ILUKA Annual Report 2007
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Directors’ Report
Remuneration Report
Financial Report
Corporate Governance
Leadership Team
Ore Reserves and Mineral Resources
Sustainable Development
Corporate Information
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Explanation of Structure of Annual Report Documents
Notice of Annual General Meeting
The 2007 Annual Report provides shareholders with detailed
information in relation to the fi nancial statements, Directors’
Report (including remuneration report), Mineral Resources and Ore
Reserves and sustainable development. The Annual Shareholder
Review provides a summary of Iluka’s 2007 fi nancial year and is
available on Iluka’s website, www.iluka.com.
The 53rd Annual General Meeting of Iluka Resources Limited will
be held at the Argyle Ballroom at the Parmelia Hilton Hotel, 14 Mill
Street, Perth, Western Australia on Wednesday 21 May 2008.
A separate Notice of Meeting and Proxy Form have been sent to
registered shareholders.
Australian currency is shown in this Report unless otherwise
indicated.
Iluka Resources Limited, ABN 34 008 675 018
Level 23, 140 St Georges Terrace, Perth WA 6000
GPO Box U1988, Perth WA 6845
Telephone + 61 8 9360 4700
Facsimile + 61 8 9360 4777
Website
www.iluka.com
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The Directors present their report on the consolidated
entity consisting of Iluka Resources Limited and the
entities it controlled at the end of, or during, the year
ended 31 December 2007.
Directors
The following individuals were Directors of Iluka
Resources Limited during the whole of the fi nancial year
and up to the date of this report:
Ian Colin Robert Mackenzie (Chairman)
Robert Lindsay Every (Deputy Chairman effective
11 December 2007)
Grahame David Campbell
Valerie Anne Davies
Donald Marshall Morley
George John Pizzey
Gavin John Rezos
David Alexander Robb
Principal Activities
The activities of the consolidated entity consist of the
exploration, mining, concentration and separation of
mineral sands, production of ilmenite, rutile, synthetic
rutile and other titaniferous concentrates, zircon and
coal and sales of these products throughout the world.
Signifi cant Changes
There were no signifi cant changes in the state of affairs
of the Group during the fi nancial year.
Review of Operations
Financial Commentary
Section I – Overview
Reported Earnings
Iluka recorded a net profi t after tax and minority
interests (NPAT) for the year ended 31 December 2007 of
$51.1 million, compared with $21.0 million for the prior
year (or $116.9 million before Signifi cant Items).
Mineral Sands EBIT, excluding the signifi cant items
incurred in 2006, decreased by $50.4 million to $86.1
million. Mineral Sands EBITDA reduced by $26.7 million
to $230.6 million, despite an initial contribution of $36.6
million from the Murray Basin. Earnings were impacted
adversely by the higher Australian dollar exchange rate,
reduced sales volumes of higher value products and an
increased proportion of production in Western Australia
being from the newer higher cost ore bodies.
The average A$/US$ spot exchange rate for 2007 was
83.90 cents compared with 75.35 cents for 2006. The
negative impact on NPAT from Australian sourced sales
was $46.1 million for the full year, including $28.6 million
in the second half. Lower sales volumes also impacted
profi ts, mitigated in part by price increases during 2007
of approximately 5 per cent.
Iluka’s interest in the Narama Coal joint venture has
been classifi ed as a discontinued operation, with the sale
completed on 15 January 2008. Narama’s contribution
to NPAT was $10.9 million (2006: $9.4 million).
Earnings per share (EPS) for 2007 were 21.6 cents
(2006: 9.1 cents).
Cash Flow
Cash fl ow from operations of $95.5 million was 33 per
cent lower than in 2006 due to lower sales revenues and
increased production costs following commissioning of
the Murray Basin. Capital expenditure at $118.2 million,
was $54.5 million lower than in 2006 due mainly to lower
expenditure for the Murray Basin project. Overall capital
expenditure for the Murray Basin and Eucla projects was
$34.3 million compared to $64.0 million in 2006.
Dividend
In the context of current Group earnings, cash fl ows and
the franking credit position, together with the capital
required to develop Jacinth-Ambrosia and Murray Basin
2, the Board decided not to pay a 2007 fi nal dividend.
The economics of both projects are attractive and the
Board believes that, at this stage, capital expenditure for
these projects is the most appropriate use of available
funds.
Gearing
Gearing (net debt/net debt + equity) was 44.3 per cent
at 31 December 2007, compared with 45.4 per cent at
31 December 2006 and 45.0 per cent at 30 June 2007.
Net debt at 31 December 2007 of $598.1 million was
$1.6 million higher than at 31 December 2006 and $10.4
million lower than at 30 June 2007.
Iluka Resources Limited
1
Section II – Income Statement Analysis
The composition of the company’s 2007 results is summarised in
Table 1 below, followed by a narrative of each line item.
prices achieved for all products and increased rutile sales from
Murray Basin production. Revenue from Florida/Georgia was
$12.9 million lower in 2007 following the cessation of mining in
2006, with 2007 operations comprising only a tails retreatment
programme.
Table 1: Group Profi t and Loss Summary – $million
Other Income
This represents profi t from the sale of rehabilitated land in the
South West of Western Australia.
Cash Costs of Production
The decrease is due mainly to the reduction in costs in Florida/
Georgia following the closure of mining operations in 2006 offset
by 2007 being the fi rst full year of production in the Murray Basin
following the commissioning of the Hamilton Mineral Separation
Plant in January 2007 and the commencement of mining
operations in March 2006. Cash costs of production in Florida/
Georgia decreased by $38.8 million to $10.6 million. Cash costs of
production in the Murray Basin increased by $30.0 million to $64.6
million.
Inventory Movement
The increase is mainly due to higher fi nished product inventories
in the Mid West and Murray Basin. The higher volumes on
hand compared to the prior year refl ect some shipment delays
associated with continuing diffi culties experienced by some
customers in sourcing acceptable vessels, as well as Iluka’s own
supply management considerations.
Marketing, Exploration and Technical Cash Costs
These comprise sales and marketing expenses, including
Government royalties, exploration expenses and technical support
costs. The total includes $10.3 million (2006: $7.2 million) in
respect of greenfi elds exploration and project expenses not
associated with existing operations.
Depreciation and Amortisation
The increase is attributable to the commencement of production in
the Murray Basin (increase of $10.7 million) and higher charges in
Western Australia ($13.9 million) due mainly to mining operations
being at shorter life ore bodies such as Cloverdale and Waroona
where depreciation of mine establishment costs is higher than that
associated with longer life ore bodies at other operations.
2007
2006
Variance
Sales Revenue
Less: Hedging
Other Income
Cash Costs of Production
Inventory Movement
Marketing, Exploration and
Technical Costs
Mineral Sands EBITDA
Depreciation and Amortisation
Mineral Sands EBIT
(excluding Signifi cant Items)
Hedging
Mining Area C
Other Earnings
Corporate
Signifi cant Items
Total EBIT
Net Interest Costs
Interest Capitalisation
Other Financing Costs
Profi t Before Tax
Tax Expense
Profi t from discontinued
operation (Narama Coal)
Minority Interests
Net Profi t After Tax
Mineral Sands EBIT
897.9
(34.0)
10.6
(654.0)
61.8
(51.7)
230.6
(144.5)
86.1
34.0
19.5
3.6
(19.5)
-
123.7
(41.8)
-
(16.9)
65.0
(15.5)
10.9
(9.3)
51.1
962.1
(28.9)
-
(670.9)
49.6
(54.6)
257.3
(120.8)
136.5
28.9
18.7
1.2
(25.6)
(87.1)
72.6
(40.5)
13.5
(13.4)
32.2
(10.1)
9.4
(10.5)
21.0
(64.2)
(5.1)
10.6
16.9
12.2
2.9
(26.7)
(23.7)
(50.4)
5.1
0.8
2.4
6.1
87.1
51.1
(1.3)
(13.5)
(3.5)
32.8
(5.4)
1.5
1.2
30.1
Mineral Sands EBIT of $86.1 million was $50.4 million lower than
in 2006, after adjusting for $99.6 million of mineral sands charges
reported as signifi cant items in 2006. An analysis of the individual
businesses is contained in Section V, Operational Overview, with
overall group commentary provided below.
Sales Revenue
Sales revenue includes $87.2 million in respect of Murray Basin,
following the fi rst shipment from the Port of Portland in March
2007. The reduced sales revenue related to lower volumes of
zircon and synthetic rutile sales and the appreciation of the
Australian dollar which more than offset the increased US dollar
2
Annual Report 2007
Hedging
Other Financing Costs
The $34.0 million gain from currency hedging, which is included in
sales revenue, was $5.1 million higher than in 2006 due to a higher
volume of hedge contracts. $26.6 million of the gain relates to
Iluka currency contracts which were closed in August 2006. The
contribution from CRL hedge benefi ts increased to $7.4 million
(2006: $4.3 million) due to the appreciation of the Australian dollar.
Mining Area C
The EBIT contribution in 2007 refl ects lower one-off capacity
payments ($2.0 million in 2007 compared to $3.0 million in 2006)
which were offset by an increase in the ongoing iron ore royalty
associated with higher US dollar denominated iron ore prices and
increased sales tonnages.
Other Earnings
The main component of Other Earnings in 2007 was the fi nal New
South Wales coal compensation receipts of $2.0 million that were
received and recognised in the fi rst half. There were no signifi cant
components of Other Earnings in 2006.
These are primarily the unwind of the discount associated with the
restoration and closure cost provisions which increased by $3.6
million from 2006.
Income Tax Expense
Income tax expense of $15.5 million at an effective tax rate of 24%
(2006: $10.1 million at 31%) increased due to higher earnings. The
effective tax rate is lower than the prevailing corporate tax rate
of 30% due primarily to the concessional tax treatment of eligible
research and development expenditure and the lower tax rates
applicable in the United States. The effective tax rate for 2006 was
high as not all of the tax benefi ts of the US related signifi cant items
were recognised. The income tax expense relating to the earnings
from Narama Coal forms part of the profi t from discontinued
operations.
Discontinued Operation - Narama Coal
The increased after tax contribution of $10.9 million (2006:
$9.4 million) refl ects lower depreciation charges following the
classifi cation of the operation as discontinued.
Corporate
These costs have reduced by 24 per cent compared with 2006 as a
result of an increased focus on the appropriate nature and extent
of corporate overhead costs in 2007 and a $1.1 million reduction in
foreign exchange losses.
Minority Interests
Lower profi ts attributable to minority interests of $9.3 million
(2006: $10.5 million) relate to a lower NPAT for Consolidated Rutile
Ltd (Iluka 51.04%) and Ashton Coal (Iluka 93.3%).
Signifi cant Items
Section III – Outlook and Earnings Guidance
The signifi cant items in 2006 related to impairment charges in the
South West of Western Australia ($60.0 million), additional iron
oxide rehabilitation provisions ($25.0 million), closure costs, asset
impairments and profi t on land sales in Florida/Georgia ($10.0
million), coal compensation income of $12.5 million and other asset
write-offs of $4.6 million.
Net Interest Costs
Interest costs (net of interest income) increased to $41.8 million
(2006: $40.5 million). Net debt at 31 December 2007 of $598.1
million was $1.6 million higher than at the previous year end.
Interest Capitalisation
Interest capitalisation associated with the development of the
Murray Basin project ceased in December 2006 prior to the
commissioning of the Mineral Separation Plant.
Iluka has previously advised the company is undergoing a
transitional period until the commencement of Murray Basin Stage
2 in 2009 and the Jacinth-Ambrosia project in the Eucla basin in
mid 2010. 2008 full year guidance is based on the usual caveats
for forward-looking statements.
The company provides NPAT guidance for 2008 in the range of $10
million to $20 million, including the after tax proceeds from the
Narama sale of approximately $30 million. This guidance is based
on the following factors:
•
•
Achievement of planned sales in 2008, particularly in the
fi nal quarter of the year. In 2007 approximately 12 per cent
of annual sales revenue was associated with sales in the
last month of the year, and
An average A$/US$ spot exchange rate of 90.00 cents for
2008 (compared with 83.90 cents in 2007).
Iluka Resources Limited
3
David Alexander Robb, BSc, GradDip (Personnel
Administration), FAIM, FAICD (Managing Director)
Mr Robb (53) commenced as Managing Director on 18 October
2006. Mr Robb was previously Managing Director, Wesfarmers
Energy as well as Executive Director, Wesfarmers Limited. Prior to
joining Wesfarmers he held senior positions with British Petroleum
in Australia and overseas, including chief executive responsibilities
for a national service business in the US; for oil, chemicals,
consumer goods, marine and aviation businesses in Malaysia and
as Director responsible for oil marketing throughout South East
Asia. Mr Robb is Chairman of Consolidated Rutile Limited.
Other current directorships of listed companies: Consolidated
Rutile Limited (October 2006 to present). Former directorships of
listed companies in the last three years: Wesfarmers Limited (July
2004 to September 2006).
Grahame David Campbell, BE, MEng Sc, HON FIE Aust,
FAICD, CP Eng
Mr Campbell (64) was appointed to the Board in December 1998.
He has extensive experience in the mining and construction
industries and is a past president of both the Association of
Consulting Engineers (Australia) and the Australian Pipeline
Industry Association. He is a Director of the Macro Engineering
Council and Worley Parsons Limited. Mr Campbell is a member of
the Audit and Risk Committee.
Other current directorships of listed companies: Worley Parsons
Limited (November 2002 to present). Former directorships of
listed companies in the last three years: None.
Valerie Anne Davies, FAICD
Ms Davies (56) was appointed to the Board in July 1997. She
is Principal of One.2.One Communications Pty Limited and a
Director of Tourism Australia and HBF Health Funds Inc. Previous
directorships include Gold Corporation, TAB (WA), ScreenWest,
Relationships Australia and Integrated Group Limited. Ms Davies
has also been a member of the Boards of Management of the Asia
Research Centre (Murdoch University) and Fremantle Hospital
and Health Service. She is a Councillor of the WA Division of the
Australian Institute of Company Directors and a past recipient of
the Telstra “WA Business Woman of the Year” award. Ms Davies is
Chairperson of the Remuneration and Nomination Committee.
Other current directorships of listed companies: None. Former
directorships of listed companies in the last three years:
Integrated Group Limited (August 1999 to June 2007).
NPAT sensitivity to currency movement, assuming current hedging,
is expected to be approximately -$3 million NPAT for every one cent
movement above 90 cents and +$6 million NPAT for every one
cent movement between 90 cents and 82 cents and +$3 million
NPAT for every one cent movement below 82 cents.
Please refer to Iluka’s Investment Presentation (released to the
ASX 21 February 2008) for further details on factors infl uencing
the company’s profi tability as well as other details.
Directors’ Profi les
Ian Colin Robert Mackenzie, BSc, BCom, MBA, FAICD
(Chairman)
Mr Mackenzie (65) was appointed to the Board in July 1999. He
is Chairman of the Bank of Western Australia Limited (BankWest)
and HBOS Australia Pty Limited. Mr Mackenzie was previously
Managing Director of Romatex Limited, Managing Director
and Chief Executive Offi cer of Bunnings Limited and Executive
Chairman of Wesfi Limited. Mr Mackenzie is a member of both the
Remuneration and Nomination Committee and the Audit and Risk
Committee. Mr Mackenzie has indicated his intention to retire as a
Director at the Company’s May 2008 Annual General Meeting.
Other current directorships of listed companies: None. Former
directorships of listed companies in the last three years: Bank of
Western Australia Limited (December 1994 to present - no longer
listed).
Robert Lindsay Every, BSc, PhD, FTSE, FIE Aust, CP Eng, FAICD
(Deputy Chairman)
Dr Every (62) was appointed to the Board in March 2004. He
is Deputy Chairman and is expected to assume the position
of Chairman following the retirement of Mr Mackenzie at the
May 2008 Annual General Meeting. Dr Every is a Director of
Wesfarmers Limited and Boral Limited. Dr Every was formerly the
Managing Director and Chief Executive Offi cer of OneSteel Limited,
a position from which he retired in May 2005. He was also the
Chairman of the New Zealand based listed company Steel and Tube
Holdings Limited and Managing Director of Tubemakers of Australia
Limited and President of BHP Steel Limited. He was formerly a
Director of Sims Group Limited. Dr Every is a member of the Audit
and Risk Committee.
Other current directorships of listed companies: Wesfarmers
Limited (February 2006 to present), Boral Limited (September 2007
to present). Former directorships of listed companies in the last
three years: Sims Group Limited (October 2005 to June 2007),
OneSteel Limited (July 2000 to May 2005).
4
Annual Report 2007
Donald Marshall Morley, BSc, MBA, FAusIMM
Gavin John Rezos, BA, LLB, BJURIS, MAICD
Mr Morley (68) was appointed to the Board in December 2002. He
was formerly the Chief Financial Offi cer and a Director of WMC
Limited from which he retired in October 2002. He is Chairman of
Alumina Limited and a Director of Spark Infrastructure Limited. Mr
Morley is Chairman of the Audit and Risk Committee.
Other current directorships of listed companies: Alumina Limited
(December 2002 to present), Spark Infrastructure Limited
(December 2005 to present). Former directorships of listed
companies in the last three years: None.
George John Pizzey, BE(Chem), Fell Dip (Management), FAIM,
FAICD, FTSE
Mr Pizzey (62) was appointed to the Board in November 2005. He
has extensive experience in mining and mineral processing. Mr
Pizzey was Chairman of Alcoa of Australia and held a number of
senior executive positions with Alcoa Inc (USA). He is a Director
of Alumina Limited, Amcor Limited, St Vincent’s Medical Research
Institute and Ivanhoe Grammar School. He was formerly the
Chairman of ION Limited (in administration), Range River Gold
Limited and the London Metal Exchange UK and a Director of WMC
Resources Limited. Mr Pizzey is a member of the Remuneration
and Nomination Committee.
Other current directorships of listed companies: Alumina Limited
(June 2007 to present), Amcor Limited (November 2003 to
present). Former directorships of listed companies in the last
three years: Range River Gold Limited (June 2004 to April 2006),
ION Limited (Administrator Appointed) (December 1999 to August
2005), WMC Resources Limited (November 2003 to June 2005).
Mr Rezos (46) was appointed to the Board in June 2006. He
has extensive Australian and international investment banking
experience and is a former Investment Banking Director of the
HSBC Group with regional roles during his HSBC career based
in London, Sydney and Dubai. Mr Rezos has held Chief Executive
Offi cer positions and executive directorships of companies in the
healthcare and technology areas in the UK, US and Singapore and
was formerly a non-executive Director of Amity Oil NL (Antares).
He is a Principal of Albion Capital Partners. Mr Rezos is a member
of the Remuneration and Nomination Committee.
Other current directorships of listed companies: None. Former
directorships of listed companies in the last three years: Antares
Energy Limited (formerly Amity Oil NL) (October 2001 to November
2004), pSivida Limited (December 2000 to July 2006).
Company Secretary
The Company Secretary is Mr Cameron Wilson LLB. Mr Wilson was
appointed to the position of Company Secretary in 2004. Before
joining Iluka Mr Wilson held a range of legal and commercial roles
at WMC Resources Limited and prior to that worked as a solicitor
with a major legal practice.
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and
of each Board Committee held during the year ended 31 December
2007, and the numbers of meetings attended by each Director
were:
Board of
Directors’ meetings
Audit and Risk
Committee meetings
Remuneration & Nomination
Committee meetings
Number
attended
Number
held
Number
attended
Number
held
Number
attended
Number
held
10
10
10
9
10
10
10
10
10
10
10
10
10
10
10
10
6
6
6
-
6
6
-
-
6
6
6
-
6
6
-
-
4
4
-
4
-
-
4
4
4
4
-
4
-
-
4
4
Director
I C R Mackenzie
D A Robb
G D Campbell
V A Davies
R L Every
D M Morley
G J Pizzey
G J Rezos
Iluka Resources Limited
5
Directors’ shareholding
Non-audit services
Directors’ shareholding is set out on page 14 of the Financial
Report.
Remuneration Report
A remuneration report is set out on pages 8 to 18.
Indemnifi cation and insurance of offi cers
The Company indemnifi es all Directors of the Company named
in this report and current and former executive offi cers of the
Company and its controlled entities against all liabilities to persons
(other than the Company or a related body corporate) which
arise out of the performance of their normal duties as Director or
executive offi cer unless the liability relates to conduct involving
bad faith. The Company also has a policy to indemnify the Directors
and executive offi cers against all costs and expenses incurred in
defending an action that falls within the scope of the indemnity and
any resulting payments.
During the year the Company has paid a premium in respect of
Directors’ and executive offi cers’ insurance. The contract contains
a prohibition on disclosure of the amount of the premium and the
nature of the liabilities under the policy.
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
consolidated entity are important.
Details of the amounts paid or payable to the auditor
(PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out below.
The Board of Directors has considered the position and, in
accordance with the advice received from the Audit and Risk
Committee, is satisfi ed 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
satisfi ed that the provision of non-audit services by the auditor,
as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following
reasons:
•
•
fees paid to external auditors for non-audit services for the
2007 year were below the limits prescribed by the Company
policy; and
none of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
A copy of the auditors’ independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 19.
During the year the following fees were paid or payable for
services provided by the auditor of the parent entity, its related
practices and non-related audit fi rms:
Consolidated
(a) Assurance services - Refer to Note 34
PricewaterhouseCoopers Australian fi rm:
Audit and review of fi nancial reports and other audit work under the Corporations Act 2001
Related practices of PricewaterhouseCoopers Australian fi rm
Total remuneration for assurance services
(b) Taxation services
PricewaterhouseCoopers Australian fi rm:
Tax compliance services, including review of company income tax returns
Related practices of PricewaterhouseCoopers Australian fi rm
Total remuneration for taxation services
2007
$
832,494
60,400
892,894
21,000
33,360
54,360
2006
$
755,020
63,000
818,020
71,220
9,333
80,553
6
Annual Report 2007
Environmental regulations
Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100,
issued by the Australian Securities & 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 Class Order to the nearest hundred thousand
dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the
Directors.
I C R Mackenzie
Chairman
Perth
12 March 2008
The Company’s Australian operations are subject to various
Commonwealth and State laws governing the protection of
the environment in areas such as air and water quality, waste
emission and disposal, environmental impact assessments,
mine rehabilitation and access to, and use of, ground water. In
particular, some operations are required to be licensed to conduct
certain activities under the environmental protection legislation
of the state in which they operate and such licenses include
requirements specifi c to the subject site.
So far as the Directors are aware, there have been no material
breaches of the Company’s licenses and all mining and exploration
activities have been undertaken in compliance with the relevant
environmental regulations.
Matters subsequent to the end of the
fi nancial year
On 21 February 2008, the Company announced an intention to
raise capital in the region of $350 million through a renounceable
pro-rata entitlement offer. Detailed work on the fi nal structure
and timing of this equity raising continues at the time of signing
this report. Also on 21 February 2008, the Company indicated that
it was well progressed in securing a single, enlarged corporate
debt facility to replace and extend the maturities of certain of its
existing facilities. The company has since executed a new $500
million debt facility package comprising a Syndicated Term Loan
Facility of $445 million and a Working Capital Facility of $55 million.
Except for the matters referred to above, the Directors are
not aware of any other matter or circumstance not otherwise
dealt with in the Directors’ Report that has or may signifi cantly
affect the operations of the economic entity, the results of
those operations or the state of affairs of the economic entity in
subsequent fi nancial years.
Iluka Resources Limited
7
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Board Oversight of Remuneration –
Remuneration and Nomination Committee
The Remuneration and Nomination Committee
(Committee) operates in accordance with its charter as
approved by the Board. The Committee is comprised
solely of independent non-executive Directors and was
chaired by Ms Davies in 2007. The Committee met
four times in 2007, with all members of the Committee
present at every meeting.
The Committee’s responsibility is to provide assistance
and recommendations to the Board in support of the
company’s objective of creating and delivering value for
shareholders and in fulfi lling its corporate governance
responsibilities relating to the following:
•
•
•
•
•
overall remuneration strategy of the company,
its development, review and implementation;
remuneration of executives, the Managing
Director and non-executive Directors;
performance of the Managing Director and key
executives;
succession planning for key roles; and
assessment, composition and succession of the
Board.
The Committee has the resources and authority
appropriate to discharge its duties and responsibilities,
including the authority to engage external professionals
on terms it determines appropriate, without seeking the
approval of the Board or management. During the 2007
year, the external advisers provided input on several
matters relating to remuneration. These advisers were:
•
•
•
Ernst and Young, who provided advice in relation
to the Iluka employee share plan;
Hay Group, who provided advice on staff and
executive remuneration; and
Egan Associates, who provided remuneration
advice in respect to the Managing Director and
non-executive Directors.
In 2007, the Remuneration and Nomination Committee
conducted a review of its charter and an evaluation of
its performance.
The remuneration policies and practices of CRL,
a subsidiary of Iluka and a company listed on the
Australian Securities Exchange (ASX), are developed by
the CRL Board and not by the Board or Remuneration
and Nomination Committee of Iluka. Information on
these arrangements is available in the CRL Annual
Report.
Remuneration Principles
Iluka’s performance is dependent on the quality of its
employees and the alignment of their activities and
performance with Iluka’s business objective – to create
and deliver shareholder value. Accordingly, Iluka’s
remuneration policy is designed to attract, retain and
motivate experienced executives and to ensure the
focus of executives on shareholder value creation and
delivery. This policy is based on the following principles:
•
•
•
•
•
•
alignment of executive and shareholder interests
is supported by executive share ownership;
executives should be focused on both short and
long term business performance;
the company’s need to attract and retain key
executive talent;
executive rewards must be competitive within
the sector in which Iluka operates;
an appropriate balance should be maintained
between fi xed and variable components of
executive remuneration; and
all aspects of executive remuneration should
be transparent in terms of disclosure, comply
with relevant legislative requirements and take
account of market practice.
The remuneration of an executive or manager for
performance is therefore linked to both annual business
performance outcomes and to the company’s ability to
generate competitive levels of shareholder value, as
defi ned by Total Shareholder Return (TSR) and Return on
Equity (ROE), on a longer term basis.
8
Annual Report 2007
A share purchased at the prevailing market price of $4.60 on 1
January 2003 has since generated $0.98 in shareholder returns
over the subsequent fi ve year period (a 21.3% return). This return
has comprised aggregate dividend returns of $0.98 with nil share
price growth over the period to 31 December 2007. Over the
corresponding fi ve year period, average executive total fi xed
remuneration (for roles existing throughout that period) increased
by 31 per cent.
Remuneration Structure
This Remuneration Report discloses remuneration details for the
Managing Director, non-executive Directors and Key Management
Personnel of the company and group in 2007.
Remuneration for executives comprises two components:
•
•
total fi xed remuneration (TFR) which is made up of base
salary and superannuation, together with other salary
sacrifi ce items such as novated leases and car parking.
Employees are required to meet any fringe benefi ts tax
obligations applicable to benefi ts; and
variable remuneration which is linked directly to
performance of both the company and the individual
executive and as such is deemed to be “at risk”.
The remuneration structure is designed to refl ect an appropriate
balance between fi xed and variable remuneration to ensure that
executive reward is aligned with the performance outcomes of the
business.
Total Fixed Remuneration (TFR)
In February 2007, Iluka adopted the Hay Job Evaluation
methodology for job sizing to strengthen internal relativities and
adopt a strong alignment to Hay Group remuneration practices and
external markets. Under the new structure, the company positions
TFR at median levels of the market as defi ned by a comparator
group of Australian companies within the resources market,
as well as referencing job evaluation data and the individual
competence levels of executives. Allowance is also made for the
highly competitive nature of the market for talent in the resources
sector.
Superannuation Benefi ts
Iluka has appropriate superannuation and pension arrangements
in countries where it operates. In Australia the company
contributes superannuation at the minimum required rate to each
executive’s nominated eligible fund. Individuals may elect to make
further voluntary contributions from pre-tax salary.
All Australian based executives are entitled to contribute to the
Iluka Superannuation Plan. The plan is administered by ING
Australia Limited as part of a master trust and over 90 per cent of
employees are members. The plan is primarily an accumulation
style plan. A small number of employees have retained membership
in a defi ned benefi t sub-plan, a legacy from the 1999 merger of
Westralian Sands Limited with RGC Limited. The defi ned benefi t
sub-plan is closed to new members. All executives (the executives
detailed on page 16) participate in the Iluka Superannuation Plan
on an accumulation basis.
Variable Remuneration
Performance and Incentives
The current performance and incentive arrangements were
introduced for the 2007 performance year. The incentive
arrangements comprise a Short Term Incentive Plan (STIP) and
a Long Term Incentive Plan (LTIP). The distinct plans balance the
short and long term aspects of business performance, refl ect
market practice and support business needs.
The incentive arrangements ensure a strong alignment between
the incentive arrangements of executives and the creation and
delivery of shareholder value and support Iluka’s aim of attracting,
retaining and motivating experienced executives.
The STIP and LTIP operate within the existing rules of the
Directors, Executives and Employees Share Acquisition Plan
(DEESAP), as approved by the shareholders at the company’s
Annual General Meeting in May 1999.
At target levels of performance, the STIP represents two-thirds of
potential variable remuneration, and the LTIP represents one-third.
Only nominated managers and executives participate in the STIP
and LTIP. The level of award opportunity is determined by an
individual’s role within the business and capacity to impact the
results of the company. In 2008, it is anticipated that approximately
89 employees (including all executives) will participate in the LTIP,
and approximately 160 employees (including all executives) will
participate in the STIP.
Iluka Resources Limited
9
Objectives, measures and targets for both the STIP and the LTIP
are set on an annual basis and are subject to the approval of the
Board.
The target incentive opportunity for key executives under the STIP
is 60 per cent of TFR and under the LTIP is 30 per cent of TFR. At
stretch levels of performance the incentive opportunity under the
STIP increases to 90 per cent.
The Short-Term Incentive Plan (STIP)
The STIP aims to provide incentive to executives whilst also
promoting equity ownership, providing awards partly in cash and
partly in deferred equity.
The STIP is linked to group and regional fi nancial and operational
performance and has a focus on return on capital (ROC) as a
key metric. A combination of fi nancial and non-fi nancial targets,
including safety and individual targets, are used to measure
performance and determine outcome. Each metric refl ects the
organisational unit within which the individual is located (for
example, regional versus corporate roles) and is measured
independently.
The measures and weighting of objectives for the 2008
performance year are:
•
•
Profi tability (ROC, EBIT and NPAT)
Sustainability (all injury frequency rate,
severity rate and notifi cations
to government)
60 per cent
10 per cent
•
Growth (individual objectives)
30 per cent
The weighting of the growth measure is targeted at 30 per cent,
however the Board (on the recommendation of the Managing
Director) has discretion at any time to vary the growth weighting
within a range from 20 per cent to 40 per cent.
The measures and weighting of objectives for the 2007
performance year varied for the key management personnel as
shown below:
•
•
Profi tability (ROC, EBIT and NPAT)
60 or 70 per cent
Sustainability (all injury frequency rate,
severity rate and notifi cations
to government)
10 per cent
•
Growth (individual objectives)
20 or 30 per cent
10
Annual Report 2007
The STIP requires profi tability and sustainability performance
exceeding 90 per cent of target before any award is payable for
these measures. Growth objectives are set at stretch levels
and are linked to the achievement of key business growth and
improvement outcomes.
The STIP award is determined after the year-end based on an
assessment of the extent to which the individual’s objectives have
been achieved. Outcomes are subject to rigorous one-up manager
assessment and, for the Managing Director and key executives, by
the Board.
Half of the STIP award is to be paid in cash and half on a deferred
basis in the form of restricted shares. Fifty per cent of the
restricted shares are subject to a time-based vesting period of one
year after the end of the performance period. The remaining 50 per
cent is subject to a time-based vesting period of two years after
the end of the performance period.
The process for determining the number of restricted shares to be
awarded to each participant is determined by dividing the dollar
value of the deferral component by the Volume Weighted Average
Price (VWAP) of Iluka shares traded on the ASX over the fi ve
trading days following release of the company’s full year results.
The deferred amount supports executive focus on both annual and
multi-year performance, as well as providing a tangible retention
factor.
To encourage executives to increase their shareholdings, voluntary
deferral of up to 100 per cent of the STIP award is available.
At the time of the assessment of the 2007 STIP the Board
exercised its discretion to re-weight the growth measure to 40 per
cent for all Australian participants. The additional value of the re-
weighted component was awarded in the form of restricted shares
which will vest on 1 January 2009.
The Long-Term Incentive Plan (LTIP)
The LTIP provides a grant of equity in the form of share rights that
vest after three years subject to performance over a three year
period.
The grant is split into two separate tranches, with one tranche (50
per cent) being assessed based on return on equity (ROE) relative
to an internal target and the other (50 per cent) based on Total
Shareholder Return (TSR) performance relative to a comparator
group consisting of companies which comprise the Materials
Index and the ASX Mid Cap 50 Index at the commencement of the
performance period (excluding property trusts and duplication).
The two performance measures are applied as follows:
Return on Equity (ROE) tranche:
The ROE tranche of the LTIP grant vests based on a prospective
three year ROE performance measure. Half of the tranche vests
for threshold performance with 100 per cent of the tranche vesting
for achievement of target. Vesting occurs on a straight-line basis
for performance between threshold and target. Targets are set
giving consideration to:
•
•
•
prior ROE performance history;
planned strategic and business plan activity throughout the
performance period; and
comparable company performance.
Total Shareholder Return (TSR) tranche:
The TSR tranche of the LTIP grant vests based on TSR relative to
a peer group of companies. The comparator group consists of the
companies which comprise the Materials Index and the ASX Mid
Cap 50 Index at the commencement of the performance period
(excluding property trusts and duplication). This comparator
group was chosen to provide a combination of companies from
Iluka’s defi ned industry sector and companies of a similar
market capitalisation to Iluka. The combined group also ensures
a suffi ciently large peer group for performance measurement,
and provides less likelihood of TSR performance being skewed to
specifi c sub industry sectors or specifi c stocks.
Fifty per cent of the TSR tranche vests if Iluka ranks at the 50th
percentile of the comparator group, with 100 per cent vesting at
the 75th percentile of the comparator group. Vesting occurs on
a straight-line basis for performance between the 50th and 75th
percentile of the comparator group.
All offers (including plans vested in the 2007 year) and details
of the maximum allocation for the Managing Director and key
executives are shown on page 14. It should be noted that
the maximum allocations listed are subject to the respective
performance criteria. If at the end of the performance period
the performance criteria have not been met there will be no
entitlement to shares.
Previous Performance Incentive Programs:
2005 and 2006
During 2005 and 2006 Iluka operated the Performance Incentive
Program (PIP) which has since been superseded by the STIP and
LTIP plans introduced in 2007.
In February 2006, the Board approved a number of refi nements to
the PIP following its fi rst year of operation.
For participating executives, 50 per cent of any award made was
in the form of cash and the balance was required to be deferred in
the form of share rights. Only nominated managers and executives
participated in the PIP. The level of potential award opportunity
was determined by an individual’s role within the business
and capacity to impact the results of the company. In 2006, 39
employees participated in the cash and equity form of PIP, with a
further 75 staff nominated for the cash only form of the plan.
The following table sets out the maximum incentive opportunity for
2005 and 2006:
Maximum incentive award (% of TFR)
Managing Director
Executives
2005 performance year
2006 performance year
80%
90%
125%
125%
The size of incentive award was determined at year-end based on
an assessment of the extent to which the individual’s objectives
had been achieved.
The PIP provided for an ‘at risk’ element of remuneration requiring
the attainment of annually set, pre-determined objectives and
targets. Objectives were both fi nancial and non-fi nancial and
were developed individually for participating staff. Performance
objectives related to fi nancial (NPAT & ROE), environmental, health
and safety performance, business improvement projects and
specifi c targets within the executive’s functional responsibilities.
Individual objectives were required to align directly with the
company’s strategic plan and annual budgets. The weighting of
fi nancial and non-fi nancial measures were as follows:
(% of award)
Financial Environmental and Key individual
health and safety
objectives
2005 performance year
2006 performance year
35%
50%
10-15%
10-15%
50-55%
35-40%
Each measure and objective had robust targets defi ned at
threshold (minimum level of performance required), target
(performance as budgeted) and stretch (superior performance
– maximum level of award). Objectives, measures and targets set
in 2006 were subject to the approval of the Board, and applicable
to both the cash and equity components of the plan.
Outcomes of PIP objectives were subject to a rigorous one up
assessment and, for the Managing Director and key executives, by
the Board.
In 2005 and 2006, threshold achievement required a 90 per
cent achievement of the target or budgeted performance of the
company and paid 45 per cent of the apportioned award. Target
achievement required meeting 100 per cent of this criterion and
paid 65 per cent of the apportioned award. Stretch achievement
required a 120 per cent performance against this criterion,
and paid 100 per cent of the apportioned award. There was no
additional payment applicable to the executive above stretch,
nor was any award payable below threshold level of fi nancial
achievement.
Iluka Resources Limited
11
For both the 2005 and 2006 plans, the fi nancial and non-fi nancial
objectives and measures were the only criteria required for
determining the share entitlements of executives.
a one up manager approval process applies with fi nal Managing
Director authority prior to any award or remuneration review being
implemented.
For the 2005 PIP, at the end of the performance period in
December 2005, performance criteria were assessed for each
executive and an incentive award determined based on the level of
achievement. Half of the incentive award was paid in cash in March
2006. Executives receive the remaining half of the award as rights
to fully paid shares in annual instalments of 25 per cent over four
years. Further, a four year holding period applies to each grant of
shares. The fi rst tranche of the 2005 PIP vested in January 2007.
For the 2006 PIP, at the end of the performance period in
December 2006, performance criteria were assessed for each
executive and an incentive award determined based on the level of
achievement. Half of the incentive award was paid in cash in March
2007. Executives receive the remaining half as rights to fully paid
shares over three years in one third instalments which commenced
in January 2007. The four year holding period on vested Share
Rights applicable in the 2005 year was replaced by a 50 per cent
minimum holding requirement once all shares have vested in the
2006 plan. Once share rights vest, the awarded shares will be
purchased on the open market.
Securities Trading
Iluka’s policy in relation to employees holding Iluka securities is
set out in the Company’s Securities Trading Policy, which can be
found on the Company’s website at www.iluka.com. The policy
sets out the circumstances in which employees may trade in
company securities, and thereby seeks to ensure employees do not
breach the laws concerning insider trading.
Remuneration Review
The company conducts a review of the remuneration of
executives and staff on an annual basis. Guidelines for reviews
are considered by the Board following recommendation by
the Remuneration and Nomination Committee in February of
each year. Review guidelines are based upon the outcomes
of direct and related market review data and external advice
from the company’s remuneration advisers. All employees and
executives participate in a performance review process which is
used in conjunction with market data to determine appropriate
remuneration recommendations.
Individual progress against objectives is reviewed throughout the
performance year with formal reviews occurring at half year and at
the conclusion of the performance year.
Recommendations by the Managing Director for STIP and LTIP
award outcomes and remuneration for key executives are
submitted to the Remuneration and Nomination Committee in
February of each year. In respect of all other eligible participants,
12
Annual Report 2007
Employee Share Plan
The company also operates an employee share plan under the
rules of the Iluka Resources Limited Employee Share Plan. The
Board may, from time to time, at its discretion, make written offers
to participate in the plan.
In 2007, Iluka introduced an employee ‘gift’ share plan (Gift Plan).
Under the terms of the Gift Plan, offers were made to eligible
employees (permanent employees with a minimum of twelve
months service) in Australia and the United States to receive
shares to the value of A$1,000.
To satisfy the legislative requirements of both Australia and the
United States, Australian employees received the shares under
a tax-exempt plan, with a three year sale restriction period (a
holding lock can be applied during the restriction period). As
US employees do not have access to a tax exemption plan, they
were offered a gift of free shares up to A$1,000 through a grant
of restricted shares. The shares will be held under the plan rules
with a restriction period of three years. To enable US employees to
receive a tax deferral, strict forfeiture conditions apply.
Of the 762 Australian employees eligible to participate, 608 (80
per cent) accepted the offer. In the US, 81 of 159 (51 per cent)
employees participated. Overall, a total of 689 of 921 (75 per
cent) eligible employees accepted the Gift Plan offer at a cost of
$609,000.
Consistent with usual industry practice, shares acquired under
the Gift Plan are not subject to performance conditions as the
primary objective of the plan is to encourage share ownership by
all employees and thereby increase the alignment of employee
attitudes and actions with shareholder value creation and delivery.
Non-Executive Directors’ Remuneration
The remuneration of the non-executive Directors is determined
by the Board on recommendation from the Remuneration and
Nomination Committee within a maximum aggregate amount
approved by shareholders at an Annual General Meeting. The
current maximum amount of non-executive Directors’ fees as
approved by shareholders is $1.1 million. The total amount paid in
2007, including superannuation, was $955,852.
A review of Iluka’s non-executive Director fees was conducted
during the year by Egan Associates. The review took into account
the nature of Directors’ work, their responsibilities and survey
data on comparative companies. As a result of this review, the
following fees were applied from 1 July 2007:
•
•
Non-executive Director Fees
Board Chairman
(inclusive of Committee fees)
Board Member
Board Member Committee Fees
Audit and Risk Committee Chair
Remuneration and Nomination
Committee Chair
Audit and Risk Committee Member
Remuneration and Nomination
Committee Member
$251,870 per annum
$95,000 per annum
$35,000 per annum
$25,000 per annum
$17,500 per annum
$12,500 per annum
The minimum required employer superannuation contribution is
paid into each Director’s nominated eligible fund and is in addition
to the above fees. Based on the above fee structure, the current
total non-executive Director remuneration is $941,870 per annum,
excluding superannuation, or $1,026,639 including superannuation.
David Robb - Managing Director
Non-executive Directors are able to purchase company shares
under the DEESAP utilising the funds that would otherwise be
payable to Directors as fees. These shares are acquired on market
and all transaction costs are borne by the relevant Director.
Details of Directors’ share purchases are listed on page 14.
No performance conditions are attached to these shares as they
are purchased using sacrifi ced fees.
Executive Employment Agreements
Remuneration and other terms of employment for the Managing
Director and key executives are formalised in service agreements.
The Managing Director and key executives are employed on rolling
agreement basis with no specifi ed fi xed terms. The Managing
Director and key executives are on total fi xed remuneration (TFR)
arrangements, inclusive of superannuation.
Total Fixed Remuneration
Short Term Incentive
Long Term Incentive
Share Rights
Retention Arrangements
Termination Arrangements
With Notice
Without Notice
Voluntary Termination
Termination for
Other Reasons
Protection of Interests
Weighting
50 per cent
10 per cent
$1,100,000 for the year ended 31 December 2007
$1,500,000 from 1 January 2008
90 per cent of TFR at target with up to 120 per cent of TFR for stretch performance awarded 50 per cent as cash and
50 per cent as deferred equity
Measure
Profi tability (ROC, EBIT, NPAT)
Sustainability (all injury frequency rate,
severity rate, notifi cations to government)
Growth (individual objectives)
A grant of equity in the form of share rights of up to 30 per cent of TFR measured over of a three year performance period
Measure
ROE
TSR
As disclosed in the 2006 Remuneration Report, Mr Robb purchased approximately $500,000 of Iluka shares prior to
commencing employment which were matched with an equivalent award of share rights (71,851 shares) due to vest on
1 July 2008.
Mr Robb was granted a further 52,970 share rights as part of the 2007 LTIP offer of which, subject to meeting performance
criteria, part or all may vest at the conclusion of the three year period.
At the time of fi nalising this Report, the Board was in the process of developing an incentive and retention plan for the
Managing Director. If approved by the Board the plan will be subject to shareholder approval at the upcoming Annual General
Meeting on 21 May 2008.
Weighting
50 per cent
50 per cent
40 per cent
Employment can be terminated during the contract period by giving 12 months notice or pay in lieu of notice plus a pro-rata
short term incentive component. All shares to which Mr Robb is entitled under the DEESAP will vest within three months
of termination.
In the case of misconduct and in certain other circumstances, employment can be terminated without notice and with no
entitlement to any payment under the executive incentive plan.
Employment may be terminated by giving six months notice. Any pro-rata award under the executive incentive plan will be at
the discretion of the Board.
• By Iluka on the ground of redundancy or by Mr Robb if, at the instigation of the Board, he suffers a material diminution in his
status as Chief Executive Offi cer and Managing Director, by giving 24 months notice (if given in the fi rst three
years of employment) or 12 months notice (thereafter) provided that Iluka may elect, or Mr Robb may require Iluka, to pay Mr
Robb an equivalent amount of TFR in lieu of notice; or
• By Iluka if Mr Robb suffers illness, accident or other cause which renders him unable to perform his duties, by giving Mr Robb
six months TFR.
• In the circumstances described above, a termination payment equal to the total incentive target for which there would have
been an entitlement under the executive incentive plan for the relevant year calculated on a pro-rata basis for the relevant
notice period given by the company.
Mr Robb is restrained from engaging in certain activities during his employment, and for a period following termination of his
employment, in order to protect Iluka’s interests. The Executive Employment Agreement contains provisions relating to the
protection of confi dential information and intellectual property.
Iluka Resources Limited
13
Executive Service Agreements
Major provisions of the agreements relating to key executives included in this Remuneration Report are set out below.
Executive
M Adams
P Beilby
P Benjamin
D Calhoun
C Cobb
D Grant
V Hugo
D McMahon
H Umlauff
C Wilson
Position
Termination Notice Period
by Iluka
Termination Notice Period
by Employee
General Manager Western Region
General Manager Murray Basin
General Manager Exploration & Geology
Executive General Manager People
& Communities
Managing Director CRL
Chief Financial Offi cer
General Manager Sales & Marketing
Chief Financial Offi cer
General Manager SA Development &
Project Management
General Manager Corporate Services &
Company Secretary
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Termination
Payments
9 months
9 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
D Calhoun, D Grant and D McMahon have ceased employment with Iluka.
Share Rights and Shareholdings of Key Management Personnel
Number of Shares
Name
Balance
held at
01/01/07
Received on
vesting of share
rights during the year
Other changes
during
the year
Balance
held at
31/12/07
Balance
held at
01/01/07
Number of Share Rights
Vested as
shares during
2007
Granted
during
2007*
Lapsed Balance
held at
during
31/12/07
2007
Non-Executive Directors
76,072
G Campbell
35,272
V Davies
17,540
R Every
42,256
I Mackenzie
25,000
D Morley
10,000
G Pizzey
-
G Rezos
Executive Director
D Robb
70,000
Executives
M Adams
P Beilby
P Benjamin
D Calhoun
D Grant
V Hugo
D McMahon
H Umlauff
C Wilson
-
11,940
7,287
200
5,400
7,510
-
-
100
-
-
-
-
-
-
-
-
2,242
14,364
9,104
27,903
16,594
15,322
-
2,423
4,776
9,668
830
710
1,554
1,012
405
40,474
85,740
36,102
18,250
43,810
26,012
10,405
40,474
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,835
72,835
71,851
52,970
-
-
-
-
-
-
-
-
42
1,065
659
(28,103)
(21,994)
-
-
46
-
2,284
27,369
17,050
-
-
22,832
-
2,469
4,876
-
30,732
15,436
19,425
36,105
33,396
-
-
16,548
24,786
19,316
24,986
28,895
12,755
24,197
21,669
32,937
24,483
(2,242)
(14,364)
(9,104)
(27,903)
(16,594)
(15,322)
-
(2,423)
(4,776)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 124,821
-
22,554
(6,774) 28,910
(3,549) 27,769
-
(20,417)
(32,266)
-
(6,528) 35,743
(21,669)
-
30,514
-
36,255
-
* Granted during 2007 includes the full grant of the 2006 PIP and Share Rights offered under the 2007 LTI.
The numbers of shares in the company and share rights for ordinary shares in the company are set out above for each director of Iluka
Resources Limited and other key management personnel of the group, including their personally related entities. There were no shares
granted during the reporting period as compensation.
14
Annual Report 2007
Incentive opportunity for 2008
Short-Term Incentive (Cash + Deferred Equity)
Long-Term Incentive (Equity)1
At Target
90% of
fi xed remuneration
At Stretch
120% of
fi xed remuneration
$ Value
of maximum number of share rights
30% of fi xed remuneration
Incentive as % of
TR at target2
$1,350,000
$1,800,000
$450,000
55%
At Target
60% of
fi xed remuneration
At Stretch
90% of
fi xed remuneration
$ Value
of maximum number of share rights
30% of fi xed remuneration
Incentive as % of
TR at target2
$264,000
$214,200
$254,400
$235,800
$339,000
$264,000
$396,000
$321,300
$381,600
$353,700
$508,500
$396,000
$132,000
$107,100
$127,200
$117,900
$169,500
$132,000
47%
47%
47%
47%
47%
47%
Name
D A Robb
Name
M Adams
P Beilby
P Benjamin
V Hugo
H Umlauff
C Wilson
1. Shows the $ value of the LTI opportunity to be granted in the form of share rights in 2008.
2. Total Remuneration (TR) represents the annual total available earnings inclusive of fi xed remuneration plus short and long term incentives at target. The table above shows the ‘at
risk’ (variable) remuneration as a percentage of total remuneration.
Remuneration report disclosures
Details of Remuneration
Details of the remuneration of the directors and other Key
Management Personnel (as defi ned in AASB 124 Related Party
Disclosures) of Iluka Resources Limited and the Iluka Resources
Limited Group are set out in the following tables. Other key
management personnel of the company and the group are the
following executives who have authority for planning, directing and
controlling the activities of the company and the group.
M Adams
P Beilby
P Benjamin
D Calhoun1
D Grant2
V Hugo
D McMahon3
H Umlauff
C Wilson
General Manager, Western Region
General Manager, Murray Basin
General Manager, Exploration & Geology
Executive General Manager, People &
Communities
Chief Financial Offi cer
General Manager, Sales & Marketing
Chief Financial Offi cer
General Manager, South Australian
Development & Project Management
General Manager, Corporate Services &
Company Secretary
1
2
3
D Calhoun ceased employment 30 November 2007.
D Grant ceased employment 16 February 2007.
D McMahon appointed as an Executive 29 January 2007 and ceased
employment 17 January 2008.
For the remainder of this Note, Key Management Personnel
other than Directors of the consolidated entity are referred to as
‘Executives’.
The above persons were also Executives during the year ended 31
December 2006, except:
•
•
•
•
•
M Adams, appointed as an Executive 1 January 2007.
P Beilby, appointed as an Executive 1 January 2007.
P Benjamin, appointed as an Executive 24 May 2006.
V Hugo, appointed as an Executive 21 February 2006.
H Umlauff, appointed as an Executive 9 May 2006.
The following persons were also Executives during the year ended
31 December 2006:
•
•
•
S Ward, ceased employment as Executive General Manager
Sales & Marketing on 10 February 2006.
M Bourke, ceased employment as Executive General
Manager Technical Services on 3 March 2006.
W Bisset, ceased employment as Executive General
Manager Global Operations on 31 December 2006.
In addition, the Managing Director of Consolidated Rutile Limited,
C Cobb, is a group executive whose remuneration must be
disclosed under the Corporations Act 2001 as one of the fi ve
highest remunerated executives.
Amounts in the ‘PIP cash’ column are dependent on the
satisfaction of performance conditions as set out in the section
headed “Performance Incentive Plan” above. Amounts in the
Share Based Payments column relate to the component of the fair
value of awards from prior years made under the various incentive
plans attributable to the year. All other elements of remuneration
are not directly related to performance.
Iluka Resources Limited
15
Short-term employee benefi ts
Non-Monetary Other
Superannuation
Termination
2007
Name
Cash Salary
& fees1
$
Non-executive Directors**
G Campbell
V Davies
R Every
I Mackenzie
D Morley
G Pizzey
G Rezos
107,750
114,000
105,250
225,577
124,000
102,750
101,409
STIP
Cash
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Executive Director
D Robb3
1,009,174
245,902
Executives
M Adams4
P Beilby4
P Benjamin*
D Calhoun5*
D Grant6
V Hugo
D McMahon7*
H Umlauff*
C Wilson
345,948
274,822
323,173
376,853
50,441
317,404
382,928
488,991
314,035
32,010
28,917
50,738
102,025
-
44,627
-
71,694
52,763
Benefi ts
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
-
-
5,250
120,803
653
5,250
-
2,634
5,250
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
-
Share Based
Payments2
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total
$
117,448
124,260
115,341
241,109
135,160
111,998
110,536
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
354,485
1,700,387
-
-
-
454,828
43,095
-
-
-
-
42,934
54,409
56,589
105,645
-
71,241
-
52,120
72,717
452,027
396,623
480,994
1,171,131
101,251
482,118
417,392
659,448
488,730
$
9,698
10,260
10,091
15,532
11,160
9,248
9,127
90,826
31,135
38,475
45,244
10,977
7,062
43,596
34,464
44,009
43,965
Other Group Executive
C Cobb8*
344,737
203,181
-
48,263
-
-
596,181
1. Cash salary includes salary that is sacrifi ced for the purchase of shares during the year.
2. Represents the estimated monetary value of shares rights under grant for the year ended 31 December 2007. The indicative valuation was determined in accordance with the
measurement criteria of accounting standard AASB 2 Share-based payment with the fair value of shares at grant date being recognised as remuneration on a straight-line basis
between grant date and vesting date. A negative value in share based payments arises where amounts recognised as remuneration in prior years are reversed due to employee
forfeiture of the share rights prior to vesting.
3. As disclosed in 2006, D Robb has elected to defer the cash component of his 2007 STIP award into Iluka shares provided for under the terms of the STIP.
4. Appointed as an Executive 1 January 2007.
5. Ceased employment 30 November 2007. Termination benefi t consisted of Severance $424,000 in accordance with terms of the contract of employment regarding termination plus
payment of statutory leave entitlements $30,828. Non-monetary benefi t relates to relocation and associated FBT pursuant to terms of the contract of employment.
6. Ceased employment 16 February 2007. Termination benefi t relates to statutory leave entitlements $43,095.
7. Commenced employment 29 January 2007, ceased employment 17 January 2008.
8. Remuneration and incentives arrangements for C Cobb are determined by the CRL Board of Directors. Further details can be obtained from the CRL annual report.
* Denotes one of the 5 highest paid executives of the Group, as required to be disclosed under the Corporations Act 2001.
** n/a denotes that Non-executive Directors are not eligible for these arrangements.
16
Annual Report 2007
2006
Name
Short-term employee benefi ts
Cash Salary
& fees11
$
PIP
Cash12
$
Non-Monetary Other
Superannuation
Termination
Non-executive Directors
W Barr1
G Campbell
V Davies
R Every
I Mackenzie
D Morley
G Pizzey
G Rezos2
R Tastula1
Executive Director
D Robb3
K Folwell4
Executives
P Benjamin5
W Bissett6*
M Bourke7
D Calhoun*
D Grant*
V Hugo8
H Umlauff9
S Ward10*
C Wilson
33,850
96,585
70,200
94,000
193,114
45,292
94,000
52,068
33,850
206,422
668,901
174,884
577,943
53,294
385,864
378,308
256,951
273,389
49,430
272,089
Benefi ts
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
200,000
76,734
-
658,939
54,594
95,018
-
60,446
90,945
47,889
51,844
-
50,913
3,117
7,810
4,045
-
5,094
4,395
-
562
5,094
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
-
-
$
3,046
8,693
41,797
8,460
17,380
74,880
8,460
4,686
3,046
18,578
14,205
11,597
14,205
6,712
14,205
51,327
37,504
23,770
6,920
36,681
40,568
Share Based
Payments13
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total
$
36,896
105,278
111,997
102,460
210,494
120,172
102,460
56,754
36,896
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
1,009,398
50,871
(273,046)
475,871
2,155,131
-
558,467
287,810
-
-
-
-
556,806
-
26,240
57,182
(97,844)
48,925
(4,842)
64,938
-
(134,749)
44,783
270,432
1,310,625
254,017
509,440
520,832
411,677
349,003
478,969
409,560
-
-
519,601
Other Group Executive
C Cobb14*
315,741
163,292
-
1. W Barr and R Tastula retired 11 May 2006.
2. G Rezos appointed 20 June 2006.
3. D Robb appointed 18 October 2006. Cash incentive of $200,000 and grant of 71,851 share rights (share based payment value of $50,871 to December 2006) made pursuant to
terms of contract of employment in lieu of participation in 2006 Performance Incentive Plan.
4. K Folwell ceased employment 31 August 2006. Termination benefi ts consisted of Severance $913,500 in accordance with terms of the contract of employment regarding termination
plus payment of statutory leave entitlements $95,898. Non-monetary benefi t relates to relocation allowance and associated FBT pursuant to terms of the contract of employment
regarding termination.
5. P Benjamin appointed to Executive 24 May 2006.
6. W Bissett ceased employment 31 December 2006. Termination benefi ts consisted of Severance $515,000 in accordance with terms of the contract of employment regarding
termination plus payment of statutory leave entitlements $43,468.
7. M Bourke ceased employment 3 March 2006.
8. V Hugo appointed to Executive 21 February 2006.
9. H Umlauff appointed to Executive 9 May 2006.
10. S Ward ceased employment 10 February 2006. Termination benefi ts consisted of Severance $485,000 in accordance with terms of the contract of employment regarding termination
plus payment of statutory leave entitlements $71,806.
11. Cash salary includes salary that is sacrifi ced for the purchase of shares during the year.
12. Represents incentives payable in relation to the cash component of the 2006 Performance Incentive Plan paid in March 2007.
13. Represents the estimated monetary value of shares rights under grant for the year ended 31 December 2006. The indicative valuation was determined in accordance with the
measurement criteria of accounting standard AASB 2 Share-based payment with the fair value of shares at grant date being recognised as remuneration on a straight-line basis
between grant date and vesting date. A negative value in share based payments arises where amounts recognised as remuneration in prior years are reversed due to employee
forfeiture of the share rights prior to vesting.
14. Remuneration and incentive arrangements for C Cobb are determined by the CRL Board of Directors. Further details can be obtained from the CRL annual report.
* Denotes one of the 5 highest paid executives of the Group, as required to be disclosed under the Corporations Act 2001.
** n/a denotes that Non-executive Directors are not eligible for these arrangements .
Iluka Resources Limited
17
STIP Share Rights awarded to the Managing Director and Executives
for 2007 Performance
Name
Directors of Iluka Resources Limited
D Robb
Executives of Iluka Resources Limited
M Adams
P Beilby
P Benjamin
D Calhoun
D Grant
V Hugo
D McMahon
H Umlauff
C Wilson
Vesting Date
01/01/09
01/01/10
33,501
33,502
18,666
17,446
14,269
-
-
12,311
-
20,037
14,913
4,361
3,940
6,913
-
-
6,080
-
9,768
7,189
Share Based Compensation
The tables below summarise awards of Shares and Share Rights
made under the various incentive schemes described in the
Variable Remuneration section during the year, and those awards
from prior years that are still to vest.
Actual awards made under previous LTI and PIP plans in 2007
Performance Period and Plan
2004 LTI
2006 PIP
01/01/04 - 31/12/061
01/01/06 - 31/12/062
Name
Number of shares
Number of share rights
Directors of Iluka Resources Limited
D Robb
-
Executives of Iluka Resources Limited
M Adams
P Beilby
P Benjamin
D Calhoun
D Grant3
V Hugo
D McMahon4
H Umlauff
C Wilson
-
10,866
5,693
-
9,641
10,472
-
-
-
Fair Value per Share
or Share Right5
$2.47
-
6,728
4,581
7,651
8,478
4,251
6,717
-
7,271
7,148
$4.00
1 Grant date 1 March 2007. Vesting date 1 March 2007, with a 10 year holding lock
until 1 April 2017.
2 Grant date 1 January 2007. Vests in three equal tranches on 1 January 2007,
2008 and 2009.
3 D Grant ceased employment 16 February 2007. Mr Grant qualifi ed to receive
tranche 1 of the 2006 PIP.
4 D McMahon appointed 29 January 2007 and ceased employment 17 January 2008.
5
The valuations were determined in accordance with AASB 2 Share Based
Payments by the Directors. The valuations were performed using an option pricing
model.
18
Annual Report 2007
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2007, I declare that, to the best
of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Iluka Resources Limited and the entities it controlled during the year.
David J Smith
Partner
PricewaterhouseCoopers
Perth
12 March 2008
Liability limited by a scheme approved under Professional Standards Legislation.
n
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p
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I
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Iluka Resources Limited
19
CONTENTS
Financial Report
Income Statements
Balance Sheets
Statements of Recognised Income and Expense
Cash Flow Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report to the Members
21
22
23
24
25
84
85
t
r
o
p
e
R
l
a
i
c
n
a
n
i
F
20
Annual Report 2007
Income Statements
for the year ended 31 December 2007
Revenue from continuing operations
Other income
Expenses, excluding borrowing costs, closure costs
and impairment charges
Exchange gains on foreign currency borrowings
Interest and fi nance charges
Rehabilitation and restoration accretion expense
Total borrowing costs
Closure costs and impairment charges
Profi t (loss) before income tax
Income tax (expense) benefi t
Profi t from continuing operations
Profi t from discontinued operations
Profi t for the year
Profi t attributable to minority interest
Profi t attributable to members of Iluka Resources Limited
Earnings per share for profi t from continuing operations attributable
to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Earnings per share for profi t attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
The above income statements should be read in conjunction with the accompanying notes.
Consolidated
Parent entity
2007
$M
920.1
13.6
2006
$M
983.4
43.0
2007
$M
277.3
10.5
2006
$M
346.0
-
(808.3)
(847.7)
(251.9)
(268.1)
8.0
(43.0)
(5.6)
(48.6)
-
(4.7)
8.6
3.9
-
3.9
-
3.9
10.5
(28.3)
(2.8)
(31.1)
(60.0)
(2.7)
10.3
7.6
-
7.6
-
7.6
-
(43.8)
(16.6)
(60.4)
-
(29.0)
(13.0)
(42.0)
-
(104.5)
65.0
(15.5)
49.5
10.9
60.4
(9.3)
51.1
32.2
(10.1)
22.1
9.4
31.5
(10.5)
21.0
Cents
Cents
17.0
17.0
21.6
21.6
5.0
5.0
9.1
9.1
Notes
5
6
7
7
7
7
8
9
44
44
44
44
Iluka Resources Limited
21
Balance sheets
as at 31 December 2007
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative fi nancial instruments
Current tax assets
Other
Assets of disposal group classifi ed as held for sale
Total current assets
Non-current assets
Receivables
Inventories
Other fi nancial assets
Property, plant and equipment
Derivative fi nancial instruments
Deferred tax assets
Intangible assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Liabilities of a disposal group classifi ed as held for sale
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained (losses) profi ts
Parent entity interest
Minority interest
Total equity
The above balance sheets should be read in conjunction with the accompanying notes.
22
Annual Report 2007
Notes
10
11
12
13
14
15
9
16
21
17
18
13
19
20
22
23
24
26
25
9
27
28
29
30
31(a)
31(b)
Consolidated
Parent entity
2007
$M
19.9
190.5
319.9
7.8
12.7
11.2
31.6
593.6
-
-
1.2
1,246.4
1.0
9.9
15.2
0.7
1,274.4
2006
$M
17.4
232.2
249.4
3.5
-
17.9
33.2
553.6
3.8
5.5
1.2
1,266.3
1.7
14.9
16.8
0.7
1,310.9
2007
$M
2006
$M
-
44.7
70.7
2.1
12.4
6.7
-
-
56.1
77.7
-
-
0.5
-
136.6
134.3
289.2
-
849.2
246.2
0.7
-
-
-
315.2
2.7
849.2
227.9
-
-
-
-
1,385.3
1,395.0
1,868.0
1,864.5
1,521.9
1,529.3
113.1
230.7
8.3
55.2
6.8
414.1
387.3
44.7
270.3
702.3
133.4
194.0
19.4
57.9
6.7
411.4
419.9
56.8
259.9
736.6
1,116.4
1,148.0
751.6
716.5
662.6
23.8
(2.8)
683.6
68.0
751.6
611.0
39.7
(3.5)
647.2
69.3
716.5
33.9
230.7
-
16.9
-
281.5
387.3
9.0
88.0
484.3
765.8
756.1
662.6
21.0
72.5
756.1
-
756.1
41.9
188.5
8.6
18.9
-
257.9
419.9
6.1
75.0
501.0
758.9
770.4
611.0
39.8
119.6
770.4
-
770.4
Statements of Recognised Income and Expense
for the year ended 31 December 2007
Exchange differences on translation of foreign entities
Cash fl ow hedges, net of tax
Actuarial losses on defi ned benefi t plans
Net expense recognised directly in equity
Profi t for the year
Total recognised income and expense for the year
Total recognised income and expense for the year is attributable to:
Members of Iluka Resources Limited
Minority interest
Notes
31
31
31
Consolidated
Parent entity
2007
$M
3.2
(16.4)
(0.2)
(13.4)
60.4
47.0
37.4
9.6
47.0
2006
$M
(0.6)
(10.9)
(0.1)
(11.6)
31.5
19.9
9.0
10.9
19.9
2007
$M
-
2006
$M
-
(16.7)
(11.4)
-
(16.7)
3.9
(12.8)
(12.8)
-
(12.8)
-
(11.4)
7.6
(3.8)
(3.8)
-
(3.8)
The above statements of recognised income and expense should be read in conjunction with the accompanying notes.
Iluka Resources Limited
23
Cash Flow Statements
for the year ended 31 December 2007
Consolidated
Parent entity
Notes
2007
$M
2006
$M
2007
$M
957.4
(841.4)
116.0
1.3
-
(45.2)
(39.7)
47.2
(18.5)
14.5
19.0
0.9
95.5
1,010.1
(855.2)
154.9
1.3
-
(41.2)
(23.8)
49.7
(20.1)
1.5
18.7
1.2
142.2
(118.2)
(172.7)
-
16.2
-
41.9
(102.0)
(130.8)
37.4
(16.4)
(39.4)
(10.8)
39.4
(0.1)
10.1
3.6
17.4
(1.1)
19.9
123.9
(74.6)
(51.2)
(10.0)
-
-
(11.9)
(0.5)
18.2
(0.3)
17.4
244.3
(218.2)
26.1
-
1.0
(44.4)
(26.3)
15.6
-
-
-
0.5
(27.5)
(52.3)
44.4
9.0
1.1
37.4
(10.9)
(39.4)
-
39.4
(0.1)
26.4
-
-
-
-
Cash fl ows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest received
Management fees from controlled entity
Borrowing costs
Income taxes paid
Goods and services tax received
Payments for exploration expenditure
Coal compensation receipts
Royalty income
Receipts from other operating activities
Net cash infl ow (outfl ow) from operating activities
42
Cash fl ows from investing activities
Payments for property, plant and equipment
Loans from controlled entities
Proceeds from sale of property, plant and equipment
Net cash (outfl ow) infl ow from investing activities
Cash fl ows from fi nancing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Dividends paid to minority interests in controlled entities
Proceeds from issue of ordinary shares
Share issue costs
Net cash infl ow (outfl ow) from fi nancing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Financing arrangements
Non-cash fi nancing and investing activities
32
10
24,27
43
The above cash fl ow statements should be read in conjunction with the accompanying notes.
24
Annual Report 2007
2006
$M
312.4
(249.2)
63.2
-
0.9
(40.4)
(9.9)
17.0
-
-
-
0.6
31.4
(43.5)
13.3
0.2
(30.0)
123.9
(74.1)
(51.2)
-
-
-
(1.4)
-
-
-
-
Contents of the Notes to the Financial Statements
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Reserves and retained profi ts
Dividends
Key management personnel
Remuneration of auditors
Retirement benefi t obligations
Contingent liabilities
Commitments
Related party transactions
Investments in signifi cant controlled entities
Deed of cross guarantee
Interests in joint ventures
Reconciliation of profi t after income tax to net cash
infl ow (outfl ow) from operating activities
Non-cash investing and fi nancing activities
Earnings per share
Share-based payments
Events occuring after the balance sheet date
63
65
66
68
68
73
74
75
76
77
79
79
79
80
81
83
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Summary of signifi cant accounting policies
Critical accounting estimates and judgements
Financial risk management
Segment information
Revenue
Other income
Expenses
Income tax
Discontinued operation
Current assets - Cash and cash equivalents
Current assets - Receivables
Current assets - Inventories
Derivative fi nancial instruments
Current assets - Current tax assets
Current assets - Other
Non-current assets - Receivables
Non-current assets - Other fi nancial assets
Non-current assets - Property, plant and equipment
Non-current assets - Deferred tax assets
Non-current assets - Intangible assets
Non-current assets - Inventories
Non-current assets - Other
Current liabilities - Payables
Current liabilities - Interest-bearing liabilities
Current liabilities - Provisions
Current liabilities - Current tax liabilities
Non-current liabilities - Interest-bearing liabilities
Non-current liabilities - Deferred tax liabilities
Non-current liabilities - Provisions
Contributed equity
26
37
38
42
44
44
45
46
47
48
48
49
50
51
51
51
51
52
54
55
55
55
56
56
56
56
57
60
60
61
Iluka Resources Limited
25
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of
the Financial Report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated. The Financial Report includes separate fi nancial statements
for Iluka Resources Limited as an individual entity and the
consolidated entity consisting of Iluka Resources Limited and its
subsidiaries.
(a) Basis of preparation
This general purpose fi nancial report has been prepared
in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting
Standards Board, Urgent Issues Group Interpretations and
the Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include Australian
equivalents to International Financial Reporting Standards
(“AIFRS”). Compliance with AIFRS ensures that the
consolidated fi nancial statements and notes of Iluka
Resources Limited comply with International Financial
Reporting Standards (“IFRS”).
Historical cost convention
These fi nancial statements have been prepared under the
historical cost convention, as modifi ed by the revaluation
of available-for-sale fi nancial assets, fi nancial assets and
liabilities (including derivative instruments) at fair value
through profi t or loss and certain classes of property, plant
and equipment.
Critical accounting estimates
The preparation of fi nancial statements in conformity
with AIFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its
judgement in the process of applying the consolidated entity’s
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and
estimates are signifi cant to the fi nancial statements are
disclosed in Note 2.
for the year then ended. Iluka Resources Limited and
its subsidiaries together are referred to in this fi nancial
report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special
purpose entities) over which the Group has the power
to govern the fi nancial 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.
The purchase method of accounting is used to account
for the acquisition of subsidiaries by the Group (refer to
Note 1(g)).
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.
Minority interests in the results and equity of
subsidiaries are shown separately in the consolidated
income statement and balance sheet respectively.
(ii) Joint ventures
The consolidated entity has a coal operation and
titanium minerals and zircon exploration activities which
are conducted through joint ventures with other parties.
The coal operation is classifi ed as a discontinued
operation. Refer Note 9.
The proportionate interests in the assets, liabilities and
expenses of the joint venture operations have been
incorporated in the fi nancial statements under the
appropriate headings. Details of joint ventures are set
out in Note 41.
(b)
Principles of consolidation
(i) Subsidiaries
The consolidated fi nancial statements incorporate
the assets and liabilities of all subsidiaries of Iluka
Resources Limited (‘’Company’’ or ‘’parent entity’’) as
at 31 December 2007 and the results of all subsidiaries
(c)
Segment reporting
A business segment is identifi ed for a group of assets and
operations engaged in providing products or services that
are subject to risks and returns that are different to those of
other business segments.
26
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
A geographical segment is engaged in providing products
or services within a particular economic environment and is
subject to risks and returns that are different from those of
segments operating in other economic environments.
(d)
Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of
the Group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (“the functional currency”). The consolidated
fi nancial statements are presented in Australian
dollars, which is Iluka Resources Limited’s functional
and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of
such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in
the income statement, except when deferred in equity
as qualifying cash fl ow hedges and qualifying net
investment hedges.
Translation differences on non-monetary fi nancial
assets and liabilities are reported as part of the fair
value gain or loss. Translation differences on non-
monetary items, such as equities held at fair value
through profi t or loss, are reported as part of the fair
value gain or loss. Translation differences on non-
monetary items, such as equities classifi ed as available-
for-sale fi nancial assets, are included in the fair value
reserve in equity.
(iii) Foreign currency loans
Loans drawn down from entities which are repayable in
foreign currencies are translated to Australian dollars
at exchange rates applicable at year-end.
(iv) Group companies
The results and fi nancial position of all the Group
entities (none of which has the currency of a
hyperinfl ationary economy) that have a functional
currency different from the presentation currency are
translated into the presentation currency as follows:
•
•
•
assets and liabilities for each balance sheet
presented are translated at the closing rate at the
date of that balance sheet;
income and expenses for each income statement
are translated at average exchange rates; and
all resulting exchange differences are recognised
as a separate component of equity.
On consolidation, exchange differences arising from
the translation of any net investment in foreign entities,
and of borrowings and other currency instruments
designated as hedges of such investments, are taken to
shareholders’ equity. When a foreign operation is sold
or borrowings repaid, a proportionate share of such
exchange differences are recognised in the income
statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the
closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are
net of returns, trade allowances and duties and taxes paid.
Revenue is recognised for the major business activities as
follows:
(i) Product sales
Amounts are recognised as sales revenue when there
has been a passing of risk to a customer, and:
•
•
•
the product is in a form suitable for delivery and
no further processing is required by, or on behalf
of, the consolidated entity;
the quantity, quality and selling price of the
product can be determined with reasonable
accuracy; and
the product has been despatched to the customer
and is no longer under the physical control of the
consolidated entity or the customer has formally
acknowledged legal ownership of the product
including all inherent risks, albeit that the product
may be stored in facilities the consolidated entity
controls.
Gains and losses, including premiums paid or received,
in respect of forward sales, options and other deferred
delivery arrangements which hedge anticipated
revenues from future production, are deferred and
included in sales revenue when the hedged proceeds
are received.
Iluka Resources Limited
27
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
(ii) Land development and resale
Land is not sold until the development work is
completed, and revenue is recognised where there is a
signed unconditional contract of sale.
(f)
Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the fi nancial
statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted or substantively
enacted for each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable
temporary differences to measure the deferred tax asset
or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset
or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a
transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profi t
or loss or taxable profi t or loss.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent
entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in
equity.
Tax consolidation legislation
Iluka Resources Limited and its wholly-owned Australian
controlled entities have implemented the tax consolidation
legislation.
28
Annual Report 2007
On adoption of the tax consolidation legislation, the entities
in the tax consolidated group entered into a tax sharing
agreement which, in the opinion of the Directors, limits the
joint and several liability of the wholly-owned entities in the
case of a default by the head entity, Iluka Resources Limited.
The entities have also entered into a tax funding agreement
under which the wholly-owned entities fully compensate
Iluka Resources Limited for any current tax payable
assumed and are compensated by Iluka Resources Limited
for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that
are transferred to Iluka Resources Limited under the
tax consolidation legislation. The funding amounts are
determined by reference to the amounts recognised in the
wholly-owned entities fi nancial 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 fi nancial year. The head entity may also
require payment of interim funding amounts to assist with
its obligations to pay tax instalments. The funding amounts
are recognised as current intercompany receivables or
payables.
(g) Acquisitions of assets
The purchase method of accounting is used to account for
all acquisitions of assets (including business combinations)
regardless of whether equity instruments or other
assets are acquired. Cost is measured as the fair value
of the assets given, shares issued or liabilities incurred
or assumed at the date of exchange plus costs directly
attributable to the acquisition. Where equity instruments
are issued in an acquisition, the fair value of the instruments
is their published market price as at the date of exchange
unless, in rare circumstances, it can be demonstrated that
the published price at the date of exchange is an unreliable
indicator of fair value and that other evidence and valuation
methods provide a more reliable measure of fair value.
Transaction costs arising on the issue of equity instruments
are recognised directly in equity.
Identifi able assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the
consolidated entity’s share of the identifi able net assets
acquired is recorded as goodwill. If the cost of acquisition
is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in the
income statement, but only after a reassessment of the
identifi cation and measurement of the net assets acquired.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(j)
Inventories
(continued)
Where settlement of any part of cash consideration is
deferred, the amounts payable in the future are discounted
to their present value as at the date of exchange. The
discount rate used is the entity’s incremental borrowing
rate, being the rate at which a similar borrowing could be
obtained from an independent fi nancier under comparable
terms and conditions.
Costs relating to the acquisition of new areas of interest are
capitalised as either exploration and evaluation expenditure,
development properties or mine properties depending on
the stage of development reached at the date of acquisition.
Refer Note 1(y) for more information.
A liability for restructuring costs is recognised as at the
date of acquisition of an entity or part thereof when there
is a demonstrable commitment to the restructuring of the
acquired entity and a reliable estimate of the amount of the
liability can be made.
(h) Cash and cash equivalents
For cash fl ow statement presentation purposes, cash and
cash equivalents includes cash on hand, deposits held at
call with fi nancial institutions, other short-term, highly liquid
investments with original maturities of three months or
less that are readily convertible to known amounts of cash
and which are subject to an insignifi cant risk of changes
in value, and bank overdrafts. Bank overdrafts are shown
within interest-bearing liabilities in current liabilities on the
balance sheet.
(i)
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision
for doubtful debts. Trade and other receivables are due
for settlement no more than 90 days from the date of
recognition.
Collectibility of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when
there is objective evidence that the consolidated entity
will not be able to collect all amounts due according to the
original terms of receivables. The amount of the provision
is the difference between the asset’s carrying amount and
the present value of estimated future cash fl ows, discounted
at the original effective interest rate. Cash fl ows relating
to short-term receivables are not discounted if the effect of
discounting is immaterial. The amount of the provision is
recognised in the income statement.
Finished goods and work in progress inventories are valued
at the lower of cost and estimated net realisable value.
Costs represent weighted average cost and include
direct costs and an appropriate portion of fi xed and
variable overhead expenditure, including depreciation and
amortisation.
Net realisable value is the amount estimated to be obtained
from the sale of the item of inventory in the normal course
of business, less any anticipated costs to be incurred prior
to its sale.
Stores are valued at weighted average cost.
Obsolete or damaged inventories have been valued at
net realisable value. A regular and ongoing review is
undertaken to establish the extent of surplus items, and a
provision is made for any potential loss on their disposal.
(k) Non-current assets (or disposal groups) held for resale
Non-current assets (or disposal groups) are classifi ed
as held for sale and stated at the lower of their carrying
amount and fair value less costs to sell if their carrying
amount will be recovered principally through a sale
transaction rather than through continuing use.
An impairment loss is recognised for any initial or
subsequent write-down of the asset (or disposal group)
to fair value less costs to sell. A gain is recognised for
any subsequent increases in fair value less costs to sell
of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or
loss not previously recognised by the date of the sale of the
non-current asset (or disposal group) is recognised at the
date of derecognition.
Non-current assets (including those that are part of a
disposal group) are not depreciated or amortised while they
are classifi ed as held for sale. Interest and other expenses
attributable to the liabilities of a disposal group classifi ed as
held for sale continue to be recognised.
Non-current assets classifi ed as held for sale and the assets
of a disposal group classifi ed as held for sale are presented
separately from the other assets in the balance sheet. The
liabilities of a disposal group classifi ed as held for sale are
presented separately from other liabilities in the balance
sheet.
Iluka Resources Limited
29
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
Movements in the hedging reserve in shareholders’ equity
are shown in Note 31.
(l)
Investments and other fi nancial assets
(i) Fair value hedge
The consolidated entity classifi es its investments in the
following categories: fi nancial assets at fair value through
profi t or loss, loans and receivables, held-to-maturity
investments, and available-for-sale fi nancial assets. The
classifi cation depends on the purpose for which the
investments were acquired. Management determines the
classifi cation of its investments at initial recognition and re-
evaluates this designation at each reporting date.
The only investment category for the current and preceding
year is loans and receivables.
Loans and receivables
Loans and receivables are non-derivative fi nancial assets
with fi xed or determinable payments that are not quoted in
an active market. They arise when the consolidated entity
provides money, goods or services directly to a debtor with
no intention of selling the receivable. They are included in
current assets, except for those with maturities greater than
12 months after the balance sheet date which are classifi ed
as non-current assets. Loans and receivables are included
in receivables in the balance sheet (Notes 11 and 16).
(m) Derivatives
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at balance date. The method
of recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument, and if
so, the nature of the item being hedged. The consolidated
entity designates certain derivatives as either: (1) hedges
of the fair value of recognised assets or liabilities or a fi rm
commitment (fair value hedge); or (2) hedges of highly
probable forecast transactions (cash fl ow hedges).
At the inception of the transaction, the consolidated entity
documents the relationship between hedging instruments
and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions.
The consolidated entity also documents its assessment, both
at transaction 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 fl ows of hedged items.
The fair values of various derivative fi nancial instruments
used for hedging purposes are disclosed in Note 13.
30
Annual Report 2007
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in the income statement, together with any
changes in the fair value of the hedged asset or liability
that are attributable to the hedged risk.
(ii) Cash fl ow hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
fl ow hedges is recognised in equity in the hedging
reserve. The gain or loss relating to the ineffective
portion is recognised immediately in the income
statement.
Amounts accumulated in equity are recycled in the
income statement in the periods when the hedged
item will affect profi t or loss (for instance when the
forecast sale that is hedged takes place). However,
when the forecast transaction that is hedged results in
the recognition of a non-fi nancial asset (for example,
inventory) or a non-fi nancial liability, the gains and
losses previously deferred in equity are transferred
from equity and included in the measurement of the
initial cost or carrying amount of the asset or liability.
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 the income statement. When
a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity
is immediately transferred to the income statement.
(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 the income statement.
(n) Fair value estimation
The fair value of fi nancial assets and fi nancial liabilities must
be estimated for recognition, measurement and disclosure
purposes.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
The fair value of fi nancial 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 balance sheet date. The quoted market price
used for fi nancial assets held by the consolidated entity is
the current bid price; the appropriate quoted market price
for fi nancial liabilities is the current ask price.
The fair value of fi nancial instruments that are not traded in
an active market (for example, over-the-counter derivatives)
is determined using valuation techniques. The consolidated
entity uses a variety of methods and makes assumptions
that are based on market conditions existing at each balance
date. Quoted market prices or dealer quotes for similar
instruments are used for long-term debt instruments held.
Other techniques, such as estimated discounted cash
fl ows, are used to determine fair value for the remaining
fi nancial instruments. The fair value of interest rate swaps
is calculated as the present value of the estimated future
cash fl ows. The fair value of forward exchange contracts
is determined using forward exchange market rates at the
balance sheet date.
The nominal value less estimated credit adjustments of
trade receivables and payables are assumed to approximate
their fair values. The fair value of fi nancial liabilities for
disclosure purposes is estimated by discounting the future
contractual cash fl ows at the current market interest
rate that is available to the consolidated entity for similar
fi nancial instruments.
(o) Property, plant and equipment
Land and buildings are shown at historical cost, less
subsequent depreciation for buildings. All other property,
plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Land is
not depreciated.
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 benefi ts
associated with the item will fl ow to the consolidated entity
and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to the income
statement during the fi nancial period in which they are
incurred.
Mine specifi c plant, machinery and equipment refers to
plant, machinery and equipment for which the economic
useful life cannot extend beyond the life of its host mine.
Depreciation and amortisation of mine buildings, reserves
and development and mine specifi c plant, machinery and
equipment is provided for over the life of the relevant
mine or asset, whichever is the shorter. Depreciation and
amortisation is determined on a straight-line basis. The
expected useful lives are as follows:
• Mine buildings
• Mine specifi c plant,
machinery and
equipment
•
•
Reserves and
development
Other non-mine
specifi c plant and
equipment
the shorter of applicable mine
life and 25 years
the shorter of applicable mine
or asset life and 25 years,
depending on the nature of the
asset
the applicable mine life
3-25 years
The reserves and life of each mine and the remaining
useful life of each class of asset are reassessed at regular
intervals and the depreciation rates adjusted accordingly.
(p)
Intangible assets
(i) Patents and trademarks
Signifi cant costs associated with patents and
trademarks are deferred and amortised on a straight-
line basis over the periods of their expected benefi t
which is 25 years.
(ii) Royalty income and amortisation of royalty assets
Royalty income included in the consolidated entity is
recognised as revenue using an accrual basis. Under
the terms of the royalty agreements, royalty income
is received on a quarterly basis and any under or over
accrual applicable to previously recognised royalty
income is adjusted for based on the receipt of the
royalty income entitlement.
The royalty entitlement asset (Mining Area C) included
in intangible assets is stated at cost less accumulated
amortisation. The cost of the asset is amortised on a
straight-line basis so as to write-off the cost over its
estimated useful life of 25 years.
Iluka Resources Limited
31
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
(q) Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of
fi nancial year which are unpaid. The amounts are unsecured
and are usually paid within 30 days of recognition.
(r) Borrowings
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 the income statement over the
period of the borrowings using the effective interest
method.
Borrowings are classifi ed as current liabilities unless the
consolidated entity has an unconditional right to defer
settlement of the liability for at least 12 months after the
balance sheet date.
•
it is more likely than not that an outfl ow of resources
will be required to settle the obligation; and
•
the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the
likelihood that an outfl ow will be required in settlement
is determined by considering the class of obligations as a
whole. A provision is recognised even if the likelihood of an
outfl ow with respect to any one item included in the same
class of obligations may be small.
(u) Employee benefi ts
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-
monetary benefi ts, annual leave and accumulating
sick leave expected to be settled within 12 months of
the reporting date are recognised in current liabilities
- payables. Liabilities for non-accumulating sick leave
are recognised when the leave is taken and measured
at the rates paid or payable.
(s) Borrowing costs
(ii) Long service leave
Borrowing costs are recognised as expenses in the period in
which they are incurred, except where they are included in
the costs of qualifying assets. Qualifying assets are assets
that take more than 12 months to prepare for their intended
use or sale.
The capitalisation rate used to determine the amount
of borrowing costs to be capitalised is the weighted
average interest rate applicable to the entity’s outstanding
borrowings during the year. No interest was capitalised in
2007, the weighted average interest rate applied in the prior
year was 6.0 per cent.
Borrowing costs include:
•
•
interest on bank overdrafts and short-term and long-
term borrowings, including amounts paid or received
on interest rate swaps;
amortisation of ancillary costs incurred in connection
with the arrangement of borrowings; and
•
fi nance lease charges.
(t) Provisions
Provisions for legal claims are recognised when:
•
the consolidated entity has a present legal obligation
as a result of past events;
32
Annual Report 2007
The liability for long service leave is recognised in the
provision for employee benefi ts 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 currency that match, as closely
as possible, the estimated future cash outfl ows.
(iii) Retirement benefi t obligations
All employees of the consolidated entity are entitled
to benefi ts on retirement, disability or death from
the consolidated entity’s superannuation plans. The
consolidated entity has defi ned benefi t section and an
accumulation type benefi ts section within its plans.
The defi ned benefi t section provides defi ned lump sum
benefi ts based on years of service and fi nal average
salary. The accumulation type benefi ts section receives
fi xed contributions from consolidated entity companies
and the consolidated entity’s legal or constructive
obligation is limited to these contributions.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
A liability or asset in respect of defi ned benefi t
superannuation plans is recognised in the balance
sheet and is measured as the present value of the
defi ned benefi t obligation at the reporting date plus
actuarial gains (less actuarial losses) less the fair
value of the superannuation fund’s assets at that
date and any unrecognised past service cost. The
present value of the defi ned benefi t obligation is
based on expected future payments which arise
from membership of the fund to the reporting date,
calculated annually by independent actuaries using the
projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of
employee departures and periods of service.
Expected future payments are discounted using market
yields at the reporting date on national government
bonds with terms to maturity and currency that match,
as closely as possible, the estimated future cash
outfl ows.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
are charged or credited to equity over the employees’
expected average remaining working lives.
Past service costs are recognised immediately in
income, unless the changes to the superannuation fund
are conditional on the employees remaining in service
for a specifi ed period of time (the vesting period). In
this case, the past service costs are amortised on a
straight-line basis over the vesting period.
Future taxes that are funded by the consolidated
entity and are part of the provision of the existing
benefi t obligation (eg taxes on investment income
and employer contributions) are taken into account in
measuring the net liability or asset.
Contributions to the accumulation fund are recognised
as an expense as they become payable. Prepaid
contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future
payments is available.
(iv) Share-based payments
Share-based compensation benefi ts are provided to
employees via the Performance Incentive Plan, the
Directors, Executives and Employees Share Acquisition
Plan and the Employee Share Ownership scheme.
Information relating to these schemes is set out in
Notes 33 and 45.
The fair value of shares granted under the
Performance Incentive Plan is determined to be the
closing share price on the grant date. The fair value of
the grant is charged as an expense through the income
statement on a straight-line basis between the grant
date and the vesting date of entitlements.
The fair value of entitlements offered under the Plan
has been determined by the Directors, in accordance
with the measurement criteria of Accounting Standard
AASB 2 Share-Based Payment. This fair value
is recognised as an expense through the income
statement on a straight line basis between the offer
date and the vesting date for each respective plan.
Shares provided under the Employee Share Ownership
scheme are purchased on-market, with the purchase cost
being recognised as an employee benefi ts expense.
(v) Profi t-sharing and bonus plans
The consolidated entity recognises a liability and
an expense for bonuses and profi t-sharing based
on a formula that takes into consideration the
profi t attributable to the Company’s shareholders
after certain adjustments. The consolidated entity
recognises a provision where contractually obliged
or where there is a past practice that has created a
constructive obligation.
(v) Contributed equity
Ordinary shares are classifi ed as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options for the
acquisition of a business, are not included in the cost of the
acquisition as part of the purchase consideration.
(w) Dividends
Provision is made for the amount of any dividend declared
on or before the end of the fi nancial year but not distributed
at balance date.
(x) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the
profi t attributable to equity holders of the Company,
excluding any costs of servicing equity other than
ordinary shares, by the weighted average number of
ordinary shares outstanding during the fi nancial year,
adjusted for bonus elements in ordinary shares issued
during the year.
Iluka Resources Limited
33
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
All the above expenditure is carried forward up to
commencement of operations at which time it is amortised
in accordance with the policy stated in Note 1(o).
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in
the determination of basic earnings per share to take
into account the after income tax effect of interest
and other fi nancing costs associated with dilutive
potential ordinary shares and the weighted average
number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
(y) Project exploration, evaluation and development
expenditure
Exploration and evaluation expenditure is accumulated
separately for each area of interest in accordance with
AASB 6 Exploration and Evaluation of Mineral Resources.
Such expenditure comprises net direct costs and an
appropriate portion of related overhead expenditure.
Expenditure is carried forward when incurred in areas
for which the consolidated entity has rights of tenure and
where economic mineralisation is indicated, but activities
have not yet reached a stage which permits a reasonable
assessment of the existence or otherwise of economically
recoverable reserves and active and signifi cant operations
in relation to the area are continuing. Each such project is
regularly reviewed. If the project is abandoned or if it is
considered unlikely the project will proceed to development,
accumulated costs to that point are written off immediately.
Each area of interest is limited to a size related to a known
or probable mineral resource capable of supporting a mining
operation.
Identifi able exploration assets acquired from another
mining company are recognised as assets at their cost of
acquisition, as determined by the requirements of AASB 3
Business Combinations.
Projects are advanced to development status when it is
expected that accumulated and future expenditure can be
recouped through project development or sale. Capitalised
exploration is transferred to mine reserves once the related
ore body has achieved JORC reserve status and has been
included in the life of mine plan.
Direct costs associated with the commissioning of plant and
equipment are capitalised and included in property, plant
and equipment. Pre-commissioning costs in testing the
processing plant are also capitalised.
34
Annual Report 2007
(z) Non-current assets constructed by the
consolidated entity
The cost of non-current assets constructed by the
consolidated entity includes the cost of all materials
used in construction, direct labour on the project, project
management costs, borrowing costs incurred during
construction and an appropriate proportion of variable and
fi xed overheads.
Borrowing costs included in the cost of non-current assets
are those costs that would have been avoided if the
expenditure on the construction of the assets had not been
made and are capitalised in accordance with the policy
stated in Note 1(s).
(aa) Rehabilitation and mine closure costs
The consolidated entity has obligations to dismantle,
remove, restore and rehabilitate certain items of property,
plant and equipment.
Under AASB 116 Property, Plant and Equipment, the cost of
an asset must include any estimated costs of dismantling
and removing the asset and restoring the site on which it
is located. The capitalised rehabilitation and mine closure
costs are depreciated (along with the other costs included
in the asset) over the asset’s useful life. The depreciation
expense is included in the cost of sales of goods.
AASB 137 Provisions, Contingent Liabilities and Contingent
Assets requires a provision to be raised for the present
value of the estimated cost of settling the rehabilitation
and restoration obligations existing at balance date. Those
costs that relate to rehabilitation and restoration obligations
arising from the production process are recognised in
production costs. The estimated costs are discounted
using a pre-tax discount rate that refl ects the time value of
money. The discount rate must not refl ect risks for which
future cash fl ow estimates have been adjusted. A discount
rate of 6.0 per cent (2006: 6.0 per cent) has been used in
calculating the rehabilitation and restoration provisions of
the consolidated entity.
As the value of the provision represents the discounted
value of the present obligation to restore, dismantle and
rehabilitate, the increase in the provision due to the passage
of time is recognised as an accretion expense within
borrowing costs. This borrowing cost is excluded from the
cost of sales of goods.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(ad) Restructuring costs
(continued)
(ab) Recoverable amount of non-current assets
AASB 136 Impairment of Assets requires that depreciable
assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value-in-use. Where there
is no binding sale agreement or active market, fair value
less costs to sell is based on the best information available
to refl ect the amount the consolidated entity could receive
for the Cash Generating Unit in an arms length transaction.
For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifi able cash fl ows (Cash Generating Units).
The estimates of future cash fl ows for each Cash Generating
Unit are based on signifi cant assumptions including:
•
•
•
•
•
•
estimates of the quantities of mineral reserves and
resources for which there is a high degree of
confi dence of economic extraction;
future production levels and the ability to sell that
production;
future product prices based on the consolidated
entity’s assessment of short and long term prices for
each of the key products;
future exchange rates for the Australian dollar
compared to the US dollar using external forecasts by
recognised economic forecasters which project a
medium term decline in the Australian dollar
against the US dollar;
future cash costs of production, sustaining capital
expenditure, rehabilitation and mine closure; and
the asset specifi c discount rate applicable to the Cash
Generating Unit, based upon the consolidated entity’s
weighted average cost of capital.
(ac) Overburden costs
Expenditure associated with the removal of mine overburden
is deferred and charged to the income statement over its
useful life, which typically does not exceed one year.
Liabilities arising directly from undertaking a restructuring
program, not in connection with the acquisition of an
entity or operations, are recognised when a detailed
plan of the restructuring activity has been developed and
implementation of the restructuring program as planned
has commenced, by either entering into contracts to
undertake the restructuring activities or making a detailed
announcement such that affected parties are in no doubt the
restructuring program will proceed.
Liabilities for the cost of restructuring entities or operations
acquired are recognised as at the date of acquisition
of an entity, or part thereof, if the main features of the
restructuring were planned and there was a demonstrable
commitment to the restructuring at the acquisition date and
this is supported by a detailed plan developed within three
months of the acquisition or prior to the completion of the
fi nancial report, if earlier.
The cost of restructuring provided for, other than related
employee termination benefi ts, is the estimated cash fl ows,
having regard to the risks of the restructuring activities,
discounted using market yields at balance date on national
government guaranteed bonds with terms to maturity and
currency that match, as closely as possible, the expected
future payments, where the effect of discounting is material.
Liabilities for employee termination benefi ts associated with
restructurings are brought to account on the basis described
in the accounting policy note for employee benefi ts (Note
1(u)). Liabilities for costs of restructurings and related
employee termination benefi ts are disclosed in aggregate
where the restructuring occurs as a consequence of an
acquisition.
(ae) Maintenance and repairs
Certain items of plant used in the primary extraction,
separation and secondary processing of extracted minerals
are subject to major overhaul on a cyclical basis. Costs
incurred during such overhauls are characterised as either
in the nature of capital or in the nature of repairs and
maintenance. Work performed may involve:
(i)
the replacement of a discrete sub-component asset,
in which case an asset addition is recognised and the
book value of the replaced item is written off; and
(ii) demonstrably extending the useful life or functionality
of an existing asset, in which case the relevant cost is
added to the capitalised cost of the asset in question.
Iluka Resources Limited
35
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(continued)
Costs incurred during a major cyclical overhaul which do
not constitute (i) or (ii) above, are written off as repairs and
maintenance as incurred. Costs qualifying for capitalisation
under (i) or (ii) above are subsequently depreciated in
accordance with Note 1(o).
General repairs and maintenance which are not
characterised as part of a major cyclical overhaul are
written off as incurred.
(af) Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100,
issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in
the Financial Report. Amounts in the Financial Report have
been rounded off in accordance with that Class Order to the
nearest hundred thousand dollars, or in certain cases, the
nearest thousand dollars and the nearest dollar.
(ag) New accounting standards and UIG interpretations
not yet adopted
Certain new accounting standards and interpretations
have been published that are not mandatory for 31
December 2007 reporting periods. The consolidated entity’s
assessment of the impact of relevant new standards and
interpretations is set out below.
AASB-I 11 AASB 2 - Group and Treasury Share
Transactions and AASB 2007-1 Amendments to
Australian Accounting Standards arising from AASB
Interpretation 11
AASB-I 11 and AASB 2007-1 are effective for annual
reporting periods commencing on or after 1 March 2007.
AASB-I 11 addresses whether certain types of share-based
payment transactions should be accounted for as equity-
settled or as cash settled transactions and specifi es the
accounting in a subsidiary’s fi nancial statements for share-
based payment arrangements involving equity instruments
of the parent. The consolidated entity will apply AASB-I
11 from 1 January 2008, but it is not expected to have any
impact on the consolidated entity’s fi nancial statements.
36
Annual Report 2007
AASB 8 Operating Segments and AASB 2007-3
Amendments to Australian Accounting Standards
arising from AASB 8
AASB 8 and AASB 2007-3 are effective for annual reporting
periods commencing on or after 1 January 2009. AASB 8
will result in a change in the approach to segment reporting,
as it requires adoption of a “management approach” to
reporting on the fi nancial performance. The information
being reported will be based on what the key decision-
makers use internally for evaluating segment performance
and deciding how to allocate resources to operating
segments. The consolidated entity will adopt AASB 8 from 1
January 2009. Application of AASB 8 may result in different
segments, segment results and different type of information
being reported in the segment note of the Financial Report.
However, it will not affect any of the amounts recognised in
the fi nancial statements.
AASB-I 12 Service Concession Arrangements, AASB
2007-2 Amendments to Australian Accounting Standards
arising from AASB Interpretation 12, revised UIG 4
Determining whether an Arrangement contains a Lease
and revised UIG 129 Service Concession Arrangements
AASB-I 12, AASB 2007-2, UIG 4 and the revised UIG 129
are all effective for annual reporting periods commencing
on or after 1 January 2008. AASB-I 12 provides guidance
on the accounting by operators for public-to-private service
concession arrangements under which private sector
entities participate in the development, fi nancing, operation
and maintenance of infrastructure for the provision of public
services, such as transport, water and energy facilities. UIG
4 has been amended to exclude public-to-private service
concession arrangements from its scope and UIG 129 was
revised to require some additional disclosures. The Group
will apply AASB-I 12 and the related amended standards and
interpretations from 1 July 2008. Application of AASB-I 12
will not have any impact on the Group’s fi nancial statements.
Revised AASB 123 Borrowing Costs and AASB 2007-6
Amendments to Australian Accounting Standards arising
from AASB 123 [AASB 1, AASB 101, AASB 107, AASB
111, AASB 116 & AASB 138 and Interpretations 1 & 12]
The revised AASB 123 is applicable to annual reporting
periods commencing on or after 1 January 2009. It has
removed the option to expense all borrowing costs and
when adopted will require the capitalisation of all borrowing
costs directly attributable to the acquisition, construction or
production of a qualifying asset. There will be no impact on
the fi nancial report of the Group, as the Group does already
capitalise borrowing costs relating to qualifying assets.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 1. Summary of significant accounting policies
(a) Critical accounting estimates and assumptions
(continued)
AASB-I 13 Customer Loyalty Programmes
AASB-I 13 is applicable to annual reporting periods
commencing on or after 1 July 2008. It provides guidance
on the accounting for customer loyalty programmes and
requires that the fair value of the consideration received/
receivable in respect of a sale transaction is allocated
between the award credits and the other components of
the sale. The Group does not operate any customer loyalty
programmes. AASB-I 13 will therefore have no impact on the
Group’s fi nancial statements. The Group will apply AASB-I 13
from 1 July 2008.
AASB-I 14 The Limit on a Defi ned Benefi t Asset,
Minimum Funding Requirements and their Interaction
AASB-I 14 will be effective for annual reporting periods
commencing 1 January 2008. It provides guidance on the
maximum amount that may be recognised as an asset in
relation to a defi ned benefi t plan and the impact of minimum
funding requirements on such an asset. None of the Group’s
defi ned benefi t plans are subject to minimum funding
requirements and none of them is in a surplus position.
The Group will apply AASB-I 14 from 1 July 2008, but it is
not expected to have any impact on the Group’s fi nancial
statements.
Revised AASB 101 Presentation of Financial Statements
and AASB 2007-8 Amendments to Australian Accounting
Standards arising from AASB 101
The revised AASB 101 that was issued in September 2007 is
applicable for annual reporting periods beginning on or after
1 January 2009. It requires the presentation of a statement
of comprehensive income and makes changes to the
statement of changes in equity but will not affect any of the
amounts recognised in the fi nancial statements. If an entity
has made a prior period adjustment or a reclassifi cation of
items in the fi nancial statements, it will need to disclose a
third balance sheet (statement of fi nancial position), this one
being as at the beginning of the comparative period.
Note 2. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances.
The consolidated entity makes estimates and assumptions
concerning the future. The resulting accounting estimates
will, by defi nition, seldom equal the related actual results.
The estimates and assumptions that have a signifi cant risk
of causing a material adjustment to the carrying amounts
of assets and liabilities within the next fi nancial year are
discussed below:
(i) Impairment of assets
The recoverable amount of each Cash Generating Unit
(CGU) is determined as the higher of value-in-use and
fair value less costs to sell, in accordance with Note
1(ab). These calculations require the use of estimates,
which have been outlined in Note 1(ab).
Given the nature of the consolidated entity’s mining
activities, future changes in long-term assumptions
upon which these estimates are based, may give
rise to material adjustments to the current or prior
years. This could lead to a reversal of part, or all, of
impairment charges recorded in the current or prior
years, or the recognition of additional impairment
charges in the future.
Due to the nature of the assumptions and their
signifi cance to the assessment of the recoverable
amount of each CGU, relatively modest changes in
one or more assumptions could require a material
adjustment (negative or positive) to the carrying value
of the related non-current assets within the next
reporting period.
The key sources of estimation uncertainty are set out
below:
•
•
future capital and operating costs for the
Northern Murray Basin development;
estimates of exchange rates between the
Australian and US dollars, which are based on
independent forecasts by recognised economic
forecasters and which project a medium term
decline in the Australian dollar against the
US dollar;
•
estimates of sales prices for titanium minerals
and zircon products; and
•
timing of access to reserves and resources.
The inter-relationships of the signifi cant assumptions
upon which estimated future cash fl ows are based,
however, are such that it is impracticable to disclose
the extent of the possible effects of a change in a key
assumption in isolation.
Iluka Resources Limited
37
Notes to the Financial Statements
for the year ended 31 December 2007
Note 2. Critical accounting estimates and
judgements (continued)
(ii) Exploration and evaluation expenditure
Expenditure with a value of $34.6 million (2006:
$6.3 million) which does not form part of the Cash
Generating Units assessed for impairment has been
carried forward in accordance with Note 1(y) on the
basis that exploration and evaluation activities have
not yet reached a stage which permits a reasonable
assessment of the existence or otherwise of
economically recoverable reserves and active and
signifi cant operations in relation to the area are
continuing. In the event that signifi cant operations
cease and/or economically recoverable reserves are
not assessed as being present, this expenditure will be
expensed to the Income Statement.
(iii) Rehabilitation and mine closure provisions
As set out in Note 1(aa), these provisions represent
the discounted value of the present obligation to
restore, dismantle and rehabilitate certain items of
property, plant and equipment. The discounted value
refl ects a combination of management’s assessment
of the cost of performing the work required, the timing
of the cash fl ows and the discount rate of 6.0 per cent
(2006: 6.0 per cent).
A change in any, or a combination, of the three key
assumptions used to determine the provisions could
have a material impact to the carrying value of the
provision. In the case of provisions for assets which
remain in use, adjustments to the carrying value of the
provision are offset by a change in the carrying value
of the related asset. Where the provisions are for
assets no longer in use or for obligations arising from
the production process, the adjustment is refl ected
directly in the Income Statement.
(iv) Income tax
The consolidated entity is subject to income taxes
in Australia and the United States (US). Signifi cant
judgement is required in determining the provision
for income taxes in each jurisdiction. There are many
transactions and calculations for which the ultimate
determination is not fi nalised until statutory tax
returns are lodged with the appropriate authorities.
Where the fi nal tax outcome of these matters is
different from the amounts that were initially recorded,
such differences will impact upon the current and
38
Annual Report 2007
deferred tax provisions in the period in which such
determination is made which is usually the subsequent
fi nancial year.
The key assumptions made regarding the income tax
expense for the current year are the level of research
and development expenditure that will qualify for
concessional tax deductions and the level of capital
gains on asset disposals that can be shielded by
available capital losses not previously recognised.
The tax effect of these amounts is $3.5 million and
$0.5 million respectively.
(b)
Critical judgements in applying the entity’s accounting
policies
Recovery of deferred tax assets
Net deferred tax assets of $8.8 million (2006: $11.6 million)
are carried in respect of the US operations, including
$5.0 million (2006: $3.7 million) attributable to tax losses.
Management has assessed that it is probable that these tax
losses will be recoverable against future taxable profi ts to
be generated in the US.
Note 3. Financial risk management
The consolidated entity’s activities expose it to a variety of
fi nancial risks: market risk (including currency risk, fair value
interest rate risk and cash fl ow interest rate risk), credit risk and
liquidity risk. The consolidated entity’s overall risk management
program focuses on the unpredictability of fi nancial markets
and seeks to minimise potential adverse effects on the fi nancial
performance of the consolidated entity.
Financial risk management is managed by a central treasury
department (Group Treasury) under policies approved by the Board
of Directors.
(a)
Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial
transactions and recognised assets and liabilities
are denominated in a currency that is not the entity’s
functional currency. The entity manages this by
borrowing in US dollars to provide a hedge for the
net US dollar denominated investment in overseas
operations or through derivative instruments.
Notes to the Financial Statements
for the year ended 31 December 2007
Note 3.
Financial risk management (continued)
(ii) Cash fl ow and fair value interest rate risk
The consolidated entity operates internationally and is
exposed to foreign exchange risk arising predominantly
from currency exposures to the US dollar. The parent
entity and a controlled entity, Consolidated Rutile
Limited (CRL), hedge this exposure through the use
of derivative instruments in accordance with policies
approved by the respective Boards.
Group sensitivity
At 31 December 2007, had the Australian dollar
weakened/strengthened by 10 per cent against the US
dollar compared to the exchange rate at that date of
87.67 cents with all other variables held constant, the
consolidated entity’s post tax profi t for the year would
have been $2.3 million higher/$1.9 million lower (2006:
$1.5 million higher/$1.2 million lower), mainly as a
result of foreign exchange gains/losses on translation
of US dollar denominated trade receivables and
payables and US dollar denominated borrowings.
Equity would have been $50.0 million lower/$58.1
million higher (2006: $3.9 million higher/$4.6
million higher) had the Australian dollar weakened/
strengthened by 10 per cent against the US dollar,
arising mainly from currency hedging contracts
designated as cash fl ow hedges. The signifi cant change
in equity’s sensitivity to movements in the Australian
dollar/US dollar exchange rates between 2007 and
2006 is due to the parent entity instigating a currency
hedging program in December 2007 resulting in an
increased amount of cash fl ow hedges open at 31
December 2007.
Parent entity sensitivity
At 31 December 2007, had the Australian dollar
weakened/strengthened by 10 per cent against the
US dollar compared to the exchange rate at that date
of 87.67 cents with all other variables held constant,
the parent entity’s post tax profi t for the year would
have been $8.4 million lower/$6.8 million higher
(2006: $11.5 million lower/$9.4 million higher). This
is as a result of foreign exchange gains/losses on
the translation of US dollar denominated borrowings.
The parent entity’s equity would have been $51.5
million lower/$48.4 million higher (2006: $8.4 million
lower/$13.4 million higher) had the Australian dollar
weakened/strengthened by 10 per cent against the US
dollar, mainly as a result of foreign forward exchange
contracts designated as cash fl ow hedges in 2007, and
the translation of US functional currency entity trade
receivables and payables in 2006.
Interest rate risk arises from the consolidated
entity’s borrowings. When managing interest rate
risk the consolidated entity seeks to minimise its
overall cost of funds with a preference for variable
interest rate exposures. During 2007 and 2006, the
consolidated entity’s borrowings at variable rates were
denominated in Australian dollars and US dollars.
Borrowings at variable rates expose the consolidated
entity to cash fl ow interest rate risk while borrowings
at fi xed rates expose the consolidated entity to fair
value interest rate risk.
The Group does not account for any fi xed rate fi nancial
assets and liabilities at fair value through profi t or
loss, and the Group does not designate derivatives
(interest rate swaps) as hedging instruments under a
fair value hedge accounting model. Therefore a change
in interest rates at the reporting date would not affect
profi t or loss.
(iii) Summarised sensitivity analysis
The following table summarises the sensitivity of the
Group’s fi nancial assets and fi nancial liabilities at 31
December 2007 to foreign exchange risk, based on an
Australian dollar to US dollar rate of 87.67 cents. The
+10.0 per cent sensitivity assumes a rate of 96.43
cents and the -10.0 per cent sensitivity assumes a rate
of 78.90 cents.
Iluka Resources Limited
39
Notes to the Financial Statements
for the year ended 31 December 2007
Note 3. Financial risk management (continued)
Consolidated Entity - 31 December 2007
Financial assets
Cash and cash equivalents
Accounts receivable
Derivatives - cash fl ow hedges
Financial liabilities
Trade payables
Interest-bearing liabilities
Total increase / (decrease)
Parent Entity - 31 December 2007
Financial assets
Accounts receivable
Derivatives - cash fl ow hedges
Financial liabilities
Trade payables
Interest-bearing liabilities
Total increase / (decrease)
(b)
Credit risk
Foreign exchange risk
-10.0%
+10.0%
Profi t
$M
Equity
$M
Profi t
$M
Equity
$M
-
14.9
-
1.4
2.4
(45.2)
-
(12.2)
-
(1.1)
(1.9)
54.1
Carrying
Amount
$M
19.9
190.5
8.8
(113.1)
(618.0)
(0.7)
(11.9)
(1.0)
(7.6)
0.6
9.7
0.8
6.2
2.3
(50.0)
(1.9)
58.1
44.7
2.8
(33.9)
(618.0)
3.7
-
-
(43.9)
(0.2)
(11.9)
-
(7.6)
(8.4)
(51.5)
(3.0)
-
0.1
9.7
6.8
-
42.2
-
6.2
48.4
The consolidated entity has no signifi cant concentrations of credit risk. The consolidated entity has policies in place to ensure that sales
of products and services are made to customers with an appropriate credit history. The consolidated entity (excluding CRL) maintains
an insurance policy to assist in managing the credit risk of its customers. Derivative counterparties and cash transactions are limited to
high credit quality fi nancial institutions. The consolidated entity has policies that limit the amount of credit exposure to any one fi nancial
institution.
(c)
Liquidity risk
Prudent liquidity risk management implies maintaining suffi cient cash or credit facilities to meet the operating requirements of the
business. This is managed through committed undrawn facilities and prudent cash fl ow management.
The tables below analyse the consolidated entity’s and the parent entity’s fi nancial liabilities and net settled derivative fi nancial
instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash fl ows, except for interest rate swaps which are stated as notional
principal amounts. Balances due within 12 months equal their carrying balances, as the impact of discounting is not signifi cant.
Consolidated Entity - At 31 December 2007
Trade and other payables
Interest-bearing liabilities
Interest rate swaps
Parent Entity - At 31 December 2007
Trade and other payables
Interest-bearing liabilities
Interest rate swaps
40
Annual Report 2007
Less than
1 year
$M
Between
1 and 2 years
$M
Between
2 and 5 years
$M
Over 5 years
$M
113.1
230.7
-
33.9
230.7
-
-
121.7
-
-
121.7
-
-
181.2
56.9
-
181.2
56.9
-
85.4
85.4
-
85.4
85.4
Notes to the Financial Statements
for the year ended 31 December 2007
Note 3. Financial risk management (continued)
The tables below analyse the consolidated entity’s derivative fi nancial instruments that will be settled on a gross basis into relevant
maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash fl ows.
Consolidated Entity - At 31 December 2007
Forward foreign exchange contracts - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
Collar Options - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
Consolidated Entity - At 31 December 2006
Forward foreign exchange contracts - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
Parent Entity - At 31 December 2007
Forward foreign exchange contracts - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
Collar Options - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
Parent Entity - At 31 December 2006
Forward foreign exchange contracts - cash fl ow hedges
-
-
infl ow (A$M)
outfl ow (US$M)
(d)
Fair value estimation
Less than 1 year
$M
Between 1 and 2 years
$M
55.7
43.1
402.6
353.0
37.4
26.5
-
-
402.6
353.0
-
-
20.5
16.9
200.7
176.0
15.5
10.5
-
-
200.7
176.0
-
-
The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of fi nancial 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 balance sheet date. The quoted market price used for fi nancial assets held by the
consolidated entity is the current bid price.
Derivative contracts classifi ed as held for trading are fair valued by comparing the contracted rate to the current market rate for a
contract with the same remaining period to maturity.
The fair value of fi nancial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined
using valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt
instruments held. Other techniques, such as estimated discounted cash fl ows, are used to determine fair value for the remaining
fi nancial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash fl ows. The
fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due
to the short-term nature of trade receivables. The fair value of fi nancial liabilities for disclosure purposes is estimated by discounting
the future contractual cash fl ows at the current market interest rate that is available to the consolidated entity for similar fi nancial
instruments.
Iluka Resources Limited
41
Notes to the Financial Statements
for the year ended 31 December 2007
Note 4. Segment information
(a)
Primary Reporting Format - Geographical Segments
2007
$M
$M
$M
$M
$M
$M
$M
WA
MB
QLD - CRL
VA
FL/G
MAC
Other
Continuing
operations
$M
Discontinued
operations
$M
Sales to external customers
575.2
87.2
124.6
94.9
16.0
-
Other revenue/income
11.2
-
0.2
0.6
-
19.9
Total segment revenue/income
586.4
87.2
124.8
95.5
16.0
19.9
-
3.9
3.9
897.9
35.8
933.7
Total segment result
69.8
8.9
30.5
13.7
5.2
19.6
(24.0)
123.7
Rehabilitation and restoration
accretion expense
Interest and fi nance costs
Interest revenue
Profi t before income tax
Income tax expense
Net profi t for the year
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Acquisition of property, plant and
equipment and other non-current
segment assets
(16.6)
(43.8)
1.7
65.0
(15.5)
49.5
861.1 594.4
198.1
83.3
21.8
13.7
41.4
1,813.8
22.6
1,836.4
326.6
22.1
46.9
15.8
22.8
-
4.4
438.6
671.0
1,109.6
76.2
26.5
7.0
5.5
2.7
-
17.8
135.7
Depreciation and amortisation expense
90.7
25.3
14.5
13.0
0.2
0.4
0.8
144.9
Other non-cash expenses
36.7
1.2
3.1
0.2
-
-
-
41.2
WA - Western Australia Operations
MB - Murray Basin (New South Wales/Victoria - Australia)
QLD - CRL Queensland, Australia
VA - Virginia, United States of America
FL/G - Florida/Georgia, United States of America
MAC - Mining Area C Iron Ore (Western Australia)
40.7
-
40.7
16.0
(0.5)
-
-
15.5
(4.6)
10.9
31.6
-
31.6
6.8
-
6.8
0.5
3.0
0.1
Consolidated
$M
938.6
35.8
974.4
139.7
(17.1)
(43.8)
1.7
80.5
(20.1)
60.4
1,845.4
22.6
1,868.0
445.4
671.0
1,116.4
136.2
147.9
41.3
Other - Includes New South Wales and coal compensation, exploration, project expenses and other corporate costs incurred not attributable to any of the
group’s operating regions
42
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 4. Segment information (continued)
2006
$M
$M
$M
$M
$M
$M
$M
WA
MB
QLD - CRL
VA
FL/G
MAC
Other
Continuing
operations
$M
Discontinued
operations
$M
Sales to external customers
Other revenue/income
Total segment revenue/income
Segment result before notable items
(and impairment charges)
696.1
1.1
697.2
148.8
Closure costs and impairment charges
(60.0)
Coal compensation
Profi t on sale of Brunswick property
Iron oxide provision
Write-off of assets
-
-
(25.0)
-
0.1
0.1
125.9
111.2
0.4
0.5
126.3
111.7
-
19.1
19.1
-
13.2
13.2
962.1
64.3
1,026.4
-
-
-
-
-
33.1
27.9
-
-
-
-
-
-
-
-
-
-
-
(4.6)
18.7
(43.7)
-
-
-
-
-
-
12.5
-
-
-
28.9
29.9
58.8
(25.1)
(39.9)
-
29.9
-
-
Total segment result
63.8
(4.6)
33.1
27.9
(35.1)
18.7
(31.2)
Rehabilitation and restoration
accretion expense
Interest and fi nance costs
Interest revenue
Profi t before income tax
Income tax expense
Net profi t for the year
Segment assets
Unallocated assets
Total assets
Unallocated liabilities
Total liabilities
Acquisition of property, plant and
equipment and other non-current
segment assets
889.1
554.8
203.4
111.0
19.1
13.2
25.8
1,816.4
Segment liabilities
315.0
13.0
40.3
15.4
38.7
-
28.8
91.1
61.7
17.1
4.8
-
-
18.6
193.3
Depreciation and amortisation expense
76.9
14.6
14.8
13.2
0.9
0.4
Other non-cash expenses
33.5
0.8
2.2
1.8
12.8
-
0.4
0.4
121.2
51.5
159.7
(99.9)
12.5
29.9
(25.0)
(4.6)
72.6
(13.0)
(29.0)
1.6
32.2
(10.1)
22.1
14.9
1,831.3
451.2
690.1
1,141.3
Consolidated
$M
1,003.2
64.3
1,067.5
173.6
(99.9)
12.5
29.9
(25.0)
(4.6)
86.5
(13.4)
(29.0)
1.6
45.7
(14.2)
31.5
1,849.6
14.9
1,864.5
457.9
690.1
1,148.0
197.1
127.3
51.5
41.1
-
41.1
13.9
-
-
-
-
-
13.9
(0.4)
-
-
13.5
(4.1)
9.4
33.2
-
33.2
6.7
-
6.7
3.8
6.1
-
Iluka Resources Limited
43
Notes to the Financial Statements
for the year ended 31 December 2007
Note 4. Segment information (continued)
(b)
Secondary reporting format - business segments
Segment revenue from
sales to external customers
Segment assets
Acquisition of property,
plant & equipment & other
non-current segment assets
Continuing operations
Titanium minerals and zircon
Iron ore royalty
Discontinued operations
Coal
Total
2007
$M
897.9
-
897.9
40.7
40.7
938.6
2006
$M
962.1
-
962.1
41.1
41.1
2007
$M
1,800.1
13.7
1,813.8
31.6
31.6
2006
$M
1,803.2
13.2
1,816.4
33.2
33.2
1,003.2
1,845.4
1,849.6
Segment revenue is derived from sales to external customers domiciled in various geographical regions.
Details of segment revenue by location of customers are as follows:
2007
$M
135.7
-
135.7
0.5
0.5
136.2
2006
$M
193.3
-
193.3
3.8
3.8
197.1
Consolidated
2007
$M
199.1
306.2
342.0
50.6
897.9
40.7
938.6
2006
$M
211.2
329.5
338.5
82.9
962.1
41.1
1,003.2
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
897.9
962.1
258.1
266.5
1.7
0.1
19.9
0.5
22.2
1.6
-
19.1
0.6
21.3
17.8
1.1
-
0.3
19.2
78.1
0.9
-
0.5
79.5
920.1
983.4
277.3
346.0
40.7
41.1
-
11.3
2.0
0.3
-
13.6
29.9
12.5
0.6
-
43.0
4.9
-
0.1
5.5
10.5
-
-
-
-
-
-
Continuing operations
North America
Europe
Asia
Australia
Discontinued operation
Australia
Total sales revenue
Note 5. Revenue
From continuing operations
Sales revenue
Sale of goods
Other revenue
Interest
Management fee income
Royalty income
Rental income
From discontinued operation
Sales revenue
Sale of goods
Note 6. Other income
Net gain on disposal of property, plant and equipment
Coal compensation receipts
Sundry income
Net foreign exchange gains
44
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Consolidated
Parent entity
Note 7. Expenses
From continuing operations
Cost of production*
Depreciation
Amortisation
Cost of sales of goods
Corporate administration and fi nance
Marketing and selling including government royalties
Research and technical support
Exploration and evaluation
Expenses, excluding borrowing costs, closure costs and impairment
charges from continuing operations
* Included in 2006 cost of production is $25.0 million (consolidated entity) and $9.4 million
(parent entity) relating to the rehabilitation of iron oxide in tailings dams
2007
$M
592.0
104.8
40.1
736.9
19.5
28.2
9.9
13.8
2006
$M
646.3
85.6
35.6
767.5
25.6
35.5
6.3
12.8
2007
$M
171.2
31.8
12.0
215.0
18.0
9.0
9.9
-
808.3
847.7
251.9
Expenses, excluding borrowing costs, closure costs and impairment
charges from discontinued operation
24.7
27.2
Profi t (loss) before income tax includes the following specifi c expenses:
Florida/Georgia closure costs and impairment charges
Provision for diminution in asset values
Rehabilitation and closure provisions
Total Florida/Georgia closure costs and impairment charges
Western Australian and Murray Basin impairment charges
South West - provision for diminution in asset values
Murray Basin - write-off of assets
Total Western Australian and Murray Basin impairment charges
Total closure costs and impairment charges
Borrowing costs from continuing operations
Interest and fi nance charges paid/payable
Rehabilitation and restoration accretion expense
Amortisation of deferred borrowing costs
Interest capitalised
Borrowing costs expensed from continuing operations
Borrowing costs from discontinued operation
(rehabilitation and restoration accretion expense)
Operating lease expense
Foreign exchange gains and losses
Net foreign exchange gains included in other income
Exchange gains on foreign currency borrowings
Net foreign exchange losses included in corporate costs
Defi ned contribution superannuation expense
Net realisable value of inventories recognised as expense
Employee benefi ts expense
-
-
-
-
-
-
-
43.5
16.6
0.3
-
60.4
0.5
10.9
-
-
(1.1)
(1.1)
15.8
12.3
171.8
27.6
12.3
39.9
60.0
4.6
64.6
104.5
42.1
13.0
0.4
(13.5)
42.0
0.4
15.4
-
-
(2.4)
(2.4)
14.5
0.5
166.8
-
-
-
-
-
-
-
-
42.7
5.6
0.3
-
48.6
-
2.8
5.5
8.0
-
13.5
13.3
6.4
62.0
2006
$M
196.6
27.5
7.4
231.5
19.8
10.5
6.3
-
268.1
-
-
-
-
60.0
-
60.0
60.0
41.4
2.8
0.4
(13.5)
31.1
-
3.6
-
10.5
(0.4)
10.1
14.5
0.5
62.7
Iluka Resources Limited
45
Notes to the Financial Statements
for the year ended 31 December 2007
Note 8. Income tax
(a)
Income tax expense (benefi t)
Current tax
Deferred tax
Under (over) provided in prior years
Income tax expense (benefi t) is attributable to:
Profi t from continuing operations
Profi t from discontinued operations
Aggregate income tax expense (benefi t)
Deferred income tax (revenue) expense included
in income tax expense comprises:
Decrease (increase) in deferred tax assets (Note 19)
(Decrease) increase in deferred tax liabilities (Note 28)
(b) Numerical reconciliation of income tax expense (benefi t)
to prima facie tax payable
Profi t (loss) from continuing operations before income tax expense
Profi t from discontinued operation before income tax expense
Tax at the Australian tax rate of 30% (2006: 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Unfranked dividends received
Tax base of foreign exchange hedge contracts
Net foreign exchange losses
Capital gains shielded by capital losses
Research and development
Other non-deductible / non-assessable items
Benefi t of tax losses not recognised
Difference in overseas tax rates
Under (over) provision in prior years*
Total income tax expense (benefi t)
*
Included in the net over provision of income tax in prior years is an amount of
$1.7 million (2006: $3.7 million) for the consolidated entity relating to additional research
and development deductions identifi ed subsequent to the 31 December 2006 and
31 December 2005 year ends.
(c)
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and
not recognised in net profi t or loss but directly debited or credited to equity
Net deferred tax - debited (credited) directly to equity
(Notes 19 and 28)
46
Annual Report 2007
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
24.4
(4.8)
0.5
20.1
15.5
4.6
20.1
1.5
(6.3)
(4.8)
65.0
15.5
80.5
24.1
-
-
-
(0.5)
(3.5)
0.6
-
20.7
(1.1)
0.5
20.1
35.2
(16.2)
(4.8)
14.2
10.1
4.1
14.2
4.4
(20.6)
(16.2)
32.2
13.5
45.7
13.7
0.9
(0.2)
-
-
(6.1)
0.3
8.5
17.1
1.9
(4.8)
14.2
(17.1)
10.4
(1.9)
(8.6)
(8.6)
-
(8.6)
-
10.4
10.4
(4.7)
-
(4.7)
(1.4)
-
-
(2.2)
-
(3.5)
0.4
-
(6.7)
-
(1.9)
(8.6)
19.2
(32.1)
2.6
(10.3)
(10.3)
-
(10.3)
-
(32.1)
(32.1)
(2.7)
-
(2.7)
(0.8)
-
-
(3.0)
-
(6.0)
-
(3.1)
(12.9)
-
2.6
(10.3)
(8.8)
(1.9)
(7.2)
(5.5)
Notes to the Financial Statements
for the year ended 31 December 2007
Note 8. Income tax (continued)
(d)
Tax losses
Unused capital losses for which no deferred tax asset has been recognised relating to the wholly-owned Australian controlled entities
of approximately $120.0 million (tax at the Australian tax rate of 30%: $36.0 million). The benefi t of these unused capital losses will
only be obtained if these entities derive future assessable income of a nature and amount suffi cient to enable the benefi t to be realised
and these entities continue to comply with the conditions for deductibility imposed by tax legislation and no changes in tax legislation
adversely effect these entities in realising the benefi t from the deduction for the losses.
Unused revenue losses for which no deferred tax asset has been recognised relating to the United States controlled entities of
approximately US$58.7 million (tax at the US tax rate of 20%: US$11.7 million). United States controlled entities are not part of the
Australian tax consolidation group.
(e)
Tax consolidation legislation
Iluka Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1
January 2004. The accounting policy in relation to this legislation is set out in Note 1.
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in
the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity,
Iluka Resources Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Iluka Resources
Limited for any current tax payable assumed and are compensated by Iluka Resources Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Iluka Resources Limited under the tax
consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’
fi nancial 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 fi nancial year. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables
or payables.
Note 9. Discontinued operation
(a) Description
In February 2007, Iluka announced its intention to consider the divestment of its 50 per cent interest in the Narama Coal joint venture.
On 7 August 2007, Iluka announced that it had reached agreement to sell its interest in the joint venture. The interest in the joint venture
was sold on 15 January 2008 with effect from 1 January 2008 and is reported in this fi nancial report as a discontinued operation. The
estimated profi t/gain on sale to be recognised in 2008 is $30.3 million subject to being able to utilise unused capital losses.
Financial information relating to the discontinued operation is set out below. Further information is set out in Note 4 - Segment
Information.
Consolidated
(b)
Financial performance and cash fl ow information
Revenue (Note 5)
Expenses
Profi t before income tax
Income tax expense
Profi t from discontinued operations
Net cash infl ow from operating activities
Net cash outfl ow from investing activities
Net increase in cash generated by the division
2007
$M
40.7
(25.2)
15.5
(4.6)
10.9
21.4
(0.3)
21.1
2006
$M
41.1
(27.6)
13.5
(4.1)
9.4
22.7
(0.9)
21.8
Iluka Resources Limited
47
Notes to the Financial Statements
for the year ended 31 December 2007
Note 9. Discontinued operation (continued)
(c)
Carrying amounts of assets and liabilities
Property, plant and equipment
Trade receivables
Inventories
Total assets
Trade creditors
Provision for rehabilitation and mine closure
Total liabilities
Net assets
Note 10. Current assets - Cash and cash equivalents
Cash at bank and in hand
Deposits at call
Deposits at call
The deposits are bearing fl oating interest rates between 1.7 per cent and
6.8 per cent (2006: 2.8 per cent and 7.0 per cent) on US dollar and
Australian dollar denominated deposits.
Note 11. Current assets - Receivables
Trade receivables
Other debtors
Prepayments
Goods and services tax (GST)
48
Annual Report 2007
Consolidated
2007
$M
2006
$M
26.9
3.0
1.7
31.6
-
(6.8)
(6.8)
29.4
3.6
0.2
33.2
(0.2)
(6.5)
(6.7)
24.8
26.5
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
17.5
2.4
19.9
15.1
2.3
17.4
-
-
-
-
-
-
160.0
14.7
7.7
8.1
190.5
198.5
21.2
7.9
4.6
232.2
33.7
3.9
4.9
2.2
44.7
45.9
3.3
5.2
1.7
56.1
Notes to the Financial Statements
for the year ended 31 December 2007
Note 11. Current assets - Receivables (continued)
(a)
Effective interest rates and credit risk
Information concerning the credit risk of both current and non current receivables is set out in the non current receivables note
(Note 16).
(b)
Foreign exchange and interest rate risk
The carrying amounts of the consolidated entity’s and parent entity’s receivables are denominated in the following currencies:
In millions
US Dollars
Australian Dollars
Euros
Consolidated
Parent Entity
2007
2006
2007
2006
136.0
32.5
1.8
151.2
34.4
2.8
29.0
11.0
0.4
36.1
10.2
0.3
For an analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk refer to Note 3.
(c)
Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is approximate to their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.
The consolidated entity does not hold any collateral as security. Refer to Note 3 for more information on the risk management policy of
the consolidated entity.
Note 12. Current assets - Inventories
Consumable stores
- at cost
Work in progress
- at cost
- at net realisable value
Finished goods
- at cost
- at net realisable value
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
32.9
29.2
8.0
9.8
82.9
19.2
102.1
93.9
91.0
184.9
319.9
133.9
1.8
135.7
82.4
2.1
84.5
249.4
22.4
17.4
39.8
18.9
4.0
22.9
70.7
41.3
1.8
43.1
23.8
1.0
24.8
77.7
Write-downs of inventories to net realisable value recognised as an expense during the year ended 31 December 2007 amounted to $12.3 million (2006: $0.5
million) for the consolidated entity and $6.4 million (2006: $0.5 million) for the parent entity.
Iluka Resources Limited
49
Notes to the Financial Statements
for the year ended 31 December 2007
Note 13. Derivative financial instruments
Current assets
Fair value gain on foreign exchange derivatives
Non-current assets
Fair value gain on foreign exchange derivatives
(a)
Instruments used by the consolidated entity
Consolidated
Parent Entity
2007
$M
7.8
1.0
2006
$M
3.5
1.7
2007
$M
2.1
0.7
2006
$M
-
-
The consolidated entity is party to derivative fi nancial instruments in the normal course of business in order to manage foreign exchange
and interest rate exposures. In accordance with the consolidated entity’s fi nancial risk management policies (refer to Note 3), hedging
of foreign currency exposures is effected through forward exchange contracts and foreign currency options.
(i) Forward exchange contracts and foreign currency options - cash fl ow hedges
Sales revenue of the consolidated entity is mainly denominated in US dollars. Given the predominately Australian dollar cost
base of the business, these US dollar sales create a foreign exchange exposure in terms of earnings and cash fl ow. In order to
protect against this exposure, the consolidated entity has entered into forward exchange contracts and foreign currency options to
forward sell US dollars.
These forward exchange contracts and foreign currency options are hedging highly probable forecast sales over a two year
timeframe. The contracts are timed to mature when receipts from customers are expected to be received.
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in
equity. When the cash fl ows occur, the consolidated entity adjusts the initial measurement of the component recognised in the
balance sheet by the related amount deferred in equity.
Consolidated Entity
The group net asset position of foreign exchange derivatives at 31 December 2007 was $8.8 million (2006: $5.2 million). During the
year ended 31 December 2007, the consolidated entity transferred a total gain of $34.0 million (2006: $28.9 million) to the Income
Statement from equity. This gain predominantly represented the gains attributable to delivered contracts and those relating to
contracts terminated early in August 2006 which were due for delivery in the year.
Parent Entity
The net asset position at 31 December 2007 was $2.8 million (2006: $Nil). During the year ended 31 December 2007, a total of
$26.6 million (2006: $24.6 million) was transferred to the Income Statement from equity.
On 25 August 2006, the parent entity closed out its hedge book. The parent entity reinstated currency hedging activities on 13
December 2007. A profi t of $37.7 million had been generated in the prior period upon closure of the hedge book, and of the balance
deferred in reserves, the remaining $26.6 million has been recognised during 2007 as revenue in line with the delivery dates of the
original contracts.
(b)
Credit risk exposures
The consolidated entity has no signifi cant concentrations of credit risk. Derivative counterparties and cash transactions are limited to
high credit quality fi nancial institutions. The consolidated entity (excluding CRL) has policies that limit the amount of credit exposure to
any one fi nancial institution.
For an analysis of the exposure to credit risk refer to Note 27, and for further information regarding the consolidated entity’s risk
management policy refer to Note 3.
(c)
Interest rate and foreign exchange risk
For an analysis of the sensitivity of derivatives to interest rate and foreign exchange risk refer to Note 3.
50
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 14. Current assets - Current tax assets
Current tax assets
12.7
-
12.4
-
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
The current tax asset has not been offset against the current tax liability as
the respective amounts relate to different group entities where settlement
on a net basis is not possible (Refer Note 26)
Note 15. Current assets - Other
Deferred overburden removal
Note 16. Non-current assets - Receivables
Loans to controlled entities
Prepayments
Other debtors
11.2
17.9
6.7
0.5
-
-
-
-
-
0.2
3.6
3.8
289.2
-
-
289.2
315.0
0.2
-
315.2
(a)
Impaired receivables and receivables past due
None of the non-current receivables are impaired or past due but not impaired.
(b)
Credit risk
The maximum exposure to credit risk at the reporting date is the carrying
amount of each class of receivables mentioned above. The consolidated entity
does not hold any collateral as security. Refer to Note 3 for more information
on the risk management policy of the consolidated entity.
Note 17. Non-current assets - Other financial assets
Retirement benefi ts surplus (Note 35)
Shares in controlled entities (Note 39)
1.2
-
1.2
1.2
-
1.2
-
849.2
849.2
-
849.2
849.2
Iluka Resources Limited
51
Notes to the Financial Statements
for the year ended 31 December 2007
Note 18. Non-current assets - Property, plant and equipment
Land &
Buildings
$M
Plant,
Machinery &
Equipment
Mine
Reserves &
Development
Exploration &
Evaluation
Project
Development
Expenditure
$M
$M
$M
$M
86.7
(18.4)
68.3
68.3
6.5
(6.6)
-
(8.0)
(0.9)
(0.2)
6.5
65.6
87.7
(22.1)
65.6
65.6
9.2
(4.6)
-
(1.1)
(0.1)
5.1
74.1
88.9
(14.8)
74.1
1,235.3
(655.5)
579.8
579.8
74.0
(0.4)
-
(73.1)
(77.8)
(7.7)
152.0
646.8
1,384.2
(737.4)
646.8
646.8
49.2
(0.2)
-
(91.2)
(5.8)
155.4
754.2
657.3
(334.6)
322.7
322.7
32.8
-
-
(11.1)
(40.7)
(0.4)
3.8
307.1
680.6
(373.5)
307.1
307.1
54.0
-
-
(51.0)
(0.5)
42.9
352.5
1,539.9
(785.7)
754.2
773.9
(421.4)
352.5
58.9
-
58.9
58.9
7.0
-
(1.7)
-
-
-
(4.5)
59.7
59.7
-
59.7
59.7
5.5
-
(1.1)
-
-
(37.4)
26.7
26.7
-
26.7
Total
$M
2,363.5
(1,060.5)
1,303.0
1,303.0
193.3
(7.0)
(1.7)
(92.2)
(119.5)
(8.3)
(1.3)
1,266.3
2,450.6
(1,184.3)
1,266.3
1,266.3
135.7
(4.8)
(1.1)
(143.3)
(6.4)
-
325.3
(52.0)
273.3
273.3
73.0
-
-
-
(0.1)
-
(159.1)
187.1
238.4
(51.3)
187.1
187.1
17.8
-
-
-
-
(166.0)
38.9
1,246.4
38.9
-
38.9
2,468.3
(1,221.9)
1,246.4
Consolidated
At 1 January 2006
Cost
Accumulated depreciation
Net written down value
Year ended 31 December 2006
Opening written down value
Additions
Disposals
Write-off of exploration expenditure
Write-offs and impairment charges
Depreciation/amortisation expense
Foreign currency exchange differences
Transfers/reclassifi cations
Closing written down value
At 31 December 2006
Cost
Accumulated depreciation*
Net written down value
Year ended 31 December 2007
Opening written down value
Additions
Disposals
Write-off of exploration expenditure
Depreciation/amortisation expense
Foreign currency exchange differences
Transfers/reclassifi cations
Closing written down value
At 31 December 2007
Cost
Accumulated depreciation*
Net written down value
* Includes impairment charges.
52
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 18. Non-current assets - Property, plant and equipment (continued)
Parent Entity
At 1 January 2006
Cost
Accumulated depreciation
Net written down value
Year ended 31 December 2006
Opening written down value
Additions
Disposals
Depreciation/amortisation expense
Impairment charges
Closing written down value
At 31 December 2006
Cost
Accumulated depreciation
Net written down value
Year ended 31 December 2007
Opening written down value
Additions
Disposals
Depreciation/amortisation expense
Transfers/reclassifi cations
Closing written down value
At 31 December 2007
Cost
Accumulated depreciation*
Net written down value
* Includes impairment charges
38.0
(4.8)
33.2
33.2
6.8
(0.3)
(0.2)
(8.0)
31.5
44.7
(13.2)
31.5
31.5
9.0
(4.0)
(0.1)
-
36.4
41.2
(4.8)
36.4
Land &
Buildings
$M
Plant,
Machinery &
Equipment
Mine
Reserves &
Development
$M
$M
Total
$M
560.4
(286.2)
274.2
274.2
49.2
(0.6)
(34.9)
(60.0)
227.9
608.9
(381.0)
227.9
227.9
64.1
(4.1)
(43.8)
2.1
246.2
430.0
(216.4)
213.6
213.6
20.8
(0.3)
(23.0)
(45.5)
165.6
449.9
(284.3)
165.6
165.6
7.2
(0.1)
(22.7)
21.5
171.5
92.4
(65.0)
27.4
27.4
21.6
-
(11.7)
(6.5)
30.8
114.3
(83.5)
30.8
30.8
47.9
-
(21.0)
(19.4)
38.3
455.5
140.1
636.8
(284.0)
(101.8)
(390.6)
171.5
38.3
246.2
Iluka Resources Limited
53
Notes to the Financial Statements
for the year ended 31 December 2007
Note 18. Non-current assets - Property, plant and equipment (continued)
Mine reserves and development
Included in mine reserves and development are amounts totalling $229.8 million for the consolidated entity and $19.0 million for the parent
entity (2006: $164.7 million and $21.8 million respectively) which have not been depreciated as mining of the related area of interest has not
yet commenced.
Plant, machinery and equipment
Included in plant, machinery and equipment are amounts totalling $25.7 million for the consolidated entity and $7.8 million for the parent
entity (2006: $39.8 million and $17.2 million respectively) which relate to assets under construction. These amounts are not currently being
depreciated as the assets are not ready for use.
Project development expenditure
Project development expenditure at 31 December 2007 comprises $11.9 million relating to Murray Basin Stage 2 and $27.0 million relating to
the Jacinth-Ambrosia project. These amounts were not depreciated as the projects had not been commissioned.
Non-current assets pledged as security
Refer to Note 27 for information on non-current assets pledged as security by the parent entity or its controlled entities.
Note 19. Non-current assets - Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profi t or loss
Employee benefi ts
Rehabilitation provisions
Other provisions
Borrowing expenses
Accruals
Tax revenue losses*
Other
Amounts recognised directly in equity
Cash fl ow hedges
Set-off of deferred tax liabilities pursuant to set-off provisions (Note 28)
Net deferred tax assets
Movements:
Opening balance at 1 January
Credited (charged) to the income statement (Note 8)
Over (under) provision in prior years
Credited (charged) directly to equity (Note 31)
Closing balance at 31 December
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
10.9
85.7
4.8
3.8
1.4
5.0
-
111.6
(1.8)
(99.9)
9.9
14.9
(1.5)
(2.2)
(1.3)
9.9
8.0
73.9
6.2
-
1.9
4.2
1.3
95.5
-
(80.6)
14.9
22.6
(4.4)
0.3
(3.6)
14.9
3.6
28.7
0.8
-
0.6
-
-
33.7
3.6
21.8
0.7
-
1.1
-
-
27.2
-
(33.7)
-
(27.2)
-
-
-
-
-
-
-
-
-
-
-
-
* The balance is attributable to carried forward US tax losses which are probable of recoupment in ensuing years.
54
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 20. Non-current assets - Intangible assets
Consolidated
At 1 January 2006
Cost
Accumulated amortisation
Net written down value
Year ended 31 December 2006
Opening written down value
Amortisation charge
Closing written down value
At 31 December 2006
Cost
Accumulated amortisation
Net written down value
Year ended 31 December 2007
Opening written down value
Amortisation charge
Closing written down value
At 31 December 2007
Cost
Accumulated amortisation
Net written down value
Patents,
trademarks &
licences
$M
Royalty
entitlement
asset
$M
17.2
(7.8)
9.4
9.4
(1.3)
8.1
17.2
(9.1)
8.1
8.1
(1.2)
6.9
17.2
(10.3)
6.9
10.0
(0.9)
9.1
9.1
(0.4)
8.7
10.0
(1.3)
8.7
8.7
(0.4)
8.3
10.0
(1.7)
8.3
Total
$M
27.2
(8.7)
18.5
18.5
(1.7)
16.8
27.2
(10.4)
16.8
16.8
(1.6)
15.2
27.2
(12.0)
15.2
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
Note 21. Non-current assets - Inventories
Consumable stores
- at cost
Note 22. Non-current assets - Other
-
5.5
Deferred overburden
0.7
0.7
-
-
2.7
-
Iluka Resources Limited
55
Notes to the Financial Statements
for the year ended 31 December 2007
Note 23. Current liabilities - Payables
Trade payables
Accrued expenses
Annual leave accruals
Other payables
(a)
Foreign currency risk
The carrying amounts of the consolidated entity’s and parent entity’s
trade and other payables are denominated in the following currencies:
In millions
US Dollars
Australian Dollars
For an analysis of the sensitivity of trade and other payables to foreign
currency risk refer to Note 3.
Note 24. Current liabilities - Interest-bearing liabilities
Secured
Bank loans
Total secured interest-bearing liabilities
Unsecured
Bank loans
Trade fi nance facility
Receivables acquisition facility
Senior notes 1996
Total unsecured interest-bearing liabilities
Further details of the security relating to each of the secured liabilities and
further information on the bank overdrafts and bank loans are set out in Note 27.
(a) Risk Exposures
Details of the consolidated entity’s exposure to interest rate changes on
interest-bearing liabilities are set out in Note 27.
Note 25. Current liabilities - Provisions
Employee benefi ts
Rehabilitation and mine closure
Other provisions
Movements in each class of provision during the current fi nancial year, other
than employee benefi ts, are set out in Note 29.
Note 26. Current liabilities - Current tax liabilities
Income tax
Consolidated
Parent Entity
2007
$M
40.3
59.6
13.2
-
2006
$M
56.6
64.0
12.7
0.1
113.1
133.4
2007
$M
8.4
20.1
5.4
-
33.9
2006
$M
11.2
25.4
5.3
-
41.9
14.4
96.1
14.6
115.0
1.4
31.9
1.5
40.1
-
-
51.3
77.1
68.1
34.2
230.7
230.7
5.5
5.5
56.9
63.0
68.6
-
188.5
194.0
-
-
51.3
77.1
68.1
34.2
230.7
230.7
-
-
56.9
63.0
68.6
-
188.5
188.5
13.8
38.8
2.6
55.2
10.8
45.7
1.4
57.9
5.7
8.7
2.5
16.9
4.5
13.5
0.9
18.9
8.3
19.4
-
8.6
The current tax liability has not been offset against the current tax asset as the respective amounts relate to different group entities where
settlement on a net basis is not possible (Refer Note 14)
56
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Consolidated
Parent Entity
Note 27. Non-current liabilities - Interest-bearing liabilities
Bank loans
Senior notes 1996
Senior notes 2003
Bilateral loan notes
Deferred borrowing costs
2007
$M
2006
$M
2007
$M
121.7
34.2
142.3
90.1
(1.0)
387.3
102.0
75.9
142.3
101.0
(1.3)
419.9
121.7
34.2
142.3
90.1
(1.0)
387.3
(a)
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Senior Notes - 1996 (i)
Senior Notes - 2003 (ii)
Syndicated Loan Note Facility (iii)
Trade Finance Facility (iv)
Bilateral Loan Note Facility (v)
Receivables Acquisition Facility (vi)
Short Term Loan (vii)
CRL Syndicated Revolving Loan Credit Facility (viii)
CRL Secured Working Capital Facility (ix)
CRL Secured Bank Overdraft Facility (x)
Used at balance date
Senior Notes - 1996 (i)
Senior Notes - 2003 (ii)
Syndicated Loan Note Facility (iii)
Trade Finance Facility (iv)
Bilateral Loan Note Facility (v)
Receivables Acquisition Facility (vi)
Short Term Loan (vii)
CRL Secured Working Capital Facility (ix)
Unused at balance date
Syndicated Loan Note Facility (iii)
Trade Finance Facility (iv)
Bilateral Loan Note Facility (v)
Receivables Acquisition Facility (vi)
CRL Syndicated Revolving Loan Credit Facility (viii)
CRL Secured Working Capital Facility (ix)
CRL Secured Bank Overdraft Facility (x)
68.4
142.3
148.3
85.0
91.3
68.3
51.3
15.0
10.0
0.5
680.4
68.4
142.3
121.7
77.1
90.1
68.1
51.3
-
619.0
26.6
7.9
1.2
0.2
15.0
10.0
0.5
61.4
75.9
142.3
164.4
85.0
101.2
75.9
56.9
15.0
10.0
0.5
727.1
75.9
142.3
102.0
63.0
101.0
68.6
56.9
5.5
615.2
62.4
22.0
0.2
7.3
15.0
4.5
0.5
111.9
68.4
142.3
148.3
85.0
91.3
68.3
51.3
-
-
-
654.9
68.4
142.3
121.7
77.1
90.1
68.1
51.3
-
619.0
26.6
7.9
1.2
0.2
-
-
-
35.9
2006
$M
102.0
75.9
142.3
101.0
(1.3)
419.9
75.9
142.3
164.4
85.0
101.2
75.9
56.9
-
-
-
701.6
75.9
142.3
102.0
63.0
101.0
68.6
56.9
-
609.7
62.4
22.0
0.2
7.3
-
-
-
91.9
Iluka Resources Limited
57
Notes to the Financial Statements
for the year ended 31 December 2007
Note 27. Non-current liabilities - Interest-bearing liabilities (continued)
(i) Senior Notes 1996 Series
The remaining tranches mature in: December 2008 US$30.0 million and December 2011 US$30.0 million. As at 31 December 2007,
US$60.0 million at an average interest rate of 7.6 per cent was outstanding on the Senior Notes (2006: US$60.0 million at 7.6
per cent).
(ii) Senior Notes 2003 Series
The Senior Notes - 2003 Series mature in three tranches being June 2010 US$40.0 million, June 2013 US$40.0 million and June
2015 US$20.0 million. As at 31 December 2007, US$100.0 million at an interest rate of 5.1 per cent was outstanding on the Senior
Notes (2006: US$100.0 million at 5.1 per cent).
The translation exposure on these notes has been eliminated through a series of cross currency swap transactions. On maturity of
the notes the principal repayments are fi xed at an exchange rate of AUD/USD 0.7025.
The swaps also convert the fi xed USD interest payments on the notes to an AUD variable interest rate exposure. As at 31
December 2007, the cross currency swaps bear an average interest rate of 7.9 per cent (2006: 6.9 per cent).
(iii) Syndicated Loan Note Facility*
The Syndicated Loan Note Facility has a limit of US$130.0 million and maturity date of December 2009. As at 31 December 2007,
US$12.0 million and A$108.0 million at average interest rates of 5.3 per cent and 7.7 per cent respectively was outstanding under
this agreement (2006: A$102.0 million at 7.0 per cent).
(iv) Trade Finance Facility*
The Trade Finance Facility has a facility limit of A$85.0 million and during the year its maturity date was extended to February 2008.
As at 31 December 2007, US$22.0 million and A$52.0 million was outstanding under this facility at interest rates of 5.1 per cent
and 7.6 per cent respectively (2006: US$17.0 million and A$41.5 million at 5.6 per cent and 6.6 per cent respectively). Subsequent
to year end the maturity was extended to 30 April 2008 and the facility limit reduced to A$80.0 million.
(v) Bilateral Loan Note Facilities*
Bilateral Loan Note Facilities with two separate fi nanciers for US$40.0 million each mature in March 2010. As at 31 December
2007, A$90.1 million at an average interest rate of 7.5 per cent was outstanding under these agreements (2006: A$101.0 million at
6.8 per cent).
(vi) Receivables Acquisition Facility**
The Receivables Acquisition Agreement has a facility limit of US$60.0 million and has a maturity date of March 2008. As at 31
December 2007, US$59.7 million was outstanding under this agreement at an interest rate of 5.25 per cent (2006: US$54.3 million
at 5.6 per cent). Subsequent to year end the maturity was extended to 30 April 2008.
(vii) Short Term Loan*
The Short Term Loan Agreement has a facility limit of US$45.0 million and during the year its maturity date was extended February
2008. As at 31 December 2007, A$51.3 million at an interest rate of 7.5 per cent was outstanding under this (2006: US$45.0 million
at 5.6 per cent). Subsequent to year end the maturity was extended to 30 April 2008.
(viii) CRL Syndicated Revolving Loan Credit Facility
The Revolving Loan Credit Facility has a limit of A$15.0 million, and as at 31 December 2007 the facility was undrawn (2006: $Nil).
(ix) CRL Secured Working Capital Facility
During the year, A$10.0 million Working Capital Facility was extended for a further 12 months to July 2008. As at 31 December
2007 the facility was undrawn (2006: A$5.5 million at 6.6 per cent).
(x) CRL Secured Bank Overdraft Facility
The Bank Overdraft Facility has a limit of A$0.5 million, and at balance date this facility has not been used (2006: $Nil).
* Subsequent to year end the company has entered into a new A$445 million Syndicated Term Loan Facility (STLF) which will replace these facilities.
** Subsequent to year end the facility limit has been reduced to A$55 million and together with the A$445 million STLF referred to above forms a new A$500 million debt facility
package.
58
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 27. Non-current liabilities -
Interest-bearing liabilities (continued)
Consolidated
Parent Entity
Notes
2007
$M
2006
$M
2007
$M
2006
$M
(b) Assets pledged as security
The carrying amounts of assets pledged as security are against the CRL Secured Facility:
Cash and cash equivalents
Current receivables
Inventories
Property, plant and equipment
Total assets pledged as security
(c)
Interest rate risk exposure
10
11
12
18
4.2
22.7
23.7
107.9
158.5
1.7
29.1
18.8
110.8
160.4
-
-
-
-
-
-
-
-
-
-
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of fi nancial liabilities is set out
in the table below. Exposures arise predominantly from liabilities bearing variable interest rates as the consolidated entity intends to hold fi xed rate
liabilities to maturity.
Fixed interest rate
Floating
interest rate
$M
-
408.3
142.3
550.6
-
397.0
142.3
539.3
1 year
or less
$M
-
34.2
-
34.2
-
-
-
-
1 to 5
years
$M
-
91.1
(56.9)
34.2
-
132.8
(56.9)
75.9
More than
5 years
Non-interest
bearing
$M
-
85.4
(85.4)
-
-
85.4
(85.4)
-
$M
113.1
-
-
113.1
133.4
-
-
133.4
Total
$M
113.1
619.0
-
732.1
133.4
615.2
-
748.6
2007
Payables (Note 23)
Interest-bearing liabilities*
(Notes 24 and 27)
Interest rate swaps**
2006
Payables (Note 23)
Interest-bearing liabilities*
(Notes 24 and 27)
Interest rate swaps**
*
Excludes deferred borrowing costs
** Notional principal amounts
(d) Risk exposures
The exposure of the consolidated entity’s and parent entity’s borrowings to interest rate
changes and the contractual repricing dates at the balance dates are as follows:
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Australian dollar
US dollar
Consolidated
Parent Entity
2007
$M
196.5
121.7
147.0
85.4
550.6
301.4
253.7
2006
$M
125.4
68.6
259.9
85.4
593.3
250.0
276.3
2007
$M
2006
$M
196.5
121.7
147.0
85.4
550.6
301.4
253.7
119.9
68.6
259.9
85.4
533.3
244.5
276.3
For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to Note 3.
Iluka Resources Limited
59
Notes to the Financial Statements
for the year ended 31 December 2007
Note 28. Non-current liabilities - Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profi t or loss
Depreciation/amortisation
Mining capital expenditure
Foreign currency exchange
Other
Receivables
Inventory
Amounts recognised directly in equity
Cash fl ow hedges
Set-off of deferred tax liabilities pursuant to set-off provisions (Note 19)
Net deferred tax liabilities
Movements:
Opening balance at 1 January
Charged/(credited) to the income statement (Note 8)
Charged/(credited) to equity (Notes 8 and 31)
Under provision in prior years
Closing balance at 31 December
Note 29. Non-current liabilities - Provisions
Employee benefi ts
Rehabilitation and mine closure
Other provisions
Consolidated
Parent Entity
2007
$M
2006
$M
2007
$M
2006
$M
118.2
7.2
3.6
1.3
3.3
10.2
143.8
0.8
144.6
(99.9)
44.7
56.8
(6.3)
(10.1)
4.3
44.7
4.7
265.6
-
270.3
106.3
11.3
1.9
1.0
5.3
10.0
135.8
1.6
137.4
(80.6)
56.8
81.1
(20.6)
(5.5)
1.8
56.8
6.6
252.2
1.1
259.9
33.2
2.2
3.7
0.2
0.1
2.5
41.9
0.8
42.7
26.2
0.8
3.2
-
0.1
3.0
33.3
-
33.3
(33.7)
9.0
(27.2)
6.1
6.1
10.4
(7.2)
(0.3)
9.0
1.0
87.0
-
88.0
35.6
(32.1)
(5.5)
8.1
6.1
2.1
72.0
0.9
75.0
60
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 29. Non-current liabilities - Provisions (continued)
Movements in each class of provision during the current fi nancial year, other than employee entitlements, are set out below:
Consolidated - 2007
Carrying amount at start of year
Additional provisions recognised
Payments
Rehabilitation and restoration accretion expense
Foreign exchange rate movements
Unused amounts reversed
Carrying amount at end of year
Parent Entity - 2007
Carrying amount at start of year
Additional provisions recognised
Payments
Rehabilitation and restoration accretion expense
Unused amounts reversed
Carrying amount at end of year
Rehabilitation and
mine closure
Other
provisions
$m
$m
297.9
24.0
(30.4)
16.6
(3.7)
-
304.4
85.5
13.9
(9.3)
5.6
-
95.7
2.5
1.6
(0.6)
-
-
(0.9)
2.6
1.8
1.6
-
-
(0.9)
2.5
Movement in rehabilitation and mine closure provisions and other provisions represents an aggregate of current and non-current balances.
Note 30. Contributed equity
(a)
Share Capital
Ordinary shares
Issued and paid up capital
(b) Movements in Ordinary Share Capital
Date
Details
1 January 2006
Opening balance
31 December 2006
Balance
1 January 2007
Opening balance
7 May 2007
7 May 2007
7 May 2007
19 October 2007
19 October 2007
Dividend Reinvestment Plan issue to shareholders
Dividend Reinvestment Plan issue to underwriter
Transaction costs arising on share issue
Dividend Reinvestment Plan issue to shareholders
Dividend Reinvestment Plan issue to underwriter
31 December 2007
Balance
Parent entity
Parent entity
2007
Number of
shares
2006
Number of
shares
2007
2006
Paid up value Paid up value
$M
$M
242,237,328
232,914,349
662.6
611.0
Number of shares
Issue price
232,914,349
232,914,349
232,914,349
1,222,687
3,637,993
-
1,017,118
3,445,181
242,237,328
$5.68
$5.77
$5.27
$5.35
$M
611.0
611.0
611.0
6.9
21.0
(0.1)
5.4
18.4
662.6
Iluka Resources Limited
61
Notes to the Financial Statements
for the year ended 31 December 2007
Note 30. Contributed equity (continued)
(c) Ordinary shares
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. On a show of hands 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.
(d) Dividend reinvestment plan
The Company has established a fully underwritten dividend reinvestment plan under which eligible holders of ordinary shares can
elect to have all or part of their dividend entitlements satisfi ed by the issue of new ordinary shares rather than by being paid in cash.
Shares are issued under the plan at a discount to the market price of 2.5 per cent and 1.0 per cent to shareholders and the underwriter
respectively.
In respect of the fi nal dividend distributed on 7 May 2007, 1,222,687 shares were issued to shareholders at a price of $5.68 per share. A
further 3,637,993 shares were issued to the underwriter at a price of $5.77 per share. Issue costs relating to the issue of shares under
the dividend reinvestment plan totalled $0.1 million. In respect of the interim dividend on 19 October 2007, 1,017,118 shares were
issued to shareholders at a price of $5.27 per share. A further 3,445,181 shares were issued to the underwriter at a price of $5.35 per
share.
(e)
Capital risk management
The consolidated entity’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going
concern, so that they can continue to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity monitors capital on the basis of the gearing ratio and the level of net debt. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as total borrowings (including ‘interest-bearing liabilities’ as shown in the balance sheet)
less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet (including minority interest) plus net
debt. The consolidated entity manages net debt on a group basis with all debt being drawn by the parent entity. All debt (excluding the
specifi c CRL facilities described in Note 27) is under the terms of the various bank facilities. Net debt and gearing for the parent entity
are therefore not considered appropriate measures and therefore not reported.
The gearing ratios at 31 December 2007 and 31 December 2006 were as follows:
Total borrowings*
Less: cash and cash equivalents (Note 10)
Net debt
Total equity
Gearing ratio
*
Excludes deferred borrowing costs
62
Annual Report 2007
Consolidated
2007
$M
619.0
(19.9)
599.1
2006
$M
615.2
(17.4)
597.8
751.6
716.5
44.3%
45.4%
Notes to the Financial Statements
for the year ended 31 December 2007
Note 31. Reserves and retained profits
(a) Reserves
Asset revaluation reserve
Hedging reserve - cash fl ow hedges
Employee share options reserve
Foreign currency translation reserve
Share-based payments reserve
Defi ned benefi t superannuation reserve
Movements:
Asset revaluation reserve
Balance 1 January
Transfer to asset realisation reserve
Transfer to retained earnings
Balance 31 December
Asset realisation reserve
Balance 1 January
Transfer from asset revaluation reserve
Transfer to retained earnings
Balance 31 December
Hedging reserve - cash fl ow hedges
Balance 1 January
Revaluation, net of tax
Hedge assets recognised
Transfer to net profi t, net of tax
Attributable to minority interest
Balance 31 December
Employee options reserve
Balance 1 January
Balance 31 December
Foreign currency translation reserve
Balance 1 January
Currency translation differences arising during the year
Balance 31 December
Share-based payments reserve
Balance 1 January
Recognition of the fair value of equity instruments granted to employees
Balance 31 December
Defi ned benefi t superannuation reserve
Balance 1 January
Decrease for the year
Balance 31 December
Consolidated
Parent Entity
2007
$M
17.6
4.1
0.2
1.7
0.5
(0.3)
23.8
18.9
-
(1.3)
17.6
-
-
-
-
20.5
3.0
1.9
(21.0)
(0.3)
4.1
0.2
0.2
(1.5)
3.2
1.7
1.7
(1.2)
0.5
(0.1)
(0.2)
(0.3)
2006
$M
18.9
20.5
0.2
(1.5)
1.7
(0.1)
39.7
20.3
(1.4)
-
18.9
4.7
1.4
(6.1)
-
31.4
7.3
-
(17.8)
(0.4)
20.5
0.2
0.2
(0.9)
(0.6)
(1.5)
1.5
0.2
1.7
-
(0.1)
(0.1)
2007
$M
18.6
1.9
0.2
-
0.3
-
21.0
19.3
-
(0.7)
18.6
-
-
-
-
18.6
-
1.9
(18.6)
-
1.9
0.2
0.2
-
-
-
1.7
(1.4)
0.3
-
-
-
2006
$M
19.3
18.6
0.2
-
1.7
-
39.8
20.7
(1.4)
-
19.3
1.2
1.4
(2.6)
-
30.0
4.6
-
(16.0)
-
18.6
0.2
0.2
-
-
-
1.5
0.2
1.7
-
-
-
Iluka Resources Limited
63
Notes to the Financial Statements
for the year ended 31 December 2007
Note 31. Reserves and retained profits (continued)
(b) Retained profi ts
Movements in retained profi ts were as follows:
Balance 1 January
Net profi t for the year
Dividends
Transfer from asset revaluation/asset realisation reserve
Balance 31 December
(c) Nature and purpose of reserves
(i) Asset revaluation reserve
Consolidated
Parent entity
2007
$M
2006
$M
2007
$M
2006
$M
(3.5)
51.1
(51.7)
1.3
(2.8)
20.6
21.0
(51.2)
6.1
(3.5)
119.6
3.9
(51.7)
0.7
72.5
160.6
7.6
(51.2)
2.6
119.6
The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets, as described
in Note 1(o). Transfers are made to retained earnings on disposal of previously revalued assets. The balance standing to the credit
of the reserve may be used to satisfy the distribution of bonus shares to shareholders and is only available for the payment of cash
dividends in limited circumstances as permitted by law.
(ii) Asset realisation reserve
This reserve records the amount of asset revaluation reserve relating to disposed assets which is now available for distribution to
shareholders. The balance of this reserve was transferred to retained earnings at 31 December 2006 as the reserve is considered
available for distribution to shareholders.
(iii) Hedging reserve - cash fl ow hedges
The hedging reserve is used to record gains or losses (net of tax) on a hedging instrument in a cash fl ow hedge that are recognised
directly in equity, as described in Note 1(m). Amounts are recognised in profi t and loss when the associated hedged transaction
affects profi t and loss.
(iv) Employee share options reserve
The employee share options reserve is used to recognise the fair value of options issued but not exercised.
(v) Foreign currency translation reserve
Exchange differences arising on translation of the net investment in foreign operations, including US dollar denominated debt used
as a hedge of the net investment, are taken to the foreign currency translation reserve net of applicable income tax, as described
in Note 1(d). The reserve is recognised in profi t and loss when the net investment is disposed of.
(vi) Employee share-based payments reserve
The employee share-based payments reserve is used to recognise the fair value of equity instruments granted but not yet issued to
employees under the group’s various equity based incentive schemes. Refer Note 45.
(vii) Defi ned benefi t superannuation reserve
The defi ned benefi t superannuation reserve represents the actuarial gains and losses of the net position of the defi ned benefi t
superannuation plans not yet recognised through the Income Statement. Refer Note 45.
64
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 32. Dividends
(a) Ordinary shares
Final dividend for the year ended 31 December 2006 of 12 cents fully franked
(2005: 12 cents partly franked to 9.6 cents at 30 per cent) per fully paid share
Paid in cash
Satisfi ed by issue of shares
Interim dividend for the year ended 31 December 2007 of 10 cents fully franked
(2006: 10 cents fully franked) per fully paid share
Paid in cash
Satisfi ed by issue of shares
(b) Dividends not recognised at year-end
Parent entity
2007
$M
2006
$M
21.0
6.9
18.4
5.4
51.7
27.9
-
23.3
-
51.2
The Directors have not declared a fi nal dividend (2006: 12 cents fully franked per fully paid ordinary share).
The aggregate amount of the dividend not recognised as a liability at year-end, is
-
27.9
(c)
Franked dividends
Franking credits available for subsequent fi nancial years based on a
tax rate of 30 per cent (2006: 30 per cent)
9.2
20.0
(3.6)
8.6
Consolidated
Parent entity
2007
$M
2006
$M
2007
$M
2006
$M
The above amounts represent the balance of the franking account as at the end of the fi nancial year, adjusted for franking credits that
will arise from the payment of the amount of the provision for income tax or receipt of income tax receivable.
The franking credits available to the consolidated entity include $8.5 million (2006: $11.0 million) for the Consolidated Rutile Limited
group and $4.2 million (2006: $0.4 million) attributable to Ashton Coal Interests Pty Limited. Distribution of franking credits by the
parent entity is subject to receipt of fully franked dividends from Consolidated Rutile Limited which was 51.04 per cent owned by the
parent entity at 31 December 2007 (2006: 51.04 per cent) and Ashton Coal Interests Pty Limited of which the parent entity owns 93.3
per cent (2006: 93.3 per cent). There will be no impact on the franking account as no dividend was recommended since year-end (2006:
$12.0 million reduction in the franking account).
Iluka Resources Limited
65
Notes to the Financial Statements
for the year ended 31 December 2007
Note 33. Key management personnel
Key Management Personnel
Key Management Personnel of the consolidated entity comprise Directors of Iluka Resources Limited as well as other specifi c employees of the
consolidated entity who met the following criteria: ‘personnel who have authority and responsibility for planning, directing and controlling the
activities of the consolidated entity, either directly or indirectly.’
The Key Management Personnel for the parent entity are the same as for the consolidated entity. Therefore, disclosure and balances in this
Note relate to both the parent entity and the consolidated entity.
Key Management Personnel – Directors
The following persons were Directors of Iluka Resources Limited during the fi nancial year:
(i) Non-executive Directors
G Campbell
V Davies
R Every (Deputy Chairman)
I Mackenzie (Chairman)
D Morley
G Pizzey
G Rezos
(ii) Managing Director and Chief Executive Offi cer
D Robb
All other above persons were Directors of Iluka Resources Limited for all of the fi nancial year, as well as for the fi nancial year ended 31
December 2006, except D A Robb who was appointed as Managing Director on 18 October 2006 and G A Rezos who was appointed as a
Director on 20 June 2006. R A Tastula and W H J Barr were Directors until their retirement on 11 May 2006.
Key Management Personnel - Employees other than Directors (‘The Executives’)
In addition to the Directors of the consolidated entity, the following employees met the defi nition of Key Management Personnel for the year
ended 31 December 2007:
M Adams
P Beilby
P J Benjamin
D Calhoun1
D Grant2
V Hugo
D McMahon3
H Umlauff
C Wilson
General Manager Western Region
General Manager Murray Basin
General Manager Exploration & Geology
Executive General Manager People and Communities
Chief Financial Offi cer
General Manager Sales and Marketing
Chief Financial Offi cer
General Manager SA Development & Project Management
General Manager Corporate Services & Company Secretary
1
2
3
D Calhoun ceased employment 30 November 2007.
D Grant ceased employment 16 February 2007.
D McMahon appointed as an Executive 29 January 2007 and ceased employment 17 January 2008.
66
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 33. Key management personnel (continued)
For the remainder of this Note, Key Management Personnel other than Directors of the consolidated entity are referred to as ‘Executives’.
The above persons were also Executives during the year ended 31 December 2006, except:
-
-
-
-
-
M Adams, appointed as an Executive 1 January 2007.
P Beilby, appointed as an Executive 1 January 2007.
P Benjamin, appointed as an Executive 24 May 2006.
V Hugo, appointed as an Executive 21 February 2006.
H Umlauff, appointed as Executive 9 May 2006.
The following persons were also Executives during the year ended 31 December 2006:
-
-
-
S Ward, ceased employment as Executive General Manager Sales & Marketing on 10 February 2006.
M Bourke, ceased employment as Executive General Manager Technical Services on 3 March 2006.
W Bisset, ceased employment as Executive General Manager Global Operations on 31 December 2006.
Key Management Personnel Compensation (Consolidated and Parent Entity)
Short Term Benefi ts
$
Post Employment Benefi ts
$
Share Based Payments
$
Termination Benefi ts
$
TOTAL
$
2007
Non-Executive Directors
Executive Directors
Executives
TOTAL
2006
Non-Executive Directors
Executive Directors
Executives
TOTAL
880,736
1,255,076
3,397,209
5,533,021
712,959
1,810,996
2,903,918
5,427,873
75,116
90,826
298,927
464,869
170,448
32,783
202,921
406,152
-
354,485
455,655
810,140
-
(222,175)
4,633
(217,542)
-
-
497,923
497,923
-
1,009,398
1,403,083
2,412,481
955,852
1,700,387
4,649,714
7,305,953
883,407
2,631,002
4,514,555
8,028,964
The company has taken advantage of the relief provided by the Corporations Regulation 2M.6.04 and has transferred the detailed remuneration
and shareholding disclosures to the directors’ report. The relevant information can be found in the remuneration report on pages 8 to 18.
Loans to Key Management Personnel
No loans existed at the commencement of the year and no loans were made during the year ended 31 December 2007.
Other Transactions with Key Management Personnel
There were no transactions which occurred between the consolidated entity and Key Management Personnel that were outside of the nature
described below:
(a)
(b)
Occurrence was within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those
it is reasonable to expect the consolidated entity would have adopted if dealing at arms length with an unrelated individual;
Information about these transactions does not have the potential to adversely affect decisions about the allocation of scarce
resources made by users of the fi nancial report, or the discharge of accountability by the Key Management Personnel; and
(c)
The transactions are trivial or domestic in nature.
Therefore, specifi c details of other transactions with Key Management Personnel are not disclosed.
Iluka Resources Limited
67
Notes to the Financial Statements
for the year ended 31 December 2007
Note 34. Remuneration of auditors
During the year the following fees were paid or payable for services provided
by the auditor of the parent entity, its related practices and non related audit fi rms:
(a) Assurance services
Audit and audit related services
Fees paid to PricewaterhouseCoopers:
PwC Australia
Other PwC fi rms
Total remuneration for audit services
Other assurance services
PwC Australia
Consolidated
Parent entity
2007
$
2006
$
2007
$
2006
$
807,610
60,400
868,010
755,020
63,000
818,020
635,000
607,000
-
-
635,000
607,000
24,884
-
24,884
-
Total remuneration for assurance services
892,894
818,020
659,884
607,000
(b)
Taxation services
Fees paid to PricewaterhouseCoopers:
PwC Australia
Other PwC fi rms
Total remuneration for taxation services
Note 35. Retirement benefit obligations
(a)
Superannuation plans
21,000
33,360
54,360
71,220
9,333
80,553
21,000
71,220
-
-
21,000
71,220
Australia
All employees of the consolidated entity who do not elect an alternate fund under the Superannuation Fund Choice Legislation are
entitled to benefi ts from the Iluka Section of the ING Master Trust (“Master Trust”) on retirement, disability or death. The consolidated
entity only provides superannuation through the Master Trust. The vast majority of members are entitled to accumulation benefi ts only
in the Master Trust. The Master Trust also provides defi ned lump sum and pension benefi ts based on years of service and fi nal average
salary for a small number of members. The defi ned contribution section receives fi xed contributions from consolidated entity companies
and the consolidated entity’s legal or constructive obligation is limited to these contributions. No balances are attributable to the parent
entity.
USA
All employees of the US operations are entitled to benefi ts from the US operations’ pension plans on retirement, disability or death.
The US operations have two defi ned benefi t plans and one defi ned contribution plan. One of the defi ned benefi ts plans provides a
monthly benefi t based on a set amount per month per year of service. The other defi ned benefi t plan provides a monthly benefi t based
on average salary and years of service. The defi ned contribution plan receives an employee’s elected contribution and an employer’s
match-up to a fi xed percentage and the entity’s legal or constructive obligation is limited to these contributions.
68
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 35. Retirement benefit obligations (continued)
The following sets out details in respect of the defi ned benefi t sections only of the Australian and US plans.
(b) Balance sheet amounts
The amounts recognised in the balance sheet are determined as follows:
Defi ned benefi t plan obligation
Defi ned benefi t fund plan assets
Defi ciency of net market value of assets over the present value
of employees’ accrued benefi t payments
Past service costs
Net liability in the balance sheet*
Consolidated
2007
$M
2006
$M
20.4
(17.9)
2.5
(1.4)
1.1
21.5
(17.4)
4.1
(2.7)
1.4
* A surplus of $1.2 million (2006: $1.2 million) in respect of the Master Trust plan is included in the 2007 net defi ciency of $1.1 million (2006: $1.4 million). That is, the amount
recognised as a liability in the balance sheet totals $2.3 million (2006: $2.6 million) whilst the surplus amount of $1.2 million (2006: $1.2 million) has been recognised as an
asset in the balance sheet (refer Note 17). The surplus has been included in this note for reconciliation purposes only.
The consolidated entity may use any surplus in the defi ned benefi ts section of the Australian plans for the purposes of payment of
superannuation expenses, a contribution holiday or a reduction in employer contributions. No surplus funds were used during 2006 or
2007.
(c)
Categories of Plan Assets
The major categories of plan assets are as follows:
Cash
Equity instruments
Debt instruments
Property
Other assets
Consolidated
2007
$M
2006
$M
1.1
12.3
2.7
0.8
1.0
17.9
0.6
11.8
2.8
1.1
1.1
17.4
The assets are invested with professional investment managers. The number of shares (if any) of Iluka Resources Limited held by the
managers is decided solely by the investment managers.
Iluka Resources Limited
69
Notes to the Financial Statements
for the year ended 31 December 2007
Note 35. Retirement benefit obligations (continued)
(d) Reconciliations
Reconciliation of the present value of the defi ned benefi t
obligation, which is partly funded:
Balance at 1 January
Current service cost
Interest cost
Contributions by plan participants
Actuarial gains and losses
Foreign currency exchange rate changes
Benefi ts paid
Curtailments
Balance at 31 December
Reconciliation of the fair value of plan assets:
Balance at 1 January
Expected return on plan assets
Actuarial gains and losses
Foreign currency exchange rate changes
Contributions by group companies
Contributions by plan participants
Benefi ts paid
Balance at 31 December
(e) Amounts Recognised in Income Statement
Current service cost
Interest cost
Expected return on plan assets
Net actuarial losses recognised in year
Past service cost
Gains on curtailments and settlements
Total included in employee benefi ts expense
Actual return on plan assets
70
Annual Report 2007
Consolidated
2007
$M
2006
$M
21.5
0.8
1.2
0.1
0.5
(1.3)
(2.4)
-
20.4
17.4
1.3
(0.3)
(0.9)
2.6
0.1
(2.3)
17.9
0.8
1.2
(1.3)
0.2
1.0
(0.1)
1.8
1.0
21.2
1.0
1.2
0.1
(0.1)
(1.1)
(0.4)
(0.4)
21.5
15.4
1.1
1.0
(0.6)
0.8
0.1
(0.4)
17.4
1.0
1.2
(1.1)
0.1
1.1
(0.2)
2.1
2.1
Notes to the Financial Statements
for the year ended 31 December 2007
Note 35. Retirement benefit obligations (continued)
(f)
Principal actuarial assumptions
The principal actuarial assumptions used (expressed as weighted averages) were as follows:
Australia*
Discount rate
Expected return on plan assets
Future salary increases
Expected rate of infl ation
USA**
Discount rate
Expected return on plan assets
Future salary increases
Expected rate of infl ation
Consolidated
2007
%
2006
%
6.0
6.5
5.0
2.0
6.3
7.5
3.5
3.0
6.0
6.5
5.0
2.0
5.8
7.5
3.5
3.0
* The expected rate of return on assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and
actual allocation of plan assets to these major categories. This resulted in the selection of a 7.2 per cent (2006: 7.2 per cent) rate of return gross of tax (and net of expenses) and a 6.5
per cent (2006: 6.5 per cent) rate of return net of tax (and expenses).
** The expected rate of return on assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and
actual allocation of plan assets to these major categories. This resulted in the selection of a 7.5 per cent (2006: 7.5 per cent) rate of return net of tax (and expenses).
(g)
Employer contributions
Australia
Employer contributions to the defi ned benefi ts section of the plan are based on recommendations by the section’s actuary.
The objective of funding is to ensure that the benefi t entitlements of members and other benefi ciaries are fully funded by the time
they become payable. To achieve this objective, the actuary has adopted a method of funding benefi ts known as the aggregate funding
method. This funding method seeks to have benefi ts funded by means of a total contribution which is expected to be a constant
percentage of members’ salaries over their working lifetimes.
Using the funding method described above and particular actuarial assumptions as to the defi ned benefi ts plan’s future experience
(as detailed below), the actuary recommended in the actuarial review, the payment of employer contributions to the defi ned benefi t
plan ranging between 8.7 per cent and 24.6 per cent (2006: 0.0 per cent to 12.4 per cent) of salaries dependent on the defi ned benefi t
category of membership.
Total defi ned benefi t section employer contributions expected to be paid by consolidated entity companies for the year ending 31
December 2008 are $0.3 million.
The economic assumptions used by the actuary to make the funding recommendations were a long term investment earning rate of 6.5
per cent pa (net of fees and taxes), a salary increase rate of 5.0 per cent pa, an infl ation rate of 2.0 per cent pa and a discount rate of
4.0 per cent pa for the pension liabilities.
Iluka Resources Limited
71
Notes to the Financial Statements
for the year ended 31 December 2007
Note 35. Retirement benefit obligations (continued)
USA
Employer contributions to the defi ned benefi ts section of the plan are based on recommendations by the plan’s actuary.
The objective of funding is to ensure that the benefi t entitlements of members and other benefi ciaries are fully funded by the time they
become payable. To achieve this objective, the actuary has adopted a method of funding benefi ts known as the Projected Unit Credit
(PUC) method effective as at 1 January 2003. Under the PUC method, unfunded past service is amortised over 10 years and future
benefi t accruals are funded during participants’ working lifetime with cost varying based on the age of participants. Actuarial gains/
losses are amortised over 5 years.
Using the funding method described above and particular actuarial assumptions as to the defi ned benefi ts section’s future experience
(as detailed below), the actuary recommended in the actuarial review, the payment of $1.5 million (2006: $0.9 million) for the salaried
defi ned benefi t plan and $0.4 million (2006: $0.2 million) for the hourly defi ned benefi t plan.
Total employer contributions expected to be paid by consolidated entity companies for the year ending 31 December 2008 are $1.9
million.
The economic assumptions used by the actuary to make the funding recommendations were a long term investment earning rate of 7.5
per cent pa (2006: 7.5 per cent) (net of fees and taxes), a salary increase rate of 3.5 per cent (2006: 3.5 per cent) together with an age
related promotional scale, an infl ation rate of 3.0 per cent (2006: 3.0 per cent) and a discount rate of 6.3 per cent (2006: 5.8 per cent)
for the pension liabilities.
(h) Net fi nancial position of plan
In accordance with AAS 25 Financial Reporting by Superannuation Plans the plan’s net fi nancial position is determined as the difference
between the present value of the accrued benefi ts and the net market value of plan assets.
Australia
This has been determined from information supplied by the Master Trust, and a surplus of $1.2 million as at 31 December 2007 (2006:
$1.2 million) was reported.
USA
The net fi nancial position of the USA plans has been determined as at the date of the most recent fi nancial report of the superannuation
fund (31 December 2007), and in accordance with IAS 19 Employee Entitlements. The defi ciency of $1.6 million as reported in the plans’
fi nancial report differs from the net liability of $2.3 million (2006: $2.6 million) recognised in the balance sheet as at 31 December 2007
due to different measurement rules in the relevant accounting standards AAS 25 and IAS 19.
(i)
Historic summary
Defi ned benefi t plan obligation
Defi ned benefi t fund plan assets
Defi ciency of net market value of assets over the present value
of employees’ accrued benefi t payments
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
72
Annual Report 2007
Consolidated
2007
$M
2006
$M
2005
$M
2004
$M
20.4
(17.9)
21.5
(17.4)
2.5
-
-
4.1
-
-
21.2
(15.4)
5.8
(0.3)
0.3
18.4
(14.1)
4.3
-
0.4
Notes to the Financial Statements
for the year ended 31 December 2007
Consolidated
Parent entity
2007
$M
2006
$M
2007
$M
2006
$M
Note 36. Contingent liabilities
Contingent liabilities
Details and estimates of maximum amounts of contingent liabilities are as follows:
Performance, Commitments and guarantees (a)
88.3
75.2
31.6
31.3
(a) The consolidated entity has negotiated a number of bank guarantees in favour of various government authorities and service providers to
meet its obligations under exploration and mining tenements.
(b) There is some risk that native title, as established by the High Court of Australia’s decision in the Mabo case, exists over some of the land
over which the consolidated entity holds tenements or over land required for access purposes. It is impossible at this stage to quantify
the impact (if any) which these developments may have on the operations of the consolidated entity.
(c) In the course of its normal business, the consolidated entity occasionally receives claims arising from its operating activities. In the
opinion of the Directors, all such matters are covered by insurance, or, if not covered, are without merit or are of such a kind or involve
such amounts that would not have a material adverse effect on the operating results or fi nancial position of the consolidated entity if
settled unfavourably.
(d) In 2004, Iluka entered into a largely lump sum Engineering, Procurement and Construction (EPC) contract with Downer Mining (formerly
Roche Mining) for the construction of a wet concentrator plant and a mining unit plant at Douglas and a mineral separation plant at
Hamilton in Victoria, both in the Murray Basin. The original contract price was $197.0 million. Downer Mining was over 12 months late
in completing construction activities. Iluka has paid Downer Mining approximately A$205 million in payments under the EPC contract
to date. During the course of construction, Downer Mining lodged contractual claims in excess of $160.0 million in respect to the wet
concentrator plant and mining unit plant at Douglas and the mineral separation plant at Hamilton. In accordance with the procedures
under the contract, Downer Mining’s claims were properly assessed and all but a small proportion were duly rejected as being without
contractual and legal basis. In October 2007, Downer Mining commenced proceedings in the Victorian Supreme Court claiming $68.4
million from Iluka in respect to various alleged breaches by Iluka of the EPC contract. This latest claim supersedes Downer Mining’s
earlier ambit contractual claims of $160 million (referred to above). Iluka also has signifi cant counterclaims against Downer Mining
which will be detailed in its defence and counterclaim. Based on detailed assessment and external specialist legal advice, the claims
continue to be rejected and, accordingly, no liability has been recognised.
(e) In December 2006, Iluka entered into an in-principle letter agreement with Bemax Resources Limited (Bemax) regarding the sale to
Bemax of a series of tenements known as the Tutunup deposit. In the letter agreement, the two parties set out a process for agreeing on
a net present value of the assets upon which the sale price would be based. The parties could not come to an agreement on the valuation,
and negotiations for the sale ceased. In December 2007 Bemax commenced proceedings against Iluka in the Supreme Court of Western
Australia. Bemax claims that the letter agreement created a binding obligation to sell the Tutunup tenements to Bemax for $12 million.
Bemax is seeking specifi c performance of the letter agreement, or, if the court is not able to order Iluka to transfer the tenements to
Bemax, damages for lost opportunities. Based on detailed assessment and external specialist legal advice, the claims continue to be
rejected and, accordingly, no liability has been recognised.
Iluka Resources Limited
73
Notes to the Financial Statements
for the year ended 31 December 2007
Note 37. Commitments
(a)
Capital commitments
Capital expenditure for the acquisition of plant and equipment
and mine development contracted for and payable not later than
one year*
* Included in capital commitments for the consolidated entity are commitments in
relation to the Murray Basin of $4.6 million (2006: $0.7 million).
(b)
Exploration commitments
Exploration expenditure commitments payable*:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
* These costs are discretionary. If the expenditure commitments are not met then
the associated exploration and mining leases may be relinquished.
(c) Lease commitments
Commitments in relation to operating leases contracted for at
the reporting date but not recognised as liabilities, payable:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
(d) Other commitments
Commitments for payments in relation to non-cancellable contracts are
payable as follows*:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
Consolidated
Parent entity
2007
$M
2006
$M
2007
$M
2006
$M
20.4
9.0
12.4
4.1
17.5
42.0
50.2
109.7
14.5
34.5
51.8
100.8
8.5
27.8
18.1
54.4
40.6
105.8
61.8
208.2
8.0
22.0
19.1
49.1
38.8
115.0
81.7
235.5
9.6
20.6
12.9
43.1
3.3
9.5
2.8
15.6
7.0
12.6
10.8
30.4
2.6
4.8
0.7
8.1
36.5
102.8
60.0
199.3
34.4
113.0
80.0
227.4
* Included in other commitments are amounts of $199.9 million (2006: $232.2 million) in respect of the consolidated entity and $199.3 million (2006: $227.4 million) in respect
of the parent entity which relate to long term contracts for coal, gas, electricity and water used in the production process.
74
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 38. Related party transactions
(a) Directors and specifi ed executives
Disclosures relating to Directors and Key Management Personnel are set out in Note 33.
(b)
Controlled entities and controlling entities
Details of material controlled entities are set out in Note 39. The ultimate Australian controlling entity and the ultimate parent entity in
the wholly-owned group is Iluka Resources Limited.
Management fees applicable to the provision of services to Consolidated Rutile Limited, a materially controlled entity, covers treasury,
taxation, exploration, internal audit, marketing and other corporate and operational services. The fee charged for these services is
based on commercial rates.
Aggregate amounts receivable from / payable to material controlled entities
at balance date:
Non-current receivables (loans)
Aggregate amounts included in the determination of profi t (loss) before
income tax that resulted from transaction with other related parties:
Management fee revenue from material controlled entity
(c) Wholly-owned group
Consolidated
Parent entity
2007
$’000
2006
$’000
2007
$’000
2006
$’000
-
-
-
-
2,996
1,697
987
940
The wholly-owned group consists of Iluka Resources Limited and its wholly-owned controlled entities. Ownership interests in these
material wholly-owned entities are set out in Note 39.
Transactions between Iluka Resources Limited and other entities in the wholly-owned group during the years ended 31 December 2007
and 31 December 2006 consisted of:
(i)
loans advanced by Iluka Resources Limited;
loans repaid to Iluka Resources Limited;
(ii)
(iii) the payment of interest on the above loans; and
(iv) management services provided by Iluka Resources Limited.
Aggregate amounts included in the determination of profi t (loss) before income
tax that resulted from transactions with entities in the wholly-owned group:
Interest revenue
Aggregate amounts receivable from / payable to entities in the wholly-owned
group at balance date:
Non-current receivables (loans)
Consolidated
Parent entity
2007
$’000
2006
$’000
2007
$’000
2006
$’000
-
-
-
-
17,686
77,965
286,186
313,222
Iluka Resources Limited
75
Notes to the Financial Statements
for the year ended 31 December 2007
Note 38. Related party transactions (continued)
Loans are made between Iluka Resources Limited and certain entities in the wholly-owned group. Where interest is levied it is payable/
receivable on the amount outstanding at commercial rates. There were no borrowings by the parent entity in 2007 or 2006. The average
lending rate for the year for loans advanced by the parent entity was 6.5 per cent (2006: 5.9 per cent). There are no fi xed terms for the
repayment of principal on loans.
Iluka Resources Limited has taken out insurance policies on behalf of certain controlled entities as part of a group wide insurance risk
management programme. The Company has a policy of insuring against risks which might materially affect the consolidated entity’s
cash fl ow. Risks covered include property damage, business interruption, public and product liability, fi delity, and Directors and offi cers’
liability.
(d)
Transactions with related parties
Consolidated
Parent entity
2007
$’000
2006
$’000
-
-
-
-
-
-
-
-
2007
$’000
39,415
15,399
2006
$’000
28,987
10,101
39,415
28,987
15,399
10,101
Current tax payable assumed from wholly-owned tax consolidated entities
Tax losses assumed from wholly-owned tax consolidated entities
(e) Outstanding balances arising from sale/purchase of
goods and services
Current receivable (tax funding arrangement)
Wholly-owned tax consolidated entities
Current payables (tax funding agreement)
Wholly-owned tax consolidated entities
(f)
Other related parties
Information relating to joint venture interests is set out in Note 41.
Note 39. Investments in significant controlled entities
The consolidated fi nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy
described in Note 1(b).
Name of Entity
Iluka Corporation Limited
Basin Minerals Limited
Iluka Midwest Limited
The Nardell Colliery Pty Limited
Consolidated Rutile Limited
Iluka Administration Limited
Iluka Resources Inc.
Iluka Exploration Pty Limited
Ashton Coal Interests Pty Limited
Iluka (Eucla Basin) Pty Limited
*The proportion of ownership interest is equal to the proportion of voting power held.
76
Annual Report 2007
Equity holding*
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
Australia
Australia
2007
%
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
93.3
100.0
2006
%
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
93.3
100.0
Notes to the Financial Statements
for the year ended 31 December 2007
Note 40. Deed of cross guarantee
In 1998, Iluka Resources Limited, Westlime (WA) Limited, Ilmenite Pty Limited, Southwest Properties Pty Limited, Western Mineral Sands Pty
Limited and Yoganup Pty Limited were 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 requirements to prepare a Financial Report and Directors’
Report under Class Order 98/1418 (as amended by Class Order 98/2017) issued by the Australian Securities and Investments Commission
(“ASIC”).
On 26 November 1999, ASIC approved a Deed of Cross Guarantee to add the following wholly-owned entities: Iluka Corporation Limited;
Associated Minerals Consolidated Limited; Iluka Administration Limited; Iluka (NSW) Limited; Iluka Consolidated Pty Limited; Iluka Exploration
Pty Limited; Gold Fields Asia Limited; Iluka International Limited; NGG Holdings Limited; Caroda Pty Limited; Iluka Midwest Limited; Western
Titanium Limited; The Mount Lyell Mining and Railway Company Limited; Colinas Pty Limited; Renison Limited; Iluka Finance Limited; The
Nardell Colliery Pty Limited; Glendell Coal Limited and Lion Properties Pty Limited.
On 30 January 2003, ASIC approved a further Deed of Assumption to add Basin Minerals Limited, Basin Minerals Holdings Pty Limited, Basin
Properties Pty Limited and Swansands Pty Limited to the Deed of Cross Guarantee. Relief from the requirement to prepare a Financial Report
and Directors’ Report under the Class Order is effective for the fi nancial year ending December 2002 and subsequent fi nancial years.
During 2004, ASIC approved a Deed of Assumption for the removal of Iluka (NSW) Limited, Caroda Pty Limited and Colinas Pty Limited from the
Deed of Cross Guarantee. During 2005, these companies were deregistered.
During 2005, ASIC approved a further Deed of Assumption to add Iluka (Eucla Basin) Pty Limited to the Deed of Cross Guarantee.
All 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 Iluka Resources Limited, they also represent the Extended Closed Group.
Set out below are condensed consolidated income statements for the years ended 31 December 2007 and 31 December 2006 of the Extended
Closed Group.
Condensed Income Statement
Revenue from ordinary activities
Interest and fi nance costs
Exchange losses on foreign currency borrowings
Other expenses from ordinary activities
Impairment charges
Income tax (expense) benefi t
Profi t for the year
Summary of Movements In Consolidated Retained Profi ts
Retained profi ts at the beginning of the fi nancial year
Transfer from asset revaluation/asset realisation reserve
Profi t for the year
Dividends provided for or paid
Retained profi ts at the end of the fi nancial year
2007
$M
2006
$M
757.6
(57.6)
(4.0)
(646.7)
-
(11.3)
38.0
85.5
1.2
38.0
(51.7)
73.0
794.0
(39.2)
(1.0)
(644.1)
(64.6)
6.1
51.2
79.4
6.1
51.2
(51.2)
85.5
Iluka Resources Limited
77
Notes to the Financial Statements
for the year ended 31 December 2007
Note 40. Deed of cross guarantee (continued)
Set out below are consolidated balance sheets as at 31 December 2007
and 31 December 2006 of the Extended Closed Group.
Condensed Balance Sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative fi nancial instruments
Current tax receivables
Other
Total current assets
Non-current assets
Receivables
Inventories
Other fi nancial assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profi ts
Total equity
78
Annual Report 2007
2007
$M
2006
$M
7.7
144.2
283.0
2.1
12.4
13.2
462.6
72.2
-
149.9
1,074.9
15.1
0.7
1,312.8
1,775.4
85.6
230.7
-
31.2
347.5
387.4
39.9
242.6
-
669.9
5.0
167.3
209.5
-
-
16.3
398.1
110.4
5.5
149.9
1,078.5
16.8
-
1,361.1
1,759.2
110.7
188.5
8.6
30.1
337.9
419.9
43.1
220.2
0.1
683.3
1,017.4
1,021.2
758.0
738.0
662.6
22.4
73.0
758.0
611.0
41.5
85.5
738.0
Notes to the Financial Statements
for the year ended 31 December 2007
Note 41. Interests in joint ventures
(a) Narama joint venture
The consolidated entity’s interest in the Narama Joint Venture is classifi ed as a discontinued operation, refer Note 9.
(b) Other joint ventures
The consolidated entity also has a number of interests in joint ventures to explore for titanium minerals and zircon resources. The
consolidated entity’s share of expenditure in respect of these exploration activities is capitalised where appropriate in accordance with
the accounting policy stated in Note 1(b)(ii), and no revenue is generated. The consolidated entity’s share of the assets and liabilities in
respect of these joint ventures is not material.
Note 42. Reconciliation of profit after income tax to
net cash inflow (outflow) from operating activities
Profi t after income tax
Depreciation and amortisation
Previously capitalised exploration expenditure written-off
Current year exploration expenditure capitalised
Interest capitalised
Net (gain) loss on disposal of property, plant and equipment
Net exchange differences on borrowings
Rehabilitation, restoration and accretion expense and other borrowing cost unwind
Non-cash employee benefi ts
Asset impairments and write-offs
Amortisation of deferred borrowing costs
Other non-cash operating activities between group entities
Hedge gains recognised in respect of hedge book realised in August 2006
Change in operating assets and liabilities
Decrease (increase) in receivables
Decrease (increase) in inventories
Decrease (increase) in deferred tax assets
Decrease (increase) in other operating assets
Decrease (increase) in income tax receivable
Increase (decrease) in payables
Increase (decrease) in other operating liabilities
Increase (decrease) in provision for income taxes payables
Increase (decrease) in provision for deferred tax liabilities
Increase (decrease) in other provisions
Net cash infl ow (outfl ow) from operating activities
Consolidated
Parent entity
2007
$M
2006
$M
2007
$M
2006
$M
60.4
147.9
1.1
(5.5)
-
(11.3)
(9.7)
17.5
1.3
-
0.3
-
(26.6)
40.4
(68.6)
3.8
6.7
(12.6)
(13.3)
(2.5)
(6.6)
(5.4)
(21.8)
95.5
31.5
127.3
1.3
(7.0)
(13.5)
(30.1)
2.4
13.4
(0.5)
92.2
0.4
-
-
(52.3)
(51.8)
6.0
29.3
-
(12.9)
2.8
4.1
(20.1)
19.7
142.2
3.9
43.8
-
-
-
(4.9)
(17.3)
5.7
0.9
-
0.3
(17.7)
(26.6)
12.6
9.7
-
(9.3)
(13.3)
(3.2)
(5.2)
(9.9)
11.4
(8.4)
(27.5)
7.6
34.9
-
-
(13.5)
0.4
(8.2)
2.8
0.1
60.0
0.4
(79.7)
-
18.6
(15.3)
-
32.2
-
1.4
5.3
5.3
(26.1)
5.2
31.4
Note 43. Non-cash investing and financing activities
Non-cash investing and fi nancing activities consisted of shares to the value of $12.3 million paid to shareholders in respect of the dividend
reinvestment program, details of which are set out in Note 30(d).
Iluka Resources Limited
79
Notes to the Financial Statements
for the year ended 31 December 2007
Note 44. Earnings per share
(a) Basic earnings per share
Profi t from continuing operations attributable to the ordinary
equity holders of the company
Profi t from discontinued operation
Profi t attributable to the ordinary equity holders of the company
(b) Diluted earnings per share
Profi t from continuing operations attributable to the ordinary
equity holders of the company
Profi t from discontinued operation
Profi t attributable to the ordinary equity holders of the company
Reconciliations of earnings used in calculating earnings per share
Profi t for the year
Net profi t attributable to minority interests
Profi t from continuing operations attributable to the ordinary equity holders
of the company used in calculating basic and diluted earnings per share
Profi t from discontinued operation
Profi t attributable to the ordinary equity holders of the company used in
calculating basic and diluted earnings per share
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
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
80
Annual Report 2007
Consolidated
2007
Cents
2006
Cents
17.0
4.6
21.6
17.0
4.6
21.6
5.0
4.1
9.1
5.0
4.1
9.1
Consolidated
2007
$M
2006
$M
49.5
(9.3)
40.2
10.9
51.1
22.1
(10.5)
11.6
9.4
21.0
Consolidated
2007
Number
2006
Number
236,966,229
232,914,349
236,966,229
232,914,349
Notes to the Financial Statements
for the year ended 31 December 2007
Note 45. Share-based payments
During the year ended 31 December 2007 the following incentive plans were active:
(a) Short Term and Long Term Incentive Plans
The 2007 plan consists of two parts being, the Short Term Incentive Plan (STIP) and Long Term Incentive Plan (LTIP). Both plans are at
risk components of remuneration which operate within the existing rules of the Directors, Executives and Employees Share Acquisition
Plan (Plan), as approved by the shareholders at the Company’s Annual General Meeting in May 1999.
At target levels of performance, the STIP represents two-thirds of potential variable remuneration, and the LTIP represents one-third.
Objectives, measures and targets for both the STIP and the LTIP are set on an annual basis and are subject to the approval of the Board.
Only nominated managers and executives participate in the short and long term incentive plans. The level of award opportunity is
determined by an individual’s role within the business and capacity to impact the results of the Company.
The target incentive opportunity for key management personnel under the STIP is 60 per cent of total fi xed remuneration (TFR) and
under the LTIP is 30 per cent of TFR. At stretch levels of performance the incentive opportunity under the STIP increases to 90 per cent.
(i) Short Term Incentive Plan (STIP)
The STIP requires profi tability and sustainability performance exceeding 90 per cent of target before any award is payable for
these measures. Growth objectives are set at stretch levels and are linked to the achievement of key business growth and
improvement outcomes.
Half of the STIP award is to be paid in cash and half on a deferred basis in the form of restricted shares. Fifty per cent of the
restricted shares are subject to a time-based vesting period of one year after the end of the performance period. The remaining 50
per cent is subject to a time-based vesting period of two years after the end of the performance period.
The share rights granted in 1 January 2008 under the STIP to participating employees is 494,082.
(ii) Long Term Incentive Plan (LTIP)
The LTIP provides a grant of equity in the form of share rights that vest after three years subject to performance over the three
year period.
The grant is split into two separate tranches, with one tranche (50 per cent) being assessed based on return on equity (ROE)
relative to an internal target and the other (50 per cent) based on Total Shareholder Return (TSR) performance relative to a
comparator group of companies.
Targets are set giving consideration to:
•
•
•
prior ROE performance history;
planned strategic and business plan activity throughout the performance period; and
comparable company performance.
The maximum share rights granted in 1 January 2007 under the LTIP to participating employees is 430,984.
(b) Performance Incentive Plans
The Performance Incentive Plan (PIP) was introduced in March 2005 and applied to the 2005 and 2006 years.
The maximum level of participation in 2006 for members of the executive team was 80% of total fi xed remuneration. Upon achievement
of pre-determined objectives, 40% maximum may be awarded as cash; the remaining 40% was required to be deferred in the form of
share rights.
For the year ended 31 December 2006, Iluka’s fi nancial performance (NPAT and ROE) represented 50% of the apportionment, health
and safety performance (LTIFR, AIFR, Level 2 Environmental Incidents) was apportioned at 10% and key objectives from the employee’s
operational or functional responsibilities accounted for the balance. Any share rights granted pursuant to the 2006 PIP had a grant date
of 1 January 2007.
Iluka Resources Limited
81
Notes to the Financial Statements
for the year ended 31 December 2007
Note 45. Share-based payments (continued)
The fair value of shares granted under the PIP was determined at grant date. The fair value of the grant was released as an expense
through the Income Statement on a straight-line basis between the grant date and the vesting date of entitlements.
Maximum potential share rights granted under the PIP to
participating employees on 1 January:
Consolidated
Parent entity
2007
Number
2006
Number
2007
Number
2006
Number
115,509
126,208
115,509
126,208
(c) Directors’, Executives’ and Employees’ Share Acquisition Plan
Prior to the introduction of the PIP in 2005, the Company operated Long-term Incentive Plans pursuant to the terms of the Directors’,
Executives’ and Employees’ Share Acquisition Plan (Plan). The Plan was approved by shareholders at the Annual General Meeting of the
Company in May 1999. From year to year the Board invited the Managing Director and other employees determined by the Board to hold
an executive position, to participate in the Plan as a means of providing those employees with an incentive to enhance the performance
of the Company. The terms of the annual offer included an allocated maximum number of shares (maximum allocation) that will be
acquired or retained under the Plan on behalf of the employee if certain performance criteria, as determined by the Board, are satisfi ed.
The performance criteria for each offer are based on total shareholder return against a pre-determined comparator group of companies
over a three year performance period. At the end of the performance period the performance of the Company against the comparator
group is assessed and a determination is made as to how much of the maximum allocation the employee will be entitled to have acquired
on his or her behalf by the Trustee. Once the maximum allocation is determined, the Trustee purchases the shares and holds them on
trust for the employee for a maximum period of ten years. At the end of the ten years, or earlier if approved by the Board, the shares
are transferred from the Trustee to the employee.
Since the Plan was approved by shareholders, there have been individual offers in respect to 2001, 2002, 2003 and 2004. The
performance period for the 2003 plan concluded and was assessed on 30 June 2006. The performance period of the 2004 plan
concluded and was assessed on 31 December 2006. Shares awarded in 2007 pursuant to the 2004 plan as well as shares awarded in
2006 pursuant to the 2003 plan are shown in the table below.
The fair value of entitlements offered under the Plan has been determined via an option pricing model. This fair value is released as an
expense through the Income Statement on a straight-line basis between the offer date and the assessment date for each respective
plan.
Shares were awarded under the Directors’, Executives’ and
Employees’ Share Acquisition Plan to participating employees
on 1 March 2007 (25 August 2006).
Consolidated
Parent entity
2007
Number
2006
Number
2007
Number
2006
Number
109,584
93,602
109,584
93,602
(d)
Share rights provided to the managing director
The Managing Director was granted 71,851 share rights in October 2006, to match the shares he purchased prior to commencing
employment on the basis that Iluka would match this with an equivalent award of share rights.
These share rights vest on 30 June 2008. The fair value of these share rights has been determined at grant date - refer Note 36. The
fair value of the grant is released as an expense through the Income Statement between the grant date and the vesting date of the
entitlements.
(e) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised
during the year as part of employee benefi t expense were as follows:
Consolidated
Parent entity
2007
$M
1.3
2006
$M
0.1
2007
$M
0.9
2006
$M
0.1
82
Annual Report 2007
Notes to the Financial Statements
for the year ended 31 December 2007
Note 46. Events occuring after the balance sheet date
(a) Disposal of interest in the Narama Coal joint venture
On the 15 January 2008 Iluka disposed of its interest in the Narama Coal joint venture with effect from 1 January 2008 – refer to Note 9.
(b) Refi nancing of existing debt facilities
On 21 February 2008, the Company indicated that it was well progressed in securing a single, enlarged corporate debt facility to replace
and extend the maturities of certain of its existing facilities. The company has since executed a new $500 million debt facility package
comprising a Syndicated Term Loan Facility of $445 million and a Working Capital Facility of $55 million (refer Note 27(a)).
(c) Intended Equity Raising
On 21 February 2008, the Company announced an intention to raise capital in the region of $350 million through a renounceable pro-rata
entitlement offer. Detailed work on the fi nal structure and timing of this equity raising continues at the time of approval of this fi nancial
report.
Iluka Resources Limited
83
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In the Directors’ opinion:
(a)
the fi nancial statements and notes set out on pages 21 to 83 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the Company’s and consolidated entity’s fi nancial position as at 31 December
2007 and of their performance for the fi nancial year ended on that date; and
(b)
(c)
(d)
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
the audited remuneration disclosures set out on pages 8 to 18 of the Directors’ Report comply with Accounting
Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group identifi ed in Note 40 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 40.
The Directors have been given the declarations by the Chief Executive Offi cer and Chief Financial Offi cer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
I C R Mackenzie
Chairman
D A Robb
Managing Director
Perth
12 March 2008
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Annual Report 2007
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Report on the fi nancial report and the AASB 124 Remuneration disclosures contained in the directors’ report
We have audited the accompanying fi nancial report of Iluka Resources Limited (the company), which comprises the
balance sheet as at 31 December 2007, and the income statement, statement of recognised income and expense and
cash fl ow statement for the year ended on that date, a summary of signifi cant accounting policies, other explanatory
notes and the directors’ declaration for both Iluka Resources Limited and the Iluka Resources Limited Group (the
consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or
from time to time during the fi nancial year.
We have also audited the remuneration disclosures contained in the directors’ report under the heading “remuneration
report” in pages 8 to 18 of the directors’ report and not in the fi nancial report.
Directors’ responsibility for the fi nancial report and the AASB 124 Remunerations disclosures contained in the
directors’ report
The directors of the company are responsible for the preparation and fair presentation of the fi nancial report in
accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the
preparation and fair presentation of the fi nancial report that is free from material misstatement, whether due to fraud
or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable
in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation
of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards
ensures that the fi nancial report, comprising the fi nancial statements and notes, complies with International Financial
Reporting Standards.
The directors of the company are also responsible for the remuneration disclosures contained in the directors’ report.
Auditor’s responsibility
Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
fi nancial report is free from material misstatement. Our responsibility is to also express an opinion on the remuneration
disclosures contained in the directors’ report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial
report and the remuneration disclosures contained in the directors’ report. The procedures selected depend on the
auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial report and the
remuneration disclosures contained in the directors’ report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
fi nancial report and the remuneration disclosures contained in the directors’ report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
fi nancial report and the remuneration disclosures contained in the directors’ report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the fi nancial report.
For further explanation of an audit, visit our website http://www.pwc.com/au/fi nancialstatementaudit.
Liability limited by a scheme approved under Professional Standards Legislation
Iluka Resources Limited
85
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion on the fi nancial report
In our opinion:
(a)
the fi nancial report of Iluka Resources Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 31 December 2007 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001, and
(b)
the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Auditor’s opinion on the AASB 124 Remuneration disclosures contained in the directors’ report.
In our opinion, the remuneration disclosures that are contained in pages 8 to 18 of the directors’ report comply with section 300A of the
Corporations Act 2001.
Perth
12 March 2008
PricewaterhouseCoopers
David J Smith
Partner
86
Annual Report 2007
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Approach to Corporate Governance
Iluka and its Board of Directors are committed
to achieving the highest standards of corporate
governance and acknowledge that this is essential
in creating and building sustainable value for
shareholders. The main elements of Iluka’s corporate
governance practices are detailed in this statement.
Overarching these detailed elements is the overall
commitment of the Board of Directors to act honestly,
ethically, diligently and in accordance with the law
in serving the interests of Iluka’s shareholders,
employees, customers and the communities in which
Iluka operates.
ASX Corporate Governance
Recommendations
Iluka considers that it meets each of the requirements
of the Australian Securities Exchange (ASX) Corporate
Governance Principles and Recommendations as
revised and released in August 2007.
The governance section of the Iluka website contains
the company’s key governance policy documents. These
include the:
•
•
•
•
•
•
•
•
Board Charter
Directors’ Code of Conduct
Audit and Risk Committee Charter
Remuneration and Nomination Committee
Charter
Employee Code of Conduct
Securities Trading Policy
Continuous Disclosure and Market
Communications Policy
Business Conduct Reporting and Control Policy
(Whistleblower Policy)
During 2007 the Board reviewed and updated a number
of these key documents. Iluka will continue to update
the corporate governance section of its website
as it makes further improvements to its corporate
governance practices.
Role and Responsibilities of the Board
of Directors
The Board operates in accordance with the broad
principles set out in its Charter. The overall role of the
Board involves four key areas of responsibility:
•
•
•
•
appointing and removing the Managing Director,
determining his or her remuneration, terms and
conditions of employment and assessment of
the performance of the Managing Director and
through him or her, the executive management
group;
determining the strategic direction and
fi nancial objectives of the company and
ensuring appropriate resources are available to
management;
monitoring the implementation and achievement
of strategic and fi nancial objectives; and
reporting to shareholders and the investment
community on the performance of the company.
The implementation of corporate strategy and day-
to-day management of Iluka’s affairs are delegated
to management; however, the Board retains specifi c
responsibility for:
•
•
•
•
•
•
•
•
reviewing and approving systems of risk
management, internal control and compliance,
codes of conduct, continuous disclosure and
legal compliance;
reviewing and approving major capital
expenditure, capital management, acquisitions
and divestitures;
reviewing and approving business plans and
budgets, including the setting of company
performance objectives;
monitoring the company’s operational and
fi nancial position and performance;
approving the company’s fi nancial and
accounting policies and fi nancial statements;
monitoring compliance with control and
accountability systems, regulatory requirements
and ethical standards;
approving the fi nancial and other reporting
mechanisms for adequate, accurate and timely
information being provided to the Board;
approving processes, procedures and systems
to ensure that fi nancial results are appropriately
and accurately reported on a timely basis;
Iluka Resources Limited
87
•
•
•
•
•
•
reviewing executive succession planning and development;
approving the acquisition, establishment, disposal or
cessation of any signifi cant business of the company;
approving the issue of any securities in the company;
approving any public statements which refl ect signifi cant
issues of company policy or strategy;
approving any changes to the discretions delegated from
the Board; and
deciding on any matters which exceed the authority limits
delegated to the Managing Director.
Board Composition
Directors are considered and nominated by the Remuneration and
Nomination Committee based on the skills and experience they
are able to bring to Board deliberations on current and emerging
issues. In addition, the Board seeks to ensure that the size of the
Board and the blend of skills within its membership is conducive to
effective discussion and effi cient decision-making. In recent years,
the services of external search consultants have been used to
assist with recruiting new Directors. Details of the members of the
Board, their date of appointment, qualifi cations and experience are
set out in the Directors’ Report under the heading ‘Directors’.
Iluka’s Constitution requires Directors to retire from offi ce no later
than the third Annual General Meeting following their election. The
Directors have adopted an internal guideline that the preferred
length of service is ten years, unless otherwise requested by the
Board to continue.
In December 2007, the Chairman, Mr Ian Mackenzie, announced
his intention to retire as Chairman and as a Director, at the
company’s next Annual General Meeting to be held in May 2008.
Associated with this decision, Dr Robert Every was appointed
Deputy Chairman of the Board and is expected to assume the
position of Chairman following the conclusion of the 2008 AGM.
Director Independence
The Board recognises the importance of independent judgement
in the decision-making process. The Board’s Charter expressly
requires that the majority of the Board be comprised of
independent Directors and that the Chairman be an independent
Director. To qualify as independent, a Director must be non-
executive and:
•
•
•
•
•
•
•
must not be a substantial shareholder of the company
or an offi cer of, or otherwise associated directly with, a
substantial shareholder of the company;
within the last three years have not been employed in
an executive capacity by the company or another group
member, or been a Director of the company within three
years after ceasing to hold any such employment;
within the last three years have not been a principal of a
material professional adviser or a material consultant to
the company or another group member, or an employee
materially associated with the service provided;
not be a material supplier or customer of the company
or other group member, or an offi cer of, or otherwise
associated directly or indirectly with, a material supplier or
customer;
have no material contractual relationship with the company
or another group member other than as a Director of the
company;
have not served on the Board for a period which could,
or could reasonably be perceived to, materially interfere
with the Director’s ability to act in the best interests of the
company; and
be free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the Director’s ability to act in
the best interests of the company.
Applying the above criteria, the Board considers that all non-
executive Directors are independent.
The Board assesses the independence of new Directors upon
appointment and reviews the independence of other Directors as
appropriate.
Managing Director
The Managing Director, Iluka’s most senior employee, recommends
policy, strategic direction and business plans for the Board’s
approval and is responsible for managing the company’s day-to-
day activities.
The Managing Director is selected and appointed by the Board and
is subject to an annual performance review by the non-executive
Directors.
88
Annual Report 2007
Confl icts of Interest
Each Director has an ongoing responsibility to:
•
•
disclose to the Board actual or potential confl icts of interest
that may, or might reasonably be thought to, exist between
the interests of the Director and the interests of any other
parties in carrying out the activities of the company; and
if requested by the Board, within a reasonable period,
take such necessary and reasonable steps to remove any
confl ict of interest.
If a Director cannot or is unwilling to remove a confl ict of interest
then the Director must, in accordance with the Corporations Act
2001, absent himself or herself from the room when discussion
and/or voting occurs on matters about which the confl ict relates.
Director Education
Directors undergo an induction process upon appointment during
which they are given a detailed briefi ng on the company. This
includes meetings with key executives, tours of operational sites
and presentations. Thereafter, in order to assist Directors to
maintain an appropriate level of knowledge of the company and its
operations, Directors undertake site visits and are provided with
regular updates and briefi ngs on current and emerging issues.
The Chairman sets aside time at the start of each scheduled Board
meeting for non-executive Directors to meet with the Managing
Director without other management present. In addition, the non-
executive Directors meet at least four times each year independent
of management to discuss the position of the company and the
performance of management.
Company Secretary
Mr Cameron Wilson is Iluka’s Company Secretary. This position of
Company Secretary is responsible for:
•
•
•
•
advising the Board on corporate governance principles;
management of the company secretarial function;
attending all Board and Board committee meetings and
taking minutes; and
communication with the Australian Securities Exchange
(ASX).
Committees of the Board
To assist in the execution of its responsibilities and to allow
detailed consideration of complex issues, the Board has
established the following sub-committees:
Directors are encouraged to undertake continuing education
relevant to the discharge of their duties. All reasonable costs of
continuing Director education are met by the company.
•
•
Remuneration and Nomination Committee; and
Audit and Risk Committee.
Directors’ Access to Independent Advice
Each Director may, with prior written approval of the Chairman,
obtain independent professional advice to assist the Director in
fulfi lling their responsibilities. Any reasonable expenses incurred in
obtaining that advice will be met by the company.
Board Meetings
The Board convenes on average for nine formal meetings per year
including one meeting dedicated primarily to strategic planning.
The agenda, frequency and length of meetings are determined
by the Chairman in consultation with the Managing Director. The
Chairman manages the conduct of meetings and strives to ensure
open and constructive discussion between Board members and
between the Board and management. Ad hoc Board and committee
meetings may be convened to consider particular matters.
Each committee is comprised wholly of independent, non-executive
Directors. The structure and membership of these committees
are reviewed periodically. Each committee has its own written
charter setting out its role and responsibilities, composition,
structure, membership requirements and the manner in which the
committee is to operate. Both of these charters are reviewed by
the respective committees on an annual basis. Unless expressly
delegated by the Board to one of its committees, all matters
determined by committees are submitted to the full Board as
recommendations for Board decision. Both the Remuneration
and Nomination Committee and the Audit and Risk Committee are
discussed separately below.
Board and Committee Performance Evaluation
The Board carries out a process of self-assessment regarding
its performance in meeting key responsibilities. This annual
review process serves to identify any areas of weakness and
mechanisms for improving the functioning and performance of the
Board, its relationship with management and to focus on specifi c
performance objectives for the year ahead. This annual review
was last undertaken with the assistance of external consultants
during September–December 2007.
Iluka Resources Limited
89
Each of the Board’s committees also conducts an annual
self-assessment of their performance in meeting their key
responsibilities. These reviews serve to identify strengths,
weaknesses and areas for improvement. The assessment for both
committees was last undertaken in September–December 2007.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee consists of the
following independent, non-executive Directors: Ms Valerie Davies
(Chairman), Mr Ian Mackenzie, Mr John Pizzey and Mr Gavin Rezos.
Details of Directors’ attendance at Remuneration and Nomination
Committee meetings and their qualifi cations and experience are
set out on pages 4 and 5.
The Committee’s responsibility is to provide assistance and
recommendations to the Board in support of the company’s
objective of creating and delivering value for shareholders and in
fulfi lling its Corporate Governance responsibilities relating to the
following:
•
•
•
•
•
overall remuneration strategy of the company, its
development, review and implementation;
remuneration of executives and non-executive Directors;
performance of the Managing Director and senior
executives;
succession planning for key roles; and
assessment, composition and succession of the Board.
Comprehensive details of the processes and principles underlying
the work of the Remuneration and Nomination Committee are
discussed in the Remuneration Report appearing on pages 8 to 18
of this Report.
Audit and Risk Committee
The Audit and Risk Committee consists of the following
independent, non-executive Directors: Mr Don Morley (Chairman),
Mr Grahame Campbell, Dr Robert Every and Mr Ian Mackenzie.
Mr Morley was a senior fi nancial executive of WMC Limited until
his retirement in October 2002 and brings a high level of fi nancial
expertise and experience to Iluka’s Audit and Risk Committee. Full
details of Mr Morley’s qualifi cations and experience and those of
the other Committee members appear on pages 4 and 5.
The Committee regularly reviews the appropriateness of its
composition in light of the skills and experiences of its members,
the responsibilities of the Committee and having regard to any
changes in the regulatory environment in which the company
operates. At all times the Audit and Risk Committee is required
under its charter to ensure that all members are fi nancially literate
and have an appropriate understanding of the industries in which
the company operates.
90
Annual Report 2007
The overall purpose of the Audit and Risk Committee is to
protect the interests of the company’s shareholders and other
stakeholders, on behalf of the Board, by overseeing processes in
respect of:
•
•
•
•
the integrity of fi nancial reporting;
the adequacy of the control environment;
the process for the management of risk; and
the internal and external audit functions.
The broad responsibilities of the Audit and Risk Committee include
assisting the Board to fulfi l its responsibilities by:
•
•
•
•
•
•
•
•
•
considering the effectiveness of the accounting and internal
control systems and management reporting, which are
designed to safeguard company assets;
serving as an independent and objective party to review
fi nancial information prior to release to shareholders;
reviewing the accounting policies adopted within the group;
reviewing the performance of the internal and external
audit functions;
evaluating the independence of the external auditor and
ensuring that the provision of non-audit services by the
external auditor does not adversely impact upon auditor
independence;
reviewing and approving internal audit plans including
identifi ed risk areas;
gaining assurance as to the adequacy of the company’s
policies and processes for identifying, documenting and
addressing risks;
reviewing other key fi nancial processes including tax,
insurance, treasury operations and superannuation
arrangements to ensure legal compliance and prudent
management practices; and
reviewing processes and internal controls in place to
ensure compliance with laws and regulations.
In fulfi lling its responsibilities, the Audit and Risk Committee:
•
•
•
•
receives regular reports from management and the internal
and external auditors;
meets regularly with the internal auditors, including
meetings independent of management;
meets regularly with the external auditors, including
meetings independent of management;
reviews any signifi cant disagreements between the
auditors and management, irrespective of whether they
have been resolved;
•
•
provides the internal and external auditors with a clear line
of direct communication at any time to either the Chairman
of the Audit and Risk Committee or the Chairman of the
Board; and
has access to management as required and is able to seek
third party expert advice if required.
Corporate Reporting
The Managing Director and Chief Financial Offi cer have made
the following certifi cations to the Board with respect to the 2007
accounts:
•
•
that the company’s fi nancial reports are complete and
present a true and fair view, in all material respects, of the
fi nancial condition and operational results of the company
and group and are in accordance with relevant accounting
standards; and
that the above statement is founded on a sound system of
risk management and internal compliance and control and
which implements the policies adopted by the Board and
that the company’s risk management and internal control is
operating effi ciently and effectively in all material respects.
Risk Assessment and Management
The Board, with assistance from the Audit and Risk Committee,
is responsible for ensuring there are adequate processes and
policies in place to identify, assess and mitigate risk. Iluka has
implemented a formal Enterprise Risk Management program
which establishes structured risk management processes, as
well as ensuring that risk management concepts and awareness
are embedded into the culture of the organisation. This program
includes the involvement of senior executives, as well as the
engagement of external risk management consultants as
necessary. The key elements of Iluka’s risk management program
are:
•
•
•
•
•
classifi cation of risk into strategic, fi nancial, operational,
compliance, information and project risks;
the quantifi cation and ranking of risk event consequences
as insignifi cant through to catastrophic;
the processes to capture and document high-level risks;
processes to capture and document lower level risks
through formalised site-based risk workshops and risk
registers;
a comprehensive management representation program
conducted twice annually which involves a detailed
hierarchy of sign-offs on a wide range of risk issues;
•
•
•
•
•
•
•
the assignment of clear accountabilities for identifi ed risk
issues to appropriate senior Iluka employees;
comprehensive regular reporting to the Board and senior
management on key areas of safety, environment, treasury
and exchange, legal matters and major projects;
targeted utilisation of both internal and external auditors to
address specifi c areas of risk exposure and controls;
a company code of conduct providing the overarching
context for behaviours and the way in which Iluka interacts
with its stakeholders;
policies and procedures to address key internal controls;
the development of a company-wide intranet-based risk
management database for communicating and updating
progress on risk matters;
a fraud-control policy for the confi dential reporting of
issues of unacceptable or undesirable conduct with
protection against reprisal afforded to the whistleblower;
and
•
a comprehensive insurance program.
Audit Functions
The company’s current external auditing fi rm is
PricewaterhouseCoopers (PwC). During 2007, the company
complied with its internal guidelines which require the fees paid to
external auditors for non-audit-related work to remain below 50
per cent of the audit-related fees without pre-approval by the Audit
and Risk Committee. This guideline is intended to preserve the
independence of the external audit function.
The external auditor will attend the Annual General Meeting
and will be available to answer shareholder questions about the
conduct of the audit and the preparation and content of the audit
report.
Iluka has an internal audit function in part resourced by internal
management and in part by KPMG. The internal audit function
assists the Board by undertaking an objective evaluation of
the company’s internal control framework. The Audit and Risk
Committee is responsible for approving the program and scope
of internal audit reviews to be conducted each fi nancial year. An
assessment of the quality and focus of the internal audit function
is undertaken periodically as part of the review of Audit and Risk
Committee effectiveness.
Iluka Resources Limited
91
The General Counsel and Company Secretary is responsible for
communication with the ASX. This role includes responsibility for
ensuring compliance with the continuous disclosure requirements
in the ASX Listing Rules and overseeing and co-ordinating
information disclosure to the ASX. In accordance with the ASX
Listing Rules, the company immediately notifi es the ASX of
information:
•
•
concerning the company that a reasonable person would
expect to have a material effect on the price of the
company’s securities; and
that would, or would be likely to, infl uence persons who
commonly invest in securities in deciding whether to
acquire or dispose of the company’s securities.
Upon confi rmation of receipt from the ASX, the company places all
information disclosed on the company’s website.
The company respects the rights of its shareholders and to
facilitate the effective exercise of those rights, the company is
committed to:
•
•
•
•
communicating effectively with shareholders through
releases to the ASX, the company’s website, information
distributed direct to shareholders and the general meetings
of the company;
giving shareholders ready access to balanced and
understandable information about the company and
corporate proposals;
making it easy for shareholders to participate in general
meetings of the company; and
requesting the external auditor to attend the Annual
General Meeting and be available to answer shareholder
questions about the conduct of the audit and the
preparation and content of the auditor’s report.
Iluka keeps shareholders and the market informed through the
Annual Report, quarterly production and exploration reports and
by disclosing material developments to the ASX as they occur.
The company also makes available a telephone number and email
address for shareholders to make inquiries of the company.
From time to time, briefi ngs and site visits are arranged for share
analysts and institutional investors. In conducting such briefi ngs,
Iluka takes care to ensure that any price-sensitive information
released is made available to all shareholders (institutional and
private) and the broader investment market at the same time.
Briefi ng materials are lodged with the ASX and then placed on the
company’s website.
Ethical Standards and Conduct
The company has an Employee Code of Conduct which identifi es
the standard of ethical conduct expected of Iluka employees. In
addition, the Board has specifi cally adopted a Code of Conduct for
Directors which establishes guidelines for their conduct in carrying
out their duties as Directors.
Iluka has also established a fraud-control policy to provide for the
confi dential reporting of issues of unacceptable or undesirable
conduct (Business Conduct Reporting and Control Policy). The
policy provides protection against reprisal to the whistleblower
and enables confi dential disclosures to be made by the
whistleblower to the fraud-control offi cer or, where applicable, if
the matter is highly sensitive and the employee believes it more
appropriate, direct to the internal audit function.
Securities Trading Policy
If Directors, offi cers and employees of the company intend to buy
or sell the company’s securities (shares, options, warrants, etc.),
they must do so in accordance with the company’s Securities
Trading Policy.
Under the Securities Trading Policy, Directors and employees are
prohibited from trading in the company’s securities if they are in
possession of price-sensitive information which is not generally
available to the market. In addition to this general prohibition,
senior management and those employees involved in preparing the
company’s statutory fi nancial information (“Restricted Employees”)
and Directors are prohibited from buying or selling securities in
the company during the period from the end of the fi nancial year
or half fi nancial year to the time of the release of the annual or
half-year results.
Prior to trading in the company’s securities, Directors must seek
approval from the Chairman and Restricted Employees must seek
approval from the General Counsel and Company Secretary. In
addition, Directors and Restricted Employees must confi rm to the
Chairman or the General Counsel and Company Secretary (as the
case may be) that they are not in possession of price-sensitive
information that is not generally available to the market.
Shareholder Interface and Continuous Disclosure
The shareholders of the company elect Directors at an Annual
General Meeting in accordance with the company’s constitution.
Shareholders have the opportunity to express their views, ask
questions about company business and vote on items of business
for resolution by shareholders at the meeting.
92
Annual Report 2007
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lluka has a leadership team with extensive experience
in the mineral sands and broader resources
sector. Key technical capabilities in exploration,
project development, operations and marketing is
complemented by the corporate and head offi ce
functions, led by Managing Director David Robb.
Mark Adams, BSc (Mining Eng), MSc (Mineral
Exploration), AusIMM
General Manager, Western Region
Mr Adams joined Iluka in 2006. He has had an extensive
career in the resources sector, including the gold, nickel
and mineral sands business. He spent six years with
BHP as Mining Manager and then General Manager
of the Cannington project. Mr Adams has also worked
with Mount Isa Mines Ltd in senior mine development,
technical and operational roles.
Peter Beilby, BSc (Mining Engineering)
General Manager, Murray Basin
Mr Beilby joined Iluka in 2001 and has over 25 years
experience in the mining industry, including senior roles
with the Wirralie Gold project in Queensland, Resident
Manager of Normandy Mining for the Golden Crown
mine, Project Manager for the Big Bell development and
Resident Manager for the Silver Swan nickel mine.
Peter Benjamin, BSc (Hon), PostGrad Dip in
Exploration and Business Admin
General Manager, Exploration and Geology
Mr Benjamin joined Iluka in 2001 as Group Manager
Exploration. He was appointed to his current role
in June 2006. Peter has extensive geological and
exploration experience, holding roles with Australian
Resources, Gold Mines of Australia and Mt Lyell Mining.
Matthew Blackwell, B Eng (Mech), Grad Dip
(Tech Mgt), MBA
General Manager, Land Management
Mr Blackwell joined Iluka in 2004 as President, US
Operations. Prior to joining Iluka, Matthew was
Executive Vice President of TSX listed Asia Pacifi c
Resources and based in Thailand. Mr Blackwell has a
background in mining and processing with positions in
project management, maintenance and production in the
Australian mining industry.
Simon Green, BA(Hons), ACA
General Manager, Finance & Commercial
(Acting Chief Financial Offi cer)
Mr Green joined Iluka in 2006 as General Manager
Finance after a twenty year career in audit and
assurance with PricewaterhouseCoopers in Australia
and the UK, specialising in the Energy and Resources
sector. Mr Green was appointed acting Chief Financial
Offi cer in January 2008.
Victor Hugo, BSc, MSc, PhD
General Manager, Sales and Marketing
Dr Hugo originally joined Iluka in 1998. After leaving
Iluka in 2001 and working with the minerals sands
industry research and consulting company TZMI, he
re-joined Iluka in 2003 as General Manager Sales
and Marketing. Dr Hugo was appointed to his present
position in February 2006. He has also held positions
with Richards Bay Minerals and Cable Sands.
Philip Nillsen, B Com, CA
General Manager, Business Evaluation and Planning
Mr Nillsen joined Iluka in 1997. He has worked in
various corporate, fi nance, project and operational
roles in Australia and the US. He was appointed Group
Manager, Commercial in 2003. In 2005, Mr Nillsen was
appointed to the role of General Manager, Business
Evaluations and Planning.
David McMahon, BCom
Chief Financial Offi cer (resigned January 2008)
Mr McMahon joined Iluka in January 2007 after 10
years with Wesfarmers Energy Limited. Prior to joining
Wesfarmers, David held senior corporate development
and fi nance roles with Parkhill Lithgow & Gibson,
Standard Chartered Australia Limited and Normandy
Mining Limited. Mr McMahon resigned in January 2008,
to relocate to Canada.
Robert Porter, BA (Hons), MSc, PhD
General Manager, Investor Relations and
Corporate Affairs
Dr Porter joined Iluka in December 2005. He has
worked in the investor relations area for over a decade
with roles at BHP Billiton, BHP, Foster’s, Southcorp and
Ampolex. Dr Porter has also held government relations
roles at Westpac and BP.
Iluka Resources Limited
93
Allan Sale
General Manager, USA
Mr Sale has over 40 years experience in the mineral sands industry
covering a broad spectrum of the industry. He joined Iluka in 1982
after working at Richards Bay Minerals and Consolidated Rutile
Limited. He has extensive experience in the development and
management of large scale and complex mining and processing
operations.
Hans Umlauff, B MEng (Hons), FIEAust
General Manager, South Australian Development &
Project Management
Mr Umlauff joined Iluka in June 2006 as Executive General
Manager, Capital Projects. He has an extensive career in various
Australian and international engineering, operational, project
management and capital management roles with BHP Steel, BHP,
Normandy Mining and Newmont Australia.
Steve Wickham, Assoc. Dip in Mechanical Engineering
General Manager, Technical Services and Best Practice
Mr Wickham is a mechanical engineer with extensive experience
in senior and executive roles in Australia and South Africa in the
manufacturing and mining sectors. Prior to joining Iluka in 2007,
he was Chief Executive Offi cer of Ticor South Africa and Managing
Director of Australian Zircon.
Cameron Wilson, LLB
General Manager, Corporate Services and Company Secretary
Mr Wilson joined Iluka in late 2004 after seven years in a range of
legal and commercial roles with WMC Resources Limited. He has
specialised in mining, corporate and general commercial law for
most of his professional career.
94
Annual Report 2007
The statement of Mineral Resources and Ore Reserves
presented in this Report has been produced in accordance
with the Australasian Code for Reporting of Mineral
Resources and Ore Reserves, December 2004 (the JORC
Code).
The information in the 2007 Annual Report relating
to Mineral Resources and Ore Reserves is based on
information compiled by Competent Persons (as defi ned
in the JORC Code). Each of the Competent Persons
for deposits located outside Australia are members of
Recognised Overseas Professional Organisations (ROPOs)
as listed by the ASX. Each of the Competent Persons have,
at the time of reporting, suffi cient experience relevant
to the style of mineralisation and type of deposit under
consideration and to the activity they are undertaking to
qualify as a Competent Person as defi ned by the JORC
Code. At the reporting date, each Competent Person listed
in the 2007 Annual Report is a full-time employee of Iluka
Resources Limited or Consolidated Rutile Limited. Each
Competent Person consents to the inclusion in the 2007
Annual Report of the matters based on their information in
the form and context in which it appears.
All of the Mineral Resources and Ore Reserve fi gures
reported represent estimates at 31 December 2007. All
tonnes and grade information has been rounded, hence
small differences may be present in the totals. All of
the Mineral Resources information is inclusive of Ore
Reserves (i.e. Ore Reserves are a sub-set of Mineral
Resources and are not additive).
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Iluka Resources Limited
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Iluka Ore Reserves Breakdown by Region and JORC Category at 31 December 2007
Summary of Ore Reserves(1)(2) for Iluka
HM Assemblage(4)
Change
Rutile
Grade HM Tonnes
(%)
Millions
5
5
5
6
6
1
1
1
13
18
16
14
14
14
-
-
-
9
7
8
6.42
(3.12)
(0.35)
3.16
(0.16)
0.06
6.01
Country
Region
Australia
Eucla Basin
Total
Eucla Basin
WA - Mid-West
WA - Mid-West
Total
WA - Mid-West
WA - South-West
WA - South-West
Total
WA - South-West(5)
Murray Basin
Murray Basin
Total
Murray Basin(6)
CRL North Stradbroke Island
CRL North Stradbroke Island
CRL North Stradbroke Island(7)
Virginia
Virginia
Virginia(8)
Proved
Probable
Grand Total
Total
USA
Total
Total
Total
Total
Notes:
(1) Competent Persons - Ore Reserves
Eucla Basin: A Whatham (MAusIMM)
Ore Reserve
Category (3)
Ore Tonnes
Millions
$
In Situ HM
HM
Tonnes Millions Grade
(%)
$
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
98.4
98.4
9.0
97.0
106.0
10.1
59.8
69.9
20.4
25.8
46.2
234.9
125.7
360.6
20.1
2.5
22.6
294.5
409.3
703.8
6.42
6.42
0.66
7.05
7.71
1.19
5.57
6.75
3.82
4.90
8.72
2.13
1.00
3.14
1.82
0.17
1.99
9.62
25.11
34.73
6.5
6.5
7.3
7.3
7.3
11.7
9.3
9.7
18.8
19.0
18.9
0.9
0.8
0.9
9.1
6.7
8.8
3.3
6.1
4.9
Ilmenite
Grade
(%)
Zircon
Grade
(%)
28
28
52
53
53
78
76
76
49
50
49
48
47
47
72
65
71
57
51
53
50
50
14
14
14
5
9
8
11
12
12
11
11
11
16
20
16
11
22
19
WA - Mid-West, WA - South-West and Murray Basin: C Lee (MAusIMM)
CRL North Stradbroke Island: I Reudavey (MAIG)
Virginia: C Stilson (SME)
(2) Ore Reserves are a sub-set of Mineral Resources.
(3) Rounding may generate differences in last decimal place.
(4) All mineralogy is reported as a percentage of in situ HM content.
(5) Rutile component in WA - South-West operations is sold as a Leucoxene product.
(6) Ilmenite currently has had no value ascribed in the reserve optimisation process for the Murray Basin.
Metallurgical testwork and marketing studies are presently underway; the outcomes of which may see a revision of the Ore Reserves.
(7) Ore Reserve estimates are adjusted to refl ect Iluka ownership of 51.04% as at 31 December, 2007.
(8) Rutile is included in Ilmenite for the Virginia region.
96
Annual Report 2007
Iluka Ore Reserves Mined and Adjusted by Region at 31 December 2007
Summary of Ore Reserves Depletion(1)
Country
Region
Australia
Total
Eucla Basin
Eucla Basin
Eucla Basin
Ore Reserves
Active Mines
Non-Active Sites
WA - Mid-West
WA - Mid-West
Active Mines
Non-Active Sites
Total
WA - Mid-West
WA - South-West
WA - South-West
Active Mines
Non-Active Sites
Total
WA - South-West
Murray Basin
Murray Basin
Murray Basin
Active Mines
Non-Active Sites
CRL North Stradbroke Island Active Mines
CRL North Stradbroke Island Non-Active Sites
CRL North Stradbroke Island(4)
Active Mines
Non-Active Sites
Virginia
Virginia
Virginia
Active Mines
Non-Active Sites
Ore Reserves
Total
Total
USA
Total
Total
Total
Total
Notes:
In Situ HM
Tonnes
Millions
2006
In Situ HM
Tonnes
Millions
Mined 2007
In Situ HM
Tonnes(2)
Millions
Adjusted 2007
In Situ HM
Tonnes
Millions
2007
In Situ HM
Tonnes(3)
Millions
Net Change
-
-
-
3.14
7.69
10.83
1.84
5.27
7.10
2.63
2.93
5.56
3.29
-
3.29
1.04
0.89
1.93
11.94
16.78
28.72
-
-
-
(1.19)
-
(1.19)
(0.67)
-
(0.67)
(0.66)
-
(0.66)
(0.28)
-
(0.28)
(0.35)
-
(0.35)
(3.14)
-
(3.14)
-
6.42
6.42
(0.22)
(1.71)
(1.93)
0.02
0.30
0.32
0.00
3.81
3.81
0.13
-
0.13
0.18
0.23
0.41
0.11
9.05
9.16
-
6.42
6.42
1.74
5.97
7.71
1.19
5.57
6.75
1.98
6.74
8.72
3.14
-
3.14
0.87
1.12
1.99
8.91
25.82
34.73
-
6.42
6.42
(1.41)
(1.71)
(3.12)
(0.65)
0.30
(0.35)
(0.65)
3.81
3.16
(0.16)
-
(0.16)
(0.17)
0.23
0.06
(3.03)
9.05
6.01
(1) Rounding may generate differences in last decimal place.
(2) Adjusted fi gure includes write-downs and modifi cations in mine design.
(3) Net change includes depletion by mining and adjustments.
(4) Ore Reserve estimates are adjusted to refl ect Iluka ownership of 51.04% as at 31 December, 2007.
Iluka Resources Limited
97
Iluka Mineral Resource Breakdown by Region and JORC Category at 31 December 2007
Summary of Mineral Resources(1)(2) for Iluka
HM Assemblage(4)
Change
Rutile
Grade HM Tonnes
(%)
Millions
5
4
5
5
7
6
6
6
1
1
2
1
13
12
14
13
14
14
13
14
-
-
-
6
7
9
7
0.13
(1.49)
(4.36)
4.30
(0.65)
(0.01)
(2.07)
Country
Region
Australia
Eucla Basin
Eucla Basin
Eucla Basin(5)
Total
Eucla Basin
WA - Mid-West
WA - Mid-West
WA - Mid-West
Total
WA - Mid-West
WA - South-West
WA - South-West
WA - South-West
Total
WA - South-West(6)
Murray Basin
Murray Basin
Murray Basin
Total
Murray Basin
CRL North Stradbroke Island
CRL North Stradbroke Island
CRL North Stradbroke Island
CRL North Stradbroke Island(7)
Virginia
Virginia
Virginia(8)
Measured
Indicated
Inferred
Grand Total
Total
USA
Total
Total
Total
Total
Total
Mineral
Resource
Category(3)
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Material
Tonnes
Millions
In Situ HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
197.0
21.9
48.4
267.3
447.1
257.9
191.9
897.0
217.8
128.3
106.6
452.7
61.2
139.9
183.2
384.4
569.4
43.0
3.2
615.7
43.0
0.4
43.4
1,535.5
591.5
533.3
8.59
0.46
1.14
10.19
24.39
12.90
8.43
45.72
19.72
9.00
8.63
37.35
8.86
16.05
23.17
48.08
5.00
0.45
0.03
5.49
3.06
0.02
3.08
69.62
38.88
41.40
2,660.3
149.90
4.4
2.1
2.4
3.8
5.5
5.0
4.4
5.1
9.1
7.0
8.1
8.2
14.5
11.5
12.6
12.5
0.9
1.0
1.0
0.9
7.1
4.2
7.1
4.5
6.6
7.8
5.6
29
19
13
27
52
48
50
50
79
78
73
77
48
44
53
49
47
45
44
47
69
60
69
57
53
55
55
48
51
58
49
11
11
9
11
8
8
7
8
9
9
10
10
11
11
11
11
16
16
16
15
10
11
12
Notes:
(1) Competent Persons - Mineral Resources
Eucla Basin: I Warland (MAusIMM)
WA - Mid-West and WA South-West: I Shackleton (MAusIMM)
Murray Basin: D Sleigh (MAusIMM)
CRL North Stradbroke Island: I Reudavey (MAIG)
Virginia: A Romeo (SME)
(2) Mineral Resources are inclusive of Ore Reserves.
(3) Rounding may generate differences in last decimal place.
(4) All mineralogy is reported as a percentage of in situ HM content.
(5) Mineral Resource estimates include a 51% interest in the Colona JV (Tripitaka) by Iluka as at 31 December, 2007.
This represents 69% Iluka ownership of HM tonnes for the Tripitaka Mineral Resource.
(6) Rutile component in WA - South-West operations is sold as a Leucoxene product.
(7) Mineral Resource estimates are adjusted to refl ect Iluka ownership of 51.04% as at 31 December, 2007.
(8) Rutile is included in Ilmenite for the Virginia region.
98
Annual Report 2007
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Sustainability is a key component of shareholder value
creation and delivery for Iluka, and a central component
of the company’s licence to operate.
An external audit of Iluka’s Environment, Health and
Safety systems was conducted at three operational
sites in Queensland, Victoria and USA during 2007, with
all other sites conducting self assessments. The average
compliance score was 80.38 per cent.
Health and Safety
Health and safety remained a major focus for Iluka
during 2007, as the company continued to improve
performance. Iluka recorded a decrease in the overall
number and severity of work place injuries during the
year, with only medical treatment injuries increasing.
The reporting of minor injuries will continue to be
encouraged to ensure near miss incidents are properly
assessed and managed.
Iluka’s loss time injury frequency rate (LTIFR) in 2007
was 1.7, a reduction of 35 per cent from 2006. This
equated to 9 Loss Time Injuries in 2007 compared to 17
in 2006, the majority being soft tissue injuries due to
strains. This is signifi cantly below the mining industry
open cut metaliferrous LTIFR of 5.1. The effective
management of soft tissue injuries led to a reduction in
the LTIFR but a corresponding increase in the medical
treatment injury frequency rate which was 8.3 at the
end of 2007, an increase of 26 per cent compared
with 6.6 in 2006. The all injury frequency rate (AIFR)
improved with a 17 per cent reduction from 32.5 in 2006
to 27 in 2007. Iluka’s AIFR target for 2008 is 25.
The improved safety performance was the result
of greater employee awareness and accountability,
the continued use of risk assessment tools and the
application of the Incident Cause Analysis Method to
learn from adverse events. Behavioural based safety
programs were reviewed during the year and introduced
at all operational sites. The Iluka Action Tracking
System was further improved with new internet based
forms resulting in easier access for employees.
During 2007, the company continued to pursue a range
of health initiatives including:
•
•
•
•
•
•
monitoring for health related exposures;
site discussions on lifestyle issues relating to
health;
fatigue management in relation to long distance
driving;
audiometric testing;
health and skin checks to assist in the early
detection of skin cancer; and
infl uenza vaccinations.
People
Iluka recognises that a strong relationship with its
employees is critical to support the achievement of its
business objectives. A full review of the company’s
attraction and retention programs were completed in
2007 to ensure employee alignment with the business
plan.
Approximately 1600 people were employed at Iluka
at the end of 2007 including operators, engineers,
geologists and various other management and
professional positions. In addition to this, contract
mining and other activities account for an additional
1000 personnel.
Working with Communities
The quality and transparency of Iluka’s consultation
with key stakeholders has been a key underpinning
for the continuation of Iluka’s mining and processing
operations, and in establishing its credentials in new
areas of operation.
In this regard, the company has a longstanding
commitment to community consultation as an integral
part of project planning and approvals, ongoing
operational activities, as well as mine closure and
rehabilitation planning.
Iluka Resources Limited
99
Iluka also maintains a targeted community support program to
deliver both fi nancial and in-kind benefi ts to the communities
in which it operates. Major contributions during 2007 included:
Landcare Australia, education grants for the Far West Coast Native
Title Group in South Australia, Orchestra Victoria, and in Western
Australia the Capel Town Hall redevelopment, Iluka Busselton Jetty
Swim, Catchment Kids Program, Gingin Environment Centre and
the Midwest Clontarf Football Academy.
The main issues that Iluka considers on an ongoing basis when
working with communities include: impact on amenity, use of
resources, such as water and energy, increased traffi c, land use,
and overall social and economic benefi ts to a region.
In Western Australia, community engagement at the Waroona
mine site presented considerable challenges in 2007. Because of
the close proximity of the operations to the township, a number
of complaints were made by residents, mainly related to noise
and dust. The company responded comprehensively to these
concerns and implemented a range of noise mitigation activities.
In addition, predictive noise modelling studies were undertaken to
better understand the complex interplay between noise generated
from its operations and that of ambient noise.
As one example of the company’s engagement with communities,
in South Australia an agreement was reached with the Far West
Coast native title claimant group for mining activities on the
Jacinth-Ambrosia and Tripitaka zircon deposits in the Eucla Basin.
The agreement will provide direct economic compensation as well
as educational, training and employment opportunities for the local
indigenous population.
Environment
Iluka is committed to operating in a responsible manner to
reduce the impact of its mining and processing operations on the
environment, maintain environmental biodiversity, and facilitate
successful rehabilitation of areas previously mined.
All environmental incidents recorded on site are classifi ed
according to the severity of their impact1. During 2007, there was
a 44 per cent reduction in Level 2 and Level 3 incidents, and a 23
per cent increase in reported Level 1 incidents as a result of better
systems, training and increased employee awareness.
One level 3 environmental incident occurred in 2007. The incident
occurred at the Eneabba mine site and involved the accidental
clearing of 11.3 hectares of the South Eneabba Nature Reserve,
including 5.7 hectares of native vegetation. Iluka worked with the
relevant West Australian regulatory authorities and effectively
implemented measures to prevent a similar event occurring in the
future.
1 Level 1 – 5 rating system; Level 5 referring to the most serious environmental
impact. There were no Level 4 or 5 incidents in 2007.
100
Annual Report 2007
The main environmental issues identifi ed at Iluka’s operations
continued to include: water usage, greenhouse gas emissions,
energy usage, dust control, noise emissions, rehabilitation and
biodiversity.
Water Management
Water management continues to be a key priority at Iluka’s
operations. Iluka’s overall water usage increased by 16 per cent
in 2007. The increase in water consumption was associated with
increased dredging operations at CRL, commencement of mining
operations in the Murray Basin and previous under reporting in
2006 in respect of the Mid West mining operations.
Greenhouse Gas Emissions and Energy Management
The company recognises the importance attached to the level of
greenhouse gas emissions as a potential contributor to climate
change, and the increased governmental and societal focus on
various potential schemes to reduce carbon dioxide equivalent
(CO2e) emissions.
In 2007, Iluka established a Greenhouse Strategy Working Group
to ensure a better understanding of the evolving legislative
environment for greenhouse gas emissions and to formulate, in
this context, appropriate management initiatives in relation to
Iluka’s greenhouse gas footprint. A focus of this work includes
the use of coal in the synthetic rutile kiln process, fuels in its
operations, in addition to indirect energy production through
electricity consumption.
Iluka’s CO2e emissions decreased by 6.6 per cent to 1,648 kilo
tonnes in 2007, mainly due to decreased synthetic rutile production
levels and improved energy use.
The amount of energy used at Iluka’s operations increased by 9
per cent between 2006 and 2007. Iluka’s South West and Mid West
operations consumed 48 per cent and 38 per cent respectively
of the company’s total (including CRL) energy consumption,
predominantly for the production of synthetic rutile where coal
represents 54.7 per cent of the total energy consumption.
Iluka is registered under the Australian Energy Effi ciency
Opportunity Act and will audit energy consumption throughout
2008.
Air Emissions
Reviews of all air emission data (oxides of sulphur, carbon dioxide,
oxides of nitrogen, particulates and water) is regularly conducted
by internal personnel and external independent experts. Iluka’s
sites operate within relevant approved levels and national
standards and do not pose a threat to the community or the
environment. Oxides of Nitrogen are detailed for the fi rst time in
this report.
The overall level of particulates generated by Iluka increased by
66 per cent due to the poor condition of the North Capel dedusting
stack and a four month shutdown at Narngulu. CRL contributed 55
per cent of Iluka’s total particulates which was due to increased
production and wind erosion during unusually dry conditions.
Dust Control
Dust control at mine sites continued to be a focus for the company.
Earth moving activities have the potential to generate dust, as do
stockpiles of topsoil, overburden and waste. To minimise airborne
dust, Iluka continued its practice of stabilising those areas using
a combination of water, clay fi nes sourced from the mineral
concentration process and hydro mulching with a mixture of annual
grasses to aid the establishment of vegetative cover. Priority is
placed on stripping vulnerable areas during wetter and less windy
months.
Noise Emissions
Iluka actively seeks to minimise the impact of noise on surrounding
neighbours from its mining and processing activities. Noise
management programs are developed for all new sites to help
reduce noise where applicable and includes activities such as:
baseline noise surveys conducted prior to commencing operations,
predictive noise modelling to simulate known noise sources
including environmental noise, restricting operating hours during
high risk periods and the creation of noise bund walls and berms.
Noise management plans are a key component of each site’s
licence to operate.
Planning
For each new project, Iluka develops a detailed environmental
management plan to address any signifi cant environmental risks
and to minimise land disturbance. These studies are undertaken in
accordance with the environmental approvals process as required
by the relevant State Government authority.
During 2007, a range of environmental studies were undertaken
which included:
•
•
•
•
ground and surface water monitoring and vegetation
surveys for new projects;
pre-mining studies at Tutunup in Western Australia,
including a vegetation survey, groundwater and surface
water monitoring;
vegetation, fauna and soil studies for the Jacinth and
Ambrosia deposits in the Eucla Basin of South Australia;
and
various environmental studies for Murray Basin Stage 2 in
Victoria.
Rehabilitation
Iluka undertakes a number of measures to minimise land
disturbance during mining and to re-establish disturbed areas
as sustainable ecosystems and community assets, upon the
completion of mining. In 2007, the amount of land disturbed
decreased by 11 per cent compared with 2006 as fewer new
mining areas were opened while the amount of rehabilitated land
increased by 42 per cent.
Biodiversity
Critical to protecting biodiversity is an understanding of the fl ora
and fauna present within and around any potential disturbance
areas. When signifi cant species or ecosystems are identifi ed
during pre-mining, environmental assessments, specifi c research
and management plans are implemented.
Iluka Resources Limited
101
Supplementary EHS Statistical Data 2002 - 2007
Table 1: Iluka Safety Performance
Injuries and Frequency Rates 2002 - 2007
Fatality
LTI
LTIFR
MTI
MTIFR
First Aid
FAIFR
AIFR
Minor
2002
2003
2004
2005
2006 2007
0
28
6.3
70
16
NA
60.1
NA
NA
0
21
4.7
32
6.7
246
72.9
64.5
309
0
7
1.4
42
8.5
210
48.4
52.3
315
0
11
1.9
34
5.7
191
27.6
39.7
435
0
17
2.6
43
6.6
152
0
9
1.7
44
8.3
91
24.7
17.1
32.5
27
572
563
2008 AIFR target: 25
Table 2: Site Safety Performance - Injuries 2007
Fatality
LTI
MTI
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Total
0
0
0
0
0
0
0
0
0
4
4
1
0
0
0
0
0
9
8
23
2
5
0
0
4
2
FA
21
49
5
5
0
1
5
5
MINOR
129
143
77
105
1
2
67
39
44
91
563
Table 3: Site Drug Tests 2006 and 2007
2006
2007
# Tests
% Detect
# Tests
% Detect
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Total
0
558
81
265
2
0
30
49
985
0.0
3.2
7.4
2.3
0.0
0.0
0.0
4.1
3.3
201
199
385
188
24
0
68
143
1208
1.5
0.5
0.3
1.1
0
0
5.9
1.4
1.1
Table 4: Iluka Environment Incidents 2002 - 2007
2002
2003
2004
2005
2006
2007
2,459
2,317
137
37
1
0
97
10
0
0
927
157
1,085
58
2
0
0
3
0
0
846
16
1
0
0
1,055
8
1
0
0
2,634
2,424
1,086
1,146
863
1,064
Level 1
Level 2
Level 3
Level 4
Level 5
TOTAL
Table 5: Site Safety Performance - Frequency Rates 2002 - 2007
2002
2003
2004
2005
2006
2007
LTIFR MTIFR
LTIFR MTIFR
LTIFR MTIFR AIFR
LTIFR MTIFR AIFR
LTIFR MTIFR FAIFR AIFR
LTIFR MTIFR FAIFR AIFR
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Total
Table Key
6
6
8.7
NA
NA
6.6
5.6
2.2
6.3
12.7
13
20.8
NA
NA
13.2
30.8
6.5
16
7.3
3.5
6.4
8.5
0
2
8.5 56.7
2.4
5.6 43.7
14.1 72.3
3
9.8 65.3
10
11.7
4.6
3.1 65.9
4.3
4.3 19.9
0
0
0 19.3
0 76.4
2.4
11.9 28.6
0
0
0
4.3 50.5
4.1 40.8
4.6
16
NA
NA
0
3.9
0
4.7
NA
NA
3.1
5.8
NA
6.7
0
NA
1.4
6.6
NA
23
NA
2.6
0 15.7
1.8
1.8
NA 14.5 46.2
0
0
2.9
4.3
0
5.4
0
0
4.4
16.7
24
13.5
43.3 61.1
5.2
6.7
0
0
31.9 37.1
13.5 25.6
5
6.7
5.3
11
5
6.7
8.9
11
3.3
2.5
2.3
0
0
0
0
0
6.7
17.5 27.5
13.5
30.2 46.2
4.6
7.9
0
0
7.3
3
11.4 18.3
7.9 15.8
0
0
17.1 17.1
9.1 16.4
7.5 10.5
8.5 52.3
1.9
5.7 39.7
2.6
6.6
24.7 32.5
1.7
8.3
17.1
27
AIFR = All Injury Frequency Rate (include LTI, MTI and FAI)
FAI = First Aid Injury
FAIFR = First Aid Injury Frequency Rate
LTI = Lost Time Injury
LTIFR = Lost Time Injury Frequency Rate
MTI = Medical Treatment Injury
MTIFR = Medical Treatment Injury Frequency Rate
NA = Not Available
** Other: Geology, Exploration, WA Projects, Eucla Basin project, Murray Basin Stage 2 project, Corporate
102
Annual Report 2007
Table 6: Site Environment Incidents for 2007
Table 9: Site Oxides of Nitrogen (tonnes - t) 2002 - 2007
Environmental
Performance
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Total
Level 1
Level 2
Level 3
Level 4
Level 5
142
567
240
38
1
0
55
12
1,055
1
5
1
1
0
0
0
0
8
0
1
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Table 7: Site Particulates (tonnes - t) 2002 - 2007
2002
2003
2004
2005
2006
2007
South West
Mid West
154
276
Murray Basin
NA
CRL
Florida
Georgia
Virginia
Other **
4
93
NA
0
NA
184
249
NA
330
58
NA
0
NA
163
348
0
292
63
NA
4
NA
Total
527
821
870
138
274
0
486
63
0
3
NA
964
78
235
0
642
17
0
7
191
333
187
897
5
0
8
NA
NA
979
1,621
Table 8: Site Oxides of Sulphur (tonnes - t) 2002 - 2007
2002
2003
2004
2005
2006
2007
South West
4,571
3,407
5,982
7,446
7,405
7,200
Mid West
327
Murray Basin
NA
CRL
Florida
Georgia
Virginia
Other **
4
28
NA
NM
NA
287
NA
8
34
NA
3
NA
454
535
275
151
0
3
32
NA
5
NA
5
5
30
19
15
NA
0
3
9
0
27
NA
0
0
8
0
26
NA
Total
4,930
3,739
6,476
8,055
7,719
7,385
2002
2003
2004
2005
2006
2007
South West
Mid West
NM
NM
Murray Basin NM
CRL
Florida
Georgia
Virginia
Other **
Total
NM
NM
NM
NM
NA
0
NM
NM
NM
NM
NM
NM
NM
NA
0
NM
NM
NM
NM
NM
NM
NM
NA
0
NM
NM
NM
NM
NM
NM
NM
NA
0
NM
NM
NM
NM
NM
NM
NM
NA
0
147
0
24
443
3
0
202
NA
819
Table 10: Site Water Use (mega litres - ML) 2002 - 2007
2002
2003
2004
2005
2006
2007
South West
5,289
5,274
4,513
5,152
5,781
4,880
Mid West
14,919
17,469
14,137
15,359
14,320
17,558
Murray Basin
NA
NA
2
1,553
1,122
2,392
CRL
25,687
25,329
54,000
26,196
23,711
27,272
Florida
Georgia
Virginia
Other **
1,502
1,500
1,707
1,524
1,150
NA
1,119
NM
NA
347
NM
324
433
141
1,005
3,275
1,196
2,092
NM
NM
11
1
779
6
Total
48,516
49,919
75,688
53,492
47,432
54,980
Table 11: Site Water Discharge (mega litres - ML) 2002 - 2007
2002
2003
2004
2005
2006
2007
South West
3,375
4,886
4,252
6,961
3,981
6,509
Mid West
0
Murray Basin
NA
CRL
Florida
Georgia
Virginia
Other **
0
819
NA
0
NA
0
NA
0
1,432
NA
14
NA
0
NA
0
962
93
3
NA
0
0
0
931
170
0
NA
0
6
0
152
10
262
6
36
26
1,422
1,415
0
159
0
Total
4,194
6,332
5,310
8,062
4,417
9,567
Table Key
NA = Not Available
NM = Not Measured
**Other: Geology, Exploration, WA Projects, Eucla Basin Project, Murray Basin Stage 2 Project, Corporate
Iluka Resources Limited
103
Table 12: Site Water Recycled (mega litres - ML) 2002 - 2007
Table 14: Site Energy Resources Used (%) 2002 - 2007
2002
2003
2004
2005
2006
2007
2002
2003
2004
2005
2006
2007
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Total
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
0
0
1
25,865
155
0
1,546
0
NM
27,567
Coal
Electricity
58.7
15.6
Natural Gas
10.3
LPG
Diesel
Petrol
Fuel, Oil
& Greases
Total
1.1
11.2
0.1
3.0
100
60.5
15.5
10.6
0.1
11.6
0.1
1.6
100
59.7
16.1
10.2
0.1
12.6
0.1
1.2
100
59.7
19.2
9.8
0.1
9.4
0.1
1.7
100
61.1
15.8
7.4
0.0
15.0
0.0
0.7
100
54.8
14.9
10.3
0.0
19.6
0.1
0.3
100
Table 13: Site Energy Use (Terajoules - TJ) 2002 - 2007
Table 15: Site Greenhouse Gases (kt CO2e) 2002 - 2007
2002
2003
2004
2005
2006
2007
2002
2003
2004
2005
2006
2007
South West
5,862
Mid West
5,416
5,897
5,323
6,447
5,440
6,663
6,441
6,019
6,206
7,725
6,047
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
NA
571
530
NA
243
NM
NA
518
424
NA
335
NM
NA
519
356
213
470
NM
112
579
378
313
501
NM
249
793
140
220
521
4
591
884
132
4
515
11
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
578
615
NA
121
59
NA
24
NA
596
614
NA
179
147
NA
71
NA
646
627
NA
158
85
50
69
NA
665
691
17
192
217
188
71
NA
651
713
46
240
19
26
70
NA
584
649
98
209
17
14
76
1
Total
12,622
12,497
13,445
14,565
14,574
15,909
Total
1,397
1,607
1,635
2,041
1,765
1,648
Table 16: Site Land Use - Disturbed, Rehabilitated, Open (hectares - Ha) 2002 - 2007
2002
2003
2004
2005
2006
2007
Disturbed Rehab Disturbed Rehab Disturbed Rehab Open Disturbed Rehab Open Disturbed Rehab Open Disturbed Rehab Open
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
120
193
NA
140
212
NA
74
NA
183
73
NA
124
368
NA
31
NA
130
210
NA
98
193
NA
90
NA
104
119
NA
68
53
NA
41
NA
285
129
104
167
152
231
121
NA
200 1,785
127 1,440
NA
66
17
14
55
NA
104
498
699
208
419
NA
135
101
306
127
36
285
134
NA
133 1,864
268 1,763
0
76
375
542
149 1,450
158
67
NA
826
371
1
172
164
73
140
0
0
113
75
134 1,902
146 1,781
0
79
448
607
447 1,003
137
71
2
689
413
74
269
131
50
101
0
0
83
49
264
1,907
54
58
36
292
646
77
59
1,858
440
672
711
43
419
64
Total
739
779
721
385
1,189
479 5,153
1,124
851 7,192
737
1,016 6,917
683
1,486
6,114
**Other: Geology, Exploration, WA Projects, Eucla Basin Project, Murray Basin Stage 2 Project, Corporate
104
Annual Report 2007
Table 17: Site Waste Management Practices 2007
Chemical & Lab Waste
Hydrocarbon Contam
Tyres
Paper & Cardboard
Scrap Metal
Grease & Oil
Batteries
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
Table Key
-
L/T
L/T
L/T
L/T
-
C
-
-
L
-
L/T
-
-
C/T
-
C
L/RU
RE
-
RE/C
L/RU
RE/C
L/RE
RU/RE
L/RE
RE
RU/RE
L/C
L/RU
L/RE
RE/C
RU/RE
RE/C
RE
RE/C
RE/C
RU/RE
RE/C
RE/C
RU
RE/T
C
RE/C
-
-
C/T/RE
-
RU/RE
RU/RE
RE
RE/C
RE/C
-
RE/C
-
L = Disposal to Land Fill
RU = Re-Use
RE = Recycling
T =
C =
=
-
Treatment off-site
Collected by licensed contractor for a range of uses
not applicable
Table 18: Site Waste Management (tonnes - t) 2007
Chemical & Lab Waste
Hydrocarbon Contam
Tyres
Paper & Cardboard
Scrap Metal
Grease & Oil
Batteries
South West
Mid West
Murray Basin
CRL
Florida
Georgia
Virginia
Other **
0
5
3
1
1
0
1
0
0
87
3
55
0
0
3
0
NA
NA
17
0
6
8
1
2
NA
5
6
27
60
24
21
NA
545
364
18
537
600
200
9
NA
NA
384
27
1
0
0
88
0
3
NA
2
3
NA
0
NA
0
**Other: Geology, Exploration, WA Projects, Eucla Basin Project, Murray Basin Stage 2 Project, Corporate
Iluka Resources Limited
105
Figure 1: Iluka Environment, Health & Safety Management System Compliance
Figure 2: Iluka Level 2 and above Environmental Incidents
6
4 8
8
5
8
9
8
1
8
8
7
5
7
6
8 7
7
8
3
.
0
8
0
0
.
1
8
100
90
80
70
60
50
40
30
20
10
0
t
n
a
i
l
p
m
o
C
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L
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a
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a
r
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u
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u
u
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n
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a
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W
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i
i
a
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a
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W
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Site
7
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e
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a
r
e
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a
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u
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I
6
0
‘
e
g
a
r
e
v
a
a
k
u
l
I
Level 2 and above Environmental Incidents
200
180
160
140
120
100
80
60
40
20
0
5
7
1
9
5
1
7
0
1
1
6
02 03 04 05
7
1
06
9
07
106
Annual Report 2007
n
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a
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Company Contact Details
Uncertifi cated Shareholders
Iluka Resources Limited
ABN: 34 008 675 018
Registered Offi ce:
Level 23, 140 St George’s Terrace
PERTH WA 6000
Postal Address:
GPO Box U1988
PERTH WA 6845 Australia
Telephone: +61 8 9360 4700
Facsimile: +61 8 9360 4777
Website: www.iluka.com
This site contains information on Iluka’s products,
marketing, operations, ASX releases, fi nancial and
quarterly reports. It also contains links to other sites,
including the share registry.
Share Registry Inquiries
Shareholders who require information about
their shareholdings, dividend payments or related
administrative matters should contact the company’s
share registry:
Computershare Investor Services Pty Limited
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH WA 6000
Postal Address:
GPO Box D182
PERTH WA 6840
Telephone: +61 8 9323 2000 or 1300 557 010
Facsimile: +61 8 9323 2033
Website: www.computershare.com
Each inquiry should refer to the shareholder number
which is shown on issuer-sponsored holding statements
and dividend statements.
Stock Exchange Listing
Iluka’s shares are listed on the Australian Securities
Exchange Limited. The company is listed as “Iluka” with
an ASX code of ILU.
Change of Address
Shareholders who have changed their address should
give written advice of the change, quoting the relevant
shareholder number, to the company’s share registry.
The share register was converted on 27 April, 1998.
Information regarding the company’s issuer-sponsored
holdings is available from the company’s share registry.
Shareholder Review and Full Annual Report
Mailing List
All shareholders are entitled to receive an Annual
Shareholder Review and an Annual Report. Shareholders
wishing to receive one or both of these documents should
write to the share registry and quote their shareholder
number. For new shareholders an election form is
available to receive a copy of the Annual Shareholder
Review and Annual Report.
Copies of the reports are available on Iluka’s website
www.iluka.com.
Payment of Dividends
The Board of Directors announced its intention not to pay
a fi nal dividend for 2007.
Tax File Numbers (TFN)
The company is obliged to deduct tax from dividend
payments, other than those which are fully franked,
to shareholders registered in Australia who have not
quoted their TFN to the company. Forms for notifying TFNs
are sent to all new shareholders of the company. For
shareholders who have not already quoted a TFN, they
may do so by contacting the company’s share registry.
2008 Calendar
21 February Announcement of full year results
19 May
Closure of acceptances of proxies for AGM
21 May
Annual General Meeting – Parmelia Hilton,
Perth, Western Australia
21 August
Announcement of half year results
31 December Financial year end
All dates are indicative and subject to change.
Shareholders are advised to check with the company to
confi rm timings.
Iluka Resources Limited
107
108
Annual Report 2007
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