ANNUAL REPORT
20
15
Iluka Resources Limited
ABN: 34 008 675 018
DIRECTORS’
AND STATUTORY
INFORMATION
CREATE AND DELIVER VALUE FOR SHAREHOLDERS
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Provided below are the results for announcement
in accordance with Australian Securities
Exchange (ASX) Listing Rule 4.2A and Appendix 4E for the Consolidated Entity Iluka Resources Limited and its
controlled entities for the year ended 31 December 2015 (the 'financial year') compared with the year ended 31
December 2014 ('comparative year').
to the market
All currencies shown in this report are Australian dollars unless otherwise indicated.
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to members
Net profit for the period attributable to members
Up 11.3% to $882.2m
Up 185.6% to profit of $53.5m
Up 185.6% to profit of $53.5m
Dividends
2015 final: 19 cents per ordinary share (100% franked), payable in April 2016
2015 interim: 6 cents per ordinary share (100% franked), paid in September 2015
2014 final: 13 cents per ordinary share (100% franked), paid in March 2015
2014 interim: 6 cents per share (100% franked), paid in October 2014
Key ratios
Basic earnings per share (cents)
Free cash flow per share1(cents)
Return on Equity2
Net tangible assets per share ($)
2015
12.8
37.0
3.8
3.31
2014
(15.0)
46.9
(4.1)
3.38
1
Free cash flow is determined as cash flow before refinance costs, proceeds/repayment of borrowings and dividends paid in the
year.
2
Calculated as Net Profit / (Loss) after Tax (NPAT) for the year as a percentage of average monthly shareholders equity over
the year.
The Company's Dividend Reinvestment Plan was suspended in 2010 and remains suspended.
The commentary on the consolidated results and outlook are set out in the Operating and Financial Review
section of the Directors' Report.
Independent auditor's report
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
Contents
Directors' Report, including:
- Operating and Financial Review
- Remuneration Report
Auditor's Independence Declaration
Financial Report
- Consolidated statement of profit or loss and other 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
Ore Reserves and Mineral Resources Statement
Shareholder Information
Share Registry Details
Corporate Information
Page
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1
Directors' Report
The directors present their report on the Group consisting of Iluka Resources Limited and the entities it controlled
at the end of, or during, the year ended 31 December 2015.
OPERATING AND FINANCIAL REVIEW
ABOUT ILUKA
Iluka is a leading mineral sands Company involved in mineral sands exploration, project development, operations
and marketing. Iluka is the largest global producer of zircon and the second largest producer of titanium dioxide
products, with a major position in the high grade products of rutile and synthetic rutile. These products are used
in a diverse range of applications from consumer, industrial and manufacturing applications. The Company also
has a royalty associated with a tier one iron ore operation - BHP Billiton’s Mining Area C province in Western
Australia.
Iluka’s objective is to create and deliver value for shareholders supported by values centred on Commitment,
Integrity and Responsibility. To facilitate this, a focus on environment, health and safety performance is
paramount, while the Company must continue to attract high quality people, provide training and growth
opportunities for existing employees, and maintain a commitment to diversity and sustainability principles.
Features of the Company’s business approach include the following:
Operations
• Globally integrated operations located in lower risk jurisdictions
• Over 60 years mineral sands exploration, mining, processing and metallurgy operational experience
• Highly skilled operators and extensive technical knowledge base in an industry with limited external technical
consulting resources
Flexible and integrated operating base
•
• Approach to match production to sales through the cycle, with ability to quickly adapt to changing market
conditions
• Approximately 12 years Reserve cover based on 2015 depletion rates and 23.0 million tonnes of Ore
Reserves. In addition the Company has 172.9 million tonnes of Mineral Resources which includes the
aforementioned Ore Reserves
Financial Focus
Focus on shareholder returns through the cycle
•
• Return on capital as an internal proxy for return on equity
•
• Maintenance of a strong balance sheet
• Capital-efficient project development and growth
Track record of returning excess cash flow to shareholders
Sustainable Development Focus
• High standards in health, safety and environmental matters
• Sound planning, control and risk management systems
• Stakeholder relationships which, over time, are mutually beneficial
Customer Focus
Focus on customer benefits
Full range of titanium dioxide feedstock grades and zircon for all applications
•
•
• Global distribution network and logistics capabilities
• Reliable supplier with a strong balance sheet
• Consistent product quality and track record of delivering on promises
Growth
Technically experienced in-house exploration team with a domestic and international programme
•
• Suite of internal growth options - several under advanced evaluation
• New developments subject to strict financial return criteria and assessed against industry supply-demand
dynamics
Focus on product development and innovation and technology activities
•
Further information regarding Iluka’s operations can be found in the Iluka Review 2015.
2
BUSINESS STRATEGIES AND FUTURE PROSPECTS
Iluka maintains its commitment to a range of activities designed to generate future growth and deliver value for
shareholders. Its business approach has the following key elements:
flex operations in line with market demand;
continue market development through the cycle;
preserve/advance mineral sands growth opportunities;
•
•
•
• maintain a strong balance sheet;
•
•
continue to evaluate/pursue corporate growth opportunities; and
act counter-cyclically where appropriate.
The future prospects of the Company are dependent on the execution of the Company’s business strategies and
operating and market demand/supply conditions for its principal products.
In 2015, specific areas of strategy implementation included:
•
•
•
•
•
•
•
strengthening of Iluka’s position as a high grade TiO2 supplier by restarting idled assets progressively, in line
with market demand and on a commercially prudent basis;
enhancement of the Company’s zircon market presence and leadership position via new products; increased
market representation and technical collaboration with customers; and introduction of a new zircon pricing
model;
optimisation of internal mineral sands production options through project timing flexibility and market-related
production profiles together with capital and operating expenditure improvements;
development, acquisition and implementation of new mineral sands mining and processing technologies,
including those with the potential to transform the Company’s resource base;
exploration activities; ranging from first stage evaluative studies in new jurisdictions to exploration and
resource delineation drilling in multiple jurisdictions in Australia and internationally;
evaluation and progression of merger and acquisition opportunities where financial merit and strategic
rationale can be demonstrated; and
proactive advancement of the Company’s sustainability and social responsibility performance and reputation,
including workforce capability and diversity, sustainable development practices and alignment to international
reporting frameworks.
Further detail surrounding the future prospects for Iluka are detailed in the Mineral Sands Projects and Other
Growth Options section in the Iluka Review 2015.
Innovation and technology
Iluka considers investment in mineral sands innovation and technology as important to: maximising the value
created from existing operations through production and recovery improvements; enabling the potential
commercialisation of non-conventional mineral sands deposits; introducing new products to enhance customers’
production processes; as well as supporting technical and commercialisation activities related to Metalysis and
the Tapira project in Brazil. The Company has a dedicated team of industry and technical experts to further work
in these areas, and operates a Metallurgical Test Facility at Capel, Western Australia, as well as various
laboratories at its operations.
A number of projects were progressed during the year with research continuing in the areas of mining
technology, process and product development.
A number of projects are being undertaken to improve both the effectiveness of synthetic rutile production as well
as provide a high grade feedstock for the sulphate pigment process. Project scoping work on the processing of
fine grained minerals was undertaken during the year with further technological development work planned in
2016. Work associated with Metalysis and the potential commercialisation of the Tapira deposit in Brazil also
formed part of Iluka’s activities in this area.
BUSINESS RISKS AND MITIGATIONS
The identification and management of risk is fundamental to achieving Iluka’s objective. We are, therefore,
committed to managing risk in a proactive and effective manner.
Iluka’s Risk Management Policy is supported by a risk management
framework which is aligned to the
International Standard for risk management, ISO 31000:2009. The framework provides a whole of business
approach to the management of risks and sets out the process for the identification, management and reporting
of risk to the achievement of our plans and objectives.
through the Board Charter, delegates responsibility for
The Board,
identifying and managing risks to
management. Management is required to report to the Board on those risks which could have a material impact
on the Company’s business. The Audit and Risk Committee assists the Board with regard to oversight of the
Company’s risk management practices.
3
Through its risk management framework Iluka seeks to:
•
•
•
•
•
•
embed a culture of risk awareness and decision making;
identify, assess and manage risks in a structured and systematic manner;
enable prudent risk taking in line with business objectives and strategies;
establish and monitor appropriate controls in line with business objectives and strategies;
ensure material business risks are effectively identified, communicated and appropriately elevated throughout
all levels of management to the Board; and
continue to fulfil governance requirements for risk management.
Iluka applied a structured and systematic approach to assess the consequence of risk in areas such as
environment; injury; illness; reputation; stakeholder; compliance; financial and Company objectives. Company
risks and how they are being managed, are reviewed by the Executive team regularly and reported to the Audit
and Risk Committee on a twice yearly basis.
Set out below are the key risk areas that could have a material impact on the Company. The nature and potential
impact of risks changes over time. The risks described below are not the only risks that Iluka faces, and whilst
every effort is made to identify and manage material risks, additional risks not currently known or detailed below
may also adversely affect future performance.
Sustaining operations risks
Maintaining a pipeline of mineral resources, mineral reserves and projects in order to sustain operations and
maintain business is a key focus for Iluka. The success of exploration activity and project delivery are critical to
sustain operations in a timely manner.
Product demand risks
The resources sector typically exhibits cyclicality. In 2015, Iluka operated in business conditions of lower than
typical demand for its products, with the Company’s approach in such conditions to adjust production in the
context of market demand and inventory levels.
Financial risks
Iluka faces risks relating to the cost of and access to funds, movement in interest rates and foreign exchange
rates (refer note 17). Iluka maintains policies which define appropriate financial controls and governance which
seek to ensure financial risks are fully recognised, managed and recorded in a manner consistent with:
•
•
•
the financial risk appetite and delegations as set by Iluka’s Board;
generally accepted industry practice and corporate governance standards; and
shareholder expectations of a mineral sands producer.
Any changes to, or material breaches of, Iluka's financial policies are reported to the Board.
Project development risks
Iluka regularly assesses its ability to enhance its production profile, or extend the economic life of deposits, by the
development of new deposits within its portfolio. A failure to develop and operate projects in accordance with
expectations could negatively impact results of operations and the Company’s financial position. A structured
capital process and project delivery framework is utilised to facilitate successful project development and manage
risks in bringing new projects into operation.
Growth risks
To ensure a sustainable business going forward, Iluka attempts to generate growth options through exploration,
innovation and appropriate external growth opportunities. The ability of Iluka to create and deliver value for
shareholders is to some extent dependent on successful growth strategies.
Evaluating growth opportunities requires prudent risk taking as part of a disciplined process of project selection
and interrogation to maximise the opportunity, achieve the desired outcomes, and manage the associated risks to
the Company. This includes applying the Company’s established disciplines and systems to evaluate growth
opportunities and assess their potential value and impact considering a range of modifying factors and
assumptions.
Country risk
Increasing international activities have increased Iluka’s exposure to country risks. The potential development of
international opportunities can be jeopardised by changes in fiscal or
regulatory regimes, difficulties in
interpreting or complying with local laws, material differences in sustainability standards and practices, or reversal
of current political, judicial or administrative policies.
4
Business interruption risks
Circumstances may arise which preclude sites from operating including natural disaster, material disruption to our
logistics, critical plant failure or industrial action. Iluka undertakes regular reviews for mitigation of property and
business continuity risks. Iluka also conducts planning and preparedness activities to ensure rapid and effective
response in the event of a crisis. Appropriate business plans, policies and training provides support to Iluka’s risk
mitigation activities.
Social licence to operate risks
An integral part of Iluka’s activities is maintaining a social licence to operate. Iluka’s safety, health, environmental,
people and stakeholder performance expectations are clearly articulated by our policies and is overseen by the
Board.
The Iluka Review 2015 contains further information on the Company’s 2015 operating conditions, as well as
elements of the business strategy. This document, as well as other Company information is available on Iluka’s
website www.iluka.com
OVERVIEW OF RESULTS
Iluka recorded a profit after tax for the year of $53.5 million, compared with a loss of $62.5 million for the previous
corresponding period. The 2014 loss included a non-cash impairment charge of $86.5 million after tax in relation
to the United States operations.
Mineral sands markets remained challenging during 2015. Iluka’s 2015 financial results can be viewed in the
context of continuing weak to variable demand in a number of end markets, and margin pressures on some
customers from declining prices in their industry sectors.
Sales volumes of zircon, rutile and synthetic rutile (Z/R/SR) increased 5.6 per cent to 651.0 thousand tonnes
compared to 616.2 thousand tonnes in 2014. Mineral sands sales revenue for the year ended 31 December 2015
was $819.8 million (2014: $724.9 million). Revenue per tonne of Z/R/SR sold increased by 10.3 per cent to
$1,136 (2014: $1,030/t), despite lower weighted average received USD prices and a higher proportion of
standard grade zircon and zircon in concentrate sales. The higher revenue per tonne therefore mainly reflected
currency translation benefits associated with the lower AUD:USD (2015 average of 75.2 cents compared with
90.3 cents in 2014).
Total cash production costs in 2015, excluding ilmenite concentrate and by-product costs, increased by 7.8 per
cent to $384.9 million (2014: $356.9 million), reflecting reactivation of mining at Tutunup South and SR kiln 2
production in the South West of Western Australia, offset by completion of mining at Woornack, Rownack, Pirro
(WRP) in Murray Basin, Victoria. Ilmenite concentrate and by-products costs reduced 69.6 per cent to $7.6
million from $25.0 million in 2014. This reflected Iluka’s decision to market less iron concentrate as a result of the
reduction in iron ore prices and decreased volumes of ilmenite concentrate transported for sale associated with
prevailing low prices for this product.
On a unit basis, cash cost of production were $569 per tonne of Z/R/SR, a 20.3 per cent decrease compared with
the prior year mainly reflecting 29.0 per cent higher production of Z/R/SR. Excluding the costs for ilmenite
concentrate and by-products, the underlying unit cash cost of production reduced 16.5 per cent to $558 per tonne
of Z/R/SR, compared with $668 per tonne in 2014.
Unit cost of goods sold has reduced 9.5 per cent to $780 per tonne of Z/R/SR sold compared to $862 per tonne
in the previous corresponding period.
Mineral sands EBITDA for 2015 was $270.6 million, a 13.4 per cent increase compared with the previous
corresponding period. Mineral sands EBIT increased by $173.3 million to a profit of $138.6 million (2014: loss
$34.7 million). As noted above, the 2014 loss included a non-cash impairment charge in relation to the United
States operations.
Mining Area C iron ore royalty earnings (MAC) decreased 7.8 per cent to $61.2 million (2014: $66.4 million),
including capacity payments of $3.0 million (2014: $1.0 million). The decrease was due to lower royalty receipts
associated with the reduction in iron ore prices. This was largely offset by higher capacity payments and a one-off
receipt of US$8.0 million (A$10.4 million) following the modification to the royalty agreement with BHP Billiton and
its joint venture partners, as announced to the ASX on 21 July 2015.
Profit before tax was $86.6 million (2014: loss $48.5 million). A net tax expense of $33.1 million (2014: $14.0
million) was recognised in respect of the profit for the year. The tax expense relates mainly to the Group's
Australian profits, with minimal benefits recognised for overseas losses.
Iluka’s NPAT is inclusive of a $25.3 million pre-tax and $17.7 million post tax non-cash accounting adjustment
related to an increase in rehabilitation provisions at closed sites associated with a sustained decline in the 15
year Australian Government Bond rate, which is used in determining the Australian rehabilitation provision. This
adjustment was announced by the Company to the ASX on 16 December 2015.
5
Earnings per share for the period were 12.8 cents compared to (15.0) cents in the previous corresponding period.
The number of fully paid ordinary shares on issue at 31 December 2015 of 418.7 million was unchanged during
the year.
Free cash flow of $155.0 million was $41.4 million lower than the previous corresponding period (2014: $196.4
million) largely reflecting $11.2 million lower receipts from MAC royalty as a result of lower iron ore prices and
lower operating cash flow (2015: $222.2 million compared to 2014: $254.8 million).
Capital expenditure of $66.4 million in the year (2014: $66.9 million) related to various major projects, including
Balranald (New South Wales) and Cataby (Western Australia), combined with land acquisitions and an increased
equity stake in Metalysis Limited.
Net cash at 31 December 2015 was $6.0 million, with a corresponding gearing ratio (net debt/ net debt + equity)
of -0.4 per cent. This compares with net debt at 31 December 2014 of $59.0 million and a gearing ratio of 4.0 per
cent. Undrawn facilities at 31 December 2015 were $955 million (2014: $708 million) and cash at bank was $55
million (2014: $101 million).
During the year Iluka has increased the size of the Multi Option Facility Agreement (MOFA) facilities by $160
million to $1,010 million and extended a portion of the maturity profiles through to 2020. Further information on
this facility can be found in Note 16 of the Financial Report.
OTHER MATTERS
During 2015 Iluka made substantial progress in addressing and finalising the majority of the pre-conditions
related to its offer to acquire UK listed Kenmare Resources Plc and its Moma mineral sands operation in north
Mozambique. The proposed transaction passed the twin tests of strategic rationale and financial merit. While
Iluka viewed this as a compelling offer for both Kenmare and Iluka shareholders, information from Kenmare that
its largest shareholder would not support the transaction resulted in Iluka terminating discussions with the Board
of Kenmare.
On 16 February 2016, Iluka announced that it would suspend mining and concentrate production activities at its
Jacinth-Ambrosia operation in the Eucla Basin, South Australia. Jacinth-Ambrosia is a globally significant source
of zircon and, at peak production, has the ability to supply 25 to 30 per cent of global zircon demand. The
suspension of these activities will be from 16 April 2016 for a period of 18 to 24 months, depending on market
conditions. The suspension will
increase net cash flow due to a reduction in Iluka’s production costs, offset
partially by a continued commitment to progressive rehabilitation and by restructure and idle costs. In 2016 a net
cash cost benefit of approximately $30 million is expected after $16 million in idle, restructure and rehabilitation
costs.
On 18 February 2016, Iluka announced that it has committed an additional £6 million (approximately A$12.2
million) to its investment in the private, UK based, Metalysis Limited with an undertaking to commit a further £4
million (approximately A$8.1 million) before 15 July 2016. The additional £10 million in total is expected to take
Iluka’s interest from 20.8 per cent to 28.8 per cent. This will result in Iluka obtaining significant influence over this
investment and will commence equity accounting effective from 18 February 2016.
On 24 March 2014 Iluka became aware that a litigation funder proposed to fund claims that current or former
shareholders may have against the Company in respect of continuous disclosure obligations in 2012. As advised
to ASX on 24 March 2014, Iluka is of the view that it has at all times fulfilled its disclosure obligations and on
receipt of any such claims, Iluka will vigorously defend its position. There has been no legal proceedings
commenced, other than a pre action discovery application filed with the Tasmanian Registry of the Federal Court
of Australia pursuant to which the applicant was seeking disclosure from Iluka of non-public documents. Iluka
opposed the pre action discovery application. In July 2015 the Federal Court dismissed the pre action discovery
application and awarded costs to Iluka. The applicant has appealed the Federal Court’s decision. The appeal is
scheduled to be heard by the Full Federal Court on 25 February 2016.
DIVIDEND
Directors have determined a fully franked dividend of 19 cents per share, payable on 1 April 2016 with a record
date of 10 March 2016.
6
OVERVIEW OF SALES AND PRODUCTION
Sales (kt)
Zircon
Rutile
Synthetic rutile
Total Z/R/SR sales
Ilmenite - saleable
Total sales volumes
Z/R/SR revenue ($m)
Ilmenite and other revenue ($m)
Total mineral sands revenue1($m)
Revenue per tonne of Z/R/SR sold2($/t)
Production (kt)
Zircon
Rutile
Synthetic rutile
Total Z/R/SR production
Ilmenite
Total saleable production volume
HMC produced
HMC processed
Cash costs of production ($m)
Unit cash cost per tonne of Z/R/SR produced ($/t)
Unit cash cost per tonne of Z/R/SR produced excluding
by-products ($/t)
Unit costs of goods sold per tonne of Z/R/SR sold ($/t)
2015
346.2
133.6
171.2
651.0
299.8
950.8
739.7
80.1
819.8
1,136
388.6
136.5
164.9
690.0
466.1
1,156.1
1,137
1,206
392.5
569
558
780
2014 % change
352.2
182.0
82.0
616.2
316.6
932.8
634.8
90.1
724.9
1,030
357.6
177.2
-
534.8
365.4
900.2
1,305
968
381.9
714
668
862
(1.7)
(26.6)
108.8
5.6
(5.3)
1.9
16.5
(11.1)
13.1
10.3
8.7
(23.0)
n/a
29.0
27.6
28.4
(12.9)
24.6
(2.8)
20.3
16.5
9.5
1
Mineral sands revenues include revenues derived from other materials not included in production volumes, including activated
carbon products and iron concentrate.
2
Revenue from the sale of zircon, rutile and synthetic rutile products.
Mineral sands sales volumes
Overall Iluka’s Z/R/SR sales increased year-on-year, with high grade feedstocks higher (up 15.5 per cent), in
large part associated with recommencement of SR kiln 2, but with zircon marginally lower (down 1.7 per cent).
Zircon demand year-on-year was broadly stable for the first three quarters, before slowing in the latter part of the
year. Iluka’s 2015 sales of 346.2 thousand tonnes were essentially in line with 2014 (2014: 352.2 thousand
tonnes). Sales in China were stable, with higher demand in Europe, the Middle East and India, offset by weaker
sales in North America, associated with the idling of the Virginia operations and reduced activity in some end
sectors.
Combined sales volumes for the high grade titanium dioxide products of rutile and synthetic rutile for the full year
were up 15.5 per cent to 304.8 thousand tonnes (2014: 264.0 thousand tonnes). Rutile sales were 133.6
thousand tonnes (2014: 182.0 thousand tonnes), with 2015 the first year of rutile allocation following completion
of mining at WRP in Murray Basin, Victoria. SR sales were 171.2 thousand tonnes (2014: 82.0 thousand tonnes),
the majority underpinned by commercial arrangements which continue beyond 2016.
Iluka sold 299.8 thousand tonnes of ilmenite in 2015 (2014: 316.6 thousand tonnes), reflecting higher utilisation
of internal ilmenite as a feed source for SR production and lower sales of ilmenite from Virginia.
Mineral sands production
Total Z/R/SR production was 690.0 thousand tonnes, representing a 29.0 per cent increase from the previous
corresponding period (2014: 534.8 thousand tonnes). Higher year-on-year production mainly reflects an increase
in SR production associated with the reactivation of SR kiln 2 in the South West of Western Australia in April;
marginally higher zircon production; offset by lower rutile production reflecting feedstock blending strategies at
the Hamilton mineral separation plant (MSP) to manage supply of rutile following the completion of mining at
WRP and before the next planned mine in the Murray Basin.
The Jacinth-Ambrosia mining and concentrating operation continued at full utilisation rates through to the end of
the year.
7
Mining at Tutunup South, Western Australia, recommenced in March as an ilmenite feed source for SR kiln 2
located nearby. Mining in the Murray Basin was completed at the WRP deposits in April following the end of the
economic life of
these deposits. Rehabilitation work has commenced and Murray Basin rutile and zircon
production will be derived from the progressive drawdown and processing of heavy mineral concentrate stocks
before the next planned mine development at Balranald, New South Wales.
During 2015, the Hamilton MSP operated at approximately 78 per cent capacity and processed a blend of both
Murray Basin and Jacinth-Ambrosia concentrate. The Narngulu MSP operated at approximately 60 per cent
capacity in 2015.
SR kiln 2, which was re-activated in April 2015 produced 164.9 thousand tonnes of SR to the end of 2015 with
higher than planned production associated with better than expected operating performance.
In Virginia, the Company’s mining and concentrating operations at Concord and Brink, as well as the MSP, were
idled in December 2015, as the Company previously indicated (refer ASX Release 12 December 2014).
INCOME STATEMENT ANALYSIS
$ million
Z/R/SR revenue
Ilmenite and other revenue
Mineral sands revenue
Cash costs of production
Inventory movement
Restructure and idle capacity charges
Rehabilitation and holding costs for closed sites
Government royalties
Marketing and selling costs
Asset sales and other income
Resource development
Mineral sands EBITDA
Depreciation and amortisation
Impairment of US assets
Mineral sands EBIT
Mining Area C
Corporate other costs
Foreign exchange loss
Group EBIT
Net interest and bank charges
Rehabilitation unwind, discount rate change and other finance costs
Profit (loss) before tax
Tax expense
Profit (loss) for the period (NPAT)
Average AUD/USD (cents)
Mineral sands operational results
$ million
Australia
United States
Resource development and other
Total
2015
2014 % change
739.7
80.1
819.8
(392.5)
(5.7)
(38.3)
(2.7)
(21.0)
(32.0)
1.4
(58.4)
270.6
(132.0)
-
138.6
61.2
(52.7)
(4.1)
143.0
(11.0)
(45.4)
86.6
(33.1)
53.5
75.2
634.8
90.1
724.9
(381.9)
14.7
(40.1)
1.0
(10.6)
(30.1)
6.0
(45.3)
238.6
(191.3)
(82.0)
(34.7)
66.4
(48.4)
-
(16.7)
(13.9)
(17.9)
(48.5)
(14.0)
(62.5)
90.3
16.5
(11.1)
13.1
(2.8)
n/a
4.5
n/a
(98.1)
(6.3)
(76.7)
(28.9)
13.4
31.0
n/a
n/a
(7.8)
(8.9)
n/a
n/a
20.9
(153.6)
n/a
(136.4)
n/a
16.7
Revenue
2015
770.5
49.3
-
819.8
2014
640.6
84.3
-
724.9
EBITDA
EBIT
2015
2014
2015
2014
376.5
(34.5)
(71.4)
270.6
290.7
1.4
(53.5)
238.6
246.8
(34.5)
(73.7)
138.6
117.3
(96.4)
(55.6)
(34.7)
An overview of performance for Australian operations and United States operations is provided later in this report.
8
Commentary in respect of the income statement analysis is provided below:
Mineral sands revenue
Mineral sands sales revenue for the year was $819.8 million representing an increase of 13.1 per cent compared
with the previous corresponding period (2014: $724.9 million).
As noted, Z/R/SR sales volumes increased 5.6 per cent to 651.0 thousand tonnes (2014: 616.2 thousand
tonnes). Revenue per tonne of Z/R/SR sold increased by 10.3 per cent to $1,136 (2014: $1,030/t), despite lower
weighted average received USD prices and a higher proportion of standard grade zircon and zircon in
concentrate sales. The higher revenue per tonne therefore mainly reflected currency translation benefits
associated with the lower AUD: USD (2015 average of 75.2 cents compared with 90.3 cents in 2014).
Cash costs of production
Cash costs of production were $392.5 million, a 2.8 per cent increase relative to the previous corresponding
period (2014: $381.9 million) despite a 29.0 per cent increase in Z/R/SR production. Production costs include
including iron
costs associated with the production of
concentrate. In 2015, the costs associated with these by-products was $7.6 million (2014: $25.0 million).
ilmenite concentrate and other by-product streams,
The increase in cash costs of production reflects the reactivation of SR kiln 2 in April, the recommencement of
mining at Tutunup South, Western Australia in February as an ilmenite feed source for the kiln, and the restart of
the Concord mining operation in Virginia, US in July which was concluded in December 2015. This was partially
offset by the conclusion of mining at the WRP deposits in Murray Basin in April following the end of the economic
life of these deposits.
Unit cash costs of Z/R/SR produced, excluding by-product costs, was $558 per tonne compared with $668 per
tonne in 2014. Unit cash costs of Z/R/SR produced, including by-product costs, was $569 per tonne of Z/R/SR
(2014: $714 per tonne).
Inventory movement
Work in progress (WIP) inventory has decreased by $42.9 million as heavy mineral concentrate processed of
1,206 thousand tonnes exceeded heavy mineral concentrate produced of 1,137 thousand tonnes. Mining in the
Murray Basin was completed at the WRP deposits in April 2015 and production will be derived from the
progressive drawdown and processing of heavy mineral concentrate stocks before the next planned mine
development at Balranald, New South Wales.
Inventory of finished product increased by $43.3 million to $377.0 million due to production of Z/R/SR exceeding
sales by 39.0 thousand tonnes during the year. Inventory movements in the balance sheet include the impacts of
foreign currency translation for the US operations, which are accounted for within a foreign currency translation
reserve and not through the profit and loss account.
Restructure and idle capacity cash charges
Restructure and idle capacity charges of $38.3 million (2014: $40.1 million) reflect costs incurred during periods
of no or restricted production. Idle costs of $34.7 million are lower than the prior year (2014: $40.1 million)
reflecting the change in operations with reactivation of the SR 2 at Tutunup South in South West of Western
Australia at the end of the first quarter 2015 whilst mining at WRP in Murray Basin concluded. Restructure costs
of $3.6 million (2014: $nil) were incurred in association with the cessation of mining at WRP in April 2015 and the
idling of the US operations in December 2015.
Rehabilitation and holding costs for closed sites
Rehabilitation and holding costs of $2.7 million (2014: $1.0 million credit) include costs incurred relating to
ongoing maintenance work completed on closed sites and changes in cost estimates for rehabilitation work
associated with closed sites, with US operations rehabilitation up $27.7 million and Australian operations down
$25.0 million.
Government royalties
Government royalties were higher than the previous corresponding period at $21.0 million (2014: $10.6 million)
reflecting increased revenue and an increase in the royalty rate applied to production from the Jacinth-Ambrosia
mine in South Australia. The Jacinth-Ambrosia mine was granted ‘new mine’ status from the State Government,
which included a reduced royalty rate of 1.5 per cent for the first five years. This rate increased to 5 per cent in
the first quarter of 2015 and will remain at that level for the remainder of the mine life.
Marketing and selling costs
Marketing and selling costs of $32.0 million are comparable with the previous corresponding period (2014: $30.1
million) and reflect a global marketing presence.
9
Resource development
Resource developments costs have increased 28.9 per cent to $58.4 million (2014: $45.3 million), reflecting a
desire to discover additional Mineral Resources and support
the definition of additional Ore Reserves.
Exploration expenditure increased $8.0 million to $27.0 million reflecting an international exploration program,
primarily for mineral sands but also with a targeted non mineral sands commodity focus. Expenditure also
increased on assessing other growth options, including Tapira, Brazil and mining and processing technical
evaluation work.
Depreciation and amortisation
The decrease of $59.3 million to $132.0 million compared to the previous corresponding period (2014: $191.3
million) reflects no depreciation charge on the US assets following the impairment charge taken in December
2014 combined with no depreciation at WRP following cessation of mining in the first quarter of 2015.
Depreciation has recommenced on mine specific equipment and mine reserves associated with the restart of
mining operations at Tutunup South and the restart of the SR 2 kiln during the first half of 2015. No depreciation
was incurred on mine specific equipment at these locations during 2014.
US impairment
There have been no impairments during 2015. An impairment charge of $82.0 million before tax was recognised
in relation to the US operations property, plant and equipment fixed assets in Virginia in 2014.
Mining Area C
Iron ore sales volumes were comparable with the previous corresponding period at 53.5 million dry metric tonnes
(DMT) (2014: 53.4 DMT). The average AUD realised price upon which the royalty is payable decreased by 27.4
per cent from the previous corresponding period. The EBIT contribution of $61.2 million (2014: $66.4 million)
includes $3.0 million of annual capacity payments for production increases in the year to 30 June (2014: $1.0
million) and a one-off receipt of US$8.0 million (A$10.4 million) following the modification to the royalty
agreement with BHP Billiton and its joint venture partners, as announced to the ASX on 21 July 2015.
Corporate and other
Corporate and other costs of $52.7 million are $4.3 million higher than the previous corresponding period (2014:
$48.4 million), reflecting increased costs associated with the evaluation of a potential acquisition of Kenmare
Resources Plc.
Foreign exchange
Foreign exchange translation losses were $4.1 million compared to a net gain of $3.7 million in 2014 which was
shown in other income.
Rehabilitation unwind
Rehabilitation unwind and other expense of $45.4 million includes a $25.3 million charge due to a reduction in the
risk free discount rate used in the calculation of the net present value of the rehabilitation provisions in respect of
closed sites in Australia. The 15 year Australian Government Bond rate (bond rate) is used as the discount rate in
calculating the Australian rehabilitation provision. Due to a sustained decline in the bond rate to around 3 per cent
(from around 4.7 per cent in 2013), the present value of the Australian rehabilitation provision has increased by
$46.6 million, which comprises a $25.3 million non-cash pre-tax charge to the profit and loss for closed sites in
2015 and a $21.3 million increase to the balance sheet for open sites.
Net interest and bank charges
The interest charge of $11.0 million is 20.9 per cent lower than the previous corresponding period. Net debt
started the year at $59.0 million and has reduced to a net cash position of $6.0 million at 31 December 2015 due
to strong cash flows. The interest charge includes commitment fees in relation to the Multi Option Facility
Agreement (MOFA) which are payable on undrawn funds under the facility.
Tax expense
The income tax expense of $33.1 million is at an effective tax rate of 38.2 per cent. This is above the Australian
corporate tax rate of 30 per cent due to minimal tax benefits recognised for US losses of $35.5 million incurred
during the year, combined with an increase in non-deductible expenses, specifically in relation to overseas
exploration and Kenmare Resources Plc transaction costs.
10
MOVEMENT IN NPAT
Commentary in respect of each bar in the NPAT waterfall above is provided below:
Z/R/SR sales price (-ve $56 million)
Lower average USD prices for all products compared to the previous corresponding period.
Rutile prices achieved an average US$721 per tonne, 7 per cent lower year-on-year (2014: US$777/t). Weighted
average prices reflect market conditions, as well as a higher proportion of lower titanium dioxide content, HyTi
product sold in 2015 relative to 2014. Iluka’s synthetic rutile sales are, in large part, underpinned by commercial
off take arrangements. The terms of these arrangements, including the pricing arrangements are commercial in
confidence and as such not disclosed by Iluka.
Average annual zircon prices were US$961 per tonne, a reduction of 6 per cent from the average achieved in
2014 (2014: US$1,024/t). Zircon prices reflect the weighted average price for zircon premium, zircon standard,
zircon in concentrate and zircon tailings. The prices for each product vary considerably, as does the mix of such
products sold period to period. 2015 included a higher proportion of standard grade zircon and zircon in
concentrate sales than the previous corresponding period.
Z/R/SR sales volumes (+ve $12 million)
The amount reflects the impact of higher Z/R/SR sales volumes, up 5.6 per cent from the previous corresponding
period, using the average margin achieved for Z/R/SR product sales in the current period.
Z/R/SR sales mix (-ve $10 million)
Z/R/SR sales volumes for the period include a lower proportion of higher priced zircon and a higher proportion of
lower priced high grade titanium dioxide products than in the previous corresponding period.
Z/R/SR foreign exchange (+ve $122 million)
The impact of a lower weighted average spot exchange rate of 74.2 cents applicable to Z/R/SR revenue
compared with the rate achieved in the previous corresponding period of 89.3 cents. Foreign exchange impacts
on operating costs, mainly those relating to the US operations, are included in the overall movement in unit cost
of goods sold. The variance also includes a foreign exchange translation loss of $4.1 million as opposed to a
translation gain of $3.7 million in 2014.
11
Ilmenite concentrate and other products (+ve $8 million)
Ilmenite concentrate and by-products costs reduced $17.4 million from 2014 to $7.6 million, reflecting Iluka’s
decision to market less iron concentrate as a result of the reduction in iron ore prices and due to decreased
volumes of ilmenite concentrate transported for sale associated with prevailing low prices for this product. This
reduction in costs has been partially offset by reduced revenue of $10.0 million for ilmenite and by-products.
Z/R/SR unit cost of goods sold (+ve $38 million)
Lower unit costs of sales for Z/R/SR sold during the period reflects reducing unit cash costs of production
combined with a change in sales mix to include lower cost material.
Restructure and idle capacity (+ve $2 million)
The reduction in costs predominantly reflects recommencement of SR2 kiln and mining at Tutunup South in
Western Australia partially offset by $3.6 million of restructure costs incurred during the year on conclusion of
mining at WRP in Murray Basin and idling the US operations.
Mineral sands other costs (-ve $30 million)
The higher costs were due mainly to increased government royalties and resource development costs.
Mining Area C (-ve $5 million)
Underlying iron ore royalties decreased compared to the previous corresponding period due to a 27.4 per cent
decrease in realised AUD iron ore prices whilst sales volumes were comparable at 53.5 million dry metric tonnes
(2014: 53.4 dry metric tonnes). MAC capacity payments of $3.0 million, before tax, were $2.0 million higher than
in the previous corresponding period. Royalty and capacity payments are payable on dry metric tonnes. Included
in MAC income in 2015 is a one-off receipt of US$8 million as referenced previously.
Corporate (-ve $4 million)
The higher corporate costs related mainly to transaction costs associated with the potential acquisition of
Kenmare Resources Plc.
Impairments and idle asset write downs (+ve $82 million)
The prior year included an impairment charge of $82.0 million recorded against the US operations reflecting a
complete write-off of all property, plant and equipment fixed assets in Virginia. No impairment charges have
occurred in 2015.
Interest and bank charges (+ve $3 million)
Interest costs decreased due to lower average borrowing levels than in the previous corresponding period.
Rehabilitation unwind and other finance charges (-ve $28 million)
The increase from the previous corresponding period largely reflects a $25.3 million charge due to a reduction in
the risk free discount rate used in the calculation of the net present value of the rehabilitation provisions in
respect of closed sites in Australia.
Tax (-ve $18 million)
A higher tax expense is mainly the result of higher earnings than the previous corresponding period, combined
with minimal tax benefits recognised for US losses of $35.5 million.
12
BALANCE SHEET, CASH FLOW AND NET DEBT
Balance sheet by operation - $ million
31 December 2015
AUS
US
MAC
Corp
Group
Receivables
Inventories
Payables and accruals
Employee and other provisions
Rehabilitation provisions
Investment in Metalysis Limited
Property, plant & equipment
Intangibles
Capital employed
Net tax asset
Net debt
Total equity
Net funding
78.5
741.2
(58.8)
(10.6)
(406.8)
-
1,018.1
-
1,361.6
13.9
70.6
(17.5)
(13.8)
(80.2)
-
34.5
-
7.5
10.2
-
-
-
-
-
-
5.1
15.3
6.3
-
(17.3)
(14.8)
-
22.7
17.2
-
14.1
108.9
811.8
(93.6)
(39.2)
(487.0)
22.7
1,069.8
5.1
1,398.5
(4.1)
(6.0)
1,408.6
1,398.5
31 Dec
2014
98.8
810.2
(80.1)
(34.5)
(457.0)
18.6
1,117.2
5.5
1,478.1
(15.5)
59.0
1,434.6
1,478.1
Receivables are marginally higher than the previous corresponding period. Iluka has continued to utilise two
trade receivables purchase facilities entered into in late 2014 which enabled the earlier collection of $75.0 million
of receivables at 31 December 2015 (31 December 2014: $84.4 million).
Inventory values are comparable with the previous corresponding period. The composition of inventory has
changed, with an increase in finished goods of $43.3 million from the previous corresponding period to $377.0
million, offset by a reduction of $42.9 million in work in progress (WIP) to $401.2 million. Lower WIP values reflect
heavy mineral concentrate processed through the mineral separation plants of 1,206 thousand tonnes exceeding
heavy mineral concentrate produced of 1,137 thousand tonnes. Mining in the Murray Basin was completed at the
WRP deposits in April following the end of the economic life of these deposits and production will be derived from
the progressive drawdown and processing of heavy mineral concentrate stocks before the next planned mine
development at Balranald, New South Wales. The progressive drawdown of WIP is expected to continue in the
coming years. The increase in finished goods is due mainly to production of Z/R/SR exceeding sales by 39.0
thousand tonnes.
Inventories include $317.9 million of predominantly concentrate material classified as
non-current (2014: $353.7 million) and $33.6 million of consumable stores (2014: $32.4 million).
Rehabilitation provisions have increased from the previous corresponding period despite active rehabilitation
throughout the year. The increase is due to the reduction in the risk free discount rate used for the Australian
sites leading to an increase of $46.6 million in the provision.
During the year, Iluka increased its equity stake in Metalysis Limited to 20.8 per cent (17.2 per cent diluted).
Metalysis Limited is a private UK based entity that is developing a new technology for titanium metal powder
production. The investment cost to date is $22.7 million.
Lower property, plant and equipment values reflect the depreciation charge for the period of $132.0 million being
higher than capital expenditure of $62.3 million, offset partially by increases related to rehabilitation obligations.
Net debt decreased $65.0 million compared to the previous corresponding period due to free cash inflow for the
year of $155.0 million, payments of $79.5 million in respect of the 13 cent 2014 final dividend in March 2015 and
the 6 cent 2015 interim dividend in October 2015 and currency translation impacts of $8.1 million on the USD
component of net debt. Since the start of the year, Iluka has increased the size of the Multi Option Facility
Agreement (MOFA) facilities by $160 million to $1,010 million through the addition of a new bilateral facility to
May 2020 and the expansion of three existing facilities. Iluka also extended a portion of the maturity profiles
within the MOFA. As a result, Iluka has facilities of $175 million maturing in April 2017, $260 million maturing in
April 2019 and $575 million maturing throughout 2020. Iluka repaid the final tranche of the US Private Placement
Notes in June 2015 (US$20 million). Undrawn facilities at 31 December 2015 were $955 million and cash and
cash equivalents were $55 million.
13
Movement in net (debt) cash
$ million
Opening net debt
Operating cash flow
MAC royalty
Exploration
Interest (net)
Tax
Capital expenditure
Purchase of investment in Metalysis Limited
Asset sales
Share purchases for employee share schemes
Free cash flow
Dividends
Net cash flow
Exchange revaluation of USD net debt
Amortisation of deferred borrowing costs
Decrease (increase) in net debt
Closing net cash (debt)
Full Year
2014
1st Half
2015
2nd Half
2015
Full Year
2015
(206.6)
254.8
75.2
(22.1)
(12.8)
(27.5)
(48.3)
(18.6)
0.3
(4.7)
196.3
(41.8)
154.5
(4.7)
(2.2)
147.6
(59.0)
(59.0)
92.1
26.7
(11.5)
(5.6)
(14.3)
(35.5)
(4.1)
0.2
(9.0)
39.0
(54.4)
(15.4)
(4.6)
(1.2)
(21.2)
(80.2)
(80.2)
130.1
37.3
(16.2)
(4.9)
(4.2)
(26.8)
-
0.7
-
116.0
(25.1)
90.9
(3.5)
(1.2)
86.2
6.0
(59.0)
222.2
64.0
(27.7)
(10.5)
(18.5)
(62.3)
(4.1)
0.9
(9.0)
155.0
(79.5)
75.5
(8.1)
(2.4)
65.0
6.0
Operating cash flow in the year of $222.2 million is lower than the previous corresponding period, reflecting the
timing of cash collections with receipts from customers down $9.3 million despite higher revenue.
MAC cash flows were $11.2 million lower than the previous corresponding period reflecting lower MAC royalty
income.
Iluka continued monthly tax instalments in Australia during the year. Iluka’s tax expense in the year was $33.1
million in comparison to net tax payments of $18.5 million.
Capital expenditure of $62.3 million in the year related to various major projects, including Cataby (Western
Australia) and Balranald (New South Wales) as well as land acquisitions. In addition, Iluka increased its equity
interest in Metalysis Limited for a cost of $4.1 million in the year taking the equity holding to 20.8 per cent (17.2
per cent diluted).
Share purchases are on-market purchases associated with the Group’s equity based incentive plans. The
increase in share purchases reflects the Board’s objective of holding a balance of shares based on the amount of
unvested share rights.
A 2014 final dividend of 13 cents per share was paid in March 2015 and a 2015 interim dividend of 6 cents per
share was paid in October 2015. The prior year cash flows included a 4 cents per share 2013 final dividend, paid
in April 2014 and a 6 cents per share 2014 interim dividend, paid in October 2014.
The exchange revaluation of net debt
in the year predominantly reflects the re-translation of US dollar
denominated debt from an exchange rate of 81.9 cents at 31 December 2014 to 72.8 cents at 31 December
2015.
14
REVIEW OF AUSTRALIAN OPERATIONS
Production volumes
Zircon
Rutile
Synthetic rutile
Total Z/R/SR production
Ilmenite
Total production volume
HMC produced
HMC processed
Unit cash cost of production - zircon/rutile/SR *
Mineral sands revenue
Cash costs of production
Inventory movements
Restructure and idle capacity charges
Rehabilitation and holding costs for closed sites
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation & amortisation
EBIT
2015
2014 % change
351.3
136.5
164.9
652.7
320.9
973.6
890
949
466
770.5
(304.3)
(46.7)
(29.3)
25.0
(21.0)
(16.4)
(1.3)
376.5
(129.7)
246.8
332.5
177.2
-
509.7
270.6
780.3
1135
796
629
640.6
(320.8)
32.9
(36.5)
1.0
(10.6)
(16.2)
0.3
290.7
(173.4)
117.3
5.7
(23.0)
n/a
28.1
18.6
24.8
(21.6)
19.2
25.9
20.3
5.1
n/a
19.7
(2,400.0)
(98.1)
(1.2)
n/a
29.5
25.2
110.4
kt
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
* Calculated as cash costs of production, including by-product costs divided by Z/R/SR production.
Higher year-on-year production mainly reflects an increase in SR production associated with the reactivation of
SR kiln 2 in the South West of Western Australia in April, with marginally higher zircon production, offset by lower
rutile production reflecting feedstock blending strategies at the Hamilton MSP to manage supply of rutile following
the completion of mining at WRP and before the next planned mine in the Murray Basin.
Cash costs of production are lower than the previous corresponding period due to the conclusion of mining at
WRP combined with lower costs associated with iron concentrate and ilmenite concentrate. This was partially
offset by higher costs relating to the restart of mining at Tutunup South and reactivation of SR kiln 2.
Higher mineral sands revenue reflects both increased sales volumes and a higher achieved AUD sales price
driven by favourable exchange movements.
Unit cash costs of production per tonne of Z/R/SR declined due to the conclusion of mining at WRP and lower
costs associated with iron concentrate and ilmenite concentrate. This was partially offset by costs associated with
reactivated mining operations at Tutunup South and the SR kiln 2.
The inventory movement reflects both a draw down in WIP and finished goods, as a result of sales of Z/R/SR
exceeding production during the year whilst HMC processed exceeded HMC produced following the conclusion
of mining at WRP.
Restructure and idle capacity charges have declined compared to the prior year and consist predominantly of idle
capacity charges related to the idled synthetic rutile kilns in the South West in the first quarter of the year and
care and maintenance activities at other idle sites. Restructure costs of $2.6 million are included in the current
year related mainly to the closure of WRP (2014: $nil).
Iluka undertook an annual assessment of the scope of work required for rehabilitation. This review has identified
opportunities to improve techniques applied to rehabilitation and has resulted in a reduction in the obligation for
closed sites of $25.0 million.
Government royalties were higher than the previous corresponding period reflecting increased revenue and an
increase in the royalty rate applied to production from the Jacinth-Ambrosia mine in South Australia. The
Jacinth-Ambrosia mine was granted new mine status and qualified for a reduced royalty rate of 1.5 per cent for
the first five years. This rate increased to 5 per cent in the first quarter of 2015.
Lower depreciation and amortisation charges mainly reflect the conclusion of mining at WRP in the first quarter of
the year partially offset by the restart of mining operations at Tutunup South and the SR 2 kiln.
15
REVIEW OF UNITED STATES OPERATIONS
Production volumes
Zircon
Ilmenite
Total saleable production volume
HMC produced
HMC processed
Unit cash cost of production - saleable product *
Mineral sands revenue
Cash cost of production
Inventory movements
Restructure and idle capacity charges
Rehabilitation costs for closed sites
EBITDA
Depreciation & amortisation
Impairment
EBIT
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
2015
2014 % change
37.3
145.1
182.4
247
257
484
49.3
(88.2)
41.0
(9.0)
(27.6)
(34.5)
-
-
(34.5)
25.1
94.8
119.9
170
172
510
84.3
(61.1)
(18.2)
(3.6)
-
1.4
(15.8)
(82.0)
(96.4)
48.6
53.1
52.1
45.3
49.4
5.1
(41.5)
(44.4)
n/a
(150.0)
n/a
n/a
n/a
n/a
n/a
* Calculated as cash costs of production, including by-product costs divided by zircon and ilmenite production.
Zircon production was 48.6 per cent higher than the previous corresponding period and ilmenite production was
53.1 per cent higher. The increase reflecting the continued operation of mining at Brink and the reactivation of the
second mining operation at Concord from July 2015. In December 2015 both Virginia mines, plus the Stony
Creek MSP, were idled.
Cash costs of production were higher than the previous corresponding period due to the reactivation of mining at
Concord and higher MSP utilisation reflected in the increase in zircon and ilmenite production.
Unit cash cost of production per tonne of finished product decreased from the previous corresponding period due
to higher production volumes, partially offset by foreign exchange currency translation impacts.
The inventory movement reflects an increase in finished goods on hand compared to the previous corresponding
period with production exceeding sales.
Costs for restructure and idle capacity increased due to costs associated with the re-start of the Concord mining
operations during the first half of 2015. Also included are restructure costs of $1.0 million associated with the
idling of operations in December 2015.
Iluka undertook an annual assessment of the scope of work required for rehabilitation. This review resulted in an
increase in the provision associated with a change in the scope of work, the cost of undertaking this work and a
revision to the timing of when the work would be undertaken. This resulted in an increase in the obligation for
closed sites of $27.6 million.
An impairment charge of $82.0 million was recorded in 2014 to reduce the carrying value of the property, plant
and equipment in Virginia, United States to $nil at 31 December 2014. No depreciation charge is included in the
current year as a result of the impairment of US assets in December 2014.
16
NON-IFRS FINANCIAL INFORMATION
This Annual Report uses non-IFRS financial information including mineral sands EBITDA, mineral sands EBIT,
Group EBITDA and Group EBIT, which are used to measure both Group and operational performance. A
reconciliation of non-IFRS financial information to profit before tax is provided below. Non-IFRS measures have
not been subject to audit.
31 December 2015
Mineral sands revenue
Mineral sands expenses
Mining Area C
Foreign exchange
Corporate costs
EBITDA
Depreciation & amortisation
EBIT
Net interest costs
Rehabilitation unwind & other
Profit (loss) before tax
AUS
770.5
(394.0)
US
49.3
(83.8)
Exploration
& Other1
(71.4)
Mineral
sands
819.8
(549.2)
376.5
(34.5)
(129.7)
246.8
(34.5)
(71.4)
(2.3)
(73.7)
270.6
(132.0)
138.6
(42.0)
204.8
(1.0)
(35.5)
(73.7)
(43.0)
95.6
MAC
Corp
61.6
61.6
(0.4)
61.2
61.2
(4.1)
(52.7)
(56.8)
(56.8)
(11.0)
(2.4)
(70.2)
Group
819.8
(549.2)
61.6
(4.1)
(52.7)
275.4
(132.4)
143.0
(11.0)
(45.4)
86.6
230.5
Segment result
1Comprises resource development costs ($58.4m), marketing and selling costs ($15.7m), offset by asset sales and other
income $2.7m.
(35.5)
204.8
169.3
61.2
31 December 2014
Mineral sands revenue
Mineral sands expenses
Mining Area C
Corporate costs
EBITDA
Depreciation & amortisation
Impairment of US assets
EBIT
Net interest costs
Rehabilitation unwind & other
Profit (loss) before tax
AUS
640.6
(349.9)
290.7
(173.4)
117.3
(14.9)
102.4
Exploration
& Other1
(53.5)
US
84.3
(82.9)
Mineral
sands
724.9
(486.3)
1.4
(53.5)
238.6
(15.8)
(82.0)
(96.4)
(0.8)
(97.2)
(2.1)
(55.6)
(191.3)
(82.0)
(34.7)
(55.6)
(15.7)
(50.4)
MAC
Corp
66.8
66.8
(0.4)
66.4
66.4
(48.4)
(48.4)
(48.4)
(13.9)
(2.2)
(64.5)
Group
724.9
(486.3)
66.8
(48.4)
257.0
(191.7)
(82.0)
(16.7)
(13.9)
(17.9)
(48.5)
71.6
Segment result
1Comprises resource development costs ($45.3m), marketing and selling costs ($13.9m), offset by asset sales and other
income $5.7m.
(97.2)
102.4
66.4
5.2
17
REMUNERATION REPORT
CONTENTS
SECTION 1
SECTION 2
SECTION 3
SECTION 4
SECTION 5
SECTION 6
SECTION 7
SECTION 8
SECTION 9
2015 OVERVIEW
2015 TOTAL REALISED EARNINGS (Non-IFRS Financial Information)
LINK BETWEEN PERFORMANCE AND REWARD
REMUNERATION GOVERNANCE
EXECUTIVE REMUNERATION
MANAGING DIRECTOR REMUNERATION
EXECUTIVE EMPLOYMENT AGREEMENTS
NON-EXECUTIVE DIRECTOR REMUNERATION
STATUTORY REMUNERATION DISCLOSURES
The directors of Iluka Resources Limited present this Remuneration Report (Report) for the consolidated entity for the year
ended 31 December 2015. The information provided in this Report, other than Section 2 which presents non-IFRS financial
information, has been audited as required by section 308(3C) of the Corporations Act 2001 (Cth) and forms part of the
Directors’ Report.
This Report sets out remuneration information for the non-executive directors, Managing Director and other senior
executives, including the Key Management Personnel (KMP) who have authority for planning, directing and controlling the
activities of the Company (as defined in AASB 124 Related Party Disclosures).
SECTION 1
2015 OVERVIEW
Iluka’s financial and business performance, and the business and operating conditions which influence these outcomes, are
described in detail elsewhere in the Annual Report (refer pages 2 to 17). Iluka’s 2015 remuneration and incentive outcomes
reflect these business conditions, as well as the returns available to shareholders.
The Board recognises the importance of delivering sustainable growth for the long-term performance of the Company. As
such, growth objectives supplementing the delivering of annual financial and sustainability outcomes, are a key element of
the objective setting and remuneration incentive arrangements for the Managing Director and his executive team.
At the commencement of each financial year, challenging individual targets are set for the Managing Director and his
executive team. These objectives focus on the achievement of Iluka’s Corporate Plan and implementation of associated
strategies.
In 2015, objectives were consistent with Iluka’s approach which, while centred on shareholder returns through industry
cycles, also involves acting counter-cyclically where appropriate. So objectives for the year therefore focused on achieving a
complex balance of positioning the Company conservatively and robustly against prevailing volatility in global economic
conditions while concurrently and conversely electing to invest to secure, advance, and enhance options which position the
business for demand recovery and future growth.
2015 objectives were, notwithstanding challenging industry conditions, framed with specific deliverables that required stretch
levels of performance. Objectives included the following:
strengthening of Iluka’s position as a high grade TiO2 supplier by restarting idled assets progressively, in line with
market demand and on a commercially prudent basis;
enhancement of the Company’s zircon market presence and leadership position via new products; increased market
representation and technical collaboration with customers; and introduction of a new zircon pricing model;
optimisation of the risk/return balance in internal mineral sands production options through project timing flexibility and
market-related production profiles together with capital and operating expenditure improvements. Major projects
included the globally significant rutile deposit, Balranald in New South Wales and the Cataby deposit in Western
Australia;
development, acquisition and implementation of new mineral sands mining and processing technologies, including
those with the potential to transform the Company’s resource base via innovative solutions to major technical
challenges facing the industry. Examples include commercialisation of the potentially disruptive Metalysis titanium
powder production technology and the large Tapira mineralisation in Brazil;
exploration activities; ranging from first stage evaluative studies in new jurisdictions to exploration and resource
delineation drilling in multiple jurisdictions in Australia and internationally, to the scoping study and associated
government negotiations regarding the Puttalam deposit in Sri Lanka;
18
evaluation and progression of merger and acquisition opportunities where financial merit and strategic rationale can be
demonstrated; and
proactive advancement of the Company’s sustainability and social responsibility performance and reputation, including
workforce capability and diversity, sustainable development practices and alignment to international reporting
frameworks.
Director’s base fees and key management personnel salaries have not been increased since 2011 and 2013 respectively.
A comprehensive review of Iluka’s incentive plans continued in 2015. Both the short-term and long-term incentive plans have
been reviewed to ensure outcomes continue to be appropriate in the context of Company performance and are aligned with
market practice.
Based on the findings of this review, the Board has determined to extend the long-term incentive performance period from
three years to four years for future grants. This change will ensure management is focused on long term strategic objectives
that are fundamental to Iluka’s growth and delivery of shareholder returns. No further changes will be made to the short-term
incentive plan in 2016, following minor changes to performance measure weightings in 2015.
The following provides an overview of Iluka’s remuneration and incentive outcomes in 2015.
Total Fixed Remuneration (TFR)
(Section 5.2)
In 2015, all executives and senior managers were excluded from the annual
salary review process.
During the year, a restructure of executive roles resulted in a change to the TFR
of Doug Warden on appointment to the CFO role to reflect promotion and
change in accountabilities. No other changes were made during 2015.
As market conditions remain challenging, the Board has determined that a
freeze will remain in place for all KMP salaries for the 2016 financial year.
Accordingly for a third consecutive year, there will be no increase to TFR levels
for KMP. Exceptions may be made for those executives with changed duties.
Short Term Incentive Plan (STIP)
(Section 5.3)
The 2015 STIP outcome equated to an average payment of 39 per cent of
maximum opportunity for all executive KMP (including the Managing Director).
Long Term Incentive Plan (LTIP)
(Section 5.4)
Managing Director’s Long Term
Incentive Deferral (LTID) Plan
(Section 6)
Thresholds for the Profitability component of the STIP award were not met,
reflecting the ongoing low cycle mineral sands industry conditions and resulting
financial outcomes.
Above-target performance was achieved for the Sustainability component due to
strong environmental performance however threshold safety performance was
not achieved. Executives achieved above-target outcomes for their individual
objectives relating to achievement of strategic growth opportunities for the
Company.
There is mandatory deferral of 50 per cent of the STIP award for executives into
restricted shares. The deferred portion vests over a two-year period, and is
subject to clawback during deferral.
32 per cent vesting of the 2013 LTIP (performance period 1 January 2013 to 31
December 2015) reflected:
Return on Equity (ROE) performance of 0.3 per cent against a threshold of
10 per cent, resulting in nil vesting of the ROE component; and
Total Shareholder Return (TSR) of (27.8) per cent that ranked at the 57.5th
percentile of the S&P/ASX 200 Materials Index comparator group on a
relative basis.
The Managing Director’s LTID plan assessed performance over the three-year
period from March 2011 to March 2014.
Of the 750,000 share rights offered, 250,000 vested in March 2015 based on
the Company’s financial performance over the three-year performance period.
The Board and the Managing Director have agreed that a replacement for the
expired Managing Director’s LTID plan is not appropriate at this time. The
Managing Director continues to participate in the LTIP.
19
Total Remuneration
(Section 2.1 and Section 9.2)
Employee Share Plan
Non–Executive Directors
Remuneration
(Section 9.1)
In 2015, total remuneration for the Managing Director and other executive KMP
decreased by 21 per cent on a statutory basis (see Section 9.2). On a realised
or ‘take-home’ basis (non-IFRS) (see Section 2.1) total remuneration increased
by 6 per cent compared with 2014 total remuneration levels.
The Company continues to offer the A$1,000 employee share plan in line with
the Company’s focus on share ownership for all employees. In 2015, 497
employees (out of 498 eligible employees) accepted the offer to participate in
the plan for which a total of 59,143 shares were awarded.
No changes were made to non-executive director board and committee fees in
2015. Base fees have not been increased since 2011. At the 2015 AGM,
shareholders approved an increase in the fee cap to $1.8 million per annum to
allow for Board succession planning.
The Board determined that non-executive director fees will remain frozen for the
2016 financial year.
Incentive Plan Review Outcomes and
Changes for 2016
As highlighted in the 2014 Remuneration Report, the following changes were
made in 2015:
The LTIP target for KMP in 2015 was increased from 30 per cent to 60 per
cent of TFR for the purpose of rebalancing the total target remuneration mix
with an increased weighting toward long-term performance. This outcome
from key
was based on
stakeholders that the structure of remuneration packages required a longer-
term focus.
independent benchmarking and
feedback
Discretionary one-off LTIP grants were introduced to provide Iluka with
flexibility to reward senior executives on promotion to key roles; and/or with
skills and experience critical to the execution of the Corporate Plan; and/or
who are a retention risk due to the specialist nature of their skills and
experience.
The percentage weightings of performance measures under the STIP were
aligned for all participants to 50 per cent weighting for Profitability, 10 per
cent weighting for Sustainability and 40 per cent weighting for Individual
Growth.
In addition to the above changes, the Board has also resolved to extend the
LTIP performance period from three years to four years to increase alignment
with longer-term strategic outcomes. This change in policy will apply for LTIP
offers made in 2016.
To ensure no major disruption to participants’ vesting profile, and the delivery of
the same grant quantum in each year of vesting, two LTIP awards will be
granted in the 2016 transitional year. The performance periods for the two
awards will be three and four years respectively.
No further changes will be made to the STIP in 2016.
20
SECTION 2
2015 TOTAL REALISED EARNINGS (NON-IFRS FINANCIAL INFORMATION)
The tables in this section use non-IFRS financial information which is used to detail ‘actual’ pay received by the Managing
Director and other executive KMP during the 2015 financial year and 2014 financial year. This is a voluntary disclosure and
is supplemental information to the statutory remuneration disclosure prepared in accordance with statutory requirements and
accounting standards as detailed in Section 9 of this Remuneration Report. A description of how to calculate the non-IFRS
financial information is set out below and in the footnotes to the tables. Non-IFRS financial information has not been subject
to audit.
2.1
Executive Total Realised Earnings in 2015 (non-IFRS)
The total realised earnings include cash salary and fees, superannuation, non-cash benefits received during the year and
the full value of incentive payments earned during the performance period ended 31 December 2015. The table does not
include the accounting value of share based payments consisting of share rights granted in the current and prior years. The
table also does not include LTIP grants in 2015 because those share-based payments are dependent on the achievement of
performance hurdles and consequently may or may not be realised. Remuneration details for the full 2015 year are shown.
Name
Base
$
Super
$
Other1
$
2015 STIP2
$
2013
LTIP3
$
2015 Total
Earnings
$
D Robb
Managing Director
D Warden4
Chief Financial Officer and
Head of Strategy and
Planning
M Blackwell5
Head of Marketing, Mineral
Sands
S Wickham
Chief Operating Officer,
Mineral Sands
A Tate6
Head of Alliances, New
Ventures and Royalties
Cash
Restricted
Shares
Shares
1,974,907
19,046
20,677
499,500
499,500
116,998
3,130,628
615,903
19,046
-
103,950
103,950
35,334
878,183
710,012
-
70,855
118,217
118,217
28,431
1,045,732
709,396
19,046
5,978
141,836
141,836
39,956
1,058,048
655,954
19,046
-
136,688
136,688
39,490
987,866
1 Includes non-monetary benefits which consist of car parking and spouse travel and US expenses relating to relocation
and social security payments.
2 Represents the value of the 2015 STIP which will be awarded partly in cash and partly in deferred equity in March 2016.
Restricted shares remain subject to continued service and are released in equal tranches after 12 months and 24 months.
The number of restricted shares will be determined by dividing the dollar value of the deferred component by the 5 day
Volume Weighted Average Price (VWAP) following the release of 2015 full year financial results (See Section 5.3 for more
details).
3 Represents the estimated value of the 2013-2015 LTIP award for which the performance period concluded on 31
December 2015. The estimate was calculated using the closing share price of $6.13 at 1 January 2016. The actual value
will be calculated using the closing share price at the date of vesting (1 March 2016).
4 D Warden was appointed to his current role on 1 June 2015.
5 M Blackwell is based in the US and received a USD denominated salary. There has been no change to his salary in the
2015 financial year. The change from 2014 is the result of the change in foreign exchange rates. M Blackwell’s earnings
have been converted from USD to AUD using the 2015 YTD average foreign exchange rate of 0.7521.
6 A Tate ceased to be a KMP on 1 June 2015. Remuneration details for the full 2015 year are shown.
21
2.2
Executive Total Realised Earnings in 2014 (non-IFRS)
Name
Base
$
Super
$
Other1
$
2014 STIP2
$
2012 LTIP3
$
2014 Total
Earnings
$
Cash
Restricted
Shares
Shares
1,981,515
18,335
57,756
503,700
503,700
80,791
3,145,797
585,721
18,279
-
84,258
84,258
20,175
792,691
589,998
2,962
32,336
82,495
82,495
20,222
810,508
693,888
18,963
27,865
112,149
112,149
30,147
995,161
655,157
19,843
38,857
116,944
116,944
30,008
977,753
D Robb
Managing Director
D Warden
Head of Resource
Development, Mineral Sands
M Blackwell4 5
Head of Marketing, Mineral
Sands
S Wickham6
Chief Operating Officer,
Mineral Sands
A Tate
Chief Financial Officer and
Head of Strategy and
Planning
1 Includes non-monetary benefits.
2 Represents the value of the 2014 STIP which was awarded partly in cash and partly in deferred equity on 1 March 2015.
Restricted shares remain subject to continued service and are released in equal tranches after 12 months and 24 months.
The number of restricted shares was determined by dividing the dollar value of the deferred component by the 5 day
Volume Weighted Average Price (VWAP) following the release of 2014 full year financial results.
3 Represents the value of the 2012-2014 LTIP award for which the performance period concluded 31 December 2014
calculated at the closing share price of $8.28 at the date of vesting (1 March 2015).
4 M Blackwell was appointed to his current role and became a KMP on 1 February 2014. Remuneration details for the full
2014 year are shown.
5 M Blackwell's earnings have been converted from USD to AUD using the 2014 YTD average foreign exchange rate of
0.9030.
6 S Wickham was appointed to his current role on 1 June 2014.
22
SECTION 3
LINK BETWEEN PERFORMANCE AND REWARD
The following section sets out details of Iluka’s financial performance and how performance has translated to incentive
outcomes for executive KMP demonstrating clear alignment between Company performance and executive reward.
3.1
Shareholder Alignment – LTIP Outcomes
LTIP Performance Measures and Vesting Outcomes
The graph below shows Iluka’s performance against the LTIP performance measures relative to the vesting outcome
executives have experienced over the five-year period. The incentive outcomes are consistent with Company performance
and shareholder outcomes over the period.
LTIP Performance Measures and Vesting Outcomes
)
%
(
g
n
i
k
n
a
R
R
S
T
R
&
e
m
o
c
t
u
O
g
n
i
t
s
e
V
100
85
70
55
40
25
Dec-11
25
20
15
10
5
0
Dec-15
Dec-12
Dec-13
Dec-14
Vesting Outcome
RTSR ranking (3yr)
ROE (Ave 3yr)
)
%
(
E
O
R
Shareholder Returns
The table below illustrates shareholder returns over the one, three and five year periods to 31 December 2015.
Initial Investment of 1 share ($)
Closing Share Price ($)
Share Price Change
Aggregate Dividends1 ($)
Dividend (ROI)
Total Return
5 years to
31 Dec 2015
3 years to
31 Dec 2015
1 year to
31 Dec 2015
9.14
6.13
(33%)
1.52
17%
(16%)
9.02
6.13
(32%)
0.44
5%
(27%)
5.95
6.13
3%
0.19
3%
6%
1 Dividends over the five-year period to 31 December 2015 comprised of 2010 final dividend (8 cps unfranked), 2011 interim dividend (20
cps unfranked), 2011 final dividend (55 cps franked), 2012 interim dividend (25 cps franked), 2012 final dividend (10 cps franked), 2013
interim dividend (5 cps franked), 2013 final dividend (4 cps franked), 2014 interim dividend (6 cps franked), 2014 final dividend (13 cps
franked) and 2015 interim dividend (6 cps franked).
23
Earnings and free cash flow over the five-year period are set out in the table below:
Net profit/(loss) after tax ($ million)
EBITDA margin (per cent)
Free Cash Flow ($ million)
Earnings per share (cents)
Closing share price ($)1
Dividends paid (cents)
Franking credit level (per cent)
Average AUD:USD spot exchange rate (cents)
Revenue per tonne Z/R/SR sold ($/t)
1 Starting share price on 1 January 2011 was $9.14.
2011
541.8
60.3
589.6
130.1
15.50
28
73.3
103.2
1,480
2012
363.2
65.5
81.2
87.1
9.02
80
100
103.6
1,191
2013
2014
2015
18.5
34.7
(62.5)
32.5
53.5
31.2
(27.5)
196.3
155.0
4.4
8.63
15
100
96.8
(15.0)
5.95
10
100
90.3
12.8
6.13
19
100
75.2
1,173
1,030
1,136
Over the five years to 31 December 2015, a period in which capital expenditure and free cash flow have varied markedly
year to year, 68 per cent of the Company’s Free Cash Flow (FCF) in total has been paid to shareholders in dividends. Total
incentives awarded under the STIP and LTIP over the corresponding period is 3.3 per cent of FCF.
2013 LTIP Outcome
At the end of 2015, the 2013 LTIP grant completed its performance period (1 January 2013 to 31 December 2015).
Performance was measured against both the ROE and relative TSR hurdles. Performance and vesting outcomes were as
follows:
Component
ROE (50%)
Relative TSR (50%)
(S&P/ASX 200 Materials
Index)
Performance target
Actual performance
Implication for vesting
50% vesting for Threshold of
10% with full vesting at
target of 14%
50% vesting for 50th
percentile and full vesting for
75th percentile
0.3 per cent
Nil vesting of the
ROE component
57.5th percentile
64.9 per cent vesting of the
TSR component
118,745 shares in total, having been purchased on market, will be awarded to participants under the 2013 LTIP.
The 2013 LTIP outcome reflects both absolute and relative performance and the Board considers it to be an appropriate
balance between reward for executive efforts and shareholder outcomes over this time.
24
3.2
STIP outcomes
2015 STIP Performance
The following chart provides a comparison between the maximum STIP opportunity for the Managing Director and other
executive KMP and the actual amounts which were awarded in 2015 and 2014.
STIP Outcomes as a percentage of maximum opportunity
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
40%
10%
40%
10%
50%
36%
32%
50%
30%
21%
40%
10%
50%
40%
10%
32%
21%
50%
38%
6%
10%
5%
10%
5%
10%
5%
Growth
Sustainability
Profitability
24%
10%
Max
2015
2014
Max
2015
2014
Max
2015
2014
Max
2015
2014
D Robb
D Warden
M Blackwell
S Wickham
The graph below shows Iluka’s performance against the STIP profitability measures relative to the profitability component
outcome over the five-year period. Incentive outcomes reflect the financial performance with a zero profitability outcome for
executive KMP for the last three years.
STIP Profitability Component Performance
)
I
m
$
(
T
B
E
d
n
a
T
A
P
N
800
700
600
500
400
300
200
100
0
(100)
160
140
120
100
80
60
40
20
0
(20)
2011
2012
2013
2014
2015
NPAT ($m)
EBIT ($m)
ROC (%)
Profitability Component Achievement (%)
25
)
%
(
C
O
R
d
n
a
t
n
e
m
e
v
e
h
c
A
y
t
i
l
i
i
b
a
t
i
f
o
r
P
Commentary on the performance outcome for each STIP component is detailed below.
2015 Performance against 2015 STIP Targets
Strategic Driver STIP
Rationale for inclusion
Performance outcome and commentary
Measures
Profitability
(50% weighting)
Return on
Capital (ROC)
Reflects how efficiently Iluka
utilises capital to generate
earnings and is the ‘internal
surrogate’ for ROE.
Net Profit After
Tax (NPAT)
Reflects the profit made by
Iluka and the resulting impact
on returns generated for
shareholders.
Earnings
Before Interest
and Tax
(EBIT)1
Reflects the quality of Iluka’s
earnings and operational
performance.
Sustainability
(10% weighting)
Total
Recordable
Injury
Frequency
Rate (TRIFR)
Providing a safe workplace for
all employees is an integral part
of Iluka’s corporate objective
and values.
Below threshold performance
The result for the year of 6.8 per cent (2014:
negative 2.0 per cent) was an improvement on the
prior year but is still considered unsatisfactory.
Capital employed, which
includes non-current
inventory and property, plant and equipment
associated with idled operations which do not
contribute to earnings, has remained relatively
stable during the year.
Below threshold performance
Iluka recorded a profit after tax for the year of $53.5
million, compared with a loss of $62.5 million for the
previous corresponding period.
Mineral sands markets remained challenging during
2015. Iluka’s 2015 financial results can be viewed
in the context of continuing weak to variable
demand in a number of end markets, and margin
pressures on some customers from declining prices
in their industry sectors.
Iluka’s NPAT is inclusive of a $17.7 million post tax
non-cash accounting adjustment related to an
increase in rehabilitation provisions for closed sites
associated with a sustained decline in the 15 year
Australian Government Bond rate, which is used in
determining the Australian rehabilitation provision.
Below threshold performance
The result for the year of $143.0 million (2014:
negative $16.7 million) has improved from the prior
year. The prior year included an $82.0 million pre-
tax charge in respect of US assets. No impairment
charges have been recorded in 2015.
As noted above, the 2015 result reflects continued
challenging market conditions.
Below threshold performance
In 2015 TRIFR of 6.7 (rolling 12-month average to
31 December 2015)
threshold
performance level. The higher occurrence was
largely attributable to first aid and minor injuries.
fell below
the
Iluka has retained a safety
focus and other
indicators such as safety visits, planned workplace
inspections, training, serious potential incidents,
near hits and hazards are trending satisfactorily.
The 2015 severity rate decreased from 21.9 in 2014
to 2.4.
26
Level 3 &
above
environmental
incidents
Iluka has a strong commitment
to ensuring that its activities do
not have an adverse impact on
the environment.
Growth
(40% weighting)
Individual
objectives
Individual objectives that
advance the Company’s longer
term prospects – which ‘make a
difference’ – are referred to as
’Growth objectives’ and are set
at a stretch level. Objectives
reflect individual roles and are
linked to major business
opportunities and the
management of key risks as
identified in Iluka’s five-year
Corporate Plan, as well as the
priorities for the relevant year.
Above stretch performance
Above stretch performance level maintained with a
(14
improvement on 2014
significant
incidents in 2015 compared with 34 incidents in
2014).
levels
Above target performance
In 2015, the Managing Director and the Executive
achieved
targeted progress against, and/or
satisfactory completion of, specific objectives and
associated detailed deliverables set at an industry
and at a Company level in the following areas:
in
the risk/return balance
enhancement of the Company’s zircon market
presence and leadership position;
optimisation of
internal mineral sands production options;
development, acquisition and implementation
of potentially transformational new mineral
sands mining and processing technologies;
evaluation and progression of merger and
acquisition opportunities;
environmental, health and safety leadership,
awareness
including
performance,
and
rehabilitation and site closure; and
business sustainability, including stakeholder
relationships, licence to operate and workforce
development.
Areas in which progress was less than targeted
against specific deliverables included:
strengthening of Iluka’s position as a high
grade TiO2 supplier, particularly to China; and
in
discovery of major new mineral sands ore
bodies.
27
SECTION 4
REMUNERATION GOVERNANCE
4.1
Board Oversight
In February 2015 the Board approved for the former Remuneration and Nomination Committee to be replaced by two
Committees; The People and Performance Committee and The Nominations Committee.
The People and Performance Committee (Committee) operates in accordance with its charter as approved by the Board.
The Committee is comprised of the following independent non-executive directors:
W Osborn (Committee Chairman)
G Martin
J Seabrook
G Rezos
J Ranck (until 16 February 2015)
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 Executives;
STIP and LTIP offers and outcomes, including all equity offers to employees;
succession planning for key roles; and
diversity strategy, policies and practices of the Company.
The Committee also make decisions on behalf of the Board where such authority has been expressly delegated.
Responsibility for the selection and appointment of, and succession planning for, non-executive directors and the Managing
Director now sits with the Nominations Committee which comprises all non-executive members of the Board.
4.2
Use of Remuneration Consultants
The Committee has the appropriate resources and authority to discharge its duties and responsibilities, including the
authority to engage external professionals on terms it determines to be appropriate.
From time to time during the 2015 financial year, the Committee engaged independent remuneration consultants to provide
insights on remuneration trends, regulatory updates and market data in relation to the remuneration of the Managing
Director, other KMP and non-executive directors. No remuneration recommendations were obtained as defined under the
Corporations Act 2011.
4.3
Securities Trading and Hedging Policy
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.
Directors, executives and certain employees are prohibited from trading in financial products issued or created over the
Company’s securities by third parties, and from 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 executives
taking out margin loans on their holdings of Iluka securities.
4.4
On-market Share Purchases
During 2015, shares were acquired on-market to satisfy vesting of equity grants and the subsequent allocation of shares to
participants under the STIP, LTIP and Employee Share Plan. Two on-market purchases of shares were made in May 2015
(59,143 shares at a share price of $8.59 and 985,212 shares at a share price $8.56). The purchases were disclosed to the
ASX within five days of the purchase.
28
4.5
People Policy and Remuneration Principles
The Iluka People Policy seeks to:
attract and retain the best people while building and maintaining a diverse, sustainable and high achieving workforce;
recognise that leadership at all levels is required to create alignment of purpose, which together with the right resources,
is crucial to the achievement of extraordinary performance; and
provide a workplace in which our employees gain a sense of achievement based on the principles of accountability,
commerciality and engagement.
To achieve these objectives, the following principles form the basis of Iluka’s remuneration framework:
Market Competitive
Performance Based
Aligned to Shareholder Returns
‐
‐
Fixed remuneration reflecting skills, experience and performance and which
is comparable and competitive within the resources sector.
An appropriate balance between fixed and variable (at risk) components of
remuneration.
‐ Remuneration practice is reasonable and effective through cyclical market
conditions.
‐
Variable component focused on both short- and long-term business
performance.
‐ Reward for achievement of corporate and individual objectives.
‐
Targets set reflect both prevailing business performance expectations and
minimum requirements over time.
‐
‐
Performance objectives support business profitability, sustainability and
growth and result in improved shareholder returns.
Share ownership for all employees with significant trailing exposure to
Company performance for executives through deferred share plans and
minimum shareholding requirements.
Fair and Transparent
Fair remuneration and reward based on performance.
‐
‐ Clear and concise disclosure.
‐ Compliant with relevant legislative frameworks.
4.6
Minimum Shareholding Requirements
The Company places strong emphasis on promoting employee share ownership, as it increases the incentive for employees
to drive continual shareholder wealth. In line with this goal, a minimum shareholding requirement for executives was
introduced in 2011 to continue to align the interests of executives and shareholders.
Executive KMP are required to achieve the following minimum levels of shareholdings within a reasonable time period:
the Managing Director is required to achieve a shareholding equivalent to 100 per cent of TFR; and
executive KMP are required to achieve a shareholding equivalent to 75 per cent of TFR.
Minimum shareholding guidelines for non-executive directors were introduced for the 2014 financial year. Non-executive
directors are also required to acquire a shareholding of approximately 50 per cent of the value of annual gross base fees
within three years of appointment.
A summary of executive KMP and non-executive directors’ current shareholdings is provided below.
29
Executive KMP Shareholdings
Balance held at
1 January 2015
Vesting of share
rights pursuant
to LTID and LTIP
Number of shares
Awarded as
Restricted
Shares pursuant
to STIP
Other changes
Balance held at
31 December
20154
746,699
259,758
65,745
(160,000)
912,202
26,333
68,492
108,206
66,487
2,437
2,443
3,642
3,625
10,998
12,441
14,639
15,264
(4,000)
(30,658)
(18,507)
(10,475)
35,768
52,718
107,980
74,901
Name
Executive director
D Robb
Executives
D Warden
M Blackwell
S Wickham
A Tate4
4 A Tate ceased to be a KMP on 1 June 2015.
Non-executive director Shareholdings
Name
Non-executive directors
Balance held at
1 January 2015
G Martin
M Bastos
W Osborn
J Ranck
G Rezos
J Seabrook
20,000
-
12,800
4,500
75,000
19,314
Number of shares
Net movement
Balance held at
31 December 20152
-
6,000
6,200
2,600
-
-
20,000
6,000
19,000
7,100
75,000
19,314
1 Shares may be held directly or through a nominee or agent (e.g. family trust).
2 No shares were forfeited during the year.
30
SECTION 5
EXECUTIVE REMUNERATION
The remuneration of executive KMP is linked to both annual business and individual performance outcomes and to the
Company’s ability to create and deliver competitive levels of shareholder value, as defined by total shareholder return (TSR)
and return on equity (ROE), on a longer term basis. Managing Director Remuneration is detailed separately in Section 6.
5.1
Components of Executive Remuneration
Executive remuneration is made up of fixed (TFR) and at risk (STIP and LTIP) components. A significant portion of total
remuneration is at risk. The components of executive remuneration are as follows:
Total Fixed Remuneration (TFR)
Set at a level that reflects the scope and responsibility of the role, experience
and performance. TFR levels are benchmarked against the median level of the
resources sector.
Short Term Incentive Plan (STIP)1
Strong link to financial performance and delivery of results. Satisfactory
individual performance against Growth objectives and above-threshold
performance against Group Profitability and Sustainability targets is required
before any award is payable on the relevant component.
Equity exposure is achieved through STIP deferral, with 50 per cent of the total
STIP award deferred in restricted shares for executives and senior managers
and 25 per cent deferred for all other participants. Half of the restricted shares
vest one year after the end of the performance period, while the remaining half
vests two years after the end of the performance period.
Long Term Incentive Plan (LTIP)1
Alignment with shareholder interests with the vesting of the award subject to
ROE and TSR over a three-year period.
1 Restricted shares and share rights were issued to employees under the Directors, Executives and Employees Share
Acquisition Plan (DEESAP).
The following table sets out the relative mix of remuneration components as a percentage of total remuneration for executive
KMP for the 2015 Financial Year.
Fixed Remuneration
Maximum STIP Opportunity1
STIP Cash
STIP Equity
LTIP Opportunity2
At Risk Remuneration
D Robb
D Warden3
M Blackwell
S Wickham
A Tate
40%
32%
40%
40%
40%
24%
15%
18%
18%
18%
24%
15%
18%
18%
18%
12%
38%
24%
24%
24%
1 Subject to achievement of all objectives at stretch
2 Subject to achievement of TSR and ROE hurdles set
3 Includes the 2015 Strategic LTIP Equity Grant made on D Warden’s appointment to the CFO role (see Section 5.4)
5.2
Total Fixed Remuneration
Total Fixed Remuneration (TFR) consists of base salary, superannuation and any salary sacrifice items. TFR levels are
assessed against the median level of the resources sector through independent data provided by Hay Group. Individual TFR
is determined within an appropriate range around the market median by referencing job evaluation data, individual
experience and performance. Allowance may also be made for the demand and resulting competition for certain skills within
the resources sector.
The Company conducts a review of the remuneration of all employees and executives on an annual basis or as required.
Review guidelines and budgets, approved by the People and Performance Committee, are based upon the outcomes of
direct and related market review data and external advice from the Company’s remuneration advisers. Annual assessments
of performance against individual objectives are used in conjunction with market data to determine appropriate remuneration
recommendations.
31
A one-up approval process applies to all remuneration adjustments with final Managing Director approval prior to any
remuneration review being implemented. Remuneration adjustments for direct reports to the Managing Director are subject
to Board approval.
5.3
Short Term Incentive Plan (STIP)
The STIP aims to provide an incentive to participants whilst driving shareholder value creation and promoting equity
ownership by providing awards partly in cash and partly in deferred equity. The structure of Iluka’s STIP is as follows:
Eligibility
Entitlement
Performance measures and
targets
All executives and other nominated senior employees are eligible to participate in the
STIP.
The level of award opportunity (based on a percentage range of each participant’s
TFR) is determined by an individual’s role within the business and capacity to impact
the results of the Company. Executive KMP targets are 60 per cent of TFR (Stretch
is set at 90 per cent of TFR).
STIP performance measures and targets are set on an annual basis under the
categories of Profitability, Sustainability and Growth. The process for setting all
targets is a rigorous one, and measures and targets are subject to the approval of
the People and Performance Committee.
STIP performance measures are linked to Iluka’s corporate plan and prevailing
industry dynamics to ensure that maximum shareholder returns are being provided
to investors.
Profitability
Profitability measures typically consist of return on capital and net profit after tax
metrics with the third element varying from time to time between an earnings
measure and a cash flow measure depending on the current stage of the cycle and
the required focus for the business at the time.
The inclusion of Earnings Before Interest and Tax (EBIT) for 2015 maintains the
focus on earnings and the efficiency with which capital is used to generate those
returns.
Profitability targets are set taking into account the budget agreed by the Board,
assessed adequacy of challenge, minimum expected
to
shareholders, and business objectives. Targets reflect business expectations at that
time and may vary from prior year performance depending on economic and market
conditions. What are deemed to be challenging targets are set each year. No
adjustments are made to profitability performance measure targets and outcomes for
uncontrollable items such as foreign exchange movements or commodity pricing
changes. The Board, in all years, may exercise discretion (up or down) if
circumstances eventuate that are different enough to expectations at the start of the
year to warrant such discretion.
levels of
return
Sustainability
Sustainability targets relate to safety and environmental objectives and are set based
on a combination of industry best practice and continual improvement versus the
prior year performance.
Growth
Individual objectives that advance the Company’s longer term prospects – which
‘make a difference’ – are referred to as ‘Growth objectives’ and are set at a stretch
level. Individual Growth objectives are linked to major business opportunities and
risks from the Corporate Plan and business priorities for the year ahead. Executive
Growth objectives are set in conjunction with the Managing Director and are
reviewed and approved by the People and Performance Committee. Managing
Director Growth objectives are reviewed and approved by the Board.
32
Performance levels
For the Profitability and Sustainability STIP performance measures, a threshold,
target and stretch goal is set at the start of the performance year. The STIP outcome
for each performance measure is calculated according to the following schedule:
Performance Level
STI Outcome (% Target)
Threshold 1
Target
Stretch
0%
100%
150% (maximum)
No payment is made in relation to Profitability and Sustainability objectives until
above-threshold levels of performance are achieved.
Achievement of the Threshold level of performance exactly results in a zero payout.
Thereafter, a sliding scale operates between threshold and target, and between
target and stretch.
Individual Growth objectives are set at a stretch level of performance.
Performance assessment
STIP outcomes are determined after the performance year end, but are accrued in
the financial results for the performance year.
the
Individual progress against Growth objectives
performance year with a formal assessment of the extent to which objectives have
been achieved at the conclusion of the performance year. Outcomes are subject to
rigorous one up assessment and, for the Managing Director and his direct reports,
assessment by the Board.
is reviewed
throughout
STIP award outcomes, on the recommendation of the Managing Director, are
approved by the People and Performance Committee in February following the end
of the performance year (ending 31 December).
Payment timing
Payments are made in March following the performance year.
STI deferral
The company operates a mandatory deferral for all STIP participants. Fifty per cent
of the award (for executives and senior managers) is deferred in the form of ordinary
restricted shares (25 per cent is deferred for lower level employees). The Board has
discretion to make offers with an increased deferred proportion (thereby reducing
the cash component). Restricted shares are granted for nil consideration.
Half of the restricted shares vest one year after the end of the performance period,
while the remaining half vest two years after the end of the performance period.
The process for determining the number of restricted shares to be awarded to each
participant is determined by dividing the dollar value of the deferred 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.
Executives must remain employed with the Company and continue to perform
satisfactorily for the shares to vest. As a consequence, executives may have a
significant trailing exposure to their own and Company performance subsequent to
the award. The deferred amount supports executive focus on both annual and multi-
year performance, as well as providing a retention element.
Voting rights and dividends
While restricted shares are unvested, participants receive dividends and are entitled
to exercise voting rights attaching to the restricted shares.
Termination/forfeiture
Change of control
Employees who resign or are dismissed for cause will forfeit the right to any
unvested deferred STIP awards. Employees who leave due to circumstances such
as redundancy, retirement, total or permanent disablement or death, at the Board’s
discretion, still retain the right to any unvested deferred STIP awards.
In the event of a takeover or other transaction that in the Board’s opinion is likely to
result in a change of control or if an actual change of control event occurs, the
Board has a discretion to determine that vesting of some or all of the restricted
shares be accelerated.
1 Typically set at 90 per cent of budget for Profitability measures
33
Clawback
All STIP incentive offers and final outcomes are subject to the full discretion of the
Board. Under the STIP offer terms and conditions and the plan rules, the Board has
discretion to determine forfeiture of deferred equity awards in certain circumstances
(e.g. unlawful, fraudulent, dishonest behaviour or serious breach of obligations to
the Company).
5.4
Long Term Incentive Plan (LTIP)
Iluka’s LTIP is designed to focus executives’ attention on sustainable long-term growth and align the interests of executives
with those of shareholders.
Key details of the LTIP are set out in the table below:
Eligibility
Instrument
All executives and nominated senior managers are eligible to participate in the LTIP. Grants are
generally restricted to employees who are most able to influence shareholder value.
Awards are made in the form of share rights for Iluka shares that vest three years after the
performance period subject to meeting performance hurdles over a three-year vesting period.
Share rights entitle the recipient to acquire fully-paid ordinary shares in the Company. No amount
is payable by a recipient for the grant of any share rights.
Until awards vest, executives have no legal or beneficial interest in Iluka shares, no entitlement to
receive dividends and no voting rights in relation to any securities granted under the LTIP.
Grant Value
The level of the grant is determined by an individual’s role within the business and capacity to
impact the results of the Company. In 2015, the maximum LTIP opportunity for the executive
KMP was set at 60 per cent of TFR.
2015 Strategic LTIP
Equity Grant
The Board retains the flexibility to make one-off strategic equity grants in recognition of executive
position changes and the impact these new and other specific roles will have on delivering Iluka’s
future strategic plan. In 2015, the strategic equity grants were made under the same terms and
conditions as the LTIP awards.
Performance hurdles
The grant is split equally into two components:
one component (50 per cent) is assessed based on ROE relative to an internal target; and
the other component (50 per cent) is assessed based on TSR performance relative to a
comparator group of companies.
ROE
The ROE component 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
the performance of comparable companies in the ASX 200 Materials Index.
Targets are reviewed annually and set for a forward three-year period. Targets reflect
expectations of the Company’s position within the mineral sands industry, the industry business
cycle, corporate plan and budget business performance expectations.
Where sustainable performance improves, it can be expected that 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.
In the interest of transparent reporting, Iluka discloses its ROE target range measure which forms
part of the LTIP.
ROE targets for the 2015, 2014 and 2013 LTIP are shown in the table below:
LTIP grant
2015 – 2017
2014 – 2016
2013 – 2015
Threshold
10%
10%
10%
Target
14%
14%
14%
34
TSR
The TSR component of the LTIP grant may vest based on TSR relative to a comparator group of
companies. The S&P/ASX 200 Materials Index is used as the comparator group, since it reflects
the companies that operate within the same industry as Iluka and with which Iluka competes for
investment and talent.
A relative TSR hurdle is used as opposed to an absolute TSR hurdle, in recognition of the fact
that Iluka and many of its peers operate in cyclical markets. This still allows awards to be made
where Iluka is out-performing its peers, even if the market is in a cyclical low, and creates
incentives for executives to continue to grow the business and look to the future at all points in
the cycle.
Vesting Schedule
The LTIP vesting schedule below details the portion of the grant which will vest after the three-
year performance period subject to the ROE and TSR hurdles.
Measure
ROE
TSR
Performance level to be
achieved
Below threshold
Threshold
Target or above
Below 50th percentile
50th percentile
75th percentile or above
Percentage of
total grant that will
vest
0%
25%
50%
0%
25%
50%
Total Grant (Maximum award)
Maximum
percentage of
total grant
50%
50%
100%
Vesting occurs on a straight-line basis for performance between threshold and target (ROE
measure) and 50th percentile and 75th percentile (TSR measure).
If at the end of the performance period the performance criteria have not been met, there will be
no entitlement to the share rights and they will lapse.
When employment with Iluka ceases, all unvested share rights are forfeited.
In the event of a takeover or other transaction that in the Board’s opinion is likely to result in a
change of control or if an actual change of control event occurs, the Board has a discretion to
determine that vesting of some or all of the share rights be accelerated.
Under the Company’s LTIP offer terms and conditions and the plan rules, the Board has
discretion to determine forfeiture of unvested equity awards in certain circumstances (e.g.
unlawful, fraudulent, dishonest behaviour or serious breach of obligations owed to the
Company). All incentive offers and final outcomes are subject to the full discretion of the Board
and, through the performance period, executives have an ongoing exposure to Company
performance.
Termination/
forfeiture
Change of control
Clawback
All LTIP offers and details of the maximum allocation for the Managing Director and executive KMP are shown in Section
9.3.
35
SECTION 6 MANAGING DIRECTOR REMUNERATION
The employment terms and conditions for the Managing Director, David Robb, are set out below:
Total Fixed Remuneration
(TFR)
$2,000,000 for the year ended 31 December 2015.
TFR is subject to annual review by the Board in December each year. The Managing
Director did not receive an increase in 2014 or 2015 and the Board has determined that his
TFR will remain unchanged in 2016.
2015 Short Term Incentive
Plan (STIP)
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, NPAT, EBIT)
Sustainability (TRIFR and
environmental incidents)
Growth (individual objectives)
Weighting
50 per cent
10 per cent
40 per cent
Growth objectives are set for the Managing Director each year by the Board at the stretch
level of performance. These objectives typically vary from year to year in line with the
Company’s objective of creating and delivering value for shareholders.
2015 Long Term Incentive
Plan (LTIP)
A grant of equity in the form of share rights valued at up to 30 per cent of TFR measured
over a three-year performance period.
Measure
ROE
TSR
Weighting
50 per cent
50 per cent
Long Term Incentive
Deferred Plan (2011 to
2013) – Plan Details
At the 2011 AGM, shareholders approved the retention arrangements for Mr Robb
(referred to as the Long Term Incentive Deferred Plan or LTID Plan). The 2011 – 2013
LTID Plan has now expired with vesting of shares occurring in 2015.
Term
Incentive
Long
Deferred Plan
to
(2011
2013) – Plan Outcomes
The table below sets out the vesting outcome of the LTID Plan against performance
hurdles over the three performance periods and the subsequent share rights that vested in
2015. A total of 250,000 shares vested in February 2015 versus a maximum possible
vesting of 750,000 shares.
Performance Hurdles
Year 1 Performance Period1
Year 2 Performance Period2
Year 3 Performance Period3
Maximum Share Rights
Total Share Rights Vested
ROE gateway
(12%)
Achieved
Achieved
Tranche 1
Tranche 2
Tranche 3
TSR (12.5%)
TSR (15%)
TSR (17.5%)
Achieved
Achieved
Achieved
Not Achieved
Not Achieved
Not Achieved
Not Achieved
Not Achieved
Not Achieved
Not Achieved
450,000
150,000
150,000
50,000
150,000
50,000
1 2011 Financial Year – performance measured from 4 March 2011 to the date 5 business days after announcement of the
2011 annual financial results.
2 2012 Financial Year – performance measured from the end of the Year 1 Performance Period to the date 5 business
days after announcement of the 2012 annual financial results.
3 2013 Financial Year – performance measured from the end of the Year 2 Performance Period to the date 5 business days
after announcement of the 2013 annual financial results.
36
Termination Arrangements
At the 2011 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
11 April 2011.
With Notice
Employment can be terminated by the Company during the contract period by giving 12
months’ notice or pay in lieu of notice, plus the total incentive for performance at target
under the STIP and LTIP, pro-rata up to the end of the 12-month notice period. All shares
to which Mr Robb is entitled under the DEESAP will vest within three months of
termination.
Without Notice
In the case of misconduct and in certain other circumstances, employment can be
terminated without notice and with no entitlement to pro-rata long service leave or any
payment under any relevant incentive plan.
Voluntary Termination
Employment may be terminated by giving six months’ notice. Any pro-rata award under
any relevant incentive plan will be at the discretion of the Board.
Termination
reasons
for
other
By Iluka on the grounds of redundancy or by Mr Robb if, at the instigation of the Board
he suffers a material diminution in his status as Managing Director, by giving 12
months’ notice or shall pay 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 12 months’ notice or pay an equivalent
amount of TFR in lieu of notice.
In the circumstances described above, Mr Robb will receive the total incentive for
performance at target under the STIP and LTIP, pro-rata up to the end of the 12-
month notice period. All shares to which Mr Robb is entitled under the DEESAP will
vest within three months of termination.
Protection of Interests
Mr Robb is restrained from engaging in certain activities during his employment, and for a
period of one year 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.
37
SECTION 7
EXECUTIVE EMPLOYMENT AGREEMENTS
Remuneration and other terms of employment for the executive KMP are formalised in service agreements. Executive KMP
are employed on a rolling basis with no specified fixed terms. Executive KMP are remunerated on a TFR basis, inclusive of
superannuation (for the Australian-based KMPs).
7.1
Executive KMP Service Agreements
Major provisions of the agreements relating to executive KMP (excluding the Managing Director) are set out below.
Executive
Position
D Warden
Chief Financial Officer and Head of
Strategy and Planning
Termination
Notice Period by
Iluka
Termination
Notice Period by
Employee
Termination
Payments1
3 months
3 months
6 months2
M Blackwell
Head of Marketing, Mineral Sands
3 months
3 months
9 months
S Wickham
Chief Operating Officer, Mineral Sands
3 months
3 months
9 months
A Tate
Head of Alliances, New Ventures and
Royalties
3 months
3 months
6 months2
1 Termination payments (other than for gross misconduct) are calculated on current TFR at date of termination and are
inclusive of the notice period.
2Termination payments reduced from 9 months to 6 months on change of role in 2015.
38
SECTION 8
NON-EXECUTIVE DIRECTOR REMUNERATION
The remuneration of the non-executive directors is determined by the Board on recommendation from the People and
Performance Committee within a maximum aggregate amount approved by shareholders at an Annual General Meeting.
The current cap on non-executive directors’ fees (including superannuation) as approved by shareholders in May 2015 is
$1.8 million. The total amount paid to non-executive directors in 2015 (including superannuation) was $1,253,809.
Recognising the additional workload and duties associated with Gavin Rezos’ appointment to the Board of Metalysis Ltd, the
Board has approved fees of GBP45,000 per annum to be paid to Mr Rezos in addition to his Iluka Resources Board member
and Committee fees. There has been no other adjustment to non-executive director fees since March 2011. Details of non-
executive director fees in 2015 are as follows:
Non-executive director fees
Board Chairman (inclusive of Committee fees)
Board Member
Board Member Committee fees
Audit and Risk Committee Chair
People and Performance Committee Chair
Audit and Risk Committee Member
People and Performance Committee Member
Other related entity Board fees
Metalysis Board member
$312,000
$125,000
$35,000
$25,000
$17,500
$12,500
GBP45,000
The minimum required employer superannuation contribution up to the statutory maximum is paid into each non-executive
director’s nominated eligible fund and is in addition to the above fees.
39
SECTION 9
STATUTORY REMUNERATION DISCLOSURES
Details of the remuneration of the KMP, prepared in accordance with the requirements of the Corporations Act and the
relevant Australian Accounting Standards, are set out in the following tables.
9.1
Non-executive director Statutory Remuneration Disclosures
2015
Name
Non-executive directors
Board, Committee
fees
$
Non-Monetary
Benefits
$
G Martin
M Bastos
W Osborn
J Ranck
G Rezos1
J Seabrook
Total
312,000
142,500
150,000
141,875
243,603
172,500
1,162,478
-
-
-
-
-
-
-
Superannuation
$
19,229
13,538
14,250
13,478
14,448
16,388
91,331
2015 Statutory
Total
$
331,229
156,038
164,250
155,353
258,051
188,888
1,253,809
1 G Rezos’ fees include fees paid in relation to Metalysis Ltd and have been converted from GBP to AUD using the 2015
YTD average foreign exchange rate of 0.4917.
2014
Name
Non-executive directors
Board, Committee
fees
$
Non-Monetary
Benefits
$
G Martin
M Bastos1
W Osborn
J Ranck
G Rezos2
J Seabrook
S Turner3
Total
312,000
122,906
150,000
137,500
229,222
172,500
58,295
1,182,423
-
-
-
-
-
-
-
-
Superannuation
$
18,279
11,547
14,063
12,891
14,531
16,172
5,392
92,875
2014 Statutory
Total
$
330,279
134,453
164,063
150,391
243,753
188,672
63,687
1,275,298
1 M Bastos was appointed on 20 February 2014.
2 G Rezos’ fees include fees paid in relation to Metalysis Ltd and have been converted from GBP to AUD using the 2014
YTD average foreign exchange rate of 0.4922.
3 S Turner retired on 28 May 2014.
40
9.2
Executive KMP Statutory Remuneration Disclosures
2015
Name
Base,
Committee,
Cash, Salary &
Fees
$
STIP
Cash1,2
$
Non-
Monetary
Benefits6
$
Other7
$
Superann
uation
$
Share Based
Payments1,3
$
2015
Statutory
Total
$
Executive director
D Robb
1,974,907
499,500
20,677
Executives
D Warden
M Blackwell4
615,903
103,950
710,012
118,217
-
-
S Wickham
709,396
141,836
5,978
273,314
56,953
-
A Tate5
Total
-
-
19,046
936,627
3,450,757
19,046
263,708
1,002,607
70,855
-
238,432
1,137,516
-
-
19,046
248,483
1,124,739
7,936
86,818
425,021
2,308,625
420,956
5,978
70,855
46,028
837,441
3,689,883
1 STIP Cash and Share Based Payments for 2015 will be made in March 2016.
2 Amounts in the STIP Cash column are dependent on the satisfaction of performance conditions as set out in Section 5.3.
3 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.
4 M Blackwell's earnings have been converted from USD to AUD using the 2015 YTD average foreign exchange rate of
0.7521.
5 A Tate was appointed to his current role and ceased to be a KMP on 1 June 2015. Remuneration disclosures reflect the
period he was a KMP.
6 Includes non-monetary benefits which consist of car parking and spouse travel.
7 Other consists of relocation and US social security expenses for M Blackwell.
2014
Name
Base,
Committee,
Cash, Salary &
Fees
$
STIP
Cash1,2
$
Non-
Monetary
Benefits8
$
Other9
$
Superann
uation
$
Share Based
Payments1,3
$
2014
Statutory
Total
$
Executive director
D Robb
Executives
D Warden
M Blackwell4,7
C Cobb5
S Wickham6
A Tate
Total
-
-
-
1,981,515
503,700
57,756
18,335
2,525,789
5,087,095
585,721
545,418
55,435
693,888
655,157
84,258
75,621
8,751
-
-
-
18,279
-
166,590
139,751
22,450
854,848
760,790
115,269
27,152
1,481
112,149
27,865
-
18,963
286,221
1,139,086
116,944
-
38,857
19,843
196,696
1,027,497
2,535,619
397,723
27,865
66,009
58,566
811,708
3,897,490
1 STIP Cash and Share Based Payments for 2014 were made on 1 March 2015.
2 Amounts in the STIP Cash column are dependent on the satisfaction of performance conditions as set out in Section 5.3.
3 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.
4 M Blackwell was appointed to his current role and became a KMP on 1 February 2014. Remuneration disclosures reflect
the period he was a KMP.
5 C Cobb was appointed to his current role and ceased to be a KMP on 1 February 2014. Remuneration disclosures reflect
the period he was a KMP.
6 S Wickham was appointed to his current role on 1 June 2014.
7 M Blackwell's earnings have been converted from USD to AUD using the 2014 YTD average foreign exchange rate of
0.9030.
8 Includes non-monetary benefits which consist of car parking, spouse travel and accommodation.
9 Other consists of an underpayment of salary in prior years for C Cobb and A Tate.
41
9.3
Share–based Compensation
STIP Restricted Shares awarded to the Managing Director and executive KMP yet to vest
Name
2013 STIP1
2014 STIP1
2015 STIP1,2
Awarded %3
2013
2014
2015
D Robb
D Warden
M Blackwell
S Wickham
20,156
65,745
81,485
3,492
3,621
8,272
10,998
16,958
12,441
19,285
14,639
23,138
32
24
31
30
42
31
31
34
42
35
37
43
1 STIP restricted share fair value is determined as the volume weighted average price of ordinary shares over the five trading
days following the release of the Company’s annual results. STIP restricted shares are awarded in March of the following
year (e.g. 2015 STIP awards will be made in March 2016).
2 Represents the estimated number of restricted shares to be awarded under the 2015 STIP calculated using the closing
share price of $6.13 at 1 January 2016.
3 The percentage achieved of the STIP maximum incentive opportunity awarded for the financial year.
4 A Tate ceased to be a KMP on 1 June 2015 so his details are not included.
Share Rights
Name
Balance held at
1 January 2015
Granted
during
20151
Vested as
shares
during 2015
Lapsed
during
20152
Balance held at
31 December 2015
Fair Value of
Share Rights
Granted in 2015
$
Number of share rights
Executive director
D Robb
403,833
78,319
(259,758)
(21,717)
200,677
460,516
Executives
D Warden
M Blackwell
S Wickham
A Tate3
44,813
41,172
53,530
52,987
94,610
51,082
57,408
52,866
(2,437)
(2,443)
(3,642)
(3,625)
(5,423)
(5,435)
(8,103)
(8,066)
131,563
84,376
99,193
94,162
556,307
300,362
337,559
310,852
1 Share rights granted in respect of the 2015 LTIP which forms part of share based payments for 2015 to 2017 inclusive.
Includes 2015 strategic LTIP equity grant to D Warden.
2 Share rights which lapsed during 2015 relate to the LTIP award granted in 2012.
3 A Tate ceased to be a KMP on 1 June 2015.
42
Maximum value of unvested restricted shares and share rights
The maximum value of restricted shares and/or share rights that will be recognised as share-based payments in future years
is set out below. The maximum value of those restricted shares and/or share rights yet to vest has been determined as the
amount of the grant date fair value of the shares and/or shares rights that is yet to be expensed. No share and/or share
rights will vest if the conditions are not satisfied, hence the minimum value of the unvested shares and/or share rights is nil.
Name
D Robb
D Warden
M Blackwell
S Wickham
Fair Value
Maximum Value ($)
Vesting Year
2017
953,916
230,717
242,037
281,470
2018
710,264
608,277
359,468
408,477
2016
960,319
231,596
207,765
311,134
The fair value of each restricted share or share right and the vesting year for each incentive plan is set out below.
Incentive Plan
Grant Date
Fair Value per Share or
Right at Grant Date2
$
2013 LTIP
2013 STIP1
2014 LTIP
2014 STIP1
2015 LTIP
2015 STIP1,3
February 2013
March 2014
January 2015
March 2015
March 2015
March 2016
8.81
9.44
7.12
7.66
5.88
6.13
Vesting Year
2016
2015 & 2016
2017
2016 & 2017
2018
2017 & 2018
1 Awards under these plans are restricted shares; all other plans grant share rights.
2 The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share Based
Payments.
3 Represents the estimated fair value of the 2015 STIP award for which the performance period concluded on 31 December
2015 calculated using the closing share price of $6.13 at 1 January 2016. The actual value will be calculated as the volume
weighted average price of ordinary shares over the five trading days following the release of the Company’s 2015 annual
results.
9.4
Transactions with Key Management Personnel
During the financial year there were no product or services purchases by KMP from the Group (2014: nil) and there are no
amounts payable at 31 December 2015 (2014: nil).
There have been no loans to KMP during the financial year (2014: nil).
A number of directors of the Group hold or have held positions in other companies, where it is considered they control or
significantly influence the financial or operating policies of those entities. There have been no transactions with those entities
and no amounts were owed by the Group to personally related entities (2014: nil).
43
DIRECTORS
The following individuals were directors of Iluka Resources Limited during the whole of the financial year and up
to the date of this report:
G Martin
M Bastos
W Osborn
J Ranck
G Rezos
D Robb
J Seabrook
There were no changes to the board members during the year ended 31 December 2015.
DIRECTORS' PROFILES
the Board, Chairman of
Gregory Martin, BEc, LLB, FAIM, MAICD, Chairman of
Committee
Mr Martin was appointed to the Board in January 2013 and as Chairman in December 2013. He has over 35
years’ experience in the energy, utility and infrastructure sectors, having spent 25 years with The Australian Gas
Light Company Ltd (AGL), including five years as CEO and Managing Director. After leaving AGL, Mr Martin was
CEO of the infrastructure division of Challenger Financial Services Group and, subsequently, Managing Director
of Murchison Metals Limited. He is currently Chairman of Prostar Investments (Australia) Pty Ltd, Chairman of
Sydney Desalination Plant Pty Limited, Deputy Board Chair of Western Power and a Non-executive Director of
Santos Ltd.
Mr Martin is an Independent Non-executive Director and is Chairman of
Committee. He is also a member of the Audit and Risk Committee and the People and Performance Committee.
the Board and the Nominations
the Nominations
Directorships of Listed Entities (last 3 years):
Santos Limited (appointed October 2009)
Energy Developments Limited (appointed May 2006, resigned October 2015)
Marcelo Bastos, Mechanical Engineering (UFMG), MBA (FDC-MG), MAICD
Mr Bastos was appointed to the Board in February 2014. He is the Chief Operating Officer of the global
resources company, MMG Limited, with responsibility for operations in three continents. He has extensive
experience in major projects development and operation, and company management in the metals and mining
industry (iron ore, gold, copper, nickel, and coal sectors). Mr Bastos has served as the Chief Executive Officer of
BHP Billiton Mitsubishi Alliance (BMA), as President of Nickel West of BHP Billiton Limited, President and Chief
Operating Officer of Cerro Matoso and Nickel Americas of BHP Billiton, and also had a 19 year career with Vale
(CVRD) in senior management and operational positions, the last of those as Director of Non Ferrous operations.
He is a former Non-executive Director of Golding Contractors Pty Ltd. He is also a former Member of the Western
Australia Chamber of Mines and Energy and served as Vice President of the Queensland Resources Council.
Mr Bastos is an Independent Non-executive Director and is a member of the Audit and Risk Committee and the
Nominations Committee.
Wayne Osborn, DipEng, MBA, FTSE, FAICD, Chairman of the People and Performance Committee
Mr Osborn was appointed to the Board in March 2010. He is a former Managing Director of Alcoa of Australia
Limited. He is a Non-executive Director of Wesfarmers Limited, Alinta Holdings and South32 Limited.
Mr Osborn is an Independent Non-executive Director and is Chairman of
Committee. He is also a member of the Nominations Committee.
the People and Performance
Directorships of Listed Entities (last 3 years):
South32 Limited (appointed May 2015)
Wesfarmers Limited (appointed March 2010)
Leighton Holdings Limited (appointed November 2008, resigned March 2013)
44
James (Hutch) Ranck, BSE (Econ), FAICD
Mr Ranck was appointed to the Board in January 2013. He has held senior management positions with DuPont,
both in Australia and internationally in finance, chemicals, pharmaceuticals and agriculture for over 30 years. He
also served as a Director of DuPont’s Hong Kong based subsidiary, Titanium Technologies, for seven years. Mr
Ranck retired as Managing Director of DuPont Australia and New Zealand and Group Managing Director of
DuPont ASEAN in May 2010. He is currently Chairman of Elders Limited and a director of CSIRO.
Mr Ranck is an Independent Non-executive Director and is a member of the Audit and Risk Committee and the
Nominations Committee.
Directorships of Listed Entities (last 3 years):
Elders Limited (appointed 2008)
Gavin Rezos, BA, LLB, B.Juris, MAICD
Mr Rezos was appointed to the Board in June 2006. Mr Rezos 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 positions
and executive directorships of companies in the technology, energy and resources areas in the UK, US and
Singapore and was formerly a Director of Amity Oil NL (Antares). He is Chairman of Alexium International Group
Limited, Non-executive Director of Department 13 International Limited, Principal of Viaticus Capital Pty Ltd and
Iluka's representative on the Board of Metalysis Limited.
Mr Rezos is an Independent Non-executive Director and is a member of the Nominations Committee and the
People and Performance Committee.
Directorships of Listed Entities (last 3 years):
Department 13 International Limited (appointed November 2015)
Alexium International Group Limited (appointed March 2010)
David Robb, BSc, GradDip (Personnel Administration), FAIM, FAICD, Managing Director
Mr Robb joined the Board in October 2006 after his appointment as Managing Director and CEO of Iluka
Resources. He is also currently a Director of the Centre for Independent Studies, a Director of the Melbourne
Football Club and Chair of the Faculty of Engineering, Computing and Mathematics at the University of Western
Australia. He worked in the downstream oil
industry with BP in Australia, the UK, the USA and Asia, before
joining Wesfarmers in Perth in 1995. In 2004 he was appointed an Executive Director of Wesfarmers Limited, a
role relinquished in 2006 on joining Iluka. Other previous roles include Chairman of Consolidated Rutile Limited
and Deputy Chair of Methodist Ladies College, Perth.
Jennifer Seabrook, BCom, FCA, FAICD, Chairman of the Audit and Risk Committee
Ms Seabrook was appointed to the Board in May 2008. She is a Special Advisor to Gresham Partners Limited
and also a Non-executive Director of IRESS Ltd, MMG Limited and Western Australian Treasury Corporation. Ms
Seabrook was formerly a member of the Takeovers Panel (2000 to 2012), and previous directorships include
being a Non-executive Director of Export Finance and Insurance Corporation, Amcor Limited, Bank of Western
Australia Limited, West Australian Newspapers Holdings Limited, Australian Postal Corporation, AlintaGas and
Western Power. In her executive career Ms Seabrook worked at senior levels in chartered accounting, capital
markets and investment banking businesses.
Ms Seabrook is an Independent Non-executive Director and is Chairman of the Audit and Risk Committee. She is
also a member of the People and Performance Committee and the Nominations Committee.
Directorships of Listed Entities (last 3 years):
MMG Limited (appointed July 2015)
IRESS Limited (appointed August 2008)
45
MEETINGS OF DIRECTORS
In 2015, the Board met on 13 occasions, of which eight meetings were scheduled. In addition to these meetings,
the Board spent a day primarily focused on strategic planning. The Chairman chaired all the meetings. The
non-executive directors periodically meet independent of management to discuss relevant issues. Directors’
attendance at Board and committee meetings during 2015 is detailed below:
DIRECTORS SHAREHOLDING
Directors shareholding is set out in the Remuneration Report, section 4.6.
EXECUTIVE TEAM PROFILES
Matthew Blackwell, B Eng (Mech), Grad Dip (Tech Mgt), MBA, MAICD, MIEAust
Head of Marketing, Mineral Sands
Mr Blackwell
joined Iluka in 2004 as President of US Operations. He has had responsibilities for Land
Management and as General Manager, USA, before being appointed Head of Marketing, Mineral Sands in
February 2014. Prior to joining Iluka, Mr Blackwell was Executive Vice President of TSX listed Asia Pacific
Resources and based in Thailand. He also held positions with WMC Resources and Normandy Poseidon. Mr
Blackwell has more than 20 years' experience in the resources industry including senior positions in project
management, maintenance, production and business development.
Christopher Cobb, Dip CSM, FIQ, MAICD
Head of Special Projects
Mr Cobb joined Iluka in 2009 and has held a number of roles including, Head of Alliances, New Ventures and
Royalties and General Manager, Sales and Marketing. He was appointed to his current role in June 2015. Mr
Cobb has 35 years of resource and manufacturing experience in Africa, Europe, Asia and Australia. Previous
roles include five years as Managing Director of Consolidated Rutile Ltd, an ASX listed Queensland mineral
sands company, 12 years in copper/cobalt mining with Zambia Consolidated Copper Mines in Zambia, and four
years as Chief Executive Officer of Pioneer Sunway Bhd, the largest construction materials company in Malaysia.
Alan Tate, BCom, FCA, FAICD
Head of Alliances, New Ventures and Royalties
Mr Tate joined Iluka in May 2008 and was Chief Financial Officer and Head of Strategy and Planning until June
2015 when he was appointed to his current role. Prior to joining Mr Tate held various senior planning, finance and
commercial roles with BHP Billiton and WMC Resources. He commenced his finance career with KPMG.
46
Douglas Warden, BCom, CA, MBA, GAICD
Chief Financial Officer and Head of Strategy and Planning
Mr Warden joined Iluka in 2003 and held a number of senior financial and commercial roles before leaving the
Company in 2007. Since returning to Iluka in 2009, Mr Warden has held a number of roles including, Head of
Resource Development, General Manager Business Development and General Manager Exploration. He was
appointed to his current role as Chief Financial Officer and Head of Strategy and Planning in June 2015. Mr
Warden has previously been CFO at Summit Resources Limited and Jabiru Metals Limited and began his career
in corporate finance and insolvency with Ernst & Young and KPMG.
Steven Wickham, Assoc Dip in Mechanical Engineering
Chief Operating Officer, Mineral Sands
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
Chief Legal Counsel and Head of Corporate Acquisitions
Mr Wilson joined Iluka in 2004. He has specialised in mining, corporate and general commercial law for most of
his professional career. Prior to joining Iluka, Mr Wilson worked in a range of legal and commercial roles with
WMC Resources.
COMPANY SECRETARY
Mr Cameron Wilson is the Company Secretary of the Company. Mr Wilson was appointed to the position of
Company Secretary in 2004. Refer to the previous section for his profile.
Mr Nigel Tinley BBus CPA GAICD also acts as Company Secretary for the Company. Mr Tinley was appointed to
the position of Joint Company Secretary in 2013 and prior to that he held senior positions in Finance and Sales
and Marketing. Before joining Iluka in 2006, Mr Tinley held a range of accounting, financial and commercial roles
over his 18 years with BHP Billiton Limited (and former BHP Limited) both in Australia and internationally.
INDEMNIFICATION AND INSURANCE OF OFFICERS
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 the
related body corporate) which arise out of the performance of their normal duties as director or executive officer
unless the liability relates to conduct involving bad faith. The Company also has a policy to indemnify the
directors and executive officers against all costs and expenses incurred in defending an action that falls within the
scope of the indemnity and any resulting payments.
The terms of engagement of Iluka's external auditor includes an indemnity in favour of the external auditor. This
indemnity is in accordance with PricewaterhouseCoopers' standard Terms of Business and is conditional upon
PricewaterhouseCoopers acting as external auditor. Iluka has not otherwise indemnified or agreed to indemnify
the external auditors of Iluka at any time during the financial year.
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.
ENVIRONMENTAL REGULATIONS
The Group'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 Group's licences and all mining
and exploration activities have been undertaken in compliance with the relevant environmental regulations.
NON-AUDIT SERVICES
The Group may decide to employ the external auditor, PricewaterhouseCoopers on assignments additional to
their statutory audit duties where the auditor's expertise and experience with the Group 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 external auditor, as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
47
•
•
fees paid to external auditors for non-audit services for the 2015 year were within the Group 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 2011 is
set out on page 49.
Fees that were paid or payable during the year for non-audit services provided by the auditor of the parent entity,
its network firms and non-related audit firms is set out in note 21 on page 77 of the financial report.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
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 entity, the results of those operations or the state of affairs of
the entity in subsequent financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the opinion of the directors, likely developments in and expected results of the operations of the Group have
been disclosed in the Operating and Financial Review on page 2. Disclosure of further material relating to those
matters could result in unreasonable prejudice to the interests of the Group.
CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement for the year ended 31 December 2015 may be accessed from
the Company’s website at http://www.iluka.com/about-iluka/governance.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the Directors' Report. Amounts in the Directors' Report
have been rounded off in accordance with that 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.
G Martin
Chairman
Perth
18 February 2016
48
Auditor’s Independence Declaration
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2015, I
declare that to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Iluka Resources Limited and the entities it controlled during the
period.
Nick Henry
Partner
PricewaterhouseCoopers
Perth
18 February 2016
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
49
Iluka Resources Limited ABN 34 008 675 018
Financial Report - 31 December 2015
Contents
Financial statements
Consolidated statement of profit or loss and other 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
Page
51
52
53
54
55
90
91
These financial statements are the consolidated financial statements of the Group consisting of Iluka Resources
Limited and its subsidiaries (the Group). 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 Group's operations and its principal activities is included in the operating and
financial review section of the Directors' Report, which is not part of these financial statements.
The financial statements were authorised for issue by the directors on 18 February 2016. The directors have 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 ASX
releases, financial reports and other relevant information are available at www.iluka.com
50
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 31 December 2015
Revenue
Other income
Expenses
Interest and finance charges
Rehabilitation and mine closure provision discount unwind
Total finance costs
Profit (loss) before income tax
Income tax expense
Profit (loss) for the year attributable to owners
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation of foreign operations
Hedge of net investment in US operation, net of tax
Items that will not be reclassified to profit or loss
Actuarial gains (losses) on defined benefit plans, net of tax
Total other comprehensive income for the year, net of tax
Total comprehensive income (loss) for the year attributable to
owners
Notes
5
19
6
16(d)
8
23
23
23
2015
$m
2014
$m
882.2
792.3
2.7
(741.1)
(14.2)
(43.0)
(57.2)
86.6
(33.1)
53.5
2.0
(1.4)
0.8
1.4
6.1
(814.4)
(16.7)
(15.8)
(32.5)
(48.5)
(14.0)
(62.5)
7.3
(2.0)
(5.3)
-
54.9
(62.5)
Cents
Cents
Earnings per share attributable to ordinary equity holders
Basic earnings per share
Diluted earnings per share
7
7
12.8
12.8
(15.0)
(15.0)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
51
Consolidated balance sheet
As at 31 December 2015
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivable
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Intangible asset - MAC Royalty
Deferred tax assets
Available-for-sale financial assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Interest-bearing liabilities
Provisions
Current tax payable
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
Notes
16
11
12
12
13
5(b)
22
20
14
16
15
16
15
18
23
23
2015
$m
2014
$m
55.0
108.9
493.9
12.2
670.0
317.9
1,069.8
5.1
17.8
22.7
1,433.3
101.3
98.8
456.5
8.5
665.1
353.7
1,117.2
5.5
13.3
18.6
1,508.3
2,103.3
2,173.4
103.5
-
57.4
25.9
186.8
49.0
458.9
507.9
694.7
89.7
24.4
63.8
6.3
184.2
135.9
418.7
554.6
738.8
1,408.6
1,434.6
1,112.7
23.1
272.8
1,408.6
1,114.4
22.8
297.4
1,434.6
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
52
Consolidated statement of changes in equity
For the year ended 31 December 2015
Balance at 1 January 2014
Loss for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners:
Transfer of shares to employees, net of tax
Purchase of treasury shares, net of tax
Share-based payments, net of tax
Dividends paid
Balance at 31 December 2014
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners:
Transfer of shares to employees, net of tax
Purchase of treasury shares, net of tax
Share-based payments, net of tax
Dividends paid
Attributable to owners of
Iluka Resources Limited
Contributed
equity
$m
Other
reserves
$m
Retained
earnings
$m
Total
equity
$m
1,112.1
19.0
407.0
1,538.1
-
-
-
-
5.3
5.3
(62.5)
(5.3)
(67.8)
(62.5)
-
(62.5)
5.3
(3.3)
0.3
-
2.3
(5.3)
-
3.8
-
(1.5)
-
-
-
(41.8)
(41.8)
-
(3.3)
4.1
(41.8)
(41.0)
1,114.4
22.8
297.4
1,434.6
-
-
-
4.3
(6.3)
0.3
-
(1.7)
-
-
-
53.5
1.4
54.9
53.5
1.4
54.9
(4.3)
-
4.6
-
0.3
-
-
-
(79.5)
(79.5)
-
(6.3)
4.9
(79.5)
(80.9)
Notes
23
23
18(b)
18(b)
23
23
23
23
18(b)
18(b)
23
23
Balance at 31 December 2015
1,112.7
23.1
272.8
1,408.6
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
53
Consolidated statement of cash flows
For the year ended 31 December 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Operating cash flow
Interest received
Interest paid
Income taxes paid
Exploration expenditure
Mining Area C royalty receipts
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Sale of property, plant and equipment
Purchase of shares in Metalysis Limited
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Purchase of treasury shares
Dividends paid
Debt refinance costs
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 31 December
2015
$m
2014
$m
Notes
814.2
(592.0)
222.2
0.8
(11.3)
(18.5)
(27.7)
64.0
229.5
(62.3)
0.9
(4.1)
(65.5)
(253.3)
131.9
(9.0)
(79.5)
(2.0)
(211.9)
(47.9)
101.3
1.6
55.0
823.5
(568.7)
254.8
0.6
(13.4)
(27.5)
(22.1)
75.2
267.6
(48.3)
0.3
(18.6)
(66.6)
(139.7)
41.0
(4.7)
(41.8)
(2.5)
(147.7)
53.3
46.4
1.6
101.3
10
20
9
16
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
54
Contents of the notes to the financial statements
Basis of preparation
1. Reporting entity
2. Basis of preparation
3. Critical accounting estimates and judgements
Performance for the year
4. Segment information
5. Revenue
6. Expenses
7. Earnings per share
8.
9. Dividends
10. Reconciliation of profit (loss) after income tax to net cash inflow from operating activities
Income tax
Operating assets and liabilities
Inventories
11. Receivables
12.
13. Property, plant and equipment
14. Payables
15. Provisions
Capital structure and finance costs
16. Net cash (debt) and finance costs
17. Financial risk management
18. Contributed equity
Other notes
19. Other income
20. Available for sale financial assets
21. Remuneration of auditors
22. Deferred tax
23. Reserves and retained earnings
24. Share-based payments
25. Commitments
26. Retirement benefit obligations
27. Key Management Personnel
28. Controlled entities and deed of cross guarantee
29. Parent entity financial information
30. Contingent liabilities
31. Related party transactions
32. New accounting standards and interpretations
33. Events occurring after the reporting period
Page
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56
56
58
59
59
61
62
63
64
65
65
66
66
66
67
69
70
71
71
73
75
76
76
76
77
78
79
80
81
82
83
84
87
88
88
89
89
55
Notes to the financial statements
The notes include information which is required to understand the financial statements and is material and
relevant
Information is
considered relevant and material if:
to the operations and the financial position and performance of
the Iluka Group.
• The amount is significant due to its size or nature;
• The amount is important in understanding the results of the Group;
• It helps to explain the impact of significant changes in the Group's business; or
• It relates to an aspect of the Group's operations that is important to its future performance.
The notes are organised into the following sections:
• Basis of preparation;
• Performance for the year;
• Operating assets and liabilities;
• Capital structure and finance costs;
• Other notes.
A brief explanation of each section is included under each section.
Basis of preparation
This section of the financial report sets out the Group’s accounting policies that relate to the financial statements
as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it
relates. This section also sets out information related to critical accounting estimates and judgements applied to
these financial statements.
1 Reporting entity
Iluka Resources Limited (Company or parent entity) is domiciled in Australia. The financial statements are for the
Group consisting of Iluka Resources Limited and its subsidiaries. A list of the Group's subsidiaries is provided in
note 28.
2 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. Iluka Resources Limited is a for-profit entity and is primarily involved in mineral sands
exploration, project development, operations and marketing.
Iluka Resources Limited had to change some of its accounting policies as the result of new or revised accounting
standards which became effective for the annual reporting period commencing on 1 January 2015, which are
detailed in note 32.
The consolidated financial statements of
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Iluka Resources Limited also comply with International Financial
These financial statements have been prepared under the historical cost convention except for financial assets
and liabilities which are required to be measured at fair value.
(a) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Iluka Resources
Limited as at 31 December 2015 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.
Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns through its power over the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date on which control commences until the date on which
control ceases. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the
policies adopted by the Group.
Intercompany transactions and balances, and unrealised gains on transactions between Group companies, are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred.
56
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at
the date of exchange. Transaction costs are expensed as incurred, except if related to the issue of debt or equity
securities.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is
generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting from the date on which the investee becomes an
associate.
Under the equity method of accounting, investments are initially recognised at cost and adjusted thereafter to
recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the
Group's share of movements in other comprehensive income of the investee in other comprehensive income.
Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying
amount of the investment.
When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the
extent of the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees
have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with AASB 136
Impairment of Assets.
(iii) Employee Share Trust
The Group's Employee Share Schemes are administered through the Iluka Director’s Executives and Employees
Share Acquisition Trust (the trust). This trust is consolidated, as the substance of the relationship is that the trust
is controlled by the Group. Shares in the Company held by the trust are disclosed as treasury shares in the
consolidated financial statements and deducted from contributed equity, net of tax.
(b) Foreign currency translation
(i) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is the Company's functional and
presentation currency.
(ii) Transactions and balances
Where Group companies based in Australia transact in foreign currencies, these transactions are translated into
Australian dollars using the exchange rate on that day. Foreign currency monetary assets and liabilities are
translated to Australian dollars at the reporting date exchange rate. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated to Australian dollars at the exchange rate when the fair
value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary
items that are measured based on historical cost in a foreign currency are not translated.
(iii) Group companies
The financial position of foreign operations is translated into Australian dollars at the exchange rates at the
reporting date. The income and expenses of foreign operations for each month are translated into Australian
dollars at average exchange rates. Foreign currency differences are recognised in other comprehensive income
and accumulated in the foreign currency translation reserve.
(iv) Hedge of net investment in foreign operations
The Group had US dollar denominated borrowings that were used to hedge against translation differences arising
from assets held by the Group’s US operations (see note 4 for more information about these assets). The US
dollar denominated borrowings used to hedge the US operations were repaid in June 2015.
To the extent that these borrowings did not exceed the net assets of the US operations, foreign currency
differences arising on the translation of these borrowings were recognised in other comprehensive income and
accumulated in the foreign currency translation reserve. Any remaining differences were recognised in profit or
loss. If the US operations were to be disposed of (in full or in part), the relevant amount in the foreign currency
translation reserve would be transferred to profit or loss as part of the gain or loss on disposal.
57
(c) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
consolidated balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(d) Determination of financial instrument fair values
For financial instruments measured and carried at fair value, the Group uses the following valuation methods:
Level 1 : the fair value is calculated using quoted prices in active markets.
Level 2 : the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 : the fair value is estimated using inputs for the asset or liability that are not based on observable market
data.
The valuation technique used for the Group's financial instruments are detailed within the relevant note.
(e) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the financial
statements 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.
3 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future in applying its accounting policies. 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.
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period
in which the estimates are revised and future periods affected.
Impairment of assets
(i)
In accordance with the Group’s accounting policy set out in note 13(e) non-current assets are assessed for
impairment when there is an indication that their carrying amount may not be recoverable. The recoverable
amount of each Cash Generating Unit (CGU) is determined as the higher of value-in-use and fair value less costs
of disposal estimated on the basis of discounted present value of the future cash flows (a level 3 fair value
estimation method).
The estimates of discounted 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 Group’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
recognised economic forecasters;
successful development and operation of new mines in Australia and the US, consistent with latest forecasts;
future cash costs of production, sustaining capital expenditure, rehabilitation and mine closure; and
the asset specific discount rate applicable to the CGU (2014: 9% for the impaired US CGU).
forecasts by
Given the nature of the Group’s mining activities, future changes in assumptions upon which these estimates are
based may give rise to material adjustments in future periods. This could lead to a reversal of part, or all, of
impairment charges recorded in the current or prior years, or the recognition of new impairment charges in the
future.
58
(ii) Rehabilitation and mine closure provisions
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 nature and extent of the work required, the future cost of performing the work required, the
timing of the cash flows and the discount rate. Changes to one or more of these assumptions is likely to result in
a change to the carrying value of the provision and the related asset (for open sites), or a change to profit or loss
(for closed sites) in accordance with the Group's accounting policy stated in note 15(a). In 2015, a reduction to
the risk free discount rate in Australia resulted in an increase to the rehabilitation provision of $46.6 million, of
which $25.3 million was charged to profit or loss account in respect of closed sites.
The total rehabilitation and mine closure provision of $487.0 million (2014: $457.0 million) includes $373.4 million
(2014: $274.0 million) for assets no longer in use or for obligations arising from production process outputs.
Changes to the provisions for assets or operations no longer in use (closed sites) are charged to profit or loss
account. Changes to closed sites, excluding discounting changes, are reported within rehabilitation and holding
costs for closed sites in note 6. The changes to the provisions for closed sites, excluding the aforementioned
impact of the change in discount rates, was an increase of $2.7 million (2014: reduction of $5.2 million).
(iii) Net realisable value and classification of product inventory
The Group’s assessment of the net realisable value and classification of its inventory holdings requires the use of
estimates, including the estimation of the relevant future product price and the likely timing of the sale of the
inventory.
Total inventory at 31 December 2015 was $811.8 million (2014: $810.2 million). During the year, no inventory
write downs occurred for work in progress or finished goods (2014: $12.0 million was expensed). If finished
goods future selling prices were five per cent lower than expected, an inventory write down of $3.3 million would
be required at 31 December 2015.
Inventory of $317.9 million (2014: $353.7 million) was classified as non-current as it is not expected to be sold
within 12 months of the balance sheet date. See note 12 for further details.
Performance for the year
This section focuses on the results and performance of the Group. This covers both profitability and the resultant
return to shareholders via earnings per share combined with cash generation and the return of cash to
shareholders via dividends.
4 Segment information
(a) Description of segments
Operating segments are reported in a manner that is consistent with the internal reporting provided to the
Managing Director. Cash, debt and tax balances are managed at a group level and, together with resource
development and other corporate activities, are not allocated to segments. The segments are unchanged from
those reported at 31 December 2014.
Australia (AUS) comprises the integrated mineral sands mining and processing operations in Victoria, Western
Australia and South Australia. Material
is mined from various deposits in Western Australia (Perth Basin),
together with the Jacinth-Ambrosia deposit in South Australia (Eucla Basin) and several deposits in Victoria
(Murray Basin). The mined material is processed predominantly at Mineral Separation Plants in the South West
and Mid West of Western Australia and the Murray Basin to produce saleable products. The processing activities
in Western Australia also include the Group’s synthetic rutile kilns.
Mining and processing activities in the South West of Western Australia, mining activities in the Mid West of
Western Australia and the Group’s synthetic rutile operations were idled during 2013. Mining and processing
activities combined with synthetic rutile operations in the South West of Western Australia were re-started during
the first half of 2015.
United States (US) comprises the integrated mineral sands mining and processing operations in Virginia and
rehabilitation obligations in Florida. Mining and processing activities were idled in Virginia in December 2015.
Mining Area C (MAC) comprises a deferred consideration iron ore royalty interest over certain mining tenements
in Australia 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 arm's length prices. Any transfers of intermediate products between operating segments are made at
cost. During 2015, no finished product was transferred from the US to Australia (2014: nil).
59
(b) Segment information
2015
Total segment sales to external customers
Total segment result
Segment assets
Segment liabilities
Depreciation and amortisation expense
Additions to non-current segment assets
2014
Total segment sales to external customers
Total segment result
Segment assets
Segment liabilities
Depreciation and amortisation expense
Impairment of US assets
Additions to non-current segment assets
AUS
$m
US
$m
MAC
$m
Total
$m
770.5
204.8
1,837.8
476.2
129.7
56.3
49.3
(35.5)
119.0
111.5
-
26.4
-
61.2
15.3
-
0.4
-
819.8
230.5
1,972.1
587.7
130.1
82.7
AUS
$m
US
$m
MAC
$m
Total
$m
640.6
102.4
1,942.7
455.6
173.4
-
128.4
84.3
(97.2)
48.1
84.2
15.8
82.0
19.9
-
66.4
18.2
-
0.4
-
-
724.9
71.6
2,009.0
539.8
189.6
82.0
148.3
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:
China
Asia excluding China
Europe
Americas
Other countries
Sale of goods
2015
$m
291.4
102.3
215.4
135.9
74.8
819.8
2014
$m
288.4
115.5
164.1
129.0
27.9
724.9
Revenue of $110.0 million, $98.0 million and $87.1 million was derived from three external customers of the
mineral sands segments, which individually account for greater than 10 per cent of the total segment revenue
(2014: revenues of $81.6 million and $78.3 million from two external customers).
Segment result is reconciled to the profit before income tax as follows:
Segment result
Interest income
Other income
Marketing and selling
Corporate and other costs
Depreciation
Resource development
Interest and finance charges
Net foreign exchange losses
Profit (loss) before income tax
2015
$m
230.5
0.8
2.7
(15.8)
(52.7)
(2.3)
(58.4)
(14.1)
(4.1)
86.6
2014
$m
71.6
0.6
5.7
(13.9)
(48.4)
(2.1)
(45.3)
(16.7)
-
(48.5)
Total segment assets and total segment liabilities are reconciled to the balance sheet as follows:
60
Segment assets
Corporate assets
Cash and cash equivalents
Current tax receivable
Deferred tax assets
Total assets as per the balance sheet
Segment liabilities
Corporate liabilities
Current tax payable
Interest-bearing liabilities
Total liabilities as per the balance sheet
5 Revenue
Sales revenue
Sale of goods
Other revenue
Mining Area C royalty income
Interest
2015
$m
2014
$m
1,972.1
46.2
55.0
12.2
17.8
2,103.3
587.7
32.1
25.9
49.0
694.7
2,009.0
41.3
101.3
8.5
13.3
2,173.4
539.8
32.4
6.3
160.3
738.8
2015
$m
2014
$m
819.8
724.9
61.6
0.8
62.4
66.8
0.6
67.4
882.2
792.3
(a) Sale of goods - Mineral sands
The Group sells mineral sands under a range of International Commercial Terms. Product sales are recognised
as revenue when the Group has transferred both the significant risks and rewards of ownership and control of the
products sold, and the amount of revenue can be measured reliably. The passing of risk to the customer occurs
when the product has been dispatched to the customer and is no longer under the physical control of the Group,
or when the customer has formally acknowledged its legal ownership of the product including all inherent risks.
Where the sold product continues to be stored in facilities the Group controls, it is clearly identified and available
to the buyer.
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of rebates, sales commissions, duties and other taxes.
(b) 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.
Included in Mining Area C iron ore royalty earnings (MAC) was a one-off receipt of US$8.0 million (A$10.4
million) following the modification to the royalty agreement with BHP Billiton and its joint venture partners, as
announced to the ASX on 21 July 2015.
The royalty entitlement asset is an intangible asset and is amortised on a straight-line basis ($0.4 million per
year) over its estimated useful life of 25 years, of which 13 years is remaining (2014: 14 years remaining). The
carrying value of the asset at the 31 December 2015 is $5.1 million (2014: $5.5 million).
(c)
Interest income
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
61
6 Expenses
Expenses
Cash costs of production, excluding by-product costs
Depreciation and amortisation
Inventory movement
Cost of goods sold
Ilmenite concentrate and by-product costs
Restructure and idle capacity charges
Rehabilitation and holding costs for closed sites
Impairment of US assets
Government royalties
Marketing and selling costs
Corporate and other costs
Resource development
Foreign exchange losses
Net loss on disposal of property, plant and equipment
(a) Cash costs of production
Notes
2015
$m
6(a)
6(b)
6(c)
6(d)
6(e)
6(f)
384.9
132.4
5.7
523.0
7.6
38.3
2.7
-
21.0
32.0
52.7
58.4
4.1
1.3
741.1
2014
$m
356.9
191.7
(14.7)
533.9
25.0
40.1
(1.0)
82.0
10.6
30.1
48.4
45.3
-
-
814.4
Cash costs of production include costs for mining and concentrating; transport of heavy mineral concentrate;
mineral separation; synthetic rutile production; externally purchased ilmenite and production overheads. This
category also includes landowner royalty payments, but excludes Australian State Government royalties which
are reported separately.
(b) Cost of goods sold
Cost of goods sold is the inventory value of each tonne of finished product sold. All production is added to
fixed and variable overhead
inventory at cost, which includes direct costs and an appropriate portion of
expenditure, including depreciation and amortisation, allocated on the basis of relative sales value. The inventory
value recognised as cost of goods sold for each tonne of finished product sold is the weighted average value per
tonne for the stockpile from which the product is sold.
Inventory movement represents the movement in balance sheet inventory of work in progress and finished
goods, including the non-cash depreciation and amortisation components and movement in the net realisable
value adjustments.
(c)
Ilmenite concentrate and by-product costs
Ilmenite and by-product costs include by-product costs such as for iron concentrate processing, activated carbon
and wet high intensity magnetic separation (WHIMS) ilmenite transport costs of $7.6 million (2014: $25.0 million).
(d) Restructure and idle capacity charges
Idle capacity charges reflect ongoing costs incurred during periods of no or restricted production. During 2015,
Iluka concluded mining at Woornack, Rownack, Pirro (WRP) deposit in Murray Basin, Victoria and also idled
mining and processing activities in Virginia in December 2015 resulting in restructure costs of $3.6 million being
recognised during the year. No restructure costs were incurred during 2014.
Liabilities for employee termination benefits associated with restructuring activities are recognised when the
Group is demonstrably committed to terminating the employment of current employees according to a detailed
formal plan without possibility of withdrawal and there is no further service required. Where further service is
required to be eligible for the benefit, the liability is recognised over the relevant service period.
(e) Rehabilitation and holding costs for closed sites
These costs include adjustments to the rehabilitation provision for closed sites which are expensed in accordance
with the policy described in note 15(a) arising from the annual review combined with ongoing holding costs for
closed sites such as property rates and taxes. The US operations incurred a $27.7 million increase in
rehabilitation estimates for closed sites following an annual assessment of the scope of work, the costs to
undertake the work and when the work will be completed. Australian operations identified opportunities to
improve techniques applied to rehabilitation and resulted in a reduction of $25.0 million in the obligation for
closed sites.
62
(f)
Impairment of US assets
In 2014, a pre tax impairment charge of $82.0 million was recognised in relation to the US operations. The
recoverable amount was determined using the fair value less costs to sell approach. Iluka's US operations
produce chloride ilmenite as well as premium zircon, both sold predominantly into the domestic market.
(g) Other required disclosures
Expenses also include the following:
Defined contribution superannuation
Defined benefits superannuation
Employee benefits (excluding share-based payments)
Share-based payments
Exploration expenditure (included in Resource development expenses)
Operating leases
Inventory write downs - finished goods and WIP
Inventory write downs - consumable stores
2015
$m
8.6
0.6
134.5
5.7
27.0
11.4
-
6.1
2014
$m
8.1
0.9
128.1
7.0
19.0
11.4
12.0
2.5
Operating leases are leases in which a significant portion of the risks and rewards of ownership are not
transferred to the Group. 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.
7 Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
2015
Cents
12.8
12.8
2014
Cents
(15.0)
(15.0)
Earnings per share (EPS) is the amount of post-tax profit attributable to each share.
Basic EPS is calculated on the profit for the period attributable to equity owners of $53.5 million (2014: loss of
$62.5 million) divided by the weighted average number of shares on issue during the year, excluding treasury
shares, being 417,769,922 shares (2014: 417,884,855 shares).
Diluted EPS takes into account the dilutive effect of all outstanding share rights vesting as ordinary shares. The
weighted average share rights outstanding is 1,665,469 (2014: 1,284,900 share rights). In 2014 this would be
anti-dilutive as the share rights would reduce the loss per share and therefore have not been included in the
calculation of diluted EPS in the prior year.
63
8 Income tax
Income tax expense comprises current and deferred tax and is recognised in profit or loss, as disclosed in (a)
below, except to the extent that it relates to items recognised directly in equity or other comprehensive income as
disclosed in (c) below.
(a)
Income tax expense
Current tax
Deferred tax
Under (over) provided in prior years
Notes
22
2015
$m
43.9
(8.8)
(2.0)
33.1
2014
$m
21.2
(7.5)
0.3
14.0
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. The current tax charge is calculated
using the tax rates and tax laws enacted or substantively enacted at the reporting date in the countries where the
Group operates and generates taxable income. Deferred taxes are explained in more detail in note 22.
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit (loss) before income tax expense
Tax at the Australian tax rate of 30% (2014: 30%)
Tax effect of amounts not deductible (taxable) in calculating taxable income:
Research and development credit
Tax losses not recognised by overseas operations
Derecognition of deferred tax assets / liabilities in relation to US state taxes
Non-assessable income
Non-deductible expenses
Other items
Difference in overseas tax rates
(Over) under provision in prior years
Income tax expense
(c) Tax expense relating to items of other comprehensive income
Hedge of net investments in US operations
Actuarial gains (losses) on retirement benefit obligation
86.6
26.0
(2.9)
8.5
-
(1.1)
3.3
(0.8)
33.0
2.1
(2.0)
33.1
(119.7)
(0.6)
0.2
(0.4)
(48.5)
(14.6)
(2.5)
19.4
4.5
-
1.6
0.4
8.8
4.9
0.3
14.0
34.5
(1.6)
(0.8)
(2.4)
(d) Tax losses
No tax benefits have been recognised in respect of exploration activities of overseas operations as their recovery
is not currently considered probable.
The idling of the US operations at the end of 2015 means that US state tax losses are not considered probable of
recovery and the benefit of these losses was derecognised as part of the US asset impairment
in 2014.
Unrecognised US state tax losses for which no deferred tax asset has been recognised are US$173.0 million at
31 December 2015 (31 December 2014: US$151.8 million).
losses for which no deferred tax asset has been recognised are approximately $92.7 million
Unused capital
(2014: $88.8 million) (tax at the Australian rate of 30%: $27.9 million (2014: $26.6 million)). The benefit of these
unused capital
losses will only be obtained if sufficient future capital gains are made and the losses remain
available under tax legislation.
64
9 Dividends
Final dividend
for 2014 of 13 cents per share, fully franked
for 2013 of 4 cents per share, fully franked
Interim dividend
for 2015 of 6 cents per share, fully franked
for 2014 of 6 cents per share, fully franked
2015
$m
54.4
-
54.4
25.1
-
25.1
79.5
2014
$m
-
16.7
16.7
-
25.1
25.1
41.8
Since balance date the directors have determined a final dividend for 2015 of 19 cents per share, fully franked
(2014: 13 cents, fully franked). The dividend is payable on 1 April 2016 for shareholders on the register as at 10
March 2016. The aggregate amount of the proposed dividend is $79.5 million, which has not been included in
provisions at balance sheet date as it was not declared on or before the end of the financial year.
The Company has a dividend reinvestment plan (DRP) which was suspended in 2010 until further notice.
(a) Franking Credits
The balance of franking credits available for future years is $103.0 million (2014: $109.4 million). This balance is
based on a tax rate of 30 per cent (2014: 30 per cent). These amounts include franking credits of $25.9 million
(2014: $6.2 million) that will arise from the payment of current income tax in Australia as provided for in these
financial statements and the reduction of $34.1 million (2014: reduction of $23.3 million) that will arise on
payment of the final dividend.
10 Reconciliation of profit (loss) after income tax to net cash inflow from operating
activities
2015
$m
53.5
132.4
(1.7)
1.3
8.1
17.7
25.3
5.7
2.4
-
2.7
(10.2)
3.1
17.0
(0.8)
(6.5)
(20.5)
229.5
2014
$m
(62.5)
191.7
(4.3)
0.1
4.3
15.8
-
7.0
2.2
82.0
(5.2)
90.0
(13.1)
(3.3)
(10.4)
(10.1)
(16.6)
267.6
Profit (loss) for the year
Depreciation and amortisation
Exploration capitalised
Net loss on disposal of property, plant and equipment
Exchange translation differences on USD denominated debt
Rehabilitation and mine closure provision discount unwind
Rehabilitation discount rate change
Non-cash share-based payments expense
Amortisation of deferred borrowing costs
Impairment of US assets
Non-cash rehabilitation for closed sites
Change in operating assets and liabilities
(Increase) / decrease in receivables
(Increase) / decrease in inventories
(Increase) / decrease in net current tax asset
Increase in net deferred tax
Decrease in payables
Decrease in provisions
Net cash inflow from operating activities
65
Operating assets and liabilities
This section shows the assets used to generate the Group’s trading performance and the liabilities incurred as a
result. Liabilities relating to the Group’s financing activities are addressed in the Capital structure and finance
costs section on page 71.
11 Receivables
Trade receivables
Mining Area C royalty receivable
Other receivables
Prepayments
2015
$m
79.5
10.2
10.1
9.1
108.9
2014
$m
69.8
12.7
9.3
7.0
98.8
Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the
amount considered recoverable. Trade receivables are generally due for settlement within 45 days of the invoice
being issued. The Group sells mineral sands to substantially all its customers on credit terms. Sales are generally
denominated in US dollars. Revenue is recognised using spot exchange rates on the date of sale, with trade
receivables being translated at the spot exchange rate at balance date and translation differences accounted for
in line with the Group’s accounting policy (refer note 2(b)(ii)).
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 sufficient evidence that the Group will
not be able to collect all amounts due.
At 31 December 2015, no trade receivables are impaired (2014: nil). There was $15.8 million overdue (2014:
$2.2 million), of which $10.9 million were less than 28 days overdue (2014: $1.9 million). Due to the short term
nature of the Group’s receivables, their carrying value is considered to approximate fair value.
(a) Trade receivables purchase facilities
Iluka has two trade receivables purchase facilities for the sale of eligible trade receivables. Under the agreements
Iluka transfers the majority of the risks and rewards of ownership, including both the credit risk (subject to a
maximum first loss) and late payment risk.
Iluka maintains an insurance policy to assist in managing the credit risk of its customers. The credit insurance
policy is a separate instrument to the receivables and is a hedge of credit risk. The trade receivables balance of
$79.5 million excludes $75.0 million (2014: excludes $84.4 million) of receivables sold under the two trade
receivables purchase facilities. Iluka has assigned a portion of the insurance policy to the supplier of the trade
receivables purchase facility but retains credit risk up to a maximum first loss of $3.4 million per annum (2014:
$3.1 million). An asset for the first loss amount has been recognised within other receivables offset by a
corresponding continuing involvement liability in other payables (refer note 14).
12 Inventories
Current
Work in progress
Finished goods
Consumable stores
Total current inventories
Non-current
Work in progress
Finished goods
Total non-current inventories
2015
$m
2014
$m
93.3
367.0
33.6
493.9
307.9
10.0
317.9
98.6
325.5
32.4
456.5
345.5
8.2
353.7
Inventories are valued at the lower of weighted average cost and estimated net realisable value. All work in
progress and finished goods inventory is carried at cost (2014: $57.5 million of finished goods and US work in
progress was carried at net realisable value).
66
There are separate inventory stockpile values for each product, including HMC and other intermediate products,
at each inventory location.
Weighted average cost
fixed and variable overhead
expenditure, including depreciation and amortisation. As a result of mineral sands being co-products from the
same mineral separation process, costs are allocated to inventory on the basis of the relative sales value of the
finished goods produced. No cost is attributed to by-products.
includes direct costs and an appropriate portion of
Net realisable value is the amount estimated to be obtained from sale in the normal course of business, less any
anticipated costs of completion and the estimated costs necessary to make the sale, including royalties.
Consumable stores include ilmenite acquired from third parties, flocculant, coal, diesel and warehouse stores. 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. Consumables stores incurred a charge of $6.1 million during
the year to record them at net realisable value (2014: $2.5 million).
Inventories expected to be sold (or consumed in the case of stores) within twelve months after the balance sheet
date are classified as current assets, all other inventories are classified as non-current assets.
13 Property, plant and equipment
Land &
Buildings
$m
Plant,
Machinery &
Equipment
$m
Mine
Reserves &
Development
$m
Exploration &
Evaluation
$m
Total
$m
At 1 January 2014
Cost
Accumulated depreciation *
Opening written down value
Additions
Disposals
Depreciation and amortisation
Foreign exchange translation
Impairment of US assets
Transfers/reclassifications
Closing written down value
At 31 December 2014
Cost
Accumulated depreciation *
Closing written down value
Year ended 31 December 2015
Opening written down value
Additions
Disposals
Depreciation and amortisation
Foreign exchange translation
Transfers/reclassifications
Closing written down value
At 31 December 2015
Cost
Accumulated depreciation *
Closing written down value
871.6
(561.7)
309.9
46.9
-
(96.7)
3.1
(38.3)
0.5
225.4
925.7
(700.3)
225.4
225.4
33.8
(1.1)
(45.6)
-
0.1
212.6
124.6
(31.7)
92.9
1,964.8
(1,088.7)
876.1
9.4
(0.7)
(3.3)
0.4
(2.7)
(3.3)
92.7
9.7
(0.1)
(91.3)
2.5
(41.0)
3.3
759.2
129.5
(36.8)
92.7
1,993.7
(1,234.5)
759.2
759.2
18.7
-
(84.1)
-
-
693.8
92.7
30.9
(0.8)
(2.3)
1.3
-
121.8
162.5
(40.7)
121.8
2,001.2
(1,307.4)
693.8
961.0
(748.4)
212.6
37.8
(2.1)
35.7
4.8
(0.1)
-
-
-
(0.5)
39.9
42.0
(2.1)
39.9
39.9
1.9
(0.2)
-
0.1
(0.1)
41.6
43.6
(2.0)
41.6
2,998.8
(1,684.2)
1,314.6
70.8
(0.9)
(191.3)
6.0
(82.0)
-
1,117.2
3,090.9
(1,973.7)
1,117.2
1,117.2
85.3
(2.1)
(132.0)
1.4
-
1,069.8
3,168.3
(2,098.5)
1,069.8
* Accumulated depreciation includes cumulative impairment charges
67
(a) Property, plant and equipment
Property plant and equipment is stated at cost less accumulated depreciation and impairment charges. Cost
includes:
•
•
•
•
expenditure that is directly attributable to the acquisition of the items;
direct costs associated with the commissioning of plant and equipment, including pre-commissioning costs in
testing the processing plant;
if the asset is constructed by the Group, the cost of all materials used in construction, direct labour on the
project, project management costs and unavoidable borrowing costs incurred during construction of assets
with a construction period greater than twelve months and an appropriate proportion of variable and fixed
overheads; and
the present value of the estimated costs of dismantling and removing the asset and restoring the site on
which it is located.
As set out in note 15(a), in the case of rehabilitation 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. Total additions in
the year include $24.2 million (2014: $13.5 million) related to changes in the rehabilitation provision (refer note
15(a)), including $21.3 million in relation to changes in the discount rate (2014: $nil).
(b) Maintenance and repairs
Certain items of plant used in the primary extraction, separation and secondary processing of extracted minerals
are subject to a 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. General repairs and maintenance which are not characterised as part of a major
cyclical overhaul are expensed as incurred.
(c) Depreciation and amortisation
Depreciation is provided to expense the cost of property, plant and equipment over its estimated useful life on
either a straight line or units of production basis. Units of production depreciation is calculated using the quantity
of heavy mineral concentrate extracted from the applicable mine or processed through the mine specific plant as
a percentage of the total quantity of heavy mineral concentrate planned to be extracted/processed in the current
and future periods based on life of mine plans. 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 for
the main categories of assets are as follows:
Land
-
- Mine buildings
- Mine specific machinery and equipment
- Mine specific plant
- Mine reserves and development
- Other non-mine specific plant and equipment
not depreciated
the shorter of applicable mine life and 25 years
the applicable mine life
units of production
units of production
3-25 years
The reserves and life of each mine and the remaining useful life of each class of asset are reassessed at regular
intervals and the depreciation rates adjusted accordingly on a prospective basis.
(d) Assets not being depreciated
Included in plant, machinery and equipment, mine reserves and development and land and buildings are
amounts totalling $20.9 million, $1.0 million and $0.7 million respectively (2014: $26.7 million, $1.7 million and
$nil respectively) relating to assets under construction which are currently not being depreciated as the assets
are not ready for use.
In addition, within property, plant and equipment are amounts totalling $303.6 million (2014: $322.7 million) which
have not been depreciated in the year as mining of the related area of interest has not yet commenced or the
asset is currently idle.
68
(e) Recoverable amount of non-current assets
Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment charge is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less costs of disposal and value-in-use. For the purposes of assessing impairment, operating assets
are grouped at the lowest levels for which there are separately identifiable cash flows (Cash Generating Units).
Assets that are not currently in use and not scheduled to be brought back in to use (idle assets) are considered
on a standalone basis. Indicators of impairment may include significant changes in business performance or
future operating plans along with changes in technology. Assets that have suffered an impairment charge are
reviewed for possible reversal of the impairment at each reporting date.
(f) Exploration, evaluation and development expenditure
Exploration and evaluation expenditure is accumulated separately for each area of interest. 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 Group 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.
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 achieved JORC reserve status (reported in accordance with JORC, 2012)
and has been included in the life of mine plan.
All of the above expenditure is carried forward up to commencement of operations at which time it is amortised in
accordance with the reserves and development depreciation policy noted in (c) above.
14 Payables
Trade payables
Accrued expenses
Other payables
Annual leave payable
Government royalties payable
2015
$m
33.7
46.8
3.8
9.8
9.4
103.5
2014
$m
28.4
45.0
3.6
8.9
3.8
89.7
the invoice received from the supplier. The amounts are
Trade payables are recognised at
unsecured and are usually paid in accordance with vendor specific payment terms. Due to the short term nature
of the Group’s trade payables, their carrying value is considered to approximate fair value.
the value of
69
15 Provisions
Current
Rehabilitation and mine closure
Employee benefits - long service leave
Workers compensation and other provisions
Non-current
Rehabilitation and mine closure
Employee benefits - long service leave
Retirement benefit obligations
Notes
26
2015
$m
42.5
12.1
2.8
57.4
444.5
3.7
10.7
458.9
2014
$m
52.7
10.4
0.7
63.8
404.3
4.2
10.2
418.7
The movements in each class of provision, other than employee related liabilities, is set out below:
Movements in provisions
Balance at 1 January
Change in provisions - closed sites
Change in provision - additions to property plant and equipment
Rehabilitation and mine closure provision discount unwind
Rehabilitation discount rate changes - for closed sites
Rehabilitation discount rate changes - for open sites
Foreign exchange rate movements
Amounts spent during the year
Change in provision - other
Change in provision - unused amounts reversed
Balance at 31 December
(a) Rehabilitation and mine closure
Rehabilitation
and mine
closure
$m
Notes
Other
provisions
$m
6
13
16(d)
16(d)
13
457.0
2.7
2.9
17.8
25.3
21.3
6.7
(46.7)
-
-
487.0
0.7
-
-
-
-
-
-
-
2.3
(0.2)
2.8
The Group has obligations to dismantle and remove certain items of property, plant and equipment and to restore
and rehabilitate the land on which they sit.
A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at
balance date, discounted to present value using an appropriate pre-tax discount rate.
Where the obligation is related to an item of property, plant and equipment, its cost includes the present value of
the estimated costs of dismantling and removing the asset and restoring the site on which it is located. Costs that
relate to obligations arising from waste created by the production process are recognised as production costs in
the period in which they arise.
The discounted value reflects a combination of management's assessment of the nature and extent of the work
required, the future cost of performing the work required, the timing of the cash flows and the discount rate. The
increase in the provision associated with discounting for closed sites is recognised as a finance cost in note
16(d).
The provisions are reassessed at least annually. A change in any of the assumptions used to determine the
provisions could have a material impact on 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, such as mines and processing
sites that have been closed, any adjustment is reflected directly in profit or loss.
70
The total rehabilitation and mine closure provision of $487.0 million (2014: $457.0 million) includes $373.4 million
(2014: $274.0 million) for assets no longer in use. Changes to the provisions for assets no longer in use are
charged/credited directly to profit or loss. A review of cost estimates resulted in a charge of $2.7 million (2014:
credit of $5.2 million) which is reported within the expense item Rehabilitation and holding costs for closed sites
in note 6. The change in discount rate resulted in a charge of $25.3 million (2014: $nil) which is reported within
the finance costs item Rehabilitation discount rate changes in note 16(d).
(b) Employee benefits
The employee benefits provision relates to long service leave entitlements measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date,
discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows. Liabilities for annual
leave are included in
payables in note 14.
The current provision represents amounts for vested long service leave for which the Group does not have an
unconditional right to defer settlement, regardless of when the actual settlement is expected to occur. However,
based on past experience, the Group does not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months.
Capital structure and finance costs
This section outlines how the Group manages its capital and related financing costs.
The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an efficient
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the level of return on capital and also the level of net cash/debt and
compliance with bank covenants, including the gearing ratio calculated as a net debt / (net debt + equity). The
Group manages funds on a Group basis with all funds being drawn by the parent entity.
16 Net cash (debt) and finance costs
Cash and cash equivalents
Cash at bank and in hand
Deposits at call
Total cash and cash equivalents
Current interest-bearing liabilities (unsecured)
Senior Notes 2003
Non-current interest-bearing liabilities (unsecured)
Multi Optional Facility Agreement
Deferred borrowing costs
Total interest-bearing liabilities
Net cash (debt)
(a) Cash and cash equivalents
2015
$m
55.0
-
55.0
-
54.9
(5.9)
49.0
49.0
6.0
2014
$m
31.0
70.3
101.3
24.4
142.2
(6.3)
135.9
160.3
(59.0)
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions with original
maturities of three months or less.
Cash and deposits are at floating interest rates between 0.0 per cent and 2.95 per cent (2014: 0.0 per cent and
3.00 per cent) on Australian and foreign currency denominated deposits.
71
(b) Interest-bearing liabilities
Interest-bearing liabilities are initially recognised at fair value less directly attributable transaction costs, with
subsequent measurement at amortised cost using the effective interest rate method. Under the amortised cost
method the difference between the amount initially recognised and the redemption amount is recognised in profit
or loss over the period of the borrowings on an effective interest basis.
Interest-bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer
settlement for at least 12 months after the balance sheet date.
A description of each of the facilities is provided below.
(i) US Private Placement Notes - 2003 Series
Iluka had a US$20 million tranche which was repaid in June 2015.
(ii) Multi Optional Facility Agreement
The Multi Optional Facility Agreement (MOFA) comprises a series of unsecured five year bilateral revolving credit
facilities with several domestic and foreign institutions, totalling A$1,010 million (2014: A$850 million) of which
A$175 million expires in 2017 (2014: A$175 million), A$260 million expires in 2019 (2014: $675 million) and
A$575 million expires in 2020 (2014: $nil). Drawings under the MOFA at 31 December 2015 were A$54.9 million
(US$40.0 million), as compared to A$142.2 million (A$75.0 million and US$55.0 million) in 2014. Undrawn MOFA
facilities at 31 December 2015 were A$955 million.
(c)
Interest rate exposure
Of the above interest-bearing liabilities, $54.9 million is subject to an effective weighted average floating interest
rate of 2.0 per cent (2014: interest-bearing liabilities of $142.2 million at 3.1 per cent). The contractual repricing
date of all of the floating rate interest-bearing liabilities at the balance date is within one year.
The only fixed interest rate borrowing related to the US$20.0 million Private Placement Senior Notes, which were
repaid in June 2015.
(d) Finance costs
Interest charges on interest-bearing liabilities
Bank fees and similar charges
Amortisation of deferred borrowing costs
Rehabilitation and mine closure provision discount unwind
Total finance costs
2015
$m
11.2
0.6
2.4
43.0
57.2
2014
$m
13.4
1.1
2.2
15.8
32.5
(i) Amortisation of deferred borrowing costs
Fees paid on establishment of borrowing facilities are recognised as transaction costs and amortised over the
period to which the facility relates. Transaction costs of $2.0 million associated with the additional facility and
extension of the MOFA were incurred and capitalised in 2015 (2014: $2.5 million).
(ii) Rehabilitation and mine closure provision discount unwind
Rehabilitation and mine closure unwind represents the cost associated with the passage of time. Rehabilitation
provisions are recognised as the discounted value of the present obligation to restore, dismantle and rehabilitate
the site; with changes associated with discounting for closed sites being recognised as a finance cost in
accordance with the policy described in note 15(a).
72
17 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 Group’s financial performance. Financial
risk management is managed by a central treasury department under policies approved by the Board.
(a) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates - will
affect the Group’s income or value of its holdings of financial instruments.
(i) Foreign exchange risk
Foreign exchange risk arises from future commercial
denominated in a currency that is not the entity's functional currency.
transactions and recognised assets and liabilities
The Group operates internationally and is exposed to foreign exchange risk arising predominantly from the US
dollar which is the currency in which the Group’s sales are generally denominated. The Group's US dollar
borrowings act as a ‘natural’ hedge against movements in US dollar receivables from Australian sales (translation
differences are taken to profit or loss).
The Group's exposure to USD foreign currency risk (by entities which have an Australian dollar functional
currency) at the end of the reporting period, expressed in Australian dollars, was as follows:
Cash and cash equivalents
Receivables
Payables
Interest-bearing liabilities
2015
$m
11.2
74.7
(21.6)
(54.9)
9.4
2014
$m
4.8
69.5
(9.3)
(91.6)
(26.6)
The Group's balance sheet exposure to other foreign currency risk is not significant.
(ii) Group sensitivity
The average US dollar exchange rate during the year was 0.7521 (2014: 0.9030). The US dollar spot rate at 31
December 2015 was 0.7279 (31 December 2014: 0.8186). Based on the Group's net financial assets at 31
December 2015, the following table demonstrates the estimated sensitivity to a -/+ 10 per cent movement in the
US dollar spot exchange rate, with all other variables held constant, on the Group's post-tax profit (loss) for the
year and equity:
31 December 2015
31 December 2014
-10%
Strengthen
Profit (loss)
$m
0.7
(0.1)
Equity
$m
0.0
(1.9)
+10%
Weaken
Profit (loss)
$m
(0.7)
0.1
Equity
$m
0.0
1.5
In 2014, the foreign currency sensitivity related to the US Private Placement Notes which impacted equity rather
than profit as it was a hedge of the net investment in the US operations. The US Private Placement Notes were
repaid in June 2015.
(iii) Interest rate risk
Interest rate risk arises from the Group’s borrowings and cash deposits. During 2015 and 2014, the Group's
borrowings at variable rates were denominated in Australian dollars and US dollars. At 31 December 2015, if
variable interest rates for the full year were -/+ 1 per cent from the year-end rate with all other variables held
constant, pre-tax profit for the year would have moved as per the table below.
31 December 2015
31 December 2014
+1%
$m
0.5
1.7
-1%
$m
(0.5)
(1.7)
73
The sensitivity is calculated using the total debt position at 31 December 2015. The interest charges in note 16(d)
of $11.2 million (2014: $13.4 million) reflect interest-bearing liabilities in 2015 that range between $49.0 million
and $223.8 million (2014: $158.8 million and $253.1 million).
(b) Credit risk
Credit risk arises from cash and cash equivalents held with financial institutions, as well as credit exposure to
customers.
The Group has policies in place to ensure that credit sales are only 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 trade receivables balance of $79.5 million,
$64.1 million is covered by an insurance policy and $15.2 million by letters of credit. The policy also covers
receivables sold to financial institutions totalling $75.0 million, refer note 11(a). The insurance policies have a
maximum claim amount of $78.3 million. All trade receivables are 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.
The Group's policy is to ensure that cash deposits are held with counterparties with a minimum A-/A3 credit
rating. Credit exposure limits are approved by the Board based on both credit and sovereign ratings.
(c) Liquidity risk
Liquidity risk is the risk the Group will not be able to meet its financial obligations as they fall due. Liquidity risk
management involves maintaining sufficient cash on hand or undrawn credit facilities to meet the operating
requirements of the business. This is managed through committed undrawn facilities under the MOFA (refer note
16(b)(ii)) of $955 million at balance date as well as cash and cash equivalents of $55 million and prudent cash
flow management.
(d) Maturities of financial liabilities
The tables below analyse the Group's interest-bearing liabilities into maturity groupings based on the remaining
period at the reporting date to the contractual maturity date. For the MOFA, the contractual maturity dates are
dates which range from 2017 to 2020 and, contractual cash flows are until the next contractual re-pricing date
which are all within one year. The amounts disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. All
other financial liabilities are due within 12 months (refer note 14).
Weighted
average rate
Less than
1 year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Total
contractual
cash flows
$m
Carrying
amount
liabilities
$m
%
2.0
103.5
0.2
103.7
-
-
-
-
54.9
54.9
103.5
55.1
158.6
103.5
54.9
158.4
Weighted
average rate
Less than 1
year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Total
contractual
cash flows
$m
Carrying
amount
liabilities
$m
At 31 December 2015
Non-derivatives
Payables
Interest-bearing variable rate
Total non-derivatives
At 31 December 2014
Non-derivatives
Payables
Interest-bearing variable rate
Interest-bearing fixed rate
Total non-derivatives
3.1
5.4
89.7
0.6
25.1
115.4
-
-
-
-
-
142.2
-
142.2
89.7
142.8
25.1
257.6
89.7
142.2
24.4
256.3
74
18 Contributed equity
(a) Share capital
Ordinary shares - fully paid
Treasury shares - net of tax
2015
Shares
2014
Shares
418,701,360
(1,194,708)
417,506,652
418,701,360
(825,110)
417,876,250
2015
$m
1,120.0
(7.3)
1,112.7
2014
$m
1,120.0
(5.6)
1,114.4
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. There have been no movements in fully paid ordinary shares since 7
May 2009.
(b) Treasury shares
Treasury shares are shares in Iluka Resources Limited acquired on market and held for the purpose of issuing
shares under the directors, Executives and Employees Share Acquisition Plan and the Employee Share Plan.
Opening balance at 1 January 2014
Acquisition of shares, net of tax
Employee share issues, net of tax
Balance at 31 December 2014
Acquisition of share net of tax
Employee share issues, net of tax
Balance at 31 December 2015
Number of
shares
937,719
490,382
(602,991)
825,110
1,044,355
(674,757)
1,194,708
$m
7.9
3.3
(5.6)
5.6
6.3
(4.6)
7.3
75
Other notes
19 Other income
Commissions and other sundry income
Foreign exchange gains
20 Available for sale financial assets
Unlisted securities
Available-for-sale financial assets
Total available for sale financial assets
2015
$m
2.7
-
2.7
2015
$m
22.7
22.7
2014
$m
2.4
3.7
6.1
2014
$m
18.6
18.6
During the year, Iluka increased its equity stake in Metalysis Limited to 20.8 per cent (17.2 per cent diluted).
Metalysis Limited is a private UK based entity that is developing a new technology for titanium metal powder
production.
Investments are designated as available for sale financial assets if they do not have fixed maturities and fixed or
determinable payments, and management intends to hold them for the medium to long term. Available for sale
assets are held at fair value, with any change in value taken to other comprehensive income. If decreases in
value are significant or prolonged they are recognised as an impairment in the profit or loss. Otherwise, gains and
losses on available for sale investments are recognised in the profit or loss on sale.
The fair value of the investment in Metalysis Limited is determined using a level 3 valuation method using as
inputs the most recent transactions in shares of this unlisted investment being the purchases by Iluka. There is
no other available information that suggests a change in fair value and so the investment is held at its original
cost.
No dividends were received from Metalysis Limited during the year (2014: $nil).
This investment exposes Iluka to market risk associated with changes in the investments fair value.
76
21 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
(a) PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements
Other assurance services
Tax and other services
Tax compliance and advisory services
Other compliance and advisory services
Total remuneration
(b) Network firms of PricewaterhouseCoopers Australia
Audit and review of financial statements
Other compliance and advisory services
2015
$000
2014
$000
537
13
550
12
5
17
567
24
9
33
575
40
615
4
87
91
706
30
-
30
77
22 Deferred tax
Deferred tax asset:
Deferred tax asset amounts recognised in profit or loss
Employee benefits
Rehabilitation provisions
Foreign currency exchange
Other
Gross deferred tax assets
Amount offset to deferred tax liabilities pursuant to set-off provision
Net deferred tax assets
Deferred tax asset amounts recognised directly in equity
Nil
Deferred tax liability:
Deferred tax liability amounts in profit or loss
Depreciation and amortisation
Foreign currency exchange
Receivables
Inventory
Other
Gross deferred tax liabilities
Amount offset to deferred tax assets pursuant to set-off provision
Net deferred tax liabilities
Deferred tax liability amounts recognised directly in equity
Treasury shares
Movements in net deferred tax balance:
Balance at 1 January
Credited to the income statement
Charged to the income statement - US
(Under) over provision in prior years
Charged directly to equity
Balance at 31 December
2015
$m
2014
$m
7.4
136.2
4.3
5.9
153.8
(136.0)
17.8
6.8
131.5
-
5.1
143.4
(130.1)
13.3
-
-
(98.7)
-
(3.2)
(33.8)
(0.3)
(136.0)
136.0
-
(3.1)
(3.1)
13.3
7.2
1.6
(7.6)
3.3
17.8
(93.8)
(0.6)
(4.0)
(31.7)
-
(130.1)
130.1
-
(2.4)
(2.4)
3.6
12.0
(4.5)
1.4
0.8
13.3
Deferred income tax is provided on all temporary differences at the balance sheet date between accounting
carrying amounts and the tax bases of assets and liabilities.
Deferred income tax liabilities are recognised for all taxable temporary differences, other than for the exemptions
permitted under accounting standards.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent it is probable that taxable profit will be available to utilise these
deductible temporary differences, other than for the exemptions permitted under accounting standards. The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
The net deferred tax asset of $17.8 million includes a net deferred tax asset in relation to the US operations of
$14.2 million, which is in respect of rehabilitation provisions where deductions for future payments can be carried
back against US taxable income for 10 years.
78
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income
statement.
Deferred tax assets of $30.9 million (2014: $44.2 million) and deferred tax liabilities of $43.8 million (2014: $23.0
million) are expected to be recovered in less than 12 months of the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
23 Reserves and retained earnings
Asset revaluation reserve
Balance at 1 January
Transfer to retained earnings on disposal
Balance at 31 December
blank
Share-based payments reserve
Balance at 1 January
Transfer of shares to employees, net of tax
Share-based payments, net of tax
Balance at 31 December
blank
Foreign currency translation
Balance at 1 January
Currency translation of US operation
Translation differences on other foreign operations
Hedge of net investment in US operation
Deferred tax
Balance at 31 December
blank
Total reserves
blank
Retained earnings
Balance at 1 January
Net profit (loss) for the year
Dividends paid
Transfer from asset revaluation reserve
Actuarial gains (losses) on retirement benefit obligation, net of tax
Balance at 31 December
(a) Asset revaluation reserve
Notes
23(a)
23(b)
23(c)
2015
$m
13.7
(0.6)
13.1
(2.4)
(4.3)
4.6
(2.1)
11.5
2.2
(0.2)
(2.0)
0.6
12.1
23.1
297.4
53.5
(79.5)
0.6
0.8
272.8
2014
$m
13.7
-
13.7
(0.9)
(5.3)
3.8
(2.4)
6.2
7.0
0.3
(2.8)
0.8
11.5
22.8
407.0
(62.5)
(41.8)
-
(5.3)
297.4
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.
(b) 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. On settlement of the
share-based payment by the issue of equity instruments to employees, the cost of the on-market acquisition, net
of tax, is transferred from treasury shares (refer note 18(b)) to the share based payment reserve.
(c) 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 into the foreign currency translation reserve
net of applicable income tax, as described in note 2(b)(iv). US$20.0 million of debt (2014: US$20.0 million) was
designated as a hedge of the net investment in the US operations until repayment in June 2015. The reserve is
recognised in profit or loss when the net investment is disposed of.
79
24 Share-based payments
Share-based compensation benefits are provided to employees via incentive plans, the directors', Executives and
Employees Share Acquisition Plan and the Employee Share Plan. Information relating to these schemes is set
out in the Remuneration Report.
The fair value of shares granted is determined based on market prices at grant date, taking into account the
terms and conditions upon which those shares were granted. The fair value is recognised as an expense through
profit or loss 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 Monte Carlo simulation 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 the Long Term Incentive Plan (LTIP - TSR tranche) also takes into account the
Company's predicted share prices against the comparator group performance at vesting date.
A credit to the share-based payments expense arises where unvested entitlements lapse on resignation or the
non-fulfilment of the vesting conditions that do not relate to market performance. Payroll tax payable on the grant
of restricted shares or share rights is recognised as a component of the share-based payments expense when
paid.
The share-based payment expense recognised in profit or loss of $5.7 million (2014: $7.0 million) results from
several schemes summarised below.
Schemes
STIP (i)
2014
2013
2012
2011
LTIP - TSR (ii)
2015
2014
2013
2012
LTIP - ROE (ii)
2015
2014
2013
2012
MD LTID (iii)
Employee Share Plan (iv)
Grant
date
Vesting
date
Mar-15 Mar-16/17
Mar-14 Mar-15/16
Mar-13 Mar-14/15
Mar-12 Mar-13/14
Feb-15
Feb-14
Feb-13
Jan-12
Feb-15
Feb-14
Feb-13
Jan-12
Mar-11
Mar-18
Mar-17
Mar-16
Mar-15
Mar-18
Mar-17
Mar-16
Mar-15
Mar-15
Fair
value
Shares /
Rights at
Expense
2015
Shares /
Rights at
Expense
2014
$
31 Dec 15
$m
31 Dec 14
$m
7.66
9.44
10.20
16.68
5.02
5.74
7.72
11.07
6.74
8.49
9.89
14.66
11.62
296,670
181,509
-
-
466,308
244,567
185,909
-
446,308
224,567
185,909
-
-
-
299,034
110,959
-
-
237,658
196,851
97,775
-
237,658
196,852
97,775
750,000
1.6
0.9
0.1
-
0.7
0.4
0.4
0.1
1.3
0.6
(1.2)
-
0.3
0.5
5.7
-
1.7
0.5
0.2
-
0.4
0.4
0.3
-
0.6
0.5
-
1.8
0.6
7.0
(i) Short Term Incentive Plan (STIP)
The fair value of the STIP is determined as the volume weighted average price of ordinary shares over the five
trading days following the release of the Company’s annual results.
(ii) Long Term Incentive Plan (LTIP)
The fair value at grant date for the 2015 LTIP Plan takes into account the exercise price of $nil, the share price at
grant date of $7.19, the expected price volatility of the share price (based on historical volatility), the expected
dividend yield of 2.15% and the risk free rate of return of 2.01%. The fair value of the TSR tranche also takes into
account the Company’s predicted share prices against the comparator group performance at vesting date.
Rights that do not vest for the Return on Equity (ROE) tranche for prior periods are credited to the share-based
payments expense.
(iii) Managing Director’s Long Term Incentive Deferred (LTID) share rights
The LTID plan performance period ended on 1 March 2014. Of the 750,000 share rights offered, 250,000 vested
in March 2015 based on the Company’s financial performance over the three year period.
80
Full details of the LTID share rights granted in March 2011 and approved by shareholders at the 2011 AGM are
set out in the Remuneration Report. The fair value of $11.62 per right is the weighted average for all share rights
in the LTID.
(iv) Employee share plan
A total of 59,143 (2014: 61,016) shares were issued to eligible employees who participated in the plan. Each
participant was issued with shares worth $1,000 based on a volume weighted average market price of $8.36
(2014: $8.59) for the five days prior to the start of the offer period.
25 Commitments
(a) Exploration and mining lease commitments
Commitments in relation to leases contracted for at reporting date but not
recognised as liabilities payable:
Within one year
Later than one year but not later than five years
Later than five years
2015
$m
2014
$m
22.7
39.0
54.6
116.3
27.9
53.7
59.8
141.4
These costs are discretionary. If the expenditure commitments are not met then the associated exploration and
mining leases may be relinquished.
(b) Lease commitments
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
17.7
13.0
0.4
31.1
18.2
18.5
0.4
37.1
The Group leases various storage facilities, offices, mining equipment and motor vehicles under non-cancellable
operating leases expiring within 1 to 11 years with varying terms.
(c) Capital commitments
Capital expenditure contracted for and payable within one year of the reporting date, but not recognised as
liabilities are $6.1 million (2014: $20.4 million). All of the commitments relate to the purchase of property, plant
and equipment.
81
26 Retirement benefit obligations
(a) Superannuation plan
(i) Australia
All employees of
the Group who do not elect an alternate fund under the Superannuation Fund Choice
Legislation have access to benefits on leaving service, retirement, disability or death from the Iluka Resources
Superannuation Plan, a sub-plan of Plum Superannuation Fund. During the year the defined contribution
(accumulation benefits only) plan administrators changed from OnePath Masterfund to Plum Superannuation
Fund. Employees accumulation superannuation plans receive fixed contributions from Group companies. The
Group's legal or constructive obligation is limited to these contributions.
During the year Iluka also provided defined lump sum and pension benefits based on years of service and final
average salary for a small number of members (defined benefits plan). The two active members of the plan took
up the option during the year to convert their defined benefits to accumulation. Iluka has closed the defined
benefits plan to new members. There are currently only a few pensioners remaining in this plan. During the year
the defined benefits plan administrators changed from OnePath Masterfund to ANZ Wealth.
(ii) 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 one defined benefit plan and one defined contribution
plan. The 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. 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. The
expense recognised in relation to the defined contribution plans is disclosed in note 6(g).
(b) Financial position
The net financial position of the Group’s defined benefit plans based on information supplied from the plans'
actuarial advisors are, for the Australian plan a surplus $0.4 million (2014: surplus $0.1 million) and for the US
plan a deficit of $11.1 million (2014: deficit $10.3 million). A net deficit of $10.7 million (2014: deficit $10.2 million)
is included in non-current provisions in note 15. The table below provides a summary of the net financial position
at 31 December for the past five years.
Defined benefit plan obligation
Plan assets
Deficit
2015
$m
(31.1)
20.4
(10.7)
2014
$m
(29.5)
19.3
(10.2)
2013
$m
(20.5)
16.7
(3.8)
2012
$m
(22.8)
14.2
(8.6)
2011
$m
(22.6)
15.0
(7.6)
(c) Defined benefits superannuation expense
In 2015, $0.6 million (2014: $0.9 million) was recognised in expenses for the year in respect of the defined benefit
plans (refer note 6(g)).
Iluka idled operations in the US at the end of 2015, resulting in a curtailment event for the US defined benefit
pension plan. Employees impacted by the restructure remain members of the plan. This resulted in a curtailment
credit of A$1.1m, included in the above net expense.
Also included within the above defined benefits expense are settlement losses of $0.1 million (2014: $nil) in
respect of the Australian plan where all the active members converted to accumulation benefits and some
pensioners commuted their pension into a cash lump sum.
Other disclosures in respect of retirement benefit obligations required by AASB 119 are not included in the
financial report as the directors do not consider them to be material to an understanding of the financial position
and performance of the Group.
82
27 Key Management Personnel
(a) Key Management Personnel
Key Management Personnel of the Group comprise directors of Iluka Resources Limited as well as other specific
employees of the Group who met the following criteria: "personnel who have authority and responsibility for
planning, directing and controlling the activities of the Group, either directly or indirectly."
(i) Key Management Personnel compensation
Detailed information about the remuneration received by each key management person is provided in the
Remuneration Report in the Annual Report on pages 18 to 43.
The below provides a summary:
Short term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total
2015
$000
6,464
156
-
-
1,774
8,394
2014
$000
6,753
170
-
-
3,337
10,260
(b) Transactions with Key Management Personnel
There were no transactions between the Group and Key Management Personnel that were outside of the nature
described below:
(i) 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 Group would have adopted if dealing at arms length with
an unrelated individual;
(ii) information about these transactions does not have the potential to adversely affect the 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
(iii) the transactions are trivial or domestic in nature.
Therefore, specific details of other transactions with Key Management Personnel are not disclosed.
83
28 Controlled entities and deed of cross guarantee
The consolidated financial statements incorporate the following principal subsidiaries:
Country of
incorporation
Equity holding
2014
2015
%
%
Controlled entities
* Iluka Resources Limited (Parent Company)
* Westlime (WA) Limited
* Ilmenite Proprietary Limited
* Southwest Properties Pty Ltd
* Western Mineral Sands Proprietary Limited
* Yoganup Pty Ltd
* Iluka Corporation Limited
* Associated Minerals Consolidated Ltd
* Iluka Royalty Holdings Limited
* Iluka Consolidated Pty Limited
* Iluka Exploration Pty Limited
* Iluka (Eucla Basin) Pty Ltd
* Gold Fields Asia Ltd
* Iluka International Limited
* NGG Holdings Ltd
* Iluka Midwest Limited
* Western Titanium Limited
* The Mount Lyell Mining and Railway Company Limited
* Renison Limited
* Iluka Finance Limited
* The Nardell Colliery Pty Ltd
* Glendell Coal Ltd
* Lion Properties Pty Limited
* Basin Minerals Limited
* Basin Minerals Holdings Pty Ltd
* Basin Properties Pty Ltd
* Swansands Pty Ltd
* Iluka International (UAE) Pty Ltd
* Iluka International (Lanka) Pty Ltd
* Iluka International (China) Pty Ltd
* Iluka International (Brazil) Pty Ltd
* Iluka Share Plan Holdings Pty Ltd
* Iluka International (Netherlands) Pty Ltd
* Iluka Royalty (MAC) Pty Limited
Ashton Coal Interests Pty Limited
Iluka International Coӧperatief U.A.
Iluka Investments 1 B.V.
Iluka Trading (Europe) B.V.
Iluka Lanka P Q (Private) Limited
P.K.D. Resources (Private) Limited
Iluka Lanka Exploration (Private) Limited
Iluka Trading (Shanghai) Co., Ltd
Iluka Brasil Mineracao Ltda
Iluka (UK) Ltd
Iluka Technology (UK) Ltd
Associated Minerals Consolidated Investments
Iluka (USA) Investments Inc
Iluka Resources Inc
Iluka Resources (NC) LLC
Iluka Resources (TN) LLC
EGEnergy Resources LLC
EGEnergy Resources United States LLC
EGEnergy Resources Manufacturing LLC
EGEnergy Resources NE Florida LLC
IR RE Holdings LLC
Iluka Atlantic LLC ***
Iluka International (SE Asia) Pte. Ltd.
Iluka Exploration (Kazakhstan) Limited Liability Partnership ** Kazakhstan
84
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
The Netherlands
The Netherlands
The Netherlands
Sri Lanka
Sri Lanka
Sri Lanka
China
Brazil
United Kingdom
United Kingdom
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Singapore
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
-
* The above companies are parties to a Deed of Cross Guarantee (the Deed) under which each company
guarantees the debts of the others.
By entering into the Deed of Cross Guarantee, 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.
The closed group is also the extended closed group.
** Iluka Exploration (Kazakhstan) Limited Liability Partnership was incorporated on 31 May 2015.
*** Iluka Atlantic LLC was incorporated on 30 December 2015.
(a) Condensed financial statements of the extended closed group
Condensed statement of profit or loss and other comprehensive income
Revenue from ordinary activities
Expenses from ordinary activities
Finance costs
Income tax expense
Profit (loss) for the year
Other comprehensive income
Actuarial gains on defined benefit plans, net of tax
Total comprehensive income (loss) for the period
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Total comprehensive income for the year
Dividends paid
Retained earnings at the end of the financial year
2015
$m
833.0
(723.9)
(56.2)
(37.8)
15.1
0.2
15.3
343.0
15.1
(79.5)
278.6
2014
$m
708.5
(662.4)
(31.5)
(16.5)
(1.9)
-
(1.9)
386.7
(1.9)
(41.8)
343.0
85
Condensed balance sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets
Inventories
Other financial assets - investments in non-closed group entities
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Provisions
Current tax payable
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
2015
$m
2014
$m
39.2
94.9
423.3
557.4
317.9
49.6
1,034.9
5.1
3.6
1,411.1
79.0
84.0
427.3
590.3
353.7
38.1
1,111.1
5.5
2.1
1,510.5
1,968.5
2,100.8
68.3
-
53.7
25.9
147.9
49.0
369.3
418.3
566.2
41.4
24.4
60.5
6.2
132.5
135.9
364.1
500.0
632.5
1,402.3
1,468.3
1,112.7
11.0
278.6
1,402.3
1,114.4
10.9
343.0
1,468.3
86
29 Parent entity financial information
(a) Summary financial information for Iluka Resources Limited
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 for the year
Total comprehensive profit
(b) Profit for the year
2015
$m
2014
$m
199.2
1,304.4
1,503.6
73.3
35.6
108.9
177.4
1,808.8
1,986.2
90.3
538.5
628.8
1,394.7
1,357.4
1,120.0
9.7
265.0
1,394.7
114.9
114.9
1,120.0
8.4
229.0
1,357.4
168.9
168.9
The profit for the year includes dividends received from controlled entities of $150.0 million (2014: $254.0 million)
and $9.3 million of expenses for rehabilitation discount rate changes (2014: $nil).
(c) Contingent liabilities of the parent entity
The parent had contingent liabilities for performance commitments and guarantees of $15.3 million as at 31
December 2015 (2014: $35.0 million).
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2015, the parent entity had contractual commitments for the acquisition of property, plant or
equipment totalling $0.5 million (2014: $0.6 million).
(e) Parent entity financial information
The financial information for the parent entity has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries
(i)
Investments in subsidiaries are accounted for at cost.
(ii) 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 consolidation group entered into a tax sharing agreement which limits the joint and several liability of the
wholly-owned entities in the case of a default by the head entity, Iluka Resources Limited.
87
30 Contingent liabilities
(a) Bank guarantees
The Group has a number of bank guarantees in favour of various government authorities and service providers to
the total value of
meet
performance commitments and guarantees was $122.9 million (2014: $121.2 million).
its obligations under exploration and mining tenements. At 31 December 2015,
(b) Native title
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 Group 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 Group.
(c) Sri Lanka exploration deposits
In October 2013 the Group acquired all of the share capital in PKD Resources (Pvt) Ltd, a Sri Lankan domiciled
company which owns an exploration tenement located near the city of Puttalam in the North Western Province of
Sri Lanka. The consideration for the acquisition which remains contingent on future events includes:
•
•
•
payment of US$2.0 million on the grant of a mining license over EL 170 or on expiry of the stage 2 period
(being a period expiring in October 2016 which may be extended in certain circumstances by Iluka for 12
months or more, if agreed by both parties);
payment of US$8.0 million on the Iluka Board approving a development of mining operations on EL 170 or on
expiry of the stage 3 period (being a 12 month period commencing on the expiry of the stage 2 period which
may be extended in certain circumstances by Iluka for 12 months or more, if agreed by both parties); and
the payment of an annual trailing payment calculated at one per cent of the gross sale proceeds received
from the annual sale of all mineral products and sand clay produced from the tenement, less the US$2.0
million paid on the grant of the mining license over EL 170, which is being treated as an advance on the
trailing payment.
Iluka has a put option to transfer either the shares in PKD Resources (Pvt) Ltd or the tenements back to the
vendor. If exercised, Iluka will not be required to make the payments referred to above.
(d) Other claims
In the course of its normal business, the Group 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 Group if settled unfavourably.
31 Related party transactions
The only related party transactions are with directors and Key Management Personnel (refer note 27). Details of
material controlled entities are set out in note 28. The ultimate Australian controlling entity and the ultimate parent
entity is Iluka Resources Limited.
88
32 New accounting standards and interpretations
Iluka Resources Limited had to change some of its accounting policies as the result of new or revised accounting
standards which became effective for the annual reporting period commencing on 1 January 2015. The affected
policies and standards are:
(i) AASB 2014-1 Amendments to Australian Accounting Standards Part A: Annual Improvements 2010-2012
and 2011-2013 Cycles
The adoption of these amendments from the 2010-2012 annual improvements cycle did not have any impact on
the current or prior period.
Certain new accounting standards and interpretations have been published that are not mandatory for 31
December 2015 reporting periods. The Group's assessment of
those new standards and
interpretations considered relevant to the Group is set out below. The Group does not intend to early adopt any of
the new standards or interpretations.
the impact of
(i) AASB 9 Financial Instruments (effective from 1 January 2018)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities and introduces new rules for hedge accounting. The changes to the standard do not have
a material impact on the Group.
(ii) AASB 15 Revenue from contracts with customers (effective from 1 January 2018)
AASB 15 introduces a new framework for accounting for revenue and will replace AASB 118 Revenue, AASB
111 Construction Contracts and IFRIC 13 Customer Loyalty Programs. AASB 15 establishes principals for
reporting the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts
with customers. The new standard is based on the principal that revenue is recognised when control of a good or
service transfers to a customer, therefore the notion of control replaces the exiting notion of risks and rewards.
The Group is assessing the potential
impact on its consolidated financial statements resulting from the
application of AASB 15.
(iii) IFRS 16 Leases (effective from 1 January 2019)
One of the key changes to IFRS 16 Leases is that lessees are required to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. IFRS 16 will result in
lessees recognising most leases on the balance sheet. The Group has not yet determined the extent of the
impact of this standard, which is yet to be adopted by the AASB.
There are no other standards that are not yet effective and that would be expected to have a material impact on
the entity in the current or future reporting periods and on foreseeable future transactions.
33 Events occurring after the reporting period
On 16 February 2016, Iluka announced that it would suspend mining and concentrate production activities at its
Jacinth-Ambrosia operation in the Eucla Basin, South Australia. Jacinth-Ambrosia is a globally significant source
of zircon and, at peak production, has the ability to supply 25 to 30 per cent of global zircon demand. The
suspension of these activities will be from 16 April 2016 for a period of 18 to 24 months, depending on market
conditions. The suspension will
increase net cash flow due to a reduction in Iluka’s production costs, offset
partially by a continued commitment to progressive rehabilitation and by restructure and idle costs.
On 18 February 2016, Iluka announced that it has committed an additional £6 million (approximately A$12.2
million) to its investment in the private, UK based, Metalysis Limited with an undertaking to commit a further £4
million (approximately A$8.1 million) before 15 July 2016. The additional £10 million in total is expected to take
Iluka’s interest from 20.8 per cent to 28.8 per cent. This will result in Iluka obtaining significant influence over this
investment and will commence equity accounting effective from 18 February 2016.
89
DIRECTORS' DECLARATION
In the directors' opinion:
(a)
(b)
(c)
the financial statements and notes set out on pages 50 to 89 are in accordance with the Corporations Act
2001, including:
(i)
complying with Accounting Standards and other mandatory professional reporting requirements as
detailed above, and the Corporations Regulations 2001; and
giving a true and fair view of the Group's financial position as at 31 December 2015 and of its
performance for the financial year ended on that date, and
(ii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed group identified in note 28 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 28.
Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
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 Martin
Chairman
D Robb
Managing Director
Perth
18 February 2016
90
Independent auditor’s report to the members of Iluka
Resources Limited
Report on the financial report
We have audited the accompanying financial report of Iluka Resources Limited (the company), which
comprises the consolidated balance sheet as at 31 December 2015, the consolidated statement of profit
or loss and other comprehensive income, consolidated statement of changes in equity and
consolidated 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 Iluka Resources Limited
Group (the consolidated entity). The consolidated entity comprises the company and the entities it
controlled at year’s end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation 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 2, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those 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 consolidated
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
91
Independent auditor’s report to the members of Iluka
Resources Limited (cont’d)
Auditor’s opinion
In our opinion:
(a)
the financial report of Iluka Resources Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 31 December
2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.
Report on the Remuneration Report
We have audited the remuneration report included in pages 18 to 43 of the directors’ report for the
year ended 31 December 2015. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Iluka Resources Limited for the year ended 31 December
2015 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Nick Henry
Partner
Perth
18 February 2016
92
Ore Reserves and Mineral Resources Statement
Iluka Ore Reserves Breakdown by Country, Region and JORC category at 31 December 2015
Summary of Ore Reserves for Iluka1,2,3
HM Assemblage4
Country
Region
Australia
Eucla Basin
Total Eucla Basin
Murray Basin
Total Murray Basin
5
Perth Basin
Total Perth Basin
6
USA
Atlantic Seaboard
Total Atlantic Seaboard
7
Total Proved
Total Probable
Grand Total
Ore Reserve
Category
Ore
Tonnes
Millions
In Situ
HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change
HM
Tonnes
Millions
Proved
Probable
Proved
Probable
Proved
Probable
Proved
Probable
101.1
2.9
104.0
-
11.1
11.1
3.91
0.06
3.97
-
1.70
1.70
95.6
179.9
275.5
6.24
10.27
16.51
4.3
12.4
16.7
0.19
0.66
0.85
201.0
206.3
10.34
12.69
407.3
23.03
3.9
2.2
3.8
-
15.2
15.2
6.5
5.7
6.0
4.5
5.3
5.1
5.1
6.2
5.7
27
21
27
-
46
46
60
60
60
68
56
59
48
57
53
50
49
50
-
14
14
10
10
10
14
19
18
25
11
18
5
5
5
-
19
19
4
5
5
-
-
-
4
7
6
(0.69)
(0.23)
(0.75)
(0.17)
(1.84)
1Competent Persons - Ore Reserves
Eucla Basin (South Australia), Perth Basin (Western Australia), Murray Basin (Victoria/New South Wales), Atlantic Seaboard
(Virginia, United States of America) : C Lee (MAusIMM (CP))
2Ore Reserves are a sub-set of Mineral Resources.
3Rounding may generate differences in last decimal place.
4Mineral assemblage is reported as a percentage of in situ heavy mineral (HM) content.
5Ilmenite 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.
6Rutile component in Perth Basin South West operation is sold as a leucoxene product.
7Rutile is included in ilmenite for the Atlantic Seaboard region.
Ore Reserves
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. Reserve estimates are determined by the
consideration of all of the “Modifying Factors” in accordance with the JORC Code 2004 and 2012, and for example, may include
limited to, product prices, mining costs, metallurgical recoveries, environmental consideration, access and
but are not
approvals. These factors may vary significantly between deposits.
For the year ending 2015, Ore Reserves decreased by 1.84Mt HM associated with mining depletion and adjustments, down
from 24.87Mt HM to 23.03Mt HM.
The main factors contributing to the movement in Iluka's Ore Reserves during 2015 include the following:
• The Eucla Basin Ore Reserves decreased by 0.69Mt HM associated with mining depletion of the Jacinth deposit.
• The Perth Basin Ore Reserves decreased by 0.75Mt HM as a result of mine depletion following recommencement of mining
at Tutunup South (0.20Mt HM) and re-optimisation of the Cataby deposit (0.55Mt HM decrease).
• The Murray Basin Ore Reserves decreased by 0.23Mt HM due principally to mining depletion at WRP.
• There was a net decrease of 0.17Mt HM in Ore Reserves for the Atlantic Seaboard associated with mining depletion of the
Brink and Old Hickory deposits.
93
Iluka Ore Reserves Mined and Adjusted by Country and Region at 31 December 2015
Summary of Ore Reserves Depletion1
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
Total Perth Basin
USA
Atlantic Seaboard
Active Mines
Non-Active Sites
Total Atlantic Seaboard
Total Active Mines
Total Non-Active Sites
Total Ore Reserves
In Situ HM
Tonnes
Millions
2014
In Situ HM
Grade 2014
In Situ HM
Tonnes
Millions
Mined 2015
In Situ HM
Tonnes
Millions
Adjusted
20152
In Situ HM
Tonnes
Millions
2015
In Situ HM
Tonnes
Millions Net
Change3
In Situ HM
Grade 2015
2.71
1.95
4.66
0.23
1.70
1.93
-
17.26
17.26
1.02
-
1.02
3.96
20.91
24.87
4.7
3.5
4.1
25.8
15.2
16.0
-
5.5
5.5
5.2
-
5.2
5.0
5.5
5.4
(0.53)
-
(0.53)
(0.22)
-
(0.22)
(0.20)
-
(0.20)
(0.23)
-
(0.23)
(1.17)
-
(0.16)
-
(0.16)
(0.01)
-
(0.01)
0.69
(1.24)
(0.55)
0.06
-
0.06
0.58
(1.24)
2.02
1.95
3.97
-
1.70
1.70
0.49
16.02
16.51
0.85
-
0.85
3.36
19.67
(1.17)
(0.66)
23.03
4.2
3.5
3.8
-
15.2
15.2
12.8
5.9
6.0
5.1
-
5.1
4.9
5.8
5.7
(0.69)
-
(0.69)
(0.23)
-
(0.23)
0.49
(1.24)
(0.75)
(0.17)
-
(0.17)
(0.59)
(1.24)
(1.84)
1Rounding may generate differences in last decimal place.
2Adjusted figure includes write-downs and modifications in mine design.
3Net change includes depletion by mining and adjustments.
94
Iluka Mineral Resource Breakdown by Country, Region and JORC Category at 31 December 2015
Summary of Mineral Resources for Iluka1,2,3
Country
Region
Australia
Eucla Basin
Total Eucla Basin
Murray Basin
Total Murray Basin
Perth Basin
Total Perth Basin
5
USA
Atlantic Seaboard
Total Atlantic Seaboard
6
Sri Lanka Sri Lanka
Total Sri Lanka
7
Total Measured
Total Indicated
Total Inferred
Grand Total
Mineral Resource
Category
Material
Tonnes
Millions
In Situ
HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change
HM
Tonnes
Millions
HM Assemblage4
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
236.2
85.4
67.1
388.7
15.9
90.9
91.9
198.7
525.6
297.2
242.2
1,065.0
58.6
43.2
16.2
118.1
213.9
47.2
428.8
689.9
1,050.1
564.0
846.2
7.50
8.09
3.57
19.16
4.38
18.79
10.64
33.81
30.88
15.93
11.62
58.43
2.36
2.42
0.47
5.24
22.20
4.10
29.96
56.26
67.32
49.32
56.24
2,460.4
172.89
3.2
9.5
5.3
4.9
27.6
20.7
11.6
17.0
5.9
5.4
4.8
5.5
4.0
5.6
2.9
4.4
10.4
8.7
7.0
8.2
6.4
8.7
6.6
7.0
32
65
62
52
62
55
48
54
59
54
55
57
65
65
61
65
70
69
66
67
60
58
60
59
44
20
19
29
11
11
9
11
10
10
9
10
12
10
11
11
3
4
4
4
12
11
7
10
4
2
2
3
11
14
14
14
5
5
5
5
-
-
-
-
4
3
5
4
5
8
6
6
(1.73)
(0.85)
(0.63)
(0.33)
0.01
(3.54)
1Competent Persons - Mineral Resources
Eucla Basin, Perth Basin and Sri Lanka: B Gibson (MAIG)
Murray Basin: R Cobcroft (MAIG)
Atlantic Seaboard: A Karst (SME)
2Mineral Resources are inclusive of Ore Reserves.
3Rounding may generate differences in last decimal place.
4Mineral assemblage is reported as a percentage of in situ heavy mineral content.
5Rutile component in Perth Basin South West operations, Western Australia is sold as a leucoxene product.
6Rutile is included in ilmenite for the Atlantic Seaboard region.
7It should be noted that the Sri Lanka resource estimates are based on a 100 per cent ownership basis which applies to the
exploration stage. The Sri Lankan Exchange Control Act currently limits the percentage holding of a foreign entity in a Sri
Lankan mining company to 40 per cent, although approval for up to 100 per cent may be granted.
Mineral Resources
Mineral Resources are estimated using all available and relevant geological, drill hole and assay data, including mineralogical
sampling and testwork on mineral and final product qualities. Resource estimates are determined by consideration of geology,
HM cut-off grades, mineralisation thickness vs. overburden ratios and consideration of the potential mining and extraction
methodology and are prepared in accordance with the 2012 JORC Code. These factors may vary significantly between
deposits.
For the year ending 2015, Mineral Resources decreased by 3.54Mt HM net of depletion and adjustments (sale, relinquishment,
exploration discovery and development and write-downs) down from 176.43Mt HM to 172.89Mt HM.
95
Iluka Mineral Resource Breakdown by Country, Region and JORC Category at 31 December 2015
(continued)
The change in Mineral Resources for 2015 was driven by the following:
• Eucla Basin Mineral Resources decreased by 1.73Mt HM Principally as a result of mining depletion at Jacinth of 0.61Mt HM
and a decrease of 1.21Mt HM for the Atacama deposit following additional exploration and updated resource estimation. There
was a slight increase of 0.12Mt of HM for Ambrosia as a result of a revised resource estimation.
• The Perth Basin Mineral Resources decreased by 0.63Mt HM Principally as a result of mining depletion at Tutunup South of
0.2Mt HM and write downs for Depot Hill North (0.42Mt HM), Depot Hill Tails (0.05Mt HM) and 04 Tails (0.05Mt HM) and an
increase in the resource for Gilmore (0.08Mt HM) following additional exploration and updated resource modelling).
• Murray Basin Resources decreased by 0.85Mt HM as a result of mining depletion at WRP (0.3Mt HM) and decreases of the
Mineral Resources for Barbary (0.34Mt HM), Dunkirk (0.13Mt HM) and Manly (0.08Mt HM) following remodelling and updated
resource estimation.
• There was a decrease in Mineral Resources for the Atlantic Seaboard of 0.33Mt HM associated with mining depletion and
write downs at Brink (0.26Mt HM) and Old Hickory (0.07Mt HM).
Iluka Mineral Resources Mined and Adjusted by Country and Region at 31 December 2015
Summary of Mineral Resources Depletion1
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
Total Perth Basin
USA
Atlantic Seaboard
Active Mines
Non-Active Sites
Total Atlantic Seaboard
Sri Lanka Sri Lanka
Active Mines
Non-Active Sites
Total Sri Lanka
Total Active Mines
Total Non-Active Sites
Total Mineral
Resources
In Situ HM
Tonnes
Millions
2014
In Situ HM
Grade 2014
In Situ HM
Tonnes
Millions
Mined 2015
In Situ HM
Tonnes
Millions
Adjusted
20152
In Situ HM
Tonnes
Millions
2015
In Situ HM
Tonnes
Millions Net
Change3
In Situ HM
Grade 2015
3.11
17.78
20.89
0.30
34.36
34.66
-
59.07
59.07
2.49
3.09
5.57
-
56.25
56.25
5.90
170.54
4.3
4.9
4.8
20.8
16.3
16.4
-
5.3
5.3
2.9
7.4
4.4
-
8.2
8.2
3.7
7.1
(0.53)
-
(0.53)
(0.22)
-
(0.22)
(0.20)
-
(0.20)
(0.23)
-
(0.23)
-
-
-
(1.17)
-
(0.07)
(1.14)
(1.20)
(0.08)
(0.55)
(0.64)
1.09
(1.53)
(0.44)
(0.10)
(0.01)
(0.10)
-
0.01
0.01
0.84
(3.22)
2.51
16.64
19.16
-
33.80
33.80
0.89
57.54
58.43
2.16
3.08
5.24
-
56.26
56.26
5.57
167.32
4.0
5.7
5.4
-
17.0
17.0
9.6
5.5
5.5
2.8
7.4
4.4
-
8.2
8.2
3.8
7.4
(0.60)
(1.14)
(1.73)
(0.30)
(0.55)
(0.85)
0.89
(1.53)
(0.63)
(0.32)
(0.01)
(0.33)
-
0.01
0.01
(0.33)
(3.22)
176.43
6.9
(1.17)
(2.37)
172.89
7.1
(3.55)
1Rounding may generate differences in last decimal place.
2Adjusted figure includes write-downs and modifications in mine design.
3Net change includes depletion by mining and adjustments.
96
Annual Statement of Mineral Resources and Ore Reserves
The Annual Statement of Mineral Resources and Ore Reserves as at the 31st of December 2015 presented in this Report has
been prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves 2012 Edition (the JORC Code 2012) and ASX listing rules. Information prepared and disclosed under the JORC
Code 2004 Edition and which has not materially changed since last reported has not been updated. Iluka is not aware of any
new information or data that materially affects the information included in this Annual Statement and confirms that all the
material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to
apply and have not materially changed.
Competent Persons Statement
The information relating to Mineral Resources and Ore Reserves is based on information compiled by Mr Brett Gibson who is a
full time employee of Iluka Resources Limited. Mr Gibson is a Member of the Australian Institute of Geoscientists and has
sufficient experience which is relevant to the styles of mineralisation and types of deposits under consideration and to the
activity which is being undertaken to qualify as a Competent Person as defined in the JORC Code 2012. Mr Gibson consents to
the inclusion in this report of the matters based on his information in the form and context in which it appears including
sampling, analytical and test data underlying the results.
The information in this report that relates to specific Mineral Resources and Ore Reserves is based on and accurately reflects
reports compiled by Competent Persons as defined in the JORC Code 2012 for each of the Company regional business units.
Each of these persons is a full-time employee of Iluka Resources Limited or its relevant subsidiaries, holds shares in Iluka
Resources Limited and is entitled to participate in Iluka’s executive equity long term incentive plan, details of which are included
in Iluka’s 2015 Remuneration report.
All the Competent Persons named are Members of The Australasian Institute of Mining and Metallurgy and/or The Australian
Institute of Geoscientists and/or the relevant jurisdiction ROPO (Recognised Overseas Professional Organisation) and have
sufficient experience which is relevant to the styles of mineralisation and types of deposits under consideration and to the
activity they are undertaking to qualify as a Competent Person as defined in the JORC Code 2012. At the reporting date, each
Competent Person listed in this Report is a full-time employee of Iluka Resources Limited or one of its subsidiaries. Each
Competent Person consents to the inclusion of material in the form and context in which it appears.
All of the Mineral Resource and Ore Reserve figures reported represent estimates at 31 December 2015. All tonnes and grade
information has been rounded, hence small differences may be present in the totals. All of the Mineral Resource information is
inclusive of Ore Reserves (i.e. Mineral Resources are not additional to Ore Reserves).
Mineral Resources and Ore Reserves Corporate Governance
Iluka has an established governance process supporting the preparation and publication of Mineral Resources and Ore
Reserves which includes a series of structures and processes independent of the operational reporting through business units
and product groups.
The Audit and Risk Committee has in its remit the governance of resources and reserves. This includes an annual review of
Mineral Resources and Ore Reserves at a Group level, as well as review of findings and progress from the Group Resources
and Reserves internal audit programme within the regular meeting schedule.
Mineral Resources and Ore Reserves are estimated by Iluka Personnel or suitably qualified independent personnel using
industry standard techniques and supported by internal guidelines for the estimation and reporting of Mineral Resources and
Ore Reserves.
All Mineral Resource and Ore Reserve estimates and supporting documentation is reviewed by Competent Persons employed
by Iluka. If there is a material change in the estimate of a Mineral Resource, the Modifying Factors for the preparation of Ore
Reserves, or reporting an inaugural Mineral Resource or Ore Reserve, the estimate and supporting documentation in question
is reviewed by a suitably qualified independent Competent Person.
All Mineral Resources and Ore Reserves are internally reviewed by Iluka Competent Persons.
The Iluka Mineral Resource and Ore Reserve position is reviewed annually by a suitably qualified independent Competent
Person prior to publication and the governance process is also audited by an independent body (PricewaterhouseCoopers).
Iluka has continued the development of internal systems and controls in order to meet JORC (2012) guidelines in all external
reporting including the preparation of all reported data by Competent Persons as members of The Australasian Institute of
Mining and Metallurgy (The AusIMM), The Australian Institute of Geoscientists (AIG) or recognised overseas professional
organisations (ROPOs).
The establishment of an enhanced governance process has also been supported by a number of process improvements and
training initiatives over recent years, including a Web based group reporting and sign-off database, annual internal Competent
Person reports and Competent Person development and training.
97
Shareholder Information
as at 1 February 2016
Australian Securities Exchange listing
Iluka’s shares are listed on the Australian Securities Exchange (ASX) Limited. The Company is listed as “Iluka”
with an ASX code of ILU.
Number of shares on issue
The Company had 418,701,360 shares on issue as at 31 December 2015. A total of 1,194,708 ordinary shares
are restricted pursuant to the Directors', Executives and Employee Share Acquisition Plan and Employee Share
Plan.
Shareholdings
There were 24,395 shareholders. Voting rights, on a show of hands, are one vote for every registered holder and
on a poll, are one vote for each share held by registered holders.
Distribution of Shareholdings
Size of shareholding
1 - 1,000
1,001 - 5,000
1,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
1,000,001 and over
Unmarketable parcel (less than $500)
Number of holders
13,419
8,743
1,400
787
31
15
1,930
Substantial Shareholders (as provided in disclosed Substantial Shareholder Notices to the Company)
Shareholder
Schroder Investment Management Australia Limited
BlackRock Investment Management (Australia) Limited
SailingStone Capital Partners LLC
Northcape Capital Pty Ltd
Fidelity Investments Ltd
Top 20 Shareholders (Nominee Company Holdings)
Shareholder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribus Noms Pty Ltd
BNP Paribus Nominees Pty Ltd
Australian Foundation Investment Company Limited
HSBC Custody Nominees (Australia) Limited
Argo Investments Limited
AMP Life Limited
Iluka Share Plan Holdings Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
R O Henderson (Beehive) Pty Limited
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Mr David Robb
BNP Paribus Noms (NZ) Ltd
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mirrabooka Investments Limited
Size of shareholding
45,649,855
44,321,759
42,324,744
25,929,369
21,000,030
% of issued capital
10.90
10.58
10.11
6.19
5.02
Number of shares
137,300,287
85,715,029
66,876,854
32,592,188
16,017,424
4,761,149
2,367,000
2,134,649
1,700,000
1,270,173
1,192,143
1,154,642
1,135,000
1,104,002
1,058,157
912,202
861,152
722,829
668,094
500,000
% of issued capital
32.79
20.47
15.97
7.78
3.83
1.14
0.57
0.51
0.41
0.30
0.28
0.28
0.27
0.26
0.25
0.22
0.21
0.17
0.16
0.12
98
Share Registry Details
Dividends
Iluka's Board of Directors typically make a determination on dividend payments twice a year.
Iluka does not operate a dividend reinvestment plan (DRP).
Share registry inquiries
Shareholders who require information about their shareholdings, dividend payments or related administrative
matters should contact the Company's share registry:
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth, Western Australia, 6000
Telephone: +61 3 9415 5000 (Head Office) +61 8 9323 2000 (Perth) or 1300 850 505
Facsimile: +61 8 9323 2033 (Perth) or +61 3 9473 2500 (Melbourne)
Annual Reports and email notification of major announcements
Shareholders can elect to receive a printed copy of the Annual Report and/or receive email notifications related to
major Company announcements. Please contact Computershare.
Postal address
GPO Box 2975
Melbourne VIC 3000
Website: www.computershare.com
Each inquiry should refer to the shareholder number which is shown on issuer-sponsored holding statements and
dividend statements.
Investor relations inquiries
Dr Robert Porter
General Manager, Investor Relations and Corporate Affairs
robert.porter@iluka.com
Melbourne, Victoria, Australia
+61 3 9225 5008
+61 (0) 407 391 829
2016 Calendar
21 January
19 February
10 March
1 April
21 April
16 May 9:30am WST
18 May 9:30am WST
14 July
25 August
13 October
31 December
December Quarter Production Report
Announcement of Full Year Financial Results
Record Date for Full Year Dividend
Full Year Dividend Payment
March Quarter Production Report
Closure of acceptances of proxies for AGM
Annual General Meeting – Perth
June Quarter Production Report
Announcement of Half Year Financial Results
September Quarter Production Report
Financial Year End
All dates are indicative and subject to change. Shareholders are advised to check with the Company to confirm timings.
99
Corporate Information
Company details
Iluka Resources Limited
ABN: 34 008 675 018
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
Company Secretary
Cameron Wilson, Company Secretary
Nigel Tinley, Joint Company Secretary
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.
Notice of Annual General Meeting
Iluka's 61st Annual Genral Meeting of Shareholders will be held in the River View Room 5 at
the Perth
Convention and Exhibition Centre, 21 Mounts Bay Road, Perth, Western Australia on Wednesday 18 May 2016
commencing at 9:30am (WST).
Disclaimer - Forward Looking Statements
This Report may contain certain forward looking statements. These statements may include, without limitation,
estimates of future production and production potential; estimates of future capital expenditure and cash costs;
estimates of future product supply, demand and consumption; statements regarding future product prices; and
statements regarding the expectation of future Mineral Resources and Ore Reserves.
Where Iluka expresses or implies an expectation or belief as to future events or results, such expectation or belief
is expressed in good faith and on a reasonable basis. No representation or warranty, express or implied, is made
by Iluka that the matters stated in this presentation will in fact be achieved or prove to be correct.
Forward-looking statements are only predictions and are subject to risks, uncertainties and other factors, which
could cause actual results to differ materially from future results expressed, projected or implied by such
forward-looking statements. Such risks and factors include, but are not limited to:
changes in exchange rate assumptions;
changes in product pricing assumptions;
•
•
• major changes in mine plans and/or resources;
•
•
•
changes in equipment life or capability;
emergence of previously underestimated technical challenges; and
environmental or social factors which may affect a licence to operate.
Iluka does not undertake any obligation to release publicly any revisions to any forward-looking statement to
reflect events or circumstances after the date of this report, or to reflect the occurrence of unanticipated events,
except as may be required under applicable securities laws.
Non-IFRS Financial Information
This document uses non-IFRS financial information including mineral sands EBITDA, mineral sands EBIT, Group
EBITDA and Group EBIT which are used to measure both Group and operational performance. Non-IFRS
measures are unaudited but derived from audited accounts. A reconciliation of non-IFRS financial information to
the audited Profit before tax in the Consolidated statement of profit or loss and other comprehensive income is
included on page 17.
100
www.iluka.com.au