More annual reports from Lynas Rare Earths:
2023 Report2021
Annual Report
Contents
FY21
Letter from the Chairman
CEO Review
Our Operations
Our Values
Board of Directors
Senior Management Team
Directors’ Report
Sustainability Statement
Remuneration Report – Audited
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
Financial Statements
Consolidated Statement of Profit or
Loss and Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Mineral Resources and Ore Reserves
Additional Information
Corporate Directory
1
2
4
7
7
8
8
9
30
31
47
48
49
55
56
57
58
59
60
101
104
109
www.LynasRareEarths.com
Contents
FY21 Highlights
$157m
$498m
Record
Profit
Record
Sales
$681m
Cash and
short term deposits
848
Employees
and Contractors
10+
21%
Nationalities
in Senior Leadership
Women
Senior Executives
Zero
COVID-19 Workplace
Transmission in FY21
External
accreditations
maintained
11
Lynas Rare Earths Limited | 2021 Annual Report Letter from the Chairman
Dear Shareholder, I’m pleased to present the 2021 Annual Report.
Operational improvements implemented in prior years meant we were well
positioned to deliver and grow in 2021, including being able to capture the
benefits of much improved market conditions.
Lynas achieved a record annual net profit (NPAT) of $157.1m and sales
revenue increased to $489.0m during the financial year. These results were
achieved as a result of strengthened market demand and prices supported
by continued strong cost control.
Despite external challenges faced during the year, particularly as a result of
the continuing effects of the COVID-19 pandemic, total production volumes
increased to 15,761 REO tonnes (FY20: 14,562 tonnes) and total NdPr
production grew to 5,461 tonnes in FY21 (FY20: 4,656 tonnes).
The second half of FY21 was particularly challenging for our team in
Malaysia as the country dealt with a 3rd wave of COVID-19. Lynas reinforced
and strengthened all health and hygiene protocols and our Lynas Malaysia
team members put in an outstanding effort to ensure that operations
could continue. Since the end of the financial year, we have achieved 99.5%
vaccination for our Malaysian employees by participating in the Malaysian
Government’s Public/Private Partnership COVID-19 Industry Immunisation
Programme (PIKAS) initiative. I would like to recognise all of our Malaysian
team members for their achievements in these difficult circumstances.
During the year Lynas benefited from favourable market conditions and
growing demand for our products. Globally, demand for electric vehicles
and wind energy has accelerated and high growth in demand for NdFeB
magnets contributed to growth in demand for Lynas’ NdPr product family
and mixed Heavy Rare Earths.
The Lynas 2025 growth vision represents Lynas’ plan to grow with the
market and meet this accelerating market demand for Rare Earths. As part
of this plan, work on the new Rare Earths Processing Facility in Kalgoorlie
progressed well throughout the year.
The Lynas balance sheet was enhanced following the successful
completion of a $425m equity raise in September 2020 to fund Lynas 2025
foundation projects, primarily the construction of the Kalgoorlie Rare Earths
Processing plant and the associated upgrades at the Lynas Malaysia plant.
The ongoing COVID-19 pandemic continues to heighten customer and
government interest in securing reliable and diversified Rare Earths supply
for growing industries. As the only significant producer of separated Rare
Earths outside of China, Lynas is engaged with governments around the
world to sustainably address this supply chain challenge.
Following year end and as announced on 22 July 2021, Lynas was awarded
a $14.8 million grant as part of the Australian government’s Modern
Manufacturing Initiative. The grant will enable Lynas to commercialise
an industry-first Rare Earth carbonate refining process that has been
“ Globally, demand
for electric
vehicles and
wind energy has
accelerated and
high growth
in demand for
NdFeB magnets
contributed
to growth in
demand for
Lynas’ NdPr
product family
and mixed Heavy
Rare Earths.”
22
www.LynasRareEarths.com developed inhouse at Lynas. The new process will feed the Lynas Malaysia
plant as well as the proposed U.S. Rare Earth processing facility and will be
installed during the construction of the Rare Earth Processing Facility in
Kalgoorlie.
During the year Lynas also received support from the United States
Government as part of its efforts to secure sustainable critical mineral
supply chains. Lynas signed two contracts with the United States
Government during the year. These were a contract for Phase 1 work on
a Heavy Rare Earths separation facility, and a contract for the construction
of a commercial Light Rare Earths separation plant in the United States.
Lynas recognises the importance of our environmental, social and govern-
ance performance to all of our stakeholders, including our shareholders
and our local communities. This year we refreshed our ESG reporting in line
with international common metrics initiatives and, in September 2021, we
confirmed Lynas’ commitment to the Science Based Targets initiative. The
full ESG Report is available at the Lynas website.
The Board is pleased to continue to build value for our shareholders. Lynas’
position in the market as the only producer of scale of separated Rare
Earths outside of China and the Group’s performance underpinned a
significant uplift in market capitalisation during the year. We are proud to
have been rated as the 4th highest performing stock on the ASX measured
by Total Shareholder Return.
On behalf of the Board, I would like to take this opportunity to thank
Amanda Lacaze, her executive team and the entire Lynas team for their
continued hard work and dedication to the business throughout the year,
particularly with the ongoing challenges presented by COVID-19.
The Board would also like to thank you, our shareholders, for your continued
support of the business. While the challenges of the pandemic are likely to
remain in the short-term, Lynas’ unique position in the market and Lynas
2025 growth vision ensures the Group is well positioned to benefit from
accelerated market growth.
Kathleen Conlon
Chairman
33
Lynas Rare Earths Limited | 2021 Annual Report CEO Review
This year the Group delivered a record profit
from record sales revenue. This is a testament
to the resilience of the business and the
excellent performance of our people in
overcoming the challenges presented by the
COVID-19 pandemic.
This has been a significant transition year for our business. Forecasts for
strong demand growth for Rare Earth materials, particularly magnetic
materials, were exceeded in FY21, driven by strong consumer demand
for new green technologies. In addition, governments around the world
intensified their efforts in relation to securing Rare Earth supply for industry.
While the ongoing pandemic continued to present challenges to the way
we operate, pleasingly, our business showed that we are sufficiently agile
to manage these risks and our people have stepped up and made the
changes needed to achieve continued success.
Overcoming the challenges of COVID-19
FY21 was a year of two halves and the conclusion of the financial year
was fundamentally different from the start. We commenced the year
with low COVID-19 case numbers in both Malaysia and Western Australia.
Unfortunately, a vigorous third wave of COVID-19 in Malaysia led to daily
cases rising to around 20,000 by the financial year end. This big step
change has presented a number of challenges for the business.
Ensuring the health and safety of our people and our communities is
always our first priority, and even more so as we managed operations
during the pandemic.
During the year we enhanced our health and safety procedures in line with
Malaysian Government SOPs as well as our own policies. This has stood us
in good stead and we have been able to continue operations in Malaysia,
albeit at 75% of our Lynas NEXT rates. This is an outstanding achievement
and highlights the strong compliance of our employees in implementing
our extended safety procedures in both their work and home lives. We
are continuing to implement these strong protocols in recognition of the
continuing risks to our people from the pandemic.
Our risk management procedures have enabled the team to mitigate
logistics risks related to shipping delays, including by holding more stock
and carefully managing inventory.
We have been pleased to provide COVID-19 vaccines to our Malaysian staff
through our participation in the Malaysian Government’s Public/Private
Partnership COVID-19 Industry Immunisation Programme (PIKAS) initiative
with 99.5% of our people now fully vaccinated.
“ Our Lynas 2025
growth vision
is designed to
develop our
resource for the
future, leverage
our downstream
processing
capability
and expand
our industrial
footprint to meet
accelerating
market demand. ”
4
www.LynasRareEarths.com Plans were progressed for the construction of a Permanent Disposal Facility (PDF) for WLP residue in Malaysia
during the year, notwithstanding constraints presented by COVID-19 conditions. In recognition of these constraints,
the regulator in Malaysia has extended the deadline for satisfaction of the licence condition related to the
commencement of construction of the PDF to 2 March 2022. We continue to engage productively with the relevant
government and regulatory authorities to progress the approvals for the PDF.
Favorable market dynamics and growing demand
The Rare Earths market has shown exciting growth since the beginning of FY21. The NdPr oxide China domestic
price commenced the year at around US$36.0 per/kg (ex-VAT). As a result of strong demand pricing strengthened
over the year reaching more favorable pricing of US$64.7 per/kg (ex-VAT) by year end. As a result of the strength-
ened demand and price during the year, net sales revenue for FY21 was a record A$489.0m (FY20 A$305.1m) and
total sales volume increased to 16,405 REOt (FY20 14,172 REOt).
We continue to be the leading supplier of NdPr products to the Japanese market and high growth in the NdFeB
market contributed to demand for our NdPr product family and mixed Heavy Rare Earths product. In addition, the
demand for catalyst from the automotive and the fluid catalytic cracking (FCC) sectors is back to its pre-COVID
levels. Throughout the financial year we continued to focus on our key strategic customer relationships.
Across both operating sites we continue to focus on operational excellence through our continuous improvement
programs. This includes strong cost control, inventory management and investment in process and product
innovation.
At Mt Weld, we are investing in continued exploration of the ore body. The team continued metallurgical test
work on drillhole samples that were retrieved following the drilling exploration. We are excited to invest in further
processing equipment at Mt Weld, including the installation of two new items; a new dryer to improve the physical
quality of the concentrate and a second stack cell following the success of the Pre-Rougher Stack Cell in 2019.
A comprehensive plant audit was conducted at Lynas Malaysia following the forced shutdown in the early stages
of the pandemic. The team has developed and is implementing a comprehensive maintenance program to ensure
the plant continues to perform at the high level seen in FY21.
Water management is important to our operations and a key focus of our ESG philosophy. Our teams at both Mt
Weld and Lynas Malaysia implemented new water management solutions during the year and have developed
plans for further significant improvements.
The strength of the Rare Earths market, despite the ongoing challenges of the pandemic, reinforced the impor-
tance of Rare Earth material globally. This resulted in governments around the world taking action to address
supply chain vulnerabilities. As the only producer of separated Rare Earths outside of China, Lynas continues to play
an active role in the development of robust and resilient Rare Earth supply chains for key international markets.
Meeting customer needs for safe, sustainable, and ethically responsible
Rare Earths
In FY21, NdPr production was 5,461 tonnes and total REO production was 15,761 tonnes. At Mt Weld, preparations
were made to commence a new mining campaign, which started in Q1 FY22.
We maintained strong safety results in FY21, achieving 12-month rolling lost time injury frequency rate at 0.8 per
million hours worked at 30 June 2021 (June 2020 0.8/m hours worked). Similarly, the 12-month total recordable
injury frequency rate improved to 2.1 per million hours worked at 30 June 2021 (June 2020 3.5/m hours worked).
5
Lynas Rare Earths Limited | 2021 Annual Report CEO Review
In line with our determination to operate as an ethical and responsible producer of Rare Earth materials, Lynas
Malaysia was awarded a Gold Medal EcoVadis Sustainability rating for the second time. Once again, this places
Lynas Malaysia among the top 5% of companies evaluated.
Progress towards our Lynas 2025 vision
Our Lynas 2025 growth vision is designed to develop our resource for the future, leverage our downstream
processing capability and expand our industrial footprint to meet accelerating market demand.
Having confirmed our plans for the Kalgoorlie Rare Earths Processing Facility in FY20, during FY21 we put that plan
into action. We closed the financial year with equipment ordered and people on site executing on the early works
that have been approved by the regulator.
Key achievements for the Kalgoorlie Rare Earths Processing Facility in FY21 included:
First Kalgoorlie-based employees hired.
• Placement of orders for all long lead time items and 60% of total equipment requirements.
•
•
Minor and preliminary works on site, as approved by the WA Environmental Protection Authority (EPA)
in March 2021. These works established an access road, site office and a pad suitable for the delivery of
equipment such as the steel tanks that were fabricated in Perth.
•
Four-week public review of the Environmental Review Document for the Kalgoorlie Rare Earth Processing
Facility by the EPA, which commenced on 9 June 2021, including the operation of a community Pop-up
Information Point in Kalgoorlie in September 2020 and again in June 2021, allowing community members to
visit the shopfront and discuss plans for the project with Lynas team members.
In FY21 we also advanced our plans for a proposed U.S. Rare Earths Separation Facility. This included signing two
separate funding contracts with the United States Government in FY21.
In line with U.S. Department of Defense (DoD) Phase 1 milestones, we submitted detailed engineering and design
work for the Heavy Rare Earths (HRE) Separation Facility to the U.S. Government during the year. Our project teams
also progressed site studies and planning for an integrated Heavy and Light Rare Earths Separation Facility.
Growing our business for the future
FY21 has been a significant transitional year for the Lynas business. We have demonstrated that we are sufficiently
agile to manage risks, and this has seen the company deliver a strong result in challenging times.
We have made good progress on our Lynas 2025 projects, and the excellent financial and operational performance
delivered during the year is the direct result of the hard work, determination and resilience of the people in this
business. We are focused on delivering our Lynas 2025 growth ambitions. In addition, we are developing new plans
that will allow us to grow faster to meet market demand and achieve accelerated growth by 2025.
I would like to acknowledge the outstanding performance of our people during the year despite the challenges
of COVID-19 and thank the Board for their continued support and guidance. I would also like to thank you, our
shareholders, for your commitment to our business. I look forward to updating you on our achievements in the next
financial year.
Amanda Lacaze
Managing Director and Chief Executive Officer
6
www.LynasRareEarths.com Our Operations
Living our values
Care
Achievement
Expertise
Diversity
Sustainability
We care for and respect
each other, our
communities and the
environment. We make
sure we all go home safe
and well.
We are resilient and
committed. We
overcome challenges to
achieve our goals.
We are driven to be the
world’s best in Rare
Earths and to earn the
respect of our
customers.
We are a multicultural
company. We value and
embrace diversity.
We are passionate about
contributing to a
sustainable future and
green technologies.
Lynas Rare Earths Limited | 2021 Annual Report
7
Lynas Malaysia: Integrated Rare Earths refinery in Gebeng, Malaysia.MALAYSIAMt Weld, WA: Tier 1 Rare Earths deposit, Concentration PlantAUSTRALIAUNITED STATESProposed U.S. Heavy Rare Earths and Light Rare Earths Processing FacilitiesKalgoorlie, WA: Rare Earths Processing Facility under construction BOARD OF DIRECTORS
Kathleen Conlon
Chair
Amanda Lacaze
Managing Director & CEO
Philippe Etienne
Non-Executive Director
Dr Vanessa Guthrie AO
Non-Executive Director
John Humphrey
Non-Executive Director
Grant Murdoch
Non-Executive Director
SENIOR MANAGEMENT TEAM
Amanda Lacaze
Managing Director
& CEO
Mimi Afzan Afza
Vice President
People & Culture
Dato’ Mashal
Ahmad
Vice President
Malaysia
Daniel Havas
Vice President
Strategy & Investor
Relations
Sarah Leonard
General Counsel &
Company Secretary
Kam Leung
Vice President
Upstream
Pol Le Roux
Vice President
Downstream
Jennifer Parker
Vice President
Corporate Affairs
Gaudenz
Sturzenegger
Chief Financial Officer
8
www.LynasRareEarths.com Directors’ Report
The Board of Directors (the “Board” or the “Directors”) of Lynas Rare Earths
Limited (the “Company”) and its subsidiaries (together referred to as the
“Group”) submit their report for the year ended 30 June 2021. In order to
comply with the provisions of the Corporations Act 2001, the Directors
report as follows:
CORPORATE INFORMATION
Lynas Rare Earths Limited is limited by shares and is incorporated and domiciled in Australia. The Group’s corporate
structure is as follows:
Lynas Corporation Limited
ACN 009 066 648
ABN 27 009 066 648
Date of Incorporation 23/5/1983
Registered in WA
0.01%
100%
Lynas Services
Pty Ltd
ABN 31 103 936 232
Date of Incorporation
3/3/2003
Registered in
Victoria
100%
Mt Weld
Holdings
Pty Ltd
ABN 75 073 998 106
Date of Incorporation
15/5/1996
Registered in
WA
100%
100%
100%
100%
Lynas Kalgoorlie
Pty Ltd
Lynas USA
LLC
Lynas Malaysia
Sdn Bhd
ABN 73 053 160 302
Date of Incorporation
29/7/1991
Registered in
NSW
Date of Incorporation
24/6/2019
Registered in
Delaware, USA
Malaysian Company No
200601032530
Date of Incorporation
6/11/2006
Registered in
Malaysia
Lynas Africa
Holdings
Pty Ltd
ACN 148 189 511
Date of Incorporation
13/1/2011
Registered in
Victoria
100%
Mt Weld Mining
Pty Ltd
ABN 96 053 160 400
Date of Incorporation
29/7/1991
Registered in
NSW
99.99%
Lynas Africa
Limited
Malawi Company No
8409
Date of Incorporation
12/7/2007
Registered in
Malawi
9
Lynas Rare Earths Limited | 2021 Annual Report 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.
Kathleen Conlon BA (Econ) (Dist.), MBA, FAICD
Non-Executive Chair (Appointed to Chair 30 September 2020)
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 is a former Non-Executive Director of CSR Limited. She is 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 a former Chairperson
of the audit committee of the Commonwealth Department of Health. Prior to her Non-Executive Director career,
Ms Conlon spent 20 years in professional consulting where she successfully assisted companies to achieve
increased shareholder returns through strategic and operational improvements in a diverse range of industries.
Ms Conlon is one of the pre-eminent thought leaders in the area of operations and change management, both
in Australia and globally. In 2003, Ms Conlon was awarded the Commonwealth Centenary medal for services to
business leadership.
Ms Conlon is a member of the Nomination, Remuneration and Community Committee and the Health, Safety and
Environment Committee.
Mike Harding MSc (MecEn)
Non-Executive Chair (Resigned 30 September 2020)
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 resigned from the Company effective 30 September 2020.
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 manage-
ment roles at ICI Australia (now Orica and Incitec Pivot). Ms Lacaze’s early experience was in consumer goods with
Nestle.
Ms Lacaze is a member of Chief Executive Women and the Australian Institute of Company Directors. She was a
Non-Executive Director of ING Bank Australia until 30 May 2021. 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.
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
10
www.LynasRareEarths.comDirectors’ Report 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 from January 2013 until June 2019. He was a Senior Partner at King & Woods
Mallesons between 1998 and 2012 and a Partner at Corrs Chambers Westgarth between 1980 and 1998. He is an
experienced Non-Executive Director having previously been Chairman and a Non-Executive Director of Spotless
Group Holdings until 31 January 2021 and Chairman and Non-Executive Director of Auswide Bank Limited (formerly
Wide Bay Australia Limited) until 31 December 2020. He was appointed as Chairman and a Non-Executive Director
of Titles Queensland in August 2021 and he has previously served as Chairman and Non-Executive Director of
Horizon Oil Limited and Villa World Limited, Deputy Chairman of King & Wood Mallesons and as a Non-Executive
Director of Cromwell Property Group, Downer Group Limited, and Sunshine Broadcasting Group Limited. He has
also served as a member of the Australian Takeovers Panel.
Mr Humphrey is the Chair of the Nomination, Remuneration and Community Committee and a member of the
Audit and Risk Committee.
Grant Murdoch M COM (Hons), FAICD, FCA
Non-Executive Director
Mr Murdoch joined the Company as a Non-Executive Director on 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 and
Auswide Bank Ltd (from 1 January 2021). 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 and a member of the Nomination, Remuneration and
Community Committee.
Dr Vanessa Guthrie AO, Hon DSc, PhD, BSc (Hons)
Non-Executive Director (Appointed 1 October 2020)
Dr Guthrie was appointed as a Non-Executive Director on 1 October 2020. Dr Guthrie has qualifications in geology,
environment, law and business management including a PhD in Geology and over 30 years’ experience in the
resources sector.
Dr Guthrie is currently a non-executive Director of Santos Limited, Tronox Holdings PLC and Cricket Australia, a Lead
Independent Director and Deputy Chair of Adbri Limited, and Pro-Chancellor of Curtin University. Dr Guthrie was
formerly the Deputy Chair of the WACA and non-executive Director of the Australian Broadcasting Corporation.
In 2017, Dr Guthrie was awarded an Honorary Doctor of Science from Curtin University for her contribution to
sustainability, innovation and policy leadership in the resources industry. Dr Guthrie was appointed an Officer of
the Order of Australia in 2021 for contribution to the minerals and resources sector.
11
Lynas Rare Earths Limited | 2021 Annual Report Dr Guthrie is a member of the Nomination, Remuneration and Community Committee and the Health, Safety and
Environment Committee.
Resignations
Mike Harding resigned effective 30 September 2020. There have been no other resignations from the Board.
COMPANY SECRETARIES
Andrew Arnold (Resigned 16 April 2021)
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 was the responsible person for communication with the Australian Securities Exchange (ASX)
in relation to listing rule matters.
Mr Arnold resigned from the Company effective 16 April 2021.
Ivo Polovineo (Resigned 16 April 2021)
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.
Mr Polovineo resigned from the Company effective 16 April 2021.
Sarah Leonard (Effective 27 January 2021)
Ms Leonard is an experienced General Counsel and is a leading resources and infrastructure lawyer. She was
previously the Group Legal Counsel at Monadelphous Group Limited, an ASX listed contractor in the resources
sector. In that role, she was responsible for governance, compliance and regulatory matters in relation to the Group.
Prior to her role as Group Legal Counsel, Sarah was a partner at Corrs Chambers Westgarth in the construction and
infrastructure team.
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.
DIRECTORS SHAREHOLDINGS
As at the date of this report, the Directors’ shareholdings are consistent with the shareholdings table described in
Section I(i) of the remuneration report.
12
www.LynasRareEarths.comDirectors’ Report NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
The principal activities of the Group are:
Integrated extraction and processing of Rare Earth minerals, primarily in Australia and Malaysia; and
•
• Development of Rare Earth deposits.
SIGNIFICANT CHANGES IN 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 including development and
implementation of the strategic plan and the operating and financial performance of the Group.
REVIEW OF OPERATIONS
Financial Highlights
A record profit was delivered in FY2021. The external environment was very challenging primarily due to the effects
of the COVID-19 pandemic. Direct effects of the pandemic included the need to implement COVID-19 health and
safety protocols such as limiting the number of employees on site, shipping disruptions and delays and disrupted
supply of certain key raw materials. Despite these challenges production was sustained at 75% of Lynas NEXT
production capacity (equivalent to original nameplate production). As a result of careful management Lynas was
able to meet the needs of key customers throughout the year.
Increased sales revenue, continuing strong cost control and strengthened market prices contributed to a Net Profit
After Tax (NPAT) of $157.1m. This represents a 910% increase on the FY2020 NPAT (which was heavily influenced
by the 6-week temporary shutdown of the Lynas Malaysia plant due to movement controls implemented by the
Malaysia Government at the start of the pandemic).
Net Sales Revenue
Cost of Sales
Gross Profit
Net Profit / (loss) after tax
Cash and short- term deposits
Net Assets
Market Capitalisation
FY21
$m
489.0
(302.2)
186.8
157.1
FY20
$m
305.1
(257.3)
47.8
(19.4)
Movement
%
60%
17%
291%
910%
$m
183.9
(44.9)
139.0
176.5
30 June 21
$m
30 June 20
$m
Movement
$m
%
680.8
1,083.4
5,145.2
101.7
518.4
579.1
565.0
1,262.1
3,883.1
569%
109%
308%
13
Lynas Rare Earths Limited | 2021 Annual Report Lynas raised $425m from equity holders (less $11m equity raising costs) in September 2020. The funds raised will
be used for the Lynas 2025 foundation projects, primarily the construction of the Kalgoorlie Rare Earths Processing
plant and associated upgrades at the Lynas Malaysia plant.
Broader recognition of Rare Earth growth prospects, Lynas’ unique market position, and improved business
performance underpinned a significant uplift in market capitalisation during the year.
Mt Weld
As part of the Lynas 2025 growth vision, Lynas Rare Earths is focused on developing the Mt Weld resource to meet
forecast demand growth.
As announced on 26 November 2020, two new exploration drill holes were successfully established to a depth of
100 metres and 106 metres respectively below the current Mt Weld pit floor. Both holes were extended for explora-
tion purposes below the current Life of Mine pit design depth and significant and continuous intersections of Rare
Earth minerals were encountered, including Light Rare Earth elements and Heavy Rare Earth elements.
Subsequent to 30 June 2021, Lynas announced the successful completion of 1020m deep core drilling into fresh
carbonatite below the current Rare Earth Mining open pit mine on 2 August 2021. The exploration drilling program
was completed ahead of schedule in June 2021 and was designed to expand the ore body knowledge of Mt Weld by
understanding the primary Rare Earth Elements mineralisation and the geology and structure of the carbonatite
host rock. Further detailed analytical work including metallurgical test work will be conducted on the drillhole
samples and follow-up geological work will be conducted. First pass geochemical assay results, microscopic
petrology and mineralogical study reports are expected by November 2021 and the drilling report is expected
to be completed in December 2021.
Mining at Mt Weld has been conducted on a campaign basis due to the high REO ore grades and relatively low
tonnages treated through the on-site concentration plant. No mining campaigns were undertaken in FY2021,
preparation for the next mining campaign commenced in late FY2021.
Commissioning of the second Stack Cell also commenced in late June. This follows the very successful implementa-
tion of the Pre-Rougher Stack Cell in 2019. The Stack flotation cells are high intensity flotation cells that incorporate
froth washing which removes fine impurities that are entrained in the froth stream. Both Stack Cells produce
final concentrate grade and provide a capital efficient upgrade path. A second concentrate dryer has been lifted
into place and installed. The new dryer is significantly larger than the initial smaller trial dryer and will be capable
of drying all the concentrate produced. It is expected to be in operation in early FY22. The concentrate dryer will
improve the physical quality of the RE concentrate produced at Mt Weld which will contribute to improved perfor-
mance at our Malaysian plant.
Lynas Malaysia
Malaysia has faced extensive challenges as a result of the COVID-19 pandemic with vigorous 2nd and 3rd waves of
infections. The Malaysian government has implemented significant controls on the movement of the population
and limitations on staff numbers allowed to attend workplaces. Lynas has complied with all government SOPs and
implemented further controls to protect the health and safety of our people, including extensive testing of our
workforce and contractors prior to admission to site. To date we have had no workplace transmission of COVID-19.
A small number of staff have acquired infections outside of the workplace. This has led to certain of our team
members being required to isolate at times throughout the year.
Despite these significant challenges Malaysian operations continued at approximately 75% of Lynas NEXT rates,
sufficient to meet the needs of our key customers. In addition, we increased our contributions to our local commu-
nities to mitigate the economic and health effects of the pandemic.
During the year the Malaysian team conducted a thorough plant audit and is now implementing a comprehensive
preventative maintenance programme. The plant has performed well throughout the year and the additional work
will ensure it is well placed to uprate production as the effects of the pandemic abate.
We have continued to work diligently on the development of the PDF required as a condition of our Malaysian
operating licence. The regulator has extended the deadline for satisfaction of the licence condition related to the
commencement of construction of the Permanent Disposal Facility (PDF) for WLP residue to 2 March 2022.
Kalgoorlie
The new Rare Earths Processing Facility in Kalgoorlie is a foundation project of the Lynas 2025 growth vision.
14
www.LynasRareEarths.comDirectors’ Report There was continued progress on the Facility during the year, including:
• EPA (Environmental Protection Authority of Western Australia) level of assessment for the project set as
“Assessment on Referral Information with additional Information”, additional information submitted to the
EPA and the updated Environmental Review Document (ERD) completed. The EPA commenced the four-
week public review of the ERD on 9 June 2021 and a Community Pop-up Information Point was established
in Kalgoorlie during the month of June to enable community members to visit the shopfront and discuss
plans for the project with Lynas team members.
• Minor and preliminary site works approved by the EPA commenced in March 2021. An access road, site office
and a pad suitable for the delivery of equipment such as a number of steel tanks that were fabricated in
Perth have been established.
• Employed the first Kalgoorlie-based members of the Lynas team.
• Procurement of key process equipment is well progressed with placement of orders for all long lead time
items and 60% of total equipment requirements.
• Manufacture of ordered equipment continues. Fabrication of the five kiln shell sections is close to
completion.
Lynas USA
In keeping with the Lynas 2025 growth vision to have upstream processing close to our resource and downstream
processing close to our customers, Lynas is currently in the planning phase for our proposed U.S. Rare Earths
Separation Facility.
Lynas has now received 2 separate funding grants from the United States Government:
1. Contract signed for Phase 1 work (detailed market and strategy study plus detailed planning and design
work) for the construction of a Heavy Rare Earths (HRE) separation facility in the United States (announced
27 July 2020).
2. Contract signed with the United States Government to build a commercial Light Rare Earths separation
plant in the United States (announced 22 January 2021) with Department of Defense funding to be capped
at approximately US$30 million with Lynas contributing a matching amount.
In the June quarter, detailed engineering and design work for the Heavy Rare Earths (HRE) facility was submitted to
the U.S. Government in line with U.S. Department of Defense (DoD) Phase 1 milestones. The DoD is now conducting
a merit evaluation of the submission.
Malawi deposit
Since fiscal year 2012, no further capital investment has been made on the Kangankunde Rare Earths 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 chal-
lenging that decision.
Health, safety and environment
Lynas is committed to ensuring the Group’s operations in Australia and Malaysia are consistent with national and
international safety and sustainability best practice. Lynas has established extensive processes to ensure that our
operations are safe for employees, safe for the environment and community, and secure for our customers.
The 12-month rolling lost time injury frequency rate as at 30 June 2021 was 0.8 per million hours worked (June 2020:
0.8 per million hours worked). In addition, the 12-month total recordable injury frequency rate at 30 June 2021 was
2.1 per million hours worked (June 2020: 3.5 per million hours worked).
Since October 2020, Malaysia has experienced a significant third wave of COVID-19 infections. We have reinforced
and strengthened our well-established health and hygiene protocols in both Malaysia and Western Australia to
protect the health and wellbeing of our people and communities. This includes communication and education,
disclosure and reporting, testing, physical distancing, hygiene and precautionary isolation procedures.
Lynas cares for the communities in which we operate and we have increased our contributions to our local commu-
nities in Malaysia who have been affected by recent flood and storm events on the east coast of Malaysia in addition
to the COVID-19 pandemic.
15
Lynas Rare Earths Limited | 2021 Annual Report The annual ISO audits were successfully completed for Lynas Malaysia and Mt Weld during the year for recertifi-
cation of ISO 9001:2015 (Quality Management) and ISO 14001:2015 (Environmental Management) as well as for ISO
45011:2018 which was a migration from OHSAS 18001:2007 (Occupational Health and Safety Management) stand-
ards. Both Lynas sites have been certified since 2012.
In FY21 a review of Greenhouse Gas (GHG) emissions target frameworks was undertaken. Lynas will confirm its
commitment to the Science-Based Targets initiative and release our Greenhouse Gas Policy in FY2022.
In line with our commitment to international environmental best practice, 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.LynasRareEarths.com.
FINANCIAL AND OPERATIONAL PERFORMANCE
Sales volume, revenue and costs
Sales by tonnage and value
FY21
FY20
FY19
FY18
Sales volume
Cash receipts from customers
Sales revenue
Average selling price
Cost of sales
(REOt)
(A$m)
(A$m)
(A$/kg)
(A$m)
16,405
465.4
489.0
29.8
14,172
321.8
305.1
21.5
19,154
367.5
363.5
19.0
17,672
383.1
374.1
21.6
(302.2)
(257.3)
(273.1)
(253.0)
FY21
% change
16%
45%
60%
39%
17%
The demand for Lynas products, in particular for our NdPr product family, continued to grow through the year. This
led to record sales and cash collection in the final quarter of FY21. Despite the global shortage of semi-conductors
which affects all industries and in particular, the automotive industry, the NdFeB market is experiencing very strong
growth, supporting the demand for NdPr and the HRE produced by Lynas. At the same time, the demand for
catalyst from the automotive and the FCC sectors is back to its pre-COVID levels.
Market prices
The average China domestic price of NdPr (VAT excluded) increased from US$36.0/kg in June 2020 to US$64.7/kg in
June 2021. Future market price trends continue to depend on end product demand (in particular in the automotive
industry).
Lynas has developed an excellent reputation as a reliable supplier of quality products. Lynas has focused on
developing strong customer relationships with strategic customers, primarily outside China. Lynas is the leading
supplier of the NdPr family of products to the Japanese market. Demand from our key customers has consistently
increased over the past few years, with accelerated growth in the last 12 months.
Costs and production volumes
Costs by tonnage and value
FY21
FY20
FY19
FY18
FY21
% change
Ready for sale production volume total
(REOt)
Ready for sale production volume NdPr
(REOt)
15,761
5,461
14,562
4,656
19,737
5,898
17,753
5,444
8%
17%
Total production volumes have increased despite the ongoing challenges of the COVID-19 pandemic in Malaysia.
The EMCO (Enhanced Malaysian Control-Order) enforced by the Malaysian Government for the 3rd wave of
COVID-19 required staff on site to be limited to 40% of our total workforce. Despite this, and water supply disruptions
16
www.LynasRareEarths.comDirectors’ Report to the Gebeng industrial estate in the June quarter, the team successfully maintained production at just over 75% of
Lynas NEXT production capacity. This provided stable supply to our key customers.
Cash and cash flows
Net operating cash inflows
Net investing cash outflows
Net financing cash outflows
Net cash flows
Impact of foreign exchange
Cash and cash equivalents
Short term deposits
FY21
A$m
215.0
(138.3)
405.6
482.4
(3.3)
580.8
100.0
FY20
A$m
32.1
(21.8)
2.0
12.3
(0.3)
101.7
–
The equity raising completed in September 2020 resulted in net proceeds of $413.9m (approximately $425m less
equity raising costs). In addition, operating cash flows increased significantly from FY20. Net investing cash outflows
included the initial payments for property plant and equipment in relation to the Lynas 2025 Kalgoorlie poject as
well as $100.0m of cash transferred into short term deposits.
At 30 June 2021, in addition to the $580.8m in cash and cash equivalents, $100.0m was held in short term deposits.
Debt and capital
JARE loan
Convertible bonds
Total borrowings
Financial income
Financial expenses
FY21
A$m
171.1
–
171.1
2.9
(13.4)
FY20
A$m
181.2
18.8
200.0
2.7
(15.6)
On 3 August 2020, bondholders converted the remaining US$12.2m (A$16.4m) convertible bonds which resulted
in an additional 16.2m shares being 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 14% as a result of lower interest
expense based on lower $A equivalent principal balances for both the JARE facility and the convertible bonds
throughout the year.
17
Lynas Rare Earths Limited | 2021 Annual Report During the year ended 30 June 2021, the Company issued shares as shown below:
Shares on issue 30 June 2020
Issue of shares pursuant to conversion of convertible bonds
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to equity raise
Shares on issue 30 June 2021
Performance rights
At 30 June 2021, the Company had the following options and performance rights on issue:
Performance rights
Earnings / (loss) per share
For the year ended 30 June
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Dividends
Number
‘000
699,209
16,203
744
184,923
901,079
Number
‘000
4,678
FY21
Cents
per share
18.08
17.99
FY20
Cents
per share
(2.79)
(2.79)
There were no dividends declared or paid during the year ended 30 June 2021 (2020: nil) and no dividends have
been declared or paid since 30 June 2021.
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 it is crucial for Directors to be a part of this process, and has established an Audit and Risk
Management Committee and a Health, Safety and Environment Committee.
Lynas Rare Earths has a Risk Management Policy and a Risk Management Framework for oversight and manage-
ment of material business risks.
18
www.LynasRareEarths.comDirectors’ Report 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. Lynas has a Risk Management Policy and a Risk Management Framework for oversight and
management of material business risks.
We identify risks, then evaluate the inherent risk of an activity and the mitigation required. Risk assessments are
updated by operations and management and reported to the Board of Directors.
In FY2021, the Lynas Board commissioned an external risk assurance mapping exercise aligned to the Board’s risk
appetite to support decision making relating to resource and capital allocation.
Set out below are the principal risks and uncertainties that could have a material effect on Lynas’ future results, both
operationally and financially. 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 coun-
tries 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 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;
•
• delays of projects with large associated capital spend, deferral of discretionary capital spend and impact on
insolvency of counterparties (including customers);
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.
19
Lynas Rare Earths Limited | 2021 Annual Report 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 China 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
restricted supply, 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 supply chain issues highlighted by the COVID-19 pandemic.
The table below illustrates how China domestic prices of NdPr (excluding VAT) have moved over FY21:
September 2020
Quarter
December 2020
Quarter
March 2021
Quarter
June 2021
Quarter
US$/kg
40.8
48.7
68.2
69.9
Lynas’ approach to reducing pricing volatility for its customers includes:
• Promoting fixed pricing to some 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 only supplier of scale of separated
Rare Earths outside China;
• End users placing more importance on being able to trace the origin of rare earths from an ethical and
environmentally responsible 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. If this is at a rate faster than demand growth it could potentially lead to lower prices.
20
www.LynasRareEarths.comDirectors’ Report 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 Malaysia. 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:
30 June 2021
$
30 June 2020
$
30 June 2019
$
30 June 2018
$
30 June 2017
$
USD/AUD
MYR/AUD
0.7468
3.0806
0.6714
2.8233
0.7156
2.9521
0.7391
2.9837
0.7545
3.2331
In-China market prices for Rare Earths are denominated in the Chinese Renminbi. 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.
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, and the delivery and grades of ore and performance of processing facilities at 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
21
Lynas Rare Earths Limited | 2021 Annual Report reliance on any estimates made by Lynas. Lynas cannot be certain that its mineral resource and ore reserve esti-
mates 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.
Lynas reports its mineral resources and ore reserves in accordance with the Australian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”).
2.7
Processing operations
Lynas’ operations are subject to the operating risks associated with Rare Earth processing, including performance of
processing facilities, 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 environ-
ment, 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.
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.
22
www.LynasRareEarths.comDirectors’ Report 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 technolo-
gies, 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 Rare
Earth 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.
3.1
Regulatory, legal and environmental risks
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 perfor-
mance 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 tene-
ments 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.
23
Lynas Rare Earths Limited | 2021 Annual Report 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 licences 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.
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 current 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. As per the announcement on 23 August 2021, this timeline has been
extended to March 2022.
• 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 unable to, comply with relevant licence conditions including the key condi-
tions 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 penal-
ties, 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.
24
www.LynasRareEarths.comDirectors’ Report 3.6
Climate change risks
In 2020, Lynas committed to continue to progress our disclosure against the recommendations of the Taskforce on
Climate-Related Financial Disclosure (TCFD). We will report against the TCFD framework in the 2021 ESG Report to
be released in October 2021.
In FY21 a review of Greenhouse Gas (GHG) emissions target frameworks was undertaken and Lynas expects to
confirm its commitment to the Science-Based Targets initiative and release a Greenhouse Gas Policy in FY2022.
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’ current reliance on fossil fuels for mining and processing activities.
To mitigate this risk, and meet customer demand for sustainable production, Lynas is committed to transitioning to
a hybrid energy solution for our Mt Weld mine and concentration plant, including renewable energy.
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 its stakeholders including share-
holders, regulatory authorities, communities, customers and suppliers. Failure to maintain its reputation with some
or all stakeholders may have a negative effect on the future performance of Lynas.
3.9
Legal action
As announced on 29 July 2021, the judicial review application lodged in Malaysia challenging the processes followed
during the August 2019 renewal of the Lynas Malaysia operating licence was dismissed with a costs order made in
favour of Lynas. As announced on 23 August 2021, a notice of appeal has been lodged challenging the dismissal of
the judicial review application.
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.
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 affect the tax liabilities of Lynas.
25
Lynas Rare Earths Limited | 2021 Annual Report 4.
4.1
Financial risks
Debt facilities and covenants
Lynas has financing arrangements in place which are subject to acceleration and enforcement rights in the event
of a default. To date, the Japan Australia Rare Earths B.V. (JARE) loan facility has been secured over all the assets of
Lynas, other than Malaysia and Malawi assets.
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 2021. The principal
amount will be due for repayment in fixed loan repayments between 31 December 2021 and 30 June 2030.
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.
5.1
General risks
General economic conditions
Lynas’ operating performance and financial performance is influenced by a variety of general economic and busi-
ness 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
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.
5.3
Force majeure events
Events may occur within or outside Lynas’ key markets that could affect 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.
26
www.LynasRareEarths.comDirectors’ Report BASIS OF REPORT
The report is based on the guidelines in The Group 100 Incorporated publication Guide to the Review of Operations
and Financial Condition.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is bound by the requirements and guidelines of the relevant environmental protection authorities
for the management and rehabilitation of mining tenements owned or previously owned by the Group. Mining
tenements are being maintained and rehabilitated following these guidelines. 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 2021.
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.LynasRareEarths.com.
SHARES ISSUED UPON EXERCISE OF PERFORMANCE RIGHTS
During the financial year 743,643 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) a wilful breach of duty; or
(b)
a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the
Corporations Act 2001.
The insurance contract prohibits disclosure of the premiums payable under the contract. The premiums are
not included as part of the Directors’ remuneration in Section H of the Remuneration Report or 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.
27
Lynas Rare Earths Limited | 2021 Annual Report NON-AUDIT SERVICES
During the year Ernst & Young, the Group’s auditor, has performed certain other services in addition to the audit
and review of the Financial Statements.
Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined
in Note 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:
• 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 2021
From 1 July 2020 to 30 September 2020, the structure of the Board committees was as follows:
Audit & Risk
G. Murdoch(c)
P. Etienne
J. Humphrey
Health, Safety
& Environment
P. Etienne(c)
K. Conlon
M. Harding
Nomination,
Remuneration & Community
K. Conlon(c)
M. Harding
J. Humphrey
Between 1 October 2020 and 24 February 2021, the structure of the Board committees has been as follows:
Audit & Risk
G. Murdoch(c)
P. Etienne
J. Humphrey
Health, Safety
& Environment
P. Etienne(c)
K. Conlon
V. Guthrie
Nomination,
Remuneration & Community
J. Humphrey(c)
K. Conlon
G. Murdoch
From 24 February 2021 to 30 June 2021, the structure of the Board committees has been as follows:
Health, Safety
& Environment
P. Etienne(c)
K. Conlon
V. Guthrie
Nomination,
Remuneration & Community
J. Humphrey(c)
K. Conlon
G. Murdoch
V. Guthrie
Audit & Risk
G. Murdoch(c)
P. Etienne
J. Humphrey
(c) Chair of Committee
28
www.LynasRareEarths.comDirectors’ Report 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 Board and Board committee meetings
attended by each Director was as follows:
Directors’
Meetings
Audit & Risk
Health, Safety &
Environment
Nomination,
Remuneration &
Community
Number of meetings held:
Number of meetings attended:
M. Harding(1)
A. Lacaze
K. Conlon
P. Etienne
J. Humphrey
G. Murdoch
V. Guthrie(2)
(1) Resigned effective 30 September 2020
(2) Appointed effective 1 October 2020
14
7
14
14
14
14
14
6
4
–
–
–
4
4
4
–
2
–
–
2
2
–
–
2
5
3
–
5
–
5
2
2
AUDITOR’S INDEPENDENCE DECLARATION
We have obtained an independence declaration from our auditors, Ernst & Young, which follows the Directors’
Declaration.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in 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 23 August 2021, the Malaysian regulator, the Atomic Energy Licensing Board (AELB), extended the deadline
for satisfaction of the licence condition related to the commencement of construction of the Permanent Disposal
Facility (PDF) for WLP residue to 2 March 2022. This recognises the constraints presented by current COVID-19
conditions. Lynas continues to engage productively with the relevant government and regulatory authorities to
progress the approvals for the PDF.
As announced on 29 July 2021, on 28 July 2021 the High Court of Malaya at Kuala Lumpur dismissed the judicial
review proceedings commenced by the anti-Lynas activists seeking review of the processes followed by the
Government of Malaysia in reaching the August 2019 decision to renew Lynas Malaysia’s fourth operating licence.
Lynas has received a notice of appeal by the anti-Lynas activists. Lynas intends to defend the appeal. The Lynas
Malaysia plant currently operates under the fifth operating licence granted in February 2020.
As announced on 22 July 2021, Lynas was awarded a $14.8m grant as part of the Australian governments’ Modern
Manufacturing Initiative. The grant will enable Lynas to commercialise an industry-first Rare Earth carbonate
refining process that has been developed by our inhouse research and development team.
With the exception of the above, there have been no other events subsequent to 30 June 2021 that would require
accrual or disclosure in this financial report.
29
Lynas Rare Earths Limited | 2021 Annual Report Sustainability Statement
Financial year ended 30 June 2021
Operating, at all times, in accordance with best practice sustainability principles is a core value for Lynas and
its people. We set high standards for ourselves. We seek at all times to have a positive effect on our people, our
customers, our suppliers, our communities and the environment.
The products we sell are traceable from our mine in Western Australia. Our customers can receive product assur-
ance 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 for 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 Environmental, Social and Governance Report (ESG Report) for FY2021 will be sent to shareholders at the
same time as our Annual Report 2021 is sent to shareholders. In addition, a copy of the Lynas ESG Report for FY2021
will be available on the Group’s website, www.LynasRareEarths.com.
30
www.LynasRareEarths.comDirectors’ Report Remuneration Report – Audited
Financial year ended 30 June 2021
Dear Shareholder,
I am pleased to present our Remuneration Report for the financial year ended 30 June 2021 (FY2021).
Lynas has achieved excellent performance for its shareholders in FY2021. Despite the many challenges presented by
COVID-19, production has been maintained to meet the strong demand for Lynas’ NdPr products. This has required
a high level of commitment from the Lynas team, in particular in Malaysia. The performance of the Lynas team is
reflected in the FY2021 STI Awards.
We believe our incentive structures are well aligned with shareholder outcomes. For FY2022, the performance
conditions of the STI and LTI Plans are focused on financial and non-financial measures that are consistent with
Lynas’ strategic goals.
We hope the report will assist your understanding of our remuneration objectives and policies.
Yours sincerely,
John Humphrey
Chair
Nomination, Remuneration and Community Committee
31
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
This report sets out Lynas’ remuneration framework and outcomes for Key Management Personnel for the financial
year ended 30 June 2021. This report has been prepared and audited in accordance with the requirements of the
Corporations Act 2001 and its regulations.
A. LIST OF KMPS
The KMP during the financial year ended 30 June 2021 were as follows:
KMP
Position
Location
Term as KMP
Executive Director
A. Lacaze
CEO and Managing Director
Australia
Full Financial Year
Non-Executive Directors
K. Conlon
Chairman, Non-Executive Director
Australia
M. Harding
P. Etienne
V. Guthrie
J. Humphrey
G. Murdoch
Executives
A. Arnold
Chairman, Non-Executive Director
Non-Executive Director,
Chair of the HSE Committee
Non-Executive Director
Non-Executive Director, Chair of the
Nomination, Remuneration &
Community Committee
Non-Executive Director, Chair of the
Audit & Risk Committee
General Counsel and Company Secretary
G. Sturzenegger
CFO
S. Leonard
K. Leung
P. Le Roux
M. Ahmad
General Counsel and Company Secretary
Vice President – Upstream
Vice President – Downstream
Vice President – Malaysia
Full Financial Year (Chairman
from 30 September 2020)
Retired 30 September 2020
Full Financial Year
Commenced 1 October 2020
Full Financial Year
Australia
Australia
Australia
Australia
Australia
Full Financial Year
Australia
Malaysia
Australia
Australia
Malaysia
Malaysia
Retired 16 April 2021
Full Financial Year
Commenced 27 January 2021
Full Financial Year
Full Financial Year
Full Financial Year
B. OUR REMUNERATION GOVERNANCE
The Nomination, Remuneration and Community Committee is responsible for reviewing and making recom-
mendations to the Board on the remuneration arrangements for Directors and Executives. The Nomination,
Remuneration and Community 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 has 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).
32
www.LynasRareEarths.comDirectors’ Report
C. OUR REMUNERATION FRAMEWORK
Overview
Lynas’ remuneration objective is to maximise shareholder benefits by attracting, retaining and motivating a high
quality board of directors and executive management team. We remunerate our people fairly and consistently
with comparable employment market conditions. Lynas is the largest producer of separated Rare Earths outside of
China and our remuneration framework takes into account the global nature of the rare earths business and the
complexity of the critical minerals supply chain.
Our Executive remuneration is linked to Lynas’ financial and operational performance. ‘At risk’ components of
individual remuneration are based upon the achievement of organisational goals, both short and long term.
Executive remuneration consists of a fixed pay component and an ‘at risk’ or performance related component
(comprising both short term and long term incentives).
Component
Description
How does it link to performance and strategy?
Fixed
Remuneration
Fixed remuneration consists of
base salary, non-monetary benefits
and statutory superannuation
contributions.
Fixed remuneration is set at a level that enable Lynas
to attract and retain talented people, at a cost which
is acceptable to shareholders. It reflects the global
nature of the rare earths supply chain, the need to
attract experienced expatriate personnel to the Lynas
Malaysia plant in Gebeng near Kuantan in regional
Malaysia and the competition for resources personnel
in Western Australia.
Individual remuneration reflects the role, responsibili-
ties, and experience of the relevant executive.
Short Term
Incentive (STI)
The STI program is based on the
achievement of annual financial
and non-financial goals.
STI supports the delivery of annual performance
goals which are selected by the Board considering
the budget and Lynas’ strategic initiatives.
Further details of the STI Plan
Structure are set out below.
The STI Plan ensures annual remuneration is
competitive to facilitate retention of key personnel.
Half of STI is paid as deferred equity (performance
rights).
Long Term
Incentive (LTI)
The LTI program provides a reward
for longer term performance.
LTI focuses on long term performance goals which
create sustained value for shareholders.
Further details of the LTI Plan
Structure are set out below.
LTI is paid as deferred equity (performance rights)
which aligns the interests of Executives and
shareholders in ensuring the sustainable, long term
performance of Lynas.
Our remuneration mix aims to achieve a balance between fixed and performance related components. This
contributes to a high performance culture amongst the Executive team.
The tables below illustrate the remuneration mix range for Executives based on the target and maximum LTI and
STI opportunities for FY2021. The actual remuneration mix for Executives will vary depending on the level of perfor-
mance relative to the LTI and STI performance objectives.
CEO
Other Executive KMP
42.5 – 44.4%
50.6 – 53.3%
22.2 – 25.5%
26.6 – 30.3%
31.9 – 33.3%
18.9 – 20.0%
Fixed
STI
LTI
33
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
Short Term Incentive Structure
The structure of the STI Plan is as follows:
Description
Under the STI Plan, Executive KMP can earn an annual incentive based on performance during
the year.
STI Plan performance conditions align with Lynas’ annual operational and financial goals. The
performance conditions are chosen to incentivise performance that is consistent with desired
business outcomes and which contributes to longer term growth in shareholder value.
The STI Plan is at risk remuneration. Actual awards depend on performance against the
performance conditions.
Participants
Executive KMP and any employee of Lynas who is invited by the Board are eligible to participate.
In addition to the Executive KMP, during FY2021, three members of the Lynas Leadership Team
and ten senior employees who are critical to the delivery of Lynas’ short-term operational and
financial goals were invited to participate in the STI Plan.
STI Opportunity
Target Performance: Up to 50% of fixed remuneration for Executive KMP (including CEO) and
Lynas Leadership Team. Up to 20% of fixed remuneration for other employees.
Maximum Opportunity: Up to 60% of fixed remuneration for over-achievement compared to
targets for Executive KMP and Lynas Leadership Team. Up to 24% of fixed remuneration for
other employees.
Half of the STI opportunity is available in cash and half is available in performance rights.
The number of STI performance rights to be granted is calculated by taking the volume
weighted average price of Lynas’ shares for the 5 trading days up to and including the date of
Board approval (the PR Value). The relevant STI grant is divided by the PR Value and rounded to
the nearest whole number.
Performance
Conditions
The Board selects both financial and non-financial performance conditions based on the Lynas
budget and strategic plan.
For FY2021, three bands of performance were set for each performance condition:
• Threshold: 90% of budget – 80% award
• Target: 100% of budget – 100% award
• Maximum: 110% of budget – 120% award
If performance falls between the Threshold and Maximum levels then awards are pro-rated.
No STI Plan awards will be made if there is a fatality during the performance period.
Financial performance conditions are selected by the Board using the approved budget.
The performance goals are selected based on the budget and considering market conditions.
The financial conditions are assessed annually.
For the FY2021 STI Plan the three financial performance conditions selected were: (1) EBITDA
Target; (2) NdPr Production; and (3) NdPr Operating Costs. Each financial condition has a 20%
weighting.
The Board selects non-financial conditions for the STI Plan based on the team/individual
responsibilities in the context of the Lynas strategic plan. The non-financial conditions are
assessed annually.
For the FY2021 STI Plan the four areas selected for assessment were: (1) Safety/COVID
Management; (2) ESG; (3) Regulatory; and (4) Growth Projects.
Financial
Performance
Conditions
(60% weighting)
Non-financial
Performance
Conditions
(40% weighting)
34
www.LynasRareEarths.comDirectors’ Report Why were these
performance
conditions
selected?
A combination of financial and non-financial performance conditions aligns the STI Plan with
growth and sustainable returns for shareholders.
The financial conditions selected by the Board in FY2021 are measures which directly affect
Lynas’ profitability and financial performance. Due to the anticipated increases in capital
expenditure for the Lynas Kalgoorlie Project during FY2021, EBITDA rather than EBIT was
selected by the Board as the financial growth measure.
The non-financial performance conditions reflect areas that are critical for the success of
Lynas and complement the measures included in the other quantitative STI and LTI targets.
Non-financial performance conditions are designed to address areas of particular importance
to shareholders. The non-financial performance conditions for the FY2021 were selected by the
Board for the following reasons:
•
•
•
•
Safety/COVID-19 management: Critical to the continued safe operations of the Mt Weld
and Lynas Malaysia operations.
ESG: Important to Lynas’ stakeholders and the future sustainable growth of the business.
Regulatory: Ensures the careful maintenance of Lynas’ key operating licences in the
jurisdictions in which it operates.
Growth Projects: Supports performance against opportunities for longer term increases
in the value of the business through delivery of annual project milestones.
Performance conditions for the STI Plan are reviewed annually by the Board to ensure they
remain aligned with business strategy and shareholder interests.
How and when
is performance
assessed?
Performance is assessed annually.
For the financial conditions, the Board calculates the results after the end of the performance
period.
For the non-financial conditions, the Board assesses the performance of the Executives based
on the recommendations from the Nomination, Remuneration and Community Committee.
Eligibility for
dividends
Holders of performance rights are not eligible for dividends until the performance rights been
converted into shares.
Cessation of
employment
STI performance rights are subject to a 12 month restriction on exercise, with continued
employment at Lynas for a period of 12 months after grant as a condition of exercise.
Clawback
If the Board becomes aware of any material misstatement in its financial statements due to: (i)
non-compliance with a financial reporting requirement; (ii) the participant’s misconduct; or (iii)
the misconduct of any other Lynas personnel under the supervision of the relevant participant,
the Board has authority under the clawback policy to require repayment of vested awards,
forfeit unvested performance rights or withhold the payment or allocation of all or any part of an
award.
Change of Control
Event
There is no automatic vesting of performance rights on a change in control. On the occurrence
of a change in control event, the Board will determine (in its discretion) how the performance
rights may be affected.
Disposal restriction
Performance rights granted under the STI Plan are not transferable.
35
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
Long Term Incentive Structure
This section summarises the LTI grants made in FY2021.
Description
Under the LTI Plan, annual grants of performance rights are made to eligible participants to
align remuneration with the creation of sustainable shareholder value over the long term.
Participants
Executive KMP and any employee of Lynas who is invited by the Board are eligible to participate.
LTI Opportunity
CEO – Up to 75% of fixed remuneration
Other KMP and Lynas Leadership Team – Up to 37.5% of fixed remuneration
Other invited employees – Up to 25% of fixed remuneration
The number of LTI performance rights to be granted is calculated by taking the volume
weighted average price of Lynas’ shares for the 5 trading days up to and including the date of
Board approval (the PR Value). The relevant LTI grant is divided by the PR Value and rounded to
the nearest whole number.
Vesting Date
9 September 2023
Performance
Conditions
For the CEO, other Executive KMP and Lynas Leadership Team, two vesting conditions apply to
the LTI grants made during FY2021:
•
•
Relative Total Shareholder Return (TSR)
Lynas 2025 Project Target
During FY2021, three members of the Lynas Leadership Team were invited to participated in the
LTI Plan.
In addition, eight senior employees who are critical to the delivery of Lynas 2025 strategic
outcomes were invited to participate in the LTI Plan. For these employees, the sole vesting
condition is the Lynas 2025 Project Target.
Relative TSR –
50% weighting
Relative TSR is assessed over a three year period from 1 July 2020 to 30 June 2023, relative to
other companies in the ASX200 index (Peer Group Companies). For any performance rights to
vest under the TSR vesting condition, Lynas’ performance must be equal to or greater than the
51% percentile of Peer Group Companies.
The percentage of the performance rights that may vest is determined as follows:
Lynas TSR Ranking across the TSR Period
Proportion of Performance Rights that vest
Below 51st percentile
At the 51st percentile
Between the 51st percentile
and the 76th percentile
0%
50%
Between 50% and 100% as determined
on a straight line basis (rounded to the
nearest 5%)
At or above 76th percentile
100%
Lynas 2025
Project Target –
50% weighting
The Lynas 2025 Project Target vesting condition is that the Lynas Kalgoorlie plant is commis-
sioned and operational by July 2023.
36
www.LynasRareEarths.comDirectors’ Report Why were these
performance
conditions
selected?
The vesting conditions for the LTI Plan were selected due to their alignment with Lynas’ long
term strategic goals.
The Relative TSR Vesting condition was selected because it ensures alignment between
competitive shareholder return and reward for the executive. The comparison with peer group
companies in the ASX200 index provides an objective, external market-based performance
measure relative to Lynas’ peer group companies. Relative TSR is widely understood and
accepted by key stakeholders.
The Lynas 2025 Project Target was selected as it is the next significant step in the growth of the
Lynas business for the benefit of all shareholders. The completion of the Lynas Kalgoorlie plant is
a key component of the Lynas 2025 Project.
Due to the difficulties setting realistic financial growth targets over a three year performance
period caused by the global economic uncertainty associated with COVID-19, the Board elected
not to include an EBIT/EBITDA financial growth measure in the FY2021 LTI Plan. An EBITDA
measure was included in the STI program to ensure a focus on earnings within the ‘at risk’
components of remuneration.
How and when
is performance
assessed?
Relative TSR will be calculated by Lynas and tested by an external adviser as soon as practicable
at the end of the performance period.
The Lynas 2025 Project Target will be assessed by the Board at the vesting date of 9 September
2023.
Eligibility for
dividends
Holders of performance rights are not eligible for dividends until the performance rights been
converted into shares.
Cessation of
employment
If a participant ceases employment prior to the vesting date of the performance rights, then
unless otherwise determined by the Board (in its discretion), the unvested performance rights
will continue to be subject to the rules of the LTI Plan until the vesting date, at which time the
performance rights will vest in accordance with the rules of the LTI Plan.
The Board may exercise its discretion to cancel the performance rights, except where the
participant has been retrenched where cancellation will occur within 36 months of the Board’s
decision.
Clawback
If the Board becomes aware of any material misstatement in its financial statements due to: (i)
non-compliance with a financial reporting requirement; (ii) the participant’s misconduct; or (iii)
the misconduct of any other Lynas personnel under the supervision of the relevant participant,
the Board has authority under the clawback policy to require repayment of vested awards,
forfeit unvested performance rights or withhold the payment or allocation of all or any part of an
award.
Change of Control
Event
There is no automatic vesting of performance rights on a change in control. On the occurrence
of a change in control event, the Board will determine (in its discretion) how the performance
rights may be affected.
Disposal restriction
Performance rights granted under the LTI Plan are not transferable.
37
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
D. REMUNERATION OUTCOMES IN FY2021
FY21 STI Grant Performance Outcomes
An award at 104.5% will be made under the FY2021 STI Plan. The table below sets out the outcomes of the FY2021
STI Plan.
Performance Outcome – Financial Performance Conditions
Performance
condition
Lynas has recorded excellent financial performance in FY2021. All financial performance targets
in the FY2021 STI Plan have been met or exceeded.
Lynas has repaid all Australian Jobkeeper payments related to FY2021 and therefore these
amounts are not included in the calculation of FY2021 STI Performance Outcomes.
Outcome –
target achieved
Performance
Condition
Target
Actual
Weighting
Threshold
90%
Target
100%
Maximum
110%
EBITDA
Forecast
target*
Greater
than 110%
of target
NdPr
Production
Targets
NdPr
Operating
Costs
5,478
REOt
5,461
REOt
Forecast
Target*
103% of
forecast
20%
20%
20%
Weighted
Outcome
(%)
24.0%
19.9%
20.6%
*
The NdPr Operating Cost Target is commercial in confidence. The NdPr Operating Cost and EBITDA
Targets are set by the Board based on the annual budget. In respect of EBITDA, actual performance
significantly exceeded 110% of the target so maximum performance was achieved. In respect of the NdPr
Operation Cost, actual operating costs were better thanTarget and equalled an award at 103% of Target.
Performance Outcome – Non-Financial Performance Conditions
Performance
Conditions
The Board assessed the performance of the Executives in four key areas: (1) Safety/COVID
Management; (2) ESG; (3) Regulatory; and (4) Growth Projects.
38
www.LynasRareEarths.comDirectors’ Report Outcome –
target achieved
The Board has assessed an award at Target (weighted outcome of 40%) against the non-finan-
cial performance conditions.
Performance
Condition
Target
Outcome
Safety/COVID-19
Management
Safety performance was measured
on a company-wide basis. Trends
in safety statistics were considered,
including LTIF, TRIFR, high potential
incidents. COVID-19 performance
was measured by the success in
achieving COVID protocols at both
sites, together with the speed and
efficacy of responses to COVID issues.
ESG
ESG performance is measured by
reference to improvements in ESG
performance and reporting during
the performance period.
Regulatory
Regulatory performance is assessed
based on regulatory compliance in
Malaysia and Australia.
Growth Projects Performance in respect of growth
projects is measured based on
achievements against project
milestones.
During FY2021, safe workplace
conditions were achieved and
all COVID-19 cases were handled
effectively despite serious second
and third waves of infection in
Malaysia. Continuous operations of
the Malaysian plant were achieved,
despite the Malaysian nationwide
lockdown and Enhanced Movement
Control Orders.
Significant progress was achieved
in ESG reporting, as recognised by
key investor groups. Further devel-
opment of ESG initiatives during the
year which will be reflected in Lynas’
ESG Report.
Significant effort was demonstrated
by the Executive in progressing the
PDF Project in Malaysia. There were
no regulatory non-compliances
during the period in respect of Lynas’
key operating licences.
Progress against milestones for the
Lynas Kalgoorlie and Lynas USA
Projects was assessed by the Board
and judged to be satisfactory.
2018 LTI Grant Performance Outcomes
The LTI performance rights issued on 28 September 2018 were granted subject to the following vesting conditions:
• EBIT Target – 50% weighting
• Relative TSR – 50% weighting
The table below sets the performance outcomes.
Performance Outcome – EBIT Target (50% weighting)
Performance
condition
Satisfaction of the EBIT Target vesting condition required Lynas’ average annual EBIT growth
at the end of the period from 1 July 2018 to 30 June 2021 to be at least 7% per annum using the
EBIT figure from 1 July 2017 to 30 June 2018 as a base.
39
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
Outcome –
Not achieved
As set out in the table below, due to the EBIT result in FY20, the EBIT Target vesting
condition has not been achieved.
FY2018 (Base)
FY2019
FY2020
FY2021
Cumulative Adjusted EBIT over the three years
Base EBIT over the three years
Average % growth over the 3 years compared to the base period figure
Outcome (EBIT)
$81 million
$56.4 million
($6.2 million)
$169.5 million
$219.7 million
$243.0 million
-3.2%
Performance Outcome – Relative TSR (50% weighting)
Vesting
Condition
Satisfaction of the Relative TSR vesting condition required Lynas’ TSR to be at least at the 51st
percentile of ASX 200 companies calculated over the three year period from 31 August 2018 to
31 August 2021.
The Relative TSR performance rights will vest in accordance with the following scale:
Lynas TSR Ranking
Proportion of Performance Rights that vest
Below 51st percentile
At the 51st percentile
Between the 51st percentile and the
76th percentile
0%
50%
Between 50% and 100% as determined on
a straight line basis (rounded up or down
to the nearest 5%)
At or above 76th percentile
100%
Outcome – still to
be assessed
Performance against the Relative TSR vesting condition will be assessed in September 2021,
after the three year performance period ends on 31 August 2021.
40
www.LynasRareEarths.comDirectors’ Report E. LINKING REMUNERATION AND GROUP PERFORMANCE
Sections C and D above set out how the LTI and STI Plan Performance Conditions are linked to Lynas’ performance.
The table below provides further information about the financial performance of Lynas over the past five years.
30 June
2017
30 June
2018
30 June
2019
30 June
2020
30 June
2021
Revenue ($‘000)
Profit / (loss) before tax ($‘000)
Profit / (loss) after tax ($‘000)
Shareholder capital ($’000)
Annual average share price*
Closing share price at financial year end*
Basic earnings / (loss) per share (cents)**
Diluted earnings / (loss) per share (cents)**
256,976
(24,263)
(534)
374,105
53,404
53,119
363,541
83,274
83,079
305,111
(19,156)
(19,395)
489,024
157,487
157,083
1,094,403
1,395,417
1,398,264
1,424,847
1,859,598
$0.77
$1.05
(0.15)
(0.15)
$2.04
$2.34
8.84
8.29
$1.99
$2.57
12.50
11.90
$2.20
$1.94
(2.79)
(2.79)
$4.15
$5.71
18.08
17.99
*
**
The share prices for the year ended 30 June 2017 have been restated to reflect the 10 to 1 share consolidation which was completed on
4 December 2017.
The basic and diluted earnings per share for the year ended 30 June 2017 comparative periods have been restated to reflect the 10 to 1
which was completed on 4 December 2017.
Separately, changes in the share based remuneration from one year to the next reflect the effect 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.
F. SERVICE AGREEMENTS
The CEO and Managing Director and Executives each have a services contract/ employment contracts which are on
reasonable commercial conditions. The key provisions of the agreement are:
CEO and Managing Director
Other Executives
Type
Services contract
Employment contract
Duration
Ongoing
Notice by
Executive
3 months
Ongoing
3 months
Notice by Lynas
6 months
Termination without notice for serious misconduct
3 – 6 months
Termination without notice for serious misconduct
Treatment of
incentives on
termination:
On resignation, then unless otherwise determined
by the Board (in its discretion), the unvested
performance rights will continue to be subject
to the rules of the LTI Plan until the vesting date,
at which time the performance rights will vest in
accordance with the rules of the LTI Plan.
On resignation, then unless otherwise determined
by the Board (in its discretion), the unvested
performance rights will continue to be subject
to the rules of the LTI Plan until the vesting date,
at which time the performance rights will vest in
accordance with the rules of the LTI Plan.
The Board may exercise its discretion to cancel the
performance rights, except where the participant
has been retrenched where cancellation will occur
within 36 months of the Board’s decision.
The Board may exercise its discretion to cancel the
performance rights, except where the participant
has been retrenched where cancellation will occur
within 36 months of the Board’s decision.
41
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
G. NON-EXECUTIVE DIRECTOR REMUNERATION
Remuneration policy
Consistent with Lynas’ approach, remuneration of Non-Executive Directors is set at a level that enables Lynas
to attract and retain talented and motivated people, at a cost which is acceptable to shareholders. We focus on
ensuring that the Board of Directors reflects the broad mix of skills, experience and diversity necessary to oversee
Lynas in its position as a significant participant in the critical global market for Rare Earth products.
Non-Executive Director fees are set considering: (1) the fees paid by companies of a similar size and/or industry;
(2) the time and commitment required; (3) the risk and responsibilities; and (4) the required commercial and
industry experience.
To ensure independence, Non-Executive Director fees are fixed, and Non-Executive Directors do not receive any
performance-related or ‘at-risk’ compensation.
Remuneration Structure
Non-Executive Director fees consist of Director fees and Committee fees. Each Non-Executive Director (other than
the Chairman of the Board) received a fee for each committee of which they are members (capped at two commit-
tees). The Chairman of the Board does not receive committee fees.
The current aggregate fee pool for the Non-Executive Directors of $1,250,000 was approved at the AGM held on
20 November 2012.
The Non-Executive Director fees payable for the period from 1 July 2020 to 30 June 2021 were:
Board fees per annum
Chairman
Non-Executive Director
Committee Chair (Audit & Risk)
Committee Chair (Nomination Remuneration & Community/ Health, Safety & Environment)
Committee member (Audit & Risk)
Committee member (Nomination Remuneration & Community/ Health, Safety & Environment)
Amount
(exclusive of
superannuation)
$250,000
$120,000
$30,000
$25,000
$15,000
$12,500
Board fees were reviewed effective from 1 January 2020 for the first time since FY2011. Committee fees remain
unchanged from FY2019.
The remuneration for each of the Non-Executive Directors for the financial years ended 30 June 2020 and 30 June
2021 is set out in Section H below.
42
www.LynasRareEarths.comDirectors’ Report H. DETAILS OF REMUNERATION
Short term
benefits
Post-employment
benefits
Long term
benefits
l
y
r
a
a
s
h
s
a
C
s
e
e
f
d
n
a
l
e
e
y
o
p
m
e
m
r
e
t
t
r
o
h
s
r
e
h
t
O
s
t
fi
e
n
e
b
y
r
a
t
e
n
o
m
-
n
o
N
s
t
fi
e
n
e
b
n
o
i
t
a
n
m
r
e
T
i
s
t
n
e
m
y
a
p
d
n
a
n
o
i
t
a
u
n
n
a
n
o
i
s
n
e
p
r
e
h
t
o
s
t
n
e
m
y
a
p
-
r
e
p
u
S
e
c
i
v
r
e
s
g
n
o
L
e
v
a
e
l
d
e
s
a
b
-
e
r
a
h
S
s
t
n
e
m
y
a
p
)
1
(
)
t
e
n
(
e
c
n
a
m
r
o
f
r
e
P
f
o
%
d
e
t
a
e
r
l
l
a
t
o
T
l
a
t
o
T
Name
FY21
Executive Director
A. Lacaze
1,251,897
133,540
Non-Executive Directors
K. Conlon(2)
M. Harding(3)
P. Etienne
J. Humphrey
G. Murdoch
V. Guthrie(4)
Executives
A. Arnold(5)
S. Leonard(6)
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
234,375
65,000
175,200
156,875
159,375
106,157
588,365
146,709
533,105
532,331
466,740
336,593
–
–
–
–
–
–
–
–
–
–
–
–
–
51,058
–
58,043
55,975
56,980
84,069
–
–
–
–
119,736
–
Total
4,752,722
439,664
119,736
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
A. Arnold
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
M. Afzan Afza(7)
147,500
255,000
157,600
137,500
140,000
510,466
578,352
505,792
401,707
365,445
302,514
–
–
–
–
–
100,207
114,315
108,737
114,265
133,528
97,912
–
–
–
–
–
–
–
41,981
68,318
–
–
Total
4,743,486
930,155
185,808
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,694
64,383
830,776
42% 2,302,290
20,011
5,424
–
14,903
15,141
3,147
10,892
6,058
–
21,694
79,238
42,076
–
–
–
–
–
–
–
–
–
–
–
–
–
2,506
–
29,945
–
–
(30,026)
39,297
220,628
206,982
250,016
174,743
0%
0%
0%
0%
0%
0%
(3%)
20%
34%
31%
32%
38%
254,386
70,424
175,200
171,778
174,516
109,304
620,289
194,570
811,776
846,927
972,710
637,481
240,278
96,834
1,692,416
29%
7,341,650
21,003
28,135
419,885
33% 2,047,333
14,013
21,003
6,650
13,063
13,300
–
–
21,003
81,078
49,899
72,079
–
–
–
–
–
–
–
–
–
–
–
–
13,403
–
–
–
100,607
110,051
107,779
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
(1) Represents the impact of amortising the accounting value
(4) Appointed effective 1 October 2020
of Options and Performance Rights over their vesting period
including the impact of forfeitures recognised during the period.
At times a negative value may be presented which results when
the forfeitures recognised in the period (which may relate also to
earlier periods) are greater than the accounting expense for the
current portion of the vesting period.
(2) Appointed to Chair effect 30 September 2020
(3) Resigned effective 30 September 2020
(5) Resigned effective 16 April 2021
(6) Appointed effective 27 January 2021
(7) Lynas reassessed its KMP as of 1 July 2020 and determined the
KMP to be limited to the directors and executives including
General Counsel and Company Secretary, CFO, Vice President
– Upstream, Vice President – Downstream and Vice President
– Malaysia. As a result, M. Afzan Afza was not included as a
member of the KMP in FY2021.
43
Lynas Rare Earths Limited | 2021 Annual Report
Remuneration Report – Audited continued
I.
KMP EQUITY HOLDINGS
(i) Shareholdings
The following table outlines the shares held directly, indirectly and beneficially by directors and KMP as at
30 June 2021.
Name
A. Lacaze
K. Conlon
P. Etienne
M. Harding
J. Humphrey
G. Murdoch
V. Guthrie
A. Arnold
S. Leonard
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
Balance
at beginning
of year
Purchased
during the
year
On exercise of
performance
rights
Sold during
the year
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
43,825
15,016
8,654
8,464
6,494
18,507
6,000
–
–
–
–
–
–
109,148
–
–
–
–
–
–
98,106
–
102,988
107,146
121,997
85,585
(1,800,000)
–
–
–
–
–
–
(602,432)
–
(487,689)
(433,369)
(933,138)
(789,202)
Other
–
–
–
(73,632)
–
–
–
(4,669)
–
–
–
–
–
Balance at
end of year
2,742,961
130,635
75,284
–
56,494
161,007
6,000
–
–
700,000
413,000
349,579
14,000
Total
9,052,701
106,960
624,970
(5,045,830)
(78,301)
4,648,960
Other movements in relation to KMP shareholdings relate to the person ceasing to be a member of the KMP
during the year.
(ii) Share Based Remuneration – Performance Rights
Performance Rights are issued with no consideration payable on exercise. As at year end the Group had on issue to
directors and KMP the following Performance Rights to acquire ordinary fully paid shares:
Series
Grant date
Number
Date vested
and exercisable
Expiry date
Exercise
price
30 November 2016
30 November 2016
28 November 2017
28 November 2017
28 August 2018
28 August 2018
27 November 2018
27 November 2018
26 August 2019
26 August 2019
26 August 2019
26 November 2019*
26 November 2019*
26 November 2019*
09 September 2020
532,373
465,117
127,567
154,044
141,811
118,176
176,920
147,433
111,559
147,629
133,870
136,435
136,435
163,722
91,995
30 August 2019
30 August 2019
28 August 2020
28 August 2020
28 August 2021
28 August 2021
28 August 2021
28 August 2021
26 August 2022
26 August 2022
26 August 2022
26 August 2022
26 August 2022
26 August 2022
09 September 2021
30 August 2021
30 August 2021
28 August 2022
28 August 2022
28 August 2023
28 August 2023
28 August 2023
28 August 2023
26 August 2024
26 August 2024
26 August 2024
26 August 2024
26 August 2024
26 August 2024
09 September 2023
09 September 2020
207,422
09 September 2023
09 September 2025
$ 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
AO
AP
AU
AV
AY
AZ
BB
BC
BE
BF
BG
BE*
BF*
BG*
BH
BI
44
Value per
performance
right at
grant date
$ 0.680
$ 0.500
$2.060
$1.620
$2.187
$1.431
$2.187
$1.463
$2.340
$2.340
$1.660
$2.290
$2.290
$1.630
$2.400
$1.790
www.LynasRareEarths.comDirectors’ Report Series
Grant date
Number
Date vested
and exercisable
Expiry date
Exercise
price
BJ
BH**
BI**
BJ**
Total
09 September 2020
26 November 2020*
26 November 2020*
26 November 2020*
207,422
55,695
208,856
208,856
09 September 2023
09 September 2021
09 September 2023
09 September 2023
09 September 2025
09 September 2023
09 September 2025
09 September 2025
$ 0.00
$ 0.00
$ 0.00
$ 0.00
3,673,337
Value per
performance
right at
grant date
$2.400
$3.560
$2.500
$3.560
*
**
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.
Performance rights relates to the CEO in series BH to BJ were approved by the Board on 9 September 2020, subject to approval at the
AGM. These performance rights were subsequently approved at the AGM on 26 November 2020.
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 2021:
PR’s issued to employees other than CEO
PR’s issued to CEO
Series BH
Series BI
Series BJ
Series BH
Series BI
Series BJ
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2023
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2025
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2025
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2023
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2025
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2025
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
9 September 2020
9 September 2020
9 September 2020
26 November 2020
26 November 2020
26 November 2020
Number of
performance
rights
Fair value
per instrument
at valuation
date
Exercise
price per
instrument
First exercise date
Last exercise
or expiry date
91,995
207,422
207,422
55,695
208,856
208,856
$2.40
$1.79
$2.40
$3.56
$2.58
$3.56
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
9 September 2021
9 September 2021
9 September 2023
9 September 2025
9 September 2023
9 September 2025
9 September 2021
9 September 2021
9 September 2023
9 September 2025
9 September 2023
9 September 2025
Total
980,246
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.
45
Lynas Rare Earths Limited | 2021 Annual Report Remuneration Report – Audited continued
The following tables outline the Performance Rights granted for the benefit of Directors and KMP during the 2020
and 2021 financial years and those Performance Rights which have vested at each respective year-end.
Balance at
beginning
of year
2,291,202
–
–
–
–
–
–
272,112
–
292,682
296,839
355,482
240,572
30 June 2021
A. Lacaze
K. Conlon
P. Etienne
M. Harding
J. Humphrey
G. Murdoch
V. Guthrie
A. Arnold
S Leonard
G. Sturzenegger
K. Leung
P. Le Roux
M. Ahmad
Granted
Grant date
Exercised
Forfeited Net change
Balance at
end of year
473,407
–
–
–
–
–
–
–
69,862
117,671
110,889
115,517
92,900
26 Nov 2020
–
–
–
–
–
–
–
9 Sept 2020
9 Sept 2020
9 Sept 2020
9 Sept 2020
9 Sept 2020
(109,148)
–
–
–
–
–
–
(98,106)
–
(102,988)
(107,146)
(121,997)
(85,585)
(142,010)
–
–
–
–
–
–
(174,006)
–
(28,071)
(31,117)
(31,632)
(23,955)
222,249
–
–
–
–
–
–
(272,112)
69,862
(13,388)
(27,374)
(38,112)
(16,640)
2,513,451
–
–
–
–
–
–
–
69,862
279,294
269,465
317,370
223,932
Total
3,748,889
980,246
(624,970)
(430,791)
(75,515)
3,673,374
30 June 2020
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
4,530,638
–
–
–
–
–
706,758
724,786
776,276
788,462
611,805
448,642
545,740
–
–
–
–
–
125,572
141,969
136,319
190,800
114,004
93,384
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)
(94,541)
–
–
–
–
–
(31,357)
(31,422)
(34,433)
(34,920)
(26,764)
(19,810)
(2,239,436)
–
–
–
–
–
(434,646)
(432,104)
(479,437)
(432,980)
(371,233)
(261,916)
2,291,202
–
–
–
–
–
272,112
292,682
296,839
355,482
240,572
186,726
Total
8,587,367
1,347,788
(5,726,293)
(273,247)
(4,651,752)
3,935,615
At 30 June 2021, 1,279,101 performance rights issued to A. Lacaze had vested and were exercisable (30 June 2019:
997,490), while no performance rights had vested but were not exercisable (30 June 2020: nil).
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,
Kathleen Conlon
Chairman, Sydney, 27 August 2021
46
www.LynasRareEarths.comDirectors’ Report Directors’ Declaration
The Directors declare that:
(a)
(b)
(c)
in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable;
in the Directors’ opinion, the attached financial report is in compliance with International Financial
Reporting Standards, as stated in 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 guaran-
tees 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,
Kathleen Conlon
Chairman
Sydney, 27 August 2021
47
Lynas Rare Earths Limited | 2021 Annual Report
Lynas Rare Earths Limited and Controlled Entities
Auditor’s Independence
Declaration
Lynas Rare Earths Limited and Controlled Entities
39
48
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39
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www.LynasRareEarths.com
Lynas Rare Earths Limited and Controlled Entities
Independent
Auditor’s Report
Lynas Rare Earths Limited and Controlled Entities
39
40
www.lynasrareearths.com
49
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Lynas Rare Earths Limited | 2021 Annual Report
Lynas Rare Earths Limited and Controlled Entities
Independent Auditor’s Report
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
40
www.lynasrareearths.com
41
39
50
41
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www.lynasrareearths.com
www.lynasrareearths.com
www.LynasRareEarths.com
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
42
39
42
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www.lynasrareearths.com
www.lynasrareearths.com
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Lynas Rare Earths Limited | 2021 Annual Report
Lynas Rare Earths Limited and Controlled Entities
Independent Auditor’s Report
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
43
39
43
52
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www.lynasrareearths.com
www.lynasrareearths.com
www.LynasRareEarths.com
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
44
39
43
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www.lynasrareearths.com
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Lynas Rare Earths Limited | 2021 Annual Report
Lynas Rare Earths Limited and Controlled Entities
Independent Auditor’s Report
Lynas Rare Earths Limited and Controlled Entities
Lynas Rare Earths Limited and Controlled Entities
45
39
43
54
www.lynasrareearths.com
www.lynasrareearths.com
www.lynasrareearths.com
www.LynasRareEarths.com
Financial Statements
as at 30 June 2021
Consolidated Statement of Profit or Loss and Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
About this Report
A
Earnings for the year
A.1 Segment revenue and expenses
A.2 Financial income and expenses
A.3 Earnings / (loss) per share
A.4
Income tax expense
B Production and Growth Assets
B.1
Deferred development expenditure
and property, plant and equipment
B.2
Impairment of non-current assets
C
Cash, Borrowings and Capital
C.1 Cash and cash equivalents
C.2 Short term deposits
C.3
Interest bearing liabilities
C.4 Financing facilities
C.5 Contributed equity
C.6 Reserves
60
62
62
65
66
67
71
71
75
77
77
78
78
80
81
82
D Other Assets and Liabilities
D.1 Trade and other 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 entity information
E.6 Entities under a deed of cross guarantee
E.7 Employee costs and share based
payments
E.8 Other accounting policies
E.9 Subsequent events
56
57
58
59
60
85
85
85
87
88
88
91
91
91
93
93
94
94
96
100
100
55
Lynas Rare Earths Limited | 2021 Annual Report
Financial Statements
Consolidated Statement of Profit or Loss
and Comprehensive Income
For the year ended 30 June 2021
Revenue
Cost of sales
Gross profit
General and administration expenses
Net foreign exchange gain
Other income / (expenses)
Profit / (loss) from operating activities
Financial income
Financial expenses
Net financial expenses
Profit / (loss) before income tax
Income tax expense
Profit / (loss) for the year
Note
A.1
A.1
A.1
A.2
A.2
2021
A$ ‘000
489,024
(302,242)
2020
A$ ‘000
305,111
(257,340)
186,782
47,771
(27,154)
8,717
1,155
(57,984)
4,093
(125)
169,500
(6,245)
2,927
(14,940)
(12,013)
2,662
(15,573)
(12,911)
157,487
(19,156)
A.4
(404)
(239)
157,083
(19,395)
Other comprehensive loss for the year net of income tax
that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
(24,750)
(12,864)
Total other comprehensive loss for the year, net of income tax
(24,750)
(12,864)
Total comprehensive income / (loss) for the year attributable
to equity holders of the Company
132,333
(32,259)
Earnings / (loss) per share
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
Note
A.3
A.3
cents per
share
cents per
share
18.08
17.99
(2.79)
(2.79)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
notes to the financial statements.
56
www.LynasRareEarths.com Consolidated Statement
of Financial Position
as at 30 June 2021
Assets
Cash and cash equivalents
Short term deposits
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
Current tax liability
Employee benefits
Provisions
Lease liabilities
Total current liabilities
Borrowings
Employee benefits
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Reserves
Note
2021
A$ ‘000
2020
A$ ‘000
C.1
D.1
D.2
D.2
B.1
B.1
D.3
D.4
C.2
D.5
D.5
E.2
C.2
D.5
D.5
E.2
C.4
C.5
580,827
100,000
23,890
–
6,442
62,888
101,731
–
5,380
46
3,773
68,132
774,047
179,062
4,434
607,297
28,347
405
63,060
9,468
653,090
28,818
540
65,147
703,543
757,063
1,477,590
936,125
1,773
40,828
20,073
84
3,331
40,874
778
2,007
28,778
34,148
–
2,797
26,142
1,226
107,741
95,098
151,049
696
133,392
1,292
164,851
599
155,462
1,734
286,429
322,646
394,170
1,083,420
417,744
518,381
1,859,598
(715,594)
(60,584)
1,424,847
(872,677)
(33,789)
Total equity attributable to the equity holders of the Company
1,083,420
518,381
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
57
Lynas Rare Earths Limited | 2021 Annual Report Financial Statements
Consolidated Statement
of Changes in Equity
For the year ended 30 June 2021
s
e
s
s
o
l
l
d
e
t
a
u
m
u
c
c
A
0
0
0
‘
$
A
e
v
r
e
s
e
r
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
e
r
o
F
i
0
0
0
‘
$
A
l
e
e
y
o
p
m
e
d
e
l
t
t
e
s
y
t
i
u
q
E
e
v
r
e
s
e
r
s
t
fi
e
n
e
b
0
0
0
‘
$
A
l
a
t
i
p
a
c
e
r
a
h
S
0
0
0
‘
$
A
e
t
o
N
e
v
r
e
s
e
r
t
n
a
r
r
a
W
0
0
0
‘
$
A
e
v
r
e
s
e
r
r
e
h
t
O
0
0
0
‘
$
A
0
0
0
‘
$
A
l
a
t
o
T
Balance at 1 July 2020
1,424,847
(872,677)
(111,771)
51,708
21,765
4,509
518,381
Other comprehensive
loss for the year
Total profit for the year
Total comprehensive
profit for the year
–
–
–
–
(24,750)
157,083
–
157,083
(24,750)
Issue of shares, net of
issues costs
Conversion of convertible
bonds
Employee remuneration
settled through share-
based payments
413,867
C.4
20,884
E.7
–
–
–
–
–
–
–
–
–
–
–
–
2,464
–
–
–
–
–
–
Balance at 30 June 2021
1,859,598
(715,594)
(136,521)
54,172
21,765
–
–
–
–
(24,750)
157,083
132,333
413,867
(4,509)
16,375
–
–
2,464
1,083,420
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
–
–
–
–
(12,864)
(19,395)
–
(19,395)
(12,864)
Conversion of convertible
bonds
Exercise of warrants
Employee remuneration
settled through share-
based payments
C.4
C.4
E.7
2,668
23,915
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,329)
1,545
–
–
–
–
(12,864)
(19,395)
(32,259)
(556)
–
–
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
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
58
www.LynasRareEarths.com
Consolidated Statement
of Cash Flows
For the year ended 30 June 2021
Note
2021
A$ ‘000
2020
A$ ‘000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Payments for discharge of rehabilitation obligation
D.5
Royalties paid
Income taxes paid
465,422
(242,348)
–
(7,735)
(274)
321,815
(266,814)
(14,916)
(7,748)
(266)
Net cash from operating activities
C.1
215,065
32,071
Cash flows from investing activities
Payments for property, plant and equipment and development expenditure
(40,444)
(12,089)
Security bonds paid
Security bonds refunded
Interest received
Deposit as collateral for AELB
Investment in term deposit
(83)
19
2,505
(255)
(100,000)
(39)
6
2,886
(12,530)
–
Net cash used in investing activities
(138,258)
(21,766)
Cash flows from financing activities
Interest and other financing costs paid
Proceeds from the issue of share capital
Payments related to the issue of share capital
Repayment of lease liabilities
Net cash provided from 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
(6,431)
425,324
(11,458)
(1,844)
405,591
482,398
101,731
(3,302)
(7,030)
11,628
–
(2,602)
1,996
12,301
89,710
(280)
Closing cash and cash equivalents
C.1
580,827
101,731
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
59
Lynas Rare Earths Limited | 2021 Annual Report Financial Statements
Notes to the Financial Statements
For the year ended 30 June 2021
ABOUT THIS REPORT
Lynas Rare Earths Limited (the “Company”) is a for-profit company domiciled and incorporated in Australia.
The financial report of Lynas Rare Earths Limited as at and for the year ended 30 June 2021 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 27 August 2021.
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 2021. Information for the comparative year is for the 12 month period ended 30 June 2020.
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 elim-
inated 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.
60
www.LynasRareEarths.com Change in company name
In accordance with a resolution passed by shareholders during the AGM held on 26 November 2020, during the half
year, the name of the company was changed from Lynas Corporation Limited to Lynas Rare Earths Limited.
Currency and foreign exchange
The financial report of the Company and the Group is presented in Australian Dollars (“AUD”), which is both the
Company’s and the Group’s presentation currency.
Items included in the financial report of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”).
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency of the respective entities at the exchange rate at that date. Non-monetary
assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the
functional currency of the respective entities at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are measured at fair value are translated to the functional currency of the
respective entities at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on translation are recognised in the statement of comprehensive income as a
component of the profit or loss.
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 2021, the entities that have a different functional currency to the Group’s presentation currency (AUD)
are Lynas Africa Limited, Lynas USA LLC (USD functional currency) and Lynas Malaysia Sdn Bhd (MYR functional
currency).
Change in functional currency
The functional currency of Lynas Rare Earths Ltd (Parent entity) has been USD. Following the equity raise and extin-
guishment of the convertible bonds, management exercised its judgement that the functional currency changed.
This judgement was influenced by the Parent entity primarily holding investments in its operating subsidiaries and
raising its funding (debt and equity) in Australian dollars (“AUD”).
The change in functional currency to AUD is accounted for prospectively from 31 August 2020. All items are trans-
lated into the new functional currency using the exchange rate at the date of the change. The resultant translated
amounts for non-monetary items are thereafter treated as their historical cost.
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.
61
Lynas Rare Earths Limited | 2021 Annual Report BASIS OF PREPARATION continued
Certain subsidiaries within the Group are exposed to foreign exchange risk on purchases denominated in curren-
cies 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.
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 Upstream, the VP Downstream, the General Counsel & Company Secretary, the VP
Malaysia, the VP People & Culture and the VP Strategy and Investor Relations. 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, deprecia-
tion 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.
66% (FY20:76%) of the Group’s non-current assets are located in Malaysia and the remaining 34% (FY20: 24%) 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.
62
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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 FY21 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. Lynas currently pays
royalties to the Western Australian Department of Minerals and Petroleum for the export of Rare Earth concentrate
to Malaysia.
Financial Income and Expenses
Financial income comprises interest income and gains on derivative financial instruments in respect of investing
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.
63
Lynas Rare Earths Limited | 2021 Annual Report A.1 Segment revenue and expenses continued
For the year ended 30 June 2021
For the year ended 30 June 2020
Rare Earth
operations
Corporate/
Unallocated
Total
Continuing
Operations
Rare Earth
operations
Corporate/
Unallocated
Total
Continuing
Operations
A$’000
A$’000
A$’000
A$’000
A$’000
A$’000
506,005
(16,981)
489,024
(239,419)
(62,823)
186,782
–
–
–
–
–
–
506,005
314,088
(16,981)
(8,977)
489,024
305,111
(239,419)
(62,823)
(205,802)
(51,538)
186,782
47,771
–
–
–
–
–
–
314,088
(8,977)
305,111
(205,802)
(51,538)
47,771
(2,383)
(3,297)
(5,680)
(17,048)
(4,665)
(21,713)
(502)
(2,459)
(2,961)
(13,250)
(1,230)
(14,480)
(9,412)
(12,297)
(9,101)
(14,847)
(18,513)
(27,154)
(13,524)
(43,822)
(8,267)
(14,162)
(21,791)
(57,984)
–
–
–
–
1,155
–
8,717
–
1,155
–
8,717
–
–
–
–
(1,020)
961
(66)
4,093
–
174,485
(4,985)
169,500
2,929
(9,174)
2,927
(14,940)
157,487
(404)
157,083
961
(66)
4,093
(1,020)
(6,245)
2,662
(15,573)
(19,156)
(239)
(19,395)
174,485
63,325
(4,985)
2,459
169,500
65,784
237,810
(2,526)
235,284
2,929
64,787
67,716
(9,174)
1,230
(6,245)
66,017
(7,944)
59,722
–
–
–
2,464
(1,155)
–
2,464
(1,155)
–
–
–
1,020
1,545
(961)
–
1,545
(961)
1,020
Business segment reporting
Revenue from contracts with customers
Other revenue:
Revenue adjustments
Total revenue
Cost of sales (excl depreciation)
Cost of sales (depreciation)
Gross profit
Employee and production costs net of
costs recovered through production
Depreciation expenses net of cost
recovered through production
Other general and administration
expenses(1)
Total general and admin expenses
Other income(2)
Other expenses
Net foreign exchange gain
Asset write-offs
Profit / (loss) before interest and tax
(“EBIT”)
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
237,810
(1,217)
236,593
68,736
(7,360)
61,376
Total assets
Total liabilities
868,004
(215,350)
609,586
(178,820)
1,477,590
(394,170)
870,680
(257,957)
65,445
(159,787)
936,125
(417,744)
(1) Other general and administration expenses include statutory, consulting, insurance, IT, marketing and general office costs.
(2) Other income in FY20 relates to Jobkeeper support to Mt Weld for the period April 2020 – June 2020, as well as other support measures
in Malaysia. Other income in FY21 relates to grants received for submissions for engineering work performed in relation to a Heavy Rare
Earths facility in the U.S. A small additional amount related to the extinguishment of lease liabilities.
64
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued A.2 Financial income and expenses
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
Interest capitalised to qualifying assets
Unwinding of discount on restoration and rehabilitation provision
Interest expense on lease liabilities
Discount unwinding on AELB deposit
Financing transaction costs and fees
Unrealised foreign exchange (loss) / gain on intercompany balance
For the year ended 30 June
2021
A$ ‘000
2,927
2,927
(5,400)
(34)
(134)
(6,146)
995
751
(4,340)
(96)
386
(610)
(312)
2020
A$ ‘000
2,662
2,662
(6,031)
(405)
(1,501)
(6,449)
413
–
(3,189)
(232)
270
(604)
2,155
Total financial expenses
Net financial expenses
(14,940)
(15,573)
(12,013)
(12,911)
65
Lynas Rare Earths Limited | 2021 Annual Report A.3 Earnings / (loss) per share
Recognition and measurement
Basic earnings / (loss) 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 earnings / (loss) per share adjusts the amount used in the determination of the basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of additional shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares. Potential ordinary shares are treated as dilutive
when, and only when, their conversion to ordinary shares would decrease earnings per share from continuing
operations.
The earnings and weighted average number of ordinary shares used in the calculations of basic and diluted
earnings / (loss) per share are as follows:
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
Net earnings / (loss) attributed to ordinary shareholders
158,096
(19,395)
Earnings / (loss) used in calculating basic earnings per share
158,096
(19,395)
Net earnings impact of assumed conversions of diluted EPS
–
–
Earnings / (loss) used in calculating diluted earnings per share
158,096
(19,395)
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)
‘000
‘000
901,079
699,209
868,750
694,085
873,197
714,749
cents per
share
cents per
share
18.08
17.99
(2.79)
(2.79)
The following dilutive shares are included in the share base for the calculation of dilutive earnings per share:
Performance rights
Unlisted convertible bonds
(Conversion price: $1.00 at a set exchange rate of A$1.00 = US$0.75)
Total
66
As at 30 June
2021
‘000
4,335
2020
‘000
4,462
–
16,203
4,335
20,665
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued A.4
Income taxes
A.4.1
Income tax expense
Current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax in prior years
Total financial expenses
Deferred tax
Deferred tax expense recognised in the year
Total income tax expense relating to the continuing operations
A.4.2 Reconciliation of income tax to tax expense
Profit / (loss) before tax for continuing operations
Income tax expense / (benefit) calculated at 30% (2020: 30%)
Add / (deduct):
Effect of expenses that are not deductible and income that is not assessable
in determining taxable profit
Effect of foreign exchange gains and losses
Deferred tax relating to the origination of and reversal of temporary differences
Effect of difference in tax rate in subsidiaries and branches
Effect of current year losses not recognised
Tax effect of prior period losses previously unrecognised, recognised in the
current year
Other adjustments
Total current year income tax expense
For the year ended 30 June
2021
A$ ‘000
2020
A$ ‘000
404
–
404
–
404
239
–
239
–
239
For the year ended 30 June
2021
A$ ‘000
157,487
47,246
(1,409)
–
–
(111)
647
(45,930)
(39)
404
2020
A$ ‘000
(19,156)
(5,747)
904
(1,200)
999
(66)
2,140
–
3,209
239
67
Lynas Rare Earths Limited | 2021 Annual Report A.4
Income taxes continued
A.4.3 Movements in deferred tax balances
Balance
at 30 June
2020
A$ ‘000
Recognised
in profit
or loss
A$ ‘000
Relating
to equity
A$ ‘000
Recognised
in OCI
A$ ‘000
Balance
at 30 June
2021
A$ ‘000
Temporary differences
Inventory
Development expenditure
Property, plant and equipment
Borrowings
Trade payables
Business related costs
Lease liabilities
Provisions
(839)
(18,846)
2,244
13,483
109
224
727
14,415
11,517
(55)
495
1,020
(3,030)
17
(77)
(311)
431
–
–
–
–
–
3,437
–
–
(1,510)
3,437
(Unrecognised) / recognised deferred tax assets
(11,517)
1,510
(3,437)
Net deferred tax asset / (liability) recognised
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(894)
(18,351)
3,264
10,453
126
3,584
416
14,846
13,444
(13,444)
–
Balance
at 30 June
2019
A$ ‘000
Recognised
in profit
or loss
A$ ‘000
Relating
to equity
A$ ‘000
Recognised
in OCI
A$ ‘000
Balance
at 30 June
2020
A$ ‘000
Temporary differences
Inventory
Development expenditure
Property, plant and equipment
Borrowings
Trade payables
Business related costs
Lease liabilities
Provisions
(872)
(14,176)
2,313
11,476
118
–
–
12,488
11,347
33
(4,670)
(69)
2,007
(9)
224
727
1,927
170
(Unrecognised) / recognised deferred tax assets
(11,347)
(170)
Net deferred tax asset / (liability) recognised
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(839)
(18,846)
2,244
13,483
109
224
727
14,415
11,517
(11,517)
–
68
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued A.4.4 Unrecognised deferred tax assets
Deductible temporary differences and unused tax losses for which no
deferred tax assets have been recognised are attributable to the following:
Gross revenue losses
Australia
Malaysia
United States
Malawi
Gross capital losses
Australia
Capital allowances
Malaysia
Deductible temporary differences (tax effected)
Recognition and measurement
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
99,083
160,370
1,919
458
136,049
172,422
–
221
2,145
2,145
64,881
13,444
269,250
11,517
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 substan-
tially 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-consol-
idated group is Lynas Rare Earths 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).
69
Lynas Rare Earths Limited | 2021 Annual Report A.4
Income taxes continued
A.4.4 Unrecognised deferred tax assets continued
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, however Lynas
believes it is highly probable it will be renewed. Whilst the formal renewal is pending, Lynas has offset
taxable profits in Malaysia against its carry forward losses as follows:
• 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.
• 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. At 30 June 2021,
losses in Malaysia consist of AUD65m (MYR 202m) in capital allowances and AUD160m (MYR 498m)
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.
• Despite utilisation of $37m of tax losses in Australia in FY21, there remains ongoing uncertainty in relation
to the probability and quantum of Australian taxable profits for the Group. Key uncertainty relates to:
• The ongoing impact of COVID-19 in the market and locations that Lynas operates and sells to.
• The investment and construction of the Lynas Kalgoorlie project, and its impact on sales out of
Australia during commissioning in FY23 and full operations from FY24 onward.
• The volatility of the Rare Earth prices.
Based on these factors, the Group has not recognised a deferred tax asset in excess of the deferred tax liability
at 30 June 2021. The potential deferred tax asset related to revenue losses and deductible temporary differ-
ence not bought to account is $97.9m.
70
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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.
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. During FY21, a capitalisation rate of 6.7% was
applied.
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 compo-
nent 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 capi-
talised as a component of inventory in the statement of financial position (which is subsequently released to the
profit or loss through the cost of goods sold on the sale of the underlying product) using a method that reflects the
pattern in which the economic benefits embodied within the asset are consumed. Generally, this is on a straight-
line basis over the estimated useful life of each part or component of an item of property, plant and equipment.
The estimated useful lives for the material classes of property, plant and equipment are as follows:
Leasehold land
30 to 99 years
Plant and equipment
2 to 30 years
Leasehold improvements
3 to 30 years
Rehabilitation assets
20 to 30 years
Buildings
Fixtures and fittings
5 to 30 years
2 to 15 years
Motor vehicles
8 years
Depreciation methods, useful lives and residual values are reassessed on an annual basis.
Gains and losses on the disposal of items of property, plant and equipment are determined by comparing the
proceeds (if any) at the time of disposal with the net carrying amount of the asset.
71
Lynas Rare Earths Limited | 2021 Annual Report B.1 Property, plant and equipment and mine development continued
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 commis-
sioning 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.
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 as described
above for capitalised development 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 compre-
hensive 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 alloca-
tion basis to apportion the stripping costs between inventory and any stripping assets for each component.
72
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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-pro-
duction 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
Property, Plant and Equipment
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Development
Expenditure
t
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m
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’
As at 30 June 2021
Cost
28,069 881,322
7,140
3,291
50,886 174,194
19,825 1,164,727 24,889
18,358
43,247
Accumulated
impairment losses
Accumulated
depreciation
– (182,776)
(377)
–
(236)
–
(7,189) (190,578)
(3,436)
–
(3,436)
(3,702) (332,107)
(6,038)
(1,657)
–
(18,235)
(5,113) (366,852)
(6,413)
(5,051)
(11,464)
Carrying amount
24,367 366,439
725
1,634 50,650 155,959
7,523 607,297 15,040
13,307 28,347
Opening cost
29,705 920,798
7,267
4,873
8,123
186,125
20,977 1,177,868 25,050
18,358 43,408
Opening accumulated
impairment and
depreciation
Opening
carrying amount
(3,617) (487,034)
(6,059)
(2,603)
(258)
(12,825)
(12,382) (524,778)
(9,716)
(4,874)
(14,590)
26,088 433,764
1,208
2,270
7,865 173,300
8,595 653,090 15,334 13,484 28,818
Additions
Disposals
–
–
2,422
–
87
–
–
1,235
42,279
– 46,023
172
Depreciation expense
(289)
(51,846)
(538)
(1,825)
(5,962)
(609)
(61,069)
–
–
–
–
–
–
–
–
–
–
–
–
Amortisation expense
Change in rehabilitation
obligations
Capitalised interest
Foreign currency
translation
Carrying amount
at 30 June 2021
(1,432)
(17,901)
(32)
(46)
(245)
(7,690)
(463)
(27,809)
24,367 366,439
725
1,634 50,650 155,959
7,523 607,297 15,040
13,307 28,347
–
–
–
(3,689)
–
–
–
–
751
–
–
–
–
–
–
(3,689)
751
–
–
–
172
–
–
–
–
–
(466)
(177)
(643)
–
–
–
–
–
–
–
–
–
Restrictions on the title of property plant and equipment and development assets are outlined in Note C.3.
73
Lynas Rare Earths Limited | 2021 Annual Report
B.1 Property, plant and equipment and mine development continued
Property, Plant and Equipment
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’
Development
Expenditure
t
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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 cost
30,245 903,749
7,460
Opening accumulated
impairment and
depreciation
Opening carrying
amount
(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
Additions
–
5,678
134
119
7,252
Additions arising from
implementation of
AASB 16
Disposals
–
–
–
–
–
–
4,766
–
Depreciation expense
(395)
(58,580)
(542)
(2,621)
–
–
–
79
13,262
202
280
482
–
–
4,766
–
–
–
–
–
–
–
(3,875)
(744)
(66,757)
(310)
(4,107)
(4,417)
–
–
–
–
(4,884)
–
–
–
–
83,295
–
–
–
–
–
–
4,819
–
(778)
428
(4,313)
–
48
–
–
2
–
–
–
–
6
–
17
–
–
–
–
83,295
–
–
–
(778)
(178)
–
–
–
–
–
–
–
–
(178)
–
(355)
(2,808)
(120)
(7,160)
–
Amortisation expense
Transfers of assets under
construction
Change in rehabilitation
obligations
Asset write offs
Foreign currency
translation
Carrying amount
at 30 June 2020
26,088 433,764
1,208
2,270
7,865 173,300
8,595 653,090 15,334 13,484 28,818
Restrictions on the title of property plant and equipment and development assets are outlined in Note C.3.
74
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued
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 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 the time value of money and the risks specific to the asset
or CGU. In assessing the fair value less cost to sell, the Company uses a variety of methods and assumptions that
are based on market conditions and risks existing at each reporting date. The methods used to determine fair value
include a discounted future cash 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 FY21 (FY20: nil). There was no reversal of prior period impair-
ment loss recognised in FY21 (FY20: 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, produc-
tion 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 addi-
tional 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.
Mineral resources and ore reserves are reported in accordance with the Australian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”).
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
75
Lynas Rare Earths Limited | 2021 Annual Report B.2
Impairment of non-current assets continued
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.
76
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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
Cash at bank and on hand
Total cash and cash equivalents
Recognition and measurement
As at 30 June
2021
A$ ‘000
580,827
580,827
2020
A$ ‘000
101,731
101,731
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$327.7m in currencies other than Australian dollars, primarily
US$163.8m (30 June 2020: US$30.7m) and MYR 340.6m (30 June 2020: MYR 111.3m).
Reconciliation of the (loss) / profit for the year with the net cash from operating activities
Profit / (loss) for the year
Adjustments for:
Depreciation and amortisation
Employee remuneration settled through share-based payments
Net financial expenses
(Gain) / loss on disposal of property, plant and equipment and
other non-cash transactions
Income tax expense
Foreign exchange gain included in profit /(loss) for the year
Change in trade and other receivables
Change in inventories
Change in operating trade and other payables
Change in provisions (excluding additional rehabilitation obligation)
Change in provisions (rehabilitation obligation)
Net cash from operating activities
For the year ended 30 June
2021
A$ ‘000
2020
A$ ‘000
157,083
(19,395)
65,784
2,464
12,013
(1,155)
404
(8,717)
(22,522)
1,525
7,810
376
–
215,065
66,018
1,545
12,911
1,151
239
(4,093)
5,678
(10,456)
(7,112)
501
(14,916)
32,071
77
Lynas Rare Earths Limited | 2021 Annual Report C.2 Short term deposits
Short term deposits
Total short term deposits
Recognition and measurement
As at 30 June
2021
A$ ‘000
100,000
100,000
2020
A$ ‘000
–
–
Short term deposits include deposits with a maturity between three and twelve months. These are held in fixed rate
deposit facilities.
C.3
Interest Bearing Liabilities
Current borrowings
JARE loan facility(1)
Convertible bonds
Total current borrowings
Non-current borrowings
JARE loan facility
Total non-current borrowings
Principal value of convertible bond facility
Unamortised equity component
Total convertible bond facility carrying amount
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
20,073
–
16,371
17,777
20,073
34,148
151,049
164,851
151,049
164,851
–
–
–
18,228
(451)
17,777
(1) A payment of interest in respect of the period commencing on 1 January 2016 and ending on 31 December 2016 was deferred until
October 2021 and is now classified as a current liability. Furthermore, in line with the repayment schedule below, payments of US$2m is
due on 31 Dec 2021 and 30 June 2022. These have also been classified as current liabilities at 30 June 2021.
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.
78
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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% (FY20: 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 2021
As at 30 June 2020
Carrying
amount
A$ ‘000
Fair
value*
A$ ‘000
Carrying
amount
A$ ‘000
171,122
171,122
–
–
181,222
17,777
Fair
value*
A$ ‘000
181,222
17,777
171,122
171,122
198,999
198,999
*
It is estimated that the carrying value of the JARE loan facility and convertible bond facility approximate fair value.
Terms and debt maturity schedule
As at 30 June 2021
As at 30 June 2020
Currency
Nominal
interest
rate
%
Date of
maturity
Face
value
US$ ‘000
Carrying
amount
A$ ‘000
Face
value
US$ ‘000
Carrying
amount
A$ ‘000
JARE loan facility
Convertible bond facility
USD
USD
2.5% June 2030
156,505(1)
171,122
156,505(1)
1.875% Sept 2020
–
–
12,476
181,222
17,777
156,505
171,122
168,981
198,999
(1) The face value of the JARE loan facility includes US$145.0m in principal and US$11.5m in interest deferred until October 2021.
79
Lynas Rare Earths Limited | 2021 Annual Report
C.3
Interest Bearing Liabilities continued
Reconciliation of liabilities arising from financing activities
30 June
2020
Cash
flows
Opening
Balance
A$ ‘000
Proceeds
/ (Repay-
ments)
A$ ‘000
16,371
164,851
17,777
2,960
–
–
–
(1,844)
JARE loan facility
(Current)
JARE loan facility
(Non-Current)
Convertible bond
facility (Current)
Lease liability
Non-cash Movements
Effective
Interest
A$ ‘000
Foreign
Exchange
A$ ‘000
Adjust-
ment(1)
A$ ‘000
Other(2)
A$ ‘000
Reclass
A$ ‘000
30 June
2021
Closing
Balance
A$ ‘000
–
(103)
–
6,145
(15,147)
(995)
–
–
3,805
20,073
(3,805)
151,049
134
96
(1,193)
(377)
–
–
(16,718)
1,235
–
–
–
–
2,070
173,192
Total
201,959
(1,844)
6,375
(16,820)
(995)
(15,483)
30 June
2019
Cash
flows
Opening
Balance
A$ ‘000
Proceeds
/ (Repay-
ments)
A$ ‘000
Non-cash Movements
Effective
Interest
A$ ‘000
Foreign
Exchange
A$ ‘000
Adjust-
ment(1)
A$ ‘000
Other(2)
A$ ‘000
Reclass
A$ ‘000
30 June
2020
Closing
Balance
A$ ‘000
JARE loan facility
(Current)
JARE loan facility
(Non-Current)
Convertible bond
facility (Current)
Convertible
bond facility
(Non-Current)
Lease liability
29,308
142,562
–
18,062
597
–
–
–
–
(2,602)
–
–
–
6,449
3,316
(413)
–
–
1,501
80
329
–
–
–
–
–
–
–
(12,937)
16,371
12,937
164,851
17,777
17,777
(2,115)
4,885
(17,777)
–
–
–
2,960
201,959
Total
190,529
(2,602)
8,030
3,645
(413)
2,770
(1) Adjustments to the carrying values of the JARE loan during the year ended 30 June 2020 and 2021 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
Other non-cash movements in the lease liability during the year ended 30 June 2020 and 2021 related to finance leases recognised in
line with AASB 16.
C.4 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 2021
(30 June 2020: 2.5% p.a.). Conditions linking the interest rate to the NdPr sales price in the previous facility have been
removed.
80
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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 31 October
2021 (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.
2. 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.
3. 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.
4. Lynas will continue to prioritize the needs of Japanese customers for the supply of Heavy Rare Earths products
produced, 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 and
Malaysia assets.
Convertible bonds
As at 30 June 2021, the Company had no outstanding convertible bonds on issue. During the year, US$12.2m
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 A$1.00 = US$0.750. The number of
ordinary shares into which the US$12.2m of bonds were converted during the year was 16.2m shares.
C.5 Contributed Equity
As at 30 June
2021
2020
Number
of shares
‘000
Value of
shares
A$ ‘000
Number
of shares
‘000
Value of
shares
A$ ‘000
Balance at the beginning of the year
699,209
1,424,847
667,802
1,398,264
Issue of shares pursuant to conversion of convertible bonds
16,203
20,884
Issue of shares pursuant to exercised performance rights
Issue of shares pursuant to exercised warrants
Issue of shares pursuant to equity raising
Costs related to issue of shares
744
–
–
–
184,923
425,324
–
(11,458)
2,000
6,151
23,256
–
–
2,668
–
23,915
–
–
Closing balance
901,079
1,859,597
699,209
1,424,847
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.
81
Lynas Rare Earths Limited | 2021 Annual Report C.5 Contributed Equity continued
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 instru-
ments 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.
C.6 Reserves
Equity settled employee benefits
Foreign currency translation
Warrant reserve
Equity component of convertible bond
As at 30 June
2021
A$ ‘000
54,172
(136,521)
21,765
–
2020
A$ ‘000
51,708
(111,771)
21,765
4,509
Balance at 30 June
(60,584)
(33,789)
Nature and Purpose
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 to
nil in line with the final 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 financial 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.
82
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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. The Group’s exposure to interest rate risk is shown below:
30 June
2021
Interest Rate Risk
0.5%
-0.5%
30 June
2020
Interest Rate Risk
0.5%
-0.5%
Exposure
Impact on Profit
and Equity
Exposure
Impact on Profit
and Equity
A$ ‘000
A$ ‘000
A$ ‘000
A$ ‘000
A$ ‘000
A$ ‘000
Floating rate instruments
Cash and cash equivalents
580,827
2,904
(2,904)
Other non-current assets
Convertible bond facility
2,932
–
15
–
(15)
–
101,731
2,992
(17,777)
Total
583,759
2,919
(2,919)
86,946
509
15
–
524
(509)
(15)
–
(524)
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.
Carrying
Amount
A$ ‘000
Contracted
cash flows
A$ ‘000
Up to and
including
6 months
A$ ‘000
Between
6 months
and up to
1 year
A$ ‘000
Between
1 year and
up to
5 years
A$ ‘000
Over
5 years
A$ ‘000
30 June 2021
JARE loan facility
Lease liabilities
171,122
2,070
237,178
2,863
20,427
497
5,026
467
63,662
599
148,063
1,300
Total
173,192
240,041
20,924
5,493
64,261
149,363
30 June 2020
Convertible bond facility
JARE loan facility
Lease liabilities
17,777
181,222
2,960
18,143
264,181
3,340
18,143
19,390
1,203
–
2,614
1,162
–
70,733
974
–
171,444
–
Total
201,959
285,664
38,736
3,776
71,707
171,444
83
Lynas Rare Earths Limited | 2021 Annual Report C.6 Reserves continued
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:
Foreign Exchange Risk
-10%
10%
Carrying
Amount
Profit
A$ ‘000
Equity
A$ ‘000
Profit
A$ ‘000
Equity
A$ ‘000
As at 30 June 2021
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 2020
US$ 188,280
A$
1,674
MYR 494,723
US$
(1,971)
18,828
167
–
–
Net exposure of US$ financial assets
US$
46,181
4,618
Net exposure of A$ financial assets
Net asset exposure – MYR currency
Net asset exposure – US$ currency
A$
815
MYR 241,314
US$ (57,869)
82
–
–
–
–
(18,828)
(167)
(14,407)
262
–
–
(7,486)
8,432
–
–
(4,618)
(82)
–
–
–
–
17,608
(262)
–
–
9,128
(8,432)
84
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued
D. OTHER ASSETS AND LIABILITIES
This section includes information about the other assets and liabilities position at the end of the period.
D.1
Trade and Other Receivables
Trade receivables
GST / VAT receivables
Other receivables
Total current trade and other receivables
As at 30 June
2021
A$ ‘000
21,729
853
1,308
23,890
2020
A$ ‘000
1,876
1,606
1,898
5,380
The Group’s exposure to credit risk is primarily in its trade receivables. As at 30 June 2021 $1.8m (2020: $0.1m) of trade
receivables were past due but not impaired. Of this amount, $1.8m has been received subsequent to 30 June 2021.
The Group is in regular contact with the remaining debtors and expects the remaining amounts will be collected
in full.
At 30 June 2021, the Group had sales under contract amounting to A$66.6m (US$50.0m) subject to price
adjustments. At the date of this report A$21.8m (US$16.3m) of this amount has been finalised with minimal price
adjustments.
Recognition and measurement
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for instruments with maturities greater than 12 months
from the reporting date, which are classified as non-current assets. The Group’s receivables comprise trade and
other receivables (including related party receivables) which are stated at their cost less impairment losses.
Fair Value and foreign exchange risk
Given the short-term nature of trade receivables, the carrying amount is a reasonable approximation of fair value.
All trade receivables are held in currencies other than the functional currency of the entity receipting them and
therefore exposed to foreign exchange risk.
D.2
Inventories
Raw materials and consumables
Work in progress
Finished goods
Total inventories
Current inventories
Non-current inventories
Total inventories
As at 30 June
2021
A$ ‘000
25,123
37,662
4,537
2020
A$ ‘000
25,796
37,181
14,623
67,322
77,600
62,888
4,434
67,322
68,132
9,468
77,600
During the year ended 30 June 2021 inventories of $302.2m (2020: $257.3m) were recognised as an expense. All of
which were included in ‘cost of sales’.
85
Lynas Rare Earths Limited | 2021 Annual Report
D.2
Inventories continued
Depreciation recognised in inventories
The Group recognised depreciation on its property, plant and equipment and amortisation on its deferred devel-
opment expenditure and intangible assets for the years ended 30 June 2021 and 2020 respectively in the following
categories:
Recognised
in General and
Administration
Expense
Recognised
in Inventory
Total
2021
A$ ‘000
2020
A$ ‘000
2021
A$ ‘000
2020
A$ ‘000
2021
A$ ‘000
2020
A$ ‘000
Property, plant and equipment
Deferred development expenditure
Intangibles
Total
2,210
643
108
13,924
58,892
556
–
–
–
52,833
3,861
–
61,102
643
108
66,757
4,417
–
2,961
14,480
58,892
56,694
61,853
71,174
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 $62.8m in the year ended 30 June 2021 (2020: $51.5m).
Write downs of inventory
During the year ended 30 June 2021, there were no write-downs to net realisable value for some products. (2020:
$0.9m)
Recognition and measurement
Raw materials, work in progress and finished goods
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based either on the
first in first out (“FIFO”) or weighted average principles and includes expenditure incurred in acquiring the invento-
ries and bringing them to their existing location and condition. In the case of manufactured or refined inventories
and work in progress, cost includes an appropriate share of production overheads based on normal operating
capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. Inventory expected to be sold or consumed within the next 12 months is
classified as current, with amounts expected to be consumed or sold after this time being classified as non-current.
Engineering and maintenance materials
Engineering and maintenance materials (representing either critical or long order components but excluding
rotable spares) are measured at the lower of cost and net realisable value. The cost of these inventories is based on
the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them
to their existing location and condition. Net realisable value is determined with reference to the cost of replacement
of such items in the ordinary course of business compared to the current market prices.
86
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued D.3 Other non-current assets
Security deposits – banking facilities and other, Malaysia
Security deposits – banking facilities and other, Australia
Security deposits – banking facilities and other, USA
Security deposits – AELB, Malaysia
Security deposits – AELB, Australia
As at 30 June
2021
A$ ‘000
2,874
58
1
8,208
51,919
63,060
2020
A$ ‘000
2,977
15
–
5,480
56,675
65,147
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). A further US$11.0m paid via cash directly to AELB is
interest earning and has been discounted to a present value of $4.8m (FY20: $4.7m).
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 meas-
ures 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.
87
Lynas Rare Earths Limited | 2021 Annual Report D.4 Trade and Other Payables
Trade payables
Accrued expenses
Other payables
Total trade and other payables
Current
Non-current
Total trade and other payables
As at 30 June
2021
A$ ‘000
11,077
16,485
13,266
2020
A$ ‘000
13,180
9,761
5,837
40,828
28,778
40,828
–
28,778
–
40,828
28,778
Recognition and measurement
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.
D.5 Provisions and Employee benefits
Current
Short term employee benefits
Restoration and rehabilitation(1)
Total current
Non-Current
Long term employee benefits
Restoration and rehabilitation
Total non-current
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
3,331
40,874
2,797
26,142
44,205
28,939
696
133,392
599
155,462
134,088
156,061
(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.
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.
88
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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 recog-
nises 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 rehabili-
tation 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 treat-
ment 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 tech-
niques. 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.
89
Lynas Rare Earths Limited | 2021 Annual Report D.5 Provisions and Employee benefits continued
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
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
181,604
9,159
–
(12,848)
(7,989)
4,340
111,145
73,970
(14,916)
9,635
(1,419)
3,189
Balance at 30 June
174,266
181,604
KEY ESTIMATES AND JUDGEMENTS
Restoration and rehabilitation expenditure
The Group’s accounting policy for its restoration and rehabilitation closure provisions requires significant esti-
mates 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 Senggara Sdn Bhd (“GSSB”) as the contractor to manage the entire PDF
project. The total cost of this project will be MYR 400m (AUD 128.4m). The provision for restoration and reha-
bilitation has increased to reflect the present value of the obligation that exists at 30 June 2021. 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 2021.
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.
90
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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 (FY20: US$39.0m) 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 obliga-
tions. 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 Leases and other commitments
AASB 16 Leases
The accounting policies of the Group upon adoption of AASB 16 are as follows:
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 commence-
ment 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-sub-
stance 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.
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).
91
Lynas Rare Earths Limited | 2021 Annual Report E.2 Leases and other commitments continued
Short term leases and low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equip-
ment (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$7,150). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a
straight-line basis over the lease term. No leases meeting the low-value criteria were recognised at 30 June 2020 or
30 June 2021.
Exploration commitments
Less than one year
Between one and five years
More than five years
Total
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
394
1,638
1,291
3,323
373
1,533
2,345
4,251
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of
the Western Australia Department of Mines and Petroleum attaching to the tenements and are subject to re-nego-
tiation upon expiry of the exploration leases or when application for a mining licence is made. These are necessary
in order to maintain the tenements in which the Group and other parties are involved. All parties are committed to
meet the conditions under which the tenements were granted in accordance with the relevant mining legislation.
Capital commitments
Less than one year
Total
As at 30 June
2021
A$ ‘000
82,479
82,479
2020
A$ ‘000
4,109
4,109
At 30 June 2020, the capital commitments related to on-going capital project costs in Malaysia. At 30 June 2021 the
capital commitments primarily related to the Lynas Kalgoorlie project.
92
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued E.3 Auditor Remuneration
The following items of expenditure are included in general and administration expenses:
For the year ended 30 June
2021
A$
2020
A$
Auditor’s remuneration to Ernst & Young (Australia), comprising:
Fees for auditing the statutory financial report of the parent covering the group
228,792
229,963
Fees for other services
Tax Services
Other assurance and agreed upon procedures
Advisory Services
5,725
58,650
67,088
4,100
–
–
Total auditor’s remuneration Ernst & Young (Australia)
360,255
234,063
Auditor’s remuneration to Ernst & Young (other locations), comprising:
Fees for auditing the financial report of any controlled entities
136,548
133,722
Fees for other services
Tax Services
20,480
16,300
Total auditor’s remuneration Ernst & Young (other locations)
157,028
150,022
Total auditor’s remuneration
517,283
384,085
Other tax service fees paid to EY Australia and other locations in FY21 and FY20 relate to completion of tax returns
for expatriate employees. Other assurance, agreed upon procedures and advisory services paid to EY Australia relate
to due diligence and review work in relation to the capital raising that took place in August 2020.
E.4 Subsidiaries
Name of Group entity
Principal activity
Ownership interest
as at 30 June
Country of
incorporation
2021
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*
Development of mining areas of interest
and operation of concentration plant
Australia
Australia
Australia
Lynas Kalgoorlie Pty Ltd*
Development of operations in Kalgoorlie
Australia
Lynas Africa Holdings Pty Ltd*
Holding company
Lynas Africa Ltd
Lynas USA LLC
Mineral exploration
Development of processing opportuni-
ties in USA
Australia
Malawi
USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
Entity has entered into a deed of cross guarantee with Lynas Rare Earths 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 6. Entity is also a member of the tax-con-
solidated group.
93
Lynas Rare Earths Limited | 2021 Annual Report E.5 Parent Entity Information
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Accumulated deficit
Reserves
Total shareholders’ equity
Loss of the Company
Total comprehensive loss of the parent Company
As at 30 June
2021
A$ ‘000
2020
A$ ‘000
139,729
31,055
1,223,788
933,333
(21,486)
(18,378)
(172,895)
(201,006)
1,050,893
732,327
1,859,598
(1,119,822)
311,117
1,424,847
(1,115,948)
423,428
1,050,893
732,327
(3,874)
(11,014)
(3,874)
(11,014)
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 subsidi-
aries of Lynas Rare Earths 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:
94
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued Statement of Financial Position
Cash and cash equivalents
Short term deposits
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
As at 30 June
2021
A$ ‘000
290,114
100,000
507,789
21,448
2020
A$ ‘000
103,390
–
397,305
16,100
919,351
516,795
4,434
151,173
28,347
375,080
51,977
8,932
123,824
28,818
375,080
16
611,011
536,670
1,530,362
1,053,465
12,435
1,773
20,073
2,846
275,761
6,923
–
34,148
3,075
217,284
312,888
261,430
45,775
1,114
151,049
46,154
1,408
164,851
197,937
212,413
510,825
473,843
1,019,537
579,622
1,859,597
1,424,847
(1,006,439)
(1,034,473)
166,379
189,248
1,019,537
579,622
95
Lynas Rare Earths Limited | 2021 Annual Report E.6 Entities under a Deed of Cross Guarantee continued
Statement of Comprehensive Income
Revenue
Cost of sales
Gross profit
Other income
General and administration expenses net of recoveries
Profit from operating activities
Financial income
Financial expenses
Net financial expenses
Profit / (loss) before income tax
Income tax expense
As at 30 June
2021
A$ ‘000
132,537
(81,657)
50,880
68
(12,628)
38,320
1,249
(11,534)
(10,285)
28,035
(1)
2020
A$ ‘000
90,256
(71,290)
18,966
589
(18,725)
830
1,691
(14,712)
(13,021)
(12,191)
(6)
Profit / (loss) for the year from continuing operations
28,034
(12,197)
Other comprehensive loss, net of income tax
Exchange differences on foreign currency transactions
Total other comprehensive income / (loss) for the year, net of income tax
9,196
9,196
(325)
(325)
Total comprehensive income / (loss) for the year
37,230
(12,522)
E.7 Employee costs and share based payments
The following items are gross employee costs before recoveries included in general and administration expenses:
Wages and salaries
Superannuation and pension contributions
Employee remuneration settled through share-based payments
Other
Total employee costs
For the year ended 30 June
2021
A$ ‘000
45,790
3,715
2,464
1,051
2020
A$ ‘000
42,389
3,808
1,545
884
53,020
48,626
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 recog-
nised over the period during which the employees become unconditionally entitled to the performance rights.
96
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued 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:
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share based payments
For the year ended 30 June
2021
A$
5,312,122
96,834
240,278
1,692,416
2020
A$
5,859,449
41,538
313,091
1,032,611
Total compensation paid to key management personnel
7,341,650
7,246,689
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 – Upstream, Vice President – Downstream, Vice President – Malaysia.
97
Lynas Rare Earths Limited | 2021 Annual Report E.7 Employee costs and share based payments continued
Movements in employee performance rights during the year
For the year ended 30 June 2021
For the year ended 30 June 2020
Number of
performance
rights
‘000
Weighted
average
exercise price
A$
Number of
performance
rights
‘000
Weighted
average
exercise price
A$
4,461,537
1,408,092
–
(743,643)
(447,460)
4,678,526
1,279,101
0.00
0.00
0.00
0.00
0.00
0.00
0.00
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
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
During the year ended 30 June 2021 the Group recognised net share based payment expense of $2.5m (2020: $1.5m)
within the profit and loss component of the statement of comprehensive income. The net expense during the year
included the reversal of expenses totalling $0.3m (2020: $1.3m) associated with the forfeiture of 301,819 (2020: 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 339 days (2020: 437 days). The performance rights exercised during
the year had a weighted average share price on exercise date of $1.91 (FY20: $2.04).
Performance rights granted in the period
For the CEO, other Executive KMP and Lynas Leadership Team, two vesting conditions apply to the LTI grants made
during FY2021:
• Relative Total Shareholder Return (TSR)
• Lynas 2025 Project Target
In addition, eight senior employees who are critical to the delivery of Lynas 2025 strategic outcomes were invited to
participate in the LTI Plan. For these employees, the sole vesting condition is the Lynas 2025 Project Target.
Relative TSR is assessed over a three year period from 1 July 2020 to 30 June 2023, relative to other companies in the
ASX200 index (Peer Group Companies). For any performance rights to vest under the TSR vesting condition, Lynas’
performance must be equal to or greater than the 51% percentile of Peer Group Companies.
The percentage of the performance rights that may vest is determined as follows:
Lynas TSR Ranking across the TSR Period
Proportion of Performance Rights that vest
Below 51st percentile
At the 51st percentile
Between the 51st percentile and
the 76th percentile
At or above 76th percentile
0%
50%
Between 50% and 100% as determined on a straight
line basis (rounded to the nearest 5%)
100%
The Lynas 2025 Project Target vesting condition is that the Lynas Kalgoorlie plant is commissioned and operational
by July 2023.
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.
98
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued The performance rights granted during the financial year had a weighted average fair value of $2.5136 (2020: $2.198)
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
Series BH
Series BI
Series BJ
Series BH
Series BI
Series BJ
Grant date
5 day VWAP
Exercise price
Dividend yield
Expected volatility
Risk-free Rate
Expiry date
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2023
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2025
09 Sept 2020
$2.40
$0.00
Nil
63.2%
0.26%
09 Sept 2025
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2023
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2025
26 Nov 2020
$3.56
$0.00
Nil
64.5%
0.11%
09 Sept 2025
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
30 November 2016
30 November 2016
28 November 2017
28 November 2017
28 August 2018
28 August 2018
27 November 2018
27 November 2018
26 August 2019
26 August 2019
26 August 2019
26 November 2019*
26 November 2019*
26 November 2019*
09 September 2020
09 September 2020
09 September 2020
26 November 2020*
26 November 2020*
26 November 2020*
AO
AP
AU
AV
AY
AZ
BB
BC
BE
BF
BG
BE*
BF*
BG*
BH
BI
BJ
BH**
BI**
BJ**
Total
532,373
465,117
127,567
154,044
165,668
138,057
176,920
147,433
131,014
638,433
157,216
136,435
136,435
163,722
141,733
275,091
517,861
55,695
208,856
208,856
30 August 2019
30 August 2019
28 August 2020
28 August 2020
28 August 2021
28 August 2021
28 August 2021
28 August 2021
26 August 2022
26 August 2022
26 August 2022
26 August 2022
26 August 2022
26 August 2022
09 September 2021
09 September 2023
09 September 2023
09 September 2021
09 September 2023
09 September 2023
30 August 2021
30 August 2021
28 August 2022
28 August 2022
28 August 2023
28 August 2023
28 August 2023
28 August 2023
26 August 2024
26 August 2024
26 August 2024
26 August 2024
26 August 2024
26 August 2024
09 September 2023
09 September 2025
09 September 2025
09 September 2023
09 September 2025
09 September 2025
$ 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
$ 0.00
$ 0.00
$ 0.00
4,678,526
Value per
performance
right at
grant date
$0.680
$0.500
$2.060
$1.620
$2.187
$1.431
$2.187
$1.463
$2.340
$2.340
$1.660
$2.290
$2.290
$1.630
$2.400
$1.790
$2.400
$3.560
$2.500
$3.560
*
**
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.
Performance rights relates to the CEO in series BH to BJ were approved by the Board on 9 September 2020, subject to approval at the
AGM. These performance rights were subsequently approved at the AGM on 26 November 2020.
99
Lynas Rare Earths Limited | 2021 Annual Report E.8 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. As required, the nature and effect of the changes of
these new standards has been disclosed throughout the report.
Standards and Interpretations in issue not yet adopted
No Australian Accounting Standards issued but not yet mandatory for the financial year ending 30 June 2021 have
had a material impact on the Group for the year ended 30 June 2021.
E.9 Subsequent events
On 23 August 2021, the Malaysian regulator, the Atomic Energy Licensing Board (AELB), extended the deadline
for satisfaction of the licence condition related to the commencement of construction of the Permanent Disposal
Facility (PDF) for WLP residue to 2 March 2022. This recognises the constraints presented by current COVID-19
conditions. Lynas continues to engage productively with the relevant government and regulatory authorities to
progress the approvals for the PDF.
As announced on 29 July 2021, on 28 July 2021 the High Court of Malaya at Kuala Lumpur dismissed the judicial
review proceedings commenced by the anti-Lynas activists seeking review of the processes followed by the
Government of Malaysia in reaching the August 2019 decision to renew Lynas Malaysia’s fourth operating licence.
Lynas has received a notice of appeal by the anti-Lynas activists. Lynas intends to defend the appeal. The Lynas
Malaysia plant currently operates under the fifth operating licence granted in February 2020.
As announced on 22 July 2021, Lynas was awarded a $14.8m grant as part of the Australian governments’ Modern
Manufacturing Initiative. The grant will enable Lynas to commercialise an industry-first Rare Earth carbonate
refining process that has been developed by our in-house research and development team.
With the exception of the above, there have been no other events subsequent to 30 June 2021 that would require
accrual or disclosure in this financial report.
100
Financial Statementswww.LynasRareEarths.comNotes to the Financial Statements continued Mineral Resources and
Ore Reserves
as at 30 June 2021
1. MT WELD RARE EARTH DEPOSIT ORE RESERVES 2021
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 2021
JORC CLASSIFICATION
Ore Reserves within Pit boundary
MILLION
TONNES
TREO
%
CONTAINED REO
‘000 TONNES
Proved
Probable
Designed Pit Total
On Stockpiles
Proved
Probable
Stockpiles Total
Total Ore Reserves
Proved
Probable
Total
13.2
5.0
18.3
0.7
0.0
0.7
13.9
5.0
18.9
8.3
7.4
8.1
14.6
0.0
14.6
8.6
7.4
8.3
1,106
372
1,478
98
0
98
1,200
370
1,571
* 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, 2021. The 2021 Ore Reserve update is based
upon no mining depletion of the in-situ ore reserves by mining activities as mining Campaign 3 was completed in
February 2020 and no ore mining occurred between 1 July 2020 and 30 June 2021. Minor changes to the stockpiles
occurred as a result of processing. Full details of the material change that occurred in 2018 are reported as per the
Lynas ASX announcement dated August 6, 2018, titled “Lynas announces a 60% increase to Mt Weld Ore Reserves,
one of the world’s richest sources of Rare Earths”. The stockpiles were estimated using survey volumes of the
stockpiles and grades assigned to the stockpiles by the grade control process. The grade control process is carried
out by Mr Thomas Leggo, an employee of Lynas Rare Earths. The surveys have been carried out by Mr Bradley
Hughes, an employee of Lynas Rare Earths. Mr Steve Lampron, (Ragnarok Mining Pty Ltd) has carried out a review
and audit of these figures and found them to fall within expected error deviations. The company confirms that
all material assumptions and technical parameters underpinning the estimated Ore Reserves set out in the ASX
announcement dated August 6, 2018 continue to apply and have not materially changed.
101
Lynas Rare Earths Limited | 2021 Annual Report Mineral Resources and Ore Reserves
2. MT WELD RARE EARTH DEPOSIT MINERAL RESOURCES 2021
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 2021
JORC CLASSIFICATION
MILLION
TONNES
TREO
%
CONTAINED REO
‘000 TONNES
Insitu
Measured
Indicated
Inferred
Subtotal
On Stockpiles
Measured
Subtotal
Total Mineral Resources
Measured
Indicated
Inferred
Total
16.7
11.9
25.9
54.5
0.7
0.7
17.3
11.9
25.9
55.2
7.5
5.4
3.6
5.2
14.6
14.6
7.8
5.4
3.6
5.3
1,257
638
938
2,833
98
98
1,354
638
938
2,931
* 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. The Mineral Resources are inclusive of Ore Reserves.
Note:
The Mineral Resource estimation for the Mt Weld Rare Earth Deposit is as of 30 June 2021. 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 6 August 2018 and is available to view on the company’s
website. The company confirms that all material assumptions and technical parameters underpinning the esti-
mated Mineral Resources set out in the ASX announcement dated 6 August 2018 continue to apply and have not
materially changed. The exception is minor depletion of the in-situ resources from mining up to 30 June 2021.
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
MILLION
TONNES
Ta2O5
%
Nb2O5
%
TLnO
%
0
1.5
36.2
37.7
0
0.037
0.024
0.024
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
CATEGORY
Measured
Indicated
Inferred
Total
102
www.LynasRareEarths.com 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 6 October
2004. Lynas Corp confirms that all material assumptions and technical parameters underpinning the estimated
Mineral Resources continue to apply and have not materially changed. Figures in the table may not sum due to
rounding.
There have been 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.
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 Rare Earths. 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 2021 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.
103
Lynas Rare Earths Limited | 2021 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 2021.
(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
Number
of Shares
Percentage
of Shares
Holders
22,312
15,470
4,101
3,721
256
10,576,231
39,488,109
30,844,759
92,901,859
728,265,111
45,860
902,076,069
1.170
4.380
3.420
10.300
80.730
100.00
The number of shareholders holding less than
a marketable parcel of shares
883
21,100
0.002339
(B) Distribution of Employee Options/Performance Rights
There are 3,681,037 unlisted employee options / performance rights. The number of beneficial holders, by size of
holding, of employee options / performance rights are:
Holders
0
0
0
22
6
28
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
104
www.LynasRareEarths.com (C) Twenty Largest Shareholders
The names of the twenty largest registered holders of quoted shares are:
Listed Ordinary Shares
Number
of Shares
% of
Shares
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
3 CITICORP NOMINEES PTY LIMITED
4 NATIONAL NOMINEES LIMITED
5 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
6 BNP PARIBAS NOMINEES PTY LTD
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