Magnes um
2016 Annual Report
Latrobe Magnesium Limited and its Controlled Entities
ABN 52 009 173 611
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
INDEX
Page
Company Directory ................................................................................................................................... 3
Review of Operations .............................................................................................................................. 4
Directors’ Report ....................................................................................................................................... 9
Auditor’s Independence Declaration .....................................................................................................16
Directors’ Declaration .............................................................................................................................17
Statement of Profit or Loss and Other Comprehensive Income.............................................................18
Statement of Financial Position ..............................................................................................................19
Statement of Changes in Equity .............................................................................................................20
Statement of Cash Flows .......................................................................................................................21
Notes to the Financial Statements .........................................................................................................22
Independent Auditors’ Report .................................................................................................................45
Additional Information .............................................................................................................................47
Corporate Governance Statement .........................................................................................................49
2
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
COMPANY DIRECTORY
Directors
Jock Murray, Chairman
David Paterson, CEO
Kevin Torpey
Philip Bruce
John Lee
Chief Executive Officer
David Paterson
Secretary
John Lee
Registered Office and Principal Place of Business
Bankers
Suite 307
16-20 Barrack Street
Sydney NSW 2000
Telephone: (02) 8097 0250
Facsimile: (02) 9279 3854
Auditors
Nexia Australia
Level 16
1 Market Street
Sydney NSW 2000
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Telephone: 1 300 850 505
www.latrobemagnesium.com
National Australia Bank Limited
Mezzanine Level
255 George Street
Sydney NSW 2000
Solicitors
Minter Ellison
Level 19
88 Philip Street
Sydney NSW 2000
Stock Exchange
Australian Securities Exchange
20 Bridge Street
Sydney NSW 2000
ASX CODE: LMG
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
LATROBE MAGNESIUM PROJECT
1. Overview
During the year, the Company has made significant progress with its Latrobe Magnesium Project in the following
areas:
•
•
•
•
•
•
the signing of the Ash Supply Term sheet with Hazelwood Power;
the signing of Memorandum of Understanding for Japanese magnesium offtake;
the signing of Memorandum of Understanding to appoint USA distributor for sale of magnesium
the signing of Memorandum of Understanding with RWE Power for a German magnesium plan;
the granting of the hydromet patents in the USA and China; and
the acquiring of the remaining 50% interest in its hydromet process.
The Company plans to use its hydromet process together with the proven thermal reduction process to extract
magnesium, char and to make a supplementary cementitious material (SCM) from the Latrobe Valley brown coal
fly ash. The first stage of the project is planned to produce magnesium metal at 5,000 tonnes per annum then
expand to 40,000 tonnes per annum.
2. Magnesium Markets
In the year ended 31 December 2015, the primary world production of magnesium declined by some 3% to
approximately 840,000 tonnes. China’s estimated primary production for 2015 was approximately 84% of the
world’s production. Some 40% of China’s production is used locally. World growth in demand is expected to
continue at an annual rate between 6% and 7% until 2024 when it is projected the market will produce some 1.7
million tonnes.
Australian and New Zealand consumption of magnesium has been recorded in the range between 7,000 tonnes to
10,000 tonnes per annum. All this magnesium is imported.
During the year, the magnesium price traded at an eleven year low in line with many commodities in a narrow range,
as follows:
FOB China
US$ per tonne
30-Jun-16
2,100
30-Jun-15
2,250
Owing to United States anti-dumping duties, the delivered price at year end was in the order of US$3,700 per tonne.
In China, the operating costs of production stayed within the range between US$2,000 to US$2,500 per tonne.
However, a number of China plants were either closed or scaled back production due to this low magnesium price.
With the adoption of lightweighting of motor vehicles and the legislated emission standards in many countries in the
World, there is a growing demand by car companies to use more magnesium in car parts. The car business has
adopted aluminium sheet in outside panels and with this sheet there is up to 6 percent of magnesium. With the
development of new magnesium alloys and new production techniques, the use of magnesium car parts and sheet
provides many exciting opportunities.
3. Ash Supply Term Sheet
In August 2015, Latrobe Magnesium Limited (ASX:LMG) executed a letter of intent and Ash Supply Term Sheet
with GDF SUEZ Hazelwood (Hazelwood) in relation to the supply of spent fly ash from Hazelwood’s site in Victoria’s
Latrobe Valley.
The purpose of the letter of intent is to pave the way for LMG and Hazelwood to enter into a fully termed Agreement
for the supply of ash from Hazelwood’s premises for use in the LMG plant as well as the installation of associated
delivery infrastructure.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
LMG and Hazelwood agree to enter into good faith discussions and use their reasonable endeavours to negotiate
the Agreement based on the principles and terms set out in the Ash Supply Term Sheet. It is envisaged that this
Agreement will be executed following the completion of LMG’s feasibility study expected to be completed in October
2016 and prior to the construction of the initial plant in the first quarter of June 2017.
This Ash Supply Term Sheet does not create any legally binding obligations between the parties at this stage.
4. Further Cementitious Material Test Results
In October 2015, LMG completed further cementitious test results that showed LMG’s material continues to
outperform fly ash. Additional applications in the ultrafine fly ash market, where product sells for over $200 per
tonne, are currently being assessed.
There is a major shortage of fly ash in Victoria. Victorian users import up to 300,000 tonnes per annum from New
South Wales and Queensland and some users are starting to import fly ash from overseas.
In the next six months LMG will be concluding a significant amount of larger scale test work. A large quantity of
supplementary cementitious material (“SCM”) will be produced from this work which will allow the properties of
LMG’s SCM to be analysed further.
LMG is in discussions with a number of major Australian cement companies in relation to selling them this material.
These companies require their individual samples to conduct their own analysis before they will commit to our
offtake agreements.
5. Test Work and Engineering Study
LMG is looking to use vertical retorts in its initial plant. It has a number of designs which it intends to test on a small
scale to confirm its suitability for LMG’s fly ash feedstock. LMG will also finalise its iron reduction and test work on
its TIPA regeneration circuit whilst this work is being completed.
This work meant that the main body of the design and engineering work was pushed back for four months and
should now be completed in November 2016.
6. Patents granted
In October and November 2015, LMG was informed that the United States of America and the Chinese patents for
its unique hydromet process had been granted on 22 September 2015 and 23 September 2015 respectively. The
Australian patent was granted on 26 September 2013 for 20 years starting from 27 August 2010.
The process is now owned 100% by Magnesium Investments Pty Ltd, a 100% owned subsidiary of LMG. LMG has
the exclusive worldwide marketing rights for the commercialisation of this technology.
Patent applications were lodged in March 2013 for additional international territories being all countries within the
European Union, India and Indonesia. All these countries are known to have large lignite / brown coal deposits.
To date LMG has concentrated its activities on the Latrobe Valley and Germany.
The progress of the patent applications in each of these countries is summarised in the table below:
Country/Region
Number
Status
Expected date of grant
Australia
2011293107
Granted
United States
9139892 (13/818788) Granted
201180040099.2
Granted
China
Europe
India
577/MUMNP2013
Examination requested
Indonesia
W00201300844
Examination requested
11819208.7
Response filed to Search Opinion
By end 2016
26 September 2013
22 September 2015
23 September 2015
By end 2016
By end 2016
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
7. Offtake Agreements
In March 2016, LMG signed a Memorandum of Understanding with a Japan-based company committing to purchase
up to 4,000 tonnes of magnesium per annum from the LMG planned production facility in Morwell Victoria. The
offtake company is Advanced Material Corporation of Japan (AMCJ), the largest titanium and magnesium trading
house in Tokyo.
Japan currently uses 40,000 tonnes of magnesium per annum and this is projected to increase with greater use of
magnesium by the motor vehicle industry. Currently most of this magnesium is imported from China. The Japanese
Magnesium Association has a stated objective to diversify their magnesium supply chain.
In June 2016, LMG signed a Memorandum of Understanding to appoint an exclusive USA distributor to sell its
magnesium into North, Central and South America and the Caribbean in the aluminium market. The distributor has
committed to purchase a minimum of 2,000 tonnes of magnesium a year from LMG’s planned production facility in
Morwell Victoria. The deal will deliver excellent prices to LMG due to an anti-dumping duty payable on Chinese
imports into US markets.
The distributor is Metal Exchange Corporation (MEC) which is headquartered in St. Louis, Missouri. Founded in
1974, MEC has grown from a regional aluminium scrap company to a global trader with offices in Switzerland,
China and Brazil. In the USA, MEC has six manufacturing plants employing over 700. With a unique blend of
marketing expertise and deep manufacturing excellence, MEC provides its customers an unparalleled array of
products and services, directly supplying scores of aluminium and magnesium ingots under short and long term
agreements.
North and Central America currently uses 160,000 tonnes of magnesium a year and this is projected to increase
with greater use of magnesium by the motor vehicle industry. There is only one magnesium producer in North and
Central America, with most magnesium imported from China.
In the USA, there is an anti-dumping duty payable on imported China magnesium. The result of this duty is that
the magnesium price in the USA is currently US$1.70 per lb or in the order of US$3,700 per tonne, whereas the
FOB China magnesium price is currently US$2,050 per tonne.
Under the USA-Australia fair trade agreement, magnesium produced in Australia is exempt from this import duty.
LMG proposes to sell at least 50% of its production into the US market at this higher price.
8. Feasibility Study
In May, 2016 LMG announced that it had successfully completed the second stage of its bankable feasibility study
(BFS) of a plant to produce 5,000 tonnes of magnesium a year from the brown coal fly ash at the Latrobe Valley’s
Hazelwood power station.
The second stage of the BFS estimated the capital cost of the initial 5,000 tonne per annum plant to be in the range
between $46 million and $51 million. A number of areas have been identified that could produce capital cost savings
and these will be investigated in the final stage of the BFS.
The final stage of the feasibility study started in July and is expected to be completed by the end of September.
LMG’s financial modelling indicated that the Project is economically viable and consistent with its previous
prefeasibility and adjustment study projections. A summary of the operating revenues and costs together with the
final capital costs will be released upon completion of the final stage of the BFS due by the end of October 2016
9. RWE Power
In June, 2016 LMG signed a MoU with RWE Power AG to continue to develop a magnesium plant capable of
producing approximately 30,000 tonnes per annum of magnesium from brown coal fly ash from its Hambach mine
near Cologne, Germany.
The project involves four stages of development, being:
• Conduct process test work on the RWE fly ash
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
• Completion of a feasibility study
• Completion of engineering, procurement and permitting
• Construction and commissioning
Each stage is conditional on the successful completion of the preceding stage.
Europe imports in excess of 150,000 tonnes of magnesium per annum. There is currently no producer in Europe
and magnesium metal has been listed as the fourth most critical raw material in the EU list of 20 metals.
RWE Power AG and LMG have identified the brown coal fly ash from RWE’s Hambach mine as being the most
suitable to commercially extract magnesium. RWE Power mines produce approximately 100 million wet tonnes of
brown coal per annum (from which approximately 35 to 40 million tonnes per annum are produced from its Hambach
mine) compared to 65 million wet tonnes per annum in the three Latrobe Valley mines.
RWE Power AG is part of the RWE Generation SE. Since 1 January 2013, all generation in the RWE Group has
been steered by RWE Generation SE, enabling the pooling of the generation and engineering expertise of RWE
Power in Germany, RWE Essent in the Netherlands, and RWE Generation UK in the UK. RWE has some 14,000
employees in its generation business and more than 40 GW of power generation capacity.
10. Hydromet acquisition
On 1 July 2016, LMG acquired the remaining 50% of the hydromet process for the issue of 30 million LMG shares.
These shares will be escrowed for a period of six months until 31 December 2016.
Patents have been granted for USA, China and Australia and patents are pending for India, Indonesia and EU.
These patents are expected to be granted by the end of 2016.
In addition, Dr. Steve Short entered into a consultancy agreement so that LMG may retain his services to adapt the
current hydromet process to process other brown coal fly ashes both in Victoria and overseas.
11. Fund Raising
In September 2015, LMG received an Australian R&D tax incentive of $421,651 following its lodging of its FY2015
tax return.
In October 2015, LMG raised $600,000 of debt funding from Platinum Road Pty Ltd to progress the development
of its Latrobe Valley magnesium project. This funding allowed LMG to complete its hydromet and cement test work
and also commence its design and engineering studies for its initial 5,000 tonnes per annum magnesium plant.
The key terms of the facility are:
Loan Amount: $600,000 including capitalised interest for 12 months
Term:
12 months to 16 October 2016.
Repayment: Cash in full from the 2016 R&D tax rebate refund.
Interest Rate: 15% per annum.
Conversion:
The lenders have the right to convert any part of their loan at the lower of the following:
1. $0.015 per share; and
2. The price of the most recently issued LMG shares throughout the Term excluding any issued
alongside this Loan. In the event of multiple issuances of shares during the term, the Lender
has up to 24 hours post the announcement of the subsequent shares being issued to determine
if they wish to convert on the basis of a prior price.
The conversion of the loan or part thereof will result in the cessation of the accrual of the interest in
respect of the amount converted. To the extent the amount of the interest that becomes accrued
is less than the amount of interest prepaid, the loan amount shall be reduced by the amount of
deficiency.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
12. Capital Raising
In July 2016, the Company raised $1,000,000 through a private placement to sophisticated and professional
investors at an issue price of $0.026. In August 2016, LMG raised a further $1,800,000 from a Share Purchase
Plan from existing shareholders at the same price.
These funds will be used to complete its vertical retort testing and it Bankable Feasibility Study. It will also provide
working capital.
8
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
The Directors present their report together with the financial report of Latrobe Magnesium Limited (“Company”) and
of the Group, being the Company and its subsidiaries for the financial year ended 30 June 2016 and the auditor’s
report thereon.
DIRECTORS
The following persons were Directors of Latrobe Magnesium Limited during the financial year and up to the date of
this report.
Chairman
Jock Murray
David Paterson CEO
K A Torpey
P F Bruce
J R Lee
PRINCIPAL ACTIVITIES
During the year the principal continuing activities of the Group consisted of:
•
•
•
•
successfully developing Latrobe magnesium project, as shown by Stage 2B of the feasibility study;
securing MoU with Japanese and USA distributors for the sale of magnesium;
entering a MoU for the development of a German magnesium plant with RWE; and
raising $2.8 million to develop the project further.
OPERATING RESULTS
The consolidated net loss of the Group after providing for income tax amounted to $1,087,123 compared to a net
loss of $691,251 for the previous corresponding period. The loss was mainly due to the costs of conducting the
test work and feasibility study on the Latrobe Magnesium project and the design of the magnesium plant in the
Latrobe valley.
Further information on review of operations of the Group is shown separately in the Directors’ Review of Operations
on Page 4 to 8 of this report.
Dividends
The Directors have not recommended the payment of a final dividend.
Significant Changes in the State of Affairs
The significant change in the state of affairs of the Group during the financial year is an increase in the contributed
equity of $315,469, from $28,670,152 to $28,985,621 as a result of issuing the following fully paid ordinary shares:
$
65,403
75,000
75,000
100,066
315,469
October 2015 6,540,300 shares issued @$0.010 to convert unlisted convertible securities to shares
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
April 2016
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
June 2016
6,671,063 shares issued @$0.015 to convert unlisted convertible securities to shares
June 2016
MATTERS SUBSEQUENT TO BALANCE DATE
There are matters or circumstance that have arisen since 30 June 2016 that has significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2016 of the Group; and
(b) the state of affairs, in financial years subsequent to 30 June 2016, of the Group.
These matters are:
•
•
•
•
the acquisition of the remaining 50% interest in the hydromet process;
the share placement on 14 July 2016 for $1,000,000; and
the share purchase plan raising of $1.8 million on 3 August 2016.
the conversion of unlisted convertible securities to 6,497,585 ordinary shares at $0.015 on 4 August 2016.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
On 9 September 2016 the financial report was authorised to be issued by a resolution of Directors.
LIKELY DEVELOPMENTS
Except for information disclosed on certain developments and the expected results of those developments included
in this report under review of operations, further information on likely developments in the operations of the Group
and the expected results of those operations have not been disclosed in this report because the Directors believe
it would be likely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATIONS
The Group’s operations are subject to normal State and Federal Environmental Regulations. There were no
breaches of these regulations during the year or to the date of this report.
INFORMATION ON DIRECTORS
John Stephen Murray – Non Executive Chairman
Experience and Expertise
Mr Murray studied economies and history with the Royal Military College at Duntroon before studying engineering
management at the Royal Military College of Science in the UK. He also holds qualifications in international politics
from Deakin University.
Roles currently held by Mr Murray include strategic adviser for law firm, King & Wood Mallesons in the government
infrastructure sector and non executive chairman of bulk liquid road tank manufacturer, Omni Tankers Holding Pty
Ltd. He managed numerous large projects in his role with NSW Department for Transport including the production
of a 10 year development plan for the State's transport infrastructure and services as well as chairing the $2 billion
Parramatta Rail Link Company project. He acted as an adviser for operational planning and infrastructure for the
Sydney, Beijing and London Olympic Games. In addition to these roles he has held numerous directorship including
non executive chairman for The Hills Motorway (M2) Limited prior to its takeover by Transurban in 2005. The non
executive chairman for Country Pipelines for the three year prior to its takeover by APA in 2008. He was on the
board of Terminals Australia for five years up until its sale to Asciano in 2008.
Prior to his foray into business, Mr Murray had a distinguished military career over almost 30 years before retiring
as a Colonel in 1994. He brings a wealth of senior management and directorship experience with a particular focus
on infrastructure, project management and freight logistics projects.
Appointed as a Director on 1 May 2015
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
None
Special Responsibilities
Chairman of the Board of Directors
Interests in Securities
11,400,000 ordinary shares in Latrobe Magnesium Limited, these shares are registered in the name of MurraySetter
Pty Limited as trustee for the MurraySetter Trust.
David Oliver Paterson – Chief Executive Officer
Experience and Expertise
Mr Paterson is a qualified non-practising Chartered Accountant and a graduate from the University of Queensland.
He is the founding director of Europacific Corporate Advisory Pty Ltd and has held an Investment dealers licence
since 1990. Prior to forming Europacific in 1990, he was a group manager of the Corporate Services Division of
Tricontinental Corporation Limited responsible for NSW and Queensland. He also worked for Coopers & Lybrand
in Brisbane and Sydney in their Corporate Services Division. He has been involved in a wide range of corporate
advisory assignments and underwritings for both debt and equity for a number of public and private companies.
10
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Mr Paterson has experience in the property and mining industries, in relation to:
Project financing;
Financial analysis;
Valuations; and
The raising of debt and equity.
Appointed as a Director on 23 August 2002
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
None
Special Responsibilities
Chief Executive Officer
Member of Audit Committee
Interests in Securities
99,990,000 ordinary shares in Latrobe Magnesium Limited, of these shares 4,998,837 are held as a direct interest
and 94,991,163 are registered in the name of Rimotran Pty Limited as trustee for the David Paterson Super Fund.
Kevin Anthony Torpey – Executive Director
Experience and Expertise
Mr Torpey is a chartered professional engineer and a graduate from Sydney University. Over the last 40 years he
has been involved in the development of many diverse major projects involving oil, iron ore, aluminium, nickel,
lead/zinc, uranium, magnesite, coal and gold, located locally, in Ireland and Indonesia. Generally these projects
have been associated with major companies such as Consolidated Goldfields, EZ Industries, Alcan, International
Nickel, Tara Minerals Limited (Ireland), Noranda, Denison Mines (Canada), Toyota, Mitsubishi and Iwatani. For the
last 20 years his association has mainly been as a corporate officer initially as managing director of Denison Mines
(Australia) and then managing director of Devex Limited. Over the last few years he has acted as a consultant to
a number of companies involved in mining projects and new technologies.
Appointed as a Director on 11 April 2002
Other Current Public Company Directorships
Empire Energy Group Ltd.
Former Public Company Directorships in Last 3 Years
None
Special Responsibilities
None
Interests in Securities
99,533,391 ordinary shares in Latrobe Magnesium Limited, these shares are held by Famallon Pty Ltd and Famallon
Pty Ltd ATF Famallon No.2 Super Fund. Mr Torpey is a principal of Famallon Pty Ltd and a beneficiary of the fund.
Philip Francis Bruce – Non Executive Director
Experience and Expertise
Mr Bruce is a director of P F Bruce & Associates, which provides corporate and project management services. He
is a mining engineer with over thirty years resource industry experience in Australia, South Africa, West Africa,
South America and Indonesia in operations, project development and corporate management. He was the CEO of
PT BHP Indonesia, managing director of Triako Resources Limited and was the general manager – development
for Plutonic Resources Limited, where he was technically responsible for acquisition and development of resource
projects during the Company’s period of growth from $35 million to over $1 billion in market capitalisation.
Appointed as a Director on 4 September 2003
Other Current Public Company Directorships
Managing Director of Hill End Gold Limited
Director of Bassari Resources Limited
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Former Public Company Directorships in Last 3 Years
Brimstone Resources Limited.
Special Responsibilities
None
Interests in Securities
11,071,439 ordinary shares in Latrobe Magnesium Limited, of these shares 704,250 are held as direct interest and
10,367,189 are registered in the name of Diazill Pty Limited as trustee for the PB Superannuation Fund.
John Robert Lee – Non Executive Director
Experience and Expertise
Mr Lee has a broad range of commercial skills and experiences in both the public and private sectors. He has held
senior management roles in the Federal Department of Employment and Industrial Relations. He was also senior
private secretary and principal adviser to Tony Street, a senior federal cabinet minister. In the private sector, Mr
Lee has held a number of senior management positions with a number of major corporations including Henry Jones
IXL, Elders Building Supplies and Woolworths Limited. He is the founder of Stockholder Relations Pty Ltd, a
management consultancy specialising in corporate advisory, investor relations and corporate governance.
Appointed as a Director on 10 December 2010
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
Mongolian Resources Corporation Limited
Special Responsibilities
Chairman of Audit Committee
Interests in Securities
4,679,750 ordinary shares in Latrobe Magnesium Limited, these shares are registered in the name of Stockholder
Relations Pty Limited of which Mr Lee is a Director.
Company Secretary
Mr John Lee who has been a Director to the Company since 10 December 2010 became Company Secretary on 1
July 2013.
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year
ended 30 June 2016 and the number of meetings attended by each Director was:
Director
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Directors’ Meetings
Audit Committee Meetings
Attended
Held Whilst in Office
Attended
Held Whilst in Office
7
7
3
6
7
7
7
7
7
7
-
2
-
-
2
-
2
-
-
2
The Board has yet to appoint a Nominations and a Remuneration Committee. The matters that would normally be
the responsibility of these committees are dealt with by the full Board of Directors.
Retirement, Election and Continuation in Office of Directors
Mr K A Torpey and Mr J R Lee are the Directors retiring by rotation at the next Annual General Meeting of the
Company. Mr Torpey and Mr Lee being eligible in accordance with Article 12.2 of the Company’s constitution offer
themselves for re-election. Their background, experience and qualification are detailed on Pages 11 and 12.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
This report outlines the Remuneration Arrangements in place for each key management person of Latrobe
Magnesium Limited. Principles used to determine the nature and amount of remuneration are:
Competitiveness and reasonableness
Acceptability to shareholders
Performance linkage / alignment of executive compensation
Appropriateness for level of operations
Transparency
Remuneration Committee
The Board has not yet formed a separate Remuneration Committee and all matters that would normally be the
responsibility of a Remuneration Committee are dealt with by the full Board of Directors.
Key Management Personnel
The full Board of Directors sets remuneration policies and practices generally and makes specific recommendations
on remuneration packages and other terms of employment for Executive Directors, other Senior Executives and
Non-Executive Directors.
Executive remuneration and other terms of employment are reviewed annually having regard to performance
against goals set at the start of the year, relevant comparative information and independent expert advice. As well
as basic salary, remuneration packages including superannuation.
Directors and executives are also able to participate in an Employee Share Acquisition Plan. Remuneration
packages are set at levels that are intended to attract and retain executives capable of managing the Group’s
operations.
Remuneration of Non-Executive Directors is determined by the Board within the maximum amount approved by
shareholders from time to time.
The Board undertakes an annual review of its performance and the performance of the Board Committees against
goals set at the start of the year.
Details of the nature and amount of each element of the emoluments of each Director of Latrobe Magnesium Limited
and each specified officer of the Company and the Group receiving the highest emoluments are set out in the
following tables.
The information which follows through to the section titled “Share Options Granted to Key Management Personnel”
is subject to audit by the external auditors.
2016
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
2015
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Base
Emoluments
$
60,000
261,600
35,427
21,804
21,804
400,635
Base
Emoluments
$
10,000
261,600
76,296
21,804
21,804
391,504
Super
Contributions
$
-
-
-
-
-
-
Super
Contributions
$
-
-
-
-
-
-
Equity
Options
$
-
-
-
-
-
-
Equity
Options
$
-
-
-
-
-
-
Total
$
60,000
261,600
35,427
21,804
21,804
400,635
Total
$
10,000
261,600
76,296
21,804
21,804
391,504
Performance
Related
%
-
-
-
-
-
-
Performance
Related
%
-
-
-
-
-
-
There are no additional executives employed by Latrobe Magnesium Limited other than those already disclosed.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Service Agreements
There are currently no service agreements in place formalising the terms of remuneration of Directors or other key
management personnel of the Company and the Group. The above emoluments for D O Paterson and K A Torpey
were agreed by the Board for the term of the prefeasibility and bankable feasibility studies.
Shareholdings
Number of shares held by Directors and Other Key Management Personnel of Parent Entity.
Directors & Other Key
Management Personnel
Balance at
beginning of
date of
appointment
Acquired under
Share Purchase Plan
for Shareholders
Net Change
Other
Acquired Under
Debt Conversion
to Equity
Balance at 30
June 2016
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
11,400,000
35,933,333
65,333,334
3,441,490
-
-
11,333,333
7,583,333
1,500,000
1,500,000
-
6,412,399
9,592,595
-
-
-
46,310,935
17,024,129
6,129,949
3,179,750
11,400,000
99,990,000
99,533,391
11,071,439
4,679,750
Share Options Granted to Key Management Personnel
Granted -
No options were granted to key management personnel over unissued shares during the financial
year.
Exercised - No options were exercised by key management personnel during or in the period since the end of the
financial year and up to the date of this report.
Expiry -
No options expired during or since the end of the financial year.
END OF AUDITED REMUNERATION REPORT
UNLISTED CONVERTIBLE SECURITIES
On 9 October 2015, a lender elected to convert $65,403 of loan to ordinary shares at $0.010 from the unlisted
convertible securities issued on 10 December 2014.
On 16 October 2015, the loan was renewed and increased to $600,000 including 12 months interest.
On 20 October 2015 the Company issued up to 40,000,000 Unlisted Convertible Securities convertible at $0.015
at any time prior to 16 October 2016 should the lenders wish to convert into ordinary shares. The lenders elected
to make the following conversions:
27 April 2016
07 June 2016
23 June 2016
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
6,671,063 shares issued @$0.015 to convert unlisted convertible securities to shares
As the securities were converted before 16 October 2016 there was an adjustment made to the interest owing under
the loan which also reduced the number of shares to be issued.
In August 2016, a lender elected to convert unlisted convertible securities to 6,497,585 ordinary share at $0.015.
The current balance of the loan and interest accrued to 16 October 2016 is $236,911 which can be converted to
shares at $0.015 at any time prior to 16 October 2016.
UNLISTED OPTIONS
On 20 October 2015 the Company issued 5,000,000 Unlisted Options exercisable at $0.015 at any time prior to 16
December 2016 in respect of professional services provided for raising $600,000 loan under the terms of the loan
facility. The value of the Options using the Black Scholes Option Value method is $7,633.
14
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
INDEMNIFICATION
During or since the end of financial year, the Company has not been indemnified or made a relevant agreement to
indemnify an officer or auditor of the Company or any related body corporate against liability incurred as such an
officer or auditor. The Company maintains a Directors and Officers Liability Insurance, including company securities
cover.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings. The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to Nexia Australia for services provided during the year are set out below:
Audit and Review of Financial Reports
Taxation Services
$
32,000
3,000
---------
35,000
=====
The Board of Directors ensure that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001.
AUDITORS’ INDEPENDENT DECLARATION
A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act 2001 is
set out on Page 16 and forms part of this report.
This report is made in accordance with a resolution of the Directors.
J S Murray
Chairman
Sydney
9 September 2016
D O Paterson
Chief Executive Officer
15
Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Latrobe Magnesium Limited.
As audit partner for the audit of the financial statements of Latrobe Magnesium Limited for the financial year
ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Court & Co
Chartered Accountants
Joseph Santangelo
Partner
Sydney, 9 September 2016
16
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ DECLARATION
The Directors of the company declare that:
1.
8
2.
3.
4.
in the Directors’ opinion, the financial statements and accompanying notes set out on Pages 18 to 44 are in
accordance with the Corporations Act 2001 and:
(a)
(b)
comply with Australian Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the company’s financial position as at 30 June 2016 and of its
performance for the year ended on that date;
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB);
in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable;
the remuneration disclosures included in Page 13 and 14 of the Directors’ report (as part of the audited
Remuneration Report), for the year ended 30 June 2016, comply with section 300A of the Corporations Act
2001; and
This declaration is made in accordance with a resolution of the Board of Directors pursuant to section 295(4) of the
Corporations Act 2001 and is signed for and on behalf of the Directors by:
J S Murray
Chairman
Sydney
9 September 2016
D O Paterson
Chief Executive Officer
17
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2016
Revenue
Finance Income
Other Income
Expenses
Administration expenses
Finance Cost
Research and evaluation expenses
Total expenses
Income tax expense
Note
GROUP
2016
$
2015
$
11,115
7,784
560,453
421,651
3
571,568
429,435
(922,849)
(813,002)
(60,228)
(39,308)
(675,614)
(268,376)
(1,658,691)
(1,120,686)
-
-
3
4
Loss attributable to members of the parent entity
(1,087,123)
(691,251)
Other Comprehensive Income
Other Comprehensive Income for the year
-
-
Total Comprehensive Income
(1,087,123)
(691,251)
Basic and diluted loss per share (cents per share)
18
(0.10)
(0.072)
GROUP
Note
2016
2015
The above income statement should be read in conjunction with the accompanying notes.
18
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total Current Assets
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Borrowings
Trade and other payables
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
TOTAL EQUITY
Note
GROUP
2016
$
2015
$
5
6
6
7
8
9
10
13,946
662,649
614,755
516,511
676,595
1,131,266
16,993
1,953
16,993
1,295
5,754,617
5,730,298
5,773,563
5,748,586
6,450,158
6,879,852
324,094
281,442
196,750
66,826
605,536
263,576
605,536
263,576
5,844,622
6,616,276
11
28,985,621
28,670,152
(23,140,999)
(22,053,876)
5,844,622
6,616,276
The above balance sheet should be read in conjunction with the accompanying notes
.
19
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
GROUP
Note
Issued
Capital
$
$
Balance at 1 July 2014
Total comprehensive income
27,322,282
-
Shares issued during the period
11
1,347,870
Balance at 1 July 2015
Total comprehensive income
28,670,152
-
Shares issued during the period
11
315,469
Balance at 30 June 2016
28,985,621
-
-
-
-
-
-
-
Reserves Accumulated
Total
Losses
$
$
(21,362,625)
5,959,657
(691,251)
(691,251)
-
1,347,870
(22,053,876)
6,616,276
(1,087,123)
(1,087,123)
-
315,469
(23,140,999)
5,844,622
The above statement of changes in equity should be read in conjunction with the accompanying notes.
20
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF CASHFLOWS
For the year ended 30 June 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from operations
Payments to suppliers and employees
Interest received
GROUP
2016
$
2015
$
Note
421,651
396,325
(1,409,946)
(1,050,537)
9,193
5,575
Net cash used in operating activities
17b
(979,102)
(648,637)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of International Patent expenditure
Payment of Rent Bond
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Borrowing
Proceeds from Borrowing
Proceeds from Issue of Shares
Placement Fees
Net cash from financing activities
(7,236)
-
(7,382)
(4,033)
(7,236)
(11,415)
(1,428)
386,957
-
-
(36,789)
-
1,135,000
(40,000)
385,529
1,058,211
Net increase / (decrease) in cash and cash equivalent held
(600,809)
398,159
Cash and cash equivalent at beginning of the financial year
614,755
216,596
Cash and cash equivalent at end of financial year
17a
13,946
614,755
The above statement of changes in equity should be read in conjunction with the accompanying notes.
21
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The financial report is a general purpose financial report and covers Latrobe Magnesium Limited and its controlled
Entities (the “Group”) and Latrobe Magnesium Limited as an individual parent entity. Latrobe Magnesium Limited
is a company limited by shares, incorporated in Australia, whose shares are publicly traded on the ASX.
The financial report has been prepared on an accruals basis and is based on historical costs and does not take into
account changing money values. Cost is based on the fair values of the consideration given in exchange for assets.
It is also recommended that the financial report be considered together with any public announcements made by
the Group during the year ended 30 June 2016, in accordance with continuous disclosure obligations arising under
both the Corporation Act 2001 and Australian Stock Exchange Listing Rules.
The financial report is presented in the Australian currency.
Statement of Compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standard (‘AIFRS’). Compliance with AIFRS ensures that the financial report,
comprising the financial statements and notes thereto, complies with International Financial Reporting Standards
(‘IFRS’) in their entirety.
A summary of significant accounting policies of the Group under AIFRS are disclosed below. The accounting
policies have been consistently applied, unless otherwise stated.
a.
Principles of Consolidation
The consolidated financial statements comprise the financial statements of Latrobe Magnesium Limited and
its subsidiaries at 30 June each year ("the Group"). Subsidiaries are entities over which the Group has the
power to govern the financial and operating policies generally accompanying a shareholding of more than
one half of the voting rights. Potential voting rights that are currently exercisable or convertible are
considered when assessing control. Consolidated financial statements include all subsidiaries from the date
that control commences until the date that control ceases. The financial statements of subsidiaries are
prepared for the same reporting period as the parent, using consistent accounting policies.
All inter-Company balances and transactions between entities in the Group, including any unrealised profits
or losses, have been eliminated on consolidation.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement and balance sheet respectively.
Subsidiaries are accounted for in the parent entity financial statements at cost.
A list of controlled entities is contained in Note 12 to the financial statements.
b.
Income Tax
The Group adopts the liability method of tax-effect accounting whereby the income tax expense is based on
the profit from ordinary activities adjusted for any non-assessable or disallowed items. It is calculated using
the tax rates that have been enacted or are substantially enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a
business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised
or liability is settled. Deferred tax is credited in the income statement except where it relates to items that
may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised. Deferred tax assets in relation to
tax losses are not brought to account unless there is convincing evidence of realisation of the benefit.
22
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income tax legislation and the anticipation that the Group will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
Latrobe Magnesium Limited and its wholly-owned Australian subsidiaries have formed an income tax group
under the Tax Consolidation Regime. Each entity in the Group recognises its own current and deferred tax
liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are
immediately assumed by the parent entity. The current tax liability of each Group entity is then subsequently
assumed by the parent entity. The Group notified the ATO on 2 January 2003 that it had formed an income
tax group to apply from 1 July 2002. The tax group has entered a tax sharing agreement whereby each
Company in the Group contributes to the income tax payable in proportion to their contribution to the net
profit before tax of the tax group.
c.
Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented
in Australian dollars which is the parent entity’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at
the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of
the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date
when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement,
except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to
the extent that the gain or loss is directly recognised in equity otherwise the exchange difference is
recognised in the income statement.
d.
Plant and Equipment
Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of operating in the manner intended by
management, less depreciation and any impairment.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess
of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the assets employment and subsequent disposal. The
expected net cash flows have been discounted to their present value in determining recoverable amounts.
Depreciation
The depreciable amount of all fixed assets is depreciated on a diminishing value basis over their useful lives
to the Group commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Depreciation Rate
Plant and equipment - diminishing value
35%
The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet
date.
Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the
asset's carrying amount and are included in the income statement in the year that the item is derecognised.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
23
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
e.
Intangibles
Research and development
Research costs are expensed as incurred. Development expenditure incurred on an individual project is
capitalised only if the product or service is technically feasible, adequate resources are available to complete
the project, it is probable that future economic benefits will be generated and expenditure attributable to the
project can be measured reliably. Expenditure capitalised comprises costs of materials, services, direct
labour and an appropriate portion of overheads. Other development costs are expensed when they are
incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and any
impairment losses and amortised over the period of expected future sales. The carrying value of
development costs is reviewed annually when the asset is not yet available for use, or when events or
circumstances indicate that the carrying value may be impaired.
f.
Impairment of Non Financial Assets
At each reporting date the Group assesses whether there is any indication that individual assets are
impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are
recognised in the income statement where the asset's carrying value exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose
of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset.
Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is
determined for the cash-generating unit to which the asset belongs.
g.
Investments and other financial assets
The Group classifies its financial assets in the following categories:
•
•
financial assets at fair value through profit or loss;
loans and receivables;
The classification depends on the purposes for which the investments were acquired. Management
determines the classification of its investments at initial recognition and, in the case of assets classified as
held-to-maturity, re-evaluates this designation at the end of each reporting period.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified
as current assets.
(ii)
Loans and receivables
Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in active market. They are included in current assets, except for those with maturities greater than
12 months after the reporting period which are classified as non-current assets. Loans and receivables are
included in trade and other receivables (Note 6) in the balance sheet.
After initial measurement, loans and receivables are carried at amortised cost using the effective interest
method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans
and receivables are derecognised or impaired, as well as through amortisation process.
(iii) Recognition and de-recognition
Regular purchase and sales of financial assets are recognised on trade-date, the date on which the Group
commits to purchase or sell the assets. Investments are initially recognised at fair value plus transaction
costs for all financial assets not carried at fair value through profit and loss. Financial assets carried at fair
value through profit and loss are initially recognised at fair value and transaction costs are expenses in profit
and loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and rewards
of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised
in other comprehensive income are reclassified to profit or loss as gains and losses from investment
securities.
24
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
(iv)
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method. Details on how the
fair value of financial instruments is determined are disclosed in Note 2d.
(v)
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial
asset or group of financial assets is impaired.
If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost; the loss
is measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the
financial asset’s original effective interest rate. The loss is recognised in profit or loss.
h.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of assets that necessarily
take a substantial period of time to prepare for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale.
All other finance costs are recognised in income in the period in which they are incurred.
i.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are
shown within short-borrowings in current liabilities on the balance sheet.
j.
Revenue
Interest
Revenue is recognised as interest accrues using the effective interest method. The effective interest method
uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts
over the expected life of the financial asset.
Government Grants
Government grants are recognised at fair value where there is reasonable assurance that the grant will be
received and all grant conditions will be met. Grants relating to expense items are recognised as income
over the periods necessary to match the grant to the cost they are compensating.
k.
Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the year
end and which are unpaid. These amounts are unsecured and have up to 60 day payment terms.
l.
Interest bearing liabilities
All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in the income statement over the period of the loans and
borrowings using the effective interest method.
All borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
m.
Other liabilities
Other liabilities comprise non-current amounts due to related parties that do not bear interest and are
repayable in more than 366 days from balance sheet date. As these are non-interest bearing, fair value at
initial recognition requires an adjustment to discount these loans using a market-rate of interest for a similar
instrument with a similar credit rating (Group's incremental borrowing rate). The discount is credited to the
income statement immediately and amortised using the effective interest method.
25
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
The component parts of compound instruments (convertible securities) issued by the Group are classified
separately as financial liabilities and equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and an equity instrument. A conversion option that
will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the
Company’s own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost
basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity
date.
The conversion option classified as equity is determined by deducting the amount of the liability component
from the fair value of the compound instrument as a whole. This is recognised and included in equity, net
of income tax effects, and is not subsequently remeasured.
n.
Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the Group
has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of
economic resources will be required to settle the obligation and the amount can be reliably estimated. For
service warranties, the likelihood that an outflow will be required to settle the obligation is determined by
considering the class of obligations as a whole. Provisions are not recognised for future operating losses.
Where the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
o.
Share-based payments
For equity-settled share-based payment transactions, the Company measures the goods or services
received, and the corresponding increase in equity, directly, at the fair value of the goods or services
received.
p.
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
q.
Contributed equity
Ordinary shares are classified as equity (refer Note 11).
Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity
proceeds. Costs directly attributable to the issue of new shares or options associated with the acquisition
of a business are included as part of the purchase consideration.
r.
Dividends
Provision is made for dividends declared and no longer at the discretion of the Group, on or before the end
of the financial year but not distributed at balance date.
s.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to members of Latrobe Magnesium
Limited, adjusted for the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares during the year.
The weighted average number of issued shares outstanding during the financial year does not include
shares issued as part of the Employee Share Loan Plan that are treated as in-substance options.
Diluted earnings per share
Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the
after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted
average number of shares used is adjusted for the weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
26
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
t.
Goods and Services Tax (GST)
Revenues, expenses are recognised net of GST except where GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which case the GST is recognised as part of the
cost of acquisition of the asset or as part of the expense item.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable
from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
u.
Critical Accounting Estimates and Judgments
The Directors evaluate, estimate and make judgements which are incorporated into the financial report
based on historical knowledge and best available current information.
Estimates assume a reasonable expectation of future events and are based on current trends and economic
data, obtained both externally and within the Group.
Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that
may lead to an impairment of assets. Where an impairment trigger exists, the recoverable amount of the
asset is determined. Value in use calculations performed in recoverable amounts incorporate a number of
key estimates.
No impairment has been recognised in respect of the intangible assets for the year ended 30 June 2016
because:
1.
2.
3.
the Company's internal valuation indicates that the recoverable amount of the asset is greater than the
book value of the assets;
the magnesium price supports this valuation; and
the Company is utilising the proven Thermal Reduction Process in its process with estimates of its
capital and operating costs which are based on its stage 2 feasibility study and subsequent reports.
The key assumptions are adjusted to incorporate risks with a particular segment, and are summarised as
follows:
•
•
• magnesium metal price of A$4,162 per tonne is used which represents the current average price
initial production of 5,000 tonnes increasing to 40,000 tonnes;
budgeted cash flow period of 20 years;
between China and the United States.
operating costs based upon third party consultant’s estimates;
• market information for forward exchange rates;
•
•
•
a pre-tax discount rate of 18%.
capital costs based upon stage 2 of its feasibility study; and
27
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 2: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s risk management policy sets out the Company’s overall risk management framework and policies,
including regular reviews by the Board of the Company’s financial position and financial forecasts.
a.
Principal financial instruments
The principal financial instruments are as follows:
(i) Cash
(ii) Trade and other receivables
Inter Company balances
(iii)
(iv) Trade and other payables
(v) Borrowings
The Group does not use derivative financial instruments, and has no off-balance sheet financial assets
and liabilities at year-end.
b.
Financial instrument risk exposure and management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial
instruments. These main risks, arising from the Group’s financial instruments are interest rate risk, liquidity
risk, foreign exchange currency risk, share market risk, credit risk and commodity risk. This note describes
the Group’s objectives, policies and processes for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is presented throughout these financial
statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them from
previous periods unless otherwise stated in this note.
c.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies and has the responsibility for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group’s finance function. The Board receives
bimonthly reports through which it reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without
unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are
set out below:
(i) Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash or access to funds to allow it to meet
its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed
facilities) to meet expected requirements for a period of at least 90 days.
The Group’s exposure to liquidity risk has been assessed as minimal. There are no past due payables at
balance date.
The Board receives cash flow projections on a bimonthly basis as well as information regarding cash
balances. At the balance sheet date, these projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably expected circumstances.
(ii)
Interest Rate Risk
The Group’s exposure to interest risk arises when the value of financial instruments fluctuates as a result
of changes in market interest rates and the effective weighted average interest rates on classes of financial
assets and financial liabilities.
The Group’s exposure to interest rate risk only extends to cash and cash equivalents at balance date. The
Group’s exposure to interest rate risk at 30 June 2016 and 30 June 2015 is set out in the following tables:
28
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
Net financial assets
13,946 (274,999)
CONSOLIDATED
Year ended 30 June 2016
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
Year ended 30 June 2015
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
Fixed Interest maturing in
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over 1 to
5 years
More than
5 years
%
1
4
15
$
$
13,946
-
-
49,095
13,946
49,095
- (324,094)
-
-
%
1
4
15
$
$
614,755
-
-
47,173
614,755
47,173
- (196,750)
-
-
Non-
interest
bearing
$
Total
$
-
613,554
13,946
662,649
613,554
676,595
-
(281,442)
(324,094)
(281,442)
332,112
71,059
Non-
interest
bearing
$
Total
$
-
469,338
614,755
516,511
469,338
1,131,266
-
(66,826)
(196,750)
(66,826)
402,512
867,690
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Fixed Interest maturing in
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over 1 to
5 years
More than
5 years
Net financial assets
614,755 (149,577)
(iii) Foreign exchange currency risk
The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods
and services in currencies other than the Group’s measurement currency.
There was no exposure to foreign currency risk at balance date.
(iv) Share market risk
The Company relies greatly on equity markets to raise capital for its magnesium project development
activities, and is thus exposed to equity market volatility.
When market conditions require prudent capital management, in consultation with its professional
advisers, the Group looks to alternative sources of funding, including debt financing and joint venture
participation.
(v) Credit risk
Credit risk arises principally when the other party to a financial instrument fails to discharge its obligations
in respect of that instrument.
The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum
exposure equal to the carrying amount of these instruments.
Trade and receivable balances are monitored on an ongoing basis with the Group’s exposure to bad debts
minimal. There was no exposure to trade receivable credit risk at balance date.
The Group does not have any material credit risk exposure to any single receivable or Group of receivables
under financial instruments entered into by the Group.
Other receivables comprise GST. Credit worthiness of debtors is undertaken when appropriate.
29
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
(vi) Commodity risk
Commodity price risk arises when the fair value of future cash flows of a financial instrument will fluctuate
because of changes in commodity market prices.
The Group had no exposure to commodity price risk at balance date. The Group’s potential exposure to
commodity price risk will materialise in the event that development of the Group’s Latrobe Magnesium
Project proceeds.
(vii) Market risk
Market risk does not arise as the Group does not use interest bearing, tradeable or foreign currency
financial instruments.
As the financial assets held by the company as at 30 June 2016 were cash and cash equivalents and trade
and other receivables, and the value of these financial assets are not affected by the short-term movement
in interest rates, a market risk sensitivity has not been performed.
(viii) Equity price risk
Equity price risk arises from investments in equity securities and Latrobe Magnesium Limited’s issued
capital.
The Group had no exposure to investments in equity securities at balance date.
The capacity of the Company to raise capital from time to time may be influenced by either or both market
conditions and the price of the Company’s listed securities at that time.
d.
Fair value of financial assets and liabilities
The fair value of all monetary financial assets and financial liabilities of Latrobe Magnesium approximate
their carrying value.
There are no off-balance sheet financial asset and liabilities at year-end. All financial assets and liabilities
are denominated in Australian dollars.
NOTE 3: LOSS FROM ORDINARY ACTIVITIES
The following revenue and expense items are relevant in explaining the financial
performance for the period.
(i)
Revenue
Finance Income
Other Income
Research and development tax rebate
(ii)
Expenses
Depreciation
Research and evaluation expenses
Directors Fees
GROUP
2016
$
2015
$
11,115
7,784
560,453
421,651
571,568
429,435
1,051
675,614
400,635
509
268,376
391,504
30
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 4: INCOME TAX EXPENSE
GROUP
2016
$
2015
$
The prima facie tax on loss from ordinary activities before income tax is reconciled
to the income tax benefit as follows:
Loss from ordinary activities before income tax
1,087,123
691,251
Prima facie tax benefit on loss from ordinary activities before income tax at 30%
326,137
207,375
Permanent differences relating to R&D claim
Increase in income tax benefit due to timing differences
(205,499)
(154,606)
5,354
7,894
Tax losses not brought to account as future income tax benefit.
(125,992)
(60,663)
Income tax benefit attributable to loss from ordinary activities before
income tax
-
-
Net deferred tax asset not taken to account
The potential future income tax benefit arising from tax losses has not been taken to account because of the
absence of convincing evidence of the realisation of the benefit.
Benefit of tax losses carried forward:
Tax losses carried forward
Capital losses
GROUP
2016
$
2015
$
1,930,780
1,804,788
818,514
818,514
2,749,294
2,623,302
The deferred tax asset will only be released if:
i.
the Group derives future assessable income of a nature and an amount sufficient to enable the benefit to be
realised;
the Group continues to comply with the conditions for deductibility imposed by the law; and
ii.
iii. no changes in tax legislation adversely affect the Group in realising the benefit.
NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank
GROUP
2016
$
2015
$
13,946
614,755
31
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 6: TRADE AND OTHER RECEIVABLES
CURRENT
R&D tax concession
GST recoverable
Promissory Note
Prepayment
NON-CURRENT
Rent Bond held in bank deposit
GROUP
2016
$
2015
$
560,453
421,651
45,102
49,095
7,999
47,687
47,173
-
662,649
516,511
16,993
16,993
16,993
16,993
There are no balances within trade and other receivable that are impaired and are past due. It is expected these
balances will be received when due. Impaired assets are provided for in full.
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
Plant and equipment at cost
Accumulated depreciation
Total Property, Plant and Equipment
Movements in Carrying Amounts
GROUP
2016
$
4,777
2015
$
3,068
(2,824)
(1,773)
1,953
1,295
Between the beginning and the end of the current financial year, movements in the carrying amounts for each class
of property, plant and equipment are:
Balance at 1 July
Additions
Depreciation expense
Carrying amount at 30 June
Plant and
Equipment
2016
Plant and
Equipment
2015
$
1,295
1,709
(1,051)
1,953
$
497
1,307
(509)
1,295
32
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 8: INTANGIBLE ASSETS
Acquired in-process research and development, at cost
Latrobe Magnesium Project based in the Latrobe Valley in Victoria. As the
project is not held ready for use, the Company is required to perform an annual
impairment test. The key assumptions underlying this impairment test have
been based on data provided in the Company’s Pre-feasibility and Adjustment
Studies and subsequent reports. The key assumptions are adjusted to
incorporate risks with a particular segment, and are summarised as follows:
•
budgeted cash flow period of 20 years;
•
initial production of 5,000 tonnes per annum increasing to 40,000 tonnes;
• magnesium metal price of A$4,162 per tonne is used which represents the
current average price between China and the United States.
• market information for forward exchange rates;
•
•
•
operating costs based upon third party consultant’s estimates;
capital costs based upon stage 2 of the feasibility study; and
a pre-tax discount rate of 18%.
International Patent – Joint worldwide patent application with Ecoengineers for
the Hydromet Process
Total Intangible Assets
NOTE 9: BORROWINGS
CURRENT
Secured Loan
GROUP
2016
$
5,684,000
2015
$
5,684,000
70,617
46,298
5,754,617
5,730,298
GROUP
2016
$
2015
$
324,094
196,750
On 16 October 2015, the loan was renewed and increased to $600,000 to progress the development of the Latrobe
Valley magnesium project and the provision of working capital. This loan amount included the capitalised interest
for the next 12 months. It is secured by a fixed and floating charge over the assets of the Company for a term of
12 months.
Details of the loan outstanding as at 30 June 2016 are as follows:
Loan as at 16 October 2015
Repayment by issue of 5,000,000 shares at $0.015 in April 2016
Repayment by issue of 11,671,063 shares at $0.015 in June 2016
Interest payable at 30 June 2016
Loan as at 30 June 2016
Repayment by issue of 6,497,585 shares at $0.015 in August 2016
Unearned interest to 16 October 2016
Total Loan as at 16 October 2016
$
521,739
(75,000)
(175,066)
52,421
324,094
(97,464)
10,281
236,911
12 months to 16 October 2016
The key terms are:
Term:
Interest Rate: 15% per annum payable in arrears
Repayment: Upon receipt of the R&D Tax Incentive refund of $560,453
Conversion:
The lenders have the right to convert any part of their loan at the lower of the following:
1. $0.015 per share; and
2. The price of the most recently issued LMG shares throughout the Term excluding any issued
alongside this Loan. In the event of multiple issuances of shares during the term, the Lender
has up to 24 hours post the announcement of the subsequent shares being issued to determine
if they wish to convert on the basis of a prior price.
33
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
The conversion of the loan or part thereof will result in the cessation of the accrual of the interest in
respect of the amount converted. To the extent the amount of the interest that becomes accrued
is less than the amount of interest prepaid, the loan amount shall be reduced by the amount of
deficiency.
NOTE 10: TRADE AND OTHER PAYABLES
CURRENT
Trade creditors and accrued expenses
281,442
66,826
GROUP
2016
$
2015
$
NOTE 11: ISSUED CAPITAL
(a) Ordinary Shares Issued and Fully Paid
GROUP
2016
$
2015
$
Balance at beginning of reporting period
28,670,152
27,322,282
07 & 13 Nov 2014 10,000,000 shares issued at $0.010 to convert unlisted
09 Dec 2014
02 Jan 2015
15 Apr 2015
22 May 2015
09 Oct 2015
27 Apr 2016
convertible securities to shares
9,733,750 shares issued at $0.008 to convert outstanding
fees owing to officeholders and consultant
7,500,000 shares issued at $0.010 to convert unlisted
convertible securities to shares
90,000,000 shares issued at $0.010 pursuant to a private
placement
Placement Fees
23,500,000 shares issued at $0.010 pursuant to a Share
Purchase Plan
6,540,300 shares issued at $0.010 to convert unlisted
convertible securities to shares
5,000,000 shares issued at $0.015 to convert unlisted
convertible securities to shares
-
-
-
-
-
-
65,403
75,000
08 & 23 Jun 2016 11,671,063 shares issued at $0.015 to convert unlisted
175,066
convertible securities to shares
100,000
77,870
75,000
900,000
(40,000)
235,000
-
-
-
(b) Shares on Issue
Balance at beginning of reporting period
Share on Issues:
•
•
•
•
•
•
•
•
07 & 13 November 2014
09 December 2014
06 January 2015
15 April 2015
22 May 2015
09 October 2015
27 April 2016
08 & 27 June 2016
Balance at end of reporting period
28,985,621
28,670,152
No.
1,067,356,869
No.
926,623,119
-
-
-
-
-
6,540,300
5,000,000
11,671,063
10,000,000
9,733,750
7,500,000
90,000,000
23,500,000
-
-
-
1,090,568,232 1,067,356,869
34
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
Fully paid ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the
number of shares held.
At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
Options
At the date of this report, there were no unissued shares under option. There are 5,000,000 unlisted options
exercisable at $0.015 at any time prior to 16 December 2016.
Employee Share Plan Scheme
For information relating to the Latrobe Magnesium Limited Share Plan Acquisition Plan, refer to Note 20: Employee
Benefits. No shares were issued during the financial year.
Capital Management
The Group considers its capital to comprise its ordinary share capital and reserves.
In managing its capital, the Group’s primary objective as an explorer is to maintain a sufficient funding base to
enable the Group to meet its working capital and the development of its Latrobe magnesium project.
The Group raised a secured short term loan of $600,000 maturing in October 2016, this loan has been partly repaid
and the balance on maturity is $236,911, repayment may be made as follows:
•
•
upon receipt of the R&D Tax Incentive refund of $560,453; or
convert this loan to ordinary shares at $0.015 per share at any time up to 16 October 2016.
In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy,
new share issues, or consideration of debt, the Group considers not only its short-term position but also its long-
term operational and strategic objectives.
NOTE 12: CONTROLLED ENTITIES
Parent Entity:
Latrobe Magnesium Limited
Subsidiaries of Latrobe Magnesium Limited
Money Management WA Pty Ltd
Gold Mines of WA Pty Ltd
Magnesium Investments Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Australia
NOTE 13: CAPITAL AND LEASING COMMITMENTS
Operating lease commitments
Percentage Owned
2016
%
-
100
100
100
2015
%
-
100
100
100
The Company’s office lease will be expiring on 30 September 2016. The monthly rent and outgoings of $4,992 is
payable monthly in advance. The Company has been discussing with the property manager to renew the lease for
a further 3 years at the current rent.
Future non-cancellable operating lease rentals not provided for and payable:
Not later than one year
Later than one year and not later than five years
Later than five years
GROUP
2016
$
14,976
-
-
14,976
2015
$
57,528
14,382
-
71,910
35
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
The Company extended its option agreement to lease a property at 320 Tramway Road, Morwell, Victoria for a
further 6 months with the payment of an option fee of $25,000. This agreement expires in January 2017. This site
is intended for the installation of the future magnesium plant and associated facilities.
NOTE 14: SEGMENT REPORTING
The Group has adopted AASB 8 Operating Segments with effect from 1 July 2009. AASB 8 requires operating
segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker in order to allocate resources to the segments and to assess their
performance. In contrast, the predecessor Standard (AASB 114 Segment Reporting) required an entity to identify
two sets of segments (business and geographical), using a risks and returns approach, with the entity’s system of
internal financial reporting to key management personnel’ serving only as the starting point for the identification of
such segments. As a result, following the adoption of AASB 8, the Board of Directors believe there is only one
operating segment and this is reflected in managements reporting processes.
AASB 8 requires a management approach under which segment information is presented on the same bases as
that used for internal reporting purposes. The Group consist one business segment being the development of its
Latrobe magnesium project.
NOTE 15: REMUNERATION OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
Names and positions held of parent entity Directors at any time during the financial year are:
Jock Murray
David Paterson
Kevin Torpey
Philip Bruce
John Lee
Chairman - Non-Executive
Chief Executive Officer
Director - Executive
Director - Non-Executive
Director - Non Executive
Directors & Other Key
Management Personnel
Base Emolument
$
2016
2015
400,635
391,504
Superannuation
$
-
-
Total
$
Performance Related
%
400,635
391,504
-
-
Shareholdings
Number of shares held by Directors and Other Key Management Personnel of Parent Entity.
Directors & Other Key
Management Personnel
Balance at
beginning of
date of
appointment
Acquired under
Share Purchase Plan
for Shareholders
Net Change
Other
Acquired Under
Debt Conversion
to Equity
Balance at 30
June 2016
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Option holdings
11,400,000
35,933,333
65,333,334
3,441,490
-
-
11,333,333
7,583,333
1,500,000
1,500,000
-
6,412,399
9,592,595
-
-
-
46,310,935
17,024,129
6,129,949
3,179,750
11,400,000
99,990,000
99,533,391
11,071,439
4,679,750
There were no options over unissued shares in the Company held during the financial year by any Director or key
management personnel of the Company including their related entities.
36
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 16: RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and conditions, no more favourable than
those available to other parties unless otherwise stated.
Transactions with and amounts receivable from and payable to Directors of related parties or their director related
entities which:
a.
b.
c.
(i)
(ii)
(iii)
(iv)
occur within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those which it is resonable to expect the entity would have adopted if dealing with the director
or director related entities at arms length in the same circumstances;
do not have the potential to adversely affect decisions about the allocations of scarce resources made by
users of the financial report, or the discharge of accountability by the director’s if disclosed in the financial
report only by general description; and
are trivial or domestic in nature must be excluded from the detailed disclosures required. Such transactions
and amounts receivable or payable shall be disclosed in the financial report by general description.
Other related entities
Director’s fees were paid to J S Murray Pty Ltd of which J S Murray is a
principal.
GROUP
2016
$
2015
$
60,000
10,000
Director’s fees were paid to Famallon Pty Ltd of which K A Torpey is a
principal.
35,427
76,296
Director’s fees were paid to Stockholders Relation Pty Ltd of which J R
Lee is a principal.
21,804
21,804
Administration and accounting fees were paid to Europacific Corporate
Advisory Pty Ltd of which D O Paterson is a principal.
12,000
12,000
NOTE 17: CASH FLOW INFORMATION
a.
Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of cash flows
is reconciled to items in the statement of financial position as follows:
Cash at Bank
13,946
614,755
b. Reconciliation of cash flow from operating activities to operating loss
GROUP
2016
$
2015
$
after income tax:
Net loss
Adjustment of non cash items:
Depreciation
Shares issued to settle cost of borrowing
Shares issued to settle loans from officeholders and consultant
Changes in Assets and Liabilities:
Decrease/(Increase) in receivables and other assets
(Decrease)/Increase in trade and other payables
Net Cash used in Operating Activities
(1,087,123)
(691,251)
1,051
23,778
-
509
10,976
77,870
(147,847)
231,039
(37,402)
(9,339)
(979,102)
(648,637)
37
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
c. Acquisition and Disposal of Entities
There was no acquisition or disposal of controlled entities during the 2016 or 2015 financial years.
d. Non-cash Financing and Investing Activities
2016
Fully Paid Ordinary Share
October 2015
April 2016
June 2016
2015
November 2014
December 2014
6,540,300
5,000,000
11,671,063
issued at $0.010 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
10,000,000
9,733,750
issued at $0.010 to convert unlisted convertible securities to shares
issued at $0.008 to convert outstanding fees owing to officeholders and
consultant
issued at $0.010 to convert unlisted convertible securities to shares
January 2015
7,500,000
NOTE 18: LOSS PER SHARE
Reconciliation of loss to net loss:
(a) Basic and diluted loss per share
cents per shares
(0.10)
(0.072)
(b) Loss used in the calculation of EPS
$
(1,087,123)
(691,251)
(c) Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
1,073,347,734
963,239,424
GROUP
2016
2015
There were no unissued shares under option at 30 June 2016.
NOTE 19: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities for the year ended 30 June 2016 (2015 : Nil).
NOTE 20: EMPLOYEE BENEFITS
Employees Share Acquisition Plan
The Directors have approved the implementation of a Share Acquisition Plan.
The Plan provides for eligible participants to purchase shares in the Company tax effectively through salary
sacrifice. Shares will be acquired on the Australian Stock Exchange at prevailing market prices on or about the first
trading day following the normal monthly pay day. The shares including transaction costs will be met by the pre-
tax remuneration forgone by the Plan participant. Administration costs of the Plan will be met by the Company.
The minimum contribution under the Plan is $2,400 per annum. Participants can allocate up to 100% of their gross
remuneration.
During the period under review and the previous corresponding period, there were no shares purchased in
accordance with the employee share acquisition plan.
38
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 21: UNLISTED CONVERTIBLE SECURITIES
Under the loan agreement, the lenders elected to make the following conversions, these conversions are shown in
Note 9.
09 October 2015 6,540,300 shares issued @$0.010 to convert unlisted convertible securities to shares
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
27 April 2016
5,000,000 shares issued @$0.015 to convert unlisted convertible securities to shares
07 June 2016
6,671,063 shares issued @$0.015 to convert unlisted convertible securities to shares
23 June 2016
As the securities were converted before 16 October 2016 there was an adjustment made to the interest owing under
the loan which also reduced the number of shares issued.
In August 2016, a lender elected to convert unlisted convertible securities to 6,497,585 ordinary share at $0.015.
The balance of the loan and interest accrued to 16 October 2016 is $236,911 which can be converted to shares at
$0.015 at any time prior to 16 October 2016.
NOTE 22: UNLISTED OPTIONS
On 20 October 2015 the Company issued 5,000,000 Unlisted Options exercisable at $0.015 at any time prior to 16
December 2016 in respect of professional services provided for raising $600,000 loan under the terms of the loan
facility. The value of the Options using the Black Scholes Option Value method is $7,633.
NOTE 23: EVENTS SUBSEQUENT TO REPORTING DATE
There are significant events subsequent to reporting date which affect the operations and state of affairs of the
Group.
•
•
•
•
the acquisition of the remaining 50% interest in the hydromet process.
the share placement on 14 July 2016 for $1,000,000;
the share purchase plan raising of $1.8 million on 3 August 2016; and
the conversion of unlisted convertible securities to 6,497,585 ordinary shares at $0.015 on 4 August 2016.
NOTE 24: GOING CONCERN
Notwithstanding the loss for the year, negative cash flow from operations and historical financial performance, the
financial report has been prepared on a going concern basis. The assessment is based on a cash on hand balance
at balance date, the collection of trade and other receivables after year end and the capital raising detailed in Note
23.
The Directors have performed a review of the cash flow forecasts and have considered the cash flow needs of the
company and consolidated group, including the ability to reduce the level of cash expenditure if required to do so.
Directors have initiated discussions with a number of parties that have expressed interest in supporting the
Company with its working capital requirements. At this time no financial commitment is contracted but discussions
are continuing. The Company does have the ability to raise extra funds through a placement if required. However,
should sufficient and appropriate capital not be available to the company on a timely basis the Directors will require
the cessation of the magnesium project and a further reduction in expenditure on staff and Directors. The business
would, under this scenario, continue to operate on existing capital reserves.
The Company has prepared cash flow forecasts for this base case scenario and the Directors are therefore satisfied
that the Company will be able to continue to operate as a going concern on this basis.
39
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 25:
PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2016 the parent entity of the Group was Latrobe Magnesium
Limited.
Result of parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of the financial entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Total equity of the parent entity comprising of
Issued capital
Accumulated Losses
Total equity
Parent entity contingencies
The parent entity has no significant contingent liabilities.
2016
$
(1,087,123)
-
(1,087,123)
676,595
5,834,901
6,511,496
605,536
-
605,536
2015
$
(691,251)
-
(691,251)
1,131,266
5,809,925
6,941,191
263,576
-
263,576
5,905,960
6,677,615
28,985,621
(23,079,661)
28,670,152
(21,992,537)
5,905,960
6,667,615
Parent entity capital commitments for the acquisition of property, plant or equipment.
The parent entity has not entered any contractual commitments for the acquisition of property, plant or equipment.
Parent entity guarantees in respect of the debts of the subsidiaries
The parent entity has not entered into deed of guarantee with the effect that the Company guarantees debts in
respect of its subsidiaries.
NOTE 26: AUDITOR’S REMUNERATION
Details of the amounts paid or payable to Nexia Australia for services provided during the year are set out below.
Audit and Review of Financial Reports
Taxation Services
GROUP
2016
$
32,000
3,000
35,000
2015
$
32,000
3,000
35,000
The Board of Directors ensure that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001.
40
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
NOTE 27: NEW ACCOUNTING STANDARDS AND AMENDMENTS
In the current year, the Group has applied the amendments to AASBs issued by the Australian Accounting
Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2015,
and therefore relevant for the current year end.
Australian Accounting
Standard
AASB 2012-3
Amendments to
Australian Accounting
Standards arising from
the Withdrawal of
AASB 1031 Materiality
Key Requirements
This amendment completes the withdrawal of references to AASB 1031 in all Australian
Accounting Standards and Interpretations, allowing that Standard to effectively be
withdrawn
The application of these amendments does not have any material impact on the disclosures or the amounts
recognised in the Group's consolidated financial statements.
NOTE 28:
ACCOUNTING STANDARDS NOT YET EFFECTIVE AND NOT BEEN ADOPTED EARLY BY THE
GROUP
A number of Australian Accounting Standards and Interpretations are in issue but are not effective for the current
year end. The following existing group accounting policies will change on adoption of these pronouncements:
Australian Accounting
Standard
AASB 9 Financial
Instruments, and the
relevant amending
standards
Effective
Date
1 January
2018
Key requirements
AASB 9 issued in December 2009 introduced new requirements for the
classification and measurement of financial assets. AASB 9 was subsequently
amended in December 2010 to include requirements for the classification and
measurement of financial liabilities and for derecognition, and in December 2013
to include the new requirements for general hedge accounting. Another revised
version of AASB 9 was issued in December 2014 mainly to include a) impairment
requirements for financial assets and b) limited amendments to the classification
and measurement requirements by introducing a ‘fair value through other
comprehensive income’ (FVTOCI) measurement category for certain simple debt
instruments.
Key requirements of AASB 9:
•
all recognised financial assets that are within the scope of AASB 9 are required
to be subsequently measured at amortised cost or fair value. Specifically, debt
investments that are held within a business model whose objective is to collect
the contractual cash flows, and that have contractual cash flows that are solely
payments of principal and interest on the principal outstanding are generally
measured at amortised cost at the end of subsequent accounting periods. Debt
instruments that are held within a business model whose objective is achieved
both by collecting contractual cash flows and selling financial assets, and that
have contractual terms that give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding,
are generally measured at FVTOCI. All other debt investments and equity
investments are measured at their fair value at the end of subsequent
accounting periods. In addition, under AASB 9, entities may make an
irrevocable election to present subsequent changes in the fair value of an
equity investment (that is not held for trading) in other comprehensive income,
with only dividend income generally recognised in profit or loss.
• with regard to the measurement of financial liabilities designated as at fair
value through profit or loss, AASB 9 requires that the amount of change in fair
value of the financial liability that is attributable to changes in the credit risk of
that liability is presented in other comprehensive income, unless the
41
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
•
•
recognition of the effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an accounting mismatch in
profit or loss. Changes in fair value attributable to a financial liability’s credit
risk are not subsequently reclassified to profit or loss. Under AASB 139
‘Financial Instruments: Recognition and Measurement’, the entire amount of
the change in the fair value of the financial liability designated as fair value
through profit or loss is presented in profit or loss.
in relation to the impairment of financial assets, AASB 9 requires an expected
credit loss model, as opposed to an incurred credit loss model under AASB
139. The expected credit loss model requires an entity to account for expected
credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition. In other words, it
is no longer necessary for a credit event to have occurred before credit losses
are recognised.
the new general hedge accounting requirements retain the three types of
hedge accounting mechanisms currently available in AASB 139. Under AASB
9, greater flexibility has been introduced to the types of transactions eligible
for hedge accounting, specifically broadening the types of instruments that
qualify for hedging instruments and the types of risk components of non-
financial items that are eligible for hedge accounting. In addition, the
effectiveness test has been overhauled and replaced with the principle of an
‘economic relationship’. Retrospective assessment of hedge effectiveness is
also no longer required. Enhanced disclosure requirements about an entity’s
risk management activities have also been introduced.
AASB 9 applies to annual periods beginning on or after 1 January 2018. The
directors of the Company anticipate that the application of AASB 9 in the future
may have a material impact on amounts reported in respect of the Group's financial
assets and financial liabilities. However, it is not practicable to provide a reasonable
estimate of the effect of AASB 9 until the Group undertakes a detailed review.
AASB 15 Revenue
from Contracts with
Customers’
AASB 15 establishes a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers. AASB 15 will
supersede the current revenue recognition guidance including AASB 118
‘Revenue,’ AASB 111 ‘Construction Contracts’ and the related interpretations when
it becomes effective.
1 January
2018
The core principle of AASB 15 is that an entity should recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those
goods or services. Specifically, the Standard introduces a 5-step approach to
revenue recognition:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations in the
contract
• Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation
Under AASB 15, an entity recognises revenue when (or as) a performance
obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the
particular performance obligation is transferred to the customer.
AASB 15 applies to annual periods beginning on or after 1 January 2018. The
directors of the Company anticipate that the application of AASB 15 in the future
may have a material impact on the amounts reported and disclosures made in the
Group's consolidated financial statements. However, it is not practicable to provide
a reasonable estimate of the effect of AASB 15 until the Group performs a detailed
review.
42
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
AASB 16 Leases
AASB 16 provides a comprehensive model for the identification of lease
arrangements and their treatment in the financial statements of both lessees and
lessors.
1 January
2019
AASB 2014-3
Amendments to
Australian Accounting
Standards–Accounting
for Acquisitions of
Interests in Joint
Operations
AASB 2015-1
Amendments to
Australian Accounting
Standards - Annual
Improvements to
Australian Accounting
Standards 2012-2014
Cycle
The accounting model for lessees will require lessees to recognise all leases on
balance sheet, except for short-term leases and leases of low value assets.
AASB 16 applies to annual periods beginning on or after 1 January 2019. The
directors of the Company anticipate that the application of AASB 16 in the future
may have a material impact on the amounts reported and disclosures made in the
Group's consolidated financial statements. However, it is not practicable to provide
a reasonable estimate of the effect of AASB 16 until the Group performs a detailed
review.
The amendments to AASB 11 provide guidance on how to account for the
acquisition of a joint operation that constitutes a business as defined in AASB 3
‘Business Combinations’. Specifically, the amendments state that the relevant
principles on accounting for business combinations in AASB 3 and other standards
(e.g. AASB 112 ‘Income Taxes’ regarding the recognition of deferred taxes at the
time of acquisition and AASB 136 ‘Impairment of Assets’ regarding impairment
testing of a cash generating unit to which goodwill on acquisition of a joint operation
has been allocated) should be applied. The same requirements should be applied
to the formation of a joint operation if, and only if, an existing business is contributed
to the joint operation by one of the parties that participate in the joint operation.
A joint operator is also required to disclose the relevant information required by
AASB 3 and other standards for business combinations.
The amendments should be applied prospectively to acquisitions of interests in joint
operations (in which the activities of the joint operations constitute businesses as
defined in AASB 3) occurring from the beginning of annual periods beginning on or
after 1 January 2016. The directors of the Company anticipate that the application
of these amendments to AASB 11 may have an impact on the Group's consolidated
financial statements in future periods should such transactions arise.
1 January
2016
The Annual Improvements to Australian Accounting Standards 2012-2014 Cycle
include a number of amendments to various AASB’s, which are summarised below.
1 January
2016
The amendments to AASB 5 introduce specific guidance in AASB 5 for when an
entity reclassifies an asset (or disposal group) from held for sale to held for
distribution to owners (or vice versa). The amendments clarify that such a change
should be considered as a continuation of the original plan of disposal and hence
requirements set out in AASB 5 regarding the change of sale plan do not apply.
The amendments also clarify the guidance for when held for distribution accounting
is discontinued.
The amendments to AASB 7 provide additional guidance to clarify whether a
servicing contract is continuing involvement in a transferred asset for the purpose
of the disclosures required in relation to transferred assets.
The amendments to AASB 119 clarify that the rate used to discount post-
employment benefit obligations should be determined by reference to market yields
at the end of the reporting period on high quality corporate bonds. The assessment
of the depth of a market for high quality corporate bonds should be at the currency
level (i.e. the same currency as the benefits are to be paid). For currencies for
which there is no deep market in such high quality corporate bonds, the market
yields at the end of the reporting period on government bonds denominated in that
currency should be used instead.
The amendments apply to annual periods beginning on or after 1 January 2016.
The directors of the Company do not anticipate that the application of these
amendments will have a material effect on the Group's consolidated financial
statements.
AASB 2015-2
Amendments to
Australian Accounting
The amendments to AASB 101 give some guidance on how to apply the concept
of materiality in practice.
1 January
2016
43
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2016
Standards – Disclosure
Initiative: Amendments
to AASB 101
AASB 2016-2
Amendments to
Australian Accounting
Standards – Disclosure
Initiative: Amendments
to AASB 107
The amendments apply to annual periods beginning on or after 1 January 2016.
The directors of the Company do not anticipate that the application of these
amendments to AASB 101 will have a material impact on the Group's consolidated
financial statements
Amends AASB 107 ‘Statement of Cashflows’ to require entities to provide
disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash
flows and non-cash changes.
1 January
2017
The amendments apply to annual periods beginning on or after 1 January 2017.
The directors of the Company do not anticipate that the application of these
amendments to will have a material impact on the Group's consolidated financial
statements.”
44
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LATROBE MAGNESIUM LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Latrobe Magnesium Limited, which comprises the
statement of financial position as at 30 June 2016, statement of profit or loss and other comprehensive
income, statement of changes in equity and cash flow statement for the year ended on that date, a
summary of significant accounting policies, other explanatory notes and the directors’ declaration of the
consolidated entity comprising the disclosing entity and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the disclosing entity 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial statements comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report
that gives a true and fair view 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.
45
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001. We confirm that the independence declaration required by the Corporations Act 2001 would be in
the same terms if it had been given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of Latrobe Magnesium Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial statements also comply with International Financial Reporting Standards as disclosed in
Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 14 of the directors’ report for the year
ended 30 June 2016. 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.
Opinion
In our opinion, the Remuneration Report of Latrobe Magnesium Limited for the year ended 30 June 2016,
complies with section 300A of the Corporations Act 2001.
Nexia Court & Co
Chartered Accountants
Joseph Santangelo
Partner
Sydney, 9 September 2016
46
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
ADDITIONAL INFORMATION
The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public
companies only.
SHAREHOLDING
a. Distribution of Shareholders as at 31 August 2016
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Total holders
Units % of Issued Capital
192
295
225
733
798
85,909
969,134
1,919,153
34,153,918
1,198,753,104
0.01
0.08
0.16
2.75
97.00
Total
2,243
1,235,881,218
100.00
b. The number of shareholdings held in less than $500 unmarketable parcels is 813.
c. Substantial Shareholders
The names of the substantial shareholders listed in the holding Company’s register as at 7 September 2016
No. Shareholder Name
Rimotran Pty Ltd
1
10 David Oliver Paterson
Total
2
7
Famallon Pty Ltd
Famallon Pty Ltd
Total
d. Voting Rights
Number of Ordinary
Interest
Fully Paid Shares Held
(%)
95,375,778
4,998,837
100,374,615
80,194,358
19,915,956
100,110,314
7.72
0.40
8.12
6.49
1.61
8.10
The voting rights attached to each class of equity security are as follows:
Ordinary shares
(i)
(ii)
(iii)
At meetings of members each member is entitled to vote in person or by proxy or attorney or, in the
case of a member which is a body corporate, by representative duly authorized.
On a show of hands every member entitled to vote and be present in person or by proxy or attorney
or representative duly authorized shall have one (1) vote.
On a poll every member is entitled to vote and be present in person or by proxy or attorney or
representative duly authorized shall have one (1) vote for each fully paid share of which they are a
holder.
47
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
ADDITIONAL INFORMATION
e. Twenty largest shareholders as at 7 September 2016
Rank Top Shareholders – Ungrouped
Number of Ordinary Fully
Paid Shares Held
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
18.
20.
Rimotran Pty Ltd
Famallon Pty Ltd
CSH Engineering Pty Ltd
95,375,778
80,194,358
46,154,798
Gibbs Plumbing Services Pty Ltd
40,111,706
S A Short Pty Ltd
JJ Wolfe Holdings Pty Limited
30,000,000
25,020,969
Arco Four Investments Pty Ltd
24,140,483
Famallon Pty Ltd
Ableside Pty Ltd
Stefan Group Pty Ltd
Mr Brett Roy Morrison + Mrs Donna-Maree Earle Morrison
HSBC Custody Nominees (Australia) Limited
Mr Antonino Galipo
Murraysetter Pty Ltd
Wiljoeana Pty Ltd
Mrs Robyn Ann Lys
Lyndcote Super Pty Ltd
Mrs Carmela Adele Murray
Diazill Pty Limited
Mr Leslie Robert Knight + Mrs Heather Margery Knight + Mr Timothy
Paul Knight
19,915,956
15,647,230
14,660,794
13,456,923
12,644,878
12,560,000
11,976,923
11,706,923
11,559,096
10,961,538
10,580,777
10,559,497
10,000,000
Holding
%
7.72
6.49
3.73
3.25
2.43
2.02
1.95
1.61
1.27
1.19
1.09
1.02
1.02
0.97
0.95
0.94
0.89
0.86
0.85
0.81
507,228,627
41.04
48
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
CORPORATE GOVERNANCE STATEMENT
OVERVIEW
The Company and the Board of Directors are committed to achieving and demonstrating the highest standards of
corporate governance and aim to comply with the Corporate Governance Principals and Recommendations set by
the ASX Corporate Governance Council.
However, given the current size of both the Company’s operations and the Board of Directors, it is not appropriate,
cost effective or practical to comply fully with those principles and recommendations. Where a recommendation has
not been followed, this fact has been disclosed together with the reasons for the departure.
Consistent with the ASX recommendations, the Company’s corporate governance practices are regularly reviewed.
Principle 1 – Lay solid foundations for management and oversight
The respective roles and responsibilities of the Board and management are set out below.
1.1
Board and Management Responsibilities
The Board of Directors is accountable to shareholders for the performance of the Group. In carrying out its
responsibilities, the Board undertakes to serve the interest of shareholders honestly, fairly and diligently. The Board’s
responsibilities are reviewed annually to determine whether any changes are necessary or desirable. The
responsibilities of the Board include:
reporting to shareholders and the market;
ensuring adequate risk management processes exist and are complied with;
reviewing internal controls and external audit reports;
ensuring regulatory compliance;
•
•
•
•
• monitoring financial performance, including approval of the annual and half-yearly financial reports and liaison
with the Company auditors;
reviewing the performance of senior management;
•
• monitoring the Board composition, Director selection and Board processes and performance;
•
•
•
validating and approving corporate strategy;
reviewing the assumptions and rationale underlying the annual plans; and
authorising and monitoring major investment and strategic objectives of the Company.
1.2
Appointment of Directors
The background, experience and qualification of a Director are thoroughly assessed before appointment. This
information is provided to shareholders through announcement to the market.
Information on each Director’s background, experience and qualification can be found on pages 10-12 of the
Director’s Annual Report. Shareholders may rely on this information in relation to re-election of Directors.
1.3
Written Contract of Appointment
The Company issues a formal letter of appointment for new Directors or senior executives setting out the terms and
conditions relevant to that appointment and the expectations of the role of the director. The Company also provides
a formal induction process which provides key information on the nature of the business and its operations.
1.4
Company Secretary
A Director of the Company also takes on the role of Company Secretary. His major functions are:
advising the board and committee on governance issues;
•
• monitoring company policies are followed;
•
•
coordinating and timing despatching of Board and committee papers; and.
ensuring that the business at Board and committee meetings are accurately captured in the minutes.
1.5
Diversity
The Company is yet to establish a diversity policy although it recognizes the benefits of diversity at Boards, in
senior management and within the organisation generally and recognizes the organisational strengths, deeper
problem solving ability and opportunity for innovation that diversity brings to an organisation.
The Company does not currently comply with this recommendation which requires ASX listed entities to establish
a diversity policy which includes a requirement that:
•
•
the Board establish measurable objectives for achieving gender diversity; and
the Board assess annually both the measurable objectives for achieving diversity and the process in achieving
them.
49
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
CORPORATE GOVERNANCE STATEMENT
The implementation of an appropriate diversity policy to reflect the circumstances of the Company and the industry
in which the Company operates is currently under review with this task being considered by the full Board.
While no formal policy is currently in place the Company is committed to providing an environment in which all
employees are treated with fairness, respect and have equal access to employment opportunities at work.
Currently, female employees are not represented in the Company’s workforce, in senior executive positions and as
members of the Board.
1.6
Board Reviews
An independent Chairman was appointed on 1 May 2015, he is responsible for leading the Board, ensuring that Board
activities are organised and efficiently conducted and for ensuring the Directors are properly briefed for meetings.
The Chairman and the CEO are responsible for implementing the Group’s strategies and Board policies.
A formal charter is in place which lays out the duties and responsibilities of the CEO. This charter also requires that
the responsibilities and accountabilities of both the Board of Directors and the CEO are clearly defined. The
assessment and monitoring of the CEO is the chief responsibility of the Board. Performance is assessed against
pre-determined objectives on a regular basis.
The Chairman’s other responsibilities include:
Ensuring that general meetings are conducted efficiently and shareholders have adequate opportunity to air their
views and obtain answers to their queries.
Present the view of the Board formally.
1.7
Management Reviews
The Board evaluates the performance of the senior executives and consultants and discharges its responsibilities in
relation to remuneration of executives. In meeting this purpose, the Board’s duties include :
regularly reviewing the executive remuneration policy of the Company to ensure that it is clearly linked to the
performance of the Company and it motivates senior executives to pursue both short term deliverables and long
term growth;
reviewing all aspects of the remuneration (including base pay, incentive payments, equity awards, retirement
rights and service contracts) and any proposed change to the terms of employment of the CEO and his or her
direct reports;
developing and reviewing appropriate succession plans for key executives; and
reviewing the recruitment, retention and termination policies and procedures for senior executives.
The Board has available to it the services of independent professional advisers to assist in the search for high calibre
people at all levels and to ensure that the terms and conditions offered by the Company are competitive with those
offered by comparable companies.
Principle 2 – Structure the Board to add value
The composition of the Board is structured to efficiently discharge its responsibilities and duties.
2.1
Nomination committee
The Board has not yet formed a separate nominations committee and all matters that would normally be the
responsibility of a nominations committee are dealt with by the full Board of Directors.
The Board reviews its composition on an annual basis to ensure that the Board has the appropriate mix of expertise
and experience. When a vacancy exists, for whatever reasons, or where it is considered that the Board would benefit
from the services of a new Director with particular skills, the Board will select appropriate candidates with relevant
qualifications, skills and experience.
External advisers may be used to assist in such a process. The Board will then appoint the most suitable candidate
who must stand for election at the next general meeting of shareholders.
For Directors retiring by rotation, the Board assesses that director before recommending re-election.
The Board considers the Company and the Board are currently not of sufficient size to justify the establishment of a
separate Nomination Committee.
2.2
Board Skills Matrix
The Board of Directors is comprised of a non-executive Chairman, three non-executive Directors and a Chief
Executive Officer, all of whom have a broad range of skills and experience. Information of each Director is on Page
10-12 of the Director’s Report.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
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CORPORATE GOVERNANCE STATEMENT
Each Director’s independent status is regularly assessed by the Board.
2.3
Independence and Length of Service
The position/status and term in office of each Director at the date of this report is as follows:
Name of Director
Position/Status
Jock Murray
David Paterson
Kevin Torpey
Philip Bruce
John Lee
Chairman – Independent
Chief Executive Officer
Non-Executive– Non-Independent
Non-Executive– Independent
Non-Executive– Independent
Term in Office
Years
1
14
14
13
5
Months
2
1
5
1
6
The Board held 7 scheduled meetings last year together with a number of ad hoc meetings. The Directors attendance
is disclosed on Page 12 of the Director’s Report.
2.4
Independent Directors
The majority of the Board comprises independent Directors. Its composition provides for the timely and efficient
decision making required for the Company and will be beneficial to the shareholders.
The Board’s size and composition is subject to limits imposed by the Company’s constitution which provides for a
minimum of three Directors and a maximum of nine.
2.5
Independent Chairman
Mr J S (Jock) Murray has been appointed as Chairman of the Board on 1 May 2015. His background and experience
is outlined on Page 10 of the Director’s Report.
2.6
Professional Development
All Directors are required to bring an independent judgement to bear on Board decisions. To facilitate this, each
Director has the right of access to all relevant Company information and to the Company’s executives. The Directors
also have access to external resources as required to fully discharge their obligations as Directors of the Company.
The use of this resource is coordinated through the Chairman of the Board.
The Company has processes in place to review the performance of the Board and its committees and individual
Directors. Each year the Board of Directors gives consideration to corporate governance matters, including the
relevance of existing committees and to reviewing its own and individual Directors’ performance. The Chairman is
responsible for monitoring the contribution of individual Directors and consulting with them in any areas of
improvement.
Principle 3 – Promote ethical and responsible decision making
Apart from complying with legal obligations, the Company actively promotes ethical and responsible decision making.
3.1
Code of conduct
The Board acknowledges the need for continued maintenance of the highest standards of Corporate Governance
Practices and ethical conduct by all Directors and employees of the Group.
The Company has established a code of conduct applicable to all Directors, employees and contractors. The
requirement to comply with the code is mandatory and is communicated to all employees. The code sets out
standards of conduct, behaviour and professionalism.
The shareholder communications strategy, the securities trading policy, the continuous disclosure policy collectively
form a solid ethical foundation for the Company’s ethical practices.
Policy on dealing in Company securities
The Company has adopted a policy on how Directors, key management personnel, contractors and all other
employees can deal in the securities of the Company.
This policy aims to ensure that the reputation of the Company is not adversely impacted by perceptions of
trading in the Company’s securities at inappropriate times or in an inappropriate manner. In addition to the
specific prohibition on insider trading, Directors and all other employees must also not deal in the Company’s
securities during the following closed periods, being the four week period before or 48 hours after:
•
•
the release of the Company’s annual results to the ASX
the release of the Company’s half-year results to the ASX
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
CORPORATE GOVERNANCE STATEMENT
the release of the Company’s quarterly cash flow and activities report to the ASX
the annual general meeting
•
•
• such other periods as advised by the Board of Directors or Chief Executive Officer (such as prior to ASX
being advised of a significant matter or event).
Requests to trade during the closed periods may be considered in exceptional circumstances. At all other times
Directors, key management personnel and all other employees are not permitted to buy or sell securities in the
Company without first obtaining written consent from the Chairman. When the Chairman trades Company
securities written approval has to be obtained from an independent Director.
The Company has introduced compliance standards and procedures to ensure that the policy is properly
implemented. In addition there is also an internal review mechanism to assess compliance and effectiveness.
A copy of the Company’s securities trading policy was lodged with the ASX Company Announcements office on
23 December 2010 and is also posted on the Company’s website.
Principle 4 – Safeguard Integrity in financial reporting
The following structure is set up to independently verify and safeguard the integrity of financial reporting.
4.1
Audit Committee
The Board has formed a separate Audit Committee. The members of the Audit Committee during the year were:
• John Lee – Chairman
• David Paterson
The structure of the Audit Committee does not comply with the recommendation that the Audit Committee consists
of only Non-Executive Directors. The committee does have an independent Chairman who is not the Chairman of
the Board and is a non-executive Director. The Board considers that given its current size and structure it is neither
appropriate nor cost effective for this recommendation to be adopted in full.
The committee met twice during the year. The Audit Committee has adopted a formal charter which sets out the
responsibilities of the Audit Committee.
The responsibilities of the Audit Committee include:
reviewing the annual and half year financial reports to ensure compliance with Australian Accounting Standards
and generally accepted accounting principles;
monitoring corporate risk management practices;
reviewing and approval of the consolidated entity’s accounting policies and procedures;
reviewing the scope and adequacies of external audit plans;
reviewing the nomination, performance and independence of the external auditors; and
organising, reviewing and reporting on any special reviews or investigations deemed necessary by the Board.
4.2
Certification of Financial Statement
The Audit Committee has received confirmation in writing from the CEO and the Company Secretary that the
Company’s Financial Report for the financial year ended 30 June 2016 presents a true and fair view in all material
respects of the Company’s financial position and operational results and is in accordance with relevant accounting
standards.
4.3
External auditors
The full Board is responsible for the appointment, removal and remuneration of the external auditors, and reviewing
the terms of their engagement, and the scope and quality of the audit. In fulfilling its responsibilities, the Board
receives regular reports from management and the external auditors at least once a year, or more frequently if
necessary. The external auditors have a clear line of direct communication at any time to the Chairman of the Audit
Committee.
The current auditors, Nexia Australia were appointed on 30 November 2009. The Australian accounting bodies’
statement on professional independence requires mandatory rotation of audit partners for listed companies every five
years. Nexia Australia confirm that they conform with the requirements of the statement.
Nexia Australia are required to attend the Annual General Meeting and be available to answer shareholder questions
about the conduct of the audit and the preparation and content of the Auditor's Report.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
CORPORATE GOVERNANCE STATEMENT
Principle 5 – Make timely and balanced disclosure
The Company makes timely and balanced disclosure of any material matters concerning the Company.
The Company has a written policy on information disclosure that focuses on the continuous disclosure of any
information concerning the Group that a reasonable person would expect to have a material effect on the price of the
Company’s securities.
The Company Secretary in consultation with the CEO and Directors is responsible for communications with the ASX.
He is also responsible for ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules,
and overseeing and coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and
the general public.
Principle 6 – Respect the rights of shareholders
The Board recognises and respects the rights of our shareholders as the beneficial owners of the Company. In order
to facilitate the effective exercise of those rights, the Company follows a communications strategy that aims to
empower shareholders by:
communicating effectively with them;
providing easy access to balanced and understandable information about the Company; and
encouraging and facilitating shareholder participation in general meetings.
6.1
Information on Website
The Company posts corporate information in the Investor Section of its website at www.latrobemagnesium.com.
Corporate Governance section is posted in the Company Section.
The Company provides shareholders with copies of all announcements made to the ASX by mail on request. Copies
are also available in its web site or the ASX web site, ensuring that all shareholders are kept informed about the
Company. Shareholders also have the option of receiving a hard copy of the Annual Report each year.
6.2
Investor Relations Program
All shareholders are invited to attend the Annual General Meetings which are held in Sydney. The full Board and
senior executives are present and available to answer questions from the floor, as are the External Auditor.
Informal meetings with shareholders in other States are also held from time to time. The Company also encourages
shareholders to communicate directly.
In December 2015, a Community Briefing was held in the Latrobe Valley on the progress of the Latrobe magnesium
project.
6.3
Facilitate participation at Shareholders meetings
The Company does not provide the facilities of live webcasting and live telecommunication at shareholders meetings
as the Board considers it is not cost effective at this stage of the Company’s development.
6.4
Electronic Communication
The Company encourages electronic communication via email with shareholders at all times.
Principle 7 – Recognise and manage risk
The Company has established a sound system of risk oversight and management. The main project risks are
assessed by the Project Committee which comprises the Chairman and CEO. The Project Committee regularly
reports to the Board on all matters to do with the development of the project.
7.1
Risk Committee
The Board is yet to set up a Risk Committee. The CEO oversees the establishment, implementation and review of
the Company’s Risk Management System. To ensure it meets its responsibilities, the Board has implemented
appropriate systems for identifying, assessing, monitoring and managing material risk throughout the organisation.
7.2
Risk Review
The Board identifies potential areas of business risk arising from changes in the financial and economic
circumstances of its operating environment. It regularly assesses the Company performance in light of risks identified.
It also reviews the effectiveness of the implementation of the Company’s risk management and internal control system
on a regular basis.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
F
CORPORATE GOVERNANCE STATEMENT
7.3
Internal Audit
The Board does not employ an internal auditor, although as part of the Company’s strategy to implement an integrated
framework of control, the Board requests the external auditors review internal control procedures. Recommendations
once presented are considered by the Board.
The Board has received written consent from the CEO and the Company Secretary that the integrity of the financial
statements is founded on a sound system of risk management, internal compliance and control system which is
operating efficiently in all material respects.
The Board requires the declaration prior to the Directors signing the Company’s financial statements.
7.4
Sustainability Risks
The Board regularly assesses risks associated with economic, global, environmental and social sustainability risks.
Principle 8 – Remunerate fairly and responsibly
The Company ensures that the level and composition of remuneration is sufficient to attract and retain high quality
Directors and executives and to align their interests with the creation of value for shareholders.
8.1
Remuneration Committee
The role of the Remuneration Committee is undertaken by the full Board of Directors. The Board has adopted a
formal charter. The main responsibilities of the Board are:
•
review and approve the Group’s policy for determining executive remuneration and any amendments to that
policy;
review the on-going appropriateness and relevance of the policy;
consider and make recommendations on the remuneration of executive Directors (including base salary,
incentive payments, equity awards and service contracts);
review and approve the design of all equity based plans;
review and approve the total proposed payments under each plan; and
review and approve the remuneration levels for non-executive Directors.
•
•
•
•
•
8.2
Executive Directors and executive remuneration
The Board reviews and approves the policy for determining an executive’s remuneration and any amendments to
that policy. Executive remuneration and other terms of employment are reviewed annually having regard to relevant
comparative information and independent expert advice, if required.
Remuneration packages include basic salary, superannuation and the rights of participation in the Company’s
Employee Share Purchase Plan. These are set at levels that are intended to attract and retain executives capable
of effectively managing the Company’s operations. Consideration is also given to reasonableness, acceptability to
shareholders and appropriateness for the current level of operations.
Remuneration of Non-Executive Directors is determined by the Board based on relevant comparative independent
expert advice and the maximum amount approved by shareholders from time to time. They have the right to
participate in the Company’s Employee Share Purchase Plan.
Further information on Directors and executive remuneration is included in the remuneration report which forms part
of the Directors’ report.
8.3.
Equity based remuneration scheme
The Company does not have an equity based remuneration scheme and therefore a policy is not set up in this regard.
In order to preserve cash flows for operational purposes, if necessary the company may pay Directors and consultants
fees by share based payments. Shareholders’ approval is obtained in the case of share payments to Directors.
54