CORPORATE DIRECTORY
ABN 27 009 066 648
Registered Office
Suite 3/5 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
200 George Street
Sydney NSW 2000 Australia
enquiries@boardroomlimited.com.au
www.lynascorp.com
2018
ANNUAL
REPORT
Contents
Letter from the Chairman
CEO Review
Consolidated Financial Report
Corporate Directory Information
Directors’ Report
Sustainability Statement
Remuneration Report – Audited
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Mineral Resources and Ore Reserves
Additional Information
ii
iv
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4
16
19
30
32
33
39
40
41
42
43
79
82
ii
Lynas Corporation Limited | 2018 Annual Report Letter from the Chairman
It gives me great pleasure to present the 2018 Annual Report
to shareholders of Lynas Corporation. During the year, the
Company commenced a new phase in its development with
the Lynas NEXT project and this has contributed to strong
operational and financial performance throughout the year.
We have been very pleased to deliver strong results for our shareholders during FY18.
Some key highlights of the year have been as follows:
•
Lynas recorded its first net profit after tax in the Rare Earth industry during
FY18 of $53.1 million. Cash flows were strong, with cash flows from operating
activities increasing to $118.5m in FY18 from $34.0m in FY17. In FY18, Lynas
achieved record total sales revenue after commissions of $374.1m, compared
with $257.0m in FY17.
• We have continued to make improvements in the production process, production
rates and the quality of final output. As noted in the Financial Report, production
of Neodymium-Praseodymium (NdPr) was 5,444 tonnes in FY18 compared to
5,223 tonnes in FY17. Total production of rare earth oxide (REO) in FY18 was
17,753 tonnes compared to 16,003 tonnes in FY17.
• The Lynas NEXT project will enable the company to increase output, expand
the product range and improve production efficiency. Lynas NEXT is on track
to deliver an increase in production capacity to 600 tonnes of NdPr per month
from the January quarter of 2019.
• Consistent with last year, Lynas maintained an excellent safety record with
the Company-wide 12-month rolling Lost Time Injury Frequency Rate at
2.2 per million hours worked, as at the end of June 2018
• Rare Earths market settings strengthened in FY18. Prices reached a five-year
high in the September 2017 quarter, before stabilising in the second half of the
financial year. These favourable market dynamics were driven by strong global
demand for Rare Earth materials.
• The principal amount of our loan facilities reduced to US$165.2 million at
June 30, 2018, down from US$425 million at June 30, 2017.
• Our share register strengthened during FY18, with several institutional share-
holders acquiring larger holdings in the company and our longstanding retail
shareholders continuing their support for our business.
• The Company’s share price recorded strong growth during the year, from $1.05
on July 1, 2017 to $2.34 on June 30, 2018 (on a post-consolidation basis), and
its market capitalisation increased from $386 million to $1.55 billion during the
same period.
• The Board welcomed a new Non-Executive Director, Grant Murdoch, in October
2017 and farewelled Liam Forde in November 2017 after 10 years of service as
a Non-Executive Director. Grant has been a valuable addition to the Board. The
Board has an excellent mix of skills and experience to support Lynas’ continued
growth in global markets.
iiii
www.lynascorp.com
www.lynascorp.com “The Lynas NEXT
project will enable
the company to
increase output,
expand the
product range and
improve production
efficiency. ”
Globally, demand is increasing for Rare Earth materials used in permanent magnets for
future facing technologies such as electric vehicles and wind turbines. Lynas continues
to develop long-term contracts with end users and upstream manufacturers which
provide pricing and supply certainty for Rare Earth materials including Lynas’ high-value
NdPr product. A key differentiator for Lynas is its ability to provide its customers with
high quality products that are traceable to the mine in Mt Weld. In addition, we have
implemented ISO standards at both sites to ensure that production is safe for employees,
the environment and the community and secure for our customers.
During the year, a new government was elected in Malaysia, bringing a sense of optimism
and reform to the country. We look forward to working with the new government.
Lynas strives to work in and alongside its local communities and to create shared value
through economic development and engagement. Lynas is an active community member
and its employees regularly contribute their time and expertise to local community
initiatives in Mt Weld and Kuantan. From an economic perspective, in addition to its
role as an employer, Lynas contributes to mining industry initiatives in Australia and the
Company makes a significant contribution to the Malaysian economy through capital
investment in the LAMP and local expenditure.
On behalf of my Board colleagues, I would like to thank our CEO Amanda Lacaze,
the executive team, and all our employees for their roles in delivering the Company’s
excellent performance. The business has come a long way over the past four years
and the team’s hard work has led to Lynas’ position as a leading Rare Earths materials
company. The Board expects that customer relationships and demand for Lynas products
will continue to grow in the year ahead.
Mike Harding
Chairman
iiiiii
Lynas Corporation Limited | 2018 Annual Report CEO Review
The 2018 financial year represents a landmark for Lynas as
we further strengthened operational and sales performance
and made substantial progress on our Lynas NEXT growth
strategy.
I am very pleased to report that the Group recorded its first full year statutory profit
as a Rare Earths producer and achieved its first positive EBIT in FY18. At the same time,
Group debt reduced by 61% during the year.
With our transformation to a proven and profitable producer of Rare Earths now
complete, Lynas is strongly positioned to benefit from accelerating demand for Rare
Earths from key markets in Asia, Europe and the United States.
Strong Financial Performance
A disciplined approach to cost management and excellent growth in sales revenue
contributed to noteworthy balance sheet improvements during the 2018 financial year.
Key financial results are as follows:
•
Lynas achieved its first statutory profit (NPAT) of $53.1m as a Rare Earths company,
representing a substantial improvement from the restated loss of $0.5m recorded in FY17
Profit from operating activities (EBIT) increased to $81.0m from a loss of $14.5m in FY17
•
• The Group’s adjusted EBITDA1 increased to $127.0m from $31.9m in FY17
• Gross profit for the year grew to $121.1m from $14.7m in FY17
•
Positive cash flows from operating activities continued to increase to $118.5m from
$34.0m in FY17.
As a result of continued improvements in the Group’s financial performance, Lynas
made a number of repayments – including voluntary early repayments – to our senior
lender during FY18 and the outstanding principal amount of the JARE senior loan
facility was reduced by US$50m to US$150m at June 30 2018.
Following the conversion of US$209.8m of Convertible Bonds during the year, the
principal amount of the outstanding Convertible Bonds reduced to US$15.2m at
June 30, 2018, bringing the total principal amount of the Group’s loan facilities to
US$165.2m at June 30 2018.
Record sales & production
Thanks to the hard work of our skilled teams in Australia and Malaysia, Lynas has
consolidated its position as the second largest NdPr producer in the world and the
largest supplier of NdPr to the free market. We continue to strengthen customer
relationships throughout the supply chain and in FY18 this included finalisation of long
term contracts with key customers providing greater certainty for our customers and a
strong foundation for the Lynas business.
1
Refer to Note 7 to the Financial Statements for the basis of this measure
iv
www.lynascorp.com “Lynas is strongly
positioned to
benefit from
accelerating
demand for Rare
Earths from key
markets in Asia,
Europe and the
United States.”
Total sales revenue after commissions increased to $374.1m from $257.0m in FY17
as a result of higher production volumes, sales prices and strategic relationships with
customers in Japan and China.
Ready for sale production of Neodymium-Praseodymium (NdPr) was 5,444 tonnes
compared to 5,223 tonnes in FY17 and total ready for sale production of rare earth
oxide (REO) was 17,753 tonnes compared to 16,003 tonnes in FY17. This includes a
record 4,804 tonnes of REO in the June 2018 quarter, resulting from NdPr production
at above design rates and improved Lanthanum and Cerium recovery rates.
Operating Environment
Lynas is proud of our world-class operations in Malaysia and Australia and of our record
of regulatory compliance at both sites. The safety of our people and our communities
is our highest priority. We will continue to be transparent about our operations and
our safety and environmental record, including via real-time and online environmental
monitoring data available on the Lynas website and on regulator websites.
The new Malaysian government, elected on 9 May 2018, has announced its intention
to review many areas of the Malaysian economy and media reports indicate the Lynas
business may be reviewed as part of this. As a lawful and transparent business, we hold
ourselves to a high standard on all aspects of our business and will co-operate with the
government with confidence in our performance.
We seek to be an excellent corporate citizen. We have a policy of zero harm for our
people, our communities and the environment, and we operate our business accordingly.
In addition, we aim to contribute positively to the lives and careers of our people, our
communities and to the Malaysian and West Australian economies.
Lynas recognises the importance of our economic and social contributions to our local
communities in Australia and Malaysia. Lynas employs skilled staff and we invest in
further development of our people. At our Malaysian processing plant, we employ 631
people – 97% of whom are Malaysian – and we are a significant employer of graduates
and interns. Through Lynas, Malaysia has become the major centre of excellence in
Rare Earths outside China and Lynas is a key part of important global supply chains,
including the automotive, electronic, Oil & Gas and renewable energy markets.
The global geopolitical situation during 2018 reinforced Lynas’ strategy to agree
long term supply agreements with selected end users and we continue to make
good progress in this area. While the potential imposition of tariffs may cause some
disruption in the broader Rare Earths market, Lynas’ business is firmly grounded in
demand from our Japanese customers and we are building a strong portfolio of end
user contracts in rest of the world markets to increase the resilience of our business.
We are continuing to engage productively with governments in relation to Rare Earths
supply and we are committed to contributing to further strengthening global Rare
Earth supply chains.
v
Lynas Corporation Limited | 2018 Annual Report “ In addition, we
aim to contribute
positively to the
lives and careers
of our people, our
communities and
to the Malaysian
and West Australian
economies.”
Outlook
As the only proven miner and processor of Rare Earth materials outside of China, Lynas is
in an excellent position to benefit from strong market dynamics and increased demand
for speciality Rare Earth materials used in high-tech and eco-friendly manufacturing.
Our Lynas NEXT project was announced at the 2017 Annual General Meeting. Its
objectives are to increase output, expand the product range and deliver greater production
efficiency. Significant progress was made in FY18. Construction of the 3rd Tailings Storage
Facility at Mt Weld, Western Australia, is scheduled for completion in September, and
upgrades at the Lynas Advanced Materials Plant (LAMP) in Kuantan, Malaysia included
the replacement of the concentrate pipe conveyor, upgrades to the residue and water
treatment circuits, leach neutralisation circuits and product finishing processing circuits
and commissioning of the new SX8 solvent extraction circuit to separate La and Ce.
We are also progressing with the construction of a third water storage pond at the
LAMP to reduce the effect of any disruptions to external water supply as has been
experienced in the second half of the financial year.
In the June quarter of 2018, we demonstrated our capacity to achieve targeted NdPr
production of 500 tonnes/month in two out of three months – with the third month
affected by external water supply issues. Looking ahead to the January quarter of 2019,
we are on track to demonstrate our capacity to produce 600 tonnes/month. In line with
our licence conditions and operating procedures, we will apply for regulatory approval
to sustainably produce at this higher level, as we do for all major changes to our
production or facilities in Mt Weld and Kuantan.
Summary
This has been a very good year for Lynas and our achievements this year are a direct
result of the hard work and dedication of our people in all areas of our business. I would
especially like to thank the executive team for leading their teams so capably throughout
the year. I would also like to acknowledge our Board of Directors for their guidance and
counsel over the past 12 months.
Finally, I would like to thank all our shareholders for your support. I look forward to
updating you on our continued progress in FY19.
Amanda Lacaze
Chief Executive Officer and Managing Director
vi
www.lynascorp.com ACN 009 066 648
and
Controlled Entities
Consolidated Financial Report
For the year ended June 30, 2018
1
Lynas Corporation Limited | 2018 Annual Report Corporate Directory Information
ABN 27 009 066 648
Directors
Mike Harding
Kathleen Conlon
Amanda Lacaze
Philippe Etienne
John Humphrey
Grant Murdoch
Company Secretary
Andrew Arnold
Ivo Polovineo
Registered Office
Suite 3, 5 Tully Road
East Perth WA 6004
Telephone: +61 8 6241 3800
Fax: + 61 8 9242 7219
Email: general@lynascorp.com
Share Register
Boardroom Pty Ltd
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
200 George Street
Sydney NSW 2000
Internet Address
www.lynascorp.com
2
2
www.lynascorp.com Table of Contents
DIRECTORS’ REPORT ........................................................................................................................................... 4
SUSTAINABILITY STATEMENT .......................................................................................................................... 16
REMUNERATION REPORT – AUDITED .............................................................................................................. 19
DIRECTORS’ DECLARATION.............................................................................................................................. 30
AUDITOR’S INDEPENDENCE DECLARATION................................................................................................... 32
INDEPENDENT AUDITOR’S REPORT................................................................................................................. 33
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................ 39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................... 40
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY................................................................................ 41
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................ 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................................. 43
3
3
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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, 2018. In order to comply with the provisions of the Corporations Act 2001, the
Directors report as follows:
DIRECTORS
The names and details of the Company’s Directors who were in office during or since the end of the financial year are as set out below. All
Directors were in office for this entire period unless otherwise stated.
Mike Harding MSc (MecEn) - Chairman
Mr Harding joined the Company as Non-Executive Chairman on January 1, 2015 and has significant experience with industrial businesses,
having previously held management positions around the world with British Petroleum (BP), including as President and General Manager of BP
Exploration Australia.
Mr Harding is currently Chairman of Downer EDI Ltd, and a Non-Executive Director of 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.
Mr Harding is a member of the Health, Safety and Environment Committee and Nomination, Remuneration and Community Committee.
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 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 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.
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.
Ms Conlon is a member of the Health, Safety and Environment Committee and Nomination, Remuneration and Community Committee.
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 ANZ Terminals Pty Ltd. Mr Etienne was also 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.
Mr Etienne is a member of the Audit and Risk Committee and Health, Safety and Environment Committee.
John Humphrey LLB - Non-Executive Director
Professor Humphrey joined the Company as a Non-Executive Director on May 15, 2017. His key areas of expertise include mergers and
acquisitions, corporate finance and corporate governance.
Professor Humphrey is the Dean of the Faculty of Law at Queensland University of Technology. He has held non-executive director positions at
other listed companies over many years and is currently Non-Executive Director of Horizon Oil Ltd, Auswide Bank Ltd (formerly Wide Bay
Australia) and Spotless Group Holdings Ltd. His previous positions include Deputy Chairman of King & Wood Mallesons, Non-Executive Director
of Downer EDI Ltd, Villa World Ltd, and Sunshine Broadcasting Network Ltd and he has served as a member of the Australian Takeovers Panel.
Professor Humphrey is a member of the Audit and Risk Committee and Nomination, Remuneration and Community Committee.
4
4
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Grant Murdoch, M COM (Hons), FAICD, FCA – Non-Executive Director
Mr Murdoch joined the Company as a Non-Executive Director with effect from October 30, 2017. Mr Murdoch has more than 38 years chartered
accounting experience. From 2004 to 2011, Mr Murdoch led the corporate finance team for Ernst & Young Queensland and was an audit and
corporate finance partner with Deloitte from 1980 to 2000. Mr Murdoch has extensive experience in providing advice in relation to mergers,
acquisitions, takeovers, corporate restructures, share issues, pre-acquisition pricing due diligence advice, expert reports for capital raisings and
initial public offerings.
Mr Murdoch is currently a non-executive director and chair of the audit committee of the listed entities ALS Limited, OFX Group Ltd and
Redbubble Limited. He was previously a director and the chair of the audit committee for QIC from 2011 to 2017. He is also a senator of the
University of Queensland (as well as chair of the risk committee and member of the finance committee), an adjunct professor at the University
of Queensland Business School and a director of UQ Holdings Limited. Mr Murdoch has a Master’s degree in Commerce (Honours) from the
University of Canterbury, New Zealand, is a graduate of the Kellogg Advanced Executive Program and the Advanced Leadership Program at
Northwestern University. He is a fellow of both the Institute of Chartered Accountants in Australia and New Zealand and of the Australian Institute
of Company Directors. He is a member of the AICD State Council for Queensland for the Australian Institute of Company Directors.
Mr Murdoch is a member of the Audit and Risk Committee.
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 resigned as Non-Executive Director of the Company effective November 28, 2017. Mr Forde has many years’ experience in
senior finance and managerial positions in 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.
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.
Resignations
Mr Forde resigned as Non-Executive Director of the Company effective November 28, 2017.
There were no other 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 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.
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.
5
5
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Corporate information
The Company is limited by shares and is incorporated and domiciled in Australia. The Group’s corporate structure is as follows:
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.
Review of operations
Highlights
•
•
Lynas recorded its maiden net profit after tax in the Rare Earth industry of $53.1m.
Lynas has consolidated its position as the second largest NdPr producer in the world and the largest supplier of NdPr to the free
market, with strong customer relationships in all key jurisdictions. In FY18, the Group achieved record total sales revenue after
commissions of $374.1m, compared with $257.0m in FY17. This result reflects increased production volumes and sales prices and
continuing strong relationships with strategic customers in Japan and China.
• Positive improvements in the production process, throughput rates and the quality of final output continued in FY18. Ready for sale
production of Neodymium-Praseodymium (NdPr) was 5,444 tonnes in FY18 compared to 5,223 tonnes in FY17. Total ready for sale
production of rare earth oxide (REO) in FY18 was 17,753 tonnes compared to 16,003 tonnes in FY17.
• Positive cash flows from operating activities increased to $118.5m in FY18 from $34.0m in FY17.
• Due to continued improvements in the Company’s financial performance, Lynas made voluntary early repayments to JARE during
FY18. As a result of this and other FY18 repayments to JARE, the outstanding principal amount of the JARE senior loan facility reduced
to US$150.0m at June 30, 2018, from US$200.0m at July 1, 2017.
• Convertible Bond holders converted US$209.8m of the issued bonds during the year, reducing the principal amount of the outstanding
convertible bonds to US$15.2m at June 30, 2018.
The Lynas NEXT project was announced in November 2017. Under the Lynas NEXT project, the company will increase output, expand
the product range and improve production efficiency.
The Lynas NEXT project is on time and on budget with completion expected by December 2018.
•
•
6
6
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Mt Weld
Mt Weld continued to operate safely and efficiently throughout the year.
A new mining campaign (Campaign 2) commenced during the September quarter of FY18 with removal of top soil, blasting and removal of
overburden. Ore mining commenced during the latter part of December 2017. This campaign is a northern extension of the original pit and is
being conducted by the same local mining contractor as the recent Campaign 1B. The approximate scope of Campaign 2 is to remove 1.8
million BCM (Bank Cubic Metres) of waste and mine 590kt of CZ (Central Zone) ore and Duncan ore at approximately 15% REO.
The removal of overburden was completed in mid-January 2018. Ore was stockpiled according to ore type and grade prior to screening and
crushing. The processing of Campaign 2 ore blends started in February 2018. Mining has occurred in a stepped profile to access some higher
grade ore earlier. The lowest cut has reached 375mRL (surface level is 425mRL) and will continue down to 362.5mRL, just above the Apatite
zone. In April 2018, Mining Campaign 2 was temporarily suspended as the contractor was used for activities related to the Lynas NEXT project.
Key Lynas NEXT initiatives at Mt Weld during the financial year included:
•
•
•
A major update of the Mineral Resource and Ore Reserve, announced on August 6, 2018. The previous Mineral Resource and
Ore Reserve Statement was announced in October 2015. The updates since have been depletion only. Key changes to the
resource model include:
o
o
The consolidation of the Central Lanthanide Deposit (“CLD”) and Duncan into a single resource; and
The 2017 Apatite (“AP”) Depth Extension exploration drilling program which extended the depth of the AP ore zone
and had significant intersections of transition and fresh rare earth mineralisation below the AP zone.
The updated ore reserve is based on the new resource model and for the first time includes the Duncan zone following the
completion of the metallurgical testwork. As announced on August 6, 2018, there was a 60% increase to Mt Weld Ore Reserves,
confirming a 25+ year mine life at Lynas NEXT output rates. Further details are provided in the Subsequent Events section.
The construction of the third Tailings Storage Facility (TSF3) is in progress and will be completed in the September quarter of
FY19.
Pilot test work for the expansion of the rougher flotation circuit was completed and a Stack Flotation Cell will be installed by
December 2018.
Lynas Advanced Materials Plant (“LAMP”)
Key Lynas NEXT improvements at the LAMP during the year included:
•
•
•
•
•
Replacement of the concentrate pipe conveyor with a more reliable, higher capacity open troughed belt conveyor;
Upgrades to the residue and water treatment circuits;
Upgrades to the leach neutralisation circuits to rectify the recovery losses from operating at higher throughputs;
Commissioning of the new SX8 solvent extraction circuit to separate LaCe to La and Ce. The new circuit will enable up to 75%
of LaCe production to be separated into La and Ce, and includes additional circuits to remove impurities; and
Reconfiguration and upgrade of the Product Finishing processing circuits to handle the increased production of La and Ce.
Rare earth oxide (REO) ready for sale production at the LAMP during the year was 17,753 tonnes (2017: 16,003 tonnes), while shipments
during the year totalled 17,672 tonnes (2017: 14,616 tonnes).
Ready for sale by tonnage
Ready for sale production volume total (REOt)
Ready for sale production volume NdPr (REOt)
FY14
3,965
946
FY15
8,799
2,258
FY16
12,631
3,896
FY17
16,003
5,223
FY18
17,753
5,444
The average selling price (revenue basis) during the year for all REO products sold by the Group was AU$21.6/kg REO (2017: AU$18.0/kg).
The Company’s most significant product is NdPr and market prices for NdPr (excluding VAT) peaked in September 2017 at US$64.5/kg before
stabilising at around US$43.0/kg to US$46.0/kg from October 2017 onwards.
Significant quality improvements in Cerium products enabled Lynas to increase share of the catalyst and UV cut glass markets. In addition,
work has commenced on developing new customized grades for niche applications in order to attract higher prices.
The LAMP has continued to operate safely for six years and Lynas has achieved a high level of acceptance among our local communities.
During this time, we have undertaken extensive community engagement programs including community days, LAMP site visits and supported
assistance programs for students, the elderly and disadvantaged members of our local communities. We have also communicated important
information regarding operations at the LAMP via national media and social media.
Management of residues from the LAMP continues to be an area of focus. Lynas stores all residues produced in storage facilities approved by
the regulators and invests in research to develop new and improved options to reduce and reuse residues. The Group is committed to paying
security deposit instalments to the Malaysian Government’s Atomic Energy Licencing Board (“AELB”) totalling US$50.0 million in the form of
bonds, in accordance with the conditions of the Full Operating Stage Licence for the LAMP. During FY18, the Group deposited US$23.4m in
bonds, with a further US$11.0m deposited directly to AELB in previous years. This amount is available for dealing with residues in the future,
should it ever be required.
The Group continues its commercialisation program of solid residues from the LAMP. Field trials have demonstrated the efficacy of the residue
material in enhancing soil structure, adjusting soil pH, enhancing growth and improving yields. The Group’s research programs have been
successfully completed, and the residue products have been certified as non-toxic, non-radioactive and non-carcinogenic. The Group awaits
regulatory approval to commercialise the products in Malaysia.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Malawi operations
Since fiscal year 2012, no further capital investment has been made on the Kangankunde Rare Earths (“KGK”) resource development in Malawi
and the project remains on hold pending resolution of an ongoing dispute between another claimant in respect of the Kangankunde deposit,
and the Malawi government.
Health, Safety and Environment
The Group’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 Group undertook ISO recertification audits in July and August 2018.
The 12-month rolling lost time injury frequency rate as at June 30, 2018 was 2.2 per million hours worked (2017: 2.2 per million hours). The
Company continued to carefully manage all residues, air, water and solid, and consistently met or exceeded its licence requirements.
Financial performance
For the year ended June 30
In AUD Million (m)
Revenue
Cost of sales
Gross profit
General and administration expenses
Net foreign exchange loss
Impairment expenses
Profit / (loss) from operating activities
Net gain on extinguishment of debts
Other financial income
Financial expenses
Net financial expenses
Profit / (loss) before income tax
2018
374.1
(253.0)
121.1
(34.3)
(5.1)
(0.7)
81.0
-
22.0
(49.6)
(27.6)
53.4
2017
Restated
257.0
(242.2)
14.7
(25.5)
(3.7)
-
(14.5)
37.3
0.2
(47.3)
(9.8)
(24.3)
Overall sales volumes in the year ending June 30, 2018 grew by 21% compared to the year ending June 30, 2017. This reflected continued
improvement in production rates, consistent demand for NdPr products above current capacity to supply and some quality improvements for
Cerium (Ce) and Lanthanum (La) products. Lynas achieved record sales volume of Ce and La to key customers outside of China. Revenue
growth of 46% was higher than the NdPr sales volume growth of 21% as a result of higher prices achieved during the current year.
The average China domestic price of NdPr (VAT excluded) increased from US$39.0/kg in June 2017 to US$64.5/kg in September 2017 due to:
-
-
Magnet makers building stocks as a hedge against further price increases; and
Intensification of environmental compliance investigations by the China central government. These actions resulted in: (i) direct
impacts on several non-compliant Rare Earths factories and (ii) indirect impacts as the investigations affected many chemical products
and several factories supplying chemicals used in Rare Earths processing were also shutdown, creating shortages of chemicals in the
sector.
Prices stabilised from Q2 FY18 to around US$43.0/kg to US$46.0/kg (VAT excluded) due to continued strong demand for magnetic materials
and the effects of the China central government’s initiatives to enforce stricter environmental controls.
NdPr China Domestic Price (VAT excluded)
Q4 FY17
Q1 FY18
Q2 FY18
Q3 FY18
Q4 FY18
US$/kg
Base 100
36.5
100
57.0
156
44.6
122
Source: Market data
45.2
124
44.2
121
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www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Gross profit for the year was $121.1m (2017: $14.7m).
The profit from operating activities (EBIT) increased to $81.0m (2017: Loss of $14.5m) in part due to the increase in sales revenue offset by an
increase in general and administration expenses. On an adjusted EBITDA basis (refer to Note 7 to the Financial Statements for the basis of
this measure) the Group reported income of $127.0m (2017: $31.9m) for the year ended June 30, 2018.
Financial expenses increased due to non-cash adjustments made to the carrying value of financial liabilities of $22.4m, primarily as a result of
early debt repayments and changes in interest rates. A reduction in interest (including both interest paid and interest calculated using the
effective interest rate method) of $7.3m was recognised on the debt facilities as a result of the reduction in principal of both facilities over the
year, as well as fluctuations in the interest rate as shown in the table below. These financial costs were offset by $22.0m of financial income,
primarily being interest forgiven on the JARE loan.
July 1, 2016 – November 30, 2016
December 1, 2016 – June 30, 2017
July 1, 2017 – September 1, 2017
JARE Loan
Convertible Bonds
Interest
Rate
Closing Principal
Balance
6.0%
2.5%
2.5%
US$203.0m
US$200.0m
US$200.0m
Interest
Rate
2.75%
1.25%
1.25%
Closing Principal
Balance
US$225.0m
US$225.0m
US$162.2m
September 2, 2017 – June 30, 2018
3.75%
US$150.0m
1.875%
US$15.2m
General and administration expenses that predominantly consist of employee costs, unrecovered production costs and depreciation (net of
recovery) increased by $8.8m during the year. Unrecovered employee costs and unrecovered production costs were $13.0m (2017: $9.0m)
primarily due to an additional $2.7m in employee share-based payments and an overall increase in employee costs in Malaysia due to the
strengthening of the MYR over the year. Unrecovered depreciation was $6.9m (2017: $4.2m). Consistent with the 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. Overall production cost recoveries increased by $14.0m in this year.
Cash flows for the year ended June 30
In A$m
Net operating cash inflows
Net investing cash outflows
Net financing cash outflows
Net cash flows
Operating cash flows
2018
118.5
(54.7)
(85.6)
(21.8)
2017
34.0
(6.9)
(3.0)
24.1
During the year ended June 30, 2018 the Group’s cash receipts from sales were $383.1m (2017: $260.4m) in line with an increase in sales
revenue. Net operating cash flows improved by $84.5m with increased sales and production volumes and overall continued focus on cost
management.
Investing cash flows
Net investing cash outflows increased by $47.8m during the year ended June 30, 2018. These outflows included a deposit paid as security for
Atomic Energy Licensing Board (AELB) payments of $29.1m and payments for property, plant and equipment of $24.2m, including costs
allocated to non-current assets as part of Mining Campaign 2.
Financing cash flows
Net financing cash outflows increased significantly due to repayments of the JARE loan facility of $65.5m and a further $27.7m in interest on
borrowings. These outflows have been offset by proceeds from the exercise of warrants of $6.5m and interest received of $1.1m.
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Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
FINANCIAL POSITION
As at 30 June
In A$m
Assets
Cash and cash equivalents
Inventories
Property, plant and equipment
Deferred development expenditure
Other assets
Total assets
Liabilities
Borrowings
Other liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated deficit
Reserves
Total equity
2018
2017
Restated
42.3
55.8
594.4
18.7
53.4
764.6
225.1
105.0
330.1
434.5
1,395.4
(936.4)
(24.6)
434.5
63.9
38.0
538.4
42.0
35.4
717.7
493.3
112.2
605.5
112.2
1,094.4
(989.5)
7.3
112.2
The overall increase in net assets of the Group during the year ended June 30, 2018 is primarily due to the extinguishment of debts through
positive cash flows generated from operations, as well as the conversion of US$209.8m of convertible bonds into share capital. This effect on
net assets has been further increased by the upward revaluation of Malaysian property, plant and equipment due to the appreciation of the
Malaysian ringgit against the Australian dollar.
Cash and cash equivalents at June 30, 2018 comprised $42.3m fully unrestricted (June 30, 2017: $35.9m unrestricted and $28.0m of restricted
In total, US$50.0m of the principal balance of the JARE loan facility was repaid during the year, reducing the outstanding loan balance
cash).
from US$200.0m to US$150.0m. A principal repayment was made to JARE from the JARE restricted bank account in the amount of US$15.0m
when the unrestricted cash balance exceeded $25.0m in August 2017. The remaining balance in the JARE restricted interest account was used
to partially settle the interest incurred from October 1, 2014 to December 31, 2015. The outstanding interest incurred in the same period was
forgiven. Interest payments on the JARE loan facility are now paid as accrued each June 30 and December 31.
US$209.8m of convertible bonds were converted during the period, leaving an outstanding principal of US$15.2m at June 30, 2018. The liability
component has been converted to Australian dollars at the June 30, 2018 exchange rate and the equity component was converted to Australian
dollars at the effective date of the amended terms during the year ended June 30, 2017.
Inventory increased by $17.8m, or 47% during the year ended June 30, 2018. Holdings of raw materials and consumables were $20.0m
compared to $12.0m at June 30, 2017, as a result of mining campaign 2 at Mount Weld. Finished goods increased by $5.7m to $9.6m at June
30, 2018 as part of a strategy to retain some finished products for future sale. Work in progress inventory increased by $4.1m to $26.2m. As at
June 30, 2018, the Group held 9,253 tonnes of processed concentrate containing 3,035 tonnes of REO, bagged and ready for export at its Mt
Weld operations.
Property, plant and equipment increased by $56.0m or 10% during the year driven by the strengthened Malaysian ringgit against the Australian
dollar ($44.9m), reclassification of the Mount Weld rehabilitation asset of $20.8m and additions primarily relating to Project NEXT and Mining
Campaign 2 of $27.3m, offset by depreciation of $38.0m.
Reserves were decreased by the value of exercised warrants and converted bonds, offset by share-based payments of $5.1m and an increase
in the foreign currency translation reserve of $47.0m driven by a strengthening of the Malaysian ringgit against Australian dollar and a weakening
USD against the AUD on the Lynas loans that are denominated in USD.
Capital structure
During the year ended June 30, 2018, the Company issued shares as shown below:
Shares on issue June 30, 2017
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised warrants
Subtotal prior to share consolidation
10 to 1 share consolidation
Subtotal after share consolidation
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised warrants
Issue of shares pursuant to exercised performance rights
Shares on issue June 30, 2018
10
10
Number
(000’s)
3,677,743
1,713,333
95,733
5,486,809
(4,938,124)
548,685
108,344
3,876
1,642
662,547
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
In addition to the ordinary shares on issue there were the following unlisted convertible bonds and warrants on issue:
Unlisted convertible bonds (Conversion price: $1.00 at a set exchange rate of AU$1.00 =
US$0.75)
Unlisted warrants (Exercise price: $0.50)
Performance rights
As at June 30, 2018, the Company had the following options and performance rights on issue:
Performance rights
Earnings / (Loss) per share
For the year ended June 30
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
Number
(000’s)
15,242
23,256
Number
(000’s)
11,286
2018
8.84
8.29
2017
Restated
(0.15)
(0.15)
The basic and diluted loss per share for the year ended June 30, 2017 comparative period has been restated to reflect the 10 to 1 share
consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017, as well as a correction of error as detailed in Note
6 to the Financial Statements.
Dividends
There were no dividends declared or paid during the year ended June 30, 2018 (2017: nil) and no dividends have been declared or paid since
June 30, 2018.
Strategic marketing and sales
Demand for magnetic materials using NdPr continues to grow in line with increased demand for energy efficient technologies, including electric
and hybrid vehicles and wind power. Demand for La and Ce materials used in catalytical applications in automotive and other applications is
also growing, albeit at a slower pace.
As the move to car electrification is yet to translate into sharp demand increases, the broader market remains unsettled. We expect this to
continue until the new growth is realised.
Lynas is focussed on continuing to build key customer relationships in strategic markets, which include current and future-facing applications for
Rare Earth materials. A key part of this strategy is to offer long term contracts delivering price stability and surety of supply for customers.
Sales by tonnage and value
H1 FY17
H2 FY17
FY17
H1 FY18
H2 FY18
FY18
Sales volume (REOt)
Cash receipts from customers (AUDm)
6,431
115.8
8,185
144.6
14,616
260.4
8,998
204.5
8,674
178.6
17,672
383.1
Lynas, with 100% of capacity commissioned and operating, can confidently serve these growing markets. The continuing growth in demand
from the electric vehicles sector is a key driver of demand increases for magnetic materials and based on recent announcements by automotive
manufacturers, may be reaching an inflection point. Lynas is heavily engaged with participants in that sector to promote Rare Earths technology
as the technology of choice for environmentally-friendly vehicles.
Risk management
The Group takes a proactive approach to risk management. The Directors are responsible for ensuring that risks and opportunities are identified
on a timely basis and that the Group’s objectives and activities are aligned with these risks and opportunities.
The Group believes that it is crucial for Directors to be a part of this process, and as such has established an Audit and Risk Management
Committee and a Health, Safety 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
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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 pricing formulae that reference published pricing for various Rare Earths materials. 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)
Supply side factors
Supply of Rare Earth materials is dominated by Chinese producers. Within China, including illegal operations, there has been excess
capacity which has provided downward pressure on market pricing. The Chinese Central Government regulates production via quotas
and environmental standards. Recently, the Chinese Central Government has significantly increased its focus on ensuring compliance
with these regulations leading to forced closure of some plants, the removal of significant volumes of illegal production and the requirement
for other firms to invest in new environmental protections. All these actions contributed to the firming of Rare Earth prices in FY18.
Fluctuations in demand
A key factor influencing Rare Earth demand is automotive market demand, both in terms of production quantity and technology
incorporated into 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
materials 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.
(ii)
The table below illustrates how China domestic prices of NdPr (excluding VAT) have moved over FY18:
US$/kg
September 2017 Quarter
57.0
December 2017 Quarter
44.6
Source: Market data
March 2018 Quarter
45.2
June 2018 Quarter
44.2
Lynas’ approach to reducing 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 aim to reduce price variations for end users and OEMs such as car makers and wind turbine
manufacturers.
Lynas achieved a small price premium compared to the NdPr market price, supported by:
Sustained demand from the Japanese market and selected customers in China;
The recognition by the market that Lynas is now well established as the second largest producer of NdPr in the world;
End users placing more importance on being able to trace the origin of rare earths from a safe and auditable source of production to
their end products, which Lynas can fulfil.
•
•
•
Market competition
Lynas' rare earths supply contracts and profits may be adversely affected by the introduction of new mining and separation facilities and any
increase in competition in the global rare earths market, either of which could increase the global supply of rare earths and thereby potentially
lower prices.
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 the Group with a partial natural hedge.
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.
Lynas is exposed to fluctuations in the Malaysian ringgit (MYR) as the currency that dominates the Group’s cash operating outflows is MYR. In
addition, most of the Group’s non-current assets are LAMP assets which are denominated in MYR.
Adverse movements in the Australian dollar against the US dollar and the MYR may have an adverse impact on Lynas. The following table
shows the average USD/AUD and MYR/AUD exchange rates over the past five years:
USD/AUD
MYR/AUD
June 30, 2018
$
0.7391
2.9837
June 30, 2017
$
0.7545
3.2331
June 30, 2016
$
0.7283
3.0098
June 30, 2015
$
0.8382
2.8828
June 30, 2014
$
0.9187
2.9804
A devaluation in the Chinese Yuan would increase attractiveness in Chinese exports and China’s internal supply. Fluctuation in the Chinese
Yuan against the US Dollar therefore increases the foreign exchange exposure of the Group as well.
Refer to Note 27 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, such as hazards in exploration,
the ability of third parties to meet their commitments in accordance with contractual arrangements, the realisation of tonnages and grades of ore
and performance of processing facilities against design specification. Factors such as these 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.
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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 the assets of the Group, other than Malawi assets. Therefore,
enforcement may involve enforcement of security over the assets of Lynas and its material subsidiaries, including appointing a receiver. The
principal amount of the JARE facility was US$150.0m as at June 30, 2018. The principal amount will be due for repayment on June 30, 2020.
In addition, the principal amount of the convertible bonds was US$15.2m as at June 30, 2018. Unless the convertible bonds are fully converted
into ordinary shares in Lynas prior to maturity, the principal amount will be due for repayment on September 30, 2020.
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 convertible bonds by their respective maturity dates of June 30, 2020 and September 30, 2020 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 if 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.
The Group requires various licences and approvals for its operations at both sites, and such licences and approvals customarily require renewal
on a periodic basis. For example, the LAMP’s operating licence was most recently renewed for a three-year period on September 2, 2016. In
addition, as the Group continues to ramp up operations, there are various conditions in our operating licences that may require amendment to
accommodate expansions of the business. Such amendments would require approval from the relevant regulatory authorities.
The operating licences for the two sites include conditions relating to several key aspects of operations, including volumes of inputs to be
processed, environmental matters and management of residues. The Group has lodged a detailed residue management plan with the regulatory
authorities in Malaysia. The Group has demonstrated that the solid residues from the LAMP can be safely commercialised, however the Group’s
commercialisation plans require approval from the regulatory authorities. Similarly, options for potential long term storage of solid residues from
the LAMP would require approval from the regulatory authorities.
Interest rates
Lynas is exposed to some interest rate risk on its borrowings. The interest rate on the JARE loan facility and the convertible bonds facility can
vary in certain circumstances, as detailed in the notes to the Financial Statements. Fluctuations in interest rates would have an impact on the
Company’s earnings.
Health, safety and environment
Lynas is subject to extensive laws and regulation in respect of the health and safety of our people and the protection and rehabilitation of the
environment within which the plants operate. Lynas must comply with known standards, existing laws and regulations which may entail greater
or lesser costs and delays depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the
permitting authority. Changes in weather patterns and unanticipated or severe weather events could also have an adverse impact on Lynas'
operations and market conditions.
Health, safety and environment matters are a key focus area for Lynas and the Group is committed to provide and maintain a healthy and safe
work environment and to comply with all relevant environmental legislation and other relevant requirements. Sanctions for non-compliance with
these laws and regulations may include administrative, civil and criminal penalties, revocation of permits and corrective action orders. These
laws sometimes apply retroactively. In addition, a party can be liable for environmental damage without regard to that party's negligence or fault.
Given the sensitive nature of this area, Lynas may be exposed to litigation and foreseen and unforeseen compliance and rehabilitation costs
despite its best efforts.
Political risks and government actions
Lynas' operations could be affected by government actions in Australia, Malaysia and other countries or jurisdictions in which it has interests.
Lynas is subject to the risk that it may not be able to carry out its operations as it intends, including because of a change in government,
legislation, regulation or policy. Lynas also may not be able to ensure the security of its assets located outside Australia, and is subject to risks
of, among other things, loss of revenue, property and equipment if action was taken by governments, political or social groups or activists, or
regulators, or if there was an increase in taxes or government royalties. The emergences of such risks, and their consequences, is difficult to
predict and any combination of one or other of the above may have a material adverse effect on Lynas.
The change of government in Malaysia that occurred in May 2018 has the potential to create additional risks for the business.
In order to
continue operating the business as currently projected, Lynas will need to continue to receive new licences, renewals of existing licences and
variations of the terms of existing licences. Examples may include increases to concentrate import volumes, additional residue storage approvals
and periodic renewals of licences. Such amendments would require approval from the relevant regulatory authorities acting in accordance with
government policy and licence conditions.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
BASIS OF REPORT
The 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 focus on ensuring positive relationships with regulators and compliance with regulatory requirements in both jurisdictions in
which we operate.
CORRECTION OF ERROR IN THE ACCOUNTING OF THE LOAN AMENDMENTS
In October 2016 the Group agreed amendments to its loan facilities. During the half-year ended December 31, 2017, the Group reviewed the
amendments and identified an error made in accounting for these loan amendments. This error involved the classification and calculation of the
new borrowing fair values which also affected the equity component of the convertible bond, associated tax balances and certain items in the
statement of profit and loss and other comprehensive income. The error relates to non-cash accounting entries only. For details refer to Note 6
of the Financial Statements.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Except as disclosed in the review of operations and the subsequent events, there have been no significant changes in the state of affairs of the
Group during the financial year ending June 30, 2018.
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement of the Group, 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, is located on the Group’s website, www.lynascorp.com.
SHARES ISSUED UPON EXERCISE OF PERFORMANCE RIGHTS
During the financial year 1,642,201 Performance Rights were exercised as set out in Note 30 to the Financial Statements.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During or since the end of the financial year, the Group has paid a premium in respect of a contract insuring all Directors and Officers of the
Group against liabilities incurred as a Director or Officer of the Group, to the extent permitted by the Corporations Act 2001, that arise because
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 $526,086 (2017: $482,964). This amount is not included as part of the Directors’
remuneration in Note 28 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 10 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 with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the
Audit and Risk 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.
14
(a)
(b)
14
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
DIRECTORS MEETINGS
Committee membership
During the financial year, the Group had the following Committees of the Board of Directors: Audit & Risk Committee, Health Safety &
Environment Committee, and Nomination, Remuneration and Community Committee.
Directors acting on the committees of the Board during the July 1, 2017 to October 1, 2017:
Audit & Risk
Health, Safety & Environment
W. Forde(c)(1)
K. Conlon
P. Etienne
J. Humphrey
W. Forde(c)(1)
K. Conlon
P. Etienne
M. Harding
(1)
(c)
Resigned on November 28, 2017.
Chair of Committee
Nomination,
Remuneration and Community
K. Conlon(c)
M. Harding
W Forde(1)
Directors acting on the committees of the Board during October 1, 2017 to November 28, 2017:
Audit & Risk
W. Forde(c)(1)
P. Etienne
J. Humphrey
(1)
(c)
Resigned on November 28, 2017.
Chair of Committee
Health, Safety & Environment
P. Etienne(c)
K. Conlon
M. Harding
Nomination,
Remuneration and Community
K. Conlon(c)
M. Harding
W Forde(1)
J. Humphrey
Directors acting on the committees of the Board from November 28, 2017 onwards:
Audit & Risk
G Murdoch(c)(1)
P. Etienne
J. Humphrey
(1)
(c)
Appointed on November 28, 2017.
Chair of Committee
Health, Safety & Environment
P. Etienne(c)
K. Conlon
M. Harding
Nomination,
Remuneration and Community
K. Conlon(c)
M. Harding
J. Humphrey
As summarised in the Corporate Governance Statement, the Audit & Risk Committee consists of independent Directors.
The number of Directors’ meetings held during the year and the number of meetings attended by each Director was as follows:
Meetings of the Board and Committees
During FY18, each Director attended every Directors’ Meeting and every Committee Meeting that he / she was eligible to attend, as set out in
the table below.
Directors’ Meetings
Audit and Risk
Health, Safety and
Environment
Number of meetings held:
Number of meetings attended:
M. Harding
A. Lacaze
W. Forde(1)
K. Conlon
P. Etienne
J. Humphrey
G Murdoch(2)
(1) Resigned on November 28, 2017.
(2) Appointed on October 30, 2017.
AUDITOR’S INDEPENDENCE DECLARATION
6
6
6
3
6
6
6
5
3
-
-
2
1
3
3
1
2
2
-
1
2
2
-
-
Nomination,
Remuneration and
Community
3
3
-
2
3
-
1
-
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 Corporations 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 Statements have been rounded off, in accordance with
the Instrument, to the nearest thousand dollars, unless otherwise stated.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Lynas Corporation Limited ACN 009 066 648
Sustainability Statement
Financial Year Ended June 30, 2018
The Lynas Group has always had a strong focus on the sustainability of all aspects of our business. We impose high standards upon ourselves
in each of the areas referred to in this Sustainability Statement and we are passionate about having a positive effect on our people, our customers
and suppliers, our communities and the environment. The products we sell are traceable to our mine in Western Australia and our customers
receive product assurance certificates to confirm that the Rare Earths they purchase from Lynas are sourced from our mine in Mt Weld, Western
Australia, and processed at our plant in Kuantan, Malaysia. Our products are used in industries where environmental provenance and
sustainability of business practices are of high importance. Life Cycle Assessments conducted in conjunction with customers provide
environmental assurance on the Lynas Rare Earths used in customer products. Our local communities also expect us to consistently comply
with high standards in this area.
This Sustainability Statement summarizes the key sustainability practices of the Lynas business. More information on these topics is available
at www.lynascorp.com.
1. Our People
We are proud of our people and continue to focus on making Lynas an employer of choice. Lynas is committed to promoting a culture that
embraces the benefits of a workforce that is diverse across ethnicity, cultural background, gender and age.
Local employment at the LAMP is high, with over 750 employees and contract staff.
Mt Weld has a total of 102 employees and contractors for its operations. In addition, contractors are engaged for drilling, mining, ore screening,
crushing and blending, maintenance, technical services, transport and other activities.
Women working at Lynas increased to 16% in FY18 from 10% in FY17, with 68% in operational roles.
Lynas believes in developing people who are motivated, committed, high performing, capable and competent to achieve their goals. At the
LAMP, 77% of our employees are at least certificate qualified, and 88% of our current management staff have been promoted during their tenure
at Lynas.
Our diversity priorities for FY19 include:
•
•
•
Continue to increase the number of female staff employed in all areas of the business every year.
Increase local employment at the Mt Weld site.
Increase employment of people living with a disability.
2. Our Workplace Safety – Key Metrics
In FY18 both sites maintained their certification to OHSAS:18001 (Occupational Health & Safety). Both Mt Weld and the LAMP first gained
certification in 2013.
There were 6 Lost Time Injuries during FY18. Major investigations were undertaken for each and corrective actions implemented.
Lynas has implemented a new safety program at the LAMP – Positive Attitude Safety System, PASS, a behavioural based safety program for
front line employees and contractors with daily discussions and reinforcement regarding safety ownership and improvement actions.
Our priorities for FY19 include:
•
Continue to focus on major hazards through leader and workgroup engagement in verification of key controls.
3. Our Communities – Key Metrics
3.1. Malaysia
Lynas contributed over RM500.0m to the Malaysian economy in FY18.
In FY18, Lynas spent over RM2.0m on research with local partners.
In FY18, 80% of inputs at the LAMP were sourced locally.
Lynas supports the local community through numerous programs including:
-
-
-
-
-
-
-
-
-
Back to school program: donation of school uniforms and stationary to local students in need
Bi-monthly recycled clothing stall in the local Kuantan community to contribute clothing and other household items for free
The provision of materials and labour for repairs to school and community buildings
Promotion of education initiatives to help create future opportunities for the next generation
Helping to conserve and protect cultural heritages in surrounding regions
Active engagement with local University on Limestone and Forest Conservation
Health checks for the villagers during the recycling programmes
Annual blood donation drive
Sporting events for adults and sports clinic for children
Lynas arranges and participates in a number of festive celebrations with different cultural groups.
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
3.2. Mt Weld
Lynas contributed over A$85.0m to the Australian economy in FY18.
Lynas has relocated its accommodation base from the Granny Smith Mine to an accommodation village within the local township of Laverton.
Lynas has been an active board member for the Laverton Leonora Cross Cultural Association (LLCCA) since 2009 through hands-on, in-kind
and financial support. The LLCCA operates as a community hub to encourage local Aboriginal people to be creative through a number of different
programs including art and music. The LLCCA is recognised as a safe space within the community where the area is drug, alcohol and smoke
free.
Lynas contributes to numerous Shire of Laverton initiatives each year, including:
-
-
-
-
ANZAC Day
Clean Up Laverton Day
NAIDOC Week Celebrations
Christmas and other Shire events
Lynas continues to support the annual Laverton Swimstars Program which was instigated by Lynas in January 2014. SwimStars encourages
local children to learn to swim in a safe and friendly environment and promotes water safety and confidence.
Lynas provides transport to and from Laverton for the Curtin Volunteers who are involved in numerous projects in Laverton including community
cultural trips, community activities and youth activities.
Lynas assists the Shire of Laverton in providing doctors supporting the local community.
Lynas has assisted the Shire and other Laverton groups by transporting items of need such as mattresses, bicycles, clothing and footwear from
Perth to Laverton.
Our priorities for FY19 include:
• Work with the Kuantan community to upgrade the Balok Library and other educational facilities.
•
•
Continued support for existing programs mentioned above at Mt Weld and Kuantan.
Continued engagement with the local communities to identify and support those in need.
4. Our Customers – Key Metrics
In FY18, both Lynas sites have maintained their certification to ISO9001 (Quality Management) certification.
Lynas is Silver rated for its Corporate Responsibility Care by Ecovadis, the organization assessing sustainability of suppliers for “Together For
Sustainability” a European Chemical Companies consortium.
Lynas has transparent product supply chain material traceability and environmental standards.
Lynas is engaged with several end users and magnet makers in Life Cycle Assessment from mine to magnet including, in some instances,
electrical motors, evaluating the impact on the environment of the full supply chain activity in accordance with United Nations guidelines.
We understand technological trends in order to anticipate and support market changes driven by innovation and consumer demand.
We regularly review our product accreditation standards.
Our priorities for FY19 include:
•
•
•
•
•
Communication of Life Cycle Assessment from mine to finished products
Continued review of best practice quality assurance
Review of customer accreditation standards
Ongoing review of environmental assurance from mine to market
Continued focus on reducing environmental impact using life cycle assessment
5. Our Ethical Business Practices and Governance – Key Metrics
We have adopted a strong framework of policies and procedures to ensure appropriate corporate governance and ethical business practices.
Regular training programs are provided to all employees on the attitudes and behaviours required at Lynas.
We have a confidential independent whistleblower hotline.
Our key policies and procedures, including our Code of Conduct, are available in multiple languages.
Our priorities for FY19 include:
•
•
More diversity in the workforce, from Board level to operations.
Enhance our training programs on ethical business practices and corporate governance, which are provided to all employees
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
6.
Environment – Key Metrics
Both Lynas’ sites have been operating safely for over 5 years.
In FY18, both Lynas’ sites have maintained their certifications to ISO14001 (Environmental Management).
There has been no increase in background radiation at independently measured sites 1km, 5km, 10km or 20km from the LAMP in Kuantan.
The International Atomic Energy Authority (“IAEA”) rates the LAMP operations as “intrinsically low risk”.
We have installed industry-leading systems at both sites to minimise impact on the environment via:
water management systems in Mt. Weld, Western Australia
waste gas emission systems and water management systems at the LAMP
-
-
In FY18, both sites have operated in accordance with the environmental management requirements enforced in Australia and Malaysia by the
relevant Government authorities.
Emissions figures for the LAMP are publicly available on the Lynas website www.lynascorp.com and the websites of the AELB and the DOE.
Emissions figures for Mt Weld are publicly available on the NPI website: http://www.npi.gov.au/npidata/action/load/individual-facility-
detail/criteria/state/null/year/2017/jurisdiction-facility/WA1105.
Our Rare Earths are used in several products that improve environmental outcomes including hybrid vehicles, electric vehicles and wind turbines.
Our priorities for FY19 include:
•
•
•
•
Continue to publish CO2 data for Mt Weld, and commence publishing CO2 data for the LAMP.
Continue to operate in accordance with the strict environmental management requirements enforced in Australia and Malaysia by the
relevant Government authorities.
Undertake regular independent monitoring to assess what impact, if any, our operations are having on the environment
Continue to monitor and manage our water resources at both sites.
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Remuneration Report – Audited
Dear Shareholder,
I am pleased to present our Remuneration Report for the year ended June 30, 2018 (FY18).
As with other areas of the business, during FY18 we continued to refine and simplify executive remuneration and are confident that we are
aligned with shareholder outcomes.
Lynas achieved excellent results for our shareholders in FY18, including significant improvements in market capitalisation, share price, debt
reduction, profitability and cash flow. Details are provided in Section D below. There were no increases in the fixed pay of the Executives from
FY14 to FY17. In FY18, the fixed pay of the Executives was increased in line with CPI, other than the fixed pay of the VP People & Culture which
was increased to reflect her expanded role in the business. The fixed pay of the Executives will not increase in FY19. In addition, the fees paid
to Non-Executive directors have not increased since FY11. Total remuneration for Directors and Executives in FY18 is shown in the table on
page 27.
We believe that the incentive structure is well aligned with shareholder outcomes and STI payments have been made only where specific
objectives that underpin improved performance have been delivered. These have included:
-
-
-
Improved production
Strong cash management
Strong financial performance in FY18
In FY18, 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
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
This report sets out the remuneration arrangements of Directors and KMP of the Group in accordance with the Corporations Act 2001 and its
regulations.
A. Explanation of Key Terms
The following table explains some key terms used in this report:
Executives
At as June 30, 2018, the Chief Executive Officer and Managing Director (“CEO”), the Chief
Financial Officer (“CFO”), the VP Production, the VP Sales & Marketing, the General
Counsel & Company Secretary, the MD Malaysia and the VP People and Culture.
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”)
The LAMP, which is located in the State of Pahang, Malaysia, is the facility for the cracking
and separation of concentrate into separated rare earths products.
Long Term Incentive (“LTI”)
Performance Right
LTI is the long term incentive component of Total Remuneration. LTI usually comprises
Options or Performance Rights with a three year vesting period that are subject to specified
vesting conditions. Further details of the vesting conditions are in Section D. Options and
Performance Rights cannot be exercised unless the vesting conditions are satisfied.
A Performance Right is a right to acquire a share in the future at nil cost, subject to the
satisfaction of specified vesting conditions. Performance Rights are issued for the benefit of
selected Executives as part of their LTI remuneration.
Short Term Incentive (“STI”)
STI is the short term incentive component of Total Remuneration. An STI could be in the
form of cash or Performance Rights and it is only received by the Executive if specified goals
are achieved.
Total Remuneration
Total Remuneration comprises fixed pay (including superannuation, non monetary benefits
and Long Service Leave (LSL) where applicable) plus STI and (if applicable) LTI.
Total Shareholder Return (“TSR”)
Total Shareholder Return is the total return from a share to an investor (i.e. capital gain plus
dividends).
The KMP during the financial year ended June 30, 2018 were as follows:
Non-Executive Directors:
M. Harding
K. Conlon
P. Etienne
J. Humphrey
G. Murdoch
W. Forde
Chairman
Non-Executive Director, and Chair of the Nomination, Remuneration & Community
Committee
Non-Executive Director, and Chair of the Health Safety & Environment Committee
Non-Executive Director
Non-Executive Director, and Chair of the Audit & Risk Committee (appointed on October
30, 2017)
Non-Executive Director, Chair of the Audit & Risk Committee and Chair of the Health
Safety & Environment Committee (resigned on November 28, 2017)
Executives:
A. Lacaze
CEO and Managing Director
G. Sturzenegger
CFO
K. Leung
P. Le Roux
A. Arnold
M Ahmad
VP Production
VP Sales & Marketing
General Counsel and Company Secretary
MD Malaysia
M Afzan Afza
VP People and Culture
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.
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Directors’ Report – Remuneration Report – Audited
B. Our Remuneration Philosophy
The Group’s objective is to provide maximum stakeholder benefit by attracting, retaining and motivating a high quality board of directors and
executive management team. Remunerating Directors and Executives fairly and appropriately, consistent with relevant employment market
conditions, is an important part of achieving this goal. We align rewards to sustainable value through creating links between the achievement of
organisational goals, both long and short term in nature, with the non-fixed elements of individual remuneration.
To help the Group achieve this objective, the Committee links the nature and amount of the remuneration paid to the Executives to the Group’s
financial and operational performance.
Total remuneration (that is, fixed remuneration plus STI and LTI) is paid at market rates except in exceptional cases where skills are scarce or
particularly valuable, in which case we pay as necessary. Our market is defined by location and function, i.e. Malaysia, Western Australia (WA)
resources and the global rare earths market. In addition, our senior expatriate executives are remunerated at market rates necessary to attract
expatriates with their skills and experience to work in our main office in Kuantan, in regional Malaysia. Those expatriate executives have been
key drivers of the business’ strong performance in FY18, as described in Section D below.
STI awards, which create an “at risk” component with a value equal to 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 financial growth hurdles (such as EBITDA growth or EBIT growth), 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).
C. Role of the Nomination, Remuneration and Community Committee
The Board is responsible for determining and reviewing remuneration arrangements for Directors and Executives. The Committee assesses, on
a regular basis, the appropriateness of the nature and amount of KMP remuneration. In fulfilling these duties and to support effective governance
processes, the Committee:
•
•
•
consists of 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, superannuation, non-monetary benefits and LSL (where applicable)); and
variable remuneration, being:
o
o
STI; and
LTI.
The Group provides no retirement benefits, other than statutory superannuation.
Fixed pay
Despite the significantly improved performance of the business in recent years there were no increases in the fixed pay of the Executives from
FY14 to FY17. Gross profit for FY18 was $121.1m (FY17: $14.7m) reflecting increased production volumes, improved selling prices and
continued cost discipline in the business. Net operating cash flows for FY18 were $118.5m (FY17: $34.0) reflecting similar factors. The
Company’s share price on July 1, 2017 was $1.05. By June 30, 2018, the Company’s share price had increased to $2.34 (both figures are
calculated on a post-consolidation basis).
The CEO’s fixed pay and total remuneration did not increase from FY14 to FY17. In FY18, the fixed pay of the CEO increased in line with CPI.
In FY19, the fixed pay of the CEO will not increase.
Lynas is an ASX 200 company. During FY18, Lynas engaged KPMG-3dc to provide market data benchmarking for the CEO’s remuneration
package against an ASX101-200 listed company peer group. Following the review of the data obtained, Lynas has concluded that the CEO’s
remuneration is reasonable.
Unusually for an ASX 200 company, Lynas’ principal administrative office is not based in a major city – it is based in the regional township of
Kuantan on the east coast of Malaysia. This creates additional issues for the company in attracting and retaining candidates of the calibre
required to lead the company, including periods of separation from family, remoteness from major cities, and the need for salary to allow for
accommodation, a motor vehicle, spousal travel and related matters. These factors are all relevant in the benchmarking of the CEO’s package.
Ms Lacaze’s package reflected the difficulty in recruiting a suitable candidate in June 2014 to undertake the challenging role of Lynas CEO, at
a time of uncertainty regarding the Group’s future. The package also reflects the Group’s requirement for an expatriate CEO with the skills and
experience necessary to manage the Group, and the need to attract and retain such a CEO in our main office in Kuantan, in regional Malaysia.
Since June 2014, Ms Lacaze has led a significant turnaround in the Group’s performance, reflected in the improved operating metrics
summarised in the first paragraph. There remains significant work to be done in the business by a CEO with Ms Lacaze’s skill set, including
strengthening the Company’s position in the volatile global market for Rare Earth products and maintaining the Company’s improved relations
with lenders, customers, investors, regulators, local communities and other key stakeholders.
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Directors’ Report – Remuneration Report – Audited
The Board of Lynas initially set Ms Lacaze’s fixed remuneration to attract an appropriately qualified executive to accept the role given the
circumstance of the Company at that point in time and that Ms Lacaze would be expected to work in the regional township of Kuantan (away
from her home in Sydney).
Ms Lacaze does not receive additional expatriate benefits beyond the fixed pay, short-term benefits and non-monetary benefits listed in the
tables in Section H. The overall amount of remuneration paid to Ms Lacaze is consistent with current market practice, which has been confirmed
by our adviser KPMG-3dc.
Variable remuneration
Our structure for STI awards and LTI awards is described in Section B above.
In summary:
Fixed pay
= base + super
Variable remuneration
= STI (Cash and Deferred) + LTI
STIs
For Executives, up to 50% of fixed pay is available for STI awards.
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, 2018 the STI Program had 4 goals as follows:
1.
Lynas Group cashflow – 25%
2. NdPr production volume – 25%
3. Operating cost targets – 25%
4.
Team / Individual Performance – 25%
The table below summarises the STI targets and outcomes for the financial year ended June 30, 2018 on Lynas Group Cashflow, NdPr
Production Volumes and Operating Costs.
Targets for Operating Costs were set at the start of FY18 based on NdPr unit operating costs, excluding employee share payments, after
crediting non-NdPr realised revenue. Those figures are commercial-in-confidence because it is not in the interest of the Group to disclose those
figures to third parties such as customers and competitors. The threshold was not met and no award was made for Operating Costs for FY18.
FY18 STI Goal
Cashflow Available for Debt Service
Target for 80% of
Award
Target for 100%
of Award
Target for 120%
of Award
FY18 Outcome
A$45,431K
A$50,479K
A$55,527K
A$60,869K
120% of Award
NdPr production volume (PF output)
5,486t
6,069t
6,676t
5,653t*
(*the 85.73% award took into account approximately
200 tonnes lost due to water supply issues)
Operating Costs – Actual targets commercial in
confidence
85.73% of
Award
Threshold not
met
0% of Award
As shown in the above table, three bands of performance were specified at the beginning of FY18 for the above STI goals, with awards to be
made equal to 80%, 100% or 120% of the available STI award pool for each goal, depending on which performance band was achieved. Awards
would be prorated if performance fell between the 80%, 100% or 120% targets.
In addition, 25% of the STI award pool was available based on Team / Individual Performance goals. The Board resolved to make an award at
the 120% level for Team / Individual Performance in FY18 in light of the strong improvement in Lynas’ performance during FY18, which benefitted
all shareholders. This improvement included the following:
(a) The increase in Lynas market capitalisation from $386.0m on July 1, 2017 to $1.55 billion on June 30, 2018.
(b) The increase in the share price from $1.05 on July 1, 2017 to $2.34 on June 30, 2018 (both calculated on a post-consolidation basis).
(c) The reduction in debt from US$425.0 million on July 1, 2017 to US$165.24 million on June 30, 2018 (excluding deferred interest).
(d) Delivery of a positive EBIT for the first time during FY18.
(e) A significantly improved cash position, with Cashflow Available for Debt Service of $61.0m. This included bringing many of Lynas’
trailing liabilities up to date, including: (i) payment of all historical interest on the two loan facilities other than 2016 interest on the
JARE facility and the small number of unconverted bonds (which is scheduled to be paid on maturity), and (ii) bringing the AELB
security deposits up-to-date.
(f)
The funding of Lynas NEXT from operating cashflows.
In accordance with the above calculations, the overall outcome was that 81.43% of the available STI awards will be made in respect of the
financial year ended June 30, 2018. Those awards will be made 50% in cash and 50% in Performance Rights with a 12 month vesting period.
After the end of the financial year, the Board calculates the STI award outcome based on the above criteria, and the Board reserves the right to
adjust the outcome, or the timing of payments, based on factors such as cash availability to pay the proposed award. No such adjustment was
made for FY18.
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.
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Directors’ Report – Remuneration Report – Audited
LTIs
LTI options and Performance Rights are granted to KMPs and other selected employees to provide greater alignment to strategic business
objectives. Each Performance Right usually has a three year vesting period, and is 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.
LTI Performance Rights that Vested or were Forfeited During FY18
The following LTI Performance Rights were forfeited during FY18 (post consolidation basis):
2,580,342 LTI Performance Rights, granted as part of the FY16 LTI plan, were conditional on the Company’s cumulative NdPr production from
July 1, 2015 to December 31, 2017 in accordance with the following table:
Minimum NdPr Production from PF: July 1, 2015 to December 31, 2017
Number of LTI Performance Rights to Vest
a)
b)
c)
10,440 tonnes
11,391 tonnes
12,530 tonnes
1,075,143
2,150,285
2,580,342
Awards would be prorated if performance fell between band (a) and (b) or between band (b) and (c).
The actual NdPr production from Product Finishing in the period July 1, 2015 to December 31, 2017 was 11,814 tonnes, which falls between
band (b) and band (c). Accordingly, of the 2,580,342 Performance Rights with an NdPr production condition that were available for vesting in
the financial year ended June 30, 2018, using a pro-rata calculation:
(a) 2,310,006 will vest; and
(b) 270,336 will be forfeited.
In addition, 1,908,481 LTI Performance Rights, granted as part of the FY16 LTI plan, were conditional on Total Shareholder Return (TSR) being
at least at the 51st percentile of ASX 200 companies over a three year vesting period expiring on September 18, 2018 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).
That TSR hurdle cannot be measured until after September 23, 2018. The Lynas share price in September 2015 was approximately A$0.377
The Lynas share price on June 30, 2018 was A$2.34 (both figures are calculated on a post-consolidation basis). If the Lynas share price
remains around current levels, then it seems likely that the 1,908,481 Performance Rights will vest.
Strategic Performance Rights Awarded During FY18
During FY18, the Group issued to selected senior managers a total of 2,932,923 Strategic Performance Rights with a two year vesting period.
This was a one-off grant related to the specific two year growth plan for the business that was announced at the 2017 AGM of shareholders. A
summary of the performance hurdles attached to the Strategic Performance Rights awarded during the financial year ended June 30, 2018 is
set out below:
(a)
the recipient remaining employed by Lynas for at least the next two years and performing at an acceptable level; and
(b) delivering the Lynas NEXT targets on time and on budget, including the Malaysian plant demonstrating that it can consistently produce
600 tonnes of NdPr per month.
The above performance hurdles were selected as a specific incentive to implement the Lynas NEXT plan for the growth of the business that was
announced at the 2017 AGM of shareholders. The business is now well placed to move to its next growth phase. The senior leadership team
have led the company through the turnaround process and they have developed a specific and credible two year plan to continue to grow
shareholder value that is reflected in the above performance hurdles.
LTI Performance Rights Awarded During FY18
In addition, during FY18, the Group issued to selected senior managers a total of 900,336 LTI Performance Rights with a three year vesting
period. A summary of the performance hurdles attached to the LTI Performance Rights awarded during the financial year ended June 30, 2018
is set out below:
(i)
50% will be conditional on the Company’s average annual EBITDA growth in the period from July 1, 2017 to June 30, 2020, using the
annualized figure from January 1, 2017 to June 30, 2017 as the base figure, in accordance with the following sliding scale:
(a)
If the average annual EBITDA growth from July 1, 2017 to June 30, 2020 is at least 21% per annum, then 50% of the EBITDA
portion will vest.
If the average annual EBITDA growth from July 1, 2017 to June 30, 2020 is at least 25% per annum, then 100% of the
EBITDA portion will vest.
If the average annual EBITDA growth from July 1, 2017 to June 30, 2020 is at least 30% per annum, then 120% of the
EBITDA portion will vest.
(b)
(c)
Awards would be prorated if the EBITDA growth outcome falls between bands (a) and (b) or between bands (b) and (c).
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(ii)
50% will be conditional on the company’s Total Shareholder Return (TSR) being at least at the 51st percentile of ASX 300 Metals and
Mining Index 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).
The above performance hurdles were selected as key measures of long-term success for the Group that were aligned with the interests of
shareholders. After several years of ramping up NdPr production to the current levels while tightly managing costs, the Company’s EBITDA
growth over the next three financial years will be an important measure of the success of the improvements to the business implemented by the
senior management team.
The TSR hurdle compares shareholder returns from Lynas to shareholder returns from ASX 300 Metals and Mining Index companies over the
three year vesting period. Lynas had received shareholder feedback to the effect that the TSR hurdle should be based on a published index of
which Lynas is a member. At the time that the hurdle was set, Lynas was a member of the ASX 300 Metals and Mining Index, and therefore
this was considered to be an appropriate benchmark for the TSR hurdle.
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;
forfeit the reference units representing all or a part of the KMP’s Relevant Award, to the extent such award remains unvested; or
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.
(b)
(c)
The Board has no enacted any clawback in FY18.
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.
Treatment of incentives
on termination:
The Group may terminate Ms Lacaze’s employment at any time without notice if serious misconduct has
occurred.
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.
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Directors’ Report – Remuneration Report – Audited
F. Linking Remuneration and Group Performance
Refer to Section D above for a summary of how Executive remuneration is linked to Group performance. In particular, despite the improving
performance of the business in recent years as summarized in Section D above, there were no increases in the fixed pay of the Executives from
FY14 to FY17. In FY18, the fixed pay of the Executives was increased in line with CPI, other than the fixed pay of the VP People & Culture
which was increased to reflect her expanded role in the business.
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, 2018, LTI grants were subject to a TSR hurdle and an EBITDA growth hurdle, as detailed in Section D above.
The reference period for these hurdles has not yet expired. In addition, as detailed in Section D above, some Performance Rights were forfeited
in FY18 due to non-satisfaction of vesting conditions.
Individual performance reviews link total remuneration to individual and business unit performance. From July 1, 2012 the mix of fixed pay and
variable remuneration has been adjusted by the introduction of a formal STI plan. The introduction of the STI plan reflects the transition of the
Group from a development phase to an operational phase, and it recognises that we have important short term goals based on successful ramp-
up, production volumes, cash flows, costs and safety and community programmes.
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 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 in its operational phase, as evident in the revenue metrics noted below.
June 30,
2011
June 30,
2012
June 30,
2013
June 30,
2014
June 30,
2015
June 30,
2016
June 30,
2017
June 30,
2018
Revenue ( $‘000 )
-
-
950
64,570
144,596
190,956
256,976
374,105
Profit / (Loss) before tax
( $‘000 )
Profit / (Loss) after tax
( $‘000 )
(57,288)
(97,879)
(141,014)
(345,431)
(118,559)
(94,117)
(24,263)*
53,404
(59,086)
(87,770)
(143,555)
(345,488)
(118,685)
(94,082)
(534)*
53,119
Shareholder capital ( $’000 )
821,994
823,161
994,645
1,034,634
1,083,898
1,088,469
1,094,403
1,395,417
Annual average share
price**
Closing share price at
financial year end**
Basic earnings / (loss) per
share (cents)***
Diluted earnings / (loss) per
share (cents)***
$16.48
$12.97
$6.52
$2.95
$0.78
$0.67
$0.77
$2.04
$19.80
$8.45
$3.75
$1.30
$0.34
$0.53
$1.05
$2.34
(35.40)
(51.20)
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
(35.40)
(51.20)
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
8.84
8.29
* Certain amounts shown here do not correspond to the June 30, 2017 Consolidated Financial Report and reflect adjustments made, refer
to Note 6 of financial report for further details.
** The share prices for the years ended June 30, 2011 to June 30, 2017 comparative periods have been restated to reflect the 10 to 1 share
consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017.
*** The basic and diluted earnings per share for the years ended June 30, 2011 to June 30, 2017 comparative periods have been restated to
reflect the 10 to 1 share consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017.
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.
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NED Skill Set
The Group has focussed on ensuring that its Directors reflect the broad mix of skills, experience, expertise and diversity necessary to oversee
the emergence of the Group as a significant participant in the volatile global market for Rare Earth products. The Group is now the second
largest NdPr producer in the world and the largest supplier of NdPr to the free market.
The Group considers it important for the following skills and experience to be represented on the Board:
•
•
•
•
•
•
Experience as a Chief Executive;
International business experience;
Financial and accounting experience;
Operational experience in the chemical and resources industries;
Strategy and strategic marketing experience;
Corporate governance, regulatory and risk management experience.
The Board’s skills matrix is based on the above sets of skills and experience. The Nomination, Remuneration and Community Committee
remains focussed on Board renewal, and the appointment of Grant Murdoch as a Director and Chair of the Audit & Risk Committee during the
year further enhanced the Board’s skill set. The Board considers that each of the above skills is currently reflected in the skills and experience
of the existing members of the Board.
Further details of the skills and experience of the members of the Board are provided in the Directors section of the Directors’ Report. Information
about the diversity of the Board is set out under Recommendation 1.5 of the Group’s Corporate Governance Statement at www.lynascorp.com.
Remuneration 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
The base fees for NEDs have not increased since FY11. The base fees for NEDs for the financial year ended June 30, 2018 were:
•
•
Chairman $250,000 per annum;
Non-Executive Director $100,000 per annum.
Committee Fees
Board Committee
Audit & Risk Committee
Nomination, Remuneration and Community Committee
Health, Safety & Environment Committee
Chair
$
30,000
25,000
25,000
Member
$
15,000
12,500
12,500
The remuneration for NEDs for the financial years ended June 30, 2017 and June 30, 2018 is set out in Section H of this report.
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Directors’ Report – Remuneration Report – Audited
H. Details of Remuneration
Short term benefits
Post-employment benefits
Long term benefits
Cash
salary
and fees
Other
short term
employee
benefits
Non-
monetary
benefits
Termin-
ation
payments
Superannuation
and other
pension
payments
Long
service
leave
Share-
based
payments
(net) (1)
Performance
related % of
Total
Total
Name
FY18
Executive Director
A. Lacaze
1,206,829
330,904
63,830
Non-Executive
Directors
K. Conlon
W. Forde(2)
M. Harding
P. Etienne
J. Humphrey
G Murdoch(3)
Executives
140,000
58,295
268,750
133,750
115,000
84,508
-
-
-
-
-
-
-
-
-
-
-
-
A. Arnold
490,640
133,839
3,778
G. Sturzenegger
504,663
128,727
-
K. Leung
491,152
138,046
29,609
P. Le Roux
388,562
149,254
81,887
M. Ahmad(6)
319,940
146,221
M. Afzan Afza(6)
226,400
55,826
-
-
4,428,489
1,082,817
179,104
Total
FY17
Executive
Director
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,049
13,104
2,092,560
65%
3,727,276
9,975
5,538
20,049
12,706
10,925
8,028
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0%
0%
0%
0%
0%
0%
149,975
63,833
288,799
146,456
125,925
92,536
334,095
529,315
49%
962,352
57%
1,162,705
20,049
7,918
385,832
49%
1,072,606
59,958
80,682
47,980
-
-
-
584,543
404,505
324,790
58%
1,264,204
58%
58%
951,349
654,995
295,939
21,022
4,655,640
54% 10,663,011
A. Lacaze
1,180,384
158,250
63,492
-
19,616
8,633
1,051,424
42% 2,481,799
Non-Executive
Directors
K. Conlon
W. Forde
M. Harding
J. Klein(4)
P. Etienne
J. Humphrey(5)
Executives
140,000
142,500
250,000
100,625
115,000
14,839
-
-
-
-
-
-
-
-
-
-
-
-
A. Arnold
487,400
62,257
5,477
G. Sturzenegger
485,732
66,266
-
K. Leung
480,384
66,875
29,603
P. Le Roux
411,364
68,855
96,257
Total
3,808,228
422,503
194,829
-
-
-
-
-
-
-
-
-
-
-
-
13,538
19,590
-
10,925
1,410
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
291,698
166,706
19,616
6,382
297,228
65,088
-
173,619
0%
0%
0%
0%
0%
0%
34%
23%
33%
21%
140,000
156,038
269,590
100,625
125,925
16,249
846,832
718,704
900,088
815,183
149,783
15,015
1,980,675
30% 6,571,033
(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) Resigned on November 28, 2017.
(3) Appointed on October 30, 2017.
(4) Resigned on May 15, 2017.
(5) Appointed on May 15, 2017.
(6) Mr Ahmad and Ms Afzan have been added to the list of Key Management Personnel with effect from FY18.
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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, 2018.
Name
A. Lacaze
K. Conlon
P. Etienne
W. Forde(1)
M. Harding
J. Humphrey
G Murdoch(2)
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Azhan Afza
Balance at
beginning of
year
Purchased
during the
year
On exercise of
performance
rights
Sold during the
year
Other
Other (Share
consolidation)
Balance at
end of year
12,416,116
856,180
166,300
1,575,893
-
-
-
1,002,811
1,485,590
40,890
1,525,596
140,000
52,664
-
-
-
-
11,174
20,000
72,500
-
-
-
-
-
-
528,368
-
-
-
-
-
-
251,970
100,000
261,701
103,909
121,483
58,038
(283,019)
-
-
-
-
-
-
(139,986)
(28,000)
(144,573)
(29,095)
(34,017)
(16,251)
-
-
-
(1,575,893) (1)
-
-
-
-
-
-
-
-
-
(11,174,503)
(770,561)
(149,670)
-
-
-
-
(902,529)
(1,337,031)
-
(1,373,036)
(126,000)
(47,397)
1,486,962
85,619
16,630
N/A
11,174
20,000
72,500
212,266
220,559
158,018
227,374
101,466
47,054
2,659,622
Total
19,262,040
103,674
1,425,469
(674,941)
(1,575,893)
(15,880,727)
(1) Resigned on November 28, 2017 and therefore ceased to be a KMP on this date.
(2) Appointed on October 30, 2017.
(3) “Other – Share Consolidation” reflects the 10 to 1 share consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017.
(ii) Share Based Remuneration – Performance Rights
Performance Rights are issued on the same terms as Options, except there is no consideration payable on exercise. As at year end the Group
had on issue to directors and KMP the following Performance Rights to acquire ordinary fully paid shares:
Series
Grant date
Number
Date vested and
exercisable
Expiry date
Exercise
price
Value per right at
grant date
AG
AH
AJ
AK
AM
AO
AP
AQ
AR
AS
AT
AU
AV
AW
Total
September 18, 2015
1,026,128 September 18, 2018
September 18, 2020
September 18, 2015
1,521,518 September 18, 2018
September 18, 2020
November 23, 2015
1,058,824 September 18, 2018
September 18, 2020
November 23, 2015
882,353 September 18, 2018
September 18, 2020
August 30, 2016
1,195,319 August 30, 2019
August 30, 2021
November 30, 2016
558,140 August 30, 2019
August 30, 2021
November 30, 2016
465,117 August 30, 2019
August 30, 2021
August 28, 2017
455,046 August 28, 2018
August 28, 2018
August 28, 2017
476,715 August 28, 2020
August 28, 2022
November 28, 2017*
1,748,362 August 28, 2019
August 28, 2019
November 28, 2017*
212,391 August 28, 2018
August 28, 2019
November 28, 2017*
231,066 August 28, 2020
August 28, 2022
November 28, 2017*
192,555 August 28, 2020
August 28, 2022
November 28, 2017*
809,107 August 28, 2019
August 28, 2019
10,832,641
$ 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
$ 0.290
$ 0.390
$ 0.900
$ 0.800
$ 0.650
$ 0.680
$ 0.500
$1.560
$1.360
$2.060
$2.060
$2.060
$1.620
$2.060
*Series AS to AW were issued on August 28, 2017, subject to approval at the AGM. These performance rights were subsequently approved at
the AGM on November 28, 2017 and has been deemed the grant date.
Fair value of Performance Rights
The fair value of each Performance Right is estimated on the date it is granted using volume-weighted average share price, Monte Carlo and
Binomial valuation methodologies. The following assumptions were considered in the valuation of Performance Rights granted during the year
ended June 30, 2018:
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
Series AQ
Aug 28, 2017
$1.560
$0.00
Nil
N/A
N/A
Aug 28, 2018
Series AR
Series AS
Aug 28, 2017 Nov 28, 2017
$1.560
$0.00
Nil
N/A
N/A
Aug 28, 2022
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2019
Series AT
Nov 28, 2017
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2019
Series AU
Nov 28, 2017
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2022
Series AV
Nov 28, 2017
$2.060
$0.00
Nil
85.90%
1.88%
Aug 28, 2022
Series AW
Nov 28, 2017
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2019
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Directors’ Report – Remuneration Report – Audited
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 Performance Right is up to 5 years 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 Performance Rights granted for the benefit of Directors and KMP during the year are:
Grant date
August 28, 2017
August 28, 2017
November 28, 2017
November 28, 2017
November 28, 2017
November 28, 2017
November 28, 2017
Total
Number of
performance rights
455,046
476,715
1,748,362
212,391
231,066
192,555
809,107
4,125,242
Fair value per
instrument at
valuation date
$1.560
$1.360
$2.060
$2.060
$2.060
$1.620
$2.060
Exercise price
per instrument
First exercise date
Last exercise
or expiry date
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
August 28, 2018
August 28, 2018
August 28, 2020
August 28, 2022
August 28, 2019
August 28, 2019
August 28, 2018
August 28, 2019
August 28, 2020
August 28, 2022
August 28, 2020
August 28, 2022
August 28, 2019
August 28, 2019
Except as specified in the table above, all Performance Rights granted for the benefit of Directors and KMP have three-year vesting periods. The
Performance Rights are exercisable up to five years after issue date, subject to achievement of the relevant performance hurdles.
The following tables outline the Performance Rights granted for the benefit of Directors and KMP during the 2018 and 2017 financial years and
those Performance Rights which have vested at each respective year-end.
Net
change
Balance at
end of
year
Amount
vested and
exercisable
at June 30,
2018
Amount
vested and
not
exercisable
at June 30,
2018
June 30, 2018
Balance at
beginning of
year
Other: share
consol
Granted
Grant date
A. Lacaze(1)
K. Conlon
P. Etienne
W. Forde(2)
M. Harding
J. Humphrey
G Murdoch(3)
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Azhan Afza
-
-
-
-
-
-
38,324,227 (34,491,804) 1,445,119 Nov 28, 2017
-
-
-
-
-
-
473,065 Aug 28, 2017
468,157 Aug 28, 2017
518,970 Aug 28, 2017
527,549 Aug 28, 2017
400,191 Aug 28, 2017
292,191 Aug 28, 2017
-
-
-
-
-
-
(9,363,468)
(6,636,177)
(9,969,998)
(6,852,882)
(6,299,236)
(3,848,032)
-
-
-
-
-
-
10,403,856
7,373,530
11,077,776
7,614,314
6,999,153
4,275,593
Performance
rights
exercised/
cancelled/
forfeited/
other
(867,991)
-
-
-
-
-
-
(441,593)
(100,000)
(451,324)
(103,909)
(166,766)
(58,038)
(33,914,676) 4,409,551
-
-
-
-
-
-
-
-
-
-
-
-
(9,331,996) 1,071,860
(6,268,020) 1,105,510
(9,902,352) 1,175,424
(6,429,242) 1,185,072
933,342
(6,065,811)
661,714
(3,613,879)
Total
86,068,449 (77,461,597) 4,125,242
(2,189,621)
(75,525,976) 10,542,473
June 30, 2017
A. Lacaze
K. Conlon
P. Etienne
W. Forde
M. Harding
J. Klein
J. Humphrey
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
37,023,320
-
-
-
-
-
-
9,776,142
6,218,334
9,903,979
6,430,888
Total
69,352,663
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,686,047 Nov 30, 2016 (11,385,140)
-
-
-
-
-
-
3,006,404 Aug 30, 2016 (2,378,690)
3,200,000 Aug 30, 2016 (2,044,804)
3,317,830 Aug 30, 2016 (2,144,033)
3,325,066 Aug 30, 2016 (2,141,640)
-
-
-
-
-
-
-
-
-
-
-
-
1,300,907 38,324,227
-
-
-
-
-
-
627,714 10,403,856
1,155,196
7,373,530
1,173,797 11,077,776
7,614,314
1,183,426
25,535,347
(20,094,307)
5,441,040 74,793,703
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,324,227
-
-
-
-
-
-
10,403,856
7,373,530
11,077,776
7,614,314
74,793,703
(1) 1,445,119 performance Rights approved by the Board were granted to A. Lacaze on August 28, 2017 and subsequently approved by the
shareholders of the Company at the AGM on November 28, 2017.
(2) Resigned on November 28, 2017.
(3) Appointed on October 30, 2017.
29
29
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Subsequent Events
A major update of the Mineral Resource and Ore Reserve was announced on August 6, 2018. The previous Mineral Resource and Ore Reserve
Statement was announced in October 2015. The updates since have been depletion only. Key changes to the resource model include:
•
•
The consolidation of the Central Lanthanide Deposit (“CLD”) and Duncan into a single resource; and
The 2017 Apatite (“AP”) Depth Extension exploration drilling program which extended the depth of the AP ore zone and had significant
intersections of transition and fresh rare earth mineralisation below the AP zone.
The updated ore reserve is based on the new resource model and for the first time includes the Duncan zone following the completion of the
metallurgical testwork. As announced on August 6, 2018, there was a 60% increase to Mt Weld Ore Reserves, confirming a 25+ year mine life
at Lynas NEXT output rates.
With the exception of the above, there have been no other events subsequent to June 30, 2018 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 6, 2018
30
30
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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 Statements;
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 Corporations Instrument 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 Corporations Instrument
applies, as detailed in Note 34 to the Financial Statements 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 6, 2018
31
31
Lynas Corporation Limited | 2018 Annual 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
Auditor’s Independence Declaration to the Directors of Lynas
Corporation Limited
As lead auditor for the audit of Lynas Corporation Limited for the financial year ended 30 June 2018, 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
Glenn Maris
Partner
6 September 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
32
32
www.lynascorp.com
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 Audit of the Financial Report
Opinion
We have audited the financial report of Lynas Corporation Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial
position as at 30 June 2018, the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended,
notes to the financial statements, including a summary of significant accounting policies, and the
directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2018 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial report of the current year. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not
provide a separate opinion on these matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
33
33
Lynas Corporation Limited | 2018 Annual Report
1. Accounting for debt facilities
Why significant
How our audit addressed the key audit matter
Our procedures in respect of the restatement
included the following:
Re-calculated each of the components of the
restatement determined by the Group.
Evaluated the adjustments made to restate the
prior year comparatives and considered the
adequacy of the restatement disclosures included
within the financial report.
Our procedures in respect of the current period
transactions included the following:
Assessed whether the Group’s calculations of the
re-measurement of the carrying value of the JARE
facility as a result of each of the actual and
estimated future repayments, the interest
forgiveness and the re-setting of the interest rate,
were performed in accordance with Australian
Accounting Standards.
Assessed the Group’s calculation of the re-
measurement of the carrying value of the
Convertible Bonds facility as a result of the re-
setting of the interest rate and the early
conversion of the convertible bonds in accordance
with Australian Accounting Standards.
Considered the adequacy of the disclosures
included within the financial report.
As described in Note 6, the Group identified and
corrected an error in respect of the accounting
for amendments made to the Japan Australia
Rare Earths B.V. (JARE) and Mt. Kellett
convertible bond (Convertible Bonds) debt
facilities in the prior year. This matter has been
corrected in the financial report, which resulted
in prior year comparatives being restated.
During the current year the Group made early
principal repayments and had interest forgiven in
respect of the JARE facility. The Group also
updated the forecast principal repayments on
the JARE facility as at 30 June 2018.
The Convertible bondholders also converted a
significant portion of the facility into equity. The
interest rates applicable to each facility were
also reset under the pricing mechanisms within
each agreement.
A number of these transactions give rise to
complex and judgmental accounting outcomes in
respect of re-measuring the carrying value of
each facility and measuring any associated
impacts to the statement of comprehensive
income. There was also significant degrees of
estimation and judgment used in the
determination of fair value, which is an input into
the prior period restatement. Accordingly, this
was considered to be a key audit matter.
Refer to Note 6 and Note 23 within the financial
report for the amounts recorded on the
consolidated statement of financial position as at
30 June 2018 and related disclosures.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
34
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www.lynascorp.com
2. Rehabilitation Provisions
Why significant
How our audit addressed the key audit matter
Our procedures included the following:
Considered the rehabilitation reports and
estimates provided by the Group’s experts. We
assessed the qualifications, competence and
objectivity of each expert based on their
independence, experience and qualification.
Evaluated the determination of the required
provision based upon the report of the experts.
We re-performed underlying calculations where
necessary and assessed the appropriateness of
the inflation and discount rate assumptions.
Considered the adequacy of the disclosures
relating to the Group’s provisions for restoration
and rehabilitation included in the financial report.
The Group incurs obligations for asset and site
restoration and rehabilitation. As at 30 June
2018 the Group’s consolidated statement of
financial position includes provisions of $64.5
million in respect of such obligations as disclosed
in note 25.
Estimating the costs associated with these
obligations requires considerable judgement in
relation to when the activities will take place, the
time required for rehabilitation to be effective,
and the costs associated with the activities and
economic assumptions such as discount rates
and foreign currency rates. Given the significant
judgements and assumptions involved, the Group
is required to continually reassess and confirm
that the assumptions used are appropriate.
Management engaged external experts to assist
with their assessment of the Group’s
rehabilitation obligations as at 30 June 2018.
Due to the significant degree of estimation and
judgment used to determine the rehabilitation
provision this was considered to be a key audit
matter.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
35
35
Lynas Corporation Limited | 2018 Annual Report
Information Other than the Financial Statements and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2018 Annual Report other than the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 control as the directors determine is necessary to enable the
preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
36
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
36
www.lynascorp.com
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
37
37
Lynas Corporation Limited | 2018 Annual Report
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 19 to 29 of the directors' report for
the year ended 30 June 2018.
In our opinion, the Remuneration Report of Lynas Corporation Limited for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
Glenn Maris
Partner
Sydney
6 September 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
38
38
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended June 30
Note
2018
In A$’000
Revenue
Cost of sales
Gross profit
General and administration expenses
Net foreign exchange loss
Other expenses
Profit / (loss) from operating activities
Financial income
Financial expenses
Net financial expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
Profit / (loss) for the year
2017
Restated*
256,976
(242,239)
14,737
(25,501)
(3,736)
-
(14,500)
37,535
(47,298)
(9,763)
(24,263)
23,729
(534)
374,105
(253,001)
121,104
(34,270)
(5,101)
(694)
81,039
22,025
(49,660)
(27,635)
53,404
(285)
53,119
46,922
46,922
(30,598)
(30,598)
100,041
(31,132)
8.84
8.29
(0.15)
(0.15)
8
9
11
11
12
14
26
26
Other comprehensive income / (loss) for the year net of income tax that may be
reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Total other comprehensive income / (loss) for the year, net of income tax
Total comprehensive income / (loss) for the year attributable to equity holders of the
Company
Earnings / (loss) per share (1)
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
(1)
The basic and diluted earnings per share for the year ended June 30, 2017 comparative period has been restated to reflect the 10 to
1 share consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017. Refer to Note 26 for details of
the share consolidation.
* Certain amounts shown here do not correspond to the June 30, 2017 Consolidated Financial Report and reflect adjustments made, refer
to Note 6.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial
statements.
39
39
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Financial Position
As at June 30
In A$’000
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Tax receivable
Inventories
Total current assets
Inventories
Property, plant and equipment
Deferred development expenditure
Intangible assets – software
Other non-current assets
Total non-current assets
Total assets
Liabilities
Interest payable
Trade and other payables
Borrowings
Employee benefits
Provisions
Tax payable
Total current liabilities
Trade and other payables
Interest payable
Borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Reserves
Total equity attributable to the equity holders of the Company
Note
2018
2017
Restated *
15
16
17
17
20
21
19
22
23
24
25
22
23
24
25
26
26
42,292
12,365
2,358
-
51,658
108,673
4,109
594,416
18,725
-
38,708
655,958
764,631
452
35,012
-
2,142
357
52
38,015
580
1,607
225,112
354
64,485
292,138
330,153
434,478
63,925
5,871
2,846
98
37,448
110,188
515
538,400
41,999
17
26,616
607,547
717,735
2,769
45,639
19,516
2,112
309
-
70,345
1,362
2,321
473,843
166
57,543
535,235
605,580
112,155
1,395,417
(936,361)
(24,578)
434,478
1,094,403
(989,480)
7,232
112,155
* Certain amounts shown here do not correspond to the June 30, 2017 Consolidated Financial Report and reflect adjustments made, refer to
Note 6.
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
40
40
www.lynascorp.com
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E
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended June 30
In A$’000
Note
2018
2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Royalties paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Security bonds paid
Security bonds refunded
Deposit as collateral for AELB
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
Repayment of long-term borrowing (JARE loan facility)
Net cash used in financing activities
Net (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
383,136
(256,656)
(7,868)
(132)
118,480
(24,220)
(1,575)
267
(29,139)
(54,667)
1,127
(27,714)
6,506
(65,542)
(85,623)
(21,810)
63,925
177
42,292
260,426
(220,813)
(5,505)
(115)
33,993
(2,276)
(6,830)
2,193
-
(6,913)
178
(5,131)
5,934
(3,950)
(2,969)
24,111
43,348
(3,534)
63,925
18
15
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
42
42
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
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, 2018 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 Suite 3, 5 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 6, 2018.
2.2
Going concern
The financial report has been prepared using the going concern assumption.
2.3
Basis of measurement
The financial report has been prepared under the historical cost, except for the borrowings which are at amortised cost.
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, 2018. Information for the comparative year is for the 12
month period ended June 30, 2017.
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 Corporations 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.
Adjustments have been made to certain amounts in the comparative period, refer to Note 6 for details.
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.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
3.1
(a)
Basis of consolidation
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 29 all entities
within the Group are 100% owned and controlled.
The Group has adopted AASB 3 Business Combinations (2008) and AASB 127 Consolidated and Separate Financial Statement (2008) under
which the acquisition method of accounting is used to account for the acquisition of subsidiaries and businesses by the Group. The cost of an
acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the
acquisition, including the fair value of any contingent consideration and share-based payment awards (as measured in accordance with AASB
2 Share Based Payment) of the acquiree that are mandatorily replaced as a result of the transaction. Transaction costs that the Group incurs in
connection with an acquisition are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured at their fair value at the acquisition date, irrespective of the extent of any non-controlling interests. Non-
controlling interests are initially recognised at their proportionate share of the fair value of the net assets acquired.
During the measurement year an acquirer can report provisional information for a business combination if by the end of the reporting year in
which the combination occurs the accounting is incomplete. The measurement year, however, ends at the earlier of when the acquirer has
received all of the necessary information to determine the fair values or one year from the date of the acquisition.
(b)
Transactions eliminated on consolidation
Intra-group balances and unrealised items of income and expense arising from intra-group transactions are eliminated in preparing the financial
report. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in
the investee. Unrealised losses are eliminated in the same manner as gains, but only to the extent that there is no evidence of impairment.
3.2
(a)
Foreign currency
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 measured at historical
cost are translated to the functional currency of the respective entities at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are measured at fair value are translated to the functional currency of the respective entities at the
exchange rate at the date that the fair value was determined.
Foreign currency differences arising on translation are recognised in the statement of comprehensive income as a component of the profit or
loss.
(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 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.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
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.
(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 available-for-
sale monetary items, are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred
to the statement of comprehensive income as a component of the profit or loss.
(e)
Other liabilities
Other liabilities comprise all non-derivative financial liabilities that are accounted for at amortised cost. 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:
Trade and other payables
(i)
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.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
3.4
(a)
Inventories
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.
3.5
(a)
Property, plant and equipment
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.
(c)
Borrowing costs
Borrowing costs directly attributable to the acquisition or construction of an item of property, plant and equipment are capitalised until such time
as the assets are substantially ready for their intended use. The interest rate used equates to the effective interest on debt where general
borrowings are used or the relevant interest rate where specific borrowings are used to finance the construction.
(d)
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the
future economic benefits embodied within that part will flow to the Group and its cost can be measured reliably. The carrying amount of the
replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of
comprehensive income as a component of the profit or loss as incurred.
(e)
Depreciation
Depreciation is recognised in the statement of comprehensive income as a component of the profit or loss or capitalised as a component of
inventory in the statement of financial position (which is subsequently released to the profit or loss through the cost of goods sold on the sale of
the underlying product) using a method that reflects the pattern in which the economic benefits embodied within the asset are consumed.
Generally, this is on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment.
The estimated useful lives for the material classes of property, plant and equipment are as follows:
Leasehold land
Plant and equipment
Leasehold improvements
30 to 99 years
2 to 30 years
3 to 30 years
Buildings
Fixtures and fittings
Motor vehicles
5 to 30 years
2 to 15 years
8 years
Depreciation methods, useful lives and residual values are reassessed on an annual basis.
Gains and losses on the disposal of items of property, plant and equipment are determined by comparing the proceeds (if any) at the time of
disposal with the net carrying amount of the asset.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
3.6
(a)
Development expenditure
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.
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.
(b)
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.
(c)
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.
3.7
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.
(a)
Impairment of loans and receivables and held-to-maturity financial assets
The recoverable amount of the Group’s loans and receivables and held-to-maturity financial assets carried at amortised cost is calculated with
reference to the present value of the estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate
computed at the date of initial recognition of these financial assets). Receivables with a short duration are not discounted.
Impairment losses on individual instruments that are considered significant are determined on an individual basis through an evaluation of the
specific instruments’ exposures. For trade receivables which are not significant on an individual basis, impairment is assessed on a portfolio
basis taking into consideration the number of days overdue and the historical loss experiences on a portfolio with a similar number of days
overdue.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
•
•
•
significant financial difficulty of the issuer or obligor;
a breach of contract, such as default or delinquency in respect of interest or principal repayment; or
observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio.
(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 identifiable
asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in the
statement of comprehensive income as a component of the profit or loss. Impairment losses recognised in respect of a CGU are allocated first
to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other non-financial assets in
the CGU on a pro-rata basis.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing the value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
In assessing the fair value less cost to sell, the Company uses a variety of
the time value of money and the risks specific to the asset or CGU.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
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 flows 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.
3.8
(a)
Employee benefits
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 expected to be settled within one year and 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.
(c)
Long-term employee benefits
The liability for annual leave and 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.
(e)
Incentive compensation plans
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.
3.9
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)
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.
(b)
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 environmental disturbance
occurs.
Rehabilitation provisions are initially measured at the expected value of future cash flows required to rehabilitate the relevant site, discounted to
their present value. The value of the provision is progressively increased over time as the effect of discounting unwinds. When provisions for
rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing part of the cost of acquiring the future
economic benefits of the operation. The capitalised cost of rehabilitation activities for the Group’s mining operations and refining operations are
recognised as a component of property, 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.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
(c)
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.
3.10
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
3.17(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 3.19) and included as part of the cost of goods sold in the statement of comprehensive income as a component
of profit or loss.
3.11
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.
3.12
Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted from equity
and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the consideration paid
including any directly attributable incremental costs (net of income taxes) is directly recognised in equity.
3.13
Share-based payment
Share-based remuneration benefits are provided to employees via a variety of schemes which are further set out in Note 30.
The fair values of the performance rights 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 performance rights.
The fair value at grant date is independently determined using a performance right pricing model that takes into account the exercise price, the
term of the performance right, 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 performance right.
The fair value of the performance right 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 performance rights that are expected to become exercisable. At the end of each reporting period, the Group revises its
estimates of the number of performance rights 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.
3.14
Revenue
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.
3.15
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.
3.16
Financial income and expenses
Financial income comprises interest income 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.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
Financial expenses comprise interest expense, 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.
3.17
Income tax
(a)
Income tax
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.
3.18
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.
3.19
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.
3.20
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
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
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.
3.21
Company entity financial information
The financial information for the Company entity as disclosed in Note 35 has been prepared on the same basis as that applied by the Group,
except as set out below:
(a)
Investments in subsidiaries, associates and joint venture entities
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.
3.22
New and revised standards and interpretations
(a)
Standards and Interpretations affecting amounts reported
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those of the previous financial
year, except for the adoption of new standards and interpretations effective as of July 1, 2017.
Several amendments apply for the first time in the current year. However, they do not impact the annual consolidated financial statements of the
Group.
(b)
Standards and Interpretations in issue not yet adopted
The Australian Accounting Standards issued but not yet mandatory for the financial year ending June 30, 2018 have not been adopted by the
Group in the preparation of this financial report and are set out below:
Standard/Interpretation
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution
of Assets between an Investor and its Associate or Joint Venture
AASB 16 Leases
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and
Measurement of Share-based Payment Transactions [AASB 21]
AASB 2016-6 Amendments to Australian Accounting Standards – Applying AASB 9
Financial Instruments with AASB 4 Insurance Contracts [AASB 4]
Effective for the
annual reporting
period beginning
on
July 1, 2018
Expected to be
initially applied
in the financial
year ending
June 30, 2019
July 1, 2018
June 30, 2019
July 1, 2018
June 30, 2019
July 1, 2019
June 30, 2020
July 1, 2018
June 30, 2019
July 1, 2018
June 30, 2019
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
July 1, 2018
June 30, 2019
AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of
Investments Property, Annual Improvements 2014-2016 Cycle and Other Amendments
IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 17 Insurance Contracts
July 1, 2018
June 30, 2019
July 1, 2019
July 1, 2021
June 30, 2020
June 30, 2022
AASB 9 Financial Instruments
A finalised version of AASB 9 has been issued which contains accounting requirements for financial instruments, replacing AASB 139 Financial
Instruments: Recognition and Measurement. The standard contains requirements in the areas of classification and measurement, impairment,
hedge accounting and derecognition. This standard applies to annual reporting periods beginning on or after January 1, 2018 and will be
applicable for the Group for the annual reporting period beginning July 1, 2018.
The Group has completed a review of the impacts of the new standard and does not expect the application of the new standard to have a
material impact on the results of the Group.
AASB 15 Revenue from Contracts with Customers
The core principle of AASB 15 is that an entity recognises revenue in accordance with the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures
about revenue are also introduced. The Group has undertaken a comprehensive analysis of the impact of the new standard in order to
determine how the contractual terms of the Group’s principle revenue streams should be treated under AASB 15. As the majority of the Group’s
revenue is derived from the sale of Rare Earths in which the transfer of risks and rewards, under current accounting, occurs at the same time
as the satisfaction of the performance obligation under AASB 15, it is expected that there will be no material changes in respect of the timing
and amount of revenue currently recognised by the Group. This standard applies to annual reporting periods beginning on or after January 1,
2018 and will be applicable for the Group for the annual reporting period beginning July 1, 2018.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
AASB 16 Leases
AASB 16 provides a new lessee accounting model which requires a lessee to recognise assets and liabilities for all leases with a term of more
than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and
lease liabilities similarly to other financial liabilities. At the commencement date of a lease, a lessee will recognise a liability to make lease
payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use
asset). Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable
lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably
certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 also contains new disclosure
requirements for lessees. This standard applies to annual reporting periods beginning on or after January 1, 2019. It is expected that upon
adoption of AASB 16, the impact of the new standard will have a material impact on the Group’s financial statements with the most significant
impact being an increase in lease liabilities representing the present value of the operating lease commitments (see Note 32) and a
corresponding increase in property, plant and equipment for the right of use asset net of lease incentives, initial direct costs and other allowable
adjustments being recognised on the statement of financial position. This will be unwound and amortised to the statement of comprehensive
income over the remaining term of the leases.
The Group anticipates that the remainder of 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 below). 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.
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
The Group assesses, at each reporting date, whether there is an indication that an assets may be impaired. If any indication exists, or when
annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash generating unit’s (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined
for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to
its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. The value in use calculation is based on a 25-year discounted
cash flow (DCF) model. The cash flows are derived from the two-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 product price movement, the discount rate used for the discounted cash flows
model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
4.3
Development expenditure
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.
LAMP production residues
The Group continues its commercialisation program of solid residues from the LAMP. Field trials have demonstrated the efficacy of the residue
material in enhancing soil structure, adjusting soil pH, enhancing growth and improving yields. A progress report was submitted to Malaysia’s
Department of Environment (DOE) as part of the commercialisation approval process. DOE has acknowledged the report confirming that the
soil conditioning product using LAMP residues known as “Condisoil” is safe for agricultural use and that Condisoil increases paddy yield.
The restoration and rehabilitation closure provision excludes costs for the disposal LAMP’s production residues. The Group does not expect that
that the restoration and rehabilitation provision would be significantly different with on site disposal / storage of LAMP’s production residues.
4.5
Recognition of deferred tax asset
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the
losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised,
based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. In making the assessment, the
Group has given specific due consideration to:
•
The pioneer period status (tax holiday) in relation to the Malaysian operations through to 2026, subject to renewal in 2019:
o
o
Tax losses generated during this period will be utilised prior to the tax exemption being applied, with any unused losses available
for utilisation by the Group once the pioneer period expires. However, these tax losses do not provide any benefit to the Group
during the pioneer period as no tax would be otherwise due on pioneer product activities over this time.
Tax losses generated prior the pioneer period will remain available for use offsetting non-pioneer profits during the pioneer period,
or general utilisation once the pioneer period expires.
•
•
Other than the current period, the Group has a history of generating tax losses.
There remains significant volatility in the selling price (revenue basis) during the year for all REO products sold by the Group. The Group’s
most significant product is NdPr and market prices for NdPr (excluding VAT) peaked in September 2017 at US$64.5/kg before falling to
US$32.2/kg in December 2017. This volatility creates uncertainty as to the probability that the Group would have future taxable profits in
these jurisdictions against which these tax losses can be utilised.
Based on these factors, the Group has not recognised a deferred tax asset in excess of the deferred tax liability at June 30, 2018.
5.
Determination of fair values
Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s
length transaction. 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
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.
5.3
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.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
6.
Correction of error
In October 2016 the Group agreed amendments to its loan facilities. During the half-year ended December 31, 2017, the Group identified an
error made in accounting for these loan amendments. This error involved the classification and calculation of the new borrowing fair values
which also impacted the equity component of the convertible bond, associated tax balances and certain items in the statement of profit and loss
and other comprehensive income. The error relates to non-cash accounting entries only.
The error has been corrected and the impact on each of the affected financial statement line items for June 30, 2017 as follows:
Changes to equity (increase/(decrease) in equity)
As at June 30
In AUD’000
Interest payable (current)
Interest payable (non-current)
Borrowings
Net decrease in liabilities
Accumulated losses
Foreign currency translation reserve
Other reserves
Net increase in equity
Changes to statement of profit or loss and other comprehensive income (increase/(decrease) in profit)
In AUD’000
Net gain on extinguishment of debt
Financial expenses
Income tax benefit
Net increase in profit/(loss) for the period
Other comprehensive income/(loss) for the period net of income tax that may be
reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Net decrease on other comprehensive income/(loss) for the period
Net increase in comprehensive income/(loss) for the period
Net increase of profit attributable to:
Equity holders of the parent
Non-controlling interests
Changes to basic and diluted earnings per share (EPS) (increase/(decrease) in EPS)
2017
31,784
22,885
(33,915)
20,754
14,342
(499)
6,911
20,754
12 months ended
June 30, 2017
14,418
(3,040)
2,964
14,342
(499)
(499)
13,843
14,342
-
12 months ended
June 30, 2017
Increase in basic earnings for the period attributable to ordinary equity holders of the parent (cents per share)
Increase in diluted earnings for the period attributable to ordinary equity holders of the parent (cents per share)
4.05
4.05
The change to basic and diluted earnings / (loss) per share for the half-year ended December 31, 2016 and year ended June 30, 2017 has been
restated to reflect the 10 to 1 share consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017.
The change did not have an effect on the Group’s operating, investing or financing cash flows.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
7.
Segment reporting
AASB 8 Operating Segments (“AASB 8”) requires operating segments to be identified on the basis of internal reports about components of the
Group that are regularly reviewed by the Chief Operating Decision Makers (CODM) in order to allocate resources to the segment and to assess
its performance.
At year end, the Group’s CODM are the Board of Directors of the Company, the Chief Executive Officer, the Chief Financial Officer, the VP
Production, the VP Sales & Marketing, the General Counsel & Company Secretary, the MD Malaysia and the VP People & Culture. 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 does 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.
77% of the Group’s non-current assets are located in Malaysia and the remaining 23% are in Australia.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
In A$’000
Business segment reporting
Revenue
Cost of sales
Gross profit
General expenses and other income
Other income / (expenses)
Net foreign exchange (loss) / gain
Profit / (loss) before interest and tax
(“EBIT”)
Net gain on extinguishment of debts
Other financial income
Financial expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
Profit / (loss) for the year
Reconciliation of EBIT to Earnings
before interest, tax, depreciation and
amortisation (“EBITDA”)
EBIT
Depreciation and amortisation
EBITDA
Included in EBITDA:
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
For the year ended June 30, 2018
For the year ended June 30, 2017
Restated*
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
256,976
(242,239)
14,737
(15,118)
-
-
(381)
-
374,105
(253,001)
121,104
(21,203)
-
-
-
-
(13,067)
(694)
(5,101)
374,105
(253,001)
121,104
(34,270)
(694)
(5,101)
99,901
(18,862)
81,039
-
-
-
22,025
(49,660)
53,404
(285)
53,119
-
-
-
(10,383)
-
(3,736)
256,976
(242,239)
14,737
(25,501)
-
(3,736)
(14,119)
(14,500)
37,302
37,302
233
(47,298)
(24,263)
23,729
(534)
99,901
39,621
139,522
(18,862)
1,240
(17,622)
81,039
40,861
121,900
(381)
42,580
42,199
(14,119)
1,355
(12,764)
(14,500)
43,935
29,435
-
-
6,935
6,935
(1,815)
(1,815)
-
-
2,622
2,622
(142)
(142)
Adjusted EBITDA
139,522
(12,502)
127,020
42,199
(10,284)
31,915
Total assets
Total liabilities
753,696
(140,938)
10,935
(189,215)
764,631
(330,153)
706,163
(162,943)
11,572
(442,637)
717,735
(605,580)
* Certain amounts shown here do not correspond to the June 30, 2017 Consolidated Financial Report and reflect adjustments made, refer to
Note 6.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
8.
General and administration expenses
In A$’000
Employee and production costs net of costs recovered through production
Depreciation expenses net of cost recovered through production
Other
Total general and administration expenses
For the year ended June 30
2018
2017
12,985
6,943
14,342
34,270
8,990
4,223
12,288
25,501
Other general and administration expenses include statutory, consulting, insurance, IT, marketing and general office costs.
8.1
Employee costs
The following items are gross employee costs before recoveries included in general and administration expenses:
In A$’000
Wages and salaries
Superannuation and pension contributions
Employee remuneration settled through share-based payments (Note 30)
Other
Total employee costs
For the year ended June 30
2018
2017
38,286
1,312
5,120
773
45,491
35,108
1,083
2,480
881
39,552
Over 50% of total wages and salaries costs are paid in MYR, and with the strengthening of the MYR during the year the AUD equivalent costs
have increased.
9.
Other expenses
In A$’000
Net loss on sale of property, plant and equipment
Property, plant and equipment written off
Total other expenses
For the year ended June 30
Note
2018
2017
164
530
694
-
-
-
A review on the carrying value of inventory and property, plant and equipment was completed in both years.
Property, plant and equipment written off in the current year relates to assets replaced as part of Project NEXT additions.
10.
Auditor’s remuneration
The following items of expenditure are included in general and administration expenses:
In $A
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Audit fees
Other fees
Total auditor’s remuneration Ernst & Young (Australia)
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
Tax fees
Other fees
Total auditor’s remuneration Ernst & Young (other locations)
For the year ended June 30
2018
2017
295,262
51,041
346,303
127,363
3,579
-
130,942
286,875
-
286,875
139,501
38,747
92
178,340
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
11.
Financial income and expenses
In A$’000
Net gain on extinguishment of debts*
Interest income on cash and cash equivalents
Interest forgiven on JARE loan
Total financial income
Interest expense on financial liabilities:
Interest expense on JARE loan facility
Interest expense on Convertible bond facility
Amortisation of deferred transaction costs - convertible bond facility
Unwinding of discount on convertible bond facility
Unwinding of discount on JARE loan facility
Non-cash adjustment to financial liabilities
Unwinding of discount on restoration and rehabilitation provision
Discount unwinding / (recognition) on AELB deposit **
Financing transaction costs and fees
Total financial expenses
Net financial expenses
*
**
refer to Note 23 for more information
refer to Notes 19 & 33 for more information
12.
Income taxes
In A$’000
Current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Deferred tax
Deferred tax expense / (benefit) recognised in the year
Total income tax expense / (benefit) relating to the continuing operations
12.1
Income tax recognised in profit / (loss)
In A$’000
Profit / (loss) before tax for continuing operations
Income tax expense / (benefit) calculated at 30% (2017: 30%)
Add / (deduct):
Effect of expenses that are not deductible and income that is not assessable in determining
taxable profit
Effect of restatement of prior year accounts
Effect of foreign exchange gains and losses
Effect of unused tax losses not recognised as deferred tax assets
Effect of adjustments recognised in equity
Effect of temporary differences not recognised as deferred tax assets
Effect of different tax rate of subsidiaries and branches
Effect of prior year losses not recognised
Other adjustments
Total current year income tax expense / (benefit)
58
58
For the year ended June 30
2018
-
1,178
20,847
22,025
(8,825)
(2,124)
-
(7,655)
(7,630)
(22,411)
(793)
332
(554)
(49,660)
(27,635)
2017
Restated
37,302
233
-
37,535
(12,756)
(7,315)
(434)
(12,033)
(4,738)
-
(875)
(8,907)
(240)
(47,298)
(9,763)
For the year ended June 30
2018
2017
Restated
285
-
285
-
285
175
-
175
(23,904)
(23,729)
For the year ended June 30
2018
53,404
16,021
15,287
23,649
16,474
-
-
(30,362)
(68)
(32,916)
(7,800)
285
2017
Restated
(24,263)
(7,279)
6,497
-
3,858
2,721
23,904
(58,409)
5,251
(31)
(241)
(23,729)
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
12.2
Income tax recognised directly in equity
In A$’000
Deferred tax
Initial recognition of equity component of convertible bonds
Total income tax expense / (benefit) recognised directly in equity
13.
Deferred tax assets and liabilities
13.1 Deferred tax balances
For the year ended June 30
2018
2017
Restated
-
-
23,904
23,904
Balance at
July 1, 2017
(Restated)
Recognised
in profit or
loss
Recognised
in equity
Recognised
in OCI
Balance at
June 30, 2018
(7,927)
1,011
28,269
3
93
8,264
29,713
(674)
(13,621)
(8,327)
(3)
26
1,884
(20,714)
(29,713)
20,714
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
July 1, 2016
Recognised
in profit or
loss
Recognised
in equity
(Restated)
Recognised
in OCI
774
(8,091)
8,367
49,151
867
42
8,429
59,539
(59,539)
-
-
(774)
164
(7,356)
3,022
(864)
51
(165)
(5,922)
-
29,826
23,904
-
-
-
(23,904)
-
-
-
(23,904)
-
-
(23,904)
-
-
-
-
-
-
-
-
-
-
-
(8,601)
(12,610)
19,942
-
119
10,148
8,998
(8,998)
-
Balance at
June 30,
2017
(Restated)
-
(7,927)
1,011
28,269
3
93
8,264
29,713
(59,539)
29,826
-
In A$’000
Temporary differences
Development expenditure
Property plant and equipment
Borrowings
Costs of equity and debt raisings
Trade payables
Provisions
Unused tax losses and credits
Tax losses
In A$’000
Temporary differences
Inventory
Deferred exploration, evaluation and
development expenditure
Property plant and equipment
Borrowings
Costs of equity and debt raisings
Trade payables
Provisions
Unused tax losses and credits
Tax losses
Deferred tax asset recognised
13.2 Unrecognised deferred tax assets
In A$’000
Deductible temporary differences and unused tax losses for which no deferred tax assets
have been recognised are attributable to the following:
Tax losses – revenue in nature
Tax losses – capital in nature
Deductible temporary differences
As at June 30
2018
2017
311,616
325,510
18,025
655,153
340,414
370,764
74,054
785,232
The Group's unused tax losses of a revenue nature for which no deferred tax assets have been recognised relate to Australia (2018: $143.9m,
2017: $174.4m), Malaysia (2017: $167.4m, 2016: $165.5m) and Malawi (2018: $0.3m, 2017: $0.5m). The potential tax benefit of these tax
losses to the Group is $83.4m (2017: $92.0m). Refer to Note 4.5 for the estimates and assumptions involved in the recognition of deferred
tax assets.
The Group's unused tax losses of a capital nature for which no deferred tax assets have been recognised relate to Australia (2018: $2.1m,
59
59
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
2017: $2.1m) and Malaysia (2018: $323.4m, 2017:368.7m). At June 30, 2018 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 $78.3m (2017: $89.1m).
The Group's net deductible temporary differences for which no deferred tax assets have been recognised relate to Australia (2018: $81.5m,
2017: $78.8m) and Malaysia (2018: $0.0m, 2017: $0.0m). At June 30, 2018 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 $24.4m (2017: $23.6m).
The Group's assessable temporary differences for which no deferred tax liability has been recognised due to the Group having sufficient
deferred tax assets to offset relate to Malaysia (2018: $59.8m, 2017: $4.8m).
14.
Other comprehensive income
Within the statement of comprehensive income the Group has disclosed certain items of other comprehensive income net of the associated
income tax expense or benefit. The pre-tax amount of each of these items and the associated tax effect is as follows:
In A$’000
2018
Pre-tax
Tax effect
Exchange differences on translating
foreign operations
46,922
Total other comprehensive income
46,922
-
-
For the year ended June 30
Total
46,922
Pre-tax
(30,598)
46,922
(30,598)
2017
Restated
Tax effect
-
-
Total
(30,598)
(30,598)
15.
Cash and cash equivalents
In A$’000
Cash at bank and on hand
Restricted cash
Total cash and cash equivalents
As at June 30
2018
42,282
-
42,292
2017
35,858
28,067
63,925
Restricted cash for JARE loan facility
In accordance with the terms of the JARE facility, the JARE restricted bank account was scheduled to be closed when the unrestricted cash
balance exceeded $25.0m on any date after July 31, 2017. Following the satisfaction of that test, the funds in the JARE restricted bank account
were applied as follows on August 4, 2017:
(a) US$15.0m was paid to JARE as a principal repayment, reducing the principal balance of the JARE facility to US$185.0m;
(b) The remaining balance in the JARE restricted interest account was used to partially settle the interest incurred from October 1, 2014
to December 31, 2015. The outstanding interest incurred in the same period was forgiven.
There is a JARE principal repayment test on each interest payment date that commenced on December 31, 2016. On each interest payment
date, when total unrestricted cash balance exceeds $40.0m, the surplus is paid as a principal repayment to JARE pursuant to a cash sweep
mechanism. Under the terms agreed with JARE and the bondholders, if Lynas received the proceeds from an equity raising (such as an issuance
of shares or an exercise of warrants), then the following amounts will be exempted from the cash sweep: (i) 75% of the proceeds received up to
a cumulative balance of US$50.0m, and (ii) 50% of the proceeds above a cumulative balance of US$50.0m.
Restricted cash for convertible bond facility
In accordance with the terms of the convertible bond facility, the convertible bond restricted bank account was scheduled to be closed when the
unrestricted cash balance exceeded $25.0m on any date after July 31, 2017. Following the satisfaction of the test, on August 4, 2017, the funds
in the convertible bond restricted bank account were applied in full payment of the interest incurred from January 1, 2015 to December 31, 2015
and additional interest on withdrawals made in 2016.
16.
Trade and other receivables
In A$’000
Trade receivables
GST / VAT receivables
Other receivables
Total current trade and other receivables
As at June 30
2018
5,843
5,645
877
12,365
2017
2,639
2,862
370
5,871
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, 2018 $0.24m (2017: $0.02m), of trade
receivables were past due and not impaired.
60
60
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
17.
Inventories
17.1
Inventories
In A$’000
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
As at June 30
2018
19,997
26,168
9,602
55,767
51,658
4,109
55,767
2017
11,988
22,075
3,900
37,963
37,448
515
37,963
Restrictions on the title of inventories are outlined in Note 23.
During the year ended June 30, 2018 inventories of $253.0m (2017: $242.2m) were recognised as an expense. All of which were included in
‘cost of sales’.
17.2 Depreciation recognised in inventories
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred exploration, evaluation and
development expenditure and intangible assets for the years ended June 30, 2018 and 2017 respectively in the following categories:
In A$’000
Property, plant and equipment
Deferred exploration and evaluation
expenditure
Intangibles
Total
Recognised in General and
Administration Expense
2017
2018
Recognised in Inventory
Total
2018
2017
2018
2017
4,433
2,493
17
6,943
1,941
2,208
74
4,223
33,594
35,094
-
-
33,594
-
-
35,094
38,027
2,493
17
40,537
37,035
2,208
74
39,317
On the sale of inventory to customers, the component of the depreciation or amortisation expense capitalised within inventory is reflected in the
cost of goods sold in the statement of comprehensive income as a component of the profit or loss. This was $33.9m in the year ended June 30,
2018 (2017: $39.7m).
During the year ended June 30, 2018 the Group recognised royalties paid to the Western Australian Government totalling $7.8m (2017: $5.8m).
Royalties arise on the shipment of the Group’s concentrate from Australia to Malaysia.
18. Reconciliation of the profit / (loss) for the year with the net cash from operating activities
In A$’000
Profit / (loss) for the year
Adjustments for:
Depreciation and amortisation
Employee remuneration settled through share-based payments
Net financial (income) / expenses
Loss on disposal of property, plant and equipment
Income tax expense / (benefit)
Foreign exchange loss included in profit / (loss) for the year
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in other assets and liabilities
Change in provisions (excluding additional rehabilitation obligation)
Change in deferred income
Foreign exchange movement on cash
Net cash from operating activities
For the year ended June 30
Note
2018
2017
Restated
53,119
(534)
11
40,861
5,120
27,635
694
285
5,360
(6,006)
(17,804)
8,539
150
527
-
-
118,480
43,935
2,480
9,763
347
(23,843)
-
(2,272)
3,262
576
13
(2,087)
(1,178)
3,531
33,993
61
61
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
18.1 Reconciliation of liabilities arising from financing activities
June 30, 2017
Cash flows
Non-Cash Movements
June 30, 2018
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjustment(1)
Other
JARE loan facility (Current)
JARE loan facility (Non-Current)
Convertible bond facility
Total liabilities from financing
activities
19,516
240,556
233,287
493,359
(20,262)
(45,280)
-
(65,542)
-
7,630
7,655
15,285
746
6,356
(3,191)
3,912
-
16,758
5,653
-
(18,571)
(225,741)
22,411
(244,312)
Closing
Balance
-
207,449
17,663
225,112
(1) Adjustments to the carrying values of the JARE loan and convertible bonds arising as a result of a change in interest rates and changes to the
timing of repayments.
Other non-cash movements in the JARE loan relate to the forgiveness of interest during the period.
Other non-cash movements in the convertible bond facility relates to conversions of the convertible bonds, including interest paid.
June 30, 2016
Cash flows
Non-Cash Movements
(Restated)
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjustment(1)
Other
June 30, 2017
Closing
Balance
(Restated)
JARE loan facility (Current)
JARE loan facility (Non-Current)
Convertible bond facility
Total liabilities from financing
activities
26,878
245,935
289,751
562,564
(3,950)
-
-
(3,950)
-
6,734
13,447
20,181
(163)
(8,439)
(7,721)
(16,323)
(22,750)
15,827
(62,190)
(69,115)
19,501
(19,501)
-
-
19,516
240,556
233,287
493,359
(1) Adjustments to the carrying values of the JARE loan and convertible bonds arising as a result of the derecognition of liabilities under the old
debt arrangement, and recognition of new liabilities under the revised facility.
Other non-cash movements in the JARE loan relate to reclassifications between current and non-current.
19.
Other non-current assets
In A$’000
Security deposits – banking facilities and other, Malaysia
Security deposits – banking facilities and other, Australia
Security deposits – AELB, Australia
Security deposits – AELB, Malaysia
As at June 30
2018
2017
2,834
398
31,568
3,908
38,708
2,562
570
-
23,484
26,616
Local banking facilities relate both to cash provided for security bonds issued to secure natural gas and electricity supply to LAMP and restricted
deposits pledged as collateral and guarantees for bank facilities in Australia.
Deposits to the Malaysian Government’s Atomic Energy Licencing Board (“AELB”) form a component of a total US$50.0m 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. The total
amount deposited as security via a bond for the instalments is US$23.4m, with a further US$11.0m paid via cash directly to AELB.
Please refer to Note 33 for the residual commitment to the AELB.
62
62
www.lynascorp.com 5
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63
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
21.
Deferred development expenditure
In A$’000
As at June 30, 2018
Cost
Accumulated impairment losses
Accumulated amortisation
Carrying amount
As at June 30, 2017
Cost
Accumulated impairment losses
Accumulated amortisation
Carrying amount
Cost at July 1, 2017
Accumulated amortisation and impairment losses at July 1, 2017
Carrying amount at July 1, 2017
Effect of movements in exchange rates
Amortisation for the year
Transfer of rehabilitation asset to property, plant and equipment
Carrying amount at June 30, 2018
Cost at July 1, 2016
Accumulated amortisation and impairment losses at July 1, 2016
Carrying amount at July 1, 2016
Effect of movements in exchange rates
Amortisation for the year
Change in rehabilitation obligations
Carrying amount at June 30, 2017
Development
expenditure
Pre-production
stripping
Rehabilitation
Asset
Total
38,862
(18,122)
(5,392)
15,348
38,844
(18,122)
(4,316)
16,406
38,844
(22,438)
16,406
20
(1,078)
-
15,348
38,859
(21,502)
17,357
1
(952)
-
16,406
4,078
-
(700)
3,378
4,078
-
(499)
3,579
4,078
(499)
3,579
-
(201)
-
3,378
4,078
(323)
3,755
-
(176)
-
3,579
-
-
-
-
24,602
-
(2,588)
22,014
24,602
(2,588)
22,014
-
(1,233)
(20,781)
-
24,602
(1,508)
23,094
-
(1,080)
-
22,014
42,940
(18,122)
(6,092)
18,725
67,524
(18,122)
(7,403)
41,999
67,524
(25,525)
41,999
20
(2,512)
(20,781)
18,725
67,539
(23,333)
44,206
1
(2,208)
-
41,999
Restrictions on the title of the deferred development expenditure are outlined in Note 23.
22.
Trade and other payables
In A$’000
Trade payables
Accrued expenses
Security deposit payable to AELB
Other payables
Total trade and other payables
Current*
Non-current
Total trade and other payables
*Current trade and other payables are non-interest bearing and are normally settled on 30 to 60 day terms.
As at June 30
2018
2017
12,556
11,994
-
11,042
35,592
35,012
580
35,592
8,747
9,136
20,267
8,851
47,001
45,639
1,362
47,001
64
64
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
23.
Borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information about the
Group’s exposure to interest rate and foreign currency risk, see Note 27.
In A$’000
Current borrowings
JARE loan facility
Non-current borrowings
JARE loan facility
Convertible bond facility
Total borrowings (1)
JARE loan facility
Total JARE loan facility carrying amount
Principal value of convertible bond facility (2)
Unamortised equity component (2)
Total convertible bond facility carrying amount
As at June 30
2018
2017
Restated
-
19,516
207,449
17,663
225,112
207,449
207,449
20,944
(3,281)
17,663
240,556
233,287
493,359
260,072
260,072
308,354
(75,067)
233,287
(1)
(2)
There has been no additional drawdown under the loan facilities. Due to the substantial amendments made to the terms of the Group’s
debt facilities during the year.
The principal balance reflects the full value of the convertible bonds. On initial recognition, part of this value is recognised as a component
of equity.
Japan Australia Rare Earths B.V. (JARE) loan facility
The maturity date of the JARE loan facility is June 30, 2020. The interest rate on this facility has increased to 3.75% p.a. at June 30, 2018 (June
30, 2017: 2.50% p.a.) in line with the interest rate calculation below.
If, on the last day of any calendar month (“test date”) the weighted average sale price of NdPr products sold by the Group in the immediately
preceding 6 calendar months is US$38.0 per kilogram or greater, the interest rate will increase to 3.75% p.a., effective on and from the day after
the test date. The interest rate will remain 3.75% p.a. until there have been 6 consecutive test dates on which the weighted average sale price
of NdPr products sold by the Group in the immediately preceding 6 calendar months is less than US$38.0 per kilogram, in which case the interest
rate will revert to 2.50% p.a. effective on and from the day after such 6th consecutive test date, and will remain 2.50% p.a. until any test date on
which the weighted average realised sale price of NdPr products sold by the Group in the immediately preceding 6 calendar month is US$38.0
per kilogram or greater.
Future interest liabilities will be paid directly to the lenders. There are no fixed principal repayments from unrestricted cash during the term of the
facility. In accordance with the terms of the JARE facility, the JARE restricted bank account was scheduled to be closed when the unrestricted
cash balance exceeded $25.0m on any date after July 31, 2017. Following the satisfaction of that test, the funds in the JARE restricted bank
account were applied as follows on August 4, 2017:
(a) US$15.0m was paid to JARE as a principal repayment, reducing the principal balance of the JARE facility to US$185.0m;
(b) The remaining balance in the JARE restricted interest account was used to partially settle the interest incurred from October 1, 2014
to December 31, 2015. The outstanding interest incurred in the same period was forgiven.
Except as indicated below there are no compulsory principal repayments due until the maturity date. Additional voluntary principal repayments
of US$15.0m and US$20m were made on October 13, 2017 and June 28, 2018 respectively.
On each interest payment date, when the total unrestricted cash balance exceeds $40.0m, the surplus is paid as a principal repayment to JARE
pursuant to a cash sweep mechanism. Under the terms agreed with JARE and the bondholders, if Lynas received the proceeds from an equity
raising (such as an issuance of shares or an exercise of warrants), then the following amounts will be exempt from the cash sweep: (i) 75% of
the proceeds received up to a cumulative balance of US$50.0m, and (ii) 50% of the proceeds above a cumulative balance of US$50.0m.
The payment of interest in respect of the period commencing on January 1, 2016 and ending on December 31, 2016 will be deferred to the
maturity date (with no penalty and no additional interest). All interest accrued after July 1, 2017 is paid as accrued at interest dates of December
31 and June 30 each year.
Lynas shall ensure that in the event of competing demands from the Japanese market and a non-Japanese market for the supply of NdPr
produced from the LAMP, the Japanese market shall have priority of supply up to 3,600 tonnes per year subject to the terms of the Availability
Agreement that was announced on March 30, 2011 and to the extent that Lynas will not have any opportunity loss.
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.
Mt. Kellett convertible bonds
As at June 30, 2018, the Company had on issue 15,242,004 convertible bonds, each with a face value of US$1.00. The bonds are convertible
at any time prior to maturity of the bonds at the election of the bondholder. During the year 209,757,996 convertible bonds were converted into
shares. The maturity of the bonds is September 30, 2020 and the coupon rate on the convertible increased to 1.875% p.a. (June 30, 2017:
1.25% p.a.) in line with the interest calculation below. The conversion price was adjusted from $0.10 per share to $1 reflecting the 10 to 1 share
consolidation during the period. The conversion exchange rate remained at AUD 1.00 = US$0.750. If all of the convertible bonds were converted
into ordinary shares, 20.323m ordinary shares would be issued.
65
65
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
If the bonds are not converted prior to the maturity date, the face value of the bonds is repayable to the bondholder on the maturity date. Prior
to the maturity date, the Company is liable to pay interest on the convertible bonds, as detailed below. A bondholder may, at any time following
the occurrence of a defined “Redemption Event”, require the Company to redeem some or all of the convertible bonds held by the bondholder.
The Redemption Events include, for example, an insolvency event occurring in relation to a Group Company, a Group Company ceasing (or
threatening to cease) to carry on all or part of its business which is likely to be materially adverse to the Group as a whole, a cross default by the
Group in relation to certain other financial indebtedness (including the JARE loan facility), and a change in control of any member of the Group.
The convertible bonds are unsecured. The convertible bond terms include customary covenants which restrict the Group from incurring any
financial liabilities or creating any security interests which in each case would rank senior to or pari passu with the convertible bonds, subject to
specified exceptions which include the JARE loan facility.
If, on the last day of any calendar month (“test date”) the weighted average sale price of NdPr products sold by the Group in the immediately
preceding 6 calendar months is US$38.0 per kilogram or greater, the interest rate will increase to 1.875% p.a., effective on and from the day
after the test date. The interest rate will remain 1.875% p.a. until there have been 6 consecutive test dates on which the weighted average sale
price of NdPr products sold by the Group in the immediately preceding 6 calendar months is less than US$38.0 per kilogram, in which case the
interest rate will revert to 1.25% p.a. effective on and from the day after such 6th consecutive test date, and will remain 1.25%p.a. until any test
date on which the weighted average realized sale price of NdPr products sold by the Group in the immediately preceding 6 calendar month is
US$38.0 per kilogram or greater.
The interest incurred from January 1, 2016 to December 31, 2016 was deferred to the maturity date with no penalty and no additional interest.
All interest accrued after July 1, 2017 is paid as accrued at interest dates of December 31 and June 30 each year. As a bond is converted prior
to the maturity date, the associated interest owed on that bond is paid on conversion.
In accordance with the terms of the convertible bond facility, the convertible bond restricted bank account was scheduled to be closed when the
unrestricted cash balance exceeded $25.0m on any date after July 31, 2017. Following satisfaction of that test, on August 4, 2017, the funds in
the convertible bond restricted bank account were applied in full payment of the interest incurred from January 1, 2015 to December 31, 2015
and additional interest on withdrawals made in 2016.
Terms and debt repayment schedule
Currency Nominal interest
Date of maturity
rate
JARE loan facility
Convertible bond facility (2)
USD
USD
3.75%
1.875%
June 2020
Sept 2020
As at June 30, 2018
As at June 30, 2017
Restated
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
161,505(1)
15,647
177,152
207,449
17,633
225,082
211,865
230,982
442,847
260,072
233,287
493,359
(1) The face value of the JARE loan facility includes US$150.0m in principal and US$11.5m in interest deferred to maturity date per the
amendments above.
(2) The face value of the Convertible bond facility includes US$15.2m in principal and US$0.4m in interest deferred to maturity date per the
amendments above. The carrying amount of the convertible bond facility reflects the current value of the debt component of the instrument.
Average for the year ended
Average for the year ended
June 30, 2018
Base rate
Margin
Total rate
Base rate
June 30, 2017
Margin
Total rate
JARE loan facility
Convertible bond facility
3.54%
1.77%
-
-
3.54%
1.77%
3.84%
1.88%
-
-
3.84%
1.88%
24.
Employee benefits
In A$’000
Provision for annual leave
Provision for long service leave
Total employee benefits
Current
Non-current
Total employee benefits
As at June 30
2018
2,142
354
2,496
2,142
354
2,496
2017
1,893
385
2,278
2,112
166
2,278
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
25.
Provisions
In A$’000
Balance at the beginning of the year
Provisions made during the year
Provisions utilised during the year
Effects of foreign exchange movement
Unwinding of discount on provision
Balance at June 30, 2018
Current
Non-current
Total provisions at June 30, 2018
Current
Non-current
Total provisions at June 30, 2017
Restoration and
rehabilitation
Onerous
contracts
Other
57,186
3,067
-
3,439
793
64,485
-
64,485
64,485
-
57,186
57,186
550
-
(309)
-
-
241
241
-
241
309
241
550
116
-
-
-
-
116
116
-
116
-
116
116
Total
57,852
3,067
(309)
3,439
793
64,842
357
64,485
64,842
309
57,543
57,852
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 4.4. 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 has reviewed the costs as at June 30, 2018. This review resulted
in an increase in the provision for rehabilitation of $3.1m. The Group will continue to review these estimates periodically over time as the
operations continue to develop.
The unwinding effect of discounting of the provision is recognised as a financial expense.
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. Due to prevailing market conditions, the Sydney office was sub-let at a rent lower than the rent payable under the head
lease. An onerous contract provision of $0.2m has been taken up, which is based on the future rental payments net of estimated recoveries from
sub-letting.
26.
Equity and reserves
26.1
Share capital
Balance at the beginning of the year
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised warrants
Issue of shares pursuant to exercised performance rights
Subtotal prior to share consolidation
10 to 1 share consolidation
Subtotal after share consolidation
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to exercised warrants
Closing balance
As at June 30
Number of
shares
‘000
3,677,743
1,713,333
95,733
-
5,486,809
(4,938,124)
548,685
108,344
1,642
3,876
662,547
2018
A$’000
1,094,403
173,914
9,066
-
1,277,383
-
1,277,383
114,275
-
3,759
1,395,417
Number of
shares
‘000
3,488,438
-
156,154
33,151
3,677,743
-
-
2017
A$’000
1,088,469
-
5,934
-
1,094,403
-
-
3,677,743
1,094,403
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in the event of a wind-up.
Further detail regarding the issue of shares on option or performance right conversion is provided in Note 30.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
26.2 Reserves
In A$’000
Equity settled employee benefits
Foreign currency translation
Warrant reserve
Equity component of convertible bond
Balance at June 30
As at June 30
2018
45,091
(109,619)
34,094
5,856
(24,578)
2017
Restated
39,970
(156,541)
40,413
83,390
7,232
The equity settled employee benefits reserve relates to performance rights granted by the Group to its employees under the employee share
option plan. Further information about share-based payments to employees is set out in Note 30.
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional currencies
to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign currency translation
reserve.
The other reserve represents the equity component of the US$225.0m unsecured convertible bond facility issued in 2012 and amended in 2016,
net of the associated deferred tax (see Note 23). This has reduced in line with the conversion of bonds during the year.
26.3
Earnings / loss per share
Basic earnings per share amounts are calculated by dividing net profit / (loss) for the year attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on
conversion of all dilutive potential ordinary shares into ordinary shares.
The earnings / (loss) and weighted average number of ordinary shares used in the calculations of basic and diluted earnings / (loss) per share
are as follows:
In A$’000
Net earnings / (loss) attributed to ordinary shareholders
Earnings / (loss) used in calculating basic earnings / (loss) per share
Net earnings impact of assumed conversions of diluted EPS
Earnings / (loss) used in calculating diluted earnings / (loss) per share
Number of ordinary shares on issue (‘000)
Weighted average number of ordinary shares used in calculating basic earnings / (loss) per
share (‘000)
Weighted average number of ordinary shares used in calculating diluted earnings / (loss)
per share (‘000)
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
As at June 30
2018
53,119
53,119
1,213
54,332
662,547
600,689
655,555
8.84
8.29
2017
Restated
(534)
(534)
-
(534)
367,743
351,842
351,842
(0.15)
(0.15)
The basic and diluted loss per share for the year ended June 30, 2017 comparative period has been restated to reflect the 10 to 1 share
consolidation of Lynas Corporation Ltd shares, which was completed on December 4, 2017, as well as the correction of error as detailed in Note
6.
26.4 Capital management
The Directors are responsible for monitoring and managing the Group's capital structure.
The Directors’ policy is to maintain an acceptable capital base to promote the confidence of the Group’s financiers and creditors and to sustain
the future development of the business. The Directors monitor the Group’s financial position to ensure that it complies at all times with its financial
and other covenants as set out in its financing arrangements.
In order to maintain or adjust the capital structure, the Directors may elect to take a number of measures including, for example, to dispose of
assets or operating segments of the business, to alter its short to medium term plans in respect of capital projects and working capital levels, or
to re-balance the level of equity and external debt in place.
Capital comprises share capital, external debt and reserves.
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Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
27.
Financial risk management
27.1
Overview
This note presents information about the Group’s exposure to market risk, credit risk and liquidity risk, and, where applicable, the Group’s
objectives, policies and procedures for managing these risks.
Exposure to market, credit and liquidity risks arise in the normal course of the Group’s business. The Directors and management of the Group
have overall responsibility for the establishment and oversight of the Group’s risk management framework.
27.2 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices will affect the Group’s
cash flows or the fair value of its holdings of financial instruments. The objective of market risk management is to manage and control market
risk exposures within acceptable parameters.
(a)
Foreign exchange risk
As a result of the Group’s international operations, foreign exchange risk exposures exist on purchases, assets and borrowings that are
denominated in foreign currencies (i.e. currencies other than the functional currency of each of the Group’s operating entities). The currencies
in which these transactions are primarily denominated are the AUD, USD and MYR.
The Group takes advantage of natural offsets to the extent possible. Therefore, when commercially feasible, the Group borrows in the same
currencies in which cash flows from operations are generated. Generally the Group does not use forward exchange contracts to hedge residual
foreign exchange risk arising from receipts and payments denominated in foreign currencies. However, when considered appropriate the Group
may enter into forward exchange contracts to hedge foreign exchange risk arising from specific transactions.
The Group’s primary exposure to foreign exchange risk is on the translation of net assets of Group entities which are denominated in currencies
other than AUD, which is the Group’s presentation currency. The impact of movements in exchange rates is recognised primarily in the other
comprehensive income component of the Group’s statement of comprehensive income.
Certain subsidiaries within the Group are exposed to foreign exchange risk on purchases denominated in currencies that are not the functional
currency of that subsidiary. In these circumstances, a change in exchange rates would impact the net operating profit recognised in the profit or
loss component of the Group’s statement of comprehensive income.
Effective from January 24, 2012, the functional currency of Lynas Corporation Limited (the Parent) changed from AUD to USD, following the
issue of the US$225.0m convertible bond facility.
Exposure to foreign exchange risk
The Group’s members are exposed to foreign exchange risk on financial assets and financial liabilities that are denominated in foreign currencies
i.e. currencies other than the functional currency of each member of the group. Whilst a member of the group with MYR as its functional currency
is exposed to USD and AUD, another member with USD as its functional currency is exposed to AUD. This exposure on financial assets and
liabilities by currency, which has potential impact on the profit or loss component of the statement of comprehensive income, is detailed below:
In A$’000
June 30, 2018
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
June 30, 2017
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total exposure
AUD
USD
Total
704
-
-
704
980
-
-
980
4,352
5,495
(670)
9,177
7,542
2,643
(644)
9,541
5,056
5,495
(670)
9,881
8,522
2,643
(644)
10,521
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:
In ’000
June 30, 2018
Net asset exposure – local currency
June 30, 2017
Net asset exposure – local currency
Significant exchange rates
MYR
USD
479,304
(143,150)
737,871
1,085,889
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 year:
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
AUD/USD
AUD/MYR
Sensitivity analysis
Average rate for the year ended
June 30
Closing rate as at June 30
2018
2017
2018
2017
0.7753
3.1614
0.7545
3.2331
0.7403
2.9839
0.7692
3.3029
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$’000
USD
AUD
Increase/(decrease) in
profit after tax
For the year ended
June 30, 2018
Increase/(decrease) in
profit after tax
For the year ended
June 30, 2017
10 %
Strengthening
(1,473)
82
10%
Weakening
1,473
(82)
10%
Strengthening
(1,070)
195
10%
Weakening
1,070
(195)
A change in exchange rates would also impact the translation of net assets of Group operations whose functional currencies are denominated
in currencies other than AUD, which is the Group’s presentation currency. A 10% strengthening or weakening of these currencies against the
Group’s presentation currency, at the reporting date, would have increased (decreased) the reported net asset. This analysis assumes that all
other variables remain constant. The same basis has been applied for all periods presented.
In A$’000
MYR
USD
(b)
Interest rate risk
Increase/(decrease) in
equity
For the year ended
June 30, 2018
Increase/(decrease) in
equity
For the year ended
June 30, 2017
10 %
Strengthening
16,064
(19,059)
10%
Weakening
(16,064)
19,059
10%
Strengthening
22,340
80,539
10%
Weakening
(22,340)
(80,539)
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 flows 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.
The following table sets out the Group’s interest rate risk re-pricing profile:
In A$’000
June 30, 2018
Floating rate instruments
Cash and cash equivalents
Other non-current assets
Convertible bond facility*
JARE loan facility**
Total
June 30, 2017 *Restated*
Floating rate instruments
Cash and cash equivalents
Other non-current assets
Convertible bond facility*
JARE loan facility**
Total
Total
6 months or
less
6 to 12
months
1 to 2 years
2 to 5 years
More than 5
years
42,292
3,232
(20,944)
(207,449)
(182,869)
63,925
3,132
(308,354)
(260,072)
(501,369)
42,292
3,232
-
-
45,524
63,925
3,132
-
(19,516)
47,541
-
-
-
-
-
-
-
-
-
-
-
-
-
(207,449)
(207,449)
-
-
(20,944)
-
(20,944)
-
-
-
-
-
-
(308,354)
(240,556)
(548,910)
-
-
-
-
-
-
-
-
-
-
*
**
If, on the last day of any calendar month (“test date”) the weighted average sale price of NdPr products sold by the Group in the immediately
preceding 6 calendar months is US$38.0 per kilogram or greater, the convertible bond interest rate will increase from 1.25% per annum to
1.875% per annum, effective on and from the date after the test date. The current rate being applied is 1.875%.
If, on the last day of any calendar month (“test date”) the weighted average sale price of NdPr products sold by the Group in the immediately
preceding 6 calendar months is US$38.0 per kilogram or greater, the JARE loan facility interest rate will increase from 2.5% per annum to
3.75% per annum, effective on and from the date after the test date. The current rate being applied is 3.75%.
The Group’s sensitivity to interest rate risk can be expressed in two ways:
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
Fair value sensitivity analysis
A change in interest rates impacts the fair value of the Group’s fixed rate borrowings. Given all debt instruments are carried at amortised
cost, a change in interest rates would not impact the statement of comprehensive income as a component of the profit or loss or the statement
of financial position.
Cash flow sensitivity analysis
A change in interest rates would have an impact on future interest payments and receipts on the Group’s floating rate assets and liabilities.
An increase or decrease in interest rates of 50 basis points at the reporting date would negatively or positively impact both the statement of
financial position and profit or loss through the statement of comprehensive income by the amounts shown, based on the assets and liabilities
held at the reporting date and a one year time frame. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant. The analysis is performed on the same basis for comparative periods.
In A$’000
50 basis point parallel increase in interest rates
50 basis point parallel decrease in interest rates
(c)
Commodity and other price risk
For the year ended 30 June
2018
2017
(915)
915
(2,427)
2,427
Commodity and other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to
the individual financial instrument or its issuer or factors affecting all similar financial instruments traded in the market.
27.3
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the Group’s receivables from customers and related entities. The Group’s exposure to credit risk is primarily in its
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.
27.4
Liquidity risk
Liquidity risk is the risk that the Group will not meet its contractual obligations as they fall due. The Group’s approach to managing liquidity
risk is to ensure that it will always have sufficient liquidity to meet its liabilities as and when they fall due and comply with covenants under
both normal and stressed conditions.
The Group evaluates its liquidity requirements on an on-going basis and ensures that it has sufficient cash on demand to meet expected
operating expenses including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot
reasonably be predicted, such as natural disasters.
The following table sets out contractual cash flows for all financial liabilities including derivatives based on expected repayments.
In A$’000
June 30, 2018
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility (4)
Convertible bond facility
Total
Weighted
average effective
interest rate
Total
1 month
or less
1 to
3 months
3 months
to 1 year
1 to 5 years More than 5
years
N/A
(1)
(2)
35,012
35,012
236,816
21,396
293,224
-
-
35,012
-
-
-
-
-
-
8,372
387
8,759
228,444
21,009
249,453
-
-
-
-
June 30, 2017
Non-derivative financial liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
-
Convertible bond facility
-
Total
-
(1) The JARE loan facility has a nominal interest rate of 3.75% and effective interest rate (EIR) is 7.00%. The EIR is the rate at which the debt
296,829
305,583
648,051
270,342
301,561
571,903
19,501
-
19,501
327
-
45,966
6,659
4,022
10,681
45,639
45,639
(1)
(2)
N/A
-
-
-
-
balance will be unwound through financial expenses over the facility term. Refer Note 23 for details.
(2) The convertible bond facility has a coupon rate of 1.875% and EIR of 10.0%. The EIR is the rate at which the debt component of the facility
will be unwound through financial expenses over the facility term. Refer Note 23 for details.
(3) The above liquidity table excludes other non-contractual financial commitments as disclosed in Note 33.
(4) The JARE loan includes a clause whereby early repayments may be required dependent on Lynas’ cash position at particular test dates.
Refer Note 23 for details.
27.5
Classification and fair values
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
In A$’000
June 30, 2018
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total assets
Liabilities
Trade and other payables
Current tax payable
Loans and borrowings
JARE loan facility
Convertible bond facility
Total liabilities
June 30, 2017 Restated
Assets
Cash and cash equivalents
Trade and other receivables
Current tax receivable
Other assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
JARE loan facility
Convertible bond facility
Total liabilities
Fair value through
the profit and loss
Cash, loans &
receivables
Other
liabilities
Total
carrying amount
Total
fair value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,292
12,365
38,708
93,365
-
-
-
-
-
63,925
5,871
98
26,616
96,510
-
-
-
-
-
-
-
35,012
52
207,449
17,663
260,175
-
-
-
-
-
45,639
260,072
233,287
538,998
42,292
12,365
38,708
93,365
35,012
52
207,449
17,663
260,175
63,925
5,871
98
26,616
96,510
45,639
260,072
233,287
538,998
42,292
12,365
38,708
93,365
35,012
52
210,825
17,885
263,774
63,925
5,871
98
26,616
96,510
45,639
260,072
233,287
538,998
The methods used in determining fair values of financial instruments are discussed in Note 5 and Note 27.7.
27.6
Fair value measurements recognised in the statement of comprehensive income
Upon 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, 2018 the Group held only Level 2 financial instruments (being the loans and borrowings) and all other liabilities Level 1.
27.7
Fair value of borrowings
The fair value of borrowings, which have been determined for disclosure purposes, is calculated by discounting the future contractual cash flows
at the current market interest rates that are available for similar financial instruments.
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Notes to Consolidated Financial Statements
For the year ended June 30, 2018
28. Related parties
28.1 Key management personnel compensation
The aggregate compensation made to the Directors and other members of KMP of the Group is set out below:
In A$
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share based payments
Total compensation paid to key management personnel
For the year ended June 30
2018
5,690,410
21,022
295,939
4,655,640
10,663,011
2017
4,425,560
15,015
149,783
1,980,675
6,571,033
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.
28.2 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.
29.
Group entities
Name of Group entity
Principal activity
Country of incorporation
Ownership interest as at June 30
2017
2018
Lynas Malaysia Sdn Bhd
Operation and development of
advanced material processing plant
Malaysia
100%
100%
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
ACN 053 160 302 Pty Ltd*
Dormant
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Mineral exploration
Australia
Australia
Australia
Australia
Australia
Malawi
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
* Entity has entered into a deed of cross guarantee with Lynas Corporation Limited pursuant to ASIC Instrument 2016/785 and is relieved from the requirement to prepare and lodge an audited
financial report, as discussed in Note 34. Entity is also a member of the tax-consolidated group.
30.
Employee share options and performance rights
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, Remuneration and Community Committee. Other
than short term incentives, each option or performance right is convertible into one ordinary share of the Company during the two years following
the vesting date, which is the third anniversary of the grant date. The exercise price for the options is not less than the VWAP for the five days
preceding the date the option is granted. The options or performance rights hold no voting or dividend rights, and are not transferrable.
Options and performance rights are granted for the benefit of Key Management Personnel (“KMP”) and other selected employees to provide
greater alignment to our strategic business objectives. KMP are those people who have authority and responsibility for planning, directing and
controlling the major activities of the Group, directly or indirectly, including any Executive Director of the Group and the Executives. At year end,
the Executives include the Chief Executive Officer, the Chief Financial Officer, the Group’s General Counsel and Company Secretary, Vice
President for Production, Vice President for Sales and Marketing, MD Malaysia and Vice President for People & Culture.
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
30.1 Movements in employee performance rights during the year
Balance at beginning of year
Adjustment for share consolidation
Balance after share consolidation
Granted during the year
Expired during the year
Exercised during the year
Forfeited during the year
Balance at end of year
Exercisable at end of year
For the year ended June 30, 2018
For the year ended June 30, 2017
No. of performance
rights
(‘000)
94,790,959
(85,311,847)
9,479,112
4,579,543
-
(1,642,201)
(1,129,512)
11,286,942
-
Weighted average
exercise price
($)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
No. of performance
rights
(‘000)
97,089,820
-
97,089,820
34,460,649
-
(33,151,019)
(3,608,491)
94,790,959
-
Weighted average
exercise price
($)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
During the year ended June 30, 2018 the Group recognised net share based payment expense of $5.1m (2017: $2.5m) within the profit and loss
component of the statement of comprehensive income. The net expense during the year included the reversal of expenses totalling $1.1m (2017:
$0.1m) associated with the forfeiture of 1,129,512 performance rights.
30.2 Options, warrants and performance rights exercised during the year
No options were exercised during the year.
Warrants have been issued to lenders as part of the amendments in debt facilities. The following warrants were exercised:
Exercise date
Number exercised
Share price on exercise date ($)
Exercise price ($)
Warrants exercised prior to share consolidation
July 24, 2017
July 24, 2017
August 9, 2017
August 11, 2017
September 27, 2017
Warrants exercised after share consolidation
May 10, 2018
18,211,504
36,434,801
23,256,255
15,504,171
2,325,626
3,876,043
0.137
0.137
0.150
0.150
0.185
2.700
0.038
0.050
0.050
0.050
0.050
0.500
The following performance rights were exercised during the year:
Exercise date
Number exercised
Share price on exercise date ($)
Exercise price ($)
Performance rights exercised after share consolidation
December 7, 2017
1,642,201
30.3
Performance rights outstanding at the end of the year
1.75
0.00
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 778 days (2017: 1,088 days).
30.4 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, 2018 with respect to the performance of the Group’s employees during the financial year ended June 30, 2017:
TSR hurdle (50%)
50% of the TSR portion will vest for:
51st percentile performance
Vesting schedule
For grants made in FY18
(performance against ASX 300 Metals
and Mining Index companies during
the vesting period)
EBITDA Production Hurdle (50%)
(EBITDA performance July, 1 2017 to
June 30, 2020)
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 EBITDA production portion will vest
for:
Average annual EBITDA growth at the end of the
period from July 1, 2017 to June 30, 2020 is at
least 21% per annum.
100% of the EBITDA production portion will
vest for:
Average annual EBITDA growth at the end of the
period from July 1, 2017 to June 30, 2020 is at
least 25% per annum.
Additional 20% of the EBITDA production
portion, giving a total of 120% of the EBITDA
production portion:
Average annual EBITDA growth at the end of the
period from July 1, 2017 to June 30, 2020 is at
least 30% per annum.
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.
74
74
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
The performance rights granted during the financial year had a weighted average fair value of $863,164 (2017: $166,339) and were priced using
volume-weighted average share prices, Monte Carlo and Binomial valuation methodologies. Where relevant the expected life used in the model
has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of
meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price
volatility over the past three years and peer volatility.
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
Series AQ
Series AR
Series AS
Series AT
Aug 28, 2017 Aug 28, 2017 Nov 28, 2017 Nov 28, 2017
$1.560
$0.00
Nil
N/A
N/A
$1.560
$0.00
Nil
N/A
N/A
Aug 28, 2018 Aug 28, 2022 Aug 28, 2019
$2.060
$0.00
Nil
N/A
N/A
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2019
Series AU
Nov 28, 2017
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2022
Series AV
Nov 28, 2017
$2.060
$0.00
Nil
85.90%
1.88%
Aug 28, 2022
Series AW
Nov 28, 2017
$2.060
$0.00
Nil
N/A
N/A
Aug 28, 2019
30.5 Options and performance rights still to vest or yet to expire
Performance rights are issued on the same terms as options, except there is no consideration payable on exercise. The following table lists any
options and performance rights which are still to vest, or have yet to expire.
Series
Grant date
Number
Date vested and
exercisable
Expiry date
Exercise
price
Value per option at
grant date
AG
AH
AJ
AK
AM
AO
AP
AQ
AR
AS
AT
AU
AV
AW
Total
September 18, 2015
1,026,128
September 18, 2018
September 18, 2020
September 18, 2015
1,521,518
September 18, 2018
September 18, 2020
November 23, 2015
1,058,824
September 18, 2018
September 18, 2020
November 23, 2015
882,353
September 18, 2018
September 18, 2020
August 30, 2016
1,195,319
August 30, 2019
August 30, 2021
November 30, 2016
558,140
August 30, 2019
August 30, 2021
November 30, 2016
465,117
August 30, 2019
August 30, 2021
August 28, 2017
August 28, 2017
533,893
August 28, 2018
August 28, 2018
476,715
August 28, 2020
August 28, 2022
November 28, 2017*
2,123,816
August 28, 2019
August 28, 2019
November 28, 2017*
212,391
August 28, 2018
August 28, 2019
November 28, 2017*
231,066
August 28, 2020
August 28, 2022
November 28, 2017*
192,555
August 28, 2020
August 28, 2022
November 28, 2017*
809,107
August 28, 2019
August 28, 2019
11,286,942
$ 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
$ 0.290
$ 0.390
$ 0.900
$ 0.800
$ 0.650
$ 0.680
$ 0.500
$1.560
$1.360
$2.060
$2.060
$2.060
$1.620
$2.060
*Series AS to AW were issued on August 28, 2017, subject to approval at the AGM. These performance rights were subsequently approved at
the AGM on November 28, 2017, and has been deemed the grant date.
31.
Warrants
On December 9, 2016 the Group issued 348,843,836 unlisted warrants to the Mt. Kellett led bond holder group as part of the commercial terms
relating to the maturity extension of the convertible bond. From the date of issue, each warrant is exercisable into one ordinary share at an
exercise price of $0.05* and has an expiry date of September 30, 2020.
The costs of these equity-settled transactions have been measured by reference to the fair value at the date at which they were granted using
the Black Scholes pricing model. Each warrant had a fair value of $0.0235.
The following table discloses how the number of warrants has changed over the year:
Exercise price
Expiry date
Balance as at June 30, 2017
Exercised on July 24, 2017
Exercised on August 9, 2017
Exercised on September 27, 2017
Subtotal before consolidation
Share consolidation
Subtotal after consolidation
Exercised on May 10, 2018
Balance as at June 30, 2018
September 2015 Issue
$0.038
September 30, 2018
December 2016 Issue
$0.50*
September 30, 2020
18,211,504
(18,211,504)
-
-
-
-
-
-
-
348,843,836
(36,434,801)
(38,760,426)
(2,325,626)
271,322,983
(244,190,682)
27,132,301
(3,876,043)
23,256,258
*Exercise price has been adjusted to $0.50 from $0.05 to reflect the 10 to 1 share consolidation of Lynas Corporation Ltd shares, which was
completed on December 4, 2017.
75
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Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
32.
Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In A$’000
Less than one year
Between one and five years
More than five years
Total
As at June 30
2018
3,139
5,667
-
8,806
2017
3,241
8,561
-
11,802
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.
33.
Capital commitments
There were no outstanding commitments which are not disclosed in the consolidated financial report of the Group as at June 30, 2018 other
than:
Exploration commitments
In A$’000
Less than one year
Between one and five years
More than five years
Total
As at June 30
2018
2017
377
1,389
1,637
3,403
364
1,415
1,767
3,546
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Department of Mines and
Petroleum attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when application for a mining
licence is made. These are necessary in order to maintain the tenements in which the Group and other parties are involved. All parties are
committed to meet the conditions under which the tenements were granted in accordance with the relevant mining legislation.
Capital commitments
In A$’000
Less than one year
Total
At June 30, 2018 capital commitments relate to on-going capital project costs in Malaysia.
Other commitments
In A$’000
Less than one year
Between one and five years
More than five years
Total
As at June 30
2018
4,255
4,255
As at June 30
2018
10,523
10,523
-
21,046
2017
1,632
1,632
2017
30,432
20,271
-
50,703
Lynas is required to pay in instalments, a total of US$50.0m to the Malaysia’s AELB in accordance with the conditions underlying the granting
of Lynas’ Full Operating Stage License for the LAMP in Gebeng, Malaysia.
34.
Deed of cross guarantee
Pursuant to ASIC Instrument 2016/785 (as amended) dated August 13, 1998, the wholly-owned Australian subsidiaries of Lynas Corporation
Limited are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Director’s reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed
is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain
provisions of the Corporations Act 2001. If a winding up event occurs under any other provision of the Act, the Company will only be liable in the
event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the
Company is wound-up.
The subsidiaries in addition to the Company subject to the deed are specified in Note 29.
76
76
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
A statement of comprehensive income and statement of financial position, comprising the Company and controlled entities which are party to
the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee is presented as follows:
Statement of Financial Position
In A$’000
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Intangible assets – software
Investments in subsidiaries
Other assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Interest payable
Borrowings
Employee benefits
Intercompany payables
Total current liabilities
Trade and other payables
Provisions
Employee benefits
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated deficit
Reserves
Total equity
Statement of comprehensive income
Revenue
Cost of sales
Gross profit
Other expenses
General and administration expenses net of recoveries
Profit / (loss) from operating activities
Financial income
Financial expenses
Net financial expenses
Loss before income tax
Income tax benefit / (expense)
Profit / (loss) for the year from continuing operations
Other comprehensive loss, net of income tax
Exchange differences on foreign currency transactions
Total other comprehensive loss for the year, net of income tax
Total comprehensive income / (loss) for the year
As at June 30
2018
2017
Restated
34,313
339,020
11,719
385,052
3,554
123,154
18,725
-
375,080
398
520,912
905,963
9,908
452
-
1,545
133,790
145,694
-
33,179
354
225,112
258,645
404,339
501,624
29,572
228,799
6,655
265,026
515
94,969
41,999
13
375,080
29,636
542,212
807,238
6,837
2,770
19,516
1,686
-
30,809
753
51,208
277
450,958
503,196
534,005
273,233
1,395,417
(1,065,549)
171,756
501,624
1,094,403
(1,056,114)
234,944
273,233
109,873
(77,612)
32,261
(10)
(14,218)
18,053
480
(27,901)
(27,421)
(9,368)
(43)
(9,411)
(24)
(24)
(9,435)
80,758
(70,164)
10,594
(28)
(13,697)
(3,131)
22,905
(34,347)
(11,442)
(14,573)
20,766
6,193
(1,362)
(1,362)
4,831
77
77
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2018
35.
Parent entity information
In A$’000
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Accumulated deficit
Reserves
Total shareholders’ equity
(Loss) / profit of the Company
Total comprehensive (loss) / gain of the parent Company
36.
Contingencies
Contingent liabilities
As at June 30,
2018
1,226
818,043
(452)
(226,095)
591,948
1,395,417
(1,128,688)
325,219
591,948
(33,204)
(33,204)
2017
Restated
29,512
856,205
(22,286)
(496,530)
359,675
1,094,443
(1,095,484)
360,716
359,675
21,308
21,308
An amount of US$23.4m has been deposited via a bond for instalments required in accordance with the conditions underlying the granting of
the Full Operating Stage Licence to the Group for the LAMP in Malaysia. Should criteria as part of this grant not continue to be met, this amount
may be utilised to settle obligations. The Group has determined that the possibility of a material outflow related to these contingent liabilities is
remote.
Litigation and legal proceedings
As a result of its operations the Group has certain contingent liabilities related to certain litigation and legal proceedings. The Group has
determined that the possibility of a material outflow related to these contingent liabilities is remote.
Security and guarantee arrangements
Certain members of the Group have entered into guarantee and security arrangements in respect of the Group’s indebtedness as described in
Note 23 and Note 19.
37.
Subsequent events
A major update of the Mineral Resource and Ore Reserve was announced on August 6, 2018. The previous Mineral Resource and Ore Reserve
Statement was announced in October 2015. The updates since have been depletion only. Key changes to the resource model include:
•
•
The consolidation of the Central Lanthanide Deposit (“CLD”) and Duncan into a single resource; and
The 2017 Apatite (“AP”) Depth Extension exploration drilling program which extended the depth of the AP ore zone and had significant
intersections of transition and fresh rare earth mineralisation below the AP zone.
The updated ore reserve is based on the new resource model and for the first time includes the Duncan zone following the completion of the
metallurgical testwork. As announced on August 6, 2018, there was a 60% increase to Mt Weld Ore Reserves, confirming a 25+ year mine life
at Lynas NEXT output rates.
78
78
www.lynascorp.com Mineral Resources and Ore Reserves
as at June 30, 2018
1. MT WELD RARE EARTH DEPOSIT ORE RESERVES 2018
The Ore Reserve estimation for the Mt Weld Rare Earth Deposit is shown in Table 1.
TABLE 1: MT WELD RARE EARTH DEPOSIT ORE RESERVES 2018
JORC CLASSIFICATION
Ore Reserves within Pit boundary
Proved
Probable
Designed Pit Total
Ore Reserves on Stockpiles
Proved
Probable
Stockpiles Total
Total Ore Reserves
Proved
Probable
Total
MILLION
TONNES
TREO*
%
CONTAINED REO
‘000 TONNES
14.1
5.1
19.2
0.5
0.0
0.5
14.6
5.1
19.7
8.8
7.7
8.5
10.6
0.0
10.6
8.9
7.7
8.6
1,240
390
1,630
50
0
50
1,290
390
1,690
* TREO = total Rare Earth Oxides (La2O3, CeO2, Pr6O11, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3) +
Yttrium (Y2O3). Totals may not balance due to rounding of figures.
Note:
The Ore Reserves is the combined CLD and Duncan Deposit as of June 30, 2018. Full details of the material change since 2017 (the last
Annual Report) and 2015 (the last major reserve announcement) are reported as per the Lynas ASX announcement dated August 6, 2018,
titled “Lynas announces a 60% increase to Mt Weld Ore Reserves, one of the world’s richest sources of Rare Earths”. The company confirms
that all material assumptions and technical parameters underpinning the estimated Ore Reserves set out in the ASX announcement dated
August 6, 2018 continue to apply and have not materially changed.
79
Lynas Corporation Limited | 2018 Annual Report 2. MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2018
The Mineral Resource estimation for the Mt Weld Rare Earth Deposit is shown in Table 2.
TABLE 2: MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2018
JORC CLASSIFICATION
Measured
Indicated
Inferred
Total
MILLION
TONNES
TREO*
%
CONTAINED REO
‘000 TONNES
17.5
12.0
25.9
55.4
8.0
5.5
3.6
5.4
1,400
660
930
3,000
* TREO = total Rare Earth Oxides (La2O3, CeO2, Pr6O11, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3) +
Yttrium (Y2O3). Totals may not balance due to rounding of figures.
Note:
The Mineral Resource estimation is the combined CLD and Duncan Deposit as of June 30, 2018. Full details of the material change since 2017
(the last Annual Report) and 2015 (the last major resource announcement) are reported as per the Lynas ASX announcement dated August
6, 2018, titled “Lynas announces a 60% increase to Mt Weld Ore Reserves, one of the world’s richest sources of Rare Earths”. The company
confirms that all material assumptions and technical parameters underpinning the estimated Mineral Resources set out in the ASX announce-
ment dated August 6, 2018 continue to apply and have not materially changed.
3. NIOBIUM RICH RARE METALS MINERAL RESOURCES
The Mineral Resource estimation for the niobium rich rare metals prospect referred to as the Niobium Rich Rare Metals Project is shown in
Table 3. The Rare Metals Project is located at Mt Weld.
TABLE 3: CLASSIFICATION OF MINERAL RESOURCES FOR THE NIOBIUM RICH 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 dated 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.
There have been no changes to the Niobium Rich Rare Metals Project Mineral Resource since the previous reporting period.
Note on governance arrangements and internal controls:
All Lynas Mineral Resource and Ore Reserve estimations are compiled by experienced competent persons who are engaged as independent
external consultants to Lynas. The relevant Competent Person ensures that all aspects of the Mineral Resource estimations or the Ore
Reserve estimations (as applicable) meet the JORC code requirements.
80
www.lynascorp.comDirectors’ Report
COMPETENT PERSON’S STATEMENTS – MINERAL RESOURCES
The information in this report that relates to the 2018 Mineral Resources is based on information compiled by Mr Alex Whishaw under the
guidance of Dr Andrew Scogings. Mr Wishaw and Dr Scogings are full-time employees of CSA Global. Mr Wishaw is a member of the Australasian
Institute of Mining and Metallurgy. Dr Scogings is a Member of the Australasian Institute of Mining and Metallurgy, a Member of the Australian
Institute of Geoscientists and an RPGeo (Industrial Minerals). Dr Scogings has sufficient experience relevant to the style of mineralisation and
type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition
of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). Dr Scogings consents to the
disclosure of information in this report in the form and context in which it appears.
The information in this report that relates to the Niobium Rich Rare Metals Project is based on information compiled by Mr Brendan Shand.
Mr Shand is a consultant geologist to Lynas Corporation. Mr. Shand is a Member of The Australian Institute of Geoscientists. Mr Shand has sufficient
experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify
as Competent Person as defined in the 2012 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and
Ore Reserves (JORC Code). Mr Shand consents to the disclosure of information in this report in the form and context in which it appears.
COMPETENT PERSON’S STATEMENTS – ORE RESERVES
The information in this Release which relates to the 2018 Ore Reserves estimate accurately reflect 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 that relates to the Mt Weld Rare Earths Project is based on information resulting from Feasibility works carried out by
Auralia Mining Consulting Pty Ltd. Mr Steve Lampron completed the Ore Reserve estimate. Mr Steve Lampron 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 Steve Lampron consents to the
inclusion in the document of the information in the form and context in which it appears.
81
Lynas Corporation Limited | 2018 Annual Report Additional Information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report.
The information is current as at August 23, 2018.
(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
9,802
8,175
2,479
2,956
250
Number
of Shares
Percentage
of Shares
4,945,604
21,181,123
19,107,352
81,284,358
534,720,791
0.748
3.203
2.890
12.293
80.866
23,662
661,239,228
100.000
The number of shareholders holding less than
a marketable parcel of shares
1,653
168,067
(B) Distribution of Employee Options/Performance Rights
There are 11,286,944 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
1
12
13
(C) Distribution of 1.875% Unsecured Convertible Bonds Maturing September 30, 2020
There are 15,242,003.79 unlisted Convertible Bonds maturing September 30, 2020. The Bonds are convertible at A$1.00 per share, based on
an exchange rate of A$1.00 = US$0.75. Fractions of a share are rounded down on conversion. The number of holders, by size of holding, of
Convertible Bonds maturing September 30, 2020 are:
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
FCCD DAC holds 9,682,945.01 Convertible Bonds. FCCO DAC holds 4,059,058.78 Convertible Bonds.
82
Holders
0
0
0
3
3
www.lynascorp.comDirectors’ Report (D) Distribution of $0.50 Warrants Expiring September 30, 2020
There are 23,256,258 unlisted Warrants expiring September 30, 2020. The number of holders, by size of holding, of $0.50 Warrants expiring
September 30, 2020 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 DAC holds 21,432,657 Warrants.
(E) Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are:
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
2
3
CITICORP NOMINEES PTY LIMITED
4 NATIONAL NOMINEES LIMITED
5
6 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
7
8
9 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JOYKEEP LIMITED
BNP PARIBAS NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
DYNAMIC SUPPLIES INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
THE PAVILION MOTOR INN OF WAGGA WAGGA PTY LTD
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
PM1942 PTY LTD
10
11 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
12
13
14
15
16
17 MALAY-SINO CHEMICAL INDUSTRIES SDN BHD
18
19
20
ARGO INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
Holders
0
0
0
4
4
Listed Ordinary Shares
Number
of Shares
% of
Shares
156,916,405
120,555,542
70,154,643
31,319,630
16,405,607
9,049,351
7,800,000
7,234,112
5,473,412
4,750,000
4,109,572
3,946,441
3,937,170
3,799,408
3,434,360
3,200,000
3,107,686
3,000,000
2,864,000
2,790,424
23.731%
18.232%
10.610%
4.737%
2.481%
1.369%
1.180%
1.094%
0.828%
0.718%
0.621%
0.597%
0.595%
0.575%
0.519%
0.484%
0.470%
0.454%
0.433%
0.422%
TOTAL
463,847,763
70.148%
(F) Substantial Shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
RELEVANT INTEREST IN LISTED ORDINARY SHARES
1
2
GREENCAPE CAPITAL PTY LTD
CHALLENGER LIMITED
40,595,360
40,640,015
83
Lynas Corporation Limited | 2018 Annual Report (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.
(H) Schedule of Interests in Mining Tenements
Tenement
Percentage Held
Mt Weld Rare Earths Project
Mt Weld
Mt 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
L38/224
L38/98
G38/34
G38/35
ML0122/2003
100
100
100
100
100
100
100
100
100
100
100
84
www.lynascorp.comDirectors’ Report CORPORATE DIRECTORY
ABN 27 009 066 648
Registered Office
Suite 3/5 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
200 George Street
Sydney NSW 2000 Australia
www.lynascorp.com
2018
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 2018
Our corporate governance statement2 for the above period above can be found at:3
☐
☒
These pages of our annual report:
This URL on our website:
www.lynascorp.com/Pages/Corporate-governance.aspx
The Corporate Governance Statement is accurate and up to date as at 6 September 2018 and has been approved by
the board.
The annexure includes a key to where our corporate governance disclosures can be located.
Date:
21 September 2018
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]
… 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]
in our Corporate Governance Statement OR
… the evaluation process referred to in paragraph (a):
☒
☐ 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
☐ 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
Page 10
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
Lynas Corporation Limited ACN 009 066 648
Corporate Governance Statement – Financial Year Ended 30 June 2018
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 as at
September 6, 2018.
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, 2018, 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, 2018 are as follows.
Principle 1 - Lay solid foundations for management and oversight
Recommendation 1.1 – Functions reserved to the Board and delegated to Senior Executives
The Group has established the functions reserved to the Board and the functions delegated to senior executives. The functions
reserved to the Board include:
(1) oversight of the Group, including its control and accountability systems;
(2) appointing and removing the Chief Executive Officer (“CEO”) (or equivalent), including approving remuneration of the
CEO and the remuneration policy and succession plans for the CEO;
(3)
ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer (“CFO”) (or equivalent)
and the Company Secretary;
(4)
input into the final approval of management’s development of corporate strategy and performance objectives;
(5)
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal
compliance;
(6) monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources
are available;
(7) approving and monitoring the progress of major capital expenditure, capital management and acquisitions and
divestitures;
(8) approving and monitoring financial and other reporting;
(9) appointment and composition of committees of the Board;
(10) on recommendation of the Audit, 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)
identifying and exploring opportunities to build and sustain the business;
(4) allocating resources to achieve the desired business outcomes;
(5) sharing knowledge and experience to enhance success;
(6)
facilitating and monitoring the potential and career development of the Group’s people resources;
(7)
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 involves 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)
the term of appointment;
(2)
the time commitment envisaged, including committee work;
(3)
remuneration;
(4) disclosure requirements;
(5)
the requirement to comply with key corporate policies;
(6)
the Group’s policy on non-executive Directors seeking independent professional advice;
(7)
the circumstances in which the Director’s office becomes vacant;
(8)
indemnity and insurance arrangements;
(9)
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) coordinating the timely completion and despatch of Board and committee papers;
(4) ensuring accurate minutes are taken of Board and committee meetings; and
(5) helping to organize and facilitate the induction and professional development of Directors.
Recommendation 1.5 – Diversity
The Group has established a policy concerning diversity. The Group recognises the need to set diversity measures in each of its
operating locations taking into account the differing diversity issues within each geographic location in which it operates. A copy
of the Diversity Policy is available from the Group’s website, www.lynascorp.com. The policy includes requirements for the Board
to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and
progress in achieving them.
Below are the measurable objectives set by the Board for achieving gender diversity together with the progress made in achieving
those objectives:
(1) Ensuring that recruitment of employees and Directors is made from a diverse pool of qualified candidates. Where
appropriate, a professional recruitment firm shall be engaged to select a diverse range of suitably qualified candidates.
The Group continues to ensure that professional recruitment firms provide a broad selection of suitably qualified
candidates together with prioritising local employment in the areas in which it operates. Further information on the skill
set of the Directors is provided in the Remuneration Report.
(2)
Increasing the number of women in operations and in other key areas of the workforce.
The Group has been very focussed on promoting the development of women within its business. The number of
female employees at the group’s largest plant in Kuantan Malaysia increased to 103 at the end of FY18 (the number
was 92 at the end of FY17). In addition, the Group has focussed on encouraging a wide range of ethnic backgrounds
among its employees, and the workforce includes people from a large number of backgrounds and cultures. 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)
initiatives focused on skills development, such as executive mentoring programmes; and
(b) 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, 2018 (prior year: June 30, 2017):
(1) Proportion of women employees in the whole organisation: 16.5% (2017 – 14.8%).
(2) Proportion of women employees in senior executive positions: 28.6% (2017 – 28.6%).
(3) Proportion of women on the Board: 33.0% (2017 – 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 100
employees in Australia during the year ending June 30, 2018.
Recommendation 1.6– Process for evaluating the performance of the Board
In accordance with the Charter of the Nomination, Remuneration and Community Committee, the Committee is responsible for
the:
(1) evaluation and review of the performance of the Board against both measurable and qualitative indicators established
by the Committee;
(2) evaluation and review of the performance of individual Directors against both measurable and qualitative indicators
established by the Committee;
(3)
review of and making of recommendations on the size and structure of the Board; and
(4)
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 2018. In 2018, the
Board evaluation was conducted via a written survey of Directors and senior managers. The survey results and action items
were then discussed during a Directors feedback session.
Recommendation 1.7 – Performance evaluation of Senior Executives
The Group has established detailed written Key Responsibility Areas and Key Performance Indicators (KPIs) for each senior
executive. The performance of senior executives is periodically reviewed against their KPIs, at least once every 12 months, as
part of the Group’s formal performance review procedures. The Group has adopted a formal procedure whereby each senior
executive meets with his/her direct supervisor to review performance against KPI’s during the review period. The results of that
review are recorded in writing for follow up during subsequent meetings, and for internal reporting purposes.
Induction procedures are in place to allow new senior executives to participate fully and actively in management decision making
at the earliest opportunity.
An evaluation of senior executives took place during the financial year. The evaluation was in accordance with the above process.
Principle 2 – Structure the board to add value
Recommendation 2.1 – Nomination Committee
The Group has established a Nomination, Remuneration and Community Committee.
The Group’s Nomination, Remuneration and Community Committee complies with each of the requirements of Recommendation
2.1 as follows:
(1) The Committee consists of a majority of independent Directors. From July 1, 2017 to October 1, 2017, the members
of the Committee were Ms Conlon, Mr Forde and Mr Harding. From October 1, 2017 to November 28, 2017, the
members of the Committee were Ms Conlon, Mr Forde, Mr Harding and Mr Humphrey. From November 28, 2017
onwards, the members of the Committee were Ms Conlon, Mr Harding and Mr Humphrey Further details, including
the relevant qualifications and experience of the members of the Committee, are provided in the Directors section of
the Directors’ Report.
(2) The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
(3) There were three formal meetings of the Committee during the financial year ending June 30, 2018. 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, 2018, the Committee had at least three members.
The Group has adopted a Charter for its Nomination, Remuneration and Community Committee. A copy of the Committee Charter
is available from the Group’s website, www.lynascorp.com.
Recommendation 2.2 – Board Skills
The Nomination, Remuneration and Community Committee recognizes that it is important that the Board has an appropriate mix
of skills, experience, expertise and diversity. The Board considers it important for the following skills and experience to be
represented:
•
•
•
• Operational experience in the chemical and resources industries;
•
•
Strategy and strategic marketing experience;
Corporate governance, regulatory and risk management experience.
Experience as a Chief Executive;
International business experience;
Financial and accounting experience;
The Board’s skills matrix is based on the above sets of skills and experience. The Nomination, Remuneration and Community
Committee remains focussed on Board renewal, and the appointment of Grant Murdoch as a Director and Chair of the Audit &
Risk Committee during the year further enhanced the Board’s skill set. The Board considers that each of the above skills is
currently reflected in the skills and experience of the existing members of the Board. Further details of the skills and experience
of the members of the Board are provided in the Directors section of the Directors’ Report. 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, 2018 the Board had a majority of independent Directors. In accordance with the
definition of independence above, and the materiality thresholds set, J. Humphrey, K. Conlon, M. Harding, P. Etienne and G.
Murdoch were viewed as independent Directors. Mr Forde was also viewed as an independent Director in accordance with the
the definition of independence above, prior to his resignation from the Board on November 28, 2017.
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, 2018 is as follows:
Name
K. Conlon
Term in office
6 years 8 months
A. Lacaze
M. Harding
P. Etienne
J. Humphrey
G. Murdoch
4 years 6 months
3 years 6 months
3 years 6 months
1 year 1 month
8 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, 2018, the Board had a
majority of independent Directors.
Recommendation 2.5 – The Chair should be an independent Director and not the same person as the CEO
M. Harding was the Chairman of the Board throughout the financial year ended June 30, 2018. 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, 2018.
Recommendation 2.6 – Director Induction and Professional Development
The Group has adopted a Board Induction Policy that summarizes the key matters to be addressed in the induction of each new
Director. Among other things, the Induction Policy deals with information to be provided to new Directors, the Chair’s role, key
contacts, remuneration, indemnities, insurance, access to information, and disclosure.
The Nomination, Remuneration and Community Committee regularly reviews the skills and experience of the Directors and
assists Directors to identify professional development opportunities to develop and maintain the skills required to perform their
roles effectively.
Principle 3 – Act ethically and responsibly
Recommendation 3.1 – Code of Conduct
The Group has established a code of conduct for its directors, senior executives and employees concerning the:
(1) practices necessary to maintain confidence in the Group’s integrity;
(2) practices necessary to take into account the Group’s legal obligations and the expectations of stakeholders; and
(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) protect the integrity of the decision-making processes within the Group by avoiding ethical, legal, financial or other
conflicts of interest;
(2) establish internal procedures so that all employees understand their obligation to avoid actual, potential or perceived
conflicts of interest;
(3) provide guidance to employees for dealing with any conflicts of interest in an open and transparent manner;
(4) provide guidance to employees for recognising and reporting on related party transactions; and
(5) establish internal procedures to ensure that related party transactions are referred to the Group’s shareholders where
required.
A copy of the conflict of interest policy is available from the Group’s website, www.lynascorp.com.
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) The Committee consists only of Non-Executive Directors. From July 1, 2017 to October 1, 2017, the members of the
Committee were Mr Forde, Ms Conlon, Mr Humphrey and Mr Etienne. From October 1, 2017 to November 28, 2017,
the members of the Committee were Mr Forde, Mr Humphrey and Mr Etienne. From November 28, 2017 onwards,
the members of the Committee were Mr Murdoch, Mr Humphrey 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.
(2) Three meetings of the Committee were held during the financial year ending June 30, 2018. Further details, including
the attendances of members, are provided in the Directors Meetings section of the Directors’ Report.
(3) All of the members of the Committee are independent Directors.
(4) The Committee is chaired by Mr Murdoch, who is an independent Director and who is not Chair of the Board.
(5) At all times during the financial year ending June 30, 2018, the Committee had at least three members.
The Group has adopted a Charter for its Audit and Risk Committee. A copy of the Committee Charter is available from the
Group’s website, www.lynascorp.com.
Recommendation 4.2 – Statement from the Chief Executive Officer and the Chief Financial Officer
Before the Board approves the Group’s financial statements for a financial period, the Board receives a declaration from the
Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 that, in
their opinion, the financial records of the Group have been properly maintained and that the financial statements comply with the
appropriate accounting standards and give a true and fair view of the financial position and performance of the Group, and that
the opinion has been formed on the basis of a sound system of risk management and internal control which is operating
effectively.
Recommendation 4.3 – Auditor Attendance at AGM
The Group holds an Annual General Meeting of shareholders (“AGM”) in October or November of each year. The Group ensures
that its external auditor attends the AGM and is available to answer questions from shareholders relevant to the audit.
Principle 5 - Make timely and balanced disclosure
Recommendation 5.1 – ASX Listing Rule Disclosure Requirements
The Group has established a written policy designed to ensure:
(1) compliance with ASX Listing Rules continuous disclosure obligations; and
(2) accountability at a senior executive level for that disclosure.
A copy of the Group’s Continuous Disclosure Policy is available from the Group’s website, www.lynascorp.com.
Principle 6 - Respect the rights of shareholders
Recommendation 6.1 – Information on the Group’s Website
The Group provides information about itself and its governance to its shareholders via the Group’s website, www.lynascorp.com.
Information about governance is available in the Corporate Governance section of the Group’s website.
Recommendation 6.2 – Investor Relations Program
The Group has an investor relations program to facilitate effective two-way communication with shareholders. The Group’s
investor relations program includes the following:
(1) an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions;
(2) actively engaging with shareholders at the AGM;
(3) periodic meetings with institutional investors, analysts and financial media representatives; and
(4)
recorded CEO interviews at the time of 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) providing an email link on the Group’s website, www.lynascorp.com for shareholders to ask questions ahead of AGMs;
and
(2) providing a facility for online lodgement of proxies.
In addition, the Group has adopted a Shareholder Communications Policy for:
(1) promoting effective communication with shareholders; and
(2) encouraging shareholder participation at AGMs.
A copy of the Group’s Shareholder Communications Policy is available from the Group’s website, www.lynascorp.com.
Recommendation 6.4 – Electronic Communications
The Group gives shareholders the option to receive communications from, and to send communications to, the Group and its
share registry electronically. The Group periodically sends communications to those shareholders who have provided an email
address. There is a facility on the Group’s website, www.lynascorp.com for shareholders to subscribe to receive emailed copies
of the Group’s ASX announcements. 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) The Committee consists only of Non-Executive Directors. From July 1, 2017 to October 1, 2017, the members of the
Committee were Mr Forde, Ms Conlon, Mr Humphrey and Mr Etienne. From October 1, 2017 to November 28, 2017,
the members of the Committee were Mr Forde, Mr Humphrey and Mr Etienne. From November 28, 2017 onwards,
the members of the Committee were Mr Murdoch, Mr Humphrey 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.
(2) Three meetings of the Committee were held during the financial year ending June 30, 2018. Further details, including
the attendances of members, are provided in the Directors Meetings section of the Directors’ Report.
(3) All of the members of the Committee are independent Directors.
(4) The Committee is chaired by Mr Murdoch, who is an independent Director and who is not Chair of the Board.
(5) At all times during the financial year ending June 30, 2018, the Committee had at least three members.
The Group has adopted a Charter for its Audit and Risk Committee. A copy of the Committee Charter is available from the
Group’s website, www.lynascorp.com.
Recommendation 7.2 – Risk Management Framework
The Group has adopted a Risk Management Policy and a Risk Management Framework for oversight and management of its
material business risks. The Audit 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, 2018.
Recommendation 7.3 – Internal Audit
During the financial year ending June 30, 2018, the Group did not have an internal audit function. The Group is implementing an
internal audit function during the financial year ending June 30, 2019. The processes that the Group employed during the
financial year ending June 30, 2018 for evaluating and continually improving the effectiveness of its risk management and internal
control processes include the following:
(1) The Group’s Risk Management Policy and Risk Management Framework clearly describe the roles and
accountabilities of the Board, the Audit & Risk Committee, the Health Safety & Environment Committee and
management.
(2) The Audit & Risk Committee and the Health Safety & Environment Committee oversee the Group’s material business
risks.
(3) Those members of the Group’s management team who are accountable for risk management, safety, health,
environment and community matters manage the Group’s material business risks.
(4) The Audit & Risk 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.
(5) The members of the Group’s finance department manage financial risks.
(6) The Group has adopted the following policies for the oversight and management of material business risks: Risk
Management Policy, Environmental Policy, Community Policy and Occupational Health and Safety Policy.
Copies of the following documents referred to in this section are available from the Group’s website, www.lynascorp.com:
(1) Audit & Risk Committee and Health Safety & Environment Committee Charters;
(2) Risk Management Policy;
(3) Environmental Policy;
(4) 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) The Group seeks to reduce the impact of fluctuations in rare earths prices and demand by building strategic
relationships with customers and other parties in the Group’s key markets. The Group seeks to reduce the impact of
exchange rate variations by having both revenue under its sales contracts and its debt repayment obligations
denominated in US dollars, and by broadly matching the currencies in which funds are held with the currencies of
anticipated outgoings.
(2) The Group manages environmental risks by adopting environmental management programs for each of its sites. The
Group has detailed environmental monitoring at each of its sites, and the Group has invested significant amounts in
environmental controls such as the Group’s Malaysian waste gas treatment plant, waste water treatment plant and
solid residues commercialisation programs. These measures have ensured that the Group has complied with all
applicable environmental standards at each site.
(3) The Group recognises that a strong mutual relationship with each community in which it operates is necessary for
successful operations. In addition, the Group recognises the importance of maintaining its reputation with all of its
stakeholders including shareholders, regulatory authorities, communities, customers and suppliers. The Group has
adopted a Community and Stakeholder Engagement Plan and the Group engages in community programs that build
relationships with each of the communities in which the Group operates.
Principle 8 - Remunerate fairly and responsibly
Recommendation 8.1 – Remuneration Committee
The Group has established a Nomination, Remuneration and Community Committee.
The Group’s Nomination, Remuneration and Community Committee complies with each of the requirements of Recommendation
8.1 as follows:
(1) The Committee consists of a majority of independent Directors. From July 1, 2017 to October 1, 2017, the members
of the Committee were Ms Conlon, Mr Forde and Mr Harding. From October 1, 2017 to November 28, 2017, the
members of the Committee were Ms Conlon, Mr Forde, Mr Harding and Mr Humphrey. From November 28, 2017
onwards, the members of the Committee were Ms Conlon, Mr Harding and Mr Humphrey. Further details, including
the relevant qualifications and experience of the members of the Committee, are provided in the Directors section of
the Directors’ Report.
(2) The Committee is chaired by Ms Conlon, who is an independent Director and who is not Chair of the Board.
(3) There were three formal meetings of the Committee during the financial year ending June 30, 2018. 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, 2018 the Committee had at least three members.
The Group has adopted a Charter for its Nomination, Remuneration and Community Committee. A copy of the Committee Charter
is available from the Group’s website, www.lynascorp.com.
Recommendation 8.2 – Remuneration of Executive Directors, Executives and Non-Executive Directors
The remuneration of Executive Directors and senior executives during the financial year consisted of the following:
(1) Fixed remuneration, superannuation payments and termination payments.
(2) Performance Rights 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, 2018 no Options or Performance
Rights 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.