Annual Report 2020Burnie Office - Tasmania (Registered Office)34A Alexander Street Burnie, TAS 7320PO Box 659 Burnie, TAS 7320Ph +61 (3) 6430 0222 Fx +61 (3) 6432 3390 Em grr.info@grangeresources.com.auANNUAL REPORT 2020 GRANGE RESOURCES LIMITED ABOUT GRANGE
OUR BUSINESS
Grange Resources Limited (Grange or the Company), ASX Code: GRR, is Australia’s most experienced magnetite producer with
over 50 years of mining and production from its Savage River mine and has a projected mine life beyond 2035.
OUR VISION
We will produce high quality steel making raw materials economically and effectively. Our operations will be efficient,
flexible, and stakeholder focused.
OUR VALUES
At Grange we ALL will...
• Work safely
• Lead and act with fairness, integrity, trust and respect
• Be responsible and accountable for our actions
• Utilise our resources efficiently and effectively
• Engage with stakeholders and proactively manage our impact on their environment
• Work together openly and transparently
• Promote an environment in which our people can develop and prosper
BOARD OF DIRECTORSMichelle Li Non-executive ChairpersonYan Jia Non-executive Deputy ChairpersonDaniel Tenardi Non-executive Director (resigned 27 May 2020)Michael Dontschuk Non-executive DirectorDavid Woodall Non-executive Director – Non-executive DirectorHonglin Zhao Chief Executive Officer / Managing DirectorCOMPANY SECRETARYPiers LewisREGISTERED OFFICEGrange Resources Limited ABN 80 009 132 40534a Alexander Street, BURNIE, TAS 7320Telephone: + 61 (3) 6430 0222Email: GRR.Info@grangeresources.com.auSHARE REGISTRYAdvance Share Registry Services Limited110 Stirling HighwayNedlands, WA 6009AUDITORSPricewaterhouseCoopers2 Riverside QuaySOUTHBANK, VIC 3006STOCK EXCHANGEGrange Resources Limited is listed on the ASX Limited (ASX Code: GRR) and the “OTC” Markets in Berlin, Munich, Stuttgart and Frankfurt in Germany (Code: WKN. 917447)WEBSITEwww.grangeresources.com.au 2021 PRIORITIES
Grange is Australia’s proven, safe, reliable, long life producer of
magnetite iron ore and premium quality pellets. Grange is committed
to the local community of North West Tasmania and makes a significant
contribution to the state economy.
The Board has defined some key areas of focus to underpin the
development of Grange’s business. The four main areas focus on:
Developing a sustainable Life-of-Mine-Plan; Integrating innovation
into all aspects of the business; Sustaining ageing infrastructure
and Building capacity and capability within our workforce. Grange’s
business and operational planning is directed to deliver into these core
strategies.
Developing a sustainable Life-of-Mine-Plan
The Life-of-Mine-Plan is a key to underpin investment decisions and
to optimise business execution. Potential failure on the East Wall
and instability in the mine introduces uncertainty into the production
profile. The single source of ore supply and low stockpiles presents
risks if any delays in the mine and extreme weather events have
the potential to interrupt production. To reduce these uncertainties
we will seek to mitigate increasing pressure on OPEX costs; develop
contingency for extreme weather events; understand and mitigate
risk of environmental approval delays on project development and
complete the studies to enable integration and optionality for Open Pit
and Underground operation.
North Pit is the main source of ore for 2021 and Grange will continue
to invest in stripping Centre Pit to deliver high grade ore. For longer
term asset development, the focus will be on the completion of
the Underground Prefeasibility Study and an integrated Enterprise
Optimisation. This will provide a basis for an optimised Life of Mine
Plan with a view to maximise the efficient and effective recovery of
the mineral resource at Savage River.
Integrate Innovation
Innovation is critical to improving safety, efficiency and reducing
cost. Innovation tools are integrated into the business through our
Management Operating System (MOS) and we are building capability
with our people and systems. This will be considered at the
transactional level, and in the development of the plan. Application of
new technology will support and improve operational outcomes. Our
focus will be to: determine the potential to introduce automation into
the operation; upgrade the equipment tracking system for the mine
and optimise the mining cycle to reduce delay and increase efficiency;
review the opportunity for sources and supply of energy; and build
production capability for potential expansion of the operation.
Sustain Ageing Infrastructure
Our operation is supported by mature and valuable infrastructure and
assets. Maintenance has been deferred over periods of downturn in
the past and assets require investment to restore or replace where
appropriate. Cost Benefit Analysis will be used to support repair versus
replacement decisions. Our focus will be to: manage and maintain
mobile plant in the mine; manage and maintain fixed plant; continue
offshore structural refurbishment; sustain the light vehicle fleet to
support safe and productive operation; and determine the ongoing
maintenance requirements to sustain the Pipeline for the long term.
Build Capacity & Capability
We recognise that our people are our most valuable asset. We have
a committed workforce with strong skills and experience base. There
is increasing competition for human resources as the resource industry
cycles and we acknowledge there is a risk of losing key technical staff
and some of our skills and experience.
To mitigate these risks we will implement retention strategies to retain
employees; develop strategies to attract the required skills into the
business; improve the communication of our brand and operation in order
to attract talent and build specialised expertise as we gain certainty with
respect to our optimised and de-risked Life-of-Mine-Plan.
2020 OVERVIEW
Production rates were impacted in the first half of the year and revised
targets were achieved in spite of delays due to heavy rainfall and wall
instability from the end of the previous year.
Operational Overview
• Achieved over 1,380 consecutive days Lost Time Injury free by
year end 2020.
• Delivered full year’s production profile and managed the safety
health and wellbeing of our employees throughout the COVID-19
pandemic.
• High grade ore was supplied from North Pit throughout 2020.
• Waste stripping was undertaken in Centre Pit to prepare for ore
•
•
•
•
•
supply later in 2021.
Progressed Prefeasibility study into underground mining in the
North Pit deposit.
Engineering and design work progressed to improve airflow
through pellet furnaces.
Steel pan conveyor commissioned at the Pellet Plant to improve
pellet quality and reduce maintenance costs.
Preserved balance sheet strength with disciplined operational
planning and execution enabling internal funding of critical mine
re-development.
Cost control disciplines maintained to ensure sustainable
operating costs.
Financial Overview
•
Total iron ore product sales of 2.49 million tonnes (2019: 2.19
million tonnes).
• Unit C1 cash operating cost of $99.77 per tonne (2019: $114.26).
• Grange’s high quality, low impurity iron ore products attracted a
high premium with average product prices of $196.77 per tonne
(2019: $158.33) (FOB Port Latta).
•
• Delivered profit after tax of $203.2 million (2019: profit after tax
of $77.3 million), on record revenues from mining operations of
$526.3 million (2019: $368.6 million).
Continued focus on selling cargoes to targeted customers and
balancing opportunities in the spot market.
Sustained strong cash and cash equivalents position at
$183.4 million (2019: $142.1 million).
•
NET PROFIT
OVER
$203MILLION
CONCENTRATE PRODUCED
OVER
2.5MILLION
TONNES
TRIFR
(Total Recordable Injury
Frequency Rate)
3.6(PER MILLION
MAN HOURS)
SALES REVENUE
OVER
$526MILLION
2
3
ABOUT THE GRANGE BUSINESS
Magnetite
Magnetite is a naturally occurring mineral commonly refined into an
iron ore concentrate and used for steel production. Iron ore makes up
about five per cent of the Earth’s crust and most commonly occurs in
the form of haematite or magnetite. Most of the magnetite mined is
usually used to produce concentrate for pellet feed or pellets which
are used to make steel.
The Australian iron ore industry has traditionally been based on the
mining, production, and export of haematite ores, also referred to
as ‘Direct Shipping Ore’ (DSO). The majority of Australian iron ore
production comes from DSO. While magnetite is an emerging industry
in Australia, globally it accounts for approximately 50 per cent of iron
ore production.
Smelting magnetite to iron involves agglomeration or ‘clumping
together’ of the magnetite concentrate, and thermal treatment to
produce haematite iron ore pellets.
The pellets can be used directly in a blast furnace or at direct reduction
iron-making plants.
Magnetite concentrate has internal thermal energy, meaning less
energy is required as the magnetite is converted into haematite
pellets. This results in lower carbon dioxide emissions. The blast
furnace chemically reduces iron oxide into liquid iron called ‘hot
metal’. The iron ore and reducing agents (coke, coal and limestone) are
combined. Pre-heated air is blown at the bottom of the combination
for up to eight hours. The final product is a liquid which is drained, and
eventually refined to produce steel.
Mining magnetite ore is capital intensive and requires significant
downstream processing infrastructure including a beneficiation plant,
a pellet plant and port facilities. Magnetite products command a value
premium above haematite ore products such as fines and lump. This
premium is derived on two fronts, through additional iron content, and
a quality premium.
The growth in Chinese demand and its understanding of the use of
magnetite-based iron ore products has seen a significant change in
the value accrued to both magnetite concentrate and pellets, and the
methodology used for determining that value.
As magnetite concentrate is a refined product, it usually has higher
iron content and lower impurities. This can have beneficial quality and
environmental outcomes for the steel maker.
Until April 2010, iron ore prices were traditionally decided in closed-
door negotiations between the small handful of “key” miners and steel
makers which dominated both spot and contract markets. Traditionally,
the first agreement on price reached between these two groups set
a benchmark price that was followed by the rest of the industry for a
12-month period.
This benchmark system broke down in 2010 with pricing moving
to short term index-based mechanisms. Given that most other
commodities already have a mature market-based pricing system, it
was natural for iron ore to follow suit. This has seen magnetite product
pricing change so that it is now based on transparent market-based
index prices, with premiums being paid for increased iron ore content
and pellet manufacture.
Grange Resources Limited (Grange Resources) owns and operates
Australia’s oldest integrated iron ore mining and pellet production
business located in the northwest region of Tasmania. The Savage
River magnetite iron ore mine, 100km southwest of the city of Burnie,
is a long-life mining asset set to continue operation to beyond 2030.
At Port Latta, 70kms northwest of Burnie, is Grange Resources’ wholly
owned pellet plant and port facility producing more than 2 million
tonnes of premium quality iron ore pellets annually with plans to
increase annual production. Grange holds long term supply contracts
for 1 million tonnes of its annual production and offers the balance of
its production to market via a spot sales tendering and contracting
process. All products are shipped to major steel producers in the Asia
Pacific region.
As well as this profitable magnetite operation, Grange Resources has
the majority interest in the Southdown magnetite mining project near
Albany in Western Australia. Grange is actively seeking an equity
partner to take a strategic share of the Company’s interest in the
project.
Grange Resources is Australia’s most experienced magnetite producer.
Grange is a proven and reliable commercial producer combining both
mining and pellet production expertise.
CHAIRPERSON’S &
CHIEF EXECUTIVE OFFICER’S REVIEW
Dear Shareholders,
As a result of the hard work and commitment made by our people
to keep our operations running safely, the Company achieved an
outstanding performance in 2020. Your Company has delivered very
strong financial results for the year and has announced dividends of
3 cents per share fully-franked. These results were achieved through
a focused strategy of disciplined capital expenditure, improvements
in operating performance and productivity, emphasis on safety, and
supported by higher iron ore prices. Our balance sheet remains strong.
We have been reviewing our strategy against changes in the external
environment by analysing the risks and opportunities we are facing and
optimising our operations with a number of long-term improvement
projects. We believe that the Board’s approach to strategy and risk
management positions us to manage and respond to changes as they
arise and captures opportunities to grow shareholder value over time.
We maintain a relentless focus on the health and safety of our people
and the communities in which we operate.
2020 Review
A focus on safety has been maintained across the business. 2020 was
a difficult and challenging year for everyone and we are very proud
of the Company’s response to COVID-19. Despite all the uncertainties
created by the pandemic, we have achieved over 1,380 days Lost Time
Injury Free at the end of the year. This remarkable achievement is
only possible through the hard work and dedication of hundreds of
employees and contractors with the support of the local communities
throughout the year.
We delivered a profit after tax of $203.2 million . Revenues from
mining operations of $526.3 million were supported by improved iron
ore prices and record pellet premiums with average product prices
of $196.77 per tonne (FOB Port Latta). Total iron ore product sales
of 2.49 million tonnes were achieved. Higher production rates in the
processing plant and higher weight recovery resulted in a decrease in
unit C1 cash operating costs to $99.77 per tonne.
Cash and cash equivalents positioned at $183.4 million, increased
largely due to increase in production and sales at higher prices and
lower unit costs.
High grade ore from the Main Ore Zone in North Pit has been delivered
throughout the year. Concentrate production exceeded 2.5 million
previous year of 2.1 million tonnes. The pre-stripping of waste material
from Centre Pit was undertaken throughout 2020 in preparation for
ore supply later in 2021. The environmental approval process is well
progressed and approval is expected in 2021.
The North pit underground pre-feasibility study is on-going and
planned to be completed in the first half of 2021. This program has
provided valuable information to support the pre-feasibility study.
Designsand schedules are now being developed to assess different
methods of mining. The study results will feed into an overall
enterprise optimisation to deliver an updated Life of Mine Plan.
Significant investment has been made this year in process improvements
at Port Latta. A complete plant shutdown was taken in the month
November to allow for the installation, commissioning and successful
operation of a new Steel Pan Conveyor.. The team completed the
commissioning within 23 days, well below the budgeted required
time, through careful planning and well managed execution. The
restoration of furnace number four is well progressed with revised
design for the current furnace under development.
This redesign will improve the airflow and ensure ease of maintenance
for the lifecycle of the furnace. Other projects at Port Latta include
the change out of the bentonite baghouse structure, structural
repair works on plant infrastructure and the installation of a sodium
hydroxide system that will enhance the performance of the scrubbers.
Grange was selected to undertake studies to explore the potential to
use hydrogen for industrial heating at the pellet plant. This feasibility
provides a great opportunity for Grange to examine the potential for
alternate and renewable energy inputs. The studies will be conducted
through 2021.
Grange ROC Property completed construction and sales of all units
in Lumley Park early in the year. Construction at Carter Toorak has
been completed and the occupancy certificate attained in July 2020.
To date, 3 of the 8 units have been sold and the focus is to sell the
remaining units. Focus is also placed on selling the Brookville land
with development approval achieved.
In the Interim Financial Report for the half-year ended 30 June 2020,
it was reported that due to the significant impact of the COVID-19
pandemic on the residential property market in Melbourne, the Joint
Venture engaged an independent third party to conduct a valuation of
the remaining unsold units in Carter Toorak and the Brookville land to
reflect their recoverable values. These valuations indicated a decline
in values relevant to the prior year. Although the outlook on the
residential property market has improved, there remain considerable
uncertainties in the current environment. As a result of the valuation,
the Joint Venture have recognised an inventory provision of $2.6
million which the Company assesses to continue to be relevant.
During 2020, the Southdown Iron Ore Project achieved a significant
milestone in June as the Company was granted approval of
the Southdown Magnetite Project (EPBC 2011/6053) under the
Environment Protection and Biodiversity Conservation Act 1999. The
Company is carrying out a strategic review of the project under the
current strong market conditions. The process of seeking a strategic
investor(s) for the project is ongoing. All tenements, permits and
project assets continue to be maintained in good order. Budgeting and
cost control over expenditure on this project continues to secure the
investment. The Joint Venture Partners continue to monitor all ongoing
project requirements.
4
5
Outlook
Looking ahead, the iron ore pellet market remains uncertain. Although
recent vaccine approvals in many countries have raised hopes of a
recovery in economic activities later this year. ongoing waves of the
pandemic and new variants of the virus pose concerns to the outlook.
The strength of the recovery is projected to vary significantly across
countries, depending on many factors, such as access to medical
interventions, effectiveness of policy support and multilateral
cooperation, and the pace of vaccinating the global population in
sufficient time to mitigate against the new and more virulent strains
emerging. In addition the challenge of meeting climate change targets
such as agreed in the Paris round mean potential economic and
financial impacts of steadily rising carbon prices while supporting the
recovery from the pandemic recession.
It is however expected that in 2021 the global economy recovers which
will drive the growth of steel demand. For instance, China’s economy
has entered a new stage of development and it will steadily build new
economic demand with deepening supply- side structural reforms as
the main thrust ofits 14th Five-Year Plan. Infrastructure investment
has continued to pick up and manufacturing has accelerated. From the
perspective of infrastructure construction, transportation investment
takes the lead as it accelerates the construction of comprehensive
transportation hub clusters. It also plans to speed up the completion of
railway infrastructure in the central and western regions of China and
the transformation of old communities in cities and towns, as it builds
a modern logistics system. These factors all lead to demand growth
potential in steel manufacturing.
As the Chinese government placed a greater emphasis on environmental
protection and carbon-neutrality, some new measures may be enacted
to curb production among industries including the steel sector. From
the supply side of the iron and steel industry, the transformation to
ultra-low emission has further promoted the green development of
the industry. The production capacity replacement standards have
become stricter to effectively regulate the development of steel
production capacity. This has raised some concerns over the potential
decline in iron ore demand. The potential for steel production cuts are
more likely to be enforced gradually and it may be unlikely that iron
ore prices will fall significantly in the near term.
Despite the uncertain conditions that we currently face, the long-
term outlook for our sector remains positive. We will continue to build
our safety culture through initiatives, in which our employees are
encouraged to come up with new, creative ideas on how to strengthen
and improve our business. Our strong balance sheet provides a
fundamental base for managing volatile markets and ensuring capital
is available for sustaining operations through the cycle. This strength
6
is underpinned by our ongoing generation of solid cash flows from
operations. We continue to implement measures to both preserve
the balance sheet strength and align our capital allocation framework
with the cyclical nature of the industry. Our primary goal is to remain
competitive in a frequently changing iron ore market. Our focus will
remain on delivering value and striving to ensure our Company remains
strong, resilient and able to deliver superior returns to shareholders in
the short, medium and long term.
Sustainability will remain an important priority and indeed, will play
an increasingly important role in our business.
The Company’s strategic focus is to generate sustained shareholder
value by safely producing high quality iron ore products from its
Savage River and Port Latta operations in Tasmania whilst continuing
to assess the feasibility of a major iron ore development project at
Southdown, near Albany in Western Australia.
The Board and the management team have a positive outlook for
the iron ore pellet market and are proactively exploring opportunities
for innovation, improvement and productivity growth. The on-going
development of the iron ore market and the issues in China for
increasing restrictions on environmental noncompliance provide a
unique opportunity for us. We are very confident of our competitiveness
to supply a sustained high quality, low impurity iron ore pellet product.
We
strive to deliver value to our loyal employees and shareholders.
Thank you
On behalf of Grange’s Board, we would like to thank all of our
employees for their dedication and hard work over the past year. We
are proud of our excellent culture, capability and resilience to best
place us for a prosperous future. And to our shareholders, thank you
for your continued support.
Michelle Li
Chairman
Honglin Zhao
Chief Executive Officer
“Pullout qoute ea
aut quaecum hil mi,
vendi sum es as”.
7
Operating and Financial Review
Key Highlights
• Achieved over 1,380 days Lost Time Injury Free .
• High grade ore from the Main Ore Zone in North Pit has been
delivered throughout the year.
•
•
•
Pre-stripping of waste material from Centre Pit was undertaken
throughout 2020 in preparation for ore supply later in 2021
The environmental impact statement for the ultimate design of
Centre Pit was prepared and the approval process is underway
with review expected through the first quarter of 2021.
Concentrate production exceeded 2.5 million tonnes of
concentrate which is a notable increase from the previous year of
2.1 million tonnes.
• Grange’s high quality, low impurity iron ore products attracted
a high premium with average realised product price (FOB Port
Latta) of $196.77 per tonne for the year compared to $158.33 for
the prior year.
• Record revenues from operations of $526.3 million compared to
$368.6 million for the prior year.
• Unit C1 cash operating costs of $99.77 per tonne for the year
compared to $114.26 for the prior year. Decrease largely due to:
• Increase in concentrate production
• Decrease in energy prices
• Delivered profit after tax of $203.2 million for the year compared
to $77.3 million for the prior year,
•
Cash and cash equivalents position of $183.4 million at the end
of year compared to $142.1 million at the end of the prior year.
Increase largely due to higher sales price on shipments and
higher sales volume.
Property Development
• Grange ROC Property completed construction and sales of all
•
•
units in Lumley Park early in the year.
Construction at Carter Toorak has been completed and the
occupancy certificate attained in July 2020. To date, 3 of the
8 units have been sold (2 settled) and the focus is to sell the
remaining units.
Focus is also placed on selling the Brookville land with
development approval achieved.
Safety Performance
Grange operations achieved over 1,380 consecutive days Lost Time
Injury free by year end 2020. The sustained focus on lead indicators,
hazard identification and risk management has helped us maintain the
current long running lost time injury free period, despite a gradual
increase in worker hours.
There was a slight decrease in disabling injuries, however a rise in
medical treatment injuries in 2020. The majority of disabling injuries
were minor, and all persons involved were given meaningful work for
their respective periods of incapacity. They have actively contributed
to their return-to-work programs reducing the periods of alternate
work.
2020 was a year of significant contractor involvement at both
operational sites, increasing our hours worked and exposures with
new and exciting projects undertaken, not the least being a four -week
shutdown at Port Latta to install the steel pan hot pellet conveyor. Our
SEMS (safety, environment management system) onsite training and
major hazard systems improvements continue to support a compliant,
well managed and mature safety culture throughout the year.
Lag Indicators
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6
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n
c
i
d
e
n
t
s
4
2
0
Dec ’19
Jan ’20
Feb ’20
Mar ’20
Apr ’20
May ’20
Jun ’20
Jul ’20
Aug ’20
Sep’20
Oct ’20
Nov ’20
Dec ’20
MTI
LTI
DI
TR:FR
LT:FR
DI:FR
10
8
6
s
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I
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Full Year Result
Grange recorded a statutory profit after tax of $203.2 million for the
year ended 31 December 2020 (2019: $77.3 million).
Key revenue metrics for the year ended 31 December 2020 and the
preceding 2019 year were as follows:
2020
2019
Iron Ore Pellet Sales (dmt)
2,376,029
2,096,673
Iron Ore Concentrate Sales (dmt)
-
122
Iron Ore Chip Sales (dmt)
113,611
95,291
Total Iron Ore Product Sales (dmt)
2,489,640
2,192,086
Average Realised Product Price
(US$/t FOB Port Latta)
Average Realised Exchange Rate
(AUD:USD)
Average Realised Product Price
(A$/t FOB Port Latta)
136.85
109.95
0.6955
0.6944
196.77
158.33
Total sales for the year ended 31 December 2020 was 2.49 million
tonnes of high quality, low impurity iron ore products (2019: 2.19
million tonnes) and reflects sustained production from maintaining
access to high grade ore.
The average iron ore product price received during the year was
$196.77 per tonne of product sold (FOB Port Latta) (2019: $158.33
per tonne).
Please refer to Note 4 of the Financial Report for segment information
for sales to different geographical markets. The sales from long term
off take agreements with Jiangsu Shagang International Trade Co. Ltd
represents 34.6% of total sales for 2020 (2019: 35.7%).
Key operating metrics for the year ended 31 December 2020 and the
preceding 2019 year were as follows:
Total BCM Mined
Total Ore BCM
2020
2019
15,567,158
14,462,931
1,384,744
2,108,370
Concentrate Produced (t)
2,531,759
2,117,053
Weight Recovery (%)
Pellets Produced (t)
Pellet Stockpile (t)
“C1” Operating Cost
(A$/t Product Produced)(1)
46.1
39.7
2,348,274
2,055,043
119,966
147,721
99.77
114.26
(1) Note: “C1” costs are the cash costs associated with producing iron ore
products without allowance for mine development, deferred stripping
and stockpile movements, and also excludes royalties, sustaining capital,
depreciation and amortisation costs.
High grade ore from the Main Ore Zone in North Pit has been delivered
throughout the year. The operation has balanced the portion of the
ore zone that has a higher level of serpentinite which hinders milling
rates, with the high-grade magnetite rich ore. This has been blended
to sustain production and yield high quality pellets. Concentrate
production exceeded 2.5 million tonnes of concentrate which is a
notable increase from the previous year of 2.1 million tonnes.
The pre-stripping of waste material from Centre Pit was undertaken
throughout 2020 in preparation for ore supply later in 2021. The
environmental impact statement for the ultimate design has been
prepared and the approval process is underway with review expected
through the first quarter of 2021.
North Pit Underground Development Project
The Exploration Decline and Bulk Sample Drive were completed in
2020. More than 2.4 kilometres of underground development and
nearly 30,000 metres of diamond drill core has been collected and
logged. This program has provided valuable information to support the
pre-feasibility study. Designs and schedules are now being developed
to assess different methods of mining. The underground study will be
completed in the first half of 2021 and the results will feed into an
overall enterprise optimisation to deliver an updated Life of Mine Plan.
Port Latta Improvement Projects
Significant investment has been made this year in process improvements
at Port Latta. A complete plant shutdown was taken in November to
allow the installation, commissioning and successful operation of a
new Steel Pan Conveyor. This German-engineered conveyor system
is 110-metres-long and carries the hot pellets from the furnaces out
of the plant for stockpiling. It carries pellets more than 600 degrees
Celsius and allows them to cool more slowly, improving their strength.
The guideline for installation was approximately 70 days. It was
planned to be undertaken in 1 month and the team completed the
commissioning within 23 days through careful planning and well
managed execution.
The restoration of Furnace number four is well progressed. A revised
design for the current furnace configuration has been developed and
detailed engineering designs are in progress. The implementation of
the new design is planned for Q4, 2021 with long lead items being
procured. This redesign will improve the airflow and ensure ease of
maintenance for the lifecycle of the furnace.
Other projects at Port Latta include the changeout of the Bentonite
Baghouse structure, structural repair works on plant infrastructure and
the installation of a Sodium Hydroxide system that will enhance the
performance of the scrubbers.
9
STATEMENT OF CASH FLOWS
Net cash flows from operating activities
Net cash inflows from operating activities for the year were $202.6
million (2019: inflows $55.7 million) and reflect higher iron ore product
sales and an increase in unit operating costs.
Net cash flows from investing activities
Net cash outflows from investing activities for the period were $125.1
million (2019: outflows $104.5 million) and principally related to
expenditures for mine properties and development $86.7 million and
property, plant and equipment $41.1 million.
Net cash flows from financing activities
Net cash outflows from financing activities for the period were $26.9
million (2019 outflow: $14.7 million) and principally related to the
payment of 2019 final dividend ($11.6 million) and 2020 interim
dividend ($11.6 million).
EXPLORATION AND EVALUATION
The resource definition work during the last year ending Dec 31, 2020
saw the completion of the underground infill drilling on the mining
lease areas around North Pit.
The Mineral Resource stands at 497.5 million tonnes at 45.8% DTR, an
increase of 7.6MT from the 2019 annual report. The increase is a result
of re-estimation of North Pit in 2020 incorporating further drilling
from the underground project. Confidence and grade of the resources
have increased. The increase in total Mineral Resources is considered
minor given the quantum of the total Mineral Resources; annual mine
production levels; and the ongoing nature of the underground mining
study. Ore Reserves decreased slightly to 107.7MT @ 47.2% DTR due
to 5.5MT of mining depletion from North Pit during the year. Reported
Ore Reserves are for open pits and do not include any underground
mineable resources as the North Pit Underground prefeasibility study
is still in progress. Estimation of the deposit will continue in 2021, as
part of the continuing pre-feasibility studies.
Energy Alternatives
The Tasmanian Government has established a Renewable Hydrogen
Industry Development Funding program to support feasibility studies
for large scale renewable hydrogen projects in the state. Grange was
selected to undertake a study to explore the potential to use hydrogen
for industrial heating at the pellet plant. This feasibility provides a
great opportunity for Grange to examine the potential for alternate
and renewable energy inputs. The study will be conducted through
2021.
SOUTHDOWN MAGNETITE
PROJECT
The Southdown Magnetite Project, situated 90km from the city of
Albany in Western Australia, is a joint venture between Grange (70%)
and SRT Australia Pty Ltd (SRTA) (30%). SRTA is jointly owned by Sojitz
Corporation, a Japanese global trading company, and Kobe Steel, one
of Japan’s largest steel producers. This advanced project has 1.2 billion
tonnes of high quality resource, which outcrops at the western end
of its 12km strike length and has access to established infrastructure.
During 2020, the joint venture partners actively investigated new
approaches to several aspects of the project, seeking to identify
reductions in capital costs without impacting the operating cost
estimates. This work is progressing well and continues into 2021.
The on-going strategy is to maintain the currency and good standing
of all tenements, permits and project assets such that the project
can be fully recommenced as soon as an appropriate opportunity
arises. Compliance with environmental and tenement conditions was
maintained.
This approach will continue into 2021, as we formulate a valid alternate
development model and seek to secure equity partners for a strategic
share of the Company’s interest in the project.
FINANCIAL POSITION
Grange’s net assets increased during the year to $712.1 million (31
December 2019: $532.1 million). The key movements in net assets
during the year are a result of the following:
• A profit after tax of $203.2 million;
• A final 2019 dividend payment of $11.6 million
• An interim 2020 dividend payment of $11.6 million
The Group’s market capitalisation as at 31 March 2021 is $567.10 million.
HEALTH AND SAFETY
Overview
Grange believe that responsible occupational Health and Safety with
sound environmental and social responsibility (HSE) practices are
integral to an efficient and successful company. Grange’s OHS & ESR
Management Systems have been integrated to form the “Safety and
Environment Management System” (SEMS) which supports OHS & ESR
policies and defines the required standards to which any Grange facility
must operate. Our OHS policy is reviewed annually by our executive
team and leads us to continually improve our Safety Systems.
SEMS is an integral part of the Grange Management System (GMS) and
is well supported by a management plan for 16 of the major hazards
identified in our industry. Of the 16 Major Hazard Standards, 4 are
deemed to be Principal Mining Hazards as outlined in the Tasmanian
Mining Legislation. The implementation and effective management of
SEMS enables compliance with legislation, reduction of risk, increased
efficiencies and provides the framework for continuous improvement.
SEMS is aligned to ISO 14001 Environmental & ISO 45001 Occupational
Health & Safety Systems and is applicable to any existing and future
national or international operation. SEMS is now integrated into our
Certificate IV Leadership & Management training competency for our
current and aspiring leaders.
During 2020 SEMS was audited to ISO45001 by an independent auditor
to ascertain the level of compliance and identify areas of improvement
for our HSE Strategic Plan.
Mission Statement
To drive a continuous improvement culture involving everyone at Grange
Resources. We strive to eliminate injury, loss and waste, and create
positive environmental outcomes adding value to the communities in
which we operate.
The goals of our Mission Statement will be achieved through effective
adherence to management systems, integrated risk management
practices, risk aware culture, demonstrable leadership, maintaining
standards, monitoring performance and looking after our people.
Proactive Lead Indicators are the prime focus for safety to ensure we
minimise and control our Lag Indicators.
To achieve superior health and safety performance we believe:
• All injuries and loss events are preventable
• All hazards can be identified and their risks managed
• No task is so important that it cannot be done safely and respectfully
Every person is accountable for their own safety and the safety of
•
those around them
Safety performance can always be improved
•
MINERAL RESOURCES AND ORE
RESERVES STATEMENT
- SAVAGE RIVER OPERATIONS
The following tables show the Mineral Resources and Ore Reserves for
the Savage River operations as at 31 December 2020. The mining of
ore throughout the year focussed on high grade supply from North Pit.
The Mineral Resource has increased since the previous estimate dated
31 December 2019 as a result of additional drilling and re-estimation.
Ore Reserves have decreased due to minor mining depletion from
North Pit.
Mineral Resources and Ore Reserves are categorised in accordance
with the Australasian Code for Exploration Results, Mineral Resources
and Ore Reserves of 2012 (JORC Code, 2012). Estimated Measured and
Indicated Mineral Resources include those Mineral Resources modified
to produce the estimated Ore Reserves. Mineral Resources which are
not included in the Ore Reserves did not meet the required economic
viability hurdle at the time of last review.
Mineral Resources
A summary of the total Mineral Resources for Savage River as at 31
December 2020, above a cut-off grade of 15% DTR is as follows:
As at December 2020
As at December 2019
Tonnes
(Mt)
Grade
% DTR*
Tonnes
(Mt)
Grade
% DTR*
163.6
188.7
145.2
497.5
54.3
43.0
39.5
45.8
152.6
182.6
154.7
489.9
55.8
43.5
37.6
45.5
Measured
Indicated
Inferred
Total
* Davis Tube Recovery – a measure of recoverable magnetite
Ore Reserve
A summary of the Ore Reserve for Savage River as at 31 December
2020, above a cut-off grade of 15% DTR is as follows:
As at December 2020
As at December 2019
Tonnes
(Mt)
Grade
% DTR*
Tonnes
(Mt)
Grade
% DTR*
Proved
Probable
Total
61.6
46.1
107.7
51.6
41.3
47.2
61.1
52.1
113.2
53.4
39.9
47.2
* Davis Tube Recovery – a measure of recoverable magnetite
A detailed statement of the Mineral Resources and Ore Reserves
can be found in the ASX announcement dated 31/03/2021. Grange
confirms in reproducing the Mineral Resources and Ore Reserves in this
subsequent report, that it is not aware of any new information or data
that materially affects the information included and all the material
assumptions and technical parameters underpinning the estimates in
this report continue to apply and have not materially changed.
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11
Safety Performance
The Company remains committed to providing a safe place of work
and safe systems of work for all its workers at every site. We take
this commitment seriously and expect those working for us share
the same level of commitment. We want all our workers, employees
and contractors, to return home in the same or better condition than
when they came to work. The effectiveness of our systems and
safety management in general is well demonstrated by the consistent
measurable improvement in our safety lag indicators. Targeted
improvements in our lag indicators are reinforced by a regime of
measurable lead indicators to help reduce risk exposures.
During 2020 the company added further safety controls to combat the
global COVID-19 pandemic. Our controls and the management of these
prevented any business disruption and ensured the health safety and
wellbeing of our employees, contractors and supported our community.
COVID-19 remains an ongoing issue and will be managed accordingly. .
In addition, Grange is committed to ensuring compliance with
legislative requirements for each area of its operations including
meeting or exceeding requirements within:
Federal & State Work Health & Safety Legislation;
•
• Anti-Discrimination Legislation
•
Fair Work Australia Legislation
• Rehabilitation & Workers Compensation Legislation
Environmental Legislation
•
•
Codes of Practice nominated in all Federal and State Legislation
• Adopting accepted industry & Australian Standards in areas where
legislation is deficient;
• Whistleblower legislation;
• Mining specific, HSE Legislation as required; and
•
Environmental licence conditions for existing and new operations.
Established systems are in place to ensure legislative requirements are
tracked, monitored and corrective actions implemented for any instances
of non-compliance.
Grange continued the focus on reducing costs without reducing support
services via:
•
Initiatives for Emergency Response Team (ERT) in-house training
again saved considerable costs, while maintaining a high standard
of response and developing our underground rescue capability.
The underground emergency refuge chambers and associated
ventilation and pumping equipment were sourced to maintain
compliance with industry standards and WST expectations
•
•
•
• Managing the emergency response team size while increasing our
general first aid training coverage has ensured we have competent
people where they are needed.
Continuing to obtain Federal and State government training funds
reduces the outlay for training in leadership and continuous
improvement and may provide an opportunity for additional young
workers to commence apprenticeships
Continuing to develop a highwall scaling excavator locally promises
to provide a machine capable of restoring lost berm catch capacity
in the mine, cleaning batters and improving mining safety. This
machine will be fine tuned to allow a 2021 introduction to the
mine. It has already generated industry wide interest.
Participating in the Insurance Underwriters safety audit continues to
provide initiatives to help reduce insurance costs
Continued investment in Mental Health and Wellbeing first aid
training for Management and Contact Officers has helped foster an
alert and caring worker relationship.
Focus on gender diversity has promoted the role of women in our
workforce and is supporting greater diversity in our teams.
Strategic focus in “Critical Controls” is improving our risk
management system and initiatives.
•
•
•
•
Grange recognises the importance of our contractors’ safety management
systems being aligned with WorkSafe Tasmania and mine safety
regulations as well as being on par with our own safety standards.
To this end we have incorporated and communicated new OHS & ESR
requirements for contractors into our SEMS.
2020 has seen further enhancing of our Safety Preventative Maintenance
(PM) work orders in lead indicators, dedicated Area Inspections covering
all areas on site, formalising Task Observations for management and key
personnel as Lead Indicator Key Performance Indicators (KPI’s). The lead
indicators have been strengthened by the addition of specific “care and
maintenance” KPIs for underground workings.
Tracking lead indicators has helped reduce risk exposures across all areas.
This was particularly evident by our continued lost time injury free status.
Sharing and Learning
Grange adopts a philosophy of continuous learning and sharing of
safety experiences. In addition to its highly successful on-line induction
programs, Grange conducts an extensive range of on-site safety training
activities including extensive work permit training, energy isolations, site
driving and pit driving permits, simulation training for new operators, fire
warden and extinguisher training as well as refreshers on occupational
first aid and road accident rescue entrapment release. Grange have also
added a very effective online “Isolations” training package allowing our
offsite contract workforce to learn our systems before coming to site.
During the year Grange continued to work closely and openly with the
Office of the Chief inspector of Mines (OCIM), traditionally our company
provide an outlet for GMIRM (Global Mining Industry Risk Management
training sponsored by the Chief inspector of Mines.
GMIRM has four levels of Risk Management training G1 for workers, G2
for Supervisors, G3 for Management and G4 for Directors and Senior
Executives. Grange ran two, week-long G3 forums and two, 2-day G2
forums both with participants from other local companies.
Unfortunately COVID-19 has closed down the travel and training
opportunities to continue with GMIRM training in 2020 however a
continuation of training is included for 2021.
Grange continue to represent Tasmanian Mines on a Mines Legislation
Safety Steering Committee (MSSC) that is reviewing and enhancing the
current Tasmanian Mining Supplementary Safety Act and Regulations.
The first stage of this, minor changes to the Act, was approved by the
Tasmanian Government during the year
In addition to training delivered at the operational level, the company
continued to reinforce many site-wide health and safety programs aimed
at improving our employee’s wellbeing, including cancer awareness,
heart safety awareness and mental health awareness/first aid.
During the year the HSE team have developed a new three-year Strategic
Plan for HSE, this will be approved by management and rolled in 2021.
The plan aims to consolidate safety improvements and target areas of
lesser performance with a focus on training and safety leadership.
The Company has a fully functional and qualified emergency response
team (“ERT”) providing expert first aid and first response care to our sites
and others in need including road accidents in the Savage River and Port
Latta areas. The company is a member of the Tasmanian Mines Emergency
Rescue Committee (TMERC) and commits to providing assistance through
Mutual Aid to other member sites if this is ever requested.
Commitment to Social Responsibility
Grange continued with its commitment to social responsibility engaging
with our stakeholders and communities to help us understand and
respond to their interests and concerns. In addition to regular dialogue
with neighbours and communities close to our operations, the Company
continues to host and support the education sector through tours, school
curriculum information, industry links, a graduate program as well as
work opportunities at its operations. During 2020 we still managed to
allow a number of work experience students to have a week each on site
and hosted smaller size “socially distanced” school tours.
In 2020 our management and workers have actively participated in
WorkSafe Tasmania (WST) workshops, helping to share our Safety
Management approach with other industry participants. Our interactions
with WST have been positive and much appreciated by the inspectorate
as demonstrated by the positive feedback following an initial WST
COVID-19 controls audit.
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13
“Pullout qoute ea aut quaecum hil mi, vendi sum es as”. ENVIRONMENTAL
Legislative Approval
Grange obtained environmental and planning approval in 1996 and
1997 allowing it to operate under the Tasmanian Land Use Planning and
Approvals Act 1993 (LUPA), the Tasmanian Environmental Management
and Pollution Control Act 1994 (EMPCA), the Tasmanian Goldamere Pty
Ltd (Agreement) Act 1996 (Goldamere Act) and the Tasmanian Mineral
Resources Development Act 1995. This approval covers an expected
mine and processing life using open-cut mining at Savage River, gangue
removal and concentrating at Savage River and pelletising at Port Latta.
During 2014 Grange received relevant approvals for the South Deposit
Tailings Storage Facility. Grange obtained approval to construct an
underground drive and a portal to allow exploration of the North Pit
ore body at depth in 2019 and continues to progress approval to mine
the ore using underground mining through the North Pit Underground
project (NPUG). Late in 2019 Grange also obtained interimapproval
to commence open pit mining of the Centre Pit (CP) ore reserve and
continued with the full approval process through 2020.
Goldamere Act
The Goldamere Act overrides all other Tasmanian legislation with
respect to Grange’s operations. The Goldamere Act limits Grange’s
liability for remediation of contamination, under Tasmanian law, to
damage caused by Grange’s operations, and indemnifies Grange for
certain environmental liabilities arising from past operations. Where
pollution is caused or might be caused by previous operations and
that pollution may be impacting on Grange’s operations or discharges,
Grange is indemnified against that pollution. Grange is required to
operate to Best Practice Environmental Management (BPEM).
Planning Approvals
Grange obtained planning approval subject to a series of environmental
permit conditions on 29 January 1997. Planning approval was issued
by the Waratah Wynyard Council for Savage River and by the Circular
Head Council for Port Latta. The approvals were conditional on the
provision of an Environmental Management Plan (EMP) incorporating
an Environmental Rehabilitation Plan (ERP) prior to the commencement
of operations. Various other studies were also required.
Grange received planning approvals from the Waratah Wynyard Council
for the South Deposit Tailings Storage Facility (SDTSF) during 2014,
construction commenced in July 2014 and operation commenced in Q4
2018.
Grange are actively working with the Waratah Wynyard Council and
Tasmanian EPA on all aspects of the NPUG and CP projects.
During the year Grange were granted approval to install , a sodium
hydroxide plant and new sewerage treatment plant at Port Latta.
Environmental Management Plans
The EMP incorporating the ERP and study results were approved by
the (then) Department of Environment Parks, Heritage and the Arts
and operations commenced in October 1997. The latest revision of the
approval documents occurred on 6 October 2000 when Environmental
Protection Notices (EPN) 248/2 and 302/2 were issued to replace
the environmental permit conditions for Savage River and Port Latta
respectively.
Approvals are required from the Department of Primary Industries,
Parks, Water and the Environment (DPIPWE) and relevant Councils
for major infrastructure developments and operational expansions
and changes. These approvals are in the form of approved EPN’s and
or amendments and reflect changing operational circumstances, an
increasing knowledge base and include approvals designed to extend
operations, amend management plans and provide for changes to
waste rock dumping plans and any proposed treatment facilities. Such
amendments are enacted by the issue of EPN’s or Permit Conditions
Environmental (PCE)’s.
An amendment to the EMP was approved for an extension of mine and
pelletising operations in early 2007 to approve the Mine Life Extension
Plan.
EMP and ERP reviews are submitted on a 3-yearly basis. Revised
EMPs reflect BPEM and current mine planning and focus on closure
requirements and rehabilitation. The development of significant new
projects such as a new pit will require additional planning approval and
at a minimum an EMP amendment approval followed by issuance of an
EPN from the EPA.
The Tasmanian EPA issued EPN 10006/1 enabling the construction
of the Exploration Decline for the North Pit Underground Project in
November 2018.
The current EMP will be updated in 2021 following final EPA approval
of the Centre Pit Project.
Goldamere Agreement
The Goldamere Agreement (which forms part of the Goldamere Act)
provides a framework for Grange to repay the Tasmanian Government
for the purchase of the mine through remediation works. A significant
variation to the Goldamere Agreement was signed on the 19 December
2014 which extends the Agreement until 24 December 2034. This
variation also removed a significant number of redundant conditions.
The amended Goldamere Agreement provides a framework for Grange
to co-manage the Savage River Rehabilitation Project (SRRP) and
carry out contracted works in lieu of paying the purchase price of the
operation to the Government. The agreement also allows Grange to
integrate its rehabilitation obligations with those of the State under
the SRRP.
Savage River Rehabilitation Project (“SRRP”)
Grange representatives meet with representatives from DPIPWE on a
regular basis to develop and implement remediation works at Savage
River. Grange has contracted with the SRRP for works including
construction, management and development of waste rock dump
covers, acid pipelines and other remediation projects. The SRRP
objective is to capture and treat 65% of the site’s copper load to
remove the possibility of an acutely toxic aquatic environment. The
scope of works to meet this objective has been completed and costed
to feasibility level.
A strategic plan outlining the works required to achieve the objective
and repay Grange’s purchase price debt has been approved by
the Tasmanian Environmental Protection Authority and is being
implemented by the SRRP Committee. This plan was updated in 2019
to reflect the long-term risks and Grange’s latest mining plan.
14
15
•
The SDTSF incorporates the ability to mix and co-treat legacy acid
and metalliferous drainage (AMD) from the Old Tailings Dam and
B-Dump using the excess alkalinity in tailings should Grange and
the Crown agree to do so. The potential transfer of the ARD seeps
from the Old Tailings Dam will also improve the long-term integrity
of the Main Creek Tails Dam (MCTD). The co-treatment of the AMD
seeps within the SDTSF would improve water quality in Main Creek
and the Savage River. Regardless of whether the AMD seeps are
treated in the SDTSF, remediation of Main Creek will be further
enhanced by the innovative design of the storage facility that
will allow water to flow through alkaline rock prior to discharge
downstream. The first stage involving the installation of pipework
was completed in 2014, with the remaining OTD Collection Bund
and associated intake and discharge works commenced in 2017.
Final completion of the bund occurred in 2019 however there is
an ongoing monitoring period before final sign off by external
consultants. Final connection through to the SDTSF discharge is
expected to occur in 2021.
• Grange requested a variation to conditions 1 and 11 of the EPBC
approval of the SDTSF to allow for a slightly larger pit perimeter and
other minor operational changes. These variations were approved
on the 28th July 2015. No further offset was required for these
variations.
• Grange progressed design and construction work for the Main
Creek Tails Dam closure during 2018. It is expected that the
closure process will take approximately two years. Closure works
progressed through 2020.
Air Emissions Reduction Program
– Port Latta
• Grange continued to work on quality and measurement systems to
improve performance of the Port Latta operations especially with
regard to air emissions. In particular, the focus is on the stable
operation of furnaces.
Rehabilitation Plans
Grange continues to plan for closure and departure on completion of the
mining plan. Principal issues in respect of closure include waste rock
dump maintenance, tailings management, future use of infrastructure
and a five-year monitoring and maintenance plan.
Principal Environmental Issues
Waste Rock, Tailings and Water Management
– Savage River
• Water, tailings and waste rock management at Savage River,
including: development of waste rock dumps which exclude oxygen
to minimise the formation of acid mine drainage and utilisation of
these dumps to form seals on old waste rock dumps; subaqueous
tailings deposition and maintenance of saturated tailings; providing
a centralised water treatment system using a disused pit to
eliminate turbidity from mine runoff. Appropriate management and
monitoring systems are in place to ensure regulatory compliance in
these areas.
•
•
In 2013 Grange developed a Development and Environmental
Management Plan (DPEMP) for the South Deposit Tails Storage
Facility (SDTSF). Due to the size and nature of the tails storage
facility, the proposal required assessment under LUPA (1993), the
State EMPC Act (1994) and the Commonwealth EPBC Act (1999),
as the proposal has the potential to impact on matters of national
environmental significance (Tasmanian Devil and Spotted Quoll).
The DPEMP was submitted to the Waratah-Wynyard Council in
May 2013 for assessment, the DPEMP was publicly advertised
through May and June with one submission received in relation
to the development. A workshop in July with the Environmental
Protection Authority (EPA) highlighted areas that needed further
clarification. Toward the end of July the EPA formally requested a
Supplementary submission, this submission provided an opportunity
to address the issues raised in the public submission. Grange spent
a number of months liaising with both the EPA and the Department
of Environment in Canberra (DoE) addressing the Supplementary
criteria. In early December 2013 the EPA and the DoE were satisfied
that all the required information had been provided which allowed
the approvals process to recommence.
• Grange received final council approval under LUPA (1993) on 24
March 2014 for the construction of the South Deposit Tailings
Storage Facility. A Permit Conditions Environment (PCE) was issued,
outlining the conditions that must be met during construction and
operation of the dam.
• Grange received approval from the federal Environment Minister on
24 April 2014, due to the potential loss of habitat for the Tasmanian
Devil and the Spotted Quoll, Grange is required to provide an offset
for unavoidable impacts. This offset is in the form of a donation
to the Save the Devil Program to a value of $160,000. Grange
received further conditions from the federal approval under the
EPBC Act (1999).
•
Construction of the dam, including the downstream waste rock
dump commenced in early July after a number of the approval
conditions had been met. These included approvals of a Devil
and Quoll Management Plan, a Waste Rock Management Plan
and a Water Quality and Remediation Plan. Grange also fulfilled
its requirements to establish training and induction packages for
threatened species and instigated an EPBC species register for
sightings and incidents involving EPBC listed species. The EPBC
Register and other relevant documents are available on the Grange
Resources Website. By December the waste rock dump was well
established, and work was commencing on the consolidated
section of the dam.
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SOUTHDOWN MAGNETITE
PROJECT
The Southdown Project is an advanced project with over 1.2 billion
tonnes of high quality mineral resources, including ore reserves of
388Mt (see announcement dated 28 February 2014). The Project has
been designed to produce 10mtpa of high grade, quality magnetite
concentrate at 69.5% iron. This is expected to command a premium
price in the iron pellet feed market over a potential mine life of
around 30 years. A Definitive Feasibility Study (DFS) was completed
by the project owners in 2012 for 10mtpa concentrate production (see
announcement dated 1 May 2012)
Just 90km from Albany in Western Australia’s Great Southern region,
Southdown is a joint venture between Grange (70%) and SRT Australia
Pty Ltd (30%). SRT Australia is jointly owned by Sojitz Corporation, a
Japanese global trading company, and Kobe Steel, one of Japan’s largest
steel producers.
Alternative Development Option
An optimised project development option has been progressed to pre-
feasibility by our JV partners since the completion of the DFS. This would
involve a smaller 5mtpa operation within the constraints of existing
approvals, mineral resources and ore reserves; and is anticipated to
deliver reductions in capital spend from ~A$2.9B down to ~A$1.4B. This
alternative case extends the life of mine from 14 years to 28 years for
the western zone, and more than 50 years for the total resource (see
Project Details below). The 10mtpa DFS completed in 2012 remains the
base case for the JV.
2020 Project Overview
•
The Project continued on reduced expenditure while further
optimising the 5mtpa development option.
• The Commonwealth EPBC environmental approval for mine,
desalination and pipelines was granted in June 2020. The Project
now has all primary approvals in place.
•
•
• Negotiations have concluded with the State for access to key
infrastructure areas with numerous easements now registered,
enhancing Project security.
Existing tenure and approvals have been maintained
Progressed studies relating to project engineering and further
environmental permitting, including:
• Metallurgical test work and process engineering to assess
alternate processing methodologies with the potential to
reduce capex, opex, power and water demand. Groundwater
confirmed multiple
exploration and modelling which
groundwater sources have some potential to contribute to
construction and operational water supply.
• Assessment of potential power supply options
• Assessment of transshipping options at the Port of Albany
2021
Project
Priorities
•
Continue to investigate
alternate development
models which may see the
Southdown Project move into
construction and operation
Continue search for new equity partner
to take a strategic share of the Company’s
interest in the Project
•
• Maintain all tenements, permits and project assets
in good order
• Maintain all environmental approvals and permits
• Grange has the in-house skills, systems, capability and
discipline to deliver Southdown’s potential when the time is right
Project Overview
Geology
The Southdown magnetite deposit is a long, thin, near-surface,
continuous ore body. It extends over 12 kilometres, with depths varying
from 50 metres in the west to 480 metres in the east. The deposit has
been drilled and evaluated since its initial discovery in 1983, including an
extensive program of resource drilling during 2011 for the feasibility study.
Conventional Mining
Targeted concentrate production rates require a material movement
in the mine of up to 132 Mt per annum by conventional drill,
blast, load and haul mining methods. The final proposed pit is
six kilometres long, one kilometre wide and about 370 metres
deep. The mining operation will draw heavily on Grange’s existing
capability as Australia’s most experienced commercial producer of
magnetite concentrate, to assist with start-up and ongoing operations.
Ore Crushing and Concentration
The project plan envisages Southdown ore being processed to increase
the iron content from around 25% to 69%. Extensive metallurgical
test work including pilot plant trials have been conducted since 2004.
The process includes crushing, grinding, classification and magnetic
separation. The concentrate is further upgraded using hydro separation
to remove fine silica, and flotation to remove sulphur impurities.
Transporting the Concentrate Slurry 110 km to the Port
Final magnetite concentrate will be thickened and transported
through a 110 km pipeline to the Port of Albany, where it will
be filtered and stored for loading onto cape size ships. A second
pipeline will return the filtered water back to the mine site so
it can be used again in the process. Both pipelines will be buried.
17
Increasing Albany’s Port Capacity
Subject to a decision to proceed on either development option, a
concentrate export facility would be built at Albany Port. The plan
incorporates a filtration plant, storage shed, new berth and ship loading
facility. The base case 10mtpa production case plans to reclaim 7Ha
of land at the eastern end of the Port, and deepen and widen a 9.5
kilometre approach channel to enable 200,000 tonne cape size ships
to use the port. Whilst minimal dust generation is expected because
of the high moisture content of the concentrate, the shed will be fully
enclosed, under negative pressure and fitted with dust extraction
equipment. The 5mtpa production case envisages using existing land
to locate the filtration and storage facilities, and then use transshipping
to transfer the concentrate out to cape size ships waiting in King
George Sound. This option would significantly reduce the footprint and
environmental impact of the proposal.
The development would more than treble Albany’s current port
capacity from approximately 4 Mt per annum to 14 Mt per annum
for the base case 10mtpa development option. The design has
been developed in close consultation with the Southern Ports
Authority, Port of Albany (formerly Albany Port Authority) and in line
with the Public Environmental Review approved in November 2010.
A new source of water and power supply
The plan also envisages that a seawater desalination plant would be
constructed 25 km from the mine to supply the plant with 11 GL per
annum of water. Multiple groundwater sources have been identified
to assess alternate water supplies for the construction period. Power
for the mine site would be provided by a new 278 kilometre 330kv
transmission line from Muja to Southdown, to be built by Western
Power. Alternate power supply solutions, including renewable sources,
are being assessed.
Operations Planning
The Southdown operation will be modelled on Grange’s existing Savage
River operation in Tasmania operating on a 24/7 basis for 365 days per year.
Construction Planning & Schedule
Subject to a decision to proceed, the project will engage an experienced
construction management company to coordinate a series of fixed price
contracts to minimise risk and the number of interfaces. The Southdown
Joint Venture continues to work alongside the community, including
traditional owners of the land, to ensure a safe and environmentally
responsible project.
MINERAL RESOURCES AND ORE RESERVES
- SOUTHDOWN PROJECT
Mineral Resources
The Mineral Resource estimate for the Southdown Project as at 31
December 2020is as follows:
Ore Reserves
The current Ore Reserve for the Southdown Project as at 31 December
2020 is based on the pit design and mining schedule developed during
the Feasibility Study and includes modifying metallurgical factors and
plant recovery.
As at December 2020
Tonnes (Mt)
Grade %DTR*
Measured
Indicated
Inferred
Total
423.0
86.8
747.1
1,256.9
37.8
38.7
30.9
33.7
* Davis Tube Recovery – a measure of recoverable magnetite Mineral
Resources are reported above a cut-off of 10% DTR
Proven
Probable
Total
ROM (Mt)
DTR* (%)
384.6
3.1
387.7
35.6
41.7
35.6
An additional 24.4 Mt of Inferred Resources is included within the designed
pit.
A detailed statement of the Mineral Resources and Ore Reserves can be
found in the ASX announcement dated 28 February 2014. Grange confirms
in reproducing the Mineral Resources and Ore Reserves in this subsequent
report, that it is not aware of any new information or data that materially
affects the information included, and all the material assumptions and
technical parameters underpinning the estimates in this report continue
to apply and have not materially changed. Grange confirms that all
environmental approvals and tenure have been maintained in compliance
and terms extended as required to retain currency.
18
19
Corporate Governance Statement
Grange is committed to creating and building sustainable value for
shareholders and protecting stakeholder interests. The Company
recognises that high standards of corporate governance are essential
to achieving that objective.
The Board has the responsibility for ensuring Grange is properly managed
so as to protect and enhance shareholders’ interests in a manner that
is consistent with the Company’s responsibility to meet its obligations
to all stakeholders. For this reason, the Board is committed to applying
appropriate standards of corporate governance across the organisation.
As part of its commitment to enhancing its corporate governance, and
as a listed company, the Board has adopted relevant practices which are
consistent with the Australian Securities Exchange (“ASX”) Corporate
Governance Principles. The 2020 corporate governance statement was
approved by the Board in February 2021.
Details of the Company’s corporate governance practices are included in
the Corporate Governance Statement and Appendix 4G which have been
announced on the ASX and can be located on our Company’s website
www.grangeresources.com.au on the Investors page. This facilitates
transparency about Grange’s corporate governance practices and assists
shareholders and other stakeholders make informed judgments.
Grange considers that its governance practices comply with the majority
of the ASX Best Practice Recommendations.
ASX Best Practice Recommendations
The following table lists the departures from the ASX Best Practice
Recommendations applicable to the Company as at the date of its
financial year end, being 31 December 2020. Where the Company
considers that it is divergent from these recommendations, or that it
is not practical to comply, there is an explanation of the Company’s
reasons set out in the following table.
“Recommendation” Ref
(“Principle No” Ref followed by
Recommendation Ref)
7.3(a)
Departure
Explanation
A separate internal audit
function has not been formed.
An Internal Audit function has not been established as per
recommendation 7.3(a), The Board monitors the need for an internal
audit function having regard to the size, geographic location and
complexity of the Company’s operations.
The Company’s Management periodically undertakes an internal review
of financial systems and processes and where systems are considered
to require improvement these systems are developed. The Board
also considers external reviews of specific areas and monitors the
implementation of system improvements.
20
21
Grange Resources Limited
ABN 80 009 132 405
and Controlled Entities
FINANCIAL REPORT
For the Year Ended 31 December 2020
Contents
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
23
40
41
76
78
The financial statements are the consolidated financial statements of the consolidated entity
consisting of Grange Resources Limited and its controlled entities. The financial statements are
presented in Australian currency.
Grange Resources Limited is a company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
34A Alexander Street
Burnie Tasmania 7320
A description of the nature of the consolidated entity’s operations and its principal activities
is included in the Directors’ Report on pages 23 to 39, which is not part of these financial
statements.
The financial statements were authorised for issue by the directors on 26 February 2021.
The directors have the power to amend and reissue the financial statements.
All press releases, financial reports and other information are available on our website:
www.grangeresources.com.au
22
DIRECTORS’ REPORT
The Directors present their report on the consolidated entity (the “Group”) consisting of Grange Resources Limited (“Grange” or “the
Company”) and the entities it controlled at the end of, or during, the year ended 31 December 2020.
Directors
The following persons were directors of the Company during the whole year and up to the date of this report:
Michelle Li
Yan Jia
Honglin Zhao
Daniel Tenardi
Michael Dontschuk
David Woodall
Chairperson
Non-Executive Director, Deputy Chairperson
Executive Director
Non-Executive Director (resigned 27 May 2020)
Non-Executive Director
Non-Executive Director
Information on Directors
Michelle Li, PhD, GAICD
Independent Non-executive Chairperson,
Member of the Audit and Risk Committee,
Member of the Remuneration and
Nomination Committee.
Dr Li has more than 30 years of international mining experience,
including senior executive roles with mining companies such as Citic
Pacific, Rio Tinto and Iluka Resources.
Dr Li has a PhD from the University of Queensland and was previously
a non-executive Director of Ardiden Limited, Orion Metals Limited and
Sherwin Iron Limited.
Honglin Zhao
Executive Director, Chief Executive Officer
Mr Zhao is a former Director of Shagang International (Australia) Pty
Ltd, former Director and General Manager of Shagang (Australia)
Pty Ltd, and former Director of Jiangsu Shagang Group, ultimate
shareholder of Shagang International Holdings Limited and China’s
largest private steel company.
Mr Zhao has over 40 years’ experience in the industry and was
previously the Commander of Project Development Headquarters
with Shagang. Mr Zhao has extensive project management and
implementation experience and expertise.
Yan Jia, GAICD
Non-executive Deputy Chairperson
and Member of the Remuneration and
Nomination Committee
Daniel Tenardi
Independent Non-executive Director and Chairperson of the
Remuneration and Nomination Committee and member of Audit
and Risk Committee.
Ms Jia is currently the Director of the Administration Department with
the Jiangsu Shagang International Trade Co Ltd, a subsidiary of Jiangsu
Shagang Group, China’s largest private steel company. Ms Jia has over
ten years’ experience of managerial, human resources, intellectual
property and commercial experience in the steel industry and bulk
raw material transaction sector.
Mr Tenardi resigned from the board on 27 May 2020.
Michael Dontschuk BSc(Hons), FFTP,
GAICD
Independent Non-executive Director
and Chairperson of the Audit and Risk
Committee
Mr Dontschuk is a finance professional with over 35 years’ experience
in investment, finance, treasury and financial risk management. He
currently is a professional NED and sits on a number of company
boards including Eticore, Public Trustee (Tasmania), Motor Accidents
Insurance Board (Tasmania) and Australia Ratings.
Previously Mr Dontschuk has been Group Treasurer of Grange
Resources, Group Treasurer of ANZ Bank, Managing Director of
Treasury Corporation Victoria, President and Director of the Finance
and Treasury Association of Australia and has worked extensively in
corporate financial advisory and investment banking including with
Oakvale Capital and Bankers Trust.
23
David Woodall, MSc, BSc, GAICD
Independent Non-executive Director
and member of the Remuneration and
Nomination Committee and Audit and
Risk Committee
Company Secretary
Mr Piers Lewis, BComm, CA, AGIA
Mr. Woodall is a mining engineer with over 30 years’ experience
in operations, project development and evaluations in the mineral
resources industry including gold, copper, iron ore, and nickel. He
has had senior management, corporate and operational positions in
large scale open pit, large and small-scale underground operations in
Canada, Australia, USA, Fiji, Africa, Central Asia and China.
Mr Lewis has more than 20 years’ global corporate experience and is
currently the Company Secretary for ASX listed companies Cycliq Group
Limited and Ultima United Limited. Mr Lewis also serves as Chairman
of Digital Wine Ventures Limited and eSense-Lab Ltd and on the Board
of Cycliq Group Limited.
Mr Woodall is Managing Director of Australian Strategic Materials
Limited, previous roles included CEO at Superior Lake Resources
Limited, Executive General Manager International Operations for
Newcrest and Director Operations for FMG.
In 2001 Mr Lewis qualified as a Chartered Accountant with Deloitte
(Perth) he has extensive and diverse financial and corporate experience
from previous senior management roles with Credit Suisse (London),
Mizuho International and NAB Capital. Mr Lewis is also a Chartered
Company Secretary.
Principal Activities
During the period, the principal continuing activities of the Group consisted of:
• the mining, processing and sale of iron ore; and
• the ongoing exploration, evaluation and development of mineral resources.
Dividends
Dividends paid to members during the financial year were as follows:
Fully franked interim dividend for half year ended 30 June 2020 - 1.0 cents per share
Fully franked final dividend for the year ended 31 December 2019 - 1.0 cents per share
Fully franked interim dividend for half year ended 30 June 2019 - 1.0 cents per share
Fully franked final dividend for the year ended 31 December 2018 - 1.0 cents per share
Total dividends paid
2020
$’000
11,574
11,574
23,148
2019
$’000
11,574
11,574
23,148
Since the end of the financial year the directors have recommended the payment of a 2.0 cent final dividend of $23.1 million. This represents a
total of $34.7 million (3.0 cents per share) fully franked dividend for the year-end 31 December 2020. The final dividend was declared NIL conduit
foreign income and will be paid on 30 March 2021.
Operating and Financial Review
Key Highlights
Mining operations
• Achieved a major milestone of over 1,380 days Lost Time Injury
Free.
• Pellet production of 2.35 million tonnes for the year compared to
2.06 million tonnes for the prior year.
• Total iron ore product sales of 2.49 million tonnes for the year
compared to 2.19 million tonnes for the prior year.
• Profit after tax of $203.2 million for the year compared to $77.3
million for the prior year, on revenues from operations of $526.3
million compared to $368.6 million for the prior year.
• Average realised product price (FOB Port Latta) of $196.77 per tonne
for the year compared to $158.33 for the prior year.
C1
cash operating
the year compared
• Unit
for
Decrease largely due to:
• Increase in concentrate production
• Decrease in energy prices
costs of $99.77 per
for
tonne
the prior year.
to $114.26
• Cash and cash equivalents position of $183.4 million at the end
of year compared to $142.1 million at the end of the prior year.
Increase largely due to higher sales price on shipments and higher
sales volume.
Property Development
Grange ROC Property completed construction and sales of all units in
Lumley Park early in the year. Construction at Carter Toorak has been
completed and the occupancy certificate attained in July 2020. To date,
3 of the 8 units have been sold (2 settled) and the focus is to sell the
remaining units. Focus is also placed on selling the Brookville land
with development approval achieved.
In the Interim Financial Report for the half-year ended 30 June 2020,
it was reported that due to the significant impact of the COVID-19
pandemic on the residential property market in Melbourne, the Joint
Venture engaged an independent third party to conduct a valuation of
the remaining unsold units in Carter Toorak and the Brookville land to
reflect their recoverable values. These valuations indicated a decline
in values relevant to the prior year. Although the outlook on the
residential property market has improved, there remain considerable
uncertainties in the current environment. As a result of the valuation,
the Joint Venture have recognised an inventory provision of $2.6
million which the Company assesses to continue to be relevant.
24
25
The implementation of the new design is planned for Q4, 2021 with
long lead items being procured. This redesign will improve the airflow
and ensure ease of maintenance for the lifecycle of the furnace.
Other projects at Port Latta include the changeout of the Bentonite
Baghouse structure, structural repair works on plant infrastructure and
the installation of a Sodium Hydroxide system that will enhance the
performance of the scrubbers.
Energy Alternatives
The Tasmanian Government has established a Renewable Hydrogen
Industry Development Funding program to support feasibility studies
for large scale renewable hydrogen projects in the state. Grange was
selected to undertake a study to explore the potential to use hydrogen
for industrial heating at the pellet plant. This feasibility provides a
great opportunity for Grange to examine the potential for alternate
and renewable energy inputs. The study will be conducted through
2021.
North Pit Underground
Development Project
The Exploration Decline and Bulk Sample Drive were completed in
2020. More than 2.4 kilometres of underground development and
nearly 30,000 metres of diamond drill core has been collected and
logged. This program has provided valuable information to support the
pre-feasibility study. Designs and schedules are now being developed
to assess different methods of mining. The underground study will be
completed in the first half of 2021 and the results will feed into an
overall enterprise optimisation to deliver an updated Life of Mine Plan.
Port Latta Improvement Projects
Significant investment has been made this year in process improvements
at Port Latta. A complete plant shutdown was taken in November to
allow the installation, commissioning and successful operation of a
new Steel Pan Conveyor. This German-engineered conveyor system
is 110-metres-long and carries the hot pellets from the furnaces out
of the plant for stockpiling. It carries pellets more than 600 degrees
Celsius and allows them to cool more slowly, improving their strength.
The guideline for installation was approximately 70 days. It was
planned to be undertaken in 1 month and the team completed the
commissioning within 23 days through careful planning and well
managed execution.
The restoration of Furnace number four is well progressed. A revised
design for the current furnace configuration has been developed and
detailed engineering designs are in progress.
Safety performance
A focus on safety has been maintained across the business with over
1,380 days Lost Time Injury Free achieved.
Covid-19 Business Response
To date, the Company has had no material production impact due to
COVID-19. The impact of the pandemic continues to be well managed
across our operations. We remain ready to respond promptly and
accordingly in the event of any required precautionary measures
and reinstatement of government restrictions. The Company has
rapidly adapted to a new mode of operation in order to ensure the
health, safety and wellbeing of our people through the course of the
pandemic. Business continuity plans have been implemented and
operations have instigated multiple layers of controls. These have
centred around our 4 simple steps to Sanitise, Separate, Self-care
and Support each other, including temperature checks onsite as we
continue our operation and protect our people at work and at home.
Key revenue metrics for the year ended 31 December 2020 and the preceding
2019 year were as follows:
2020
Iron Ore Pellet Sales (dmt - dry metric tonne)
Iron Ore Concentrate Sales (dmt)
Iron Ore Chip Sales (dmt)
Total Iron Ore Product Sales (dmt)
Average Realised Product Price (US$/t FOB Port Latta)
Average Realised Exchange Rate (AUD:USD)
Average Realised Product Price (A$/t FOB Port Latta)
2,376,029
-
113,611
2,489,640
136.85
0.6955
196.77
2019
2,096,673
122
95,291
2,192,086
109.95
0.6944
158.33
Total sales for the year ended 31 December 2020 was 2.49 million
tonnes of high quality, low impurity iron ore products (2019: 2.19
million tonnes) and reflects sustained production from maintaining
access to high grade ore.
Please refer to Note 4 of the Financial Report for segment information
for sales to different geographical markets. The sales from long term
off take agreements with Jiangsu Shagang International Trade Co. Ltd
represents 34.6% of total sales for 2020 (2019: 35.7%).
The average iron ore product price received during the year was
$196.77 per tonne of product sold (FOB Port Latta) (2019: $158.33
per tonne).
Key operating metrics for the year ended 31 December 2020 and the preceding
2019 year were as follows:
Total BCM Mined
Total Ore BCM
Concentrate Produced (t)
Weight Recovery (%)
Pellets Produced (t)
Pellet Stockpile (t)
“C1” Operating Cost (A$/t Product Produced)(1)
2020
15,567,158
1,384,744
2,531,759
46.1
2,348,274
119,966
99.77
2019
14,462,931
2,108,370
2,117,053
39.7
2,055,043
147,721
114.26
(1) Note: “C1” costs are the cash costs associated with producing iron ore products without allowance for mine development, deferred stripping and stockpile move-
ments,and also excludes royalties, sustaining capital, depreciation and amortisation costs.
High grade ore from the Main Ore Zone in North Pit has been delivered
throughout the year. The operation has balanced the portion of the
ore zone that has a higher level of serpentinite which hinders milling
rates, with the high-grade magnetite rich ore. This has been blended to
sustain production and yield high quality pellets. Concentrate production
exceeded 2.5 million tonnes of concentrate which is a notable increase
from the previous year of 2.1 million tonnes.
The pre-stripping of waste material from Centre Pit was undertaken
throughout 2020 in preparation for ore supply later in 2021. The
environmental impact statement for the ultimate design has
been prepared and the approval process is underway with
review expected through the first quarter of 2021.
26
27
“Pullout qoute ea aut quaecum hil mi, vendi sum es as”. “Grange’s strategic focus is to
generate shareholder value by
safely producing high quality
iron ore products...”
Southdown Magnetite Project
The Southdown Magnetite Project, situated 90km from the city
of Albany in Western Australia, is a joint venture between Grange
(70%) and SRT Australia Pty Ltd (SRTA) (30%). SRTA is jointly owned
by Sojitz Corporation and Kobe Steel. This advanced project has 1.2
billion tonnes of high quality resource and has access to established
infrastructure.
Significant Changes in
State of Affairs
There was no significant change in the state of affairs of the Group
that occurred during the year ended 31 December 2020. Commentary
on the overall state of affairs of the Group is set out in the Operating
and Financial Review.
During 2020, the Project achieved a significant milestone in June as the
Company was granted approval of the Southdown Magnetite Project
(EPBC 2011/6053) under the Environment Protection and Biodiversity
Conservation Act 1999.
The Company is carrying out a strategic review of the project under
the current strong market conditions.
The process of seeking a strategic investor(s) for the project is ongoing.
All tenements, permits and project assets continue to be maintained
in good order. Budgeting and cost control over expenditure on this
project continues to secure the investment.
The Joint Venture Partners continue to monitor all ongoing project
requirements.
Financial Position
Grange’s net assets increased during the year to $712.1 million (31
December 2019: $532.1 million). The key movements in net assets
during the year are a result of the following:
• A profit after tax of $203.2 million;
• A final 2019 dividend payment of $11.6 million
• An interim 2020 dividend payment of $11.6 million
Statement of Cash Flows
Net cash flows from operating activities
Net cash inflows from operating activities for the year were $202.6
million (2019: inflows $55.7 million) and reflect higher iron ore product
sales and an increase in unit operating costs.
Net cash flows from investing activities
Net cash outflows from investing activities for the period were $125.1
million (2019: outflows $104.5 million) and principally related to
expenditures for mine properties and development $86.7 million and
property, plant and equipment $41.1 million.
Net cash flows from financing activities
Net cash outflows from financing activities for the period were $26.9
million (2019 outflow: $14.7 million) and principally related to the
payment of 2019 final dividend ($11.6 million) and 2020 interim
dividend ($11.6 million).
Matters Subsequent to the
End of the Financial Year
The Company performed a review of its investment in property
development and concluded to exit the current joint venture
arrangement and have reached an in principle agreement with its
joint venture partner subsequent to the end of the financial year. As
a result of the exit arrangements, the Company intends to forgive
the outstanding loans owed by its joint venture partner and take full
ownership of the remaining assets in the unsold units at Carter Toorak
and the Brookville property.
There were no other matters or circumstances arising since 31
December 2020 that has significantly affected, or may significantly
affect:
• the Group’s operations in future financial years; or
• the results of those operations in future financial years; or
• the Group’s state of affairs in future financial years.
Likely Developments and
Expected Results of Operations
Grange’s strategic focus is to generate shareholder value by safely
producing high quality iron ore products from its Savage River and Port
Latta operations in Tasmania and continuing to assess the feasibility
of a major iron ore development project at Southdown, near Albany
in Western Australia. The Group’s current strategic priorities include:
Savage River and Port Latta Operations
• Optimising the Life of Mine Plan together with cost reduction
strategies
• Completing feasibility study into the ability to access the ore body
in North Pit through underground development
• Optimising the mine design for Centre Pit
• Securing majority of sales through off take agreements
• Broadening our customer base for the longer term to take advantage
of market opportunities and to diversify geographic customer risk
• Maintaining access to high grade ore by continuing to invest in mine
development
• Continuing to invest in process infrastructure
• Continuing focus on improving productivity and implementing cost
control projects
28
29
Southdown Project
• Ensuring that all tenements, permits and project assets remain in
good standing
• Maintaining the currency of all the elements of the Definitive
Feasibility Study
• Continuing review and identifying the potential for alternative
project development models
• Continuing the search for new equity partners to take a strategic
share of the Company’s interest in the Project
Risk Management
The Group continues to assess and manage various business risks that
could impact the Group’s operating and financial performance and its
ability to successfully deliver strategic priorities including:
• Fluctuations in iron ore market and movements in foreign exchange
rates
• Volatility in the electricity and gas price and availability
• Mitigate market demand risk through securing off-take agreements
• Geotechnical risks including wall stability
• Production risks and costs associated with aging infrastructure
• Project evaluation and development
• Health, safety and environment
• Impacts of climate change on our business
Risk mitigation strategies include the following:
• Optimise timing of sales to the fluctuations in iron ore prices and
demands from different markets
• Flexible strategy to determine the volume to be secured through
off-take agreements
• Intense program of geotechnical wall monitoring, modelling and
redesign work to mitigate potential stability issues
• Continue disciplined and rigorous review process regarding budget
development and cost control to ensure investment directed to
highest priority areas while reducing overall operating costs
• Hedging strategies for key energy exposures
• A well developed tool kit to ensure projects are adequately planned
and peer reviewed prior to commitment and execution
• Outstanding safety record is supported by comprehensive safety
system that enables management to develop a resilient safety
culture and ensure our stewardship over the environment
Environmental Regulation
The mining and exploration tenements held by the Group contain
environmental requirements and conditions that the Group must
comply with in the course of normal operations. These conditions
and regulations cover the management of the storage of hazardous
materials and rehabilitation of mine sites.
The Group is subject to significant environmental legislation and
regulation in respect of its mining, processing and exploration activities
as set out below:
Savage River and Port Latta Operations
The Group obtained approvals to operate in 1996 and 1997 under the
Land Use Planning and Approvals Act (LUPA) and the Environmental
Management and Pollution Control Act (EMPCA) as well as the
Goldamere Act and Mineral Resources Development Act. The land use
permit conditions for Savage River and Port Latta are contained in
Environmental Protection Notices 248/2 and 302/2 respectively. The
currently approved Environmental Management Plans were submitted
for Savage River and Port Latta on 21 December 2010. The extension of
the project’s life was approved by the Department of Tourism, Arts and
the Environment on 12 March 2007 and together with the Goldamere
Act and the Environmental Protection Notices, is the basis for the
management of all environmental aspects of the mining leases. The
Group has been relieved of any environmental obligation in relation
to contamination, pollutants or pollution caused by operations prior to
the date of the Goldamere Agreement (December 1996).
During the financial year there were no breaches of licence conditions.
Southdown Joint Venture
The Southdown Joint Venture has not been responsible for any
activities which would cause a breach of environmental legislation.
Mount Windsor Joint Venture
The Group is a junior partner (30%) in the Mt Windsor project in
North Queensland which is now being rehabilitated for future lease
relinquishment. An ongoing Transitional Environment Program has
been entered into voluntarily to identify and remediate various sources
of pollution on site. A comprehensive plan has been developed and
instigated to manage the leases with relinquishment expected in 2045.
During the financial year there were no breaches of licence conditions.
National Greenhouse and Energy Reporting
Act 2007
The National Greenhouse and Energy Reporting Act 2007 requires the
Group to report its annual greenhouse gas emissions and energy use
by 31 October each year. The Group has implemented systems and
processes for the collection and calculation of the data required and
has submitted its annual reports to the Greenhouse and Energy Data
Officer by 31 October each year.
Clean Energy Act 2011 and the Clean Energy
Legislation (Carbon Tax Repeal) Act 2014
The Group has complied with its obligations under the Clean Energy
Act, the Clean Energy Legislation (Carbon Tax Repeal) Act and related
legislation by completing True-up requirements with regard to
assistance received through the Jobs and Competitiveness Program
for the emissions-intensive trade-exposed activities of Production
of Iron Ore Pellets and Production of Magnetite Concentrate in the
moderately emissions-intensive category.
Climate Change Risk and Opportunities
Physical Risks
• Concentrated rainfall event causing flooding
• Rising sea levels and reduced rainfall causing groundwater scarcity
Risk related to transition to a low carbon economy
• Policy and legal risks as a result of government regulation of carbon
emissions,resulting in higher energy prices and other production
costs or restricted energy availability.
• Technology, market and reputation risk as a result of change in
consumer expectations and demand for low carbon goods and
services.
The Group identifies and monitors these risks through the enterprise
risk assessment process and continues to identify opportunities for
improvement. The Group acknowledges that the world is moving to
a low-carbon future. The steel market is already starting to value
‘green steel’ and while our pellets reduce emissions in the production
of steels, the Group will continue to explore opportunities to reduce
carbon emissions in its production processes.
The Tasmanian Government has established a Renewable Hydrogen
Industry Development Funding program to support feasibility studies
for large scale renewable hydrogen projects in the state. Grange has
been selected to undertake a study to explore the potential to use
hydrogen for industrial heating at the pellet plant. This feasibility
provides a great opportunity for Grange to examine the potential for
alternate and renewable energy inputs. The study will be conducted
through 2021.
30
31
Variable Remuneration
– Short Term Incentive (“STI”)
The objective of the STI is to link the achievement of the Company’s
annual operational targets (usually reflected in the approved budgets)
and an individual’s personal targets with the remuneration received
by selected executive directors and senior employees responsible for
meeting those targets. Payments are made as a cash incentive payable
after the financial statements have been audited and released to the
Australian Securities Exchange (“ASX”). 50% of the STI relates to the
achievement of company performance goals and 50% relates to the
attainment of agreed personal performance goals.
(iii) Executive remuneration
philosophy and framework
It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a small high-quality executive team
by remunerating Executive Directors and executives fairly and
appropriately with reference to relevant market conditions. To assist
in achieving this objective, the Board attempts to link the nature and
amount of executives’ emoluments to the Company’s performance.
The remuneration framework aims to ensure that remuneration
practices are:
• acceptable to shareholders, transparent and easily understood;
• competitive and reasonable, enabling the company to attract
and retain key talents who share the same values with Grange
Resources; and
• aligned to the Company’s strategic and business objectives and the
creation of shareholder value.
Using external remuneration sector comparative data, the Group
has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the
organisation. The framework is reviewed regularly along with the
remuneration strategy review.
The framework provides a mix of fixed and variable pay, and a blend
of short and long term incentives detailed as follows:
Fixed Remuneration
Fixed remuneration is reviewed annually by the Remuneration and
Nomination Committee. The process consists of a review of Group and
individual performance, relevant comparative remuneration externally
and internally and, where appropriate, external advice on policies and
practices.
Executives are given the opportunity to receive their fixed (primary)
remuneration in a variety of forms including cash and fringe benefits.
It is intended that the manner of payment chosen is optimal for the
recipient without creating any undue cost for the Group.
There are no guaranteed fixed pay increases included in any
executives’ contracts.
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 December 2020,
and the numbers of meetings attended by each Director were:
Name
M Li
Y Jia
D Tenardi
H Zhao
M Dontschuk
D Woodall
Directors’
meetings
Meetings of Committees
Audit
Remuneration
A
6
6
3
6
6
6
B
6
6
3
6
6
6
A
7
-
2
-
7
4
B
7
-
3
-
7
4
A
5
5
2
-
-
3
B
5
5
2
-
-
3
A=Number of meetings attended, B=Number of meetings held during the time the Director held office or was a member
of the committee during the year ended 31 December 2020
Interests in the Shares, Rights
and Options of the Company
The relevant interest of each Director in the share capital and options
of the Company as at the date of this report is:
Director
M Li
Y Jia(1)
D Tenardi
M Dontschuk
D Woodall
H Zhao(2)
Number of Fully Paid
Ordinary Shares
Rights
Options
13,507
-
-
13,000
-
1,287,702
-
-
-
-
-
-
-
-
-
-
-
-
(1) Y Jia is an employee of Jiangsu Shagang International Trade Co. Ltd which is a
subsidiary of the Jiangsu Shagang Group, ultimate shareholder of Shagang
International Holdings Limited. Shagang International Holdings Limited and its
affiliates hold 554,762,656 ordinary fully paid shares in the Company as at the
date of this report.
(2) H Zhao is a former Director on the Board of the Jiangsu Shagang Group, ultimate
shareholder of Shagang International Holdings Limited. Shagang International
Holdings Limited and its affiliates hold 554,762,656 ordinary fully paid shares in
the Company as at the date of this report.
Remuneration Report
This remuneration report sets out remuneration information for Non-
executive Directors, Executive Directors and other key management
personnel of the Group and the company.
(i) Key management personnel disclosed
in this report
Non-executive directors
Michelle Li
Yan Jia
Daniel Tenardi – resigned 27 May 2020
Michael Dontschuk
David Woodall
Executive directors
Honglin Zhao
Position
Executive Director
Chief Executive Officer
Other key management personnel
Steven Phan
Ben Maynard
Position
Chief Financial Officer
General Manager Operations
(ii) Remuneration governance
The Board has an established Remuneration and Nomination
Committee to assist in overseeing the development of policies and
practices which enable the Company to attract and retain capable
Directors and employees, reward employees fairly and responsibly
and meet the Board’s oversight responsibilities in relation to corporate
governance practices.
The Remuneration and Nomination Committee is composed of Ms Yan
Jia (Non-executive Deputy Chairperson and Committee Chairperson),
Dr Michelle Li (Chairperson) and Mr David Woodall (Non-executive
director).
The responsibilities and functions for the Remuneration and Nomination
Committee include reviewing and making recommendations on the
following:
• Equity based executive and employee incentive plans;
• Recruitment,
performance
succession
measurement and termination policies and procedures for Non-
executive Directors, Executive Directors and Key Management
Personnel;
retention,
planning,
• The remuneration of the Chief Executive Officer; Chief Financial
Officer; and General Manager Operations;
• Periodically assessing the skills required by the Board;
• Recommend processes to evaluate the performance of the Board, its
Committees and individual Directors; and
• Reviewing governance arrangements pertaining to remuneration
matters.
The Charter is reviewed annually, and remuneration strategies are
reviewed regularly.
32
33
“Pullout qoute ea aut quaecum hil mi, vendi sum es as”.
“We recognise that
our people are
our most valuable
asset. We have
a committed
workforce with
strong skills and
experience base.”
Variable Remuneration - Long Term Incentive (“LTI”)
a) Deferred Cash
The Board determined that it was appropriate to simplify the Company
LTI plan and introduce a 3 year deferred cash incentive scheme with
immediate effect from 1 January 2019.
The objective of this deferred cash scheme is to reward selected
executive directors and senior employees with a cash payment which
is linked to the Company satisfying performance hurdles and subject
to ongoing employment with Grange. The deferred cash component is
determined by measuring the Company’s progress made on:
• Development of mineral assets (weighting 35%)
• Mine development (weighting 20%)
• Downstream process improvement (weighting 15%)
• Financial returns (weighting 20%)
• Safety and sustainability (weighting 10%)
The deferred cash component is determined based on the Company’s
performance for the year ended 31 December, with 33.3% payable
on 31 December the first following year, 33.3% payable on 31
December the second following year, and the balance payable
on the following 31 December (i.e. 3 years after the relevant
calculation date). Payment of deferred cash is subject to continuing
employment with Grange at the scheduled date of the payment.
b) Rights to Grange Shares
The objective for the issue of Rights under the LTI program was replaced
with Deferred Cash from 1 January 2014. The Company did not issue
any Rights to employees in the 12 months ended 31 December 2020.
(iv) Relationship between remuneration and Grange Resources performance
The table below shows key performance indicators of Company performance over the past five years.
Revenue from operations
Net profit/(loss) after tax
Basic earnings per share
Dividend payments
Share price (last trade day of
financial year)
$ million
$ million
Cents
$ million
Cents
2016
276.3
92.9
8.03
11.6
14.0
2017
247.9
60.71
5.25
11.6
21.5
2018
368.2
112.94
9.79
23.1
20.0
2019
368.6
77.3
6.71
23.1
25.0
2020
526.3
203.19
17.64
23.1
29.5
(v) Non-executive director remuneration policy
The following annual fees (inclusive of superannuation) have applied:
reflect
to Non-executive Directors
Fees and payments
the
responsibilities and demands made on them. Non-executive Directors’
fees and payments are reviewed periodically by the Board. The Board
also considers comparative market data and if required the advice
of independent remuneration consultants to ensure Non-executive
Directors’ fees and payments are appropriate and in line with the
market. The Chairperson’s fees are determined independently to the
fees of Non-executive Directors based on comparative roles in the
external market.
The current remuneration was last reviewed with effect from 1
November 2014. The Chairperson’s remuneration is inclusive of
committee fees while other Non-executive Directors who chair a
Committee receive additional yearly fees. The Deputy Chairperson is
also entitled to receive an additional yearly fee.
Non-executive Directors’ fees are determined within an aggregate
Directors’ fee pool limit, which is periodically reviewed for adequacy.
Any increase to the aggregate Directors’ fee pool is submitted to
shareholders for approval. The maximum currently stands at $800,000
per annum and was approved by shareholders at the Annual General
Meeting on 26 November 2010. Non-executive Directors do not
receive performance-based pay.
Board of Directors
Chairperson (1)
Deputy Chairperson
Non-executive Director
Audit and Risk Committee
Chairperson
Committee Member
$170,000
$92,000
$81,000
$15,750
$10,500
Remuneration and Nomination Committee
Chairperson
Committee Member
(1) The Chairperson is not paid any additional amounts for Committee membership.
$15,750
$7,500
34
35
vi) Details of remuneration
Details of the remuneration of the key management personnel of the Group are set out in the following tables.
Table 1: Remuneration for the year ended 31 December 2020
Short-term employee benefits
Post
employment
benefits
Long-term
benefits
Long term incentive
(LTI)
Super-
annuation
Long service
leave
Termination
benefits
Earned
Rights
$
$
$
$
Salary
& fees
$
155,256
104,313
40,820
88,356
83,563
472,308
Non-
monetary
benefits
Short term
incentive
(STI)
$
$
-
-
-
-
-
-
-
-
-
-
-
-
$
14,748
-
3,875
8,400
7,942
34,965
526,656
93,012
115,337
50,029
30,626
340,427
378,453
-
-
67,098
74,593
32,340
35,953
10,286
15,359
1,245,536
93,012
257,028
118,322
56,271
TOTAL
1,717,844
93,012
257,028
153,287
56,271
(1) Mr Tenardi resigned on 27 May, 2020
Table 2: Remuneration for the year ended 31 December 2019
Short-term employee benefits
Post
employment
benefits
Long-term
benefits
Long term incentive
(LTI)
Super-
annuation
Long service
leave
Termination
benefits
Earned (1)
Rights
$
$
$
$
Salary
& fees
$
155,255
99,503
97,946
88,357
61,649
502,710
Non-
monetary
benefits
Short term
incentive
(STI)
$
$
-
-
-
-
-
-
-
-
-
-
-
-
$
14,748
-
9,303
8,397
5,859
38,307
Non-Executive Directors
M Li
Y Jia
D Tenardi(1)
M Dontschuk
D Woodall
Sub-total
Non-Executive
Directors
Executive Directors
H Zhao
Key Management
Personnel
S Phan
B Maynard
Sub-total Key
Management Personnel
Non-Executive Directors
M Li
Y Jia
D Tenardi(1)
M Dontschuk
D Woodall
Sub-total
Non-Executive
Directors
Executive Directors
H Zhao
Key Management
Personnel
S Phan
B Maynard
Sub-total Key
Management Personnel
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,152
37,567
42,032
151,751
151,751
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,944
35,467
39,514
141,925
141,925
511,813
156,967
99,268
48,624
27,773
330,829
375,204
-
-
60,683
68,822
31,427
35,644
11,445
16,643
1,217,846
156,967
228,773
115,695
55,861
TOTAL
1,720,556
156,967
228,773
154,002
55,861
(1) Based on an earned basis. In 2019, STI and LTI were reported on a cash basis
36
Table 3: Relative proportions linked to performance
The relative proportions of remuneration that are linked to performance
and those that are fixed are as follows:
Long term incentive
a) Deferred Cash
Total
$
170,004
104,313
44,695
96,756
91,505
507,273
887,812
487,718
546,390
1,921,920
2,429,193
Total
$
170,003
99,503
107,249
96,754
67,508
541,017
911,389
469,851
535,827
1,917,067
2,458,084
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fixed
Remuneration
At Risk - STI
At Risk - LTI
Dec-
20
Dec-
19
Dec-
20
Dec-
19
Dec-
20
Dec-
19
Name
Executive Directors
H Zhao
79% 82% 13% 11%
8%
7%
Key Management
Personnel
S Phan
B Maynard
79% 80% 14% 13%
79% 80% 14% 13%
8%
8%
8%
7%
Based on an earned basis. In 2019, STI and LTI were reported on a cash basis.
(vii) Service agreements
On appointment to the Board, all Non-executive Directors sign a letter
of appointment with the Company. The document details the term of
appointment, the role, duties and obligations of the Directors as well
as the likely time commitment and performance expectations and
review arrangements and circumstances relating to the vacation of
office. In addition, it also summarises the major Board policies and
terms, including compensation, relevant to the office of Director.
Remuneration and other terms of employment for the executives are
formalised in service agreements. Each of the agreements provides for
the provision of fixed pay, performance related variable remuneration
and other benefits. The agreements with executives are ongoing and
provide for termination of employment at any time by giving three
months’ notice or by the Company paying an amount equivalent to
three months remuneration in lieu of notice.
(viii) Details of STI and LTI
(including share-based payment) held by key
management personnel
Short term incentive
For each short term incentive benefit, the percentage of the available
bonus to be awarded will be paid early in the year subsequent to the
year of assessment.
At the date of this report, the recommendation for the 2020 STI pro-
gram had been proposed and yet to be approved:
2020 STI Program
Proposed
Amount
Maximum
possible
incentive award
Name
Executive Directors
H Zhao
$138,404
83%
$115,337(1)
Key Management
Personnel
S Phan
B Maynard
(1) Inclusive of superannuation.
$80,518
$89,512
83%
83%
$ 67,098(1)
$ 74,593(1)
At the date of this report, the performance for the 2020 LTI program had
been proposed and yet to be approved.
2020 LTI Program
Proposed
Amount
Maximum
possible
incentive award
Name
Executive Directors
H Zhao
$103,803
83%
$86,503(1)
Key Management
Personnel
S Phan
B Maynard
(1) Inclusive of superannuation.
$53,678
$59,674
83%
83%
$ 67,098(1)
$ 74,593(1)
b) Rights to Grange Shares
The Board will review regularly and reserves the right to vary from
time to time the appropriate hurdles and vesting periods for Rights to
Grange shares.
The objective for the issue of Rights under the LTI program is to reward
selected senior employees in a manner that aligns this element of
their remuneration package with the creation of long term shareholder
wealth while at the same time securing the employee’s tenure with
the Company over the longer term. The LTI grants Rights to the Com-
pany’s shares to selected senior employees.
There were no Rights to Grange shares issued to directors or senior
employees in the years 2020 and 2019.
37
Share holdings
The number of shares in the Company held during the period by each Director of Grange Resources Limited and other key management personnel
of the Group, including their personally related parties, are set out below:
31 December 2020
Balance
1 January 2020
On vesting of
rights
On market
purchases
On market
disposals
Other
Directors of Grange Resources Limited
M Li
M Dontschuk
H Zhao
Key Management Personnel
B Maynard
31 December 2019
13,507
13,000
-
68,122
-
-
-
-
-
-
1,287,702
-
-
-
-
-
Balance
1 January 2019
On vesting of
rights
On market
purchases
On market
disposals
Other
Directors of Grange Resources Limited
M Li
M Dontschuk
Key Management Personnel
B Maynard
13,507
41,500
68,122
-
-
-
-
-
-
-
28,500
-
Balance
31 December
2020
13,507
13,000
1,287,702
68,122
Balance
31 December
2019
13,507
13,000
68,122
-
-
-
-
-
-
-
(ix) Loans to key management personnel
There were no loans to key management personnel during the year
(December 2019: Nil).
(x) Other transactions with Directors and key
management personnel
A director, Mr Honglin Zhao, is a former director of Jiangsu Shagang
Group (Shagang) to which sales of iron ore products are made under
long-term off-take agreements. As at 26th February 2021, Shagang
holds 47.93% (28 February 2020: 47.93%) of the issued ordinary
shares of Grange. Transactions between Shagang and Grange must be
approved by non-associated shareholders of Shagang or approved by
the Grange independent directors.
A director, Ms Yan Jia, is an employee of Shagang International Trade
Co. Ltd., which is a wholly owned subsidiary of Jiangsu Shagang Group
(Shagang) to which sales of iron ore products are made under long-
term off-take agreements. Transactions between Shagang and Grange
must be approved by non-associated shareholders of Shagang, or
approved by the Grange independent directors.
Aggregate amounts of each of the above types of other transactions:
Sales of iron ore products
Pellets
2020
$
2019
$
182,146,622
131,598,839
The following balances are outstanding at the end of the reporting
period in relation to the above transactions:
Trade receivables (sales of iron ore products)
$
2020
2019
$
Pellets
Other
32,350,066
2,869,107
(10,187)
2,062
32,339,879
2,871,169
Insurance of Officers
During the financial period, the Company has paid premiums in
respect of Directors’ and Officers’ Liability Insurance and Company
Reimbursement policies, which cover all Directors and Officers of the
Group to the extent permitted under the Corporations Act 2001. The
policy conditions preclude the Group from any detailed disclosures.
It is the Group’s policy to employ PwC on assignments additional to
their statutory audit duties where PwC’s expertise and experience
with the Group are important. These assignments are principally tax
consulting and advice or where PwC is awarded assignments on a
competitive basis. It is the Group’s policy to seek competitive tenders
on all major consulting assignments. Group policy also requires the
Chairperson of the Audit and Risk Committee to approve all individual
assignments performed by PwC with total fees greater than $10,000.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 40.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the Directors’
Report. Amounts in the Directors’ Report have been rounded off in
accordance with the instrument to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
Auditor
PwC continues in office in accordance with section 327 of the
Corporations Act 2001.
The report is made in accordance with a resolution of Directors.
Michelle Li
Chairperson of the Board of Directors
Perth, Western Australia
26 February 2021
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations
Act 2001 for leave to bring proceedings on behalf of the company, or to
intervene in any proceedings to which the company is a party, for the
purpose of taking responsibility on behalf of the company for all or part
of those proceedings. No proceedings have been brought or intervened
in on behalf of the company with leave of the Court under section 237
of the Corporations Act 2001.
Indemnity of Auditors
The Company has entered into an agreement to indemnify its auditor,
PwC, against any claims or liabilities (including legal costs) asserted
by third parties arising out of their services as auditor of the Company,
where the liabilities arise as a direct result of the Company’s breach
of its obligations to the Auditors, unless prohibited by the Corporations
Act 2001.
Audit and Non-audit Services
The Board of Directors has considered the position and, in accordance
with advice received from the Company’s Audit and Risk Committee,
is satisfied that the provision of non-audit services is compatible with
the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of
non-audit services by the auditor, as set out below, did not compromise
the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
•
•
all non-audit services have been reviewed by the Audit and Risk
Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
none of the services undermine the general principles relating
to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
During the year the following fees were paid or payable for services
provided by the auditor of the parent entity, its related practices and
non-related audit firms:
2020
$’000
2019
$’000
Assurance services
PwC - Australia
Audit and review of financial reports
Other assurance services
Network firms of PwC Australia
Total assurance services
Non-assurance services
PwC - Australia
Taxation compliance services
Total remuneration paid
325
26
18
369
1
370
302
43
20
365
5
370
38
39
Auditor’s Independence Declaration
As lead auditor for the audit of Grange Resources Limited for the year ended 31 December 2020, 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.
This declaration is in respect of Grange Resources Limited and the entities it controlled during the
period.
Amanda Campbell
Partner
PricewaterhouseCoopers
Melbourne
26 February 2021
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.
40
41
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Consolidated
Revenues from operations
Cost of sales
Gross profit from operations
Administration expenses
Operating profit before other income
Exploration and evaluation expenditure
Other income
Operating profit before finance costs
Finance income
Finance expenses
Profit before tax
Income tax expense
Profit for the year
NOTES
4, 5
6
7
8
9
9
10
2020
$’000
526,324
(295,506)
230,818
(5,218)
225,600
(1,414)
386
224,572
5,344
(21,037)
208,879
(5,693)
203,186
2019
$’000
368,601
(286,072)
82,529
(5,949)
76,580
(1,235)
174
75,519
7,991
(1,884)
81,626
(4,292)
77,334
Total comprehensive income for the year
203,186
77,334
Total comprehensive income/(loss) for the period attributable to:
- Equity holders of Grange Resources Limited
- Non Controlling Interests
Earnings per share for profit attributable to the ordinary equity holders of Grange Resources Limited
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
34
34
204,179
(993)
203,186
17.64
17.64
77,661
(327)
77,334
6.71
6.71
The above statement of comprehensive income should be read in conjunction with the accompanying notes
Consolidated
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Right of Use Assets
Mine properties and development
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Lease liability
Trade and other payables
Borrowings
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Lease liability
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Retained earnings
Capital and reserves attributable to owners of Grange Resources Limited
Non-Controlling Interests
Total equity
NOTES
2, 11
12
13
2
14
15
16
17
18
16
2, 19
2, 20
21
2
16
22
2
23
24
26
2020
$’000
183,385
94,469
123,010
19,539
420,403
8,484
113,994
2,311
269,297
59,291
453,377
873,780
1,109
39,879
14,044
24,584
3,890
83,506
1,299
72,616
4,268
78,183
161,689
712,091
331,513
381,747
713,260
(1,169)
712,091
2019
$’000
142,143
58,809
119,801
19,783
340,536
8,470
97,756
2,883
206,321
32,855
348,285
688,821
839
51,258
16,755
22,854
944
92,650
2,084
62,034
-
64,118
156,768
532,053
331,513
200,716
532,229
(176)
532,053
42
43
The above statement of financial position should be read in conjunction with the accompanying notes
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Balance at 1 January 2020
Profit for the period attributable to owners of
Grange Resources Limited
Loss attributable to non-controlling interests
Total comprehensive profit/(loss) for the year
Transactions with owners in their
capacity as owners
Dividends paid
Balance at 31 December 2020
Balance at 1 January 2019
Change in Accounting Policy
Restated Opening Equity at 1 January 2019
Profit for the period attributable to owners of
Grange Resources Limited
Loss attributable to non-controlling interests
Total comprehensive profit/(loss) for the year
Transactions with owners in their
capacity as owners
Dividends paid
Non-controlling interest
Contributed equity
NOTES
Contributed
equity
$’000
331,513
-
-
-
-
331,513
331,513
-
331,513
-
-
-
-
-
-
25
25
26
Non-
Controlling
Interests
$’000
(176)
-
(993)
(993)
Retained
earnings
$’000
200,716
204,179
-
204,179
TOTAL
$’000
532,053
204,179
(993)
203,186
-
(1,169)
(23,148)
381,747
(23,148)
712,091
74
-
74
-
(327)
(327)
-
77
77
146,243
(40)
146,203
77,661
-
77,661
477,830
(40)
477,790
77,661
(327)
77,334
(23,148)
(23,148)
-
(23,148)
200,716
77
(23,071)
532,053
Balance at 31 December 2019
331,513
(176)
The above statements of changes in equity should be read in conjunction with the accompanying notes
Consolidated
Cash flows from operating activities
Receipts from customers and other debtors (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for mine properties and development
Proceeds / (payments) from loan receivable
Proceeds from managed funds
Payments to managed funds
Payments for term deposits
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds/(Repayment) of borrowings
Dividends paid to shareholders
Lease Payments
Contributed equity - non-controlling interests
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net foreign exchange differences
Cash and cash equivalents at end of the year
NOTES
$’000
$’000
478,540
(234,585)
243,955
5,408
(327)
(46,468)
202,568
21
(41,092)
(86,652)
2,626
-
-
(23)
359,299
(276,845)
82,454
7,405
(38)
(34,085)
55,736
-
(42,214)
(50,974)
(10,930)
10,163
(10,000)
(537)
(125,120)
(104,492)
(2,711)
(23,148)
(1,027)
-
(26,886)
50,562
142,143
(9,320)
183,385
8,865
(23,148)
(446)
77
(14,652)
(63,408)
204,497
1,054
142,143
33
15
17
25
11
The above statement of cash flows should be read in conjunction with accompanying notes.
44
45
NOTE 1. SUMMARY OF
SIGNIFICANT ACCOUNTING
POLICIES
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. These policies
have been consistently applied for all the periods presented, unless
otherwise stated.
The financial statements are for the consolidated entity consisting of
Grange Resources Limited and its subsidiaries.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance
with Australian Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board and the Corporations Act
2001. Grange Resources Limited is a for-profit entity for the purpose
of preparing the financial statements.
Compliance with IFRS
The consolidated financial statements of the Grange Resources Limited
group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board
(IASB).
Historical cost convention
These financial statements have been prepared under the historical
costs convention, except for certain assets which, as noted, are at fair
value.
New and amended standards adopted by the group
The group has applied the following standards and amendments for
the first time for their annual reporting period commencing 1 January
2020:
• AASB 2018-7 Amendments to Australian Accounting Standards –
Definition of Material [AASB101 and AASB 108]
• AASB 2018-6 Amendments to Australian Accounting Standards –
Definition of a Business [AASB3]
• AASB 2019-3 Amendments to Australian Accounting Standards –
Interest Rate Benchmark Reform [AASB 9, AASB 139 and AASB 7]
• AASB 2019-5 Amendments to Australian Accounting Standards –
Disclosure of the Effect of New IFRS Standards Not Yet issued in
Australia [AASB 1054]
• Conceptual Framework for Financial Reporting and AASB 2019-1
Amendments to Australian Accounting Standards – References to
the Conceptual Framework.
The amendments listed above did not have any impact on the amounts
recognised in prior periods and are not expected to significantly affect
the current or future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the group. These
standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable future
transactions.
Comparative figures
Where necessary, comparative figures have been adjusted to conform
to changes in the presentation in the current period.
Critical accounting estimates
The preparation 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 Group’s accounting policies.
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 3.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Grange Resources Limited as at 31
December 2020 and the results of all subsidiaries for the year then
ended. Grange Resources Limited and its subsidiaries together are
referred to in this financial report as the Group or the consolidated
entity.
Subsidiaries are those entities over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities
of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that
control ceases. Details of subsidiaries are set out in note 31.
The acquisition method of accounting is used to account for business
combinations by the Group (refer to note 1(e)).
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of the impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
(ii) Joint arrangements
Joint operations
The Group recognises its direct right to the assets, liabilities, revenues
and expenses of joint operations and its share of any jointly held
or incurred assets, liabilities, revenues and expenses. These have
been incorporated in the financial statements under the appropriate
headings. Details of the joint operations are set out in note 32.
(c) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the Chief Executive Officer.
Refer to note 4 for further information on segment descriptions.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Australian
dollars, which
is Grange Resources Limited’s functional and
presentation currency.
(ii) Transactions and balances
All foreign currency transactions during the financial period are
translated into the functional currency using the exchange rate
prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from
the translation at period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the profit
and loss, 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.
Non-monetary items that are measured in terms of historical cost in
foreign currency are translated using the exchange rate as at the date
of the initial transaction. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rates at the
date when the fair value was determined.
(iii) Group companies
The results and financial position of all the Group entities (none of
which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet,
• income and expenses for each income statement are translated
at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions), and
• all resulting exchange differences are recognised
in other
comprehensive income.
On consolidation, exchange differences arising from the translation of
any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments,
are recognised in other comprehensive income. When a foreign
operation is sold or any borrowings forming part of the net investment
are repaid, a proportionate share of such exchange differences are
reclassified to the income statement, as part of the gain or loss on
sale where applicable. Goodwill and fair value adjustments arising on
the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entities and translated at the closing rate.
(e) Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other
assets are acquired. The consideration transferred for the acquisition
of a subsidiary comprises the
• fair values of the assets transferred
• liabilities incurred to the former owners of the acquired business
• equity interests issued by the Group
• fair value of any asset or liability resulting from a contingent
consideration arrangement, and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. The
Group recognises any non-controlling interest in the acquired entity on
an acquisition-by-acquisition basis either at fair value or at the non-
controlling interest’s proportionate share of the acquired entity’s net
identifiable assets. Acquisition-related costs are expensed as incurred.
The excess of the
• consideration transferred,
• amount of any non-controlling interest in the acquired entity, and
• acquisition-date fair value of any previous equity interest in the
acquired entity
over the fair value of the net identifiable assets acquired is recorded
as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the subsidiary acquired, the difference is
recognised directly in profit or loss as a bargain purchase. Where
settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the
date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and
conditions.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit
or loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer’s previously held equity interest in the
acquire is remeasured to fair value at the acquisition date. Any gains
or losses arising from such remeasurement are recognised in profit
or loss.
46
47
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(f) Revenue recognition
Revenue is recognised for the major business transactions as follows:
Sale of ore and the related freight revenue
Sales revenue is recognised on individual sales when control transfers
to the customer. In most instances, control passes and sales revenue
is recognised when the product is delivered to the vessel on which
it will be transported. There may be circumstances when judgment
is required when recognising revenue based on the five-step model
below:
Identify the contract(s) with a customer
Identify the performance obligations in the contact
i.
ii.
iii. Determine the transaction price
iv. Allocate the transactions price to the performance of obligations
v.
in the contract.
Recognise revenue when (or as) the entity satisfies the
performance obligation.
The Group sells a portion of its product on Cost and Freight (CFR). This
means that the Group is responsible for providing shipping services.
Using the 5-step model above, the Group has determined that
freight services is a separate performance obligation. Therefore, the
revenue for shipping services is recognised as the Group satisfies the
performance obligation over time rather than at point when product is
transferred to the vessel on which the product will be shipped.
Typically, the Group has a right to payment at the point that control of
the goods passes including a right, where applicable, to payment for
provisionally priced products and unperformed freight services. Cash
received before control passes is recognised as a contract liability.
The amount of consideration does not contain a significant financing
component as payment terms are less than one year.
Interest revenue
Interest revenue is recognised on a time proportion basis using the
effective interest method.
Sale of apartments
Revenue is recognised when control of a good or service transfers to
a customer therefore the notion of control replaces the existing notion
of risks and rewards. In most instances, control passes, and sales
revenue is recognised when legal title of the property is transferred
to the buyer. There may be circumstances when judgment is required
based on the five indicators of control below:
i.
ii.
The buyer 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;
The buyer has a present obligation to pay in accordance with
the terms of the sales contract. For property disposed of, this is
generally on transfer of legal title, at which time settlement of
the remaining contract price occurs;
iii. The buyer has accepted the asset;
iv. The buyer has legal title to the asset; and
v.
The buyer has physical possession of the asset
AASB 15 requires the Group to identify deliverables in contracts with
customers that qualify as ‘performance obligations’. The transaction
price receivable from customers must be allocated between the
Group’s performance obligations under the contracts on a relative
stand-alone selling price basis. Revenue will be recognised at a point
in time when the performance obligations are met.
Distribution Income
Distribution income from short term managed funds is recognised
when the right to receive the income has been established.
(g) Government Grants
Government grants are recognised at their fair value when there is
reasonable assurance that the grant will be received, and all attaching
conditions will be complied with.
When the grant relates to an expense item, it is recognised as income
over the periods necessary to match the grant on a systematic basis to
the costs that it is intended to compensate.
When the grant relates to an asset, the fair value is credited to a
deferred income account and is released to the income statement
over the expected useful life of the relevant asset by equal annual
instalments.
(h) Leases
i. The group’s leasing activities and how these are accounted for
The group leases office spaces, mobile radars, forklifts, and motor
vehicles with lease terms between 3 to 8 years but may have
extension options as described below. Lease terms are negotiated on
an individual basis and contain a wide range of different terms and
conditions.
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 Group. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the
lease period as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period – refer to Note 9. The
right of use asset is depreciated over the shorter of the asset’s useful
life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease payments included in the measure of the
lease liability comprise:
• fixed payments less any lease incentives
• variable lease payments that are based on an index or rate
• amounts expected to be payable under residual value guarantees
• purchase option exercise price where lessee is reasonably certain to
exercise
• lease payments in an optional renewal period if the Group is
reasonably certain to exercise an extension option
• penalties for termination of lease.
The lease payments are discounted using the interest rate implicit
in the lease. If that rate cannot be readily determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee
would have to pay to borrow the funds necessary to obtain an asset of
a similar value in a similar economic environmental with similar terms
and conditions.
The Group presents lease liabilities in the statement of financial
position (note 16).
(k) Inventories
Raw materials and stores, ore stockpiles, work in progress and finished
goods are stated at the lower of cost and net realisable value. Cost
is determined primarily on the basis of weighted average costs and
comprises of the cost of direct materials and the costs of production
which include:
• labour costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore;
• depreciation of property, plant and equipment used in the extraction
and processing of ore; and
• production overheads directly attributable to the extraction and
processing of ore.
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 the ore can be predicted with confidence 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 partly
processed material. Quantities are assessed primarily through surveys
and assays.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Development work in progress pertains to development and
construction of housing units and comprises expenditures relating to:
• Cost of acquisition
The cost of acquisition comprises the purchase price of the land
along with any direct costs incurred as part of the acquisition
including legal, valuation and stamp duty costs.
• Development and other costs
Cost includes variable and fixed costs directly related to specific
contracts, costs related to general contract activity which can be
allocated to specific projects on a reasonable basis, and other costs
specifically chargeable under the contract.
• Interest capitalised
Financing costs on the purchase and development of housing units
are also included in the cost of inventory.
Right-of-use assets are initially measured at cost comprising of the
following:
• the amount of the initial measurement of the lease liability
• any lease payments made at or before the commencement date less
any lease incentives received
• any initial direct costs, and an
• restoration costs.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases of less than 12 months and leases of
low-value assets. The Group recognises lease payments associated
with these types of leases as an expense in the profit or loss.
ii. Extension options
Options for a new lease are stipulated in the office space and mobile
radars lease and are only exercisable by the Group, not the lessor.
Exercising the option will contain similar terms as the initial lease. In
determining the lease term under AASB 16, management considers all
facts and circumstances that create an economic incentive to exercise
the extension option or not exercise a termination option. The Group
reassesses whether it is reasonably certain to exercise the options if
there is a significant event or significant change in the circumstances
within its control.
As it is reasonably certain that the Group will exercise the extension
option for the office space lease, additional future cash outflows of
$403,180 have been included in the calculation of the lease liability
with a corresponding adjustment to the right-of-use asset.
iii. Variable lease payments
The group is exposed to potential future increases in variable lease
payments based on an index or rate. When adjustments to lease
payments based on an index or rate take effect, the lease liability
is reassessed and adjusted against the right of use asset. The forklift
hire lease contains variable lease payments that are subject to CPI
adjustments, effective on an annual basis.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to amounts of cash and which are subject to
an insignificant risk of changes in value. Bank overdrafts are shown
within borrowings in current liabilities on the balance sheet.
(j) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less
loss allowance.
As permitted by AASB 9, the Group applies the ‘simplified approach’
to trade receivable balances and the ‘general approach’ to all other
financial assets. The simplified approach requires expected lifetime
credit losses to be recognised from initial recognition of the receivables.
The general approach incorporates a review for any significant increase
in counterparty credit risk since inception.
The expected credit losses (ECL) review include assumptions about
the risk of default and expected credit loss rates. In determining the
recoverability of a trade or other receivable using the ECL model, the
Group performs a risk analysis considering the type and age of the
outstanding receivables, the creditworthiness of the counterparty,
contract provisions, letter of credit and timing of payment.
48
49
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the balance
sheet.
(l) Income tax
The income tax expense or benefit for the period is the tax payable
on the current period’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to 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 countries where the Group’s subsidiaries operate and generate
taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
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 consolidated financial
statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill. Deferred income tax is
also 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 end of the
reporting period 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 liabilities and assets are not recognised for temporary
differences between the carrying amount and the tax bases of
investments in foreign operations where the Group is able to control
the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
Deferred 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.
Grange Resources Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation. As a
consequence, Grange Resources Limited and its subsidiaries are taxed
as a single entity and the deferred tax assets and liabilities of the
Group are set off in the consolidated financial statements.
(m) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of
GST except:
• when GST incurred on a purchase of goods and services is not
recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
• receivables and payables, which are stated with the amount of GST
included.
50
Cash flows are included in the Statement of Cash Flows on a gross
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the
taxation authority, are presented as operating cash flows.
Commitments and contingencies are presented net of the amount of
GST recoverable from, or payable to, the taxation authority.
(n) Property, plant and equipment
Land and buildings and plant and equipment are measured at cost
less, where applicable, any accumulated depreciation, amortisation
or impairment in value. Cost includes expenditure that is directly
attributable to the acquisition of the item. In the event that all or
part of the purchase consideration is deferred, cost is determined by
discounting the amounts payable in the future to their present value
as at the date of acquisition.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. The
carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are
charged to the income statement during the reporting period in which
they are incurred.
Land is not depreciated. Assets under construction are measured at
cost and are not depreciated until they are ready and available for
use. Depreciation on assets is calculated using either a straight-
line or diminishing value method to allocate the cost, net of their
residual values, over the estimated useful lives or the life of the mine,
whichever is shorter. Leasehold improvements and certain leased
plant and equipment are depreciated over the shorter lease term.
Other non-mine plant and equipment typically has the following
estimated useful lives:
Buildings
Plant and Equipment
Computer Equipment
10 years
4 to 8 years
3 to 5 years
The assets residual values, useful lives and amortisation methods are
reviewed and adjusted if appropriate, at each financial period end.
An item of property, plant and equipment is derecognised upon
disposal or when no further economic benefits are expected from its
use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement in the period
the asset is derecognised.
The carrying value of property, plant and equipment is assessed
annually for impairment in accordance with note 1(r).
component of the ore body are deferred to the extent that the current
period ratio exceeds the expected ratio for the life of the identified
component of the ore body. Such deferred costs are then charged
against the income statement on a systematic units of production
basis over the expected useful life of an identified component of the
ore body.
Changes to the life of mine plan, identified components of an ore
body, stripping ratios, units of production and expected useful life are
accounted for prospectively.
Deferred stripping costs form part of the total investment in a cash
generating unit, which is reviewed for impairment if events or
changes in circumstances indicate that the carrying value may not be
recoverable.
(r) Impairment of assets
At each reporting date, the Group assesses whether there is any
indication that an asset, including capitalised development expenditure,
may be impaired. Where an indicator of impairment exists, the Group
makes a formal estimate of the recoverable amount. Where the
carrying amount of an asset exceeds its recoverable amount the asset
is considered impaired and is written down to its recoverable amount.
Impairment losses are recognised in the income statement.
Recoverable amount is the greater of fair value less costs of disposal
and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from
other assets or groups of assets (cash generating units).
Where there is no binding sale agreement or active market, fair value
less costs of disposal is based on the best information available to
reflect the amount the Group could receive for the cash generating unit
in an arm’s length transaction. In assessing fair value, the estimated
future cash flows are discounted to their present value using a post-
tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
An assessment is also made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists, the
recoverable amount is estimated. A previously recognised impairment
loss is reversed only if there has been a change in the estimates used
to determine the asset’s recoverable amount since the last impairment
loss was recognised. If that is the case the carrying amount of the asset
is increased to its recoverable amount. That increased amount cannot
exceed the pre-impairment value, adjusted for any depreciation that
would have been recognised on the asset had the initial impairment
loss not occurred. Such reversal is recognised in profit or loss.
After such a reversal the depreciation charge is adjusted in future
periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful life.
(o) Exploration and evaluation
Exploration and evaluation expenditure comprise costs which are
directly attributable to:
• research and analysing exploration data
• conducting geological studies, exploratory drilling and sampling
• examining and testing extraction and treatment methods
• compiling pre-feasibility and definitive feasibility studies
Exploration and evaluation expenditure also include the costs incurred
in acquiring rights, the entry premiums paid to gain access to areas of
interest and amounts payable to third parties to acquire interests in
existing projects.
Exploration and evaluation expenditure is charged against profit and
loss as incurred; except for expenditure incurred after a decision to
proceed to development is made, in which case the expenditure is
capitalised as an asset.
(p) Mine properties and development
Mine properties and development represent the accumulation of all
exploration, evaluation and development expenditure incurred by, not
on behalf of, the entity in relation to areas of interest in which mining
of a mineral resource has commenced.
Where further development expenditure is incurred in respect of a
production property after the commencement of production, such
expenditure is carried forward as part of the cost of that production
property only when substantial future economic benefits arise,
otherwise such expenditure is classified as part of the cost of
production.
Costs on production properties in which the Group has an interest are
amortised over the life of the area of interest to which such costs
relate on the production output basis. Changes to the life of the area
of interest are accounted for prospectively.
The carrying value of each mine property and development are
assessed annually for impairment in accordance with note 1(r).
(q) Deferred stripping costs
Stripping (i.e. overburden and other waste removal) costs incurred
in the production phase of a surface mine are capitalised to the
extent that they improve access to an identified component of the
ore body and are subsequently amortised on a systematic basis over
the expected useful life of the identified component of the ore body.
Capitalised stripping costs are disclosed as a component of Mine
Properties and Development.
Components of an ore body are determined with reference to life
of mine plans and take account of factors such as the geographical
separation of mining locations and/or the economic status of mine
development decisions.
Capitalised stripping costs are initially measured at cost and represent
an accumulation of costs directly incurred in performing the stripping
activity that improves access to the identified component of the ore
body, plus an allocation of directly attributable overhead costs. The
amount of stripping costs deferred is based on a relevant production
measure which uses a ratio obtained by dividing the tonnage of waste
mined by the quantity of ore mined for an identified component of
the ore body. Stripping costs incurred in the period for an identified
51
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(s) Investments and other financial assets
(i) Classification
The group classifies its financial assets in the following measurement
categories:
• those to be measured subsequently at fair value (either through
other comprehensive income (OCI) or through profit or loss), and
• those to be measured at amortised cost.
The classification depends on the entity’s business model for managing
the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be
recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the group
has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other
comprehensive income (FVOCI).
The group reclassifies debt investments when and only when its
business model for managing those assets changes.
(ii) Recognition
Regular way purchases and sales of financial assets are recognised
on trade-date, the date on which the group commits to purchase or
sell the asset. Financial assets are derecognised when the rights to
receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and
rewards of ownership.
(iii) Measurement
At initial recognition, the group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial
assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their
entirety when determining whether their cash flows are solely
payment of principal and interest.
Debt instruments.
Subsequent measurement of debt instruments depends on the
group’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories
into which the group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual
cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. Interest
income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented
in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as separate line item in the
statement of profit or loss.
• FVOCI: Assets that are held for collection of contractual cash flows
and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured
at FVOCI. Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest
income and foreign exchange gains and losses which are recognised
in profit or loss. When the financial asset is derecognised, the
cumulative gain or loss previously recognised in OCI is reclassified
from equity to profit or loss and recognised in other gains/
(losses). Interest income from these financial assets is included in
finance income using the effective interest rate method. Foreign
exchange gains and losses are presented in other gains/(losses) and
impairment expenses are presented as separate line item in the
statement of profit or loss.
• FVPL: Assets that do not meet the criteria for amortised cost or
FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in profit or loss
and presented net within other gains/(losses) in the period in which
it arises.
Equity instruments
The group subsequently measures all equity investments at fair value.
Where the group’s management has elected to present fair value
gains and losses on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the
group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in
other gains/(losses) in the statement of profit or loss as applicable.
Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other
changes in fair value.
(iv) Impairment
The group assesses on a forward-looking basis, the expected credit
losses associated with its debt instruments carried at amortised cost
and FVOCI. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.
(t) Derivatives
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their
fair value at the end of each reporting period. The accounting for
subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item
being hedged. Changes in the fair value of any derivative instrument
that does not qualify for hedge accounting are recognised immediately
in profit or loss and are included in other income or other expenses.
The full fair value of a hedging derivative is classified as a non-current
asset or liability when the remaining maturity of the hedged item is
more than 12 months; it is classified as a current asset or liability when
the remaining maturity of the hedged item is less than 12 months.
(u) Ore reserves
The Company estimates its mineral resources and ore reserves
based on information compiled by Competent Persons as defined in
accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves of December 2012 (the
JORC 2012 code). Reserves, and certain mineral resources determined
in this way, are used in the calculation of depreciation, amortisation
and impairment charges, the assessment of life of mine stripping
ratios and for forecasting the timing of the payment of close down
and restoration costs.
(x) Provisions
Provisions are recognised when the Group has a present obligation, it
is probable that there will be a future sacrifice of economic benefits
and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be recovered from
a third party, for example under an insurance contract, the receivable
is recognised as a separate asset but only when the reimbursement is
virtually certain, and it can be measured reliably. The expense relating
to any provision is presented in the income statement net of any
reimbursement.
In assessing the life of a mine for accounting purposes, mineral
resources are only taken into account where there is a high degree of
confidence of economic extraction.
(v) Trade and other payables
Trade payables and other payables are carried at amortised cost and
represent liabilities for goods and services provided to the Group prior
to the end of the financial period that are unpaid. Trade payables and
other payables arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.
The amounts are unsecured and are usually paid within 30 days of
recognition.
(w) Borrowings
All borrowings are initially recognised at the fair value of the
consideration received, less transaction costs. After initial recognition,
borrowings are subsequently measured at amortised cost. Fees paid
on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of
the facility will be drawn down. In this case the fee is deferred until
the draw down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised over
the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation
specified in the contract is discharged, cancelled or expired.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting date.
Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset
are capitalised during the period of time that is required to complete
and prepare the asset for its intended use or sale. Other borrowing
costs are expensed.
If the effect of the time value of money is material, provisions are
discounted using a pre-tax rate that reflects the current market
assessment of the time value of money. Where this is the case, its
carrying amount is the present value of these estimated future cash
flows. When discounting is used, the increase in the provision due to
the passage of time is recognised as a finance cost.
Decommissioning and restoration
Decommissioning and restoration provisions include the dismantling
and demolition of infrastructure and the removal of residual materials
and remediation of disturbed areas. The provision is recognised in
the accounting period when the obligation arising from the related
disturbance occurs, whether this occurs during the mine development
or during the production phase, based on the net present value of
estimated future costs. The costs are estimated on the basis of a
closure plan. The cost estimates are calculated annually during the
life of the operation to reflect known developments and are subject to
formal review at regular intervals.
Changes in cost of goods or services required for restoration activity
as a result of future changes to the legal and regulatory framework,
for example, surrounding climate change, may result in future actual
expenditure differing from the amounts currently provided.
The amortisation or ‘unwinding’ of the discount applied in establishing
the net present value of provisions is charged to the income statement
in each accounting period. The amortisation of the discount is shown
as a financing cost, rather than as an operating cost. Other movements
in the
provisions for close down and restoration costs, including those
resulting from new disturbance, updated cost estimates, changes to
the lives of operations and revisions to discount rates are capitalised
within mine properties and development, to the extent that any
amount of deduction does not exceed the carrying amount of the
asset. Any deduction in excess of the carrying amount is recognised
in the income statement immediately. If an adjustment results in an
addition to the cost of the related asset, consideration will be given to
whether an indication of impairment exists, and the impairment policy
will apply. These costs are then depreciated over the life of the area of
interest to which they relate.
52
53
“We strive to eliminate
injury, loss and waste,
and create positive
environmental outcomes...”
(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 additional ordinary shares that
would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
(ac) Parent entity financial information
The financial information for the parent entity, Grange Resources
Limited, disclosed in note 35 has been prepared on the same basis as
the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries and joint venture entities are accounted
for at cost in the financial statements of Grange Resources Limited.
Dividends received from associates are recognised in the parent
entity’s profit or loss, rather than being deducted from the carrying
amount of these investments.
Financial guarantees
Where the parent entity has provided financial guarantees in relation
to loans and payables of subsidiaries for no compensation, the fair
values of these guarantees are accounted for as contributions and
recognised as part of the cost of the investment.
(ad) Rounding of amounts
The Group is of a kind referred to in ASIC Legislative Instrument
2016/191 Class, 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 the instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(y) Employee entitlements
Wages, salaries and sick leave
Liabilities for wages and salaries, including non-monetary benefits
and accumulating sick leave expected to be settled within 12 months
of the reporting date are recognised in other payables in respect of
employees’ services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
Annual leave
Liabilities for annual leave expected to be settled within 12 months
of the reporting date are recognised in the provision for employee
benefits in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when the
liabilities are settled.
Long service leave
The liability for long service leave is recognised in the provision for
employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit
method.
Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting
date on corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation funds
Contributions to defined contribution funds are recognised as an
expense in the income statement as they become payable.
(z) Contributed equity
Ordinary share capital is recognised at the fair value of the
consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity as a reduction, net of tax, of the share
proceeds received.
(aa) Dividends
Provision is made for the amount of any dividend declared, being
appropriately authorised and no longer at the discretion of the entity,
on or before the end of the financial period but not distributed at
balance date.
(ab) Earnings per share (EPS)
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to equity holders 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 period and excluding treasury shares.
54
55
NOTE 2. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market
risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management program
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of
the Group. The Group has used derivative financial instruments such
as foreign exchange contracts and forward commodity contracts to
manage certain risk exposures. Derivatives are exclusively used for
hedging purposes, i.e. not as trading or other speculative instruments.
The Group uses different methods to measure different types of risks
to which it is exposed. These methods include sensitivity analysis in
the case of interest rate, foreign exchange and commodity price risks
and aging analysis for credit risk.
Risk management is carried out by the management team following
guidance received from the Audit and Risk Committee.
The Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Short Term Managed Funds
Trade and other receivables
Financial Liabilities
Trade and other payables
Other financial liabilities
Borrowings
2020
$’000
2019
$’000
183,385
19,539
101,900
304,824
39,879
8,158
14,044
62,081
142,143
19,783
66,088
228,014
51,258
944
16,755
68,957
Net debt reconciliation
This section sets out an analysis of net debt and the movements in net
debt for each of the periods presented.
Net debt reconciliation
Cash and cash equivalents
Liquid investments
Borrowings -
2020
$’000
183,385
19,539
2019
$’000
142,143
19,783
repayable within one year
(14,044)
(16,755)
Borrowings -
repayable after one year
-
-
Net (debt)/asset
Cash and liquid investments
Gross debt - fixed interest rates
Net (debt)/asset
188,880
202,924
(14,044)
188,880
145,171
161,926
(16,755)
145,171
Financial assets/(liabilities) at fair value through
profit or loss
Classification
The group classifies the following financial assets/(liabilities) at fair
value through profit or loss (FVPL)
• short term managed funds
• derivative financial instruments
Financial assets/(liabilities) measured at FVPL
include the following:
The carrying amount and movement in Short Term Managed Funds
are set out below:
Short Term Managed Funds
Derivative financial instruments
2020
$’000
19,539
(8,158)
11,381
2019
$’000
19,783
(944)
18,839
Short Term Managed Funds
Balance at the beginning
of the year
Movement in Short Term
Managed Funds
2020
$’000
2019
$’000
19,783
19,988
(244)
(205)
Carrying amount at the end of the year 19,539
19,783
Amounts recognised in profit or loss
During the year, the following gains/(losses) were recognised in
profit or loss:
Fair value loss on short term managed
funds held at FVPL recognised in
Finance expenses
Fair value loss on derivative financial
instruments at FVPL recognised in
Finance expenses
2020
$’000
2019
$’000
(243)
(43)
(7,214)
(7,457)
(690)
(733)
56
57
NOTE 2. FINANCIAL RISK MANAGEMENT
(CONTINUED)
(iii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from cash and cash
equivalents, term deposits and short term managed funds.
(a) Market Risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange
risk arising from various currency exposures, primarily with respect to
the US dollar.
For short term managed funds, the interest-bearing financial assets
in each of the Funds expose it to risks associated with the effects of
fluctuations in the prevailing levels of market interest rates
on its financial position and cash flows. The main interest rate risk
arises from the Fund’s investments in bonds.
As at the reporting date, the Group has no variable rate borrowings
outstanding. Borrowings issued at variable rates expose the Group to
cash flow interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk if the borrowings are carried at fair
value. The Group’s fixed rate borrowings are carried at amortised cost.
The Group analyses its interest rate exposure on a dynamic basis.
Various scenarios are simulated taking into consideration refinancing,
renewal of existing positions, alternative financing and hedging.
Based on these scenarios, the Group calculates the impact on profit
and loss of a defined interest rate shift. No financial instruments are
used to manage interest rate risk.
(b) Credit Risk
Credit risk is managed on a Group basis. Credit risk arises from cash
and cash equivalents and deposits with banks and financial institutions,
as well as credit exposures to customers, including outstanding
receivables and committed transactions.
The Group is exposed to a concentration of risk with sales of iron ore
being made to a limited number of customers. The maximum exposure
to credit risk at the reporting date is limited to the carrying value of
trade receivables, cash and cash equivalents and deposits with banks
and financial institutions. As at 31 December 2020, there are $8.76m in
trade receivables (2019 $1.54m) that are past due. The other classes
within trade and other receivables do not contain impaired assets and
are not past due.
Foreign exchange risk arises from commercial transactions, given that
the Group’s sales revenues are denominated in US dollars and the
majority of its operating costs are denominated in Australian dollars,
and recognised assets and liabilities denominated in a currency that
is not the entity’s functional currency. The risk is measured using
sensitivity analysis and cash flow forecasting.
The Group’s exposure to US dollar denominated foreign currency risk
at the reporting date, expressed in Australian dollars, was as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Net US dollar surplus
2020
$’000
99,117
78,694
(125)
177,686
2019
$’000
43,104
29,848
(73)
72,879
Group sensitivity
Based on the financial instruments held at 31 December 2020, had
the Australian dollar weakened/strengthened by 10% against the US
dollar with all other variables held constant, the Group’s post tax profit
for the financial period would have been $11.3 million higher / $13.8
million lower (2019: $4.6 million higher / $5.7 million lower), mainly
as a result of foreign exchange gains/losses on US dollar denominated
cash and cash equivalents, term deposits and receivables as detailed
in the above table.
(ii) Price risk
The Group is exposed to commodity price risk. During current and prior
years, the price of iron ore pellets is based on a price index used in the
market. At this time, the Group does not manage its iron ore price risk
with financial instruments.
Going forward, the Group may consider using financial instruments to
manage commodity price risk given exposures to market prices arising
from the adoption of index based market pricing mechanisms.
Short term managed funds are exposed to price risk arising from
investments held by the fund for which the future prices are
uncertain. The investment manager moderates this risk through a
careful selection of securities within specified limits. The fund actively
maintains a high level of diversification in its holdings, thus potentially
reducing the amount of risk in the fund.
58
(c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient
cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the ability to close
out market positions. The Group manages liquidity risk by continuously
monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into relevant
maturity groupings based on the remaining period as at the reporting
date to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows.
2020 - Consolidated
Non-derivatives
Less than
6 months
$'000
6-12
months
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over
5 years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
liabilities
$'000
Trade and other payables
39,879
Fixed rate borrowings
Lease liabilities
Total non-derivatives
Derivatives
Trading derivatives
Total derivatives
2019 - Consolidated
Non-derivatives
-
603
40,482
2,015
2,015
-
14,044
654
14,698
1,875
1,875
-
-
812
812
4,275
4,275
-
-
513
513
(7)
(7)
-
-
-
39,879
14,044
2,582
-
56,505
-
-
8,158
8,158
39,879
14,044
2,408
56,331
8,158
8,158
Less than
6 months
$'000
6-12
months
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over
5 years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
liabilities
$'000
Trade and other payables
51,258
Fixed rate borrowings
Lease liabilities
Total non-derivatives
Derivatives
Trading derivatives
Total derivatives
-
486
51,744
(103)
(103)
-
16,755
968
17,723
1,047
1,047
-
-
1,302
1,302
-
-
-
-
460
460
-
-
-
-
-
-
-
-
51,258
16,755
3,216
71,229
944
944
51,258
16,755
2,923
70,936
944
944
(d) Capital Risk Management
When managing capital, the Group’s objective is to safeguard the
ability to continue as a going concern so that the Group continues to
provide returns for shareholders and benefits for other stakeholders,
and to maintain an optimal capital structure to reduce the cost of
capital.
Management is constantly reviewing and adjusting, where necessary,
the capital structure. This involves the use of corporate forecasting
models which enable analysis of the Group’s financial position
including cash flow forecasts to determine future capital management
requirements. To ensure sufficient funding, a range of assumptions
are modeled.
(e) Derivatives
Derivatives are only used for economic hedging purposes and not as
speculative investments.
(i) Classification of derivatives
Derivatives are classified as held for trading and accounted for at fair
value through profit or loss. They are presented as current assets or
liabilities if they are expected to be settled within 12 months after the
end of the reporting period.
The Group has the following derivative financial instruments:
Foreign currency forward
Foreign currency options
Electricity fixed forward
Diesel commodity swap
Derivative financial instruments
2020
$’000
(364)
228
(3,859)
(4,163)
(8,158)
2019
$’000
-
(18)
(1,554)
628
(944)
59
assets assumptions have been made regarding the Group’s ability
to generate future taxable profits. There is an inherent risk and
uncertainty in applying these judgments and a possibility that changes
in legislation or forecasts will impact upon the carrying amount of
deferred tax assets and deferred tax liabilities recognised on the
balance sheet.
(f) Provision for decommissioning and
restoration costs
Decommissioning and restoration costs are a normal consequence of
mining, and the majority of this expenditure is incurred at the end
of a mine’s life. In determining an appropriate level of provision,
consideration is given to the expected future costs to be incurred, the
timing of these expected future costs (largely dependent on the life of
the mine), and the estimated future level of inflation, with reference
to analysis performed by internal and external experts.
The ultimate cost of decommissioning and restoration is uncertain and
costs can vary in response to many factors including changes to the
relevant legal requirements, changes to mine plan, and the emergence
of new restoration techniques or experience at other mine sites. The
expected timing of expenditure can also change, for example in
response to changes in reserves or to production rates.
Certain rehabilitation activities are undertaken as part of the mining
operations included in the life of mine plan. Should the life of mine
plan be amended in the future to exclude these activities, the provision
for rehabilitation would increase correspondingly.
Changes to any of the estimates could result in significant changes to
the level of provisioning required, which would in turn impact future
financial results. These estimates are reviewed annually and adjusted
where necessary to ensure that the most up to date data is used.
NOTE 2. FINANCIAL RISK MANAGEMENT
(CONTINUED)
(f) Recognised fair value measurements
This section explains the judgements and estimates made in
determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements.
To provide an indication about the reliability of the inputs used in
determining fair value, the Group has classified its financial instruments
into the three levels prescribed under the accounting standards.
Level 1: The fair value of financial instruments traded in active markets
(such as publicly traded derivatives and equity securities) is based on
quoted market prices at the end of the reporting period. The quoted
market price used for financial assets held by the group is the current
bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded
in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques which maximise the use of
observable market data and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on
observable market data, the instrument is included in level 3.
Specific valuation techniques used to value the derivative financial
instruments mainly include determining the fair value of forward
contracts using forward rates at the balance sheet date provided by
the dealers.
The following table presents the group’s assets and liabilities measured and recognised at fair value at
31 December 2020 and 31 December 2019.
2020
Financial Assets
Short Term Managed Funds
Financial Liabilities
Derivative financial instruments
2019
Financial Assets
Short Term Managed Funds
Financial Liabilities
Derivative financial instruments
Level 1
$'000
-
-
-
Level 1
$'000
-
-
-
Level 2
$'000
19,539
(8,158)
11,381
Level 2
$'000
19,783
(944)
18,839
Level 3
$'000
-
-
-
Level 3
$'000
-
-
-
Total
$'000
19,539
(8,158)
11,381
Total
$'000
19,783
(944)
18,839
NOTE 3. 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 entity and that
are believed to be reasonable under the circumstances.
The Group 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) Net realisable value of inventories
The Group reviews the carrying value of its inventories at each reporting
date to ensure that the cost does not exceed net realisable value.
Estimates of net realisable value include a number of assumptions,
including commodity price expectations, foreign exchange rates and
costs to complete inventories to a saleable product. As at 31 December
2020 the net realisable value exceeded cost for all significant inventory
balances.
Development Properties
Property acquired for development and sale in the ordinary course
of business is carried at the lower of cost and Net Realisable Value
(NRV). The cost of development properties includes expenditure
incurred in acquiring the property, preparing it for sale and borrowing
costs incurred,
The NRV is the estimated selling price, less the estimated costs
of completion and selling expenses. Management considers the
estimation of both selling prices and costs of completion to be an area
of estimation uncertainty, as these estimations take into consideration
market conditions affecting each property and the underlying strategy
for selling the property.
The recoverable amount of each property is assessed at each balance
date and accounting judgement is required to assess whether a
provision is raised where cost (including costs to complete) exceeds
NRV.
(b) Impairment of property, plant and equipment
and mine properties and development
Where there is an indication of a possible impairment, a formal
estimate of the recoverable amount of each Cash Generating Unit
(CGU) is made, which is deemed to be the higher of a cash generating
unit’s fair value less costs of disposal and its value in use.
Details in relation to the Group’s impairment assessment are disclosed
at note 27.
(c) Stripping costs in the production phase of a
surface mine (Interpretation 20)
The application of Interpretation 20 requires management judgement
in determining whether a surface mine is in the production phase and
whether the benefits of production stripping activities will be realised
in the form of inventory produced through improved access to ore.
Judgement is also applied in identifying the component of the ore body
and the manner in which stripping costs are capitalised and amortised.
There are a number of uncertainties inherent in identifying components
of the ore body and the inputs to the relevant production methods
for capitalising and amortising stripping costs and these assumptions
may change significantly when new information becomes available.
Such changes could impact on capitalisation and amortisation rates for
capitalised stripping costs and deferred stripping asset values.
(d) Determination of mineral resources
and ore reserves
Mineral resources and ore reserves are based on information
compiled by a Competent Person as defined in accordance with
the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the JORC 2012 code). There are numerous
uncertainties inherent in estimating ore reserves and assumptions
that are valid at the time of estimation may change significantly
when new information becomes available. Changes in 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 reserves being restated. Such changes in reserves could
impact on depreciation and amortisation rates, asset carrying values
and provisions for rehabilitation.
(e) Taxation
The Group’s accounting policy for taxation requires management
judgment in relation to the application of income tax legislation. There
are many transactions and calculations undertaken during the ordinary
course of business where the ultimate tax determination is uncertain.
The Group recognises liabilities for tax, and if appropriate taxation
investigation or audit issues, based on whether tax will be due and
payable. Where the taxation outcome of such matters is different from
the amount initially recorded, such difference will impact the current
and deferred tax positions in the period in which the assessment is
made.
The Group merged its multiple tax consolidated groups on 6 January
2011 which has impacted the carrying amount of deferred tax assets and
deferred tax liabilities recognised on the balance sheet. Management
has used judgment in the application of income tax legislation on
accounting for this tax consolidation. These judgments are based on
management’s interpretation of the income tax legislation applicable
at the time of the consolidation.
In addition, certain deferred tax assets for deductible temporary
differences have been recognised. In recognising these deferred tax
60
61
NOTE 4. SEGMENT
INFORMATION
(a) Description of segments
Operating segments are determined based on the reports reviewed by
the Chief Executive Officer, who is the Group’s chief operating decision
maker in terms of allocating resources and assessing performance.
The Group has two reportable segments:
i. Exploration, evaluation, and development of mineral resources and
iron ore mining operations; and
ii. Development and construction of housing units
The Chief Executive Officer allocates resources and assesses
performance, in terms of revenues earned, expenses incurred, and
assets employed, on a consolidated basis in a manner consistent with
that of the measurement and presentation in the financial statements.
Exploration, evaluation and development projects (including the
Southdown project) are not deemed reportable operating segments
at this time as the financial performance of these operations is not
separately included in the reports provided to the Chief Executive
Officer. These projects may become segments in the future.
Segment information
Ore Mining
Property Development
Total
Revenue from external customers
Timing of revenue recognition
At a point in time - Pellets
Over time - Freight
Total Assets
Total Liabilities
2020
$’000
510,985
489,882
21,103
2020
$’000
836,968
148,589
2019
$’000
368,601
347,068
21,533
2019
$’000
635,796
137,733
2020
$’000
15,339
15,339
-
2020
$’000
36,812
13,100
2019
$’000
2020
$’000
2019
$’000
-
-
-
2019
$’000
53,025
19,035
526,324
368,601
505,222
21,103
2020
$’000
873,780
161,689
347,068
21,533
2019
$’000
688,821
156,768
The Group holds 51% ownership of the property development segment and is fully consolidated (refer to note 26).
The following table presents revenues from sales of iron ore based on
the geographical location of the port of discharge.
Segment revenues from sales to external customers
Ore Mining
Australia
China
Korea
Total Mining
2020
$’000
2019
$’000
41,667 24,704
469,318 313,738
- 30,159
510,985 368,601
Property Development
Australia
Total Property Development
15,339
15,339
-
-
TOTAL REVENUE
526,324
368,601
Segment assets and capital are allocated based on where the assets
are located. The consolidated assets of the Group were predominately
located in Australia as at 31 December 2020 and 31 December 2019.
The total costs incurred during the current and comparative periods to
acquire segment assets were also predominately incurred in Australia.
NOTE 5. REVENUE
Disaggregation of revenue from contracts with customers
Revenue from
Contracts with
Customers
2020
Other
Revenue/
(Loss)
Total
Revenues
Revenue from
Contracts with
Customers
2019
Other
Revenue/
(Loss)
Total
Revenues
$’000
$’000
$’000
$’000
$’000
$’000
487,282
23,703
510,985
366,875
1,726
368,601
15,339
502,621
-
15,339
-
23,703
526,324
366,875
-
1,726
-
368,601
From mining operations
Sales of iron ore
From property development
Sales of property
Revenue from contracts with provisional pricing is recognised based on the estimated forward prices where available which the Group expects
to receive at the end of the quotation period. Where an estimated forward price is not available, spot prices are applied as management’s best
estimate of the provisional prices. The quotation period exposure is considered to be an embedded derivative and forms part of trade receivables.
The subsequent changes in the fair value were recognised in the statement of profit or loss and other comprehensive income as other revenue
(loss). Changes in fair value over, and until the end of the quotation period, are estimated by reference to updated forward market prices
NOTE 7. ADMINISTRATIVE
EXPENSES
Salaries
Consultancy fees
Provision for rehabilitation -
Interest in joint operation
Other
2020
$’000
3,348
675
269
926
5,218
NOTE 8. OTHER INCOME
/(EXPENSES)
Rent income
Other income
Gain/(loss) on the disposal of property,
plant and equipment
2020
$’000
188
178
20
386
2019
$’000
3,412
1,334
370
833
5,949
2019
$’000
236
28
(90)
174
NOTE 6. COST OF SALES
2020
$’000
2019
$’000
Cost of sales - mining
Mining costs
Production costs
Changes in inventories
Mining & Production Costs
Freight costs
Government royalties
Depreciation and amortisation expense
Mine properties and development
- Capitalised
- Amortisation expense
Deferred stripping
- Amounts capitalised during the year
- Amortisation expense
Foreign exchange gain/(loss)
Total cost of sales - mining
139,992
114,971
(11,010)
243,953
21,103
19,646
21,056
-
7,035
(69,308)
31,127
4,554
279,166
Cost of sales - property development
13,771
Property Costs
Inventory provision
2,569
Total cost of sales - property development 16,340
295,506
Total cost of sales
Depreciation and amortisation expense
Land and buildings
Plant and equipment
Computer equipment
920
19,666
470
21,056
133,656
107,960
(32,443)
209,173
21,533
9,511
21,991
(14,525)
6,659
(3,989)
35,832
(113)
286,072
-
-
-
286,072
480
21,221
290
21,991
62
63
NOTE 9. FINANCE INCOME
/(EXPENSES)
Finance Income
Interest income received or receivable
Distribution Income
Finance expenses
Loss on financial instruments
Borrowing costs
Interest charge on lease liabilities
Other interest charges
Exchange gains/(loss) on foreign
currency deposits / borrowings (net)
Provisions: unwinding of discount
- Decommissioning and restoration
Expected credit losses
2020
$’000
4,428
916
5,344
(7,457)
(326)
(132)
(224)
(9,320)
(774)
(2,804)
(21,037)
2019
$’000
5,978
959
6,937
(733)
(37)
(58)
(61)
1,054
(995)
-
(830)
NOTE 10. INCOME TAX EXPENSE/(BENEFIT)
(a)
Income tax expense (benefit)
Current tax
Previously unrecognised tax losses now
recouped to reduce current tax expense
Total current tax expense
2020
$’000
2019
$’000
32,694
29,036
-
32,694
(4,869)
24,167
Deferred income tax
(Increase) decrease in deferred tax assets
Previously unrecognised deferred tax assets for temporary differences now recognised
Total deferred tax expense/(benefit)
30,827
(57,828)
(27,001)
(19,875)
-
(19,875)
Total income tax expense
5,693
4,292
(b)
Numerical reconciliation of income tax (benefit) / expense to prima facie tax payable
Profit from continuing operations before income tax (benefit) / expense
Tax expense (credit) at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Sundry items
Movement in current year net deferred tax assets relating to temporary differences
Deferred tax recognised for previously unrecognised temporary differences
Previously unrecognised tax losses now recouped to reduce income tax expense
Adjustments to tax of prior period
Income tax expense
208,879
62,664
91
62,754
(205)
(57,828)
-
972
5,693
81,626
24,488
280
24,768
(15,386)
-
(4,869)
(221)
4,292
Taxation Losses
Unused taxation losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
4,855
1,457
1,882
565
Unrecognised temporary differences
Temporary difference for which deferred tax assets not recognised
Potential tax benefit @ 30%
1,339
402
192,897
57,869
Unrecognised deferred tax assets relating to above temporary differences
402
57,869
In 2020 the Group has recognised all previously unrecognised deductible temporary differences for the mining operation.
(c)
(d)
64
NOTE 11. CASH AND CASH
EQUIVALENTS
2020
$’000
Cash at bank and in hand
Short-term deposits
Cash at bank and in hand as
per statement of cash flows
9,508
173,877
183,385
183,385
183,385
2019
$’000
6,435
135,708
142,143
142,143
142,143
Total cash is held in trading accounts or term deposits with major
financial institutions under normal terms and conditions appropriate
to the operation of the accounts. These deposits earn interest at
rates set by these institutions. As at 31 December 2020 the weighted
average interest rate on the Australian dollar accounts was 0.47% (31
December 2019: 1.69%) and the weighted average interest rate on the
United States dollar accounts was 2.44% (31 December 2019: 3.53%).
(a) Risk exposure
The Group’s exposure to interest rate risk is discussed in note 2. The
maximum exposure to credit risk at the reporting date is the carrying
amount of each class of cash and cash equivalents mentioned above.
NOTE 12. TRADE AND OTHER
RECEIVABLES
2020
$’000
2019
$’000
Trade receivables
Security deposits
Loan receivable
Other receivables
Prepayments
79,323
374
11,483
2,235
1,054
94,469
30,469
364
16,913
9,870
1,193
58,809
Trade receivables include provisionally priced receivables relating to
sales contracts where the selling price is determined after delivery to
the customers, based on the market price at the relevant quotation
point stipulated in the contract (note 5 – Revenue). The quotation
period exposure is considered to be an embedded derivative and not
separated from the entire balance. The entire balance is accounted for
as one instrument and measured at fair value.
Loans receivable, classified as financial asset held at amortised cost,
from the other partner in the arrangement of $11.5 million, representing
the other partner’s portion of the shareholder loans. Expected credit
loss of $2.8 million has been applied to this loan receivable balance.
Security deposits comprises of restricted deposits that are used for
monetary backing for performance guarantees.
(a) Impaired trade receivables
Information regarding the impairment of trade and other receivables
is provided in note 2.
(b) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign currency risk and
interest rate risk in relation to trade and other receivables is provided
in note 2.
(c) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying
amount is assumed to be their fair value. The maximum exposure to
credit risk at the end of the reporting period is the carrying amount
of each class of receivables mentioned above. Refer to note 2 for
more information on the credit quality of the Group’s trade and other
receivables.
NOTE 13. INVENTORIES
2020
$’000
Stores and spares
Ore stockpiles
Work in progress
Finished goods
(at lower of cost and net realisable value)
Properties developed for sale
34,975
38,551
11,420
19,344
18,720
123,010
2019
$’000
29,117
40,476
508
17,322
32,378
119,801
Inventories are valued at the lower of weighted average cost and
estimated net realisable value. A credit of $11.01 million in 2020 and a
credit of $32.44 million in 2019 were recognised for the movements
in inventories (note 6).
Properties developed for sale pertains to property acquired for
development and sale. Sale of these properties is expected to occur
within the next 12 months.
NOTE 14. NON-CURRENT
RECEIVABLES
Security deposits
2020
$’000
8,484
8,484
2019
$’000
8,470
8,470
Non-current security deposits comprise of restricted deposits that are
used for monetary backing for performance guarantees.
(a) Risk exposure
Information about the Group’s exposure to credit risk, foreign exchange
risk and interest rate risk in relation to security deposits is provided
in note 2. The maximum exposure to credit risk at the reporting date
is the carrying amount of each class of receivables mentioned above.
65
NOTE 15. PROPERTY, PLANT AND EQUIPMENT
At 1 January 2020
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 31 December 2020
Opening net book amount
Additions
Disposals - net book value
Depreciation charge
Transfer to MP&D
Closing net book amount
At 31 December 2020
Cost
Accumulated depreciation and impairment
Net book amount
At 1 January 2019
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 31 December 2019
Opening net book amount
Additions
Disposals - net book value
Depreciation charge
Closing net book amount
At 31 December 2019
Cost
Accumulated depreciation and impairment
Net book amount
Land and
buildings
$’000
49,818
(38,093)
11,725
11,725
4,466
-
(922)
-
15,269
54,284
(39,015)
15,269
45,908
(37,612)
8,296
8,296
3,910
-
(481)
11,725
49,818
(38,093)
11,725
Plant and
equipment
$’000
434,387
(349,181)
85,206
Computer
Equipment
$’000
9,085
(8,260)
825
85,206
35,968
(1)
(18,808)
(4,643)
97,722
454,083
(356,361)
97,722
396,905
(328,253)
68,652
68,652
37,572
(90)
(20,928)
85,206
434,387
(349,181)
85,206
825
658
-
(480)
-
1,003
9,741
(8,738)
1,003
8,353
(7,956)
397
397
732
-
(304)
825
9,085
(8,260)
825
Total
$’000
493,290
(395,534)
97,756
97,756
41,092
(1)
(20,210)
(4,643)
113,994
518,108
(404,114)
113,994
451,166
(373,821)
77,345
77,345
42,214
(90)
(21,713)
97,756
493,290
(395,534)
97,756
(a) Assets under construction
The carrying amounts of the assets disclosed above includes expenditure of $43.01 million (2019: $23.78 million) recognised in relation to
property, plant and equipment which is in the course of construction.
NOTE 16. LEASES
This note provides information for leases where the group is a lessee.
(i) Amounts recognised in the balance sheet
The balance sheet shows the following
amounts relating to leases:
Right-of-use assets
Land and buildings
Plant and equipment
Lease liabilities
Current
Non-current
Total lease liabilities
2020
$’000
330
1,981
2,311
1,109
1,299
2,408
2019
$’000
404
2,479
2,883
839
2,084
2,923
Additions to the right-of-use assets during the 2020 financial year
were $380,057 (2019: $2,769,358)
(ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating
to leases:
Movements in mine properties and development are set out below:
2019
$’000
2020
$’000
Mine properties and development
Opening net book amount
Current year expenditure capitalised
Change in rehabilitation estimate
Transfer from PPE
Amortisation expense
Closing net book amount
146,415
17,344
9,843
4,643
(7,661)
170,584
101,553
46,985
4,536
-
(6,659)
146,415
Deferred stripping costs
Opening net book amount
Current year expenditure capitalised
Amortisation expense
Closing net book amount
59,906
69,308
(30,501)
98,713
91,749
3,989
(35,832)
59,906
NOTE 18. DEFERRED TAX
ASSETS
2020
$’000
2019
$’000
Depreciation charge of right of use assets
Land and buildings
Plant and equipment
(75)
(878)
(953)
(75)
(312)
(387)
The balance comprises temporary
differences attributable to:
Deferred Tax Assets
Property, plant and equipment
Mine properties and development
Employee benefits
Decommissioning and restoration
Tax losses
Trade Receivables
Foreign exchange
Derivatives
Trade Payables
Total deferred tax assets
Deferred Tax Liabilities
Inventory
Foreign exchange
Prepayments
Total deferred tax liabilities
Total net deferred tax assets
21,895
10,131
6,620
20,585
-
841
1,131
2,447
205
63,855
10,335
16,828
2,354
6,591
565
-
397
-
16
37,086
(4,503)
-
(61)
(4,564)
59,291
(4,204)
-
(27)
(4,231)
32,855
Interest expense (included in finance cost)
Expense relating to short-term leases
(included in cost of sales)
132
6
58
-
The total cash outflow for leases in 2020 was
$1,027,102 (2019: $376,135)
NOTE 17. MINE PROPERTIES AND
DEVELOPMENT
2020
$’000
2019
$’000
Mine properties and development
(at cost)
Accumulated amortisation
and impairment
Net book amount
Deferred stripping costs
(net book amount)
Total mine properties and development
652,389
620,559
(481,805)
170,584
(474,144)
146,415
98,713
269,297
59,906
206,321
66
67
The following amounts reflect leave that is not expected to be taken
or paid within the next 12 months.
NOTE 19. TRADE AND OTHER
PAYABLES
Trade payables and accruals
Contract Liabilities
Tax payable
Other payables
2020
$’000
34,037
4,238
66
1,538
39,879
2019
$’000
25,048
5,594
19,274
1,342
51,258
Current leave obligations expected
to be settled after 12 months
2020
$’000
9,700
Movements in provision for decommissioning
and restoration are set out below
2020
$’000
(a) Risk exposure
Trade payables are non-interest bearing and are normally settled
on repayment terms between 7 and 30 days. Information about the
Group’s exposure to foreign exchange risk is provided in note 2.
7,378
Balance at beginning of the year
Payments
(2,101)
Transfers from non-current provisions 673
5,950
Balance at the end of the year
NOTE 20. BORROWINGS
(CURRENT)
NOTE 22. PROVISIONS
(NON-CURRENT)
2019
$’000
6,780
2019
$’000
5,506
(189)
2,061
7,378
Other borrowings (1)
2020
$’000
14,044
14,044
2019
$’000
16,755
16,755
(1) Loans payable to the other partner in the arrangement of $14.0 million,
representing the other partner’s portion of the shareholder loans. This
loan is secured, carries an annual interest of 7% to 15% and will be
payable upon completion of the development property projects.
NOTE 21. PROVISIONS
(CURRENT)
Leave Obligations
Employee benefits
Other provision
Decommissioning and restoration
2020
$’000
15,449
2,780
405
5,950
24,584
2019
$’000
13,290
2,186
-
7,378
22,854
The leave obligations cover the group’s liabilities for long service leave
and annual leave which are classified as either current or non-current
benefits. The current portion of this liability includes all of the accrued
annual leave, the unconditional entitlements to long service leave
where employees have completed the required period of service and
also for those employees that are entitled to pro-rata payments in
certain circumstances. The entire amount of the provision of $15.45
million (2019: $13.29 million) is presented as current, since the group
does not have an unconditional right to defer settlement for any of
these obligations. However, based on past experience, the group does
not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months.
2020
$’000
2019
$’000
Leave obligations
Employee benefits
Decommissioning and restoration
3,643
302
68,671
72,616
Movements in provision for decommissioning
and restoration are set out below
Balance at beginning of the year
Change in estimate
Unwinding of discount
Transfers to current provisions
Balance at the end of the year
2020
$’000
58,311
10,337
696
(673)
68,671
3,621
102
58,311
62,034
2019
$’000
54,564
4,966
842
(2,061)
58,311
NOTE 23. CONTRIBUTED EQUITY
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the
proceeds of winding up of the Company in proportion to the number
of and amounts paid on the shares held. Ordinary shares entitle their
holder to one vote per share, either in person or by proxy, at a meeting
of the Company. Ordinary shares have no par value and the Company
does not have a limited amount of authorised share capital.
(a) Movements in ordinary share capital
Balance at 1 January 2020
/ 31 December 2020
Number of shares
$’000
1,157,338,698
331,513
68
69
NOTE 24. RETAINED EARNINGS
ATTRIBUTABLE TO OWNERS OF
GRANGE RESOURCES
2020
$’000
2019
$’000
Retained profits
Movements in retained profits were as follows:
Balance at the beginning of the year
Change in Accounting Policy
Restated Opening Retained Earnings
Profit for the year
Dividends paid
Balance at the end of the year
200,716
200,716
204,179
(23,148)
381,747
-
146,243
(40)
146,203
77,661
(23,148)
200,716
NOTE 25. DIVIDENDS
Fully franked interim dividend
for half year ended 30 June 2020
- 1.0 cents per share
Fully franked final dividend
for the year ended 31 December 2019
- 1.0 cents per share
Fully franked interim dividend
for half year ended 30 June 2019
- 1.0 cents per share
Fully franked final dividend
or the year ended 31 December 2018
- 1.0 cents per share
2020
$’000
2019
$’000
11,574
11,574
-
-
-
-
11,574
11,574
Total dividends paid
23,148
23,148
Since the end of the financial year the directors have recommended the
payment of a 2.0 cent final dividend of $23.1 million. This represents
a total of $34.7 million (3.0 cents per share) fully franked dividend for
the year-end 31 December 2020. The final dividend was declared NIL
conduit foreign income and will be paid on 30 March 2021.
Franked Dividends
The final dividends recommended after 31 December 2020 will
be fully franked out of existing franking credits, or out of franking
credits arising from the payment of income tax in the year ending 31
December 2020.
31 December
2020
$’000
31 December
2019
$’000
74,505
36,434
Franking credits available for
subsequent reporting periods
Based on a tax rate of 30%
(2019 – 30%)
The above amounts are calculated from the balance of the franking
account as at the end of the reporting period, adjusted for franking
credits and debits that will arise from the settlement of liabilities or
receivables for income tax and dividends after the end of the year.
NOTE 26. NON-CONTROLLING
INTEREST
Non-controlling interest pertains to the 49% interest in Grange ROC
Property Pty Ltd. This entity is involved in the development and
construction of apartments.
Grange ROC Property Pty Ltd is a controlled entity and therefore is fully
consolidated as the Group has:
i. Exposure, or rights, to variable returns from its involvement with
the other partner in the arrangement;
ii. Power over the entity (i.e., existing rights that give it the current
ability to direct the relevant activities of the entity); and
In 2020, the Joint Venture have successfully completed the construction
and settlement of sales of all five units for the first project in Lumley
Park. In July 2020, the second project in Carter Toorak completed
construction, attained the occupancy permits for all eight units with
two of the units successfully completed settlement of sales at higher
than budgeted prices and a third unit will settle in the second half
of 2021. The Joint Venture is currently focused on undertaking sales
campaigns to sell the remaining unsold units at the Carter Toorak
project and the land at the Brookville project.
Due to the significant impact of the COVID-19 pandemic on the
residential property market, particularly in Melbourne, the Joint
Venture engaged an independent third party to conduct a valuation of
the remaining unsold units in Carter Toorak and the Brookville land as
at 30 June 2020 and reassessed the valuation at the end of the financial
year. The valuations were based on direct comparisons to sales of
similar properties in adjoining localities. Whilst sales evidence of direct
comparability is limited during the current Covid-19 environment, the
evidence available indicated a decline in values relevant to late last
year. With considerable market uncertainty in the current environment,
there is also significant uncertainty in the valuation. As a result of the
valuation, the Joint Venture have recognised an inventory provision of
$2.6 million (Note 6 Cost of Sales and Note 13 Inventories) of which
$0.6 million relates to the Carter Toorak project and $2.0 million
relates to the Brookville project. As a result of the inventory provision
in the joint venture, the Company assessed the recoverability of its
loans receivable from the joint venture and applied expected credit
losses in the amount of $2.8 million (Note 9 Finance Expense and Note
12 Other Receivables).
NOTE 27. IMPAIRMENT OF NON-CURRENT ASSETS
At each reporting date, the Group assesses whether there is any
indication that an asset may be impaired. The Company considers
the relationship between its market capitalisation and its book value
among other factors, when reviewing for indicators for impairment.
During the year and as at 31 December 2020, the market capitalisation
of the Company was below the book value of its net assets indicating
a potential trigger for impairment of assets.
future cash flows for a CGU. Future cash flows are based on a number
of assumptions, including commodity price expectations, foreign
exchange rates, reserves and resources and expectations regarding
future operating performance and capital requirements which are
subject to risk and uncertainty. An adverse change in one or more of
the assumptions used to estimate fair value could result in a reduction
of the CGU’s fair value.
(a) Impairment Testing
(i) Methodology
An impairment loss is recognised for a Cash Generating Unit (CGU)
when the recoverable amount is less than the carrying amount. The
recoverable amount of each CGU has been estimated using a fair value
less costs of disposal basis. The costs of disposal have been estimated
by management based on prevailing market conditions. The fair value
assessment is categorised within level 3 in the fair value hierarchy.
Fair value is estimated based on the net present value of estimated
(ii) Key assumptions
The key assumptions which are used by the Directors in determining
the recoverable amount for the Group’s Savage River CGU were in the
following ranges at 31 December 2020:
Assumptions
Iron ore pellets (FOB Port Latta)
(US$ per DMT)
AUD:USD exchange rate
Post-tax real discount rate
as at 31-Dec-20
2021
2022 – 2026
Long Term 2027+
US$161.42
US$109.22 – US$127.04
$0.8025
$0.7670
7.32%
US$135.67
$0.75
Commodity prices and foreign
exchange rates
Commodity prices and foreign exchange rates are estimated with
reference to analysis performed by an external party and are updated
at least once every six months, in-line with the Group’s reporting
dates.
Operating performance
(production, operating costs and capital
costs)
Life of mine production, operating cost and capital cost assumptions
are based on the Group’s most recent life of mine plan approved
by the Board adjusted for expected improvements reflecting the
Group’s objective of maximising free cash flow (mainly operating
and investing cash flows) by optimising production and improving
productivity. Mineral resources and ore reserves not in the most
recent life of mine plan are not included in the determination of
recoverable amount.
While the Group acknowledges that factors such as future changes
to the regulatory framework in response to climate change could
impact future recoverability, these factors have not been included
in our assumptions. While the Group acknowledges that the world
is moving to a low-carbon future and it must address the risks and
opportunities that climate change may bring, the Group has not
identified any immediate financial impacts of climate change risk
in the short term. Medium and long-term risks and opportunities of
climate change have been included on page 31 of the Directors report.
Discount rate
To determine the recoverable amount, the estimated future cash
flows have been discounted to their present value using a post-tax
real discount rate that reflects a current market assessment of the
time value of money and risks specific to the asset.
(iii) Impacts
The Group has conducted a carrying value analysis and has not
identified any impairment to its net assets carrying value as at 31
December 2020.
(iv) Sensitivity analysis
It is estimated that changes in the following key assumptions would
have the following approximate impact on the fair value of the
Savage River CGU as at 31 December 2020:
Decrease in fair value resulting from:
US$1 per dmt decrease in iron ore pellet prices
(FOB Port Latta)
$0.01 increase in the AUD:USD exchange rate
1% increase in estimated operating costs
25 bps increase in the discount rate
$21.73 million
$31.52 million
$14.77 million
$14.10 million
Reasonably possible changes in circumstances may affect these
key assumptions and therefore the fair value. In reality, a change
in any one of the aforementioned assumptions (including operating
performance) would usually be accompanied by a change in another
assumption which may have an off-setting impact. Action is usually
taken to respond to adverse changes in assumptions to mitigate the
impact of any such change. If the carrying amount is assessed to be
impaired, the impairment charge is recognised in profit or loss.
70
71
(c) Contractual operating expenditure
commitments
Obligations to external parties which arise with respect to legal supply
contracts made by the company (other than lease agreements).
Within one year
After one year but not more
than five years
Later than five years
2020
$’000
13,870
2019
$’000
15,334
212
-
14,082
5,169
-
20,503
(d) Bank Guarantees
Bank guarantees have been provided on the Group’s behalf to secure,
on demand by the Minister for Mines and Energy for the State of
Queensland, any sum to a maximum aggregate amount of $2,517,424
(2019: $2,517,424), in relation to the rehabilitation of the Highway
Reward project.
A Bank guarantee has been provided by Grange Resources (Tasmania)
Pty Ltd, held by the Tasmanian Government, as required under
Environmental Management and Pollution Control Act 1994 (EMPCA)
for the amount of $3,166,540 (2019: $3,153,121). This amount is to
guarantee the rehabilitation responsibilities under the mining lease at
Savage River.
A Bank guarantee has been provided by Grange Resources (Tasmania)
Pty Ltd, held by the National Australia Bank, as required under
the Goldamere Agreement and applicable Deeds of Variation, for
the amount of $2,800,000 (2019: $2,800,000). This amount is a
guarantee against the purchase price outstanding with the Tasmanian
Government as specified in the Goldamere Agreement.
No material losses are anticipated in respect to the above bank
guarantees and the rehabilitation provisions include these amounts.
(e) Contingent Assets and Liabilities
The Group did not have any material contingent assets or liabilities at
the Balance Sheet Date.
NOTE 28. REMUNERATION OF
AUDITORS
During the period the following fees were paid or payable for services
provided by the auditor of the parent entity, its related practices and
non-related audit firms.
2020
$’000
2019
$’000
325
26
18
369
2020
$’000
302
43
20
365
2019
$’000
Assurance services
PwC - Australia
Audit and review of financial reports
Other assurance services
Network firms of PwC Australia
Total assurance services
Non-assurance services
PwC - Australia
Taxation compliance services
Total remuneration paid
1
370
5
370
NOTE 29. COMMITMENTS AND
CONTINGENCIES
(a) Tenement expenditure commitments
In order to maintain the mining and exploration tenements in which
the Group is involved, the Group is committed to meet conditions under
which the tenements were granted. If the Group continues to hold
those tenements, the minimum expenditure requirements (including
interests in joint venture arrangements) will be approximately:
Within one year
Later than one year but not later
than five years
Later than five years
2020
$’000
532
2019
$’000
583
1,169
-
1,701
2,167
-
2,750
(b) Capital expenditure commitments
Capital expenditure obligations at the end of the reporting period but
not recognised as liabilities are as follows:
Within one year
After one year but not more
than five years
Later than five years
2020
$’000
7,131
2019
$’000
6,899
10,000
-
17,131
9,082
-
15,981
Long term off-take agreement
Grange Resources (Tasmania) Pty Ltd (Grange Tasmania) is party to a
long term off-take agreement (Pellets and Chips) with Jiangsu Shagang
International Trade Co. Ltd (Shagang), a wholly owned subsidiary of
Jiangsu Shagang Group Co. Ltd, who, as at 26 February 2021, holds
47.93% (28 February 2020: 47.93%) of the issued ordinary shares of
Grange.
Pellets
The key terms of the agreement with Shagang, as advised to the ASX
on 19 November 2012, are as follows:
• The sale of 1 million dry metric tonnes of iron ore pellets per annum
until 2022.
• The price for the iron ore pellets will be based on a price index used
by other market participants as agreed by the parties having regard
to:
• seaborne iron ore supply and demand conditions;
• available published price benchmarks for iron ore; and
• product quality differentials and potential freight costs.
As set out in the Grange Notice of Meeting dated 5 November 2008,
transactions between Shagang and Grange must be approved by
non-associated shareholders of Grange, or approved by the Grange
independent directors.
NOTE 30. RELATED PARTY
TRANSACTIONS
(a) Ultimate Parent
Grange Resources Limited (Grange) is the ultimate Australian parent
company.
(b) Subsidiaries
Interests in subsidiaries are set out in note 32.
(c) Key management personnel compensation
Short term employee benefits
Post-employment benefits
Long-term benefits
Long-term incentives
2020
$
1,595,576
118,322
56,271
151,751
1,921,920
2019
$
1,603,586
115,695
55,861
141,925
1,917,067
Detailed remuneration disclosures are provided in the remuneration
report on pages 32 to 38.
(d) Transactions with related parties
During the year the following transactions occurred with related
parties:
Sales of iron ore products(1)
2020
$
182,146,622
2019
$
131,598,839
(1) Sales of iron ore products to Jiangsu Shagang International Trade Co.,
Ltd, a wholly owned subsidiary of Jiangsu Shagang Group, under long-term
off-take agreements.
During the year, 1,012,503 dry metric tonnes of iron ore products were
sold to Shagang in accordance with the terms of the long term off-take
agreements (2020 contract year (1 April 2019 to 31 March 2020): 923,349
dmt) (2019: 852,489 dry metric tonnes, 2019 contract year (1 April 2018 to
31 March 2019): 1,018,371 dmt)).
(e) Outstanding balances arising from
transactions with related parties
The following balances are outstanding at the end of the reporting
period in relation to transactions with related parties:
Trade receivables
(sales of iron ore products)
Pellets
Other
2020
$
2019
$
32,350,066
(10,187)
32,339,879
2,869,107
2,062
2,871,169
Amounts outstanding under the long term off-take agreement with
Shagang are unsecured whereas amounts outstanding in respect of
spot sales are secured against an irrevocable letter of credit. All
outstanding balances will be settled in cash. The credit balance of the
receivables in the current year represents the final price adjustments
due to the quotation periods and final discharge port results.
There is no allowance account for impaired receivables in relation to
any outstanding balances with related parties, and no expense has
been recognised during the year in respect of impaired receivables due
from related parties (2019: Nil).
72
73
NOTE 31. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities
and results of the following subsidiaries in accordance with the
accounting policy described in note 1.
Percentage of equity interest
held by the Group
Name
Ever Green Resources Co., Limited (1)
Grange Tasmania Holdings Pty Ltd
Beviron Pty Ltd
Grange Resources (Tasmania) Pty Ltd
Grange Capital Pty Ltd
Grange Administrative Services Pty Ltd
Barrack Mines Pty Ltd
Bamine Pty Ltd
BML Holdings Pty Ltd
Horseshoe Gold Mine Pty Ltd
Grange Resources (Southdown) Pty Ltd
Southdown Project Management
Company Pty Ltd
Grange Investment Pty Ltd
Grange ROC Property Pty Ltd
2020
%
100
100
100
100
100
100
100
100
100
100
100
100
100
51
2019
%
100
100
100
100
100
100
100
100
100
100
100
100
100
51
(1) Ever Green Resources Co., Limited is incorporated in Hong Kong, and registered
as a foreign company under the Corporations Act 2001.
NOTE 32. INTEREST IN JOINT
OPERATIONS
Name of Joint Operation
Southdown Magnetite and
Associated Pellet Project(s) – Iron Ore
Reward - Copper / Gold
Highway – Copper
Reward Deeps / Conviction - Copper
Mt Windsor Exploration
- Gold / Base Metals
Durack / Wembley – Exploration Gold
% Interest
2020
% Interest
2019
70.00
31.15
30.00
30.00
30.00
15.00
70.00
31.15
30.00
30.00
30.00
15.00
The joint operations are not separate legal entities. They are contractual
arrangements between the participants for the sharing of costs and
output and do not in themselves generate revenue and profit.
Southdown Magnetite and Associated Pellet Project(s) is a joint
venture between Grange Resources Limited and SRT Australia Pty
Ltd. The joint venture proposes to mine and export premium iron ore
pellets and concentrates. The principal place of business of the joint
venture is at 34a Alexander Street, Burnie, Tasmania, 7320.
Mt Windsor Exploration is a joint venture between BML Holdings Pty
Limited, a subsidiary of Grange Resources Limited, and Thalanga Copper
Mines Pty Ltd. The joint venture was engaged in ore mining and is now
being rehabilitated for future lease relinquishment. The principal place
of business of the joint venture is at 1 Penghana Road, Queenstown,
Tasmania, 7326.
NOTE 33. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
2020
$’000
2019
$’000
Profit for the year
Unwinding of discount
Depreciation and amortisation
Mine properties and development amortisation
Credit loss provision on loan receivable
Interest expense
Inventory provision
Proceeds from sale of property, plant and equipment
Loss (profit) on sale of property, plant and equipment
Loss (gain) on financial instruments
Net unrealised foreign exchange gain
Change in operating assets and liabilities
(Increase) decrease in trade and other receivables
Decrease (increase) in inventories
Decrease (increase) in deferred tax assets
Increase in trade and other payables (excluding tax payable)
Increase in other provisions
Decrease provision for income tax payable
Net cash inflow from operating activities
NOTE 34. EARNINGS PER SHARE
Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the Company
Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the Company
(a) Reconciliations of earnings used in calculating earnings per share
Profit (loss) attributable to the ordinary equity holders of the Company used in
calculating basic earnings per share from continuing operations
Diluted earnings per share
Profit attributable to the ordinary equity holders of the Company used in calculating
diluted earnings per share from continuing operations
(b) Weighted average number of shares used as the denominator
203,186
774
21,163
38,162
2,804
356
2,569
(21)
1
7,457
9,320
(41,080)
(5,778)
(26,437)
7,849
1,451
(19,208)
202,568
2020
Cents
17.64
17.64
2020
$’000
204,179
204,179
2020
Number
77,334
995
22,101
42,491
-
119
-
-
90
733
(1,054)
(15,445)
(58,849)
(20,439)
10,627
1,518
(4,485)
55,736
2019
Cents
6.71
6.71
2019
$’000
77,661
77,661
2019
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
1,157,338,698
1,157,338,698
74
75
NOTE 35. PARENT ENTITY
FINANCIAL INFORMATION
NOTE 36. EVENTS OCCURRING
AFTER THE REPORTING PERIOD
The Company performed a review of its investment in property
development and concluded to exit the current joint venture
arrangement and have reached an in principle agreement with its
joint venture partner subsequent to the end of the financial year. As
a result of the exit arrangements, the Company intends to forgive
the outstanding loans owed by its joint venture partner and take full
ownership of the remaining assets in the unsold units at Carter Toorak
and the Brookville land.
There were no matters or circumstances arising since 31 December
2020 that has significantly affected, or may significantly affect:
• the Group’s operations in future financial years; or
• the results of those operations in future financial years; or
• the Group’s state of affairs in future financial years.
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
2020
$’000
2019
$’000
1,269
313,825
2,450
34,810
6,026
315,727
20,243
51,803
392,475
392,475
- Share-based payments
Retained losses
Total equity
31,191
(144,651)
279,015
31,191
(159,742)
263,924
Profit (loss) for the year
Total comprehensive income
(loss) for the year
39,230
29,003
39,230
29,003
(b) Contingent liabilities of the parent entity
Other contingent liabilities
Pursuant to the terms of an agreement dated 21 November 2003,
under which the Company purchased certain tenements comprising
the Southdown project, the Company is required to make a further
payment of $1,000,000 to MedAire, Inc upon commencement of
commercial mining operations from those tenements.
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 42 to 76 are
in accordance with the Corporations Act 2001, including:
Note 1(a) confirms that the financial statements also comply
with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
(i) complying with Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional
reporting requirements, and
The Directors have been given the declarations of the Chief Executive
Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
(ii) giving true and fair view of the consolidated entity’s
financial position as at 31 December 2020 and of its
performance for the financial year ended on that date, and
This declaration is made in accordance with a resolution of the
Directors.
(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,
and
Michelle Li
Chairperson of the Board of Directors
Perth, Western Australia
26 February 2021
76
77
78
79
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. Independent auditor’s report To the members of Grange Resources Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Grange Resources Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Group's financial position as at 31 December 2020 and of itsfinancial performance for the year then ended(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Group financial report comprises: •the statement of financial position as at 31 December 2020•the statement of comprehensive income for the year then ended•the statement of changes in equity for the year then ended•the statement of cash flows for the year then ended•the notes to the financial statements, which include significant accounting policies and otherexplanatory information•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 Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & 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. 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 Group, its accounting processes and controls and the industry in which it operates. The Group’s operations consist principally of owning and operating the Savage River integrated iron ore mining and pellet production business located in the north-west region of Tasmania. Materiality Audit scope Key audit matters •For the purpose of our auditwe used overall Groupmateriality of $10.0 million,which representsapproximately 5% of theGroup’s profit before tax.•We applied this threshold,together with qualitativeconsiderations, to determinethe scope of our audit and thenature, timing and extent ofour audit procedures and toevaluate the effect ofmisstatements on the financialreport as a whole.•We chose Group profit beforetax because, in our view, it isthe benchmark against whichthe performance of the Groupis most commonly measured.•We utilised a 5% thresholdbased on our professionaljudgement, noting it is withinthe range of commonlyacceptable thresholds.•Our audit focused on wherethe Group made subjectivejudgements; for example,significant accountingestimates involvingassumptions and inherentlyuncertain future events.•Amongst other relevant topics,we communicated the followingkey audit matters to the Auditand Risk Committee:−−Impairment assessment forthe Savage River cashgenerating unit (CGU)−−Accounting for the cost ofrehabilitation•These are further described inthe Key audit matters section ofour report. 80
81
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. Key audit matter How our audit addressed the key audit matter Impairment assessment for the Savage River cash generating unit (CGU) (Refer to note 27) The impairment assessment of the Savage River CGU, which consists of the mine and pelletising plant, was a key audit matter given the significance of the carrying amount to the statement of financial position. There were also a number of factors in the impairment assessment requiring judgement by the Group including: •The pellet (final product) price and theAUD/USD exchange rates.•The discount rate•Estimation uncertainty associated with forecastof operating and capital expenditure for theperiod to 2036 (Life of Mine).The Group prepared a discounted cashflow model (the model) to determine the recoverable amount of the Savage River CGU balance, which requires a number of assumptions as described in Note 29. We developed our understanding of the process by which the cash flow forecasts were prepared, tested the mathematical accuracy and logic of the discounted cash flow model, and assessed that the methodology utilised to determine the recoverable amount was consistent with Australian Accounting Standards. We satisfied ourselves that the operating and capital expenditure forecasts were consistent with the board approved Life of Mine plan. In order to assess the Group’s ability to make reliable forecasts, we compared current year (2020) actual results with the figures included in the prior year forecasts (2019). We also assessed: •The long term pellet price and AUD/USDexchange rate assumptions by agreeing them toanalysis performed by external parties andcomparing them to economic and industryforecasts;•The discount rate used by assessing the cost ofcapital for the Group, assisted by PwCvaluations experts, and comparing the rate tomarket data and industry research.•The reasonableness of the disclosures made inthe financial report against the requirements ofAustralian Accounting StandardsAccounting for the cost of rehabilitation (Refer to note 21 and 22) The main component of the provision is for the Group’s obligation to rehabilitate the Savage River and Port Latta sites for the disturbance caused by its operations. The rehabilitation provision also includes an obligation under the Tasmanian Goldamere Pty Ltd Act 1996 to repay the Tasmanian Government for part of the purchase of the mine through expenditure on We evaluated the Group’s calculation of the rehabilitation obligation for consistency with the current Life of Mine plan. We compared the discount rate used to available market data. Where external and internal experts were used by the Group to estimate remediation costs, we assessed our ability to use their estimates, considering their objectivity, competency and capability and assessing Key audit matter How our audit addressed the key audit matter remediation. The net present value of the cost of rehabilitation is recorded as a provision of $68.8 million (non-current) and $6.0 million (current), for a total of $74.8 million. Given the significance of this balance and the level of complexity and uncertainty within the estimate, our examination of the provision for rehabilitation was a key audit matter. that the scope of work they performed was appropriate for the purposes of the estimate. We compared the Group’s assumptions on rehabilitation costs to other similar costs in the business where appropriate. 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 2020, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the Directors' Report and the Corporate Governance Statement. We expect the remaining other information to be made available to us after the date of this auditor's report. Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or any form of assurance conclusion thereon. 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. When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take. 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 Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the TENEMENT SCHEDULE
as at 28 February 2021
PROSPECT
TASMANIA
Savage River
WESTERN AUSTRALIA
Southdown
TENEMENT
INTEREST
2M/2001
14M/2007
11M/2008
4M/2019
EL30/2003
EL8/2014
M70/1309
G70/217
R70/61
L70/185
L70/186
L70/188
L70/201
L70/225
100% (1)
100% (1)
100% (1)
100% (1)
100% (1)
100% (1)
70% (3) (4)
70% (4)
70% (4)
70% (4)
70% (4)
70% (2) (4)
70% (2) (4)
70% (2) (4)
Notes:
1. Held by Grange Resources (Tasmania) Pty Ltd.
2. Under application.
3. Subject to conditional purchase agreement with Medaire Inc.
4. Subject to Joint Venture Implementation Agreement with SRT
Australia Pty Ltd
5. Subject to 1% Net Smelter Return royalty with Lac Minerals
(Australia) NL
6. Subject to joint venture agreement with Aragon Resources Pty Ltd
7. Royalty interest with Horseshoe Metals Limited
8. Royalty interest with Nova Energy Pty Ltd
9. Royalty interest with Kanowna Mines Pty Ltd
10. Royalty interest with Dampier (Plutonic) Pty Ltd
11. Royalty interest with Billabong Gold Pty Ltd
12. Royalty interest with Fortescue Metals Group Ltd
13. Subject to joint venture agreement with Thalanga Copper Mines Pty
Limited
14. Royalty interest with Santexco Pty Ltd
15. Royalty interest with Giants Reef Exploration Pty Ltd
Wembley
M52/801
15% (5) (6)
Horseshoe Lights
M52/743
0% (7)
Abercromby Well
Red Hill
Freshwater
Pilbara
QUEENSLAND
Mt Windsor JV
NORTHERN TERRITORY
Mt Samuel
True Blue
Aga Khan
Black Cat
M53/336
M27/57
M52/278,279,299
M52/295-296
M52/300-301
M52/305-306
M52/369-370
E47/1846
ML 1571
ML 1734
ML 1739
ML 10028
ML 1758
MLC 49
MLC 527
MLC 599
MLC 617
MCC 174
MCC 212
MCC 287-288
MCC 308
MCC 344
MCC 342
MLC 619
MLC 522
MCC 338-339
MCC316-317
MCC 340-341
0% (8)
0% (9)
0% (10)
0% (11)
0% (11)
0% (10)
0% (10)
0% (12)
30% (13)
30% (13)
30% (13)
30% (13)
30% (13)
0% (14)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
0% (15)
83
82
going concern basis of accounting unless the directors either intend to liquidate the Group 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 32 to 38of the directors’ report for the year ended 31 December 2020. In our opinion, the remuneration report of Grange Resources Limited for the year ended 31 December 2020 complies with section 300A of the Corporations Act 2001. 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 Amanda Campbell Melbourne Partner 26 February 2021
Grange Full Yr Statutory Accts 12 Months Ended 31
Dec 2020
Shagang International Holdings Ltd
(Hong Kong)
Name
Number
%
554,762,656
47.9
The number of shareholders holding less than a marketable parcel of Ordinary Shares at 9 March 2021 was 403.
ASX Additional Information
Additional information required by the Australian Securities Exchange
Limited and not shown elsewhere in this report is as follows. The
shareholder information set out below was applicable as at 9 March
2021 except where otherwise indicated.
ORDINARY SHARES
Twenty Largest Shareholders as at 9 March 2021. The twenty largest
holders of ordinary fully paid shares are listed below:
Distribution of Equity Securities
Analysis of number of shareholders by size and holding:
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - and over
Total
Ordinary
Shares
521
2,514
2,247
548
5,830
Director
Options
Employee
Options
-
-
-
-
0
-
-
-
-
0
Other
Options
-
-
-
-
0
Pacific International Co (Hong Kong)
77,531,005
Realindex Investments Pty Ltd
(Australia)
DFA Australia Ltd (Australia)
RGL Holdings Ltd (Hong Kong)
JP Morgan Securities (Australia) Ltd
(Australia)
26,751,258
16,855,497
16,385,466
14,369,531
ABN AMRO Bank NV (Netherlands)
13,474,381
Mr Gary and Mrs Susan Sadler
(Australia)
Morgan Stanley & Co. International Plc
(United Kingdom)
Coöperatieve Rabobank U.A.
(Netherlands)
Acadian Asset Management LLC
(United States)
Credit Suisse AG (Switzerland)
Dimensional Fund Advisors LP
(United States)
Minbok Family (Australia)
Interactive Brokers
Mr John Swinnerton (Australia)
11,450,000
9,772,825
8,934,927
7,616,097
7,613,720
7,528,627
7,500,000
7,000,000
6,649,490
6,200,000
LSV Asset Management (United States)
6,183,400
UBS AG Switzerland (Switzerland)
Mr Jonathan Hestelow (Australia)
6,035,560
5,098,200
Sub-total
817,712,640
70.5
Voting Rights
All shares carry one vote per share without restriction.
Substantial Shareholders
An extract of the Company’s Register of Substantial Shareholders as at 9 March 2021 is set out below:
Name
Shagang International Holdings Limited
Ever Lucky Developments Limited
RGL Holdings Co. Ltd
Number of fully
paid shares
>572,104,668
Pacific International Co
77,531,005
Voting
power
49.4%
6.7%
Securities Subject to Voluntary Escrow
The following securities are subject to voluntary escrow:
Class of Security
Fully Paid Ordinary Shares
Number of
Securities
Nil
Escrow
period ends
Not applicable
6.7
2.3
1.5
1.4
1.2
1.2
1.0
0.8
0.8
0.7
0.7
0.6
0.6
0.6
0.6
0.5
0.5
0.5
0.4
List of Significant
ASX Announcements
From 1 January 2020 through to 9 March 2021
Date Announcement
26/02/2021
Corporate Governance Statement
26/02/2021
Appendix 4G
26/02/2021
Dividend/Distribution - GRR
26/02/2021
26/02/2021
Grange Resources Limited Appendix 4E - 31
December 2020
2/02/2021
Board Update
25/01/2021
GRR - Quarterly Report for 3 months ended 31
December 2020
16/12/2020
Grange Major Projects Update
28/10/2020
GRR - Quarterly Report for 3 months ended 30 Sept
2020
28/08/2020
Change in substantial holding
28/08/2020
Dividend/Distribution - GRR
28/08/2020
Half Yearly Report and Accounts
28/08/2020
Appendix 4D - Half Year Ending 30 June 2020
28/07/2020
GRR - Quarterly Report for 3 months ended 30 June
2020
28/05/2020
Results of Meeting
28/05/2020
AGM Presentation
27/05/2020
Final Director’s Interest Notice
14/05/2020
Change of Director’s Interest Notice
28/04/2020
Annual Report to shareholders
28/04/2020
27/04/2020
GRR - Quarterly Report for 3 months ended 31
March 2020
Update to Savage River Mineral Resources and Ore
Reserves
15/04/2020
Change of Director’s Interest Notice
3/04/2020
Date of AGM
25/03/2020
Board Update
28/02/2020
Corporate Governance Statement
28/02/2020
Appendix 4G
28/02/2020
Dividend/Distribution - GRR
28/02/2020
28/02/2020
28/01/2020
Grange Full Yr Statutory Accts 12 Months Ended 31
Dec 2019
Grange Resources Limited Appendix 4E - 31
December 2019
GRR - Quarterly Report for 3 months ended 31
December 2019
28/04/2020
Notice of Annual General Meeting/Proxy Form
Mr Adam Garrigan (Australia)
84
85
86
BOARD OF DIRECTORSMichelle Li Non-executive ChairpersonYan Jia Non-executive Deputy ChairpersonDaniel Tenardi Non-executive Director (resigned 27 May 2020)Michael Dontschuk Non-executive DirectorDavid Woodall Non-executive Director – Non-executive DirectorHonglin Zhao Chief Executive Officer / Managing DirectorCOMPANY SECRETARYPiers LewisREGISTERED OFFICEGrange Resources Limited ABN 80 009 132 40534a Alexander Street, BURNIE, TAS 7320Telephone: + 61 (3) 6430 0222Email: GRR.Info@grangeresources.com.auSHARE REGISTRYAdvance Share Registry Services Limited110 Stirling HighwayNedlands, WA 6009AUDITORSPricewaterhouseCoopers2 Riverside QuaySOUTHBANK, VIC 3006STOCK EXCHANGEGrange Resources Limited is listed on the ASX Limited (ASX Code: GRR) and the “OTC” Markets in Berlin, Munich, Stuttgart and Frankfurt in Germany (Code: WKN. 917447)WEBSITEwww.grangeresources.com.au Annual Report 2020Burnie Office - Tasmania (Registered Office)34A Alexander Street Burnie, TAS 7320PO Box 659 Burnie, TAS 7320Ph +61 (3) 6430 0222 Fx +61 (3) 6432 3390 Em grr.info@grangeresources.com.auANNUAL REPORT 2020 GRANGE RESOURCES LIMITED