record throughput rates despite the difficulties that
come with operating a 40-year old plant. This is testament
to the hard work and determination of the ERA workforce.
In the context of a depressed uranium oxide market,
it has been necessary to achieve efficiencies across
the business. During 2019 the business-wide “Safely
Transforming ERA Together” program identified
smarter ways of working and realised crucial cash
generation opportunities in many parts of the Company.
Overwhelmingly these initiatives have been generated,
nurtured and implemented by the people at ERA. It is a
wonderful example of what can be achieved by unleashing
the creativity, commitment and collaboration of our people.
This year we emphasised our commitment to caring for
the environment by introducing a dedicated priority of
“Environment: We care for country and deliver best in class
rehabilitation.” This recognises the continued protection of
the surrounding environment and the progressive delivery
on our rehabilitation obligations.
We safely launched our second dredge and, for the
second consecutive year, saw record-breaking productivity
from the Brine Concentrator. These are impressive
outcomes under pressing timelines and with complex
technical challenges.
In 2019 we publicly released an updated Ranger Mine
Closure Plan which, together with the outcomes of the
Ranger Closure Feasibility Study, gives stakeholders
and the broader community greater confidence in ERA’s
ability to achieve the Ranger Mine closure objectives
on schedule.
One of the highlights for me this year has been the
opportunity to meet with senior Mirarr Traditional Owners
on country to gain a deeper understanding of their cultural
connection. We also had the opportunity to work with
Mirarr to support their vision for the future of Jabiru. I was
very pleased to co-sign a Memorandum of Understanding
about the future of the town with the Gundjeihmi Aboriginal
Corporation and the Commonwealth and the Northern
Territory Governments.
When reflecting on 2020, our last full year of production
at Ranger under the current authority, my driving thought
is this: the way we finish is the way we will be remembered.
I want our final year of Ranger production to be, above all,
a year of zero harm. A year where everything we do serves
to keep ourselves, our colleagues, our communities and our
environment safe. In what will be an exciting but also
a year of significant change, it is essential that we never
lose sight of this most important value and business priority.
An important aspect of the Company’s commitment to
employee well-being is to help manage uncertainty as
we approach the end of Ranger operations. More than
250 ERA employees have participated in the Company’s
“My Future Plan” program. This program provides training
and support for their future beyond Ranger operations,
including the potential to redeploy within the wider
Rio Tinto group.
Paul Arnold sitting with Yvonne Margarula and Nida Mangarrba
in the first Relationship Committee Meeting on Mirarr Country at
Djarr Djarr – Image courtesy of Gundjeihmi Aboriginal Corporation.
During 2019 we asked much of our people and they
continually rose to the task to support ERA in meeting its
objectives. The commitment and achievements of the team
give me great confidence in looking to the future. I thank
everyone at ERA for their contribution over the past year
and look forward to working with the team and all of our
stakeholders in the coming year.
PAUL ARnoLD
CHIeF exeCUtIve A nD MAnAGInG DIReC toR
5
ENERGY RESOURCES OF AUSTRALIA LTD CoMPAny oveRvIew
Energy Resources of Australia Ltd (ERA) acknowledges
the Mirarr people, Traditional Owners of the land on
which ERA operates.
ERA operates the Ranger uranium mine, Australia’s
longest continually operating uranium mine.
ERA has provided international customers with reliable
supply of uranium oxide (U3O8
production at Ranger began. During that time, Ranger
has produced in excess of 130,000 tonnes of uranium.
) in the 38 years since
The Ranger mine’s operational infrastructure lies within
the 79 square kilometre Ranger Project Area, which
is located eight kilometres east of Jabiru and
260 kilometres east of Darwin, in the Northern Territory
of Australia. ERA’s operations on the Ranger Project
Area are undertaken pursuant to an authorisation granted
under section 41 of the Atomic Energy Act 1953 (Cth)
(the Ranger Authority).
ERA is currently processing stockpiled ore following the
completion of open cut mining in 2012.
The Ranger 3 Deeps ore body contains a Mineral
Resource of 43,858 tonnes of contained uranium
oxide, comprised of 19.58 million tonnes at an overall
grade of 0.244% U3O8. In 2015, ERA decided not to
progress the Ranger 3 Deeps project to feasibility study.
The exploration decline and associated infrastructure
is currently under a reduced care and maintenance
program. In order to fully develop the Ranger 3 Deeps
resource, ERA would require an extension to the Ranger
Authority which expires in January 2021. ERA is of the
view that the prospect of any development is remote
considering the economic, legislative and operational
challenges that exist.
ERA also holds title to the world-class Jabiluka Mineral
Lease. In accordance with the Jabiluka Long Term Care
and Maintenance Agreement, the Jabiluka deposit 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.
In addition to the Ranger Authority, ERA’s uranium mining
activities are regulated through Commonwealth and
Northern Territory legislation. ERA has also entered into
a suite of agreements which govern its operations on
the Ranger Project Area with the Gundjeihmi Aboriginal
Corporation, on behalf of the Mirarr Traditional Owners,
the Northern Land Council and the Commonwealth
Government.
ERA has a sales and marketing agreement with Rio Tinto
Uranium pursuant to which ERA’s product is sold to
international power utilities under strict international and
Australian Government safeguards which ensure that
Australian uranium is only used for peaceful purposes.
ERA is committed to strong environmental management
practices. The previously exhausted open cut mines at
Ranger are being progressively rehabilitated in line with
regulatory requirements.
The Company’s shares are publicly held and traded
on the Australian Securities Exchange, with Rio Tinto,
a diversified resources group, currently holding
86.3 per cent of ERA shares.
6
ENERGY RESOURCES OF AUSTRALIA LTD FInAnCIAL PeRFoRMAnCe
In 2019, ERA incurred negative cash flow from operating
activities of $100 million compared to negative $76 million
in 2018. This was largely due to an increased rehabilitation
spend on the Ranger Project Area of $92 million and an
ongoing build-up of inventory for sale into future periods.
Despite negative cash flow, ERA continued to generate
a positive margin1 from the sale of uranium oxide.
ERA held total cash resources of $285 million at
31 December 2019, comprised of $209 million in
cash at bank and $76 million of cash held by the
Commonwealth Government as part of the Ranger
Rehabilitation Trust Fund. The Company has no debt.
On 15 November 2019, ERA announced a fully
underwritten pro rata renounceable entitlement offer to
raise approximately $476 million (Entitlement Offer)
in order to meet ERA’s rehabilitation obligations for
the Ranger Project Area. The Entitlement Offer closed
on 18 February 2020, with the issue of new shares to
participating shareholders on 25 February 2020 – further
details below.
ERA recorded a net profit after tax of $6 million compared
to a net loss after tax of $435 million in 2018. The 2018
earnings were adversely impacted by a change in the
rehabilitation estimate and impairment charge of
$433 million after tax. The 2019 results were supported
by the settlement of a dispute regarding the design,
manufacture and supply of certain infrastructure and
the successful execution of the ongoing “Transforming
ERA Safely Together” program.
The Ranger Project Area continued to be progressively
rehabilitated during 2019, with expenditure of $92 million.
Expenditure was primarily associated with the dredge
operating to transfer tailings from the Tailings Storage
Facility to Pit 3, construction and commissioning of water
treatment capacity, the backfill of waste material to Pit 1
and various studies. Additional dredging capacity was
launched in the second quarter, with full commissioning
completed during the third quarter.
At 31 December 2019, the ERA rehabilitation provision is
$770 million.2 The strategy and estimate remain consistent
with 31 December 2018.
RevenUe
Revenue from the sale of uranium oxide was $210 million
(2018: $201 million). Revenue was favourably impacted
by higher sales volumes and a favourable movement in
the Australian/US dollar exchange rate. This was partially
offset by a lower average realised sales price.
Sales volume for 2019 was 1,597 tonnes compared with
1,467 tonnes for 2018. The average realised sales price
on contracted sales in 2019 was US$48.53 per pound
compared to US$47.67 per pound in 2018. The average
realised price on all sales (including uncontracted
material sold into the spot market) in 2019 was US$41.89.
The average realised price compares favourably against
the average spot price for 2019 of US$25.90 per pound.
With uranium oxide sales denominated in US dollars,
the weakening of the Australian dollar had a positive
impact on ERA’s financial results. With sales weighted
towards the first half, the average exchange rate was
70 US cents, compared with 77 US cents for 2018.
As a result of timings within the contract portfolio, sales
volumes in 2019 were weighted towards the first half of
the year. ERA had substantially fulfilled its contracted
sales for the year by 30 June 2019. In the second half of
the year, ERA made a number of opportunistic sales into
the spot market while also building inventory of uranium
oxide for sales in future periods. As at 31 December
2019, ERA had sufficient drummed inventory to meet
supply commitments under its existing long term contract
portfolio. Therefore 2020 production and future sales
volumes will have a greater exposure to the spot market
than in 2019.
oPeRAtInG C osts
Costs for 2019 were lower than the corresponding period
in 2018. This result has benefited from the successful
execution of a business transformation program. The
program was implemented to improve cashflow while
maintaining the Company’s core values of health, safety
and the environment. The Company is well advanced
in its execution of the program, with ERA having
implemented a number of cost reduction and productivity
improvement initiatives across the Company’s operations.
To date, the transformation program has resulted in cost
savings, lower input costs and increased productivity.
Further savings are expected to be realised in 2020 as
the identified initiatives are progressed.
1. When comparing the marginal production cost to the uranium spot price
2. 31 December 2019 provision discounted at 2 per cent and presented
in real terms (undiscounted in real terms of $818 million and $874 million
undiscounted in nominal terms)
7
ENERGY RESOURCES OF AUSTRALIA LTD FInAnCIAL PeRFoRMAnCe
These savings in 2019 were however, largely offset by
the recognition of an additional provision for payment
of employee benefits on termination.
Minor depreciation has been recorded in 2019 due
to the implementation of Australian Accounting
Standard 16 “Leases”. No other depreciation was
recorded due to the Ranger Cash Generating Unit
remaining fully impaired.
On 11 December 2019, the Takeovers Panel (Panel)
made a Declaration of Unacceptable Circumstances in
relation to an application dated 18 November 2019 by
Zentree Investments Limited in relation to the affairs of
ERA. Copies of the Panel’s Declaration and Orders are
reproduced on the Panel’s website at:
http://www.takeovers.gov.au/content/Media_
Releases/2019/downloads/MR19-078.pdf
On 13 December 2019, Rio Tinto lodged an application
for a review of the Initial Panel’s decision. On 20 January
2020, the review Panel (Review Panel) affirmed the
decision of the Initial Panel to make a declaration of
unacceptable circumstances and varied the Initial Panel’s
orders. Copies of the Review Panel’s declaration and the
variations ordered by the Review Panel are reproduced
on the Panel’s website at:
https://www.takeovers.gov.au/content/Media_
Releases/2020/downloads/MR20-005.pdf
New shares under the Entitlement Offer were issued on
25 February 2020. Following the issue of new shares to
Rio Tinto under the Entitlement Offer and Underwriting
Agreement, Rio Tinto’s relevant interests increased from
68.4 per cent to 86.3 per cent.
CAPItAL exPenDI tURe
Capital expenditure for the year was $4 million, consistent
with 2018. All expenditure in 2019 related to sustaining
capital activities. In 2019, capital expenditure was
immediately written off to the Statement of Comprehensive
Income and recorded in other expenses. This is a result of
the Ranger Cash Generating Unit remaining fully impaired.
entItLeMent oFFeR
On 15 November 2019, ERA announced the
Entitlement Offer of 6.13 new fully paid ERA ordinary
shares (New Shares) for each existing ERA ordinary
share to raise approximately $476 million to fund its
rehabilitation obligations for the Ranger Project Area.
The terms and conditions of the Entitlement Offer
were set out in an information booklet dated
15 November 2019 (Offer Information Booklet).
The Entitlement Offer was fully underwritten by North
Limited (the Underwriter or North), a wholly-owned
subsidiary of Rio Tinto, pursuant to an Underwriting
Agreement dated 15 November 2019. A summary
of the Underwriting Agreement was included in the
Offer Information Booklet.
8
ENERGY RESOURCES OF AUSTRALIA LTD oPeRAtIons AnD ReHABILItAtIon
In 2019, ERA produced 1,751 tonnes of uranium oxide,
which was towards the higher end of ERA’s market
guidance of 1,400 to 1,800 tonnes. This was 12 per cent
lower than the 1,999 tonnes of uranium oxide produced
in 2018. Production was lower in the period due to the
impact of declining ore grades from existing stockpiles.
Processing continued from primary ore stockpiles, while
additional uranium oxide continued to be produced
through brines to leach production, an initiative of the
“Safely Transforming ERA Together” program. Under this
process, uranium is recovered from recycled brine which
was returned to the leaching circuit for further extraction.
Despite the declining head grade, the plant achieved its
production milestones for the year, continuing to focus on
the optimisation of the mine plan and utilisation of the mill.
Business transformation initiatives drove plant throughput
for the year to 2.5 million tonnes of uranium ore, with
a peak mill rate of 381 tonnes per hour. The average
recovery rate for the year was 86.7 per cent and average
ore head grade was 0.081 per cent uranium oxide.
In 2019, ERA elected to extend the independent oversight
program of process safety management at Ranger
until it ceases operations in January 2021. The Noetic
Group conducted two oversight visits to further review
improvements to process safety management and the
implementation of the Company’s “Maintaining Process
Safety Excellence to Closure” management plan. In 2020,
Noetic is scheduled to conduct two further oversight
visits, with an internal ERA team maintaining oversight
of process safety at Ranger.
RAnGeR MIne CL osURe PLA n
Under the Ranger Authority, ERA is required to cease
mining and processing activities in the Ranger Project
Area by January 2021, with final rehabilitation to
be completed by January 2026. The Ranger Mine
Closure Plan (the Plan) details the works program and
schedule to achieve the closure objectives set out in
the legal framework and the associated Environmental
Requirements.
The inaugural public release of the Plan in June 2018
was a milestone for ERA and followed a rigorous
18 month stakeholder consultation process including
discussions with the Gundjeihmi Aboriginal Corporation
and the Northern Land Council, as representatives of
the Mirarr Traditional Owners, and Northern Territory and
Commonwealth Government agencies. ERA released an
update to the Plan in October 2019 and will continue to
update the Plan annually in close consultation with key
stakeholders.
Animation of rehabilitation program available at
https://www.energyres.com.au/sustainability/closureplan/
An animation of the rehabilitation program is available
on ERA’s website (https://www.energyres.com.au/
sustainability/closureplan/). It provides a visual overview
of the Plan, breaking down the rehabilitation process into
readily understood concepts, and a timeline for the works
to be carried out. Due to the support of the Gundjeihmi
Aboriginal Corporation, the animation also includes a
narration in the local Kunwinjku language.
FeAsIBILI ty st UDy
On 8 February 2019, ERA confirmed the approval and
implementation of the closure Feasibility Study for the
rehabilitation of the Ranger Project Area (Feasibility
Study). The Feasibility Study, prepared in accordance
with the Ranger Mine Closure Plan, was supported by an
experienced engineering services provider and examined
the technical, costing and scheduling aspects of Ranger
closure having regard to the prescribed closure criteria,
the progressive rehabilitation activities already undertaken
and updated closure forecasts and modelling.
The approval and implementation of the Feasibility Study
resulted in a rehabilitation provision as at 31 December
2018 of $830 million.3 Following completion of the study,
ERA has a consolidated, executable plan (inclusive of
progressive rehabilitation activities and post closure
activities) to meet the obligations of the Ranger Authority.
3. Discounted at 2 per cent and presented in real terms ($897 million undiscounted in real terms and $973 million undiscounted in nominal terms,
excluding employee termination benefits not yet recognised in line with Australian Accounting Standards).
9
ENERGY RESOURCES OF AUSTRALIA LTD oPeRAtIons AnD ReHABILItAtIon
The findings of the Feasibility Study further increase
confidence to stakeholders that ERA’s planned
rehabilitation strategy will satisfy regulatory obligations,
including the January 2026 milestone.
PRoGRessIve ReHABILItAtIon
Disturbed land on the Ranger Project Area continued to
undergo progressive rehabilitation throughout the year
alongside operational and water treatment activities.
ERA’s progressive rehabilitation and water treatment
activities are based on extensive research, studies and
consultation with stakeholders, with the main activities
focussed on dredging operations and completion of the
second dredge, Pit 1 bulk backfill, the operation of the
Brine Concentrator, as well as the construction of the
Brine Squeezer and refurbishment of the smaller scale
high density sludge plant.
In line with ERA’s statutory obligations, the primary
objective is to rehabilitate the Ranger Project Area to form
one final landform across the site which will blend in with
the surrounding landscape. ERA plans to establish a fully
functioning landform and ecosystem that is similar to the
surrounding Kakadu National Park.
The area of disturbance around the mine footprint
measures approximately 950 hectares where most of
the rehabilitation work will occur.
A number of key tasks form the basis of the closure
strategy, including:
• treatment of all pond and process water inventories;
• transfer of tailings from the Tailings Storage Facility
to the exhausted Pits 1 and 3;
• remediation of the Tailings Storage Facility and
contaminated sites;
• removal and re-shaping of the stockpiles and disturbed
areas of the Ranger Project Area to establish a final
landform; and
• revegetation of the final landform using locally sourced
native seeds.
As part of ERA’s progressive rehabilitation strategy, many
of these rehabilitation activities are well underway.
The transfer of tailings to Pit 1 was completed in late
2008 and the pit is now entering its final stages of
backfilling with waste rock in preparation for final
landform construction in 2020. In addition, tailings
continue to be dredged from the Tailings Storage Facility
and transferred to Pit 3, while process water from the
Tailings Storage Facility is being treated by the Brine
Concentrator prior to release into constructed wetlands
and then offsite.
ERA’s approach to revegetation is informed by its
long-running trial landform research, which began in
2009 to provide for testing of landform design and
revegetation strategies. The trial landform used locally
sourced native plant species planted out as seed and
tube stock into the type of waste rock to be used in
the final landform process. In 2019, ERA continued its
partnership with Kakadu Native Plants, which collected
seeds from native plants in Kakadu National Park and the
Ranger Project Area for harvesting for the purposes of
revegetation. An outline of the relationship between ERA
and Kakadu Native Plants, and accompanying video, are
available on ERA’s website (https://www.energyres.com.
au/media/stories/a-journey-with-kakadu-native-plants-to-
mine-rehabilitation/).
A key feature of ERA’s closure strategy is the management
of tailings and brine which incorporates the rehabilitation
of Pits 1 and 3 and the Tailings Storage Facility. These
activities continued to progress during 2019.
Additional tailings transfer capacity, through the launch
of a second dredge, occurred in the second quarter
of 2019. The full commissioning of the dredge was
completed during the third quarter, in order to complete
rehabilitation activities within the regulatory timeframe.
While the dredging operations experienced some
technical challenges, a total of 5.8 million cubic metres of
tailings were transferred from the Tailings Storage
Facility to Pit 3.
BRIne ConCentRAtoR
The Brine Concentrator treats process water to produce
a distillate (clean water) and a brine (concentrated waste
stream). Distillate is discharged to the environment during
the wet season.
Originally commissioned in 2013, the Brine Concentrator
has undergone upgrades to ensure continuous
improvement in performance and to overcome various
technical challenges.
The Brine Concentrator consistently achieved
above nameplate capacity during 2019, producing
2,109 megalitres of distillate. As foreshadowed by
the Ranger Mine Closure Plan, ERA is progressing a
project to upgrade the Brine Concentrator to further
increase its capacity.
10
ENERGY RESOURCES OF AUSTRALIA LTD oPeRAtIons AnD ReHABILItAtIon
ReHABILI tAtIon oF PI t 1
Bulk material movement to backfill Pit 1 progressed
during 2019, with 4.2 million tonnes of waste rock placed
over Pit 1. The backfilling operation is scheduled for
completion in 2020, before land forming and revegetation
activities commence.
The 39.3 hectare site has stored mill tailings in the pit
as required by the Ranger Authority. Approximately
7,700 dewatering wicks were installed in 2012, along
with a geotextile fabric layer and a pre-load rock layer to
compress the tailings mass. The pre-load rock layer was
capped with an impervious layer of laterite in 2016 to
prevent surface water infiltration.
ReHABILI tAtIon oF PI t 3
Tailings waste from ongoing milling activities continued to
be pumped via a pipeline into Pit 3. For some of the year,
tailings from the Tailings Storage Facility were deposited
into Pit 3 via the subaerial pipeline before the transfer
method was transitioned to subaqueous deposition. The
level of water held in both Pit 3 and the Tailings Storage
Facility is an important factor in the productivity of
tailings transfer to Pit 3. During the latter stages of 2019,
productivity of the two dredges operating in the Tailings
Storage Facility were impacted by low water levels. Water
levels are impacted by rainfall, water treatment capacity,
tailings consolidation and evaporation.
Cone penetration testing took place through the year to
test the consolidation of the tailings in Pit 3.
Excess process water from Pit 3 is pumped back to
the Tailings Storage Facility and directed to the Brine
Concentrator for treatment. The concentrated brine
waste stream from the Brine Concentrator, currently
being directed to the Tailings Storage Facility and to the
leach tanks (brines to leach), is planned to eventually be
injected into Pit 3 for final deposition. The treated water
from the Brine Concentrator is released into constructed
wetlands prior to release off site.
In similar fashion to Pit 1, wicks will eventually be installed
into the tailings mass within Pit 3 and then covered with a
geotextile fabric membrane, prior to initial preload. Bulk
backfilling is expected to commence in 2023, followed by
final landform contouring and revegetation.
ReveGetAtIon
During 2019, the former drilling core yard on the Ranger
Project Area was converted to a revegetation nursery. The
nursery now has capacity for 250,000 seedlings, and its
capacity is expected to double when stage two of the
project completes in 2023. Local Indigenous business
Kakadu Native Plants Pty Ltd has been engaged by ERA
to collect local native plant seeds under licence and to
raise tube stock seedlings suitable for planting into the
final landform.
The final landform represents landscape gardening on an
industrial scale, using waste rock shaped and contoured
to blend with the undulations and terrain characteristics
of the surrounding natural woodland.
In 2019, ERA continued to collaborate with Charles
Darwin University to investigate methods of establishing
understorey such as grasses, shrubs and ground
covers on the waste rock trial landform. Several species
successfully established, flowered and seeded. One
species recruited second generation seedlings on the
trial landform. These results will enable ERA to develop
appropriate strategies to establish understorey on the
final landform.
Barry Pohatu, employee of Kakadu Native Plants, a local
indigenous business supporting Ranger rehabilitation.
Kakadu Native Plants are supporting the mine rehabilitation by means of seed
collection and raising seedlings which, in time, will be planted on the final landform.
11
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness stRAteGy
ERA’s purpose is to provide clean energy to the world
and care for people and country.
The strategic priority for ERA is the successful
rehabilitation of the Ranger Project Area, which
ERA believes will demonstrate ERA’s commitment to
long-term sustainable operations in the region, creating
a sustainable, positive legacy and underpin potential
future growth opportunities.
The net proceeds of the Entitlement Offer, together with
ERA’s existing cash resources and expected future cash
flows, will be used primarily for the purposes of funding
rehabilitation. A sum of $20 million from existing cash
resources and expected future cash flows has been
provisionally designated for expenditure on prospective
development opportunities or otherwise as the ERA
Board determines to be in the interests of the Company
from time to time.
In addition to Ranger, ERA holds title to the Jabiluka
Mineral Lease, a large, high quality uranium orebody of
global significance. The carrying value of the Jabiluka
Undeveloped Property was recorded at approximately
$90 million as at 31 December 2019. In accordance with
the Long Term Care and Maintenance Agreement, the
Jabiluka deposit will not be developed by ERA without
the approval of the Mirarr Traditional Owners.
ERA’s near-term strategic priorities are:
• continue the progressive rehabilitation of the Ranger
Project Area;
• maximise the generation of cash flow from the
processing of stockpiled ore, which can be potentially
sustained until the current Ranger Authority expires in
January 2021; and
• preserve optionality over the Company’s undeveloped
resources.
12
ENERGY RESOURCES OF AUSTRALIA LTD CURRent oPeRAtIons AnD ResoURCes
pause on rehabilitation activities, would add fixed cost
to the operation, further challenging the Ranger 3 Deeps
Project’s viability. With the current Ranger Authority
requiring processing to cease in January 2021 and
with decommissioning and rehabilitation of the Ranger
Project Area continuing through to January 2026, the
prospect of any development is remote and further
compromised once the Ranger mine infrastructure
begins decommissioning.
The Ranger 3 Deeps Mineral Resource remains
unchanged for 2019 at 19.58 million tonnes at an overall
grade of 0.224% U3O8, representing 43,858 tonnes of
contained uranium oxide.
JABILUKA
ERA has entered into a Long Term Care and Maintenance
Agreement in relation to the Jabiluka Mineral Lease.
Jabiluka is a large, high quality uranium orebody of
global significance and remains one of ERA’s key assets.
Future mining developments at Jabiluka will not occur
without the consent of the Mirarr Traditional Owners.
Current operations rely on the processing of existing
uranium ore stockpiles following the cessation of open
pit mining in Pit 3.
The Company’s estimate of Ore Reserves for the Ranger
stockpiles at 31 December 2019 was 1,711 tonnes of
contained uranium oxide.
The Company is well advanced in its execution of
the “Safely Transforming ERA Together” transformation
program. Under the program, cost reduction and
productivity improvement initiatives have been
established for the business to reduce costs and
improve productivity to offset the adverse impact
of declining ore grades over time.
Subject to market conditions, and in the absence of
further mine development, the mine plan which supports
the Ore Reserves Statement assumes that stockpiled ore
can continue to be economically produced at Ranger
until January 2021. In this regard, ERA continues to
monitor production economics and plans to continue
to produce, in 2020, provided a positive cash margin
is generated between the marginal production cost
and the uranium spot price.
RAnGeR 3 DeePs
ERA has implemented a reduced care and maintenance
program for the Ranger 3 Deeps exploration decline.
Whilst the implementation of this reduced program
maintains project optionality, a rapid and sustained
recovery of the uranium market is required for the Ranger
3 Deeps Project to be economically viable.
Amendments to legislation to effect an extension of the
Ranger Authority would be required to manage a gap
between the cessation of processing in January 2021
and the commencement of Ranger 3 Deeps production
at a later point. This gap, together with an extensive care
and maintenance program for the mill and a required
13
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness RIsKs
The business risks that could adversely affect the
achievement of the financial performance or financial
outcomes of the Company are described below.
ReHABILI tAtIon
In accordance with applicable Commonwealth and
Northern Territory Government statutory requirements,
ERA is required to cease mining and processing activities
at the Ranger Project Area by 8 January 2021 and must
rehabilitate the site by January 2026.
On 8 February 2019, ERA confirmed the approval and
implementation of the Feasibility Study. The Feasibility
Study, prepared in accordance with the Ranger Mine
Closure Plan released in June 2018, was supported by an
experienced engineering services provider and examined
the technical, costing and scheduling aspects of Ranger
closure having regard to the prescribed closure criteria,
the progressive rehabilitation activities already undertaken
and updated closure forecasts and modelling.
Calculating the rehabilitation provision for the Ranger
Project Area requires significant estimation and
judgement by the Company. Assumptions are made
in respect of methods of rehabilitation, costs and
timing, as well as the potential for changes in legal
requirements, technological changes, environmental
conditions, weather events and market conditions. The
most significant components of the provision relate to
material movement, water treatment, tailings transfer,
demolition and revegetation. Any significant change to
the components and schedule of activities to implement
closure and rehabilitation may adversely affect the cost,
timing and completion of the rehabilitation in accordance
with applicable Commonwealth and Northern Territory
statutory requirements.
Ultimately, the cost of rehabilitation of the Ranger Project
Area is uncertain and may be materially more or less than
the current rehabilitation estimate. Rehabilitation costs may
increase in response to factors beyond ERA’s control such
as legal requirements, technological changes, environment
conditions, weather events and market conditions. In
addition, should current forecasts for foreign exchange
rate, prices, costs and processing of stockpiles not be
realised, additional funding may be required to fund the
rehabilitation of the Ranger Project Area. Any increase
in rehabilitation costs is likely to have a material adverse
effect on ERA’s business and its financial position and
performance. There is no certainty that the Company
could secure additional funding in the future in the
event it was required.
14
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness RIsKs
wAteR tReAtMent
ACCess to CAPI tAL RIsK
Management of water on the Ranger Project Area is
critical to the ongoing operation of ERA’s processing and
rehabilitation activities. ERA has a number of procedures
and initiatives underway in respect to water management,
including a project to upgrade the capacity of the Brine
Concentrator. To the extent that these initiatives cost more
than expected or ERA is required to implement further
initiatives (such as the installation of additional water
treatment infrastructure), ERA may have insufficient
funds for rehabilitation.
On 29 April 2016, the Company entered into a $100 million
Loan Agreement with North Limited (a wholly-owned
subsidiary of Rio Tinto) in support of ERA’s rehabilitation
obligations should additional funding ultimately be
required. This agreement currently remains in place and
is undrawn. Drawdown of the credit facility under the Loan
Agreement is subject to ERA being able to demonstrate at
the time of drawdown that it satisfies customary conditions
precedent as mentioned in the “credit facility agreement”
announcement released on 29 April 2016.
The Loan Agreement contains a review mechanism which
is triggered if, before the first drawdown, the estimated
rehabilitation cost increases by $12.5 million or more for
reasons other than external factors or operational issues
beyond ERA’s reasonable control. The review mechanism
ultimately provides Rio Tinto with a right to terminate the
Loan Agreement if the parties cannot agree a satisfactory
path forward following such an increase in the estimated
rehabilitation cost. If future estimates of the rehabilitation
costs are materially higher than those currently estimated,
ERA will be required to increase the rehabilitation
provision, which in turn may result in termination of the
Loan Agreement. The termination of the Loan Agreement
may have a material adverse effect on ERA’s ability to meet
its rehabilitation obligations as well as its business and
financial position and performance.
Should ERA require additional funding for rehabilitation
of the Ranger Project Area or otherwise beyond the
Entitlement Offer, there can be no assurance that
additional funding will be available on acceptable terms,
or at all. Any inability to obtain additional capital or to
monetise assets would have a material adverse effect
on ERA’s ability to meet its rehabilitation obligations
as well as its business and its financial position and
performance. If ERA does not have sufficient funding
to support its continued operations and rehabilitation
of the Ranger Project Area, ERA may be unable to
meet its liabilities as and when they fall due and its
ability to continue as a going concern.
RAnGeR ReHABILI tAtIon tRUst FUnD
Each year, ERA 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 ERA into the Ranger Rehabilitation Trust Fund
(Trust Fund) is then determined. The Trust Fund
includes both cash and financial guarantees.
ERA’s ability to continue to access these financial
guarantees can be influenced by many factors including
future cash balance, cash flows and shareholder support.
Guarantees are subject to periodic review by the banks.
Should the Company at any point be unable to access
financial guarantees, substantial additional cash would
be required to be deposited into the Trust Fund. In the
scenario where this occurs ERA’s cash reserves available
to fund operations would reduce. The balance of bank
guarantees, and Trust Fund cash held is currently
$410 million. In late January 2020, the Commonwealth
Government notified ERA that the independent assessor
has reviewed the Plan, and estimated the net present
cost of implementation to be $671 million. ERA is
questioning certain elements of that assessment, but
does not expect the final amount to be materially different
to the independent assessment. ERA anticipates that the
relevant Commonwealth Minister will finally determine the
revised security amount and require ERA to provide the
additional security into the Trust Fund later in quarter 1
2020. At this time, ERA will evaluate the appropriate mix
of bank guarantees and Trust Fund Cash held. This may
result in a significant increase in the amount of cash held
in the Trust Fund. Should this occur, the Company’s ability
to drawdown on the cash held in trust will present as an
ongoing risk to the Company’s cash liquidity position.
Drawdown on security is expected to require ongoing
review and approval by the Commonwealth Government.
15
ENERGY RESOURCES OF AUSTRALIA LTD Regulatory approvals would also be required to
commence any production from the Ranger 3 Deeps
or on any other parts of the Ranger Project Area. As
noted under “Undeveloped Resources”, at present,
no work is being conducted on further development
options for the Ranger 3 Deeps deposit, no approvals are
being pursued and the prospect of any development is
remote and further compromised once the Ranger mine
infrastructure begins decommissioning.
In relation to Jabiluka, as noted under “Undeveloped
Resources” ERA has entered into a Long Term
Care and Maintenance Agreement with the Mirarr
Traditional Owners. ERA has agreed that future mining
developments at Jabiluka will not occur without the
consent of the Mirarr people. There is no guarantee
that this consent will be forthcoming and, by extension,
that the Jabiluka deposit will be developed. Should
this consent not eventuate in the future, the Jabiluka
Undeveloped Property would face full impairment.
BUsIness RIsKs
ReGULAtoRs AnD stAKeHoLDeR s
The Ranger Mine Closure Plan is subject to ongoing
review and refinement, with ERA required to review and
submit an updated plan for regulatory approval each
year. In addition, regulatory approvals are required in
order to carry out certain rehabilitation activities. If these
regulatory approvals are not obtained or are obtained
with unsatisfactory conditions, ERA’s ability to complete
the rehabilitation program in a timely and cost effective
manner will be at risk.
The Ranger Mine Closure Plan builds on more than
20 years of scientific work undertaken on the progressive
rehabilitation at Ranger, and was developed by reference
to the Western Australian Mine Closure Plan Guidelines
(in the absence of relevant Northern Territory closure
plan guidelines). It also includes proposed closure
criteria for the Ranger mine which addresses the key
themes of the final landform, radiation, water, flora
and fauna, soils and cultural heritage.
ERA first released the Plan to the public in June
2018 following an intensive stakeholder engagement
process with all key stakeholders which commenced
on the provision a draft Plan in December 2016. Key
stakeholders who provided feedback on the draft
included the Gundjeihmi Aboriginal Corporation
and Northern Land Council (as representatives of
the Mirarr Traditional Owners), and Northern Territory
and Commonwealth Government agencies.
In October 2019, the Ranger Mine Closure Plan update
was released and will continue to be updated annually in
close consultation with Traditional Owner representatives,
regulators and key stakeholders. ERA also formally
submitted the updated Plan to the relevant Northern
Territory and Commonwealth Ministers for approval in
compliance with the authorisation.
16
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness RIsKs
UnDeveL oPeD ResoURC es
The Company is currently processing stockpiled ore
following the completion of open cut mining in 2012. The
stockpiles are potentially sufficient to sustain operations
until 8 January 2021, when the Ranger Authority expires.
The Company has significant undeveloped uranium
resources at Ranger 3 Deeps and Jabiluka.
The Company has implemented a reduced care and
maintenance program for the Ranger 3 Deeps exploration
decline. Whilst the implementation of this reduced
program maintains project optionality, a rapid and
sustained recovery of the uranium market is required for
the Ranger 3 Deeps Project to be economically viable.
Amendments to legislation to effect an extension of the
Ranger Authority would be required to manage a gap
between the cessation of processing in January 2021
and the commencement of Ranger 3 Deeps production
at a later point. This gap, together with an extensive care
and maintenance program for the mill and a required
pause on rehabilitation activities, would add fixed cost
to the operation, further challenging the Ranger 3 Deeps
Project’s viability.
With the current Ranger Authority requiring processing
to cease in January 2021 and with decommissioning
and rehabilitation of the Ranger Project Area continuing
through to January 2026, the prospect of any
development is remote and further compromised once
the Ranger mine infrastructure begins decommissioning.
At present, no work is being conducted on further
development options for the Ranger 3 Deeps deposit.
The Jabiluka Mineral Lease is currently held subject to
a Long Term Care and Maintenance Agreement with the
Mirarr Traditional Owners. This agreement provides that
the Jabiluka deposit will not be developed without the
consent of the Traditional Owners. It is uncertain that this
consent will be forthcoming and, by extension, that the
Jabiluka deposit will be developed. Should this consent
not eventuate in the future, the Jabiluka Undeveloped
Property would face full impairment.
URAnIUM MARKet DeMA nD, PRICe AnD
FoReIGn exCHA nGe RI sKs
As ERA’s business relates primarily to the production and
subsequent sale of uranium oxide to Rio Tinto Uranium
for on sale to a variety of customers, fluctuations in
the global uranium market may materially affect ERA’s
financial performance. Demand for, and pricing of,
uranium oxide remains sensitive to external economic
and political factors, many of which are beyond ERA’s
control including: worldwide uranium supply and
demand, regional political developments in uranium
producing and nuclear power generating countries and
regions (including potential for trade sanctions), and the
price and availability of competing power generating
technologies. Accordingly, it is impossible to predict
future uranium price movements with certainty.
Global uranium and foreign exchange market fluctuations
may materially affect ERA’s financial performance.
GeneRAL ReGULAtoRy RI sKs
Uranium mining in Australia is extensively regulated by
Commonwealth, and State or Territory Governments.
The areas of uranium mining that are regulated include
exploration, development, production, transport, export,
taxes and royalties, labour standards, occupational
health, waste disposal, protection and rehabilitation of
the environment, mine reclamation, mine safety, toxic
and radioactive substances and native title. In particular,
the approval processes for uranium mining are more
onerous, and therefore more costly, than for the mining of
other minerals.
The mining and export of uranium is currently permitted
under strict international agreements designed to prevent
nuclear proliferation. The export of uranium is tightly
controlled by the Commonwealth Government through
its licensing process and Australian uranium can only
be exported to countries that have signed the nuclear
non-proliferation treaty. 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.
17
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness RIsKs
Future legislation and changes in the regulatory
framework could cause additional expense, capital
expenditures, restrictions and delays in the development
of ERA’s assets, the extent of which cannot be predicted.
Any such government action may require increased
capital or operating expenditures and could prevent
or delay certain operations by ERA, which could have
a material adverse effect on ERA’s business and its
financial position and performance as well as its ability
to meet its rehabilitation obligations.
Uranium mining in the Northern Territory is regulated
through a suite of Commonwealth and Northern Territory
legislation. The Traditional Owners of the land on which
the Ranger Project Area and Jabiluka is situated are the
Mirarr people.
The Ranger Mine Closure Plan is subject to ongoing
review and refinement, with ERA required to review and
submit an updated Annual Plan for regulatory approval
each year. In addition, regulatory approvals are required
in order to carry out certain rehabilitation activities. If
these regulatory approvals are not obtained in a timely
manner or are obtained on unsatisfactory conditions,
ERA’s ability to complete the rehabilitation program in a
timely and cost effective manner will be at risk and ERA’s
business and its financial position and performance may
be materially adversely affected.
envIRonMentAL RI sK
A condition of the Ranger Authority is that ERA must
rehabilitate the Ranger Project Area to establish an
environment similar to the adjacent areas of Kakadu
National Park such that, in the opinion of the Minister with
the advice of the Supervising Scientist, the rehabilitated
area could be incorporated into the Kakadu National Park.
While substantially complete and agreed, certain closure
criteria relating to environmental matters for Ranger are
still to be finalised and agreed to by the stakeholders
(including, in particular, the Ranger and Jabiluka Minesite
Technical Committees). The ability for ERA to meet its
Ranger closure and rehabilitation obligations requires
careful management of various environmental conditions
into the future, including preventing:
• pond and process water being discharged to the
environment;
• impact of surface water on groundwater under the site
and on the surrounding environment;
• impact of salt accumulation in dry watercourses during
the dry season;
• weeds, feral animals and fire from the Kakadu National
Park encroaching the Ranger Project Area; and
• release, spillage and impact on the surrounding
environment of hazardous materials such as
radioactive material, diesel and acid.
If these environmental conditions are not satisfactorily
managed, ERA’s ability to complete the rehabilitation
program in a timely and cost effective manner will be
at risk and ERA’s business and its financial position
and performance may be materially impacted.
18
ENERGY RESOURCES OF AUSTRALIA LTD BUsIness RIsKs
oPeRAtIons
ERA’s operations may be delayed or be unsuccessful
for many reasons, including unanticipated financial,
operational or political events, cost overruns, decline
in uranium prices and demand, foreign exchange
fluctuations, equipment and labour shortages, technical
concerns including possible reserves and deliverability
difficulties, environmental impacts including climatic
conditions, increases in operating cost structures,
community or industrial actions and any other
circumstance which results in the delay, suspension
or termination of ERA’s capital or exploration projects
and/or the total or partial loss of ERA’s capital.
In addition, ERA has now produced sufficient drummed
inventory to meet supply commitments under its existing
long-term contract portfolio. As a result, a greater portion
of future sales will be exposed to the spot market. ERA
continues to monitor production economics and plans to
continue to produce, in 2020, provided a positive cash
margin is generated between marginal production cost
and the uranium spot price. Should this diminish, ERA
may choose to cease production earlier than planned.
This is likely to have a material adverse impact on ERA’s
ability to meet its rehabilitation obligations as well as its
business and financial position and performance.
ERA is required to cease processing at Ranger no later
than 8 January 2021, meaning Ranger has a maximum
of one full year of processing the remaining stockpiles.
There is a risk that ore grade may vary from that planned,
impacting drummed uranium oxide production quantities.
Furthermore, given 2020 will be the final year of Ranger
production, there is an increase in risks associated with
unplanned maintenance and reduced plant availability.
In the event of a critical failure of key infrastructure,
ERA may elect not to repair the relevant infrastructure
and instead elect to conclude processing earlier than
planned. This is likely to have a material adverse effect on
ERA’s ability to meet its rehabilitation obligations as well
as its business and financial position and performance.
19
ENERGY RESOURCES OF AUSTRALIA LTD Internal approval of Ore Reserves and Mineral Resources
for ERA is the responsibility of the Chief Executive and
estimates are carried out by a Competent Person as
defined by the JORC Code 2012.
As part of its internal controls, ERA applies the standards
of the Rio Tinto Ore Reserves Steering Committee
(ORSC) in the generation and publication of Mineral
Resources and Ore Reserves. The ORSC comprises
senior representatives from technical, financial and
business fields within the Rio Tinto Group and meets
on a quarterly basis.
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 Person.
Other improvements introduced by the ORSC include
a web-based reporting and sign-off database, annual
internal Competent Person reports and Competent
Person development and training.
FUtURe sUPPLy
evALUAtIon AnD exPLoRAtIon
There was no evaluation or exploration expenditure for
2019. ERA suspended the final stage of the surface
exploration program on the Ranger Project Area in 2015
to preserve cash following the deferral of the Ranger 3
Deeps project.
As noted under “Undeveloped Resources”, at present,
no work is being conducted on further development
options for the Ranger 3 Deeps deposit, no approvals are
being pursued and the prospect of any development is
remote and further compromised once the Ranger mine
infrastructure begins decommissioning.
RAnGeR 3 DeePs ReseRves A nD
ResoURC es
The economic assumptions for the Ranger 3 Deeps
Mineral Resource uses a cut-off grade of 0.11% U3O8.
The Ranger 3 Deeps estimated Mineral Resource is
19.58 million tonnes with an overall grade of 0.224%
U3O8, equating to 43,858 tonnes of contained
uranium oxide.
RAnGeR ReseRves A nD ResoURC es
Probable Ore Reserves of uranium oxide for Ranger
decreased by 2,024 tonnes in 2019 to 1,711 tonnes at
31 December 2019 (31 December 2018: 3,735 tonnes).
This included the impact of depletion by processing
in 2019 of 2,024 tonnes. During the reporting period,
all processed ore was sourced from either run of mine
stocks or low grade stockpiles.
For the same period, Ranger Mineral Resources
remained consistent at 54,701 tonnes.
JABILUKA ReseRves A nD ResoURC es
The Jabiluka Mineral Lease 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.
The Jabiluka estimated Mineral Resource is
137,107 tonnes of uranium oxide at a cut-off grade
of 0.2% U3O8.
GoveRnA nCe
ERA’s Competent Person is a full time employee of ERA.
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.
20
ENERGY RESOURCES OF AUSTRALIA LTD eRA 2019 oRe ReseRves & MIneRAL ResoURC es
CUt-oFF GRADe –
stoCKPILe oRe 0.06% U 3o8
As At 31 DeC eMBeR 2019
CUt-oFF GRADe –
stoCKPILe oRe 0.06% U 3o8
As At 31 DeC eMBeR 2018
oRe (Mt)
% U3o8
t U 3o8
oRe (Mt)
% U3o8
t U 3o8
RAnGeR PRoBABLe oRe ReseRves
Current Stockpiles
2.42
0.071
1,711
4.90
0.076
3,735
In situ
Proved
Probable
–
–
–
–
–
–
–
–
–
–
–
–
Sub-total Proved and Probable Reserves
2.42
0.071
1,711
4.90
0.076
3,735
Total Ranger No. 3 Stockpiles, Proved and
Probable Reserves
2.42
0.071
1,711
490
0.076
3,735
RAnGeR MIneRAL ResoURC es
IN ADDITION TO THE ABOVE RESERVE
CUt-oFF GRADe –
stoCKPILe ResoURC e 0.02% U 3o8
UnDeRGRoUnD InsI tU ResoURC e
0.11% U3o8
CUt-oFF GRADe –
stoCKPILe ResoURC e 0.02% U 3o8
UnDeRGRoUnD InsI tU ResoURC e
0.11% U3o8
oRe (Mt)
% U3o8
t U 3o8
oRe (Mt)
% U3o8
t U 3o8
Current Mineralised Stockpiles
27.16
0.04
10,843
27.16
0.04
10,843
In situ resource (R3 Deeps)
Measured
Indicated
Sub-total Measured and Indicated Resources
Inferred Resources
Total Resources
JABILUKA oRe ReseRves
(all written back to Mineral Resources)
Proved
Probable
Total Proved and Probable Reserves
JABILUKA MIneRAL ResoURC es
Measured
Indicated
Sub-total Measured and Indicated
Inferred Resources
Total Resources
Rounding difference may occur.
3.72
10.41
41.29
5.44
46.74
0.27
0.22
0.11
0.20
0.12
10,134
22,636
43,614
11,087
3.72
10.41
41.29
5.44
54,701
46.74
0.27
0.22
0.11
0.20
0.12
10,134
22,636
43,614
11,087
54,701
As At 31 DeC eMBeR 2019
CUt-oFF GRADe
0.20% U3o8
As At 31 DeC eMBeR 2018
CUt-oFF GRADe
0.20% U3o8
oRe (Mt)
% U3o8
t U 3o8
oRe (Mt)
% U3o8
t U 3o8
–
–
–
1.21
13.88
15.09
10.03
25.12
–
–
–
0.89
0.52
0.55
0.54
–
–
–
10,769
72,176
82,945
54,162
–
–
–
1.21
13.88
15.09
10.03
–
–
–
0.89
0.52
0.55
0.54
–
–
–
10,769
72,176
82,945
54,162
0.55
137,107
25.12
0.55
137,107
21
ENERGY RESOURCES OF AUSTRALIA LTD
URAnIUM oxIDe
(U3o8 tonnes)*
3,735
(2,024)4
1,711
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 Ore Reserves and Mineral
Resources is based on information compiled by geologist
Stephen Pevely (a full time employee of ERA).
Stephen Pevely is a member of the Australasian Institute
of Mining and Metallurgy and has sufficient experience
which is relevant to the style of mineralisation and the
type of deposit under consideration, and to the activity
being undertaken, to qualify as a Competent Person
as defined in the JORC Code 2012. Stephen Pevely
consents to the inclusion in this report of the matters
based on his information in the form and context in
which it appears.
Summary data for year end 2018 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 may result if the
calculations are repeated using the tabulated figures.
FUtURe sUPPLy
oRe ReseRves
Ranger Ore Reserves as at 31 December 2018
Depletion by Processing
Ranger Ore Reserves as at 31 December 2019
*Rounding differences may occur
CoMPetent PeR sons
Ranger and Jabiluka 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).
The JORC Code 2012 envisages 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. Estimates of such material are based
largely on geological information with only preliminary
consideration of mining, economic and other factors.
While in the judgement 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
ERA 2019 Annual Statement of Reserves and Resources
which was released to ASX on 26 February 2020 and can
be found at: https://www.asx.com.au/asxpdf/20200226/
pdf/44fh75xlybyy2l.pdf
Neither the information that relates to Ranger and
Jabiluka Mineral Resources or Ore Reserves, nor the
underlying resource models, have changed since the
ERA 2019 Annual Statement of Reserves and Resources
was disclosed to ASX.
4. This does not include 26.6 tonnes of metal recovered from brines-to-leach process water, as this does not come directly from reserve.
22
ENERGY RESOURCES OF AUSTRALIA LTD sALes AnD MARKetInG
ERA sells uranium primarily under long term contracts via
a sales and marketing agreement with Rio Tinto Uranium.
ERA entered into a Revised Sales and Marketing
Agreement with Rio Tinto Uranium in August 2017. Under
the revised agreement, ERA’s allocation of existing Rio
Tinto Uranium contracts were fixed from 1 January 2017.
ERA’s reliance on long-term contracts provides its
customers with security of continued supply, and has
helped ERA achieve prices for its uranium that are
significantly above the global spot price.
The average realised sales price on contracted sales
in 2019 was US$48.53 per pound compared to
US$47.67 per pound in 2018. The average realised
price on all sales (including uncontracted material
sold into the spot market) in 2019 was US$41.89.
The average realised price compares favourably against
the average spot price for 2019 of US$25.90 per pound.
ERA’s customers are located in the United States of
America, Europe, China, Japan, South Korea and the
UAE and use ERA’s product as fuel to generate low
emissions power.
The uranium spot price remained volatile in 2019 with a
closing December spot price of US$24.82 per pound
approximately 14 per cent lower than the closing
December 2018 price.
The pace of Japanese nuclear reactor restarts has
been slow following the failure at Fukushima. The
World Nuclear Association notes there are currently
442 operable nuclear reactors in the world providing
approximately 10 per cent of the share of global
electricity generation and a further 53 reactors under
construction.
Many analysts believe China’s nuclear energy program
has a key role to play in the longer term uranium outlook.
Despite the rise of renewable energy sources, nuclear
power is expected to continue to play an important role
in the overall global energy mix.
23
ENERGY RESOURCES OF AUSTRALIA LTD HeALtH AnD sAFety
At ERA, safety comes first. It is central to workplace
culture and operational activities. ERA’s safety goals,
accountabilities and systems are articulated in ERA’s
Health, Safety and Environment Management System,
which is certified to Australian (AS4801) and international
(ISO14001) standards and subject to regular review.
The SMM is a two year program being implemented over
2019 and 2020.
A number of SMM initiatives that were implemented at
ERA included leadership coaching training, introduction
of a cascaded coaching program, targeted leadership in
the field and HSE Back to Basics.
A key performance measure at ERA is the All Injury
Frequency Rate (AIFR). AIFR measures the frequency
of recordable injuries – lost time injuries, restricted
work injuries and medical treatment cases – per
200,000 hours worked.
In 2019, ERA achieved an AIFR of 1.07 (2018: 0.56;
2017: 1.17).
During the year ERA recorded five lost time injuries, no
restricted work day injuries and one medical treatment
case injury.
The importance of safety leadership and safety
awareness was highlighted through the year. These
initiatives included Management Essentials, ASIST
(suicide intervention training), Build Up Blues, Peer
Support and Workforce Resilience programs, hearing
conservation campaign and several workshops on
other health and safety issues.
sAFety MAtURIty MoDeL
The Safety Maturity Model (SMM) is a global Rio Tinto
safety initiative that drives behaviours and activity
to deliver effective safety performance across the
three pillars of the safety strategy; fatality elimination,
reducing injuries and illnesses and catastrophic
event prevention.
The model is led through leadership engagement,
creating an enabling environment in the areas of
risk management, leaning and improving and
work planning and execution.
MAnAGInG HeAt AnD HUMIDIty
During the wet season from October through to March,
hydration and thermal stress become critical issues for
ERA’s workforce. Employees and contractors required
to work outdoors while wearing protective clothing and
equipment are at a higher risk of thermal stress.
Each year ERA implements a holistic program “Beat
the Build-Up Blues” designed to encourage behaviours
which can help to manage mental wellness, fitness for
work, work/life balance, thermal stress and maintain
hydration. In 2019, ERA again promoted the campaign
during the build-up season.
AUDIts
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). The system was audited in February 2019 and
December 2019 with re-certification granted.
ERA underwent a Rio Tinto Safety Maturity Assessment in
April and November 2019.
Leadership and
engagement
– Creating an enabling
environment
Risk management
– Understanding and controlling risk
Learn and improve
– Striving to do better every shift
Work planning and execution
– Operational practices and routines
24
ENERGY RESOURCES OF AUSTRALIA LTD HeALtH AnD sAFety
eMeRGenCy ResPonse
Building ERA’s Emergency Response Team skills and
capabilities continued to be a strong focus during 2019.
The team comprises 10 Emergency Services Officers
and 26 workforce volunteers who are trained to respond
immediately to incidents such as evacuation, fires or
vehicle accidents.
ERA has invested in specialist training for team members
and has also been actively recruiting and training new
members.
RADIAtIon MonI toRInG
ERA monitors radiation at Ranger in accordance with
the Company’s Radiation Policy and Radiation
Management Plan.
The desired performance outcomes are described in
ERA’s Health, Safety and Environment Management
System, which is certified to Australian (AS4801) and
international (ISO14001) standards.
Monitoring results are compared to limits recommended
by the International Commission on Radiological
Protection (ICRP) for occupationally exposed persons
as adopted by Australian legislation.
ERA employees and contractors whose occupational
exposure to radiation may exceed 5 millisieverts (mSv)
per year are declared ‘designated’ workers and their
exposure is more stringently monitored. Examples of
activities at Ranger that require a designated worker
status include mine production, process production,
process maintenance and electrical maintenance.
To ensure the highest possible quality control on radiation
doses, the results are reviewed internally by ERA and
externally by the Company’s regulators. ERA provides
quarterly occupational radiation dose data for workers
at Ranger mine to the Australian Government’s Australian
Radiation Dose Register.
The maximum and mean annual radiation doses received
by designated workers and the maximum radiation doses
received by non-designated workers during 2019 will
be reported in the 2019 Annual Ranger Mine and
Ranger 3 Deeps Radiation Protection and Atmospheric
Monitoring Report.
Preliminary analysis of the available dose results for
2019 indicates that all occupational and public radiation
doses remain well below the national and international
dose limits. The resulting contribution from Ranger mine
remains very low in comparison to both the public dose
limit and the natural background radiation level.
The table on this page provides a summary of maximum
and mean annual radiation doses received by designated
and non-designated workers for the first three quarters
of the year. Historically the theoretical contribution from
the Ranger mine has been, on average, approximately
0.02 mSv (or two per cent) of the 1 mSv member of
public dose limit and less than one per cent of the
natural background radiation level in Australia of
between 2 and 3 mSv.
2019
Q1
Q2
Q3
DESIGNATED WORKERS (mSv)
NON DESIGNATED WORKERS (mSv)
Mean
0.32
0.38
0.36
Max
1.37
1.25
1.05
Mean
0.11
0.12
0.16
Max
0.32
0.22
0.31
25
ENERGY RESOURCES OF AUSTRALIA LTD Committee members include representatives of the
Northern Territory Government, the Commonwealth
Government, the Northern Land Council, Aboriginal
associations, mining companies (including ERA),
West Arnhem Regional Council, 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/science/supervising-scientist/
communication/committees/arrac
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 10 ARRTC members include independent
scientists nominated by the Federation of Australian
Scientists Branch and Technological Societies
with the remaining representatives being from the
Commonwealth Supervising Scientist Branch, Northern
Territory Government, 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/science/supervising-scientist/
communication/committees/arrtc
InteRnAtIonAL AnD AUstRALIA n
CeRtIFICAtIon
ERA maintains international certification (ISO 14001)
of its Health, Safety and Environment 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.
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
conditions to ensure that Australian uranium is only
used for peaceful purposes.
ReGULAtIon oF eRA’s oPeRA tIons
Commonwealth and Northern Territory legislation
provide the regulatory framework for ERA’s uranium
mining activities.
ERA’s operations are closely supervised and monitored
by key statutory bodies and stakeholder organisations
including:
• Northern Territory Department of Primary Industry and
Resources (DPIR), the Commonwealth Department of
Industry, Science, Energy and Resources (DISER), the
Commonwealth Supervising Scientist Branch (SSB)
and the Gundjeihmi Aboriginal Corporation (GAC) and
the Northern Land Council (NLC) representing the
Mirarr;
• 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
– made up of ERA, DPIR, SSB, GAC and NLC (with
DISER as observers) – are the key forums for approvals
on environmental matters relating to Ranger and Jabiluka.
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.
26
ENERGY RESOURCES OF AUSTRALIA LTD FInAnCIAL
RePoRt
Contents
DIRECTOR’S REPORT
28
AUDITOR’S INDEPENDENCE DECLARATION
51
CORPORATE GOVERNANCE STATEMENT
52
STATEMENT OF COMPREHENSIVE INCOME
58
BALANCE SHEET
STATEMENT OF CHANGES IN EQUITY
CASH FLOW STATEMENT
NOTES TO THE FINANCIAL STATEMENTS
DIRECTOR’S DECLARATION
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER INFORMATION
2019 ASX ANNOUNCEMENTS
TEN YEAR PERFORMANCE
INDEX
59
60
61
62
94
95
101
103
104
105
eneRGy ResoURCes oF AUstRALIA LtD 27
DIReCtoR's RePoRt
DIReC toRs
PeteR MA nseLL
CHAIRMAn
BCom, LLB, H. Dip. Tax, FAICD
PAUL ARnoLD
CHIeF exeCUtIve A nD MAnAGInG
DIReC toR
BE (Hons) Mining, MBA, MAusIMM, MAICD
sHAne CHARLes
non-exeCUtIve DIReC toR
LLB
Appointed in October 2015.
Appointed in August 2017.
Appointed in October 2015.
Mr Arnold brings extensive experience
to ERA gained over more than 25 years
in the resources sector working in
operations, commercial, business analysis
and major project development roles.
Mr Arnold has worked in the Rio Tinto
group since 2001 and was most recently
Rio Tinto Aluminium’s Pacific Operations
Engineering and Growth team leader.
Before joining Rio Tinto, Mr Arnold worked
for more than a decade with BHP in
operations and corporate roles.
Mr Arnold was a Director of the
Queensland Resources Council for over
5 years and as past Chair of the
Indigenous Affairs Committee established
the annual Queensland Resources
Council Indigenous Awards in 2014.
Chair of the Audit and Risk Committee
from January 2016; member of Health,
Safety and Environment Committee and
Remuneration Committee.
Mr Charles is currently the Chairman
of the Toowoomba and Surat Basin
Enterprise (TSBE), an independent,
business driven economic development
organisation with a vision to pursue
sustainable growth and diversity.
Mr Charles is also currently President
of the Royal Agricultural Society of
Queensland.
He has also previously acted as
Chairman of Stanwell Corporation
Limited, as director and Chairman
of the Endeavour Foundation and
as a commissioner of the Gasfields
Commission of Queensland.
External appointments: Chairman
of TSBE; and President of the Royal
Agricultural Society of Queensland.
Chairman of Remuneration Committee
and member of Audit and Risk
Committee.
Mr Mansell has extensive experience
in the mining, corporate and energy
sectors, both as an advisor and as an
independent non-executive Chairman
and Director of listed and unlisted
companies.
Mr Mansell practised law for a number
of years as a partner in corporate and
resources law firms in each of South
Africa and Australia. He retired from
legal practice in 2004 and has since
held directorships in a number of
companies including BWP Management
Ltd, Foodland Associated Ltd, OZ
Minerals Ltd, W.A. Newspaper Holdings
Ltd (Chairman), Electricity Networks
Corporation (trading as Western Power)
(Chairman) and Zinifex Ltd (Chairman).
Mr Mansell also chaired the Advisory
Board of Pacific Aluminium Ltd in
anticipation of its intended float in 2014.
External appointments: Non-executive
Chairman of Ora Banda Mining Ltd, DRA
Global Limited and the Cancer Research
Trust and non-executive director of
Foodbank Australia Limited; former
non-executive director of Aurecon Group
Pty Ltd (until September 2017) and Tap
Oil Limited (until January 2018).
2828
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
DIReC toRs
PAUL DowD
AnDReA sUtton
JUstIn CARey
non-exeCUtIve DIReC toR
non-exeCUtIve DIReC toR
non-exeCUtIve DIReC toR
BSC (ENG), FAUSIMM, MAICD
BE (Hons) Chemical, GradDipEcon,
GAICD
BCom
Appointed in October 2015.
Appointed in October 2018.
Appointed in August 2019.
Member of Health, Safety and
Environment Committee.
Ms Sutton served as Chief Executive and
Managing Director of ERA from 2013 to
2017. In addition to her ERA experience,
Andrea brings almost 25 years of
operational, technical and corporate
experience with Rio Tinto to the ERA
Board and was most recently the
head of health, safety, security and
environment services.
External appointments: Board member
of Infrastructure WA, former chair of the
Northern Territory Minerals Council of
Australia Management Committee; former
member of the Northern Territory Mining
Advisory Council.
Mr Carey brings extensive financial,
technical and corporate experience,
with over 25 years’ experience in a
variety of commercial finance roles,
with 20 of those years’ experience
within the mining industry. Included in
that time Justin spent two and a half
years as CFO for Oyu Tolgoi LLC based
in Mongolia. Since leaving Mongolia
Justin has been in the Rio Tinto corporate
finance team, first as finance officer
for the groups corporate entities and
currently in leading the groups planning
and forecasting processes as the
General Manager Financial Planning
& Analysis. Justin has served on
several Rio Tinto entity boards and
brings extensive experience in corporate
governance and control processes.
Chair of Health, Safety and Environment
Committee; member of Audit and Risk
Committee and Remuneration Committee.
Mr Dowd is a mining engineer with
more than 50 years’ experience in the
mining industry, primarily in the private
sector, but also serving in the public
sector as head of the Victorian Mines
and Petroleum Departments. Mr Dowd
has previously held senior executive
management positions including as
Managing Director of Newmont Australia
Ltd and Vice President of Newmont
Mining Corporation’s Australian and
New Zealand Operations and prior to
that as Chief Operating Officer of
Normandy Mining Ltd.
Mr Dowd was previously Chairman
of Adelaide Resources Ltd and a
non-executive Director of Oz Minerals
Limited and Macarthur Coal Ltd.
External appointments: Non-executive
Director of PNX Metals Limited;
Chairman of CSIRO Minerals Resources
Sector Advisory Council; Advisory Board
Member of South Australian Minerals and
Petroleum Expert Group (SAMPEG) and
University of Queensland – Sustainable
Minerals Institute.
29
29
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
DIReC toRs
exeCUtIve C oMMIttee
ZARA FIsHeR
PAUL ARnoLD
DAvID BLAnCH
non-exeCUtIve DIReC toR
B Com, MASc, MAICD
CHIeF exeCUtIve A nD MAnAGInG
DIReC toR
CHIeF FInA nCIAL oFFIC eR
BA, CA, Grad Dip Applied Finance
BE (Hons) Mining, MBA, MAusIMM, MAICD
Mr Blanch was appointed as Chief
Financial Officer in July 2018 and brings
over 16 years’ financial, accounting and
business development experience to ERA.
Mr Blanch brings previous experience in
business analysis in the Rio Tinto Copper
& Diamonds product group and has also
worked in various financial and corporate
roles in Rio Tinto. Mr Blanch is a Chartered
Accountant through the Institute of
Chartered Accountants in Australia.
Appointed in August 2016 and resigned
in August 2019.
See biography on page 28.
Previous member of Health, Safety
and Environment Committee (from
January 2017).
Ms Fisher has worked in the mining
industry for over 20 years and was formerly
Vice President HSE for Rio Tinto Iron
Ore. In this role she was accountable
for the health, safety and environmental
performance of Rio Tinto’s Iron Ore
operations and a member of the Iron
Ore Executive Committee. Ms Fisher
worked with Rio Tinto in a range of roles
in Australia and internationally in the Iron
Ore, Aluminium, Copper, Energy and
Minerals groups. Ms Fisher has extensive
experience in operations, maintenance,
strategy, corporate services and finance.
Ms Fisher holds a Bachelor of Commerce
and a Masters of Applied Science
(Environmental Management and
Restoration) and is a member of the
Australian Institute of Company Directors.
Prior to joining Rio Tinto Ms Fisher worked
in chartered accounting.
30
30
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
exeCUtIve C oMMIttee
LesLey BRyC e
JAMes o’C onneLL
ALAn tIet ZeL
GeneRAL MA nAGeR oPeRA tIons
B ENG (HONS) FIEAUST, CPENGEXEC,
MAUSIMM, GAICD
LeGAL C oUnseL A nD CoMPAny
seCRetARy
LLB, BCOM
GeneRAL MA nAGeR
exteRnAL ReLAtIons
BA, BCOM, DIP ED MBA
Ms Bryce was appointed General
Manager Operations in June 2017.
Ms Bryce has previously worked in
diagnostic engineering in the electronics
industry, and Quality Management (ISO
9001) and Business Improvement in
the manufacturing industry. In 2005 Ms
Bryce joined Rio Tinto working in the
Shared Services, Aluminium and Argyle
Diamonds sectors.
Ms Bryce brings to ERA senior level
experience in Business Improvement,
Operations, Projects and Planning.
Mr O’Connell joined ERA as Legal
Counsel in June 2017 and was appointed
Company Secretary in August 2017.
Mr O’Connell joined Rio Tinto in
2010, most recently acting as Senior
Corporate Counsel in London. Before
joining Rio Tinto, Mr O’Connell worked
at private law firms in Melbourne and
London. Professionally qualified in both
Australia and the United Kingdom, he
has Bachelor of Laws and Bachelor
of Commerce degrees from Monash
University.
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 and
has worked in the diamonds, salt, bauxite
and alumina sectors and in a variety of
corporate functions.
31
31
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's 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 are shown below:
DIRECTOR
P Mansell
P Arnold
S Charles
P Dowd
A Sutton1
J Carey2
Z Fisher3
DIRECTORS
MEETINGS4
AUDIT AND RISK
COMMITTEE4
REMUNERATION
COMMITTEE4
HSE COMMITTEE4
OTHER4,5
12/12
12/12
12/12
12/12
12/12
6/7
5/5
4/4
-
4/4
4/4
-
-
-
2/2
-
2/2
2/2
-
-
-
-
-
3/3
3/3
2/2
-
1/1
15/16
1/1
16/16
15/15
-
-
-
Appointed as a member of the HSE Committee 9 September 2019.
Appointed as a Director 7 August 2019.
Resigned as a Director 7 August 2019.
Number of meetings attended/maximum the Director would have attended.
Other meetings include meetings of the committee formed for the purposes of the assessment of funding alternatives.
Note 1
Note 2
Note 3
Note 4
Note 5
Mr Arnold was invited to meetings of the Audit and Risk Committee and the Health, Safety and Environment Committee and attended
all such meetings held during that time.
Interests of Directors
The interests of each Director in the share capital of the Company and its related body corporates as at 31 January 2020 are shown
below:
DIRECTORS
P Mansell
P Arnold
S Charles
P Dowd
A Sutton
J Carey1
ENERGY RESOURCES OF
AUSTRALIA LTD
ORDINARY SHARES
RIO TINTO LIMITED
ORDINARY SHARES
RIO TINTO LIMITED CONDITIONAL
INTERESTS IN ORDINARY SHARES
-
-
-
-
-
-
2,000
3,971
-
1,500
18,895
4,153
-
10,591
-
-
7,621
4,471
Note 1
Appointed as a Director 7 August 2019.
32
32
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Remuneration report
The Remuneration Report is set out under the following main
headings:
A.
B.
C.
D.
E.
F.
G.
Board oversight of remuneration
Principles used to determine non-executive Directors’
remuneration
Principles used to determine executive remuneration
Details of remuneration
Executive 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
Board oversight of remuneration
The Remuneration Committee has responsibility to review:
•
•
•
•
remuneration framework and policies (including key perfor-
mance indicators) for the Company’s Chief Executive and
senior executives;
remuneration and performance of the Company’s Chief
Executive and senior executives;
remuneration of the Company’s non-executive Directors;
and
remuneration disclosures made by the Company.
The Remuneration Committee Charter is available at the
Corporate Governance section of ERA’s website.
Principles used to determine non-
B
executive Directors’ remuneration
Fees and payments to non-executive Directors reflect the
demands which are made on, and the responsibilities of, the non-
executive Directors. The Remuneration Committee reviews and
makes recommendations to the Board regarding non-executive
Directors’ remuneration. These fees are comprised of a base
fee and any fees payable to non-executive Directors for their
membership on established committees of the Board. ERA does
not pay retirement or post-employment benefits to non-executive
Directors, however, statutory superannuation contributions are
paid to non-executive Directors. In addition, from time to time,
the Board may approve that non-executive Directors receive
additional fees for services provided outside the established
committee processes.
The following principles are applied in determining the
remuneration of non-executive Directors:
•
•
•
•
the responsibilities of, and time spent by, the non-executive
Directors on the affairs of ERA, including preparation time;
acknowledgement of the personal risk borne as a Director;
comparison with professional market rates of remunera-
tion to remain competitive with the market having regard to
companies of similar size and complexity; and
the desire to attract Directors of a high calibre with appropri-
ate levels of expertise and experience.
At the 2008 Annual General Meeting, shareholders resolved to
amend the Constitution of the Company to provide that the
aggregate remuneration for non-executive Directors of ERA
would be not more than $800,000 per annum. At the 2019
Annual General Meeting, the 2018 Remuneration Report was
approved with 96.25 per cent of shares voted in favour (voting
comprised 355,929,859 votes ‘for’ the resolution and 13,882,793
votes ‘against’ the resolution). North Limited and Peko-Wallsend
Pty Ltd, which are both Rio Tinto entities, voted a combined total
of 354,078,854 votes ‘for’ the resolution. The aggregate amount
of non-executive Directors’ remuneration paid in 2019 was
approximately $793,000 inclusive of statutory superannuation.
The non-executive Directors’ fees were reviewed by the Board
in January 2019. The annual fees for non-executive Directors for
2019 (excluding superannuation) were as follows:
Chairman
Non-executive Director
Audit and Risk Committee
Chair1
Audit and Risk Committee
Member1
Health, Safety and
Environment Chair1
Health, Safety and
Environment Committee
Member1
Remuneration Committee
Chair1
Other2
2019
$180,000
$100,000
2018
$172,000
$96,000
$24,000
$22,500
$13,260
$13,260
$20,400
$20,400
$13,260
$13,260
$20,400
$20,400
$13,260
-
Note 1 Fees are payable in addition to Chairman and non-executive Director fees.
Note 2 Rule 10.3 of the Company’s constitution provides that “if a Director, at the
request of the Board and for the purposes of the Company, performs extra services
or makes special exertions… the Company may pay that Director a fixed sum set by
the Board for doing so.” Given the significant number of meetings (15), additional
travel undertaken over the period and increased demands on their time, the non-
independent directors resolved it was reasonable and appropriate to compensate the
independent directors for their services as members of the Board Committee
established to oversee the funding position of the Company. The compensation was a
one-off fixed sum of $13,260 each.
The Board also confirmed that all non-executive Director and
Committee fees should increase by a percentage equal to the
average increase awarded to employees across the Company
until the next detailed review is conducted, which should take
place in January 2021.
Principles used to determine executive
C
remuneration
The Remuneration Committee is responsible for the review of,
and where appropriate will make recommendations to the Board
in respect of, executive remuneration.
The Corporations Act 2001 and relevant Accounting Standards
require disclosures in respect of “key management personnel”,
being those persons having authority and responsibility for
planning, directing and controlling the activities of the Company.
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
DIReCtoR's RePoRt
The key management personnel are, in addition to the Directors,
the permanent General Managers of the Company (including the
General Manager External Relations) reporting directly to the
Chief Executive. Throughout this Remuneration Report the key
management personnel who are not Directors are collectively
referred to as “senior executives”.
As the Company is a member company of the Rio Tinto Group, it
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 Group to determine the remuneration of the Chief Executive
and senior executives.
As a member of the Rio Tinto Group, ERA’s Chief Executive and
senior executives are seconded from Rio Tinto and are hence
drawn from the talented pool of executives in the wider Rio Tinto
Group. It is the view of the Remuneration Committee (which has
been endorsed by the Board) that a company of ERA’s size,
scope and remote location would have significant difficulty in
attracting executives of the calibre necessary to ensure superior
performance or in retaining them for significant periods if this
arrangement was not in place. Under these circumstances,
the Board believes that the general application of the Rio
Tinto remuneration framework to ERA’s Chief Executive and
senior executives, with appropriate review by the Company’s
Remuneration Committee, is of benefit to ERA.
For 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.
Typically, base salaries are positioned at the median of these
comparator groups, 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 programs are recognised in the
Company’s financial statements.
Executive remuneration, including base salary and short and long
term incentive plan awards, 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, global economic conditions and relevant comparative
information. As well as base salary, remuneration packages may
include fringe benefits such as medical insurance, car, rent and
other allowances, superannuation, retirement entitlements and
short and long term incentives.
The annual performance evaluation and management process for
2019 included formal consultation between the Chairman (based
on the Remuneration Committee’s review and recommendations)
and the Chief Executive, Rio Tinto Energy and Minerals
regarding the Chief Executive of the Company, and between
the Remuneration Committee and the Chief Executive of the
Company regarding the senior executives.
An annual performance evaluation of the Chief Executive and
senior executives was undertaken in 2019.
The executive pay and reward framework is designed to provide
a total remuneration package which is competitive in the market,
aligns total remuneration with delivered individual and short
and long term business performance, strikes an appropriate
balance between fixed and variable components, 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 executives
required to lead the Company.
The Company Secretary of the Company is subject to the same
executive remuneration pay and reward framework.
The executive pay and reward framework has four components:
•
•
•
•
base salary and benefits;
short term incentive plans;
long term incentive plans through participation in the
Rio Tinto 2018 Equity Incentive Plan (EIP), the Rio Tinto
plan introduced in 2018 which will govern all future
long-term, share-based remuneration, including
management share awards (MSA), performance
share awards (PSA) and bonus deferral awards (BDA).
other remuneration such as superannuation.
Performance and non-performance related
remuneration
Total remuneration is a combination of the fixed, performance
and service related elements described in this report. The short
and long term incentives are the variable components of the
total remuneration package and are therefore “at risk”. They are
tied to achievement of specific business measures, individual
performance and service. Other components are referred to as
“fixed” as they are not at risk.
The long term incentive plans are designed to provide a target
expected value of between 22.5 and 45 per cent of base salary
for the senior executives and the Chief Executive, delivered in
any one year through a blend of PSAs, MSAs and BDAs. In 2019
PSAs, MSAs and BDAs were awarded.
Excluding post-employment and non-monetary benefits, the
proportion of total direct remuneration, assuming maximum
award levels and maximum levels of performance, provided by
way of variable at risk components as at 31 December 2019 for
the Chief Executive and senior executives was between 48 and
68 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,
Rio Tinto and individual performance and the current blend of
share plans
Base salary
Base salary is set at a level consistent with market expectations
within the wider Rio Tinto remuneration framework and may
be delivered as a mix of cash and prescribed non-financial
benefits. It is targeted broadly at the median of companies of
similar size, global reach and complexity, including other large
natural resource companies. Base salary is reviewed annually
and adjusted taking into account the individual and Company
performance, global economic conditions, role responsibilities,
an assessment against comparator groups, internal relativities
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
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
management personnel on calendar year performance against
challenging individual and business targets.
Short term incentive performance conditions
Individual performance is reviewed against relevant targets and
objectives annually. The Chief Executive and senior executives
of the Company have between 40 and 70 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 2019 relating to performance in 2018,
as 2018 performance calculations are not finalised at the date
of this report. The Company’s business performance measures
for 2018 used in the determination of short term incentive plan
payments were:
•
•
•
Safety - All Injury Frequency Rate, Lost Time Injuries and
measures relating to implementation of critical risk manage-
ment (CRM);
Financial - net earnings and free cash flow; and
Business - drummed production, cost of material milled,
volume and cost of material moved and Brine Concentrator
performance.
Incentive Plans
In 2018, Rio Tinto implemented a new discretionary employee
share plan, the Rio Tinto EIP, for executive directors and
employees. The EIP replaced Rio Tinto’s Performance Share
Plan (PSP) 2013, Management Share Plan (MSP) 2007 and
Bonus Deferral Plan (BDP). This allowed Rio Tinto to continue
operating its long-term incentive arrangements (including bonus
deferred awards) through a single set of plan rules. As previously
outlined, the Remuneration Committee believes that the general
application of the Rio Tinto remuneration framework (including
the EIP to ERA’s Chief Executive and senior executives, with
appropriate review by the Remuneration Committee) is of benefit
to the Company. During 2020, the Remuneration Committee will
review the position for future years.
Awards under the EIP can take the form of:
•
•
Conditional Awards - under which the participant receives
shares for free automatically to the extent the award vests
(which may be subject to the achievement of performance
conditions);
Forfeitable Shares - under which the participant receives
free shares on grant, which must be given back to the extent
the award lapses;
• Options - under which the participant can acquire shares, to
the extent their award has vested, either at no cost or at a
price set when the option is granted.
Inclusion of other award types is to provide for sufficient flexibility
in the future should the Group’s remuneration approach change
during the life of the Plan. Awards may also be granted as cash
awards.
An award may be granted on the basis that it will normally only
vest to the extent that a performance condition, set by the Rio
Tinto Remuneration Committee at the time of grant, is satisfied
by Rio Tinto. However, awards representing deferred bonuses
will not be subject to performance conditions. The vesting of
awards granted to executive directors (other than bonus deferred
awards) will always be subject to a performance condition, except
as otherwise permitted by Rio Tinto’s Remuneration Policy.
Conditional awards and nil-cost options will be granted on the
basis that the participant will receive dividend equivalents for
the vesting period (in additional shares or cash) when, and to
the extent that, the award vests or is exercised. The dividend
equivalent will be calculated based on the aggregate value of
dividends paid during the vesting period unless the Rio Tinto
Remuneration Committee decides to use a different approach.
Awards will normally vest, to the extent that any performance
condition is met, at the end of a period set when the award is
granted or the end of the period over which any performance
condition is tested. Shares will be issued or transferred to the
participant (or an option may be exercised) from vesting. Vesting
may be delayed where a participant is subject to any external
investigation or similar circumstances.
An award may be granted on the basis that the participant is
required to hold a net number of vested shares (or shares subject
to an option) for a set period following vesting.
If Rio Tinto was subject to a change of control, awards will vest
subject to the extent to which any performance condition has
been satisfied. Alternatively, participants may be allowed or
required to exchange their awards for equivalent awards over
shares in the acquiring company. If awards vest, the awards
will be pro-rated unless the Rio Tinto Remuneration Committee
decides otherwise. However, pro rating will not apply to deferred
bonus awards or, normally, where an award subject to a
performance condition vests on or after the third anniversary of
grant.
Awards
The current intention remains that awards will be made under
the EIP in the form of Conditional Awards to replicate awards
previously made under the PSP, MSP and BDP and in line with
the Rio Tinto Group’s Remuneration Policy.
Performance Share Awards
Performance share awards (PSA), provide a conditional right
to Rio Tinto shares to eligible senior management personnel
within the Rio Tinto Group, including the Chief Executive and
senior executives of ERA. Award levels under the EIP are at the
discretion of Rio Tinto.
35
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
The conditional awards only vest if the performance condition set
by the Rio Tinto Remuneration Committee is satisfied by Rio Tinto,
although the Rio Tinto Remuneration Committee retains discretion
to satisfy itself that satisfaction of the performance condition is a
genuine reflection of the underlying performance
of the business. Prior to the vesting of conditional awards,
Rio Tinto’s Total Shareholder Return (TSR) performance
against the performance condition is calculated independently
by Willis Towers Watson.
Subject to Rio Tinto Remuneration Committee approval, awards
vest based on the Rio Tinto Group’s TSR performance against
the Morgan Stanley Capital World Index (one half) and the
EMIX Global Mining Index (one half), 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.
Management Share Awards
Management share awards (MSA) are conditional grants of
Rio Tinto shares to eligible employees of the company which will
vest, wholly or partly, upon expiry of a three year vesting period.
Rio Tinto shares to satisfy the vesting are purchased in the market.
Award levels under the EIP are at the discretion of Rio Tinto.
Other Share Plans
All employees of the company may participate in Rio Tinto share
purchase plans applicable at particular locations. Under the plan,
employees may acquire shares up to the value of US$5,000
(or local currency equivalent) per year capped at 10 per cent
of their base salary. Each share purchased will be matched by
the Company (currently at a ratio of one for one) providing the
participant holds the shares and remains employed at the end
of the three year vesting period. Further details are at Note 30
to the Financial Statements.
Share dealing policy
The participation of the Chief Executive and senior executives
in the Rio Tinto share plans involving the awarding of Rio Tinto
securities at a future date, and any grants of shares and options
under these plans, is subject to and conditional upon compliance
with the terms of the “Rules for dealing in securities of Rio Tinto”
(Dealing Rules). The Dealing Rules for dealing expressly prohibit
the limiting of exposure to economic risk in relation to such
securities, and are available on the Rio Tinto website at
www.riotinto.com.
36
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Details of remuneration
D
Details of the remuneration of each non-executive and executive Director and each of the senior executives in respect of their
services to the Company are set out in the following table.
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 Mansell
S Charles
P Dowd
A Sutton 1,2,3
J Carey1,4
Z Fisher1.5
K McLeish1,6
S Kaufman 1,7
Total 2019
Total 2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2019
2018
2018
2018
227
205
151
132
147
130
104
16
40
68
109
35
45
737
672
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Amounts paid directly to Rio Tinto Limited (amounts paid directly to Ms Sutton from 10 May 2019).
Appointed as a Director 30 October 2018.
Appointed as a member of the Health, Safety and Environment Committee 9 September 2019.
Appointed as a Director 7 August 2019.
Resigned as a Director 7 August 2019.
Appointed as a Director 19 June 2018 and resigned as a Director 30 October 2018.
Resigned as a Director 19 June 2018.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22
20
14
12
14
12
6
-
-
-
-
-
-
56
44
249
225
165
144
161
142
110
16
40
68
109
35
45
793
716
37
37
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD LTIP awards granted
Award levels are set so as to incentivise executives to provide
sufficient retention for the executive team and to contribute
to the competitiveness of the overall remuneration package.
The value of the MSAs and PSAs granted to Mr Arnold in
2019, based on the expected value calculations performed
by individual advisors, was 45 per cent of base salary. The
eventual amount that vests will depend on performance during
the period 2019 to 2023.
DIReCtoR's RePoRt
Executive Director and senior executives
Set out below is an overview of the remuneration paid to the
Executive Director and senior executives in 2019. This includes
details of the key elements of remuneration and a summary of
total remuneration for 2019.
Paul Arnold
(Chief Executive and Managing Director from 2 August
2017)
Base salary
Mr Arnold was appointed as Chief Executive and Managing
Director on 2 August 2017. Mr Arnold’s base salary was reviewed
annually with reference to the underlying performance of ERA
and the Rio Tinto Group, global economic conditions, role
responsibility, individual performance, an assessment against
relevant comparator groups, internal relativities and base salary
budgets applying to the broader employee population.
On 1 March 2019, Mr Arnold’s base salary was $387,329
(1 March 2018 $378,000).
STIP objectives
The STIP cash payment made to Mr Arnold in 2019 was
determined by assessing individual and business performance in
2018 against objectives set for that year.
The following individual objectives were set for Mr Arnold for
2018:
•
•
•
safe and predictable operations with particular emphasis on
process safety, asset integrity, productivity, output, quality,
costs and cash flow;
effective implementation of strategies for water manage-
ment, other environmental controls and progressive
rehabilitation and dredging operations, including stable and
consistent operation of Brine Concentrator; and
effective leadership behaviours in interaction with employ-
ees, the Board and stakeholders including Traditional Own-
ers, regulators, investors and the community.
STIP outcomes
Mr Arnold’s achievement against his 2018 individual objectives
was assessed as ‘good’.
‘good’. DDetailed outcomes are below:
•
•
•
•
•
•
a decrease in the All Injury Frequency Rate to 0.56 (2017;
1.17);
production of 1,999 tonnes of uranium oxide was
at the top end of market guidance;
Ranger rehabilitation program progressed to schedule;
strong cash management focus of cash reserves;
optimised availability and throughput of the Brine Concentra-
tor, including injection of brine into Pit 3 backfill; and
continued progress with key stakeholders regarding rehabili-
tation of the Ranger Project Area.
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Total remuneration
The table below provides a summary of Mr Arnold’s total remuneration disclosed for the years of 2018 and 2019. 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’s remuneration arrangements. The remuneration details set out on page 42 include theoretical accounting
values relating to various parts of the remuneration packages, most notably long term incentive plan arrangements. Accordingly, the
numbers below are not compatible with those in the table on page 42.
(STATED IN $’000)
Base salary paid1
STIP cash bonus2
STIP deferred shares3
LTIP share based payments
Superannuation
Other benefits4
Total remuneration
% change from previous year
% of maximum STIP cash bonus awarded
% of maximum STIP cash bonus forfeited
2019
2018
385
144
48
190
29
162
958
3%
51%
49%
377
170
57
135
30
164
933
-
69%
31%
Note 1
Note 2
Note 3
Note 4
Salaries are reviewed with effect from 1 March.
Bonus payment relates to prior year performance.
Value of deferred share awards granted under the EIP.
Other benefits include accommodation, vehicle and other allowances and Company paid superannuation above statutory requirements that is taken as cash.
39
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Senior executives
Base salary
Base salaries are reviewed annually, with reference to the underlying performance of ERA, the Rio Tinto Group and the individual,
global economic conditions, role responsibility, an assessment against relevant comparator groups and base salary budgets applying
to the broader employee population.
At the end of 2018 and 2019, the base salaries of the Company’s senior executives were:
BASE SALARY A’$000 (UNLESS OTHERWISE SPECIFIED)
David Blanch
Lesley Bryce
Alan Tietzel
2019
2018
CHANGE
247
315
371
240
288
366
3%
9%
1%
STIP objectives and outcomes
The individual objectives set out below relate to the 2018 financial year (with the corresponding STIP Award paid in 2019).
SUMMARY OF INDIVIDUAL OBJECTIVES
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Prevention of high consequence safety and environmental events
Demonstrate Health, Safety and Environment leadership and contribute to sustained
improvement in health and safety performance
Achieve target metrics for production and cost, plant utilisation, availability and recovery
Delivery of planned rehabilitation activities in accordance with the Ranger Mine Closure Plan,
including dredging and tailings deposition in Pit 3
Demonstrate behaviours that align with the values of accountability, teamwork, integrity and
respect
Prevention of high consequence safety and environmental events
Demonstrate Health, Safety and Environment leadership and contribute to sustained
improvement in health and safety performance
Continue effective implementation of stakeholder engagement strategy
Design, plan and deliver stakeholder initiatives which progress the Company’s direction on
Ranger closure planning and the future of Jabiru
Demonstrate behaviours that align with the values of accountability, teamwork, integrity and
Respect
Prevention of high consequence safety and environmental events
Demonstrate Health, Safety and Environment leadership and contribute to sustained
improvement in health and safety performance
Lead the program management for cash generation and cost improvement across ERA
Deliver efficient and effective commercial support services to ERA, including IT and
procurement
Deliver excellence in accounting, performance reporting and financial forecasting
Lead ERA’s sales and logistics planning, maximizing the value of ERA’s marketing
arrangements
Demonstrate behaviours that align with the values of accountability, teamwork, integrity and
respect
Lesley Bryce
Alan Tietzel
David Blanch
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
A summary of the individual targets and performance for each of the Company’s senior executives (other than the Chief Executive) for
the 2018 financial year (with the corresponding STIP Award paid in 2019) is set out in the table below.
MEASURES
Lesley Bryce
Business and financial performance
Health and Safety
Individual
Total
Alan Tietzel
Business and financial performance
Health and Safety
Individual
Total
David Blanch
Business and financial performance
Health and Safety
Individual
Total
WEIGHT (%)
RESULT
(OUT OF
200%)
WEIGHTED
RESULT (%)
25.0
15.0
60.0
100.0
25.0
15.0
60.0
100.0
25.0
15.0
60.0
100.0
121.4
163.0
145.0
-
121.4
163.0
110.0
-
121.4
163.0
115.0
-
30.4
24.4
87.0
141.8
30.4
24.4
66.0
120.8
30.4
24.4
69.0
123.8
LTIP awards
Award levels are set so as to incentivise executives to provide sufficient retention for the executive team and to contribute to
the competitiveness of the overall remuneration package. The value of the awards granted to the Company’s senior executives
(other than the Chief Executive) in 2019, based on the fair value calculations performed by independent advisors, was between
22.5 per cent and 30 per cent of base salary.
41
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Executive Director and senior executives total remuneration
SHORT TERM BENEFITS
CASH
SALARY
($000)
CASH
BONUS6
($000)
OTHER7
($000)
TERMINATION
PAYMENTS
($000)
POST
EMPLOYMENT
BENEFITS
SHARE
BASED
PAYMENTS
SUPER-
ANNUATION
PENSION
($000)
CASH &
EQUITY
SETTLED
($000)
Executive Director
P Arnold1
Senior executives
D Blanch2
L Bryce3
A Tietzel4
J May5
Total 2019
Total 2018
2019
2018
2019
2018
2019
2018
2019
2018
2018
385
377
246
120
307
283
369
365
136
1,307
1,281
144
170
74
-
123
102
133
129
89
474
490
162
164
116
90
118
128
104
102
47
500
531
-
-
-
-
-
-
-
-
-
-
-
29
30
53
35
29
30
29
30
57
140
182
190
135
49
15
85
53
141
119
31
465
353
TOTAL
($000)
910
876
538
260
662
596
776
745
360
2,886
2,837
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Performance related cash bonus: 51 per cent awarded in 2019, 49 per cent forfeited. 69 per cent awarded in 2018, 31 per cent forfeited.
Performance related cash bonus: 62 per cent awarded in 2019, 38 per cent forfeited. Salary paid in 2018 financial year from 2 July to 31 December 2018.
Performace related cash bonus: 71 per cent awarded in 2019, 29 per cent forfeited. 63 per cent awarded in 2018, 37 per cent forfeited.
Performance related cash bonus: 60 per cent awarded in 2019, 40 per cent forfeited. 61 per cent awarded in 2018, 39 per cent forfeited.
Salary paid in financial year from 1 January 2018 to 1 June 2018. Performance related cash bonus: 74 per cent awarded in 2018, 26 per cent forfeited.
Performance and related bonuses paid in 2019 relate to services in 2018 (equally bonuses paid in 2018 relate to services in 2017).
Other benefits include relocation, accommodation, travel, vehicle, other allowances, Company paid superannuation above statutory requirement that is taken as
cash excluding cash paid site allowances which are treated as cash salary.
The value of share based awards has been determined in accordance with the recognition and measurement requirements of AASB2
“Share-based Payment”. The fair value of awards granted under the Rio Tinto 2018 Equity Incentive Plan, the Rio Tinto Management
Share Plan (MSP), Bonus Deferral Plan (BDP), Performance Share Plan (PSP) and myShare has been calculated at their dates of
grant using valuation models provided by external consultants Lane Clark and Peacock LLP, including an independent lattice-based
option valuation model and a Monte Carlo valuation model which takes into account the constraints on vesting and exercise attached
to these awards.
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Executive service agreements
E
Remuneration and other terms of employment for the Chief Executive and senior executives 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, including: medical insurance, vehicle and accommodation
allowances, relocation allowances and expenses and travel allowances.
The Chief Executive and senior executives are also entitled to a range of pre-existing redundancy entitlements, depending on the
business and region from where they were originally employed within the Rio Tinto Group. These include:
•
•
•
•
•
•
•
notice may be worked or fully or partly paid in lieu, at ERA’s discretion;
additional capped service related payments may apply;
pro rata short term incentive plan payments may be paid based on the proportion of the performance period worked;
conditional share awards granted and held for less than three years at the date of termination are reduced pro-rata;
conditional share awards held for less than three years at date of termination are reduced pro-rata;
there is no contractual entitlement to payments in the event of a change of control; and
other major provisions of the agreements relating to remuneration as set out below.
P Arnold - Chief Executive
Term of agreement - Open, commenced 2 August 2017
Base salary (excluding superannuation, allowances and other benefits) as at 31 December 2019 of $387,329 per annum. Maximum
short term incentive bonus upon meeting performance criteria is 100 per cent of base salary. Base 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 six
months’ notice or equivalent payment in lieu of notice.
In addition to Mr Arnold’s service agreement, ERA has entered into a secondment agreement with Rio Tinto in relation to Mr Arnold’s
services to ERA. The secondment agreement provides that ERA can end Mr Arnold’s secondment by giving Rio Tinto three months’
notice at any time. Rio Tinto can end Mr Arnold’s secondment by giving three months’ notice to ERA provided such notice can be
given no earlier than 2 May 2020.
L Bryce - General Manager Operations
Term of agreement - Open, commenced 1 June 2017
Base salary (excluding superannuation, allowances and other benefits) as at 31 December 2019 of $315,000 per annum. Maximum
short term incentive bonus upon meeting performance criteria is 60 per cent of base salary. Base 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 six months’
notice or equivalent payment in lieu of notice.
D Blanch - Chief Financial Officer
Term of agreement - Open, commenced 2 July 2018
Base salary (excluding superannuation, allowances and other benefits) as at 31 December 2019 of $247,200 per annum. Maximum
short term incentive bonus upon meeting performance criteria is 50 per cent of base salary. Base 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 six months’
notice or equivalent payment in lieu of notice.
A Tietzel - General Manager External Relations
Term of agreement - Open, commenced 1 October 2010
Base salary (excluding superannuation, allowances and other benefits) as at 31 December 2019 of $370,515 per annum. Maximum
term incentive bonus upon meeting performance criteria is 60 per cent of base salary. Base 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 six months’ notice or
equivalent payment in lieu of notice.
43
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
F
Share based compensation
Rio Tinto Performance Share Awards
Rio Tinto Performance Share Awards (PSA) are granted at the discretion of the Rio Tinto Remuneration Committee in line with
Rio Tinto guidelines. 100 per cent potentially vest after five years. PSAs have been granted under either the previous Rio Tinto
Performance Share Plan or, for awards granted from 2018, granted under the EIP. The terms and conditions of each right to Rio Tinto
Limited or Rio Tinto plc shares affecting remuneration in this or future reporting periods are as follows:
AWARD DATE
Rio Tinto Limited
11 March 2016
9 March 2017
15 May 2018
18 March 2019
MARKET PRICE AT AWARD
PERFORMANCE PERIOD
ENDS1
MARKET PRICE AT
31 DECEMBER 2019
$44.57
$58.97
$83.61
$93.17
31 December 2020
31 December 2021
31 December 2022
31 December 2023
$100.40
$100.40
$100.40
$100.40
Note 1
Vesting dependent upon continued employment with a Rio Tinto Group company and achievement of relevant performance conditions.
Rio Tinto Management Share Awards
Rio Tinto Management Share Awards (MSA) are granted at the discretion of the Rio Tinto Remuneration Committee in line with
Rio Tinto guidelines. MSAs have been granted under either the previous Rio Tinto Management Share Plan or, for awards granted
from 2018, granted under the EIP. The terms and conditions of each right to Rio Tinto Limited or Rio Tinto plc shares affecting
remuneration in this or future reporting periods are as follows:
AWARD DATE
Rio Tinto Limited
9 March 2017
15 May 2018
18 March 2019
MARKET PRICE
AT AWARD
PERFORMANCE PERIOD
ENDS1
PRICE AT
31 DECEMBER 2019
$58.97
$83.61
$93.17
18 February 2020
15 February 2021
21 February 2022
$100.40
$100.40
$100.40
Note 1
Vesting dependent upon continued employment with a Rio Tinto Group company.
44
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Rio Tinto Bonus Deferral Awards
Rio Tinto Bonus Deferral Awards (BDA) are granted at the discretion of the Rio Tinto Remuneration Committee in line with Rio Tinto
guidelines. BDAs have been granted under either the previous Rio Tinto Bonus Deferral Plan or, for awards granted from 2018, under
the EIP. The terms and conditions of each right to Rio Tinto Limited shares affecting remuneration in this or future reporting periods
are as follows:
AWARD DATE
Rio Tinto Limited
15 May 2018
18 March 2019
MARKET PRICE AT AWARD
VESTING DATE1
PRICE AT
31 DECEMBER 2019
$83.61
$93.17
1 December 2020
1 December 2021
$100.40
$100.40
Note 1
Vesting dependent upon continued employment with a Rio Tinto Group company.
Share based compensation – Rio Tinto employee share schemes
The key management personnel and Directors of the Company who elected to participate in the Rio Tinto myShare share purchase
plan as at 31 December 2019 are set out below:
P Arnold
D Blanch
L Bryce
J Carey
A Tietzel
Rio Tinto myShare
Rio Tinto myShare
Rio Tinto myShare
Rio Tinto myShare
Rio Tinto myShare
Equity instrument disclosures relating to key management personnel
Options provided as remuneration
Details of options over ordinary shares in Rio Tinto Limited and Rio Tinto plc held during the year and provided as remuneration to key
management personnel in respect of their service to ERA (or, in the case of non-executive Directors, to Rio Tinto) are set out below.
When exercisable, each option is convertible into one ordinary share of Rio Tinto Limited 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
UNVESTED
Rio Tinto Limited
Non-executive Directors4
A Sutton
2019
2018
1,158
1,158
-
-
(1,158)
-
-
-
-
1,158
-
-
Note 1
Note 2
Note 3
Note 4
Where key management personnel joined during the year, balance at start of the year reflects holdings at time of commencement with ERA.
Other changes and end of year balance include changes made in relation to awards for service within the wider Rio Tinto Group, including before joining or after
ceasing with ERA, and forfeited options where conditions were not met.
Where key management personnel left prior to the end of the year, the balance reflects the holding at the time of resignation.
Changes to balances for non-executive Directors do not relate to remuneration for services provided to the Company.
45
45
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Conditional awards provided as remuneration
Rio Tinto 2018 Equity Incentive Plan
No conditional awards of ordinary shares of either ERA or of Rio Tinto Limited or Rio Tinto plc were provided during the year as
remuneration for services provided to ERA to any of the non-executive Directors. Details of conditional awards of ordinary shares in
Rio Tinto Limited and Rio Tinto plc held during the year and provided as remuneration to the Chief Executive and senior executives of
ERA in respect of their duties as officers of ERA are set out below. When exercisable, each award converts into one ordinary share of
Rio Tinto Limited or Rio Tinto plc.
BALANCE
AT START OF THE
YEAR OR ON JOINING1
GRANTED AS
REMUN-
ERATION VESTED LAPSED
AWARDS
CANCELLED
OTHER
CHANGES2
BALANCE
AT END
OF YEAR3
Rio Tinto Limited
Executive Director
P Arnold
Senior executives
L Bryce
D Blanch
A Tietzel
J May
Non-executive Directors4
A Sutton
J Carey
Z Fisher
K McLeish
S Kaufman
2019
2018
2019
2018
2019
2018
2019
2018
2018
2019
2018
2019
2019
2018
2018
2018
8,837
5,754
2,610
1,880
1,533
1,533
5,866
6,325
3,643
19,515
21,019
4,471
14,115
11,268
25,397
23,603
3,713
(1,959)
4,877
(1,794)
1,189
1,318
736
-
(675)
(588)
(336)
-
1,583
(2,126)
1,865
(2,181)
966
(1,043)
(7,778)
(1,660)
-
(1,869)
(1,627)
-
(1,621)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(143)
(45)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,591
8,837
3,124
2,610
1,933
1,533
5,323
5,866
3,521
(4,116)
7,621
156
19,515
-
4,471
3,447
4,474
15,693
14,115
-
25,397
15,618
37,600
Note 1
Note 2
Note 3
Note 4
Where key management personnel joined during the year, balance at start of the year reflects holdings at time of commencement with ERA.
Other changes and end of year balance include changes made in relation to awards for service within the wider Rio Tinto Group, including before joining or after
ceasing with ERA, and Rio Tinto Rights Issue adjustments to accrued balances.
When key management personnel left prior to the end of the year, the balance reflects holdings at the date of resignation.
Changes to balances for non-executive Directors do not relate to remuneration for services provided to ERA.
46
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Shareholdings
The number of shares held in ERA or Rio Tinto Limited during the financial year by each Director of ERA are set out below.
Rio Tinto Limited
P Mansell
P Arnold
A Sutton
P Dowd
J Carey
Z Fisher
S Kaufman
K McLeish
BALANCE
AT START OF
THE YEAR1
INCREASED
DURING
THE YEAR
OTHER CHANGES
DURING THE
THE YEAR
BALANCE
AT END OF
THE YEAR2
2019
2018
2019
2018
2019
2018
2019
2018
2019
2019
2018
2018
2018
2,000
2,000
2,713
704
9,937
9,937
1,500
1,744
4,100
3,708
4,162
2,944
6,019
-
-
2,619
2,009
9,373
1,600
-
-
42
2,127
1,832
1,721
56
-
-
(650)
-
(415)
(1,600)
-
(244)
-
(1,200)
(2,286)
-
-
2,000
2,000
4,682
2,713
18,895
9,937
1,500
1,500
4,142
4,635
3,708
4,665
6,075
Note 1
Note 2
Where a Director was appointed during the year, balance reflects holdings at the time of commencement with the Company.
Where a Director resigned during the year, balance reflects holdings at time of resignation as a Director of the Company.
G
Additional information
Loans and other transactions with Directors and other key management personnel
There are no loans with Directors and other key management personnel. Other transactions with Director related entities are
disclosed in Note 24 – Related parties.
47
47
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Principal activities
The principal activities of the Company during the course of the year
consisted of the mining, processing and sale of uranium oxide.
Dividends
No dividends have been paid by ERA to members in respect of
the 2019 financial year (2018: nil).
Operating and financial review
Details of ERA’s review and results of operations are included
in the Chairman’s Report (page 4), the Chief Executive’s Report
(page 5) and the Financial Performance (page 7) and Operations
and Rehabilitation (page 9) sections.
Significant changes to the state of affairs
In the opinion of the Directors, other than matters reported in the
Directors’ Report, the Chairman’s Report and the Chief Executive’s
Report, there were no significant changes in the state of affairs of
the Company during the year ended 31 December 2019.
Matters subsequent to the end of the financial
year
On 15 November 2019, the Company announced a pro-rata
renounceable entitlement offer of 6.13 new fully paid ERA
ordinary shares to fund its rehabilitation obligations for the
Ranger Project Area (Entitlement Offer). The terms and
conditions of the Entitlement Offer are set out in an Offer
Information Booklet released on 15 November 2019.
The Entitlement Offer was fully underwritten by North Limited (the
Underwriter or North), a wholly-owned subsidiary of Rio Tinto,
pursuant to an Underwriting Agreement dated 15 November 2019
(Underwriting Agreement).
On 11 December 2019, the Takeovers Panel (Initial Panel) made
a declaration of unacceptable circumstances and orders in
relation to an application dated 18 November 2019 by Zentree
Investments Limited in relation to the affairs of ERA. Copies of
the Initial Panel’s declaration and orders are reproduced on the
Panel’s website at:
http://www.takeovers.gov.au/content/Media_Releases/2019/
downloads/MR19-078.pdf
On 13 December 2019, Rio Tinto lodged an application for a
review of the Initial Panel’s decision. On 20 January 2020, the
review Panel (Review Panel) affirmed the decision of the Initial
Panel to make a declaration of unacceptable circumstances and
varied the Initial Panel’s orders. Copies of the Review Panel’s
declaration and the variations ordered by the Review Panel are
reproduced on the Panel’s website at:
https://www.takeovers.gov.au/content/Media_Releases/2020/
downloads/MR20-005.pdf
New shares under the Entitlement Offer were issued on
25 February 2020. Following the issue of the new shares to
Rio Tinto under the Entitlement Offer and Underwriting
Agreement, Rio Tinto’s relevant interests in the Company
increased from 68.4 to 86.3 per cent.
Other than detailed above, there has not arisen in the interval
between the end of the year and the date of this report any item,
transaction or event of a material nature that has significantly
affected or may significantly affect:
•
•
•
the operations of the Company;
the results of those operations; or
the state of affairs of the Company subsequent to the
financial year ended 31 December 2019.
Likely developments
In the opinion of the Directors, any likely developments in the
operations of the Company 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 ERA is presented in the
Operations and Rehibilitation section on page 9.
Annual General Meeting
The 2020 Annual General Meeting will be held on 6 May 2020 in
Darwin, in the Northern Territory of Australia. Notices of the 2020
Annual General Meeting will be set out in separate letters to the
shareholders of the Company.
Indemnification
Clause 11 of the Company’s constitution provides that every
Director, manager, 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, secretaries, executive officers and
auditors from liability except for liability to a party, other than the
Company or a related body corporate, where the liability does not
arise out of conduct involving a lack of good faith and except 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, secretaries or
executive officers, is not expressly prohibited by the Corporations
Act 2001.
The Directors and Company Secretary of the Company, and all
former Directors and Company Secretaries, have the benefit of
the indemnity in Clause 11 of the Company’s constitution.
The indemnity also applies to executive officers of the Company
(being the senior executives and managers who are concerned
with, or take part in the management of the Company) as well as
other employees.
Insurance
Since the end of the previous financial year, the Company has
paid insurance premiums in respect of a Directors’ and officers’
liability policy of insurance.
The policy indemnifies all Directors and officers of ERA (including
the Directors, Company Secretaries, and executive officers
referred to above) against certain liabilities.
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
In accordance with common commercial practice, the insurance
policy prohibits disclosure of the nature of the liability insured
against and the amount of the premium.
Environmental regulation and policy
ERA strives to be at the forefront of environmental management
in the uranium industry. It operates in accordance with relevant
Commonwealth and Northern Territory environmental legislation
as well as site specific environmental licences, permits and
statutory authorisations. ERA’s environmental management
system is ISO14001 compliant.
ERA is required to report any incident that is a divergence from
strict compliance with statutory requirements, even if the incident
has no detrimental environmental impact, and reports are made
to the Department of Primary Industry and Resources (Northern
Territory); the Supervising Scientist Branch of the Commonwealth
Department of Environment; the Northern Land Council; the
Commonwealth Department of Industry, Science, Energy
and Resources and the Gundjeihmi Aboriginal Corporation
(representatives of the Mirarr Traditional Owners).
ERA’s commitment to protect the environment in 2019 was
overseen by the Supervising Scientist Branch, which conducts
extensive monitoring and research programs on the Ranger
Project Area and Jabiluka Mineral Lease.
There were no prosecutions commenced or fines incurred in
respect of ERA’s environmental performance during 2019.
The environment remained protected throughout the period.
Corporate governance
The Board of ERA considers high standards of corporate
governance to be critical to business integrity and performance.
The corporate governance structures and practices in place
at ERA are substantially in compliance with the 3rd Edition of
the Corporate Governance Principles and Recommendations
developed by the ASX Corporate Governance Council (Council).
Areas where the corporate governance practices of ERA do not
follow the Council’s recommendations arise due to Rio Tinto’s
86.3 per cent ownership of the Company and the management,
direction, services and support this provides. The extent to
which the Company does not comply is detailed in the Corporate
Governance Statement on pages 52 to 55.
Rounding of amounts
The Company is of a kind referred to in ASIC Class Order
2016/191 and in accordance with that Class Order amounts
in the financial statements and Directors’ Report have been
rounded to the nearest thousand dollars, unless otherwise
indicated.
Auditor
PricewaterhouseCoopers is the auditor of the Company. No
person who was an officer of the Company during the year was
a former partner or director of the auditor. Each of the Directors
at the time this report was approved has confirmed that, so far as
he or she is aware:
•
•
there is no relevant audit information (ie information needed
by the auditor in connection with preparing its report) of
which the auditor is unaware 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 auditor is
aware of that information.
Non audit services
The Company may decide to employ the auditor on assignments
additional to its statutory audit duties where the auditor’s
expertise and experience with the Company are important.
Details of the amounts paid or payable to the auditor 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, is satisfied that the provision of non-audit services
is compatible with the general standard of independence for the
auditor imposed by the Corporations Act 2001.
All non-audit services are reviewed by the Audit and Risk
Committee to ensure they do not impact on the impartiality
and objectivity of the auditor and do not undermine the general
principles relating to auditor’s independence as set out in
Professional Statement F1, including reviewing or auditing the
auditor’s own work, acting in a management or decision making
capacity for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards. Accordingly, the
Directors have satisfied themselves that the provision of non-
audit services by the auditor does not compromise the auditor
independence requirements of the Corporations Act 2001.
During the year, the following fees were paid or payable for
services provided by the auditor of the Company, its related
practices and non-audit related firms.
PricewaterhouseCoopers Australia
Audit and review of financial reports
275
290
2019
$000
2018
$000
Audit and review of financial reports
(additional prior year fees)
Total remuneration for audit
services
Other non-audit related services
Total Remuneration
65
340
316
656
10
300
-
300
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's RePoRt
Information on Auditor
PricewaterhouseCoopers 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 51.
Signed at Perth this 6th March 2020 in accordance with a resolution of the Directors.
P Mansell
Director
Perth
6 March 2020
50
50
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD 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
2019, 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.
Charles Christie
Partner
PricewaterhouseCoopers
Melbourne
6 March 2020
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
5151
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD CoRPoRAte GoveRnAnCe stAteMent
The Board of ERA considers high standards of corporate
governance to be critical to business integrity and performance
and to maximise the overall long term return to shareholders.
The Board seeks to ensure that ERA meets the objectives of
its shareholders, while paying proper regard to the interests of
employees and external stakeholders.
The corporate governance structures and practices in place
at ERA are substantially in compliance with the 3rd Edition of
the Corporate Governance Principles and Recommendations
(Principles) developed by the ASX Corporate Governance
Council (Council).
The Board has considered the Council’s Principles, and ERA
did not comply with the following recommendation for the whole
of the reporting period:
•
Recommendation 2.4 – there was not a majority of
independent Directors.
As explained further below, the Board considers that this is
appropriate. This Corporate Governance Statement is current as
at 6 March 2020 and has been approved by the Board of ERA.
Board responsibilities and charter
In carrying out its responsibilities and powers, the Board at all
times recognises its overriding responsibility to act honestly,
fairly, diligently and in accordance with the law in serving the
interests of the ERA’s shareholders and employees and the
community.
The Board Charter underpins the strategic guidance and
effective management oversight provided by the Board, and
defines the division of responsibility between Board and
management by formal delegation and a system of Board
reserve powers.
Other than as specifically reserved to the Board in the Board
Charter, responsibility for the management of ERA’s business
is delegated to the Chief Executive who is accountable to the
Board.
The Board approves strategy and business plans and monitors
the performance of ERA against these plans. The Board also
monitors compliance with policies prescribed by the Board in
areas such as health and safety, environment, business ethics,
internal control and risk management. These policies are
designed to ensure that ERA meets or exceeds the regulatory
requirements governing its operations.
In addition to the matters expressly required by law to be
approved by the Board, the powers specifically reserved for the
Board are as follows:
confirming the appointment and removal of a Chief
Executive proposed by Rio Tinto and the terms and
conditions of the Chief Executive’s employment;
appointment and removal of a Company Secretary;
appointment of the Chairman of the Board and members of
Board Committees;
any matters set out in the Schedule of Matters Reserved
for Decision or Consideration by the Board; and
•
•
•
•
5252
•
approval, subject to the Constitution, the Corporations Act
2001 and the ASX Listing Rules, of each of the following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
the issue of new shares or other securities in
the Company;
incurring of debt (other than trade creditors
incurred in the normal course of business);
capital expenditure in excess of $5,000,000;
the acquisition, divestment or establishment of
any significant business assets;
changes to the discretions delegated from the
Board;
the annual operating budget plan;
changes to the capital and operating approval
limits of senior management; and
the annual report and interim and preliminary
final reports.
The Board Charter is available at the Corporate Governance
section of ERA’s website.
Composition
Throughout 2019, the Board of ERA consisted of six Directors,
five of whom were non-executive.
Mr Mansell, Mr Charles and Mr Dowd all served as independent
non-executive Directors throughout 2019. Ms Fisher and Ms
Sutton, who are former executives of Rio Tinto, and Mr Carey, an
executive of Rio Tinto, also served as non-executive Directors
during the period.
On 7 August 2019, Ms Fisher resigned as a Director.
Mr Carey was appointed as a Director on 7 August 2019.
Skills, experience and diversity
The Board strives to achieve a diversity of skills, experience and
perspective among its Directors. Details of the Directors, their
experience, qualifications and other appointments are set out
on pages 28 to 29. Details of the independent status of each
Director are outlined in the Independence section below.
Qualification for Board membership is driven by the principle that
the Board’s composition should reflect the right balance of skills,
knowledge and diversity that the Board considers will best serve
the interests of ERA and all of its shareholders.
The Board reviews its structure, size and composition regularly.
The Board has not established a Nominations Committee. The
Board considers that its existing practices in reviewing Director
competencies, Board succession planning, Board performance
evaluation and Director selection and nomination carried out
in accordance with the Board Charter, are satisfactory and
appropriate given the size of the Board and ERA’s current
ownership structure.
The process to identify and nominate new independent Directors
from time to time is led by the incumbent independent Directors.
Decisions relating to the appointment of Directors are made by
the full Board. Directors appointed by the Board are required
by ERA’s Constitution to submit themselves for re-election by
shareholders at the Annual General Meeting following their
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
CoRPoRAte GoveRnAnCe stAteMent
appointment. There is no share ownership qualification for
appointment as a Director.
The ERA Board undertakes appropriate background checks and
screening prior to appointing a Director or putting a candidate
to security holders for election as a Director. ERA provides
security holders with all material information in its possession
concerning each Director standing for election or re-election in
the explanatory notes accompanying the notice of meeting.
Non-executive Directors are required to retire at least every
three years in accordance with ERA’s Constitution, but may offer
themselves for re-election. The key attributes that the Board
seeks to achieve in its membership are set out below.
Mining
Health, Safety
and Environment
Financial
Technical
Strategy
Governance
Executive
leadership
Government
relations
Senior executive experience in the
resources industry, including mining,
development, marketing and exploration
Familiarity with issues associated with
workplace health and safety, environment
and social responsibility
Proficiency in financial accounting and
reporting, corporate finance, internal
financial controls, corporate funding and
associated risks
A strong understanding in technical
areas of the resource industry, including
engineering, mining and processing
Proven ability in developing and
implementing successful business
strategies, including the capacity to
probe and challenge management on the
delivery of strategic objectives
Commitment to the highest standards of
governance, including Board experience
with other ASX listed companies that
demonstrate rigorous governance
standards
Sustainable success in business at a
very senior executive level
Interaction with government and
regulators and involvement in public
policy initiatives and decisions
Community
and indigenous
engagement
Experience in engaging with a cross-
section of community and Indigenous
stakeholders
Risk
management
Experience in developing and
establishing risk management
frameworks, setting risk appetite and
overseeing organisational risk culture
Appointment, induction training and professional
development
All new non-executive Directors sign a letter of appointment
which sets out the key terms and conditions of their appointment
including duties, rights and responsibilities, the time commitment
envisaged and the Board’s expectations regarding their
involvement with committee work. The Chief Executive and
senior executives enter into service agreements which govern
the terms of their employment (see page 43).
Induction training is provided to all new Directors. It includes
comprehensive induction materials, discussions with the Chief
Executive and senior executives and the option to visit the
Company’s operations at Ranger mine, either by appointment or
with the Board during its next site tour. The induction materials
and discussions include information on the Company’s strategy,
culture and values, key corporate and Board policies, the
Company’s financial, operational and risk management position,
the rights and responsibilities of Directors, the role of the Board
and its committees and meeting arrangements.
All Directors are expected to maintain the skills required to
discharge their obligations to the Company. ERA provides
the opportunity for Directors to participate in professional
development activities to develop and maintain the skills and
knowledge needed to perform their role as Directors effectively.
Independence
For the purposes of determining Director independence, the
Board considers any material business relationship which
could interfere, or be perceived to interfere, with the Director’s
independence of judgement, ability to provide a strong, valuable
contribution to the Board’s deliberations and the Director’s ability
to act in the best interests of ERA and all shareholders. Where
contracts in the ordinary course of business exist between ERA
and a company in which a Director has declared an interest,
these are reviewed for materiality to both ERA and the other
party to the contract.
In addition to the examples set out in the Principles, the following
may be taken into account in considering such material business
relationships:
•
•
•
•
•
whether, within the last three years, the Director or a close
family member has been a member of executive manage-
ment of ERA, employed in a senior position with a member
of the Rio Tinto Group or has received additional remunera-
tion from the Company or a member of the Rio Tinto Group;
whether the Director or a close family member is, or is as-
sociated with, a substantial shareholder (more than five per
cent of the voting shares) in the Company or in a member of
the Rio Tinto Group;
the Director’s cross directorships of, or significant links with,
or involvement in, other companies;
the Director’s length of service on the Board and whether
this may have compromised independence; and
whether, within the last three years, the Director or a close
family member has had, either directly or indirectly and
whether as principal, employee or consultant, a material
business relationship with ERA or with a member of the
Rio Tinto Group, whether as an auditor, professional ad-
viser, supplier, or customer (“material” being more than five
per cent of ERA’s or the counterparty’s consolidated gross
revenue per annum).
53
53
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD CoRPoRAte GoveRnAnCe stAteMent
Mr Mansell, Mr Charles and Mr Dowd are considered by the
Board to be independent Directors.
For the reporting period, the Board of Directors did not consist
of a majority of independent Directors. This does not follow
Recommendation 2.4 of the Council’s Principles. The Board
considers it is appropriate that the composition of the
Board recognised Rio Tinto’s 86.3 per cent shareholding.
All Directors are required to, and do, bring an independent
judgement to bear on Board decisions and act in accordance
with their statutory duties of good faith and for a proper purpose,
and in the interests of all shareholders.
All related party transactions, including those with Rio Tinto, have
been determined by the independent Directors to be on arm’s
length terms and in the interests of ERA.
Chairman and Chief Executive
The Chairman, Mr Mansell, is an independent non-executive
Director. Mr Mansell’s other appointments are set out
on page 28. The Board considers that none of his other
commitments interfere with the discharge of his duties to ERA.
The Chief Executive is Mr Arnold, who is also a Director.
Company Secretary
The Company Secretary is responsible for ensuring that Board
procedures are complied with and that governance matters are
addressed. All Directors have direct access to the Company
Secretary who is accountable directly to the Board, through the
Chairman, on all matters to do with the proper functioning of
the Board. Details of the Company Secretary’s experience and
qualifications are set out on page 31.
Board meetings
The Board held six scheduled meetings and six extraordinary
meeting during 2019. In addition, there were 16 meetings held
in 2019 of Committees established by the Board. The Board and
Committee meeting attendance details for Directors in 2019 are
set out on page 32.
Performance self assessment
The Board has a process for periodically evaluating its
performance, as well as the performance of its committees
and individual Directors. The evaluation and self-assessment
generally takes the form of an internal process facilitated by
the Chairman. After consulting each Director and the Company
Secretary, the Chairman reports a summary of the findings to
all Directors for discussion at the next Board meeting where
relevant actions are agreed. Periodically the Board may utilise
the services of an external consultant to facilitate the process.
The external process takes the form of a questionnaire
completed by each of the Directors and the Company Secretary.
Following collation by the consultant, the results, adequacy and
appropriateness of the self-assessment process are compiled.
A report outlining the results is circulated to all Directors and
discussed at the following Board meeting where actions arising
are agreed.
The Chairman conducted an evaluation of the Board in 2019
obtaining feedback from the Directors on the performance of
the Board and its committees.
Independent professional advice
The Board has adopted a procedure for Directors wishing to seek
independent professional advice, at the Company’s expense, in
the furtherance of their duties. The Board recognises that there
may be circumstances in which individual Directors are entitled
to independent professional advice at the Company’s expense
in the furtherance of their duties, and any Director may do so by
arrangement with the Company Secretary.
Remuneration
ERA’s Constitution provides that the aggregate remuneration
paid to non-executive Directors of ERA in any one year will not
exceed $800,000 or such other amount as may be approved
by shareholders from time to time. At the 2019 Annual General
Meeting, the 2018 Remuneration Report was approved with
96.25 per cent of shares voted in favour (voting comprised
355,929,859 votes ‘for’ the resolution and 13,882,793 votes
‘against’ the resolution). North Limited and Peko-Wallsend Pty
Ltd, which are both Rio Tinto entities, voted a combined total of
354,078,854 votes ‘for’ the resolution.
In 2012, the Board established a Remuneration Committee.
Throughout 2019, the Remuneration Committee comprised three
non-executive Directors, being Mr Mansell (Chair), Mr Dowd and
Mr Charles, all of whom are independent. A majority of members
constitutes a quorum for a meeting. The Chief Executive may
be invited to attend Remuneration Committee meetings. Other
executives may also be invited to discuss or report on particular
agenda items.
The Remuneration Committee Charter sets out the role and
objectives of the Remuneration Committee. A summary of the
objectives of the Remuneration Committee and the policies and
practices of the Company regarding the remuneration of non-
executive Directors, the Chief Executive and senior executives is
set out on pages 33 to 36 of the Remuneration Report.
The complete Remuneration Committee Charter is available at
the Corporate Governance section of ERA’s website at
www.energyres.com.au
Details of how the performance evaluation process is undertaken
by the Board in respect of the Chief Executive and senior
executives are set out on pages 33 to 36 of the Remuneration
Report.
Audit and Risk Committee
The Audit and Risk Committee is appointed by the Board and
throughout 2019 comprised three non-executive Directors, all
of whom are independent. A majority of members constitutes a
quorum. The present members of the Audit and Risk Committee
are Mr Charles (Chair), Mr Mansell and Mr Dowd. The
Company’s Chief Financial Officer, Chief Executive and Legal
Counsel & Company Secretary, the external auditor and the
internal auditor are invited to attend all meetings.
54
54
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
CoRPoRAte GoveRnAnCe stAteMent
The Committee provides a formal structure to further support
governance and initiatives for improvement in health, safety and
the environmental management of ERA operations.
The Health, Safety and Environment Committee held three
scheduled meetings during 2019. Attendance details of the 2019
meetings of the Health, Safety and Environment Committee, and
the qualifications and experience of the members, are set out in
the Directors’ Report on pages 32 and 28 to 29.
Funding Committee
In January 2019, the Board resolved that a Committee
comprising Mr Mansell (Chair), Mr Dowd and Mr Charles, being
those Directors considered to be independent from Rio Tinto,
be established to further progress the engagement with Rio Tinto
regarding funding options or transactions under consideration
by the Company. The Committee was granted all of the powers,
authorities and discretions of the Board in respect of, among
other things, evaluating, negotiating and, if they consider it to
be in the best interests of the Company, approving any proposed
agreement with Rio Tinto (including entering into any funding
support term sheet and subsequent binding agreement with
Rio Tinto) in relation to any funding proposal. A majority
of members constitutes a quorum. The committee held
15 meetings during 2019.
Diversity
ERA acknowledges the benefits that flow from advancing Board
and employee diversity, in particular gender and Indigenous
diversity. These benefits include identification and rectification
of gaps in the skills and experience of Directors and employees,
enhanced employee retention, greater innovation and
maximisation of available talent to achieve corporate goals and
increased financial performance.
Diversity, in the context of the Company, primarily refers to
groups which are underrepresented in its workforce. ERA has a
particular focus on the representation of women and Indigenous
people in its workforce. ERA’s policy on diversity can be found
on the Company’s website at www.energyres.com.au. In
accordance with the Company’s diversity policy, ERA has set
measurable objectives to achieve diversity.
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 Governance section of ERA’s website.
The Committee provides a formal structure for reviewing ERA’s
financial statements, accounting policies, control systems, risk
management practices and taxation issues and for liaison with
the external and internal auditors. The Committee also reviews
the adequacy of internal and external audit arrangements.
The Audit and Risk Committee advises the Board of any matters
that might have a significant impact on the financial condition
of ERA and has the authority to investigate any matters within
its terms of reference, having full access to the information and
resources of ERA 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
requirements.
The Audit and Risk Committee held four meetings during 2019.
Attendance details of the 2019 meetings of the Audit and
Risk Committee, and the qualifications and experience of the
members, are set out in the Directors’ Report on pages 32 and
28 to 29.
Each year the external auditor submits a schedule of audit
services and fee estimate to the Audit and Risk Committee
for consideration and approval. PricewaterhouseCoopers has
been ERA’s external auditor for a number of years. Each year,
the Audit and Risk Committee reviews the effectiveness of the
external audit process and the independence of the auditor.
Based on its 2019 review, the Audit and Risk Committee was
satisfied with the external audit process and that the external
auditor remained independent. Any work to be conducted by the
external auditor other than the audit is approved by the Audit and
Risk Committee.
Details of the fees paid to PricewaterhouseCoopers during 2019
are outlined on page 49.
Health, Safety and Environment Committee
The Health, Safety and Environment Committee is appointed by
the Board and ordinarily comprises three non-executive Directors.
A majority of members constitutes a quorum. Throughout 2019,
Mr Dowd (Chair) and Mr Charles were members of the Health,
Safety and Environment Committee. Ms Fisher served as a
member of the Committee in 2019, but resigned as a Director
during the period. Ms Sutton was appointed to the Committee
on 9 September 2019. The Company’s Chief Executive, General
Manager Operations and Company Secretary are invited to
attend all meetings.
The Health, Safety and Environment Committee Charter sets out
the role and objectives of the Health, Safety and Environment
Committee and is reviewed regularly. It is available at the
Corporate Governance section of ERA’s website.
55
55
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD CoRPoRAte GoveRnAnCe stAteMent
The objectives and the Company’s progress in achieving each
objective are set out below:
OBJECTIVE
OUTCOME
Women to represent 20 per
cent of the management
(being manager level and
above) and the Board by end
of 2019.
Target of 33 per cent
Indigenous people and 25 per
cent female participation in
new apprenticeships by end
of 2019.
As at 31 December 2019
female participation at manager,
Executive Committee and
Board level is 29 per cent.
Women comprise 17 per cent
of Directors. Total female
participation is 18 per cent.
Throughout 2019, ERA had 4
full time apprentices, 3 of whom
are female (75 per cent) and 3
of whom are indigenous (75 per
cent). In addition, ERA had five
Indigenous trainees.
Target Indigenous
employment of 20 per cent
by the end of 2019.
ERA ended 2019 with an
Indigenous employment rate of
12 per cent.
As at 31 December 2019, the proportion of women employed by
ERA was as follows:
Board of Directors
Executive Committee and
managers
Company
17%
29%
18%
Code of business conduct
We have clear standards around bribery and corruption, conflicts
of interest, antitrust, benefits, sponsorships and donations, data
privacy, fraud and third party due diligence. ERA has a Code
of Business Conduct to be met by all employees and Directors.
All employees are required to maintain high standards of ethical
behaviour in the execution 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 Business Conduct is reviewed to ensure it
adequately addresses the issues facing the Company and is
available for inspection on the Corporate Governance section of
the Company’s website at www.energyres.com.au.
In addition to the Company’s Code of Business Conduct, the
Company’s employees are required to comply with Rio Tinto’s
statement of business practice The Way We Work, available at
Rio Tinto’s website at www.riotinto.com. These provide a clear
framework for how we should conduct our business.
The Company has a confidential whistleblower program known
as Speak-Out ‘Talk to Peggy’. Employees are encouraged to
report any suspicion of unethical or illegal practices. Further
details regarding the program are available in the Corporate
Governance seciton of the Company’s website at
www.energyres.com.au.
Purchase and sale of Company securities
ERA has in place a formal policy that reinforces to all Directors,
officers and employees the prohibitions against insider trading.
The Share Trading Policy is available for inspection at the
Corporate Governance section of the Company’s website at
www.energyres.com.au.
In addition, the “Rules for dealing in securities of Rio Tinto”
(Dealing Rules) apply to the participation of ERA executives 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 subject to,
and conditional upon, compliance with the terms of the Dealing
Rules, including an express prohibition on hedging or limiting
of exposure to economic risk in relation to such securities.
Under the ERA Share Trading Policy:
•
•
•
Directors, senior executives and senior managers must
advise the Chairman in writing, and receive approval in
writing from the Chairman, if they intend to purchase or
sell ERA securities.
In regard to his own dealings, the Chairman is required to
notify the Chair of the Audit and Risk Committee.
No dealings in ERA securities may take place for the period
from the end of any relevant financial period to the trading
day following announcement of ERA’s annual results or
half year results.
Particulars of the interests held by Directors are outlined on
page 32 of the Remuneration Report.
Risk identification and management
ERA 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 Board, with primary
oversight by the Audit and Risk Committee, to ensure that
potential business risks are identified and appropriate action
taken.
The Company has an annual internal audit program that is
determined by the Audit and Risk Committee. The annual internal
audit program is executed by an outsourced provider which
reports back to the Audit and Risk Committee on its assessment
of the Company’s control environment. In addition, the Company
Secretary provides support for internal audit planning activities
and the monitoring of actions implemented by the Company in
response to findings raised by the internal auditor.
ERA benefits from the Rio Tinto Group’s knowledge, policies
and practices on risk management and corporate assurance,
developed to manage Rio Tinto’s diverse business activities
covering a variety of commodities and operational locations.
Together, these make up a comprehensive framework and
approach to risk analysis and risk management.
The Board has in place a number of systems to identify and
manage business risks. These include:
•
the identification and review of all of the business risks
known to be facing the Company;
56
56
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD CoRPoRAte GoveRnAnCe stAteMent
•
•
•
•
•
the provision of reports and information by management to
the Board, on a periodic basis, confirming the status and
effectiveness of the plans, controls, policies and procedures
implemented to manage business risks;
guidelines for ensuring that capital expenditure and revenue
commitments exceeding certain approved limits are placed
before the Board for approval;
limits and controls for all financial exposures, including the
use of derivatives;
a regulatory compliance program; and
safety, health and environmental policies which are support-
ed by a set of standards and management systems which
recognise the Company’s commitment to achieving high
standards of performance in all its activities in these areas.
The Audit and Risk Committee reviews ERA’s risk management
framework at least annually, and did so in 2019, to satisfy itself
that it continues to be sound.
The Audit and Risk Committee and the Board has assessed the
strategic risks to the Company’s business and the mitigation
strategies to be implemented by management. The strategic
risks identified through this assessment were future operating
cash flow and financial resources, stakeholder support of the
Company’s strategic initiatives, rehabilitation of the Ranger
Project Area, internal constraints relating to the Company’s
licence to operate, external events relating to the Company’s
licence to operate and retention and recruitment of key
personnel.
These strategic risks are in addition to risks inherent to the
mining industry generally which include economic conditions
(fluctuations in commodity pricing and exchange rates),
international regulation of greenhouse gas emissions and impact
of climatic conditions. More information on ERA’s business risks,
including any material exposure to economic, environmental
and social sustainability risks, is set out on pages 14 to 19 of the
Annual Report.
Each reporting period, the Chief Executive and the Chief
Financial Officer give statements to the Board that, in their
opinion, the financial records of the Company have been properly
maintained and that the financial statements comply with the
Australian Accounting Standards and give a true and fair view
of the Company’s financial position and performance. The
statements also provide that the opinion has been formed on the
basis of a sound system of risk management and internal control
which is operating effectively in all material respects.
Public statements and disclosure matters
ERA makes full and immediate disclosures to its shareholders
and the market as required by, and in accordance with, its legal
and regulatory obligations. Established systems are in place
to ensure compliance and matters that may have a material
impact on the price or value of ERA’s securities are reported to
the market in accordance with the ASX Listing Rules and the
Corporations Act 2001. ERA’s Continuous Disclosure Policy
is available at the Corporation Governance section of ERA’s
website at www.energyres.com.au.
Management is responsible for establishing and maintaining
adequate internal controls over financial reporting. These
controls, supervised by the Chief Executive and Chief Financial
Officer, provide reasonable assurance regarding the reliability
of the Group’s financial reporting and the preparation and
presentation of financial statements for external reporting
purposes, in accordance with International Financial Reporting
Standards (IFRS). The Company’s internal controls over financial
reporting include policies and procedures designed to ensure
the maintenance of records that: (i) accurately and fairly reflect
transactions and dispositions of assets; (ii) provide reasonable
assurances that transactions are recorded as necessary,
enabling the preparation of financial statements in accordance
with IFRS, and (iii) receipts and expenditures are made with
the authorisation of management and directors of each of the
companies.
Shareholder communication
ERA recognises the importance of effective communication with
shareholders and the general investment community. Apart from
ERA’s compliance with its mandatory continuous disclosure
obligations, ERA takes steps to ensure that its shareholders
and other stakeholders are kept informed. Full advantage is
taken of the Annual General Meeting to inform shareholders of
current developments and to give shareholders the opportunity
to ask questions. PricewaterhouseCoopers, ERA’s external
auditor attends the Annual General Meeting and is available to
answer shareholder questions about the conduct of the audit
and the preparation and content of the auditor’s report. ERA
shareholders are also able to submit written questions regarding
the statutory audit report to the auditor via the Company. Any
questions received and answers provided will be made available
to members at the Annual General Meeting. Shareholders who
are unable to attend meetings are encouraged to appoint a proxy
to vote either as they direct or at their discretion.
ERA believes that investor seminars, presentations and briefings
on financial and operational issues, including social and
environmental performance, are valuable ways of communicating
with relevant professionals, employees and other interested
persons. The Chief Executive and Chief Financial Officer are
available for regular meetings with the Company’s major investors,
and the Company releases investor presentations to coincide with
the release of half year and full year financial results.
ERA gives equal access to information disclosed in investor
seminars, presentations and briefings. If any such event is used
to disclose new material, it will, in advance or simultaneously, be
disclosed to the ASX and available on ERA’s website.
ERA provides shareholders with the option to receive
communications from, and send communications to, the
Company and the share registrar electronically. The contact
details are available on the Company’s website.
57
57
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD stAteMent oF CoMPReHensIve InCoMe
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue from continuing operations
Changes in inventories
Materials and consumables used
Employee benefits and contractor expenses
Government and other royalties
Commission and shipping expenses
Depreciation and amortisation expenses
Non-cash impairment charge
Changes in estimate of rehabilitaton provision
Financing costs
Statutory and corporate expenses
Other expenses
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit/(loss) is attributable to:
Owners of Energy Resources of Australia Ltd
Total comprehensive income for the year is attributable to:
Owners of Energy Resources of Australia Ltd
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
3
4
12
17
4
4
5
2019
$’000
2018
$’000
235,929
215,612
26,642
30,799
(81,499)
(79,877)
(108,821)
(109,953)
(11,085)
(10,724)
(5,589)
(176)
-
-
(34,580)
(9,055)
(5,514)
(3,453)
-
(113,776)
(343,199)
(22,539)
(14,205)
(5,008)
6,252
(456,323)
-
21,049
6,252
(435,274)
-
-
6,252
(435,274)
6,252
(435,274)
6,252
(435,274)
27
27
1.2
1.2
(84.1)
(84.1)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
5858
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD BALAnCe sHeet
AS AT 31 DECEMBER 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Inventories
Undeveloped properties
Property, plant and equipment
Investment in trust fund
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Income received in advance
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net liabilities
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
The above balance sheet should be read in conjunction with the accompanying notes.
NOTES
2019
$’000
2018
$’000
15
41,465
7
8
9
10
11
12
13
14
16
17
18
19
20
20
208,591
313,736
9,400
10,519
144,281
115,352
5,785
1,484
368,057
441,091
28,118
89,856
4,213
76,333
198,520
566,577
-
2,408
137,351
181,224
30,104
89,856
-
74,715
194,675
635,766
37,877
34,561
-
102,233
174,671
1,770
-
658,270
741,885
-
660,040
841,264
-
741,885
916,556
(274,687)
(280,790)
706,485
388,748
706,485
388,897
(1,369,920)
(1,376,172)
(274,687)
(280,790)
5959
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD stAteMent oF CHAnGes In eQUIty
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Employee share options – value of employee services
20
Balance at 31 December 2018
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Employee share options – value of employee services
20
CONTRIBUTED
EQUITY
$’000
RESERVES
$’000
RETAINED
EARNINGS
$’000
NOTES
TOTAL
$’000
706,485
389,300
(940,898)
154,887
-
-
-
-
-
-
-
-
(435,274)
(435,274)
-
-
(435,274)
(435,274)
(403)
(403)
-
-
(403)
(403)
706,485
388,897
(1,376,172)
(280,790)
-
-
-
-
-
-
-
-
(149)
(149)
6,252
-
6,252
-
-
6,252
-
6,252
(149)
(149)
Balance at 31 December 2019
706,485
388,748
(1,369,920)
(274,687)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
6060
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD CAsH FLow stAteMent
FOR THE YEAR ENDED 31 DECEMBER 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
(inclusive of Goods and Services Tax)
Payments to suppliers and employees
(inclusive of Goods and Services Tax)
Payments for rehabilitation
Interest received
Financing costs paid
NOTES
2019
$’000
2018
$’000
219,197
215,290
(230,704)
(239,089)
(11,507)
(23,799)
(91,965)
(58,946)
5,953
(1,981)
8,479
(2,070)
Net cash (outflow)/inflow from operating activities
26
(99,500)
(76,336)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash (outflow)/inflow from investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Payment of lease liabilities
Employee share option payments
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(3,623)
500
(3,123)
(1,087)
(1,418)
(2,505)
(105,128)
313,736
(17)
(4,334)
-
(4,334)
-
(1,068)
(1,068)
(81,738)
395,477
(3)
Cash and cash equivalents at end of year
7
208,591
313,736
The above cash flow statement should be read in conjunction with the accompanying notes.
6161
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
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,
unless otherwise stated. The financial statements are for Energy
Resources of Australia Ltd (ERA).
(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) Going Concern
As at 31 December 2019, ERA, has a deficiency of capital
and reserves of $275 million (2018: $281 million), it has also
experienced operating losses and negative cash flows during the
financial year ending on that date.
As a result of the increase in rehabilitation provision in 2018,
ERA launched an entitlement offer on 15 November 2019 to raise
approximately $476 milion. The offer completed on 25 February
2020. Prior to this there was a material uncertainty over ERA’s
ability to continue as a going concern. ERA now considers that it
will have adequate available cash to fully rehabilitate the Ranger
Project Area, as such no further uncertainity exists over ERA’s
ability to continue as a going concern.
(ii) Compliance with IFRS
The financial statements of the Company also comply with
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
(iii) Historical cost convention
These financial statements have been prepared under the
historical cost convention.
(iv) Critical accounting estimates
The presentation of financial statements requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the
accounting policies of the Company. The areas involving a higher
degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements, are
disclosed in Note 2.
(b) Principles of consolidation
(i) Subsidiaries
ERA has no subsidiaries and is referred to in the financial report
as the Company or ERA.
Subsidiaries are all those entities (including special purpose
entities) over which the Company has the power to govern
the financial and operating policies, generally accompanying
a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing
whether the Company controls another entity.
(c) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances, 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 flow to the entity and specific criteria have been met
for the Company’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, taking into
consideration the type of customer, the type of transaction and
the specifics of each arrangement.
(i) Sale of goods
ERA places all sales through a marketing agreement with Rio
Tinto Marketing PTE Limited (Rio Tinto Uranium) based in
Singapore (Marketing Agreement).
Generally under the marketing agreement with Rio Tinto
Uranium, payment for uranium oxide is connected to the date
the material is shipped. When this is the case, once cash is
received it is treated as unearned revenue until the sale occurs
and control transfers. The amount of consideration does not
contain a significant financing component as payment terms are
significantly less than one year.
Certain sales may be provisionally priced at the date revenue
is recognised. Sales revenue is accounted for under AASB
15 ‘Revenue from Contracts with Customers’ and subsequent
movements in provisionally priced receivables is accounted for
under AASB 9 ‘Financial Instruments’.
Revenue from contracts with customers is recognised on
provisionally priced sales based on the selling price for the period
stipulated in the contract, with subsequent fair value movements
reported as revenue. This is because it is highly probable that the
revenue would not be subject to a significant revenue reversal.
As noted above, certain sales may be provisionally priced at the
date revenue is recognised, however, substantially all Uranium
sales are reflected at final prices in the results for the period due
to the majority of sales being settled prior to the period end. The
final selling price for all provisional priced products is based on
the price for the quotational period stipulated in the contract. The
change in value of the provisionally priced receivable is based on
relevant market prices and is included in sales revenue as noted
above.
Sales revenue as disclosed in these accounts includes revenue
from movements in provisionally priced receivables, consistent
with the treatment in prior periods.
Sales revenue is recognised on individual sales when control
transfers to the customer. Judgement is required and
6262
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
generally the Company would consider the following indicators
(acknowledging the standard does not have a hierarchy). The
customer has control if the customer has:
•
•
•
•
•
the significant risks and rewards of ownership and has the
ability to direct the use of, and obtain substantially all of the
remaining benefits from, the good or service;
a present obligation to pay in accordance with the terms of
the sales contract;
accepted the asset. Sales revenue may be subject to
adjustment if the product specification does not conform to
the terms specified in the sales contract but this does not
impact the passing of control and is immaterial. Assay and
specification adjustments have been immaterial historically;
legal title to the asset. The Company usually retains legal
title until payment is received for credit risk purposes only;
and
physical possession of the asset. This indicator may be less
important as the customer may obtain control of an asset
prior to obtaining physical possession, which may be the
case for goods in transit.
After consideration of these five indicators, the company
considers that control passes and sales revenue is recognised
when, following a contractual requirement the product is
transferred out of the Company’s holding account at the uranium
converter (usually upon delivery to the converter) or upon
delivery if the exchange occurs not at a uranium converter, at
which stage the risks of ownership are transferred. There is only
one performance obligation, being for provision of product at the
point where control passes.
Sales revenue excludes any applicable sales taxes. Mining
royalties payable are presented as an operating cost.
In the case where a sale occurs immediately after which (or
part of) the goods are borrowed back by the company under a
seperate agreeement, 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
Other revenue/income recognised by the Company includes:
•
•
•
•
•
•
interest income, which is recognised on a time proportion
basis using the effective interest rate method;
rental income, which is recognised on a straight line basis;
net gains on disposal of assets, which is recognised at the
date control of the asset passes to the acquirer;
contract compensation, which is recognised upon cancella-
tion of a sales contract;
foreign exchange gains; and
insurance recoveries, which is recognised on confirmation
from the insurer that the claim payment has been approved.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements are measured using
the currency of the primary economic environment in which
the entity operates (“the functional currency”). The financial
statements are presented in Australian dollars, which is the
Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange 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, except when they are
deferred in equity as qualifying cash flow hedges and qualifying
net investment hedges or are attributable to part of the net
investment in a foreign operation.
(e) Financing costs
Financing costs (including interest) are included in the statement
of comprehensive income in the period during which they are
incurred, except where they are included in the cost of non-
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 expenditure on the development
had not been made.
Once the asset is ready for use, 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’s outstanding borrowings during
the year.
(f) Provisions
Provisions are recognised when the Company has a present
legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle
the obligation and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management’s
best estimate of the expenditure, adjusted for risk, required
to settle the present obligation at the balance sheet date. The
discount rate used to determine the present value reflects current
market assessments of the time value of money. The increase in
the provision due to the passage of time is recognised as interest
expense.
(i) Rehabilitation
The Company is required to rehabilitate the Ranger Project Area
upon cessation of mining operations. The costs are estimated
on the basis of a closure model, taking into consideration the
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63
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
technical closure options available to meet the Company’s
obligations. The cost estimates are calculated annually during
the life of the operation to reflect known developments, and are
subject to regular reviews.
The amortisation or unwinding of the discount applied in
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.
Other movements in the provision for closure and restoration
costs, including those resulting from new disturbance, updated
cost estimates, changes to lives of operations and revisions to
discount rates are capitalised within fixed assets, unless the
assets that they relate to are fully written down or impaired in
which case the movement in the provision is allocated directly
to the statement of comprehensive income. These costs are
then depreciated on a unit of production basis over the life
of the reserves.
Where rehabilitation is conducted systematically over the life
of the operation, rather than at the time of closure, 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.
Costs are allowed for in the closure provision when they are
directly related to rehabilitation of the Ranger Project Area. Costs
incurred to operate and manage the site whilst uranium oxide
production is occurring are allocated to operating costs and
so excluded from the rehabilitation provision. The operation of
the Brine Concentrator and pond water management are costs
that are allocated to operating costs up until such time as the
production of uranium oxide ceases (forecast to be January
2021), they are then included in the closure provision from this
time. Following cessation of uranium oxide production all costs
associated with the Ranger Project Area are included in the
closure provision, cost associated with other corporate activities
will remain in operating costs and so are not provided for.
Separately, the Company is required to maintain with the
Commonwealth Government the Ranger Rehabilitation Trust
Fund (Trust Fund), to provide security against the estimated
costs of closing and rehabilitating the mine immediately (rather
than upon the planned cessation of mining operations). 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 in the Trust Fund, is then
determined. The Trust Fund includes both cash and financial
guarantees. The cash portion is shown as an investment on the
balance sheet (Note 14), and interest received by the Trust Fund
is shown as interest income. The balance of bank guarantee is
shown at Note 28.
The Company is required to rehabilitate the Jabiluka Mineral
Lease upon cessation of operations to a standard specified by
the Authorisation to operate issued by the Northern Territory
Government. The estimated cost of rehabilitation is currently
secured by a bank guarantee and fully provided for in the
financial statements.
64
64
(g) Income tax
Income tax expense for the period is the tax payable on the
current period’s taxable income based on the applicable income
tax rate adjusted by temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the
financial statements, and unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of the
reporting period in the country where the Company generates
taxable income (Australia).
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements. However, the deferred income tax 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 taxable profit
or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by
the reporting date and are expected 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
taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax 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 equity are also recognised directly in
equity.
(h) Trade and other receivables
Trade receivables are recognised at fair value.The company
applies the forward looking expected credit loss model
required by AASB 9, using the simplified approach for its trade
receivables portfolio review and the general approach for all
other financial assets as required by the standard.
Trade receivables are normally settled within 45 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.
Other receivables relate to transactions outside the usual
operating activities of the Company and are predominantly
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.
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
(i) Inventories
Inventories, other than stores, 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, including transport.
Inventory is valued using the weighted average cost method and
includes both fixed and variable production costs as well as cash
and non-cash charges.
Stockpiles represent ore that has been extracted and is available
for further processing. If there is significant uncertainty as
to when the stockpiled ore will be processed it is expensed
as incurred. Where the future processing of this ore can be
predicted with confidence, for example because it exceeds the
mine’s cut-off grade, it is valued at the lower of cost and net
realisable value.
Work in progress inventory includes ore stockpiles and other
partly processed material. Quantities are assessed primarily
through surveys and assays.
Stores are valued at the lower of cost or net realisable value and
are impaired accordingly to take into account obsolescence.
For 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’s inventory. The uranium loans do not
meet the definition of a financial liability and are recorded net of
inventory.
(j) Impairment of assets
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’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less cost to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash
generating units).
Fair value is determined as the amount that would be obtained
from the sale of the asset in an arm’s length transaction.
The value in use is determined using the present value of the
future cashflow expected to be derived from an asset or cash
generating unit.
(k) Property, plant and equipment
(i) Acquisition
Items of property, plant and equipment are recorded at historical
cost and, except for land, are depreciated as outlined below.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items. Subsequent costs are included in
the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the 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 equipment is provided for as follows:
(a) individual assets that have a life equal 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;
and
(b) 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 equipment on which the depreciation charges are
based:
•
•
buildings – units of production over the life of reserves;
plant and equipment* – 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.
Office equipment: computers - three years
•
Office equipment: general - five years
•
Plant and equipment - five years
•
Furniture and fittings - ten years
•
• Motor vehicles - five years
•
•
Tailings Storage Facility - three years
Brine Concentrator - 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.
All ERA’s property, plant and equipment (excluding right of use
assets) is currently fully impaired. Property, plant and equipment
expenditure incurred is recorded directly in other expenses.
(iii) 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 subsequently 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.
(l) Leases
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset
is available for use by the Company. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period.
The right-of-use asset is shown as a non-current asset and
depreciated over the shorter of its useful life and the lease terms
on a straight line basis. As right-of-use assets represent an
economic benefit they are not impaired as is the case for other
Ranger cash generating unit (CGU) assets.
65
65
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
Assets and liabilities arising from a lease are initially measured
on a present value basis. Lease liabilities include the net present
value of the following lease payments:
• fixed payments (including in-substance fixed payments),
•
•
less any lease incentives receivable;
variable lease payment that are based on an index or a rate;
amounts expected to be payable by the lessee under
residual value guarantees;
• the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
•
•
•
construction of underground tunnels, where necessary
for exploration drilling;
examining and testing extraction and treatment methods;
and
compiling prefeasibility and feasibility studies.
Exploration and evaluation expenditure 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 acquire interests in existing projects.
• payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined,
the incremental borrowing rate is used.
•
•
Capitalisation of exploration expenditure commences when
there is a high degree of confidence in the project’s viability and
hence it is probable that future economic benefits will flow to the
Company. Capitalised exploration expenditure is reviewed for
impairment indicators at each balance sheet date.
Right-of-use assets are measured at cost comprising the
following:
•
•
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement
date less any lease incentives received;
any initial direct costs; and
restoration costs.
•
•
Payments associated with short-term leases and leases of
low-value assets are recognised as an expense in profit or loss.
Short-term leases are leases with a lease term of twelve months
or less.
Treatment of lease agreements recognised in the
rehabilitation provision
Lease payments have been contemplated in the rehabilitation
provision. However, once a lease for equipment to be used in
rehabilitation activities is entered into, a separate lease liability
and right-of-use asset is recognised. The rehabilitation obligation
is not extinguished by entering into a lease, instead, the
rehabilitation obligation is extinguished over time as the leased
asset is put to use in executing the rehabilitation program.
Lease payments are allocated to the lease liability, with the
interest component allocated to financing cost in the Statement of
Comprehensive Income.
Where the right-of-use asset resulting from the lease
arrangement is to be used exclusively for rehabilitation, it
represents an economic resource which will have a future use in
the completion of rehabilitation activity. As such the right-of-use
asset is not impaired as is the case for other non-lease Ranger
Cash Generating Unit (CGU) assets.
When the right-of-use asset is depreciated, the depreciation
charge is allocated to the rehabilitation provision to reduce the
outstanding amount provided for in the rehabilitation provision.
(m) Exploration and evaluation expenditure
Exploration and evaluation expenditure comprises costs which
are directly attributable to:
•
•
researching and analysing existing exploration data;
conducting geological studies, exploratory drilling and
sampling;
66
66
Subsequent recovery of the resulting carrying value depends
on successful development of the area of interest or sale of the
project. If a project does not prove viable, all unrecoverable costs
associated with the project 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. If the project proceeds to
development, the amounts included within intangible assets are
transferred to property, plant and equipment.
(i) Undeveloped properties
Undeveloped 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
Board and Audit and Risk Committee. Impairment is assessed
using the fair value less cost of disposal method.
(n) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other
receivables or payables in the balance sheet. Cash flows are
presented on a gross basis. The GST components of cash
flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are
presented as operating cash flows.
(o) 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,
whether or not billed to the Company. Trade accounts payable
are normally settled within 60 days. These are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest rate method.
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
(p) Employee entitlements
(i) Wages and salaries, annual leave and sick 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’ services provided
up to the reporting date. A provision exists for annual leave and
accumulating sick leave as it is earned by employees and is
measured at the amount expected to be paid when it is settled
and includes all related on costs. Liabilities for non-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 expected to be settled within
12 months of the reporting date is recognised in the provision
of employee benefits and is measured in accordance with (i)
above. The liability for long service leave expected to be settled
more than 12 months from the reporting date is measured as
the present value of expected future payments to be made in
respect of services provided by employees up to the reporting
date. Consideration is given to the expected future wage and
salary levels, experience of employee departures and periods
of service.
Expected future payments are discounted using the rates
attaching to Commonwealth Government securities at the
reporting date, which most closely match the terms of maturity
of the related liabilities.
(iii) Superannuation plan
Employees of the Company are entitled to benefits on retirement,
disability or death from their membership of the Rio Tinto Staff
Superannuation Fund (“The Fund”). The Fund has both a defined
benefit and a defined contribution section. Contributions to the
defined contribution superannuation plans are expensed in the
income statement when incurred.
The Company has no staff who are members of the defined
benefits section.
(iv) Termination benefits
Termination benefits are payable when employment is terminated
before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange 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.
(q) Segment reporting
Management has determined the operating segments based
on the reports reviewed by the Chief Executive, used to make
strategic decisions. The Chief Executive considers the business
from a product perspective.
(r) Cash and cash equivalents
For the purposes of the statement of cash flows, cash includes
cash on hand and deposits held at call, net of any bank
overdrafts.
(s) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from
the proceeds. Incremental 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 acquisition as part of the purchase
consideration.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is determined by dividing net profit after
income tax attributable to members of the Company, excluding
any costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares
issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax 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.
(u) Rounding of amounts
The Company is of a kind referred to in Class Order 2016/191,
issued by the Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the financial report.
Amounts in the financial report have been ‘rounded off’ in
accordance with that Class Order to the nearest thousand
dollars, or in certain cases, to the nearest dollar.
(v) 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 expense.
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 (TSR) performance.
Fair values are subsequently re-measured at each accounting
date to reflect the number of awards expected to vest based on
the current and anticipated TSR performance. If any awards are
ultimately settled in shares, 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, by the purchase of
shares on market or by the use of shares previously acquired
as part of a share buyback. The fair value of the share plans is
recognised as an expense over the expected vesting period with
a corresponding entry to other reserves.
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
The Company has used the modified retrospective approach in
transitioning to the standard. At the end of December 2018, no
leases were identified that were required to be recognised under
the standard. The permitted practical expedient of accounting
for operating leases with a remaining lease term of less than
12 months as at 1 January 2019 as short term leases was used
in applying AASB 16 for the first time. The Company has also
elected not to reassess whether a contract is, or contains a lease
at the date of initial application. Instead, for contracts entered into
before the transition date, the Company relied on its assessment
made applying AASB 117 and Interpretation 4 Determining
whether an Arrangement contains a lease.
A reconciliation of lease commitments recognised at 1 January
2019 is detailed below:
Operating lease commitments disclosure as at
31 December 2018 (note 22)
417
(less): short-term leases not recognised as a
liability
(less) low-value leases not recognised as
a liability
(317)
(100)
Lease liability recognised as at 1 January 2019
-
Details regarding the leases are disclosed separately in Note 1 (l)
and 22.
If the cost of shares acquired to satisfy the plans exceeds
the expense charged, the excess is taken to the appropriate
reserve. The fair value of the share plans is determined at the
date of grant, taking into account any market based vesting
conditions attached to the award (e.g. TSR). The Company
uses fair values provided by independent actuaries calculated
using a lattice based option valuation model. Non-market based
vesting conditions (e.g. earnings per share targets) 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, at which point
the estimate is adjusted to reflect the actual awards issued. No
adjustment is made after the vesting date even if the awards are
forfeited or not exercised.
Further information about the treatment of individual share based
payment plans is provided in Note 30.
(w) New accounting standards and interpretations
The Company has not early adopted any amendments,
standards or interpretations that have been issued but are not
yet effective.
(i) AASB 16 leases – Accounting policy
applied from 1 January 2019
The new accounting standards and interpretations adopted on
1 January 2019 related to AASB 16 “leases”. The impact of the
transition and new accounting policies are disclosed below.
This note explains the impact of the adoption of AASB 16 leases
and also discloses the new accounting policies applied from
1 January 2019, where these differ from those applied in prior
periods.
There was no impact on equity attributable to owners of ERA as
at 1 January 2019 from the adoption of AASB 16.
The standard, which replaces AASB 117 “Leases”, removes the
concept of operating and finance leases for lessees, replacing
it with a single accounting model under which lessees must
recognise all leases (including property and equipment) on the
balance sheet as a new ‘right of use asset’ and ‘lease liability’.
Previously, leases in which a significant portion of risks and
rewards at ownership were not transferred to the the company
as leassee were classified as operating leases (Note 22).
Payments were made under operating leases (net at any
incentives received from the lessor) were charged to the
Statement of Comprehensive Income on a straight-line basis
over the period of the lease.
Payments associated with low value assets (below $5,000) and
short term leases (less than twelve months), continue to be
recognised on a straight-line basis as an expense in the profit
and loss. Low-value assets comprise Information Technology
equipment or small site tooling. Additionally, mineral leases are
excluded from the standard and costs continue to be recognised
on a straight-line basis.
68
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
2
Critical accounting estimates
and judgements
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations 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, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
(a) Rehabilitation provision
The calculation of the rehabilitation provision relies on estimates
of costs and their timing to rehabilitate and restore disturbed land
to original condition.
The costs are estimated on the basis of a closure model,
taking into account considerations of the technical closure
options available to meet ERA’s obligations. The provision for
rehabilitation represents the net present cost at 31 December
2019 of the preferred plan within the requirements of the
Ranger Authority. The Ranger Authority requires ERA to cease
mining and processing activities by January 2021 and complete
rehabilitation of the Ranger Project Area by January 2026.
The closure model is based on the recently completed Feasibility
Study which expanded on the previous Prefeasibility Study
completed in 2011. Key packages of work progressed since
2012 include preliminary Pit 3 backfill, Pit 1 capping and design,
construction and commissioning of the tailings dredging system.
The Feasibility Study has increased the level of certainty
regarding forecast rehabilitation expenditure.
Major activities to complete the rehabilitation plan include:
material movements, water treatment, tailings transfer, demolition
and revegetation. Major cost sensitivities include material
movements, water treatment and tailings transfer costs.
The ultimate cost of rehabilitation is uncertain and can vary
in response to many factors including legal requirements,
technological change, weather events and market conditions. It is
reasonably possible that outcomes from within the next financial
year that are different from the current cost estimate could
require material adjustment to the rehabilitation provision for the
Ranger Project Area.
Selected downside sensitivities on the Ranger rehabilitation
provision are detailed below.
Process water
Additional process water volumes are sensitive to many factors
and any additional water would require treating through ERA’s
process water treatment infrastructure, primarily the brine
concentrator. Water volumes can vary due to:
• additional rainfall above an average wet season;
•
the performance of water treatment plants, including new
smaller scale plants that are yet to be fully commissioned;
the timing of closure of which water catchments occurs; and
the volume of water expressed from tailings.
•
•
If water treatment volumes exceed the available capacity, it
may be necessary to expand treatment capacity. This may
involve the construction of an additional brine concentrator plant
or other alternate technology. This has not been allowed for
in the estimate and would come at significant additional cost.
Furthermore, any significant delay may further compress the
schedule requiring alteration to other closure activities.
Bulk material movement
Pit 3 bulk material movements are sensitive to the volume and
unit cost of the material which is to be moved and the schedule
of movement.
Tailings transfer
Tailings transferred from the Tailings Storage Facility to Pit 3 are
principally sensitive to the characteristics of the tailings being
moved. An additional dredge has been launched and is now fully
commissioned to reduce the risk underpinning this process and
maintain the schedule.
Other factors
In addition to the factors described above there are many
additional items that the estimate is sensitve to including:
evaporation rates, stakeholder requirements, brine salt disposal,
engineering studies, tailings consolidation rates, plant mortality
and project support costs.
In estimating the rehabilitation provision a risk-free discount rate
is applied to the underlying cash flows. At 31 December 2019, the
real discount rate was 2.00 per cent.
(b) Taxation
ERA has approximately $195 million tax losses (at 30 per cent)
that are not recognised as deferred tax assets due to uncertainty
regarding ERA’s ability to generate adequate levels of future
taxable profits. This treatment is reviewed periodically. Should
future taxable profits eventuate this treatment will not impact
ERA’s ability to utilise available tax losses in future periods.
Judgement is required in regard to the application of income tax
legislation. There is an inherent risk and uncertainty in applying
these judgements and a possibility that changes in legislation will
impact the carrying amount of deferred tax assets and deferred
tax liabilities recognised on the balance sheet.
(c) Determination of ore reserves and resources
ERA estimates the Ore Reserves and Mineral Resources based
on information compiled by a Competent Person as defined
69
69
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
in the 2012 Edition of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves
(the JORC code). There are numerous uncertainties inherent
in estimating Ore Reserves and Mineral Resources 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 Ore Reserves and may, ultimately, result in the Ore
Reserves being restated. Such changes in Ore Reserves could
impact on depreciation and amortisation rates, asset carrying
values and provisions for rehabilitation. ERA’s Ore Reserves
and Mineral Resources Statement as at 31 December 2019 is
on pages 21 and 22.
(d) Asset carrying values
ERA has two cash generating units (CGUs), the Ranger Project
Area and the Jabiluka Mineral Lease. The Ranger CGU includes
all assets and liabilities related to activities on the Ranger
Project Area, including the rehabilitation provision. The Jabiluka
Undeveloped Property relates to the Jabiluka Mineral Lease
which is currently subject to a Long Term Care and Maintenance
Agreement with Traditional Owners.
At 31 December 2019, the property, plant and equipment in
the Ranger CGU continues to be fully impaired. When capital
expenditure is incurred it is immediately expensed to the
Statement of Comprehensive Income. In the year ended
31 December 2019, $4 million in capital expenditure was
expensed.
At the end of each reporting period, ERA assesses whether
there are any indications that the CGUs may be impaired or
whether circumstances have changed to indicate reversal of
prior impairments. This requires judgment in analysing possible
impacts caused by factors such as the price of uranium oxide,
foreign exchange movements, project progression, Traditional
Owner relationships and weather impacts on process water
inventories.
ERA assesses the recoverable amount using a fair value less
costs of disposal (FVLCD) method. ERA conducts impairment
testing using a probability-weighted discounted cash flow model.
(e) Undeveloped Properties
Undeveloped properties are considered assets not yet ready for
use. In reporting periods where impairment testing is required,
the recoverable amount of the undeveloped properties is
determined using the fair value less costs of disposal method.
Undeveloped properties consist of the Jabiluka Mineral Lease.
The Jabiluka Mineral Lease is currently subject to a Long Term
Care and Maintenance Agreement with Traditional Owners. This
agreement ensures the Jabiluka deposit will not be developed
without the consent of the Mirarr Traditional Owners. It is
uncertain that this consent will be forthcoming and, by extension,
that the Jabiluka deposit will be developed. Should this consent
not eventuate in the future, the Jabiluka Undeveloped Property
would face full impairment.
70
70
The valuation of the Jabiluka Mineral Lease requires a high
degree of judgment. To determine the fair value, ERA uses a
probability weighted discounted cash flow model, based on
post-tax cash flows expressed in real terms, estimated until
the end of the life of mine plan and discounted using an asset-
specific post-tax real discount rate. Results are cross checked
against market valuations of other undeveloped mining projects
in the uranium industry and the broader mining sector, including
market valuations of mining assets subject to long term approval
constraints. The approach has been reviewed by an external
valuation expert.
ERA regularly reviews and updates these assumptions and
assesses potential impairment indicators. In 2019, the review
did not identify any indicators that the carrying amount of the
Jabiluka Undeveloped Property may not be recovered in full from
successful development or sale. This review primarily considered
the following key factors:
• uranium consensus price changes based on a set of brokers
that regularly provide a view on the long term uranium oxide
price and the ongoing presence of a contract price premium;
•
long term consensus forecast Australian/US dollar exchange
rates;
• probability and timing of development and ongoing
stakeholder relations; and
• applicable discount rate.
The review of these factors did not identify any material changes
that would warrant a full impairment review to be conducted. As
a result the carrying value of the Jabiluka Undeveloped Property
remains at $90 million.
Key assumptions to which the Jabiluka model is sensitive
include: the probability of future development (which includes an
assessment of obtaining any required approval and/or support
of various stakeholders including Traditional Owners, regulatory
bodies and shareholders), uranium oxide prices (including term
contract price premiums in the future), foreign exchange rates,
production and capital costs, discount rate, ore reserves and
mineral resources, lease tenure renewal and development delays.
A change in these assumptions may result in further impairment.
Selected downside sensitivities to the fair value of the Jabiluka
CGU and the potential further impact on impairment testing at
31 December 2019 are summarised below:
Sensitivity
Potential further impairment
-10 per cent change in the
forecast uranium oxide prices
+20 per cent change in
development capital
+5 per cent change in forecast
Australian/US dollar exchange
rates
+1 per cent change in discount
rate
$76 million further impairment
$76 million further impairment
$20 million further impairment
$19 million further impairment
ERA’s view remains that Jabiluka is a large, high quality uranium
ore body of global significance.
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
(f) Inventory net realisable value
The calculation of net realisable value is sensitive to key
assumptions including: uranium price, Australia/US dollar
exchange rate and, where applicable, costs to complete.
The sales price of uranium oxide is denominated in US dollars,
so fluctuations in the Australian/US dollar exchange rate will
affect the proceeds received from sales and consequently the
recoverable amount.
Inventories are carried at the lower of cost or net realisable
value in accordance with AASB 102.
No net realisable value adjustments was recorded at
31 December 2019 (2018:nil).
Where necessary the net realisable value adjustments are
included in ‘Changes in inventories’ in the statement of
comprehensive income.
(g) Employee Benefits
During the year ended 31 December 2019, the Company
continued to develop and plan for the restructure of the work
force post production. This has now reached a level of detail
where a provision for benefits payable on termination has been
recognised in line with Australian Accounting Standards. The total
provision recognised is $10 million. This is split between current
liabilities and non current liabilities based on whether the balance
is forecast to be payable within one year.
Potential termination payments beyond 2021 are yet to be
recognised due to the level of uncertainty regarding quantum
and timing.
71
71
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
3
Revenue
REVENUE FROM CONTINUING OPERATIONS
Sale of goods
Rendering of services
Total sales revenue
Other revenue
Interest received/receivable, other parties
Rent received
Contract compensation (uranium oxide)
Dispute settlement
Insurance recoveries
Net gain on sale of property, plant and equipment
Net revenue foreign exchange gain / (loss)
Total other revenue
Total revenue from continuing operations
4
Expenses
PROFIT/(LOSS) BEFORE INCOME TAX INCLUDES
THE FOLLOWING SPECIFIC EXPENSES:
Cost of sales
Third party produced product U308
Produced product (uranium oxide)
Total cost of sales
Government and other royalties
Royalty payments
Payments to Indigenous interests
Total Government and other royalties
Financing costs
Other parties
Unwinding of discount (rehabilitation provision)
Total Financing Costs
Other Expenses
Property, plant and equipment expensed
Office and other expenses
Total Other Expenses
Other individually significant expenses
Net expenses foreign exchange (gain)/loss
Short term and low value leases
Interest expense related to leases
Sustainability payment to aboriginal interests
Defined contribution superannuation expense
72
72
2019
$’000
2018
$’000
209,636
201,203
41
70
209,677
201,273
7,571
926
3,083
14,071
101
500
-
26,252
10,293
904
3,194
-
152
-
(204)
14,339
235,929
215,612
NOTES
2019
$’000
2018
$’000
22
22
1,548
138,792
140,340
-
144,432
144,432
2,519
8,566
11,085
1,982
32,598
34,580
3,623
1,891
5,514
(155)
725
40
2,059
3,980
2,437
8,287
10,724
2,070
20,469
22,539
4,334
674
5,008
362
917
-
2,021
3,992
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
5
Income tax expense/(benefit)
INCOME TAX EXPENSE/(BENEFIT)
Current tax
Deferred tax
Under/(over) provided in prior years
Income tax expense/(benefit)
Deferred income tax (revenue)/expense included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (Note 18B)
(Decrease)/increase in deferred tax liabilities (Note 18A)
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% (2018: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Derecognition of deferred tax assets
Rehabilitation expenditure
Other items
Income tax expense/(benefit)
6
Dividends
Dividends paid or declared
No dividends have been paid or declared for the year ended 31 December 2019 (2018: nil).
Dividends franking account
Franking credits available for subsequent financial years
based on a tax rate of 30% (2018: 30%)
2019
$’000
2018
$’000
-
-
-
-
-
(21,049)
-
(21,049)
(422)
422
2,280
(23,329)
-
(21,049)
6,252
1,876
(456,323)
(136,897)
8,323
(10,192)
(7)
-
126,977
(11,632)
503
(21,049)
2019
$’000
2018
$’000
234,095
234,095
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking credits that
will arise from the payment of the amount of the provision for income tax as applicable.
The ability to utilise the franking account credits is dependent upon there being sufficient available profits to declare dividends.
73
73
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
7
Cash and cash equivalents
CURRENT
Cash at bank and in hand
Deposits at call
Cash and cash equivalents
2019
$’000
2018
$’000
33,486
175,105
208,591
15,528
298,208
313,736
Cash at bank/Deposits at call
Cash assets and deposits bear floating interest rates between 0 per cent and 2.82 per cent (2018: 0.0 per cent and 2.83 per cent).
Interest rate risk exposure
The Company’s exposure to interest rate risk is discussed in Note 28.
8
Trade and other receivables
CURRENT
Trade debtors
Amounts due to related parties
Other debtors
Trade and other receivables
2019
$’000
2018
$’000
3,161
3,712
2,527
9,400
2,815
5,016
2,688
10,519
Impairment of receivables
No trade receivables are past due. There is no impairment of trade receivables.
Other debtors 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 expected to be settled
during the 12 months subsequent to balance date.
Foreign exchange and interest rate risk
The Company operates internationally but is primarily exposed to foreign exchange risk arising from currency exposures with respect
to the US dollar.
A summarised analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk can be found in
Note 28.
Fair value and credit risk
Due to the short-term nature of trade and other receivables, their carrying amount approximates their fair value.
The maximum exposure 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 28 for more information on the financial risk management policy
of the Company.
9
Inventories – current
Stores and spares
Work in progress at cost
Finished product U3O8 at cost
Total current Inventory
74
74
2019
$’000
16,214
3,808
124,259
144,281
2018
$’000
15,913
1,879
97,560
115,352
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
Inventory expense
Obsolescence of inventory provided for and recognised as an expense during the year ended 31 December 2019 amounted to
$104,542 (2018: $141,812).
Write-downs of inventories to net realisable value recognised as an expense during the year ended 31 December 2019 amounted to
$Nil (2018: $Nil).
10 Other assets
Prepayments
11
Inventories – non-current
Finished product U3O8 at cost
12 Undeveloped properties
Jabiluka: Long-term care and maintenance development project
Balance brought forward
Amount capitalised during the year
Non-cash impairment change
Total undeveloped properties
2019
$’000
5,785
2018
$’000
1,484
2019
$’000
2018
$’000
28,118
30,104
2019
$’000
2018
$’000
89,856
203,632
-
-
-
(113,776)
89,856
89,856
Undeveloped properties are considered an asset not yet ready for use. In reporting periods where impairment testing is required, the
the recoverable amount of the undeveloped properties is determined using the fair value less cost of disposal method.
Fair value less cost of disposal is determined using a discounted cash flow model. In 2019 no impairment test was required as
a trigger assessment did not identify any indicators that the carrying amount of the Jabiluka Undeveloped Property may not be
recoverable in full from successful development or sale. Key assumptions the fair value is most sensitive to include:
uranium prices;
foreign exchange rates;
production and capital costs;
discount rate;
•
•
•
•
• Ore Reserves and Mineral Resources; and
•
probability of future development.
As a result of identifying an indicator of impairment at 30 June 2018 ERA conducted an impairment review of the Jabiluka
Undeveloped Property. In determining the value assigned to each key assumption, the Company used external sources of information
and utilised the expertise of external consultants to validate entity-specific assumptions. Further, the Company’s cash flow forecasts
were based on estimates of future uranium prices, which are based on long term broker consensus forecasts and assume a premium
for long term contracts. ERA concluded that the fair value of the Jabiluka Undeveloped Property amounted to $89.9 million, resulting
in an after tax impairment charge of $90.4 million, comprising impairment charge of $113.8 million, partially offset by the release of a
deferred tax liability of $23.4 million as at June 2018.
A review of possible indicatiors of impairment was conducted in 2019 with no factors identified that indicate the Jabiluka Undeveloped
Property faced further impairment. Further details can be found in Note 2.
The recoverable amount is dependent on the development and life of the ore body together with the term and continuity of the mining
lease. It reflects expected future cashflows contained in the long term asset plan with an adjustment of cashflows expected to take
into account project development risk. The Company has projected cashflows for the period of the current mining lease, together with
a ten year renewal period.
75
75
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
The Jabiluka Mineral Lease is currently under long-term care and maintenance. The Company has agreed that future mining
development will not occur without the consent of the Mirarr Traditional Owners. It is uncertain that this consent will be forthcoming
and, by extension, that the Jabiluka deposit will be developed. Should this consent not eventuate in the future, the Jabiluka
Undeveloped Property would face full impairment.
The discount rate applied to the future cash flow forecasts represents 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 flow estimates have not been adjusted.
13 Property, plant and equipment
MINE LAND AND
BUILDINGS
$’000
PLANT AND
EQUIPMENT
$’000
MINE
PROPERTIES
$’000
REHAB-
ILITATION
$’000
RIGHT OF
USE ASSETS
$’000
TOTAL
$’000
YEAR ENDED 31 DECEMBER
2019
Opening net book amount
Additions
Disposals
Depreciation charged to
rehabilitation provision
Depreciation/amortisation
charge
Additons immediately impaired
Closing net book amount
-
-
-
-
-
-
-
-
3,623
-
-
-
(3,623)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cost
110,845
1,179,347
421,700
342,327
-
5,266
-
(877)
(176)
-
4,213
5,266
-
8,889
-
(877)
(176)
(3,623)
4,213
2,059,485
(110,845)
(1,179,347)
(421,700)
(342,327)
(1,053)
(2,055,272)
Accumulated depreciation/
amortisation/impairment/writeoffs
Net book amount
YEAR ENDED 31 DECEMBER
2018
Opening net book amount
Additions
Disposals
Change in estimate
Additons immediately impaired
Closing net book amount
-
-
-
-
-
-
-
-
-
4,334
-
-
(4,334)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cost
110,845
1,175,724
421,700
342,327
Accumulated depreciation/
amortisation/impairment
Net book amount
(110,845)
(1,175,724)
(421,700)
(342,327)
-
-
-
-
76
76
4,213
4,213
-
-
-
-
-
-
-
-
-
4,334
-
-
(4,334)
-
2,050,596
(2,050,596)
-
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
Right of use assets
Right of use assets include buildings at $881,000 and equipment used for rehabilitation at $3,332,000.
Assets under construction
The cost of the assets disclosed above include the following expenditure disclosed in property, plant and equipment which is in the
course of construction:
Plant and equipment
2019
$’000
2,220
2018
$’000
1,618
77
77
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
14
Investment in trust fund
NON-CURRENT
Trust Fund
2019
$’000
2018
$’000
76,333
74,715
Trust Fund
The Ranger Rehabilitation Trust Fund holds a restricted fixed term investment in the form of bank bills which mature and are
reinvested periodically. The Trust Fund is held at fair value through profit or loss (FVTPL) and is classified as a non-current receivable.
The applicable weighted average interest rate for the year ended 31 December 2019 was 2.02 per cent (2018: 2.47 per cent).
15 Payables
CURRENT
Trade payables
Amounts due to related parties
Other payables
Total payables
16 Provisions – current
CURRENT
Employee benefits
Rehabilitation
Total current provisions
2019
$’000
2018
$’000
39,735
910
820
36,059
1,110
708
41,465
37,877
2019
$’000
2018
$’000
13,856
123,495
137,351
10,357
91,876
102,233
Employee benefits provision
During 2019 a provision for benefits payable on termination of employment was recognised. A total of $10.1 million was recognised,
with $3.1 million classified as a current provision and $7.0 million classified as a non current provision (Note 17). Further details are
in Note 2(g). The remaining employee benefits relate to annual leave and long service leave. Entitlements currently payable are
classified as current provisions and entitlements due in greater than 12 months are classified as non current provsions.
Movements in rehabilitation provision
Movements in the rehabilitation provision during the financial year are set out below:
2019
Carrying amount at the start of the year
Payments
Utilisation of lease assets
Transfer from non-current provision
Carrying amount at the end of the year
78
78
REHABILITATION
$’000
91,876
(91,965)
(877)
124,461
123,495
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
2018
Carrying amount at the start of the year
Payments
Transfer from non-current provision
Carrying amount at the end of the year
17 Provisions – non-current
NON-CURRENT
Employee benefits (Note 16)
Rehabilitation
Carrying amount at the end of the year
REHABILITATION
$’000
71,640
(58,946)
79,182
91,876
2019
$’000
2018
$’000
11,598
646,672
658,270
3,350
738,535
741,885
Movements in rehabilitation provision
As a result of the Ranger Cash Generating Unit being fully impaired in 2016, the 2018 changes in rehabilitation estimates were
allocated directly to the Statement of Comprehensive Income. Movements in the rehabilitation provision during the financial year are
set out below:
2019
Carrying amount at the start of the year
Change in estimate
Unwinding of discount
Transfer to current provision
Carrying amount at the end of the year
2018
Carrying amount at the start of the year
Change in estimate
Unwinding of discount
Transfer to current provision
Carrying amount at the end of the year
REHABILITATION
$’000
738,535
-
32,598
(124,461)
646,672
REHABILITATION
$’000
454,049
343,199
20,469
(79,182)
738,535
79
79
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
18 Deferred tax liability
(A) DEFERRED TAX LIABILITY
The balance comprises temporary differences attributable to:
Amounts recognised in profit and loss
Investment in trust fund
Inventories
Receivables
Total deferred tax liabilities
Off-set of deferred tax asset pursuant to set-off provisions (Note 18B)
Net deferred tax liabilities
Movements
Opening balance at 1 January
(Credited)/debited to the income statement (Note 5)
Closing balance at 31 December
(B) DEFERRED TAX ASSETS
The balance comprises temporary differences attributable to:
Amounts recognised in profit and loss
Property, plant and equipment
Employee provisions
Other
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions (Note 18A)
Net deferred tax assets
Movements
Opening balance at 1 January
Credited to the income statement (Note 5)
Closing balance at 31 December
2019
$’000
2018
$’000
22,901
22,415
3,780
460
3,734
570
27,141
26,719
(27,141)
(26,719)
-
-
26,719
50,048
422
(23,329)
27,141
26,719
15,337
20,331
7,642
4,162
4,111
2,277
27,141
26,719
(27,141)
(26,719)
-
-
26,719
422
27,141
28,999
(2,280)
26,719
80
80
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
19 Share capital
SHARE CAPITAL
A Class shares fully paid
Total contributed equity
2019
SHARES
2018
SHARES
517,725,062
517,725,062
2019
$’000
706,485
706,485
2018
$’000
706,485
706,485
Following completion of the Entitlement Offer on 25 February 2020, A class shares increased to 3,173,658,136.
Ordinary 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.
On a show of hands every holder of ordinary shares present at a shareholders’ meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Capital risk management
Details of the Company’s exposure to risks when managing capital are set out in Note 28.
20 Reserves and retained profits
RESERVES
Share-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
ACCUMULATED LOSSES
Movements in retained profits were as follows:
Opening retained earnings – 1 January
Net profit/(loss) for the year
Closing retained earnings/(accumulated losses) – 31 December
2019
$’000
2018
$’000
(752)
389,500
388,748
(603)
389,500
388,897
(603)
(149)
(752)
(200)
(403)
(603)
389,500
389,500
-
-
389,500
389,500
(1,376,172)
(940,898)
6,252
(435,274)
(1,369,920)
(1,376,172)
Nature and purpose of reserves
The share based payments reserve is used to recognise the fair value of equity instruments issued to employees but not exercised.
Capital reconstruction reserve
In June 1995, the Company reduced its share capital by cancelling $0.95 of the capital paid up on each issued share and reducing
the par value of each issued share from $1.00 to $0.05. The cancelled capital (comprising $389,500,000 in total) was credited to a
Capital Reconstruction Reserve. The Company has the ability to distribute capital to shareholders from this reserve.
81
81
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
21 Contingencies
Contingent liabilities
Legal actions against the Company:
The remaining argument in the action listed in the Federal 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, 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 liability disclosed above.
22 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date is as follows:
Within one year
2019
$’000
481
2018
$’000
3,158
Lease commitments
Future lease payments for short-term and low value leases 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
Within one year
Later than one year but not later than five years
Total short-term and low value leases
2019
$’000
2018
$’000
100
-
100
367
50
417
The Company leases information technology equipment and small site tooling under short-term and low value leases expiring in less
than one year.
Lease commitments recognised in the balance sheet
Lease liabilities recognised in the balance sheet are classified as a current liablity when payable within one year and a non-current
liability when payable in greater than one year. No leases have payments due in greater than three years.
Mineral tenement leases
Future mineral tenement lease payments not provided for in the financial statements and payable:
Within one year
Later than one year but not later than five years
Later than five years
Total mineral tenement leases
2019
$’000
1,189
1,610
-
2,799
2018
$’000
1,172
2,711
102
3,985
In order to maintain current rights of tenure to mining tenements, the Company will be required to outlay an amount of $1.2 million
in the year ending 31 December 2020 in respect of tenement lease rentals. This includes payments for the Ranger Project Area and
Jabiluka Lease. In 2019, lease payments for the Ranger Project Area have been removed from lease commitments and allocated to
mining tenement leases. The 2018 comparitive has been updated for consistency.
82
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ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
The Company is liable to make payments to the Commonwealth as listed below:
(i)
(ii)
(iii)
An annual amount equal to the sum payable by the Commonwealth to the Northern Land Council pursuant to the Section
44 Agreement for rent for the duration of the agreement. This amounted to $1,036,232 for 2019 and is indexed for future
years.
Amounts equal to the sums payable by the Commonwealth to the Aboriginal Benefits Reserve pursuant to a determination
under Section 63(5) (b) of the Aboriginal Land Rights (Northern Territory) Act 1976. The Company is required to pay 2.5
per cent of Ranger net sales revenue to the Commonwealth and 1.75 per cent of Ranger net sales revenue to the Northern
Land Council or an entity representing the Mirarr Traditional Owners as directed by the Northern Land Council (amounts
paid during 2019: $8,565,674; 2018: $8,286,580).
Amounts equal to sums payable by the Commonwealth to the Northern Territory pursuant to an understanding in respect of
financial arrangements between the Commonwealth and the Government 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 (amounts paid
during 2019:$2,519,316; 2018:$2,437,229) .
The Company is liable to make payments to the Northern Land Council pursuant to the Section 43 Agreement between
Pancontinental Mining Limited and Getty Oil Development Company Limited and the Northern Land Council dated 21 July 1982,
which was assigned to the Company with the consent of the Northern Land Council, as listed below:
(i)
(ii)
Up front payment of $3,400,000 on the commencement of production at Jabiluka.
Annual royalty payments calculated at 4.5 per cent of net sales revenue less $500,000 less any amounts paid to the
Aboriginal Benefits Reserve by the Commonwealth under the conditions specified in the Jabiluka Mineral Lease for the first
10 years and thereafter at 5 per cent of net sales revenue less any amounts paid to the Aboriginal Benefits Reserve by the
Commonwealth under the conditions specified in the mineral lease (refer commitment below).
The Company is liable to make payments to the Commonwealth in respect of the Jabiluka project pursuant to the conditions attached
to the mineral lease. The amount payable was, until 30 June 1990, calculated at the rate of 5.25 per cent of net sales revenue from
the Jabiluka project. The Jabiluka project is now under long term care and maintenance and will not be developed without the consent
of the Mirarr Traditional Owners.
23 Auditor’s remuneration
During the year the auditor of the Company earned the following remuneration:
PricewaterhouseCoopers Australian firm
Audit and review of financial reports
Audit and review of financial reports (additional prior year fees)
Other non-audit related services
Total remuneration of PricewaterhouseCoopers Australia
2019
$’000
2018
$’000
275
65
316
656
290
10
-
300
83
83
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
24 Related parties
Directors
The names of persons who were Directors of the Company at any time during the financial year are as follows:
Peter Mansell, Shane Charles, Paul Dowd, Paul Arnold, Zara Fisher (resigned 7 August 2019), Andrea Sutton and Justin Carey
(appointed 7 August 2019).
Information relating to Directors’ compensation, shareholdings and retirement benefits is set out in the Remuneration Report in the
Directors’ Report.
Key management personnel
Key management personnel and Directors’ compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
2019
$’000
3,018
196
465
2018
$’000
2,974
226
353
3,679
3,553
In compliance with Corporations Regulations 2001 2M.3.03 the Company has provided detailed remuneration disclosures in the
Director’s report. The relevant information can be found in the Remuneration Report on pages 33 to 36.
Loans with Directors and key management personnel
There were no loans with Directors or key management personnel during 2019 (2018: Nil).
Transactions with Directors and Director-related entities
There were no transactions with Directors or Director-related entities other than Rio Tinto Limited during 2019 (2018: nil). Details of
transactions with Rio Tinto Group Companies are outlined below.
Ultimate parent entity
The ultimate parent entity is Rio Tinto Limited. This interest is held through North Limited (incorporated in Victoria, Australia) which
has beneficial ownership of 86.3 per cent of the issued ordinary shares of the Company. North Ltd owns 52.0 per cent directly and
the remaining 34.3 per cent through its subsidiary, Peko-Wallsend Pty Ltd. This follows the completion of the Entitlement Offer on
25 February 2020, prior to this Rio Tinto Limited held 68.4 per cent.
Interest income
Interest income is received from Rio Tinto Finance Ltd which holds cash on behalf of the Company.
84
84
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
Transactions with related parties
The following transactions occurred with related parties:
Management services fees paid to ultimate parent entity:
Rio Tinto Group Companies
Consulting fees paid to:
Rio Tinto Group Companies
Other reimbursements paid for commercial services received:
Rio Tinto Group Companies
Amounts received from related parties:
Rio Tinto Group Companies – sales
Rio Tinto Group Companies – interest
Dividends paid to:
Related parties – North Ltd
Related parties – Peko-Wallsend Pty Ltd
2019
$’000
2018
$’000
(91)
(91)
(1,770)
(2,193)
(12,929)
(12,154)
208,883
202,327
1,471
1,105
-
-
-
-
Amounts received from related parties include sales of uranium oxide at market price. The Company is party to a marketing
agreement with Rio Tinto Uranium on the basis that it represented a superior value to the Company then alternative marketing
agreements considered. Under the revised marketing agreement, uranium oxide produced by the Company is sold to Rio Tinto
Uranium a related party of Rio Tinto plc.
Outstanding balances arising from sales/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 were as follows:
2019
$’000
2018
$’000
Current assets - cash assets
Related parties - Rio Tinto Finance Ltd
Current assets - receivables
Related parties - Rio Tinto Group Companies
Current liabilities - creditors
Related parties - Rio Tinto Group Companies
Current liabilities - income received in advance
Related parties - Rio Tinto Group Companies
All related party transactions were conducted on arm’s length terms and conditions and at market rates.
55,105
98,208
3,712
5,016
910
1,110
-
34,561
85
85
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
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 Executive that are used to make strategic
decisions.
The Chief Executive considers the business from a product prospective and has identified only one reportable segment in the year ended 31
December 2019, being the mining, processing and selling of uranium. There are no other unallocated operations.
Primary reporting – business segments
The segment information provided to the Chief Executive for the reportable segment is as follows:
Revenue from external customers
Other revenue
Total segment revenue
Segment result
Income Tax Benefit
Profit/(loss) for the year
Segment assets
Total assets
Segment liabilities
Total liabilities
Acquisitions of non-current assets
Non-cash Impairment charge
Depreciation and amortisation expenses
Net (gain)/loss on sale of property, plant and equipment
URANIUM
2019
$’000
2018
$’000
209,677
201,273
26,252
14,339
235,929
215,612
6,252
(456,323)
-
21,049
6,252
(435,274)
566,577
566,577
841,264
841,264
3,623
635,766
635,766
916,556
916,556
4,334
-
113,766
176
(500)
-
-
86
86
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
Other segment information
Segment revenue
The revenue from external parties reported to the Chief Executive is measured in a manner consistent with that in the
income statement.
Revenues from external customers are derived from the sale of uranium. A breakdown of revenue and results is provided in the tables
below. 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 external customers in other countries is outlined in the
table below:
Asia
Total revenue
SEGMENT REVENUES
FROM SALES TO
EXTERNAL CUSTOMERS
2019
$’000
209,636
209,636
2018
$’000
201,203
201,203
Segment revenues are allocated based on the country in which the customer is located. During 2017 the Company entered into a
revised marketing agreement with Rio Tinto Uranium based in Asia. Details are disclosed in Note 24.
Segment assets
The amounts provided to the Chief Executive 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, receivables, inventories, property, plant
and equipment and other assets, net of provisions.
All assets of the Company as at 31 December 2019 are in Australia with the exception of inventories in transit or at converters
of $122,715,101 (2018: $57,344,834). All acquisitions of property, plant and equipment and other non-current assets occurred in
Australia.
Segment liabilities
The amounts provided to the Chief Executive 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, employee entitlements and provisions. The Company does not have any borrowings or derivative financial
instruments as at 31 December 2019.
87
87
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
26 Reconciliation of loss after income tax to net cash inflow/(outflow) from
operating activities
Profit/(Loss) for the year
Add/(less) items classified as investing/financing activities:
2019
$’000
6,252
2018
$’000
(435,274)
Net (gain)/loss on sale or write-off of non-current assets
3,123
4,334
Add/(less) non-cash items:
Depreciation and amortisation
Non cash impairment charge
Rehabilitation provision: unwinding of discount
Employee benefits: share based payments
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
(Increase)/decrease in investment in trust fund
(Decrease)/increase in payables
(Increase)/decrease in net deferred tax assets
(Decrease)/increase in provisions
Net cash inflow/(outflow) provided from operating activities
27 Earnings per share
Basic earnings per share
Diluted earnings per share
176
-
32,598
1,270
17
(33,442)
(26,944)
(4,301)
(1,618)
3,588
-
(80,219)
(99,500)
-
113,776
20,469
665
3
(13,036)
(29,530)
(1,011)
(1,814)
1,100
(21,049)
285,031
(76,336)
2019
CENTS
1.2
1.2
2018
CENTS
(84.1)
(84.1)
Earnings used in the calculation of basic and diluted earnings per share: 2019: $6,252,075 (2018: ($435,273,942)).
Weighted average number of ordinary shares on issue used in calculation of basic earnings per share: 2019: 517,725,062 shares
(2018: 517,725,062). Earnings per share has been calculated on the basis of the Company’s issued capital prior to the issue of
shares under the pro-rata entitlement offer approved on 15 November 2019.
28 Financial risk management
The Company carries out risk management under policies approved by the Board of Directors. The Board provides principles for
overall risk management, as well as written policies covering specific areas, such as mitigating interest rate and other risks, use of
derivative and non-derivative financial instruments.
The Company’s business is mining and not trading. Accordingly, the Company only contracts to sell uranium that it plans to produce,
however purchasing uranium for resale may be required in circumstances where actual production falls short of contractual sales
volumes. The Company operates entirely in Australia and is exposed primarily to Australian dollar denominated costs. Sales are
primarily denominated in US dollars.
Market risk
The Company markets its products internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and
liabilities that are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis
and cash flow forecasting.
88
88
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
The Company’s exposure to foreign currency risk at the reporting date was as follows:
Trade receivables
Trade payables
2019
USD
$’000
2,512
(181)
2018
USD
$’000
3,364
(275)
Group sensitivity
At 31 December 2019, had the Australian Dollar weakened/strengthened by 10 per cent against the US Dollar with all other
variables held constant, the change in trade receivables would have affected pre-tax profit for the year by $358,704 higher/lower
(2018: $477,596 higher/lower).
At 31 December 2019, had the Australian Dollar weakened/strengthened by 10 per cent against the US Dollar with all other
variables held constant, the change in trade payables would have effected pre-tax profit for the year by $25,802 higher/lower
(2018: $38,982 higher/lower).
Commodity price risk
In the absence of uranium being traded on global futures exchanges, the Company uses a combination of both fixed and market price
related contracts for future sales to manage this exposure. No financial instruments are used by the Company to manage commodity
price risk.
Interest rate risk
The Company’s main interest rate risk arises from cash on deposit. When cash is surplus to operational and investing requirements
it is invested in lump sum deposits to maximise interest received. In addition, the Company is exposed to interest rate risk on cash in
the Ranger Rehabilitation Trust Fund.
Credit risk
The Company has policies in place to ensure that sales of products are made to customers with an appropriate credit history. Where
customers are rated by an independent credit rating agency, these ratings are used to set credit limits. If no independent rating exists,
the credit quality of the customer is subject to extensive assessment. Letters of credit and other forms of credit insurance are also
used as required. Cash transactions and cash invested through the Ranger Rehabilitation Trust Fund are limited to high credit quality
financial institutions. The Company has policies that limit the amount of credit exposure to any one financial institution.
TRADE RECEIVABLES
AA
A
BBB
Other
2019
$’000
-
6,873
-
-
2018
$’000
-
7,831
-
-
Liquidity and capital risk
ERA’s objectives when managing capital are to safeguard ERA’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.
ERA does not have a target debt to equity ratio, but has a policy of maintaining a flexible financing structure to be able to fund capital
expenditure programs, pay dividends and fund expansion opportunities as they arise. This policy is balanced against the desire to ensure
efficiency in the debt/equity structure of ERA’s balance sheet in the longer term through pro-active capital management programs.
The future liquidity and capital requirements of ERA will depend on many factors. As a result of the increase in the rehabilitation
provision in 2018, ERA has undertaken an Entitlement Offer to raise approximately $476 million (refer to Note 29 below). Following
the finalisation of the Entitlement Offer ERA considers that it has adequate cash available to fully rehabilitate the Ranger Project Area.
As a result no material uncertainty exists over ERA’s ability to continue as a going concern.
In April 2016, ERA entered into a $100 million credit facility agreement with Rio Tinto. This agreement remains in place.
89
89
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
notes to tHe FInAnCIAL stAteMents
Each year, ERA 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 ERA into the Ranger Rehabilitation Trust Fund (Trust Fund) is then determined. The Trust Fund includes both cash and
financial guarantees.
ERA’s ability to continue to access these financial guarantees can be influenced by many factors including future cash balance, cash
flows and shareholder support. Guarantees are subject to periodic review by the banks. Shoud the Company at any point be unable
to access fianancial guarantees, substantial additional cash would be required to be deposited into the Trust Fund. In the scenario
where this occurs ERA’s cash reserves available to fund operations would reduce. The balance of bank guarantees, and Trust Fund
Cash held is currently $410 million. In late January 2020, the independent assessor notified ERA that the estimated Annual Plan of
Rehabilitation would increase to $671 million. ERA is questioning certain elements of that assessment, but does not expect the final
amount to be materially different to the independent assessment. ERA anticipates that the relevant Commonwealth Minister will finally
determine the revised security amount and require ERA to provide the additional security into the Trust Fund later in quarter 1 of 2020.
At this time, ERA will evaluate the appropriate mix of bank guarantees and Trust Fund Cash held. This may result in a significant
increase in Trust Fund Cash held.
ERA places cash deposits with a mix of approved financial institutions. ERA monitors these deposits periodically with a view of
maximising interest revenue, minimising risk and exposure to any one financial institution and cash liquidity. Consequently, ERA holds
a variety of term deposits and at call cash accounts.
ERA currently has no debt and $285 million in total cash resources (comprising $209 million of cash on hand or at call and $76 million
invested as part of the Trust Fund).
Fair value estimation
The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due
to the short-term nature of these amounts.
29 Events occurring after the reporting period
On 15 November 2019, the Company announced a pro-rata renounceable entitlement offer of 6.13 new fully paid ERA ordinary shares
to fund its rehabilitation obligations for the Ranger Project Area (Entitlement Offer). The terms and conditions of the Entitlement Offer
are set out in an Offer Information Booklet released on 15 November 2019.
The Entitlement Offer was fully underwritten by North Limited (the Underwriter or North), a wholly-owned subsidiary of Rio Tinto,
pursuant to an Underwriting Agreement dated 15 November 2019 (Underwriting Agreement).
On 11 December 2019, the Takeovers Panel (Initial Panel) made a declaration of unacceptable circumstances and orders in relation to
an application dated 18 November 2019 by Zentree Investments Limited in relation to the affairs of ERA. Copies of the Initial Panel’s
declaration and orders are reproduced on the Panel’s website at:
http://www.takeovers.gov.au/content/Media_Releases/2019/downloads/MR19-078.pdf
On 13 December 2019, Rio Tinto lodged an application for a review of the Initial Panel’s decision. On 20 January 2020, the review
Panel (Review Panel) affirmed the decision of the Initial Panel to make a declaration of unacceptable circumstances and varied the
Initial Panel’s orders. Copies of the Review Panel’s declaration and the variations ordered by the Review Panel are reproduced on the
Panel’s website at:
https://www.takeovers.gov.au/content/Media_Releases/2020/downloads/MR20-005.pdf
New shares under the Entitlement Offer were issued on 25 February 2020. Following the issue of the new shares to Rio Tinto under
the Entitlement Offer and Underwriting Agreement, Rio Tinto’s relevant interests in the Company increased from 68.4 to 86.3 per cent.
No other matters or circumstances has arisen since the end of the financial year that have significantly affected, or may significantly
affect the operations or state of affairs of the Company in subsequent financial years.
30 Share-based payments
ERA participates in a number of share-based payment plans administered by Rio Tinto plc and Rio Tinto Limited, which are described
in detail in the Remuneration Report. These plans have been accounted for in accordance with the fair value recognition provisions of
AASB2, ‘Share-based Payment’.
90
90
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD -
-
-
-
Weighted average fair
value at grant date
2018
Rio Tinto Limited
Weighted average fair
value at grant date
notes to tHe FInAnCIAL stAteMents
Rio Tinto Performance Share Awards
The Rio Tinto Performance Share Award (PSA) details are described in the Remuneration Report. The awards are accounted for in
accordance with the requirements applying to equity-settled sharebased payments transactions. The fair value of each award on the
day of grant is set equal to the share price on the day of grant. No forfeitures are assumed. A summary of the status of shares granted
under the share plan at 31 December 2019, and changes during the year, is presented below:
BALANCE
AT START
OF THE
YEAR
GRANTED
DURING
THE YEAR
TRANSFERS
IN/(OUT)
EXERCISED
DURING
THE YEAR
FORFEITED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
VESTED AND
EXER-
CISABLE AT
END OF
THE YEAR
2019
Rio Tinto Limited
2,827
2,229
$83.61
$93.17
-
-
-
-
-
-
5,056
$87.82
1,058
2,622
(238)
(427)
(188)
2,827
$39.25
$83.37
$55.24
$34.52
$34.52
$83.61
The weighted average share price at the date of exercise of conditional grants of shares exercised during the year ended 31 December
2019 was $Nil (2018: $82.25).
The weighted average remaining contractual life of conditional grants of shares outstanding at the end of the period was four years
(2018: five years).
Where shares are issued to employees of subsidiaries within the Rio Tinto Group, the subsidiaries compensate the parent for the
amount recognised as expense in relation to these shares.
myShare Savings Plan
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 equity and accounted for accordingly. The fair value of each award on the day of grant is set equal to the share
price on the day of grant.
A summary of the status of conditional shares granted under the plan at 31 December 2019, and changes during the year, is
presented below:
BALANCE
AT START
OF THE
YEAR
GRANTED
DURING
THE YEAR
TRANSFERS
IN/(OUT)
VESTED
DURING
THE YEAR
FORFEITED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
VESTED AND
EXERCISABLE
AT END OF
THE YEAR
14,067
5,594
212
(5,635)
(2,273)
11,965
$78.13
$91.21
$60.27
$46.15
$60.27
$83.93
16,103
4,987
(111)
(5,405)
(1,507)
14,067
$61.69
$78.80
$62.32
$51.87
$62.32
$78.13
-
-
-
-
2019
Rio Tinto Limited
Weighted average
exercise price
2018
Rio Tinto Limited
Weighted average
exercise price
The weighted average share price at the date of exercise of conditional grants of shares exercised regularly during the year ended
31 December 2019 was $93.82 (2018: $78.18).
The weighted average remaining contractual life of conditional grants of shares outstanding at the end of the period was two years
(2018: two years).
Where shares are issued to employees of subsidiaries within the Rio Tinto Group, the subsidiaries compensate the parent for the
amount recognised as expense in relation to these shares.
91
91
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
Rio Tinto Management Share Awards
The Rio Tinto Management Share Award (MSA) which are described in the Remuneration Report. The awards will be settled in
equity including the dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the
requirements applying to equity-settled share-based payment transactions. The fair value of each award on the day of grant is set
equal to share price on the day of grant. No forfeitures were assumed. A summary of the status of shares granted under the MSA plan
at 31 December 2019, and changes during the year, is presented below:
BALANCE
AT START
OF THE
YEAR
GRANTED
DURING
THE YEAR
TRANSFERS
IN/(OUT)
EXERCISED
DURING
THE YEAR
FORFEITED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
VESTED
AND EXER-
CISABLE
AT END OF
THE YEAR
2019
Rio Tinto Limited
14,969
4,767
Weighted average fair
value at grant date
2018
$62.17
$89.27
-
-
(5,095)
$44.59
Rio Tinto Limited
16,246
5,527
(1,708)
(5,096)
Weighted average fair
value at grant date
$52.75
$81.55
$59.62
$54.02
-
-
-
-
14,641
$77.12
14,969
$62.17
-
-
-
-
The weighted average share price at the date of exercise of conditional grants of shares exercised regularly during the year ended
31 December 2019 was $94.32 (2018: $82.48).
The weighted average remaining contractual life of conditional grants of shares outstanding at the end of the period was two years
(2018: two years).
Where shares are issued to employees of subsidiaries within the Rio Tinto Group, the subsidiaries compensate the parent for the
amount recognised as expense in relation to these shares.
Bonus Deferral Plan
The Bonus Deferral Award (BDA) is detailed and described in the Remuneration Report. These awards were established for the
mandatory deferral of a specific percentage of the Chief Executive’s Short Term Incentive Plan 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 equity including the
dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the requirements applying to
equity-settled share based payment transactions. The fair value of each award on the day of grant is equal to share price on the day
of grant less a small adjustment for the timing of dividends vesting. No forfeitures are assumed.
BALANCE
AT START
OF THE
YEAR
GRANTED
DURING
THE YEAR
TRANSFERS
IN/(OUT)
EXERCISED
DURING
THE YEAR
FORFEITED
DURING THE
YEAR
BALANCE
AT END OF
THE YEAR
VESTED
AND EXER-
CISABLE
AT END OF
THE YEAR
745
530
$83.39
$93.17
-
-
-
-
745
$83.39
-
-
-
-
-
-
-
-
1,275
$87.45
745
$83.39
-
-
-
-
2019
Rio Tinto Limited
Weighted average fair
value at grant date
2018
Rio Tinto Limited
Weighted average fair
value at grant date
The weighted average share price at the date of exercise of conditional grants of shares exercised during the year ended 31
December 2019 was $Nil (2018: Nil).
92
92
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD notes to tHe FInAnCIAL stAteMents
The weighted average remaining contractual life of conditional grants of shares outstanding at the end of the period was 2 years
(2018: 2 years).
Where shares are issued to employees of subsidiaries within the Rio Tinto Group, the subsidiaries compensate the parent for the
amount recognised as expense in relation to these shares.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense
were as follows:
Share based payment expense
2019
$’000
1,270
2018
$’000
665
93
93
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD DIReCtoR's DeCLARAtIon
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 58 to 93 are in accordance with the Corporations Act 2001 (Cth),
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the Company’s financial position as at 31 December 2019 and of its performance for
the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable. Note 1 (a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive and the Chief Financial Officer required by section 295A of the
Corporations Act 2001 (Cth). This declaration is made in accordance with a resolution of the directors.
P Mansell
Perth
6 March 2020
9494
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
InDePenDent AUDItoR's RePoRt
Independent auditor’s report
To the members of Energy Resources of Australia Ltd
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Energy Resources of Australia Ltd (the Company) is in
accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Company's financial position as at 31 December 2019 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The financial report comprises:
•
•
•
•
•
•
the balance sheet as at 31 December 2019
the statement of comprehensive income for the year then ended
the statement of changes in equity for the year then ended
the cash flow statement for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
9595
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
InDePenDent AUDItoR's RePoRt
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Company, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
•
•
Our audit focused on where the Company made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
The audit procedures were predominantly
performed at the Company's Darwin office and the
shared service centre in Brisbane.
•
For the purpose of our audit we used overall
materiality of $2.7 million, which represents
approximately 1% of the Net Liabilities.
• We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
• We chose Net Liabilities because, in our view, it is
the benchmark which is most representative of the
Company in its current stage and is most relevant
to the users of the financial statements.
• We utilised a 1% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
96
96
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD InDePenDent AUDItoR's RePoRt
Key audit matter
How our audit addressed the key audit matter
Accounting for the cost of rehabilitation of the
Ranger Project Area
(Refer to notes 16 and 17) $770 million provision
The Company is required under the Ranger section 41
Authority (Ranger Authority) to fully rehabilitate the
Ranger Project Area site by January 2026.
We obtained an understanding of how the Company
monitors and updates the provision.
Calculating the final rehabilitation provision requires
significant estimation and judgement by the Company.
Assumptions are required to be made in respect of
methods of rehabilitation, costs and timing. The most
significant components of the provision relate to
material movements, water treatment, tailings transfer,
demolition and revegetation.
We obtained the Company’s calculation of the
rehabilitation obligation (the model). We checked the
timing of the cash flows in the model were consistent
with the requirements of the Ranger Authority.
We obtained an understanding of the basis of estimate
for the significant costs within the model and assessed
the reasonableness of these.
The provision may still change as a result of the
outcomes of current progressive rehabilitation
activities and ongoing technical studies. The calculation
of the provision requires significant input from
specialists and experts, both within and external to the
Company.
For significant cost estimates within the model we
compared the amount in the provision to the
Company’s external expert’s estimate of costs.
Furthermore, we assessed the experts’ objectivity,
competence and independence.
Given the significance of this balance and the factors
outlined above, the provision for rehabilitation was a
key audit matter.
Carrying value assessment for the Jabiluka
Undeveloped Property
(Refer to note 12) $90 million carrying value
Assessing the carrying amount of the Company’s
Jabiluka Undeveloped Property asset was a key audit
matter. Factors giving rise to this conclusion included
the financial size of the balance and the judgement
required by the Company in the assessment of the
carrying value as a result of the long-term nature of the
asset, particularly in relation to:
• Whether the development of the Jabiluka
resource will ultimately proceed given it
requires consent of the Mirarr Traditional
We developed an understanding of the costs incurred
during the year and compared the actual spend to the
prior period’s estimation to assess the Company’s
historical ability to forecast accurately.
We evaluated the discount rate used to discount the
provision.
We performed procedures over the assessment of the
carrying value of the Jabiluka Undeveloped Property,
by updating our understanding of:
•
•
•
The likelihood and timing of development;
The latest long-term uranium oxide forecast
price and AUD/USD exchange rate;
Changes in circumstances since the last
assessment of the carrying value, including
97
97
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD InDePenDent AUDItoR's RePoRt
Key audit matter
How our audit addressed the key audit matter
Owners under the Long Term Care and
Maintenance Agreement;
•
The long-term uranium oxide price and the
AUD/USD exchange rate used in the
probability weighted discounted cash flow
model to estimate the fair value of the asset.
matters related to the discount rate;
The consent process required;
The resource including size and grade.
•
•
Having updated our understanding of the above points,
we considered whether there had been any changes in
these assumptions which would give rise to an
impairment indicator.
Liquidity and capital management
(Refer to notes 28 and 29)
The Company recognised a cash balance of $209
million and a further amount of $76 million held in the
Ranger Rehabilitation Trust Fund by the
Commonwealth Government for the purposes of the
rehabilitation at 31 December 2019. At 31 December
2019 the Company had insufficient resources to fully
fund the rehabilitation of the Ranger Project Area.
Subsequent to the balance sheet date the Company has
undertaken an Entitlement Offer to raise
approximately $476 million. Following the finalisation
of the Entitlement Offer, the Company considers that it
has adequate cash available to fully rehabilitate the
Ranger Project Area.
The risks around funding and the outcome of the
Entitlement Offer are important to understand the
financial position of the Company and were therefore
considered to be a key audit matter.
We evaluated the process by which the Company
projects cash flows over the medium to long term.
We inspected the Rio Tinto credit facility agreement to
assess the Company’s position with regard to key terms
and conditions supporting the continued availability of
the agreement.
Our procedures included obtaining written
confirmation of cash balances and the financial
guarantees provided by a number of banks.
We inspected the information relating to, and the
outcome of, the Entitlement Offer subsequent to the
balance sheet date and the incorporation of this into
the cash flow projections.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2019, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
98
98
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD InDePenDent AUDItoR's RePoRt
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Company
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 33 to 47 of the directors’ report for the
year ended 31 December 2019.
In our opinion, the remuneration report of Energy Resources of Australia Ltd for the year ended 31
December 2019 complies with section 300A of the Corporations Act 2001.
99
99
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD InDePenDent AUDItoR's RePoRt
Responsibilities
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.
PricewaterhouseCoopers
Charles Christie
Partner
Melbourne
6 March 2020
100
100
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD sHAReHoLDeR InFoRMAtIon
Energy Resources of Australia Ltd is a for-profit company limited by shares, incorporated and domiciled in Australia.
The financial statements were authorised by Directors on 6 March 2020. The Directors have the power to amend and reissue the
financial statements.
The shareholder information set out below was applicable as at 26 February 2020.
Distribution of equity securities
Analysis of numbers of registered equity security holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
5,471
2,400
818
1,004
128
9,821
ORDINARY SHARES
NUMBER
OF SHARE-
HOLDERS
% OF
SHARE-
HOLDERS
NUMBER
OF SHARES
1,736,442
6,174,713
6,197,464
30,042,063
55.71
24.44
8.33
10.22
1.30
3,647,232,516
100.00
3,691,383,198
There were 7,231 holders of less than a marketable parcel of ordinary shares.
Equity security holders
The names of the twenty largest registered holders of quoted equity securities are listed below:
North Limited
Peko Wallsend Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Little Cove Capital Pty Ltd
Creative Living (Qld) Pty Ltd
National Nominees Limited
Airport Finance Pty Ltd
Mr Tian Lan Luan
Australian Executor Trustees Limited
Morgan Stanley Australia Securities (Nominee) Pty Limited
Mr Li Wan
Mrs Tew Hua Cameron
Mrs Faye Lesley Duffield
Lemmis Holdings Pty Ltd
Northern Property Group Pty Ltd
Mrs Qiuyu Ping
Ganra Pty Ltd
NUMBER
OF SHARES
1,920,852,964
1,265,829,670
293,007,113
84,988,124
33,352,981
10,727,917
2,000,000
1,526,000
1,350,761
1,140,800
942,956
935,110
843,577
823,265
806,500
713,000
713,000
713,000
658,022
651,429
% OF
ISSUED
SHARES
0.05
0.17
0.17
0.81
98.80
100.00
% OF
ISSUED
SHARES
52.04
34.29
7.94
2.30
0.90
0.29
0.05
0.04
0.04
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
101101
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
sHAReHoLDeR InFoRMAtIon
Entitlements to vote
Subject to any rights or restrictions for the time being attached to any shares on a show of hands, every member present in person or
by proxy or by attorney or by representative and entitled to vote at a shareholders’ meeting shall have one vote.
On a poll, every member present in person or by proxy or by attorney or by representative shall have one vote for each share held by
him/her.
Annual General Meeting
The next Annual General Meeting will be held at 9.30 am on 6 May 2020 in Darwin, Northern Territory, Australia.
Tax file numbers
Tax file numbers or exemption details are recorded from shareholders who wish to provide the information. Dividend advice
statements, when issued to shareholders, indicate whether or not a shareholder’s tax file number has been recorded. ERA normally
pays fully franked dividends. In the event of an unfranked dividend being paid, ERA will be required to deduct tax at the top marginal
rate from the dividend paid to shareholders resident in Australia who have not supplied a tax file number or exemption form.
Information on shareholding
Shareholders who require information about their shareholding or dividend payment should contact ERA’s principal registry.
Shareholders who have changed their address should advise the change in writing to:
ERA Share Registry
Computershare Investor Services Pty Ltd
Level 1, 200 Mary Street
Brisbane QLD 4000
Telephone: +61 (0) 3 9473 2500
Facsimile: +61 (0) 3 9415 4000
Sponsored shareholders should note, however, that they should contact their sponsored broker to initiate a change of address.
102
102
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
5 Mar 2019
18 Feb 2019
13 Feb 2019
Feb 2019
8 Feb 2019
8 Feb 2019
8 Feb 2019
8 Feb 2019
Notice of Annual General Meeting
2018 Annual Report
ERA Financial Community Presentation
February 2019
Responses to ASX Price Query
ERA 2018 Full Year Results
Preliminary Final Report
Ranger Project Area- Closure Feasibility
Study Finalisation
Annual Statement of Reserves and
Resources
10 Jan 2019
Quarterly Activities Report
2019 Asx AnnoUnCeMents
20 Dec 2019
13 Dec 2019
13 Dec 2019
11 Dec 2019
11 Dec 2019
5 Dec 2019
Entitlement Offer Despatch of
Supplementary Statement
ERA notes lodgment of Takeover Panel
review application
TOV: ERA Panel receives Review
Application
Takeovers Panel announcement and
Entitlement Offer Update
TOV:ERA Declaration of Unacceptable
Circumstances and Orders
Suspension of Class from Official
Quotation
4 Dec 2019
ERA notes Takeover Panel interim orders
22 Nov 2019
19 Nov 2019
19 Nov 2019
Despatch of Entitlement Offer Information
Booklet
Takeover Panel : ERA Panel Receives
Application
ERA notes lodgement of Takeovers Panel
application
18 Nov 2019
Despatch of notices to shareholders
15 Nov 2019
Appendix 3B
15 Nov 2019
Entitlement Offer Information Booklet
15 Nov 2019
Cleansing Statement
15 Nov 2019
ERA Capital Raising Investor
Presentation
15 Nov 2019
ERA Capital Raising
9 Oct 2019
8 Aug 2019
31 July 2019
Quarterly Activities Report
Resignation and appointment of directors
ERA Additional Information for the
Financial Community
25 July 2019
Half Yearly Report and Accounts
25 July 2019
Funding update
25 Jul 2019
10 Jul 2019
25 Jun 2019
13 Jun 2019
12 Apr 2019
10 Apr 2019
10 Apr 2019
10 Apr 2019
10 Apr 2019
5 Mar 2019
June 2019 Half Year Results
Quarterly Activities Report
Change in substantial holding
ERA releases further details on tailings
facilities
Change in substantial holding
2019 Annual General Meeting- Results of
Voting
2019 AGM Chief Executive’s Address
2019 AGM Chairman’s Address
Quarterly Activities Report
Annual General Meeting Proxy Form
Details of these announcements are available at www.energyres.com.au.
103103
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD ten yeAR PeRFoRMAnCe
YEAR ENDED
31 DECEMBER
Sales Revenue ($000)
Earnings Before Interest
and Tax ($000)
Profit/(Loss) Before Tax
($000)
Income Tax Expense/
(Benefit) ($000)
Profit/(Loss) After Tax
($000)
Total Assets ($000)
Shareholders’ Equity ($000)
Long Term Debt ($000)
Current Ratio
Liquid Ratio
Gearing Ratio (%)
Interest Cover (times)
Return on Shareholders’
Equity (%)
Earnings Per Share (cents)
Dividends Per Share (cents)
Payout Ratio (%)
Share Price ($) closing
Price-Earning Ratio
Dividend Yield (%)
Net Tangible Assets per
Share ($)
No. of Employees
Profit After Tax per
Employee ($000)
Ore Mined (million tonnes)
Ore Milled (million tonnes)
Mill Head Grade (% U3O8)
Mill Recovery (%)
Production (tonnes U3O8) –
Drummed
Sales – Ranger
Concentrates (tonnes U3O8)
Sales – Other Concentrates
(tonnes U3O8)
Sales – Total (tonnes U3O8)
Note 1
Post rights issue
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
209,677 201,273
211,181 267,765 332,777 379,166 356,139 396,629 651,381 572,283
(1,103) (466,616)
(52,925) (279,781)
(88,292) (284,274) (199,431) (278,266) (220,633)
47,726
6,252 (456,323)
(43,532) (271,077)
(79,798) (273,602) (186,541) (254,785) (206,340)
59,427
-
(21,049)
-
- 195,695 (85,802)
(50,712)
(36,026)
(52,741)
12,423
6,252 (435,274)
(43,532) (271,077) (275,493) (187,800) (135,829) (218,759) (153,599)
47,004
566,577 635,766 797,312 819,432 1,100,815 1,341,724 1,627,561 1,826,275 1,948,972 1,423,396
(274,687) (280,790) 154,887 198,559 469,947 745,607 934,022 1,069,619 1,288,536 951,076
-
-
3.4
4.0
2.1
3.0
-
-
47.8
-
-
7.1
6.0
-
(177.9)
-
4.0
2.9
-
(156.7)
-
4.0
3.1
-
-
-
3.8
2.3
-
-
-
4.1
2.7
-
-
-
2.5
1.9
-
-
-
2.0
1.2
-
-
-
3.2
2.5
-
-
(2.3)
1.2
-
-
0.17
13.75
-
(0.54)
155.0
(84.1)
-
-
0.25
(0.29)
-
(0.54)
355
(28.1)
(8.4)
-
-
0.91
(10.83)
-
(136.5)
(52.4)
-
-
0.44
(0.83)
-
0.30
358
0.38
356
(58.6)
(53.2)
-
-
0.36
(0.68)
-
0.91
374
(25.2)
(36.3)
-
-
1.30
(3.58)
-
(14.5)
(26.2)
-
-
1.26
(4.81)
-
1.44
389
1.80
519
(20.5)
(42.3)
-
-
1.27
(3.00)
-
2.07
594
17.61 (1,226.1)
-
2.5
0.09
86.6
-
2.5
0.08
86.8
(121.6)
-
2.6
0.10
84.7
(761.5)
-
2.7
0.10
84.9
(736.6)
-
2.5
0.10
82.0
(482.8)
-
1.3
0.11
81.5
(264.8)
-
2.3
0.15
84.8
(374.5)
3.8
2.6
0.17
86.2
(11.9)
(29.7)1
-
-
1.23
(2.54)
-
2.49
567
(270.9)
1.2
1.6
0.18
87.9
4.9
24.6
8.0
32
11.13
45.24
2.96
4.99
523
89.87
1.4
2.4
0.19
87.2
1,751
1,999
2,294
2,351
2,005
1,165
2,960
3,710
2,641
3,793
1,577
1,467
2,089
2,130
2,183
2,164
2,767
2,665
3,258
4,373
20
-
-
9
-
984
48
558
1,597
1,467
2,089
2,139
2,183
3,148
2,815
3,223
1,908
5,167
653
5,026
Definition of statistical ratios
Current Ratio
Liquid Ratio
foreign exchange
Gearing Ratio
Interest Cover
Return on Shareholders’ Equity
Earnings per Share
=
=
=
=
=
=
current assets/current liabilities
(current assets-inventory-prepayments-foreign exchange hedge asset on borrowings)/(current liabilities-bank overdraft –
hedge liability)
(long term debt + term creditors)/(shareholders’ equity + long term debt + term creditors)
earnings before interest and tax/interest expense
profit after tax/average shareholders’ equity
profit after tax/weighted average number of shares issued
104104
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD
InDex
2019 ASX Announcements
103
2019 ERA Ore Reserves and Mineral Resources
Auditor’s Independence Declaration
Balance Sheet
Business Risks
Business Strategy
Cash Flow Statement
Chairman’s Report
Chief Executive’s Report
Company Overview
Corporate Governance Statement
Current Operations and Resources
Director’s Declaration
Director’s Report
Financial Performance
Future Supply
Health and Safety
Independent Auditor’s Report
Notes to the Financial Statements
Operations and Rehabilitation
Regulatory Framework
Sales and Marketing
Shareholder Information
Statement of Changes in Equity
Statement of Comprehensive Income
Ten Year Performance
21
51
59
14
12
61
4
5
6
52
13
94
28
7
20
24
95
62
9
26
23
101
60
58
104
(Daniel, Sharon & Ezra), (Zoran, Anthony, Mick),(Aidan, Jess, Mahla & Elsy),
(Gayle), (Lesley, Roger, Ryan, Chantelle, Josh, Ava, Ellie & Sonny),
(Andrew, Dimity, Clementine & Rupert), (Steve, Joy, Jakob & Krystal), (Sioux & Peter)
Back Cover L-R:
105105
ENERGY RESOURCES OF AUSTRALIA LTD ENERGY RESOURCES OF AUSTRALIA LTD