CORPORATE DIRECTORY
ABN 27 009 066 648
Registered Office
Level 1, 45 Royal Street
East Perth WA 6004
Tel: +61 8 6241 3800
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
2020
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
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78
Cover photography by Martine Perret
ii
Lynas Corporation Limited | 2020 Annual Report Letter from the Chairman
It gives me great pleasure to present the 2020 Annual Report
to our shareholders. Due to the effects of the COVID-19
pandemic, the second half of the financial year was
particularly challenging for people and businesses all over
the world. For Lynas, this included a six-week temporary
production halt as a result of the Malaysian government’s
Movement Control Order.
Lynas has come through this period in good shape thanks to prudent capital
management over a number of years, as well as the extensive COVID-19 health
and safety protocols implemented at both of our sites. We continue to work towards
the Lynas 2025 growth vision and despite COVID-19, the project teams made good
progress on key growth initiatives during the year.
Some key highlights of the year were as follows:
•
Lynas continued to deliver further improvement in safe operation with a
12-month rolling lost time injury frequency rate of 0.8 per million hours worked
(2019: 0.9 per million hours).
• Certification to Occupational Health and Safety Management Systems and ISO
standards were maintained during the year for both the Western Australian and
Malaysian operations. In November 2019, the AELB completed its pre-licence
renewal audit of the Lynas Malaysia operations. All regulatory conditions were
in compliance. The audit result was “Very Satisfactory”, which is the highest
performance rating and the third audit in a row Lynas has achieved a “Very
Satisfactory” performance rating.
• Cash flows from operating activities continued to be positive and have allowed
the Group to invest in expansion activities and reduce debt. Positive operational
cash flows over the past 3 years have exceeded $270m, excluding costs
associated with the discharge of rehabilitation obligations relating to residue
disposal in Malaysia.
•
Lynas recorded an EBITDA of $59.8m for the year (FY19: $100.7m), which was
heavily influenced by the 6 week temporary shutdown of the Lynas Malaysia
plant from late March 2020 to early May 2020, in accordance with the Malaysian
government’s COVID-19 Movement Control Order. Mt Weld operations were
also temporarily shut down from early April to mid-June 2020 after target
inventory levels of concentrate stocks were reached. A company-wide focus on
cost management and other non-operational work limited the effect on cash
flows during this period.
iiii
www.lynascorp.com
www.lynascorp.com “I would like
to take this
opportunity to
thank you for
your support over
the past five and
a half years”
• Net sales revenue for FY2020 was $305.1m (FY19: $363.5m) and total sales
volume was 14,172 REOt (FY19: 19,154 REOt).
• Project teams were established and progress was made on key Lynas 2025
projects, in particular the planned Kalgoorlie Rare Earth Processing Facility and
the proposed Heavy Rare Earths plant. During the year, Lynas received notifica-
tion of the U.S. Department of Defense’s intention to award a Phase 1 contract
for the Heavy Rare Earths plant to Lynas.
• The COVID-19 pandemic has heightened customer and government interest in
securing reliable and diversified Rare Earths supply for growing industries. Lynas
is the only significant producer of separated Rare Earth materials outside of
China and therefore Lynas is in an ideal position to benefit from the desire for
greater supply chain diversity.
• By August 2020, the Convertible Bond holders had converted the remaining
US$13.7m of issued bonds. As of 3 August 2020, Lynas’ only remaining debt
is the JARE loan facility with a principal amount of US$145m.
In late February 2020, the Lynas Malaysia operating licence was renewed for a three
year period to March 2023. The achievement of a three year licence subject to acceptable
conditions provides the foundation for the future operation of the Lynas Malaysia business.
As this is my final letter to Shareholders before I retire as Chair and Non-executive
Director of the Lynas Board on 30 September 2020, I would like to take this
opportunity to thank you for your support over the past five and a half years.
iiiiii
Lynas Corporation Limited | 2020 Annual Report Letter from the Chairman
“...our company’s
proven track record,
together with our
swift response
to the pandemic,
has placed us in
the best possible
position to
continue to
create value for
our shareholders...”
As Lynas embarks on the next phase of its development with the Lynas 2025 growth
plan I felt that it was an appropriate time to transition to a new Chair who can see
the growth projects through to completion. I’ve been proud to lead the Board as we
overcame many challenges to become a global leader in the Rare Earths industry.
I’m delighted that Kathleen Conlon is succeeding me as Chair, as this will ensure that
the Company continues to benefit from her longstanding experience with Lynas as well
as her extensive expertise in the fields of business strategy and operations.
On behalf of my Board colleagues, I would like to thank CEO Amanda Lacaze, the Lynas
executives, and all members of the Lynas team for their hard work and resilience during
these challenging times.
The Board would also like to thank you, our shareholders, for your ongoing support this
year. We understand this has been a difficult year for many people and we are confident
that our company’s proven track record, together with our swift response to the
pandemic, has placed us in the best possible position to continue to create value for
our shareholders and our customers and to benefit our people and our communities.
Mike Harding
Chairman
iv
www.lynascorp.com CEO Review
Our resilient business and strong focus on cost management
delivered solid revenue and positive operating cashflows, despite
the challenges of FY20.
The COVID-19 pandemic made for a challenging year for Lynas, as it did for many
businesses around the world.
Our FY20 financial performance was affected by the COVID-19 related temporary shutdown
as well as lower market prices and the temporary production halt in December after we
reached the annual concentrate processing limit for calendar year 2019.
However we have built a resilient business and despite the lower market pricing, our
performance in quarters not affected by the production halts remained strong.
Responding to COVID-19
Our strong safety culture meant that both of our sites could quickly implement government
and industry best practices in March 2020 to protect the health and wellbeing of our workforce
and our local communities.
At the same time, our resilient workforce adapted to new ways of working and our people
who were unable to be on site used the time productively.
Importantly, we continued to pay all of our employees whether they were working on site,
working from home or were not rostered on.
While demand for Rare Earth products has been affected by the global COVID-19 situation,
market prices for NdPr have improved in recent months. It may take a few more quarters
to clarify the effects on demand and market prices, including the effects of government
economic policies.
Making progress on Lynas 2025 projects
In FY20, we continued to progress key Lynas 2025 projects, including our planned Kalgoorlie
Rare Earth Processing Facility and proposed Heavy Rare Earth separation facility.
The Kalgoorlie Rare Earth Processing Facility, which is expected to create up to 500 jobs
during construction and 100 new ongoing jobs once operational, was awarded Lead Agency
status by the State Government of Western Australia and Major Project status by the
Australian federal government during the year.
• A dedicated project team was established, front end engineering design was
completed and the tender for the longest lead item, the kiln, was released and
has been awarded.
The development of Heavy Rare Earths separation capability is an attractive and strategic
project to meet the needs of our customers and during the year Lynas was selected for
Phase 1 of the U.S. Department of Defense tender for a U.S. based Heavy Rare Earths
separation plant.
v
Lynas Corporation Limited | 2020 Annual Report CEO Review
“A highlight of
FY20 was the
renewal of our
Malaysian
operating licence
for three years
to March 2023...”
On 17 August 2020, we announced a $425m equity raising to fund the Lynas 2025
foundation project, our planned Kalgoorlie Rare Earth Processing Facility and associated
changes at the Lynas Malaysia plant. We were delighted with the support shown by existing
shareholders and new investors for the equity raising. With the completion of this raising we
have confidence the project will be delivered and operational by mid-2023.
Renewal of our Malaysian operating licence
A highlight of FY20 was the renewal of our Malaysian operating licence for three years
to March 2023 with acceptable conditions. The three year operating licence is subject to
key conditions including the development of a Permanent Disposal Facility (PDF) for WLP
residue and ceasing imports into Malaysia of raw materials containing Naturally Occurring
Radioactive Material (NORM) from July 2023.
This renewal provides the foundation for the continued operation of Lynas Malaysia as well
as resolutions for the management of our two residue streams.
We are progressing with the development of our Kalgoorlie Rare Earth Processing Facility
by July 2023. In addition, on 30 January 2020 we announced that we had received consent
from the State Government of Pahang for the proposed site for the PDF and we appointed
a turnkey contractor to manage the entire PDF project.
In a further step towards satisfying the Malaysian licence conditions, on 5 August 2020, we
announced that the Atomic Energy Licensing Board has approved the proposed site for the
PDF, subject to relevant studies and final approvals.
vi
www.lynascorp.com “Lynas Malaysia
was awarded a
Gold medal CSR
rating from EcoVadis
during the year...”
Delivering safe, sustainable production
In FY20 NdPr production was 4,656 tonnes and total REO was 14,562 tonnes. Mining
Campaign 3 was completed at Mt Weld during the year, resulting in approximately
560,000 tonnes of ore extracted.
During the year, production at Lynas Malaysia was temporarily halted for 44 days from
23 March 2020, in accordance with the Malaysian government’s COVID-19 Movement
Control Order. Operations were restarted at approximately 70% of the Lynas NEXT
production rates which was determined as sufficient to refill supply chains and to restock
depleted inventories of critical materials while maintaining new COVID-related health and
safety protocols for our people and local communities. Production increased to 75% of the
Lynas NEXT production rates in June and we expect to maintain this rate until COVID-19
uncertainty is resolved.
Production was also temporarily halted in December 2019 after the annual (calendar year)
lanthanide concentrate processing limit was reached. This time was utilised to complete
circuit upgrades to further improve product quality.
We continued to deliver excellent safety outcomes in FY20 and achieved a 12-month rolling
lost time injury frequency rate at 0.8 per million hours worked for FY20 (2019: 0.9 per
million hours).
Pleasingly, Lynas Malaysia was awarded a Gold medal CSR rating from EcoVadis during the
year, a supply chain sustainability assessment used by many global manufacturers. This puts
Lynas in the top 5% of companies evaluated and reflects our ongoing commitment
to sustainable and environmentally-responsible Rare Earths production.
Quality initiatives delivering positive outcomes
The market price for NdPr reduced during the year from US$45.8/kg (VAT excluded) in June
2019 to US$36.0/kg in June 2020. In light of this, and the two production halts, net sales
revenue for FY2020 was $305.1m (FY19: $363.5m) and total sales volumes were 14,172
REOt (FY19: 19,154 REOt). The market price for NdPr has improved in recent months.
Our focus on quality improvements and product customisation in the La and Ce product
family have started to deliver value with an increased average selling price for this product
family despite the market price trend. We continue to develop our La-Ce specialties business,
a strategic move that will further enhance the value of this business independently of
market price.
We remain focused on serving customer demand and supporting development of the
market outside China and we continue to make progress towards our objective of selling
all production into outside China markets.
Notwithstanding the effect on demand, COVID-19 has heightened the focus on resilient
supply chains and securing a diverse supply of critical minerals, including Rare Earths, is
now a priority for many governments around the world as well as for end users. As the only
significant producer of separated Rare Earth materials outside of China, Lynas is in an ideal
position to benefit from the desire for greater supply chain diversity.
vii
Lynas Corporation Limited | 2020 Annual Report “Lynas is well
positioned to
benefit from the
future demand
growth of Rare
Earth materials.”
Looking to the future
We are working hard to transform our business as we grow with our markets and deliver a
larger, more diverse business by 2025. This is the essence of our Lynas 2025 growth vision
and I am delighted with the progress we have made on our key Lynas 2025 initiatives during
the year. I would like to thank all of our people for their continued hard work, dedication and
passion for our business. I would also like to thank my Board colleagues for their guidance
and support through an unexpectedly challenging year.
Most of all, I would like to thank Mike Harding, for over 5 years of leadership and counsel as
Chair of Lynas. Mike has been an integral part of our initial turnaround and then our growth
to become the company we are today. I’m sure you will join me in wishing Mike all the very
best following his retirement from the Lynas Board on 30 September 2020.
Kathleen Conlon, a Non-executive Director of Lynas since 2011, has been elected to succeed
Mike as Chair and I’m looking forward to working with Kathleen as we deliver the Lynas
2025 vision.
Last but certainly not least, I would like to thank you, our shareholders, for your steadfast
support and I look forward to updating you on our progress in FY21.
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 30 June 2020
1
Lynas Corporation Limited | 2020 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
Level 1, 45 Royal Street
East Perth WA 6004
Telephone: +61 8 6241 3800
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 .......................................................................................................................... 18
REMUNERATION REPORT – AUDITED .............................................................................................................. 19
DIRECTORS’ DECLARATION.............................................................................................................................. 31
AUDITOR’S INDEPENDENCE DECLARATION................................................................................................... 32
INDEPENDENT AUDITOR’S REPORT................................................................................................................. 33
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................ 40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................... 41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY................................................................................ 42
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................ 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................................. 44
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3
Lynas Corporation Limited | 2020 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 30 June 2020. 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 1 January 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 25 June 2014 following her appointment as a
Non-Executive Director of the Company on 1 January 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 1 November 2011. Ms Conlon is currently a Non-Executive Director of REA Group
Limited, Aristocrat Leisure Limited, BlueScope Steel 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.
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Ms Conlon is the Chair of the Nomination, Remuneration and Community Committee and a member of the Health, Safety and Environment
Committee.
Philippe Etienne MBA, BSc (Phys) (Pharm) - Non-Executive Director
Mr Etienne joined the Company as a Non-Executive Director on 1 January 2015. He is a Non-Executive Director of Cleanaway Waste
Management Limited (formerly Transpacific Industries Group Ltd), Aristocrat Leisure Limited and Chairman of 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
Mr Humphrey joined the Company as a Non-Executive Director on 15 May 2017. His key areas of expertise include mergers and acquisitions,
corporate finance and corporate governance.
Mr Humphrey is a senior 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.
Mr 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 30 October 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 entity OFX Ltd. He was previously a director and
the chair of the audit committee for ALS Limited, Redbubble Limited and QIC. He is 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.
COMPANY SECRETARIES
Andrew Arnold
Mr Arnold was appointed as General Counsel and Company Secretary to the Group on 23 July 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 20 October 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.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
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.
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
• As a result of a number of years of prudent capital management, Lynas entered the COVID-19 pandemic in robust financial shape. In
March 2020, the Lynas team moved quickly to implement recommended government safety and health recommendations and industry
best practices across all sites and the company continues to update protocols in line with the evolving situation.
•
Lynas recorded an EBITDA of $59.8m for the year (FY19: $100.7m). which was heavily influenced by the 6 week temporary shutdown
of the Lynas Malaysia plant from late March 2020 to early May 2020, in accordance with the Malaysian government’s COVID-19
Movement Control Order. There was no production during this period and sales (from inventory) were limited. Mt Weld operations
were also temporarily shut down from 9 April 2020 until 16 June 2020 after target inventory levels of concentrate stocks were reached.
Mt Weld staff were redeployed to development and maintenance projects during that period. A company-wide focus on cost
management and other non-operational work limited the effect on cash flows during this period.
• Operations were restarted in May 2020 at approximately 70% of the Lynas NEXT production rates which was determined as sufficient
to refill supply chains and to restock depleted inventories of critical materials while maintaining new COVID-related health and safety
protocols for our people and local communities.
•
Lynas Malaysia received 2 operating licenses during the year, the second and current licence being for a 3 year period. The first
licence renewal was in late August 2019 for a 6 month period. At the end of February 2020 a longer licence renewal for a three year
term to March 2023 was received. The achievement of a three year licence subject to acceptable conditions provides the foundation
for the future operation of the Lynas Malaysia business and clarity regarding:
o
o
the onsite disposal and commercialisation of NUF residue; and
resolution of the WLP residue permanent disposal facility requirements in Malaysia.
• During the year, Lynas continued to consolidate its position as the world’s second largest Rare Earths producer with strong customer
relationships in key markets of Asia, Europe and North America. Net sales revenue for FY2020 was $305.1m (FY19: $363.5m) and
total sales volumes were 14,172 REOt (FY19: 19,154 REOt). This result reflects the effect of the temporary production halts (due to
COVID-19 Movement Control Order and reaching the concentrate processing limit in December 2019) and lower market pricing during
the year. Despite this, product quality initiatives continued to deliver higher value La and Ce products.
• Substantial progress was achieved during FY20 on key Lynas 2025 projects, in particular the planned Rare Earth Processing Facility
in Kalgoorlie and the proposed Heavy Rare Earths plant, currently planned for location in Texas.
The significant achievements in relation to these projects during FY20 included the following:
a)
b)
Securing Major Project Status from the Australian federal government and lead agency status from the WA State government
for the Kalgoorlie project;
Securing local support from the City of Kalgoorlie Boulder and conducting several successful community engagement forums
in Kalgoorlie;
c) Recruiting the core team to lead the Kalgoorlie project;
d) Release of the contract for the kiln to be installed in Kalgoorlie, the longest lead time item (with contract awarded in July 2020)
e) Receiving notification of the US Department of Defense’s intention to award a phase 1 contract for the Heavy Rare Earths
plant to the Lynas / Blue Line team;
Progressing detailed planning and engineering work for the proposed Heavy Rare Earths separation plant.
f)
• Cash flows from operating activities continue to be positive and have allowed the Group to invest in expansion activities and reduce
debt. Positive operational cash flows over the past 3 years have exceeded $270m, excluding costs associated with the discharge of
rehabilitation obligations relating to residue disposal in Malaysia.
• Convertible Bond holders converted a further US$1.5m of the issued bonds during the year, reducing the principal amount of the
outstanding convertible bonds to US$12.2m ($A17.6m) at 30 June 2020. After year end, the remaining bonds were converted and
16.2m shares were issued.
• Completed Mining Campaign 3 was completed at Mt Weld during the year, resulting in approximately 560,000 tonnes of ore extracted.
Mt Weld
The Lynas mine at Mt Weld, Western Australia continued to operate safely and efficiently throughout the year.
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Lynas Malaysia
As announced on 27 February 2020, the Malaysian Atomic Energy Licensing Board (AELB) renewed the operating licence for the Lynas Malaysia
plant for three years expiring March 2023, subject to the following key conditions:
1.
2.
3.
Lynas to begin the process of developing the Permanent Disposal Facility (PDF) by early March 2021.
Lynas must submit a work development plan for the construction of the PDF and report on its development status as determined by
the AELB.
Lynas must ensure that the Cracking and Leaching plant outside Malaysia is in operation before July 2023. After that period, Lynas
will no longer be allowed to import raw materials containing Naturally Occurring Radioactive Material (NORM) into Malaysia.
4. Holding of the financial deposit will be maintained for compliance with the relevant licence conditions.
Lynas has continued to engage productively with local stakeholders and communities. During the year, we welcomed over 2,500 visitors to our
plant. This included visitors from Institute of Engineers Malaysia, Pahang Institute of Chemistry, IAEA Postgraduates in Radiation Protection
and Safety, Royal Military College Alumni, Metal Events International Rare Earths Conference participants and 2000 esteemed visitors and
community members who attended an Open Day at our plant. In all cases visitors to the Lynas Malaysia plant provided positive feedback
including that it was well worth their time to see the plant with their own eyes.
Our excellent CSR record continued through the year and Lynas Malaysia received a gold medal CSR rating from EcoVadis, ranking in the top
5% of companies evaluated, as well as being recognised by Lang International with Lynas Malaysia receiving the Best in CSR Award. Lynas
continues to proactively engage with key NGOs and our local communities directly and in January 2020 commenced a new communication
programme in major Malaysian media.
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 22 January 2019,
the Malawi government has purported to cancel the Group’s Malawi mining lease and the Group has initiated judicial review proceedings in the
Malawi courts challenging that decision.
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 successfully undertook ISO recertification audits in July and August 2019 and is currently undertaking recertification
audits for 2020.
A continued focus on health and safety initiatives resulted in Lynas Malaysia achieving Lynas Malaysia achieved 461 days LTI free in August
2019. The 12-month rolling lost time injury frequency rate as at 30 June 2020 was 0.8 per million hours worked (2019: 0.9 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.
On 26 November 2019, the AELB completed its pre-licence renewal audit of the Lynas Malaysia operations. All regulatory conditions were in
compliance. The audit result was “Very Satisfactory”, which is the highest performance rating. This is the third audit in a row that we have
maintained a “Very Satisfactory” performance rating. The Lynas Malaysia operating licence was subsequently renewed for a 3 year period (27
February 2020).
In line with our commitment to international environmental best practices, detailed environmental monitoring since the start of Lynas Malaysia’s
operations in Kuantan in 2012 has consistently demonstrated that Lynas Malaysia is compliant with regulatory requirements and international
standards. Information concerning the Company’s environmental monitoring programs, including monitoring data, is available at
www.lynascorp.com.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Financial and Operational Performance
Sales volume, revenue and costs
Sales by tonnage and value
Sales volume
Cash receipts from customers
Sales revenue
Average selling price
FY20
FY19
FY18
FY17
(REOt)
(A$m)
(A$m)
(A$/kg)
14,172
321.8
305.1
21.5
19,154
367.5
363.5
19.0
17,672
383.1
374.1
21.6
14,616
260.4
257.0
18.0
FY20
Percentage
change
(26%)
(12%)
(16%)
13%
Cost of sales
(A$m)
(257.3)
(273.1)
(253.0)
(242.2)
(6%)
The reduced sales volumes reflected the temporary shutdown at Lynas Malaysia between 23 March 2020 and 4 May 2020 in compliance with
the Malaysian government’s COVID-19 Movement Control Order, and the reduced volumes produced during the ramp up of the plant upon
restart.
The quality improvements and product customisation achieved in the La and Ce product family have started to deliver value with an increased
average selling price for this product family despite the market price trend. Lynas continues to develop its La-Ce specialties business, a strategic
move that will further enhance the value of this business independently of market price.
Total cost of sales has decreased based on lower production volumes and cost management during the temporary production halt periods. This
has occurred despite a significant increase in depreciation charges as a result of accelerated depreciation recognised on the Malaysian Cracking
and Leaching assets. This charge forms part of the costs of sales for FY20 and has arisen due to a reassessment of the assets’ useful life in
light of the new licence conditions. Furthermore, increases in the depreciation recognised on the rehabilitation assets and leased assets and
other costs associated with the COVID-19 shutdowns has increased the total cost of sales.
Market prices
The average China domestic price of NdPr (VAT excluded) decreased from US$45.8/kg in June 2019 to US$36.0/kg in June 2020. Future market
price trends will depend on end product demand (in particular in the automotive industry).
Demand for Rare Earth products has been affected by the global COVID-19 situation, especially in those segments related to the automotive
market. It may take a few quarters to clarify the effects on demand of the global COVID-19 pandemic, including the effects of government
economic policies and possible regulatory developments. The latest forecast from the International Energy Association (IEA) estimates a likely
decrease in the global automotive market of 15% in 2020 compared to 2019. However, it also estimates that sales of EVs (battery electric cars
and plug hybrid cars) would remain unchanged compared to last year, suggesting a growing consumer trend towards EVs. A 15% decrease in
the global automotive market represents a 1,000 tons per annum or 2-3% decrease in demand for NdPr. Most of this forecast decrease has
occurred in the first half of this calendar year (China in Q1, Japan in Q2), and based on customer feedback, the Group expects demand for NdPr
to improve in the second half of this year.
Demand for Cerium is affected by the decline of the automotive market and the decrease of internal combustion engine vehicles (ICEs) in the
vehicle mix. Accordingly, Lynas continues to work on developing new applications and market positions for Cerium specialty products.
Demand for Lanthanum, which is mainly used in fluid catalytic cracking (FCC) in oil refineries, depends on demand for gasoline. During the June
quarter, the movement controls imposed by many countries translated into substantial reductions in gasoline consumption, leading to a significant
decrease in Lanthanum demand for FCC. We consider this to be a very temporary situation since the number of cars on the road has mostly
returned to normal, and most existing cars are ICE vehicles.
Lynas is primarily focused on serving customer demand and supporting development of the market outside China. Lynas continues to make
strong progress towards its objective of selling all production to outside China markets.
Costs and production volumes
Costs by tonnage and value
Ready for sale production volume total
Ready for sale production volume NdPr
FY20
FY19
FY18
FY17
(REOt)
(REOt)
14,562
4,656
19,737
5,898
17,753
5,444
16,003
5,223
FY20
Percentage
change
(26%)
(21%)
Production at the Lynas Malaysia plant was temporarily halted on 23 March 2020 in compliance with the Malaysian government’s COVID-19
Movement Control Order. Production restarted at the Lynas Malaysia plant on 4 May 2020 in line with the easing of Malaysian government
control orders, and we continued to maintain prudent Standard Operating Procedures. Operations were restarted at approximately 70% of the
Lynas NEXT production rates which was determined as sufficient to refill supply chains and to restock depleted inventories of critical materials
while maintaining new COVID-19 related health and safety protocols for our people and local communities. Since June 2020, production has
been operating at 75% of Lynas NEXT rates and this rate is expected to be maintained until COVID-19 uncertainty is resolved.
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Production at Lynas Malaysia was also temporarily halted in December 2019 after annual (calendar year) lanthanide concentrate processing
limits were reached. Lynas Malaysia utilised this time to invest in various circuit upgrades to further improve product quality.
Cash and cash flows
In A$m
Net operating cash inflows
Net investing cash outflows
Net financing cash outflows
Net cash flows
Impact of foreign exchange
Cash and cash equivalents
FY20
32.1
(21.8)
2.0
12.3
(0.3)
101.7
FY19
104.1
(40.6)
(16.8)
46.7
0.7
89.7
Lynas maintained a positive operating cash flow and an overall positive net cash flow despite a challenging year and the temporary shutdown
in line with the Malaysian government’s COVID-19 Movement Control Order. During this time, Lynas focused on cost management and other
non-operational work, limiting the impact on cash flows. Included in the operating cash flows is the first payment of $14.9m (2019: nil) in relation
to the settlement of a total MYR400m (A$136m) rehabilitation obligation in relation to residue disposal in Malaysia. Net investing cash outflows
included a deposit paid as security to the AELB of $12.5m and payments for property, plant and equipment and $12.1m. These outflows have
been offset by proceeds from interest received of $2.9m. Net financing cash inflows from the issue of share capital in relation to the exercise of
warrants was $11.6m, offset by $2.6m in lease liability payments and a further $7.0m in interest and other financing costs.
Debt and capital
JARE loan
Convertible bonds
Total borrowings
Financial income
Financial expenses
Interest forgiven on JARE loan
Gain on extinguishment of debt
A$m
A$m
A$m
A$m
A$m
A$m
FY20
FY19
FY18
181,222
171,870
17,777
18,062
198,999
189,932
2.7
(15.6)
-
-
2.3
(22.0)
-
46.5
207,449
17,663
225,112
1.2
(49.7)
20.8
-
US$1.5m (A$2.0m) of convertible bonds were converted during the year, leaving an outstanding principal of US$12.2m (A$17.6m) at 30 June
2020. The A$ equivalent present value of the bonds increased due to accretion of interest and exchange rate movements over the period. As
noted in the subsequent events, on 3 August 2020, bondholders converted the remaining US$12.2m convertible bonds which resulted in an
additional 16.2m shares issued. As a result of these conversions, the remaining liability in respect to the convertible bonds has been fully
extinguished.
No principal repayments were made on the JARE facility. The balance increased due to the unwinding of the discounting of the future cash
outflows. The financial expenses have decreased by 29% as a result of lower interest expense based on lower principal balances for both the
JARE facility and the convertible bonds throughout the year.
During the year ended 30 June 2020, the Company issued shares as shown below:
Shares on issue 30 June 2019
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to exercised warrants
Shares on issue 30 June 2020
In addition to the ordinary shares on issue there were the following unlisted convertible bonds on issue:
Unlisted convertible bonds (Conversion price: $1.00 at a set exchange rate of A$1.00 =
US$0.75)
Number
(000’s)
667,802
2,000
6,151
23,256
699,209
Number
(000’s)
12,152
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Performance rights
As at 30 June 2020, the Company had the following options and performance rights on issue:
Performance rights
(Loss) / earnings per share
For the year ended 30 June
Basic (loss) / earnings per share (cents per share)
Diluted (loss) / earnings per share (cents per share)
Dividends
Number
(000’s)
4,462
FY20
(2.79)
(2.79)
FY19
12.50
11.90
There were no dividends declared or paid during the year ended 30 June 2020 (2019: nil) and no dividends have been declared or paid since
30 June 2020.
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. Set out
below are the principal risks and uncertainties that could have a material effect on Lynas’ future results from an operations and financial position.
It is not possible to determine the likelihood of these risks occurring with any certainty. In the event that one or more of these risks materialise,
Lynas’ reputation, strategy, business, operations, financial condition and future performance could be materially and adversely affected. There
may also be other risks that are currently unknown or are deemed immaterial, but which may subsequently become known and/or material.
These may individually or in aggregate adversely affect Lynas.
1
Impact of COVID-19 and general economic conditions
In light of recent global macroeconomic events, including the impact of COVID-19, it is likely that some of the countries in which Lynas operates
will experience an economic recession or downturn of uncertain severity and duration. These economic disruptions could have a material
adverse effect on Lynas’ operating and financial position and performance and could affect the price of Lynas shares.
Additionally, the events relating to COVID-19 have resulted in significant market changes and volatility of supply and demand. The outbreak
and its impacts are rapidly evolving and outcomes are uncertain and dependent upon many factors beyond Lynas’ control.
Many of the risks highlighted in further detail below may be heightened due to the impacts of the COVID-19 pandemic. There continues to be
considerable uncertainty as to the further short- and long-term impact of COVID-19 including in relation to governmental responses, international
trade impacts, potential taxation changes, work stoppages, lockdowns, quarantines, travel restrictions and the impact on the global economy
and share markets.
The potential effects of these possible outcomes on Lynas include:
•
•
•
•
•
•
•
•
closure of and/or reduced capacity at Lynas’ plants and facilities;
delays or interruption in supply chains leading to an inability to secure or obtain raw materials, finished products or components, or to
distribute products to customers;
health outcomes for Lynas’ employees or its customers’ employees, which could result in the closure of a plant or facility for a period
and could adversely affect the availability of technically equipped and qualified personnel needed to conduct certain operations;
a reduction in processing of downstream products and production of end-products that utilize Lynas' Rare Earths or other industrial
activity, leading to a decrease in demand for Lynas' Rare Earths;
counterparty non-performance or claims under existing contractual arrangements;
insolvency of counterparties (including customers);
delays of projects with large associated capital spend, deferral of discretionary capital spend and impact on valuation of assets;
disruptions to international trade resulting from policies developed by governments in response to COVID-19 or as a result of disputes
or disagreements amongst governments on matters relating directly or indirectly to COVID-19.
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2
2.1
Operational risks
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:
•
•
•
Supply side factors: Supply side factors are a 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.
Demand side factors: Demand side factors are also a significant influence on price volatility for Rare Earth materials. Demand for
end-products that utilise Lynas' Rare Earths including internal combustion vehicles, hybrid vehicles, electric vehicles and electronic
devices fluctuates due to factors including global economic trends, regulatory developments and consumer trends.
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.
The table below illustrates how China domestic prices of NdPr (excluding VAT) have moved over FY20:
US$/kg
September 2019 Quarter
39.0
December 2019 Quarter
36.2
March 2020 Quarter
35.0
June 2020 Quarter
33.8
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.
•
•
•
Strong Rare Earth prices, as well as real or perceived disruptions in supply, may create economic incentives to identify or create alternate
technologies that ultimately could depress future long-term demand for Rare Earths. This may, at the same time, incentivise the development of
additional mining properties to produce Rare Earths. If industries reduce their reliance on Rare Earth products, the resulting change in demand
could have a material adverse effect on Lynas' business. In particular, if prices or demand for Rare Earths were to decline, this could impair
Lynas' ability to obtain financing for current or additional projects and its ability to find purchasers for its products at prices acceptable to Lynas.
It is impossible to predict future Rare Earths price movements with certainty. Any sustained low Rare Earths prices or further declines in the
price of Rare Earths, including as a result of periods of over-supply and/or speculative trading of Rare Earths, will adversely affect Lynas'
business, results of operations and its ability to finance planned capital expenditures, including development projects.
2.2
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.
2.3
Exchange rates
Lynas is exposed to fluctuations in the US dollar as all sales are denominated in US dollars. Lynas borrows money and holds a portion of cash
in US dollars, which provides Lynas with a partial natural hedge. Accordingly, Lynas’ income from customers, and the value of its business, will
be affected by fluctuations in the rate by which the US dollar is exchanged with the Chinese Renminbi and the Australian dollar.
Lynas is exposed to fluctuations in the Malaysian ringgit (MYR), which is the currency that dominates Lynas’ cash operating outflows. In addition,
most of Lynas’ 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’ financial position and
operating results. The following table shows the average USD/AUD and MYR/AUD exchange rates over the past five years:
USD/AUD
MYR/AUD
30 June 2020
$
0.6714
2.8233
30 June 2019
$
0.7156
2.9521
30 June 2018
$
0.7391
2.9837
30 June 2017
$
0.7545
3.2331
30 June 2016
$
0.7283
3.0098
In-China market prices for Rare Earths are denominated in the Chinese Renminbi. In addition, a devaluation in the Chinese Renminbi would
increase attractiveness in Chinese exports and China’s internal supply. Fluctuation in the Chinese Renminbi against the US Dollar therefore
also increases the foreign exchange exposure on Lynas.
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2.4
Operational 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.
2.5
Nature of mining
Mineral mining involves risks, which even with a combination of experience, knowledge and careful evaluation may not be able to be fully
mitigated. Mining operations are subject to hazards normally encountered in exploration and mining. These include unexpected geological
formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment, which may
cause a material adverse impact on Lynas' operations and its financial results. Projects may not proceed to plan with potential for delay in the
timing of targeted output, and Lynas may not achieve the level of targeted mining output. Mining output levels may also be affected by factors
beyond Lynas' control.
2.6
Mineral and ore reserves
No assurance can be given that the anticipated tonnages and grades of ore will be achieved during production or that the anticipated level of
recovery will be realised. Mineral resource and ore reserve estimates are based upon estimates made by Lynas personnel and independent
consultants. Estimates are inherently uncertain and are based on geological interpretations and inferences drawn from drilling results and
sampling analyses. There is no certainty that any mineral resources or ore reserves identified by Lynas will be realised, that any anticipated
level of recovery of minerals will be realised, or that an identified ore reserve or mineral resource will be a commercially mineable (or viable)
deposit which can be legally and economically exploited.
Further, the grade of mineralisation which may ultimately be mined may differ materially from what is predicted. The quantity and resulting
valuation of ore reserves and mineral resources may also vary depending on, amongst others, metal prices, cut-off grades and estimates of
future operating costs (which may be inaccurate). Production can be affected by many factors. Any material change in the quantity of ore
resources, mineral reserves, grade, or stripping ratio may affect the economic viability of any project undertaken by Lynas.
Lynas' estimated mineral resources and ore reserves should not be interpreted as assurances of commercial viability or potential or of the
profitability of any future operations. Investors should be cautioned not to place undue reliance on any estimates made by Lynas. Lynas cannot
be certain that its mineral resource and ore reserve estimates are accurate and cannot guarantee that it will recover the expected quantities of
metals. Future production could differ dramatically from such estimates for the following reasons:
•
•
•
•
•
actual mineralisation or Rare Earth grade could be different from those predicted by drilling, sampling, feasibility or technical reports;
increases in the capital or operating costs of the mine;
decreases in Rare Earth oxide prices;
changes in the life-of-mine plan;
the grade of Rare Earths may vary over the life of a Lynas project and Lynas cannot give any assurances that any particular mineral
reserve estimate will ultimately be recovered; or
metallurgical performance could differ from forecast.
•
The occurrence of any of these events may cause Lynas to adjust its mineral resource and reserve estimates or change its mining plans. This
could negatively affect Lynas' financial condition and results of operations. Moreover, short-term factors, such as the need for additional
development of any Lynas project or the processing of new or different grades, may adversely affect Lynas.
2.7
Processing operations
Lynas' operations are subject to the operating risks associated with Rare Earth processing, including performance of processing facilities against
design specification, and the related risks associated with storage and transportation of raw materials, products and residues. These operating
risks have the potential to cause personal injury, property damage and environmental contamination, and may result in the shutdown of affected
facilities and in business interruption and the imposition of civil or criminal penalties, and negatively impact the reputation of Lynas.
The hazards associated with Lynas' mining and processing operations and the related storage and transportation of products and residues
include:
•
•
•
•
pipeline and storage tank leaks and ruptures;
explosions and fires;
mechanical failures; and
chemical spills and other discharges or releases of toxic or hazardous substances or gases.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which may result in
suspension of operations and the imposition of civil or criminal penalties, including fines, expenses for remediation and claims brought by
governmental entities or third parties. Although Lynas has detailed and closely managed plans to mitigate these risks and maintains property,
business interruption and casualty insurance of types and in the amounts that it believes is customary for the chemicals industry, Lynas is not
fully insured against all potential hazards incidental to its businesses.
2.8
Availability of key inputs, Including water
The Mt Weld Concentration Plant and the Lynas Malaysia Plant rely on the ready availability of key inputs, including chemical reagents, water,
electricity and gas. Any inability of Lynas to obtain such inputs in sufficient quantities on a timely basis could materially adversely affect Lynas’
operations. For example, the insolvency of key suppliers may adversely affect the availability of chemical reagents. In addition, the water supply
to the Mt Weld Concentration Plant is primarily sourced from a local aquifer supplemented by recycling, and the water supply to the Lynas
Malaysia plant is primarily sourced from the local Kuantan water supply infrastructure, supplemented by recycling. Reductions in water
availability from those sources, for example due to changes in weather patterns or failures of infrastructure, could materially adversely affect the
availability of water to the Lynas operations.
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2.9
Supply chain and counterparty risk
Lynas is dependent on contractors and suppliers to supply vital goods and services to its operations, including for the supply of chemicals and
other materials. Lynas is therefore exposed to the possibility of adverse developments in the business environments of its contractors and
suppliers, including in respect of the ability of those contractors and suppliers to meet their commitments under sales contracts. Any disruption
to services or supplies may have an adverse effect on Lynas’ financial business and financial condition.
2.10
Reliance on key personnel
Lynas’ execution capacity is substantially attributable to the role played by a group of its senior management and key employees. Lynas’ future
success depends significantly on the full involvement of these key executives and employees and its ability to continue to retain and recruit high-
level personnel. The loss of key employees could significantly affect Lynas’ operations.
In addition, industrial and labour disputes, work stoppages and accidents, and logistical and engineering difficulties may also have an adverse
effect on Lynas' profitability and share price.
2.11
Customer risks
Lynas’ revenue is dependent on continuing sales to its key customers, many of whom require delivery to specific timetables of products that
comply with detailed specifications. The loss of key customers could significantly affect Lynas’ business, for example due to disputes with
customers, customers switching to other suppliers or technologies, or customer businesses being adversely affected by events outside the
control of Lynas, including customer insolvency or declining markets for the end-products of customers.
2.12
Industry Trends, including changes in technology
Changes in technology, including switches to renewable energy sources, present both opportunities and risks to the Lynas business. As
technologies and consumer trends continue to evolve, new competing technologies may emerge that may reduce demand for Lynas Rare Earth
products. Any significant trends away from technologies that utilize Lynas Rare Earths products could materially adversely affect the Lynas
business.
2.13
Project development risks
Lynas is undertaking significant and complex construction projects, primarily related to the new Lynas Cracking & Leaching facility in Kalgoorlie.
Construction projects are subject to numerous risks, many of which are outside the control of Lynas, including project delays and cost overruns,
disputes with contractors, insolvency of contractors, problems with design, delays in commissioning or ramp-up and new facilities not performing
in accordance with expectations.
3.1
General regulatory risks
Lynas' business is subject, in each of the countries in which Lynas operates, to various national and local laws and regulations relating to the
mining, production, marketing, pricing, transportation and storage of Lynas' products and residues. A change in the legislative and administrative
regimes, taxation laws, interest rates, and other legal and government policies may have an adverse effect on the assets, operations and
ultimately the financial performance of Lynas and the market price of Lynas shares. Other changes in the regulatory environment (including
applicable accounting standards) may have a material adverse effect on the carrying value of material assets or otherwise have a material
adverse effect on Lynas' business and financial condition.
3.2
Licences, permits, approvals, consents and authorisations
Lynas’ mining and production activities are dependent on the granting and maintenance of appropriate licences, permits, approvals, 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, approvals 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, approvals and regulatory consents and authorisations
will be granted, continued or renewed as a matter of course, or as to the terms of renewals or grants, including that new conditions, or new
interpretations of existing conditions, will not be imposed in connection therewith. Whether such licences, permits, approvals and regulatory
consents and authorisations may be granted, continued or renewed (as the case may be) often depends on Lynas being successful in obtaining
the required statutory approvals for proposed activities. If there is a failure to obtain or retain the appropriate licences, permits, approvals 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.
3.3
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, guidelines, regulation or policy, including in relation to the environment, the Rare Earths sector, competition policy, native title and
cultural heritage. Such changes could affect land access, the granting of licenses and other tenements, the approval of developments and
freedom to conduct operations.
The possible extent of introduction of additional legislation, regulations, guidelines or amendments to existing legislation that might affect Lynas'
business is difficult to predict. Any such government action may require increased capital or operating expenditures and could prevent or delay
certain operations by Lynas, which could have a material adverse effect on Lynas' business and financial condition.
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 as a result of hazards such as expropriation, war, insurrection and acts of terrorism and other political risks
and increases in taxes and government royalties. The effects of these factors are difficult to predict and any combination of one or other of the
above may have a material adverse effect on Lynas' business and financial position.
Recent changes of governments in Malaysia created additional political focus on Lynas, 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
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
and periodic renewals of licences. Such amendments would require approval from the relevant regulatory authorities acting in accordance with
government policy and licence conditions.
3.4
Malaysian regulatory matters
Without limiting the generality of the risks specified above in this section, as announced on 27 February 2020, the Malaysian Atomic Energy
Licensing Board (AELB) has renewed the operating licence for the Lynas Malaysia plant for three years expiring March 2023, subject to the
following key conditions:
•
•
•
•
Lynas to begin the process of developing the Permanent Disposal Facility (PDF) within the first year from the date of approval of the
licence.
Lynas must submit a work development plan for the construction of the PDF and report on its development status as determined by
the AELB.
Lynas must ensure that the Cracking and Leaching plant outside Malaysia is in operation before July 2023. After that period, Lynas
will no longer be allowed to import raw materials containing Naturally Occurring Radioactive Material (NORM) into Malaysia.
Holding of the financial deposit will be maintained for compliance with the relevant licence conditions.
To the extent that Lynas does not, or is not able to, comply with relevant licence conditions including the key conditions specified above, and/or
comply with licence conditions within the timeframes prescribed, then Lynas’ licences and approvals may be revoked. Government action,
including legal action, may be also taken by or at the direction of the Malaysian government in order to ensure that the terms and conditions of
Lynas’ licences and approvals are complied with to levels satisfactory to, and within the timeframes prescribed by, the Malaysian government.
3.5
Environmental risks
Lynas' activities are subject to extensive laws and regulations controlling not only the mining of, exploration for and processing of Rare Earths,
but also the possible effects of such activities upon the environment and interests of local communities. In the context of obtaining environmental
permits, including the approval of reclamation plans, Lynas must comply with known standards, existing laws and regulations which may entail
greater or lesser costs and delays depending on the nature of the activity to be permitted and how stringently the regulations are implemented
by the permitting authority. With increasingly heightened government and public sensitivity to environmental sustainability, environmental
regulation is becoming more stringent, and Lynas could be subject to increasing environmental responsibility and liability, including laws and
regulations dealing with air quality, water and noise pollution and other discharges of materials into the environment, plant and wildlife protection,
the reclamation and restoration of certain of its properties, greenhouse gas emissions, the storage, treatment and disposal of residues and the
effects of its business on the water table and groundwater quality.
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.
3.6
Climate change risks
Climate change and the rapidly evolving response to it may lead to a number of risks, including but not limited to:
•
Increased political, policy and legal risks (e.g. the introduction of regulatory changes aimed at reducing the impact of, or addressing climate
change, including reducing or limiting carbon emissions);
Increased capital and operational costs, including increased costs of inputs and raw materials; and
Technological change and reputational risks associated with Lynas’ conduct.
•
•
Climate change may also result in more extreme weather events and physical impacts on Lynas due to the energy intensive nature of Lynas’
operations, and Lynas’ reliance on fossil fuels for mining and processing activities.
3.7
Disposal of residues
At the Mt Weld Mine and Concentration Plant, the Lynas Malaysia Plant, and the new Lynas Kalgoorlie Rare Earths Processing Plant, Lynas
operations generate/will generate residue materials in the form of solids, liquids and gases. Lynas has appropriate plans in place for the
treatment, sale or disposal each of those residues. Failure to implement those plans could have a material effect on Lynas’ licensing conditions
and may adversely affect its operations.
3.8
Community acceptance and reputation
Lynas recognises that a strong mutual relationship with each community in which it operates is a pre-condition to successful operations. Failure
to maintain those relationships and the acceptance by those communities may have an adverse effect on Lynas’ operations.
In addition, Lynas recognises the importance of maintaining its reputation with all of its stakeholders including shareholders, regulatory
authorities, communities, customers and suppliers. Failure to maintain its reputation with some or all of its stakeholders may have a negative
impact on the future performance of Lynas.
3.9
Legal action
As announced on 17 January 2020, a judicial review application has been lodged in Malaysia challenging the processes followed during the
August 2019 renewal of the Lynas Malaysia operating licence. The hearing of that judicial review application is scheduled for 19 October 2020.
While Lynas has been successful in defending several similar judicial review applications in the past, any adverse court findings could materially
adversely affect the ability of Lynas to operate its Malaysian plant in its current form. In addition, it is possible that in the future, Lynas could be
exposed to other litigation or proceedings, either from shareholders, financiers, regulators or members of the communities in which Lynas
operates.
3.10
Health and safety
Lynas is subject to extensive laws and regulation in respect of the health and safety of its people and communities, and the protection and
rehabilitation of the environments within which it operates. 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.
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3.11
Tax risks
Lynas is subject to taxation and other imposts in Australia, Malaysia and other countries or jurisdictions in which it has interests.
In addition to
the normal level of income tax imposed on all industries, companies in the resources sector are required to pay government royalties, direct and
indirect taxes and other imposts. The profitability of companies in these industries can be affected by changes in government taxation and
royalty policies or in the interpretation or application of such policies. Further, changes in tax law, or changes in the way tax law is expected to
be interpreted, in the various jurisdictions in which Lynas operates, may impact the tax liabilities of Lynas.
4.1
Debt facilities and covenants
Lynas has financing arrangements in place which are subject to acceleration and enforcement rights in the event a default were to arise under
them. To date, the Japan Australia Rare Earths B.V. (JARE) loan facility has been secured over all the assets of Lynas, other than Malawi
assets. Pursuant to the amendments announced on 27 June 2019, JARE has released the following securities: (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$145m as at 30 June 2020. The principal amount will be due for repayment in fixed loan repayments
between 31 December 2021 and 30 June 2030.
In addition, the principal amount of the convertible bonds was US$12.2m (A$ 17.6m) as at 30 June 2020. The convertible bonds fully converted
into ordinary shares in August 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 by the maturity date of 30 June 2030, Lynas’ ability to continue as a going concern may also be affected.
In addition, Lynas' existing debt facilities are subject to a range of covenants. A failure to comply with any of these debt covenants may require
Lynas to seek amendments, waivers of covenant compliance or alternative borrowing arrangements. There is no assurance that its lenders
would consent to such an amendment or waiver in the event of non-compliance, or that such consent would not be conditional upon the receipt
of a cash payment, revised payout terms, increased interest rates, or restrictions in the expansion of debt facilities in the foreseeable future, or
that its lenders would not exercise rights that would be available to them, including among other things, calling an event of default and demanding
immediate payment of outstanding borrowings. If such a demand was made and appropriate forbearance or refinance arrangements could not
be reached, Lynas may not have sufficient available funds to meet that demand.
4.2
Funding risk
Lynas’ existing debt facility agreements restrict its ability to incur further debt except in certain circumstances. Should Lynas experience a
protracted decline in earnings, there is a possibility that the quantum of debt and/or equity funding available to Lynas would not be sufficient to
execute its strategy (including its development of large scale projects) which could have a negative impact on the future financial performance
or position of Lynas.
5.1
General economic conditions
Lynas' operating performance and financial performance is influenced by a variety of general economic and business conditions including the
level of inflation, interest rates, exchange rates and government fiscal, monetary and regulatory policies. Prolonged deterioration in general
economic conditions, including an increase in interest rates or decrease in consumer and business demand, could be expected to have an
adverse impact on Lynas' business, results of operations or financial condition and performance.
5.2
Dividends
The payment of any dividends in respect of Lynas’ shares is affected by several factors, including covenants in the JARE loan facility, Lynas’
profitability, retained earnings, ability to frank dividends, capital requirements and free cash flow. Any future dividends will be determined by
Lynas’ Board having regard to these factors, among others. There is no guarantee that any dividends will be paid by Lynas. If Lynas is unable
to pay dividends the price of its shares may fall.
5.3
Accounting standards
Accounting standards may change. This may affect the reporting earnings of Lynas and its financial position from time to time. Lynas has
previously and will continue to assess and disclose, when known, the effect of adopting new accounting standards in its periodic financial
reporting.
5.4
Force majeure events
Events may occur within or outside Lynas’ key markets that could impact upon the global economies and the operations of Lynas. The events
include, but are not limited, to acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, changes in weather patterns
or other severe weather events, labour strikes, civil wars, natural disasters, outbreaks of disease or other natural or man-made events or
occurrences that can have an adverse effect on market conditions, the demand for Lynas’ product offering and services and Lynas’ ability to
conduct business.
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
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these guidelines. The Group is also bound by the requirements of its operating licence in Malaysia. 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 30 June 2020.
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 6,151,083 Performance Rights were exercised as set out in Note E.7 to the Financial Statements.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During or since the end of the financial year, the Group has paid a premium in respect of a contract insuring all Directors and Officers of the
Group against liabilities incurred as a Director or Officer of the Group, to the extent permitted by the Corporations Act 2001, that arise because
of the following:
(a)
(b)
a wilful breach of duty; or
a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.
The insurance contract prohibits disclosure of the premiums payable under the contract. The premiums are 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 30 June 2020:
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:
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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
12
12
12
12
12
12
5
-
-
-
5
5
5
4
4
-
4
4
-
-
Nomination,
Remuneration &
Community
4
4
-
4
-
4
-
AUDITOR’S INDEPENDENCE DECLARATION
We have obtained an independence declaration from our auditors, Ernst & Young, which follows the Directors’ Declaration.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in 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.
SUBSEQUENT EVENTS
On 7 July 2020, Lynas announced that Lynas Chair Mike Harding had informed the Board of his intention to retire as Chair of the Lynas Board
and as a non-executive Director of Lynas, effective from 30 September 2020. Kathleen Conlon, a Non-Executive Director of Lynas since
November 2011, has been elected to succeed Mike as the Non-Executive Chair of the Lynas Board with effect from 30 September 2020.
On 15 July 2020, Lynas announced a significant step towards its new Kalgoorlie Rare Earths processing plant with Metso Outotec awarded the
contract to supply the plant’s kiln after a competitive tender process. The 110 metre long, 1500 tonne kiln is the largest and longest lead time
piece of equipment required for the plant’s operation. The contract for engineering and supply of the kiln is valued at approximately US$15m
(A$21.6m), including the discharge housing, combustion chamber and burner, motor control stations and delivery to Kalgoorlie.
On 27 July 2020, Lynas announced that Phase I work on a U.S. based Heavy Rare Earth separation facility has proceeded to the contract phase
and Lynas and the U.S. Department of Defense have signed a contract for this work.
On 3 August 2020, bondholders converted the remaining US$12.2m (A$17.6m) convertible bonds which resulted in an additional 16.2m shares
issued. As a result of these conversions, the remaining liability in respect to the convertible bonds has been fully extinguished.
On 13 August 2020, Lynas announced that, consistent with JARE’s previous reductions of payments under the JARE Loan Facility to allow
Lynas to use cash flow from operations on capital expenditure for the Lynas 2025 Projects, JARE has now agreed to defer until 31 October
2021 further interest payments in the amount of US$11.5m that had previously been due on 31 October 2020.
On 17 August 2020, Lynas announced that the Company is undertaking an equity raising comprising a fully underwritten institutional
placement and a pro-rata accelerated non-renounceable entitlement offer to raise approximately $A425m. The offer will fund the Lynas 2025
foundation projects to be delivered in 2023, including:
-
-
The Kalgoorlie Rare Earth Processing Facility to produce mixed Rare Earth carbonate for shipment to Lynas Malaysia, and
Associated upgrades at Lynas Malaysia
With the exception of the above, there have been no other events subsequent to 30 June 2020 that would require accrual or disclosure in this
financial report.
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Sustainability Statement
Financial Year Ended 30 June 2020
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 FY20 will be sent to shareholders at the same time as our Annual Report 2020 is sent to shareholders. In
addition, a copy of the Lynas Sustainability Report for FY20 will be available on the Group’s website, www.lynascorp.com.
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Remuneration Report – Audited
Dear Shareholder,
I am pleased to present our Remuneration Report for the year ended 30 June 2020 (FY20).
As with other areas of the business, during FY20 we continued to refine and simplify executive remuneration and the Board is confident that
this is aligned with shareholder outcomes.
Lynas achieved important milestones for our shareholders in FY20, including receipt of a three year operating licence in Malaysia, clarification
of the Malaysian regulatory requirements for NUF Residue and WLP Residue, substantial progress on the Lynas 2025 projects, in particular the
proposed plant in Kalgoorlie and progress on the proposed Specialty Rare Earths plant, ongoing significant community engagement programs,
particularly in Malaysia, and a well-managed return to work from the COVID-19 shutdown. There were no increases in the fixed pay of the
Executives from FY14 to FY17 and in FY19. In FY18 and in FY20, the fixed pay of the Executives was increased in line with CPI. There will be
no increase in the fixed pay of the Executives in FY21. In addition, the fees paid to Non-Executive directors did not increase from FY11 to FY19.
From 1 January 2020, the fees paid to Non-Executive Directors were increased as set out on page 27. Total remuneration tables for Directors
and Executives are shown on page 28.
We believe that the incentive structure is well aligned with shareholder outcomes and STI payments have been made only to the extent that
specific objectives that underpin improved performance have been delivered, as summarised above.
In FY20, the only remuneration paid to Non-Executive Directors was fees (i.e. no options or similar benefits were issued).
We hope that the report will assist your understanding of our remuneration objectives and policies. We welcome your feedback on how we can
further improve the remuneration report in the future.
Yours sincerely,
Kathleen Conlon
Chair
Nomination, Remuneration and Community Committee
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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 30 June 2020, 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 30 June 2020 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.
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Directors’ Report – Remuneration Report – Audited
B. Our Remuneration Philosophy
The Group’s objective is to provide maximum stakeholder benefit by attracting, retaining and motivating a high quality board of directors and
executive management team. Remunerating Directors and Executives fairly and appropriately, consistent with relevant employment market
conditions, is an important part of achieving this goal. We align rewards to sustainable value through creating links between the achievement of
organisational goals, both long and short term in nature, with the non-fixed elements of individual remuneration.
To help the Group achieve this objective, the Committee links the nature and amount of the remuneration paid to the Executives to the Group’s
financial and operational performance.
Total remuneration (that is, fixed remuneration plus STI and LTI) is paid at market rates except in exceptional cases where skills are scarce or
particularly valuable, in which case we pay as necessary. Our market is defined by location and function, i.e. Malaysia, Western Australia (WA),
resources and the global rare earths market. In addition, our senior expatriate executives are remunerated at market rates necessary to attract
expatriates with their skills and experience to work in our main office in Gebeng near Kuantan, in regional Malaysia. Those expatriate executives
have been key drivers of the business’ strong performance 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, 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 FY20.
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.
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Directors’ Report – Remuneration Report – Audited
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 30 June 2020 the STI Program had 4 goals as follows:
1.
EBIT – 20%
2. NdPr production volume – 20%
3. Costs – 20%
4.
Team / Individual Performance – 40%
Three bands of performance were specified at the beginning of FY20 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 STI targets for EBIT, NdPr Production Volume and Costs in the financial year ended 30 June 2020 and those targets were not
met. Accordingly, no STI awards were made for EBIT, NdPr Production Volume or Costs in respect of the financial year ended 30 June 2020.
Key drivers of the outcomes on those three metrics in FY20 were the 44 day temporary shutdown in Malaysia due to the Malaysian government’s
COVID-19 Movement Control Order and low global Rare Earths prices during the year.
The table below summarises the STI targets and outcomes for NdPr Production Volume in the financial year ended 30 June 2020. Details of
the targets for EBIT and Costs are commercial-in-confidence.
Goal
NdPr Production
Target - 80% of
award
5,477t REOt
Outcome
Performance
4,656 REOt
85.0%
Payout
0%
In addition, 40% of the STI award pool was available based on Team / Individual Performance goals. The Team/Individual component of the
potential STI award is designed to reward non-financial outcomes. During FY20, the Executives achieved significant and important outcomes
for the Group. Chief amongst these outcomes were:
1. Receipt of 2 operating licenses in Malaysia, the second for a 3 year period.
This matter involved significant and difficult work by the Executives. The first licence renewal was in late August 2019. This matter
involved numerous meetings, correspondence and exchanges of documentation with the regulators and all other key stakeholders in
Malaysia. A statutory appeal was completed under the Atomic Energy Licensing Act at the beginning of the financial year. Thereafter,
submissions were made to the regulators regarding renewal of the licence and the conditions for renewal of the licence. Once the renewal
was achieved, management ensured that the conditions of the renewed licence were satisfied and that a compliant application was lodged
for the next licence renewal, which was due at the end of February 2020.
The end of February 2020 licence renewal for a three year term was a major achievement by Lynas during FY20. At the same time, there
was a change of government in Malaysia, necessitating engagement with a new set of stakeholders. The achievement of a three year
licence subject to acceptable conditions provides the foundation for the future operation of the Lynas Malaysia business.
2. Clarification of the Malaysian regulatory requirements for permanent NUF residue disposal onsite and commercialisation of NUF
During FY20, the licence for permanent onsite disposal of NUF was renewed.
In addition, Lynas customers have begun receiving
approvals to reuse NUF Residue in their businesses. These are both significant achievements and they have normalised the regulatory
treatment of NUF residue in Malaysia, which creates another foundation for long term operation of the Lynas business in Malaysia.
3. Resolution of the WLP PDF requirements in Malaysia
During FY20, the regulatory position regarding WLP residue was normalised arising from the following outcomes:
(a) The licence renewals in August 2019 and February 2020 created a framework for permanent offsite disposal at a PDF site in Malaysia
(b) In January 2020, commercial terms were agreed with the Gading Senggarra group for development of the PDF at a site in Pahang
State of Malaysia, with Gading Senggarra providing a turnkey solution including ongoing responsibility for management and
monitoring of the PDF and the WLP residue in the PDF.
(c) The local state government of Pahang has approved the site for the PDF
(d) Independent studies have confirmed the suitability of the site selected for the PDF.
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4. Good progress on proposed Kalgoorlie Rare Earths Processing Facility and progress in relation to assessing feasibility of a Heavy Rare
Earths separation plant.
The significant achievements in relation to these projects during FY20 included the following:
a)
b)
Securing Major Project Status from the federal government and lead agency status from the WA State government for the Kalgoorlie
project
Securing local support from the City of Kalgoorlie Boulder and conducting several successful community engagement forums in
Kalgoorlie
c) Recruiting the core team to lead the Kalgoorlie project
d)
Awarding the longest lead time contract; the kiln
e) Receiving notification of the US DoD’s intention to award a phase 1 contract for the HRE plant to the Lynas / Blue Line team
f)
Progressing detailed planning and engineering work for a potential Heavy Rare Earths separation plant to be located in Texas.
5. Ongoing significant community engagement programs, particularly in Malaysia
During FY20, significant community engagement work continued in Malaysia. Some key highlights were:
(a) Numerous grass roots information forums conducted with local community groups
(b) Numerous site visits by regulators, community groups, student groups, and other key stakeholders
(c) A very successful Community Forum at the Lynas Malaysia plant in mid-February 2020
(d) Engagements with politicians, regulators, community leaders and other key stakeholders in Malaysia
(e) Continuing strong support from all members of the Lynas staff for the Lynas business and for our community engagement programs
(f) Online, print media and electronic media communications programs.
6.
A well managed return to work from the COVID-19 shutdown
The emerging COVID-19 situation in March 2020 required clear and decisive action by management. We have implemented prudent
health and safety guidelines in accordance with government requirements and guidelines. The restart of operations in May 2020 has been
managed successfully, and production rates in June were above the targeted restart rate of 70% of Lynas Next rates.
Each of these important outcomes has required a full team effort in complex and difficult circumstances, with significant contributions by each
Executive. Therefore, the Board has approved a Team / Individual Performance award amounting to 40% of the available STI entitlements for
FY20.
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 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. Performance Rights
usually have an exercise period between three and five years after they were granted.
LTI Performance Rights that are Due to Vest or be Forfeited Following FY20
491,092 LTI Performance Rights that were granted as part of the FY17 LTI plan, and that are due to vest on August 28, 2020 are conditional
on the Company’s cumulative average annual increase in adjusted EBITDA in the three year period from 1 July 2017 to 30 June 2020,
compared to the base figure of the annualized adjusted EBITDA from 1 January 2017 to 30 June 2017, in accordance with the following sliding
scale:
(a)
(b)
(c)
If the cumulative average annual increase is at least 21% per annum, then 50% of the EBITDA portion will vest;
If the cumulative average annual increase is at least 25% per annum, then 100% of the EBITDA portion will vest;
If the cumulative average annual increase is at least 30% per annum, then 120% of the EBITDA portion will vest.
Awards will be prorated if the outcome falls between bands (a) and (b) or between bands (b) and (c). As disclosed to the ASX at the time the
awards were first announced on September 26, 2017, the EBITDA figure that will be used to measure the outcome will be an adjusted EBITDA
figure (after removing the non-cash employee remuneration settled through share based payments). The annualized adjusted EBITDA for the
base period from 1 January 2017 to 30 June 2017 was A$58.8 million.
The table below shows the outcome.
Cumulative Adjusted EBITDA over the three years from
1 July 2017 to 30 June 2020
Cumulative Base Figure over three years
Cumulative Average % increase in the 3 year period
compared to the base figure
Outcome
(Adjusted EBITDA)
A$294.2 million
A$176.4 million
22.3% p.a.
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In accordance with the above table, it is expected that when this class of LTI Performance Rights is due to vest on August 28, 2020 approximately
50% of this class will vest, and approximately 50% of this class will be forfeited.
In addition, 409,244 LTI Performance Rights that were granted as part of the FY17 LTI plan, and that are due to vest on August 28, 2020 are
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 28 August 2020 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 28 August 2020. The outcome on the TSR hurdle will be announced to the ASX after the TSR
calculations have been made for the three year period expiring on 28 August 2020.
LTI Performance Rights Awarded During FY20
In addition, during FY20, the Group issued to selected senior managers a total of 1,446,970 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 30 June 2020
is set out below:
(i)
352,331 Performance Rights are conditional on the Company’s cumulative average annual increase in EBIT in the three year period
from 1 July 2019 to 30 June 2022, compared to the base figure of EBIT in the period from 1 July 2018 to 30 June 2019, in accordance
with the following sliding scale:
(a)
(b)
(c)
If the cumulative average annual increase is at least 7% per annum, then 50% of the EBIT portion will vest.
If the cumulative average annual increase is at least 10% per annum, then 100% of the EBIT portion will vest.
If the cumulative average annual increase is at least 15% per annum, then 120% of the EBIT portion will vest.
Awards would be prorated if the outcome falls between bands (a) and (b) or between bands (b) and (c). The EBIT for the base period from 1
July 2018 to 30 June 2019 was $56.4 million.
(ii)
293,610 Performance Rights are 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).
(iii)
801,129 Performance Rights are conditional on the company delivering the following Lynas 2025 project targets: By July 2022, Lynas
has demonstrated:
(a)the capacity to separate heavy rare earths,
(b)a specialty cerium capability, and
(c)delivery of the project milestones for the Lynas 2025 Project in Western Australia.
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.
The Lynas 2025 project is the next significant step in the growth of the Lynas business for the benefit of all shareholders. The key goals of the
Lynas 2025 project include developing the capacity to separate heavy rare earths, developing a specialty cerium capability, and delivery of the
project milestones for the Lynas 2025 Project in Western Australia.
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 1 July 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 FY20.
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:
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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 and in FY19 despite the improving performance of the business in recent years as
summarized in Section D above. In FY18 and in FY20, the fixed pay of the Executives was increased in line with CPI. The fixed pay of the
Executives will not be increased in FY21.
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 30 June 2020, 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 are
expected to be forfeited following FY20 due to non-satisfaction of vesting conditions.
Individual performance reviews link total remuneration to individual and business unit performance.
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.
30 June
2013
30 June
2014
30 June
2015
30 June
2016
30 June
2017
30 June
2018
30 June
2019
30 June
2020
Revenue ($‘000)
950
64,570
144,596
190,956
256,976
374,105
363,541
305,111
Profit / (loss) before tax
($‘000)
Profit / (loss) after tax
($‘000)
(141,014)
(345,431)
(118,559)
(94,117)
(24,263)
53,404
83,274
(19,156)
(143,555)
(345,488)
(118,685)
(94,082)
(534)
53,119
83,079
(19,395)
Shareholder capital ($’000)
994,645
1,034,634
1,083,898
1,088,469
1,094,403
1,395,417
1,398,264
1,424,847
Annual average share
price*
Closing share price at
financial year end*
Basic earnings / (loss) per
share (cents)**
Diluted earnings / (loss) per
share (cents)**
$6.52
$2.95
$0.78
$0.67
$0.77
$2.04
$1.99
$2.20
$3.75
$1.30
$0.34
$0.53
$1.05
$2.34
$2.57
$1.94
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
(51.30)
(154.10)
(38.20)
(27.00)
(0.15)
8.84
8.29
12.50
(2.79)
11.90
(2.79)
* The share prices for the years ended 30 June 2011 to 30 June 2017 comparative periods have been restated to reflect the 10 to 1 share
consolidation of Lynas Corporation Ltd shares, which was completed on 4 December 2017.
** The basic and diluted earnings per share for the years ended 30 June 2011 to 30 June 2017 comparative periods have been restated to
reflect the 10 to 1 share consolidation of Lynas Corporation Ltd shares, which was completed on 4 December 2017.
G. Non-Executive Director Remuneration
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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 20 November 2012, and an aggregate pool of $1,250,000
was approved. The aggregate fees for NEDs for the period did not exceed this amount.
Components of Non-Executive Director Remuneration
Each NED receives a fee for being a Director of the Company, and (other than the Chairman of the Board) each NED receives a fee for each
committee of which they are members. The NED fees, including committee fees, include statutory superannuation contributions where
appropriate.
Base Fees
The base fees for NEDs were increased effective 1 January 2020 for the first time since FY11. The base fees for NEDs for the financial year
ended 30 June 2020 were:
Chairman
Non-Executive Director
Committee Fees
The Committee fees for NEDs are unchanged from FY19 as follows:
Board Committee
Audit & Risk Committee
Nomination, Remuneration & Community Committee
Health, Safety & Environment Committee
To 31 Dec
2019
$
250,000
100,000
From 1 Jan
2020
$
260,000
120,000
Chair
$
30,000
25,000
25,000
Member
$
15,000
12,500
12,500
The remuneration for NEDs for the financial years ended 30 June 2019 and 30 June 2020 is set out in Section H of this report.
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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 %
Total
Total
Name
FY20
Executive Director
A. Lacaze
1,241,610
261,191
75,509
Non-Executive
Directors
K. Conlon
M. Harding
P. Etienne
J. Humphrey
G. Murdoch
Executives
147,500
255,000
157,600
137,500
140,000
-
-
-
-
-
A. Arnold
510,466
100,207
G. Sturzenegger
578,352
114,315
-
-
-
-
-
-
-
K. Leung
505,792
108,737
41,981
P. Le Roux
401,707
114,265
68,318
M. Ahmad
365,445
133,528
M. Afzan Afza
302,514
97,912
-
-
Total
FY19
4,743,486
930,155
185,808
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
4,588,681
937,205
212,660
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,003
28,135
419,885
33%
2,047,333
14,013
21,003
6,650
13,063
13,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,607
110,051
21,003
13,403
107,779
81,078
49,899
72,079
-
-
-
133,522
89,085
71,682
0%
0%
0%
0%
0%
28%
28%
27%
31%
35%
31%
161,513
276,003
164,250
150,563
153,300
711,280
802,718
798,695
789,890
637,957
544,187
313,091
41,538
1,032,611
27% 7,246,689
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% 1,164,265
20,531
10,956
551,592
54% 1,220,613
74,120
68,527
67,938
-
-
-
563,315
431,015
324,435
54% 1,257,753
58%
54%
973,968
769,788
323,942
31,825
4,505,943
51% 10,600,256
(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.
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I. KMP equity holdings
(i) Shareholdings
The following table outlines the shares held directly, indirectly and beneficially by directors and KMP as at 30 June 2020.
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
Total
Balance at
beginning of
year
1,699,353
115,619
66,630
65,168
50,000
142,500
392,450
693,992
448,561
583,401
387,516
192,000
4,837,190
Purchased
during the year
On exercise of
performance rights
Sold during the
year
Other
Balance at
end of year
-
-
-
-
-
-
-
-
-
-
-
-
-
2,690,635
-
-
-
-
-
528,861
542,651
581,323
588,860
458,473
335,490
-
-
-
-
-
-
(412,316)
(151,943)
(290,661)
-
(128,372)
(450,438)
5,726,293
(1,433,730)
-
-
-
-
-
-
-
-
-
-
-
-
-
4,389,988
115,619
66,630
65,168
50,000
142,500
508,995
1,084,700
739,223
1,172,261
717,617
77,052
9,129,753
(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
Vesting and
exercise date
Expiry date
Exercise
price
AO
AP
AR
AU
AV
AY
AZ
BB
BC
BD
BE
BF
BG
BD*
BE*
BF*
BG*
Total
30 November 2016
532,373
30 August 2019
30 August 2021
30 November 2016
465,117
30 August 2019
30 August 2021
28 August 2017
476,715
28 August 2020
28 August 2022
28 November 2017
231,066
28 August 2020
28 August 2022
28 November 2017
192,555
28 August 2020
28 August 2022
28 August 2018
28 August 2018
199,446
28 August 2021
28 August 2023
166,205
28 August 2021
28 August 2023
27 November 2018
176,920
28 August 2021
28 August 2023
27 November 2018
147,433
28 August 2021
28 August 2023
26 August 2019
26 August 2019
26 August 2019
26 August 2019
263,019
26 August 2020
26 August 2020
157,175
26 August 2022
26 August 2024
193,245
26 August 2022
26 August 2024
188,609
26 August 2022
26 August 2024
26 November 2019*
109,148
26 August 2020
26 August 2020
26 November 2019*
136,435
26 August 2022
26 August 2024
26 November 2019*
136,435
26 August 2022
26 August 2024
26 November 2019*
163,722
26 August 2022
26 August 2024
3,935,618
$ 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
$ 0.00
Value per
performance
right at grant
date
$0.680
$0.500
$1.360
$2.060
$1.620
$2.187
$1.431
$2.187
$1.463
$2.340
$2.340
$2.340
$1.660
$2.290
$2.290
$2.290
$1.630
* Performance rights relates to the CEO in series BD to BG were approved by the Board on 26 August 2019, subject to approval at the AGM.
These performance rights were subsequently approved at the AGM on 26 November 2019.
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 30 June 2020:
PR’s issued to employees other than CEO
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
Series BD
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2020
Series BE
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BF
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BG
26 Aug 2019
$1.66
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BD
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
26 Aug 2020
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PR’s issued to CEO
Series BF
Series BE
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
26 Aug 2022
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
26 Aug 2022
Series BG
26 Nov 2019
$1.63
$0.00
Nil
61.2%
0.73%
26 Aug 2022
www.lynascorp.com 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
26 August 2019
26 August 2019
26 August 2019
26 August 2019
26 November 2019
26 November 2019
26 November 2019
26 November 2019
Number of
performance rights
263,019
157,175
193,245
188,609
109,148
136,435
136,435
163,722
Fair value per
instrument at
valuation date
$2.34
$2.34
$2.34
$1.66
$2.29
$2.29
$2.29
$1.63
Exercise price
per instrument
First exercise date
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
26 August 2020
26 August 2022
26 August 2022
26 August 2022
26 August 2020
26 August 2022
26 August 2022
26 August 2022
Last exercise
or expiry date
26 August 2020
26 August 2024
26 August 2024
26 August 2024
26 August 2020
26 August 2024
26 August 2024
26 August 2024
Total
1,347,788
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 2020 financial years and
those Performance Rights which have vested at each respective year-end.
30 June 2020
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. Afzan Afza
Total
30 June 2019
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
Granted
Grant date
Exercised
Forfeited
Net change
Balance at end
of year
4,530,638
-
-
-
-
-
706,758
724,786
776,276
788,462
611,805
448,642
8,587,367
545,740
-
-
-
-
-
125,572
141,969
136,319
190,800
114,004
93,384
1,347,788
Nov 26, 2019
-
-
-
-
-
Aug 26, 2019
Aug 26, 2019
Aug 26, 2019
Aug 26, 2019
Aug 26, 2019
Aug 26, 2019
(2,690,635)
-
-
-
-
-
(528,861)
(542,651)
(581,323)
(588,860)
(458,473)
(335,490)
(5,726,293)
(94,541)
-
-
-
-
-
(31,357)
(31,422)
(34,433)
(34,920)
(26,764)
(19,810)
(273,247)
(2,239,436)
-
-
-
-
-
(434,646)
(432,104)
(479,437)
(432,980)
(371,233)
(261,916)
(4,651,752)
2,291,202
-
-
-
-
-
272,112
292,682
296,839
355,482
240,572
186,726
3,935,615
4,409,551
-
444,408
-
Nov 27, 2018
-
(212,391)
-
(110,930)
-
121,087
-
4,530,638
-
-
-
-
-
1,071,860
1,105,510
1,175,424
1,185,072
933,342
661,714
-
-
-
-
107,768
116,558
117,809
122,385
95,696
76,116
-
-
-
-
Aug 31, 2018
Aug 31, 2018
Aug 31, 2018
Aug 31, 2018
Aug 31, 2018
Aug 31, 2018
-
-
-
-
(450,464)
(473,433)
(492,480)
(494,484)
(397,294)
(275,368)
-
-
-
-
(22,407)
(23,850)
(24,479)
(24,511)
(19,939)
(13,820)
-
-
-
-
(365,103)
(380,725)
(399,150)
(396,610)
(321,537)
(213,072)
-
-
-
-
706,758
724,786
776,276
788,462
611,805
448,642
Total
10,542,473
1,080,740
(2,795,914)
(239,936)
(1,955,110)
8,587,367
(1) 545,740 performance Rights approved by the Board were granted to A. Lacaze on 26 August 2019 and subsequently approved by the
shareholders of the Company at the AGM on 26 November 2019.
At 30 June 2020, 997,490 performance rights issued to A. Lacaze had vested and were exercisable (30 June 2019: 1,830,247), while no
performance rights had vested but were not exercisable (30 June 2019: nil).
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Directors’ 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, 17 August 2020
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Directors’ Declaration
The Directors declare that:
(a)
(b)
(c)
in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable;
in the Directors’ opinion, the attached financial report is in compliance with International Financial Reporting Standards, as stated in 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, 17 August 2020
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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 (Loss) / 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 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
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39
Other
.
Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June
In A$’000
Revenue
Cost of sales
Gross profit
General and administration expenses
Net foreign exchange gain / (loss)
Other expenses
(Loss) / profit from operating activities
Net gain on extinguishment of debt
Financial income
Financial expenses
Net financial income / (expenses)
(Loss) / profit before income tax
Income tax expense
(Loss) / profit for the year
Other comprehensive (loss) / income for the year net of income tax that may be
reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Total other comprehensive (loss) / income for the year, net of income tax
Total comprehensive (loss) / income for the year attributable to equity holders of the
Company
(Loss) / earnings per share
Basic (loss) / earnings per share (cents per share)
Diluted (loss) / earnings per share (cents per share)
A.3
A.3
(2.79)
(2.79)
Note
2020
A.1
A.1
A.1
A.2
A.2
A.2
A.4
305,111
(257,340)
47,771
(57,984)
4,093
(125)
(6,245)
-
2,662
(15,573)
(12,911)
(19,156)
(239)
(19,395)
(12,864)
(12,864)
(32,259)
2019
Restated
363,541
(273,052)
90,489
(33,611)
(273)
(168)
56,437
46,483
2,312
(21,958)
26,837
83,274
(195)
83,079
10,712
10,712
93,791
12.50
11.90
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the notes to the financial
statements.
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Financial Position
As at 30 June
In A$’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
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Interest payable
Trade and other payables
Borrowings
Employee benefits
Provisions
Lease liabilities
Total current liabilities
Trade and other payables
Interest payable
Borrowings
Employee benefits
Provisions
Lease liabilities
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
2020
2019
Restated
C.1
D.1
D.2
D.2
B.1
B.1
D.3
D.4
C.2
D.5
D.5
E.2
D.4
C.2
D.5
D.5
E.2
C.4
C.5
101,731
5,380
46
3,773
68,132
179,062
9,468
653,090
28,818
540
65,147
757,063
936,125
2,007
28,778
34,148
2,797
26,142
1,226
95,098
-
-
164,851
599
155,462
1,734
322,646
417,744
518,381
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
160,624
550
111,145
-
274,476
343,408
535,397
1,424,847
(872,677)
(33,789)
518,381
1,398,264
(853,282)
(9,585)
535,397
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
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Lynas Corporation Limited | 2020 Annual Report
Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Changes in Equity
l
a
t
i
p
a
c
e
r
a
h
S
s
e
s
s
o
l
d
e
t
a
l
u
m
u
c
c
A
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
e
v
r
e
s
e
r
n
o
i
t
a
l
s
n
a
r
t
e
v
r
e
s
e
r
d
e
l
t
t
e
s
y
t
i
u
q
E
s
t
i
f
e
n
e
b
e
e
y
o
p
m
e
l
e
v
r
e
s
e
r
t
n
a
r
r
a
W
l
a
t
o
T
e
v
r
e
s
e
r
r
e
h
t
O
In A$’000
f
e
R
Balance at 1 July 2019
1,398,264
(853,282)
(98,907)
50,163
34,094
5,065
535,397
Other comprehensive loss for
the year
Total loss for the year
Total comprehensive loss for
the year
Conversion of convertible note
Exercise of warrants
Employee remuneration settled
through share-based payments
C.4
C.4
E.7
-
-
-
-
(12,864)
(19,395)
-
(19,395)
(12,864)
2,668
23,915
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,329)
1,545
-
-
-
-
(556)
-
-
(12,864)
(19,395)
(32,259)
2,112
11,586
1,545
Balance at 30 June 2020
1,424,847
(872,677)
(111,771)
51,708
21,765
4,509
518,381
Balance at 1 July 2018
1,395,417
(936,361)
(109,619)
45,091
34,094
5,856
434,478
Other comprehensive income for
the year
Total profit for the year
Total comprehensive income
for the year
Conversion of convertible note
Employee remuneration settled
through share-based payments
C.4
E.7
-
-
-
2,847
-
-
10,712
83,079
-
83,079
10,712
-
-
-
-
-
-
-
-
5,072
-
-
-
-
-
-
-
-
(791)
-
10,712
83,079
93,791
2,056
5,072
Balance at 30 June 2019
1,398,264
(853,282)
(98,907)
50,163
34,094
5,065
535,397
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
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Lynas Corporation Limited and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June
In A$’000
Note
2020
2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Payments for discharge of rehabilitation obligation
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 lease liabilities
Repayment of long-term borrowing (JARE loan facility)
Net cash provided from / (used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations (net) on cash held
Closing cash and cash equivalents
321,815
(266,814)
(14,916)
(7,748)
(266)
32,071
(12,089)
(39)
6
2,886
(12,530)
(21,766)
(7,030)
11,628
(2,602)
-
1,996
12,301
89,710
(280)
101,731
D.5
C.1
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
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 30 June 2020 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 17 August 2020.
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 1, 1st Floor 45 Royal Street, East Perth 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”)
issued 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”).
Going concern
The financial report has been prepared using the going concern assumption.
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 30 June 2020. Information for the comparative year is for the 12
month period ended 30 June 2019.
Restatement of comparative information
In preparing the financial statements for the year-ended 30 June 2020, it was noted that there was a misstatement of the JARE loan on initial
recognition on 26 June 2019. The financial modelling to determine the fair value of the loan on initial recognition resulted in the non- current
portion of the JARE loan balance at 30 June 2019 being overstated by $3,049,627 and the gain in the profit or loss account on extinguishment
of the previous JARE loan being understated by $3,049,627, which in turn understated the profit after tax for the year by $3,049,627. Although
not material to the prior period both items have been restated in the prior period comparatives to adjust for this amount as the profit and loss
impact of the adjustment would have been material if it had been recognised as a gain in the current year.
In addition to the two line items being adjusted as detailed above as a result of the restatement, various sub-totals and totals affected in the
Consolidated Statement of profit or loss and other comprehensive income and the Consolidated Statement of Financial Position have also
been restated.
It should be noted that the restatement is non-cash in nature and does not affect reported cash flows. Furthermore, the restatement did not
affect reported EBITDA and EBIT for the year ended 30 June 2019.
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”).
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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.
Foreign operations
The results and financial position of those entities that have a functional currency different from the presentation currency of the Group are
translated into the Group’s presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date of the statement
of financial position;
• income and expense items for each profit or loss item are translated at average exchange rates;
• items of other comprehensive income are translated at average exchange rates; and
• all resulting exchange differences are recognised as a separate component of equity.
As at 30 June 2020, the entities that have a different functional currency to the Group’s presentation currency (AUD) are Lynas Corporation
Limited and Lynas Africa Limited (USD functional currency) and Lynas Malaysia Sdn Bhd (MYR functional currency).
Foreign exchange risk management
As a result of the Group’s international operations, foreign exchange risk exposures exist on purchases, assets and borrowings that are
denominated in foreign currencies (i.e. currencies other than the functional currency of each of the Group’s operating entities). The currencies
in which these transactions are primarily denominated are the AUD, USD and MYR.
The Group takes advantage of natural offsets to the extent possible. Therefore, when commercially feasible, the Group borrows in the same
currencies in which cash flows from operations are generated. Generally the Group does not use forward exchange contracts to hedge residual
foreign exchange risk arising from receipts and payments denominated in foreign currencies. However, when considered appropriate the Group
may enter into forward exchange contracts to hedge foreign exchange risk arising from specific transactions.
The Group’s primary exposure to foreign exchange risk is on the translation of net assets of Group entities which are denominated in currencies
other than AUD, which is the Group’s presentation currency. The impact of movements in exchange rates is recognised primarily in the other
comprehensive income component of the Group’s statement of comprehensive income.
Certain subsidiaries within the Group are exposed to foreign exchange risk on purchases denominated in currencies that are not the functional
currency of that subsidiary. In these circumstances, a change in exchange rates would impact the net operating profit recognised in the profit or
loss component of the Group’s statement of comprehensive income. Details of this exposure is detailed in the capital risks in Section C of this
report.
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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.
76% (FY19:78%) of the Group’s non-current assets are located in Malaysia and the remaining 24% (FY19: 22%) 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 30 June 2020.
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 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 FY20 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.
46
46
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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) (3)
Gross profit
Employee and production costs net of costs
recovered through production
Depreciation expenses net of cost recovered
through production(3)
Other general and administration expenses(1)
Total general and admin expenses
Other income(2)
Other expenses
Net foreign exchange gain / (loss)
Asset write-offs
Profit / (loss) before interest and tax
(“EBIT”)
Net gain on extinguishment of debts
Other financial income
Financial expenses
Profit / (loss) before income tax
Income tax expense
Profit /(loss) for the year
Reconciliation of EBIT to Earnings before
interest, tax, depreciation and
amortisation (“EBITDA”)
EBIT
Depreciation and amortisation
EBITDA
Included in EBITDA:
Non-cash employee remuneration settled
through share based payments comprising:
Share based payments expense for the
year
Other income
Other non-cash transactions
Adjusted EBITDA
For the year ended 30 June 2020
For the year ended 30 June 2019
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
Rare Earth
Operations
Corporate/
Unallocated
Total
Continuing
Operations
314,088
(8,977)
305,111
(205,802)
(51,538)
47,771
-
-
-
-
-
-
314,088
358,297
(8,977)
305,111
(205,802)
(51,538)
47,771
5,244
363,541
(233,651)
(39,401)
90,489
-
-
-
-
-
-
358,297
5,244
363,541
(233,651)
(39,401)
90,489
(17,048)
(4,665)
(21,713)
(3,122)
(8,013)
(11,135)
(13,250)
(13,524)
(43,822)
-
-
-
(1,020)
(1,230)
(14,480)
(8,267)
(14,162)
(21,791)
(57,984)
(3,677)
(11,852)
(18,651)
(1,227)
(4,904)
(5,720)
(14,960)
(17,572)
(33,611)
961
(66)
4,093
-
961
(66)
4,093
(1,020)
-
-
-
-
-
(168)
(273)
-
-
(168)
(273)
-
2,929
(9,174)
(6,245)
71,838
(15,401)
56,437
-
-
-
2,662
(15,573)
(19,156)
(239)
(19,395)
-
46,483
46,483
2,312
(21,958)
83,274
(195)
83,079
2,929
64,787
67,716
(9,174)
1,230
(7,944)
(6,245)
66,017
59,772
71,838
43,077
114,915
(15,401)
1,227
(14,174)
56,437
44,304
100,741
-
1,545
1,545
-
5,072
5,072
1,020
68,736
(961)
-
(7,360)
(961)
1,020
61,376
-
(42)
114,873
-
-
(9,102)
-
(42)
105,771
Total assets
Total liabilities
870,680
(257,957)
65,445
(159,787)
936,125
(417,744)
823,155
(193,156)
55,650
(153,301)
878,805
(346,457)
(1)Other general and administration expenses include statutory, consulting, insurance, IT, marketing and general office costs.
(2)Other income relates to Jobkeeper support to Mt Weld for the period April 2020 – June 2020, as well as other support measures in Malaysia.
(3) Depreciation expenses have increased to reflect the accelerated depreciation associated with the closure of the Malaysia Cracking and
Leaching plant within 4 years from the renewal of the licence in September 2019.
47
47
Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
A.2 Financial income and expenses
In A$’000
Net gain on extinguishment of debt(1)
Interest income on cash and cash equivalents
Total financial income
Interest expense on financial liabilities:
Interest expense on JARE loan facility
Interest expense on convertible bond facility
Unwinding of effective interest on convertible bond facility
Unwinding of effective interest on JARE loan facility
Non-cash adjustment to financial liabilities
Unwinding of discount on restoration and rehabilitation provision
Interest expense on ROU asset
Discount unwinding on AELB deposit
Financing transaction costs and fees
Unrealised foreign exchange gain / (loss) on intercompany balance
Total financial expenses
Net financial benefit / (expenses) (1)
For the year ended 30 June
2020
-
2,662
2,662
(6,031)
(405)
(1,501)
(6,449)
413
(3,189)
(232)
270
(604)
2,155
(15,573)
(12,911)
2019
46,483
2,312
48,795
(8,773)
(435)
(1,477)
(7,152)
1,484
(907)
-
356
(471)
(4,583)
(21,958)
26,837
(1) During the year ended 30 June 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. The net gain on extinguishment of the previous JARE loan
was understated by $3,049,627 in 30 June 2019 and has been restated to reflect this adjustment.
A.3 (Loss) / Earnings per share
Recognition and measurement
Basic (loss) / earnings per share amounts are calculated by dividing net loss or profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the year.
Diluted (loss) / earnings per share adjusts the amount used in the determination of the basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of
additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Potential ordinary shares
are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share from continuing operations.
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted (loss) / earnings per share are as
follows:
In A$’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 the 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$0.75)
Performance rights
Total
48
48
As at 30 June
2020
2019
(19,395)
(19,395)
-
(19,395)
699,209
694,085
714,749
(2.79)
(2.79)
83,079
83,079
1,336
84,415
667,801
664,803
709,451
12.50
11.90
Number
(000’s)
16,203
4,462
20,665
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
A.4 Income taxes
A.4.1 Income tax expense
In A$’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$’000
(Loss) / Profit before tax for continuing operations
Income tax (benefit) / expense calculated at 30% (2019: 30%)
Add / (deduct):
Effect of expenses that are not deductible and income that is not assessable in determining
taxable profit
Effect of foreign exchange gains and losses
Deferred tax relating to the origination of and reversal of temporary differences
Effect of previously unrecognised tax losses bought to account
Effect of difference in tax rate in Malaysia
Effect of current year losses not recognised
Other adjustments
Total current year income tax expense
A.4.3 Movements in deferred tax balances
For the year ended 30 June
2020
2019
239
-
239
-
239
195
-
195
-
195
For the year ended 30 June
2020
2019
(19,156)
(5,747)
904
(1,200)
999
-
(66)
2,140
3,209
239
83,274
24,982
4,736
3,787
(15,198)
(1,244)
(13,156)
-
(3,712)
195
In A$’000
Temporary differences
Inventory
Development expenditure
Property plant and equipment
Borrowings
Trade payables
Business related costs
Lease liabilities
Provisions
(Unrecognised) / recognised deferred tax assets
Net deferred tax asset / (liability) recognised
In A$’000
Temporary differences
Inventory
Development expenditure
Property plant and equipment
Borrowings
Trade payables
Provisions
(Unrecognised) / recognised deferred tax assets
Net deferred tax asset / (liability) recognised
Balance at 30
June 2019
Recognised in
profit or loss
Recognised
in equity
Recognised
in OCI
Balance at 30
June 2020
(872)
(14,176)
2,313
11,476
118
-
-
12,488
11,347
(11,347)
-
33
(4,670)
(69)
2,007
(9)
224
727
1,927
170
(170)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(839)
(18,846)
2,244
13,483
109
224
727
14,415
11,517
(11,517)
-
Balance at 1
July 2018
Recognised in
profit or loss
Recognised
in equity
Recognised
in OCI
Balance at 30
June 2019
(872)
(5,575)
559
(8,466)
(1)
2,340
(12,015)
12,015
-
-
(8,601)
1,754
19,942
119
10,148
23,362
(23,362)
-
49
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(872)
(14,176)
2,313
11,476
118
12,488
11,347
(11,347)
-
49
Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
A.4.4 Unrecognised deferred tax assets
In A$’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 30 June
2020
2019
136,049
172,422
221
2,145
269,250
128,523
167,441
229
2,145
305,537
Deductible temporary differences (tax effected)
11,517
11,347
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 1 July 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. This renewal
continues to be pending approval at the date of this report:
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 to 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 30 June 2020 as to the impact of Covid-19 in the market and locations that Lynas operates and sells to.
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 30 June 2020. The
potential deferred tax asset related to revenue losses and deductible temporary difference not bought to account is $97.1m.
50
50
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 weighted 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
Rehabilitation assets
30 to 99 years
2 to 30 years
3 to 30 years
20 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.
51
51
Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 Note B.2
52
52
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
B.1 Property, plant and equipment and mine development (cont’d)
Property, Plant and Equipment
Development Expenditure
d
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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
n
o
i
t
c
u
d
o
r
p
-
e
r
P
t
e
s
s
a
g
n
p
p
i
r
t
S
i
/
l
a
t
o
T
In A$’000
As at 30 June 2020
Cost
29,705
920,798
7,267
4,873
8,123
186,125
20,977
1,177,868
25,050
18,358
43,408
Accumulated impairment
losses
Accumulated
depreciation
-
(193,463)
(401)
-
(258)
-
(7,608)
(201,730)
(3,725)
-
(3,725)
(3,617)
(293,571)
(5,658)
(2,603)
-
(12,825)
(4,774)
(323,048)
(5,991)
(4,874)
(10,865)
Carrying amount
26,088
433,764
1,208
2,270
7,865
173,300
8,595
653,090
15,334
13,484
28,818
Opening accumulated
impairment and
depreciation
Opening carrying
amount
Additions
Additions arising from
implementation of AASB
16
Disposals
-
-
-
Opening cost
30,245
903,749
7,460
(4,190)
(416,811)
(5,894)
26,055
486,938
1,566
-
-
-
6,105
105,120
21,301
1,073,980
39,759
18,078
57,837
(253)
(8,432)
(11,938)
(447,518)
(24,139)
(767)
(24,906)
5,852
96,688
9,363
626,462
15,620
17,311
32,931
5,678
134
119
7,252
-
-
-
-
4,766
-
-
-
-
79
13,262
202
280
482
-
-
4,766
-
-
-
-
-
-
-
(3,875)
(744)
(66,757)
(310)
(4,107)
(4,417)
Depreciation expense
(395)
(58,580)
(542)
(2,621)
Amortisation expense
Transfers of assets under
construction
Change in rehabilitation
obligations
Asset write offs
Foreign currency
translation
Carrying amount at 30
June 2020
-
-
-
-
-
4,819
-
(778)
428
(4,313)
-
48
-
-
2
-
-
-
-
6
-
-
-
-
83,295
-
-
17
-
-
-
-
83,295
-
-
-
(778)
(178)
(355)
(2,808)
(120)
(7,160)
-
-
-
-
-
-
-
-
-
(178)
-
26,088
433,764
1,208
2,270
7,865
173,300
8,595
653,090
15,334
13,484
28,818
-
-
-
-
(4,884)
Restrictions on the title of property plant and equipment and development assets are outlined in Note C.3.
53
53
Lynas Corporation Limited | 2020 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 30 June 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
-
(196,505)
(407)
-
(253)
-
(7,730)
(204,895)
(18,299)
-
(18,299)
Accumulated depreciation (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
Asset (write off) /
reversal
Foreign currency
translation
Carrying amount at 30
June 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.
54
54
www.lynascorp.com
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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
There was no impairment expense recognised during FY20 (FY19: nil). There was no reversal of prior period impairment loss recognised in
FY20 (FY19: 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 recoverable value, the estimated future cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. Where applicable, the fair value less costs to sell
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.
55
55
Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 30 June
2020
101,731
101,731
2019
89,710
89,710
Cash and cash equivalents comprise cash on hand, deposits held at call with banks 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$84.6m in currencies other than Australian dollars, primarily US$30.7m (30 June 2019:
US$27.2m) and MYR 111.3m (30 June 2019: MYR 96.9m).
Reconciliation of the (loss) / profit for the year with the net cash from operating activities
In A$’000
(Loss) / 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 (gain) / loss included in (loss) / profit for the year
Change in trade and other receivables
Change in inventories
Change in operating trade and other payables
Change in provisions (excluding additional rehabilitation obligation)
Change in provisions (rehabilitation obligation)
Net cash from operating activities
For the year ended 30 June
2020
2019
(19,395)
83,079
66,018
1,545
12,911
1,151
239
(4,093)
5,678
(10,456)
(7,112)
501
(14,916)
32,071
42,851
5,072
(26,837)
169
195
273
(108)
(7,270)
6,453
236
-
104,113
56
56
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
C.2 Interest Bearing Liabilities
In A$’000
Current borrowings
JARE loan facility(1)
Convertible bonds(2)
Total current borrowings
Non-current borrowings
JARE loan facility
Convertible bond facility:
Total non-current borrowings
Principal value of convertible bond facility (3)
Unamortised equity component (3)
Total convertible bond facility carrying amount
As at 30 June
2020
2019
16,371
17,777
34,148
164,851
-
164,851
18,228
(451)
17,777
29,308
-
29,308
142,562
18,062
160,624
20,247
(2,185)
18,062
(1)
(2)
(3)
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 31 December 2019. This condition was met in August 2019 and the repayment was not required. Additionally,
a payment of interest in respect of the period commencing on 1 January 2016 and ending on 31 December 2016 was deferred until October
2020 and is now classified as a current liability. This payment was deferred until 31 October 2021 subsequent to year end, refer Note E.10.
The convertible bonds mature on 30 September 2020 and are classified as a current liability as at 30 June 2020. These convertible bonds
have been converted subsequent to 30 June 2020, refer Note E.10.
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% (FY19: 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 3 in the fair value hierarchy. There has been no change to the valuation technique during the year. These have been determined as follows:
JARE loan facility
Convertible bond facility
As at 30 June 2020
As at 30 June 2019
Carrying amount
(AUD ‘000)
Fair value
(AUD ‘000)
Carrying amount
(AUD ‘000)
Fair value
(AUD ‘000)
181,222
17,777
198,999
181,222
17,777
198,999
171,870
18,062
189,932
171,870
18,290
190,160
57
57
Lynas Corporation Limited | 2020 Annual Report
Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 30 June 2020
As at 30 June 2019
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
Face value
(USD ‘000)
Carrying
amount
(AUD ‘000)
156,505(1)
12,476
168,981
181,222
17,777
198,999
156,505(1)
14,015
170,520
174,919
18,062
192,981
(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$12.2m 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
30 June 2019
Cash flows
Non-Cash Movements
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjust-
ment(1)
Other
(2)
JARE loan facility (Current)
JARE loan facility (Non-Current)
Convertible bond facility (Current)
Convertible bond facility (Non-
Current)
Lease liability
Total
29,308
142,562
-
18,062
597
190,529
-
-
-
-
(2,602)
(2,602)
-
6,449
-
1,501
80
8,030
-
3,316
-
329
-
3,645
-
(413)
-
-
-
-
-
(2,115)
-
(413)
4,885
2,770
30 June
2018
Cash flows
Non-Cash Movements
Reclass
(12,937)
12,937
17,777
(17,777)
-
-
30 June
2020
Closing
Balance
16,371
164,851
17,777
-
2,960
201,959
30 June
2019
Opening
Balance
Proceeds /
(Repayments)
Effective
Interest
Foreign
Exchange
Adjust-
ment(1)
Other
(2)
Derecog-
nition
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
142,562
-
171,870
29,308
142,562
18,062
189,932
(1) Adjustments to the carrying values of the JARE loan during the year ended 30 June 2019 and 2020 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.
Other non-cash movements in the lease liability relates to finance leases recognised in line with AASB 16.
C.3 Financing Facilities
Japan Australia Rare Earths B.V. (JARE) loan facility
An extension of the JARE loan facility was announced on 27 June 2019. As part of this extension, new terms were agreed to as detailed below.
The maturity date of the JARE loan facility is 30 June 2030. The interest rate on this facility is 2.5% p.a. at 30 June 2020 (30 June 2019: 2.5%
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 31 December and 30 June each year. The payment of interest in respect of the period
commencing on 1 January 2016 and ending on 31 December 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 31 Dec 2021 to 31 Dec 2023
30 June 2024
Each half-year from 31 Dec 2024 to 31 Dec 2027
Each half-year from 30 June 2028 to 30 June 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.
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 30 March 2011.
58
58
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
2.
3.
4.
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.
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: (i) Deed of Charge - All Assets (Malaysia) and (ii) Malaysian
Real Property Mortgage.
Convertible bonds
As at 30 June 2020, the Company had on issue 12,152,136 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. The issuer, Lynas Corporation Limited, has US dollars as its functional
currency, hence the conversion option is treated as equity. During the year, US$1.5m 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$1.5m of bonds were converted during the year was 2.0m shares.
The maturity of the bonds is 30 September 2020 and the coupon rate on the convertible bonds is 1.875% p.a. (30 June 2019: 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. All of the
12,152,136 unconverted bonds at 30 June 2020 have been converted subsequent to year end, resulting in 16.2m ordinary shares 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$38.0
per kilogram or greater.
The interest incurred from 1 January 2016 to 31 December 2016 was deferred to the maturity date with no penalty and no additional interest. All
interest accrued after 1 January 2017 is paid as accrued at interest dates of 31 December and 30 June each year. As a bond is converted prior
to the maturity date, the associated interest owed on that bond is paid on conversion.
C.4 Contributed Equity
Balance at the beginning of the year
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to exercised warrants
Closing balance
As at 30 June
Number of
shares
‘000
667,802
2,000
6,151
23,256
699,209
2020
A$’000
1,398,264
2,668
-
23,915
1,424,847
Number of
shares
‘000
662,547
2,120
3,135
-
667,802
2019
A$’000
1,395,417
2,847
-
-
1,398,264
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share. All shares rank equally with regard to the Group’s residual assets in the event of a wind-up.
Recognition and measurement
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Where equity instruments are reacquired by the Group, for example, as a result of a share buy-back, those instruments are deducted from equity
and the associated shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the consideration paid
including any directly attributable incremental costs (net of income taxes) is directly recognised in equity.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
C.5 Reserves
In A$’000
Equity settled employee benefits
Foreign currency translation
Warrant reserve
Equity component of convertible bond
Balance at 30 June
Nature and Purpose
As at 30 June
2020
2019
51,708
(111,771)
21,765
4,509
(33,789)
50,163
(98,907)
34,094
5,065
(9,585)
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
30 June 2020
Exposure
Interest Rate Risk
0.5%
-0.5%
30 June 2019
Interest Rate Risk
Exposure
0.5%
-0.5%
Impact on Profit and Equity
Impact on Profit and Equity
Floating rate instruments
Cash and cash equivalents
Other non-current assets
Convertible bond facility
Total
101,731
2,992
(17,777)
86,946
60
(509)
(15)
-
(524)
89,710
3,009
(17,663)
75,056
449
15
(88)
376
(449)
(15)
88
(376)
509
15
-
524
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Maturity analysis of financial liabilities
The table below sets out a maturity analysis for financial liabilities containing principal and interest flows. For loans outstanding, undiscounted
cash flows are presented until contractual final maturity. Interest cash flows are projected based on the interest rates prevailing on the closing
date.
In A$’000
Carrying
Amount
Contracted cash
flows
Up to and
including 6
months
Between 6 months
and up to 1 year
Between 1 year
and up to 5 years
Over 5 years
Convertible bond facility
JARE loan facility
Lease liabilities
Total
17,777
181,222
2,960
201,959
18,143
264,181
3,340
285,664
18,143
19,390
1,203
38,736
-
2,614
1,162
3,776
-
70,733
974
71,707
-
171,444
-
171,444
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 $A’000’s
Carrying
Amount
Foreign Exchange Risk
-10%
10%
Profit
Equity
Profit
Equity
As at 30 June 2020
Net exposure of US$ financial assets
Net exposure of A$ financial assets
Net asset exposure – MYR currency
Net asset exposure – US$ currency
As at 30 June 2019
Net exposure of US$ financial assets
Net exposure of A$ financial assets
Net asset exposure – MYR currency
Net asset exposure – US$ currency
US$ 46,181
A$ 815
MYR 241,314
USD (57,869)
US$ 8,377
A$ 244
MYR 373,890
USD (79,935)
4,618
(82)
1,086
(24)
-
-
(4,618)
(82)
-
-
(7,486)
8,432
-
-
9,128
(8,432)
-
-
(12,875)
11,139
(1,086)
24
-
-
-
-
12,875
(11,139)
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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 30 June
2020
1,876
1,606
1,898
5,380
2019
9,240
2,261
1,372
12,873
The Group’s exposure to credit risk is primarily in its trade receivables. As at 30 June 2020 $0.14m (2019: $0.60m), of trade receivables were
past due but not impaired. The Group is in regular contact with these debtors and expects the remaining amounts will be collected in full.
Recognition and measurement
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included
in current assets, except for instruments with maturities greater than 12 months from the reporting date, which are classified as non-current
assets. The Group’s receivables comprise trade and other receivables (including related party receivables) which are stated at their cost less
impairment losses.
Fair Value and foreign exchange risk
Given the short-term nature of trade receivables, the carrying amount is a reasonable approximation of fair value.
All trade receivables are held in currencies other than the functional currency of the entity receipting them and therefore exposed to foreign
exchange risk.
D.2 Inventories
In A$’000
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
As at 30 June
2020
25,796
37,181
14,623
77,600
68,132
9,468
77,600
2019
18,627
25,003
19,407
63,037
58,332
4,705
63,037
During the year ended 30 June 2020 inventories of $257.3m (2019: $273.1m) were recognised as an expense. All of which were included in
‘cost of sales’.
Depreciation recognised in inventories
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred development expenditure and
intangible assets for the years ended 30 June 2020 and 2019 respectively in the following categories:
In A$’000
Recognised in General and
Administration Expense
2019
2020
Recognised in Inventory
Total
2020
2019
2020
2019
Property, plant and equipment
Deferred development expenditure
Total
13,924
556
14,480
4,416
488
4,904
52,833
3,861
56,694
37,947
-
37,947
66,757
4,417
71,174
42,363
488
42,851
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 $51.5m in the year ended 30 June
2020 (2019: $39.4m).
Write downs of inventory
During the year ended 30 June 2020, $0.9m (2019: nil) was recognised in relation to write-downs to net realisable value for some products.
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Recognition and measurement
Raw materials, work in progress and finished goods
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based either on the first in first out (“FIFO”) or
weighted average principles and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and
condition. In the case of manufactured or refined inventories and work in progress, cost includes an appropriate share of production overheads
based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. Inventory expected to be sold or consumed within the next 12 months is classified as current, with
amounts expected to be consumed or sold after this time being classified as non-current.
Engineering and maintenance materials
Engineering and maintenance materials (representing either critical or long order components but excluding rotable spares) are measured at
the lower of cost and net realisable value. The cost of these inventories is based on the weighted average principle and includes expenditure
incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is determined with reference
to the cost of replacement of such items in the ordinary course of business compared to the current market prices.
D.3 Other non-current assets
In A$’000
Security deposits – banking facilities and other, Malaysia
Security deposits – banking facilities and other, Australia
Security deposits – AELB, Malaysia
Security deposits – AELB, Australia
As at 30 June
2020
2019
2,977
15
5,480
56,675
65,147
2,993
16
4,388
44,419
51,816
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$39.0m (all of which is interest earning), with a further US$11.0m paid via cash
directly to AELB (none of which is interest earning, and has been discounted to a present value of $5.5m).
Recognition and measurement
Financial assets are classified, at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive
income and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables, the Group initially
measures a financial asset at its fair value.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that
are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and
is performed at an instrument level.
Financial assets at amortised cost
This category is the most relevant to the Group as all deposits in Note D.3 are classified this way. The Group measures financial assets at
amortised cost if both of the following conditions are met:
-
-
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows,
and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost
includes trade receivables, and security deposits included under other non-current financial assets
D.4 Trade and Other Payables
In A$’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 30 June
2020
2019
13,180
9,761
5,837
28,778
28,778
-
28,778
14,119
14,397
8,980
37,496
37,029
467
37,496
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.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
D.5 Provisions and Employee benefits
In A$’000
Current
Short term employee benefits
Restoration and rehabilitation (1)
Total current
As at 30 June
2020
2019
2,797
26,142
28,939
2,182
-
2,182
Non-Current
Long term employee benefits
Restoration and rehabilitation
Total non-current
(1) The current portion of the restoration and rehabilitation provision represents Lynas’ best estimate of the present value of the outflows
relating to the discharge of the rehabilitation obligation relating to residue disposal in Malaysia over the next 12 month period.
599
155,462
156,061
550
111,145
111,695
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 the restoration and rehabilitation provisions at Lynas Malaysia
as at 30 June 2018 and Mt Weld as at 30 June 2020. 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.
At each reporting date the rehabilitation liability is re-measured to account for any new disturbance, updated cost estimates, changes to the
estimated lives of the associated operations, new regulatory requirements and revisions to discount rates. Changes to the rehabilitation liability
are added or deducted from the related rehabilitation asset and amortised accordingly.
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
In A$’000
Restoration and Rehabilitation
Balance at the beginning of the year
Provisions made during the year
Provisions paid during the year
Changes to inflation and discounts rates
Effects of foreign exchange movement
Unwinding of discount on provision
Balance at 30 June
Key estimates and judgements
Restoration and rehabilitation expenditure
As at 30 June
2020
2019
111,145
73,970
(14,916)
9,635
(1,419)
3,189
181,604
64,485
42,650
-
2,107
996
907
111,145
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
On January 30, 2020, the Group announced that The State Government of Pahang has issued its consent to a site for the Permanent Disposal
Facility (PDF) for Water Leach Purification (WLP) residue. In additional Lynas Malaysia has appointed Gading Sengarra Sdn Bhd (“GSSB”)
as the contractor to manage the entire PDF project. The total cost of this project will be MYR 400m. The provision for restoration and
rehabilitation has increased to reflect the present value of the obligation that exists at 30 June 2020. Those costs expected to be due within
12 months have been reflected as current. The unwinding effect of discounting of the provision is recognised as a finance cost.
Payments in relation to the discharge of rehabilitation liabilities are recognised in the Statement of Cash Flows as an operating cash outflow.
The Group has included its best estimate of the timing of these costs within the provision for restoration and rehabilitation at 30 June 2020.
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. Cash and cash deposits are held in banks and financial institutions with A+ credit ratings.
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.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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$39.0m (FY19: 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
AASB 16 Leases
The Group adopted AASB 16 as of 1 July 2019.
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. The depreciation of the lease assets and interest on the lease liabilities are recognised
in the consolidated income statement.
Prior to the adoption of AASB 16, Lynas designated each of its leases as either a finance or operating lease. Finance leases were capitalised to
the Statement of Financial Position as per AASB 117. Operating leases were not capitalised and lease payments were recognised in the
Statement of Profit or Loss as they were incurred.
Transition to AASB 16
The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 July 2019. At the
transition date, the Group assessed all contracts which had assets embedded in it for leases under AASB 16. The Group has applied the practical
expedient for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option
(‘short-term leases’) are not recognised as an right of use asset. For all other applicable lease contracts, the Group has recorded the right of use
asset at an amount equal to the lease liability.
The impact on the statement of financial position as at 1 July 2019 on adoption of AASB 16 and the carrying values of right of use assets and
lease liability at 30 June 2020 are set out in the table below:
In A$’000
1 July 2019
30 June 2020
Right of use assets – Buildings, Plant and Equipment
Total Assets
Lease liability – current
Lease liability – non – current
Total lease liability
4,766
4,766
2,134
2,632
4,766
2,270
2,270
1,226
1,734
2,960
Lease liabilities reconciliation on transition
A$’000
Operating lease commitments disclosed at 30 June 2019
Less
Present value discounting of lease liabilities(1)
Short term leases
Contracts reassessed as service contracts(2)
Add
Additional leases identified during transition(3)
Lease liabilities recognised
(1)
7,296
(556)
(315)
(2,276)
617
4,766
(2)
(3)
Lease liabilities were discounted using a weighted average discount rate of 6.5%
The operating commitment disclosure at 30 June 2019 included amounts relating to contracted electricity and other service charges which
have not been recognised as a lease asset upon implementation of AASB 16.
Buy out options on some assets have been included in the valuation of some leases upon implementation.
Payments of $0.34m for short term leases (lease term of 12 months or less) and no payments for leases of low value assets were expensed in
the consolidated income statement for the year ended 30 June 2020.
The new accounting policies of the Group upon adoption of AASB 16 are as follows:
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Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Right of Use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-
of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of
the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term (where the entity does not have a purchase option at the end of the lease term). Right-of-use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made
over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on
an index or a rate are recognised as an expense in the period on which the event or condition that triggers the payment occurs. In calculating
the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit
in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short term leases and low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those leases that have
a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption (i.e. below US$5,000/A$7,150). Lease payments on short-term leases and leases of low-value assets are
recognised as an expense on a straight-line basis over the lease term. No leases meeting the low-value criteria were recognised at 30 June
2019 or 30 June 2020.
Key estimates and judgements
Determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the
lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to
be exercised. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers
all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the
lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise)
the option to renew (e.g. a change in business strategy).
Non-cancellable operating lease rentals are payable as follows:
In A$’000
Less than one year
Between one and five years
More than five years
Total
As at 30 June
2020
N/A
N/A
N/A
N/A
2019
3,566
3,729
-
7,295
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. These have now been accounted for through AASB 16 Leases.
Exploration commitments
In A$’000
Less than one year
Between one and five years
More than five years
Total
As at 30 June
2020
2019
373
1,533
2,345
4,251
373
1,313
1,600
3,286
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Department of Mines and
Petroleum attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when application for a mining
licence is made. These are necessary in order to maintain the tenements in which the Group and other parties are involved. All parties are
committed to meet the conditions under which the tenements were granted in accordance with the relevant mining legislation.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Capital commitments
In A$’000
Less than one year
Total
At 30 June 2020 and 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 30 June
2020
2019
4,109
4,109
3,680
3,680
As at 30 June
2020
2019
-
-
-
-
13,258
-
-
13,258
Other commitments included the following in FY19:
•
•
Lynas was 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 was paid
in November 2019; and
Fees for corporate costs committed which were paid in early FY19.
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:
For the year ended 30 June
2020
2019
Fees for auditing the statutory financial report of the parent covering the group and auditing
the statutory financial reports of any controlled entities
229,963
244,725
Fees for other services
-
Tax Services
4,100
6,800
Total auditor’s remuneration Ernst & Young (Australia)
234,063
251,525
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Fees for auditing the financial report of any controlled entities
133,722
127,806
Fees for other services
-
Tax Services
Total auditor’s remuneration Ernst & Young (other locations)
Total auditor’s remuneration
16,300
36,125
150,022
163,931
384,085
415,456
Other fees paid to EY Australia in FY20 and FY19 relate to completion of tax returns for expatriate employees.
68
68
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
E.4 Subsidiaries
Name of Group entity
Principal activity
Country of incorporation
Ownership interest as at 30 June
2019
2020
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*
Lynas Kalgoorlie Pty Ltd*
Development of mining areas of
interest and operation of
concentration plant
Development of operations in
Kalgoorlie
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Lynas USA LLC
Mineral exploration
Development of processing
opportunities in USA
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
Australia
100%
100%
Australia
Malawi
USA
100%
100%
100%
100%
100%
100%
* Entity has entered into a deed of cross guarantee with Lynas Corporation Limited pursuant to ASIC Instrument 2016/785 and is relieved from the requirement to prepare and lodge an audited
financial report, as discussed in Note 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
As at 30 June
2020
2019
31,055
933,333
(18,378)
(201,006)
732,327
1,424,847
(1,115,948)
423,428
732,327
(11,014)
(11,014)
37,013
875,234
(30,452)
(194,736)
680,498
1,398,264
(1,104,934)
387,168
680,498
23,754
23,754
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
E.6 Entities under a Deed of Cross Guarantee
Pursuant to ASIC Instrument 2016/785 (as amended) dated August 13, 1998, the wholly-owned Australian subsidiaries of Lynas Corporation
Limited are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Director’s reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed
is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain
provisions of the Corporations Act 2001. If a winding up event occurs under any other provision of the Act, the Company will only be liable in the
event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the
Company is wound-up. The subsidiaries in addition to the Company subject to the deed are specified in Note 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
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
70
70
As at 30 June
2020
2019
103,390
397,305
16,100
516,795
8,932
123,824
28,818
375,080
16
536,670
1,053,465
6,923
-
34,148
3,075
217,284
261,430
46,154
1,408
164,851
212,413
473,843
579,622
96,319
368,754
13,056
478,129
3,632
124,147
30,865
375,080
16
533,740
1,011,869
9,277
413
29,308
2,421
200,348
241,767
40,348
550
163,673
204,571
446,338
565,531
1,424,847
(1,037,196)
191,971
579,622
1,398,264
(1,024,999)
192,266
565,531
90,256
(71,290)
18,966
589
(18,725)
830
1,691
(14,712)
(13,021)
(12,191)
(6)
(12,197)
(325)
(325)
(12,522)
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
www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
E.7 Employee costs and share based payments
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 30 June
2020
2019
44,683
1,514
1,545
884
48,626
43,035
1,400
5,072
662
50,169
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.
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 30 June
2020
5,859,449
41,538
313,091
1,032,611
7,246,689
2019
5,738,546
31,825
323,942
4,505,943
10,600,256
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.
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Movements in employee performance rights during the year
For the year ended 30 June 2020
For the year ended 30 June 2019
No. of performance
rights
(‘000)
Weighted average
exercise price
($)
No. of performance
rights
(‘000)
Weighted
average exercise
price
($)
Balance at beginning of year
Granted during the year
Expired during the year
Exercised during the year
Forfeited during the year
Balance at end of year
Exercisable at end of year
9,044,069
1,873,707
-
(6,151,083)
(305,156)
4,461,537
997,490
0.00
0.00
0.00
0.00
0.00
0.00
0.00
11,286,942
1,161,987
-
(3,134,524)
(270,336)
9,044,069
1,830,247
0.00
0.00
0.00
0.00
0.00
0.00
0.00
During the year ended 30 June 2020 the Group recognised net share based payment expense of $1.5m (2019: $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 $1.3m (2019:
$0.2m) associated with the forfeiture of 305,156 performance rights and reassessment of the probability of achieving non-market based vesting
criteria.
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 437 days (2019: 231 days). The performance rights exercised during the year had a weighted average share price on exercise
date of $2.04 (FY19: $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 30 June
2020 with respect to the performance of the Group’s employees during the financial year ended 30 June 2019:
Vesting schedule
For grants made in FY20
TSR hurdle (50%)
50% of the TSR portion will vest for:
51st percentile performance
(performance against ASX 200
Companies during the vesting period)
100% of the TSR portion will vest for:
76th percentile performance
Pro-rata vesting will occur between each of the above points
EBIT Hurdle (50%)
(EBIT performance 1 July 2019 to 30
June 2022)
50% of the EBIT portion will vest for:
100% of the EBIT portion will vest for:
Additional 20% of the EBIT portion, giving a
total of 120% of the EBIT portion:
Cumulative average annual EBIT increase at the
end of the period from 1 July 2019 to 30 June
2022 compared to the base period of FY19 is at
least 7% per annum.
Cumulative average annual EBIT increase at the
end of the period from 1 July 2019 to 30 June
2022 compared to the base period of FY19 is at
least 10% per annum.
Cumulative average annual EBIT increase at the
end of the period from 1 July 2019 to 30 June
2022 compared to the base period of FY19 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 $2.198 (2019: $1.986) 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.
PR’s issued to employees other than CEO
PR’s issued to CEO
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
Series BD
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2020
Series BE
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BF
26 Aug 2019
$2.34
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BG
26 Aug 2019
$1.66
$0.00
Nil
69.4%
0.69%
26 Aug 2022
Series BD
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
26 Aug 2020
Series BE
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
26 Aug 2022
Series BF
26 Nov 2019
$2.29
$0.00
Nil
61.2%
0.73%
Aug 28, 2022
Series BG
26 Nov 2019
$1.63
$0.00
Nil
61.2%
0.73%
Aug 28, 2022
72
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www.lynascorp.com Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
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
AO
AP
AR
AU
AV
AY
AZ
BB
BC
BD
BE
BF
BG
BD*
BE*
BF*
BG*
Total
30 November 2016
532,373
30 August 2019
30 August 2021
30 November 2016
465,117
30 August 2019
30 August 2021
28 August 2017
476,715
28 August 2020
28 August 2022
28 November 2017
231,066
28 August 2020
28 August 2022
28 November 2017
192,555
28 August 2020
28 August 2022
28 August 2018
28 August 2018
199,446
28 August 2021
28 August 2023
166,205
28 August 2021
28 August 2023
27 November 2018
176,920
28 August 2021
28 August 2023
27 November 2018
147,433
28 August 2021
28 August 2023
26 August 2019
26 August 2019
26 August 2019
26 August 2019
317,589
26 August 2020
26 August 2020
157,175
26 August 2022
26 August 2024
664,594
26 August 2022
26 August 2024
188,609
26 August 2022
26 August 2024
26 November 2019*
109,148
26 August 2020
26 August 2020
26 November 2019*
136,435
26 August 2022
26 August 2024
26 November 2019*
136,435
26 August 2022
26 August 2024
26 November 2019*
163,722
26 August 2022
26 August 2024
4,461,537
$ 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
$ 0.00
Value per
performance
right at grant
date
$ 0.680
$ 0.500
$1.360
$2.060
$1.620
$2.187
$1.431
$2.187
$1.463
$2.340
$2.340
$2.340
$1.660
$2.290
$2.290
$2.290
$1.630
* Performance rights relates to the CEO in series BD to BG were approved by the Board on 26 August 2019, subject to approval at the AGM.
These performance rights were subsequently approved at the AGM on 26 November 2019.
E.8 Options and warrants
On 9 December 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 had 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.
All outstanding warrants were exercised during the year.
Exercise price
Expiry date
Balance as at 30 June 2019
Exercised during the year
Balance as at 30 June 2020
December 2016 Issue
$0.50*
30 September 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 4 December 2017.
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 1 July 2020.
Several amendments apply for the first time in the current year. The Group applies, for the first time, AASB 16 Leases and AASB Interpretation
23 Uncertainty over Income Tax Treatment. As required, the nature and effect of the changes of these new standards has been disclosed
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Lynas Corporation Limited | 2020 Annual Report Lynas Corporation Limited and Controlled Entities
Notes to Consolidated Financial Statements
For the year ended 30 June 2020
Standards and Interpretations in issue not yet adopted
No other Australian Accounting Standards issued but not yet mandatory for the financial year ending 30 June 2020 have been adopted by the
Group in the preparation of this financial report.
New and amended accounting standards and interpretations
AASB 16 Leases
The Group adopted AASB 16 as of 1 July 2019. Refer to Note E2 for disclosures associated with the adoption of this standard.
AASB Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB
112 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 112, nor does it specifically include requirements relating to
interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately
• The assumptions an entity makes about the examination of tax treatments by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax
treatments. The approach that better predicts the resolution of the uncertainty needs to be followed. The Group applies judgement in identifying
uncertainties over income tax treatments. The Group has not recognised any deferred tax assets as at 30 June 2020. The interpretation did
not have an impact on the consolidated financial statements of the Group.
E.10 Subsequent events
On 7 July 2020, Lynas announced that Lynas Chair Mike Harding had informed the Board of his intention to retire as Chair of the Lynas Board
and as a non-executive Director of Lynas, effective from 30 September 2020. Kathleen Conlon, a Non-Executive Director of Lynas since
November 2011, has been elected to succeed Mike as the Non-Executive Chair of the Lynas Board with effect from 30 September 2020.
On 15 July 2020, Lynas announced a significant step towards its new Kalgoorlie Rare Earths processing plant with Metso Outotec awarded the
contract to supply the plant’s kiln after a competitive tender process. The 110 metre long, 1500 tonne kiln is the largest and longest lead time
piece of equipment required for the plant’s operation. The contract for engineering and supply of the kiln is valued at approximately US$15m
(A$21.6m), including the discharge housing, combustion chamber and burner, motor control stations and delivery to Kalgoorlie.
On 27 July 2020, Lynas announced that Phase I work on a U.S. based Heavy Rare Earth separation facility has proceeded to the contract phase
and Lynas and the U.S. Department of Defense have signed a contract for this work.
On 3 August 2020, bondholders converted the remaining US$12.2m (A$17.6m) convertible bonds which resulted in an additional 16.2m shares
issued. As a result of these conversions, the remaining liability in respect to the convertible bonds has been fully extinguished.
On 13 August 2020, Lynas announced that, consistent with JARE’s previous reductions of payments under the JARE Loan Facility to allow
Lynas to use cash flow from operations on capital expenditure for the Lynas 2025 Projects, JARE has now agreed to defer until 31 October
2021 further interest payments in the amount of US$11.5m that had previously been due on 31 October 2020.
On 17 August 2020, Lynas announced that the Company is undertaking an equity raising comprising a fully underwritten institutional
placement and a pro-rata accelerated non-renounceable entitlement offer to raise approximately $A425m. The offer will fund the Lynas 2025
foundation projects to be delivered in 2023, including:
-
-
The Kalgoorlie Rare Earth Processing Facility to produce mixed Rare Earth carbonate for shipment to Lynas Malaysia, and
Associated upgrades at Lynas Malaysia
With the exception of the above, there have been no other events subsequent to 30 June 2020 that would require accrual or disclosure in this
financial report.
74
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www.lynascorp.com Mineral Resources and Ore Reserves
as at 30 June 2020
1. MT WELD RARE EARTH DEPOSIT ORE RESERVES 2020
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 2020
JORC CLASSIFICATION
Ore Reserves within Pit boundary
Proved
Probable
Designed Pit Total
On Stockpiles
Proved
Probable
Stockpiles Total
Total Ore Reserves
Proved
Probable
Total
MILLION
TONNES
TREO*
%
CONTAINED REO
‘000 TONNES
13.2
5.0
18.3
0.9
0.0
0.9
14.1
5.0
19.2
8.3
7.4
8.1
13.9
0.0
13.9
8.7
7.4
8.4
1,106
372
1,478
126
0
126
1,232
372
1,604
* 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, 2020. The 2020 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. The changes to the Ore Reserves
since the previous reporting period are not material. 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 grade control process is carried out by Mr Thomas Leggo, an employee of Lynas Corporation. The surveys have been
carried out by Mr Bradley Hughes, 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 assump-
tions 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.
75
Lynas Corporation Limited | 2020 Annual Report Mineral Resources and Ore Reserves
2. MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2020
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 2020
JORC CLASSIFICATION
Measured
Indicated
Inferred
Total
MILLION
TONNES
TREO*
%
CONTAINED REO
‘000 TONNES
16.7
11.9
25.9
54.5
7.5
5.3
3.6
5.2
1,300
600
900
2,800
* 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, 2020. 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 changes to the Mineral Resource estimation since the previous reporting period are not material.
The exception is minor depletion of the in-situ resources from mining up to June 30, 2020.
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 Tantalum 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.
Note:
In this report, totals may not balance due to rounding.
76
www.lynascorp.com COMPETENT PERSON’S STATEMENTS – MINERAL RESOURCES
The information in this report that relates to the 2020 Mineral Resources is based on information compiled by Ms Elizabeth Haren and
Dr Andrew Scogings. Ms Haren is Associate Principal Consultant at Snowden Group Mining Industry Consultants. Dr Scogings is Associate
Executive Consultant at a Snowden Group Mining Industry Consultants and a Member of the Australasian Institute of Mining and Metallurgy
and a Member of the Australian Institute of Geoscientists. 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 2020 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.
77
Lynas Corporation Limited | 2020 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 1 September 2020.
(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
12,564
11,090
3,725
3,851
270
31,500
Number
of Shares
Percentage
of Shares
6,534,899
29,810,877
29,216,572
101,338,217
684,069,011
0.770
3.500
3.430
11.910
80.390
850,969,576
100.000
The number of shareholders holding less than
a marketable parcel of shares
1,778
189,575
(B) Distribution of Employee Options/Performance Rights
There are 4,461,537 unlisted employee options / performance rights. The number of beneficial holders, by size of holding, of employee
options / performance rights are:
Holders
0
0
20
7
27
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
78
www.lynascorp.com (C) Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares as at 1 September 2020 are:
J P MORGAN NOMINEES AUSTRALIA PTY LTD
CITICORP NOMINEES PTY LIMITED
1 HSBC CUSTODY NOMINEES
2
3
4 NATIONAL NOMINEES LIMITED
5 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LTD
6
7
8
9 HSBC CUSTODY NOMINEES
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
ARGO INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
AMANDA LACAZE AND WAYNE MORGAN < THE MORGAN LACAZE A/C>
10 MEDICH CAPITAL PTY LTD
11 MEDICH CAPITAL PTY LTD
12
13
14 HSBC CUSTODY NOMINEES
15 MALAY-SINO CHEMICAL INDUSTRIES
16 HSBC CUSTODY NOMINEES
17
18 HSBC CUSTODY NOMINEES
19 MS BO XU
20
BNP PARIBAS NOMINEES PTY LTD
PROVEDORE HOLDINGS PTY LIMITED
Listed Ordinary Shares
Number
of Shares
% of
Shares
207,088,671
132,308,459
93,223,742
60,967,121
42,324,634
13,659,916
9,783,238
6,779,221
6,566,112
6,090,940
5,600,000
4,835,804
4,286,889
4,248,291
3,107,686
3,056,015
2,064,329
2,056,766
1,920,000
1,847,723
24.336%
15.548%
10.955%
7.164%
4.974%
1.605%
1.150%
0.797%
0.772%
0.716%
0.658%
0.568%
0.504%
0.499%
0.365%
0.359%
0.243%
0.242%
0.226%
0.217%
TOTAL
611,815,557
71.896%
(D) 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 (18 September 2020)
CHALLENGER LIMITED (18 September 2020)
AUSBIL INVESTMENT MANAGEMENT LIMITED (1 September 2020)
65,794,834
67,410,390
66,698,196
RELEVANT INTEREST IN LISTED ORDINARY SHARES
(E) 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.
79
Lynas Corporation Limited | 2020 Annual Report Additional Information
(F) 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
80
www.lynascorp.com CORPORATE DIRECTORY
ABN 27 009 066 648
Registered Office
Level 1, 45 Royal Street
East Perth WA 6004
Tel: +61 8 6241 3800
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
2020
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 2020
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 17 August 2020 and has been approved by the
board.
The annexure includes a key to where our corporate governance disclosures can be located.
Date:
6 October 2020
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 FY20 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 FY20 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 FY20 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.
☐ an explanation why that is so in our Corporate Governance
Statement
[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]
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.
… 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:
☒
in our Corporate Governance Statement OR
☐ an explanation why that is so in our Corporate Governance
Statement
☐ at [insert location]
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 FY20 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 June 30, 2020
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
17, 2020.
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, 2020, 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, 2020 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) demonstrating leadership;
(2) approving the Company’s Values and Code of Conduct;
(3)
reviewing and leading the development of the Company’s culture;
(4) oversight of the Company, including its control and accountability systems;
(5) electing the Chair in accordance with the Constitution;
(6) appointing and removing the CEO (or equivalent), including approving remuneration of the CEO and the remuneration
policy and succession plans for the CEO;
(7)
ratifying the appointment and, where appropriate, the removal of the CFO (or equivalent) and the Secretary
;
(8)
input into, and final approval of, management’s development of corporate strategy and performance objectives;
(9)
reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal
compliance;
(10) monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources
are available;
(11) approving and monitoring the progress of budgets, major capital expenditure, capital management and acquisitions
and divestitures;
(12) approving and monitoring financial and other reporting;
(13) overseeing the Company’s process for making timely and balanced disclosure of material information to the market;
(14) satisfying itself that an appropriate framework exists for relevant information to be reported by management to the
Board;
(15) whenever required, challenging management and holding it to account;
(16) appointment and composition of committees of the Board;
(17) on recommendation of the Audit & Risk Committee, appointment of external auditors and overseeing the external audit;
(18) setting the risk appetite for the Company, overseeing its risk management framework and satisfying itself that the
framework is sound;
(19) overseeing the strategic planning of the Company, including periodically reviewing key business risks of the Company
and providing suggestions and guidance on the management of those risks;
(20) on recommendation of the Nomination, Remuneration & Community Committee, satisfying itself that the Company’s
remuneration policies are appropriate, and initiating Board and director evaluation; and
(21) monitoring the effectiveness of the Company’s governance practices.
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 contained in the FY20 Financial 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 contained in the FY20 Financial 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. The specific quantitative
objectives set by the Board for achieving gender diversity are as follows:
Level of the
Organization
The whole organization
Gender Diversity Level
at 30 June 2020
15.5%
Target for the end of
2021
20%
Target for the end of
2023
30%
Senior Executives (the
Company now defines
this category as including
all managers and above)
The Board
16.7%
33%
20%
33%
30%
40%
(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 a 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, 2020 (prior year: June 30, 2019):
(1) Proportion of women employees in the whole organisation: 15.5% (FY19 – 15.9%).
(2) Proportion of women employees in senior executive positions: 16.7% (FY19 – 15.1%).
(3) Proportion of women on the Board: 33.0% (FY19 – 33.0%).
In FY20, the Group adopted a new definition for “senior executives” which it now defines as all managers and above. This change
in the definition is reflected in the percentage of “senior executive” women reported for both FY19 and FY20.
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, 2020.
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 the year ending June
30, 2020. During the year ending June 30, 2020, 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’ Report in the FY20 Financial 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, 2020. In addition, there
were several informal meetings. Further details, including the attendances of members, are provided in the Directors
Meetings section of the FY20 Financial Report.
(4) At all times during the financial year ending June 30, 2020, 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:
•
•
Experience as a Chief Executive;
International business experience;
Financial and accounting experience;
•
• Operational experience in the chemical and resources industries;
•
•
Strategy and strategic marketing experience;
Corporate governance, regulatory and risk management experience.
The Board’s skills matrix is based on the above sets of skills and experience. The Nomination, Remuneration and Community
Committee remains focussed on Board renewal, 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’ Report in the FY20 Financial 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, 2020 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, 2020 is as follows:
Name
K. Conlon
A. Lacaze
M. Harding
P. Etienne
J. Humphrey
G. Murdoch
Term in office
8 years 8 months
6 years 6 months
5 years 6 months
5 years 6 months
3 years 1 month
2 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, 2020, 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
Mr. Harding was the Chairman of the Board throughout the financial year ended June 30, 2020. 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, 2020.
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’ Report in the FY20 Financial Report.
(2) Five meetings of the Committee were held during the financial year ending June 30, 2020. Further details, including
the attendances of members, are provided in the Directors Meetings section of the FY20 Financial 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, 2020, 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 presentations 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’ Report in the FY20 Financial Report.
(2) Five meetings of the Committee were held during the financial year ending June 30, 2020. Further details, including
the attendances of members, are provided in the Directors Meetings section of the FY20 Financial 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, 2020, 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, 2020.
Recommendation 7.3 – Internal Audit
During the financial year ending June 30, 2020, the Group began implementing an internal audit function. The Group’s internal
audit function currently focusses on compliance with ISO standards by the Group’s operating processes. The internal audit
function will be progressively expanded to other key areas of risk in the business.
The other processes that the Group employed during the financial year ending June 30, 2020 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 and storage 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’ Report in the FY20 Financial 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, 2020. In addition, there
were several informal meetings. Further details, including the attendances of members, are provided in the Directors
Meetings section of the FY20 Financial Report.
(4) At all times during the financial year ending June 30, 2020 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 FY20 Financial 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 FY20 Financial 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, 2020 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.