More annual reports from Lynas Rare Earths:
2023 Report2012 AnnuAl RepoRt
Contents
6 Lynas Timeline
10 Executive Chairman’s Report
12 The Year in Review
17 Sustainability
20 Global Market Activity
22 Directors’ Report
30 Corporate Governance Statement
39 Remuneration Report – Audited
53 Independent Auditor’s Report
55 Auditor’s Independence Declaration
56 Financial Report
108 ASX Additional Information
What are rare earths?
Rare Earths are a unique group of 15 chemical elements
in the periodic table known as the Lanthanide series.
Rare Earths are essential for many hundreds of applications. Their versatile yet specific
metallurgical, chemical, catalytic, electrical, magnetic and optical properties have given
them a level of technological, environmental and economic importance considerably
greater than might be expected from their relative obscurity.
La
lanthanum
Ce
Cerium
Pr
Nd
praseodymium
neodymium
Sm
Samarium
Eu
europium
Er
erbium
Gd
Gadolinium
Tm
thulium
Tb
terbium
Yb
Ytterbium
Dy
Dysprosium
Ho
Holmium
Lu
lutetium
Y
Yttrium
the LYNas WaY:
INTEGRATED
VISION, VALUES
AND BEHAVIOURS
Our vision is to become
the leader in Rare Earths
for a sustainable future.
Our values of Care, Respect,
Relationships, Integrity
and Courage are integral
to achieving this vision.
Shared values and a culture
that unlocks the potential
of our people are fundamental
to our success.
This is the Lynas Way.
The Lynas Way includes
striving to create shared
value through co‑operative
economic development.
Working with host communities to
address their concerns and share the
benefits of our operations is integral
to our business.
lynas is a founding sponsor of
the Balok Ivory tower Academic
programme in Kuantan, Malaysia.
In Western Australia, lynas has
established the Mount Weld
Community Consultative
Committee.
67
stUdeNts
aLL stUdeNts
frOM the
fIrst phase
Of the BaLOk
IvOrY tOWer
prOgraMMe
gradUated
sUCCessfULLY
COMMUNItY:
CREATING
SHARED VALUE
ZerO harM:
COMMITMENT
TO EXCELLENCE
IN SAFETY AND
HEALTH
Lynas is committed to providing and
maintaining a safe work environment and
preventing injury, illness and impairment
to the health of its employees, business
partners and the community.
our goal is Zero Harm, delivered
through caring leadership, safe
behaviour and continuous improvement
of our management systems.
our operating sites incorporate
state‑of‑the‑art technology based
on extensive hazard and operability
(HAZop) studies completed during
the design phase.
8.7
MILLION
hOUrs LOst
tIMe INjUrY
free at
the LaMp
sUstaINaBLe
deveLOpMeNt:
CONTRIBUTING
TO A GREENER
TOMORROW
The Lynas strategy is to create
a reliable, fully integrated source
of Rare Earths supply from mine
through to customers.
lynas’ goal is to become the global
benchmark for security of supply
and environmental standards in
the Rare earths industry.
through our commitment,
expertise and capacity for
innovation we will continually
explore and improve our
contribution to Sustainable
Development outcomes.
hYBrId vehICLe
Hybrid vehicles cut fuel
use by combining a
gasoline engine, battery
powered electric motors
and brakes that capture
energy from stopping.
COMpaCt
fLUOresCeNt
LIght BULBs
Compact fluorescent
light bulbs use only a
quarter of the power
needed to produce
the same amount of
light as the standard
incandescent light bulb.
MeetINg tOdaY’s
ChaLLeNges
WIth tOMOrrOW
IN MINd
fLUId
CraCkINg
CataLYsts
Fluid Cracking Catalysts
are used in the refining
of crude oil, enabling
the transformation
of heavy molecules
into lighter compounds
that make up gasoline
and other fuels.
NaNO
teChNOLOgY
Rare earth magnets
are more powerful
than alternatives and
hence are key enablers
of digital technology
and its miniaturisation.
WINd
tUrBINe
Wind turbines use
natural wind energy to
generate zero emission
electricity with magnets
moving past stationary
coils of wire.
aUtOMOtIve
CataLYtIC
CONverter
Automotive catalytic
converters transform
the primary pollutants
in engine exhaust
gases into non‑toxic
compounds preventing
harmful emissions
from entering the
atmosphere.
fLat paNeL
dIspLaYs
liquid Crystal Displays
(lCD), plasma televisions,
and computer monitors
are coated with the
Rare earth phosphors
that generate the
primary colours red,
blue and green.
Rare earths are the
backbone to the devices
we use on a daily
basis, as well as the
technologies that will
contribute to the health
of our planet.
10
10 years
in the making
Our journey has been more than 10 years
in the making. In that time we have built
up considerable expertise, processes,
knowledge and assets leaving us in
an enviable position as we prepare to
cross the threshold from development
to production of Rare Earths.
10
JUNE 2004
MOUNT WELD MINING:
Initial Feasibility
Study for mining and
concentration plant
completed. Environmental
approvals received.
EARLY 2007
LAMP: Decision to locate
the Lynas Advanced
Materials Plant in Malaysia.
MAY 2007
RARE EARTHS DIRECT:
The first Rare Earths
supply contract signed.
JUNE 2007
MOUNT WELD MINING:
With all approvals in
place, mining operations
commenced with the first
drill and blast at Mount Weld.
FEbRUARY 2008
LAMP: Lynas receives
all approvals required to
commence construction
of the LAMP.
MAY 2008
MOUNT WELD MINING:
First mining campaign
completed on schedule, on
budget and lost-time-injury
free. Mined 773,300 tonnes
with an average grade of
15.4% REo.
JANUARY 2010
RARE EARTHS DIRECT:
Lynas extends Rare Earths
supply contract and signs
a Technical Co-operation
Agreement with Rhodia to
support operational planning,
commissioning and ramp-up
of the LAMP.
MAY 2011
MOUNT WELD MINING:
Lynas is issued the licences
to operate the Mount Weld
Concentration Plant by
regulatory authorities.
First feed of ore occurs
on 14 May.
JUNE 2011
LAMP: International Atomic
Energy Agency (IAEA) review
confirms LAMP is safe
and fully compliant with
international standards.
JUNE 2002
MOUNT WELD MINING:
Generation of JoRC
Code compliant resource
estimate through validation
of geological, drilling and
assay information.
FEbRUARY 2006
RARE EARTHS DIRECT:
heads of Agreement for
supply of Rare Earths to
Rhodia Electronics and
Catalysis signed.
FEbRUARY 2009
LAMP: Detailed engineering
design completed and major
equipment procured.
FEbRUARY 2010
LAMP: Letter of Award
issued for engineering,
procurement, construction,
and management services
to LAMP.
JANUARY 2012
MOUNT WELD MINING:
Lynas announces significant
increase in the Mount
Weld Mineral Resource
estimate at both the
Central Lanthanide Deposit
and the Duncan Deposit.
FEbRUARY 2012
LAMP: Malaysia’s Atomic
Energy Licensing board (AELb)
announces the approval of
the Temporary operating
Licence (ToL) for the LAMP.
AUGUST 2012
LAMP: Phase 1
construction of the
LAMP complete.
SEPTEMbER 2012
LAMP: Lynas receives
Temporary operating
Licence for the LAMP.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
JUNE 2003
MOUNT WELD MINING:
Successful pilot plant
demonstration of the
flotation process completed.
MARCh 2005
MOUNT WELD MINING:
Full Mount Weld Rare Earths
Feasibility Study completed.
AUGUST 2007
LAMP: Site selected in the
Gebeng Industrial Estate,
on the East Coast Economic
Corridor of Malaysia.
6
JULY 2008
MOUNT WELD MINING:
Reconciliation of mined
ore against resource
estimates confirm the
accuracy and confidence
in geological modeling.
SEPTEMbER 2009
LAMP: Lynas announces
capital raising to fund
completion of Phase 1.
NovEMbER 2009
LAMP: Lynas secures
A$450 million from
capital raising.
MARCh 2010
MOUNT WELD MINING:
Letter of Award issued for
engineering, design and
construction of the Mount
Weld Concentration Plant.
NovEMbER 2010
RARE EARTHS DIRECT:
Lynas signed a strategic
alliance agreement with
Sojitz Corporation, leading
to a significant investment by
Sojitz and Japan oil, Gas and
Metals National Corporation.
JULY 2011
RARE EARTHS DIRECT:
Lynas and Siemens Drive
Technology Division sign
Letter of Intent with a view
to forming a joint venture
for the production of
Nd-based magnets.
MARCh 2012
LAMP: Malaysian Government
sets up a Parliamentary
Select Committee (PSC)
to help raise public awareness
about the LAMP.
bEYoND
RARE EARTHS DIRECT:
Producing Rare Earths
that meet the world’s
environmental standards
and marketing an
international brand
of quality.
AUGUST 2011
MOUNT WELD MINING:
Mount Weld Concentration
Plant officially opened by
The hon. Colin barnett MLA,
Premier of Western Australia.
JUNE 2012
LAMP: The PSC tables its
report to the Malaysian
Parliament, recommending
that the Temporary
operating Licence (ToL) be
issued for the LAMP, noting
that Lynas has complied with
the standards and laws in
Malaysia, which are in line
with international standards.
JUNE 2004
MOUNT WELD MINING:
Initial Feasibility
Study for mining and
concentration plant
completed. Environmental
approvals received.
EARLY 2007
LAMP: Decision to locate
the Lynas Advanced
Materials Plant in Malaysia.
MAY 2007
RARE EARTHS DIRECT:
The first Rare Earths
supply contract signed.
JUNE 2007
MOUNT WELD MINING:
With all approvals in
place, mining operations
commenced with the first
drill and blast at Mount Weld.
FEbRUARY 2008
LAMP: Lynas receives
all approvals required to
commence construction
of the LAMP.
MAY 2008
MOUNT WELD MINING:
First mining campaign
completed on schedule, on
budget and lost-time-injury
free. Mined 773,300 tonnes
with an average grade of
15.4% REo.
JANUARY 2010
RARE EARTHS DIRECT:
Lynas extends Rare Earths
supply contract and signs
a Technical Co-operation
Agreement with Rhodia to
support operational planning,
commissioning and ramp-up
of the LAMP.
MAY 2011
MOUNT WELD MINING:
Lynas is issued the licences
to operate the Mount Weld
Concentration Plant by
regulatory authorities.
First feed of ore occurs
on 14 May.
JUNE 2011
LAMP: International Atomic
Energy Agency (IAEA) review
confirms LAMP is safe
and fully compliant with
international standards.
JUNE 2002
MOUNT WELD MINING:
Generation of JoRC
Code compliant resource
estimate through validation
of geological, drilling and
assay information.
FEbRUARY 2006
RARE EARTHS DIRECT:
heads of Agreement for
supply of Rare Earths to
Rhodia Electronics and
Catalysis signed.
FEbRUARY 2009
LAMP: Detailed engineering
design completed and major
equipment procured.
FEbRUARY 2010
LAMP: Letter of Award
issued for engineering,
procurement, construction,
and management services
to LAMP.
JANUARY 2012
MOUNT WELD MINING:
Lynas announces significant
increase in the Mount
Weld Mineral Resource
estimate at both the
Central Lanthanide Deposit
and the Duncan Deposit.
FEbRUARY 2012
LAMP: Malaysia’s Atomic
Energy Licensing board (AELb)
announces the approval of
the Temporary operating
Licence (ToL) for the LAMP.
AUGUST 2012
LAMP: Phase 1
construction of the
LAMP complete.
SEPTEMbER 2012
LAMP: Lynas receives
Temporary operating
Licence for the LAMP.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
JUNE 2003
MOUNT WELD MINING:
Successful pilot plant
demonstration of the
flotation process completed.
MARCh 2005
MOUNT WELD MINING:
Full Mount Weld Rare Earths
Feasibility Study completed.
AUGUST 2007
LAMP: Site selected in the
Gebeng Industrial Estate,
on the East Coast Economic
Corridor of Malaysia.
6
JULY 2008
MOUNT WELD MINING:
Reconciliation of mined
ore against resource
estimates confirm the
accuracy and confidence
in geological modeling.
SEPTEMbER 2009
LAMP: Lynas announces
capital raising to fund
completion of Phase 1.
NovEMbER 2009
LAMP: Lynas secures
A$450 million from
capital raising.
MARCh 2010
MOUNT WELD MINING:
Letter of Award issued for
engineering, design and
construction of the Mount
Weld Concentration Plant.
NovEMbER 2010
RARE EARTHS DIRECT:
Lynas signed a strategic
alliance agreement with
Sojitz Corporation, leading
to a significant investment by
Sojitz and Japan oil, Gas and
Metals National Corporation.
JULY 2011
RARE EARTHS DIRECT:
Lynas and Siemens Drive
Technology Division sign
Letter of Intent with a view
to forming a joint venture
for the production of
Nd-based magnets.
MARCh 2012
LAMP: Malaysian Government
sets up a Parliamentary
Select Committee (PSC)
to help raise public awareness
about the LAMP.
bEYoND
RARE EARTHS DIRECT:
Producing Rare Earths
that meet the world’s
environmental standards
and marketing an
international brand
of quality.
AUGUST 2011
MOUNT WELD MINING:
Mount Weld Concentration
Plant officially opened by
The hon. Colin barnett MLA,
Premier of Western Australia.
JUNE 2012
LAMP: The PSC tables its
report to the Malaysian
Parliament, recommending
that the Temporary
operating Licence (ToL) be
issued for the LAMP, noting
that Lynas has complied with
the standards and laws in
Malaysia, which are in line
with international standards.
exeCUtIve
ChaIrMaN’s
repOrt
the past year was one of
significant transformation for
the Company as we transitioned
from development phase to
operational readiness.
We are now ramping up our operations to become a new integrated supply source of Rare Earths outside China. Our
Concentration Plant in Western Australia performed ahead of expectations during the year with Rare Earth Oxide (REO)
grades in line with, and REO recoveries ahead of, internal targets. This part of our production process is now significantly
de-risked. In Malaysia, construction of Phase 1 of the Lynas Advanced Materials Plant (LAMP) is now complete and is being
ramped up to full capacity. Our Phase 2 expansion of the LAMP, which will double our capacity to 22,000 tonnes per
annum REO, is on time and on budget for start up in early 2013. I am pleased to report that our operations in Malaysia
remained Lost-Time-Injury (LTI) free during the year, highlighting our commitment to Zero Harm in everything we do.
We are building a green Rare Earths supply chain for a sustainable future and this is being recognised by some of the
world’s largest companies. Early in the year we were very pleased to announce the signing of a Letter of Intent with
Siemens AG with a view to forming a joint venture for the sustainable production of Neodymium-based Rare Earths
magnets to serve Siemens’ production requirements for energy-efficient drive applications and wind-turbine generators.
Lynas will provide raw materials for the joint venture, predominantly a combined Neodymium-Praseodymium metal,
through a long-term supply contract. The joint venture for magnet production will be led by Siemens with the planned
shareholding to be 55% Siemens and 45% Lynas. It is clear Rare Earths magnets have tremendous growth potential in
this field, and Lynas is pleased to be able to provide the necessary ingredients of a stable and environmentally sound
supply chain which is required to enable this market to grow to its full potential.
In September 2011, the Company signed a new long-term supply agreement with BASF Corporation for the supply of
Rare Earths. BASF’s Fluid Catalytic Cracking business consumes Lanthanum and the contract shall secure a substantial
portion of BASF’s long-term Lanthanum requirements, with a pricing mechanism tied to market price. The contract is
another example of how Lynas is able to stabilise the important Rare Earths supply chains for major industrial users.
Strengthening these supply chains is critical to promote the development of a number of environmental protection
and energy efficiency applications. For example, Rare Earths inside automotive catalytic converters help to reduce
greenhouse gas emissions while Rare Earths permanent magnets inside wind turbines help countries achieve their
renewable energy targets. Rare Earths also play a critical role in improving the efficiency of oil refineries and the
development of energy-efficient lighting applications. The unique catalytic, magnetic and optical properties of Rare
Earths cannot be replicated or substituted in many of these applications.
The quality of our asset base was reinforced this year with a significant upgrade to our mineral resources at Mount Weld
and the successful results of a scoping study into the Duncan deposit. The mineral resource estimate for Mount Weld is
now 23.9 million tonnes, at an average grade of 7.9% REO, for a total of 1.9 million tonnes REO. This represents a 37%
increase versus the previous resource estimate announced in September 2010. With such a large resource base we look
forward to supplying our Rare Earths products to our customers for many years to come.
The Duncan deposit, adjacent to our current operations at the Central Lanthanide Deposit, is currently being analysed as
a way of providing a broader suite of Rare Earth products to our customers. Duncan has a REO distribution biased more
towards high value heavy Rare Earths. We are now proceeding with a definitive feasibility study to evaluate potential
process plant locations and optimising the metallurgical process flow sheet.
10
Subsequent to the end of the financial year, the Company
announced that the Ore Reserves estimate for the Central
Lanthanide Deposit is 362% higher compared with the 2005
estimate and the contained REO in the Ore Reserves is 260%
higher than the 2005 estimate.
as Non-Executive Director in November 2011. Ms Conlon is one
of the pre-eminent thought leaders in the area of operations
and change management both in Australia and globally. She is
also currently a Non-Executive Director of CSR Limited and REA
Group Limited.
A key priority for the Company in the past year was the completion
of the regulatory review process for the LAMP in Malaysia. Lynas
entered the process with a strong belief about the safety, technical
and scientific facts about the LAMP. I recognise that there has been
a very open and vigorous debate within the Malaysian community
about the Lynas project. We engaged in a large public consultation
programme during the year, communicating directly with more
than 12,000 local residents, community leaders, villagers and
their families. In addition, the Balok Ivory Tower programme, an
academic programme supported by Lynas for local Malaysian
school children, continued to yield positive results for the local
community. We are now engaging in a conversation with the
Malaysian community that will continue for the life of the plant
and we will continue to strengthen our community engagement
and education and awareness programmes in Malaysia.
I am happy to report that subsequent to the end of the year the
Atomic Energy Licensing Board (AELB) issued the Temporary
Operating Licence for the LAMP on 5 September 2012 following
a detailed and rigorous regulatory approval process. The AELB’s
decision to issue the Temporary Operating Licence verifies Lynas’
continued commitment to strong safety, health, environmental
and community values and highlights the Company’s absolute
determination to achieve its Zero Harm goal. Our commitment
to safety extends from the design and construction of the LAMP
through to commissioning, operations and expansion.
During the year we welcomed into the Company a number of
highly experienced individuals who will help lead and guide the
Company in its journey to becoming a new source of Rare Earths
supply for a sustainable future. Following the appointment of Dr
Ziggy Switkowski in February 2011, the Board of Directors was
further strengthened by the appointment of Ms Kathleen Conlon
Within the executive management, I was very pleased to
have Luisa Catanzaro join the Company in December 2011
as Chief Financial Officer. Prior to joining Lynas, Luisa was
CFO of Dairy Farmers Group and before that, CFO of Australian
Agricultural Company Limited. She has extensive experience in
manufacturing, supply chain and branded product environments,
and her extensive experience makes her well suited to a
leadership role at Lynas.
I would like to thank the whole team at Lynas for their strong
contributions this year. We have made significant progress in
our journey to becoming a new sustainable source of Rare Earths
supply. While we faced a number of challenges in our journey
to operations, we responded to these with strong resolve and
a commitment to our core set of values.
In closing, I am very excited about our future. For more than
a decade we have been building up a wealth of knowledge
and expertise in our organisation to maximise the value of our
portfolio of unique assets. Now that the Company has moved
into its operational phase we will continue to strive to ensure
our business delivers benefits for the communities in which
we operate and long-term value for our shareholders.
Nicholas Curtis AM
Executive Chairman
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
11
the Year
IN revIeW
over the past year
the Company made
significant progress
towards becoming a
new, sustainable supply
source of Rare earths.
1.
3.
keY
hIghLIghts:
hIgh QUaLItY,
LONg LIfe asset
Central lanthanide
Deposit confirmed
as the highest grade
Rare earths ore body
in the world
NeW
appOINtMeNts
Ms Kathleen
Conlon appointed
as non‑executive
Director, and Ms luisa
Catanzaro as Chief
Financial officer,
to complement
an experienced
management team
seCUre
Offtake
agreeMeNts
With strong
customer
relationships
INCREASE IN MOUNT WELD RESOURCE ESTIMATE
Following the results of the extension drilling programme, Lynas reported a significant upgrade to the
Mount Weld Mineral Resource estimate for the Central Lanthanide Deposit (CLD) and the Duncan Deposit,
confirming its status as the richest known deposit of Rare Earths in the world. The Resource estimate now
stands at 23.9 million tonnes, at an average grade of 7.9% REO, for a total of 1.9 million tonnes REO.
Specifically, the Resource estimate for the CLD has increased by 51% to 14.9 million tonnes, at an
average grade of 9.8% REO, for a total of 1.5 million tonnes REO. This represents a 37% increase
in contained REO. The Resource estimate for the Duncan Deposit, located immediately to the east
and south of the CLD, has increased by 18% to 9.0 million tonnes, at an average grade of 4.8% REO,
for a total of 431,600 tonnes REO. This also represents an increase of 18% in contained REO.
In June 2012, Lynas reported the completion of a scoping study in respect of the Duncan Deposit.
Next steps include a more detailed evaluation of potential locations for processing, and other work
that will allow a detailed feasibility study to be prepared.
SIGNIFICANT INCREASE IN MOUNT WELD ORE RESERvES
In September 2012 Lynas announced an upgrade to the Mount Weld Ore Reserves based on a mining
study that re-optimised the pit design using the updated Mineral Resources estimate that was
announced to the ASX on 18 January 2012. The revised Ore Reserves at the Central Lanthanide Deposit
(CLD), applying cut-off grades ranging from 4 to 7% depending on the type of ore, are estimated at 9.7
million tonnes at an average grade of 11.7% REO for a total of 1.14 million tonnes of contained REO.
The Ore Reserves estimate for the CLD is 362% higher compared with the 2005 Feasibility Study and
the contained REO in the Ore Reserves is 260% higher than the 2005 estimate.
Classification of Ore Reserves for the Central Lanthanide Deposit
TOTAL ORE RESERVES
Proved
Probable
Total
MILLION
TONNES
5.6
4.1
9.7
REO
(%)*
CONTAINED REO
(‘000 TONNES)
13
10
11.7
728
410
1,138
* REO (%) includes all the lanthanide elements plus Yttrium.
As at September 2012.
12
2.
1. Phase 2 construction – dewatering
plant civils in the foreground
2. Aerial view of the Mount Weld
Concentration Plant
3. Phase 2 construction – flotation
plant civils in the foreground
4. Bagged concentrate
awaiting transport
4.
COMMERCIAL DEvELOPMENTS
During the year, Lynas continued to develop its strong relationships with the Japanese Rare Earths industry, including with Sojitz
Corporation, our distributor and agent in Japan.
In July 2011, Lynas signed a Letter of Intent with the Siemens AG’s Drive Technologies Division, the world’s leading supplier of entire drive
trains with electrical and mechanical components, with a view to establishing a joint venture company for the sustainable production of
Neodymium-based Rare Earth magnets.
The joint venture aims to secure a long-term, sustainable end-to-end supply chain for the production of Neodymium-based Rare Earth
magnets for energy efficient drive applications and wind turbine generators.
Subsequently in September 2011, Lynas signed a significant new long-term supply agreement with BASF Corporation for the supply of
Rare Earths to be produced at the LAMP in Malaysia. BASF’s Fluid Catalytic Cracking business consumes Lanthanum and the contract
seeks to secure a substantial portion of BASF’s long-term Lanthanum requirements, with a pricing mechanism that is tied to market price.
TEMPORARY OPERATING LICENCE IN MALAYSIA
On 1 February 2012, Malaysia’s Atomic Energy Licensing Board (AELB) announced its approval of the Temporary Operating Licence
(TOL) for the Lynas Advanced Materials Plant (LAMP). The AELB’s decision followed a thorough and extensive review of the project
by the Malaysian Government and regulatory authorities.
The issuance of the TOL was subject to two legal challenges. The first involved a group of individuals who applied to the High Court
of Malaya for a judicial review of the decision by the AELB. The second related to an appeal which was lodged under Section 32 of
the Atomic Energy Licensing Act. The initial application to the High Court of Malaya was denied by the Court on the basis that an
appeal was in progress to the Minister of Science, Technology and Innovation (MOSTI) and it would not be appropriate for the Court
to intervene in the matter. Subsequently, the second appeal to MOSTI was dismissed in June 2012, affirming the AELB’s decision
to approve the issuance of the TOL. Lynas understands that the applicants intend to pursue further appeals of those decisions.
In March 2012, the Malaysian Government set up a Parliamentary Select Committee (PSC), to help raise public awareness concerning
the LAMP. The PSC, headed by the Higher Education Minister, tabled its report in June 2012, making it clear that it had taken into
consideration a broad range of issues raised by concerned citizens, special interest groups and NGOs relating to public health and
environmental safety, and subjected the LAMP to intense independent, expert scrutiny.
The report recommended that the TOL be issued for the LAMP. In addition, the report noted that Lynas has complied with the
standards and laws in Malaysia, which are in line with international standards.
The AELB subsequently issued the TOL on September 5, 2012.
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
13
the Year IN revIeW COnTInuED
keY
hIghLIghts:
WesterN
aUstraLIa
OperatIONs
Bagged
CONCeNtrate
readY fOr
expOrt
Containing more
than 4,800 tonnes
of Reo
phase 2
expaNsION
IN prOgress
With the award
of a fixed price
contract to Abesque
engineering
IsO aNd
Ohsas
CertIfICatION
lynas Western
Australia achieved
external certification
by Bureau Veritas
WESTERN AUSTRALIA OPERATIONS
Following the commissioning of the Concentration Plant at Mount Weld in May 2011, the ramp up in
production continued this financial year. The plant has been processing ore that had been mined and
stockpiled from the first mining campaign. The Concentration Plant operated on an ‘8-days on, 6-days off’
basis during the financial year. The design throughput rate of 15 tonnes per hour was achieved.
Plant Feed Rate – Dry Tonnes Per Hour (DTPH)
18
16
14
12
10
8
6
4
2
0
13.3
13.5
14.1
15.6
14.5
12.4
10.0
7.3
7.3
6.5
7.5
8.1
MAY-11
JUN-11
JUL-11
AUG-11
SEP-11
OCT-11
NOV-11
DEC-11
JAN-12
FEB-12
MAR-12
APR-12
Monthly Average DTPH
Project to Date
Initial Design Phase (15.1 dtph)
At the end of the financial year, more than 13,000 dry tonnes of concentrate containing more than
4,800 tonnes of REO were bagged ready for export. Ahead of the start-up of the LAMP in Malaysia,
the Company elected to bring forward a period of routine maintenance on the Concentration Plant. The
downtime was used to identify areas of continuous improvement as well as preparing the Phase 2
mobilisation on site. Lynas Management expects to realise significant operating cost savings from the
temporary shutdown of the plant. The re-start of the plant will be synchronised in accordance with the
requirements of the LAMP.
The Phase 2 expansion of the Concentration Plant has progressed with the awarding of a fixed price
contract to Abesque Engineering Ltd. All necessary regulatory approvals for construction were obtained
and site works commenced in June 2012. The Phase 2 project will double the Concentration Plant
capacity and also incorporate many of the learnings from the commissioning and operations of Phase 1.
Key components include new flotation plant, control room, concentrate thickener and concentrate filter
plus a power station and reverse osmosis plant upgrades. Commissioning of the Phase 2 expansion is
planned for second quarter of 2013.
As noted previously, the Company announced a significant increase in the Mount Weld Mineral
Resource estimate at both the Central Lanthanide Deposit (CLD) and Duncan Deposit in January 2012.
The existing Rare Earths operation is based on a mine plan covering a high grade REO zone in the centre
of the Mount Weld Carbonatite within the CLD.
In May 2012, Mr Kam Leung joined Lynas as General Manager for the Western Australia Operations.
Mr Leung’s experience extends across broad operational areas in a number of leading resource companies.
Lynas Western Australia Operations is implementing the Lynas Integrated Operational Management
System Standards (LIOMSS), which incorporates compliance to ISO9001:2008, ISO14001:2004 and
OHSAS18001:2007.
During August 2012, Lynas Western Australia’s Integrated Management System was externally audited
by Bureau veritas, and subsequently certified to Safety and Quality Management Standards – ISO
and OHSAS.
14
1.
2.
1. LAMP Phase 2 expansion – aerial view
2. Executive Chairman nicholas Curtis briefing customers during a site visit
3. Site staff at work at the LAMP
3.
MALAYSIA OPERATIONS
The Malaysia Operations team grew significantly over the past
year and the total number of staff at the end of the financial
year stood at 256.
As part of the International Atomic Energy Agency
recommendation and the AELB’s subsequent requirements for the
application for the TOL, Lynas made revised submissions for the
Radiological Impact Assessment (RIA), Emergency Response Plan,
Radiation Protection Plan, Waste Management Plan and Safety
Case, and Conceptual Decommissioning Plan to the AELB.
The AELB formed an expert review panel to examine Lynas’
submissions, and after several iterations, Lynas submitted
documents to the AELB on December 31, 2011 taking into
account all comments from the expert review panel.
The AELB approved the TOL on February 1, 2012, at which time
the licence fee was paid. As of the end of the financial year, the
licence was yet to be issued.
Post the approval of the TOL by the AELB, the Malaysian
Government appointed a Parliamentary Select Committee
(PSC) in March 2012, chaired by the Higher Education Minister
YB Dato’ Seri Mohamed Khaled Nordin, with the purpose
of helping to raise public awareness concerning the LAMP.
Following presentations and a detailed Question and Answer
session, Lynas welcomed the PSC on a LAMP site visit in early May.
On June 19, 2012, the PSC gave its recommendation for Lynas
to be awarded the TOL.
By end of June 2012, the LampsOn team commenced its
demobilisation from site, allowing Lynas to continue to progress
and finalise the permitting of the site to ensure that the final
commissioning process progresses as efficiently as possible.
The Ready for Start-Up programme was 97.1% complete as at the
end of the financial year. The balance of the remaining projects
are not critical for start-up.
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
15
the Year IN revIeW COnTInuED
2.
1. Lynas Malaysia Managing Director, Dato’ Mashal Ahmad leads a media briefing
2. Lynas Malaysia staff during a Family Picnic Day
3. Lynas accepted as a member of Gebeng Emergency Mutual Aid (GEMA)
In July 2011, Lynas issued a Letter of Award to Toyo Thai Corporation for the Engineering, Procurement,
Construction and Commissioning Assistance of the Phase 2 expansion of the LAMP to 22,000tpa
REO. The contract is a lump sum fixed price contract. As at the end of June 2012, the overall project’s
cumulative progress was 72% complete and the project remains LTI free. The Phase 2 expansion of the
LAMP is expected to be construction complete in early 2013.
various training programmes were conducted over the past year in preparation of commissioning
and operation of the Plant. They included Monitoring of Chemical Hazards to Health; Certified
Environmental Professional in Scheduled Waste Management; Certified Environmental Professional
Effluent Treatment System; First Aid; Fire Fighting; Confined Space Training; Radiation Protection
Officer Training; Safety and Health Induction for Construction Workers; Liyang Rhodia Laboratory
Training; Production, Planning and Control; and Internal Audit ISO9001 Training.
On September 5, 2012 the Group received confirmation from the AELB in Malaysia that the TOL for
the LAMP facility had been finalised and granted. As a result of the receipt of the TOL, the Group has
commenced its ramp-up of operations.
MALAWI OPERATIONS
During the year, an Environmental and Social Impact Report was completed and submitted to the
Government of Malawi for review. Comments were received and the final document was submitted in
July 2012. On site, the refurbishment of existing infrastructure continued and drill roads and pads were
constructed in preparation for the next phase of the drilling programme.
As announced on June 13, 2012, Lynas is currently assessing a decision of the Malawi High Court that
may affect the proposed Kangankunde resource development. Lynas is reassessing the project’s risks
in the context of Malawi’s present governance and institutional framework, and consequently deferred
the planned drilling programme along with further development and test work until clarity in the legal
position and processes in Malawi is obtained.
1.
3.
keY
hIghLIghts:
MaLaYsIa
OperatIONs
LaMp
phase 1
Construction
complete and
8.7 million hours
lost‑time‑injury free
teMpOrarY
OperatINg
LICeNCe
Issued for
the lAMp
16
sUstaINaBILItY
At lynas, our approach is
defined by a foundation
strategy to create a reliable,
fully integrated, sustainable
source of Rare‑earths from
mine through to market.
Today, Lynas sets a new benchmark for environmental standards in the global Rare Earths industry
which exceeds all other supply sources.
We strive for quality and consistency in each part of our operation, as well as excellence in safety,
health and protecting people and the environment.
Our vision is to build a leadership position in Rare Earths for a sustainable future.
ZERO HARM
Lynas is dedicated to Zero Harm. It is especially important to us that our employees, business partners and
the communities in which we live and work understand that we care about them and their environment.
Lynas prides itself on upholding the highest standards in relation to all its operations, particularly
in terms of health, safety and the environment.
During the course of the year we continued to achieve excellent health and safety performance.
SAFETY PERFORMANCE FOR FY2012
LTI Frequency Rate
Alternative Injury Frequency Rate
Total Recordable Injury Frequency Rate
NO. OF INjURIES
PER ONE MILLION HOURS WORkED
0.6
1.1
5.7
The LAMP reached more than 8.7 million hours LTI free. This is a significant achievement and reflects
our strong commitment to health and safety in practice.
The engineering and construction of the LAMP have been implemented in accordance with all
international standards, suitable for the plant’s specific location, and required to facilitate a safe
and sustainable operation.
The LAMP has been subject to review by the International Atomic Energy Agency (IAEA),
a Parliamentary Select Committee and several independent experts from the USA, China,
Canada and Germany at the invitation of the Malaysian Government.
ZerO harM
lynas is committed
to excellence in health
and safety. We will
continually strive to
achieve our goal of
Zero Harm.
sUstaINaBLe
deveLOpMeNt
lynas is committed
to Sustainable
Development. through
our commitment,
expertise and capacity
for innovation we will
continually explore and
improve our contribution
to Sustainable
Development outcomes.
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
17
sUstaINaBILItY COnTInuED
Each has judged Lynas to be safe and fully compliant
with international standards, affirming the LAMP is a
state-of-the-art chemical plant setting new benchmarks in
safety and environmental standards for Rare Earths processing.
In Western Australia, the Lynas Mount Weld HSE (Health,
Safety and Environment) Improvement team was established
in March 2012, consisting of safety and health representatives
and senior managers on site. The improvement team plays a
pivotal role in ensuring the workplace is compliant and the
site’s Safety Management System is effective. The role of the
HSE improvement team is to facilitate cooperation between
Mount Weld and its employees in instigating, developing and
carrying out actions designed to ensure health and safety in the
workplace. The team also formulate, review and disseminate the
standards, policies and procedures relating to health and safety
carried out at Mount Weld.
REDUCE, RECYCLE, REUSE
Lynas is committed to using all its resources efficiently and
cleanly. Our operations aspire to the principle of “reduce,
reuse, recycle” and energy efficiency.
Alongside Rare Earths, Lynas will recycle and reuse its LAMP
residues to create a series of synthetic gypsum products. We have
always believed in providing a viable source of synthetic mineral
products to meet growing demand from the commercial building
and agricultural sectors.
Added to this is the environmental benefit of synthetic gypsum –
as it reduces the need to mine natural deposits, thereby conserving
natural resources and reducing greenhouse gas emissions.
Recycling residues into commercial by-products is a current
world-wide best practice. Residues of the same scale and
composition containing low levels of Naturally Occurring
Radioactive Material (NORM) are regularly transformed
into commodities by the mineral and oil industries, and
used in building products, plasterboard and road base.
Lynas continues to express its willingness to go further than
Malaysian, Australian and international regulatory requirements,
particularly in relation to emissions and the environment.
In May 2012, Lynas installed solar-powered security cameras at
the LAMP site. A total of 26 solar panels were installed on site.
Each panel takes one day to charge, and is sufficient to power
a camera for up to four days. This allows each camera to run
for a total of eight days without sunlight.
At Lynas we are committed to contributing to a sustainable future.
COMMUNITY
The Lynas Way includes striving to create shared value through
co-operative economic development, and working with our
host communities to address concerns and share the benefits
of our operations.
Lynas’ intent is to establish and maintain relationships with
our host communities, based on involvement, so as to contribute
to community development and resilience.
This includes:
• Engaging with local communities regarding actual and potential
emissions and waste; related health risks; and actual and
proposed mitigation measures.
• Consulting representative community groups in determining
priorities for social investment and community development
activities.
• Participating in local associations with the objective of
contributing to the development goals of host communities.
• Maintaining transparent relationships with government officials
and political representatives.
• Promoting and supporting education at all levels, and engaging
in actions to improve the quality of and access to education.
• Helping conserve and protect cultural heritage.
• Giving priority to buying and hiring locally.
Lynas is absolutely confident that by-products of the LAMP
will be recycled and reused in commercial applications, and will
not require long-term storage. The IAEA has recognised this
approach as a good example of Fundamental Safety Principle 7 –
Protection of Present and Future Generations – IAEA Safety Series
No. SF-1
In Malaysia, we have mounted a large scale public consultation
effort specifically focused on factors of safety, health, emissions
and safe handling and storage of plant residues. This includes
face-to-face briefings for more than 12,000 local residents,
community leaders, villagers and their families; and regular
participation in public consultation committees.
This is the principle prescribed by the World Health Organisation
(WHO), United Nations Environmental Program, Pan American
Health Organisation, and other reputable international
organisations.
This was complemented by public forums, national advertising,
information boards and a strong presence on social media,
drawing attention to, and engaging a broad audience on,
the benefits and safety standards of the LAMP.
Lynas remains a foundation sponsor of the Balok Ivory Tower
Academic programme in Kuantan, Malaysia. The programme
promotes learning opportunities for vulnerable students from
underprivileged backgrounds to continue their education and
secure placement at local universities. Lynas representatives
regularly volunteer their time to meet with students throughout
the year to discuss the importance of safe workplace practices
and environmental protection.
WATER QUALITY AND ENERGY EFFICIENCY
Any water discharged from our processing operations is cleaned and
treated and will not exceed the standard specified of 1 Bq/litre.
In Malaysia this limit is set by the Atomic Energy Licencing Board
(AELB) and is within the range allowed in the drinking water as set
by the WHO international standards. This is an example of Lynas’
absolute commitment to protect the local environment.
Likewise, the design of our LAMP facility has included extensive
geotechnical analysis and modelling of storm water management,
and takes into consideration the unlikely occurrence of extreme
rainfall and flood events.
18
In December 2012, the first phase of the Balok Ivory Tower
Academic programme was completed, with all 67 students
successfully achieving the minimum requirement to gain
placement at a local university or college.
In Western Australia, Lynas has implemented a thorough
stakeholder engagement programme which culminated in
the establishment of a Mount Weld Community Consultative
Committee (CCC) in February 2012.
Based in the town of Laverton, the purpose of the CCC is to
provide a forum for open discussion between the Company
and appointed Mount Weld Community representatives;
more specifically, its goal is to determine community initiatives
in accordance with the principle of creating shared value and
building community resilience.
While still in its early stages, the Mount Weld CCC meets
bi-monthly and has been enthusiastically embraced by the
local indigenous community. This effort reflects a strong
corporate values-basis aligned with host community values.
Lynas regularly conducts cultural awareness programmes
at its Mount Weld facility. The objective of these programmes
is to increase employee appreciation of local indigenous
culture, build relationships and identify indigenous employment
opportunities for the future.
REGULATORY SUBMISSIONS
In Malaysia, Lynas submitted a Waste Management Plan, Safety
Case and Decommissing Plan to the AELB in support of the LAMP
licensing approvals.
In Western Australia, Lynas submitted and received environmental
approval for Phase 2 expansion of its operations at Mount
Weld. The Department of Indigenous Affairs also approved the
relocation of two Aboriginal heritage sites, and a Mount Weld
“mine closure” plan was developed.
In Malawi, Lynas submitted Environmental Impact Reports
and an Environmental Management Plan for the Kangankunde
Project to regulatory authorities, and appointed a Safety, Health,
Environment and Community Manager to support project
requirements and sustainability initiatives.
BUSINESS EXCELLENCE
The Lynas Industrial Management Framework (MInd) seeks to
operationalise the Lynas vision and strategic goals by focusing
on the key performance areas of:
• Responsible care;
• Customer satisfaction;
• Asset optimisation; and
• Growth management.
Each Lynas operating entity is responsible for developing an
operational action plan detailing how they will deliver on the key
result areas detailed in the MInd Framework. Key performance
indicators are allocated to each focus area so we may track our
progress to achieving our goals.
Lynas staff engage with the community as part of the Lynas Cultural
Awareness Programme in Laverton
A key component of the MInd framework is the Lynas Integrated
Operational Management System Standards (LIOMSS) which covers:
• Safety
• People and Culture
• Environment
• Community
• Quality and Customer Satisfaction
• Supply Chain
Our Western Australia and Malaysian operations teams are
implementing these system standards to promote continuous
improvement and meet the requirements of international
standards for safety, environment and quality.
GOvERNANCE AND RISK MANAGEMENT
The Risk Management and Safety, Health, Environment and
Community (SHEC) Committee of the Lynas Board met on three
occasions during the past financial year.
In October 2011, the Lynas Board endorsed the Occupational
Health and Safety (OHS) Due Diligence Wheel – a framework
detailing specific OHS items to be addressed at Board and
Leadership team meetings throughout the 2012 calendar year.
Specific topics include:
• OHS risk mitigation;
• Compliance with OHS legislation; and
• Compliance with Lynas OHS Standards.
Each of our operational sites report on specific OHS initiatives,
progress and performance.
Lynas has engaged internationally accredited Bureau veritas (Bv)
to provide third party, independent auditing and certification
services in the areas of occupational health and safety,
environment and quality management.
Lynas continues to meet, and in some cases, exceed safety
standards for protecting people and the environment. We look
forward to playing our part in delivering sustainable outcomes
and making an important contribution to our host communities.
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
19
gLOBaL
Market
aCtIvItY
Rare Earths prices stabilised during the year after a period of
significant price volatility in 2011. China continues to restructure
its Rare Earths industry enforcing stricter compliance with
environmental protection standards and closing down illegal
mining and processing activities. Non-Chinese Rare Earths
consumers are focused on securing new sources of supply to
meet growing end product demand. Lynas will play a key role
in meeting the supply needs of major Rare Earths consumers.
GLOBAL DEMAND
The chemical properties of Rare Earths differ from the main
group of elements in the periodic table due to their unique
electron configuration. These properties are critical to the
many applications that utilise Rare Earths and are the reason why
there are no substitutes for these elements in most applications.
CATALYTIC PROPERTIES
Rare Earths are very effective catalysts. They easily absorb, store
and release oxygen and also stabilise environments in which they
operate. The two main markets which utilise these properties
are environmental catalysts for the automotive market and
petroleum catalysts for the oil refinery market.
Environmental catalysts are primarily used to control pollutant
emissions from automotive engines, and the automotive market
is the key driver of the environmental catalyst industry. Tougher
emissions legislation around the world has driven demand growth
at 10% per annum in recent years. This is expected to continue
as the impending legislation continues to grow the auto-catalyst
market beyond normal vehicle growth. In addition the legislative
umbrella is covering an increasingly wide selection of vehicles such
as trucks and buses as well as non-road machinery, all of which will
add to future growth. Cerium is the main Rare Earth element used in
auto-catalysts. Cerium balances the oxygen environment within the
catalyst for optimal performance and also provides high temperature
stability which allows the auto-catalyst to operate more efficiently.
The main petroleum catalyst for the production of fuels and
other petroleum derivatives is used in a process known as
Fluid Catalytic Cracking (FCC). Due to strong demand from
the gasoline and petrochemical market, petroleum catalysts
are forecast to remain a growth application for Rare Earths.
Lanthanum stabilises the molecular sieve used in the FCC process
which increases the life of the catalyst and increases oil refinery
yields by approximately 7% per annum. To put a 7% yield benefit
into perspective, US$500 million of Lanthanum sales into the
FCC application creates approximately US$150 billion in yield
benefit for the refineries globally. This example also shows that the
demand for Lanthanum is not sensitive to price.
MAGNETIC PROPERTIES
Certain Rare Earths exhibit very large magnetic moments.
Neodymium Rare Earth magnets utilise this property to create
the strongest type of permanent magnets made, substantially
stronger than ferrite or alnico magnets. This market is forecast
to continue to be a growth application for Rare Earths. Rare
Earth magnets are used in most computer hard disk drives,
audio speakers, air conditioning compressors and electric motors.
Electric motors which use Rare Earth magnets are smaller,
lighter and more powerful than comparable electric motors
with other magnets.
The automotive market is an important demand driver for Rare
Earth magnets. A car has numerous electric motors, and Rare
Earth magnets are penetrating these applications to reduce the
car’s weight. However, the main growth application for magnets
in the automotive market is the hybrid electric motor which
drives a hybrid vehicle at low speed using battery power. This
hybrid motor also doubles as a generator to recharge the battery
during deceleration and braking. Approximately 2kg to 3kg of Rare
Earths are used in high strength Rare Earth magnets in the hybrid
car. Analysts predict approximately an additional 1.8 million
hybrid vehicles per annum shall be produced between 2010 and
2014, which would account for approximately 25% of the total
magnet market growth.
OPTICAL PROPERTIES
Rare Earths have very useful optical properties. Rare Earths are
incorporated into phosphors which provide light in fluorescent
lamps. Similar phosphors play a critical role in plasma and liquid
crystal display television and computer screens.
Legislation is already taking effect around the world to ban the
energy inefficient incandescent light bulb and replacing it with more
energy efficient light bulbs such as the compact fluorescent lamp.
This market is forecast to continue to be a growth application for
Rare Earths. The phosphors which create the light in these lamps,
and in plasma and liquid crystal displays, are dependent upon a
number of Rare Earths, especially Europium, Terbium and Yttrium.
Another important optical property of Rare Earths allowed the
development of high refractive index, low dispersion glass. The
most familiar example of dispersion is probably a rainbow, in which
dispersion causes the separation of white light into components of
different colours. Low dispersion glass is used in camera lens and
has allowed the miniaturisation of today’s digital cameras. These
lenses typically contain 30% Lanthanum, and whilst this market
is relatively small it is experiencing strong growth.
20
Cerium is also added to automotive glass, particularly in Japan,
as it reduces the transmission of ultraviolet light, and therefore
reducing heat entering the car and as a result cutting down the
air conditioning loads. The final glass additive application is the
addition of Cerium to Cathode Ray Tube (CRT) glass; however
this market is shrinking as flat screens replace CRT in the
television and computer market.
METALLURGICAL PROPERTIES
A metal alloy of Rare Earths and nickel is very efficient for
storing hydrogen, and this property is applied in the rechargeable
battery market. Nickel Metal Hydride technology, or NiMH,
is used extensively in consumer electronics, the power tool
market and in hybrid vehicles. A state-of-the-art NiMH battery
for a hybrid vehicle with the size and performance of the Toyota
Prius, for example, uses between 12 and 20kg of Rare Earths,
primarily Lanthanum and Cerium with some Neodymium
and Praseodymium, in its overall construction.
Most of the hybrid cars built in the last decade, primarily by
Toyota, Honda, and Ford, are still on the road and provide
daily testimony to the reliability of the NiMH battery. This
reliability factor is a large hurdle for potential alternative battery
technologies such as the lithium-ion (Li-ion) battery. NiMH
battery sales in hybrid vehicles are forecast by battery market
analysts to continue to grow until 2018, after which the Li-ion
battery is forecast to dominate the growth in the market.
GLOBAL MARKET SIZE
The overall Rare Earths market was steady in 2011 after a recovery
in demand following the global financial crisis. The recent sharp
rise in prices caused by this increase in demand as well as China’s
tighter export restrictions have triggered the implementation of
some manufacturing productivity improvements, mainly in the
polishing and magnet industries. These changes reduced demand
for “fresh” Rare Earths contributing to this flat growth. With these
productivity improvements now fully deployed, global demand
is expected to grow over the coming years.
Lynas market forecasts are derived by assembling the customer
demand estimates within each application for the market outside
China, combined with the data published by the China Rare Earths
Information Centre for the market inside China. The market outside
China currently represents around 40-45% of the total end demand,
but is being impacted by the current restriction on Chinese exports.
Lynas estimates that non-China demand could recover strongly
if quickly supported by a non-China Rare Earths supply chain.
GLOBAL SUPPLY
China continues to dominate global supply with over 90% of Rare
Earths production. The main mine in China is the Bayun Obo mine
near Baotou in Inner Mongolia. This is controlled by a large State
Owned Enterprise, Baotou Iron & Steel, and produces approximately
55 kilotonnes (kt) REO per annum. A second region is located in
Sichuan province and is less consolidated. The Sichuan region has
lower value resources and mining is now underground, as opposed
to open pit mining. Sichuan has an estimated annual production of
up to 20kt REO per annum. The third Rare Earths producing region
in China mines “ionic clay” deposits. This region is known as the
southern region as it comprises Jiangxi, Guangdong, Hu’nan and
Fujian provinces, and is where most of the “heavy” Rare Earths are
produced. Europium, Terbium, Dysprosium and Yttrium are the key
heavy Rare Earths in demand today. Accurate production figures are
unavailable due to the artisanal mining in this region, however it is
estimated at approximately 35kt REO per annum. China continues
to impose domestic production controls on the Rare Earths industry.
In 2011, the domestic production quota was 93.8kt REO. Chinese
authorities have issued production quotas for the first half of 2012
which are broadly in line with the prior year. The second batch of
quotas is expected to be released later in 2012.
CHINESE EXPORT QUOTAS
In 2012, China set a maximum Rare Earths export quota
of 31.13kt REO, up 3% on the prior year. However, the availability
of the full quota is subject to a number of companies passing
environmental inspections. For the first time, Chinese authorities
divided the quota between light and heavy Rare Earths, with a
maximum quota of 27.125kt REO for light Rare Earths and 4,005
tonnes for heavy Rare Earths.
PRICING
Rare Earths prices retraced from very high levels at the start of
the year as manufacturing process changes in selected industries,
customer inventory de-stocking and a general easing of global
macroeconomic conditions combined to reduce upward pressure
on prices. The period of very high Rare Earths prices seriously
impacted the non-Chinese Rare Earths processing industry.
Importantly, prices have returned to a range that is supportive of
demand growth in key applications while still providing an adequate
return for sustainable re-investment in Rare Earths supply.
Lynas maintains a position of strategic importance as one of the
few non-Chinese producers in the market.
RARE EARTHS PRICES: DOMESTIC CHINA AND FOB CHINA (USD/KG REO)
RARE EARTH OXIDES (PURITY 99% MIN)
CHINA DOMESTIC (DLVD)
RARE EARTH OXIDES (PURITY 99% MIN)
CHINA EXPORTS (FOB)
La Ce
Dom
NdPr
Dom
Dy
Dom
Eu
Dom
MT
WELD
LaCe
FOB
NdPr
FOB
Dy
FOB
Eu
FOB
MT
WELD
6.6
23.6
23.9
19.6
14.9
12.4
44.7
121.1
154.5
93.2
60.3
65.9
307
885
1666
1120
728
685
502
1999
3382
2218
1405
1198
20
62
82
57
39
36
76.8
137.3
126.9
57.6
34.2
40.7
117
218
265
200
144
100
407
967
2436
1885
1335
1062
690
1820
5143
3780
3562
2354
91
172
196
120
85
58
QUARTER
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Source: Metal Pages
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
21
dIreCtOrs’
repOrt
The Board of Directors (the “Board” or the “Directors”) of
Lynas Corporation Limited (the “Company”) and its subsidiaries
(together referred to as the “Group”) submit their report for the
year ended June 30, 2012. In order to comply with the provisions
of the Corporations Act 2001, the Directors report as follows:
DIRECTORS
The names and details of the Company’s Directors who were in office
during or since the end of the financial year are as set out below. All
Directors were in office for this entire period unless otherwise stated.
INFORMATION ABOUT THE DIRECTORS
NICHOLAS CURTIS AM
BA (HONS)
EXECUTIvE CHAIRMAN
Mr Curtis is the Executive Chairman of the Company. He is
Chairman of Forge Resources Limited and of the private corporate
advisory firm, Riverstone Advisory. Mr Curtis also serves as a
Director of the Asia Society AustralAsia Centre and as Chairman
of Faces in the Street Urban Mental Health Research Institute at
St vincent’s Hospital Sydney. He was a Non-Executive Director of
Conquest Mining Limited from May 12, 2010 to October 18, 2011
prior to the company’s restructure to become Evolution Mining.
From June 2004 to August 2011 he served as a Director of the
Garvan Institute of Medical Research and from August 2004 to
October 2009 he was Chairman of the Board of St vincent’s &
Mater Health Sydney Limited. In addition he served as a Director
of St vincent’s Health Australia Ltd and St vincent’s Healthcare
Ltd from June 1, 2004 to October 1, 2010. His career spans more
than 30 years in the resources and finance industries.
On June 13, 2011, Mr Curtis was awarded an AM (Member of the
Order) for his services to the community through executive roles
supporting medical research and healthcare organisations and
also for his work fostering Australia-China relations.
WILLIAM (LIAM) FORDE
BSC (ECON), AICD
LEAD INDEPENDENT DIRECTOR
Mr Forde joined the Company as a Non-Executive Director in
December 2007 and is the Lead Independent Director of the
Company. Mr Forde has many years experience in senior finance
and managerial positions in both Ireland and Australia. He is
currently a Director of Hastings Funds Management Limited
and Chairman of Hastings Management Pty Ltd. Mr Forde is
also a Director of Hastings Diversified Utilities Fund, Australian
Infrastructure Fund Ltd and Hastings High Yield Fund.
In addition Mr Forde is a member of several advisory boards and
is a member of the Australian Institute of Company Directors. Mr
Forde was Chief Executive Officer of the Baulderstone Hornibrook
Group from 2002 to 2005, following 15 years as Chief Financial
Officer for the group.
kATHLEEN CONLON
BA (ECON) (DIST), MBA, FAICD
NON-EXECUTIvE DIRECTOR
Ms Conlon was appointed as a Non-Executive Director from
November 1, 2011. Ms Conlon is currently a Non-Executive
Director of CSR Limited and REA Group Limited. She also serves
on the NSW Council of the Australian Institute of Company
Directors and is a member of Chief Executive Women. Prior to
her Non-Executive Director career, Ms Conlon spent 20 years in
professional consulting where she successfully assisted companies
achieve increased shareholder returns through strategic and
operational improvements in a diverse range of industries.
Ms Conlon is one of the pre-eminent thought leaders in the area
of operations and change management, both in Australia and
globally. In 2003, Ms Conlon was awarded the Commonwealth
Centenary medal for services to business leadership.
22
Left to right: William (Liam) Forde, Kathleen Conlon, nicholas Curtis AM,
David Davidson, Jacob Klein, Ziggy Switkowski.
Prior to joining Sino Gold Mining Limited in 1995, Mr Klein was
employed at Macquarie Bank and PricewaterhouseCoopers. Mr
Klein is also currently a Non-Executive Director of OceanaGold
Corporation (appointed in December 2009). Mr Klein is a past
president of the NSW Branch of the Australia China Business
Council and previously served on the NSW Asia Business Council.
ZYGMUNT (ZIGGY) SWITkOWSkI
PHD, FAICD, FTSE
NON-EXECUTIvE DIRECTOR
Dr Switkowski joined the Company as a Non-Executive Director
in February 2011. With an Australian and international executive
career spanning more than 25 years, Dr Switkowski has
established a reputation as one of Australia’s most distinguished
business leaders. Dr Switkowski’s career highlights include serving
as Chief Executive Officer and Managing Director of Telstra, Chief
Executive Officer of Optus and Chairman and Managing Director
of Kodak (Australasia).
Dr Switkowski currently serves as a Director of Tabcorp Limited
and Oil Search Limited and is Chairman of Suncorp Group and
Opera Australia. He is also Chancellor of the Royal Melbourne
Institute of Technology (RMIT University). Dr Switkowski is
the former Chairman of the Australian Nuclear Science and
Technology Organisation. He holds an honours degree in science
and a PhD in nuclear physics from the University of Melbourne
and is a Fellow of the Australian Institute of Company Directors.
DAVID DAVIDSON
NON-EXECUTIvE DIRECTOR
Mr Davidson is a Non-Executive Director of the Company and
originally joined the Board on March 28, 2002. He resigned from
the Board on August 18, 2005 and was re-appointed as a Director
on December 8, 2005. Mr Davidson has had a distinguished
career with ICI and DuPont. An Australian, he has lived and
worked in Europe and North America and held a number of senior
executive roles with global responsibilities. He is a former Director
of ICI America Inc.
Since returning to Australia, Mr Davidson has been providing
executive and corporate advice on organisation development and
strategy. Mr Davidson currently does not hold any other listed
company Directorships.
jAkE kLEIN
BCOM (HONS), ACA
NON-EXECUTIvE DIRECTOR
Mr Klein is a Non-Executive Director of the Company and joined
the Board on August 25, 2004. Mr Klein has also been Executive
Chairman of Evolution Mining since October 2011, a company
formed following the merger of Conquest Mining Limited (of
which he was Executive Chairman from May 2010 until the
merger) and Catalpa Resources Limited. Prior to that, Mr Klein
was President and Chief Executive Officer of Sino Gold Mining
Limited, where he managed (with Mr Curtis who was Chairman
until November 2005) the development of that company into
the largest foreign participant in the Chinese Gold Industry.
Sino Gold Mining Limited was listed on the ASX in 2002 with
a market capitalisation of $100 million and was purchased by
Eldorado Gold Corporation in late 2009 for over $2 billion. Sino
Gold Mining Limited was an ASX 100 company, operating two
award-winning gold mines and engaging over 2,000 employees
and contractors in China. Mr Klein resigned as a Director of Sino
Gold Mining Limited in December 2009.
LYNAS CORPORATION LIMITED ANNUAL REPORT 2012
23
Directors’ report
Directors’ shareholDings
As at the date of this report, the interests of the Directors in the shares and options of the Group were:
N. Curtis
W. Forde
K. Conlon(1)
D. Davidson
J. Klein
Z. Switkowski
total
(1) Shares held by spouse.
orDinary
shares
options
over
orDinary
shares
16,045,758
30,000,000
1,001,656
4,000,000
18,154
700,828
2,082,236
700,828
–
3,100,000
3,100,000
–
20,549,460 40,200,000
remuneration of key management personnel
Information about the remuneration of key management personnel is set out in the Remuneration Report of this Directors’ Report. The
term ‘key management personnel’ refers to those persons having authority and responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including any Director of the Company.
share options granteD to key management personnel
The following table outlines the options and performance rights issued for the benefit of Directors and other key management
personnel during the 2012 financial year.
A. Arnold
G. Barr
L. Catanzaro(1)
N. Curtis
E. Noyrez
J.G. Taylor(2)
total
granteD
grant Date
935,000
1,210,000
2,000,000
4,000,000(3)
2,000,000
1,020,000
11,165,000
September 23, 2011
September 23, 2011
December 12, 2011
November 30, 2011
September 23, 2011
September 23, 2011
(1) Appointed December 12, 2011.
(2) Ceased as a member of the KMP on December 12, 2011.
(3) The options issued to N.Curtis were initially approved by the Board on September 23, 2011 and then subsequently approved by the shareholders
of the Company at the AGM on November 30, 2011.
company secretaries
anDrew arnolD
Mr Arnold was appointed as General Counsel and Company Secretary to the Group on July 23, 2008, following 15 years as a lawyer
at Deacons, including six years as a Partner. During that time Mr Arnold also spent two years on secondment at Riddell Williams,
Seattle. In his role at Deacons he had been overseeing the legal work of the Group since 2001. Mr Arnold is the responsible person for
communication with the Australian Securities Exchange (“ASX”) in relation to listing rule matters.
24
Directors’ report
sally mcDonalD
Ms McDonald was appointed as In-house Counsel and an additional Company Secretary on January 30, 2012. She is a practising lawyer
with over six years post admission experience in corporate and commercial law at Norton Rose and Addleshaw Goddard.
ivo polovineo
Mr Polovineo resigned as Company Secretary on January 30, 2012.
corporate information
The Company is limited by shares and is incorporated and domiciled in Australia. The Group’s corporate structure is as follows:
Lynas Corporation Ltd
100%
Lynas Malaysia
Sdn Bhd
100%
Lynas Services
Pty Ltd
100%
100%
100%
Mt Weld
Holdings Pty Ltd
Mt Weld
Rare Earths Pty Ltd
Lynas Africa
Holdings Pty Ltd
100%
Mt Weld
Mining Pty Ltd
83% (5 shares)
Lynas Africa
Limited
17% (1 share)
nature of operations anD principal activities
The principal activities of the Group are:
• integrated extraction and processing of rare earth minerals, primarily in Australia and Malaysia;
• exploration and development of Rare Earth deposits; and
• exploration for other mineral resources.
performance review
The Directors together with management monitor the Group’s overall performance, from implementation of the mission statement and
strategic plan through to the performance of the Group against operating and financial plans.
review anD results of operations
Financial performance
in a$’000
General and administration expenses
Other expenses
profit (loss) from operating activities
Financial income
Financial expenses
net financial income (expenses)
profit (loss) before income tax
June 30,
2012
2011
(74,124)
(15,928)
(56,584)
(1,322)
(90,052)
(57,906)
2,840
(10,667)
(7,827)
(97,879)
10,006
(9,388)
618
(57,288)
lynas corporation limiteD ANNUAL REPORT 2012
25
Directors’ report
For the year ended June 30, 2012, the Group realised a loss before tax of $97,879 thousand (2011: $57,288 thousand). This loss has been
compounded during the year by the continued incurrence of pre-production start-up costs combined with one off impairment charges
totalling $15,928 thousand.
During the year the Group recognised an impairment loss of $1,211 thousand in relation to its property, plant and equipment and
$2,613 thousand in relation to its deferred exploration and evaluation expenditure in Malawi (resulting from the previously reported
court proceeding that arose during the period) and a $3,559 thousand impairment loss in relation to property, plant and equipment
at its Malaysian operation (which resulted from the identification of certain assets being surplus or redundant to the current operational
plan). A write-down of inventories to net realisable value relating to externally acquired raw materials for the Malaysian operation
totalled $8,545 thousand.
Financial position
in a$’000
assets
Cash and cash equivalents
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Available for sale financial assets
Other assets
total assets
liabilities
Borrowings
Other liabilities
total liabilities
net assets
equity
Share capital
Retained earnings (accumulated deficit)
Reserves
total equity
June 30,
2012
2011
205,438
65,691
706,603
26,342
3,754
15,829
433,956
30,243
361,070
29,287
9,652
9,825
1,023,657
874,033
(403,062)
(57,101)
(212,364)
(34,902)
(460,163)
(247,266)
563,494
626,767
823,161
(287,136)
27,469
821,994
(199,366)
4,139
563,494
626,767
The overall net assets of the Group decreased by $63,273 thousand.
Cash and cash equivalents at June 30, 2012 comprise $124,377 thousand of unrestricted cash and $81,061 thousand of restricted cash.
Restricted cash represents funds provided under the Sojitz loan facility which are only available to fund capital expenditure required for
Phase 2 of the Rare Earths Project.
On January 24, 2012, the Company executed binding documentation for a US$225,000 thousand unsecured convertible bonds issue
with Mt Kellett Capital Management, a US-based investment firm. The convertible bonds issue is being used to fund construction and
commissioning of Phase 1 of the Rare Earths Project in Malaysia and for operational expenses.
During the year, the Group has capitalised assets under construction for Phases 1 and 2 of $355,404 thousand. Assets under
construction of $86,679 thousand have come into operation during the year at Mount Weld and as such have been transferred out
of assets under construction.
The movement in reserves of $23,330 thousand during the current year reflects movements in the equity settled employee benefits, foreign
currency translation and investment revaluation reserves, plus the tax effected equity component of the Mt Kellett convertible bonds.
26
Directors’ report
Capital structure
At the start of the year the Group had 1,713,646,913 ordinary shares on issue. During the year an additional 1,382,218 shares were
issued as follows:
Shares on issue June 30, 2011
Issue of shares pursuant to option conversion
Shares on issue June 30, 2012
number
1,713,646,913
1,382,218
1,715,029,131
In addition to the ordinary shares on issue there were 83,029,418 unlisted options and performance rights and 171,594,000 unlisted
convertible bonds on issue.
review of operations
Significant operational progress has been made since the May 2011 commissioning of the WA component of Phase 1 of the Rare Earths
Project. In Malaysia each of the pre-commissioning steps to allow for the production ramp-up to commence are underway. Work is
also well underway at both locations for the Phase 2 component of the Rare Earths Project, which will allow the Group to increase its
production to 22,000 tonnes per annum of Rare Earth Oxide (“REO”).
Western Australia operations
Following the commissioning of the Concentration Plant at Mount Weld in May 2011, the ramp up in production continued this financial
year. The plant has been processing ore that had been mined and stockpiled from the first mining campaign. The Concentration Plant
continued to operate on an ‘8-days on/6-days off’ basis. The design throughput rate of 15 tonnes per hour has been achieved.
At the end of the financial year, more than 13,000 dry tonnes of concentrate containing more than 4,800 tonnes of REO were
bagged ready for export. Ahead of the start-up of the Lynas Advanced Materials Plant (LAMP) in Malaysia, the Company elected to
bring forward a period of routine maintenance on the Concentration Plant. The downtime has also been used for identifying areas of
continuous improvement as well as preparing the Phase 2 mobilisation on site. Lynas Management expects to realise operating cost
savings from the temporary shutdown of the Plant. The re-start of the Plant will be synchronised in accordance with the requirements
of the LAMP.
Following the results of the extension drilling programme at Mount Weld, Lynas reported a significant upgrade to the Resources at
Mount Weld at both the Central Lanthanide Deposit (“CLD”) and the Duncan Deposit, confirming its status as the richest known deposit
of Rare Earths in the world. The Mineral Resource estimate for Mount Weld increased by 37% from that announced in September 2010
and a 34% increase in contained REO.
Specifically, the Resource estimate for the CLD has increased by 51% to 14.9 million tonnes, at an average grade of 9.8% REO, for a
total of 1.5 million tonnes REO (cut-off 2.5%). This represents a 38% increase in contained REO. The Resource estimate for the Duncan
Deposit, located immediately to the east and south of the CLD, has increased by 18% to 9.0 million tonnes, at an average grade of 4.8%
REO, for a total of 431,600 tonnes REO (cut-off 2.5%). This also represents an increase of 18% in contained REO.
The Phase 2 expansion of the Concentration Plant has progressed with the awarding of a fixed price contract to Abesque Engineering
Ltd. All necessary regulatory approvals for construction were obtained and site works commenced in June 2012. The Phase 2 project
will double the Concentration Plant capacity and also incorporate many of the learnings from the commissioning and operation of the
Phase 1 operation. Key components include a new flotation plant, control room, concentrate thickener and concentrate filter plus a
power station and reverse osmosis plant upgrades. Commissioning of the Phase 2 expansion is planned for second quarter of 2013.
In June 2012, Lynas reported on the completion of a scoping study on the Duncan Deposit. The scoping study results recommend
progressing the project and the next steps would include a more detailed evaluation of potential locations for processing, and other
work that will allow a detailed feasibility study to be prepared.
Lynas Western Australia Operations is implementing the Lynas Integrated Operational Management System Standards (“LIOMSS”), which
incorporates compliance to ISO9001:2008, ISO14001:2004 and OHSAS18001:2007.
During August 2012, Lynas Western Australia’s Integrated Management System was externally audited by Bureau Veritas, and
subsequently certified to Safety and Quality Management Standards – ISO and OHSAS.
lynas corporation limiteD ANNUAL REPORT 2012
27
Directors’ report
Malaysia operations
The Malaysia Operations team grew significantly over the past year and the total number of staff at the end of the financial year
stood at 256.
As part of the International Atomic Energy Agency recommendation and the AELB’s subsequent requirements for the application for the
Temporary Operating Licence (TOL), Lynas made revised submissions for Radiological Impact Assessment (RIA), Emergency Response
Plan, Radiation Protection Plan, Waste Management Plan and Safety Case and Conceptual Decommissioning Plan to the AELB.
The AELB formed an expert review panel to examine Lynas’ submissions, and after several iterations, Lynas submitted documents to the
AELB on December 31, 2011 taking into account all comments from the expert review panel.
The AELB approved the TOL on February 1, 2012, at which time the licence fee was paid. As of the end of the financial year, the licence
was yet to be issued.
Post the approval of the TOL by the AELB, the Malaysian Government appointed a Parliamentary Select Committee (PSC) in March
2012, chaired by the Higher Education Minister YB Dato’ Seri Mohamed Khaled Nordin, with the purpose of helping to raise public
awareness concerning the LAMP. Following presentations and a detailed Question and Answer session, Lynas welcomed the PSC
on a LAMP site visit in early May.
On June 19, 2012, the PSC gave its recommendation for Lynas to be awarded the TOL.
By end of June 2012, the LampsOn team commenced its demobilisation from site, allowing Lynas to continue to progress and finalise
the permitting of the site to ensure that final commissioning progresses as efficiently as possible on receipt of the TOL.
The Ready for Start-Up programme was 97.1% complete as at the end of the financial year. The balance of the remaining projects are
not critical for start-up.
In July 2011, Lynas issued a Letter of Award to Toyo Thai Corporation for the Engineering, Procurement, Construction and
Commissioning Assistance of the Phase 2 expansion of the LAMP to 22,000tpa REO. The contract is a lump sum fixed price contract.
As at the end of June 2012, the overall project’s cumulative progress was 72.0% complete and the project remains LTI free. The Phase 2
expansion of the LAMP is expected to be construction complete in early 2013.
Various training programmes were conducted over the past year in preparation of commissioning and operation of the Plant. They
included Monitoring of Chemical Hazards to Health; Certified Environmental Professional in Scheduled Waste Management; Certified
Environmental Professional Effluent Treatment System; First Aid; Fire Fighting; Confined Space Training; Radiation Protection Officer
Training; Safety and Health Induction for Construction Workers; Liyang Rhodia Laboratory Training; Production, Planning and Control;
and Internal Audit ISO9001 Training.
On September 5, 2012 the Group received confirmation from the AELB in Malaysia that the TOL for the LAMP facility had been finalised
and granted. As a result of the receipt of the TOL, the Group has commenced its ramp-up of operations.
Malawi operations
During the year, an Environmental and Social Impact Report was completed and submitted to the Government of Malawi for review.
Comments were received and the final document was submitted in July 2012. On site, the refurbishment of existing infrastructure
continued and drill roads and pads were constructed in preparation for the next phase of the drilling programme.
As announced on June 13, 2012, Lynas is currently assessing a decision of the Malawi High Court that may affect the proposed
Kangankunde resource development. Lynas is reassessing the project’s risks in the context of Malawi’s present governance and
institutional framework, and consequently deferred the planned drilling programme along with further development and test work
until clarity in the legal position and processes in Malawi is obtained. As a result of this action the Group during the year recognised
an impairment charge relating to the assets in Malawi totalling $3.824 thousand.
28
earnings per share
earnings (loss) per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Directors’ report
June 30,
2012
2011
(5.12)
(5.12)
(3.54)
(3.54)
DiviDenDs
No dividend has been recommended since the end of the financial year.
risk management
The Group takes a proactive approach to risk management. The Directors are responsible for ensuring that risks and opportunities
are identified on a timely basis and that the Group’s objectives and activities are aligned with these risks and opportunities.
The Group believes that it is crucial for Directors to be a part of this process, and as such has established a Risk Management, Safety,
Health, Environment and Community Committee.
statement of compliance
The financial report is based on the guidelines in ‘The Group 100 Incorporated Publication Guide to the Review of Operations and
Financial Condition’.
significant changes in the state of affairs
Except as disclosed in the review of operations and subsequent events, there have been no significant changes in the state of affairs
of the Group during the current financial year.
environmental regulation anD performance
The Group is bound by the requirements and guidelines of the relevant environmental protection authorities for the management and
rehabilitation of mining tenements owned or previously owned by the Group. Mining tenements are being maintained and rehabilitated
following these guidelines. There have been no known breaches of any of these conditions.
lynas corporation limiteD ANNUAL REPORT 2012
29
corporate Governance statement
The Board of Directors of the Company is responsible for the corporate governance of the Group. The Board guides and monitors the
business and affairs of the Group on behalf of the shareholders by whom they are elected and to whom they are accountable.
In accordance with the ASX Corporate Governance Council’s (the “Council’s”) recommendations, the Corporate Governance Statement
must contain certain specific information and also report on the Group’s adoption of the Council’s best practice recommendations on
an exception basis, whereby disclosure is required of any recommendations that have not been adopted by the Group, together with
the reasons why they have not been adopted. The Group’s corporate governance principles and policies are therefore structured with
reference to the Council’s best practice recommendations.
The Group’s corporate governance practices were in place throughout the financial year ended June 30, 2012, and complied with all
of the Council’s Principles and Recommendations except as noted below in relation to Recommendations 2.2 and 2.3.
Details of the Group’s corporate governance practices are as follows.
principle 1 – lay soliD founDations for management
anD oversight
Recommendation 1.1 – Functions reserved to the Board and delegated to Senior Executives
The Group has established the functions reserved to the Board and the functions delegated to senior executives. The functions reserved
to the Board include:
(1)
(2)
(3)
(4)
(5)
oversight of the Group, including its control and accountability systems;
appointing and removing the Chief Executive Officer (“CEO”) (or equivalent), including approving remuneration of the CEO
and the remuneration policy and succession plans for the CEO;
ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer (“CFO”) (or equivalent) and the
Company Secretary;
input into the final approval of management’s development of corporate strategy and performance objectives;
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal
compliance;
(6) monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources are
available;
(7)
approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures;
(8) approving and monitoring financial and other reporting;
(9) appointment and composition of committees of the Board;
(10) on recommendation of the Audit Committee, appointment of external auditors; and
(11) on recommendation of the Nomination and Remuneration Committee, initiating Board and Director evaluations.
The functions delegated to senior executives include:
(1)
implementing the Group’s vision, values and business plan;
(2) managing the business to agreed capital and operating expenditure budgets;
(3)
(4)
(5)
(6)
(7)
identifying and exploring opportunities to build and sustain the business;
allocating resources to achieve the desired business outcomes;
sharing knowledge and experience to enhance success;
facilitating and monitoring the potential and career development of the Group’s people resources;
identifying and mitigating areas of risk within the business;
(8) managing effectively the internal and external stakeholder relationships and engagement strategies;
(9)
sharing information and making decisions across functional areas;
(10) determining the senior executives’ position on strategic and operational issues; and
(11) determining the senior executives’ position on matters that will be referred to the Board.
Recommendation 1.2 – Performance evaluation of Senior Executives
The Group has established detailed written Key Responsibility Areas and Key Performance Indicators (“KPIs”) for each senior executive.
The performance of senior executives is periodically reviewed against their KPIs, at least once every 12 months, as part of the Group’s
formal performance review procedures. The Group has adopted a formal procedure whereby each senior executive meets with his/her
direct supervisor to review performance against KPI’s during the review period. The results of that review are recorded in writing for
follow up during subsequent meetings, and for internal reporting purposes.
Induction procedures are in place to allow new senior executives to participate fully and actively in management decision making at the
earliest opportunity.
30
corporate Governance statement
Recommendation 1.3 – Performance evaluation of Senior Executives during the financial year
An evaluation of senior executives took place during the financial year. The evaluation was in accordance with the procedure disclosed
in relation to Recommendation 1.2.
The matters reserved for the Board are disclosed in relation to Recommendation 1.1. In addition, these matters are summarised in
the Group’s Board Charter, a copy of which is available on the Group’s website, www.lynascorp.com. The matters delegated to senior
executives are disclosed in relation to Recommendation 1.1.
principle 2 – structure the boarD to aDD value
Recommendation 2.1 – A majority of the Board should be independent Directors
Recommendation 2.1 requires a majority of the Board to be independent Directors. The Council defines independence as being free
from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere
with – the exercise of unfettered and independent judgement.
The Board has a majority of independent Directors. In accordance with the definition of independence above, and the materiality
thresholds set, D. Davidson, J. Klein, W. Forde, Z. Switkowski and K. Conlon are viewed as independent Directors. During the financial
year Mr Forde acted as Chairman of the LampsOn Board, which oversees the construction of Phase 1 of the Rare Earths Project and
received consultancy fees for those services, the Board does not view this as interfering with the exercise of unfettered and independent
judgement. As Phase 1 of the Rare Earths Project has been completed, Mr Forde has not provided any consultancy service to the Group
since June 30, 2012.
N. Curtis is the Executive Chairman and Chief Executive Officer of the Group. As the Chief Executive Officer of the Group, Mr Curtis
is not an independent Director of the Group in accordance with the definition above.
Recommendation 2.2 – The Chair should be an independent Director
N. Curtis is the Executive Chairman and Chief Executive Officer of the Group. Mr Curtis has a 0.58% shareholding in the Group and
the Board does not view this as interfering with the exercise of unfettered and independent judgement.
The Group is in development phase and the Board believes that Mr Curtis is the best person to perform both the roles of Chairman
and Chief Executive Officer at this stage of the Group’s growth.
The dual role of Mr Curtis is balanced by the presence of a clear majority of independent Directors on the Board. In addition Mr Forde
acts as the lead independent Director of the Group. The role of the lead independent Director includes chairing meetings of the Board
on matters where the Chairman is unable to act in that capacity, for example due to a lack of independence.
The Group announced at its 2011 AGM that Mr Curtis would stand for re-election as a Director in accordance with the Group’s normal
cycle of each Director standing for re-election every three years.
Recommendation 2.3 – The roles of Chair and Chief Executive officer should be separated
As disclosed in relation to Recommendation 2.2, N. Curtis acts as both Executive Chairman and Chief Executive Officer of the Group.
The reasons why Mr Curtis performs that dual role are disclosed in relation to Recommendation 2.2.
Recommendation 2.4 – Nomination Committee
The Board has established a Nomination and Remuneration Committee. A copy of the Charter of the Nomination and Remuneration
Committee is available from the Group’s website, www.lynascorp.com.
The Nomination and Remuneration Committee consists only of independent Non-Executive Directors. During the year, the members
of the Nomination and Remuneration Committee were Messrs. Davidson, Forde and Switkowski and Ms Conlon. Further details are
provided in the Directors Meetings section of the Director’s Report.
Recommendation 2.5 – Process for evaluating the performance of the Board
In accordance with the Charter of the Nomination and Remuneration Committee, the Committee is responsible for the:
(1)
(2)
(3)
(4)
evaluation and review of the performance of the Board against both measurable and qualitative indicators established
by the Committee;
evaluation and review of the performance of individual Directors against both measurable and qualitative indicators
established by the Committee;
review of and making of recommendations on the size and structure of the Board; and
review of the effectiveness and programme of Board meetings.
lynas corporation limiteD ANNUAL REPORT 2012
31
corporate Governance statement
Recommendation 2.6 – Additional information concerning the Board and Directors
In accordance with Recommendation 2.6, the Group provides the following additional information:
(1)
The skills and experience of each Director is set out in the Directors section of the Directors’ Report.
(2) The period of office of each Director is as follows:
name
N. Curtis
J. Klein
D. Davidson
W. Forde
Z. Switkowski
K. Conlon
term in office
10 years
7 years
6 years 7 months
4 years 5 months
1 year 5 months
8 months
(3) The reasons why Messrs Klein, Davidson, Forde and Switkowski and Ms Conlon are considered to be independent Directors
are disclosed in relation to Recommendation 2.1.
(4) There are procedures in place, agreed by the Board, to enable Directors, in furtherance of their duties, to seek independent
professional advice at the Group’s expense.
(5) Details of the names of members of the Nomination and Remuneration Committee are disclosed in relation to
Recommendation 2.4 and attendances at meetings are set out in the Directors Meetings section of the Directors’ Report.
(6) An evaluation of the performance of the Board, its committees and individual Directors took place during the financial year.
That evaluation was in accordance with the process disclosed.
(7) The Nomination and Remuneration Committee is responsible for providing the Board with advice and recommendations
regarding the ongoing development of:
(a)
(b)
a plan for identifying, assessing and enhancing Director competencies; and
a succession plan that is designed to ensure that an appropriate balance of skills, experience and expertise is maintained
on the Board.
The Charter of the Nomination and Remuneration Committee requires that prior to identifying an individual for nomination
for Directorship, the Committee must evaluate the range of skills, experience and expertise currently existing on the Board
to ensure that the Committee identifies the particular skills, experience and expertise that will most effectively complement
the Board’s current composition. If a new candidate is approved by the Nomination and Remuneration Committee, the
appointment of that new candidate is ultimately subject to shareholder approval in accordance with the Corporations Act 2001
and the Group’s Constitution.
(8) The Group is committed to promoting a culture that embraces diversity and recognises that employees at all levels of
the Group may have domestic responsibilities. Diversity includes, but is not limited to, gender, age, ethnicity and cultural
background. There is a particular focus on gender diversity throughout the various levels of employment and management
in the Group.
(9) The Group is committed to identifying programmes that assist in the development of a broader pool of skilled and
experienced Board candidates including:
(a)
(b)
initiatives focused on skills development, such as executive mentoring programmes; and
career advancement programmes to develop skills and experience that prepare employees for senior management and
Board positions.
(10) Pursuant to Article 13.2 of the Company’s Constitution, one-third of the Directors of the Company (other than the Chief
Executive Officer), or if their number is not a multiple of three, then such number as is appropriate to ensure that no Director
other than alternate Directors and the Managing Director holds office for more than three years, must retire at each Annual
General Meeting and being eligible may offer themselves for re-election. If a candidate is approved by the Nomination and
Remuneration Committee for re-election, the re-election of that candidate is subject to shareholder approval at the Annual
General Meeting.
(11) The Board’s policy for the nomination and appointment of Directors is summarised above. Further details are set out in
the Charter of the Nomination and Remuneration Committee. A copy of the Charter of the Nomination and Remuneration
Committee is available from the Group’s website, www.lynascorp.com.
32
corporate Governance statement
principle 3 – promote ethical anD responsible Decision making
Recommendation 3.1 – Code of Conduct
The Group has established a code of conduct as to the:
(1)
practices necessary to maintain confidence in the Group’s integrity;
(2) practices necessary to take into account the Group’s legal obligations and the expectations of stakeholders; and
(3)
responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
A copy of the code of conduct is available from the Group’s website, www.lynascorp.com.
Conflict Of Interest Policy
The Group has established a “conflict of interest” policy to:
(1)
(2)
protect the integrity of the decision-making processes within the Group by avoiding ethical, legal, financial or other conflicts
of interest;
establish internal procedures so that all employees understand their obligation to avoid actual, potential or perceived conflicts
of interest;
(3) provide guidance to employees for dealing with any conflicts of interest in an open and transparent manner;
(4) provide guidance to employees for recognising and reporting on related party transactions; and
(5)
establish internal procedures to ensure that related party transactions are referred to the Group’s shareholders where required.
A copy of the conflict of interest policy is available from the Group’s website, www.lynascorp.com.
Recommendation 3.2 – Diversity Policy
The Group has established a policy concerning diversity. The Group recognises the need to set diversity measures in each of its operating
locations taking into account the differing diversity issues within each geographic location in which it operates. A copy of the “Diversity
Policy” is available from the Group’s website, www.lynascorp.com. The policy includes requirements for the Board to establish measurable
objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them.
Recommendation 3.3 – Measurable Objectives for Achieving Gender Diversity
Below are the measurable objectives set by the Board for achieving gender diversity together with the progress made in achieving
those objectives:
(1)
Ensuring that recruitment of employees and Directors is made from a diverse pool of qualified candidates. Where appropriate,
a professional recruitment firm shall be engaged to select a diverse range of suitably qualified candidates.
The Group continues to ensure that professional recruitment firms provide a broad selection of suitably qualified candidates
together with prioritising local employment in the areas in which it operates.
(2)
Ensuring that there are appropriate proportions of women or other groups of individuals within areas of the Group.
The Group recognises that further work can be done across all businesses to ensure that there are appropriate proportions
of women and other groups of individuals. The Group believes that its current diversity levels are good compared to
other companies in its industry. The Group’s policies of favouring local employment and promoting education in its local
communities will continue to contribute to the diversity of its workforce.
(3)
Identifying programmes that assist in the development of a broader pool of skilled and experienced Board candidates including:
(a)
(b)
initiatives focused on skills development, such as executive mentoring programmes; and
career advancement programmes to develop skills and experience that prepare employees for senior management and
Board positions.
The Group has in place a formal talent management process including mentoring and succession planning.
(4)
Taking action against inappropriate workplace behaviour and behaviour that is inconsistent with the diversity objectives of the Group.
The Group has in place a Code of Conduct which defines inappropriate behaviour and the potential resultant disciplinary
actions. A formal employee grievance process has been established to assist in identifying issues such as inappropriate
workplace behaviour and behaviour that is inconsistent with the values and diversity objectives of the Group.
lynas corporation limiteD ANNUAL REPORT 2012
33
corporate Governance statement
Recommendation 3.4 – Proportion of Women Employees
The Group provides the following statistics on gender diversity as at July 23, 2012 (prior year: July 31, 2011):
(1)
Proportion of women employees in the whole organisation: 19.7% (2011 – 18.9%)
(2) Proportion of women in senior management positions: 20.5% (2011 – 21.9%)
(3) Proportion of women on the Board: 17.0% (2011 – 0%)
Recommendation 3.5 – Documents on Company Website
Copies of the Code of Conduct and the Diversity Policy are available from the Group’s website, www.lynascorp.com
principle 4 – safeguarD integrity in financial reporting
Recommendation 4.1 – Audit Committee
The Group has established an Audit Committee.
Recommendation 4.2 – Structure of the Audit Committee
The Group’s Audit Committee complies with each of the requirements of Recommendation 4.2 as follows:
(1)
The Audit Committee consists only of Non-Executive Directors. During the financial year, the members of the Audit
Committee were Messrs. Forde, Klein and Switkowski and Ms Conlon. Further details are provided in the Directors Meetings
section of the Directors’ Report.
(2) All of the members of the Audit Committee are independent Directors.
(3) The Audit Committee is chaired by Mr Forde, who is an independent Director and who is not Chair of the Board.
(4) The Audit Committee has four members.
Recommendation 4.3 – Audit Committee Charter
The Group has adopted an Audit Committee Charter. A copy of the Audit Committee Charter is available from the Group’s website,
www.lynascorp.com.
Recommendation 4.4 – Additional information concerning the Audit Committee
In accordance with Recommendation 4.4, the Group provides the following additional information concerning the Audit Committee:
(1) Details of the members of the Audit Committee and their qualifications are as set out above under Recommendation 4.2
– Structure of the Audit Committee and in the Directors section of the Directors’ Report.
(2) Three meetings of the Audit Committee were held during the financial year.
(3) The Audit Committee is responsible for reviewing and recommending to the Board the appointment, remuneration and terms
of engagement of the external auditors.
(4)
In accordance with the Corporations Act 2001, if an external audit engagement partner plays a significant role in the audit of
the Group for five successive financial years, that partner is not eligible to play a significant role in the audit of the Group for
a later financial year unless the partner has not played a significant role in the audit of the Group for at least two successive
financial years.
principle 5 – make timely anD balanceD Disclosure
Recommendation 5.1 – ASX Listing Rule Disclosure Requirements
The Group has established a written policy designed to ensure:
(1)
compliance with ASX Listing Rules Disclosure; and
(2)
accountability at a senior executive level for that disclosure.
Recommendation 5.2 – Continuous Disclosure Policy
A copy of the Group’s Continuous Disclosure Policy is available from the Group’s website, www.lynascorp.com.
34
corporate Governance statement
principle 6 – respect the rights of shareholDers
Recommendation 6.1 – Shareholder Communications Policy
The Group has adopted a Shareholder Communications Policy for:
(a)
(b)
promoting effective communication with shareholders; and
encouraging shareholder participation at AGMs.
A copy of the Group’s Shareholder Communications Policy is available from the Group’s website, www.lynascorp.com.
Recommendation 6.2 – Availability of Shareholder Communications Policy
As noted above, a copy of the Group’s Shareholder Communications Policy is available from the Group’s website, www.lynascorp.com.
principle 7 – recognise anD manage risk
Recommendation 7.1 – Risk Management Policies
The Group has established policies for the oversight and management of its material business risks as follows:
(1)
The Group has adopted a Risk Management Policy and a Risk Management Framework for oversight and management of its
material business risks. Those documents clearly describe the roles and accountabilities of the Board, the Risk Management,
Safety, Health, Environment and Community Committee, the Audit Committee and management.
(2) The Risk Management, Safety, Health, Environment and Community Committee oversees the Group’s material business risks.
(3) The risk management, safety, health, environment and community departments of the Group manage the Group’s material
business risks.
(4) The Audit Committee oversees financial risks pursuant to the Audit Committee Charter. This includes internal controls to
deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance
of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the
benchmarking of operational key performance indicators.
(5) The finance department of the Group manages financial risks.
(6) The Group has adopted the following policies for the oversight and management of material business risks: Risk Management
Policy, Environmental Policy, Community Policy and Occupational Health and Safety Policy.
Copies of the following documents referred to in this section are available from the Group’s website, www.lynascorp.com.
(1) Risk Management, Safety, Health, Environment and Community Committee Charter;
(2) Risk Management Policy;
(3) Audit Committee Charter;
(4) Environmental Policy;
(5) Community Policy; and
(6) Occupational Health and Safety Policy.
The categories of risk managed by the Group include operational, environmental, sustainability, compliance, strategic, ethical,
reputational, technological, quality, human capital, financial reporting and market-related risks.
Recommendation 7.2 – Risk Management and Internal Control System
The Board has required management to design and implement a Risk Management and Internal Control System to manage the Group’s
business risks.
The Board has required management to report to it on whether those risks are being managed effectively.
Management has reported to the Board as to the effectiveness of the Group’s management of its material business risks.
Recommendation 7.3 – Statement from the Chief Executive Officer and the Chief Financial Officer
The Board has received assurance from the Chief Executive Officer and the Chief Financial Officer that the declaration in accordance
with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control, and that the
system is operating effectively in all material respects in relation to financial risks.
Recommendation 7.4 – Additional information concerning Risk Management
In accordance with Recommendation 7.4, the Group provides the following additional information concerning Risk Management:
The Board has received the report from management under Recommendation 7.2.
(1)
(2) The Board has received assurance from the Chief Executive Officer and the Chief Financial Officer under Recommendation 7.3.
(3) As noted above in relation to Recommendation 7.1, copies of the Group’s policies on risk oversight and management
of material business risks are available from the Group’s website, www.lynascorp.com.
lynas corporation limiteD ANNUAL REPORT 2012
35
corporate Governance statement
principle 8 – remunerate fairly anD responsibly
Recommendation 8.1 – Remuneration Committee
The Group has established a Nomination and Remuneration Committee.
Recommendation 8.2 – Structure of the Remuneration Committee
The Nomination and Remuneration Committee consists only of independent Non-Executive Directors. The members of the
Nomination and Remuneration Committee are Messrs. Davidson, Forde and Switkowski and Ms Conlon. Further details are provided
in the Directors Meetings section of the Directors’ Report.
The Nomination and Remuneration Committee is chaired by David Davidson, who is an independent Director and who is not Chair
of the Board.
Recommendation 8.3 – Remuneration of Executive Directors, Executives and Non-Executive Directors
The remuneration of Executive Directors and senior executives during the financial year comprised the following:
(1)
Fixed remuneration, superannuation payments and termination payments.
(2) Share options issued for the benefit of the relevant individuals pursuant to the Group’s employee share option plan.
(3) Non-monetary benefits.
Details of the remuneration of Executive Directors and senior executives during the financial year are set out in the Remuneration
Report section of the Directors’ Report.
The remuneration of Non-Executive Directors during the financial year comprised only of cash fees and superannuation payments.
Details of the remuneration of Non-Executive Directors during the financial year are set out in the Remuneration Report section
of the Directors’ Report.
The fixed remuneration paid to the Executive Director and senior executives is clearly distinguished from the cash fees paid to
Non-Executive Directors.
The Group complies with Recommendation 8.3 by clearly distinguishing the structure of Non-Executive Directors’ remuneration
from that of Executive Directors and senior executives. During the financial year ended June 30, 2012 no options were issued to
Non-Executive Directors.
Recommendation 8.4 – Additional information concerning Remuneration
In accordance with Recommendation 8.4, the Group provides the following additional information concerning Remuneration:
(1)
The Nomination and Remuneration Committee consists only of independent Non-Executive Directors. The members of the
Nomination and Remuneration Committee were Messrs. Davidson, Forde and Switkowski and Ms Conlon. Further details
are provided in the Directors Meetings section of the Directors’ Report. There were three formal meetings of the Committee
during the year. In addition, there were several informal meetings.
(2) The Group has no schemes for retirement benefits for Non-Executive Directors, other than superannuation.
(3) A copy of the Charter of the Nomination and Remuneration Committee is available from the Group’s website, www.lynascorp.com.
In accordance with the Group’s share trading policy, Directors and employees must not at any time enter into transactions in associated
products which limit the economic risk of participating in unvested entitlements under equity-based remuneration schemes. A copy of
the share trading policy is available from the Group’s website, www.lynascorp.com.
36
Directors’ report
share options anD performance rights
As at year end the Group had on issue the following options and performance rights to acquire ordinary fully paid shares:
grant Date
August 20, 2007
March 19, 2008
July 21, 2008
September 24, 2008
September 24, 2008
January 5, 2009
July 10, 2009
October 8, 2009
July 1, 2010
August 19, 2010
August 19, 2010*
October 1, 2010
August 19, 2010
May 18, 2011
June 6, 2011*
November 30, 2011
September 23, 2011
September 22, 2011*
September 22, 2011*
September 22, 2011*
September 22, 2011*
December 12, 2011
total
number
50,000
500,000
1,000,000
14,200,000
2,700,000
1,100,000
200,000
24,500,000
1,000,000
10,500,000
1,608,618
1,000,000
12,900,000
200,000
420,000
4,000,000
4,145,000
30,232
20,245
10,323
945,000
2,000,000
83,029,418
Date vesteD anD
exercisable
expiry Date
exercise
price
value per
option at
grant Date
August 24, 2010
December 31, 2010
July 21, 2011
September 24, 2011
September 24, 2011
January 5, 2012
September 24, 2011
October 8, 2012
July 1, 2013
August 19, 2013
August 19, 2013
October 1, 2013
August 19, 2013
October 1, 2011
June 6, 2014
September 22, 2014(1)
September 22, 2014
September 22, 2012
September 22, 2013
September 22, 2014
September 22, 2014
December 12, 2014
August 24, 2012
December 31, 2012
July 21, 2013
September 24, 2013
September 24, 2013
January 5, 2014
September 24, 2013
October 8, 2014
July 1, 2015
August 19, 2015
August 19, 2015
October 1, 2015
August 19, 2015
December 31, 2015
June 6, 2016
September 22, 2016
September 22, 2016
September 22, 2014
September 22, 2015
September 22, 2016
September 22, 2016
December 12, 2016
$0.81
$1.06
$0.98
$0.66
$0.81
$0.16
$0.66
$0.66
$0.66
$1.15
$0.00
$1.60
$1.15
$2.36
$0.00
$1.69
$1.69
$0.00
$0.00
$0.00
$0.00
$1.57
$0.49
$0.53
$0.52
$0.33
$0.34
$0.16
$0.08
$0.23
$0.24
$0.34
$0.96
$0.48
$0.66
$1.12
$2.30
$0.40
$0.55
$1.41
$1.41
$1.41
$1.34
$0.51
(1) The options issued to N.Curtis were initially approved by the Board on September 23, 2011 and then subsequently approved by the shareholders
of the Company at the AGM on November 30, 2011.
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
shares issueD as a result of exercise of options
During the financial year 1,382,218 options were exercised as set out in note 26 of the ‘notes to the financial statements’.
inDemnification anD insurance of Directors anD officers
During or since the end of the financial year, the Group has paid a premium in respect of a contract insuring all Directors and Officers
of the Group against liabilities incurred as a Director or Officer of the Group, to the extent permitted by the Corporations Act 2001, that
arise as a result of the following:
(a)
(b)
a wilful breach of duty; or
a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.
The total amount of insurance contract premiums paid was $84,292. This amount is not included as part of the Directors remuneration
in note 28 of the ‘notes to the financial statements’.
non-auDit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note
7 of the ‘notes to the financial statements’. The Directors are satisfied that the provision of non-audit services, during the year, by the
auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
lynas corporation limiteD ANNUAL REPORT 2012
37
Directors’ report
Directors meetings
Committee membership
As at the date of this report, the Group has an Audit Committee, a Nomination and Remuneration Committee, and a Risk Management,
Safety, Health, Environment and Community Committee of the Board of Directors.
Directors acting on the committees of the Board during the year were:
auDit
W. Forde(c)
K. Conlon*
J. Klein
Z. Switkowski
nomination anD
remuneration
risk management, safety, health,
environment anD community
D. Davidson(c)
K. Conlon*
W. Forde
Z. Switkowski
Z. Switkowski(c)
N. Curtis
D. Davidson
J. Klein
(c) Designates the Chair of the Committee.
* Appointed as a Director on November 1, 2011.
As summarised in the Corporate Governance Statement, the Audit Committee is comprised of independent Directors.
The number of Directors’ meetings held during the year and the number of meetings attended by each Director was as follows:
meetings of the boarD anD committees
boarD of
Directors
nomination
anD
remuneration
auDit
risk
management,
safety, health,
environment
anD community
11
11
11
8(1)
11
11
10
3
–
3
2(1)
–
2
3
3
–
3
2(1)
3
–
2
2
2
–
–
2
2
1
Number of meetings held:
Number of meetings attended:
N. Curtis
W. Forde
K. Conlon
D. Davidson
J. Klein
Z. Switkowski
(1) K. Conlon was appointed as a Director, and a member of the Audit and Nomination and Remuneration Committees on November 1, 2011.
competent person’s statement
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled
by Brendan Shand, who is a member of The Australasian Institute of Mining and Metallurgy. Brendan Shand is an employee of the
Group and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to
the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Brendan Shand consents to the inclusion in the report of the
matters based on his information in the form and context in which it appears.
auDitor’s inDepenDence Declaration
We have obtained an independence declaration from our auditors, Ernst & Young, which follows the Directors’ Declaration.
rounDing of amounts
The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, in relation
to the “rounding off” of amounts. Amounts in the Directors’ Report and Financial Report have been rounded off in accordance with the
Class Order relief to the nearest thousand dollars, or in certain cases, the nearest dollar.
38
remuneration report – auDiteD
Dear Shareholder,
I am pleased to present our Remuneration Report for 2012. I believe it reflects the Group’s ongoing commitment to ensuring that our
remuneration strategy aligns with our business objectives, performance and delivery of shareholder value.
The Nomination and Remuneration Committee (the “Committee”) believes that shareholder value is best created by attracting and
retaining the best and brightest talent who are focused on the achievement of our strategic business objectives. The Group is focused
on aligning remuneration and Group performance, in the context of a business that is transitioning from development to operations.
To facilitate this, the Group’s remuneration philosophy is underpinned by market-competitive remuneration with rewards differentiated
based on performance.
Our remuneration framework continues to evolve as the business matures. For example, in 2011, we introduced a performance hurdle
(net positive operating cash flow) into our Long-Term Incentive (“LTI”) plan and these hurdles were further enhanced in 2012 to include
project milestones and relative Total Shareholder Return (“TSR”).
In the coming year, we are introducing a formal Short-Term Incentive (“STI”) plan to further link pay with performance. The introduction
of the STI plan, in the year ending June 30, 2013, reflects the transition of the Group from development phase to operational phase, and
it recognises that we have important short-term goals including successful commissioning and ramp up, production volumes, costs and
safety, community programmes and meeting appropriate cash flow targets. The STI component will be in substitution for (and not in
addition to) portions of remuneration that were previously paid as fixed pay or LTIs. Therefore, it is intended that total remuneration not
be increased due to the introduction of a STI.
Other key elements of this year’s remuneration report include:
• fixed pay is targeted at the median level (50th percentile) or better of relevant peer groups, and total remuneration (that is, fixed plus
variable pay) is targeted at the 75th percentile.
• the LTI grant for the Executive Chairman and Executives includes relative TSR and project milestone performance hurdles. This will
strengthen the link between Group performance and the rewards achieved by our Executives.
• in 2012, the only remuneration paid to Non-Executive Directors was fees (i.e. no options or similar benefits were issued).
We hope that the report will assist your understanding of our remuneration objectives and policies. We welcome your feedback on how
we can further improve the remuneration report in the future.
Yours sincerely,
David o Davidson
chairman
nomination and remuneration committee
lynas corporation limiteD ANNUAL REPORT 2012
39
remuneration report – auDiteD
This report sets out the remuneration arrangements of Directors and KMP of the Group in accordance with the Corporations Act 2001
and its regulations.
a. explanation of key terms
The following table explains some key terms used in this report:
employee share trust (“est”)
executive
key management personnel
(“kmp”)
long-term incentive (“lti”)
option
Options and Performance Rights that are issued for the benefit of selected Executives are issued
for value to the EST. At the same time, the EST makes an advance to the Executive equivalent
to the value of the options and/or performance rights to enable the Executive to subscribe for
an equivalent number of units in the EST. There is no cash impact for the Group arising from
those arrangements.
The Executive Chairman, the President and Chief Operating Officer (“COO”), the Chief
Financial Officer (“CFO”), the Group’s General Counsel and Company Secretary, the Executive
Vice President People and Culture and the Executive Vice President Strategy and Corporate
Communication (until August 31, 2011).
Those people who have authority and responsibility for planning, directing and controlling the
major activities of the Group, directly or indirectly, including any Director (whether executive
or otherwise) of the Group and the Executive.
LTI is the long-term incentive component of Total Remuneration. LTI usually comprises Options
or Performance Rights with a three year vesting period that are subject to specified vesting
conditions. Further details of the vesting conditions are in Section D. Options and Performance
Rights cannot be exercised unless the vesting conditions are satisfied.
An Option is a right to purchase a share in the future, subject to the relevant Executive paying
an exercise price. Options are issued for the benefit of selected Executives as part of their LTI
remuneration. The exercise price is usually set at a premium to the volume weighted average price
of the Company’s shares on the ASX over the five days prior to the date of offer of the Options.
performance right
A Performance Right is similar to an Option, except that no “exercise price” is payable when
a Performance Right is exercised.
short-term incentive (“sti”)
STI is the short-term incentive component of Total Remuneration. STI usually comprises a cash
payment that is only received by the Executive if specified annual goals are achieved.
total remuneration
Total Remuneration comprises fixed pay (including superannuation) plus STI plus LTI.
total shareholder return (“tsr”)
TSR is the total return from a share to an investor (i.e. capital gain plus dividends).
The KMP, at the date of this report, are as follows:
non-executive Directors:
W. Forde
K. Conlon
D. Davidson
J. Klein
Z. Switkowski
executives:
N. Curtis
A. Arnold
G. Barr
L. Catanzaro
E. Noyrez
M. James
J.G. Taylor
Lead Independent Director, Non-Executive Director
Non-Executive Director (appointed November 1, 2011)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Chairman
General Counsel and Company Secretary
Executive Vice President People and Culture
Chief Financial Officer (appointed December 12, 2011)
President and Chief Operating Officer
Executive Vice President – Strategy and Corporate Communication (resigned August 31, 2011)
Chief Financial Officer (ceased role on December 12, 2011)
40
Except as noted, the named person held their current position for the whole of the financial year and since the end of the financial year.
remuneration report – auDiteD
b. our remuneration philosophy
The Group’s objective is to provide maximum stakeholder benefit through the attraction, retention and motivation of a high
quality Board and Executive management team, by remunerating Directors and Executives fairly and appropriately, consistent with
relevant employment market conditions. We align rewards to sustainable value through creating links between the achievement of
organisational goals and the non-fixed elements of individual remuneration.
To help the Group achieve this objective, the Committee links the nature and amount of the remuneration paid to the Executives to the
Group’s financial and operational performance.
The Group also uses external benchmarks to set the total remuneration opportunity for the KMP. Generally speaking, fixed pay will be
targeted at the median level (50th percentile) or better of relevant peer groups, and total remuneration will be targeted at the 75th percentile.
When comparing total remuneration to market benchmarks and reference group data as a basis on which to determine total remuneration,
the Group considers three remuneration elements: annual fixed pay (“FP”), target short-term incentive and long-term incentive.
The peer group used to benchmark remuneration consisted of 12 companies with similar operating models and size (based on the
Group’s projected size following completion of Phase 2 of the Rare Earths Project). They were selected based on the criteria of
comparable market capitalisation and projected revenue. Some companies fell above or below the Group’s Phase 2 revenue estimates,
however it is reasonably expected that as the Group grows to its Phase 2 levels, the peer group will grow as well. The peer group should
therefore provide a consistent view of the market for Executive talent over the next few years.
The Committee received advice from Mercer in setting the appropriate levels of total remuneration for Executives. Fees paid during the
year totalled $53,191 (2011: $162,607). This work was completed by June 30, 2012.
c. role of the nomination anD remuneration committee
The Board is responsible for determining and reviewing remuneration arrangements for Directors and Executives. The Committee
assesses, on a regular basis, the appropriateness of the nature and amount of KMP remuneration. In fulfilling these duties and to
support effective governance processes, the Committee:
• consists only of independent Non-Executive Directors;
• has unrestricted access to management and any relevant documents; and
• engages external advisers for assistance to the extent appropriate and necessary (e.g. detailing market levels of remuneration).
From June 2011, PricewaterhouseCoopers was appointed by the Committee as its lead external adviser.
Remuneration structure
In line with best practice corporate governance, the remuneration structure for Non-Executive Directors is separate and distinct from
that of Executives.
D. our executive remuneration framework
Objective
The Group aims to remunerate its Executives at a level commensurate with their position and responsibilities within the Group so as to:
• reward them for the Group, business unit and individual performance against agreed targets set by reference to appropriate benchmarks;
• align their interests with those of our shareholders;
• link their reward with the Group’s strategic goals and performance; and
• provide total remuneration that is competitive by market standards.
Structure
Executive remuneration of the Group consists of the following key elements:
• fixed remuneration (base salary and superannuation);
• variable remuneration:
– short-term incentives; and
– long-term incentives.
The Group provides no retirement benefits, other than statutory superannuation or defined benefit pension payments.
Further, we explain how the different elements are calculated.
lynas corporation limiteD ANNUAL REPORT 2012
41
remuneration report – auDiteD
Fixed remuneration
Fixed remuneration consists of base salary and superannuation. It is determined on an individual basis, taking into account external
market benchmarks and individual factors such as capability, experience, responsibility and accountability. Fixed remuneration is
targeted at the median level (50th percentile) or better of relevant peer group.
Variable remuneration
The Board exercises discretion in relation to the payment of bonuses, Options and other incentive payments, based on the overall
performance of the Group and of the individual during the year.
In summary:
fixed remuneration
= base + super
variable remuneration
= STIs + LTIs
Short-term incentives
Prior to June 30, 2012 the Board had only a discretionary STI policy used to reward exceptional performance.
From July 1, 2012 we will adjust the mix of fixed and variable remuneration by introducing a formal STI plan. Under the STI plan, a
higher portion of Executive remuneration will be dependent on performance. The introduction of the STI plan reflects the transition
of the Group from development phase to operational phase. It recognises that we have important short-term goals over the next
12 months based on successful commissioning and ramp up of the LAMP, meeting specified production volumes and customer
specifications, managing our operating costs while continuing to meet our standards of safety, community development and care
and meeting appropriate cash flow targets.
Long-term incentives
Options and Performance Rights are provided to KMP and other selected employees to provide greater alignment to our strategic
business objectives. They have three year vesting periods, and are exercisable between three and five years after they were granted
provided the Executive is still employed with the Group (unless this requirement, in limited circumstances is waived by the Board),
and any relevant performance conditions are achieved.
The following table summarises the performance conditions attached to Options and Performance Rights issued during the financial
years ended June 30, 2012 and June 30, 2013 (in addition to the requirement that the Executive is still employed by the Group at the
end of a three year vesting period):
vesting scheDule
for grants maDe in fy2012
for grants to be maDe in fy2013
tsr hurdle
(performance against
asx 100 companies)
(50%)
50% of the TSR portion
will vest for:
100% of the TSR portion
will vest for:
50th percentile performance
51st percentile performance
75th percentile performance
76th percentile performance
reo capacity hurdle
n/a
(50%)
Pro-rata vesting will occur between each of the above points
Lynas Kuantan plant must have
demonstrated capacity to produce
22,000 tonnes per annum of REO
over at least a four week period
during last calendar quarter of 2013
Lynas Kuantan plant must have
demonstrated capacity to produce
at a rate equivalent to 22,000 tonnes
per annum of REO before the end
of calendar year 2013
The Board considered that having the Lynas Kuantan plant demonstrate the capacity to produce 22,000 tonnes per annum of REO is
currently the most important measure of long-term success for the Group. The reference to “before the end of calendar year 2013” was
considered by the Board to be appropriate in light of the regulatory delays in Malaysia which have delayed the commissioning of Phase 1 of
the Lynas Kuantan plant.
During the year, the Board approved a change to the Group’s employee option plan and employee performance rights plan. From April 2012
onwards, any Options or Performance Rights will not automatically vest during a takeover bid period. Options and Performance Rights will
automatically vest if a change of control actually occurs in respect of the Company, unless the Board in its discretion resolves otherwise.
In accordance with the Group’s policy that governs trading of the Company’s shares by Directors and employees, Directors and
Executives are not permitted to hedge their Options or Performance Rights before the Options vest.
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remuneration report – auDiteD
e. non-executive Director remuneration
Objective
Remuneration of Non-Executive Directors (“NEDs”) is set at a level that enables the Group to attract and retain people of the highest
calibre at a cost which is acceptable to shareholders. In setting remuneration, the Group takes into account, among other factors:
• fees paid to NEDs of companies of a similar size/industry;
• the time commitment required for NEDs to properly fulfil their duties;
• the risks and responsibilities associated with the roles; and
• the relevant commercial and industry experience required.
When undertaking the annual review process, the Board considers advice from external consultants where required, as well as fees paid
to NEDs of comparable companies.
Structure
The Company’s Constitution and the ASX Listing Rules specify that the maximum aggregate remuneration of NEDs must be determined
from time to time by a general meeting. The last determination was at the AGM held on November 24, 2010, and an aggregate pool of
$750,000 was approved. The aggregate fees for NEDs for the period did not exceed this amount.
Components of Non-Executive Director Remuneration
Each NED receives a fee for being a Director of the Company, and fees for committees on which they sit. The NED fees, including
committee fees, include statutory superannuation contributions where appropriate.
Base Fees
NED fees are determined by the Committee and fall within the aggregate amount approved by shareholders. In 2011 the Committee
engaged Egon Zender to provide advice on the appropriate levels for Non-Executive Directors’ fees and Committee fees. Fees paid to
Egon Zender during the year totalled $125,988 (2011: $219,991). As a result of this review the level of NED fees and Committee fees
were increased effective February 1, 2011 (but did not exceed the NED aggregate pool).
Base fees for NEDs for the financial year ended June 30, 2012 were:
• Lead Independent Director $125,000 per annum; and
• Non-Executive Director $100,000 per annum.
Committee Fees
boarD committee
Audit Committee
Risk Management, Safety, Health, Environment and Community Committee
Nomination and Remuneration Committee
chair
$
member
$
30,000
25,000
25,000
15,000
12,500
12,500
It is considered good governance for NEDs to have a stake in the Company, and the Board has long encouraged NEDs to hold shares in
the Group. The Group announced at the 2010 AGM that it will not offer Options to NEDs in the future.
The remuneration for NEDs for the years ended June 30, 2012 and June 30, 2011 is set out in Section H of this report.
lynas corporation limiteD ANNUAL REPORT 2012
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f. service agreements
The Committee’s policy is that only the Executive Chairman may enter into a fixed-term employment agreement with the Group.
The Executive Chairman has signed a fixed-term agreement of reasonable commercial conditions. Its key provisions are:
• the agreement expires on July 31, 2013;
• Mr Curtis must give three months written notice of an intention to resign. On resignation any unvested Options may be forfeited
subject to the discretion of the Board;
• the Group may terminate the agreement by giving six months written notice;
• upon the Group terminating the agreement, the Group will pay a benefit for past services equal to the lower of:
(a)
(b)
the amount permitted under Part 2D.2 of the Corporations Act 2001;
the balance of Mr Curtis’ salary over the greater of (a) one year, or (b) the remaining term of the agreement at the time
of termination;
• In accordance with the Corporations Act 2001 and the formula specified above, the maximum termination payment payable
to Mr Curtis is equal to his base salary for one year; and
• the Group may terminate the agreement at any time without notice if serious misconduct has occurred.
Employment conditions for all other KMPs are on the following terms:
• each may give three month’s written notice of their intention to resign;
• the Group may terminate the employment by providing six month’s written notice;
• on resignation or termination all unvested Options will be forfeited subject to the discretion of the Board; and
• the Group may terminate employment at any time without notice if serious misconduct has occurred.
g. linking remuneration anD group performance
Prior to the financial year ended June 30, 2011, KMP remuneration (including any component that consisted of securities in the Group)
was not formally linked to Group performance. The reason behind this approach was that as the Group was in development phase
it was not appropriate to link remuneration to factors such as profitability or share price. This approach has changed now that the
Group is transitioning into its operational phase. In the financial year ended June 30, 2011, 50% of the LTI grant was subject to the
achievement of a net positive operating cash flow hurdle for the six months ending December 31, 2012. In the financial year ended June
30, 2012, LTI grants are subject to TSR and project milestone hurdles related to REO capacity, as detailed in Section D above.
Fixed pay will be targeted at the median level (50th percentile) or better of relevant peer group, and total remuneration will be targeted
at the 75th percentile. Individual performance reviews link total remuneration to individual and business unit performance. In addition,
from July 1, 2012 the mix of fixed and variable remuneration has been adjusted by the introduction of a formal STI plan. Under the STI
plan, a higher portion of Executive remuneration is dependent on performance. The introduction of the STI plan reflects the transition
of the Group from development phase to operational phase, and it recognises that we have important short-term goals over the
next 12 months based on successful commissioning and ramp up, production volumes, cash flow, costs and safety and community
programmes. The STI component is intended to be in substitution for (and not in addition to) portions of remuneration that were
previously paid predominantly as fixed pay or LTI.
For further context we provide a comparison of KMP remuneration over the last five years against the Company’s average and closing
share price over the same period. The increase in remuneration from one year to the next reflects the fact that additional Directors and
Executives joined the Group to facilitate the transition from a development entity to an operating entity.
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remuneration report – auDiteD
financial year enDeD
June 30, 2008
June 30, 2009
June 30, 2010
June 30, 2011
June 30, 2012
number of kmps
Executive Director
Non-Executive Directors
Other KMP
cash remuneration paid ($)
Executive Director
Non-Executive Directors
Other KMP(1)
total cash remuneration paid(2)
share-based remuneration ($)(3)
Executive Director
Non-Executive Directors
Other KMP
1
3
3
1
3
3
1
3
4
1
4
6
432,640
217,961
1,297,765
626,053
254,587
1,501,753
890,000
225,509
2,146,212
585,920
461,832
2,331,786
1,948,366
2,382,393
3,261,721
3,379,538
1
5
4
657,932
680,223
2,279,343
3,617,498
3,354,243
1,209,861
2,839,426
7,403,530
743,142
total share-based remuneration
2,543,850
4,171,652
5,129,969
total other remuneration ($)(4)
147,698
156,941
308,632
1,366,667
–
1,177,183
1,789,338
306,001
2,076,313
2,472,449
510,933
2,146,587
3,218,720
1,337,722
3,093,634
7,650,076
767,923
total ($)
Annual average share price
Closing share price at financial year end
earnings per share (eps)
Diluted eps
loss before tax (‘000)
loss after tax (‘000)
4,639,914
6,710,986
8,700,322
11,797,537
11,764,170
$1.23
$1.30
($3.65)
($3.65)
($21,481)
($21,481)
$0.52
$0.47
($4.50)
($4.50)
($29,282)
($29,282)
$0.55
$0.55
($3.23)
($3.23)
($43,041)
($43,041)
$1.66
$1.98
($3.54)
($3.54)
($57,288)
($59,086)
$1.30
$0.85
($5.12)
($5.12)
($97,879)
($87,770)
(1) Other KMP encompass the Executives of the Group (excluding the Executive Chairman). During the period J.G. Taylor ceased as the Group CFO
and a member of the KMP on December 12, 2011 as a result of the appointment of L. Catanzaro who was appointed as the Group CFO on this date.
In addition M. James resigned from the Group on August 31, 2011.
(2) Total cash remuneration encompasses cash salary and fees and other short-term employee benefits.
(3) Represents the cumulative impact of amortising the accounting value of Options and Performance Rights over their three-year vesting period.
(4) Other remuneration encompasses non-monetary benefits, superannuation and other pension payments.
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remuneration report – auDiteD
h. Details of remuneration
year enDeD June 30, 2012
short-term benefits
post employment
benefits
long-term benefits
other
short-
term
employee
benefits
cash
salary
anD fees
non-
monetary
benefits
term-
ination
payments
super-
annuation
anD other
pension
payments
share-
baseD
payments
perfor-
mance
relateD
% of total
total
657,932
85,000
35,610
303,670(2)
127,500
128,443
385,548
266,644
318,509
564,463
125,394
55,932
–
–
–
–
–
–
–
–
–
17,622
–
51,890
–
–
–
15,703
15,104
7,932
450,000(4)
348,125
–
–
18,557
4,516
–
–
–
–
–
–
–
–
–
–
–
112,853
4,366
3,354,243
83%
4,034,163
–
50,000
13,830
–
11,560
27,670
25,000
24,387
–
370,858
468,145
370,858
–
526,916
247,159
187,187
80,705(5)
1,018,401
20,738
5,437
177,323
682,440
0%
73%
60%
74%
0%
55%
45%
35%
41%
52%
79%
85,000
508,358
785,645
498,358
140,003
955,837
553,907
538,015
2,461,694
342,012
861,178
11,764,170
3,054,645
450,000
479,449
112,853
263,693
7,403,530
name
executive
Director
N. Curtis
non-executive
Directors
K. Conlon(1)
D. Davidson
W. Forde
J. Klein
Z. Switkowski
executives
A. Arnold
G. Barr
L. Catanzaro(3)
E. Noyrez
J.G. Taylor(6)
M. James(7)
total
(1) Appointed November 1, 2011.
(2) Amount includes Non-Director related fees paid for consulting services provided by W. Forde (as Chair of the LampsOn Board) totalling $150,000.
As Phase 1 of the Rare Earths Project has been completed, Mr Forde has not provided any consultancy services to the Group since June 30, 2012.
(3) Appointed December 12, 2011.
(4) $150,000 of the other short-term benefits payment relates to the year ended June 30, 2011 but was paid during the year ended June 30, 2012.
$300,000 of the other short-term benefits payment relates to the year ended June 30, 2012.
(5) French Citizen Pension Payment.
(6) Ceased as a member of the KMP on December 12, 2011.
(7) Resigned August 31, 2011.
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remuneration report – auDiteD
year enDeD June 30, 2011
short-term benefits
post employment
benefits
long-term benefits
other
short-
term
employee
benefits
cash
salary
anD fees
non-
monetary
benefits
term-
ination
payments
super-
annuation
anD other
pension
payments
share-
baseD
payments
perfor-
mance
relateD
% of total
total
585,920
29,792
272,897(1)
105,625
53,518
294,698
202,251
187,864
521,147
246,750
307,177
17,841
30,000
–
–
–
4,122
29,314
–
–
–
–
–
–
–
–
300,000(3)
321,459
–
–
37,454
10,487
–
–
–
–
–
–
–
271,899
–
–
–
4,371
3,218,720
84%
3,826,852
50,000
9,908
–
4,817
25,689
21,933
39,445
76,653(4)
56,784
27,646
407,520
522,682
407,520
–
621,401
123,307
942,149
691,727
204,314
510,736
79%
65%
79%
0%
66%
33%
65%
36%
37%
60%
517,312
805,487
513,145
58,335
945,910
376,805
1,441,357
1,910,986
545,302
856,046
2,807,639
300,000
450,677
271,899
317,246
7,650,076
11,797,537
name
executive
Director
N. Curtis
non-executive
Directors
D. Davidson
W. Forde
J. Klein
Z. Switkowski
executives
A. Arnold
G. Barr
J. Brien(2)
E. Noyrez
J.G. Taylor
M. James
total
(1) Amount includes Non-Director related fees paid for consulting services provided by W. Forde (as Chair of the LampsOn Board) totalling $150,000.
As Phase 1 of the Rare Earths Project has been completed, Mr Forde has not provided any consultancy services to the Group since June 30, 2012.
(2) Resigned April 4, 2011. On cessation of employment, Mr Brien was paid a settlement equal to 12 months annual base salary in settlement
of all outstanding matters between Mr Brien and the Group.
(3) $150,000 of the other short-term benefits payment relates to the year ended June 30, 2010 but was paid during the year ended June 30, 2011.
$150,000 of the other short-term benefits payment relates to the year ended June 30, 2011.
(4) French Citizen Pension Payment.
Certain amendments and reclassifications have been made to the June 30, 2011 “Details of Remuneration” to align to the presentation
for June 30, 2012. These amendments include the addition of the Non-Director related fees paid for consulting services totalling $150,000
to W. Forde and payments to E. Noyrez totalling $352,680 for other short-term benefits, non-monetary benefits and pension payments.
lynas corporation limiteD ANNUAL REPORT 2012
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remuneration report – auDiteD
share-baseD remuneration
i.
The following table lists any Options and Performance Rights which are still to vest, or have yet to expire.
grant Date
number
Date vesteD anD
exercisable
expiry Date
exercise
price
value per
option at
grant Date
August 20, 2007
March 19, 2008
July 21, 2008
50,000
August 24, 2010
August 24, 2012
500,000
December 31, 2010
December 31, 2012
1,000,000
July 21, 2011
July 21, 2013
September 24, 2008
14,200,000
September 24, 2011
September 24, 2013
September 24, 2008
2,700,000
September 24, 2011
September 24, 2013
January 5, 2009
July 10, 2009
October 8, 2009
July 1, 2010
August 19, 2010
August 19, 2010*
October 1, 2010
August 19, 2010
May 18, 2011
June 6, 2011*
November 30, 2011
September 23, 2011
September 22, 2011*
September 22, 2011*
September 22, 2011*
September 22, 2011*
1,100,000
January 5, 2012
January 5, 2014
200,000
September 24, 2011
September 24, 2013
24,500,000
October 8, 2012
October 8, 2014
1,000,000
July 1, 2013
10,500,000
August 19, 2013
1,608,618
August 19, 2013
1,000,000
October 1, 2013
12,900,000
August 19, 2013
July 1, 2015
August 19, 2015
August 19, 2015
October 1, 2015
August 19, 2015
200,000
420,000
October 1, 2011
December 31, 2015
June 6, 2014
June 6, 2016
4,000,000
September 22, 2014(1)
September 22, 2016
4,145,000
September 22, 2014
September 22, 2016
30,232
20,245
10,323
September 22, 2012
September 22, 2014
September 22, 2013
September 22, 2015
September 22, 2014
September 22, 2016
945,000
September 22, 2014
September 22, 2016
December 12, 2011
2,000,000
December 12, 2014
December 12, 2016
total
83,029,418
$ 0.81
$ 1.06
$ 0.98
$ 0.66
$ 0.81
$ 0.16
$ 0.66
$ 0.66
$ 0.66
$ 1.15
$ 0.00
$ 1.60
$ 1.15
$ 2.36
$ 0.00
$ 1.69
$ 1.69
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 1.57
$ 0.49
$ 0.53
$ 0.52
$ 0.33
$ 0.34
$ 0.16
$ 0.08
$ 0.23
$ 0.24
$ 0.34
$ 0.96
$ 0.48
$ 0.66
$ 1.12
$ 2.30
$ 0.40
$ 0.55
$ 1.41
$ 1.41
$ 1.41
$ 1.34
$ 0.51
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
(1) The Options issued to N. Curtis were approved by the Board on September 23, 2011 subject to shareholder approval, and subsequently approved by
the shareholders of the Company at the AGM on November 30, 2011.
Fair value of Options
The fair value of each Option and Performance Right is estimated on the date the Options are granted using a Black Scholes valuation
model. The following assumptions were considered in the valuation of Options issued throughout the year:
Dividend yield
Expected volatility
Risk-free interest rate
Life of Option
Nil
50%
4.75%
5 years
No dividends have been paid in the past and so it is not appropriate to estimate future possible dividends in arriving at the fair values.
The life of the Options is based on a five-year expiry from date of issue and is therefore not necessarily indicative of exercise patterns
that may occur.
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remuneration report – auDiteD
The resulting weighted average fair values for those Options issued during the year are:
name
of options grant Date
number
fair
value
per
option
at grant
Date
exercise
price
per
option expiry Date
first
exercise Date
last
exercise Date
A. Arnold
935,000 September 23, 2011
G. Barr
1,210,000 September 23, 2011
L. Catanzaro 2,000,000 December 12, 2011
N. Curtis
4,000,000 November 30, 2011(1)
E. Noyrez
2,000,000 September 23, 2011
$0.55
$0.55
$0.51
$0.40
$0.55
$1.69 September 22, 2016
September 22, 2014 September 22, 2016
$1.69 September 22, 2016
September 22, 2014 September 22, 2016
$1.57 December 12, 2016
December 12, 2014
December 12, 2016
$1.69 September 22, 2016
September 22, 2014 September 22, 2016
$1.69 September 22, 2016
September 22, 2014 September 22, 2016
total
10,145,000
(1) The Options issued to N. Curtis were approved by the Board on September 23, 2011 subject to shareholder approval, and subsequently approved
by the shareholders of the Company at the AGM on November 30, 2011.
All Options or Performance Rights granted for the benefit of Directors and the Executives have three-year vesting periods. The Options
and Performance Rights are exercisable between three and five years after the Options have been granted, subject to achievement of
the relevant performance hurdles.
lynas corporation limiteD ANNUAL REPORT 2012
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The following tables outline the Options and Performance Rights issued for the benefit of Directors and the KMP during the 2012 and
2011 financial years and those Options which have vested at each respective year-end.
June 30, 2012
balance at
beginning
of perioD granteD
grant Date
options
exerciseD/
cancelleD/
other(1)
options
expireD
without
exercise
net
change
balance
at enD of
perioD
amount
vesteD at
June 30,
2012
A. Arnold
5,900,000
935,000
September 23, 2011
G. Barr
850,000 1,210,000
September 23, 2011
L. Catanzaro(2)
K. Conlon(3)
– 2,000,000
December 12, 2011
–
–
–
N. Curtis
31,000,000 4,000,000
November 30, 2011(6)
D. Davidson
3,100,000
W. Forde
J. Klein
4,000,000
3,100,000
–
–
–
–
–
–
E. Noyrez
8,000,000 2,000,000
September 23, 2011
Z. Switkowski
–
–
–
–
–
–
–
–
–
–
–
–
–
J.G. Taylor(4)
2,500,000 1,020,000
September 23, 2011
(3,520,000)
–
–
–
–
935,000
6,835,000
2,000,000
1,210,000
2,060,000
450,000
2,000,000
2,000,000
–
–
–
–
(5,000,000)
(1,000,000) 30,000,000
5,000,000
–
–
–
–
–
–
–
–
–
3,100,000
800,000
4,000,000
1,100,000
3,100,000
800,000
2,000,000 10,000,000
–
(2,500,000)
–
–
–
–
–
–
–
M. James(5)
7,250,000
–
–
(5,250,000)
(2,000,000)
(7,250,000)
total
65,700,000 11,165,000
(8,770,000) (7,000,000) (4,605,000) 61,095,000 10,150,000
(1) Other represents the derecognition of Options and Performance Rights of individuals no longer members of the KMP or who have resigned their
employment with the Group.
(2) Appointed December 12, 2011.
(3) Appointed November 1, 2011.
(4) Ceased as a member of the KMP on December 12, 2011, all Options on issue at this time ceased being reported from this date for the purpose
of this disclosure.
(5) Resigned August 31, 2011, all Options on issue at this time ceased being reported from this date for the purpose of this disclosure.
(6) The Options issued to N. Curtis were approved by the Board on September 23, 2011 subject to shareholder approval, and subsequently approved
by the shareholders of the Company at the AGM on November 30, 2011.
June 30, 2011
balance at
beginning
of perioD granteD
grant Date
options
exerciseD/
cancelleD/
other(1)
options
expireD
without
exercise
net
change
balance
at enD of
perioD
amount
vesteD at
June 30,
2011
A. Arnold
4,400,000 1,500,000
August 19, 2010
650,000
200,000
August 19, 2010
700,000 2,500,000
August 19, 2010
(3,200,000)
27,000,000 9,000,000
November 24, 2010 (5,000,000)
D. Davidson
1,900,000 1,200,000
November 24, 2010
2,500,000 1,500,000
November 24, 2010
6,250,000 2,000,000
August 19, 2010
(1,000,000)
1,900,000 1,200,000
November 24, 2010
G. Barr
J. Brien(2)
N. Curtis
W. Forde
M. James
J. Klein
E. Noyrez
5,000,000 3,000,000
August 19, 2010
Z. Switkowski
–
–
–
J.G. Taylor
1,000,000 1,500,000
August 19, 2010
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,500,000
5,900,000
–
200,000
850,000
200,000
(700,000)
–
–
4,000,000 31,000,000
5,000,000
1,200,000
3,100,000
1,500,000
4,000,000
–
–
1,000,000
7,250,000
2,000,000
1,200,000
3,100,000
3,000,000
8,000,000
–
–
1,500,000
2,500,000
–
–
–
–
total
51,300,000 23,600,000
(9,200,000)
– 14,400,000 65,700,000
7,200,000
(1) Other represents the derecognition of Options and Performance Rights of individuals no longer members of the KMP or who have resigned their
employment with the Group.
(2) Resigned April 4, 2011.
50
Directors’ report
Future development
Disclosures of information regarding likely developments in the operations of the Group in future financial years and the expected
results of those operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been
disclosed in this report.
Subsequent events
On September 5, 2012 the Group received confirmation from the AELB in Malaysia that the TOL for the Kuantan facility had been
finalised and granted. As a result of the receipt of the TOL the Group commenced its ramp-up of operations.
On September 21, 2012 the Group announced an upgrade to the Mount Weld Ore Reserves based on a mining study that re-optimised
the pit design using the updated Mineral Resources estimate that was announced to the ASX on 18 January 2012. The revised Ore
Reserves at the Central Lanthanide Deposit (CLD), applying cut-off grades ranging from 4 to 7% depending on the type of ore, are
estimated at 9.7 million tonnes at an average grade of 11.7% REO for a total of 1.14 million tonnes of contained REO. The Ore Reserves
estimate for the CLD is 362% higher compared with the 2005 Feasibility Study and the contained REO in the Ore Reserves is 260%
higher than the 2005 estimate.
Given the delay in the receipt of the TOL, as at September 30, 2012, the Group anticipates it would not have met certain requirements
in the Sojitz loan facility, which related to the year ended June 30, 2012. Therefore, on September 25, 2012 the Group entered into an
Amendment Deed (the “Deed”) with respect to the Sojitz loan facility. Under the terms of the Deed and as a result of the delays in first
production at the LAMP, the parties have agreed to postpone the measurement of certain financial covenant tests until nine months
after Completion of Phase 1 (as defined under the Sojitz loan facility). As a result of entering into the Deed, the Group has agreed that
certain restrictions will apply until nine months after Completion of Phase 1. Those temporary restrictions relate to capital and dividend
returns to shareholders, limitations on the incurrence of new indebtedness (capped at US$80,000 thousand) and a temporary higher
interest rate of LIBOR as published quarterly plus a margin of 5.25%.
As announced on September 25, 2012 the Kuantan High Court has issued an interim order maintaining the status quo in respect of the
TOL that has previously been issued for the LAMP and pending a hearing that is scheduled for October 4, 2012.
With the exception of the above, there have been no other events subsequent to June 30, 2012 that would require accrual or disclosure
in this financial report.
The Directors’ report is signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
nicholas curtis
executive chairman
Sydney
September 25, 2012
lynas corporation limiteD ANNUAL REPORT 2012
51
Directors’ Declaration
The Directors declare that:
(a)
(b)
(c)
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;
in the Directors’ opinion, the attached financial report is in compliance with International Financial Reporting Standards,
as stated in note 2.1 to the financial report;
in the Directors’ opinion, the attached financial report and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of
the Group; and
(d)
the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the
deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt
in accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order
applies, as detailed in note 33 to the financial report will, as a group, be able to meet any obligations or liabilities to which they are,
or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
nicholas curtis
executive chairman
Sydney,
September 25, 2012
52
inDepenDent auDitor’s report
Independent auditor's report to the members of Lynas Corporation
Limited
Report on the financial report
We have audited the accompanying financial report of Lynas Corporation Limited which comprises the
consolidated statement of financial position as at 30 June 2012, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation 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 controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also
state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the
financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with International Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about 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 judgment, 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 controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
Liability limited by a scheme approved
under Professional Standards Legislation
lynas corporation limiteD ANNUAL REPORT 2012
53
inDepenDent auDitor’s report
Auditor’s Opinion
In our opinion:
a.
the financial report of Lynas Corporation Limited is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2012
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2012. 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
International Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Lynas Corporation Limited for the year ended 30 June 2012,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Michael Elliott
Partner
Sydney
25 September 2012
54
auDitor’s inDepenDence Declaration
Auditor’s Independence Declaration to the Directors of Lynas Corporation
Limited
In relation to our audit of the financial report of Lynas Corporation Limited for the financial year ended
30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Ernst & Young
Michael Elliott
Partner
Sydney
25 September 2012
Liability limited by a scheme approved
under Professional Standards Legislation
lynas corporation limiteD ANNUAL REPORT 2012
55
consoliDateD statement of comprehensive income
for the year enDeD
in a$’000
General and administration expenses*
Other expenses*
profit (loss) from operating activities
Financial income
Financial expenses
net financial income (expenses)
profit (loss) before income tax
Income tax benefit (expense)
profit (loss) for the year from continuing operations
other comprehensive income (loss), net of income tax
Exchange differences on translating foreign operations
Gain (loss) on the revaluation of available for sale financial assets
total other comprehensive income (loss) for the year, net of income tax
total comprehensive income (loss) for the year attributable to equity holders
of the company
earnings (loss) per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
* For more information on expenses by nature, reference should be made to notes 7, 8, 9, 19, 20, 21 and 31.
June 30,
note
2012
2011
(74,124)
(15,928)
(56,584)
(1,322)
(90,052)
(57,906)
2,840
(10,667)
(7,827)
(97,879)
10,109
10,006
(9,388)
618
(57,288)
(1,798)
(87,770)
(59,086)
(10,191)
(4,653)
(50,560)
5,518
(14,844)
(45,042)
(102,614)
(104,128)
(5.12)
(5.12)
(3.54)
(3.54)
9
10
10
11
13
13
26
26
The Consolidated Statement of Comprehensive Income should be read in conjunction with the notes to the financial statements.
56
consoliDateD statement of financial position
as at
in a$’000
assets
Cash and cash equivalents
Trade and other receivables
Inventories
total current assets
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Intangible assets
Available for sale financial assets
Other assets
total non-current assets
total assets
liabilities
Trade and other payables
Current tax liabilities
Provisions
Employee benefits
total current liabilities
Provisions
Employee benefits
Borrowings
total non-current liabilities
total liabilities
net assets
equity
Share capital
Retained earnings (accumulated deficit)
Reserves
total equity attributable to the equity holders of the company
June 30,
note
2012
2011
14
15
16
16
19
20
21
17
18
22
11
25
24
25
24
23
26
26
205,438
433,956
2,470
52,419
5,748
11,569
260,327
451,273
13,272
706,603
26,342
321
3,754
13,038
763,330
1,023,657
18,674
361,070
29,287
346
9,652
3,731
422,760
874,033
(48,331)
(27,965)
(120)
(3,061)
(1,382)
–
(1,931)
(997)
(52,894)
(30,893)
(3,777)
(430)
(3,674)
(335)
(403,062)
(212,364)
(407,269)
(216,373)
(460,163)
(247,266)
563,494
626,767
823,161
(287,136)
27,469
821,994
(199,366)
4,139
563,494
626,767
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
lynas corporation limiteD ANNUAL REPORT 2012
57
consoliDateD statement of chanGes in equity
in a$’000
share
capital
accum-
ulateD
Deficit
foreign
currency
trans-
lation
reserve
equity
settleD
employee
benefits
reserve
invest-
ment
reval-
uation
reserve
balance at the beginning of the year
821,994
(199,366)
(25,941)
24,562
5,518
Exercise of options, net of issue costs
1,167
Equity component of the Mt Kellett
convertible bonds
Deferred tax on the issue of the
Mt Kellett convertible bonds
Employee remuneration settled through
share-based payments
Total comprehensive income for the year
–
–
–
–
–
–
–
–
–
–
–
–
(87,770)
(10,191)
–
–
–
9,431
–
–
–
–
–
(4,653)
other
reserves
total
–
–
626,767
1,167
40,936
40,936
(12,193)
(12,193)
–
–
9,431
(102,614)
balance at June 30, 2012
823,161
(287,136)
(36,132)
33,993
865
28,743
563,494
balance at the beginning of the year
719,857
(140,280)
24,619
14,947
Issue of shares, net of issue costs and
deferred tax
Exercise of options, net of issue costs
Employee remuneration settled through
share-based payments
Total comprehensive income for the year
98,869
3,268
–
–
–
–
–
–
–
–
(59,086)
(50,560)
–
–
9,615
–
balance at June 30, 2011
821,994
(199,366)
(25,941)
24,562
–
–
–
–
5,518
5,518
–
–
–
–
–
–
619,143
98,869
3,268
9,615
(104,128)
626,767
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
58
consoliDateD statement of cash flows
for the year enDeD
in a$’000
cash flows from operating activities
Payments to suppliers and employees
Income taxes (paid) received
net cash flows from (used in) operating activities
cash flows from investing activities
Payment for property, plant and equipment
Payment for deferred exploration, evaluation and development expenditure
Payment for intangible assets
Security bonds paid
Payment for available for sale financial assets
net cash from (used in) investing activities
cash flows from financing activities
Drawdown of loans and borrowings
Sojitz loan facility
Mt Kellett convertible bonds
Interest received
Interest and other financing costs paid
Proceeds from the issue of share capital
Proceeds from the issue of share capital resulting from the exercise of options
Payment of transaction costs – Sojitz loan facility
Payment of transaction costs – Issue of Mt Kellett convertible bonds
Payment of transaction costs – Issue of shares
net cash from (used in) financing activities
net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations (net) on cash held
closing cash and cash equivalents
cash and cash equivalents comprise
Cash at bank and on hand
Short-term deposits
Restricted cash
total cash and cash equivalents
June 30,
note
2012
2011
(86,847)
(43,253)
(66)
–
(86,913)
(43,253)
(339,373)
(193,047)
(111)
(125)
(9,308)
(749)
(3,099)
(156)
(401)
(1,769)
(349,666)
(198,472)
–
212,364
211,864
6,027
(12,244)
–
1,167
–
(625)
–
–
9,176
–
98,355
3,268
(1,744)
–
(107)
206,189
321,312
433,956
1,872
405,245
(50,876)
14
205,438
433,956
26,040
98,337
81,061
37,810
160,601
235,545
14
205,438
433,956
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
lynas corporation limiteD ANNUAL REPORT 2012
59
consoliDateD statement of cash flows CONTINuED
Reconciliation of the profit (loss) for the year with the net cash from (used in) operating activities
for the year enDeD
in a$’000
Profit (loss) for the year
adjustments for:
Depreciation of property, plant and equipment
Amortisation of deferred exploration, evaluation and development expenditure
Amortisation of intangible assets
Employee remuneration settled through share-based payments
Impairment loss on property, plant and equipment
Impairment loss on deferred exploration, evaluation and development expenditure
Impairment loss on inventories
Net financial (income) expenses
Income tax (benefit) expense
Income taxes (paid) received
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in tax payable
Change in provisions and employee benefits
net cash from (used in) operating activities
June 30,
2012
2011
(87,770)
(59,086)
965
260
124
9,431
4,770
2,613
8,545
7,827
(10,109)
(66)
2,524
(37,649)
9,789
120
1,713
831
265
125
9,615
–
1,322
–
(618)
1,798
–
(3,895)
(6,356)
12,181
–
565
(86,913)
(43,253)
60
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
1. reporting entity
Lynas Corporation Limited (the “Company”) is a for profit company domiciled and incorporated in Australia.
The financial report of Lynas Corporation Limited as at and for the year ended June 30, 2012 comprises the Company and its
subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities.
The Group is principally engaged in the extraction and processing of rare earth minerals, primarily in Australia and Malaysia.
The address of the registered office of the Company is Level 7, 56 Pitt Street, Sydney NSW 2000, Australia.
2. basis of presentation
Statement of compliance
2.1
The financial report is a general purpose financial report and has been prepared in accordance with Australian Accounting Standards
(“AASBs”) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001.
The financial report also complies with International Financial Reporting Standards and Interpretations (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
The financial report was approved by the Board of Directors (the “Directors”) on September 25, 2012.
2.2 Going concern
The financial report has been prepared using the going concern assumption.
Basis of measurement
2.3
The financial report has been prepared under the historical cost convention except certain components of inventory which are
measured at net realisable value, derivatives and certain available for sale financial assets (being listed securities) which are measured
at fair value and certain non-current assets that are presented on a revalued amount. The methods used to measure fair values are
discussed further in note 5.
Information as disclosed in the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the current year is for the 12 month period ended June 30, 2012. Information for the
comparative year is for the 12 month period ended June 30, 2011.
Presentation currency
2.4
The financial report of the Company and the Group is presented in Australian Dollars (“AUD”), which is both the Company’s and the
Group’s presentation currency.
Rounding of amounts
2.5
The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, in relation
to the “rounding off” of amounts. Amounts in the financial report have been rounded off in accordance with the Class Order relief to
the nearest thousand dollars, or in certain cases, the nearest dollar.
2.6 use of estimates and judgements
The preparation of the financial report requires the Directors to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and liabilities, income and expenses and disclosure of contingent assets and
liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates. These estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision
affects only that year or in the year of the revision and future years if the revision affects both the current and future years.
Information about the significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the
most material effect on the amounts recognised in the financial report are described in note 4.
Revision/reclassification of comparative information
2.7
Certain elements of the information presented for comparative purposes have been revised to conform with the current year
presentation. The effects of these material changes are disclosed in note 36.
Revisions to comparative information resulting from change in accounting policies
2.8
During the year, the Group elected to change its accounting policy in respect of the presentation of those cash flows associated with its
financing activities. As a result of this change interest received and interest and other financing costs paid are now presented as a component
of the Group’s financing activities, whereas historically such amounts were presented as part of the Group’s operating activities.
lynas corporation limiteD ANNUAL REPORT 2012
61
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies
The accounting policies set out below have been applied consistently to all years presented in this financial report and have been
applied consistently by all Group entities.
Basis of consolidation
Subsidiaries
3.1
(a)
Subsidiaries are entities controlled by the Company or the Group. Control exists when the Company or the Group has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting
rights that are presently exercisable are taken into account. The financial statements of subsidiaries are included in the financial report
from the date control (or effective control) commences until the date that control ceases.
The Group has adopted AASB 3 Business Combinations (2008) and AASB 127 Consolidated and Separate Financial Statement (2008) for
each acquisition or business combination occurring on or after January 1, 2009. All business combinations occurring on or after July 1,
2009 are accounted for using the acquisition method, while those prior to this date are accounted for using the purchase method.
The acquisition method of accounting is used to account for the acquisition of subsidiaries and businesses by the Group for transactions
completed on or after July 1, 2009. The cost of an acquisition is measured at the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of the acquisition, including the fair value of any contingent consideration and
share-based payment awards (as measured in accordance with AASB 2 Share Based Payment) of the acquiree that are mandatorily
replaced as a result of the transaction. Transaction costs that the Group incurs in connection with an acquisition are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their
fair value at the acquisition date, irrespective of the extent of any non-controlling interests. Non-controlling interests are initially
recognised at their proportionate share of the fair value of the net assets acquired.
During the measurement year an acquirer can report provisional information for a business combination if by the end of the reporting
year in which the combination occurs the accounting is incomplete. The measurement year, however, ends at the earlier of when the
acquirer has received all of the necessary information to determine the fair values or one year from the date of the acquisition.
The purchase method of accounting is used to account for the acquisition of subsidiaries and businesses by the Group for transactions
completed prior to July 1, 2009. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of the acquisition, plus costs directly attributable to the acquisition. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the
acquisition date, irrespective of the extent of any minority interests. Final values for a business combination are determined within
12 months of the date of the acquisition.
Associates
(b)
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies
(generally accompanying a shareholding of between 20% and 50% of the voting rights). Investments in associates are accounted for
using the equity method of accounting and are initially recognised at cost. Investments in associates include goodwill identified on
acquisition, net of accumulated impairment losses (if any).
The Group’s share of its associates’ post-acquisition profits or losses and movements in other comprehensive income is recognised
in the Group’s statement of comprehensive income (after adjustments (as required) are made to align the accounting policies of the
associate with those of the Group). The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest
(including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that
the Group has a financial obligation or has made payments on behalf of the investee.
Joint ventures
(c)
Joint ventures are those operations, entities or assets in which the Group has joint control, established by contractual agreement and
requiring unanimous consent for strategic, financial and operating decisions. Interests in jointly controlled entities are accounted for
using the equity method of accounting (as described in note 3.1(b)).
Interests in jointly controlled assets and operations are reported in the financial report by including the Group’s share of assets
employed in the joint venture, the share of liabilities incurred in relation to the joint venture and the share of any expenses incurred
in relation to the joint venture in their respective classification categories.
Transactions eliminated on consolidation
(d)
Intra-group balances and unrealised items of income and expense arising from intra-group transactions are eliminated in preparing the
financial report. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the
Group’s interest in the investee. Unrealised losses are eliminated in the same manner as gains, but only to the extent that there is no
evidence of impairment.
62
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies continued
Transactions and non-controlling interests
(e)
The Group accounts for transactions with non-controlling interests as transactions with the equity owners of the Group. For purchases
from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of
net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with
the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts
previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
Transactions between entities under common control
(f)
Common control transactions arise between entities that are under the ultimate ownership of the Company.
Certain transactions between entities that are under common control may not be transacted on an arm’s length basis. Accordingly any
gains or losses on these types of transactions are recognised directly in equity. Examples of such transactions include but are not limited to:
• debt forgiveness transactions;
• transfer of assets for greater than or less than fair value; and
• acquisition or disposal of subsidiaries for no consideration or consideration greater than or less than fair value.
Foreign currency
Functional and presentation currency
3.2
(a)
Items included in the financial report of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the “functional currency”).
Foreign currency transactions
(b)
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional
currency of the respective entities at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at historical cost are translated to the functional currency of the respective entities at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the
functional currency of the respective entities at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on translation are recognised in the statement of comprehensive income as a component of the
profit or loss, except for differences arising on the translation of a financial liability designated as a hedge of the net investment in a
foreign operation (see (c) further).
Foreign operations
(c)
The results and financial position of those entities that have a functional currency different from the presentation currency of the Group
are translated into the Group’s presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date of the
statement of financial position;
• income and expense items for each profit or loss item are translated at average exchange rates;
• items of other comprehensive income are translated at average exchange rates; and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings and
other currency instruments designated as hedges of such investments are recognised as a component of equity and included in the
foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in the statement of
comprehensive income as a component of the profit or loss as part of the gain or loss on the sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and are translated on this basis.
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Changes in functional currency
(d)
Any change in a Group company’s functional currency is applied prospectively from the date of the change. All items are translated into
the new functional currency using the exchange rate at the date of the change. The resultant translated amounts for non-monetary
items are thereafter treated as their historical cost.
Following the issue of the Mt Kellett convertible bonds, the primary economic environment in which the Company operates has
changed. Management performed a functional currency review and concluded that the functional currency of the Company should
change prospectively to the United States dollar (“USD”), effective as of January 24, 2012. Prior to this date the functional currency
of the Company was the AUD.
3.3 Non-derivative financial instruments
Non-derivative financial instruments comprise cash and cash equivalents, receivables, available for sale financial assets, trade and other
payables, interest bearing borrowings and compound instruments.
A non-derivative financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Non-derivative financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if
the Group transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset.
Non-derivative financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through the profit or
loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as
described further.
Non-derivative financial instruments are recognised on a gross basis unless a current and legally enforceable right to off-set exists and
the Group intends to either settle the instrument net or realise the asset and liability simultaneously.
Upon initial acquisition the Group classifies its financial instruments in one of the following categories, which is dependent on the
purpose for which the financial instruments were acquired.
Cash and cash equivalents
(a)
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, restricted cash and other short-term highly liquid
investments with maturities of less than three months. Bank overdrafts are included within borrowings and are classified as current
liabilities on the statement of financial position except where these are repayable on demand, in which case they are included separately
as a component of current liabilities. In the statement of cash flows, overdrafts are included as a component of cash and cash equivalents.
Financial instruments at fair value through profit or loss
(b)
An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition.
Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase
and sale decisions based on the instrument’s fair value. Upon initial recognition (at the trade date) attributable transaction costs are
recognised in the statement of comprehensive income as a component of the profit or loss. Subsequent to initial recognition, financial
instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the statement of
comprehensive income as a component of the profit or loss.
Loans and receivables
(c)
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for instruments with maturities greater than 12 months from the reporting date, which
are classified as non-current assets. The Group’s loans and receivables comprise trade and other receivables (including related party
receivables) which are stated at their cost less impairment losses.
held-to-maturity investments
(d)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that
the Group has the positive intention to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured
at amortised cost using the effective interest method, less any impairment losses.
The effective interest method is a method of calculating the amortised cost of a financial instrument and allocating the interest over the
relevant years. The effective interest method results in an interest rate that exactly discounts estimated future cash payments or receipts
over the expected life of the financial instrument, or, where appropriate, a shorter period to the net amount of the financial instrument.
Available-for-sale financial assets
(e)
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any
of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12
months of the reporting date.
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Available-for-sale financial assets are measured at fair value on initial recognition plus transaction costs. Subsequent to initial
recognition, the assets are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and
losses on available-for-sale monetary items, are recognised directly in equity. When an investment is derecognised, the cumulative gain
or loss in equity is transferred to the statement of comprehensive income as a component of the profit or loss.
Other liabilities
(f)
Other liabilities comprise all non-derivative financial liabilities that are not disclosed as liabilities at fair value through profit or loss.
Other liabilities 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 reporting date. The Group’s other liabilities comprise trade and other payables and interest bearing
borrowings, including compound instruments and those with related parties. The Group’s other liabilities are measured as follows:
(i) Trade and other payables
Subsequent to initial recognition trade and other payables are stated at amortised cost using the effective interest method.
(ii) Interest bearing borrowings including related party borrowings
Subsequent to initial recognition interest bearing loans and borrowings are measured at amortised cost using the effective
interest method.
Compound financial instruments
(g)
Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option
of the holder, with the number of shares to be issued being fixed.
The liability component of a compound financial instrument is recognised initially at the fair value of a similar financial liability that
does not have the equity conversion option. The equity component is recognised initially as the difference between the fair value of the
compound financial instrument as a whole and the fair value of the financial liability component. Any directly attributable transaction
costs are then allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to the initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the
effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest related to the financial liability is recognised in the statement of comprehensive income as a component of the profit or loss.
On conversion the financial liability is reclassified to equity and no gain or loss is recognised in the statement of comprehensive income.
3.4 Derivative financial instruments
A derivative financial instrument is recognised if the Group becomes a party to the contractual provisions of an instrument at the trade date.
Derivative financial instruments are initially recognised at fair value (which includes, where applicable, consideration of credit risk), with
transaction costs being expensed as incurred. Subsequent to initial recognition, derivative financial instruments are stated at fair value.
The gain or loss on re-measurement to fair value is recognised in the statement of comprehensive income as a component of the profit
or loss unless the derivative financial instruments qualify for hedge accounting. Where a derivative financial instrument qualifies for
hedge accounting, recognition of any resulting gain or loss depends on the nature of the hedging relationship (see further).
Derivative financial instruments are recognised on a gross basis unless a current and legally enforceable right to off-set exists.
Derivative financial assets are derecognised if the Group’s contractual right to the cash flows from the instrument expire or if the Group
transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset.
Derivative financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Cash flow hedges
(a)
Changes in the fair value of a derivative financial instrument designated as a cash flow hedge are recognised directly in equity as
a component of other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective,
changes in fair value are recognised in the statement of comprehensive income as a component of the profit or loss for the year.
If a hedging instrument no longer meets the criteria for hedge accounting or it expires, is sold, terminated or exercised, then hedge
accounting is discontinued prospectively. At this point in time, the cumulative gain or loss previously recognised in equity remains there
until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred
to the carrying amount of the asset when it is recognised. In all other cases the amount recognised in equity is transferred within the
statement of comprehensive income in the same year that the hedged item affects this statement and is recognised as part of financial
income or expenses. If the forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred within the statement of comprehensive income and is recognised as part of financial income or expenses in the
profit or loss.
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Fair value hedges
(b)
Changes in the fair value of a derivative financial instrument designated as a fair value hedge are recognised in the statement of
comprehensive income as a component of the profit or loss in financial income or expenses together with any changes in the fair value
of the hedged assets or liabilities that are attributable to the hedged risk.
Embedded derivatives
(c)
Embedded derivatives are separated from the host contract and accounted for separately if the following conditions are met:
• the economic characteristics and risks of the host contract and the embedded derivative are not closely related;
• a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
• the combined instrument is not measured at fair value through profit or loss.
At the time of initial recognition of the embedded derivative an equal adjustment is also recognised against the host contract. The
adjustment against the host contract is amortised over the remaining life of the host contract using the effective interest method.
Any embedded derivatives that are separated are measured at fair value with changes in fair value recognised through net financial
expense in the statement of comprehensive income as a component of the profit or loss.
Inventories
Raw materials, work in progress and finished goods
3.5
(a)
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based either on the first in first out
(“FIFO”) or weighted average principles and includes expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured or refined inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and selling expenses. Inventory expected to be sold or consumed within the
next 12 months is classified as current, with amounts expected to be consumed or sold after this time being classified as non-current.
Engineering and maintenance materials
(b)
Engineering and maintenance materials (representing either critical or long order components but excluding rotable spares) are
measured at the lower of cost and net realisable value. The cost of these inventories is based on the weighted average principle and
includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable
value is determined with reference to the cost of replacement of such items in the ordinary course of business compared to the current
market prices.
Property, plant and equipment
Recognition and measurement
3.6
(a)
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses (if any).
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of property, plant and equipment
acquired in a business combination is determined by reference to its fair value at the date of acquisition. The cost of self-constructed
assets includes the cost of materials and direct labour and any other costs directly attributable to bringing the asset to a working
condition for its intended use. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of
foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related
equipment is capitalised as part of the cost of that equipment.
Assets under construction
(b)
Assets under construction are transferred to the appropriate asset category when they are ready for their intended use. Assets under
construction are not depreciated but tested for impairment at least annually or when there is an indication of impairment.
Borrowing costs
(c)
Borrowing costs directly attributable to the acquisition or construction of an item of property, plant and equipment are capitalised until
such time as the assets are substantially ready for their intended use. The interest rate used equates to the effective interest on debt
where general borrowings are used or the relevant interest rate where specific borrowings are used to finance the construction.
Subsequent costs
(d)
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable
that the future economic benefits embodied within that part will flow to the Group and its cost can be measured reliably. The carrying
amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in
the statement of comprehensive income as a component of the profit or loss as incurred.
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Depreciation
(e)
Depreciation is recognised in the statement of comprehensive income as a component of the profit or loss or capitalised as a
component of inventory in the statement of financial position (which is subsequently released to the profit or loss through the cost of
goods sold on the sale of the underlying product) using a method that reflects the pattern in which the economic benefits embodied
within the asset are consumed. Generally this is on a straight-line basis over the estimated useful life of each part or component of an
item of property, plant and equipment.
The estimated useful lives for the material classes of property, plant and equipment are as follows:
• leasehold land
• buildings
• plant and equipment
• fixtures and fittings
• leasehold improvements
• motor vehicles
99 years
20 to 30 years
15 to 20 years
5 years
1 to 30 years
5 years
Depreciation methods, useful lives and residual values are reassessed on an annual basis.
Gains and losses on the disposal of items of property, plant and equipment are determined by comparing the proceeds (if any) at the
time of disposal with the net carrying amount of the asset.
3.7 Mineral exploration, evaluation and development expenditure
(a)
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Exploration and
evaluation expenditure includes:
Exploration and evaluation expenditure
• researching and analysing historical exploration data;
• gathering exploration data through topographical, geochemical and geophysical studies;
• exploratory drilling, trenching and sampling;
• determining and examining the volume and grade of the mineral resource;
• surveying transportation and infrastructure requirements;
• conducting market and finance studies;
• administration costs that are directly attributable to a specific exploration area; and
• licensing costs.
These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the
area of interest, or where activities in the area have not yet reached a stage that permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. Accumulated costs in relation to an abandoned area of interest are written off in full in the statement of
comprehensive income as a component of the profit or loss in the period in which the decision to abandon the area is made.
Development expenditure
(b)
Once an area of interest has been established as commercially viable and technically feasible, expenditure other than that relating
to land, buildings and plant and equipment is capitalised as development expenditure. Development expenditure includes previously
capitalised exploration and evaluation expenditure, pre-production development expenditure and other subsurface expenditure
pertaining to that area of interest. Costs related to surface plant and equipment and any associated land and buildings are accounted for
as property, plant and equipment.
Development costs are accumulated in respect of each separate area of interest. Costs associated with commissioning new assets in the
period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after
the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.
When an area of interest is abandoned or the Directors decide that it is not commercially viable or technically feasible, any accumulated
costs in respect of that area are written off in full in the statement of comprehensive income as a component of the profit or loss in the
period in which the decision to abandon the area is made to the extent that they will not be recoverable in the future.
Development assets are assessed for impairment if the facts and circumstance suggest that the carrying amount exceed the recoverable
amount. For the purpose of impairment testing, development assets are allocated to the cash-generating units (“CGUs”) to which the
development activity relates.
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Deferred stripping
(c)
Overburden and other mine waste materials are often removed during the initial development of a mine in order to access the
mineral deposit. This activity is referred to as development stripping. The directly attributable costs associated with these activities are
capitalised as a component of development costs. Capitalisation of development stripping ceases and amortisation of those capitalised
costs commences upon extraction of ore. Amortisation of capitalised development stripping costs occurs on a straight line basis with
reference to the life of mine of the relevant area of interest.
Removal of waste material normally continues through the life of a mine. This activity is referred to as production stripping and
commences upon the extraction of ore.
Amortisation of development
(d)
Amortisation of development is recognised either in the statement of comprehensive income as a component of the profit or loss
or capitalised as a component of inventory in the statement of financial position (which is subsequently released to the profit or loss
through the cost of goods sold on the sale of the underlying product) on a units of production basis which aims to recognise cost
proportionally to the depletion of the economically recoverable mineral resources. Costs are amortised from the commencement of
commercial production.
Intangible assets
Goodwill
3.8
(a)
Goodwill arises on the acquisition of subsidiaries, associates, joint ventures and business operations and is recognised at the date that
control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously-held equity interest (if any) in the acquiree
over the fair value of the identifiable net assets recognised.
If the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the
amount of the any non-controlling interest in the acquiree and the fair value of the acquirer’s previously-held equity interest (if any)
in the acquiree, the excess is recognised immediately in the statement of comprehensive income as a component of the profit or loss
as a bargain purchase gain.
Goodwill is measured at cost less accumulated impairment losses (if any) and is tested at least annually for impairment. Goodwill is not
amortised and is allocated to CGUs for the purpose of impairment testing. The allocation is made to the CGUs that are expected to
benefit from the business combination in which the goodwill arose after the allocation of purchase consideration is finalised.
In respect of joint ventures and investments accounted for using the equity method, the carrying amount of goodwill is included in the
carrying amount of the investment and is tested for impairment at least annually as part of the overall investment balance.
Research and development
(b)
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technological knowledge and
understanding, is recognised in the statement of comprehensive income as a component of the profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technologically
and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs
that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the statement
of comprehensive income as a component of the profit or loss as incurred.
Intangible assets arising from development activities are measured at cost less accumulated amortisation and accumulated impairment
losses (if any).
Other intangible assets
(c)
Other intangible assets comprise internally developed software (which is capitalised in accordance with the Group’s policy in respect
of Research and Development as outlined at note 3.8(b)). Other intangible assets have finite useful lives and are carried at cost less
accumulated amortisation and impairment losses (if any).
Subsequent expenditure
(d)
Subsequent expenditure in respect of intangible assets is capitalised only when the expenditure increases the future economic benefits
embodied in the specific asset to which the expenditure relates and it can be reliably measured. All other expenditure, including
expenditure on internally generated goodwill and other intangibles, is recognised in the statement of comprehensive income as a
component of the profit or loss as incurred.
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Amortisation
(e)
Amortisation is recognised in either the statement of comprehensive income as a component of the profit or loss or capitalised as a
component of inventory in the statement of financial position (which is subsequently released to the profit or loss through the cost of
goods sold on the sale of the underlying product) on a straight-line basis over the estimated useful lives of intangible assets, other than
goodwill and indefinite life trademarks, from the date that the intangible assets are available for use. The estimated useful lives for the
material classes of intangible assets are as follows:
• software/technology
3 years
Impairment
3.9
The carrying amounts of the Group’s assets are reviewed regularly and at least annually to determine whether there is any objective
evidence of impairment. An impairment loss is recognised whenever the carrying amount of an asset or CGU exceeds its recoverable
amount. Impairment losses directly reduce the carrying amount of assets and are recognised in the statement of comprehensive income
as a component of the profit or loss.
Impairment of loans and receivables and held-to-maturity financial assets
(a)
The recoverable amount of the Group’s loans and receivables and held-to-maturity financial assets carried at amortised cost is calculated
with reference to the present value of the estimated future cash flows, discounted at the original effective interest rate (i.e. the effective
interest rate computed at the date of initial recognition of these financial assets). Receivables with a short duration are not discounted.
Impairment losses on individual instruments that are considered significant are determined on an individual basis through an evaluation
of the specific instruments’ exposures. For trade receivables which are not significant on an individual basis, impairment is assessed on
a portfolio basis taking into consideration the number of days overdue and the historical loss experiences on a portfolio with a similar
number of days overdue.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
• significant financial difficulty of the issuer or obligor;
• a breach of contract, such as default or delinquency in respect of interest or principal repayment; or
• observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio.
Non-financial assets
(b)
The carrying amounts of the Group’s non-financial assets are reviewed at least annually to determine whether there is any indication
of impairment. If any such indicators exist then the asset or CGU’s recoverable amount is estimated. For goodwill and intangible assets
that have indefinite lives or that are not yet available for use, recoverable amounts are estimated at least annually and whenever there
is an indication that they may be impaired.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. A CGU is the smallest
identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are
recognised in the statement of comprehensive income as a component of the profit or loss. Impairment losses recognised in respect of
a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount
of the other non-financial assets in the CGU on a pro-rata basis.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing the 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 or CGU. In assessing the fair value less cost to sell, the
Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date.
The methods used to determine fair value include a discounted future cash flow analysis and forecasted EBITDA multiplied by a
relevant market indexed multiple.
In respect of assets other than goodwill, impairment losses recognised in prior years are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s revised carrying amount
will not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had
been recognised.
3.10 Assets and liabilities classified as held for sale
Assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through
continuing use are classified as held for sale. Immediately before classification as held for sale, the assets or components of a disposal
group are re-measured in accordance with the Group’s accounting policies. Thereafter the assets (or disposal groups) are measured
at the lower of their carrying amount or fair value less costs to sell. Upon reclassification the Group ceases to depreciate or amortise
non-current assets classified as held for sale. Any impairment loss on a disposal group is first allocated to goodwill and then to the
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remaining assets on a pro-rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets or employee
benefit assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses incurred on
the initial classification as being held for sale and subsequent gains or losses on re-measurement are recognised in the statement of
comprehensive income as a component of the profit or loss. Gains are not recognised in excess of any prior cumulative impairment loss.
Pension and superannuation obligations
3.11 Employee benefits
(a)
A defined contribution pension and superannuation plan is a plan under which the employee and the Group pay fixed contributions to
a separate entity. The Group has no legal or constructive obligation to pay further contributions in relation to an employee’s service in
the current and prior years. The contributions are recognised in the statement of comprehensive income as a component of the profit
or loss as and when they fall due.
Short-term employee benefits
(b)
Short-term employee benefits are measured on an undiscounted basis and are expensed in the statement of comprehensive income
as a component of the profit or loss as the related services are provided. A provision is recognised for the amount expected to be paid
under short-term cash bonus plans and outstanding annual leave balances if the Group has a present legal or constructive obligation
to pay this amount as a result of past services provided by the employee and the obligation can be estimated reliably.
Termination benefits
(c)
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary
redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be
accepted and the number of acceptances can be estimated reliably.
Incentive compensation plans
(d)
The Group recognises a liability and associated expense for incentive compensation plans based on a formula that takes into
consideration certain threshold targets and the associated measures of profitability. The Group recognises a provision when
it is contractually obligated or when there is a past practice that has created a constructive obligation to its employees.
3.12 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefit will be required to settle the obligation. 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 the risks specific to the liability. Where discounting is used, the increase in the provision for the passage of time is recognised
as a financial expense in the statement of comprehensive income as a component of the profit or loss.
(a) Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty
data and a weighting of all possible outcomes against their associated probabilities.
Business closure and rationalisation
(b)
A provision for business closure and rationalisation is recognised when the Group has approved a detailed and formal restructuring plan,
and the restructuring has either commenced or has been publicly announced. Future operating costs are not provided for.
Rehabilitation
(c)
The mining/extraction and refining/processing activities of the Group give rise to obligations for asset and site rehabilitation.
Rehabilitation obligations can include facility decommissioning and dismantling, removal or treatment of waste materials, land
rehabilitation and site restoration. The extent of work required and the associated costs are estimated based on feasibility and
engineering studies using current restoration standards and techniques. Provisions for the cost of each rehabilitation programme
are recognised at the time that the environmental disturbance occurs.
Rehabilitation provisions are initially measured at the expected value of future cash flows required to rehabilitate the relevant site,
discounted to their present value. The value of the provision is progressively increased over time as the effect of discounting unwinds.
When provisions for rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing part of the
cost of acquiring the future economic benefits of the operation. The capitalised cost of rehabilitation activities for the Group’s mining
operations is recognised as a component of “development expenditure”, whereas those relating to its refining operations are recognised
as a component of either “buildings” or “plant and equipment”. Amounts capitalised are depreciated or amortised accordingly.
Where rehabilitation is expected to be conducted systematically over the life of the operation, rather than at the time of closure, a provision
is made for the present obligation or estimated outstanding continuous rehabilitation work at each balance sheet date with the costs
recognised in the statement of comprehensive income as a component of the profit or loss in line with the remaining future cash flows.
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At each reporting date the rehabilitation liability is re-measured to account for any new disturbance, updated cost estimates, changes
to the estimated lives of the associated operations, new regulatory requirements and revisions to discount rates. Changes to the
rehabilitation liability are added or deducted from the related rehabilitation asset and amortised accordingly.
3.13 Royalties
Royalties are treated as taxation arrangements when they have the characteristics of a tax. This is considered to be the case when they
are imposed under government authority and the amount payable is calculated by reference to revenue derived (net of any allowable
deductions) after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same
basis as described in note 3.20(a) for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these
criteria are recognised as current provisions (as outlined in note 3.12) and included as part of the cost of goods sold in the statement
of comprehensive income as a component of profit or loss.
3.14 Dividends
Dividends to the Group’s shareholders are recognised as a liability in the Group’s statement of financial position in the period in which
the dividends are declared.
3.15 Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from
the proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the
consideration paid including any directly attributable incremental costs (net of income taxes) is directly recognised in equity.
3.16 Share-based payment
Share-based remuneration benefits are provided to employees via a variety of schemes which are further set out in note 30.
The fair values of the options granted under these various schemes are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at the grant date and recognised over the period during which the employees become
unconditionally entitled to the options.
The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the options granted is measured to reflect the expected market vesting conditions, but excludes the impact of any
non-market vesting conditions (for example, profitability and production targets). Non-market vesting conditions are included in
assumptions about the number of options that are expected to become exercisable. At the end of each reporting period, the Group
revises its estimates of the number of options that are expected to become exercisable. The employee benefits expense recognised
each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the
statement of comprehensive income as a component of profit or loss, with a corresponding adjustment to equity.
Sale of goods
3.17 Revenue
(a)
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable net of returns and allowances,
trade discounts, volume rebates and other customer incentives. Revenue is recognised when the significant risks and rewards of
ownership have been substantially transferred to the buyer, recovery of the consideration is probable, the associated costs and possible
return of goods can be estimated reliably, and there is no continuing management involvement with the goods.
Transfers of risks and rewards vary depending on the individual terms of the contract of sale.
Government grants
(b)
Government grants are recognised when there is reasonable assurance that they will be received and that the Group will comply with
the conditions associated with the grant. Grants that compensate the Group for an item which is to be expensed are recognised in the
statement of comprehensive income on a systematic basis in the same years in which the expenses are recognised or, for expenses
already incurred the grants are recognised in the year in which they become receivable. Grants that compensate the Group for the cost
of purchasing, constructing or otherwise acquiring a long-term asset are recognised as a reduction in the cost of that asset and included
in the statement of comprehensive income as a component of depreciation expense in accordance with the Group’s depreciation policy.
Dividend income
(c)
Dividend income is recognised when the right to receive payment is established.
lynas corporation limiteD ANNUAL REPORT 2012
71
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies continued
Royalties
(d)
Royalty revenue is recognised on an accruals basis in accordance with the substance of the relevant agreement (provided that it is
probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Royalties determined
on a time basis are recognised on a straight-line basis over the period of the agreement. Royalty arrangements that are based on
production, sales and other measures are recognised by reference to the underlying arrangement.
3.18 Lease payments
Minimum lease payments made under finance leases are apportioned between the finance charges and the reduction of the
outstanding liability. The finance charges which are recognised in the statement of comprehensive income as a component of the profit
or loss are allocated to each year during the lease term so as to produce a constant rate of interest on the remaining balance of the
liability. Contingent lease payments are accounted for in the years in which the payments are incurred.
Payments made under operating leases are recognised in the statement of comprehensive income as a component of the profit or loss
on a straight-line basis over the term of the lease, except where another systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed. Contingent lease payments arising under operating leases are recognised
as an expense in the year in which the payments are incurred.
In the event that lease incentives are received to enter into an operating lease, such incentives are deferred and recognised as a liability.
The aggregated benefits of the lease incentives are recognised as a reduction to the lease expenses on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
3.19 Financial income and expenses
Financial income comprises interest income, foreign currency gains and gains on derivative financial instruments in respect of financing
activities that are recognised in the statement of comprehensive income as a component of the profit or loss. Interest income is
recognised as it accrues using the effective interest method.
Financial expenses comprise interest expense, foreign currency losses, impairment losses recognised on financial assets (except for
trade receivables) and losses in respect of financing activities on derivative instruments that are recognised in the statement of
comprehensive income as a component of the profit or loss. All borrowing costs not qualifying for capitalisation are recognised in the
statement of comprehensive income as a component of the profit or loss using the effective interest method.
Income tax
Income tax
3.20
(a)
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of comprehensive income
as a component of the profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive
income, in which case it is recognised with the associated items on a net basis.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method of providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the carrying amounts for taxation purposes. Deferred tax is not recognised for
the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries
and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future and the Group is in a position to
control the timing of the reversal of the temporary differences. Deferred tax is measured at the tax rates that are expected to be applied
to the temporary differences when they reverse, based on the laws that have been enacted or substantially enacted at the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time the liability to pay the related
dividend is recognised. Deferred income tax assets and liabilities in the same jurisdiction are offset in the statement of financial position
only to the extent that there is a legally enforceable right to offset current tax assets and current tax liabilities and the deferred balances
relate to taxes levied by the same taxing authority and are expected either to be settled on a net basis or realised simultaneously.
Tax consolidation
(b)
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from July 1, 2002
and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Lynas Corporation
Limited. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the
members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group).
72
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies continued
Entities within the tax-consolidated group have entered into a tax sharing agreement with the Company. The tax sharing agreement
entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities
between the entities should the Company default on its tax payment obligations or if an entity should leave the tax-consolidated group.
The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax-consolidated group is limited to the
amount payable to the head entity under the tax funding arrangement.
3.21 Sales tax, value added tax and goods and services tax
All amounts (including cash flows) are shown exclusive of sales tax, value added tax (“VAT”) and goods and services tax (“GST”) to the
extent the taxes are reclaimable, except for receivables and payables that are stated inclusive of sales tax, VAT and GST.
3.22 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
The Group as lessor – finance leases
(a)
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases.
The Group as lessee – finance leases
(b)
Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. The corresponding liability to the lessor is included within loans and borrowings as a finance lease obligation.
Subsequent to initial recognition the liability is accounted for in accordance with the accounting policy described at note 3.3(f) and the
asset is accounted for in accordance with the accounting policy applicable to that asset.
Basic earnings per share
3.23 Earnings per share
(a)
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period,
adjusted for bonus elements in ordinary shares issued during the financial period.
Diluted earnings per share
(b)
Diluted earnings per share adjusts the amount used in the determination of the basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per
share from continuing operations.
3.24 Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operation that has been disposed of or is held for sale, or is a subsidiary or business acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for
sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is
re-presented as if the operation had been discontinued from the start of the comparative year.
3.25 Segment reporting
The Group’s operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed
by the Chief Operating Decision Makers (“CODM”) in order to allocate resources to the segment and to assess its performance.
3.26 Company entity financial information
The financial information for the Company entity as disclosed in note 34 has been prepared on the same basis as that applied by the
Group, except as set out below:
Investments in subsidiaries, associates and joint venture entities
(a)
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial information of the Company.
Dividends received from associates are recognised in the statement of comprehensive income as a component of profit or loss, rather
than being deducted from the carrying amount of these investments.
Effect of tax consolidation
(b)
Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the
tax-consolidated group, are accounted for by the Company rather than by the members of the tax-consolidated group themselves.
lynas corporation limiteD ANNUAL REPORT 2012
73
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies continued
Standards and Interpretations affecting amounts reported in the current period
3.27 New and revised standards and interpretations
(a)
The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had
any significant impact on the amounts reported in this financial report but may affect the accounting for future transactions
or arrangements.
new anD
reviseD stanDarD
Amendments to AASB 7
‘Financial Instruments:
Disclosure’
Amendments to AASB 101
‘Presentation of Financial
Statements’
requirements anD impact assessment
The amendments (part of AASB 2010-4 ‘Further Amendments to Australian Accounting Standards
arising from the Annual Improvements Project’) clarify the required level of disclosures about credit
risk and collateral held and provide relief from disclosures previously required regarding renegotiated
loans. The application of the amendment to AASB 7 has not had a material effect on the Company
or Group’s financial information as neither transact in instruments of this type.
The amendments (part of AASB 2010-4 ‘Further Amendments to Australian Accounting Standards
arising from the Annual Improvements Project’) clarify that an entity may choose to present the
required analysis of items of other comprehensive income either in the statement of changes in
equity or in the notes to the financial report. The application of the amendment to AASB 101 has
not had a material impact on the Company or Group’s financial information as the amendment
merely provides further choice in the disclosure options available for presentation purposes.
AASB 124 ‘Related Party
Disclosures’ (revised
December 2009)
AASB 124 (revised December 2009) has been revised on the following two aspects:
(a) AASB 124 (revised December 2009) has changed the definition of a related party and
(b) AASB 124 (revised December 2009) introduces a partial exemption from the disclosure
requirements for government-related entities.
AASB 2009-12
‘Amendments to Australian
Accounting Standards’
The application of the revision to AASB 124 has not had a material effect on the Company or
Group’s financial information as neither are government-related entities and the expanded
definition of related parties does not extend the current disclosure being undertaken.
The application of AASB 2009-12 makes amendments to AASB 8 ‘Operating Segments’ as a result
of the issuance of AASB 124 ‘Related Party Disclosures’ (2009). The amendment to AASB 8 requires
an entity to exercise judgement in assessing whether a government and entities known to be
under the control of that government are considered a single customer for the purposes of certain
operating segment disclosures. The Standard also makes numerous editorial amendments to a
range of Australian Accounting Standards and Interpretations. The application of the amendment
to AASB 2009-12 has not had a material effect on the Company or Group’s financial information as
neither are government-related entities
AASB 2010-6
‘Amendments to Australian
Accounting Standards’
The application of AASB 2010-6 makes amendments to AASB 7 ‘Financial Instruments –
Disclosures’ to introduce additional disclosure requirements for transactions involving transfer
of financial assets. These amendments are intended to provide greater transparency around risk
exposures when a financial asset is transferred and derecognised but the transferor retains some
level of continuing exposure in the asset.
The application of the amendment to AASB 2010-6 has not had a material effect on the Company
or Group’s financial information as neither have transacted in instruments of this type.
AASB 2009-14
‘Amendments to
Australian Interpretation –
Prepayments of a Minimum
Funding Requirement’
Interpretation 114 addresses when refunds or reductions in future contributions should be regarded
as available in accordance with paragraph 58 of AASB 119; how minimum funding requirements
might affect the availability of reductions in future contributions; and when minimum funding
requirements might give rise to a liability. The amendments now allow recognition of an asset in
the form of prepaid minimum funding contributions. The application of the amendment to AASB
2009-14 has not had a material effect on the Company or Group’s financial information as neither
operate a defined benefit plan.
74
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
3. summary of significant accounting policies continued
Standards and Interpretations in issue not yet adopted
(b)
At the date of authorisation of the financial report, the following Standards and Interpretations listed below were in issue but not yet effective.
stanDarD/interpretation
Interpretation 20 ‘Stripping Costs in the Production Phase of a Surface Mine’
and AASB 2011-12 ‘Amendments to Australian Accounting Standards arising
from Interpretation 20’
AASB 9 ‘Financial Instruments’, AASB 2009-11 ‘Amendments to Australian
Accounting Standards arising from AASB 9 and AASB 2010-7 ‘Amendments
to Australian Accounting Standards arising from AASB 9 (December 2010)’
effective for
the annual
reporting perioD
beginning on
expecteD to
be initially applieD
in the financial
year enDing
July 1, 2013
June 30, 2014
July 1, 2013
June 30, 2014
AASB 10 ‘Consolidated Financial Statements’
July 1, 2013
June 30, 2014
AASB 11 ‘Joint Arrangements’
July 1, 2013
June 30, 2014
AASB 12 ‘Disclosure of Interests in Other Entities’
July 1, 2013
June 30, 2014
AASB 127 ‘Separate Financial Statements’ (2011)
July 1, 2013
June 30, 2014
AASB 128 ‘Investments in Associates and Joint Ventures’ (2011)
July 1, 2013
June 30, 2014
AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to
Australian Accounting Standards arising from AASB 13’
July 1, 2013
June 30, 2014
AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 ‘Amendments
to Australian Accounting Standards arising from AASB 119 (2011)’
July 1, 2013
June 30, 2014
AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax:
Recovery of Underlying Assets’
July 1, 2012
June 30, 2013
AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove
Individual Key Management Personnel Disclosure Requirements’
July 1, 2013
June 30, 2014
AASB 2011-7 ‘Amendments to Australian Accounting Standards arising
from the Consolidation and Joint Arrangements Standards’
July 1, 2013
June 30, 2014
AASB 2011-9 ‘Amendments to Australian Accounting Standards – Presentation
of Items of Other Comprehensive Income’
July 1, 2012
June 30, 2013
The Directors anticipate that the above amendments and interpretations will not have a material impact on the financial report of
the Group in the year of initial application with the exception of AASB 9 Financial Instruments. Although the Group is yet to assess the
full implications of this new Standard, initial indications are that it may affect the Group’s accounting for its available for sale financial
assets, since the standard only permits the recognition of fair value gains and losses in other comprehensive income if they relate to
equity investments that are not held for trading. The Directors have not yet decided when to adopt AASB 9 Financial Instruments.
lynas corporation limiteD ANNUAL REPORT 2012
75
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
4. critical accounting estimates anD assumptions
In the process of applying the Group’s accounting policies management has made certain estimates and assumptions about the carrying
values of assets and liabilities, income and expenses and the disclosure of contingent assets and liabilities. Management has not made
any significant judgements apart from those involving estimations (as discussed further). The key assumptions concerning the future
and other key sources of uncertainty in respect of estimates at the reporting date that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial reporting period are as listed below.
Reserve estimates and mine life
4.1
Reserves are estimates of the amount of product that can be economically and legally extracted from the Group’s mining tenements.
In order to calculate reserves, estimates and assumptions are required to be formulated about a range of geological, technical and
economic factors including quantities, grades, production techniques, recovery rates, production costs, transportation costs, refining
costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size,
shape and depth of the ore bodies or field to be determined by analysing geological data such as drilling samples. This process may
require complex and difficult geological judgement and calculation to interpret the data.
As the economic assumptions used to estimate reserves change from period to period, and because additional geological data is
generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may
affect the Group’s financial results and financial position in a number of ways, including:
• asset carrying values may be affected due to changes in the estimated future cash flows; and
• depreciation and amortisation charges in the statement of comprehensive income may change as result of the change in the useful
economic lives of assets.
Impairment of assets
4.2
Assets are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Income taxes
4.3
The Group is subject to income taxes in multiple jurisdictions which require significant judgement to be exercised in determining the
Group’s provision for income taxes. There are a number of transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Current tax liabilities and assets are recognised at the amount expected to be paid
to or recovered from the taxation authorities.
4.4 Realisation of deferred tax assets
The Group assesses the recoverability of deferred tax assets with reference to estimates of future taxable income. To the extent that
actual taxable income differs from management’s estimate of future taxable income, the value of recognised deferred tax assets may
be affected. Deferred tax assets have been recognised to offset deferred tax liabilities to the extent that the deferred tax assets and
liabilities are expected to be realised in the same jurisdiction and reporting period. Deferred tax assets have also been recognised based
on management’s best estimate of the recoverability of these assets against future taxable income. Deferred income tax assets and
liabilities in the same jurisdiction are off-set in the statement of financial position only to the extent that there is a legally enforceable
right to off-set current tax assets and current tax liabilities and the deferred balances relate to taxes levied by the same taxing authority
and are expected either to be settled on a net basis or realised simultaneously.
Exploration, evaluation and development expenditure
4.5
The Group’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area
of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which
permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as
to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates
and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is
made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the statement of comprehensive income.
Development activities commence after project sanctioning by the appropriate level of management and the Board. Judgement is applied
by management in determining when a project is economically viable. In exercising this judgement, management is required to make certain
estimates and assumptions similar to those described above for capitalised exploration and evaluation expenditure. Any such estimates and
assumptions may change as new information becomes available. If, after having commenced the development activity, a judgement is made
that a development asset is impaired, the appropriate amount will be written off to the statement of comprehensive income.
4.6 Restoration and rehabilitation expenditure
The Group’s accounting policy for its restoration and rehabilitation closure provisions requires significant estimates and assumptions
such as: requirements of the relevant legal and regulatory framework; the magnitude of possible contamination; and the timing, extent
and costs of required closure and rehabilitation activity. These uncertainties may result in future actual expenditure differing from
the amounts currently provided. The provision recognised is periodically reviewed and updated based on the facts and circumstances
available at the time. Changes to the estimated future costs for operating sites are recognised in the statement of financial position
by adjusting both the closure and rehabilitation asset and the provision.
76
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
5. Determination of fair values
A number of the Group’s accounting policies and associated disclosures require the determination of fair values for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the
following methods. Where applicable, further information regarding the assumptions made in determining fair values is disclosed in
the notes specific to that asset or liability.
Trade and other receivables
5.1
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate
of interest at the reporting date. Given the short-term nature of trade receivables the carrying amount is a reasonable approximation
of fair value.
Investments in equity securities
5.2
The fair value of investments in listed equity securities is determined by reference to their quoted bid price at the reporting date.
5.3 Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available,
then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the
residual maturity of the contract using a risk-free interest rate (based on government bonds).
The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated
future cash flows based on the terms and maturity of each contract using market interest rates for a similar instrument at the
measurement date.
The fair value of commodity and other price derivatives is based on a valuation model. The valuation model (which includes where
relevant the consideration of credit risk) discounts the estimated future cash flows based on the terms and maturity of each contract
using forward curves and market interest rates at the reporting date.
5.4 Non-derivative financial liabilities
The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated by discounting the future
contractual cash flows at the current market interest rates that are available for similar financial instruments.
6. segment reporting
AASB 8 Operating Segments (“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 Makers (“CODM”) in order to allocate resources to the
segment and to assess its performance.
The Group’s CODM are the Board of Directors of the Company, the Chief Executive Officer, the Chief Financial Officer and the Chief
Operating Officer of the Group. Information reported to the Group’s CODM for the purposes of resource allocation and assessment of
performance currently focuses on the construction and development of the Group’s integrated rare earth extraction and process facilities.
The Group has only one reportable segment under AASB 8 being its Rare Earth Operations. The CODM do not review the business
activities of the Group based on geography.
The accounting policies applied by each segment are the same as the Group’s accounting policies. Results from operating activities
represent the profit earned by each segment without allocation of central administrative revenue and expenses, interest income and
expense and income tax benefit (expense).
The CODM assess the performance of the operating segments based on adjusted EBITDA. Adjusted EBITDA is defined as net profit
before income tax expense, net of financial expenses, depreciation and amortisation and adjusted to exclude certain significant
items, including but not limited to such items as employee remuneration settled through share-based payments, restructuring costs,
unrealised gains or losses on derivatives, gains or losses on the sale of non-strategic assets, asset impairments and write downs.
The composition of reportable segments has changed during the current year. As a result of this, the corresponding information
disclosed for the year ended June 30, 2011 has been revised.
lynas corporation limiteD ANNUAL REPORT 2012
77
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
6. segment reporting continued
in a$’000
business segment reporting
Expenses and other income
earnings before interest
and tax (“ebit”)
Financial income
Financial expenses
profit (loss) before income tax
Income tax benefit (expense)
profit (loss) for the year
ebit
Depreciation and amortisation
earnings before interest,
tax, depreciation and
amortisation (“ebitDa”)
Included in EBITDA:
Impairment charge
– property, plant and equipment
Impairment charge
– deferred exploration, evaluation
and development expenditure
Impairment charge – inventory
Non-cash employee
remuneration settled through
share-based payments
adjusted earnings before
interest, tax, depreciation and
amortisation (“adjusted ebitDa”)
for the year enDeD June 30, 2012
for the year enDeD June 30, 2011*
rare earth
operations
corporate/
unallocateD
total
continuing
operations
rare earth
operations
corporate/
unallocateD
total
continuing
operations
(69,932)
(20,120)
(90,052)
(29,084)
(28,822)
(57,906)
(69,932)
(20,120)
(90,052)
(29,084)
(28,822)
(57,906)
2,840
(10,667)
(97,879)
10,109
(87,770)
(90,052)
1,349
(88,703)
4,770
2,613
8,545
9,431
10,006
(9,388)
(57,288)
(1,798)
(59,086)
(57,906)
1,221
(56,685)
–
1,322
–
9,615
(63,344)
(45,748)
*
Information for the year ended June 30, 2011 has been revised to conform to the current period presentation.
78
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
7. auDitors remuneration
The following items of expenditure are included in general and administration expenses:
in $a
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Audit fees
Tax fees
Other fees
total auditor’s remuneration ernst & young (australia)
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
Other fees
total auditor’s remuneration ernst & young (other locations)
for the year enDeD June 30,
2012
2011
209,850
25,600
11,300
177,204
15,813
6,500
246,750
199,517
25,286
–
55,196
151,255
25,286
206,451
Other fees include accounting advice on the Mt Kellett convertible bond issue and change in functional currency of the Company.
Tax fees include reviews of transfer pricing positions and tax losses.
8. personnel expenses
The following items of expenditure are included in general and administration expenses:
in a$’000
Wages and salaries
Superannuation and pension contributions
Employee remuneration settled through share-based payments
Termination costs
Other
total personnel expenses
9. other expenses
in a$’000
Impairment loss - inventory
Impairment loss - property, plant and equipment
Impairment loss - deferred exploration, evaluation and development expenditure
total other expenses
for the year enDeD June 30,
2012
2011
26,254
1,327
9,431
256
791
16,814
943
9,615
230
1,368
38,059
28,970
for the year enDeD June 30,
2012
2011
8,545
4,770
2,613
15,928
–
–
1,322
1,322
lynas corporation limiteD ANNUAL REPORT 2012
79
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
10. financial income anD expenses
in a$’000
Interest income on cash and cash equivalents*
financial income
Interest expense on financial liabilities measured at amortised cost*
Mt Kellett convertible bonds
Amortisation of deferred transaction costs – Mt Kellett convertible bonds
Amortisation of Mt Kellett equity conversion option
Financing transaction costs and fees
Net foreign currency exchange loss
financial expenses
net financial income (expense)
*
Interest income (expense) are shown net of amounts capitalised in respect of qualifying assets.
11. income taxes
in a$’000
current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Deferred tax
Deferred tax expense recognised in the year
total income tax (benefit) expense relating to the continuing operations
11.1
Income tax recognised in the statement of comprehensive income
in a$’000
Profit (loss) before tax for continuing operations
Income tax (benefit) expense calculated at 30% (2011:30%)
Add (deduct):
Effect of expenses that are not deductible in determining taxable profit
Effect of unrealised foreign exchange gains and losses on USD assets and liabilities
Effect of unused tax losses and tax offsets not recognised as deferred tax assets
Effect of different tax rates of operations in foreign jurisdictions
Foreign tax paid on profits attributable to foreign permanent establishments
Other adjustments
Effect of (under) over provision in prior years
total current year income tax (benefit) expense
for the year enDeD June 30,
2012
2011
2,840
2,840
(974)
(35)
(2,881)
(4,526)
(2,251)
(10,667)
(7,827)
10,006
10,006
–
–
–
(755)
(8,633)
(9,388)
618
for the year enDeD June 30,
2012
2011
371
(383)
(12)
(10,097)
(10,097)
(10,109)
1,798
–
1,798
–
–
1,798
for the year enDeD June 30,
2012
2011
(97,879)
(57,288)
(29,364)
(17,186)
11,644
(5,376)
13,243
(57)
87
97
(383)
(10,109)
7,635
–
10,640
(360)
–
1,069
–
1,798
80
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
11. income taxes continued
11.2
Income tax recognised directly in equity
in a$’000
Deferred tax
Initial recognition of the equity component of Mt Kellett convertible bonds
Share issue costs
11.3
Income tax recognised directly in other comprehensive income
in a$’000
Deferred tax
Financial assets available for sale
11.4 Current tax assets and liabilities
in a$’000
current tax liabilities
Income tax payable
for the year enDeD June 30,
2012
2011
12,193
–
12,193
–
(2,365)
(2,365)
for the year enDeD June 30,
2012
2011
(2,096)
(2,096)
2,365
2,365
as at June 30,
2012
2011
(120)
(120)
–
–
12. DeferreD tax assets anD liabilities
12.1 Deferred tax balances
in a$’000
temporary differences
Deferred exploration, evaluation and development
expenditure
Property, plant and equipment
Financial assets available for sale
Borrowings
Share-based payments
Costs of equity and debt raisings
Other
unused tax losses and credits
Tax losses
balance at
July 1, 2011
recogniseD
in profit
or loss
recogniseD
in equity
recogniseD
in compre
-hensive
income
balance at
June 30, 2012
–
–
(2,365)
–
–
2,365
–
–
–
–
1,346
430
(102)
6,768
(2,820)
(623)
408
–
–
–
(12,230)
–
37
–
–
–
2,096
–
–
–
–
1,346
430
(371)
(5,462)
(2,820)
1,779
408
5,407
(12,193)
2,096
(4,690)
4,690
10,097
–
–
(12,193)
2,096
4,690
–
lynas corporation limiteD ANNUAL REPORT 2012
81
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
12. DeferreD tax assets anD liabilities continued
12.1 Deferred tax balances continued
in a$’000
temporary differences
Financial assets available for sale
Equity raising costs
balance at
July 1, 2010
recogniseD
in profit
or loss
recogniseD
in equity
recogniseD
in compre
-hensive
income
balance at
June 30, 2011
–
–
–
–
–
–
–
2,365
2,365
(2,365)
–
(2,365)
(2,365)
2,365
–
12.2 unrecognised deferred tax assets
in a$’000
Deductible unused tax losses for which no deferred tax assets
have been recognised are attributable to the following:
Tax losses – revenue in nature
Tax losses – capital in nature
as at June 30,
2012
2011
125,808
2,330
128,138
101,496
2,330
103,826
The Group’s deductible unused tax losses for which no deferred tax assets have been recognised relate to Malawi. At June 30, 2012 it
was not highly probable that the Group would have future taxable profits against which these unused tax losses can be utilised.
The Australian unused tax losses may be carried forward indefinitely subject to meeting certain statutory tests. The Malawian unused
tax losses may only be carried forward for six years subject to meeting certain statutory tests.
At June 30, 2012 a deferred tax asset of $4,690 thousand has been recognised in relation to unused tax losses in Australia on the basis
that the Group had sufficient net taxable temporary differences against which these unused tax losses can be utilised at that date.
13. other comprehensive income
Within the statement of comprehensive income the Group has disclosed certain items of other comprehensive income net of the
associated income tax expense or benefit. The pre-tax amount of each of these items and the associated tax effect is as follows:
for the year enDeD June 30,
2012
2011
in a$’000
pre-tax
tax effect
total
pre-tax
tax effect
total
Exchange differences on translating
foreign operations
Available for sale financial assets
(10,191)
(6,647)
total other comprehensive income
(16,838)
–
1,994
1,994
(10,191)
(4,653)
(50,560)
7,883
(14,844)
(42,677)
–
(2,365)
(2,365)
(50,560)
5,518
(45,042)
82
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
14. cash anD cash equivalents
in a$’000
Cash at bank and on hand
Short-term deposits
Restricted cash
total cash and cash equivalents
as at June 30,
2012
2011
26,040
98,337
81,061
205,438
37,810
160,601
235,545
433,956
Restricted cash represents funds provided under the Sojitz loan facility (refer to note 23) which is only available to fund capital
expenditure required for Phase 2 of the Rare Earths Project.
15. traDe anD other receivables
in a$’000
Other receivables
total current trade and other receivables
Other receivables represent interest receivable and operating prepayments.
16. inventories
in a$’000
Raw materials and consumables
Work in progress
total inventories
Current inventories
Non-current inventories
as at June 30,
2012
2011
2,470
2,470
5,748
5,748
as at June 30,
2012
2011
41,823
23,868
65,691
52,419
13,272
29,885
358
30,243
11,569
18,674
During the year ended June 30, 2012 the write-down of inventories to net realisable value relating to externally acquired raw materials
for the Malaysian operations totalled $8,545 thousand (2011: nil).
17. other financial assets
Non-current financial assets comprise the following investment in listed equity securities which is classified as available for sale:
in a$’000
listed equity securities
Northern Minerals Limited (ASX:NTU):
– at cost
– impact of mark-to-market movement (gross of tax)
as at June 30,
2012
2011
2,518
1,236
3,754
1,769
7,883
9,652
Northern Minerals Limited is a company listed on the Australian Securities Exchange. The fair value of the available for sale financial
asset is considered to be a Level 1 fair value as it is derived from quoted market selling prices.
lynas corporation limiteD ANNUAL REPORT 2012
83
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
18. other non-current assets
in a$’000
Security deposits – bank facilities, Malaysia
Security deposits – mining tenements, Mount Weld
as at June 30,
2012
2011
8,058
4,980
13,038
–
3,731
3,731
Security deposits relate both to cash provided for security bonds issued to secure the mining tenements at Mount Weld and a restricted
deposit pledged as collateral for bank facilities in Malaysia. The weighted average annual interest rate was 3.6% (2011: 3.5%).
19. property, plant anD equipment
in a$’000
as at June 30, 2012
Cost
Accumulated impairment losses
Accumulated depreciation
carrying amount
as at June 30, 2011
Cost
Accumulated depreciation
carrying amount
lease-
holD
lanD
builDings,
plant
anD
equipment
fixtures
anD
fittings
motor
vehicles
assets
unDer
constr-
uction
lease-
holD
improve-
ments
total
26,962
88,060
–
(1,105)
25,857
(845)
(6,036)
81,179
27,169
(839)
26,330
1,429
(96)
1,333
5,956
(28)
(2,187)
3,741
2,900
(1,478)
1,422
968
(161)
(202)
605
818
(92)
726
598,900
(3,736)
–
249
–
(192)
721,095
(4,770)
(9,722)
595,164
57
706,603
331,180
–
331,180
249
(170)
363,745
(2,675)
79
361,070
Cost at the beginning of the year
27,169
1,429
2,900
818
331,180
249
363,745
Accumulated depreciation and impairment
losses at the beginning of the year
(839)
(96)
(1,478)
Carrying amount at the
beginning of the year
Additions
Capitalisation of borrowing costs
Depreciation for the year
Impairment loss for the year
Transfers
26,330
–
–
(277)
–
–
Effect of movements in exchange rates
(196)
1,333
2,350
–
(5,935)
(845)
84,262
14
carrying amount at June 30, 2012
25,857
81,179
Cost at the beginning of the year
31,450
Accumulated depreciation
and impairment losses at the
beginning of the year
Carrying amount at the
beginning of the year
Additions
Depreciation for the year
Effect of movements in exchange rates
–
–
–
(652)
30,798
–
1,429
(292)
(4,176)
(87)
(9)
1,422
626
–
(755)
(28)
2,417
59
3,741
2,054
(1,133)
921
873
(369)
(3)
carrying amount at June 30, 2011
26,330
1,333
1,422
84
(92)
726
146
–
(111)
(161)
–
5
–
(170)
(2,675)
331,180
355,404
7,051
–
(3,736)
(86,679)
(8,056)
79
–
–
(22)
–
–
–
361,070
358,526
7,051
(7,100)
(4,770)
–
(8,174)
605
595,164
57
706,603
133
146,730
229
180,596
(31)
102
817
(62)
(131)
726
–
(149)
(1,965)
146,730
199,330
–
(14,880)
331,180
80
20
(21)
–
79
178,631
202,469
(831)
(19,199)
361,070
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
19. property, plant anD equipment continued
During the year ended June 30, 2012, the Group recognised an impairment loss of $1,211 thousand in relation to its property, plant and
equipment in Malawi (resulting from the previously reported court proceeding that arose during the period) and a $3,559 thousand
impairment loss in relation to property, plant and equipment at its Malaysian operation (which resulted from the identification of certain
assets being surplus or redundant to the current operational plan). These charges were recognised in the statement of comprehensive
income as a component of other expenses in the profit or loss (2011: $nil) and reduced the carrying value of these assets to nil.
The depreciation charge of $7,100 thousand for the year ended June 30, 2012 (2011: $831 thousand) is recognised in the statement
of comprehensive income as a component of the profit or loss within general and administration expenses (2012: $965 thousand and
2011: $831 thousand) and within the statement of financial position within inventory (2012: $6,135 thousand and 2011: 2011: $nil). On
the sale of inventory to customers the component of the depreciation expense capitalised within inventory is reflected in the cost of
goods sold in the statement of comprehensive income as a component of the profit or loss.
Depreciation during the year ended June 30, 2012 commenced for the Mount Weld operations from July 1, 2011, with the Malaysian
operations holding all assets as under construction pending the completion of the Lynas Advanced Materials Plant (“LAMP”).
Restrictions on the title of items of property, plant and equipment are outlined in note 23.
20. DeferreD exploration, evaluation
anD Development expenDiture
in a$’000
as at June 30, 2012
Cost
Accumulated impairment losses
Accumulated amortisation
carrying amount
as at June 30, 2011
Cost
Accumulated impairment losses
Accumulated amortisation
carrying amount
Cost at the beginning of the year
Accumulated amortisation and impairment
losses at the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
Impairment loss for the year
carrying amount at June 30, 2012
Cost at the beginning of the year
Accumulated amortisation and impairment
losses at the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
Impairment loss for the year
Movement in rehabilitation asset
carrying amount at June 30, 2011
exploration
anD
evaluation
expenDiture
Development
expenDiture
pre-
proDuction
stripping
total
45,012
(17,861)
(809)
20,394
(3,641)
–
4,078
–
–
16,753
4,078
26,342
20,540
(14,220)
(809)
5,511
20,430
(11,607)
(367)
8,456
20,394
(3,641)
–
16,753
20,430
20,394
(11,974)
8,456
111
(443)
(2,613)
5,511
(3,641)
16,753
–
–
–
16,753
17,331
20,021
(10,387)
6,944
3,099
(265)
(1,322)
–
8,456
(3,641)
16,380
–
–
–
373
16,753
4,078
–
–
4,078
4,078
–
4,078
–
–
–
4,078
4,078
–
4,078
–
–
–
–
44,902
(15,248)
(367)
29,287
44,902
(15,615)
29,287
111
(443)
(2,613)
26,342
41,430
(14,028)
27,402
3,099
(265)
(1,322)
373
4,078
29,287
lynas corporation limiteD ANNUAL REPORT 2012
85
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
20. DeferreD exploration, evaluation anD
Development expenDiture continued
During the year ended June 30, 2012, the Group recognised an impairment loss of $2,613 thousand in relation to its exploration and
evaluation expenditure in Malawi (resulting from the previously reported court proceeding that arose during the period). These charges
were recognised in the statement of comprehensive income as a component of other expenses in the profit or loss (2011: $1,322) and
reduced the carrying value of these assets to nil.
The amortisation charge of $443 thousand for the year ended June 30, 2012 (2011: $265 thousand) is recognised in the statement of
comprehensive income as a component of the profit or loss within general and administration expenses (2012: $260 thousand and
2011: $265 thousand) and within the statement of financial position within inventory (2012: $183 thousand and 2011: $nil). On the sale
of inventory to customers the component of the amortisation expense capitalised within inventory is reflected in the cost of goods sold
in the statement of comprehensive income as a component of the profit or loss. Restrictions on the title of the deferred exploration,
evaluation and development expenditure are outlined in note 23.
21. intangible assets
in a$’000
as at June 30, 2012
Cost
Accumulated amortisation
carrying amount
as at June 30, 2011
Cost
Accumulated amortisation
carrying amount
Cost at the beginning of the year
Accumulated amortisation and impairment losses at the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
carrying amount at June 30, 2012
Cost at the beginning of the year
Accumulated amortisation and impairment losses at the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
carrying amount at June 30, 2011
computer
software
883
(562)
321
758
(412)
346
758
(412)
346
125
(150)
321
602
(287)
315
156
(125)
346
The amortisation charge of $150 thousand for the year ended June 30, 2012 (2011: $125 thousand) is recognised in the statement
of comprehensive income as a component of the profit or loss within general and administration expenses (2012: $124 thousand and
2011: $125 thousand) and within the statement of financial position within inventory (2012: $26 thousand and 2011:$ nil). On the sale
of inventory to customers the component of amortisation capitalised within inventory is reflected in the cost of goods sold in the
statement of comprehensive income as a component of the profit or loss. Restrictions on the title of the intangible assets are outlined
in note 23.
86
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
22. traDe anD other payables
in a$’000
Trade payables
Accrued expenses
Other payables
total trade and other payables
Current
Non-current
as at June 30,
2012
2011
21,521
23,170
3,640
48,331
48,331
–
12,468
14,800
697
27,965
27,965
–
Trade and other payables are non-interest bearing and are normally settled on 30 day terms. Trade and other payables include amounts
in relation to Phase 1 of the Rare Earth Project (2012: $29,087 thousand) and Phase 2 of the Rare Earth Project (2012: $11,415 thousand).
23. borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information
about the Group’s exposure to interest rate and foreign currency risk, see note 27.
in a$’000
Sojitz loan facility
Mt Kellett convertible bonds
non-current borrowings
Sojitz loan facility
Transaction costs
carrying amount
Mt Kellett convertible bonds
Transaction costs
carrying amount
as at June 30,
2012
2011
221,479
181,583
403,062
221,479
–
221,479
182,045
(462)
181,583
212,364
–
212,364
212,364
–
212,364
–
–
–
Sojitz facility
The Sojitz loan facility for US$225,000 thousand was received from a Special Purpose Company (“SPC”) established by Sojitz
Corporation and Japan, Oil, Gas and Metals National Corporation (“JOGMEC”). The proceeds of the loan facility are only available to
fund capital expenditure required for Phase 2 of the Rare Earths Project, enabling the Company to increase planned production of REO
to 22,000 tonnes per annum from the expected Phase 1 run-rate production of 11,000 tonnes per annum. The facility was signed on
March 30, 2011, the funds were received as restricted cash on June 3, 2011 and the first withdrawal of funds occurred on July 19, 2011.
The facility is secured over all of the assets of the Group, other than the Malawi assets. Most of the Sojitz fixed securities are released
upon the Group achieving “Completion of Phase 1”, which occurs once there has been an average level of production over three
consecutive months of not less than 70% of the nameplate capacity of the LAMP. After the Group achieves Completion of Phase 1,
the securities retained by Sojitz comprise of a floating featherweight charge over the assets of the Company, charges over some bank
accounts related to the Sojitz loan facility and a charge over receivables from Japanese customers.
Interest on the principal accrues daily on the basis of the actual number of days based on a 360 day year and is payable quarterly.
The rate of interest for each interest period is the LIBOR published quarterly rate plus a margin of 2.75%. There is also a requirement
to pay withholding tax on this interest.
The principal must be repaid in five equal instalments with the first principal repayment scheduled on March 31, 2015, and the last
principal repayment scheduled on March 31, 2017. The principal can be prepaid in whole or in part at any time by giving 10 business
days’ prior written notice to Sojitz. If the prepayment is made on a day other than the last day of a quarterly interest period, a break
fee may be payable by the Company.
lynas corporation limiteD ANNUAL REPORT 2012
87
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
23. borrowings continued
The Sojitz loan facility agreement contains a number of financial covenants including, for example, covenants relating to the Group’s
debt service cover ratio (both forward-looking and backward-looking), loan life coverage ratio and gross debt to equity ratio. The
Company is required to report on compliance with these covenants on a semi-annual basis. A failure to comply with a covenant will
constitute a “Review Event”, which will impose certain restrictions on the Company. In addition, during the period in which a Review
Event subsists, the rate of interest payable by Lynas in respect of the loan facility increases to the LIBOR published quarterly rate plus
a margin of 5.25%.
The Sojitz loan facility agreement also contains customary covenants which restrict the Group from creating, or permitting to exist, any
security over its assets or disposing of any of its assets (other than defined “Permitted Encumbrances” and “Permitted Disposals”). Unless
a Review Event has occurred, the Company may incur an additional financial liability provided that such liability is unsecured and is either
subordinated to, or ranks pari passu with, the Sojitz loan. The Sojitz loan facility agreement also contains customary events of default,
including the “Completion of Phase 2” which requires the Group to meet certain production volumes and cash operating costs over a
three month period, by no later than the Project Sunset Date of January 19, 2014.
The obligations of the Company under the Sojitz loan facility are guaranteed by the subsidiaries other than Lynas Africa Holdings Pty Ltd
and Lynas Africa Limited. Any wholly-owned subsidiary that becomes a member of the Group is required to accede to the loan agreement.
Mt Kellett convertible bonds
On January 24, 2012, the Company executed binding documentation for a US$225,000 thousand unsecured convertible bonds issue
with Mt Kellett Capital Management (“Mt Kellett”), a US-based investment firm. The Company received the first tranche amount of
US$50,000 thousand on January 25, 2012 and it was agreed that the balance of the US$175,000 thousand convertible bonds would be
paid upon the satisfaction of certain conditions precedent. The parties subsequently agreed to increase the number of convertible bonds
to be issued as part of the second tranche subscription from 175,000 thousand to 225,000 thousand (“Tranche 2 Convertible Bonds”)
and for the first tranche of 50,000 thousand convertible bonds (“Tranche 1 Convertible Bonds”) to be redeemed early. The redemption
of the Tranche 1 Convertible Bonds and the issue of the Tranche 2 Convertible Bonds occurred simultaneously. The final payment of
US$175,000 thousand was received on February 28, 2012. None of the 225,000 thousand Tranche 2 Convertible Bonds had been
converted into shares as at the end of the financial year.
The convertible bond issue is being used to fund construction and commissioning of Phase 1 of the LAMP in Malaysia and for
operational expenses. Interest accrues daily on the basis of the actual number of days based on a 365-day year and is payable quarterly.
The rate of interest is 2.75% per annum. Each bond entitles the holder to convert to one share at an initial conversion price of $1.25 per
share. Conversion may occur at any time between July 25, 2012 and July 25, 2016.
A bondholder may, at any time following the occurrence of a defined “Redemption Event”, require the Company to redeem some or all
of the Convertible Bonds held by the bondholder. The Redemption Events include, for example, an insolvency event occurring in relation
to a Group Company, a Group Company ceasing (or threatening to cease) to carry on all or part of its business which is likely to be
materially adverse to the Group as a whole, and a change in control of any member of the Group.
If, at any time during the period between July 25, 2015 and July 25, 2016, the 30-day Volume Weighted Average Price (“VWAP”)
of the shares is equal to or exceeds 160% of the conversion price, the Company may give notice of its intention to redeem all of the
Convertible Bonds on issue by delivering a redemption notice to bondholders. The conversion price was subject to adjustment upon
the occurrence of a Reset Event. A “Reset Event” is: (a) the Temporary Operating License (“TOL”) not being obtained by the Group on
or before October 15, 2012; or (b) the announcement by the Malaysian government on or before October 15, 2012 of its decision to
refuse to grant the TOL.
Where the TOL was not obtained on or before October 15, 2012, the conversion price would have been the lower of: (a) $1.25; and
(b) 120% of the VWAP for the 30 trading days commencing on October 16, 2012. Where the Malaysian government communicates
its decision to the Group on or before October 15, 2012 to refuse to grant the TOL, the conversion price would have been the lower of:
(a) $1.25; and (b) 120% of the VWAP for the 30 trading days commencing on the date of such announcement. As stated in Note 37,
the TOL was received subsequent to June 30, 2012.
The Convertible Bonds are unsecured. The Mt Kellett Convertible Bond subscription documents contain customary covenants which
restrict the Group from incurring any financial liabilities or creating any security interests which in each case would rank senior to
or pari passu with the Convertible Bonds, subject to specified exceptions which include the Sojitz loan facility. Those restrictions are
released upon the Group achieving “Completion of Phase 1”, which occurs once there has been an average level of production over
six consecutive months of not less than 70% of the nameplate capacity of the LAMP. After the Group achieves Completion of Phase
1, the obligations of the Company and the Guarantors in respect of the Convertible Bonds must at all times rank at least pari passu
with all other present and future unsecured financial liabilities (other than the Sojitz loan facility).
On July 25, 2016, the Company must redeem all Convertible Bonds held by bondholders that have not otherwise been redeemed
or converted by paying the relevant redemption amount to each bondholder.
88
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
23. borrowings continued
The net proceeds received from the issue of the convertible bonds have been split between the financial liability element and an equity
component, representing the residual attributable to the option to convert the financial liability into equity of the Company, as follows:
in us$’000
Net proceeds of issue
Liability component at date of issue
equity component
224,510
(181,568)
42,942
The equity component of US$42,942 thousand (A$40,936 thousand) has been credited to reserves within equity.
The liability component is measured at amortised cost. The interest expense for the year ($974 thousand) is calculated by applying
an effective interest rate of 9.48% against the first tranche and 7.83% against the second tranche of the liability component. The
difference between the carrying amount at the date of issue ($173,501 thousand) and the amount reported in the statement of financial
position as at June 30, 2012 ($181,583 thousand) represents the effective interest rate less interest paid to that date.
Terms and debt repayment schedule
currency
nominal
interest
rate
year of
maturity
as at June 30,
as at June 30,
2012
face
value
(usD ‘000)
2012
carrying
amount
(auD ‘000)
2011
face
value
(usD ‘000)
2011
carrying
amount
(auD ‘000)
Sojitz loan facility
USD LIBOR + 2.75%
Mt Kellett convertible bonds
USD
2.75%
2017
2016
225,000
225,000
221,479
181,583
225,000
212,364
–
–
450,000
403,062
225,000
212,364
Nominal interest rates
as at June 30, 2012
as at June 30, 2011
base rate
margin
total rate
base rate
margin
total rate
Sojitz loan facility
Mt Kellett convertible bonds
0.57%
2.75%
2.75%
–
3.32%
2.75%
0.30%
–
2.75%
–
3.05%
–
24. employee benefits
in a$’000
Provision for annual leave
Provision for long service leave
total employee benefits
Current
Non-current
as at June 30,
2012
2011
1,382
430
1,812
1,382
430
997
335
1,332
997
335
The provision for employee benefits represents annual leave and long service leave entitlements accrued.
The liability for long service leave for which settlement can be deferred beyond 12 months from the balance date is measured as the
present value of expected future payments to be made in respect of services provided by employees. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
lynas corporation limiteD ANNUAL REPORT 2012
89
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
25. provisions
in a$’000
Balance at the beginning of the year
Provisions made during the year
Provision utilised during the year
Effect of discounting
balance at June 30, 2012
Current
Non-current
total provisions at June 30, 2012
Current
Non-current
total provisions at June 30, 2011
restoration
anD rehab
-ilitation
onerous
contracts
3,674
–
–
103
3,777
–
3,777
3,777
–
3,674
3,674
1,931
4,100
(2,970)
–
3,061
3,061
–
3,061
1,931
–
1,931
total
5,605
4,100
(2,970)
103
6,838
3,061
3,777
6,838
1,931
3,674
5,605
Restoration and Rehabilitation
The activities of the Group give rise to obligations for asset and site restoration and rehabilitation. The provision recognised in the
current year relates to site rehabilitation at Mount Weld and is measured at the expected value of future cash flows required to
rehabilitate the site, discounted to its present value. As a component of the finalisation of the construction of the Phase 1 capital project
in Malaysia, management is presently assessing the valuation of the associated restoration and rehabilitation provision which will be
recognised on receipt of the TOL and on the commencement of production.
Onerous contracts
The provision for onerous contracts represents the expected value of the “take or pay” obligations the Group is currently obliged to
make under non-cancellable supplier contracts.
26. equity anD reserves
26.1 Share capital
Balance at the beginning of the year
1,713,647
821,994
1,655,499
as at June 30,
2012
2011
number
of shares
a$’000
number
of shares
–
1,382
–
–
–
1,167
–
–
47,548
10,600
–
–
1,715,029
823,161
1,713,647
821,994
a$’000
719,857
98,355
3,268
(1,851)
2,365
Equity raising
Issue of shares pursuant to option conversion
Equity raising costs
Deferred tax on equity raising costs
balance at June 30
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as
declared from time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in
the event of a wind-up.
Further detail regarding the issue of shares on option conversion is provided in note 30.
90
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
26. equity anD reserves continued
26.2 Reserves
in a$’000
Equity settled employee benefits
Foreign currency translation
Investment revaluation
Other
balance at June 30
as at June 30,
2012
2011
33,993
(36,132)
865
28,743
27,469
24,562
(25,941)
5,518
–
4,139
The equity settled employee benefits reserve relates to share options granted by the Group to its employees under the employee share
option plan. Further information about share-based payments to employees is set out in note 30.
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional
currencies to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign
currency translation reserve.
The investment revaluation reserve represents the cumulative gains and losses arising on the revaluation of available for sale financial
assets that have been recognised in other comprehensive income (see note 17).
The other reserve represents the equity component of the 225,000 thousand unsecured Mt Kellett convertible bonds issued during the
year, net of tax (see note 23).
26.3 Earnings (loss) per share
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted loss per share are as follows:
Net loss attributed to ordinary shareholders (in A$’000)
loss used in calculating basic and diluted loss per share (in a’$000)
number of shares (‘000)
Weighted average number of ordinary shares used in calculating basic loss per share:
Diluted earnings per share:
The number of options which are potential ordinary shares that are not
dilutive and hence not used in the valuation of the diluted loss per share
The number of convertible bonds which are potential ordinary shares that
are not dilutive and hence not used in the valuation of the diluted earnings
per share – assuming 100% conversion at the inception date of the bonds.
adjusted weighted average number of ordinary shares used in calculating diluted loss per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
as at June 30,
2012
2011
(87,770)
(87,770)
(59,086)
(59,086)
1,714,094
1,668,999
83,029
82,129
171,594
1,714,094
(5.12)
(5.12)
–
1,668,999
(3.54)
(3.54)
26.4 Capital management
The Directors are responsible for monitoring and managing the Group’s capital structure.
The Directors’ policy is to maintain an acceptable capital base to promote the confidence of the Group’s financiers and creditors and
to sustain the future development of the business. The Directors monitor the Group’s financial position to ensure that it complies at
all times with its financial and other covenants as set out in its financing arrangements.
In order to maintain or adjust the capital structure, the Directors may elect to take a number of measures including, for example,
to dispose of assets or operating segments of the business, to alter its short to medium term plans in respect of capital projects
and working capital levels, or to re-balance the level of equity and external debt in place.
Capital comprises share capital, external debt and reserves.
lynas corporation limiteD ANNUAL REPORT 2012
91
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management
27.1 Overview
This note presents information about the Group’s exposure to market risk, credit risk and liquidity risk, and, where applicable,
the Group’s objectives, policies and procedures for managing these risks.
Exposure to market, credit and liquidity risks arise in the normal course of the Group’s business. The Directors and management
of the Group have overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Directors have established a treasury policy that identifies risks faced by the Group and sets out policies and procedures to
mitigate those risks. Monthly consolidated treasury reports are prepared for the Directors, who ensure compliance with the Group’s
risk management policies and procedures.
27.2 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices will affect the
Group’s cash flows or the fair value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters.
Foreign exchange risk
(a)
As a result of the Group’s international operations, foreign exchange risk exposures exist on purchases, assets and borrowings that
are denominated in foreign currencies (i.e. currencies other than the functional currency of each of the Group’s operating entities).
The currencies in which these transactions are primarily denominated are the AUD, USD and the Malaysian Ringgit (“MYR”).
The Group takes advantage of natural offsets to the extent possible. Therefore, when commercially feasible, the Group borrows in the
same currencies in which cash flows from operations are generated. Generally the Group does not use forward exchange contracts to
hedge residual foreign exchange risk arising from receipts and payments denominated in foreign currencies. However, when considered
appropriate the Group may enter into forward exchange contracts to hedge foreign exchange risk arising from specific transactions.
Exposure to foreign exchange risk
in a$’000
as at June 30, 2012
Cash and cash equivalents
Trade and other receivables
total exposure
in a$’000
as at June 30, 2011
Cash and cash equivalents
Loans and borrowings
Sojitz loan facility
total exposure
auD
usD
total
60,379
4,088
64,467
3,997
–
3,997
64,376
4,088
68,464
usD
auD
total
225,292
342
225,634
(212,364)
12,928
–
342
(212,364)
13,270
In addition to the above, the Group is exposed to foreign exchange risk on future sales and purchases that are denominated in foreign
currencies. It should be noted that during the year ended June 30, 2012 the Group altered the functional currency of the Company to
the USD, which resulted in a change in the Group’s currency exposure profile.
92
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management continued
Significant exchange rates
The following significant exchange rates applied during the period:
USD
MYR
average rate
for the year enDeD June 30,
closing rate
as at June 30,
2012
2011
2012
2011
1.0367
3.1968
0.9994
3.0663
1.0159
3.2431
1.0595
3.2184
Sensitivity analysis
A change in exchange rates would impact future payments and receipts on the Group’s assets and liabilities denominated in differing
currencies to each respective member of the Group’s functional currency. A 10% strengthening or weakening of these currencies against
the respective Group member’s functional currency, at the reporting date, would have increased (decreased) the reported profit or
loss for the period in the statement of comprehensive income, by the amounts shown. This analysis assumes that all other variables,
in particular interest rates, remain constant. The same basis has been applied for all periods presented.
In A$’000
USD
AUD
for the year enDeD
June 30, 2012
for the year enDeD
June 30, 2011
strengthening
weakening
strengthening
weakening
400
6,447
(400)
(6,447)
1,293
34
(1,293)
(34)
The Group’s primary exposure to foreign exchange risk is on the translation of net assets of Group entities which are denominated
in currencies other than AUD, which is the Group’s presentation currency. The impact of movements in exchange rates is therefore
recognised primarily in other comprehensive income.
Certain subsidiaries within the Group are exposed to foreign exchange risk on purchases denominated in currencies that are not the
functional currency of that subsidiary. In these circumstances, a change in exchange rates would impact the net operating profit
recognised in the profit or loss component of the Group’s statement of comprehensive income.
Effective from January 24, 2012, the functional currency of Lynas Corporation Limited (the Parent) changed from AUD to USD, following
the issue of the US$225,000 thousand Mt Kellett convertible bonds.
Interest rate risk
(b)
The Group’s interest rate risk arises from long-term borrowings at both fixed and floating rates and deposits which earn interest at
floating rates. Borrowings and deposits at floating rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates
expose the Group to fair value interest rate risk.
The Group’s primary exposure is to both floating and fixed interest rates on borrowings in Australia denominated in USD.
Interest rate risk on borrowings is partially offset by the Group as it has a component of its cash deposits in both floating and fixed rate accounts.
lynas corporation limiteD ANNUAL REPORT 2012
93
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management continued
The following table sets out the Group’s interest rate risk repricing profile:
total
6 months
or less
6 to 12
months
1 to 2
years
2 to 5
years
more than
5 years
in a$’000
as at June 30, 2012
fixed rate instruments
Loans and borrowings
Mt Kellett convertible bonds
total fixed rate instruments
(182,045)
(182,045)
–
–
floating rate instruments
Cash and cash equivalents
Loans and borrowings
Sojitz loan facility
total variable rate instruments
total
in a$’000
as at June 30, 2011
floating rate instruments
Cash and cash equivalents
Loans and borrowings
Sojitz loan facility
total variable rate instruments
total
205,438
205,438
(221,479)
(16,041)
(198,086)
(221,479)
(16,041)
(16,041)
–
–
–
–
–
–
–
–
–
–
–
–
(182,045)
(182,045)
–
–
–
(182,045)
–
–
–
–
–
–
total
6 months
or less
6 to 12
months
1 to 2
years
2 to 5
years
more than
5 years
433,956
433,956
(212,364)
(212,364)
221,592
221,592
221,592
221,592
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The Group’s sensitivity to interest rate risk can be expressed in two ways:
Fair value sensitivity analysis
A change in interest rates impacts the fair value of the Group’s fixed rate borrowings. Given all debt instruments are carried at amortised
cost, a change in interest rates would not impact the statement of comprehensive income as a component of the profit or loss.
Cash flow sensitivity analysis
A change in interest rates would have an impact on future interest payments and receipts on the Group’s floating rate assets and
liabilities. An increase or decrease in interest rates of 50 basis points at the reporting date would negatively or positively impact the
statement of financial position result by the amounts shown, based on the assets and liabilities held at the reporting date and a one
year time frame. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis for comparative periods.
in a$’000
50 basis point parallel increase in interest rates
50 basis point parallel decrease in interest rates
for the year enDeD 30 June
2012
2011
(80)
80
1,108
(1,108)
94
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management continued
Commodity and other price risk
(c)
Commodity and other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer or factors affecting all similar financial instruments traded in the market.
27.3 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and related entities.
The Group’s exposure to credit risk is primarily in its other receivables and is influenced mainly by the individual characteristics of each
customer. Demographically there are no concentrations of credit risk.
27.4 Liquidity risk
Liquidity risk is the risk that the Group will not meet its contractual obligations as they fall due. The Group’s approach to managing
liquidity risk is to ensure that it will always have sufficient liquidity to meet its liabilities as and when they fall due and comply with
covenants under both normal and stressed conditions.
The Group evaluates its liquidity requirements on an ongoing basis and ensures that it has sufficient cash on demand to meet expected
operating expenses including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that
cannot reasonably be predicted, such as natural disasters.
The following table sets out contractual cash flows for all financial liabilities including derivatives.
weighteD
average
effective
interest
rate
in a$’000
as at June 30, 2012
non-derivative financial liabilities
total
1 month
or less
1 to 3
months
3 months
to 1 year
1 to 5
years
more than
5 years
Trade and other payables
n/a
48,331
48,331
–
–
–
Loans and borrowings
Sojitz loan facility
Mt Kellett convertible bonds
total
as at June 30, 2011
non-derivative financial liabilities
Trade and other payables
Loans and borrowings
3.75%
(1)
252,555
260,913
561,799
643
713
49,687
1,287
1,425
2,712
8,559
6,413
242,066
252,362
14,972
494,428
n/a
27,965
27,965
–
–
–
–
–
–
–
–
Sojitz loan facility
3.32%
total
255,540
283,505
644
28,609
1,287
1,287
6,000
6,000
29,610
29,610
217,999
217,999
(1) The cash coupon on the instrument of 2.75% is payable on the $US225,000 thousand principal. The weighted average effective interest rate is
8.07% on the Mt Kellett convertible bonds. This rate is impacted by the unwinding of the equity component of the instrument which is recognised
as a component of the Group’s net financing expenses.
lynas corporation limiteD ANNUAL REPORT 2012
95
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management continued
27.5 Classification and fair values
in a$’000
as at June 30, 2012
assets
Cash and cash equivalents
Trade and other receivables
Investments
Other assets
total assets
liabilities
Trade and other payables
Tax payable
Loans and borrowings
Sojitz loan facility
Mt Kellett convertible bonds
Employee benefits
total liabilities
in a$’000
as at June 30, 2011
assets
Cash and cash equivalents
Trade and other receivables
Investments
Other assets
total assets
liabilities
Trade and other payables
Loans and borrowings
Sojitz loan facility
Employee benefits
total liabilities
fair value
through
the profit
anD loss
available
for sale
cash,
loans anD
receivables
other
liabilities
total
carrying
amount
total
fair value
–
–
–
–
–
–
–
–
–
–
–
–
–
3,754
–
205,438
2,470
–
13,038
3,754
220,946
–
–
–
–
–
205,438
205,438
2,470
3,754
13,038
2,470
3,754
13,038
224,700
224,700
–
–
–
–
–
–
–
–
–
–
–
–
(48,331)
(120)
(48,331)
(120)
(48,331)
(120)
(221,479)
(181,583)
(1,812)
(221,479)
(181,583)
(1,812)
(221,479)
(181,583)
(1,812)
(453,325)
(453,325)
(453,325)
fair value
through
the profit
anD loss
available
for sale
cash,
loans anD
receivables
other
liabilities
total
carrying
amount
total
fair value
–
–
–
–
–
–
–
–
–
–
–
9,652
–
433,956
5,748
–
3,731
9,652
443,435
–
–
–
–
–
433,956
433,956
5,748
9,652
3,731
5,748
9,652
3,731
453,087
453,087
–
–
–
–
–
–
–
–
(27,965)
(27,965)
(27,965)
(212,364)
(212,364)
(212,364)
(1,332)
(1,332)
(1,332)
(241,661)
(241,661)
(241,661)
The methods used in determining fair values of financial instruments are discussed in note 5.
96
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
27. financial risk management continued
27.6 Fair value measurements recognised in the statement of comprehensive income
The following table sets out an analysis of the Group’s financial instruments that are measured subsequent to initial recognition at fair
value grouped into levels based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
in a$’000
level 1
level 2
level 3
total
as at June 30, 2012
available for sale financial assets
Listed shares
total
in a$’000
at as June 30, 2011
available for sale financial assets
Listed shares
total
28. relateD parties
3,754
3,754
–
–
–
–
3,754
3,754
level 1
level 2
level 3
total
9,652
9,652
–
–
–
–
9,652
9,652
Key management personnel compensation
The aggregate compensation made to the Directors and other members of KMP of the Group is set out below:
in a$
Short-term employee benefits
Other long-term benefits
Share-based payments
total compensation paid to key management personnel
for the year enDeD 30 June
2012
2011
3,984,094
3,558,316
376,546
589,145
7,403,530
7,650,076
11,764,170
11,797,537
The compensation of each member of the KMP of the Group for the current and prior year is set out within the Remuneration Report.
lynas corporation limiteD ANNUAL REPORT 2012
97
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
28. relateD parties continued
Transactions with key management personnel
Key management personnel equity holdings
The following tables outline the fully paid ordinary shares of the Group held by the Directors and other members of KMP during the
2012 and 2011 financial years.
June 30, 2012
A. Arnold
G. Barr
N. Curtis
D. Davidson
W. Forde
J. Klein
E. Noyrez
Z. Switkowski
L. Catanzaro(1)
K. Conlon(2)
J.G. Taylor(3)
M. James(5)
total
balance at
July 1
receiveD on
exercise of
options
net other
change
balance at
June 30
1,000
2,828
16,045,758
700,828
1,001,656
2,082,236
–
400,828
–
–
71,973
1,151,058
21,458,165
–
–
–
–
–
–
–
–
–
–
–
–
–
2,000
–
–
–
–
–
–
3,000
2,828
16,045,758
700,828
1,001,656
2,082,236
–
300,000
700,828
–
18,154
(71,973)(4)
(1,151,058)(6)
–
18,154
–
–
(902,877)
20,555,288
(1) Appointed December 12, 2011.
(2) Appointed November 1, 2011. Shares in Company held by spouse.
(3) Ceased as a member of the KMP on December 12, 2011.
(4) During the period J.G. Taylor ceased being a member of the KMP. All fully paid ordinary shares on issue at this time ceased being reported from this
date for the purpose of this disclosure.
(5) Ceased as a member of the KMP on August 31, 2011.
(6) During the period M. James ceased being a member of the KMP. All fully paid ordinary shares on issue at this time ceased being reported from this
date for the purpose of this disclosure.
balance at
July 1
receiveD on
exercise of
options
net other
change
balance at
June 30
1,000
2,000
23,045,758
935,000
1,000,000
2,080,580
–
–
49,836
–
–
–
–
–
–
–
–
–
–
828
1,000
2,828
(7,000,000)
16,045,758
(234,172)
700,828
1,656
1,656
–
400,828
22,137
1,001,656
2,082,236
–
400,828
71,973
599,000
1,000,000
(447,942)
1,151,058
27,713,174
1,000,000
(7,255,009)
(21,458,165)
June 30, 2011
A. Arnold
G. Barr
N. Curtis
D. Davidson
W. Forde
J. Klein
E. Noyrez
Z. Switkowski
J.G. Taylor
M. James
total
98
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
28. relateD parties continued
Key management personnel share options
The following tables outline the options and performance rights issued for the benefit of Directors and the KMP during the 2012 and
2011 financial years and those options which have vested at each respective year-end.
balance at
beginning
of perioD
granteD
grant Date
options
exerciseD/
cancelleD/
other(1)
options
expireD
without
exercise
net
change
balance
at enD of
perioD
amount
vesteD at
June 30,
2012
–
5,900,000
850,000
–
–
September 23, 2011
September 23, 2011
December 12, 2011
935,000
1,210,000
2,000,000
–
31,000,000 4,000,000 November 30, 2011(6)
3,100,000
–
4,000,000
–
–
3,100,000
8,000,000 2,000,000
–
1,020,000
–
65,700,000 11,165,000
–
2,500,000
7,250,000
September 23, 2011
September 23, 2011
–
–
–
–
–
–
–
–
–
–
6,835,000 2,000,000
935,000
–
450,000
2,060,000
1,210,000
–
–
2,000,000 2,000,000
–
–
–
–
– (5,000,000) (1,000,000) 30,000,000 5,000,000
–
–
800,000
3,100,000
–
1,100,000
– 4,000,000
–
–
800,000
3,100,000
–
–
–
–
2,000,000 10,000,000
–
–
–
–
–
–
–
–
(3,520,000)
–
– (2,500,000)
–
–
(7,250,000)
(5,250,000) (2,000,000)
(8,770,000) (7,000,000) (4,605,000) 61,095,000 10,150,000
June 30, 2012
A. Arnold
G. Barr
L. Catanzaro(2)
K. Conlon(3)
N. Curtis
D. Davidson
W. Forde
J. Klein
E. Noyrez
Z. Switkowski
J.G. Taylor(4)
M. James(5)
total
(1) Other represents the derecognition of options and performance rights associated with individuals no longer members of the KMP or who have
resigned their employment with the Group.
(2) Appointed December 12, 2011.
(3) Appointed November 1, 2011.
(4) Ceased as a member of the KMP on December 12, 2011, all options on issue at this time ceased being reported from this date for the purpose
of this disclosure.
(5) Resigned August 31, 2011, all options on issue at this time ceased being reported from this date for the purpose of this disclosure.
(6) The options issued to N.Curtis were initially approved by the Board on September 23, 2011 and then subsequently approved by the shareholders
of the Company at the AGM on November 30, 2011.
balance at
beginning
of perioD
granteD
grant Date
options
exerciseD/
cancelleD/
other(1)
options
expireD
without
exercise
net
change
balance
at enD of
perioD
amount
vesteD at
June 30,
2011
4,400,000
650,000
1,500,000
200,000
August 19, 2010
August 19, 2010
–
–
–
–
1,500,000
200,000
5,900,000
850,000
–
200,000
700,000
2,500,000
August 19, 2010
(3,200,000)
27,000,000 9,000,000 November 24, 2010 (5,000,000)
–
1,200,000 November 24, 2010
–
1,500,000 November 24, 2010
(1,000,000)
–
–
–
–
(9,200,000)
1,900,000
2,500,000
6,250,000 2,000,000
1,900,000
5,000,000 3,000,000
–
1,500,000
1,200,000 November 24, 2010
51,300,000 23,600,000
–
1,000,000
August 19, 2010
August 19, 2010
August 19, 2010
–
–
(700,000)
–
–
– 4,000,000 31,000,000 5,000,000
–
–
1,200,000
3,100,000
–
–
1,500,000 4,000,000
7,250,000 2,000,000
–
1,000,000
–
3,100,000
–
1,200,000
–
3,000,000 8,000,000
–
–
–
–
–
–
2,500,000
– 14,400,000 65,700,000 7,200,000
–
1,500,000
June 30, 2011
A. Arnold
G. Barr
J. Brien(2)
N. Curtis
D. Davidson
W. Forde
M. James
J. Klein
E. Noyrez
Z. Switkowski
J.G.Taylor
total
(1) Other represents the derecognition of options and performance rights associated with individuals no longer members of the KMP or who have
resigned their employment with the Group.
(2) Resigned April 4, 2011.
lynas corporation limiteD ANNUAL REPORT 2012
99
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
28. relateD parties continued
All share options and performance rights issued to KMP were made in accordance with the provisions of the employee share option
plan. Further details of the employee share option plan and of the share options granted during the 2012 and 2011 financial years are
contained in note 30.
Other than those noted above, there were no transactions entered into by the Group with the KMP during the 2012 and 2011 financial years.
Other related party transactions
Lynas Corporation Limited is the ultimate controlling party of the Group. Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
29. group entities
ownership interest
as at June 30,
name of group entity
principal activity
country of
incorporation
2012
2011
Lynas Malaysia Sdn Bdh
Development of advanced
material processing plant
Lynas Services Pty Ltd*
Provision of corporate services
Mount Weld Holdings Pty Ltd*
Holding company
Mount Weld Mining Pty Ltd*
Development of mining areas of interest
and operation of concentration plant
Mount Weld Rare Earths Pty Ltd*
Dormant
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Mineral exploration
Malaysia
Australia
Australia
Australia
Australia
Australia
Malawi
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
Entity has entered into a deed of cross guarantee with Lynas Corporation Limited pursuant to ASIC Class Order 98/1418 and is relieved from the
requirement to prepare and lodge an audited financial report, as discussed in note 33. Entity is also a member of the tax-consolidated group.
30. employee share option plan
An employee share option plan has been established whereby the Company may, at the discretion of Directors, grant options over the
ordinary shares of the Group for the benefit of Directors, Executives and certain employees of the Group. The options issued for nil
consideration are granted in accordance with performance guidelines established by the Nomination and Remuneration Committee.
Each option is convertible into one ordinary share of the Company during the two years following the vesting date, which is the third
anniversary of the grant date. The exercise price is the volume weighted average market price for the five days preceding the date the
option is granted. The options hold no voting or dividend rights and are not transferable.
Options and Performance Rights are provided to KMP and other selected employees to provide greater alignment to our strategic
business objectives. They have three year vesting periods, and are exercisable between three and five years after they were granted
provided the employee is still employed with the Group (unless this requirement, in limited circumstances, is waived by the Board),
and any relevant performance conditions are achieved.
100
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
30. employee share option plan continued
The following table summarises the performance conditions attached to Options and Performance Rights issued during the financial
year ended June 30, 2012 and to be issued during June 30, 2013 (in addition to the requirement that the employee is still employed
by the Group at the end of a three year vesting period):
vesting scheDule
for grants maDe in fy2012
for grants to be maDe in fy2013
tsr hurdle
(performance against
asx 100 companies)
(50%)
50% of the TSR portion will vest for:
50th percentile performance
51st percentile performance
100% of the TSR portion will vest for:
75th percentile performance
76th percentile performance
Pro-rata vesting will occur between each of the above points
reo capacity hurdle
n/a
(50%)
Lynas Kuantan plant must
have demonstrated capacity
to produce 22,000 tonnes per
annum of REO over at least a
four week period during last
calendar quarter of 2013
Lynas Kuantan plant must
have demonstrated capacity
to produce at a rate equivalent
to 22,000 tonnes per annum
of REO before the end of
calendar year 2013
The Board considered that having the Lynas Kuantan plant demonstrate the capacity to produce 22,000 tonnes per annum of REO is
currently the most important measure of long-term success for the Group. The reference to “before the end of calendar year 2013” was
considered by the Board to be appropriate in light of the regulatory delays in Malaysia which have delayed the commissioning of Phase 1
of the Lynas Kuantan plant.
During the year, the Board approved a change to the Group’s employee option plan and employee performance rights plan. From April 2012
onwards, any options or performance rights will not automatically vest during a takeover bid period. Options and performance rights will
automatically vest if a change of control actually occurs in respect of the Company, unless the Board in its discretion resolves otherwise.
In accordance with the Group’s policy that governs trading of the Company’s shares by Directors and employees, Directors and
employees are not permitted to hedge their options or performance rights before the options vest.
lynas corporation limiteD ANNUAL REPORT 2012
101
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
30. employee share option plan continued
The following table lists any options and performance rights which are still to vest, or have yet to expire.
series grant Date
number
Date vesteD
anD exercisable
expiry Date
exercise
price
value per
option at
grant Date
a August 20, 2007
b March 19, 2008
50,000
August 24, 2010
August 24, 2012
500,000
December 31, 2010
December 31, 2012
c July 21, 2008
1,000,000
July 21, 2011
July 21, 2013
D September 24, 2008
14,200,000
September 24, 2011
September 24, 2013
e
f
September 24, 2008
2,700,000
September 24, 2011
September 24, 2013
January 5, 2009
1,100,000
January 5, 2012
January 5, 2014
g July 10, 2009
200,000
September 24, 2011
September 24, 2013
h October 8, 2009
24,500,000
October 8, 2012
October 8, 2014
i
J
July 1, 2010
1,000,000
July 1, 2013
August 19, 2010
10,500,000
August 19, 2013
k August 19, 2010*
1,608,618
August 19, 2013
l October 1, 2010
1,000,000
October 1, 2013
m August 19, 2010
12,900,000
August 19, 2013
July 1, 2015
August 19, 2015
August 19, 2015
October 1, 2015
August 19, 2015
n May 18, 2011
o June 6, 2011*
200,000
October 1, 2011
December 31, 2015
420,000
June 6, 2014
June 6, 2016
p November 30, 2011
4,000,000
September 22, 2014(1)
September 22, 2016
q September 23, 2011
4,145,000
September 22, 2014
September 22, 2016
r September 22, 2011*
30,232
September 22, 2012
September 22, 2014
s
t
September 22, 2011*
September 22, 2011*
20,245
10,323
September 22, 2013
September 22, 2015
September 22, 2014
September 22, 2016
u September 22, 2011*
945,000
September 22, 2014
September 22, 2016
v December 12, 2011
2,000,000
December 12, 2014
December 12, 2016
total
83,029,418
$ 0.81
$ 1.06
$ 0.98
$ 0.66
$ 0.81
$ 0.16
$ 0.66
$ 0.66
$ 0.66
$ 1.15
$ 0.00
$ 1.60
$ 1.15
$ 2.36
$ 0.00
$ 1.69
$ 1.69
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 1.57
$ 0.49
$ 0.53
$ 0.52
$ 0.33
$ 0.34
$ 0.16
$ 0.08
$ 0.23
$ 0.24
$ 0.34
$ 0.96
$ 0.48
$ 0.66
$ 1.12
$ 2.30
$ 0.40
$ 0.55
$ 1.41
$ 1.41
$ 1.41
$ 1.34
$ 0.51
(1) The options issued to N.Curtis were initially approved by the Board on September 23, 2011 and then subsequently approved by the shareholders of
the Company at the AGM on November 30, 2011.
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
Fair value of share options granted in the year
The weighted average fair value of the share options granted during the financial year is $1,041,084 (2011:$2,353,401). Options were
priced using a Black Scholes Merton methodology. Where relevant the expected life used in the model has been adjusted based on
management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market
conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility
over the past three years and peer volatility.
102
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
30. employee share option plan continued
Inputs into the model
Grant date share price ($)
Exercise price ($)
Expected volatility
Option life
Dividend yield
Risk-free interest rate
Movements in share options during the year
Balance at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
balance at end of year
Exercisable at end of year
Share options exercised during the year
The following share options were exercised during year:
option
series p
option
series q
option
series v
performance
rights
series r-u
1.22
1.69
50%
5 years
Nil
4.75%
1.06
1.69
50%
5 years
Nil
4.75%
1.36
1.57
50%
5 years
Nil
4.75%
1.11
0.00
50%
5 years
Nil
4.75%
for the year enDeD June 30, 2012
for the year enDeD June 30, 2011
number of
options
(‘000)
weighteD
average
exercise
price ($)
number of
options
(‘000)
weighteD
average
exercise
price ($)
82,329
12,170
(1,320)
(1,382)
(8,768)
83,029
19,850
0.84
1.53
1.31
0.89
1.00
0.92
0.70
65,000
27,929
–
(10,600)
–
82,329
10,500
0.66
1.07
–
0.45
–
0.84
1.01
exercise Date
August 12, 2011
February 13, 2012
February 7, 2012
February 8, 2012
February 16, 2012
March 13, 2012
May 4, 2012
May 4, 2012
May 16, 2012
June 25, 2012
number
exerciseD
share price
at exercise
Date ($)
exercise
price ($)
200,000
50,000
350,000
100,000
50,000
100,000
50,000
50,000
250,000
182,218
1,382,218
1.74
1.39
1.22
1.22
1.22
1.10
1.07
1.07
0.92
0.91
1.09
1.01
0.66
0.91
0.64
0.66
1.01
1.01
1.01
1.01
Share options outstanding at the end of the year
The share options outstanding at the end of the year had a weighted average exercise price of $0.92 and a weighted average remaining
contractual life of 943 days.
lynas corporation limiteD ANNUAL REPORT 2012
103
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
31. operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
in a$’000
Less than one year
Between one and five years
More than five years
total
as at June 30,
2012
2011
4,698
8,133
–
2,967
5,301
4,301
12,831
12,569
During the year ended June 30, 2012 $3,910 thousand was recognised as an expense in the statement of comprehensive income
as a component of the profit or loss in respect of operating leases (2011: $2,026 thousand).
The Group has contracts for several operating leases for business premises located in Sydney, Perth, Laverton, Beijing and Gebeng.
The Group also has several operating leases for motor vehicles and mobile plant and equipment.
32. capital commitments
There were no outstanding commitments, which are not disclosed in the consolidated financial report of the Group as at June 30, 2012
other than:
Exploration commitments
in a$’000
Less than one year
Between one and five years
More than five years
total
as at June 30,
2012
2011
270
1,034
3,076
4,380
407
1,385
1,692
3,484
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Department of
Mines and Petroleum attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when
application for a mining licence is made. These are necessary in order to maintain the tenements in which the Group and other parties
are involved. All parties are committed to meet the conditions under which the tenements were granted in accordance with the relevant
mining legislation.
Capital commitments
in a$’000
Less than one year
total
as at June 30,
2012
2011
68,021
68,021
92,714
92,714
The Group has issued contracts and orders for the procurement of equipment and services in relation to the development of the
Concentration Plant at Mount Weld and the LAMP in Malaysia. At June 30, 2012 the uncommitted expenditure totalled $10,521
thousand (2011: $73,900 thousand).
104
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
33. DeeD of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated August 13, 1998, the wholly-owned Australian subsidiaries of Lynas
Corporation Limited are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial
reports, and Directors’ report.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect
of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001. If a winding up event occurs under any other provision of the Act,
the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also
given similar guarantees in the event that the Company is wound-up.
The subsidiaries in addition to the Company subject to the deed are specified in note 29.
A statement of comprehensive income and statement of financial position, comprising the Company and controlled entities which
are party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee is presented as follows.
Statement of financial position
in a$’000
assets
Cash and cash equivalents
Trade and other receivables
Inventories
total current assets
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Intangible assets
Available for sale financial assets
Investments in subsidiaries
Other assets
Impairment of intercompany balances
total non-current assets
total assets
liabilities
Trade and other payables
Employee benefits
total current liabilities
Provisions
Employee benefits
Borrowings
total non-current liabilities
total liabilities
net assets
equity
Share capital
Retained earnings (accumulated deficit)
Reserves
total equity
as at June 30,
2012
2011
181,221
2,086
31,882
348,444
2,154
5,110
215,189
355,708
13,272
98,270
26,342
261
3,754
375,080
365,341
–
882,320
1,097,509
(8,000)
(1,337)
(9,337)
(3,777)
(414)
18,674
87,904
23,855
346
9,652
375,080
67,799
(125,432)
457,878
813,586
(15,424)
(985)
(16,409)
(3,649)
(325)
(403,062)
(212,364)
(407,253)
(216,338)
(416,590)
(232,747)
680,919
580,839
823,161
(210,387)
68,145
821,994
(271,236)
30,081
680,919
580,839
lynas corporation limiteD ANNUAL REPORT 2012
105
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
33. DeeD of cross guarantee continued
Statement of comprehensive income
in a$’000
Other income
Reversal of impairment (impairment) of intercompany balances
General and administration expenses
Other expenses
profit (loss) from operating activities
Financial income
Financial expenses
net financial income (expenses)
profit (loss) before income tax
Income tax benefit (expense)
profit (loss) for the year from continuing operations
other comprehensive income, net of income tax
Exchange differences on translating foreign operations
Gain on available for sale financial assets
total other comprehensive profit (loss) for the year, net of income tax
for the year enDeD June 30,
2012
2011
11,222
125,432
(60,232)
–
76,422
4,073
(30,040)
(25,967)
50,455
10,394
60,849
4,858
(4,653)
205
–
(125,432)
(47,654)
(1,322)
(174,408)
5,517
(9,185)
(3,668)
(178,076)
–
(178,076)
–
5,518
5,518
total comprehensive income (loss) for the year
61,054
(172,558)
34. company entity information
in a$’000
Current assets
total assets
Current liabilities
total liabilities
net assets
Share capital
Retained earnings (accumulated deficit)
Reserves
total shareholders’ equity
in a$’000
Profit (loss) of the Company
Total comprehensive income (loss) of the Company
106
as at June 30,
2012
2011
179,800
1,192,163
(2,927)
345,533
839,476
–
(419,815)
(212,364)
772,348
627,112
823,161
821,994
(143,074)
(224,963)
92,261
772,348
30,081
627,112
for the year enDeD June 30,
2012
2011
81,889
82,094
(138,335)
(132,817)
notes to the financial statements
FOR ThE yEAR ENDED JuNE 30, 2012
35. contingencies
Litigation and legal proceedings
As result of its operations the Group has certain contingent liabilities related to certain litigation and legal proceedings. The Group
has determined that the possibility of a material outflow related to these contingent liabilities is remote.
Security and guarantee arrangements
Certain members of the Group have entered into guarantee and security arrangements in respect of the Group’s indebtedness
as described in note 23.
36. revision/reclassification of comparative information
During the year, the Group elected to make certain changes to the presentation of its financial information that has resulted in revisions
to the comparative information previously presented. The material revisions in re-presenting the comparative information are as follows:
• tenements rights previously included as a component of other assets are now presented as a component of deferred exploration,
evaluation and development expenditure; and
• the composition of reportable segments has changed during the year. As a result of this, the corresponding information disclosed for
the year ended June 30, 2011 has been revised.
37. subsequent events
On September 5, 2012 the Group received confirmation from the AELB in Malaysia that the TOL for the Kuantan facility had been
finalised and granted. As a result of the receipt of the TOL the Group commenced its ramp-up of operations.
On September 21, 2012 the Group announced an upgrade to the Mount Weld Ore Reserves based on a mining study that re-optimised
the pit design using the updated Mineral Resources estimate that was announced to the ASX on 18 January 2012. The revised Ore
Reserves at the Central Lanthanide Deposit (CLD), applying cut-off grades ranging from 4 to 7% depending on the type of ore, are
estimated at 9.7 million tonnes at an average grade of 11.7% REO for a total of 1.14 million tonnes of contained REO. The Ore Reserves
estimate for the CLD is 362% higher compared with the 2005 Feasibility Study and the contained REO in the Ore Reserves is 260%
higher than the 2005 estimate.
Given the delay in the receipt of the TOL, as at September 30, 2012, the Group anticipates it would not have met certain requirements
in the Sojitz loan facility, which related to the year ended June 30, 2012. Therefore, on September 25, 2012 the Group entered into an
Amendment Deed (the “Deed”) with respect to the Sojitz loan facility. Under the terms of the Deed and as a result of the delays in first
production at the LAMP, the parties have agreed to postpone the measurement of certain financial covenant tests until nine months
after Completion of Phase 1 (as defined under the Sojitz loan facility). As a result of entering into the Deed, the Group has agreed that
certain restrictions will apply until nine months after Completion of Phase 1. Those temporary restrictions relate to capital and dividend
returns to shareholders, limitations on the incurrence of new indebtedness (capped at US$80,000 thousand) and a temporary higher
interest rate of LIBOR as published quarterly plus a margin of 5.25%.
As announced on September 25, 2012 the Kuantan High Court has issued an interim order maintaining the status quo in respect of the
TOL that has previously been issued for the LAMP and pending a hearing that is scheduled for October 4, 2012.
With the exception of the above, there have been no other events subsequent to June 30, 2012 that would require accrual or disclosure
in the financial report.
lynas corporation limiteD ANNUAL REPORT 2012
107
asX aDDitional information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report. The information
is current as at September 6, 2012.
(a) Distribution of ordinary shares
The number of shareholders, by size of holding, of ordinary shares is:
number of holDers
number of shares
5,411
12,498
6,872
10,220
1,126
36,127
2,335
3,538,499
37,399,455
54,552,593
301,320,435
1,319,318,149
1,716,129,131
790,767
various Directors
anD employees
–
–
–
25
26
51
Ordinary shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
total on register
The number of shareholders holding less than a marketable parcel of shares
(b) Distribution of Options/ Performance Rights
The numbers of holders, by size of holding, in each class of unlisted options are:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
total
108
asX aDDitional information
Twenty largest shareholders
(c)
The names of the twenty largest holders of quoted shares are:
holDer name
1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2.
JP MORGAN NOMINEES AUSTRALIA LIMITED
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