THE PATH FROM HERE
2013 AnnuAl RepoRt
Contents
8 Chairman’s letter
12 Ceo’s Review
20 Global Market Activity
22 Directors’ Report
31 Corporate Governance Statement
41 Remuneration Report
56 Independent Auditor’s Report
58 Auditor’s Independence Declaration
59 Financial Report
110 ASX Additional Information
112 Corporate Information
Lynas has continued to achieve
significant milestones during FY2013.
With our vision to become the
leader in Rare Earths for a sustainable
future in sight, we remain
committed to our core values:
Safe for people
Safe for the environment
Secure for cuStomerS
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
1
SAFE FOR PEOPLE
Focussed on the Safety
and health of our
employeeS, buSineSS
partnerS and
the community.
At Lynas, we are dedicated to becoming the benchmark
for occupational safety and health standards in the
global Rare Earths industry by providing and maintaining
a safe working environment and preventing injury, illness
and impairment to the health of our employees, business
partners and the community. Our goal is Zero Harm.
LOst timE injuRY
FREquEncY RAtiO
0.5
0.8
0.9
1.5
1.7
1.9
2.4
3.7
chemicals industry peer 1
chemicals industry peer 2
lynas Corporation
mining industry peer 1
chemicals industry peer 3
mining industry peer 2
chemicals industry peer 4
mining industry peer 3
2
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
3
4
SAFE FOR THE ENVIRONMENT
paving the way in
world claSS Safety
and environmental
StandardS.
Real-time independent monitoring of environmental
data from the Lynas Advanced materials Plant (LAmP)
in malaysia verifies no increase in radiological risk and
that all emissions and discharges are below permissible
limits. Results are publicly displayed at LAmP, in
Kuantan and via malaysia’s Department of Environment
and Atomic Energy Licensing Board websites.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
5
SECURE FOR CUSTOMERS
committed to creating
a greener and more
SuStainable Supply chain.
Rare earths are essential ingredients enabling the advanced
technologies that provide applications delivering a greener
and more energy-efficient world. Lynas’ mission is to
provide a secure and sustainable rare earths supply chain
to its customers operating in or supplying the oil refining,
automotive, consumer electronics, lighting and power
generation industries around the world.
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
6
Fccs
mAGnEts
AutOcAts
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
7
chairman’S letter
dear ShareholderS,
As Chairman of Lynas Corporation, and on behalf of my fellow Directors, I am pleased to be able to
present our Annual Report for 2013.
This has been the most important year in our history in moving Lynas toward achieving its vision
of becoming the leading global supplier of rare earths for a sustainable future. The Lynas Advanced
Materials Plant (LAMP) in Malaysia is now complete and undergoing ramp up to targeted production
capacity. Conditions in the global rare earths markets have been difficult and we have experienced
a number of important operational challenges. But despite this, the production of our first products
for customers in February 2013 represented an auspicious moment in the Company’s history. Also
noteworthy during the year were the commissioning of the Phase 2 expansion of our Mount Weld
Concentration Plant in Western Australia and the virtual completion of the construction of the Phase
2 expansion of the LAMP. Pending final approvals, we expect first production from LAMP Phase 2
shortly, although subsequent ramp-up will be determined by market conditions.
I look forward in future annual reports to detailing highlights in terms of production, sales and
financial metrics. For FY2013, our highlights are measured in terms of concluding our construction
phase, embarking on our journey into sustainable production, and the attendant conversations we
are having with customers about our products. Initial production and sales volumes are smaller than
we would have liked; however, viewed in the context of our 12-year journey to achieve production,
I believe they are significant nonetheless. A detailed review of operations for the year is contained
in the Directors’ Report, beginning on page 22.
Commercial production of rare earths is a much more complex and capital-intensive undertaking
than production of many other mineral commodities. In reality, our business is as much about
chemicals processing as it is about mining. Supplying our customers with refined rare earth products
is only possible after an exhaustive process involving mining, crushing and concentration of ore,
followed by cracking, leaching, purification, separation, and final processing to meet specific customer
product specifications. Then follows a qualification process by each customer for rare earth material
that can as be short as a few weeks or as long as a year – it is only complete when the customer
concludes their specifications have been satisfactorily met. I am pleased to report that, at the time
of writing, we had received 25 qualifications for products by customers with a similar number pending,
and that we have achieved sales for each of the products that LAMP has been designed to produce.
For the past few years, our focus has been principally on construction — the construction of a
concentration plant at Mount Weld in Western Australia and the construction of a state-of-the-
art rare earths production facility at Gebeng in Pahang, Malaysia. With these efforts now largely
accomplished, we are increasingly focused on operations, on ramping up production, on achieving
quality that meets individual customer specifications, and on reducing costs and delivering value to
our stakeholders.
With our total investment now in excess of $1 billion in Malaysia and $300 million in our Mount Weld
operations, we look confidently towards FY2014 as a year during which we will achieve production
substance and continue to transform the company to deliver sustainable returns to shareholders.
sHARED VALuE / tHE LYnAs WAY
Lynas is committed to the concept that our activities are directed to benefitting all constituencies
with which we engage. We believe that seeking beneficial returns for our shareholders cannot be done
without also benefitting our communities, employees, customers and suppliers. In other words, we
are engaged in a partnership for sustainable and mutual benefit, and this unwavering commitment
to Shared Value guides our decisions at Lynas. First among equals are those who invest in our
company and those who support us by purchasing our products, but just as important are our host
communities, our employees and contractors, and our business partners. Examples of our community
activities can be found in the CEO’s Review following.
The fundamental set of behaviours and principles that underpins all of our activities is The Lynas
Way. We are committed to ensuring that everything we do reflects The Lynas Way, and this includes
a policy of zero tolerance with respect to bribery and other forms of corrupt behaviour. This is
captured by the Lynas Anti-Bribery Policy and associated policies (such as the Lynas Code of Conduct
and the Lynas Whistleblower Policy), and these policies extend beyond Directors and employees to
contractors and suppliers. These policies can be viewed on our website.
8
BOARD REnEWAL
I would like to take this opportunity to thank my Board colleagues,
the Lynas management team, and our employees and contractors
for their efforts and commitment during the 2013 financial year.
We have now completed building the world’s biggest, most
advanced, and environmentally-friendly rare earths plant, and
offer our customers an integrated, sustainable source of rare
earths. Our vision of being “the global leader in rare earths for a
sustainable future” is truly achievable.
Following the achievement of first production for customers from
the LAMP, the Lynas Board determined it an appropriate time
to implement the planned CEO succession. Consequently, from
March 31, I became a non-executive Chairman and Eric Noyrez
was appointed an Executive Director and Chief Executive Officer.
With the subsequent appointment in August 2013 of Jean-Claude
Steinmetz as Chief Operating Officer, based in Malaysia, I believe
Lynas now has two very qualified and capable senior executives
with a collective 70-plus years of rare earths, chemicals and
industrial company management expertise.
Also in August, David Davidson and Zygmunt Switkowski
announced their departure from the Lynas Board. On behalf of
my Board colleagues and the entire company, I would again like
to thank David and Ziggy for their counsel and their contributions
to the Company through its development phase. I previously
acknowledged David’s contribution to helping to shape the culture
and organisation of Lynas, and I am pleased to announce that the
Board has decided to recognise his particular focus on the Zero
Harm principles that are a priority for us by establishing a safety
award in his name.
We previously established a Board succession planning and
renewal program recognising that the skills, knowledge and
Production technician Riduan
Yusof (L) and Production
supervisor Khairul Anuwa (R)
overseeing lanthanum oxide
product finishing in the tunnel
furnace at Lynas Advanced
material Plant, Gebeng, malaysia.
experience required to effectively direct an organisation
will change over time in response to market developments,
opportunities and evolution. The program is designed to ensure
Board renewal is achieved in an efficient and orderly manner.
Executive search firm Egon Zehnder is assisting the Board in
identifying suitable candidates, preferably with experience in
global industrial or chemical operations.
tHE FutuRE
The Board and management of Lynas intend delivering a
significant change agenda during the coming year and expect
to do so without diminishing focus on our customers or the
growth of our business.
Lynas is strongly positioned for the future and your Board
is confident in the company’s prospects. I would like to
thank customers who have continued to offer support and
encouragement as we bring production on-line, our employees
and contractors whose wholehearted endeavours are integral
to our success, our suppliers and business partners, and the
communities in Western Australia and Pahang who have accepted
us as their neighbours. Lastly, I would like to thank each of you
for your ongoing support.
Nicholas Curtis AM
Chairman
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
9
10
committed to creating
Shared value and Supporting
local communitieS.
the Lynas Way includes creating shared value through
economic development, and working with our host communities
to address concerns and share the benefits of our operations.
Lynas supports the Balok ivory tower Academy and the Hockey
Development Program in Pahang state, malaysia, and the
Laverton Leonora cross cultural Association in Western Australia.
HRH crown Prince of Pahang
talking to students from the
Lynas Hockey Development
Program during a field trip to
the finals of the 9th Asia cup
tournament in ipoh.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
11
ceo’S review
lynaS achieved Significant mileStoneS during the
year as it transitioned from a development company to a producer.
In September 2012, the Company was issued a Temporary
Operating Licence (TOL) from Malaysia’s Atomic Energy Licensing
Board for the Lynas Advanced Materials Plant (LAMP) following
a detailed and rigorous regulatory review process. Securing the
TOL enabled Lynas to commence the transport of rare earths
concentrate from Western Australia to Malaysia and to complete
all necessary steps to prepare for first feed to kiln. On November
30, 2012, the first Mount Weld rare earths concentrate was fed
into the kiln at the LAMP and, following the initial period of filling
the plant, our first two rare earths products for customers were
produced on February 27 and 28, 2013.
By May, the full suite of rare earth products had been produced
– cerium, lanthanum, lanthanum/cerium, neodymium/
praseodymium and SEG (samarium, europium, gadolinium).
As we ramped up Phase 1 operations, we experienced premature
wearing of some equipment in the cracking unit and some
clogging of filters in the leaching section which affected our
ability to operate sustainably at nameplate production capacity.
We began implementing a series of work programs involving
equipment changes and materials handling (such as replacing
some stainless steel components with special alloys) from June
2013, and we are confident that production rates will improve
in the coming year.
During the second half of the financial year, we completed a
detailed assessment of each of the rare earth market segments
in order to refine our development strategy. Lynas expects rare
earths demand to grow at above-GDP rates over the medium
term, particularly in the key sectors of rare earth permanent
magnets, automotive catalysts and fluid cracking catalysts (FCCs)
for oil refineries. These three end markets are projected to account
for around half of global rare earths product demand by 2015.
By the end of the decade, Lynas predicts that demand growth
in these sectors could create supply shortages in certain rare earth
element markets, most likely in neodymium/praesodymium and,
to a lesser extent, lanthanum.
Close consultation with customers as well as with major
OEM (original equipment manufacturer) end-users was a key
component of this analysis, and I am pleased to report we
continue to receive strong support and encouragement from
those groups with which we have established long-standing
relationships. We have now commenced supplying products
to these customers and looks forward to continued growth
in volumes.
12
Phase 1 rotary kiln and waste gas
treatment plant at Lynas Advanced
material Plant, Gebeng, malaysia.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
13
ceo’S review CONTINUED
Notwithstanding the medium-term outlook, the present rare
earths market remains subdued with prices continuing to fall
through the first half of calendar 2013. In response to this macro
environment, we implemented a program to reduce operating
costs and expenditure and announced our intention to optimise
production at the Phase 1 capacity level until such time as higher
rare earth prices can be sustainably achieved. Recognising that
the market requires a pricing paradigm that is sustainable for both
producers and customers if it is to achieve its full potential over
the long term and avoid triggering another supply crisis such as
that of 2010 – 2011, we also announced our intention to adhere
to a minimum price schedule. We received encouraging support
from customers. Prices in some categories have since begun
showing signs of recovery (see charts and tables on pages 20-21).
We also reviewed and reprioritised our expansion and
exploration projects, as well as related ongoing expenditure.
While some expenditure was curtailed, much of our efficiency
improvement program involves ensuring future spending delivers
cost-competitive growth over time to support the specific value
proposition expected by our stakeholders.
Our objective is to ensure that our people and our financial
resources are directed exclusively towards activities deemed
essential to the Company’s mission of becoming the leader in
rare earths for a sustainable future. Underlying everything we do
at Lynas is an irrevocable commitment to be safe for people, to
be safe for the environment, and to be secure for our customers.
With rare earths being used in oil refineries, permanent magnet
wind turbines, cars, and many high tech and household electronic
devices such as smart phones and tablet computers, a founding
principle of Lynas is to offer a secure and sustainable supply of
rare earths to our customers. Lynas has a very strong customer
base; we are committed to providing supply visibility and, where
necessary, price visibility, to allow the rare earths market to
continue growing to its full potential. By June 30, 2013, several
major customers had qualified our rare earth products allowing
for commercial shipments to commence. Subsequent to the end
of the year, we completed additional product qualifications with
more customers, especially in the rapidly-growing rare earth
magnet industry. Based on existing customer agreements and
negotiations, we expect to sell our annual Phase 1 production
of 11,000tpa REO.
14
Construction of the Phase 2 expansion project in Malaysia to
22,000tpa REO (rare earth oxide) production capacity was
virtually completed by end of June 2013 with 6.2 million hours
worked with zero Lost Time Injury (LTI). This is an excellent
achievement, well in keeping with safety being our primary
objective, and I congratulate the Lynas personnel and our main
contractors specifically involved in achieving this milestone.
Pre-commissioning activities reached 90% completion at the
end of June 2013; by September 30 commissioning was pending
approvals ahead of an expected start-up later in 2013. The
construction was completed within budget. The subsequent
ramp-up of Phase 2 production will be determined mainly
by market conditions.
As our operations ramp up and move to steady-state basis,
we strongly believe the Lynas rare earths operation in Malaysia
has the potential to act as a hub for a cluster of high-technology
industries that depend on our materials. The development of
a rare earths cluster is consistent with the Malaysian Government’s
aspirations to move Malaysia up to a middle-income economy
based on a greater contribution from high-skilled, value-add
industries. In addition, Lynas is making a significant economic
contribution to Malaysia by buying locally-produced products,
materials, equipment, and support activities.
Our Western Australia Concentration Plant operated as required
during the year following the successful commissioning and
ramp-up in the prior financial year. The operations in Western
Australia are synchronised to the requirements of the LAMP, and
sufficient stockpiles of concentrate were produced ahead of the
ramp up of LAMP. At the end of June 2013, 15,710 dry tonnes of
concentrate containing 5,626 tonnes of REO were bagged ready
for export. Ore commissioning of the Phase 2 Concentration
Plant circuit commenced on April 15, 2013. The new flotation
circuit, concentrate thickener and pressure filter were successfully
commissioned with first concentrate produced on April 18, 2013.
The plant reached more than 90% of design capacity several
days after the start-up, a performance usually only achieved
after several months. Again, I congratulate the Lynas staff and
contractors responsible.
top: Production technician izzatrafizzi napis
(L), Panelman Kamal mustaffa (seated) and
supervisor Production mohd Zahari Zakarian
in the main control room at Lynas Advanced
material Plant, Gebeng, malaysia.
Bottom: Office assistant norizah Othman in the
main administration building at Lynas Advanced
material Plant, Gebeng, malaysia.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
15
ceo’S review CONTINUED
16
sustAinABiLitY
Safety for our people and for the communities in which we operate
is at the front of mind in everything we do. We are committed to Zero
Harm and excellence in health and safety. During the year, our Lost
Time Injury Frequency Rate was 0.9, which is on par with benchmark
chemical companies and compares favourably with mining company
peers. Nevertheless, we had six LTIs, and will continue to strive towards
our goal of Zero Harm as we move into steady-state operations. We
continue to recruit talented and motivated people, to provide training
and growth opportunities for existing employees, and to maintain
a commitment to diversity and sustainability principles.
In August 2012, our Western Australian operations were externally
audited by the internationally-renowned Bureau Veritas and
subsequently certified to ISO and OHSAS Safety, Environment and
Quality Management Standards (ISO9001, ISO14001 and OHSAS18001).
Certification was confirmed by two further audits during 2013. We
are very proud of this certification achieved for Quality, Occupational
Health and Safety and Environment protection. Subsequent to the
end of the year, Lynas Malaysia continues to implement the Lynas
Integrated Operational Management System Standards (LIOMSS),
which incorporates compliance to OHSAS 18001 (Occupational Health
and Safety), ISO14001 (Environment) and ISO9001 (Quality). We are
targeting Bureau Veritas certification for Lynas Malaysia by the end of
2013. Considering legacy standards in the rare earths industry, and the
associated reputation, it was essential for us to differentiate Lynas from
the beginning. Our standards are based on the best practices adopted
by other mature and reputable chemicals companies.
Since the commencement of LAMP operations, we have proven
beyond doubt that the LAMP is safe for people and safe for the local
community. Environmental monitoring data from the LAMP, undertaken
by independent third-party experts and available through the websites
of the Malaysian Department of Environment and the Malaysian Atomic
Energy Licensing Board, verifies our absolute compliance with radiation,
air and water quality standards. All results are well below the permissible
limits. Lynas emissions data is also displayed in real-time displays and
visible to the public at LAMP and in Kuantan. Lynas remains committed
to absolute transparency to the local community, and our results will
continue to be assessed by independent parties.
Lynas is committed to shared value with its local communities.
In Western Australia, the Mount Weld Community Consultative
Committee provides a forum for open discussion between the Company
and community representatives to determine initiatives for sharing
value and building community resilience. Lynas is also an active
participant in the Laverton Leonora Cross Cultural Association.
Since 2010, Lynas Malaysia has sponsored the Balok Ivory Tower
Academy (BITA) program. BITA’s vision is to eradicate poverty through
education. Funded jointly with The Abdul Aziz Palace Foundation
and utilising staff from the National University of Malaysia, BITA
identifies students with good academic performance from families
from the villages close to LAMP and provides a specially-developed
program of learning modules conducted on weekends. This also
includes inter-session mentoring and motivation programs to assist
the students graduate to university.
During 2012-13, Lynas Malaysia also began a Hockey Development
Project. With similar objectives to BITA, the hockey program provides
continuous training by experienced coaches accredited by the Malaysia
Hockey Confederation to talented hockey students from families close
to LAMP. At the end of the program, consistently well-performed
students will earn selection to further education at the Pahang Hockey
Academy, a sports boarding school. Since the end of the financial
year, the Company also initiated an education program in which Lynas
Malaysia staff visit schools to talk about rare earths and outline career
development opportunities in rare earths and rare earth dependent
industries. The program is initially being rolled out in Pahang State.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
17
metallurgical technician
meagan cunningham
testing samples in the
laboratory at mount Weld,
Western Australia.
ceo’S review CONTINUED
REsPOnsiBLE cARE
Aligned with our vision to become the leader in Rare Earths for
a sustainable future and our Lynas Way values, Responsible Care
ensures our employees’ health and safety is guaranteed and their
social rights are secured. Attracting and retaining employees is
critical to our success so it is equally important that they remain
engaged and are provided opportunities to develop their skills and
experience. Our commitment to gender diversity remains strong
and I am proud to report that the number of women involved
in the senior management of our Company has risen from 20.5%
in 2012 to 26.7%.
From an environmental perspective, we have implemented
robust environmental management systems to promote
sustainability, limit our impact on the environment and comply
with relevant environmental legislation. Part of our commitment
to environmental management is the minimisation of the storage
of solid residues from the LAMP. We are actively engaged in the
commercialisation of our solid residues in the form of synthetic
mineral products that have potential applications ranging from
construction materials to fertiliser additives. We have received
customer interest for our synthetic mineral products and we are
continuing market trials for these products. These results allow the
relevant authorities in Malaysia to address the necessary regulatory
approvals to commence commercialisation of these products.
I look forward to keeping you updated as we progress this work.
Initial testing of the synthetic mineral products made from our
recycled solid residues has demonstrated that they are non-toxic,
will not leach into the ground and are non-radioactive. The
Company has applied for approval from the AELB to use the
aggregate co-product in a road base trial. We plan to build a
road at LAMP that will be tested and monitored by independent
experts over a period of 12 months to demonstrate the
performance of the material. The Company has also applied
to the AELB to approve the release of our synthetic gypsum
co-products from its jurisdiction after a three-month radioactivity
analysis revealed levels of radioactivity concentration below
1Bq/g. Once approved, these products will be subjected to
Department of Environment jurisdiction as scheduled waste
material. Market trials and product testing continue across the
range of synthetic mineral products, with further work being
done with potential customers and relevant regulatory agencies.
18
mount Weld senior site Administrator
Amelia cox assisting in the Laverton
Outback Art Gallery, which is run on
a co-operative basis by the Laverton
Leonora cross cultural Association,
of which Lynas is a sponsor. the gallery
was established in 2002 to display,
promote and sell authentic Aboriginal
art on behalf of the people of the
Laverton and Western Desert areas.
the art and craft on display is made
by the local Wongi people from the
lands of the north Eastern Goldfields
extending into the Western Desert
region. the artists receive up to 80%
of the price of the artwork.
PEOPLE AnD RELAtiOnsHiPs
The key to our success will be how well we build and sustain
effective relationships, including the way in which we interact with
each other, the way we collaborate and cooperate, and the way
we access and use each other’s capabilities and experience. Lynas
endeavours to create a climate of trust and respect in an environment
where people can grow both personally and professionally.
I would like to thank everyone in the Lynas team for their
significant contributions this year as we progressed from
development into production. I believe Lynas is well positioned
to benefit from robust rare earths demand growth in our major
markets. As we ramp up our operations I believe Lynas has the
potential to deliver further shared value for the communities
in which we operate and long-term value for our shareholders.
In April 2013, I was privileged to be appointed by the Board to
the position of Executive Director and Chief Executive Officer.
I would like to acknowledge the vision and perseverance of
Nicholas Curtis in recognising the potential of Mount Weld and
creating the opportunity for Lynas to become a new source
of rare earths, and I would like to thank the Board for entrusting
me with the responsibility for delivering that potential.
During 2013, we welcomed a number of highly experienced
individuals who will help lead and guide the Company in its
journey to being the leading rare earths producer: one that
is safe for people, safe for the environment and secure for
customers. Within the senior executive management, Mr Alan
Jury joined as Executive Vice President for Corporate Affairs
in April 2013, and Mr Jean-Claude Steinmetz was appointed
Chief Operating Officer, based in Malaysia, in August 2013.
Eric Noyrez
Chief Executive Officer
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
19
global market activity
g
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/
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$
140
120
100
80
60
40
20
0
25
20
15
10
5
0
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market conditionS were challenging during the
year. Demand for new product was subdued reflecting ongoing
customer destocking and weaker than expected global economic
growth, especially in China and Japan. Production shutdowns
by some leading Chinese producers to try to improve market
dynamics and foster sustainable production practices failed to
halt falling prices as customers deferred purchases. By financial
year end, rare earths prices had fallen to levels that were
140
reportedly impacting the ability of major producers to supply
120
product sustainably over the long term.
100
Since the year end, rare earths prices, especially those for
80
magnet-making raw materials and heavy rare earths, have
60
increased in response to several important trends. On the supply
40
side, ongoing restructuring and consolidation of the Chinese
20
rare earths industry continues to limit the availability of illegal and
environmentally unsustainable supply of rare earths. Authorised
0
Sep-13
Feb-13
Chinese producers are also facing higher costs associated with
complying with stricter enforcement of China’s environmental
emission regulations. This has led to a general reluctance to lower
Pr Oxide China Domestic
offer prices further. On the demand side, evidence of a continued
economic recovery in the US, stimulus-driven economic growth
in Japan and the first signs of a recovery in the Eurozone have seen
a number of major consumers resume rare earths raw materials
offtake to support growth in their businesses.
Aug-13
Sep-13
Feb-13
Jun-13
Jan-13
Jul-13
Cerium and lanthanum oxide prices ($us/kg)
SEG Oxide China Domestic
Nd Oxide China Domestic
Nd Oxide FOB China
Pr Oxide FOB China
M ay-13
M ay-13
N ov-12
Aug-13
Aug-12
Sep-12
Jun-13
Dec-12
Jan-13
M ar-13
M ar-13
O ct-12
Apr-13
Apr-13
Jul-13
Jul-12
China domestic price rose 24%
from May to August 2013
Jul-12
Aug-12
Sep-12
O ct-12
N ov-12
Dec-12
China domestic price rose 24%
from May to August 2013
Pr Oxide FOB China
Nd Oxide FOB China
25
Pr Oxide China Domestic
Nd Oxide China Domestic
SEG Oxide China Domestic
g
k
/
S
U
$
20
15
10
5
0
Jul-12
Aug-12
Sep-12
O ct-12
N ov-12
Dec-12
Jan-13
Feb-13
M ar-13
Apr-13
M ay-13
Jun-13
Jul-13
Aug-13
Sep-13
La Oxide FOB China
Ce Oxide FOB China
La Oxide China Domestic
Ce Oxide China Domestic
neodymium, praseodymium and SeG oxide prices ($us/kg)
140
Feb-13
M ar-13
Apr-13
M ay-13
Jun-13
Jul-13
Aug-13
Sep-13
Ce Oxide FOB China
Ce Oxide China Domestic
Jul-12
Aug-12
Sep-12
O ct-12
N ov-12
Dec-12
Jan-13
Feb-13
M ar-13
Apr-13
M ay-13
Jun-13
Jul-13
Aug-13
Sep-13
Pr Oxide FOB China
Nd Oxide FOB China
Pr Oxide China Domestic
Nd Oxide China Domestic
SEG Oxide China Domestic
Source: Metal-Pages
Jul-12
Aug-12
Sep-12
O ct-12
N ov-12
Dec-12
120
Jan-13
100
La Oxide FOB China
La Oxide China Domestic
g
k
/
S
U
$
China domestic price rose 24%
from May to August 2013
20
g
k
/
S
U
$
80
60
40
20
0
25
20
15
10
5
0
50
40
30
20
10
0
O
E
R
s
e
n
n
o
t
0
0
0
’
GLOBAL DEmAnD OutLOOK
Magnets
Rare earth permanent magnets are expected to be the major
growth market over the medium term. The automotive market is
an important demand driver for rare earth magnets. Conventional
autos use numerous rare earth magnets in electric motors to
reduce weight and improve fuel efficiency. In addition to growth
10
in global vehicle sales, Lynas also expects increased magnet
consumption per vehicle to contribute to growth over the long
term. The hybrid electric vehicle (HEV) market is also expected
to drive strong growth for rare earth magnets. HEVs use more rare
earth magnets per vehicle compared with conventional autos as
they are also used in the vehicle’s drive-train.
8
4
6
100% AUTOCAT TAKE-UP
GLOBALLY EXPECTED
2
The use of rare earth magnets in wind turbines is expected to
10
be another major growth market over the long term. The latest
generation of direct drive wind turbines, in which the use of
0
2015
8
rare earth magnets allows the gearbox to be removed from the
turbine, have greatly reduced weight and maintenance costs.
6
This makes them ideal for large offshore wind farms. Lynas
expects direct drive turbines could account for at least 15% of
4
global rare earth magnet consumption by the end of the decade.
100% AUTOCAT TAKE-UP
GLOBALLY EXPECTED
2014
2013
2012
2011
2
Rare earth magnets continue to be the preferred choice in major
consumer and industrial electronic applications due to their
0
high magnetic strength and high performance to size ratio. Key
2019
2015
50
applications include smart phones, acoustic speakers, hard disk drives,
GLOBAL VEHICLE PRODUCTION EFFECT OF INCREASED AUTOCAT TAKE-OUT
inverter air conditioners, industrial automation and drive units.
40
2020
2018
2014
2016
2013
2012
2017
2011
Overall, Lynas believes demand for rare earths used in permanent
magnets has the potential to grow by at least 10% per annum
over the medium term.
30
9 %
2 0 1 0 - 2 0 2 0 C A G R :
Forecast Reo demand in magnet industry (’000 tonnes REO)
O
E
R
s
e
n
n
o
t
0
0
0
’
20
10
0
2016
2017
2018
2019
2020
GLOBAL VEHICLE PRODUCTION EFFECT OF INCREASED AUTOCAT TAKE-OUT
2010
9 %
2 0 1 0 - 2 0 2 0 C A G R :
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
OTHER AUTOMATION & DRIVES ELECTRONICS
HEV/EV CONVENTIONAL AUTOS WIND TURBINES
10
2010
2011
2012
2013
2014
8
2015
2016
2017
2018
2019
2020
OTHER AUTOMATION & DRIVES ELECTRONICS
6
HEV/EV CONVENTIONAL AUTOS WIND TURBINES
100% AUTOCAT TAKE-UP
GLOBALLY EXPECTED
4
Source: Industry sources, Lynas est.
Catalysts
2
Cerium and lanthanum are highly effective components of
catalyst systems. They absorb, store and release oxygen and
0
2015
also stabilise environments in which they operate. The major
applications for rare earth catalysts are in automotive catalytic
converters (autocats) for cars and utility vehicles, and in fluid
cracking catalysts (FCCs) used in oil refineries.
2014
2013
2012
2011
2016
2017
2018
2019
2020
GLOBAL VEHICLE PRODUCTION EFFECT OF INCREASED AUTOCAT TAKE-OUT
9 %
2 0 1 0 - 2 0 2 0 C A G R :
50
40
30
20
10
0
O
E
R
s
e
n
n
o
t
0
0
0
’
Jul-12
Aug-12
Sep-12
O ct-12
N ov-12
Dec-12
Jan-13
Feb-13
M ar-13
Apr-13
M ay-13
Jun-13
Jul-13
Aug-13
Sep-13
La Oxide FOB China
Ce Oxide FOB China
La Oxide China Domestic
Ce Oxide China Domestic
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
OTHER AUTOMATION & DRIVES ELECTRONICS
HEV/EV CONVENTIONAL AUTOS WIND TURBINES
Cerium-based autocats are mainly used to reduce pollutant
emissions from vehicles. Apart from growth in global vehicle
sales, demand for autocats is further supported by increasingly
demanding legislation around the world governing vehicle
emissions. Lynas believes demand for rare earths in autocats
has the potential to continue to grow by around 6% per annum
between 2010 and 2020. Once autocat take-up reaches 100%
globally, autocat growth is likely to average around 3% per
annum, in line with global vehicle sales growth.
Lanthanum stabilises the molecular sieve used in the FCC process
which increases the life of the catalyst and increases oil refinery
yields by around 5-7%. The FCC market is expected to remain
resilient with good growth in demand for rare earth-based FCCs,
partially offset by declining gasoline consumption per capita,
especially in the Western World.
nickel metal hydride (niMH) Batteries
The hybrid electric vehicle market using NiMH batteries is expected
to grow over the medium term with HEVs accounting for increased
number of global vehicle sales per year. Major HEV producers have
confirmed their commitment to NiMH batteries for the time being;
however, non-rare earth-consuming lithium-ion batteries may take
some market share over the longer term. Lynas expects rare earths
demand in NiMH batteries to increase by around 3% per annum
over the medium term.
polishing
Glass polishing powders are used in a number of different end
markets (e.g. LCD screens, HDD, precision optical, ophthalmic,
crystals and flat glass). While rare earth-based polishing powders
are the most effective, rare earth price increases in prior years
have impacted demand through the introduction of improved
glass manufacturing process and recycling of polishing powder
slurries. Lynas expects demand for rare earth-based polishing
powders to increase in line with global glass demand at around
4-5% per annum over the medium term.
GLOBAL suPPLY OutLOOK
Global supply of rare earths is predominantly sourced from
China, although Lynas and the US now offer customers
alternative sources of supply. China continues to restructure
and consolidate its rare earths industry to industrialise what
was once a “cottage” industry. Environmentally sustainable rare
earths production involves significant capital and operating
expenditure to safely manage waste gases, process water and
solid residues. Such investment requires large-scale operations
to justify the cost, well beyond the economical scale of many
small operators. China has imposed various production control
measures and enforces them through periodic inspections
and audits of producing workshops. It is expected that the
industry will become economically viable only for a few large
state-owned enterprises in a rationalisation similar to that
previously undertaken by China in base metals, steel and other
commodity industries.
The speed with which new suppliers can enter the market is likely
to be very slow due to rare earth price volatility in recent years and
the early-stage nature of potential new developments. New supply,
over time, is more likely to come from existing producers expanding
their capacity. Lynas, for example, is able to supply an additional
11,000tpa REO from its completed Phase 2 expansion as and when
market conditions warrant bringing this supply to market.
RARE EARtHs PRicinG
Rare earths oxide
(Purity 99% min)
lanthanum oxide
Cerium oxide
neodymium oxide
praseodymium oxide
Samarium oxide
Dysprosium oxide
europium oxide
terbium oxide
FOB CHiNa avEraGE PriCE
CHiNa DOMESTiC avEraGE PriCE
Sep-12
Dec-12 Mar-13
Jun-13
Sep-13
Sep-12
Dec-12 Mar-13
Jun-13
Sep-13
19.54
20.38
105.31
108.85
64.77
967.69
13.92
15.31
87.46
88.46
34.85
716.15
11.00
11.85
79.15
85.00
25.00
8.42
8.49
65.71
77.64
19.36
6.50
6.80
82.00
117.00
11.00
10.82
10.98
68.88
67.13
9.88
630.00
561.43
550.00
596.94
2020.00
1853.08
1600.00
1110.71
1100.00
1028.38
8.18
8.18
60.60
60.79
8.19
452.71
937.74
1938.46
1446.15
1300.00
954.29
950.00
874.03
709.92
7.15
7.20
52.64
58.14
7.71
345.35
838.37
617.81
5.43
5.44
45.30
57.91
5.88
4.56
4.56
57.80
94.44
4.56
246.74
366.35
636.24
481.80
797.82
667.57
Disclaimer: Information concerning rare earths market data has been sourced from independent analysis of end application demand, along with Lynas
estimates of quantities of rare earths end use in various key applications. Although Lynas believes that the outcomes expressed in any forward-looking
statements in this document are based on reasonable assumptions, such statements are not guarantees of future performance. Forward-looking statements
are based on assumptions and contingencies which are subject to change without notice. Factors that could cause actual results to differ materially from
those in forward-looking statements include new applications, the development of economic substitutes, and general economic, market or business
conditions. While Lynas has made every reasonable effort to ensure the veracity of the information presented, Lynas does not guarantee the accuracy and
reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the market data in this document should be used for general guidance
only. There can be no guarantee that actual outcomes will not differ materially from forward-looking statements.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
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, 2013. 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), FAICD
CHAIRMAN
Mr Curtis is Chairman of the Company. He is Chairman of
Forge Resources Limited (renamed Rutila Resources Limited on
September 26, 2013) and of the private corporate advisory firm,
Riverstone Advisory. Mr Curtis 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. Mr Curtis also serves as a Governor of the Mining and
Metals Industry Partnership Group at the World Economic Forum,
and is Co-Chair of the Global Growth Company community with
the World Economic Forum. 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), MAICD
DEPUTY CHAIRMAN
Mr Forde joined the Company as a Non-Executive Director in
December 2007 and is the Deputy Chairman 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 Limited. Mr Forde is also a Director of Hastings
High Yield Fund.
In addition, Mr Forde 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.
22
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, REA Group Limited and The Benevolent
Society. She is also President of the NSW division of the Australian
Institute of Company Directors, a member of the National Board
of the Australian Institute of Company Directors and 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.
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.
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.
eric noyrez
ExECUTIVE DIRECTOR
Mr Noyrez is an Executive Director and Chief Executive Officer
of the Company and was appointed to the Board on 31 March
2013. Mr Noyrez joined Lynas as Chief Operating Officer
in February 2010 and was given additional responsibilities
as President in March 2011. Mr Noyrez has extensive senior
management and board level experience in major multinational
industrial and chemical companies. He also has detailed
knowledge of the international rare earths industry.
Prior to joining Lynas he was a member of the Executive
Committee of Rhodia, a global specialty chemicals company and
President of Rhodia Silcea, its rare earths, silicas and diphenols
division. Before joining Rhodia, Mr Noyrez held Director and
Senior Executive roles in several divisions at Shell between 1989
and 2000 after an earlier career with the Peugeot-Citroen Group.
He holds a Masters degree in Engineering and Mechanicals from
ENSM (Ecole Nationale Supérieure des Mines) in France.
David Davidson
NON-ExECUTIVE DIRECTOR
(resigned with effect from August 20, 2013)
As announced by Lynas on August 20, 2013, Mr Davidson
resigned as a director of Lynas with effect from August 20, 2013.
Mr Davidson 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.
Zygmunt (Ziggy) Switkowski PhD, FAICD, FTSE
NON-ExECUTIVE DIRECTOR
(resigned with effect from August 20, 2013)
As announced by Lynas on August 20, 2013, Dr Switkowski
resigned as a director of Lynas with effect from August 20, 2013.
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, Managing Director of
Kodak (Australasia) and Chairman of Opera Australia.
Dr Switkowski currently serves as Executive Chairman of NBN
Co, a Director of Tabcorp Limited and Oil Search Limited and
is Chairman of Suncorp Group. 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.
lYnAS CoRpoRAtIon lIMIteD ANNUAL REPORT 2013
23
Directors’ report
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.
Sally McDonald
Ms McDonald was appointed as In-house Counsel and an additional Company Secretary on January 30, 2012, following six years as a
lawyer at Norton Rose and Addleshaw Goddard.
DireCtors’ shareholDings
As at the date of this report, the interests of the Directors who held office during the 2013 financial year in the shares and options of
the Group were:
N. Curtis (1)
W. Forde
K. Conlon (2)
D. Davidson (3)
J. Klein
Z. Switkowski (4)
E. Noyrez (5)
total
orDinary
shares
16,045,758
1,028,441
129,515
727,613
2,082,236
727,613
–
20,741,176
options over
orDinary
shares
25,500,000
3,250,000
–
2,500,000
2,500,000
–
9,812,853
43,562,853
(1) Ceased to be a member of the Executive and assumed role of Non-Executive Chairman from March 31, 2013.
(2) Shares held by spouse.
(3) Resigned with effect from August 20, 2013.
(4) Resigned with effect from August 20, 2013.
(5) Appointed as CEO and an Executive Director, and ceased to act as COO and President, with effect from March 31, 2013.
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 2013 financial year.
granteD options
A. Arnold
G. Barr
L. Catanzaro
E. Noyrez
24
options
granteD
1,057,402
–
453,172
–
1,510,574
performanCe
rights
granteD
grant
Date
–
September 25, 2012
439,806
September 25, 2012
–
September 25, 2012
1,312,853
September 25, 2012
1,752,659
Directors’ report
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 limited
ACN 009 066 648
ABN 27 009 066 648
Date of Incorp. 23/5/1983
Registered in WA
1 share
100%
Lynas Services Pty Ltd
ABN 31 103 936 232
Date of Incorp. 3/3/2003
Registered in Victoria
100%
Mt Weld Holdings Pty Ltd
ABN 75 073 998 106
Date of Incorp. 15/5/1996
Registered in WA
100%
ACN 053 160 302 Pty Ltd
ABN 73 053 160 302
Date of Incorp. 29/7/1991
Registered in NSW
100%
Lynas Malaysia Sdn Bhd
Malaysian Co Number 752289D
Date of Incorp. 6/11/2006
Registered in Malaysia
100%
Lynas Africa Holdings Pty Ltd
ACN 148 189 511
Date of Incorp. 13/1/2011
Registered in Victoria
100%
Mt Weld Mining Pty Ltd
ABN 96 053 160 400
Date of Incorp. 29/7/1991
Registered in NSW
5 shares
Lynas Africa Limited
Malawi Co Number 8409
Date of Incorp. 12/7/2007
Registered in Malawi
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; and
• development of Rare Earth deposits.
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
for the year enDeD
in a$ million
Revenue
Cost of sales
gross profit (loss)
Other income
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,
2013
2012
0.9
(0.9)
–
9.8
(125.1)
(13.1)
(128.4)
4.8
(17.4)
(12.6)
(141.0)
–
–
–
–
(74.1)
(16.0)
(90.1)
2.8
(10.6)
(7.8)
(97.9)
The year ended June 30, 2013 was a period of significant milestones for the Group, with the finalisation of commissioning and
commencement of production from the Phase 1 operations at the LAMP (January 2013), the production of the Group’s first rare earth
oxide (REO) separated and finished products (February 2013) and the completion and commissioning of the Phase 2 expansion of the
Mount Weld operations (June 2013). These milestones mark the end of the Group’s development stage and the commencement of its
transition into production.
lynas Corporation limiteD ANNUAL REPORT 2013
25
Directors’ report
Commensurate with the above milestones, the Group recognised its maiden revenue from the sales of REO products. Although these
sales were limited, just $0.9 million, and were impacted by the early stage nature of the Group’s production profile and on-going
customer qualification processes, they represent a clear step forward in the Group achieving its core objective of becoming the leading
sustainable supplier of Rare Earth materials to the market.
The overall loss from operating activities increased by $38.3 million, or 43%, to $128.4 million for the year ended June 30, 2013,
compared to $90.1 million for the year ended June 30, 2012. Consistent with its state of operational readiness, the Group has
recognised increased non-cash depreciation and amortisation resulting from the commissioning of Phase 1 of the LAMP in Malaysia
(2013: $16.5 million; 2102: $1.3 million) while also recognising higher employee costs (2013: $38.1 million; 2012 $26.5 million) as a
result of staffing the Group’s operations to full Phase 1 production capacity.
In addition, the loss for the year ended June 30, 2013 reflects the impact of reduced production at the Group’s Mount Weld operations
due to the planned shutdown (aimed at managing the Group’s on hand concentrate stocks) and the tie in of the Phase 2 expansion that
resulted in production costs of $16.5 million during the period not being captured and capitalised to inventory. Also, the Group has been
impacted by the recognition of charges under non-cancellable take or pay obligations (2013: $20.7 million; 2012: $4.1 million) which
have been provided for based on our future short-term (12 months) delivery estimates, non-cash impairment charges on inventory
(2013: $9.1 million; 2012: $8.5 million) from the valuation of certain inventory items to their current net realisable value, while also
recognising non-cash impairment charges on property plant and equipment (2013: $3.4 million; 2012: $4.8 million) for items identified
as surplus or redundant to current operating capacity.
The Group was also positively impacted during the year ended June 30, 2013 by the recognition in the profit and loss of $9.8 million of
the $15.2 million received from the Australian Taxation Office arising from eligible research and development expenditure undertaken in
the year ended June 30, 2012 around the testing, development and commissioning of the Mount Weld processing facilities.
Net financial expenses increased by $4.8 million, or 62%, to $12.6 million for the year ended June 30, 2013 compared to $7.8 million
for the year ended June 30, 2012. During the year the Group recognised an increase in interest income of $2.0 million offset by an
increase of $7.5 million in interest and financing costs associated with the Sojitz facility and Mt Kellett convertible bonds. The increased
interest expense reflected a full year of interest on the Mt Kellett convertible bonds (2012 included a part-year of interest on the facility)
and an additional 2.5% margin on the Sojitz facility since September 2012. In addition, the Group had a period-on-period $0.7 million
foreign exchange movement (2013: net loss of $1.5 million; 2012: net loss of $2.2 million) primarily attributable to the movement of the
US Dollar and Malaysian Ringgit exchange rates against the AUD.
On an adjusted EBITDA basis (refer to note 6 to the Financial Report for the basis of this measure) the Group reported a loss of $107.4
million in the year ended June 30, 2013, compared to a loss of $63.3 million in the year ended June 30, 2012.
Cash flow
for the year enDeD
in a$ million
Net Operating Cash flow
Net Investing Cash flow
Net Financing Cash flow
net cash flow
June 30,
2013
2012
(106.2)
(114.2)
155.0
(65.4)
(86.9)
(349.7)
206.2
(230.4)
Overall the net cash out flow for the period decreased by $165.0 million from a net cash outflow of $230.4 million for the year ended
June 30, 2012 to a net cash outflow of $65.4 million for the year ended June 30, 2013.
Operating cash flows
Net operating cash outflows increased by $19.3 million, or 22%, to $106.2 million for the year ended June 30, 2013, compared to $86.9
million for the year ended June 30, 2012. The increase in the net cash outflow period-on-period is in line with the Group’s operational
readiness and ramp-up activities and was principally driven by an increase in employee costs and the build-up of working capital
reflecting the procurement of chemicals and associated inventory items for use in the Groups processing operations. These amounts
were offset by the receipt from the Australian Taxation Office of $15.2 million in recognition of the eligible research and development
activities undertaken in the year ended June 30, 2012 around the testing, development and commissioning of the Mount Weld
processing facilities and $0.6 million representing receipts on the sales of the Group’s first REO products.
Investing cash flows
Net investing cash outflows decreased by $235.5 million or 67%, to $114.2 million for the year ended June 30, 2013, compared with
$349.7 million for the year ended June 30, 2012. The decrease in the net outflow for the year principally reflects the operational
readiness of the LAMP in Malaysia where Phase 1 of the Group’s capital programme outflow were predominantly completed in the 2012
and previous financial years ($132.3 million reduction in cash payments when compared to the June 30, 2012 year) combined with a
$95.8 million reduction in settlements on the Phase 2 capital expansion programme (when compared to the June 30, 2012 year) due to
the timing of the associated progress payments and the Phase 2 expansion project nearing completion.
26
Directors’ report
Financing cash flows
Net financing cash flows have decreased by $51.2 million, or 25%, to a net cash inflow of $155.0 million for the year ended June 30,
2013, compared to a net cash inflow of $206.2 million for the year ended June 30, 2012. The $155.0 million inflow in the current year
principally reflects the net proceeds from the Group’s equity raising completed during November and December 2012 ($169.7 million).
The prior year financing inflows mainly comprise the net proceeds of $211.2 million from the Mt Kellett convertible bonds issue in
February 2012. These amounts were offset by net interest expense and other finance costs in the respective years.
Financial position
for the year enDeD
in a$ million
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,
2013
2012
141.4
92.9
880.3
47.7
1.8
23.6
205.4
65.7
706.6
26.3
3.8
15.8
1,187.7
1,023.6
(458.0)
(101.0)
(559.0)
628.7
994.6
(430.7)
64.8
628.7
(403.1)
(57.0)
(460.1)
563.5
823.1
(287.1)
27.5
563.5
The overall net assets of the Group increased by $65.2 million from $563.5 million as at June 30, 2012 to $628.7 million as at
June 30, 2013.
Cash and cash equivalents at June 30, 2013 comprise $125.7 million of unrestricted cash and $15.7 million of restricted cash. Restricted
cash is principally available to fund the capital expenditure associated with the Phase 2 expansion of the Concentration Plant at Mount
Weld and the Lynas Advanced Materials Plant in Malaysia ($10.3 million), with the residual available to fund future interest payments
under the Sojitz facility ($5.4 million).
Inventory has increased by $27.2 million, or 41%, to $92.9 million at June 30, 2013, compared to $65.7 million at June 30, 2012.
This increase in inventory (net of non-cash impairment charges of $9.1 million made in the year ended June 30, 2013 as previously
discussed), reflects the production ramp-up at the LAMP which has seen increases in the Group’s work in progress by $26.3 million,
finished goods by $0.5 million and raw materials and consumables by $0.4 million. As at June 30, 2013 the Group continues to hold
15,865 tonnes of processed concentrate and unprocessed ore of 343,533 tonnes at its Mount Weld operations which are expected to be
used for production purposes over the next 12 to 24 month periods respectively.
Property plant and equipment has increased by $173.7 million, or 25%, to $880.3 million at June 30, 2013 compared to $706.6 million
at June 30, 2012. The increase in property plant and equipment during the year is largely driven by additions of $96.2 million in relation
to Phases 1 and 2 construction of the LAMP ($67.1 million) and Phase 2 construction of the Mount Weld concentration plant ($29.1
million). During the year the Group also recognised an initial rehabilitation asset of $16.3 million (and corresponding provision) for
the costs associated with the decommissioning, restoration and rehabilitation of the LAMP site in Malaysia. These costs arise from
the ongoing construction and operation of Phase 1 of the LAMP. The remainder of the movement relates to the uplift in value of the
Malaysian Ringgit denominated assets due to foreign exchange movements, offset by depreciation ($18.6 million) and a transfer of
consumables from assets under construction to inventory on completion of Phase 1 construction of the LAMP ($9.3 million).
lynas Corporation limiteD ANNUAL REPORT 2013
27
Directors’ report
Deferred exploration and evaluation costs have increased by $21.4 million, or 81%, to $47.7 million at June 30, 2013, compared to
$26.3 million at June 30, 2012. The increase mainly relates to recognition of an increase in the rehabilitation asset (and corresponding
provision) of $20.8 million for the future costs to decommission, restore and rehabilitate the Mount Weld mine and concentration plant
back to pastoral-use land. These costs arise from the operation of the mining and concentration processing facilities at Mount Weld and
take into account the areas of disturbance back to pastoral used land at the balance date and the actions required upon cessation of
operations to decommission and remove the processing plant from the location.
Borrowings of $458.0 million represent the US$225 million Sojitz loan facility revalued at the June 30, 2013 exchange rate, and the
liability component of the convertible bonds issued to funds managed or selected by Mt Kellett Capital Management.
Other liabilities have increased by $44.0 million, or 77%, to $101.0 million at June 30, 2013, compared to $57.0 million at June 30,
2012. The increase is driven principally by the aforementioned initial recognition of the rehabilitation costs of the LAMP in Malaysia
$16.3 million ,the revision to the rehabilitation costs in relation to the Mount Weld concentration plant of $20.8 million and the change
in change in provisions for onerous contacts $13.5 million.
The increase in share capital of $171.5 million is primarily attributable to the net proceeds of $169.7 million from the equity raising
announced during the period which was completed in November and December 2012.
The movement in reserves of $37.3 million during the current period reflects movements in the equity settled employee benefits,
foreign currency translation and investment revaluation reserves.
As outlined in note 23 to the financial report, on September 13, 2013 the Group amended the Sojitz loan facility to extend the existing
Project Sunset Date from January 19, 2014 to March 31, 2015. In connection with this amendment certain terms relating to the principal
repayments of the loan facility and the release of security were modified, as outlined in note 23.
Capital structure
At the start of the year the Group had 1,715,029,131 ordinary shares on issue. During the year an additional 245,772,161 shares were
issued as follows:
Shares on issue June 30, 2012
Issue of shares pursuant to equity raising
Issue of shares pursuant to option conversion
shares on issue June 30, 2013
number
1,715,029,131
244,641,929
1,130,232
1,960,801,292
In addition to the ordinary shares on issue there were 72,485,196 unlisted options and performance rights and 225,000,000 unlisted
convertible bonds on issue with a conversion price of A$1.15 (based on a US$:A$ exchange rate of 0.9533).
review of operations
Lynas commenced commercial production and shipments of Rare Earths products during the year. The Company was issued a
Temporary Operating Licence (TOL) for its Lynas Advanced Materials Plant (LAMP) in September 2012. First feed of Rare Earths
concentrate into the LAMP rotary kilns occurred in November 2012 and first Rare Earths products were produced in February 2013.
Since then, the LAMP has been ramping up production towards the Phase 1 nameplate production capacity of 11,000 tonnes per annum
Rare Earths Oxide (REO).
Western Australia operations
During the year, the Mount Weld Concentration Plant effectively remained shut down due to sufficient stockpiles of concentrate having
been produced ahead of the ramp up of operations at the LAMP. At the end of the year 15,710 dry tonnes of concentrate containing
5,626 tonnes of REO were bagged ready for export.
Ore commissioning of the Phase 2 Concentration Plant circuit commenced on April 15, 2013. The new flotation circuit, concentrate
thickener and pressure filter were successfully commissioned with first concentrate produced on April 18, 2013.
In August 2012, the Western Australian Operations achieved certification to the OHSAS 18001 (Occupational Health and Safety
Management Systems), ISO 14001 (Environmental Management Systems) and ISO 9001 (Quality Management Systems) standards.
The Operations remain certified to these standards.
In September 2012, Lynas announced a significant upgrade of the Ore Reserves at Mount Weld. The new Ore Reserves at the Central
Lanthanide Deposit (CLD), using cut-off grades ranging from 4-7% depending on the type of ore, are 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 estimate and the contained REO in the Ore Reserves is 260% higher than the 2005 estimate.
28
Directors’ report
In June 2012, Lynas announced it had completed a scoping study on the development of the Duncan deposit at Mount Weld. Since that
time, further work has been done evaluating potential locations for processing and optimising the metallurgical flowsheet. However,
against the backdrop of declining Rare Earths prices and the Group’s strategy to reduce operating costs, management has decided to
postpone further development work on the Duncan Deposit until market conditions recover.
In February 2013, the Australian Taxation Office made a $15.2 million payment to Lynas for eligible research and development
expenditure during the year ended June 30, 2012, principally on the development of the Lynas Mount Weld Rare Earths project.
Global rare earths market conditions were relatively challenging during the year. Demand for fresh product was subdued reflecting
ongoing customer destocking and weaker than expected global economic growth, especially in China. Rare earths pricing reflected
this trend with prices continuing to retrace over the course of the year. Declining prices triggered temporary production shutdowns in
2012 by some of the leading Chinese producers in an effort to improve market dynamics. Despite these measures, prices continued
to fall as customers deferred fresh purchases due to prevailing macroeconomic uncertainties affecting the growth outlook for their
businesses. By year end, rare earths prices had fallen to levels that were impacting the ability of producers to supply product sustainably
over the long term.
Malaysia operations
On September 5, 2012, the Malaysian Atomic Energy Licensing Board (AELB) issued the TOL for the LAMP. The AELB will monitor the
plant’s operations and adherence to prescribed safety standards. Compliance with those standards will be the criteria for conversion of
the TOL to a permanent operating licence during the next two years.
Following receipt of the TOL, the Group commenced transportation of Rare Earths concentrate from Western Australia and achieved
first feed of concentrate into the LAMP rotary kilns in November 2012. In February 2013, Lynas produced its first Rare Earths products
for customers. In the year ending June 30, 2013, the Company produced 144 tonnes on an REO equivalent basis and shipped 117 tonnes
on an REO equivalent basis.
Following commencement of commercial production, the Group began engaging with its customers in a series of product qualifications.
Several customers qualified the Group’s Rare Earths products during the year allowing for commercial shipments to commence.
The Group remained engaged in the qualification process with other customers at year end.
In the process of ramping up operations at the LAMP, the Company identified some issues relating to clogging and premature wearing
of equipment that affected its ability to operate at around nameplate production capacity in the cracking and leaching units of Phase
1 of the LAMP. Subsequent to the end of the period, the Company began implementing a series of work programs involving equipment
changes and materials handling to allow the cracking and leaching units to operate continuously at nameplate production capacity.
None of these programs involved significant capital investments. Commercial production of REO products continues at a reduced
volume while these programs are ongoing during the second half of calendar 2013.
Concurrent with the production of Rare Earths at the LAMP, the Group also commenced production of synthetic gypsum and aggregate
co-products on site. Lynas has received customer interest for its synthetic mineral products and is continuing market trials for these
products. The Group remained in discussions with the relevant authorities in Malaysia at year end regarding obtaining the necessary
regulatory approvals to commence exports of these products. One of the products was tested by a third party laboratory during the
year which concluded that it is safe and meets regulatory requirements. For other synthetic mineral products, testing and market trials
remained ongoing.
Construction of the Phase 2 project in Malaysia was virtually completed by end of June 2013 with 6.2 million hours worked with
zero Loss Time Injury (LTI). Pre-commissioning activities reached 90% complete and commissioning has started ahead of an
expected start-up in Q3 2013. The subsequent ramp-up of Phase 2 production will be determined by various factors, primarily being
market conditions.
In total, there have been three legal challenges to the TOL. The first challenge related to the decision of the AELB in February 2012 to
approve the TOL. That challenge has been dismissed by the Kuala Lumpur High Court, the Malaysian Court of Appeal and the Malaysian
Federal Court. There are no further avenues for this challenge to be appealed.
The second challenge relates to the decision of the Minister of Science, Technology and Innovation to dismiss a statutory appeal of the
AELB’s decision to approve the TOL. That challenge is expected to be heard by the Kuantan High Court during 2013.
The third challenge relates to the decision of the AELB in September 2012 to issue the TOL. That challenge has been dismissed by the
Kuantan High Court. Lynas understands that the applicants intend to appeal this decision to the Court of Appeal. The appeal is expected
to be heard during 2013.
Since the commencement of LAMP operations, the measured emissions on site have consistently been significantly lower than the
regulatory limits. Lynas provides real-time monitoring of these emissions at LAMP, and the results are transmitted to Malaysia’s
Department of Environment (DoE) and to the AELB.
Lynas Malaysia continues to implement the Lynas Integrated Operational Management System Standards (LIOMSS), which incorporates
compliance to OHSAS 18001 (Occupational Health and Safety), ISO14001 (Environment) and ISO9001 (Quality). Lynas Malaysia is on
track to achieve external certification to these standards in 2013.
lynas Corporation limiteD ANNUAL REPORT 2013
29
Directors’ report
Malawi operations
The company is continuing to work with the Malawi Government with the aim of resolving the issues affecting Lynas’ title to the
Kangankunde Rare Earths (“KGK”) resource development in Malawi. Since fiscal year 2012, no further capital investment has been made
and the project remains on hold.
earnings per share
earnings (loss) per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
June 30,
2013
2012
(7.71)
(7.71)
(5.12)
(5.12)
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 and Environment 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.
30
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, 2013, and complied with all of
the Council’s Principles and Recommendations except as noted below in relation to Recommendations 2.2 and, up until March 31, 2013,
Recommendation 2.3.
Details of the Group’s corporate governance practices in place throughout the financial year ended June 30, 2013 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 evaluation.
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.
lynas Corporation limiteD ANNUAL REPORT 2013
31
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.
During the financial year ended June 30, 2013, the Board had 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 were viewed as
independent Directors. During the financial year ending June 30, 2012, Mr Forde acted as Chairman of the LampsOn Board, which had
oversight of the construction of Phase 1 of the Rare Earths Project, and received consultancy fees for those services. As construction
of 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. The Board does not view this historical consultancy arrangement as interfering with the exercise of unfettered and
independent judgement.
N. Curtis is the Non-Executive Chairman. As Mr Curtis was employed as the Chief Executive Officer of the Group up until March 31,
2013, Mr Curtis is not an independent Director of the Group in accordance with the definition above.
E. Noyrez is an Executive Director and the Chief Executive Officer of the Group. As the Chief Executive Officer of the Group, Mr Noyrez
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 Chairman of the Group. Mr Curtis has a 0.82% shareholding in the Group and the Board does not view this as
interfering with the exercise of unfettered and independent judgement. However, as Mr Curtis was employed as the Chief Executive
Officer of the Group up until March 31, 2013, Mr Curtis is not an independent Director of the Group in accordance with the Council’s
definition of independence.
The Board believes that Mr Curtis is the best person to perform the role of Chairman of the Group. The role of Mr Curtis as Chairman
is balanced by the presence of a clear majority of independent Directors on the Board. In addition Mr Forde, who is an independent
Non-Executive Director, acts as the Deputy Chairman of the Board. The role of the Deputy Chairman 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.
Recommendation 2.3 – The roles of Chair and Chief Executive officer should be separated
As disclosed in relation to Recommendation 2.2, N. Curtis acted as both Executive Chairman and Chief Executive Officer of the Group up
until March 31, 2013. During that period, the Group was primarily in the development phase and the Board believed that Mr Curtis was
the best person to perform both the roles of Chairman and Chief Executive Officer at that stage of the Group’s growth. To reflect the
Group’s transition from development to producing status, Mr Curtis’ role changed from Executive Chairman and Chief Executive Officer
to Non-Executive Chairman with effect from March 31, 2013. E. Noyrez succeeded Mr Curtis as Chief Executive Officer from that date.
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 Ms Conlon and Messrs. Davidson, Forde and Switkowski. 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:
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.
(1)
(2)
(3)
(4)
32
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 who held office as at June 30, 2013 is as follows:
name
N. Curtis
J. Klein
D. Davidson
W. Forde
Z. Switkowski
K. Conlon
E. Noyrez
term in offiCe
11 years
8 years
7 years 7 months
5 years 5 months
2 year 5 months
1 year 8 months
3 months*
* E. Noyrez joined Lynas in February 2010 as the President and Chief Operating Officer. Mr Noyrez was appointed as Chief Executive Officer
and Executive Director with effect from March 31, 2013.
(3) The reasons why Messrs Klein, Davidson, Forde and Switkowski and Ms Conlon were 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 during the year 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 Company’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 Chief Executive Officer 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.
lynas Corporation limiteD ANNUAL REPORT 2013
33
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 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.
Recommendation 3.4 – Proportion of Women Employees
The Group provides the following statistics on gender diversity as at August 28, 2013 (prior year: July 23, 2012):
(1)
Proportion of women employees in the whole organisation: 30.5% (2012 – 19.7%)
(2) Proportion of women in senior management positions: 26.7% (2012 – 20.5%)
(3) Proportion of women on the Board: 20% (2012 – 17.0%)
34
corporate Governance statement
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) During the financial year, the Audit Committee had 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 during the year 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)
Four 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)
(2)
compliance with ASX Listing Rules disclosure; and
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.
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.
lynas Corporation limiteD ANNUAL REPORT 2013
35
corporate Governance statement
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 and Environment Committee, the Audit Committee and management.
(2) The Risk Management, Safety, Health and Environment 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 and Environment 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:
(1)
The Board has received the report from management under Recommendation 7.2.
(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.
36
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 during the financial year were Ms Conlon and Messrs. Davidson, Forde and Switkowski.
Further details are provided in the Directors Meetings section of the Directors’ Report.
The Nomination and Remuneration Committee was chaired by David Davidson up until June 25, 2013. During that time, Mr Davidson
was an independent Director and was not Chair of the Board. Mr Davidson resigned as chair of the Committee, and Ms Conlon was
appointed as chair of the Committee, with effect from 25 June 2013.
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 Executive Directors 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, 2013 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 during the financial year were Ms Conlon and Messrs. Davidson, Forde and
Switkowski. 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.
lynas Corporation limiteD ANNUAL REPORT 2013
37
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:
series
grant Date
number
Date vesteD
anD exerCisable
expiry Date
exerCise
priCe
value per
option at
grant Date
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
July 21, 2008
1,000,000
July 21, 2011
July 21, 2013
September 24, 2008
14,100,000
September 24, 2011
September 24, 2013
September 24, 2008
2,700,000
September 24, 2011
September 24, 2013
January 5, 2009
July 10, 2009
100,000
200,000
January 5, 2012
January 5, 2014
September 24, 2011
September 24, 2013
October 8, 2009
24,500,000
October 8, 2012
October 8, 2014
July 1, 2010
August 19, 2010
August 19, 2010*
October 1, 2010
August 19, 2010
May 18, 2011
June 6, 2011*
1,000,000
July 1, 2013
5,250,000
August 19, 2013
604,309
August 19, 2013
1,000,000
October 1, 2013
6,450,000
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
September 22, 2014(1)
June 6, 2016
September 22, 2016
November 30, 2011
4,000,000
September 23, 2011
4,145,000
September 22, 2014
September 22, 2016
September 22, 2011*
September 22, 2011*
9,302
4,651
September 22, 2013
September 22, 2015
September 22, 2014
September 22, 2016
September 22, 2011*
765,000
September 22, 2014
September 22, 2016
December 12, 2011
2,000,000
December 12, 2014
December 12, 2016
September 25, 2012
1,510,574
September 24, 2015
September 24, 2017
September 25, 2012*
2,526,360
September 24, 2015
September 24, 2017
total
72,485,196
$ 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
$ 1.57
$ 1.02
$ 0.00
$ 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
$1.34
$ 0.51
$ 0.26
$ 0.72
(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 1,130,232 options were exercised as set out in note 30 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 $163,876. This amount is not included as part of the Directors remuneration
in note 30 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 are outlined in note 10 of the ‘notes to
the financial statements’. The Directors are satisfied that the provision of non-audit services by the auditor during the year is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001.
38
Directors’ report
DireCtors meetings
Committee membership
During the financial year, the Group had an Audit Committee, a Nomination and Remuneration Committee, and a Risk Management,
Safety, Health and Environment Committee of the Board of Directors.
Directors acting on the committees of the Board during the financial year were:
auDit
W. Forde (c)
K. Conlon
J. Klein
Z. Switkowski
nomination
anD remuneration
risk management, safety,
health anD environment
K. Conlon (c)
D. Davidson *
W. Forde
Z. Switkowski
Z. Switkowski (c)
N. Curtis
D. Davidson
J. Klein
(c) Designates the Chair of the Committee as at June 30, 2013.
* Mr Davidson resigned as chair of the Nomination and Remuneration Committee with effect from June 25, 2013. Ms Conlon was appointed as chair
with effect from June 25, 2013.
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
auDit
nomination anD
remuneration
risk management,
safety, health anD
environment
number of meetings held:
Number of meetings attended:
N. Curtis
W. Forde
K. Conlon
D. Davidson
J. Klein
Z. Switkowski
E. Noyrez
9
7
9
9
8
8
9
3*
4
–
4
4
–
4
4
–
3
–
3
3
3
–
3
–
4
2
–
–
4
4
4
–
* Mr. Noyrez was appointed as a Director with effect from March 31, 2013.
As noted earlier in this report, Messrs Davidson and Switkowski resigned as directors of the Company with effect from August 20, 2013.
The Directors acting on the committees of the Board as at the date of this report are as follows:
auDit / risk management, safety, health anD environment *
nomination anD remuneration
W. Forde (c)
K. Conlon
J. Klein
K. Conlon (c)
N. Curtis
W. Forde
(c) Designates the Chair of the Committee.
* With effect from August 20, 2013, the Board resolved to merge the Audit Committee and the Risk Management, Safety, Health & Environment
Committee into one committee.
lynas Corporation limiteD ANNUAL REPORT 2013
39
Directors’ report
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.
The Ore Reserves statement in this report has been compiled in accordance with the guidelines defined in The JORC Code. The Ore
Reserves have been compiled by Ross Bertinshaw of Golder Associates, who is a fellow of The Australasian Institute of Mining and
Metallurgy and a Chartered Professional (Mining). Mr Bertinshaw has had sufficient experience in Ore Reserve estimation relevant to
the style of mineralisation and type of deposit under consideration to qualify as Competent Person as defined in The JORC Code. Mr
Bertinshaw consents to the inclusion in this 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.
40
remuneration report – auDiteD
Dear Shareholder,
I am pleased to present our Remuneration Report for 2013. 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 enhanced by the attraction and
retention of talented and motivated individuals 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. In recent years we have focussed on enhancing alignment to
shareholders through refining the performance hurdles associated with the LTI plan. For example, in 2011, we introduced a performance
hurdle (net positive operating cash flow) into our LTI plan and then further enhanced the plan by assessing LTI against project
milestones and relative total shareholder return (“TSR”).
For the current year, we introduced a formal Short Term Incentive (“STI”) plan to further link pay with performance. The introduction
of the STI plan reflects the Group’s transition from a development phase to an 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 and meeting appropriate funds employed, working capital and cash flow targets. The STI
component was in substitution for (and not in addition to) portions of remuneration that were previously paid as LTI.
In the current year, we also introduced a clawback policy, in line with best practice in corporate governance. The policy entitles the
Group to “claw back” certain elements of the remuneration of Key Management Personnel (“KMP”) if the Group becomes aware of any
material misstatement in its financial statements for the immediately preceding three financial years due to: (i) non-compliance with
any financial reporting requirement (provided that the relevant KMP was a KMP at the time of non-compliance); (ii) the misconduct of
the KMP; or (iii) the misconduct of any other Lynas personnel under the supervision of the KMP.
Our remuneration report for 2013 reflects key events that occurred during the year, including the following:
• Effective March 31, 2013, Nicholas Curtis became Non-Executive Chairman and Eric Noyrez became Chief Executive Office and
an Executive Director. One-off termination payments totalling $953,516 were made to Mr Curtis pursuant to the cessation of his
employment contract as Executive Chairman. This is reflected in the table in Section F of this report.
• The performance hurdle for some Long Term Incentive (“LTI”) awards made in the financial year ended June 30, 2011 was not
satisfied. As a consequence, 11,700,000 options and 604,609 performance rights were cancelled. This has resulted in a reversal of
current and prior period share based payments expense of $5.5 million of which $4.1 million related to KMP. This is reflected in the
table in Section F of this report as a component of the net share based payment expense.
Other fundamental elements of our remuneration structure remain unchanged, and include:
• Fixed pay targeted at the median level (50th percentile) or better of relevant peer groups, and total remuneration (that is, fixed plus
variable pay) targeted at the 75th percentile. In response to the current operating environment, the Group has adopted a policy of no
salary increases for the financial year ending June 30, 2014.
• The LTI grant for the Executives includes relative TSR and operating milestone performance hurdles.
• In 2013, 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,
kathleen Conlon
Chair
nomination and remuneration Committee
lynas Corporation limiteD ANNUAL REPORT 2013
41
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”)
Options and Performance Rights that are issued for the benefit of selected Executives are
issued for market value to the Lynas 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 (until March 31, 2013), the Chief Executive Officer and Executive
Director (“CEO”) (from March 31, 2013), the President and Chief Operating Officer (“COO”)
(until March 31, 2013), 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 Corporate Affairs (from April 2, 2013).
Those people who have authority and responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly, including the Directors (whether
executive or otherwise) and the Executives.
lynas advanced materials plant
(“lamp”)
The LAMP, which is located in the State of Pahang, Malaysia, is the facility for the cracking
and separation of concentrate into separated Rare Earths products.
long term incentive (“lti”)
option
performance right
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 shares on the ASX over the five days prior to the date of offer
of the Options.
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 and LTI.
total shareholder return (“tsr”)
Total Shareholder Return is the total return from a share to an investor (i.e. capital gain
plus dividends).
The KMP during the financial year ended June 30, 2013 were as follows:
non-exeCutive DireCtors:
N. Curtis
W. Forde
K. Conlon
D. Davidson
J. Klein
Z. Switkowski
Chairman (from March 31, 2013, previously Executive Chairman)
Deputy Chairman, Non-Executive Director (from March 31, 2013, previously Lead
Independent Director), and Chairman of the Audit Committee
Non-Executive Director, and Chairman of the Nomination and Remuneration Committee
Non-Executive Director (resigned with effect from August 20, 2013)
Non-Executive Director
Non-Executive Director, and Chairman of the Risk Management, Safety, Health and
Environment Committee (resigned with effect from August 20, 2013)
42
remuneration report – auDiteD
exeCutives:
E. Noyrez
L. Catanzaro
A. Arnold
G. Barr
A. Jury
CEO and Executive Director (from March 31, 2013), previously President and COO
CFO
General Counsel and Company Secretary
Executive Vice President People and Culture
Executive Vice President Corporate Affairs (from April 2, 2013)
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.
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 of directors 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, both long and short term in nature, with 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 total remuneration in three elements: fixed pay, STI and LTI.
The peer group used to benchmark remuneration consisted of 12 companies (Australian and international) with similarities to the
Group in respect of their operating model, size (based on the Group’s projected size following the completion and commissioning of the
Phase 2 expansion of the Rare Earths Project), market capitalisation, target revenue, and industry sector. They were selected based on
the criteria of comparable market capitalisation and projected revenue. The peer group is designed to provide a consistent view of the
market for Executive talent over the next few years.
External advisors and remuneration advice
The Committee engages external advisors to provide advice and market related information as required.
• During the year, the Committee received remuneration recommendations (as defined in the Corporations Act 2001) from Mercer
in relation to the Non-Executive Director remuneration for the Chairman and Deputy Chairman. The following arrangements were
made to ensure that the remuneration recommendations were free from undue influence:
– The terms of Mercer’s engagement were finalised by the Chair of the Committee and all remuneration recommendations were
provided directly to the Committee Chair.
– The report containing the remuneration recommendations was provided by Mercer directly to the Chair of the Committee.
– Neither the Chairman nor the Deputy Chairman were involved in the selection and appointment of Mercer or in the development
of any advice in relation to their roles.
As a consequence, the Board is satisfied that the remuneration recommendations received were made free from ‘undue influence’ by
the members of the Key Management Personnel to whom the recommendations related.
• During the year, the Committee also received advice (but no remuneration recommendations) from Mercer in setting the appropriate
levels of total remuneration for Executives.
• Total fees paid during the year to Mercer totalled $23,463 (2012: $53,191). Of that amount, $17,325 was for the remuneration
recommendation referred to above in respect of the Chairman and Deputy Chairman. This work was completed by June 30, 2013.
• From June 2011, PricewaterhouseCoopers (“PwC”) was appointed by the Committee as its lead external adviser. During the year, PwC
did not provide any remuneration recommendations to the Committee.
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).
lynas Corporation limiteD ANNUAL REPORT 2013
43
remuneration report – auDiteD
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 consists of the following key elements:
• fixed pay (base salary and superannuation); and
• variable remuneration, being:
– STI; and
– LTI.
The Group provides no retirement benefits, other than statutory superannuation or defined benefit pension payments.
Fixed pay
Fixed pay 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 pay is targeted at
approximately the median level (50th percentile) or better of the relevant peer group.
Variable remuneration
Notwithstanding the introduction of a formal STI Plan, the Board retains ultimate 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 pay
= base + super
variable remuneration
= STI + LTI
STIs
Prior to June 30, 2012 the Board had a discretionary STI policy used to reward exceptional performance. However, with effect from July
1, 2012, the Board decided that a move towards a formalised STI policy was appropriate. The introduction of a formal STI plan resulted
in an adjustment of remuneration mix of fixed pay and variable remuneration, rather than an increase in Total Remuneration received
by Executives. The STI target opportunities for the KMP are contained in the table below.
stratum
role example
sti target
(expresseD as % of base salary)
5
6
Members of the Lynas Leadership Team (excluding CEO)
CEO & Executive Director
30 %
35 %
The goals and measures of the STI programme (including individual, team and company performance goals and measures), the relative
weightings of those measures and goals, and STI target amounts are determined and approved at the commencement of each review
period by the Remuneration Committee. During the financial year ended June 30, 2013, the measures were drafted with reference to
the following goals:
• Corporate: Profitability, Liquidity, Return on Capital, Safety
• team: Responsible Care, Customer Satisfaction, Asset Optimisation, Growth Management
• individual: Performance Rating
The payment of any award under the STI programme is subject to the Group achieving 90% of budgeted performance for free
operating cash flows.
LTIs
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 award recipient is still employed with the Group (unless this requirement, in limited circumstances, is waived by the Board),
and any relevant performance conditions are achieved.
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remuneration report – auDiteD
A summary of the performance conditions attached to Options and Performance Rights issued during the financial year ended June 30,
2013 (in addition to the requirement that the award recipient is still employed by the Group at the end of a three year vesting period)
is set out below:
(i)
50% will be conditional on the LAMP having demonstrated the capacity to produce at a rate equivalent to 22,000 tonnes
per annum rare earth oxides (REO) before the end of calendar year 2013; and
(ii) 50% will be conditional on the company’s Total Shareholder Return (TSR) being at least at the 51st percentile of ASX 100
companies calculated over the 3-year vesting period, in accordance with the following sliding scale:
(a)
(b)
(c)
If the Lynas TSR is at least at the 51st percentile, 50% of the TSR portion will vest.
If the Lynas TSR is at least at the 76th percentile, 100% of the TSR portion will vest.
If the Lynas TSR is between the 51st percentile and the 76th percentile, a pro rata amount of between 50% and
100% of the TSR portion will vest (with the relevant percentile being rounded up or down to the nearest 5%, for ease
of calculation).
In accordance with the Group’s policy governing the trading of the Company’s shares by Directors and employees, award recipients are
not permitted to hedge their Options or Performance Rights before they vest.
Clawback Policy
In circumstances where the Group becomes aware of any material misstatement in its financial statements due to: (i) non-compliance
with a financial reporting requirement; (ii) the KMP’s misconduct; or (iii) the misconduct of any other Lynas personnel under the
supervision of the relevant KMP, the Board has authority under the clawback policy to:
(a)
(b)
require a KMP to repay some or all of any STI award or LTI award granted to the KMP from July 1, 2013 (“Relevant Award”),
to the extent such award has vested;
forfeit the reference units representing all or a part of the KMP’s Relevant Award, to the extent such award
remains unvested; or
(c) withhold the payment or allocation of all or a part of the KMP’s Relevant Award, to the extent such award has not been paid
or given to that KMP.
e. serviCe agreements
The CEO and Executive Director has signed an executive services agreement containing reasonable commercial conditions. Subject to
the following provisions, the agreement is for an indefinite duration. The key provisions of the agreement are:
notice by Ceo:
notice by group:
treatment of incentives
on termination:
termination benefits:
Mr Noyrez must give three months written notice of an intention to resign. The effective date of any
such notice cannot fall prior to 31 March 2014.
The Group may terminate the agreement by giving six months’ written notice. The effective date of any
such notice cannot fall prior to 31 March 2014.
On resignation, any unvested Options may be forfeited subject to the discretion of the Board. Upon
termination of Mr Noyrez’ employment by the Group other than as a result of misconduct, Mr Noyrez
will be entitled to retain a pro – rata portion of any unvested Options and Performance Rights held by
him on the date of termination. For example, where 50% of the vesting period has been served, Mr
Noyrez will be entitled to retain 50% of the unvested Options or Performance Rights. Mr Noyrez will also
be entitled to retain any Options or Performance Rights that have vested prior to the date of termination.
Upon the Group terminating Mr Noyrez’ employment, the Group will pay a benefit for past services
equal to the lower of:
(a) the amount permitted under Part 2D.2 of the Corporations Act 2001;
(b) the sum of:
(i) the balance of Mr Noyrez’ salary over the greater of one year, plus
(ii) the STI applicable to the year in which the date of termination occurs, calculated at target.
In accordance with the Corporations Act 2001 and the formula specified above, the maximum termination
payment payable to Mr Noyrez is equal to his base salary for one year (i.e. excluding any LTI component).
Upon the Group terminating Mr Noyrez’ employment, provided that Mr Noyrez remains an employee
of good standing up until termination, Mr Noyrez will be eligible to be relocated back to his nominated
home country in accordance with Lynas’ relocation policy.
The Group may terminate Mr Noyrez’ employment 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;
lynas Corporation limiteD ANNUAL REPORT 2013
45
remuneration report – auDiteD
• on resignation or termination, unvested incentives will be treated in the same manner set out above in respect of Mr Noyrez; and
• the Group may terminate employment at any time without notice if serious misconduct has occurred.
linking remuneration anD group performanCe
f.
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 a 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. That hurdle was not satisfied.
• In the financial year ended June 30, 2012, LTI grants were subject to TSR and project milestone hurdles related to REO capacity. The
reference period for these hurdles has not yet expired.
• In the financial year ended June 30, 2013, LTI grants were also subject to TSR and project milestone hurdles related to REO capacity,
as detailed in Section D above. The reference period for these hurdles has not yet expired.
Individual performance reviews link total remuneration to individual and business unit performance. From July 1, 2012 the mix of fixed
pay and variable remuneration has been adjusted by the introduction of a formal STI plan. The introduction of the STI plan reflects
the transition of the Group from a development phase to an 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 LTI. During the financial year ended June 30, 2013, the STI plan consisted of two separate review
periods, with the first period being from July to December 2012 (“first half review period”), and the second period from January
to June 2013 (“second half review period”). As noted above in section D, the payment of any award under the STI programme is
subject to the Group achieving 90% of budgeted performance for free operating cash flow (“sti gateway”). The STI Gateway was
satisfied with respect to the First Half Review Period, and any awards that are payable under the STI programme with respect to that
period will be paid in the year ended June 30, 2014. The STI Gateway was not satisfied with respect to the Second Half Review Period.
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 cash remuneration paid 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. It also reflects
the restructure of the Executive Chairman role into two roles: (i) Non-Executive Chairman; and (ii) CEO, as discussed in the Chair’s
letter to shareholders on page 19. In the case of Executives, the increase in cash received during the financial year ended June 30, 2013
in comparison to the previous financial year reflects an adjustment to the remuneration mix in connection with the introduction of a
formal STI plan (as described in Section D above).Separately, changes in the share based remuneration from one year to the next reflect
the impact of amortising the accounting value of Options and Performance Rights over their three year vesting period and the impact
of forfeitures which can relate to both the current and prior periods in a given fiscal period. In certain periods, a negative value may
be presented which results when the forfeitures recognised in a period are greater than the accounting amortisation expense for the
current portion of the vesting period.
46
remuneration report – auDiteD
finanCial year enDeD
June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013
Number of KMPs
Executive Director
Non-Executive Directors
Other KMP
Cash Remuneration Paid ($)
Executive Director
Non-Executive Directors
Other KMP
total Cash remuneration paid (4)
Share-based remuneration net ($)
Executive Director
Non-Executive Directors
Other KMP
total share-based remuneration net (5)
total other remuneration (8) ($)
1
3
3
1
3
4
1
4
6
1
5
4
1
6
4
626,053
254,587
890,000
225,509
585,920
461,832
657,932
680,223
1,501,753
2,146,212
2,331,786
2,279,343
896,298(1)
2,399,338(2)
2,062,285(3)
2,382,393
3,261,721
3,379,538
3,617,498
5,357,921
1,789,338
2,472,449
3,218,720
3,354,243
306,001
510,933
1,337,722
1,209,861
2,076,313
2,146,587
3,093,634
2,839,426
562,628(6)
(377,239)(7)
861,969(3)
4,171,652
5,129,969
7,650,076
7,403,530
1,047,358
156,941
308,632
767,923
743,142
693,943
total remuneration ($)
6,710,986
8,700,322
11,797,537
11,764,170
7,099,222
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)
$0.52
$0.47
($4.50)
($4.50)
$0.55
$0.55
($3.23)
($3.23)
$1.66
$1.98
($3.54)
($3.54)
$1.30
$0.85
($5.12)
($5.12)
$0.65
$0.38
($7.71)
($7.71)
($29,282)
($43,041)
($57,288)
($97,879)
($141,014)
($29,282)
($43,041)
($59,086)
($87,770)
($143,555)
(1) Cash Remuneration paid to the CEO in his previous role as COO (until March 31, 2013) and as CEO (from March 31, 2013).
(2)
Includes the cash remuneration paid to the Chairman as Chief Executive Officer and Executive Chairman (until March 31, 2013) and as
Non-Executive Chairman (from March 31, 2013).
(3) Other KMP encompasses the Executives (excluding both the Executive Chairman and the COO for the period up to March 31, 2013, and excluding
the CEO from March 31, 2013).
(4) Total cash remuneration encompasses cash salary and fees and other short term employee benefits.
(5) Represents the cumulative impact of amortising the accounting value of Options and Performance Rights over their three year vesting period
including the impact of forfeitures recognised during the period.
(6) Share-based remuneration (as determined in accordance with note 5 above) to the CEO in his previous role as COO and President (until March 31,
2013) and as CEO and Executive Director (from March 31, 2013).
(7) Includes the share-based remuneration (as determined in accordance with note 5 above) to the Chairman as Chief Executive Officer and Executive
Chairman (until March 31, 2013) and as Non-Executive Chairman (from March 31, 2013).
(8) Other remuneration encompasses non-monetary benefits, superannuation and other pension payments.
g. non-exeCutive DireCtor remuneration
Objective
Remuneration of Non-Executive Directors (“NEDs”) is set at a level that enables the Group to attract and retain talented and motivated
people 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.
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 20, 2012, and an aggregate pool of
$1,250,000 was approved. The aggregate fees for NEDs for the period did not exceed this amount.
lynas Corporation limiteD ANNUAL REPORT 2013
47
remuneration report – auDiteD
Components of Non-Executive Director Remuneration
Each NED receives a fee for being a Director of the Company, and a fee for each committee of which they are members. The NED fees,
including committee fees, include statutory superannuation contributions where appropriate.
Base Fees
Base fees for NEDs for the financial year ended June 30, 2013 were:
• Chairman $350,000 per annum
• Deputy Chairman $125,000 per annum; and
• Non-Executive Director $100,000 per annum.
As Mr Curtis was employed by the Group as Executive Chairman until March 31, 2013, he received only a pro-rata proportion of the
Non-Executive Chairman fee.
Committee Fees
boarD Committee
Audit Committee
Risk Management, Safety, Health and Environment Committee
Nomination and Remuneration Committee
Chair
$
member
$
30,000
25,000
25,000
15,000
12,500
12,500
The remuneration for NEDs for the financial years ended June 30, 2013 and June 30, 2012 is set out in Section H of this report.
48
remuneration report – auDiteD
h. Details of remuneration
year enDeD June 30, 2013
short-term benefits
post employment
benefits
long-term benefits
other
short-
term
employee
benefits
Cash
salary
anD fees
non-
monetary
benefits
termi-
nation
payments
superan-
nuation
anD other
pension
payments
total
short
term anD
post-emp
benefits
share-
baseD
payments
(net)(1)
perfor-
manCe
relateD
% of
total
total
896,298
837,500
127,500
71,209
153,670
127,500
128,443
481,516
419,728
665,160
95,881
–
–
–
–
–
–
–
–
–
300,000(9)
100,000(11)
380,353
–
74,826(3)
1,351,477
562,628
29%
1,914,105
14,155
953,516(5)
–
44,292
–
–
–
17,628
13,419
16,832
3,090
–
–
–
–
–
–
–
–
–
–
–
25,000
13,830
–
1,805,171
(78,620)
(5%)
1,726,551
127,500
140,501
167,500
127,500
–
(92,047)
(114,525)
(92,047)
0%
(190%)
(216%)
(260%)
127,500
48,454
52,975
35,453
11,560
140,003
–
0%
140,003
25,000
25,000
524,144
458,147(8)
24,840
1,006,832
4,118
203,089
218,035
274,395
369,539
–
29%
37%
27%
0%
742,179
732,542
1,376,371
203,089
name
executive
Director
E. Noyrez(2)
non-executive
Directors
N. Curtis(4)
K Conlon
D. Davidson(6)
W. Forde
J. Klein
Z. Switkowski(7)
executives
A. Arnold
G. Barr
L. Catanzaro
A. Jury(10)
total
4,004,405 400,000
489,769
953,516
204,174 6,051,864
1,047,358
7,099,222
(1) Represents the cumulative impact of amortising the accounting value of Options and Performance Rights over their three year vesting period
including the impact of forfeitures recognised during the period. At times a negative value may be presented which results when the forfeitures
recognised in the period (which may relate also to earlier periods) are greater than the accounting expense for the current portion of the
vesting period.
(2) Appointed as CEO, and ceased to act as COO, with effect from March 31, 2013.
(3) French Citizen Pension Payment.
(4) Ceased to be a member of the Executive and assumed role of Non-Executive Chairman with effect from March 31, 2013.
(5) This amount represents payments made to Mr Curtis pursuant to the cessation of his employment as Executive Chairman, including a termination
payment in accordance with his Service Agreement, and accrued entitlements for annual leave and long service leave.
(6) Resigned with effect from August 20, 2013.
(7) Resigned with effect from August 20, 2013.
(8) The increase in cash paid to Mr Barr in the financial year ended June 30, 2103 is consistent with the Group’s benchmarking analysis and
remuneration policy set out in section B of this report. Mr Barr was appointed as Executive Vice President of People & Culture in April 2011.
However, Mr Barr’s remuneration was not adjusted to reflect this change in role until the financial year ended June 30, 2013.
(9) Represents one-off amounts fixed under the terms of Ms Catanzaro’s employment contract.
(10) Appointed as Executive Vice President Corporate Affairs with effect from April 2, 2013.
(11) Represents one-off amounts fixed under the terms of Mr Jury’s employment contract.
lynas Corporation limiteD ANNUAL REPORT 2013
49
remuneration report – auDiteD
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
termi-
nation
payments
superan-
nuation
anD other
pension
payments
total
short
term anD
post-emp
benefits
share-
baseD
payments
(net)(1)
perfor-
manCe
relateD
% of
total
total
4,366
679,920
3,354,243
83% 4,034,163
657,932
85,000
35,610
303,670(3)
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(5)
348,125
–
–
18,557
4,516
–
–
–
–
–
–
–
–
–
–
–
112,853
–
50,000
13,830
–
85,000
137,500
317,500
127,500
11,560
140,003
428,921
306,748
350,828
27,670
25,000
24,387
80,705(6)
20,738
5,437
–
370,858
468,145
370,858
–
526,916
247,159
187,187
0%
73%
60%
74%
0%
55%
45%
35%
85,000
508,358
785,645
498,358
140,003
955,837
553,907
538,015
1,443,293
1,018,401
41% 2,461,694
164,689
178,738
177,323
682,440
52%
79%
342,012
861,178
name
executive
Director
N. Curtis
non-executive
Directors
K Conlon(2)
D. Davidson
W. Forde
J. Klein
Z. Switkowski
executives
A. Arnold
G. Barr
L. Catanzaro(4)
E. Noyrez
J. G. Taylor(7)
M. James(8)
total
3,054,645
450,000
479,449
112,853
263,693 4,360,640 7,403,530
11,764,170
(1) Represents the cumulative impact of amortising the accounting value of Options and Performance Rights over their three year vesting period
including the impact of forfeitures recognised during the period. At times a negative value may be presented which results when the forfeitures
recognised in the period (which may relate also to earlier periods) are greater than the accounting expense for the current portion of the
vesting period.
(2) Appointed Director from November 1, 2011.
(3) 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 30 June 2012.
(4) Appointed CFO from December 12, 2011.
(5) $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.
(6) French Citizen Pension Payment.
(7) Ceased as a member of the KMP on December 12, 2011.
(8) Resigned August 31, 2011.
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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
July 21, 2008
1,000,000
July 21, 2011
September 24, 2008
14,100,000
September 24, 2011
September 24, 2008
2,700,000
September 24, 2011
January 5, 2009
July 10, 2009
100,000
200,000
January 5, 2012
September 24, 2011
October 8, 2009
24,500,000
October 8, 2012
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*
December 12, 2011
September 25, 2012
September 25, 2012*
total
1,000,000
5,250,000
604,309
1,000,000
6,450,000
200,000
420,000
4,000,000
4,145,000
9,302
4,651
765,000
2,000,000
1,510,574
2,526,360
72,485,196
July 1, 2013
August 19, 2013
August 19, 2013
October 1, 2013
August 19, 2013
October 1, 2011
June 6, 2014
September 22, 2014
September 22, 2014
September 22, 2013
September 22, 2014
September 22, 2014
December 12, 2014
September 24, 2015 (1)
September 24, 2015 *(2)
expiry Date
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, 2015
September 22, 2016
September 22, 2016
December 12, 2016
September 24, 2017
September 24, 2017
exerCise
priCe
value per
option at
grant Date
$ 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
$ 1.57
$ 1.02
$ 0.00
$ 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
$ 1.34
$ 0.51
$ 0.26
$ 0.72
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
(1) Options Series T
(2) Performance Rights Series U
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 and Performance Rights issued during the year
ended June 30, 2013:
Grant date share price ($)
Exercise price ($)
Dividend yield
Expected volatility
Risk-free interest rate
Life of Option
series t
series u
$0.795
$1.02
Nil
50%
2.63%
5 years
$0.795
$0.00
Nil
50%
2.58%
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.
lynas Corporation limiteD ANNUAL REPORT 2013
51
remuneration report – auDiteD
The resulting weighted average fair values for those Options and Performance Rights issued during the year are:
number
of options
anD
performanCe
name
rights grant Date
fair
value
per
instru-
ment at
grant
Date
exerCise
priCe
per
instru-
ment expiry Date
first
exerCise Date
last
exerCise Date
A. Arnold
G. Barr
1,057,402 September 25, 2012
439,806 September 25, 2012
L. Catanzaro
453,172 September 25, 2012
E. Noyrez
1,312,853 September 25, 2012
$0.26
$0.72
$0.26
$0.72
$1.02 September 24, 2017 September 24, 2015 September 24, 2017
$0.00 September 24, 2017 September 24, 2015 September 24, 2017
$1.02 September 24, 2017 September 24, 2015 September 24, 2017
$0.00 September 24, 2017 September 24, 2015 September 24, 2017
total
3,263,233
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.
The following tables outline the Options and Performance Rights issued for the benefit of Directors and the KMP during the 2013 and
2012 financial years and those Options which have vested at each respective year-end.
June 30, 2013
balanCe at
beginning
of perioD
granteD
grant Date
options
exerCiseD/
CanCelleD/
forfeiteD/
other
options
expireD
without
exerCise
net
Change
balanCe
at enD of
perioD
amount
vesteD at
June 30,
2013
A. Arnold
G. Barr
6,835,000
1,057,402 September 25, 2012
(750,000)
–
307,402
7,142,402
4,400,000
2,060,000
439,806 September 25, 2012
(100,000)
(200,000)
139,806
2,199,806
450,000
L. Catanzaro
2,000,000
453,172 September 25, 2012
–
30,000,000
3,100,000
4,000,000
–
3,100,000
–
–
–
–
–
–
K. Conlon
N. Curtis(1)
D. Davidson(2)
W. Forde
A. Jury(3)
J. Klein
E. Noyrez(4)
Z. Switkowski(5)
10,000,000
1,312,853 September 25, 2012 (1,500,000)
–
–
–
–
–
–
–
– (4,500,000)
–
–
–
–
(600,000)
(750,000)
–
(600,000)
–
–
–
–
–
–
–
–
–
453,172
2,453,172
–
–
–
–
(4,500,000) 25,500,000
17,000,000
(600,000)
2,500,000
1,900,000
(750,000)
3,250,000
2,500,000
–
–
–
(600,000)
2,500,000
1,900,000
(187,147)
9,812,853
5,000,000
–
–
–
total
61,095,000 3,263,233
(8,800,000)
(200,000)
(5,736,767) 55,358,233 33,150,000
(1) Ceased to be a member of the Executive, and assumed the role of Non-Executive Chairman, with effect from March 31, 2013.
(2) Resigned with effect from August 20, 2013.
(3) Appointed as Executive Vice President Corporate Affairs with effect from April 2, 2013.
(4) Appointed as CEO and an Executive Director, and ceased to act as COO and President, with effect from March 31, 2013.
(5) Resigned with effect from August 20, 2013.
52
remuneration report – auDiteD
June 30, 2012
balanCe at
beginning
of perioD granteD
grant Date
options
exerCiseD/
CanCelleD/
forfeiteD/
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
–
–
–
–
–
–
–
Z. Switkowski
J. G. Taylor(4)
–
–
–
2,500,000 1,020,000
September 23, 2011
(3,520,000)
M. James(5)
7,250,000
–
total
65,700,000 11,165,000
–
(5,250,000)
(2,000,000)
(7,250,000)
(8,770,000) (7,000,000) (4,605,000) 61,095,000 10,150,000
(1) Other represents the de-recognition of Options and Performance Rights of individuals no longer members of the KMP or who have resigned their
employment with the Group.
(2) Appointed CFO with effect from December 12, 2011.
(3) Appointed as a Non-Executive Director with effect from 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 Mr. 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.
lynas Corporation limiteD ANNUAL REPORT 2013
53
Directors’ report
future Development
The Group regularly reports quarterly information regarding developments in the operations of the Group. Most recently, the Group
indicated that, in response to challenging Rare Earths market conditions, it has taken a number of steps to strengthen its position during
this subdued period, and in turn, be ready to respond to improved market conditions. The Group has decided to optimise its production
levels at LAMP at the Phase 1 capacity level of 11,000 tonnes per annum REO until market prices recover. The Group will continue with
the commissioning of the Phase 2 expansion of the LAMP ahead of an expected start-up in Q3 2013. The subsequent ramp up of Phase
2 production will be determined by various factors, primarily being market conditions.
subsequent events
On September 13, 2013 the Group entered into a deed of amendment to modify certain provisions under the Sojitz Loan Facility.
Reference should be made to note 23 to the Financial Report for further details.
With the exception of the above, there have been no other events subsequent to June 30, 2013 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
Chairman
Sydney
September 13, 2013
54
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
Chairman
Sydney
September 13, 2013
lynas Corporation limiteD ANNUAL REPORT 2013
55
inDepenDent auDitor’s report
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
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 2013, 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
56
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 2013
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
2013. 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 2013,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Graham Ezzy
Partner
Sydney
13 September 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
lynas Corporation limiteD ANNUAL REPORT 2013
57
auDitor’s inDepenDence Declaration
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
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 2013, 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
Graham Ezzy
Partner
Sydney
13 September 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
58
consoliDateD statement of comprehensive income
for the year enDeD
in a$’000
Revenue
Cost of sales*
gross profit (loss)
Other income
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
other comprehensive income (loss) for the period net of income tax that may
be reclassified subsequently to profit or loss
Exchange differences on translation of 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 8, 9, 10, 17 and 31.
June 30,
note
2013
2012
950
(950)
–
9,795
(125,124)
(13,082)
–
–
–
–
(74,124)
(15,928)
(128,411)
(90,052)
4,767
(17,370)
(12,603)
(141,014)
(2,541)
2,840
(10,667)
(7,827)
(97,879)
10,109
(143,555)
(87,770)
37,015
(865)
(10,191)
(4,653)
36,150
(14,844)
(107,405)
(102,614)
(7.71)
(7.71)
(5.12)
(5.12)
7
9
11
11
12
14
14
26
26
The Consolidated Statement of Comprehensive Income should be read in conjunction with the notes to the financial statements.
lynas Corporation limiteD ANNUAL REPORT 2013
59
consoliDateD statement of financial position
for the year enDeD
in a$’000
assets
Cash and cash equivalents
Trade and other receivables
Current tax receivables
Prepayments
Inventories
total current assets
Inventories
Available for sale – financial assets
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Intangible assets – software
Other assets
total non-current assets
total assets
liabilities
Trade and other payables
Borrowings
Current tax liabilities
Employee benefits
Provisions
Deferred income
total current liabilities
Trade and other payables
Borrowings
Provisions
Employee benefits
total non-current liabilities
total liabilities
net assets
equity
Share capital
Retained earnings (accumulated deficit)
Reserves
total equity attributable to the equity holders of the Company
June 30,
note
2013
2012
15
16
17
17
18
20
21
19
22
23
24
25
7
22
23
25
24
26
26
141,371
205,438
1,765
49
3,946
78,380
932
–
1,538
52,419
225,511
260,327
14,555
1,802
880,335
47,654
431
17,396
13,272
3,754
706,603
26,342
321
13,038
962,173
763,330
1,187,684
1,023,657
(33,515)
(10,949)
–
(3,650)
(16,520)
(5,420)
(46,369)
–
(120)
(1,382)
(3,061)
–
(70,054)
(50,932)
(782)
(1,962)
(447,068)
(403,062)
(40,865)
(207)
(3,777)
(430)
(488,922)
(409,231)
(558,976)
(460,163)
628,708
563,494
994,645
(430,691)
64,754
823,161
(287,136)
27,469
628,708
563,494
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
60
consoliDateD statement of chanGes in equity
in a$’000
balance at the
beginning of the year
Other comprehensive income
(loss) for the period
Total income (loss) for the period
Total comprehensive income
(loss) for the year
Issue of shares, net of issue costs
Exercise of options, net of
issue costs
Employee remuneration settled
through share-based payments
share
Capital
aCCumulateD
DefiCit
foreign
CurrenCy
translation
reserve
equity
settleD
employee
benefits
reserve
investment
revaluation
reserve
other
reserves
total
823,161
(287,136)
(36,132)
33,993
865
28,743
563,494
–
–
–
37,015
(143,555)
–
–
–
823,161
(430,691)
883
33,993
171,258
226
–
–
–
–
–
–
–
–
–
1,135
35,128
(865)
–
–
–
–
–
–
–
–
36,150
(143,555)
28,743
456,089
–
–
–
171,258
226
1,135
28,743
628,708
balance at June 30, 2013
994,645
(430,691)
883
balance at the
beginning of the year
Other comprehensive income
(loss) for the period
Total income (loss) for the period
Total comprehensive income (loss)
for the year
Exercise of options, net of issue
costs
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
821,994
(199,366)
(25,941)
24,562
5,518
–
–
–
(10,191)
(87,770)
–
–
–
821,994
(287,136)
(36,132)
24,562
1,167
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,431
(4,653)
–
865
–
–
–
–
–
–
–
–
–
626,767
(14,844)
(87,770)
(524,153)
1,167
40,936
40,936
(12,193)
(12,193)
–
9,431
balance at June 30, 2012
823,161
(287,136)
(36,132)
33,993
865
28,743
563,494
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
lynas Corporation limiteD ANNUAL REPORT 2013
61
consoliDateD statement of cash flows
for the year enDeD
in a$’000
Cash flows from operating activities
Receipts from customers
Receipt of government grants
Payments to suppliers and employees
Royalties paid
Income taxes (paid) received
net cash flows from (used in) operating activities
Cash flows from investing activities
Payment for property, plant and equipment
Payment for deferred exploration, evaluation and development expenditure
Payment for intangible assets
Security bonds paid
Security bonds refunded
Payment for available for sale financial assets
net cash from (used in) investing activities
Cash flows from financing activities
Drawdown of loans and borrowings
Mt Kellett convertible bonds
Interest received
Interest and other financing costs paid
Proceeds from the issue of share capital
Payment of transaction costs – Issue of shares
Proceeds from the issue of share capital resulting from the exercise of options
Payment of transaction costs – Issue of Mt Kellett convertible bonds
net cash from (used in) financing activities
net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations (net) on cash held
Closing cash and cash equivalents
June 30,
note
2013
2012
597
15,216
–
–
(121,293)
(86,847)
(558)
(204)
–
(66)
(106,242)
(86,913)
(111,351)
(339,373)
(102)
(90)
(111)
(125)
(3,053)
(9,568)
349
–
260
(749)
(114,247)
(349,666)
–
4,984
(19,741)
175,000
(5,350)
226
–
211,864
6,027
(12,244)
–
–
1,167
(625)
155,119
206,189
(65,370)
(230,390)
205,438
1,303
433,956
1,872
15
141,371
205,438
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
62
consoliDateD statement of cash flows
Reconciliation of the profit (loss) for the year with the net cash from (used in) operating activities
for the year enDeD
in a$’000
Profit (loss) for the year
Adjustments for:
Depreciation and amortisation
Employee remuneration settled through share-based payments
Impairment loss on property, plant and equipment & other
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 other assets and liabilities
Change in provisions and employee benefits
Change in deferred income
Foreign exchange
June 30,
note
2013
2012
(143,555)
(87,770)
17
9
9
9
11
12
16,567
1,135
3,950
–
9,132
12,603
2,541
(204)
(997)
1,349
9,431
4,770
2,613
8,545
7,827
(10,109)
(66)
2,524
(22,673)
(37,649)
(12)
(4,358)
15,504
5,420
(1,295)
9,789
(9,307)
1,713
–
9,427
net cash from (used in) operating activities
(106,242)
(86,913)
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
lynas Corporation limiteD ANNUAL REPORT 2013
63
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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, 2013 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 13, 2013.
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, 2013. Information for the
comparative year is for the 12 month period ended June 30, 2012.
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.
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.
64
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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) under
which the acquisition method of accounting is used to account for the acquisition of subsidiaries and businesses by the Group. 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.
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.
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.
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FOR THE YEAR ENDED JUNE 30, 2013
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.
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 was
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.
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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.
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.
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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 re-measured 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.
Derivative financial instruments
3.4
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 below).
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.
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.
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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.
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
Plant and Equipment
Leasehold improvements
30 to 99 years
4 to 25 years
5 to 30 years
Buildings
Fixtures and fittings
Motor vehicles
10 to 30 years
3 to 15 years
7 to 8 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.
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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.
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 or pre-production 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.
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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. When the excess is negative, it 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.
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
4 to 5 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.
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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 adjusted EBITDA (forecasted) 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
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.
Other long-term employee benefits
(c)
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.
72
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Termination benefits
(d)
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
(e)
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.
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.
lynas Corporation limiteD ANNUAL REPORT 2013
73
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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.
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.
74
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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).
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.
lynas Corporation limiteD ANNUAL REPORT 2013
75
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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 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.
3.25 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.
3.26 New and revised standards and interpretations
(a)
The following new and revised Standards and Interpretations have been adopted in the current year.
Standards and Interpretations affecting amounts reported in the current period
• AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets
• AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income
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.
76
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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
effeCtive for
the annual
reporting perioD
beginning on
expeCteD to be
initially applieD
in the finanCial
year enDing
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
July 1, 2013
June 30, 2014
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)
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian
Accounting Standards arising from AASB 13
July 1, 2015
June 30, 2016
July 1, 2013
June 30, 2014
July 1, 2013
June 30, 2014
July 1, 2013
June 30, 2014
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 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
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 or period of initial application.
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.
lynas Corporation limiteD ANNUAL REPORT 2013
77
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Income taxes
4.2
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.
4.3 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.
Impairment of assets
4.4
Assets are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
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.
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.
78
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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.
Non-derivative financial liabilities
5.4
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 operation, further 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 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.
in a$’000
business segment reporting
Revenue
Cost of sales
gross profit
Expenses and other income
earnings before interest
and tax (“ebit”)
Financial income
Financial expenses
profit (loss) before income tax
Income tax benefit (expense)
profit (loss) for the year
EBIT
Depreciation and amortisation
earnings before interest,
tax, depreciation and
amortisation (“ebitDa”)
for the year enDeD June 30, 2013
for the year enDeD June 30, 2012
note
rare earth
operations
Corporate/
unalloCateD
total
Continuing
operations
rare earth
operations
Corporate/
unalloCateD
total
Continuing
operations
950
(950)
–
–
–
–
950
(950)
–
–
–
–
–
–
–
–
–
–
(117,479)
(10,932)
(128,411)
(87,886)
(2,166)
(90,052)
(117,479)
(10,932)
(128,411)
(87,886)
(2,166)
(90,052)
4,767
(17,370)
(141,014)
(2,541)
(143,555)
(117,479)
16,226
(10,932)
(128,411)
341
16,567
(87,886)
1,317
(2,166)
32
17
2,840
(10,667)
(97,879)
10,109
(87,770)
(90,052)
1,349
(101,253)
(10,591)
(111,844)
(86,569)
(2,134)
(88,703)
lynas Corporation limiteD ANNUAL REPORT 2013
79
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Reconciliation of EBITDA to Adjusted EBITDA
for the year enDeD June 30, 2013
for the year enDeD June 30, 2012
note
rare earth
operations
Corporate/
unalloCateD
total
Continuing
operations
rare earth
operations
Corporate/
unalloCateD
total
Continuing
operations
in a$’000
earnings before interest,
tax, depreciation and
amortisation (“ebitDa”)
Included in EBITDA:
Impairment charge – property plant
and equipment & other
Impairment charge – deferred
exploration, evaluation and
development expenditure
Impairment charge – inventory
Receipt of government grants
Non-cash employee remuneration
settled through share based
payments comprising:
Share based payments
expense for the period
Impact of options and performance
rights forfeited during the period
adjusted earnings before
interest, tax, depreciation and
amortisation (“adjusted ebitDa”)
9
9
9
7
30
30
7. other inCome
in a$’000
Government grants
total other income
(101,253)
(10,591)
(111,844)
(86,569)
(2,134)
(88,703)
3,179
771
3,950
4,770
–
9,132
–
–
–
–
–
(9,795)
–
9,132
(9,795)
6,627
6,627
(5,492)
(5,492)
2,613
8,545
–
–
–
–
–
–
–
4,770
2,613
8,545
–
9,431
9,431
–
–
(88,942)
(18,480)
(107,422)
(70,641)
7,297
(63,344)
for the year enDeD June 30,
2013
2012
9,795
9,795
–
–
In January 2013 the Company received a cash payment of $15.2 million from the Australian Taxation Office (“ATO”) for eligible
research and development (R&D) expenditure principally incurred in connection with the testing and commissioning of the Mt Weld
concentration and processing plant. The eligible R&D expenditure was incurred in the prior year and was partly recognised through the
profit or loss component of the statement of comprehensive income and partly capitalised to inventory. During the year ended June 30,
2013 $9.8 million of this amount has been recognised in the profit and loss component of the statement of comprehensive income to
match the treatment of the underlying R&D expenditure. The remaining amount of $5.4 million has been deferred for future recognition
to reflect the progressive utilisation of the Group’s concentrate inventory to which certain of these costs were capitalised.
80
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
8. personnel expenses
The following items of expenditure are included in general and administration expenses:
in a$’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
Impairment loss – other
total other expenses
10. 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(1)
Other fees
total auditor’s remuneration ernst & young (australia)
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
total auditor’s remuneration ernst & young (other locations)
for the year enDeD June 30,
2013
2012
37,006
26,254
1,396
1,135
1,100
1,599
1,327
9,431
256
791
42,236
38,059
note
17
20
21
for the year enDeD June 30,
2013
9,132
3,361
–
589
2012
8,545
4,770
2,613
–
13,082
15,928
for the year enDeD June 30,
2013
2012
321,764
384,064
125,041
209,850
25,600
11,300
830,869
246,750
33,297
33,297
25,286
25,286
(1) Tax services represent work undertaken for the preparation of the Australian tax-consolidated group’s research and development expenditure
return which resulted in the Company receiving a cash payment of $15.2 million from the ATO (refer to note 7).
lynas Corporation limiteD ANNUAL REPORT 2013
81
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
11. finanCial inCome anD expenses
in a$’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)
for the year enDeD June 30,
2013
2012
4,767
4,767
2,840
2,840
(5,614)
(113)
(8,439)
(1,694)
(1,510)
(974)
(35)
(2,881)
(4,526)
(2,251)
(17,370)
(12,603)
(10,667)
(7,827)
*
Interest income (expense) are shown net of amounts capitalised in respect of qualifying assets; refer to note 20 for more information.
12. inCome taxes
in a$’000
Current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Deferred tax
Deferred tax (benefit) expense recognised in the year
total income tax (benefit) expense relating to the continuing operations
12.1
Income tax recognised in profit (loss)
in a$’000
Profit (loss) before tax for continuing operations
Income tax (benefit) expense calculated at 30% (2012: 30%)
Add (deduct):
R&D tax offset not included in assessable income
Effect of expenses that are not deductible in determining taxable profit
Effect of foreign exchange gains and losses
Effect of unused tax losses not recognised as deferred tax assets
Effect of temporary differences not recognised as deferred tax assets
Effect of different tax rates of subsidiaries operating in other jurisdictions
Foreign tax paid on profits attributable to foreign permanent establishments
Effect of (under) over provision in prior years
Other adjustments
total current year income tax (benefit) expense
82
for the year enDeD June 30,
2013
2012
53
–
53
371
(383)
(12)
2,488
2,541
(10,097)
(10,109)
for the year enDeD June 30,
2013
2012
(141,014)
(97,879)
(42,304)
(29,364)
(2,939)
21,502
(16,420)
37,839
5,256
–
58
–
(451)
2,541
–
11,644
(5,376)
13,243
–
(57)
87
(383)
97
(10,109)
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
12.2
Income tax recognised directly in equity
in a$’000
Deferred tax
Initial recognition of the equity component of Mt Kellett convertible bonds
Share issue costs
total income tax (benefit) expense recognised directly in equity
12.3
Income tax recognised directly in other comprehensive income
in a$’000
Deferred tax
Available for sale – financial assets
Revaluation of deferred tax assets and liabilities through foreign currency translation reserve
total income tax (benefit) expense recognised directly in other comprehensive income
13. DeferreD tax assets anD liabilities
13.1 Deferred tax balances
for the year enDeD June 30,
2013
2012
–
1,502
1,502
(12,193)
–
(12,193)
for the year enDeD June 30,
2013
2012
371
615
986
2,096
–
2,096
in a$’000
temporary differences
Inventory
Deferred exploration, evaluation and development
expenditure
Property plant and equipment
Available for sale – financial assets
Borrowings
Share-based payments
Costs of equity and debt raisings
Other
unused tax losses and credits
Tax losses
balanCe at
July 1,
2012
reCogniseD
in profit
or loss
reCogniseD
in equity
reCogniseD
in oCi
balanCe at
June 30,
2013
–
(5,927)
1,346
430
(371)
(5,462)
(2,820)
1,779
408
(3,156)
(22,994)
215
11,168
1,927
(885)
(494)
(4,690)
(20,146)
4,690
–
17,658
(2,488)
–
–
–
–
–
–
1,502
–
1,502
–
1,502
–
–
–
371
–
–
–
615
986
–
986
(5,927)
(1,810)
(22,564)
215
5,706
(893)
2,396
529
(22,348)
22,348
–
lynas Corporation limiteD ANNUAL REPORT 2013
83
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
balanCe
at July 1,
2011
reCogniseD
in profit
or loss
reCogniseD
in equity
reCogniseD
in oCi
balanCe
at June 30,
2012
–
–
(2,365)
–
–
2,365
–
–
–
–
1,346
430
(102)
6,768
(2,820)
(623)
408
5,407
–
–
–
(12,230)
–
37
–
–
–
2,096
–
–
–
–
(12,193)
2,096
4,690
10,097
–
–
(12,193)
2,096
1,346
430
(371)
(5,462)
(2,820)
1,779
408
(4,690)
4,690
–
in a$’000
temporary differences
Deferred exploration, evaluation and development
expenditure
Property plant and equipment
Available for sale – financial assets
Borrowings
Share-based payments
Costs of equity and debt raisings
Other
unused tax losses and credits
Tax losses
13.2 Unrecognised deferred tax assets
in a$’000
Deductible temporary differences and 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
Deductible temporary differences
as at June 30,
2013
2012
236,678
2,330
17,519
125,808
2,330
–
256,527
128,138
The Group’s unused tax losses of a revenue nature for which no deferred tax assets have been recognised relate to Australia (2013:
$178.2 million, 2012: $125.8 million), Malaysia (2013: $56.5 million, 2012: Nil) and Malawi (2013: $1.9 million, 2012: Nil). At June 30,
2013 it was not probable that the Group would have future taxable profits in these jurisdictions against which these tax losses can be
utilised. The potential tax benefit of these tax losses to the Group is $68.2 million (2012: $37.7 million).
The Group’s unused tax losses of a capital nature and deductible temporary differences of $2.3 million (2012: $2.3 million) and $17.5
million (2012: Nil), respectively, for which no deferred tax assets have been recognised relate to Australia. At June 30, 2013 it was not
probable that the Group would have future taxable profits in Australia against which these tax losses and deductible temporary differences
can be utilised. The potential tax benefit of these tax losses and temporary differences to the Group is $6.0 million (2012: $0.7 million).
14. other Comprehensive inCome
Within the statement of comprehensive income the Group has disclosed certain items of other comprehensive income net of the
associated income tax expense or benefit. The pre-tax amount of each of these items and the associated tax effect is as follows:
in a$’000
2013
2012
for the year enDeD June 30,
Exchange differences on translating
foreign operations
Available for sale financial assets
total other comprehensive income
pre-tax
tax effect
total
pre-tax
tax effect
total
36,400
(1,236)
35,164
615
371
986
37,015
(865)
(10,191)
(6,647)
36,150
(16,838)
–
1,994
1,994
(10,191)
(4,653)
(14,844)
84
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
15. 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,
2013
2012
17,665
108,000
15,706
141,371
26,040
98,337
81,061
205,438
Restricted cash represents funds provided under the Sojitz loan facility (refer to note 23) which is principally available to fund the capital
expenditure associated with the Phase 2 expansion of the Concentration Plant at Mount Weld and the Lynas Advanced Materials Plant
(“LAMP”) in Malaysia ($10.3 million). The residual restricted funds are available to fund future interest payments under the Sojitz facility
($5.4 million).
16. traDe anD other reCeivables
in a$’000
Trade receivables
total current trade and other receivables
17.
inventories
in a$’000
Raw materials and consumables
Work in progress
Finished goods
total inventories
Current inventories
Non-current inventories
as at June 30,
2013
1,765
1,765
2012
932
932
as at June 30,
2013
2012
42,235
50,167
533
92,935
78,380
14,555
41,823
23,868
–
65,691
52,419
13,272
During the year ended June 30, 2013 the Group recognised write-downs on inventories held to their net realisable value totalling $9.1
million for externally acquired raw materials ($5.1 million), work in progress ($3.8 million) and finished goods ($0.2 million). The write
down was recognised as a component of other expenses in the profit and loss component of the statement of comprehensive income
(refer to note 9). In the year ended 30 June 2012 the write down of $8.5 million related to externally acquired raw materials for the
Malaysian operations.
lynas Corporation limiteD ANNUAL REPORT 2013
85
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred exploration, evaluation and
development expenditure and intangible assets for the years ended June 30, 2013 and 2012 respectively in the following categories:
in a$’000
2013
2012
2013
2012
2013
reCogniseD in general anD
aDministration expense
reCogniseD in inventory
total
Property, plant and equipment
Deferred exploration and evaluation
expenditure
Intangibles
total
15,797
530
140
965
260
124
2,838
6,135
18,635
–
–
183
26
530
140
16,467
1,349
2,838
6,344
19,305
2012
7,100
443
150
7,693
On the sale of inventory to customers, the component of the depreciation or 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. This was $0.1 million
in the year ended June 30, 2013 (June 30, 2012: nil).
During the year ended June 30, 2013 the Group recognised royalties payable to the Western Australian Government totalling $0.6
million (year ended June 30, 2012: $nil). Royalties arise on the shipment of the Group’s concentrate from Australia to Malaysia.
18. available for sale – finanCial assets
in a$’000
listed equity securities
- at cost
- impact of marked-to-market movement (gross of tax)
as at June 30,
2013
2012
2,518
(716)
1,802
2,518
1,236
3,754
The fair value of the available for sale asset is derived from quoted market selling prices. Refer to note 27.6 for further information.
19. other non-Current assets
in a$’000
Security deposits – Local banking facilities, Malaysia
Security deposits – Local banking facilities and Mining Tenements, Australia
Security deposits – AELB, Malaysia
as at June 30,
2013
2012
9,836
4,271
3,289
8,058
4,980
–
17,396
13,038
Local banking facilities 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 Australia and Malaysia. The weighted average annual interest rate in
Australia was 5.84% (2012: 4.48%) and the weighted average annual interest rate in Malaysia was 3% (2012: 3%).
During the year the Group transferred in total $3.3 million to the Malaysian Government’s Atomic Energy Licencing Board (“AELB”).
These payments form a component of a total US$50 million of instalments due in accordance with the conditions underlying the
granting of the TOL to the Group for the LAMP in Malaysia. Please refer to note 32 for the residual commitment to the AELB.
86
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
20. property, plant anD equipment
in a$’000
as at June 30, 2013
Cost
Accumulated impairment losses
Accumulated depreciation
Carrying amount
as at June 30, 2012
Cost
Accumulated impairment losses
Accumulated depreciation
Carrying amount
leaseholD
lanD
builDings
plant anD
equipment
fixtures
anD
fittings
motor
vehiCles
assets
unDer
ConstruC-
tion
leaseholD
improve-
ments
total
46,597
592,325
–
(1,907)
(1,549)
(23,827)
45,048
566,591
26,962
88,060
–
(1,105)
25,857
(845)
(6,036)
81,179
26,962
88,060
8,628
(25)
(3,163)
5,440
5,956
(28)
(2,187)
3,741
5,956
1,197
(196)
(312)
689
968
(161)
(202)
605
249,791
(6,313)
19,696
918,234
–
(8,441)
–
(607)
(29,458)
243,478
19,089
880,335
598,900
(3,736)
–
249
–
(192)
721,095
(4,770)
(9,722)
595,164
57
706,603
968
598,900
249
721,095
(1,105)
(6,881)
(2,215)
(363)
(3,736)
(192)
(14,492)
Cost at the beginning of the year
Accumulated depreciation and impairment
losses at the beginning of the year
Carrying amount at the beginning
of the year
Additions
Capitalisation of borrowing costs
25,857
–
–
81,179
2,594
–
Depreciation for the year (note 17)
(279)
(16,895)
Impairment loss for the year
Transfers of assets under construction
Transfers from (to) inventory
Change in rehabilitation obligations
(note 25)
Effect of movements in exchange rates
–
–
–
16,263
3,207
(1,195)
450,244
1,086
409
–
50,255
–
–
85
Carrying amount at June 30, 2013
45,048
566,591
5,440
Cost at the beginning of the year
Accumulated depreciation and impairment
losses at the beginning of the year
Carrying amount at the beginning
of the year
Additions
Capitalisation of borrowing costs
Depreciation for the year (note 17)
Impairment loss for the year
Transfers
27,169
1,429
2,900
(839)
(96)
(1,478)
26,330
–
–
(277)
–
–
1,333
2,350
–
(5,935)
(845)
84,262
14
Effect of movements in exchange rates
(196)
Carrying amount at June 30, 2012
25,857
81,179
3,741
1,503
–
(975)
–
1,422
626
–
(755)
(28)
2,417
59
3,741
605
49
–
(102)
(53)
–
–
–
190
689
818
(92)
726
146
–
(111)
(161)
–
5
595,164
96,221
13,946
–
(2,113)
57
27
52
706,603
100,394
13,998
(384)
(18,635)
–
(3,361)
(468,590)
17,260
(9,665)
–
–
–
18,515
2,077
–
(9,256)
16,263
74,329
243,478
19,089
880,335
331,180
249
363,745
–
(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
On January 7, 2013 the Group announced the successful commissioning of the cracking and leaching Rare Earths extraction units of
Phase 1 of the LAMP in Malaysia. During June 2013, the Group announced that the expansion of the concentration plant at Mount Weld
(Phase 2) was completed and that the plant had produced at capacity. With these activities complete, assets under construction that
related to Phase 1 of the LAMP and Phase 2 of the Mount Weld concentration plant were transferred to the appropriate asset category.
Depreciation during the year ended June 30, 2013 commenced for Phase 1 of the Malaysian operations from January 2013 and from 30
June 2013 for Phase 2 of the Mount Weld concentration plant.
The transfer to inventory of $9.7 million relates to items categorised as spares paid for as a component of the LAMP’s Phase 1
construction. The remaining balance of assets under construction relates predominately to Phase 2 of the LAMP.
lynas Corporation limiteD ANNUAL REPORT 2013
87
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
During the year ended June 30, 2013 the Group recognised an asset and a provision for the future estimated cost of restoring and
rehabilitating Phase 1 of the LAMP in Malaysia ($16.3 million). Refer to note 25 for further details.
During the year ended June 30, 2013, the Group recognised an impairment loss of $3.4 million in relation to its property plant and
equipment in Malaysia ($3.0 million) and the Mount Weld operations ($0.4 million) which resulted from the identification of certain
assets being surplus or redundant to the current operational plan.
During the year ended June 30, 2012, the Group recognised an impairment loss of $1.3 million in relation to its property, plant
and equipment in Malawi (resulting from the previously reported court proceeding that arose during the period) and a $3.5 million
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).
The impairment charges in both years were recognised in the statement of comprehensive income as a component of other expenses
in the profit or loss (2013: $3.4 million; 2012: $4.8 million) and reduced the carrying value of associated assets.
Restrictions on the title of property plant and equipment are outlined in note 23.
21.
DeferreD exploration, evaluation anD
Development expenDiture
exploration
anD
evaluation
expenDiture
Development
expenDiture
pre
proDuCtion
stripping
rehabili-
tation
asset
20,944
(14,483)
(1,047)
5,414
20,540
(14,220)
(809)
5,511
20,540
(15,029)
5,511
91
(188)
–
5,414
20,430
(11,974)
8,456
111
(443)
(2,613)
5,511
17,543
(3,641)
(278)
13,624
16,617
(3,641)
–
12,976
16,617
(3,641)
12,976
926
(278)
–
13,624
16,617
(3,641)
12,976
–
–
–
4,078
24,602
–
(64)
–
–
4,014
24,602
4,078
3,777
–
–
4,078
4,078
–
4,078
–
(64)
–
4,014
4,078
–
4,078
–
–
–
–
–
3,777
3,777
–
3,777
–
–
20,825
24,602
3,777
–
3,777
–
–
–
total
67,167
(18,124)
(1,389)
47,654
45,012
(17,861)
(809)
26,342
45,012
(18,670)
26,342
1,017
(530)
20,825
47,654
44,902
(15,615)
29,287
111
(443)
(2,613)
12,976
4,078
3,777
26,342
in a$’000
as at June 30, 2013
Cost
Accumulated impairment losses
Accumulated amortisation
Carrying amount
as at June 30, 2012
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 (note 17)
Change in rehabilitation obligations
Carrying amount at June 30, 2013
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 (note 17)
Impairment loss for the year
Carrying amount at June 30, 2012
88
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
During the year the Group recognised an increase to the future estimated rehabilitation asset and provision for the restoration and
rehabilitation of the Mount Weld mining operations and concentration plant. Refer to note 25 for further details.
During the year ended June 30, 2012, the Group recognised an impairment loss of $2.6 million in relation to its exploration and
evaluation expenditure in Malawi (resulting from the previously reported court proceeding that arose during the period). These charges
were recognised in the statement of comprehensive income as a component of other expenses in the profit or loss and reduced the
carrying value of these assets to nil. No changes for impairment were made in the year ended June 30, 2013.
Restrictions on the title of the deferred exploration, evaluation and development expenditure are outlined in note 23.
22. traDe anD other payables
in a$’000
Trade payables
Accrued expenses
Other payables
total trade and other payables
Current
Non-current
as at June 30,
2013
2012
9,393
19,622
5,282
21,521
23,170
3,640
34,297
48,331
33,515
782
46,369
1,962
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 (2013: $3.7 million; 2012: $29.1 million) and Phase 2 of the Rare Earth Project (2013:
$13.2 million; 2012: $11.4 million).
23. borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information
about the Group’s exposure to interest rate and foreign currency risk, see note 27.
in a$’000
Current borrowings
Sojitz loan facility
non-current borrowings
Sojitz loan facility
Mt Kellett convertible bonds
Sojitz loan facility
Unamortised transaction costs
Carrying amount
Principal value of Mt Kellett convertible bonds (1)
Unamortised equity component
Unamortised transaction costs
total financial liability carrying amount
as at June 30,
2013
2012
10,949
–
235,410
211,658
221,479
181,583
447,068
403,062
246,359
221,479
–
–
246,359
221,479
246,359
(34,353)
(348)
221,479
(39,434)
(462)
211,658
181,583
(1) The principal balance reflects the full value of the Mt Kellett convertible bond. On initial recognition, part of this value is recognised as a
component of equity.
lynas Corporation limiteD ANNUAL REPORT 2013
89
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Sojitz facility
The Sojitz loan facility for US$225 million 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 Sojitz 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 capacity of Rare
Earth Oxide (“REO”) to 22,000 tonnes per annum from the expected Phase 1 production capacity of 11,000 tonnes per annum.
The Sojitz loan 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, under the original terms of the facility, occurred once there
has been an average level of production over three consecutive months of not less than 70% of the nameplate capacity of Phase 1 of
the LAMP and a cash operating margin test is met. After the Group achieves Completion of Phase 1, the securities retained by Sojitz
comprise 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 semiannually.
The rate of interest for each interest period is the LIBOR published semi annual rate plus a margin of 2.75%. There is also a requirement
to pay withholding tax on this interest.
Under the original terms of the facility, the principal was repayable 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 semi annual interest period, a break fee may be payable by the Company.
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 imposes 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 semi annual rate plus a margin of 5.25%.
Given the delay in the receipt of the TOL in 2012, the Group entered into an Amendment Deed (the “Deed”) with respect to the
Sojitz loan facility on September 25, 2012. Under the terms of the Deed and as a result of the delays in first production at the LAMP,
the parties 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 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 million) and a temporary higher interest rate of LIBOR published
semi annual 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”).
Subject to the above paragraph, 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” test which, under the original terms of the facility,
required the Group to meet certain production volumes and cash operating margins over a three month period, by no later than the
original Project Sunset Date of January 19, 2014.
Arising from subdued global rare earths demand and previous delays to the start up of the LAMP, the production and financial profile of
Lynas will be different to that envisaged at the time of the Sojitz loan facility’s establishment. Consequently, the Group entered into a
deed of amendment on September 13, 2013 under which the terms and conditions of the Sojitz loan facility are restructured to better
suit the new profile. Pursuant to the deed of amendment, the parties agreed to amend the Sojitz loan facility as follows:
(1)
(2)
Defer until March 31, 2015 the date by which the Group is required to either (a) meet certain production volume and cash
operating margins under the Completion of Phase 2 test (as described above) or (b) make an additional principal repayment of
US$35 million (giving a total principal repayment of at least US$125 million by March 31, 2015);
Completion of Phase 1 (as described above) for the purpose of the release of most of the Sojitz fixed securities will occur once
the necessary average production and cash operating margin is achieved over a period of six consecutive months (previously
three consecutive months);
90
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
(3)
Amend the repayment schedule as follows:
repayment Date:
January 19, 2014
September 30, 2014
March 31, 2015
September 30, 2015
March 31, 2016
instalment
US$10 million
US$35 million
US$45 million
US$45 million
US$90 million
The previous repayment schedule was 5 equal six monthly instalments of US$45 million from March 31, 2015 to March 31, 2017.
(4)
That each time that the Group conducts a debt raising (subject to an exception for a basket of “Permitted Financial Liabilities”
up to US$80 million), 50% of the amount raised must be used for a partial prepayment (without penalty or break costs) of the
Sojitz loan facility. This obligation ceases to apply once a total principal amount of US$125 million is repaid.
Any prepayments in addition to those specified under paragraph 3 and including those under paragraph 1(b) above are to be applied in
reverse order to the repayment schedule (i.e. applied in the first instance to the March 2016 payment).
The obligations of the Company under the Sojitz loan facility are guaranteed by the Group’s subsidiaries other than Lynas Africa
Holdings Pty Ltd and Lynas Africa Limited (“the Guarantors”). 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 million unsecured convertible bonds issue (the
“Convertible Bonds”) with Mt Kellett Capital Management (“Mt Kellett”), a US-based investment firm. Initially funding for the
Convertible Bonds was received on January 25, 2012 (US$50 million) with the final payment of US$175 million being received on
February 28, 2012. None of the Convertible Bonds had been converted into shares as at the end of the financial year.
The proceeds from the Convertible Bond issue have been 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 A$1.25 per share (at a set US$ to A$ exchange rate). Conversion may occur at any time between July 25, 2012 and July 25, 2016.
The conversion price may be adjusted as a result of certain equity related transactions such as the issue of shares, payment of dividends,
rights issues or redemptions. Following the ISP and SPP placement in November and December 2012 (refer to note 26), the conversion
price was adjusted to A$1.15 per share.
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, a cross default by the Group in relation to certain other financial indebtedness (including
the Sojitz loan facility), 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 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 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 Phase 1 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.
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 shown above.
lynas Corporation limiteD ANNUAL REPORT 2013
91
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Terms and debt repayment schedule
CurrenCy
nominal
interest rate
year of
maturity
faCe value
(usD ‘000)
Carrying
amount
(auD ‘000)
faCe value
(usD ‘000)
Carrying
amount
(auD ‘000)
as at June 30, 2013
as at June 30, 2012
Sojitz loan facility
Mt Kellett
convertible bonds*
USD
USD
LIBOR + 2.75% +2.50%
from 25 September 2012
2.75%
2016
2016
225,000
246,359
225,000
221,479
225,000
450,000
211,658
458,017
225,000
450,000
181,583
403,062
*
The carrying amount of the Mt Kellet note reflects the current value of the debt component of the instrument.
Nominal interest rates
average for the year enDeD
June 30, 2013
average for the year enDeD
June 30, 2012
base rate
margin
total rate
base rate
margin
total rate
Sojitz loan facility
Mt Kellett convertible bonds
0.61%
2.75%
4.62%
–
5.86%
2.75%
0.57%
2.75%
2.75%
–
3.32%
2.75%
24. employee benefits
in a$’000
Provision for annual leave
Provision for long service leave
Other
total employee benefits
Current
Non-current
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, 2013
Current
Non-current
total provisions at June 30, 2013
Current
Non-current
total provisions at June 30, 2012
92
as at June 30,
2013
2012
1,611
375
1,871
3,857
3,650
207
restoration
anD rehabili-
tation
onerous
ContraCts
3,777
37,088
–
–
3,061
20,694
(7,235)
–
40,865
16,520
–
40,865
40,865
–
3,777
3,777
16,520
–
16,520
3,061
–
3,061
1,382
430
–
1,812
1,382
430
total
6,838
57,782
(7,235)
–
57,385
16,520
40,865
57,385
3,061
3,777
6,838
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Restoration and Rehabilitation
The activities of the Group give rise to obligations for asset and site restoration and rehabilitation at the LAMP in Malaysia and the
Mount Weld concentration plant. The key areas of uncertainty in estimating the provisions for these obligations are set out in note 4.6.
An initial provision of $16.3 million was made during 2013 in respect of the Group’s future costs to decommission, restore and
rehabilitate the LAMP in Malaysia. These costs arise from the ongoing construction and operation of Phase 1 of the LAMP. The provision
was recognised following the successful commissioning of the Phase 1 operations at the LAMP during June 2013. Upon cessation of
operations, the site including the processing assets, ancillary facilities, utilities and the onsite storage facility will be decommissioned
and any materials removed from the location. The Group has used third party specialists to assist in estimating these costs and will
review these estimates periodically over time as the operations continue to develop.
The provision for the restoration and rehabilitation of the Mount Weld mining operations and concentration plant site increased
from $3.8 million at June 30, 2012 to $24.6 million at June 30, 2013 following a reassessment of the future costs to decommission
and restore the site to pastoral use. These costs arise from the operation of the mining and concentration processing facilities at Mt
Weld and take into account the areas of disturbance at the balance date and the actions required upon cessation of operations to
decommission and remove the processing plant from the location. The Group has used current guidance as provided by the Department
of Minerals and Petroleum in Western Australia along with internal specialists with the relevant industry experience to develop and
revise these cost estimates. These estimates will be periodically reviewed over time as the operations continue to develop.
For both the provision at the LAMP and the Mount Weld concentration plant, a corresponding increase in either property plant and
equipment or deferred exploration and evaluation expenditure assets respectively has been recognised on the Group’s balance sheet.
Reference should be made to notes 20 and 21 respectively for details on the corresponding assets at the LAMP and Mount Weld. The
unwinding of the effect of discounting of the provision is recognised as a finance cost.
Onerous contracts
The provision for onerous contracts represents the expected value of obligations arising under ‘take or pay’ clauses of non-cancellable
supply agreements that the Group is currently contracted to. The provision at June 30, 2013 represents management’s current
forecasted estimate of the value of materials that the Group will be unable to take under these contracts over the life of the agreement
as well as the value of materials not delivered under the agreement through to June 30, 2013.
26. equity anD reserves
26.1 Share capital
Balance at the beginning of the year
Issue of shares pursuant to Institutional Share Placement (“ISP”)
Issue of shares pursuant to Share Purchase Plan (“SPP”)
Issue of shares pursuant to option conversion
Equity raising costs
Deferred tax on equity raising costs
balance at June 30
as at June 30,
2013
2012
number of
shares
‘000
1,715,029
200,000
44,642
1,130
–
–
number of
shares
‘000
a$’000
1,713,647
821,994
–
–
–
–
1,382
1,167
–
–
–
–
a$’000
823,161
150,000
25,000
226
(5,244)
1,502
1,960,801
994,645
1,715,029
823,161
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as
declared from time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in
the event of a wind-up.
Further detail regarding the issue of shares on option conversion is provided in note 30.
lynas Corporation limiteD ANNUAL REPORT 2013
93
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
26.2 Reserves
in a$’000
Equity settled employee benefits
Foreign currency translation
Investment revaluation
Other
balance at June 30
as at June 30,
2013
2012
35,128
883
–
28,743
64,754
33,993
(36,132)
865
28,743
27,469
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 18). As at June 30, 2013, the cumulative revaluation losses
of $0.9 million were transferred to the profit or loss component of the statement of comprehensive income. This was on the basis that
the revaluation losses on the available for sale financial assets was considered to represent a significant and prolonged decline in value.
The other reserve represents the equity component of the US$225 million unsecured Mt Kellett convertible bonds issued in the prior
year, net of the associated deferred tax (see note 23).
26.3 Earnings (loss) per share
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted loss per share are as follows:
in a$’000
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 (No‘000)
as at June 30,
2013
2012
(143,555)
(143,555)
(87,770)
(87,770)
Weighted average number of ordinary shares used in calculating basic loss per share:
1,861,087
1,714,094
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.
72,485
83,029
186,515
171,594
adjusted weighted average number of ordinary shares used in calculating diluted loss per share
1,861,087
1,714,094
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
(7.71)
(7.71)
(5.12)
(5.12)
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.
94
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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.
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 recognised
primarily in the other comprehensive income component of the Group’s statement of 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$225 million Mt Kellett convertible bonds.
Exposure to foreign exchange risk
The Group is exposed to foreign exchange risk on financial assets and financial liabilities that are denominated in foreign currencies (i.e.
currencies other than the functional currency of each of the Group’s operating entities). The Group’s exposure on financial assets and
liabilities by currency which have the potential of impacting the profit or loss component of the statement of comprehensive income is
detailed below.
in a$’000
June 30, 2013
Cash and cash equivalents
Trade and other receivables
Trade and other payables
total exposure
June 30, 2012
Cash and cash equivalents
Trade and other receivables
Trade and other payables
total exposure
auD
usD
total
5,342
24
(42)
5,324
60,379
4,088
–
64,467
571
1,834
(13,680)
(11,275)
3,997
–
(6,783)
(2,786)
5,913
1,858
(13,722)
(5,951)
64,376
4,088
(6,783)
61,681
lynas Corporation limiteD ANNUAL REPORT 2013
95
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
In addition, the Group is exposed to foreign exchange risk on the translation of its operations that are denominated in currencies other
than AUD. The Group’s net assets denominated in currencies other than the AUD which have the potential of impacting the other
comprehensive income component of the statement of comprehensive income are:
in ’000
June 30, 2013
Net asset exposure – local currency
June 30, 2012
Net asset exposure – local currency
myr
usD
2,147,429
975,255
1,945,580
586,268
Significant exchange rates
The following significant exchange rates applied to the translation of net assets of Group entities which are denominated in currencies
other than AUD during the period:
USD
MYR
average rate for the year
enDeD June 30,
Closing rate as at June 30,
2013
2012
2013
2012
1.0212
3.1375
1.0367
3.1968
0.9133
2.8826
1.0159
3.2431
Sensitivity analysis
A change in exchange rates would impact future payments and receipts on the Group’s financial 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 year 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$’000
USD
AUD
inCrease/(DeCrease) in profit
after tax for the year enDeD
June 30, 2013
inCrease/(DeCrease) in profit
after tax for the year enDeD
June 30, 2012
10%
strengthening
10%
weakening
10%
strengthening
10%
weakening
(1,128)
532
1,128
(532)
(278)
6,447
278
(6,447)
A change in exchange rates would also impact the translation of net assets of Group operations whose functional currencies are
denominated in currencies other than AUD, which is the Group’s presentation currency. A 10% strengthening or weakening of these
currencies against the Group’s presentation currency, at the reporting date, would have increased (decreased) the reported net asset
position with a corresponding change to the foreign currency translation reserve (‘FCTR’) for the year by the amounts shown. This
analysis assumes that all other variables remain constant. The same basis has been applied for all periods presented.
inCrease/(DeCrease) in fCtr
for the year enDeD
June 30, 2013
inCrease/(DeCrease) in fCtr
for the year enDeD
June 30, 2012
10%
strengthening
10%
weakening
10%
strengthening
10%
weakening
59,092
74,496
(59,092)
(74,496)
31,825
59,992
(31,825)
(59,992)
in a$’000
USD
MYR
96
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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.
The following table sets out the Group’s interest rate risk re-pricing profile:
in a$’000
June 30, 2013
fixed rate instruments
Loans and borrowings
Mt Kellett convertible bonds
total fixed rate instruments
floating rate instruments
Cash and cash equivalents
Other non-current assets
Loans and borrowings
Sojitz loan facility
total variable rate instruments
total
June 30, 2012
fixed rate instruments
Loans and borrowings
Mt Kellett convertible bonds
total fixed rate instruments
floating rate instruments
Cash and cash equivalents
Other non-current assets
Loans and borrowings
Sojitz loan facility
total variable rate instruments
total
total
6 months
or less
6 to 12
months
1 to 2
years
2 to 5
years
more than
5 years
(212,006)
(212,006)
–
–
141,371
14,107
141,371
14,107
(246,359)
(90,881)
(302,887)
(246,359)
(90,881)
(90,881)
(182,045)
(182,045)
–
–
205,438
13,038
205,438
13,038
(221,479)
(3,003)
(185,048)
(221,479)
(3,003)
(3,003)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(212,006)
(212,006)
–
–
–
(212,006)
(182,045)
(182,045)
–
–
–
–
(182,045)
–
–
–
–
–
–
–
–
–
–
–
–
–
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 or the statement of financial position.
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 both
the statement of financial position and profit or loss through the statement of comprehensive income 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.
lynas Corporation limiteD ANNUAL REPORT 2013
97
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
in a$’000
50 basis point parallel increase in interest rates
50 basis point parallel decrease in interest rates
for the year enDeD June 30,
2013
2012
(454)
454
(15)
15
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 material 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 on-going 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
June 30, 2013
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
34,297
34,297
–
–
–
Loans and borrowings
Sojitz loan facility
Mt Kellett convertible
bonds
total
June 30, 2012
non-derivative
financial liabilities
4.79%
275,681
*
268,716
578,694
–
–
34,297
7,016
17,810
250,855
1,863
8,879
5,589
23,399
261,264
512,119
Trade and other payables
n/a
48,331
48,331
–
–
–
Loans and borrowings
Sojitz loan facility
Mt Kellett convertible
bonds
total
3.75%
252,555
*
260,913
561,799
643
713
49,687
1,287
1,425
2,712
8,559
242,066
6,413
14,972
252,362
494,428
*
The cash coupon on the instrument of 2.75% is payable on the $US225 million principal. The weighted average effective interest rate is 8.07%
on the Mt Kellett convertible bonds. This rate is impacted by the unwinding of the equity component of the instrument which is recognised as
a component of the Group’s net financing expenses.
–
–
–
–
–
–
–
–
98
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
available
for sale
Cash,
loans anD
reCeivables
other
liabilities
total
Carrying
amount
total
fair value
–
–
–
–
1,802
–
1,802
141,371
1,765
49
3,946
–
17,396
164,527
–
–
–
–
–
–
–
141,371
141,371
1,765
49
3,946
1,802
17,396
1,765
49
3,946
1,802
17,396
166,329
166,329
–
–
–
–
–
–
–
3,754
–
–
–
–
–
(34,297)
(34,297)
(34,297)
(246,359)
(211,658)
(246,359)
(211,658)
(246,359)
(211,658)
(492,314)
(492,314)
(492,314)
205,438
1,538
932
–
13,038
3,754
220,946
–
–
–
–
–
–
205,438
205,438
1,538
932
3,754
13,038
1,538
932
3,754
13,038
224,700
224,700
–
–
–
–
–
–
–
–
–
–
(48,331)
(120)
(48,331)
(120)
(48,331)
(120)
(221,479)
(181,583)
(221,479)
(181,583)
(221,479)
(181,583)
(451,513)
(451,513)
(451,513)
27.5 Classification and fair values
in a$’000
June 30, 2013
assets
Cash and cash equivalents
Trade and other receivables
Current tax receivable
Prepayments
Available for sale financial assets
Other assets
total assets
liabilities
Trade and other payables
Loans and borrowings:
Sojitz loan facility
Mt Kellett convertible bonds
total liabilities
June 30, 2012
assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Available for sale financial assets
Other assets
total assets
liabilities
Trade and other payables
Tax payable
Loans and borrowings:
Sojitz loan facility
Mt Kellett convertible bonds
total liabilities
The Group did not have any financial assets or financial liabilities classified as fair value through profit or loss at June 30, 2013
(June 30, 2012: none).
The methods used in determining fair values of financial instruments are discussed in note 5.
lynas Corporation limiteD ANNUAL REPORT 2013
99
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
27.6 Fair value measurements recognised in the statement of comprehensive income
Subsequent to initial recognition, the Group measures financial instruments at fair value grouped into the following 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).
As at June 30, 2013, the Group had available for sale financial assets comprising listed shares of $1.8 million (June 30, 2012: $3.8
million) that were classified as Level 1 financial instruments. The Group did not hold any level 2 or level 3 financial instruments as at
June 30, 2013 (June 30, 2012: none).
28. relateD parties
28.1 Key management personnel compensation
The aggregate compensation made to the Directors and other members of KMP of the Group is set out below:
in a$’000
Short-term employee benefits
Other long-term benefits
Share-based payments
total compensation paid to key management personnel
for the year enDeD June 30,
2013
2012
4,894,174
3,984,094
1,157,690
1,047,358
376,546
7,403,530
7,099,222
11,764,170
The compensation of each member of the KMP of the Group for the current and prior year is set out within the Remuneration Report.
28.2 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
2013 and 2012 financial years:
June 30, 2013
A. Arnold
G. Barr
L. Catanzaro
K. Conlon(1)
N. Curtis(2)
D. Davidson(3)
W. Forde
A. Jury(4)
J. Klein
E. Noyrez(5)
Z. Switkowski(6)
total
balanCe at
July 1, 2012
reCeiveD on
exerCise of
options
net other
Change
balanCe at
June 30, 2013
3,000
2,828
–
18,154
16,045,758
700,828
1,001,656
20,828
2,082,236
–
700,828
20,576,116
–
–
–
–
–
–
–
–
–
–
–
–
4,464
–
–
7,464
2,828
–
111,361
129,515
–
16,045,758
26,785
26,785
79,172
–
–
727,613
1,028,441
100,000
2,082,236
–
26,785
727,613
275,352
20,851,468
(1) Shares held by spouse.
(2) Ceased to be a member of the Executive and assumed role of Non-Executive Chairman from March 31, 2013.
(3) Resigned with effect from August 20, 2013.
(4) Appointed as Executive Vice President Corporate Affairs with effect from April 2, 2013.
(5) Appointed as CEO and an Executive Director, and ceased to act as COO and President, with effect from March 31, 2013.
(6) Resigned with effect from August 20, 2013.
100
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
balanCe at
July 1, 2011
reCeiveD on
exerCise of
options
net other
Change
balanCe at
June 30, 2012
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
–
–
18,154
–
–
–
–
–
3,000
2,828
–
18,154
16,045,758
700,828
1,001,656
2,082,236
–
300,000
700,828
(71,973)(4)
(1,151,058)(6)
–
–
(902,877) 20,555,288
June 30, 2012
A. Arnold
G. Barr
L. Catanzaro(1)
K. Conlon(2)
N. Curtis
D. Davidson
W. Forde
J. Klein
E. Noyrez
Z. Switkowski
J. Taylor(3)
M. James(5)
total
(1) Appointed CFO from December 12, 2012.
(2) Appointed Director from November 1, 2012. Shares in the Company held by spouse.
(3) Ceased as a member of the KMP on December 12, 2012.
(4) During the period J. 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, 2012.
(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.
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 2013 and
2012 financial years and those options which have vested at each respective year-end.
June 30, 2013
balanCe at
beginning
of perioD
granteD
grant Date
options
exerCiseD/
CanCelleD/
other
options
expireD
without
exerCise net Change
balanCe
at enD
of perioD
amount
vesteD at
June 30,
2013
A. Arnold
G. Barr
6,835,000
1,057,402 September 25, 2012
(750,000)
–
2,060,000
439,806 September 25, 2012
(100,000)
(200,000)
L. Catanzaro
2,000,000
453,172 September 25, 2012
–
30,000,000
3,100,000
4,000,000
–
3,100,000
–
–
–
–
–
–
–
–
–
–
–
–
K. Conlon
N. Curtis(1)
D. Davidson(2)
W. Forde
A. Jury(3)
J. Klein
E. Noyrez(4)
Z. Switkowski(5)
10,000,000
1,312,853 September 25, 2012 (1,500,000)
–
–
–
–
–
–
(4,500,000)
(600,000)
(750,000)
–
(600,000)
307,402
139,806
453,172
–
7,142,402
4,400,000
2,199,806
2,453,172
–
450,000
–
–
(4,500,000) 25,500,000
17,000,000
(600,000)
2,500,000
1,900,000
(750,000)
3,250,000
2,500,000
–
–
–
(600,000)
2,500,000
1,900,000
(187,147)
9,812,853
5,000,000
–
–
–
–
–
–
–
–
–
–
–
–
total
61,095,000
3,263,233
(8,800,000)
(200,000)
(5,736,767) 55,358,233 33,150,000
(1) Ceased to be a member of the Executive and assumed role of Non-Executive Chairman from March 31, 2013.
(2) Resigned with effect from August 20, 2013.
(3) Appointed as Executive Vice President Corporate Affairs with effect from April 2, 2013.
(4) Appointed as CEO and an Executive Director, and ceased to act as COO and President, with effect from March 31, 2013.
(5) Resigned with effect from August 20, 2013.
lynas Corporation limiteD ANNUAL REPORT 2013
101
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
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
L. Catanzaro(2)
K. Conlon(3)
850,000
1,210,000 September 23, 2011
–
–
2,000,000 December 12, 2011
–
–
N. Curtis
31,000,000
4,000,000 November 30, 2011(6)
D. Davidson
3,100,000
4,000,000
3,100,000
–
–
–
–
–
–
8,000,000
2,000,000 September 23, 2011
–
–
–
2,500,000
1,020,000 September 23, 2011
(3,520,000)
W. Forde
J. Klein
E. Noyrez
Z. Switkowski
J. G. Taylor(4)
M. James(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
–
–
–
–
–
–
–
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 de-recognition of Options and Performance Rights of individuals no longer members of the KMP or who have resigned their
employment with the Group.
(2) Appointed CFO from December 12, 2011.
(3) Appointed as a Non-Executive Director from 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.
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 2013 financial year are
contained in note 30.
Other than those noted above, there were no transactions entered into by the Group with the KMP during the 2013 and 2012
financial years.
28.3 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.
102
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
29. group entities
name of group entity
prinCipal aCtivity
ownership interest
as at June 30,
Country of
inCorporation
2013
2012
Lynas Malaysia Sdn Bdh
Operation and continued 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*
Lynas Africa Ltd
Holding company
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
The Group has established an employee share plan whereby, at the discretion of Directors, options and performance rights may be
granted over the ordinary shares of the Company for the benefit of Directors, Executives and certain employees of the Group. The
options and performance rights which are issued are granted in accordance with performance guidelines established by the Nomination
and Remuneration Committee. Each option or performance right 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 for the options is not less than the
VWAP for the five days preceding the date the option is granted. The options or performance rights hold no voting or dividend rights
and are not transferable.
Options and performance rights are provided to Key Management Personnel (“KMP”) and other selected employees to provide greater
alignment to our strategic business objectives. KMP are 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. The Executive include The Executive Chairman (until March 31, 2013), the Chief Executive Officer (“CEO”) (from
March 31, 2013), the President and Chief Operating Officer (“COO”) (until March 31, 2013), 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
Corporate Affairs (from April 2, 2013).
30.1 Movements in share options and performance rights during the year
Balance at beginning of year
Granted during the year
Expired during the year
Exercised during the year
Forfeited during the year
balance at end of year
Exercisable at end of year
for the year enDeD
June 30, 2013
for the year enDeD
June 30, 2012
number
of options
(‘000)
weighteD
average
exerCise
priCe ($)
number
of options
(‘000)
weighteD
average
exerCise
priCe ($)
83,029
4,122
(665)
(1,130)
(12,871)
72,485
42,800
0.92
0.37
–
0.20
1.09
0.87
0.68
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
lynas Corporation limiteD ANNUAL REPORT 2013
103
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
During the year ended June 30, 2013 the Group recognised a net expense of $1.1 million within the profit and loss component of the
statement of comprehensive income (2012: net expense $9.4 million). The net expense during the year ended June 30, 2013 included
the reversal of prior period expenses totalling $5.5 million associated with the forfeitures of 50% of the outstanding options and
performance rights issued on August 19, 2010 and 50% of specific performance rights issued on September 22, 2011 resulting from the
Group not achieving a specified net operating cash flow target (non-market vesting condition).
30.2 Options and performance rights exercised during the year
The following share options were exercised during the year ended June 30, 2013:
exerCise Date
September 6, 2012
September 6, 2012
September 27, 2012
number
exerCiseD
share priCe
at exerCise
Date ($)
exerCise
priCe ($)
1,000,000
100,000
30,232
1,130,232
0.84
0.84
0.80
0.16
0.66
0.00
30.3 Options and performance rights outstanding at the end of the year
The share options outstanding at the end of the year had a weighted average exercise price of $0.87 (2012: $0.92 and a weighted
average remaining contractual life of 607 days (2012: 943 days).
30.4 Options and performance rights issued in the period
The following table summarises the performance conditions attached to Options and Performance Rights issued during the financial
year ended June 30, 2013 with respect to the performance of the Group’s employees during the financial year ended June 30, 2012:
vesting sCheDule
for grants maDe in fy2013
(relateD to fy12 performanCe)
tsr hurdle (50%)
(performance against asx 100 companies)
50% of the TSR portion will vest for:
100% of the TSR portion will vest for:
51st percentile performance
76th percentile performance
Pro-rata vesting will occur between each of the above points
reo capacity hurdle (50%)
n/a
The Lynas Kuantan plant must have
demonstrated the capacity to produce at
a rate equivalent to 22,000 tonnes per
annum of REO before the end of calendar
year 2013
In addition to these requirements, the employee is required to be still employed by the Group at the end of a three year vesting period
unless the condition is waived by the Company.
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.
The weighted average fair value of the share options granted during the financial year is $427,550 (2012:$1,041,087). Options
were priced using a Black Scholes methodology. Where relevant the expected life used in the model has been adjusted based on
management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market
conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility
over the past three years and peer volatility.
Grant date share price ($)
Exercise price ($)
Expected volatility
Option life
Dividend yield
Risk-free interest rate
104
option series t option series u
0.795
1.02
50%
5 years
Nil
2.63%
0.795
0.00
50%
5 years
Nil
2.58%
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
30.5 Options and performance rights still to vest or yet to expire
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
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
July 21, 2008
1,000,000
July 21, 2011
July 21, 2013
September 24, 2008
14,100,000
September 24, 2011
September 24, 2013
September 24, 2008
2,700,000
September 24, 2011
September 24, 2013
January 5, 2009
July 10, 2009
100,000
January 5, 2012
January 5, 2014
200,000
September 24, 2011
September 24, 2013
October 8, 2009
24,500,000
October 8, 2012
October 8, 2014
July 1, 2010
August 19, 2010
August 19, 2010*
October 1, 2010
August 19, 2010
May 18, 2011
June 6, 2011*
1,000,000
July 1, 2013
July 1, 2015
5,250,000
August 19, 2013
August 19, 2015
604,309
August 19, 2013
August 19, 2015
1,000,000
October 1, 2013
October 1, 2015
6,450,000
August 19, 2013
August 19, 2015
200,000
October 1, 2011
December 31, 2015
November 30, 2011
4,000,000
420,000
June 6, 2014
September 22, 2014(1)
June 6, 2016
September 22, 2016
September 23, 2011
4,145,000
September 22, 2014
September 22, 2016
September 22, 2011*
September 22, 2011*
9,302
4,651
September 22, 2013
September 22, 2015
September 22, 2014
September 22, 2016
September 22, 2011*
765,000
September 22, 2014
September 22, 2016
December 12, 2011
2,000,000
December 12, 2014
December 12, 2016
September 25, 2012
1,510,574
September 24, 2015
September 24, 2017
September 25, 2012*
2,526,360
September 24, 2015
September 24, 2017
total
72,485,196
$ 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
$ 1.57
$ 1.02
$ 0.00
$ 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
$1.34
$ 0.51
$ 0.26
$ 0.72
(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.
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,
2013
2012
5,230
12,271
6,918
4,698
8,133
–
24,419
12,831
During the year ended June 30, 2013 $4.6 million was recognised as an expense in the statement of comprehensive income as a
component of the profit or loss in respect of operating leases (2012: $3.9 million).
The Group has contracts for several operating leases for business premises located in Sydney, Perth, Laverton, Beijing, Kuala Lumpur and
Gebeng. The Group also has several operating leases for motor vehicles and mobile plant and equipment.
lynas Corporation limiteD ANNUAL REPORT 2013
105
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
32. Capital Commitments
There were no outstanding commitments which are not disclosed in the consolidated financial report of the Group as at June 30,
2013 other than:
Exploration commitments
in a$’000
Less than one year
Between one and five years
More than five years
total
as at June 30,
2013
2012
304
1,229
3,366
4,899
270
1,034
3,076
4,380
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$’000
Less than one year
total
as at June 30,
2013
2012
2,388
2,388
68,021
68,021
At June 30, 2013 capital commitments relate to on-going capital project costs in Malaysia. All Phase 1 and Phase 2 costs in Malaysia
and Mt Weld are fully accrued at year-end.
Other commitments
in a$’000
Less than one year
Between one and five years
More than five years
total
as at June 30,
2013
2012
13,084
38,322
–
51,406
–
–
–
–
Lynas is required to pay in instalments, a total of US$50 million to the Malaysian AELB in accordance with the conditions underlying
the granting of Lynas’ TOL for the LAMP in Gebeng Malaysia. During the year Lynas has transferred $3.3 million to the Malaysian
government’s AELB, refer to note 19.
33. DeeD of Cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated August 13, 1998, the wholly-owned Australian subsidiaries of Lynas
Corporation Limited are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports,
and Director’s reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect
of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001. If a winding up event occurs under any other provision of the Act, the
Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given
similar guarantees in the event that the Company is wound-up.
The subsidiaries in addition to the Company subject to the deed are specified in note 29.
A statement of comprehensive income and statement of financial position, comprising the Company and controlled entities which are
party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee is presented as follows.
106
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Statement of Financial Position
in a$’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 – software
Available for sale financial assets
Investments in subsidiaries
Other assets
total non-current assets
total assets
Liabilities
Trade and other payables
Borrowings
Deferred income
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,
2013
2012
139,677
1,687
37,463
181,221
2,086
31,882
178,827
215,189
11,856
123,632
47,654
337
1,802
375,080
565,759
13,272
98,270
26,342
261
3,754
375,080
365,341
1,126,120
882,320
1,304,947
1,097,509
(11,094)
(10,949)
(5,420)
(1,720)
(29,183)
(24,472)
(204)
(8,000)
–
–
(1,337)
(9,337)
(3,777)
(414)
(447,068)
(403,062)
(471,744)
(407,253)
(500,927)
(416,590)
804,020
680,919
994,645
(272,662)
82,037
823,161
(210,387)
68,145
804,020
680,919
lynas Corporation limiteD ANNUAL REPORT 2013
107
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
Statement of Comprehensive Income
in a$’000
Revenue
Cost of sales
gross profit
Other income
Impairment reversal (impairment) of intercompany balances
General and administration expenses
Other expenses
profit (loss) from operating activities
Financial income
Financial expenses
net financial income (expenses)
profit (loss) before income tax
Income tax benefit (expense)
profit (loss) for the year from continuing operations
other comprehensive income, net of income tax
Exchange differences on translating foreign operations
Gain (loss) on available for sale financial assets
total other comprehensive profit (loss) for the year, net of income tax
total comprehensive income (loss) for the year
for the year enDeD June 30,
2013
2012
10,863
(9,146)
1,717
9,795
(2,592)
(60,689)
(1,327)
(53,096)
4,914
(11,546)
(6,632)
(59,728)
(2,547)
(62,275)
13,307
(865)
12,442
(49,833)
–
–
–
11,222
125,432
(60,232)
–
76,422
4,073
(30,040)
(25,967)
50,455
10,394
60,849
4,858
(4,653)
205
61,054
108
notes to the financial statements
FOR THE YEAR ENDED JUNE 30, 2013
34. Company entity information
in a$’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 parent Company
35. ContingenCies
as at June 30,
2013
2012
24,427
1,445,777
(14,631)
(461,701)
984,076
994,645
(152,356)
141,787
984,076
179,800
1,192,163
(2,927)
(419,815)
772,348
823,161
(143,074)
92,261
772,348
for the year enDeD June 30,
2013
2012
(9,282)
(10,147)
81,889
82,094
Litigation and legal proceedings
As a 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. subsequent events
On September 13, 2013 the Group entered into a deed of amendment to modify certain provisions under the Sojitz Loan Facility.
Reference should be made to note 23 to the Financial Report for further details.
With the exception of the above, there have been no other events subsequent to June 30, 2013 that would require accrual or disclosure
in this financial report.
lynas Corporation limiteD ANNUAL REPORT 2013
109
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, 2013.
(a) Distribution of ordinary shares
The number of shareholders, by size of holding, of ordinary shares is:
Ordinary shares
holDings ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
totals
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
holDers
number
of holDers
number
of shares
4,938
11,894
7,104
12,593
1,485
3,199,909
35,623,213
56,685,961
393,574,260
1,471,717,949
38,014 1,960,801,292
5,503
0.163
1.817
2.891
20.072
75.057
100.000
3,840,481
various DireCtors
anD employees
–
–
–
39
27
66
110
asX aDDitional information
Twenty largest shareholders
(c)
The names of the twenty largest holders of quoted shares are:
holDer name
1.
JP MORGAN NOMINEES AUSTRALIA LIMITED
2. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3. NATIONAL NOMINEES LIMITED
4. CITICORP NOMINEES PTY LIMITED
5.
J P MORGAN NOMINEES AUSTRALIA LIMITED
6. BNP PARIBAS NOMS PTY LTD
7. CITICORP NOMINEES PTY LIMITED
8. DYNAMIC SUPPLIES INVESTMENTS PTY LTD
9. 3RD WAVE INVESTORS LTD
10. UOB KAY HIAN PRIVATE LIMITED
11.
JAPAN AUSTRALIA RARE EARTHS BV
12. MR CONGLIN YUE
13. UCA GROWTH FUND LIMITED
14. DMG & PARTNERS SECURITIES PTE LTD
15. LANDO PTY LTD
16. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
17. AMP LIFE LIMITED
18. SILMAR PTY LIMITED
19. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
20. ALIANA PTY LTD
listeD orDinary shares
number of shares
perCentage of
orDinary shares
225,720,956
203,825,522
150,202,637
121,807,146
107,993,268
50,800,421
21,698,970
20,500,000
15,000,000
13,573,600
10,972,275
10,600,000
10,000,000
9,312,063
9,050,000
8,956,870
6,763,680
6,003,234
5,988,097
5,767,519
11.512
10.395
7.660
6.212
5.508
2.591
1.107
1.045
0.765
0.692
0.560
0.541
0.510
0.475
0.462
0.457
0.345
0.306
0.305
0.294
total
1,014,536,288
51.742
Substantial shareholders
(d)
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporation Act 2001 are: Nil.
Voting rights
(e)
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(f)
Schedule of interests in mining tenements
loCation
mt weld rare earths project
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
kangankunde rare earths project
Kangankunde, Malawi
tenement
perCentage helD
M38/58
M38/59
M38/326
M38/327
E38/2224
E38/2359
E38/2558
L38/224
L38/98
ML 0122/2003
100
100
100
100
100
100
100
100
100
100
lynas Corporation limiteD ANNUAL REPORT 2013
111
corporate information
ABN 27 009 066 648
REgiStEREd OFFiCE
Level 7, 56 Pitt Street, SYdNEY NSW 2000
tel: +61 2 8259 7100 Fax: +61 2 8259 7199
Email: general@lynascorp.com
ShARE REgiStRY
Boardroom Pty Ltd
Level 7, 207 Kent Street, SYdNEY NSW 2000
tel: +61 2 9290 9600 Fax: +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au
AuditORS
Ernst & Young
680 george Street, SYdNEY NSW 2000
www.lynascorp.com
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