More annual reports from Lynas Rare Earths:
2023 Report5 October 2015
2015 ANNUAL REPORT AND APPENDIX 4G
Lynas Corporation (ASX:LYC, OTC:LYSDY) is pleased to attach the following:
1. 2015 Annual Report
2. Appendix 4G
Page 10 of the attached Annual Report corrects a typographical error that appeared in
the FY15 Financial Report that was lodged with the ASX on 21 September 2015. The
correct figure for Rare Earth Oxide production for the 12 months to 30 June 2015 was
8,799 tonnes. The correct figure also appeared in the Quarterly Report that was lodged
with the ASX on 17 July 2015.
For all media enquiries please contact Renee Bertuch from Cannings Corporate
Communications on +61 2 8284 9990.
Andrew Arnold
Company Secretary
Lynas Corporation HQ
PT17212 Jalan Gebeng 3, Kawasan Perindustrian Gebeng, 26080 Kuantan, Pahang Darul Makmur, Malaysia
Tel: +60 9 582 5200 +60 9 582 5800
Fax: +60 9 582 5291 +60 9 582 5292
www.lynascorp.com
ACN 009 066 648
CORPORATE DIRECTORY
ABN 27 009 066 648
Registered Office
Level 1, 7 Tully Road
East Perth WA 6004 Australia
Tel: +61 8 6241 3800
Fax: +61 8 9225 6842
general@lynascorp.com
Principal Administrative Office
PT17212 Jalan Gebeng 3
Kawasan Perindustrian Gebeng
26080 Kuantan, Pahang Darul Makmur
Malaysia
Tel: +60 9 582 5200
Fax: +60 9 582 5291
general@lynascorp.com
Share Register
Boardroom Pty Ltd
Level 12, Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Tel: +61 2 9290 9600
Fax: +61 2 9279 0664
enquiries@boardroomlimited.com.au
Auditors
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
www.lynascorp.com
2015
ANNUAL
REPORT
Contents
Directors’ Report
Corporate Governance Statement
Remuneration Report – Audited
Directors’ Declaration
Auditor’s Report
Auditor’s Independence Declaration
Financial Statements
Consolidated Statement of Profit or Loss
and Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Mineral Resources and Ore Reserves
Additional Information
7
16
27
41
42
44
45
46
47
48
49
50
94
97
Corporate Directory Information
100
Lynas Corporation Limited | 2015 Annual Report
11
Lynas Corporation Limited | 2015 Annual Report Letter from the Chairman
I am pleased to be addressing you, our shareholders, in the
first Annual Report since I was appointed as Non-Executive
Chairman of the Lynas Board in January.
In the last year, Lynas has achieved significant milestones, greatly improved business
performance and created exciting opportunities for growth within the rare earths market.
In Lynas’ second full year of production, 8,799 tonnes of rare earth oxides was
produced, up from 3,965 tonnes last financial year. Q1 FY16 production output is
expected to exceed 3,000 tonnes. This result is testament to the strong leadership of
our CEO, Amanda Lacaze, and the hard work of each member of the Lynas team. The
team resolved issues associated with the Cracking and Leaching, and Solvent Extraction
processes earlier this year, and we are now producing at a stable and consistent rate.
Lynas has a strong continuous improvement culture. In the past year we have created
a stable operating platform and reinforced the balance sheet. The current dynamics of
the global rare earths market are our next challenge. Market prices decreased during
FY15 and the continuing uncertainty of Chinese government policy meant many
customers were satisfied to consume inventories rather than purchase fresh product.
Growing demand in target segments is our current focus.
Rare earths are an important functional material crucial to the delivery of key product
benefits that we all value as consumers. We are developing and strengthening Lynas’
relationships with customers in key sectors, such as the global automotive market
and energy efficient consumer products. These relationships are important as we see
engineers and designers respond to consumer demand and look to ways to create
functionality in products that can best be achieved using rare earths.
One of the difficulties with the rare earths market is that it is marked by speculative
activity in all stages of the value chain. Whilst we expect a level of uncertainty in the
market to continue in the near term, we remain focused on becoming the strongest
performing company within the rare earths sector. Our full year results reflect Lynas’
determination to build a company whose valuation is based on performance rather
than speculation.
In the last year, the rare earths industry has also experienced a number of changes.
The Chinese tax regime is now relatively clear and export taxes are gone, which should
improve the competitiveness of the magnet supply chains outside of China and
ultimately that should be good for Lynas.
Ideally, the healthiest markets are ones where there are many suppliers who are healthy
and capable. As many of you would have seen, Molycorp, the only rare earth miner and
producer outside of China apart from Lynas, recently filed for Chapter 11 in the USA
and announced the closure of its Mountain Pass mining and processing facility.
22
www.lynascorp.com
www.lynascorp.com “...It is our
commitment that
Lynas will continue
to operate safely
and efficiently for
its staff and the
communities and
environments in
which we operate.”
The presence of Lynas as a competitor in the rare earths market is important to the
health of the global rare earths industry. The current volatility in the market has the
effect of limiting demand as end users respond to a perception of uncertainty regarding
both supply and pricing. Lynas’ competitive presence is good for every participant in
the rare earths industry, particularly end users who can be confident in formulating rare
earths into their products knowing that Lynas will continue to offer an environmentally
assured and reliable supply of high quality rare earth materials.
In June this year, Lynas also welcomed the report by the International Atomic Energy
Agency (IAEA), which confirmed that the radiological risks to the public and envi-
ronment at the Lynas Advanced Materials Plant (LAMP) are intrinsically low. It is our
commitment that Lynas will continue to operate safely and efficiently for its staff and
the communities and environments in which we operate.
One of our most significant announcements was made in August this year, when Lynas
reached a new long-term debt structure agreement with our strategic debt providers,
JARE, and the Mt Kellett led group of bondholders. The new structure strengthens the
Company’s financial position, extends the debt maturity profile and underpins the
recent initiatives to position Lynas as a sustainable and financially viable business.
I would like to thank each member of the Lynas team for their efforts this last year.
Lynas has consistently improved business performance in all areas: production, sales,
cost reduction and cash management. It could not have been done without the
exceptional team culture of empowerment and excellence.
To our valued customers, suppliers and business partners, thank you for your ongoing
commitment to Lynas and for strategically aligning yourselves with our business.
To the Kuantan and Mt Weld communities, we look forward to working together with
you and contributing to the local economy and community enrichment initiatives in
the year to come.
Finally, to our shareholders, we thank you for your patience and support of Lynas. Your
Board is confident that Lynas is well positioned for the future and for opportunities to
increase shareholder value.
Yours sincerely,
Mike Harding
Non Executive Chairman
Lynas Corporation Limited | 2015 Annual Report
33
Lynas Corporation Limited | 2015 Annual Report CEO Review
4
The last financial year has been significant in the history
of our company. In the past year, Lynas has successfully
transitioned from project status to a fully operational
business, delivering improved and improving results on all
key business measures. Production capability has improved
and stabilised, sales revenue has grown, costs have been
reduced and new debt agreements have been reached,
which underpin ongoing operations.
In addition, we have farewelled founder and Chairman Nick Curtis, welcomed Mike
Harding as Non Executive Chairman, Philippe Etienne as Non Executive Director, and
relocated our main office to Kuantan in Malaysia.
A year ago we made a commitment to shareholders that we would tackle each issue in
the business with careful and disciplined management. This included underperformance in
production, efficiency, revenue, market share, and cost structure. I am pleased to say that
in the last year, Lynas has successfully completed change programs in all of these areas.
A number of notable achievements include:
•
Positive free cashflow for the June quarter: a first in the history of Lynas
• Much improved production output, which is now stable and at target rates
• Healthy revenue growth achieved by building strong relationships with key
customers, particularly in the Japanese market
• Resetting the company’s cost base, with annualised savings in excess of
A$40 million achieved
• Raising A$83 million less expenses from the entitlement offer in October 2014
• Relocating Lynas’ principal administrative office from Sydney to Kuantan in
October 2014
• Granting of the Full Stage Operating License for the Lynas Advanced Materials
Plant (LAMP) in September 2014
• New improved contracts with many of our key suppliers. One important
example of this is the agreement with our major chemical supplier which has
allowed Lynas to avoid future penalty payments over the course of the contract
(previously provisioned at A$42.3 million)
• Establishing a new long-term debt agreement with Japan Australia Rare Earths
BV (JARE) and the Mt Kellett led group of bondholders
www.lynascorp.com In the final quarter,
Lynas produced
2,606 tonnes and in
Q1 FY16, production
output is expected
to exceed 3,000
tonnes.
Positive free cash flow
The company achieved positive free cash flow for the last four months of this financial
year. This improved outcome is the result of a well-executed strategic plan as well as a
shift in culture to one of empowerment and improvement. I want to congratulate every
member of the Lynas team on this outcome.
Cost reduction
In July 2014, Lynas announced an operational improvement plan targeting improved
organisational efficiency and reduced costs.
Implementation of this plan – which addressed a number of commercial elements
including reducing overhead costs and reviewing supply contracts – has allowed us to
deliver annualised savings in excess of A$40 million. The effect of this is that we now
have a cost base that is appropriate to a business of our size.
As a business we will continue to focus on optimising production costs and to look
for further opportunities to deliver savings.
Customers
At Lynas, we continue to work closely with our strategic customers; strengthening
relationships, and understanding product needs and usage patterns.
A focus on product quality has enabled Lynas to build strong relationships with key
customers, particularly in the Japanese market, which is the most important market
for our products.
Our goal is to further develop a strong and loyal core customer base that values the
reliability, dependability and assured environmental provenance of Lynas’ products.
Production
Lynas production rates improved through the year. In the final quarter, Lynas produced
2,606 tonnes and in Q1 FY16, production output is expected to exceed 3,000 tonnes.
As production rates have now stabilised at target rates, focus will now shift to core
production costs, with a detailed program to improve recovery rates at both Mt Weld
and the LAMP. By continuing to reduce the cost/kg produced, we aim to mitigate the
effects of the current low market prices.
5
Lynas Corporation Limited | 2015 Annual Report CEO Review
The business
improvements
and results in
FY15 reflect the
achievement of
key production
and operational
milestones and
signal the good
progress in Lynas’
turnaround.
Debt restructure
In August this year we announced a two-year extension of principal debt maturity
with our two strategic lenders, JARE and the Mt Kellett led group of bondholders. This
refinancing strengthens our financial position and underpins the recent initiatives to
position Lynas as a sustainable and financially viable business. Over the last 12 months
we have worked very closely with both of our lenders to ensure that they understand
our business initiatives and the improvements we have delivered leading up to this new
agreement. Our lenders visit our plant often and are very familiar with the operational
improvements achieved so we are delighted they have recommitted to the business.
The long-term financial horizon is manageable and supports our business as we continue
to improve. This is unreservedly good news for all Lynas stakeholders. It gives:
• Customers the confidence that Lynas is a reliable, environmentally assured
supplier who can offer reliability of supply over the life of their products
• Suppliers the opportunity to grow with our business
• Governments (WA, Malaysia) assurance of our commitment to continue to
contribute to the local communities in which we operate
• Communities confidence in our ability to continue to contribute positively
to the local communities
• Shareholders confidence in the future operation of Lynas
Outlook
The business improvements and results in FY15 reflect the achievement of key
production and operational milestones and signal the good progress in Lynas’ turnaround.
Lynas has delivered on the goals outlined at the beginning of this financial year.
The changes delivered in FY15 provide us with a solid operating and business platform.
Our key focus in FY16 will be to work with customers and with the broader rare earths
market to build the confidence of end users to use, and therefore to increase total
demand for rare earths products.
Within a growing market, Lynas can now confidently present itself as the most
desirable supplier of rare earths, based on a record of supply reliability, product quality
and most importantly our ability to provide environmentally assured rare earth
products. We believe these benefits will allow us to continue to deliver improvements
in business performance.
Amanda Lacaze
CEO and Managing Director
6
www.lynascorp.com 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,
2015. 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.
Mike Harding MSc (MecEn) – Chairman
Mr Harding joined the Company as Non-Executive Chairman on January 1, 2015 and has significant experience with industrial businesses,
having previously held management positions around the world with British Petroleum (BP), including as President and General Manager of
BP Exploration Australia.
Mr Harding is currently Chairman of Downer EDI Ltd, and a Non-Executive Director of Transpacific Limited. He is a former Chairman of Roc
Oil Company Limited and a former Non-Executive Director of Santos Limited and Clough Limited.
Amanda Lacaze BA, MAICD – Managing Director
Ms Lacaze was appointed Managing Director and Chief Executive Officer of the Company on June 25, 2014 following her appointment as a
Non-Executive Director of the Company on January 1, 2014.
Ms Lacaze is a highly credentialed manager who brings more than 25 years of senior operational experience to Lynas, including as Chief
Executive Officer of Commander Communications, Executive Chairman of Orion Telecommunications and Chief Executive Officer of
AOL 7. Prior to that, Ms Lacaze was Managing Director of Marketing at Telstra and held various business management roles at ICI Australia
(now Orica and Incitec Pivot). Ms Lacaze’s early experience was in consumer goods with Nestle.
Ms Lacaze is currently a Non-Executive Director of ING Bank Australia Ltd and McPherson’s Ltd, is on the Advisory Board of CMOS research
group at UTS and is a member of Chief Executive Women and the Australian Institute of Company Directors. Ms Lacaze holds a Bachelor of
Arts Degree from the University of Queensland and postgraduate Diploma in Marketing from the Australian Graduate School of Management.
William (Liam) Forde BSc (Econ), MAICD – Non-Executive Director
Mr Forde joined the Company as a Non-Executive Director in December 2007 and was also the Deputy Chairman of the Company until
January 1, 2015. 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.
7
Lynas Corporation Limited | 2015 Annual Report 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, Aristocrat Leisure 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. Ms Conlon is also Chairperson of the audit committee of the Commonwealth Department of Health. 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. Mr Klein was also a Non-Executive Director of OceanaGold
Corporation between December 2009 and July 2014.
Prior to joining Sino Gold Mining Limited in 1995, Mr Klein was employed at Macquarie Bank and PricewaterhouseCoopers. 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.
Philippe Etienne MBA, BSc (Phys) (Pharm) – Non-Executive Director
Mr Etienne joined the Company as a Non-Executive Director on 1 January 2015. He is a Non-Executive Director of Transpacific Industries
Group Limited and Sedgman Limited and the former Managing Director and Chief Executive Officer of Innovia Security Pty Ltd.
In addition, he was previously Chief Executive Officer of Orica Mining services and was a member of Orica Limited’s Executive Committee.
Mr Etienne’s career includes senior executive positions with Orica in Australia, the USA and Germany including strategy and planning and
responsibility for synergy delivery of large scale acquisitions.
Resignation
Nicholas Curtis – Chairman and Non-Executive Director
Mr Curtis ceased to be Chairman with effect from January 1, 2015 and Non-Executive Director with effect from February 1, 2015.
Details of Mr Curtis’ relevant experience are set out in the Director’s report for the year ended June 30, 2014.
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 Joint Company Secretary on January 30, 2012, following six years as a lawyer at Norton
Rose and Addleshaw Goddard. Ms McDonald resigned as a Company Secretary of Lynas with effect from July 31, 2014.
Ivo Polovineo
Mr Polovineo, appointed as Joint Company Secretary on October 20, 2014, was previously Chief Financial Officer and Company Secretary
for Sino Gold Mining Limited, formerly an ASX 100 company. He was with Sino Gold for 12 years forming part of the executive team. Ivo is
a Fellow of the Institute of Public Accountants (FIPA) with more than 30 years’ experience as a CFO and Company Secretary including over
20 years in the resources sector. Ivo is Company Secretary of Variscan Mines Limited, Silver City Minerals Limited, Thomson Resources Ltd
and KBL Mining Limited
8
www.lynascorp.comDirectors’ Report 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.
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 Incorporation 23/5/1983
Registered in WA
0.01%
100%
Lynas Services
Pty Ltd
ABN 31 103 936 232
Date of Incorporation
3/3/2003
Registered in Victoria
100%
Mt Weld
Holdings Pty Ltd
ABN 75 073 998 106
Date of Incorporation
15/5/1996
Registered in WA
100%
ACN 053 160
302 Pty Ltd
ACN 053 160 302
Pty Ltd
ABN 73 053 160 302
Date of Incorporation
29/7/1991
Registered in NSW
100%
Lynas Malaysia
Sdn Bhd
Lynas Malaysia Sdn Bhd
Malaysian Co Number
752289D
Date of Incorporation
6/11/2006
Registered in Malaysia
100%
Lynas Africa
Holdings Pty Ltd
ACN 148 189 511
Date of Incorporation
13/1/2011
Registered in Victoria
100%
Mt Weld Mining
Pty Ltd
ABN 96 053 160 400
Date of Incorporation
29/7/1991
Registered in NSW
99.99%
Lynas Africa
Limited
Malawi Co No 8409
Date of Incorporation
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 strategic plan through to
the operating and financial performance of the Group.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Note 2.2 Going Concern contain additional information relating to the preparation of the financial statements using the going concern
assumption.
9
Lynas Corporation Limited | 2015 Annual Report REVIEW OF OPERATIONS
Highlights
• The ramp up of the Malaysian plant (‘LAMP”) experienced continuing production issues in the Cracking and Leaching (C&L) and
Solvent Extraction (SX) stages, affecting production output through the year. These have been managed and resolved and by the end
of the year, production was stable and at target rates.
• Quarterly sales volume and quarterly sales revenue increased significantly during the year, and continue to grow as production
output grows.
• A focus on product quality has enabled Lynas to build strong relationships with key customers, particularly in the Japanese market.
• Cost reductions of over A$40m per annum have been achieved well in excess of original targets. The company continues to work to
achieve further reductions in the cost of production.
• The business reported positive cash flow in the fourth quarter.
• The Full Operating Stage Licence for the LAMP was granted in September 2014.
• Both of the Company’s debt providers, Japan Australia Rare Earths B.V. and the Mt Kellett led bondholder group, continued to demonstrate
their support for the business by extending the term of their facilities and by agreeing to other amendments to the terms of their facilities.
• Rare Earths prices declined during the year; however the Company’s initiatives during the year have positioned the Company to take
advantage of any future improvements in Rare Earths prices.
Significant progress has been made in all areas of the business during the year; however, there is still work to be done, particularly in
developing additional sales opportunities.
Rare Earth Oxide (REO) production for the 12 months to 30 June 2015 was 8,799 tonnes (2014: 3,965 tonnes), while shipments during the
year totalled 7,883 tonnes (2014: 3,008 tonnes). Production increased from 2,043 tonnes in the first quarter to 2,606 tonnes in the fourth
quarter. Sales increased from 1,546 tonnes in the first quarter to 2,353 tonnes in the fourth quarter. Production in the fourth quarter was
32% higher than in the third quarter and represented 30% of full year production, while shipment volume in the fourth quarter was 29%
more than in the third quarter and represented 30% of the full year total. The average selling price (revenue basis) during the financial year
was A$18.34/kg REO (2014: A$21.47/kg). The Company’s most significant product is NdPr. The China Domestic price (VAT excluded) of NdPr
oxide declined from US$41.4/kg in July 2014 to US$37.3/kg in June 2015.
Lynas products are sold to customers involved in high technology, high growth future facing industries in Japan, China, Vietnam, Europe and
North America.
The Company’s Western Australian and Malaysian operations maintained certification to the OHSAS 18001 (Occupational Health and Safety
Management Systems), ISO 14001 (Environmental Management Systems) and ISO 9001 (Quality Management Systems) standards during
the year. The 12-month rolling Lost Time Injury Frequency Rate as at 30 June 2015 was 1.9 per million hours worked (2014: 1.5 per million
hours). The Company continued to carefully manage all residues, air, water and solid, and met or exceeded all licence requirements. In FY15,
the IAEA reviewed the Company’s operations in Malaysia and confirmed that the LAMP is low risk.
In Western Australia, the Concentration Plant performed in line with expectations during the year. Until concentrate stocks run down,
the Plant continues to be operated on a campaign basis, synchronised to demand from the LAMP. At 30 June 2015, 5,263 dry tonnes of
concentrate (2014: 10,828 dry metric tonnes) containing 2,050 tonnes REO (2014: 4,144 tonnes) were bagged in WA ready for export. In line
with the ramp up of production at the LAMP, concentrate stocks reduced by 49% (2014: 31% reduction) during the year.
At the LAMP, the ramp up was achieved as key issues in the primary production stages were addressed. By the end of the year, production
was stable and at target rates.
Identified bottlenecks at the LAMP have been resolved. During the year, significant improvements were made in plant organisation and
operating procedures. The LAMP has three main stages: Cracking & Leaching, Solvent Extraction and Product Finishing. The Phase 2 Cracking
& Leaching and Product Finishing assets were successfully commissioned in FY14. During FY15, the Company commissioned selected assets
in the Phase 2 Solvent Extraction circuits. The SX5 circuits perform the important role of separating NdPr from LaCe. During the third quarter,
the Company commissioned SX5 Train 3. The timing for commissioning of the final SX5 Train (SX5 Train 4) will be determined primarily by
customer demand.
The Company continues its commercialisation program of solid residues from the LAMP. The Company’s commercialization programs include
the use of solid residues in soil additives, fertilizers and road base material.
During the year, the Company successfully implemented a number of cost saving initiatives. This included a simplification of the Company’s
structure by co-locating management personnel and resources with production and sales facilities in Western Australia and Malaysia. This
has resulted in the Company’s Head Office relocating from Sydney to Kuantan, and the closure of the Company’s Kuala Lumpur office. Other
initiatives to reduce costs included reducing management personnel, reducing workforce numbers (mostly by reducing contractor positions),
improving asset utilisation, renegotiating supplier contracts and improvements in procurement practices.
10
www.lynascorp.comDirectors’ Report FINANCIAL PERFORMANCE
For the year ended June 30
Revenue
Cost of sales
Gross loss
Other income
General and administration expenses
Restructuring expenses
Impairment expenses
Loss from operating activities
Financial income
Financial expenses
Net financial expenses
Loss before income tax
2015
A$ million
2014
A$ million
144.6
(168.3)
(23.7)
0.1
(40.9)
-
(16.8)
(81.3)
0.5
(37.8)
(37.3)
64.6
(77.7)
(13.1)
20.4
(125.1)
(3.8)
(196.4)
(318.0)
2.0
(29.4)
(27.4)
(118.6)
(345.4)
Other income decreased from $20.4m to $0.1m during the year as the Company was not entitled to a cash rebate from the Australian Tax
Office on research and development expenditure incurred in the year ended June 30, 2015 since its sales exceeded the entitlement threshold
of $20.0m. Other income in the current year consists of a gain on sale of financial assets (2014: $0.9m).
General and administration expenses that predominantly consist of employee costs, unrecovered production costs and depreciation (net
of recovery) reduced by $84.2m during the year. In FY14, unrecovered employee costs and unrecovered production costs were $94.4m and
unrecovered depreciation was $10.7m. In FY15, production costs have been substantially accounted in cost of sales. In FY15, unrecovered
employee costs and unrecovered production costs included in general and administration expenses were reduced to $25.6m. Unrecovered
depreciation was $12.5m. Other general and administration expenses include insurance premiums, consultancy fees, telecommunications and
general office expenditures. Net production cost recoveries improved by $61.2m in FY15.
An impairment review of the carrying value of LAMP and Mt Weld assets was carried out, resulting in an impairment adjustment of $16.8m in
the current year. However, this adjustment is significantly lower than in the prior year when the cost and performance of the Phase 2 assets
were used to assess whether the carrying value ascribed to the Phase 1 assets represented fair value. The Board and Management consider
the assets’ book value currently reflects the corresponding fair values. The impairment adjustment is recorded as a non-cash item.
Net financial expenses increased by $9.9m to $37.3m for the year ended June 30, 2015. Interest income reduced by $1.5m attributable to
lower unrestricted cash balances compared to prior year. As a result of the USD and MYR strengthening against the AUD, the Group also
realised a foreign exchange gain of $3.9m (2014: loss of $1.5m) mainly via the revaluation of bank balances denominated in USD and MYR.
However, also as a result of that and since no interest has been capitalised in the current year, interest expense on loan facilities increased by
$12.9m from $25.8m to $38.7m.
CASH FLOW
For the year ended June 30
Net Operating Cash flow
Net Investing Cash flow
Net Financing Cash flow
Net cash flow
2015
A$ million
2014
A$ million
(32.0)
(9.6)
51.9
10.3
(103.2)
(8.6)
8.2
(103.6)
11
Lynas Corporation Limited | 2015 Annual Report Operating cash flows
Net operating cash outflows decreased by $71.2m, to $32.0m for the year ended June 30, 2015. The decrease in the net cash outflow is in
line with the Group’s operational ramp-up activities and was principally driven by increased sales receipts of $96.7m offset by increased
payments to suppliers and employees of $10.2m and non-entitlement to cash-based government grants (2014: $14.1m).
Investing cash flows
Net investing cash outflows increased by $1m to $9.6m for the year ended June 30, 2015. Even though payments for property, plant and
equipment reduced by $7.2m and payments of security bonds reduced by $6.8m, the amount of security bonds refunded reduced by $12.4m
and there had been no proceeds from sale of property, plant and equipment this year (2014: $2.7m).
Financing cash flows
Net financing cash inflows increased by $43.7m to $51.9m for the year ended June 30, 2015. The increment mainly comprises the proceeds
from capital raising totaling $77.9m net of costs during the year compared with $40.0m raised in the prior year. Net financing costs have
reduced by $5.8m.
FINANCIAL POSITION
For the year ended June 30
Assets
Cash and cash equivalents
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Other assets
Total assets
Liabilities
Borrowings
Other liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings (accumulated deficit)
Reserves
Total equity
2015
A$ million
2014
A$ million
52.0
61.8
658.4
45.8
27.5
845.5
(546.2)
(116.1)
(662.3)
183.2
1,083.9
(894.9)
(5.8)
183.2
38.1
73.4
669.1
46.9
24.8
852.3
(443.6)
(106.7)
(550.3)
302.0
1,034.6
(776.2)
43.6
302.0
The overall net assets of the Group decreased by $118.8m during the year which primarily reflects an increase in the AUD value of the
Group’s USD borrowings (arising from the strengthening of the USD in FY15) and continued operating losses experienced by the Group
as it ramped up performance levels at the LAMP in Malaysia.
Cash and cash equivalents comprise $31.4m of unrestricted cash and $20.6m of restricted cash. Restricted cash is available to fund future
interest payments under the JARE loan facility and Mt. Kellett Convertible Bond.
Inventory decreased by $11.6m, or 16% during the year. The decrease includes impairment of obsolete inventory of $4.7m. Additional
decrease reflects the production ramp-up at the LAMP and the reclassification of spares from WIP Inventory to PP&E, which more correctly
reflects the nature of the asset. As at June 30, 2015 the Group continues to hold 2,050 tonnes REO (2014: 5,994 tonnes) of processed
concentrate and unprocessed ore of 213,518 tonnes (2014: 289,560 tonnes) at its Mount Weld operations; which are expected to be used
for production purposes over the next 6 to 18 month periods respectively.
12
www.lynascorp.comDirectors’ Report Property plant and equipment decreased by $10.7m. The decrease is predominantly related to depreciation on buildings, plant and equipment
of $38.0m and impairment loss of $12.0m offset by effects of change in exchange rates of $24.5m, additions of $9.9m and reclassification
from inventory to plant and equipment of $5.3m.
Borrowings of $546.2m are represented by the USD205.0 million JARE loan facility revalued to AUD using the exchange rate at June 30,
2015 and the liability component of the convertible bonds issued to funds managed or selected by Mt Kellett Capital Management. During
the year, the Group made $11.4m (USD10.0m) in repayments against the JARE loan facility that is in line with the previously announced
repayment schedule (refer to note 24).
The increase in share capital of $49.3m is predominantly attributable to the net proceeds from the equity raising which was completed in
November 2014.
The movement in reserves of $49.4m during the current period reflects movements in the equity settled employee benefits, foreign currency
translation reserves and options issued in conjunction with the equity raising mentioned above.
CAPITAL STRUCTURE
At the start of the year the Group had 2,333,661,566 ordinary shares on issue. During the year an additional 1,037,570,737 shares were
issued as follows:
Shares on issue June 30, 2014
Issue of shares pursuant to equity raising
Issue of shares pursuant to exercises of options and performance rights
Shares on issue June 30, 2015
Number
2,333,661,566
1,037,071,988
498,749
3,371,232,303
In addition to the ordinary shares on issue there were 740,178,231 listed options, 29,428,814 unlisted options and performance rights and
225,000,000 unlisted convertible bonds on issue with a conversion price of $0.5634 (at a set exchange rate of USD1.00 = AUD0.9533).
Loss per share
For the year ended June 30
Basic loss per share
Diluted loss per share
2015
cents per share
2014
cents per share
(3.82)
(3.82)
(15.41)
(15.41)
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 has established a Risk Management, Safety, Health and
Environment Committee.
FACTORS AND BUSINESS RISKS THAT AFFECT FUTURE PERFORMANCE
Lynas operates in a changing environment and is therefore subject to factors and business risks that will affect future performance.
The following factors and business risks could have a material effect on Lynas’ future results from an operations and financial position:
Rare Earth prices
Lynas’ sales performance is affected by market fluctuations in rare earth prices. This is because the product prices used in the majority of
Lynas’ sales are calculated by a pricing formula that is tied to average rare earth market prices in the previous calendar quarter. The market
price has been volatile in the past because it is influenced by numerous factors and events that are beyond the control of Lynas.
13
Lynas Corporation Limited | 2015 Annual Report These include:
(i)
(ii)
Production capacity
For most rare earth products, global capacity for rare earth production, including illegal operations in China, currently exceeds
global demand.
Fluctuations in demand
A key factor influencing rare earth demand is automotive market demand, both in terms of production quantity and technology
incorporated in the vehicles manufactured. Energy-efficient (hybrid/electrical), green (emission controlled) and luxury vehicles
require significantly more rare earth materials during the manufacturing process than basic motor vehicles. The market price of
rare earth is influenced by rare earth market traders’ expectations of the demand for energy-efficient, green and luxury vehicles as
opposed to actual daily demand for those vehicles.
(iii) Chinese government regulations
China currently supplies around 90% of the global rare earths and China represents around 60% of the global demand. That has
enabled China to encourage many downstream activities to relocate into China. As an example, Chinese regulators previously
enforced quotas and taxes on rare earth exports. In FY15, Chinese regulators removed regulations on export quotas and export
taxes, and introduced new resource and production taxes. The net effect has been a reduction in taxes on rare earths produced in
China and a reduction in realised prices outside of China.
The table below includes the published rare earth market price over a 3-year period and illustrates its volatility. It also calculates the possible
impact on Lynas’ aggregate market price.
24%
NdPr
40.8
37.2
46.3
45.2
43.5
43.3
41.8
38.7
41.4
39.5
Rare Earth Content in Lynas ore
4%
SEG
47%
Cerium
24%
Lanthanum
Market Price in China, VAT excluded
Lynas
Aggregate
Market Price
56.3
45.6
37.8
44.9
43.7
38.4
33.4
29.4
25.7
20.6
5.8
4.3
3.7
3.3
2.8
2.4
2.1
1.8
1.7
1.6
5.8
4.3
3.7
3.4
2.9
2.5
2.2
2.0
1.8
1.7
16.4
14.0
15.4
15.2
14.4
13.8
13.0
11.9
12.3
11.5
USD/kg
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Lynas’ approach to reduce pricing volatility for its customers includes:
Promoting fixed pricing to its direct customers, set for periods relevant to customer operations;
•
• Developing long term contracts that include clauses that aim to reduce price variations for end users such as car makers and wind
turbine manufacturers.
Exchange rates
Lynas is exposed to fluctuations in the US dollar as all sales are denominated in US dollars. The Company borrows money and holds a portion
of cash in US dollars, which provides a partial natural hedge.
Accordingly, Lynas’ income from, and the value of its business, will be affected by fluctuations in the rates by which the US dollar is
exchanged with Australian dollars.
Adverse movements in the Australian dollar against the US dollar may have an adverse impact on Lynas. The following table shows the
average USD/AUD exchange rate over the last three years:
USD/AUD
30-Jun-15
$
0.8382
30-Jun-14
$
0.9187
30-Jun-13
$
1.0239
Refer to Note 28 to the financial statements for details of the Company’s foreign currency exposure and sensitivity analysis.
14
www.lynascorp.comDirectors’ Report Operating and development risks
Lynas’ operations and development activities could be affected by various unforeseen events and circumstances, which may result in
increased costs, lower production levels and, following on from that, lower revenue levels. Any negative outcomes flowing from these
operational risks could have an adverse effect on Lynas’ business, financial condition, profitability and performance.
Lynas undertakes regular reviews of its operational, development and business interruption risks. Lynas seeks to minimise the potential
damage flowing from these risks by obtaining business interruption insurance for certain events and, where available, indemnities from
suppliers and contractors.
Debt covenants
Lynas has financing arrangements in place which are subject to acceleration and enforcement rights in the event a default were to arise under
them. The Japan Australia Rare Earths B.V. (JARE) loan facility is secured over all of the assets of the Group, other than the Malawi assets; so
enforcement may involve enforcement of security over the assets of Lynas and its material subsidiaries, including appointing a receiver.
The future principal repayments due prior to maturity under the JARE loan facility as at June 30, 2015 were as follows:
Repayment date
30 September 2015
21 December 2015
31 March 2016
30 June 2016
Repayment amount
USD30m
USD20m
USD20m
USD135m
As detailed in the Subsequent Events note, the above repayment schedule has now been amended to the following:
Repayment date
30 June 2016
21 December 2016
30 June 2017
21 December 2017
30 June 2018
Repayment amount
USD2m
USD5m
USD15m
USD30m
USD153m
During the current year, the principal repayment due on September 30, 2014 in respect of the JARE facility was paid by its due date.
In addition, the principal amount of the Mt Kellett convertible bonds is US$225 million. Unless the convertible bonds are converted into
ordinary shares in Lynas prior to maturity, the principal amount of US$225 million was originally due for repayment on July 25, 2016. As
detailed in the Subsequent Events note, that repayment date has now been extended to September 30, 2018.
In the event of repayment default, Lynas may be required to seek amendments and/or waivers of covenant compliance or alternative funding
arrangements such as a refinance. There is no assurance that Lynas’ lenders would consent to such an amendment or waiver in the event of
non-compliance, or that such consent would not be conditioned upon the receipt of a cash payment, revised payout terms, increased interest
rates, or restrictions on the expansion of debt facilities in the foreseeable future, or that its lenders would not exercise rights that would be
available to them, including among other things, accelerating repayment of outstanding borrowings, or appointing a receiver.
In the event significant uncertainty arises in relation to Lynas’ ability to fully repay, refinance or reschedule the outstanding balances of the
JARE loan facility and the Mt Kellett convertible bonds by their respective maturity dates in mid-2018, the Group’s ability to continue as a
going concern may also be affected.
Regulatory and title risk
Changes in legislative and administrative regimes, taxation laws, interest rates, other legal and government policies in Australia and Malaysia
may have an adverse effect on the assets, operations and ultimately the financial performance of Lynas and the market price of Lynas shares.
Lynas’ mining and production activities are dependent on the granting and maintenance of appropriate licences, permits and regulatory
consents and authorisations (including those related to interests in mining tenements and those related to the operation of the Lynas plants
in Australia and Malaysia), which may not be granted or may be withdrawn or be made subject to limitations at the discretion of government
or regulatory authorities.. Although such licences, permits and regulatory consents and authorisations may be granted, continued or renewed
(as the case may be), there can be no assurance that such licences, permits and regulatory consents and authorisations will be granted,
continued or renewed, or as to the terms of renewals or grants. If there is a failure to obtain or retain the appropriate licences, permits and
regulatory consents and authorisations or there is a material delay in obtaining or renewing them or they are granted subject to onerous
conditions or withdrawn, then Lynas’ ability to conduct its mining and production activities may be adversely affected. As noted in the
15
Lynas Corporation Limited | 2015 Annual Report Corporate Government Statement continued
Quarterly Report released on July 17, 2015, one court challenge remains to the original Temporary Operating Licence for the LAMP.
A decision in respect of that challenge is expected later in 2015.
Interest rates
Lynas is exposed to some interest rate risk on its borrowings. The interest rate on the JARE facility can vary in certain circumstances, as
detailed in Note 28 to the financial statements. Fluctuation in interest rates would have an impact on the Company’s earnings.
Health, safety and environment
Lynas is subject to regulation in respect of the health and safety of our people and the protection and rehabilitation of our environment...
Health, safety and the environment is a key focus area and Lynas is committed to provide and maintain a healthy and safe work environment
and to comply with all relevant environmental legislation and other relevant requirements. Given the sensitive nature of this area, Lynas may
be exposed to litigation, foreseen and unforeseen compliance and rehabilitation costs despite its best efforts.
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.
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. The Board has approved
this Corporate Governance Statement. This Corporate Governance Statement is current on the date that the Directors’ report is signed in
accordance with a resolution of Directors made pursuant to s.298 (2) of the Corporations Act 2001.
In accordance with the ASX Corporate Governance Council’s (the “Council’s”) Principles and Recommendations (3rd edition), 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, 2015, and complied with all of the
Council’s Principles and Recommendations except as noted below in relation to Recommendation 2.5. As noted below, the Group has been
fully compliant with Recommendation 2.5 since January 1, 2015.
Details of the Group’s corporate governance practices in place throughout the financial year ended June 30, 2015 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) oversight of the Group, including its control and accountability systems;
(2) 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;
(3)
(4)
(5)
16
www.lynascorp.comDirectors’ Report (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, Risk Management, Safety, Health and Environment Committee, appointment of external auditors;
and
(11) on recommendation of the Nomination, Remuneration and Community Committee, initiating Board and Director evaluation.
The functions delegated to senior executives include:
implementing the Group’s strategic business plan;
(1)
(2) managing the business to agreed capital and operating expenditure budgets;
(3)
identifying and exploring opportunities to build and sustain the business;
(4) allocating resources to achieve the desired business outcomes;
(5) sharing knowledge and experience to enhance success;
(6)
(7)
(8) managing effectively 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.
facilitating and monitoring the potential and career development of the Group’s people resources;
identifying and mitigating areas of risk within the business;
In addition, the functions reserved for the Board are summarised in the Group’s Board Charter, a copy of which is available on the Group’s
website, www.lynascorp.com
Recommendation 1.2 – Information in Relation to Board Candidates
The Nomination, Remuneration and Community Committee of the Board ensures that appropriate checks are undertaken before a person
is appointed as a Director, or before a person is put forward to shareholders as a candidate for election as a Director. If the Nomination,
Remuneration and Community Committee concludes that it would be appropriate to consider the appointment of an additional Director, an
extensive process is undertaken to identify suitable candidates, usually involving an external search firm. That process will involve identifying
the skills and experience required of the candidate, compiling lists of potential candidates, identifying a short list of candidates to be
interviewed, conducting interviews, obtaining and checking information in relation to the character, experience, education, criminal record
and bankruptcy history of the short listed candidates, and selecting a recommended candidate.
The Group provides shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect
a Director by providing all material information concerning the proposed Director in the Explanatory Memorandum that accompanies each
Notice of Meeting at which candidates are proposed for election or re-election.
Recommendation 1.3 – Written Agreements with Directors and Senior Executives
The Group has signed letters of appointment with each non-executive Director, and service contracts with the CEO and the other senior
executives. Further details are set out in the Remuneration Report. The letters of appointment with the non-executive Directors cover topics
including:
the term of appointment;
the time commitment envisaged, including committee work;
remuneration;
(1)
(2)
(3)
(4) disclosure requirements;
(5)
(6)
(7)
(8)
(9)
(10) confidentiality obligations.
the requirement to comply with key corporate policies;
the Group’s policy on non-executive Directors seeking independent professional advice;
the circumstances in which the Director’s office becomes vacant;
indemnity and insurance arrangements;
rights of access to corporate information; and
17
Lynas Corporation Limited | 2015 Annual Report Corporate Government Statement continued
Recommendation 1.4 – Company Secretary
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board.
The role of the Company Secretary includes:
(1) advising the Board and its committees on governance matters;
(2) monitoring that Board and committee policy and procedures are followed;
(3) coordinating the timely completion and despatch of Board and committee papers;
(4) ensuring accurate minutes are taken of Board and committee meetings; and
(5) helping to organize and facilitate the induction and professional development of Directors.
Recommendation 1.5 – Diversity
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.
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 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.
Identifying programmes that assist in the development of a broader pool of skilled and experienced candidates including:
(a)
(b) career advancement programmes to develop skills and experience that prepare employees for senior management and Board
initiatives focused on skills development, such as executive mentoring programmes; and
(3)
positions.
The Group has in place a formal talent management process including mentoring and succession planning.
(4) Taking action to correct inappropriate workplace behaviour and behaviour that is inconsistent with the diversity objectives of the
Group.
The Group has in place a Code of Conduct as well as an Harassment & Discrimination Policy 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.
The Group provides the following statistics on gender diversity as at June 30, 2015 (prior year: June 26, 2014):
(1) Proportion of women employees in the whole organisation: 11.7% (2014 – 16.8%). Proportion of women employees in Australia:
16% (2014 – 34.3%).
(2) Proportion of women employees in senior executive positions in the whole organisation: 33.0% (2014 – 35.3%).
(3) Proportion of women on the Board: 33% (2014 – 40%).
The Group defines “senior executive positions” as members in the leadership team who have the authority and responsibility for planning,
directing and controlling major activities of the group.
The Group is not a “relevant employer” under the Workplace Gender Equality Act, because the Group had less than 80 employees in Australia
for more than 6 months of the year ending June 30, 2015.
Recommendation 1.6 – Process for evaluating the performance of the Board
In accordance with the Charter of the Nomination, Remuneration and Community Committee, the Committee is responsible for the:
(1) evaluation and review of the performance of the Board against both measurable and qualitative indicators established by the
Committee;
(2) 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.
(3)
(4)
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 above process.
18
www.lynascorp.comDirectors’ Report
Recommendation 1.7 – 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.
An evaluation of senior executives took place during the financial year. The evaluation was in accordance with the above process.
Principle 2 – Structure the board to add value
Recommendation 2.1 – Nomination Committee
The Group has established a Nomination, Remuneration and Community Committee.
The Group’s Nomination, Remuneration and Community Committee complies with each of the requirements of Recommendation 2.1 as follows:
(1) The Committee consists of a majority of independent Directors. During the financial year ending June 30, 2015, the members of
the Committee were Ms Conlon, Mr Forde and Mr Curtis (until February 1, 2015) and Mr Harding (from February 1, 2015).
(2) The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
(3) There were three formal meetings of the Committee during the financial year ending June 30, 2015. In addition, there were several
informal meetings. Further details, including the attendances of members, are provided in the Directors Meetings section of the
Directors’ Report.
(4) At all times during the financial year ending June 30, 2015, the Committee had three members.
The Group has adopted Charters for its Nomination, Remuneration and Community Committee. Copies of the Committee Charters are
available from the Group’s website, www.lynascorp.com.
Recommendation 2.2 – Board Skills
The Nomination, Remuneration and Community Committee recognizes that it is important that the Board has an appropriate mix of skills,
experience, expertise and diversity. The Board considers it important for the following skills and experience to be represented:
Experience as a Chief Executive;
International business experience;
Financial and accounting experience;
•
•
•
• Operational experience in the chemical and resources industries
•
• Corporate governance and risk management experience.
Strategy and strategic marketing experience
Information about the diversity of the Board is set out under Recommendation 1.5 above.
Recommendation 2.3 – Independence of Directors
The Council defines independence as being free from any interest, position, association or relationship that might influence, or could
reasonably be perceived to influence, in a material respect his or her capacity to bring an independent judgement to bear on issues before the
board and to act in the best interests of the Group and its shareholders generally.
During the financial year ended June 30, 2015, the Board had a majority of independent Directors. In accordance with the definition of
independence above, and the materiality thresholds set, J. Klein, W. Forde, K. Conlon and M Harding (since January 1, 2015) and P. Etienne
(since January 1, 2015), 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. This historical consultancy arrangement was for approximately 12 months, and it was not material. As Chairman of
the LampsOn Board, Mr Forde acted as the Lynas Board representative in the supervisory board for the construction of Phase 1 of the Rare
Earths Project, and this role was an extension of his role as a Non-Executive Director.
N. Curtis was the Non-Executive Chairman until January 1, 2015, and a Non-Executive Director until February 1, 2015. As Mr Curtis was
employed as the Chief Executive Officer of the Group up until March 31, 2013, Mr Curtis was not an independent Director of the Group in
accordance with the definition above.
A. Lacaze’s appointment as Chief Executive Officer of the Group was effective from June 25, 2014 (previously, a Non-Executive Director from
January 1, 2014). As the Chief Executive Officer of the Group, Ms Lacaze is not an independent Director of the Group in accordance with the
definition above.
19
Lynas Corporation Limited | 2015 Annual Report Corporate Government Statement continued
The length of service of each Director who held office as at June 30, 2015 is as follows:
Name
J. Klein
W. Forde
K. Conlon
A. Lacaze
M. Harding
P. Etienne
Term in office
10 years
7 years 5 months
3 year 8 months
1 year 6 months
6 months
6 months
Recommendation 2.4 – Majority of Independent Directors
As noted above in relation to Recommendation 2.3, at all times during the financial year ended June 30, 2015, the Board had a majority of
independent Directors.
Recommendation 2.5 – The Chair should be an independent Director and not the same person as the CEO
Until January 1, 2015, N. Curtis was the Chairman of the Group.. As Mr Curtis was employed as the Chief Executive Officer of the Group up
until March 31, 2013, Mr Curtis was not an independent Director of the Group in accordance with the Council’s definition of independence.
The role of Mr Curtis as Chairman until January 1, 2015 was 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, acted as the Deputy Chairman of the Board during Mr Curtis’
tenure. 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.
Since January 1, 2015, M. Harding has been the Chairman of the Board. Mr Harding is an independent Director and he is not the CEO.
Accordingly, the Group has been fully compliant with Recommendation 2.5 since January 1, 2015.
Recommendation 2.6 – Director Induction and Professional Development
The Group has adopted a Board Induction Policy that summarizes the key matters to be addressed in the induction of each new Director.
Among other things, the Induction Policy deals with information to be provided to new Directors, the Chair’s role, key contacts, remuneration,
indemnities, insurance, access to information, and disclosure.
The Nomination, Remuneration and Community Committee regularly reviews the skills and experience of the Directors and assists Directors
to identify professional development opportunities to develop and maintain the skills required to perform their roles effectively.
Principle 3 – Act ethically and responsibly
Recommendation 3.1 – Code of Conduct
The Group has established a code of conduct for its directors, senior executives and employees concerning 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
responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
(3)
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) protect the integrity of the decision-making processes within the Group by avoiding ethical, legal, financial or other conflicts of
interest;
(2) 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.
20
www.lynascorp.comDirectors’ Report Principle 4 – Safeguard integrity in corporate reporting
Recommendation 4.1 – Audit Committee
The Group has established an Audit, Risk Management, Safety, Health and Environment Committee.
The Group’s Audit, Risk Management, Safety, Health and Environment Committee complies with each of the requirements of
Recommendation 4.1 as follows:
(1) The Committee consists only of Non-Executive Directors. During the financial year ending June 30, 2015, the members of the
Committee were Mr Forde, Mr Klein, Ms Conlon and Mr Etienne (from February 1, 2015). Further details, including the relevant
qualifications and experience of the members of the Committee, are provided in the Directors section of the Directors’ Report.
(2) Eight meetings of the Committee were held during the financial year ending June 30, 2015. Further details, including the
attendances of members, are provided in the Directors Meetings section of the Directors’ Report.
(3) All of the members of the Committee are independent Directors.
(4) The Committee is chaired by Mr Forde, who is an independent Director and who is not Chair of the Board.
(5) At all times during the financial year ending June 30, 2015, the Committee had at least three members.
The Group has adopted Charters for its Audit, Risk Management, Safety, Health and Environment Committee. Copies of the Committee
Charters are available from the Group’s website, www.lynascorp.com.
Recommendation 4.2 – Statement from the Chief Executive Officer and the Chief Financial Officer
Before the Board approves the Group’s financial statements for a financial period, the Board receives a declaration from the Chief Executive
Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 that, in their opinion, the financial
records of the Group have been properly maintained and that the financial statements comply with the appropriate accounting standards
and give a true and fair view of the financial position and performance of the Group, and that the opinion has been formed on the basis of
a sound system of risk management and internal control which is operating effectively.
Recommendation 4.3 – Auditor Attendance at AGM
The Group holds an Annual General Meeting of shareholders (“AGM”) in October or November of each year. The Group ensures that its
external auditor attends the AGM and is available to answer questions from shareholders relevant to the audit.
Principle 5 – Make timely and balanced disclosure
Recommendation 5.1 – ASX Listing Rule Disclosure Requirements
The Group has established a written policy designed to ensure:
(1) compliance with ASX Listing Rules continuous disclosure obligations; and
(2) accountability at a senior executive level for that disclosure.
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 – Information on the Group’s Website
The Group provides information about itself and its governance to its shareholders via the Group’s website, www.lynascorp.com. Information
about governance is available under the Corporate Governance tab of the Group’s website.
Recommendation 6.2 – Investor Relations Program
The Group has an investor relations program to facilitate effective two-way communication with shareholders. The Group’s investor relations
program includes the following:
(1) an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions;
(2) actively engaging with shareholders at the AGM;
(3) periodic meetings with institutional investors, analysts and financial media representatives; and
(4)
recorded CEO interviews at the time of each quarterly report, which are accessible via www.asx.com.au and the Group’s website,
www.lynascorp.com.
Recommendation 6.3 – Encouraging Shareholder Participation at AGMs
The Group’s processes to encourage shareholder participation at AGMs include:
(1) providing an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions ahead of AGMs; and
(2) providing a facility for online lodgement of proxies.
21
Lynas Corporation Limited | 2015 Annual Report Corporate Government Statement continued
In addition, the Group has adopted a Shareholder Communications Policy for:
(1) promoting effective communication with shareholders; and
(2) 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 6.4 – Electronic Communications
The Group gives shareholders the option to receive communications from, and to send communications to, the Group and its share registry
electronically. The Group periodically sends communications to those shareholders who have provided an email address. In addition, there is
an email link on the Group’s website, www.lynascorp.com for shareholders to communicate with the Group electronically. The Group’s share
registry, Boardroom Pty Ltd, has similar arrangements that are accessible via its website www.boardroomlimited.com.au.
Principle 7 – Recognise and manage risk
Recommendation 7.1 – Risk Management Committee
The Group has established an Audit, Risk Management, Safety, Health and Environment Committee to oversee risk.
The Group’s Audit, Risk Management, Safety, Health and Environment Committee complies with each of the requirements of
Recommendation 7.1 as follows:
(1) The Committee consists only of Non-Executive Directors. During the financial year ending June 30, 2015, the members of the
Committee were Mr Forde, Mr Klein, Ms Conlon and Mr Etienne (from February 1, 2015). Further details, including the relevant
qualifications and experience of the members of the Committee, are provided in the Directors section of the Directors’ Report.
(2) Eight meetings of the Committee were held during the financial year ending June 30, 2015. Further details, including the attend-
ances of members, are provided in the Directors Meetings section of the Directors’ Report.
(3) All of the members of the Committee are independent Directors.
(4) The Committee is chaired by Mr Forde, who is an independent Director and who is not Chair of the Board.
(5) At all times during the financial year ending June 30, 2015, the Committee had at least three members.
The Group has adopted Charters for its Audit, Risk Management, Safety, Health and Environment Committee. Copies of the Committee
Charters are available from the Group’s website, www.lynascorp.com.
Recommendation 7.2 – Risk Management Framework
The Group has adopted a Risk Management Policy and a Risk Management Framework for oversight and management of its material business
risks The Audit, Risk Management, Safety, Health and Environment Committee reviews the Group’s Risk Management Framework at least
annually to satisfy itself that it continues to be sound. Such a review has taken place in the financial year ending June 30, 2015.
Recommendation 7.3 – Internal Audit
The Group does not have an internal audit function. The processes that the Group employs for evaluating and continually improving the
effectiveness of its risk management and internal control processes include the following:
(1) The Group’s Risk Management Policy and Risk Management Framework clearly describe the roles and accountabilities of the Board,
the Audit, Risk Management, Safety, Health and Environment Committee and management.
(2) The Audit, Risk Management, Safety, Health and Environment Committee oversees the Group’s material business risks.
(3) Those members of the Group’s management team who are accountable for risk management, safety, health, environment and
community matters manage the Group’s material business risks.
(4) The Audit, Risk Management, Safety, Health and Environment Committee oversees financial risks pursuant to its 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 considera-
tions such as the benchmarking of operational key performance indicators.
(5) The members of the Group’s finance department manage 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) Audit, Risk Management, Safety, Health and Environment Committee Charters;
(2) Risk Management Policy;
(3) Environmental Policy;
(4) Community Policy; and
(5) Occupational Health and Safety Policy.
22
www.lynascorp.comDirectors’ Report Recommendation 7.4 – Economic, Environmental and Social Sustainability Risks
The categories of risk to which the Group has exposure include economic, environmental and social sustainability risks. The Group manages
these risks as follows:
(1) The Group seeks to reduce the impact of fluctuations in Rare Earths prices and demand by building strategic relationships with
customers and other parties in the Group’s key markets. The Group seeks to reduce the impact of exchange rate variations by
having both revenue under its sales contracts and its debt repayment obligations denominated in US dollars, and by broadly
matching the currencies in which funds are held with the currencies of anticipated outgoings.
(2) The Group manages environmental risks by adopting environmental management programs for each of its sites. The Group has
detailed environmental monitoring at each of its sites, and the Group has invested significant amounts in environmental controls
such as the Group’s Malaysian waste gas treatment plant, waste water treatment plant and solid residues commercialization
programs. These measures have ensured that the Group has complied with all applicable environmental standards at each site.
(3) The Group recognises that a strong mutual relationship with each community in which it operates is necessary for successful
operations. In addition, the Group recognises the importance of maintaining its reputation with all of its stakeholders including
shareholders, regulatory authorities, communities, customers and suppliers. The Group has adopted a Community and Stakeholder
Engagement Plan and the Group engages in community programs that build relationships with each of the communities in which
the Group operates.
Principle 8 – Remunerate fairly and responsibly
Recommendation 8.1 – Remuneration Committee
The Group has established a Nomination, Remuneration and Community Committee.
The Group’s Nomination, Remuneration and Community Committee complies with each of the requirements of Recommendation 8.1 as follows:
(1) The Committee consists of a majority of independent Directors. During the financial year ending June 30, 2015, the members of
the Committee were Ms Conlon, Mr Forde and Mr Curtis (until February 1, 2015) and Mr Harding (from February 1, 2015).
(2) The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
(3) There were three formal meetings of the Committee during the financial year ending June 30, 2015. In addition, there were several
informal meetings. Further details, including the attendances of members, are provided in the Directors Meetings section of the
Directors’ Report.
(4) At all times during the financial year ending June 30, 2015, the Committee had three members.
The Group has adopted Charters for its Nomination, Remuneration and Community Committee. Copies of the Committee Charters are
available from the Group’s website, www.lynascorp.com.
Recommendation 8.2 – Remuneration of Executive Directors, Executives and Non-Executive Directors
The remuneration of Executive Directors and senior executives during the financial year consisted of 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 incentive plans.
(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 consisted 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 8.2 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, 2015 no options were issued to Non-Executive Directors.
Recommendation 8.3 – Use of Derivatives and Similar Transactions
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.
23
Lynas Corporation Limited | 2015 Annual Report Corporate Government Statement continued
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
G
H
J
K
T
U
V
W
X
Y
Z
AA
AB
AC
AD
AE
July 1, 2010
August 19, 2010
October 1, 2010
August 19, 2010
September 25, 2012
September 25, 2012*
September 23, 2013*
September 23, 2013*
September 23, 2013*
September 23, 2013*
September 23, 2013*
November 28, 2014*(1)
November 28, 2014*(1)
November 28, 2014*(1)
November 28, 2014*(1)
Refer footnote (2)
1,000,000
4,500,000
1,000,000
1,350,000
679,758
432,489
579,663
1,237,127
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,277
2,830,189
4,464,286
Total
33,893,100
July 1, 2013
August 19, 2013
October 1, 2013
August 19, 2013
September 24, 2015
September 24, 2015
September 23, 2016
September 23, 2016
September 23, 2016
September 24, 2015
September 24, 2015
September 23, 2015
September 30, 2015
September 23, 2017
September 23, 2017
May 6, 2016
July 1, 2015
August 19, 2015
October 1, 2015
August 19, 2015
September 24, 2017
September 24, 2017
September 23, 2018
September 23, 2018
September 23, 2018
September 24, 2017
September 24, 2017
September 23, 2017
September 30, 2017
September 23, 2019
September 23, 2019
May 6, 2018
$ 0.66
$ 1.15
$ 1.60
$ 1.15
$ 1.02
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.24
$ 0.34
$ 0.48
$ 0.66
$ 0.26
$ 0.72
$ 0.41
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
Refer footnote(2)
*
Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
(1)
(2)
Performance Rights Series AA, AB, AC and AD were approved by the Board on September 23 and September 30, 2014 subject to shareholder approval, and subsequently
approved by the shareholders of the Company at the AGM on November 28, 2014. Accordingly, those Performance rights were valued as at November 28, 2014.
One series of performance rights granted to A Lacaze were approved by the Board on May 6, 2015 subject to shareholder approval. Shareholder approval is expected
to be sought at the Lynas AGM on November 23, 2015. A provisional value per option of $0.0448 has been used as at 30 June 2015. This will be revalued on the date
of shareholder approval.
SHARES ISSUED AS A RESULT OF EXERCISE OF OPTIONS AND PERFORMANCE RIGHTS
During the financial year 124,789 options and 373,960 performance rights were exercised as set out in note 31 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) a wilful breach of duty; or
(b) 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 $361,052 (2014: $324,956). This amount is not included as part of the Directors
remuneration in note 29 of the ‘notes to the financial statements’.
INDEMNIFICATION AND INSURANCE OF AUDITOR
During or since the end of the financial year, the Group entered into an agreement with its auditors, Ernst & Young, indemnifying them
against any claims by third parties arising from their report on the Annual Financial Report, except where the liability arises out of conduct
involving a lack of good faith. No payment has been made to indemnify Ernst & Young during or since the financial year.
24
www.lynascorp.comDirectors’ Report
NON-AUDIT SERVICES
During the year Ernst & Young, the Group’s auditor, has performed certain other services in addition to the audit and review of the financial
statements.
Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in note 11 of the ‘notes to
the financial statements’. The Directors have considered the non-audit services provided during the year by the auditor are satisfied that the
provision of non-audit services by the auditor during the year is compatible, and did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
(a) all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the
(b)
audit committee to ensure they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
DIRECTORS MEETINGS
Committee membership
During the financial year, the Group had an Audit, Risk Management, Safety, Health and Environment Committee and a Nomination,
Remuneration and Community Committee of the Board of Directors.
Directors acting on the committees of the Board during the financial year were:
Audit, Risk Management,
Safety, Health and Environment
Nomination, Remuneration
and Community
W. Forde(c)
K. Conlon
J. Klein
P. Etienne(2)
K. Conlon(c)
N. Curtis(1)
W. Forde
M. Harding(3)
(c) Designates the Chair of the Committee as at June 30, 2015.
(1) N. Curtis resigned as a Director with effect from February 1, 2015.
(2) P. Etienne was appointed as a member of the Audit, Risk Management, Safety, Health & Environment Committee with effect from February 1, 2015.
(3) M. Harding was appointed as a member of the Nomination, Remuneration & Community Committee with effect from February 1, 2015.
As summarised in the Corporate Governance Statement, the Audit, Risk Management, Safety, Health & Environment Committee consists of
independent Directors.
The number of Directors’ meetings held during the year and the number of meetings attended by each Director was as follows:
Number of meetings held:
Number of meetings attended:
N. Curtis(1)
W. Forde
K. Conlon
J. Klein
A. Lacaze
M. Harding(2)
P. Etienne(3)
Meetings of the Board and Committees
Directors’ Meetings
Audit, Risk Management,
Safety, Health and
Environment
Nomination, Remuneration
and Community
10
6
10
10
10
10
4
4
8
–
8
8
8
–
–
2
3
2
3
3
–
–
1
–
(1) N. Curtis resigned as a Director with effect from February 1, 2015.
(2)
M. Harding was appointed as Chairman of the Board with effect from January 1, 2015, and as a member of the Nomination, Remuneration & Community Committee
with effect from February 1, 2015
P. Etienne was appointed as a Non-Executive Director with effect from January 1, 2015, and as a member of the Audit, Risk Management, Safety, Health and
Environment Committee with effect from February 1, 2015
(3)
25
Lynas Corporation Limited | 2015 Annual Report
On July 28, 2015 the Board resolved to restructure the committees of the Board of Directors acting on the committees of the Board as at the
date of this report are as follows:
Audit & Risk
W. Forde (c)
K. Conlon
J. Klein
P. Etienne
Health, Safety
& Environment
Nomination, Remuneration
and Community
W. Forde(c)
K. Conlon
J. Klein
P. Etienne
K. Conlon(c)
M. Harding
W. Forde
(c) Designates the Chair of the Committee.
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.
26
www.lynascorp.comDirectors’ Report Directors’ Report
Remuneration Report – Audited
Year ended 30 June 2015
Dear Shareholder,
I am pleased to present our Remuneration Report for the year ended June 30, 2015 (FY15).
As with other areas of the business, we have fundamentally restructured the executive team and executive remuneration in FY15.
FY15 was our first full financial year with Amanda Lacaze in the role of Chief Executive Officer and Managing Director.
In addition, in FY15, we substantially restructured the Board, welcoming Mike Harding and Philippe Etienne to the Board.
Remuneration has been simplified and reduced. Total remuneration for the continuing Directors and Executives in FY15 is shown in the
table on page 34.
The incentive structure has also been simplified. Payments have been made only where specific objectives that underpin improved
performance have been delivered. These have included:
Improved production
•
• Achievement of significant cost reductions
•
•
• Completion of new debt agreements
Excellent cash management
Implementation of new strategies to manage residues from both the mining and manufacturing operations
In FY15, 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, Remuneration and Community Committee
27
Lynas Corporation Limited | 2015 Annual Report Remuneration Report – Audited continued
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”)
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 net cash impact for the Group arising from those arrangements.
Executives
At as June 30, 2015 year end, the Chief Executive Officer and Managing Director (“CEO”), the Chief Financial
Officer (“CFO”), the VP Production, the VP Malaysia and the General Counsel and Company Secretary.
Key Management
Personnel (“KMP”)
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”)
Long Term
Incentive (“LTI”)
Option
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.
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.
Performance Right
A Performance Right is similar to an Option, except that no “exercise price” is payable when a Performance Right is
exercised.
Short Term
Incentive (“STI”)
STI is the short term incentive component of Total Remuneration. An STI could be in the form of cash or equity and
it is only received by the Executive if specified goals are achieved.
Total
Remuneration
Total Shareholder
Return (“TSR”)
Total Remuneration comprises fixed pay (including superannuation) plus STI and (if applicable) LTI.
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, 2015 were as follows:
Non-Executive Directors:
M. Harding
Chairman (appointed with effect from January 1, 2015)
Non-Executive Director, Chairman of the Audit, Risk Management, Safety, Health and Environment Committee
Non-Executive Director, and Chairman of the Nomination, Remuneration and Community Committee
Non-Executive Director
Non-Executive Director
Chairman until January 1, 2015 (resigned as a Non-Executive Director with effect from February 1, 2015)
W. Forde
K. Conlon
J. Klein
P. Etienne
N. Curtis
28
www.lynascorp.comDirectors’ Report Executives:
A. Lacaze
CEO and Managing Director
G. Sturzenegger
CFO (commencement date was November 1, 2014)
L. Catanzaro
CFO (cessation date was November 1, 2014)
K. Leung
M. Ahmad
P. Le Roux
A. Arnold
G. Barr
A. Jury
VP Production (commencement date was August 1, 2014)
VP Malaysia
VP Sales & Marketing
General Counsel and Company Secretary
VP People & Culture (cessation date was January 2, 2015)
VP Corporate Affairs (cessation date was September 25, 2014)
J. C. Steinmetz
Chief Operating Officer (cessation date was December 8, 2014)
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 by attracting, retaining and motivating a high quality board of directors
and executive management team. Remunerating Directors and Executives fairly and appropriately, consistent with relevant employment
market conditions, is an important part of achieving this goal. 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.
Total remuneration (that is, fixed remuneration plus STI and LTI) is paid at market rates except in exceptional cases where skills are scarce or
particularly valuable, in which case we pay as necessary. Our market is defined by location and function, i.e. Malaysia, WA resources and the
global Rare Earths market.
STI awards, which create an “at risk” component are equal to approximately 50% of total fixed remuneration for senior Executives (with 25%
paid in cash and 25% paid in performance rights).
LTI awards for senior Executives with TSR and operating milestone performance hurdles equal to approximately 25% of total fixed remunera-
tion for senior Executives, and 50% of total fixed remuneration for the Chief Executive Officer.
External advisors and remuneration advice
The Committee engages external advisors to provide advice and market related information as required.
• During the year, the Committee did not receive any remuneration recommendations (as defined in the Corporations Act 2001).
C. ROLE OF THE NOMINATION, REMUNERATION AND COMMUNITY 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 of a majority of independent Non-Executive Directors and is chaired by an independent chair;
•
• 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).
29
Lynas Corporation Limited | 2015 Annual Report Remuneration Report – Audited continued
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.
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 market rates in the geographic
and functional markets in which we operate.
Variable remuneration
Notwithstanding the introduction of a formal STI Plan, the Board retains ultimate discretion in relation to the payment of bonuses, options,
performance rights and other incentive payments, based on the overall performance of the Group and of the individual during the year.
In summary:
STIs
Fixed Pay
= base + super
Variable remuneration
= STI (Cash and Deferred) + LTI
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.
Our target STI for Executives is 50% of fixed pay.
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, 2015, the measures were drafted with reference to the following goals:
• Corporate: Operating Cashflow, Operating Margin
• Team: Health & Safety of Employees, Raw Water Consumption, Yield, SMP and Recovery
•
Individual: Performance Rating
The payment of any award under the STI programme is subject to the Group achieving operating cashflow that is at or better than budgeted
operating cashflow (“STI Gateway”). The STI Gateway was not satisfied during the financial year ended June 30, 2015. The below table shows
which of the individual STI goals were achieved during the financial year ended June 30, 2015:
30
www.lynascorp.comDirectors’ Report STI FY 2014/15 – Corporate
STI test
Gateway (Operating Cash Flow)
(At or better than budgeted Operating Cash Flow)
Company goals:
(1)
Operating Cash Flow
(At or better than budgeted Operating Cash Flow)
(2) Operating Margin
(At or better than budgeted Operating Margin)
(3) Health & Safety LTI
(Reduction in ‘Lost Time Injury’ when compared to last performance year)
Overall STI pay-out based on goals and achieved performance:
Ex Gratia Award at the end of FY15
Status
Fail
Fail
Fail
Pass
NIL
Notwithstanding that the STI Gateway for FY15 was not satisfied, the Board concluded after the end of FY15 that it was appropriate to make
an ex gratia award to selected senior Executives, in recognition of recent achievements and as part of the Group’s retention policies.
In approving the awards, the Executives’ contributions to the following key performance areas were assessed.
Improved production rates
(a)
(b) Decreased costs
(c) Cash performance
(d) The debt rescheduling
Recognizing the importance of cash conservation, the award to senior Executives was approved as an award of performance rights. The award
is in an amount equal to approximately 15% of total fixed remuneration.
The performance rights will vest after 1 year of service with no other vesting conditions. The performance rights will be valued based on the
5 day VWAP at the date of the Board’s decision to approve the award, being July 28, 2015.
LTIs
Options and Performance Rights are provided to KMP and other selected employees to provide greater alignment to 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.
A summary of the performance conditions attached to Options and Performance Rights granted during the financial year ended June 30,
2015 (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 satisfaction of the following operational hurdle:
Consistency of Production – Right First Time (RFT): During the calendar year 2016, the percentage of first time conforming
produced tonnes over total produced tonnes for Mt Weld and the LAMP must be at least 85% in accordance with the following
sliding scale:
(a)
(b)
(c)
If the RFT is 85% or more, and less than 90%, then 50% of the RFT portion will vest.
If the RFT is 90% or more, and less than 92%, then 100% of the RFT portion will vest.
If the RFT is 92% or more, then an additional 20% of the RFT portion will vest, giving a total vested portion equal to 120%
of the RFT portion.
(ii) 50% will be conditional on the company’s Total Shareholder Return (TSR) being at least at the 51st percentile of ASX 200
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.
31
Lynas Corporation Limited | 2015 Annual Report
Remuneration Report – Audited continued
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)
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;
(b)
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 Managing 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:
Ms Lacaze must give three months’ written notice of an intention to resign.
Notice by Group:
The Group may terminate the agreement by giving six months’ written notice.
The Group may terminate Ms Lacaze’s employment at any time without notice if serious misconduct has
occurred.
Treatment of
incentives on
termination:
On resignation, any unvested Options and Performance Rights may be forfeited subject to the discretion of
the Board. Upon termination of Ms Lacaze’s employment by the Group other than as a result of misconduct,
Ms Lacaze will be entitled to retain a pro – rata portion of any unvested Options and Performance Rights held
by her on the date of termination. For example, where 50% of the vesting period has been served, Ms Lacaze
will be entitled to retain 50% of the unvested Options or Performance Rights. Ms Lacaze will also be entitled
to retain any Options or Performance Rights that have vested prior to the date of termination.
Termination
benefits:
In accordance with the Corporations Act 2001, the maximum termination payment payable to Ms Lacaze is equal
to her base salary for one year (i.e. excluding any LTI component).
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 three to six months’ written notice;
•
•
• on resignation or termination (other than as a result of misconduct), unvested incentives will be treated in the same manner set out
above in respect of Ms Lacaze; 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 a TSR hurdle and to project milestone hurdles related to REO
capacity. Those hurdles were not satisfied.
In the financial year ended June 30, 2013, LTI grants were also subject to a TSR hurdle and to project milestone hurdles related to REO
capacity. The project milestone hurdles were not satisfied. The reference period for the TSR hurdle has not yet expired.
In the financial year ended June 30, 2014, LTI grants were also subject to a TSR hurdle and to project milestone hurdles related to
consistency of production – Right First Time. The reference period for these hurdles has not yet expired.
In the financial year ended June 30, 2015, LTI grants were also subject to a TSR hurdle and to project milestone hurdles related to
consistency of production – Right First Time, 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 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.
32
www.lynascorp.comDirectors’ Report During the financial year ended June 30, 2015, the STI plan consisted of one single 12-month review period, commencing on July 1, 2014.
As noted above in section D, the payment of any award under the STI programme is subject to the Group achieving positive operating cash
flow (“STI Gateway”). The STI Gateway was not satisfied.
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.
For further context the following table provides reported financial information on which remuneration has been based. As noted elsewhere
the group has moved from a development phase and is now transitioning into its operational phase, as evident in the revenue metrics noted
below.
Revenue ($‘000 )
Loss before tax ($‘000 )
Loss after tax ($‘000 )
Shareholder funds ($’000 )
Annual average share price
Closing share price at financial year end
Earnings Per Share (EPS) (CPS)
Diluted (EPS) (CPS)
June 30
2010
June 30
2011
June 30
2012
June 30
2013
June 30
2014
June 30
2015
–
(43,041)
(43,041)
719,857
$0.55
$0.55
(3.23)
(3.23)
–
(57,288)
(59,086)
821,994
$1.66
$1.98
(3.54)
(3.54)
–
(97,879)
(87,770)
823,161
$1.30
$0.85
(5.12)
(5.12)
950
(141,014)
(143,555)
994,645
$0.65
$0.38
(5.13)
(5.13)
64,570
(345,431)
(345,488)
1,034,634
$0.29
$0.13
(15.41)
(15.41)
144,596
(118,559)
(118,685)
1,083,898
$0.08
$0.03
(3.82)
(3.82)
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.
Components of Non-Executive Director Remuneration
Each NED receives a fee for being a Director of the Company, and (other than the Chairman of the Board) each NED receives 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, 2015 were:
• Chairman $250,000 per annum;
• Non-Executive Director $100,000 per annum.
Committee Fees
Board Committee
Audit, Risk Management, Safety, Health and Environment Committee
Nomination, Remuneration and Community Committee
Chair
$
30,000
25,000
Member
$
15,000
12,500
The remuneration for NEDs for the financial years ended June 30, 2014 and June 30, 2015 is set out in Section H of this report.
33
Lynas Corporation Limited | 2015 Annual Report
Short term benefits
Post-employment
benefits
e
e
y
o
l
p
m
e
m
r
e
t
t
r
o
h
s
r
e
h
t
O
s
t
fi
e
n
e
b
y
r
a
t
e
n
o
m
-
n
o
N
s
t
fi
e
n
e
b
y
r
a
l
a
s
h
s
a
C
s
e
e
f
d
n
a
n
o
i
t
a
n
m
r
e
T
i
s
t
n
e
m
y
a
p
n
o
i
s
n
e
p
r
e
h
t
o
d
n
a
n
o
i
t
a
u
n
n
a
-
r
e
p
u
S
s
t
n
e
m
y
a
p
m
r
e
T
t
r
o
h
S
l
a
t
o
T
p
m
E
-
t
s
o
P
d
n
a
s
t
fi
e
n
e
B
e
c
i
v
r
e
s
g
n
o
L
e
v
a
e
l
Remuneration Report – Audited continued
H. DETAILS OF REMUNERATION
Year Ended June 30, 2015
Name
Executive Director
A. Lacaze
Non-Executive Directors
K.Conlon
W. Forde
M. Harding(2)
J. Klein
P. Etienne(3)
Executives
A. Arnold
G. Sturzenegger(4)
K. Leung(5)
M. Ahmad(6)
P. Le Roux(7)
1,181,552
300,000
59,998
140,000
173,613
125,000
115,000
57,500
622,419
458,220
464,939
353,002
423,667
–
–
–
–
–
–
–
–
–
–
–
–
–
38,584
–
10,651
25,370
27,013
215
69,671
Sub-total for current
Directors and Executives
4,114,912
338,584
192,918
Former Non-Executive Directors
N.Curtis(8)
183,333
Former Executives
G. Barr(9)
L. Catanzaro(10)
A. Jury(11)
J.C. Steinmetz(12)
Sub-total for former
Directors and Executives
217,877
359,541
114,298
309,954
1,185,003
–
–
–
–
–
–
–
–
–
–
88,635
193,269
223,007
–
13,908
9,689
9,874
4,696
185,702
420,835
592,422
118,994
598,199
88,635
430,184
209,961 1,913,783
Total
5,299,915
338,584
281,553
430,184
404,977 6,755,213
–
–
–
–
–
–
–
–
–
–
–
–
–
18,783 1,560,333
–
16,105
9,392
–
5,463
6,261
–
18,783
62,655
57,574
140,000
189,718
134,392
115,000
62,963
639,331
483,590
510,735
454,456
550,912
195,016 4,841,430
–
183,333
Long term benefits
)
1
(
)
t
e
n
(
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
l
a
t
o
T
f
o
%
d
e
t
a
l
e
r
e
c
n
a
-
m
r
o
f
r
e
P
l
a
t
o
T
272,568
15% 1,832,901
–
–
–
–
–
–
–
–
–
–
140,000
189,718
134,392
115,000
62,963
284,968
–
107,920
49,568
15,832
–
31% 924,299
483,590
17% 618,655
10% 504,024
3% 566,744
730,856
13% 5,572,286
110,509
38% 293,842
(162,603)
(1,786)
(23,809)
–
(63%)
–
(25%)
–
258,232
590,636
95,185
598,199
(77,689)
(4%) 1,836,094
653,167
9% 7,408,380
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) Represents the cumulative impact of amortising the accounting value of Options and Performance Rights over their 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 Non-Executive Chairman with effect from January 1, 2015.
(3) Appointed Non-Executive Director with effect from January 1, 2015.
(4) Appointed Chief Financial Officer with effect from November 1, 2014. Prior to that, Mr. Sturzenegger was the General Manager-Finance of the Group.
(5) Appointed Vice President of Production on August 1, 2014.
(6) Appointed Executive Vice President Malaysia with effect from November 1, 2012 and has been considered to be a KMP in the current year.
(7) Appointed Executive Vice President of Sales and Marketing with effect from October 1, 2010 and has been considered to be a KMP in the current year.
(8) Ceased to be Chairman with effect from January 1, 2015 and Non-Executive Director with effect from February 1, 2015.
(9) Ceased to be Executive Vice President of People and Culture with effect from January 2, 2015.
(10) Ceased to be Chief Financial Officer with effect from January 2, 2015.
(11) Ceased to be Executive Vice President of Corporate Affairs with effect from September 25, 2014.
(12) Ceased to be Chief Operating Officer with effect from December 8, 2014.
34
www.lynascorp.comDirectors’ Report
Year Ended June 30, 2014
Name
Executive Director
A. Lacaze(2)
Former Executive Director
E. Noyrez(3)
Non-Executive Directors
K.Conlon
N.Curtis
W. Forde
J. Klein
Executives
A. Arnold
G. Barr
L. Catanzaro
A. Jury
J.C. Steinmetz(7)
Total
Short term benefits
Post-employment
benefits
e
e
y
o
l
p
m
e
m
r
e
t
t
r
o
h
s
r
e
h
t
O
s
t
fi
e
n
e
b
y
r
a
t
e
n
o
m
-
n
o
N
s
t
fi
e
n
e
b
y
r
a
l
a
s
h
s
a
C
s
e
e
f
d
n
a
n
o
i
t
a
n
m
r
e
T
i
s
t
n
e
m
y
a
p
n
o
i
s
n
e
p
r
e
h
t
o
d
n
a
n
o
i
t
a
u
n
n
a
-
r
e
p
u
S
s
t
n
e
m
y
a
p
m
r
e
T
t
r
o
h
S
l
a
t
o
T
p
m
E
-
t
s
o
P
d
n
a
s
t
fi
e
n
e
B
e
c
i
v
r
e
s
g
n
o
L
e
v
a
e
l
Long term benefits
)
1
(
)
t
e
n
(
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
l
a
t
o
T
f
o
%
d
e
t
a
l
e
r
e
c
n
a
-
m
r
o
f
r
e
P
l
a
t
o
T
131,997
–
–
–
5,362
137,359
–
–
0% 137,359
1,415,482 121,156(8)
361,374 1,239,189(4)
71,707 3,208,908
–
141,523
8% 3,350,431
–
149,375
350,000 252,409(8)
–
186,765
–
124,375
–
15,575
–
–
482,779
428,097
713,900
383,352
387,489
76,177(8)
68,150(8)
12,620(8)
–
–
17,287
–
17,886
12,410
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,985
–
149,375
617,984
203,750
124,375
4,166
2,152
20,834
25,416
–
–
–
–
–
–
–
(32,835)
20,634
16,508
0% 149,375
38% 585,149
9% 224,384
12% 140,883
16,508
–
44%
0%
37,342
25,416
25,196
25,123
25,000
17,775
111,427
601,439
521,370
769,406
413,537
498,916
7,100
6,352
–
–
–
50,772
26,023
(45,939)
23,809
–
19% 659,311
17% 553,745
723,467
(5%)
5% 437,346
0% 498,916
4,788,368
530,512
429,707
1,239,189
304,893 7,292,669
13,452
217,003
7,523,124
Former Non-Executive Directors
D. Davidson(5)
Z. Switkowski(6)
11,493
23,264
–
–
5,175
–
(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 Chief Executive Officer and Executive Director with effect from June 25, 2014, previously Non-Executive Director from January 1, 2014. Entitled to a
sign-on bonus of $100,000 under the terms of Ms Lacaze’s employment contract. This is subject to Lynas shareholder approval.
(3) Ceased as Chief Executive Officer and Director with effect from June 25, 2014.
(4) This amount represents the termination payment which is payable to Eric Noyrez pursuant to the cessation of Mr Noyrez’s employment as Chief Executive Officer, in
accordance with his Service Agreement. The amount is payable in instalments to Mr Noyrez during the course of the financial year ending June 30, 2015. In addition
to this amount, Mr Noyrez has forfeited options and performance rights with a value of $60,872
(5) Resigned with effect from August 20, 2013.
(6) Resigned with effect from August 20, 2013.
(7) Appointed as Chief Operating Officer with effect from August 1, 2013.
(8) Represents an STI award paid in the financial year ended June 30, 2014 relating to the First Half Review Period STI Performance Gateway being satisfied for the prior
year ended June 30, 2013 and approved for payment by the Board on September 13, 2013.
35
Lynas Corporation Limited | 2015 Annual Report
I. KMP EQUITY HOLDINGS
(i) Shareholdings
The following table outlines the shares held directly, indirectly and beneficially by directors and KMP as at June 30, 2015.
Purchased
Granted
On exercise
of options
Other
Balance
at end of
period
Held nominally
at end of period
Name
A. Lacaze
K. Conlon
P. Etienne(1)
W. Forde
M. Harding(2)
J. Klein
A. Arnold
G. Sturzenegger(3)
K. Leung(4)
M. Ahmad(5)
P. Le Roux(6)
Balance at
beginning of
period
82,500
262,258
–
1,161,184
–
2,082,236
34,401
–
–
100,000
–
948,476
593,922
–
414,709
–
743,657
12,287
–
–
40,000
–
Total
3,722,579
2,753,051
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,030,976
856,180
–
1,575,893
–
2,825,893
46,688
–
–
140,000
–
6,475,630
–
–
–
–
–
–
–
–
–
–
–
(1)
(2)
(3)
(4)
(5)
(6)
Appointed as a Director with effect from January 1, 2015.
Appointed as Chairman with effect from January 1, 2015.
Commenced as Chief Financial Officer with effect from November 1, 2014.
Appointed Vice President of Production on August 1, 2014.
Appointed Executive Vice President Malaysia with effect from November 1, 2012 and has been considered to be a KMP in the current year.
Appointed Executive Vice President of Sales and Marketing with effect from October 1, 2010 and has been considered to be a KMP in the current year.
(ii) Share Based Remuneration – Options and Performance Rights
The following table lists any options and performance rights which are still to vest, or have yet to expire, as at 30 June 2015.
Grant date
July 1, 2010
August 19, 2010
August 19, 2010
October 1, 2010
September 25, 2012
September 25, 2012*
September 23, 2013*
September 23, 2013*
September 23, 2013*
September 23, 2014*
September 23, 2014*
November 28, 2014*(2)
November 28, 2014*(2)
November 28, 2014*(2)
November 28, 2014*(2)
Refer footnote*(3)
Number
1,000,000
4,500,000
1,350,000
1,000,000
679,758
432,489
579,663
1,237,127
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,227
2,830,189
4,464,286
Date vested
and exercisable
July 1, 2013
August 19, 2013
August 19, 2013
October 1, 2013
September 24, 2015
September 24, 2015
September 23, 2016
September 23, 2016
September 23, 2016
September 23, 2017(1)
September 23, 2017(1)
September 23, 2015(1)
September 30, 2015(1)
September 23, 2017(1)
September 23, 2017(1)
Expiry date
July 1, 2015
August 19, 2015
August 19, 2015
October 1, 2015
September 24, 2017
September 24, 2017
September 23, 2018
September 23, 2018
September 23, 2018
September 23, 2019
September 23, 2019
September 23, 2017
September 30, 2017
September 23, 2019
September 23, 2019
May 6, 2016(1)
May 6, 2018
Exercise
price
Value per Option
at valuation date
$ 0.66
$ 1.15
$ 1.15
$ 1.60
$ 1.02
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.24
$ 0.34
$ 0.66
$ 0.48
$ 0.26
$ 0.72
$ 0.41
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
Refer footnote*(3)
Total
33,893,100
* Denotes Performance Rights which are granted on the same terms as Options, except there is no consideration payable on exercise.
(1)
(2)
Performance Rights Series Y, Z, AA, AB, AC, AD and AE.
Performance Rights Series AA, AB, AC and AD were approved by the Board on September 23 and September 30, 2014 subject to shareholder approval, and subsequently
approved by the shareholders of the Company at the AGM on November 28, 2014. Accordingly, those Performance rights were valued as at November 28, 2014.
The proposed issuance of Performance Rights Series AE was approved by the Board on May 6, 2015, subject to shareholder approval, and shareholder approval is
expected to be sought at the Lynas AGM on November 23, 2015. A provisional value per option of $0.0448 has been used as at 30 June 2015. This will be revalued
on the date of shareholder approval.
(3)
36
www.lynascorp.comDirectors’ Report 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 granted during the year ended June 30, 2015:
Series Y
Series Z
Series AA
Series AB
Series AC
Series AD
Series AE
Valuation date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Life of Option
$0.116
$0.00
Nil
87.01%
2.83%
5 years
$0.096
$0.00
Nil
87.01%
2.83%
5 years
$0.059
$0.00
Nil
73.28%
2.40%
3 years
$0.059
$0.00
Nil
73.28%
2.40%
3 years
$0.059
$0.00
Nil
73.28%
2.40%
5 years
$0.059
$0.00
Nil
73.28%
2.40%
5 years
Refer footnote
(1)
(1)
Performance Rights Series AE were approved by the Board on May 6, 2015, subject to shareholder approval, and shareholder approval is expected to be sought at the
Lynas AGM on November 23, 2015. Accordingly, those Performance rights have been valued as at September 30, 2014. A provisional value per option of $0.0448 has
been used as at 30 June 2015. This will be revalued on the date of shareholder approval.
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 either a three-year expiry or a five-year expiry from date of grant (as specified above) and is therefore not
necessarily indicative of exercise patterns that may occur.
The resulting weighted average fair values for those Options and Performance Rights granted during the year are:
Number of
Options and
performance
rights
Grant date
Fair value per
Instrument
at valuation
date
Exercise
price per
Instrument
First exercise date
Last exercise
or Expiry date
Name
A. Lacaze(1)
A. Lacaze(1)
A. Lacaze(1)
A. Lacaze(1)
A. Lacaze(2)
K. Leung
K. Leung
M. Ahmad
M. Ahmad
A. Arnold*
A. Arnold
862,069 November 28, 2014
1,086,957 November 28, 2014
3,396,227 November 28, 2014
2,830,189 November 28, 2014
4,464,286
1,896,227
1,580,189
452,830
377,358
1,896,226
1,580,189
Refer footnote(2)
September 23, 2014
September 23, 2014
September 23, 2014
September 23, 2014
September 23, 2014
September 23, 2014
Former KMP
J.C. Steinmetz(3)
J.C. Steinmetz(3)
1,896,226
1,580,189
September 23, 2014
September 23, 2014
Total
23,899,162
$0.059
$0.059
$0.059
$0.031
Refer(2)
$0.116
$0.096
$0.116
$0.096
$0.116
$0.096
$0.116
$0.096
September 23, 2015
September 30, 2015
September 23, 2017
September 23, 2017
$0.00
$0.00
$0.00
$0.00
$0.00 May 6, 2016
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
September 23, 2017
September 23, 2017
September 23, 2017
September 23, 2017
September 23, 2017
September 23, 2017
September 23, 2017
September 30, 2017
September 23, 2019
September 23, 2019
May 6, 2018
September 23, 2019
September 23, 2019
September 23, 2019
September 23, 2019
September 23, 2019
September 23, 2019
$0.00
$0.00
September 23, 2017
September 23, 2017
September 23, 2019
September 23, 2019
(1)
(2)
(3)
Four series of performance rights granted to A Lacaze were approved by the Board on September 23 and September 30, 2014 subject to shareholder approval, and
subsequently approved by the shareholders of the Company at the AGM on November 28, 2014.
One series of performance rights granted to A Lacaze were approved by the Board on May 6, 2015 subject to shareholder approval. Shareholder approval is expected
to be sought at the Lynas AGM on November 23, 2015. A provisional value per option of $0.0448 has been used as at 30 June 2015. This will be revalued on the date
of shareholder approval.
The performance rights granted to J.C. Steinmetz were forfeited after he ceased to be Chief Operating Officer effective December 8, 2014.
Except as specified in the table above, 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.
37
Lynas Corporation Limited | 2015 Annual Report The following tables outline the Options and Performance Rights granted for the benefit of Directors and the KMP during the 2015 and 2014
financial years and those Options which have vested at each respective year-end.
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 and
exercisable
at June 30,
2015
Amount
vested
and not
exercisable
at June 30,
2015
June 30, 2015
A. Lacaze(1)
K. Conlon
P Etienne(2)
W. Forde
M. Harding(3)
J. Klein
A. Arnold
G. Sturzenegger(4)
K. Leung(5)
M. Ahmad(6)
P. Le Roux(7)
Former KMP
G. Barr(8)
L. Catanzaro(9)
N. Curtis(10)
A. Jury(11)
J.C. Steinmetz(12)
–
–
–
2,150,000
–
1,700,000
5,172,378
–
107,213
288,178
1,156,589
1,851,080
1,689,132
18,500,000
256,544
–
12,639,728
–
–
–
–
–
Refer(1)
–
–
–
–
–
3,476,415 Sep 23, 2014
–
3,476,416 Sep 23, 2014
830,188 Sep 23, 2014
–
–
–
–
–
–
–
–
–
(467,500)
–
–
(130,000)
(45,000)
–
–
–
(1,400,000)
–
(1,100,000)
(2,400,000)
–
–
12,639,728
–
–
(1,400,000)
–
(1,100,000)
608,915
–
3,583,629
700,188
(45,000)
12,639,728
–
–
750,000
–
600,000
5,781,293
–
3,583,629
988,366
1,111,589
–
–
–
750,000
–
600,000
750,000
–
–
1,000,000
–
–
–
–
–
–
3,476,415 Sep 23, 2014
(1,362,419)
(1,689,132)
(6,500,000)
(256,544)
(3,476,415)
–
–
(12,000,000)
–
–
(1,362,419)
(1,689,132)
(18,500,000)
(256,544)
–
488,661
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
32,871,114 23,899,162
(13,927,010) (16,900,000)
(6,927,848) 25,943,266
3,100,000
(1)
8,175,442 performance rights granted to A. Lacaze were approved by the Board on September 23 and September 30, 2014, subject to shareholder approval, and
subsequently approved by the shareholders of the Company at the AGM on November 28, 2014. The proposed issuance of 4,464,286 performance rights granted
to A. Lacaze was approved by the Board on May 6, 2015 subject to shareholder approval, and shareholder approval is expected to be sought at the Lynas AGM on
November 23, 2015.
Appointed as a Director with effect from January 1, 2015.
Appointed as Chairman with effect from January 1, 2015.
Commenced as Chief Financial Officer with effect from November 1, 2014.
Appointed Vice President of Production on August 1, 2014.
Appointed Executive Vice President Malaysia with effect from November 1, 2012 and has been considered to be a KMP in the current year.
Appointed Executive Vice President of Sales and Marketing with effect from October 1, 2010 and has been considered to be a KMP in the current year.
Ceased as Vice President of People and Culture with effect from January 2, 2015.
Ceased as Chief Financial Officer with effect from November 1, 2014.
(2)
(3
(4)
(5)
(6)
(7)
(8)
(9)
(10) Acted as Chairman until January 1, 2015. Resigned as a Non-Executive Director with effect from February 1, 2015.
(11) Ceased as Vice President of Corporate Affairs with effect from January 2, 2015.
(12) Ceased as Chief Operating Officer with effect from December 8, 2014.
38
www.lynascorp.comDirectors’ Report –
–
–
–
–
–
–
–
–
–
–
–
–
–
June 30, 2014
A. Arnold
G. Barr
L. Catanzaro
K. Conlon
N. Curtis
J. Klein
A. Lacaze(1)
W. Forde
A. Jury
J.C. Steinmetz (2)
Former KMP
D. Davidson(3)
E. Noyrez(4)
Z. Switkowski(5)
Amount
vested and
exercisable
at June 30,
2014
Amount
vested
and not
exercisable
at June 30,
2014
Net
change
Balance
at end of
period
Balance at
beginning of
period
7,142,402
2,199,806
2,453,172
–
25,500,000
2,500,000
–
3,250,000
–
–
Granted
Grant Date
1,026,177 Sep 23, 2013
1,026,177 Sep 23, 2013
462,546 Sep 23, 2013
–
–
–
–
–
256,544 Sep 23, 2013
–
–
–
–
–
–
–
Options
exercised/
cancelled/
forfeited/
other
(996,201)
(924,903)
(1,226,586)
–
(2,000,000)
–
–
–
–
–
Options
expired
without
exercise
(2,000,000)
(450,000)
–
–
(5,000,000)
(800,000)
–
(1,100,000)
–
–
(1,970,024)
(348,726)
(764,040)
–
5,172,378
1,851,080
1,689,132
–
(7,000,000) 18,500,000
1,700,000
–
2,150,000
256,544
–
(800,000)
–
(1,100,000)
256,544
–
3,150,000
–
–
–
16,500,000
1,700,000
–
2,150,000
–
–
2,500,000
9,812,853
–
–
–
2,802,840 Nov 29, 2013(4)
–
–
–
(6,115,693)
–
(800,000)
–
–
(800,000)
(3,312,853)
–
1,700,000
6,500,000
–
1,700,000
6,500,000
–
Total
55,358,233
5,574,284
(11,263,383) (10,150,000) (15,839,099) 39,519,134 31,700,000
(1)
Appointed as Chief Executive Officer and an Executive Director with effect from June 25, 2014, previously Non-Executive Director from January 1, 2014.
As announced on June 25, 2014, subject to shareholder approval, A. Lacaze is entitled to a sign-on bonus of performance rights of $100,000.
(2) Appointed as Chief Operating Officer with effect from August 1 2013.
(3) Resigned as a Director with effect from August 20, 2013.
(4)
Ceased as Chief Executive Officer and a Director with effect from June 25, 2014. The performance rights issued to E. Noyrez were approved by the Board on
September 23, 2013 subject to shareholder approval, and subsequently approved by the shareholders of the Company at the AGM on November 29, 2013.
(5) Resigned as a Director with effect from August 20, 2013.
Subsequent events
On August 17, 2015 the Company announced it had agreed on a long term debt structure with its current debt providers and bondholders.
Japan Australia Rare Earths B.V. (JARE) loan facility
The new maturity date of this facility is June 30, 2018. Interest is paid into a restricted bank account in the name of Lynas. Interest liabilities
will only be paid to the lenders to the extent that, from June 30, 2016 onwards, there is a total cash balance (unrestricted and restricted
funds) in excess of AUD60m. The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the Lynas business.
The Company has agreed an interest regime which provides Lynas with the ability to reduce the effective interest rate on the JARE facility
from 7% per annum to a floor of 2.8% per annum over time. The initial interest rate is unchanged at 7% per annum, however the new
framework sets specific targets that, if met, will effect a cascading decrease in the interest rate payable on the facility.
The Principal Repayments due prior to maturity under the JARE facility have been adjusted significantly.
Terms in place at June 30, 2015
New terms announced August 17, 2015
19 January 2014
2 October 2014
30 September 2015
21 December 2015
31 March 2016
30 June 2016
USD10m (paid)
USD10m (paid)
USD30m
USD20m
USD20m
USD135m
19 January 2014
2 October 2014
30 June 2016
21 December 2016
30 June 2017
21 December 2017
30 June 2018
USD10m (paid)
USD10m (paid)
USD2m
USD5m
USD15m
USD30m
USD153m
39
Lynas Corporation Limited | 2015 Annual Report Under the new agreement, Lynas has the ability to reduce the effective interest rate on the JARE facility from 7% to a minimum floor of
2.8% over time. This is based on meeting certain milestones as shown below.
Production Target
Cumulative NdPr Production from July 1, 2015
Interest reduction when
production target achieved
Interest penalty when
production target not achieved
December 31, 2015
June 30, 2016
December 31, 2016
June 30, 2017
December 31, 2017
1,860 tonnes
3,840 tonnes
5,940 tonnes
8,040 tonnes
10,440 tonnes
0.5%
0.5%
0.5%
0.25%
0.25%
0.25%
Nil
0.25%
0.25%
0.25%
If the target of 3,840 tonnes is not met by June 30, 2016, Lynas agrees to start up SX5 Train 4 production. Lynas is continuously assessing the
appropriate time to start up SX5 Train 4 which is largely dependent on market conditions.
Scheduled Repayments
Each time a scheduled repayment is fully paid on or before its scheduled repayment date, the interest rate decreases by 0.3% per annum
effective from the day after the repayment is made.
Principal Prepayments
If, at any time on or before 21 December 2016, the total repayment and prepayment amount (including the USD20m already repaid by
October 2, 2014) is equal to or greater than USD50m, the interest rate decreases by 1.0%. An additional 0.5% reduction applies if, at any
time on or before June 30, 2017, the total repayment and prepayment amount (including the USD20m already repaid by October 2, 2014) is
equal to or greater than USD70m. In the alternative, if, at any time on or before 30 June 2017, the total repayment and prepayment amount
(including the USD20m already repaid by October 2, 2014) is equal to or greater than USD50m, the interest rate decreases by 0.4%.
The previous “Phase 2 Completion Test” and any potential requirement for early repayments arising from that test are deleted.
Mt Kellett convertible bonds
The maturity of the bonds has been extended from July 25, 2016 to September 30, 2018.
The interest coupon on the bondholder facility remains at 2.75% for the duration of the loan. The interest payment dates are set at June
30, and December 31 each year. Interest payable on the Bonds in respect of the interest periods ending March 31, June 30, September 30,
December 31, 2015 and March 31 ,2016 are deferred until June 30, 2016 without penalty.
The convertible bond facility contains the same mechanism as the JARE facility for payment of interest into restricted bank accounts in the
name of Lynas. Interest liabilities will only be paid to the lenders to the extent that there is a total cash balance (unrestricted and restricted
funds) in excess of AUD60m after June 30, 2016. The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the
Lynas business.
As part of the agreement, the Company has issued warrants to bondholders for 174,365,466 shares at a strike price of $0.038 per share.
These warrants will expire on September 30, 2018.
With the exception of the above, there have been no other events subsequent to June 30, 2015 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
Mike Harding
Chairman
Sydney
September 21, 2015
40
www.lynascorp.comDirectors’ Report Directors’ Declaration
The Directors declare that:
(a)
(b)
(c)
(d)
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
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 34 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
Mike Harding
Chairman
Sydney
September 21, 2015
41
Lynas Corporation Limited | 2015 Annual Report
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 2015, 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 Australian
Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
42
www.lynascorp.comDirectors’ Report 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.
Auditor’s Opinion
In our opinion:
a. the financial report of Lynas Corporation Limited is in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year
ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial 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 2015. The directors of the company
are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Lynas Corporation Limited for the year ended 30 June 2015, complies with section 300A of the
Corporations Act 2001.
Ernst & Young
Graham Ezzy
Partner
Sydney
21 September 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
43
Lynas Corporation Limited | 2015 Annual Report
Directors’ Report
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 2015, 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
21 September 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
44
www.lynascorp.com Financial Statements
as at June 30, 2015
Consolidated Statement of Profit or Loss
and Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Reporting entity
Basis of presentation
Summary of significant accounting policies
Critical accounting estimates and assumptions
Determination of fair values
Segment reporting
Other income
General and administration expenses
Restructuring expenses
Impairment
Auditor’s remuneration
Financial income and expenses
Income taxes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14. Deferred tax assets and liabilities
15. Other comprehensive income
16.
17.
18.
19.
Cash and cash equivalents
Trade and other receivables
Inventories
Reconciliation of the profit (loss) for the year with
the net cash from (used in) operating activities
20. Other non-current assets
21.
22.
Property, plant and equipment
Deferred exploration, evaluation and
development expenditure
Trade and other payables
23.
Borrowings
24.
Employee benefits
25.
Provisions
26.
Equity and reserves
27.
Financial risk management
28.
29.
Related parties
30. Group Entities
31.
32. Operating leases
33.
34. Deed of cross guarantee
35.
36.
37.
Parent entity information
Contingencies
Subsequent events
Employee share option plan
Capital commitments
46
47
48
49
50
50
50
51
62
64
64
66
66
67
67
67
68
68
70
71
71
72
72
73
73
74
75
76
76
79
79
80
81
87
87
88
90
91
91
93
93
93
45
Lynas Corporation Limited | 2015 Annual Report Consolidated Statement of Profit or Loss
and Comprehensive Income
Year ended June 30, 2015
Revenue
Cost of sales*
Gross loss
Other income
General and administration expenses*
Restructuring expenses
Impairment expenses
Loss from operating activities
Financial income
Financial expenses
Net financial expenses
Loss before income tax
Income tax expense
Loss for the year
Note
7
9
10
12
12
13
2015
A$ ‘000
144,596
(168,345)
2014
A$ ‘000
64,570
(77,679)
(23,749)
(13,109)
133
(40,920)
–
(16,741)
20,398
(125,102)
(3,823)
(196,384)
(81,277)
(318,020)
508
(37,790)
1,966
(29,377)
(37,282)
(27,411)
(118,559)
(345,431)
(126)
(57)
(118,685)
(345,488)
Other comprehensive (loss) income for the period net of income tax
that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
15
(78,362)
(20,315)
Total other comprehensive (loss) income for the year, net of income tax
(78,362)
(20,315)
Total comprehensive loss for the year attributable to equity holders
of the Company
(197,047)
(365,803)
Loss per share
Basic and diluted loss per share (cents per share)
* For more information on expenses by nature, reference should be made to notes 8, 18 and 32.
Note
2015
cents per share
2014
cents per share
27
(3.82)
(15.41)
The Consolidated Statement of Profit or Loss and Comprehensive Income should be read in conjunction with the notes to the financial statements.
46
www.lynascorp.com Consolidated Statement
of Financial Position
as at June 30, 2015
Assets
Cash and cash equivalents
Trade and other receivables
Current tax receivables
Prepayments
Inventories
Total current assets
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Intangible assets – software
Other non-current assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Borrowings
Employee benefits
Current tax payable
Provisions
Other provisions
Total current liabilities
Finance Lease Liabilities
Borrowings
Provisions
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Reserves
Total equity attributable to the equity holders of the Company
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
Note
2015
A$ ‘000
2014
A$ ‘000
16
17
18
18
21
22
20
23
24
25
26
9
23
24
26
25
27
27
51,973
6,032
–
3,146
59,511
38,144
9,586
24
3,865
64,427
120,662
116,046
2,329
658,353
45,784
207
18,163
724,836
845,498
57,841
267,799
2,393
22
–
–
8,976
669,075
46,857
350
11,042
736,300
852,346
31,953
122,094
2,733
–
10,210
3,823
328,055
170,813
1,261
278,368
54,356
227
334,212
662,267
183,231
1,381
321,477
56,340
295
379,493
550,306
302,040
1,083,898
(894,864)
(5,803)
1,034,634
(776,179)
43,585
183,231
302,040
47
Lynas Corporation Limited | 2015 Annual Report Consolidated Statement
of Changes in Equity
for the year ended June 30, 2015
Accu-
mulated
deficit
A$ ‘000
Foreign
currency
translation
reserve
A$ ‘000
Equity
settled
employee
benefits
reserve
A$ ‘000
Share
Capital
A$ ‘000
Note
Option
reserve
A$ ‘000
Other
reserves
A$ ‘000
Total
A$ ‘000
2015
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 and perfor-
mance rights, net of issue costs
Issue of shares and options from
equity raising, net of issue costs
Employee remuneration settled
through share-based payments
15
27
27
27
1,034,634
(776,179)
(19,432)
34,274
–
–
–
–
(118,685)
(78,362)
–
(118,685)
(78,362)
11
49,253
–
–
–
–
–
–
–
–
–
–
–
–
28,143
–
–
–
–
–
831
–
28,743
302,040
–
–
–
–
–
–
(78,362)
(118,685)
(197,047)
11
77,396
831
Balance at June 30, 2015
1,083,898
(894,864)
(97,794)
35,105
28,143
28,743
183,231
2014
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
Issue of shares, net of issue costs
Employee remuneration settled
through share-based payments
15
27
27
27
994,645
(430,691)
883
35,128
–
–
–
–
(345,488)
(20,315)
–
(345,488)
(20,315)
16
39,973
–
–
–
–
–
–
–
–
–
–
–
–
(854)
Balance at June 30, 2014
1,034,634
(776,179)
(19,432)
34,274
–
–
–
–
–
–
–
–
28,743
628,708
–
–
–
–
–
–
(20,315)
(345,488)
(365,803)
16
39,973
(854)
28,743
302,040
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
48
www.lynascorp.com Consolidated Statement
of Cash Flows
for the year ended June 30, 2015
Cash flows from operating activities
Receipts from customers
Receipt of government grants
Payments to suppliers and employees
Royalties paid
Income taxes (paid)
Note
2015
A$ ‘000
2014
A$ ‘000
155,300
–
(183,663)
(3,524)
(60)
58,598
14,082
(173,484)
(2,269)
(135)
Net cash flows (used in) operating activities
19
(31,947)
(103,208)
Cash flows from investing activities
Payment for property, plant and equipment
Payment for intangible assets
Security bonds paid
Security bonds refunded
Receipt from sale of available for sale financial assets
Proceeds from sale of property, plant and equipment
(10,017)
(6)
–
385
–
–
(17,241)
(135)
(6,845)
12,819
2,703
105
Net cash (used in) investing activities
(9,638)
(8,594)
Cash flows from financing activities
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
Repayment of long-term borrowing (JARE loan facility)
Net cash from 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
16
379
(15,069)
82,977
(5,062)
–
(11,371)
51,854
10,269
38,144
3,560
51,973
2,457
(22,960)
42,079
(2,106)
16
(11,270)
8,216
(103,586)
141,371
359
38,144
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
49
Lynas Corporation Limited | 2015 Annual Report Financial Statements
Notes to the Financial Statements
for the year ended 30 June 2015
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, 2015 comprises the Company and its subsidiaries
(together referred to as the “Group”).
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 1, 7 Tully Road, East Perth WA 6004, Australia.
2. BASIS OF PRESENTATION
2.1 Statement of compliance
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 21, 2015.
2.2 Going concern
The financial report has been prepared using the going concern assumption.
The Board has reached the view that this is appropriate after considering a number of key factors affecting the business. These include the
continuing extremely low prices for Rare Earths products experienced in the first quarter of FY16 and the possibility that these low prices
could continue through FY16, continuing improvements in cost performance and the recently announced restructuring of the company’s
debt facilities.
At June 30, 2015 the Group has net current liabilities of $207.4m, primarily arising due to the scheduled repayment of debt falling due in the
following 12-month period. Whilst this reflected the position at June 30, 2015, the effect of the subsequent refinancing of debt post year end
as outlined below means that at the time these financial statements were approved, the Group had net current assets.
The directors have prepared a cashflow forecast which indicates that the Group will have sufficient cashflows to meet all commitments
and working capital requirements for the 12-month period from the date of signing this report. The Group’s operations have demonstrated
the ability to generate net positive cash inflows. It is the intention of the directors to finance future operations solely with cashflows from
operating activities considering its update on borrowings below.
Borrowings
Full details of the Group’s material debt facilities are set out in note 24 Borrowings and include both the JARE loan facility and the Mt Kellett
convertible bonds.
As set out in that note 24 Borrowings and note 37 Subsequent Events, the Company have reached amended agreements on its long term debt
structure with its debt providers. The maturity dates of the JARE loan facility and the Mt Kellett convertible bond have been extended to 2018.
An amended principal repayment schedule for the JARE loan facility under the amended agreement is set out in that note. The table
illustrates how repayments required have been adjusted significantly in favour of the Company.
2.3 Basis of measurement
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, 2015. Information for the comparative
year is for the 12 month period ended June 30, 2014.
50
www.lynascorp.com 2.4 Presentation currency
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.
2.5 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 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.
2.7 Reclassification of comparative information
Certain elements of the information presented for comparative purposes have been revised to conform to the current year presentation.
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.
3.1 Basis of consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Company or the Group. Control is achieved when the Company or Group has power over the
investee, is exposed, or has the rights to variable returns from its involvement with the investee; and has the ability to use its power to affect
its returns. 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. As
per note 30 all entities within the Group are 100% owned and controlled.
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.
(b) Transactions eliminated on consolidation
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.
3.2 Foreign currency
(a) Functional and presentation currency
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”).
51
Lynas Corporation Limited | 2015 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(b) Foreign currency transactions
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 meas-
ured 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.
(c) Foreign operations
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.
(d) Changes in functional currency
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 AUD.
3.3 Non-derivative financial instruments
Non-derivative financial instruments comprise cash and cash equivalents, receivables, available for sale financial assets, trade and other
payables, interest bearing borrowings and compound instruments.
A non-derivative financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Non-derivative financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if
the Group transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset.
Non-derivative financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through the profit or loss, any
directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described further.
Non-derivative financial instruments are recognised on a gross basis unless a current and legally enforceable right to off-set exists and the
Group intends to either settle the instrument net or realise the asset and liability simultaneously.
Upon initial acquisition the Group classifies its financial instruments in one of the following categories, which is dependent on the purpose
for which the financial instruments were acquired.
(a) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, restricted cash and other short-term highly liquid invest-
ments 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.
(b) Loans and receivables
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.
52
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued (c) Held-to-maturity investments
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.
(d) Available-for-sale financial assets
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 availa-
ble-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.
(e) Other liabilities
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.
(f) Compound financial instruments
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.
3.4 Derivative financial instruments
A derivative financial instrument is recognised if the Group becomes a party to the contractual provisions of an instrument at the trade date.
Derivative financial instruments are initially recognised at fair value (which includes, where applicable, consideration of credit risk), with
transaction costs being expensed as incurred. Subsequent to initial recognition, derivative financial instruments are stated at fair value.
The gain or loss on re-measurement to fair value is recognised in the statement of comprehensive income as a component of the profit
or loss unless the derivative financial instruments qualify for hedge accounting. Where a derivative financial instrument qualifies for hedge
accounting, recognition of any resulting gain or loss depends on the nature of the hedging relationship (see further).
Derivative financial instruments are recognised on a gross basis unless a current and legally enforceable right to off-set exists.
Derivative financial assets are derecognised if the Group’s contractual right to the cash flows from the instrument expire or if the Group
transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset.
Derivative financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
(a) Cash flow hedges
Changes in the fair value of a derivative financial instrument designated as a cash flow hedge are recognised directly in equity as a compo-
nent 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.
53
Lynas Corporation Limited | 2015 Annual Report
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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 compre-
hensive 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.
(b) Fair value hedges
Changes in the fair value of a derivative financial instrument designated as a fair value hedge are recognised in the statement of comprehen-
sive 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.
(c) Embedded derivatives
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 adjust-
ment 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.
3.5 Inventories
(a) Raw materials, work in progress and finished goods
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.
(b) Engineering and maintenance materials
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.
3.6 Property, plant and equipment
(a) Recognition and measurement
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.
(b) Assets under construction
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.
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www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued (c) Borrowing costs
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.
(d) Subsequent costs
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.
(e) Depreciation
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
2 to 30 years
15 to 30 years
Buildings
Fixtures and fittings
Motor vehicles
5 to 30 years
2 to 15 years
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.
3.7 Mineral exploration, evaluation and development expenditure
(a) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Exploration and evaluation
expenditure includes:
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.
(b) Development expenditure
Once an area of interest has been established as commercially viable and technically feasible, expenditure other than that relating to land, build-
ings 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.
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Lynas Corporation Limited | 2015 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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.
(c) Deferred stripping
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.
(d) Amortisation of development
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.
3.8 Intangible assets
(a) Research and development
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).
(b) Other intangible assets
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(a)). Other intangible assets have finite useful lives and are carried at cost less accumulated
amortisation and impairment losses (if any).
(c) Subsequent expenditure
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.
(d) Amortisation
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
3.9 Impairment
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.
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www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued Impairment of loans and receivables and held-to-maturity financial assets
(a)
The recoverable amount of the Group’s loans and receivables and held-to-maturity financial assets carried at amortised cost is calculated
with reference to the present value of the estimated future cash flows, discounted at the original effective interest rate (i.e. the effective
interest rate computed at the date of initial recognition of these financial assets). Receivables with a short duration are not discounted.
Impairment losses on individual instruments that are considered significant are determined on an individual basis through an evaluation
of the specific instruments’ exposures. For trade receivables which are not significant on an individual basis, impairment is assessed on a
portfolio basis taking into consideration the number of days overdue and the historical loss experiences on a portfolio with a similar number
of days overdue.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
significant financial difficulty of the issuer or obligor;
a breach of contract, such as default or delinquency in respect of interest or principal repayment; or
•
•
• observable data indicating that there is a measureable decrease in the estimated future cash flows from a portfolio.
(b) Non-financial assets
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 iden-
tifiable 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.
3.11 Employee benefits
(a) Pension and superannuation obligations
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.
(b) Short-term employee benefits
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.
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Lynas Corporation Limited | 2015 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(c) Other long-term employee benefits
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.
(d) Termination benefits
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.
(b) Business closure and rationalisation
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.
(c) Rehabilitation
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 environ-
mental 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.
(d) Onerous Contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist
where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic
benefits expected to be received from the contract.
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www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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 deduc-
tions) after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same basis as described
in note 3.20(a) for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as
current provisions (as outlined in note 3.12) and included as part of the cost of goods sold in the statement of comprehensive income as a
component of profit or loss.
3.14 Dividends
Dividends to the Group’s shareholders are recognised as a liability in the Group’s statement of financial position in the period in which the
dividends are declared.
3.15 Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted from
equity and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the considera-
tion 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 31.
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.
3.17 Revenue
(a) Sale of goods
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable net of sales commissions, 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.
(b) Government grants
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.
(c) Dividend income
Dividend income is recognised when the right to receive payment is established.
(d) Royalties
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.
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Lynas Corporation Limited | 2015 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
3.18 Lease payments
Minimum lease payments made under finance leases are apportioned between the finance charges and the reduction of the outstanding
liability. The finance charges which are recognised in the statement of comprehensive income as a component of the profit or loss are
allocated to each year during the lease term so as to produce a constant rate of interest on the remaining balance of the liability. Contingent
lease payments are accounted for in the years in which the payments are incurred.
Payments made under operating leases are recognised in the statement of comprehensive income as a component of the profit or loss on
a straight-line basis over the term of the lease, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed. Contingent lease payments arising under operating leases are recognised as an
expense in the year in which the payments are incurred.
In the event that lease incentives are received to enter into an operating lease, such incentives are deferred and recognised as a liability. The
aggregated benefits of the lease incentives are recognised as a reduction to the lease expenses on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
3.19 Financial income and expenses
Financial income comprises interest income, foreign currency gains and gains on derivative financial instruments in respect of financing
activities that are recognised in the statement of comprehensive income as a component of the profit or loss. Interest income is recognised
as it accrues using the effective interest method.
Financial expenses comprise interest expense, foreign currency losses, impairment losses recognised on financial assets (except for trade
receivables) and losses in respect of financing activities on derivative instruments that are recognised in the statement of comprehensive
income as a component of the profit or loss. All borrowing costs not qualifying for capitalisation are recognised in the statement of
comprehensive income as a component of the profit or loss using the effective interest method.
3.20
Income tax
Income tax
(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.
(b) Tax consolidation
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.
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www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 3.21 Sales tax, value added tax and goods and services tax
All amounts (including cash flows) are shown exclusive of sales tax, value added tax (“VAT”) and goods and services tax (“GST”) to the extent
the taxes are reclaimable, except for receivables and payables that are stated inclusive of sales tax, VAT and GST.
3.22 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
(a) The Group as lessor – finance leases
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases.
(b) The Group as lessee – finance leases
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.
3.23 Earnings per share
(a) Basic earnings per share
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.
(b) Diluted earnings per share
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 35 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.
(b) Effect of tax consolidation
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) Standards and Interpretations affecting amounts reported
The following new and revised Standards and Interpretations have been adopted in the current year.
Interpretation 21 Levies
• AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities.
•
• AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
• AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting
• AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities [AASB 1, 3, 7, 10, 12, 107, 112, 124, 127, 132, 134
and 139]
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Lynas Corporation Limited | 2015 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
• AASB 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and Interests of Policy Holders [AASB 1038]
• AASB 1031 Materiality
• Annual Improvements 2010-2012 Cycle
• Annual Improvements 2011-2013 Cycle
• AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments
(Part A and Part B)
• AASB 2014-1 Amendments to Australian Accounting Standards – Defined Benefit Plans: Employee Contributions
• AASB 2014-2 Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 Disclosure Requirements
Their adoption has not had any significant impact on the amounts reported in these consolidated financial statements but may affect the
accounting for future transactions or arrangements.
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
AASB 9 Financial Instruments
Effective for the annual
reporting period
beginning on
Expected to be initially
applied in the financial
year ending
January 1, 2018
June 30, 2019
AASB 14 Interim standard on regulatory deferral accounts
January 1, 2016
June 30, 2017
AASB 15 Revenue from Contracts with Customers
January 1, 2017
June 30, 2018
AASB 2013-9 Amendments to Australian Accounting Standards –
Conceptual Framework, Materiality and Financial Instruments
AASB 2014-3 Amendments to Australian Accounting Standards –
Accounting for Acquisitions of interests in Joint Operations
Part C: January 1, 2015
Part C: June 30, 2016
January 1, 2016
June 30, 2017
AASB 2014-4 Clarification of Acceptable Methods of Depreciation and Amortisation
January 1, 2016
June 30, 2017
AASB 2014-9 Amendments to Australian Accounting Standards –
Equity Method in Separate Financial Statements
January 1, 2016
June 30, 2017
AASB 2014-10 Amendments to Australian Accounting Standards –
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
January 1, 2016
June 30, 2017
AASB 2015.5 Investment Entities: Applying the Consolidation Exception Amendment to
IFRS 10, IFRS 12 and IAS 28
January 1, 2016
June 30, 2017
AASB 2015-1 Amendments to Australian Accounting Standards –
Annual Improvements to Australian Accounting Standards 2012-2014 Cycle
January 1, 2016
June 30, 2017
AASB 2015-2 Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101
January 1, 2016
June 30, 2017
AASB 2015-3 Amendments to Australian Accounting Standards arising from the
Withdrawal of AASB 1031 Materiality
July 1, 2015
June 30, 2016
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.
62
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 4.1 Reserve estimates and mine life
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.
4.2 Income taxes
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.
4.4 Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair
value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales
transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value
in use calculation is based on a 25 year discounted cash flow (DCF) model. The cash flows are derived from the three year budget and forecast
model that is extrapolated over 25 years and do not include restructuring activities that the Group is not yet committed to or significant future
investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used
for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.
Assets are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
4.5 Exploration, evaluation and development expenditure
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
63
Lynas Corporation Limited | 2015 Annual Report 4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS continued
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.
5.1 Trade and other receivables
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.
5.2 Investments in equity securities
The fair value of investments in listed equity securities is determined by reference to their quoted bid price at the reporting date.
5.3 Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair
value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity
of the contract using a risk-free interest rate (based on government bonds).
The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future
cash flows based on the terms and maturity of each contract using market interest rates for a similar instrument at the measurement date.
The fair value of commodity and other price derivatives is based on a valuation model. The valuation model (which includes where relevant
the consideration of credit risk) discounts the estimated future cash flows based on the terms and maturity of each contract using forward
curves and market interest rates at the reporting date.
5.4 Non-derivative financial liabilities
The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated by discounting the future
contractual cash flows at the current market interest rates that are available for similar financial instruments. We consider these inputs to be
level 2 fair value measurements as described in Note 28.6.
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.
At year end, the Group’s CODM are the Board of Directors of the Company, the Chief Executive Officer, the Chief Financial Officer, the VP
Production and the VP Sales & Marketing. Information reported to the Group’s CODM for the purposes of resource allocation and assessment
of performance currently focuses on the operation 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 this segment are the same as the Group’s accounting policies. Results from operating activities represent
the profit earned by this segment without allocation of interest income and expense and income tax benefit (expense). The CODM assess the
performance of the operating segment 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.
Revenues by geographical location, based on invoicing as a percentage of total revenues, comprise: Japan 51%, China 23%, Vietnam 16%,
France 7% and other 3% (2014: Japan 58%, China 22.1%, France 10.1% and other 9.8%). The majority of the Group’s non-current assets are
located in Malaysia.
64
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued For the year ended June 2015
For the year ended June 30, 2014
Rare Earth
operations
Corporate/
Unallocated
Total
Continuing
Operations
Rare Earth
operations
Corporate/
Unallocated
Total
Continuing
Operations
Note
A$’000
A$’000
A$’000
A$’000
A$’000
A$’000
Business segment reporting
Revenue
Cost of sales
Gross profit
Expenses and other income
Impairments
Earnings before interest and tax (“EBIT”)
Financial income
Financial expenses
Profit (loss) before income tax
Income tax benefit (expense)
Profit (loss) for the year
144,596
(168,345)
(23,749)
–
–
–
144,596
(168,345)
64,570
(77,679)
(23,749)
(13,109)
–
–
–
64,570
(77,679)
(13,109)
(30,091)
(16,741)
(10,696)
–
(70,581)
(10,696)
(40,787)
(16,741)
(81,277)
508
(37,790)
(118,559)
(126)
(118,685)
(114,022)
(196,384)
(323,515)
5,495
–
5,495
(108,527)
(196,384)
(318,020)
1,966
(29,377)
(345,431)
(57)
(345,488)
EBIT
Depreciation and amortisation
18
(70,581)
44,452
(10,696)
1,041
(81,277)
45,493
(323,515)
36,607
5,495
403
(318,020)
37,010
Earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
Reconciliation of EBITDA to Adjusted EBITDA
Included in EBITDA:
Impairment charge – property plant and
equipment & other
Impairment charge – inventory
Other income
Restructuring provision
Non-cash employee remuneration settled
through share based payments comprising:
10
10
7
9
Share based payments expense for
the period
Impact of options and performance
rights forfeited during the period
31.1
31.1
Adjusted EBITDA
Total assets
Total liabilities
(26,129)
(9,655)
(35,784)
(286,908)
5,898
(281,010)
12,031
4,710
–
–
–
–
(133)
–
12,031
4,710
(133)
–
193,223
3,161
–
–
–
–
(20,398)
3,823
193,223
3,161
(20,398)
3,823
–
–
1,748
1,748
(917)
(917)
–
–
2,400
2,400
(3,254)
(3,254)
(9,388)
(8,957)
(18,345)
(90,524)
(11,531)
(102,055)
836,696
(136,477)
8,802
(525,790)
845,498
(662,267)
811,821
(104,907)
40,525
(445,399)
852,346
(550,306)
65
Lynas Corporation Limited | 2015 Annual Report 7. OTHER INCOME
Government grants
Gain on disposal of available for sale – financial assets
Total other income
For the year ended June 30
2015
A$’000
–
133
133
2014
A$’000
19,497
901
20,398
In the prior year, the Company received research and development (R&D) rebate of $14.1 million from the Australian Taxation Office (ATO)
principally in relation to the development of the Mt Weld concentration and processing plant in the year ended June 30, 2013. The R&D
rebate that is related to the year ended June 30, 2014 amounted to $0.6m and was claimed as a tax offset. It was non-refundable because
the respective sales turnover exceeded the threshold of $20 million.
The Company is assessing the amount spent on R&D during the year ended June 30, 2015 that may be eligible for R&D claim.
8. GENERAL AND ADMINISTRATION EXPENSES
Employee and production costs net of costs recovered through production
Depreciation expenses net of cost recovered through production
Other
Total general and administration expenses
8.1
Employee costs
The following items are gross employee costs before recoveries included in general and administration expenses:
Wages and salaries
Superannuation and pension contributions
Employee remuneration settled through share-based payments (note 31)
Other
Total employee costs
For the year ended June 30
2015
A$’000
25,640
12,535
2,745
2014
A$’000
94,359
10,744
19,999
40,920
125,102
For the year ended June 30
2015
A$’000
37,381
863
831
605
2014
A$’000
41,172
1,467
(854)
1,867
39,680
43,652
66
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 9. RESTRUCTURING EXPENSES
Employee costs
Asset costs
Premises break out costs
Other
Total restructuring expenses
For the year ended June 30
2015
A$’000
2014
A$’000
–
–
–
–
–
1,970
676
932
245
3,823
The restructuring expenses in 2014 related to amounts associated with the head office relocation and Group-wide redundancies as per the
ASX announcement dated July 2, 2014.
10.
IMPAIRMENT
Impairment loss – inventory
Impairment loss - property, plant and equipment
Total other expenses
Notes
18
21
For the year ended June 30
2015
A$’000
4,710
12,031
2014
A$’000
3,161
193,223
16,741
196,384
A review on the carrying value of inventory and property, plant and equipment was completed in both years.
In the prior year, the cost and performance of the Phase 2 assets were used to assess whether the carrying value ascribed to the Phase 1 assets
represented fair value. As a result, the LAMP Phase 1 assets have been written down by $190.0 million to the assessed replacement cost.
In the current year, a further $16.7m was written off in relation to obsolete inventory, spare parts and reverse osmosis plant.
11. AUDITOR’S REMUNERATION
The following items of expenditure are included in general and administration expenses:
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Audit fees
Tax fees
Other fees*
Total auditor’s remuneration Ernst & Young (Australia)
* Relates to due diligence services
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
Other fees
Total auditor’s remuneration Ernst & Young (other locations)
For the year ended June 30
2015
A$
2014
A$
241,575
42,924
175,000
317,437
275,191
10,900
460,499
603,528
170,000
3,469
173,469
68,000
10,000
78,000
67
Lynas Corporation Limited | 2015 Annual Report
12. FINANCIAL INCOME AND EXPENSES
Interest income on cash and cash equivalents*
Total financial income
Interest expense on JARE loan facility*
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 gain (loss)
Total financial expenses
Net financial income (expense)
* refer to note 24 for more information
13. INCOME TAXES
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
For the year ended June 30
2015
A$’000
508
508
2014
A$’000
1,966
1,966
(17,669)
(8,003)
(8,951)
(144)
(12,122)
(2,783)
3,879
(7,459)
(132)
(10,308)
(1,992)
(1,483)
(37,790)
(29,377)
(37,282)
(27,411)
For the year ended June 30
2015
A$’000
2014
A$’000
126
–
126
–
126
55
2
57
–
57
68
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 13.1
Income tax recognised in profit (loss)
Loss before tax for continuing operations
Income tax benefit calculated at 30% (2014: 30%)
Add (deduct):
R&D tax offset not included in assessable income
Effect of pioneer status (tax holiday) in Malaysia
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
Foreign tax paid on profits attributable to foreign permanent establishments
Effect of different tax rate of subsidiaries and branches
Other adjustments
Total current year income tax (benefit) expense
13.2
Income tax recognised directly in equity
Deferred tax
Share issue costs
Total income tax (benefit) expense recognised directly in equity
13.3
Income tax recognised directly in other comprehensive income
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
For the year ended June 30
2015
A$’000
2014
A$’000
(118,559)
(345,431)
(35,568)
(103,629)
–
48,626
(34,129)
(31,050)
7,397
34,887
–
9,709
254
126
(5,849)
39,543
10,402
4,795
41,508
13,797
57
–
(567)
57
–
–
–
–
–
–
–
–
–
–
69
Lynas Corporation Limited | 2015 Annual Report 14. DEFERRED TAX ASSETS AND LIABILITIES
14.1 Deferred tax balances
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
Trade payables
Provisions
Other
Unused tax losses and credits
Tax losses
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, 2014
A$’000
Recognised in
Profit or loss
A$’000
Recognised in
equity
A$’000
Recognised
in OCI
A$’000
Balance at
June 30, 2015
A$’000
(2,141)
(1,571)
474
–
131
(88)
2,022
–
–
1,173
–
–
–
–
(8,622)
9,489
–
42,996
–
1,505
56
7,898
–
53,322
(53,322)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,141)
(10,193)
9,963
–
43,127
(88)
3,527
56
7,898
1,173
53,322
(53,322)
–
Balance at
July 1, 2013
A$’000
Recognised in
Profit or loss
A$’000
Recognised in
equity
A$’000
Recognised
in OCI
A$’000
Balance at
June 30, 2014
A$’000
(5,927)
(1,810)
(22,564)
215
5,706
(893)
2,396
529
3,786
239
23,038
(215)
(5,575)
805
(374)
644
(22,348)
22,348
22,348
(22,348)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,141)
(1,571)
474
–
131
(88)
2,022
1,173
–
–
–
70
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 14.2 Unrecognised deferred tax assets
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
For the year ended June 30
2015
A$’000
2014
A$’000
371,944
2,145
183,780
345,104
2,330
63,510
557,869
410,944
The Group’s unused tax losses of a revenue nature for which no deferred tax assets have been recognised relate to Australia (2015: $176.7,
2014: $149.9 m), Malaysia (2015: $194.0m, 2014: $194.0m) and Malawi (2015: $1.2 m, 2014: $1.2 m). At June 30, 2015 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 $101.9m (2014: $93.8m).
The Group’s unused tax losses of a capital nature for which no deferred tax assets have been recognised relate to Australia (2015: $2.1m,
2014: $2.3 m). At June 30, 2015 it was not probable that the Group would have future taxable profits in Australia against which these tax
losses can be utilised. The potential tax benefit of these tax losses and temporary differences to the Group is $0.6m (2014: $0.7m).
The Group’s deductible temporary differences for which no deferred tax assets have been recognised relate to Australia (2015: $147.5m,
2014: $30.7m) and Malaysia (2015: $36.3m, 2014: $32.8m). At June 30, 2015 it was not probable that the Group would have future
taxable profits in these jurisdictions against which these deductible temporary differences can be utilised. The potential tax benefit of these
deductible temporary differences to the Group is $53.3m (2014: $17.4m).
15. OTHER COMPREHENSIVE INCOME
Within the statement of comprehensive income the Group has disclosed certain items of other comprehensive income net of the associated
income tax expense or benefit. The pre-tax amount of each of these items and the associated tax effect is as follows:
For the year ended June 30,
2015
2014
Pre-tax
A$’000
Tax effect
A$’000
Total
A$’000
Pre-tax
A$’000
Tax effect
A$’000
Exchange differences on translating
foreign operations
(78,362)
Total other comprehensive income
(78,362)
–
–
(78,362)
(20,315)
(78,362)
(20,315)
–
–
16. CASH AND CASH EQUIVALENTS
Total
A$’000
(20,315)
(20,315)
Cash at bank and on hand
Restricted cash
Total cash and cash equivalents
For the year ended June 30
2015
A$’000
2014
A$’000
31,335
20,638
51,973
33,289
4,855
38,144
Restricted cash represents funds provided under the JARE loan facility and Mt. Kellett convertible notes (refer to note 24 Borrowings), which
is available to fund interest payment that is due to JARE and Mt. Kellett.
Pursuant to a binding term sheets dated March 12, 2015, the Senior Lender under the Group’s JARE loan facility and the convertible
bondholders led by Mount Kellett agreed to reduce cash flow burden on the Group by agreeing to deposit each interest payment that is due
in calendar year 2015 into the Group’s restricted bank account, with the payments available, at the lenders’ discretion, for reuse in the Lynas
business between April 2015 to March 2016.
71
Lynas Corporation Limited | 2015 Annual Report 16. CASH AND CASH EQUIVALENTS continued
As mentioned in Note 24 Borrowings and announcement dated August 17, 2015, interest liabilities will only be paid to lenders to the extent
that there is a total cash balance (unrestricted and restricted funds) in excess of $60m.
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Total current trade and other receivables
For the year ended June 30
2015
A$’000
4,325
1,707
6,032
2014
A$’000
7,795
1,791
9,586
The Group’s exposure to credit risk is primarily in its trade receivables. Credit risk is assessed on a customer by customer basis and includes a
credit analysis of each customer, negotiated payment terms, and payment history. As at June 30, 2015, no trade receivables were past due or
impaired (none past due or impaired as at June 30, 2014).
18.
INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
For the year ended June 30
2015
A$’000
2014
A$’000
15,083
37,401
9,356
33,081
33,392
6,930
61,840
73,403
59,511
2,329
61,840
64,427
8,976
73,403
During the year ended June 30, 2015 inventories of $173.0m (2014: $77.7m) were recognised as an expense. $168.3m of which were
included in ‘cost of sales’ and the remaining $4.7m relates to impairment of obsolete inventory. The Group also reversed, within ‘cost of sales’,
prior year’s write-down to net realisable value of $3.2m.
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred exploration, evaluation and
development expenditure and intangible assets for the years ended June 30, 2015 and 2014 respectively in the following categories:
Recognised in General and
Administration Expense
Recognised in Inventory
Total
2015
A$’000
11,434
560
2014
A$’000
21,428
797
2015
A$’000
26,577
–
2014
A$’000
16,011
–
2015
A$’000
38,011
560
2014
A$’000
37,439
797
540
185
–
–
540
185
12,535
22,410
26,577
16,011
39,111
38,421
Property, plant and equipment
Deferred exploration and evaluation
expenditure
Intangibles
Total
72
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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 $33.0 million in the year
ended June 30, 2015 (June 30, 2014: $14.6 million).
During the year ended June 30, 2015 the Group recognised royalties payable to the Western Australian Government totalling $3.2 million
(year ended June 30, 2014: $3.1 million). Royalties arise on the shipment of the Group’s concentrate from Australia to Malaysia.
19.
RECONCILIATION OF THE PROFIT (LOSS) FOR THE YEAR WITH THE
NET CASH FROM (USED IN) OPERATING ACTIVITIES
Profit (loss) for the year
Adjustments for:
Depreciation and amortisation
Employee remuneration settled through share-based payments
Impairment loss on property, plant and equipment and other
Impairment loss on inventories
Net financial (income) expenses
Gain on disposal of available for sale - financial assets
Income tax (benefit) expense
Other Provisions
Income taxes (paid) received
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in other assets and liabilities
Change in provisions and employee benefits
Change in deferred income
Foreign exchange
10
10
12
7
13
9
For the year ended June 30
2015
A$’000
2014
A$’000
(118,685)
(345,488)
39,111
831
12,031
4,710
37,282
(133)
126
–
–
4,273
(4,810)
9,667
46
(16,425)
–
29
37,030
(854)
193,223
3,161
27,411
(901)
57
2,584
166
(9,830)
(4,991)
9,878
–
(9,745)
(5,415)
506
Net cash from (used in) operating activities
(31,947)
(103,208)
20. OTHER NON-CURRENT ASSETS
Security deposits – banking facilities and other, Malaysia
Security deposits – banking facilities and other, Australia
Security deposits – AELB, Malaysia
For the year ended June 30
2015
A$’000
4,243
850
13,070
2014
A$’000
3,951
786
6,305
18,163
11,042
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 2.96%
(2014: 3.95%) and the weighted average annual interest rate in Malaysia was 3.25% (2014: 3.25%).
During the year the Group recorded an increase of $6.8 million (2014: $3.0 million) in deposits to the Malaysian Government’s Atomic
Energy Licencing Board (“AELB”). These deposits form a component of a total USD50 million of instalments due in accordance with the
conditions underlying the granting of the Temporary Operating Licence to the Group for the LAMP in Malaysia. Please refer to note 33 for the
residual commitment to the AELB.
73
Lynas Corporation Limited | 2015 Annual Report 21. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land
A$’000
Buildings
plant and
equipment
A$’000
Fixtures and
fittings
A$’000
Motor
vehicles
A$’000
Assets under
construction
A$’000
Leasehold
improve-
ments
A$’000
Total
A$’000
As at June 30, 2015
Cost
Accumulated impairment losses
Accumulated depreciation
58,243
–
(3,834)
870,546
(196,322)
(92,015)
8,697
(371)
(4,302)
Carrying amount
54,409
582,209
4,024
As at June 30, 2014
Cost
Accumulated impairment losses
Accumulated depreciation
55,658
–
(2,475)
832,344
(187,726)
(53,351)
8,803
(30)
(4,278)
Carrying amount
53,183
591,267
4,495
Cost at the beginning of the year
Accumulated depreciation and
impairment losses at beginning of year
55,658
832,344
8,803
(2,475)
(241,077)
(4,308)
681
(54)
(481)
146
958
(174)
(409)
375
958
(583)
6,851
(249)
–
20,834
(7,748)
(2,123)
965,852
(204,744)
(102,755)
6,602
10,963
658,353
8,604
(191)
–
20,129
(7,404)
(1,383)
926,496
(195,525)
(61,896)
8,413
11,342
669,075
8,604
20,129
926,496
(191)
(8,787)
(257,421)
Carrying amount at the
beginning of the year
53,183
591,267
4,495
375
8,413
11,342
669,075
Additions
Disposals
Depreciation for the year
Impairment loss for the year
Transfers of assets under construction
Transfers from (to) inventory
Change in rehabilitation obligations (note 26)
Effect of movements in exchange rates
–
–
(1,995)
–
–
–
–
3,221
907
–
(34,913)
(11,719)
10,494
5,281
–
20,892
16
(249)
(393)
–
115
–
–
40
Carrying amount at
June 30, 2015
54,409
582,209
4,024
30
(123)
(126)
–
–
–
–
(10)
146
8,921
–
–
(312)
(10,609)
–
–
189
–
–
(584)
–
–
–
–
205
9,874
(372)
(38,011)
(12,031)
–
5,281
–
24,537
6,602
10,963
658,353
Cost at the beginning of the year
Accumulated depreciation and
impairment losses at beginning of year
Carrying amount at the
beginning of the year
Additions
Capitalisation of borrowing costs
Depreciation for the year
Impairment loss for the year
Transfers of assets under construction
Transfers from (to) inventory
Change in rehabilitation obligations (note 26)
Effect of movements in exchange rates
46,597
592,325
8,628
1,197
249,791
19,696
918,234
(1,549)
(25,734)
(3,188)
(508)
(6,313)
(607)
(37,899)
45,048
566,591
5,440
689
243,478
19,089
880,335
–
–
(1,021)
–
–
–
10,468
(1,312)
5,730
–
(34,351)
(185,819)
235,388
23,192
–
(19,464)
102
–
(1,118)
–
–
–
–
71
–
–
(106)
–
–
–
–
(208)
375
8,125
6,771
–
–
(236,699)
–
–
(13,262)
–
–
(843)
(7,404)
1,311
–
–
(811)
13,957
6,771
(37,439)
(193,223)
–
23,192
10,468
(34,986)
8,413
11,342
669,075
Carrying amount at June 30, 2014
53,183
591,267
4,495
The transfers from inventory relate to items categorised as spares to the value of $5.3m (2014: $1.2m) paid for as a component of the LAMP
Phase 2 construction. No “organics” have been transferred from inventories this year (2014: $22.0m).
Restrictions on the title of property plant and equipment are outlined in note 24.
74
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 22. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
As at June 30, 2015
Cost
Accumulated impairment losses
Accumulated amortisation
Exploration
and evaluation
expenditure
A$’000
Development
expenditure
A$’000
Pre-
production
stripping
A$’000
Rehabilitation
Asset
A$’000
Total
A$’000
21,304
(14,483)
(1,498)
17,543
(3,640)
(1,138)
4,078
–
(198)
24,602
–
(786)
67,527
(18,123)
(3,620)
Carrying amount
5,323
12,765
3,880
23,816
45,784
As at June 30, 2014
Cost
Accumulated impairment losses
Accumulated amortisation
20,944
(14,483)
(1,234)
17,543
(3,641)
(509)
4,078
–
(117)
24,602
–
(326)
67,167
(18,124)
(2,186)
Carrying amount
5,227
13,393
3,961
24,276
46,857
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
Change in rehabilitation obligations
20,944
17,543
4,078
24,602
67,167
(15,717)
5,227
360
(264)
–
(4,150)
13,393
–
(628)
–
(117)
3,961
–
(81)
–
(326)
(20,310)
24,276
–
(460)
–
46,857
360
(1,433)
–
Carrying amount at June 30, 2015
5,323
12,765
3,880
23,816
45,784
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
Change in rehabilitation obligations
20,944
17,543
4,078
24,602
67,167
(15,530)
5,414
–
(187)
–
(3,919)
13,624
–
(231)
–
(64)
4,014
–
(53)
–
–
(19,513)
24,602
–
(326)
–
47,654
–
(797)
–
Carrying amount at June 30, 2014
5,227
13,393
3,961
24,276
46,857
Restrictions on the title of the deferred exploration, evaluation and development expenditure are outlined in note 24.
75
Lynas Corporation Limited | 2015 Annual Report 23. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Interest payable
Other payables
Total trade and other payables
Current
Non-current
Total trade and other payables
For the year ended June 30
2015
A$’000
2014
A$’000
19,065
15,509
19,104
5,424
15,597
12,023
3,203
2,511
59,102
33,334
57,841
1,261
59,102
31,953
1,381
33,334
Trade and other payables are non-interest bearing and are normally settled on 60 day terms. Trade and other payables include amounts in
relation to Phase 2 of the Rare Earth Project (2015: $1.4 million; 2014: $2.7 million).
Interest is payable to JARE and Mt. Kellett. Refer to Note 24 Borrowings for further details.
24. BORROWINGS
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information
about the Group’s exposure to interest rate and foreign currency risk, see note 28.
Current borrowings
JARE loan facility
Non-current borrowings
JARE loan facility
Mt Kellett convertible bonds
Total borrowings(1)
JARE loan facility
Total JARE loan facility carrying amount
Principal value of Mt Kellett convertible bonds(2)
Equity component
Unamortised transaction costs
Total financial liability carrying amount
For the year ended June 30
2015
A$’000
2014
A$’000
267,799
122,094
–
278,368
106,168
215,309
546,167
443,571
267,799
228,262
267,799
228,262
293,910
(15,420)
(122)
238,879
(23,335)
(235)
278,368
215,309
(1)
There has been no additional drawdown under the loan facilities. However, due to the strengthening of the USD against the AUD, total borrowings in AUD have
increased from the prior year. Total principal borrowings in USD have in fact reduced from USD440m as at June 30, 2014 to USD430m as at June 30, 2015.
(2) 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.
76
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued Japan Australia Rare Earths B.V. (JARE) loan facility
The JARE loan facility for USD225 million was received from a special purpose company established by Sojitz Corporation and Japan, Oil, Gas
and Metals National Corporation (“JOGMEC”). The proceeds of the JARE loan facility funded 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 JARE loan facility is secured over all of the assets of the Group, other than the Malawi assets. Pursuant to a binding term sheet dated
September 24, 2014, the parties agreed that all of the Senior Lender’s securities will remain in place for the term of the JARE facility.
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 the first quarter of the year was the LIBOR published semi-annual rate plus a margin of 5.25%. For the remaining
3 quarters, rate of interest increased to a nominal rate of 7%.
Pursuant to a binding term sheet dated March 12, 2015, the Senior Lender and Lynas agreed to reduce the cash flow burden of the JARE loan
facility on Lynas, including by deferring the repayments previously due on March 31, 2015 and June 30, 2015 until June 30, 2016. The Senior
Lender and Lynas also agreed that each interest payment that is due in calendar year 2015 will be deposited into a restricted bank account,
with the payments available, at the lender’s discretion, for reuse in the Lynas business.
During the current year, the principal repayment due on September 30, 2014 was paid by its due date.
On August 17, 2015 the Company announced that it had agreed on a long term debt structure with its debt providers. The new maturity date
of this facility is June 30, 2018. Interest is paid into a restricted bank account in the name of Lynas. Interest liabilities will only be paid to the
lenders to the extent that, from June 30 2016 onwards, there is a total cash balance (unrestricted and restricted funds) in excess of AUD60m.
The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the Lynas business. The Company has agreed an
interest regime which provides Lynas with the ability to reduce the effective interest rate on the JARE facility from 7% per annum to a floor
of 2.8% per annum over time. The initial interest rate is unchanged at 7% per annum, however the new framework sets specific targets that,
if met, will effect a cascading decrease in the interest rate payable on the facility.
The Principal Repayments due prior to maturity under the JARE facility have been adjusted significantly.
Facility in place at 30 June 2015
New facility announced August 17, 2015
19 January 2014
2 October 2014
30 September 2015
21 December 2015
31 March 2016
30 June 2016
USD10m (paid)
USD10m (paid)
USD30m
USD20m
USD20m
USD135m
19 January 2014
2 October 2014
30 June 2016
21 December 2016
30 June 2017
21 December 2017
30 June 2018
USD10m (paid)
USD10m (paid)
USD2m
USD5m
USD15m
USD30m
USD153m
Under the new agreement, Lynas has the ability to reduce the effective interest rate on the JARE facility from 7% to a minimum floor of
2.8% over time. This is based on meeting certain milestones as shown below.
(a) Production Target
Cumulative NdPr Production from 1 July 2015
31 December 2015
30 June 2016
31 December 2016
30 June 2017
31 December 2017
1,860 tonnes
3,840 tonnes
5,940 tonnes
8,040 tonnes
10,440 tonnes
Interest reduction
when production
target achieved
Interest penalty when
production target not
achieved
0.5%
0.5%
0.5%
0.25%
0.25%
0.25%
Nil
0.25%
0.25%
0.25%
If the target of 3,840 tonnes is not met by June 30, 2016, Lynas agrees to start up SX5 Train 4 production. Lynas is continuously assessing the
appropriate time to start up SX5 Train 4 which is largely dependent on market conditions.
Scheduled Repayments
Each time a scheduled repayment is fully paid on or before its scheduled repayment date, the interest rate decreases by 0.3% per annum
effective from the day after the repayment is made.
Principal Prepayments
If, at any time on or before December 21, 2016, the total repayment and prepayment amount (including the USD20m already repaid by
October 2, 2014) is equal to or greater than USD50m, the interest rate decreases by 1.0%. An additional 0.5% reduction applies if, at any
time on or before June 30, 2017, the total repayment and prepayment amount (including the USD20m already repaid by October 2, 2014)
77
Lynas Corporation Limited | 2015 Annual Report 24. BORROWINGS continued
is equal to or greater than USD70m. In the alternative, if, at any time on or before June 30, 2017, the total repayment and prepayment
amount (including the USD20m already repaid by October 2, 2014) is equal to or greater than USD50m, the interest rate decreases by 0.4%.
The previous “Phase 2 Completion Test” and any potential requirement for early repayments arising from that test are deleted.
First Ranking Securities
The Senior Lender’s first ranking securities will remain in place throughout the term of the Senior Facility.
Mt Kellett convertible bonds
On January 24, 2012, the Company executed binding documentation for a USD225 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 (USD50 million) with the final payment of USD175 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 Convertible Bonds are unsecured. Each bond entitled the holder to convert to one share at a conversion price of AUD0.5634 per share
(at a set exchange rate of USD1.00 = AUD0.9533). Conversion may occur at any time between July 25, 2012 and the maturity date. 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.
Interest is payable quarterly on the Convertible Bonds at 2.75% per annum. Pursuant to a binding term sheet dated March 12, 2015, Lynas
and the Convertible bondholders led by Mount Kellett agreed to reduce the cash flow burden of the Convertible Bonds on Lynas by agreeing
that each interest payment that is due in calendar year 2015 will be deposited into a restricted bank account, with the payments available, at
the lender’s discretion, for reuse in the Lynas business.
On August 17, 2015 the Company announced that it had agreed on a long term debt structure with its bondholders. The maturity of the
bonds has been extended from July 25, 2016 to September 30, 2018.
The interest coupon on the bondholder facility remains at 2.75% for the duration of the loan. The interest payment dates are set at 30 June
and 31 December each year. Interest payable on the Bonds in respect of the interest periods ending 31 March, 30 June, 30 September, 31
December 2015 and 31 March 2016 are deferred until 30 June 2016 without penalty.
The convertible bond facility contains the same mechanism as the JARE facility for payment of interest into restricted bank accounts in the
name of Lynas. Interest liabilities will only be paid to the lenders to the extent that there is a total cash balance (unrestricted and restricted
funds) in excess of AUD60m after June 30, 2016. The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the
Lynas business.
Terms and debt repayment schedule
As at June 30, 2015
As at June 30, 2014
Nominal
interest
rate
Currency
Year of
maturity
Face value
USD ‘000
JARE loan facility
Mt Kellett convertible bonds*
USD
USD
7.00%
2.75%
2016**
2016**
205,000
225,000
Carrying
amount
AUD ‘000
267,799
278,368
Face value
USD ‘000
215,000
225,000
Carrying
amount
AUD ‘000
228,262
215,309
430,000
546,167
440,000
443,571
*
**
The carrying amount of the Mt Kellett note reflects the current value of the debt component of the instrument.
The maturity dates in the above table were the maturity dates as at June 30, 2015. After the balance date, those maturity dates were extended to 2018, as described above.
Nominal interest rates
Average for the year ended June 30, 2015
Average for the year ended June 30, 2014
Base rate
Margin
Total rate
Base rate
Margin
Total rate
JARE loan facility
Mt Kellett convertible bonds
1.32%
2.75%
5.32%
–
6.64%
2.75%
0.38%
2.75%
5.25%
–
5.63%
2.75%
78
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 25. EMPLOYEE BENEFITS
Provision for annual leave
Provision for long service leave
Other
Total employee benefits
Current
Non-current
Total employee benefits
26. PROVISIONS
Balance at the beginning of the year
Provisions made during the year
Provision utilised during the year
Provision reversed during the year
Provisions allocated to Trade Creditors & Other Payables
Effects of foreign exchange movement
Effects of discounting
Balance at June 30, 2015
Current
Non-current
Total provisions at June 30, 2015
Current
Non-current
Total provisions at June 30, 2014
Restoration and Rehabilitation
For the year ended June 30
2015
A$’000
2014
A$’000
827
320
1,473
2,620
2,393
227
2,620
Onerous
contracts
A$’000
14,384
27,602
(309)
(34,642)
(7,035)
–
–
–
–
–
–
10,210
4,174
14,384
1,731
592
705
3,028
2,733
295
3,028
Total
A$’000
66,550
27,602
(309)
(34,642)
(7,035)
1,273
917
54,356
–
54,356
54,356
10,210
56,340
66,550
Restoration
and
rehabilitation
A$’000
52,166
–
–
–
–
1,273
917
54,356
–
54,356
54,356
–
52,166
52,166
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 established 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. Subsequent to the commence-
ment of commissioning of Phase 2 of the LAMP in Malaysia in the 2014 financial year, an independent assessment of site rehabilitation
and restoration was performed which resulted in the Group increasing this provision to $27.5 million. 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 remains unchanged
from June 30, 2014.
79
Lynas Corporation Limited | 2015 Annual Report 26. PROVISIONS continued
For the provision at the LAMP, a corresponding increase in property plant and equipment has been recognised on the Group’s balance
sheet. Reference should be made to notes 21 and 22 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, 2014 represented management’s estimate of the value
of materials that the Group would be unable to take under these contracts over the life of the agreement as well as the unpaid value of
materials not delivered under the agreement through to June 30, 2014.
During the year, the Group continued to review this provision and has been increasing it based on production output and usage rates.
Subsequent to reaching a new agreement with the supplier, most of the provision had been reversed with the balance of $7m allocated to
Trade and Other Payables. Refer to the ASX announcement on July 17, 2015 for more details.
27. EQUITY AND RESERVES
27.1 Share capital
Balance at the beginning of the year
Issue of shares pursuant to Institutional Share Placement (“ISP”)
Issue of shares pursuant to Share Purchase Plan (“SPP”)
Issue of shares pursuant to exercised options
Issue of shares pursuant to exercised performance rights
Equity raising costs
As at June 30,
2015
2014
Number of
shares
‘000
2,333,661
150,000
887,072
125
374
–
A$’000
1,034,634
9,150
54,099
11
–
(13,996)
Number of
shares
‘000
1,960,801
106,195
266,181
484
–
–
A$’000
994,645
12,000
30,079
16
–
(2,106)
Balance at June 30
3,371,232
1,083,898
2,333,661
1,034,634
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in the event of a wind-up.
Further detail regarding the issue of shares on option conversion is provided in note 31.
27.2 Reserves
Equity settled employee benefits
Foreign currency translation
Options
Other
Balance at June 30
As at June 30
2015
A$’000
2014
A$’000
35,105
(97,794)
28,143
28,743
34,274
(19,432)
–
28,743
(5,803)
43,585
The equity settled employee benefits reserve relates to share options granted by the Group to its employees under the employee share
option plan. Further information about share-based payments to employees is set out in note 31.
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional
currencies to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign
currency translation reserve.
80
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued Option reserve includes options issued as part of the rights issue that was completed in October 2014.
The other reserve represents the equity component of the USD225 million unsecured Mt Kellett convertible bonds issued in 2012, net of the
associated deferred tax (see note 24).
27.3 Earnings/(loss) per share
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted loss per share are as follows:
Net loss attributed to ordinary shareholders (in A$’000)
Loss used in calculating basic and diluted loss per share (in A’$000)
For the year ended June 30
2015
A$’000
2014
A$’000
(118,685)
(345,488)
(118,685)
(345,488)
Number
of shares
’000
Number
of shares
’000
Weighted average number of ordinary shares used in calculating basic loss per share:
3,106,712
1,992,714
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
cents
per share
cents
per share
(3.82)
(3.82)
(15.41)
(15.41)
2014 EPS has been restated to take account the extra shares issued arising from 2015 equity raisings and its theoretical ex-rights fair value
per share.
27.4 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.
28. FINANCIAL RISK MANAGEMENT
28.1 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.
81
Lynas Corporation Limited | 2015 Annual Report 28. FINANCIAL RISK MANAGEMENT continued
28.2 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.
(a) Foreign exchange risk
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 USD225 million Mt Kellett convertible bonds.
Exposure to foreign exchange risk
The Group’s members are 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 member of the group. Whilst a member of the group with MYR as its functional currency
is exposed to USD and AUD, another member with USD as its functional currency is exposed to AUD. This exposure on financial assets and
liabilities by currency, which has potential impact on the profit or loss component of the statement of comprehensive income, is detailed below:
June 30, 2015
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
June 30, 2014
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
AUD
A$’000
USD
A$’000
Total
A$’000
1,759
–
–
1,759
428
–
–
428
19,348
5,547
(8,089)
21,107
5,547
(8,089)
16,806
18,565
1,123
7,554
(4,264)
4,413
1,551
7,554
(4,264)
4,841
In addition, the Group’s members are 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:
June 30, 2015
Net asset exposure – local currency
June 30, 2014
Net asset exposure – local currency
82
MYR
’000
USD
’000
1,418,095
957,459
1,616,364
931,287
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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:
AUD/USD
AUD/MYR
USD/MYR
Sensitivity analysis
Average rate for the year
ended June 30
Closing rate
as at June 30
2015
2014
2015
2014
0.8434
2.8807
3.4194
0.9119
2.9514
3.2363
0.7655
2.8905
3.7764
0.9419
3.0247
3.2113
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$’000
USD
AUD
Increase/(Decrease) in Profit After Tax
For the year ended June 30, 2015
Increase/(Decrease) in Profit After Tax
For the year ended June 30, 2014
10% Strengthening
10% Weakening
10% Strengthening
10% Weakening
1,681
176
(1,681)
(176)
815
279
(815)
(279)
A change in exchange rates would also impact the translation of net assets of Group operations whose functional currencies are denominated
in currencies other than AUD, which is the Group’s presentation currency. A 10% strengthening or weakening of these currencies against the
Group’s presentation currency, at the reporting date, would have increased (decreased) the reported net asset. This analysis assumes that all
other variables remain constant. The same basis has been applied for all periods presented.
Increase/(Decrease) in Equity
For the year ended June 30, 2015
Increase/(Decrease) in Equity
For the year ended June 30, 2014
10% Strengthening
10% Weakening
10% Strengthening
10% Weakening
48,967
76,590
(48,967)
(76,890)
53,349
60,283
(53,349)
(60,283)
in A$’000
MYR
USD
(b)
Interest rate risk
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.
83
Lynas Corporation Limited | 2015 Annual Report 28. FINANCIAL RISK MANAGEMENT continued
The following table sets out the Group’s interest rate risk re-pricing profile:
Total
A$’000
6 months
or less
A$’000
6 to 12
months
A$’000
1 to 2
years
A$’000
2 to 5
years
A$’000
More than
5 years
A$’000
June 30, 2015
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
JARE loan facility
–
(293,926)
(293,926)
–
–
–
–
–
–
–
(293,926)
(293,926)
51,973
5,093
(267,799)
51,973
5,093
–
–
–
(267,799)
–
–
–
–
–
–
–
–
–
–
–
–
Total variable rate instruments
(210,733)
57,066
(267,799)
Total
(504,659)
57,066
(267,799)
(293,926)
June 30, 2014
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
JARE loan facility
–
(238,879)
(238,879)
–
–
–
38,144
4,737
(228,262)
38,144
4,737
(228,262)
Total variable rate instruments
(185,381)
(185,381)
Total
(424,260)
(185,381)
The Group’s sensitivity to interest rate risk can be expressed in two ways:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(238,879)
(238,879)
–
–
–
–
(238,879)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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.
50 basis point parallel increase in interest rates
50 basis point parallel decrease in interest rates
84
For the year ended June 30
2015
A$’000
(1,054)
1,054
2014
A$’000
(927)
927
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued (c) Commodity and other price risk
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.
28.3 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 trade and other receivables and is influenced mainly by the individual characteristics of
each customer. Demographically there are no material concentrations of credit risk.
28.4 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
Total
A$’000
1 month
or less
A$’000
1 to 3
months
A$’000
3 months
to 1 year
A$’000
1 to 5 years
A$’000
More than
5 years
A$’000
June 30, 2015
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
Mt Kellett convertible bonds
Total
June 30, 2014
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
Mt Kellett convertible bonds
–
–
N/A
54,705
54,705
–
–
7.00%
(1)
282,929
302,817
–
–
39,190
2,223
243,739
6,668
293,926
640,451
54,705
41,413
250,407
293,926
N/A
32,888
32,888
–
–
–
5.58%
(1)
244,560
253,330
–
–
43,536
1,806
127,424
5,419
73,600
246,105
Total
530,778
32,888
45,342
132,843
319,705
(1)
The cash coupon on the instrument of 2.75% is payable on the $US225 million principal. The weighted average effective interest rate is 8.07% on the Mt Kellett
convertible bonds. This rate is impacted by the unwinding of the equity component of the instrument which is recognised as a component of the Group’s net
financing expenses.
Refer to notes 2.2, 24 and 37 with respect to the events subsequent to June 30, 2015 which address the Group’s year end liquidity
requirements.
–
–
–
–
–
–
–
85
Lynas Corporation Limited | 2015 Annual Report 28. FINANCIAL RISK MANAGEMENT continued
28.5 Classification and fair values
Fair value
through the
profit and loss
A$’000
Available
for sale
A$’000
Cash, loans &
receivables
A$’000
Other
liabilities
A$’000
Total
carrying
amount
A$’000
Total
fair value
A$’000
June 30, 2015
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total assets
Liabilities
Trade and other payables
Current tax payable
Loans and borrowings
JARE loan facility
Mt Kellett convertible bonds
Total liabilities
June 30, 2014
Assets
Cash and cash equivalents
Trade and other receivables
Investments
Other assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Current tax payable
JARE loan facility
Mt Kellett convertible bonds
Total liabilities
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,973
9,281
18,163
79,417
–
22
–
–
22
38,144
13,479
–
11,042
62,665
–
–
–
–
51,973
9,281
18,163
51,973
9,281
18,163
79,417
79,417
59,090
–
267,799
278,368
59,090
22
267,799
278,368
59,090
22
267,799
278,368
605,257
605,279
605,279
–
–
–
–
38,144
13,479
–
11,042
38,144
13,479
–
11,042
–
62,665
62,665
–
34,573
34,573
34,573
15
–
–
15
–
228,262
215,309
15
228,262
215,309
15
228,262
215,309
478,144
478,159
478,159
The Group did not have any financial assets or financial liabilities classified as fair value through profit or loss at June 30, 2015
(June 30, 2014: none).
The methods used in determining fair values of financial instruments are discussed in note 5.
28.6 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, 2015, the Group did not hold any available for sale financial assets (June 30, 2014: none) 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, 2015 (June 30, 2014: none).
86
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 29. RELATED PARTIES
29.1 Key management personnel compensation
The aggregate compensation made to the Directors and other members of KMP of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total compensation paid to key management personnel
For the year ended June 30
2015
A$
2014
A$
5,920,052
404,877
–
430,184
653,167
5,748,587
304,893
13,452
1,239,189
217,003
7,408,380
7,523,124
The compensation of each member of the KMP of the Group for the current and prior year is set out within the Remuneration Report.
The Share-based payments amount 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 from 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.
29.2 Other related party transactions
Lynas Corporation Limited is the ultimate controlling party of the Group. Balances and transactions between the Company and its subsidi-
aries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
30. GROUP ENTITIES
Name of Group entity
Principal activity
Lynas Malaysia Sdn Bhd
Operation and development of advanced
material processing plant
Lynas Services Pty Ltd*
Provision of corporate services
Mount Weld Holdings Pty Ltd*
Holding company
Mount Weld Mining Pty Ltd*
Development of mining areas of interest
and operation of concentration plant
Mount Weld Rare Earths Pty Ltd*
Dormant
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Mineral exploration
Country of
incorporation
Malaysia
Australia
Australia
Australia
Australia
Australia
Malawi
Ownership interest
as at June 30
2015
100%
100%
100%
100%
100%
100%
100%
2014
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 34. Entity is also a member of the tax-consolidated group.
87
Lynas Corporation Limited | 2015 Annual Report 31. 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 perfor-
mance 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 transferrable.
Options and performance rights are granted for the benefit of 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 Executive Director of the Group and the Executive. At year end,
the Executive includes, the Chief Executive Officer (“CEO”), the Chief Operating Officer (“COO”), the Chief Financial Officer (“CFO”), the Group’s
General Counsel and Company Secretary, the Executive Vice President People and Culture, and the Executive Vice President Corporate Affairs.
Employee Share Trust (“EST”)
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 net cash impact for the Group arising from those arrangements.
31.1 Movements in employee share options and performance rights during the year
For the year ended June 30, 2015
For the year ended June 30, 2014
Number of
options
‘000
Weighted average
exercise price
$
Number of
options
‘000
Weighted average
exercise price
$
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
49,035
25,560
(15,828)
(374)
(24,500)
33,893
7,850
0.81
0.00
0.89
0.00
0.66
0.29
1.14
72,485
7,439
(18,000)
(484)
(12,404)
49,035
38,769
0.87
0.00
0.70
0.03
1.56
0.81
0.83
During the year ended June 30, 2015 the Group recognised a net expense of $0.8 million within the profit and loss component of the
statement of comprehensive income (2014: net benefit $0.9 million). The net expense during the year ended June 30, 2015 included the
reversal of expenses totalling $0.9 million associated with the forfeitures of 33% of the outstanding options issued on September 25, 2012,
33% of the specific performance rights issued on September 25, 2012 and 67% of the specific performance rights issued on September 23,
2013. These forfeitures were resulting from the pro-rated shares of resigned employees.
31.2 Listed options and employee options and performance rights exercised during the year
The following non-employee listed options were exercised during year ended June 30, 2015:
Exercise date
Number exercised
Share price at exercise date ($)
Exercise price ($)
November 5, 2014
November 13, 2014
November 14, 2014
November 18, 2014
November 26, 2014
January 20, 2015
February 3, 2015
February 10, 2015
February 19, 2015
March 3, 2015
March 17, 2015
June 29, 2015
88
25,769
500
55
505
50,000
982
2,684
32,632
1,072
1,785
8,211
594
124,789
0.06
0.06
0.06
0.06
0.06
0.05
0.04
0.05
0.05
0.05
0.05
0.03
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued The following employee performance rights were exercised during year ended June 30, 2015:
Exercise date
August 12, 2014
October 1, 2014
May 17, 2015
Number exercised
Share price at exercise date ($)
Exercise price ($)
140,000
4,651
229,309
373,960
0.16
0.08
0.04
0.00
0.00
0.00
31.3 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 $0.29 (2014: $0.78) and a weighted average
remaining contractual life of 1,036 days (2014: 497 days).
31.4 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, 2015 with respect to the performance of the Group’s employees during the financial year ended June 30, 2014:
Vesting schedule
For grants made in FY2015
(related to FY14 performance)
TSR hurdle (50%)
(performance against
ASX 200 companies)
50% of the TSR portion will vest for:
51st percentile performance
100% of the TSR portion will vest for:
76th percentile performance
Pro-rata vesting will occur between each of the above points
RFT hurdle (50%)
(consistency of production
measured in calendar year
2016)
50% of the RFT portion will vest for:
If the RFT is 85% or more, and less than 90%
100% of the RFT portion will vest for:
If the RFT is 90% or more, and less than 92%
Additional 20% of the RFT portion, giving a
total of 120% of the RFT portion:
If the RFT is 92% or more
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 $157,203 (2014:$ 394,676). Options were priced
using a Monte Carlo 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.
Series Y
Series Z
Series AA
Series AB
Series AC
Series AD
Series AE
Grant date share price ($)
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Life of Option
$0.116
$0.00
Nil
87.01%
2.83%
5 years
$0.096
$0.00
Nil
87.01%
2.83%
5 years
$0.059
$0.00
Nil
73.28%
2.40%
3 years
$0.059
$0.00
Nil
73.28%
2.40%
3 years
$0.059
$0.00
Nil
73.28%
2.40%
5 years
$0.059
$0.00
Nil
73.28%
2.40%
5 years
Refer
footnote
(1)
(1)
Performance Rights Series AE were approved by the Board on May 6, 2015, subject to shareholder approval, and shareholder approval is expected to be sought at
the Lynas AGM on November 23, 2015. Accordingly, a provisional value per option of $0.0448 has been used as at 30 June 2015. This will be revalued on the date of
shareholder approval.
89
Lynas Corporation Limited | 2015 Annual Report 31. EMPLOYEE SHARE OPTION PLAN continued
31.5 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.
Date vested
and exercisable
Expiry date
Exercise
price
Value per
option at
grant date
July 1, 2013
August 19, 2013
October 1, 2013
August 19, 2013
September 24, 2015
September 24, 2015
September 23, 2016
September 23, 2016
September 23, 2016
September 23, 2017
September 23, 2017
September 23, 2015
September 30, 2015
September 23, 2017
September 23, 2017
May 6, 2016
July 1, 2015
August 19, 2015
October 1, 2015
August 19, 2015
September 24, 2017
September 24, 2017
September 23, 2018
September 23, 2018
September 23, 2018
September 23, 2019
September 23, 2019
September 23, 2017
September 30, 2017
September 23, 2019
September 23, 2019
May 6, 2018
$ 0.66
$ 1.15
$ 1.60
$ 1.15
$ 1.02
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.24
$ 0.34
$ 0.48
$ 0.66
$ 0.26
$ 0.72
$ 0.41
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
Refer footnote (2)
Number
1,000,000
4,500,000
1,000,000
1,350,000
679,758
432,489
579,663
1,237,127
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,277
2,830,189
4,464,286
Series Grant date
July 1, 2010
August 19, 2010
October 1, 2010
August 19, 2010
September 25, 2012
September 25, 2012*
September 23, 2013*
September 23, 2013*
September 23, 2013*
September 23, 2014*
September 23, 2014*
November 28, 2014*(1)
November 28, 2014*(1)
November 28, 2014*(1)
November 28, 2014*(1)
Refer to footnote *(2)
G
H
J
K
T
U
V
W
X
Y
Z
AA
AB
AC
AD
AE
*
(1)
(2)
Total
33,893,100
Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
Performance Rights Series AA, AB, AC and AD were approved by the Board on September 23 and September 30, 2014 subject to shareholder approval, and subsequently
approved by the shareholders of the Company at the AGM on November 28, 2014. Accordingly, those Performance rights were valued as at November 28, 2014.
One series of performance rights granted to A Lacaze were approved by the Board on September 30, 2014 subject to shareholder approval and subject to
performance conditions that have now been satisfied. Shareholder approval is expected to be sought at the Lynas AGM on November 23, 2015. A provisional value
per option of $0.0448 has been used as at 30 June 2015. This will be revalued on the date of shareholder approval.
32. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Total
As at June 30
2014
A$’000
3,503
9,517
7,125
2015
A$’000
3,746
11,557
3,090
18,393
20,145
The Group has contracts for several operating leases for business premises located in Sydney, Perth, Laverton, Kuala Lumpur and Kuantan.
The Group also has several operating leases for motor vehicles and mobile plant and equipment.
90
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued
33. CAPITAL COMMITMENTS
There were no outstanding commitments which are not disclosed in the consolidated financial report of the Group as at June 30, 2015 other than:
Exploration commitments
Less than one year
Between one and five years
More than five years
Total
As at June 30
2015
A$’000
2014
A$’000
336
1,098
2,520
3,954
311
1,203
3,039
4,553
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
Less than one year
Total
1,848
1,848
436
436
At June 30, 2015 capital commitments relate to on-going capital project costs in Malaysia. All remaining Phase 1 and Phase 2 retention costs
in Malaysia and Mt Weld are fully accrued at year-end.
Other commitments
Less than one year
Between one and five years
More than five years
Total
21,339
35,618
–
8,822
34,769
–
56,957
43,591
Lynas is required to pay in instalments, a total of USD50 million to the Malaysia’s Atomic Energy Licensing Board (AELB) in accordance with
the conditions underlying the granting of Lynas’ Full Operating Stage License for the LAMP in Gebeng Malaysia. During the year Lynas has
transferred $0.5 million (2014: $3.0 million) to AELB (refer to note 20).
34. 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 30.
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:
91
Lynas Corporation Limited | 2015 Annual Report Statement of Financial Position
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
Investments in subsidiaries*
Other assets*
Total non-current assets
Total assets
Liabilities
Trade and other payables
Borrowings
Employee benefits
Total current liabilities
Trade and other payables
Provisions
Employee benefits
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated deficit*
Reserves
Total equity
Statement of comprehensive income
Revenue
Cost of sales
Gross Profit
Other income
Provision against investments/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 foreign currency transactions
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
* Refer to note 35 Parent Entity Information for further details
92
As at June 30
2015
A$’000
2014
Restated
A$’000
26,793
70,406
19,479
116,678
2,329
103,659
45,784
164
375,080
166,384
693,400
810,078
26,977
267,799
2,213
296,989
–
24,760
227
278,368
303,355
600,344
209,734
33,328
7,849
30,126
71,303
8,976
114,339
46,857
286
375,080
7,041
552,579
623,882
12,658
122,094
4,992
139,744
52
24,681
295
321,477
346,505
486,249
137,633
1,083,898
(1,034,358)
160,194
1,034,634
(972,839)
75,838
209,734
137,633
61,793
(77,801)
(16,008)
4
(2,314)
(2,572)
–
(20,890)
178
(40,763)
(40,585)
(61,475)
(44)
57,175
(46,976)
10,199
20,398
(665,085)
(33,084)
(123)
(667,695)
1,799
(33,918)
(32,119)
(699,814)
(363)
(61,519)
(700,177)
(3,012)
–
(3,012)
5,344
–
5,344
(64,531)
(694,833)
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 35. PARENT ENTITY INFORMATION
Current assets
Total assets*
Current liabilities
Total liabilities
Net assets
Share capital
Accumulated deficit*
Reserves
Total shareholders’ equity
Profit (loss) of the Company*
Total comprehensive income (loss) of the parent Company
As at June 30
2015
A$’000
2014
Restated
A$’000
22,167
5,432
863,966
571,371
(286,902)
(88,154)
(563,683)
(446,790)
300,283
124,581
1,083,898
(1,076,248)
292,633
1,034,634
(1,033,487)
123,434
300,283
124,581
(42,761)
(881,131)
(42,761)
(881,131)
*
2014 comparative balances have been restated to show a provision against intercompany loans of $843.9m recorded in the parent company. The consolidated
financial statements of the Group are unaffected by this restatement.
36. CONTINGENCIES
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 24.
37. SUBSEQUENT EVENTS
On August 17, 2015 the Company announced it had agreed on a long term debt structure with its current debt providers and bondholders.
Refer to Note 24 Borrowings for more information.
93
Lynas Corporation Limited | 2015 Annual Report Mineral Resources and Ore Reserves
as at August 31, 2015
1. CENTRAL LANTHANIDE DEPOSIT ORE RESERVES
The Ore Reserve estimation for the Central Lanthanide Deposit is shown in Table 1.
TABLE 1: CLASSIFICATION OF ORE RESERVES FOR THE CENTRAL LANTHANIDE DEPOSIT
CATEGORY
Ore Reserves within Designed Pit
Proven
Probable
Designed Pit Total
Ore Reserves on Stockpiles
Proven
Probable
Stockpiles Total
Total Ore Reserves
Proven
Probable
Total
MILLION
TONNES
REO
%
CONTAINED REO
‘000 TONNES
5.2
4.2
9.4
0.5
0.0
0.5
5.7
4.2
9.9
11.7
9.3
10.6
14.4
0
14.4
11.9
9.3
10.8
608
391
999
72
0
72
680
391
1,071
* REO (%) includes all lanthanide element oxides and ytrrium oxide
Notes:
The Ore Reserve estimation for the Central Lanthanide Deposit is as per the Lynas ASX announcement dated October 5, 2015. The company
confirms that all material assumptions and technical parameters underpinning the estimated Mineral Resources and Ore Reserves continue to
apply and have not materially changed.
The 2015 Ore Reserves were estimated utilising updated modifying factors covering mining costs, processing costs, selling prices, selling
costs and mill recoveries. Modifying factors covering geotechnical parameters, mining dilution and mining recovery factors were unchanged
from those applied in prior studies. Given the Mt Weld project is in operation, and historical empirical data exists for the mining operation,
the confidence of the modifying factors applied is high. Considering the number of changes to the modifying factors there has been little
change to the Ore Reserves from 2014 to 2015. Depletion of the stockpiles has reduced the ore reserves by approximately 30 kt of total REO
and the new unmined Ore Reserves has reduced by a further 30 kt total REO compared to the 2014 Ore Reserves. The main change in the
unmined Ore Reserves compared to 2014 was an increase in tonnes and a reduction in REO grade resulting in similar total REO.
The 2015 Ore Reserves and Mineral Resource estimations were estimated on August 31, 2015 to match the availability of personnel to carry
out the work. There have been no material changes to the Ore Reserves and Mineral Resources between the end of the financial year and
August 31, 2015.
94
www.lynascorp.com 2. CENTRAL LANTHANIDE DEPOSIT MINERAL RESOURCES
The Mineral Resource estimation for the Central Lanthanide Deposit is shown in Table 2.
TABLE 2: CLASSIFICATION OF MINERAL RESOURCES FOR THE CENTRAL LANTHANIDE DEPOSIT
CATEGORY
Central Lanthanide Deposit
Measured
Indicated
Inferred
Total
* REO (%) includes all lanthanide element oxides and ytrrium oxide
Note:
MILLION
TONNES
6.3
5.4
3.4
15.0
REO
%
11.5
8.6
4.1
8.8
The Mineral Resource estimation for the Central Lanthanide Deposit is as per the Lynas ASX announcement dated October 5, 2015. The
company confirms that all material assumptions and technical parameters underpinning the estimated Mineral Resources and Ore Reserves
continue to apply and have not materially changed.
3. DUNCAN DEPOSIT MINERAL RESOURCES
The Mineral Resource estimation for the Duncan Deposit is shown in Table 3.
TABLE 3: CLASSIFICATION OF MINERAL RESOURCES FOR THE DUNCAN DEPOSIT
CATEGORY
Duncan Deposit
Measured
Indicated
Inferred
Total
MILLION
TONNES
3.8
3.3
1.1
8.2
REO
%
5.2
4.6
3.6
4.7
* REO (%) includes all lanthanide element oxides and ytrrium oxide
Note:
The Mineral Resource estimation for the Duncan Deposit is as per the Lynas ASX announcement October 5, 2015. The company confirms that
all material assumptions and technical parameters underpinning the estimated Mineral Resources and Ore Reserves continue to apply and
have not materially changed.
95
Lynas Corporation Limited | 2015 Annual Report Mineral Resources and Ore Reserves
4. NIOBIUM RICH RARE METALS MINERAL RESOURCES
The Mineral Resource estimation for the niobium rich rare metals prospect referred to as the Rare Metals Project is shown in Table 3. The Rare
Metals Project is located at Mt Weld.
TABLE 4: CLASSIFICATION OF MINERAL RESOURCES FOR THE RARE METALS PROJECT
CATEGORY
Measured
Indicated
Inferred
Total
MILLION
TONNES
0
1.5
36.2
37.7
TA2O5
%
0
0.037
0.024
0.024
NB2O5
%
TLNO
%
0
1.4
1.06
1.07
0
1.65
1.14
1.16
ZRO
%
0
0.32
0.3
0.3
P2O5
%
0
8.9
7.96
7.99
Y2O3
%
0
0.1
0.09
0.09
TIO2
%
0
5.8
3.94
4.01
Notes:
1. All figures are percentages. Ta2O5 Tantulum Oxide, Nb2O5 Niobium Oxide, TLnO Total Rare Earth Oxide, ZrO zirconia, P2O5 Phosphate,Y2O3
yttria, TiO2 titanium oxide.
2. The Mineral Resource estimation for the niobium rich rare metals is as per ASX announcement released 6 October 2004- Lynas Corp
confirms that all material assumptions and technical parameters underpinning the estimated Mineral Resources continue to apply and have
not materially changed .Figures in the table may not sum due to rounding.
There have been changes to the Mineral Resource estimations for the Duncan Deposit and Central Lanthanide Deposit compared to the
2014 Mineral Resource estimations. Re-interpretations of the Mineral Resource model have been carried out in 2015 to better reflect the
current knowledge of the orebody. The re-interpretations changed a number of parameters including the way the categories were assigned. The
re-interpretations resulted in some changes to the total tonnes, grade and the quantities in each category for each deposit. The overall result
for the Central Lanthanide Deposit was similar tonnes and a lower grade resulting in a reduction of approximately 110,000 tonnes total REO
compared to 2014. Approximately 30,000 tonnes of this was depletion of stockpiles. The overall result for the Duncan Deposit was less tonnes at
a similar grade resulting in a reduction of approximately 45,000 tonnes of total REO compared to 2014.
There have been no changes to the niobium rich rare metals prospect Mineral Resources since 2014.
Note on governance arrangements and internal controls:
All Lynas mineral resource and ore reserve estimations are managed by an experienced competent person employed by Lynas. The competent
person employed by Lynas ensures all aspects of the mineral resource and ore reserve estimations meet the JORC code requirements. In
addition, in the past, Lynas has engaged experienced third parties to review specific aspects of its mine plan and ore reserve estimations.
COMPETENT PERSON’S STATEMENTS – MINERAL RESOURCES
The Mineral Resources and Ore Reserves Statement in this report is based on, and fairly represents, information compiled by Mr Brendan
Shand who is a consultant geologist to Lynas Corporation. Mr Shand is a Member of The Australian Institute of Geoscientists and has
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is
undertaking, to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves. Mr Shand consents to the inclusion in the document of the information in the form and context in
which it appears.
COMPETENT PERSON’S STATEMENTS – ORE RESERVES
The information in this Report which relates to the Central Lanthanide Deposit Ore Reserve estimate accurately reflects information prepared
by Competent Persons (as defined by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves). The
information in this public statement relating to the Central Lanthanide Deposit Ore Reserves at the Mt Weld Rare Earths Project is based
on information resulting from Feasibility-level updated Ore Reserve works carried out by Auralia Mining Consulting Pty Ltd. Mr Daniel Tuffin
completed the Ore Reserve estimate. Mr Daniel Tuffin is a Member and Chartered Professional (Mining) of the Australasian Institute of
Mining and Metallurgy and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration
and to the activity that he is undertaking to qualify him as a Competent Person as defined in accordance with the 2012 Edition of the
Australasian Joint Ore Reserves Committee (JORC). Mr Tuffin consents to the inclusion in the document of the information in the form and
context in which it appears.
96
www.lynascorp.com Additional Information
As at September 21, 2015
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report.
(A) Distribution of Ordinary Shares
The number of shareholders by size of holding of ordinary shares is:
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Holders
4,064
8,676
4,804
11,511
3,524
Number
of Shares
Percentage
of Shares
2,464,323
25,344,457
38,143,212
409,565,176
3,012,921,201
0.071
0.727
1.093
11.741
86.369
32,579
3,488,438,369
100.000
The number of shareholders holding less than
a marketable parcel of shares
18,958
82,256,699
(B) Distribution of Employee Options/Performance Rights
There are 22,578,814 unlisted employee options/performance rights. The number of beneficial holders, by size of holding, of employee
options/performance rights are:
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Holders
0
6
1
30
10
47
(C) Distribution of 2.75% Unsecured Convertible Bonds Maturing September 30, 2018
There are 225,000,000 unlisted Convertible Bonds maturing September 30, 2018. The number of holders, by size of holding, of Convertible
Bonds maturing September 30, 2018 are:
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Mount Kellett Capital Partners (Ireland) II Limited holds 138,238,006 Convertible Bonds.
Holders
0
0
0
0
14
14
97
Lynas Corporation Limited | 2015 Annual Report Additional Information
(D) Distribution of $0.038 Warrants Expiring 30 September 2018
There are 174,365,466 unlisted Warrants expiring September 30, 2018. The number of holders, by size of holding, of $0.038 Warrants expiring
September 30, 2018 are:
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Mount Kellett Capital Partners (Ireland) II Limited holds 107,128,597 Warrants.
(E) Twenty Largest Shareholders
The names of the twenty largest registered holders of quoted shares are:
DNU NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
1
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3
4 NATIONAL NOMINEES LIMITED
5 MALAY-SINO CHEMICAL INDUSTRIES SDN BHD
6
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
8
9
10
11
12
13
14
15
16
17 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
18
19 MR CONGLIN YUE
20
UOB KAY HIAN PRIVATE LIMITED
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