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2009
ilukA resources limite d
ANNUAL REPORT
CONTENTS
Directors’ Report
Remuneration Report
Corporate Governance
Financial Report
Ore Reserves and Mineral Resources
Sustainable Development
Leadership Team
Five Year Financial Performance History
Statement of Shareholdings
Corporate Information
1
6
19
25
73
77
85
86
87
88
E x p l a n a t i o n o f S t 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 2009 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 2009
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 M e e t i n g
The 55th Annual General Meeting of Iluka Resources Limited
will be held at the Swan Room at the Parmelia Hilton Hotel,
14 Mill Street, Perth, Western Australia on 20 May 2010.
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
DIRECTORS’ REPORT
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 2009.
the result includes a significant non-cash charge of $67.6 million,
before tax, and a contribution of $23.3 million from the sale of iluka’s
interest in consolidated rutile limited (“crl”).
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)
donald marshall morley
George John Pizzey (deputy chairman)
Gavin John rezos
david alexander robb
Jenny seabrook
Wayne Geoffrey osborn (was appointed as director on 26 march 2010)
stephen John turner (was appointed as director on 26 march 2010)
Pr iNc iP a l a c t iVi t i e s
the activities of the consolidated entity consist of 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)
$114.0 million in new equity funds raised through a share
placement.
settlement was reached with downer mining for $9.0
million in relation to the long running dispute over the
construction by downer mining of the first stage of iluka’s
murray Basin operations, completed in 2007.
the business service interruption insurance claim in respect
of the pipeline explosion at apache energy’s Varanus island
facility was finalised.
(b)
(c)
(e)
(d) disposed of shares in consolidated rutile limited (“crl”)
on 27th may 2009 to unimin australia limited for 45 cents
per share.
in response to an unprecedented reduction in short term
demand for mineral sands products, particularly zircon,
associated with the global economic crisis, iluka took a
number of actions to reduce production and ongoing cash
costs at it’s existing operations, further detail is outlined in
the review of operations.
there were no other significant changes in the state of affairs of the
Group during the financial year.
reVi eW oF o Pe r at i oNs
reported earnings
iluka recorded a net loss after tax and minority interests for the year
of $108.6 million, compared with a net profit of $77.5 million for the
previous corresponding period.
sales volumes declined by 37 per cent from 2008, including a 55 per
cent reduction in zircon sales volumes. sales revenue, including
hedge losses, declined by 38.1 per cent to $533.1 million (2008:
$862.4 million).
in response to an unprecedented reduction in short term demand
for mineral sands products, particularly zircon, associated with the
global economic crisis, iluka took a number of actions to reduce
production and ongoing cash costs at its existing operations. the
actions were aimed at more closely matching supply with demand
and resulted in restructure and idle capacity cash costs of $57.8
million, directly expensed depreciation on idled assets of $32.8
million and a non-cash charge of $67.6 million to write off the fair
value ascribed to deposits acquired in 1998 and 2002 which are now
unlikely to be mined. in the previous corresponding period $12.6
million of cash costs and depreciation of $6.1 million were directly
expensed due to production curtailments as a result of the Western
australia gas supply disruption.
total cash costs of production of $453.6 million were 19.6 per cent
lower than 2008 due to the changes in production made during the
year. unit cash costs of production of saleable product increased
by 12.2 per cent to $396/t due to a 27.8 per cent reduction in
production volumes associated with the production curtailments and
the cessation of lower value ilmenite mining operations in Western
australia as they reached the end of their economic lives.
total group eBit, before impairment charges and reversals, was
a loss of $114.3 million (2008 profit: $50.6 million), with mining
area c (“mac”) making an eBit contribution of $50.2 million (2008
$56.4 million). mac capacity payments were $2 million higher than
the prior year but royalty payments reduced, despite a 10 per cent
increase in sales volumes, due to lower iron ore prices received for
mac product.
the loss before tax from continuing operations of $204.6 million
compares to a profit of $21.9 million in 2008. a net tax benefit of
$72.9 million was recognised for the year.
the sale of iluka’s investment in crl in the first half of 2009
generated a profit of $23.3 million. No tax expense arises on the
profit as the sale generated a capital loss for income tax purposes.
earnings per share for the year were (26.8) cents compared to 22.4
cents in 2008. total shares on issue at 31 december 2009 were
418.7 million compared with 380.7 million at 31 december 2008
following an institutional share placement during the period.
Gearing and net debt
Gearing (net debt/net debt + equity) was 25.9 per cent at 31
december 2009, compared with 17.4 per cent at 31 december 2008.
Net debt of $382.1 million increased by $166.4 million during the
period due to the significant capital expenditure on murray Basin
stage 2 and Jacinth ambrosia. the increase was partially offset
by the proceeds from the sale of crl and the share placement
amounting to approximately $200 million.
dividend
in the context of current Group earnings, cash flows and the franking
credit position the Board has decided not to pay a 2009 dividend.
i l u k a r e s o u r c e s l i m i t e d 1
income statement analysis
inventory movement
$ million
2009
2008
Variance%
(114.3)
50.6
4.0
212.5
currency hedging
33.4
576.0
(453.6)
mineral sands revenue
cash costs of production
inventory and overburden
movement
restructure and idle capacity
(50.1)
cash charges
(13.7)
Government royalties
(10.2)
marketing and selling
asset sales and other income
14.2
Product and technical development (4.2)
(16.2)
exploration
mineral sands eBitda
depreciation and amortisation
mineral sands eBit
currency hedging
mining area c
Foreign exchange gains
corporate and other
75.6
(176.2)
(100.6)
(42.9)
50.2
5.0
(26.0)
Group eBit before impairment
charges and reversals
impairment charges
and reversals
Net interest costs
interest capitalisation (Jacinth
ambrosia and murray Basin)
rehabilitation accretion and
other finance costs
(loss) profit before tax
tax benefit
(loss) profit from
continuing operations
Profit from discontinued
operations (crl & Narama)
(loss) profit for the period
crl minority interests
Net (loss) Profit after tax
mineral sands revenue
(67.6)
(17.1)
12.5
(18.1)
(204.6)
72.9
(131.7)
22.9
(108.8)
0.2
(108.6)
894.8
(564.3)
(35.6)
(19.6)
(77.2)
n/a
(12.6)
(20.0)
(11.2)
3.9
(10.2)
(16.9)
186.3
(145.2)
41.1
(32.4)
56.4
10.6
(25.1)
5.5
(23.2)
(297.6)
31.5
8.9
264.1
58.8
4.1
(59.4)
(21.3)
n/a
(32.4)
(11.0)
(52.8)
(3.6)
n/a
n/a
26.3
(15.0)
21.9
15.8
37.7
47.3
85.0
(7.5)
77.5
(20.7)
n/a
361.4
n/a
(51.6)
n/a
n/a
n/a
mineral sands revenue reduced due to a 37 per cent reduction
in total sales volumes, including a 55 per cent reduction in sales
volumes for zircon, the highest value product. Higher prices were
achieved for all products. the timing of sales and movements in
exchange rates during 2008 and 2009 was such that the effect of
currency movements on 2009 mineral sands revenue compared with
2008 was not significant.
iluka sold 60 per cent of its volumes, including 80 per cent of its
zircon volumes, in the second half of 2009.
cash costs of production
total cash costs of production reduced by 19.6 per cent, or $110.7
million, due to actions taken to reduce production in Western
australia and the united states, together with a range of initiatives
to reduce operating and business support costs. Production of
finished product was 27.8 per cent lower than in 2008, including
a significant reduction in low value saleable ilmenite. as a
consequence of the focus on higher value products, the allocation of
fixed costs over lower volumes has contributed to an increased unit
cash cost of production for the group of 12.2 per cent to $396 per
tonne.
2 a N Nu a l r ePo r t 2 0 0 9
the increase in inventory is due to stockpiled intermediate product
that will be processed at Narngulu in future years as capacity allows.
this material is classified as non-current inventory in the balance
sheet.
restructure and idle capacity cash charges
in response to the severe reduction in demand, particularly in
the first half of 2009, associated with global economic conditions,
iluka implemented a range of initiatives to reduce production
volumes and cash operating costs in future periods. the reduced
volumes and associated cost reduction actions resulted in mineral
sands restructure and idle capacity cash costs of $50.1 million.
approximately half of these costs relate to redundancy charges in
the Western australian operations where approximately 50 per cent
of the productive capacity was idled.
depreciation and amortisation
the increased charges are due to higher charges on Western
australian assets associated with shorter operating lives following
the production changes made during 2009. the commissioning of the
Brink mine in Virginia in the first half of 2009 resulted in increased
charges for the us operation. No murray Basin stage 2 or Jacinth
ambrosia assets were depreciated in 2009 as commissioning of both
operations was incomplete at year end.
losses of $42.9 million were realised mainly in the first half of
2009. average spot exchange rates in the second half of 2009 were
comparable to hedge contract rates.
mining area c
iron ore sales volumes increased 10 per cent to 40.3 million dry
metric tonnes but lower royalty payments were received due to
lower iron ore prices achieved by BHP Billiton for the product
upon which the mac royalty is payable. capacity payments for the
year were $8.0 million (2008: $6.0 million) due to higher annual
production to 30 June 2009 following the completion of an expansion
of the area c operation by BHP Billiton.
corporate and other costs
corporate costs were $0.9 million lower than the prior year after
including restructure and other non-recurring costs of $7.7 million.
these costs include $3.7 million of legal and other costs associated
with the roche dispute that were expensed in the first half, prior to
settlement of the matter.
impairment charges
this represents the write off of fair values for deposits in Western
australia ($38.5 million) and murray Basin ($29.1 million) from
acquisitions in 1998 and 2002 that are now considered unlikely to be
mined.
interest
the reduction in net interest costs, before capitalisation associated
with funding for the Jacinth ambrosia and murray Basin stage 2
developments, reflects lower interest rates and a greater proportion
of us dollar denominated debt.
tax benefit
an income tax benefit of $72.9 million, at an effective tax benefit rate
of 35.6 per cent, is influenced by the tax expense on earnings in the
united states being 20 per cent and benefits associated with the
australian Government’s investment allowance on eligible capital
expenditure increasing the australian tax loss position. the 2008 tax
benefit of $15.8 million included a benefit for the recognition of prior
year losses in the united states.
discontinued operations - crl and Narama
the 2009 balance represents the operating results of crl to the date
of sale and the gain on sale of crl, net of tax. the 2008 balance
comprises the $30 million post tax gain on the sale of iluka’s 50 per
cent share of the Narama coal joint venture, recognised in January
2008, and the post tax operating result of crl for the year.
di r e c t o r s ’ Pr 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, the deputy chairman of Boral
limited and a director of the charity redkite. 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 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.
directorships of listed entities (last 3 years)
Wesfarmers limited (appointed February 2006)
Boral limited (appointed september 2007)
sims Group limited (appointed october 2005 resigned November
2007)
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.
directorships of listed entities (last 3 years)
consolidated rutile limited (appointed october 2006 resigned may
2009)
George John Pizzey, Be (chem), Felldip (management),
Ftse, Faicd, Faim, deputy chairman and 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 and st Vincent’s medical research institute.
He was formerly the chairman of ioN limited (in administration),
range river Gold and the london metal exchange uk and a director
of Wmc resources ltd and ivanhoe Grammar school.
directorships of listed entities (last 3 years)
alumina limited (appointed June 2007)
amcor limited (appointed september 2003)
donald marshall morley, Bsc, mBa, Hon. 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.
directorships of listed entities (last 3 years)
alumina limited (appointed 11 december 2002)
spark infrastructure ltd (appointed November 2005)
Gavin 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 chairman of
alexium international Group limited, a principal of albion capital
Partners and a director of rowing australia. mr rezos is a member
of the remuneration and Nomination committee.
directorships of listed entities (last 3 years)
alexium international Group limited (appointed march 2010)
Jennifer anne seabrook, Bcom, aca, Faicd
ms seabrook was appointed in may 2008. she is a special advisor
to Gresham Partners limited. 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 and Financial advisory Group of the
Financial services institute of australia (FiNsia) and a member
of asic’s external advisory Group. she was formerly a director
of West australian Newspapers Holdings limited, BWa managed
investments limited, st andrew’s superannuation services ltd and
Western Power. ms seabrook is a member of the audit and risk
committee.
directorships of listed entities (last 3 years)
iress market technology limited (appointed august 2008)
West australian Newspaper Holdings limited (appointed February
2006 resigned december 2008)
Wayne Geoffrey osborn, dipeng, mBa, Ftse, mie(aust), maicd
mr osborn is a former managing director of alcoa of australia
limited. He is a non-executive director of leighton Holdings limited
and Wesfarmers limited, chairman of thiess Pty limited, chairman
of the australian institute of marine science, a director of the
international centre for radio astronomy research and a trustee
of the Western australian museum. He was formerly a director of
the australian Business arts Foundation and Vice President of the
chamber of commerce and industry, Western australia. mr osborn
is a member of the remuneration and Nomination committee.
directorships of listed entities (last 3 years)
leighton Holdings limited (appointed 6 November 2008)
i l u k a r e s o u r c e s l i m i t e d 3
stephen John turner Bcom, aca
co mP aNy se c r e ta r y
mr turner is a founder of the london stock exchange listed company,
international Ferro metals limited. He was the chief executive
officer of international Ferro metals limited from 2002 to 2009 and
continues as a non-executive director of that company. mr turner
has had responsibility for resource projects in australia, africa, and
the Pacific islands. He was a founding director of the australian
subsidiary of PsG investment Group, a south african investment
bank. He is an australian chartered accountant. mr turner is a
member of the audit and risk committee.
me e t iN Gs oF di r e c t o r s
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.
the numbers of meetings of the company’s Board of directors and of each Board committee held during the year ended 31 december 2009, and
the numbers of meetings attended by each director were:
Board of
directors’ meetings
audit and risk
committee meetings
remuneration and Nomination
committee meetings
Number
attended
Number
held
Number
attended
Number
held
Number
attended
Number
held
11
11
10
11
11
11
11
11
11
11
11
11
-
61
7
-
7
7
-
7
7
-
7
7
-
5
-
5
5
-
-
5
-
5
5
-
director
d a robb
r l every
d m morley
G J Pizzey
G J rezos
J a seabrook
1
dr every attended the audit & risk committee meeting by invitation but was not a member of the committee.
di r e c t o r s ’ sHa r eHo l d iN G
directors’ shareholding is set out in note 21.
re m uNe r at i oN r ePo r t
the remuneration report is set out on pages 6 to 17.
i N d e m N i F i c at i o N a N d i N s u r a N c e o F
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.
the terms of engagement of iluka’s external auditor includes an
indemnity in favour of the external auditor. this indemnity is in
accordance with Pricewaterhousecoopers’ standard terms of
business and is conditional upon Pricewaterhousecoopers’ acting
as external auditor. iluka has not otherwise indemnified or agreed
to indemnify the external auditors of iluka at any time during the
financial year.
4 a N Nu a l r ePo r t 2 0 0 9
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.
N oN- a u d i t s e rVi c e s
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.
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
2009 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 18.
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
other
Total remuneration for other assurance services
(b)
taxation services
Pricewaterhousecoopers australian firm:
tax compliance services, including review of income tax returns
related practices of Pricewaterhousecoopers australian firm
Total remuneration for taxation services
(c) other services
Pricewaterhousecoopers australian firm:
other services
related practices of Pricewaterhousecoopers australian firm
Total remuneration for other services
consolidated
2008
$000
772
73
845
445
445
87
12
99
57
57
2009
$000
562
52
614
65
65
67
-
67
50
34 -
84
e N Vi r oNm eNta l r eGu l at i oNs
l i k e ly d e V e l o P m e N t s a N d e X P e c t e d
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.
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
the directors are not aware of any 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.
r e s u lt s
in the opinion of the directors, likely developments in and expected
results of the operations of the consolidated entity have been
disclosed in significant events after balance date, disclosure
of further material relating to those matters could result in
unreasonable prejudice to the interests of the company and the
consolidated entity. that material has therefore been omitted from
the directors’ report.
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 thousand dollars.
this report is made in accordance with a resolution of the directors.
r l every
chairman
Perth
31 march 2010
i l u k a r e s o u r c e s l i m i t e d 5
REMUNERATION REPORT
re m uNe r at i oN P r iNc iPl e s
ta rGe t re m uNe r at i oN miX
executive remuneration is made up of fixed (tFr) and at risk (stiP
& ltiP) components. a significant portion of total remuneration
is at risk. the graph below shows the at target remuneration mix
compared with what was actually achieved in 2009.
managing director
(at target)
realised
in 2009
executives (avg)
(at target)
realised in
2009 (avg)
tFr
stiP
ltiP
41%
14%
16%
13%
31%
16%
45%
45%
53%
53%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
a c t u a l e Xe c u t iVe Pa y iN 2 0 0 9
details of the remuneration received by the managing director
and key executives prepared in accordance with statutory
requirements and accounting standards are detailed on page 16 of
the remuneration report.
the table below sets out the actual earnings realised by the
managing director and key executives for 2009. actual earnings
include cash salary and fees, superannuation, non cash benefits
received during the year and the full value of incentive payments
received relating to the 2009 performance year. the table does not
include share based payments which reflect the accounting value
for share rights granted in the current and prior years which may
or may not be realised as they are dependent on the achievement
of performance hurdles.
iluka’s remuneration practices are designed to support the
company’s objective – to create and deliver value for shareholders.
accordingly, iluka’s remuneration policy is designed to attract,
retain and motivate experienced executives and to ensure a focus
by executives on shareholder value creation and delivery. this
policy is based on the following principles:
market competitive
•
•
•
fixed remuneration positioned at the market median of the
resources sector to support the company’s need to attract
and retain key executive talent
executive rewards competitive within the sector in which
iluka operates
an appropriate balance between fixed and variable
components of executive remuneration
Performance Based
•
•
executives focused on both short and long term business
performance
reward for achievement aligned to company performance
shareholder aligned
•
•
performance objectives that support business growth and
improved shareholder returns
alignment of executive and shareholder interests supported
by executive share ownership
transparent Practices
•
all aspects of executive remuneration should be transparent
in terms of disclosure, comply with relevant legislative
requirements and take account of market practice
c o m P o N e N t s o F e X e c u t i V e
re m uNe r at i oN
total Fixed remuneration (“tFr”)
competitively positioned at the
market median of the resources
sector to support attraction
and retention strategies.
short term incentive Plan (“stiP”) strong link to financial performance
and delivery of results requiring
profitability and sustainability
performance exceeding 90 per cent of
target before any award is payable for
these measures.
the stiP is designed to incentivise
executives whilst promoting equity
ownership through an award partly
in cash and partly in deferred equity.
Provides alignment with
shareholder interests through
return on equity (roe) and total
shareholder return (tsr) measured
over a three year period.
long term incentive Plan (“ltiP”)
6 a N Nu a l r ePo r t 2 0 0 9
a c t u a l e Xe c u t iVe Pa y iN 2 0 0 9
Name
d robb
P Beilby
P Benjamin
c cobb1
V Hugo
a tate
H umlauff
s Wickham
c Wilson
Base
1,431,078
382,263
408,716
83,194
374,950
450,306
531,968
413,485
414,857
super
68,922
34,404
36,784
7,488
28,823
40,528
47,477
14,103
30,407
other2
2009 stiP3
2007 ltiP4 actual earnings
2009 total
51,489
-
5,495
-
5,495
-
4,632
1,280
5,495
521,685
46,532
46,472
-
80,982
131,157
182,447
145,521
119,210
-
-
-
-
-
-
-
-
-
2,073,174
463,199
497,467
90,682
490,250
621,991
766,524
574,389
569,969
includes non-monetary benefits.
1 appointed 12 october 2009, formerly managing director of consolidated rutile limited.
2
3 represents total value of 2009 stiP which is awarded half in cash and half in deferred equity.
4 represents the outcome of the 2007 ltiP for which the performance period concluded 31 december 2009.
a c t u a l e Xe c u t iVe Pa y iN 2 0 0 8
Name
d robb
P Beilby
P Benjamin
c cobb1
V Hugo
a tate
H umlauff
s Wickham
c Wilson
Base
super
other2
2008 stiP3
ltiP4
1,402,793
336,544
387,920
-
355,963
290,520
513,456
397,171
397,554
97,207
32,502
37,316
-
34,293
24,958
46,211
13,437
38,284
31,189
-
5,316
-
5,316
-
4,074
-
5,316
1,634,994
295,596
319,130
-
311,714
370,342
448,138
206,530
378,692
-
-
-
-
-
-
-
-
-
2008 total
actual earnings
3,166,183
664,642
749,682
-
707,286
685,820
1,011,879
617,138
819,846
includes non-monetary benefits.
1 appointed 12 october 2009, formerly managing director of consolidated rutile limited.
2
3 represents total value of 2008 stiP which is awarded half in cash and half in deferred equity.
4
there were no ltiP plans due to vest in the 2008 reporting year.
2 0 0 9 o Ve rVi eW
the company’s responses to the effects of the unprecedented
global economic conditions in 2009 are detailed in the shareholder
annual review. in regard to remuneration policy and practices, the
company responded by implementing a number of actions affecting
Board, executive and general employee remuneration, including:
•
•
•
•
•
•
•
the managing director’s fixed remuneration was not
increased in 2009 (last increase effective 1 January 2008);
director fees were not increased in 2009 (last increase
effective 1 July 2008);
a recruitment freeze was established for the 2009 calendar
year (with the exception of critical roles) and will continue
into 2010;
employees participating in the 2009 short term incentive
plan did not receive an increase to their fixed remuneration
for the 2010 annual salary review;
no awards were made in relation to the profitability
component of the 2009 short term incentive plan (which
accounts for 60 per cent of total opportunity) with
awards limited to the achievement of group and regional
sustainability (10 per cent) objectives and individual
business growth objectives (30 per cent);
the employee share plan was suspended for 2009; and
the iluka retention Plan was closed in august 2009.
in addition, no awards were made in respect to the 2007 long
term incentive plan due to tsr and roe performance not achieving
minimum targets.
iluka continually reviews its incentive plans to ensure that
performance metrics are appropriately linked to short and long
term business requirements and shareholder value. accordingly,
an additional performance hurdle has been introduced for the tsr
component of the long term incentive plan that absolute tsr must
be positive for any award to be made in relation to this measure.
this new performance hurdle will apply from 2010.
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
– 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 te 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 mr Pizzey in 2009.
i l u k a r e s o u r c e s l i m i t e d 7
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. during the 2009 year, external advisers mandated
by the committee provided input on several matters relating to
remuneration. these advisers were:
•
•
•
ernst and young, which provided advice in relation to iluka’s
management and employee share plans;
egan associates, which provided advice in respect to
general remuneration trends and other related issues;
mckenzie moncrieff, which provided legal advice in respect
to share plans and executive remuneration.
in November and december 2009 the remuneration and
Nomination committee conducted an evaluation of its performance.
the remuneration policies and practices of crl, a subsidiary of
iluka until may 2009, were developed by the crl Board and not by
the Board or remuneration and Nomination committee of iluka.
re m uNe r at i oN P r a c t i c e s
r e l at i o N s H i P B e t W e e N r e W a r d a N d
Pe rFo r m aNc e
as discussed in detail in the “Variable incentives” section of this
report, the key performance measures underlying the incentive
plans in 2009 were:
•
•
: Profitability (roc, eBit and NPat), sustainability
stiP
(all injury frequency rate, severity rate and notifications of
environmental incidents or licence breaches to government)
and Growth (individual objectives).
ltiP
: roe and relative tsr
Performance against each of the above measures determines the
quantum of stiP awards paid to executives and the portion of ltiP
awards that vest to executives.
For the 2009 performance year, due to the financial performance
targets not being achieved, no stiP awards were made in relation
to the Profitability component of the plan. awards were limited to
the sustainability and Growth components only.
at the end of 2009, the 2007 ltiP grant completed its performance
period (1 January 2007 to 31 december 2009). Performance
was measured against both the roe and relative tsr hurdles.
Performance and resulting vesting was as follows:
component
roe tranche
(50%)
relative tsr
tranche (50%)
Performance
target
actual
performance
implication
for vesting
50% vesting for
threshold of 10%
with full vesting at
target of 14%
50th percentile for
50% vesting and
75th percentile
for full vesting
2.18%
(before
adjustments)
31.5th
percentile
Nil vesting
and awards
lapse
For statutory reporting purposes the company is also required
to show the five year total shareholder return and five years of
earnings. in summary:
the remuneration of an executive or manager is 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.
•
in accordance with the interests of transparent practices, iluka
discloses its current return on equity target range measure which
forms part of the long term incentive scheme.
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 2005 to 31 december 2009
the company completed a 4 for 7 renounceable share
rights entitlement at $2.55 per share in march 2008.
assuming a shareholder participated in the rights issue,
a share purchased at the prevailing market price of $6.29
(closing price on 31 december 2004) has since generated
negative shareholder returns of $2.12, over the five year
period, excluding dividends (a -27.4 per cent return). With
aggregate dividend payments of $0.66 per share, the total
shareholder return was -18.9 per cent over the five year
period.
8 a N Nu a l r ePo r t 2 0 0 9
•
earnings over the same five year period are set out in the
table below:
V a r i aBl e r e m uNe r at i oN
31 dec 31 dec 31 dec 31 dec 31 dec
07
08
05
06
09
Net profit
after tax
($ million)
earnings
per share
(cents)
closing
share price
($)
dividends paid
and declared
(cents)
(85.9)
21
51.1
77.5
(108.6)
(36.9)
9.1
21.6
22.4
(26.8)
7.00
5.94
4.11
4.64
3.58
22
22
22
N/a
N/a
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 the iluka group in 2009.
remuneration for executives comprises two components:
•
•
total fixed remuneration 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
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
(as detailed on page 12) participate in the iluka superannuation
Plan or a fund of choice on an accumulation basis.
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 2010, it is anticipated
that approximately 87 employees (representing 8.7 per cent of
employees and including all executives) will participate in the ltiP,
and approximately 153 employees (representing 15.3 per cent of
employees and 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
the stiP aims to provide an incentive to executives whilst also
promoting equity ownership, providing awards partly in cash and
partly in deferred equity.
the stiP is linked to group and regional 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 growth specific 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.
i l u k a r e s o u r c e s l i m i t e d 9
the measures and weighting of objectives for the 2009
performance year were:
•
•
•
Profitability (roc, eBit and NPat)
sustainability (all injury frequency rate,
severity rate and notifications to government) 10 per cent
30 per cent
Growth (individual objectives)
60 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 relevant year. specific
and 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 level of performance. objectives are set in conjunction
with the managing director for all key executives, followed
by review and approval by the remuneration and Nomination
committee. 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 award is determined after the year-end based on an
assessment of the extent to which the individual’s objectives have
been achieved. the stiP requires profitability and sustainability
performance exceeding 90 per cent of target before any award
is payable for these measures. outcomes are subject to rigorous
one-up manager assessment and, for the managing director and
key executives, by the Board.
consistent with this approach, no stiP payments were made
to the managing director or key executives in respect to the
profitability component in 2009 (which represent 60 per cent of
total opportunity), reflecting the company’s failure to achieve
2009 financial targets. stiP awards made are reflective of the
achievement of group / regional sustainability targets (which
represent 10 per cent of total opportunity) and individual growth
objectives (which represent 30 per cent of total opportunity)
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. 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 and,
therefore, there is 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
the ltiP provides a grant of equity in the form of share rights for
iluka shares 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 relative
to an internal target and the other (50 per cent) based on total
shareholder return 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 tr a n c h e :
the roe tranche of the ltiP grant vests based on a prospective
three year average roe performance measure. 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.
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 tr 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.
10 a N Nu a l r ePo r t 2 0 0 9
ltiP Vesting schedule
re m uNe r at i oN reVi eW
measure
Performance Hurdle
to be achieved
Percentage
of total grant
that will vest
maximum
percentage
of total grant
50th percentile
75th percentile
threshold
target
tsr
roe
total Grant
25%
50%
25%
50%
50%
50%
100%
Vesting occurs on a straight-line basis for performance between
threshold and target for both measures.
all offers and details of the maximum allocation for the managing
director and key executives are shown on page 17. 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.
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 mm es : 2 0 0 5 aNd 2 0 0 6
during 2005 and 2006, iluka operated the Performance incentive
Programme (“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 with each tranche of
shares being subject to a ten year holding lock. 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.
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.
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.
emPl o y e e s Ha r e P l aN
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 $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.
i l u k a r e s o u r c e s l i m i t e d 11
as noted earlier, the employee share plan was not offered to
employees in 2009.
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 management and technical 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 14.
in august 2009, the Board closed the retention Plan.
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
2009, including superannuation, was $842,278.
in 2009, the Board decided not to increase their fees and, as a
result, the fees (excluding superannuation) detailed below have
been in place since 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, the current total non-executive director
remuneration is $782,500 per annum, excluding superannuation,
or $842,636 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 14 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 arrangements,
inclusive of superannuation.
12 a N Nu a l r ePo r t 2 0 0 9
da Vi d roB B - maN
a GiN G di r e c t o r
total Fixed remuneration
$1,500,000 for the year ended 31 december 2009.
$1,500,000 from 1 January 2010.
2009 short term incentive
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)
Weighting
50 per cent
10 per cent
40 per cent
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 2009 related to the company’s response
to the global economic crisis, 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.
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
2009 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
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 2007 (ie. tranche 1 performance period is 27 February 2008 to 25 February 2009).
the performance hurdle for tranche 1 of mr robb’s retention plan was achieved with 333,333 share rights granted accordingly.
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 (ie. tranche 2 performance period is 25 February 2009 to 3 march 2010).
the performance hurdle of tranche 2 of mr robb’s retention plan was not achieved and therefore, share rights relating to tranche
2 of the plan have not been awarded.
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 (ie. tranche 3 performance period is 3 march 2010 to 2 march 2011).
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 per cent (annual Hurdle); or
30 per cent tsr for the First and second or second and third performance periods; or
45 per cent 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.
Forfeiture
all entitlements under the retention plan are forfeited if mr robb resigns prior to the end of the three year retention period.
Termination Arrangements at the 2007 aGm, shareholders approved the following termination payments which may become payable to mr robb under
Vesting date
With Notice
Without Notice
Voluntary termination
the 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.
Termination for other reasons • 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.
• 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.
Protection of interests
i l u k a r e s o u r c e s l i m i t e d 13
e X e c u t i V e s e r V i c e a G r e e m e N t s
major provisions of the agreements relating to key executives included in this remuneration report are set out below.
Position
termination Notice Period
by iluka
termination Notice Period
by employee
executive
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s Wickham
c Wilson
General manager murray Basin
General manager exploration
General manager sales and marketing
General manager Product and
technical development
chief Financial officer
General manager sa development and
Project management
General manager eastern and Western
operations
General manager corporate services and
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
termination
Payments*
9 months
12 months
9 months
12 months
9 months
12 months
9 months
3 months
12 months
* termination payments (other than for gross misconduct) are calculated on current total fixed remuneration at date of termination.
sHa r e r iG Ht s aNd sHa r eHo l d iN Gs oF k e y m aN
a Ge m eNt Pe r s oN Ne l
Number of shares
Number of share rights
Name
Non-Executive Directors
r every
d morley
G Pizzey
G rezos
J seabrook
Executive Director
d robb
Executives
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s Wickham
c Wilson
Balance held
at 1/1/09
Vesting of
share rights
awarded as
restricted
shares
other
changes
Balance
held at
31/12/09*
Balance
held at
1/1/09
Granted
during
2009*
Vested as
shares during
2009
lapsed
during
2009
Balance
held at
31/12/09
28,679
40,876
16,351
63,602
17,612
405,798
86,203
67,542
-
-
-
-
-
-
-
6,858
5,378
-
77,077
8,786
-
54,525
16,425
43,741
-
2,724
-
9,286
-
-
-
-
-
185,373
33,514
36,182
-
35,341
41,988
50,809
23,415
42,935
28,679
40,876
16,351
63,602
19,314
-
-
-
1,702
-
-
-
-
-
-
-
-
-
-
591,171 1,175,586
102,041
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(52,970) 1,224,657
126,575
134,992
109,102
167,340
-
-
121,204
116,337
41,988
140,828
108,058
135,575
39,840
74,565
28,571
30,544
-
27,823
33,605
39,252
29,728
30,544
(6,858)
(14,735)
141,970
(5,378)
(17,335)
175,171
-
-
-
(8,786)
(17,480)
117,894
-
-
174,433
(2,724)
(25,666)
146,437
-
(12,039)
92,254
(9,286)
(17,335)
178,202
(14,913)
81,049
174,279
-
-
-
-
-
-
-
-
* Balances for the executive director and the executives include restricted shares which will vest in future periods subject to legislative requirements.
14 a N Nu a l r ePo r t 2 0 0 9
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
(i)
Non-executive directors
r l every (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 2008,
except J a seabrook who was appointed as a director on 1 may 2008. G c campbell, V a davies and i c mackenzie were directors in the prior year
and retired on 21 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 2009 and are referred to as executives:
P Beilby3
P Benjamin
c cobb1
V Hugo2
a tate
H umlauff
s Wickham
c Wilson
General manager murray Basin
General manager exploration
General manager sales and marketing
General manager Product and technical development
chief Financial officer
General manager sa development and Project management
General manager eastern and Western operations
General manager corporate services and company secretary
1 appointed 12 october 2009, formerly managing director of consolidated rutile limited.
2
3 ceased employment 1 march 2010.
Formerly General manager sales and marketing, appointed to current role 12 october 2009.
the above persons were also executives in the prior year, except a tate, appointed as executive 13 may 2008 and s Wickham, appointed as an
executive 1 september 2008.
s Green, acting chief Financial officer between 18 January 2008 and 12 may 2008 and d mcmahon, chief Financial officer to 17 January 2008
were executives in the prior year.
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.
i l u k a r e s o u r c e s l i m i t e d 15
2009
Name
Non-executive Directors
r every
d morley
G Pizzey
G rezos
J seabrook
Executive Director
d robb
Executives
P Beilby*
P Benjamin*
c cobb5
V Hugo
a tate*
H umlauff*
s Wickham
c Wilson*
short term employee Benefits
cash salary
& fees1
$
stiP
cash4**
$
Non-monetary
Benefits**
$
other**
$
275,000
135,000
125,000
130,000
117,500
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
superannuation Payments2,3,4**
share Based
$
14,103
12,150
11,250
11,700
10,575
$
n/a
n/a
n/a
n/a
n/a
total
$
289,103
147,150
136,250
141,700
128,075
1,431,078
260,843
51,489
-
68,922
1,383,517
3,195,849
382,263
408,716
83,194
374,950
450,306
531,968
413,485
414,857
23,266
23,236
-
40,491
65,579
91,224
72,761
59,605
-
5,495
-
5,495
-
4,632
1,280
5,495
-
-
-
-
-
-
-
-
34,404
36,784
7,488
28,823
40,528
47,477
14,103
30,407
398,088
454,572
-
325,980
564,725
473,032
255,266
474,605
838,021
928,803
90,682
775,739
1,121,137
1,148,333
756,895
984,969
1. cash salary includes salary that is sacrificed for the purchase of shares during the year.
2.
3. the higher level of share based payments in 2009 compared with 2008 reflects the deferred equity component of the 2008 stiP which is charged as remuneration in 2009 and 2010
includes negative amounts for the reversal of prior year charges for the roe component of the 2007 ltiP which did not vest.
together with the full year charge for the iluka retention Plan share rights granted in march 2008 which vest in march 2011.
4. stiP cash and share-based awards for 2009 were made in march 2010.
5. appointed 12 october 2009. c cobb was formerly managing director of consolidated rutile limited. No payments were made to c cobb as consideration for his joining iluka.
* 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.
2008
Name
Non-executive Directors
G campbell3
V davies3
r every
i mackenzie3
d morley
G Pizzey
G rezos
J seabrook4
Executive Director
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**
$
other**
$
superannuation
$
share Based
Payments2
$
total
$
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
1,402,793
817,497
31,189
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
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
41,618
-
-
-
-
24,446
-
-
-
-
3,950
4,500
15,195
5,471
11,925
10,590
10,866
6,975
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
47,842
51,318
224,783
103,738
144,425
128,260
131,605
84,475
97,207
713,310
3,061,996
26,422
32,502
37,316
9,119
34,293
1,750
24,958
46,211
13,437
38,284
(292,901)
252,921
285,641
32,346
226,056
-
118,976
295,392
133,067
298,025
68,717
769,765
875,758
202,784
777,485
45,642
619,625
1,083,202
646,940
928,525
1. cash salary includes salary that is sacrificed for the purchase of shares during the year.
2. Negative share based payments arise where amounts recognised as remuneration in prior years are reversed due to performance conditions associated with restricted shares and
share rights are not being met prior to vesting.
3. retired 21 may 2008.
4. appointed 1 may 2008.
5. ceased employment 26 september 2008. other relates to payment of statutory leave entitlements.
6. represents pro-rata remuneration as an executive between 18 January 2008 and 12 may 2008.
7. ceased employment 17 January 2008. other relates to payment of statutory leave entitlements.
8. appointed 13 may 2008.
* 5 highest paid executives of the group, as required to be disclosed under the corporations act 2001.
** n/a denotes that Non-executive directors are not eligible for these arrangements.
16 a N Nu a l r ePo r t 2 0 0 9
s H a r e - B a s e d c o m P e N s at i o N
PiP share rights and stiP restricted shares awarded to the managing director and executives yet to vest
Name
d robb
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s Wickham
c Wilson
awarded %
PiP 2005
2007 stiP
2008 stiP
2009 stiP
2007
2008
2009
-
2,216
968
-
2,946
-
-
-
2,691
33,502
3,940
6,913
-
6,080
-
9,678
3,523
7,189
185,373
33,514
36,182
-
35,341
41,988
50,809
23,415
42,935
70,689
6,305
6,297
-
10,973
17,772
24,722
19,718
16,153
37
39
40
-
34
-
38
29
41
91
92
84
-
88
87
88
87
96
29
12
12
-
22
30
35
37
30
a) the fair value of PiP share rights determined using an option pricing model. stiP restricted share fair value determined independently 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 vesting period.
b) the percentage achieved of the stiP maximum available incentive opportunity awarded for the financial year.
c) the performance period for the 2007 ltiP ended on 31 december 2009, no awards were made under the plan
d) No awards have been made in respect to the 2008 and 2009 ltiPs or the retention plan. the performance period for the schemes end on 31 december 2010, 31 december 2011
and 31 march 2011 respectively.
m aXi m u m V a l u e oF r e s t r i c t e d sHa r e s aNd sHa r e r iG Ht s
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/rights that vest in that year. the amount to be reported as share based payments in future years will be
determined in accordance with aasB 2 share Based Payments over the vesting period.
maximum Number
Vesting year
2011
1,215,303
127,940
161,750
-
104,796
161,822
132,590
74,234
166,435
2012
102,041
28,571
30,544
-
27,823
33,605
39,252
29,728
30,544
2010
126,188
22,913
25,972
-
26,696
20,994
35,172
15,230
31,347
maximum Value
Vesting year
2011
2012
1,787,853
498,974
631,665
-
401,423
628,778
503,199
285,320
651,234
414,286
115,998
124,009
-
112,961
136,436
159,363
120,696
124,009
2010
568,940
108,761
118,938
-
126,565
97,832
158,334
68,964
147,119
Name
d robb
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s Wickham
c Wilson
F a i r V a l u e
the fair value of each restricted share or share right and the vesting
year for each incentive plan is set out below.
incentive Plan
2005 PiP (tranche 4)
2007 stiP (tranche 2)*
2008 ltiP
2008 stiP*
2009 ltiP
2009 stiP*
retention Plan
retention Plan md 1
retention Plan md 2
retention Plan md 3
Fair Value per
share
$
6.57
4.09
2.93
4.66
4.06
3.57
4.09
0.90
1.19
0.90
Vesting
year
2010
2010
2011
2010 & 2011
2012
2011 & 2012
2011
2011
2011
2011
* awards under these plans are restricted shares, all other plans grant share rights.
i l u k a r e s o u r c e s l i m i t e d 17
AUDITOR’S INDEPENDENCE DEClARATION
as lead auditor for the audit of iluka resources limited for the year ended 31 december 2009, i declare that to the best of my knowledge and
belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the corporations act 2001 in relation to the audit; and
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 period.
david smith
Partner
Pricewaterhousecoopers
Perth
31 march 2010
liability limited by a scheme approved under Professional standards legislation.
18 a N Nu a l r ePo r t 2 0 0 9
CORPORATE GOvERNANCE
a P Pr o a c H t o co rPo r at e G oVe rN
aNc e
B o a r d co mPo s i t i oN
iluka and its Board of directors believe that the highest standards
of corporate governance are essential in order to create and deliver
sustainable value for shareholders. the main elements of iluka’s
corporate governance practices are detailed in this statement.
the Board of directors are committed to acting 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
council’s corporate Principles and recommendations (second
edition).
the corporate Governance section of the iluka website
www.iluka.com contains the company’s key governance policy
documents. these include the:
•
•
•
•
•
•
•
•
d charter
Boar
directors’ code of conduct
audit and risk committee charter
remuneration and Nomination committee charter
employee code of conduct
securities trading Policy
continuous di
Whistleblower Policy
sclosure Policy
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’. 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 the Board. 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.
iluka’s constitution requires directors to retire from office no later
than the third annual General meeting following their election or
re-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 is an independent director.
the Board charter sets out the criteria for determining whether a
non-executive director is independent. applying this 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.
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
maN a GiN G di r e c t o r
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 the Board charter. the primary roles of the Board are:
•
•
•
•
•
g and removing the managing director;
appointin
monitoring the performance of the managing director and
the senior management group;
determining the strategic direction and financial objectives
of the company and ensuring appropriate resources are
available to management;
monitoring the im
and financial objectives; and
reporting to shareholders and the investment community on
the performance of the company.
plementation and achievement of strategic
the implementation of corporate strategy and day-to-day
management of iluka’s affairs are delegated to senior management.
the roles, duties and responsibilities of the Board and delegation
to senior management are defined in the Board charter which is
available on iluka’s website.
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 details of transactions or interests,
actual or potential that may create a conflict of interest; 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.
i l u k a r e s o u r c e s l i m i t e d 19
di r e c t o r ed u c at i oN
r e m u N e r at i o N a N d N o m i N at i o N
directors undergo an induction process upon appointment during
which they are given a detailed briefing on the company, meet
key executives and tour operational sites. thereafter, 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 chairman chairs these meetings. 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.
directors’ attendance at Board and committee meetings is detailed
on page 4 of this report.
co mP aNy se c r e ta r y
mr cameron Wilson is iluka’s company secretary. the position of
company secretary is responsible for:
•
•
•
•
the Board on corporate governance;
advising
management of the company secretarial function;
attending all Board and Board committee meetings and
taking minutes; and
communication with the asX.
co m m i t t e e s oF tHe B o a r d
the Board has established two committees: the remuneration and
Nomination committee and the audit and risk committee. each
committee functions under a specific charter and is comprised
wholly of independent, non-executive directors. the structure
and membership of these committees are reviewed periodically.
the 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.
co m m i t t e e
the remuneration and Nomination committee is responsible for
providing assistance and recommendations to the Board in relation
to:
•
•
•
•
•
development, review and implementation of the remuneration
strategy of the company;
remuneration of executives and non-executive directors;
performance of the managing director and senior executives;
ion planning for key roles; and
success
assessment, composition and succession of the Board.
the remuneration and Nomination committee’s consists of the
following independent, non-executive directors: mr John Pizzey
(chairman), mr Gavin rezos, mr Wayne osborn and dr robert every.
details of directors attendance at remuneration and Nomination
committee meetings are set out on page 4.
comprehensive details of the processes and principles underlying
the work of the remuneration and Nomination committee are
discussed in the remuneration report appearing on page 6 to 17 of
this report.
For further information on the scope and responsibilities of the
remuneration and Nomination committee, please refer to iluka’s
website.
a u d i t aNd ri s k co m m i t t e e
the audit and risk committee’s role is to assist the Board to fulfil
its responsibilities in relation to the company’s accounts, external
reporting and risk. this is achieved by ensuring that appropriate
processes are in place in relation to:
•
•
•
•
egrity of financial reporting;
the int
the adequacy of the control environment;
the proce
the internal and external audit functions.
ss for the management of risk; and
the committee regularly reviews the appropriateness of its
composition in light of the skills and experiences of its members and
the responsibilities of the committee. 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 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;
20 a N Nu a l r ePo r t 2 0 0 9
•
•
•
•
•
nce of the external auditor and
evaluating the independe
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;
ng assurance as to the adequacy of the company’s
gaini
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.
the audit and risk committee consists of the following independent,
non-executive directors: mr don morley (chairman), ms Jenny
seabrook and mr stephen turner.
For further information on the scope and responsibilities of the audit
and risk committee, please refer to iluka’s website.
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
issues and initiatives for improving the functioning and performance
of individual directors and the Board as a whole. this annual review
was last undertaken december 2009.
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 december 2009.
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 2009
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.
a u d i t F uNc t i oNs
Pricewaterhousecoopers (“Pwc”) is the company’s external audit
provider. during 2009, 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.
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 that 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 director’s code of conduct,
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.
copies of the employee code of conduct, director’s code of
conduct and the Whistleblower Policy can be found in the corporate
governance section of iluka’s website.
se c u r i t i e s tr a d iN G P o l i c y
the company has a policy on the trading of the company’s securities
(shares, options, warrants, etc.) by directors and employees.
the Board believes it is in the best interests of shareholders for
directors and employees to own shares in the company, subject to
strict controls and guidelines on share trading.
the securities trading Policy prohibits directors and employees 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 trading in securities in the company during the period from the
end of half or full financial year and the release of the results for the
relevant period.
Prior to trading in the company’s securities, directors must seek
approval from the chairman and restricted employees must seek
approval from company secretary.
a copy of iluka’s securities trading Policy can be found in the
corporate governance section of iluka’s website.
i l u k a r e s o u r c e s l i m i t e d 21
coNt iNu o u s di s c l o s u r e
the company is committed to providing best practice continuous
disclosure and has developed a comprehensive continuous
disclosure Policy to ensure compliance with the continuous and
periodic disclosure obligations under the corporations act and
the asX listing rules and to providing accurate information to all
shareholders and market participants. the company has established
a disclosure committee comprising the company secretary, chief
Financial officer and the General manager, investor relations.
the committee reports to the managing director. the committee’s
responsibilities include determining if disclosure is required,
ensuring the managing director is advised of and approves all
information disclosed to the market and ensuring the Board is kept
fully informed of the disclosure committee’s determinations and
all information subsequently disclosed to the market. the company
secretary is convenor of the disclosure committee and has primary
responsibility for administration of the continuous disclosure
Policy. the company secretary’s responsibilities include ensuring
compliance with the company’s continuous disclosure obligations and
overseeing and co-ordinating information disclosure to the asX.
the company’s continuous disclosure Policy is available in the
corporate governance section of iluka’s website.
s Ha r eHo l d e r co m m uNi c at i oN
the company is committed to providing accurate information to all
shareholders and the market and follows a yearly programme of
regular disclosure to the market on its financial and operational
results and discloses events to the asX during the year as they
occur.
at the annual General meeting, shareholders elect the directors and
have the opportunity to express their views, ask questions about
company business and vote on items of business for resolution by
shareholders. the company communicates with shareholders through
releases to the asX, the company’s website, information distributed
direct to shareholders and the general meetings of the company.
more information on shareholder communication is contained in the
company’s continuous disclosure Policy.
22 a N Nu a l r ePo r t 2 0 0 9
c o m Pa r i s o N t o a s X c o r P o r at e G o V e r N a N c e c o u N c i l ’ s c o r P o r at e G o V e r N a N c e
Pr iNc iPl e s aNd r e c o m m eNd at i oNs ( 2 Nd e d i t i oN )
recommendation
compliance
Principle 1
lay solid foundations for management and oversight
1.1
1.2
1.3
companies should establish the functions reserved to the board and those delegated to senior executives and disclose
those functions.
companies should disclose the process for evaluating the performance of senior executives.
companies should provide the information indicated in the Guide to reporting on Principle 1.
Principle 2
structure the board to add value
2.1
2.2
2.3
2.4
2.5
2.6
a majority of the board should be independent directors.
the chairman should be an independent director.
the roles of chairman and chief executive officer should not be exercised by the same individual.
the board should establish a nomination committee.
companies should disclose the process for evaluating the performance of the board, its committees and individual
directors.
companies should provide the information indicated in the Guide to reporting on Principle 2.
Principle 3
Promote ethical and responsible decision-making
3.1
companies should establish a code of conduct and disclose the code or a summary of the code as to:
•
•
the practices necessary to maintain confidence in the company’s integrity;
the practices necessary to take into account their legal obligations and the reasonable expectations of their
stakeholders;
comply
comply
comply
comply
comply
comply
comply
comply
comply
comply
comply
comply
•
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
comply
3.2
3.3
companies should establish a policy concerning trading in company securities by directors, senior executives and
employees, and disclose the policy or a summary of the policy.
companies should provide the information indicated in the Guide to reporting on Principle 3.
Principle 4
safeguard integrity in financial reporting
4.1
4.3
4.4
4.5
the board should establish an audit committee.
the audit committee should be structured so that it:
•
•
•
•
consists only of non-executive directors
consists of a majority of independent directors
is chaired by an independent chair, who is not chairman of the board
has at least three members.
the audit committee should have a formal charter.
companies should provide the information indicated in the Guide to reporting on Principle 4.
Principle 5
make timely and balanced disclosure
5.1
5.2
companies should establish the functions reserved to the board and those delegated to senior executives and disclose
those functions.
companies should provide the information indicated in the Guide to reporting on Principle 5.
Principle 6
respect the rights of shareholders
6.1
6.2
companies should design a communications policy for promoting effective communication with shareholders and
encouraging their participation at general meetings and disclose their policy or a summary of that policy.
companies should provide the information indicated in the Guide to reporting on Principle 6.
comply
comply
comply
comply
comply
comply
comply
comply
comply
comply
i l u k a r e s o u r c e s l i m i t e d 23
recommendation
Principle 7
recognise and manage risk
7.1
7.2
7.3
7.4
companies should establish policies for the oversight and management of material business risks and disclose a
summary of those policies.
the board should require management to design and implement the risk management and internal control system to
manage the company’s material business risks and report to it on whether those risks are being managed effectively.
the board should disclose that management has reported to it as to the effectiveness of the company’s management of
its material business risks.
the board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the
chief Financial officer (or equivalent) that the declaration provided in accordance with section 295a of the corporations
act is founded on a sound system of risk management and internal control and that the system is operating effectively in
all material respects in relation to financial reporting risks.
companies should provide the information indicated in the Guide to reporting on Principle 7.
Principle 8
remunerate fairly and responsibly
8.1
8.2
8.3
the board should establish a remuneration committee.
companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive
directors and senior executives.
companies should provide the information indicated in the Guide to reporting on Principle 8.
compliance
comply
comply
comply
comply
comply
comply
comply
24 a N Nu a l r ePo r t 2 0 0 9
FINANCIAl REPORT
CONTENTS
Financial report
income statements
statements of comprehensive income
Balance sheets
statements of changes in equity
cash flow statements
Notes to the financial statements
directors’ declaration
independent audit report to the members
26
27
28
29
31
32
70
71
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 2010. 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 25
iNcome statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Revenue from continuing operations
other income
expenses
interest and finance charges
rehabilitation and restoration unwind
total finance costs
impairment charges and reversals
(Loss) profit before income tax from continuing operations
income tax benefit
(Loss) profit from continuing operations
Profit from discontinued operations
(Loss) profit for the year
Profit attributable to non-controlling interest
(Loss) profit attributable to owners of Iluka Resources Limited
Notes
5
6
7
7
7
8
9
consolidated
Parent entity
2009
$M
586.0
18.3
(717.2)
(8.4)
(15.7)
(24.1)
(67.6)
(204.6)
72.9
(131.7)
22.9
(108.8)
0.2
(108.6)
2008
$m
926.1
13.7
(883.1)
(26.1)
(14.2)
(40.3)
5.5
21.9
15.8
37.7
47.3
85.0
(7.5)
77.5
2009
$M
176.3
55.1
(243.6)
(20.4)
(5.7)
(26.1)
-
(38.3)
22.3
(16.0)
-
(16.0)
-
(16.0)
2008
$m
227.7
16.4
(293.3)
(29.6)
(6.2)
(35.8)
45.6
(39.4)
21.0
(18.4)
-
(18.4)
-
(18.4)
Basic and diluted earnings per share
earnings per share from continuing operations attributable
to owners
earnings per share attributable to owners
Cents
cents
29
29
(32.5)
(26.8)
13.8
22.4
the above income statements should be read in conjunction with the accompanying notes.
26 a N Nu a l r ePo r t 2 0 0 9
statemeNts oF comPreHeNsiVe iNcome
FOR THE YEAR ENDED 31 DECEMBER 2009
(Loss) profit for the year
Other comprehensive income
changes in fair value of foreign exchange cash flow hedges, net of tax
currency translation of us operation
Hedge of net investment in us operation, net of tax
actuarial gains (losses) on defined benefit plans, net of tax
Other comprehensive income for the year
Total comprehensive income for the year
total comprehensive income for the year is attributable to:
owners of iluka resources limited
Non-controlling interest
the above statements of comprehensive income should be read in conjunction with the accompanying notes.
consolidated
Parent entity
2009
$M
(108.8)
109.9
(22.8)
23.6
2.4
113.1
4.3
(1.1)
5.4
4.3
2008
$m
85.0
(113.5)
13.2
(18.0)
(8.5)
(126.8)
(41.8)
(42.5)
0.7
(41.8)
2009
$M
2008
$m
(16.0)
(18.4)
99.3
(99.7)
- -
- -
- -
99.3
83.3
83.3
-
83.3
(99.7)
(118.1)
(118.1)
-
(118.1)
i l u k a r e s o u r c e s l i m i t e d 27
BalaNce sHeets
AS AT 31 DECEMBER 2009
ASSETS
Current assets
cash and cash equivalents
receivables
inventories
derivative financial instruments
deferred overburden
total current assets
Non-current assets
loans to subsidiaries
inventories
investments in subsidiaries
Property, plant and equipment
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
total current liabilities
Non-current liabilities
interest-bearing liabilities
loans from subsidiaries
Provisions
derivative financial instruments
total non-current liabilities
Total liabilities
Net assets
EQUITY
contributed equity
reserves
retained (losses) profits
owners interest
Non-controlling interest
Total equity
the above balance sheets should be read in conjunction with the accompanying notes.
28 a N Nu a l r ePo r t 2 0 0 9
consolidated
Parent entity
Notes
2009
$M
2008
$m
2009
$M
2008
$m
10
11
12
3
12
13
14
15
16
17
18
3
17
18
3
19
20(a)
20(b)
86.3
103.9
205.5
15.9
-
411.6
-
56.6
-
97.6
243.2
249.7
-
8.5
599.0
-
-
-
1,566.6
1,414.6
53.7
9.9
1,686.8
2,098.4
31.0
13.5
1,459.1
2,058.1
183.7
44.7
-
28.1
-
256.5
423.7
-
322.9
-
746.6
164.1
36.8
5.0
61.4
104.0
371.3
276.5
-
322.7
49.6
648.8
1,003.1
1,095.3
1,020.1
1,038.0
1,114.4
19.9
(39.0)
1,095.3
-
998.1
(84.3)
66.0
979.8
58.2
65.0
63.7
72.5
75.7
27.0
29.0
15.9 -
- -
147.6
201.2
930.4
56.6 -
849.2
221.5
37.8
- -
241.4
849.2
283.4
41.9
2,095.5
2,243.1
1,415.9
1,617.1
52.2
44.7
-
10.4
-
29.4
36.8
1.1
21.8
93.0
107.3
182.1
423.7
406.5 -
123.1
-
953.3
1,060.6
1,182.5
276.6
125.7
46.7
449.0
631.1
986.0
1,120.0
1,006.5
21.1
41.4
1,182.5
-
(74.6)
54.1
986.0
-
986.0
1,095.3
1,038.0
1,182.5
statemeNts oF cHaNGes iN equity
FOR THE YEAR ENDED 31 DECEMBER 2009
attributable to owners of iluka resources limited
reserves
$m
25.1
-
(106.7)
13.2
(18.0)
-
(0.1)
(111.6)
-
(3.3)
5.5
-
-
2.2
(84.3)
-
104.3
(22.8)
23.6
-
(1.2)
retained
earnings
$m
(3.1)
77.5
-
-
-
(8.5)
0.1
69.1
-
-
-
-
-
-
66.0
(108.6)
-
-
-
2.4
1.2
Consolidated
Notes
Balance at 1 January 2008
Profit for the year
changes in fair value of foreign exchange
cash flow hedges, net of tax
currency translation of us operation
Hedge of net investment in us operation,
net of tax
actuarial losses on retirement benefit
obligations, net of tax
transfer of asset revaluation reserve
Total comprehensive income
Transactions with owners in their
capacity as owners:
share issue, net of transaction costs
transfer of shares to employees
share based payments, net of tax
Purchase of treasury shares
dividends paid to crl minorities
Balance at 1 January 2009
loss for the year
changes in fair value of foreign exchange
cash flow hedges, net of tax
currency translation of us operation
Hedge of net investment in us operation,
net of tax
actuarial gains on retirement benefit obligations,
net of tax
transfer of asset revaluation reserve
Total comprehensive income
Transactions with owners in their capacity
as owners:
share placement, net of costs
transfer of shares to employees
share based payments, net of tax
dividends paid to crl minorities
disposal of subsidiary
Balance at 31 December 2009
20
20
20
20
19
20
20
20
20
20
20
20
19
19
contributed
equity
$m
661.6
-
-
-
-
-
-
-
343.9
3.3
-
(10.7)
-
336.5
998.1
-
-
-
-
-
-
-
113.5
2.8
-
-
-
116.3
1,114.4
Total
$M
683.6
77.5
(106.7)
13.2
(18.0)
(8.5)
-
Non-controlling
interest
$m
Total
equity
$M
68.0
7.5
751.6
85.0
(6.8)
(113.5)
-
-
-
-
13.2
(18.0)
(8.5)
-
(42.5)
0.7
(41.8)
343.9
-
5.5
(10.7)
-
338.7
979.8
(108.6)
104.3
(22.8)
23.6
2.4
-
-
-
-
-
(10.5)
(10.5)
58.2
(0.2)
5.6
-
-
-
-
343.9
-
5.5
(10.7)
(10.5)
328.2
1,038.0
(108.8)
109.9
(22.8)
23.6
2.4
-
4.3
113.5
-
3.1
(1.8)
(61.8)
53.0
103.9
(105.0)
(1.1)
5.4
-
(2.8)
3.1
-
-
0.3
19.9
-
-
-
-
-
-
113.5
-
3.1
-
-
116.6
-
-
-
(1.8)
(61.8)
(63.6)
(39.0)
1,095.3
-
1,095.3
i l u k a r e s o u r c e s l i m i t e d 29
Notes
contributed
equity
$m
662.6
reserves
$m
21.0
-
(99.7)
retained
earnings
$m
72.5
(18.4)
-
Total
equity
$M
756.1
(18.4)
(99.7)
(99.7)
(18.4)
(118.1)
-
4.1
4.1
(74.6)
-
99.3
(3.3)
96.0
-
(0.3)
(0.3)
21.1
-
-
-
54.1
(16.0)
-
3.3
(12.7)
-
-
-
343.9
4.1
348.0
986.0
(16.0)
99.3
-
83.3
113.5
(0.3)
113.2
41.4
1,182.5
-
-
-
343.9
-
343.9
1,006.5
-
-
-
-
113.5
-
113.5
1,120.0
statemeNts oF cHaNGes iN equity
FOR THE YEAR ENDED 31 DECEMBER 2009
Parent entity
Balance at 1 January 2008
loss for the year
changes in fair value of foreign exchange cash flow hedges, net of tax
20
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
share issue, net of transaction costs
share based payments, net of tax
Balance at 1 January 2009
loss for the year
changes in fair value of foreign exchange cash flow hedges, net of tax
transfer of asset revaluation reserve
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
share placement, net of transaction costs
share based payments, net of tax
Balance at 31 December 2009
19
20
20
20
19
the above statements of changes in equity should be read in conjunction with the accompanying notes.
30 a N Nu a l r ePo r t 2 0 0 9
casH FloW statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
consolidated
Parent entity
Notes
2009
$M
2008
$m
2009
$M
Cash flows from operating activities
receipts from customers
Payments to suppliers and employees
interest received
interest paid
income tax (net)
exploration expenditure
royalty receipts
other
Net cash inflow (outflow) from operating activities
28
744.8
(663.0)
81.8
1.5
(14.0)
(4.4)
(20.0)
55.2
2.1
102.2
1,017.4
(794.4)
223.0
6.3
(32.2)
4.1
(20.9)
49.3
3.4
233.0
Cash flows from investing activities
Payments for property, plant and equipment
sale of property, plant and equipment
sale of Narama
sale of crl
loans (to) from controlled entities
9(c)
9(c)
(521.6)
(198.4)
9.9
-
84.2
-
7.6
53.4
-
-
Net cash (outflow) inflow from investing activities
(427.5)
(137.4)
Cash flows from financing activities
Proceeds from borrowings
repayment of borrowings
dividends paid to crl minority interests
issue of ordinary shares
share issue costs
Purchase of treasury shares
debt refinance costs
Net cash (outflow) inflow from financing activities
Net (decrease) increase in cash and cash equivalents
cash and cash equivalents at 1 January
exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 31 December
Financing arrangements
309.8
(105.6)
(1.8)
114.0
(0.5)
-
-
315.9
(9.4)
97.6
(1.9)
86.3
83.9
(414.5)
(10.5)
353.1
(13.2)
(14.3)
(4.3)
(19.8)
75.8
19.9
1.9
97.6
19(b)
19(b)
10
17
the above cash flow statements should be read in conjunction with the accompanying notes.
194.3
(226.6)
(32.3)
1.2
(13.9)
0.8
-
-
2.9
(41.3)
(9.6)
8.6
-
-
(255.3)
(256.3)
300.4
(105.6)
-
114.0
(0.5)
-
-
308.3
10.7
65.0
-
75.7
2008
$m
200.2
(174.4)
25.8
5.4
(33.1)
18.9
-
-
1.5
18.5
(30.8)
2.3
-
-
65.9
37.4
83.9
(414.4)
-
357.1
(13.2)
-
(4.3)
9.1
65.0
-
-
65.0
i l u k a r e s o u r c e s l i m i t e d 31
CONTENTS OF ThE NOTES TO ThE FINANCIAl STATEMENTS
1
2
3
4
5
summary of significant accounting policies
critical accounting estimates and judgements
Financial risk management
segment information
revenue from continuing operations
6 other income
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
expenses
income tax
discontinued operations
cash and cash equivalents
receivables
inventories
Property, plant and equipment
deferred tax assets
intangible assets
Payables
interest bearing liabilities
Provisions
contributed equity
reserves and retained profits
key management personnel
remuneration of auditors
retirement benefit obligations
contingent liabilities
commitments
related party transactions
controlled entities and deed of cross guarantee
reconciliation of profit after income tax to
net cash inflow from operating activities
earnings per share
share-based payments
33
40
42
44
46
46
47
48
49
50
50
51
51
53
53
54
54
55
56
58
59
61
62
64
65
65
66
68
68
69
32 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
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 which, together, ensure that
the consolidated financial statements and notes of iluka
resources limited comply with international Financial
reporting standards (“iFrs”). these financial statements
have been prepared under the historical cost convention.
(b) Principles of consolidation
(i) Subsidiaries
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 and are not material in 2009
and 2008.
(c) segment reporting
operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker. the chief operating decision maker has
been identified as the managing director.
the group has adopted aasB 8 operating segments
from 1 January 2009 which replaces aasB 114 segment
reporting. the new standard requires a ‘management
approach’ under which segment information is presented
on the same basis as that used for internal reporting
purposes. in addition, the segments are reported in
a manner that is consistent with the internal reporting
provided to the managing director. comparatives for 2008
have been restated.
(d) revenue recognition
the consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of iluka
resources limited (‘’company’’ or ‘’parent entity’’) as
at 31 december 2009 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.
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.
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.
Non controlling 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.
Mineral Sands
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.
Product sales are recognised as 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(m).
Mining Area C royalty income and amortisation of
royalty asset
royalty income is recognised on an accrual basis. 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 is an intangible asset and is
amortised on a straight-line basis over its estimated useful
life of 25 years of which 19 years is remaining.
i l u k a r e s o u r c e s l i m i t e d 33
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
(e)
interest and other
interest income is recognised in the income statement as it
accrues, using the effective interest method.
(f)
income tax
the income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the 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 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.
34 a N Nu a l r ePo r t 2 0 0 9
the funding amounts are determined by reference to
the amounts recognised in the wholly-owned entities’
financial statements.
the amounts receivable/payable under the tax funding
agreement are due upon receipt of the funding advice from
the head entity, which is issued as soon as practicable
after the end of each financial year. the head entity
may also require payment of interim funding amounts
to assist with its obligations to pay tax instalments. the
funding amounts are recognised as current intercompany
receivables or payables.
(g) acquisitions of assets
the purchase method of accounting is used to account for
all acquisitions of assets (including business combinations)
regardless of whether equity instruments or other
assets are acquired. cost is measured as the fair value
of the assets given, shares issued or liabilities incurred
or assumed at the date of exchange plus costs directly
attributable to the acquisition.
Where 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(p) for more information.
a liability for restructuring costs is recognised as at the
date of acquisition of an entity or part thereof when there
is a demonstrable commitment to the restructuring of the
acquired entity and a reliable estimate of the amount of the
liability can be made.
(h) cash and cash equivalents
For cash 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.
(i)
trade receivables
trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful debts. trade and other receivables are 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.
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
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. 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.
(j)
inventories
inventories are valued at the lower of weighted average
cost and estimated net realisable value.
Weighted average cost includes 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 sale in the normal course of business, less any
anticipated costs to be incurred prior to sale.
a regular and ongoing review is undertaken to establish the
extent of surplus obsolete or damaged stores, which are
then valued at estimated net realisable value.
(k) 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.
(l)
Foreign currency translation
(i)
Functional and presentation 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
australian dollars using the exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses including those from the translation
at balance date of foreign currency denominated
monetary assets and liabilities are recognised in the
income statement, except when deferred in equity
as qualifying cash flow hedges and qualifying net
investment hedges.
(iii) Group companies
the results and financial position of the us entities that
have a us dollar functional currency are translated into
aud as follows:
•
•
•
assets and liabilities are translated at the
exchange rate at balance date;
income and expenses for each month are
translated at average exchange rates; and
all resulting exchange differences are recognised
in the foreign currency translation reserve.
(m) derivatives
derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at balance date. the method
of recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument, and if
so, the nature of the item being hedged. the consolidated
entity designates certain derivatives as either: (1) hedges
of the fair value of recognised assets or liabilities or a 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 3.
movements in the hedging reserve in shareholders’ equity
are shown in Note 20.
(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
affects profit or loss (for instance when the forecast
receipt 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 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
For derivatives that do not qualify for hedge accounting
changes in the fair value are recognised immediately in
the income statement.
i l u k a r e s o u r c e s l i m i t e d 35
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
(n) Non-current assets (or disposal groups) held for resale
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(q).
(q) Property, plant and equipment
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.
(o)
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.
(p)
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 on
development can be recouped through project development
or sale. capitalised exploration is transferred to mine
reserves once the related ore body achieves 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.
36 a N Nu a l r ePo r t 2 0 0 9
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.
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.
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 is determined on a
straight-line basis as the consumption of economic benefits
is not expected to vary over the operational life of the asset.
the basis of depreciation of each asset is reviewed annually
and changes to the basis of depreciation are made if the
straight-line basis is no longer considered to represent the
expected pattern of consumption of economic benefits. 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.
Revision of useful lives
during the year, the estimated useful lives of various
items of plant and equipment were shortened to reflect
revised operating conditions in Western australia. as
a result of the revisions, an additional depreciation
expense of $14.5 million was incurred in the year. at 31
december 2009 the carrying value of the assets to which
the additional depreciation relates was $6.6 million and
the impact of the shorter lives on depreciation in future
years is not material.
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
Revision of depreciation methods effective
1 January 2010
the depreciation method for mine specific plant,
machinery and equipment will be revised effective
1 January 2010 from “straight line” to “units of
production” so as to more appropriately match depreciation
charges with the expected pattern of consumption of
economic benefit of the asset. the change in method
reflects an increase in the expected future re-deployment
of assets between mine sites and periods of inactivity for
certain assets.
assets depreciated on a straight line basis in 2009 with
a carrying value at 31 december 2009 of $551.5 million
(parent $145.7 million) are subject to the change in
method. the change is expected to result in a decrease
in depreciation in 2010 for those assets of $18.0 million
compared to the straight line charge incurred in 2009.
(r) 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(q).
General repairs and maintenance which are not
characterised as part of a major cyclical overhaul are
expensed as incurred.
(s) 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(w). Borrowing costs are not capitalised
whilst assets are being commissioned.
(t)
intangible assets
significant costs associated with patents and trademarks
are deferred and amortised over the periods of expected
benefit. this period was revised during the year with an
associated increase in amortisation expense of $1.9 million.
the carrying value at 31 december 2009 of $2.4 million will
be amortised in 2010.
(u) 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
that suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
(v)
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.
(w) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred and are subsequently measured
at amortised cost. any difference between the net proceeds
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.
(x) 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 which take more than 12
months to prepare for their intended use.
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. $12.5 million interest at
a weighted average interest rate of 3.2 per cent was
capitalised in 2009, (2008: $4.0 million at a rate of 7.0 per
cent).
Borrowing costs include:
•
interest on borrowings, including amounts paid or
received on interest rate swaps; amortisation of
deferred borrowing costs; and
•
finance lease charges.
i l u k a r e s o u r c e s l i m i t e d 37
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
(y) Provisions for legal claims
Provisions for legal claims are recognised when there is a
present legal obligation as a result of past events and it is
more likely than not that a settlement will be made, and the
amount can be estimated reliably.
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.
(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 includes the present value of the estimated
costs of dismantling and removing the asset and
restoring the site on which it is located.
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. a pre tax
nominal discount rate of 6.0 per cent (2008: 6.0 per
cent) has been used in calculating the rehabilitation and
restoration provisions of the consolidated entity. this
rate does not reflect risks for which future cash flow
estimates have been adjusted.
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 a finance cost.
(aa) 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 as current payables.
Non-accumulating sick leave, parental leave and other
ex-gratia leave is recognised as an expense when
taken.
(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.
38 a N Nu a l r ePo r t 2 0 0 9
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
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.
contributions to the accumulation fund are recognised
as an expense as they become payable.
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
(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 Note 30 with
additional information in the remuneration report.
the fair value of entitlements offered 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 is determined to be the volume 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 grant date and the vesting date for each
respective plan.
the fair value of share rights 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.
the fair value of share rights at grant date of the long
term incentive Plan (ltiP) is independently determined
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. a credit to the share based payments
expense arises where unvested entitlements lapse
on resignation or the non fulfilment of market vesting
conditions.
(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 particular plans.
(ab) contributed equity
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.
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.
(ac) 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.
(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.
(ae) 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 2009 reporting periods. the consolidated entity’s
assessment of the impact of relevant new standards and
interpretations is set out below.
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
and will be applied by the group from 1 January 2010. 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.
i l u k a r e s o u r c e s l i m i t e d 39
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 1.
summary of significant accounting policies
(continued)
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 aasB
108 accounting Policies, changes in accounting estimates
and errors. the amendment prohibits designating inflation
as a hedgeable component of a fixed rate debt and 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. the impact on
the financial report is being determined.
AASB Interpretation 17 Distribution of Non-Cash Assets
to Owners and AASB 2008-13 Amendments to Australian
Accounting Standards arising from AASB Interpretation
17 (effective 1 July 2009)
aasB-i 17 applies to situations where an entity
pays dividends by distributing non-cash assets to its
shareholders. these distributions will need to be measured
at fair value and the entity will need to recognise the
difference between the fair value and the carrying amount
of the distributed assets in the income statement on
distribution rather than measuring distributions of non-cash
assets at their carrying amounts. the interpretation further
clarifies when a liability for the dividend must be recognised
and that it is also measured at fair value. the Group will
apply the interpretation prospectively from 1 January 2010.
AASB 2009-4 Amendments to Australian Accounting
Standards arising from the Annual Improvements Project
(effective for annual periods beginning on or after 1 July
2009)
the aasB has made amendments to aasB 2 share-
based payment, aasB 138 intangible assets and aasB-i
9 reassessment of embedded derivatives and aasB
interpretation 16 Hedges of a Net investment in a Foreign
operation as a result to the iasB’s annual improvements
project. the Group will apply the amendments from
1 January 2010. the Group does not expect that any
adjustments will be necessary as a result of applying the
revised rules.
AASB 9 Financial Instruments and AASB 2009-11
Amendments to Australian Accounting Standards arising
from AASB 9 (effective from 1 January 2013)
aasB 9 Financial instruments addresses the classification
and measurement of financial assets and is likely to affect
the group’s accounting for its financial assets. the standard
is not applicable until 1 January 2013 but is available for
early adoption. the group is yet to assess its full impact.
AASB 2009-14 Amendments to Australian Interpretation
– Prepayments of a Minimum Funding Requirement
(effective from 1 January 2011)
in december 2009, the aasB made an amendment to
interpretation 14 the limit on a defined Benefit asset,
minimum Funding requirements and their interaction.
40 a N Nu a l r ePo r t 2 0 0 9
the amendment removes an unintended consequence of the
interpretation related to voluntary prepayments when there
is a minimum funding requirement in regard to the entity’s
defined benefit scheme. it permits entities to recognise
an asset for a prepayment of contributions made to cover
minimum funding requirements. the group does not make
any such prepayments. the amendment is therefore not
expected to have any impact on the group’s or the parent
entity’s financial statements. the group intends to apply the
amendment from 1 January 2011.
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
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 and has been estimated
on the basis of discounted present value of the future
cashflows.
the estimates of future cash flows for each cGu 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; and
the asset specific discount rate applicable to the
cGu.
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 2. critical accounting estimates and judgements
(iii) rehabilitation and mine closure provisions
(continued)
Given the nature of the consolidated entity’s mining
activities, future changes in 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 2011. 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 of impairment testing. the group has not yet
incorporated the impact of a cPrs into its assumptions
at 31 december 2009 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 $20.4 million (2008: $17.0
million) which does not form part of the cGu assessed
for impairment has been carried forward in accordance
with Note 1(p) 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.
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 (2008 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.
a key assumption made regarding the income tax
expense for the current year is the level of investment
allowance and 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 $7.5
million and $1.1 million respectively, (2008 $3.4million
and $10.2 million).
(b) critical judgements in applying the entity’s accounting
policies
recovery of deferred tax assets
Net deferred tax assets of $53.7 million (2008: $19.5 million)
are carried in respect of the australian and us operations,
including $50.7 million (2008: $11.9 million) attributable to
tax losses. management has assessed that it is probable
that these tax losses will be recoverable against future
taxable profits to be generated in the relevant jurisdiction.
i l u k a r e s o u r c e s l i m i t e d 41
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 3.
Financial risk management
the Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow
interest rate risk), credit risk and liquidity risk. the Group’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity.
Financial risk management is managed by a central treasury department (Group treasury) under policies approved by the Board of directors
(the Board).
(a)
market risk
(i)
Foreign exchange risk
Foreign exchange risk arises when commercial transactions and recognised assets and liabilities are denominated in a currency
that is not australian dollars.
the Group operates internationally and is exposed to foreign exchange risk arising predominantly from currency exposures to the
us dollar. the consolidated balance sheet translation risk is managed by borrowing in us dollars to provide a hedge for the net
us dollar investment in the us operation and the us dollar receivables from australian sales. the income statement exposure is
hedged through the use of derivative instruments in accordance with policies approved by the Board.
the table below summarises financial assets and liabilities denominated in foreign currencies that form part of the balance sheet
carrying values.
cash and cash equivalents
receivables
Payables
interest bearing liabilities
consolidated
Parent entity
2009
US$M
17.1
77.0
(13.7)
(165.0)
(84.6)
2008
us$m
10.1
136.9
(9.8)
(180.5)
(43.3)
2009
US$M
7.8
21.7
(0.5)
(165.0)
(136.0)
2008
us$m
-
26.1
(2.4)
(180.5)
(156.8)
Group sensitivity
at 31 december 2009, had the australian dollar weakened/strengthened by 10 per cent against the us dollar compared to the
exchange rate at that date of 89.41 cents with all other variables held constant, the consolidated entity’s post-tax profit for the
year would have been $0.9 million higher/$0.8 million lower (2008: $1.1 million higher/$1.0 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 $34.4 million lower/$34.6 million higher (2008: $99.2 million lower/$86.7 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.
Parent entity sensitivity
at 31 december 2009, had the australian dollar weakened/strengthened by 10 per cent against the us dollar compared to the
exchange rate at that date of 89.41 cents with all other variables held constant, the parent entity’s post-tax profit for the year
would have been $11.8 million lower/$9.7 million higher (2008: $25.1 million lower/$20.5 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 $26.3 million lower/$28.0 million higher (2008: $75.0 million lower/$66.5 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.
(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 2009 and 2008, 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 2009, 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 $2.3 million higher/lower (2008: $0.6 million higher/lower), mainly as a result of lower/
higher interest expense from net debt.
42 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 3.
Financial risk management (continued)
(b)
credit risk
the Group has no significant concentrations of credit risk and has policies in place to ensure that sales of products and services are
made to customers with an appropriate credit history. the Group also 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 and policies limit
the amount of credit exposure to any one financial institution.
(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 group and parent financial liabilities and net settled derivative financial instruments into 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 net receivable amounts. the carrying value
of payables balances per the balance sheet have been excluded from the tables below as these balances for both the group and parent
at 31 december 2009 and 31 december 2008 are due within 12 months. Balances due within 12 months equal their carrying balances as
the impact of discounting is not significant.
Group and Parent -
At 31 December 2009
Non-derivatives
interest bearing Variable rate
interest bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
(net receivable)
Total derivatives
Group and Parent -
At 31 December 2008
Non-derivatives
interest bearing Variable rate
interest bearing Fixed rate
Total non-derivatives
Derivatives
interest rate swaps
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
$m
5.60
4.40
-
5.65
3.05
-
13.9
52.5
66.4
0.1
0.1
10.6
40.1
50.7
0.5
0.5
13.9
40.3
54.2
0.1
0.1
111.8
3.0
114.8
0.5
0.5
326.7
65.1
391.8
0.2
0.2
66.1
97.8
163.9
0.7
0.7
-
23.0
23.0
-
-
29.7
-
29.7
-
-
354.5
180.9
535.4
314.1
157.6
471.7
0.4
0.4
-
-
218.2
140.9
359.1
1.7
1.7
187.1
130.8
317.9
-
-
sales revenue of the consolidated entity is mainly denominated in us dollars. Given the predominately australian dollar cost base of the
business, these us dollar sales create a foreign exchange exposure in terms of earnings and cash flow. in order to protect against this
exposure, the consolidated entity has entered into forward exchange contracts and foreign currency options to forward sell us dollars.
the forward exchange contracts and foreign currency options hedge highly probable forecast sales over a period of up to a two and a
half year timeframe. the contracts are timed to mature when receipts from customers are expected to be received.
i l u k a r e s o u r c e s l i m i t e d 43
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 3.
Financial risk management (continued)
Consolidated and Parent - At 31 December 2009
Forward foreign exchange contracts - cash flow hedges
inflow (a$m)
-
- outflow (us$m)
options - cash flow hedges
-
inflow (a$m)
- outflow (us$m)
Balance sheet fair value of derivative financial instruments (a$m)
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)
Balance sheet fair value of derivative financial instruments (a$m)
Parent Entity - At 31 December 2008
Forward foreign exchange contracts - cash flow hedges
-
inflow (a$m)
- outflow (us$m)
collar options - cash flow hedges
-
inflow (a$m)
- outflow (us$m)
Balance sheet fair value of derivative financial instruments (a$m)
less than 1 year
$m
Between 1 and 2 years
$m
179.4 -
153.5 -
261.1 -
235.0 -
15.9 -
281.2
236.3
218.0 -
176.0 -
(104.0)
199.8
173.0
218.0 -
176.0 -
(93.0)
214.2
178.9
(49.6)
179.5
153.5
(46.7)
the above derivatives are likely to affect the income 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.
at 31 december 2009, the financial assets or liabilities that have been measured and recognised at fair value in both the Group and
Parent entity are the derivative financial instruments. the fair value of the call options is determined using the Garman and kohlhagen
Formula at the end of the reporting period. the derivative financial instruments were valued at $15.9 million at 31 december 2009.
(level 2 per aasB 7:27a)
Note 4.
segment information
(a) description of segments
operating segments are now reported in a manner that is consistent with the internal reporting provided to the managing director, who
is considered the chief operating decision maker, for the purpose of making decisions regarding the allocation of resources and the
monitoring of performance.
Eucla/Perth Basin (“E/PB”) comprises the integrated mineral sands mining and processing operations in Western australia and south
australia. material is mined from various deposits in the south West and mid West of Western australia (Perth Basin), together with the
Jacinth-ambrosia deposit in south australia (eucla Basin) which was being commissioned at 31 december 2009. the mined material is
processed at facilities in the south West and mid West of Western australia to produce saleable products.
Murray Basin (“MB”) comprises the integrated mineral sands mining and processing operations in Victoria, including the murray Basin
stage 2 development which was being commissioned at 31 december 2009.
United States (“US”) comprises the integrated mineral sands mining and processing operations in Virginia, together with a zircon
retreatment operation in Florida which ceased in 2009.
44 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 4.
segment information (continued)
Mining Area C (“MAC”) comprises an iron ore royalty interest over certain mining tenements operated by BHP Billiton iron ore.
Where finished product capable of sale to a third party is transferred between operating segments, the transfers are made at arms
length prices. any transfers of intermediate products between operating segments are made at cost.
the group’s investment in consolidated rutile limited (“crl”) was sold effective from 27 may 2009. crl was a separate operating
segment and information about this discontinued segment is provided in note 9.
(b)
segment information
2009
total segment sales
inter segment sales
total segment sales to external customers
total segment result
segment assets
segment liabilities
acquisition of property, plant and equipment and
other non-current segment assets
depreciation and amortisation expense
impairment charges
2008
total segment sales
inter segment sales
total segment sales to external customers
total segment result
segment assets
segment liabilities
acquisition of property, plant and equipment and
other non-current segment assets
depreciation and amortisation expense
impairment (reversals) charges
e/PB
$m
397.1
(11.4)
385.7
(93.5)
1,022.6
377.7
316.7
124.2
38.5
587.3
-
587.3
(1.1)
938.2
359.8
156.5
103.3
(24.6)
mB
$m
124.8
-
124.8
(19.4)
785.4
86.2
211.2
31.9
29.1
199.9
-
199.9
24.7
666.6
75.1
126.3
28.3
19.1
us
$m
65.5
-
65.5
12.8
107.3
33.7
19.5
17.3
-
107.6
-
107.6
20.3
123.8
46.7
22.2
13.6
-
mac
$m
-
-
-
50.2
15.8
-
-
0.4
-
-
-
-
56.4
20.8
-
-
0.4
-
total
$m
587.4
(11.4)
576.0
(49.9)
1,931.1
497.6
547.4
173.8
67.6
894.8
-
894.8
100.3
1,749.4
481.6
305.0
145.6
(5.5)
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
asia
europe
North america
australia
other countries
Segment sales to external customers
consolidated
2009
$M
269.9
134.8
85.7
36.3
49.3
576.0
2008
$m
335.9
327.8
151.9
38.9
40.3
894.8
revenues of $136.7 million and $96.9 million are derived from 2 external customers from all mineral sands segments which individually
account for greater than 10 per cent of segment revenue, (2008: revenues of $128.6 million is derived from 1 customer from all mineral
sands segments).
i l u k a r e s o u r c e s l i m i t e d 45
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 4.
segment information (continued)
segment sales to external customers is reconciled to total sale of goods as follows:
Segment sales to external customers
less hedging losses
Sale of goods
segment result is reconciled to the (loss) profit before income tax from continuing operations as follows:
Segment result
Hedging losses
interest income
Net foreign exchange gains
exploration and evaluation
corporate and other costs
exploration and corporate restructure and non-recurring costs
interest and finance charges
impairment charges
(Loss) profit before income tax from continuing operations
total segment assets and total segment liabilities are reconciled to the balance sheet as follows:
Segment assets
derivative financial instruments
corporate assets
discontinued operations (crl)
cash and cash equivalents
deferred tax assets
Total assets as per the balance sheet
Segment liabilities
derivative financial instruments
corporate liabilities
discontinued operations (crl)
income tax payable
interest bearing liabilities
consolidated
2009
$M
576.0
(42.9)
533.1
(49.9)
(42.9)
1.4
5.0
(16.2)
(18.3)
(7.7)
(8.4)
(67.6)
(204.6)
2008
$m
894.8
(32.4)
862.4
100.3
(32.4)
6.1
10.6
(16.9)
(25.2)
-
(26.1)
5.5
21.9
1,931.1
1,749.4
15.9
11.4
-
86.3
53.7
-
12.9
167.2
97.6
31.0
2,098.4
2,058.1
497.6
-
37.0
-
-
468.5
481.6
153.6
21.0
45.6
5.0
313.3
Total liabilities as per the balance sheet
1,003.1
1,020.1
consolidated
Parent entity
Note 5. revenue from continuing operations
sales revenue
sale of goods
other revenue
interest
royalty income
other
2009
$M
2008
$m
2009
$M
533.1
862.4
154.5
1.4
50.6
0.9
52.9
6.1
56.8
0.8
63.7
20.1
-
1.7
21.8
revenue from continuing operations
586.0
926.1
176.3
Note 6. other income
Net gain on sale of land
Net gain on disposal of property, plant and equipment
insurance receipt in respect of Wa gas outage
sundry income
Net foreign exchange gains
external interest recharged to controlled entities
46 a N Nu a l r ePo r t 2 0 0 9
5.6
0.8
5.7
1.2
5.0
-
18.3
-
0.6
2.5
-
10.6
-
13.7
5.4 -
-
-
1.1
36.1
12.5
55.1
2008
$m
205.7
20.4
-
1.6
22.0
227.7
-
-
-
12.4
4.0
16.4
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 7.
expenses
From continuing operations
cash cost of production
depreciation
amortisation
inventory movement
Cost of sales of goods
restructure, idle capacity and other non-recurring cash costs
depreciation of non productive assets
Government royalties
marketing and selling
corporate and other
technical support and major projects
exploration and evaluation
Foreign exchange losses
consolidated
Parent entity
2009
$M
453.6
109.1
34.7
(33.4)
564.0
57.8
32.8
13.7
10.2
18.3
4.2
16.2
-
2008
$m
564.3
103.5
36.0
77.2
781.0
12.6
6.1
20.0
11.2
25.1
10.2
16.9
-
2009
$M
124.5
40.2
9.5
13.1
187.3
15.9
7.9
2.9
6.8
18.6
4.2
-
-
2008
$m
148.0
39.4
13.7
4.9
206.0
6.8
-
2.6
6.4
26.0
5.9
-
39.6
Expenses, from continuing operations
717.2
883.1
243.6
293.3
Impairment charges (reversals) on property, plant and equipment (refer note 13)
south West - reversal of prior impairment
mid West Processing - reversal of prior impairment
mid West mining - ore body fair value write-offs
murray Basin - ore body fair value 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
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
Expenses from continuing operations include
defined contribution superannuation
defined benefits superannuation
employee benefits (excluding share-based payments)
Writedown of year end inventory to net realisable value
share-based payments (note 30)
operating lease
-
-
38.5
29.1
67.6
19.8
15.7
1.1
(12.5)
24.1
5.0
-
5.0
12.9
1.9
176.5
10.6
6.2
8.6
(45.6)
(9.5)
30.5
19.1
(5.5)
29.3
14.2
0.8
(4.0)
40.3
10.6
-
10.6
15.5
1.4
174.2
0.3
4.6
8.3
-
-
-
-
-
19.4
5.7
1.1
-
26.1
36.1
-
36.1
12.9
-
63.2
7.3
6.2
3.3
(45.6)
-
-
-
(45.6)
28.8
6.2
0.8
-
35.8
12.4
(39.6)
(27.2)
7.5
-
64.9
0.3
3.7
3.3
i l u k a r e s o u r c e s l i m i t e d 47
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 8.
income tax
(a)
income tax benefit
current tax
deferred tax (note 14)
over provided in prior years
income tax is attributable to:
Profit from continuing operations
Profit from discontinued operations
aggregate income tax (benefit)
(b) Numerical reconciliation of income tax benefit
to prima facie tax payable
(loss) profit from continuing operations before income tax expense
Profit from discontinued operation before income tax expense
tax at the australian tax rate of 30% (2008: 30%)
tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Net foreign exchange gains / losses
Benefits of capital losses utilised
research and development and investment allowance
Gain on sale of crl not assessable for tax (note 9c)
other items
Benefit of us tax losses utilised in the year not previously recognised
difference in overseas tax rates
over provision in prior years
income tax (benefit)
(c)
tax losses
consolidated
Parent entity
2009
$M
(4.6)
(65.6)
(2.6)
(72.8)
(72.9)
0.1
(72.8)
(204.6)
23.0
(181.6)
(54.5)
-
(1.1)
(7.5)
(6.7)
0.8
(0.6)
(69.6)
(0.6)
(2.6)
(72.8)
2008
$m
13.7
(20.1)
(1.3)
(7.7)
(15.8)
8.1
(7.7)
21.9
55.4
77.3
23.2
-
(10.2)
(3.4)
-
1.5
(22.0)
(10.9)
4.5
(1.3)
(7.7)
2009
$M
1.4
(20.0)
(0.9)
(22.3)
(22.3)
-
(22.3)
(38.3)
-
(38.3)
(11.5)
(2.9)
(1.1)
(7.5)
-
1.6
-
(21.4)
-
(0.9)
(22.3)
2008
$m
(14.1)
(4.2)
(2.7)
(21.0)
(21.0)
-
(21.0)
(39.4)
-
(39.4)
(11.8)
6.1
(10.2)
(3.4)
-
1.0
-
(18.3)
-
(2.7)
(21.0)
unused capital losses for which no deferred tax asset has been recognised relating to the wholly owned australian controlled entities
are approximately $95.6 million (2008: $76.9 million) (tax at the australian tax rate of 30%: $28.7 million (2008: $23.0 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.
(d)
Franking credits
Franking credits available for future years based
on a tax rate of 30 per cent (2008: 30 per cent)
(1.6)
8.3
(1.6)
(0.5)
the above amounts include adjustments that will arise from the payment of current income tax or receipt of income tax receivable. the franking credits
available to the consolidated entity in 2008 included $8.8 million for consolidated rutile limited which was sold on 27 may 2009.
48 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 9. discontinued operations
(a) description
on 27th may 2009 iluka disposed of its shares in consolidated rutile limited (“crl”) to unimin australia limited for 45 cents per share.
crl is reported in this financial report as a discontinued operation, together with the interest in the Narama coal joint venture that was
sold on 15 January 2008 with effect from 1 January 2008.
consolidated
(b)
Financial performance and cash flow information
CRL
revenue - sale of goods
cash expenses
depreciation and amortisation
Finance costs
Profit before income tax
Profit on sale
income tax expense (note 8)
Profit after income tax
Narama
Profit on sale
income tax expense (note 8)
Profit after income tax
Profit from discontinued operations
Net cash (outflow) inflow from operating activities
Net cash inflow from investing activities
Net cash inflow from financing activities
Net increase in cash generated by the discontinued operations
(c) details of the sale of discontinued operations
cash consideration received
carrying amount of net assets sold
Non controlling interest at date of disposal
Gain on sale before income tax
2009
$M
21.8
(16.6)
(4.7)
(0.8)
(0.3)
23.3
(0.1)
22.9
-
-
-
22.9
(13.4)
81.7
7.5
75.8
84.2
(122.7)
61.8
23.3
2008
$m
129.3
(87.4)
(16.1)
(2.1)
23.7
-
(6.4)
17.3
31.7
(1.7)
30.0
47.3
3.0
53.4
-
56.4
53.4
(21.7)
-
31.7
the sale of the shares in crl results in a capital loss for income tax purposes. No benefit has been recognised for the capital losses which are available
for use against future capital gains, subject to the satisfaction of eligibility tests at the time of their use. these losses are included in the capital losses
disclosed in note 8.
i l u k a r e s o u r c e s l i m i t e d 49
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 9. discontinued operations (continued)
(d)
sale of crl
the carrying amounts of assets and liabilities at the date of sale and 31 december 2008 were:
27 May 2009
$M
31 dec 2008
$m
cash
receivables
inventories
Property, plant and equipment
deferred tax asset
derivative financial instruments
Total assets
trade creditors
current tax liabilities
Provisions
derivative financial instruments
interest bearing liabilities
Total liabilities
Net assets
(e)
sale of Narama
the carrying amounts of assets and liabilities at the date of sale were:
receivables
inventories
Property, plant and equipment
Total assets
Provisions
Total liabilities
Net assets
Note 10. cash and cash equivalents
cash at bank and in hand
deposits at call
interest rates
cash and deposits are at floating interest rates between 0.0 per cent and 3.75 per cent
(2008: 0.0 per cent and 4.7 per cent) on us dollar and australian dollar denominated
deposits, and a weighted average interest rate of 2.87 per cent (2008: 3.65 per cent).
Note 11. receivables
trade receivables
other debtors
Prepayments
Goods and services tax (Gst)
-
6.8
40.5
128.2
-
2.7
178.2
(6.7)
(1.8)
(37.6)
-
(9.4)
(55.5)
122.7
14.5
14.0
22.7
130.5
2.7
-
184.4
(12.0)
(3.6)
(33.5)
(13.9)
-
(63.0)
121.4
15 Jan 2008
$m
3.0
1.7
26.9
31.6
(6.8)
(6.8)
24.8
consolidated
Parent entity
2009
$M
84.4
1.9
86.3
85.8
9.5
3.9
4.7
103.9
2008
$m
18.2
79.4
97.6
206.3
14.5
9.3
13.1
243.2
2009
$M
75.7
-
75.7
24.7
0.3
1.2
0.8
27.0
2008
$m
-
65.0
65.0
55.1
1.3
5.0
2.3
63.7
None of the receivables are impaired or past due and due to the short-term nature of these receivables, their carrying amount approximates fair value.
50 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 12. inventories
Current
consumable stores
- at cost
Work in progress
- at cost
Finished goods
- at cost
- at net realisable value
total current inventories
Non-current
Work in progress
- at cost*
*
represents material not scheduled to be processed to finished product during 2010.
Note 13. Property, plant and equipment
consolidated
Parent entity
2009
$M
2008
$m
2009
$M
2008
$m
30.2
35.4
44.1
100.6
95.1
36.1
131.2
205.5
104.6
9.1
113.7
249.7
9.0
7.7
1.4
10.9
12.3
29.0
9.0
45.6
8.8
9.1
17.9
72.5
56.6
-
56.6
-
land &
Buildings
$m
Plant,
machinery &
equipment
$m
mine
reserves &
development
$m
exploration &
evaluation
$m
Project
development
expenditure
$m
Consolidated
At 1 January 2008
cost
accumulated depreciation*
opening written down value*
additions
disposals
impairment reversals
depreciation/amortisation
Foreign exchange differences
transfers/reclassifications
closing written down value*
At 31 December 2008
cost
accumulated depreciation*
Net written down value
additions
disposals
Write-offs and impairment charges
depreciation/amortisation
Foreign exchange differences
transfers/reclassifications
closing written down value
At 31 December 2009
cost
accumulated depreciation*
Net written down value
88.9
(14.8)
74.1
3.2
(0.5)
6.6
(3.4)
-
(1.3)
78.7
89.1
(10.4)
78.7
9.0
(11.1)
-
0.7
(0.1)
(1.4)
75.8
85.0
(9.2)
75.8
1,539.9
(785.7)
754.2
81.5
(8.7)
47.0
(102.3)
13.4
(0.6)
784.5
1,586.8
(802.3)
784.5
59.9
(78.4)
-
(129.9)
(16.3)
4.2
624.0
1,379.6
(755.6)
624.0
774.6
(421.4)
353.2
89.7
(1.8)
(46.6)
(52.7)
2.1
14.9
358.8
783.3
(424.5)
358.8
60.4
(52.4)
(67.6)
(47.4)
(1.3)
10.8
261.3
754.7
(493.4)
261.3
26.7
-
26.7
10.0
-
(1.5)
-
-
(18.0)
17.2
17.2
-
17.2
4.7
-
-
-
-
(1.5)
20.4
20.4
-
20.4
total
$m
2,469.0
(1,221.9)
1,247.1
317.6
(11.0)
5.5
(160.1)
15.5
-
38.9
-
38.9
133.2
-
-
(1.7)
-
5.0
175.4
1,414.6
175.4
-
175.4
421.8
-
-
-
-
(12.1)
585.1
585.1
-
585.1
2,651.8
(1,237.2)
1,414.6
555.8
(141.9)
(67.6)
(176.6)
(17.7)
-
1,566.6
2,824.8
(1,258.2)
1,566.6
*includes cumulative impairment (reversals) charges (refer Note 7).
i l u k a r e s o u r c e s l i m i t e d 51
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 13. Property, plant and equipment (continued)
Parent entity
At 1 January 2008
cost
accumulated depreciation
opening written down value
additions
disposals
impairment reversal
depreciation/amortisation
transfers/reclassifications
closing written down value
At 31 December 2008
cost
accumulated depreciation
Net written down value
additions
disposals
depreciation/amortisation
transfers/reclassifications
closing written down value
At 31 December 2009
cost
accumulated depreciation
Net written down value
land &
Buildings
$m
Plant,
machinery &
equipment
$m
mine
reserves &
development
$m
41.2
(4.8)
36.4
2.3
(0.3)
6.6
(2.4)
(0.8)
41.8
46.6
(4.8)
41.8
2.4
(2.4)
(0.5)
(1.8)
39.5
44.4
(4.9)
39.5
455.5
(284.0)
171.5
24.3
(0.2)
37.5
(27.0)
(0.4)
205.7
477.7
(272.0)
205.7
2.9
(2.6)
(43.7)
1.5
163.8
460.3
(296.5)
163.8
140.1
(101.8)
38.3
20.4
(1.7)
1.5
(23.8)
1.2
35.9
161.9
(126.0)
35.9
4.5
(9.1)
(13.4)
0.3
18.2
83.5
(65.3)
18.2
total
$m
636.8
(390.6)
246.2
47.0
(2.2)
45.6
(53.2)
-
283.4
686.2
(402.8)
283.4
9.8
(14.1)
(57.6)
-
221.5
588.2
(366.7)
221.5
Mine reserves and development
included in mine reserves and development are amounts totalling $223.2 million for the consolidated entity (2008: $236.0 million) and $12.0 million for the
parent entity (2008: $7.2 million) 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 $3.9 million for the consolidated entity (2008: $17.0 million) and $2.4 million for the parent
entity (2008: $5.3 million) 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 2009 comprises $585.1 million (2008: $175.4 million) relating to murray Basin stage 2 and Jacinth-ambrosia
projects. these amounts were not depreciated as these projects were not commissioned at 31 december 2009.
impairment reversals (charges)
2008
south West impairment reversal
mid West impairment reversal
mid West ore body fair value write off
murray Basin ore body fair value write off
total
2009
mid West ore body fair value write off
murray Basin ore body fair value write off
total
land
& Buildings
$m
Plant, machinery
& equipment
$m
mine reserves
& development
$m
exploration
& evaluation
$m
6.6
-
-
-
6.6
-
-
-
37.5
9.5
-
-
47.0
-
-
-
1.5
-
(29.0)
(19.1)
(46.6)
(38.5)
(29.1)
(67.6)
-
-
(1.5)
-
(1.5)
-
-
-
total
$m
45.6
9.5
(30.5)
(19.1)
5.5
(38.5)
(29.1)
(67.6)
the impairment charge in 2009 represents the write-off of fair values for deposits from acquisitions in 1998 (mid West) and 2002 (murray Basin) that are now considered unlikely to be
mined.
52 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 14. deferred tax assets
deferred tax asset amounts recognised in profit or loss
employee benefits
rehabilitation provisions
other provisions
accruals
tax revenue losses
Foreign exchange
other
deferred tax liability amounts in profit or loss off-set in accordance with aasB 112
depreciation/amortisation
mining capital expenditure
Foreign currency exchange
receivables
inventory
other
Net amount recognised in profit or loss
deferred tax asset amounts recognised directly in equity
cash flow hedges
share issue costs
actuarial gains/losses on retirement benefit obligations
Net deferred tax assets
Movements:
Balance at 1 January
credited (charged) to the income statement (Note 8)
assumption of tax losses from tax consolidated entities
over (under) provision in prior years
credited (charged) directly to equity (Note 20)
Balance at 31 december
Note 15. intangible assets
Consolidated
At 1 January 2008
cost
accumulated amortisation
Net written down value
amortisation charge 2008
closing written down value
At 31 December 2008
cost
accumulated amortisation
Net written down value
amortisation charge 2009
closing written down value
At 31 December 2009
cost
accumulated amortisation
Net written down value
consolidated
Parent entity
2009
$M
6.8
97.9
1.1
-
50.7
-
3.8
(97.5)
(3.3)
(4.7)
(2.6)
-
(0.3)
51.9
(0.6)
2.6
(0.2)
1.8
53.7
31.0
65.6
-
1.0
(43.9)
53.7
2008
$m
10.1
102.2
2.6
2.8
11.9
0.3
1.0
(128.2)
(7.8)
-
(3.9)
(10.0)
(0.7)
(19.7)
46.1
3.1
1.5
50.7
31.0
(34.8)
20.1
-
(7.7)
53.4
31.0
Patent
$m
17.2
(10.3)
6.9
(1.3)
5.6
17.2
(11.6)
5.6
(3.2)
2.4
17.2
(14.8)
2.4
2009
$M
2.5
37.9
0.9
-
41.6
-
0.2
(32.7)
(3.0)
(9.0)
(0.1)
-
(2.5)
35.8
(0.6)
2.6
-
2.0
37.8
41.9
20.0
17.8
0.4
(42.3)
37.8
royalty
entitlement asset
$m
10.0
(1.7)
8.3
(0.4)
7.9
10.0
(2.1)
7.9
(0.4)
7.5
10.0
(2.5)
7.5
2008
$m
3.2
40.9
1.9
1.9
-
0.9
0.6
(44.9)
(4.5)
-
-
(2.8)
(0.3)
(3.1)
41.9
3.1
-
45.0
41.9
(9.0)
4.2
-
-
46.7
41.9
total
$m
27.2
(12.0)
15.2
(1.7)
13.5
27.2
(13.7)
13.5
(3.6)
9.9
27.2
(17.3)
9.9
i l u k a r e s o u r c e s l i m i t e d 53
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 16. Payables
trade payables
accrued expenses
employee benefits
Note 17. interest bearing liabilities
Current
senior Notes 2003
Non-current
syndicated term loan Facility
senior Notes 1996
senior Notes 2003
deferred borrowing costs
(a)
Financing arrangements
total facilities
senior Notes - 1996 (i)
senior Notes - 2003 (ii)
Working capital Facility (iii)
syndicated term loan Facility (iv)
used at balance date
senior Notes - 1996 (i)
senior Notes - 2003 (ii)
Working capital Facility (iii)
syndicated term loan Facility (iv)
unused at balance date
Working capital Facility (iii)
syndicated term loan Facility (iv)
consolidated
Parent entity
2009
$M
102.6
71.3
9.8
183.7
44.7
44.7
314.1
33.6
79.3
(3.3)
423.7
33.6
124.0
55.0
445.0
657.6
33.6
124.0
-
314.1
471.7
55.0
130.9
185.9
2008
$m
40.5
109.3
14.3
164.1
36.8
36.8
93.9
43.4
143.7
(4.5)
276.5
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
2009
$M
34.8
13.6
3.8
52.2
44.7
44.7
314.1
33.6
79.3
(3.3)
423.7
33.6
124.0
55.0
445.0
657.6
33.6
124.0
-
314.1
471.7
55.0
130.9
185.9
2008
$m
5.4
18.7
5.3
29.4
36.8
36.8
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
(i) Senior Notes - 1996 Series
the remaining tranche of us$30.0 million matures in december 2011 and carries a fixed interest rate of 7.6%.
(ii) Senior Notes - 2003 Series
the notes have an average fixed interest rate of 5.1% and mature in three tranches; being June 2010 us$40.0 million, June 2013
us$40.0 million and June 2015 us$20.0 million.
the translation exposure on the June 2013 us$40 million notes has been eliminated through a cross currency swap at aud/
usd 0.7025. the cross currency swap also converts the fixed usd interest payments of 5.25% to an aud variable interest rate
exposure. as at 31 december 2009, the cross currency swap bears an average variable interest rate of 5.1% (2008: 4.4%). the
swap requires settlement of interest receivable and payable on a semi-annual basis on dates which coincide with the interest
payable dates on the underlying notes.
54 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 17. interest bearing liabilities (continued)
(iii) Working Capital Facility
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 2010 and subsequent to year end has been extended to 12 march 2011 with a limit of us$40.0 million.
as part of the extension, acceptance of credit insured receivables for drawings under the facility is at the discretion of the working
capital facility provider.
(iv) Syndicated Term Loan Facility
the syndicated term loan Facility has maturity dates of march 2012 (a$100 million) and march 2013 (a$345 million). as at 31
december 2009, a$314.1 million was outstanding at an average interest rate of 4.4% (2008: $94.0 million at 3.22%)
(v)
CRL Facilities
crl had facilities of $30.5 million which were all undrawn at 31 december 2008. the facilities were drawn to $9.4 million at the
date of disposal (note 9(d))
(b)
interest rate risk exposure and maturities of interest bearing liabilities
Fixed interest rate
2009 Group and Parent
interest-bearing liabilities
interest rate swaps
(notional principal)
2008 Group and Parent
interest-bearing liabilities
interest rate swaps
(notional principal)
effective
floating average
interest rate
%
Floating
interest rate
$m
4.44
5.07
3.05
4.44
314.1
56.9
371.0
130.8
56.9
187.7
1 year
or less
$m
44.7
-
44.7
-
-
-
1 to 5
years
$m
90.5
(56.9)
33.6
158.6
(56.9)
101.7
more than
5 years
$m
22.4
-
22.4
28.5
-
28.5
total
$m
471.7
-
471.7
317.9
-
317.9
the contractual repricing dates of the floating rate interest bearing liabilities at the balance dates are as follows:
consolidated
Parent entity
less than 1 year
Between 1 and 2 years
Between 2 and 5 years
Note 18. Provisions
Current
employee benefits
rehabilitation and mine closure
other provisions
Non Current
employee benefits
rehabilitation and mine closure
retirement benefit obligations
2009
$M
371.1
-
-
371.1
7.9
17.6
2.6
28.1
3.3
314.9
4.7
322.9
2008
$m
36.8
-
150.9
187.7
16.0
40.1
5.3
61.4
2.7
309.4
10.6
322.7
2009
$M
371.1
- -
-
371.1
3.4
4.6
2.4
10.4
1.3
121.8
-
123.1
2008
$m
36.8
150.9
187.7
5.5
11.1
5.2
21.8
0.9
124.8
-
125.7
the current provision for employee benefits represents amounts for which the Group does not have an unconditional right to defer settlement. the
Group does not expect a significant amount of the provision will be paid in the next 12 months.
i l u k a r e s o u r c e s l i m i t e d 55
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 18. Provisions (continued)
(a) movements in provisions
movements in rehabilitation and mine closure and other provisions during the financial year, are set out below:
Consolidated - 2009
Balance at 1 January
change in provisions*
Foreign exchange rate movements
unused amounts reversed
disposal of subsidiary
rehabilitation and restoration accretion expense
amounts used during the year
Balance at 31 december
Parent entity - 2009
Balance at 1 January
change in provisions*
unused amounts reversed
rehabilitation and restoration accretion expense
amounts used during the year
Balance at 31 december
rehabilitation and
mine closure
$m
other
provisions
$m
349.5
15.2
(5.6)
-
(29.6)
15.7
(12.7)
332.5
135.9
(9.0)
-
5.7
(6.3)
126.3
5.3
0.7
-
(1.1)
(0.3)
-
(2.0)
2.6
5.2
0.3
(1.1)
-
(2.0)
2.4
* changes in provision for rehabilitation and mine closure form part of additions and disposals in note 13.
movement in retirement benefit obligations during the financial year is set out in note 23 (b).
Note 19. contributed equity
(a)
share capital
2009
Number of
shares
2008
Number of
shares
2009
Paid up value
$M
2008
Paid up value
$m
ordinary shares issued and paid up
418,700,517
380,700,517
1,120.0
Total contributed equity - parent entity
treasury shares
Total contributed equity - consolidated
(b) movements in ordinary share capital
(1,904,380)
(2,812,532)
(5.6)
1,120.0
1,114.4
date
details
Number of shares
issue price
1 January 2008
opening balance
22 march 2008
22 april 2008
rights issue
rights issue
transaction costs on rights issue net of tax
31 december 2008
Balance
7 may 2009
share placement
transaction costs on share placement net of tax
31 december 2009
Balance
242,237,328
101,124,750
37,338,439
380,700,517
38,000,000
418,700,517
$2.55
$2.55
$3.00
1,006.5
1,006.5
(8.4)
998.1
$m
662.6
257.9
95.2
(9.2)
1,006.5
114.0
(0.5)
1,120.0
56 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 19. contributed equity (continued)
(c)
treasury shares
treasury shares are shares in iluka resources limited held by iluka administration limited for the purpose of issuing shares under the
directors, executives and employees share acquisition Plan (see Note 30 for further information).
details
Balance at 1 January 2008
transfer from share based payments reserve
acquisition of shares net of tax
employee share issues
Balance at 31 december 2008
employee share issues
Balance at 31 december 2009
(d) dividend reinvestment plan
Number of shares
-
286,572
3,495,483
(969,523)
2,812,532
(908,152)
1,904,380
$m
-
1.0
10.7
(3.3)
8.4
(2.8)
5.6
the company has a dividend reinvestment plan (drP). under the plan, the directors can invite eligible holders of ordinary shares to
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.
(e) capital risk management
the group and 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 and 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 has the same covenants. Net debt and gearing for the
parent entity are therefore not considered applicable 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 57
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 20. reserves and retained profits
(a) reserves
asset revaluation reserve
Hedging reserve
Foreign currency translation reserve
share-based payments reserve
Movements:
asset revaluation reserve
Balance at 1 January
transfer to retained earnings on disposal
deferred tax
Balance at 31 december
Hedging reserve
Balance 1 January
revaluation
transfer to profit or loss
deferred tax
Balance at 31 december
Foreign currency translation reserve
Balance at 1 January
translation differences of us operation
Hedge of net investment in us operation
deferred tax
Balance at 31 december
share based payments reserve
Balance at 1 January
transfer of shares to employees
share based payments
deferred tax
Balance at 31 december
(b) retained profits
movements in retained profits were as follows:
Balance at 1 January
Net (loss) profit for the year
actuarial gains / (losses) on retirement benefit obligation, net of tax
transfer from asset revaluation reserve
Balance 31 december
(c) Nature and purpose of reserves
(i) Asset revaluation reserve
consolidated
Parent entity
2009
$M
2008
$m
2009
$M
2008
$m
16.3
1.5
(2.3)
4.4
19.9
17.5
(1.7)
0.5
16.3
(102.6)
105.9
(42.9)
(44.7)
17.5
(102.6)
(3.1)
3.9
(84.3)
17.6
(0.1)
-
17.5
4.1
(191.7)
39.3
45.7
1.5
(102.6)
(3.1)
(27.1)
23.6
(4.3)
(2.3)
3.9
(3.9)
6.2
(1.8)
4.4
66.0
(108.6)
2.4
1.2
(39.0)
1.7
18.9
(25.7)
2.0
(3.1)
1.7
(1.0)
4.6
(1.4)
3.9
(3.1)
77.5
(8.5)
0.1
66.0
15.2
1.5
-
4.4
21.1
18.5
(4.7)
1.4
15.2
(97.8)
129.6
12.3
(42.6)
1.5
-
-
-
-
-
4.7
(4.7)
6.2
(1.8)
4.4
54.1
(16.0)
-
3.3
41.4
18.5
(97.8)
-
4.7
(74.6)
18.6
(0.1)
-
18.5
1.9
(148.1)
5.7
42.7
(97.8)
-
-
-
-
-
0.5
-
4.6
(0.4)
4.7
72.5
(18.4)
-
-
54.1
the asset revaluation reserve records revaluations of non-current assets prior to the adoption of aiFrs. 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.
58 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 20. reserves and retained profits (continued)
(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(m). amounts are recognised in profit and loss when the associated hedged transaction
affects profit and loss.
(iii) 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(l). us$80.0 million of debt (2008: us$65.0 million) is designated as a hedge of the net investment in the us operations.
the reserve is recognised in profit and loss when the net investment is disposed of.
(iv) 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.
Note 21. key management personnel
(a)
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) Managing Director and Chief Executive Officer
d a robb
(ii) Non-executive Directors
r l every
d m morley
G J Pizzey
G J rezos
J a seabrook
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 2008, except J a seabrook who was appointed as a director on 1 may 2008. G c campbell, V a davies and i c mackenzie
were directors in the prior year and retired on 21 may 2008.
(b)
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 2009 and are referred to as executives:
P Beilby1
P Benjamin
c cobb2
V Hugo3
a tate
H umlauff
s Wickham
c Wilson
General manager murray Basin
General manager exploration
General manager sales and marketing
General manager Project and technical development
chief Financial officer
General manager sa development and Project management
General manager eastern and Western operations
General manager corporate services and company secretary
1
2
3
ceased employment on 1 march 2010.
appointed 12 october 2009, formerly managing director of consolidated rutile limited.
Formerly General manager sales and marketing, appointed to current role 12 october 2009.
i l u k a r e s o u r c e s l i m i t e d 59
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 21. key management personnel (continued)
the above persons were also executives during the prior year ended 31 december 2008, except a tate, appointed as executive 13 may
2008 and s Wickham, appointed as an executive 1 september 2008.
s Green, acting chief Financial officer, between 18 January 2008 and 12 may 2008 and d mcmahon, chief Financial officer to 17 January
2008 were executives in the prior year.
key management Personnel compensation (consolidated and Parent entity)
short-term Benefits
$
Post employment Benefits
$
share Based Payments
$
termination Benefits
$
total
$
2009
Non-executive directors
executive director
executives
total
2008
Non-executive directors
executive director
executives
total
782,500
1,743,410
3,458,297
5,984,207
846,974
2,251,479
4,404,628
7,503,081
59,778
68,922
240,013
368,713
69,472
97,207
264,292
430,971
-
1,383,517
2,946,268
4,329,785
-
713,310
1,349,523
2,062,833
-
-
-
-
-
-
-
-
842,278
3,195,849
6,644,578
10,682,705
916,446
3,061,996
6,018,443
9,996,885
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 6 to 17 of the remuneration report.
share rights and shareholdings of key management Personnel
the numbers of shares in the company and share rights for ordinary shares in the company are set out below for each key management personnel,
including their personally related entities. No shares were granted as compensation during the reporting period.
Number of shares
Number of share rights
Balance
held at
January 2009*
Vesting of
share rights
awarded as
restricted
shares
Balance held at
31 december
2009*
other
changes
Balance
held at 1
January 2009
Granted
during
2009
Name
Balance
held at
Vested as
lapsed
shares during during 31 december
2009
2009
2009
Non-Executive Directors
r every
d morley
G Pizzey
G rezos
J seabrook
Executive Director
d robb
Executives
P Beilby
P Benjamin
c cobb
V Hugo
a tate
H umlauff
s Wickham
c Wilson
28,679
40,876
16,351
63,602
17,612
405,798
86,203
67,542
-
-
-
-
-
-
-
6,858
5,378
-
77,077
8,786
-
54,525
16,425
43,741
-
2,724
-
9,286
-
-
-
-
-
-
-
-
-
1,702
28,679
40,876
16,351
63,602
19,314
-
-
-
-
-
-
-
-
-
-
591,171
1,175,586
102,041
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(52,970) 1,224,657
185,373
33,514
36,182
-
35,341
41,988
50,809
23,415
42,935
-
-
-
-
-
-
-
-
(14,913)
126,575
109,102
-
121,204
41,988
108,058
39,840
81,049
134,992
28,571
(6,858)
(14,735)
141,970
167,340
30,544
(5,378)
(17,335)
175,171
-
-
-
-
-
116,337
27,823
(8,786)
(17,480)
117,894
140,828
33,605
-
-
174,433
135,575
39,252
(2,724)
(25,666)
146,437
74,565
29,728
-
(12,039)
92,254
174,279
30,544
(9,286)
(17,335)
178,202
* Balances for the executive director and the executives include restricted shares which will vest in future periods subject to legislative requirements.
60 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 21. key management personnel (continued)
(c)
transactions with key management Personnel
No loans existed at the commencement of the year and no loans were made during the year ended 31 december 2009.
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 $745,000 were provided under normal commercial terms and
conditions. services in the prior year of $1,659,000 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.
there were no other transactions that were required to be disclosed 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.
therefore, specific details of other transactions with key management Personnel are not disclosed.
Note 22. 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
other assurance services
Pwc australia
total remuneration for assurance services
(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
other Pwc firms
total remuneration for other services
consolidated
Parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
562
52
614
65
679
67
-
67
50
34
84
772
73
845
445
1,290
87
12
99
57
-
57
562
-
562
65
627
57
-
57
49
-
49
625
-
625
445
1,070
87
-
87
57
-
57
i l u k a r e s o u r c e s l i m i t e d 61
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 23. retirement benefit obligations
(a)
superannuation plans
Australia
all employees of the consolidated entity who do not elect an alternate fund under the superannuation Fund choice legislation are
entitled to benefits on leaving service, retirement, disability or death from the iluka section of the iNG master trust (“master trust”)
a sub plan of the iNG masterfund. Within the iluka Plan, the vast majority of members are entitled to accumulation (ie defined
contribution) benefits only. the plan also provides defined lump sum and pension benefits based on years of service and final average
salary for a small number of members. the accumulation 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.
consolidated
(b) Balance sheets amounts
defined benefit plan obligation - present value
defined benefit fund plan assets - fair value
deficiency of plan assets or obligations
unrecognised past service costs
Net liability in the balance sheet
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
exchange rate changes
Benefits paid
Balance at 31 december
Fair value of plan assets:
Balance at 1 January
expected return on plan assets
actuarial gains and losses
exchange rate changes
contributions by group companies
contributions by plan participants
Benefits paid
Balance at 31 december
the major categories of plan assets are as follows:
cash
equity instruments
debt instruments
Property
other assets
total
2009
$M
19.7
(15.0)
4.7
-
4.7
27.6
0.7
1.2
0.1
(1.3)
(4.0)
(4.6)
19.7
16.2
0.8
1.7
(2.4)
3.2
0.1
(4.6)
15.0
0.5
8.7
4.4
0.6
0.8
15.0
2008
$m
27.6
(16.2)
11.4
(0.8)
10.6
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
0.8
9.4
4.5
0.4
1.1
16.2
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.
62 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 23. retirement benefit obligations (continued)
(c)
amounts recognised in income statements
current service cost
interest cost
expected return on plan assets
Past service cost
total included in employee benefits expense
actual return on plan assets
(d)
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
2009
$M
0.8
1.2
(0.9)
0.8
1.9
3.0
2008
$m
0.7
1.2
(1.3)
0.8
1.4
(4.8)
consolidated
2009
%
2008
%
5.7
5.0
3.5
1.5
6.0
7.5
3.5
3.0
3.5
5.0
3.5
2.0
6.0
5.0
3.5
3.0
the expected rate of return on plan 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.
(e)
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,
the actuary recommended payment of employer contributions ranging between 12.5 per cent and 12.9 per cent (2008: 8.7 per cent to
24.6 per cent) of salaries, dependent on the defined benefit category of membership. Because of the Plan’s deficiency, arising from
substantially negative investment returns (the defined benefit obligation exceeded Plan assets by $4.2 million at 31 december 2008),
the actuary also recommended a programme of additional contributions designed to restore the Plan’s financial position to surplus. in
accordance with actuarial recommendations, the employer has contributed an additional $2.4 million (2008: nil) to the defined benefit
section of the Plan during 2009.
an actuarial valuation of the Plan as at 30 June 2009 is currently underway. the actuary has indicated that further additional
contributions may be required during 2010.
i l u k a r e s o u r c e s l i m i t e d 63
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 23. retirement benefit obligations (continued)
USA
employer contributions to the plans 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). 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 plan’s future experience the
actuary recommended in the actuarial review, the payment of us$0.7 million (2008: us$1.1 million) for the salaried defined benefit plan
and us$0.1 million (2008: us$0.3 million) for the hourly defined benefit plan.
total employer contributions expected to be paid by the consolidated entity for the year ending 31 december 2010 are us$0.6 million.
(f)
Net financial position of plans
in accordance with aas 25 Financial reporting by superannuation Funds the plans’ 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 determined from information supplied by the master trust at 31 december 2009 was a surplus of
$0.6 million (2008: deficit $4.1 million).
USA
the net financial position of the us plans has been determined as at the date of the most recent financial report of the superannuation
fund (31 december 2009) and in accordance with ias 19 employee entitlements, and a deficit of $5.2 million as at 31 december 2009
(2008: deficit $6.5 million) was reported.
(g) Historic summary
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
experience adjustments arising on plan liabilities
experience adjustments arising on plan assets
2009
$M
19.7
(15.0)
2008
$m
27.6
(16.2)
2007
$m
20.4
(17.9)
2006
$m
21.5
(17.4)
4.7
11.4
2.5
4.1
-
-
-
-
-
-
-
-
Note 24. contingent liabilities
Performance commitments and guarantees (a)
consolidated
Parent entity
2009
$M
84.6
2008
$m
109.5
2009
$M
31.1
2005
$m
21.2
(15.4)
5.8
(0.3)
0.3
2008
$m
29.5
(a)
the consolidated entity has negotiated a number of bank guarantees in favour of various government authorities and service providers
to meet its obligations under exploration and mining tenements.
(b) there is some risk that native title, as established by the High court of australia’s decision in the mabo case, exists over some of the
land over which the consolidated entity holds tenements or over land required for access purposes. it is impossible at this stage to
quantify the impact (if any) which these developments may have on the operations of the consolidated entity.
(c)
in the course of its normal business, the consolidated entity occasionally receives claims arising from its operating activities. in the
opinion of the directors, all such matters are covered by insurance, or, if not covered, are without merit or are of such a kind or involve
such amounts that would not have a material adverse effect on the operating results or financial position of the consolidated entity if
settled unfavourably.
64 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 25. commitments
(a)
capital commitments
consolidated
Parent entity
2009
$M
2008
$m
2009
$M
2008
$m
amounts contracted for and payable within 1 year
25.3
142.9
2.2
1.7
includes amounts in relation to the murray Basin stage 2 development of $1.7 million (2008: $56.7 million), and Jacinth ambrosia development of $10.0 million (2008: $64.6
million).
(b) exploration and mining lease commitments
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
24.9
36.7
56.6
118.2
19.9
43.6
51.4
114.9
11.3
13.4
11.2
35.9
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 for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
later than one year but not later than five years
later than five years
(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
10.5
28.9
8.8
48.2
77.4
134.9
41.7
254.0
14.1
33.8
13.1
61.0
56.9
107.5
41.8
206.2
4.5
10.4
1.1
16.0
32.2
106.8
26.7
165.7
10.8
19.7
11.0
41.5
3.8
11.0
1.5
16.3
36.5
86.3
40.0
162.8
the commitments include $189.3 million (2008: $163.2 million) in respect of the consolidated entity and $165.7 million (2008: $162.8 million) in respect of the parent entity for
term contracts for coal, gas, electricity and water used in the production process.
Note 26. related party transactions
(a) directors and specified executives
disclosures relating to directors and key management Personnel are set out in Note 21.
(b)
controlled entities and controlling entities
details of material controlled entities are set out in Note 27. 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 crl prior to it’s disposal on 27 may 2009 was based on commercial rates
and amounted to $409,000 (2008: $982,000).
amounts due from crl at 31 december 2008 of $4,237,000 plus amounts due from management fees in 2009 were repaid prior to the
sale of crl.
i l u k a r e s o u r c e s l i m i t e d 65
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 26. related party transactions (continued)
(c) Wholly owned group
transactions between iluka resources limited and it’s wholly owned controlled entities (together with “wholly owned group”) during
the years ended 31 december 2009 and 31 december 2008 consisted of:
(i)
(ii)
(iii)
(iv)
loans advanced by iluka resources limited;
loans repaid to iluka resources limited;
the payment of interest on the above loans; and
recharge of external interest on borrowings attributable to the construction of qualifying assets.
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 2009 or 2008. the average
lending rate for the year for loans advanced by the parent entity was 4.81 per cent (2008: 5.0 per cent). there are no fixed terms for
the repayment of principal on loans.
amounts included in the income statement and Balance sheet are:
interest revenue
aggregate amounts receivable from/payable to entities in the wholly owned group at balance date:
Non current receivables (loans)
Non current payables (loans)
external interest recharged to controlled entities
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.
(d)
transactions and balances with related parties
current tax payable assumed from wholly-owned entities
tax losses assumed from wholly-owned entities
sales of finished goods to subsidiary
current receivable (tax funding arrangement)
Wholly-owned tax consolidated entities
current payables (tax funding agreement)
Wholly-owned tax consolidated entities
Parent entity
2009
$’000
19,000
930,432
(406,540)
12,518
2008
$’000
15,025
237,179
-
3,990
22,732
40,504
11,376
27,123
16,009
9,962
22,732
27,123
40,504
16,009
Note 27. controlled entities and deed of cross guarantee
the following companies are all incorporated in australia and are parties to a deed of cross Guarantee under which each company guarantees
the debts of the others: iluka resources limited, Westlime (Wa) limited, ilmenite Pty limited, southwest Properties Pty limited, Western
mineral sands Pty limited and yoganup Pty limited, 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.
By entering into the deed, the wholly-owned entities represent a closed group and 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”). 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.
in addition to the members of the extended closed group, the iluka Group also includes the following australian companies: consolidated
rutile limited (sold 27 may 2009, iluka interest prior to sale 51.04%) and aston coal interests Pty ltd (iluka interest 93.4%). the group’s
activities in the united states are undertaken by iluka resources inc which is 100% owned.
66 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 27. controlled entities and deed of cross guarantee
condensed statement of comprehensive income of extended closed Group
revenue from ordinary activities
other expenses from ordinary activities
Finance costs
impairment charges
income tax benefit (expense)
(Loss) profit for the year
Other comprehensive income
changes in fair value of foreign exchange cash flow hedges, net of tax
actuarial gains (losses) on defined benefit plans, net of tax
Total other comprehensive income
Total comprehensive income 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
(loss) profit for the year
Retained (losses) profits at the end of the financial year
condensed balance sheet of extended closed Group
Current assets
cash and cash equivalents
receivables
inventories
derivative financial instruments
deferred overburden
total current assets
Non current assets
receivables
inventories
other financial assets
Property, plant and equipment
deferred tax assets
intangible assets
total non current assets
Total assets
Current liabilities
Payables
interest bearing liabilities
current tax liabilities
Provisions
derivative financial instruments
total current liabilities
Non current liabilities
interest bearing liabilities
Provisions
derivative financial instruments
total non current liabilities
Total liabilities
Net assets
Equity
contributed equity
reserves
retained profits
Total equity
consolidated
2009
$M
522.3
(657.5)
(23.3)
(67.6)
76.4
(149.7)
99.3
(2.0)
97.3
(52.4)
139.9
-
(149.7)
(9.8)
75.7
90.7
171.2
15.9 -
-
353.5
80.7
56.6 -
42.6
1,517.3
36.4
9.9
1,743.5
2,097.0
174.1
44.7
-
20.1
-
238.9
423.7
307.6
-
731.3
970.2
2008
$m
897.5
(795.4)
(38.6)
5.5
(1.8)
67.2
(99.7)
3.5
(96.2)
(29.0)
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
5.7
13.5
1,476.9
1,970.1
138.4
36.8
1.1
37.7
93.0
307.0
276.5
276.0
46.7
599.2
906.2
1,126.8
1,063.9
1,114.4
22.2
(9.8)
998.1
(74.1)
139.9
1,126.8
1,063.9
i l u k a r e s o u r c e s l i m i t e d 67
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 28. reconciliation of profit after income tax to net
cash inflow from operating activities
(loss) profit for the year
depreciation and amortisation
exploration capitalised
interest capitalised
external interest recharged to controlled entities
Net gain on disposal of property, plant and equipment
Net gain on disposal of crl/Narama
Net exchange differences on borrowings
rehabilitation and restoration accretion expense
Non cash share based payments expense
intercompany interest
amortisation of deferred borrowing costs
other
impairment charges (reversals)
change in operating assets and liabilities
decrease (increase) in receivables
decrease (increase) in inventories
decrease (increase) in current tax assets
decrease (increase) in deferred tax assets
decrease (increase) in other assets
increase (decrease) in payables
increase (decrease) in current tax liabilities
increase (decrease) in provisions
Net cash inflow from operating activities
Note 29. earnings per share
(a) Basic and diluted earnings per share
(loss) profit from continuing operations attributable to owners
Profit from discontinued operation
(loss) profit attributable to owners
reconciliations of earnings used in calculating earnings per share
(loss) profit for the year from continuing operations
Net (loss) profit attributable to non-controlling interests
(loss) profit from continuing operations attributable to owners
Profit from discontinued operation
(loss) profit attributable to owners used in calculating basic earnings per share
consolidated
Parent entity
2009
$M
(108.8)
176.6
(3.3)
(12.5)
-
(6.8)
(22.9)
(17.5)
15.7
6.2
-
1.1
(0.6)
67.6
121.7
(59.5)
-
(68.5)
7.4
43.5
(5.9)
(31.3)
102.2
2008
$m
85.0
161.7
(4.0)
(4.0)
-
(2.3)
(30.0)
11.2
15.9
4.6
-
0.8
-
(5.5)
(51.1)
74.2
12.7
(12.3)
3.4
(3.6)
(3.3)
(20.4)
233.0
2009
$M
(16.0)
57.6
-
-
(12.5)
(5.4)
-
(40.9)
5.7
6.2
(18.9)
1.1
(0.6)
-
36.8
(13.1)
-
(42.9)
-
14.7
(1.1)
(12.0)
(41.3)
2008
$m
(18.4)
53.1
-
-
(4.0)
-
-
29.4
8.5
3.7
(15.0)
0.8
0.5
(45.6)
(19.0)
(1.8)
13.3
(8.2)
7.1
(4.3)
1.1
17.3
18.5
consolidated
2009
Cents
2008
cents
(32.5)
5.7
(26.8)
(131.7)
0.2
(131.5)
22.9
(108.6)
13.8
8.6
22.4
37.7
(7.5)
30.2
47.3
77.5
Weighted average number of shares used in calculating basic and diluted earnings per share
405,582,708
345,621,183
68 a N Nu a l r ePo r t 2 0 0 9
Notes to tHe FiNaNcial statemeNts
FOR THE YEAR ENDED 31 DECEMBER 2009
Note 30. share-based payments
the share Based Payment expense in the profit and loss account of $6,245,000 (2008: $4,620,000) results from several schemes summarised below. Further
information on each scheme is contained in the remuneration report on pages 9 to 12.
Schemes
2008 stiP (i)
2007 stiP (i)
2009 ltiP (ii)
2008 ltiP (ii)
2007 ltiP (ii)
retention share rights (i) (iv)
md retention share rights (ii) (iii)
md share rights (iii)
employee share scheme
2006 PiP and prior plans (i) (v)
Total share based payments
Grant
date
Vesting
date
Fair
value
share rights
at 31 dec 09
expense
2009
$m
share
rights at
31 dec 08
expense
2008
$m
Jan-09
Jan-11 Jan-12
Jan-08
Jan-09 Jan-10
Jan-09
Jan-08
Jan-07
mar-08
oct-06
oct-06
oct-08
various
Jan-12
Jan-11
Jan-10
mar-11
Feb-11
Jul-08
oct-08
various
4.66
4.09
4.06
2.93
4.32
4.09
1.00
7.08
3.67
856,314
296,435
734,743
767,633
318,878
1,060,000
1,000,000
-
-
41,763
2.7
0.5
0.9
0.8
(0.5)
1.4
0.3
-
-
0.1
6.2
-
490,143
-
882,678
380,369
1,140,000
1,000,000
80,762
195,024
67,869
-
1.0
-
0.7
0.8
1.0
0.1
0.2
0.7
0.1
4.6
(i)
(ii)
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.
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.
(iii)
information on the managing director’s share rights and retention share rights is disclosed in the remuneration report on page 14.
(iv)
(v)
the iluka retention Plan share rights were offered on various dates with the majority offered in march 2008 at $4.09 per share. the fair
value per share disclosed in the table is the weighted average value for all outstanding rights.
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.
i l u k a r e s o u r c e s l i m i t e d 69
DIRECTORS’ DEClARATION
31 DECEMBER 2009
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 2009 and of their
performance for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
(c)
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed Group identified
in Note 27 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 27.
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 2010
70 a N Nu a l r ePo r t 2 0 0 9
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ILUKA RESOURCES LIMITED
re p o r t o n t h e f i n a n c i a l r e 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 2009, and the income statement, the statement of comprehensive income, statement of changes in equity and the statement of cash
flows 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 the financial statements comply 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.
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 2009 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 consolidated financial statements and notes also comply with international Financial reporting standards as disclosed in Note 1.
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 71
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 6 to 17 of the directors’ report for the year ended 31 december 2009. 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 year ended 31 december 2009, complies with section 300a of the
corporations act 2001.
Pricewaterhousecoopers
david smith
Partner
Perth
31 march 2010
72 a N Nu a l r ePo r t 2 0 0 9
ORE RESERvES AND MINERAl RESOURCES
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 relating to mineral resources and ore reserves
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 (“roPos”) 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 resource limited.
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 2009. 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 (that is, 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.
i l u k a r e s o u r c e s l i m i t e d 73
i l u k a o r e r e s e r V e B r e a k d o W N B y c o u N t r y, r e G i o N a N d J o r c c at e G o r y at
3 1 d e c e mBe r 2 0 0 9
summary of ore reserves(1,2,3) for iluka
country
region
australia
crl North stradbroke island
crl North stradbroke island
total
crl North stradbroke island(5)
eucla Basin
eucla Basin
total
eucla Basin
murray Basin
murray Basin
total
murray Basin(6)
Perth Basin
Perth Basin
Perth Basin(7,8)
Virginia
Virginia
Virginia(9)
Proved
Probable
Grand total
total
usa
total
total
total
Notes:
ore
reserve
category
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
(1) competent Persons - ore reserves
eucla Basin: a Whatham (mausimm)
Perth Basin and murray Basin: c lee (mausimm)
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
Hm assemblage(4)
ore
tonnes
millions
in situ Hm
tonnes
millions
Hm
Grade
(%)
ilmenite
Grade
(%)
Zircon
Grade
(%)
change
rutile
Grade Hm tonnes
(%)
millions
-
-
-
93.2
4.5
97.7
21.7
15.0
36.7
12.4
149.4
161.8
19.2
1.1
20.3
146.4
170.1
316.5
-
-
-
6.25
0.12
6.37
5.11
2.94
8.05
1.18
10.91
12.09
1.52
0.06
1.58
14.07
14.02
28.09
-
-
-
6.7
2.5
6.5
23.6
19.5
21.9
9.5
7.3
7.5
7.9
5.2
7.8
9.6
8.2
8.9
-
-
-
29
20
28
52
51
51
62
63
63
72
64
72
44
60
52
-
-
-
50
53
50
10
13
12
13
11
11
15
20
16
29
12
20
-
-
-
5
5
5
16
14
15
2
5
4
-
-
-
8
7
7
(3.20)
(0.05)
(0.66)
(0.73)
(0.43)
(5.07)
(5) sale of crl to unimin resources resulted in removal of crl ore reserves from the iluka inventory
(6) ilmenite currently has had no value ascribed in the reserve optimisation process for the murray Basin
metallurgical testwork and marketing studies are presently underway; the outcomes of which may see a revision of the ore reserves
(7) rutile component in Perth Basin south West operations is sold as a leucoxene product
(8) Western australia mid West and south West regions were reported separately in 2008 and have been consolidated into Perth Basin for 2009 reporting
(9) rutile is included in ilmenite for the Virginia region
74 a N Nu a l r ePo r t 2 0 0 9
i l u k a o r e r e s e r V e s m i N e d a N d a d J u s t e d B y c o u N t r y a N d r e G i o N at
3 1 d e c e mBe r 2 0 0 9
summary of ore reserve depletion(1)
country
region
category
australia
crl stradbroke island(4)
crl stradbroke island
active mines
Non-active sites
total
crl stradbroke island
active mines
Non-active sites
active mines
Non-active sites
active mines
Non-active sites
active mines
Non-active sites
total
eucla Basin
eucla Basin
eucla Basin
murray Basin
murray Basin
total
murray Basin
Perth Basin
Perth Basin
Perth Basin(5)
Virginia
Virginia
Virginia
active mines
Non-active sites
ore reserves
total
usa
total
total
total
total
Notes:
in situ Hm
tonnes
millions
2008
in situ Hm
tonnes
millions
mined 2009
in situ Hm
tonnes(2)
millions
adjusted 2009
in situ Hm
tonnes
millions
2009
in situ Hm
tonnes(3)
millions
Net change
3.20
-
3.20
4.97
1.45
6.42
3.34
5.38
8.71
1.32
11.50
12.82
2.01
-
2.01
14.83
18.33
33.15
-
-
-
(0.05)
-
(0.05)
(0.82)
-
(0.82)
(1.25)
-
(1.25)
(0.25)
-
(0.25)
(2.37)
-
(2.37)
(3.20)
-
(3.20)
-
-
-
0.19
(0.03)
0.16
0.74
(0.22)
0.52
(0.18)
-
(0.18)
(2.44)
(0.25)
(2.69)
-
-
-
4.91
1.45
6.37
2.70
5.35
8.05
0.81
11.28
12.09
1.58
-
1.58
10.01
18.08
28.09
(3.20)
-
(3.20)
(0.05)
-
(0.05)
(0.63)
(0.03)
(0.66)
(0.51)
(0.22)
(0.73)
(0.43)
-
(0.43)
(4.81)
(0.25)
(5.07)
(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) Write-down of crl ore reserves from sale to unimin during the 2009 reporting year
(5) Western australia mid West and south West regions were reported separately in 2008 and have been consolidated into Perth Basin for 2009 reporting
i l u k a r e s o u r c e s l i m i t e d 75
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 oW N By co uNt r y, reGi oN aNd Jo r c cat eGo r y
at 3 1 de c e mBe r 2 0 0 9
summary of mineral resources(1,2,3) for iluka
Hm assemblage(4)
material
tonnes
millions
in situ Hm
tonnes
millions
Hm
Grade
(%)
ilmenite
Grade
(%)
Zircon
Grade
(%)
change
rutile
Grade Hm tonnes
(%)
millions
-
-
-
-
186.3
53.1
14.3
253.6
42.5
94.3
128.4
265.2
506.4
266.8
195.5
968.7
23.8
-
-
23.8
-
-
-
-
8.52
1.23
0.30
10.05
7.58
12.16
23.18
42.92
31.78
15.10
8.99
55.88
1.77
-
-
1.77
758.9
414.2
338.2
1,511.3
49.66
28.50
32.46
110.62
-
-
-
-
4.6
2.3
2.1
4.0
17.8
12.9
18.0
16.2
6.3
5.7
4.6
5.8
7.4
-
-
7.4
6.5
6.9
9.6
7.3
-
-
-
-
29
12
18
27
51
47
55
52
60
52
50
56
71
-
-
71
54
49
54
52
-
-
-
-
49
62
53
51
11
10
11
10
11
10
8
10
16
-
-
16
17
12
10
14
-
-
-
-
(5.29)
5
5
5
5
(0.35)
15
13
14
14
(4.90)
5
5
6
5
(19.19)
-
-
-
-
6
8
12
8
(0.73)
(30.46)
mineral
resource
category
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
measured
indicated
inferred
country
region
australia
crl North stradbroke island
crl North stradbroke island
crl North stradbroke island
total
crl North stradbroke island(5)
eucla Basin
eucla Basin
eucla Basin
total
eucla Basin
murray Basin
murray Basin
murray Basin
total
murray Basin
Perth Basin
Perth Basin
Perth Basin
Perth Basin(6,7,8)
Virginia
Virginia
Virginia
Virginia(9)
measured
indicated
inferred
Grand total
total
usa
total
total
total
total
Notes:
(1) competent Persons - mineral resources
eucla Basin: i Warland (mausimm)
Perth Basin: B Gibson (maiG), r stockwell (maiG)
murray Basin: V o’Brien (mausimm)
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) sale of crl to unimin resources resulted in removal of crl mineral resources from the iluka inventory
(6) divestment and write-down of resources in the Perth Basin due to rationalisation of operations
(7) rutile component in Perth Basin south West operations is sold as a leucoxene product
(8) Western australia mid West and south West regions were reported separately in 2008 and have been consolidated into Perth Basin for 2009 reporting
(9) rutile is included in ilmenite for the Virginia region
76 a N Nu a l r ePo r t 2 0 0 9
SUSTAINABlE DEvElOPMENT
iluka is committed to operating in a sustainable matter. the
company believes that targeting high levels of performance and
pursuing best practice in the areas of environment, health and
safety reflects iluka’s values of: commitment, integrity and
responsibility.
during 2009, external audits of iluka’s environmental Health and
safety management system were conducted at the: south West
and mid West, Western australian mining operations; Hamilton
processing operations and kulwin mine site in the murray Basin
(Victoria); usa operations; and for the exploration function. the
average compliance score was 87 per cent, in line with the 2008
compliance score of 86 per cent.
the company’s Group major risk Procedures were also audited at
all sites during the year. the average compliance score was 91 per
cent, an improvement on the 2008 compliance score of 87 per cent.
H e a ltH aNd saFe t y
lluka’s all injury frequency rate (“aiFr”) for 2009 was 27.9,
representing a 10.3 per cent increase from 25.3 in 2008. the
aiFr target for 2009 was 22.9. iluka’s severity rate (“sr”) was
58.7 and represents a 32.8 per cent reduction from 87.3 in 2008.
the sr target for 2009 was 81.2. the lost time injury frequency
rate (“ltiFr”) in 2009 was 3.0, an increase of 7 per cent from
2.8 in 2008. there was no change in the total number of lost time
injuries incurred from 2008 and this remained at 15 in 2009. the
ltiFr in the first half of the year was disappointing and a renewed
effort was put into safety measures and culture in all regions in
the second half of the year. this resulted in the ltiFr reducing by
46 per cent from 3.7 in the first half to 2.0 in the second half. the
medically treated injury frequency rate (“mtiFr”) reduced in 2009
to 7.6, down 2.5 per cent compared to the 2008.
iluka’s health and safety management focus during the year
recognised the fact that the company was executing two major
new projects, while undertaking a significant restructuring of
its existing operational base. as indicated previously, the ltiFr
increased relative to 2008, notwithstanding that many reported
occurrences were minor soft tissue injuries. a refocussed effort by
the company’s regional operational management, including shared
assessments of risks and means to improve performance, has
been implemented to address the decline in safety performance.
the Jacinth-ambrosia project (south australia) was successfully
delivered without a lost time injury. integral to this achievement
was appointing contractors with health and safety values aligned
with iluka’s values and conducting team risk workshops prior to
mobilisation onto site.
during 2009, iluka started to measure the frequency rate of safety
inputs; made up of workplace inspections, hazards identified and
recorded safety interactions. this rate increased by 78 per cent
during the year. this input based indicator was used in conjunction
with the lag indicators to closely monitor areas with adverse
performance trends.
to ensure all employees are fit and fully capable of executing
their work responsibilities, iluka maintains a “fitness for work
programme” to reduce risks associated with employees and
contractors who cannot fulfil their work responsibilities to the
highest physical standards due to impairment by alcohol and/or
drugs. during 2009, 8,000 drug and alcohol tests were completed
with a compliance rate of 98.9 per cent, which was similar to the
2008 level.
Health and safety highlights for the year included:
•
•
•
•
the south West, Western australian operations achieved
one year without a lost time injury (“lti”);
the Jacinth-ambrosia project was completed lti free;
the murray Basin operations completed significant mine
moves injury free; and
the murray Basin douglas mine site risk assessments
have been selected by the Victorian mines inspectorate as
exemplars for the mining industry in Victoria.
e N Vi r oNm eNt
iluka is committed to operating in a responsible manner to
minimise the impact of mining and processing operations on the
environment and facilitate the rehabilitation of areas mined. a
feature of iluka’s mineral sands mining activities is that land
disturbed is typically returned to a rehabilitated state which
is similar to its original usage, whether farming land or native
vegetation.
all environmental incidents recorded at sites are classified
according to the severity of their impact1. in 2009, a consultative
process was undertaken to standardise the classification of
environmental incidents across the company. a comprehensive
list of examples that better define each level of environmental
incident was developed and introduced in January 2009. this
standardisation resulted in an increased focus on the improved
classification of incidents and as a result, 92 fewer level 1
incidents and 89 more level 2 incidents were recorded.
three level 3 incidents were recorded in 2009, up from zero in
2008, reflecting:
•
•
two incidents at the murray Basin relating to the failure of a
slurry pumping system which resulted in an overflow of site
water over its retaining structure; and
an incident at the mid West, Western australian operations
which related to a failed iron oxide tailings liner which led
to the release of iron oxide, later contained and recovered.
For the seventh consecutive year, no level 4 or 5 incidents were
recorded.
in accordance with iluka’s environmental management plans, 11
environmental incidents were reported directly to Government
regulators during 2009, a 59 per cent reduction compared to 27
environmental incidents reported in 2008.
Note: Health, safety and environmental statistical data for 2009 includes data from
consolidated rutile limited’s (“crl”) operations until its divestment by the company
on 27 may 2009. Previous years include crl data on a 100 per cent basis.
1 level 1 - 5 rating system; level 5 referring to the most serious environmental impact.
i l u k a r e s o u r c e s l i m i t e d 77
the main environmental issues identified at iluka’s operations
continued to include carbon dioxide and other gas emissions,
energy management, water management, dust control, noise
emissions, and rehabilitation and biodiversity. operational
management plans are implemented at each site to address these
areas.
c a r B o N d i o X i d e e m i s s i o N s & e N e r G y
e F Fi c i eNc y
iluka undertook detailed internal analysis to be in a position to
submit its assessment of potential liability under the Federal
Government’s proposed carbon Pollution reduction scheme, or
emissions trading scheme, as it has been now defined. on the
basis of this assessment, and in the context of current legislation
before Parliament, iluka is eligible for the export intensive, trade
exposed status for its ilmenite upgrading or synthetic rutile
activities. iluka has not received a determination in relation to
the level of concession for its australian mining and processing
activities. iluka remains concerned about the potential adverse
impacts of an emissions trading scheme on the australian
mineral sands sector, in advance of any such similar legislative
arrangements being applied to its main competitors in other
jurisdictions.
iluka has been reporting publicly on carbon dioxide gas emissions
since 1999.
the company:
•
•
•
•
•
is a signatory to the Federal Government energy efficiency
opportunities (“eeo”) act which requires reduction
programmes to be identified and implemented;
has a continuous improvement programme where
employees are encouraged to contribute greenhouse/
energy reduction ideas;
has a greenhouse gas emissions working group, composed
of senior management from across the company, which
reports to the managing director and Board on programmes
and initiatives to manage carbon dioxide emissions;
has a dedicated eeo manager to develop energy
optimisation strategies; and
has implemented changes to its business structure based
on commercial considerations, such as the idling of two of
its four synthetic rutile kilns, which will result in a reduction
in carbon dioxide gas emission levels from this activity.
iluka commenced eeo assessments on its business units in
2008. as at 31 december 2009, assessments of 98.5 per cent of
iluka’s total energy consumption has been undertaken, which is
ahead of the 80 per cent completion schedule within five years
as prescribed by regulations. during 2009, energy efficiency
assessments were conducted at the south West and mid West
operations in Western australia. opportunities identified to
decrease coal, natural gas and electricity usage have the potential
to reduce energy consumption by 4 per cent at the south West
operations and 3.7 per cent at the mid West operations.
iluka’s carbon dioxide equivalent emissions reduced by 27 per
cent to 1,078 thousand tonnes during 2009, relative to 1,480 in
2008. the amount of energy used at iluka’s operations decreased
by 15 per cent year-on-year. these reductions are mainly due
to the idling of two synthetic rutile kilns in Western australia
and the divestment of the consolidated rutile limited (“crl”)
operations in queensland, effective may 2009. carbon dioxide
emissions, excluding crl, decreased by 25 per cent across
iluka’s operations due to lower production rates in 2009.
on a unit of production basis, carbon dioxide emissions
intensity increased by 8 per cent in 2009, compared to 2008,
due to reduced operational efficiencies associated with
lower production rates in 2009. the increase was despite the
group’s total carbon dioxide emissions reducing by 27 per
cent. carbon dioxide emissions intensity of synthetic rutile
production from iluka’s south West operation reduced by 11 per
cent in 2009. this improvement was achieved through higher
feed intake coupled with a waste heat recovery plant and
implementation of a number of energy efficiency opportunities.
W at e r maN a Ge m eNt
Water management continues to be a key focus across all
operations. overall water usage decreased from 49,617 mega
litres in 2008 to 36,478 mega litres in 2009 which is a reduction
of 26.5 per cent. taking into account the change in ownership of
crl the adjusted overall water saving for iluka was 7.3 per cent
in 2009.
the Western australian operations recorded a 15 per cent
decrease and the us operation recorded a 45 per cent reduction
in water consumption. the south australian operations recorded a
1,092 mega litre increase as construction and production activities
increased throughout the year. the Jacinth-ambrosia operation
will be reliant on the use of hyper-saline water drawn from a
paleochannel, with a reverse osmosis plant providing potable
water.
ai r 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. over all the level of particulates generated by iluka in 2009
decreased from 3,196 tonnes in 2008 to 2,077 tonnes in 2009, a
reduction of 35 per cent. a significant proportion of that reduction
was due to the exclusion of crl data. a 13 per cent decrease
in oxides of sulphur and an increase of 7 per cent of oxides of
nitrogen was recorded across all sites.
the Narngulu synthetic rutile air quality Working Group was
established in January 2009 to address the quality of stack
emissions at the Narngulu processing plant in the mid West of
Western australia. since the group’s inception, 32 individual
improvement actions have been identified, trialled and
implemented and the group will continue to meet monthly to
review air emission incidents and undertake actions to minimise
poor quality emissions.
78 a N Nu a l r ePo r t 2 0 0 9
du s t coNt r o l
B i o d iVe r s i t y
dust control, at both mine and processing sites, continues to be a
focus for the company. earth moving activities at mine sites has the
potential to generate dust, as do stockpiles of topsoil, overburden
and waste. at processing sites dust is primarily caused by the
movement of waste and trucking movements of product.
to minimise airborne dust, iluka continued its practice of
stabilising areas using a combination of water, commercial
suppressants and clay fines sourced from the mineral
concentration process. to minimise dust generation from truck
movement of product, trucks use tarpaulins to cover loaded
trailers.
operational management of dust at sites is supported by the use
of real time dust monitors and regulatory monitors which are also
used for compliance measurement purposes.
in 2009 there were two regulatory dust exceedences compared to
10 in 2008, representing an 80 per cent decrease.
N o i s e em i s s i oNs
at some operations, iluka’s mining and processing facilities
are in close proximity to residential areas. the company seeks
to minimise the impact of noise on surrounding neighbours. as
an example, the operation of an extensive network of real time,
directional noise monitors at the Waroona mine site in Western
australia has enabled operations to minimise environmental
noise both by restricting activities under certain environmental
conditions and by a range of noise mitigation and suppression
measures associated with mining equipment. the contractual
documents prepared for the tutunup south mine site in Western
australia were prepared and awarded on the basis of sound
attenuated equipment to ensure compliance with the approved
Noise management Plan.
reHaBi l i tat i oN
iluka undertakes measures to minimise land disturbance during
mining and to re-establish disturbed areas upon the completion of
mining as sustainable ecosystems and community assets. in 2009,
the amount of land disturbed was 27 per cent higher than the area
of land rehabilitated. this is primarily due to the opening of new
mining areas in the murray Basin and south australia.
in 2009, iluka’s Virginia operation in the united states, was
awarded “Best overall reclamation” by the interstate mining
compact commission. the national award recognises commitment
to the rehabilitation of mined lands and best management
practices for environmental stewardship.
at iluka’s Jacinth-ambrosia operation in south australia, a three
year research partnership, established in 2006 with the university
of adelaide and the department for environment and Heritage
through the adelaide Botanic Gardens, has supported doctoral
and Post doctoral research into seed dormancy and germination
of native plant species in the yellabinna regional reserve. the
research was completed in November 2009 and the published
results will be utilised by iluka for its rehabilitation plans at the
Jacinth-ambrosia mine site.
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 2009, iluka’s
exploration team liaised with the department of environment,
Water, Heritage and the arts to undertake surveys for the sandhill
dunnart, an endangered species found in south australia’s
yellabinna regional reserve. the survey results added 19 new
sandhill dunnart records to the state Biological database (a 30 per
cent increase on previous records) and significantly extended the
animals’ area of occupancy.
emPl o y e e s
iluka recognises that a partnership with its employees based
on communication, alignment, and engagement, is vital to the
achievement of its business objectives. the company’s values
centre on commitment, integrity and responsibility. iluka’s
organisational culture focusses on profitability, sustainability
and growth, and also includes a commitment to the highest
standards of health and safety performance, as well as
providing opportunities for professional development.
iluka values the health and safety of employees and has continued
in 2009 with a range of integrated programmes to improve
employee awareness of, and accountability for, safety.
in 2009 the company made significant structural changes to its
existing operations in response to weak demand for mineral sands
products. these included the acceleration of the reconfiguration
of the Western australian operational base of the company, which
resulted in a significant reduction in the workforce. as part of this,
it was a focus of the company to mitigate the impact on affected
employees through measures such as:
•
•
•
•
redeployment to other operations, which while limited in
terms of the number of employees affected, occurred in a
number of cases;
providing employment transition and career planning
advice;
financial planning assistance; and
personal and family counselling where sought.
While the reduction in the company’s Western australian
workforce was significant, the commencement of operations in
south australia and Victoria has provided the ability to relocate
some employees and generated employment in the regional areas
concerned.
iluka employed approximately 1,000 people at the end of 2009,
compared to 1,400 people at the end of 2008.
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. as an example, at 31 december
2009 the Jacinth-ambrosia operation in south australia had 14
indigenous employees in a variety of positions, including equipment
operators, administration officers, shift coordinator and an
indigenous relations advisor. this level of indigenous employment
matches the achievement of the internal goal for the Jacinth-
ambrosia operation to reach and retain a 20 per cent indigenous
workforce.
i l u k a r e s o u r c e s l i m i t e d 79
sta k eHo l d e r e N Ga Ge m eNt
iluka’s engagement and consultation with stakeholders is integral
to the establishment, operation, rehabilitation and eventual closure
of its mining and processing operations.
For example, at its south australian operation, iluka delivered a
road train safety awareness programme to address community
concerns regarding educating children about road trains. iluka
also signed a native title agreement with the robinvale native title
claim group in Victoria and engaged with the Gnaala karla Booja
claim group to receive approval for a project at its North capel
processing facility in the south West of Western australia.
iluka also continued to support a range of organisations in
2009, including the Wakakirri Festival which provided over 800
students from ceduna and surrounding areas in south australia
with the opportunity to participate in performing and visual arts
programmes. iluka continued its support for other community
events such as the Geraldton sunshine Festival and capelfest
in Western australia. iluka completed the third of a three year
partnership with landcare australia.
iluka recorded 101 complaints in 2009 compared to 296 complaints
in 2008 which represented a 66 per cent decrease. the majority
of these complaints related to noise and dust issues, mainly
associated with the mining operations in the south West (ceased in
2009 following exhaustion of the resource base).
80 a N Nu a l r ePo r t 2 0 0 9
suP Pl e m eNta r y eHs stat i s t i c a l data 2 0 0 5 - 2 0 0 9
table 1: iluka safety Performance
injuries and Frequency rates 2005 - 2009
Fatality
lti
ltiFr
mti
mtiFr
First aid
FaiFr
aiFr
minor
2005
2006
2007
2008
2009
0
11
1.9
34
5.7
191
27.6
39.7
435
0
17
2.6
43
6.6
152
24.7
32.5
572
0
9
1.7
44
8.3
91
17.1
27.0
563
0
14
2.8
40
7.8
80
14.7
25.3
550
0
15
3.0
38
7.6
87
17.3
27.9
505
ltiFr reported for 1 million hours worked
table 3: site safety Performance - Frequency rates 2005 - 2009
table 2: site safety Performance - injuries 2009
Fatality
lti
mti
Fai
minor
south West
mid West
NuP
murray Basin
crl
usa
sa
exploration
corporate
total
0
0
0
0
0
0
0
0
0
0
2
2
0
3
3
2
0
3
0
15
5
17
1
3
1
4
7
0
0
38
14
46
3
8
2
2
9
1
2
87
73
80
9
158
87
29
53
15
1
505
2005
2006
2007
2008
2009
ltiFr mtiFr aiFr
ltiFr mtiFr FaiFr aiFr
ltiFr mtiFr FaiFr aiFr
ltiFr mtiFr FaiFr aiFr
ltiFr mtiFr FaiFr aiFr
south West
mid West
murray Basin
crl
usa
sa
2.4
3.0
4.3
0.0
0.9
5.6
9.8
4.3
4.3
2.8
43.7
65.3
19.9
50.5
21.8
2.9
4.3
0.0
5.4
1.1
4.4
16.7 24.0
3.3
6.7
17.5 27.5
0.9 11.0
20.1 32.0
13.5
43.3 61.1
2.5 13.5
30.2 46.2
3.2 12.9
27.7 43.8
5.2
6.7
1.1
31.9 37.1
13.5 25.6
4.4
5.5
2.3
0.0
0.0
4.6
7.9
5.3
11.4 18.3
7.9 15.8
7.9 13.2
Nm
Nm
Nm
Nm
Nm
Nm Nm
0.0 17.0
0.0 17.0
exploration
0.0 15.4
46.3
corporate
Group total
0.0
1.9
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
0.0
0.0
1.7
0.0
0.0
8.3
32.9 32.9
0.0
0.0
17.1 27.0
6.6
4.5
1.4
0.0
0.0
0.0
2.8
3.3
3.0
4.3
0.0
6.0
0.0
7.8
6.6 16.5
5.9 13.4
11.4
4.3 10.0
12.8 12.8
3.1
0.0
12.0 18.0
24.9
0.0
0.0
14.7 25.3
0.0
3.0
3.7
1.7
2.9
9.2 25.8 38.7
14.5 39.2 55.4
2.9
3.8
6.2
7.6 13.4
7.6 22.8
3.1 12.4
9.0 11.5 20.5
0.0
0.0
0.0 24.9
5.2
5.2
7.6 17.3 27.9
table key
aiFr =
Fai
=
FaiFr =
=
lti
ltiFr =
mti =
mtiFr =
=
Na
=
Nm
all injury Frequency rate (includes lti, mti and Fai)
First aid injury
First aid injury Frequency rate
lost time injury
lost time injury Frequency rate
medical treatment injury
medical treatment injury Frequency rate
Not available
Not measured
table 5: site drug tests 2005 - 2009
table 4: iluka Group major risk Procedures
average compliance (%) 2005 - 2009
iluka Group
2005
Nm
2006
72.3
2007
81.6
2008
86.7
2009
90.9
the audit process includes: general vehicles; isolation; safe work at heights; surface
mobile equipment; and tailings
2005
2006
2007
2008
# tests
% detect
# tests
% detect
# tests
% detect
# tests
% detect
2009
# tests % detect
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
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
24
631
229
0
112
361
53
0
1,410
8.3
1.6
0.4
0.0
0.0
0.0
0.0
0.0
0.9
Notes:
south West refers to south West, Western australia
mid West refers to mid West, Western australia
NuP refers to Narngulu upgrade Project, Western australia
murray Basin refers to murray Basin, Victoria
crl refers to consolidated rutile limited, queensland – part of year only
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 81
table 6: site alcohol tests 2005 - 2009
2005
2006
2007
2008
# tests
% detect
# tests
% detect
# tests
% detect
# tests
% detect
2009
# tests % detect
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Nm
334
1,023
992
477
120
1,892
2,406
106
7,350
1.5
0.0
0.2
0.2
0.0
0.3
0.0
0.0
0.2
64
655
496
210
112
2,634
2,418
0
6,589
0.0
0.5
0.2
0.5
0.0
0.4
0.0
0.0
0.2
table 7: iluka environment Performance
environment incidents 2005 - 2009
level 1
level 2
level 3
level 4
level 5
2005
2006
2007
2008
2009
1,085
58
3
0
0
846
16
1
0
0
1,055
679
8
1
0
0
7
0
0
0
587
96
3
0
0
Group total
1,146
863
1,064
686
686
table 8: site environment Performance - incidents 2009
table 10: site energy resources used (%) 2005 - 2009
2005
2006
2007
2008
2009
coal
electricity
Natural Gas
lPG
diesel
Petrol
Fuel, oil & Greases
total
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
50.1
13.8
9.6
1.9
21.4
2.9
0.2
100
level 1
level 2
level 3
level 4
level 5
table 11: site carbon dioxide Gas emissions (ktco2e) 2005 - 2009
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
74
194
140
7
23
135
14
0
587
6
68
3
0
3
16
0
0
96
0
1
2
0
0
0
0
0
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
table 9: site energy use (terajoules) 2005 - 2009
2005
2006
2007
2008
2009
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
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
0
362
462
112
74
48
19
1
0
Group total
2,041
1,765
1,648
1,480
1,078
2005
2006
2007
2008
2009
table 12: site Particulates (tonnes) 2005 - 2009
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
6,663
6,019
112
579
1,192
Na
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
3,800
4,120
740
352
1,368
251
314
0
Group total
14,565
14,574
14,702
12,823
10,945
2005
2006
2007
2008
2009
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
138
274
0
486
66
Na
Na
Na
964
78
235
0
642
24
Na
Na
Na
191
309
187
897
13
Na
Na
Na
243
345
435
2,161
13
0
Na
Na
61
216
826
968
7
0
Na
Na
979
1,597
3,196
2,077
82 a N Nu a l r ePo r t 2 0 0 9
table 13: site oxides of sulphur (tonnes) 2005 - 2009
table 16: site Water discharge (megalitres) 2005 - 2009
2005
2006
2007
2008
2009
2005
2006
2007
2008
2009
south West
7,446
7,405
7,200
2,850
2,482
south West
6,961
3,981
6,509
5,331
3,137
mid West
535
275
151
murray Basin
crl
usa
sa
exploration
corporate
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
61
6
2
21
0
Na
Na
mid West
murray Basin
crl
usa
sa
exploration
corporate
0
0
0
1,101
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
608
26
1,735
1,515
0
1
0
Group total
8,055
7,719
7,385
2,943
2,571
Group total
8,062
4,417
9,567
10,491
7,022
table 14: site oxides of Nitrogen (tonnes) 2005 - 2009
table 17: site Water recycled (megalitres) 2005 - 2009
2005
2006
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
Nm
Nm
Nm
Nm
Nm
Na
Na
Na
0
Nm
Nm
Nm
Nm
Nm
Na
Na
Na
0
2007
147
0
24
443
205
Na
Na
Na
819
2008
2009
2005
2006
2007
2008
2009
112
0
10
170
166
0
Na
Na
458
73
97
203
70
142
0
Na
Na
585
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Na
0
Nm
Nm
Nm
Nm
Nm
Nm
Nm
Na
0
0
1
0
0
2
0
0
1
25,865
21,758
11,584
1,701
1,341
Nm
Nm
Na
0
1
0
1,120
1,008
0
0
0
27,567
23,101
13,713
table 15: site Water use (megalitres) 2005 - 2009
2005
2006
2007
2008
2009
south West
5,152
5,781
4,880
3,656
3,190
mid West
15,359
14,320
17,558
18,790
15,536
murray Basin
1,553
1,122
2,392
2,826
3,012
crl
usa
sa
exploration
corporate
26,196
23,711
27,272
21,710
12,198
5,232
2,487
2,877
2,607
Na
Nm
Na
11
Nm
Na
1
Nm
Na
27
1
0
1,422
1,119
1
0
Group total
53,492
47,432
54,980
49,617
36,478
i l u k a r e s o u r c e s l i m i t e d 83
table 18: site land use - disturbed, rehabilitated, open (hectares) 2005 - 2009
2005
2006
2007
2008
2009
disturbed rehab open
disturbed rehab open
disturbed rehab open
disturbed rehab open disturbed rehab open
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Group total
open area calculation:
135
101
306
127
455
Na
Nm
Na
133 1,864
268 1,763
0
76
410
542
374 2,648
Na
Nm
Na
Na
Nm
Na
172
164
73
140
113
75
Nm
Na
134
146
0
79
1,902
1,781
483
607
655
2,105
2
Nm
Na
74
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
Nm
Na
64
35
Na
35
311
195
85
136
207
79
Na
114 2,126
5
161 1,970
120 2,049
0
42
668
2
20
Na
670
715
614
269
94
Na
315
624
78
58
720
512
Na
111 2,253
58 1,236
49
170
0
35
Na
744
502
989
571
Na
1,124
851 7,227
737
1,016
6,952
586
1,486 6,455
1,048
966 6,537
2,312
584 8,265
open area + (disturbed area - rehabilitated area proceeding year) = open proceeding year
table 19: site Waste management Practices 2009
chemical & lab Waste
Hydrocarbons
tyres
Paper & cardboard
scrap metal
Grease & oil
Batteries
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
table key
Na
l/t
Na
Na
c
Na
l
Na
Na
l
Na
Na
re/c
Na
c
Na
Na
Na
re
Na
l
l/re
re
Na
re
re
re
Na
re
re
re/c
re
re/c
re
re
Na
re
l/re
ru/re
Na
ru
re
Na
Na
re/t
re
re/c
Na
re
Na
Na
Na
re
l/re
re/c
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 20: site Waste management (tonnes) 2009
chemical & lab Waste
Hydrocarbons
tyres
Paper & cardboard
scrap metal
Grease & oil
Batteries
south West
mid West
murray Basin
crl
usa
sa
exploration
corporate
Na
1
Nm
Nm
1
Nm
225
Nm
Na
16
Nm
Nm
2
Nm
Nm
Nm
Na
Nm
98
Nm
Nm
11
2
Nm
Nm
8
9
Nm
7
22
3
Nm
131
248
66
Nm
73
119
11
Nm
106
281
63
Nm
5
16
Nm
Nm
Nm
Nm
1
Nm
Nm
1
Nm
Nm
84 a N Nu a l r ePo r t 2 0 0 9
lEADERShIP TEAM
iluka’s senior management team is led by managing director,
david robb.
robert Porter Ba (Hons), msc (econ), Phd
General manager, investor relations and corporate affairs
the remuneration report contains details of remuneration
arrangements.
Peter Benjamin B appsc (Hons), Grad dip (exploration),
(Bus admin), Gaicd, mausimm, aFaim
General manager, exploration
mr Benjamin joined iluka in 2001 as Group manager exploration and
was appointed General manager exploration in June 2006. during
2008 and 2009, his role included the management of technical
services. mr Benjamin has operations, project and exploration
experience, having held 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, usa
mr Blackwell joined iluka in 2004 as President us operations. From
2007 he was responsible for land management before returning
to lead the usa region in may 2009. Prior to joining iluka he was
executive Vice President of tsX listed asia Pacific resources based
in thailand. mr Blackwell has a background in mining and processing
having held senior positions in project management, maintenance,
production and business development.
chris cobb dip csm, Fiq
General manager, sales and marketing
mr cobb has 31 years of resource and manufacturing experience in
africa, europe, asia and australia. Previous roles include 5 years
as managing director of consolidated rutile ltd, an asX listed
queensland mineral sands company, 12 years in copper/cobalt
mining in Zambia, and 4 years as chief executive officer of the
largest construction materials company in malaysia.
simon Green Ba (Hons), aca, maicd
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, Product and technical development
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. in september 2009, dr Hugo was
appointed General manager Product and technical development. He
has also held positions with richards Bay minerals and cable sands.
dr Porter joined iluka in december 2005. He has worked in
the investor relations area for over 15 years with roles at BHP
Billiton, Foster’s, southcorp and ampolex. dr Porter has also held
government relations roles at Westpac and BP australia.
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.
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 had a career in various australian and
international engineering, operational, project management and
capital management roles with BHP steel, BHP, Normandy mining
and Newmont australia.
doug Warden Bcom, ca, mBa
General manager, Business development
mr Warden originally joined iluka in 2003. after leaving iluka in
2007, mr Warden gained experience in the uranium and base metals
industries as chief Financial officer of both summit resources ltd
and Jabiru metals ltd. Prior to joining iluka, he worked in corporate
finance and insolvency areas with ernst & young and kPmG.
steve Wickham assoc dip mechanical engineering
General manager, eastern and Western operations
mr Wickham is a mechanical engineer with 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 allan sale, General manager usa operations, retired during
2009.
mr Philip Nillsen, General manager Business development, took
extended leave during the course of 2009.
ms christine truscott, General manager land management,
commenced maternity leave in 2009.
mr Peter Beilby left iluka in 2010, associated with an organisational
change in which mr steve Wickham was appointed General manager,
eastern and Western operations (the former encompassing murray
Basin).
i l u k a r e s o u r c e s l i m i t e d 85
FIvE YEAR FINANCIAl PERFORMANCE hISTORY
all figures are in a$ million
Production
Production Volumes (k tonnes)
- Zircon
- rutile
- synthetic rutile
- ilmenite (saleable)
- ilmenite
average aud:usd exchange rate (cents)
aud:usd range (cents)
summary Financials
mineral sands revenue
earnings before depreciation, net interest and tax
(excluding asset impairments / write-downs)
- mineral sands eBitda
- mining area c eBitda
- other
depreciation and amortisation
Net interest and finance charges
income tax (expense) benefit
Profit from discontinued operations
NPat (excluding asset impairments / write-downs)
NPat (inclusive of asset impairments / write-downs)
operating cash flow
capital expenditure
Net debt
capital and dividends
ordinary shares on issue (millions)
dividends in respect of the year
dividends per share (cents)
Franking level (per cent)
Financial ratios
ePs, excluding asset impairments/ write-downs (cents)
cash Flow per share (cents)
return on shareholders' equity (per cent),
excluding asset impairments / write-downs
Gearing (net debt/(net debt + equity) (per cent)
Financial Position as at 31 december
total assets
total liabilities
Net assets
shareholders' equity attributable to
members of iluka resources
Net tangible asset backing per share (dollars)
2009
2008
2007
2006
2005
263.0
127.1
405.0
342.0
496.7
79.34
385.1
140.1
467.3
586.2
641.0
85.35
513.8
216.1
526.6
931.7
702.5
83.90
445.7
172.8
506.6
934.9
752.5
75.35
418.2
174.1
529.6
781.7
810.5
76.24
62.91/93.68
60.38/98.05
76.98/93.25
70.54/79.08
72.51/79.75
576.0
988.5
938.6
1,003.2
921.0
62.3
75.6
50.6
(63.9)
(176.6)
(22.7)
72.9
22.91
(61.3)
(108.6)
111.6
(521.6)
382.1
418.7
N/a
N/a
N/a
(15.1)
(2.2)
(5.6)
25.9
274.6
186.3
56.8
(47.0)
(161.7)
(35.6)
7.7
30.02
73.7
77.5
233.0
(198.4)
215.7
380.7
N/a
N/a
N/a
17.8
19.9
7.9
17.4
287.7
230.6
19.9
18.1
(148.0)
(59.2)
(20.1)
N/a
51.1
51.1
95.5
(118.2)
598.1
242.2
(51.7)
10
100
21.6
1.5
6.8
44.3
199.2
257.3
19.1
4.5
(112.7)
(40.8)
(14.2)
N/a
66.2
21.0
142.2
(172.7)
596.5
232.9
(51.2)
22
100
50.2
(0.2)
3.3
45.4
46.6
222.3
23.5
76.2
(125.4)
34.0
41.3
N/a
131.9
(85.9)
227.0
(341.9)
554.2
232.9
(51.2)
22
66.4
58.5
2.0
(12.5)
42.3
2,098.4
(1,003.1)
1,095.3
1,095.3
2.58
2,058.1
(1,020.1)
1,038.0
1,868.0
(1,116.4)
751.6
1,864.5
(1,148.0)
716.5
979.8
2.69
683.6
3.04
647.2
3.00
1864.5
(1,107.4)
757.1
688.8
3.17
1 this table includes the contribution from consolidated rutile limited on a 100% basis in years 2005 - 2008. iluka divested its interest in crl in may 2009
with the crl trading activity included in the profit from discontinued operations.
2 iluka divested its 50% interest in the Narama coal Joint Venture in January 2008. trading activity is included in the profit from discontinued operations in
2008.
86 a N Nu a l r ePo r t 2 0 0 9
STATEMENT OF ShAREhOlDINGS
stat e m eNt oF s Ha r eHo l d iN Gs a s at 9 m a r c
H 2 0 1 0
i.
ii
iii.
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
iv.
distribution of shareholdings
shareholding
1 - 1,000
1,000 - 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, london
schroder investment management Group, sydney
Blackrock Group
lazard asset managements Pacific co
orbis investment management (australia) Pty ltd
mFs investment management
National australia Bank limited
vi.
top 20 shareholders (Nominee company Holdings)
Name
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
queensland investment corporation
cogent Nominees Pty limited
aNZ Nominees limited
uBs Nominees Pty ltd
rBc dexia investor services australia Nominees Pty limited
cogent Nominees Pty limited
amP life limited
citicorp Nominees Pty limited
HsBc custody Nominees (australia) limited
iluka administration limited
argo investments limited
mirrabooka investments limited
australian Foundation investment company limited
r o Henderson (Beehive) Pty limited
rBc dexia investor services australia Nominees Pty limited
18,054
418,701,360
Number of holders
9,265
6,621
1,261
851
56
1,995
Number of shares in which a
relevant interest is held
% Holding
79,634,439
41,636,612
23,506,347
21,565,414
21,497,235
21,122,417
21,029,080
19.01
9.94
5.61
5.15
5.13
5.04
5.02
Number of shares
% Holding
120,324,700
106,036,433
61,961,382
23,999,833
9,632,710
4,489,879
4,208,012
4,179,380
3,479,481
3,041,536
2,498,803
2,200,260
2,200,000
2,136,740
1,904,380
1,700,927
1,500,000
1,390,000
1,105,000
952,698
28.74
25.33
14.80
5.73
2.30
1.07
1.01
1.00
0.83
0.73
0.60
0.53
0.53
0.51
0.45
0.41
0.36
0.33
0.26
0.23
i l u k a r e s o u r c e s l i m i t e d 87
CORPORATE INFORMATION
co m p a n y de 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
sh a r e h o l d e r re v i e w a n d an n u a l
re p o r t ma i l i n g li 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. By registering with the share registry, shareholders
can be provided with email notification of the availability of the
shareholder review and annual report online.
copies of the reports are available on iluka’s 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.
P a y m e n t o f di v i d e n d s
the Board of directors announced its decision not to pay a final
dividend for 2009.
sh a r e re g i s t r y in 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 8 9323 2033
Website: www.computershare.com
each inquiry should refer to the shareholder number which is
shown on issuer-sponsored holding statements and dividend
statements.
st o c k ex c h a n g e li 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.
ch a n g e o f ad 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.
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 1 0 ca l e n d a r
20 January
december quarter Production and exploration
report
25 February
announcement of Full year Financial results
22 april
18 may
9.30am Wst
march quarter Production and exploration
report
closure of acceptances of proxies for aGm
20 may
9.30am Wst
annual General meeting - Parmelia Hilton,
Perth, Western australia
20 July
June quarter Production and exploration
report
26 august
announcement of Half year Financial results
21 october
september quarter Production and exploration
report
31 december
Financial year end
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.
all dates are indicative and subject to change. shareholders are advised to
check with the company to confirm timings.
Wst refers to Western australian standard time.
88 a N Nu a l r ePo r t 2 0 0 9
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2009
ANNUAL REPORT
il ukA r e so urc es lim it ed