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Iluka
ResouRces
lImIted
Report 2010
annual
the cReatIon and delIveRy of shaReholdeR value
contents
Directors’ Report
Leadership Team
Remuneration Report
Corporate Governance
Financial Report
Ore Reserves and Mineral Resources
Sustainability
Five Year Financial Performance History
Statement of Shareholdings
Iluka and Mineral Sands Information
Corporate Information
1
8
9
23
29
73
76
82
83
84
85
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 2010.
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 except as noted below:
George John Pizzey (Chairman)
Robert Lindsay Every (was Chairman and a Director until his
resignation on 20 May 2010)
Donald Marshall Morley
Gavin John Rezos
David Alexander Robb
Jennifer Anne Seabrook
Wayne Geoffrey Osborn (was appointed a Director on 26 March 2010)
Stephen John Turner (was appointed a Director on 26 March 2010)
P R I N C I PA L A C T I V I T I E S
Mineral sands EBITDA was $250.2 million, a 231 per cent increase
compared with the previous corresponding period. Mineral sands
EBIT increased to $31.6 million (2009: loss $100.6 million), with
higher depreciation charges of $218.6 million, compared to $176.2
million in the previous corresponding period, reflecting the transition
to the new operations and the start of depreciation on approximately
$800 million of assets during 2010.
Mining Area C iron ore royalty earnings (“MAC”) increased by 51.2
per cent to $75.9 million as a result of a 7.2 per cent increase in
sales volumes and a 56 per cent increase in the average realised
AUD iron ore price, offset partially by capacity payments being $3.0
million lower than the previous corresponding period.
Group EBIT was $86.1 million, compared to a loss in 2009 of $144.1
million which included a significant non-cash charge of $67.6 million.
The profit before tax was $39.9 million (2009 loss: $166.8 million).
A net tax expense of $3.8 million was recognised in respect of the
profit for the period.
Earnings per share for the period were 8.6 cents compared to (20.2)
cents in the previous corresponding period. Total shares on issue
at 31 December 2010 of 418.7 million were unchanged during the
period.
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.
Net debt at 31 December 2010 was $312.6 million, with a gearing
ratio (net debt/net debt + equity) of 21.8 per cent. This compares
with net debt at 31 December 2009 of $382.1 million and a gearing
ratio of 25.9 per cent.
During the second half of 2010, net debt reduced by $126.4 million
as capital expenditure reduced to $21.2 million and operating cash
flows increased to $119.7 million from $43.9 million in the first
half of 2010. The stronger operating cash flows reflect both the
transition to higher margin operations and the benefit of higher
zircon prices. Undrawn facilities at 31 December 2010 were
approximately $250 million and cash at bank was $30.1 million.
D i v i d e n d
Directors have determined a final dividend of eight cents per share,
unfranked. The dividend is unfranked as Iluka does not have franking
credits currently available for distribution. The dividend is payable
on 6 April 2011 for shareholders on the register as at 9 March 2011.
Directors have decided to suspend the Dividend Reinvestment Plan
until further notice.
S I G N I F I C A N T C H A N G E S
During the year the following significant changes occurred:
Murray Basin Stage 2 and Jacinth Ambrosia operations were both
commissioned and ramped up during the first half of 2010 and
reached name plate capacity mid year.
There were no other significant changes in the state of affairs of the
Group during the financial year.
R E V I E W O F O P E R AT I O N S
R e p o r t e d e a r n i n g s
Iluka recorded a profit after tax for the year ended 31 December
2010 of $36.1 million (reflecting a second half profit after tax of
$42.7 million), compared with a net loss after tax of $82.4 million for
the previous corresponding period reflecting higher sales volumes,
higher zircon pricing and contribution from the new, higher margin
operations in the second half of the year.
ANNUAL REPORT 2010
1
Mineral sands production and sales
2009
% change
2010
2009
% change
Income statement analysis
$ million
Mineral sands revenue
Cash costs of production
Inventory movement
Restructure and idle capacity
cash charges
Rehabilitation and holding
costs for closed sites
Government royalties
Marketing and selling
Asset sales and other income
Product, technical development
& major projects
Exploration
Mineral sands EBITDA
Depreciation and amortisation
Mineral sands EBIT
Mining Area C
Currency hedging and foreign
exchange
Corporate and other
Significant non-cash items
Group EBIT
Net interest costs
Interest capitalised (Jacinth-
Ambrosia and Murray Basin)
Rehabilitation unwind and
other finance costs
Profit (loss) before tax
Tax (expense) benefit
Profit (loss) from
continuing operations
Profit from discontinued
operations (CRL)
Profit (loss) for the period
Average AUD/USD (cents)
2010
874.4
(543.8)
(2.9)
(13.2)
(10.4)
(17.1)
(24.1)
7.4
(5.6)
(14.5)
250.2
(218.6)
31.6
75.9
8.9
(30.3)
-
86.1
(30.9)
576.0
(453.6)
33.4
(50.1)
-
(13.7)
(10.2)
14.2
(4.2)
(16.2)
75.6
(176.2)
(100.6)
50.2
(0.1)
(26.0)
(67.6)
(144.1)
(18.4)
-
12.5
(15.3)
39.9
(3.8)
(16.8)
(166.8)
61.5
36.1
(105.3)
-
36.1
92.0
22.9
(82.4)
79.3
Production volumes (kt)
Zircon
Rutile
Synthetic rutile
Ilmenite – saleable
Ilmenite – upgraded to
synthetic rutile
412.9
250.1
347.5
469.0
215.9
263.1
141.4
405.0
342.1
496.7
Total saleable production
1,479.5
1,151.6
Cash costs of production
Unit cash cost – total
saleable product
Unit cash cost – zircon/
rutile/synthetic rutile
Sales volumes (kt)
Zircon
Rutile
Synthetic rutile
Ilmenite – saleable
$543.8m
$453.6m
$367/t
$394/t
$538/t
$560/t
478.7
240.0
362.5
373.7
222.6
138.7
396.7
376.4
Total sales
1,454.9
1,134.4
Revenue
Unit revenue – total saleable
product
Unit revenue – zircon/rutile/
synthetic rutile
$874.4m
$576.0m
$601/t
$508/t
$809/t
$760/t
56.9
76.9
(14.2)
37.1
(56.5)
28.5
(19.9)
6.9
3.9
115.0
73.0
(8.6)
(0.7)
28.3
51.8
18.3
6.4
51.8
(19.9)
n/a
73.6
n/a
(24.8)
(136.3)
(47.9)
(33.3)
10.5
230.9
(24.1)
n/a
51.2
n/a
(16.5)
n/a
n/a
(67.9)
n/a
8.9
n/a
n/a
n/a
n/a
n/a
(16.0)
Mineral sands operational results
Eucla/Perth Basin
Murray Basin
United States
Exploration & other*
Total
2010
468.7
281.4
124.3
-
874.4
Revenue
EBITDA
EBIT
2009
385.6
124.8
65.6
-
576.0
2010
119.9
113.9
40.2
(23.7)
250.3
2009
47.9
13.2
30.7
(16.2)
75.6
2010
33.8
0.9
23.2
(26.2)
31.7
2009
(79.3)
(18.5)
13.4
(16.2)
(100.6)
* 2010 values includes central marketing and product development costs allocated to operations in prior periods
2
ILUKA RESOURCES LIMITED
M i n e r a l s a n d s r e v e n u e
I n v e n t o r y m o v e m e n t
Mineral sands revenue increased by $298.4 million (51.8 per cent)
compared with the previous corresponding period due to significantly
higher zircon and rutile sales volumes.
Zircon demand reflected a strong recovery in demand in China to
above pre global economic crisis levels, a recovery in European
demand and robust North American demand. Zircon sales volumes
increased by 115 per cent to 478.7 thousand tonnes (2009: 222.6
thousand tonnes). Sale of Murray Basin Stage 2 and Jacinth-
Ambrosia production commenced during the June quarter, with sales
of material from these two new operations constituting the majority
of Australian product sales in the second half.
Rutile sales volumes of 240.0 thousand tonnes represented a 73.0
per cent increase from 2009 (138.7 thousand tonnes), following the
start of production from Murray Basin Stage 2 in the first half of
2010. Substantially all of the group’s rutile production in the second
half of 2010 was from Murray Basin.
Synthetic rutile sales volumes of 362.5 thousand tonnes were 8.6 per
cent lower than 2009 (396.7 thousand tonnes) which reflects Iluka’s
decision to idle synthetic rutile capacity during 2009 and reduce
production.
Ilmenite sales of 373.7 thousand tonnes were similar to 2009 levels
(376.4 thousand tonnes), with Iluka’s focus, in terms of Australian
ilmenite production, being to provide the maximum practicable
proportion of suitable ilmenite produced as a feed source for its
synthetic rutile operations.
Higher average prices for zircon and rutile largely offset the effects
of an increase in the average AUD:USD exchange rate from 79.3
cents in 2009 to 92.0 cents in 2010. The significant increases in
higher value zircon and rutile sales volumes, however, lead to an 18.3
per cent increase in the average revenue per tonne of product sold
from $508 to $601 as the proportion of zircon, rutile and synthetic
rutile increased from 66 per cent of total sales to 74 per cent.
C a s h c o s t s o f p r o d u c t i o n
Cash costs of production of $543.8 million were 19.9 per cent higher
than the previous corresponding period, with unit cash costs of
production per tonne of zircon/rutile/synthetic rutile lower at $538/
tonne, compared to $560/tonne in the previous corresponding
period. The transition of mining operations from Western Australia
to the new operations of Jacinth-Ambrosia and Murray Basin Stage
2 results in a different mix of production and cash cost profiles when
compared to previous periods, with costs in the first half of 2010
including those necessary to establish higher concentrate stockpiles
associated with the new operations.
In the second half of 2010, unit cash costs of production per tonne
of zircon/rutile/synthetic rutile were $502/tonne, compared to
$583/tonne in the first half, reflecting the transition to the higher
cash margin operations and concentrate levels that were largely
unchanged during the half.
Inventory values are comparable year on year, however, the
composition of the balance has changed as a result of an increase in
concentrate and intermediate stockpiles of approximately $40 million
during the first half of 2010 associated with the start of operations
at Jacinth-Ambrosia and Murray Basin Stage 2. Finished goods
inventory reduced by approximately $40 million due mainly to the
sale of material on hand in Virginia at the end of 2009.
R e s t r u c t u r e a n d i d l e c a p a c i t y c a s h c h a r g e s
The charges relate mainly to redundancy and other costs associated
with the idling during the year, as planned, of the remaining mining
operations at Eneabba in Western Australia and the planned idling of
the second synthetic rutile kiln at Narngulu in Western Australia.
R e ha b i l i t a t i o n a n d h o l d i n g c o s t s f o r c l o s e d s i t e s
Reassessments of rehabilitation costs for closed sites are expensed
(or credited) to profit and loss. The charge for the year relates to
reassessments at several former operations, with the majority being
for Florida in the United States.
G o v e r n m e n t r o y a l t i e s a n d m a r k e t i n g c o s t s
Government royalties increased with higher sales volumes and
prices. Marketing and selling costs similarly reflect higher sales
volumes, together with the costs for certain port related activities
that were previously reported as production costs.
D e p r e c i a t i o n a n d a m o r t i s a t i o n
The increase of $42.4 million includes an $81.3 million increase
in the Murray Basin following the completion of commissioning of
the Kulwin mine in March 2010, offset by a $41.1 million reduction
in Eucla/Perth Basin where the asset configuration and level of
operations were significantly different to those in the previous
corresponding period due to the start of depreciation at Jacinth
Ambrosia in February 2010 and the idling of the majority of the
Western Australian productive capacity over the course of the
current and previous corresponding period.
M i n i n g A r e a C
Iron ore sales volumes increased 7.2 per cent to 43.3 million dry
metric tonnes. The average AUD realised price upon which the
royalty is payable increased by 56 per cent from the previous
corresponding period, following the move away from sales at
contracted benchmark prices by BHP Billiton during the year. The
EBIT contribution of $75.9 million includes $5.0 million of annual
capacity payments for production increases in the year to 30 June
(2009: $8.0 million), reflecting a full year of production following an
expansion of the Area C operation by BHP Billiton in early 2009.
C o r p o r a t e a n d o t h e r
Corporate costs were $4.3 million higher than the previous
corresponding period, due mainly to increases in insurance and
incentive costs. Costs for the period include $7.2 million for support
activities that were centralised after the 2009 restructure and which
are no longer included in regional costs, one-off restructure costs of
$7.7 million were incurred in 2009.
ANNUAL REPORT 2010
3
I n t e r e s t
The increase in net interest costs reflects higher average net debt
than the previous corresponding period, increases in Australian
variable interest base rates and higher margins in the first half
of the year. Capitalisation of interest in respect of the Jacinth-
Ambrosia and Murray Basin Stage 2 projects ceased in the second
half of 2009.
Ta x e x p e n s e
An income tax expense of $3.8 million, at an effective tax rate of 9.5
per cent, compares to a benefit in 2009 of $61.5 million reflecting
the pre-tax loss for the year. The effective tax rate is influenced
by benefits in respect of Investment Allowance and Research &
Development concessions in Australia, together with the tax expense
on earnings in the United States being at 20 per cent, compared with
30 per cent for Australian earnings.
D I R E C T O R S ’ P R O F I L E S
George John Pizzey, BE (Chem), FellDip (Management), FTSE,
FAICD, FAIM, Chairman
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 Limited 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 the London Metal
Exchange UK and a Director of WMC Resources Limited and Ivanhoe
Grammar School.
Directorships of Listed Entities (last 3 years)
Alumina Limited (appointed June 2007)
Amcor Limited (appointed September 2003)
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)
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 John Rezos, BA, LLB, B.JURIS, MAICD
Mr Rezos was appointed to the Board in June 2006. He has extensive
Australian and international investment banking experience and is a
former Investment Banking Director of the HSBC Group with regional
roles during his HSBC career based in London, Sydney and Dubai.
Mr Rezos has held chief executive officer 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 Viaticus Capital Pty Ltd and a Director
of Rowing Australia. Mr Rezos is a member of the Audit and Risk
Committee and the Remuneration and Nomination Committee.
Directorships of Listed Entities (last 3 years)
Alexium International Group Limited (appointed March 2010)
DFS International Holdings Limited (suspended) (appointed
November 2008)
Jennifer Anne Seabrook, BCom, ACA, FAICD
Ms Seabrook was appointed to the Board in May 2009. 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, IRESS Market Technology Ltd and
Australia Post. 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 Limited and Western Power. Ms Seabrook
is a member of the Audit and Risk Committee and the Remuneration
and Nomination 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)
4
ILUKA RESOURCES LIMITED
Wayne Geoffrey Osborn, DipEng, MBA, FTSE, MIE(Aust), MAICD,
Chairman of the Remuneration and Nomination Committee
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 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.
Directorships of Listed Entities (last 3 years)
Leighton Holdings Limited (appointed 6 November 2008)
Wesfarmers Limited (appointed 24 March 2010)
Stephen John Turner, BCom, ACA
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.
M E E T I N G S O F D I R E C T O R S
He is also a director of South American Ferro Metals Limited
and Chairman of Vantage Goldfields Limited. 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.
Directorships of Listed Entities (last 3 years)
International Ferro Metals Limited (appointed 26 January 2002)
Vantage Goldfields Limited (appointed 22 October 2009)
South American Ferro Metals Limited (appointed 11 November 2010)
C O M PA N Y S E C R E TA R Y
The Company Secretary is Mr Cameron Wilson LLB. Mr Wilson was
appointed to the position of Company Secretary in 2004. Before
joining Iluka Mr Wilson held a range of legal and commercial roles at
WMC Resources Limited and prior to that worked as a solicitor with
a major legal practice.
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 December 2010, and the
numbers of meetings attended by each Director were:
Director
D A Robb
R L Every
G J Pizzey
D M Morley
G J Rezos
J A Seabrook
W G Osborn
S J Turner
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
10
5
10
10
9
10
85
85
10
10
10
10
10
10
10
10
-
21
42
6
43
6
-
47
-
6
6
6
6
6
-
6
-
2
4
-
4
24
26
-
-
4
4
-
4
4
4
-
1.
2.
3.
4.
5.
6.
7.
Dr Every attended the Audit and Risk Committee meeting by invitation but was not a member of the Committee. He resigned from the Iluka Board on 19 May 2010.
Mr Pizzey accepted the role of Chairman of the Board, effective 19 May 2010. He resigned as Chairman of the Remuneration and Nomination Committee at the August Committee
Meeting but continued to attend as a member of the Committee. Mr Pizzey attended the Audit and Risk Committee meeting by invitation but was not a member of the Committee.
Mr Rezos stepped down from the Audit and Risk Committee on 26 March 2010. He was reappointed to the Committee on 20 September 2010.
Ms Seabrook joined the Remuneration and Nomination Committee on 25 August 2010.
Mr Osborn and Mr Turner joined the Board on 26 March 2010.
Mr Osborn joined the Remuneration and Nomination Committee as a member on 25 August 2010 and assumed the Chair of the Committee at the conclusion of that meeting.
Mr Turner joined the Audit and Risk Committee on 22 June 2010.
D I R E C T O R S S H A R E H O L D I N G
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
Directors’ shareholding is set out in note 21.
O F O F F I C E R S
R E M U N E R AT I O N R E P O R T
The Remuneration Report is set out on pages 9 to 21.
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.
ANNUAL REPORT 2010
5
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.
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 O N - A U D I T S E R V I 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 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
2010 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 22.
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:
Consolidated
2010
$000
2009
$000
550
50
600
107
107
27
27
65
-
65
562
52
614
65
65
67
67
113
34
147
( a )
A s s u r a n c e s e r v i c e s
Audit and audit related services
Fees paid to PwC
PwC Australia
Other PwC firms
Total remuneration for audit services
Other assurance services
PwC Australia
Total remuneration for other assurance services
( b )
Ta x a t i o n s e r v i c e s
Fees paid to PwC
PwC Australia
Total remuneration for taxation services
( c ) O t h e r s e r v i c e s
Fees paid to PwC
PwC Australia
Other PwC firms
Total remuneration for other services
6
ILUKA RESOURCES LIMITED
E N V I R O N M E N TA L R E G U L AT I O N S
L I K E LY D E V E L O P M E N T S A N 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.
D I V I D E N D S
Since the end of the financial year the Directors have determined
the payment of a final ordinary dividend of eight cents per share,
unfranked. The dividend is unfranked as Iluka does not have franking
credits currently available for distribution. The dividend is payable
on 6 April 2011 for shareholders on the register as at 9 March 2011.
E X P E C T E D 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.
R O U N D I N G O F A M O U N T 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.
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
F I N A N C 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.
G J Pizzey
Chairman
Perth
24 March 2011
ANNUAL REPORT 2010
7
leadership
team
Iluka’s senior management team is led by Managing Director, David
Robb.
Alan Tate, BCom, FCA, AICD
Chief Financial Officer
The Remuneration Report on page 9 contains details of remuneration
arrangements.
Peter Benjamin, BSc (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 and
based in Thailand. Mr Blackwell has a background in mining and
processing with positions in project management, maintenance,
production and business development.
Chris Cobb, Dip CSM, FIQ
General Manager, Sales and Marketing
Mr Cobb has over 30 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.
Robert Porter, BA (Hons), MSc (Econ), PhD
General Manager, Investor Relations and Corporate Affairs
Dr Porter joined Iluka in December 2005. He has worked in the
investor relations area of BHP Billiton, Foster’s, Southcorp and
Ampolex. Dr Porter has also held government relations roles at
Westpac and BP Australia.
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, 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, AICD
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 in Mechanical Engineering
General Manager, Australian Operations
Mr Wickham is a mechanical engineer with extensive experience
in senior and executive roles in Australia and South Africa in the
manufacturing and mining sectors. Prior to joining Iluka in 2007,
he was Chief Executive Officer of Ticor South Africa and Managing
Director of Australian Zircon.
Cameron Wilson, LLB, GAICD
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.
Organisational changes in 2010 include:
•
•
•
•
Mr Steve Wickham’s role changed to include all of Iluka’s Australian mineral
sands operations. To reflect this, Mr Wickham’s role was renamed to General
Manager Australian Operations, previously General Manager Eastern and
Western Operations;
Mr Hans Umlauff’s role was retitled to General Manager Project
Management from General Manager South Australian Development and
Project Management. He has assumed responsibility for major growth
opportunities including the delivery of the Woornack, Rownack, and Pirro
project in the Murray Basin, Victoria;
after taking extended leave in 2009, Mr Philip Nillsen, former General
Manager Business Development will not be returning to the company; and
after taking maternity leave in 2009, Ms Christine Truscott, General Manager
Land Management will not be returning to the company.
8
ILUKA RESOURCES LIMITED
remuneration
report
RE M U N E R AT I O N PR I N C I P L E S
E X E C U T I V E RE M U N E R AT I O N MI X
Iluka’s remuneration practices are designed to support the
company’s objective - to create and deliver value for shareholders.
Accordingly, Iluka’s remuneration approach is designed to attract,
retain and motivate experienced executives and to ensure a focus by
executives on shareholder value creation and delivery. Remuneration
policy and procedures are therefore designed to achieve
remuneration outcomes which are:
Executive Remuneration is made up of fixed (“TFR”) and at risk
(“STIP” and “LTIP”) components. A significant portion of total
remuneration is at risk.
Target performance was exceeded in 2010, details of which are
provided on pages 10 and 11.
M a r k e t C o m p e t i t i v e
A C T U A L EX E C U T I V E R E W A R D I N 2 0 1 0
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 21 of the
Remuneration Report.
The table below sets out the actual earnings realised by the
Managing Director and Key Executives for 2010. 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 2010 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.
–
–
fixed remuneration which reflects the skills, experience and
performance and which is comparable and competitive within
the resources sector; and
an appropriate balance between fixed and variable (at risk)
components of executive remuneration.
P e r f o r m a n c e B a s e d
–
–
executives focused on both short and long term business
performance; and
reward for achievement aligned to company and individual
performance.
S h a r e h o l d e r A l i g n e d
–
–
objectives set that support business profitability, sustainability
and growth and thus improved shareholder returns; and
executive share ownership, including trailing exposure to
company performance.
Tr a n s p a r e n t
–
–
clear disclosure which takes account of market practice; and
compliance with relevant legislative requirements.
CO M P O N E N T S O F EX E C U T I V E RE M U N E R AT I O N
Total Fixed Remuneration
(“TFR”)
Competitively positioned to support
attraction and retention strategies.
Short Term Incentive Plan
(“STIP”)
Long Term Incentive Plan
(“LTIP”)
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.
ANNUAL REPORT 2010
9
Name
D Robb4
P Beilby5,6
P Benjamin
C Cobb
V Hugo
A Tate
H Umlauff
S Wickham
C Wilson
Base
$
1,451,941
165,752
410,092
407,833
382,519
462,423
529,358
472,556
422,376
Super
$
48,059
5,905
36,908
36,180
26,139
28,514
47,642
17,781
26,385
Other1
$
38,206
-
6,487
-
6,487
-
4,767
4,768
6,487
2010 STIP2
$
2008 LTIP3
$
Retention
Plan7
$
2010
Total Actual
Earnings
$
1,672,772
653,542
10,660,000
14,524,520
-
355,034
366,335
329,133
410,873
472,563
412,875
370,414
-
192,301
184,735
-
171,228
206,955
246,168
114,733
191,706
-
-
-
-
-
-
-
363,958
993,256
810,348
915,506
1,108,765
1,300,498
1,022,713
1,017,368
1
2
3
4
5
6
Includes non-monetary benefits (for example spouse travel, car park)
Represents total value of 2010 STIP which is awarded half in cash and half in deferred equity awarded in March 2011.
Represents the value of the 2008-10 LTIP award for which the performance period concluded 31 December 2010 calculated at a share price of $10.66 being the volume weighted
average price of shares traded over the five days following the release of the 2010 full year results.
Represents the value of the Managing Director’s 2008-10 performance and retention plan award calculated at a share price of $10.66 being the volume weighted average price of
shares traded over the five days following the release of the 2010 full year results.
Ceased employment 1 March 2010.
Represents the value of the retention plan award (awarded 1 March 2010) calculated at a share price of $3.67 being the volume weighted average price of shares traded over the
five days following the release of the 2009 full year results.
7 The Retention period for other key executives will conclude on 31 March 2011 and outcomes will be disclosed in the 2011 Remuneration Report.
A C T U A L EX E C U T I V E R E W A R D I N 2 0 0 9
The table below shows actual earnings realised by the Managing Director and Key Executives in 2009 for comparison purposes.
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
$
51,489
-
5,495
-
5,495
-
4,632
1,280
5,495
2009 STIP3
$
2007 LTIP4
$
521,685
46,532
46,472
-
80,982
131,157
182,447
145,521
119,210
-
-
-
-
-
-
-
-
-
2009
Total Actual
Earnings
$
2,073,174
463,199
497,467
90,682
490,250
621,991
766,524
574,389
569,969
1
2
3
4
Appointed 12 October 2009, formerly Managing Director of Consolidated Rutile Limited.
Includes non-monetary benefits (ie. spouse travel, car park, etc).
Represents total value of 2009 STIP which is awarded half in cash and half in deferred equity.
Represents the outcome of the 2007-09 LTIP for which the performance period concluded 31 December 2009.
2 0 1 0 OV E R V I E W
K e y I n i t i a t i v e s
As reported in the 2009 Remuneration Report, the company imposed
a fixed remuneration freeze for Directors and Executives and
established a recruitment freeze for the 2009 calendar year.
The company has continued its focus on managing employee fixed
costs to support financial performance initiatives in 2010 including:
•
•
the Managing Director’s fixed remuneration was not
increased in 2010 (last increase effective 1 January 2008);
Director’s fees were not increased in 2010 (last increase
effective 1 July 2008);
10
ILUKA RESOURCES LIMITED
•
•
•
the recruitment freeze established in 2009 (with the
exception of critical roles) continued in 2010 with further
exceptions permitted in order to meet business requirement
as profitability improved and in response to pressures from a
tightening labour market;
employees participating in the 2009 short term incentive plan
did not receive an increase to their fixed remuneration in
2010; and
the employee share plan was suspended for 2009 and 2010
but will be re-instated in 2011 now that the company’s
financial performance has improved.
P e r f o r m a n c e B a s e d R e w a r d
S h a r e h o l d e r A l i g n m e n t
Profitability targets for the 2010 STIP were reviewed to ensure
alignment with corporate objectives for the year. Accordingly, for
the 2010 performance year, an EBITDA rather than EBIT target was
introduced to provide an increased focus on cashflow during a period
of elevated company debt levels after the high capital expenditure in
2008 and 2009.
Total Recordable Injury Frequency Rate and Level 2 and above
environmental incidents were introduced as new sustainability
targets for the 2010 STIP replacing All Injury Frequency Rate and
Notifications to Government. The revised targets provided a stronger
alignment to Iluka’s internal health and safety priorities and
facilitated improved benchmarking.
Iluka’s performance for the 2010 financial year was achieved
with earnings improvements across the group. Overall financial
performance met or exceeded stretch targets resulting in the 2010
STIP delivering above target awards to the Managing Director and
Executives. The outcome of the 2010 STIP was further supported by
the achievement of individual long term growth objectives including,
for example, the delivery of two major projects (Jacinth-Ambrosia
and Murray Basin Stage 2) successful production ramp ups and
establishment of improved product pricing dynamics.
Iluka reviews its incentive plans regularly to ensure that
performance metrics are appropriately linked to short and long term
business requirements and shareholder value generation.
2008 Long Term Incentive Plan
The TSR target for the 2008 Long Term Incentive Plan was exceeded
with the company achieving a TSR of 86.6 per cent and ranked
at the 100th percentile of the Materials Index and MidCap 50
comparator groups. Accordingly, share rights granted in respect
to this tranche will vest in full. This is the first time since the 2004
Long Term Incentive Plan that there has been any payment of LTIP
and demonstrates the alignment of company performance with LTIP
awards.
No awards were made in respect to the ROE measure due to
performance not achieving the minimum target.
Shares awarded under this plan are detailed on page 18.
Managing Director’s Retention Plan
The performance measure associated with the Managing Director’s
Retention Plan, which was approved by shareholders at the 2008
Annual General Meeting, required TSR of a minimum of 45 per cent
over the three year performance period from 1 January 2008. In
terms of share price (i.e. absent any other contributor to TSR such as
dividends) full vesting of the Plan shares over the three year period
required Iluka’s share price to reach a minimum of $5.32 (calculated
on the volume weighted average price (VWAP) of shares traded over
the five days following the release of the 2010 financial results). The
VWAP was calculated for the five trading days from 25 February to
3 March 2011 inclusive resulting in the volume weighted average
share price of $10.66 exceeding the target of $5.32 by 100 per cent
and resulting share price growth of 190 per cent for the performance
period. Market capitalisation of the company increased from $0.9
billion to $4.5 billion over the corresponding period.
Accordingly, Mr Robb was awarded 1,000,000 ordinary shares under
this plan on 4 March 2011.
The graph below shows Iluka’s share price performance compared
with the Materials and the Metals and Mining Indices over the
corresponding three year period.
Index (2008 = 100)
Iluka
Materials
Metals and Mining
250
200
150
100
50
0
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
ANNUAL REPORT 2010
11
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.
R e l a t i o n s h i p b e t w e e n R e w a r d a n d
P e r f o r m a n c e
As discussed in detail in the “Variable Remuneration” section of this
report, the key performance measures underlying the incentive plans
in 2010 were:
•
Profitability (ROC, EBITDA and NPAT), Sustainability
STIP:
(total recordable injury frequency rate, severity rate and
level two and above environmental incidents) and Growth
(individual stretch objectives); and
•
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 2010 performance year, the STIP delivered above target
awards to the Managing Director and Executives reflecting the
achievement of profitability and growth objectives at stretch levels
of performance.
At the end of 2010, the 2008 LTIP grant completed its performance
period (1 January 2008 to 31 December 2010). Performance
was measured against both the ROE and relative TSR hurdles.
Performance and resulting vesting was as follows:
Performance
target
Actual
performance
0.7%
Implication for
vesting
Nil vesting and
awards lapse
Component
ROE tranche
(50%)
Relative TSR
tranche (50%)
50% vesting
for threshold
of 10% with full
vesting at target
of 14%.
50th percentile
for 50% vesting
and 75th
percentile for
full vesting.
100th
percentile
Full vesting of the
TSR tranche
R E M U N E R AT I O N R E P O R T
B o a r d O v e r s i g h t o f R e m u n e r a t i o n -
R e m u n e r a t i o n a n d N o m i n a t i o n C o m m i t t e e
The Remuneration and Nomination Committee (“Committee”)
operates in accordance with its charter as approved by the Board.
The Committee is comprised solely of independent non-executive
Directors and was chaired by Mr Pizzey until August 2010. From
August 2010, the Committee was chaired by Mr Osborn.
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;
succession planning for key roles; and
diversity strategy, policies and practices of the company.
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 2010 year, external advisers mandated by the Committee
provided input on several matters relating to remuneration. These
advisers were:
•
•
Ernst & Young, which provided advice in relation to executive
remuneration, general remuneration trends and Iluka’s
management and employee share plans; and
McKenzie Moncrieff, which provided legal advice in respect to
share plans and executive contracts.
In November and December 2010 the Remuneration and Nomination
Committee conducted an evaluation of its performance.
R e m u n e r a t i o n P r a c t i c e s
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.
12
ILUKA RESOURCES LIMITED
I l u k a ’ s F i v e Y e a r P e r f o r m a n c e
T o t a l F i x e d R e m u n e r a t i o n
For statutory reporting purposes the company is also required
to show the five year total shareholder return and five years of
earnings. In summary:
•
During the period 1 January 2006 to 31 December 2010 the
company completed a 4 for 7 renounceable share rights
entitlement at $2.55 per share in March 2008. A portfolio
of shares bought at the prevailing market price of $7.84
at the start of the performance period (closing price on 30
December 2005), assuming full take up of the rights issue at
$2.55 per share, generated a shareholder return of 54.5 per
cent return taking into account the shareholder’s participation
in the 2008 share rights entitlement. With aggregate dividend
payments of $0.44 per share, the total shareholder return
was 59.2 per cent over the five year period.
•
Earnings over the same five year period are set out in the
table below:
31 Dec
06
31 Dec
07
31 Dec
08
31 Dec
09
31 Dec
10
Net profit
after tax
($ million)
Earnings
per share
(cents)
Closing
share price
($)
Dividends paid
(cents)
21.0
51.1
49.0
(82.4)
36.1
9.1
21.6
14.2
(20.2)
8.6
5.94
4.11
4.64
3.58
9.14
22
22
N/A
N/A
N/A
R e m u n e r a t i o n S t 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 2010.
Remuneration for executives comprises two components:
•
•
Total Fixed Remuneration (“TFR”) which is made up of
base salary and superannuation, together with other salary
sacrifice items such as novated leases and car parking.
Employees are required to meet any fringe benefits tax
obligations applicable to benefits; and
variable remuneration which is linked directly to performance
of both the company and the individual executive and, as
such, is deemed to be “at risk”.
The remuneration structure is designed to reflect an appropriate
balance between fixed and variable remuneration to ensure that
executive reward is aligned with the performance of the business.
Iluka’s total fixed remuneration structure is assessed against the
median level of the market as defined by a comparator group of
Australian companies within the resources market. Individual TFR
is determined within an appropriate range centred at the market
median by referencing job evaluation data and individual experience
and performance levels of executives. Allowance is also made for
the competitive nature of the market for talent in the resources
sector.
S u p e r a n n u a t i o n B e n e f i 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
19) participate in the Iluka Superannuation Plan or a fund of choice
on an accumulation basis.
V A R I A B L E R E M U N E R AT I O N
P e r f o r m a n c e a n d I n c e n t i v e 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 2011, it is anticipated that 81 employees (representing 9
per cent of employees and including all executives) will participate in
the LTIP, and 138 employees (representing 15 per cent of employees
and including all executives) will participate in the STIP.
ANNUAL REPORT 2010
13
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 h e S h o r t - Te r m I n c e n t i v e P l a n
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.
The weighting of the growth measure is typically set at 30 per cent,
however the Board 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 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. Outcomes are subject to rigorous one-up manager
assessment and, for the Managing Director and key executives, by
the Board.
2 0 1 0 S T I P
The measures and weighting of objectives for the 2010 performance
year were:
Profitability (ROC, EBITDA and NPAT)
60 per cent
•
•
Sustainability (total recordable injury
frequency rate, severity rate and level 2
and above environmental incidents)
•
Growth (individual objectives)
10 per cent
30 per cent
STIP payments to the Managing Director and key executives were
significantly higher in 2010 than in 2009, due primarily to increased
profitability, a strong relative share price performance and the
achievement of growth objectives including successful delivery of
two major projects.
14
ILUKA RESOURCES LIMITED
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 an employee having to
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 h e L o n g - Te r m I n c e n t i v e P l a n
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 (“ROE”)
relative to an internal target and the other (50 per cent) based
on total shareholder return (“TSR”) performance relative to
a comparator group consisting of companies which in 2010
comprised the Materials Index and the ASX Mid Cap 50 Index at
the commencement of the performance period (excluding property
trusts and duplication). The two performance measures are applied
as follows:
Return on Equity tranche:
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.
2010 ROE targets were 10 per cent for Threshold and 14 per cent for
Target. These targets may be compared with a 10 year history for
Iluka (to 2009) in which the average ROE was 5.7, or with a 10 year
average for the ASX 200 (less property trusts) of 8.85.
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.
Total Shareholder Return tranche:
R e m u n e r a t i o n R e v i e w
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 in 2010 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.
Performance
Hurdle to be
achieved
50th percentile
75th percentile
Threshold
Target
Measure
TSR
ROE
Total Grant
LTIP Vesting Schedule
Percentage of
total grant that
will vest
Maximum
percentage of
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 21. 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 o g r a m s :
2 0 0 5 P I P
During 2005, Iluka operated the Performance Incentive Program
(“PIP”) which has since been superseded by the STIP and LTIP plans
introduced in 2007.
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 four year holding lock. Tranche one of the 2005 PIP
vested in January 2007 with tranche two vesting January 2008 and
tranche three vesting January 2009. The final tranche of the 2005
PIP vested in January 2010.
S e c u r i t i e s Tr a d i n 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 an objective setting and performance
review process which is used in conjunction with market data to
determine appropriate remuneration recommendations.
Individual progress against objectives is reviewed throughout the
performance year with formal reviews occurring at half year and at
the conclusion of the performance year.
Recommendations by the Managing Director for STIP and LTIP
award outcomes and remuneration for key executives are submitted
to the Remuneration and Nomination Committee in February of each
year. In respect of all other eligible participants, a one up manager
approval process applies with final Managing Director approval prior
to any award or remuneration review being implemented.
E m p l o y e e S h a r e P l a n
The Board believes that strong employee alignment with shareholder
outcomes is a vital element of high performing companies
which create and deliver value for shareholders. Put simply, the
company wants all employees to identify with shareholder returns.
Accordingly, the company also operates an employee share plan
under the rules of the Iluka Resources Limited Employee Share Plan.
The Board may, from time to time, at its discretion, make written
offers to participate in the plan.
In 2007 and 2008, offers were made to eligible employees
(permanent employees with a minimum of twelve months service,
who do not participate in the STIP) in Australia and the United States
to receive ordinary shares in Iluka Resources Limited to the value of
A$1,000.
To satisfy the legislative requirements of both Australia and the
United States, Australian employees received the shares under a
tax-exempt plan, with a three year sale restriction period (a holding
lock is applied during the restriction period). As US employees do
not have access to a tax exemption plan, they were offered shares
up to A$1,000 through a grant of restricted shares. The shares will
be held under the plan rules with a restriction period of three years.
To enable US employees to receive a tax deferral, strict forfeiture
conditions apply.
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.
The employee share plan was not offered to employees in 2009 or
2010 but will be re-instated in 2011.
ANNUAL REPORT 2010
15
I l u k a R e t e n t i o n P l a n
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 offered 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. 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 18.
In August 2009, the Board closed the Retention Plan.
N o n - E x e c u t i v e D i r e c t o r s ’ R e m u n e r a t i o n
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 2010, including
superannuation, was $956,565.
In 2009 and 2010, the Board decided not to increase their fees.
A review of Iluka’s non-executive Director fees was conducted by
Ernst & Young in 2011. The review took into account the nature
of the Director’s work, their responsibilities and survey data on
comparative companies. Details of Director fees in 2010 and
increased fees from 1 March 2011 are as follows:
From 1 March
2011
$ p.a
From 1 July
2008 to 28
February 2011
$ p.a
312,000
125,000
275,000
100,000
35,000
25,000
17,500
12,500
35,000
25,000
17,500
12,500
Non-executive Director Fees
Board Chairman
(inclusive of Committee fees)
Board Member
Board Member Committee Fees
Audit and Risk Committee Chair
Remuneration and
Nomination Committee Chair
Audit and Risk Committee Member
Remuneration and
Nomination Committee Member
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
assuming no changes to the Board, is $1,074,500 per annum,
excluding superannuation, or $1,158,324 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 18 of the Report. No
performance conditions are attached to these shares as they are
purchased using sacrificed fees.
E x e c u t i v e E m p l o y m e n t A g r e e m e n t s
Remuneration and other terms of employment for the Managing
Director and key executives are formalised in service agreements.
The Managing Director and key executives are employed on a
rolling basis with no specified fixed terms. The Managing Director
and relevant executives are on Total Fixed Remuneration (“TFR”)
arrangements, inclusive of superannuation.
16
ILUKA RESOURCES LIMITED
D a v i d R o b b - M a n a g i n g D i r e c t o r
Total Fixed Remuneration
$1,500,000 for the year ended 31 December 2010.
2010 Short Term Incentive
2010 Long 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, EBITDA, NPAT)
Sustainability (total recordable injury frequency rate, severity rate,
level 2 and above notifications to government)
Growth (individual objectives)
Individual objectives and related deliverables are set each year by the Board at what is assessed to be a stretch level of
performance. These objectives typically vary from year to year and in 2010 related to the company’s ongoing response to the
global economic crisis, major project development and certain industry related and other initiatives.
10 per cent
40 per cent
50 per cent
Weighting
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
50 per cent
50 per cent
Weighting
Retention Arrangements
At the 2008 AGM, shareholders approved the following retention arrangements for Mr Robb.
Retention Offer
1,000,000 Share Rights offered in three equal tranches over a 3 year retention period.
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 (that is, 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 (that is, Tranche 2 performance period is 25 February 2009 to 3 March 2010).
The performance hurdle for tranche 2 of Mr Robb’s retention plan was not achieved and therefore, share rights relating to
tranche 2 of the plan were not 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 (that is, Tranche 3 performance period is 3 March 2010 to 3 March 2011).
The performance hurdle for tranche 3 of Mr Robb’s retention plan was achieved. In accordance with the terms and conditions of
Mr Robb’s retention offer (see Vesting Conditions), a total of 666,667 share rights relating to tranches 2 and 3 of the plan have
been awarded.
A tranche of Retention Incentive Share Rights will vest on the Vesting Date if the TSR of the company calculated over the
Performance Period for that tranche is 15% (Annual Hurdle); or
30% TSR for the First and Second or Second and Third performance periods; or
45% TSR measured over the First, Second and Third performance periods.
Vesting Date
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 the
terms of the Executive Employment Agreement entered into between Mr Robb and the company on 18 October 2006.
With Notice
Without Notice
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.
Voluntary Termination
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.
Protection of Interests
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.
ANNUAL REPORT 2010
17
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.
Executive
Position
P Benjamin
General Manager Exploration
C Cobb
V Hugo
A Tate
General Manager Sales and Marketing
General Manager Product and Technical Development
Chief Financial Officer
H Umlauff
General Manager Project Management
S Wickham
General Manager Australian Operations
C Wilson
General Manager Corporate Services and Company Secretary
Termination Notice
Period by Iluka
Termination Notice
Period by Employee
Termination
Payments*
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
12 months
9 months
12 months
9 months
12 months
9 months
12 months
*
Termination payments (other than for gross misconduct) are calculated on current total fixed remuneration at date of termination and are inclusive of the notice period.
S H A R E R I G H T S A N D S H A R E H O L D I N G S O F K E Y M A N A G E M E N T P E R S O N N E L
Number Of Shares
Number Of Share Rights
Balance
held at
1/1/10
Vesting
of share
rights
Awarded
as
Restricted
Shares
Name
Non-Executive Directors
Balance
held at
31/12/10*
Balance
held at
1/1/10
Granted
during
2010*
Vested
as shares
during
2010
Lapsed
during
2010
Balance
held at
31/12/10
Other
changes
(28,679)
-
-
-
-
-
50,000
-
-
-
-
-
-
-
-
40,876
-
16,351
63,602
19,314
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,689
1,355
663,215
1,224,657
121,951
54,614
968
-
2946
-
-
-
2,691
-
(181,188)
-
6,297
-
10,973
17,772
24,722
19,718
16,153
1,355
110,832
-
-
(18,645)
116,478
-
59,760
(19,873)
112,906
1,355
-
60,913
99,892
141,970
175,171
-
117,894
174,433
146,437
92,254
178,202
-
(54,614)
(968)
-
(2,946)
-
-
-
36,504
34,146
33,252
40,163
46,911
40,650
36,504
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(61,308)
1,285,300
(87,365)
(17,329)
-
(16,062)
(19,414)
(23,092)
(10,763)
-
193,378
34,146
132,138
195,182
170,256
122,141
(2,691)
(17,983)
194,032
-
-
-
-
-
-
-
-
R Every**
D Morley
W Osborn
G Pizzey
G Rezos
J Seabrook
S Turner
28,679
40,876
-
16,351
63,602
19,314
-
Executive Director
D Robb
591,171
Executives
P Beilby**
P Benjamin
C Cobb
V Hugo
A Tate
H Umlauff
S Wickham
C Wilson
126,574
102,212
-
121,204
41,988
108,057
39,840
81,048
Balances for the Executive Director and the Executives include restricted shares which will vest in future periods subject to legislative requirements.
Shares and Share Rights are reversed to show a zero balance at 31 December on cessation of employment.
*
**
No shares were forfeited during the year.
18
ILUKA RESOURCES LIMITED
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.
K e y M a n a g e m e n t P e r s o n n e l - D i r e c t o r s
(i)
Non-executive Directors
R L Every (Chairman)
D M Morley
W G Osborn
G J Pizzey (Chairman)
G J Rezos
J A Seabrook
S J Turner
(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
2009, except W G Osborn and S J Turner who were appointed as Directors on 26 March 2010. R L Every was a Director in the prior year and
retired on 20 May 2010.
K e y M a n a g e m e n t P e r s o n n e l - E m p l o y e e s O t h e r T h a n D i r e c t o r s ( ‘ T h e E x e c u t i v e s ’ )
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 2010 and are referred to as Executives:
P Beilby1
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 Project Management
General Manager Australian Operations
General Manager Corporate Services and Company Secretary
1
Ceased employment 1 March 2010.
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.
ANNUAL REPORT 2010
19
2010
Name
Non-executive Directors
R Every5
D Morley
W Osborn6
G Pizzey
G Rezos
J Seabrook
S Turner7
Executive Director
D Robb
Executives
P Beilby4
P Benjamin*
C Cobb
V Hugo
A Tate*
H Umlauff*
S Wickham*
C Wilson*
Short Term Employee Benefits
Cash, Salary
& Fees1
STIP Cash2**
$
Non-Monetary
Benefits
$
Other
$
Superannuation
$
Share Based
Payments2,3**
$
106,944
136,237
90,456
217,262
124,763
121,951
89,828
n/a
n/a
n/a
n/a
n/a
n/a
n/a
7,794
6,076
-
-
-
-
-
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5,421
12,150
8,141
13,123
11,229
10,976
8,085
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total
$
120,159
154,463
98,597
230,385
135,992
132,927
97,913
1,451,941
836,386
38,206
-
48,059
1,359,631
3,734,223
165,752
410,092
407,833
382,519
462,423
529,358
472,556
422,376
-
177,517
183,167
164,566
205,436
236,282
206,438
185,207
-
6,487
-
6,487
-
4,767
4,768
6,487
315,000
-
-
-
-
-
-
-
5,905
36,908
36,180
26,139
28,514
47,642
17,781
26,385
261,039
361,570
41,580
256,549
369,704
366,074
242,164
364,455
747,696
992,574
668,760
836,260
1,066,077
1,184,123
943,707
1,004,910
1.
2.
3.
4.
5.
6.
7
*
**
STIP Cash includes cash that is sacrificed for the purchase of shares during the year.
STIP Cash and share-based awards for 2009 were made in March 2010.
Includes negative amounts for the reversal of prior year charges for the ROE component of the 2008 LTIP which did not vest.
Ceased employment 1 March 2010. “Other” relates to redundancy payment and statutory leave entitlements on cessation of employment.
Retired on 20 May 2010.
Appointed 26 March 2010. No payments were made to W Osborn as consideration for his appointment.
Appointed 26 March 2010. No payments were made to S Turner as consideration for his appointment.
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.
Short Term Employee Benefits
Cash, Salary
& Fees1
STIP Cash4 **
$
Non-Monetary
Benefits**
$
Other
$
Superannuation
$
Share Based
Payments2,3,4**
$
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*
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
1,431,078
260,843
51,489
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
n/a
n/a
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
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
68,922
1,383,517
3,195,849
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.
2.
3.
4.
5.
*
**
STIP cash salary includes salary that is sacrificed for the purchase of shares during the year.
Includes negative amounts for the reversal of prior year charges for the ROE component of the 2007 LTIP which did not vest.
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 together with the full year charge for the Iluka Retention Plan share rights granted in March 2008 which vest in March 2011.
STIP Cash and share-based awards for 2009 were made in March 2010.
Appointed 12 October 2009. C Cobb was formerly Managing Director of Consolidated Rutile Limited. No payments were made to C Cobb as consideration for him 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.
20
ILUKA RESOURCES LIMITED
S H A R E - B A S E D C O M P E N S AT I O N
S T I P R e s t r i c t e d S h a r e s a w a r d e d t o t h e M a n a g i n g D i r e c t o r a n d E x e c u t i v e s y e t t o v e s t
Name
D Robb
P Benjamin
C Cobb
V Hugo
A Tate
H Umlauff
S Wickham
C Wilson
2008 STIP1
2009 STIP1
2010 STIP1
2008
2009
2010
Awarded %2
92,687
18,091
-
17,671
20,994
25,405
11,708
21,468
70,689
6,297
-
10,973
17,772
24,722
19,718
16,153
78,460
16,653
17,183
15,438
19,272
22,165
19,366
17,374
91
84
-
88
87
88
87
96
29
12
-
22
30
35
37
30
93
88
97
89
92
91
92
92
1
2
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. STIP restricted shares are awarded in March of the following year (for
example, 2010 STIP awards are made in March 2011).
The percentage achieved of the STIP maximum available incentive opportunity awarded for the financial year.
M a x i m u m v a l u e o f r e s t r i c t e d s h a r e s a n d s h a r e r i g h t 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
Maximum Value ($)
Vesting Year
2011
1,250,647
164,898
-
110,282
170,708
144,951
84,093
174,511
2012
137,386
33,693
-
33,310
42,491
51,613
39,587
38,621
2013
121,951
36,504
34,146
33,252
40,163
46,911
40,650
36,504
2011
1,914,031
642,903
-
421,008
660,501
547,328
320,517
680,066
2012
540,468
135,251
-
132,550
168,159
203,492
155,892
152,844
2013
376,829
112,797
105,511
102,749
124,104
144,955
125,609
112,797
Name
D Robb
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
2010 LTIP
2010 STIP*
Fair Value
per Share
$
6.57
4.09
2.93
4.66
4.06
3.57
4.09
0.90
1.19
0.90
3.09
Vesting Year
2010
2010
2011
2010 & 2011
2012
2011 & 2012
2011
2011
2011
2011
2013
10.66
2012 & 2013
The fair value is calculated 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 (“LTI P”) 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.
*
Awards under these plans are restricted shares, all other plans grant share
rights.
ANNUAL REPORT 2010
21
auditor’s independence
declaration
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2010, 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 J Smith
Partner
PricewaterhouseCoopers
Perth
24 March 2011
Liability limited by a scheme approved under Professional Standards Legislation.
22
ILUKA RESOURCES LIMITED
corporate
governance
AP P R O A C H T O CO R P O R AT E GO V E R N A N C E
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
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 E N D AT I O N S
Iluka considers that it meets each of the requirements of the
Australian Securities Exchange (“ASX”) Corporate Governance
Council’s (“Council”) Corporate Principles and Recommendations
(Second Edition) (“Corporate Principles”).
The Corporate Governance section of the Iluka website www.iluka.
com contains the company’s key governance policy documents. These
include the:
•
•
•
•
•
•
•
•
Board Charter
Directors’ Code of Conduct
Audit and Risk Committee Charter
Remuneration and Nomination Committee Charter
Employee Code of Conduct
Securities Trading Policy
Continuous Disclosure Policy
Whistleblower Policy
DI V E R S I T Y
Iluka acknowledges the Council’s amendments to the Corporate
Principles in respect to diversity that were released on 30 June 2010
(“Diversity Principles”). In regard to Iluka, the Diversity Principles
take effect from and including the 2011 financial year. As a result,
Iluka will report for the first time on compliance with Diversity
Principles in the 2011 Annual Report.
In 2011, Iluka will continue to seek to attract and retain the best
people while building and maintaining a diverse, sustainable and
high achieving workforce that reflects its communities. The company
will develop and implement programs to further foster workforce
diversity in regards to gender and age and in terms of participation
by indigenous people and people with disabilities.
BO A R D O F 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:
•
•
•
•
•
appointing and removing the Managing Director;
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 implementation and achievement of strategic
and financial objectives; and
reporting to shareholders and the investment community on
the performance of the company.
The implementation of corporate strategy and day-to-day
management of Iluka’s affairs are delegated to 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 (www.iluka.com).
BO A R D CO M P O S I T I O N
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 a maximum of ten years, unless
otherwise requested by the Board to continue.
DI R E C T O R IN D E P E N D E N C 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.
ANNUAL REPORT 2010
23
The Board assesses the independence of new Directors upon
appointment and reviews the independence of other Directors as
appropriate.
MA N A G I N G DI R E C T O R
The Managing Director, Iluka’s most senior employee, recommends
policy, strategic direction and business plans for the Board’s
approval and is responsible for managing the company’s day-to-day
activities.
The Managing Director is selected and appointed by the Board and
is subject to an annual performance review by the non-executive
Directors.
CO N F L I C T S O F IN T E R E S T
The non-executive Directors periodically meet independent of
management to discuss relevant issues.
Directors’ attendance at Board and Committee meetings is detailed
on page 5 of this report.
CO M PA N Y SE C R E TA R Y
Mr Cameron Wilson is Iluka’s Company Secretary. The position of
Company Secretary is responsible for:
•
•
•
•
advising the Board on corporate governance;
management of the company secretarial function;
attending all Board and Board committee meetings and taking
minutes; and
communication with the ASX.
Each Director has an ongoing responsibility to:
CO M M I T T E E S O F T H E BO A R D
•
•
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.
DI R E C T O R ED U C 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
IN D E P E N D E N T AD V I 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.
BO A R D ME E T I N G S
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 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.
R E M U N E R AT I O N A N D N O M I N AT I O N
CO M M I T T E E
The Remuneration and Nomination Committee 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;
succession planning for key roles; and
assessment, composition and succession of the Board.
The Remuneration and Nomination Committee’s consists of the
following independent, non-executive Directors: Mr Wayne Osborne
(Chairman), Ms Jennifer Seabrook, Mr Gavin Rezos and Mr John
Pizzey. Details of Directors attendance at Remuneration and
Nomination Committee meetings are set out on page 5.
Comprehensive details of the processes and principles underlying
the work of the Remuneration and Nomination Committee are
discussed in the Remuneration Report appearing on pages 9 to 21 of
this Report.
For further information on the scope and responsibilities of the
Remuneration and Nomination Committee, please refer to Iluka’s
website (www.iluka.com).
24
ILUKA RESOURCES LIMITED
A U D I T A N D RI S K CO M M I T T E E
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
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:
•
•
•
•
the integrity of financial reporting;
the adequacy of the control environment;
the process for the management of risk; and
the internal and external audit functions.
The 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;
evaluating the independence of the external auditor and
ensuring that the provision of non-audit services by the
external auditor does not adversely impact upon auditor
independence;
reviewing and approving internal audit plans including
identified risk areas;
gaining assurance as to the adequacy of the company’s
policies and processes for identifying, documenting and
addressing risks;
reviewing other key financial processes including tax,
insurance, treasury operations and superannuation
arrangements to ensure legal compliance and prudent
management practices; and
reviewing processes and internal controls in place to ensure
compliance with laws and regulations.
The Audit and Risk Committee consists of the following independent,
non-executive Directors: Mr Don Morley (Chairman), Mr Gavin Rezos,
Mr Stephen Turner and Ms Jenny Seabrook.
For further information on the scope and responsibilities of the Audit
and Risk Committee, please refer to Iluka’s website
(www.iluka.com).
EV A L U AT I O N
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 the Board. This annual review was last undertaken December
2010.
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 2010.
CO R P O R AT E RE P O R T I N G
The Managing Director and Chief Financial Officer have made
the following certifications to the Board with respect to the 2010
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, 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 FU N C T I O N S
PricewaterhouseCoopers (“PwC”) is the company’s external audit
provider. During 2010, 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.
ANNUAL REPORT 2010
25
ET H I C A L STA N D A R D S A N D CO N D U C T
CO N T I N U O U S DI S C L O S U R E
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 (www.iluka.com).
SE C U R I T I E S TR A D I N G PO 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 (www.iluka.com).
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 (www.iluka.com).
SH A R E H O L D E R CO M M U N I C AT I O N
The company is committed to providing accurate information to all
shareholders and the market and follows a yearly program 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.
26
ILUKA RESOURCES LIMITED
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
P R I N C I P L E S A N D R E C O M M E N D AT I O N S ( 2 N D E D I T I O N ) W I T H 2 0 1 0 A M E N D M E N T S
Principle
Recommendation
Compliance
1
1.1
1.2
2
2.1
2.2
2.3
2.4
2.5
3
3.1
3.2
3.3
3.4
4
4.1
4.3
4.4
5
5.1
6
6.1
Lay solid foundations for management and oversight
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.
Structure the board to add value
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.
Promote ethical and responsible decision-making
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;
the responsibility and accountability of individuals for reporting and investigating reports of unethical
practices.
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy.
The policy should include requirements for the board to establish measurable objectives for achieving gender
diversity for the board to assess annually both the objective and progress in achieving them.
Intend to comply and will report
progress in the 2011 Annual
Report
Companies should disclose in each annual report the measurable objectives for achieving gender diversity set
by the board in accordance with the diversity policy and progress towards achieving them.
Companies should disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the board.
Intend to comply and will report
progress in the 2011 Annual
Report
Intend to comply and will report
progress in the 2011 Annual
Report
Safeguard integrity in financial reporting
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.
Make timely and balanced disclosure
Comply
Comply
Comply
Companies should establish the functions reserved to the board and those delegated to senior executives and
disclose those functions.
Comply
Respect the rights of shareholders
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.
Comply
ANNUAL REPORT 2010
27
Principle
Recommendation
7
7.1
7.2
7.3
8
8.1
8.2
8.3
Recognise and manage risk
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.
Remunerate fairly and responsibly
The board should establish a remuneration committee.
The remuneration committee should be structured so that it:
–
–
–
consists of a majority of independent directors
is chaired by an independent chair
has at least three members.
Compliance
Comply
Comply
Comply
Comply
Comply
Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of
executive directors and senior executives.
Comply
28
ILUKA RESOURCES LIMITED
financial
report
Financial report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members
30
31
32
33
34
35
70
71
This financial report covers the consolidated financial statements for the consolidated entity consisting of Iluka Resources Limited and
its subsidiaries. The financial statements are 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 statements were authorised for issue by the directors on 24 March 2011. The company has the power to amend and reissue
the financial statements.
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
ANNUAL REPORT 2010
29
consolidated income statement
for the year ended 31 december 2010
Revenue from continuing operations
Other income
Expenses
Interest and finance charges
Rehabilitation and restoration unwind
Total finance costs
Impairment charges
Profit (loss) before income tax from continuing operations
Income tax (expense) benefit
Profit (loss) from continuing operations
Profit from discontinued operations
Profit (loss) for the year
Basic and diluted earnings per share
Earnings per share from continuing operations attributable to owners
Earnings per share attributable to owners
The above income statement should be read in conjunction with the accompanying notes.
Notes
5
6
7
7
7
8
9
29
29
2010
$m
964.6
8.4
(885.8)
(33.0)
(14.3)
(47.3)
-
39.9
(3.8)
36.1
-
36.1
Cents
8.6
8.6
2009
$m
602.6
39.5
(717.2)
(8.4)
(15.7)
(24.1)
(67.6)
(166.8)
61.5
(105.3)
22.9
(82.4)
Cents
(25.9)
(20.2)
30
ILUKA RESOURCES LIMITED
consolidated statement of comprehensive income
for the year ended 31 december 2010
Profit (loss) 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 on defined benefit plans, net of tax
Other comprehensive (loss) 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
2010
$m
36.1
(3.6)
(6.9)
6.7
0.6
(3.2)
32.9
32.9
-
32.9
2009
$m
(82.4)
83.5
(22.8)
23.6
2.4
86.7
4.3
(1.1)
5.4
4.3
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2010
31
consolidated balance sheet
as at 31 december 2010
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
Non-current assets
Inventories
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
Provisions
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained (losses) profits
Non-controlling interests
Total equity
Notes
10
11
12
3
12
13
14
15
16
17
18
17
18
19
20(a)
20(b)
2010
$m
30.1
164.8
201.0
-
-
395.9
56.6
1,425.0
55.3
7.1
1,544.0
1,939.9
103.7
29.5
-
54.9
-
188.1
313.3
313.9
-
627.2
815.3
1,124.6
1,108.3
20.4
(4.1)
1,124.6
-
2009
$m
86.3
103.9
205.5
15.9
-
411.6
56.6
1,566.6
53.7
9.9
1,686.8
2,098.4
183.7
44.7
-
28.1
-
256.5
423.7
322.9
-
746.6
1,003.1
1,095.3
1,114.4
22.0
(41.1)
1,095.3
-
1 January
2009*
97.6
243.2
249.7
-
8.5
599.0
-
1,414.6
31.0
13.5
1,459.1
2,058.1
164.1
36.8
5.0
61.4
104.0
371.3
276.5
322.7
49.6
648.8
1,020.1
1,038.0
998.1
(55.8)
37.5
979.8
58.2
1,124.6
1,095.3
1,038.0
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
*
See note 1(a) for details regarding a change in accounting policy.
32
ILUKA RESOURCES LIMITED
consolidated statement of changes in equity
for the year ended 31 december 2010
Attributable to owners of Iluka Resources Limited
Contributed
equity
$m
Reserves
$m
Retained
earnings
$m
Total
$m
Non-controlling
interests
$m
Total equity
$m
Notes
Balance at 1 January 2009
998.1
(84.3)
66.0
979.8
58.2
1,038.0
1
-
28.5
(28.5)
-
-
-
998.1
(55.8)
37.5
979.8
58.2
1,038.0
-
(82.2)
Adjustment on adoption of AASB 2008-8
Restated total equity at the beginning of
the financial year
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
Balance at 1 January 2010
Adjustment on adoption of AASB 2008-8
Restated total equity at the
beginning of the financial year
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 gains on retirement benefit
obligations, net of tax
Transfer of asset revaluation reserve
Total comprehensive income
Transactions with owners in their
capacity as owners:
Transfer of shares to employees
Share based payments, net of tax
Purchase of treasury shares, net of tax
20
20
20
20
20
19
19
19
1
20
20
20
20
20
19
19
19
-
-
-
-
-
-
-
113.5
2.8
-
-
-
116.3
1,114.4
1,114.4
-
1,114.4
-
-
-
-
-
-
-
1.1
-
(7.2)
(6.1)
77.9
(22.8)
23.6
-
(1.2)
77.5
-
(2.8)
3.1
-
-
0.3
22.0
19.9
2.1
22.0
(82.2)
77.9
(22.8)
23.6
2.4
-
(1.1)
113.5
-
3.1
-
-
116.6
-
-
-
2.4
1.2
(78.6)
-
-
-
-
-
-
(41.1)
1,095.3
(39.0)
(2.1)
1,095.3
-
(41.1)
1,095.3
-
36.1
36.1
(3.6)
(6.9)
6.7
-
(0.3)
(4.1)
(1.1)
3.6
-
2.5
-
-
-
0.6
0.3
37.0
-
-
-
-
(3.6)
(6.9)
6.7
0.6
-
32.9
-
3.6
(7.2)
(3.6)
Balance at 31 December 2010
1,108.3
20.4
(4.1)
1,124.6
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
(0.2)
5.6
-
-
-
-
5.4
-
-
-
(1.8)
(61.8)
(63.6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(82.4)
83.5
(22.8)
23.6
2.4
-
4.3
113.5
-
3.1
(1.8)
(61.8)
53.0
1,095.3
1,095.3
-
1,095.3
36.1
(3.6)
(6.9)
6.7
0.6
-
32.9
-
3.6
(7.2)
(3.6)
1,124.6
ANNUAL REPORT 2010
33
consolidated statement of cash flows
for the year ended 31 december 2010
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Tax paid
Exploration expenditure
MAC royalty receipts
Other
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Sale of property, plant and equipment
Sale of CRL
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Purchase of treasury shares
Dividends paid to CRL minority interests
Issue of ordinary shares
Share issue 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
The above cash flow statement should be read in conjunction with the accompanying notes.
Notes
28
9
19(b)
19(b)
10
2010
$m
888.3
(727.2)
161.1
1.1
(30.5)
(1.5)
(17.9)
63.9
2.5
178.7
(117.2)
9.0
-
(108.2)
-
(116.4)
(9.8)
-
-
-
(126.2)
(55.7)
86.3
(0.5)
30.1
2009
$m
744.8
(663.0)
81.8
1.5
(14.0)
(4.4)
(20.0)
55.2
2.1
102.2
(521.6)
9.9
84.2
(427.5)
309.8
(105.6)
-
(1.8)
114.0
(0.5)
315.9
(9.4)
97.6
(1.9)
86.3
34
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
for the year ended 31 december 2010
CO N T E N T S
1 Summary of significant accounting policies
2 Critical accounting estimates and judgements
3
Financial risk management
4 Segment information
5 Revenue from continuing operations
6 Other income
7
Expenses
8
Income tax
9 Discontinued operations
10 Cash and cash equivalents
11 Receivables
12
Inventories
13 Property, plant and equipment
14 Deferred tax assets
15
Intangible assets
16 Payables
17
Interest bearing liabilities
18 Provisions
19 Contributed equity
20 Reserves and retained earnings
21 Key management personnel
22 Remuneration of auditors
23 Retirement benefit obligations
24 Contingent liabilities
25 Commitments
26 Related party transactions
27 Controlled entities and deed of cross guarantee
28 Reconciliation of profit (loss) after
income tax to net cash inflow from operating activities
29
Earnings per share
30 Share-based payments
31 Parent entity financial information
36
44
46
48
50
50
50
51
51
52
52
52
53
54
54
55
55
56
57
58
59
61
62
64
65
65
65
67
67
68
69
ANNUAL REPORT 2010
35
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated. These financial statements are for the consolidated entity
consisting of Iluka Resources Limited and its subsidiaries.
( a )
B a s i s o f p r e p a r a t i o n
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.
The consolidated financial statements of Iluka Resouces Limited also comply with International Financial Reporting Standards (“IFRS”)
as issued by the international Accounting Standards Board (IASB). These financial statements have been prepared under the historical
cost convention except for derivative financial instruments which have been measured at fair value through profit and loss.
Change in Accounting policy
Accounting policy 1(l) Derivatives and hedging activities was amended from 1 January 2010 to comply with AASB 2008 8 “Amendments
to Australian Accounting Standards-Eligible Hedged Items” which permits only the intrinsic value of an option to be recognised in equity
for hedge accounting purposes.
The impact of the change in accounting policy is summarised in the table below:
Previous policy
$m
Notes
Ineffective
losses
$m
Ineffective
fair value
$m
Revised policy
$m
Balance Sheet at 1 January 2009
Reserves (change is to hedging reserve)
Retained profits
Income statement - year ended 31 December 2009
Hedge revenue (losses)
Ineffective (gains) losses of changes in fair value of hedges
Tax benefit
Loss for the year ended 31 December 2009
Other comprehensive income - year ended 31 December 2009
Change in fair value of cash flow hedges net of tax
Balance Sheet at 1 January 2010
Reserves (change is to hedging reserve)
Retained profits
Income statement - year ended 31 December 2010
Hedge revenue (losses)
Ineffective gains from changes in fair value of hedges
20
20
5
6
8
20
20
5
8
(84.3)
66.0
(42.9)
-
72.9
(108.8)
109.9
19.9
(39.0)
13.8
-
-
-
16.6
(16.6)
-
-
-
-
-
(12.4)
12.4
28.5
(28.5)
-
37.8
(11.4)
26.4
(55.8)
37.5
(26.3)
21.2
61.5
(82.4)
(26.4)
83.5
2.1
(2.1)
10.8
(10.8)
22.0
(41.1)
12.2
1.6
As a result of the above change in accounting policy earnings per share attributable to owners for the prior period increased from
(26.8) to (20.2) cents per share.
( b )
P r i n c i p l e s o f c o n s o l i d a t i o n
(i)
Subsidiaries
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Iluka
Resources Limited (‘’Company’’ or ‘’parent entity’’) as
at 31 December 2010 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 consolidated entity.
They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised
gains on transactions between consolidated entity
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 consolidated entity.
36
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
( f )
I n c o m e t a x
(contd)
Non-controlling interests in the results and equity
of subsidiaries are shown separately in the income
statements, consolidated statement of comprehensive
income, consolidated statement of changes in equity and
consolidated balance sheet respectively.
( c )
S e g m e n t r e p o r t i n g
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.
( d )
R e v e n u e r e c o g n i t i o n
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(l).
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 18 years is remaining.
( e )
I n t e r e s t a n d o t h e r
Interest income is recognised in the income statement as it
accrues, using the effective interest method.
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
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.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority.
Current 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. The funding amounts are determined by reference
to the amounts recognised in the wholly-owned entities’
financial statements.
ANNUAL REPORT 2010
37
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(contd)
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 )
A c q u i s i t i o n s o f a s s e t s
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. Acquisition related costs
are expensed as incurred.
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(n) 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 )
C a s h a n d c a s h e q u i v a l e n t s
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 )
Tr a d e r e c e i v a b l e s
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.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when
there is objective evidence that the consolidated entity
will not be able to collect all amounts due according to the
original terms of receivables. The amount of the provision
is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted
at the original effective interest rate. 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 )
I n v e n t o r i e s
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 )
F o r e i g n c u r r e n c y t r a n s l a t i o n
(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.
( l )
D e r i v a t i v e s a n d h e d g i n g a c t i v i t i e s
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
38
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(ii) Net investment hedges
(contd)
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 derivatives 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. To
comply with AASB 2008-8 “Amendments to Australian
Accounting Standards - Eligible Hedged Items”, which
permits only the intrinsic value of an option to be
recognised in equity for hedge accounting purposes,
the group amended its accounting policy from 1 January
2010. The effect of this change in accounting policy is
disclosed in note 1(a).
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.
Hedges of net investments in foreign operations are
accounted for similarly to cashflow hedges. Any gain or
loss on the hedging instrument relating to the effective
portion of the hedge is recognised in equity. The gain
or loss relating to the ineffective portion is recognised
immediately in the income statement within other
income or expenses. Gains or losses accumulated in
equity are included in the income statement on disposal
of the foreign operation.
(iii) 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.
( m )
L o a n s a n d r e c e i v a b l e s
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.
( n ) E x p l o r a t i o n , e v a l u a t i o n a n d
d e v e l o p m e n t e x p e n d i t u r e
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.
ANNUAL REPORT 2010
39
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(contd)
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.
Expenditure associated with the advance 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.
All the above expenditure is carried forward up to
commencement of operations at which time it is amortised in
accordance with the policy stated in Note 1(o).
( o )
P r o p e r t y, p l a n t a n d e q u i p m e n t
Land and buildings are shown at historical cost, less
subsequent depreciation for buildings. Land is not
depreciated. 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.
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 profit or loss during the
reporting 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 of mine buildings, reserves and development
and other non mine specific plant and equipment 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. Depreciation of mine specific
plant is determined on a unit of production basis to more
appropriately match depreciation charges with expected
pattern of consumption of economic benefit 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 or units of production 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 applicable mine life
the applicable mine lives
3-25 years
( p ) M a i n t e n a n c e a n d r e p a i r s
Certain items of plant used in the primary extraction,
separation and secondary processing of extracted minerals
are subject to major overhaul on a cyclical basis. Costs
incurred during such overhauls are characterised as either
in the nature of capital or in the nature of repairs and
maintenance. Work performed may involve:
(i)
the replacement of a discrete sub-component asset,
in which case an asset addition is recognised and the
book value of the replaced item is written off; and
(ii) demonstrably extending the useful life or functionality
of an existing asset, in which case the relevant cost is
added to the capitalised cost of the asset in question.
Costs incurred during a major cyclical overhaul which do
not constitute (i) or (ii) above, are written off as repairs and
maintenance as incurred. Costs qualifying for capitalisation
under (i) or (ii) above are subsequently depreciated in
accordance with Note 1 (o).
General repairs and maintenance which are not
characterised as part of a major cyclical overhaul are
expensed as incurred.
( q ) N o n - c u r r e n t a s s e t s c o n s t r u c t e d b y t h e
c o n s o l i d a t e d e n t i t y
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(v). Borrowing costs are not capitalised whilst
assets are being commissioned.
( r )
I n t a n g i b l e a s s e t s
Significant costs associated with patents and trademarks are
deferred and amortised over the periods of expected benefit.
( s )
R e c o v e r a b l e a m o u n t o f n o n - c u r r e n t
a s s e t s
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
40
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
( x ) R e h a b i l i t a t i o n a n d m i n e c l o s u r e c o s t s
(contd)
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.
( t )
Tr a d e a n d o t h e r p a y a b l e s
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.
( u )
B o r r o w i n g s
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.
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 (2009: 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.
The provisions are reassessed annually and any changes are
accounted for as set out in note 2(iii).
( y )
E m p l o y e e b e n e f i t s
( v )
B o r r o w i n g c o s t s
(i) Wages and salaries, annual leave and sick leave
Borrowing costs are recognised as expenses in the period
in which they are incurred, except where they are included
in the costs of qualifying assets 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. No borrowing costs were
capitalised in 2010 (2009: $12.5 million at a rate of 3.2 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.
( w ) P r o v i s i o n s f o r l e g a l c l a i m s
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.
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. 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
ANNUAL REPORT 2010
41
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(v) Share-based payments
(contd)
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 end of the reporting period 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 (e.g. 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.
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.
( z )
L e a s e s
The group only has operating leases. Leases in which a
significant portion of the risks and rewards of ownership
are not transferred to the group as lessee are classified as
operating leases (note 25). Payments made under operating
leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight line basis over the
period of the lease.
42
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(contd)
( a f ) N e w a c c o u n t i n g s t a n d a r d s a n d
i n t e r p r e t a t i o n s n o t y e t a d o p t e d
( a a ) C o n t r i b u t e d e q u i t y
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.
( a b ) D i v i d e n d s
Provision is made for the amount of any dividend declared on
or before the end of the financial year but not distributed at
balance date.
( a c ) E a r n i n g s p e r s h a r e
(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.
Comparatives have been amended to reflect changes
to the accounting policy on Derivatives and hedging
activities, refer note (1a)
( a d ) R o u n d i n g o f a m o u n t s
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.
( a e ) P a r e n t e n t i t y f i n a n c i a l i n f o r m a t i o n
The financial information for the parent entity, Iluka
Resources Limited, disclosed in note 31 has been prepared
on the same basis as the consolidated financial statements.
Certain new accounting standards and interpretations have
been published that are not mandatory for 31 December 2010
reporting periods. The potential effect of these Standards
is yet to be fully determined. However, it is not expected
that the new Standards will significantly affect the Group’s
financial position. The group does not intend to early adopt
any new standards.
(i) AASB 2009-10 Amendments to Australian
Accounting Standards - Classification of Rights
Issues AASB 132 (effective for annual reporting
periods beginning on or after 1 February 2010)
In October 2009 the AASB issued an amendment to
AASB 132 Financial Instruments: Presentation which
addresses the accounting for rights issues that are
denominated in a currency other than the functional
currency of the issuer.
(ii) AASB 9 Financial Instruments, AASB 2009-
11 Amendments to Australian Accounting
Standards arising from AASB 9 and AASB
2010-7 Amendments to Australian Accounting
Standards arising from AASB 9 (December
2010) (effective for annual reporting periods
beginning on or after 1 January 2013)
AASB 9 Financial Instruments addresses the
classification, measurement and derecognition of
financial assets and financial liabilities.
(iii) Revised AASB 124 Related Party Disclosures
and AASB 2009-12 Amendments to Australian
Accounting Standards (effective for annual
reporting periods beginning on or after 1 January
2011)
In December 2009 the AASB issued a revised AASB 124
Related Party Disclosures. The amendment clarifies and
simplifies the definition of a related party and removes
the requirement for government-related entities to
disclose details of all transactions with the government
and other government-related entities.
(iv) AASB 2009-14 Amendments to Australian
Interpretation - Prepayments of a Minimum Funding
Requirement (effective 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.
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.
ANNUAL REPORT 2010
43
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 1. Summary of significant accounting policies
(i)
Impairment of assets
(contd)
(v) AASB 1053 Application of Tiers of Australian
Accounting Standards and AASB 2010-
2 Amendments to Australian Accounting
Standards arising from Reduced Disclosure
Requirements (effective 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised
differential reporting framework in Australia. Under
this framework, a two-tier differential reporting regime
applies to all entities that prepare general purpose
financial statements.
(vi) AASB 2010-3 Amendments to Australian
Accounting Standards arising from the
Annual Improvements Project and AASB
2010-4 Further Amendments to Australian
Accounting Standards arising from the Annual
Improvements Project (effective for annual periods
beginning on or after 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments
to Australian Accounting Standards as a result of the
IASB’s annual improvements project.
(vii) AASB 2010-6 Amendments to Australian
Accounting Standards - Disclosures on Transfers
of Financial Assets (effective for annual reporting
periods beginning on or after 1 July 2011)
In November 2010, the AASB made amendments to
AASB 7 Financial Instruments: Disclosures which
introduce additional disclosures in respect of risk
exposures arising from transferred financial assets. The
amendments will affect particularly entities that sell,
factor, securitise, lend or otherwise transfer financial
assets to other parties.
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 may have a financial impact on the entity and that
are believed to be reasonable under the circumstances.
( a ) C r i t i c a l a c c o u n t i n g e s t i m a t e s a n d
a s s u m p t i o n s
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:
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.
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.
44
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 2. Critical accounting estimates and judgements
(contd)
In addition, the Australian Federal Government has
proposed introducing a carbon tax no earlier than 2012.
This introduction 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 carbon tax into
its assumptions at 31 December 2010 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; and
government assistance.
(ii) Exploration and evaluation expenditure
Expenditure with a value of $24.7 million (2009: $20.4
million) which does not form part of the CGU assessed
for impairment has been carried forward in accordance
with Note 1 (n) on the basis that exploration and
evaluation activities have not yet reached a stage which
permits a reasonable assessment of the existence or
otherwise of economically recoverable ore reserves and
active and significant operations in relation to the area
are continuing. In the event that significant operations
cease and/or economically recoverable reserves are
not assessed as being present, this expenditure will be
expensed to the Income Statement.
(iii) Rehabilitation and mine closure provisions
As set out in Note 1(x), 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 (2009 6.0
per cent). Of the total provisions $347.4 million (2009:
$332.5 million), $192.4 million (2009: $118.4 million)
relate to assets no longer in use or for obligations
arising from the production process outputs.
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 $2.7
million and $nil million respectively (2009: $7.5 million
and $1.1 million).
( b ) C r i t i c a l j u d g e m e n t s i n a p p l y i n g t h e
e n t i t y ’ s a c c o u n t i n g p o l i c i e s
Recovery of deferred tax assets
Net deferred tax assets of $55.3 million (2009: $53.7 million)
are carried in respect of the Australian and US operations,
including $60.9 million (2009: $51.6 million) attributable to
tax losses. Management has assessed that it is probable
that the net deferred tax will be recoverable against future
taxable profits to be generated in the relevant jurisdiction.
ANNUAL REPORT 2010
45
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 3. Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group.
Financial risk management is managed by a central treasury department under policies approved by the Board of Directors.
( a ) M a r k e t r i s k
(i)
Foreign exchange risk
Foreign exchange risk arises when commercial transactions and recognised assets and liabilities are denominated in a currency other
than Australian dollars.
The Group operates internationally and is exposed to foreign exchange risk arising predominantly from currency exposures to the US
dollar. Balance sheet translation risk is managed by borrowing in US dollars to provide a hedge for the net US dollar investment in the
US operation and the US dollar receivables from Australian sales.
The table below summarises financial assets and liabilities denominated in foreign currencies that form part of the balance sheet
carrying values.
Cash and cash equivalents
Receivables
Payables
Interest bearing liabilities
Group sensitivity
2010
US$m
10.4
133.7
(10.4)
(155.0)
(21.3)
2009
US$m
17.1
77.0
(13.7)
(165.0)
(84.6)
At 31 December 2010, had the Australian dollar been higher/lower by 10 per cent against the US dollar compared to the exchange
rate at that date of US 101.76 cents with all other variables held constant, the consolidated entity’s post-tax profit for the year would
have been $5.6 million higher/$4.6 million lower (2009: $0.9 million higher/$0.8 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 $4.9 million lower/$4.0 million higher (2009: $34.4 million lower/$34.6 million higher) had the Australian
dollar weakened/strengthened by 10 per cent against the US dollar, arising mainly from US dollar debt designated as a natural
hedge. The significant reduction in the sensitivity to movements in the Australian dollar/US dollar exchange rates is due to all cash
flow hedges being delivered by 31 December 2010, with no new cash flow hedges being taken out. The sensitivity is based on the
USD balances at 31 December 2010 rather than amounts which are more reflective of the Group’s objective to reduce balance sheet
translation risk 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.
(ii)
Interest rate risk
Interest rate risk arises from the consolidated entity’s borrowings. When managing interest rate risk the Group seeks to mitigate its
interest rate exposure by utilising a blend of floating and fixed rate debt. During 2010 and 2009, 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 2010, if interest rates for the full year were -/+1 per cent from the year-end rate with all other variables held
constant, post-tax profit for the year would have been $2.1 million higher/lower (2009: $2.3 million higher/lower), mainly as a result
of lower/higher interest expense from net debt. The sensitivity is based on net debt at 31 December 2010 assuming that the net debt
balance stays constant throughout the year.
46
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 3. Financial risk management (contd)
( b )
C r e d i t r i s k
The Group 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 and therefore has no significant
concentrations of credit risk. Of the total receivables balance of $131.0 million, $121.0 million is covered by an insurance policy and is
considered low risk. 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 )
L i q u i d i t y r i s k
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 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 notional principal amounts. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
At 31 December 2010
Non-derivatives
Interest bearing variable rate
Interest bearing fixed rate
Total non-derivatives
Derivatives
Interest rate swaps (net receivable)
Total derivatives
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
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
4.8
6.2
5.6
4.4
11.5
34.9
46.4
1.2
1.2
13.9
52.5
66.4
0.1
0.1
11.5
3.1
14.6
1.2
1.2
13.9
40.3
54.2
0.1
0.1
241.1
80.2
321.3
0.5
0.5
326.7
65.1
391.8
0.2
0.2
-
-
-
-
-
-
23.0
23.0
-
-
264.1
118.2
382.3
2.9
2.9
354.5
180.9
535.4
0.4
0.4
238.9
106.1
345.0
-
-
314.1
157.6
471.7
-
-
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 the previous financial year the
consolidated entity entered into forward exchange contracts and foreign currency options to forward sell US dollars. At 31 December 2010
the Group has not entered into any forward exchange contracts or currency options.
At 31 December 2009, the consolidated entity was due to receive an inflow of A$179.4 million and A$261.1 million and pay an outflow of
US$ 153.5 million and US$ 235.0 million in relation to forward exchange contracts and options respectively, that matured within 1 year.
( d )
F a i r v a l u e e s t i m a t i o n
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. The fair value of call options is determined using the Garman and Kohlhagen (Black
Scholes) Formula at the end of the reporting period.
At 31 December 2010, the Group does not hold derivative financial instruments. At 31 December 2009 the derivative financial instruments
measured and recognised at fair value, were valued at $15.9 million (Level 2 per AASB 7:27A).
ANNUAL REPORT 2010
47
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 4. Segment information
( a ) D e s c r i p t i o n o f s e g m e n t s
Operating segments are 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. These segments are unchanged from those at 31 December 2009.
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 commissioned in the period. 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 commissioned in the period.
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.
Mining Area C (“MAC”) comprises a deferred consideration 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.
( b )
S e g m e n t i n f o r m a t i o n
2010
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
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 (reversals) charges
E/PB
$m
468.7
21.8
981.4
343.1
45.9
86.1
397.1
(11.4)
385.7
(93.5)
1,022.6
377.7
316.7
124.2
38.5
MB
$m
281.4
(0.9)
771.8
71.8
23.3
113.0
124.8
-
124.8
(19.4)
785.4
86.2
211.2
31.9
29.1
US
$m
124.3
22.7
63.3
37.4
10.9
17.0
65.5
-
65.5
12.8
107.3
33.7
19.5
17.3
-
MAC
$m
-
75.9
27.7
-
-
Total
$m
874.4
119.5
1,844.2
452.3
80.1
0.4
216.5
-
-
-
50.2
15.8
-
-
0.4
-
587.4
(11.4)
576.0
(49.9)
1,931.1
497.6
547.4
173.8
67.6
48
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 4. Segment information (contd)
2010
$m
2009
$m
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
Hedging gains (losses)
Sale of goods
Revenues of $168.7 million is derived from an external customer from all mineral sands segments which
individually account for greater than 10 per cent of segment revenue (2009: revenues of $136.7 million and
$96.9 million were derived from two customers from all mineral sands segments).
Segment result is reconciled to the profit (loss) before income tax from continuing operations as follows:
Segment result
Hedging gains (losses)
Interest income
Other income
Ineffective gains of changes in fair value of cash flow hedges
Net foreign exchange (losses) gains
Exploration and corporate restructure and non-recurring costs
Marketing and selling
Corporate and other costs
Depreciation
Product and technical development
Exploration and evaluation
Interest and finance charges
Impairment charges
Profit (loss) 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
Cash and cash equivalents
Deferred tax assets
Total assets as per the balance sheet
Segment liabilities
Corporate liabilities
Interest bearing liabilities
Total liabilities as per the balance sheet
386.3
178.2
216.2
44.2
49.5
874.4
12.2
886.6
119.5
12.2
1.1
1.8
1.6
(4.9)
-
(5.4)
(30.3)
(2.5)
(5.7)
(14.5)
(33.0)
-
39.9
269.9
134.8
85.7
36.3
49.3
576.0
(26.3)
549.7
(49.9)
(26.3)
1.4
-
21.2
5.0
(7.7)
-
(18.3)
-
-
(16.2)
(8.4)
(67.6)
(166.8)
1,844.2
1,931.1
-
10.3
30.1
55.3
1,939.9
452.3
20.3
342.7
815.3
15.9
11.4
86.3
53.7
2,098.4
497.6
37.0
468.5
1,003.1
ANNUAL REPORT 2010
49
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 5. Revenue from continuing operations
Sales revenue
Sale of goods
Other revenue
Interest
Royalty income
Other
Note 6. Other income
Net gain on sale of land
Net gain on disposal of property, plant and equipment
Sundry income
Net ineffective gains from changes in fair value of cash flow hedges
Insurance receipt in respect of WA gas outage
Net foreign exchange gains
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
Rehabilitation and holding costs for closed sites
Depreciation of non productive assets
Government royalties
Marketing and selling
Corporate and other
Technical support, product development and major projects
Exploration and evaluation
Foreign exchange losses
Impairment charges on property, plant and equipment (refer note 13)
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 unwind
Amortisation of deferred borrowing costs
Interest capitalised
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
50
ILUKA RESOURCES LIMITED
2010
$m
886.6
1.1
76.3
0.6
78.0
964.6
0.8
3.3
2.7
1.6
-
-
8.4
543.8
136.9
82.1
2.9
765.7
13.2
10.4
-
17.1
24.1
30.3
5.6
14.5
4.9
2009
$m
549.7
1.4
50.6
0.9
52.9
602.6
5.6
0.8
1.2
21.2
5.7
5.0
39.5
453.6
109.1
34.7
(33.4)
564.0
57.8
-
32.8
13.7
10.2
18.3
4.2
16.2
-
885.8
717.2
-
-
-
32.0
14.3
1.0
-
47.3
9.8
0.6
127.0
0.4
4.1
8.1
38.5
29.1
67.6
19.8
15.7
1.1
(12.5)
24.1
12.9
1.9
176.5
10.6
6.2
8.6
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 8. Income tax
( a )
I n c o m e t a x e x p e n s e ( b e n e f i t )
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 expense (benefit)
( b ) N u m e r i c a l r e c o n c i l i a t i o n o f i n c o m e t a x e x p e n s e ( b e n e f i t )
t o p r i m a f a c i e t a x p a y a b l e
Profit (loss) from continuing operations before income tax expense (benefit)
Profit from discontinued operation before income tax expense
Tax at the Australian tax rate of 30% (2009: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Research and development and investment allowance
Gain on sale of CRL not assessable for tax
Other items
Difference in overseas tax rates
Over provision in prior years
Income tax expense (benefit)
( c )
Ta x e x p e n s e ( i n c o m e ) r e l a t i n g t o i t e m s o f o t h e r c o m p r e h e n s i v e
i n c o m e
Changes in fair value of foreign exchange cash flow hedges (note 20(a))
Currency translation of US operation (note 20 (a))
Actuarial gains (losses) on retirement benefit obligation
( d )
Ta x l o s s e s
Unused capital losses for which no deferred tax asset has been recognised relating to the wholly-owned
Australian controlled entities are approximately $94.7 million (2009: $95.6 million) (tax at the Australian
tax rate of 30 per cent: $28.4 million (2009: $28.7 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 deductibility imposed by tax legislation and no
changes in tax legislation adversely effect these entities in realising the benefit from the deduction for the
losses.
( e )
F r a n k i n g C r e d i t s
2010
$m
-
7.6
(3.8)
3.8
3.8
-
3.8
39.9
-
39.9
12.0
(2.7)
-
0.2
9.5
(1.9)
(3.8)
3.8
1.5
0.7
-
2.2
2009
$m
(4.6)
(54.2)
(2.6)
(61.4)
(61.5)
0.1
(61.4)
(166.8)
23.0
(143.8)
(43.1)
(7.5)
(6.7)
(0.9)
(58.2)
(0.6)
(2.6)
(61.4)
(33.3)
4.3
(0.7)
(29.7)
Franking credits available for future years based on a tax rate of 30 per cent (2009: 30 per cent)
-
(1.6)
The above amounts include adjustments that will arise from the payment of current income tax or receipt of income tax receivable.
Note 9. Discontinued operations
On 27 May 2009 Iluka disposed of its shares in Consolidated Rutile Limited (“CRL”) to Unimin Australia Limited for 45 cents per share and a
consideration of $84.2 million resulting in a profit from discontinued operations of $22.9 million. Details of this disposal were disclosed in note 9 of
the Group’s annual report for the year ended 31 December 2009.
ANNUAL REPORT 2010
51
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 9. Discontinued operations (contd)
Financial performance and cash flow information
Revenue - sale of goods
Cash expenses
Depreciation and amortisation
Finance costs
Profit before income tax
Profit on sale
Income tax expense
Profit after income tax
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 operation
Note 10. Cash and cash equivalents
Cash at bank and in hand
Deposits at call
I n t e r e s t r a t e s
Cash and deposits are at floating interest rates between 0.0 per cent and 4.25 per cent (2009: 0.0 per cent and 3.75
per cent) on US dollar and Australian dollar denominated deposits, and a weighted average interest rate of 2.49 per
cent (2009: 2.87 per cent).
Note 11. Receivables
Trade receivables
Other debtors
Prepayments
Goods and services tax (“GST”)
No trade receivables are impaired and $1.9 million are between 0 and 28 days aged. Due to the short term nature of
these receivables, their carrying amount approximates fair value.
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 2011.
52
ILUKA RESOURCES LIMITED
2010
$m
-
-
-
-
-
-
-
-
-
-
-
-
28.2
1.9
30.1
130.9
23.1
6.8
4.0
164.8
27.8
83.1
86.8
3.3
90.1
201.0
56.6
56.6
2009
$m
21.8
(16.6)
(4.7)
(0.8)
(0.3)
23.3
(0.1)
22.9
(13.4)
81.7
7.5
75.8
84.4
1.9
86.3
85.8
9.5
3.9
4.7
103.9
30.2
44.1
95.1
36.1
131.2
205.5
56.6
56.6
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 13. Property, plant and equipment
At 1 January 2009
Land &
Buildings
$m
Plant,
Machinery &
Equipment
$m
Mine
Reserves &
Development
$m
Exploration &
Evaluation
$m
Project
Development
Expenditure
$m
Cost
Accumulated depreciation*
Opening 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*
Year ended 31 December 2010
Opening written down value
Additions
Disposals
Depreciation/amortisation
Foreign exchange differences
Transfers/reclassifications
Closing written down value
At 31 December 2010
Cost
Accumulated depreciation*
Net written down value*
89.1
(10.4)
78.7
9.0
(11.1)
-
0.7
(0.1)
(1.4)
75.8
85.0
(9.2)
75.8
2.1
(4.8)
(2.7)
(0.1)
20.8
91.1
103.1
(12.0)
91.1
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
27.6
(0.3)
(125.0)
(5.7)
452.2
972.8
1,670.1
(697.3)
972.8
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
37.4
-
(88.5)
(0.3)
126.5
336.4
459.9
(123.5)
336.4
17.2
-
17.2
4.7
-
-
-
-
(1.5)
20.4
20.4
-
20.4
6.9
(1.4)
-
-
(1.2)
24.7
24.7
-
24.7
175.4
-
175.4
421.8
-
-
-
-
(12.1)
585.1
585.1
-
585.1
13.2
-
-
-
(598.3)
-
-
-
-
Total
$m
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
87.2
(6.5)
(216.2)
(6.1)
-
1,425.0
2,257.8
(832.8)
1,425.0
*
Includes cumulative impairment charges (refer note 7)
M i n e r e s e r v e s a n d d e v e l o p m e n t
Included in mine reserves and development are amounts totalling $50.1 million (2009: $223.2 million) which have not been depreciated as mining
of the related area of interest has not yet commenced. An additional $12.1 million relates to assets under construction which are currently not
being depreciated as the assets are not ready for use.
P l a n t , m a c h i n e r y a n d e q u i p m e n t
Included in plant, machinery and equipment are amounts totalling $6.5 million for the consolidated entity (2009: $3.9 million) which relate to assets
under construction. These amounts are not currently being depreciated as the assets are not ready for use.
P r o j e c t d e v e l o p m e n t e x p e n d i t u r e
Project development expenditure in 2009 was: $585.1 million relating to Murray Basin Stage 2 and Jacinth-Ambrosia projects. These projects were
commissioned during the period.
I m p a i r m e n t ( c h a r g e s )
The impairment charge in 2009 of $67.6 million represents the write-off of fair values for deposits from acquisitions in 1998 (Mid West) of $38.5
million and 2002 (Murray Basin) of $29.1 million that are now considered unlikely to be mined.
ANNUAL REPORT 2010
53
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 14. Deferred tax assets
Deferred tax asset amounts recognised in profit or loss
Employee benefits
Rehabilitation provisions
Tax revenue losses
Other
Deferred tax liability amounts in profit or loss off-set in accordance with AASB 112
Depreciation/amortisation
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)
Over (under) provision in prior years
Credited (charged) directly to equity (note 20)
Cash payment of franking deficits tax
Balance at 31 December
2010
$m
6.3
101.6
62.4
6.6
176.9
(103.7)
(3.6)
(6.4)
(7.2)
(2.4)
53.6
-
1.7
-
1.7
55.3
53.7
(7.6)
2.9
4.8
1.5
55.3
2009
$m
6.8
97.9
51.6
4.9
161.2
(100.8)
(4.7)
(2.6)
-
(0.3)
52.8
(1.5)
2.6
(0.2)
0.9
53.7
31.0
54.2
1.8
(33.3)
-
53.7
Deferred tax assets of $77.0 million (2009: $8.4 million) and deferred tax liabilities of $19.6 million (2009: $9.1 million) are expected to be
recovered in less than 12 months.
Note 15. Intangible assets
At 1 January 2009
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
Amortisation charge 2010
Closing written down value
At 31 December 2010
Cost
Accumulated amortisation
Net written down value
54
ILUKA RESOURCES LIMITED
Patent
$m
17.2
(11.6)
5.6
(3.2)
2.4
17.2
(14.8)
2.4
(2.4)
-
-
-
-
Royalty
entitlement asset
$m
10.0
(2.1)
7.9
(0.4)
7.5
10.0
(2.5)
7.5
(0.4)
7.1
10.0
(2.9)
7.1
Total
$m
27.2
(13.7)
13.5
(3.6)
9.9
27.2
(17.3)
9.9
(2.8)
7.1
10.0
(2.9)
7.1
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 16. Payables
Trade payables
Accrued expenses
Employee benefits
Note 17. Interest bearing liabilities
Current
Senior Notes 1996
Non-current
Syndicated Term Loan Facility
Senior Notes 1996
Senior Notes 2003
Deferred borrowing costs
( a )
F i n a n c i n g a r r a n g e m e n t s
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)
(i) Senior Notes - 1996 Series
2010
$m
36.0
58.6
9.1
103.7
29.5
29.5
238.9
-
76.6
(2.2)
313.3
29.5
76.6
39.3
445.0
590.4
29.5
76.6
-
238.9
345.0
39.3
206.1
245.4
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
The remaining tranche of US$30.0 million matures in December 2011 and carries a fixed interest rate of 7.6 per cent.
(ii) Senior Notes - 2003 Series
The notes have an average fixed interest rate of 5.3 per cent and mature in two tranches; being 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 per cent to an AUD variable interest rate
exposure. As at 31 December 2010, the cross currency swap bears an average variable interest rate of 5.7 per cent (2009: 5.1 per
cent). 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.
(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 2011 and subsequent to year end has been extended to 12 March 2012 with a limit of US$50.0 million. Drawings
under the facility are at the discretion of the working capital facility provider based on the acceptance of credit insured receivables.
(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 2010, A$238.9 million was outstanding at an average interest rate of 4.8 per cent (2009: $314.0 million at 4.4 per cent).
ANNUAL REPORT 2010
55
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 17. Interest bearing liabilities (contd)
( b )
I n t e r e s t r a t e r i s k e x p o s u r e a n d m a t u r i t i e s o f i n t e r e s t b e a r i n g l i a b i l i t i e s
2010
Interest-bearing liabilities
Interest rate swaps (notional principal)
2009
Interest-bearing liabilities
Interest rate swaps (notional principal)
Effective floating
average interest
rate
%
Floating
interest rate
$m
1 year or less
$m
1 to 5 years
$m
More than 5
years
$m
Fixed interest rate
4.8
5.7
4.4
5.1
238.9
56.9
295.8
314.1
56.9
371.0
29.5
-
29.5
44.7
-
44.7
76.6
(56.9)
19.7
90.5
(56.9)
33.6
-
-
-
22.4
-
22.4
Total
$m
345.0
-
345.0
471.7
-
471.7
The contractual repricing date of the floating rate interest bearing liabilities at the balance dates will be reset within 1 year or less.
Note 18. Provisions
Current
Employee benefits
Rehabilitation and mine closure
Other provisions
Non Current
Employee benefits
Rehabilitation and mine closure
Retirement benefit obligations (note 23)
2010
$m
7.4
40.2
7.3
54.9
3.3
307.2
3.4
313.9
2009
$m
7.9
17.6
2.6
28.1
3.3
314.9
4.7
322.9
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.
( a ) M o v e m e n t s i n p r o v i s i o n s
Movements in rehabilitation and mine closure and other provisions during the financial year are set out
below:
Balance at 1 January
Change in provisions*
Foreign exchange rate movements
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
332.5
15.8
(2.1)
-
14.3
(13.1)
347.4
2.6
9.1
-
0.1
-
(4.5)
7.3
*
Changes in provision for rehabilitation and mine closure either form part of additions in plant, machinery and equipment or mine reserves and development in note 13.
Costs relating to closed sites are expensed directly to profit and loss.
Other provisions includes $5.4 million in relation to restructure costs.
56
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 19. Contributed equity
( a )
S h a r e c a p i t a l
Ordinary shares Issued and paid up
2010
Number of shares
2009
Number of shares
2010
Paid up value
$m
2009
Paid up value
$m
418,700,517
418,700,517
1,120.0
1,120.0
Treasury shares
(3,220,149)
(1,904,380)
Total consolidated contributed equity
(11.7)
1,108.3
(5.6)
1,114.4
( b ) M o v e m e n t s i n o r d i n a r y s h a r e c a p i t a l
Date
1 January 2009
7 May 2009
Details
Opening balance
Share placement
Transaction costs on share placement net of tax
31 December 2009
Balance
1 January 2010
Opening balance
31 December 2010
Balance
( c )
Tr e a s u r y s h a r e s
Number of shares
Issue price
$3.00
380,700,517
38,000,000
-
418,700,517
418,700,517
418,700,517
$m
1,006.5
114.0
(0.5)
1,120.0
1,120.0
1,120.0
Treasury shares are shares in Iluka Resources Limited held 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 2009
Employee share issues
Balance at 31 December 2009
Acquisition of shares, net of tax
Employee share issues, net of tax
Balance at 31 December 2010
( d ) D i v i d e n d s
Number of shares
2,812,532
(908,152)
1,904,380
1,721,133
(405,364)
3,220,149
$m
8.4
(2.8)
5.6
7.2
(1.1)
11.7
Directors have determined a final dividend of eight cents per share, unfranked. The dividend is unfranked as Iluka does not have franking
credits currently available for distribution. The dividend is payable on 6 April 2011 for shareholders on the register as at 9 March 2011.
( e ) D i v i d e n d r e i n v e s t m e n t p l a n
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. The Directors
have decided to suspend the Dividend Reinvestment Plan until further notice.
( f )
C a p i t a l r i s k m a n a g e m e n t
The groups’ objectives when managing capital are to safeguard its 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.
ANNUAL REPORT 2010
57
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 20. Reserves and retained earnings
( a )
R e s e r v e s
Asset revaluation reserve
Hedging reserve
Share-based payments reserve
Foreign currency translation 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 31 December
Share based payments reserve
Balance at 1 January
Transfer of shares to employees
Share based payments
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 31 December
( b )
R e t a i n e d e a r n i n g s ( a c c u m u l a t e d l o s s e s )
Movements in retained earnings were as follows:
Balance 1 January
Net profit (loss) for the year
Adjustment on adoption of AASB 2008-8*
Acturial gains/(losses) on retirement benefit obligation, net of tax
Transfer from asset realisation reserve
Balance 31 December
2010
$m
16.0
-
6.9
(2.5)
20.4
16.3
(0.4)
0.1
16.0
3.6
7.1
(12.2)
1.5
-
4.4
(1.1)
4.1
(0.5)
6.9
(2.3)
(7.6)
6.7
0.7
(2.5)
(41.1)
36.1
-
0.6
0.3
(4.1)
2009
$m
16.3
3.6
4.4
(2.3)
22.0
17.5
(1.7)
0.5
16.3
(74.2)
84.8
26.3
(33.3)
3.6
3.9
(2.8)
6.2
(2.9)
4.4
(3.1)
(27.1)
23.6
4.3
(2.3)
66.0
(82.2)
(28.5)
2.4
1.2
(41.1)
*
Refer to note 1(a) for explanations of a change in accounting policy and retrospective adjustments recognised on 1 January 2010.
58
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 20. Reserves and retained earnings (contd)
( c ) N a t u r e a n d p u r p o s e o f r e s e r v e s
(i)
Asset revaluation reserve
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.
(ii) Hedging reserve
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(l). Amounts are relassified to profit or loss when the associated hedged transaction affects
profit or loss.
(iii) 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.
(iv) Foreign currency translation reserve
Exchange differences arising on translation of the net investment in foreign operations, including US dollar denominated debt used as
a hedge of the net investment, are taken to the foreign currency translation reserve net of applicable income tax, as described in note
1(k). US$50.0 million of debt (2009: US$80.0 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.
Note 21. Key management personnel
( a )
K e y M a n a g e m e n t P e r s o n n e l
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
W G Osborn
S J Turner
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 2009, except W G Osborn and S J Turner who were appointed as Directors on 26 March 2010. R L Every was Chairman and
Director until his resignation on 20 May 2010.
ANNUAL REPORT 2010
59
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 21. Key management personnel (contd)
( b )
K e y M a n a g e m e n t P e r s o n n e l - E m p l o y e e s O t h e r T h a n D i r e c t o r s ( “ t h e E x e c u t i v e s ” )
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 2010 and are referred to as Executives:
P Beilby1
P Benjamin
C Cobb
V Hugo
A Tate
H Umlauff
S Wickham
C Wilson
1
Ceased employment on 1 March 2010
General Manager Murray Basin
General Manager Exploration
General Manager Sales and Marketing
General Manager Project and Technical Development
Chief Financial Officer
General Manager Project Management
General Manager Australian Operations
General Manager Corporate Services and Company Secretary
Key Management Personnel Compensation (Consolidated and Parent Entity)
2010
Non-executive Directors
Executive Director
Executives
Total
2009
Non-executive Directors
Executive Director
Executives
Total
Short term
benefits
$
Post employment
benefits
$
Share based
payments
$
Termination
benefits
$
Total
$
901,311
2,326,533
4,640,518
69,125
48,059
225,454
-
1,359,631
2,263,135
-
-
315,000
970,436
3,734,223
7,444,107
7,868,362
342,638
3,622,766
315,000
12,148,766
782,500
1,743,410
3,458,297
5,984,207
59,778
68,922
240,013
368,713
-
1,383,517
2,946,268
4,329,785
-
-
-
-
842,278
3,195,849
6,644,578
10,682,705
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 9 - 21 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 1 January
2010*
Vesting of
share rights
Awarded as
Restricted
Shares
Other
changes
Name
Balance
held at 31
December
2010*
Balance held
at 1 January
2010
Granted
during 2010
Vested
as shares
during 2010
Lapsed
during 2010
Balance
held at 31
December
2010
Non-Executive Directors
R Every
D Morley
G Pizzey
G Rezos
J Seabrook
W Osborn
S Turner
28,679
40,876
16,351
63,602
19,314
-
-
Executive Director
D Robb
Executives
P Beilby
P Benjamin
C Cobb
V Hugo
A Tate
H Umlauff
S Wickham
C Wilson
591,171
126,574
102,212
-
121,204
41,988
108,057
39,840
81,048
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(28,679)
-
-
-
-
-
50,000
-
40,876
16,351
63,602
19,314
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,689
1,355
591,171
1,224,657
121,951
-
-
-
-
-
-
-
-
54,614
968
-
2,946
-
-
-
2,691
-
6,297
-
10,973
17,772
24,722
19,718
16,153
(181,188)
1,355
-
(18,645)
-
(19,873)
1,355
-
-
110,832
-
116,478
59,760
112,906
60,913
99,892
141,970
175,171
-
117,894
174,433
146,437
92,254
178,202
-
36,504
34,146
33,252
40,163
46,911
40,650
36,504
(54,614)
(968)
-
(2,946)
-
-
-
(2,691)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(61,308)
1,285,300
(87,356)
(17,329)
-
(16,062)
(19,414)
(23,092)
(10,763)
(17,983)
-
193,378
34,146
132,138
195,182
170,256
122,141
194,032
*
Balances for the Executive Director and the Executives include restricted shares which will vest in future periods subject to legislative requirements.
60
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 21. Key management personnel (contd)
( c )
Tr a n s a c t i o n s w i t h K e y M a n a g e m e n t P e r s o n n e l
No loans existed at the commencement of the year and no loans were made during the year ended 31 December 2010.
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 $116,279 were provided under normal commercial terms and conditions.
Services in the prior year of $745,000 were provided prior to the appointment of Ms Seabrook as a director under normal terms and
conditions.
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)
(b)
occurrence was within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those
it is reasonable to expect the consolidated entity would have adopted if dealing at arms length with an unrelated individual;
information about these transactions does not have the potential to adversely affect decisions about the allocation of scarce
resources made by users of the 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:
2010
$000
2009
$000
( a )
A s s u r a n c e s e r v i c e s
Audit and audit related services
Fees paid to PwC
PwC Australia
Other PwC firms
Total remuneration for audit services
Other assurance services
PwC Australia
Total remuneration for assurance services
( b )
Ta x a t i o n s e r v i c e s
Fees paid to PwC
PwC Australia
Total remuneration for taxation services
( c ) O t h e r s e r v i c e s
Fees paid to PwC
PwC Australia
Other PwC firms
Total remuneration for other services
550
50
600
107
707
27
27
65
-
65
562
52
614
65
679
67
67
113
34
147
ANNUAL REPORT 2010
61
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 23. Retirement benefit obligations
( a )
S u p e r a n n u a t i o n p l a n s
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 (that is, 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.
USA
All employees of the United States (“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.
( b )
B a l a n c e s h e e t a m o u n t s
Defined benefit plan obligation - present value
Defined benefit fund plan assets - fair value
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
2010
$m
17.5
(14.1)
3.4
19.7
0.5
1.0
0.1
(0.3)
(1.7)
(1.8)
17.5
15.0
0.9
0.4
(1.3)
0.8
0.1
(1.8)
14.1
0.4
8.8
3.7
0.2
1.0
14.1
2009
$m
19.7
(15.0)
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
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
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 23. Retirement benefit obligations (contd)
( c )
A m o u n t s r e c o g n i s e d i n i n c o m e s t a t e m e n t s
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 )
P r i n c i p a l a c t u a r i a l a s s u m p t i o n s
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
2010
$m
0.5
1.0
(0.9)
-
0.6
1.4
2010
%
4.7
5.0
3.5
1.5
6.0
7.5
3.5
3.0
2009
$m
0.8
1.2
(0.9)
0.8
1.9
3.0
2009
%
5.7
5.0
3.5
1.5
6.0
7.5
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 )
E m p l o y e r c o n t r i b u t i o n s
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 (2009: 12.5 per cent to 12.9 per
cent) of salaries, dependent on the defined benefit category of membership.
An actuarial valuation of the Plan as at 30 June 2010 is currently underway. The economic assumptions being used by the actuary to make
funding recommendations are, for defined benefit members: a long term investment earning rate of 5.0 per cent (2009: 5.0 per cent) (net of
fees and taxes), a salary increase rate of 3.5 per cent (2009: 3.5 per cent), and an indexation rate of 1.5 per cent (2009: 1.5 per cent). As at
31 December 2010 only 5 members remain in the plan.
ANNUAL REPORT 2010
63
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 23. Retirement benefit obligations (contd)
USA
Employer contributions to the defined benefits section of the plan are based on recommendations by the plan’s actuary.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they
become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the Projected Unit Credit
(“PUC”) method. 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 plans future experience the
actuary recommended in the actuarial review, the payment of US$0.6 million (2009: US$0.7 million) for the salaried defined benefit plan and
US$0.1 million (2009: US$0.1 million) for the hourly defined benefit plan.
Total employer contributions expected to be paid by the consolidated entity for the year ending 31 December 2011 are US$0.7 million.
( f )
N e t f i n a n c i a l p o s i t i o n o f p l a n s
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 2010 was a surplus of $0.4
million (2009: deficit $0.6 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 2010) and in accordance with IAS 19 Employee Entitlements, and a deficit of $3.6 million as at 31 December 2010 (2009:
deficit $5.2 million) was reported.
( g ) H i s t o r i c s u m m a r y
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
2010
$m
17.5
(14.1)
3.4
2009
$m
19.7
(15.0)
4.7
2008
$m
27.6
(16.2)
11.4
2007
$m
20.4
(17.9)
2.5
Note 24. Contingent liabilities
Performance commitments and guarantees (a)
2010
$m
103.6
2006
$m
21.5
(17.4)
4.1
2009
$m
84.6
(a)
(b)
(c)
The consolidated entity has negotiated a number of bank guarantees in favour of various government authorities and service providers to
meet its obligations under exploration and mining tenements.
There is some risk that native title, as established by the High Court of Australia’s decision in the Mabo case, exists over some of the land
over which the consolidated entity holds tenements or over land required for access purposes. It is impossible at this stage to quantify the
impact (if any) which these developments may have on the operations of the consolidated entity.
In the course of its normal business, the consolidated entity occasionally receives claims arising from its operating activities. In the opinion
of the Directors, all such matters are covered by insurance, or, if not covered, are without merit or are of such a kind or involve such
amounts that would not have a material adverse effect on the operating results or financial position of the consolidated entity if settled
unfavourably.
64
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 25. Commitments
( a )
C a p i t a l c o m m i t m e n t s
2010
$m
2009
$m
Amounts contracted for and payable within 1 year
9.9
25.3
( b )
E x p l o r a t i o n a n d m i n i n g l e a s e c o m m i t m e n t s
Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities
payable:
Within one year
Later than one year but not later than five years
Later than five years
These costs are discretionary. If the expenditure commitments are not met then the associated exploration
and mining leases may be relinquished.
( c )
L e a s e c o m m i t m e n t s
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 ) O t h e r c o m m i t m e n t s
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
22.9
42.2
59.1
124.2
18.8
27.7
4.7
51.2
41.3
122.4
20.0
183.7
24.9
36.7
56.6
118.2
10.5
28.9
8.8
48.2
77.4
134.9
41.7
254.0
The commitments include $170.7 million (2009: $189.3 million) in respect of the consolidated entity for term contracts for coal, gas, electricity and water
used in the production process.
Note 26. Related party transactions
( a ) D i r e c t o r s a n d s p e c i f i e d e x e c u t i v e s
Disclosures relating to Directors and Key Management Personnel are set out in Note 21.
( b )
C o n t r o l l e d e n t i t i e s a n d c o n t r o l l i n g e n t i t i e s
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.
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: Aston Coal Interests
Pty Ltd (Iluka interest 93.4 per cent), Iluka International (Brazil) Pty Ltd (Iluka interest 100.0 per cent). The group’s activities in the United States
are undertaken by Iluka Resources Inc which is 100 per cent owned.
ANNUAL REPORT 2010
65
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 27. Controlled entities and deed of cross guarantee (contd)
C o n d e n s e d i n c o m e s t a t e m e n t o f E x t e n d e d C l o s e d G r o u p
Revenue from ordinary activities
Other expenses from ordinary activities
Finance costs
Impairment charges
Income tax benefit
Profit (loss) for the year
C o n d e n s e d s t a t e m e n t o f c o m p r e h e n s i v e i n c o m e
Profit (loss) 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
S u m m a r y o f m o v e m e n t s i n c o n s o l i d a t e d r e t a i n e d e a r n i n g s
Retained earnings at the beginning of the financial year
Profit (loss) for the year
Retained earnings at the end of the financial year
C o n d e n s e d b a l a n c e s h e e t o f E x t e n d e d C l o s e d G r o u p
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
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
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
66
ILUKA RESOURCES LIMITED
2010
$m
840.4
(769.6)
(46.9)
-
2.7
26.6
26.6
(3.6)
0.6
(3.0)
23.6
(11.9)
26.6
14.7
19.2
156.0
193.9
-
369.1
15.3
56.6
42.4
1,389.1
44.8
7.1
1,555.3
1,924.4
96.1
29.5
41.7
167.3
313.3
297.9
611.2
778.5
1,145.9
1,108.3
22.9
14.7
1,145.9
2009
$m
538.9
(636.3)
(23.3)
(67.6)
65.0
(123.3)
(123.3)
72.9
(2.0)
70.9
(52.4)
111.4
(123.3)
(11.9)
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
1,126.8
1,114.4
24.3
(11.9)
1,126.8
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 28. Reconciliation of profit (loss) after income tax to net cash inflow from
operating activities
Profit (loss) for the year
Depreciation and amortisation
Unrealised ineffective (gains) losses of changes in fair value of cash flow hedges
Exploration capitalised
Interest capitalised
Net gain on disposal of property, plant and equipment
Net gain on disposal of CRL
Net exchange differences on borrowings
Rehabilitation and restoration accretion expense
Non-cash share based payments expense
Amortisation of deferred borrowing costs
Other
Impairment charges
Change in operating assets and liabilities
Decrease (increase) in receivables
Decrease (increase) in inventories
Decrease (increase) in derivatives
Decrease (increase) in deferred tax assets
Increase (decrease) in payables
Increase (decrease) in current tax liabilities
Increase (decrease) in provisions
Net cash inflow (outflow) from operating activities
Note 29. Earnings per share
( a )
B a s i c a n d d i l u t e d e a r n i n g s p e r s h a r e
(Loss) profit from continuing operations attributable to owners
Profit from discontinued operation
Profit attributable to the owners
( b )
R e c o n c i l i a t i o n s o f e a r n i n g s u s e d i n c a l c u l a t i n g
e a r n i n g s p e r s h a r e
(Loss) profit for the year from continuing operations
Net profit (loss) attributable to non-controlling interests
Profit from continuing operations attributable to owners
Profit from discontinued operation
Profit attributable to owners used in calculating basic earnings per share
2010
$m
36.1
219.0
-
(4.3)
-
(4.1)
-
(5.7)
14.3
3.8
1.0
0.8
-
(62.0)
2.6
10.8
4.5
(38.7)
-
0.6
178.7
2010
cents
8.6
-
8.6
36.1
-
36.1
-
36.1
2009
$m
(82.4)
176.6
(26.4)
(3.3)
(12.5)
(6.8)
(22.9)
(17.5)
15.7
6.2
1.1
(0.6)
67.6
129.1
(59.5)
-
(68.5)
43.5
(5.9)
(31.3)
102.2
2009
cents
(25.9)
5.7
(20.2)
(105.5)
0.2
(105.3)
22.9
(82.4)
Weighted average number of shares used in calculating basic and diluted earnings per share
418,700,517
405,582,708
ANNUAL REPORT 2010
67
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 30. Share-based payments
The Share Based Payment expense in the profit and loss account of $4,100,000 (2009: $6,245,000) results from several schemes summarised
below. Further information on each scheme is contained in the Remuneration Report.
Schemes
2009 STIP (i)
2008 STIP (i)
2007 STIP (i)
2010 LTIP (ii)
2009 LTIP (ii)
2008 LTIP (ii)
2007 LTIP (ii)
Iluka Retention Plan Share Rights (i) (iv)
MD Retention Share Rights (ii)
2006 PIP and prior plans (i) (v)
Total share based payments
Grant date
Vesting date
Fair value
Share rights at
31 Dec 10
Expense 2010
$m
Share rights at
31 Dec 09
Expense 2009
$m
Jan-10
Jan-09
Jan-08
Jan-10
Jan-09
Jan-08
Jan-07
Mar-08
Mar-08
various
Jan-11
Jan-12
Jan-10
Jan-11
Jan-09
Jan-10
Jan-13
Jan-12
Jan-11
Jan-10
Mar-11
Mar-11
various
3.58
4.66
4.09
2.59/ 3.58
3.49/ 4.64
2.29/ 3.56
2.79/ 5.84
4.09
1.00
336,834
840,325
-
941,056
645,311
683,621
-
922,230
1,000,000
-
-
856,314
296,435
-
734,743
767,633
318,878
1,060,000
1,000,000
41,763
0.9
0.7
-
1.1
0.7
(0.9)
-
1.1
0.5
-
4.1
-
2.7
0.5
-
0.9
0.8
(0.5)
1.4
0.3
0.1
6.2
(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 is disclosed in the remuneration report.
(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. All shares
relating to the 2005 PIP expired in 2010.
68
ILUKA RESOURCES LIMITED
notes to the consolidated financial statements
notes to the consolidated financial statements
for the year ended 31 december 2010
Note 31. Parent entity financial information
Parent Entity
2010
$m
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Shareholders' equity
Contributed equity
Reserves
Retained earnings
Profit (loss) for the year
Total comprehensive income
66.3
2,267.1
2,333.4
68.3
1,096.0
1,164.3
1,169.1
1,120.0
21.7
27.4
1,169.1
(12.2)
(15.8)
2009
$m
147.6
2,095.5
2,243.1
107.3
953.3
1,060.6
1,182.5
1,120.0
23.2
39.3
1,182.5
10.4
83.3
( a )
C o n t i n g e n t l i a b i l i t i e s o f t h e p a r e n t e n t i t y
The parent had contingent liabilities for performance commitments and guarantees of $29.0 million as at 31 December 2010 and $31.1
million as at 31 December 2009.
( b )
C o n t r a c t u a l c o m m i t m e n t s f o r t h e a c q u i s i t i o n o f p r o p e r t y, p l a n t o r e q u i p m e n t
As at 31 December 2010, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling
$6.5 million (31 December 2009: $2.2 million).
ANNUAL REPORT 2010
69
directors’
declaration
31 december 2010
In the Directors’ opinion:
(a)
the financial statements and notes to the financial statements 29 to 69 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance
for the financial year ended on that date, and
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 note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
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.
(b)
(c)
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.
G J Pizzey
Chairman
D A Robb
Managing Director
Perth
24 March 2011
70
ILUKA RESOURCES LIMITED
independent
auditor’s report
to the members of iluka resources limited
R E 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 2010, and the income statement, the statement of comprehensive income, statement of changes in equity and 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
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.
D i r e c t o r s ’ r e s p o n s i b i l i t y f o r t h e f i n a n c i a l r e p o r t
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. 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.
A u d i t o r ’ s r e s p o n s i b i l i t y
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
I n d e p e n d e n c e
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
A u d i t o r ’ s o p i n i o n
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 consolidated entity’s financial position as at 31 December 2010 and of its performance
for the year ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Liability limited by a scheme approved under Professional Standards Legislation.
ANNUAL REPORT 2010
71
REpO R T On
ThE RE M UnE R AT I On REpO R T
We have audited the remuneration report included in pages 9 to 21 of the directors’ report for the year ended 31 December 2010. 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.
A u d i t o r ’ s o p i n i o n
In our opinion, the remuneration report of Iluka Resources Limited for the year ended 31 December 2010, complies with section 300A of the
Corporations Act 2001.
pricewaterhouseCoopers
David J. Smith
partner
perth
24 March 2011
72
ILUKA RESOURCES LIMITED
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 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 2010. 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).
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 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 a t e g o r y a t 3 1 D e c e m b e r 2 0 1 0
Summary of Ore Reserves(1,2,3) for Iluka
Ore Reserve
Category
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
Ore
Tonnes
Millions
In Situ HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change
HM Tonnes
Millions
HM Assemblage(4)
99.5
7.6
107.1
15.9
14.0
29.8
12.4
163.2
175.6
18.1
3.1
21.2
145.9
187.9
333.8
6.10
0.30
6.40
3.97
2.53
6.50
1.18
11.53
12.71
1.25
0.14
1.38
12.51
14.49
27.00
6.1
3.9
6.0
25.0
18.1
21.8
9.5
7.1
7.2
6.9
4.4
6.5
8.6
7.7
8.1
28
39
29
51
50
51
62
63
63
72
65
72
43
60
52
52
38
51
11
13
12
13
11
11
15
19
16
31
12
21
4
5
4
16
15
16
2
4
4
-
-
-
7
6
7
0.03
(1.55)
0.62
(0.20)
(1.09)
Country
Region
Australia
Eucla Basin
Total
Murray Basin
Total
Murray Basin(5)
Perth Basin
Perth Basin(6)
Virginia
Virginia(7)
Proved
Probable
Grand Total
Total
USA
Total
Total
Total
Notes
(1)
Competent Persons - Ore Reserves
Eucla Basin, Perth Basin and Murray Basin: C Lee (MAusIMM)
Virginia: C Stilson (SME)
(2) Ore Reserves are a sub-set of Mineral Resources
(3)
(4) Mineral assemblage is reported as a percentage of in situ HM content
Rounding may generate differences in last decimal place
(5)
(6)
(7)
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
Rutile component in Perth Basin - South West operations is sold as a leucoxene
product
Rutile is included in ilmenite for the Virginia region
ANNUAL REPORT 2010
73
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 a t 3 1 D e c e m b e r 2 0 1 0
Summary of Ore Reserve Depletion(1)
Country
Region
Category
Australia
Eucla Basin
Active mines
Non-active sites
Total
Eucla Basin
Murray Basin
Active mines
Non-active sites
Total
Murray Basin
Perth Basin
Active mines
Non-active sites
Active mines
Non-active sites
Total
USA
Total
Total
Total
Total
Perth Basin
Virginia
Virginia
Active mines
Non-active sites
Ore Reserves
In Situ
HM Tonnes
Millions
2009
In Situ
HM Tonnes
Millions
Mined
2010
In Situ
HM Tonnes(2)
Millions
Adjusted
2010
In Situ
HM Tonnes
Millions
2010
In Situ
HM Tonnes(3)
Millions
Net Change
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
(0.68)
-
(0.68)
(1.68)
-
(1.68)
(0.34)
-
(0.34)
(0.48)
-
(0.48)
(3.18)
-
(3.18)
0.61
0.10
0.71
0.95
(0.82)
0.13
(0.17)
1.13
0.96
0.28
-
0.28
1.67
0.41
2.09
4.85
1.55
6.40
1.97
4.53
6.50
0.31
12.41
12.71
1.39
-
1.39
8.51
18.49
27.00
(0.07)
0.10
0.03
(0.73)
(0.82)
(1.55)
(0.51)
1.13
0.62
(0.20)
-
(0.20)
(1.50)
0.41
(1.09)
Notes:
(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
74
ILUKA RESOURCES LIMITED
I l u k a M i n e r a l R e s o u r c 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 a t e g o r y a t 3 1 D e c e m b e r 2 0 1 0
Summary of Mineral Resources(1,2,3) for Iluka
Country
Region
Australia
Eucla Basin
Mineral
Resource
Category
Measured
Indicated
Inferred
Total
Eucla Basin
Murray Basin
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Total
Murray Basin
Perth Basin
Total
USA
Total
Total
Total
Total
Perth Basin(5)
Virginia
Virginia(6)
Measured
Indicated
Inferred
Grand Total
Material
Tonnes
Millions
In Situ HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change
HM Tonnes
Millions
HM Assemblage(4)
175.3
53.1
65.5
293.9
31.8
118.2
90.2
240.2
478.5
285.3
221.1
984.9
25.4
25.4
711.0
456.5
376.9
7.72
1.22
4.93
13.87
5.89
21.64
12.71
40.23
28.97
17.55
11.89
58.40
1.55
1.55
44.12
40.41
29.53
1,544.4
114.06
4.4
2.3
7.5
4.7
18.5
18.3
14.1
16.8
6.1
6.2
5.4
5.9
6.1
6.1
6.2
8.9
7.8
7.4
29
12
65
40
51
55
51
53
58
57
55
57
71
71
52
55
55
54
49
62
17
39
11
10
11
10
10
10
8
10
16
16
18
12
11
14
5
5
2
4
15
13
15
14
5
4
5
5
-
-
6
9
8
8
3.82
(2.69)
2.53
(0.22)
3.44
Notes:
(1) Competent Persons - Mineral Resources
Eucla Basin: I Warland (MAusIMM)
Perth Basin - Mid West: B Gibson (MAIG)
Perth Basin - South West: 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) Rutile component in WA - South West operations is sold as a leucoxene product
(6) Rutile is included in ilmenite for the Virginia region
ANNUAL REPORT 2010
75
sustainability
Sustainability is a key component of shareholder value creation
and delivery for Iluka, and a central component of the company’s
licence to operate. Iluka places a high organisational priority
on internal systems procedures and behaviours that facilitate
continued improved performance in a number of areas, but with a
focus in the following:
Iluka Health & Safety Measures of Success
LTIFR
TRIFR
Severity Rate
2009 Actual
2010 Plan
2010 Actual
3.0
3.4
3.7
n/a
13.5
16.4
58.7
52.8
47.4
•
•
•
•
health and safety performance
hazards and risk of injury to the company’s employees,
contractors; and
- including eliminating
management systems
environmental management -
and reporting procedures to minimise the impact of Iluka’s
operation on the environment. Areas of company focus
include: water management; energy efficiency; reduction
of carbon dioxide emissions on a unit of production
basis; biodiversity conservation and closure planning and
rehabilitation;
attaining and maintaining a diverse, talented
people -
workforce that are engaged, encouraged and equipped to
achieve extraordinary performance; and
maintaining effective and open
community engagement -
communications with stakeholders regarding the company’s
activities, including potential risks as well as beneficial
opportunities through direct employment, training and
broader community economic and social benefits.
HE A LT H A N D SA F E T Y
Iluka’s approach to health and safety recognises the need for best
practice across its operations, and delivering an environment where
employees and others are not exposed to risks to their health and
well-being.
During the year, Iluka established its Health and Safety Strategy
covering a five year period from 2010 to 2015. The strategy outlines
a series of actions for the company to progressively achieve the
following measures of success:
•
•
•
target a substantial reduction in the Loss Time Injury
Frequency Rate (“LTIFR”) of 80 per cent;
sustain a significant reduction in the incidence of work related
injuries measured by a reduction in the Total Recordable Injury
Frequency Rate1 (“TRIFR”) of 50 per cent; and
reduce the severity of workplace injury measured by a
reduction in the severity rate of 50 per cent.
Iluka views a safe workplace, in large part, as the result of people
taking individual responsibility for their personal safety, as well as
that of their colleagues. To strengthen individuals’ safety capability,
the company has continued to focus on enhancing its policies,
procedures and awareness raising activities. Disappointingly,
Iluka’s safety performance in 2010 did not meet the high standards
expected, as reflected in the following table, which displays an
adverse movement in some key safety measures during 2010.
In 2010 Iluka was not successful in achieving its total recordable
injury frequency rate target of 13.5, with a recorded a rate of
16.4. The lost time injury frequency rate per million hours worked,
increased in 2010 by 23.3 per cent compared with 2009.
However, Iluka’s injury severity rate declined year-on-year, with
a 19.2 per cent reduction in the severity of injuries reported.
This indicates that those reported incidents which did occur were
predominantly minor in nature, including a high proportion of strain-
related injuries.
There were no fatalities at Iluka’s operations during the year.
The TRIFR target for 2011 is 11.9, an 11.8 per cent improvement on
2010.
In 2010, a revised Environment, Health and Safety policy was
communicated to all employees and contractors, from which will be
a range of initiatives, designed to achieve an improvement in health
and safety performance. These include operational leadership team
safety programmes across the Australian operations, measures to
ensure operational consistency standards related to key identified
safety risk areas, as well as formal programmes to engender
improved site based cultural and behavioural safety plans.
During 2010, an external audit of Iluka’s environmental health and
safety management system was conducted at the Virginia operation
in the United States, while internal audits were completed at the
Murray Basin operation in Victoria, at Jacinth-Ambrosia in South
Australia and at the Western Australian operations. The average
compliance score was 91 per cent, similar to the 2009 compliance
score of 90 per cent.
Iluka continued its Fitness for Work Programme, one element of which
is random drug and alcohol testing. The compliance rate of 99.3 per
cent was similar to 2009. Iluka’s contractors run parallel programmes
which support and promote the requirements of this policy.
An additional element to the Fitness for Work Programme is Iluka’s
Employee Assistance Programme which provides all employees,
and their immediate families with free access to confidential,
professional counselling to resolve personal or work-related
problems. The company is wholly supportive of its employees dealing
with difficult circumstances and recognises the key impact that
mental health and personal wellbeing has on business productivity
and profitability.
1
Total Recordable Injury Frequency Rate and Level 2 and above environmental
incidents were introduced as new sustainability targets for Iluka’s 2010 short
term incentive plan replacing All Injury Frequency Rate and Notifications to
Government. The revised targets provided a stronger alignment to Iluka’s
internal health and safety priorities and facilitated improved benchmarking.
76
ILUKA RESOURCES LIMITED
EN V I R O N M E N T
W a t e r U s a g e
Iluka has a commitment to operating in a responsible manner and
ensuring adherence to all conditions in regulatory licences. Extensive
environmental management plans govern the company’s operations
at each site and these, along with experienced environmental
management personnel, as well as regular reporting of Level 22
and above environmental incidents through to the company’s Board
of Directors, seek to ensure a strong focus on environmental
performance.
E n v i r o n m e n t a l M a n a g e m e n t
Iluka undertakes mining and processing activities in Australia and
the United States, from regional reserves in South Australia, farming
and grazing properties in Victoria and Virginia, to operations in close
proximity to populated areas, such as in Western Australia. Each
operating environment presents unique environmental challenges
and differing management issues.
The Jacinth-Ambrosia mining and concentrating operation in the
Eucla Basin of South Australia is the first mining and processing
operation to be permitted on a mixed-use regional reserve, the
Yellabinna Regional Reserve. Mining is allowed under a multiple use
framework, yet with high standards applied and enforced in terms of
protecting the environment and minimising the impact on the area’s
unique biodiversity. Extensive environmental management planning
and assessment was required to gain progressive approvals for the
project, from exploration through to construction and, subsequently,
the operational phase, which is conducted under a Mining and
Rehabilitation Plan. These approvals have required detailed
studies on all aspects of the biophysical environment, and active
engagement with State and Federal Government agencies.
Key environmental issues on the site include the containment of
ultra-saline water used in concentrating activities; management
plans for native fauna, as well as a requirement to remove all
waste materials from the site. In regards to the latter, an extensive
recycling programme is in place, supported by key service providers
and other external parties. All steel, aluminium cans, cardboard,
tyres and timber are segregated and recycled, with oil products
recycled through the Kalgoorlie Power station waste oil facility.
Site personnel have implemented extensive recycling systems and
educational programmes to encourage good practice.
R e c o r d e d E n v i r o n m e n t I n c i d e n t s
All environmental incidents recorded at sites are classified according
to the severity of their impact2.
In 2010, Iluka recorded no Level 5 or 4 incidents, the most serious
categories. This was the eighth consecutive year the company has
reported no incidents at these levels. There were also no Level 3
incidents. Iluka recorded 494 Level 1 incidents, down from 587 in
2009, and 59 Level 2 incidents compared with 96 in the previous year.
2
Level 1-5 rating system; Level 5 referring to the most serious environmental impact
Iluka’s total water usage in 2010 was 24.2 mega litres (“ML”). This
compares with 36.5ML in 2009 and a 2006-2008 average of 50.6ML
per annum. Table 4 displays water usage by operation. The 33.7 per
cent reduction in 2010 water usage has been primarily associated
with the divestment, in May 2009, of Consolidated Rutile Limited’s
operations in Queensland where dredge mining is used. Lower water
usage in Western Australia was associated with the idling of mining
operations at Eneabba. In this area, water usage decreased from
18,726ML in 2009 to 8,610ML.
Water usage in the Eucla Basin, South Australia, reflects the
commencement of mining and concentrating activities at the
Jacinth-Ambrosia operations. Water usage increased from 1,119ML
in 2009 to 9,636ML in 2010. Iluka utilises ultra-saline water, sourced
from a paleochannel, located approximately 32 kilometres from the
mining operation. This water is unsuitable for agricultural or human
consumption. A large proportion is recycled through the operational
process and environmental management requirements stipulate
that the water must be contained within specific areas, so as not to
present the risk of damage to native vegetation. Iluka operates a
reverse osmosis process on site, which provides potable water for
drinking and other uses, including for fire fighting purposes.
In 2010, Iluka completed the development of the Kulwin deposit
near the township of Ouyen, in the Murray Basin, Victoria, and also
commenced mining operations at the Echo deposit. Increased water
usage reflected the ramp up to full production at Kulwin. Total water
use for the region was 4,522ML representing an increase of 50.1 per
cent from 2009. Iluka’s mining operations in the northern part of the
Murray Basin are conducted under the water table. Dewatering of
the mining pit is required, with water able to be used for pumping of
ore and for preconcentrating and wet concentration activities. At the
Hamilton mineral processing plant, the company uses recycled water
from the local Shire of Southern Grampians for approximately 99 per
cent of its water requirements.
Iluka’s Virginia operations in the United States, operated at full
capacity from February 2010, after operations were curtailed in
2009 associated with global economic conditions. Water efficiency
management was maintained with 1,467ML of water used, compared
with 1,422ML in 2009. In Virginia approximately 69 per cent of water
used was recycled.
E n e r g y C o n s u m p t i o n
Iluka’s total energy consumption in 2010 was 10,071 terajoules
(“TJ”), an 8.2 per cent reduction from the 2009 level of 10,966TJ.
The main sources of energy consumed include coal, diesel, electricity
and natural gas.
Operational changes in the Perth Basin, Western Australia – the
idling of the Eneabba mining operations and reduction of synthetic
rutile kiln operations from four to two - affected energy consumption
levels. Energy used in the Perth Basin decreased by 11.1 per cent to
7,059TJ, from 7,941TJ in 2009.
Increased energy usage in the Eucla Basin, South Australia and
at the Murray Basin in Victoria, reflects the commencement and
increase in production to capacity at the two new mining and
processing operations which, in the case of the Murray Basin,
has also entailed a higher level of processing throughput at the
company’s Hamilton minerals separation plant.
ANNUAL REPORT 2010
77
PE O P L E
Iluka seeks to build and maintain a diverse, sustainable workforce
of talented people, that reflect the communities in which the
company operates.
It is recognised that leadership at all levels is required to create
alignment of purpose which, together with the right resources,
is crucial to the achievement of Iluka’s objective - to create and
deliver shareholder value.
Iluka seeks to offer a sense of achievement to its employees based
on the principles of accountability, commerciality and engagement
and maintains a work culture reflecting its values of commitment,
integrity and responsibility. Iluka’s emphasis includes a high
standard of health and safety behaviour and the development
of individuals, leaders and teams to achieve extraordinary
performance.
D i v e r s i t y
Iluka respects the diversity of the communities in which it operates
and recognises the opportunities that it creates for its business.
Iluka currently supports gender equality, parental leave, flexible
hours where practicable and has a strong commitment to
indigenous employment at all our operations. Iluka’s workforce
currently is approximately 20 per cent female, a level above
comparable industry benchmarks.
A Diversity Committee has been established to develop internal
programmes and undertake initiatives to, initially, improve
the gender, age, indigenous and disability diversity across the
company’s operations. Iluka’s diversity aims will be measured and
reported on a regular basis.
The company continued in 2010 with the following initiatives:
•
compulsory employee equal opportunities training for all
new employees and contractors;
fair and equitable selection and appointment criteria;
formal performance and salary review processes;
native title agreements that include opportunities for
indigenous employment in operational areas;
paid parental leave eight weeks paid maternity leave and
one week paid paternity leave; and
flexible work arrangements.
•
•
•
•
•
Energy usage in the Eucla Basin increased from 251TJ in 2009
to 522TJ in 2010, while in the Murray Basin energy consumption
increased from 740TJ to 1,451TJ.
Iluka is committed to achieving energy efficiency improvements and
reducing its carbon dioxide gas emissions on a unit of production
basis. A specialised management group, involving technical and
operational personnel, has been established to develop a long term
strategy, as well as implement ongoing improvement measures,
to enhance the company’s monitoring and recording systems and
improve energy performance, in accordance with Energy Efficiency
Opportunities (“EEO”) and National Greenhouse and Energy
Reporting requirements.
Iluka implemented 11 new EEO projects during 2010, with the results
equating to a reduction in total energy of 545TJ annually, constituting
an approximate 5 per cent reduction in energy usage.
An energy efficiency assessment was conducted at Iluka’s Kulwin
operation in the Murray Basin. A saving of 88TJ in overall energy
usage was identified over the mine life. A detailed energy efficiency
assessment will be carried out at Jacinth-Ambrosia in 2011.
Iluka completed its second year of reporting to the National
Greenhouse and Energy Program. The public document is available
on Iluka’s website (www.iluka.com).
C a r b o n D i o x i d e E m i s s i o n s
Iluka’s operations recorded carbon dioxide emissions of 995
thousand tonnes (“ktCO2e”) in 2010 representing an 8.1 per cent
decrease on its 2009 result of 1,083 ktCO2e and 33.6 per cent on the
2006-2008 average of 1,630 ktCO2e. The carbon emissions reduction
is consistent with the decline in the company’s Western Australian
ilmenite upgrading, or synthetic rutile operations, where coal is the
primary fuel used in the production process.
During 2010, Iluka’s synthetic rutile operations received formal
recognition as an Emissions Intensive Trade Exposed industry under
the previously proposed Carbon Pollution Reduction Scheme.
R e h a b i l i t a t i o n
A closure planning working group was established in the second half
of 2009 to design and oversee best practice management for the
safe closure and re-establishment of former mining and processing
sites across Iluka’s Australian operations.
Rehabilitation and closure activities are a major focus of the
company’s Western Australian operations given the maturity of
Iluka’s mining operations in this area. Approximately 115 hectares
was rehabilitated in the Mid West and South West regions of
Western Australia during 2010. Areas of the Eneabba, Gingin, and
Waroona mine sites were progressed to the return of topsoil stage,
in preparation for final rehabilitation to occur in 2011.
In the Murray Basin, re-establishment of previously mined areas in
the Douglas region to grazing and pastoral usage continued with an
additional 25 hectares of land rehabilitated in 2010.
In the United States, Iluka closed its Florida/Georgia operations and
commenced rehabilitation activities in 2006. Reclamation in Georgia
was completed in 2010 and the company fulfilled its environmental
obligations with regulators. Reclamation and remediation of the
Florida mine and processing sites is continuing with approximately
100 hectares rehabilitated during the year.
78
ILUKA RESOURCES LIMITED
W o r k f o r c e C h a n g e s i n 2 0 1 0
CO M M U N I T Y A N D STA K E H O L D E R EN G A G E M E N T
Iluka recognises that engagement and consultation with
stakeholders is integral in the establishment, operation,
rehabilitation and relinquishment of its mining and processing
facilities.
Extensive stakeholder engagement occurred to facilitate the
progression of planning and approval activities for the Woornack,
Rownack, Pirro (Victoria) and Balranald (New South Wales)
projects.
Existing operations have continued to undertake regular liaison
with stakeholders through various avenues including:
•
•
•
Environmental Review Committees in the Murray Basin,
Victoria;
local government authority briefings in Western Australia;
and
the production of community newsletters in regional South
Australia.
Iluka’s Eneabba mining operations in Western Australia were idled
in 2010, which resulted in approximately 30 redundancies. This is in
addition to a larger workforce reduction that took place in 2009.
As in 2009, it was a focus of the company to mitigate the impact on
affected employees and their families through measures such as:
•
•
•
•
redeployment of employees to other operations where
possible;
the provision of employment transition and career planning
services;
financial planning assistance; and
personal and family counselling.
I l u k a W o r k f o r c e D i s t r i b u t i o n
The following table shows the distribution of Iluka’s workforce at
the end of 2010:
Location
Employees
Perth Basin, Western Australia
Eucla Basin, South Australia
Murray Basin, Victoria
Corporate, Perth, Western Australia1
Virginia, US
Shanghai, China
Total Group
318
89
214
144
139
7
911
Contract mining and other activities account for approximately 1,000 contractor positions
1
Includes exploration, business development, sales and marketing, product and
technical development, and technical functions, in addition to usual corporate
roles
L e a d e r s h i p D e v e l o p m e n t
During 2010, Iluka invested in a leadership development
programme titled Achieving Extraordinary Performance, designed
to provide its current and future leaders with the tools to deal
with change, encourage alignment and accept accountability.
Approximately 160 employees attended workshops with
participation drawn from operational and corporate personnel at
varying levels within the organisation.
E n g a g e m e n t
Iluka recognises that honest and timely communication with its
employees is key to business performance and is a high priority for
the company’s management team.
An employee engagement survey was conducted during 2010 to
measure the organisation’s performance in terms of levels of
employee engagement and to identify areas for improvement.
This survey has been conduced biennially since 2002. The 2010
survey revealed that despite significant changes to the business
in 2009 and 2010, employee responses conveyed a strong level of
alignment with, and positive assessment of, the organisation. The
results of the survey are used, along with other input, to improve
organisational and cultural alignment and engagement.
ANNUAL REPORT 2010
79
Severity Rate
LTIFR
TRIFR
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
60
50
40
30
20
10
0
1.2
1.0
0.8
KE Y PE R F O R M A N C E DATA
S a f e t y
Table 1 – 2010 Safety Performance by Operation
Fatality
LTI
MTI
FAI
TRI Minor
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
Exploration
Corporate
Total
0
0
0
0
0
0
0
2
0
6
1
1
0
10
12
4
11
2
1
2
32
16
12
32
3
2
0
65
28
4
21
4
3
2
60
30
93
52
9
0
62
244
LTI = Loss Time Injury
MTI = Medical Treatment Injury
FAI = First Aid Injury
TRI = Total Recordable Injury
Figure 1 - Iluka Group 2010 Total Recordable Injury Frequency Rate,
Severity Rate and Loss Time Injury Frequency Rate
TRIFR
Severity Rate
LTIFR
60
50
40
30
20
10
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
TRIFR refers to Total Recordable Injury Frequency Rate
TRIFR = LTI + MTI + FA + Minor injuries classified as Restricted Work Case
LTIFR refers to Loss Time Injury Frequency Rate
LTIFR (loss time injury frequency rate) = number of days lost per million hours
worked
Severity Rate
LTIFR
TRIFR
E n v i r o n m e n t a l P e r f o r m a n c e
Table 2 – 2010 Environmental Incidents by Operation
Table 3 - Iluka Group Environmental Incidents
Level 1
Level 2
Level 3
Level 4
Level 5
117
79
244
43
11
0
8
4
44
3
0
0
494
59
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Level 1
Level 2
Level 3
Level 4
Level 5
Total
2010
494
59
0
0
0
2009
587
96
3
0
0
2006-2008
average
860
10
1
0
0
553
686
871
Level 1-5 rating system; Level 5 referring to the most serious environmental impact
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
Exploration
Corporate
Total
W a t e r
Table 4 - Water Use (megalitres – ML) by Operation
Table 5 - Water Discharge (megalitres – ML) by Operation
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
CRL, (QLD)3
Exploration
Corporate
Total
2010
4,522
9,636
8,610
1,467
n/a
< 1
< 1
2009
3,012
1,119
18,726
1,422
12,198
< 1
< 1
2006-2008
average
2,113
13
21,622
2,657
24,231
< 1
< 1
24,236
36,478
50,637
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
CRL, (QLD)3
Exploration
Corporate
Total
2010
128
0
1,559
290
n/a
< 1
n/a
2009
26
0
3,745
1,515
1,735
< 1
n/a
2006-2008
average
19
2
5,295
982
1,860
< 1
n/a
1,978
7,022
8,158
n/a denotes not available
< denotes less than
3 Includes Consolidated Rutile Limited (“CRL”)s operation on a 100% basis until its divestment by the Company in May 2009
80
ILUKA RESOURCES LIMITED
E n e r g y
Table 6 - Water Recycled (megalitres – ML) by Operation
Table 7 – Energy Use (terajoules - TJ) by Operation
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
CRL, (QLD)3
Exploration
Corporate
Total
2010
0
3,329
< 1
1,017
n/a
< 1
n/a
2009
1
1,008
< 1
1,120
11,584
< 1
n/a
2006-2008
average
1
0
< 1
1,521
23,811
< 1
n/a
4,346
13,713
25,333
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
CRL, (QLD)3
Exploration
Corporate
Total
2010
1,451
522
7,059
977
n/a
62
< 1
2009
740
251
7,941
1,368
352
314
< 1
2006-2008
average
512
9
12,036
706
766
4
< 1
10,071
10,966
14,033
Table 8 – Iluka Group Energy Resources Used (%)
Table 9 – Carbon Dioxide Emissions (ktCO2e) by Operation
C a r b o n D i o x i d e E m i s s i o n s
2010
2009
2006-2008
average
2010
2009
2006-2008
average
55
11
10
5
19
< 1
< 1
50
14
10
2
21
3
< 1
58
16
10
< 1
16
< 1
< 1
Murray Basin (VIC/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
CRL, (QLD)3
Exploration
Corporate
Total
182
40
704
69
n/a
< 1
n/a
995
112
19
830
48
74
< 1
n/a
86
< 1
1,245
104
194
< 1
n/a
1,083
1,630
Coal
Electricity
Natural gas
LPG
Diesel
Petrol
Fuel, oil & greases
L a n d
Table 10 – 2009-2010 Land use by Operation (hectares - Ha)
2009
Disturbed
Rehabilitated
Murray Basin (Vic/NSW)
Eucla Basin (SA/WA)
Perth Basin (WA)
Virginia (US)
Exploration
Total
624
720
320
58
512
2,233
58
0
273
170
35
535
Open
1,236
988
3,888
528
536
7,177
Open area calculation:
Open area + (disturbed area – rehabilitated area proceeding year) = open area proceeding year
2010
Disturbed
Rehabiltated
666
61
59
93
654
1,533
25
80
15
97
62
279
Open
1,877
969
3,932
524
1,128
8,431
n/a denotes not available
< denotes less than
3 Includes Consolidated Rutile Limited (“CRL”)s operation on a 100% basis until its divestment by the Company in May 2009
ANNUAL REPORT 2010
81
five year physical
and financial
information
Production & Sales
Production volumes (kt)
- Zircon
- Rutile
- Synthetic rutile
- Ilmenite (saleable)
- Ilmenite (upgradeable)
Average AUD:USD spot exchange rate (cents)
AUD:USD range (cents)
Summary Financials
Revenue from operations (excluding hedging)
Earnings before depreciation, net interest and tax
(excluding asset impairment/write-downs)
- Mineral Sands EBITDA
- Mining Area C EBITDA
- Other EBITDA
Depreciation and amortisation
Net interest and finance charges
Income tax (expense) benefit
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 per share (cents)
Franking level (per cent)
Opening year share price ($)
Closing year share price ($)
Financial Ratios
EPS, excluding asset impairments/write-downs (cents)
Cash Flow per Share (cents)
Return on shareholders' equity (per cent),
excluding asset impairments/write-downs
Gearing (net debt/net debt + equity) (per cent)
Financial Position as at 31 December
Total assets
Total liabilities
Net assets
Shareholders' equity attributable to members of Iluka Resources
Net tangible asset backing per share (dollars)
All figures in A$ million unless otherwise indicated
2009 restated for change in hedge accounting in accordance with amendments to AASB 2008-8
82
ILUKA RESOURCES LIMITED
2010
2009
2008
2007
2006
412.9
250.1
347.5
469.0
215.9
92.00
263.1
141.4
405.0
342.1
496.7
79.34
385.1
140.1
467.3
586.2
641
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
81.23/1.02
62.91/93.68
60.38/98.05
76.98/93.25
70.54/79.08
874.4
304.7
250.2
76.3
(21.0)
(219.0)
(46.2)
(3.8)
36.1
36.1
163.6
(117.2)
(312.6)
418.7
8
0
3.58
9.14
8.6
13.3
3.2
21.8
576.0
99.6
75.6
50.2
(9.5)
(176.6)
(22.7)
61.5
(35.1)
(82.4)
83.9
(521.6)
(382.1)
418.7
n/a
n/a
4.64
3.58
(8.7)
(2.2)
(3.2)
25.9
988.5
274.6
186.3
56.8
(47.0)
(161.7)
(35.6)
7.7
73.7
77.5
233.0
(198.4)
(215.7)
380.7
n/a
n/a
4.11
4.64
17.8
19.9
7.9
17.4
938.6
1,003.2
287.7
230.6
19.9
18.1
(148.0)
(59.2)
(20.1)
51.1
51.1
95.5
(118.2)
(598.1)
242.2
10
100
5.94
4.11
21.6
1.5
6.8
44.3
199.2
257.3
19.1
4.5
(112.7)
(40.8)
(14.2)
66.2
21
142.2
(172.7)
(596.5)
232.9
22
100
7.00
5.94
50.2
(0.2)
3.3
45.4
1,939.9
(815.3)
1,124.6
1,124.6
2.54
2,098.4
(1,003.1)
1,095.3
1,095.3
2.46
2,058.1
(1,020.1)
1,868.0
(1,116.4)
1,864.5
(1,148.0)
1038
979.8
2.69
751.6
683.6
3.04
716.5
647.2
3.00
statement of
shareholdings
as at 2 march 2011
Number of holders of shares
Number of shares on issue
18,560
418,701,360
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
D i s t r i b u t i o n o f S h a r e h o l d i n g s
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):
Number of holders
9,576
7,289
731
45
19
900
S u b s t a n t i a l S h a r e h o l d e r s
Name
M&G Investment Management, London
BlackRock Group
T o p 2 0 S h a r e h o l d e r s ( N o m i n e e C o m p a n y H o l d i n g s )
Name
J P Morgan Nominees Australia
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
Tasman Asset Management Ltd
J P Morgan Nominees Australia
RBC Dexia Investor Services Australia Nominees Pty Limited
UBS Nominees Pty Ltd
Iluka Administration Limited
Queensland Investment Corporation
CS Fourth Nominees Pty Ltd
AMP Life Limited
Australian Foundation Investment Company Limited
Argo Investments Limited
Mirrabooka Investments Limited
HSBC Custody Nominees (Australia) Limited
R O Henderson (Beehive) Pty Limited
Australian Reward Investment Alliance
Share Direct Nominees Pty Ltd
Number of shares in
which a relevant interest
is held
81,830,567
25,280,290
% Holding
19.54
6.02
Number of shares
% Holding
116,069,588
110,718,520
68,952,709
27,467,606
6,078,344
4,844,544
4,207,048
3,709,932
3,138,628
3,099,016
2,197,196
2,161,928
1,826,289
1,700,000
1,500,000
1,500,000
1,240,929
1,105,000
1,061,260
890,958
27.72
26.44
16.47
6.56
1.45
1.16
1.00
0.89
0.75
0.74
0.52
0.52
0.44
0.41
0.36
0.36
0.30
0.26
0.25
0.21
ANNUAL REPORT 2010
83
iluka and mineral
sands information
For more information on Iluka Resources and the mineral sands
sector, please refer to the Iluka website and the following
publications:
I l u k a R e v i e w 2 0 1 0
•
provides a summary of Iluka’s 2010 financial year,
Chairman’s and Managing Director’s review, as well as
an overview of the company’s operations, exploration
activities, sales and marketing, industry market conditions,
product and technical development.
M i n e r a l s S a n d s Te c h n i c a l I n f o r m a t i o n
Briefing Papers
•
•
•
•
•
Mineral Sands Products: Attributes and Applications
Mining Area C Iron Ore Royalty
Iluka’s Exploration Focus
Mineral Sands Physical Flow Information
Titanium Metal
Virtual Mine Site Tours
•
•
Murray Basin, Victoria
Jacinth-Ambrosia, South Australia
84
ILUKA RESOURCES LIMITED
corporate
information
C o m p a n y D e t a i l s
Iluka Resources Limited
ABN: 34 008 675 018
D i v i d e n d s
Iluka recommenced dividend payments with the 2010 full year
results. Iluka has suspended its dividend reinvestment plan.
S t o c k E x c h a n g e L i s t i n g
I n v e s t o r R e l a t i o n s I n q u i r i e s
For shareholder, potential investor and media inquiries of the
company, please contact:
Dr Robert Porter
General Manager, Investor Relations
robert.porter@iluka.com
2 0 1 1 C a l e n d a r
19 January
December Quarter Production Report
25 February
Announcement of Full Year Financial Results
28 April
March Quarter Production Report
23 May 9:30 am EST Closure of acceptances of proxies for AGM
25 May 9:30 am EST Annual General Meeting - Melbourne
Convention and Exhibition Centre,
Melbourne, Victoria
21 July
June Quarter Production Report
25 August
Announcement of Half Year Financial Results
20 October
September Quarter Production Report
31 December
Financial Year End
All dates are indicative and subject to change. Shareholders are
advised to check with the company to confirm timings.
Iluka’s shares are listed on the Australian Securities Exchange
Limited. The company is listed as “Iluka” with an ASX code of ILU.
The company had 418.7 million shares on issue as at 31 December
2010.
Registered Office:
Level 23, 140 St George’s Terrace
PERTH WA 6000 Australia
Postal Address:
GPO Box U1988
PERTH WA 6845 Australia
Telephone: +61 8 9360 4700
Facsimile: +61 8 9360 4777
Website:
www.iluka.com
This site contains information on Iluka’s products, marketing,
operations, ASX releases, financial and quarterly reports. It also
contains links to other sites, including the share registry.
S h a r e R e g i s t r y I n q u i r i e s
Shareholders who require information about their shareholdings,
dividend payments or related administrative matters should
contact the company’s share registry:
Computershare Investor Services Pty Limited
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH WA 6000 Australia
Postal Address:
GPO Box D182
PERTH WA 6840 Australia
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.
ANNUAL REPORT 2010
85
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