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 9242 7219
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
Auditors
Ernst & Young
The EY Centre
200 George Street,
Sydney NSW 2000
enquiries@boardroomlimited.com.au
www.lynascorp.com
2016
ANNUAL
REPORT
Contents
Letter from the Chairman
CEO Review
Directors’ Report
Corporate Governance Statement
Remuneration Report – Audited
Directors’ Declaration
Auditor’s Independence Declaration
Auditor’s Report
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
Corporate Directory Information
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96
11
Lynas Corporation Limited | 2016 Annual Report Letter from the Chairman
Lynas has continued to make good progress during 2016.
Significant production growth caps a two-year trend of
positive operational improvements, with 100% of NdPr
production capacity now commissioned and operating.
The Company has delivered record sales, in line with the
improved production output and continued development
of strong relationships with key customers, which is very
encouraging given the uncertainty that abounds in our sector.
After a long start-up phase, the operational competence of
our workforce continues to improve. We now have a strong
operational platform and are pleased to consider that we have
come to the end of our start-up phase.
The greatest challenge to our business is the continued low pricing of products. The
effects of this are felt throughout the industry. Whilst there was some brief recovery
of pricing late in the year from the historically low levels in the first quarter of FY16,
the gains have not been sustained and the price has once again fallen close to the
previously low levels.
Lynas is implementing strategies to mitigate the effect of the low market pricing,
including continuing to work on agreeing constructive pricing arrangements with
direct and indirect customers and continuing to focus on opportunities to further
reduce operational costs.
The only US producer of rare earths filed for bankruptcy late in 2015 and Lynas is
now the only integrated miner and producer of rare earths outside of China.
Lynas has distinct advantages on which we will now capitalise. Chief amongst these
advantages is our ability to deliver security of supply in a market dominated by one
country of origin. Our facility at Mt Weld in Australia is recognised as the highest grade
developed rare earths mine in the world.
Of further value for customers, Lynas offers environmental provenance at each stage
of the supply chain with industry leading environmental management systems and
practices at both of our production sites. During the year, Lynas has introduced a certi-
fication system that assures the origin of all products through to finished materials.
Lynas employs more than 650 people across its operations in Malaysia and Australia.
As a business that operates in one of the world’s most challenging industries, the
importance of recruiting, managing, developing and retaining our team is an important
factor in continuing to deliver to customer requirements and in delivering growth. Lynas
continually seeks to upskill its workforce and improve knowledge as part of its long-term
vision to be the leading supplier of rare earth oxides in the world. On behalf of the Board,
I would like to thank all of our staff members for their hard work during 2016 and for
their continued commitment to Lynas.
22
www.lynascorp.com
www.lynascorp.com “Lynas continually
seeks to upskill
its workforce and
improve knowledge
as part of its long-
term vision to be
the leading supplier
of rare earth oxides
in the world. ”
In particular, our chief executive Amanda Lacaze has played a pivotal role in driving
and leading the turnaround of Lynas into a stronger, more agile company. I would like
to take this opportunity to thank Amanda and her team for their focus on identifying
strategic improvement, driving growth and delivering positive bottom-line results.
Of great importance is our commitment to operate our facilities in a way that is safe
for our people, safe for our communities and safe for the environment. We are very
pleased to mark 4 years of safe operation at our plant in Kuantan Malaysia with the
renewal of our operating license for a further 3 years. In the past 4 years there has been
no increase in background radiation levels 1km, 5km, 10km or 20km from the plant
and we have had no adverse impact on our local communities and near neighbours.
The International Atomic Energy Agency (IAEA) has rated the Lynas plant in Kuantan,
Malaysia, as intrinsically low risk. Further, Lynas is committed to being an active and
positive citizen in the communities in which we operate and has implemented a
number of programs to contribute to the communities close to Mt Weld, in Kuantan
and in the broader Malaysian community.
Whilst there have been many positives in the year past, Lynas continues to be highly
dependent on the price of rare earth oxides, the low levels of which limit current
financial returns. The Board and Management are focused on managing the currently
highly leveraged Balance Sheet, including our relationships with our key lenders, in
a way that allows the business to progressively improve financial outcomes and to
optimise future increases in demand and pricing.
Finally, we thank our shareholders for their continued interest and support of Lynas.
Mike Harding
Chairman
33
Lynas Corporation Limited | 2016 Annual Report CEO Review
4
At the end of FY16, Lynas has completed the start-up phase of
operations with 100% of capacity commissioned and operating.
In the year, the business has delivered sustained improvements
in business operations, including record production output,
record sales and continuing reductions in cost.
Lynas operations, at both production sites have been conducted in a way that is
consistent with our goal of being safe for our people, safe for our communities and
safe for the environment.
Against a backdrop of global uncertainty, we have continued to consolidate our
position as the only sustainable rare earth miner and producer outside of China and
we are now well positioned to capitalise on any upward movement in the price for
rare earth products.
Notable milestones achieved throughout FY16 include:
• Record production volume in the fourth quarter with total Rare Earth Oxides
tonnes up 30% and neodymium-praseodymium (NdPr) production up 36%
• Record sales revenue of A$196.1 million, compared with A$144.6 million in FY15
• 19% reduction in unit production costs
• Completion of the Tailings Facility Storage 2 at Mt Weld safely, on budget and
on schedule
Safety
A core objective of all staff at Lynas is to deliver safe, stable production. It guides our
operations and informs our actions, from management to technician level within the
company.
To achieve this objective, we have invested in people, systems and processes to ensure that
production is safe for employees, safe for the environment and safe for the community.
In FY16, we continued to deliver good safety results, and the 12-month rolling Lost
Time Injury Frequency Rate as at June 30, 2016 was 0.5 per million hours worked. We
continue to work to drive this down further with continuing investment in our safety
training, safety systems and our safety teams who provide excellent leadership to our
operating teams.
In FY16 Lynas has continued to invest in industry-leading systems at both sites to
minimise our impact on the environment. This includes our water management system
at Mt Weld, the waste gas emission system at LAMP, and also the water management
system at LAMP.
Water management is our key challenge in Mt Weld. Our water use has reduced by
more than 75% since commencement of operations and is now well below design.
At Kuantan, we now have 4 years of safe operations with clear data regarding the
effect of our operations. In this time, there has been no increase in background radiation,
at the plant or at independently measured sites 1km, 5km, 10km or 20km from the
www.lynascorp.com “... most of all,
contributing to
our communities
is a positive
and rewarding
experience for
all our staff.”
LAMP. In keeping with our objective to always operate in an open and transparent
way, we provide, online, real time operational readings directly to authorities which
are accessible to the public. The IAEA rates our operations as ‘intrinsically low risk’.
As part of our continued commitment to ensure best practice in the areas of safety
and the environment, a coordination committee was established by the Pahang state
government to monitor the LAMP’s performance, especially in the areas of safety,
health and the environment. The committee is chaired by the President of the Kuantan
Municipal Council (MPK) and the members represent the various Federal Agencies,
Pahang state agencies and the MPK. The federal agencies include the Department
of Environment, Atomic Energy Licensing Board, Department of Occupational Safety
& Health, Ministry of Health and the Ministry of International Trade & Industry.
At the committee meeting on December 14, 2015, it was reported that:
•
•
the LAMP operation did not impact workers, the public and the environment; and
in collaboration with national and international universities and research
facilities, LAMP’s NUF residues and potential commercial products have been
characterised as non-radioactive, non-toxic, non-carcinogenic and non-ecotoxic
to the public and the environment.
Government agencies reported that Lynas is in compliance with their regulatory
requirements and the Ministry of Health reported no changes in public health.
Licence renewal (FOSL)
In September 2016, the LAMP’s full operating stage licence was renewed for 3 years
until September 2019. The renewal follows a rigorous review undertaken by the AELB
and other independent regulatory bodies in Malaysia, all of whom have concluded that
the LAMP is in compliance with applicable regulations. We are very pleased with the
renewal of this licence as it reflects 4 years of safe operations at the LAMP.
We are committed to continuing to be a valuable contributor to the local Kuantan
and broader Malaysian communities and the renewal of the FOSL for an extended
3 year period is an essential foundation to that commitment.
We will continue this level of open and transparent operations and improved safety at
both Mt Weld and the LAMP into FY17.
Lynas is actively engaged in community support programs at both locations. It is true,
that even with a legal licence to operate, every business needs a community licence to
operate. More importantly, it is impossible for any firm to sustainably prosper if it doesn’t
contribute to the prosperity of the communities in which it operates. But most of all,
contributing to our communities is a positive and rewarding experience for all our staff.
5
Lynas Corporation Limited | 2016 Annual Report CEO Review
“... we have entered
a new era of the
‘rare metal age’
with rare earth
elements set
to be no less
transformative to
the 21st century
than coal or oil was
to the 20th century.”
6
The Market
During FY16, market pricing for our products remained stubbornly low. However, demand
continues to grow. This growth is expected to continue. With increased demand and new
applications, we are hopeful that prices will start to more accurately reflect the value of
these important functional materials.
The speed of current technological change means the future looks increasingly
resource-heavy, with rare earths crucial to the production of smartphones, solar panels
and wind turbines. David Abraham, in his 2015 book The Elements of Power, suggests
we have entered a new era of the ‘rare metal age’ with rare earth elements set to be
no less transformative to the 21st century than coal or oil was to the 20th century.
Lynas’ products are increasingly in demand through product innovation. One example is
the recent announcement from Honda and Daido in Japan of the development of a new
light rare earth magnet for the automotive industry that includes no heavy rare earths.
Lynas is primarily a light rare earth company, and innovations such as these provide
manufacturers with greater confidence to include rare earth technologies in their long
term design decisions. With our production capacity at 100% of design, Lynas’ priority
is to build and maintain important customer relationships over the long-term.
Customers
Despite pricing in the rare earth market remaining challenging throughout the year,
Lynas has retained strong support from our customers, who are leaders in their own
market segments in Japan, China and Europe.
Particularly pleasing has been the company’s ability through the year to successfully
establish new strategic customer relationships within China and for the first time
contract supply agreements over a period of time, rather than participating on a spot
price basis only. There is now only a slim price differential between inside and outside
Chinese pricing.
Lynas’ growing reputation as a reliable supplier of quality, environmentally assured
product is an important part of developing these strong customer relationships.
Moving into FY17 we will continue to engage productively with our strategic
customers, to deliver quality product and build strategic, long-term relationships
that will help us to better meet our customers’ needs.
Operations
Production of NdPr increased from 2,258 tonnes in FY15 to 3,897 tonnes for FY16,
with further growth expected in FY17.
During the fourth quarter, Lynas increased the operating capacity of the LAMP by
commissioning the fourth and final NdPr separation train in SX5. The commissioning
of this final train means that the LAMP can bring NdPr production capacity to 100%
of design.
This caps off a two-year trend of positive improvements in the production process,
throughput rates and quality of final output. This increase in capacity will help to
mitigate the effects of the continued low rare earth market pricing.
www.lynascorp.com “This caps off a
two-year trend
of positive
improvements
in the production
process, throughput
rates and quality of
final output.”
The commissioning of the Tailings Storage Facility 2 at Mt Weld in May this year
has led to improved capability for water recycling efficiencies and environmental
sustainability at the plant. A new Micro-Filtration unit was installed and successfully
commissioned at Mt Weld to treat free water from the tailings storage facility prior to
reverse osmosis treatment. It is planned to install additional units to further increase
the amount of water recycled.
Cost reduction
Lynas continued to focus on reducing costs through the year. Further reductions were
achieved year over year in cash costs, driven by improved production control and
management, improved control of raw materials inventory and some cost reductions
from the selection of new suppliers.
Overall per unit production costs decreased 19% with logistics costs seeing a particu-
larly strong reduction of 32%, equivalent to a cost avoidance of A$5 million. Structural
production costs including labour increased by only 5% compared to an overall
production increase of more than 40%. This has to be seen in context of significant
changes including the addition of another train in the solvent extraction section and
clearly shows the economics of scale which have been achieved.
We are now embarking on a next phase of cost reduction activity with a particular
focus on the cost of chemical reagents and opportunities for process innovation to
reduce total cost of production.
Cash flow
Lynas has achieved an improved trend toward consistent positive free cash flow
(revenue less operating costs and CAPEX) over the past twelve months.
However, the unevenness of costs related to changes in production capacity and
delivery, particularly during April and May of FY16 has resulted in some misaligned
incurred costs and cash flow in some quarters. With constantly improving reliability
and consistency of the business, we believe Lynas is moving to a position of closer
correlation between the incurred cost and the cash over time.
We expect to continue to improve our cash outcomes as we continue the higher
production volumes.
Debt restructure
Over the past 2 years, our lenders, JARE and the convertible bond holders have been
prepared to accommodate Lynas’ need for time to execute.
Our lenders have taken a longer term view of the business and all stakeholders have
benefited from their support including their agreement to reschedule the debt on
multiple occasions.
Lynas Corporation Limited | 2016 Annual Report
7
CEO Review
“We have an
excellent resource,
a processing facility
that is the envy
of the industry, an
excellent customer
portfolio, and a
highly experienced
and disciplined
management team.”
In July we announced that our NdPr production had exceeded the target set by the senior
loan facility JARE for the 12 months ending June 30, 2016, leading to the interest rate
payable on the loan being reduced to 5.7% per annum. This reduction for the senior loan
brings the total reduction for FY16 to 1.3%.
In addition, US$2 million has been repaid on the JARE facility, reducing the outstanding loan
balance from US$205 million to US$203 million.
Outlook
Our improvements and results in FY16 reflect the outcome of management programmes
and projects initiated over the past 2 years. The operational improvement is very pleasing
and should provide the foundation for further success.
Demand for rare earth materials, and particularly the magnetic materials (Nd and Pr) which
our resource has in greater concentration than any other operating mine in the world, is
growing. This growth reflects the functional performance of rare earths, which often offer
better technical solutions than their functional equivalents. We expect this growth to
continue and to accelerate in certain segments as new technologies are developed.
The various operational improvements delivered in FY16 have emphasised our position as the
only sustainable rare earth miner and producer outside of China. In FY17 we will approach
100% production capacity for NdPr and we will continue to work with our customers to
encourage end users to be confident to formulate rare earths into their products.
FY16 has seen continued softness in the rare earth market. The rare earth market is
currently highly reactive and speculative, driving fluctuations in pricing which are not
correlated to demand. For this reason it is prudent to consider that the current low market
pricing might be the new norm. Therefore, we will continue to work closely with our
customers and end use formulators to increase the demand for rare earths.
We have an excellent resource, a processing facility that is the envy of the industry, an
excellent customer portfolio, and a highly experienced and disciplined management team.
Whilst the market is currently difficult, we are now well placed to benefit from any future
increases in price and demand.
Amanda Lacaze
Chief Executive Officer
8
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,
2016. In order to comply
with the provisions of the
Corporations Act 2001, the
Directors’ report as follows:
DIRECTORS
The names and details of the Company’s Directors who were in office during or since the end of the financial year are as set out below.
All Directors were in office for this entire period unless otherwise stated.
INFORMATION ABOUT THE DIRECTORS
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 Cleanaway Waste Management Limited (formerly
Transpacific Industries Group Ltd). 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 as 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. Mr Forde
is a Director of China Matters Ltd. He is also a former Director of Hastings Funds Management Limited and Hastings High Yield Fund, and
a former Chairman of Hastings Management Pty Limited.
9
Lynas Corporation Limited | 2016 Annual Report 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.
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 REA
Group Limited, Aristocrat Leisure Limited and The Benevolent Society and a former Non-Executive Director of CSR Limited. She is also a
member of Chief Executive Women, former President of the NSW division of the Australian Institute of Company Directors and a former
member of the National Board of the Australian Institute of Company Directors. Ms Conlon is 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 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 $100m 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 January 1, 2015. He is a Non-Executive Director of Cleanaway Waste
Management Limited (formerly Transpacific Industries Group Ltd) 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 is a graduate of the Australian Institute of Company Directors. His 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.
RESIGNATIONS
There were no resignations of directors during the year and before the date of this report.
COMPANY SECRETARIES
Andrew Arnold
Mr Arnold was appointed as General Counsel and Company Secretary to the Group on July 23, 2008, following 15 years as a lawyer at
Deacons, including six years as a Partner. During that time Mr Arnold also spent two years on secondment at Riddell Williams, Seattle. In his
role at Deacons he had been overseeing the legal work of the Group since 2001. Mr Arnold is the responsible person for communication with
the Australian Securities Exchange (ASX) in relation to listing rule matters.
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.
Mr Polovineo is a Fellow of the Institute of Public Accountants (FIPA) with 35 years’ experience as a CFO and Company Secretary including
25 years in the resources sector. Mr Polovineo is also Company Secretary of Variscan Mines Limited, Silver City Minerals Limited and Thomson
Resources Ltd.
10
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
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
This Financial Report has been prepared on the basis of a going concern, subject to certain risks as outlined in Note 2.2. These include production
levels, foreign currency exchange rates, regulatory environments in both jurisdictions, and price volatility in the rare earth markets. In addition,
Lynas has significant future repayments under the JARE facility and the convertible bond facility, as outlined in Note 2.2 and Note 22. The ability
of the Company to continue to meet its financial obligations will depend on the factors summarized above and in addition the Company will
require either amendments to the terms of its loan facilities or alternative sources of funding. The Company is in negotiations with both lender
groups regarding amendments to the terms of its loan facilities.
The financial statements have been prepared on a going concern basis, because the directors and management, including as a result of
consultations with relevant advisers, have concluded that there are reasonable grounds to believe that to the extent that either amendments
or alternative funding will be required, they will be obtained in a timely manner.
11
Lynas Corporation Limited | 2016 Annual Report REVIEW OF OPERATIONS
Highlights
• The Group achieved record total gross sales revenue in FY16 of A$196.1m, compared with A$148.6m in FY15, reflecting increased
•
production volumes and continuing strong relationships with strategic customers in Japan and China.
For FY16, 3,897 tonnes of neodymium-praseodymium (NdPr) was produced (FY15: 2,258 tonnes) and total rare earth oxide (REO)
production was 12,630 tonnes (FY15: 8,799 tonnes), reflecting a continuing trend of positive improvements in the production process,
throughput rates and quality of final output.
• Costs remained well managed throughout the year, with general and administration expenses excluding depreciation of A$22.8m,
compared to A$28.4m in FY15, despite increased production in FY16. Capital expenditure was A$10.7m compared to A$10.0m last year.
• During the year the Group successfully negotiated the extension of both of its debt facilities until June 30, 2018, reflecting the support
of both lender groups during the year.
• During the March quarter, the Group increased the operating capacity of the Lynas Advanced Materials Plant (LAMP) by commissioning
the fourth and final NdPr separation train in SX5.
• Although the rare earth market remained challenging throughout the year, Lynas retained strong support from the strategic relationships
it has developed with customers, which are leaders in their own market segments in Japan, China and Europe.
• The Group-wide 12-month rolling Lost Time Injury Frequency Rate, as at the end of June 30, 2016 was 0.5 per million hours worked.
As outlined in ASX announcements dated January 6, 2016 and July 6, 2016, the Group exceeded each NdPr production target agreed
with JARE for FY16. In addition, USD2m was repaid on the JARE facility prior to June 30, 2016 reducing the outstanding loan balance
from USD205m to USD203m. As a consequence of achieving these milestones, the interest rate for the JARE facility is now 5.7% per
annum, a reduction of 1.3% compared to the rate at the beginning of FY16.
Mt Weld
Mt Weld continued to operate efficiently throughout the year and with the commissioning of the Tailings Storage Facility 2 in May 2016,
the Group is well placed to implement further improvements in water recycling efficiencies and environmental sustainability.
A new Resource and Reserves statement for Mt Weld was announced in October 2015, confirming the physical robustness and quality of
the Mt Weld deposit and confirming that the Ore Reserves represent more than 25 years of economic, continuous operations based on the
estimated production of 22,000 tonnes per annum REO finished products.
The Concentration Plant at Mt Weld performed well throughout the year. The duration of production campaigns at Mt Weld has previously
been limited by the supply of reverse osmosis treated bore water resulting in frequent 8 to 12 day campaigns, after which stocks of treated
water were replenished. Improved water management during the June quarter (i.e. reduced usage and increased recycling) has removed this
constraint and enabled extended production campaigns during May (20 days) and June (23 days). Over 2,000 tonnes REO in concentrate was
produced during June.
Lynas Advanced Materials Plant (LAMP)
Rare earth oxide (REO) production at the LAMP for the 12 months to June 30, 2016 was 12,630 tonnes (2015: 8,799 tonnes), while ship-
ments during the year totalled 12,513 tonnes (2015: 7,883 tonnes). Total REO production increased from 3,171 tonnes in the first quarter
to 3,727 tonnes in the fourth quarter. Sales increased from 2,691 tonnes in the first quarter to 3,806 tonnes in the fourth quarter.
Production in the fourth quarter was 45% higher than in the third quarter and represented 30% of full year production, while shipment
volume in the fourth quarter was 30% 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$15.67/kg REO (2015: A$18.34/kg). The Company’s most significant product is NdPr and prices
have remained low. The China Domestic price (VAT excluded) of NdPr oxide declined from USD37.3/kg in July 2015 to USD34.2/kg in June
2016. A small upward trend in the NdPr market price early in the June quarter has not been sustained.
The Group continues its commercialisation program of solid residues from the LAMP. A successful program of field trials was conducted
throughout the year using solid residue material from the LAMP in soil additives and fertilizers. The field trails demonstrated the efficacy
of the residue material in enhancing soil structure, adjusting soil pH, enhancing growth and improving yields.
The Subsequent Events section also notes that the Group’s Full Operating Stage Licence for the LAMP has been renewed until September
2, 2019. On October 9, 2015 the High Court of Malaya in Kuantan dismissed with costs the remaining court challenge to Lynas’ operating
licences. Each court challenge that has been lodged in relation to Lynas’ operating licences has been dismissed and no appeals are pending.
Health, Safety and Environment
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 June 30, 2016 was 0.5 per million hours worked (2015: 1.9 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 operations are intrinsically low risk.
12
www.lynascorp.comDirectors’ Report Financial performance
For the year ended June 30
Revenue
Cost of sales
Gross loss
Other income
General and administration expenses
Impairment expenses
Loss from operating activities
Financial income
Financial expenses
Net financial expenses
Loss before income tax
2016
A$ million
2015
A$ million
191.0
(211.4)
(20.4)
–
(34.8)
(1.5)
(56.7)
0.2
(37.6)
(37.4)
144.6
(168.3)
(23.7)
0.1
(40.9)
(16.8)
(81.3)
0.5
(37.8)
(37.3)
(94.1)
(118.6)
Sales volumes in the year grew by 59% compared to the year ended June 30, 2015, reflecting continued improvement in production rates,
consistent demand for NdPr products, and quality improvements for Cerium and Lanthanum products. Revenue growth at 32% being lower
than the sales volume growth reflected the low rare earth prices during the period.
Market pricing, for all products, throughout the year remained low. NdPr prices have not recovered as much as expected in the prior financial
year. However, there has been a small upward trend in the China domestic price of NdPr rising from USD31.6/kg in the first quarter to
USD34.2/kg in the fourth quarter. A small upward trend in the NdPr market price early in the June quarter has not been sustained.
Gross loss for the period was $20.4m (2015: $23.7m) reflecting the fixed nature of many production costs, which were not fully recovered in
selling prices.
The loss from operating activities decreased by $24.6m, to $56.7m for the year ended June 30, 2016. On an adjusted EBITDA basis (refer to note
6 to the financial statements for the basis of this measure) the Group reported a loss of $11.0m (2015: $18.3m) in the year ended June 30, 2016.
The primary drivers of the decrease in the general and administrative expenses are efficiency gains due to the streamlining of the organization
including the elimination of the HQ operations in Sydney and an increase in production recovery.
Impairment expenses during the current year relate to inventory written off.
General and administration expenses that predominantly consist of employee costs, unrecovered production costs and depreciation (net
of recovery) reduced by $6.1m during the year. Unrecovered employee costs and unrecovered production costs were $10.4m (2015: $25.6m)
and unrecovered depreciation was $12.0m (2015: $12.5m). Same as prior year, production costs have been substantially accounted for within
cost of sales. Other general and administration expenses include insurance premiums, consultancy fees, telecommunications and general
office expenditures. Net production cost recoveries improved by $15.6m in this year.
An impairment review of the carrying value of LAMP and Mt Weld assets was carried out. The Board and Management consider the assets’
book value currently reflects the corresponding fair values and therefore, there has not been an impairment adjustment made in the current
year (2015:$16.8m).
Net financial expenses only increased by $0.1m in the current year. Borrowing costs have reduced by $3.3m mainly due to favourable foreign
exchange movement on the Group’s USD-denominated borrowings. This gain has been offset by a decrease of $3.1m on foreign exchange
gain from the revaluation of bank balances denominated in USD and MYR.
13
Lynas Corporation Limited | 2016 Annual Report Cash flow
For the year ended June 30
Net operating cash inflow / (outflow)
Net investing cash outflow
Net financing cash (outflow) / inflow
Net cash flow
2016
A$ million
2015
A$ million
4.1
(10.3)
(2.6)
(8.8)
(32.0)
(9.6)
51.9
10.3
Operating cash flows
Net operating cash outflows increased by $36.1m during the year ended June 30, 2016. This reflects our focus on sustaining the business
through operating cash flow rather than raising additional capital and was principally driven by increased sales receipts of $47.3m offset by
increased payments to suppliers and employees of $10.2m.
Investing cash flows
Net investing cash outflows increased by $0.7m during the year ended June 30, 2016. Expenditure during the current year was mainly on the
second tailings storage facility at Mt Weld.
Financing cash flows
Net financing cash flows have decreased significantly by $54.5m since there have been no capital raising activities carried out during the
year.
Financial position
As at June 30
Assets
Cash and cash equivalents
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Other assets
Total assets
Liabilities
Borrowings
Other liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated deficit
Reserves
Total equity
2016
A$ million
2015
A$ million
43.3
53.9
612.1
44.2
33.5
787.0
562.6
153.2
715.8
71.2
52.0
61.8
658.4
45.8
27.5
845.5
546.2
116.1
662.3
183.2
1,088.5
(989.0)
(28.3)
71.2
1,083.9
(894.9)
(5.8)
183.2
The overall net assets of the Group decreased by $112.0m 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 FY16) and continued operating losses experienced by the Group
as it ramped up performance levels at the LAMP in Malaysia.
14
www.lynascorp.comDirectors’ Report Cash and cash equivalents comprise $10.4m of unrestricted cash and $32.9m of restricted cash. Restricted cash is available to fund future
interest payments under the JARE loan facility and Mt Kellett Convertible bond. Interests on the JARE loan and convertible bond facilities are
paid into separate 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 $60m. The balance in the restricted accounts is available, at the lenders’
discretion, for reuse in the Lynas business.
Inventory decreased by $7.9m, or 13% during the year. The decrease includes impairment of obsolete inventory of $1.5m. Additional
decrease reflects the production ramp-up at the LAMP. As at June 30, 2016 the Group holds 1,859 tonnes (2015: 2,050 tonnes) of processed
concentrate and unprocessed ore of 204,591 tonnes (2015: 213,518 tonnes) at its Mount Weld mine site; which are expected to be used for
production purposes over the next 1 to 12 month periods respectively.
Property plant and equipment decreased by $46.3m and is predominantly related to depreciation on buildings, plant and equipment of
$40.0m and effects of exchange rate movement of $13.7m, disposals of $2.3m and other movement of $3.2m offset by additions of $12.9m.
Borrowings of $562.6m are represented by the USD203.0m JARE loan facility revalued to AUD using the exchange rate at June 30, 2016 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 $2.8m (USD2.0m) in repayments against the JARE loan facility that is in line with the previously announced repayment
schedule (refer to note 22).
The movement in reserves of $22.5m during the current period reflects mainly the movement in foreign currency translation reserves as a
result of translating assets and liabilities denominated in foreign currencies.
Capital structure
At the start of the year the Group had 3,371,232,303 ordinary shares on issue. During the year an additional 117,206,066 shares were issued
as follows:
Shares on issue June 30, 2015
Issue of shares during the year
Shares on issue June 30, 2016
Number
3,371,232,303
117,206,066
3,488,438,369
In addition to the ordinary shares on issue there were 98,327,088 unlisted options and performance rights, 225,000,000 unlisted convertible
bonds on issue each with a face value of USD1.00 and a conversion price of $0.5634 (at a set exchange rate of USD1.00 = $0.9533) and
174,365,466 unlisted warrants with exercise price of $0.038 each.
Loss per share
For the year ended June 30
Basic and diluted loss per share (cents per share)
2016
cents per share
2015
cents per share
(2.70)
(3.82)
Dividends
There were no dividends declared or paid during the year ended June 30, 2016 (2015: nil) and no dividends have been declared or paid since
June 30, 2016.
Strategic Marketing and Sales
Whilst all rare earth producers, inside and outside China, face extremely challenging market conditions, it is likely that several underlying
market dynamics will lead to positive market change favourable to Lynas over time:
• Rare earths provide the best technologies for fast developing Green applications where quality and environmental assurance from
mine to customer is important. Lynas offers assurance and traceability of all products.
• Rare earths products can be differentiated based on quality and performance. Lynas is working with customers to innovate and
improve functionality.
• Market growth is dependent on end users and product formulators developing confidence in supply and price reliability. Lynas can offer
both of these via long term contracts tailored to customer needs.
• Many customers are seeking to diversify their supply chains. In mid-2015, Molycorp filed for Chapter 11 protection and has announced
the mothballing of the Mountain Pass facility which strengthens Lynas’ market position as an alternate supply source.
• The current price volatility is difficult for all market participants. It has been estimated by industry bodies that at current prices, 90%
of Chinese producers are unprofitable which could lead to some Chinese separators reducing output.
15
Lynas Corporation Limited | 2016 Annual Report Sales by Tonnage and Value
Sales Volume (REOt)
Cash Receipts From Customers (AUD)
7,883
155.3m
2,691
55.4m
3,082
50.3m
2,935
46.3m
3,806
50.6m
12,514
202.6m
FY15
Q1 FY16
Q2 FY16
Q3 FY16
Q4 FY16
FY16
Sales volumes continued to increase reflecting stable production rates, consistent demand for NdPr products and quality improvements
for Cerium and Lanthanum products. This allowed us to acquire new customers and address new applications. This business development,
supported by technical improvements and product customizations, will continue through the coming quarters and should result in Lynas
securing better value for our Cerium and Lanthanum products.
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. These
include:
(i) Production capacity
For most rare earth products, global capacity for rare earth production, including illegal operations in China, currently exceeds global
demand.
(ii) 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 illustrates how NdPr prices have moved over FY16:
NdPr Domestic China USD/kg VAT excluded
Base 100
31.6
100
34.1
108
33.8
107
34.2
108
35.1
111
34.2
108
Q1 FY16
Q2 FY16
Q3 FY16
Apr-16
May-16
Jun-16
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.
16
www.lynascorp.comDirectors’ Report Accordingly, Lynas’ income from customers, 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 annual
average USD/AUD exchange rate over the last four years:
June 30, 2016
$
June 30, 2015
$
June 30, 2014
$
June 30, 2013
$
USD/AUD
0.7283
0.8382
0.9187
1.0239
Lynas is also exposed to fluctuations in the Chinese yuan against the US dollar. A devaluation in the yuan would increase attractiveness in
Chinese exports and China’s internal supply.
Refer to Note 26 to the financial statements for details of the Company’s foreign currency exposure and sensitivity analysis.
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 facilities
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, 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, 2016 are as follows:
Repayment date
December 21, 2016
June 30, 2017
December 21, 2017
June 30, 2018
Repayment amount (USD)
5m
15m
30m
153m
In addition, the principal amount of the Mt Kellett convertible bonds is USD225m. Unless the convertible bonds are converted into ordinary
shares in Lynas prior to maturity, the principal amount of USD225m is due for repayment on September 30, 2018.
In the event of repayment default, Lynas may be required to seek amendments and/or waivers of non-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.
17
Lynas Corporation Limited | 2016 Annual Report 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 26 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 the environment within
which the plants operate. 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.
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.
We continue to have a major focus on ensuring positive relationships with regulators and complying with regulatory requirements in both of
the jurisdictions in which we operate.
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.
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, 2016, and complied with all of the
Council’s Principles and Recommendations throughout the financial year.
Details of the Group’s corporate governance practices in place throughout the financial year ended June 30, 2016 are as follows.
Principle 1 – Lay solid foundations for management and oversight
Recommendation 1.1 – Functions reserved to the Board and delegated to Senior Executives
The Group has established the functions reserved to the Board and the functions delegated to senior executives. The functions reserved
to the Board include:
(1)
(2)
(3)
(4)
(5)
oversight of the Group, including its control and accountability systems;
appointing and removing the Chief Executive Officer (‘CEO’) (or equivalent), including approving remuneration of the CEO
and the remuneration policy and succession plans for the CEO;
ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer (‘CFO’) (or equivalent) and the
Company Secretary;
input into the final approval of management’s development of corporate strategy and performance objectives;
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal compliance;
(6) monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources are available;
approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures;
approving and monitoring financial and other reporting;
appointment and composition of committees of the Board;
(7)
(8)
(9)
18
www.lynascorp.comDirectors’ Report (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:
(1)
implementing the Group’s strategic business plan;
(2) managing the business to agreed capital and operating expenditure budgets;
(3)
(4)
(5)
(6)
(7)
identifying and exploring opportunities to build and sustain the business;
allocating resources to achieve the desired business outcomes;
sharing knowledge and experience to enhance success;
facilitating and monitoring the potential and career development of the Group’s people resources;
identifying and mitigating areas of risk within the business;
(8) managing effectively 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.
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:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
the term of appointment;
the time commitment envisaged, including committee work;
remuneration;
disclosure requirements;
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
(10) confidentiality obligations.
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)
(4)
(5)
coordinating the timely completion and despatch of Board and committee papers;
ensuring accurate minutes are taken of Board and committee meetings; and
helping to organize and facilitate the induction and professional development of Directors.
19
Lynas Corporation Limited | 2016 Annual Report Corporate Government Statement continued
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.
(3)
Identifying programmes that assist in the development of a broader pool of skilled and experienced candidates including:
(a)
(b)
initiatives focused on skills development, such as executive mentoring programmes; and
career advancement programmes to develop skills and experience that prepare employees for senior management and
Board positions.
The Group has in place a formal talent management process including mentoring and succession planning.
(4)
Taking action 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, 2016 (prior year: June 30, 2015):
(1)
(2)
(3)
Proportion of women employees in the whole organisation: 10.6% (2015 – 11.7%).
Proportion of women employees in senior executive positions: 33.3% (2015 – 33.0%).
Proportion of women on the Board: 33.0% (2015 – 33.0%).
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, 2016.
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)
(2)
(3)
(4)
evaluation and review of the performance of the Board against both measurable and qualitative indicators established by the
Committee;
evaluation and review of the performance of individual Directors against both measurable and qualitative indicators established by
the Committee;
review of and making of recommendations on the size and structure of the Board; and
review of the effectiveness and programme of Board meetings.
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.
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 perfor-
mance 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.
20
www.lynascorp.comDirectors’ Report Principle 2 – Structure the board to add value
Recommendation 2.1 – Nomination Committee
The Group has established a Nomination and Remuneration Committee.
The Group’s Nomination and Remuneration Committee complies with each of the requirements of Recommendation 2.1 as follows:
(1)
(2)
(3)
The Committee consists of a majority of independent Directors. During the financial year ending June 30, 2016, the members of
the Committee were Ms Conlon, Mr Forde and Mr Harding.
The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
There were two formal meetings of the Committee during the financial year ending June 30, 2016. 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, 2016, the Committee had three members.
The Group has adopted Charters for its Nomination and Remuneration Committee. Copies of the Committee Charters are available from the
Group’s website, www.lynascorp.com.
Recommendation 2.2 – Board Skills
The Nomination and Remuneration 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, 2016, 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, M. Harding and P. Etienne 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.
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.
The length of service of each Director who held office as at June 30, 2016 is as follows:
Name
J. Klein
W. Forde
K. Conlon
A. Lacaze
M. Harding
P. Etienne
Term in office
11 years
8 years 5 months
4 year 8 months
2 years 6 months
1 year 6 months
1 year 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, 2016, the Board had a majority of
independent Directors.
21
Lynas Corporation Limited | 2016 Annual Report Corporate Government Statement continued
Recommendation 2.5 – The Chair should be an independent Director and not the same person as the CEO
M. Harding was the Chairman of the Board throughout the financial year ended June 30, 2016. Mr Harding is an independent Director and he
is not the CEO. Accordingly, the Group was compliant with Recommendation 2.5 throughout the financial year ended June 30, 2016.
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 and Remuneration 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
(3) responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
A copy of the code of conduct is available from the Group’s website, www.lynascorp.com.
Conflict Of Interest Policy
The Group has established a ‘conflict of interest’ policy to:
(1)
(2)
(3)
(4)
(5)
protect the integrity of the decision-making processes within the Group by avoiding ethical, legal, financial or other conflicts of interest;
establish internal procedures so that all employees understand their obligation to avoid actual, potential or perceived conflicts of interest;
provide guidance to employees for dealing with any conflicts of interest in an open and transparent manner;
provide guidance to employees for recognising and reporting on related party transactions; and
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.
Principle 4 – Safeguard integrity in corporate reporting
Recommendation 4.1 – Audit Committee
The Group has established an Audit and Risk Committee.
The Group’s Audit and Risk Committee complies with each of the requirements of Recommendation 4.1 as follows:
(1)
(2)
(3)
(4)
(5)
The Committee consists only of Non-Executive Directors. During the financial year ending June 30, 2016, the members of the
Committee were Mr Forde, Mr Klein, Ms Conlon and Mr Etienne. Further details, including the relevant qualifications and experience
of the members of the Committee, are provided in the Directors section of the Directors’ Report.
Five meetings of the Committee were held during the financial year ending June 30, 2016. Further details, including the attend-
ances of members, are provided in the Directors Meetings section of the Directors’ Report.
All of the members of the Committee are independent Directors.
The Committee is chaired by Mr Forde, who is an independent Director and who is not Chair of the Board.
At all times during the financial year ending June 30, 2016, the Committee had at least three members.
The Group has adopted Charters for its Audit and Risk 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.
22
www.lynascorp.comDirectors’ Report Principle 5 – Make timely and balanced disclosure
Recommendation 5.1 – ASX Listing Rule Disclosure Requirements
The Group has established a written policy designed to ensure:
(1)
(2)
compliance with ASX Listing Rules continuous disclosure obligations; and
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)
(2)
(3)
(4)
an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions;
actively engaging with shareholders at the AGM;
periodic meetings with institutional investors, analysts and financial media representatives; and
recorded CEO interviews at the time of the release of quarterly reports, 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)
(2)
providing an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions ahead of AGMs; and
providing a facility for online lodgement of proxies.
In addition, the Group has adopted a Shareholder Communications Policy for:
(1)
(2)
promoting effective communication with shareholders; and
encouraging shareholder participation at AGMs.
A copy of the Group’s Shareholder Communications Policy is available from the Group’s website, www.lynascorp.com.
Recommendation 6.4 – 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 and Risk Committee to oversee risk.
The Group’s Audit and Risk Committee complies with each of the requirements of Recommendation 7.1 as follows:
(1)
(2)
(3)
(4)
(5)
The Committee consists only of Non-Executive Directors. During the financial year ending June 30, 2016, the members of the
Committee were Mr Forde, Mr Klein, Ms Conlon and Mr Etienne. Further details, including the relevant qualifications and experience
of the members of the Committee, are provided in the Directors section of the Directors’ Report.
Five meetings of the Committee were held during the financial year ending June 30, 2016. Further details, including the attendances
of members, are provided in the Directors Meetings section of the Directors’ Report.
All of the members of the Committee are independent Directors.
The Committee is chaired by Mr Forde, who is an independent Director and who is not Chair of the Board.
At all times during the financial year ending June 30, 2016, the Committee had at least three members.
The Group has adopted Charters for its Audit and Risk Committee. Copies of the Committee Charters are available from the Group’s website,
www.lynascorp.com.
23
Lynas Corporation Limited | 2016 Annual Report Corporate Government Statement continued
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 and Risk 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, 2016.
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)
(2)
(3)
(4)
(5)
(6)
The Group’s Risk Management Policy and Risk Management Framework clearly describe the roles and accountabilities of the Board,
the Audit & Risk Committee, the Health Safety & Environment Committee and management.
The Audit & Risk Committee and the Health Safety & Environment Committee oversee the Group’s material business risks.
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.
The Audit & Risk 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 considerations such as the benchmarking of operational
key performance indicators.
The members of the Group’s finance department manage financial risks.
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)
(2)
(3)
(4)
Audit & Risk Committee and Health Safety & Environment Committee Charters;
Risk Management Policy;
Environmental Policy;
Community Policy; and
(5) Occupational Health and Safety Policy.
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)
(2)
(3)
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.
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.
The Group recognises that a strong mutual relationship with each community in which it operates is necessary for successful opera-
tions. 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 and Remuneration Committee.
The Group’s Nomination, Remuneration and Community Committee complies with each of the requirements of Recommendation 8.1 as follows:
(1)
(2)
(3)
The Committee consists of a majority of independent Directors. During the financial year ending June 30, 2016, the members of
the Committee were Ms Conlon, Mr Forde and Mr Harding.
The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
There were two formal meetings of the Committee during the financial year ending June 30, 2016. 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, 2016, the Committee had three members.
The Group has adopted Charters for its Nomination and Remuneration Committee. Copies of the Committee Charters are available from the
Group’s website, www.lynascorp.com.
24
www.lynascorp.comDirectors’ Report 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)
(2)
Fixed remuneration, superannuation payments and termination payments.
Share options granted 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, 2016 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.
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
V
X
Y
Z
AA
AB
AC
AD
AE
AF
AG
AH
AI
AJ
AK
September 23, 2013*
September 23, 2013*
September 23, 2014*
September 23, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 23, 2015*
July 28, 2015*
September 18, 2015*
September 18, 2015*
November 23, 2015*
November 23, 2015*
November 23, 2015*
579,663
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,227
2,830,189
4,464,286
20,715,092
12,862,523
15,435,028
4,971,828
10,588,235
8,823,529
Total
97,089,961
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 28, 2016
September 18, 2018
September 18, 2018
July 28, 2016
September 18, 2018
September 18, 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
December 31, 2016
September 18, 2020
September 18, 2020
December 31, 2016
September 18, 2020
September 18, 2020
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
$ 0.090
$ 0.038
$ 0.029
$ 0.039
$ 0.090
$ 0.090
$ 0.080
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
SHARES ISSUED AS A RESULT OF EXERCISE OF OPTIONS AND PERFORMANCE RIGHTS
During the financial year 1,129,208 options were exercised as set out in note 29 of the ‘notes to the financial statements’.
25
Lynas Corporation Limited | 2016 Annual Report INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During or since the end of the financial year, the Group has paid a premium in respect of a contract insuring all Directors and Officers of the
Group against liabilities incurred as a Director or Officer of the Group, to the extent permitted by the Corporations Act 2001, that arise as a
result of the following:
(a)
(b)
a wilful breach of duty; or
a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.
The total amount of insurance contract premiums paid was $355,290 (2015: $361,052). This amount is not included as part of the Directors’
remuneration in note 27 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.
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 9 of the ‘notes to the
financial statements’. The Directors have considered the non-audit services provided during the year by the auditor, and 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)
(b)
all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the
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 the following Committees of the Board of Directors: Audit and Risk Committee, Health Safety
and Environment Committee, and Nomination and Remuneration Committee.
Directors acting on the committees of the Board during the financial year were:
Audit and Risk
Health, Safety and Environment
Nomination, Remuneration and Community
W. Forde(c)
K. Conlon
J. Klein
P. Etienne
W. Forde(c)
K. Conlon
J. Klein
P. Etienne
K. Conlon(c)
M. Harding
W. Forde
(c) Designates the Chair of the Committee as at June 30, 2016.
As summarised in the Corporate Governance Statement, the Audit & Risk Committee consists of independent Directors.
26
www.lynascorp.comDirectors’ Report The number of Directors’ meetings held during the year and the number of meetings attended by each Director was as follows:
Meetings of the Board and Committees
Directors’ Meetings
Audit and Risk
Health, Safety
and Environment
Nomination and
Remuneration
Number of meetings held:
Number of meetings attended:
M. Harding
A. Lacaze
W. Forde
K. Conlon
J. Klein
P. Etienne
7
7
7
7
7
7
7
5
–
–
5
5
5
5
2
–
–
2
2
2
2
2
2
–
2
2
–
–
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 Instrument 2016/191 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
Instrument, to the nearest thousand dollars, unless otherwise stated.
27
Lynas Corporation Limited | 2016 Annual Report Remuneration Report – Audited
Dear Shareholder,
I am pleased to present our Remuneration Report for the year ended June 30, 2016 (FY16).
As with other areas of the business, during FY16 we continued to restructure the executive team and executive remuneration. As production
has ramped up, we have increasingly focussed on objectives that are aligned with the creation of value for our key stakeholders.
Remuneration has been simplified and reduced. Total remuneration for the continuing Directors and Executives in FY16 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 perfor-
mance have been delivered. These have included:
Improved production
•
• Achievement of significant cost reductions
•
• Completion of new debt agreements
Strong cash management
In FY16, 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
28
www.lynascorp.comDirectors’ Report 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, 2016, the Chief Executive Officer and Managing Director (‘CEO’), the Chief Financial Officer (‘CFO’),
the VP Production, the VP Sales & Marketing, the VP Malaysia and the General Counsel & 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’)
Total
Remuneration
Total Shareholder
Return (‘TSR’)
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 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, 2016 were as follows:
Non-Executive Directors:
M. Harding
Chairman
W. Forde
K. Conlon
J. Klein
Non-Executive Director, Chair of the Audit & Risk Committee and Chair of the Health Safety & Environment Committee
Non-Executive Director, and Chair of the Nomination & Remuneration Committee
Non-Executive Director
P. Etienne
Non-Executive Director
29
Lynas Corporation Limited | 2016 Annual Report Remuneration Report – Audited continued
Executives:
A. Lacaze
CEO and Managing Director
G. Sturzenegger
CFO
K. Leung
M. Ahmad
P. Le Roux
A. Arnold
VP Production
VP Malaysia
VP Sales & Marketing
General Counsel and Company Secretary
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.
OUR REMUNERATION PHILOSOPHY
B.
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 with a value equal to approximately 50% of total fixed remuneration for senior Executives
(with 25% available to be paid in cash and 25% available to be paid in performance rights).
LTI awards for senior Executives are subject to TSR and operating milestone performance hurdles, and are granted equal to approximately
25% of total fixed remuneration 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).
ROLE OF THE NOMINATION AND REMUNERATION COMMITTEE
C.
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 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).
D.
OUR EXECUTIVE REMUNERATION FRAMEWORK
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.
30
www.lynascorp.comDirectors’ Report 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:
Fixed Pay
= base + super
Variable remuneration
= STI (Cash and Deferred) + LTI
STIs
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, 2016, the STI Program had 4 goals as follows:
1.
2.
3.
4.
Lynas Group cash balance – 50%
NdPr production – 16.66%
Cost targets – 16.66%
Team / Individual Performance – 16.66%
The table below summarizes the STI outcomes for the financial year ended June 30, 2016:
STI Targets
Cash balances
NdPr production volume
Costs
Team / Individual Performance
Status
Failed
Passed
Passed
Passed
In accordance with the above criteria, 50% of the available STI awards will be made in respect of the financial year ended June 30, 2016.
Those awards will be made half in cash and half in performance rights.
In addition, if there had been a fatality during the year (which there was not), no STI awards would have been made unless so resolved by the
Board.
LTIs
LTI options and Performance Rights are granted to KMP and other selected employees to provide greater alignment to strategic business
objectives. They usually have three year vesting periods, and are usually 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.
During the financial year ended June 30, 2014, an award of 2,268,067 LTI performance rights was made subject to the following vesting conditions:
(i)
(ii)
1,237,127 performance rights were conditional on a Right First Time (RFT) hurdle measured over calendar year 2015. That RFT
hurdle was not satisfied and the 1,237,127 performance rights were forfeited in the financial year ended June 30, 2016.
1,030,940 performance rights were conditional on a Total Shareholder Return (TSR) hurdle benchmarked against ASX 200
companies over a 3 year vesting period expiring on September 23, 2016. That TSR hurdle is not expected to be satisfied, and it is
expected that the 1,030,940 performance rights will be forfeited.
A summary of the performance conditions attached to Options and Performance Rights granted during the financial year ended June 30,
2016 is set out below:
(i)
50% will be conditional on the Company’s cumulative NdPr production during the target NdPr production period set for the
Company’s JARE senior debt facility (i.e. from July 1, 2015 to December 31, 2017), in accordance with the following sliding scale:
(a)
If cumulative NdPr production from July 1, 2015 to December 31, 2017 is at least 10,440 tonnes (being the JARE senior
debt facility target), then 50% of the NdPr production portion will vest.
31
Lynas Corporation Limited | 2016 Annual Report Remuneration Report – Audited continued
(b)
(c)
If cumulative NdPr production from July 1, 2015 to December 31, 2017 is at least 11,391 tonnes, then 100% of the NdPr
production portion will vest.
If cumulative NdPr production from July 1, 2015 to December 31, 2017 is at least 12,530 tonnes, then 120% of the NdPr
production portion will vest.
(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.
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 an executive services agreement with the Group 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.
In recent years, LTI grants have been subject to hurdles that are aligned with the interests of key stakeholders in the Group. For example,
in the financial year ended June 30, 2016, LTI grants were subject to a TSR hurdle and an operations hurdle related to NdPr production, 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
32
www.lynascorp.comDirectors’ Report 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.
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.
June 30
2010
June 30
2011
June 30
2012
June 30
2013
June 30
2014
June 30
2015
June 30
2016
Revenue ( $‘000 )
Loss before tax ( $‘000 )
Loss after tax ( $‘000 )
Shareholder capital ( $’000 )
Annual average share price
Closing share price at financial year end
Loss per share (cents)
Diluted loss per share (cents)
–
(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)
190,956
(94,117)
(94,082)
1,088,469
$0.07
$0.05
(2.70)
(2.70)
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, 2016 were:
• Chairman $250,000 per annum;
• Non-Executive Director $100,000 per annum.
Committee Fees
Board Committee
Audit and Risk, Health, Safety 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, 2015 and June 30, 2016 is set out in Section H of this report.
33
Lynas Corporation Limited | 2016 Annual Report Remuneration Report – Audited continued
H. DETAILS OF REMUNERATION
Year Ended June 30, 2016
Name
Executive Director
A. Lacaze
Non-Executive Directors
K. Conlon
W. Forde
M. Harding
J. Klein
P. Etienne
Executives
A. Arnold
G. Sturzenegger
K. Leung
M. Ahmad
P. Le Roux
Total
Short term benefits
Post-employment
benefits
d
n
a
y
r
a
l
a
s
h
s
a
C
s
e
e
f
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
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
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
1,180,867
200,000
62,314
140,000
142,500
250,000
115,000
115,000
476,171
507,605
480,866
331,214
447,014
–
–
–
–
–
–
–
–
–
–
–
–
–
36,929
–
12,911
241
31,204
212
45,229
4,186,237
236,929
152,111
–
–
–
–
–
–
–
–
–
–
–
–
19,133
6,238
1,101,687
43% 2,570,239
–
13,538
19,133
–
10,925
–
–
19,133
60,377
63,489
–
–
–
–
–
–
–
–
–
–
–
–
9,794
–
–
153,290
109,858
227,905
119,543
106,379
0%
0%
0%
0%
0%
24%
18%
30%
22%
16%
140,000
156,038
269,133
115,000
125,925
642,372
617,704
768,902
548,275
662,111
205,728
16,032
1,818,662
28% 6,615,699
(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.
34
www.lynascorp.comDirectors’ Report
Short term benefits
Post-employment
benefits
d
n
a
y
r
a
l
a
s
h
s
a
C
s
e
e
f
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
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
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
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)
Former Executives
G. Barr(9)
L. Catanzaro(10)
A. Jury(11)
J.C. Steinmetz(12)
Sub-total for former
Directors and Executives
Former Non-Executive Directors
N. Curtis(8)
183,333
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
217,877
359,541
114,298
309,954
–
–
–
–
–
–
–
–
38,584
–
–
–
–
–
–
–
–
–
–
–
10,651
25,370
27,013
215
69,671
–
–
–
–
88,635
–
–
–
–
–
–
–
–
–
–
–
–
18,783
–
16,105
9,392
–
5,463
6,261
–
18,783
62,655
57,574
–
193,269
223,007
–
13,908
9,689
9,874
4,696
185,702
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
272,568
15% 1,832,901
–
–
–
–
–
284,968
–
107,920
49,568
15,832
–
–
–
–
–
31%
–
17%
10%
3%
140,000
189,718
134,392
115,000
62,963
924,299
483,590
618,655
504,024
566,744
110,509
38%
293,842
(162,603)
(1,786)
(23,809)
–
(63%)
–
(25%)
–
258,232
590,636
95,185
598,199
653,167
9% 7,408,390
653,167
9% 7,408,380
Total
5,299,915
338,584
281,553
430,184
404,977
5,299,915
338,584
281,553
430,184
404,977
(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.
35
Lynas Corporation Limited | 2016 Annual Report
Remuneration Report – Audited continued
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, 2016.
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
W. Forde
M. Harding
J. Klein
A. Arnold
G. Sturzenegger
K. Leung
M. Ahmad
P. Le Roux
Balance at
beginning of
period
1,030,976
856,180
–
1,575,893
–
2,825,893
46,688
–
–
140,000
–
–
–
166,300
–
–
–
–
–
40,890
–
–
Total
6,475,630
207,190
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,030,976
856,180
166,300
1,575,893
–
2,825,893
46,688
–
40,890
140,000
–
6,682,820
–
–
–
–
–
–
–
–
–
–
–
(ii) Share Based Remuneration – Options and Performance Rights
The following table lists all options and performance rights which are still to vest, or have yet to expire, as at June 30, 2016.
Grant date
September 23, 2013*
September 23, 2013*
September 23, 2014*
September 23, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 23, 2015*
July 28, 2015*
September 18, 2015*
September 18, 2015*
November 23, 2015*
November 23, 2015*
November 23, 2015*
Date vested
and exercisable
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 28, 2016
September 18, 2018
September 18, 2018
July 28, 2016
September 18, 2018
September 18, 2018
579,663
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,227
2,830,189
4,464,286
20,715,092
12,862,523
15,435,028
4,971,828
10,588,235
8,823,529
Expiry date
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
December 31, 2016
September 18, 2020
September 18, 2020
December 31, 2016
September 18, 2020
September 18, 2020
Exercise
price
Value per Option
at valuation date
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
$ 0.090
$ 0.038
$ 0.029
$ 0.039
$ 0.090
$ 0.090
$ 0.080
Total
97,089,961
* Denotes Performance Rights which are granted on the same terms as Options, except there is no consideration payable on exercise.
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, 2016:
Series AE
Series AF
Series AG
Series AH
Series AI
Series AJ
Series AK
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Life of Option/Right
$0.090
$0.00
Nil
79.39%
2.147%
3 years
$0.038
$0.00
Nil
N/A
N/A
1 year
$0.029
$0.00
Nil
77.77%
1.930%
3 years
$0.039
$0.00
Nil
77.77%
1.930%
3 years
$0.090
$0.00
Nil
79.39%
2.147%
1 year
$0.090
$0.00
Nil
79.39%
2.147%
3 years
$0.090
$0.00
Nil
79.39%
2.147%
3 years
No dividends have been paid in the past and so it is not appropriate to estimate future possible dividends in arriving at the fair values.
The life of the Options is based on 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 all Options and Performance Rights granted for the benefit of Directors and KMP during the year are:
Grant date
July 28, 2015
September 18, 2015
September 18, 2015
November 23, 2015
November 23, 2015
November 23, 2015
Total
Number of Options
and performance rights
Fair value per
Instrument at
valuation date
Exercise
price per
Instrument
9,918,511
9,162,004
10,994,405
4,971,828
10,588,235
8,823,529
54,458,512
$ 0.038
$ 0.029
$ 0.039
$ 0.090
$ 0.090
$ 0.090
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
First exercise date
July 28, 2016
September 18, 2018
September 18, 2018
July 28, 2016
September 18, 2018
September 18, 2018
Last exercise
or Expiry date
December 31, 2016
September 18, 2020
September 18, 2020
December 31, 2016
September 18, 2020
September 18, 2020
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.
The following tables outline the Options and Performance Rights granted for the benefit of Directors and KMP during the 2016 and 2015
financial years and those Options which have vested at each respective year-end.
June 30, 2016
Balance at
beginning of
period
A. Lacaze
K. Conlon
P. Etienne
W. Forde
M. Harding
J. Klein
A. Arnold
12,639,728
–
–
750,000
–
600,000
5,781,293
G. Sturzenegger
–
K. Leung
3,583,629
M. Ahmad
988,366
P. Le Roux
1,111,589
Granted
Grant Date
–
–
–
–
–
5,833,283
24,383,592 Nov 23, 2015
–
–
–
–
–
Jul 28, 2015 &
Sep 18, 2015
Jul 28, 2015 &
Sep 18, 2015
Jul 28, 2015 &
Sep 18, 2015
Jul 28, 2015 &
Sep 18, 2015
Jul 28, 2015 &
Sep 18, 2015
6,389,117
6,378,830
6,218,334
5,255,356
Options
expired
without
exercise
Net
change
Balance
at end of
period
Amount
vested and
exercisable
at June 30,
2016
Amount
vested
and not
exercisable
at June 30,
2016
Options
exercised/
cancelled/
forfeited/
other
–
–
–
–
–
–
(1,088,434)
–
(58,480)
(116,056)
–
–
–
(750,000)
–
(600,000)
(750,000)
24,383,592
–
–
(750,000)
–
(600,000)
3,994,849
37,023,320
–
–
–
–
–
9,776,142
6,413,312
–
–
–
–
–
–
–
–
–
6,218,334
6,218,334
6,320,350
9,903,979
5,139,300
6,127,666
–
–
–
–
(69,818)
(1,000,000)
5,319,299
6,430,888
Total
25,454,605 54,458,512
(1,332,788)
(3,100,000) 50,025,724 75,480,329
6,413,312
–
–
–
–
–
–
–
–
–
–
–
–
37
Lynas Corporation Limited | 2016 Annual Report Remuneration Report – Audited continued
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
Refer footnote (1)
12,639,728
–
–
–
–
–
–
–
–
–
–
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
–
3,476,416
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
1,851,080
1,689,132
18,500,000
256,544
–
–
–
–
–
–
–
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 subsequently approved by the shareholders of the Company at the Lynas
AGM on November 23, 2015.
(2) Appointed as a Director with effect from January 1, 2015.
(3) Appointed as Chairman with effect from January 1, 2015.
(4) Commenced as Chief Financial Officer with effect from November 1, 2014.
(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 as Vice President of People and Culture with effect from January 2, 2015.
(9) Ceased as Chief Financial Officer with effect from November 1, 2014.
(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.
SUBSEQUENT EVENTS
On September 3, 2016 the Malaysian Atomic Energy Licensing Board (AELB) renewed the Full Operating Stage Licence (FOSL) for the Lynas
Advanced Materials Plant (LAMP) for 3 years until September 2, 2019. The renewal follows a rigorous review undertaken by the AELB and
other independent regulatory bodies in Malaysia, all of whom have concluded that the LAMP is in compliance with applicable regulations.
With the exception of the above, there have been no other events subsequent to June 30, 2016 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 29, 2016
38
www.lynascorp.comDirectors’ Report Directors’ Declaration
The Directors declare that:
(a)
(b)
(c)
in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable;
in the Directors’ opinion, the attached financial report is in compliance with International Financial Reporting Standards, as stated
in note 2.1 to the financial report;
in the Directors’ opinion, the attached financial report and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of the
Group; and
(d)
the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the
deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in
accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order
applies, as detailed in note 33 to the financial report will, as a Group, be able to meet any obligations or liabilities to which they are, or may
become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the Directors,
Mike Harding
Chairman
Sydney
September 29, 2016
39
Lynas Corporation Limited | 2016 Annual Report Auditor’s Independence Declaration
Ernst & Young
200 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 LYNASCORPORATION LIMITED
As lead auditor for the audit of Lynas Corporation Limited for the financial year ended 30 June 2016, I declare to the best of my knowledge
and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Lynas Corporation Limited and the entities it controlled during the
financial year.
Ernst & Young
Graham Ezzy
Partner
Sydney
29 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
40
www.lynascorp.com Auditor’s Report
Ernst & Young
200 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 2016, 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.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors
of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
41
Lynas Corporation Limited | 2016 Annual 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 2016 and of its performance for the year
ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.
Emphasis of matter
Without qualifying our opinion, we draw attention to Note 2.2 in the financial report which describes the principal conditions that raise
doubt about the entity’s ability to continue as a going concern. These conditions indicate the existence of a material uncertainty that may
cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its
assets and discharge its liabilities in the normal course of business.
Report on the remuneration report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016. The directors of the company
are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Lynas Corporation Limited for the year ended 30 June 2016, complies with section 300A of the
Corporations Act 2001.
Ernst & Young
Graham Ezzy
Partner
Glenn Maris
Partner
Sydney
29 September 2016
Sydney
29 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
42
www.lynascorp.com
Financial Statements
as at June 30, 2016
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
General and administration expenses
Other expenses
Auditor’s remuneration
Finance income and costs
Income taxes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12. Deferred tax assets and liabilities
13. Other comprehensive income
14.
15.
16.
17.
Cash and cash equivalents
Trade and other receivables
Inventories
Reconciliation of the loss for the year with the
net cash from (used in) operating activities
18. Other non-current assets
19.
20.
Property, plant and equipment
Deferred exploration, evaluation and
development expenditure
Trade and other payables
21.
Borrowings
22.
Employee benefits
23.
Provisions
24.
Equity and reserves
25.
Financial risk management
26.
27.
Related Parties
28. Group Entities
29.
30. Warrants
31. Operating leases
32.
33. Deed of cross guarantee
34.
35.
36.
Parent entity information
Contingencies
Subsequent events
Employee share option plan
Capital commitments
44
45
46
47
48
48
48
49
60
61
62
64
64
65
65
66
67
68
68
69
69
70
70
71
72
73
73
75
76
76
78
83
83
83
86
86
86
87
89
89
89
43
Lynas Corporation Limited | 2016 Annual Report Consolidated Statement of Profit or Loss
and Comprehensive Income
Year ended June 30, 2016
Revenue
Cost of sales
Gross loss
Other income
General and administration expenses
Other expenses
Loss from operating activities
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax benefit / (expense)
Loss for the year
Other comprehensive loss for the period net of income
tax that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Total other comprehensive loss for the year, net of income tax
Total comprehensive loss for the year attributable to equity
holders of the Company
Loss per share
Basic and diluted loss per share (cents per share)
Note
7
8
10
10
11
13
2016
A$ ‘000
190,956
(211,401)
2015
A$ ‘000
144,596
(168,345)
(20,445)
(23,749)
–
(34,785)
(1,468)
133
(40,920)
(16,741)
(56,698)
(81,277)
196
(37,615)
508
(37,790)
(37,419)
(37,282)
(94,117)
(118,559)
35
(126)
(94,082)
(118,685)
(28,149)
(28,149)
(78,362)
(78,362)
(122,231)
(197,047)
25
(2.70)
(3.82)
The Consolidated Statement of Profit or Loss and Comprehensive Income should be read in conjunction with the notes to the financial statements.
44
www.lynascorp.com Consolidated Statement
of Financial Position
as at June 30, 2016
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Current tax receivable
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
Interest payable
Trade and other payables
Borrowings
Employee benefits
Deferred income
Provisions
Current tax payable
Total current liabilities
Trade and other payables
Borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Reserves
Total equity attributable to the equity holders of the Company
Note
2016
A$ ‘000
2015
A$ ‘000
14
15
16
16
19
20
18
22
21
22
23
24
21
22
23
24
25
25
43,348
3,065
2,029
111
53,643
51,973
6,032
3,146
–
59,511
102,196
120,662
219
612,065
44,206
100
28,259
684,849
787,045
49,761
32,770
26,878
2,146
1,178
411
–
2,329
658,353
45,784
207
18,163
724,836
845,498
19,104
38,737
267,799
2,393
–
–
22
113,144
328,055
11,519
535,686
359
55,127
602,691
715,835
71,210
1,261
278,368
227
54,356
334,212
662,267
183,231
1,088,469
(988,946)
(28,313)
1,083,898
(894,864)
(5,803)
71,210
183,231
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
45
Lynas Corporation Limited | 2016 Annual Report Consolidated Statement
of Changes in Equity
for the year ended June 30, 2016
Accu-
mulated
losses
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
1,083,898
(894,864)
(97,794)
35,105
28,143
28,743
183,231
13
30
25
25
25
–
–
–
–
160
4,411
–
–
(94,082)
(28,149)
–
(94,082)
(28,149)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,385
–
–
–
3,313
(59)
–
–
–
–
–
–
–
–
–
(28,149)
(94,082)
(122,231)
3,313
101
4,411
2,385
Balance at July 1, 2015
Other comprehensive
loss for the year
Total loss for the year
Total comprehensive
loss for the year
Issue of warrants
Exercise of options and perfor-
mance rights, net of issue costs
Shares issued pursuant to
settlement of liability
Employee remuneration settled
through share-based payments
Balance at June 30, 2016
1,088,469
(988,946)
(125,943)
37,490
31,397
28,743
71,210
1,034,634
(776,179)
(19,432)
34,274
Balance at July 1, 2014
Other comprehensive
loss for the year
Total loss for the year
Total comprehensive
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
13
25
25
25
–
–
–
–
(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
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
46
www.lynascorp.com Consolidated Statement
of Cash Flows
for the year ended June 30, 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Royalties paid
Income taxes paid
Note
2016
A$ ‘000
2015
A$ ‘000
202,638
(193,921)
(4,489)
(81)
155,300
(183,663)
(3,524)
(60)
Net cash flows from/(used in) operating activities
17
4,147
(31,947)
Cash flows from investing activities
Payment for property, plant and equipment
Payment for intangible assets
Security bonds paid
Security bonds refunded
Proceeds on sale of assets
Net cash used in investing activities
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
Repayment of long-term borrowing (JARE loan facility)
(10,667)
–
(116)
475
33
(10,017)
(6)
–
385
–
(10,275)
(9,638)
73
(66)
102
–
(2,767)
379
(15,069)
82,977
(5,062)
(11,371)
Net cash (used in)/from financing activities
(2,658)
51,854
Net increase (decrease) / increase 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
14
(8,786)
51,973
161
43,348
10,269
38,144
3,560
51,973
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
47
Lynas Corporation Limited | 2016 Annual Report Financial Statements
Notes to the Financial Statements
for the year ended June 30, 2016
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, 2016 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 29, 2016.
2.2 Going concern
The financial report has been prepared using the going concern assumption. The Directors note the Company generated a net loss and had
net cash outflows from operations in FY16, and had net current liabilities as at June 30, 2016.
The directors have concluded that using the going concern assumption remains appropriate after considering a number of key assumptions
affecting the business. These include the continuing low prices for rare earth products experienced in FY16 and the possibility that these low
prices may continue in FY17. Other key assumptions include forecast production volumes, foreign currency exchange rates and the contin-
uing improvements in cost performance. Production levels, foreign currency exchange rates, regulatory environments in both jurisdictions,
and price volatility in the rare earth markets continue to pose significant risks to the Company.
The Directors bring to the readers’ attention Note 21 and Note 31, which present information about the Company’s various financial
exposures including to the AELB , and the timing of contractual cash flows for all financial liabilities/commitments.
Details of the Company’s loan facilities are set out in Note 22. The Company is scheduled to make payments into the restricted interest
accounts for its loan facilities of approximately US$19 million by December 31, 2016. In addition, the following principal repayments are
due under the JARE facility:
Repayment Date:
Instalment
December 21, 2016
US$5 million
June 30, 2017
US$15 million
December 21, 2017
US$30 million
June 30, 2018
US$153 million
The principal amount of the Mt Kellett Convertible Bond facility, being US$225 million, is due for repayment on September 30, 2018.
In addition, the current interest rate under the JARE facility is 5.7% per annum, and the current interest rate under the Mt Kellett Convertible
Bond facility is 2.75% per annum.
The ability of the Company to continue to meet its financial obligations will depend on the factors summarized above and in addition the
Company will require either amendments to the terms of the loan facilities or alternative sources of funding. The Company is in negotiations
with both lender groups regarding amendments to the terms of the loan facilities, however there is no guarantee that those negotiations will
be completed on terms favorable to the Company.
While there is some uncertainty as to whether the lenders will agree to suitable amendments or whether alternative sources of funding will
be available to the Company, these financial statements have been prepared on a going concern basis, because the directors and management,
including as a result of consultations with relevant advisers, have concluded that there are reasonable grounds to believe that to the extent
that either amendments or alternative funding will be required, they will be obtained in a timely manner.
No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities
that might be necessary should the consolidated entity not continue as a going concern.
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www.lynascorp.com 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, 2016. Information for the comparative
year is for the 12 month period ended June 30, 2015.
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 Instrument 2016/191 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
Instrument, to the nearest thousand dollars, unless otherwise stated.
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 28 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.
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Lynas Corporation Limited | 2016 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(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’).
(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 offset 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
investments with maturities of less than three months.
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www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued (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.
(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.
Derivative financial instruments are recognised on a gross basis unless a current and legally enforceable right to offset 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.
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Lynas Corporation Limited | 2016 Annual Report
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(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.
If a hedging instrument no longer meets the criteria for hedge accounting or it expires, is sold, terminated or exercised, then hedge accounting
is discontinued prospectively. At this point in time, the cumulative gain or loss previously recognised in equity remains there until the forecast
transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount
of the asset when it is recognised. In all other cases the amount recognised in equity is transferred within the statement of comprehensive
income in the same year that the hedged item affects this statement and is recognised as part of financial income or expenses. If the forecast
transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred within the
statement of comprehensive income and is recognised as part of financial income or expenses in the profit or loss.
(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 comprehensive
income as a component of the profit or loss in financial income or expenses together with any changes in the fair value of the hedged assets or
liabilities that are attributable to the hedged risk.
(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 adjustment
against the host contract is amortised over the remaining life of the host contract using the effective interest method.
Any embedded derivatives that are separated are measured at fair value with changes in fair value recognised through net financial expense
in the statement of comprehensive income as a component of the profit or loss.
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
30 to 99 years
Buildings
5 to 30 years
Plant and Equipment
2 to 30 years
Fixtures and fittings
2 to 15 years
Leasehold improvements
15 to 30 years
Motor vehicles
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
licencing 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,
buildings and plant and equipment is capitalised as development expenditure. Development expenditure includes previously capitalised
exploration and evaluation expenditure, pre-production development expenditure and other subsurface expenditure pertaining to that area
of interest. Costs related to surface plant and equipment and any associated land and buildings are accounted for as property, plant and
equipment.
Development costs are accumulated in respect of each separate area of interest. Costs associated with commissioning new assets in the
period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after the
commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.
When an area of interest is abandoned or the Directors decide that it is not commercially viable or technically feasible, any accumulated
costs in respect of that area are written off in full in the statement of comprehensive income as a component of the profit or loss in the
period in which the decision to abandon the area is made to the extent that they will not be recoverable in the future.
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Lynas Corporation Limited | 2016 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.
55
Lynas Corporation Limited | 2016 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.
56
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 deductions)
after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same basis as described in note
3.20(a) for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current
provisions (as outlined in note 3.12) and included as part of the cost of goods sold in the statement of comprehensive income as a component
of profit or loss.
3.14 Dividends
Dividends to the Group’s shareholders are recognised as a liability in the Group’s statement of financial position in the period in which the
dividends are declared.
3.15 Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted from
equity and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the 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 29.
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.
57
Lynas Corporation Limited | 2016 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.
58
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 34 has been prepared on the same basis as that applied by the Group,
except as set out below:
Investments in subsidiaries, associates and joint venture entities
(a)
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial information of the Company.
Dividends received from associates are recognised in the statement of comprehensive income as a component of profit or loss, rather than
being deducted from the carrying amount of these investments.
(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.
• AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments
• AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
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.
59
Lynas Corporation Limited | 2016 Annual Report 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Standards and Interpretations in issue not yet adopted
(b)
At the date of authorisation of the financial report, the following Standards and Interpretations listed below were issued but not yet effective.
Standard/Interpretation
Effective for the annual
reporting period
beginning on
Expected to be initially
applied in the financial
year ending
AASB 2014-3 Amendments to Australia Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations [AASB 1 and AASB 11]
July 1, 2016
June 30, 2017
AASB 2014-4 Clarification of Acceptable Methods of Depreciation and Amortisation
(Amendments to AASB 116 and AASB 138)
July 1, 2016
June 30, 2017
AASB1057 Application of Australian Accounting Standards
AASB 2014-9 Amendments to Australian Accounting Standards
– Equity Method in Separate Financial Statements
July 1, 2016
July 1, 2016
June 30, 2017
June 30, 2017
AASB 2014-10 Amends to Australian Accounting Standards
– Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
July 1, 2018
June 30, 2019
AASB 2015-1 Amendments to Australian Accounting Standards
– Annual Improvements to Australian Accounting Standards 2012-2014 Cycle
July 1, 2016
June 30, 2017
AASB 2015-2 Amendments to Australia Accounting Standards
– Disclosure Initiative: Amendments to AASB 101
AASB 2015-5 Amendments to Australian Accounting Standards
– Investment Entities: Applying the Consolidation Exception
AASB 2015-9 Amendments to Australian Accounting Standards
– Scope and Application Paragraphs [AASB8, AASB 133 and AASB 10557]
AASB 2016-1 Amendments to Australian Accounting Standards
– Recognition of Deferred Tax Assets for Unrealised Losses [AASB 112]
AASB 2016-2 Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 107
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 16 Leases
July 1, 2016
June 30, 2017
July 1, 2016
June 30, 2017
July 1, 2016
June 30, 2017
July 1, 2017
June 30, 2018
July 1, 2017
June 30, 2018
July 1, 2018
July 1, 2018
July 1, 2019
June 30, 2019
June 30, 2019
June 30, 2020
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.
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.
60
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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 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.
4.3 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.
4.4 Restoration and rehabilitation expenditure
The Group’s accounting policy for its restoration and rehabilitation closure provisions requires significant estimates and assumptions such as:
requirements of the relevant legal and regulatory framework; the magnitude of possible contamination; and the timing, extent and costs of
required closure and rehabilitation activity. These uncertainties may result in future actual expenditure differing from the amounts currently
provided. The provision recognised is periodically reviewed and updated based on the facts and circumstances available at the time. Changes
to the estimated future costs for operating sites are recognised in the statement of financial position by adjusting both the closure and
rehabilitation asset and the provision.
5. DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and associated disclosures require the determination of fair values for both financial and
non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. Where applicable, further information regarding the assumptions made in determining fair values is disclosed in the notes specific
to that asset or liability.
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).
61
Lynas Corporation Limited | 2016 Annual Report 5. DETERMINATION OF FAIR VALUES continued
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 Trade and other payables
The fair value of trade and other payables 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 payables, the carrying amount is a reasonable approximation of fair value.
5.4 Non-derivative long term financial liabilities
The fair value of borrowings which is normally calculated for disclosure purposes by discounting the future contractual cash flows at the current
market interest rates that are available for similar financial instruments. However, as described in Note 26.7, the Company has not disclosed the
fair value of borrowings.
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 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 39%, China 47%, Vietnam 8%,
France 5% and other 1% (2015: Japan 51%, China 23%, Vietnam 16%, France 7% and other 3%). 75% of the Group’s non-current assets
are located in Malaysia, 24% in Australia and 1% in Africa.
62
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued For the year ended June 30, 2016
For the year ended June 30, 2015
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 loss
Expenses and other income
Impairment
Earnings before interest and tax (“EBIT”)
Finance income
Finance cost
Loss before income tax
Income tax benefit (expense)
Loss for the year
Reconciliation of EBIT to Earnings
before interest, tax, depreciation and
amortisation (‘EBITDA’)
EBIT
Depreciation and amortisation
Earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
Included in EBITDA:
Impairment charge – property plant and
equipment & other
Impairment charge – inventory
Other income
Non-cash employee remuneration settled
through share based payments comprising:
Share based payments expense
for the year
Impact of options and performance
rights forfeited during the year
16
8
8
29.1
29.1
Adjusted EBITDA
Total assets
Total liabilities
190,956
(211,401)
(20,445)
–
–
–
190,956
(211,401)
144,596
(168,345)
(20,445)
(23,749)
–
–
–
144,596
(168,345)
(23,749)
(23,291)
(1,468)
(11,494)
–
(45,204)
(11,494)
(34,785)
(1,468)
(56,698)
196
(37,615)
(94,117)
35
(94,082)
(30,091)
(16,741)
(10,696)
–
(70,581)
(10,696)
(40,787)
(16,741)
(81,277)
508
(37,790)
(118,559)
(126)
(118,685)
(45,204)
40,325
(11,494)
1,480
(56,698)
41,805
(70,581)
44,452
(10,696)
1,041
(81,277)
45,493
(4,879)
(10,014)
(14,893)
(26,129)
(9,655)
(35,784)
–
1,468
–
–
–
–
–
1,468
–
12,031
4,710
–
–
–
(133)
12,031
4,710
(133)
–
–
2,701
2,701
(315)
(315)
–
–
1,748
1,748
(917)
(917)
(3,411)
(7,628)
(11,039)
(9,388)
(8,957)
(18,345)
769,740
(145,161)
17,305
(570,674)
787,045
(715,835)
836,696
(136,477)
8,802
(525,790)
845,498
(662,267)
63
Lynas Corporation Limited | 2016 Annual Report 7. 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
* Includes $8.8m reversal of provision on onerous contract.
7.1 Employee costs
The following items are gross employee costs before recoveries included in general and administration expenses:
Wages and salaries
Superannuation and pension contributions
Employee remuneration settled through share-based payments (note 29.1)
Other
Total employee costs
8. OTHER EXPENSES
Impairment loss – inventory
Impairment loss – property, plant and equipment
Total other expenses
Note
16
19
A review on the carrying value of inventory and property, plant and equipment was completed in both years.
In the current year, impairment losses were made on obsolete inventory.
For the year ended June 30
2016
A$’000
10,415
11,995
12,375
2015
A$’000
25,640
12,535
2,745*
34,785
40,920
For the year ended June 30
2016
A$’000
33,681
985
2,386
668
2015
A$’000
37,381
863
831
605
37,720
39,680
For the year ended June 30
2016
A$’000
1,468
–
1,468
2015
A$’000
4,710
12,031
16,741
64
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 9. AUDITOR’S REMUNERATION
The following items of expenditure are included in general and administration expenses:
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Audit fees
Tax fees
Other fees*
Total auditor’s remuneration Ernst & Young (Australia)
* Prior year’s other fees relate to due diligence services
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
Tax fees
Other fees
Total auditor’s remuneration Ernst & Young (other locations)
10. FINANCE INCOME AND COSTS
Interest income on cash and cash equivalents
Total finance income
Interest expense on JARE loan facility*
Interest expense on financial liabilities measured at amortised cost:*
Mt Kellett convertible bonds
Amortisation of deferred transaction costs - Mt Kellett convertible bonds
Unwinding of discount on Mt Kellett convertible bonds
Financing transaction costs and fees
Net foreign currency exchange gain
Total finance costs
Net finance costs
* refer to note 22 for more information
For the year ended June 30
2016
A$’000
2015
A$’000
300,000
5,850
–
241,575
42,924
175,000
305,850
459,499
150,000
33,617
624
170,000
–
3,469
184,241
173,469
For the year ended June 30
2016
A$’000
2015
A$’000
196
196
508
508
(21,328)
(17,669)
(9,359)
(1,127)
(5,688)
(911)
798
(8,951)
(144)
(12,122)
(2,783)
3,879
(37,615)
(37,790)
(37,419)
(37,282)
65
Lynas Corporation Limited | 2016 Annual Report 11. INCOME TAXES
Current tax
Current tax (benefit) / expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Total
Deferred tax
Deferred tax (benefit) expense recognised in the year
Total income tax (benefit) expense relating to the continuing operations
11.1 Income tax recognised in profit (loss)
Loss before tax for continuing operations
Income tax benefit calculated at 30% (2015: 30%)
Add (deduct):
Effect of expenses that are not deductible in determining taxable profit
Effect of foreign exchange gains and losses
Effect of unused tax losses not recognised as deferred tax assets
Effect of temporary differences not recognised as deferred tax assets
Effect of different tax rate of subsidiaries and branches
Other adjustments
Total current year income tax (benefit) expense
11.2 Income tax recognised directly in equity
Deferred tax
Share issue costs
Total income tax (benefit) expense recognised directly in equity
For the year ended June 30
2016
A$’000
2015
A$’000
(35)
–
(35)
–
(35)
126
–
126
–
126
For the year ended June 30
2016
A$’000
2015
A$’000
(94,117)
(118,559)
(28,235)
(35,568)
12,510
(4,863)
5,481
8,304
6,587
181
(34,129)
(31,050)
56,023
34,887
9,709
254
(35)
126
For the year ended June 30
2016
A$’000
2015
A$’000
–
–
–
–
66
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued
12. DEFERRED TAX ASSETS AND LIABILITIES
12.1 Deferred tax balances
Temporary differences
Inventory
Deferred exploration, evaluation
and development expenditure
Property plant and equipment
Borrowings
Share-based payments
Costs of equity and debt raisings
Trade payables
Provisions
Other
Unused tax losses and credits
Tax losses
Temporary differences
Inventory
Deferred exploration, evaluation and development
expenditure
Property plant and equipment
Borrowings
Share-based payments
Costs of equity and debt raisings
Trade payables
Provisions
Other
Unused tax losses and credits
Tax losses
Balance at
July 1, 2015
A$’000
Recognised in
Profit or loss
A$’000
Recognised
in equity
A$’000
Recognised
in OCI
A$’000
Balance at
June 30, 2016
A$’000
(2,141)
(10,193)
9,963
43,127
(88)
3,527
56
7,898
1,173
53,322
2,915
7,526
(1,596)
–
88
(3,130)
(14)
531
(1,173)
5,147
–
–
–
6,024
–
–
–
–
–
6,024
(53,322)
(5,147)
(6,024)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
774
(2,667)
8,367
49,151
–
397
42
8,429
–
64,493
(64,493)
–
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$’000
(2,141)
(1,571)
474
131
(88)
2,022
–
–
1,173
–
–
–
–
(8,622)
9,489
42,996
–
1,505
56
7.898
–
53,322
(53,322)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,141)
(10,193)
9,963
43,127
(88)
3,527
56
7,898
1,173
53,322
(53,322)
–
67
Lynas Corporation Limited | 2016 Annual Report 12. DEFERRED TAX ASSETS AND LIABILITIES continued
12.2 Unrecognised deferred tax assets
Deductible temporary differences and unused tax losses for which no
deferred tax assets have been recognised are attributable to the following:
Tax losses – revenue in nature
Tax losses – capital in nature
Deductible temporary differences
As at June 30
2016
A$’000
2015
A$’000
351,162
2,145
204,277
325,155
2,145
183,780
557,584
511,080
The Group’s unused tax losses of a revenue nature for which no deferred tax assets have been recognised relate to Australia (2016: $177.6m,
2015: $173.5m), Malaysia (2016: $172.5m, 2015: $150.7m) and Malawi (2016: $1.0m, 2015: $1.0m). At June 30, 2016 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 $95.0m (2015: $88.5m).
The Group’s unused tax losses of a capital nature for which no deferred tax assets have been recognised relate to Australia (2016: $2.1m,
2015: $2.1m). At June 30, 2016 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 (2015: $0.6m).
The Group’s deductible temporary differences for which no deferred tax assets have been recognised relate to Australia (2016: $175.2m,
2015: $147.5m) and Malaysia (2016: $29.1m, 2015: $36.3m). At June 30, 2016 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 $59.4m (2015: $53.3m).
13. OTHER COMPREHENSIVE INCOME
Within the statement of comprehensive income the Group has disclosed certain items of other comprehensive income net of the associated
income tax expense or benefit. The pre-tax amount of each of these items and the associated tax effect is as follows:
For the year ended June 30
2016
2015
Pre-tax
A$’000
Tax effect
A$’000
Total
A$’000
Pre-tax
A$’000
Tax effect
A$’000
Exchange differences on translating
foreign operations
(28,149)
Total other comprehensive income
(28,149)
–
–
(28,149)
(78,362)
(28,149)
(78,362)
–
–
14. CASH AND CASH EQUIVALENTS
Total
A$’000
(78,362)
(78,362)
Cash at bank and on hand
Restricted cash
Total cash and cash equivalents
As at June 30
2015
A$’000
31,335
20,638
51,973
2016
A$’000
10,402
32,946
43,348
Interests on the JARE loan facility and the Mt Kellett convertible bond are 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 $60m. The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the Lynas business.
68
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 15. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Total current trade and other receivables
As at June 30
2015
A$’000
4,325
1,707
6,032
2016
A$’000
1,483
1,582
3,065
The Group’s exposure to credit risk is primarily in its trade receivables. Credit risk is assessed on a customer by customer basis and includes a
credit analysis of each customer, negotiated payment terms, and payment history. As at June 30, 2016 and June 30, 2015, no trade receiva-
bles were past due nor impaired.
16. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
As at June 30
2015
A$’000
15,083
37,401
9,356
2016
A$’000
13,585
34,113
6,164
53,862
61,840
53,643
219
53,862
59,511
2,329
61,840
During the year ended June 30, 2016 inventories of $212.9m (2015: $173.0m) were recognised as an expense. $211.4m of which were
included in ‘cost of sales’ and the remaining $1.5m relates to write down of inventory to net realisable value.
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred exploration, evaluation and
development expenditure and intangible assets for the years ended June 30, 2016 and 2015 respectively in the following categories:
Recognised in General and
Administration Expense
Recognised in Inventory
Total
2016
A$’000
10,141
1,390
2015
A$’000
11,434
560
2016
A$’000
29,811
–
2015
A$’000
26,577
–
2016
A$’000
39,952
1,390
2015
A$’000
38,011
560
463
540
–
–
463
540
Property, plant and equipment
Deferred exploration and evaluation
expenditure
Intangibles
Total
11,994
12,535
29,811
26,577
41,805
39,111
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 $31.0m in the year ended
June 30, 2016 (2015: $33.0m).
During the year ended June 30, 2016 the Group recognised royalties payable to the Western Australian Government totalling $4.7m (2015:
$3.2m). Royalties arise on the shipment of the Group’s concentrate from Australia to Malaysia.
69
Lynas Corporation Limited | 2016 Annual Report 17. RECONCILIATION OF THE LOSS FOR THE YEAR
WITH THE NET CASH FROM (USED IN) OPERATING ACTIVITIES
Loss for the year
Adjustments for:
Depreciation and amortisation
Employee remuneration settled through share-based payments
Impairment loss on property, plant and equipment and other
Impairment loss on inventories
Net financial income expenses
Gain on disposal of available for sale - financial assets
Income tax (benefit) / expense
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in other assets and liabilities
Change in provisions and employee benefits
Change in deferred income
Foreign exchange
Net cash from (used in) operating activities
18. OTHER NON-CURRENT ASSETS
Security deposits – banking facilities and other, Malaysia
Security deposits – banking facilities and other, Australia
Security deposits – AELB, Malaysia
Note
8
8
10
11
For the year ended June 30
2016
A$’000
2015
A$’000
(94,082)
(118,685)
41,806
2,386
–
1,468
37,419
–
(35)
4,084
9,211
2,029
(89)
(1,067)
1,178
(161)
4,147
39,111
831
12,031
4,710
37,282
(133)
126
4,273
(4,810)
9,667
46
(16,425)
–
29
(31,947)
As at June 30
2015
A$’000
4,243
850
13,070
2016
A$’000
4,087
636
23,536
28,259
18,163
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 2.20%
(2015: 2.96%) and the weighted average annual interest rate in Malaysia was 3.30% (2015: 3.25%).
During the year the Group recorded an increase of $10.5m (2015: $6.8m) in deposits to the Malaysian Government’s Atomic Energy
Licencing Board (“AELB”). These deposits form a component of a total USD50m of instalments due in accordance with the conditions
underlying the granting of the Full Operating Stage Licence to the Group for the LAMP in Malaysia. Please refer to note 32 for the residual
commitment to the AELB.
70
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 19. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land
A$’000
Buildings
plant and
equipment
A$’000
Fixtures
and
fittings
A$’000
Motor
vehicles
A$’000
Assets
under con-
struction
A$’000
Leasehold
improve-
ments
A$’000
Total
A$’000
As at June 30, 2016
Cost
Accumulated impairment losses
Accumulated depreciation
56,562
–
(4,931)
857,561
(192,366)
(125,331)
8,660
(360)
(5,020)
698
(54)
(582)
7,702
(265)
–
20,235
(7,524)
(2,920)
951,418
(200,569)
(138,784)
Carrying amount
51,631
539,864
3,280
62
7,437
9,791
612,065
As at June 30, 2015
Cost
Accumulated impairment losses
Accumulated depreciation
58,243
–
(3,834)
869,912
(196,322)
(92,015)
8,697
(371)
(4,302)
Carrying amount
54,409
581,575
4,024
681
(54)
(481)
146
7,485
(249)
–
20,834
(7,748)
(2,123)
965,852
(204,744)
(102,755)
7,236
10,963
658,353
Cost at the beginning of the year
Accumulated depreciation and impairment
losses at the beginning of the year
Carrying amount at the
beginning of the year
Additions
Disposals
Depreciation for the year
Transfers of assets under construction
Other movement
Effect of movements in exchange rates
58,243
869,912
8,697
681
7,485
20,834
965,852
(3,834)
(288,337)
(4,673)
(535)
(249)
(9,871)
(307,499)
54,409
–
–
(1,203)
–
–
(1,575)
581,575
1,814
(966)
(37,222)
9,207
(3,531)
(11,013)
4,024
15
(199)
(867)
–
563
(256)
146
22
–
(103)
–
–
(3)
7,236
11,007
(1,152)
–
(9,207)
(200)
(247)
10,963
–
–
(558)
–
–
(614)
658,353
12,858
(2,317)
(39,953)
–
(3,168)
(13,708)
Carrying amount at June 30, 2016
51,631
539,864
3,280
62
7,437
9,791
612,065
55,658
831,710
8,803
958
9,238
20,129
926,496
(2,475)
(241,077)
(4,308)
(583)
(191)
(8,787)
(257,421)
Cost at the beginning of the year
Accumulated depreciation and impairment
losses at the beginning of the year
Carrying amount at the
beginning of the year
Additions
Disposals
Depreciation for the year
Impairment loss for the year
Transfers of assets under construction
Transfers from (to) inventory*
Effect of movements in exchange rates
53,183
–
–
(1,995)
–
–
–
3,221
590,633
907
–
(34,913)
(11,719)
10,494
5,281
20,892
4,495
16
(249)
(393)
–
115
–
40
Carrying amount at June 30, 2015
54,409
581,575
4,024
*Prior year’s transfers from inventory were spare components used in the LAMP Phase 2 construction.
Restrictions on the title of property plant and equipment are outlined in note 22.
375
30
(123)
(126)
–
–
–
(10)
146
9,047
8,921
–
–
(312)
(10,609)
–
189
11,342
–
–
(584)
–
–
–
205
669,075
9,874
(372)
(38,011)
(12,031)
–
5,281
24,537
7,236
10,963
658,353
71
Lynas Corporation Limited | 2016 Annual Report 20. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
As at June 30, 2016
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$’000
21,317
(14,483)
(1,699)
17,542
(3,639)
(1,681)
4,078
–
(323)
24,602
–
(1,508)
67,539
(18,122)
(5,211)
Carrying amount
5,135
12,222
3,755
23,094
44,206
As at June 30, 2015
Cost
Accumulated impairment losses
Accumulated amortisation
21,304
(14,483)
(1,498)
17,543
(3,640)
(1,138)
4,078
–
(198)
24,602
–
(786)
67,527
(18,123)
(3,620)
Carrying amount
5,323
12,765
3,880
23,816
45,784
Cost at the beginning of the year
Accumulated amortisation and impairment losses at
the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
Change in rehabilitation obligations
21,304
17,543
4,078
24,602
67,527
(15,981)
5,323
14
(201)
–
(4,778)
12,765
–
(543)
–
(198)
3,880
–
(126)
–
(786)
(21,743)
23,816
–
(722)
–
45,784
14
(1,592)
–
Carrying amount at June 30, 2016
5,136
12,222
3,754
23,094
44,206
Cost at the beginning of the year
Accumulated amortisation and impairment losses
at the beginning of the year
Carrying amount at the beginning of the year
Additions
Amortisation for the year
Change in rehabilitation obligations
20,944
17,543
4,078
24,602
67,167
(15,717)
5,227
360
(264)
–
(4,150)
13,393
–
(628)
–
(117)
3,961
–
(81)
–
(326)
(20,310)
24,276
–
(460)
–
46,857
360
(1,433)
–
Carrying amount at June 30, 2015
5,323
12,765
3,880
23,816
45,784
Restrictions on the title of the deferred exploration, evaluation and development expenditure are outlined in note 22.
72
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 21. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses*
Other payables
Total trade and other payables
Current
Non-current
Total trade and other payables
As at June 30
2015
A$’000
19,065
15,509
5,424
2016
A$’000
11,370
26,999
5,920
44,289
39,998
32,770
11,519
44,289
38,737
1,261
39,998
* includes $16.7m due to the Malaysian Government’s Atomic Energy Licencing Board (“AELB”) in accordance with the conditions underlying the granting of the Full
Operating Stage Licence to the Group for the LAMP in Malaysia. Please refer to note 32 for the residual commitment to the AELB.
Trade and other payables are non-interest bearing and are normally settled on 60 day terms.
22. BORROWINGS
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information
about the Group’s exposure to interest rate and foreign currency risk, see note 26.
Current borrowings
JARE loan facility
Non-current borrowings
JARE loan facility
Mt Kellett convertible bonds
Total borrowings(1)
JARE loan facility
Total JARE loan facility carrying amount
Principal value of Mt Kellett convertible bonds(2)
Unamortised equity component(2)
Unamortised transaction costs(3)
Total Mt Kellett convertible bonds carrying amount
As at June 30
2016
A$’000
2015
A$’000
26,878
267,799
245,935
289,751
–
278,368
562,564
546,167
272,813
267,799
272,813
267,799
302,379
(10,265)
(2,363)
293,910
(15,420)
(122)
289,751
278,368
(1)
(2)
(3)
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 USD430m as at June 30, 2015 to USD428m as at June 30, 2016. Further
details on the terms and conditions of the Group’s borrowings are set out below.
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.
The Group issued 174,365,466 unlisted warrants to the Mt Kellett led bond holder group as part of the commercial terms relating to the maturity extension of the
Mount Kellett convertible bond. The costs have been recognised as transaction costs on borrowings and measured by reference to the fair value at the date at which
they were granted using the Black Scholes pricing model.
73
Lynas Corporation Limited | 2016 Annual Report 22. BORROWINGS continued
Japan Australia Rare Earths B.V. (JARE) loan facility
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.
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 $60m.
The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the Lynas business.
The principal repayments due prior to maturity under the JARE facility have been adjusted significantly.
Facility in place at June 30, 2015
New facility announced August 17, 2015
September 30, 2015
December 21, 2015
March 31, 2016
June 30, 2016
USD30m
USD20m
USD20m
USD135m
June 30, 2016
December 21, 2016
June 30, 2017
December 21, 2017
June 30, 2018
USD2m (paid)
USD5m
USD15m
USD30m
USD153m
The Company has agreed an interest regime which provides Lynas with the ability to reduce the 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. This is based on meeting certain
milestones as shown below.
Production Target
Cumulative NdPr Production from July 1, 2015
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
Interest reduction
when production
target achieved
Interest penalty
when production
target not achieved
0.5% (met)
0.5% (met)
0.5%
0.25%
0.25%
0.25%
Nil
0.25%
0.25%
0.25%
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) 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 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.
74
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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 $60m after June 30, 2016. The balance in the restricted accounts is available, at the lenders’ discretion, for reuse in the Lynas business.
Terms and debt repayment schedule
As at June 30, 2016
As at June 30, 2015
Nominal
interest
rate
Currency
Year of
maturity
Face value
USD ‘000
JARE loan facility
Mt Kellett convertible bonds*
USD
USD
6.75%
2.75%
2018
2018
203,000
225,000
Carrying
amount
AUD ‘000
272,813
289,751
Face value
USD ‘000
205,000
225,000
Carrying
amount
AUD ‘000
267,799
278,368
428,000
562,564
430,000
546,167
* The carrying amount of the Mt Kellett note reflects the current value of the debt component of the instrument.
Average for the year ended June 30, 2016
Average for the year ended June 30, 2015
Base rate
Margin
Total rate
Base rate
Margin
Total rate
JARE loan facility
Mt Kellett convertible bonds
6.75%
2.75%
–
–
6.75%
2.75%
1.32%
2.75%
5.32%
–
6.64%
2.75%
23. EMPLOYEE BENEFITS
Provision for annual leave
Provision for long service leave
Other
Total employee benefits
Current
Non-current
Total employee benefits
As at June 30
2016
A$’000
2015
A$’000
1,482
460
563
2,505
2,146
359
2,505
827
320
603
1,750
1,523
227
1,750
75
Lynas Corporation Limited | 2016 Annual Report 24. PROVISIONS
Balance at the beginning of the year
Provisions made during the year
Provisions allocated to Trade Creditors & Other Payables
Effects of foreign exchange movement
Effects of discounting
Balance at June 30, 2016
Current
Non-current
Total provisions at June 30, 2016
Current
Non-current
Total provisions at June 30, 2015
Restoration
and
rehabilitation
A$’000
Onerous
contracts
A$’000
Other
A$’000
Total
A$’000
54,356
–
–
(851)
910
54,415
–
54,415
54,415
–
54,356
54,356
–
1,007
–
–
–
1,007
411
596
1,007
–
–
–
–
–
116
–
–
116
–
116
116
–
870
870
54,356
1,007
116
(851)
910
55,538
411
55,127
55,538
–
55,226
55,226
Restoration and Rehabilitation
The activities of the Group give rise to obligations for asset and site restoration and rehabilitation at the LAMP in Malaysia and the Mount Weld
concentration plant. The key areas of uncertainty in estimating the provisions for these obligations are set out in note 4.6. 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 engaged third party specialists to assist in estimating costs and will review these estimates periodically over time as the
operations continue to develop.
The unwinding effect of discounting of the provision is recognised as a finance cost.
Onerous Lease Provision
Since the relocation of headquarters from Sydney to Kuantan, the Company has endeavoured to sub-let the Sydney office to save on rental
expenses going forward. An onerous contract provision of $1.0m has been taken up, which is based on the future rental payments net of
estimated recoveries from sub-letting.
25. EQUITY AND RESERVES
25.1 Share capital
Balance at the beginning of the year
Issue of shares pursuant to Institutional Share Placement (‘ISP’)
Issue of shares pursuant to Share Purchase Plan (‘SPP’)
Issue of shares pursuant to exercised options
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to settlement of liability
Equity raising costs
As at June 30
2016
2015
Number of
shares
‘000
3,371,232
–
–
1,129
–
116,077
–
A$’000
1,083,898
–
–
160
–
4,411
–
Number of
shares
‘000
2,333,661
150,000
887,072
125
374
–
–
A$’000
1,034,634
9,150
54,099
11
–
–
(13,996)
Balance at the end of the year
3,488,438
1,088,469
3,371,232
1,083,898
76
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in the event of a wind-up.
Further detail regarding the issue of shares on option conversion is provided in note 29.
25.2 Reserves
Equity settled employee benefits
Foreign currency translation
Options
Other
Balance at June 30
As at June 30
2015
A$’000
35,105
(97,794)
28,143
28,743
(5,803)
2016
A$’000
37,490
(125,943)
31,397
28,743
(28,313)
The equity settled employee benefits reserve relates to share options granted by the Group to its employees under the employee share
option plan. Further information about share-based payments to employees is set out in note 29.
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional
currencies to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign
currency translation reserve.
The other reserve represents the equity component of the USD225m unsecured Mt Kellett convertible bonds issued in 2012, net of the
associated deferred tax (see note 22).
25.3 Loss per share
The loss and weighted average number of ordinary shares used in the calculations of basic and diluted loss per share are as follows:
Net loss attributed to ordinary shareholders
Loss used in calculating basic and diluted loss per share
Number of ordinary shares on issue (‘000)
Weighted average number of ordinary shares used in calculating basic loss per share (‘000)
Basic and diluted loss per share (cents per share)
As at June 30
2016
A$’000
2015
A$’000
(94,082)
(118,685)
(94,082)
(118,685)
3,488,438
3,481,875
3,371,232
3,106,712
(2.70)
(3.82)
Options and performance rights which would normally be dilutive are considered to be anti-dilutive in the current reporting period. For
further details regarding these options and performance rights, refer to Note 29
25.4 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.
77
Lynas Corporation Limited | 2016 Annual Report 26. FINANCIAL RISK MANAGEMENT
26.1 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.
26.2 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 denomi-
nated 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 USD225m 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, 2016
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
June 30, 2015
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
78
AUD
A$’000
USD
A$’000
Total
A$’000
53
–
–
53
1,759
–
–
1,759
4,676
1,483
(8,184)
4,729
1,483
(8,184)
(2,025)
(1,972)
19,348
5,547
(8,089)
21,107
5,547
(8,089)
16,806
18,565
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 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, 2016
Net asset exposure – local currency
June 30, 2015
Net asset exposure – local currency
Significant exchange rates
MYR
’000
USD
’000
1,049,984
980,571
1,418,095
957,459
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
2016
2015
2016
2015
0.7283
3.0098
4.1329
0.8434
2.8807
3.4194
0.7441
2.9764
4.0000
0.7655
2.8905
3.7764
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$’000
USD
AUD
Increase/(Decrease) in Profit After Tax
for the year ended June 30, 2016
Increase/(Decrease) in Profit After Tax
for the year ended June 30, 2015
10 % Strengthening
10% Weakening
10% Strengthening
10% Weakening
(203)
12
203
(12)
1,681
176
(1,681)
(176)
A change in exchange rates would also impact the translation of net assets of Group operations whose functional currencies are denominated
in currencies other than AUD, which is the Group’s presentation currency. A 10% strengthening or weakening of these currencies against the
Group’s presentation currency, at the reporting date, would have increased (decreased) the reported net asset. This analysis assumes that all
other variables remain constant. The same basis has been applied for all periods presented.
in A$’000
MYR
USD
Increase/(Decrease) in Equity
for the year ended June 30, 2016
Increase/(Decrease) in Equity
for the year ended June 30, 2015
10 % Strengthening
10% Weakening
10% Strengthening
10% Weakening
35,195
75,785
(35,195)
(75,785)
48,967
76,590
(48,967)
(76,890)
Interest rate risk
(b)
The Group’s interest rate risk arises from long-term borrowings at both fixed and floating rates and deposits which earn interest at floating
rates. Borrowings and deposits at floating rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group
to fair value interest rate risk.
The Group’s primary exposure is to 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.
79
Lynas Corporation Limited | 2016 Annual Report
26. 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, 2016
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
–
(302,379)
(302,379)
–
–
–
–
–
–
–
(302,379)
(302,379)
43,348
4,723
(272,813)
43,348
4,723
(6,720)
–
–
(20,158)
–
–
(245,935)
Total variable rate instruments
(224,742)
41,351
(20,158)
(245,935)
Total
(527,121)
41,351
(20,158)
(548,314)
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)
The Group’s sensitivity to interest rate risk can be expressed in two ways:
Fair value sensitivity analysis
A change in interest rates impacts the fair value of the Group’s fixed rate borrowings. Given all debt instruments are carried at amortised
cost, a change in interest rates would not impact the statement of comprehensive income as a component of the profit or loss or the
statement of financial position.
Cash flow sensitivity analysis
A change in interest rates would have an impact on future interest payments and receipts on the Group’s floating rate assets and liabilities.
An increase or decrease in interest rates of 50 basis points at the reporting date would negatively or positively impact both the statement
of financial position and profit or loss through the statement of comprehensive income by the amounts shown, based on the assets and
liabilities held at the reporting date and a one year time frame. This analysis assumes that all other variables, in particular foreign currency
rates, remain constant. The analysis is performed on the same basis for comparative periods.
50 basis point parallel increase in interest rates
50 basis point parallel decrease in interest rates
80
For the year ended June 30
2016
A$’000
(1,124)
1,124
2015
A$’000
(1,054)
1,054
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued (d) 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.
26.3 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.
Management believes that the Group’s trade and other receivables are collectible in full, based on historical behaviour and extensive analysis
of customer credit risk, including underlying customers’ credit ratings if they are applicable.
26.4 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, 2016
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
Mt Kellett convertible bonds
Total
June 30, 2015
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
Mt Kellett convertible bonds
N/A
32,770
32,770
6.75%
(1)
337,541
322,197
–
–
692,508
32,770
–
–
2,287
2,287
–
–
26,878
6,860
310,663
313,050
33,738
623,713
N/A
54,705
54,705
–
–
–
7.00%
(1)
282,929
302,817
–
–
39,190
2,223
243,739
6,668
–
293,926
Total
640,451
54,705
41,413
250,407
293,926
(1)
(2)
The cash coupon on the instrument of 2.75% is payable on the USD225m principal. The weighted average effective interest rate is 4.37% 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.
The above liquidity table excludes other non-contractual financial commitments as disclosed in note 31.
Refer to notes 2.2, 22 and 35 with respect to the events subsequent to June 30, 2016 which address the Group’s year end liquidity
requirements.
–
–
–
–
–
–
–
–
81
Lynas Corporation Limited | 2016 Annual Report 26. FINANCIAL RISK MANAGEMENT continued
26.5 Classification and fair values
Fair value through
the profit and loss
A$’000
Cash, loans &
receivables
A$’000
Other liabilities
A$’000
Total
carrying amount
A$’000
Total
fair value
A$’000
June 30, 2016
Assets
Cash and cash equivalents
Trade and other receivables
Current tax receivable
Other assets
Total assets
Liabilities
Trade and other payables
Total liabilities
June 30, 2015
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total assets
Liabilities
Trade and other payables
Current tax payable
Total liabilities
–
–
–
–
–
–
–
–
–
–
–
–
–
43,348
5,094
111
28,259
76,812
–
–
–
–
–
–
–
44,289
44,289
51,973
9,281
18,163
79,417
–
22
22
–
–
–
–
59,090
–
59,090
43,348
5,094
111
28,259
76,812
44,289
44,289
51,973
9,281
18,163
79,417
59,090
22
59,112
43,348
5,094
111
28,259
76,812
44,289
44,289
51,973
9,281
18,163
79,417
59,090
22
59,112
The methods used in determining fair values of financial instruments are discussed in note 5 and note 26.7.
26.6 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, 2016 the Group did not hold any Level 1 financial instruments. All financial instruments held are level 2 financial instruments
except borrowings, which are level 3 financial instruments as described in note 26.7.
26.7 Fair value of borrowings
It is noted that there is significant judgement in determining the fair value of borrowings which could be expected to be less than the carrying
value of borrowings due to the higher interest rate a market participant would expect to receive on the present borrowings relative to the actual
interest rate obtained by the Company at inception of the borrowings. Given this uncertainty and the lack of reliable inputs, the Company has
not disclosed a fair value of borrowings.
82
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 27. RELATED PARTIES
27.1 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
Long-term employee benefits
Post-employment benefits
Termination benefits
Share based payments
Total compensation paid to key management personnel
*Prior year’s long-term employee benefits were minor and therefore not disclosed.
For the year ended June 30
2016
A$’000
2015
A$’000
4,575,277
16,032
205,728
–
1,818,662
5,920,052
–*
404,877
430,184
653,167
6,615,699
7,408,380
The compensation of each member of the KMP of the Group for the current and prior year is set out within the Remuneration Report.
All transactions with these related parted have been considered and included in the report.
The Share-based payments amount represents the cumulative impact of amortising the accounting value of options and performance rights
over their vesting periods 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.
27.2 Other related party transactions
Lynas Corporation Limited is the ultimate controlling party of the Group. Balances and transactions between the Company and its subsidiaries,
which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
28. 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
2016
100%
100%
100%
100%
100%
100%
100%
2015
100%
100%
100%
100%
100%
100%
100%
* Entity has entered into a deed of cross guarantee with Lynas Corporation Limited pursuant to ASIC Class Order 98/1418 and is relieved from the requirement to prepare
and lodge an audited financial report, as discussed in note 33. Entity is also a member of the tax-consolidated group.
29. EMPLOYEE SHARE OPTION PLAN
The Group has established an employee share plan whereby, at the discretion of Directors, options and performance rights may be granted
over the ordinary shares of the Company for the benefit of Directors, Executives and certain employees of the Group. The options and
performance rights 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.
83
Lynas Corporation Limited | 2016 Annual Report 29. EMPLOYEE SHARE OPTION PLAN continued
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 Financial Officer (‘CFO’), the Group’s General Counsel and
Company Secretary, Vice President for Production, Vice President for Malaysia and Vice President for Sales and Marketing.
Employee Share Trust (‘EST’)
Options and Performance Rights that are granted for the benefit of selected Australian resident Executives are granted 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.
29.1 Movements in employee share options and performance rights during the year
For the year ended June 30, 2016
For the year ended June 30, 2015
No. of
options/rights
‘000
Weighted average
exercise price
$
No. of
options/rights
‘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
33,893
73,396
(7,850)
–
(2,349)
97,090
6,413
0.29
–
1.14
–
0.30
0.00
0.00
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
During the year ended June 30, 2016 the Group recognised net expense of $2.4m (2015: $0.8m) within the profit and loss component of the
statement of comprehensive income. The net expense during the year included the reversal of expenses totalling $0.4m associated with the
forfeiture of 886,530 performance rights (2015: $0.9m).
29.2 Listed options and employee options and performance rights exercised during the year
The following non-employee listed options were exercised during year ended June 30, 2016:
Exercise date
Number exercised
Share price at exercise date ($)
Exercise price ($)
August 20, 2015
September 1, 2015
September 7, 2015
September 10, 2015
September 14, 2015
September 17, 2015
September 18, 2015
157
287,719
263,121
153,996
102,502
216,215
105,498
1,129,208
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.09
0.09
0.09
0.09
0.09
0.09
0.09
No employee performance rights or options were exercised during year ended June 30, 2016.
29.3 Options and performance rights outstanding at the end of the year
No employee options are outstanding at the end of the year.
The employee performance rights outstanding at the end of the year had nil weighted average exercise price and a weighted average
remaining contractual life of 1,047 days.
The employee performance rights and options outstanding at the beginning of the year had a weighted average exercise price of $0.29 and
remaining contractual life of 1,036 days.
84
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 29.4 Options and performance rights granted in the period
The following table summarises the performance conditions attached to Options and Performance Rights granted during the financial year
ended June 30, 2016 with respect to the performance of the Group’s employees during the financial year ended June 30, 2015:
TSR hurdle (50%)
(performance against ASX 200
companies during the vesting
period)
NdPr Production Hurdle (50%)
(NdPr production from July, 1
2015 to December 31, 2017)
Vesting schedule
For grants made in FY16
(related to FY15 performance)
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
50% of the NdPr production portion will vest for:
100% of the NdPr production portion will vest for:
10,440 tonnes of NdPr production from
July 1, 2015 to December 31, 2017.
11,391 tonnes of NdPr production from
July 1, 2015 to December 31, 2017.
Additional 20% of the NdPr production portion, giving
a total of 120% of the NdPr production portion:
12,530 tonnes of NdPr production from
July 1, 2015 to December 31, 2017.
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 $157,203 (2015:$ 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 AE
Series AF
Series AG
Series AH
Series AI
Series AJ
Series AK
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Life of Option/Right
$0.090
$0.00
Nil
79.39%
2.147%
3 years
$0.038
$0.00
Nil
N/A
N/A
1 year
$0.029
$0.00
Nil
77.77%
1.930%
5 years
$0.039
$0.00
Nil
77.77%
1.930%
3 years
$0.090
$0.00
Nil
79.39%
2.147%
1 year
$0.090
$0.00
Nil
79.39%
2.147%
3 years
$0.090
$0.00
Nil
79.39%
2.147%
3 years
29.5 Options and performance rights still to vest or yet to expire
The following table lists any options and performance rights which are still to vest, or have yet to expire.
Series Grant date
Number
Date vested
and exercisable
V
X
Y
Z
AA
AB
AC
AD
AE
AF
AG
AH
AI
AJ
AK
September 23, 2013*
September 23, 2013*
September 23, 2014*
September 23, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 28, 2014*
November 23, 2015*
July 28, 2015*
September 18, 2015*
September 18, 2015*
November 23, 2015*
November 23, 2015*
November 23, 2015*
Total
579,663
1,030,940
5,150,943
4,292,452
862,069
1,086,957
3,396,227
2,830,189
4,464,286
20,715,092
12,862,523
15,435,028
4,971,828
10,588,235
8,823,529
97,089,961
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 28, 2016
September 18, 2018
September 18, 2018
July 28, 2016
September 18, 2018
September 18, 2018
Expiry date
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
December 31, 2016
September 18, 2020
September 18, 2020
December 31, 2016
September 18, 2020
September 18, 2020
* Denotes Performance Rights which are issued on the same terms as Options, except there is no consideration payable on exercise.
Exercise
price
Value per
option/right
at grant date
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.41
$ 0.31
$ 0.116
$ 0.096
$ 0.059
$ 0.059
$ 0.059
$ 0.031
$ 0.090
$ 0.038
$ 0.029
$ 0.039
$ 0.090
$ 0.090
$ 0.080
85
Lynas Corporation Limited | 2016 Annual Report 30. WARRANTS
On September 7, 2015 the Group issued 174,365,466 unlisted warrants to the Mt Kellett led bond holder group as part of the commercial
terms relating to the maturity extension of the Mount Kellett convertible bond. From the date of issue, each warrant is convertible into one
ordinary share at an exercise price of $0.038 on or before the expiry date of September 30, 2018.
The costs of these equity-settled transactions has been measured by reference to the fair value at the date at which they were granted using
the Black Scholes pricing model. Each option had a fair value of $0.019.
31. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Total
As at June 30
2015
A$’000
3,746
11,557
3,090
2016
A$’000
3,773
10,313
1,541
15,627
18,393
The Group has contracts for several operating leases for business premises located in Sydney, Perth, Laverton and Kuantan. The Group also
has several operating leases for motor vehicles and mobile plant and equipment.
32. CAPITAL COMMITMENTS
There were no outstanding commitments which are not disclosed in the consolidated financial report of the Group as at June 30, 2016 other than:
Exploration commitments
Less than one year
Between one and five years
More than five years
Total
As at June 30
2015
A$’000
336
1,098
2,520
3,954
2016
A$’000
317
1,237
2,472
4,026
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Department of Mines
and Petroleum attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when application for a
mining licence is made. These are necessary in order to maintain the tenements in which the Group and other parties are involved. All parties
are committed to meet the conditions under which the tenements were granted in accordance with the relevant mining legislation.
86
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued Capital commitments
Less than one year
Total
As at June 30
2015
A$’000
1,848
1,848
2016
A$’000
709
709
At June 30, 2016 capital commitments relate to on-going capital project costs in Malaysia. All remaining Phase 1 and Phase 2 retention costs
in Malaysia and Mt Weld are fully accrued at year-end.
Other commitments
Less than one year
Between one and five years
More than five years
Total
As at June 30
2015
A$’000
21,339
35,618
–
2016
A$’000
6,222
52,372
–
58,594
56,957
Lynas is required to pay in instalments, a total of USD50m to the Malaysia’s 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 did not transfer funds to AELB but has
recorded amount due to AELB as payables (refer to note 21).
33. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated August 13, 1998, the wholly-owned Australian subsidiaries of Lynas Corporation
Limited are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Director’s reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the
Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under
certain provisions of the Corporations Act 2001. If a winding up event occurs under any other provision of the Act, the Company will only be
liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event
that the Company is wound-up.
The subsidiaries in addition to the Company subject to the deed are specified in note 28.
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:
87
Lynas Corporation Limited | 2016 Annual Report 33. DEED OF CROSS GUARANTEE continued
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
Interest payable
Trade and other payables
Borrowings
Employee benefits
Total current liabilities
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 Loss
Other income
Provision against investments/intercompany balances
General and administration expenses net of recoveries
Loss from operating activities
Financial income
Financial expenses
Net financial expenses
Loss before income tax
Income tax expense
Loss for the year from continuing operations
Other comprehensive income, net of income tax
Exchange differences on foreign currency transactions
Total other comprehensive profit (loss) for the year, net of income tax
Total comprehensive loss for the year
88
As at June 30
2016
A$ ‘000
2015
A$ ‘000
34,379
147,928
13,412
195,719
219
102,085
44,206
75
375,080
120,185
641,850
837,569
49,761
8,322
26,878
1,776
86,737
25,551
359
535,686
561,596
648,333
189,236
26,793
70,406
19,479
116,678
2,329
103,659
45,784
164
375,080
166,384
693,400
810,078
19,104
7,873
267,799
2,213
296,989
24,760
227
278,368
303,355
600,344
209,734
1,088,469
(1,075,287)
176,054
189,236
1,083,898
(1,034,358)
160,194
209,734
78,097
(86,880)
(8,783)
48
–
6,604
(2,131)
9
(37,489)
(37,480)
(39,611)
(44)
(39,655)
(1,275)
(1,275)
(40,930)
61,793
(77,801)
(16,008)
4
(2,314)
(2,572)
(20,890)
178
(40,763)
(40,585)
(61,475)
(44)
(61,519)
(3,012)
(3,012)
(64,531)
www.lynascorp.comFinancial StatementsNotes to the Financial Statements continued 34. 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
35. CONTINGENCIES
As at June 30
2016
A$’000
2015
A$’000
33,055
22,167
903,221
863,966
(76,639)
(286,902)
(610,404)
(563,683)
292,817
300,283
1,088,469
(1,116,792)
321,140
1,083,898
(1,076,248)
292,633
292,817
300,283
(40,544)
(42,761)
(40,544)
(42,761)
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 22.
36. SUBSEQUENT EVENTS
On September 3, 2016 the Malaysian Atomic Energy Licensing Board (AELB) renewed the Full Operating Stage Licence (FOSL) for the Lynas
Advanced Materials Plant (LAMP) for 3 years until September 2, 2019. The renewal follows a rigorous review undertaken by the AELB and
other independent regulatory bodies in Malaysia, all of whom have concluded that the LAMP is in compliance with applicable regulations.
89
Lynas Corporation Limited | 2016 Annual Report Mineral Resources and Ore Reserves
as at June 30, 2016
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
0.3
0.0
0.3
5.5
4.2
9.7
11.7
9.3
10.6
13.5
0
13.5
11.8
9.3
10.7
608
391
999
40
0
40
648
391
1,039
* REO (%) includes all lanthanide element oxides and ytrrium oxide
Note:
The 2016 Ore Reserve update is based on stockpile survey volume depletion calculations. These calculations have been carried out by Mr
Steve Leipold of Lone Star Surveys. Mr Daniel Tuffin (Auralia Mining Consulting, MAusIMM (CP)) has carried out a review and audit of these
figures and found them to fall within expected error deviations. There have been no other material changes to the previously announced Ore
Reserves (ie: no mining activity has occurred) since the previous Ore Reserve release.
90
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
6.1
5.4
3.4
14.9
REO
%
11.6
8.6
4.1
8.8
The Mineral Resource estimation for the Central Lanthanide Deposit is as of June 30, 2016. The company confirms that all material assump-
tions and technical parameters underpinning the estimated Mineral Resources and Ore Reserves continue to apply and have not materially
changed to those reported as per the Lynas ASX announcement dated October 5, 2015 with the exception of depletion of stockpiles
processed since the 2015 announcement. The depletion of the stockpiles amount to approximately 185,000 tonnes.
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 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.
91
Lynas Corporation Limited | 2016 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 October 6, 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.
The only changes to the Central Lanthanide Deposit Ore Reserves and Mineral Resources has been depletion of the stockpiles processed
between August 31, 2015 and June 30, 2016.
There have been no changes to the Duncan Deposit Mineral Resources since 2015.
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.
92
www.lynascorp.com Additional Information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report.
The information is current as at September 15, 2016.
(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
3,933
7,938
4,506
11,071
3,693
Number
of Shares
Percentage
of Shares
2,331,210
23,085,845
35,914,531
404,287,106
3,022,819,677
0.067
0.662
1.030
11.589
86.653
31,141
3,488,438,369
100.000
The number of shareholders holding less than
a marketable parcel of shares
14,301
41,378,630
(B) Distribution of Employee Options/Performance Rights
There are 95,840,222 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
0
0
15
20
35
(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
93
Lynas Corporation Limited | 2016 Annual Report Additional Information
(D) Distribution of $0.038 Warrants Expiring September 30, 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:
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA
1
2 HSBC CUSTODY NOMINEES
3
4 NATIONAL NOMINEES LIMITED
5 NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
6
7
TLG TRADING PTY LTD
8 MALAY-SINO CHEMICAL INDUSTRIES
9
RHB SECURITIES SINGAPORE PTE
DYNAMIC SUPPLIES INVESTMENTS
UPLANDS GROUP PTY LTD
ROVER INVESTMENTS PTY LTD
ABN AMRO CLEARING SYDNEY
JAPAN AUSTRALIA RARE EARTHS BV
BNP PARIBAS NOMS PTY LTD
10 MERRILL LYNCH (AUSTRALIA)
11
12
13
14
15
16
17 MR CONGLIN YUE
18 MR CHRISTOPHER ROBERT FLESSER
19
20
YARDIA PTY LTD
LANDO PTY LTD
Holders
0
0
0
0
14
14
Listed Ordinary Shares
Number
of Shares
% of
Shares
546,479,172
303,207,460
180,609,954
110,997,663
98,765,112
38,647,230
32,100,000
31,076,858
26,772,403
25,015,922
21,677,508
20,500,000
17,541,406
14,928,572
13,089,942
10,972,275
10,335,715
10,287,956
10,000,000
9,050,000
15.665
8.692
5.177
3.182
2.831
1.108
0.920
0.891
0.767
0.717
0.621
0.588
0.503
0.428
0.375
0.315
0.296
0.295
0.287
0.259
TOTAL
1,532,055,148
43.918
(F) Substantial Shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are Nil.
(G) Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. No other class of equity securities carries voting
rights unless converted into ordinary shares.
94
www.lynascorp.com (H) Schedule of Interests in Mining Tenements
Tenement
Percentage Held
Mt Weld Rare Earths Project
Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Mt Weld
Kangankunde Rare Earths Project
Kangankunde, Malawi
M38/58
M38/59
M38/326
M38/327
E38/2224
E38/2935
E38/2558
L38/224
ML38/98
ML0122/2003
100
100
100
100
100
100
100
100
100
100
95
Lynas Corporation Limited | 2016 Annual Report Corporate Directory Information
ABN 27 009 066 648
Directors
Mike Harding
William (Liam) Forde
Kathleen Conlon
Jake Klein
Amanda Lacaze
Philippe Etienne
Company Secretaries
Andrew Arnold
Ivo Polovineo
Registered Office
Level 1, 7 Tully Road
East Perth WA 6004
Telephone: +61 8 6241 3800
Fax: + 61 8 9242 7219
Email: general@lynascorp.com
Share Register
Boardroom Pty Limited
Level 12, Grosvenor Place
225 George Street
Sydney NSW 2000
Telephone: +61 2 9290 9600
Fax: +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au
Auditors
Ernst & Young
The EY Centre
200 George Street
Sydney NSW 2000
Internet Address
www.lynascorp.com
9696
www.lynascorp.com
www.lynascorp.com 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 9242 7219
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
The EY Centre
200 George Street,
Sydney NSW 2000
www.lynascorp.com
2016
ANNUAL
REPORT
Rules 4.7.3 and 4.10.31
Appendix 4G
Key to Disclosures
Corporate Governance Council Principles and Recommendations
Name of entity:
Lynas Corporation Limited
ABN / ARBN:
27 009 066 648
Financial year ended:
30 June 2016
Our corporate governance statement2 for the above period above can be found at:3
☒
These pages of our annual report:
18 to 25
☐
This URL on our website:
The Corporate Governance Statement is accurate and up to date as at September 29, 2016 and has been approved by
the board.
The annexure includes a key to where our corporate governance disclosures can be located.
Date:
26 October 2016
Name of Director or Secretary authorising
lodgement:
Andrew Arnold, Company Secretary
1 Under Listing Rule 4.7.3, an entity must lodge with ASX a completed Appendix 4G at the same time as it lodges its annual report with ASX.
Listing Rule 4.10.3 requires an entity that is included in the official list as an ASX Listing to include in its annual report either a corporate
governance statement that meets the requirements of that rule or the URL of the page on its website where such a statement is located. The
corporate governance statement must disclose the extent to which the entity has followed the recommendations set by the ASX Corporate
Governance Council during the reporting period. If the entity has not followed a recommendation for any part of the reporting period, its corporate
governance statement must separately identify that recommendation and the period during which it was not followed and state its reasons for not
following the recommendation and what (if any) alternative governance practices it adopted in lieu of the recommendation during that period.
Under Listing Rule 4.7.4, if an entity chooses to include its corporate governance statement on its website rather than in its annual report, it must
lodge a copy of the corporate governance statement with ASX at the same time as it lodges its annual report with ASX. The corporate governance
statement must be current as at the effective date specified in that statement for the purposes of rule 4.10.3.
2 “Corporate governance statement” is defined in Listing Rule 19.12 to mean the statement referred to in Listing Rule 4.10.3 which discloses the
extent to which an entity has followed the recommendations set by the ASX Corporate Governance Council during a particular reporting period.
3 Mark whichever option is correct and then complete the page number(s) of the annual report, or the URL of the web page, where the entity’s
corporate governance statement can be found. You can, if you wish, delete the option which is not applicable.
Throughout this form, where you are given two or more options to select, you can, if you wish, delete any option which is not applicable and just
retain the option that is applicable. If you select an option that includes “OR” at the end of the selection and you delete the other options, you can
also, if you wish, delete the “OR” at the end of the selection.
Page 1
ANNEXURE – KEY TO CORPORATE GOVERNANCE DISCLOSURES
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
1.1
1.2
A listed entity should disclose:
(a)
the respective roles and responsibilities of its board and
management; and
those matters expressly reserved to the board and those
delegated to management.
(b)
A listed entity should:
(a)
undertake appropriate checks before appointing a person, or
putting forward to security holders a candidate for election,
as a director; and
provide security holders with all material information in its
possession relevant to a decision on whether or not to elect
or re-elect a director.
(b)
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and information about the respective roles and responsibilities of
our board and management (including those matters expressly
reserved to the board and those delegated to management):
☒ at www.lynascorp.com
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
1.3
A listed entity should have a written agreement with each director
and senior executive setting out the terms of their appointment.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
1.4
The company secretary of a listed entity should be accountable
directly to the board, through the chair, on all matters to do with the
proper functioning of the board.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
4 If you have followed all of the Council’s recommendations in full for the whole of the period above, you can, if you wish, delete this column from the form and re-format it.
Page 2
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
1.5
1.6
1.7
A listed entity should:
(a)
have a diversity policy which includes requirements for the
board or a relevant committee of the board to set
measurable objectives for achieving gender diversity and to
assess annually both the objectives and the entity’s progress
in achieving them;
disclose that policy or a summary of it; and
disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity set by
the board or a relevant committee of the board in accordance
with the entity’s diversity policy and its progress towards
achieving them and either:
(1) the respective proportions of men and women on the
board, in senior executive positions and across the
whole organisation (including how the entity has defined
“senior executive” for these purposes); or
(2) if the entity is a “relevant employer” under the Workplace
Gender Equality Act, the entity’s most recent “Gender
Equality Indicators”, as defined in and published under
that Act.
A listed entity should:
(a)
have and disclose a process for periodically evaluating the
performance of the board, its committees and individual
directors; and
disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
A listed entity should:
(a)
have and disclose a process for periodically evaluating the
performance of its senior executives; and
disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
(b)
(c)
(b)
(b)
… the fact that we have a diversity policy that complies with
paragraph (a):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
… and a copy of our diversity policy or a summary of it:
☒ at www.lynascorp.com
… and the measurable objectives for achieving gender diversity set by
the board or a relevant committee of the board in accordance with our
diversity policy and our progress towards achieving them:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and the information referred to in paragraphs (c)(1) or (2):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… the evaluation process referred to in paragraph (a):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and the information referred to in paragraph (b):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… the evaluation process referred to in paragraph (a):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and the information referred to in paragraph (b):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
Page 3
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE
2.1
The board of a listed entity should:
(a)
have a nomination committee which:
(1) has at least three members, a majority of whom are
independent directors; and
[If the entity complies with paragraph (a):]
… the fact that we have a nomination committee that complies with
paragraphs (1) and (2):
☒
in our Corporate Governance Statement OR
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
if it does not have a nomination committee, disclose that
fact and the processes it employs to address board
succession issues and to ensure that the board has the
appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge its
duties and responsibilities effectively.
(b)
☐ at [insert location]
… and a copy of the charter of the committee:
☒ at www.lynascorp.com
… and the information referred to in paragraphs (4) and (5):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
[If the entity complies with paragraph (b):]
… the fact that we do not have a nomination committee and the
processes we employ to address board succession issues and to
ensure that the board has the appropriate balance of skills,
knowledge, experience, independence and diversity to enable it to
discharge its duties and responsibilities effectively:
☐
☐ at [insert location]
in our Corporate Governance Statement OR
2.2
A listed entity should have and disclose a board skills matrix
setting out the mix of skills and diversity that the board currently
has or is looking to achieve in its membership.
… our board skills matrix:
☒
☐ at [insert location]
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
Page 4
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
2.3
A listed entity should disclose:
(a)
the names of the directors considered by the board to be
independent directors;
if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the board
is of the opinion that it does not compromise the
independence of the director, the nature of the interest,
position, association or relationship in question and an
explanation of why the board is of that opinion; and
the length of service of each director.
(b)
(c)
☐ an explanation why that is so in our Corporate Governance
Statement
… the names of the directors considered by the board to be
independent directors:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and, where applicable, the information referred to in paragraph (b):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and the length of service of each director:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
2.4
A majority of the board of a listed entity should be independent
directors.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
2.5
2.6
The chair of the board of a listed entity should be an independent
director and, in particular, should not be the same person as the
CEO of the entity.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
A listed entity should have a program for inducting new directors
and provide appropriate professional development opportunities
for directors to develop and maintain the skills and knowledge
needed to perform their role as directors effectively.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
3.1
A listed entity should:
(a)
have a code of conduct for its directors, senior executives
and employees; and
disclose that code or a summary of it.
(b)
… our code of conduct or a summary of it:
☐
in our Corporate Governance Statement OR
☒ at www.lynascorp.com
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement
Page 5
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
4.1
The board of a listed entity should:
(a)
have an audit committee which:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
(2) is chaired by an independent director, who is not the
chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b)
if it does not have an audit committee, disclose that fact
and the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including
the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement
partner.
4.2
The board of a listed entity should, before it approves the entity’s
financial statements for a financial period, receive from its CEO
and CFO a declaration that, in their opinion, the financial records
of the entity 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 entity and that the opinion has been formed
on the basis of a sound system of risk management and internal
control which is operating effectively.
[If the entity complies with paragraph (a):]
… the fact that we have an audit committee that complies with
paragraphs (1) and (2):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and a copy of the charter of the committee:
☒ at www.lynascorp.com
… and the information referred to in paragraphs (4) and (5):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
[If the entity complies with paragraph (b):]
… the fact that we do not have an audit committee and the processes
we employ that independently verify and safeguard the integrity of our
corporate reporting, including the processes for the appointment and
removal of the external auditor and the rotation of the audit
engagement partner:
☐
in our Corporate Governance Statement OR
☐ at [insert location]
… the fact that we follow this recommendation:
☒
☐ at [insert location]
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☐ an explanation why that is so in our Corporate Governance
Statement
Page 6
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
4.3
A listed entity that has an AGM should ensure that its external
auditor attends its AGM and is available to answer questions
from security holders relevant to the audit.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity that does not hold an
annual general meeting and this recommendation is therefore
not applicable
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
5.1
A listed entity should:
(a)
have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
disclose that policy or a summary of it.
(b)
… our continuous disclosure compliance policy or a summary of it:
☐
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☒ at www.lynascorp.com
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
6.1
6.2
6.3
6.4
A listed entity should provide information about itself and its
governance to investors via its website.
… information about us and our governance on our website:
☒ at www.lynascorp.com
☐ an explanation why that is so in our Corporate Governance
Statement
A listed entity should design and implement an investor relations
program to facilitate effective two-way communication with
investors.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☐ at [insert location]
A listed entity should disclose the policies and processes it has in
place to facilitate and encourage participation at meetings of
security holders.
… our policies and processes for facilitating and encouraging
participation at meetings of security holders:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
A listed entity should give security holders the option to receive
communications from, and send communications to, the entity
and its security registry electronically.
… the fact that we follow this recommendation:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity that does not hold
periodic meetings of security holders and this recommendation
is therefore not applicable
☐ an explanation why that is so in our Corporate Governance
Statement
Page 7
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
7.1
The board of a listed entity should:
(a)
have a committee or committees to oversee risk, each of
which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b)
if it does not have a risk committee or committees that
satisfy (a) above, disclose that fact and the processes it
employs for overseeing the entity’s risk management
framework.
7.2
The board or a committee of the board should:
(a)
review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound; and
disclose, in relation to each reporting period, whether such
a review has taken place.
(b)
[If the entity complies with paragraph (a):]
… the fact that we have a committee or committees to oversee risk
that comply with paragraphs (1) and (2):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and a copy of the charter of the committee:
☒ at www.lynascorp.com
… and the information referred to in paragraphs (4) and (5):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
[If the entity complies with paragraph (b):]
… the fact that we do not have a risk committee or committees that
satisfy (a) and the processes we employ for overseeing our risk
management framework:
☐
in our Corporate Governance Statement OR
☐ at [insert location]
… the fact that board or a committee of the board reviews the entity’s
risk management framework at least annually to satisfy itself that it
continues to be sound:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… and that such a review has taken place in the reporting period
covered by this Appendix 4G:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
☐ an explanation why that is so in our Corporate Governance
Statement
☐ an explanation why that is so in our Corporate Governance
Statement
Page 8
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
7.3
A listed entity should disclose:
(a)
(b)
if it has an internal audit function, how the function is
structured and what role it performs; or
if it does not have an internal audit function, that fact and
the processes it employs for evaluating and continually
improving the effectiveness of its risk management and
internal control processes.
7.4
A listed entity should disclose whether it has any material
exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage those
risks.
[If the entity complies with paragraph (a):]
… how our internal audit function is structured and what role it
performs:
☐
in our Corporate Governance Statement OR
☐ at [insert location]
[If the entity complies with paragraph (b):]
… the fact that we do not have an internal audit function and the
processes we employ for evaluating and continually improving the
effectiveness of our risk management and internal control processes:
☒
in our Corporate Governance Statement OR
☐ at [insert location]
… whether we have any material exposure to economic,
environmental and social sustainability risks and, if we do, how we
manage or intend to manage those risks:
☒
☐ at [insert location]
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☐ an explanation why that is so in our Corporate Governance
Statement
Page 9
Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation is
therefore not applicable
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
8.1
The board of a listed entity should:
(a)
have a remuneration committee which:
(1) has at least three members, a majority of whom are
independent directors; and
[If the entity complies with paragraph (a):]
… the fact that we have a remuneration committee that complies with
paragraphs (1) and (2):
☒
in our Corporate Governance Statement OR
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b)
if it does not have a remuneration committee, disclose that
fact and the processes it employs for setting the level and
composition of remuneration for directors and senior
executives and ensuring that such remuneration is
appropriate and not excessive.
☐ at [insert location]
… and a copy of the charter of the committee:
☒ at www.lynascorp.com
… and the information referred to in paragraphs (4) and (5):
☒
in our Corporate Governance Statement OR
☐ at [insert location]
[If the entity complies with paragraph (b):]
… the fact that we do not have a remuneration committee and the
processes we employ for setting the level and composition of
remuneration for directors and senior executives and ensuring that
such remuneration is appropriate and not excessive:
☐
in our Corporate Governance Statement OR
☐ at [insert location]
8.2
8.3
A listed entity should separately disclose its policies and
practices regarding the remuneration of non-executive directors
and the remuneration of executive directors and other senior
executives.
… separately our remuneration policies and practices regarding the
remuneration of non-executive directors and the remuneration of
executive directors and other senior executives:
☒
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
A listed entity which has an equity-based remuneration scheme
should:
(a)
have a policy on whether participants are permitted to
enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk of
participating in the scheme; and
disclose that policy or a summary of it.
(b)
☐ at [insert location]
… our policy on this issue or a summary of it:
☐
in our Corporate Governance Statement OR
☒ at www.lynascorp.com
☐ an explanation why that is so in our Corporate Governance
Statement OR
☐ w e do not have an equity-based remuneration scheme and this
recommendation is therefore not applicable OR
☐ we are an externally managed entity and this recommendation
is therefore not applicable
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Corporate Governance Council recommendation
We have followed the recommendation in full for the whole of the
period above. We have disclosed …
We have NOT followed the recommendation in full for the whole
of the period above. We have disclosed …4
ADDITIONAL DISCLOSURES APPLICABLE TO EXTERNALLY MANAGED LISTED ENTITIES
-
-
Alternative to Recommendation 1.1 for externally managed listed
entities:
The responsible entity of an externally managed listed entity
should disclose:
(a)
the arrangements between the responsible entity and the
listed entity for managing the affairs of the listed entity;
the role and responsibility of the board of the responsible
entity for overseeing those arrangements.
(b)
… the information referred to in paragraphs (a) and (b):
☐
☐ at [insert location]
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
Alternative to Recommendations 8.1, 8.2 and 8.3 for externally
managed listed entities:
An externally managed listed entity should clearly disclose the
terms governing the remuneration of the manager.
… the terms governing our remuneration as manager of the entity:
☐
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☐ at [insert location]
Page 11