progr ess
toWarDs Creating anD DeliVering sHareHolDer Value
annual report
il uka | 200 8
Co n t e n t s
DIReCtoRs’ RepoRt
RemuNeRAtIoN RepoRt
CoRpoRAte GoveRNANCe
FINANCIAL RepoRt
oRe ReseRves AND mINeRAL ResouRCes
sustAINABLe DeveLopmeNt
LeADeRshIp teAm
FIve YeAR FINANCIAL peRFoRmANCe
stAtemeNt oF shARehoLDINGs
CoRpoRAte INFoRmAtIoN
1
9
22
27
90
94
101
103
104
105
ex p l a n a t i o n o f st r u c t u r e o f
A n n u a l R e p o r t D o c u m e n t s
the 2008 Annual Report provides shareholders
with detailed information in relation to the financial
statements, Directors’ Report (including remuneration
report), ore reserves and mineral resources and
sustainable development. the Annual shareholder
Review provides a summary of Iluka’s 2008 financial year
and is available on Iluka’s website, www.iluka.com
Australian currency is shown in this report
unless otherwise indicated.
N o t i c e o f A n n u a l G e n e r a l me e t i n g
the 54th Annual General meeting of shareholders
of Iluka Resources Limited will be held at the
Argyle Ballroom at the parmelia hilton hotel, 14
mill street, perth, Western Australia on thursday
28 may 2009, commencing at 9.30am (Wst).
A separate Notice of meeting and proxy Form have
been sent to registered shareholders. the Notice
of meeting is available on Iluka’s website.
Iluka Resources Limited, ABN 34 008 675 018
Level 23, 140 st Georges terrace, perth WA 6000
Gpo Box u1988, perth WA 6845 Australia
telephone + 61 8 9360 4700
Facsimile + 61 8 9360 4777
Website www.iluka.com
d i r e c t o r s ’ r e p o r t
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 2008.
reVi e w oF o Pe r at i oNs
F iN aNc i a l co m m eNta r y
d i r e c t o r s
the following individuals were directors of iluka
resources limited during the whole of the financial year
and up to the date of this report:
robert lindsay every (chairman effective 21 may 2008)
donald marshall morley
George John Pizzey
Gavin John rezos
david alexander robb
ms Jenny seabrook was appointed as director on 21 may
2008 and continues in office at the date of this report.
mr ian colin robert mackenzie, mr Grahame david
campbell and ms Valerie anne davies were directors
until their resignation on 21 may 2008.
Pr iNc iP a l a c t iVi t i e s
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 and zircon, and
sales of these products throughout the world.
s iG NiFi c aNt c
HaN Ge s
during the year the following significant changes
occurred:
(a)
$339.0 million in new equity funds raised through
a 4 for 7 right issue.
executed a $500.0 million debt facility agreement
on 12 march 2008.
committed to two new major projects in 2008:
Jacinth ambrosia and murray Basin stage 2.
divested 50% interest in the Narama coal joint
venture on 15 January 2008 with effect from 1
January 2008.
(b)
(c)
(d)
there were no other significant changes in the state of
affairs of the Group during the financial year.
section i – overview
reported earnings
iluka recorded a net profit after tax and minority interests
(NPat) for the year ended 31 december 2008 of $77.5
million, inclusive of $30.0 million attributable to the sale of
iluka’s interest in the Narama coal joint venture, compared
with $51.1 million for the previous corresponding period.
NPat is inclusive of significant items of $15.8 million
relating to impairment reversals net of asset write offs
and the recognition of previously unrecognised tax losses
to be utilised in future years offset by the tax expense.
the result also includes a net cash and non-cash charge
of $13.1 million relating to western australian operating
costs that were directly expensed whilst production was
suspended due to the interruption to gas supplies that
occurred during the year, net insurance proceeds of $2.5
million pre-tax have been received to date.
total Group eBit, inclusive of mineral sands was $81.3
million (2007: $123.7 million), with mining area c making
an eBit contribution of $56.4 million (2007: $19.5 million),
reflecting higher capacity payments, increased sales
volumes and higher iron ore prices.
mineral sands eBitda of $222.3 million was 3.6 per cent
lower than the previous corresponding period (2007:
$230.6 million). mineral sands eBit before significant
items of $61.0 million (2007: $86.1 million) was 29.1 per
cent lower than the prior corresponding period due to the
lower eBitda result and higher depreciation charges.
sales revenue (including currency hedging) increased
by 10.1 per cent to $988.5 million (2007: $897.9 million).
total mineral sands sales volumes were relatively stable,
however, the sale of higher value zircon from inventory
and higher overall us dollar product prices more than
offset a $63.6 million currency hedging variance.
the average a$/us$ spot exchange rate for 2008
was 85.35 cents (ranging from 98.05 cents to 60.38
cents) compared with 83.90 cents for the year ended
31 december 2007 (ranging from 92.67 cents to 77.23
cents). the significant fluctuations in exchange rates
throughout 2007 and 2008, however, resulted in a positive
NPat benefit of $11.9 million in 2008 compared with the
previous corresponding period. this benefit was offset
by a negative NPat impact of $21.7 million for hedge
contracts in 2008 compared to a net benefit of $21.1
million in the previous corresponding period associated
primarily with the close out of the iluka hedge book in
2006.
total cash costs of production of $656.0 million were
similar to those in 2007 of $650.3 million, notwithstanding
the significant cost pressures in the resources sector
throughout most of 2007 and 2008.
i l u k a r e s o u r c e s l i m i t e d
1
2
aN Nu a l
r ePo r t 2 0 0 8
unit cash costs of production increased by 6.5 per cent to $325.70
per tonne due to lower production volumes, after adjusting for
$12.6 million of cash costs incurred when there was no production
in western australia due to the gas supply situation. cost of
goods sold includes an adverse inventory movement of $79.6
million reflecting a drawdown in stocks in 2008. depreciation and
amortisation costs were $161.3 million, up $16.8 million on the
previous corresponding period reflecting the shorter life higher strip
ratio mines being mined in western australia during the period.
the sale of iluka’s interest in the Narama coal joint venture was
completed on 15 January 2008, effective from 1 January 2008. the
net profit after tax on the sale of Narama of $30.0 million is reported
as a discontinued operation. Narama’s contribution to NPat in the
previous corresponding period when it was an operating business
was $10.9 million.
earnings per share (“eps”) for 2008 were 22.5 cents (2007: 21.6
cents). the shares on issue at 31 december were 380.7 million
compared with 242.2 million at 31 december 2007, the higher level
reflecting the 4 for 7 pro-rata entitlement issue in 2008.
cash Flow
cash flow from operating activities of $233.0 million was $137.5
million higher than the previous corresponding period. Net cash
from operations of $223.0 million was $59.8 million higher than the
previous corresponding period with slightly lower eBitda in 2008
being offset by a reduction in working capital due to the drawdown
in inventory. Net cash flows from interest, tax, exploration, mining
area c and coal compensation were $65.8 million higher than the
previous corresponding period due to higher mining area c royalty
receipts and the recovery of tax instalments that were required to be
made in 2007.
capital expenditure payments of $198.4 million were $80.2 million
higher than in 2007. overall capital expenditure payments for the
new projects of murray Basin stage 2, Jacinth-ambrosia and Brink
were $123.0 million. Net proceeds from the pro-rata entitlement
offer, undertaken in the first half, were $339.9 million.
dividend
Given current Group capital requirements to develop Jacinth-
ambrosia and murray Basin stage 2, available franking credits and
uncertainty associated with global economic conditions, directors
have decided not to pay a 2008 final dividend.
Gearing & interest cover
Gearing (net debt/net debt + equity) was 17.4 per cent at 31
december 2008, compared with 44.3 per cent at 31 december 2007
and 14.9 per cent at 30 June 2008. Net debt at 31 december 2008 of
$215.7 million was $382.4 million lower than at 31 december 2007.
Net interest expense for 2008 of $19.0 million was net of $4.0 million
of interest capitalised in respect of debt drawn to fund new projects.
iluka’s interest coverage ratio (eBitda/net interest expense) for the
year was 12.7 times (2007: 6.4 times)
se c t i o n i i - in c o m e st a t e m e n t an a l y s i s
the composition of the company’s 2008 year results is summarised
in table 1 below, followed by a narrative of each line item.
table 1: Group Profit and loss summary - $million
2008
988.5
29.6
1,018.1
3.9
(656.0)
(79.6)
(64.1)
222.3
(161.3)
61.0
(29.6)
56.4
13.7
(25.7)
5.5
81.3
(23.0)
4.0
(16.7)
45.6
(0.9)
10.3
30.0
(7.5)
77.5
sales revenue
add/(less): currency hedging
sales revenue (pre hedging)
other income
cash costs of Production
inventory movement
marketing, exploration,
Project and technical costs
mineral sands eBitda
depreciation and amortisation
mineral sands eBit
(before significant items)
currency hedging
mining area c
other earnings
corporate and other
significant items
total eBit
Net interest costs
interest capitalisation
other Financing costs
Profit Before tax
tax expense
tax Benefit - significant items
Profit from discontinued
operation (Narama coal)
minority interests
Net Profit after tax
sales revenue
2007
Variance%
897.9
(34.0)
863.9
10.6
(650.3)
58.3
(51.9)
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
10.0
N/a
17.8
(63.2)
1.0
N/a
(23.5)
(3.6)
(11.6)
(29.1)
N/a
189.2
280.6
(31.8)
N/a
(34.3)
45.0
N/a
1.1
(29.8)
94.1
N/a
175.2
19.3
51.7
sales revenue excluding currency hedging gains increased by $154.2
million (17.8 per cent) compared with the previous corresponding
period. Higher volumes of zircon and high value titanium dioxide
products were sold with an overall average price increase of 3.2
per cent resulting from higher prices for titanium dioxide products
offsetting small reductions, on a full year basis, in prices for zircon
after price increases were achieved in the second half. the benefit
of higher product pricing was offset partially by the appreciation of
the australian dollar from an average of 83.90 us cents in 2007 to
85.35 us cents in 2008.
other income
the other income of $3.9 million (2007: $10.6 million) includes
insurance claim proceeds received to date of $2.5 million in respect
of the western australian gas outage that occurred in the year. in
2007, other income comprised mainly profit on land disposals in
western australia.
Production and cash cost of Production
mining area c
total mineral sands production decreased over the same period by
8.7 per cent, with higher murray Basin production being offset by
lower production in western australia due to planned maintenance,
the gas outage and lower grade and assemblage characteristics that
were expected of the ore bodies being mined, leading to a 6.5 per
cent increase in the unit cash cost of production for the group.
cash costs of production were higher in the murray Basin, due to
a full year of production in 2008. costs were lower in western
australia, despite additional cost imposts associated with the
gas supply disruption and cost pressures in the resources sector
throughout much of the year. cash costs include $12.6 million in
western australia incurred when operations were temporarily shut
down due to the gas outage in June which were expensed and have
been excluded from the unit cash cost calculation so as to more
appropriately reflect underlying cost performance.
inventory movement
the large decrease in inventory mainly reflects the drawdown in
stocks in western australia and murray Basin. in western australia,
inventory reduced by $45.5 million following planned maintenance of
the synthetic rutile kilns in the first quarter, production restrictions
associated with the disruption to gas supply for the operations in
June/July and the drawdown of zircon stockpiles to meet strong
demand in the second half of the year. in the murray Basin, the
reduction was $35.5 million due to the sale of zircon stockpiles built
up in 2007 and the depletion of the Hmc stockpile remaining from
mining activity at douglas in 2006 that preceded the commissioning
of the Hamilton mineral separation plant.
marketing, exploration, Project and technical costs
these expenses of $64.1 million (2007: $51.9 million) comprise
sales and marketing expenses, including Government royalties of
$26.3 million (2007: $18.0 million), exploration expenses, technical
support costs and related expenses. the total includes $17.0 million
(2007: $10.2 million) associated with greenfields exploration, which
increased in 2008 to assess non-mineral sands opportunities and
previously unexplored areas of iluka’s significant tenement holdings
in the eucla and murray Basins, and project expenses not associated
with existing operations.
depreciation and amortisation
the increase in mineral sands depreciation and amortisation
charges to $161.3 million (2007: $144.5 million) is attributable to
higher charges in western australia due to mining operations over
the last year being on shorter life deposits, including cloverdale
and waroona in the south west of western australia. these mining
operations commenced in the third quarter of 2007, with mining
at cloverdale ceasing in 2008 and mining at waroona scheduled to
cease in the fourth quarter of 2009.
currency Hedging
the $29.6 million loss from currency hedging, which is included in
sales revenue, compares to a gain of $34.0 million in 2007, of which
$26.2 million was associated with the accounting profit from the
close out of the previous iluka currency hedging arrangements in
2006. the currency hedging loss in 2008 results from the lower spot
exchange rates prevailing for contracts delivered compared to the
rates at which the hedges were taken out.
the eBit contribution in 2008 of $56.4 million (2007: $19.5 million)
reflects higher one-off capacity payments and an increase in the
royalties resulting from higher us dollar denominated iron ore prices
and increased sales tonnages. capacity payments of $1.0 million
are payable to iluka for each incremental million tonnes of mac
production in the year ending 30 June and any payments due to iluka
are recognised at 30 June each year. Production at mac increased
following the completion of BHP Billiton’s rapid Growth Project 3
and resulted in capacity payments of $6.0 million for the period,
compared with $2.0 million for the previous corresponding period.
associated with an expansion in the production capacity at mac,
sales of iron ore, on which iluka is entitled to a 1.25% FoB royalty,
increased by 13.6 million dry metric tonnes (“mdmt”) to 36.8 mdmt.
other earnings
the majority of other earnings are foreign exchange gains of $13.6
million that arose on the revaluation of debtors due mainly to a
reduction in the level of us dollar denominated debt used as an
offset to us dollar receivables following the equity raising. Gains of
$10.6 million arose in iluka and us dollar debt increased to offset
the level of debtors. Gains of $3.0 million arose in crl which has no
us dollar debt to offset its receivables. there were no significant
components of other earnings in 2008. other earnings in 2007
comprised mainly the final New south wales coal compensation
receipts of $2.0 million.
corporate and other
corporate and other costs increased by $7.3 million to $25.7 million
compared with the previous corresponding period ($18.4 million) due
mainly to an increase in expenditure for commercial and business
development activities within the group, as well as higher charges
associated with iluka’s predominantly equity based incentive and
key employee retention arrangements. the previous corresponding
period also included debtor revaluation losses of $1.1 million.
significant items
at each balance date, the carrying value of non-current assets
is reviewed to ensure no assets are stated in excess of their
recoverable amount. where carrying values are assessed to be less
than corresponding recoverable amounts, an ‘impairment charge’
may be required to be taken.
as part of this process, assets which have had previous impairment
charges are also reassessed and, where the recoverable value of
the assets has increased as a result of changes to the assumptions
and factors, the impairment charge is reversed to a maximum of the
original charge less the depreciation and amortisation that would
otherwise have been incurred if no impairment had been recognised.
impairment testing for the group’s non-current assets involves
consideration of a range of significant assumptions including
those relating to quantities of mineral reserves and ore resources,
operational parameters, future short and long-term product prices,
future spot exchange rates for the australian dollar compared to
the us dollar and future cash costs of production, sustaining capital
expenditure and rehabilitation. the impact of foreign currency
hedges on future cash flows is excluded from the impairment
assessment as the underlying derivative contracts are carried at
their fair value on the balance sheet. a summary of the changes in
iluka’s non-current assets associated with the year-end review of
carrying values is provided in the following table.
i l u k a r e s o u r c e s l i m i t e d
3
4
aN Nu a l
r ePo r t 2 0 0 8
summary of changes in year end carrying values of Non current assets
$ million
south west mid west murray Basin total
the non-current assets of the mid west operations at 31 december
2008 (after the carrying value adjustments) were $231.7 million.
231.9
252.8
596.1
1,080.8
murray Basin
Before adjustments
reversal of 2006
impairment charge
reversal of 2005 impairment
on processing assets
write-off of fair value of ore
bodies unlikely to be mined
write-off of study costs
and other
after adjustments
south west
45.6
-
9.5
-
-
-
-
45.6
9.5
(21.7)
(16.0)
(37.7)
-
277.5
(8.9)
231.7
(3.0)
577.1
(11.9)
1,086.3
impairment testing at 31 december 2006 generated a pre-tax
write-down against the non-current assets of the south west
operations (which at the time were $285.4 million) of $60.0 million.
the charge arose following a review of a range of business and
economic assumptions and exclusion from mine development plans
of significant ore deposits which had been included in previous plans.
at 31 december 2008 a combination of increased product prices,
lower exchange rates and further changes to mine plans resulted
in the present value of the future cash flows of the operation being
significantly higher than the carrying value of the non-current assets.
an impairment reversal of $45.6 million (before tax) has been
recognised, representing the full value of the previous impairment
less depreciation and amortisation that would otherwise have been
charged.
after the impairment reversal the non-current assets of the south
west operations at 31 december 2008 are $277.5 million.
mid west
impairment testing at 31 december 2005 generated a pre-tax write
down against the non-current assets of the mid west operations
(which at the time were $401.1 million) of $96.1 million. the charge
arose following a review of a range of business and economic
assumptions and the exclusion of any cash inflows in relation to the
commercial treatment of iron oxide tailings.
at 31 december 2008 the mid west assets were reviewed in the
context of a revised group operating strategy associated with the
development of the Jacinth-ambrosia deposit in south australia and
the processing of concentrate material from the deposit through the
Narngulu mineral separation Plant, together with the decision to idle
one of the two synthetic rutile kilns for an indefinite period from mid
2009.
the Narngulu processing facilities will now be used for an extended
life and accordingly the impairment charge recorded on that asset
has been reversed, net of the depreciation that would otherwise
have been charged, resulting in an impairment reversal of $9.5
million (before tax) for the year.
the revised mine plan for eneabba arising from the decision to
prioritise Jacinth-ambrosia material through the Narngulu mineral
separation Plant, resulted in two ore bodies with fair value balances
from previous acquisitions in 1998 being considered unlikely to be
mined. a charge of $30.6 million (before tax) has been recorded in
respect of these ore bodies and study costs for other developments
that are no longer considered to be of value.
the revised mine plan for the region resulted in ore bodies with
fair value associated with the acquisition of Basin minerals limited
in 2002 being considered unlikely to be mined, resulting in an
impairment charge of $16.0 million (before tax). in addition, study
costs for developments that will not proceed of $3.0 million (before
tax) have also been written off.
the non-current assets of the murray Basin operations at 31
december 2008 after the carrying value adjustments were $577.1
million.
Net interest costs
interest costs (net of interest income) decreased to $23.0 million
(2007: $41.8 million) due to the reduction in net debt following the
receipt of proceeds from the pro-rata entitlement offer in march and
april. Net debt at 31 december 2008 of $215.7 million was $382.4
million lower than the 2007 year-end balance of $598.1 million.
interest capitalisation
interest capitalisation of $4.0 million was associated with capital
expenditure for the development of the murray Basin stage 2 and
Jacinth-ambrosia projects. interest is capitalised until the assets
are ready for use and then depreciated over the life of the asset.
other Financing costs
these are primarily the unwind of the discount associated with the
restoration and closure cost provisions.
tax expense
an income tax expense of $0.9 million, compares to a 2007 tax
expense of $15.5 million. the low effective tax rate is influenced
by the tax expense on earnings in the united states being at 20
per cent, the recognition of united states tax losses that were not
previously recognised due to the expected level of taxable income
in the united states and other permanent adjustments which are
similar in quantum to the previous corresponding period. the income
tax expense relating to the profit on sale of Narama coal forms part
of the profit from discontinued operations.
tax Benefit on significant items
a deferred tax expense of $1.6 million has been recognised in
respect of the net impairment credit of $5.5 million arising from the
matters set out above.
in addition, certain us deferred tax benefits for tax losses
associated with the closure of the Florida/Georgia operation were
not recognised previously due to uncertainty as to their eventual
use. Following the decision to develop the Brink deposit in the year
and given the forecasts of future taxable income in the us, all of
the unrecognised tax losses remaining at 31 december 2008 have
been recognised as a deferred tax asset of $11.9 million with an
associated benefit included in tax expense.
recognition of these losses as an asset at 31 december 2008 was
in addition to the recognition of $2.8 million of such losses against
taxable income for the year.
discontinued operation - Narama coal
the after tax contribution of $30.0 million (2007: $10.9 million)
reflects the profit on sale of iluka’s interest in the joint venture
effective 1 January 2008 was inclusive of the recognition of $9.6
million of previously unrecognised capital losses.
minority interests
lower profits attributable to minority interests of $7.5 million (2007:
$9.3 million) related to a lower NPat for consolidated rutile ltd
(iluka 51.04 per cent interest).
di r e c t o r s ’ P r oFi l e s
robert lindsay every, Bsc, Phd, Ftse, Fie aust, cP eng, Faicd
chairman
dr every was appointed to the Board in march 2004. He is the
chairman of wesfarmers limited and a director of Boral limited.
dr every was formerly the managing director and chief executive
officer 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 remuneration and Nomination
committee.
david alexander robb, Bsc, Graddip(Personnel administration),
Faim, Faicd
managing director
mr robb 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.
donald marshall morley, Bsc, mBa, Fausimm
chairman of the audit and risk committee
mr morley was appointed to the Board in december 2002. He was
formerly the chief Financial officer 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 a member of the audit and risk committee.
George John Pizzey, Be (chem), Felldip (management), Ftse,
Faicd, Faim
chairman of the remuneration and Nomination committee
mr Pizzey 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 former chairman
of ioN limited (in administration), range river Gold and the
london metal exchange uk and a director of wmc resources
ltd. mr Pizzey is a member of the remuneration and Nomination
committee.
Gavin John rezos, Ba, llB, B.Juris, maicd
mr rezos 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
office 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 audit and risk committee and the remuneration and
Nomination committee.
Jenny a. seabrook, Bcom, aca, Faicd
ms seabrook is a special advisor to Gresham Partners’ limited and
deputy chairperson of electricity Networks corporation (trading
as western Power) where she is the chairperson of the Finance
and risk committee. she is also a non-executive director of the
Bank of western australia limited, m G kailis Holdings Pty limited
and iress market technology ltd. ms seabrook is a member of
the takeovers Panel, corporate Finance advisory Group of the
Financial services institute of australia (“FiNsia”) and asic’s
external advisory Panel. she was formerly an executive director of
Gresham Partners limited and Gresham advisory Partners limited
and a non executive director of west australian Newspapers
Holdings limited, Bwa managed investments limited and st
andrew’s superannuation services ltd. ms seabrook is a member
of the audit and risk committee.
co mP aNy se c r e ta r y
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.
i l u k a r e s o u r c e s l i m i t e d
5
6
aN Nu a l
r ePo r t 2 0 0 8
me e t iN Gs oF di r e c t o r s
the numbers of meetings of the company’s Board of directors and of each Board committee held during the year ended 31 december 2008, 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
6
12
6
6
12
12
12
11
7
6
12
6
6
12
12
12
12
7
2
-
2
-
2
7
-
5
5
2
-
2
-
2
7
-
5
5
2
-
-
2
3
-
3
4
-
2
-
-
2
3
-
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
J a seabrook
di r e c t o r s ’ sHa r eHo l d iN G
N oN a u d i t s e rVi c e s
directors’ shareholding is set out in note 31.
re m uN e r at i oN r ePo r t
the remuneration report is set out on pages 9 to 20.
i Nd e mNiFi c at i oN aNd iNs u r aNc e
oF oF Fi c e r s
the company indemnifies all directors of the company named in this
report and current and former executive officers 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
officer unless the liability relates to conduct involving bad faith. the
company also has a policy to indemnify the directors and executive
officers 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 officers’ 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 satisfied that the provision of the non-audit services is
compatible with the general standard of independence for auditors
imposed by the corporations act 2001. the directors are satisfied
that the provision of non-audit services by the auditor, 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
2008 year were within 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 21.
during the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non
related audit firms:
(a) assurance services
audit services
Pricewaterhousecoopers australian firm:
audit and review of financial reports and other audit work under the corporations act 2001
related practices of Pricewaterhousecoopers australian firm
Total remuneration for audit services
other assurance services
due diligence services in connection with the equity raising
Total remuneration for other assurance services
(b)
taxation services
Pricewaterhousecoopers australian firm:
tax compliance services, including review of company income tax returns
related practices of Pricewaterhousecoopers australian firm
Total remuneration for taxation services
(c) other services
Pricewaterhousecoopers australian firm:
other services
Total remuneration for other services
consolidated
2007
2008
$ $
851,363
60,400
911,763
21,000
33,360
54,360
771,969
72,569
844,538
445,000 -
445,000 -
86,800
12,000
98,800
56,980 -
56,980 -
e N Vi r oNm eNta l r eGu l at i oNs
G r e e N H o u s e G a s a N d e N e r G y d ata
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 specific 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.
r ePo r t iN G r e q u i r e m eNt s
the Group is subject to the reporting requirements of both
the energy efficiency opportunities act 2006 and the National
Greenhouse and energy reporting act 2007.the energy efficiency
opportunities act 2006 requires the Group to assess its energy
usage, including the identification, investigation and evaluation
of energy saving opportunities, and to report publicly on the
assessments undertaken, including what action the Group
intends to take as a result. as required under this act, the Group
registered with the department of resources, energy and tourism
as a participant entity before the deadline of 31 march 2007 and
submitted its first assessment plan and reporting schedule before 31
december 2007. the Group completed its initial assessments during
the financial year ended 30 June 2008 and will publicly report on
these assessments by 31 december 2008.
the National Greenhouse and energy reporting act 2007 requires
the Group to report its annual greenhouse gas emissions and energy
use. the first measurement period for this act runs from 1 July
2008 until 30 June 2009. the Group has implemented systems and
processes for the collection and calculation of the data required to
enable it to prepare and submit its initial report to the Greenhouse
and energy data officer (‘Gedo’) by 31 october 2009. the Group
registered with the Gedo before the deadline of 31 august 2008
i l u k a r e s o u r c e s l i m i t e d
7
8
aN Nu a l
r ePo r t 2 0 0 8
m at t e r s s u B s e q u e N t t o t H e e N d o F t H e
FiN aNc i a l y e a r
supreme court proceedings were commenced by Bemax against
various iluka entities in december 2007. the action concerns the
enforceability of an in-principle agreement concerning iluka’s
tutunup tenements and includes a claim for damages against iluka.
on 13 January 2009 a deed of discharge and release was executed
by Bemax and iluka under which terms have been agreed to settle
the proceedings, subject to various conditions precedent relating
to Foreign investment review Board approval and ministerial
approvals to the transfer of various tenements and land. the parties
have agreed to use their best endeavours to satisfy the conditions
precedent by 1 June 2009.
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 significantly affect the
operations of the economic entity, the results of those operations
or the state of affairs of the economic entity in subsequent financial
years.
ro uNd iN G oF a m o uNt s
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.
r l every
chairman
Perth
31 march 2009
r e m u n e r at i o n r e p o r t
B o a r d o V e r s i G H t o F r e m u N e r at i o N
re m uNe r at i oN P r iNc iPl e s
– r e m u N e r at i o N a N d N o m i N at i o N
co m m i t t e e
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
until her resignation in may 2008. mr Pizzey replaced ms
davies as committee chairman following her resignation.
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 fulfilling its corporate governance
responsibilities relating to the following:
•
•
•
•
•
•
overall remuneration strategy of the company;
remuneration of non-executive directors;
performance and remuneration of the managing
director and key executives;
selection and appointment of, and succession
planning for, non-executive directors;
selection and appointment of, and succession
planning for, the managing director; and
succession planning for key roles.
the committee will also make decisions on behalf of the
Board where such authority has been expressly delegated
by 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 2008
year, external advisers provided input on several matters
relating to remuneration. these advisers were:
•
•
•
ernst and young, who provided advice in relation to
iluka’s management and employee share plans;
Hay Group, who provided advice on staff and
executive remuneration; and
egan associates, who provided advice in respect to
the managing director and non-executive directors’
remuneration and other related issues.
in November and december 2008, 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.
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 fixed 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.
in accordance with increased transparency, iluka is
disclosing its current return on equity target range as part
of the long term incentive scheme.
the remuneration of an executive or manager is,
therefore, linked to both annual business and individual
performance outcomes and to the company’s ability to
generate competitive levels of shareholder value, as
defined by total shareholder return (tsr) and return on
equity (roe), on a longer term basis.
directors and key executives are prohibited from trading
in financial products issued or created over the company’s
securities by third parties, or trading in associated
products and entering into transactions which operate
to limit the economic risk of their security holdings in the
company. this prohibition extends to directors and key
executives taking out margin loans on their holdings of
iluka securities.
during the period 1 January 2004 to 31 december 2008,
inclusive of a shareholder’s participation in the 2008 4
for 7 renounceable share rights entitlement at $2.55
per share, a share purchased at the prevailing market
price of $4.53 on 1 January 2004 has since generated
$1.30 in shareholder returns over the five year period,
excluding dividends (a 21.8 per cent return taking into
account the shareholder’s participation in the 2008 share
rights entitlement). with dividend payments of $0.88, the
aggregate total shareholder return was 36.5 per cent over
the five year period.
i l u k a r e s o u r c e s l i m i t e d
9
10
aN Nu a l
r ePo r t 2 0 0 8
over the corresponding five year period, average executive total
fixed remuneration (based on three roles existing throughout that
period) increased by 58 per cent. in comparison, executive total
fixed remuneration for top 5 executives over the corresponding
five year period increased by 36 per cent.
For the 2008 year, the share price has increased from $4.60 at
1 January 2008 (before the share rights entitlement) to $4.64
at 31 december 2008 (following the share rights entitlement in
april 2008). For a shareholder who participated in the 4 for 7
renounceable share rights entitlement at $2.55 per share, the
increase in the value of a shareholder’s investment is 20.4 per cent
over the 12 month period.
2 0 0 8 re m uNe r at i oN coNt eXt
iluka’s remuneration principles must be applied in the context of
prevailing industry, sector, geographic and project circumstances.
in 2008, competition for management talent in the resources
sector and for major projects was intense for most of the year,
with resultant risks of losing key staff at a critical time for the
company. the company responded to these risks in a considered
way with salary adjustments, where required, and via the
introduction of a retention plan for key staff. these actions
contributed to the achievement of company objectives for the year,
led by a motivated and stable senior management team.
re m uNe r at i oN st r u c t u r e
this remuneration report discloses remuneration details for the
managing director, non-executive directors and key management
Personnel of the company and group in 2008.
remuneration for executives comprises two components:
•
•
total fixed remuneration (tFr) which is made up of base
salary and superannuation, together with other salary
sacrifice items such as novated leases and car parking.
employees are required to meet any fringe benefits tax
obligations applicable to benefits; 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 reflect an appropriate
balance between fixed and variable remuneration to ensure that
executive reward is aligned with the performance of the business.
to ta l F iXe d re m uNe r at i oN (tFr)
iluka positions tFr at median levels of the market as defined by a
comparator group of australian companies within the resources
market, as well as referencing job evaluation data and individual
competence levels of executives. allowance is also made for the
competitive nature of the market for talent in the resources sector.
suPe r aN Nu at i oN B eNeFi t s
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 of which 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 defined benefit sub-plan, a legacy from
the 1999 merger of westralian sands limited with rGc limited.
the defined benefit sub-plan is closed to new members. all
executives (the executives detailed on page 16) participate in the
iluka superannuation Plan or a fund of choice on an accumulation
basis.
V a r i aBl e re m uNe r at i oN
P e rFo r m aNc e aNd i Nc eNt iVe s
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). these distinct plans balance
the short and long term aspects of business performance, reflect
market practice and support business needs.
the incentive plans 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 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 2009, it is anticipated that approximately
94 employees (including all executives) will participate in the ltiP,
and approximately 164 employees (including all executives) will
participate in the stiP.
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 a maximum of 90 per cent of tFr.
t He s Ho r t-te r m i Nc eNt iVe P l aN (s t iP )
the stiP aims to incentivise executives whilst also promoting
equity ownership, providing awards partly in cash and partly in
deferred equity.
the stiP is linked to group and regional financial and operational
performance and has a focus on return on capital (roc) as a
key metric. a combination of financial and non-financial targets,
including safety and individual targets, are used to measure
performance and determine outcomes. each metric reflects
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 and 2009
performance year are:
•
•
•
Profitability (roc, eBit and NPat)
sustainability (all injury frequency rate,
severity rate and notifications
to government)
Growth (individual objectives)
60 per cent
10 per cent
30 per cent
the weighting of the growth measure is typically set at 30 per
cent, however the Board (on the recommendation of the managing
director) has discretion at any time to vary the growth weighting
for any individual within a range from 20 per cent to 40 per cent
in line with the process of objective setting and performance
assessment.
the process for the development and assessment of individual
objectives is a rigorous one. objectives are linked to major
business opportunities and risks as typically identified in iluka’s
corporate Plan and to the priorities for the year in question.
specific, measurable, deliverables and the timeframe for
achievement are defined for each objective. the deliverables and
the timeframes are set at a level of performance that is assessed
to be achievable at a stretch. objectives are set and performance
assessed by the managing director for all key executives, followed
by review and approval by the remuneration and Nomination
committee. departmental outcomes are also benchmarked across
the organisation to ensure consistent performance standards. the
process is designed to ensure a close alignment between the stiP
and the company’s objective of creating and delivering value for
shareholders.
the stiP requires profitability 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.
consistent with this approach, stiP payments to the managing
director and key executives were significantly higher in 2008 than
in 2007, reflecting achievements during the year – including a
successful recapitalisation of the company, targeted progress on
two major projects, improved financial performance and a strong
relative share price performance.
Half of the stiP award is paid in cash and half must be taken on
a deferred basis in the form of ordinary restricted shares in iluka
resources limited. Fifty per cent of the restricted shares do not
vest until one year after the end of the performance period, while
the remaining fifty per cent does not vest until two years after the
end of the performance period. this mandatory deferral results
in a significant portion of the annual incentive becoming “medium
term” in nature. an employee must remain with the company
and continue to perform satisfactorily for the shares to vest. the
employee has a significant trailing exposure to the value of the
company’s shares.
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 five
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 representing a tangible
retention factor.
t He loN G-te r m i Nc eNt iVe P l aN (lt iP )
the ltiP provides a grant of equity in the form of share rights for
ordinary shares in iluka resources limited 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:
re t u r n o n eq u i t y t r a n c h e :
the roe tranche of the ltiP grant vests based on a prospective
three year average 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:
•
•
•
the company’s roe performance history;
planned strategic and business plan activity throughout the
performance period; and
comparable company performance.
current roe targets are 10 per cent for threshold and 14 per cent
for target. these targets may be compared with a 10 year history
for iluka (to 2008) in which the average roe was 6.3, or with a 10
year average for the asX 200 (less property trusts) of 13.9.
targets are reviewed annually and set for a forward three year
period. it can be expected that, as sustainable performance
improves, targets will be increased - within the bounds of feasible
achievement - creating a “staircase” effect over time. similarly,
because performance is measured over the three years as an
average, a failure to achieve targeted levels of performance in any
one year increases the hurdle in the remaining years.
i l u k a r e s o u r c e s l i m i t e d
11
12
aN Nu a l
r ePo r t 2 0 0 8
roe performance assessment is also subject to maintenance of an
acceptable level of gearing.
t o t a l sh a r e h o l d e r re t u r n t r a n c h e :
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 defined industry sector and companies of a similar
market capitalisation to iluka. the combined group also ensures
a sufficiently large peer group for performance measurement,
and provides less likelihood of tsr performance being skewed to
specific sub industry sectors or specific 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 and details of the maximum allocation for the managing
director and key executives are shown on page 19. 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.
No vesting of the ltiP has occurred in 2008.
P r e V i o u s P e r F o r m a N c e i N c e N t i V e
P r oGr a m s : 2 0 0 5 aNd 2 0 0 6
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.
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 received the remaining half of the award
as rights to fully paid ordinary shares in iluka resources limited in
annual instalments of 25 per cent over four years. Further, a four
year holding period applies to each grant of shares. tranche one
of the 2005 PiP vested in January 2007 with tranche two vesting
January 2008. tranche three of the 2005 PiP vested in January
2009 with the final tranche vesting in January 2010.
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 received the remaining half as rights to fully
paid ordinary shares in iluka resources limited over three years in
one third instalments which commenced in January 2007. the four
year holding period on vested share rights applicable for the 2005
PiP was replaced by a 50 per cent minimum holding requirement
once all shares have vested in the 2006 plan. tranche one of the
2006 PiP vested in January 2007 with tranche two vesting January
2008. the final tranche of the 2006 PiP vested in January 2009.
Vesting conditions for both the 2005 PiP and 2006 PiP are time
based and require the participant to be employed at the vesting
date. total share rights awarded under the both plans which
had not vested at the time of the accelerated renounceable
entitlement offer were adjusted to address the dilution resulting
from the market issue of new shares.
upon cessation of employment, any entitlement to unvested share
rights or shares that are subject to mandatory sale restrictions are
forfeited.
se c u r i t i e s tr a d iN G
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.
re m uNe r at i oN reVi e w
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. 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,
a one up manager approval process applies with final managing
director approval prior to any award or remuneration review being
implemented.
e m P l o y e e s H a r e P l a N
the Board believes that strong employee alignment with
shareholder outcomes is a vital element of high performing
companies which create and deliver value for shareholders.
Put simply, the company wants all employees to identify with
shareholder returns. accordingly, 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 and 2008, offers were made to eligible employees
(permanent employees with a minimum of twelve months service)
in australia and the united states to receive ordinary shares in
iluka resources limited 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 is applied during the restriction period). as us
employees do not have access to a tax exemption plan, they were
offered 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.
in 2007, 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 offer at a cost of $609,000.
in 2008, of the 708 australian employees eligible to participate,
614 (87 per cent) accepted the offer. in the us, all 103 eligible
employees (100 per cent) employees participated in the offer.
overall, a total of 717 of 811 (88 per cent) eligible employees
participated in the offer at a cost of $716,680.
consistent with usual industry practice, shares acquired under the
employee share 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.
il u k a re t eNt i oN P l aN
during 2007 and 2008, the resources sector experienced very
high levels of competition for talent, with resulting skill shortages
and upward pressures on remuneration. these pressures were
particularly prevalent at the executive level and for highly skilled
professionals critical to business operation.
the Board recognises that continuity of management and retention
of key talent is critical to achieving the successful delivery of major
projects and other strategies in order to enhance shareholder
returns. in that context, the Board regularly reviews the market
competitiveness of executive remuneration and its ability to retain
key executives to achieve long term business objectives.
consequently, in march 2008, the Board approved the introduction
of a retention Plan limited to certain individuals identified as
critical to business outcomes over the medium term.
the retention Plan offers participants a grant of share rights
to ordinary shares in iluka resources limited which vest in full
at the conclusion of a three year retention period, subject to
continued satisfactory individual performance and approval by
the Board, at its discretion. the grant of share rights rather than
a cash payment provides a strong alignment of the interests of
participants with those of shareholders.
where a participant voluntarily ceases employment during the
retention period, all share rights awarded under the retention Plan
are forfeited.
retention Plan share rights awarded to executives and key
management Personnel are included as rights granted in the table
on page 15.
N oN-e Xe c u t iVe di r e c t o r s ’ re m uNe r at i oN
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
2008, including superannuation, was $916,447.
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 2008:
•
•
Non-executive director Fees
Board chairman
(inclusive of committee fees)
Board member
$275,000 per annum
$100,000 per annum
Board member committee Fees
audit and risk committee chair
remuneration and Nomination
committee chair
audit and risk committee member
remuneration and Nomination
committee member
$35,000 per annum
$25,000 per annum
$17,500 per annum
$12,500 per annum
the minimum required employer superannuation contribution up
to the statutory maximum is paid into each director’s nominated
eligible fund and is in addition to the above fees. Based on the
above fee structure and the Board’s decision to reduce the number
of non-executive directors, the current total non-executive director
remuneration is $782,500 per annum, excluding superannuation, or
$841,920 including superannuation.
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 21 of the
report. No performance conditions are attached to these shares
as they are purchased using sacrificed fees.
e Xe c u t iVe emPl o y m eNt a Gr e e m eNt s
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 a
rolling basis with no specified fixed terms. the managing director
and relevant executives are on total fixed remuneration (tFr)
arrangements, inclusive of superannuation.
i l u k a r e s o u r c e s l i m i t e d
13
14
aN Nu a l
r ePo r t 2 0 0 8
da Vi d roB B - maN
a GiN G di r e c t o r
total Fixed remuneration
short term incentive
long term incentive
share rights
Retention Arrangements
retention offer
Performance Period
- tranche 1
333,333 share rights
- tranche 2
-
333,333 share rights
tranche 3
333,334 share rights
Vesting conditions
Vesting date
$1,500,000 for the year ended 31 december 2008.
$1,500,000 from 1 January 2009.
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
Profitability (roc, eBit, NPat)
sustainability (all injury frequency rate,
severity rate, notifications to government)
Growth (individual objectives)
individual objectives and related deliverables are set each year by the Board at what is assessed to be a stretch level of
performance. these objectives typically vary from year to year and in 2008 related to the recapitalisation of the company, major
project development and certain industry related and other initiatives.
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
Weighting
50 per cent
10 per cent
40 per cent
Measure
roe
tsr
as disclosed previously, 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), due to vest on 1 July 2008. the number of share rights were
increased by 8,911 to address the dilutionary impact of the accelerated renounceable entitlement offer and 80,762 shares vested
to mr robb on 1 July 2008.
at the 2008 aGm, shareholders approved the following retention arrangements for mr robb.
1,000,000 share rights offered in three equal tranches over a 3 year retention period.
Weighting
50 per cent
50 per cent
the 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the
year (19 February 2009) ending 31 december 2007
the 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the
year ending 31 december 2008
the 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the
year ending 31 december 2009
a tranche of retention incentive share rights will vest on the Vesting date if the tsr of the company calculated over the
Performance Period for that tranche is 15% (annual Hurdle); or 30% tsr for the First and second or second and third
performance periods; or 45% tsr measured over the First, second and third performance periods.
subject to the performance criteria of each tranche being satisfied, each tranche will vest the day after the last day of the tranche
3 performance period.
all entitlements under the retention plan are forfeited if mr robb resigns prior to the end of the three year retention period.
Forfeiture
Termination Arrangements at the 2007 aGm, shareholders approved the following termination payments which may become payable to mr robb under the
with Notice
without Notice
Voluntary termination
Termination for
other reasons
Protection of interests
terms of the executive employment agreement entered into between mr robb and the company on 18 october 2006.
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 officer and managing director, by giving 24 months notice (if given in the first 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 confidential information and intellectual property.
e Xe c u t iVe se rVi c e a Gr e e m eNt s
major provisions of the agreements relating to key executives included in this remuneration report are set out below.
executive
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s wickham
c wilson
termination Notice Period
by iluka
termination Notice Period
by employee
Position
General manager murray Basin
General manager exploration &
technical services
managing director crl
General manager sales & marketing
chief Financial officer
General manager sa development &
Project management
General manager western region
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
termination
Payments
9 months
12 months
12 months
12 months
9 months
12 months
9 months
12 months
termination payments (other than for gross misconduct) are calculated on current total fixed remuneration at date of termination.
s Ha r e riG Ht s aNd s Ha r eHo l d iN Gs oF ke y maN
a Ge m eNt P e r s oN Ne l
Number of shares
Number of share rights
received on
vesting of
share rights
during the year
Balance held
at 1/1/08
awarded as
restricted
shares
other
changes during
the year**
Balance
held at
31/12/08***
Balance
held at
1/1/08
Granted
during
2008*
Vested as
shares during
2008
lapsed
during
2008**
Balance
held at
31/12/08
85,740
36,102
18,250
43,810
26,012
10,405
40,474
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(85,740)
(36,102)
-
-
10,429
28,679
(43,810)
-
14,864
40,876
5,946
16,351
23,128
63,602
17,612
17,612
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,835
80,762
67,003
185,198
405,798
124,821
1,189,619
(80,762)
-
1,233,678
2,284
27,369
17,050
22,842
2,243
-
(4,527)
-
6,102
4,786
7,816
21,386
21,182
18,391
31,346
24,524
28,028
86,203
67,542
77,077
- - -
- -
- - -
- -
2,469
2,424
- -
4,876
8,263
29,805
10,452
22,102
19,827
5,973
8,500
54,525
16,425
43,741
22,554
28,910
27,769
35,733
-
-
30,514
12,039
36,255
167,994
133,570
165,542
106,811
-
140,828
137,291
72,978
168,391
(2,243)
(188,305)
-
(6,102)
(4,786)
(7,816)
-
-
(2,424)
-
(8,263)
-
-
-
-
-
-
-
-
156,378
188,525
134,728
-
140,828
165,381
85,017
196,383
Name
Non-Executive Directors
G campbell
V davies
r every
i mackenzie
d morley
G Pizzey
G rezos
J seabrook
Executive Director
d robb
Executives
m adams
P Beilby
P Benjamin
V Hugo
d mcmahon
a tate
H umlauff
s wickham
c wilson
* Granted during 2008 includes the full grant of the share rights offered under the 2008 ltiP, iluka retention Plan and share right adjustment for previous grants relating to the
dilution impact of the accelerated renounceable entitlement offer.
** Negative amounts reflect the result of leaving the company during the year.
*** Balance includes restricted shares awarded during the year of which half vested 1 January 2009 and half will vest 1 January 2010.
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.
i l u k a r e s o u r c e s l i m i t e d
15
16
aN Nu a l
r ePo r t 2 0 0 8
d e ta i l s o F r e m u N e r at i o N
details of the remuneration of the directors and other key management Personnel (as defined 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.
key management Personnel – directors
the following persons were directors of iluka resources limited during the financial year:
(i)
Non executive directors
G c campbell
V a davies
r l every (chairman)
i c mackenzie (chairman)
d m morley
G J Pizzey
G J rezos
J a seabrook
(ii) managing director and chief executive officer
d robb
all above persons were directors of iluka resources limited for all of the financial year, as well as for the financial year ended 31 december
2007, except G c campbell, V a davies and i c mackenzie who retired on 21 may 2008, and J a seabrook who was appointed as a director on
1 may 2008.
key management Personnel - employees other than directors (‘the executives’)
in addition to the directors of the consolidated entity, the following employees met the definition of key management Personnel for the year
ended 31 december 2008:
m adams1
P Beilby
P Benjamin
s Green2
V Hugo
d mcmahon3
a tate
H umlauff
s wickham
c wilson
General manager western region
General manager murray Basin
General manager exploration & technical services
acting chief Financial officer
General manager sales and marketing
chief Financial officer
chief Financial officer
General manager sa development & Project management
General manager western region
General manager corporate services & company secretary
1 m adams ceased employment 26 september 2008.
2 s Green acting chief Financial officer from 18 January 2008 to 12 may 2008.
3 d mcmahon 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 2007, except:
-
-
-
s Green, classed as an executive between 18 January 2008 and 12 may 2008.
a tate, appointed as executive 13 may 2008.
s wickham, appointed as an executive 1 september 2008.
the following persons were also executives during the year ended 31 december 2007:
-
-
-
d calhoun, ceased employment as executive General manager People & communities on 30 November 2007.
d Grant, ceased employment as chief Financial officer on 16 February 2007.
d mcmahon, appointed as an executive 29 January 2007.
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 five highest remunerated executives in 2007.
amounts in the ‘stiP cash’ column are dependent on the satisfaction of performance conditions as set out in the section headed “short
term 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 measured in accordance with aasB 2 share Based Payments. all other
elements of remuneration are not directly related to performance.
2008
Name
Non-executive Directors
G campbell3
V davies3
r every
i mackenzie3
d morley
G Pizzey
G rezos
J seabrook4
Executive Directors
d robb
Executives
m adams5
*P Beilby
*P Benjamin
s Green6
*V Hugo
d mcmahon7
a tate8
*H umlauff
s wickham
*c wilson
short-term employee benefits
cash salary
& fees1
$
stiP
cash
$
Non-monetary
Benefits
$
43,892
46,818
209,588
98,267
132,500
117,670
120,739
77,500
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
other
superannuation
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$
3,950
4,500
15,195
5,471
11,925
10,590
10,866
6,975
share Based
Payments2
$
total
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
47,842
51,318
224,782
103,738
144,425
128,260
131,605
84,475
1,376,147
817,497
31,189
97,207
713,310 3,035,350
293,578
336,544
387,920
128,805
355,963
19,446
290,520
513,456
397,171
397,554
147,798
159,565
32,514
155,857
-
185,171
224,069
103,265
189,346
5,316
5,316
4,074
5,316
41,618
24,446
26,422
32,502
37,316
9,119
34,293
1,750
24,958
46,211
13,437
38,284
68,717
(292,901)
769,765
252,921
875,758
285,641
202,784
32,346
777,485
226,056
45,642
-
118,976
619,625
295,392 1,083,202
646,940
133,067
928,525
298,025
1. cash salary includes salary that is sacrificed for the purchase of shares during the year.
2. represents the estimated monetary value of shares rights and restricted shares under grant for the year ended 31 december 2008. 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 performance conditions associated with share rights not being met prior to vesting.
3. G campbell, V davies and i mackenzie retired 21 may 2008.
4. J seabrook appointed 1 may 2008.
5. ceased employment 26 september 2008. other relates to statutory leave entitlements on cessation of employment.
6. represents pro-rata remuneration paid as an executive from 18 January 2008 to 12 may 2008.
7. ceased employment 17 January 2008. other relates to statutory leave entitlements on cessation of employment.
8. appointed as an executive 13 may 2008.
* 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.
i l u k a r e s o u r c e s l i m i t e d
17
18
aN Nu a l
r ePo r t 2 0 0 8
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
short-term employee benefits
stiP
cash
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Non-monetary other
superannuation
termination
Benefits
$
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
$
9,698
10,260
10,091
15,532
11,160
9,248
9,127
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
share Based
Payments2
$
total
$
n/a
n/a
n/a
n/a
n/a
n/a
n/a
117,448
124,260
115,341
241,109
135,160
111,998
110,536
Executive Directors
d robb3
Executives
m adams4
P Beilby4
*P Benjamin
*d calhoun5
d Grant6
V Hugo
*d mcmahon7
*H umlauff
c wilson
1,009,174
245,902
-
-
90,826
-
354,485
1,700,387
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
-
-
5,250
120,803
653
5,250
-
2,634
5,250
-
-
-
30,828
43,095
-
-
-
-
31,135
38,475
45,244
10,977
7,062
43,596
34,464
44,009
43,965
-
-
-
424,000
-
-
-
-
-
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
Other Group Executive
*c cobb8
344,737
203,181
-
-
48,263
-
-
596,181
1. cash salary includes salary that is sacrificed 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 performance
conditions associated with share rights not being met 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 benefit consisted of severance $424,000 in accordance with terms of the contract of employment regarding termination.
other relates to statutory leave entitlements on cessation of employment. Non-monetary benefit relates to relocation and associated FBt pursuant to terms of the contract of
employment.
6. ceased employment 16 February 2007. other 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 .
s Ha r e B a s e d co mPeNs at i oN
the tables below summarise awards of share rights made under the various PiP schemes described in page 12 during the year that are still to
vest for key executives at 31 december 2008.
Performance Period and Plan
2005
transition Plan1
2005 PiP2
2006 PiP3
-
2,926
1,544
3,323
-
3,918
$5.17
-
4,432
1,936
5,892
-
5,382
$6.57
-
1,716
2,866
2,517
2,724
2,677
$6.17
Name
d robb
P Beilby
P Benjamin
V Hugo
H umlauff
c wilson
Fair Value per
share right4
1 Grant date 1 august 2005. Vests in two equal tranches on 1 January 2008 and 1 January 2009.
2 Grant date 1 January 2006. Vests in four equal tranches on 1 January 2007, 2008, 2009 and 2010.
3 Grant date 1 January 2007. Vests in three equal tranches on 1 January 2007, 2008 and 2009.
4
the valuations were determined in accordance with aasB 2 share Based Payments by the directors. the valuations were performed using an option pricing model.
2007 and 2008 stiP restricted shares awarded to the managing director and key executives yet to vest
2007 stiP Vesting dates1
awarded4,5
2008 stiP Vesting dates2
awarded4,5
Name
d robb
P Beilby
P Benjamin
V Hugo
a tate
H umlauff
s wickham
c wilson
1/01/20096
1/01/2010
33,501
17,446
14,269
12,311
-
20,037
6,929
14,913
33,502
3,940
6,913
6,080
-
9,768
3,523
7,189
%
37%
39%
40%
34%
-
38%
29%
41%
1/01/2010
1/01/2011
92,686
16,757
18,091
17,671
20,994
25,404
11,708
21,468
92,687
16,757
18,092
17,671
20,995
25,405
11,708
21,468
%
91%
92%
84%
88%
87%
88%
87%
96%
Fair Value per share3
$4.09
$4.64
1
2
3
2007 stiP restricted shares awarded 1 January 2008 for the 2007 performance year.
2008 stiP restricted shares awarded 1 January 2009 for the 2008 performance year.
the fair value is independently determined using the Black-scholes model that takes into account the share price at grant date, the expected price volatility of the underlying share,
the expected dividend yield and the risk free discount rate for the term of the right.
4 Half the award made in cash (refer page 17), half the award made in restricted shares as detailed in the above table
5
6
the percentage achieved of the available incentive opportunity for the financial year
includes the discretionary re-weighted growth component awarded as restricted shares.
No awards have been made in respect to the 2007, 2008 ltiP or retention plan. the performance period for the schemes end on 31 december 2009, 31 december 2010 and 31 march
2011 respectively.
i l u k a r e s o u r c e s l i m i t e d
19
20
aN Nu a l
r ePo r t 2 0 0 8
maXi m u m V a l u e o F re s t r i c t e d s Ha r e s a Nd s Ha r e riG Ht s
key executives participate in a number of the incentive plans for which restricted shares or share rights are yet to vest. the fair value of each
restricted share or share right is set out below.
incentive Plan
2005 transition
2005 PiP
2006 PiP
*2007 stiP
2007 ltiP
2008 ltiP
retention Plan 1
retention Plan md 1
retention Plan md 2
retention Plan md 3
Fair Value per
share
$
5.17
6.57
6.17
4.09
4.32
2.93
4.09
0.90
1.19
0.90
Vesting
year
2009
2009 & 2010
2009
2009 & 2010
2010
2011
2011
2011
2011
2011
* the 2007 stiP is the only plan to have awarded as restricted shares. all other plans listed above have been granted as share rights.
the maximum number of restricted shares and/or share rights that may vest in future years, together with the maximum value of these shares
/ rights that will be recognised as share based payments in future years is set out below. the maximum value for a year relates to the value
of those restricted shares or share rights that vest in future years. the amount to be reported as share based payments in future years will be
calculated in accordance with aasB 2 share Based Payments over the vesting period.
Name
d robb
P Beilby
P Benjamin
V Hugo
a tate
H umlauff
s wickham
c wilson
maximum Number
Vesting year
2010
86,472
20,891
25,216
26,506
2009
33,501
24,304
19,647
21,097
-
-
22,761
6,929
24,199
35,434
15,562
27,215
2011
1,122,616
111,183
143,659
87,125
140,828
107,185
62,526
144,967
maximum Value $
Vesting year
2010
2011
365,854
94,329
109,521
119,736
0
150,828
66,418
121,970
1,355,931
420,886
547,361
319,076
530,946
384,812
230,761
551,193
2009
137,019
111,628
90,386
102,417
0
98,758
38,340
115,447
a u d i t o r ’ s i n d e p e n d e n c e
de c l a r at i o n
as lead auditor for the audit of iluka resources limited for the year ended 31 december 2008, 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
31 march 2009
liability limited by a scheme approved under Professional standards legislation.
i l u k a r e s o u r c e s l i m i t e d
21
22
aN Nu a l
r ePo r t 2 0 0 8
c o r p o r at e GoVe r n a n c e
a P P r o a c H t o c o r P o r at e
G oVe rN aNc e
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
delivering 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.
a s X c o r P o r at e G o V e r N a N c e
re c o m m eNd at i oNs
iluka considers that it meets each of the requirements
of the australian securities exchange (“asX”) corporate
Governance Principles and recommendations.
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
whistleblower Policy
r o l e a N d r e s P o N s i B i l i t i e s o F t H e
B o a r d oF di r e c t o r s
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, the executive management group;
determining the strategic direction and
financial objectives of the company and
ensuring appropriate resources are available to
management;
monitoring the implementation and achievement
of strategic and financial 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 specific
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
financial position and performance;
approving the company’s financial and accounting
policies and financial statements;
monitoring compliance with control and
accountability systems, regulatory requirements
and ethical standards;
approving the financial and other reporting
mechanisms for adequate, accurate and timely
information being provided to the Board;
approving processes, procedures and systems
to ensure that financial results are appropriately
and accurately reported on a timely basis;
reviewing executive succession planning and
development;
approving the acquisition, establishment, disposal
or cessation of any significant business of the
company;
approving the issue of any securities in the
company;
approving any public statements which reflect
significant 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.
B o a r d co mPo s i t i oN
directors are considered and recommended to the Board
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 are
conducive to effective discussion and efficient 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, qualifications and experience
are set out in the directors’ report under the heading
‘directors’.
iluka’s constitution requires directors to retire from office 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.
di r e c t o r i Nd ePeNd eNc e
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 officer 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 officer 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.
maN a GiN G di r e c t o r
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-today
activities.
the managing director is selected and appointed by the Board and
is subject to an annual performance review by the non-executive
directors.
coN Fl i c t s oF i Nt e r e s t
each director has an ongoing responsibility to:
•
•
disclose to the Board actual or potential conflicts 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 conflict
of interest.
if a director cannot or is unwilling to remove a conflict 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 conflict relates.
di r e c t o r ed u c at i oN
directors undergo an induction process upon appointment during
which they are given a detailed briefing 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 operational site visits and
are provided with regular updates and briefings on current and
emerging issues.
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.
d i r e c t o r s ’ a c c e s s t o i N d e P e N d e N t
ad Vi c e
each director may, with prior written approval of the chairman,
obtain independent professional advice to assist the director in
fulfilling their responsibilities. any reasonable expenses incurred in
obtaining that advice will be met by the company.
B o a r d me e t iN Gs
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.
the non-executive directors periodically meet independent of
management to discuss relevant issues.
i l u k a r e s o u r c e s l i m i t e d
23
24
aN Nu a l
r ePo r t 2 0 0 8
co mP aNy se c r e ta r y
r e m u N e r at i o N a N d N o m i N at i o N
mr cameron wilson is iluka’s company secretary. the position of
company secretary is responsible for:
•
•
•
•
advising the Board on corporate governance;
management of the company secretarial function;
attending all Board and Board committee meetings and
taking minutes; and
communication with the australian securities exchange
(“asX”).
co m m i t t e e s oF tHe B o a r d
to assist in the execution of its responsibilities and to allow
detailed consideration of complex issues, the Board has
established the following sub-committees:
•
•
remuneration and Nomination committee; and
audit and risk committee.
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.
B o a r d a N d c o m m i t t e e P e r F o r m a N c e
e V a l u at i oN
the Board carries out an annual review of its performance
in meeting key responsibilities. this review process, which is
periodically facilitated by external consultants, 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 specific performance objectives
for the year ahead. this annual review was last undertaken
september-december 2008.
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 2008.
co m m i t t e e
the remuneration and Nomination committee consists of the
following independent, non-executive directors: mr John Pizzey
(chairman), mr Gavin rezos and dr robert every. details of
directors attendance at remuneration and Nomination committee
meetings and their qualifications and experience are set out on
pages 5 and 6.
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
fulfilling 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 9 to 20
of this report.
a u d i t aNd ri s k co m m i t t e e
the audit and risk committee consists of the following
independent, non-executive directors: mr don morley (chairman),
mr Gavin rezos and ms Jenny seabrook. mr morley was a senior
financial executive of wmc limited until his retirement in october
2002 and brings a high level of financial expertise and experience
to iluka’s audit and risk committee. Full details of mr morley’s
qualifications and experience and those of the other committee
members appear on page 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 financially literate
and have an appropriate understanding of the industries in which
the company operates.
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 financial reporting;
the adequacy of the control environment;
the process for the management of risk; and
the internal and external audit functions.
the responsibilities of the audit and risk committee include
assisting the Board to fulfil 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
financial 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
identified risk areas;
gaining assurance as to the adequacy of the company’s
policies and processes for identifying, documenting and
addressing risks;
reviewing other key financial 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 fulfilling 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 significant 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.
co rPo r at e rePo r t iN G
the managing director and chief Financial officer have made
the following certifications to the Board with respect to the 2008
accounts:
•
that the company’s financial reports are complete and
present a true and fair view, in all material respects, of the
financial 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 efficiently and effectively in all material respects.
ri s k as s e s s m eNt aNd maN
a Ge m eNt
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 programme
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 programme
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
programme are:
•
•
•
•
•
•
•
•
•
•
•
•
•
classification of risk into strategic, financial, operational,
compliance, information and project risks;
the quantification and ranking of risk event consequences
as insignificant 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 programme
conducted twice annually which involves a detailed
hierarchy of sign-offs on a wide range of risk issues;
the assignment of clear accountabilities for identified 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 specific 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 whistleblower policy for the confidential reporting
of issues of unacceptable or undesirable conduct with
protection against reprisal afforded to the whistleblower;
and
a comprehensive insurance programme.
i l u k a r e s o u r c e s l i m i t e d
25
26
aN Nu a l
r ePo r t 2 0 0 8
a u d i t F uNc t i oNs
the company’s current external auditing firm is
Pricewaterhousecoopers (“Pwc”). during 2008, 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 programme and scope
of internal audit reviews to be conducted each financial 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.
etHi c a l staNd a r d s aNd coNd u c t
the company has an employee code of conduct which identifies
the standard of ethical conduct expected of iluka employees. in
addition, the Board has specifically adopted a code of conduct for
directors which establishes guidelines for their conduct in carrying
out their duties.
iluka has also established a whistleblower policy to provide for
the confidential reporting of issues of unacceptable or undesirable
conduct. the policy provides protection against reprisal to the
whistleblower.
se c u r i t i e s tr a d iN G P o l i c y
if directors, officers 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 financial information (restricted employees)
and directors are prohibited from buying or selling securities in
the company during the period from the end of the financial year
or half financial 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 company secretary.
in addition, directors and restricted employees must confirm to
the chairman or the 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.
s H a r e H o l d e r i N t e r F a c e a N d
coNt iNu o u s di s c l o s u r e
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.
the 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 notifies 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, influence persons who
commonly invest in securities in deciding whether to
acquire or dispose of the company’s securities.
upon confirmation 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, briefings and site visits are arranged for share
analysts and institutional investors. in conducting such briefings,
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.
Briefing materials are lodged with the asX and then placed on the
company’s website.
Fi n a n c i a l r e p o r t
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
28
29
30
31
33
87
88
this financial report covers both the separate financial statements of iluka resources limited as an individual entity
and the consolidated financial statements for the consolidated entity consisting of iluka resources limited and its
subsidiaries. the financial report is presented in the australian currency.
iluka resources limited is a company limited by shares, incorporated and domiciled in australia. its registered office
and principal place of business is:
iluka resources limited
level 23, 140 st George’s terrace
Perth wa 6000
a description of the nature of the consolidated entity’s operations and its principal activities is included in the review of
operations in the directors’ report.
the financial report was authorised for issue by the directors on 31 march 2009. the company has the power to amend
and reissue the financial report.
through the use of the internet, we have ensured that our corporate reporting is timely and complete. all press releases,
financial reports and other information are available at www.iluka.com
i l u k a r e s o u r c e s l i m i t e d
27
28
aN Nu a l
r ePo r t 2 0 0 8
iNcome statemeNts
for the year ended 31 december 2008
Revenue from continuing operations
other income
expenses, from continuing operations
interest and finance charges
rehabilitation and restoration accretion expense
total finance costs
impairment reversals and charges
Profit (loss) before income tax
income tax benefit (expense)
Profit (loss) from continuing operations
Profit from discontinued operations
Profit (loss) for the year
Profit attributable to minority interest
Profit (loss) attributable to members of Iluka Resources Limited
Notes
5
6
7
7
7
8
9
consolidated
Parent entity
2008
$M
1,052.4
16.8
(987.2)
(26.1)
(15.8)
(41.9)
5.5
45.6
9.4
55.0
30.0
85.0
(7.5)
77.5
2007
$m
920.1
13.6
(808.3)
(43.8)
(16.6)
(60.4)
-
65.0
(15.5)
49.5
10.9
60.4
(9.3)
51.1
2008
$M
227.7
12.4
(293.4)
(25.5)
(6.2)
(31.7)
45.6 -
(39.4)
21.0
(18.4)
- -
(18.4)
- -
(18.4)
2007
$m
277.3
18.5
(251.9)
(43.0)
(5.6)
(48.6)
(4.7)
8.6
3.9
3.9
3.9
Earnings per share for profit from continuing operations attributable
to the ordinary equity holders of the Company:
Basic and diluted earnings per share
42
13.8
17.0
Cents
cents
Earnings per share for profit attributable to
the ordinary equity holders of the Company:
Basic and diluted earnings per share
42
22.4
21.6
the above income statements should be read in conjunction with the accompanying notes.
BalaNce sHeets
as at 31 december 2008
ASSETS
Current assets
cash and cash equivalents
receivables
inventories
derivative financial instruments
current tax assets
other assets
assets of disposal group classified as held for sale
total current assets
Non-current assets
receivables
other financial assets
Property, plant and equipment
derivative financial instruments
deferred tax assets
intangible assets
total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
interest-bearing liabilities
current tax liabilities
Provisions
derivative financial instruments
liabilities of a disposal group classified as held for sale
total current liabilities
Non-current liabilities
interest-bearing liabilities
deferred tax liabilities
Provisions
derivative financial instruments
total non-current liabilities
Total liabilities
Net assets
EQUITY
contributed equity
reserves
retained (losses) profits
Parent entity interest
minority interest
Total equity
the above balance sheets should be read in conjunction with the accompanying notes.
Notes
10
11
12
13
14
15
9
16
17
18
13
19
20
21
22
24
23
13
9
25
26
27
13
28
29(a)
29(b)
consolidated
Parent entity
2008
$M
97.6
243.2
249.7
-
-
8.5
-
599.0
-
-
2007
$m
19.9
190.5
319.9
7.8
12.7
11.2
31.6
593.6
-
1.2
1,414.6
1,247.1
-
31.0
13.5
1,459.1
2,058.1
164.1
36.8
5.0
61.4
104.0
-
371.3
276.5
-
322.7
49.6
648.8
1.0
9.9
15.2
1,274.4
1,868.0
113.1
230.7
8.3
55.2
-
6.8
414.1
387.3
44.7
270.3
-
702.3
1,020.1
1,038.0
1,116.4
751.6
998.1
(84.3)
66.0
979.8
58.2
1,038.0
662.6
23.8
(2.8)
683.6
68.0
751.6
2008
$M
2007
$m
65.0 -
63.7
72.5
-
-
-
- -
44.7
70.7
2.1
12.4
6.7
201.2
136.6
289.2
849.2
246.2
0.7
241.4
849.2
283.4
-
41.9 -
- -
1,415.9
1,617.1
1,385.3
1,521.9
33.9
230.7
16.9
29.4
36.8
1.1 -
21.8
93.0 -
- -
182.1
281.5
276.6
-
125.7
46.7 -
449.0
631.1
986.0
1,006.5
(74.6)
54.1
986.0
- -
986.0
387.3
9.0
88.0
484.3
765.8
756.1
662.6
21.0
72.5
756.1
756.1
i l u k a r e s o u r c e s l i m i t e d
29
30
aN Nu a l
r ePo r t 2 0 0 8
statemeNts oF recoGNised iNcome aNd eXPeNse
for the year ended 31 december 2008
exchange differences on translation of foreign entities
Foreign exchange cash flow hedges, net of tax
actuarial losses on defined benefit plans, net of tax
Net expense recognised directly in equity
Profit (loss) 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
29
29
consolidated
Parent entity
2008
$M
(4.8)
(106.9)
(8.5)
(120.2)
85.0
(35.2)
(35.6)
0.4
(35.2)
2007
$m
3.2
(16.4)
(0.2)
(13.4)
60.4
47.0
37.4
9.6
47.0
2008
$M
- -
(99.7)
- -
(99.7)
(18.4)
(118.1)
2007
$m
(16.7)
(16.7)
3.9
(12.8)
(118.1)
(12.8)
- -
(118.1)
(12.8)
the above statements of recognised income and expense should be read in conjunction with the accompanying notes.
casH Flow statemeNts
for the year ended 31 december 2008
consolidated
Parent entity
Notes
2008
$M
2007
$m
2008
$M
2007
$m
Cash flows from operating activities
receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
interest received
management fees from controlled entity
interest paid
income taxes received (paid)
Payments for exploration expenditure
royalty income
receipts from other operating activities
Net cash inflow (outflow) from operating activities
40
Cash flows from investing activities
1,017.4
(794.4)
223.0
6.3
-
(32.2)
4.1
(20.9)
49.3
3.4
233.0
1,004.6
(841.4)
163.2
1.3
-
(45.2)
(39.7)
(18.5)
19.0
15.4
95.5
200.2
(174.4)
25.8
5.4 -
1.0
(33.1)
18.9
- -
- -
0.5
18.5
259.9
(218.2)
41.7
1.0
(44.4)
(26.3)
0.5
(27.5)
Payments for property, plant and equipment
(198.4)
(118.2)
(30.8)
(52.3)
Net proceeds on disposal of interest in Narama JV
9(d)
loans from controlled entities
Proceeds from sale of property, plant and equipment
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
repayment of borrowings
dividends paid
dividends paid to minority interests in controlled entities
Purchase of treasury shares
Proceeds from issue of ordinary shares
share issue costs
debt refinance costs
Net cash (outflow) inflow from financing activities
Net increase 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 financing and investing activities
30
28(d)
28(b)
28(b)
10
22, 25
41
the above cash flow statements should be read in conjunction with the accompanying notes.
53.4
-
7.6
(137.4)
83.9
(414.5)
-
(10.5)
(14.3)
353.1
(13.2)
(4.3)
(19.8)
75.8
19.9
1.9
97.6
-
-
16.2
(102.0)
37.4
(16.4)
(39.4)
(10.8)
-
39.4
(0.1)
-
10.1
3.6
17.4
(1.1)
19.9
- -
65.9
2.3
37.4
83.9
(414.4)
-
- -
- -
357.1
(13.2)
(4.3) -
9.1
65.0 -
- -
- -
65.0 -
44.4
9.0
1.1
37.4
(10.9)
(39.4)
39.4
(0.1)
26.4
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
31
31
37
38
39
40
41
42
43
44
investments in significant controlled entities
deed of cross guarantee
interests in joint ventures
reconciliation of profit after income tax to net
cash inflow (outflow) from operating activities
Non-cash investing and financing activities
earnings per share
share-based payments
events occurring after the balance sheet date
80
81
82
82
82
83
84
86
32
aN Nu a l
r ePo r t 2 0 0 8
c o n t e n t s o F t h e n o t e s
t o t h e F i n a n c i a l st at e m e n t s
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
31
32
33
34
35
36
summary of significant 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 financial instruments
current assets - current tax assets
current assets - other
Non-current assets - receivables
Non-current assets - other financial assets
Non-current assets - Property, plant and
equipment
Non-current assets - deferred tax assets
Non-current assets - intangible assets
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
reserves and retained profits
dividends
key management personnel
remuneration of auditors
retirement benefit obligations
contingent liabilities
commitments
related party transactions
33
42
43
47
49
49
50
51
52
53
53
54
54
55
55
55
55
56
59
59
60
60
60
60
61
64
65
66
68
70
70
73
73
77
78
79
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
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 financial 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 financial 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 financial statements and notes
of iluka resources limited comply with international
Financial reporting standards (“iFrs”).
historical cost convention
these financial statements have been prepared under the
historical cost convention, as modified by the revaluation
of financial assets and liabilities (including derivative
instruments) at fair value through profit or loss.
critical accounting estimates
the preparation of financial 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 significant to the financial
statements are disclosed in Note 2.
investments in subsidiaries are accounted for at
cost. subsidiaries are all those entities (including
special purpose entities) over which the Group has the
power to govern the financial and operating policies,
generally accompanying a shareholding of more than
one half of the voting rights. the existence and effect
of potential voting rights that are currently exercisable
or convertible are considered when assessing whether
the Group controls another entity.
subsidiaries are fully consolidated from the date on
which control is transferred to the Group. they are de-
consolidated from the date that control ceases.
the purchase method of accounting is used to account
for the acquisition of subsidiaries by the Group (refer
to Note 1(f)).
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 had a coal operation (sold
effective 1 January 2008) and has titanium minerals
and zircon exploration activities which are conducted
through joint ventures with other parties. the coal
operation is classified 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 financial statements under
the appropriate headings. details of joint ventures are
set out in Note 39.
(b) Principles of consolidation
(c) segment reporting
(i) subsidiaries
the consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of iluka
resources limited (‘’company’’ or ‘’parent entity’’) as
at 31 december 2008 and the results of all subsidiaries
for the year then ended. iluka resources limited
and its subsidiaries together are referred to in this
financial report as the Group or the consolidated entity.
a business segment is identified 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. 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.
i l u k a r e s o u r c e s l i m i t e d
33
34
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
(d) 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 in accordance with
accounting policy 1(k).
(iii) 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 of which 20 years is
remaining.
(e)
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 financial
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 profit
or loss or taxable profit 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 and loans 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 as of 1 January 2004.
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
financial statements.
the amounts receivable/payable under the tax funding
agreement are due upon receipt of the funding advice
from the head entity, which is issued as soon as
practicable after the end of each financial year. the
head entity may also require payment of interim
funding amounts to assist with its obligations to pay tax
installments. the funding amounts are recognised as
current intercompany receivables or payables.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
(f) acquisitions of assets
cash flows 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.
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 settlement of any part of cash consideration
is deferred, the amounts payable in the future are
discounted to their present value as at the date of
exchange. the discount rate used is the entity’s
incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent
financier under comparable terms and conditions.
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(o) 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.
(g) cash and cash equivalents
For cash flow statement presentation purposes, cash
and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three
months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts. Bank
overdrafts are shown within interest-bearing liabilities in
current liabilities on the balance sheet.
(h)
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 generally 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 flows, discounted at the original
effective interest rate.
(i)
inventories
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 fixed 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.
(j)
Foreign currency translation
(i) Functional and presentation currency
items included in the financial statements of each of
the Group’s entities are measured using the currency
of the primary economic environment in which the
entity operates (“the functional currency”). the
consolidated financial statements are presented in
australian dollars, which is 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 flow hedges and qualifying net
investment hedges.
(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 financial position of all the Group
entities (none of which has the currency of a
hyperinflationary economy) that have a functional
currency different from the presentation currency are
translated into the presentation currency as follows:
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
35
35
36
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
•
•
•
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 where the hedge is effective, 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.
(k) 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 firm commitment (fair
value hedge); or (2) hedges of highly probable forecast
transactions (cash flow 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 flows of hedged items.
the fair values of various derivative financial instruments
used for hedging purposes are disclosed in Note 13.
movements in the hedging reserve in shareholders’
equity are shown in Note 29.
(i) cash flow hedge
the effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in 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 profit 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 financial asset (for example,
inventory), 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.
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.
(ii) 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.
(l) Non-current assets (or disposal groups) held for resale
Non-current assets (or disposal groups) are classified
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.
Non-current assets (including those that are part of a
disposal group) are not depreciated or amortised while
they are classified as held for sale. interest and other
expenses attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the
assets of a disposal group classified as held for sale
are presented separately from the other assets in
the balance sheet. the liabilities of a disposal group
classified as held for sale are presented separately from
other liabilities in the balance sheet.
(m) investments and other financial assets
loans and receivables
loans and receivables including amounts due from Group
entities are included in current assets, except for those
with maturities greater than 12 months after the balance
sheet date which are classified as non-current assets.
loans and receivables are included in receivables in the
balance sheet (Notes 11 and 16).
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
(n) exploration, evaluation and development expenditure
exploration and evaluation expenditure is accumulated
separately for each area of interest in accordance
with aasB 6 exploration for 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 ore reserves and active and significant
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 mineral resource capable of supporting a mining
operation.
identifiable 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 achieved Jorc reserve status
(reported in accordance with Jorc, 2004) 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.
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).
(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 benefits associated with the item will flow 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 financial
period in which they are incurred.
mine specific 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 specific 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 specific plant,
machinery and
equipment
•
•
Reserves and
development
Other non-mine
specific 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) 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 fixed 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(t).
(q)
intangible assets
(i) patents and trademarks
significant costs associated with patents and
trademarks are deferred and amortised on a straight-
line basis over the periods of their expected benefit
which is 10 years of which 5 years is remaining.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
37
37
38
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
(r) trade and other payables
these amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of
financial year which are unpaid. the amounts are unsecured
and are usually paid within 30 days of recognition.
(s) 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 classified 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.
(t) Borrowing costs
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. $4.0 million interest at
a weighted average interest rate of 7.0 per cent was
capitalised in 2008, no interest was capitalised in 2007.
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
•
finance lease charges.
(u) Provisions
Provisions for legal claims are recognised when:
•
•
the consolidated entity has a present legal obligation
as a result of past events;
it is more likely than not that an outflow of resources
will be required to settle the obligation; and
•
the amount has been reliably estimated.
Provisions are not recognised for future operating
losses.
where there are a number of similar obligations, the
likelihood that an outflow 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 outflow with respect to any one item included in the
same class of obligations may be small.
(v) employee benefits
(i) Wages and salaries, annual leave and sick leave
liabilities for wages and salaries, including non-
monetary benefits, 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.
(ii) long service leave
the liability for long service leave is recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be made
in respect of services provided by employees up to
the reporting date. 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 outflows.
(iii) termination Benefits
liabilities for employee termination benefits associated
with restructurings are brought to account when a
detailed restructuring plan has been developed.
(iv) retirement benefit obligations
all employees of the consolidated entity are entitled
to benefits on retirement, disability or death from
the consolidated entity’s superannuation plans. the
consolidated entity has defined benefit section and an
accumulation type benefits section within its plans.
the defined benefit section provides defined lump sum
benefits based on years of service and final average
salary. the accumulation type benefits section receives
fixed contributions from consolidated entity companies
and the consolidated entity’s legal or constructive
obligation is limited to these contributions.
a liability or asset in respect of defined benefit
superannuation plans is recognised in the balance
sheet, and is measured as the present value of the
defined benefit 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 defined benefit 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
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
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
outflows.
actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are
charged or credited to equity in the period in which
they occur.
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 specified 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
benefit obligation (eg taxes on investment income
and employer contributions) are taken into account in
measuring the net liability or asset.
the long term incentive Plan (ltiP) rights have
been valued using a monte carlo simulation to model
iluka share prices against the comparator group
performance at vesting date. the monte carlo method
is a procedure for repeatedly sampling random
movements in a stock’s price to estimate the average
or mean share price.
shares provided under the employee share ownership
scheme are purchased on market, with the purchase
cost being recognised as an employee benefits
expense.
(vi) cash settled incentive arrangements
the consolidated entity recognises a liability and an
expense for cash settled components of incentive
plans based on the conditions of the stiP.
(w) contributed equity
ordinary shares are classified as equity.
incremental costs directly attributable to the issue
of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. incremental
costs directly attributable to the issue of new shares or
options for the acquisition of a business, are not included
in the cost of the acquisition as part of the purchase
consideration.
contributions to the accumulation fund are recognised
as an expense as they become payable.
(x) dividends
(v) share-based payments
share based compensation benefits are provided
to employees via incentive plans, the directors,
executives and employees share acquisition Plan and
the employee share ownership scheme. information
relating to these schemes is set out in Notes 31 and
43 with additional information in the remuneration
report.
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. the fair value of
restricted shares granted under the incentive plans is
determined to be the weighted average price 5 days
after results are announced to the market. the 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.
the fair value at grant date of the Performance
incentive Plan (PiP) and short-term incentive Plan
(stiP) is independently determined using a Black
scholes share right pricing model that takes into
account the exercise price, the term of the share right,
the impact of dilution, the share price at grant date and
expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate
of the term of the share right.
Provision is made for the amount of any dividend
declared on or before the end of the financial year but
not distributed at balance date.
(y) earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the company,
excluding any costs of servicing equity other than
ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued
during the year.
(ii) diluted earnings per share
diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take
into account the after income tax effect of interest
and other financing costs associated with dilutive
potential ordinary shares and the weighted average
number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
39
39
40
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
(z) 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 carrying value of 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 reflects the time value of money. the discount
rate must not reflect risks for which future cash flow
estimates have been adjusted. a discount rate of 6.0 per
cent (2007: 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.
(aa) 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
(FVlcs) and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash
Generating units (refer note 2)). Non financial assets
other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each
reporting date.
(ab) overburden costs
expenditure associated with the removal of mine
overburden after the initial development of a mine is
deferred and charged to the income statement over its
useful life, which typically does not exceed one year.
(ac) 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.
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.
(ad) 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 2008 reporting periods. the consolidated
entity’s assessment of the impact of relevant new
standards and interpretations is set out below.
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 financial
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 financial statements.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 1.
summary of significant accounting policies
(continued)
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 and
requires 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
financial report of the Group, as the Group already
capitalises borrowing costs relating to qualifying assets.
revised aasB 101 presentation of Financial statements
and aasB 2007-8 amendments to australian accounting
standards arising from aasB 101
the revised aasB 101 is applicable for annual reporting
periods beginning on or after 1 January 2009. it requires
the presentation of a statement of comprehensive income
but will not affect any of the amounts recognised in the
financial statements. if an entity has made a prior period
adjustment or a reclassification of items in the financial
statements, it will need to disclose a third balance sheet
(statement of financial position), this one being as at the
beginning of the comparative period. the group will apply
the revised standard from 1 January 2009.
aasB 2008-1 amendments to australian accounting
standard - share-based payments: Vesting conditions and
cancellations
aasB 2008-1 is applicable for annual reporting periods
beginning on or after 1 January 2009. the revised
standard clarifies that vesting conditions are service
conditions and performance conditions only and that
other features of a share-based payment are not vesting
conditions. it also specifies that all cancellations,
whether by the entity or by other parties, should receive
the same accounting treatment. the Group will apply
the revised standard from 1 January 2009, but it is not
expected to affect the accounting for the Group’s share-
based payments.
revised aasB 3 Business combinations, aasB 127
consolidated and separate Financial statements and
aasB 2008-3 amendments to australian accounting
standards arising from aasB 3 and aasB 127
the revised accounting standards for business
combinations and consolidated financial statements
are operative for annual reporting periods beginning
on or after 1 July 2009, but may be applied earlier.
the Group has not yet decided when it will apply the
revised standards. However, the new rules generally
apply only prospectively to transactions that occur after
the application date of the standard. their impact will
therefore depend on whether the Group enters into any
business combinations or other transactions that affect
the level of ownership held in the controlled entities in
the year of initial application.
aasB 2008-7 amendments to australian accounting
standards - cost of an investment in a subsidiary, Jointly
controlled entity or associate
the revised new rules will apply to financial reporting
periods commencing on or after 1 January 2009. the
Group will apply the revised rules prospectively from 1
January 2009. after that date, all dividends received
from investments in subsidiaries, jointly controlled
entities or associates will be recognised as revenue, but
the investments may need to be tested for impairment
as a result of the dividend payment. the impact will
therefore depend on the dividend profile of subsidiaries.
improvements to australian accounting standards: aasB
2008-5 and aasB 2008-6
in July 2008, the aasB issued a number of improvements
to existing australian accounting standards. the
amendments will generally apply to financial reporting
periods commencing on or after 1 January 2009, except
for some changes to aasB 5 Non-current assets Held
for sale and discontinued operations regarding the
sale of the controlling interest in a subsidiary which will
apply from 1 July 2009. the Group will apply the revised
standards from 1 January 2009. the Group does not
expect that any adjustments will be necessary as the
result of applying the revised rules.
aasB interpretation 16 hedges of a net investment in a
Foreign operation
aasB-i 16 was issued in august 2008 and applies to
reporting periods commencing on or after 1 october
2008. the interpretation clarifies which foreign
currency risks qualify as hedged risk in the hedge of a
net investment in a foreign operation and that hedging
instruments may be held by any entity or entities within
the group. it also provides guidance on how an entity
should determine the amounts to be reclassified from
equity to profit or loss for both the hedging instrument
and the hedged item. the Group will apply the
interpretation prospectively from 1 January 2009. there
will be no changes to the accounting for the existing
hedge of the net investment in us operations.
aasB 2008-8 amendment to australian accounting
standards - eligible hedged items
aasB 2008-8 was issued in august 2008. it is effective
for accounting periods beginning on or after 1 July
2009 and must be applied retrospectively in accordance
with ias 8 accounting Policies, changes in accounting
estimates and errors. the amendment makes two
significant changes. it prohibits designating inflation
as a hedgeable component of a fixed rate debt. it also
prohibits including time value in the one sided hedged
risk when designating options as hedges. the Group will
apply the amended standard from 1 January 2010. it is
currently reviewing its hedging transactions to determine
whether there will be an impact on the financial report
when the standard is first applied.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
41
41
42
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
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.
(a)
critical accounting estimates and assumptions
the consolidated entity makes estimates and assumptions
concerning the future. the resulting accounting estimates
will, by definition, seldom equal the related actual results.
the estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are
discussed below:
(i) impairment of assets
as outlined in note 1 (aa) 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.
the group uses fair value less costs to sell. where
there is no binding sale agreement, fair value less
costs to sell is based on the best information available
to reflect the amount the consolidated entity could
receive for the cGu in an arms length transaction.
Fair value less costs to sell has been estimated on
the basis of discounted present value of the future
cashflows.
the estimates of future cash flows for each cash
Generating unit are based on significant assumptions
including:
•
•
•
•
•
•
•
•
estimates of the quantities of mineral reserves
and ore resources for which there is a high
degree of confidence of economic extraction and
the timing of access to these reserves and ore
resources ;
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;
future cash costs of production, sustaining capital
expenditure, rehabilitation and mine closure;
the asset specific discount rate applicable to the
cash Generating unit;
future operating costs for the Northern Murray
Basin development and existing operations; and
future capital and operating costs for the Eucla
Basin development.
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
significance 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 inter-relationships of the significant assumptions
upon which estimated future cash flows 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.
in addition, the australian Federal Government has
proposed introducing a carbon Pollution reduction
scheme (cPrs) by 2010. the introduction of a
cPrs has the potential to significantly impact the
assumptions used to determine the future cash flows
generated from the continuing use of the group’s
assets for the purpose impairment testing. the group
has not yet incorporated the impact of a cPrs into
it’s assumptions at 31 december 2008 as insufficient
market information exists. uncertainties exist around
the following areas:
•
•
•
•
•
•
•
•
the nature and timing of the proposed legislation
the level of emissions the group is expected to
emit
abatement opportunities
the price or range of prices of emission permits
the number of permits required to be purchased
the impact on costs charged by suppliers
the ability to pass on the cost of the permits
government assistance.
(ii) exploration and evaluation expenditure
expenditure with a value of $17.2 million (2007:
$34.6 million) which does not form part of the cash
Generating units assessed for impairment has been
carried forward in accordance with Note 1(n) 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 ore reserves and active
and significant operations in relation to the area are
continuing. in the event that significant operations
cease and/or economically recoverable reserves are
not assessed as being present, this expenditure will be
expensed to the income statement.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 2. critical accounting estimates and judgements
Note 3.
Financial risk management
(continued)
(iii) rehabilitation and mine closure provisions
as set out in Note 1(z), 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 reflects a
combination of management’s assessment of the cost
of performing the work required, the timing of the cash
flows and the discount rate of 6.0 per cent (2007: 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, any adjustment is reflected
directly in the income statement.
(iv) income tax
the consolidated entity is subject to income taxes
in australia and the united states (us). significant
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 finalised until statutory tax
returns are lodged with the appropriate authorities.
where the final tax outcome of these matters is
different from the amounts that were initially recorded,
such differences will impact upon the current and
deferred tax provisions in the period in which such
determination is made which is usually the subsequent
financial 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 offset by available
capital losses not previously recognised. the tax effect
of these amounts is $3.4 million and $10.2 million
respectively, (2007: $3.5 million and $0.5 million).
(b) critical judgements in applying the entity’s accounting
policies
recovery of deferred tax assets
Net deferred tax assets of $19.5 million (2007: $8.8 million)
are carried in respect of the us operations, including
$11.9 million (2007: $5.0 million) attributable to tax losses.
management has assessed that it is probable that these tax
losses will be recoverable against future taxable profits to
be generated in the us.
the Group’s activities expose it to a variety of financial risks:
market risk (including currency risk, fair value interest rate
risk and cash flow interest rate risk), credit risk and liquidity
risk. the Groups’s overall risk management program
focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial
performance of the 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.
the Group 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 2008, had the australian dollar
weakened/strengthened by 10 per cent against the us
dollar compared to the exchange rate at that date of
69.16 cents with all other variables held constant, the
consolidated entity’s post tax profit for the year would
have been $1.1 million higher/$1.0 million lower (2007:
$3.0 million higher/$2.5 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 $99.2 million lower/$86.7
million higher (2007: $61.6 million lower/$51.5
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 flow hedges. the significant change
in equity’s sensitivity to movements in the australian
dollar/us dollar exchange rates between 2008 and
2007 is due to the parent entity instigating a currency
hedging program in december 2007 resulting in an
increased amount of cash flow hedges open at 31
december 2008.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
43
43
44
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 3. Financial risk management (continued)
(c)
liquidity risk
Prudent liquidity risk management implies maintaining
sufficient cash or credit facilities to meet the operating
requirements of the business. this is managed through
committed undrawn facilities and prudent cash flow
management.
maturities of financial liabilities
the tables below analyse the consolidated entity’s and the
parent entity’s financial liabilities and net settled derivative
financial 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 flows,
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
significant.
parent entity sensitivity
at 31 december 2008, had the australian dollar
weakened/strengthened by 10 per cent against the
us dollar compared to the exchange rate at that date
of 69.16 cents with all other variables held constant,
the parent entity’s post tax profit for the year would
have been $25.1 million lower/$20.5 million higher
(2007: $16.0 million lower/$13.1 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 $75.0
million lower/$66.5 million higher (2007: $46.9 million
lower/$39.4 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 flow hedges in 2008, and
the translation of us functional currency entity trade
receivables and payables in 2007.
(ii) cash flow and fair value interest rate risk
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 2008 and 2007, 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 flow interest rate risk while borrowings
at fixed rates expose the consolidated entity to fair
value interest rate risk.
the Group does not account for any fixed rate financial
assets and liabilities at fair value through profit or
loss, and the Group does not designate derivatives
(interest rate swaps) as hedging instruments under a
fair value hedge accounting model.
at 31 december 2008, if interest rates had changed by
-/+1% from the year-end rate with all other variables
held constant, post tax profit for the year would have
been $0.6 million higher/lower (2007: $3.9 million
higher/lower), mainly as a result of lower/higher
interest expense from net debt.
(b)
credit risk
the consolidated entity has no significant 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 financial institutions. the consolidated
entity has policies that limit the amount of credit exposure to
any one financial institution.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 3. Financial risk management (continued)
Group - At 31 December 2008
Non-derivatives
interest-bearing Variable rate
interest-bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
Total derivatives
Group - At 31 December 2007
Non-derivatives
interest-bearing Variable rate
interest-bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
Gross settled
-
-
(inflow)
outflow
Total derivatives
Parent - At 31 December 2008
Non-derivatives
Non interest-bearing
interest-bearing Variable rate
interest-bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
Total derivatives
Parent - At 31 December 2007
Non-derivatives
Non interest-bearing
interest-bearing Variable rate
interest-bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
Gross settled
-
-
(inflow)
outflow
Total derivatives
weighted
average
rate
%
less than
1 year
$m
Between 1
and 2 years
$m
Between 2
and 5 years
$m
over 5
years
$m
total
contractual
cash flows
$m
carrying
amount
(assets)/
liabilities
$m
5.65
3.05
-
5.87
5.60
-
-
-
-
5.65
3.05
-
-
5.87
5.60
-
-
-
10.6
40.1
50.7
0.5
0.5
46.6
222.8
269.4
111.8
3.0
114.8
0.5
0.5
9.8
136.3
146.1
66.1
97.8
163.9
0.7
0.7
166.8
91.7
258.5
29.7
-
29.7
-
-
30.8
-
30.8
218.2
140.9
359.1
1.7
1.7
187.1
130.8
317.9
-
-
254.0
450.8
704.8
210.7
408.3
619.0
(4.0)
(4.0)
(6.7)
(2.1)
(16.8)
-
-
-
-
-
-
-
-
-
-
(4.0)
(4.0)
(6.7)
(2.1)
(16.8)
-
10.6
40.1
50.7
0.5
0.5
-
46.6
222.8
269.4
-
111.8
3.0
114.8
0.5
0.5
-
9.8
136.3
146.1
-
66.1
97.8
163.9
0.7
0.7
-
166.8
91.7
258.5
-
29.7
-
29.7
-
-
-
30.8
-
30.8
-
218.2
140.9
359.1
1.7
1.7
-
254.0
450.8
704.8
(4.0)
(4.0)
(6.7)
(2.1)
(16.8)
-
-
-
-
-
-
-
-
-
-
(4.0)
(4.0)
(6.7)
(2.1)
(16.8)
-
-
-
-
-
187.1
130.8
317.9
-
-
-
210.7
408.3
619.0
-
-
-
-
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
45
45
46
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 3. Financial risk management (continued)
Consolidated Entity - At 31 December 2008
Forward foreign exchange contracts - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
collar options - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
Consolidated Entity - At 31 December 2007
Forward foreign exchange contracts - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
collar options - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
Parent Entity - At 31 December 2008
Forward foreign exchange contracts - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
collar options - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
Parent Entity - At 31 December 2007
collar options - cash flow hedges
-
-
inflow (a$m)
outflow (us$m)
less than 1 year
$m
Between 1 and 2 years
$m
281.2
236.3
218.0
176.0
55.7
43.1
402.6
353.0
199.8
173.0
218.0
176.0
766.8
402.6
353.0
755.6
214.4
178.9
-
-
20.5
16.9
200.7
176.0
179.5
153.5
-
-
333.0
200.7
176.0
376.7
the above derivatives are likely to affect the profit and loss statement in line with the above maturity profile.
(d)
Fair value estimation
the fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. the fair value of forward
exchange contracts is determined using forward exchange market rates at the balance sheet date. the fair value of financial liabilities
for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available
to the consolidated entity for similar financial instruments.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 4. segment information
(a)
Primary reporting format - geographical segments
wa
mB
qld - crl
Va
Fl/G
sa
mac
other continuing discontinued consolidated
operations operations
2008
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
sales to external customers
564.4
190.5
126.1
95.4
12.1
inter segment sales
other revenue/income
10.0
3.2
-
0.1
-
-
-
-
-
0.6
total segment revenue/income
577.6
190.6
126.1
95.4
12.7
-
-
-
-
-
-
-
988.5
(10.0)
-
56.8
13.7
74.4
56.8
3.7
1,062.9
-
-
-
-
$m
988.5
-
74.4
1,062.9
total segment result
2.0
7.6
22.6
19.2
2.4
(10.1)
56.4
(18.8)
81.3
31.7
113.0
rehabilitation and restoration
accretion expense
interest and finance costs
interest revenue
Profit before income tax
income tax expense
Net profit 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
818.0
666.6
167.2
119.2
4.6
120.2
20.8
13.0
1,929.6
128.5
2,058.1
343.0
75.1
45.6
29.8
16.9
16.8
-
174.3
701.5
318.6
1,020.1
66.0
126.3
8.2
18.8
3.4
90.5
-
5.2
318.4
(15.8)
(26.1)
6.2
45.6
9.4
55.0
-
-
-
31.7
(1.7)
30.0
(15.8)
(26.1)
6.2
77.3
7.7
85.0
1,929.6
128.5
2,058.1
701.5
318.6
1,020.1
318.4
161.7
(5.5)
-
-
-
-
-
-
-
-
-
depreciation and amortisation expense 103.3
28.3
16.1
13.3
0.3
impairment (reversals) charges (note 18) (24.6)
19.1
-
-
-
-
-
0.4
-
-
-
161.7
(5.5)
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
sa - eucla Basin
mac - mining area c iron ore (western australia)
other - includes New south wales and coal compensation, exploration, project expenses, other corporate costs incurred not attributable to any of the group’s
operating regions and intersegment eliminations
all intersegment sales are made at arms length prices.
i l u k a r e s o u r c e s l i m i t e d
47
48
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 4. segment information (continued)
wa
mB
qld - crl
Va
Fl/G
sa
mac
other continuing discontinued consolidated
operations operations
2007
$m
$m
$m
$m
$m
$m
$m
$m
$m
sales to external customers
575.2
87.2
124.6
94.9
16.0
inter segment sales
other revenue/income
-
11.2
-
-
-
0.2
-
0.6
-
-
total segment revenue/income
586.4
87.2
124.8
95.5
16.0
-
-
-
-
-
-
19.9
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
(2.0)
19.6
(22.0)
123.7
rehabilitation and restoration
accretion expense
interest and finance costs
interest revenue
Profit before income tax
income tax expense
Net profit for the year
segment assets
unallocated assets
total assets
(16.6)
(43.8)
1.7
65.0
(15.5)
49.5
861.1
594.4
198.1
83.3
21.8
35.4
13.7
6.0
1,813.8
segment liabilities
326.6
22.1
46.9
15.8
22.8
2.2
-
2.2
438.6
unallocated liabilities
total liabilities
acquisition of property, plant and
equipment and other non-current
segment assets
61.2
26.5
7.0
5.5
depreciation and amortisation expense
90.7
25.3
14.5
13.0
671.0
1,109.6
2.7
0.2
26.5
-
-
0.4
6.3
0.8
135.7
144.9
6.8
-
6.8
0.5
3.0
445.4
671.0
1,116.4
136.2
147.9
$m
40.7
-
-
40.7
16.0
(0.5)
-
-
15.5
(4.6)
10.9
31.6
$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
22.6
-
1,836.4
31.6
1,868.0
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
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
2008
$M
988.5
-
988.5
-
-
988.5
2007
$m
897.9
-
897.9
40.7
40.7
938.6
2008
$M
1,908.8
20.8
1,929.6
-
-
2007
$m
1,800.1
13.7
1,813.8
31.6
31.6
2008
$M
318.4
- -
318.4
-
-
1,929.6
1,845.4
318.4
2007
$m
135.7
135.7
0.5
0.5
136.2
Continuing operations
titanium minerals and zircon
iron ore royalty
Discontinued operations
coal
Total
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:
Continuing operations
North america
europe
asia
australia
other countries
Discontinued operations
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
consolidated
2008
$M
163.1
319.9
422.0
44.4
39.1 -
988.5
-
988.5
2007
$m
199.1
306.2
342.0
50.6
897.9
40.7
938.6
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
988.5
897.9
205.7
258.1
6.3
-
56.8
0.8
63.9
1.7
0.1
19.9
0.5
22.2
20.4
1.0
- -
0.6
22.0
17.8
1.1
0.3
19.2
revenue from continuing operations
1,052.4
920.1
227.7
277.3
From discontinued operation
sales revenue
sale of goods (note 9)
Note 6. other income
Net gain on disposal of property, plant and equipment
coal compensation receipts
insurance receipt wa gas outage (note 7)
sundry income
Net foreign exchange gains (note 7)
-
40.7
- -
0.6
-
2.5
0.1
13.6
16.8
11.3
2.0
-
0.3
-
13.6
-
- -
- -
-
12.4
12.4
4.9
0.1
13.5
18.5
i l u k a r e s o u r c e s l i m i t e d
49
50
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 7. expenses
From continuing operations
cost of production
depreciation
amortisation
Cost of sales of goods*
corporate other and foreign exchange losses
marketing and selling
Government royalties
research, technical support and major projects
exploration and evaluation
Expenses, from continuing operations
* includes $18.7 million of costs directly expensed due to the gas supply
interruptions in western australia which restricted production in 2008.
the consolidated entity has received an initial $2.5 million payment in respect
of a claim from its insurers for costs associated with the gas supply interruptions
in western australia which is included in other income (Note 6).
consolidated
Parent entity
2008
$M
735.7
121.4
40.3
897.4
25.7
10.7
26.3
10.2
16.9
2007
$m
592.0
104.8
40.1
736.9
19.5
10.2
18.0
9.9
13.8
2008
$M
159.7
39.4
13.7
212.8
65.7
6.4
2.6
5.9
- -
2007
$m
171.2
31.8
12.0
215.0
18.0
5.6
3.4
9.9
987.2
808.3
293.4
251.9
Expenses, from discontinued operation
-
24.7
- -
Impairment charges (reversals) on property, plant
and equipment (refer note 18)
south west - reversal of prior impairment
mid west Processing - reversal of prior impairment
mid west mining - asset write-offs
murray Basin - asset write-offs
Finance costs from continuing operations
interest and finance charges paid/payable
rehabilitation and restoration accretion expense
amortisation of deferred borrowing costs
interest capitalised
Finance 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
Net foreign exchange losses on foreign currency
borrowings included in corporate costs
Defined contribution superannuation expense
Charge to writedown inventory to net realisable value
(45.6)
(9.5)
30.5 -
19.1
(5.5)
29.3
15.8
0.8
(4.0)
41.9
-
8.3
13.6
-
13.6
15.5
0.3
-
-
-
-
43.5
16.6
0.3
-
60.4
0.5
10.9
-
(1.1)
(1.1)
15.8
12.3
(45.6) -
- -
-
- -
(45.6) -
28.7
6.2
0.8
(4.0) -
31.7
- -
3.3
-
42.7
5.6
0.3
48.6
2.8
12.4
13.5
(39.6) -
(27.2)
7.5
0.3
13.5
13.3
6.4
62.0
Employee benefits expense
174.2
171.8
64.9
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 8. income tax
(a)
income tax (benefit) expense
current tax
deferred tax
under (over) provided in prior years
income tax (benefit) expense is attributable to:
Profit from continuing operations*
Profit from discontinued operations (note 9)
aggregate income tax (benefit) expense
*
includes a benefit of $11.9 million from the recognition of previously
unrecognised us tax losses for utilisation in future years.
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 26)
(b) Numerical reconciliation of income tax expense (benefit)
to prima facie tax payable
Profit (loss) from continuing operations before income tax expense
Profit from discontinued operation before income tax expense
tax at the australian tax rate of 30% (2007: 30%)
tax effect at 30% of amounts which are not deductible (taxable)
in calculating taxable income:
unfranked dividends received
share-based payments
Net foreign exchange gains (losses)
capital gains offset by previously unrecognised capital losses
research and development
other non-deductible / non-assessable items
Benefit of tax losses utilised in the year not previously recognised *
Benefit of tax losses for utilisation in future years, not previously recognised **
difference in overseas tax rates
under (over) provision in prior years
total income tax expense
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
13.7
(20.1)
(1.3)
(7.7)
(9.4)
1.7
(7.7)
23.8
(43.9)
(20.1)
45.6
31.7
77.3
23.2
0.1
1.2
-
(10.2)
(3.4)
0.2
(4.2)
(17.8)
(10.9)
4.5
(1.3)
(7.7)
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
(14.1)
(4.2)
(2.7)
(21.0)
(21.0)
- -
(21.0)
4.0 -
(8.2)
(4.2)
(39.4)
- -
(39.4)
(11.8)
- -
0.9 -
6.1
(10.2) -
(3.4)
0.1
- -
- -
(18.3)
- -
(2.7)
(21.0)
(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)
*
relates to revenue losses in the united states that were not recognised in respect of impairment charges in 2006 due to uncertainty over their future use which have
been utilised against current year taxable income. the benefit of the tax expense is $2.8 million after adjusting for the difference in tax rates to the prevailing us tax rate
of 20 per cent.
** relates to revenue losses in the united states that were not recognised in respect of impairment charges in 2006 due to uncertainty over their future use for which future
use is now considered probable. the benefit to the tax expense for the year and the associated deferred tax asset at 31 december 2008 is $11.9 million when measured
at the prevailing us tax rate of 20 per cent.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
51
51
52
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 8. income tax (continued)
(c)
amounts recognised directly in equity
aggregate current and deferred tax arising in the reporting period and
not recognised in net profit or loss but directly debited or credited to equity
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
Net deferred tax-debited (credited) directly to equity (Notes 19 and 26)
(53.4)
(8.8)
(46.7)
(7.2)
(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 $76.9 million (2007: $120.0 million) (tax at the australian tax rate of 30%: $23.0 million (2007: $36.0 million)). the
benefit of these unused capital losses will only be obtained if these entities derive future capital gains sufficient to enable the benefit to
be realised and these entities continue to comply with the conditions for deductability imposed by tax legislation and no changes in tax
legislation adversely effect these entities in realising the benefit from the deduction for the losses.
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 financial report as a discontinued operation.
Financial information relating to the discontinued operation is set out below. Further information is set out in note 4 - segment
information.
(b)
Financial performance and cash flow information
revenue (note 5)
expenses (note 7)
Profit before income tax
income tax expense (note 8)
Profit after income tax of discontinued operations
Gain on sale of the interest in the Joint Venture before income tax
income tax expense (note 8)
Gain on sale of the interest in the Joint Venture after income tax
Profit from discontinued operations
Net cash inflow from operating activities
Net cash inflow (outflow) from investing activities
Net increase in cash generated by the discontinued operation
(c)
carrying amounts of assets and liabilities
the carrying amounts of assets and liabilities at the date of sale and 31 december 2007 were:
Property, plant and equipment
trade receivables
inventories
Total assets
Provision for rehabilitation and mine closure
Total liabilities
Net assets
consolidated
2008
$M
-
-
-
-
-
31.7 -
(1.7) -
30.0 -
30.0
3.0
53.4
56.4
2007
$m
40.7
(25.2)
15.5
(4.6)
10.9
10.9
21.4
(0.3)
21.1
consolidated
2007
$m
26.9
3.0
1.7
31.6
(6.8)
(6.8)
24.8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 9. discontinued operation (continued)
(d) details of the sale of the division
consideration received:
cash
carrying amount of net assets sold
Gain on sale before income tax
Note 10. current assets - cash and cash equivalents
cash at bank and in hand
deposits at call
the carrying amounts of the consolidated entity’s and parent entity’s
cash and cash equivalents are denominated in the following currencies:
In millions
us dollars
australian dollars
euros
Deposits at call
the deposits are at floating interest rates between 0.0 per cent and
4.70 per cent (2007: 1.7 per cent and 6.8 per cent) on us dollar and
australian dollar denominated deposits, and a weighted average
interest rate of 3.65 per cent (2007: 2.47 per cent)
Note 11. current assets - receivables
trade receivables
other debtors
Prepayments
Goods and services tax (Gst)
(a)
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
2008
$m
53.4
(21.7)
31.7
consolidated
Parent entity
2008
$M
18.2
79.4
97.6
10.1
83.0
-
2007
$m
17.5
2.4
19.9
12.3
5.2
0.4
206.3
14.5
9.3
13.1
243.2
160.0
14.7
7.7
8.1
190.5
136.9
48.3
0.3
136.0
32.5
1.8
2008
$M
- -
65.0 -
65.0 -
- -
65.0 -
- -
55.1
1.3
5.0
2.3
63.7
26.1
24.6
-
2007
$m
33.7
3.9
4.9
2.2
44.7
29.0
11.0
0.4
For an analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk refer to Note 3.
None of the current receivables are impaired or past due.
(b)
Fair value and credit risk
due to the short-term nature of these receivables, their carrying amount approximates their fair value.
i l u k a r e s o u r c e s l i m i t e d
53
54
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 12. current assets - inventories
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
consumable stores
- at cost
work in progress
- at cost
- at net realisable value
Finished goods
- at cost
- at net realisable value
Note 13. derivative financial instruments
Current assets
Fair value of foreign exchange derivatives
Non-current assets
Fair value of foreign exchange derivatives
Current liabilities
Fair value of foreign exchange derivatives
Non-current liabilities
Fair value of foreign exchange derivatives
(a)
instruments used by the consolidated entity
35.4
32.9
9.0
100.5
-
100.5
104.7
9.1
113.8
249.7
-
-
104.0
49.6
82.9
19.2
102.1
93.9
91.0
184.9
319.9
7.8
1.0
-
-
45.6
-
45.6
8.8
9.1
17.9
72.5
-
-
93.0 -
46.7 -
8.0
22.4
17.4
39.8
18.9
4.0
22.9
70.7
2.1
0.7
the consolidated entity is party to derivative financial instruments in the normal course of business in order to manage foreign exchange
and interest rate exposures. in accordance with the consolidated entity’s financial 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 flow 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 flow. 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.
the forward exchange contracts and foreign currency options hedge highly probable forecast sales over a period of up to two and
a half year timeframe. the contracts are timed to mature when receipts from customers are expected to be received.
consolidated entity
the group liability for foreign exchange derivatives at 31 december 2008 was $153.6 million (2007: $8.8 million asset). during the
year ended 31 december 2008, the consolidated entity transferred a total loss of $29.6 million (2007: $34.0 million gain) to the
income statement from equity. this loss represented the net losses attributable to delivered contracts. in 2007 $26.6 million of the
gain related to derivative contracts that were terminated in 2006.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 13. derivative financial instruments (continued)
Parent entity
the liability position at 31 december 2008 was $139.7 million (2007: $2.8 million asset). during the year ended 31 december 2008,
a total loss of $5.7 million (2007: $26.6 million gain) was transferred to the income statement from equity. in 2007 $26.6 million of
the gain related to derivative contracts that were terminated in 2006.
on 25 august 2006, the parent entity closed out its hedge book. a profit of $37.7 million was generated upon closure of the
hedge book of which the final $26.6 million was recognised during 2007 as revenue in line with the delivery dates of the original
contracts. the parent entity reinstated currency hedging activities on 13 december 2007.
(b)
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.
Note 14. current assets - current tax assets
current tax assets
Note 15. current assets - other
deferred overburden removal
Note 16. Non-current assets - receivables
consolidated
Parent entity
2008
$M
-
2007
$m
12.7
8.5
11.2
2008
$M
-
-
2007
$m
12.4
6.7
loans to controlled entities
-
-
241.4
289.2
(a)
impaired receivables and receivables past due
None of the non-current receivables are impaired or past due.
(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 benefits surplus (Note 33)
shares in controlled entities (Note 37)
consolidated
Parent entity
2008
$M
-
-
-
2007
$m
1.2
-
1.2
2008
$M
- -
849.2
849.2
2007
$m
849.2
849.2
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
55
55
56
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 18. Non-current assets - Property, plant and equipment
land &
Buildings
$m
Plant,
machinery &
equipment
$m
mine
reserves &
development
$m
exploration &
evaluation
$m
Project
development
expenditure
$m
Consolidated
At 1 January 2007
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/reclassifications
closing written down value
At 31 December 2007
cost
accumulated depreciation*
Net written down value
Year ended 31 December 2008
opening written down value
additions
disposals
impairment (charges) reversals
depreciation/amortisation expense
Foreign currency exchange differences
transfers/reclassifications
closing written down value
At 31 December 2008
cost
accumulated depreciation*
Net written down value
*
includes impairment charges (refer Note 7).
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
74.1
3.2
(0.5)
6.6
(3.4)
-
(1.3)
78.7
89.1
(10.4)
78.7
1,384.2
(737.4)
646.8
646.8
49.2
(0.2)
-
(91.2)
(5.8)
155.4
754.2
1,539.9
(785.7)
754.2
754.2
81.5
(8.7)
47.0
(102.3)
13.4
(0.6)
784.5
680.6
(373.5)
307.1
307.1
54.0
-
-
(51.0)
(0.5)
43.6
353.2
774.6
(421.4)
353.2
353.2
89.7
(1.8)
(46.6)
(52.7)
2.1
14.9
358.8
1,586.8
(802.3)
784.5
783.3
(424.5)
358.8
59.7
-
59.7
59.7
5.5
-
(1.1)
-
-
(37.4)
26.7
26.7
-
26.7
26.7
10.0
-
(1.5)
-
-
(18.0)
17.2
17.2
-
17.2
total
$m
2,450.6
(1,184.3)
1,266.3
1,266.3
135.7
(4.8)
(1.1)
(143.3)
(6.4)
0.7
1,247.1
2,469.0
(1,221.9)
1,247.1
1,247.1
317.6
(11.0)
5.5
238.4
(51.3)
187.1
187.1
17.8
-
-
-
-
(166.0)
38.9
38.9
-
38.9
38.9
133.2
-
-
(1.7)
(160.1)
-
5.0
15.5
-
175.4
1,414.6
175.4
2,651.8
-
(1,237.2)
175.4
1,414.6
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 18. Non-current assets - Property, plant and equipment (continued)
Parent entity
At 1 January 2007
cost
accumulated depreciation
Net written down value
Year ended 31 December 2007
opening written down value
additions
disposals
depreciation/amortisation expense
transfers/reclassifications
closing written down value
At 31 December 2007
cost
accumulated depreciation
Net written down value
Year ended 31 December 2008
opening written down value
additions
disposals
write-offs and impairment charges
depreciation/amortisation expense
transfers/reclassifications
closing written down value
At 31 December 2008
cost
accumulated depreciation*
Net written down value
* includes impairment charges (refer Note 7).
mine reserves and development
land &
Buildings
$m
Plant,
machinery &
equipment
$m
mine
reserves &
development
$m
total
$m
608.9
(381.0)
227.9
227.9
66.2
(4.1)
(43.8)
-
246.2
636.8
(390.6)
246.2
246.2
47.0
(2.2)
45.6
114.3
(83.5)
30.8
30.8
47.9
-
(21.0)
(19.4)
38.3
140.1
(101.8)
38.3
38.3
20.4
(1.7)
1.5
(23.8)
(53.2)
1.2
35.9
21.3
14.6
35.9
-
283.4
545.6
(262.2)
283.4
44.7
(13.2)
31.5
31.5
9.0
(4.0)
(0.1)
-
36.4
41.2
(4.8)
36.4
36.4
2.3
(0.3)
6.6
(2.4)
(0.8)
41.8
46.6
(4.8)
41.8
449.9
(284.3)
165.6
165.6
9.3
(0.1)
(22.7)
19.4
171.5
455.5
(284.0)
171.5
171.5
24.3
(0.2)
37.5
(27.0)
(0.4)
205.7
477.7
(272.0)
205.7
included in mine reserves and development are amounts totalling $236.0 million for the consolidated entity and $7.2 million for the parent
entity (2007: $229.8 million and $19.0 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 $17.0 million for the consolidated entity and $5.3 million for the parent
entity (2007: $25.7 million and $7.8 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 2008 comprises $113.5 million (2007: $11.9 million) relating to murray Basin stage 2 and
$61.9 million (2007: $27.0 million) relating to the Jacinth-ambrosia project. these amounts were not depreciated as the projects had not been
commissioned.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
57
57
58
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 18. Non-current assets - Property, plant and equipment (continued)
non-current assets pledged as security
refer to Note 25 for information on non-current assets pledged as security by the parent entity or its controlled entities.
impairment reversals (charges)
at each balance date, the carrying value of non-current assets is reviewed to ensure no assets are stated in excess of their recoverable
amount. where carrying values are assessed to be less than corresponding recoverable amounts, an ‘impairment charge’ may be required to
be taken.
as part of this process, factors giving rise to previous impairment charges as at 31 december 2006 and 31 december 2005 were reassessed
and as stated in Note 1(aa), where the recoverable value of the assets has increased as a result of changes to the factors, the impairment
charge is reversed to a maximum of the original charge less the depreciation and amortisation that would otherwise have been incurred if no
impairment had been recognised for each cash Generating unit (cGu). the key assumptions are included in Note 2. there were no impairment
reversals (charges) in 2007.
2008
cash Generating units
wa - south west
wa - mid west
murray Basin
total
land &
Buildings
$m
Plant,
machinery &
equipment
$m
mine
reserves &
development
$m
exploration &
evaluation
$m
Project
development
$m
total write-off
& impairment
charges
$m
6.6
-
-
6.6
37.5
9.5
-
47.0
1.5
(29.0)
(19.1)
(46.6)
-
(1.5)
-
(1.5)
-
-
-
-
45.6
(21.0)
(19.1)
5.5
the impairment reversals (charges) in 2008 in respect of the south west, mid west and murray Basin relates to the carrying value as a result
of impairment testing at year-end. the factors contributing to the impairment reversal (charges) for each cGu are provided below:
wa - south west
the impairment reversal is due to a combination of increased product prices, lower exchange rates and further changes to mine plans resulting
in the present value of the future cash flows of the operation being significantly higher than the carrying value of the non-current assets.
wa - mid west
the impairment reversal for plant, machinery and equipment is in respect to assets reviewed in the context of a revised group operating
strategy associated with the development of the Jacinth-ambrosia deposit in south australia and the processing of concentrate material from
the deposit through the Narngulu mineral separation Plant.
the impairment charge arose from the revised mine plan for eneabba and from the decision to prioritise Jacinth-ambrosia material through
the Narngulu mineral separation Plant resulting in two ore bodies with fair value balances from previous acquisitions in 1998 and associated
exploration capitalised post acquisition now being considered unlikely to be mined.
murray Basin
the impairment charge is due to revised mine plan for the region resulting in ore bodies with fair value associated with the acquisition of Basin
minerals limited in 2002 now being considered unlikely to be mined and study costs for developments that will not proceed have also been
impaired.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 19. Non-current assets - deferred tax assets
The balance comprises temporary differences attributable to:
amounts recognised in profit or loss
employee benefits
rehabilitation provisions
other provisions
accruals
tax revenue losses*
Foreign exchange
other
amounts recognised directly in equity
cash flow hedges
share issue costs
super plan reserve
set-off of deferred tax liabilities pursuant to set-off provisions (Note 26)
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 29)
closing balance at 30 June
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
10.1
102.2
2.6
2.8
11.9
0.3
1.0
130.9
46.1
3.1
1.5
181.6
(150.6)
31.0
9.9
(23.8)
(7.7)
52.6
31.0
10.9
85.7
4.8
1.4
5.0
3.8
-
111.6
(1.8)
-
-
109.8
(99.9)
9.9
14.9
(1.5)
(2.2)
(1.3)
9.9
3.2
40.9
1.9
1.9
- -
0.9 -
0.6 -
49.4
41.9 -
3.1 -
- -
94.4
(52.5)
41.9 -
- -
(4.0) -
- -
45.9 -
41.9 -
* the balance is attributable to carried forward us tax losses which are probable of recoupment in ensuing years (refer note 8).
Note 20. Non-current assets - intangible assets
Consolidated
At 1 January 2007
cost
accumulated amortisation
Net written down value
Year ended 31 December 2007
opening net book amount
amortisation charge
closing written down value
At 31 December 2007
cost
accumulated amortisation
Net written down value
Year ended 31 December 2008
opening written down value
amortisation charge
closing written down value
At 31 December 2008
cost
accumulated amortisation
Net written down value
Patents,
trademarks &
licences
$m
royalty
entitlement
asset
$m
17.2
(9.1)
8.1
8.1
(1.2)
6.9
17.2
(10.3)
6.9
6.9
(1.3)
5.6
17.2
(11.6)
5.6
10.0
(1.3)
8.7
8.7
(0.4)
8.3
10.0
(1.7)
8.3
8.3
(0.4)
7.9
10.0
(2.1)
7.9
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
59
59
3.6
28.7
0.8
0.6
33.7
33.7
(33.7)
total
$m
27.2
(10.4)
16.8
16.8
(1.6)
15.2
27.2
(12.0)
15.2
15.2
(1.7)
13.5
27.2
(13.7)
13.5
60
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
consolidated
Parent entity
2008
$M
40.5
109.3
14.3
164.1
2007
$m
40.3
59.6
13.2
113.1
2008
$M
5.4
18.7
5.3
29.4
2007
$m
8.4
20.1
5.4
33.9
9.8
150.2
14.4
96.1
2.4
25.6
1.4
31.9
-
-
36.8
-
36.8
51.3
77.1
68.1
34.2
230.7
-
-
36.8
-
36.8
51.3
77.1
68.1
34.2
230.7
16.0
40.1
5.3
61.4
13.8
38.8
2.6
55.2
5.5
11.1
5.2
21.8
5.7
8.7
2.5
16.9
Note 21. current liabilities - Payables
trade payables
accrued expenses
employee benefits
(a)
Foreign currency risk
the carrying amounts of the consolidated entity’s and parent entity’s
payables are denominated in the following currencies:
In millions
us dollars
australian dollars
For an analysis of the sensitivity of payables to foreign
currency risk refer to Note 3.
Note 22. current liabilities - interest-bearing liabilities
Unsecured
Bank loans
trade finance facility
working capital facility
senior notes 1996
total unsecured interest-bearing liabilities
the carrying value of the interest-bearing liabilities is a reasonable
approximation to their fair value.
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 25.
(a) risk exposures
details of the consolidated entity’s exposure to interest rate changes on
interest-bearing liabilities are set out in Note 25.
Note 23. current liabilities - Provisions
employee benefits
rehabilitation and mine closure
other provisions
(a) amounts not expected to be settled within the next 12 months
the current provision for employee benefits is presented as current,
since the Group does not have an unconditional right to defer settlement.
However, based on past experience, the group does not expect a significant
amount of the provision will be paid in the next 12 months.
movements in each class of provision during the current period, other than
employee benefits, are set out in Note 27.
Note 24. current liabilities - current tax liabilities
income tax payable
5.0
8.3
1.1 -
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
consolidated
Parent entity
Note 25. Non-current liabilities - interest-bearing liabilities
Unsecured
Bank loans
senior notes 1996
senior notes 2003
Bilateral loan notes
deferred borrowing costs
2008
$M
93.9
43.4
143.7
-
(4.5)
276.5
(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)
working capital Facility (vi)
short-term loan (vii)
crl secured syndicated revolving loan credit Facility (viii)
crl secured working capital Facility (ix)
crl secured Bank overdraft Facility (x)
syndicated term loan Facility (xi)
crl secured cash advance Facility (xii)
crl secured working capital Facility (xiii)
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)
working capital Facility (vi)
short-term loan (vii)
syndicated term loan Facility (xi)
unused at balance date
syndicated loan Note Facility (iii)
trade Finance Facility (iv)
Bilateral loan Note Facility (v)
working capital Facility (vi)
crl secured syndicated revolving loan credit Facility (viii)
crl secured working capital Facility (ix)
crl secured Bank overdraft Facility (x)
syndicated term loan Facility (xi)
crl secured cash advance Facility (xii)
crl secured working capital Facility (xiii)
43.4
143.7
-
-
-
55.0
-
-
-
0.5
445.0
15.0 -
15.0
717.6
43.4
143.7
-
-
-
36.8
-
94.0
317.9
-
-
-
18.2
-
-
0.5
351.0
15.0
15.0
399.7
2007
$m
121.7
34.2
142.3
90.1
(1.0)
387.3
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
2008
$M
94.0
43.4
143.7
-
(4.5)
276.6
43.4
143.7
-
-
-
55.0
-
- -
- -
- -
445.0 -
-
- -
687.1
43.4
143.7
-
-
-
36.8
-
94.0 -
317.9
-
-
-
18.2
- -
- -
- -
351.0 -
- -
- -
369.2
2007
$m
121.7
34.2
142.3
90.1
(1.0)
387.3
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
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
61
61
62
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 25. Non-current liabilities - interest-bearing liabilities (continued)
(i) senior notes 1996 series
the remaining tranche of us$30.0 million matures in december 2011. as at 31 december 2008, us$30.0 million at an average
interest rate of 7.6% was outstanding on the senior Notes (2007: us$60.0 million at 7.6%).
(ii) senior notes 2003 series
the notes 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 2008, us$100.0 million at an average interest rate of 5.1% was outstanding (2007: us$100.0 million at 5.1%).
the translation exposure on the us$40.0 million notes maturing in 2013 notes has been eliminated through the use of a cross
currency swap transaction. on maturity of these notes the principal repayments are fixed at an exchange rate of aud/usd 0.7025.
the cross currency swap also converts the fixed usd interest payments of 5.25% on the us$40.0 million 2013 tranche to an aud
variable interest rate exposure. as at 31 december 2008, the cross currency swaps bear an average variable interest rate of 4.4%
(2007: 7.9%).
the swaps require settlement of interest receivable and payable on a semi-annual basis. the settlement dates coincide with the
dates on which interest is payable on the underlying notes.
in 2004 cross currency swaps were in place for all three tranches at an exchange rate of aud/usd 0.7025 and an average aud
variable interest rate of 6.03%. during 2008, the cross currency swaps on the 2010 and 2015 tranches were closed out at an
average rate of aud/usd 0.6951. the gain on the close out of $0.9 million is included as other income on the income statement.
(iii) syndicated loan note Facility
during the period, the company entered into a new a$445.0 million syndicated term loan Facility replacing the syndicated loan
Note Facility. the syndicated loan Note Facility is a multi currency facility which can be drawn in australian dollars, us dollars and
euro.
(iv) trade Finance Facility
during the period, the company entered into a new a$445.0 million syndicated term loan Facility replacing the trade Finance
Facility.
(v) Bilateral loan note Facilities
during the period, the company entered into a new a$445.0 million syndicated term loan Facility replacing the Bilateral loan Note
Facility.
(vi) Working capital Facility (formerly receivables acquisition Facility)
during the period, as part of the refinancing of the groups debt facilities, the limit was reduced from us$60.0 million to a$55.0
million. this is a multi currency facility which requires the company to have sufficient credit risk insurance to enable it to be drawn.
the facility matured on 12 march 2009 and subsequent to year-end has been extended to 12 march 2010..
(vii) short-term loan
during the period, the company entered into a new a$445.0 million syndicated term loan Facility replacing the short-term loan.
(viii) crl secured syndicated revolving loan credit Facility
during the period, the company entered into a new a$15.0 million cash advance Facility replacing the syndicated revolving loan
credit Facility.
(ix) crl secured Working capital Facility
during the period, the company entered into a new a$15.0 million crl working capital Facility replacing the crl secured working
capital Facility.
(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 (2007: $Nil).
(xi) syndicated term loan Facility
during the year, an a$445.0 million syndicated Facility agreement was entered into with maturity dates of march 2012 (a$100.0
million) and march 2013 (a$345.0 million). as at 31 december 2008, a$94.0 million was outstanding under this agreement at an
average interest rate of 3.22% (2007: $Nil).
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 25. Non-current liabilities - interest-bearing liabilities (continued)
(xii) crl secured cash advance Facility
during the year, an a$15.0 million cash advance Facility was entered into with a maturity date of september 2011. as at 31
december 2008 the facility was undrawn (2007: $Nil).
(xiii) crl secured Working capital Facility
during the year, an a$15.0 million working capital Facility was entered into with a maturity date of september 2009. as at 31
december 2008 the facility was undrawn (2007: $Nil).
the carrying value of the interest-bearing liabilities is a reasonable approximation to their fair value.
(b) assets pledged as security
consolidated
Parent entity
Notes
2008
$M
2007
$m
2008
$M
2007
$m
the carrying amounts of crl assets pledged as security are against
various crl secured facilities, these facilities are secured by a fixed and
floating charge over all of the crl assets:
cash and cash equivalents
current receivables
inventories
Property, plant and equipment
total assets pledged as security
10
11
12
18
14.5
14.1
22.7
101.7
153.0
4.2
24.8
23.7
107.9
160.6
- -
-
- -
- -
- -
-
(c)
interest rate risk exposure and maturities of interest-bearing liabilities
the consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial
liabilities is set out in the table below. exposures arise predominantly from liabilities bearing variable interest rates as the consolidated
entity intends to hold fixed rate liabilities to maturity.
effective
floating average
interest rate
%
Floating
interest rate
$m
1 year
or less
$m
3.05
4.44
7.5
6.96
7.67
14.6
130.8
56.9
187.7
408.3
142.3
550.6
-
-
-
34.2
-
34.2
Fixed interest rate
1 to 5
years
$m
158.6
(56.9)
101.7
91.1
(56.9)
34.2
more than
5 years
$m
28.5
-
28.5
85.4
(85.4)
-
total
$m
321.0
4.4
325.4
626.0
7.7
633.7
2008 Group and Parent
interest-bearing liabilities*
(Notes 22 and 25)
interest rate swaps**
2007 Group and Parent
interest-bearing liabilities*
(Notes 22 and 25)
interest rate swaps**
*
excludes deferred borrowing costs
** Notional principal amounts
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
63
63
64
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 25. Non-current liabilities - interest-bearing liabilities (continued)
the contractual repricing dates of the floating rate interest-bearing liabilities
at the balance dates are as follows:
less than 1 year
Between 1 and 2 years
Between 2 and 5 years
over 5 years
(d) Foreign currency exposure
the consolidated entity has the following foreign currency risk exposure
on interest-bearing liabilities.
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
36.8
-
150.9
-
187.7
196.5
121.7
147.0
85.4
550.6
36.8
-
150.9
-
187.7
196.5
121.7
147.0
85.4
550.6
australian dollar
us dollar
-
180.5
301.4
153.7
-
180.5
301.4
153.7
Note 26. Non-current liabilities - deferred tax liabilities
The balance comprises temporary differences attributable to:
amounts recognised in profit or loss
depreciation/amortisation
mining capital expenditure
Foreign currency exchange
other
receivables
inventory
amounts recognised directly in equity
cash flow 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 29)
under provision in prior years
closing balance at 31 december
128.2
118.2
7.8
-
0.7
3.9
10.0
150.6
-
150.6
(150.6)
-
44.7
(43.9)
(0.8)
-
-
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
44.9
4.5
-
0.3
-
2.8
52.5
-
52.5
(52.5)
-
9.0
(8.2)
(0.8)
-
-
33.2
2.2
3.7
0.2
0.1
2.5
41.9
0.8
42.7
(33.7)
9.0
6.1
10.4
(7.2)
(0.3)
9.0
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 27. Non-current liabilities - Provisions
employee benefits
rehabilitation and mine closure
retirement benefit obligations
consolidated
Parent entity
2008
$M
2.7
309.4
10.6
322.7
2007
$m
2.7
265.6
2.0
270.3
2008
$M
0.9
124.8
- -
125.7
2007
$m
1.0
87.0
88.0
movements in each class of provision during the current financial year, other than employee entitlements, are set out below:
Consolidated - 2008
carrying amount at start of year
additional provisions recognised
Payments
rehabilitation and restoration accretion expense
Foreign exchange rate movements
carrying amount at end of year
Parent entity - 2008
carrying amount at start of year
additional provisions recognised
Payments
transfers/reclassifications
rehabilitation and restoration accretion expense
unused amounts reversed
carrying amount at end of year
rehabilitation and
mine closure
$m
retirement
benefits
$m
other
provisions
$m
304.4
49.6
(24.2)
14.4
5.4
349.6
2.0
8.6
-
-
-
10.6
2.6
2.9
(0.1)
-
-
5.4
rehabilitation and
mine closure
$m
other
provisions
$m
95.7
19.1
(10.6)
25.6
6.2
-
136.0
2.5
2.7
-
-
-
-
5.2
movement in rehabilitation and mine closure provisions and other provisions represents an aggregate of current and non-current balances.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
65
65
66
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 28. contributed equity
(a)
share capital
ordinary shares
issued and paid up capital
Total contributed equity - parent entity
treasury shares
Total consolidated contributed equity
(b) movements in ordinary share capital
consolidated and
Parent entity
consolidated and
Parent entity
2008
Number of
shares
2007
Number of
shares
2008
2007
Paid up value Paid up value
$M
$m
380,700,517
242,237,328
1,006.5
662.6
- -
1,006.5
662.6
(2,812,532)
-
(8.4) -
998.1
662.6
date
details
Number of shares
issue price
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
1 January 2008
22 march 2008
22 april 2008
opening balance
rights issue
rights issue
232,914,349
1,222,687
3,637,993
-
1,017,118
3,445,181
242,237,328
242,237,328
101,124,750
37,338,439
$5.68
$5.77
$5.27
$5.35
$2.55
$2.55
transaction costs on rights issue net of tax
31 december 2008
Balance
380,700,517
$m
611.0
6.9
21.0
(0.1)
5.4
18.4
662.6
662.6
257.9
95.2
1,015.7
(9.2)
1,006.5
(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)
treasury shares
treasury shares are shares in iluka resources limited that are held by iluka administration limited for the purpose of issuing shares
under the directors, executives and employees share acquisition Plan (see Note 43 for further information).
details
opening balance 1 January 2008
transfer from share-based payments reserve
acquisition of shares net of tax
employee share scheme issue
Balance 31 december 2008
Number of shares
-
286,572
3,495,483
(969,523)
2,812,532
$m
-
1.0
10.7
(3.3)
8.4
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 28. contributed equity (continued)
(e) dividend reinvestment plan
the company has a dividend reinvestment plan (drP) under which eligible holders of ordinary shares can elect to have all or part of
their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. the drP’s for the final 2006
dividend and interim 2007 dividend were fully underwritten, with shares issued to the underwriter being at a discount of 1.0 percent.
in respect of the final dividend for 2006 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 for 2007 distributed 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. No dividends have since been declared.
(f)
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 benefits 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 level of net debt in compliance with bank covenants, including the gearing
ratio. 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 ‘total equity’ as shown in the
balance sheet, excluding hedge reserve and foreign currency translation reserve 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 specific crl facilities described in Note 25)
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.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
67
67
68
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 29.reserves and retained profits
(a) reserves
asset revaluation reserve
Hedging reserve - foreign exchange cash flow hedges
employee share options reserve
Foreign currency translation reserve
share-based payments reserve
defined benefit superannuation reserve
Movements:
asset revaluation reserve
Balance 1 January
transfer to retained earnings
Balance 31 december
Hedging reserve - foreign exchange cash flow hedges
Balance 1 January
revaluation, net of tax
transfer to net profit, net of tax
Balance 31 december
employee options reserves
Balance 1 January
transfer to share-based payments reserve
Balance 31 december
Foreign currency translation reserve
Balance 1 January
currency translation differences arising during the year
Hedge of net investment in foreign entity
Balance 31 december
share-based payments reserve
Balance 1 January
recognition of the fair value of equity instruments
granted to employees
transfer from employee options reserve
Balance 31 december
defined benefit superannuation reserve
Balance 1 January
decrease for the year
transfer to retained earnings
Balance 31 december
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
17.5
(102.6)
-
(3.1)
3.9
-
(84.3)
17.6
(0.1)
17.5
4.1
(134.2)
27.5
(102.6)
0.2
(0.2)
-
1.7
(22.9)
18.1
(3.1)
0.5
3.2
0.2
3.9
(0.3)
-
0.3
-
17.6
4.1
0.2
1.7
0.5
(0.3)
23.8
18.9
(1.3)
17.6
20.5
4.9
(21.3)
4.1
0.2
-
0.2
(1.5)
10.5
(7.3)
1.7
1.7
(1.2)
-
0.5
(0.1)
(0.2)
-
(0.3)
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
18.5
(97.8)
-
- -
4.7
- -
(74.6)
18.6
(0.1)
18.5
1.9
(99.7)
-
(97.8)
0.2
(0.2) -
-
- -
- -
- -
- -
0.3
4.2
0.2 -
4.7
- -
- -
- -
- -
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 29.reserves and retained profits (continued)
(b) retained profits
movements in retained profits were as follows:
Balance 1 January
Net profit for the year
dividends
actuarial gains / (losses) on retirement benefit obligation, net of tax
transfer from asset revaluation reserve
transfer from defined benefits superannuation reserve
Balance 31 december
(c) Nature and purpose of reserves
(i) asset revaluation reserve
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
(2.8)
77.5
-
(8.5)
0.1
(0.3)
66.0
(3.5)
51.1
(51.7)
-
1.3
-
72.5
(18.4)
-
- -
-
- -
119.6
3.9
(51.7)
0.7
(2.8)
54.1
72.5
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) hedging reserve - foreign exchange cash flow hedges
the hedging reserve is used to record gains or losses (net of tax) on a hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in Note 1(k). amounts are recognised in profit and loss when the associated hedged transaction
affects profit and loss.
(iii) employee share options reserve
the employee share options reserve is used to recognise the fair value of options issued but not exercised. the balance of this
reserve was transferred to share-based payments reserve on 1 January 2008.
(iv) 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(j). the reserve is recognised in profit and loss when the net investment is disposed of.
(v) 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 43.
(vi) defined benefit superannuation reserve
the defined benefit superannuation reserve represents the actuarial gains and losses of the net position of the defined benefit
superannuation plans not yet recognised through the income statement. the balance of this reserve was transferred to retained
earnings on 1 January 2008 and all movements since that date are taken to retained earnings. refer Note 33.
(vii) hedge of net investment in foreign entity
us$65.0 million of debt (2007: us$60.0 million) is designated as a hedge of the net investment in the us operations. the fair value
and carrying amount of the borrowings designated as a hedge at 31 december 2008 was $94.0 million (2007: $68.4 million).
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
69
69
70
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 30. dividends
(a) ordinary shares
Final dividend for the year ended 31 december 2007 Nil
(2006: 12 cents fully franked) per fully paid share
Paid in cash
satisfied by issue of shares
interim dividend for the year ended 31 december 2008 Nil
(2007: 10 cents fully franked) per fully paid share
Paid in cash
satisfied by issue of shares
(b)
Franked dividends
Parent entity
2008
$M
2007
$m
-
-
-
-
-
21.0
6.9
18.4
5.4
51.7
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
Franking credits available for subsequent financial years based on a
tax rate of 30 per cent (2007: 30 per cent)
8.3
9.2
(0.5)
(3.6)
the above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking credits that
will arise from the payment of the amount of the provision for income tax or receipt of income tax receivable.
the franking credits available to the consolidated entity include $8.8 million (2007: $8.5 million) for the consolidated rutile limited
group. distribution of franking credits by the parent entity is subject to receipt of fully franked dividends from consolidated rutile
limited which is 51.04 per cent owned by the parent entity at 31 december 2008.
Note 31. key management Personnel
key management Personnel
key management Personnel of the consolidated entity comprise directors of iluka resources limited as well as other specific 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 financial year:
(i) non-executive directors
G c campbell
V a davies
r l every (chairman)
i c mackenzie (chairman)
d m morley
G J Pizzey
G J rezos
J a seabrook
(ii) managing director and chief executive officer
d robb
all above persons were directors of iluka resources limited for all of the financial year, as well as for the financial year ended 31 december
2007, except G c campbell, V a davies and i c mackenzie who retired on 21 may 2008, and J a seabrook who was appointed as a director on
1 may 2008.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 31. key management Personnel (continued)
key management Personnel - employees other than directors (‘the executives’)
in addition to the directors of the consolidated entity, the following employees met the definition of key management Personnel for the year
ended 31 december 2008:
m adams1
P Beilby
P Benjamin
s Green2
V Hugo
d mcmahon3
a tate4
H umlauff
s wickham5
c wilson
General manager western region
General manager murray Basin
General manager exploration & technical services
acting chief Financial officer
General manager sales and marketing
chief Financial officer
chief Financial officer
General manager sa development & Project management
General manager western region
General manager corporate services & company secretary
1 m adams ceased employment 26 september 2008.
2
3
4
5
s Green acting chief Financial officer from 18 January 2008 to 12 may 2008.
d mcmahon ceased employment 17 January 2008.
a tate appointed as chief Financial officer 13 may 2008.
s wickham appointed as an executive 1 september 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 2007, except:
-
-
-
s Green, classified as an executive between 18 January 2008 and 12 may 2008.
a tate, appointed as executive 13 may 2008.
s wickham, appointed as an executive 1 september 2008.
the following persons were also executives during the year ended 31 december 2007, except:
-
-
-
d calhoun, ceased employment 30 November 2007.
d Grant, ceased employment 16 February 2007.
d mcmahon, appointed as an executive 29 January 2007.
key management Personnel compensation (consolidated and Parent entity)
2008
Non-executive directors
executive directors
executives
TOTAL
2007
Non-executive directors
executive directors
executives
TOTAL
short-term Benefits
$
Post employment Benefits
$
share Based Payments
$
termination Benefits
$
total
$
846,974
2,224,833
4,404,628
7,476,435
880,736
1,255,076
3,397,209
5,533,021
69,472
97,207
264,292
430,971
75,116
90,826
372,850
538,792
-
713,310
1,349,523
2,062,833
-
354,485
455,655
810,140
-
-
-
-
-
-
424,000
424,000
916,446
3,035,350
6,018,443
9,970,239
955,852
1,700,387
4,649,714
7,305,953
the company has taken advantage of the relief provided by the corporations regulation 2m.6.04 and has transferred the detailed remuneration
disclosures to the remuneration report. the relevant information can be found on pages 15 to 20 of the remuneration report.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
71
71
72
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 31. key management Personnel (continued)
share rights and shareholdings of key management Personnel
Number of shares
Number of share rights
received on
vesting of
share rights
during the year
Balance held
at 1/1/08
awarded as
restricted
shares
other
changes during
the year**
Balance
held at
31/12/08***
Balance
held at
1/1/08
Granted
during
2008*
Vested as
shares during
2008
lapsed
during
2008**
Balance
held at
31/12/08
85,740
36,102
18,250
43,810
26,012
10,405
40,474
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(85,740)
(36,102)
-
-
10,429
28,679
(43,810)
-
14,864
40,876
5,946
16,351
23,128
63,602
17,612
17,612
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,835
80,762
67,003
185,198
405,798
124,821
1,189,619
(80,762)
-
1,233,678
2,284
27,369
17,050
22,842
2,243
-
(4,527)
-
6,102
4,786
7,816
21,386
21,182
18,391
31,346
24,524
28,028
86,203
67,542
77,077
- - -
- -
- - -
- -
2,469
2,424
- -
4,876
8,263
29,805
10,452
22,102
19,827
5,973
8,500
54,525
16,425
43,741
22,554
28,910
27,769
35,733
-
-
30,514
12,039
36,255
167,994
133,570
165,542
106,811
-
140,828
137,291
72,978
168,391
(2,243)
(188,305)
-
(6,102)
(4,786)
(7,816)
-
-
(2,424)
-
(8,263)
-
-
-
-
-
-
-
-
156,378
188,525
134,728
-
140,828
165,381
85,017
196,383
Name
Non-Executive Directors
G campbell
V davies
r every
i mackenzie
d morley
G Pizzey
G rezos
J seabrook
Executive Director
d robb
Executives
m adams
P Beilby
P Benjamin
V Hugo
d mcmahon
a tate
H umlauff
s wickham
c wilson
* Granted during 2008 includes the full grant of the share rights offered under the 2008 ltiP, iluka retention Plan and share right adjustment for previous grants relating to the
dilution impact of the accelerated renounceable entitlement offer.
** Negative amounts reflect the result of leaving the company during the year.
*** Balance includes restricted shares awarded during the year of which half vested 1 January 2009 and half will vest 1 January 2010.
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.
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 2008.
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) 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;
(b)
information about these transactions does not have the potential to adversely affect decisions about the allocation of scarce resources
made by users of the financial report, or the discharge of accountability by the key management Personnel; and
(c)
the transactions are trivial or domestic in nature.
(d) ms seabrook is a special advisor to Gresham Partners limited, a company associated with Gresham advisory Partners limited. services
provided by Gresham advisory Partners limited during the year of $1,659,000 were provided under normal commercial terms and
conditions (all services were provided prior to the appointment of ms seabrook as a director and were in connection with the sale of the
Narama Joint Venture and the equity raising).
therefore, specific details of other transactions with key management Personnel are not disclosed.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 32. 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 firms:
(a) assurance services
Audit and audit related services
Fees paid to Pricewaterhousecoopers:
Pwc australia
other Pwc firms
total remuneration for audit services
consolidated
Parent entity
2008
$
2007
$
2008
$ $
2007
771,969
72,569
844,538
851,363
60,400
911,763
625,000
- -
708,000
625,000
708,000
Other assurance services - due diligence services in connection
with the equity raising
Pwc australia
445,000
-
445,000 -
total remuneration for assurance services
1,289,538
911,763
1,070,000
708,000
(b)
taxation services
Fees paid to Pricewaterhousecoopers:
Pwc australia
other Pwc firms
total remuneration for taxation services
(c) other services
Fees paid to Pricewaterhousecoopers:
Pwc australia
total remuneration for other services
Note 33. retirement benefit obligations
(a)
superannuation plans
86,800
12,000
98,800
21,000
33,360
54,360
86,800
- -
86,800
21,000
21,000
56,980
56,980
24,884
24,884
56,980
56,980
24,884
24,884
australia
all employees of the consolidated entity who do not elect an alternate fund under the superannuation Fund choice legislation are
entitled to benefits 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 benefits only
in the master trust. the master trust also provides defined lump sum and pension benefits based on years of service and final average
salary for a small number of members. the defined contribution section receives fixed 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 benefits from the us operations’ pension plans on retirement, disability or death.
the us operations have two defined benefit plans and one defined contribution plan. one of the defined benefits plans provides a
monthly benefit based on a set amount per month per year of service. the other defined benefit plan provides a monthly benefit based
on average salary and years of service. the defined contribution plan receives an employee’s elected contribution and an employer’s
match-up to a fixed percentage and the entity’s legal or constructive obligation is limited to these contributions.
the following sets out details in respect of the defined benefit sections only of the australian and us plans.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
73
73
74
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 33. retirement benefit obligations (continued)
(b) Balance sheet amounts
the amounts recognised in the balance sheet are determined as follows:
defined benefit plan obligation
defined benefit fund plan assets
deficiency of net market value of assets over the present value
of employees’ accrued benefit payments
unrecognised past service costs
Net liability in the balance sheet (refer note 27) *
*
in 2007 the net deficiency of $1.1 million in respect of the master trust plan consisted of
a surplus of $1.2 million recognised as an asset and a deficiency of $2.3 million recognised as a liability.
(c)
categories of plan assets
the major categories of plan assets are as follows:
cash
equity instruments
debt instruments
Property
other assets
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.
(d) reconciliations
Reconciliation of the present value of the defined benefit
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
Benefits paid
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
Benefits paid
Balance at 31 december
consolidated
2008
$M
2007
$m
27.6
(16.2)
11.4
(0.8)
10.6
0.8
9.4
4.5
0.4
1.1
16.2
20.4
0.7
1.2
0.1
2.8
3.5
(1.1)
27.6
17.9
1.3
(6.1)
2.2
1.9
0.1
(1.1)
16.2
20.4
(17.9)
2.5
(1.4)
1.1
1.1
12.3
2.7
0.8
1.0
17.9
21.5
0.8
1.2
0.1
0.5
(1.3)
(2.4)
20.4
17.4
1.3
(0.3)
(0.8)
2.6
0.1
(2.4)
17.9
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 33. retirement benefit obligations (continued)
(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 benefits expense
actual return on plan assets
(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 inflation
USA**
discount rate
expected return on plan assets
Future salary increases
expected rate of inflation
consolidated
2008
$M
0.7
1.2
(1.3)
-
0.8
-
1.4
(4.8)
consolidated
2008
%
3.5
5.0
3.5
2.0
6.0
7.5
3.5
3.0
2007
$m
0.8
1.2
(1.3)
0.2
1.0
(0.1)
1.8
1.0
2007
%
6.0
6.5
5.0
2.0
6.3
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 5.0 per cent (2007: 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 (2007: 7.5 per cent) rate of return net of tax and
expenses.
(g)
employer contributions
australia
employer contributions to the defined benefits section of the plan are based on recommendations by the section’s actuary.
the objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time
they become payable. to achieve this objective, the actuary has adopted a method of funding benefits known as the aggregate funding
method. this funding method seeks to have benefits 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 defined benefits plan’s future experience
(as detailed below), the actuary recommended in the actuarial review, the payment of employer contributions to the defined benefit
plan ranging between 8.7 per cent and 24.6 per cent (2007: 8.7 per cent to 24.6 per cent) of salaries dependent on the defined benefit
category of membership.
total defined benefit employer contributions expected to be paid by consolidated entity companies for the year ending 31 december
2009 are $1.1 million
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
75
75
76
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 33. retirement benefit obligations (continued)
usa
employer contributions to the defined benefits section of the plan are based on recommendations by the plan’s actuary.
the objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they
become payable. to achieve this objective, the actuary has adopted a method of funding benefits 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
benefit 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 defined benefits section’s future experience
(as detailed below), the actuary recommended in the actuarial review, the payment of us$1.1 million (2007: us$1.5 million) for the
salaried defined benefit plan and us$0.3 million (2007: us$0.4 million) for the hourly defined benefit plan.
total employer contributions expected to be paid by consolidated entity companies for the year ending 31 december 2009 are us$2.1
million.
(h) Net financial position of plan
in accordance with aas 25 Financial reporting by superannuation Plans the plan’s net financial position is determined as the difference
between the present value of the accrued benefits and the net market value of plan assets.
australia
the net financial position of the plan has been determined from information supplied by the master trust, and a deficit of $4.1 million as
at 31 december 2008 (2007: $1.2 million surplus) was reported.
usa
the net financial position of the usa plans has been determined as at the date of the most recent financial report of the superannuation
fund (31 december 2008), and in accordance with ias 19 employee entitlements, and a deficit of $us 6.5 million as at 31 december 2008
(2007: $us 2.0 million) was reported.
(i)
Historic summary
defined benefit plan obligation
defined benefit fund plan assets
2008
$M
27.6
(16.2)
2007
$m
20.4
(17.9)
consolidated
2006
$m
21.5
(17.4)
deficiency (surplus) of net market value of assets over the present
value of employees’ accrued benefit payments
11.4
2.5
4.1
experience adjustments arising on plan liabilities
experience adjustments arising on plan assets
-
-
-
-
-
-
2005
$m
21.2
(15.4)
5.8
(0.3)
0.3
2004
$m
18.4
(14.1)
(4.3)
-
0.4
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 34. contingent liabilities
Contingent liabilities
details and estimates of maximum amounts of contingent liabilities
are as follows:
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
Performance commitments and guarantees (a)
109.5
88.3
29.5
31.6
(a)
(b)
(c)
(d)
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.
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.
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 financial position of the consolidated entity if
settled unfavourably.
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$205.0 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 $160.0 million (referred to above). iluka also has significant 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.
Contingent assets
(a)
during 2008, production at iluka’s western australian operations were interrupted, as a consequence of the pipe line explosion at
apache energy’s Varanus island facility on 3 June 2008. iluka has Business service interruption insurance (although this is capped and
includes a deductible period) and is currently progressing a claim under that policy. iluka has received $2.5 million from its insurers as
an initial payment in respect of the claim which is included in other income (Note 6).
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
77
77
78
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 35. 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 $56.7 million (2007: $4.6 million),
and Jacinth-ambrosia of $64.6 million (2007: $1.1 million).
(b)
exploration and mining lease commitments
exploration expenditure commitments payable*:
commitments in relation to leases contracted for at the reporting date but
not recognised as liabilities, payable:
within one year
later than one year but not later than five years
later than five 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
reporting date but not recognised as liabilities, payable:
within one year
later than one year but not later than five years
later than five years
consolidated
Parent entity
2008
$M
2007
$m
2008
$M
2007
$m
142.9
20.4
1.7
12.4
19.9
43.6
51.4
114.9
17.5
42.0
50.2
109.7
10.8
19.7
11.0
41.5
14.1
33.8
13.1
61.0
8.5
27.8
18.1
54.4
40.6
105.8
61.8
208.2
3.8
11.0
1.5
16.3
36.5
86.3
40.0
162.8
9.6
20.6
12.9
43.1
3.3
9.5
2.8
15.6
36.5
102.8
60.0
199.3
(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 five years
later than five years
56.9
107.5
41.8
206.2
* included in other commitments are amounts of $163.2 million (2007: $199.9 million) in respect of the consolidated entity and $162.8 million (2007: $199.3 million) in respect
of the parent entity which relate to long-term contracts for coal, gas, electricity and water used in the production process.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 36. related party transactions
(a) directors and specified executives
disclosures relating to directors and key management Personnel are set out in Note 31.
(b)
controlled entities and controlling entities
details of material controlled entities are set out in Note 37. 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.
interest revenue
Non-current receivables (loans)
aggregate amounts included in the determination of profit (loss) before
income tax that resulted from transactions with other related parties:
management fee revenue from material controlled entity
(c) wholly-owned group
consolidated
Parent entity
2008
$’000
2007
$‘000
2008
$’000
2007
$‘000
-
-
-
-
4,237
2,996
982
987
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 37.
transactions between iluka resources limited and other entities in the wholly-owned group during the years ended 31 december 2008
and 31 december 2007 consisted of:
loans advanced by iluka resources limited;
loans repaid to iluka resources limited;
the payment of interest on the above loans; and
(i)
(ii)
(iii)
(iv) management services provided by iluka resources limited.
agregate amounts included in determination of profit (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
2008
$’000
2007
$’000
2008
$’000
2007
$’000
- -
- -
15,025
17,686
237,179
286,186
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 2008 or 2007. the average
lending rate for the year for loans advanced by the parent entity was 5.0 per cent (2007: 6.5 per cent). there are no fixed 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 flow. risks covered include property damage, business interruption, public and product liability, fidelity, and directors and officers’
liability.
consolidated
Parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
(d)
transactions and balances with related parties
current tax payable assumed from wholly-owned tax consolidated entities
tax losses assumed from wholly-owned tax consolidated entities
sales of finished goods to subsidiary
-
-
-
-
-
-
27,123
16,009
9,962 -
39,415
15,399
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
79
79
80
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 36. related party transactions (continued)
(d)
transactions and balances with related parties (continued)
current receivable (tax funding arrangement)
wholly-owned tax consolidated entities
current payables (tax funding agreement)
wholly-owned tax consolidated entities
(e) other related parties
information relating to joint venture interests is set out in Note 39.
Note 37. investments in significant controlled entities
consolidated
Parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
-
-
-
-
27,123
39,415
16,009
15,399
the consolidated financial statements incorporate the assets, liabilities and results of the following significant 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
equity holding**
country of
incorporation
australia
australia
australia
australia
australia
australia
usa
australia
australia
australia
2008
% %
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
93.3
100.0
2007
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
93.3
100.0
** the proportion of ownership interest is equal to the proportion of voting power held.
Note 38. 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 financial year ending december 2002 and subsequent financial 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 2008 and 31 december 2007 of the extended
closed Group.
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 38. deed of cross guaranteed (continued)
condensed income statement
revenue from ordinary activities
interest and finance costs
exchange losses on foreign currency borrowings
other expenses from ordinary activities
income tax benefit (expense)
Profit for the year
summary of movements in consolidated retained profits
retained profits at the beginning of the financial year
transfer from asset revaluation/asset realisation reserve
Profit for the year
dividends provided for or paid
Retained profits at the end of the financial year
condensed balance sheet
set out below are consolidated balance sheets as at 31 december 2008 and 31 december 2007 of the extended closed Group.
Current assets
cash and cash equivalents
receivables
inventories
derivative financial instruments
current tax receivables
other
total current assets
Non-current assets
receivables
other financial assets
Property, plant and equipment
intangible assets
other
total non-current assets
Total assets
Current liabilities
Payables
interest-bearing liabilities
current tax liabilities
Provisions
other
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 profits
Total equity
consolidated
2008
$M
897.5
(38.6)
(0.4)
(789.9)
(1.8)
66.8
73.0
0.1
66.8
-
139.9
76.6
206.2
205.5
-
-
4.9
493.2
93.8
144.5
1,219.4
13.5
-
1,471.2
1,964.4
138.4
36.8
1.1 -
37.7
93.0 -
307.0
276.5
(5.7)
322.7
593.5
900.5
1,063.9
998.1
(74.1)
139.9
1,063.9
2007
$m
757.6
(57.6)
(4.0)
(646.7)
(11.3)
38.0
85.5
1.2
38.0
(51.7)
73.0
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
1,017.4
758.0
662.6
22.4
73.0
758.0
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
81
81
82
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 39. interests in joint ventures
(a) Narama Joint Venture
the consolidated entity’s interest in the Narama Joint Venture is classified 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.
consolidated
Parent entity
Note 40. reconciliation of profit after income tax to net
cash inflow (outflow) from operating activities
Profit (loss) after income tax
depreciation and amortisation
current year exploration expenditure capitalised
interest capitalised
Net gain on disposal of property, plant and equipment
Net exchange differences on borrowings
rehabilitation, restoration and accretion expense
Non-cash employee benefits
amortisation of deferred borrowing costs
other non-cash operating activities between group entities
impairment (reversals) charges
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 current tax assets
decrease (increase) in other operating assets
decrease (increase) in deferred tax assets
increase (decrease) in payables
increase (decrease) in current tax liabilities
increase (decrease) in other operating liabilities
increase (decrease) in deferred tax liabilities
increase (decrease) in provisions
Net cash inflow from operating activities
Note 41. Non-cash investing and financing activities
2008
$M
85.0
161.7
(4.0)
(4.0)
(32.3)
11.2
15.9
4.6
0.8
-
(5.5)
-
(51.1)
74.2
12.7
3.4
32.4
(3.6)
(3.3)
-
(44.7)
(20.4)
233.0
2007
$m
60.4
147.9
(4.4)
-
(11.3)
(9.7)
17.5
1.3
0.3
-
-
(26.6)
40.4
(68.6)
(12.6)
6.7
3.8
(13.3)
(6.6)
(2.5)
(5.4)
(21.8)
95.5
2008
$M
(18.4)
53.1
- -
(4.0) -
-
29.4
8.5
3.7
0.8
(14.5)
(45.6) -
-
(19.0)
(1.8)
13.3
7.1
- -
(4.3)
1.1
-
(8.2)
17.3
18.5
2007
$m
3.9
43.8
(4.9)
(17.3)
5.7
0.9
0.3
(17.7)
(26.6)
12.6
9.7
(13.3)
(9.3)
(3.2)
(9.9)
(5.2)
11.4
(8.4)
(27.5)
Non-cash investing and financing activities 2008 nil (2007: $12.3 million in respect of the dividend reinvestment program, details of which are
set out in Note 28(e)).
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 42. earnings per share
(a) Basic and diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the company
Profit from discontinued operation
Profit attributable to the ordinary equity holders of the company
reconciliations of earnings used in calculating earnings per share
Profit for the year
Net profit attributable to minority interests
Profit from continuing operations attributable to the ordinary equity holders
of the company used in calculating basic and diluted earnings per share
Profit from discontinued operation
Profit 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 and diluted earnings per share
Note 43. share-based payments
consolidated
2008
Cents
13.8
8.6
22.4
consolidated
2008
$M
55.0
(7.5)
47.5
30.0
77.5
2007
cents
17.0
4.6
21.6
2007
$m
49.5
(9.3)
40.2
10.9
51.1
consolidated
2008
Number
2007
Number
345,621,183
236,966,229
during the year ended 31 december 2008 the following incentive plans were active. Please refer to the remuneration report for further
information in respect to each type of share-Based Payment Plans adopted by the Group.
(a)
short term incentive Plan
information on the short term incentive Plan (stiP) is disclosed in the remuneration report. set out below are details of the restricted
shares granted under the plan:
Grant dates
Vesting Period
maximum potential number of restricted shares granted under the plan
Fair Value of restricted shares
there were no restricted shares granted under the plan in 2007.
consolidated
2008
01/02/08
01/01/09
01/01/10
490,143
$4.09
Parent
2008
01/02/08
01/01/09
01/01/10
490,143
$4.09
the fair value at grant date is independently determined using the Black-scholes model that takes into account the share price at grant
date, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate for the term of the
right.
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
83
83
84
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 43. share-based payments (continued)
(b)
long term incentive Plan
information on the long term incentive Plan (ltiP) is disclosed in the remuneration report. set out below are details of the share rights
granted under the plan:
Grant date
Vesting Period
maximum potential number of share rights granted under the plan
Fair Value of share rights
consolidated
Parent
2008
2007
2008
2007
01/03/08
01/03/11
882,678
$2.93
01/03/07
01/03/10
380,369
$4.32
01/03/08
01/03/11
882,678
$2.93
01/03/07
01/03/10
380,369
$4.32
the fair value at grant date is independently determined using the monte-carlo simulation to model share prices at vesting date by
repeatedly sampling random movements in a share’s price. this repeated random sample in conjunction with certain known and
historical data (e.g. rates, dividend yields and volatility) makes it possible to form a complete probability distribution of a share’s price at
a particular time in the future and hence estimate the average or mean share price at this time.
(c)
iluka retention Plan
information on the iluka retention Plan is disclosed in the remuneration report.
set out below are details of the share rights granted under the plan:
Grant dates
Vesting Period
maximum potential number of share rights granted under the plan
Fair Value of share rights
consolidated
2008
Parent
2008
2008
2011
1,140,000
$4.09
2008
2011
1,140,000
$4.09
there were no share rights granted under the plan in 2007 as this plan was established in the current year.
the fair value at grant date is independently determined using the Black-scholes model that takes into account the share price at grant
date, the exercise price, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate
for the term of the right.
(d) managing director’s retention arrangements
information on the managing director’s retention share rights is disclosed in the remuneration report. set out below are details of the
share rights granted under the plan:
Grant date
Vesting Period
maximum potential number of share rights granted under the plan
Fair Value of share rights
consolidated
2008
01/02/08
28/02/11
1,000,000
$1.00
Parent
2008
01/02/08
28/02/11
1,000,000
$1.00
there were no share rights granted under the plan in 2007 as this plan was established in the current year.
the fair value at grant date is independently determined using the monte-carlo simulation to model share prices at vesting date by
repeatedly sampling random movements in a share’s price. this repeated random sample in conjunction with certain known and
historical data (e.g. rates, dividend yields and volatility) makes it possible to form a complete probability distribution of a share’s price at
a particular time in the future and hence estimate the average or mean share price at this time.
(e) managing director’s share rights
information on the managing director’s share rights is disclosed in the remuneration report. set out below are details of the share
rights awarded under the plan:
Grant date
Vesting Period
Number of share rights awarded
Fair Value of share rights
there were no share rights awarded under the plan in 2007.
consolidated
2008
01/10/06
01/07/08
80,762
$7.08
Parent
2008
01/10/06
01/07/08
80,762
$7.08
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 43. share-based payments (continued)
(f)
Previous Performance incentive Plans
information on the Previous Performance incentive Plans (PiP) is disclosed in the remuneration report. set out below are details of the
share rights awarded under the plan:
Grant date
Vesting Period
Number of share rights awarded
Fair Value of share rights
consolidated
Parent
2008
2007
2008
2007
01/01/06
01/01/07
01/01/08
47,362
$6.67
01/01/06
01/01/07
01/01/07
63,198
$7.01
01/01/06
01/01/07
01/01/08
47,362
$6.67
01/01/06
01/01/07
01/01/07
63,198
$7.01
the fair value at grant date is independently determined using the Black-scholes model that takes into account the share price at grant
date, the exercise price, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate
for the term of the right.
(g) 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 satisfied.
shares rights awarded under the directors’, executives’ and employees’ share acquisition Plan to participating employees is set out
below:
Grant date
Vesting Period
Number of share rights awarded
Fair Value of share rights
consolidated
Parent
2008
2005
2008
22,507
$5.43
2007
2003/4
2007
109,584
$5.30
2008
2005
2008
22,507
$5.43
2007
2003/4
2007
109,584
$5.30
the fair value at grant date is independently determined using the Black-scholes model that takes into account the share price at grant
date, the exercise price, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate
for the term of the right.
(h)
employee share plan
information on the employee share Plan is disclosed in the remuneration report. set out below are details of the shares awarded under
the plan:
consolidated
Parent
2008
2007
2008
2007
Number of shares issued under the employee share Plan
weighted average market Price
195,024
$3.67
105,000
195,024
$5.80
$3.67
105,000
$5.80
(i)
expenses arising from share-based payment transactions
total expenses arising from share-based payment transactions recognised during the year as part of employee benefit expense were as
follows:
expenses arising from share-Based Payment transactions
consolidated
Parent
2008
$M
4.6
2007
$m
1.3
2008
$M
3.7
2007
$m
0.9
i l u k a r e s o u r c e s l i m i t e d
i l u k a r e s o u r c e s l i m i t e d
85
85
86
aN Nu a l
r ePo r t 2 0 0 8
Notes to tHe FiNaNcial statemeNts
for the year ended 31 december 2008
Note 44. events occurring after the balance sheet date
supreme court proceedings were commenced by Bemax against various iluka entities in december 2007. the action concerns the
enforceability of an in-principle agreement concerning iluka’s tutunup tenements and includes a claim for damages against iluka. on
13 January 2009 a deed of discharge and release was executed by Bemax and iluka under which terms have been agreed to settle the
proceedings, subject to various conditions precedent relating to Foreign investment review Board approval and ministerial approvals to the
transfer of various tenements and land. the parties have agreed to use their best endeavours to satisfy the conditions precedent by 1 June
2009.
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 significantly affect the operations of the economic entity, the results of those operations or the state of
affairs of the economic entity in subsequent financial years.
d i r e c t o r s ’ de c l a r at i o n
3 1 de c e mBe r 2 0 0 8
in the directors’ opinion:
(a)
the financial statements and notes to the financial statements 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 financial position as at 31 december
2008 and of their performance for the financial 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 in the remuneration 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 identified in Note 38 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 38.
the directors have been given the declarations by the chief executive officer and chief Financial officer required by
section 295a of the corporations act 2001.
this declaration is made in accordance with a resolution of the directors.
r l every
chairman
d a robb
managing director
Perth
31 march 2009
i l u k a r e s o u r c e s l i m i t e d
87
88
aN Nu a l
r ePo r t 2 0 0 8
in d e p e n d e n t a u d i t o r ’ s r e p o r t
t o t h e me mBe r s oF il u k a re s o u r c e s li m i t e d
re p o r t on t h e F i n a n c i a l re p o r t
we have audited the accompanying financial report of iluka resources limited (the company), which comprises the
balance sheet as at 31 december 2008, and the income statement, statement of recognised income and expense and
cash flow statement for the year ended on that date, a summary of significant 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 financial year.
directors’ responsibility for the financial report
the directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with australian accounting standards (including the australian accounting interpretations) and the corporations act 2001.
this responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation
of the financial 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 financial report,
comprising the financial statements and notes, complies with international Financial reporting standards.
auditor’s responsibility
our responsibility is to express an opinion on the financial report based on our audit. we conducted our audit in
accordance with australian auditing standards. 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
financial report is free from material misstatement.
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. in making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
our procedures include reading the other information in the annual report to determine whether it contains any material
inconsistencies with the financial report.
For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit.
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 sufficient 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
in our opinion:
(a)
the financial 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 financial position as at 31 december
2008 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 financial report also complies with international Financial reporting standards as disclosed in Note 1.
liability limited by a scheme approved under Professional standards legislation.
re p o r t o n t h e re m u n e r a t i o n re p o r t
we have audited the remuneration report included in pages 9 to 20 of the directors’ report for the year ended 31 december 2008. the
directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300a
of the corporations act 2001. our responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with australian auditing standards.
auditor’s opinion
in our opinion, the remuneration report of iluka resources limited for the period ended 31 december 2008 complies with section 300a of the
corporations act 2001.
Pricewaterhousecoopers
david J smith
Partner
Perth
31 march 2009
i l u k a r e s o u r c e s l i m i t e d
89
90
aN Nu a l
r ePo r t 2 0 0 8
o r e r e s e r V e s a n d
mi n e r a l re s o u r c e s
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
(Jorc code).
the information in the 2008 annual report relating to
mineral resources and ore reserves in this report
is based on information compiled by competent
Persons (as defined in the Jorc code). each of the
competent Persons for deposits located outside
australia are members of recognised overseas
Professional organisations as listed by the asX.
each of the competent Persons have, at the time of
reporting, sufficient 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 defined by the Jorc code. at
the reporting date, each competent Person listed in
this report is a full time employee of iluka resources
limited or consolidated rutile limited (“crl”). each
competent Person consents to the inclusion in this
report of the matters based on their information in the
form and context in which it appears.
all of the mineral resource and ore reserve figures
reported represent estimates at 31 december 2008. 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).
or e re s e rVe s
ore reserves are estimated using all available
geological and relevant drill hole and assay data,
including mineralogical sampling and test work on
mineral recoveries and final product qualities. ore
reserve estimates are determined by the consideration
of all of the “modifying factors” in accordance with
the Jorc code 2004, and for example, may include
but are not limited to, product prices, mining costs,
metallurgical recoveries, environmental consideration,
access and approvals. these factors may vary
significantly between deposits.
il u k a or e re s e rVe B r e a k d o wN By reGi oN aNd Jo r c cat eGo r y at 3 1 de c e mBe r 2 0 0 8
summary of ore reserves(1,2,3) for iluka
country
region
australia
eucla Basin
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:
ore
reserve
category
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Hm assemblage(4)
ore
tonnes
millions
in situ Hm
tonnes
millions
Hm
Grade
(%)
ilmenite
Grade
(%)
Zircon
Grade
(%)
change
rutile
Grade Hm tonnes
(%)
millions
93.8
4.5
98.3
6.1
125.6
131.7
2.1
39.1
41.2
17.4
25.0
42.4
223.0
150.0
373.0
20.7
3.8
24.5
363.0
348.1
6.31
0.11
6.42
0.37
7.73
8.10
0.19
4.53
4.71
3.29
5.43
8.71
1.97
1.22
3.20
1.79
0.22
2.01
13.91
19.24
711.1
33.15
6.7
2.5
6.5
6.1
6.2
6.2
9.0
11.6
11.4
18.9
21.7
20.6
0.9
0.8
0.9
8.6
5.7
8.2
3.8
5.5
4.7
28
20
28
50
54
54
81
75
76
49
51
50
48
46
47
72
68
72
43
58
51
50
53
50
12
13
13
6
10
10
10
12
11
11
11
11
16
18
16
29
12
19
5
4
5
5
6
6
1
1
1
13
16
15
14
14
14
-
-
-
7
8
8
(0.00)
0.39
(2.04)
(0.01)
0.06
0.02
(1.58)
(1) competent Persons - ore reserves
eucla Basin: a whatham (mausimm)
wa - mid west, wa - south west and murray Basin: c lee (mausimm)
crl North stradbroke island: G mathias (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) mineral assemblage 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 test work 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 reflect iluka ownership of 51.04% as at december 31, 2008.
(8) rutile is included in ilmenite for the Virginia region.
i l u k a r e s o u r c e s l i m i t e d
91
92
aN Nu a l
r ePo r t 2 0 0 8
il u k a or e re s e rVe s miNe d aNd adJu s t e d By reGi oN at 3 1 de c e mBe r 2 0 0 8
summary of ore reserve depletion(1)
country
region
australia
total
eucla Basin
eucla Basin
eucla Basin
wa - mid west
wa - mid west
total
wa - mid west
ore reserves
active mines
Non-active sites
active mines
Non-active sites
wa - south west
wa - south west
active mines
Non-active sites
total
wa - south west
murray Basin
murray Basin
active mines
Non-active sites
total
murray Basin
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
usa
total
total
total
total
Notes:
in situ Hm
tonnes
millions
2007
in situ Hm
tonnes
millions
mined 2008
in situ Hm
tonnes(2)
millions
adjusted 2008
in situ Hm
tonnes
millions
2008
in situ Hm
tonnes(3)
millions
Net change
-
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
-
-
-
(1.27)
-
(1.27)
(0.63)
-
(0.63)
(0.72)
-
(0.72)
(0.24)
-
(0.24)
(0.40)
-
(0.40)
(3.27)
-
(3.27)
-
(0.00)
(0.00)
0.67
1.00
1.67
(0.37)
(1.04)
(1.41)
0.33
0.38
0.72
0.30
-
0.30
0.19
0.23
0.42
1.11
0.57
1.69
-
6.42
6.42
1.13
6.97
8.10
0.19
4.53
4.71
1.59
7.12
8.71
3.20
-
3.20
0.65
1.35
2.01
6.76
26.40
33.15
-
(0.00)
(0.00)
(0.60)
1.00
0.39
(1.00)
(1.04)
(2.04)
(0.39)
0.38
(0.01)
0.06
-
0.06
(0.22)
0.23
0.02
(2.15)
0.57
(1.58)
(1) rounding may generate differences in last decimal place.
(2) adjusted figure includes write-downs and modifications in mine design.
(3) Net change includes depletion by mining and adjustments.
(4) ore reserve estimates are adjusted to reflect iluka ownership of 51.04% as at december 31, 2008.
m i N e r a l r e s o u r c e s
mineral resources are estimated using all available and relevant geological, drill hole and assay data, including mineralogical sampling
and test work on mineral and final product qualities. resource estimates are determined by consideration of geology, Hm cut-off grades,
mineralisation thickness versus overburden ratios and consideration of the potential mining and extraction methodology. these factors may
vary significantly between deposits.
il u k a miNe r a l re s o u r c e B r e a k d o wN By reGi oN aNd Jo r c cat eGo r y
at 3 1 de c e mBe r 2 0 0 8
summary of mineral resources(1,2,3) for iluka
country
region
australia
eucla Basin
eucla Basin
eucla Basin
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(5,6)
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
Notes:
mineral
resource
category
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
Hm assemblage(4)
material
tonnes
millions
in situ Hm
tonnes
millions
Hm
Grade
(%)
ilmenite
Grade
(%)
Zircon
Grade
(%)
change
rutile
Grade Hm tonnes
(%)
millions
197.0
61.4
20.2
278.6
432.0
275.4
204.6
912.0
187.7
88.6
60.5
336.9
51.3
124.5
182.1
357.9
577.4
32.2
0.6
610.3
34.5
0.3
34.7
1,479.9
582.4
468.0
2,530.4
8.59
1.37
0.44
10.40
23.62
13.91
9.05
46.58
16.50
6.22
5.77
28.49
8.66
13.96
25.20
47.82
4.97
0.31
0.01
5.29
2.49
0.01
2.50
64.83
35.79
40.46
141.08
4.4
2.2
2.2
3.7
5.5
5.1
4.4
5.1
8.8
7.0
9.5
8.5
16.9
11.2
13.8
13.4
0.9
1.0
0.9
0.9
7.2
3.9
7.2
4.4
6.1
8.6
5.6
29
12
18
26
52
50
50
51
80
76
76
78
50
46
54
51
47
45
38
47
70
54
70
56
51
56
55
48
60
48
50
11
10
9
10
9
8
7
8
10
9
10
10
11
12
13
11
16
16
16
15
11
10
13
5
5
4
5
7
6
6
6
1
1
2
0.21
0.86
1
(8.86)
14
12
6
9
14
14
15
14
-
-
-
6
8
5
6
(0.26)
(0.20)
(0.58)
(8.82)
(1) competent Persons - mineral resources
eucla Basin: i warland (mausimm)
wa - mid west and wa south west: i shackleton (mausimm)
murray Basin: V o’Brien (mausimm)
crl North stradbroke island: G mathias (maiG)
Virginia: c stilson (sme)
(2) mineral resources are inclusive of ore reserves.
(3) rounding may generate differences in last decimal place.
(4) mineral assemblage is reported as a percentage of in situ Hm content.
(5)
includes relinquishment of metricup and sale of Burekup to doral.
(6) rutile component in wa - south west operations is sold as a leucoxene product.
(7) mineral resource estimates are adjusted to reflect iluka ownership of 51.04% as at december 31, 2008.
(8) rutile is included in ilmenite for the Virginia region.
i l u k a r e s o u r c e s l i m i t e d
93
94
aN Nu a l
r ePo r t 2 0 0 8
su s t a i n aBl e deVe l o p m e n t
sustainability is a key component of shareholder value
creation and delivery for iluka, and a central component
of the company’s licence to operate. iluka continues
to place high priority on improving environment,
Health and safety systems that protect people and the
environment, and create business opportunities and
access to future resources.
an external audit of iluka’s environment, Health and
safety systems was conducted at the mid west and
south west, western australian operations during 2008,
with all other sites conducting self assessments. the
average compliance score was 85.59, an improvement
on the 2007 compliance score of 80.38.
H e a ltH aNd saFe t y
Health and safety remained a major focus for iluka
during 2008. iluka’s all injury frequency rate (“aiFr”)
was 25.4. this represents a 6 per cent reduction from
27.1 in 2007. the aiFr target for 2008 was 25.0. the
loss time injury frequency rate (“ltiFr”) in 2008 was
2.8, an increase of 65 per cent from 2007. this equated
to 15 ltis in 2008 compared to 9 in 2007. the company
seeks to avoid any form of harm to employees, and
as a result, efforts to prevent potential injuries to the
workforce have been increased. the implementation of
a range of integrated programmes with the engagement
of iluka management and operational personnel
resulted in the last two months of the year being lti
free.
Both the medically treated injury frequency rate
(“mtiFr”) and the first aid injury frequency rate
(“FaiFr”) also reduced in 2008. the mtiFr was down 7
per cent compared to 2007 and the FaiFr was down 13
per cent compared to 2007.
a key influence upon improved safety performance has
been improved employee accountability, and ongoing
commitment to quality training, reinforcement of risk
assessment as a prevention tool, utilisation of an
incident cause analysis methodology and tailoring
programmes within the eH&s management system for
specific site solutions.
integral to ensuring all employees are fit and fully
capable of executing their work responsibilities, iluka
maintains a Fitness for work programme. during 2008,
9,507 drug and alcohol tests were completed with a
compliance rate of 98.7 per cent which is similar to
2007. iluka’s contractors run parallel programmes
which support and promote the requirements of iluka’s
Fitness for work Policy.
e N V i r o N m e N t
iluka is committed to operating in a responsible
manner to reduce the impact of mining and processing
operations on the environment, and facilitate successful
rehabilitation of areas previously mined.
all environmental incidents recorded at sites are
classified according to the severity of their impact1.
during 2008, there was a 35 per cent reduction in level
1 and level 2 incidents as a result of better systems,
training and increased employee awareness. there
were no level 3, 4 or 5 incidents in 2008.
the main environmental issues identified at iluka’s
operations continued to include greenhouse gas
emissions, energy management, air emissions,
water management, dust control, noise emissions,
rehabilitation and biodiversity.
G r e e N H o u s e G a s e m i s s i o N s a N d
e Ne rGy maN a Ge m eNt
the company recognises the importance of
greenhouse gas emissions as a potential contributor
to climate change. in addition to continuing to identify
opportunities to reduce energy usage as a part
of the energy efficiency opportunity (“eeo”), the
company continued to closely monitor and assess the
implications of both domestic and international climate
change initiatives.
in 2008, the australian Government’s carbon Pollution
reduction scheme was released, providing a greater
level of clarity associated with the obligations that
industries may have with respect to measuring,
monitoring and managing their emissions. this has
enabled the company to undertake preliminary
assessments of the potential impact to costs of the
scheme on the business. iluka intends to pursue
emissions intensive trade effected status which should
provide the organisation with some level of Government
financial assistance. the company continues to develop
appropriate management initiatives in relation to iluka’s
greenhouse gas footprint to reduce this impact and
ameliorate the potential cost impost of the scheme.
iluka is a part of the National Greenhouse and energy
reporting act and reporting on greenhouse gas
emissions will begin in october 2009.
iluka’s business improvement processes were
extensively used to identify, assess and plan energy
improvement opportunities. through these processes
and key eeo methodologies, the principal requirements
of the eeo legislation have been met. as part of this,
iluka has implemented cultural and process changes
designed to improve energy management, including:
•
•
eeo training across operations to increase
awareness of energy efficiency initiatives; and
engineering guidelines on energy efficiency
to minimise energy usage and carbon dioxide
equivalent (“co2e”) emissions at new facilities.
1 level 1 - 5 rating system; level 5 referring to the most serious
environmental impact.
the murray Basin operation in Victoria was iluka’s first business
unit to undergo assessment, successfully fulfilling all eeo
requirements. a range of opportunities were identified to reduce
energy consumption of this business unit by at least 7 per cent
(based on 2007 energy usage), associated with a reduction in both
natural gas and electricity consumption.
the south west operations in western australia also underwent an
eeo assessment, with the results currently being collated. the mid
west operations in western australia will undergo a similar energy
assessment during 2009.
iluka’s south west and mid west operations consumed 42 per cent
and 43 per cent respectively of the company’s total (including crl)
energy consumption, predominantly for the production of synthetic
rutile where coal represents 57.8 per cent of the total energy
consumption.
in total, the amount of energy used at iluka’s operations in 2008,
decreased by 13 per cent relative to 2007, mainly due to the
planned major maintenance of the two synthetic rutile kilns in the
south west and the operational slowdown associated with the
disruption to western australian gas supplies during the year.
iluka’s co2e emissions in 2008, were reduced by 10 per cent
to 1,480 kilo tonnes from 1,648 kilo tonnes in 2007, also mainly
associated with decreased production associated with the
maintenance outage at the south west operations and the gas
supply disruption in western australia. co2e emissions at murray
Basin increased by 17 per cent due to increased mining activities.
iluka announced, during the year, its intention to idle indefinitely
one of its four synthetic rutile kilns from mid 2009.
w at e r maN a Ge m eNt
water management continues to be a key area of focus across
iluka’s operations. iluka’s overall water usage decreased by 10
per cent in 2008, largely due a 20 per cent reduction in water
usage at crl where mining activities within the water table
prevented excess water loss and lowered bore water consumption.
in the murray Basin, Victoria, the Hamilton mineral separation
plant decreased its water usage by 10 per cent in 2008. the
mineral separation plant relies predominantly on treated sewerage
water from Hamilton. water usage at the douglas mine site has
increased during 2008 due to increased tailings area. the douglas
mining operation now sources its water requirements from nearby
bores, instead of drawing from the rocklands reservoir.
water usage at Virginia operations in the usa, was reduced during
the year with greater use of captured water.
du s t coNt r o l
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, commercial suppressants and clay fines
sourced from the mineral concentration process. at the Narngulu
processing facility in the mid west, over 2,000 seedlings in tree
shelter belts were planted on the site boundary to reduce dust
dispersion. depositional dust gauges were installed at eneabba
and Narngulu processing facility to improve dust monitoring on the
site boundaries.
ai r em i s s i oNs
N o i s e em i s s i oNs
iluka monitors a range of air emission data including oxides of
sulphur, carbon dioxide, oxides of nitrogen, particulates and water.
the level of particulates generated by iluka increased by 100 per
cent from 2007 to 2008. Particulates recorded by the murray Basin
in Victoria and crl in queensland, increased by 133 per cent and
141 per cent respectively. this is mainly attributed to changes in
emission estimation techniques which now include dust generated
by machinery movements in the murray Basin and a calculation
factor correction by crl and, to a lesser extent, increased mining
activities in the murray Basin.
a 60 per cent reduction in oxide of sulphur emissions from 2007
to 2008 is largely due to improvements in emission estimation
techniques and partially due to operational outages, in the south
west, during the year.
an air quality management Plan has been prepared for the
Narngulu processing facility in the mid west of western australia.
the management Plan includes continuous monitoring of
particulate emissions, minimising stack emission discolouration,
and regular air dispersion modelling to ensure emissions remain
below applicable guidelines for ambient air quality.
iluka actively seeks to minimise the impact of noise on surrounding
neighbours from its mining and processing activities. during 2008,
an extensive network of real time, directional noise monitors were
operational at the waroona mine site in western australia which
has allowed management of operations to minimise environmental
noise, given the close location of this operation to residences.
these initiatives follow complaints from some neighbours received
in both 2007 and 2008.
a noise modelling assessment has also been completed at
the Narngulu processing facility to forecast any increase in
environmental noise associated with the planned upgrade of the
mineral separation plant to process heavy mineral concentrate
from Jacinth-ambrosia in south australia. this modelling has
shown that changes in noise levels will, as a result of the upgrade,
be negligible.
reHaBi l i tat i oN
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.
i l u k a r e s o u r c e s l i m i t e d
95
wo r k iN G w i tH co m m uNi t i e s
the quality and integrity of iluka’s consultation with stakeholders
has been a key underpinning of the establishment, operation and
eventual closure of iluka’s mining and processing operations.
in western australia, iluka has supported the mid west Football
academy since its inception in 2004, which involves working with
young indigenous men in the mid west and Gascoyne regions
of western australia. the academy, as part of the clontarf
Foundation, uses football as a vehicle to encourage young men
to continue education and training and to develop pathways to
employment.
in south australia, associated with the Jacinth-ambrosia project,
the company instigated an extensive community engagement
programme directed to the communities likely to be affected by
the commencement of mining and processing operations in the
Far west of south australia. in this regard, a focus of iluka’s
engagement activities was with the regional communities of the
Far west of south australia, including the indigenous population in
the region, as well as specific interest groups.
regular and comprehensive community presentations, meetings,
newsletters and other forms of communication were undertaken
to ensure the communities were kept informed of the Jacinth-
ambrosia project.
regular and on-going meetings with various south australian
Government departments and agencies were held throughout
2008, as an integral part of the process of determining and
responding to government regulatory requirements necessary to
secure mining and infrastructure approvals.
iluka and the Far west coast liaison committee met during
the year to formulate programmes and activities to give effect
to the direct financial, educational, training and employment
arrangements for the local indigenous population, which forms
part of the Native title agreement concluded in 2007, allowing
mining operations at Jacinth-ambrosia.
96
aN Nu a l
r ePo r t 2 0 0 8
in 2008, the amount of land disturbed was 8 per cent higher than
area rehabilitated. this is due to new mining areas being opened in
the murray Basin, Victoria, south australia and associated with the
Brink development in Virginia, usa. the Florida and Georgia sites
in the usa continued to make significant advances in rehabilitation
during 2008 with 668 hectares rehabilitated. Georgia has now
rehabilitated all open areas and has no land open.
B i o d iVe r s i t y
critical to protecting biodiversity is an understanding of the
flora and fauna present within and around any potential
disturbance areas. when significant species or ecosystems
are identified during pre-mining environmental assessments,
specific research and management plans are implemented. in
2008, iluka established two nature conservation covenants at
the douglas mine site in the murray Basin, Victoria. these areas
are now legally protected as required by the approval conditions.
establishment of processes for protecting biodiversity at new sites
in south australia and the murray Basin have included establishing
monitoring schedules, education of staff and development of
management plans and procedures. a new method of rolling
exploration drill-lines rather than using conventional chainsaw
techniques was trialled successfully in south australia exploration
areas. this has less impact on vegetation and soil and facilitates
rehabilitation. Helicopter transport of drill crews to remote areas,
rather than establishing camps or access tracks, has also reduced
the impact of exploration activities on the environment.
emPl o y e e s aNd coNt r a c t o r s
iluka recognises that a strong partnership with its employees,
based on alignment, engagement and communication, is vital to
the achievement of its business objectives. the company is building
an organisational culture focused on profitability, sustainability
and growth which includes a commitment to the highest standards
of occupational health and safety performance. during 2008, a
new programme focusing on enhancing employee and business
performance, referred to as ace (accountability, commerciality and
execution) was implemented.
to ensure iluka has appropriate succession plans in place for
leadership and key technical positions, a review of the leadership
succession plan is undertaken regularly.
an employee engagement survey was conducted during the year.
the results demonstrated a further improvement in employee
engagement and alignment with the company’s key business
objectives and health and safety culture.
as part of native title agreements in western australia, south
australia and Victoria, iluka has developed pre-employment and
on-the-job training to assist indigenous people gain employment
across the company’s operations.
iluka employed approximately 1,400 people at the end of 2008,
encompassing all operational and functional positions in australia
(western australia, south australia and Victoria) and the united
states (Virginia and Florida).
contract mining and other activities accounted for an additional
1,000 positions.
suP Pl e m eNta r y eHs stat i s t i c a l data 2 0 0 4 - 2 0 0 8
table 1: iluka safety Performance
injuries and Frequency rates 2004 - 2008
Fatality
lti
ltiFr
mti
mtiFr
First aid
FaiFr
aiFr
minor
2004
2005
2006
2007
2008
0
7
1.9
34
9.0
182
48.4
59.3
315
0
10
1.9
31
5.3
161
27.6
34.6
444
0
18
2.9
43
7.0
153
24.7
34.6
572
0
9
1.7
44
8.3
91
17.1
27.1
563
0
15
2.8
41
7.7
79
14.9
25.4
551
table 3: site safety Performance - Frequency rates 2004 - 2008
table 2: site safety Performance - injuries 2008
Fatality
lti
mti
Fai
minor
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
0
0
0
0
0
0
0
0
0
1
6
4
3
1
0
0
0
12
21
2
2
3
0
1
0
22
42
4
4
3
2
2
0
152
129
106
117
16
7
23
1
15
41
79
551
2004
2005
2006
2007
2008
ltiFr mtiFr aiFr
ltiFr mtiFr aiFr
ltiFr mtiFr FaiFr aiFr
ltiFr mtiFr FaiFr aiFr
ltiFr mtiFr FaiFr aiFr
south west
0.0
8.5
mid west
2.0 14.1
56.7
72.3
65.9
19.3
34.2
Nm
19.9
5.8
52.3
2.4
3.0
4.3
0.0
0.9
5.6
9.8
4.3
4.3
2.8
Nm
Nm
43.7
65.3
19.9
50.5
21.8
Nm
2.9
4.4
16.7
24.0
4.3 13.5
43.3
61.1
0.0
5.4
1.1
5.2
6.7
1.1
Nm Nm
31.9
37.1
13.5
25.6
4.4
Nm
5.5
Nm
0.0
0.0
1.9
15.4
46.3
2.2
5.7
2.2
39.7
0.0
0.0
2.6
0.0
0.0
6.6
11.0
11.0
0.0
0.0
24.7
32.5
3.3
2.5
2.3
0.0
0.0
0.0
0.0
0.0
1.7
6.7
17.5
27.5
13.5
30.2
46.2
4.6
7.9
5.3
17.0
11.4
18.3
7.9
7.9
0.0
15.8
13.2
17.0
0.0
0.0
8.3
32.9
32.9
0.0
0.0
17.1
27.1
0.9
3.9
6.6
4.5
1.4
0.0
0.0
0.0
2.8
11.0
20.1 32.0
13.5
27.1 44.5
3.3
3.0
4.3
0.0
6.0
0.0
7.7
6.6 16.5
5.9 13.4
4.3 10.0
12.8 12.8
12.0 18.0
0.0
0.0
14.9 25.4
4.6
0.0
1.1
3.1
0.0
7.7
Nm
Nm
0.0
0.0
1.4
0.0
5.8
8.5
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
table key
aiFr =
Fai
=
FaiFr =
=
lti
all injury Frequency rate (include lti, mti and Fai)
First aid injury
First aid injury Frequency rate
lost time injury
table 4: site drug tests 2006 - 2008
2006
2007
2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
0
558
81
265
32
0
49
0
985
0.0
3.2
7.4
2.2
0.0
0.0
4.1
0.0
3.3
201
199
385
188
92
Nm
76
67
1,208
1.5
0.5
0.3
1.1
4.3
Nm
2.6
0.0
1.1
150
866
532
313
120
54
53
69
2,157
2.0
1.7
0.4
0.3
1.7
0.0
0.0
0.0
1.1
ltiFr =
mti =
mtiFr =
=
Na
=
Nm
lost time injury Frequency rate
medical treatment injury
medical treatment injury Frequency rate
Not available
Not measured
table 5: iluka environment Performance
environment incidents 2004 - 2008
level 1
level 2
level 3
level 4
level 5
total
927
157
2
0
0
1,085
58
3
0
0
846
16
1
0
0
1,055
8
1
0
0
2008
679
7
0
0
0
1,086
1,146
863
1,064
686
Notes:
south west refers to south west, western australia
murray Basin refers to murray Basin, Victoria
crl refers to consolidated rutile limited, queensland
sa refers to south australia
corporate refers to Head office, Perth
i l u k a r e s o u r c e s l i m i t e d
97
# tests % detect # tests % detect # tests % detect
2004
2005
2006
2007
98
aN Nu a l
r ePo r t 2 0 0 8
table 6: site environment Performance - incidents 2008
table 9: site Greenhouse Gases (ktco2e) 2004 - 2008
level 1
level 2
level 3
level 4
level 5
2004
2005
2006
2007
2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
83
369
114
40
9
31
33
0
679
1
3
0
0
1
2
0
0
7
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
646
627
Na
158
204
Na
Nm
Nm
665
691
17
192
476
Na
Nm
Nm
651
713
46
240
115
Na
Nm
Nm
584
649
98
209
107
1
Nm
Nm
532
607
115
134
90
1
1
Nm
1,635
2,041
1,765
1,648
1,480
table 7: site energy use (terajoules) 2004 - 2008
table 10: site Particulates (tonnes) 2004 - 2008
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
6,447
5,440
Na
519
6,663
6,019
112
579
1,039
1,192
Na
Na
Nm
Nm
Nm
Nm
6,441
6,206
6,518
6,047
5,402
5,496
249
793
881
4
Nm
Nm
591
884
651
11
Nm
Nm
695
620
586
13
11
0
13,445
14,565
14,574
14,702
12,823
table 8: site energy resources used (%) 2004 - 2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
163
348
0
292
67
Na
Na
Na
870
138
274
0
486
66
Na
Na
Na
964
78
235
0
642
24
Na
Na
Na
979
191
309
187
243
345
435*
897
2,161**
13
Na
Na
Na
13
0
Na
Na
1,597
3,197
* includes dust generated by machinery movements
** reflects change in calculation factor of dust off open areas
2004
2005
2006
2007
2008
table 11: site oxides of sulphur (tonnes) 2004 - 2008
coal
electricity
Natural Gas
lPG
diesel
Petrol
Fuel, oil
& Greases
total
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
57.8
17.8
11.2
0.1
12.8
0.1
0.2
100
2004
2005
2006
2007
2008
south west
5,982
7,446
7,405
7,200
2,850
mid west
454
535
275
151
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
0
3
37
Na
Na
Na
5
5
64
Na
Na
Na
0
3
36
Na
Na
Na
0
0
34
Na
Na
Na
60
0
3
30
0
Na
Na
6,476
8,055
7,719
7,385
2,943
table 12: site oxides of Nitrogen (tonnes) 2007 - 2008
table 14: site water discharge (megalitres - ml) 2004 - 2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
2007
147
2008
112
2004
2005
2006
2007
2008
south west
4,252
6,961
3,981
6,509
5,331
0
24
443
205
Na
Na
Na
819
0
10
170
166
0
Na
Na
458
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
0
Na
0
0
0
0
1,058
1,101
Na
Na
Nm
Na
Nm
Na
0
6
0
424
6
Nm
Na
36
26
1,422
1,575
0
Nm
Na
29
26
4,160
945
0
1
0
total
5,310
8,062
4,417
9,567
10,491
table 13: site water use (megalitres) 2004 - 2008
2004
2005
2006
2007
2008
south west
4,513
5,152
5,781
4,880
3,656
mid west
14,137
15,359
14,320
17,558
18,790
murray Basin
2
1,553
1,122
2,392
2,826
crl
usa
sa
Geology and
tech services
corporate
total
54,000
26,196
23,711
27,272
21,710
3,036
5,232
2,487
2,877
2,607
Na
Na
11
Nm
Na
Nm
Na
Nm
Na
1
Nm
Na
27
1
0
75,688
53,492
47,432
54,980
49,617
table 15: site water recycled (megalitres) 2007 - 2008
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
2007
2008
0
0
1
0
0
2
25,865
21,758
1,701
1,341
Nm
Nm
Na
0
1
0
27,567
23,101
table 16: site land use - disturbed, rehabilitated, open (hectares) 2004 - 2008
2004
2005
2006
2007
2008
disturbed rehab open
disturbed rehab open
disturbed rehab open
disturbed rehab open disturbed rehab open
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
total
285
129
104
167
504
Na
Nm
Na
200 2,257
127 1,929
Na
66
104
495
86 2,539
Na
Na
Nm
Na
Nm
Na
135
101
306
127
455
Na
Nm
Na
133
268
0
76
2,259
1,762
410
546
374
2,620
Na
Na
Nm
Na
Nm
Na
172
164
73
140
113
75
Nm
Na
134 2,297
146 1,780
0
79
483
607
655 2,078
2
73
Nm
Na
Nm
Na
172
131
50
101
83
49
Nm
Na
264 2,205
54 1,858
58
36
475
672
1,015 1,146
59
63
Nm
Na
Nm
Na
35
311
195
85
136
207
79
Na
114 2,126
120 2,049
0
42
668
2
20
Na
670
715
614
268
59
Na
1,189
479 7,325
1,124
851
7,598
737
1,016 7,319
586
1,486 6,419
1,048
966 6,501
open area calculation:
open area + (disturbed area - rehabilitated area proceeding year) = open area proceeding year
i l u k a r e s o u r c e s l i m i t e d
99
100
aN Nu a l
r ePo r t 2 0 0 8
table 17: site waste management Practices 2008
chemical & lab waste
Hydrocarbons
tyres
Paper & cardboard
scrap metal
Grease & oil
Batteries
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
table key
Na
l/t
l/t
l/t
l/t
Na
l
Na
re/t
l
l
l/t
re/c
c
Na
Na
c
l
re
c
l/ru
Na
l
Na
re
re
re
ru/re
l/re
re
l
re
re/c
re/c
re
re/c
re/c
re
re
Na
re/t
re/t
c
re/c
re/c
Na
Na
Na
ru/re
ru/re
re
re/c
re/c
Na
re
Na
l
ru
re
t
=
=
=
=
disposal to land Fill
re-use
recycling
treatment off-site
c
=
Na =
Nm =
collected by licensed contractor for a range of uses
Not applicable
Not measured
table 18: site waste management (tonnes) 2008
chemical & lab waste
Hydrocarbons
tyres
Paper & cardboard
scrap metal
Grease & oil
Batteries
south west
mid west
murray Basin
crl
usa
sa
Geology and
tech services
corporate
Na
4
2
2
1
Na
0.1
Na
1
30
3
56
1
0
Na
Na
Nm
Nm
0
Nm
19
Na
1
Na
Nm
7
10
107
24
3
1
Nm
172
213
19
467
212
3
1
Na
94
370
61
3,550
15
Na
Na
Na
3
3
2
2
1
Na
0.1
Na
d i r e c t o r s ’ r e p o r t
le a d e r s h i p te a m
iluka’s senior management team is led by managing
director, david robb.
Philip Nillsen, Bcom, ca
General manager, Business development
the remuneration report contains details of
remuneration arrangements for key executives.
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, B appsc (Hons), Grad dip
(exploration), (Bus admin), Gaicd, mausimm
General manager, exploration and technical services
mr Benjamin joined iluka in 2001 as Group manager
exploration. He was appointed General manager
exploration in June 2006 and in 2008, his role was
expanded to include technical services. mr Benjamin
has extensive operations, project 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, maicd, mieaust
General manager, special Projects
mr Blackwell joined iluka in 2004 as President, us
operations. Prior to joining iluka he was executive Vice
President of tsX listed asia Pacific 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. mr Blackwell will assume the position of
General manager, usa following the retirement of mr
sale in mid 2009.
simon Green, Ba (Hons), aca
General manager, Finance and commercial
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.
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. He has also held positions with richards Bay
minerals and cable sands. dr Hugo is a non-executive
director of consolidated rutile limited.
mr Nillsen joined iluka in 1997. He has worked in
various corporate, finance, 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 (retitled Business
development in august 2008).
robert Porter, Ba (Hons), msc (econ), 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 australia.
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. on 10 december 2008, iluka
announced mr sale’s intention to retire from his position
in mid 2009. He will be replaced by mr Blackwell.
alan tate, Bcom, ca, aicd
chief Financial officer
mr tate joined iluka in may 2008. He was previously
chief Financial officer for Jabiru metals. Prior to joining
Jabiru, he held senior planning, finance and accounting
roles with BHP Billiton and wmc resources. He
commenced his career with Peat marwick.
christine truscott, B eng (chem) (Hons)
General manager, land management
ms truscott joined iluka in 1989. she has worked
across the organisation in operational, marketing
and commercial roles, including management of the
synthetic rutile plant in the mid west and the processing
plants in the south west of western australia. she was
also programme manager for an organisational change
project and most recently, managed the business
improvement and best practice functions. ms truscott
was appointed to her current role in september 2008.
i l u k a r e s o u r c e s l i m i t e d
101
102
aN Nu a l
r ePo r t 2 0 0 8
Hans umlauff, B meng (Hons), Fieaust
General manager, south australian development and
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, western region
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 officer of ticor south africa and managing
director of australian Zircon.
cameron wilson, llB
General manager, corporate services
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. mr wilson is a non-executive
director of consolidated rutile limited.
leadership team members who left the company in 2008: david
mcmahon, chief Financial officer; mark adams, General manager,
western region.
F iVe Y e a r F i n a n c i a l pe rFo r m a n c e
d i r e c t o r s ’ r e p o r t
sales Volumes
total mineral sands (k tonnes)
coal*
summary Financials
revenue from operations
earnings before depreciation, net interest and tax,
including significant items
depreciation and amortisation
Net interest and finance charges**
income tax (expense) benefit
minority interests
Net profit after tax and minority interests,
including significant items
Net profit after tax and minority interests,
excluding significant items
average a$/us$ spot rate - cents
capital and dividends
ordinary shares on issue (millions)***
dividends in respect of the year
dividend per share (cents)
Franking level (per cent)
Financial ratios
earnings per share, including
significant items (cents)
earnings per share, excluding
significant items (cents)
return on shareholders equity,
including significant items (per cent)
return on shareholders equity,
excluding significant items (per cent)
Gearing (net debt/debt + equity) (per cent)
Financial Position as at 31 december
total assets
total liabilities
Net assets
minority interest in controlled entities
shareholders’ equity attributable to members
of iluka resources
Net tangible asset backing per ordinary share (dollars)
* iluka’s interest in the Narama coal joint venture was sold in 2008.
** inclusive of rehabilitation and restoration accretion expenses.
2008
2007
2006
2005
2004
2,119.2
N/a
2,062.4
1,152.5
2,077.4
1,237.5
1,975.8
1,233.5
1,858.8
1,055.0
988.5
938.6
1,003.2
921.0
819.6
274.6
(161.7)
(35.6)
7.7
(7.5)
77.5
61.7
85.35
380.7
N/a
N/a
N/a
22.5
17.8
7.9
6.4
17.4
2,058.1
(1,020.1)
1,038.0
58.2
979.8
2.69
287.7
(148.0)
(59.2)
(20.1)
(9.3)
51.1
51.1
83.90
242.2
(51.7)
10.0
100.0
21.6
21.6
6.8
6.8
44.3
1,868.0
(1,116.4)
751.6
(68.0)
683.6
3.04
199.2
(112.7)
(40.8)
(14.2)
(10.5)
46.6
(125.4)
(34.0)
41.3
(14.4)
21.0
(85.9)
116.9
75.35
232.9
(51.2)
22.0
100.0
9.1
50.2
3.3
15.7
45.4
136.3
76.24
232.9
(51.2)
22.0
66.4
(36.9)
58.5
(12.5)
15.0
42.3
1,864.5
(1,148.0)
716.5
(69.3)
1,864.5
(1,107.4)
757.1
(68.3)
647.2
3.00
688.8
3.17
286.3
(122.0)
(44.0)
(14.0)
(11.5)
94.8
94.8
73.62
232.9
(51.2)
22.0
66.8
40.7
40.7
12.0
12.0
32.2
1,842.0
(989.4)
852.6
(59.4)
793.2
3.56
*** during 2008, iluka issued an additional 108,462,189 shares associated with the pro-rata entitlement offer.
i l u k a r e s o u r c e s l i m i t e d
103
104
aN Nu a l
r ePo r t 2 0 0 8
st at e m e n t oF sh a r e h o l d i nGs
stat e m eNt oF s Ha r eHo l d iN Gs a s at 5 ma r c
H 2 0 0 9
i.
ii.
iii.
iv.
Number of holders of shares
Number of shares on issue
Voting rights, on a show of hands, are one vote for
every registered holder and on a poll, are one vote
for each share held by registered holders
distribution of shareholdings
17,835
380,701,360
Number of holders
9,093
6,562
1,282
835
63
1,586
shareholding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of shareholders holding less than
a marketable parcel (less than $500):
v.
substantial shareholders
Name
m&G investment management limited
Perpetual limited
schroder investment management Group
Franklin resources inc
commonwealth Bank of australia
Number of shares in which a
relevant interest is held
66,369,887
36,127,503
23,953,692
23,901,686
19,227,965
% Holding
17.43%
9.49%
6.29%
6.28%
5.05%
vi.
top 20 shareholders (Nominee company Holdings)
J P morgan Nominees australia limited
HsBc custody Nominees (australia) limited
National Nominees limited
citicorp Nominees Pty limited
rBc dexia investor services australia Nominees Pty limited
aNZ Nominees limited
rBc dexia investor services australia Nominees Pty limited
uBs Nominees Pty ltd
citicorp Nominees Pty limited
rBc dexia investor services australia Nominees Pty limited
cogent Nominees Pty limited
amP life limited
iluka administration limited
cogent Nominees Pty limited
queensland investment corporation
Neweconomy com au Nominees Pty limited
argo investments limited
citicorp Nominees Pty limited
HsBc custody Nominees (australia) limited
mirrabooka investments limited
No. of shares
% Holding
81,589,787
73,159,700
48,299,693
30,547,141
19,111,802
12,915,965
12,725,506
7,927,265
4,547,543
3,894,154
3,400,311
3,081,772
2,807,289
2,805,517
2,688,741
1,777,754
1,700,927
1,700,000
1,292,882
1,170,000
21.43
19.22
12.69
8.02
5.02
3.39
3.34
2.08
1.19
1.02
0.89
0.81
0.74
0.74
0.71
0.47
0.45
0.45
0.34
0.31
C o r p o r at e i n f o r m at i o n
C o m p a n y C o n t a c t D e t a i l s
Iluka Resources Limited
ABN: 34 008 675 018
Registered office:
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, financial and quarterly reports. It also
contains links to other sites, including the share registry.
sh a r e R e g i s t r y I n q u i r i e s
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 3 9415 4801 or 1300 733 043
Facsimile: +61 3 9473 2500
Website: www.computershare.com
each inquiry should refer to the shareholder number which is
shown on issuer-sponsored holding statements and dividend
statements.
st o c k ex c h a n g e L i s t i n g
Iluka’s shares are listed on the Australian securities exchange
Limited. the company is listed as “Iluka” with an AsX code of ILu.
C h a n g e o f A d d r e s s
shareholders who have changed their address should give written
advice of the change, quoting the relevant shareholder number, to
the company’s share registry.
un c e r t i f i c a t e d sh a r e h o l d e r s
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.
s h a r e h o l d e r R e v i e w a n d F u l l A n n u a l R e p o r t
ma i l i n g L i s t
All shareholders are entitled to receive a shareholder Review
and/or 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 shareholder Review and
Annual Report.
Copies of the reports are available on Iluka’s website
www.iluka.com
p a y m e n t o f D i v i d e n d s
the Board of Directors announced its intention not to pay a final
dividend for 2008.
ta x F i l e N u m b e r s ( “tF N ” )
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.
2 0 0 9 C a l e n d a r
21 January
December Quarter production and
Development Report
19 February
Announcement of Full Year Financial Results
16 April
26 may
9.30am Wst
march Quarter production and Development
Report
Closure of acceptances of proxies for AGm
28 may
9.30am Wst
Annual General meeting - parmelia hilton,
perth, Western Australia
16 July
June Quarter production and Development
Report
19 August
Announcement of half Year Financial Results
15 october
september Quarter production and
Development Report
31 December
Financial year-end
All dates are indicative and subject to change. shareholders are
advised to check with the company to confirm timings.
I Lu kA
Re s o uR Ce s L ImIt eD
105
I
l
u
k
a
R
e
s
o
u
r
c
e
s
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
0
8
A
B
N
3
4
0
0
8
6
7
5
0
1
8
I
n
s
i
g
h
t
C
o
m
m
u
n
i
c
a
t
i
o
n
&
D
e
s
i
g
n