Annual Report 2016
Unlocking Growth Through
2016 and Beyond
WHO WE ARE
IGO is an ASX listed, diversified mining, development and
exploration company that is currently developing the
world class Nova Project as well as producing gold, nickel,
copper, zinc and silver from three mining operations in
Western Australia.
IGO has a strong sense of purpose focused on the creation of long-term
shareholder value through discovery, acquisitions, development and operation of
high-margin, long-life mining projects diversified by commodity and geography.
The Company has a unique platform for growth with the expected delivery of first
concentrate from the world class Nova Project in December 2016 and the potential
to transform the Tropicana Gold Mine through exploration and a study work
program that is currently underway.
Along with a quality suite of assets, IGO has the people and culture that are
focused on optimising and maximising our business. This is “The IGO Way”.
CONTENTS
Interesting Facts
Chairman and CEO’s Message
Board Profile
Our People
Sustainability
Corporate Governance
Asset Summary
FY17 Guidance
Operations
Nova Project
Regional Exploration and Development
Mineral Resources and Ore Reserves
Financial Report
Additional ASX Information
2
4
6
8
10
11
12
13
14
18
22
23
29
122
2016 HIGHLIGHTS
FINANCIAL SNAPSHOT
•
Completed the acquisition and
integration of Sirius Resources
NL into the IGO Group
• Released the inaugural
Sustainability Report
•
•
Tropicana Gold Mine celebrated
1 Million ounce milestone
Completed the Nova
Project Optimisation Study
demonstrating significant value
up-lift
• Rationalisation and
prioritisation of exploration
expenditure for FY16
•
•
First Ore mined in development
at Nova
Significant investment at
Tropicana Gold Mine to expand
capacity and unlock resource
upside potential
Financial Summary
Highlights
Total revenue and other income
Underlying EBITDA1
(Loss) profit after tax
Net cash flow from operating activities
Free cash flow1
Total assets
Cash
Marketable securities
Total liabilities
Shareholders’ equity
Net tangible assets per share ($ per share)
Dividends per share – fully franked (cents)
1 See Notes to Glossary of Terms for definitions
FY16
$M
417
137.5
(59)
95
(328)
2,007
46
5
552
1,456
$2.85
2.5
FY15
$M
499
213
77
202
116
820
121
16
155
665
$2.84
8.5
FY14
$M
399
142
49
129
30
781
57
1
171
610
$2.62
8.0
IGO HISTORICAL PAYABLE METAL
Gold (oz)
Zinc (t)
Nickel (t)
Copper (t)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
FY12
FY13 FY14
FY15 FY16
FY12
FY13 FY14
FY15 FY16
FY12
FY13 FY14
FY15 FY16
FY12
FY13 FY14
FY15 FY16
1 Gold production at Tropicana commenced in FY14
Price (A$)
Share Price
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
-
Volume (M)
14
12
10
8
6
4
2
-
5
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Share Ownership
Substantial Holders(1)
Institutional Ownership(1)
Mark Creasy
Van Eck
FIL Limited
Ausbil
17%
11%
10%
5%
Australia
69%
USA & Canada 18%
3%
UK & Europe
10%
Rest
27%
31%
73%
69%
Instos
Retail & Other
Domestic Instos
International Instos
1 As at 7 September 2016
Annual Report 2016 1
Nickel
5th
nickel is the 5th most common element on earth
but the majority is in the earth’s core
65%
over the past ten years, global nickel output has
increased by more than 65%
75%
a US 5 cent coin or “nickel” is made of
75% copper and 25% nickel
Ni
2nd
nickel is a major component of high energy
density electric vehicle batteries
copper is the 2nd most conductive metal,
- silver is 1st
50%
50% of world copper production is
consumed by China
180kg
180kg of copper is contained in the average
home’s electrical wiring, pipes and appliances
81t
the Statue of Liberty is made from
81t of copper
5.53km
mine development to June 2016
114km
electrical wiring in the mill
18.75km
piping on the project
Copper
Nova
314
maximum number of people on site
during construction in FY16
2 Independence Group NL
Gold
Zinc
Tropicana
57%
26%
57% of 2015 global gold production was
used in production of jewellery
26% of 2015 global gold production was
from recycling
9.72oz
a tonne of iPhone 5S contains 9.72oz
of gold or has a grade of 302g/t
97km
a single ounce of gold can be drawn into
a wire 97km long
4th
4th most widely consumed metal in the world
after iron, aluminium and copper
2-4mg
adults have an average of 2-4mg of zinc
in their bodies
50%
50% of zinc is used for galvanising
23%
Judean brass from the 14th to 10th
centuries BC contains 23% zinc
930
exploration holes drilled for 137,495m
(both RC & diamond) in FY16
58.8Mt
ore and waste mined in FY16
79,124
blast holes drilled in FY16
263,192
truck cycles in FY16
Annual Report 2016 3
CHAIRMAN AND CEO’s MESSAGE
On behalf of the Board of Directors, we
are pleased to present you with the
Company’s 2016 Annual Report.
FY16 year has been an exciting but
challenging year. We completed the
acquisition of the Nova Project and fully
integrated Nova into the IGO Group;
we progressed the construction and
development of Nova, on time and
on budget, with first production of
concentrate expected in December
2016; we invested at Tropicana to
expand capacity and to unlock additional
resource potential to extend mine life;
we managed our 100% owned activities
at Jaguar and Long to generate positive
cash flow during a period of significant
commodity price volatility; and we
continued to strengthen the Company’s
management team and systems and
processes to meet the needs of an
expanding business.
Commodity prices are cyclical and gold
and base metals prices can fluctuate to
different or inversely related cycles. We
experienced this in FY16 with weakness
in copper, zinc and nickel prices but
benefited from strong gold and silver
prices. The commodity price volatility
experienced in FY16 demonstrates
the benefit of IGO’s strategy to be
a diversified gold and base metals
producer.
4 Independence Group NL
Looking forward, there are indications
that base metal prices are recovering
from cyclical lows and this potentially
coincides with commencement
of production at the Nova Project
in December 2016. Nova not only
significantly grows the size of our
business, but increases our exposure to
base metals and positions IGO to reap the
rewards of strengthening base metals
prices.
It is important to note that there are
very few mining developments that
are delivered on time and on budget.
Delivering this at Nova will be a result
of the calibre and outstanding efforts of
our employees and of the contractors
engaged on the Project.
In other parts of the business, we
had good production results from our
30% interest in the AngloGold Ashanti
operated Tropicana Gold Mine, and IGO’s
Long and Jaguar Operations.
At Tropicana, gold production and cash
costs in the first half of FY16 benefited
from the continuation of our grade
streaming strategy. The grade streaming
strategy was developed in the Tropicana
feasibility study to maximise early returns
from the mine. The strategy was based
on mining more ore than required for the
processing plant thereby allowing higher
grade ore to be preferentially processed
and low grade ore to be stockpiled.
Whilst this was a sound strategy,
this arrangement could not be
sustained indefinitely. Consequently,
we discontinued the grade streaming
strategy in December 2015 and since
then have only mined enough ore, at
the average reserve grade of 2g/t, to
meet the requirements of the processing
plant. As a result, gold production in the
second half of FY16 was lower and, with
a relatively fixed cost structure for the
mine, cash costs per ounce were higher.
We have also made significant
investments in Tropicana in FY16. Firstly,
we invested to expand processing
capacity from the name plate 5.8Mtpa
to 7.5Mtpa. At year end, this work was
nearing completion and is expected to
be completed by September 2016. The
second area of investment was in near
mine exploration and drilling to unlock
additional potential resources close to
the four existing pits which extend over
a strike length of 5km. The first phase of
this drilling is complete and we expect
updated resource and reserve estimates
in FY17.
Our employees at Jaguar and Long
delivered outstanding outcomes in FY16
with improved productivity and cost
control in response to the challenges
presented by declining metal prices.
At Jaguar, we responded to this
challenge with a focus on productivity
and operational consistency to maximise
production. As a result we achieved
record mined and processed tonnes. At
Long, we responded by restructuring the
mine to focus on the lowest cost mining
methods. This resulted in less nickel
production year on year but at a lower
overall cash cost and a higher operating
margin.
Although we scaled back our brownfields
and greenfields exploration expenditure
in FY16 to prioritise investment dollars
to the development of Nova and the
expansions and mine life extension work
at Tropicana, we advanced exploration
initiatives on several fronts.
At Jaguar we infill drilled mineral
resources at depth in the Flying Spur
and Arnage lenses to convert these
to reserves and extend mine life. We
also progressed drilling of the Triumph
discovery and target generation
elsewhere on the 50km long corridor on
our Jaguar concession that is prospective
for VMS deposits. At Long, we temporarily
discontinued exploration in December
2015 and expect to recommence
exploration in FY17.
Our business has grown during FY16
and this has created opportunities for
our existing employees. Today we have
people working at the Nova Project who
have transferred from our Jaguar and
Long Operations and from our Corporate
office. In addition, people from Sirius
are now in key positions across the IGO
business, at our Jaguar Operation, at our
Nova Project and in our exploration and
corporate teams. There have also been
opportunities to attract new employees
who bring with them new and diverse
skills sets, capabilities and experiences, all
of which helps to make IGO stronger.
Peter Bilbe
Chairman
Peter Bradford
Managing Director and
Chief Executive Officer
On our greenfields projects at Bryah
Basin in Western Australia, Fraser Range
– Tropicana in Western Australia, and
Lake Mackay in the Northern Territory,
we continued belt scale early exploration
programs targeting gold and base metals
discoveries.
In the last twelve months we have
achieved much. We have consistently
delivered financial and production
performance broadly within, or better
than, guidance. We have achieved this
whilst also improving the capacity and
effectiveness of our team and business
processes.
These achievements are only possible
through the dedication and high
performance of our employees and
through the support and contributions
of our stakeholders, of which there are
many. IGO stakeholders include our
shareholders, staff and contractors, the
government and our regulators, our host
communities, our Traditional Owners
and the public in general. We take this
opportunity to thank our employees and
stakeholders for their contributions and
or support of IGO.
IGO’s strategy is to be a diversified mining
company that delivers superior returns
for all stakeholders
Annual Report 2016 5
BOARD PROFILE
Peter Bilbe (66)
B.Eng. (Mining) (Hons), MAusIMM
Peter Bradford (58)
B.AppSc., FAusIMM, MSMME
Geoffrey Clifford (66)
B.Bus., FCPA, FGIA, FAICD
Non-executive Chairman
Term of Office
Managing Director and
Chief Executive Officer
Term of Office
Mr. Bilbe was appointed as Non-
executive Director in March 2009 and
Non-executive Chairman in July 2011.
Mr. Bradford was appointed as Managing
Director and Chief Executive Officer in
March 2014.
Experience
Experience
Mr. Bilbe is Chair of the Nomination
Committee and a member of the Audit
Committee, Remuneration Committee
and Sustainability & Risk Committee.
Mr. Bilbe is a mining engineer with 40
years’ Australian and international mining
experience in gold, base metals and iron
ore at the operational, managerial and
board levels. Mr. Bilbe has held senior
positions at Northern Iron, Norseman
Gold Mines, Mount Gibson, Aztec
Resources, Portman, Aurora Gold and
Kalgoorlie Consolidated Gold Mines.
Other current directorships:
Intermin Resources Limited.
Former directorships in the last 3 years:
Mr. Bradford is a member of the
Sustainability & Risk Committee and
Nomination Committee.
Mr. Bradford is a senior executive and
a qualified metallurgist with over 35
years’ experience in gold and base
metals mining operations, exploration
and development. Mr. Bradford has
held senior positions internationally and
within Australia with Ashanti Goldfields
(and Golden Shamrock Mines), Golden
Star Resources, Anvil Mining, Copperbelt
Minerals and PMI Gold.
Mr. Bradford is also a council member of
the Association of Mining and Exploration
Companies Inc (AMEC).
Other current directorships:
Northern Iron Limited and Sihayo Gold
Limited.
None
Non-executive Director
Term of Office
Mr. Clifford was appointed as Non-
executive Director in December 2012.
Experience
Mr. Clifford is Chair of the Audit Committee
and a member of the Nomination
Committee, Remuneration Committee and
Sustainability & Risk Committee.
Mr. Clifford has more than 35 years’
experience in senior accounting, finance,
administration and company secretarial
roles in the mining, retail and wholesale
industries. Mr. Clifford has held non-
executive directorships at Centaurus
Metals, Fox Resources, Aztec Resources,
and Atlas Iron. From 2008 until 2011 he
was non-executive chairman of Atlas Iron.
Mr. Clifford was Company Secretary and
GM Admin of Portman Limited from 1997
to 2005.
Other current directorships:
Saracen Mineral Holdings (non-executive
chairman).
Former directorships in the last 3 years:
Former directorships in the last 3 years:
None
Asanko Gold Inc.
6 Independence Group NL
Keith Spence (62)
BSc. (Geophysics) (Hons)
Peter Buck (67)
M.Sc. (Geology), MAusIMM
Neil Warburton (60)
Assoc. MinEng WASM,
MAusIMM, FAICD
Non-executive Director
Non-executive Director
Non-executive Director
Term of Office
Term of Office
Term of Office
Mr. Spence was appointed as Non-
executive Director in December 2014.
Mr. Buck was appointed as Non-executive
Director in October 2014.
Mr. Warburton was appointed as Non-
executive Director in October 2015.
Experience
Experience
Experience
Mr. Spence is Chair of the Sustainability
& Risk Committee and a member of the
Audit Committee, Nomination Committee
and Remuneration Committee.
Mr. Buck is Chair of the Remuneration
Committee and a member of the Audit
Committee, Nomination Committee and
Sustainability & Risk Committee.
Mr. Warburton is a member of the
Audit Committee, Sustainability & Risk
Committee, Nomination Committee and
Remuneration Committee.
Mr. Spence has over 30 years’ experience
in the oil and gas industry including
18 years with Shell and 14 years with
Woodside where during that time
he held executive positions including
chief operating officer and acting chief
executive officer.
Mr. Spence chairs the Board of the
National Offshore Petroleum Safety and
Environmental Management Authority
and the Industry Advisory Board of the
Australian Centre for Energy and Process
Training.
Other current directorships:
Geodynamics Limited and Base
Resources Limited (non-executive
chairman), Oil Search Limited and
Murray & Roberts Holdings Limited.
Mr. Buck is a geologist with over 40 years’
experience in the mineral exploration and
mining industry and was directly involved
with the discovery and development of a
number of mineral deposits in Australia,
Africa and Brazil. Mr. Buck has worked
with WMC Resources, Forrestania Gold
and LionOre in executive management
and director positions, and was managing
director of Breakaway Resources. He has
been a non-executive director of Gallery
Gold Ltd and PMI Gold.
Mr. Buck is also a board member of the
Centre for Exploration Targeting at the
University of Western Australia and Curtin
University.
Other current directorships:
Antipa Minerals Limited.
Former directorships in the last 3 years:
Former directorships in the last 3 years:
Clough Limited (non-executive chairman).
None
Mr. Warburton is a qualified mining
engineer with more than 35 years’
experience in gold and nickel
development and mining. He has
previously held senior executive positions
with Barminco Limited and Coolgardie
Gold.
Other current directorships:
Australian Mines Limited and
Namibian Copper Limited.
Former directorships in the last 3 years:
Sirius Resources NL, Peninsular Energy
Limited and Red Mountain Mining Ltd
(non-executive chairman).
Annual Report 2016 7
SAFETY
IGO had no fatalities or serious disabling
injuries during FY16, however there was
one serious injury wherein a contractor
broke his leg whilst unhitching a truck
trailer; an injury that required many
months of recuperation. In addition, there
were 33 injuries that required medical
treatment, time off work or resulted in
people being assigned to alternate duties
(18 in FY15).
IGO’s lost-time injury frequency rate
(LTIFR) for FY16 was 3.90 injuries per
million hours worked by IGO employees
and contractors. These results are
higher than the most recently published
averages for the Western Australian
gold mining and nickel mining sectors
which have a reported LTIFR of 2.5 and
3.3 respectively. Tropicana’s LTIFR, which is
not included in IGO’s statistics, was 1.0.
IGO acknowledges that the significant
injuries were painful and caused distress
to the injured people, their workmates
and their families. IGO is not satisfied
with its overall safety performance. IGO’s
clear objective is to improve, with the goal
of causing no harm to our employees.
For further information on IGO’s safety
performance and improvement programs,
please refer to the 2016 Sustainability
Report, which can be found on the IGO
website at www.igo.com.au.
For further information on IGO’s safety performance
and improvement programs, please refer to the
2016 Sustainability Report
8 Independence Group NL
OUR PEOPLE
FY16 has been a transformational year for
IGO and our people have been integral
to the successful implementation of our
strategy. We remain a proud Western
Australian employer, employing 357
direct employees, across all phases of the
mining cycle, across five business units.
We believe that a key factor in our
success and transformation this year,
to build a stronger and sustainable IGO,
is in our continued creation of a strong
culture characterised by our people and
“The IGO Way”. The IGO Way is our point
of difference, it is what makes us who we
are, it is at the heart of all that we do and
creates in our people a sense of pride
that they are part of the IGO team.
BUILDING OUR TEAMS
In early FY16, we completed the
integration of the Nova Project, including
the successful assimilation of site based
and support functions into a number of
our teams. In completing this integration
we were particularly proud of the way
in which our people worked together
to accomplish the successful business
alignment. In FY17, we will continue to
build the Nova team in preparation for
first production and as a foundation for
our future.
In other parts of the organisation, a key
focus is the development of systems
and processes to expand the skills
and experience of our employees. This
work, along with initiatives to develop
and support excellence in leadership,
will continue to build a motivated
and engaged team and will drive
achievement of our business objectives
and shareholder value.
INCREASING OUR DIVERSITY
IGO is an equal opportunity employer,
with a continued commitment to
providing a work environment that is
both diverse and inclusive, and a single-
mindedness about ensuring that we
have the “right people, in the right roles,
at the right time”.
This year, we have worked hard to
increase diversity within our business
units with a particular focus on the mix
of new employees commencing with the
organisation and a specific emphasis on
gender and indigenous diversity.
At the end of FY16, our overall female
participation rate was 21.9%, an increase
of 5.0% from the previous year (2015:
16.9%). This improvement has largely
been accomplished by an increased focus
on, and enhancement of, our recruitment
and selection processes, and is an
achievement that we are proud of. We
have also conducted and posted our third
Workplace Gender Equality Report which
is located on the IGO website at
www.igo.com.au.
During the year, we have also had an
increased emphasis on indigenous
employment which began with, and has
been facilitated by, the implementation
of our Aboriginal Employment and
Business Standard. This Standard is a
clear statement of our commitment to
support pathways to employment and
the creation of real employment and
business opportunities for Aboriginal
people, many of whom are Traditional
Owners on the lands on which IGO
operates. Since the implementation
of the Standard, we have made good
progress on increasing Aboriginal
employment and providing training
for roles with both IGO and our major
contractors. As our Nova Project has
grown, we have created a number of
new indigenous jobs and 15 traineeships
and will expand this commitment in FY17
to include work readiness programs and
a number of apprenticeships.
Employment of an Aboriginal Liaison
Officer at our Nova Project has been
another important step in increasing
the support and engagement of our
Aboriginal employees and contractors
at the Nova Project. During FY17, this
role will continue to work with our
business leaders to identify opportunities
for employment and development, to
build capacity, and to support our local
communities.
LEADING OUR FUTURE
In FY16, IGO has continued to support
the industry in which we work and to
build our talent pipeline with an ongoing
commitment to the employment of
graduates, vacation students and
apprentices across the organisation. In
FY16, we employed seven new graduates
in the disciplines of Geology, Mining
Engineering, Finance, Metallurgy and
Occupational Health and Safety, taking
our total graduate cohort to ten. We also
invested time in the restructure of our
two year graduate program (including
our shorter vacation program) to achieve
a more structured approach to learning
and development outcomes for new and
existing graduates.
In FY17, we will continue our graduate
and vacation programs and intend
to take in ten vacation students in
November 2016 and an additional
five new graduates and a number
of apprentices in early 2017. We will
also continue to be proud supporters
of our local universities, their alumni
associations and the student chapters of
industry organisations such as AusIMM.
We were excited to work in collaboration
with the Western Australian Mining
Club (WAMC), to provide support for a
tertiary student in the form of a Geology
Scholarship which was awarded in
August 2015. Following this success, we
have continued the commitment in 2016
again sponsoring a Geology Scholarship
and have expanded our support to an
additional WAMC Indigenous Scholarship
to assist an indigenous student in the
completion of their degree.
The 2016 financial year was an incredibly
exciting year. We look forward to the
2017 financial year and to being part of
the remarkable things that our people
achieve together.
Annual Report 2016 9
SUSTAINABILITY
IGO is intent on building a diversified
mining company that delivers superior
returns for all of our stakeholders. We
are pleased to report IGO has completed
its second Sustainability Report for the
FY16 reporting period. This report can
be found on our website at
www.igo.com.au.
IGO has improved the sustainability of
our business through the addition of
Nova to our portfolio. However, we
have also improved the sustainability
of our business through a focus on
aligning our leadership and improving our
business processes. In essence, we care
about results, but we also care about
how they are achieved. Leaders, and
in particular front-line leaders, define a
business culture. IGO has completed, or
commenced, a range of activities to align
our leadership, from front-line supervisor
upwards, on our mission, vision and
values, and the manner in which they
inform our strategic planning and the
way in which this plan is delivered upon.
The success of each element of our
business has been, and continues to
be, dependent on the support and
contributions of our stakeholders, of
which there are many. IGO stakeholders
include our shareholders, staff and
contractors, the government and our
regulators, our host communities, our
Traditional Owners and the public in
general. One way or another, each
affects our capacity, and our licence
to operate. In turn, IGO demonstrably
operates in a manner that creates
economic benefit, not just for our
shareholders, but also for the broader
community. We are intent on creating
a business that serves the communities
in which we operate whilst limiting our
environmental impacts. This aspiration
is based on IGO’s publicly stated values,
among which sustainability is our primary
focus.
To this end, IGO continues its efforts to
create a business culture that genuinely
reflects these aspirations.
IGO has also improved a broad range
of business processes related to
governance, occupational health and
safety management, environmental
management, community engagement
and Traditional Owner participation.
Importantly, IGO has established a set of
universal safety standards that define
our minimum process and outcome
expectations; expectations that go
beyond simple statutory compliance.
IGO is pleased to note that we completed
another year without any significant
environmental incident. IGO has seen
a steady decrease in the number of
workplace injuries; a good result but not
a great result. In FY16, IGO had three
serious injuries whereby the injured
persons each lost more than ten work
days in recuperation. Additionally,
we continue to see high numbers of
potentially serious incidents. We continue
to see encouraging results in our drive to
increase the diversity of our workplaces,
particularly in terms of Aboriginal
participation. We continue to support a
range of community projects through our
corporate giving program.
Both our success to date and the self-
evident need for further improvement
provides the ongoing impetus to pursue
our sustainability improvement programs.
We welcome your feedback on IGO’s
Sustainability Report so that we can
continue to improve our performance
and strengthen our stakeholder
engagement.
10 Independence Group NL
CORPORATE GOVERNANCE
The Board of Directors of IGO is
responsible for the Company’s
corporate governance and recognises
the importance of its corporate
governance framework in establishing
accountabilities, guiding and regulating
activities, monitoring and managing
risks and optimising the Company’s
performance. The Board recognises the
need to regularly review its system of
corporate governance as best practice
evolves over time.
The ASX Listing Rules require the
Company to report on the extent
to which it has followed the
Corporate Governance Principles and
Recommendations contained in the
ASX Corporate Governance Council’s
3rd Edition of its Corporate Governance
Principles and Recommendations (ASX
Recommendations). During FY16, the
Company’s corporate governance
practices have complied with the ASX
Recommendations in their entirety.
The Company’s Corporate Governance
Statement outlines the Company’s
current corporate governance
framework, by reference to the ASX
Recommendations. This statement can
be found in the Governance section of
IGO’s website at http://www.igo.com.au/
irm/content/governance.aspx?RID=295,
along with the ASX Appendix 4G, a
checklist cross-referencing the ASX
Recommendations to disclosures in the
Corporate Governance Statement, the
current Annual Report and the Company
website.
The Company reviews and amends
its corporate governance policies as
appropriate to reflect the growth of
the Company, current legislation and
best practice. The following corporate
governance codes, charters, standards
and guidelines can be found on IGO’s
website www.igo.com.au.
Code of Conduct
Corporate Control Standard
Diversity and Equal Employment
Opportunity Standard
Information and Technology Usage and
Electronic Communications Standard
Privacy Standard
Social Media Standard
Whistleblower Standard
Continuous Disclosure and Information
Standard
Dealing in Securities Standard
Anti-Bribery and Corruption Standard
Board Charter
Audit Committee Charter
Sustainability and Risk Committee Charter
Remuneration Committee Charter
Nomination Committee Charter
The Company reviews and amends its
corporate governance policies as appropriate
to reflect the growth of the Company,
current legislation and best practice
Annual Report 2016 11
SNAPSHOT OF
ASSET BASE
Western
Australia
Bryah Basin JV (Cu)
IGO earning 70-80%
Jaguar Mine (Zn-Cu-Ag)
IGO 100%
Long Mine (Ni)
IGO 100%
Lake Mackay JV (Au)
IGO earning 70%
Stockman
(Cu-Zn-Ag)
IGO 100%
Tropicana JV (Au)
IGO 30%
Nova Project (Ni-Cu)
IGO 100%
Legend
Mines
Development Projects
Gold Projects
Base Metal Projects
0
750
kilometres
Tropicana JV (30%)
Au
Jaguar
Zn, Cu, Ag
Long mine life with potential to increase
Restructured management, significant exploration potential
Status
Est. Mine Life
Producing
7+ years
Status
Est. Mine Life
Producing
3+ years
Est. cash cost (FY17)
$850 – $950/oz (1)
Est. cash cost (FY17)
$0.70 – $0.80/lb Zn (1)
Current Resources (2)
2.2Moz Au (IGO share)
Current Resources (2)
Estimated production (FY17)
117koz – 129koz Au pa (IGO share)
256,000t Zn
51,000t Cu
13.1 Moz Ag
Growth potential
Plant capacity increase from 5.8 to
7.5Mtpa complete H1FY17
Long Island open pit study to
complete in H1FY17
Underground potential
Expansion potential
Large tenement package
Regional exploration upside
Estimated production (FY17)
39,000 – 43,000t Zn
Growth potential
4,600 – 5,100t Cu
0.4 – 0.5 Moz Ag
Bentley deeps remains open
Potential VMS clusters
Projects/Exploration Opportunities
Long
Ni
Cash flow positive throughout nickel cycle
Stockman
(Cu, Zn, Ag, Au)
Status
Est. Mine Life
Producing
2 years
Est. cash cost (FY17)
$3.50 – $3.90/lb (1)
Current Resources (2)
59,700t Ni
Estimated production (FY17)
7,400 – 8,200t Ni
Growth potential
In mine exploration opportunities
under review
Nova
Ni, Cu
World-class development project
Status
Est. Mine Life
Est. cash cost
Current Resources (2)
Under construction
10+ years
FY17: $4.00 – $4.50/lb (1)
FY18: $1.50 – $2.00/lb
325,000 Ni t
134,000 Cu t
Estimated production
FY17: 9,000 – 10,000t Ni
Growth potential
12 Independence Group NL
FY18: 27,000 – 30,000t Ni
In-mine exploration and resource
extensions
Regional exploration opportunities
Fraser Range Project &
Salt Creek JV
(Ni, Cu) (70%)
Lake Mackay
(Gold/Base metals) (70%)
Bryah Basin
(Cu, Au) (70%)
Final permitting process
Considering strategic ownership options
Resource 294,000 Cu t, 598,0000 Zn t,
17.0Moz Ag, 0.4Moz Au (2)
Regional geochemical sampling, moving
loop electromagnetic surveying and/or
drilling
Aircore programs identified anomalous
results requiring additional exploration
Unlocking new underexplored mineral
province
Drilling at Bumblebee has confirmed
proof of concept
Follow up drilling of targets within a
2km strike of previously delineated
zone of geochemical anomalism and
electromagnetic conductors
De Beers Database
Unique sample database
1.
For further information see ASX release 27 July 2016 - June 2016 Quarterly
Activities Report and Presentation
2. Resources shown are inclusive of Reserves, for further information on
Mineral Resources and Ore Reserves please refer to IGO’s 2016 Resources
and Reserves Statement, as released to the ASX, which is available on the
IGO website.
OPERATIONAL SCORECARD AND OUTLOOK
FY17 GUIDANCE (Compared to FY16 guidance and performance)
Units
FY16 Guidance Range(1)
FY16 Results
FY17 Guidance Range
Mining Operation
Tropicana (IGO 30%)
Gold produced (100% basis)
Gold (IGO’s 30% share)
Cash cost
All-in Sustaining Costs
Sustaining capex
Improvement capex
Capitalised waste stripping
Exploration expenditure
Long
Nickel (contained metal)
Cash cost (payable)
Sustaining capex
Exploration expenditure
Jaguar
Zinc in concentrate
Copper in concentrate
Cash cost (payable)
Sustaining capex
Development capex
Exploration expenditure
Nova
Nickel in concentrate
Copper in concentrate
Cash cost (payable)
Capital Build capex (cash basis)
Sustaining capex
Development capex
Exploration expenditure
Greenfields & generative
oz
oz
A$/oz Au
A$/oz Au
A$M
A$M
A$M
A$M
tonnes
A$/Ib Ni
A$M
A$M
tonnes
tonnes
A$/Ib Zn
A$M
A$M
A$M
tonnes
tonnes
A$/Ib Ni
A$M
A$M
A$M
A$M
A$M
430,000 to 470,000
448,116
390,000 to 430,000
129,000 to 141,000
134,435
117,000 to 129,000(2)
680 to 750
900 to 950
14 to 16
See Note 4
18 to 20
9 to 11
8,500 to 9,000
3.50 to 4.00
2 to 3
8 to 9
730
918
6.4
5.9
16.1
7.6
8,483
3.68
1.7
7.1
850 to 950
1,150 to 1,250
2 to 3
2 to 3
29 to 36
6 to 8
7,400 to 8,200
3.50 to 3.90
1
2 to 3
38,000 to 40,000
39,335
39,000 to 43,000
6,500 to 7,000
0.60 to 0.70
2 to 3
11 to 13
9 to 10
7,412
0.53
1.8
12.8
8.9
242
6 to 8
6
4,600 to 5,100
0.70 to 0.80
8 to 9
12 to 13
3 to 4
9,000 to 10,000
3,900 to 4,400
4.00 to 4.50(3)
140 to 150
3 to 5
22 to 25
3.5 to 4.5
11 to 15
Annual Report 2016 13
1. As restated in the March 2016 Quarterly Report
2. Total gold hedging in FY17 represents 70% of guidance production including 72,600 ounces at A$1,641/oz
3. Nova cash cost guidance for FY17 is indicative of the period of ramp-up following plant commissioning
4.
Improvement capex included in Sustaining capex for FY16 Guidance Range
Grade streaming completed in
December 2015. Mill throughput
expansion commenced increasing
processing rates from 5.8Mtpa
to 7.5Mtpa
TROPICANA
Location
370km north-east of Kalgoorlie
Product
Gold
Resources
7.48Moz (100%)1
Reserves
2.41Moz (100%)1
Mining
Owner operated underground mine
Processing method
Conventional crushing, grinding and
CIL (carbon in leach)
FY16 Production
448,116oz (100%)
Sales
To a combination of the Perth Mint
and financial institutions via forward
sales contracts.
1 See Resources and Reserves section
on pages 23-28 of this report
IGO’s attributable gold
production during FY16
was 134,435oz
448,116oz
of gold
(100% basis)
was produced
during FY16
Gold (oz)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
FY12
FY13 FY14
FY15 FY16
14 Independence Group NL
OPERATIONS - TROPICANA GOLD MINE
IGO 30%, ANGLOGOLD ASHANTI 70% (MANAGER)
BACKGROUND
ATTRIBUTABLE PRODUCTION
GAS PIPELINE PROJECT UPDATE
The gas pipeline project including the
installation of the gas fired generators is
complete with the commissioning of the
17 gas fired generating units. Further cost
savings resulting from this project will
be achieved as site equipment requiring
LNG as fuel is progressively upgraded to
operate on natural gas.
LONG ISLAND STUDY
The Long Island study is looking at
alternative lower cost mining methods
to enable the mining of ore below the
currently planned pits.
This approach is considering strip mining
mine design techniques, more commonly
used in the coal mining industry which
has the effect of reducing haulage of
waste as the open pit mining progresses
at depth. The concept involves the
existing Tropicana pit, once its resources
are depleted, being backfilled with waste
from the strip mining of the Havana,
Havana South, and Boston Shaker ore
zones. This approach would reduce
waste removal costs as a result of in
pit dumping of waste and shorter haul
distances which would, in turn, facilitate
the extension of mine life.
The study is supported by data from a
substantial framework drilling program
targeting extensions beneath and along
strike of the existing pits completed
during FY16.
IGO targeted and pegged the area
containing the current gold reserves in
2001. AngloGold Ashanti farmed into
the project in 2002, discovering the
Tropicana, Havana and Boston Shaker
gold deposits respectively in 2005, 2006
and 2010. Mining of the Havana deposit
commenced in 2012 with the first gold
being produced in September 2013. In
October 2016, the Tropicana Gold Mine
achieved its 1 million ounce milestone,
in line with expectations outlined in the
2010 Bankable Feasibility Study.
FY16 PRODUCTION
Tropicana gold production for FY16 was
in line with expectation at 448,116oz (on
a 100% basis) and cash costs and All-in
Sustaining Costs (AISC) were $730/oz
produced and $918/oz sold respectively.
During the year, a total of 24.6M bank
cubic metres of material were mined and
hauled ex-pit. This material comprised
of 7.3Mt of full grade ore (>0.6g/t), 1.2Mt
of marginal ore (grading between 0.4 &
0.6g/t Au) and 50.3Mt of waste material.
Full grade ore sources were the Havana
Pit (4.47Mt), the Boston Shaker Pit
(0.82Mt) and Tropicana (2.0Mt) with the
average run-of-mine grade for full grade
ore (>0.6g/t Au) being 2.13g/t Au for the
year.
A total of 6.53Mt of ore at an average
grade of 2.39g/t Au was processed
during the year. Average metallurgical
recovery was 89% for 448,116oz of gold
produced.
The reduction in gold production for the
year compared to the FY15 (496,413oz)
is a result of the cessation of grade
streaming in December 2015. Gold
production is forecast to trend to long
term guidance of 400,000oz/pa once
expansion of the process plant to 7.5Mtpa
is achieved.
IGO’s attributable gold production
during FY16 was 134,435oz and IGO’s
attributable share of gold refined and
sold was 135,864oz. IGO’s attributable
average cash costs for FY16 were $730/
oz Au produced and AISC were $918/oz
Au refined.
TROPICANA OPTIMISATION PROJECT
Business improvement initiatives
within the mining operation include the
implementation of priority road rules,
which have improved mining costs
and efficiencies by reducing haul truck
stoppage time.
Optimisation and upgrade of the process
plant due for completion in September
2016 is targeted to achieve a throughput
rate of 7.5Mtpa. This project involves
optimisation and upgrade of existing
equipment including:-
• Upgrades to the conveyor systems in
the secondary crushing, High Pressure
Grinding Rolls (HPGR), and grinding
circuits
• Optimising screens in the secondary
and HPGR circuits
• Upgrade to the lime storage
• Upgrade to the oxygen plant
• Upgrade to the air water and elution
systems
• Upgrade to the emergency fine ore
stockpile
•
Improved utilisation of the HPGR circuit
The progress of these works enabled the
process plant to achieve an annualised
rate of 6.88Mtpa in the June 2016 quarter
at a 95% availability with May and June
achieving an annualised rate of 7.3Mtpa.
Annual Report 2016 15
OPERATIONS - LONG
Location
Kambalda, 60km south of Kalgoorlie
Reserves
13,600t contained nickel1
Product
High grade nickel
Mining
Owner operated underground mine
FY16 Production
8,493t contained nickel
Resources
59,700t contained nickel @ 4.7%
nickel1
Sales
IGO has an agreement with BHPB,
whereby the ore produced is
delivered to the adjacent BHPB
Nickel Concentrator for toll
treatment and production of nickel
concentrate. This offtake agreement
expires in 2019.
1 See Resources and Reserves section
on pages 23-28 of this report
BACKGROUND
BUSINESS IMPROVEMENT
The Long Operation in Kambalda, WA was
acquired from BHP Billiton Nickel West
Pty Ltd (BHPB) (formerly WMC Resources
Ltd) in September 2002. The mine was
re-commissioned in October of that year
and has been operating successfully and
safely since then.
Since the acquisition, IGO has produced
over 3.2Mt of nickel ore, containing
approximately 124,600t of nickel metal.
Over the period, exploration has seen
the discovery of the McLeay (2005) and
Moran (2008) ore bodies and historically
enabled the operation to maintain a
reserve base to support a two to three
year mine life. The current life of mine
plan supports the next 18 months.
FY16 PRODUCTION
Production for FY16 came from the
Moran, McLeay, Victor South and Long
ore bodies. Total production was 215,300t
of ore (FY15 258,600t) at an average
grade of 3.9% nickel for 8,493t of
contained nickel.
In response to low nickel prices, the Long
business plan was reviewed in late 2015
and a new business plan developed.
The new plan ensures profitability and
sustainability for the current life of mine
plan at lower nickel prices. This has been
achieved with a focus on mechanised
bulk mining techniques and a reduction
in working hours. Handheld airleg mining
was ceased in January 2016.
By February 2016, the mine workforce
was reduced to 65 personnel,
approximately half the size at the
beginning of the financial year. The
current mine workforce comprises 89%
locally employed personnel working nine
operating days per fortnight, with two
crews. Additional cost savings have been
achieved by surplus assets being made
available for inter-IGO Operations transfer,
or sale.
In order to minimise expenditure, and as
part of the revision, mine development
was reduced in FY16 resulting in 1,007m
of advance compared with 2,882m in the
FY15 year.
Successfully transitioned to new mine
operating plan in H2FY16
16 Independence Group NL
A high degree of focus remains on mine
induced and regional seismicity which
remains an inherent risk within the Long
Operation. Procedures to manage these
conditions are well understood by the
Long mining team and built into standard
operating procedures.
NEAR MINE EXPLORATION
Drilling that targeted potential resource
extensions at Moran South and McLeay
South were ceased in December 2015,
in line with the updated business plan
which focused on the most profitable
parts of the mine. No new resources or
reserves were developed at Moran South
or McLeay South.
Nickel (t)
Payable Metal
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
FY12
FY13 FY14
FY15 FY16
OPERATIONS - JAGUAR
Location
300km north of Kalgoorlie, 60km
north of Leonora
Product
Copper concentrate with significant
silver credits and minor gold credits, zinc
concentrate with minor silver credits
Mining
Owner operated underground mine
Processing
Single stage crushing, SAG/Ball milling,
differential flotation and filtration
FY16 Production
39,335t Zn, 7,412t Cu, 1,603,565oz Ag,
4,880oz Au contained in 112,711t of
concentrate.
Resources
2,107,000t at 10.3% Zn, 1.2% Cu,
157g/t Ag, 1.0g/t Au1
Reserves
1,438,000t at 9.5% Zn, 1.1% Cu,
145g/t Ag, 0.8g/t Au1
Sales
During FY16, IGO had an offtake
agreement with MRI Trading AG
1 See Resources and Reserves section
on pages 23-28 of this report
BACKGROUND
IGO acquired the Jaguar operations
from Jabiru Metals in 2011. At that point
it comprised the Jaguar and Bentley
underground mines. In FY14, the Jaguar
mine was closed.
In FY16, all ore was sourced from the
Bentley mine and processed through the
Jaguar concentrator to produce a copper
concentrate rich in silver and gold credits,
plus a high grade zinc concentrate.
FY16 PRODUCTION
A total of 497,751t (FY15 485,302t) of ore
at 8.98% Zn, 1.77% Cu, 131g/t Ag and
0.77g/t Au was mined from the Bentley
underground mine, predominantly
from the Arnage and Comet lenses.
Advancement of 2,539m of capital
development was undertaken.
The processing facility treated 505,578t of
ore at 8.90% Zn, 1.70% Cu, 128g/t Ag,
0.75g/t Au (FY15 488,466t @ 10.5% Zn,
1.75% Cu, 156g/t Ag).
Metal production was 39,335t Zn
(FY15: 44,999t), 7,412t Cu (FY15: 7,380t),
1,603,565oz Ag (FY15: 1,876,384oz),
4,880oz Au (FY15: 4,439oz) in 112,711t
(FY15: 122,029t) of concentrate.
The production of zinc was at the
upper end of FY16 guidance and copper
production exceeded restated FY16
guidance.
BUSINESS IMPROVEMENT
A key focus for Jaguar is the
development of continuous improvement
opportunities in all aspects of the
operation. This focus has resulted in
continued improvement in productivity
over the last 1-2 years resulting in higher
and more consistent production. Work
in FY16 also focused on opportunities to
reduce manning numbers and improve
pricing on a number of supply and
services contracts.
A second Jumbo was mobilised to site in
June 2016 to commence the acceleration
of capital development in the Arnage and
Flying Spur lenses in Bentley and ensure
consistency of future production rates.
Improvement works are being
undertaken on the Jaguar processing
facility in FY17 to further improve
operational and maintenance efficiencies.
Record mining and milling rates
achieved in the year
NEAR MINE EXPLORATION
In FY16 drilling at Bentley commenced
from the hanging wall drill drive
established in FY15 primarily for the
conversion of inferred resources to
indicated category and to drill test
mineralisation extensions at depth.
As a result, the conversion of Arnage
and Flying Spur lenses from inferred
to indicated category extended from
3820mRL in FY2015 to 3625mRL in FY16.
In addition, the Arnage lens has extended
270m down dip from FY15 confirming
the Arnage mineralisation is continuous
to Bentley Deeps mineralisation drilled
in FY15 to a depth of 1,000m below
surface. Electromagnetic downhole
geophysical surveys were conducted in
FY16 and resulted in off hole conductors
being identified to the south of Arnage
lens. These conductors will be tested in
early FY17 with further exploration drilling
planned to test extensions of the Arnage
and Flying Spur lenses below a depth of
1,000m from surface.
Ni Produced (t)
Zinc (t)
Copper (t)
Payable Metal
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
FY12
FY13
FY14
FY15
FY16
Annual Report 2016 17
NOVA PROJECT - KEY MILESTONES
Discovery
Jul 2012
Scoping
Study
Sep 2013
Native Title
Agreement &
Mining Lease
Aug 2014
IGO
acquisition
Sep 2015
Commissioning &
first concentrate
Dec 2016
2012
2013
2014
2015
2016
Permitting &
Construction
commencement
Jan 2015
Accelerated
Bollinger Decline
July 2016
Maiden
Resource
May 2013
Definitive
Feasibility Study
Jul 2014
Optimisation
Study
Dec 2015
The Nova Project has progressed rapidly in 2016 which is a testament to the quality of the Project
and the commitment of all stakeholders involved in the Project.
NOVA
Location
160km by road, east of Norseman
Product
Nickel and copper
Mining
Owner operated underground mine
and process plant
Processing method
Conventional crushing, grinding,
flotation and filtration
FY16 Production
n/a - in construction
Resources
325,000t contained nickel and
134,000t copper1
Reserves
275,000t contained nickel and
112,000t copper1
Sales
100% of nickel sulphide concentrate
for first three years have been signed
with BHP Billiton Nickel West Pty Ltd
and Glencore International AG. 100%
of copper sulphide concentrate for
first three years has been signed
with Trafigura Pte Ltd.
1 See Resources and Reserves section
on pages 23-28 of this report
As at June 2016, the overall
Project was 93% complete
and was on schedule and on
budget to produce first nickel
and copper concentrates by
December 2016 as planned.
18 Independence Group NL
OPERATIONS - NOVA PROJECT
FY17 will be both challenging and rewarding
as we complete the construction phase, move
through the commissioning phase and into
full operations
BACKGROUND
The Nova discovery hole was drilled in
July 2012 and a maiden resource was
released some 12 months later in May
2013. The current JORC 2012 compliant
Mineral Resource1 is 14.3Mt 2.3%Ni,
0.9%Cu and 0.08%Co. The Definitive
Feasibility Study, completed in July 2014,
confirmed the robustness of the Project
and development at Nova commenced
on 26 January 2015. IGO acquired the
Nova Project in September 2015 through
the acquisition of Sirius Resources NL.
As at June 2016, the overall Project was
93% complete and was on schedule and
on budget to produce first nickel and
copper concentrates by December 2016
as planned.
CONSTRUCTION
Construction of the process plant and
its associated infrastructure was 86%
complete as at 30 June 2016 and was
being progressed ahead of schedule. All
major mechanical equipment was onsite
with the focus on piping and electrical
installation. It is expected commissioning
will commence in the December 2016
quarter with first saleable concentrate
produced in accordance with plan by
December 2016.
Other sections of the Project completed
to date include the 492 room
accommodation village, the 38km sealed
site access road, the sealed aerodrome
(certified for jet aircraft), the central water
treatment plant, the administration
facilities, the heavy equipment workshop
and associated fuelling and wash down
facilities and the life of mine tailings
facility.
Electric power for the Project is provided
by Zenith Pacific under a Build Own
Operate contract. Stage 1 of this power
generation facility, consisting of three
1.7MW diesel generators, has been
commissioned and is suppling reticulated
power to all areas of the Project. Stage
2, consisting of five 3MW GE diesel
generators, which are capable of
operating on either gas or diesel in the
future if required, will be commissioned
during the September 2016 quarter.
To supplement power generation at
Nova a 6.7MW solar farm is planned for
installation later in FY17.
The Project is expected to be completed
within the capital expenditure budget of
$443M and, with the work completed to
date, the risk of a capital cost overrun has
largely been eliminated.
$443
million
Capital Budget
492
room
Accommodation
Village
1st
Ore
June 2016
1 See Resources and Reserves section on pages 23-28 of this report.
Annual Report 2016 19
OPERATIONAL READINESS
During the latter part of FY16, emphasis
was placed on developing operational
readiness plans, with the ultimate goal
of achieving a smooth transition from
construction into operations. Plans are
progressing well, with the recruitment
of the senior operational management
team now complete.
Priority has also been placed on the
development and education of safe
systems of work and management
systems.
Training and recruitment of the
operational workforce commenced
mid-year and is planned for completion
to coincide with the commissioning of
the concentrator in the December 2016
quarter.
Underground development has
proceeded as planned, with the focus
on capital development to advance
the infrastructure required to achieve
sustainable production. For FY16, 5.5km
of underground development was
achieved.
The contract for the underground works
was awarded to Barminco Holdings
Limited and their performance to date
has enabled mine development to
remain ahead of the Feasibility Study
plan. Delivery of first ore to the surface
was announced in late June 2016 and
work has continued on the development
of the decline, stope access and
infrastructure for ventilation dewatering
and other service.
20 Independence Group NL
THE YEAR AHEAD
FY17 will be both challenging and rewarding
as the construction phase is completed,
followed by the commissioning phase
and into full operations. Commissioning
is expected to begin in earnest in the
December 2016 quarter and for first
concentrate to be produced in December
2016. Ramp up to full production is expected
to be complete by June 2017.
The project is expected to be
completed within the capital
expenditure budget
Annual Report 2016 21
REGIONAL
EXPLORATION AND
DEVELOPMENT
• Exploration on the 50km of favourable
mineralisation stratigraphy for VMS
systems at Jaguar will continue
through FY17 along with the
recommencement of exploration at
Long designed to continue to extend
the life of mine.
• An extensive systematic
reconnaissance exploration program is
planned for the Lake Mackay Project.
Exploration is at a very early stage
over the extensive land package.
Work programs which will be executed
during FY17 include airborne magnetic
survey, surface geophysics, soil
sampling and drilling of high-priority
targets.
• Work on the Bryah Basin Project,
targeting a DeGrussa Cu-Au analogue
will include drilling to follow-up
several geochemical anomalies, along
with extending effective testing of
prospective stratigraphy over the
eastern portion of the project.
DISCOVERY
IGO is committed to transformational
value creation through exploration
discovery. The discovery portfolio
includes both highly prospective
brownfields opportunities and a number
of unique belt-scale greenfields projects.
During the year, IGO rationalised and
prioritised exploration activities across
the Company with a focus on in-ground
expenditures at Tropicana and Nova,
along with three belt-scale opportunities,
being the Fraser Range/ Tropicana Belt,
Lake Mackay and Bryah Basin projects.
A number of encouraging milestones
where achieved during the year with
completion of the:
• Tropicana framework drilling as part
of the Long Island study including the
identified high-grade Havana south
ore-shoot;
• Extensions to the Jaguar Operation
life of mine through exploration of
the Flying Spur and Arnage lens at
Bentley;
• Advancement of exploration and
consolidation of the Albany Fraser
/ Tropicana belts including delivery
of anomalous results generated
from the Salt Creek JV, supporting
potential magmatic nickel sulphide
mineralisation; and
• Multi-commodity mineralisation
intersected at Lake Mackay, providing
proof of concept from the early stage
reconnaissance program.
The year ahead promises to be exciting
with the platform in place for delivery
of organic growth. IGO is committed to
the investment of $25.5 to $33.0M for
exploration across the portfolio. Some
expected key milestones as part of the
FY17 work program include:
• A focus on delivering additional value
through both resource extensions
and discovery of additional deposits
at the Nova Project and on IGO’s
extensive ground position on the
Albany Fraser / Tropicana Belt. This
will be driven by our understanding
of the Nova deposit and the evolution
of the belt, including the commitment
to world-leading embedded research
programs. Technology will also play
an important part, with the planned
execution of a 3D seismic survey
over the Nova deposit. We will also
have underground drilling platforms
in place to allow testing for potential
repetitions to the Nova and Bollinger
orebodies at depth.
• The completion of the Tropicana
resource extension drilling program
during FY16 will provide the
framework to unlock the full potential
of Tropicana as part of the Long
Island study. The plan is the delivery
of the Mineral Resource during the
September 2016 quarter and the Long
Island study in the December 2016
quarter. Exploration drilling will focus
on improved definition and extension
of the new Havana South high-grade
ore shoot, along with continuation on
the systematic regional exploration
program.
The year ahead promises to be exciting with the
platform in place for delivery of organic growth
22 Independence Group NL
MINERAL RESOURCES & ORE RESERVES
All Competent Persons statements for the following tables are incorporated in the JORC Code (2012) Competent
Persons Statement section found on page 28.
Table 1: Nova Project – 30 June 2016 Mineral Resources (and 2015 comparison)
Mineral Resources - June 2015
Mineral Resources - 30 June 2016
Tonnes
Grade
Contained Metal
Tonnes
Grade
Contained Metal
Deposit
Classification
(Mt)
Ni
(%)
Cu
(%)
Nova
Measured
Indicated
Inferred
Sub-total
Bollinger
Measured
Indicated
Inferred
Sub-total
Stockpile
GRAND TOTAL
Notes:
-
9.1
1.0
10.1
-
2.4
1.8
4.2
-
14.3
-
2.5
1.4
2.4
-
2.7
1.0
2.0
-
2.3
Co
(%)
-
0.08
0.05
0.08
-
0.11
0.04
0.08
-
Ni
(kt)
-
230
14
244
-
64
17
82
-
Cu
(kt)
-
94
6
100
-
26
8
34
-
Co
(kt)
-
7.3
0.5
7.7
-
2.6
0.7
3.3
-
(Mt)
-
9.1
1.0
10.1
-
2.4
1.8
4.2
-
-
1.0
0.6
1.0
-
1.1
0.4
0.8
-
0.9
0.08
325
134
11.0
14.3
Ni
(%)
-
2.5
1.4
2.4
-
2.7
1.0
2.0
-
2.3
Cu
(%)
-
1.0
0.6
1.0
-
1.1
0.4
0.8
-
Co
(%)
-
0.08
0.05
0.08
-
0.11
0.04
0.08
-
Ni
(kt)
-
230
14
Cu
(kt)
-
94
6
244
100
-
64
17
82
-
-
26
8
34
-
Co
(kt)
-
7.3
0.5
7.7
-
2.6
0.7
3.3
-
0.9
0.08
325
134
11.0
1. Mineral Resources are reported above a 0.6% nickel equivalent cut-off grade which is calculated as NiEq% = ((Cu % x 0.95) x ($7,655/$16,408))
+ (Ni % x 0.89).
2. As at 30 June 2016 the resource broken stocks was not material to the Mineral Resource with an estimated 11.8kt at 0.88% Ni, 0.55% Cu and
0.03% Co stockpile.
3. There is no change to the Mineral Resources from June 2015 to June 2016, with no drilling completed nor changes to the understanding of
the geological controls.
4. Mineral Resources are inclusive of Ore Reserves.
5. No depletion has occurred during the period.
6. Ore tonnes have been rounded to the nearest hundred thousand tonnes.
7. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
8.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Table 2: Nova Project – 30 June 2016 Ore Reserves (and 2015 comparison)
Ore Reserves - December 2015
Ore Reserves - 30 June 2016
Tonnes
Grade
Contained Metal
Tonnes
Grade
Contained Metal
Deposit
Classification
(Mt)
Ni
(%)
Cu
(%)
Co
(%)
Ni
(kt)
Cu
(kt)
Co
(kt)
(Mt)
Proven
Probable
Sub-Total
Proven
Probable
Sub-Total
Stockpile
Bollinger
Nova
GRAND TOTAL
Notes:
2.7
2.7
10.9
10.9
-
13.6
2.2
2.2
2.0
2.0
-
2.0
0.9
0.9
0.8
0.8
-
0.09
0.09
0.06
0.06
-
59
59
216
216
-
0.8
0.07
275
24
24
89
89
-
112
2
2
7
7
-
9
2.7
2.7
10.9
10.9
-
13.6
Ni
(%)
2.2
2.2
2.0
2.0
-
2.0
Cu
(%)
Co
(%)
Ni
(kt)
Cu
(kt)
Co
(kt)
0.9
0.9
0.8
0.8
-
0.09
0.09
0.06
0.06
-
59
59
216
216
-
0.8
0.07
275
24
24
89
89
-
112
2
2
7
7
-
9
1. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
2. As at 30 June 2016 the Ore Reserves broken stocks was not material to the Ore Reserve with an estimated 9.3kt at 0.99% Ni, 0.62% Cu and
0.03% Co stockpile.
3. A Net Smelter Return (NSR) cut-off value of $64/t of stope ore has been used in the evaluation of the Ore Reserve, which includes mining
and G&A operating costs. Processing costs are captured as a variable to the NSR block value.
4. There is no change to the December 2015 Ore Reserve as the project is still under construction and no new significant information is available
as of 30 June 2016.
5. Minor Ore reserves are now broken stocks on the ROM pad but as yet have not been reconciled through processing and sampling.
6. Sub-level open-stoping with paste backfill is the primary method of mining to be used at Nova.
7.
8.
The Ore Reserve has been estimated as part of the Optimisation Study completed by IGO December 2015.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Annual Report 2016 23
Table 3: Tropicana Gold Mine -100% basis (IGO 30%) – 30 June 2016 Mineral Resources (and 2015 comparison)
Mineral Resources - 30 June 2015
Mineral Resources - 30 June 2016
Tonnes
(Mt)
12.8
75.3
5.8
93.9
-
2.4
5.8
8.2
13.6
26.4
77.7
11.7
115.7
Grade
Au
(g/t)
2.09
1.85
2.54
1.92
-
3.58
3.14
3.26
0.87
1.46
1.90
2.84
1.89
Contained
Metal
Au
(Moz)
0.86
4.47
0.48
5.80
-
0.27
0.59
0.86
0.38
1.24
4.74
1.06
7.04
Tonnes
Grade
(Mt)
10.9
78.3
4.4
93.7
-
5.4
12.1
17.6
13.6
24.5
83.8
16.6
124.8
Au
(g/t)
1.91
1.71
2.23
1.76
-
3.36
3.13
3.20
0.85
1.32
1.82
2.89
1.86
Contained
Metal
Au
(Moz)
0.67
4.32
0.32
5.30
-
0.59
1.22
1.81
0.37
1.04
4.90
1.54
7.48
Classification
Measured
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Sub-Total
Measured
Measured
Indicated
Inferred
Open Pit
Underground
Stockpiles
Total Tropicana
GRAND TOTAL
Notes:
1.
The open pit Mineral Resource is reported at a 0.3g/t Au cut-off for oxide material and a 0.4g/t Au cut-off for transitional and fresh material,
constrained within an a US$1,400/oz Au (A$1,817/oz Au) optimised pit shell based on actual mining and processing costs.
2. The underground Mineral Resource is reported outside the US$1,400/oz Au pit optimisation based on underground mineable shapes at a
cut-off grade of 2.0g/t Au.
3. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
4. Mineral Resources are inclusive of Ore Reserves.
5. All Mineral Resources are completed in accordance with the 2012 JORC Code.
6.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Table 4: Tropicana Gold Mine -100% basis (IGO 30%) – 30 June 2016 Ore Reserves (and 2015 comparison)
Ore Reserves - 30 June 2015
Ore Reserves - 30 June 2016
Tonnes
(Mt)
11.1
29.0
40.1
8.4
48.5
Grade
Au
(g/t)
2.27
2.05
2.11
1.09
1.93
Contained
Metal
Tonnes
Grade
Contained
Metal
Au
(Moz)
0.81
1.91
2.72
0.29
3.01
(Mt)
7.6
24.2
31.8
9.2
41.0
Au
(g/t)
2.33
2.01
2.07
0.98
1.83
Au
(Moz)
0.57
1.56
2.12
0.29
2.41
Classification
Proved
Probable
Sub-Total
Proved
Open Pit
Stockpiles
GRAND TOTAL
Notes:
1.
The Proven and Probable Ore Reserves is reported above economic break-even gold cut-off grade for each material type at nominated gold
price of US$1,100/oz (A$1,436/oz).
2. The Ore Reserve estimate is update based on depletion as at 30th June 2016, using the Resource model from July 2015.
3. The cut-off grades reported were 0.6/g Au for oxide material and 0.7g/t Au for transitional and fresh.
4. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
5.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
24 Independence Group NL
Table 5: Long Operation – June 2016 Mineral Resources (and 2015 comparison)
Mineral Resources - 30 June 2015
Mineral Resources - 30 June 2016
Tonnes
Grade
Contained
Metal
Tonnes
Grade
Contained
Metal
Classification
Measured
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Sub-Total
Measured
Long
Victor South
McLeay
Moran
Stockpiles
GRAND TOTAL
Notes:
(t)
65,000
287,000
355,000
707,000
-
147,000
33,000
180,000
63,000
71,000
21,000
155,000
234,000
51,000
52,000
337,000
-
1,379,000
Ni
(%)
5.4
5.1
4.7
4.9
-
2.1
1.5
2.0
6.3
4.9
6.7
5.7
6.6
3.3
3.7
5.7
-
4.8
Ni
(t)
3,500
14,600
16,700
34,800
-
3,100
500
3,600
4,000
3,500
1,400
8,900
15,500
1,700
1,900
19,100
-
(t)
62,000
287,000
355,000
704,000
-
147,000
33,000
180,000
61,000
71,000
21,000
153,000
126,000
44,000
52,000
222,000
-
66,400
1,259,000
Ni
(%)
5.3
5.1
4.7
4.9
-
2.1
1.5
2.0
6.4
4.9
6.7
5.8
7.2
3.9
3.7
5.7
-
4.7
Ni
(t)
3,300
14,600
16,700
34,600
-
3,100
500
3,600
3,900
3,500
1,400
8,800
9,100
1,700
1,900
12,700
-
59,700
1. Mineral Resources are reported using a 1% Ni cut-off grade except for the Victor South disseminated Mineral Resource, which is reported
using a cut-off grade of 0.6% Ni.
2. Block modelling used the ordinary-kriging grade-interpolation method on 1m composites within wireframes for all elements and density for
the Victor South, McLeay and Moran deposits. For the Long mineralisation, ordinary-kriging was used to estimate metal accumulation and
horizontal width variables for each drill hole intercept into a two-dimensional block model. The final block grades were back-calculated and
the block model was converted to a conventional three-dimensional block model using nearest neighbour assignment.
3. Mining as at 30 June 2016 has been removed from the 2016 Mineral Resource estimate.
4. Mineral Resources are inclusive of Ore Reserves.
5. All figures are rounded to reflect appropriate levels of confidence. Apparent difference may occur due to rounding.
6.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Table 6: Long Operation – June 2016 Ore Reserves (and 2015 comparison)
Ore Reserves - 30 June 2015
Ore Reserves - 30 June 2016
Tonnes
Grade
Contained
Metal
Tonnes
Grade
Contained
Metal
Classification
Proved
Probable
Sub-Total
Proved
Probable
Sub-Total
Proved
Probable
Sub-Total
Proved
Probable
Sub-Total
Proved
(t)
28,000
94,000
122,000
7,000
15,000
22,000
22,000
24,000
46,000
380,000
38,000
418,000
-
608,000
Long
Victor South
McLeay
Moran
Stockpiles
GRAND TOTAL
Notes:
Ni
(%)
3.6
2.8
3.0
3.0
2.2
2.5
3.5
3.1
3.3
4.0
3.0
3.9
-
3.6
Ni
(t)
1,000
2,600
3,600
200
300
500
800
700
1,500
15,200
1,200
16,400
-
(t)
23,000
45,000
68,000
4,000
6,000
10,000
18,000
19,000
37,000
224,000
12,000
236,000
-
22,000
351,000
Ni
(%)
3.5
3.1
3.2
5.0
1.7
3.0
3.9
3.2
3.5
4.2
3.3
4.2
-
3.9
Ni
(t)
800
1,400
2,200
200
100
300
700
600
1,300
9,400
400
9,800
-
13,600
1. Ore Reserves are reported above an economic Ni Cut-off value as at 30 June 2016.
2. A NSR value of $176/t has been used in the evaluation of the 2016 Ore Reserve.
3. Mining as at 30 June 2016 has been depleted from the 2016 Ore Reserve estimate.
4. All figures are rounded to reflect appropriate levels of confidence. Apparent difference may occur due to rounding.
5. Revenue factor inputs (US$): Ni $11,766/t, Cu $5,173/t. Exchange rate A$1.00 : US$0.74.
6.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Annual Report 2016 25
Table 7: Jaguar Operation – June 2016 Mineral Resources (and 2015 comparison)
Mineral Resources - 30 June 2015
Mineral Resources - 30 June 2016
Tonnes
Grade
Tonnes
Grade
Classification
(t)
Bentley
Measured
529,000
Indicated 1,252,000
Inferred
1,113,000
Stockpiles
13,000
Sub-Total 2,907,000
Teutonic Bore
Measured
-
Indicated
946,000
Inferred
608,000
Sub-Total
1,554,000
GRAND TOTAL
4,461,000
Notes:
Cu
(%)
2.1
1.6
1.0
1.1
1.5
Zn
(%)
11.5
7.3
8.8
9.2
8.6
Ag
(g/t)
Au
(g/t)
159
118
149
121
138
0.8
0.8
1.1
0.6
0.9
(t)
402,000
1,418,000
282,000
5,000
2,107,000
Cu
(%)
1.8
1.0
0.7
2.0
1.2
Zn
(%)
11.5
11.0
5.3
8.9
10.3
177
161
107
131
157
Ag
(g/t)
Au
(g/t)
Mineral Resources – 30 August 2009
Mineral Resources – 30 August 2009
-
1.7
1.4
1.6
1.5
-
3.6
0.7
2.5
6.5
-
65
25
49
107
-
-
-
-
-
-
946,000
608,000
1,554,000
3,661,000
-
1.7
1.4
1.6
1.4
-
3.6
0.7
2.5
7.0
-
65
25
49
111
0.9
1.0
1.0
0.8
1.0
-
-
-
-
0.6
1. 2015 Mineral Resources include massive sulphide and stringer sulphide mineralisation. Massive sulphide resources are geologically defined;
stringer sulphide resources for 2015 are reported above a cut-off grade of 0.7% Cu. No economic mining constraints were applied to the 2015
Mineral Resource.
2. 2016 massive sulphide Mineral Resource is reported above a cut-off of $96/t NSR. Stringer sulphide (incremental resources) reported above a
cut-off of $60/t NSR. Economic mining constraints have been applied to the 2016 Mineral Resource.
3. Block modelling mainly used ordinary-kriging grade-interpolation methods within wireframes for all elements and density.
4. All Mineral Resources are depleted for mining
5. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
6. Mineral Resources are inclusive of Ore Reserves.
7. The Teutonic Bore Resource estimate is reported in accordance with JORC Code 2012 reporting guidelines. The model is unchanged from
the 2009 model.
8. JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Table 8: Jaguar Operation – June 2016 Ore Reserves (and 2015 comparison)
Ore Reserves - 30 June 2015
Ore Reserves - 30 June 2016
Tonnes
Grade
Tonnes
Grade
Classification
(t)
Bentley
Proved
323,000
Probable
821,000
Sub-Total
1,144,000
Stockpiles
Proved
13,000
GRAND TOTAL
1,157,000
Notes:
Cu
(%)
2.0
1.6
1.7
1.1
1.7
Zn
(%)
10.8
6.3
7.6
9.2
7.6
Ag
(g/t)
Au
(g/t)
155
115
126
121
126
0.8
0.7
0.7
0.6
0.7
(t)
277,000
1,157,000
1,434,000
4,000
1,438,000
Cu
(%)
1.8
1.0
1.1
1.7
1.1
Zn
(%)
9.7
9.5
9.5
9.3
9.5
Ag
(g/t)
Au
(g/t)
157
142
145
138
145
0.8
0.7
0.8
0.7
0.8
1. Cut-off values were based on NSR values of $134/t ore or direct mill feed and $80/t ore for marginal feed.
2. Revenue factor inputs (US$): Copper price $5,540/t, Zinc price $2,020/t, Silver price $17.00/oz, Gold price $1,200/oz and foreign exchange rate
of A$1.00 : US$0.75.
3.
The following metallurgical recovery factors have been used: 85.0% Cu recovery into Cu concentrate, 45.0% Ag recovery into Cu concentrate,
32.0% Au recovery into Cu concentrate, 86.0% Zn recovery into Zn concentrate and 16.0% Ag recovery into the Zn concentrate.
4.
Longitudinal sub-level long hole stoping with unconsolidated rock fill is the primary method of mining.
5. All Measured Resources and associated dilution was classified as Proved Reserves. All Indicated Resources and associated dilution was
classified as Probable Reserves. No Inferred Resources has been converted into Reserves.
6. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
7.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
26 Independence Group NL
Table 9: Stockman Project – June 2016 Mineral Resources (and 2015 comparison)
Mineral Resources - 30 June 2015
Mineral Resources - 30 June 2016
Tonnes
Grade
Tonnes
Grade
(Mt)
-
9.5
0.8
10.3
-
3.0
0.7
3.7
14.0
Cu
(%)
-
2.0
1.4
2.0
-
2.0
3.7
2.3
2.1
Zn
(%)
-
4.2
2.2
4.0
-
4.8
5.5
4.9
4.3
Ag
(g/t)
Au
(g/t)
-
42
23
40
-
31
34
32
38
-
1.2
0.5
1.1
-
0.54
0.4
0.54
1.04
(Mt)
-
9.5
0.8
10.3
-
3.0
0.7
3.7
14.0
Cu
(%)
-
2.0
1.4
2.0
-
2.0
3.7
2.3
2.1
Zn
(%)
-
4.2
2.2
4.0
-
4.8
5.5
4.9
4.3
Ag
(g/t)
Au
(g/t)
-
42
23
40
-
31
34
32
38
-
1.2
0.5
1.1
-
0.54
0.4
0.54
1.04
Classification
Currawong
Measured
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Sub-Total
Wilga
GRAND TOTAL
Notes:
1. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
2. The Mineral Resource estimate is unchanged since 2012.
3. Mineral Resources include massive sulphide and stringer sulphide mineralisation. Massive sulphide resources are geologically defined;
stringer sulphide resources are reported above cut-off grades of 0.5% Cu.
4. Au grades for Wilga are all Inferred due to paucity of Au data in historic drilling.
5. Block modelling used ordinary-kriging grade-interpolation methods within wireframes for all elements and density.
6. Mining as at end of historic mine life (1996) has been removed from the Mineral Resource estimate for Wilga.
7. Mineral Resources are inclusive of Ore Reserves.
8.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Table 10: Stockman Project – June 2016 Ore Reserves (and 2015 comparison)
Ore Reserves - 30 June 2015
Ore Reserves - 30 June 2016
Tonnes
Grade
Tonnes
Grade
Classification
(Mt)
Cu
(%)
Zn
(%)
Ag
(g/t)
Au
(g/t)
Proved
Probable
Sub-Total
Proved
Probable
Sub-Total
-
7.4
7.4
-
1.6
1.6
9.0
-
2.1
2.1
-
2.1
2.1
2.1
-
4.3
4.3
-
5.6
5.6
4.5
-
40
40
-
31
39
-
1.2
1.2
-
0.52
0.52
1.12
(Mt)
-
7.4
7.4
-
1.6
1.6
9.0
Cu
(%)
Zn
(%)
Ag
(g/t)
Au
(g/t)
-
2.1
2.1
-
2.1
2.1
2.1
-
4.3
4.3
-
5.6
5.6
4.5
-
40
40
-
31
39
-
1.2
1.2
-
0.52
0.52
1.12
Currawong
Wilga
GRAND TOTAL
Notes:
1. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
2. Gold (Au) grades are Inferred at Wilga due to a paucity of gold assays in historic drilling. Revenue from gold in the Wilga ore was included
in the estimation of the Ore Reserve. The contribution to revenue of this gold was estimated to be $8.65/g of gold in situ. This inclusion
was not material to the value of the mining envelopes considered and did not warrant downgrading of any portion of the Ore Reserve
attributable to Wilga. The contribution from Wilga represents 18% of the Total Ore Reserve.
3. The Ore Reserve was estimated using the NSR method. The NSR value represents unit revenue per tonne net of all off-site costs. These
off-site costs included road transport, sea transport, treatment charges, refining costs and state royalties. The NSR value did not include site
costs such as mining, geology, processing and site administration. These site costs were applied in the form of an NSR cut-off, used to guide
the limits of a practical and economic mining envelope. The Currawong NSR cut-off was $97/t and for Wilga it was $105/t.
4. Revenue factor inputs (US$): Cu $6,591/t, Zn $2,979/t, Ag $20.17/oz, Au $1,146/oz. Exchange rate A$1.00 : US$0.84.
5. Metallurgical recoveries – 81.5% Cu, 40.7% Ag, and 20.4% Au in Cu concentrate; 76.4% Zn and 18.5% Ag in Zn concentrate.
6. Long hole open stoping with cemented paste backfill is the primary method of mining proposed at Stockman.
7. Historic mining at Wilga has been removed from the Ore Reserve estimate.
8. The Ore Reserve estimate includes Inferred and unclassified material in the form of mining dilution estimated to be approximately 780,000t
at 0.31 Cu%, 1.0 Zn%, 5.2g/t Ag and 0.1g/t Au.
9.
JORC Code (2012) Table 1 Parameters are contained within IGO’s 2016 ASX Resources and Reserves Statement as released to the ASX which
can be found at www.igo.com.au
Annual Report 2016 27
JORC CODE (2012) COMPETENT PERSONS STATEMENTS
General
Nova Project Resources and Reserves
The information that relates to the Nova Project Mineral Resources is based on, and fairly represents information and supporting documentation compiled
by Mr Mark Drabble and Mr David Hammond. Mr Hammond is an employee of IGO and Mr Drabble is Principal Consultant-Geology of consultancy group
Optiro Pty Ltd. Both are members of The Australasian Institute of Mining and Metallurgy and both have sufficient experience relevant to the type and style
of mineral deposit under consideration, and to the activity which has been undertaken, to qualify as Competent Persons as defined in the 2012 edition of
the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code). Mr Drabble and Mr Hammond consent to
the inclusion in this report of the Nova Bollinger Mineral Resource estimate, based on their information in the form and context in which it appears.
The information that relates to the Nova Project Ore Reserves is based on, and fairly represents information and supporting documentation compiled by
Mr Brett Hartmann who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Hartmann is a full-time employee of IGO. Mr Hartmann
has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity which has been
undertaken, to qualify as a Competent Person as defined in the 2012 edition of the JORC Code. Mr Hartmann consented to the inclusion in this report of the
Nova Bollinger Ore Reserve estimate, based on his information, in the form and context in which it appears.
Tropicana Gold Mine Resources and Reserves
The information that relates to the Tropicana Mineral Resources is based on, and fairly represents information and supporting documentation compiled by
Mr Mark Kent, a full-time employee and security holder of AngloGold Ashanti Australia Limited, who is a member of The Australasian Institute of Mining and
Metallurgy. Mr Kent has sufficient experience relevant to the type and style of mineral deposits under consideration, and to the activity which has been
undertaken, to qualify as a Competent Person as defined in the 2012 edition of the JORC Code. Mr Kent consented to the inclusion in this report of the
Tropicana Mineral Resource estimate, based on the information in the form and context in which it appears.
The information that relates to the Tropicana Ore Reserves is based on, and fairly represents information and supporting documentation compiled by Mr
Jason Vos, a full-time employee and security holder of AngloGold Ashanti Australia Limited, who is a member of The Australasian Institute of Mining and
Metallurgy. Mr Vos has sufficient experience relevant to the type and style of mineral deposit under consideration, and to the activity which has been
undertaken, to qualify as a Competent Person as defined in the 2012 edition of the JORC Code. Mr Vos consented to the inclusion in this report of the
Tropicana Ore Reserve estimate, based on the information, in the form and context in which it appears.
Long Operation Resources and Reserves
The information in this report that relates to the Long Operation’s Mineral Resources is based on, and fairly represents information and supporting
documentation compiled by Ms Somealy Sheppard. The information in this report that relates to the Long Operation’s Ore Reserves is based on information
compiled by Mr Brett Hartmann. Ms Sheppard is a full-time employee of IGO and is a member of the Australian Institute of Geoscientists. Mr Hartmann
is a full-time employee of IGO and is a member of The Australasian Institute of Mining and Metallurgy. Ms Sheppard and Mr Hartmann have sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify
as Competent Persons as defined in the 2012 edition of the JORC Code. Ms Sheppard and Mr Hartmann consent to the inclusion in the report of the matters
based on their information in the form and context in which it appears.
Jaguar Operation Bentley / Teutonic Bore Resources and Reserves
The information in this report that relates to the Bentley Mineral Resources is based on, and fairly represents information and supporting documentation
compiled by Mr William Stewart. The information in this report that relates to the Teutonic Bore Mineral Resources is based on information compiled by Mr
Stewart. Mr Stewart is a full-time employee of IGO and member of The Australasian Institute of Mining and Metallurgy and member of Australian Institute of
Geoscientists. The information in this report that relates to the Bentley Ore Reserves is based on information compiled by Mr Shane McLeay who is a Fellow
of The Australasian Institute of Mining and Metallurgy. Mr McLeay is a full-time employee of Entech Pty Ltd. Mr Stewart and Mr McLeay have sufficient
experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaken to qualify as
Competent Persons as defined in the 2012 edition of the JORC Code. Mr Stewart and Mr McLeay consent to the inclusion in the report of the matters based
on their information in the form and context in which it appears.
Stockman Project Currawong and Wilga Resources and Reserves
The information in this report that relates to the Stockman Mineral Resources is based on, and fairly represents information and supporting documentation
compiled by Mr Matthew Dusci. Mr Dusci is a full-time employee of IGO and is a member of the Australian Institute of Geoscientists. Mr Dusci has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration, and the activity which he is undertaking, to qualify as a
Competent Person as defined in the 2012 edition of the JORC Code. Mr Dusci consents to the inclusion in the report of the matters based on his information
in the form and context in which it appears.
The information in this report that relates to the Stockman Ore Reserves is based on, and fairly represents information and supporting documentation
compiled by Mr Geoff Davidson who is a Fellow of The Australasian Institute of Mining and Metallurgy. Mr Davidson is a consultant working for Mining and
Cost Engineering Pty Ltd. Mr Davidson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration,
and the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 edition of the JORC Code. Mr Davidson consents to the
inclusion in the report of the matters based on his information in the form and context in which it appears.
Annual Report Mineral Resource and Ore Reserve Statement
The information in this report that relates to the Independence Group Annual Report Mineral Resources and Ore Reserves Statement as a whole is based
on information compiled by Mr. Dusci who is a member of Australian Institute of Geoscientists and is a full-time employee of IGO. The Annual Report Mineral
Resources and Ore Reserves Statement is based on, and fairly represents, information and supporting documentation prepared by the above-named
Competent Persons. The Annual Report Mineral Resources and Ore Reserves Statement has been issued with the prior written consent of Mr. Dusci, in the
form and context in which it appears in the Annual Report.
Mineral Resource and Ore Reserve Governance
In estimating Mineral Resources and Ore Reserves the Competent Person(s) for each estimate is (are) responsible for:
• Adopting annual Board approved metal prices and foreign exchange assumptions for use in estimates
• Monitoring the planning, progress, estimation and reporting of Mineral Resources and Ore Reserves to meet IGO standards and timelines
• JORC Code compliant reporting
• Periodic internal review of process, data, estimates and reports
• Periodic external review of data, Estimates and reports for new or materially changed estimates.
Independence Group NL reports its Mineral Resources and Ore Reserves on an annual basis, in accordance with the ‘Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code) 2012 Edition. Mineral Resources are quoted inclusive of Ore Reserves.
Competent Persons named by Independence Group NL are Members or Fellows of the AusIMM and/or the Australian Institute of Geoscientists, and qualify
as Competent Persons as defined in the JORC Code.
28 Independence Group NL
FINANCIAL REPORT 2016
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement Of Cash Flows
Consolidated Statement Of Changes In Equity
Notes To The Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Information For Listed Public Companies
30
60
61
62
63
64
68
119
120
122
Annual Report 2016 29
DIRECTORS’ REPORT
Directors' report
30 June 2016
Your Directors present
their report on the consolidated entity (referred to hereafter as the Group) consisting of
Independence Group NL (referred to hereafter as the Company) and the entities it controlled at the end of, or during, the
year ended 30 June 2016.
Directors
The following persons held office as Directors of Independence Group NL during the whole of the financial year and up
to the date of this report, unless otherwise noted:
Peter Bilbe
Peter Bradford
Peter Buck
Geoffrey Clifford
Keith Spence
Neil Warburton
Mark Bennett
Neil Warburton was appointed as a Non-executive Director on 12 October 2015 and continues in office at the date of
this report.
Mark Bennett was appointed as a Non-executive Director on 12 October 2015 and was in office until his resignation on
31 May 2016.
Principal activities
The principal activities of the Group during the financial year were non-operator gold mining from the Company’s 30%
interest in the Tropicana Gold Mine, nickel mining at the Long Operation, zinc and by-product mining at the Jaguar
Operations, development of the Nova Project and ongoing mineral exploration.
Dividends
Dividends paid to members during the financial year were as follows:
Final ordinary dividend for the year ended 30 June 2015 of 2.5 cents (2014: 5 cents)
per fully paid share
Interim ordinary dividend for the year ended 30 June 2016 of nil cents (2015: 6 cents)
per fully paid share
2016
$'000
2015
$'000
12,786
11,713
-
12,786
14,055
25,768
In addition to the above dividends, since the end of the financial year the Company has announced the payment of a
final ordinary dividend of $11,734,000 (2 cents per fully paid share, fully franked) to be paid on 23 September 2016.
Operating and financial review
Independence Group NL is a company listed on the Australian Securities Exchange (ASX:IGO). The Company has
been listed on the ASX since 17 January 2002, having traded as Independence Gold NL from 17 January 2002 to 19
December 2003.
Independence Group NL
1
30 Independence Group NL
Operating and financial review (continued)
Directors' report
30 June 2016
(continued)
The Group currently has operations in the production phase in Western Australia comprising:
•
The Tropicana Gold Mine (IGO: Non-operator joint venturer; 30% owned) is located 330km east northeast of
Kalgoorlie. The Operation comprises approximately 3,000km2 of tenements (excluding the Beachcomber and Salt
Creek joint venture tenure) stretching over more than 275km in strike length along the Yilgarn Craton and Fraser
Range Mobile Belt Collision Zone. The Company targeted and pegged the area containing the current Ore
Reserves in 2001. AngloGold Ashanti Australia Limited farmed into the project in 2002, discovering Tropicana,
Havana and the Boston Shaker gold deposits in 2005, 2006 and 2010 respectively. The gold deposits occur over a
5km strike length with gold mineralisation intersected to a depth of 1km vertically beneath the natural surface. The
decision by the Tropicana Joint Venture partners to develop the Tropicana Gold Mine was announced in November
2010 following a positive bankable feasibility study assessment. In early 2011, construction commenced with the
site access road, followed by key site infrastructure including an aerodrome, accommodation village, borefields and
processing plant. Mining of the Havana deposit commenced in 2012.
Commissioning of the processing plant occurred in 2013, with the first gold poured in September 2013. Nameplate
capacity of the processing plant, 5.8Mtpa, was achieved in March 2014, and the operation is currently targeting and
on track to expand the capacity to 7.5Mtpa in FY17.
The gas pipeline project, including the installation of the gas fired generators, is complete with the commissioning of
the 17 gas generating units.
Independence Group NL
2
Annual Report 2016 31
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
•
•
The Jaguar zinc, copper and silver mine and processing operations, located 60km north of Leonora in Western
Australia - 100% owned. The Jaguar Operation consists of the Bentley underground mine, the Jaguar processing
facility and administration infrastructure and the accommodation village. These assets are situated on tenure that
hosts a 50km long corridor of prospective stratigraphy.
The prospective corridor has hosted three economically viable volcanogenic massive sulphides (VMS) ore bodies.
The first deposit discovered was Teutonic Bore in 1976. The Jaguar deposit was discovered in 2002, approximately
4km south of Teutonic Bore and the most recent discovery, the Bentley deposit located another 4km south of
Jaguar, was discovered in 2008.
All ore is processed at the Jaguar concentrator, which produces both a copper concentrate and a zinc concentrate.
The copper concentrate also contains significant silver and gold credits. The concentrates are trucked to the port of
Geraldton for export.
The Long nickel mine located near Kambalda - 100% owned. The Company acquired the Long Operation in
Kambalda, Western Australia, from BHP Billiton Nickel West Pty Ltd (BHPB Nickel West) in September 2002. The
mine was successfully re-commissioned in October 2002 and has been operating successfully and safely since
then.
Since recommissioning, and through to 30 June 2016, the Long Operation has mined 3.2Mt ore for 124,600t of
contained nickel metal and has achieved exploration success with the discovery of the McLeay (2005) and Moran
(2008) ore bodies. At the time of purchasing the Long Operation, the Group entered into an offtake agreement with
BHPB Nickel West whereby the ore produced from the mine is delivered to the adjacent BHPB Nickel West
Kambalda Nickel Concentrator for toll
treatment and production of nickel concentrate. The current offtake
agreement with BHPB Nickel West expires in February 2019.
In September 2015, the Company restructured its mining activities at the Long Operation to ensure that the mine
remains profitable and sustainable at lower nickel prices. Future mining activities at the Long Operation are focused
on longhole stoping, supported by twin boom jumbo development. Other mining methods and activities, including
mechanised cut and fill and air-leg mining, were discontinued with effect from 9 September 2015.
The Group also has one operation in the construction phase in Western Australia as follows:
•
Nova Project - The Company completed the acquisition of Sirius Resources NL (Sirius) in September 2015. Sirius
was an ASX listed minerals exploration and development company with a key focus on the development of the
Nova Project, located east of Norseman in Western Australia.
On 25 May 2015, the Company and Sirius announced two separate but inter-conditional Schemes of Arrangement,
being the Acquisition Scheme of Arrangement (the Acquisition Scheme), whereby the Company would acquire all of
the shares in Sirius, and the Demerger Scheme of Arrangement (Demerger Scheme), under which Sirius would
create a new listed company, S2 Resources Limited. Following the approval of the Schemes on 12 September
2015, the scheme participants received 0.66 new shares in IGO and $0.52 cash per Sirius ordinary share.
The transaction was completed on 22 September 2015, resulting in cash consideration paid for the acquisition of
Sirius of $250.6 million plus the issue of 275,842,684 shares in the Company. Suspension of trading of Sirius was in
effect on close of business 10 September 2015. Implementation of the Schemes occurred on 22 September 2015
and integration of Sirius into the Group was completed during the December 2015 quarter. An Optimisation Study to
a bankable feasibility level, which demonstrated a significant enhancement of the project value, was also completed
in the December 2015 quarter.
Progress at Nova has continued according to plan during the period, reaching the 93.4% mark as at 30 June 2016
and remaining ahead of schedule and on budget relative to the Optimisation Study schedule. Total expenditure for
the period on the Nova Project was $240.4 million, with $179.5 million spent since the Company completed the
transaction.
The Nova Project comprises an underground mine to mine two orebodies, Nova and Bollinger, as well as a 1.5Mtpa
processing facility that will produce a nickel concentrate and a copper concentrate, and associated infrastructure.
Independence Group NL
3
32 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
•
In July 2016, the Company announced it was accelerating the development of the Bollinger orebody (Bollinger).
This work would enable earlier access to Bollinger which is expected to deliver enhanced early cash flow and
additional project value while staying within the original $443 million capital cost estimate announced in the
Optimisation Study schedule.
Total mine development of 5.53km had been completed and the first ore from development activities was mined
and hauled to the surface by the end of the period. The current schedule indicates concentrate will be produced and
ready for shipment, as planned, during December 2016.
The Company has actively focused on organic growth during FY16 through dedicated exploration programs for base
and precious metals. An outline of the key work activities during this period include:
Brownfields Exploration
•
•
•
•
Tropicana Gold Mine - An extensive resource extension drilling program, which was initiated at Tropicana during
2015 to provide a framework for the understanding of the Tropicana Mineralised Complex, was completed in the
June 2016 quarter. The drilling forms part of the ongoing mining studies internally referred to as the Long Island
Study. A total of 106,750m of drilling has been completed since June 2015 to the end of the period. The drilling has
focused on the resource extension to the Boston Shaker, Tropicana, Havana and Havana South mineralised zones
at depth. The drilling has returned encouraging results which continue to highlight the potential of the Tropicana
mineralised system. A mineral resource update is scheduled for the September 2016 quarter.
Jaguar Operation - Exploration activities during FY16 focused on in-mine diamond drilling programs designed to
upgrade the Mineral Resource confidence on the Flying Spur lens along with testing resource extensions on the
Arnage lens. Regional exploration was focused on the Triumph Prospect, located approximately 5km north of the
Jaguar processing plant. Drilling at Triumph has identified mineralisation over a strike length of 400m.
Nova Project - The focus on the Nova Project has been on the commencement of grade-control drilling from
underground drill platforms as part of the development of the project to production of first concentrate scheduled for
December 2016. Exploration focused on resource extensions and discovery of additional orebodies will be a key
include utilisation of the underground drilling platforms to test for
focus for work streams in FY17. This will
mineralised positions beneath the Nova and Bollinger orebodies.
Long Operation - Exploration activities at Long were suspended in early calendar year 2016 due to low nickel
prices. Renewed exploration activities are planned to re-commence in FY17.
Greenfields Exploration
• Greenfields exploration during FY16 has focused on in-ground expenditure on three projects that deliver belt-scale
opportunities, being Fraser Range/Tropicana Belt, Lake Mackay and Bryah Basin projects.
This review should be read in conjunction with the financial statements and the accompanying notes.
The objective and strategy of the Group is to create long-term shareholder value through the discovery, development
and acquisition of low cost and high grade gold and base metals projects. Since incorporation in 2002, and including the
current financial year, the Company has returned to shareholders in excess of $146.6 million by way of a combination of
$136.9 million fully franked dividends and a $9.7 million share buy back in 2009. The Company currently has
586,698,580 shares outstanding.
The Group’s future prospects are dependent on a number of external factors that are summarised towards the end of
this report.
At the end of the financial year, the Group had cash and cash equivalents of $46.3 million and marketable securities of
$5.0 million (2015: $121.3 million and $15.6 million respectively).
Cash flows from operating activities for the Group were $95.2 million, despite the drop in base metals prices during the
year. This was a result of strong gold sales from the Tropicana Gold Mine, combined with sound operating cash flows
from the Jaguar Operation and the Long Operation. Payments for exploration expenditure fell by 22% to $20.0 million.
Included in operating activities were cash outflows of $6.9 million in relation to the Syndicated Facility Agreement (refer
Facility Agreement below) and $12.4 million in acquisition and other integration costs.
Independence Group NL
4
Annual Report 2016 33
DIRECTORS’ REPORT Operating and financial review (continued)
Operating and financial review (continued)
Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Cash outflows from investing activities increased during the year to $423.5 million, primarily due to the cash payment for
the acquisition of Sirius ($202.1 million, net of cash acquired) and payments towards the construction of the Nova
Project ($179.5 million). Other movements comprised $10.6 million for capitalised exploration expenditure and $10.7
million associated with acquisition of property, plant and equipment, primarily driven by Tropicana improvement work
aimed at delivering higher plant throughput. The Group also realised $16.0 million from the sale of its investment in Gold
Road Resources Ltd.
On 16 July 2015, the Company entered into a new Syndicated Facility Agreement (Facility Agreement) with National
Australia Bank Limited, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia
Limited for a $550 million committed term finance facility on an unsecured basis. The Facility Agreement comprises a
five year $350 million amortising term loan facility that was used to refinance Sirius' existing Nova Project finance
facility, and provide funds for the continued development, construction and operation of the Nova Project; and a five
year $200 million revolving loan facility that was used to partially fund the payment of the cash component of the
Acquisition Scheme and transaction costs, in addition to providing funding for general corporate purposes.
Cash flows from financing activities during the financial year predominantly comprised drawdowns from the debt facility,
which totalled $271.0 million for the period. In addition, the Group paid $12.8 million in dividends during the year. Total
cash flows relating to capitalised transaction costs associated with the Facility Agreement were $5.3 million. These
costs are incremental costs that are directly attributable to the Facility Agreement and include loan origination fees, legal
fees and other costs relating to the establishment of the loan.
During discussions of the operating results of its business, the Group’s Board and management monitor a measure
known as Underlying EBITDA. The Board considers this measure to be important to the Group and investors alike, as it
represents a useful proxy to measuring an operation’s cash generating capabilities. Underlying EBITDA is calculated as
profit after tax adjusted for income tax expense, finance costs, interest income, asset impairments, depreciation and
amortisation. Underlying EBITDA decreased relative to the previous financial year as can be seen in the following chart:
Below is a reconciliation of Underlying EBITDA to NPAT for FY16:
Net profit/(loss) after tax (NPAT) for the year was a loss of $58.8 million compared to a profit of $76.8 million in the
previous financial year. The current year loss includes $65.1 million of acquisition and related integration costs relating
to the acquisition of Sirius, $35.5 million of impairments of capitalised exploration costs (primarily Stockman Project) and
$19.7 million of exploration expenditure. The chart below outlines the key drivers of the results for FY16 compared to
the prior corresponding year.
Depreciation and amortisation expense (D&A) of $99.7 million was in line with the previous financial year (2015: $98.6
million) and includes $50.3 million relating to Tropicana, $25.7 million to Jaguar Operation, $22.5 million to Long
Operation and the balance to corporate assets.
Operations
Tropicana Gold Mine
The table below outlines the key results and operational statistics during the current and prior year.
Independence Group NL
5
Independence Group NL
6
34 Independence Group NL
DIRECTORS’ REPORT Operating and financial review (continued)
Directors' report
30 June 2016
(continued)
Below is a reconciliation of Underlying EBITDA to NPAT for FY16:
Depreciation and amortisation expense (D&A) of $99.7 million was in line with the previous financial year (2015: $98.6
million) and includes $50.3 million relating to Tropicana, $25.7 million to Jaguar Operation, $22.5 million to Long
Operation and the balance to corporate assets.
Operations
Tropicana Gold Mine
The table below outlines the key results and operational statistics during the current and prior year.
Independence Group NL
6
Annual Report 2016 35
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
Operations (continued)
Tropicana Gold Mine (continued)
Tropicana Gold Mine
Total revenue
Segment operating profit before tax
Total segment assets
Total segment liabilities
Gold ore mined (>0.6g/t Au)
Gold ore mined (>0.4 and 0.6g/t Au)
Waste mined
Gold grade mined (>0.6g/t)
Ore milled
Gold grade milled
Metallurgical recovery
Gold recovered
Gold produced
Gold refined and sold (IGO share)
Cash Costs
All-in Sustaining Costs (AISC)**
$'000
$'000
$'000
$'000
'000 dmt
'000 dmt
'000 dmt
g/t
'000 dmt
g/t
%
ounces
ounces
ounces
$ per ounce produced
$ per ounce sold
2016
214,998
64,330
840,174
36,813
7,289
1,210
50,350
2.13
6,528
2.39
89.3
448,546
448,116
135,864
730
918
2015
218,966
76,117
645,071
31,748
10,763
1,601
42,761
2.06
5,826
2.98
90.2
492,780
496,413
150,836
568
795
** All-in Sustaining Costs is a measure derived by the World Gold Council. On 27 June 2013, the Council released a publication
outlining definitions of both Cash Costs and All-in Sustaining Costs.
Tropicana revenue for the period was $215.0 million, which was slightly lower than the previous year as a result of the
cessation of grade streaming in December 2015. The average AUD gold price achieved increased by $111 per ounce or
8% compared to the previous period whilst gold sold to the Company's account decreased by 14,972 ounces or 10%.
Cash costs per ounce produced, which comprises the costs of producing gold at the mine site and includes credit
adjustments for waste stripping costs and inventory build and draw costs, were $730 or 29% higher than the previous
period. All-in Sustaining Costs (AISC) per ounce sold were $918 or 15% higher. AISC comprises of cash costs and
capitalised sustaining deferred waste stripping costs, sustaining exploration costs, sustaining capital and non-cash
rehabilitation accretion costs. AISC excludes improvement capital expenditure and other sustaining or expansion
exploration expenditure.
During the period, optimisation and upgrades have steadily increased processing plant
throughput continued to trend higher with an annualised rate of 6.9Mtpa being achieved in the June 2016 quarter.
throughput. Annualised
Total Tropicana segment assets increased by 30% due to ongoing contributions by the Company to the operation by
way of cash calls paid to the joint venture manager ($148.8 million for the year). During the year, a total of 7.3Mt of full
grade ore (>0.6g/t), 1.2Mt of marginal ore (grading between 0.4 & 0.6g/t Au) and 50.3Mt of waste material was mined,
with the average run-of-mine grade for full grade ore (>0.6g/t Au) being 2.13g/t Au for the year. At year end, the
capitalised run of mine stockpile comprised ore > 0.6g/t and totalled 9.0Mt grading an average of 0.96g/t (2015: 8.9Mt at
1.09g/t).
Based on current ore reserves, the mine currently has a life of approximately 7.5 years.
Long Operation
Independence Long Pty Ltd has entered into a long term ore tolling agreement with BHPB Nickel West whereby the
Group is paid for the nickel metal contained in the ore mined, less applicable ore toll charges and payability discounts.
Revenue from nickel sales is priced on a quotational period of three months after the month of production. 70% of the
sales receipt is provisionally paid based on the average London Metals Exchange (LME) price for the month of delivery;
a balancing adjustment is paid in the fourth month after delivery based on the average LME price of the third month
after delivery. The mine produced 8,493t of contained nickel during the year at payable cash costs including royalties
(net of copper credits) of $3.67/lb (2015: $4.01/lb).
Independence Group NL
7
36 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
Operations (continued)
Long Operation (continued)
The Long Operation constitutes an operating segment as disclosed in the Financial Report. During the year a total of
215,337t of ore was mined, sourced from Moran (93%), Long Lower (3%), McLeay (2%) and Victor South (2%). The
majority of ore continued to be mined from long hole stoping (91%) with lesser amounts coming from other mechanised
mining methods and non-mechanised methods.
Total segment revenue decreased by 43% during 2016, driven predominantly by a 34% lower realised AUD nickel price
together with 16% lower payable nickel tonnes sold. In addition, the restructure that was implemented in September
2015 resulted in the discontinuation of a number of mining methods at the Long Operation, resulting in lower, though
more profitable, sales volumes.
Based on current ore reserves, the mine currently has a life of approximately 1.5 years.
The table below highlights the key results and operational statistics during the current and prior year.
Long Operation
Total revenue
Segment operating (loss) profit before tax
Total segment assets
Total segment liabilities
Ore mined
Nickel grade
Copper grade
Tonnes milled
Nickel delivered
Copper delivered
Metal payable (IGO share)
- Nickel
- Copper
Ni cash costs and royalties
* Cash costs include credits for copper
Jaguar Operation
$'000
$'000
$'000
$'000
tonnes
head %
head %
tonnes
tonnes
tonnes
tonnes
tonnes
A$ per pound of payable metal
2016
63,926
(3,532)
65,738
35,200
215,337
3.94
0.28
215,337
8,493
610
5,125
247
3.67
2015
111,423
32,110
92,546
36,180
258,634
3.94
0.28
258,634
10,198
723
6,151
293
4.01
The Jaguar Operation was acquired by the Company in 2011 through the acquisition of Jabiru Metals Limited. The
Operation is located 60km north of Leonora and 300km north of Kalgoorlie. All ore is currently mined from the Bentley
underground mine, located 6km south of the Jaguar processing facility, which is used to beneficiate the ore mined to
produce zinc and copper concentrates. These concentrates are trucked to the Geraldton port for shipping to customers
primarily in Asia. The copper concentrate contains significant levels of silver and gold as by-products, which attract
precious metal credits that contribute significantly to the Group’s cash flows and revenue. The zinc concentrate has
minor amounts of silver in its concentrate.
In addition, both near mine and greenfields exploration targets continue to be investigated for potential to add mine life
to the operation. Two potential areas are projects known as the ‘Bentley deeps', beneath the existing Bentley
underground mine, and Triumph, located 6km north of the Jaguar processing facility. Both projects continued to be
targeted in the 2016 financial year for drilling, once completed they will be further evaluated.
The performance of the Bentley underground mine outperformed the previous year; ore mined increased by 3% and ore
milled increased by 4%. Copper grades were constant at 1.8% while zinc grades mined fell 1.6% to 8.9%. This variation
in run of mine grades is due to the variable nature of the geology and the stopes scheduled for mining. Both reserves
and resources are reconciling well.
Copper and zinc concentrate sales are paid on a quotational period that varies between one and four months, with
generally 90% of the sales receipt payable by the customer shortly after shipment. The one month or four month
average LME copper and zinc price ultimately determines the final price paid by the customer.
Independence Group NL
8
Annual Report 2016 37
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
Operations (continued)
Jaguar Operation (continued)
Based on current ore reserves, the Bentley underground mine is currently anticipated to have a life of approximately 3.5
years.
The table below outlines the key results and operational statistics during the current and prior year.
Directors' report
30 June 2016
(continued)
$'000
$'000
$'000
$'000
tonnes
%
%
g/t
g/t
tonnes
tonnes
tonnes
ounces
ounces
Operating and financial review (continued)
Cash outflows from investing activities increased during the year to $423.5 million, primarily due to the cash payment for
the acquisition of Sirius ($202.1 million, net of cash acquired) and payments towards the construction of the Nova
Project ($179.5 million). Other movements comprised $10.6 million for capitalised exploration expenditure and $10.7
million associated with acquisition of property, plant and equipment, primarily driven by Tropicana improvement work
aimed at delivering higher plant throughput. The Group also realised $16.0 million from the sale of its investment in Gold
Road Resources Ltd.
On 16 July 2015, the Company entered into a new Syndicated Facility Agreement (Facility Agreement) with National
Australia Bank Limited, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia
Limited for a $550 million committed term finance facility on an unsecured basis. The Facility Agreement comprises a
five year $350 million amortising term loan facility that was used to refinance Sirius' existing Nova Project finance
facility, and provide funds for the continued development, construction and operation of the Nova Project; and a five
year $200 million revolving loan facility that was used to partially fund the payment of the cash component of the
Acquisition Scheme and transaction costs, in addition to providing funding for general corporate purposes.
Cash flows from financing activities during the financial year predominantly comprised drawdowns from the debt facility,
which totalled $271.0 million for the period. In addition, the Group paid $12.8 million in dividends during the year. Total
cash flows relating to capitalised transaction costs associated with the Facility Agreement were $5.3 million. These
costs are incremental costs that are directly attributable to the Facility Agreement and include loan origination fees, legal
fees and other costs relating to the establishment of the loan.
During discussions of the operating results of its business, the Group’s Board and management monitor a measure
known as Underlying EBITDA. The Board considers this measure to be important to the Group and investors alike, as it
represents a useful proxy to measuring an operation’s cash generating capabilities. Underlying EBITDA is calculated as
profit after tax adjusted for income tax expense, finance costs, interest income, asset impairments, depreciation and
amortisation. Underlying EBITDA decreased relative to the previous financial year as can be seen in the following chart:
Jaguar Operation
Total revenue
Segment operating profit before tax
Total segment assets
Total segment liabilities
Ore mined
Copper grade
Zinc grade
Silver grade
Gold grade
Ore milled
Metal in concentrate
- Copper
- Zinc
- Silver
- Gold
Metal payable (IGO share)
- Copper
- Zinc
- Silver
- Gold
Zinc cash costs and royalties*
tonnes
tonnes
ounces
ounces
A$/lb total Zn metal produced
2016
132,987
17,317
145,892
22,816
497,751
1.7
8.9
128
0.75
505,578
7,412
39,335
1,603,565
4,880
7,122
32,634
1,071,989
4,543
0.53
2015
164,016
47,585
134,569
24,374
485,302
1.8
10.6
156
0.7
488,466
7,380
44,999
1,876,384
4,439
7,090
37,551
1,293,858
4,110
0.43
*Cash costs include credits for copper, silver and gold
The Jaguar Operation also constitutes an operating segment. Segment revenue decreased by 19% during FY16, with
the main drivers of this result being a decrease in zinc revenue of 27% and copper revenue of 20%. This was due to a
combination of 13% lower payable zinc sold and 9% lower realised prices. Copper revenue decreased due to 18%
lower realised prices.
External factors affecting the Group's results
Net profit/(loss) after tax (NPAT) for the year was a loss of $58.8 million compared to a profit of $76.8 million in the
previous financial year. The current year loss includes $65.1 million of acquisition and related integration costs relating
to the acquisition of Sirius, $35.5 million of impairments of capitalised exploration costs (primarily Stockman Project) and
$19.7 million of exploration expenditure. The chart below outlines the key drivers of the results for FY16 compared to
the prior corresponding year.
The Group operates in an uncertain economic environment and its performance is dependent upon the result of inexact
and incomplete information. As a consequence, the Group’s Board and management monitor these uncertainties and
mitigate the associated risk of adverse outcomes where possible. The following external factors are all capable of
having a material adverse effect on the business and will affect the prospects of the Group for future financial years.
Commodity prices
Independence Group NL
5
The Group’s operating revenues are sourced from the sale of base metals and precious metals that are priced by the
LME. The Group is not a price maker with respect to the metals it sells and it is, and will remain, susceptible to adverse
price movements. The Company took advantage of strong gold price appreciation and hedged additional gold
production during and after the year-end to further de-risk future cash flow during the expected term of the repayment of
the debt used primarily for construction of the Nova Project. Hedging in FY17, FY18 and FY19 represents approximately
70%, 50% and 40% respectively of the Company's share of forecast annual gold production. The average realised gold
price achieved in FY16 was A$1,576/oz.
During the period, the Company initiated diesel hedging in order to benefit from historically low oil prices. As at
year-end, the Company had hedged 25% of expected diesel usage for the next two years.
Independence Group NL
9
38 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
External factors affecting the Group's results (continued)
Exchange rates
The Group is exposed to exchange rate risk on sales denominated in United States dollars (USD) whilst its Australian
dollar (AUD) functional currency is the currency of payment to the majority of its suppliers and employees. The monthly
average AUD/USD currency pair weakened from 0.8188 for the 2015 financial year to 0.7272 for the year ended 30
June 2016. A weaker AUD implies a higher AUD receipt of sales denominated in USD. The Group’s policy is to mitigate
adverse foreign exchange risk by transacting commodity hedges in AUD equivalent terms where possible.
Downstream processing markets
The price of sea freight, smelting and refining charges are market driven and vary throughout the year. These also
impact on the Group’s overall profitability.
Interest rates
Interest rate movements affect both returns on funds on deposit as well as the cost of borrowings. Furthermore, AUD
and USD interest rate differentials are intimately related to movements in the AUD/USD exchange rate.
Native Title
With regard to tenements in which the Group has an existing interest in, or will acquire an interest in the future, it is the
case that there are areas over which common law Native Title rights exist, or may be found to exist, which may preclude
or delay exploration, development or production activities. Specifically, at our Long Operation, a Federal Court ruling by
a single Judge, which determined that certain tenements are invalid insofar as they are inconsistent with the exercise of
the Native Title rights of the Aboriginal Native Title holders, was overturned on appeal by the Full Bench of the Federal
Court. An application for Special Leave to appeal to the High Court has been lodged by the Native Title holders however
no date has yet been set for the hearing. The Company will continue to monitor the matter, in conjunction with other
affected parties.
Exposure to economic, environmental and social sustainability risks
The Company has material exposure to economic, environmental and social sustainability risks, including exposure to
base metal and foreign exchange market fluctuations and changes in environmental regulatory legislation.
The Company employs suitably qualified personnel to assist with the management of its exposure to environmental and
social sustainability risks, including appropriate health and safety personnel, as well as heritage and environmental
experts. These risks are discussed in more detail in the Company's Sustainability Report which can be found on the
Company's website.
Other external factors and risks
• Operational performance including uncertain mine grades, seismicity ground support conditions, grade control, in fill
resource drilling, mill performance and experience of the workforce;
•
•
Contained metal (tonnes and grades) are estimated annually and published in resource and reserve
statements, however actual production in terms of tonnes and grade often vary as the ore body can be
complex and inconsistent.
Active underground mining operations can be subjected to varying degrees of seismicity. This natural
occurrence can represent significant safety, operational and financial risk. To mitigate this risk substantial
amounts of resources and technology are used in an attempt to predict and control seismicity.
•
Exploration success or otherwise;
•
Due to the nature of an ever depleting reserve/resource base, the ability to continually find or replace
reserves/resources presents a significant operational risk. Drill sites need to be continually mined (for
underground drilling) to enable effective exploration drilling.
• Operating costs including labour markets and productivity;
•
Labour is one of the main cost drivers in the business and as such can materially impact the profitability of
an operation.
Changes in market supply and demand of products;
•
Any change in the supply or demand impacts on the ability to generate revenues and hence the profitability
of an operation.
Changes in government taxation legislation;
•
•
Independence Group NL
10
Annual Report 2016 39
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Operating and financial review (continued)
External factors affecting the Group's results (continued)
Other external factors and risks (continued)
•
•
•
Changes in health, safety and environmental regulations;
Environmental issues and social expectations; and
Assumption of estimates that impact on reported asset and liability values.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the financial year were as follows:
The Company completed the acquisition of Sirius Resources NL (Sirius) in September 2015. Sirius was an ASX listed
minerals exploration and development company with a key focus on the development of the Nova Project, located east
of Norseman in Western Australia.
On 25 May 2015, the Company and Sirius announced two separate but inter-conditional Schemes of Arrangement,
being the Acquisition Scheme of Arrangement (the Acquisition Scheme), whereby the Company would acquire all of the
shares in Sirius, and the Demerger Scheme of Arrangement (Demerger Scheme), under which Sirius would create a
new listed company, S2 Resources Limited. Following the approval of the Schemes on 12 September 2015, the scheme
participants received 0.66 new shares in IGO and $0.52 cash per Sirius ordinary share.
The transaction was completed on 22 September 2015, resulting in cash consideration paid for the acquisition of Sirius
of $250.6 million plus the issue of 275,842,684 shares in the Company. Suspension of trading of Sirius was in effect on
close of business 10 September 2015. Implementation of the Schemes occurred on 22 September 2015 and integration
of Sirius into the Group was completed during the December 2015 quarter. During this quarter, the Company also
completed an Optimisation Study to bankable feasibility level which demonstrated a significant enhancement of the
project value.
In July 2015, the Company entered into a Syndicated Facility Agreement (Facility Agreement) with National Australia
Bank Limited, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia Limited for a
$550 million unsecured committed term finance facility. The Facility Agreement comprises:
•
•
A five year $350 million amortising term loan facility that was used to refinance the existing Nova Project finance
facility, and provide funds for the continued development, construction and operation of the Nova Project; and
A five year $200 million revolving loan facility that was used to partially fund the payment of the cash component of
the Acquisition Scheme for Sirius (as discussed above) and transaction costs, in addition to providing funding for
general corporate purposes.
There have been no other significant changes in the state of affairs of the Group during the year.
Events since the end of the financial year
On 31 August 2016, the Company announced that a final dividend for the year ended 30 June 2016 would be paid on
23 September 2016. The dividend is 2 cents per share and will be fully franked.
On 27 July 2016, the Company announced it was conducting a fully underwritten institutional placement (Placement) to
raise approximately $250.0 million. The Placement comprised an issue of 66,666,667 new shares in the Company and
was underwritten at a price of $3.75 per share (Placement Price).
The Company also conducted a non-underwritten Share Purchase Plan (SPP)
to facilitate retail shareholder
participation of up to $15,000 per eligible shareholder at the Placement Price, subject to an overall cap of $30 million (or
approximately 8 million shares)
(the Placement and SPP together being the Equity Raising). The SPP was
oversubscribed, however in recognition of the strong interest in the SPP by eligible retail shareholders, the Company's
Board resolved to accept all valid applications without any scale back. The SPP resulted in the issue of an additional
8,388,689 ordinary shares and raised $31.5 million.
The Company undertook the Equity Raising to strengthen its balance sheet and to provide greater financial flexibility to
fund growth initiatives. Specifically,
the Equity Raising provided funding for the remaining development capital
expenditure for the Nova Project, reducing the requirement for further drawdown under the Company's existing debt
facilities. The Equity Raising will also provide additional funds for the payment of residual acquisition costs (stamp duty),
funding for debt repayment and general corporate purposes including working capital.
Events since the end of the financial year (continued)
Other than the above, there has been no other transaction or event of a material and unusual nature likely, in the
opinion of the Directors, to significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
Environmental regulation
The Group’s operations are subject to significant environmental regulation under the laws of the Commonwealth and
various States of Australia. During the year there were no non-compliance incidents.
The Group is subject to the reporting obligations of the National Greenhouse and Energy Reporting Act 2007, under
which the Group reports its greenhouse emissions, energy consumption and production. Systems have been put in
place to comply with these reporting requirements. The Directors have considered compliance with the National
Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and
energy use.
Information on directors
The Environmental Policy is available in the Sustainability section of the Company’s website.
Peter Bilbe - Chairman and Independent Non-executive Director
Qualifications
BEng (Mining) (Hons), MAusIMM
Tenure
Board member since March 2009 and Chairman since July 2011.
Special responsibilities
Mr Bilbe is Chair of the Nomination Committee and a member of the Remuneration
Committee, Audit Committee and Sustainability & Risk Committee.
Other directorships
Mr Bilbe is currently a director of Intermin Resources Limited. He was also previously a
director of Northern Iron Limited and Sihayo Gold Limited.
Peter Bradford - Managing Director and Chief Executive Officer
Qualifications
BAppSc (Extractive Metallurgy), FAusIMM, MSMME
Tenure
Managing Director and Board member since March 2014.
Special responsibilities
Mr Bradford is the executive in charge of the day to day management of the Group’s
activities, including operations, risk management and corporate development. He is also a
member of the Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Bradford was previously a director of PMI Gold Corporation and Asanko Gold Inc.
Peter Buck - Independent Non-executive Director
Qualifications
M.Sc. (Geology), M.AusIMM
Tenure
Board member since October 2014.
Special responsibilities
Mr Buck is Chair of the Remuneration Committee and a member of the Audit Committee,
Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Buck is currently a non-executive director of Antipa Minerals Ltd.
Geoffrey Clifford - Independent Non-executive Director
Qualifications
BBus, FCPA, FGIA, FAICD
Tenure
Board member since 2012.
Special responsibilities
Mr Clifford is Chair of the Audit Committee and a member of the Remuneration Committee,
Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Clifford is currently non-executive chairman of Saracen Mineral Holdings Limited.
Independence Group NL
11
Independence Group NL
12
40 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Events since the end of the financial year (continued)
Other than the above, there has been no other transaction or event of a material and unusual nature likely, in the
opinion of the Directors, to significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
Environmental regulation
The Group’s operations are subject to significant environmental regulation under the laws of the Commonwealth and
various States of Australia. During the year there were no non-compliance incidents.
The Group is subject to the reporting obligations of the National Greenhouse and Energy Reporting Act 2007, under
which the Group reports its greenhouse emissions, energy consumption and production. Systems have been put in
place to comply with these reporting requirements. The Directors have considered compliance with the National
Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and
energy use.
The Environmental Policy is available in the Sustainability section of the Company’s website.
Information on directors
Peter Bilbe - Chairman and Independent Non-executive Director
Qualifications
BEng (Mining) (Hons), MAusIMM
Tenure
Board member since March 2009 and Chairman since July 2011.
Special responsibilities
Mr Bilbe is Chair of the Nomination Committee and a member of the Remuneration
Committee, Audit Committee and Sustainability & Risk Committee.
Other directorships
Mr Bilbe is currently a director of Intermin Resources Limited. He was also previously a
director of Northern Iron Limited and Sihayo Gold Limited.
Peter Bradford - Managing Director and Chief Executive Officer
Qualifications
BAppSc (Extractive Metallurgy), FAusIMM, MSMME
Tenure
Managing Director and Board member since March 2014.
Special responsibilities
Mr Bradford is the executive in charge of the day to day management of the Group’s
activities, including operations, risk management and corporate development. He is also a
member of the Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Bradford was previously a director of PMI Gold Corporation and Asanko Gold Inc.
Peter Buck - Independent Non-executive Director
Qualifications
M.Sc. (Geology), M.AusIMM
Tenure
Board member since October 2014.
Special responsibilities
Mr Buck is Chair of the Remuneration Committee and a member of the Audit Committee,
Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Buck is currently a non-executive director of Antipa Minerals Ltd.
Geoffrey Clifford - Independent Non-executive Director
Qualifications
BBus, FCPA, FGIA, FAICD
Tenure
Board member since 2012.
Special responsibilities
Mr Clifford is Chair of the Audit Committee and a member of the Remuneration Committee,
Nomination Committee and Sustainability & Risk Committee.
Other directorships
Mr Clifford is currently non-executive chairman of Saracen Mineral Holdings Limited.
Independence Group NL
12
Annual Report 2016 41
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Information on directors (continued)
Keith Spence - Independent Non-executive Director
Qualifications
BSc (Geophysics) (Hons)
Tenure
Board member since December 2014.
Special responsibilities
Mr Spence is Chair of the Sustainability & Risk Committee and a member of the
Remuneration Committee, Audit Committee and Nomination Committee.
Other directorships
Mr Spence is currently the non-executive Chairman of Geodynamics Limited and Base
Resources Limited and a non-executive director of Oil Search Limited and Murray &
Roberts Holdings Limited. Mr Spence was also previously a director of Clough Limited.
Neil Warburton - Non-executive Director from 12 October 2015
Qualifications
Assoc. MinEng WASM, MAusIMM, FAICD
Tenure
Board member since his appointment on 12 October 2015.
Special responsibilities
Mr Warburton is a member of the Remuneration Committee, Audit Committee, Nomination
Committee and Sustainability & Risk Committee.
Other directorships
Mr Warburton is currently a non-executive director of Australian Mines Limited and
Namibian Copper Limited. He was previously a non-executive director of Sirius Resources
NL and Peninsular Energy Limited and non-executive chairman of Red Mountain Mining
Ltd.
Company secretary
Ms Joanne McDonald was appointed to the position of Company Secretary on 5 October 2015. Ms McDonald is a
qualified Chartered Secretary with over 12 years' experience working for listed companies in Australia and the UK. Ms
McDonald was previously Assistant Company Secretary with Paladin Energy Ltd and, during her eight years at Paladin,
she also held the role of Company Secretary of Summit Resources Ltd. Ms McDonald is a Fellow of the Governance
Institute Australia.
Mr Tony Walsh was Company Secretary until his resignation on 9 October 2015. Mr Walsh, who was also employed as
the Company’s General Manager, Corporate, had over 25 years’ experience in dealing with listed companies, ASX,
ASIC and corporate transactions. Mr Walsh was a member of the West Australian State Council of the Governance
Institute Australia and also a Fellow of the Governance Institute Australia and the Institute of Chartered Accountants in
Australia.
Meetings of directors
The numbers of meetings of the Company's board of Directors and of each Board Committee held during the year
ended 30 June 2016, and the numbers of meetings attended by each Director were:
Meetings of committees
Full meetings of
directors
B
A
12
12
12
12
12
12
12
12
12
12
8
8
7
5
Remuneration
Committee
B
A
5
5
**
**
5
5
5
5
5
5
2
2
1
1
Audit Committee
A
6
**
6
6
6
2
1
B
6
**
6
6
6
2
2
Nomination
Committee
B
A
3
3
3
3
3
3
3
3
3
3
1
1
-
-
Peter Bilbe
Peter Bradford
Peter Buck
Geoffrey Clifford
Keith Spence
Neil Warburton1
Mark Bennett2
Sustainability
and Risk
Committee
B
5
5
5
5
5
1
1
A
5
5
5
5
5
1
-
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
** = Not a member of the relevant committee
1. Appointed a Non-executive director on 12 October 2015
Independence Group NL
13
42 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors interests in shares and share rights of the Company
At the date of this report, the interests of the Directors in the shares and share rights of Independence Group NL were
as follows:
Ordinary fully paid shares
Share rights
Peter Bilbe
Peter Bradford
Peter Buck
Geoffrey Clifford
Keith Spence
Neil Warburton
Total
24,000
599,680
8,700
-
-
106,034
738,414
-
392,756
-
-
-
-
392,756
Independence Group NL
14
Annual Report 2016 43
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report
The Remuneration Report
arrangements of the Company in accordance with the requirements of the Corporations Act 2001 and its regulations.
for the year ended 30 June 2016 outlines the Director and executive remuneration
For the purposes of this report, Key Management Personnel (KMP) of the Group are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly,
including any Director, whether executive or otherwise of the Company. For the purposes of this report the term
“Executive” includes the Managing Director, Chief Operating Officer, Chief Financial Officer, Chief Growth Officer,
Sustainability Manager, Organisational Capability Manager and Company Secretary.
Details of KMP covered in this report
Non-executive and executive Directors (see pages 41 to 42 for details about each Director)
Peter Bilbe
Peter Bradford
Peter Buck
Geoffrey Clifford
Keith Spence
Neil Warburton (from 12 October 2015)
Mark Bennett (from 12 October 2015 until 31 May
2016)
Chairman
Managing Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Other key management personnel
Name
Keith Ashby
Rob Dennis (from 1 March 2016)
Matt Dusci
Joanne McDonald (from 5 October 2015)
Sam Retallack
Scott Steinkrug
Brett Hartmann (until 29 February 2016)
Tony Walsh (until 9 October 2015)
Position
Sustainability Manager
Chief Operating Officer
Chief Growth Officer
Company Secretary
Organisational Capability Manager
Chief Financial Officer
General Manager, Operations
Company Secretary and General Manager, Corporate
1. Prior to being appointed Chief Operating Officer, Mr Dennis held the role of General Manager, Project Development (from 22
September 2015) and prior to that Chief Operating Officer of Sirius Resources NL.
2. Mr Hartmann now holds the role of General Manager, Nova.
Remuneration Committee
The Company’s Remuneration Committee (Committee) is made up entirely of non-executive directors, the majority of
whom are independent. The Committee is charged with assisting the Board by reviewing and making appropriate
recommendations on the following:
•
•
•
•
•
the Company’s remuneration policy and structure annually, to ensure it remains aligned to business needs and
meets the Company’s remuneration principles (including determining total fixed remuneration (TFR), short-term
incentive (STI) key performance indicators and long-term incentive (LTI) performance hurdles, and vesting of
STIs/LTIs);
an executive remuneration policy for KMP (including reviewing and monitoring the ongoing appropriateness and
relevance of the policy);
equity based remuneration plans for KMP and other employees;
superannuation arrangements; and
remuneration by gender.
The Committee, chaired by Peter Buck, held five meetings during the year. Messrs Bilbe, Clifford, Spence and
Warburton are also Committee members. The Managing Director is invited to attend those meetings which consider the
remuneration strategy of the Group and recommendations in relation to Executives.
Further information on the Committee’s role, responsibilities and membership can be found at www.igo.com.au.
Independence Group NL
15
44 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Remuneration Committee (continued)
Use of remuneration consultants
From time to time, the Committee engages external remuneration consultants to ensure it is fully informed when making
remuneration decisions. During the year ended 30 June 2016 no remuneration recommendations, as defined by the
Corporations Act, were provided by remuneration consultants. However, it did utilise data provided by AON Hewitt
McDonald ($5,030), Mercer Consulting ($4,500), Godfrey Remuneration Group ($4,000) and Ernst and Young ($5,100)
regarding salaries and benefits across the organisation.
Remuneration philosophy
The Board recognises that, as a mid-tier diversified mining company, there is an added complexity to the business that
depends upon the quality of its Directors and Executives. To ensure the Company continues to succeed and grow, it
must attract, motivate and retain highly skilled Directors and Executives.
The principles supporting the Company’s remuneration policy are that:
•
•
•
remuneration arrangements are competitive and reasonable to attract and retain key talent;
remuneration is linked to the Company’s strategic and business objectives and the creation of shareholder value;
and
individual reward is based on performance against a range of appropriate targets relating to the delivery of and
execution of the Company’s strategic plan.
Remuneration components
Component Vehicle
Total fixed
remuneration
(TFR)
STI
Base salary and
superannuation
contributions.
Cash payments targeted at a
percentage of TFR.
LTI
Performance rights based on
a percentage of TFR.
Objective
• To provide competitive fixed remuneration
with reference to role, market and
experience.
• To provide an ‘at risk’ incentive to reward
for current year performance which aims to
align individual’s performance with
achieving the overall strategic plan through
the achievement of annual performance
measures.
• To provide an ‘at risk’ grant to incentivise
and motivate executives to pursue the
long-term growth and success of the
Company which aligns to long-term
shareholder value and the Company’s
long-term strategic objectives.
• To support retention of executives and key
personnel.
Link to performance
Annual performance of
individual and the Company.
Combination of specific
Company KPIs and
Individual KPIs.
Total Shareholder Return
percentile ranking over the 3
year performance period
relative to a selected peer
group.
Developments during FY16
Following extensive market research and the report prepared by Gerard Daniels in FY15 (as reported in the 2015
Annual Report) which examined the competitiveness of remuneration for Director's and executives employed by the
Company, on the recommendation of the Committee the Board approved:
•
•
•
•
•
no increase to the Managing Director’s TFR for the second consecutive year;
no general increase to executive TFR, except for instances of role change, for the second consecutive year;
increase in potential STI award for the Managing Director from 40% to 50% of TFR;
increase in potential STI award for executives from 15-25% to 30-40% of TFR; and
no increase to Directors’ fees, however additional committee chairman fees were introduced (see page 55 for
details).
Independence Group NL
16
Annual Report 2016 45
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration
Remuneration for FY16 consisted of a mix of:
•
•
fixed remuneration; and
variable remuneration, comprising STIs and LTIs.
Fixed remuneration
Individual executives’ TFR for FY16 were as follows:
Name
Position
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Joanne McDonald
Sam Retallack1
Scott Steinkrug
Brett Hartmann
Tony Walsh
Sustainability Manager
Chief Operating Officer (appointed 1 March 2016)
Chief Growth Officer
Company Secretary (appointed 5 October 2015)
Organisational Capability Manager
Chief Financial Officer
General Manager, Operations (ceased 29
February 2016)
Company Secretary and General Manager,
Corporate (ceased 9 October 2015)
TFR
(30/6/2015)
$
TFR
(30/6/2016)
$
TFR change
in FY16
%
750,000
333,975
n/a
390,000
n/a
223,963
390,000
455,000
390,000
750,000
333,975
498,225
390,000
280,000
333,975
390,000
n/a
n/a
-
-
n/a
-
n/a
49.6%
-
n/a
n/a
1. Effective 1 July 2015, TFR increase due to change in role from Human Resources Manager to Organisational Capability Manager.
The Committee and Board consider the remuneration for Executive Management on an annual basis to ensure that the
Company remains competitive and is able to attract and maintain key personnel.
In prior years, remuneration reviews have been based upon benchmark surveys or targeted market research on an
alternating basis. For the 2016 review recommendations, the Committee relied upon benchmark surveys, including Aon
McDonald, AusRem and Godfrey Remuneration Group. Further to this review, the following recommendations were
approved by the Board for FY17:
•
•
•
TFR for Managing Director increased by 6.7% to $800,000;
TFR for Chief Growth Officer increased by 7.8% to $420,000; and
TFR for Chief Financial Officer increased by 7.8% to $420,000.
The following table reflects remuneration components available to executives effective 1 July 2016:
Name
Position
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Sustainability Manager
Chief Operating Officer (COO)
Chief Growth Officer (CGO)
Joanne McDonald
Company Secretary
Sam Retallack
Organisational Capability Manager
Scott Steinkrug
Chief Financial Officer (CFO)
TFR
$
800,000
333,975
498,225
420,000
280,000
333,975
420,000
Potential STI Potential LTI
%*
70
35
50
50
35
35
50
%*
70
20
40
40
20
20
40
* Potential STI and LTI are based on a % of TFR comprising base salary and superannuation only.
Remuneration report (continued)
2016 Executive remuneration (continued)
Fixed remuneration (continued)
The mix of fixed and at-risk remuneration varies depending on the role and grading of executives, and also depends on
the performance of the Company and the individual.
If maximum at-risk remuneration were to be earned for FY17, the percentage of fixed to at-risk remuneration would be
as follows:
STIs paid in FY16 were for the performance by eligible executives in FY15. The following table indicates the
performance of KMP against FY15 KPIs:
KPI Measure (in summary)*
Achievement
Variable remuneration - STIs
Key Result Area
Sustainability (7.5%)
People (7.5%)
Processes and outputs (15%)
(50%)
2016:
Quality and communication (5%)
Assessed against implementation of
0%
7.5%
7.5%
22.5%
Assessed against improvement in LTIF and
TRIF, completion of external review of EMS and
SMS and preparation of Sustainability Report.
Assessed against completion of Group
restructure to align with Company strategy and
implement vision and values across the
organisation.
standardised systems and processes across
the Company and incorporation of risk
management measures.
Assessed against achievement of NPAT for
FY15, improvement of reporting time lines to
ASX and implementation and improvement of
internal reporting systems. Stretch target
achieved.
and Long, identifying advanced stage
exploration projects for acquisition and
completion of acquisition of a
producing/development stage asset.
Jaguar and Long, identifying advanced stage
exploration projects for acquisition and
completion of acquisition of a
producing/development stage asset.
Growth (15%)
Assessed against increase mine life at Jaguar
12.5%
Individual KPIs/Personal performance
Assessed against increase in mine life at
37.5 - 47.5%
* Due to the sensitive nature of some corporate KPIs the full detail on measures and achievement is confidential.
The following table indicates performance against FY16 KPIs (corporate and individual) which will be paid in September
Independence Group NL
17
Independence Group NL
18
46 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration (continued)
Fixed remuneration (continued)
The mix of fixed and at-risk remuneration varies depending on the role and grading of executives, and also depends on
the performance of the Company and the individual.
If maximum at-risk remuneration were to be earned for FY17, the percentage of fixed to at-risk remuneration would be
as follows:
Variable remuneration - STIs
STIs paid in FY16 were for the performance by eligible executives in FY15. The following table indicates the
performance of KMP against FY15 KPIs:
Key Result Area
Sustainability (7.5%)
People (7.5%)
Quality and communication (5%)
Processes and outputs (15%)
Growth (15%)
Individual KPIs/Personal performance
(50%)
KPI Measure (in summary)*
Achievement
Assessed against improvement in LTIF and
TRIF, completion of external review of EMS and
SMS and preparation of Sustainability Report.
Assessed against completion of Group
restructure to align with Company strategy and
implement vision and values across the
organisation.
Assessed against implementation of
standardised systems and processes across
the Company and incorporation of risk
management measures.
Assessed against achievement of NPAT for
FY15, improvement of reporting time lines to
ASX and implementation and improvement of
internal reporting systems. Stretch target
achieved.
Assessed against increase mine life at Jaguar
and Long, identifying advanced stage
exploration projects for acquisition and
completion of acquisition of a
producing/development stage asset.
Assessed against increase in mine life at
Jaguar and Long, identifying advanced stage
exploration projects for acquisition and
completion of acquisition of a
producing/development stage asset.
7.5%
7.5%
0%
22.5%
12.5%
37.5 - 47.5%
* Due to the sensitive nature of some corporate KPIs the full detail on measures and achievement is confidential.
The following table indicates performance against FY16 KPIs (corporate and individual) which will be paid in September
2016:
Independence Group NL
18
Annual Report 2016 47
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration (continued)
Variable remuneration - STIs (continued)
Key Result Area
KPI Measure (in summary)*
Operations and financial (17.5%)
Near-term growth (15%)
Longer-term growth (10%)
Sustainability (7.5%)
Assessed against Group underlying NPAT,
Jaguar and Long production, Jaguar and Long
mine life and Tropicana conceptual studies.
Assessed against completion of Sirius
transaction, integration of Sirius assets and
people, completion of Nova Project optimisation
study and development timetable and
expenditure. Stretch target achieved.
Assessed against measures in line with growth
strategy.
Assessed against systems and processes and
ESG measures.
Achievement
12.5%
17.5%
2.5%
5.0%
Individual KPIs/Personal performance
(50%)
As determined for each individual executive
40-50%
* Due to the sensitive nature of some corporate KPIs the full detail on measures and achievement is confidential.
The KPIs are set and weighted at the beginning of each year and are designed to drive successful and sustainable
financial and business outcomes, with reference to the Company’s strategic plan. The Board assesses and sets the
KPIs applicable to the Managing Director, and the Managing Director assesses and sets the KPIs for each of his direct
reports in consultation with the Board.
The Board determined the KPIs above reflected the key result areas of the business. KPIs related to the operations and
financial, near term growth and longer term growth were chosen as they are key future profitability drivers, the
the business is paramount, hence is included as a measure and individual KPIs focus on key
sustainability of
performance elements that align to the Company’s strategic plan and are within the executive’s control.
As a result, STI payments for FY16 to executive KMP were recommended as detailed in the following table, and will be
paid in September 2016.
The following table reflects eligible individual executives’ potential STI components as a percentage of TFR against paid
or to be paid amounts:
Remuneration report (continued)
2016 Executive remuneration (continued)
Variable remuneration - STIs (continued)
3. To be paid in September 2016.
4. Not qualified as only commenced in April 2015 (minimum 5 months required).
5. Appointed Chief Operating Officer on 1 March 2016, previously General Manager, Project Development (from 22 September 2015)
and prior to that Chief Operating Officer of Sirius Resources NL.
6. Pro-rata entitlement based on commencement date. Appointed Company Secretary on 5 October 2015.
The payment of STIs is subject to Board approval. The Board has the discretion to adjust remuneration outcomes
higher or lower to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any STI.
Variable remuneration - LTIs
The LTI component of the remuneration package is to reward executive directors, senior managers and other invited
employees of the Group in a manner which aligns a proportion of their remuneration package with the creation of
shareholder wealth over a longer period than the STI.
The Independence Group NL Employee Performance Rights Plan (PRP) was approved by shareholders at the Annual
General Meeting in November 2014. Under the PRP, participants are granted share rights for no consideration that will
only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the
vesting period. Participation in the PRP is at the Board’s discretion and no individual has a contractual right to
participate in the plan or to receive any guaranteed benefits.
To FY16, the Managing Director has the opportunity to earn 100% of his TFR as an LTI. All other executives have the
opportunity to earn between 20-55% of their TFR as an LTI. From FY17, the LTI opportunity for the Managing Director
will reduce to 70% of TFR and the LTI opportunity for all other executives will be between 20-40% of TFR.
During the period 643,911 share rights were issued as FY16 LTIs to executive KMP and senior staff in accordance with
the PRP. Of this amount, 217,391 were issued to the Managing Director as approved by shareholders at the 2015
Annual General Meeting. The quantum of share rights is determined by the executive’s TFR; the applicable multiplier;
and the face value of the Company's shares, calculated as the 20 day volume weighted average price (VWAP).
The following share rights were issued to executive KMP in relation to FY16:
Number of
share rights
issued for
FY15 period1
Number of
share rights
issued for
FY16 period2
175,365
n/a3
n/a4
50,154
n/a5
10,473
50,154
58,513
50,154
217,391
19,361
78,116
62,174
10,5866
19,361
62,174
72,536
n/a
Name
Position
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Sustainability Manager
Chief Operating Officer
Chief Growth Officer
Joanne McDonald
Company Secretary
Sam Retallack
Organisational Capability Manager
Scott Steinkrug
Chief Financial Officer
Brett Hartmann
General Manager, Operations (ceased 29 February 2016)
Tony Walsh7
Company Secretary and General Manager, Corporate
(ceased 9 October 2015)
1. Share rights awarded at 20 day VWAP to 30 September 2014 of $4.28.
2. Share rights awarded at 20 day VWAP to 20 August 2015 of $3.45.
3. Not qualified as only appointed in April 2015.
and prior to that Chief Operating Officer of Sirius Resources NL.
5. Appointed 5 October 2015.
6. Pro-rata entitlement based on commencement date.
4. Appointed KMP on 1 March 2016, prior to that held the role of General Manager, Project Development (from 22 September 2015)
7. Ceased to be an employee on 9 October 2015. In accordance with the PRP all unvested share rights lapsed and were cancelled.
Keith Ashby
Rob Dennis5
Matt Dusci
Chief Growth Officer
Joanne McDonald6 Company Secretary
Sam Retallack
Scott Steinkrug
Chief Financial Officer
Brett Hartmann
Tony Walsh
General Manager, Operations
(ceased 29 February 2016)
Company Secretary and General
Manager, Corporate (ceased 9
October 2015)
1. % of TFR (base salary plus superannuation).
2. Paid in September 2015.
FY15
Potential
STI1
%
40
-4
n/a
25
n/a
25
25
25
25
FY15 Paid2
$
270,000
-
n/a
90,000
n/a
35,000
90,000
280,000
60,000
120,000
120,000
37,500
60,000
120,000
n/a
n/a
FY16
Potential
STI1
%
FY16
Declared3
$
Name
Position
Peter Bradford
Managing Director
90,000
n/a
75,000
n/a
Organisational Capability Manager
50
30
40
40
30
30
40
Chief Operating Officer
Sustainability Manager
Independence Group NL
19
Independence Group NL
20
48 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration (continued)
Variable remuneration - STIs (continued)
3. To be paid in September 2016.
4. Not qualified as only commenced in April 2015 (minimum 5 months required).
5. Appointed Chief Operating Officer on 1 March 2016, previously General Manager, Project Development (from 22 September 2015)
and prior to that Chief Operating Officer of Sirius Resources NL.
6. Pro-rata entitlement based on commencement date. Appointed Company Secretary on 5 October 2015.
The payment of STIs is subject to Board approval. The Board has the discretion to adjust remuneration outcomes
higher or lower to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any STI.
Variable remuneration - LTIs
The LTI component of the remuneration package is to reward executive directors, senior managers and other invited
employees of the Group in a manner which aligns a proportion of their remuneration package with the creation of
shareholder wealth over a longer period than the STI.
The Independence Group NL Employee Performance Rights Plan (PRP) was approved by shareholders at the Annual
General Meeting in November 2014. Under the PRP, participants are granted share rights for no consideration that will
only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the
vesting period. Participation in the PRP is at the Board’s discretion and no individual has a contractual right to
participate in the plan or to receive any guaranteed benefits.
To FY16, the Managing Director has the opportunity to earn 100% of his TFR as an LTI. All other executives have the
opportunity to earn between 20-55% of their TFR as an LTI. From FY17, the LTI opportunity for the Managing Director
will reduce to 70% of TFR and the LTI opportunity for all other executives will be between 20-40% of TFR.
During the period 643,911 share rights were issued as FY16 LTIs to executive KMP and senior staff in accordance with
the PRP. Of this amount, 217,391 were issued to the Managing Director as approved by shareholders at the 2015
Annual General Meeting. The quantum of share rights is determined by the executive’s TFR; the applicable multiplier;
and the face value of the Company's shares, calculated as the 20 day volume weighted average price (VWAP).
The following share rights were issued to executive KMP in relation to FY16:
Name
Position
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Sustainability Manager
Chief Operating Officer
Chief Growth Officer
Joanne McDonald
Company Secretary
Sam Retallack
Organisational Capability Manager
Scott Steinkrug
Chief Financial Officer
Brett Hartmann
General Manager, Operations (ceased 29 February 2016)
Tony Walsh7
Company Secretary and General Manager, Corporate
(ceased 9 October 2015)
Number of
share rights
issued for
FY15 period1
175,365
n/a3
n/a4
50,154
n/a5
10,473
50,154
58,513
50,154
Number of
share rights
issued for
FY16 period2
217,391
19,361
78,116
62,174
10,5866
19,361
62,174
72,536
n/a
1. Share rights awarded at 20 day VWAP to 30 September 2014 of $4.28.
2. Share rights awarded at 20 day VWAP to 20 August 2015 of $3.45.
3. Not qualified as only appointed in April 2015.
4. Appointed KMP on 1 March 2016, prior to that held the role of General Manager, Project Development (from 22 September 2015)
and prior to that Chief Operating Officer of Sirius Resources NL.
5. Appointed 5 October 2015.
6. Pro-rata entitlement based on commencement date.
7. Ceased to be an employee on 9 October 2015. In accordance with the PRP all unvested share rights lapsed and were cancelled.
Independence Group NL
20
Annual Report 2016 49
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration (continued)
Variable remuneration - LTIs (continued)
The number of share rights able to be issued under the PRP is limited to 5% of the issued capital. The 5% limit includes
grants under all plans made in the previous five years (with certain exclusions under the Corporations Act 2001). This
percentage now stands at 1.1%. There are no voting or dividend rights attached to the share rights.
Share rights granted after 1 July 2014
Vesting of the share rights granted to executive KMP after 1 July 2014 is based on a continuous service condition and a
total shareholder return (TSR) scorecard.
Service condition
The service condition is met if employment with IGO is continuous for three years commencing on or around the grant
date. The condition is aimed at retaining key personnel.
The treatment of LTI awards of executives, whose employment ceases prior to vesting, depends on the reason for
cessation and is subject to Board discretion to determine otherwise. If, in the opinion of the Board, the executive acts
fraudulently or dishonestly, or is in material breach of his or her obligations to any Group entity, then the Board in its
absolute discretion may determine all the executive's unvested share rights will lapse and the Board's discretion will be
final and binding.
Performance condition
The TSR scorecard for the three year measurement period will be determined based on a percentile ranking of the
Company's TSR results relative to the TSR of each of the companies in the peer group over the same three year
relative TSR is an appropriate
measurement period. Reflecting on market practice,
performance hurdle because it ensures that a proportion of each participant’s remuneration is linked to the return
received by shareholders from holding shares in a company over a particular period. There is no re-testing provision of
the TSR performance condition following the initial testing at the end of the three year measurement period.
the Board considers that
The peer group is to comprise the constituents of the S&P ASX 300 Metals and Mining Index who are engaged in gold
and/or base metals mining in Australia and have the closest market capitalisation to the Company.
The vesting schedule of the share rights subject to relative TSR testing is as follows:
Relative TSR performance
Less than 50th percentile
Between 50th and 75th percentile
75th percentile or better
Level of vesting
Zero
Pro-rata straight line percentage between 50% and 100%
100%
The Company's TSR performance for share rights issued during FY16 will be assessed against the following 20 peer
group companies:
Peer Group
Aditya Birla Minerals Ltd1
Cudeco Ltd
Medusa Mining Ltd
Northern Star Resources Limited
Panoramic Resources Ltd
Resolute Mining Limited
Silver Lake Resources Limited
Alacer Gold Corp.
Evolution Mining Limited
Metals X Limited
Oceana Gold Limited
Perseus Mining Limited
Saracen Mineral Holdings Limited
Western Areas Ltd
Beadell Resources Ltd
Kingsgate Consolidated Limited
Mincor Resources NL
Oz Minerals Ltd
Regis Resources Limited
Sandfire Resources Ltd
1. To be removed from peer group of companies following takeover of the company.
Share trading policy
The trading of shares issued to participants under the PRP is subject to, and conditional upon, compliance with the
Company’s Dealing in Securities Standard. The Standard also prohibits all employees, including Directors and senior
management, from entering into any hedging arrangement over unvested securities issued pursuant to any share
scheme, performance rights plan or option plan.
Independence Group NL
21
50 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
2016 Executive remuneration (continued)
Variable remuneration - LTIs (continued)
Shares rights granted prior to 30 June 2014
Vesting of the share rights granted to executive KMP prior to 30 June 2014 is subject to a combination of the
Company’s shareholder
the three year
return and return on equity. The performance rights will vest
measurement period, the following performance hurdles are achieved:
if, over
Shareholder return
The vesting of 75% of the share rights at the end of the third year will be based on measuring the actual shareholder
return over the three year period compared with the change in the S&P ASX 300 Metals and Mining Index (Index) over
that same period. The portion of share rights (75% of the total) that will vest based on the comparative shareholder
return will be:
Shareholder return
100% of the Index
Between 100% and 115% of the Index
115% of the Index or greater
Level of vesting
25%
Pro-rata straight line percentage
100%
Return on equity
The vesting of the remaining 25% of the share rights at the end of the third year will be based on the average return on
equity over the three year period compared with the average target return on equity as set by the Board for the same
period.
Return on equity (ROE) for each year will be calculated in accordance with the following formula:
ROE = Net profit after tax / Total shareholders’ equity
The target ROE will be set each year by the Board as part of the budget approval process for the following year. The
target ROE used in previous financial years was 10%. The portion of share rights (25% of the total) that will vest based
on the comparative return on equity will be:
Actual ROE
100% of average target ROE
Between 100% and 115% of average target ROE
115% of average target ROE or greater
Level of vesting
25%
Pro-rata straight line percentage
100%
Long term incentive - Non-executive directors
The PRP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not
currently intended that non-executive directors will be issued with share rights under the PRP and any such issue would
be subject to all necessary shareholder approvals.
Developments for FY17
FY16 has been a year of continued development for the Company. During this period the Committee has continued to
focus on the employee remuneration to ensure that the Company remains market competitive and can attract, motivate
and retain the diverse range of skilled people that are essential to achieve its strategic objectives and maximise the
alignment of employee performance and shareholder value.
Following a review of the Company’s Remuneration and Rewards policies a number of changes have been made which
will have effect from 1 July 2016. The completed changes will be reported in more detail in the 2017 Remuneration
Report, however a summary of the key elements has been provided below:
Independence Group NL
22
Annual Report 2016 51
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Developments for FY17 (continued)
Executive Management STI
•
•
•
•
To date the STI has been a 100% cash payment. In order to further align the interests of shareholders and
management, from FY17 the STI will be paid annually as a cash payment (50%) and service rights (50%). The
service rights will vest in two tranches, with the first tranche of 50% vesting after 12 months following the award and
the second tranche of 50% vesting after 24 months;
Clawback provisions will be put in place for any unvested STI and LTI awards in the case of fraud, dishonesty,
gross misconduct or a material misstatement of the financial statements and subject to Board discretion;
In the event of a takeover or change of control of the Company, the Board will have discretion to determine the
treatment of the unvested STI and LTI awards which may include pro-rata vesting; and
The LTI measurement period will remain at three years and the performance measurement will continue to be
relative TSR, however, a gateway will be put in place to provide the Board with the overriding discretion to adjust
the LTI vesting if TSR is negative over the period.
Group-wide Remuneration
A number of changes have been made to the Company’s group-wide Total Rewards Framework to ensure the
Company continues to attract, motivate and retain the best people. The key highlights being:
•
•
•
•
A revised benchmarking policy and job banding system;
Payment of a competitive and equitable total
increment;
Revision of the STI program; and
Agreement to launch an Employee Share Ownership Plan in FY17 (subject to shareholder approval).
fixed remuneration that
incorporates a “pay for performance”
Company performance and remuneration
The Company aims to align its executive remuneration to the strategic and business objectives of the Group and the
creation of shareholder value. The table below shows measures of the Group's financial performance over the last five
years as required by the Corporations Act 2001. These measures are not necessarily consistent with the measures
used in determining the variable amounts of remuneration to be awarded to KMPs as other internal measures are used
to drive these results.
Revenue ($millions)
Profit (loss) for the year attributable to owners of ($millions)
Dividends payments (cents/share)
Share price at year end ($/share)
Executive Contracts
2016
413.2
(58.8)
2.5
3.28
2015
495.3
76.8
11.0
4.17
2014
399.1
48.6
7.0
4.35
2013
2012
225.9
18.3
5.0
2.26
216.6
(285.3)
2.0
3.16
Remuneration and other terms of employment for the executives are formalised in service agreements. The service
agreements specify the components of remuneration, benefits and notice periods. Participation in the STI and LTI plans
is subject to the Board's discretion. Other major provisions of the agreements relating to remuneration are set out below.
Independence Group NL
23
Independence Group NL
24
52 Independence Group NL
Remuneration report (continued)
Executive Contracts (continued)
Base salary
including
super-
$
Name
Position
agreement
annuation
Term of
Notice
period
Termination
benefit
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Sustainability Manager
Chief Operating Officer
Chief Growth Officer
Joanne McDonald Company Secretary
No fixed term
800,000
No fixed term
333,975
No fixed term
498,255
No fixed term
420,000
No fixed term
280,000
Sam Retallack
Organisational Capability Manager
No fixed term
333,975
Scott Steinkrug
Chief Financial Officer
No fixed term
420,000
6 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months1
6 months
6 months
6 months
6 months
6 months
6 months
1. In addition to the above, Mr Bradford is entitled to a maximum termination benefit payable of up to 12 months of average annual base
salary should the Company terminate the employment contract without cause, but only if such payment would not breach ASX Listing
Rules. A termination benefit of three month's remuneration is payable to Mr Bradford should the Company terminate the employment
contract due to illness, injury or incapacity.
Remuneration expenses for KMP's
The following table shows the cash value of earnings realised by executive KMP during FY16. The cash value of
earnings realised include cash salary, superannuation and cash bonuses received in cash during the year and the
intrinsic value of LTI vesting during the financial year.
This is in addition and different
to the disclosures required by the Corporations Act and Accounting Standards,
particularly in relation to share rights. As a general principle, the Accounting Standards require a value to be placed on
share rights based on probabilistic calculations at the time of grant, which may be reflected in the remuneration report
even if ultimately the share rights do not vest because performance and service hurdles are not met. By contrast, this
table discloses the intrinsic value of share rights, which represents only those share rights which actually vest and result
in shares issued to a KMP. The intrinsic value is the Company’s closing share price on the date of vesting.
Name
Peter Bradford
Keith Ashby
Rob Dennis4
Matt Dusci
Joanne McDonald5
Sam Retallack
Scott Steinkrug
Brett Hartmann6
Tony Walsh7
Fixed
Remuneration1
$
STI2
$
LTI3
$
750,000
333,975
171,690
390,000
187,345
333,975
390,000
305,062
123,847
270,000
-
-
-
90,000
35,000
90,000
90,000
75,000
Total Actual
Remuneration
$
1,020,000
333,975
171,690
480,000
187,345
411,707
641,147
568,758
198,847
-
-
-
-
-
-
42,732
161,147
173,696
1. Includes base salary and superannuation.
2. Represents the amount paid in the financial year for performance in FY15.
3. Value of share rights granted in FY12 and vesting on 6 August 2015 at a market price of $3.44.
4. Appointed to KMP on 1 March 2016.
5. Appointed to KMP on 5 October 2015.
6. Ceased to be a KMP on 29 February 2016.
7. Ceased employment with the Company on 9 October 2015.
DIRECTORS’ REPORT Remuneration report (continued)
Executive Contracts (continued)
Name
Position
Peter Bradford
Managing Director
Keith Ashby
Rob Dennis
Matt Dusci
Sustainability Manager
Chief Operating Officer
Chief Growth Officer
Joanne McDonald Company Secretary
Term of
agreement
Base salary
including
super-
annuation
$
No fixed term
800,000
No fixed term
333,975
No fixed term
498,255
No fixed term
420,000
No fixed term
280,000
Sam Retallack
Organisational Capability Manager
No fixed term
333,975
Scott Steinkrug
Chief Financial Officer
No fixed term
420,000
Directors' report
30 June 2016
(continued)
Notice
period
Termination
benefit
6 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months1
6 months
6 months
6 months
6 months
6 months
6 months
1. In addition to the above, Mr Bradford is entitled to a maximum termination benefit payable of up to 12 months of average annual base
salary should the Company terminate the employment contract without cause, but only if such payment would not breach ASX Listing
Rules. A termination benefit of three month's remuneration is payable to Mr Bradford should the Company terminate the employment
contract due to illness, injury or incapacity.
Remuneration expenses for KMP's
The following table shows the cash value of earnings realised by executive KMP during FY16. The cash value of
earnings realised include cash salary, superannuation and cash bonuses received in cash during the year and the
intrinsic value of LTI vesting during the financial year.
to the disclosures required by the Corporations Act and Accounting Standards,
This is in addition and different
particularly in relation to share rights. As a general principle, the Accounting Standards require a value to be placed on
share rights based on probabilistic calculations at the time of grant, which may be reflected in the remuneration report
even if ultimately the share rights do not vest because performance and service hurdles are not met. By contrast, this
table discloses the intrinsic value of share rights, which represents only those share rights which actually vest and result
in shares issued to a KMP. The intrinsic value is the Company’s closing share price on the date of vesting.
Name
Peter Bradford
Keith Ashby
Rob Dennis4
Matt Dusci
Joanne McDonald5
Sam Retallack
Scott Steinkrug
Brett Hartmann6
Tony Walsh7
Fixed
Remuneration1
$
STI2
$
LTI3
$
750,000
333,975
171,690
390,000
187,345
333,975
390,000
305,062
123,847
270,000
-
-
90,000
-
35,000
90,000
90,000
75,000
-
-
-
-
-
42,732
161,147
173,696
-
Total Actual
Remuneration
$
1,020,000
333,975
171,690
480,000
187,345
411,707
641,147
568,758
198,847
1. Includes base salary and superannuation.
2. Represents the amount paid in the financial year for performance in FY15.
3. Value of share rights granted in FY12 and vesting on 6 August 2015 at a market price of $3.44.
4. Appointed to KMP on 1 March 2016.
5. Appointed to KMP on 5 October 2015.
6. Ceased to be a KMP on 29 February 2016.
7. Ceased employment with the Company on 9 October 2015.
Independence Group NL
24
Annual Report 2016 53
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Remuneration expenses for KMP's (continued)
The following tables show details of the remuneration received by the Group's KMP for the current and previous
financial year.
Short-term employee
benefits
Post-
employment
benefits
Cash
salary and
fees1
$
Cash
bonus2
$
Super-
annuation
$
Long-
term
benefits
Long
service
leave3
$
Share based
payments
Share
rights4
$
Total
$
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
219,178
195,914
123,288
81,398
123,288
102,312
123,288
59,162
79,286
-
70,154
-
-
-
-
-
-
-
-
-
-
-
-
-
717,681
757,217
270,000
-
317,920
77,013
370,584
348,730
331,045
204,351
369,564
378,608
157,269
-
174,784
-
246,379
429,856
121,487
351,860
-
-
82,192
-
31,963
18,265
82,192
38,356
-
-
-
-
82,192
45,662
68,493
38,356
20,822
18,615
11,712
7,732
11,712
9,721
11,712
5,620
7,532
-
6,655
-
35,000
35,000
28,975
6,805
30,000
28,524
30,000
21,237
33,835
30,000
14,540
-
16,254
-
27,808
36,575
16,407
35,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
240,000
214,529
135,000
89,130
135,000
112,033
135,000
64,782
86,818
-
76,809
-
11,028
5,869
279,523
165,311
1,313,232
963,397
2,555
263
3,951
1,246
12,173
5,070
11,132
9,414
1,748
-
709
-
7,093
14,489
(5,198)
3,950
4,828
-
65,773
27,469
15,325
45,865
121,899
136,016
12,277
-
2,640
-
86,016
149,036
(113,303)
83,716
354,278
84,081
552,500
405,969
420,506
294,788
618,622
592,394
185,834
-
194,387
-
449,488
675,618
87,886
512,882
Name
Non-executive Directors
Peter Bilbe
Peter Bilbe
Peter Buck5
Peter Buck
Geoffrey Clifford
Geoffrey Clifford
Keith Spence6
Keith Spence
Neil Warburton7
Neil Warburton
Mark Bennett8
Mark Bennett
Executive Directors
Peter Bradford
Peter Bradford
Other key management
personnel
Keith Ashby9
Keith Ashby9
Matt Dusci10
Matt Dusci
Sam Retallack
Sam Retallack
Scott Steinkrug
Scott Steinkrug
Rob Dennis11
Rob Dennis
Joanne McDonald12
Joanne McDonald12
Brett Hartmann13
Brett Hartmann
Tony Walsh14
Tony Walsh
Remuneration report (continued)
Remuneration expenses for KMP's (continued)
1. Cash salary and fees includes movements in annual leave provision during the year.
2. Cash bonus excludes superannuation contribution component of STI which is shown in Post-employment benefits.
3. Long service leave relates to movements in long service leave provision during the year.
4. Rights to shares granted under the PRP are expensed over the performance period, which includes the vesting period of the rights, in
accordance with AASB 2 Share-based Payment. Refer to note 26 for details of the valuation techniques used for the PRP.
5. Mr Buck was appointed a Non-executive Director effective 3 October 2014.
6. Mr Spence was appointed a Non-executive Director effective 17 December 2014.
7. Mr Warburton was appointed a Non-executive Director on 12 October 2015.
8. Mr Bennett was appointed a Non-executive Director on 12 October 2015 and resigned effective 31 May 2016.
9. Mr Ashby commenced employment as Sustainability Manager with the Company on 7 April 2015.
10. Mr Dusci commenced employment as General Manager, New Business with the Company on 27 July 2014.
11. Mr Dennis was appointed Chief Operating Officer effective 1 March 2016, having previously held the role of General Manager,
Project Development (from 22 September 2015) and prior to that Chief Operating Officer, Sirius Resources NL.
12. Ms McDonald commenced employment as Company Secretary on 5 October 2015.
13. Effective 1 March 2016, Mr Hartmann became the General Manager, Nova, having previously held the role of Chief Operating
Officer.
14. Mr Walsh ceased employment with the Company on 9 October 2015.
Non-executive director remuneration policy
The remuneration of non-executive directors is determined by the Board within the maximum amount approved by
shareholders in general meeting. Non-executive directors are not entitled to retirement benefits other than statutory
superannuation or other statutory required benefits. Non-executive directors do not participate in share or bonus
schemes designed for executive directors or employees.
The remuneration of Non-executive directors is fixed to encourage impartiality, high ethical standards and
independence on the Board. The available non-executive directors’ fees pool is $1,500,000 which was approved by
shareholders at the Annual General Meeting on 16 December 2015, of which $885,000 was being utilised at 30 June
2016 (2015: $590,000).
The Board resolved not to increase directors’ fees for FY16, however it was resolved to approve additional fees for
Audit Committee, Remuneration Committee and Sustainability and Risk Committee chairmen of $15,000 per annum;
and an additional fee for Nomination Committee chairman of $10,000 per annum.
The Board resolved, for a second consecutive year, not to increase directors’ fees for FY17.
Non-executive directors may provide additional consulting services to the Group, at a rate approved by the Board. No
such amounts were paid to Directors during the current year.
Base fees/Committee fees
Chairman
Non-executive directors
Chair Audit Committee
Chair Remuneration Committee
Chair Sustainability and Risk Committee
Chair Nomination Committee
30 June 2016
30 June 2015
$
230,000
120,000
15,000
15,000
15,000
10,000
$
230,000
120,000
n/a
n/a
n/a
n/a
Independence Group NL
25
Independence Group NL
26
54 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Remuneration expenses for KMP's (continued)
1. Cash salary and fees includes movements in annual leave provision during the year.
2. Cash bonus excludes superannuation contribution component of STI which is shown in Post-employment benefits.
3. Long service leave relates to movements in long service leave provision during the year.
4. Rights to shares granted under the PRP are expensed over the performance period, which includes the vesting period of the rights, in
accordance with AASB 2 Share-based Payment. Refer to note 26 for details of the valuation techniques used for the PRP.
5. Mr Buck was appointed a Non-executive Director effective 3 October 2014.
6. Mr Spence was appointed a Non-executive Director effective 17 December 2014.
7. Mr Warburton was appointed a Non-executive Director on 12 October 2015.
8. Mr Bennett was appointed a Non-executive Director on 12 October 2015 and resigned effective 31 May 2016.
9. Mr Ashby commenced employment as Sustainability Manager with the Company on 7 April 2015.
10. Mr Dusci commenced employment as General Manager, New Business with the Company on 27 July 2014.
11. Mr Dennis was appointed Chief Operating Officer effective 1 March 2016, having previously held the role of General Manager,
Project Development (from 22 September 2015) and prior to that Chief Operating Officer, Sirius Resources NL.
12. Ms McDonald commenced employment as Company Secretary on 5 October 2015.
13. Effective 1 March 2016, Mr Hartmann became the General Manager, Nova, having previously held the role of Chief Operating
Officer.
14. Mr Walsh ceased employment with the Company on 9 October 2015.
Non-executive director remuneration policy
The remuneration of non-executive directors is determined by the Board within the maximum amount approved by
shareholders in general meeting. Non-executive directors are not entitled to retirement benefits other than statutory
superannuation or other statutory required benefits. Non-executive directors do not participate in share or bonus
schemes designed for executive directors or employees.
The remuneration of Non-executive directors is fixed to encourage impartiality, high ethical standards and
independence on the Board. The available non-executive directors’ fees pool is $1,500,000 which was approved by
shareholders at the Annual General Meeting on 16 December 2015, of which $885,000 was being utilised at 30 June
2016 (2015: $590,000).
The Board resolved not to increase directors’ fees for FY16, however it was resolved to approve additional fees for
Audit Committee, Remuneration Committee and Sustainability and Risk Committee chairmen of $15,000 per annum;
and an additional fee for Nomination Committee chairman of $10,000 per annum.
The Board resolved, for a second consecutive year, not to increase directors’ fees for FY17.
Non-executive directors may provide additional consulting services to the Group, at a rate approved by the Board. No
such amounts were paid to Directors during the current year.
Base fees/Committee fees
Chairman
Non-executive directors
Chair Audit Committee
Chair Remuneration Committee
Chair Sustainability and Risk Committee
Chair Nomination Committee
30 June 2016
$
30 June 2015
$
230,000
120,000
15,000
15,000
15,000
10,000
230,000
120,000
n/a
n/a
n/a
n/a
Independence Group NL
26
Annual Report 2016 55
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Additional statutory information
Remuneration report (continued)
Additional statutory information (continued)
(i) Relative proportions of fixed vs variable remuneration expense
(iii) Terms and conditions of the share-based payment arrangements
The following table shows the relative proportions of remuneration that are linked to performance and those that are
fixed, based on the amounts disclosed as statutory remuneration expense:
Rights to deferred shares
Name
Fixed remuneration1
2016
%
2015
%
At risk - STI
2016
%
2015
%
At risk - LTI
2016
%
2015
%
Executive Directors of
Independence Group NL
Peter Bradford
Other key management personnel
of the group
Keith Ashby
Rob Dennis
Matt Dusci
Joanne McDonald
Sam Retallack
Scott Steinkrug
Brett Hartmann
Tony Walsh
58
99
93
72
99
88
66
61
63
83
100
-
93
-
78
71
71
76
21
-
-
16
-
8
14
20
37
-
-
-
-
-
6
6
7
8
21
1
7
12
1
4
20
19
-
17
-
-
7
-
16
23
22
16
1. Fixed remuneration paid is not based upon any measurable performance indicators. Non-performance based remuneration is based
on relative industry remuneration levels and is set at a level designed to retain the services of the director or senior executive.
(ii) Performance based remuneration granted and forfeited during the year
The table below shows for each KMP how much of their STI cash bonus was awarded and how much was forfeited. It
also shows the value of share rights that were granted, vested and forfeited during FY16. The number of share rights
and percentages vested/forfeited for each grant are disclosed on page 57 below.
2016
Peter Bradford
Keith Ashby3
Rob Dennis3
Matt Dusci
Joanne McDonald3
Sam Retallack
Scott Steinkrug
Brett Hartmann
Tony Walsh
Total STI bonus (cash)
LTI Share Rights
Total
opportunity
$
300,000
-
-
-
97,500
35,250
90,000
113,750
97,500
Awarded
%
Forfeited
%
90
-
-
92
-
99
92
79
77
10
-
-
8
-
1
8
21
23
Value
granted1
$
399,913
23,186
93,548
74,456
12,677
23,806
74,456
86,865
-
Value
vested2
$
Value
forfeited2
$
-
-
-
-
-
-
42,893
96,468
103,982
-
-
-
-
-
13,553
32,158
34,661
-
1. The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with AASB 2
Share-based Payment. Refer to note 26 for details of the valuation techniques used for the PRP.
2. Value of shares vested and forfeited is based on the value of the share right at grant date.
3. Not eligible for STI as not employed by the Company in FY15 or did not meet the minimum qualifying period.
Rights to deferred shares under the Company's PRP are granted annually. The shares vest after three years from the
start of the financial year. On vesting, each right automatically converts into one ordinary share. The executives do not
receive any dividends and are not entitled to vote in relation to the rights during the vesting period. If an executive
ceases employment before the rights vest, the rights will be forfeited, except in limited circumstances that are approved
The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with
AASB 2 Share-based Payment. Refer to note 26 for details of the valuation techniques used for the PRP.
Vesting date
Grant date value
1 July 2018
1 July 2018
1 July 2017
1 July 2017
1 July 2016
1 July 2015
$1.20
$1.56
$2.55
$2.84
$2.14
$2.06
by the Board.
Grant date
22 January 2016
16 December 2015
9 January 2015
20 November 2014
28 February 2014
28 February 2013
(iv) Reconciliation of share rights shares held by KMP
The table below shows the number of share rights that were granted, vested and forfeited during the year.
Name
granted
Number
Number
Number
%
Number
%
Number
$
Balance at
the start of
the year
Granted
during the
year
Vested1
Forfeited2
217,391
175,365
Balance at
the end of
the year
(unvested)
Maximum
value yet to
vest
217,391
175,365
226,609
165,765
Peter Bradford
Keith Ashby
Matt Dusci
Rob Dennis
Joanne McDonald
Sam Retallack3
Scott Steinkrug
Brett Hartmann
Tony Walsh4
Year
2016
2015
2016
2016
2015
2016
2016
2016
2015
2014
2016
2015
2014
2013
2016
2015
2014
2013
2015
2014
-
-
-
-
-
-
50,154
10,473
16,347
50,154
66,272
62,461
58,513
71,421
67,324
50,154
66,596
19,361
62,174
78,116
10,586
19,361
62,174
72,536
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,422
76
3,925
24
46,845
75
15,616
25
50,493
75
16,831
25
100
100
50,154
66,596
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,361
62,174
50,154
78,116
10,586
19,361
10,473
62,174
50,154
66,272
72,536
58,513
71,421
-
-
-
-
-
18,357
58,951
50,131
81,271
10,037
18,357
10,468
58,971
50,131
68,776
58,486
-
-
-
-
-
-
-
Independence Group NL
56 Independence Group NL
27
Independence Group NL
28
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Additional statutory information (continued)
(iii) Terms and conditions of the share-based payment arrangements
Rights to deferred shares
Rights to deferred shares under the Company's PRP are granted annually. The shares vest after three years from the
start of the financial year. On vesting, each right automatically converts into one ordinary share. The executives do not
receive any dividends and are not entitled to vote in relation to the rights during the vesting period. If an executive
ceases employment before the rights vest, the rights will be forfeited, except in limited circumstances that are approved
by the Board.
The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with
AASB 2 Share-based Payment. Refer to note 26 for details of the valuation techniques used for the PRP.
Grant date
22 January 2016
16 December 2015
9 January 2015
20 November 2014
28 February 2014
28 February 2013
Vesting date
Grant date value
1 July 2018
1 July 2018
1 July 2017
1 July 2017
1 July 2016
1 July 2015
$1.20
$1.56
$2.55
$2.84
$2.14
$2.06
(iv) Reconciliation of share rights shares held by KMP
The table below shows the number of share rights that were granted, vested and forfeited during the year.
Name
Peter Bradford
Keith Ashby
Matt Dusci
Rob Dennis
Joanne McDonald
Sam Retallack3
Scott Steinkrug
Brett Hartmann
Tony Walsh4
Year
granted
2016
2015
2016
2016
2015
2016
2016
2016
2015
2014
2016
2015
2014
2013
2016
2015
2014
2013
2015
2014
Balance at
the start of
the year
Granted
during the
year
Vested1
Forfeited2
Balance at
the end of
the year
(unvested)
Maximum
value yet to
vest
Number
Number
Number
%
Number
%
Number
$
217,391
175,365
226,609
165,765
-
175,365
-
50,154
-
-
10,473
16,347
-
50,154
66,272
62,461
-
58,513
71,421
67,324
50,154
66,596
217,391
-
19,361
62,174
-
78,116
10,586
19,361
-
-
62,174
-
-
-
72,536
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,422
-
-
-
46,845
-
-
-
50,493
-
-
-
-
-
-
-
-
-
-
-
76
-
-
-
75
-
-
-
75
-
-
-
-
-
-
-
-
-
-
3,925
-
-
-
15,616
-
-
-
16,831
50,154
66,596
-
-
-
-
-
-
-
-
-
24
-
-
-
25
-
-
-
25
19,361
62,174
50,154
78,116
10,586
19,361
10,473
-
62,174
50,154
66,272
-
72,536
58,513
71,421
-
100
100
-
-
18,357
58,951
50,131
81,271
10,037
18,357
10,468
-
58,971
50,131
-
-
68,776
58,486
-
-
-
-
Independence Group NL
28
Annual Report 2016 57
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Remuneration report (continued)
Additional statutory information (continued)
(iv) Reconciliation of share rights shares held by KMP (continued)
1. The Company achieved shareholder return over the 3 year period to 30 June 2015 of greater than 115% of the S&P ASX 300 Metals
and Mining Index (Index) resulting in 100% vesting of the share rights attributable to shareholder return (75%).
2. The Company achieved less than 100% of average target Return on Equity (ROE) for the 3 year period to 30 June 2015 resulting in
0% vesting of the share rights attributable to ROE (25%).
3. Share rights vesting to Ms Retallack in the FY16 year relate to the grant of share rights prior to being a KMP and were based on a
combination of shareholder return and personal performance. The Company achieved shareholder return over the one year period to 30
June 2014 of greater than 115% of the Index resulting in 100% vesting of the share rights attributable to shareholder return (40%). Ms
Retallack's personal performance return for the year ended 30 June 2014 resulted in 60% vesting of the share rights attributable to
personal performance (60%).
4. Share rights forfeited following resignation of KMP during the year.
(v) Shareholdings of KMP
The number of ordinary shares in the Company held by each director and other KMP, including their personally related
entities, are set out below.
2016
Name
Directors of Independence Group NL
Peter Bilbe
Peter Bradford
Peter Buck
Geoffrey Clifford
Keith Spence
Neil Warburton2
HEADER
Other key management personnel
Keith Ashby
Rob Dennis
Matt Dusci
Joanne McDonald
Sam Retallack
Scott Steinkrug
Brett Hartmann
Tony Walsh
Balance at the
start of the
period
Received on vesting
of share rights
Other changes
during the
period1
Balance at the
end of the
year
20,000
250,000
4,700
-
-
-
-
-
9,900
-
7,443
-
40,000
-
-
-
-
-
-
-
-
-
-
-
12,422
46,845
50,493
-
-
345,680
-
-
-
103,368
53,885
16,644
-
-
-
-
(90,493)
-
20,000
595,680
4,700
-
-
103,368
53,885
16,644
9,900
-
19,865
46,845
-
-
Total
332,043
109,760
429,084
870,887
1. Shareholdings are reversed to show a zero balance at 30 June 2016 on resignation as a director or ceasing to be a KMP.
2. Other changes during the year include opening balances on becoming a KMP for the first time during the year.
(vi) Other transactions with KMP
During the current financial year, there were no other transactions with KMP or their related parties.
(vii) Voting of shareholders at last year's annual general meeting
Independence Group NL received more than 99% of “yes” votes on its remuneration report for the 2015 financial year.
The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
Shares under option
At the reporting date, there were no unissued ordinary shares under options, nor were there any ordinary shares issued
during the year ended 30 June 2016 on the exercise of options.
Independence Group NL
29
58 Independence Group NL
DIRECTORS’ REPORT Directors' report
30 June 2016
(continued)
Insurance of officers and indemnities
During the financial year, the Company paid an insurance premium in respect of a contract insuring the Directors and
executive officers of the Company and of any related body corporate against a liability incurred as such a Director or
executive officer to the extent permitted by the Corporations Law. The contract of insurance prohibits disclosure of the
nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an
officer of the Company or of any related body corporate against a liability incurred by such an officer.
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.
The Company was not a party to any such proceedings during the year.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor's expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor BDO Audit (WA) Pty Ltd for non-audit services provided during the
year are set out below.
The Directors are satisfied that the provision of the 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 did not compromise the auditor independence requirements of the Corporations Act
2001 nor the principles set out in APES110 Code of Ethics for Professional Accountants.
During the period the following fees were paid or payable for non-audit services provided by the auditor of the parent
entity, its related practices and non-related audit firms:
Other services
BDO Audit (WA) Pty Ltd firm:
Other services in relation to the entity and any other entity in the consolidated
Group
Total remuneration for non-audit services
Auditor's independence declaration
2016
$
2015
$
38,158
38,158
35,913
35,913
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 60.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporation 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 that Legislative Instrument to the nearest thousand dollars,
or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
Peter Bradford
Managing Director
Perth, Western Australia
Dated this 30th day of August 2016
Independence Group NL
30
Annual Report 2016 59
DIRECTORS’ REPORT Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
AUDITOR’S INDEPENDENCE DECLARATION
DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF INDEPENDENCE GROUP NL
As lead auditor of Independence Group NL for the year ended 30 June 2016, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Independence Group NL and the entities it controlled during the period.
DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF INDEPENDENCE GROUP NL
As lead auditor of Independence Group NL for the year ended 30 June 2016, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
Glyn O’Brien
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
Director
This declaration is in respect of Independence Group NL and the entities it controlled during the period.
BDO Audit (WA) Pty Ltd
Perth, 30 August 2016
Glyn O’Brien
Director
BDO Audit (WA) Pty Ltd
Perth, 30 August 2016
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an
Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form
part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts
or omissions of financial services licensees
Independence Group NL
60 Independence Group NL
or omissions of financial services licensees
Independence Group NL
31
31
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an
Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form
part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2016
Revenue from continuing operations
Other income
Mining, development and processing costs
Employee benefits expense
Share-based payments expense
Fair value movement of financial investments
Depreciation and amortisation expense
Rehabilitation and restoration borrowing expense
Exploration costs expensed
Royalty expense
Ore tolling expense
Shipping and wharfage costs
Borrowing and finance costs
Other expenses
(Loss) profit before income tax
Income tax benefit (expense)
(Loss) profit for the period
Impairment of exploration and evaluation expenditure
Acquisition and other integration costs
Notes
2
3
15
5
2016
$'000
413,188
3,862
(139,931)
(66,975)
(819)
2,374
(99,695)
(707)
(19,720)
(12,557)
(10,092)
(16,143)
(76)
(35,518)
(65,137)
(11,266)
(59,212)
442
(58,770)
2015
$'000
495,326
3,268
(135,352)
(63,841)
(2,949)
1,467
(98,551)
(590)
(25,263)
(15,647)
(12,297)
(19,539)
(1,566)
(3,461)
-
(11,044)
109,961
(33,182)
76,779
404
-
404
2,038
(8)
2,030
(58,366)
78,809
Cents
Cents
Other comprehensive income
Items that may be reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Total comprehensive (loss) income for the period
(58,366)
78,809
(Loss) profit for the period attributable to the members of Independence
Group NL
(58,770)
76,779
Total comprehensive (loss) income for the period attributable to the
members of Independence Group NL
(Loss) earnings per share for (loss) profit attributable to the ordinary
equity holders of the Company:
Basic (loss) earnings per share
Diluted (loss) earnings per share
6
6
(13.12)
(13.12)
32.78
32.47
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
Independence Group NL
33
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2016
Revenue from continuing operations
Other income
Mining, development and processing costs
Employee benefits expense
Share-based payments expense
Fair value movement of financial investments
Depreciation and amortisation expense
Rehabilitation and restoration borrowing expense
Exploration costs expensed
Royalty expense
Ore tolling expense
Shipping and wharfage costs
Borrowing and finance costs
Impairment of exploration and evaluation expenditure
Acquisition and other integration costs
Other expenses
(Loss) profit before income tax
Income tax benefit (expense)
(Loss) profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Other comprehensive income for the period, net of tax
Notes
2
3
15
5
2016
$'000
413,188
3,862
(139,931)
(66,975)
(819)
2,374
(99,695)
(707)
(19,720)
(12,557)
(10,092)
(16,143)
(76)
(35,518)
(65,137)
(11,266)
(59,212)
442
(58,770)
2015
$'000
495,326
3,268
(135,352)
(63,841)
(2,949)
1,467
(98,551)
(590)
(25,263)
(15,647)
(12,297)
(19,539)
(1,566)
(3,461)
-
(11,044)
109,961
(33,182)
76,779
404
-
404
2,038
(8)
2,030
Total comprehensive (loss) income for the period
(58,366)
78,809
(Loss) profit for the period attributable to the members of Independence
Group NL
(58,770)
76,779
Total comprehensive (loss) income for the period attributable to the
members of Independence Group NL
(58,366)
78,809
Cents
Cents
(Loss) earnings per share for (loss) profit attributable to the ordinary
equity holders of the Company:
Basic (loss) earnings per share
Diluted (loss) earnings per share
6
6
(13.12)
(13.12)
32.78
32.47
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
Independence Group NL
33
Annual Report 2016 61
Consolidated statement of changes in equity
For the year ended 30 June 2016
Issued
Accumulated
losses
$'000
Hedging
reserve
$'000
payments
Acquisition
translation
reserve
$'000
reserve
$'000
reserve
$'000
capital
$'000
Share-
based
Foreign
currency
1 July 2014
Profit for the period
Other comprehensive income
735,060
(139,031)
(2,038)
12,372
3,142
76,779
Currency translation
differences - current
period
Effective portion of
changes in fair value of
cash flow hedges, net of
tax
Total comprehensive
income for the period
Transactions with
owners in their capacity
as owners:
Dividends paid
Share-based payments
expense
Issue of shares -
Employee Performance
Rights Plan
-
-
-
-
-
-
2,264
-
-
-
-
(25,768)
-
-
-
-
-
-
-
-
-
-
-
2,949
(2,264)
13,057
-
-
-
-
-
-
-
Total
equity
$'000
609,505
76,779
(8)
(8)
(25,768)
2,949
-
-
-
-
-
-
-
2,038
2,038
76,779
2,038
(8)
78,809
Balance at 30 June 2015
737,324
(88,020)
3,142
(8)
665,495
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2016
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Financial assets at fair value through profit or loss
Derivative financial instruments
Total current assets
Non-current assets
Receivables
Inventories
Property, plant and equipment
Mine properties
Exploration and evaluation expenditure
Deferred tax assets
Derivative financial instruments
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Consolidated balance sheet
As at 30 June 2016
Notes
2016
$'000
2015
$'000
7
8
9
10
20
9
13
14
15
5
20
11
16
20
12
16
20
12
5
17
18
46,264
30,900
46,498
5,017
784
129,463
14
31,995
47,309
1,470,851
107,533
219,427
799
1,877,928
121,296
22,086
40,298
15,574
4,981
204,235
18
24,979
47,244
303,300
109,930
130,517
-
615,988
2,007,391
820,223
107,132
43,154
2,487
6,901
159,674
222,672
-
68,305
100,949
391,926
40,476
510
2,384
7,274
50,644
-
717
29,387
73,980
104,084
551,600
154,728
1,455,791
665,495
1,601,458
12,873
(158,540)
1,455,791
737,324
16,191
(88,020)
665,495
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Independence Group NL
34
Independence Group NL
35
62 Independence Group NL
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated statement of changes in equity
For the year ended 30 June 2016
Issued
capital
$'000
Accumulated
losses
$'000
Hedging
reserve
$'000
Share-
based
payments
reserve
$'000
Foreign
currency
translation
reserve
$'000
Acquisition
reserve
$'000
Total
equity
$'000
1 July 2014
Profit for the period
735,060
-
(139,031)
76,779
(2,038)
-
12,372
-
3,142
-
-
-
609,505
76,779
Other comprehensive income
Currency translation
differences - current
period
Effective portion of
changes in fair value of
cash flow hedges, net of
tax
Total comprehensive
income for the period
Transactions with
owners in their capacity
as owners:
Dividends paid
Share-based payments
expense
Issue of shares -
Employee Performance
Rights Plan
-
-
-
-
-
2,264
Balance at 30 June 2015
737,324
(88,020)
-
-
-
2,038
76,779
2,038
(25,768)
-
-
-
-
-
-
-
-
-
-
2,949
(2,264)
13,057
-
-
-
-
-
-
(8)
(8)
-
2,038
(8)
78,809
-
-
-
(25,768)
2,949
-
3,142
(8)
665,495
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Independence Group NL
35
Annual Report 2016 63
Consolidated statement of cash flows
For the year ended 30 June 2016
Notes
2016
$'000
2015
$'000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest and other costs of finance paid
Interest received
Payments for exploration expenditure
Receipts from other operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment and other investments
Payments for purchase of listed investments
Payments for development expenditure
Payments for capitalised exploration and evaluation expenditure
Payment for acquisition of subsidiary, net of cash acquired
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs associated with borrowings
Repayment of finance lease liabilities
Payment of dividends
Net cash inflow (outflow) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
19
7
441,317
(320,926)
120,391
(6,915)
1,587
(20,032)
163
95,194
(10,711)
16,961
(1,605)
(215,489)
(10,586)
(202,052)
(423,482)
271,000
-
(5,355)
(510)
(12,786)
252,349
(75,939)
121,296
907
46,264
527,425
(300,592)
226,833
(1,054)
1,351
(25,742)
325
201,713
(16,602)
336
(13,085)
(44,118)
(12,417)
(85,886)
-
-
(25,000)
(142)
(3,497)
(25,768)
(54,407)
61,420
56,972
2,904
121,296
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated statement of changes in equity
For the year ended 30 June 2016
(continued)
Issued
capital
$'000
Accumulated
losses
$'000
Hedging
reserve
$'000
Share-
based
payments
$'000
Acquisition
reserve
$'000
Foreign
currency
translation
reserve
$'000
Total
equity
$'000
737,324
(88,020)
-
13,057
3,142
(8)
665,495
-
1,036
(1,036)
-
-
-
-
737,324
(86,984)
(1,036)
13,057
3,142
(8)
665,495
1 July 2015
Adjustment on adoption of
AASB 9 (net of tax)
Restated total equity at the
1 July 2015
-
-
-
-
-
Loss for the period
Other comprehensive income
Effective portion of
changes in fair value of
cash flow hedges, net of
tax
Total comprehensive
loss for the period
Transactions with
owners in their capacity
as owners:
Dividends paid
Share-based payments
expense
Issue of shares -
Employee Performance
Rights Plan
Shares issued on
acquisition of subsidiary
3,505
860,629
(58,770)
-
-
(58,770)
404
404
(12,786)
-
-
-
-
-
-
-
-
-
-
-
819
(3,505)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(58,770)
404
(58,366)
(12,786)
819
-
860,629
Balance at 30 June 2016
1,601,458
(158,540)
(632)
10,371
3,142
(8)
1,455,791
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Independence Group NL
36
Independence Group NL
37
64 Independence Group NL
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated statement of cash flows
For the year ended 30 June 2016
Notes
2016
$'000
2015
$'000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest and other costs of finance paid
Interest received
Payments for exploration expenditure
Receipts from other operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment and other investments
Payments for purchase of listed investments
Payments for development expenditure
Payments for capitalised exploration and evaluation expenditure
Payment for acquisition of subsidiary, net of cash acquired
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs associated with borrowings
Repayment of finance lease liabilities
Payment of dividends
Net cash inflow (outflow) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
19
7
441,317
(320,926)
120,391
(6,915)
1,587
(20,032)
163
95,194
(10,711)
16,961
(1,605)
(215,489)
(10,586)
(202,052)
(423,482)
271,000
-
(5,355)
(510)
(12,786)
252,349
(75,939)
121,296
907
46,264
527,425
(300,592)
226,833
(1,054)
1,351
(25,742)
325
201,713
(16,602)
336
(13,085)
(44,118)
(12,417)
-
(85,886)
-
(25,000)
(142)
(3,497)
(25,768)
(54,407)
61,420
56,972
2,904
121,296
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Independence Group NL
37
Annual Report 2016 65
About this report
Independence Group NL is a company limited by shares incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group
are described in the directors' report.
The financial report of Independence Group NL (the Company) and its subsidiaries (collectively, the Group) for the year
ended 30 June 2016 was authorised for issue in accordance with a resolution of the Directors on 29 August 2016.
Basis of preparation
This financial report is a general purpose financial report, prepared by a for-profit entity, which:
•
•
•
•
•
•
Has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting
Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board
(IASB);
Has been prepared on a historical cost basis, as modified by the revaluation of available-for-sale financial assets,
financial assets and liabilities (including derivative instruments) at fair value through profit or loss and certain
classes of property, plant and equipment;
Is presented in Australian dollars with values rounded to the nearest thousand dollars or in certain cases, the
nearest dollar,
in accordance with the Australian Securities and Investments Commission "ASIC Corporation
Legislative Instrument 2016/191";
Presents comparative information where required for consistency with the current year's presentation;
Adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the
operations of the Group and effective for reporting periods beginning on or after 1 July 2015 as disclosed in note 31;
and
Does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet
effective with the exception of AASB 9 Financial Instruments (December 2010) as amended by 2013-0 (AASB 9
(2013)) including consequential amendments to other standards which was adopted on 1 July 2015. Refer to note
31 for further details.
This financial report has been re-designed with the aim of streamlining and improving readability. The notes to the
consolidated financial statements have been organised into logical groupings to help users find and understand the
information. Where possible, related information has been provided in the same note.
Key estimates and judgements
In the process of applying the Group's accounting policies, management has made a number of judgements and applied
judgement or complexity, or areas where
estimates of
assumptions and estimates are significant to the financial statements, are disclosed in the following notes:
future events. The areas involving a higher degree of
Note 5
Note 9
Note 12
Note 13
Note 14
Note 15
Note 26
Income tax expense
Inventories
Provisions
Property, plant and equipment
Mine properties
Exploration and evaluation expenditure
Share-based payments
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities
(subsidiaries) at year end is contained in note 23.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using
consistent accounting policies.
In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses
and profit and losses resulting from intra-Group transactions have been eliminated. Subsidiaries are consolidated from
the date on which control
is disposed. The acquisition of subsidiaries is
accounted for using the acquisition method of accounting.
is obtained to the date on which control
Independence Group NL
38
66 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial Performance
1
2
Segment information
Revenue
3 Other income
4
5
6
Expenses and losses
Income tax
Earnings per share
Working Capital Provisions
7
8
9
Cash and cash equivalents
Trade and other receivables
Inventories
10 Financial assets at fair value through profit or loss
11
Trade and other payables
12 Provisions
Invested capital
13 Property, plant and equipment
14 Mine properties
15 Exploration and evaluation
Capital structure and financing activities
16 Borrowings
17 Contributed equity
18 Reserves
19 Dividends paid and proposed
Risk
20 Derivatives
21 Financial risk management
Group structure
22 Business combination
23 Subsidiaries
Unrecognised items
24 Commitments and contingencies
25 Events occurring after the reporting period
Other information
26 Share-based payments
27 Related party transactions
28 Parent entity financial information
29 Deed of cross guarantee
30 Remuneration of auditors
31 Other accounting policies
68
68
71
72
72
72
76
77
77
78
78
79
80
80
82
82
84
86
88
88
89
90
92
93
93
96
105
105
107
108
108
109
110
110
112
113
114
117
117
Annual Report 2016 67
Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
Financial Performance
This section of the notes includes segment information and provides further information on key line items relevant to
financial performance that the Directors consider most relevant, including accounting policies, key judgements and
estimates relevant to understanding these items.
1
Segment information
(a)
Identification of reportable segments
Management has determined the operating segments based on the reports reviewed by the Board that are used to
make strategic decisions. The Group operates in predominantly only one geographic segment (ie. Australia) and has
identified the following operating segments, being the Tropicana Operation, the Long Operation, the Jaguar Operation,
the Nova Project and New Business and Regional Exploration Activities (New Business).
The Tropicana Operation represents the Group’s 30% joint venture interest in the Tropicana Gold Mine. AngloGold
Ashanti Australia Limited (AngloGold Ashanti) is the manager of the project and holds the remaining 70% interest.
Programs and budgets are provided by AngloGold Ashanti and are considered for approval by the Company's Board.
The Long Operation produces primarily nickel, together with copper, from which its revenue is derived. Revenue derived
by the Long Operation is received from one customer, being BHP Billiton Nickel West Pty Ltd. The Registered Manager
of the Long Operation is responsible for the budgets and expenditure of the operation, which includes exploration
activities on the mine’s tenure. The Long Operation and exploration properties are owned by the Group’s wholly owned
subsidiary Independence Long Pty Ltd.
The Jaguar Operation primarily produces copper and zinc concentrate. Revenue is derived from a single customer. The
General Manager of the Jaguar Operation is responsible for the budgets and expenditure of the operation, responsibility
for ore concentrate sales rests with the Chief Operating Officer. The Jaguar Operation and exploration properties are
owned by the Group’s wholly owned subsidiary Independence Jaguar Pty Ltd.
The Nova Project was acquired by the Company following the acquisition of Sirius Resources NL in September 2015.
The Nova Project comprises the construction and development of the Nova nickel, copper and cobalt mine, located east
of Norseman in Western Australia. The General Manager of the Nova Project is responsible for the budgets and
expenditure of the Project. During the construction phase, the Project Manager has responsibility for construction
budgets and costs.
The Group’s Chief Growth Officer is responsible for budgets and expenditure relating to the Group’s regional
exploration, scoping studies, feasibility studies and new business development. The New Business division does not
normally derive any income. Should a project generated by the New Business division commence generating income or
lead to the construction or acquisition of a mining operation, that operation would then be disaggregated from New
Business and become reportable in a different segment.
1
Segment information (continued)
(b) Segment results
Business
New
and
Regional
Year ended 30 June 2016
Tropicana
Operation
Long
Jaguar
Operation
Operation
Nova
Exploration
Project
Activities
$'000
$'000
$'000
$'000
$'000
Total
$'000
Revenue from external customers
214,998
63,796
132,773
Other revenue
-
130
214
Total segment revenue
214,998
63,926
132,987
-
30
30
411,567
374
411,941
Segment net operating profit (loss) before
64,330
(3,532)
17,317
(196)
(57,405)
20,514
Total segment assets
840,174
65,738
145,892
1,213,261
111,412 2,376,477
Total segment liabilities
36,813
35,200
22,816
682,152
33,588
810,569
Acquisition of property, plant and
4,540
1,638
1,779
516
8,473
Impairment loss before tax
-
-
-
35,518
35,518
Depreciation and amortisation
50,282
22,503
25,703
79
98,567
Other non-cash expenses
233
32
246
196
707
Year ended 30 June 2015
Revenue from external customers
218,966
110,834
163,675
Other revenue
-
589
341
Total segment revenue
218,966
111,423
164,016
Segment net operating profit (loss) before
76,117
32,110
47,585
(32,514)
123,298
Total segment assets
645,071
92,546
134,569
112,424
984,610
Total segment liabilities
31,748
36,180
24,374
33,914
126,216
Acquisition of property, plant and
Impairment loss before tax
1,652
-
4,622
1,229
8,256
-
Depreciation and amortisation
55,931
21,949
19,671
Other non-cash expenses
319
32
239
5
14,535
2,232
3,461
97
-
97,648
590
income tax
SPACE
SPACE
SPACE
equipment
SPACE
SPACE
SPACE
income tax
SPACE
SPACE
SPACE
equipment
SPACE
SPACE
SPACE
-
-
Total
-
28
28
493,475
958
494,433
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Independence Group NL
40
Independence Group NL
41
68 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
1
Segment information (continued)
(b) Segment results
Year ended 30 June 2016
Tropicana
Operation
$'000
Long
Operation
$'000
Jaguar
Operation
$'000
Nova
Project
$'000
New
Business
and
Regional
Exploration
Activities
$'000
Total
$'000
Revenue from external customers
Other revenue
214,998
-
63,796
130
132,773
214
Total segment revenue
214,998
63,926
132,987
-
-
-
-
30
30
411,567
374
411,941
Segment net operating profit (loss) before
income tax
SPACE
Total segment assets
SPACE
Total segment liabilities
SPACE
Acquisition of property, plant and
equipment
SPACE
Impairment loss before tax
SPACE
Depreciation and amortisation
SPACE
Other non-cash expenses
Year ended 30 June 2015
64,330
(3,532)
17,317
(196)
(57,405)
20,514
840,174
65,738
145,892
1,213,261
111,412 2,376,477
36,813
35,200
22,816
682,152
33,588
810,569
4,540
1,638
1,779
516
-
8,473
-
-
-
50,282
22,503
25,703
-
-
233
32
246
196
35,518
35,518
79
-
98,567
707
Revenue from external customers
Other revenue
218,966
-
110,834
589
163,675
341
Total segment revenue
218,966
111,423
164,016
Segment net operating profit (loss) before
income tax
SPACE
Total segment assets
SPACE
Total segment liabilities
SPACE
Acquisition of property, plant and
equipment
SPACE
Impairment loss before tax
SPACE
Depreciation and amortisation
SPACE
Other non-cash expenses
76,117
32,110
47,585
645,071
92,546
134,569
31,748
36,180
24,374
1,652
-
4,622
1,229
8,256
-
55,931
21,949
19,671
319
32
239
Total
-
28
28
493,475
958
494,433
(32,514)
123,298
112,424
984,610
33,914
126,216
5
14,535
2,232
3,461
97
-
97,648
590
-
-
-
-
-
-
-
-
-
-
Independence Group NL
41
Annual Report 2016 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
1
Segment information (continued)
(c) Segment revenue
A reconciliation of reportable segment revenue to total revenue is as follows:
A reconciliation of reportable segment liabilities to total liabilities is as follows:
Revenue from external customers
Other revenue from continuing operations
Total revenue
2016
$'000
411,941
1,247
413,188
2015
$'000
494,433
893
495,326
Revenues for the Long Operation are all derived from a single customer, being BHP Billiton Nickel West Pty Ltd.
Revenues for the Jaguar Operation were derived from a single customer during the year.
Revenues for the Tropicana Operation were derived from various customers during the year.
(d) Segment net profit (loss) before income tax
A reconciliation of reportable segment net profit before income tax to net (loss) profit before income tax is as follows:
Segment net operating profit before income tax
Interest revenue on corporate cash balances and other unallocated revenue
Unrealised gains on financial assets
Share-based payments expense
Other corporate costs and unallocated other income
Borrowing and finance costs
Acquisition and other integration costs
Total net (loss) profit before tax
(e) Segment assets
2016
$'000
20,514
1,247
2,396
(819)
(17,349)
(64)
(65,137)
(59,212)
2015
$'000
123,298
893
1,467
(2,949)
(11,363)
(1,385)
-
109,961
A reconciliation of reportable segment assets to total assets is as follows:
(a) Recognition and measurement
Total assets for reportable segments
Intersegment eliminations
Unallocated assets:
Deferred tax assets
Listed equity securities
Cash and receivables held by the parent entity
Office and general plant and equipment
Total assets as per the balance sheet
2016
$'000
2015
$'000
2,376,477
(616,812)
984,610
(389,508)
219,427
4,989
18,967
4,343
2,007,391
130,517
15,524
75,812
3,268
820,223
Revenue is measured at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the Group and revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
Revenue from the sale of goods is recognised when there is persuasive evidence indicating that there has been a
transfer of risks and rewards to the customer.
Sales revenue comprises gross revenue earned, net of treatment and refining charges where applicable, from the
provision of product to customers, and includes hedging gains and losses. Sales are initially recognised at estimated
sales value when the product is sold. Adjustments are made for variations in metals price, assay, weight and currency
between the time of sale and the time of final settlement of sales proceeds.
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to the net carrying amount of the financial asset.
Independence Group NL
42
Independence Group NL
43
70 Independence Group NL
1
Segment information (continued)
(f) Segment liabilities
Total liabilities for reportable segments
Intersegment eliminations
Unallocated liabilities:
Deferred tax liabilities
Creditors and accruals
Provision for employee entitlements
Bank loans
Total liabilities as per the balance sheet
2 Revenue
Sales revenue
Sale of goods
Other revenue
Interest revenue
Other revenue
Total revenue
Sale of goods
Interest income
2016
$'000
810,569
(690,382)
100,949
63,358
1,280
265,826
551,600
2015
$'000
126,216
(55,005)
73,980
8,225
1,312
-
154,728
2016
$'000
2015
$'000
411,567
411,567
493,475
493,475
1,458
163
1,621
1,396
455
1,851
413,188
495,326
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
1
Segment information (continued)
(f) Segment liabilities
A reconciliation of reportable segment liabilities to total liabilities is as follows:
Total liabilities for reportable segments
Intersegment eliminations
Unallocated liabilities:
Deferred tax liabilities
Creditors and accruals
Provision for employee entitlements
Bank loans
Total liabilities as per the balance sheet
2 Revenue
Sales revenue
Sale of goods
Other revenue
Interest revenue
Other revenue
Total revenue
2016
$'000
810,569
(690,382)
100,949
63,358
1,280
265,826
551,600
2015
$'000
126,216
(55,005)
73,980
8,225
1,312
-
154,728
2016
$'000
2015
$'000
411,567
411,567
493,475
493,475
1,458
163
1,621
1,396
455
1,851
413,188
495,326
(a) Recognition and measurement
Revenue is measured at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the Group and revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when there is persuasive evidence indicating that there has been a
transfer of risks and rewards to the customer.
Sales revenue comprises gross revenue earned, net of treatment and refining charges where applicable, from the
provision of product to customers, and includes hedging gains and losses. Sales are initially recognised at estimated
sales value when the product is sold. Adjustments are made for variations in metals price, assay, weight and currency
between the time of sale and the time of final settlement of sales proceeds.
Interest income
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to the net carrying amount of the financial asset.
Independence Group NL
43
Annual Report 2016 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
3 Other income
Net gain on disposal of property, plant and equipment
Net foreign exchange gains
Net gain on sale of investments
Net gain on disposal of tenements
4
Expenses and losses
Cost of sale of goods
Employee benefits expenses
Share-based payments expense
Exploration costs expensed
Rental expense relating to operating leases
Rehabilitation and restoration borrowing costs
Impairment of exploration and evaluation expenditure
Net loss of sale of property, plant and equipment
Amortisation expense
Depreciation
Depreciation expense
Less : amounts capitalised
Depreciation expensed
Borrowing and finance costs
Borrowing and finance costs - other entities
Amortisation of borrowing costs
Less: amounts capitalised
Finance costs expensed
5
Income tax
(a)
Income tax expense
The major components of income tax expense are:
Deferred income tax expense
Current income tax (benefit) expense
Income tax (benefit) expense
Deferred income tax revenue (expense) included in income tax expense comprises:
(Increase) decrease in deferred tax assets
Increase in deferred tax liabilities
Income tax (benefit) expense
2016
$'000
-
907
1,433
1,522
3,862
2016
$'000
233,880
66,975
819
19,720
1,473
707
35,518
219
84,843
15,759
(907)
14,852
10,729
402
(11,055)
76
2016
$'000
17,087
(17,529)
(442)
(25,141)
24,699
(442)
2015
$'000
211
2,892
-
165
3,268
2015
$'000
239,745
63,841
2,949
25,263
1,273
590
3,461
-
81,911
16,640
-
16,640
857
709
-
1,566
2015
$'000
15,841
17,341
33,182
22,068
11,114
33,182
5
Income tax (continued)
(b) Amounts recognised directly in equity
Deferred income tax benefit (expense) related to items charged or credited to other
comprehensive income:
Recognition of hedge contracts
Income tax expense reported in equity
(c) Numerical reconciliation of income tax expense to prima facie tax payable
(Loss) profit from continuing operations before income tax expense
Tax (benefit) expense at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Share-based payments
Non-deductible costs associated with acquisition of subsidiary
Other non-deductible items
Previously unrecognised capital losses brought to account
Difference in overseas tax rates
Overseas tax losses not brought to account
Adjustments for current tax of prior periods
Income tax (benefit) expense
(d) Reconciliation of carry forward tax losses, income tax paid and effective income tax rate
Tax effected balances at 30%
Carry forward tax losses at the beginning of the year
Tax losses arising (recouped) from current income tax benefit (expense)
Tax losses acquired through business combination
Income tax paid during the year
Carry forward tax losses at the end of the year
Effective income tax rate
-%
-%
2016
$'000
173
173
2016
$'000
(59,212)
(17,764)
(1,378)
19,234
17
(721)
20
56
94
2016
$'000
92,958
17,529
56,019
-
2015
$'000
1,074
1,074
2015
$'000
109,961
32,988
(318)
-
296
(52)
42
116
110
2015
$'000
110,299
(17,341)
-
-
(442)
33,182
59,654
(143,143)
166,506
92,958
Independence Group NL
44
Independence Group NL
45
72 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
5
Income tax (continued)
(b) Amounts recognised directly in equity
Deferred income tax benefit (expense) related to items charged or credited to other
comprehensive income:
Recognition of hedge contracts
Income tax expense reported in equity
(c) Numerical reconciliation of income tax expense to prima facie tax payable
(Loss) profit from continuing operations before income tax expense
Tax (benefit) expense at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Share-based payments
Non-deductible costs associated with acquisition of subsidiary
Other non-deductible items
Previously unrecognised capital losses brought to account
Difference in overseas tax rates
Overseas tax losses not brought to account
Adjustments for current tax of prior periods
Income tax (benefit) expense
2016
$'000
173
173
2016
$'000
(59,212)
(17,764)
(1,378)
19,234
17
(721)
20
56
94
(442)
2015
$'000
1,074
1,074
2015
$'000
109,961
32,988
(318)
-
296
(52)
42
116
110
33,182
(d) Reconciliation of carry forward tax losses, income tax paid and effective income tax rate
59,654
(143,143)
Tax effected balances at 30%
Carry forward tax losses at the beginning of the year
Tax losses arising (recouped) from current income tax benefit (expense)
Tax losses acquired through business combination
Income tax paid during the year
Carry forward tax losses at the end of the year
2016
$'000
2015
$'000
92,958
17,529
56,019
-
166,506
110,299
(17,341)
-
-
92,958
Effective income tax rate
-%
-%
Independence Group NL
45
Annual Report 2016 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 5
Income tax (continued)
(g) Recognition and measurement (continued)
Current taxes (continued)
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 Company's subsidiaries and associates 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 taxes
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
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 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 tax
bases of investments in foreign operations where the company 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.
Offsetting deferred tax balances
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.
(h) Significant estimates
The Group is subject
to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining deferred tax assets and liabilities. There are many transactions and calculations
during the ordinary course of business for which the ultimate tax determination is uncertain.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probably that future forecast taxable profits are available to utilise those temporary differences and losses, and the tax
losses continue to be available having regard to the relevant tax legislation associated with their recoupment.
The Australian consolidated tax group has recognised a deferred tax asset relating to carry forward tax losses of
$166,506,000 at 30 June 2016 (2015: $92,958,000). The utilisation of this deferred tax asset amount depends upon
future taxable amounts in excess of profits arising from the reversal of temporary differences. The Group believes this
amount to be recoverable based on taxable income projections.
Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
5
Income tax (continued)
(e) Deferred tax assets and liabilities
Balance Sheet
Profit or loss
Equity
2016
$'000
2015
$'000
2016
$'000
2015
$'000
2016
$'000
2015
$'000
Acquisition of
Subsidiary
2016
$'000
2015
$'000
Deferred tax liabilities
Capitalised exploration
expenditure
Mine properties
Deferred gains and losses
on hedging contracts
Trade debtors
Consumable inventories
Other
(20,393)
(73,270)
(24,914)
(44,443)
(4,521)
26,853
(6,021)
18,851
(1,440)
(3,932)
(1,700)
(214)
(1,467)
(1,377)
(1,748)
(31)
(323)
2,555
(48)
183
(697)
(1,508)
489
-
Gross deferred tax liabilities
(100,949)
(73,980)
24,699
11,114
-
-
296
-
-
-
296
-
-
-
1,974
1,264
-
-
-
1,264
-
-
-
-
1,974
Deferred tax assets
Property, plant and
equipment
Deferred losses on hedged
commodity contracts
Concentrate inventories
Business-related capital
allowances
Provision for employee
entitlements
Provision for rehabilitation
Mining information
Carry forward tax losses
Other
1,711
-
5,007
2,654
19,908
1,022
166,506
1,249
21,370
20,640
(730)
3,379
-
-
-
-
-
(684)
398
1,148
(366)
(123)
-
(190)
-
904
398
908
1,554
494
2,700
8,298
1,392
92,958
2,319
46
(9,636)
370
(17,529)
1,070
(313)
(1,093)
1,288
17,341
190
-
-
-
-
-
-
-
-
-
-
-
-
(5,653)
-
(1,974)
-
(56,019)
-
Gross deferred tax assets
219,427
130,517
(25,141)
22,068
(123)
(190)
(63,646)
Deferred tax expense
(benefit)
(f) Tax losses
118,478
56,537
(442)
33,182
173
1,074
(61,672)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In addition to the above recognised tax losses, the Group also has the following capital tax losses for which no deferred
tax asset has been recognised:
Unrecognised capital tax losses
Potential tax benefit @ 30% (2015: 30%)
(g) Recognition and measurement
2016
$'000
-
-
2015
$'000
2,403
721
Current taxes
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.
Independence Group NL
46
Independence Group NL
47
74 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
5
Income tax (continued)
(g) Recognition and measurement (continued)
Current taxes (continued)
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 Company's subsidiaries and associates 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 taxes
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
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 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 tax
bases of investments in foreign operations where the company 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.
Offsetting deferred tax balances
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.
(h) Significant estimates
to income taxes in Australia and jurisdictions where it has foreign operations. Significant
The Group is subject
judgement is required in determining deferred tax assets and liabilities. There are many transactions and calculations
during the ordinary course of business for which the ultimate tax determination is uncertain.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probably that future forecast taxable profits are available to utilise those temporary differences and losses, and the tax
losses continue to be available having regard to the relevant tax legislation associated with their recoupment.
The Australian consolidated tax group has recognised a deferred tax asset relating to carry forward tax losses of
$166,506,000 at 30 June 2016 (2015: $92,958,000). The utilisation of this deferred tax asset amount depends upon
future taxable amounts in excess of profits arising from the reversal of temporary differences. The Group believes this
amount to be recoverable based on taxable income projections.
Independence Group NL
47
Annual Report 2016 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
6
Earnings per share
(a) Earnings used in calculating earnings per share
Loss used in calculating basic and diluted earnings per share attributable to ordinary equity holders of the parent is
$58,770,000 (2015: $76,779,000 profit).
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Share rights
2016
Number
2015
Number
448,064,084
234,248,549
-
2,183,588
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
448,064,084
236,432,137
(c)
Information concerning the classification of securities
Share rights
There are share rights granted to executives and employees under the Company's Employee Performance Rights Plan
that are not included in the calculation of diluted earnings per share because they are anti-dilutive for the current period.
Share rights have been included in the determination of diluted earnings per share in the prior period to the extent that
they were dilutive. The rights are not included in the determination of basic earnings per share. Further information
about the share rights is provided in note 26.
(d) Calculation of earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
(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.
Working Capital Provisions
This section of the notes provides further information about the Group's working capital and provisions, including
accounting policies and key judgements and estimates relevant to understanding these items.
7 Cash and cash equivalents
Cash at bank and in hand
Deposits at call
The Group has cash balances of $2,360,000 (2015: $2,226,000) not generally available for use as the balances are
held by the Tropicana Joint Venture and may only be used in relation to joint venture expenditure.
The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in
note 21.
(a) Reconciliation of (loss) profit after income tax to net cash inflow from operating activities
(Loss) profit for the period
Depreciation and amortisation
Impairment of exploration and evaluation expenditure
Net (gain) loss on sale of non-current assets
Fair value of movement of financial investments
Non-cash employee benefits expense - share-based payments
Amortisation of borrowing expenses
Amortisation of lease incentive
Foreign exchange gains (losses) on cash balances
Change in operating assets and liabilities:
(Increase) decrease in trade receivables
(Increase) in inventories
(Increase) decrease in deferred tax assets
(Increase) decrease in other operating receivables and prepayments
(Increase) decrease in derivative financial instruments
(Decrease) increase in trade and other payables
(Decrease) increase in deferred tax liabilities
(Decrease) increase in other provisions
Net cash inflow from operating activities
(b) Recognition and measurement
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an
original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value.
For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the
balance sheet.
2016
$'000
46,235
29
46,264
2015
$'000
121,247
49
121,296
2016
$'000
(58,770)
99,695
35,518
(2,736)
(2,374)
819
27
(72)
(907)
(6,488)
(12,914)
(25,264)
2,254
3,359
37,985
24,822
240
95,194
2015
$'000
76,779
98,551
3,461
(376)
(1,467)
2,949
709
(55)
(2,904)
11,348
(16,091)
21,878
(686)
(1,971)
(2,539)
11,304
823
201,713
Independence Group NL
48
Independence Group NL
49
76 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Working Capital Provisions
This section of the notes provides further information about the Group's working capital and provisions, including
accounting policies and key judgements and estimates relevant to understanding these items.
7 Cash and cash equivalents
Cash at bank and in hand
Deposits at call
2016
$'000
46,235
29
46,264
2015
$'000
121,247
49
121,296
The Group has cash balances of $2,360,000 (2015: $2,226,000) not generally available for use as the balances are
held by the Tropicana Joint Venture and may only be used in relation to joint venture expenditure.
The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in
note 21.
(a) Reconciliation of (loss) profit after income tax to net cash inflow from operating activities
(Loss) profit for the period
Depreciation and amortisation
Impairment of exploration and evaluation expenditure
Net (gain) loss on sale of non-current assets
Fair value of movement of financial investments
Non-cash employee benefits expense - share-based payments
Amortisation of borrowing expenses
Amortisation of lease incentive
Foreign exchange gains (losses) on cash balances
Change in operating assets and liabilities:
(Increase) decrease in trade receivables
(Increase) in inventories
(Increase) decrease in deferred tax assets
(Increase) decrease in other operating receivables and prepayments
(Increase) decrease in derivative financial instruments
(Decrease) increase in trade and other payables
(Decrease) increase in deferred tax liabilities
(Decrease) increase in other provisions
Net cash inflow from operating activities
(b) Recognition and measurement
2016
$'000
(58,770)
99,695
35,518
(2,736)
(2,374)
819
27
(72)
(907)
(6,488)
(12,914)
(25,264)
2,254
3,359
37,985
24,822
240
95,194
2015
$'000
76,779
98,551
3,461
(376)
(1,467)
2,949
709
(55)
(2,904)
11,348
(16,091)
21,878
(686)
(1,971)
(2,539)
11,304
823
201,713
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an
original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value.
For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the
balance sheet.
Independence Group NL
49
Annual Report 2016 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
8
Trade and other receivables
Trade receivables
GST Receivable
Sundry debtors
Prepayments
2016
$'000
21,561
3,804
2,741
2,794
30,900
2015
$'000
13,481
1,924
3,442
3,239
22,086
No balances within trade and other receivables contain impaired assets. The balance of trade receivables includes
amounts of $1,448,000 (2015: $nil) that are past due but not impaired.
(a) Change in accounting policy
The Group has early adopted AASB 9 Financial Instruments (AASB 9) with effect from 1 July 2015. AASB 9 introduces
a new impairment model for financial assets at amortised cost (including trade receivables). The new model did not
have a material impact on the Group's assessment of its doubtful debt provision for the 2016 financial year which was
assessed as $nil.
(b) Recognition and measurement
(i) Trade receivables
Trade receivables are generally received up to four months after the shipment date. The receivables are initially
recognised at fair value.
Trade receivables are subsequently revalued by the marking-to-market of open sales. The Group determines
mark-to-market prices using forward prices at each period end for copper and zinc concentrates and nickel ore.
(ii)
Impairment of trade receivables
Collectibility of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible
are written off when identified. An allowance is made for doubtful debts based on credit losses expected over the life of
the trade receivable taking into account information about past events, current conditions and forecasts of further
economic conditions. On confirmation that the trade receivable will not be collectible, the gross carrying value of the
asset is written off against the associated provision.
9
Inventories
Current
Mine spares and stores - at cost
ROM inventory - at cost
Concentrate inventory - at cost
Concentrate inventory - at net realisable value
Work in progress - gold in process
Gold in circuit
Gold dore
Non-current
ROM inventory - at cost
2016
$'000
2015
$'000
16,368
19,513
7,058
-
1,175
1,145
1,239
46,498
16,103
9,670
4,726
5,696
881
798
2,424
40,298
31,995
31,995
24,979
24,979
Inventory classified as non-current relates to 0.6g/t to 1.2g/t grade gold ore stockpiles which are not intended to be
utilised within the next 12 months but will be utilised beyond that period.
9
Inventories (continued)
(a) Classification of inventory
(b) Recognition and measurement
(i) Ore, concentrate and gold inventories
included in the cost of inventory.
(ii) Stores and fuel
Inventories, comprising copper and zinc in concentrate, gold dore, gold in circuit and ore stockpiles, are valued at the
lower of weighted average cost and net realisable value. Costs include fixed direct costs, variable direct costs and an
appropriate portion of fixed overhead costs. A portion of the related depreciation, depletion and amortisation charge is
Inventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Cost is
assigned on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of
business less estimated costs of completion, and the estimated costs necessary to make the sale.
The recoverable amount of surplus items is assessed regularly on an ongoing basis and written down to its net
realisable value when an impairment indicator is present.
(c) Key estimates and judgements
The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed net realisable
value. In determining net realisable value various factors are taken into account, including estimated future sales price
of the product based on prevailing spot metals prices at the reporting date, less estimated costs to complete production
and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the amount of
contained metal based on assay data, and the estimated recovery percentage based on the expected processing
method.
10 Financial assets at fair value through profit or loss
Shares in Australian listed and unlisted companies - at fair value through profit or loss
2016
$'000
5,017
5,017
2015
$'000
15,574
15,574
(a) Amounts recognised in profit or loss
During the current year, the changes in fair values of financial assets resulted in a gain to the profit or loss of
$2,374,000 (2015: $1,467,000). Changes in fair values of financial assets at fair value through profit or loss are
recorded in fair value of financial investments in the profit or loss.
(b) Recognition and measurement
The Group classifies financial assets at fair value through profit or loss if they are acquired principally for the purpose of
selling in the short term, ie are held for trading. They are presented as current assets if they are expected to be sold
within 12 months after the end of the reporting period; otherwise they are presented as non-current assets.
Independence Group NL
50
Independence Group NL
51
78 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
9
Inventories (continued)
(a) Classification of inventory
Inventory classified as non-current relates to 0.6g/t to 1.2g/t grade gold ore stockpiles which are not intended to be
utilised within the next 12 months but will be utilised beyond that period.
(b) Recognition and measurement
(i) Ore, concentrate and gold inventories
Inventories, comprising copper and zinc in concentrate, gold dore, gold in circuit and ore stockpiles, are valued at the
lower of weighted average cost and net realisable value. Costs include fixed direct costs, variable direct costs and an
appropriate portion of fixed overhead costs. A portion of the related depreciation, depletion and amortisation charge is
included in the cost of inventory.
(ii) Stores and fuel
Inventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Cost is
assigned on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of
business less estimated costs of completion, and the estimated costs necessary to make the sale.
The recoverable amount of surplus items is assessed regularly on an ongoing basis and written down to its net
realisable value when an impairment indicator is present.
(c) Key estimates and judgements
The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed net realisable
value. In determining net realisable value various factors are taken into account, including estimated future sales price
of the product based on prevailing spot metals prices at the reporting date, less estimated costs to complete production
and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the amount of
contained metal based on assay data, and the estimated recovery percentage based on the expected processing
method.
10 Financial assets at fair value through profit or loss
Shares in Australian listed and unlisted companies - at fair value through profit or loss
2016
$'000
5,017
5,017
2015
$'000
15,574
15,574
(a) Amounts recognised in profit or loss
During the current year, the changes in fair values of financial assets resulted in a gain to the profit or loss of
$2,374,000 (2015: $1,467,000). Changes in fair values of financial assets at fair value through profit or loss are
recorded in fair value of financial investments in the profit or loss.
(b) Recognition and measurement
The Group classifies financial assets at fair value through profit or loss if they are acquired principally for the purpose of
selling in the short term, ie are held for trading. They are presented as current assets if they are expected to be sold
within 12 months after the end of the reporting period; otherwise they are presented as non-current assets.
Independence Group NL
51
Annual Report 2016 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
11 Trade and other payables
Current liabilities
Trade payables
Other payables
(a) Recognition and measurement
2016
$'000
9,933
97,199
107,132
2015
$'000
8,918
31,558
40,476
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
12 Provisions
Current
Provision for employee entitlements
Non-current
Provision for employee entitlements
Provision for rehabilitation costs
(a) Movements in provisions
Movements in the provision for rehabilitation costs during the financial year are set out below:
Carrying amount at beginning of financial year
Additional provision
Additional provision on acquisition of subsidiary
Rehabilitation and restoration borrowing costs expense
Payments during the period
Carrying amount at end of financial year
(b) Recognition and measurement
2016
$'000
6,901
6,901
2016
$'000
1,946
66,359
68,305
2016
$'000
27,660
31,439
6,579
707
(26)
66,359
2015
$'000
7,274
7,274
2015
$'000
1,727
27,660
29,387
2015
$'000
24,018
3,120
-
590
(68)
27,660
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are not recognised for future operating losses.
12 Provisions (continued)
(b) Recognition and measurement (continued)
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the liability. The
increase in the provision due to the passage of time is recognised as rehabilitation and restoration borrowing expense in
the profit or loss.
(i) Rehabilitation and restoration
Long-term environmental obligations are based on the Group’s environmental management plans, in compliance with
current environmental and regulatory requirements.
Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance
that has occurred up to the reporting date. To the extent that future economic benefits are expected to arise, these costs
are capitalised and amortised over the remaining lives of the mines.
Annual increases in the provision relating to the change in the net present value of the provision are recognised as
finance costs. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in
legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale
of assets or from plant clean-up at closure.
The provision for employee benefits represents annual
leave and long service leave entitlements accrued by
(ii) Employee benefits
employees.
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees’ services up to the end of the reporting period 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 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. 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 national Government bonds with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
(c) Key estimates and judgements
Rehabilitation and restoration provisions
The provision for rehabilitation and restoration costs is based on the net present value of the estimated cost of restoring
the environmental disturbance that has occurred up to the reporting date. Significant estimates and assumptions are
made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate
liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological
changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates. These
uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at
reporting date represents management’s best estimate of the present value of the future rehabilitation costs required.
Long service leave
Long service leave is measured at the present value of benefits accumulated up to the end of the reporting period. The
liability is discounted using an appropriate discount
rate. Management
requires judgement
to determine key
assumptions used in the calculation, including future increases in salaries and wages, future on-costs rates and future
settlement dates of employees' departures.
Independence Group NL
52
Independence Group NL
53
80 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
12 Provisions (continued)
(b) Recognition and measurement (continued)
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the liability. The
increase in the provision due to the passage of time is recognised as rehabilitation and restoration borrowing expense in
the profit or loss.
(i) Rehabilitation and restoration
Long-term environmental obligations are based on the Group’s environmental management plans, in compliance with
current environmental and regulatory requirements.
Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance
that has occurred up to the reporting date. To the extent that future economic benefits are expected to arise, these costs
are capitalised and amortised over the remaining lives of the mines.
Annual increases in the provision relating to the change in the net present value of the provision are recognised as
finance costs. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in
legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale
of assets or from plant clean-up at closure.
(ii) Employee benefits
The provision for employee benefits represents annual
employees.
leave and long service leave entitlements accrued by
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees’ services up to the end of the reporting period 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 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. 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 national Government bonds with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
(c) Key estimates and judgements
Rehabilitation and restoration provisions
The provision for rehabilitation and restoration costs is based on the net present value of the estimated cost of restoring
the environmental disturbance that has occurred up to the reporting date. Significant estimates and assumptions are
made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate
liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological
changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates. These
uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at
reporting date represents management’s best estimate of the present value of the future rehabilitation costs required.
Long service leave
Long service leave is measured at the present value of benefits accumulated up to the end of the reporting period. The
liability is discounted using an appropriate discount
to determine key
assumptions used in the calculation, including future increases in salaries and wages, future on-costs rates and future
settlement dates of employees' departures.
requires judgement
rate. Management
Independence Group NL
53
Annual Report 2016 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
Invested Capital
This section of the notes provides further information about property, plant and equipment, mine properties and
exploration and evaluation expenditure and the carrying amount of these non-financial assets, including accounting
policies, key judgements and estimates relevant to understanding these items.
13 Property, plant and equipment
Land and
buildings
$'000
Mining plant
and
equipment
$'000
Furniture,
fittings and
other
equipment
$'000
Motor
vehicles
$'000
Assets under
construction
$'000
Total
$'000
39,383
133,754
11,773
5,900
2,534
193,344
(20,288)
(114,240)
19,095
19,514
(7,704)
4,069
(3,803)
2,097
-
(146,035)
2,534
47,309
20,041
1,113
412
1,332
(127)
(3,676)
19,095
20,086
1,010
6,045
2,297
(87)
(9,837)
19,514
2,467
510
1,777
847
(22)
(1,510)
4,069
1,219
788
780
70
(24)
(736)
2,097
3,431
11
1,378
(2,286)
-
-
2,534
47,244
3,432
10,392
2,260
(260)
(15,759)
47,309
36,176
127,953
8,490
4,440
3,431
180,490
(16,135)
(107,867)
20,041
20,086
(6,023)
2,467
(3,221)
1,219
-
(133,246)
3,431
47,244
23,424
112
70
-
(3,565)
20,041
16,916
11,009
3,628
(127)
(11,340)
20,086
2,609
926
185
-
(1,253)
2,467
3,874
383
(2,536)
(20)
(482)
1,219
407
3,338
(314)
-
-
3,431
47,230
15,768
1,033
(147)
(16,640)
47,244
Year ended 30 June 2016
Cost
Accumulated depreciation
and impairment
Net book amount
Movements
Opening net book amount
Acquisition of subsidiary
Additions
Transfers
Disposals
Depreciation charge
Closing net book amount
Year ended 30 June 2015
Cost
Accumulated depreciation
and impairment
Net book amount
Movements
Opening net book amount
Additions
Transfers
Disposals
Depreciation charge
Closing net book amount
(a) Leased assets
Plant and equipment includes the following amounts where the Group is a lessee under a finance lease:
Leased equipment
Cost
Accumulation depreciation
Net book amount
Independence Group NL
82 Independence Group NL
2016
$'000
-
-
-
2015
$'000
3,903
(3,424)
479
54
13 Property, plant and equipment (continued)
(b) Non-current assets pledged as security
Refer to note 16 for information on non-current assets pledged as security by the Group.
(c) Recognition and measurement
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. It also
includes the direct cost of bringing the asset to the location and condition necessary for first use and the estimated
future cost of rehabilitation, where applicable. The assets are subsequently measured at cost less accumulated
depreciation and any accumulated impairment losses.
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 profit or loss during the reporting period in which they
Land is not depreciated. Depreciation on other assets is calculated using either units-of-production or straight-line
are incurred.
Depreciation
depreciation as follows:
Depreciation periods are primarily:
Buildings
Mining plant and equipment
Motor vehicles
Furniture and fittings
Leased assets
5 - 10 years
2 - 10 years
3 - 8 years
3 - 10 years
3 - 4 years
Depreciation is expensed as incurred, unless it relates to an asset or operation in the construction phase, in which case
it is capitalised.
Derecognition
item is derecognised.
period.
years).
An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is
expected to bring no future economic benefits. Any gain or loss from derecognising the asset (being the difference
between the proceeds of disposal and the carrying amount of the asset) is included in the profit or loss in the period the
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
(d) Key estimates and judgements
The estimations of useful lives, residual values and depreciation methods require significant management judgements
and are regularly reviewed. If they need to be modified, the depreciation and amortisation expense is accounted for
prospectively from the date of the assessment until the end of the revised useful life (for both the current and future
Independence Group NL
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
13 Property, plant and equipment (continued)
(b) Non-current assets pledged as security
Refer to note 16 for information on non-current assets pledged as security by the Group.
(c) Recognition and measurement
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. It also
includes the direct cost of bringing the asset to the location and condition necessary for first use and the estimated
future cost of rehabilitation, where applicable. The assets are subsequently measured at cost less accumulated
depreciation and any accumulated impairment losses.
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 profit or loss during the reporting period in which they
are incurred.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated using either units-of-production or straight-line
depreciation as follows:
Depreciation periods are primarily:
Buildings
Mining plant and equipment
Motor vehicles
Furniture and fittings
Leased assets
5 - 10 years
2 - 10 years
3 - 8 years
3 - 10 years
3 - 4 years
Depreciation is expensed as incurred, unless it relates to an asset or operation in the construction phase, in which case
it is capitalised.
Derecognition
An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is
expected to bring no future economic benefits. Any gain or loss from derecognising the asset (being the difference
between the proceeds of disposal and the carrying amount of the asset) is included in the profit or loss in the period the
item is derecognised.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
(d) Key estimates and judgements
The estimations of useful lives, residual values and depreciation methods require significant management judgements
and are regularly reviewed. If they need to be modified, the depreciation and amortisation expense is accounted for
prospectively from the date of the assessment until the end of the revised useful life (for both the current and future
years).
Independence Group NL
55
Annual Report 2016 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 14 Mine properties
Year ended 30 June 2016
Cost
Accumulated amortisation and impairment
Net book amount
Movements
Opening net book amount
Additions
Acquisition of subsidiary
Transfers from exploration and evaluation expenditure
Transfers to property, plant and equipment
Amortisation expense
Borrowing costs capitalised
Depreciation expense capitalised
Notes to the consolidated financial statements
30 June 2016
(continued)
Mine
properties in
development
$'000
Mine
properties in
production
$'000
Total mine
properties
$'000
1,197,011
-
1,197,011
685,668
(411,828)
1,882,679
(411,828)
273,840
1,470,851
-
200,273
984,776
-
-
-
11,055
907
303,300
47,057
-
10,586
(2,260)
(84,843)
-
-
303,300
247,330
984,776
10,586
(2,260)
(84,843)
11,055
907
Closing net book amount
1,197,011
273,840
1,470,851
Year ended 30 June 2015
Cost
Accumulated amortisation and impairment
Net book amount
Movements
Opening net book amount
Additions
Transfers from exploration and evaluation expenditure
Transfers to property, plant and equipment
Amortisation expense
Closing net book amount
(a) Recognition and measurement
-
-
-
-
-
-
-
-
-
630,285
(326,985)
630,285
(326,985)
303,300
303,300
329,279
46,356
10,609
(1,033)
(81,911)
303,300
329,279
46,356
10,609
(1,033)
(81,911)
303,300
(i) Mine properties
Mine properties in development
Mine properties in development represent the expenditure incurred when technical feasibility and commercial viability of
extracting a mineral resource have been demonstrated, and includes the costs incurred up until such time as the asset
is capable of being operated in a manner intended by management. These costs are not amortised but the carrying
value is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may
exceed its recoverable amount.
Notes to the consolidated financial statements
30 June 2016
(continued)
14 Mine properties (continued)
(a) Recognition and measurement (continued)
(i) Mine properties (continued)
Mine properties in production
Mine properties in production represent the accumulation of all acquisition, exploration, evaluation and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of the mineral resource
has commenced. When further development expenditure, including waste development and stripping, is incurred in
respect of a mine property after the commencement of production, such expenditure is carried forward as part of the
cost of that mine property only when substantial future economic benefits are established, otherwise such expenditure is
classified as part of the cost of production.
Amortisation is provided on a units-of-production basis, with separate calculations being made for each mineral
resource. The units-of-production method results in an amortisation charge proportional
to the depletion of
the
economically recoverable mineral resources (comprising proven and probable reserves).
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest. An impairment exists when the carrying value of mine properties exceeds its
estimated recoverable amount. The asset is then written down to its recoverable amount and the impairment losses are
recognised in profit or loss.
(ii) Deferred stripping
Stripping activity costs incurred in the development phase of a mine are capitalised as part of the cost of constructing
the mine and subsequently amortised over the life of the mine on a units-of-production basis.
Stripping activity incurred during the production phase of a mine is assessed as to whether the benefit accruing from
that activity is to provide access to ore that can be used to produce ore inventory, or whether it in addition provides
improved access to ore that will be mined in future periods.
To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the Group accounts
for those stripping activity costs in accordance with AASB102 Inventories. A stripping activity asset is brought to account
if it is probable that future economic benefits (improved access to the ore body) will flow to the Group, the component of
the ore body for which access has been improved can be identified and costs relating to the stripping activity can be
measured reliably.
The amount of stripping activity costs that are capitalised is determined based on a comparison of the stripping ratio in
the relevant period with the life of mine stripping ratio. To the extent that there is a period of sustained stripping that
exceeds the average life of mine stripping ratio, mine waste stripping costs are capitalised to the stripping activity asset.
Such capitalised costs are amortised over the life of that mine on a units-of-production basis. The life of mine ratio is
based on ore reserves of the mine. Changes to the life of mine are accounted for prospectively.
(b) Key estimates and judgements
(i) Proved and probable ore reserves
The Group uses the concept of a life of mine as an accounting value to determine the amortisation of mine properties. In
determining life of mine, the Group prepares ore reserve estimates in accordance with the JORC Code 2012, guidelines
prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia. The estimate of these proved and probable ore reserves, by
their very nature, require judgements, estimates and assumptions.
Where the proved and probable reserve estimates need to be modified, the amortisation expense is accounted for
prospectively from the date of the assessment until the end of the revised mine life (for both the current and future
years).
(ii) Deferred stripping
The Group defers advanced stripping costs incurred during the production stage of its operations. This calculation
requires the use of judgements and estimates, such as estimates of tonnes of waste to be removed over the life of the
mining area and economically recoverable reserves extracted as a result. Changes in a mine's life and design may
result in changes to the expected stripping ratio (waste to mineral reserves ratio). Any resulting changes are accounted
for prospectively.
Independence Group NL
56
Independence Group NL
57
84 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
14 Mine properties (continued)
(a) Recognition and measurement (continued)
(i) Mine properties (continued)
Mine properties in production
Mine properties in production represent the accumulation of all acquisition, exploration, evaluation and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of the mineral resource
has commenced. When further development expenditure, including waste development and stripping, is incurred in
respect of a mine property after the commencement of production, such expenditure is carried forward as part of the
cost of that mine property only when substantial future economic benefits are established, otherwise such expenditure is
classified as part of the cost of production.
Amortisation is provided on a units-of-production basis, with separate calculations being made for each mineral
resource. The units-of-production method results in an amortisation charge proportional
the
economically recoverable mineral resources (comprising proven and probable reserves).
to the depletion of
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest. An impairment exists when the carrying value of mine properties exceeds its
estimated recoverable amount. The asset is then written down to its recoverable amount and the impairment losses are
recognised in profit or loss.
(ii) Deferred stripping
Stripping activity costs incurred in the development phase of a mine are capitalised as part of the cost of constructing
the mine and subsequently amortised over the life of the mine on a units-of-production basis.
Stripping activity incurred during the production phase of a mine is assessed as to whether the benefit accruing from
that activity is to provide access to ore that can be used to produce ore inventory, or whether it in addition provides
improved access to ore that will be mined in future periods.
To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the Group accounts
for those stripping activity costs in accordance with AASB102 Inventories. A stripping activity asset is brought to account
if it is probable that future economic benefits (improved access to the ore body) will flow to the Group, the component of
the ore body for which access has been improved can be identified and costs relating to the stripping activity can be
measured reliably.
The amount of stripping activity costs that are capitalised is determined based on a comparison of the stripping ratio in
the relevant period with the life of mine stripping ratio. To the extent that there is a period of sustained stripping that
exceeds the average life of mine stripping ratio, mine waste stripping costs are capitalised to the stripping activity asset.
Such capitalised costs are amortised over the life of that mine on a units-of-production basis. The life of mine ratio is
based on ore reserves of the mine. Changes to the life of mine are accounted for prospectively.
(b) Key estimates and judgements
(i) Proved and probable ore reserves
The Group uses the concept of a life of mine as an accounting value to determine the amortisation of mine properties. In
determining life of mine, the Group prepares ore reserve estimates in accordance with the JORC Code 2012, guidelines
prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia. The estimate of these proved and probable ore reserves, by
their very nature, require judgements, estimates and assumptions.
Where the proved and probable reserve estimates need to be modified, the amortisation expense is accounted for
prospectively from the date of the assessment until the end of the revised mine life (for both the current and future
years).
(ii) Deferred stripping
The Group defers advanced stripping costs incurred during the production stage of its operations. This calculation
requires the use of judgements and estimates, such as estimates of tonnes of waste to be removed over the life of the
mining area and economically recoverable reserves extracted as a result. Changes in a mine's life and design may
result in changes to the expected stripping ratio (waste to mineral reserves ratio). Any resulting changes are accounted
for prospectively.
Independence Group NL
57
Annual Report 2016 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
15 Exploration and evaluation (continued)
(b) Recognition and measurement (continued)
evaluation phase.
(c) Key estimates and judgements
Upon approval for the commercial development of an area of interest, exploration and evaluation assets are tested for
impairment and transferred to 'Mine properties in development'. No amortisation is charged during the exploration and
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on the successful
development and commercial exploitation, or alternatively, sale of the respective area of interest.
The Group reviews the carrying value of exploration and evaluation expenditure on a regular basis to determine whether
economic quantities of reserves have been found or whether further exploration and evaluation work is underway or
planned to support continued carry forward of capitalised costs. This assessment requires judgement as to the status of
the individual projects and their estimated recoverable amount.
15 Exploration and evaluation
Jaguar
Operation
$'000
Long
Operation
$'000
Nova Project
$'000
Stockman
Project
$'000
Karlawinda
$'000
Total
$'000
8,235
-
3,152
-
(2,985)
(3,152)
5,250
9,888
1,611
(2,232)
(1,032)
8,235
-
-
7,434
-
-
-
34,100
-
-
-
100,716
-
-
-
(32,533)
(7,434)
-
-
-
34,100
68,183
-
10,806
(1,229)
(9,577)
-
-
-
-
-
-
100,716
-
-
-
100,716
979
-
-
(979)
-
-
-
979
-
-
-
979
109,930
34,100
10,586
(979)
(35,518)
(10,586)
107,533
111,583
12,417
(3,461)
(10,609)
109,930
Year ended 30 June 2016
Opening net book amount
Acquisition of subsidiary
Additions
Disposals
Impairment charge
Transfer to mine
properties in production
Closing net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Impairment charge
Transfer to mine
properties in production
Closing net book amount
(a)
Impairment
The Group recognised impairment charges of $35,518,000 during the current reporting period (2015: $3,461,000).
An amount of $32,533,000 related to the Stockman Project, which is an exploration asset reported within the New
Business and Regional Exploration Activities segment. The circumstances and events that led to the recognition of the
impairment loss emerged following an assessment for the existence of impairment triggers as at 31 December 2015 in
accordance with AASB6 Exploration for and Evaluation of Mineral Resources. The recognised impairment charge has
been determined with reference to the recoverable amount of the asset being assessed based on its fair value less
costs of disposal.
The Company adopted a discounted cash flow fair value model to arrive at the recoverable amount. Key assumptions
include a post-tax real discount rate of 10.2%, and five year average commodity prices as follows: Copper: USD5,380
per tonne, Zinc: USD2,076 per tonne, Silver: USD16.50 per ounce and foreign exchange: USD:AUD 0.72.
(b) Recognition and measurement
Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained
legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability
of extracting the mineral resource.
Exploration and evaluation expenditure is expensed to the profit or
circumstances in which case the expenditure may be capitalised:
loss as incurred except
in the following
•
•
The existence of a commercially viable mineral deposit has been established and it is anticipated that future
economic benefits are more likely than not to be generated as a result of the expenditure; and
The exploration and evaluation activity is within an area of interest which was acquired as an asset acquisition or in
a business combination and measured at fair value on acquisition.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest. An impairment exists when the carrying value of expenditure exceeds its
estimated recoverable amount. The area of interest is then written down to its recoverable amount and the impairment
losses are recognised in profit or loss.
Independence Group NL
58
Independence Group NL
59
86 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
15 Exploration and evaluation (continued)
(b) Recognition and measurement (continued)
Upon approval for the commercial development of an area of interest, exploration and evaluation assets are tested for
impairment and transferred to 'Mine properties in development'. No amortisation is charged during the exploration and
evaluation phase.
(c) Key estimates and judgements
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on the successful
development and commercial exploitation, or alternatively, sale of the respective area of interest.
The Group reviews the carrying value of exploration and evaluation expenditure on a regular basis to determine whether
economic quantities of reserves have been found or whether further exploration and evaluation work is underway or
planned to support continued carry forward of capitalised costs. This assessment requires judgement as to the status of
the individual projects and their estimated recoverable amount.
Independence Group NL
59
Annual Report 2016 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
Capital structure and financing activities
This section of the notes provides further information about the Group's borrowings, contributed equity, reserves and
dividends, including accounting policies relevant to understanding these items.
The Group had access to the following financing arrangements at the reporting date:
16 Borrowings
Current
Secured
Lease liabilities
Unsecured
Bank loans
Total current borrowings
Non-current
Unsecured
Bank loans
Total non-current borrowings
(a) Corporate loan facility
2016
$'000
-
43,154
43,154
2016
$'000
222,672
222,672
2015
$'000
510
-
510
2015
$'000
-
-
On 16 July 2015, the Company entered into a Syndicated Facility Agreement (Facility Agreement) with National
Australia Bank Limited, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia
Limited for a $550,000,000 unsecured committed term finance facility. The Facility Agreement comprises:
•
•
A five year $350,000,000 amortising term loan facility that was used to refinance the existing Nova Project finance
facility, and provide funds for the continued development, construction and operation of the Nova Project; and
A five year $200,000,000 revolving loan facility that was used to partially fund the payment of the cash component
of the Acquisition Scheme for Sirius Resources NL and transaction costs, in addition to providing funding for
general corporate purposes.
The Facility Agreement replaced the existing Corporate Loan Facility (Loan Facility) which the Company previously had
with National Australia Bank. The Loan Facility comprised a corporate debt facility of $20,000,000, an asset finance
facility of $20,000,000 and a contingent instrument facility of $20,000,000.
Total capitalised transaction costs to 30 June 2016 are $5,549,000 (2015: $nil). Transaction costs are accounted for
under the effective interest rate method. These costs are incremental costs that are directly attributable to the loan and
include loan origination fees, commitment fees and legal fees. At 30 June 2016, a balance of unamortised transaction
costs of $5,174,000 (2015: $nil) was offset against the bank loans contractual liability of $271,000,000 (2015: $nil).
Borrowing costs of $11,055,000 (2015: $nil) relate to a qualifying asset (Nova Project) and have been capitalised in
accordance with AASB 123 Borrowing Costs. Refer to note 14.
The Facility Agreement has certain financial covenants that the Company has to comply with. All such financial
covenants have been complied with in accordance with the Facility Agreement.
(b) Assets pledged as security
There were no assets pledged as security at 30 June 2016 (2015: $nil).
16 Borrowings (continued)
(c) Financing arrangements
Total facilities
Corporate debt facility
Asset finance facility
Contingent instrument facility1
Facilities used as at reporting date
Corporate debt facility
Asset finance facility
Contingent instrument facility
Facilities unused as at reporting date
Corporate debt facility
Asset finance facility
Contingent instrument facility
(d) Recognition and measurement
(i) Borrowings
intended use or sale.
17 Contributed equity
(a) Share capital
Fully paid issued capital
1. This facility provides financial backing in relation to non-performance of third party guarantee requirements.
Borrowings are initially recognised at
fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
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
and amortised over the period of the remaining facility.
(ii) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its
intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their
Other borrowing costs are expensed in the period in which they are incurred.
2016
$'000
550,000
-
1,315
551,315
271,000
1,315
272,315
279,000
279,000
-
-
-
2015
$'000
20,000
20,000
20,000
60,000
-
510
1,315
1,825
20,000
19,490
18,685
58,175
2016
$'000
2015
$'000
1,601,458
737,324
Independence Group NL
60
Independence Group NL
61
88 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
16 Borrowings (continued)
(c) Financing arrangements
The Group had access to the following financing arrangements at the reporting date:
Total facilities
Corporate debt facility
Asset finance facility
Contingent instrument facility1
Facilities used as at reporting date
Corporate debt facility
Asset finance facility
Contingent instrument facility
Facilities unused as at reporting date
Corporate debt facility
Asset finance facility
Contingent instrument facility
2016
$'000
550,000
-
1,315
551,315
271,000
-
1,315
272,315
279,000
-
-
279,000
2015
$'000
20,000
20,000
20,000
60,000
-
510
1,315
1,825
20,000
19,490
18,685
58,175
1. This facility provides financial backing in relation to non-performance of third party guarantee requirements.
(d) Recognition and measurement
(i) Borrowings
Borrowings are initially recognised at
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
fair value, net of
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
and amortised over the period of the remaining facility.
(ii) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its
intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their
intended use or sale.
Other borrowing costs are expensed in the period in which they are incurred.
17 Contributed equity
(a) Share capital
Fully paid issued capital
2016
$'000
2015
$'000
1,601,458
737,324
Independence Group NL
61
Annual Report 2016 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
17 Contributed equity (continued)
(a) Share capital (continued)
(b) Movements in ordinary share capital
Details
Balance at beginning of financial year
Issue of shares under the Employee
Performance Rights Plan
Acquisition of subsidiary
2016
Number of shares
2016
$'000
2015
Number of shares
2015
$'000
234,256,573
737,324
233,323,905
735,060
1,323,614
275,842,684
3,505
860,629
932,668
-
2,264
-
Balance at end of financial year
511,422,871
1,601,458
234,256,573
737,324
(c) Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business.
The capital structure of the Group consists of debt, which includes the borrowings, cash and cash equivalents and
equity, comprising issued capital, reserves and retained earnings.
Operating cash flows are used to maintain and expand the Group’s operating and exploration assets, as well as to
make dividend payments. The Board and management assess various financial ratios to determine the Group’s debt
levels and capital structure prior to making any major investment or expansion decisions.
None of the Group’s entities are currently subject to externally imposed capital requirements.
There were no changes in the Group’s approach to capital management during the year.
(d) Recognition and measurement
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares entitle the holder to participate in
dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the
shares held. Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and
upon a poll each share is entitled to one vote.
18 Reserves
Hedging reserve
Share-based payments reserve
Foreign currency translation
Acquisition reserve
(a) Movements in reserves
2016
$'000
(632)
10,371
(8)
3,142
12,873
2015
$'000
-
13,057
(8)
3,142
16,191
The following table shows a breakdown of the movements in these reserves during the year. A description of the nature
and purpose of each reserve is provided below the table.
Adjusted balance at 1 July 2015
13,057
3,142
(8)
18 Reserves (continued)
(a) Movements in reserves (continued)
Balance at 1 July 2015
Reclassification on adoption of AASB
9, net of tax
Revaluation - gross
Deferred tax
Share-based payment expenses
Issue of shares under the Employee
Performance Rights Plan
Balance at 1 July 2014
Revaluation - gross
Deferred tax
Transfer to profit or loss - gross
Deferred tax
current period
Currency translation differences -
Share-based payment expenses
Issue of shares under the Employee
Performance Rights Plan
Balance at 30 June 2015
(b) Nature and purpose of reserves
Hedging reserve
Hedging
reserve
$'000
-
(1,036)
(1,036)
577
(173)
(2,038)
4,349
(1,305)
(1,237)
231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
819
(3,505)
10,371
2,949
(2,264)
13,057
Share- based
payments
Acquisition
translation
reserve
$'000
13,057
reserve
$'000
3,142
Foreign
currency
reserve
$'000
(8)
16,191
Total
$'000
(1,036)
15,155
577
(173)
819
(3,505)
12,873
13,476
4,349
(1,305)
(1,237)
231
(8)
2,949
(2,264)
16,191
-
-
-
-
-
-
-
-
-
-
-
-
(8)
-
-
-
-
-
-
-
-
-
-
-
-
3,142
(8)
Balance at 30 June 2016
(632)
3,142
(8)
12,372
3,142
The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow
hedges and that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the
associated hedged transaction affects profit or loss.
Share-based payments reserve
The share-based payments reserve is used to record the value of share-based payments provided to employees,
including key management personnel, as part of their remuneration. Refer to note 26 for further details of these plans.
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss
Foreign currency translation reserve
when the net investment is disposed of.
Acquisition reserve
The acquisition reserve is used to record differences between the carrying value of non-controlling interests and the fair
value of the shares issued, where there has been a transaction involving non-controlling interests that do not result in a
loss of control. The reserve is attributable to the equity of the parent.
Independence Group NL
62
Independence Group NL
63
90 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Hedging
reserve
$'000
Share- based
payments
reserve
$'000
-
13,057
(1,036)
(1,036)
577
(173)
-
-
(632)
(2,038)
4,349
(1,305)
(1,237)
231
-
-
-
-
-
13,057
-
-
819
(3,505)
10,371
12,372
-
-
-
-
-
2,949
(2,264)
13,057
Acquisition
reserve
$'000
Foreign
currency
translation
reserve
$'000
3,142
-
3,142
-
-
-
-
3,142
3,142
-
-
-
-
-
-
-
3,142
(8)
-
(8)
-
-
-
-
(8)
-
-
-
-
-
(8)
-
-
(8)
Total
$'000
16,191
(1,036)
15,155
577
(173)
819
(3,505)
12,873
13,476
4,349
(1,305)
(1,237)
231
(8)
2,949
(2,264)
16,191
18 Reserves (continued)
(a) Movements in reserves (continued)
Balance at 1 July 2015
Reclassification on adoption of AASB
9, net of tax
Adjusted balance at 1 July 2015
Revaluation - gross
Deferred tax
Share-based payment expenses
Issue of shares under the Employee
Performance Rights Plan
Balance at 30 June 2016
Balance at 1 July 2014
Revaluation - gross
Deferred tax
Transfer to profit or loss - gross
Deferred tax
Currency translation differences -
current period
Share-based payment expenses
Issue of shares under the Employee
Performance Rights Plan
Balance at 30 June 2015
(b) Nature and purpose of reserves
Hedging reserve
The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow
hedges and that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the
associated hedged transaction affects profit or loss.
Share-based payments reserve
The share-based payments reserve is used to record the value of share-based payments provided to employees,
including key management personnel, as part of their remuneration. Refer to note 26 for further details of these plans.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss
when the net investment is disposed of.
Acquisition reserve
The acquisition reserve is used to record differences between the carrying value of non-controlling interests and the fair
value of the shares issued, where there has been a transaction involving non-controlling interests that do not result in a
loss of control. The reserve is attributable to the equity of the parent.
Independence Group NL
63
Annual Report 2016 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
19 Dividends paid and proposed
(a) Ordinary shares
Final ordinary dividend for the year ended 30 June 2015 of 2.5 cents (2014: 5 cents)
per fully paid share
Interim dividend for the year ended 30 June 2016 of nil cents (2015: 6 cents) per fully
paid share
Total dividends paid during the financial year
(b) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since year end the Directors have recommended
the payment of a final dividend of 2 cents (2015: 2.5 cents) per fully paid ordinary
share, fully franked based on tax paid at 30%. The aggregate amount of the proposed
dividend expected to be paid on 23 September 2016 out of retained earnings at 30
June 2016, but not recognised as a liability at year end, is:
(c) Franked dividends
2016
$'000
12,786
-
12,786
2015
$'000
11,713
14,055
25,768
2016
$'000
2015
$'000
11,734
12,786
2016
$'000
2015
$'000
Franking credits available for subsequent reporting periods based on a tax rate of 30%
(2015: 30%)
42,373
47,845
The above amounts are calculated from the balance of the franking account as at the end of the reporting period,
adjusted for:
(a)
(b)
(c)
franking credits that will arise from the payment of the amount of the provision for income tax;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The impact on the franking account of the dividend recommended by the Directors since the end of the reporting period,
but not recognised as a liability at the reporting date, will be a reduction in the franking account of $5,029,000 (2015:
$5,480,000).
(d) Recognition and measurement
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 reporting period but not distributed at the end of the reporting period.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly
recommended on or before the balance sheet date.
Notes to the consolidated financial statements
30 June 2016
(continued)
Risk
20 Derivatives
This section of the notes includes information on the Group's exposure to various risks and shows how these could
affect the Group's financial position and performance.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where
derivatives do not meet the hedging criteria, they are classified as ‘held for trading’ for accounting purposes below. The
Group has the following derivative financial instruments:
Current assets
Commodity hedging contracts - held for trading
Diesel hedging contracts - cash flow hedges
Non-current assets
Diesel hedging contracts - cash flow hedges
Current liabilities
Commodity hedging contracts - cash flow hedges
Foreign currency contracts - held for trading
Non-current liabilities
Commodity hedging contracts - cash flow hedges
(a)
Instruments used by the Group
2016
$'000
-
784
784
799
799
2,487
2,487
-
-
-
2015
$'000
4,981
4,981
-
-
-
762
1,622
2,384
717
717
Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to
fluctuations in foreign exchange rates, commodity prices and diesel prices.
The derivative financial instruments are classified as held for trading and accounted for at fair value through profit or
loss unless they are designated as cash flow hedges. The Group's accounting policy for its cash flow hedges is set out
The fair value of the derivative instruments at the reporting date is reflected in current and non-current assets and
liabilities in the balance sheet and is calculated by comparing the contracted rate to the market rates for derivatives with
the same length of maturity.
Refer to note 21 and below for details of the foreign currency, commodity prices and diesel fuel risk being mitigated by
the Group’s derivative instruments as at 30 June 2016 and 30 June 2015.
below.
Gold
Gold collar structures (i.e. purchased put and sold call) have been designated as hedges of future gold sales and have
been designated as cash flow hedges. These comprise:
Independence Group NL
92 Independence Group NL
64
Independence Group NL
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Risk
This section of the notes includes information on the Group's exposure to various risks and shows how these could
affect the Group's financial position and performance.
20 Derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where
derivatives do not meet the hedging criteria, they are classified as ‘held for trading’ for accounting purposes below. The
Group has the following derivative financial instruments:
Current assets
Commodity hedging contracts - held for trading
Diesel hedging contracts - cash flow hedges
Non-current assets
Diesel hedging contracts - cash flow hedges
Current liabilities
Commodity hedging contracts - cash flow hedges
Foreign currency contracts - held for trading
Non-current liabilities
Commodity hedging contracts - cash flow hedges
(a)
Instruments used by the Group
2016
$'000
-
784
784
799
799
2,487
-
2,487
-
-
2015
$'000
4,981
-
4,981
-
-
762
1,622
2,384
717
717
Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to
fluctuations in foreign exchange rates, commodity prices and diesel prices.
The derivative financial instruments are classified as held for trading and accounted for at fair value through profit or
loss unless they are designated as cash flow hedges. The Group's accounting policy for its cash flow hedges is set out
below.
The fair value of the derivative instruments at the reporting date is reflected in current and non-current assets and
liabilities in the balance sheet and is calculated by comparing the contracted rate to the market rates for derivatives with
the same length of maturity.
Refer to note 21 and below for details of the foreign currency, commodity prices and diesel fuel risk being mitigated by
the Group’s derivative instruments as at 30 June 2016 and 30 June 2015.
Gold
Gold collar structures (i.e. purchased put and sold call) have been designated as hedges of future gold sales and have
been designated as cash flow hedges. These comprise:
Independence Group NL
65
Annual Report 2016 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
20 Derivatives (continued)
Gold (continued)
0 - 6 months
Gold put options purchased
Gold call options sold
6 - 12 months
Gold put options purchased
Gold call options sold
12 - 18 months
Gold put options purchased
Gold call options sold
Total/weighted average
strike price
Gold put options purchased
Gold call options sold
Ounces of metal
Weighted average price
(AUD/ounce)
2016
2015
2016
2015
12,500
12,500
-
-
-
-
23,500
23,500
15,000
15,000
12,500
12,500
1,330
1,593
-
-
-
-
12,500
12,500
51,000
51,000
1,330
1,593
1,350
1,744
1,330
1,560
1,330
1,593
1,339
1,653
Fair value
2016
$'000
4
(2,491)
-
-
-
-
2015
$'000
137
(101)
314
(1,112)
460
(1,177)
4
(2,491)
911
(2,390)
Diesel
The Group held various diesel fuel hedging contracts at 30 June 2016 to reduce the exposure to future increases in the
price of the Singapore gasoil component of diesel fuel.
The following table details the diesel fuel hedging contracts outstanding at the reporting date:
Barrels of oil
Weighted average price
(AUD/barrel)
0 - 6 months
6 -12 months
1 - 2 years
Total
2016
20,228
29,532
60,525
110,285
2015
-
-
-
-
2016
61.50
65.61
74.37
69.67
2015
-
-
-
-
Fair value
2016
$'000
341
443
799
1,583
2015
$'000
-
-
-
-
Nickel
There were no nickel commodity contracts held by the Group at 30 June 2016. The tables below detail the outstanding
nickel commodity contracts denominated in United States dollars (USD), and the foreign exchange contracts which
match the terms of the commodity contracts, held by the Group at 30 June 2015. These contracts were used to reduce
the exposure to a future decrease in the Australian dollar (AUD) market value of nickel sales.
The following table details the nickel contracts outstanding at the reporting date:
Tonnes of metal
Weighted average price
(USD/metric tonne)
0 - 3 months
Total
2016
-
-
2015
750
750
2016
-
-
2015
16,711
16,711
Fair value
2016
$'000
-
-
2015
$'000
4,626
4,626
The following table details the forward foreign currency contracts outstanding at the reporting date:
20 Derivatives (continued)
Nickel (continued)
Sell USD forward
0 - 3 months
Total
Copper
Notional amounts (USD)
AUD:USD exchange rate
Fair value
2016
$'000
2016
2015
2016
$'000
Weighted average
2015
$'000
12,534
12,534
2015
$'000
3,444
3,444
-
-
-
-
2015
$'000
(1,533)
(1,533)
2015
$'000
355
355
2015
$'000
(89)
(89)
-
-
-
-
-
-
-
-
0.8482
0.8482
0.7825
0.7825
There were no copper commodity contracts held by the Group at 30 June 2016. The tables below detail the outstanding
copper commodity contracts denominated in USD, and the foreign exchange contracts which match the terms of the
commodity contracts, held by the Group at 30 June 2015. These contracts were used to reduce the exposure to a future
decrease in the AUD market value of copper sales.
The following table details the copper contracts outstanding at the reporting date:
Tonnes of metal
Weighted average price
(USD/metric tonne)
0 - 3 months
Total
2016
-
-
2015
550
550
2016
-
-
2015
6,261
6,261
Fair value
2016
$'000
-
-
The following table details the forward foreign currency contracts outstanding at the reporting date:
Notional amounts (USD)
AUD:USD exchange rate
Fair value
2016
$'000
2016
2015
2016
$'000
Weighted average
Sell USD forward
0 - 3 months
Total
(b) Change in accounting policy
The Group has early adopted the new accounting standard AASB 9 Financial Instruments with effect from 1 July 2015.
As explained in note 31, the adoption of the standard has affected the accounting treatment of the fair value of certain
derivative assets and liabilities. The adoption of the standard had no impact on the net assets of the Group, however
resulted in the restatement of balances at 1 July 2015 with a reduction in accumulated losses of $1,036,000 and a
corresponding debit in the hedging reserve of $1,036,000.
(c) Recognition and measurement
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. The Group designates certain derivatives as either:
•
•
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges).
The Group documents, at the inception of the hedging transaction, the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or
cash flows of hedged items.
Independence Group NL
66
Independence Group NL
67
94 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
20 Derivatives (continued)
Nickel (continued)
Notional amounts (USD)
Weighted average
AUD:USD exchange rate
Sell USD forward
0 - 3 months
Total
2016
$'000
-
-
2015
$'000
12,534
12,534
2016
2015
Fair value
2016
$'000
-
-
0.8482
0.8482
-
-
2015
$'000
(1,533)
(1,533)
Copper
There were no copper commodity contracts held by the Group at 30 June 2016. The tables below detail the outstanding
copper commodity contracts denominated in USD, and the foreign exchange contracts which match the terms of the
commodity contracts, held by the Group at 30 June 2015. These contracts were used to reduce the exposure to a future
decrease in the AUD market value of copper sales.
The following table details the copper contracts outstanding at the reporting date:
Tonnes of metal
Weighted average price
(USD/metric tonne)
0 - 3 months
Total
2016
-
-
2015
550
550
2016
-
-
2015
6,261
6,261
Fair value
2016
$'000
-
-
The following table details the forward foreign currency contracts outstanding at the reporting date:
Notional amounts (USD)
Weighted average
AUD:USD exchange rate
2016
2015
Fair value
2016
$'000
Sell USD forward
0 - 3 months
Total
2016
$'000
-
-
2015
$'000
3,444
3,444
(b) Change in accounting policy
-
-
0.7825
0.7825
-
-
2015
$'000
355
355
2015
$'000
(89)
(89)
The Group has early adopted the new accounting standard AASB 9 Financial Instruments with effect from 1 July 2015.
As explained in note 31, the adoption of the standard has affected the accounting treatment of the fair value of certain
derivative assets and liabilities. The adoption of the standard had no impact on the net assets of the Group, however
resulted in the restatement of balances at 1 July 2015 with a reduction in accumulated losses of $1,036,000 and a
corresponding debit in the hedging reserve of $1,036,000.
(c) Recognition and measurement
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. The Group designates certain derivatives as either:
•
•
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges).
The Group documents, at the inception of the hedging transaction, the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or
cash flows of hedged items.
Independence Group NL
67
Annual Report 2016 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
20 Derivatives (continued)
(c) Recognition and measurement (continued)
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. Trading derivatives are classified as a current asset or liability. Movements in the
hedging reserve in shareholder's equity are shown in note 18.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or
loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated in the hedging reserve in equity. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or
loss. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is
recognised in profit or loss within 'sales'.
The changes in the time value component of options are recognised in the hedge reserve. The cumulative changes
accumulated in the hedge reserve are reclassified to the profit or loss when the hedged item affects profit or loss.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in profit or loss.
21 Financial risk management
The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, interest rate risk,
equity price risk and commodity 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 uses derivative financial instruments such as foreign exchange contracts, forward
commodity contracts and collar arrangements to hedge certain risk exposures.
Risk management relating to commodity and foreign exchange risk is overseen by management, under policies
approved by the Board of Directors. The Board identifies, evaluates and hedges financial risks in close co-operation
with the Group’s operating units. The Board provides written principles for overall risk management, as well as written
policies covering specific areas, such as mitigating foreign exchange, commodity price, interest rate and credit risks,
use of derivative financial instruments and investing excess liquidity.
(a) Risk exposures and responses
(i) Foreign currency risk
As the Group’s sales revenues for nickel, copper, zinc, gold and silver are denominated in United States dollars (USD)
and the majority of operating costs are denominated in Australian dollars (AUD), the Group’s cash flow is significantly
exposed to movements in the AUD:USD exchange rate. The Group mitigates this risk through the use of derivative
instruments, including, but not limited to, forward contracts denominated in AUD.
Financial
currency (i.e. AUD) were as follows:
instruments, including derivative instruments, denominated in USD and then converted into the functional
21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(i) Foreign currency risk (continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Financial liabilities
Derivative financial instruments
Net financial assets
2016
$'000
14,773
19,969
34,742
-
-
-
34,742
2015
$'000
16,971
15,506
4,981
37,458
1,622
1,622
35,836
The cash balance above only represents the cash held in the USD bank accounts at the reporting date and converted
into AUD at the 30 June 2016 AUD:USD exchange rate of $0.7426 (2015: $0.7680). The remainder of the cash balance
of $31,491,000 (2015: $104,325,000) was held in AUD and therefore not exposed to foreign currency risk.
The trade and other receivables amounts represent the USD denominated trade debtors. All other trade and other
receivables were denominated in AUD at the reporting date.
The following table summarises the Group’s sensitivity of financial instruments held at 30 June 2016 to movements in
the AUD:USD exchange rate, with all other variables held constant.
Sensitivity of financial instruments to foreign currency movements
Increase/decrease in foreign exchange rate
Impact on post-tax profit
2016
$'000
(884)
988
2015
$'000
(110)
132
The Group’s sales revenues are generated from the sale of nickel, copper, zinc, silver and gold. Accordingly, the
Group’s revenues, derivatives and trade receivables are exposed to commodity price risk fluctuations, primarily nickel,
Nickel ore sales have an average price finalisation period of three months until the sale is finalised with the customer.
It is the Board’s policy to hedge between 0% and 70% of total nickel production tonnes.
Copper and zinc concentrate sales have an average price finalisation period of up to four months from shipment date.
It is the Board’s policy to hedge between 0% and 70% of total copper and zinc production tonnes.
It is the Board’s policy to hedge between 0% and 70% of forecast gold production from the Company’s 30% interest in
Increase 5.0%
Decrease 5.0%
(ii) Commodity price risk
copper, zinc, silver and gold.
Nickel
Copper and zinc
Gold
the Tropicana Gold Mine.
Diesel fuel
It is the Board's policy to hedge up to 75% of forecast diesel fuel usage. Diesel fuel price comprises a number of
components, including Singapore gasoil and various other costs such as shipping and insurance. The total of all costs
represent
the wholesale or Terminal Gate Price (TGP) of diesel. The Group only hedges the Singapore gasoil
component of the diesel TGP, which represents approximately 40% of the total diesel price.
Independence Group NL
68
Independence Group NL
69
96 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(i) Foreign currency risk (continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Financial liabilities
Derivative financial instruments
Net financial assets
Notes to the consolidated financial statements
30 June 2016
(continued)
2016
$'000
14,773
19,969
-
34,742
-
-
34,742
2015
$'000
16,971
15,506
4,981
37,458
1,622
1,622
35,836
The cash balance above only represents the cash held in the USD bank accounts at the reporting date and converted
into AUD at the 30 June 2016 AUD:USD exchange rate of $0.7426 (2015: $0.7680). The remainder of the cash balance
of $31,491,000 (2015: $104,325,000) was held in AUD and therefore not exposed to foreign currency risk.
The trade and other receivables amounts represent the USD denominated trade debtors. All other trade and other
receivables were denominated in AUD at the reporting date.
The following table summarises the Group’s sensitivity of financial instruments held at 30 June 2016 to movements in
the AUD:USD exchange rate, with all other variables held constant.
Sensitivity of financial instruments to foreign currency movements
Increase/decrease in foreign exchange rate
Increase 5.0%
Decrease 5.0%
Impact on post-tax profit
2016
$'000
(884)
988
2015
$'000
(110)
132
(ii) Commodity price risk
The Group’s sales revenues are generated from the sale of nickel, copper, zinc, silver and gold. Accordingly, the
Group’s revenues, derivatives and trade receivables are exposed to commodity price risk fluctuations, primarily nickel,
copper, zinc, silver and gold.
Nickel
Nickel ore sales have an average price finalisation period of three months until the sale is finalised with the customer.
It is the Board’s policy to hedge between 0% and 70% of total nickel production tonnes.
Copper and zinc
Copper and zinc concentrate sales have an average price finalisation period of up to four months from shipment date.
It is the Board’s policy to hedge between 0% and 70% of total copper and zinc production tonnes.
Gold
It is the Board’s policy to hedge between 0% and 70% of forecast gold production from the Company’s 30% interest in
the Tropicana Gold Mine.
Diesel fuel
It is the Board's policy to hedge up to 75% of forecast diesel fuel usage. Diesel fuel price comprises a number of
components, including Singapore gasoil and various other costs such as shipping and insurance. The total of all costs
represent
the wholesale or Terminal Gate Price (TGP) of diesel. The Group only hedges the Singapore gasoil
component of the diesel TGP, which represents approximately 40% of the total diesel price.
Independence Group NL
69
Annual Report 2016 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(ii) Commodity price risk (continued)
The markets for nickel, copper, zinc, silver and gold are freely traded and can be volatile. As a relatively small producer,
the Group has no ability to influence commodity prices. The Group mitigates this risk through derivative instruments,
including, but not limited to, quotational period hedging, forward contracts and collar arrangements.
At the reporting date, the carrying value of the financial instruments exposed to commodity price movements were as
follows:
Financial instruments exposed to commodity price movements
Financial assets
Trade and other receivables
Derivative financial instruments - commodity hedging contracts
Derivative financial instruments - diesel hedging contracts
Financial liabilities
Derivative financial instruments - commodity hedging contracts
Net exposure
2016
$'000
18,520
-
1,583
20,103
2,487
2,487
17,616
2015
$'000
10,702
4,981
-
15,683
1,479
1,479
14,204
The following table summarises the sensitivity of financial instruments held at 30 June 2016 to movements in the nickel
price, with all other variables held constant. Trade receivables valuation uses a sensitivity analysis of 1.5% (2015: 1.5%)
and a 20.0% (2015: 20.0%) sensitivity rate is used to value derivative contracts.
Sensitivity of financial instruments to nickel price movements
Increase/decrease in nickel prices
Increase
Decrease
Impact on post-tax profit
2016
$'000
177
(177)
2015
$'000
(1,517)
1,517
The following table summarises the sensitivity of financial instruments held at 30 June 2016 to movements in the copper
price, with all other variables held constant. Trade receivables valuation uses a sensitivity analysis of 1.5% (2015: 1.5%)
and a 20.0% (2015: 20.0%) sensitivity rate is used to value derivative contracts.
Sensitivity of financial instruments to copper price movements
Increase/decrease in copper price
Increase
Decrease
Impact on post-tax profit
2016
$'000
251
(251)
2015
$'000
(572)
572
The following table summarises the sensitivity of financial instruments held at 30 June 2016 to movements in the gold
price, with all other variables held constant.
Sensitivity of financial instruments to gold price movements
Increase/decrease in gold price
Increase 20% (2015: 20%)
Decrease 20% (2015: 20%)
Independence Group NL
98 Independence Group NL
Impact on other components of
equity
2016
$'000
(3,018)
1,743
2015
$'000
(6,590)
5,325
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(ii) Commodity price risk (continued)
The following table summarises the sensitivity of financial instruments held at 30 June 2016 to movements in the zinc
price, with all other variables held constant.
Sensitivity of financial instruments to zinc price movements
Increase/decrease in zinc price
Increase 1.5% (2015: 1.5%)
Decrease 1.5% (2015: 1.5%)
Impact on post-tax profit
2016
$'000
225
(225)
2015
$'000
108
(108)
The following table summarises the sensitivity of financial
Singapore gasoil price, with all other variables held constant.
instruments held at 30 June 2016 to movements in the
Sensitivity of financial instruments to Singapore gasoil price movements
Increase/decrease in Singapore gasoil price
Increase 20% (2015: 0%)
Decrease 20% (2015: 0%)
Impact on other components of
equity
2016
$'000
1,301
(1,301)
2015
$'000
-
-
(iii) Equity price risk sensitivity analysis
The following sensitivity analysis has been determined based on the exposure to equity price risks at the reporting date.
Each equity instrument is assessed on its individual price movements with the sensitivity rate based on a reasonably
possible change of 20% (2015: 45%). At reporting date, if the equity prices had been higher or lower, net profit for the
year would have increased or decreased by $702,000 (2015: $4,890,000).
(iv) Cash flow and fair value interest rate risk
The Group’s exposure to interest rate risk is the risk that a financial
instrument’s value will fluctuate as a result of
changes in market interest rates. At the reporting date, the Group had the following exposure to interest rate risk on
financial instruments:
Financial assets
Cash and cash equivalents
Financial liabilities
Bank loans
30 June 2016
30 June 2015
Weighted
average
interest rate
%
1.7%
1.7%
4.5%
4.5%
Weighted
average
interest rate
%
1.6%
1.6%
-%
-%
Balance
$'000
46,264
46,264
271,000
271,000
Balance
$'000
121,296
121,296
-
-
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and
the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting
period.
Independence Group NL
71
Annual Report 2016 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(iv) Cash flow and fair value interest rate risk (continued)
Sensitivity of interest revenue and expense to interest rate movements
Interest revenue
Increase 1.0% (2015: 1.0%)
Decrease 1.0% (2015: 1.0%)
Interest expense
Increase 1.0% (2015: 1.0%)
Decrease 1.0% (2015: 1.0%)
(b) Credit risk
Impact on post-tax profit
2016
$'000
276
(276)
(1,897)
1,897
2015
$'000
804
(804)
-
-
Nickel ore sales
The Group has a concentration of credit risk in that it depends on BHP Billiton Nickel West Pty Ltd (BHPB Nickel West)
for a significant volume of revenue. During the year ended 30 June 2016 all nickel sales revenue was sourced from this
company. The risk is mitigated in that the agreement relating to sales revenue contains provision for the Group to seek
alternative revenue providers in the event that BHPB Nickel West is unable to accept supply of the Group’s product due
to a force majeure event. The risk is further mitigated by the receipt of 70% of the value of any months’ sale within a
month of that sale occurring.
Copper and zinc concentrate sales
Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of at least 90%
of the estimated value of each sale. This is generally paid promptly after vessel loading. Title to the concentrate does
not pass to the buyer until this provisional payment is received by the Group.
Due to the large size of concentrate shipments, there are a relatively small number of transactions each month and
therefore each transaction and receivable balance is actively managed on an ongoing basis, with attention to timing of
customer payments and imposed credit limits. The resulting exposure to bad debts is not considered significant.
Gold bullion sales
Credit risk arising from the sale of gold bullion to the Company's customer is low as the payment by the customer (being
The Perth Mint Australia) is guaranteed under statute by the Western Australian State Government. In addition, sales
are made to high credit quality financial institutions, hence credit risk arising from these transactions is considered to be
low.
The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit
history.
Other
In respect of financial assets and derivative financial
instruments, the Group's exposure to credit risk arises from
potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Exposure at the reporting date is addressed below. The Group does not hold any credit derivatives to offset its credit
exposure.
Derivative counterparties and cash transactions are restricted to high credit quality financial institutions.
The maximum exposure to credit risk at the reporting date was as follows:
21 Financial risk management (continued)
(b) Credit risk (continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Other receivables
Financial assets
Derivative financial instruments
Consolidated entity
2016
$'000
46,264
21,561
6,559
5,017
1,583
80,984
2015
$'000
121,296
13,481
5,384
15,574
4,981
160,716
On analysis of trade and other receivables, no balances are impaired for either 30 June 2016 or 30 June 2015. Trade
receivables balance includes $1,448,000 (2015: $nil) that are past due but not impaired.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s
approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. Management and the Board monitors liquidity levels on an ongoing basis.
Maturities of financial liabilities
can be required to pay.
The following table details the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The
tables are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
Contractual maturities of financial liabilities
At 30 June 2016
Trade and other payables
Bank loans*
At 30 June 2015
Trade and other payables
Finance lease liabilities
* Includes estimated interest payments.
Less than 6
months
$'000
6 - 12
months
$'000
Between
1 and 5
years
$'000
contractual
Total
cash
flows
$'000
Carrying
amount
$'000
107,132
6,070
113,202
-
46,735
46,735
243,056
243,056
107,132
295,861
107,132
265,826
402,993
372,958
40,476
458
40,934
-
64
64
40,476
40,476
522
510
40,998
40,986
-
-
-
-
The following table details the Group’s liquidity analysis for its derivative financial instruments. The table is based on the
undiscounted net cash inflows/(outflows) on the derivative instrument that settles on a net basis. When the net amount
payable is not fixed, the amount disclosed has been determined by reference to the projected forward curves existing at
the reporting date.
Independence Group NL
72
Independence Group NL
73
100 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 21 Financial risk management (continued)
(b) Credit risk (continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Other receivables
Financial assets
Derivative financial instruments
Notes to the consolidated financial statements
30 June 2016
(continued)
Consolidated entity
2016
$'000
46,264
21,561
6,559
5,017
1,583
80,984
2015
$'000
121,296
13,481
5,384
15,574
4,981
160,716
On analysis of trade and other receivables, no balances are impaired for either 30 June 2016 or 30 June 2015. Trade
receivables balance includes $1,448,000 (2015: $nil) that are past due but not impaired.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s
approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. Management and the Board monitors liquidity levels on an ongoing basis.
Maturities of financial liabilities
The following table details the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The
tables are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay.
Contractual maturities of financial liabilities
At 30 June 2016
Trade and other payables
Bank loans*
At 30 June 2015
Trade and other payables
Finance lease liabilities
* Includes estimated interest payments.
Less than 6
months
$'000
6 - 12
months
$'000
Between
1 and 5
years
$'000
Total
contractual
cash
flows
$'000
Carrying
amount
$'000
107,132
6,070
113,202
-
46,735
46,735
-
243,056
243,056
107,132
295,861
107,132
265,826
402,993
372,958
40,476
458
40,934
-
64
64
-
-
-
40,476
522
40,998
40,476
510
40,986
The following table details the Group’s liquidity analysis for its derivative financial instruments. The table is based on the
undiscounted net cash inflows/(outflows) on the derivative instrument that settles on a net basis. When the net amount
payable is not fixed, the amount disclosed has been determined by reference to the projected forward curves existing at
the reporting date.
Independence Group NL
73
Annual Report 2016 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(c) Liquidity risk (continued)
Maturities of financial liabilities (continued)
At 30 June 2016
Commodity hedging contracts
At 30 June 2015
Commodity hedging contracts
Foreign currency hedging contracts
Less than 6
months
$'000
6 - 12
months
$'000
Between
1 and 5
years
$'000
Total
contractual
cash
flows
$'000
Carrying
amount
$'000
2,487
2,487
100
1,622
1,722
-
-
662
-
662
-
-
717
-
717
2,487
2,487
2,487
2,487
1,479
1,622
3,101
1,479
1,622
3,101
(d) Recognised fair value measurements
(i) Fair value hierarchy
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure
purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
(a)
(b)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
(c)
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2016
and 30 June 2015 on a recurring basis.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
At 30 June 2016
Financial assets
Listed investments
Derivative instruments
Diesel hedging contracts
Financial liabilities
Derivative instruments
Commodity hedging contracts
5,017
-
5,017
-
-
-
1,583
1,583
2,487
2,487
-
-
-
-
-
5,017
1,583
6,600
2,487
2,487
Independence Group NL
74
Independence Group NL
75
102 Independence Group NL
21 Financial risk management (continued)
(d) Recognised fair value measurements (continued)
(i) Fair value hierarchy (continued)
At 30 June 2015
Financial assets
Listed investments
Derivative instruments
Commodity hedging contracts
Financial liabilities
Derivative instruments
Commodity hedging contracts
Foreign currency hedging contracts
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
15,524
15,524
-
-
-
-
-
4,981
4,981
1,479
1,622
3,101
50
-
50
-
-
-
15,574
4,981
20,555
1,479
1,622
3,101
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30
June 2016 and did not transfer any fair value amounts between the fair value hierarchy levels during the year ended 30
June 2016.
(ii) Valuation techniques used to determine level 1 fair values
The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and
available-for-sale 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.
(iii) Valuation techniques used to determine level 2 and level 3 fair values
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. These valuation techniques maximise the use of observable market data
where it is available 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.
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 financial instruments include:
The use of quoted market prices or dealer quotes for similar instruments.
The fair value of commodity and forward foreign exchange contracts is determined using forward commodity and
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining
exchange rates at the reporting date.
financial instruments.
All of the resulting fair value estimates are included in level 2 except for unlisted equity securities which are included in
•
•
level 3.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 21 Financial risk management (continued)
(d) Recognised fair value measurements (continued)
(i) Fair value hierarchy (continued)
At 30 June 2015
Financial assets
Listed investments
Derivative instruments
Commodity hedging contracts
Financial liabilities
Derivative instruments
Commodity hedging contracts
Foreign currency hedging contracts
Notes to the consolidated financial statements
30 June 2016
(continued)
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
15,524
-
15,524
-
-
-
-
4,981
4,981
1,479
1,622
3,101
50
-
50
-
-
-
15,574
4,981
20,555
1,479
1,622
3,101
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30
June 2016 and did not transfer any fair value amounts between the fair value hierarchy levels during the year ended 30
June 2016.
(ii) Valuation techniques used to determine level 1 fair values
The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and
available-for-sale 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.
(iii) Valuation techniques used to determine level 2 and level 3 fair values
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. These valuation techniques maximise the use of observable market data
where it is available 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.
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 financial instruments include:
•
•
The use of quoted market prices or dealer quotes for similar instruments.
The fair value of commodity and forward foreign exchange contracts is determined using forward commodity and
exchange rates at the reporting date.
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining
financial instruments.
All of the resulting fair value estimates are included in level 2 except for unlisted equity securities which are included in
level 3.
Independence Group NL
75
Annual Report 2016 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(d) Recognised fair value measurements (continued)
(iv) Fair value of other financial instruments
The Group also has a number of financial instruments which are not measured at fair value in the balance sheet. These
instruments had the following fair value at the reporting date.
At 30 June 2016
Current assets
Cash and cash equivalents
Current liabilities
Bank loans
Non-current liabilities
Bank loans
At 30 June 2015
Current assets
Cash and cash equivalents
Current liabilities
Lease liabilities
Carrying
amount
$'000
Fair value
$'000
46,264
46,264
43,154
43,154
222,672
222,672
Carrying
amount
$'000
46,264
46,264
43,750
43,750
227,250
227,250
Fair value
$'000
121,296
121,296
121,296
121,296
510
510
522
522
This section of the notes provides information which will help users understand how the group structure affects the
financial position and performance of the Group.
On 22 September 2015, Independence Group NL acquired 100% of the issued capital of Sirius Resources NL (Sirius).
Sirius was an ASX listed minerals exploration and development company with a key focus on the development of the
Nova Project, located east of Norseman in Western Australia.
Details of the purchase consideration and the net assets acquired are as follows:
The fair value of the 275,842,684 shares issued as part of the consideration paid for Sirius ($860,629,000) was based
on the published share price on 22 September 2015 of $3.12 per share.
The assets and liabilities recognised as a result of the acquisition are as follows:
Group structure
22 Business combination
(a) Summary of acquisition
Purchase consideration (refer to (b) below):
Cash paid
Ordinary shares issued
Total purchase consideration
Cash
Trade and other receivables
Inventories
Plant and equipment
Mine properties
Exploration and evaluation expenditure
Deferred tax assets
Trade and other payables
Deferred tax liability
Provisions
Net identifiable assets acquired
Revenue and profit contribution
September 2015 to 30 June 2016.
Cash flows
development of the Nova Project.
There were no acquisitions in the year ending 30 June 2015.
The acquired business contributed revenues of $409,000 and net loss of $1,372,000 to the Group for the period from 22
If the acquisition had occurred on 1 July 2015, consolidated pro-forma revenue and loss for the year ended 30 June
2016 would have been $414,140,000 and $75,807,000 respectively.
Since acquisition, expenditure of $179,475,000 was incurred by the acquired entity relating to the construction and
$'000
250,285
860,629
1,110,914
Fair value
$'000
48,233
6,008
214
3,432
984,776
34,100
63,646
(20,942)
(1,974)
(6,579)
1,110,914
Independence Group NL
76
Independence Group NL
77
104 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Group structure
This section of the notes provides information which will help users understand how the group structure affects the
financial position and performance of the Group.
22 Business combination
(a) Summary of acquisition
On 22 September 2015, Independence Group NL acquired 100% of the issued capital of Sirius Resources NL (Sirius).
Sirius was an ASX listed minerals exploration and development company with a key focus on the development of the
Nova Project, located east of Norseman in Western Australia.
Details of the purchase consideration and the net assets acquired are as follows:
Purchase consideration (refer to (b) below):
Cash paid
Ordinary shares issued
Total purchase consideration
$'000
250,285
860,629
1,110,914
The fair value of the 275,842,684 shares issued as part of the consideration paid for Sirius ($860,629,000) was based
on the published share price on 22 September 2015 of $3.12 per share.
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Trade and other receivables
Inventories
Plant and equipment
Mine properties
Exploration and evaluation expenditure
Deferred tax assets
Trade and other payables
Deferred tax liability
Provisions
Net identifiable assets acquired
Fair value
$'000
48,233
6,008
214
3,432
984,776
34,100
63,646
(20,942)
(1,974)
(6,579)
1,110,914
There were no acquisitions in the year ending 30 June 2015.
Revenue and profit contribution
The acquired business contributed revenues of $409,000 and net loss of $1,372,000 to the Group for the period from 22
September 2015 to 30 June 2016.
If the acquisition had occurred on 1 July 2015, consolidated pro-forma revenue and loss for the year ended 30 June
2016 would have been $414,140,000 and $75,807,000 respectively.
Cash flows
Since acquisition, expenditure of $179,475,000 was incurred by the acquired entity relating to the construction and
development of the Nova Project.
Independence Group NL
77
Annual Report 2016 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
22 Business combination (continued)
(b) Purchase consideration - cash outflow
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less: balances acquired
Cash
Net outflow of cash - investing activities
2016
$'000
2015
$'000
250,285
(48,233)
202,052
-
-
-
Acquisition-related costs
Acquisition and other integration related costs of $65,137,000 are included in acquisition and other integration expenses
in profit or loss and an amount of $12,426,000 is included in operating cash flows in the statement of cash flows.
(c) Recognition and measurement
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 value of the assets transferred, liabilities incurred and the equity interests issued by the Group. The consideration
transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement
and the 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.
23 Subsidiaries
(a) Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of Independence Group NL and the
subsidiaries listed in the following table:
23 Subsidiaries (continued)
(a) Significant investments in subsidiaries (continued)
Name of entity
Note
Country of
incorporation
Equity holding
Independence Long Pty Ltd
Independence Newsearch Pty Ltd
Independence Karlawinda Pty Ltd
Independence Jaguar Pty Ltd
Independence ESP Pty Ltd
Independence Jaguar Exploration Parent Pty Ltd
Independence Jaguar Exploration Pty Ltd
Independence Stockman Parent Pty Ltd
Independence Stockman Project Pty Ltd
Independence Jaguar Project Parent Pty Ltd
Independence Jaguar Project Pty Ltd
Independence CM Pty Ltd
Independence BBS Pty Ltd
Independence Projects Pty Ltd
Independence Europe Pty Ltd
Independence Nova Holdings Pty Ltd
Independence Nova Pty Ltd
Sirius Exploration Canada Ltd
VMS Metals Pty Ltd
Independence Group Europe AB
(a),(d)
(a)
(c)
(c)
(c)
(c)
(c)
(c)
(a),(b)
(a),(b)
(c)
(c)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Australia
Sweden
2016
%
100
100
100
100
-
-
-
-
-
-
-
-
100
100
100
100
100
100
100
100
2015
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with
Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information refer
to note 29.
On 18 April 2016, Sirius Resources Pty Ltd changed its name to Independence Nova Holdings Pty Ltd and Sirius
Gold Pty Ltd changed its name to Independence Nova Pty Ltd.
This entity was deregistered or dissolved during the year.
On 23 March 2016, Independence Jaguar Limited changed its name to Independence Jaguar Pty Ltd and the
company type was changed from Limited to Pty Ltd.
(b) Principles of consolidation
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another
(a)
(b)
(c)
(d)
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.
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.
Independence Group NL
78
Independence Group NL
79
106 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 23 Subsidiaries (continued)
(a) Significant investments in subsidiaries (continued)
Name of entity
Independence Long Pty Ltd
Independence Newsearch Pty Ltd
Independence Karlawinda Pty Ltd
Independence Jaguar Pty Ltd
Independence ESP Pty Ltd
Independence Jaguar Exploration Parent Pty Ltd
Independence Jaguar Exploration Pty Ltd
Independence Stockman Parent Pty Ltd
Independence Stockman Project Pty Ltd
Independence Jaguar Project Parent Pty Ltd
Independence Jaguar Project Pty Ltd
Independence CM Pty Ltd
Independence BBS Pty Ltd
Independence Projects Pty Ltd
Independence Europe Pty Ltd
Independence Nova Holdings Pty Ltd
Independence Nova Pty Ltd
Sirius Exploration Canada Ltd
VMS Metals Pty Ltd
Independence Group Europe AB
Note
(a)
(a),(d)
(c)
(c)
(c)
(c)
(c)
(c)
(a),(b)
(a),(b)
(c)
(c)
Notes to the consolidated financial statements
30 June 2016
(continued)
Country of
incorporation
Equity holding
2016
%
2015
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Australia
Sweden
100
100
100
100
-
-
-
100
100
100
100
-
-
-
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
(a)
(b)
(c)
(d)
These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with
Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information refer
to note 29.
On 18 April 2016, Sirius Resources Pty Ltd changed its name to Independence Nova Holdings Pty Ltd and Sirius
Gold Pty Ltd changed its name to Independence Nova Pty Ltd.
This entity was deregistered or dissolved during the year.
On 23 March 2016, Independence Jaguar Limited changed its name to Independence Jaguar Pty Ltd and the
company type was changed from Limited to Pty Ltd.
(b) Principles of consolidation
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another
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.
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 asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
the impairment of
Independence Group NL
79
Annual Report 2016 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Unrecognised items
This section of the notes provides information about items that are not recognised in the financial statements as they do
not yet satisfy the recognition criteria but could potentially have an impact on the Group's financial position and
performance.
24 Commitments and contingencies
(a) Capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as
follows:
Mine properties in development
(b) Commitments
(i) Leasing commitments
Operating lease commitments
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Total minimum lease payments
Finance lease and hire purchase commitments
Future minimum lease payments under lease contracts with the present value of net
minimum lease payments are as follows:
Within one year
Total minimum lease payments
Future finance charges
Present value of minimum lease payments
Current borrowings
Total included in borrowings
2016
$'000
163,938
163,938
2015
$'000
-
-
2016
$'000
2015
$'000
1,549
6,458
-
8,007
2016
$'000
-
-
-
-
-
-
1,275
5,516
1,242
8,033
2015
$'000
522
522
(12)
510
510
510
24 Commitments and contingencies (continued)
(c) Gold delivery commitments
Later than one but not later than five years
Within one year
Total
Notes to the consolidated financial statements
30 June 2016
(continued)
Gold for
physical
delivery
oz
72,600
60,000
132,600
Average
contracted
sale price
A$/oz
1,641
1,796
1,711
Value of
committed
sales
$'000
119,126
107,786
226,912
The physical gold delivery contracts are settled by the physical delivery of gold as per the contract terms. The contracts
are accounted for as sales contracts with revenue recognised once gold has been delivered to the counterparties. The
physical gold delivery contracts are considered to sell a non-financial item and therefore do not fall within the scope of
AASB 139 Financial Instruments: Recognition and Measurement. Hence, no derivatives have been recognised in
respect of these contracts.
(d) Contingencies
The Group had guarantees outstanding at 30 June 2016 totalling $1,315,000 (2015: $1,315,000) which have been
granted in favour of various third parties. The guarantees primarily relate to environmental and rehabilitation bonds at
the various mine sites.
25 Events occurring after the reporting period
On 31 August 2016, the Company announced a fully franked dividend final dividend of 2 cents per share to be paid on
23 September 2016.
On 27 July 2016, the Company announced it was conducting a fully underwritten institutional placement (Placement) to
raise approximately $250,000,000. The Placement comprises an issue of 66,666,667 new shares in the Company and
was underwritten at a price of $3.75 per share (Placement Price).
The Company also conducted a non-underwritten Share Purchase Plan (SPP)
to facilitate retail shareholder
participation of up to $15,000 per eligible shareholder a the Placement Price, subject to an overall cap of $30,000,000
(or approximately 8 million shares) (the Placement and SPP together being the Equity Raising). The SPP was
oversubscribed, however in recognition of the strong interest in the SPP by eligible retail shareholders, the Company's
Board resolved to accept all valid applications without any scale back. The SPP resulted in the issue of an additional
8,388,689 ordinary shares and raised $31.5 million.
The Company undertook the Equity Raising to strengthen its balance sheet and to provide greater financial flexibility to
fund growth initiatives. Specifically,
the Equity Raising provided funding for the remaining development capital
expenditure for the Nova Project, reducing the requirement for further draw-down under the Company's existing debt
facilities. The Equity Raising will also provide additional funds for the payment of residual acquisition costs (stamp duty),
funding for debt repayment and general corporate purposes including working capital.
Other than the above, there has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of the Director of the
Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of
affairs of the consolidated entity, in future financial years, other than as stated elsewhere in the financial report.
Independence Group NL
108 Independence Group NL
80
Independence Group NL
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 24 Commitments and contingencies (continued)
(c) Gold delivery commitments
Within one year
Later than one but not later than five years
Total
Notes to the consolidated financial statements
30 June 2016
(continued)
Gold for
physical
delivery
oz
72,600
60,000
132,600
Average
contracted
sale price
A$/oz
1,641
1,796
1,711
Value of
committed
sales
$'000
119,126
107,786
226,912
The physical gold delivery contracts are settled by the physical delivery of gold as per the contract terms. The contracts
are accounted for as sales contracts with revenue recognised once gold has been delivered to the counterparties. The
physical gold delivery contracts are considered to sell a non-financial item and therefore do not fall within the scope of
AASB 139 Financial Instruments: Recognition and Measurement. Hence, no derivatives have been recognised in
respect of these contracts.
(d) Contingencies
The Group had guarantees outstanding at 30 June 2016 totalling $1,315,000 (2015: $1,315,000) which have been
granted in favour of various third parties. The guarantees primarily relate to environmental and rehabilitation bonds at
the various mine sites.
25 Events occurring after the reporting period
On 31 August 2016, the Company announced a fully franked dividend final dividend of 2 cents per share to be paid on
23 September 2016.
On 27 July 2016, the Company announced it was conducting a fully underwritten institutional placement (Placement) to
raise approximately $250,000,000. The Placement comprises an issue of 66,666,667 new shares in the Company and
was underwritten at a price of $3.75 per share (Placement Price).
to facilitate retail shareholder
The Company also conducted a non-underwritten Share Purchase Plan (SPP)
participation of up to $15,000 per eligible shareholder a the Placement Price, subject to an overall cap of $30,000,000
(or approximately 8 million shares) (the Placement and SPP together being the Equity Raising). The SPP was
oversubscribed, however in recognition of the strong interest in the SPP by eligible retail shareholders, the Company's
Board resolved to accept all valid applications without any scale back. The SPP resulted in the issue of an additional
8,388,689 ordinary shares and raised $31.5 million.
The Company undertook the Equity Raising to strengthen its balance sheet and to provide greater financial flexibility to
fund growth initiatives. Specifically,
the Equity Raising provided funding for the remaining development capital
expenditure for the Nova Project, reducing the requirement for further draw-down under the Company's existing debt
facilities. The Equity Raising will also provide additional funds for the payment of residual acquisition costs (stamp duty),
funding for debt repayment and general corporate purposes including working capital.
Other than the above, there has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of the Director of the
Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of
affairs of the consolidated entity, in future financial years, other than as stated elsewhere in the financial report.
Independence Group NL
81
Annual Report 2016 109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Other information
This section of the notes includes other information that must be disclosed to comply with the accounting standards and
other pronouncements, but are not considered critical in understanding the financial performance or position of the
Group.
26 Share-based payments
The Group provides benefits to employees (including executive directors) of the Group through share-based incentives.
Information relating to these schemes is set out below.
(a) Employee Performance Rights Plan
The Independence Group NL Employee Performance Rights Plan (PRP) was approved by shareholders at the Annual
General Meeting of the Company in November 2014. Under the PRP, participants are granted share rights which will
only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the
vesting period. Participation in the PRP is at the Board’s discretion and no individual has a contractual right to
participate in the plan or to receive any guaranteed benefits.
(b) Equity settled awards outstanding
Outstanding at the beginning of the year
Rights issued during the year
Rights vested during the year
Rights lapsed during the year
Rights cancelled during the year
Outstanding at the end of the year
(c) Fair value of share rights granted
2016
2015
Number of
share rights
2,313,757
643,911
(1,323,613)
(258,903)
(23,029)
1,352,123
Weighted
average fair
value
Number of
share rights
Weighted
average fair
value
2.85
1.32
3.19
2.23
2.41
1.91
3,255,175
509,480
(932,668)
(518,230)
-
2,313,757
2.99
2.65
3.00
3.23
-
2.85
The fair value of the share rights granted during the year ended 30 June 2016 are determined using a trinomial tree
which has been adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy, with the following
inputs:
Fair value inputs
Grant date
Vesting date
Share price at grant date
Fair value estimate at grant date
Expected share price volatility (%)
Expected dividend yield (%)
Expected risk-free rate (%)
CEO
Other senior management
The trading of shares issued to participants under the Company’s PRP is subject to, and conditional upon, compliance
16 December 2015
1 July 2018
$2.20
$1.56
47
1.14
2.14
22 January 2016
1 July 2018
$2.11
$1.20
48
1.14
1.94
The share-based payments expense included in profit or loss for the year totalled $819,000 (2015: $2,949,000).
(d) Employee share scheme
Share rights granted after 1 July 2014
Vesting of the performance rights granted to executive directors and executives after 1 July 2014 is based on a total
shareholder return (TSR) scorecard. The TSR scorecard for the three year measurement period will be determined
based on a percentile ranking of the Company's TSR results relative to the TSR of each of the companies in the peer
group over the same three year measurement period.
The peer group is to comprise the constituents of the S&P ASX 300 Metals and Mining Index who are engaged in gold
and/or based metals mining in Australia and have the closest market capitalisation to the Company.
Independence Group NL
110 Independence Group NL
82
Independence Group NL
83
Notes to the consolidated financial statements
30 June 2016
(continued)
26 Share-based payments (continued)
(d) Employee share scheme (continued)
Share rights granted after 1 July 2014 (continued)
The vesting schedule of the performance rights subject to relative TSR testing is as follows:
Relative TSR performance
Less than 50th percentile
Between 50th and 75th percentile
75th percentile or better
Pro-rata straight line percentage between 50% and 100%
Level of vesting
Zero
100%
The Company's TSR performance for share rights issued during the current financial year will be assessed against the
following 20 peer group companies:
* Aditya Birla Minerals Ltd1
* Alacer Gold Corp.
* Beadell Resources Ltd
* Cudeco Ltd
* Evolution Mining Limited
* Kingsgate Consolidated Limited
* Medusa Mining Ltd
* Metals X Limited
* Mincor Resources NL
* Northern Star Resources Limited
Peer companies
* Oceana Gold Limited
* Oz Minerals Ltd
* Panoramic Resources Ltd
* Perseus Mining Limited
* Regis Resources Limited
* Resolute Mining Limited
* Saracen Mineral Holdings Limited
* Sandfire Resources Ltd
* Silver Lake Resources Limited
* Western Areas Ltd
1. To be removed from peer group of companies following takeover of the company.
Share rights granted prior to 30 June 2014
Vesting of the performance rights granted to executive directors and other executives of the Company prior to 30 June
2014 is subject to a combination of the Company’s shareholder return (with a 75 per cent weighting) and return on
equity (with a 25 per cent weighting), measured over a three year measurement period. Further information is included
The performance rights will not be subject to any further escrow restrictions once they have vested to the employees.
in the Remuneration Report.
Share trading policy
with the Company’s employee share trading policy.
Non-executive Directors
(e) Recognition and measurement
Equity-settled transactions
The PRP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not
currently intended that non-executive directors will be issued with performance rights under the PRP and any such issue
would be subject to all necessary shareholder approvals.
The fair values of equity settled awards are recognised in share-based payments expense,
together with a
corresponding increase in share-based payments reserve within equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting
date).
The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are
granted. The fair value is determined with the assistance of a valuation software using a trinomial tree which has been
adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy.
In valuing equity-settled
transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares
of Independence Group NL (market conditions).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of
the Company, will ultimately vest. This opinion is formed based on the best available information at the reporting date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
26 Share-based payments (continued)
(d) Employee share scheme (continued)
Share rights granted after 1 July 2014 (continued)
The vesting schedule of the performance rights subject to relative TSR testing is as follows:
Relative TSR performance
Less than 50th percentile
Between 50th and 75th percentile
75th percentile or better
Level of vesting
Zero
Pro-rata straight line percentage between 50% and 100%
100%
The Company's TSR performance for share rights issued during the current financial year will be assessed against the
following 20 peer group companies:
* Aditya Birla Minerals Ltd1
* Alacer Gold Corp.
* Beadell Resources Ltd
* Cudeco Ltd
* Evolution Mining Limited
* Kingsgate Consolidated Limited
* Medusa Mining Ltd
* Metals X Limited
* Mincor Resources NL
* Northern Star Resources Limited
Peer companies
* Oceana Gold Limited
* Oz Minerals Ltd
* Panoramic Resources Ltd
* Perseus Mining Limited
* Regis Resources Limited
* Resolute Mining Limited
* Saracen Mineral Holdings Limited
* Sandfire Resources Ltd
* Silver Lake Resources Limited
* Western Areas Ltd
1. To be removed from peer group of companies following takeover of the company.
Share rights granted prior to 30 June 2014
Vesting of the performance rights granted to executive directors and other executives of the Company prior to 30 June
2014 is subject to a combination of the Company’s shareholder return (with a 75 per cent weighting) and return on
equity (with a 25 per cent weighting), measured over a three year measurement period. Further information is included
in the Remuneration Report.
The performance rights will not be subject to any further escrow restrictions once they have vested to the employees.
Share trading policy
The trading of shares issued to participants under the Company’s PRP is subject to, and conditional upon, compliance
with the Company’s employee share trading policy.
Non-executive Directors
The PRP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not
currently intended that non-executive directors will be issued with performance rights under the PRP and any such issue
would be subject to all necessary shareholder approvals.
(e) Recognition and measurement
Equity-settled transactions
The fair values of equity settled awards are recognised in share-based payments expense,
together with a
corresponding increase in share-based payments reserve within equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting
date).
The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are
granted. The fair value is determined with the assistance of a valuation software using a trinomial tree which has been
adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy.
In valuing equity-settled
transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares
of Independence Group NL (market conditions).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of
the Company, will ultimately vest. This opinion is formed based on the best available information at the reporting date.
Independence Group NL
83
Annual Report 2016 111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
26 Share-based payments (continued)
(e) Recognition and measurement (continued)
Equity-settled transactions (continued)
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of
the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the cancelled and new award is treated as
if it was a modification of the original award, as described in the previous paragraph.
Upon the settlement of equity settled share awards, the balance of the share-based payments reserve relating to those
rights and awards is transferred to share capital. The dilutive effect, if any, of outstanding rights is reflected as additional
share dilution in the computation of diluted earnings per share.
27 Related party transactions
(a) Transactions with other related parties
During the financial year, a wholly-owned subsidiary paid dividends of $22,000,000 (2015: $48,000,000)
to
Independence Group NL. This amount has been eliminated on consolidation for the purposes of calculating the profit of
the Group for the financial year.
Loans were made between Independence Group NL and certain entities in the wholly-owned group. The loans
receivable from controlled entities are interest-free and repayable on demand.
(b) Key management personnel
Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2016
$
4,162,227
302,964
45,191
474,978
4,985,360
2015
$
3,212,925
242,994
40,301
607,413
4,103,633
Detailed remuneration disclosures are provided in the remuneration report on pages 44 to 58.
28 Parent entity financial information
(a) Summary financial information
The following information relates to the parent entity, Independence Group NL, at 30 June.
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Acquisition reserve
Hedging reserve
Share-based payments reserve
Accumulated losses
Total equity
1,500,671
666,524
(1,500,671)
(666,524)
1,601,458
737,324
2016
$'000
54,755
1,846,030
1,900,785
124,219
275,895
400,114
3,142
(1,322)
10,371
(112,978)
1,500,671
2016
$'000
(14,229)
-
(14,229)
2015
$'000
115,225
614,930
730,155
24,717
38,914
63,631
3,142
-
13,057
(86,999)
666,524
2015
$'000
73,736
-
73,736
(Loss) profit for the year
Other comprehensive income for the period
Total comprehensive (loss) income for the year
(b) Guarantees entered into by the parent entity
The parent entity has no unsecured guarantees in respect of finance leases of subsidiaries (2015: $510,000).
There are cross guarantees given by Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty
Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd as described in note 29. No deficiencies of
assets exist in any of these companies.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any outstanding contractual commitments for the acquisition of property, plant and
equipment at 30 June 2016 or 30 June 2015.
(e) Recognition and measurement
The financial
information for the parent entity has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Independence Group NL
84
Independence Group NL
85
112 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
28 Parent entity financial information
(a) Summary financial information
The following information relates to the parent entity, Independence Group NL, at 30 June.
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Acquisition reserve
Hedging reserve
Share-based payments reserve
Accumulated losses
Total equity
(Loss) profit for the year
Other comprehensive income for the period
Total comprehensive (loss) income for the year
(b) Guarantees entered into by the parent entity
2016
$'000
54,755
1,846,030
1,900,785
124,219
275,895
400,114
2015
$'000
115,225
614,930
730,155
24,717
38,914
63,631
1,500,671
666,524
(1,500,671)
(666,524)
1,601,458
737,324
3,142
(1,322)
10,371
(112,978)
1,500,671
2016
$'000
(14,229)
-
(14,229)
3,142
-
13,057
(86,999)
666,524
2015
$'000
73,736
-
73,736
The parent entity has no unsecured guarantees in respect of finance leases of subsidiaries (2015: $510,000).
There are cross guarantees given by Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty
Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd as described in note 29. No deficiencies of
assets exist in any of these companies.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015.
(d) Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any outstanding contractual commitments for the acquisition of property, plant and
equipment at 30 June 2016 or 30 June 2015.
(e) Recognition and measurement
The financial
statements, except as set out below.
information for the parent entity has been prepared on the same basis as the consolidated financial
Independence Group NL
85
Annual Report 2016 113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
28 Parent entity financial information (continued)
(e) Recognition and measurement (continued)
(i)
Investments in subsidiaries, associates and joint venture entities
29 Deed of cross guarantee (continued)
(a) Consolidated income statement, statement of comprehensive income and summary of movements in consolidated
retained earnings (continued)
Investments in subsidiaries entities are accounted for at cost in the financial statements of Independence Group NL.
Consolidated statement of profit or loss and other comprehensive income
(ii) Tax consolidation legislation
Independence Group NL and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation.
The head entity, Independence Group NL, and the controlled entities in the tax consolidated Group account for their
own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated Group
continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Independence Group NL also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated Group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate
Independence Group NL for any current tax payable assumed and are compensated by Independence Group NL for
any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are
transferred to Independence Group NL under the tax consolidation legislation. The funding amounts are determined by
reference to the amounts recognised in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the
head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also
require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current
amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
29 Deed of cross guarantee
Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty
Ltd and Independence Nova Pty Ltd are parties to a deed of cross guarantee under which each company guarantees
the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to
prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian
Securities and Investments Commission.
(a) Consolidated statement of profit or loss and other comprehensive income and summary of movements in
consolidated retained earnings
The above companies represent a 'closed group' for the purposes of the Class Order, and as there are no other parties
to the deed of cross guarantee that are controlled by Independence Group NL, they also represent the 'extended closed
group'.
Set out below is a consolidated statement of profit or loss and other comprehensive income and a summary of
movements in consolidated retained earnings for the year ended 30 June 2016 of the closed group consisting of
Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty
Ltd and Independence Nova Pty Ltd.
Revenue from continuing operations
Other income
Mining, development and processing costs
Employee benefits expense
Share-based payments expense
Fair value movement of financial investments
Depreciation and amortisation expense
Rehabilitation and restoration borrowing costs
Exploration costs expensed
Royalty expense
Ore tolling expense
Shipping and wharfage expense
Borrowing and finance costs
Impairment of exploration and evaluation expenditure
Impairment of loans to and investments in subsidiaries
Acquisition and other integration costs
Other expenses
(Loss) profit before income tax
Income tax expense
(Loss) profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges, net of tax
Other comprehensive income for the period, net of tax
Total comprehensive (loss) income for the period
Summary of movements in consolidated retained earnings (accumulated
losses)
Retained earnings (accumulated losses) at the beginning of the financial year
Adjustment on adoption of AASB 9, net of tax
Restated retained earnings (accumulated losses) at the beginning of the
financial year
(Loss) profit for the year
Dividends paid
(b) Consolidated balance sheet
(Accumulated losses) retained earnings at the end of the financial year
2016
$'000
413,159
2,342
(139,931)
(66,975)
(819)
2,396
(105,872)
(474)
(17,875)
(12,557)
(10,092)
(16,143)
(76)
(2,985)
(1,960)
(65,137)
(11,121)
(34,120)
(6,999)
(41,119)
404
404
(40,715)
2016
$'000
35,552
1,036
2015
$'000
495,298
3,327
(135,352)
(63,841)
(2,949)
1,467
(95,959)
(271)
(21,184)
(15,647)
(12,297)
(19,539)
(1,566)
(3,461)
(4,278)
-
(11,004)
112,744
(35,142)
77,602
2,038
2,038
79,640
2015
$'000
(16,282)
-
36,588
(16,282)
(41,119)
(12,786)
(17,317)
77,602
(25,768)
35,552
Set out below is a consolidated balance sheet as at 30 June 2016 of the closed group consisting of Independence
Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and
Independence Nova Pty Ltd.
Independence Group NL
86
Independence Group NL
87
114 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
29 Deed of cross guarantee (continued)
(a) Consolidated income statement, statement of comprehensive income and summary of movements in consolidated
retained earnings (continued)
Consolidated statement of profit or loss and other comprehensive income
Revenue from continuing operations
Other income
Mining, development and processing costs
Employee benefits expense
Share-based payments expense
Fair value movement of financial investments
Depreciation and amortisation expense
Rehabilitation and restoration borrowing costs
Exploration costs expensed
Royalty expense
Ore tolling expense
Shipping and wharfage expense
Borrowing and finance costs
Impairment of exploration and evaluation expenditure
Impairment of loans to and investments in subsidiaries
Acquisition and other integration costs
Other expenses
(Loss) profit before income tax
Income tax expense
(Loss) profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges, net of tax
Other comprehensive income for the period, net of tax
Total comprehensive (loss) income for the period
Summary of movements in consolidated retained earnings (accumulated
losses)
Retained earnings (accumulated losses) at the beginning of the financial year
Adjustment on adoption of AASB 9, net of tax
Restated retained earnings (accumulated losses) at the beginning of the
financial year
(Loss) profit for the year
Dividends paid
(Accumulated losses) retained earnings at the end of the financial year
2016
$'000
413,159
2,342
(139,931)
(66,975)
(819)
2,396
(105,872)
(474)
(17,875)
(12,557)
(10,092)
(16,143)
(76)
(2,985)
(1,960)
(65,137)
(11,121)
(34,120)
(6,999)
(41,119)
404
404
(40,715)
2016
$'000
35,552
1,036
2015
$'000
495,298
3,327
(135,352)
(63,841)
(2,949)
1,467
(95,959)
(271)
(21,184)
(15,647)
(12,297)
(19,539)
(1,566)
(3,461)
(4,278)
-
(11,004)
112,744
(35,142)
77,602
2,038
2,038
79,640
2015
$'000
(16,282)
-
36,588
(16,282)
(41,119)
(12,786)
(17,317)
77,602
(25,768)
35,552
(b) Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2016 of the closed group consisting of Independence
Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and
Independence Nova Pty Ltd.
Independence Group NL
87
Annual Report 2016 115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 29 Deed of cross guarantee (continued)
(b) Consolidated balance sheet (continued)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Financial assets at fair value through profit or loss
Derivative financial instruments
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Mine properties
Exploration and evaluation expenditure
Deferred tax assets
Investments in controlled entities
Investments in joint ventures
Derivative financial instruments
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Other reserves
Retained earnings
TOTAL EQUITY
Notes to the consolidated financial statements
30 June 2016
(continued)
Notes to the consolidated financial statements
30 June 2016
(continued)
30 Remuneration of auditors
The auditor of Independence Group NL is BDO Audit (WA) Pty Ltd.
Amounts received or due and receivable by BDO Audit (WA) Pty Ltd for:
Audit and review of financial statements
Other services in relation to the entity and any other entity in the consolidated
Group
31 Other accounting policies
(a) New and amended standards and interpretations adopted by the Group
2016
$
2015
$
232,500
220,500
38,158
270,658
35,913
256,413
The Group has applied the following standards and amendments for first
time in their annual reporting period
commencing 1 July 2015:
AASB 2014-1 Amendments to Australian Accounting Standards (including Part A: Annual Improvements 2010-2012
and 2011-2013 Cycles and Part B: Defined Benefit Plans: Employee Contributions - Amendments to AASB 119)
The following Australian Accounting Standards were early adopted by the Group from 1 July 2015:
AASB 9 Financial Instruments
The Group has early adopted AASB 9 Financial
Instruments (AASB 9),
issued in December 2009,
including
consequential amendments to other standards, with effect from 1 July 2015. The standard has been retrospectively
applied to derivative financial instruments held at 1 July 2015 and comparative amounts have been restated where
In accordance with AASB 9, the time value (or extrinsic value) of an option is also designated as the hedging
instrument. This result has resulted in changes in the time value of the option being deferred in other comprehensive
income rather than being accounted for in the profit or loss.
The adoption of this standard had no impact on the net assets of the Group, however resulted in the following
restatement of balances at 1 July 2015:
a reduction in accumulated losses of $1,036,000; and
a corresponding debit to the hedging reserve of $1,036,000.
(b) New standards and interpretations not yet adopted
•
•
•
•
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
2016
$'000
2015
$'000
43,832
27,086
17,540
4,989
784
94,231
4
22,242
1,270,512
39,350
215,406
139,494
306,151
799
1,993,958
119,009
19,179
21,511
15,524
4,981
180,204
8
25,353
82,935
8,235
130,725
139,333
316,150
-
702,739
2,088,189
882,943
necessary.
120,150
43,154
2,487
2,000
167,791
222,672
-
48,567
52,137
323,376
491,167
52,389
510
2,384
2,659
57,942
-
717
13,942
21,267
35,926
93,868
1,597,022
789,075
1,601,458
12,881
(17,317)
1,597,022
737,324
16,199
35,552
789,075
Independence Group NL
88
Independence Group NL
89
116 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Notes to the consolidated financial statements
30 June 2016
(continued)
30 Remuneration of auditors
The auditor of Independence Group NL is BDO Audit (WA) Pty Ltd.
Amounts received or due and receivable by BDO Audit (WA) Pty Ltd for:
Audit and review of financial statements
Other services in relation to the entity and any other entity in the consolidated
Group
31 Other accounting policies
(a) New and amended standards and interpretations adopted by the Group
2016
$
2015
$
232,500
220,500
38,158
270,658
35,913
256,413
The Group has applied the following standards and amendments for first
commencing 1 July 2015:
time in their annual reporting period
•
AASB 2014-1 Amendments to Australian Accounting Standards (including Part A: Annual Improvements 2010-2012
and 2011-2013 Cycles and Part B: Defined Benefit Plans: Employee Contributions - Amendments to AASB 119)
The following Australian Accounting Standards were early adopted by the Group from 1 July 2015:
•
AASB 9 Financial Instruments
The Group has early adopted AASB 9 Financial
including
consequential amendments to other standards, with effect from 1 July 2015. The standard has been retrospectively
applied to derivative financial instruments held at 1 July 2015 and comparative amounts have been restated where
necessary.
issued in December 2009,
Instruments (AASB 9),
In accordance with AASB 9, the time value (or extrinsic value) of an option is also designated as the hedging
instrument. This result has resulted in changes in the time value of the option being deferred in other comprehensive
income rather than being accounted for in the profit or loss.
The adoption of this standard had no impact on the net assets of the Group, however resulted in the following
restatement of balances at 1 July 2015:
•
•
a reduction in accumulated losses of $1,036,000; and
a corresponding debit to the hedging reserve of $1,036,000.
(b) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
Independence Group NL
89
Annual Report 2016 117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 Notes to the consolidated financial statements
30 June 2016
(continued)
31 Other accounting policies (continued)
(b) New standards and interpretations not yet adopted (continued)
Mandatory application
date/ Date of adoption by
group
Mandatory for financial
years commencing on or
after 1 January 2018, but
available for early adoption
Expected date of adoption
by the group: 1 January
2018.
Title of
standard
AASB 15
Revenue from
Contracts with
Customers
Nature of change
Impact
This standard is not expected to have a
material impact on the Group's financial
statements and disclosures.
The AASB has issued a
new standard for the
recognition of revenue. This
will replace AASB 118
which covers revenue
arising from the sale of
goods and the rendering of
services and AASB 111
which covers construction
contracts.
The new standard is based
on the principle that
revenue is recognised
when control of a good or
service transfers to a
customer.
The standard permits either
a full retrospective or a
modified retrospective
approach for the adoption.
There are no other standards that are not yet effective and that would be expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
Independence Group NL
90
118 Independence Group NL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016 DIRECTORS’ DECLARATION
Directors' declaration
30 June 2016
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 61 to 118 are in accordance with the Corporations Act
2001, including:
(i)
(ii)
complying with Accounting Standards,
professional reporting requirements, and
the Corporations Regulations 2001 and other mandatory
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its
performance for the year ended on that date, and
(b)
(c)
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
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed
group identified in note 29 will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in note 29.
This declaration is made in accordance with a resolution of Directors.
Peter Bradford
Managing Director
Perth, Western Australia
Dated this 30th day of August 2016
Independence Group NL
91
Annual Report 2016 119
INDEPENDENT AUDITOR’S REPORT
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
To the members of Independence Group NL
INDEPENDENT AUDITOR’S REPORT
Report on the Financial Report
We have audited the accompanying financial report of Independence Group NL, which comprises the
To the members of Independence Group NL
consolidated balance sheet as at 30 June 2016, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
Report on the Financial Report
policies and other explanatory information, and the directors’ declaration of the consolidated entity
We have audited the accompanying financial report of Independence Group NL, which comprises the
comprising the company and the entities it controlled at the year’s end or from time to time during the
consolidated balance sheet as at 30 June 2016, the consolidated statement of profit or loss and other
financial year.
comprehensive income, the consolidated statement of changes in equity and the consolidated
Directors’ Responsibility for the Financial Report
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the consolidated entity
The directors of the company are responsible for the preparation of the financial report that gives a
comprising the company and the entities it controlled at the year’s end or from time to time during the
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
financial year.
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
Directors’ Responsibility for the Financial Report
fraud or error. In page 66, the directors also state, in accordance with Accounting Standard AASB 101
The directors of the company are responsible for the preparation of the financial report that gives a
Presentation of Financial Statements, that the financial statements comply with International
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
Financial Reporting Standards.
and for such internal control as the directors determine is necessary to enable the preparation of the
Auditor’s Responsibility
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In page 66, the directors also state, in accordance with Accounting Standard AASB 101
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
Presentation of Financial Statements, that the financial statements comply with International
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
Financial Reporting Standards.
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
Auditor’s Responsibility
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
the financial report. The procedures selected depend on the auditor’s judgement, including the
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
In making those risk assessments, the auditor considers internal control relevant to the company’s
reasonable assurance about whether the financial report is free from material misstatement.
preparation of the financial report that gives a true and fair view in order to design audit procedures
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
the financial report. The procedures selected depend on the auditor’s judgement, including the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
In making those risk assessments, the auditor considers internal control relevant to the company’s
well as evaluating the overall presentation of the financial report.
preparation of the financial report that gives a true and fair view in order to design audit procedures
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
for our audit opinion.
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
Independence Group NL
120 Independence Group NL
92
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
Independence Group NL
92
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of Independence Group NL, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of Independence Group NL is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
page 66.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 44 to 58 of the directors’ report for the
year ended 30 June 2016. 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.
Opinion
In our opinion, the Remuneration Report of Independence Group NL for the year ended 30 June 2016
complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Glyn O’Brien
Director
Perth, 30 August 2016
Independence Group NL
Annual Report 2016 121
93
ADDITIONAL ASX INFORMATION
The following additional information not shown elsewhere in this report is required by ASX Limited in respect of listed
companies only. This information is current as at 12 September 2016.
1.
Shareholding
a. Distribution of shareholders
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 999,999,999
1,000,000,000 - 9,999,999,999
Total holders
Units
% of Issued Capital
3,910
3,503
1,290
1,314
163
0
1,507,058
9,140,110
9,439,161
32,842,212
533,770,039
0
0.26
1.56
1.61
5.60
90.98
0.00
100.00
TOTAL
10,180
586,698,580
b. The number of shareholders holding less than a marketable parcel of fully paid ordinary shares is 1,265.
c. The Company has received the following notices of substantial shareholding (“Notice”):
Substantial shareholder
Relevant Interest per the Notice - Number of shares
Ausbil Investment Management Limited
AustralianSuper Pty Ltd
Commonwealth Bank of Australia
FIL Limited
Van Eck Associates Corporation
Mark Creasy and Creasy Group entities
30,790,105
30,912,424
31,196,831
50,715,214
62,547,002
95,562,917
d. Voting rights: The voting rights of the fully paid ordinary shares are one vote per share held.
2.
Twenty largest holders of ordinary shares
Ordinary Shareholders
No. of Shares held
Percentage Held
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees
Yandal Investments Pty Ltd
Citicorp Nominees Pty Limited
Fraserx Pty Ltd
Ponton Minerals Pty Ltd
Free CI Pty Ltd
Lake Rivers Gold Pty Ltd
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
Yandal Investments Pty Ltd
Perth Select Seafoods Pty Ltd
Yandal Investments Pty Ltd
BNP Paribas Nominees Pty Ltd
Zero Nominees Pty Ltd
UBS Nominees Pty Ltd
20
RBC Investor Services Australia Nominees Pty Limited
130,563,043
98,203,411
82,570,061
41,929,135
40,145,871
13,415,188
10,964,532
10,964,531
10,964,531
10,594,339
6,444,015
4,757,134
4,749,132
4,620,000
2,837,200
2,705,000
2,643,000
2,108,910
2,088,773
1,938,966
22.25
16.74
14.07
7.15
6.84
2.29
1.87
1.87
1.87
1.81
1.10
0.81
0.81
0.79
0.48
0.46
0.45
0.36
0.36
0.33
485,206,772
82.70
122 Independence Group NL
3.
Unquoted securities: IGO has 1,058,316 performance right on issue. The number of beneficial holders of
performance rights totals 20.
SHAREHOLDER REPORTING TIMETABLE
Please note that the dates below are subject to change. Please check the IGO website nearer the time to confirm dates.
Important Dates
2016
26 October 2016
26 October 2016
September Quarterly Activities Report
Investor Webcast
18 November 2016
Annual General Meeting to be held in Perth, Western Australia
2017
25 January 2017
25 January 2017
21 February 2017
21 February 2017
26 April 2017
26 April 2017
26 July 2017
26 July 2017
December Quarterly Activities Report
Investor Webcast
Half Yearly Financial Statements
Investor Webcast
March Quarterly Activities Report
Investor Webcast
June Quarterly Activities Report
Investor Webcast
Annual Report 2016 123
GLOSSARY OF TERMS
AC – air core usually in the context of drilling or drill holes.
AngloGold Ashanti – AngloGold Ashanti Australia Pty Ltd.
Ag – silver.
Au – gold.
BCM – bulk cubic metres.
Cu – copper.
EM – electromagnetic.
EM conductors – electromagnetic conductors returned from EM surveys.
FLEM – Fixed-Loop electromagnetic.
HPGR – High Pressure Grinding Rolls
LTIFR – lost time injury frequency rate per million hours worked.
MLEM – moving-loop electromagnetic surveys.
Mt – million metric tonnes.
NPAT – Net Profit After Tax
Ni – nickel.
oz – ounce.
RC drilling – reverse circulation drilling.
t – metric tonnes.
TGM – Tropicana Gold Mine that is 30% owned by the Company and 70% owed by AngloGold Ashanti under the TJV agreement.
TJV – Tropicana Joint Venture that is 30% owned by the Company and 70% owed by AngloGold Ashanti.
Underlying EBITDA – Underlying Earnings Before Interest, Tax, Depreciation and Amortisation
Zn – zinc.
$ – Australian dollars. All currency amounts in this report are Australian Dollars unless otherwise stated.
$M – million Australian dollars.
Notes
This document may include Forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning
IGO’s planned production and planned exploration program and other statements that are not historical facts. When used in this document,
the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions are Forward-looking
statements. Although IGO believes that its expectations reflected in these Forward-looking statements are reasonable, such statements
involve risks and uncertainties and no assurance can be given that actual results will be consistent with these Forward-looking statements.
All cash costs quoted include royalties and net of by-product credits unless otherwise stated
Underlying EBITDA is a non-IFRS measure and comprises net profit or loss after tax, adjusted to exclude tax expense, finance costs, interest
income, asset impairments, investment sales, depreciation and amortisation, and once-off transaction costs. Underlying NPAT comprises net
profit (loss) after tax adjusted for; post tax effect of acquisition and integration costs, investment sales and impairments.
Free cash flow comprises net cash flow from operating activities and net cash flow from investing activites.
All currency amounts in this report are Australian Dollars unless otherwise stated.
IGO reports All-in Sustaining Costs (AISC) per ounce of gold sold in AUD for its 30% interest in the Tropicana Gold Mine using the World Gold
Council guidelines for AISC. The World Gold Council guidelines publication was released via press release on 27th June 2013 and is available
from the World Gold Council’s website.
124 Independence Group NL
COMPANY DIRECTORY
Directors
Perth Office
Shares
Listed on Australian Securities Exchange
(ASX)
ASX code: IGO
Shares on issue: 586,698,580
ordinary shares
Website
Through the use of the internet, we have
ensured that our corporate reporting
is timely, complete and available at
minimum cost to the Company. All ASX
releases, investor presentations, financial
statements and other information are
available on our website.
www.igo.com.au
Suite 4, Level 5
South Shore Centre
85 South Perth Esplanade
South Perth WA 6151
Postal: PO Box 496
South Perth WA 6951
Telephone: +61 8 9238 8300
Facsimile: +61 8 9238 8399
Email: contact@igo.com.au
Website: www.igo.com.au
External Auditor
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: +61 8 6382 4600
Share Registry
Computershare Investor Services
Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: 1300 850 505
(within Australia),
+61 3 9415 4000 (outside Australia)
Fax: +61 3 9473 2500
Email: www.investorcentre.com/contact
Web: www.computershare.com
Peter Bilbe
Non-Executive Chairman
Peter Bradford
Managing Director and CEO
Peter Buck
Non-Executive Director
Geoffrey Clifford
Non-Executive Director
Keith Spence
Non-Executive Director
Neil Warburton
Non-Executive Director
Management
Peter Bradford
Managing Director and CEO
Keith Ashby
Sustainability Manager
Rob Dennis
Chief Operating Officer
Matt Dusci
Chief Growth Officer
Joanne McDonald
Company Secretary
Sam Retallack
Organisational Capability Manager
Scott Steinkrug
Chief Financial Officer &
Joint Company Secretary
Cautionary Notes and Disclaimer
This annual report has been prepared by Independence Group NL (IGO) (ABN 46 092 786 304). It should not be considered as an offer or invitation to
subscribe for or purchase any securities in IGO or as an inducement to make an offer or invitation with respect to those securities in any jurisdiction. This
annual report contains general summary information about IGO. The information, opinions or conclusions expressed in the course of this annual report
should be read in conjunction with IGO’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX),
which are available on the IGO website. No representation or warranty, express or implied, is made in relation to the fairness, accuracy or completeness of
the information, opinions and conclusions expressed in this annual report.
This annual report includes forward looking information regarding future events, conditions, circumstances and the future financial performance of
IGO. Often, but not always, forward looking statements can be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”,
“plan”, “estimate”, “anticipate”, “continue” and “guidance”, or other similar words and may include statements regarding plans, strategies and objectives of
management, anticipated production or construction commencement dates and expected costs or production outputs. Such forecasts, projections and
information are not a guarantee of future performance and involve unknown risks and uncertainties, many of which are beyond IGO’s control, which may
cause actual results and developments to differ materially from those expressed or implied. Further details of these risks are set out below. All references to
future production and production guidance made in relation to IGO are subject to the completion of all necessary feasibility studies, permit applications and
approvals, construction, financing arrangements and access to the necessary infrastructure. Where such a reference is made, it should be read subject to
this paragraph and in conjunction with further information about the Mineral Resources and Ore Reserves, as well as any Competent Persons’ Statements
included in periodic and continuous disclosure announcements lodged with the ASX. Forward looking statements in this annual report only apply at the
date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information IGO
does not undertake any obligation to publically update or revise any of the forward looking statements or to advise of any change in events, conditions or
circumstances on which any such statement is based.
There are a number of risks specific to IGO and of a general nature which may affect the future operating and financial performance of IGO and the value
of an investment in IGO including and not limited to economic conditions, stock market fluctuations, commodity demand and price movements, access to
infrastructure, timing of environmental approvals, regulatory risks, operational risks, reliance on key personnel, reserve and resource estimations, native title
and title risks, foreign currency fluctuations and mining development, construction and commissioning risk. The production guidance in this annual report is
subject to risks specific to IGO and of a general nature which may affect the future operating and financial performance of IGO.
Any references to Mineral Resources and Ore Reserves estimates should be read in conjunction with IGO’s 2016 Mineral Resource and Ore Reserve
Statement, as released to the ASX, which is available on the IGO website.
www.igo.com.au
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