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 9225 6842
general@lynascorp.com
Principal Administrative Office
PT17212 Jalan Gebeng 3
Kawasan Perindustrian Gebeng
26080 Kuantan, Pahang Darul Makmur
Malaysia
Tel: +60 9 582 5200
Fax: +60 9 582 5291
general@lynascorp.com
Share Register
Boardroom Pty Ltd
Level 12, Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Tel: +61 2 9290 9600
Fax: +61 2 9279 0664
Auditors
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
enquiries@boardroomlimited.com.au
www.lynascorp.com
2019
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
v
1
2
4
14
15
28
29
30
37
38
39
40
41
71
74
Cover photography by Martine Perret
ii
Lynas Corporation Limited | 2018 Annual Report Letter from the Chairman
It is my pleasure to present the 2019 Annual Report to our
shareholders. During the year, the Company completed the
Lynas NEXT expansion program at both Mt Weld and Lynas
Malaysia which resulted in strong operational and financial
performance throughout the year. At the same time, the
Company successfully managed considerable regulatory and
market challenges and we were delighted to announce the
Lynas 2025 growth plan to shareholders on May 21, 2019.
We were pleased to deliver continued positive results for our shareholders during FY19.
Some key highlights of the year were as follows:
•
Lynas recorded its second consecutive annual net profit as a Rare Earths
company in FY19 of $80.0 million. Additionally, cash flows exceeded $100m
for the second consecutive year, with cash flows from operating activities
of $104.1m in FY19 ($118.5m in FY18). In FY19, total sales revenue after
commissions remained steady at $363.5m ($374.1m in FY18) despite significant
market volatility.
• The completion of Lynas NEXT initiatives resulted in continued improvements
in the production process and demonstrated the Company’s capacity to produce
at higher rates during the year. Record annual production rates were achieved
for both total REO and NdPr during the period. Production of Neodymium-
Praseodymium (NdPr) was 5,898 tonnes in FY19 compared to 5,444 tonnes
in FY18. Total production of rare earth oxide (REO) in FY19 was 19,737 tonnes
compared to 17,753 tonnes in FY18.
• The Lynas 2025 growth plan will enable the Company to expand production
capacity to 10,500mt per annum of NdPr products and to relocate cracking and
leaching operations to Western Australia. Furthermore, Lynas announced the
signing of an MOU to form a joint venture with Blue Line Corporation for the
establishment of heavy rare earths separation capability in the United States.
•
Lynas continued an excellent safety record with the Company-wide 12-month
rolling Lost Time Injury Frequency Rate at 0.9 per million hours worked, as at the
end of June 2019. Most importantly, Lynas Malaysia recorded 365 days LTI free
in July 2019. Maintaining our excellent safety record requires daily attention as
this remains a key priority for our business.
• We were also pleased to record another year with no environmental exceedances,
reflecting our zero harm approach to all facets of our business. During the year,
our upgraded kiln waste gas treatment circuits enabled Lynas Malaysia to meet
new air quality standards, which included an 80% reduction in some of the air
emission parameters.
iiii
www.lynascorp.com
www.lynascorp.com “The completion
of Lynas NEXT
initiatives resulted
in continued
improvements
in the production
process and
demonstrated
the Company’s
capacity to produce
at higher rates
during the year.”
• During the year, 3rd party audits of our environmental performance consist-
ently ranked our business as best practice. This includes the Department of
Environment audit in early 2019 which found 21 best practices, 1 observation
and zero non-conformances, the 2019 AELB audit which delivered a ranking of
Very Satisfactory (i.e. the best available ranking) and the awarding of a Gold
Medal from EcoVadis.
• The Rare Earths market was volatile in FY19, driven by the US-China trade
tensions, concerns regarding security of supply and risks associated with single
sourcing. This has generated further interest in Lynas as a secure and sustainable
supplier.
• Total Group debts reduced to $193.0 million at June 30, 2019, down from
$225.1 million at June 30, 2018. New terms for the existing JARE loan facility
were agreed with JARE on June 27, 2019. The revised terms extend the facility to
2030, with a more favourable interest rate, demonstrating the ongoing support
of the Group’s lenders.
• The Company’s share price recorded strong growth during the year, from $2.34
on July 1, 2018 to $2.57 on June 30, 2019 and its market capitalization growing
to around $1.72 billion at the end of the period.
•
Lynas continued to consolidate its position as the world’s second largest Rare
Earths producer and the largest supplier of Neodymium-Praseodymium (NdPr)
to the free market.
Trade tensions between the United States and China have brought Rare Earths back
into the spotlight during the year. This has translated into increased interest in Lynas
as a proven sustainable and secure Rare Earths supplier, with the ability to mitigate
sourcing risks through long term agreements. In line with this, Lynas continues to
focus on serving customer demand and supporting development of the market outside
China. Lynas’ ability to provide customers with the environmental assurance from mine
to market was reinforced by receiving the gold medal award from Eco Vadis in its CSR
assessment of our Malaysian operations. In addition, our workplace health and safety
and environmental management ISO standards were maintained during the year at
both operations.
Following the May 2018 election, the new government of Malaysia undertook a
review Lynas’ operations. In December 2018, the Pakatan Harapan government’s
scientific Executive Review Committee published its report that found Lynas Malaysia’s
operations are low risk and compliant with relevant regulations. This finding is
consistent with the findings of three previous scientific reviews, including by the
International Atomic Energy Agency.
Following year end, on August 22, 2019, Lynas Malaysia’s operating licence was
renewed for an initial period of 6 months. This renewal is excellent news and the
terms of the renewal provide a clear pathway for our continued operation.
iiiiii
Lynas Corporation Limited | 2018 Annual Report Letter from the Chairman
“This has generated
further interest in
Lynas as a secure
and sustainable
supplier.”
On behalf of my Board colleagues, I would like to extend our sincere thanks to our CEO
Amanda Lacaze, the leadership team, and to all of the Lynas team for their hard work
and focus. This ensured the Company delivered a strong performance despite a number
of challenging conditions. This has led to Lynas’ sustained position as the second largest
Rare Earths company.
The Board also thanks you, our shareholders, for your support this year. We look
forward to continuing to leverage Lynas’ unique position, strategic customer
relationships and growing demand for Lynas Rare Earth materials that will
continue to support the Company’s growth.
Mike Harding
Chairman
iv
www.lynascorp.com CEO Review
The completion of the Lynas NEXT capacity building program
during FY19 ensured that we delivered record production and
strong financial results despite challenging conditions.
I am delighted to report that Lynas achieved our second full year profit as a Rare Earths
company and another year of record Rare Earth Oxide production.
For the second consecutive year, cash flows from operating activities exceeded
$100m and this enabled the Company to further reduce debt and invest in Lynas
NEXT activities.
These results reflect the sustained operational improvements delivered by our team
this year. Our ability to produce NdPr at the higher Lynas NEXT rates was proven
ahead of schedule, and we introduced new separated Nd and Pr products as part of our
product range.
It is a testament to the hard work and dedication of our entire team that these
improvements were accomplished in a year that presented some extremely challenging
regulatory and market conditions.
During the year, the increased awareness of the global significance of Rare Earths
reinforced Lynas’ unique position as the only significant rest of world Rare Earths miner
and producer. Our Lynas 2025 growth plan, announced to shareholders on May 21,
2019, will assist us to meet the forecast demand growth and consolidate our position
as a preferred supplier of Rare Earth materials for digital age technologies.
Key Financial Highlights
Profit from operating activities (EBIT) was $56.4m (FY18: $81.0m)
EBITDA of $100.7m (FY18: $121.9m)
• Net profit after tax (NPAT) of $80.0m (FY18: $53.1m)
•
•
• Net sales revenue steady at $363.5m (FY18: $374.1m)
• Cash flows from operating activities of $104.1m (FY18: $118.5m)
• Total Group debts reduced to $193.0m (FY18: $225.1m).
The ongoing support from our senior lender, JARE, was demonstrated through the
agreement of new loan terms to the existing loan facility. The revised terms extend the
facility to 2030, with a more favourable interest rate, to support the Company’s Lynas
2025 growth plan.
v
Lynas Corporation Limited | 2018 Annual Report CEO Review
“During the year,
the increased
awareness of the
global significance
of Rare Earths
reinforced Lynas’
unique position as
the only significant
rest of world Rare
Earths miner and
producer.”
vi
Record Production & Unique Market Position
The Company achieved record Rare Earth Oxide (REO) and NdPr production in FY19.
This was the result of Lynas NEXT improvements as well as quality improvements to
La and Ce during the period. Ready for sale production of Neodymium-Praseodymium
(NdPr) was 5,898 tonnes in FY19 compared to 5,444 tonnes in FY18. Total ready for
sale production of Rare Earth Oxide (REO) was 19,737 tonnes in FY19 compared to
17,753 tonnes in FY18.
Net sales revenue was steady at $363.5m compared to $374.1m in FY18, as a result
of lower market pricing during the year and a higher proportion of La and Ce sold
compared to previous years, which delivered a lower average price. Due to Rare Earth
market volatility, in the second half of the year we chose to reserve NdPr production
for the current and future needs of our strategic customers. This led to a small
inventory build by year end. As demand from outside China customers grows, we will
continue to focus on serving these markets.
Our strong results and the current geopolitical and macroeconomic issues, have
strengthened Lynas’ unique position as the only significant rest of world miner and
producer of sustainable Rare Earth materials.
World-Class Operating Environment
I am very pleased to report that as a result of our unrelenting focus on workplace
health and safety, Lynas Malaysia achieved 365 days LTI free in July 2019. This is a
credit to our team and their commitment to our safety culture.
The safety of our people, our communities and the environment will always be our
first priority. We demonstrate this through our ISO certifications, and by ensuring
compliance with licence conditions and international standards throughout our
operations in Western Australia and Malaysia.
This year we formalised our commitment to the United Nations principles of human
rights, labour, environment and anti-corruption by becoming a signatory to the
United Nations Global Compact, the world’s largest corporate sustainability initiative.
Additionally, on July 12, 2019, our Malaysian operation was awarded a gold medal in
the latest EcoVadis CSR assessment, positioning us in the top 5% of all businesses
evaluated. Further detail on these matters is included in the Lynas 2019 Sustainability
Report.
Challenging Regulatory & Market Conditions
Following the election of the Pakatan Harapan government in May 2018, a review of
Lynas Malaysia’s operations was undertaken in November 2018. In December 2018,
the Pakatan Harapan government’s scientific Executive Review Committee published
its report which found that Lynas Malaysia’s operations are low risk and compliant with
relevant regulations. These findings are consistent with three previous national and
international scientific reviews.
www.lynascorp.com “The safety of
our people, our
communities and
the environment
will always be our
first priority.”
Following extensive consultation with the Malaysian government, on August 22, 2019,
Lynas Malaysia’s operating licence was renewed for an initial period of 6 months.
Subject to meeting specified conditions over the next six months, this renewal provides
a clear pathway for our continued operation. As outlined in our ASX announcement on
August 16, 2019, these conditions include obtaining consent from the Pahang State
Government for the location of a Permanent Disposal Facility (PDF) for WLP residue
and relocating cracking and leaching to Western Australia within 4 years. Our plan to
relocate cracking and leaching to Western Australia was announced on May 21, 2019 as
part of the Lynas 2025 growth plan.
While the trade tensions between the United States and China intensified interest
in Rare Earth materials, the average China domestic price of NdPr (VAT excluded)
decreased from US$40.8/kg in July 2018 to US$36.9/kg in May 2019, before increasing,
albeit briefly, to US$45.8/kg in June 2019.
The NdPr magnet market is currently weakened by the Chinese economy and
temporary slow growth of the automotive market. However, the catalyst market
is focused on long-term security of supply and we have now pre-sold Lanthanum
production for the next 12 months.
Lynas is well positioned to benefit from the future demand growth of Rare Earth
materials. In addition to our Lynas 2025 growth plans, we continue to prioritise long
term strategic customer agreements and we are investing in R&D to grow our product
suite, particularly higher quality, higher priced Ce and La materials.
Lynas 2025: Growing with the Market
Following on from Lynas NEXT, we announced our five-year growth plan, Lynas 2025:
Growing with the Market, at our first Investor Day on May 21, 2019.
Key elements of the Lynas 2025 growth plan are as follows:
• A larger business to meet forecast demand growth: increase capacity to 10,500 tpa of
NdPr
• A diversified industrial footprint with processing facilities in optimal locations:
cracking and leaching closer to our resource in Western Australia and downstream
processing close to our customers
• Continuing to be the supplier of choice to non-Chinese customers with a fit for
market product portfolio: proposed new Heavy Rare Earths facility in the United
States and further product development
Enhancing earnings: improved portfolio pricing and continued flow sheet and cost
efficiencies
•
• A $500m capital plan: self-funded with the support of our senior lender, JARE.
On May 20, 2019, we announced the signing of an MOU with a skilled partner in
the United States, Blue Line Corporation, for a joint venture to develop Rare Earths
separation capacity. The proposed Heavy Rare Earths separation facility in Hondo,
Texas, will add to our downstream processing capability to meet current and future
customer needs. The joint venture plans to separate Dysprosium (Dy), Terbium (Tb), and
potentially some other Heavy Rare Earths from our SEG product at the Texas facility.
As demand for Dy and Tb increases, this is a great opportunity to add value to our
business and to further serve the needs of our customers.
vii
Lynas Corporation Limited | 2018 Annual Report “Lynas is well
positioned to
benefit from the
future demand
growth of Rare
Earth materials.”
Another part of our Lynas 2025 growth plan is the relocation of our cracking and
leaching plant to Western Australia. We have received strong public support from the
Western Australian Minister for Mines and Petroleum, and the local communities in
both of the short-listed locations, Mt Weld and Kalgoorlie.
We look forward to updating you as we progress the implementation plans for Lynas 2025.
Summary
This was another strong year for Lynas. Our excellent financial results and record
production demonstrate the resilience we have developed, given the significant market
and regulatory challenges faced during the year.
I would like to thank all of our people for their hard work and dedication during
the year. We are fortunate to have a leadership team who share an unwavering
commitment to our people and to our Company’s success and I extend my sincere
thanks to them. I would also like to thank my Board colleagues for their support and
guidance through a particularly complex year.
I would also like to thank you, our shareholders, for your continued support of our
business. I look forward to keeping you updated on our progress in the 2020 financial year.
Amanda Lacaze
Chief Executive Officer and Managing Director
viii
www.lynascorp.com ACN 009 066 648
and
Controlled Entities
Consolidated Financial Report
For the year ended June 30, 2019
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
11 Mounts Bay Road
Perth WA 6000
Internet Address
www.lynascorp.com
2
2
www.lynascorp.com Table of Contents
DIRECTORS’ REPORT ........................................................................................................................................... 4
SUSTAINABILITY STATEMENT .......................................................................................................................... 14
REMUNERATION REPORT – AUDITED .............................................................................................................. 15
DIRECTORS’ DECLARATION.............................................................................................................................. 28
AUDITOR’S INDEPENDENCE DECLARATION................................................................................................... 29
INDEPENDENT AUDITOR’S REPORT................................................................................................................. 30
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................ 37
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................... 38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY................................................................................ 39
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................ 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................................. 41
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, 2019. In order to comply with the provisions of the Corporations Act 2001, the
Directors report as follows:
Corporate information
Lynas Corporation Limited is limited by shares and is incorporated and domiciled in Australia. The Group’s corporate structure is 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, Chairman of Horizon Oil Limited, 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 also a former 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 to 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 the Chair of the Nomination, Remuneration and Community Committee and a member of the Health, Safety and Environment
Committee.
4
4
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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.
Previously, he was 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 the Chair of the Health, Safety and Environment Committee and a member of the Audit and Risk 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 a consultant to King & Wood Mallesons. He was the Dean of the Faculty of Law at Queensland University of Technology
until June 2019. He has held non-executive director positions at other listed companies over many years and is currently Chairman and Non-
Executive Director of Auswide Bank Ltd (formerly Wide Bay Australia) and Spotless Group Holdings Ltd. His previous positions include Non-
Executive Director of Horizon Oil Ltd, Deputy Chairman of King & Wood Mallesons, Non-Executive Director of Downer EDI Ltd, Villa World Ltd,
and Sunshine Broadcasting Network Ltd. He has also 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.
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 of
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 the Chair of the Audit and Risk Committee.
Resignations
There were no resignations of directors during the year and before the date of this report.
COMPANY SECRETARIES
Andrew Arnold
Mr Arnold was appointed as General Counsel and Company Secretary to the Group on July 23, 2008, following 15 years as a lawyer at Deacons,
including six years as a Partner. During that time Mr Arnold also spent two years on secondment at Riddell Williams, Seattle. In his role at
Deacons he had been overseeing the legal work of the Group since 2001. Mr Arnold is the responsible person for communication with the
Australian Securities Exchange (ASX) in relation to listing rule matters.
Ivo Polovineo
Mr Polovineo, appointed as Joint Company Secretary on October 20, 2014, was previously Chief Financial Officer and Company Secretary for
Sino Gold Mining Limited, formerly an ASX 100 company. He was with Sino Gold for 12 years as 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.
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.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Except as disclosed in the review of operations the factors and business risks that affect future performance and the subsequent events, there
have been no significant changes in the state of affairs of the Group during the current financial year.
5
5
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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 a net profit after tax of $80.0m (FY18: $53.1m), representing the second consecutive annual net profit for the Rare
Earths Group. Profit from operating activities was $56.4m (FY18: $81.0m) despite financial performance being affected by difficult
regulatory environment and subdued market conditions compared to the prior year.
Lynas has continued to consolidate its position as the world’s second largest Rare Earths producer and the largest supplier of
Neodymium-Praseodymium (NdPr) to the free market, with strong customer relationships in all key jurisdictions. In FY19, the Group
achieved record total sales volumes of 19,154 REOt (FY18: 17,672 REOt). Net sales revenue was steady at $363.5m (FY18: $374.1m)
This result reflects lower market pricing in FY19 and a higher proportion of La and Ce in the sales volume compared to previous years,
delivering a lower average price.
The Lynas NEXT expansion program was substantially complete at Lynas Malaysia and at Mt Weld, Western Australia.
Improvements in the production process from the Lynas NEXT program enabled Lynas to successfully demonstrate the Group’s
capacity to produce at higher rates during the year. Ready for sale production of Neodymium-Praseodymium (NdPr) was 5,898 REOt
in FY19 compared to 5,444 REOt in FY18. Total ready for sale production of rare earth oxide (REO) in FY19 was 19,737 REOt
compared to 17,753 REOt in FY18. These results included equipment shutdowns associated with Project NEXT and a temporary
shutdown due to regulatory reasons in December 2018.
• Cash flows from operating activities exceeded $100m for the second consecutive year. Positive operational cash flows of $223m over
the past 24 months have allowed the Group to invest in expansion activities and reduce debt.
• New terms were agreed with JARE on June 27, 2019 regarding the existing JARE loan facility. The revised terms extend the facility
to 2030, with a more favourable interest rate, demonstrating the ongoing support from the Group’s lenders.
• Convertible Bond holders converted a further US$1.6m of the issued bonds during the year, reducing the principal amount of the
•
outstanding convertible bonds to US$13.7m at June 30, 2019.
The new Nd and Pr separation circuit was successfully commissioned as part of Lynas NEXT and first production and sales of
separated Nd and Pr were delivered.
• Commenced Mining Campaign 3 at Mt Weld.
Mt Weld
The Lynas mine at Mt Weld, Western Australia continued to operate safely and efficiently throughout the year.
Overburden removal for Mining Campaign 3 was substantially completed at Mt Weld, Western Australia during the period, and ore is now being
mined and stockpiled. A locally based company who conducted the previous two mining campaigns is the contractor for this mining campaign.
Several Lynas NEXT improvements were completed at Mt Weld during the financial year including:
•
•
•
•
•
A major update of the Mt Weld Mineral Resources and Ore Reserves Statement was announced on August 6, 2018 with a 70%
increase in Mineral Resource and a 60% increase in Ore Reserve. Transition and fresh mineralisation were included for the first time
as Inferred Resource. The Duncan deposit was included in the Ore Reserve for the first time. The updated Ore Reserve has confirmed
a 25+ year life at Lynas NEXT rates (7000t NdPr/annum).
The construction of the third Tailings Storage Facility (TSF3) was completed and has been commissioned.
A sump has been excavated in the eastern diversion channel and two of the four planned aquifer re-injection wells have been drilled
and installed.
Commissioning of the Pre-Rougher Stack Cell, one of the Lynas NEXT initiatives, commenced at the start of May 2019. The Stack
Cell incorporates froth washing to reduce entrainment. The Stack Cell concentrate meets specifications and is being sent to final
concentrate. Reclamation of Duncan ore from the stockpile for crushing and screening has commenced.
Duncan ore will be included in the concentrator feed blend from the start of July 2019 and should reach Malaysia late in the first quarter
of FY20. The Duncan ore zone is an extension of the high grade Central Lanthanide Deposit (CLD) with higher levels of Heavy Rare
Earths including Dy.
Lynas Malaysia
Production from the Lynas Malaysia plant continued to grow reaching a total of 19,737 tonnes including 5898 tonnes of NdPr. Safety
performance continue to improve. At the end of the year, we had achieved 365 days LTI free. This good performance has continued into FY20.
Key Lynas NEXT initiatives completed during FY19 include:
•
•
•
•
•
•
The upgrade of the kiln waste gas treatment circuits was completed. There is now a dedicated spray tower for each of the four kilns,
all with a new design spray system which reduces emissions to below the new regulatory limits.
The new Solvent Extraction (SX) circuits to increase the production of La and Ce were optimised. This included the additional SX
circuits to remove impurities.
One of the four SX5 trains was converted to be the first part of a two-stage circuit to separated Nd and Pr.
Product Finishing (PF) circuits were upgraded for the increased production of La and Ce, and the production of separated Nd and Pr.
The first production of Nd oxide was delivered in December 2018 with the first Pr oxide produced in February 2019.
Since commissioning, a key production focus has been the stabilisation and optimisation of the new SX and PF circuits to meet a
range of product specifications (over a dozen in total).
A third, larger water storage pond was constructed as part of the Lynas NEXT project and has now been commissioned. This will
reduce the impact of any future water supply disruptions at the Lynas Malaysia plant.
6
6
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Management of residues from the Malaysian plant continues to be an area of focus. Lynas stores all residues produced in storage facilities.
These are PDF compliant above ground, engineered cells that have been approved by the regulators. Lynas also invests in research to develop
new and improved options to reduce and reuse residues. The Group is required to pay security deposit instalments to the Malaysian
Government’s Atomic Energy Licencing Board (“AELB”) totalling US$50.0 million in the form of cash and cash-backed bonds, in accordance
with the conditions of the Full Operating Stage Licence for the Lynas Malaysia plant. During FY19, the Group deposited a further US$7.8m in
cash-backed bonds. This amount is available for dealing with residues in the future, should it be required. The total amount deposited in cash
and cash-backed bonds is currently US$42.2m. Security bonds or guarantees are international best practice in the mining and minerals
processing industry future as a monetary safeguard to fund residue management or site remediation if the need arises.
The Lynas Malaysia plant produces two solid residues as follows:
• WLP – Iron phosphate, classified as very low level radioactive material in accordance with IAEA guidelines, regulated by the AELB.
•
NUF – Magnesium rich gypsum which is non-radioactive and non-toxic. Regulated by the Department of Environment (DOE) as a
“scheduled waste” under Malaysian regulations.
Lynas Malaysia’s Rare Earths processing plant in the Gebeng Industrial Estate has operated safely for over six years and Lynas has achieved
a high level of acceptance among our local communities. The company has undertaken extensive community engagement and education
programs including community days, site visits and supported assistance programs for students, the elderly and disadvantaged members of our
local communities. Lynas has also communicated important information regarding the Group’s operations in Gebeng via national media and
social media. In December 2018, the Pakatan Harapan government’s scientific Executive Review Committee published its report that found
Lynas Malaysia’s operations are low risk and compliant with relevant regulations. This was the latest of four national and international scientific
reviews to have found that Lynas Malaysia is low risk and compliant with laws and regulations.
On August 15, 2019, the Group announced final approval of the long term solution for NUF residue that was originally announced on February
14, 2019. The long term solution includes commercialisation options for NUF and long term NUF disposal.
On August 22, 2019, the Group confirmed the renewal of the Lynas Malaysia operating licence for an initial period of 6 months. During that 6
month period, the Group is required to obtain consent for the location of a Permanent Deposit Facility (PDF) for WLP residue. In addition, the
Group is required to relocate Cracking & Leaching, the first stage of its operations currently located in Malaysia, to Western Australia within 4
years. The Group plans to implement that relocation as part of the Lynas 2025 growth plan.
Malawi Deposit
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 while the Malawi deposit remains the subject of an ongoing title dispute. As announced on January 22, 2019,
the Malawi government has purported to cancel the Group’s Malawi mining lease and the Group is initiating judicial review proceedings in the
Malawi courts challenging that decision.
Lynas 2025 Growth Plan
On May 21, 2019, the group announced its Lynas 2025 Growth Plan. The key elements of the Lynas 2025 Growth Plan include expanding
production capacity to 10,500mt per annum of NdPr products, relocating cracking and leaching operations to Western Australia and the
proposed establishment of heavy rare earths separation capability in the United States of America via the proposed Joint Venture with Blue
Line Corporation.
Wesfarmers Limited
On March 26, 2019, Wesfarmers Limited (Wesfarmers) announced an unsolicited, conditional, indicative, non-binding proposal to acquire the
shares of Lynas Corporation Limited. Subsequently, on August 22, 2019, Wesfarmers announced that it does not intend to pursue its proposal.
Health, Safety and Environment
Certification to the OHSAS 18001 (Occupational Health and Safety Management Systems), ISO 14001 (Environmental Management Systems)
and ISO 9001 (Quality Management Systems) standards were maintained during the year for both the western Australian and Malaysian
operations. The Group undertook ISO recertification audits in July and August 2018 and is currently undertaking recertification audits for 2019.
The 12-month rolling lost time injury frequency rate as at June 30, 2019 was 0.9 per million hours worked (2018: 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 in both of
its operating locations.
Financial and Operational Performance
Revenue and Sales Volumes
Sales by tonnage and value
Sales volume
Cash receipts from customers
Sales revenue
Average selling price
FY16
FY17
FY18
FY19
(REOt)
(A$m)
(A$m)
(A$/kg)
12,514
202.6
191.0
15.3
7
14,616
260.4
257.0
18.0
17,672
383.1
374.1
21.6
19,154
367.5
363.5
19.0
Percentage
change
8%
(4%)
(3%)
(12%)
7
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
The improved sales volumes reflected continued improvement in production rates, consistent demand for NdPr products above current capacity
to supply and further quality improvements for Cerium (Ce) and Lanthanum (La) products.
Market Prices
The average China domestic price of NdPr (VAT excluded) decreased from US$40.8/kg in July 2018 to US$36.9/kg in May 2019, before
increasing, albeit briefly, to US$45.8/kg in June 2019.
The US-China trade tensions have brought Rare Earths back into the spotlight, raising concerns regarding security of supply and risks associated
with single sourcing. This has translated into renewed interest in Lynas as a secure and sustainable supplier able to mitigate sourcing risks
through long term agreements, in line with the strategy that Lynas has presented to the market for several years. However, the roll-out of this
strategy varies depending on market segments:
-
-
While most magnet buyers seek long term security of supply with multiple supply chains, demand is currently weakened by the Chinese
economy and the temporary slow growth of the automotive market. Additional contracts in this sector will be negotiated into the future.
In the catalyst market, negotiations have proceeded more quickly as buyers address the best sourcing strategies for their long term
business. As an example, Lynas has now pre-sold most of its Lanthanum supply for the next 12 months.
Lynas is primarily focused on serving customer demand and supporting development of the market outside China. Demand in these markets
remains strong and Lynas is making excellent progress towards its objective of selling all production to outside China markets.
In FY19, Lynas has increased its investment in R&D with a key focus on producing higher quality, higher priced Ce and La materials. This R&D
includes proprietary developments and customer specific projects. The markets for these materials are known and customers are keen for Lynas
to bring these products to market. It is expected this will occur over the next 2 years.
Costs and Production Volumes
Costs by tonnage and value
Ready for sale production volume total
Ready for sale production volume NdPr
Cost of sales (Cash)
Average cost of sales per REOt sold
FY16
FY17
FY18
FY19
(REOt)
(REOt)
(A$m)
(A$/kg)
12,631
3,896
16,003
5,223
17,753
5,444
(220.5)
(242.2)
(253.0)
17.5
15.1
14.3
19,737
5,898
(273.1)
13.8
Percentage
change
11%
8%
8%
(3%)
Record annual production rates were achieved for both total REO and NdPr during the period. In addition, the Group achieved a slight reduction
in the average cost of sales per REOt sold during the year. This continues a downward trend for several years and the Group continues to
develop processes to increase efficiency and reduce costs.
Cash and Cash flows
In A$m
Net operating cash inflows
Net investing cash outflows
Net financing cash outflows
Net cash flows
Cash and cash equivalents
FY18
118.5
(53.5)
(86.8)
(21.8)
42.3
FY19
104.1
(40.6)
(16.8)
46.7
89.7
Net operating cash flows in excess of $100m were maintained for the second consecutive year as a result of increased sales and production
volumes and a continued focus on cost management. Net investing cash outflows included a deposit paid as security to the AELB of $10.3m
and payments for property, plant and equipment and others of $32.3m, including costs allocated to non-current assets as part of Mining
Campaign 2 and 3. These outflows have been offset by proceeds from interest received of $2.0m. Net financing cash outflows decreased
significantly with repayments of the JARE loan facility of $7.0m (FY18: $65.5m) and a further $9.8m (FY18: $27.7m) in interest on borrowings.
Debt and Capital
JARE loan
Convertible bonds
Total borrowings
Financial income
Financial expenses
Interest forgiven on JARE loan
Gain on extinguishment of debt
FY17
FY18
FY19
260,072
233,287
493,359
0.2
(47.3)
-
37.3
207,449
17,663
225,112
1.2
(49.7)
20.8
-
174,919
18,062
192,981
2.3
(22.0)
-
43.4
A$m
A$m
A$m
A$m
A$m
A$m
8
8
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
US$1.6m of convertible bonds were converted during the year, leaving an outstanding principal of US$13.7m at June 30, 2019. The A$ equivalent
present value of the bonds increased due to accretion of interest and exchange rate movements over the period.
Principal repayments of US$3.0m (AU$4.4m) in January 2019 and a further US$1.9m (A$2.6m) in June 2019 were made on the JARE loan
facility. The new terms of the JARE facility announced on June 27, 2019 resulted in a $43.4m gain on the extinguishment of the old facility and
recognition of the new facility. The financial expenses have decreased by 56% as a result of lower interest expense based on lower principal
balances for both the JARE facility and the convertible bonds.
During the year ended June 30, 2019, the Company issued shares as shown below:
Number
(000’s)
Shares on issue June 30, 2018
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Shares on issue June 30, 2019
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 A$1.00 =
US$0.75)
Unlisted warrants (Exercise price: $0.50)
Subsequent to June 30, 2019, all unlisted warrants were exercised as described in Note E.10.
Performance rights
As at June 30, 2019, the Company had the following options and performance rights on issue:
662,547
2,120
3,135
667,802
Number
(000’s)
13,652
23,256
Number
(000’s)
9,044
FY18
8.84
8.29
FY19
12.04
11.47
Performance rights
Earnings per share
For the year ended June 30
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Dividends
There were no dividends declared or paid during the year ended June 30, 2019 (2018: nil) and no dividends have been declared or paid since
June 30, 2019.
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
Lynas’ revenue 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 side factors are the most significant influence on price volatility for Rare Earth materials. Supply of Rare Earth materials is
dominated by Chinese producers. The Chinese Central Government regulates production via quotas and environmental standards. Over
the past few years, there has been significant restructuring of the Chinese market in line with China Central government policy. However,
periods of over supply or speculative trading of Rare Earths can lead to significant fluctuations in Rare Earth pricing.
(ii) Geopolitical Factors
Recently Rare Earths have been the focus of significant attention, including as a result of the recent trade tensions between the US and
China.
9
9
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
The table below illustrates how China domestic prices of NdPr (excluding VAT) have moved over FY19:
US$/kg
September 2018 Quarter
40.8
December 2018 Quarter
39.3
March 2019 Quarter
38.5
June 2019 Quarter
39.1
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 Rare Earths in the world;
End users placing more importance on being able to trace the origin of rare earths from a sustainable 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 the Australian dollar.
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 Lynas Malaysia 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, 2019
$
0.7156
2.9521
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
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 C.5 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.
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. To date, the Japan Australia Rare Earths B.V. (JARE) loan facility has been secured over all the assets of the Group, other than Malawi
assets. Pursuant to the amendments announced on June 27, 2019, JARE agreed to release the following securities within 2 months: (i) Deed
of Charge - All Assets (Malaysia) and (ii) Malaysian Real Property Mortgage.
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$145.0m as at June 30, 2019. The principal amount will be due for repayment in fixed loan
repayments between December 31, 2021 and June 30, 2030, as detailed in Note C.3 to the Financial Statements.
In addition, the principal amount of the convertible bonds was US$13.7m as at June 30, 2019. 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, 2030 and September 30, 2020, the Group’s ability to continue
as a going concern may also be affected.
10
10
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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.
Health, safety and environment
Lynas is subject to extensive laws and regulation in respect of the health and safety of our people and communities, and the protection and
rehabilitation of the environments within which we 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 the implementation of the regulations 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. The Group is committed to providing and maintaining 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 created additional political focus on the business, which creates 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.
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 local communities, and compliance with regulatory requirements in
both jurisdictions in which we operate.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Except as disclosed in the review of operations, the factors and business risks that affect future performance and the subsequent events, there
have been no significant changes in the state of affairs of the Group during the year ended June 30, 2019.
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 3,134,524 Performance Rights were exercised as set out in Note E.7 to the Financial Statements.
11
11
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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 $711,543 (2018: $526,086). This amount is not included as part of the Directors’
remuneration in Note E.7 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 E.3 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:
(a)
(b)
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.
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 year ended June 30, 2019:
Audit & Risk
G. Murdoch(c)
P. Etienne
J. Humphrey
(c)
Chair of Committee
Health, Safety & Environment
P. Etienne(c)
K. Conlon
M. Harding
Nomination,
Remuneration & 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:
Directors’ Meetings
Audit & Risk
Health, Safety &
Environment
Number of meetings held:
Number of meetings attended:
M. Harding
A. Lacaze
K. Conlon
P. Etienne
J. Humphrey
G. Murdoch
12
11
12
11
12
12
12
5
-
-
-
5
5
5
5
4
-
5
5
-
-
Nomination,
Remuneration &
Community
4
3
-
4
-
4
-
AUDITOR’S INDEPENDENCE DECLARATION
We have obtained an independence declaration from our auditors, Ernst & Young, which follows the Directors’ Declaration.
12
12
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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.
COMPETENT PERSON’S STATEMENTS
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.
Competent Person’s Statements– Ore Reserves
The information in this report which relates to the 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 report 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 this report of the information
in the form and context in which it appears.
13
13
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Sustainability Report
Financial Year Ended June 30, 2019
The Lynas Group has always had a strong focus on the sustainability of all aspects of our business. We impose high standards upon ourselves
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 Gebeng,
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.
The Lynas Sustainability Report for FY19 will be sent to shareholders at the same time as our Annual Report 2019 is sent to shareholders. In
addition, a copy of the Lynas Sustainability Report for FY19 will be available on the Group’s website, www.lynascorp.com.
14
14
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Remuneration Report – Audited
Dear Shareholder,
I am pleased to present our Remuneration Report for the year ended June 30, 2019 (FY19).
As with other areas of the business, during FY19 we continued to refine and simplify executive remuneration and the Board is confident that
this is aligned with shareholder outcomes.
Lynas achieved excellent results for our shareholders in FY19, including significant improvements in market capitalisation, debt reduction,
profitability and cash flow. We successfully completed the Lynas NEXT project on time and on budget. In addition, we negotiated a ten-year
extension of the JARE senior loan facility with an interest rate of 2.5% p.a. and minimal principal repayments until 2025. Further details are
provided in Section D of the Financial Report. 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 did 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 FY19 is shown in the table on page 24.
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 and financial performance in FY19
In FY19, 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
15
15
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, 2019, 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 & 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 Malaysia
Lynas Malaysia is located in Gebeng in the State of Pahang, Malaysia, and is the Group’s
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, 2019 were as follows:
Non-Executive Directors:
M. Harding
K. Conlon
P. Etienne
J. Humphrey
G. Murdoch
Executives:
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
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 & Company Secretary
MD Malaysia
M. Afzan Afza
VP People & 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.
16
16
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
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 Gebeng near Kuantan, in regional Malaysia. Those expatriate executives
have been key drivers of the business’ strong performance in FY19, as described in Section D below.
STI awards 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 has only been a marginal increase in CEO fixed pay since
2015, being a CPI increase of 3% in FY18.
Percentage Growth in Revenue, Average Share price and Fixed CEO
Remuneration
300%
250%
200%
150%
100%
50%
June 30, 2015
June 30, 2016
June 30, 2017
June 30, 2018
June 30, 2019
Revenue ( $‘000 )
Annual average share price**
Fixed remuneration
17
17
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
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 Gebeng near 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 above. 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.
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 on the outskirts of the regional
city 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.
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 city 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, 2019 the STI Program had 3 goals as follows:
1.
EBIT – 40%
2. NdPr production volume – 30%
3.
Team / Individual Performance – 30%
Three bands of performance were specified at the beginning of FY19 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.
The Board set an STI target for EBIT in the financial year ended June 30, 2019 and that target was not met. Accordingly, no STI award was
made for EBIT in respect of the financial year ended June 30, 2019.
The table below summarises the STI targets and outcomes for NdPr Production Volume in the financial year ended June 30, 2019.
Goal
NdPr
Production
Target -
80% of
award
5,657 REOt
Target -
100% of
award
6,286 REOt
Target -
120% of
award
6,915 REOt
Outcome
Performance
Payout
5,898 REOt
93.8%
87.7%
In addition, the remainder of the STI award pool was available based on Team / Individual Performance goals. The Board resolved to make a
discretionary award for Team / Individual Performance in FY19 in light of the unique and difficult challenges successfully addressed during the
year. This included managing the political issues in Malaysia and managing a defence against the unsolicited takeover proposal received in
March. In Malaysia, the issues faced by the Group in FY19 included dealing with a small but vocal group of opponents to the business in
Malaysia, resolving complex regulatory and legal issues arising from new conditions imposed in the Malaysian operating licence, and managing
a large number of stakeholders in Malaysia and internationally, including community members, customers, shareholders, lenders, regulators
and politicians. The outcome was that on August 22, 2019, the Group confirmed the renewal of the Malaysian operating licence, as described
in the Subsequent Events section.
18
18
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
The strong performance of the Group in FY19 included the following:
(a) The increase in Lynas market capitalisation from $1.55 billion on July 1, 2018 to $1.72 billion on June 30, 2019.
(b) The increase in the share price from $2.34 on July 1, 2018 to $2.57 on June 30, 2019.
(c) Continuing reductions in costs per kg of NdPr produced, in line with targets.
(d) A significantly improved cash position. Total cash has increased from $42.3 million on July 1, 2018 to $89.7 million on June 30, 2019.
(e) The successful completion of the Lynas NEXT project on time and on budget. The Lynas NEXT project was funded from operating
cashflow.
(f) A ten-year extension of the JARE senior loan facility with an interest rate of 2.5% p.a. and minimal principal repayments until 2025.
(g) Renewal of the Lynas Malaysia operating licence in August 2019 following a period of regulatory uncertainty in Malaysia.
The overall outcome was that the Board resolved to make an STI award at the 80% level in respect of the financial year ended June 30, 2019.
That award will be made 50% in cash and 50% in Performance Rights with a 12 month vesting period.
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 FY19
The following LTI Performance Rights were forfeited during FY19:
1,210,133 LTI Performance Rights, granted as part of the FY17 LTI plan, were conditional on the Company’s cumulative NdPr production from
July 1, 2016 to June 30, 2019 in accordance with the following table:
Minimum NdPr Production from PF: July 1, 2016 to June 30, 2019
Number of LTI Performance Rights to Vest
a)
b)
c)
13,903 tonnes
15,448 tonnes
16,993 tonnes
504,222
1,008,444
1,210,133
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, 2016 to June 30, 2019 was 16,565 tonnes, which falls between band
(b) and band (c). Accordingly, of the 1,210,133 Performance Rights with an NdPr production condition that were available for vesting in the
financial year ended June 30, 2019, using a pro-rata calculation:
(a) 1,154,269 will vest; and
(b) 55,864 will be forfeited.
In addition, 1,008,445 LTI Performance Rights, granted as part of the FY17 LTI plan, were conditional on Total Shareholder Return (TSR) being
at least at the 51st percentile of ASX 300 Metals and Mining Index companies over a three-year vesting period expiring on August 30, 2019 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 August 30, 2019. The Lynas share price in August 2016 was approximately $0.685. The Lynas
share price on June 30, 2019 was A$2.57 (both figures are calculated on a post-consolidation basis). If the Lynas share price remains around
current levels, then it seems likely that the 1,008,445 Performance Rights will vest.
LTI Performance Rights Awarded During FY19
In addition, during FY19, the Group issued to selected senior managers a total of 690,004 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, 2019
is set out below:
(i)
50% will be conditional on the Company’s average annual EBIT growth in the period from July 1, 2018 to June 30, 2021, using the
period from July 1, 2017 to June 30, 2018 as the base figure, in accordance with the following sliding scale:
(a)
If the average annual EBIT growth from July 1, 2018 to June 30, 2021 is at least 7% per annum, then 50% of the EBIT
portion will vest.
If the average annual EBIT growth from July 1, 2018 to June 30, 2021 is at least 10% per annum, then 100% of the EBITDA
portion will vest.
If the average annual EBIT growth from July 1, 2018 to June 30, 2021 is at least 15% per annum, then 120% of the EBITDA
portion will vest.
(b)
(c)
Awards would be prorated if the EBIT growth outcome falls between bands (a) and (b) or between bands (b) and (c). The EBIT figure that will
be used to measure the outcome will be an adjusted EBIT figure (after removing non-cash expenses such as employee share based payments).
The EBIT for the base period from July 1, 2017 to June 30, 2018 was $81.0 million.
19
19
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
(ii)
50% will be conditional on the company’s Total Shareholder Return (TSR) being at least at the 51st percentile of ASX 200 companies
calculated over the 3-year vesting period, in accordance with the following sliding scale:
(a)
(b)
(c)
If the Lynas TSR is at least at the 51st percentile, 50% of the TSR portion will vest.
If the Lynas TSR is at least at the 76th percentile, 100% of the TSR portion will vest.
If the Lynas TSR is between the 51st percentile and the 76th percentile, a pro-rata amount of between 50% and 100% of
the TSR portion will vest (with the relevant percentile being rounded up or down to the nearest 5%, for ease of calculation).
The Directors believe that the above performance hurdles are important measures of long-term success for the Group that are fully 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 EBIT growth over the next 3 financial years will be an important measure of the success of the improvements to the business
implemented by Lynas.
The TSR hurdle compares shareholder returns from Lynas to shareholder returns from ASX 200 companies over the 3-year vesting period.
Lynas is currently a member of the S&P ASX 200 Index, and TSR performance at the 51st percentile or above of ASX 200 companies is
considered to be an appropriate hurdle that is directly aligned with shareholder returns.
Strategic Performance Rights
At the 2017 Lynas AGM, Lynas shareholders approved an award of 2,932,923 Strategic Performance Rights. The Strategic Performance Rights
had a two-year vesting period expiring in the first employee share trading window after August 28, 2019. This grant of Strategic Performance
Rights was a specific incentive to implement the two-year Lynas NEXT growth plan for the business that was announced at the 2017 AGM. The
senior leadership team have led the company through the turnaround process and they developed specific plans to continue to grow shareholder
value that were reflected in the vesting conditions for the Strategic Performance Rights.
The outcomes on the vesting conditions for the Strategic Performance Rights were as follows:
Outcome
Met in respect of each of the relevant senior managers.
Award
100%
Partially Met.
66%
The Lynas NEXT Project was delivered on time and on budget. The LAMP
demonstrated that it can produce 600 tonnes of NdPr products per month during
September and October 2018 and during March 2019.
Despite the above, in assessing this goal, the Board used a conservative metric
of assessing the average monthly uplift in NdPr production from the previous
capacity of 440 tonnes per month. From September 2018 to June 2019, the LAMP
delivered an average 66% of the uplift from 440 tonnes per month to 600 tonnes
per month. This calculation excludes the period November 2018 to January 2019,
during which production volumes were reduced by regulatory constraints.
Consistently exceeded in the period September 2018 to June 2019.
Vesting Condition
1. The recipient remaining
employed by Lynas during the 2
year vesting period and performing
at an acceptable level
2. Delivering the Lynas NEXT
targets on time and on
budget. Specifically:
(a) The LAMP
demonstrating its
capacity to consistently
produce 600 tonnes of
NdPr products per
month
(b) A consistent uplift in
NdPr recoveries at the
LAMP in accordance
with Lynas NEXT
targets
(c) The LAMP has
Met
demonstrated that it can
consistently produce
separated Nd and Pr.
Overall Award
100%
100%
91.5%
In accordance with the above table, 91.5% of the Strategic Performance Rights are expected to vest in the first employee share trading window
after August 28, 2019 as follows:
(a) 2,683,629 Strategic Performance Rights will vest; and
(b) 249,294 Strategic Performance Rights will be forfeited.
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 not enacted any clawback in FY19.
20
20
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
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.
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, there were no increases
in the fixed pay of the Executives from FY14 to FY17 despite the improving performance of the business in recent years as summarized in
Section D above. In FY18, the fixed pay of the Executives was increased in line with CPI. There has been no increase in fixed pay in FY19.
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, 2019, LTI grants were subject to a TSR hurdle and an EBIT growth hurdle, as detailed in Section D above.
The reference period for some of these hurdles has not yet expired. In addition, as detailed in Section D above, some Performance Rights were
forfeited in FY19 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.
21
21
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
June 30,
2012
June 30,
2013
June 30,
2014
June 30,
2015
June 30,
2016
June 30,
2017
June 30,
2018
June 30,
2019
Revenue ( $‘000 )
-
950
64,570
144,596
190,956
256,976
374,105
363,541
Profit / (loss) before tax
( $‘000 )
Profit / (loss) after tax
( $‘000 )
(97,879)
(141,014)
(345,431)
(118,559)
(94,117)
(24,263)*
53,404
80,225
(87,770)
(143,555)
(345,488)
(118,685)
(94,082)
(534)*
53,119
80,030
Shareholder capital ( $’000)
823,161
994,645
1,034,634
1,083,898
1,088,469
1,094,403
1,395,417
1,398,264
Annual average share
price**
Closing share price at
financial year end**
Basic earnings / (loss) per
share (cents)***
Diluted earnings / (loss) per
share (cents)***
$12.97
$6.52
$2.95
$0.78
$0.67
$0.77
$2.04
$1.99
$8.45
$3.75
$1.30
$0.34
$0.53
$1.05
$2.34
$2.57
(51.20)
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
(51.20)
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
8.84
8.29
12.04
11.47
** 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.
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 & Community Committee remains
focussed on Board renewal, notwithstanding that 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.
22
22
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
Base Fees
The base fees for NEDs have not increased since FY11. The base fees for NEDs for the financial year ended June 30, 2019 were:
•
•
Chairman $250,000 per annum;
Non-Executive Director $100,000 per annum.
Committee Fees
Board Committee
Audit & Risk Committee
Nomination, Remuneration & 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, 2018 and June 30, 2019 is set out in Section H of this report.
23
23
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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
FY19
Executive Director
A. Lacaze
1,216,813
269,572
73,126
Non-Executive
Directors
K. Conlon
M. Harding
P. Etienne
J. Humphrey
G Murdoch
Executives
140,000
275,000
140,000
127,500
130,000
-
-
-
-
-
A. Arnold
499,034
102,935
G. Sturzenegger
543,543
111,330
-
-
-
-
-
-
-
K. Leung
495,302
112,525
29,707
P. Le Roux
393,595
116,896
109,827
M. Ahmad
344,274
130,152
M. Afzan Afza
283,620
93,795
-
-
Total
FY18
4,588,681
937,204
212,660
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
319,940
146,221
M. Afzan Afza
226,400
55,826
-
-
Total
4,428,489
1,082,817
179,104
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,531
20,869
1,623,563
59%
3,224,474
13,300
20,531
13,300
12,814
12,350
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0%
0%
0%
0%
0%
153,300
295,531
153,300
140,314
142,350
502,631
509,392
55%
1,104,600
53%
1,164,264
20,531
10,956
551,592
54%
1,220,613
74,120
68,527
67,938
-
-
-
563,315
431,015
324,435
54%
1,257,754
58%
54%
973,968
769,788
323,942
31,825
4,505,943
51% 10,600,259
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
(1) Represents the 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.
24
24
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Directors’ Report – Remuneration Report – Audited
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, 2019.
Purchased
during the
year
On exercise of
performance
rights
Sold during the
year
Other
Balance at
end of year
Name
A. Lacaze
K. Conlon
P. Etienne
M. Harding
J. Humphrey
G Murdoch
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Afzan Afza
Balance at
beginning of
year
1,486,962
85,619
16,630
11,174
20,000
72,500
212,266
220,559
158,018
227,374
101,466
47,054
-
30,000
50,000
53,994
30,000
70,000
-
-
-
-
-
-
212,391
-
-
-
-
-
450,464
473,433
462,480
494,484
397,294
275,368
-
-
-
-
-
-
(270,280)
-
(201,938)
(138,457)
(111,244)
(130,422)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,699,353
115,619
66,630
65,168
50,000
142,500
392,450
693,992
448,560
583,401
387,516
192,000
4,837,190
Total
2,659,622
233,994
2,795,914
(852,341)
(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
AJ
AK
AM
AO
AP
AR
AS
AU
AV
AW
AX
AY
AZ
BA
BB
BC
November 23, 2015
947,894
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
476,715
August 28, 2020
August 28, 2022
November 28, 2017
1,748,362
August 28, 2019
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
August 31, 2018
August 31, 2018
August 31, 2018
270,681
August 31, 2019
August 31, 2019
199,446
August 31, 2021
August 28, 2023
166,205
August 28, 2021
August 28, 2023
November 27, 2018*
120,055
August 28, 2019
August 28, 2019
November 27, 2018*
176,920
August 28, 2021
August 28, 2023
November 27, 2018*
147,433
August 28, 2021
August 28, 2023
Total
8,587,368
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.900
$ 0.800
$ 0.650
$ 0.680
$ 0.500
$1.360
$2.060
$2.060
$1.620
$2.060
$2.187
$2.187
$1.431
$2.187
$2.187
$1.463
* Series BA to BC were approved by the Board on August 31, 2018, subject to approval at the AGM. These performance rights were subsequently
approved at the AGM on November 27, 2018, with the date of grant being approved as August 31, 2018.
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, 2019:
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free rate
Expiry date
Series AX
Aug 31, 2018
$2.187
$0.00
Nil
51.1%
1.995%
Aug 31, 2019
Series AY
Aug 31, 2018
$2.187
$0.00
Nil
51.1%
1.995%
Aug 31, 2021
Series AZ
Aug 31, 2018
$2.187
$0.00
Nil
51.1%
1.995%
Aug 31, 2021
Series BA
Nov 27, 2018
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2019
Series BB
Nov 27, 2018
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2021
Series BC
Nov 27, 2018
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2021
25
25
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
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 31, 2018
August 31, 2018
August 31, 2018
November 27, 2018
November 27, 2018
November 27, 2018
Total
Number of
performance rights
270,681
199,446
166,205
120,055
176,920
147,433
1,080,740
Fair value per
instrument at
valuation date
$2.187
$2.187
$1.431
$2.187
$2.187
$1.463
Exercise price
per instrument
First exercise date
Last exercise
or expiry date
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
August 31, 2019
August 31, 2019
August 31, 2021
August 31, 2023
August 31, 2021
August 31, 2023
August 31, 2019
August 31, 2019
August 31, 2021
August 31, 2023
August 31, 2021
August 31, 2023
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 2019 and 2018 financial years and
those Performance Rights which have vested at each respective year-end.
June 30, 2019
A. Lacaze(1)
K. Conlon
P. Etienne
M. Harding
J. Humphrey
G. Murdoch
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Azhan Afza
Balance at
beginning of
year
Other: share
consol
Granted
Grant date
Exercised
Forfeited
Net change
Balance at
end of year
4,409,551
-
-
-
-
-
1,071,860
1,105,510
1,175,424
1,185,072
933,342
661,714
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
444,408 Nov 27, 2018
-
-
-
-
-
107,768 Aug 31, 2018
116,558 Aug 31, 2018
117,809 Aug 31, 2018
122,385 Aug 31, 2018
95,696 Aug 31, 2018
76,116 Aug 31, 2018
(212,391)
-
-
-
-
-
(450,464)
(473,433)
(492,480)
(494,484)
(397,294)
(275,368)
(110,930)
-
-
-
-
-
(22,407)
(23,850)
(24,479)
(24,511)
(19,939)
(13,820)
121,087
-
-
-
-
-
(365,103)
(380,725)
(399,150)
(396,610)
(321,537)
(213,072)
4,530,638
-
-
-
-
-
706,757
724,785
776,274
788,462
611,805
448,642
Total
10,542,473
- 1,080,740
(2,795,914)
(239,936)
(1,955,110)
8,587,363
June 30, 2018
A. Lacaze(1)
K. Conlon
P. Etienne
M. Harding
J. Humphrey
G. Murdoch(2)
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Afzan 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
(528,368)
-
-
-
-
-
(251,969)
(100,000)
(261,701)
(103,909)
(121,483)
(58,038)
(339,623)
-
-
-
-
-
(189,623)
-
(189,623)
-
(45,283)
-
(33,914,676)
-
-
-
-
-
(9,331,995)
(6,268,020)
(9,902,352)
(6,429,242)
(6,065,811)
(3,613,879)
4,409,551
-
-
-
-
-
1,071,861
1,105,510
1,175,424
1,185,072
933,342
661,714
Total
86,068,449 (77,461,597) 4,125,242
(1,425,468)
(764,152)
(75,525,976)
10,542,474
(1) 444,408 performance Rights approved by the Board were granted to A. Lacaze on August 31, 2018 and subsequently approved by the
shareholders of the Company at the AGM on November 27, 2018.
(2) Appointed on October 30, 2017.
At June 30, 2019, 1,830,247 performance rights issued to A. Lacaze had vested and were exercisable (June 30, 2018: nil), while no performance
rights had vested but were not exercisable (June 30, 2018: nil).
26
26
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Directors’ Report
SUBSEQUENT EVENTS
On July 31, 2019, 23,256,258 unlisted warrants were exercised at a price of $0.50 per warrant, resulting in the issuance of 23,256,258 ordinary
shares and the receipt by the Group of $11,628,129. These warrants had been issued to the bond holder group as part of the amendments to
the terms of the convertible bonds that were approved by shareholders at the 2016 AGM of shareholders.
On August 22, 2019, the Group confirmed the renewal of the Lynas Malaysia operating licence for an initial period of 6 months. During that 6
month period, the Group is required to obtain consent for the location of a Permanent Deposit Facility (PDF) for WLP residue. In addition, the
Group is required to relocate Cracking & Leaching, the first stage of its operations currently located in Malaysia, to Western Australia within 4
years. The Group plans to implement that relocation as part of the Lynas 2025 growth plan.
With the exception of the above, there have been no other events subsequent to June 30, 2019 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, August 29, 2019
27
27
Lynas Corporation Limited | 2018 Annual Report 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 the
Basis of preparation note 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 E.6 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, August 29, 2019
28
28
www.lynascorp.com Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of Lynas
Corporation Limited
As lead auditor for the audit of the financial report of Lynas Corporation Limited for the financial year
ended 30 June 2019, 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
Gavin Buckingham
Partner
Perth
29 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:JG:LYNAS:009
29
Lynas Corporation Limited | 2018 Annual Report
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
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
2019, the consolidated statement of profit or loss and other 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 2019
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
GB:JG:LYNAS:0010
30
www.lynascorp.com
1. Accounting for the JARE debt facility
Why significant
How our audit addressed the key audit matter
As described in Note C.3, the Group agreed to
amendments to the Japan Australia Rare Earths
B.V. (JARE) debt facility on 27 June 2019. The
amendments were assessed as a substantial
modification of the existing financial liability,
which requires de-recognition of the existing
financial liability, recognition of the amended
financial liability at fair value and measurement
of the resultant impact on the statement of
comprehensive income.
Accounting for substantial modifications to
financial liabilities gives rise to complex and
judgmental accounting outcomes in respect of
assessing whether a substantial modification has
occurred, estimating the fair value of the
amended facility and measuring the impact to
the statement of comprehensive income upon
de-recognition. Accordingly, this was considered
to be a key audit matter.
Refer to Note A.2 and Note C.2 within the
financial report for the amounts recorded on the
consolidated statement of financial position as at
30 June 2019 and related disclosures.
Our procedures included the following:
► Reperformed the Group’s assessment of whether
a substantial modification occurred, ensuring the
calculations were performed in accordance with
the requirements of Australian Accounting
Standards and that key terms related to the
existing and amended facilities agreed to the
signed contracts.
► With assistance from EY Valuation specialists,
assessed the reasonability of the discount rate
utilized to estimate the fair value of the amended
facility at initial recognition.
► Recalculated the gain recognised on
extinguishment.
► Considered the adequacy of the disclosures and
classification of the facility included within the
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
31
Lynas Corporation Limited | 2018 Annual Report
2. Rehabilitation Provisions
Why significant
How our audit addressed the key audit matter
The Group incurs obligations for asset and site
restoration and rehabilitation, which includes
requirements under its Full Operating Stage
License in Malaysia to manage water leached
purification (WLP) and neutralisation underflow
(NUF) residues arising from the production
process. As at 30 June 2019 the Group’s
consolidated statement of financial position
includes provisions of $111m in respect of such
obligations as disclosed in Note D.5.
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,
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.
Due to the significant degree of estimation and
judgment used to determine the rehabilitation
provision this was considered to be a key audit
matter.
Our procedures included the following:
► Assessed the appropriateness of the changes in
cost estimates and the assumptions underpinning
the cost estimates against the prior year
calculations, which were prepared by external
experts.
► Understood changes in license conditions with
respect to the management of WLP and NUF
residues and assessed the appropriateness of
changes in assumptions and calculations within
the rehabilitation cost estimates as a result of
these changed conditions.
► Tested the mathematical accuracy of the
rehabilitation models and assessed the
appropriateness of the inflation and discount rate
assumptions.
► Performed site inspections at Mount Weld and the
Lynas Advanced Materials Plant and understood
changes to the disturbed areas since the previous
annual reporting period.
► Considered the adequacy of the disclosures
relating to the Group’s provisions for restoration
and rehabilitation included in the financial 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 2019 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
32
www.lynascorp.com
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.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
33
Lynas Corporation Limited | 2018 Annual Report
►
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.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Lynas Corporation Limited for the year ended 30 June 2019,
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
Gavin Buckingham
Partner
Perth
29 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
34
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Table of Contents
Financial Statements
Notes to the Financial Statements
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
About this Report
Earnings for the year
A
A.1 Segment revenue and expenses
A.2 Financial income and expense
A.3 Earnings per share
A.4 Income taxes
B Production and Growth Assets
B.1 Mine properties and property, plant and equipment
B.2
Impairment of non-current assets
C Cash, Borrowings and Capital
C.1 Cash
C.2 Interest bearing liabilities
C.3 Financing facilities
C.4 Contributed equity
C.5 Reserves
D Other Assets and Liabilities
D.1 Receivables
D.2 Inventories
D.3 Other non current assets
D.4 Trade and Other Payables
D.5 Provisions and Employee Benefits
E Other Items
E.1 Contingent assets and liabilities
E.2 Leases and other commitments
E.3 Auditor remuneration
E.4 Subsidiaries
E.5 Parent information
E.6 Entities under a deed of cross guarantee
E.7 Employee benefits and share based payments
E.8 Options and warrants
E.9 Other accounting policies
E.10 Subsequent events
Directors Declaration
Independent Auditor Information
Shareholder Information
36
35
Other
.
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended June 30
In A$’000
Revenue
Cost of sales
Gross profit
General and administration expenses
Net foreign exchange loss
Other expenses
Profit from operating activities
Net gain on extinguishment of debt
Financial income
Financial expenses
Net financial income / (expenses)
Profit before income tax
Income tax expense
Profit for the year
Note
2019
2018
A.1
A.1
A.1
A.2
A.2
A.2
A.4
363,541
(273,052)
90,489
(33,611)
(273)
(168)
56,437
43,434
2,312
(21,958)
23,788
80,225
(195)
80,030
374,105
(253,001)
121,104
(34,270)
(5,101)
(694)
81,039
-
22,025
(49,660)
(27,635)
53,404
(285)
53,119
Other comprehensive income 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 for the year, net of income tax
10,712
10,712
46,922
46,922
Total comprehensive income for the year attributable to equity holders of the Company
90,742
100,041
Earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
A.3
A.3
12.04
11.47
8.84
8.29
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial
statements.
36
37
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Financial Position
As at June 30
In A$’000
Assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Prepayments
Inventories
Total current assets
Inventories
Property, plant and equipment
Deferred development expenditure
Other non-current assets
Total non-current assets
Total assets
Liabilities
Interest payable
Trade and other payables
Borrowings
Employee benefits
Provisions
Tax payable
Total current liabilities
Trade and other payables
Interest payable
Borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Reserves
Total equity attributable to the equity holders of the Company
Note
2019
2018
C.1
D.1
D.2
D.2
B.1
B.1
D.3
D.4
C.2
D.5
D.5
D.4
C.2
D.5
D.5
C.4
C.5
89,710
12,873
18
1,958
58,332
162,891
4,705
626,462
32,931
51,816
715,914
878,805
413
37,029
29,308
2,182
-
-
68,932
467
1,690
163,673
550
111,145
277,525
346,457
532,348
42,292
12,365
-
2,358
51,658
108,673
4,109
594,416
18,726
38,707
655,958
764,631
452
35,012
-
2,142
357
52
38,015
580
1,607
225,112
354
64,485
292,138
330,153
434,478
1,398,264
(856,331)
(9,585)
532,348
1,395,417
(936,361)
(24,578)
434,478
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
38
37
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Changes in Equity
In A$’000
Share
capital
Accumula
ted losses
Foreign
currency
translation
reserve
Equity settled
employee
benefits
reserve
Warrant
reserves
Other
reserves
Total
Balance at July 1, 2018
1,395,417
(936,361)
(109,619)
45,091
34,094
5,856
434,478
Other comprehensive income for
the year
Total profit for the year
Total comprehensive income
for the year
Conversion of convertible note
Employee remuneration settled
through share-based payments
-
-
-
2,847
-
-
10,712
80,030
-
80,030
10,712
-
-
-
-
-
-
-
-
5,072
-
-
-
-
-
-
-
-
(791)
-
10,712
80,030
90,649
2,056
5,072
Balance at June 30, 2019
1,398,264
(856,331)
(98,907)
50,163
34,094
5,065
532,348
Balance at July 1, 2017
(Restated)
Other comprehensive income for
the year
Total profit for the year
Total comprehensive income
for the year
Conversion of convertible note
Exercise of warrants
Employee remuneration settled
through share-based payments
1,094,403
(989,480)
(156,541)
39,970
40,413
83,390
112,155
-
-
-
-
46,922
53,119
-
53,119
46,922
288,191
12,825
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,319)
5,121
-
-
-
-
46,922
53,119
100,041
(77,534)
210,657
-
-
6,506
5,121
Balance at June 30, 2018
1,395,417
(936,361)
(109,619)
45,091
34,094
5,856
434,478
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
38
39
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended June 30
In A$’000
Note
2019
2018
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 and development expenditure
Security bonds paid
Security bonds refunded
Interest received
Deposit as collateral for AELB
Net cash used in investing activities
Cash flows from financing activities
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 increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations (net) on cash held
Closing cash and cash equivalents
C.1
367,538
(254,196)
(8,949)
(280)
104,113
(32,279)
(77)
14
2,002
(10,291)
(40,631)
(9,840)
-
(6,973)
(16,813)
46,669
42,292
749
89,710
383,136
(256,656)
(7,868)
(132)
118,480
(24,220)
(1,575)
267
1,127
(29,139)
(53,540)
(27,714)
6,506
(65,542)
(86,750)
(21,810)
63,925
177
42,292
The Consolidated Statement of Cash flows should be read in conjunction with the notes to the financial statements.
40
39
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
About this Report
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, 2019 comprises the Company and its subsidiaries
(together referred to as the “Group”). The financial report was approved by the Board of Directors (the “Directors”) on August 29, 2019.
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.
Basis of preparation
Statement of compliance
The financial report is a general purpose financial report and has been prepared in accordance with Australian Accounting Standards (“AASs”)
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 August 29, 2019.
Going concern
The financial report has been prepared using the going concern assumption.
As detailed in Note C.3, on June 27, 2019, the Group announced a 10 year extension of the JARE loan facility. The new terms of the JARE loan
facility include a maturity date of June 30, 2030 (previously June 30, 2020) and an interest rate of 2.5% p.a. (previously 3.75% p.a.).
As noted in Subsequent Events section (Note E.10), on August 22, 2019, the Group confirmed the renewal of the Lynas Malaysia operating
licence for an initial period of 6 months. During that 6 month period, the Group is required to obtain consent for the location of a Permanent
Deposit Facility (PDF) for WLP residue. In addition, the Group is required to relocate Cracking & Leaching, the first stage of its operations
currently located in Malaysia, to Western Australia within 4 years. The Group plans to implement that relocation as part of the Lynas 2025 growth
plan.
Basis of measurement
The financial report has been prepared under the historical cost convention, 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, 2019. Information for the comparative year is for the 12
month period ended June 30, 2018.
Consolidation of 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 E.4 all
entities within the Group are 100% owned and controlled.
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.
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.
Currency and foreign exchange
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.
Items included in the financial report of each of the Group’s entities are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”).
Foreign currency transactions
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.
40
41
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
i
l
i
i
i
i
l
i
i
i
i
i
i
i
y
n
n
f
o
o
t
i
r
p
e
h
t
e
h
t
i
s
h
t
e
r
a
e
r
a
t
o
n
t
a
h
t
t
a
h
t
d
n
a
e
h
T
s
k
s
i
r
l
i
r
a
m
e
m
a
s
s
t
e
s
s
a
r
e
h
t
o
e
h
t
s
w
o
r
r
o
b
.
)
s
e
i
t
i
t
n
e
y
c
n
e
r
r
u
c
Foreign operations
of financial position;
p
u
o
r
G
e
h
t
s
e
c
n
e
r
r
u
c
d
e
s
n
g
o
c
e
r
s
g
n
w
o
r
r
o
b
s
e
c
n
e
r
r
u
c
n
n
o
i
t
a
t
n
e
s
e
r
p
a
n
o
i
t
c
n
u
f
e
h
t
t
n
e
m
e
t
a
t
s
e
h
t
r
o
t
i
f
o
r
p
e
h
t
n
a
u
d
s
e
r
e
g
d
e
h
f
o
C
n
o
i
t
c
e
S
n
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date of the statement
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:
f
o
e
t
a
d
g
n
i
t
r
o
p
Foreign exchange risk management
e
r
e
Notes to Consolidated Financial Statements
r
a
For the year ended June 30, 2019
p
u
o
r
G
e
h
t
p
u
o
r
G
e
h
t
e
t
a
d
i
r
e
p
t
o
a
r
n
p
p
m
• income and expense items for each profit or loss item are translated at average exchange rates;
a
o
• items of other comprehensive income are translated at average exchange rates; and
n
d
• all resulting exchange differences are recognised as a separate component of equity.
e
e
d
r
e
e
d
r
s
a
n
h
o
c
c
h
n
w
e
h
s
w
e
i
t
i
t
n
e
p
u
o
r
G
s
t
c
a
r
t
n
o
c
e
g
n
As a result of the Group’s international operations, foreign exchange risk exposures exist on purchases, assets and borrowings that are
a
h
denominated in foreign currencies (i.e. currencies other than the functional currency of each of the Group’s operating entities). The currencies
c
in which these transactions are primarily denominated are the AUD, USD and MYR.
x
e
d
r
a
w
r
o
f
e
s
u
t
o
n
s
e
o
d
p
u
o
r
G
e
h
t
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
.
s
comprehensive income component of the Group’s statement of comprehensive income.
e
c
n
e
r
r
u
c
n
g
e
r
o
f
n
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. Details of this exposure is detailed in the capital risks in Section C of this
R
report.
Y
M
d
n
a
D
S
U
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.
t
i
f
o
r
p
g
n
i
t
a
r
e
p
o
t
e
n
e
h
t
c
i
f
i
c
e
p
s
m
o
r
f
g
n
s
i
r
a
t
a
e
t
a
r
g
n
s
o
c
e
h
t
d
e
t
a
n
m
o
n
e
d
.
s
n
o
i
t
c
a
s
n
a
r
t
s
t
n
e
m
e
v
o
m
s
p
u
o
r
G
e
h
t
a
c
r
e
m
m
o
c
d
e
s
n
g
o
c
e
r
,
s
e
s
a
h
c
r
u
p
,
e
r
o
f
e
r
e
h
T
s
e
c
n
e
r
r
u
c
s
e
r
u
s
o
p
x
e
s
e
s
a
h
c
r
u
p
d
n
a
;
s
e
t
a
r
e
g
n
a
h
c
x
e
e
g
n
a
h
c
x
e
,
r
e
v
e
w
o
H
g
n
i
t
a
r
e
p
o
e
r
u
s
o
p
x
e
y
c
n
e
r
r
u
c
y
c
n
e
r
r
u
c
,
e
b
s
a
e
f
e
g
a
r
e
v
a
.
e
m
o
c
n
t
n
e
r
e
f
f
i
.
y
t
i
u
q
e
t
c
a
p
m
a
t
i
p
a
c
;
s
e
t
a
r
n
e
h
w
s
e
t
a
r
h
c
a
e
a
t
e
D
t
s
x
e
m
o
r
f
a
t
e
d
s
h
t
k
s
i
r
k
s
i
r
k
s
i
r
e
h
t
e
h
t
n
o
n
o
d
e
f
o
f
o
f
o
f
o
n
n
n
d
o
s
s
y
y
s
l
l
l
i
l
l
l
i
.
f
l
i
l
i
i
i
i
i
l
’
i
i
i
i
i
i
i
i
l
i
i
i
i
i
i
l
l
t
a
d
e
t
a
s
n
a
r
t
e
r
a
d
e
t
n
e
s
e
r
p
n
o
i
t
i
s
o
p
l
i
a
c
n
a
n
i
f
f
o
t
n
e
m
e
t
a
t
s
h
c
a
e
r
o
f
s
e
i
t
i
l
i
b
a
i
l
d
n
a
s
t
e
s
s
a
;
n
o
i
t
i
s
o
p
l
i
a
c
n
a
n
i
f
f
o
t
n
e
n
o
p
m
o
c
e
t
a
r
a
p
e
s
a
s
a
i
d
e
s
n
g
o
c
e
r
e
r
a
s
e
c
n
e
r
e
f
f
i
d
e
g
n
a
h
c
x
e
g
n
i
t
l
u
s
e
r
l
l
a
e
g
n
a
h
c
x
e
e
g
a
r
e
v
a
t
a
d
e
t
a
s
n
a
r
t
l
e
r
a
e
m
o
c
n
i
i
e
v
s
n
e
h
e
r
p
m
o
c
r
e
h
t
o
f
o
s
m
e
t
i
l
t
a
d
e
t
a
s
n
a
r
t
e
r
a
m
e
t
i
s
s
o
l
r
o
t
i
f
o
r
p
h
c
a
e
r
o
f
s
m
e
t
i
e
s
n
e
p
x
e
d
n
a
e
m
o
c
n
i
•
•
•
•
a
n
o
i
t
c
n
u
f
a
e
v
a
h
t
a
h
t
s
e
i
t
i
t
n
e
e
s
o
h
t
f
o
n
o
i
t
i
s
o
p
l
i
a
c
n
a
n
i
f
d
n
a
s
t
l
u
s
e
r
e
h
T
s
n
o
i
t
a
r
e
p
o
n
g
e
r
o
F
i
:
s
w
o
l
l
o
f
s
a
y
c
n
e
r
r
u
c
n
o
i
t
a
t
n
e
s
e
r
p
’
s
p
u
o
r
G
e
h
t
o
t
n
i
d
e
t
l
a
s
n
a
r
t
s
e
i
t
i
t
n
E
d
e
l
l
o
r
t
n
o
C
d
n
a
d
e
t
i
i
m
L
n
o
i
t
a
r
o
p
r
o
C
s
a
n
y
L
s
t
n
e
m
e
t
a
t
S
i
l
a
i
c
n
a
n
F
d
e
t
a
d
i
l
o
s
n
o
C
o
t
s
e
t
o
N
9
1
0
2
,
0
3
e
n
u
J
d
e
d
n
e
r
a
e
y
e
h
t
r
o
F
f
o
s
t
e
s
s
a
t
e
n
f
o
n
o
i
t
a
s
n
a
r
t
e
h
t
n
o
s
l
i
i
k
s
i
r
e
g
n
a
h
c
x
e
n
g
e
r
o
f
o
t
e
r
u
s
o
p
x
e
y
r
a
m
’
i
r
p
s
p
u
o
r
G
e
h
T
i
e
v
s
n
e
h
e
r
p
m
o
c
f
o
t
n
e
m
e
t
a
t
s
’
s
p
u
o
r
G
e
h
t
f
o
t
n
e
n
o
p
m
o
c
e
m
o
c
n
i
i
e
v
s
n
e
h
e
r
p
m
o
c
t
c
a
p
m
i
e
h
T
.
y
c
n
e
r
r
u
c
n
o
i
t
a
t
n
e
s
e
r
p
’
s
p
u
o
r
G
e
h
t
s
i
i
h
c
h
w
,
D
U
A
n
a
h
t
r
e
h
t
o
l
d
u
o
w
s
e
t
a
r
e
g
n
a
h
c
x
e
n
i
e
g
n
a
h
c
a
,
s
e
c
n
a
t
s
m
u
c
r
i
c
e
s
e
h
t
n
I
i
.
y
r
a
d
s
b
u
s
i
t
a
h
t
f
o
y
c
n
e
r
r
u
c
e
g
n
a
h
c
x
e
n
g
e
r
o
f
i
o
t
d
e
s
o
p
x
e
e
r
a
p
u
o
r
G
e
h
t
n
h
i
t
i
w
s
e
i
r
a
d
s
b
u
s
i
i
i
n
a
t
r
e
C
.
e
m
o
c
n
i
i
e
v
s
n
e
h
e
r
p
m
o
c
f
o
t
n
e
m
e
t
a
t
s
’
s
p
u
o
r
G
e
h
t
f
o
t
n
e
n
o
p
m
o
c
s
s
o
l
.
t
r
o
p
e
r
41
a
r
e
n
e
G
.
d
e
t
a
r
e
n
e
g
e
r
a
s
n
o
i
t
a
r
e
p
o
m
o
r
f
s
w
o
l
f
h
s
a
c
h
c
h
w
n
i
i
i
s
e
c
n
e
r
r
u
c
i
d
e
t
a
n
m
o
n
e
d
s
t
n
e
m
y
a
p
d
n
a
s
t
p
e
c
e
r
i
m
o
r
f
i
g
n
s
i
r
a
k
s
i
r
e
g
n
a
h
c
x
e
n
g
e
r
o
f
i
e
g
n
a
h
c
x
e
n
g
e
r
o
f
e
g
d
e
h
i
o
t
s
t
c
a
r
t
n
o
c
e
g
n
a
h
c
x
e
d
r
a
w
r
o
f
o
n
t
i
r
e
t
n
e
y
a
m
l
i
.
e
b
s
s
o
p
t
n
e
t
x
e
e
h
t
o
t
s
t
e
s
f
f
o
l
a
r
u
t
a
n
f
o
e
g
a
t
n
a
v
d
a
s
e
k
a
t
p
u
o
r
G
e
h
T
a
n
o
i
t
c
n
u
f
e
h
t
n
a
h
t
r
e
h
t
o
i
s
e
c
n
e
r
r
u
c
.
e
.
i
(
i
s
e
c
n
e
r
r
u
c
i
n
g
e
r
o
f
n
i
i
t
d
e
a
n
m
o
n
e
d
e
g
n
a
h
c
x
e
i
n
g
e
r
o
f
,
s
n
o
i
t
a
r
e
p
o
l
a
n
o
i
t
a
n
r
e
t
n
i
’
s
p
u
o
r
G
e
h
t
f
o
t
l
u
s
e
r
a
s
A
t
n
e
m
e
g
a
n
a
m
k
s
i
r
e
g
n
a
h
c
x
e
n
g
e
r
o
F
i
,
D
U
A
e
h
t
e
r
a
d
e
t
a
n
m
o
n
e
d
y
i
l
i
r
a
m
i
r
p
e
r
a
s
n
o
i
t
c
a
s
n
a
r
t
e
s
e
h
t
i
h
c
h
w
n
i
42
2
4
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
A. Earnings for the Year
This section includes the results and performance of the Group. It includes segmental information and details about the Group’s tax position.
A.1 Segment revenue and expenses
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.
All of the Group’s revenue is derived through the sale of Rare Earth products and is sold to non-Australian customers.
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.
78% (FY18 :77%) of the Group’s non-current assets are located in Malaysia and the remaining 22% (FY18: 23%) are in Australia.
Recognition and measurement
Revenue
Rare Earth Product sales:
The Group derives revenue from the sale of rare earth products, which are governed by a sales contract with their customers. Revenue is
recognised in relation to rare earth sales at the time control transfers to customers at the date of loading/shipment. Sales made under CIF
incoterms, where the Group is responsible for freight and shipping, are generally recognised at the point in time when the rare earth products
are loaded onto the vessel for shipment. In these sales, the freight and shipping service represents a separate performance obligation to the
sale of the rare earth products. For those sales not made under CIF incoterms, this timing is upon the delivery of the rare earth products.
Provisionally priced sales:
Certain of the Group’s sales are provisionally priced, where the final price depends on the sale price of products sold to a third party outside of
the Lynas transaction. Adjustments to the sales price occur based on movements in market prices up to the secondary point of sale. Under
AASB 15 any fair value adjustments on receivables subject to Quotational Pricing (QP) are recognised in other revenue and not included in
revenue from contracts with customers. There are no receivables on these terms at June 30, 2019.
Shipping services:
As noted above, a portion of the Group’s rare earth product sales are sold on CIF incoterms, whereby the Group is responsible for providing
freight and shipping services after the date that it transfers control of the rare earth products to the customer. Under AASB 118, freight and
shipping services were not accounted for as separate services. Instead all the revenue relating to the sale was recognised at the date of loading
and presented as revenue from sale of rare earth products. Under AASB 15, it has been concluded that freight and shipping represent a separate
performance obligation and that the Group acts as principal. As a result, a portion of the transaction price is now required to be allocated to this
performance obligation and will be recognised over time on a gross basis as the services are provided. The Group has concluded that for the
FY19 period the amount is insignificant and therefore not disclosed separately in Note A.1.
Royalties
Obligations arising from royalty arrangements are recognised as current liabilities and included as part of the cost of goods sold in the statement
of comprehensive income as a component of profit or loss.
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.
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.
42
43
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
In A$’000
Business segment reporting
Revenue from contracts with customers
Other revenue:
Price adjustments
Total revenue
Cost of sales (excl depreciation)
Cost of sales (depreciation)
Gross profit
Employee and production costs net of
costs recovered through production
Depreciation expenses net of cost
recovered through production
Other general and administration expenses
Total general and admin expenses
Other expenses
Net foreign exchange loss
Profit / (loss) before interest and tax
(“EBIT”)
Net gain on extinguishment of debts
Other financial income
Financial expenses
Profit before income tax
Income tax expense
Profit 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
Other non-cash transactions
Adjusted EBITDA
For the year ended June 30, 2019
For the year ended June 30, 2018
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
358,297
5,244
363,541
(233,651)
(39,401)
90,489
-
-
-
-
-
-
358,297
374,105
5,244
363,541
(233,651)
(39,401)
90,489
-
374,105
(219,083)
(33,918)
121,104
-
-
-
-
-
-
374,105
-
374,105
(219,083)
(33,918)
121,104
(3,122)
(8,013)
(11,135)
(3,444)
(9,541)
(12,985)
(3,677)
(1,227)
(4,904)
(11,852)
(18,651)
(5,720)
(14,960)
(17,572)
(33,611)
(5,703)
(10,695)
(19,842)
(1,240)
(6,943)
(3,647)
(14,428)
(14,342)
(34,270)
-
-
(168)
(273)
(168)
(273)
-
-
(694)
(5,101)
(694)
(5,101)
71,838
(15,401)
56,437
101,292
(20,223)
81,039
-
43,434
43,434
2,312
(21,958)
80,225
(195)
80,030
-
-
-
22,025
(49,660)
53,404
(285)
53,119
71,838
43,077
114,915
(15,401)
1,227
(14,174)
56,437
44,304
100,741
101,262
39,621
140,883
(20,223)
1,240
(18,983)
81,039
40,861
121,900
-
-
5,234
5,234
(162)
(162)
-
-
6,935
6,935
(1,815)
(1,815)
(42)
114,873
-
(9,103)
(42)
105,769
-
139,522
-
(12,502)
-
127,020
Total assets
Total liabilities
823,155
(193,156)
55,650
(153,301)
878,805
(346,457)
753,696
(140,938)
10,935
(189,215)
764,631
(330,153)
Other general and administration expenses include statutory, consulting, insurance, IT, marketing and general office costs.
44
43
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
A.2 Financial income and expenses
In A$’000
Net gain on extinguishment of debt(1)
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
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 on AELB deposit
Financing transaction costs and fees
Unrealised foreign exchange loss on intercompany balance
Total financial expenses
Net financial benefit / (expenses)
For the year ended June 30
2019
43,434
2,312
-
45,746
(8,773)
(435)
(1,477)
(7,152)
1,484
(907)
356
(471)
(4,583)
(21,958)
23,788
2018
-
1,178
20,847
22,025
(8,825)
(2,124)
(7,655)
(7,630)
(22,411)
(793)
332
(554)
-
(49,660)
(27,635)
(1) During the year ended June 30, 2019 Lynas restructured its debt facility with JARE, resulting in a net gain due to the derecognition
of the old facility and recognition of the new facility as detailed in Note C.2.
A.3 Earnings per share
Recognition and measurement
Basic earnings per share amounts are calculated by dividing net profit 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 adjusts the amount used in the determination of the basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional
shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Potential ordinary shares are treated
as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share from continuing operations.
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted earnings per share are as follows:
In A$’000
Net earnings attributed to ordinary shareholders
Earnings used in calculating basic earnings per share
Net earnings impact of assumed conversions of diluted EPS
Earnings used in calculating diluted earnings per share
Number of ordinary shares on issue (‘000)
Weighted average number of ordinary shares used in calculating basic earnings per share
(‘000)
Weighted average number of ordinary shares used in calculating diluted earnings per share
(‘000)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The following dilutive shares are included in share base for the calculation of dilutive earnings per share:
Unlisted convertible bonds (Conversion price: $1.00 at a set exchange rate of A$1.00 =
US$0.75)
Unlisted warrants (Exercise price: $0.50)
Performance rights
Total
44
45
As at June 30
2019
2018
80,030
80,030
1,336
81,366
667,801
664,803
709,451
12.04
11.47
53,119
53,119
1,213
54,332
662,547
600,689
655,555
8.84
8.29
Number
(000’s)
18,203
17,402
9,044
44,649
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
A.4 Income taxes
A.4.1 Income tax expense
In A$’000
Current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Deferred tax
Deferred tax expense recognised in the year
Total income tax expense relating to the continuing operations
A.4.2 Reconciliation of income tax to tax expense
In A$’000
Profit before tax for continuing operations
Income tax expense calculated at 30% (2018: 30%)
Add / (deduct):
Effect of expenses that are not deductible and income that is not assessable in determining
taxable profit
Effect of restatement of prior year accounts
Effect of foreign exchange gains and losses
Deferred tax relating to the origination of and reversal of temporary differences
Effect of previously unrecognised tax losses bought to account
Effect of difference in tax rate in Malaysia
Other adjustments
Total current year income tax expense
A.4.3 Movements in deferred tax balances
For the year ended June 30
2019
2018
195
-
195
-
195
285
-
285
-
285
For the year ended June 30
2019
2018
80,225
24,067
5,651
-
3,787
(15,198)
(1,244)
(13,156)
(3,712)
195
53,404
16,021
24,837
23,649
16,474
(30,362)
(2,288)
(40,178)
(7,868)
285
In A$’000
Temporary differences
Inventory
Development expenditure
Property plant and equipment
Borrowings
Trade payables
Provisions
(Unrecognised) / recognised deferred tax assets
Net deferred tax asset / (liability) recognised
In A$’000
Temporary differences
Development expenditure
Property plant and equipment
Borrowings
Costs of equity and debt raisings
Trade payables
Provisions
(Unrecognised) / recognised deferred tax assets
Net deferred tax asset / (liability) recognised
(29,713)
-
Balance at
June 30, 2018
Recognised in
profit or loss
Recognised
in equity
Recognised
in OCI
Balance at
June 30, 2019
-
(8,601)
1,754
19,942
119
10,148
23,362
(23,362)
-
(872)
(5,575)
559
(8,466)
(1)
2,340
(12,015)
12,015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(872)
(14,176)
2,313
11,476
118
12,488
11,347
(11,347)
-
Balance at
July 1, 2017
(Restated)
Recognised in
profit or loss
Recognised
in equity
Recognised
in OCI
Balance at
June 30, 2018
(7,927)
1,011
28,269
3
93
8,264
29,713
(674)
743
(8,327)
(3)
26
1,884
(6,350)
6,350
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,601)
1,754
19,942
-
119
10,148
23,362
(23,362)
-
46
45
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
A.4.4 Unrecognised deferred tax assets
In A$’000
Deductible temporary differences and unused tax losses for which no deferred tax assets
have been recognised are attributable to the following:
Gross revenue losses
Australia
Malaysia
Malawi
Gross capital losses
Australia
Malaysia
As at June 30
2019
2018
128,523
167,441
229
2,145
305,537
143,878
167,441
298
2,145
323,365
Deductible temporary differences (tax effected)
11,347
23,362
Recognition and measurement
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of comprehensive income as a
component of the profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which
case it is recognised with the associated items on a net basis. Current tax is the expected tax payable on the taxable income for the year using
tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method of providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the carrying amounts for taxation purposes. Deferred tax is not recognised for the following
temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled
entities to the extent that they probably will not reverse in the foreseeable future and the Group is in a position to control the timing of the reversal
of the temporary differences. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantially enacted at the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time the liability to pay the related dividend is
recognised. Deferred income tax assets and liabilities in the same jurisdiction are offset in the statement of financial position only to the extent
that there is a legally enforceable right to offset current tax assets and current tax liabilities and the deferred balances relate to taxes levied by
the same taxing authority and are expected either to be settled on a net basis or realised simultaneously.
Tax consolidation
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.
Key estimates and judgements
Recognition of deferred tax assets
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 for a period of 7 years after incurring the loss. Pre-pioneer period losses in Malaysia consist of MYR 368m in capital
losses and MYR 257m in business losses. There is uncertainty if these losses will be utilised as they will have expired at the
conclusion of the pioneer period under the 7 year carry forward period.
•
There remains uncertainty at June 30, 2019 regarding the Operating Licence renewal in Malaysia, and the renewal received subsequent
to year end extends through to March 2020. Until a longer term licence has been received, there is ongoing uncertainty around the
quantum and 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, 2019.
46
47
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
B. Production and Exploration Assets
This section includes information about the recognition, measurement, depreciation, amortisation and impairment considerations of the core
producing and exploration assets of the Group.
B.1 Property, plant and equipment and mine development
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.
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.
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.
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.
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.
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.
48
47
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
B.1 Property, plant and equipment and mine development (cont’d)
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 unit of production basis with reference
to the life of mine of the relevant area of interest.
Removal of waste material normally continues through the life of a mine. This activity is referred to as production stripping and commences upon
the extraction of ore.
Amortisation of development
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.
Key estimates and judgements
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.
Stripping Asset
As with many mining operations similar to Mt Weld, overburden and other mine waste materials are often removed during the initial
development of a mine in order to access the mineral deposit. The extraction of the ore body itself will also include a waste component
extracted during the mining campaign. The costs of extraction of both these elements form the stripping costs. Judgement is required to
identify a suitable allocation basis to apportion the stripping costs between inventory and any stripping assets for each component
The Group considers that the ratio of the expected volume of waste to be stripped for an expected volume of ore to be mined for a specific
component of the ore body, to be the most suitable production measure. An identifiable component is a specific volume of the ore body that
is made more accessible by the stripping activity.
Pre-Production Stripping
The Group has determined that the overburden removal where no ore is recovered forms part of a pre-production stripping asset and has
been determined to provide more accessibility to the total ore body and is amortised on this basis.
Production Stripping ratio
The Group has adopted a policy of deferring production stage stripping costs and amortising them on a units-of-production basis. Judgement
is required in determining the contained ore units for each mining campaign.
Estimation of mineral reserves and resources – refer to B.2
48
49
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
B.1 Property, plant and equipment and mine development (cont’d)
Property, Plant and Equipment
Development Expenditure
d
n
a
l
l
d
o
h
e
s
a
e
L
t
n
a
l
p
s
g
n
d
i
l
i
u
B
i
t
n
e
m
p
u
q
e
d
n
a
d
n
a
s
e
r
u
t
x
i
F
s
g
n
i
t
t
i
f
s
e
l
c
i
h
e
v
r
o
t
o
M
r
e
d
n
u
s
t
e
s
s
A
n
o
i
t
c
u
r
t
s
n
o
c
n
o
i
t
a
t
i
l
i
b
a
h
e
R
t
e
s
s
a
l
d
o
h
e
s
a
e
L
s
t
n
e
m
e
v
o
r
p
m
i
l
a
t
o
T
t
n
e
m
p
o
l
e
v
e
D
e
r
u
t
i
d
n
e
p
x
e
t
e
s
s
a
g
n
p
p
i
r
t
S
i
l
a
t
o
T
In A$’000
As at June 30, 2019
Cost
30,245
902,620
7,460
1,129
6,105
105,120
21,301
1,073,980
39,759
18,078
57,837
Accumulated impairment
losses
Accumulated
depreciation
-
(196,505)
(407)
-
(253)
-
(7,730)
(204,895)
(18,299)
-
(18,299)
(4,190)
(219,477)
(5,487)
(829)
-
(8,432)
(4,208)
(242,623)
(5,840)
(767)
(6,607)
Carrying amount
26,055
486,638
1,566
300
5,852
96,688
9,363
626,462
15,620
17,311
32,931
Opening cost
29,304
866,403
7,867
1,158
26,476
59,582
20,595
1,011,385
38,862
4,078
42,940
(2,977)
(388,214)
(5,876)
(809)
(264)
(7,840)
(10,989)
(416,969)
(23,514)
(700)
(24,214)
26,327
478,189
1,991
349
26,212
51,742
9,606
594,416
15,348
3,378
18,726
-
-
1,270
-
30
(2)
-
-
-
-
75
-
(2)
23,494
693
14,000
14,693
Depreciation expense
(580)
(39,598)
(491)
(91)
(992)
(611)
(42,363)
-
-
-
-
-
43,096
-
-
-
-
-
-
307
3,682
38
-
-
-
42
-
-
-
-
-
44,757
-
-
17
-
-
-
-
44,757
42
634
1,181
276
6,117
-
-
-
-
-
-
(421)
(67)
(488)
-
-
-
-
-
-
-
-
-
-
-
-
Opening accumulated
impairment and
depreciation
Opening carrying
amount
Additions
Disposals
Amortisation expense
Transfers of assets under
construction
Change in rehabilitation
obligations
Impairment expense
(reversal)
Foreign currency
translation
Carrying amount at
June 30, 2019
26,054
486,639
1,566
300
5,852
96,688
9,363
626,462
15,620
17,311
32,931
22,119
-
-
-
(43,113)
Restrictions on the title of property plant and equipment and development assets are outlined in Note C.3.
50
49
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
B.1 Property, plant and equipment and mine development (cont’d)
Property, Plant and Equipment
Development Expenditure
d
n
a
l
l
d
o
h
e
s
a
e
L
t
n
a
l
p
s
g
n
d
i
l
i
u
B
i
t
n
e
m
p
u
q
e
d
n
a
d
n
a
s
e
r
u
t
x
i
F
s
g
n
i
t
t
i
f
s
e
l
c
i
h
e
v
r
o
t
o
M
r
e
d
n
u
s
t
e
s
s
A
n
o
i
t
c
u
r
t
s
n
o
c
n
o
i
t
a
t
i
l
i
b
a
h
e
R
t
e
s
s
a
l
d
o
h
e
s
a
e
L
s
t
n
e
m
e
v
o
r
p
m
i
l
a
t
o
T
t
n
e
m
p
o
l
e
v
e
D
e
r
u
t
i
d
n
e
p
x
e
t
e
s
s
a
g
n
p
p
i
r
t
S
i
l
a
t
o
T
In A$’000
As at June 30, 2018
Cost
29,304
866,403
7,867
1,158
26,476
59,582
20,595 1,011,385
38,862
4,078
42,940
Accumulated impairment
losses
Accumulated
depreciation
-
(190,791)
(393)
(42)
(264)
-
(7,506)
(198,996)
(18,122)
-
(18,122)
(2,977)
(197,423)
(5,483)
(767)
-
(7,840)
(3,483)
(217,973)
(5,392)
(700)
(6,092)
Carrying amount
26,327
478,189
1,991
349
26,212
51,742
9,606
594,416
15,348
3,378
18,726
-
-
-
-
-
-
-
-
-
-
Opening cost
55,848
799,452
6,782
947
1,468
Opening accumulated
impairment and
depreciation
Opening carrying
amount
Additions
Disposals
(5,540)
(323,468)
(5,112)
(721)
(234)
50,308
475,984
1,670
226
1,234
-
-
-
(2,193)
-
-
-
27,262
(4)
(56)
Depreciation expense
(1,302)
(35,534)
(530)
(113)
18,379
882,876
38,844
4,078
42,922
(9,401)
(344,476)
(22,438)
(499)
(22,937)
8,978
538,400
16,406
3,579
19,985
-
-
27,262
(2,253)
(548)
(38,027)
-
-
-
-
-
-
-
-
-
Amortisation expense
Transfers of assets under
construction
Transfer of rehabilitation
asset from buildings,
plant and equipment
Transfer of rehabilitation
asset from deferred
development
Change in rehabilitation
obligations
Foreign currency
translation
Carrying amount at
June 30, 2018
-
-
-
(1,078)
(201)
(1,279)
-
-
(25,658)
-
-
2,207
760
227
(3,482)
-
-
-
-
-
-
-
-
-
-
-
-
25,658
20,781
3,068
-
288
-
-
-
-
-
-
20,781
3,068
-
-
-
-
2,979
37,726
91
13
1,255
2,235
888
45,186
20
-
-
-
-
-
-
-
-
-
20
26,327
478,189
1,991
349
26,212
51,742
9,606
594,416
15,348
3,378
18,726
Restrictions on the title of property plant and equipment and development assets are outlined in Note C.3.
50
51
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
B.2 Impairment of non-current 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.
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.
Recognised impairment
No impairment loss or reversal of prior period impairment loss was recognised in 2019 (2018: Nil).
Key estimates and judgements
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.
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset 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. Where applicable, 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.
52
51
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
C. Cash, Borrowings and Capital
This section includes information about cash and cash equivalents, borrowings and capital position of the Company at the end of the reporting
period.
C.1 Cash and cash equivalents
In A$’000
Cash at bank and on hand
Total cash and cash equivalents
Recognition and measurement
As at June 30
2019
89,710
89,710
2018
42,292
42,292
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.
Fair value and foreign exchange risk
The carrying amount of cash and cash equivalents approximates their fair value.
The Group’s cash and cash equivalents include A$73.7m in currencies other than Australian dollars, primarily US$27.2m (June 30, 2018:
US$3.8m) and MYR 96.9m (June 30, 2018: MYR 89.1m).
Reconciliation of the profit for the year with the net cash from operating activities
In A$’000
Profit 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 and other non-cash transactions
Income tax expense
Foreign exchange loss included in profit for the year
Change in trade and other receivables
Change in inventories
Change in operating trade and other payables
Change in other assets and liabilities
Change in provisions (excluding additional rehabilitation obligation)
Net cash from operating activities
For the year ended June 30
2019
2018
80,030
53,119
42,851
5,072
(23,788)
169
195
273
(108)
(7,270)
6,453
-
236
104,113
40,861
5,120
27,635
694
285
5,360
(6,006)
(17,804)
8,539
150
527
118,480
52
53
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
C.2 Interest Bearing Liabilities
In A$’000
Current borrowings
JARE loan facility(1)
Total current borrowings
Non-current borrowings
JARE loan facility
Convertible bond facility
Total non-current borrowings
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
2019
2018
29,308
29,308
145,611
18,062
163,673
174,919
174,919
23,130
(5,068)
18,062
-
-
207,449
17,663
225,112
207,449
207,449
23,519
(5,856)
17,663
(1)
(2)
The revised terms of the JARE loan include a condition whereby an early repayment of AU$30m is required if the Malaysian operating
licence is not renewed by December 31, 2019. Subsequent to June 30, 2019, the operating license was renewed and therefore this amount
is no longer current.
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.
Recognition and measurement
Interest bearing loans and borrowings
Subsequent to initial recognition interest bearing loans and borrowings are measured at amortised cost using the effective interest method.
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.
Key estimates and judgements
Interest bearing loans and borrowings are measured at amortised cost using the effective interest method.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability
to the amortised cost of the liability. The Group has applied judgement and determined the appropriate rate for a similar instrument to be
6.5%. When the Group revises the estimates of future cash flows, the carrying amount of the financial liability is adjusted to reflect the new
estimate discounted using the original effective rate. Any changes are recognised in the profit or loss.
Fair value and foreign exchange risk
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. The fair value methodology adopted was categorised as
Level 2 in the fair value hierarchy. These have been determined as follows:
JARE loan facility
Convertible bond facility
As at June 30, 2019
As at June 30, 2018
Carrying amount
(AUD ‘000)
Fair value
(AUD ‘000)
Carrying amount
(AUD ‘000)
Fair value
(AUD ‘000)
174,919
18,062
192,981
174,919
18,290
193,209
207,449
17,663
225,112
210,825
17,885
228,710
54
53
Lynas Corporation Limited | 2018 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
Terms and debt maturity schedule
Currency Nominal interest
Date of maturity
rate
JARE loan facility
Convertible bond facility (2)
USD
USD
2.5%
1.875%
June 2030
Sept 2020
As at June 30, 2019
As at June 30, 2018
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
156,505(1)
14,015
170,520
174,919
18,062
192,981
161,505(1)
15,647
177,152
207,449
17,633
225,082
(1) The face value of the JARE loan facility includes US$145.0m in principal and US$11.5m in interest deferred until October 2020.
(2) The face value of the Convertible bond facility includes US$13.7m in principal and US$0.3m in interest deferred to maturity date. The carrying
amount of the convertible bond facility reflects the current value of the debt component of the instrument.
Reconciliation of liabilities arising from financing activities
June 30,
2018
Cash flows
Non-Cash Movements
June 30,
2019
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjust-
ment(1)
Other
(2)
Derec-
ognition
Recog-
nition
Closing
Balance
JARE loan facility (Current)
JARE loan facility (Non-Current)
Convertible bond facility
Total
-
207,449
17,663
225,112
-
(6,973)
-
(6,973)
-
7,152
1,477
8,629
-
12,210
978
13,188
-
(1,484)
-
(1,484)
-
-
(2,056)
(2,056)
-
(218,354)
-
(218,354)
29,308
145,611
-
174,919
29,308
145,611
18,062
192,981
June 30, 2017
Cash flows
Non-Cash Movements
June 30, 2018
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjustment
Other (2)
JARE loan facility (Current)
JARE loan facility (Non-Current)
Convertible bond facility
Total
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
22,411
-
(18,571)
(225,741)
(244,312)
Closing
Balance
-
207,449
17,663
225,112
(1) Adjustments to the carrying values of the JARE loan during the year ended June 30, 2019 relate to changes in the cash flow profile used to
measure the carrying value of the loan.
(2) Other non-cash movements in the convertible bond facility relates to conversions of the convertible bonds, including interest paid.
C.3 Financing Facilities
Japan Australia Rare Earths B.V. (JARE) loan facility
An extension of the JARE loan facility was announced on June 27, 2019. As part of this extension, new terms were agreed to as detailed below.
The maturity date of the JARE loan facility has been extended to June 30, 2030 (previously June 30, 2020). The interest rate on this facility is
2.5% p.a. at June 30, 2019 (June 30, 2018: 3.75% p.a.). Conditions linking the interest rate to the NdPr sales price in the previous facility have
been removed.
Interest liabilities will be paid directly to the lenders at December 31 and June 30 each year. The payment of interest in respect of the period
commencing on January 1, 2016 and ending on December 31, 2016 is deferred to October 31, 2020 (with no penalty, and no additional interest).
There are a series of fixed repayments in the facility which have replaced the “Cash Sweep” mechanism in the former facility. The details of the
fixed repayments are as follows:
Repayment date
Each half-year from Dec 31, 2021 to Dec 31, 2023
June 30, 2024
Each half-year from Dec 31, 2024 to Dec 31, 2027
Each half-year from June 30, 2028 to June 30, 2030
Amount
US$2m on each date
US$5m
US$10m on each date
US$12m on each date
Japan will have the following priority supply rights until 2038:
1.
2.
3.
Any fundraising will not hinder Lynas’ ability to support Japanese industries diversifying their rare earths supply sources, in accordance
with the Availability Agreement announced on March 30, 2011.
Lynas shall ensure that in the event of competing demands from the Japanese market and a non-Japanese market for the supply by the
Borrower or Lynas Malaysia for NdPr produced from the Lynas Malaysia plant, the Japanese market shall have priority of supply up to
7,200 tonnes per year subject to the terms of the Availability Agreement and to the extent that Lynas will not have any opportunity loss.
JARE has rights of negotiation with Lynas in priority to non-Japanese market customers for the priority supply to the Japanese market of
additional NdPr and Nd products produced by the Lynas 2025 Project.
54
55
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
4.
Lynas will continue to prioritize the needs of Japanese customers for the supply of Heavy Rare Earths products produced by the Blue
Line JV, to the extent possible under any agreement with the U.S.
To date, the JARE loan facility has been secured over all of the assets of the Group, other than the Malawi assets. Pursuant to the amendments
announced on June 27, 2019, JARE agreed to release the following securities within 2 months: (i) Deed of Charge - All Assets (Malaysia) and
(ii) Malaysian Real Property Mortgage.
Mt. Kellett convertible bonds
As at June 30, 2019, the Company had on issue 13,652,136 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, US$1.59m convertible bonds were converted into
shares. The average conversion price paid upon conversion of convertible bonds during the year was $1 per share, with a conversion exchange
rate of AUD 1.00 = US$0.750. The number of ordinary shares into which the US$1.59m of bonds were converted during the year was 2.12m
shares.
The maturity of the bonds is September 30, 2020 and the coupon rate on the convertible bonds is 1.875% p.a. (June 30, 2018: 1.875% p.a.) in
line with the interest calculation below. The conversion price remains at $1, with a conversion exchange rate at AUD 1.00 = US$0.750. If all of
the 13,652,136 unconvertible bonds were converted into ordinary shares, 18.203m ordinary shares would be issued.
The bonds may be converted by the bondholder issuing a notice of conversion to the Company. 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 increases 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$38.0
per kilogram or greater.
The interest incurred from January 1, 2016 to December 31, 2016 was deferred to the maturity date with no penalty and no additional interest.
All interest accrued after January 1, 2017 is paid as accrued at interest dates of December 31 and June 30 each year. As a bond is converted
prior to the maturity date, the associated interest owed on that bond is paid on conversion.
C.4 Equity
Balance at the beginning of the year
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised warrants
Subtotal prior to share consolidation
10 to 1 share consolidation
Subtotal after share consolidation
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to exercised warrants
Closing balance
As at June 30
2019
A$’000
Number of
shares
‘000
662,547
-
-
662,547
-
662,547
2,120
3,135
-
667,802
1,395,417
-
-
1,395,417
-
1,395,417
2,847
-
-
1,398,264
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$’000
1,094,403
173,914
9,066
1,277,383
-
1,277,383
114,275
-
3,759
1,395,417
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in the event of a wind-up.
Recognition and measurement
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted from equity
and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the consideration paid
including any directly attributable incremental costs (net of income taxes) is directly recognised in equity.
56
55
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
C.5 Reserves
In A$’000
Equity settled employee benefits
Foreign currency translation
Warrant reserve
Equity component of convertible bond
Balance at June 30
Nature and Purpose
As at June 30
2019
2018
50,163
(98,907)
34,094
5,065
(9,585)
45,091
(109,619)
34,094
5,856
(24,578)
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 E.7.
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.
Warrant reserve includes options issued as part of rights issues.
The equity component of convertible bond 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. This has reduced in line with the conversion of bonds during the year.
Key Financial and capital risks associated with cash, debt and capital
Exposure to market, credit and liquidity risks arise in the normal course of the Group’s business. The Directors and management of the Group
have overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Directors have established a treasury policy that identifies risks faced by the Group and sets out policies and procedures to mitigate those
risks. Monthly consolidated treasury reports are prepared for the Directors, who ensure compliance with the Group’s risk management policies
and procedures.
Capital risk 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.
Liquidity risk management
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.
Interest rate risk management
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 exposure to interest rate risk is shown below:
In A$’000
June 30, 2019
Exposure
Maturity
Profile
Interest Rate Risk
-1%
1%
June 30, 2018
Exposure
Interest Rate Risk
1%
-1%
Impact on Profit and Equity
Impact on Profit and Equity
Floating rate instruments
Cash and cash equivalents
Other non-current assets
Convertible bond facility
JARE loan facility
Total
89,710
3,009
(17,663)
-
75,056
< 6 months
< 6 months
1-2 years
-
(449)
(15)
88
-
(376)
42,292
3,232
(20,944)
(207,449)
(182,869)
211
16
(105)
(1,038)
(916)
(211)
(16)
105
1,038
916
449
15
(88)
-
376
57
56
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
Foreign exchange risk management
The Group’s foreign exchange risks are detailed in the basis of preparation of these financial reports.
There are two elements of foreign exchange risk. Firstly, the Group holds cash, trade receivables and trade payables currencies other than the
functional currency of the Company in which it is held. Movement in the prevailing exchange rates have an impact on the Group’s profit and
equity. Secondly, 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 $A’000’s
Carrying
Amount
Foreign Exchange Risk
-10%
10%
Profit
Equity
Profit
Equity
As at June 30, 2019
Net exposure of US$ financial assets
Net exposure of A$ financial assets
Net asset exposure – MYR currency
Net asset exposure – US$ currency
As at June 30, 2018
Net exposure of US$ financial assets
Net exposure of A$ financial assets
Net asset exposure – MYR currency
Net asset exposure – US$ currency
US$ 8,377
A$ 244
MYR 373,890
USD (79,935)
US$ 9,177
A$ 704
MYR 479,304
US$ (143,350)
1,086
(24)
-
-
1,473
(82)
-
-
-
-
(12,875)
11,139
-
-
(16,094)
19,059
(1,086)
24
-
-
(1,473)
82
-
-
-
-
12,875
(11,139)
-
-
16,094
(19,059)
58
57
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
D. Other Assets and Liabilities
This section includes information about the other assets and liabilities position at the end of the period.
D.1 Receivables
In A$’000
Trade receivables
GST / VAT receivables
Other receivables
Total current trade and other receivables
As at June 30
2019
9,240
2,261
1,372
12,873
2018
5,843
5,645
877
12,365
The Group’s exposure to credit risk is primarily in its trade receivables. As at June 30, 2019 $0.60m (2018: $0.24m), of trade receivables were
past due but not impaired, of which $0.45m has been received subsequent to year end. The Group is in regular contact with these debtors and
expects the remaining amounts will be collected in full.
Recognition and measurement
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included
in current assets, except for instruments with maturities greater than 12 months from the reporting date, which are classified as non-current
assets. The Group’s receivables comprise trade and other receivables (including related party receivables) which are stated at their cost less
impairment losses.
Fair Value and foreign exchange risk
Given the short-term nature of trade receivables, the carrying amount is a reasonable approximation of fair value.
All trade receivables are held in currencies other than Australian dollars and therefore exposed to foreign exchange risk.
D.2 Inventories
In A$’000
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
As at June 30
2019
18,627
25,003
19,407
63,037
58,332
4,705
63,037
2018
19,997
26,168
9,602
55,767
51,658
4,109
55,767
During the year ended June 30, 2019 inventories of $273.1m (2018: $253.0m) were recognised as an expense. All of which were included in
‘cost of sales’.
Depreciation recognised in inventories
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred exploration, evaluation and
development expenditure and intangible assets for the years ended June 30, 2019 and 2018 respectively in the following categories:
In A$’000
Property, plant and equipment
Deferred exploration and evaluation
expenditure
Intangibles
Total
Recognised in General and
Administration Expense
2018
2019
Recognised in Inventory
Total
2019
2018
2019
2018
4,416
488
-
4,904
4,433
2,493
17
6,943
37,947
33,594
-
-
37,947
-
-
33,594
42,363
488
-
42,851
38,027
2,493
17
40,537
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 $39.4m in the year ended June 30,
2019 (2018: $33.9m).
58
59
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
Recognition and measurement
Raw materials, work in progress and finished goods
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based either on the first in first out (“FIFO”) or
weighted average principles and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and
condition. In the case of manufactured or refined inventories and work in progress, cost includes an appropriate share of production overheads
based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. Inventory expected to be sold or consumed within the next 12 months is classified as current, with
amounts expected to be consumed or sold after this time being classified as non-current.
Engineering and maintenance materials
Engineering and maintenance materials (representing either critical or long order components but excluding rotable spares) are measured at
the lower of cost and net realisable value. The cost of these inventories is based on the weighted average principle and includes expenditure
incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is determined with reference
to the cost of replacement of such items in the ordinary course of business compared to the current market prices.
D.3 Other non-current assets
In A$’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
2019
2018
2,993
16
44,419
4,388
51,816
2,834
398
31,568
3,907
38,707
Deposits to the Malaysian Government’s Atomic Energy Licensing 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 Lynas Malaysia plant. The total
amount deposited as security via a bond for the instalments is US$31.2m, with a further US$11.0m paid via cash directly to AELB. The final
instalment will be due in late 2019.
Recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income
and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash
flow characteristics and the Group’s business model for managing them. With the exception of trade receivables, the Group initially measures a
financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that
are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and
is performed at an instrument level.
Financial assets at amortised cost
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are
met:
-
-
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows,
and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost
includes trade receivables, and security deposits included under other non-current financial assets
D.4 Trade and Other Payables
In A$’000
Trade payables
Accrued expenses
Other payables
Total trade and other payables
Current
Non-current
Total trade and other payables
Recognition and measurement
As at June 30
2019
2018
14,119
14,397
8,980
37,496
37,029
467
37,496
12,556
11,994
11,042
35,592
35,012
580
35,592
Current trade and other payables are non-interest bearing and are normally settled on 30 to 60 day terms. Subsequent to initial recognition trade
and other payables are stated at amortised cost using the effective interest method.
Given the short-term nature of trade payables, the carrying amount is a reasonable approximation of fair value.
60
59
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
D.5 Provisions and Employee benefits
In A$’000
Current
Short term employee benefits
Onerous contracts
Other
Total current
Non-Current
Long term employee benefits
Restoration and rehabilitation
Total non-current
As at June 30
2019
2018
2,182
-
-
2,182
550
111,145
111,695
2,142
241
116
2,499
354
64,485
64,839
An onerous contract provision relating to the Sydney office was taken up based on the future rental payments net of estimated recoveries from
sub-letting. This contract expired in February 2019 with the associated make good provision paid during the year.
Recognition and measurement
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.
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.
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.
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.
Restoration and Rehabilitation
The activities of the Group give rise to obligations for asset and site restoration and rehabilitation at the Lynas Malaysia plant and the Mount
Weld concentration plant. The key areas of uncertainty in estimating the provisions for these obligations are set out below. 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 most recently engaged a third party specialist to assist in estimating costs at Lynas Malaysia as at June 30, 2018 and Mt Weld
as at June 30, 2019. The Group will continue to review the need to engage third party specialists periodically over time as the operations continue
to develop.
The unwinding effect of discounting of the provision is recognised as a financial expense.
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.
60
61
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
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.
In A$’000
Restoration and Rehabilitation
Balance at the beginning of the year
Provisions made during the year
Changes to inflation and discounts rates
Effects of foreign exchange movement
Unwinding of discount on provision
Balance at June 30
Key estimates and judgements
Restoration and rehabilitation expenditure
As at June 30
2019
2018
64,485
42,650
2,107
996
907
111,145
57,186
3,067
-
3,439
793
64,485
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.
Lynas Malaysia production residues
A requirement of the licence renewal announced on August 15, 2019, is for the Group to obtain consent for the location of a Permanent
Deposit Facility (PDF) for WLP residue within 6 months. The Group has included its best estimate of these costs within the Provision for
restoration and rehabilitation at June 30, 2019. The current estimate is impacted by assumptions relating to the future location of the PDF,
the distance required for the WLP residue to be transported and the size and design of the PDF. In line with the licence conditions, the Group
expects these costs to be further refined in FY20.
Key Financial risks associated with other assets and liabilities
Credit risk management
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.
62
61
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
E. Other Items
This section includes information on items which require disclosure to comply with Australian Accounting Standards and the Australian
Corporations Act 2001.This section includes group structure information and other disclosures.
E.1 Contingent Liabilities
An amount of US$31.2m 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. Refer to Note D.3 for details of bonds.
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 E.6.
E.2 Operating Leases and other commitments
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.
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.
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 and the asset is accounted for in accordance with the
accounting policy applicable to that asset.
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
2019
3,566
3,729
-
7,296
2018
3,139
5,667
-
8,806
The Group has contracts for several operating leases for business premises located in Perth, Laverton and Kuantan. The Group also has
several operating leases for motor vehicles and mobile plant and equipment.
Capital commitments
There were no outstanding commitments which are not disclosed in the consolidated financial report of the Group as at June 30, 2019 other
than:
Exploration commitments
In A$’000
Less than one year
Between one and five years
More than five years
Total
62
63
As at June 30
2019
2018
373
1,313
1,600
3,285
377
1,389
1,637
3,403
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Department of Mines and
Petroleum attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when application for a mining
licence is made. These are necessary in order to maintain the tenements in which the Group and other parties are involved. All parties are
committed to meet the conditions under which the tenements were granted in accordance with the relevant mining legislation.
Capital commitments
In A$’000
Less than one year
Total
At June 30, 2019 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
2019
2018
3,680
3,680
4,255
4,255
As at June 30
2019
2018
13,258
-
-
13,258
10,523
10,523
-
21,046
Other commitments include the following:
•
•
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 Licence for the Lynas Malaysia plant in Gebeng, Malaysia. The final instalment will be due in
late 2019; and
Fees for corporate costs committed to be paid in the next 12 months.
E.3 Auditor Remuneration
The following items of expenditure are included in general and administration expenses:
In $A
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Audit fees
Other fees
Total auditor’s remuneration Ernst & Young (Australia)
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Audit fees
Tax fees
Other fees
Total auditor’s remuneration Ernst & Young (other locations)
For the year ended June 30
2019
2018
244,725
6,800
251,525
127,806
36,125
-
163,931
295,262
51,041
346,303
127,363
3,579
-
130,942
Other fees paid to EY Australia in FY19 relate to completion of tax returns for expatriate employees. FY18 related primarily to other advisory
services.
E.4 Subsidiaries
Name of Group entity
Principal activity
Country of incorporation
Ownership interest as at June 30
2018
2019
Lynas Malaysia Sdn Bhd
Operation and development of
advanced material processing plant
Malaysia
100%
100%
Lynas Services Pty Ltd*
Provision of corporate services
Mount Weld Holdings Pty Ltd*
Holding company
Mount Weld Mining Pty Ltd*
Development of mining areas of
interest and operation of
concentration plant
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
ACN 053 160 302 Pty Ltd*
Dormant
Australia
100%
100%
64
63
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Lynas USA LLC
Mineral exploration
Development of processing
opportunities in USA
Australia
Malawi
USA
100%
100%
100%
100%
100%
-
* Entity has entered into a deed of cross guarantee with Lynas Corporation Limited pursuant to ASIC Instrument 2016/785 and is relieved from the requirement to prepare and lodge an audited
financial report, as discussed in Note E 26. Entity is also a member of the tax-consolidated group.
E.5 Parent Entity Information
In A$’000
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Accumulated deficit
Reserves
Total shareholders’ equity
Profit / (loss) of the Company
Total comprehensive gain / (loss) of the parent Company
E.6 Entities under a Deed of Cross Guarantee
As at June 30,
2019
2018
37,013
875,234
(30,452)
(194,736)
680,498
1,398,264
(1,104,934)
387,168
680,498
23,754
23,754
1,226
818,043
(452)
(226,095)
591,948
1,395,417
(1,128,688)
325,219
591,948
(33,204)
(33,204)
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 E.4.
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$’000
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Inventories
Property, plant and equipment
Deferred exploration, evaluation and development expenditure
Investments in subsidiaries
Other assets
Total non-current assets
Total assets
Trade and other payables
Interest payable
Borrowings
Employee benefits
Intercompany payables
Total current liabilities
64
65
As at June 30
2019
2018
96,319
368,754
13,056
478,129
3,632
124,147
30,865
375,080
16
533,739
1,011,868
9,277
413
29,308
2,421
200,348
241,768
34,313
339,020
11,719
385,052
3,554
123,154
18,726
375,080
398
520,912
905,963
9,908
452
-
1,545
133,790
145,694
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
In A$’000
Provisions
Employee benefits
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Share capital
Accumulated deficit
Reserves
Total equity
Statement of comprehensive income
Revenue
Cost of sales
Gross profit
Other income / (expenses)
General and administration expenses net of recoveries
Profit from operating activities
Financial income
Financial expenses
Net financial income / (expenses)
Profit / (loss) before income tax
Income tax benefit / (expense)
Profit / (loss) for the year from continuing operations
Other comprehensive 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
E.7 Employee costs and share based payments
2019
40,348
550
163,673
204,571
446,339
565,529
1,398,264
(1,025,001)
192,266
565,529
As at June 30
2018
33,179
354
225,112
258,645
404,339
501,624
1,395,417
(1,065,549)
171,756
501,624
107,746
(80,906)
26,840
47
(14,733)
12,154
44,790
(16,518)
28,272
40,426
35
40,461
92
92
40,553
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)
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
Other
Total employee costs
For the year ended June 30
2019
2018
43,035
1,400
5,072
662
50,169
38,286
1,312
5,120
773
45,491
Share-based remuneration benefits are provided to employees via a variety of schemes which are further set out below.
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.
66
65
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
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
2019
5,738,546
31,825
323,942
4,505,943
10,600,259
2018
5,690,410
21,022
295,939
4,655,640
10,663,011
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 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.
Employee share options and performance rights
The Group has established an employee share plan whereby, at the discretion of Directors, 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 performance rights are granted in
accordance with performance guidelines established by the Nomination, Remuneration and Community Committee. Other than short term
incentives and Strategic Performance Rights, each 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 performance rights hold no voting or dividend rights and are not
transferrable.
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 & Company Secretary, Vice President
for Production, Vice President for Sales & Marketing, MD Malaysia and Vice President for People & Culture.
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, 2019
For the year ended June 30, 2018
No. of performance
rights
(‘000)
11,286,942
-
11,286,942
1,161,987
-
(3,134,524)
(270,336)
9,044,069
1,830,247
Weighted average
exercise price
($)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
No. of performance
rights
(‘000)
94,790,959
(85,311,847)
9,479,112
4,579,543
-
(1,642,201)
(1,129,512)
11,286,942
-
Weighted average
exercise price
($)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
During the year ended June 30, 2019 the Group recognised net share based payment expense of $5.1m (2018: $5.1m) within the profit and loss
component of the statement of comprehensive income. The net expense during the year included the reversal of expenses totalling $0.2m (2018:
$1.1m) associated with the forfeiture of 270,336 performance rights.
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 231 days (2018: 778 days). The performance rights exercised during the year had a share price on exercise date of $2.19.
Performance rights granted in the period
The following table summarises the performance conditions attached to performance rights granted during the financial year ended June 30,
2019 with respect to the performance of the Group’s employees during the financial year ended June 30, 2018:
Vesting schedule
For grants made in FY19
TSR hurdle (50%)
50% of the TSR portion will vest for:
51st percentile performance
(performance against ASX 200
Companies during the vesting period)
EBITDA Production Hurdle (50%)
(EBITDA performance July 1, 2018 to
June 30, 2021)
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 EBIT growth portion will vest for:
Average annual EBIT growth at the end of the
period from July 1, 2018 to June 30, 2021 is at
least 7% per annum.
66
67
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
100% of the EBIT growth portion will vest for:
Average annual EBIT growth at the end of the
period from July 1, 2018 to June 30, 2021 is at
least 10% per annum.
Additional 20% of the EBIT growth portion,
giving a total of 120% of the EBIT growth
portion:
Average annual EBIT growth at the end of the
period from July 1, 2018 to June 30, 2021 is at
least 15% 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.
The performance rights granted during the financial year had a weighted average fair value of $1.986 (2018: $1.910) 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 AX
Series AY
Series AZ
Series BA
Aug 31, 2018 Aug 31, 2018 Aug 31, 2018 Nov 27, 2018
$2.187
$0.00
Nil
51.1%
1.995%
$2.187
$0.00
Nil
51.1%
1.995%
Aug 31, 2019 Aug 31, 2021 Aug 31, 2021
$2.187
$0.00
Nil
51.1%
1.995%
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2019
Series BB
Nov 27, 2018
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2021
Series BC
Nov 27, 2018
$2.187
$0.00
Nil
55.1%
2.09%
Aug 28, 2021
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
performance rights which are still to vest, or have yet to expire.
Series
Grant date
Number
Date vested and
exercisable
Expiry date
Exercise
price
AJ
AK
AM
AO
AP
AR
AS
AU
AV
AW
AX
AY
AZ
BA
BB
BC
November 23, 2015
947,894
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
476,715
August 28, 2020
August 28, 2022
November 28, 2017
2,123,816
August 28, 2019
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
August 31, 2018
August 31, 2018
August 31, 2018
351,928
August 31, 2019
August 31, 2019
199,446
August 31, 2021
August 28, 2023
166,205
August 28, 2021
August 28, 2023
November 27, 2018*
120,055
August 28, 2019
August 28, 2019
November 27, 2018*
176,920
August 28, 2021
August 28, 2023
November 27, 2018*
147,433
August 28, 2021
August 28, 2023
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
Value per
performance
right at grant
date
$ 0.900
$ 0.800
$ 0.650
$ 0.680
$ 0.500
$1.360
$2.060
$2.060
$1.620
$2.060
$2.187
$2.187
$1.431
$2.187
$2.187
$1.463
Total
9,044,069
*Series BA to BC were approved by the Board on August 31, 2018, subject to approval at the AGM. These performance rights were
subsequently approved at the AGM on November 27, 2018, with the date of grant being approved as August 31, 2018.
E.8 Options and warrants
On December 9, 2016 the Group issued 348,843,836 unlisted warrants to the bond holder group. These warrants were issued to the bond
holder group as part of the amendments to the terms of the convertible bonds that were approved by shareholders at the 2016 AGM of
shareholders. 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.
68
67
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
The following table discloses how the number of warrants has changed over the year:
Exercise price
Expiry date
Balance as at June 30, 2018
Balance as at June 30, 2019
December 2016 Issue
$0.50*
September 30, 2020
23,256,258
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.
These warrants have been exercised subsequent to June 30, 2019. Refer to Note E.10.
Options and warrants exercised
No options or warrants were exercised during the year.
E.9 Other Items
New and revised standards and interpretations
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, 2019.
Several amendments apply for the first time in the current year. The Group applies, for the first time, AASB 15 Revenue with Contracts from
Customers and AASB 9 Financial Instruments. As required, the nature and effect of the changes of these new standards has been outlined
below.
Standards and Interpretations in issue not yet adopted
The Australian Accounting Standards issued but not yet mandatory for the financial year ending June 30, 2019 have not been adopted by the
Group in the preparation of this financial report and are set out below:
Standard/Interpretation
AASB 16 Leases
AASB 2017-6 Amendments to Australian Accounting Standards –Prepayment Features
with Negative Compensation
Effective for the
annual reporting
period beginning
on
Expected to be
initially applied
in the financial
year ending
January 1, 2019
June 30, 2020
January 1, 2019
June 30, 2020
AASB 2018-1 Annual Improvements to IFRS Standards 2015 – 2017 Cycles
January 1, 2019
June 30, 2020
AASB 2018-2 Amendments to Australian Accounting Standards – Plan, Amendment,
Curtailment or Settlement
January 1, 2019
June 30, 2020
AASB Interpretation 23 Uncertainty over Income Tax Treatments
January 1, 2019
June 30, 2020
AASB 17 Insurance Contracts
January 1, 2021
June 30, 2022
New and amended accounting standards and interpretations
AASB 15 Revenue from Contracts with Customers
The Group adopted AASB 15 using the full retrospective method of adoption with an initial application date of July 1, 2018 and has not restated
comparative information. The effects of adopting AASB 15 are as follows:
Rare Earth Product Sales:
The Group derives revenue from the sale of rare earth products. There were no changes identified with respect to the timing of revenue
recognition in relation to rare earth sales as control transfers to customers at the date of loading/shipment which is consistent with the point
in time when risks and rewards passed under AASB 118.
Whilst there has technically been a change in the amount of revenue recognised for rare earths sold under Cost and Freight (“CIF”) Incoterms
where the Group provides shipping services, management have not deemed this to be material as the costs of insurance and freight (which
would be deemed to approximate revenue) represents less than 1% of the total revenue made from rare earth products. These services are
now considered to represent a separate performance obligation which is satisfied at a different point in time from the loading of the rare earth
products. Therefore, some of the transaction price that was previously allocated to the rare earth products under AAB 118 is now allocated to
this new performance obligation under AASB 15.
Provisionally priced sales:
Certain of the Group’s sales are provisionally priced, where the final price depends on the sale price of products sold outside of the Lynas
transaction. Adjustments to the sales price occur based on movements in market prices up to the secondary point of sale. Under AASB 15
the accounting for revenue will remain unchanged except that the fair value adjustments on receivables subject to Quotational Pricing (QP)
are recognised in other revenue and not included in revenue from contracts with customers. There were no receivables subject to QP
adjustments at June 30, 2019.
68
69
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
Shipping services:
As noted above, a portion of the Group’s rare earth product sales are sold on CIF Incoterms, whereby the Group is responsible for providing
freight and shipping services after the date that it transfers control of the rare earth products to the customer. Under AASB 118, freight and
shipping services were not accounted for as separate services. Instead all the revenue relating to the sale was recognised at the date of
loading and presented as revenue from sale of rare earth products. Under AASB 15, it has been concluded that freight and shipping represent
a separate performance obligation and that the Group acts as principal. As a result, a portion of the transaction price is now required to be
allocated to this performance obligation and will be recognised over time on a gross basis as the services are provided. However as mentioned
above the impact of this revenue is not material and management has not separately disclosed this revenue.
Impact on the financial statements
Other than the additional disclosure requirements it was determined that the adoption of AASB 15 did not have a significant impact on the
Group.
AASB 9 Financial Instruments
The Group adopted AASB 9 as of July 1, 2018.
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement, bringing together all three aspects of
the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The hedge accounting changes
are not applicable as the Company is not the party to any hedge relationship.
(a) Classification and measurement
Under AASB 9, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition of the asset. Under AASB 9, debt financial instruments are subsequently
measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The
classification is based on two criteria: the Group’s business model for managing the assets; and whether the instruments’ contractual cash
flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’).
On adoption of AASB 9, Lynas has reclassified its financial assets as subsequently measured at amortised cost or fair value depending on the
basis above. As a result, the Groups financial assets, being cash and cash equivalents and receivables are classified as ‘financial assets at
amortised cost.” Other non-current assets in the form of term deposits are also classified as ‘‘financial assets at amortised cost”. There has
been no change to the classification or measurement of financial liabilities.
In relation to the reclassification and measurement of financial assets and liabilities, there was no impact to the Statement of Comprehensive
Income, Statement of Financial Position or Statement of Changes in Equity, nor has there been any impact on basic or diluted earnings per
shares.
(b)
Impairment
The adoption of AASB 9 has fundamentally changed the Group’s accounting for impairment losses for financial assets by replacing IAS 39’s
incurred loss approach with a forward-looking expected credit loss (ECL) approach. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an
approximation to the asset’s original effective interest rate.
For trade and other receivables, the Group has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected
credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-
looking factors specific to the debtors and the economic environment
The adoption of the ECL requirements of AASB 9 has not had a material impact on an impairment allowance for the Group’s receivables. As a
result, there has been no impact to the Statement of Comprehensive Income, Statement of Financial Position or Statement of Changes in
Equity, nor has there been any impact on basic or diluted earnings per share.
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.
The Group’s review of all contracts is in progress, however it is expected that upon adoption of AASB 16 the new standard will have a material
impact on the Group’s financial statements. The most significant impact being an increase in lease liabilities representing the present value of
the operating lease commitments (see Note E.2) 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.
E.10 Subsequent events
On July 31, 2019, 23,256,258 unlisted warrants were exercised at a price of $0.50 per warrant, resulting in the issuance of 23,256,258 ordinary
shares and the receipt by the Group of $11,628,129. These warrants had been issued to the bond holder group as part of the amendments to
the terms of the convertible bonds that were approved by shareholders at the 2016 AGM of shareholders.
70
69
Lynas Corporation Limited | 2018 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended June 30, 2019
On August 22, 2019, the Group confirmed the renewal of the Lynas Malaysia operating licence for an initial period of 6 months. During that 6
month period, the Group is required to obtain consent for the location of a Permanent Deposit Facility (PDF) for WLP residue. In addition, the
Group is required to relocate Cracking & Leaching, the first stage of its operations currently located in Malaysia, to Western Australia within 4
years. The Group plans to implement that relocation as part of the Lynas 2025 growth plan.
70
71
www.lynascorp.com Mineral Resources and Ore Reserves
as at 30 June 2019
1. MT WELD RARE EARTH DEPOSIT ORE RESERVES 2019
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 2019
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
13.9
5.1
19.0
0.5
0.0
0.5
14.4
5.1
19.5
8.7
7.7
8.4
10.0
0.0
11.0
8.7
7.7
8.5
1,208
390
1,598
50
0
50
1,258
390
1,648
* 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 for the Mt Weld Rare Earth Deposit is as of June 30, 2019. The 2019 Ore Reserve update is based upon depletion of the
in-situ ore reserves by mining activities and changes to the stockpiles as a result of mining and processing. Full details of the material change
that occurred in 2018 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 stockpiles were estimated using survey volumes of the stockpiles
and grades assigned to the stockpiles by the grade control process. The surveys have been carried out by Mr Bradley Hughes, an employee
of Lynas Corporation. The grade control during mining was managed by Mr Ronan Fahey, an employee of Lynas Corporation. Mr Steve
Lampron, (Auralia Mining Consulting Pty Ltd) has carried out a review and audit of these figures and found them to fall within expected error
deviations. 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.
71
Lynas Corporation Limited | 2018 Annual Report Mineral Resources and Ore Reserves
2. MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2019
The Mineral Resource estimation for the Mt Weld Rare Earth Deposit is shown in Table 2, reported above a cut-off of 2.5% Total Rare Earth
Oxides (TREO).
TABLE 2: MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2019
JORC CLASSIFICATION
Measured
Indicated
Inferred
Total
MILLION
TONNES
TREO*
%
CONTAINED REO
‘000 TONNES
17.3
12.0
25.9
55.2
7.9
5.5
3.6
5.4
1,370
660
930
2,980
* 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. Mineral Resources have been reported above a cut-off of 2.5%
TREO.
Note:
The Mineral Resource estimation for the Mt Weld Rare Earth Deposit is as of June 30, 2019. The information is extracted from the Lynas
ASX announcement titled “Lynas announces a 60% increase to Mt Weld Ore Reserves, one of the world’s richest sources of Rare Earths”,
dated August 6, 2018 and is available to view on the company’s website. The company confirms that all material assumptions and technical
parameters underpinning the estimated Mineral Resources set out in the ASX announcement dated August 6, 2018 continue to apply and
have not materially changed. The exception is depletion of stockpiles processed and minor depletion of the in-situ resources from mining.
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.
72
www.lynascorp.com
COMPETENT PERSON’S STATEMENTS – MINERAL RESOURCES
The information in this report that relates to the 2019 Mineral Resources is based on information compiled by Mr Alex Whishaw under the
guidance of Dr Andrew Scogings. Mr Whishaw is a full-time employee of CSA Global Pty Ltd and is a member of the Australasian Institute of
Mining and Metallurgy. Dr Scogings is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute
of Geoscientists, and is employed by KlipStone Pty Ltd. Dr Scogings has sufficient experience relevant to the style of mineralisation and type
of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the
Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves. Dr Scogings consents to the inclusion in the
report of the matters based on his information 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 2019 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 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.
73
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 23 August 2019.
(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
10,592
8,602
2,653
2,921
252
25,020
Number
of Shares
Percentage
of Shares
5,344,221
22,583,395
20,631,406
80,042,375
559,121,872
0.777
3.284
3.000
11.639
81.300
687,723,269
100.000
The number of shareholders holding less than
a marketable parcel of shares
1,793
192,637
(B) Distribution of Employee Options/Performance Rights
There are 9,044,071 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
1
1
2
10
14
(C) Distribution Of 1.875% Unsecured Convertible Bonds Maturing 30 September 2020
There are 13,652,135.93 unlisted Convertible Bonds maturing 30 September 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 30 September 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 8,695,014.40 Convertible Bonds. FCCO DAC holds 3,457,121.53 Convertible Bonds.
74
Holders
0
0
0
3
3
www.lynascorp.com (D) Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are:
J P MORGAN NOMINEES AUSTRALIA
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
ARGO INVESTMENTS LIMITED
CITICORP NOMINEES PTY LIMITED
JOYKEEP LIMITED
1 HSBC CUSTODY NOMINEES
2
3
4 NATIONAL NOMINEES LIMITED
5 MERRILL LYNCH (AUSTRALIA)
6
7
8
9
10
11 MEDICH CAPITAL PTY LTD
12 HSBC CUSTODY NOMINEES
13
14
15
16 HSBC CUSTODY NOMINEES
17 HSBC CUSTODY NOMINEES
18 MALAY-SINO CHEMICAL INDUSTRIES
PROVEDORE HOLDINGS PTY LIMITED
19
AMP LIFE LIMITED
20
BNP PARIBAS NOMINEES PTY LTD
PM1942 PTY LTD
THE PAVILION MOTOR INN OF
Listed Ordinary Shares
Number
of Shares
% of
Shares
147,639,656
120,308,171
83,875,437
42,324,486
38,705,732
6,958,794
6,213,239
6,000,000
5,477,106
5,000,000
5,000,000
4,488,964
4,172,721
4,040,000
3,992,500
3,437,503
3,343,453
3,107,686
2,064,329
1,867,169
21.468%
17.494%
12.196%
6.154%
5.628%
1.012%
0.903%
0.872%
0.796%
0.727%
0.727%
0.653%
0.607%
0.587%
0.581%
0.500%
0.486%
0.452%
0.300%
0.272%
TOTAL
498,016,946
72.415%
(E) Substantial Shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
1
2
3
GREENCAPE CAPITAL PTY LTD
AUSBIL INVESTMENT MANAGEMENT LIMITED
FIL LIMITED
RELEVANT INTEREST IN LISTED ORDINARY SHARES
56,794,325
44,973,094
41,737,267
(F) 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.
75
Lynas Corporation Limited | 2018 Annual Report Additional Information
(G) 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
M38/58
M38/59
M38/326
M38/327
E38/2224
E38/2935
L38/224
L38/98
G38/34
G38/35
100
100
100
100
100
100
100
100
100
100
76
www.lynascorp.com 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 9225 6842
general@lynascorp.com
Principal Administrative Office
PT17212 Jalan Gebeng 3
Kawasan Perindustrian Gebeng
26080 Kuantan, Pahang Darul Makmur
Malaysia
Tel: +60 9 582 5200
Fax: +60 9 582 5291
general@lynascorp.com
Share Register
Boardroom Pty Ltd
Level 12, Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Tel: +61 2 9290 9600
Fax: +61 2 9279 0664
enquiries@boardroomlimited.com.au
Auditors
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
www.lynascorp.com
2019
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 2019
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:
https://www.lynascorp.com/about-us/corporate-governance/
The Corporate Governance Statement is accurate and up to date as at 29 August 2019 and has been approved by the
board.
The annexure includes a key to where our corporate governance disclosures can be located.
Date:
2 October 2019
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
in our FY19 Financial Report at www.lynascorp.com
☒
[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.
☐ an explanation why that is so in our Corporate Governance
Statement
[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
in our FY19 Financial Report at www.lynascorp.com
☒
[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
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)
☐ an explanation why that is so in our Corporate Governance
Statement
[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
in our FY19 Financial Report at www.lynascorp.com
☒
[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
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
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
in our FY19 Financial Report at www.lynascorp.com
☒
[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
☐ 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
8.2
8.3
☐ at [insert location]
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 2019
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 August
29, 2019.
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, 2019, 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, 2019 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 Group’s female
employees increased to 117 at the end of FY19 (the number was 113 at the end of FY18). 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, 2019 (prior year: June 30, 2018):
(1) Proportion of women employees in the whole organisation: 15.9% (2018 – 16.5%).
(2) Proportion of women employees in senior executive positions: 30.4% (2018 – 28.6%).
(3) Proportion of women on the Board: 33.0% (2018 – 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, 2019.
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 2019. In 2019, 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. The members of the Committee are 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 four formal meetings of the Committee during the financial year ending June 30, 2019. 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, 2019, 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, notwithstanding that 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, 2019 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.
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, 2019 is as follows:
Name
K. Conlon
A. Lacaze
M. Harding
P. Etienne
Term in office
7 years 8 months
5 years 6 months
4 years 6 months
4 years 6 months
J. Humphrey
G. Murdoch
2 years 1 month
1 year 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, 2019, 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, 2019. 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, 2019.
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. The members of the Committee are 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) Five meetings of the Committee were held during the financial year ending June 30, 2019. 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, 2019, 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;
(2)
live streaming the Group’s AGM; and
(3) 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. The members of the Committee are 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) Five meetings of the Committee were held during the financial year ending June 30, 2019. 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, 2019, 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, 2019.
Recommendation 7.3 – Internal Audit
During the financial year ending June 30, 2019, 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, 2019 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. The members of the Committee are 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 four formal meetings of the Committee during the financial year ending June 30, 2019. 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, 2019 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, 2019 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.