ACN 010 441 666
Magontec Limited
Annual Report
2022
Global Locations
and Activities
Rhode Island
Charlotte
Bottrop
Santana
Golmud
Xi’an
Production
Sales
Office
Technology
Centre
Cast House
Project
Contents
Xi’an
Tokyo
Sydney
Melbourne
Cast House
Project
Headquarters
2
4
8
10
16 Metals
19
23
25
28
30
32
49
50
Executive Chairman’s Letter
Chief Financial Officer’s Report
Letter from the Chairman of the Remuneration Committee
Environmental, Social and Governance (ESG)
Income Taxes
Summary of Accounting Policies
Magnesium Markets and Commodity Review
Anodes
Innovation
Board of Directors
Executive Management
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit & Loss
and Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
1.
2. Results from Operations
3.
4. Key Management Personnel Remuneration
5. Remuneration of Auditors
6. Current Trade and Other Receivables
7. Current Inventories
8. Other Current Assets
9. Non Current Trade and Other Receivables
10. Property Plant & Equipment
11.
12. Current Trade and Other Payables
13. Borrowings
14. Current Provisions
15. Non-Current Provisions
16. Share Capital
17. Reserves
18. Accumulated Losses
19. Earnings/(Loss) Per Share
20. Contingent Liabilities and Assets
21. Capital and Leasing Commitments
22. Controlled Entities
23. Segment Information
24. Related Party Disclosures
25. Financial Instruments
26. Parent Entity Information Magontec Limited
27. Subsequent Events
Directors’ Declaration
Independent Auditor’s Report to the Members of Magontec Limited
Shareholder Information
Intangibles
51
52
53
54
54
58
60
62
62
63
63
63
63
64
65
65
66
66
66
68
69
70
70
70
71
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73
75
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81
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84
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88
Authorisation:
Nicholas Andrews, Executive Chairman of Magontec Limited has
authorised the release of this document to the ASX on 23 February 2023.
A summary of the Group’s corporate governance practices including the Corporate
Governance Statement discussing adherence to the Australian Securities Exchange’s
Fourth Edition “Corporate Governance Principles and Recommendations” can be
located at www.magontec.com under the Investor Centre section.
1
Magontec LimitedAnnual Report 2022
Executive Chairman’s Letter
Executive Chairman’s Letter
Market conditions
for Magontec’s
recycling and
anodes business
in 2022 were
exceptional.
Higher profitability and strong cash flows
were driven by elevated magnesium prices,
supply uncertainty and positive pricing
pressures in key markets.
Net Profit After Tax rose to $16.5
million in the year to 31 December
2022, up from $5 million in the
prior year, with all businesses
contributing increased profitability.
The effects on Magontec’s
balance sheet were profound as
positive cash flow and the impact
of rising interest rates on pension
obligations, reduced debt and
other liabilities. At the end of 2022
Magontec Net Tangible Assets
Per Share were 67.9 cents, up from
42.4 cents at the end of 2021.
Cash flow from underlying
operations* in 2022 was $28.0
million, 168% ahead of the previous
year, eliminating the company’s net
debt position. As of 31 December
2022, Magontec has positive cash,
net of all bank debt obligations,
of $2.0 million.
*
Cash from underlying operations
is defined as Operating Cashflow
excluding working capital
movements, interest and tax paid
Nicholas Andrews
2
As we enter 2023, when trading
conditions are likely to be more
muted than in the previous 18
months, Magontec has relatively
limited exposure to higher interest
rates and the opportunity to
examine growth prospects in
magnesium and other industries in
which it has current operations.
When markets present
opportunities to expand margins
and develop new businesses, the
ability of a company to leverage
those opportunities is a measure
of the quality of its employees and
the underlying business structure.
In 2022 Magontec’s sales and
production teams in Europe and
Asia were extremely active and
able to fully exploit the group’s
assets and advantages.
Following a strong first half of
2022 Magontec announced a
maiden unfranked dividend of
0.6 cents per share, which was
paid in October 2022.
For the six months to 31 December
2022 the Board has announced
that the company will pay another
unfranked dividend of 0.6 cents
per share bringing the annual
dividend to 1.2 cents per share
(unfranked).
As a part of the dividend offering
the company also put in place
a Dividend Reinvestment Plan
(DRP). Most shareholders,
including the company’s largest
shareholders, took the opportunity
to re-invest in the company.
There were two changes to the
Board of Magontec in 2022.
Robert Kaye, who has served as
non-Executive Director since 2013,
was appointed Lead Independent
Director and in September, under
the terms of the agreements
between Magontec and our largest
shareholder, the Qinghai Salt
Lake Magnesium Co Ltd (QSLM),
Mr Xing Cai Li was appointed to
the Board.
Magontec LimitedAnnual Report 2022 Executive Chairman’s Letter (continued)
Magontec is privileged to have
a strong and active Board and
I would like to thank them for
their efforts in 2022. Magontec’s
Board members have a wide
variety of skills and experience
that provides insight and advice
on our global operations base
and on governance issues.
Since 2008 John Talbot has
served Magontec, first as CFO
and more recently as Company
Secretary. John’s efforts on
behalf of shareholders have been
extraordinary and I extend both
my personal gratitude and that of
the many shareholders who have
engaged with John over the last
15 years. We wish him well in his
retirement.
In the following pages we describe
in more detail the market trends
and operational features of the
12 months to 31 December 2022. In
summary our recycling and anodes
businesses were particularly
busy in Europe, North America
and Asia. As our businesses have
grown over recent years so we have
become an increasingly important
supplier for major Tier 1 and OEM
manufacturers in the automotive,
power tool and hot water appliance
industries among others. Through
the difficult COVID period and in
the period since, Magontec has
proved itself a reliable, innovative
and consistent supplier
In addition to high volume alloy and
anode products, the company has
moved in both businesses towards
higher value and lower volume
activities, to take advantage of
market opportunities and to
balance volatility associated with
our more narrowly focused historic
businesses.
In these endeavours we
have targeted new products,
applications and markets and
developed new processes to
exploit opportunities. While
it is a lengthy process to enter
new markets and to develop
new customers, in 2022 we saw
growing demand for Magontec-
developed specialist metals and
higher technology powered
anodes. We have also worked hard
to ensure that our processes emit
very low levels of unusable waste.
The driving rationale is to further
reduce emissions and develop
different grades of magnesium
output while at the same time
lowering average production costs.
As a recycling and fabrication
business Magontec already has
a low environmental footprint,
both because we source high
levels of renewable energy for
our European and Qinghai plants
and because we are an efficient
recycler of waste materials. In our
magnesium anode and magnesium
alloy manufacturing operations we
find great synergies that ensure we
have consistent access to material
for both manufacturing processes.
Like your Board, shareholders will
be disappointed by the ongoing
delays at the company’s project at
Qinghai. Other than the comments
in this report, and in other releases
to the ASX in late 2022, there is
little more to add. However, the
Board remains confident that
QSLM will bring their 100,000
tonnes per annum electrolytic
magnesium smelter into
production at the conclusion of the
current remediation process and
we are very pleased to welcome
the General Manager of QSLM’s
parent company, Mr Xing Cai Li,
to the Board. He has brought new
energy to the QSLM project and
a renewed commitment to the
agreements with Magontec.
QSLM’s facility remains the only
constructed, high volume, low
emission electrolytic magnesium
smelter in the world and its
commencement is eagerly awaited
by Magontec and our magnesium
alloy die casting customers.
Through 2022, Magontec
operated its adjacent magnesium
alloy cast house at close to a break
even level. Profitability continues
to be constrained by higher
logistics costs of raw material
supply of pure magnesium from
plants in other parts of China
rather than the QSLM facility.
However, on recommencement
of liquid pure magnesium supply
to the Magontec cast house, we
are confident that we will be able
to quickly increase output of
magnesium alloy to customers in
Europe, North America and Asia.
While 2022 has been an
outstanding year for the company,
the short-term outlook is less clear.
Whatever the immediate future
does hold the company now enjoys
a robust financial position and is
largely insulated from rising global
interest rates.
Our major growth project at
Qinghai remains in prospect for
re-commencement in the next
12 months while other Magontec
manufacturing activities have
strong market positions, many
with the benefit of innovative
new processes and products to
drive revenues and profitability
in the years ahead. Our recycling
businesses anticipate a less
exciting year as motor vehicle sales
flag in many markets while our
anode businesses are expected
to be more predictable and may
even grow in 2023.
We think the emergence of
the Chinese economy from
zero COVID and the growing
likelihood of a soft landing for the
US economy will be positive for
our PRC anodes businesses. The
war in Ukraine and rising interest
rates are less positive for European
economic activity. Despite an
uncertain economic horizon
Magontec has a strong presence
in its key markets and a global
reputation for quality products. In
2023 we will continue to leverage
those assets to the best effect.
Nicholas Andrews
Executive Chairman
3
Magontec LimitedAnnual Report 2022 Chief Financial Officer’s Report
Chief Financial Officer’s Report
Strong cash flows
through 2022
have transformed
Magontec’s
financial position.
The period under review
was distinguished by
several notable
achievements.
Key financial
highlights
Equity and Earnings
Highest ever reported net profit after
tax of $16.5 million for the year to
31 December 2022
Dividends declared of 1.2 cents per
share (unfranked) with respect to the
year to 31 December 2022 – the first
in the Company’s history to be paid
from operating profits
Net cash position of $2.0 million
achieved as at 31 December 2022
Return on equity increased to 35.7%
for the year to 31 December 2022. This
was a significant rise over the 15.4%
achieved for the prior year and well above
the trend of the preceding years.
Return on invested capital of 35.3%
also substantially exceeded the Group’s
weighted average cost of capital.
Net tangible assets rising to a
record 67.9 cents per share as at
31 December 2022.
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
% chg
Gross Profit
38,595
19,232
100.7%
Gross Margin (%)
24.3%
16.7%
Reported EBITDA
27,263
10,077
170.5%
Reported Net Profit After Tax
16,515
5,008
229.8%
Net Profit After Tax excluding
unrealised FX
Return on Equity (%)
Return on Invested Capital (%)
Net tangible assets per share
(cents)
Borrowings
17,818
35.7%
35.3%
4,426
302.6%
15.4%
13.2%
67.9
42.4
60.1%
Net debt/(net cash)
Net debt to net debt + equity (%)
(1,964)
(3.6%)
6,890
16.0%
(128.5%)
Cashflow
Reported Operating Cashflow
10,746
Underlying Operating Cashflow
28,030
5,823
10,457
84.6%
168.1%
Free Cashflow (excluding
working capital movements)
23,211
8,556
171.3%
In the period under review, the company has progressed on almost every
metric. Gross Profit for the year to 31 December 2022 was $38.6m, up
101% on the previous year, and underlying NPAT was $16.5m, up 230%
on the prior year.
Derryn Chin
4
Magontec LimitedAnnual Report 2022
Outgoing Chief Executive’s statement
Chief Financial Officer’s Report (continued)
Underlying NPAT*
(A$m)
Return on Equity
(%)
20
15
10
5
0
-5
17.8
4.4
0.5
(1.2)
(0.3)
(1.3)
2017
2018
2019
2020
2021
2022
40
35
30
25
20
15
10
5
0
-5
-10
35.7
15.4
2.3
(4.8)
2017
(4.2)
(2.4)
2018
2019
2020
2021
2022
Working Capital Funding Profile
(A$m)
60
Gross Profit (A$m)
and Gross Margin (%)
60
50.7
50
40
35.4
49%
51%
30
20
10
0
34.4
56%
44%
36.3
31.7
63%
81%
37%
19%
26.8
81%
19%
2017
2018
2019
2020
2021
Net Debt
Equity
100%
75%
50
40
104%
50%
30
25%
0%
20
10
0
12.5
57%
43%
2017
14.8
60%
40%
2018
(4%)
2022
13.1
60%
40%
2019
12.2
67%
33%
2020
19.2
71%
29%
2021
Metal
Anodes GP margin (%)
30
25
20
15
10
5
0
G
r
o
s
s
M
a
r
g
n
i
38.6
47%
53%
2022
Net working capital = trade & other receivables + prepayments
+ inventory less trade & other payables
Cash flow from underlying operations**
(A$m)
30
28.0
Net Debt
(A$m)
20
18.0
25
20
15
10
5
0
10.5
5.0
2.9
3.9
2.3
15
10
5
0
-5
15.3
11.7
5.2
6.9
(2.0)
2017
2018
2019
2020
2021
2022
2017
2018
2019
2020
2021
2022
* Underlying NPAT is defined as Reported Net Profit After tax excluding unrealised foreign exchange gains and losses
** Cash from underlying operations is defined as Operating Cashflow excluding working capital movements, interest and tax paid
5
Magontec LimitedAnnual Report 2022
Chief Financial Officer’s Report (continued)
Balance Sheet
Summary
31 Dec 2022
31 Dec 2021
% chg
Net cash/(net debt)
1,964
(6,890)
(128.5%)
Working capital
Pension liability
50,715
36,276
39.8%
(9,024)
(13,111)
(31.2%)
Fixed and intangible assets
20,158
20,994
(4.0%)
Income tax liability
Other net assets
Net assets
(7,963)
(2,171)
266.8%
279
1,178
(76.3%)
56,129
36,275
54.7%
Magontec Limited Net Asset Bridge Analysis
Year to 31 December 2022
+ $ 4.1 m
+ $ 8.9 m
+ $ 14.4 m
($ 5.8m)
($ 0.8m)
($ 0.9m)
$ 56.1 m
$ 36.3 m
31 Dec 21
Working
capital
Net cash/
(net debt)
Pension
liability
reduction
Income tax
liability
Fixed and
intangible
assets
Other net
assets
31 Dec 22
Banking
As at 31 December 2022, the
weighted average interest rate
of drawn borrowings was 4.0%, a
1.1% increase over the 12 month
period. The Group maintains
banking facilities in all regions,
although at much lower levels
in Europe than in previous
years. The additional headroom
afforded under these facilities
will be necessary to underpin
future growth opportunities
for Magontec, including the
Qinghai business. However, for
the time being a reduced level of
borrowings in Europe comes at
an opportune moment as interest
rates have risen throughout the
year in both Germany and Romania.
Furthermore, the prospect remains
of more interest rate rises in 2023
as central banks continue to
address inflation challenges.
The weighted average maturity of
all debt facilities was less than 1 year
as at 31 December 2022. However,
the Group has maintained strong
relationships with its key banking
partners and the current year’s
strong financial outcomes leave
the Group well positioned.
Rising margins for the company’s
higher volume activities in
magnesium anodes and
magnesium alloys were particularly
impactful. The resulting cash
flow from operating activities of
$10.7 million, up from $5.8 million
in the prior year, has driven the
transformation of the balance
sheet from Net Debt of $6.9 million
to Net Cash of $2.0 million as at
31 December 2022.
Balance Sheet
Net assets increased considerably
to $56.1 million as at 31 December
2022, up 54.7% from $36.3 million
in the prior year. As can be seen on
the chart, the largest contributor
to this increase was higher net
working capital of $14.4 million
funding a higher value sales base.
The net asset position was further
improved by a reduction of $8.9
million in net debt and a decline in
the German pension fund liability
of $4.1 million (from $13.1 million
to $9.0 million), driven mostly by
a rise in the discount rate to 3.9%
as at 31 December 2022 (1.3%:
31 December 2021).
At the end of December 2022,
Magontec’s balance sheet showed
deployed working capital of $50.7
million, up from $36.3 million in
the prior year. This is largely the
result of higher prices feeding
through from increases in raw
material pricing. In the last few
weeks of 2022 and the early weeks
of 2023 prices of Magontec’s key
raw materials have moderated.
While they have not fallen to the
levels of early 2021, they are well
below the levels of early 2022. The
timing of Magontec’s contracts will
likely see the amount of working
capital deployed decline further
in the early part of 2023, making
further cash resources available
to the group.
6
Magontec LimitedAnnual Report 2022 Chief Financial Officer’s Report (continued)
Bank Borrowing Interest Rate Profile
(%)
Magontec Limited Bank Borrowing Interest Rate Profile
Total weighted average
Zheshang Bank Facility
2.9
4.0
3.90
3.18
Unicredit Romania
Borrowing Base
4.49
8.31
Commerzbank Factoring
0.95
3.33
Commerzbank Term Loan
Commerzbank
Borrowing Base
1.85
1.85
1.55
3.68
In China the Zheshang Bank
facility was increased to RMB
31 million at the 2022 renewal
and at an improved interest rate
of 3.18% as at 31 December 2022
(31 December 2021: 3.9%). This
larger facility has been required to
fund growing activities in the US
markets where distance from our
Xi’an, China factory and uncertain
supply chains have seen inventories
at higher levels than in prior years.
These began to trend down in
the latter quarters of 2022 but
may grow again as sales volumes
recover in the USA in 2023.
With respect to US customers,
Magontec also enters hedges from
time to time to protect its position
on US denominated receivables
where it is available and practicable
to do so.
2021
2022
Dividend
Bank Borrowings Maturity Profile
(Years to maturity as at 31 December 2022)
2.2
0.9
1.0
2.5
2.0
1.5
1.0
0.5
0.0
0.5
0.6
0.2
Commerzbank
Borrowing
Base
Commerzbank
Term Loan
Commerzbank
Factoring
Unicredit
Romania
Borrowing Base
Zheshang
Bank Facility
Total
weighted
Average
In 2022 Magontec Limited
paid a maiden dividend from
operating profits, a reflection
of buoyant markets and a large
group of smaller shareholders
who expressed a desire for a
dividend payment. The Board of
Magontec Limited has declared
a final dividend to shareholders of
0.6 cents per share (unfranked)
with respect to the 6 months to
31 December 2022. Along with
the interim dividend of 0.6 cents
per share (unfranked), this brings
the total dividend for the year to
1.2 cents per share (unfranked).
At the time of the Interim
Dividend, paid in October 2022,
Magontec established a Dividend
Reinvestment Plan (DRP) so
that shareholders could elect to
take their dividend in new shares
instead of cash. This was well
received in October with nearly
65% of the dividend paid in shares
at a 5% discount to the then
prevailing price. A similar facility will
be available for the Final Dividend.
The popularity of the DRP allows
the Company to conserve cash
and satisfy its dividend obligations.
7
Magontec LimitedAnnual Report 2022
Letter from the Chairman of the Remuneration Committee
Letter from the Chairman
of the Remuneration Committee
On behalf of the
Magontec Limited
Board of Directors,
I am pleased to
present the 2022
Remuneration
Report.
Dear Shareholders,
It is the Board and Remuneration
Committee’s intent to regularly
review Magontec’s remuneration
practices and maintain their
market competitiveness, whilst
ensuring the framework is aligned
with market and shareholder
expectations to motivate and
incentivise executives to improve
shareholder returns.
The Remuneration & Nominations
Committee (REM) comprises 3
members, the majority of whom
are independent directors,
and is Chaired by me as Lead
Independent Director.
Through 2022, the management
team continued to build on
the foundation established in
prior years, resulting in a record
financial performance despite the
continued challenges presented by
the COVID pandemic, particularly
in our China based operations.
Robert Kaye, SC
8
The strong financial result in 2022
allowed the Board to declare an
inaugural dividend payment of
0.6 cents per share which will
be followed by a final dividend
to shareholders of 0.6 cents per
share, both unfranked.
The 2022 result was supported by
strong global magnesium prices
and provides a solid platform for
future growth. The executive team
continues to focus on the group’s
core strategic objectives including
the anticipated receipt of liquid
pure Magnesium at our Qinghai
facility and the development of
new markets and customers for the
company’s existing products.
Magontec’s remuneration
framework is designed to
incentivise and motivate the
executive team to deliver improved
performance for shareholders.
Details of the governance process
are explained in the Remuneration
Report.
2022 AGM: Remuneration
Report
The 2021 Remuneration Report
resolution tabled for approval at
the 2022 AGM was passed with
71.03% of votes cast in favour of
its adoption (prior year 95.31%
voted in favour) but failed to
reach the required 75% under
the Corporations Act 2001.
Feedback obtained from our
shareholders related mostly to
explanation surrounding KMP
rewards, particularly with respect
to the Executive Chairman.
The REM Committee has taken
steps to review the remuneration
framework, policies and processes
that determine fixed and variable
remuneration of executives.
Fixed Remuneration
During the 2021 year, an external
remuneration advisor (Mercer)
was appointed to perform an
Magontec LimitedAnnual Report 2022 Letter from the Chairman of the Remuneration Committee (continued)
independent market assessment
of Key Management Personnel
(KMP). The work resulted in
identification of a gap between
Magontec executive remuneration
levels and those of the peer
group as identified by Mercer.
This resulted in increases in fixed
remuneration as disclosed in the
2021 REM Report.
Some of the underlying causes
of this gap included:
– A reduction in fixed
remuneration in 2020 to meet
the challenge of COVID and
to protect Magontec from a
potential economic downturn
and cashflow reduction.
– A remuneration policy and
procedure that only reviewed
KMP remuneration every 3
years. This policy resulted in
larger increases in each review
year that were inclusive of prior
years’ market movements.
– The 2021 results reflected
a change in remuneration
process to an annual basis,
reinstatement of the COVID
related reduction and
an alignment to current
market rates.
Variable (at-risk)
Remuneration
The Magontec Global
Management Group Incentive
Plan framework was originally
developed by external advisor
Godfrey Remuneration Group in
2011 and aligned with best practice
at the time. The recommendations
for variable (at-risk) remuneration
in the form of STI and LTI structures
were implemented. Over time
there have been modifications
made to the plan, but underlying
fundamentals have remained
in place.
Following feedback from the 2021
Report, the Plan and framework
will be reviewed in greater detail.
In addition to reviewing the
remuneration Plan, the REM
Committee must also develop
an appropriate transition plan.
It is expected that this work
will be completed in 2023 with
appropriate disclosures made
once approved by the Board.
The outline of Magontec’s current
framework for remuneration is
detailed in the 2022 Remuneration
Report.
Remuneration and
Incentives approved by
the Board for year
2022 Executive reward
outcomes: Fixed
The Remuneration Framework
aims to reward KMP at the
25th percentile of the relative
benchmark for each Executive
(measured independently) which is
low to market but offset by higher
at-risk components in the form of
variable remuneration (STI, LTI).
During 2022, fixed increases in
remuneration of 4 members of
Key Management Personnel
(KMP) were provided which align
with the 25th Percentile of their
relative benchmark. Details of
the increases are shown in the
Remuneration Report.
2022 Executive reward
outcomes: STI
The Remuneration Committee
recommended and the Board
approved the provision of a STI
payment pool of $693k (2021:
$275k) for payment to the
Global Management Group.
The remuneration committee
took into consideration individual
executive plans, their KPIs and
individual contribution and the
impact of external factors on
the result.
The Short-Term Incentive is
calculated according to a formula
which measures the extent of
outperformance between actual
financial performance compared
with budget. The Board and
Remuneration Committee have
the right to adjust the discretionary
component to allow for
circumstances that are considered
external to the outperformance.
2022 Executive reward
outcomes: LTI
The LTI Performance Rights (PR)
allocation is limited to a % of the
executive’s fixed remuneration
mix. Vesting conditions include
both market based and non market
based vesting conditions, including
share price targets being achieved
over a rolling 3-year performance
period.
In 2022, the Remuneration
Committee recommended, and
the Board approved the issue
of 3,125,212 PRs in accordance
with the approved Magontec
Management Group Incentive
Plan. Offsetting this were
1,275,809 lapsed PRs as at
31 December 2022. Following a
further issue of 3,021,042 PRs in
2023, there are currently 8,955,793
PRs issued to the executive
team outstanding.
The LTI scheme has not vested for
participating executives since the
year ended 31 December 2016.
In Summary
2022 saw a continuation of the
2021 performance. Looking ahead
the Group will remain focussed
on current operations and
opportunities for growth.
I would like to take this opportunity
to thank shareholders for their
ongoing support.
Robert Kaye SC
Lead Independent Director
Chairman - Remuneration
& Nomination Committee
9
Magontec LimitedAnnual Report 2022
Environmental, Social and Governance (ESG)
Environmental, Social and Governance (ESG)
Magontec has
developed a system
of Board oversight
that monitors
environmental and
social issues as well
as critical corporate
governance metrics
across its global
operating activities.
Team building exercise for Magontec Romania
– a cooking night
10
In 2022 the Magontec Board
and Committees have continued
to maintain and build a system
of governance oversight. This
includes compliance oversight
at corporate and operational
levels with environmental and
governance regulations and rapidly
changing social expectations.
While ESG reporting for Australia
is not compulsory, the Magontec
Board continues to develop its
compliance within the current
voluntary standards.
In 2022 the Company addressed
the issue of Board structure.
Robert Kaye, a non-executive
independent director of Magontec
since 2013, has been elected by
the Board to the position of Lead
Independent Director. The role of
the Lead Independent Director
is to chair sessions outside of
the presence of the Executive
Chairman, to set meeting agendas
where necessary and to provide
an alternative communications
channel between the Executive
Chairman and other non-
executive Directors.
The structure of the Board has
also changed as a result of the
sale by Straits Mine Management
of its 12.94% holding in the
company. Prior to this sale, Andre
Labuschagne, as Executive
Chairman of Aeris Resources (the
parent company of Straits Mine
Management), served as a Non-
Executive Director. Andre agreed
to continue to serve as a director
after the sale of Straits’ stake and
is now an Independent Director.
The Board of Magontec currently
comprises three Independent
Directors and two Non-Executive
Directors with associated
shareholdings as well as the
Executive Chairman.
Magontec LimitedAnnual Report 2022 Environmental, Social and Governance (ESG) (continued)
The Board members have diverse
skills and backgrounds. It includes
individuals with magnesium
industry experience in Europe and
China, legal, accounting and other
professional qualifications and
relevant experience.
The Board operates three
committees, each of which meet
at least twice a year; the Finance
and Audit Committee, chaired
by Independent Director Atul
Malhotra, the Remuneration and
Nominations Committee, chaired
by Lead Independent Director
Robert Kaye and the Business
Risk Committee, chaired by the
Executive Chairman Nicholas
Andrews.
Each committee has responsibility
for oversight of management
actions and accountability across
the Group’s four operating facilities
in China and Europe, and at Head
Office in Australia. In addition to
this granular oversight, broader
trends within individual Magontec
business operations are reviewed
at each Board meeting.
A Charter is established for each
Committee and is available for
shareholders to view on the
company’s website under the
Investor Centre/ Corporate
Governance tab.
The remit of each of these
committees reflects risks
associated with compliance
regimes for the listed entity in
Australia and for the operating
subsidiaries in Europe, Asia and
the USA. By actively managing
identified risks the company seeks
to reduce its financial exposure
to costly remedial actions or ad
hoc financial burdens imposed
by regulatory authorities. These
significant tasks associated with
this growing administrative burden
are managed within the existing
resources of the Group.
Below, and in comments elsewhere
in this report, we review some of
the issues that arose for these
committees in 2022 and discuss
some of the strategies and actions
that have been adopted.
1. Environment
The magnesium industry has an
inherent environmental deficit as
the vast majority (more than 90%)
of its global production base relies
on off-gas from coal derivatives.
Pidgeon process magnesium
plants (silica-thermic reduction)
that produce pure magnesium
in China, and the coal and ferro
silicon industries that supply raw
materials to that process, are
high CO2 emission activities. As a
magnesium alloy and magnesium
anode manufacturer, Magontec
currently buys pure magnesium
from these Chinese producers for
conversion into magnesium alloy
ingots and magnesium anode rods.
As an intermediate manufacturing
business (transforming raw
materials, including pure
magnesium, for supply to other
industrial processes) Magontec has
specifically sought to address this
negative environmental burden.
Magontec’s involvement with
Qinghai Salt Lake Magnesium
Co Ltd’s (QSLM) 100,000 metric
tonne per annum electrolytic
magnesium production facility at
Golmud in Qinghai province PRC,
includes access to high levels of
renewable energy including hydro,
wind and solar.
When this project comes on stream
it will have very low CO2 emissions
compared with Pidgeon process
pure magnesium production (less
than 7 tonnes of CO2 compared
with more than 20 tonnes of
CO2 per tonne of magnesium
produced). Under agreements
between Magontec and QSLM this
facility will deliver 56% of its output
to Magontec Qinghai’s magnesium
alloy cast house, making Magontec
the world’s most environmentally
advanced, high volume magnesium
alloy producer. 2022 production
from this cast house, over 5,000
mt per annum, received 87% of
its energy from these renewable
sources.
Magontec’s other manufacturing
operations, at Santana in Romania,
Bottrop in Germany and at Xi’an in
China, also have significant non-
carbon energy inputs and actively
seek to grow the proportion of
power sourced from renewable
energy.
In 2022 the availability of nuclear
energy to Magontec’s European
operations reduced in total
contribution from 9.1% to 6.0%
while renewable energy inputs
other than nuclear increased
contribution from 55.9% to 57.4%.
While we actively seek energy
supplies from renewable sources,
competition for non-gas supplies
in Europe rose sharply over recent
months.
At Magontec’s European
operations, where we recycle
magnesium alloy scrap and
manufacture magnesium anodes,
our plants use electrical power
and not gas. This allows us to
preference energy suppliers that
source power from renewable
technologies and has provided
some additional protection against
surging European gas prices
through 2022.
In Xi’an the regional energy supply
remains carbon focussed and a
strategic issue for the company
to address in the years ahead.
In 2022, 13% of the energy used
at the Xi’an factory was derived
from renewable energy sources
(12% in 2021).
11
Magontec LimitedAnnual Report 2022 Environmental, Social and Governance (ESG) (continued)
Magontec energy supply by source
(%)
36.7
36.6
35.0
36.6
8.5
8.1
9.1
54.8
55.3
55.9
6.0
57.4
2019
2020
2021
2022
Renewable
Nuclear
Carbon
In 2022 Magontec’s processing
operations continued to pursue
a continuous improvement
strategy. The re-processing of
waste products from magnesium
alloy recycling and the reduction
of energy inputs through the
implementation of efficiency
programmes have assumed even
greater importance through 2022
as energy prices rose precipitously.
Magontec’s most salient
environmental contribution is in
its commitment to and focus on
magnesium, the lightest structural
metal. Magnesium is 2/3rds the
weight of aluminium and 1/3rd
the weight of steel. Unlike plastics
and carbon fibre, it is also 100%
recyclable. Magontec is one of
the largest magnesium recycling
companies in the world and the
largest in Europe with two plants
and recycling capacity of over
25,000 metric tonnes per annum.
As lower emission magnesium
becomes available over the coming
years, Magontec’s low emission
recycling assets represent an
increasingly valuable regional
environmental resource.
2. Governance
Magontec operates three
committees that provide
Governance oversight of the
Group’s operating activities.
The Remuneration and
Nominations Committee is chaired
by Robert Kaye, Lead Independent
Director. Committee members
include Independent Director
Atul Malhotra and Non-Executive
Director Zhong Jun Li.
The committee is established
under a charter and has
responsibilities including
ensuring that:
– The Group’s remuneration
policies and practices are
consistent with the Group’s
goals and objectives
– MGL has a Board of an
effective composition, size and
commitment to adequately
discharge its responsibilities
and duties.
The Committee is responsible
for making recommendations
to the Board on all aspects of
appointment, remuneration and
termination for the Chairman
and Chief Executive Officer (or
equivalent) and to review the
12
appointment, remuneration or
termination of key management
personnel (defined as those senior
executives reporting directly to the
CEO) as requested by the Board,
Chairman or Chief Executive
Officer (or their equivalents). It
also addresses relevant Group
remuneration issues.
The Committee is authorised
by the Board to investigate
any activity within its terms of
reference. It is authorised to seek
any information it requires from any
employee and all employees are
directed to co-operate with any
request made by the Committee.
The Committee is authorised
by the Board to obtain outside
independent professional advice,
if it considers this necessary within
the scope of its duties with the cost
of advice borne by the Company.
In 2022 the Remunerations and
Nominations Committee met
3 times.
The Finance, Audit & Compliance
Committee (FAC) is Chaired
by Independent Director Atul
Malhotra and its members include
Lead Independent Director Robert
Kaye and Independent Director
Andre Labuschagne.
The Finance, Audit & Compliance
Committee of Magontec Limited
is responsible for oversight and for
making recommendations to the
Board in respect of the Company’s
financial affairs, information
technology, business control
framework and legal requirements.
The Committee is authorised
by the Board to investigate any
activity within its charter. It is
authorised to seek any information
it requires from any employee and
all employees are directed to co-
operate with any request made by
the Committee.
Magontec LimitedAnnual Report 2022
Environmental, Social and Governance (ESG) (continued)
The Committee is authorised
by the Board to obtain outside
legal or other independent
professional advice and to secure
the attendance of outsiders with
relevant experience and expertise
if it considers this necessary within
the scope of its duties.
The FAC is specifically responsible
for review of the interim and full
year company audits including the
appointment of the auditor and
approval of changes to accounting
policies.
The FAC is also responsible for
oversight of financial exposures,
monitoring the application of
risk management techniques
and financial exposures and
for recommending strategies
regarding funding and dividend
payments.
In 2022 the FAC committee met
on 2 occasions.
The Business Risk Committee
(BRC), which was established
in 2020, provides additional
oversight to the Board and
Committee functions through
a twice yearly granular review of
broader strategic and operational
risks. The committee focuses
on risks relating to business,
trading and overall compliance
with applicable laws, regulations,
policies and procedures in each
of the jurisdictions in which
Magontec operates.
The Chair of the Committee is
Executive Chairman Nicholas
Andrews and the members include
Independent Directors Andre
Labuschagne and Atul Malhotra.
Other Independent and Non-
Executive Directors are invited
to attend.
This committee reviews the
company’s risk settings through the
prism of a Risk Register, a dynamic
document that is updated and
adjusted prior to each meeting.
The committee is an important
conduit through which Director
experience can assist executive
management to anticipate, identify
and manage risks inherent in the
structure and nature of Magontec’s
diverse operational activities.
The primary responsibility of the
BRC is to oversee and evaluate
the overall effectiveness of the
Group’s business risk management
framework, systems for compliance
and adequacy of internal controls.
Further, the BRC seeks to ensure
that Management has:
a.
identified and analysed the
business and environmental
risks facing the Group,
including assessment and
implementation of principles,
policies, processes and controls
to avoid, manage or mitigate
those risks, and
b. established policies and
procedures to ensure, monitor
and report on ongoing
compliance with statutory and
internal compliance obligations
The BRC ensures that the board
maintains oversight of material
operational, environmental and
social risks. In addition to the
analysis of the Risk Register the
BRC reviews environmental
and operational certification for
each manufacturing location
including currency, renewal date
and outstanding requirements
imposed by a relevant regional
authority.
This committee meets on two
occasions each year, immediately
prior to the key Interim and Annual
Reports to shareholders.
a. Safety
The Board reviews Magontec’s
safety records and risks each
month. The company has in place a
rigorous system of workplace injury
monitoring. All accidents, large
and small are noted and reported.
This system allows operations
managers to closely oversight
critical employee actions and
habits, particularly in magnesium
cast house operations where
molten metal is stored, alloyed,
or otherwise processed and
transferred between one activity
and another.
Over the years there have been
accidents at all Magontec factories.
A task of management is to
continually review and challenge
the processes and structures
in place that are designed to
ensure that accidents are avoided
wherever possible.
In 2022 there were four lost-time
injuries (LTI) sustained among 320
Magontec employees of whom 220
work in manufacturing operations
and 100 in administrative and
management roles.
There were two significant
accidents in 2022. An employee in
our Xi’an plant was injured during
a machine cleaning process and
required hospitalisation. This
employee has since returned to
work. In July and August there was
a fire at the company’s German
recycling plant in a scrap holding
bay. This was addressed by the
company’s own emergency
response team and did not require
outside assistance.
While all accidents are distressing,
particularly where there is an injury
to a staff member, remedial action
and changes to work processes and
oversight are quickly introduced.
We continue to seek to make our
workplaces safer and to avoid any
repeat accidents.
13
Magontec LimitedAnnual Report 2022 Environmental, Social and Governance (ESG) (continued)
30
25
20
15
10
5
0
Total Accidents
Lost Time Injuries (RHS)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
6
5
4
3
2
1
0
Total Accidents
Lost Time Injuries (RHS)
14
0
24
2
20
4
22
4
16
1
16
4
12
5
7
1
8
2
17
3
9
4
1
1
5
4
Over the last few years, Magontec
has implemented a comprehensive,
third party supplied and supported,
ERP (enterprise resource
planning) infrastructure across all
its operations in Europe, North
America and China. Management
can track and locate inventories
and monitor logistics at each
point between despatch from the
company’s facilities and arrival at
customers premises.
3. Social
Magontec has maintained a strong
record of staff retention, among
its operations employees and in
administrative and management
roles. The company’s senior
management team, the global
executive management group
and the regional leadership teams
in operations and sales, have an
average tenure of over 15 years.
While this length of service
endows the company with deep
experience across our business
activities, it also requires a focus
on communication from factory
and office staff to our long serving
senior management team.
In 2021 the company introduced
a Whistleblower policy so that
employees can anonymously raise
issues to an independent arbitrator
(not an employee of the company)
who can elevate concerns to an
Independent Director. This is part
of a Code of Conduct document
that obliges all Magontec
personnel, including the Board
and executive management, to
acknowledge and abide by a set of
principles and ethical standards in
their internal and external dealings.
This document can be viewed on
the Magontec website.
The BRC undertakes a twice yearly
review of the Group’s trading
relationships in the context of
regional, United Nations and other
sanctions. Magontec trades with
customers and suppliers in 23
different countries. Through the
BRC and management, policies
have been introduced at regional
levels so that the Group can
more transparently manage its
exposure to sanctioned regimes
or companies and understand the
associated regulatory risks.
b.
Cyber, Information
Technology and Fraud
In common with companies
all over the world, Magontec is
subjected to daily phishing and
other deceptive practice attacks
through the Internet. The Group
addresses these threats through
the enforcement of IT and data
usage protocols and practices,
by maintaining and transmitting
information via secure channels
and by subjecting company
systems to testing and review.
We are able to acquire further
protection for our European and
US subsidiaries through cyber
insurance policies that offer
protection against identity and
reputation theft (blackmailing),
bank account and credit card
fraud, hardware and data breaches,
business interruption and
compensation in liability cases and
data protection incidents. This type
of insurance policy is not available
in China.
In 2022 Magontec engaged
external parties in China and
Europe to test the company’s
defences against external threats.
Reports on both business units
were provided to the BRC and
recommendations were made
to strengthen the company’s
defences.
14
Magontec LimitedAnnual Report 2022 Environmental, Social and Governance (ESG) (continued)
Diversity by Gender (2022)
Women
Men
266
200
131
132
31
22
1
3
66
34
20
54
Asia
Europe
Australia
Office
Factory
Total
b. COVID-19
In our 2021 Annual Report we
identified the COVID situation
in China as posing a particular
risk to the Group’s operations in
that part of the World. Indeed
throughout 2022 COVID
presented a significant threat to
our Chinese business. Over the last
12 months we have experienced
factory closures in Xi’an and at the
Golmud factory. While these were
difficult to manage there was no
interruption in supply to anode or
alloy customers. With the move
away from zero COVID in China we
think that the risks from COVID are
now highly manageable.
In Europe there were very few
ongoing pandemic effects.
a. Diversity
The company’s Code of Conduct
details the manner in which
employees are expected to behave
and how employees should
be treated by the company, by
management and by each other.
As a multi-national organisation
there is a high level of ethnic
diversity within Magontec, but
a more modest level of gender
diversity. Our published Code
actively promotes equality,
diversity and inclusion within
the organisation for employees
of all ages, ethnic or national
origins, sexual orientation, marital
and parental status, physical
impairment, disability and religious
beliefs.
In Europe we evaluate the
specific function of a job based on
established criteria and a scoring
system. Fixed salary levels are
assigned to a fixed range of points
for 13 salary levels. Through this
mechanism we seek to ensure
that there is no difference in
pay between employees based
on gender or other perceived
differences.
In China, recruitment, promotion,
and salary levels are based on
market benchmarks and an internal
position ranking system designed
to remove gender discrimination.
These processes are regularly
reviewed and will incorporate
changing industry standards and
regulatory requirements in each
of the regions in which Magontec
operates.
The metals industry is orientated
around a central function that
requires the application of
relatively heavy physical labour.
The management of cast house
processes including metal melting,
the loading of metal scrap and
ingots into furnaces has not
hitherto attracted a gender-
diverse labour force.
In our anodes manufacturing
operations there has been a
growing level of gender diversity
over many years at the Xi’an and
Santana facilities.
15
Magontec LimitedAnnual Report 2022
Metals
Metals
The magnesium
alloy recycling and
primary magnesium
alloy manufacturing
businesses enjoyed
buoyant conditions
in 2022.
Magontec manufactures primary magnesium
alloys in China at its Golmud, Qinghai facility
and recycles magnesium alloys in Germany
and Romania.
As the adjacent charts show, while
margins were strong, magnesium
alloy sales volumes were lower than
in 2021, partly the result of high
prices and widespread economic
contraction leading to lower
offtake by customers in Europe,
North America and Asia.
While economic factors have
constrained industrial activity,
Magontec’s global magnesium
alloy sales volumes are further
reduced by the low output of
primary product from our Golmud
cast house. Since 2019 this facility
has operated without supply from
our partner company, the Qinghai
Salt Lake Magnesium Co Ltd
(QSLM).
The automotive industry is the
principal customer for these
products along with smaller
volumes to the power tool
industry. The company also
manufactures a wide variety of
specialist alloys and a growing
volume in other value-added
magnesium products that are
sold into the aerospace and
steel industries, among others.
Metals Report
In 2022 all Magontec’s metals
businesses recorded profits ahead
of the previous year. The surge in
magnesium prices was reflected
in increased revenues and created
exceptional opportunities for
margin expansion.
16
Magontec Metal Volumes
(tonnes)
20,000
19,130
19,839
13,588
15,000
10,000
5,000
0
2020
2021
2022
Magontec Metal Revenues
(AUD mil)
102.8
72.1
63.7
120
100
80
60
40
20
0
2020
2021
2022
Magontec Metal Gross Profit
(AUD mil)
25
20.5
20
15
10
5
0
5.6
4.0
2020
2020
2021
2021
2022
2022
Gross Profit GP margin RHS (%)
25
20
15
10
5
0
Magontec LimitedAnnual Report 2022
Metals (continued)
Magontec Qinghai’s magnesium alloy cast house
Magontec’s global magnesium
alloy business is reliant on the
supply of primary product from our
Chinese facility into European and
other markets, and scrap returns
generated from those sales to our
recycling factories.
The lengthy delay in the start-up
of the QSLM pure magnesium
electrolytic smelter, and the
absence of supply of that product
to Magontec’s adjacent cast house,
creates a deficit at each step of the
global metals production chain
for our company. In particular
it reduces our ability in Europe
to source scrap returns for our
recycling assets in Romania and
Germany.
Magontec remains fully invested
in its Qinghai project which
produced several thousand
tonnes for customers in Asian
and North American markets.
Because of the location of the
plant it is heavily reliant on local
supply by QSLM and under the
current supply metrics (no metal
was supplied by QSLM in 2022) it
is not possible to produce higher
volumes at a reasonable margin.
Despite these limitations, the
Magontec Qinghai cast house
reduced its losses in the year under
review while the overall metals
business, including recycling
activities, posted a close to break-
even EBIT result.
Our partners at Qinghai, QSLM (a
major shareholder), have continued
to work their way through a difficult
remediation schedule and financial
restructure. The new leader of the
Golmud pure magnesium project,
Xing Cai Li, joined the Board of
Magontec in September 2022
after his appointment as General
Manager at Qinghai Huixin Asset
Management (QSLM’s parent
company) in early 2022.
We remain confident that QSLM
will commence supply of pure
magnesium to Magontec’s Qinghai
cast house in the near future as
the technical and process issues
that have impacted this project
are resolved.
It remains the case that the QSLM
electrolytic magnesium smelter
will manufacture the lowest CO2
magnesium product in the world.
While there are other projects
under consideration in other
regions of the world, with some
reportedly under construction,
the QSLM facility is the only
constructed large scale, low
emission electrolytic project in
the world today and its output
will be much in demand.
In 2022 Magontec’s metals
recorded Gross Profit of $20.5
million compared with $5.6 million
in 2021. This was largely generated
by the company’s recycling
and remelting businesses.
17
Magontec LimitedAnnual Report 2022 Metals (continued)
In the first six months of 2022
magnesium prices remained
high and we were able to ship
a large inventory of recycled
scrap material to customers all
over the world. In the US the
shuttering of the local magnesium
manufacturer was a key contributor
to higher prices. For nearly 20
years American magnesium
customers have paid a very high
duty on Chinese magnesium
imports to protect a local producer
from whom they have historically
sourced a large proportion of their
requirements. In the absence of
this source, US customers have had
to source supply from international
recyclers among others. No
announcements have been made
by the sole domestic US producer
on a recommencement of its Great
Salt Lake operations.
Magontec operates Europe’s
lowest CO2 emissions recycling
business with two plants
strategically located in Germany
and Romania. The migration of
European industry from west to the
east over the last 20 years has seen
the growth of a magnesium alloy
die casting industry, particularly
magnesium alloy steering wheels,
to Romania.
Both of Magontec’s European
recycling operations performed
extremely well through the year
with little downtime. There were no
residual COVID effects and both
operations were back to normal
operating status.
The salient operating event was the
change in energy prices. Since the
Russian invasion of Ukraine, energy
supplies to all European companies
have been under threat and prices
have been rising. In 2022 the
average energy cost per kWh rose
by 68% for the combined European
recycling businesses over 2021.
18
In Romania the effect was slow to
materialise as the Government in
that country capped energy prices
for businesses in the early part of
the year. This cap has since been
removed. In Germany there was
no cap in 2022 but in 2023 a price
cap has been introduced limiting
the price paid for 70% of historical
production volume.
Energy costs and availability
are critical inputs for recycling
and primary magnesium alloy
manufacturing. While the
immediate energy crisis has been
successfully managed through
the northern winter and energy
prices will likely retrace through
the spring and summer, the
longer-term energy situation is not
resolved and will remain a risk into
the winter of 2023 and possibly
beyond. Other costs are also rising.
Wages in Germany and Romania
have risen rapidly in the last few
months and labour availability
is an issue at all manufacturing
operations.
Magontec’s European metals
business has sought to manage
reduced scrap availability and
rising costs by growing activities
in downstream value-added
products. Our specialist metals
division supplies increasing
volumes of hybrid magnesium
products to the aerospace
industry and has been a growing
contributor to earnings in the last
few years. It is likely to receive a
boost from aerospace inventory
re-stocking that is now occurring
in many Western countries.
Other businesses and supply
sources have been developed
by better management of melt
output and metal recovery.
The outlook for the metals business
is certainly more challenging than
for the last 12 months. For our
customers, supply of primary metal
from China is now more certain
than it appeared at this time last
year. Shipping availability is no
longer a threat, transportation
costs between China and Europe
have declined to lower levels and
pure magnesium prices have
been stable around ¥20,000
- ¥25,000 per tonne for some
time. While the US producer has
been absent from World markets
for over 12 months, its long-term
future and the ramifications for
the global magnesium industry if
it does not return, are difficult to
forecast. As things stand Chinese
imports to the US remain highly
taxed. A change to this tariff, which
aluminium alloy manufacturers will
be as keen to pursue as magnesium
alloy die casters, would impact
global magnesium metal flows
and prices in all jurisdictions.
Magontec’s magnesium metal
strategy continues to focus on the
re-start of supply of liquid pure
magnesium metal from QSLM to
our adjacent magnesium alloy cast
house. This event will revitalise
our global trading and recycling
activities and is keenly anticipated
by the wider magnesium alloy
diecasting industry. We have
also worked hard to develop new
earnings streams for this business
to reduce reliance on recycling and
reduce risks associated with a high-
volume lower margin business.
Our new activities are all focussed
on higher margins and a broad
range of niche products where
production and technology skills
are more important than volume
throughput. In the near future
we expect to have both of these
strategies driving higher profits
for shareholders.
Magontec LimitedAnnual Report 2022 Magnesium Markets and Commodity Review
Magnesium Markets and Commodity Review
The magnesium
industry has been
through a price
rollercoaster over the
last year and a half. It
appears to be settling
back down again at
the start of 2023.
The underlying price of pure magnesium
emerged as a key profit driver for Magontec
over the last 18 months.
Rapidly rising and then sustained
high prices coupled with higher
levels of demand resulted in robust
trading conditions for both primary
and recycled Mg alloy production,
particularly in the first half of 2022.
In recent months demand has
moderated and is likely to be more
muted still in the early part of 2023.
There have been a variety of
influences on the magnesium
price in this period including a
sharp reduction in supply from the
sole US producer, environmental
constraints on Chinese producers
and Chinese coal miners through
2021 to fluctuating demand
for magnesium products as
international consumers have
sought to manage global logistics
risks and, more latterly, challenging
macro-economic trends.
Chart 1 on page 20 shows the
long run relationship between
magnesium (Mg) and aluminium
(Al) expressed in Chinese RMB
and the seismic price event of
August 2021.
The world’s principal light
metals, Mg and Al, are relatively
interchangeable, at least for
some automotive and electronics
applications, and this has caused
the two prices to run in sync for
many years. As the global economy
emerged from the COVID period,
the price of all metals began to rise,
reflecting rising consumer demand
and supply shortages.
For Mg two other events occurred
in mid-2021 causing an even
sharper price increase; the
closure of the US Magnesium
operations at Park City Utah
and the imposition of stricter
environmental conditions on
Chinese coal miners and Pidgeon
process magnesium producers that
are heavily dependent on coal gas
and coal prices.
19
Magontec LimitedAnnual Report 2022 Magnesium Markets and Commodity Review (continued)
While the US Magnesium facility
has not returned to prior output
levels, Chinese regulatory
impositions on domestic coal and
Mg production appear to have
moderated, at least temporarily,
and the global economy has
stalled. This caused Mg prices
to retrace sharply in 2022 and
stabilise in a band between
¥20,000 and ¥25,000 a tonne in
the second half of the year, still at
a level somewhat higher than the
long-run average. In the US prices
have stayed higher for longer
reflecting a complex supply matrix
that has historically excluded direct
Mg alloy ingot shipments from
China due to extreme tariff barriers
but includes a wide variety of
indirect scrap collection from Asia
and European ingot supply.
It seems likely that Mg prices
will continue to be supported
at these higher levels as coal,
ferro-silicon and dolomite prices,
the key energy and raw material
inputs for Pidgeon production, are
also tracking above longer-term
trends. While demand has been
weakening for some months and
is expected to weaken further
in the first period of 2023, the
current Chinese factory gate price
is estimated to be close to the
Chinese costs of production.
Ferro Silicon (Chart 2), the most
expensive raw material input
for Pidgeon magnesium, is also
heavily influenced by coal prices
(Chart 3) and has been subjected
to growing environmental controls
that have increased its own costs
of production. Similarly, the
magnesium host rock, dolomite
(Chart 4), has also seen a sharp
rise in production costs over the
last 18 months. Other inputs,
in particular labour, are also
subject to economic pressures.
20
Chart 1. Magnesium & Aluminium
(1 Jan 2020 - 31 Dec 2022)
Chart 1. Magnesium & Aluminium
(1 Jan 2020 - 31 Dec 2022)
¥70,000
¥60,000
¥50,000
¥70,000
¥40,000
¥60,000
¥30,000
¥50,000
¥20,000
¥40,000
¥10,000
¥30,000
¥0
¥20,000
¥10,000
Jan/2 0
¥0
Jan/2 0
M ar/2 0
M ar/2 0
M ay/2 0
M ay/2 0
Mg 99.9% China RMB
Chart 1. Magnesium & Aluminium
(1 Jan 2020 - 31 Dec 2022)
Al Ingot 99.7% China RMB
Mg 99.9% China RMB
Al Ingot 99.7% China RMB
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
M ar/21
M ay/21
Jul/21
Sep/21
N ov/21
Jan/22
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
M ar/21
M ay/21
Jul/21
Sep/21
N ov/21
Jan/22
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
Chart 2. Magnesium & Ferro Silicon (RHS)
(1 Jan 2020 - 31 Dec 2022)
Chart 2. Magnesium & Ferro Silicon (RHS)
¥70,000
(1 Jan 2020 - 31 Dec 2022)
Mg 99.9% China RMB
¥60,000
Chart 2. Magnesium & Ferro Silicon (RHS)
(1 Jan 2020 - 31 Dec 2022)
FeSi 75% Ch RMB
Mg 99.9% China RMB
FeSi 75% Ch RMB
¥50,000
¥70,000
¥40,000
¥60,000
¥30,000
¥50,000
¥20,000
¥40,000
¥10,000
¥30,000
¥0
¥20,000
¥10,000
Jan/2 0
M ar/2 0
¥0
Jan/2 0
M ar/2 0
M ay/2 0
M ay/2 0
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
M ar/21
M ay/21
Jul/21
Sep/21
N ov/21
Jan/22
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
M ar/21
M ay/21
Jul/21
Sep/21
N ov/21
Jan/22
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
Chart 3. Chinese Coal and Magnesium prices
Chart 3. Chinese Coal and Magnesium prices
(1 Jan 2021 - 31 Dec 2022)
(1 Jan 2021 - 31 Dec 2022)
Mg 99.9% China RMB
Chinese Coal Price per Tonne (RHS)
¥70,000
¥60,000
¥50,000
¥40,000
¥30,000
¥20,000
¥10,000
¥0
Jan/2 0
M ar/2 0
M ay/2 0
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
M ar/21
M ay/21
Jul/21
Sep/21
N ov/21
Jan/22
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
Chart 5. Mg alloy quarterly Chinese export volumes and Mg prices
(1Q '20- 4Q '22)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
1Q22 2Q22 3Q22 4Q22
Mg alloy quarterly Chinese export volumes
Mg quarterly average price
¥25,000
¥20,000
¥25,000
¥15,000
¥20,000
¥10,000
¥15,000
¥5,000
¥10,000
¥0
¥5,000
¥0
¥3,000
¥2,500
¥2,000
¥1,500
¥1,000
¥500
¥0
¥50,000
¥45,000
¥40,000
¥35,000
¥30,000
¥25,000
¥20,000
¥15,000
¥10,000
¥5,000
¥0
Magontec LimitedAnnual Report 2022
Magnesium Markets and Commodity Review (continued)
Chart 4. Chinese Dolomite Prices
(December 2021 to January 2023)
¥400
¥350
¥300
¥70,000
¥250
¥60,000
¥200
¥50,000
¥150
Chart 3. Chinese Coal and Magnesium prices
(1 Jan 2021 - 31 Dec 2022)
Mg 99.9% China RMB
Chinese Coal Price per Tonne (RHS)
¥100
¥40,000
¥50
¥30,000
¥0
¥20,000
¥10,000
D e c-21
Jan/2 0
¥0
Ja n-22
Fe b-22
M ar-22
A pr-22
Ju n-22
Jul-22
Se p-22
O ct-22
N o v-22
D e c-22
M a y-22
M ar/21
M ay/21
A u g-22
Jan/22
M ar/2 0
M ay/2 0
Jul/2 0
Sep/2 0
N ov/2 0
Jan/21
Jul/21
Sep/21
N ov/21
M ar/22
M ay/22
Jul/22
Sep/22
N ov/22
¥3,000
¥2,500
¥2,000
¥1,500
¥1,000
Ja n-23
¥500
¥0
Chart 5. Mg alloy quarterly Chinese export volumes
and Mg prices (1Q ‘20- 4Q ‘22)
Chart 5. Mg alloy quarterly Chinese export volumes and Mg prices
(1Q '20- 4Q '22)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
¥50,000
¥45,000
¥40,000
¥35,000
¥30,000
¥25,000
¥20,000
¥15,000
¥10,000
¥5,000
¥0
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
1Q22 2Q22 3Q22 4Q22
Mg alloy quarterly Chinese export volumes
Mg quarterly average price
Chart 6. Global Automotive Sales By Region
Chart 6. Global Automotive Sales By Region
China
Asia ex China
Nth America
Europe
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
100
90
80
70
60
50
40
30
20
10
0
s
t
i
n
U
s
e
a
S
l
l
a
u
n
n
A
-
V
L
2019
2020
2021
2022 (e)
2023 (e)
Chart 7. Global ICE and EV Automotive Sales
EV
2017
2018
2019
2020
2021
2022 (e)
2023 (e)
2024 (e)
Pidgeon process magnesium
has a very high labour input
cost compared to electrolytic
magnesium production; a great
advantage 20 years ago but likely
to become a growing burden in the
years ahead.
Demand for Mg alloy, the market
that Magontec operates in as a
primary producer and recycler, is
largely focussed on the automotive
industry with smaller shares going
to power tools and electronics – all
consumer sectors and exposed to
rising interest rates and underlying
demand weakness.
Chart 5 shows Chinese Mg alloy
export volumes and the pure Mg
price over the last three years,
including a sharp rise in demand
following the initial COVID wave,
a less sharp decline as Mg prices
rose through 2Q and 3Q 2021 and
a more sustained level of exports
through the first three quarters
of 2022 as pent-up automotive
demand, artificially suppressed
by COVID induced microchip
shortages, began to flow into
new automotive sales.
Through the last 12 months
automotive sales have continued
a steady recovery from the 2020
COVID shock and chip shortage
leading to marginally higher global
sales in all regions, although the
outlook in 2023 remains uncertain.
In Europe a general decline in
automotive sales, exacerbated
by plummeting Russian demand,
has seen regional unit sales fall by
around 1.1 million in 2022 while
in China, despite the COVID
lockdown, sales grew strongly,
particularly in the EV (electric
vehicle) sector. Indeed, as Chart 7
shows, EV sales are expected to
grow to around 10% of all global
sales by 2024, with China leading
the way in this sector.
21
Magontec LimitedAnnual Report 2022
Chart 6. Global Automotive Sales By Region
China
Asia ex China
Nth America
Europe
15%
10%
5%
0%
Magnesium Markets and Commodity Review (continued)
-5%
-10%
-15%
-20%
-25%
2019
2020
2021
2022 (e)
2023 (e)
Chart 7. Global ICE and EV Automotive Sales
Chart 7. Global ICE and EV Automotive Sales
EV
ICE
EV
100
90
80
70
60
50
40
30
20
10
0
s
t
i
n
U
s
e
a
S
l
l
a
u
n
n
A
-
V
L
2017
2018
2019
2020
2021
2022 (e)
2023 (e)
2024 (e)
Chart 8. Global Pure Magnesium Production
(1994 - 2022)
Chart 8. Global Pure Magnesium Production
(1994 - 2022)
China
China
Rest of the World
Rest of the World
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-
s
e
n
n
o
T
19 9 4
19 9 6
19 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
2 010
2 012
2 014
2 016
2 018
2 0 2 0
2 0 22 (f)
The chart also shows the
resurgence of production following
the COVID period in 2020.
Demand for magnesium products
from the aluminium, automobile,
power tool, steel and titanium
industries continues to experience
long-term positive momentum
with the magnesium alloy sector
(where Magontec operates)
expected to enjoy CAGR over the
5-year period to 2027 of 6.7%.
As a result of the magnesium price
spike in 2021 several new projects
have emerged in Europe, Australia
and Canada. None of these are yet
in production and most are still in
an embryonic stage. As a global
magnesium alloy producer and
recycler, new pure magnesium
production, both within and
outside of China, will provide
added impetus for all Magontec’s
Mg alloying businesses.
There is certainly hesitancy
in the automotive sector and
Magontec has experienced this in
its conversations with customers
in Europe, North America and
China in the last few months
of 2022. Our direct customers
are the automotive application
manufacturers. These are Tier 1
die casting companies that make
steering wheels, instrument panel
beams and airbag containers
among other products. Most of
the applications manufactured
using Magontec’s primary and
recycled magnesium alloys will
continue to be applied in EVs as
they have been in ICEs (internal
combustion engine). The exception
being gear box cases that will no
longer be present in EVs. The
outlook for 2023 is as difficult to
predict as in any prior year. We can,
however, say with some certainly
that margins for Mg alloy products
will be lower than in 2022
Finally, a comment on the
emerging magnesium supply
matrix. As shareholders will recall
China is the largest producer of
pure magnesium and uses the
Pidgeon manufacturing process.
Other major producing countries
are Israel, the USA, Russia and
Brazil. In Chart 8 we show the long
run growth in pure magnesium
production and the change in the
production base from principally
western countries to around 88%
Chinese production in 2022.
China continues to be the
dominant player in this industry
and the Pidgeon process, despite
its environmental challenges, the
dominant production method.
22
Magontec LimitedAnnual Report 2022
Anodes
Anodes
Anodes are an
essential and integral
part of the hot water
appliance industry and
Magontec is a leading
global supplier.
Magontec manufactures both magnesium
anodes and electronic anodes in China and
Europe. The key customer for Magontec
anodes is the global hot water appliance
manufacturing industry.
Magontec’s anodes businesses
enjoyed stronger markets in 2022
driven by rising raw material prices
and some regional market share
growth.
Despite improved margins, sales
volumes for both magnesium and
electronic anodes were slightly
lower than in 2021, reflecting
weakening markets and high
inventories in the second half
of the year, particularly in China
and the USA.
Hot water appliance sales have
a strong bias to the replacement
cycle (generally about 80% of
production) in the longer run,
however the speed of the global
economic adjustment in late 2022
appeared to cause some inventory
indigestion, exacerbated by the
Chinese covid lock down. We
expect that to clear through the
first half of 2023 in all regions.
The rise in the price of magnesium
is largely responsible for the strong
increase in revenues in the early
part of 2022. As magnesium prices
have fallen significantly from their
highest levels this will feed into
contract prices through the first
half of 2023. Our expectation
at this time is that prices will not
return to first half 2021 levels when
pure magnesium prices averaged
just ¥16,645 per tonne.
Magontec is a global leader in the
anode manufacturing business
with strong market shares in China,
Europe, the US and the Middle
East.
Ready access to magnesium raw
materials, even in periods of supply
constraint, an active approach to
technical development and high-
quality manufacturing processes
are all factors that help Magontec’s
businesses remain competitive in
a challenging global market.
23
Magontec LimitedAnnual Report 2022 Anodes (continued)
In China we have continued to
invest in automation and expanded
capacity and in 2023 we will
start delivering a wider selection
of anodes to customers where
water quality requires a different
technology.
In Europe and China a key industry
attribute is the ability to supply
many different anode types for a
wide range of hot water appliances
to many different manufacturers
at a competitive price. Over many
years our Xi’an, PRC and Santana,
Romania magnesium anode
factories have proved themselves
equal to that task.
In the US and Europe we will
launch a new series of electronic
anodes with higher functionality
to meet new standards in the
rapidly growing heat pump
market. As climate change pushes
regional regulations towards more
environmentally friendly water
heating devices, the demand for
intelligent anodes that can manage
all aspects of cathodic protection
is also growing.
As a leader in electronic anode
technology, and with a team of
scientists based at our German
facility in Bottrop, Magontec is
well placed to meet the changing
market for cathodic protection
devices for hot water appliance
manufacturers and other
applications that are subject to
the effects of corrosion from
proximity to water.
While 2022 was a more profitable
year for Magontec’s sacrificial
anodes, all these businesses have
enjoyed steady growth in volumes
and earnings over many years.
As a stand-alone business with a
Gross Profit of $18.1 million in 2022,
Magontec’s global anode business
would likely attract an independent
valuation greater than the entire
market value of the company as at
the end of 2022.
The outlook for Magontec’s
global anodes businesses
remains positive. We continue
to grow volumes into the US in
all anode types and see much
opportunity there. We are
beginning to see opportunities
in other Asian regions as new
housing developments in major
cities are starting to resemble
the explosive growth of Chinese
apartment developments over
the last 20 years. In China itself
apartment building has slowed
through the heavily pandemic-
impacted 2022 but should see
some resurgence through 2023 as
government support for apartment
development companies provides
greater stability to this important
sector. Together with the move
towards more environmentally
friendly technologies in western
countries the outlook for sacrificial
and electronic anode demand
continues in a long-term positive
trend, albeit the margins in
magnesium anodes experienced
in 2022 cannot be repeated.
24
Mg Anode Volumes
3,294
3,255
3,038
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2020
2021
2022
Total Anode Revenues
(AUD mil)
55.8
43.0
31.4
60
50
40
30
20
10
0
2020
2021
2022
Anode Business Gross Profit
(AUD mil) and GP Margin
20
18.1
13.6
8.2
15
10
5
0
2020
2020
2021
2021
2022
2022
Gross Profit GP margin RHS (%)
35
30
25
20
15
10
5
0
Magontec LimitedAnnual Report 2022
Innovation
Innovation
Magontec is a
market leader in a
number of niche
industries. Our
focus on innovation
is designed to
entrench and grow
our participation in
each sector.
Magontec continues to invest in new product
development and process refinement at its
Chinese and European facilities.
In addition to the company’s own
research and development teams,
we also engage with universities
and research institutes in Germany,
China and Australia.
China
Through 2022 the company’s
Chinese teams focused on
developing local capacity for hybrid
specialist metals production, a new
sacrificial anode product for the US
market and a new resistor anode for
Chinese markets.
In 2023 we expect to deliver the
new sacrificial anode product
to a US customer after installing
and commissioning equipment
for this market. The product has
a wide application for poor water
quality regions and we expect to
find other US customers in the
coming months. The new resistor
anode is a cast or extruded product
integrated with an injection
process. This product will also
be introduced for the Chinese
market in 2023.
In 2022 Magontec Xi’an again
participated in China’s National
Key R&D program together with
10 partners and over ¥19m of
funding. Magontec was awarded
specific funding of ¥1.16m and
participated in one of 5 sub-
projects to optimize alloying of
magnesium using liquid pure
Mg raw material from its partner
company in Qinghai, QSLM. The
project started at the end of 2022
and will continue for 3 years.
Other associations include an
Australian Linkage project, a
collaborative enterprise that
includes Magontec Xi’an, Monash
University and Baosteel with
additional financial support
from the Australian government.
A new alloy system is being
investigated that shows good
deformation symmetry behaviour
after extrusion, improving
tensile and compression
property asymmetry issues.
25
Magontec LimitedAnnual Report 2022 Magontec has recently returned
to master alloy innovation and
research, this time in partnership
with Swinburne University, based
in Melbourne, Australia, and
Indonesia’s National Research and
Innovation agency, BRIN.
Many specialist magnesium alloys,
such as ZE41, the workhorse alloy
for magnesium gravity casting
foundries, and AE44 used in high
pressure diecasting applications,
rely on the low-cost rare earths
cerium and lanthanum that are
produced as by-products of more
expensive rare earths such as
neodymium and europium.
Typical rare earth production
proceeds through numerous
stages from concentrated
oxide that is converted to rare
earth metal. The conversion to
metal occurs at a small number
of locations worldwide and is
associated with high cost and
environmental penalties. The
production of magnesium-rare
earth master alloys directly
from oxide materials, the focus
of these research projects,
presents advantages in terms of
cost, environment, and supply
chain security.
The examples given by Magontec’s
magnesium master alloys illustrate
how research and innovation can
lead from initial innovation to
commercial success and deliver
significant commercial rewards
for shareholders.
Innovation (continued)
This may lead to stamping and
drawing process applications that
use existing Magontec specialist
alloy components.
Our Chinese research team is
also involved in the Qinghai Key
Science and Technology project
seeking to expand applications
for Magontec’s proprietary
AE44 magnesium alloy in new
automotive applications.
Australia
In Australia, in association with
universities in Victoria, we have
focussed on developing master
alloys; a mixture of magnesium plus
high levels of a second element.
These are used in the manufacture
of commercial alloys when direct
addition of the second element in
pure form is problematic. These
master alloys are now a key part
of Magontec’s specialist metals
product portfolio.
26
Starting from a zero base some
years ago, in 2022 master alloys
and associated metals products
now represent a significant
business for Magontec in the
aerospace industries, among
others. The development story
of these products illustrates the
value of innovation, research and
development and points to future
opportunities.
The development of master
alloys began with university scale
research at The University of
Queensland followed by further
development at the Australian
research organisation, CSIRO.
Research was undertaken under
the Australian Government’s
Cooperative Research Centres
program that combined the
activities of research organisations
with one of Magontec’s
predecessor organisations,
Australian Magnesium
Corporation. Industrial scale
production trials were carried
out in several locations including
Japan, China, and Germany
before eventually settling on
the commercially successful
products of today.
Magontec LimitedAnnual Report 2022 Innovation (continued)
Europe
In Europe our research focus
has been on developing new
products and new standards
for our global water heater
manufacturing customers. As
national governments and global
authorities commit to further
reductions in carbon dioxide
emissions, customer demands for
sustainability in production and
operation of building services
equipment are also rising.
This trend plays to Magontec’s
strength as a supplier of durable
corrosion protection equipment
that increases the service life of
drinking water appliances and
saves valuable natural resources.
Our European application
technology & engineering (A&E)
team is now focused more than
ever on increasing longevity and
energy efficiency of existing and
new products.
This work has led to newly
established service-life tests
of electrical components and
functional materials, which are
performed in-house at Magontec
and at external facilities. Examples
include accelerated life-time tests
of powered anode coatings as well
as thermic stress tests for switching
mode power supplies.
The A&E team is also engaged in
the search for trusted international
suppliers from early-stage
development through all phases
of each product’s life cycle. Only
the most durable components
from the most reliable sources are
accepted into serial production.
This focus on supply chains helps
prevent product failures and allows
long-run strategic planning with
minimum risk. In 2022 Magontec
commenced a major extension
of its Bottrop laboratory facilities
that is now near completion and
will allow more advanced in-house
long-term testing.
Magontec’s German research
efforts are also focused on the next
generation of cathodic corrosion
protection systems: smart, efficient
and aesthetically appealing.
Features of Magontec’s new
product lines go beyond cathodic
corrosion protection; a key aspect
of the new generation products is a
platform strategy which allows easy
adjustment to national technical
standards, such as different
regional power grid characteristics.
Through optimization of control
algorithms and the use of modern
circuit elements it is now possible
to reduce the power consumption
of powered anode controllers by
up to 90 % compared with prior
generation models.
In 2022 our German A&E team
have worked on international
standards relating to regulatory
aspects for products in contact
with drinking water. Magontec has
now obtained product certification
from the National Sanitation
Foundation (NSF) for new powered
anode systems designed for the
North American market. NSF
accreditation provides customers
with the highest level of confidence
and transparency. These same
products are in full compliance
with the strictest drinking water
regulatory frameworks in the world
including the Water Regulatory
Advisory Scheme (WRAS) of the
United Kingdom and the German
Environment Agency (UBA).
27
Magontec LimitedAnnual Report 2022 Board of Directors
Board of Directors
Nicholas Andrews
Executive Chairman
Chairman of the Business Risk
Committee (BRC)
B Ec.(Syd)
Mr Andrews serves as the
Executive Chairman of
Magontec Limited. From
2007 to 2009 Mr Andrews
served as a Non-Executive
Director of Advanced
Magnesium Limited prior to
the acquisition of Magontec
GmbH and the company
name change to Magontec
Limited.
Mr Andrews has a financial
services background in
investment management
and investment banking.
From 1996 to 2005 he
was a Managing Director
at UBS Investment Bank
and responsible for global
distribution of Australian and
New Zealand Equity products.
From 1989 to 1996 Mr
Andrews was the Chief
Investment Officer at LGT
Investment Management
in charge of the group’s
investment portfolios for the
Australasian region.
Mr Andrews is a Member of
the Executive Committee
and serves on the Board of
the International Magnesium
Association. Since 2017 he
has also served as Honorary
Treasurer of the IMA.
28
Robert Kaye SC
Lead Independent Director
(re-appointed 29 July 2020)
Xing Cai Li
Non-Executive Director
(appointed 28 September 2022)
Andre Labuschagne
Independent Director
(re-appointed 25 May 2022)
Member of the Finance, Audit and
Compliance Committee (FAC)
Member of the Business Risk
Committee (BRC)
B. Comm (Potchefstroom
University)
Mr Labuschagne is the
Executive Chairman of Aeris
Resources Limited, (formerly
Straits Resources Limited).
Mr Labuschagne is an
experienced mining executive
with a career spanning more
than 30 years, primarily in
the gold industry, and has
held various executive roles
in South Africa, PNG, Fiji
and Australia for a number
of leading gold companies,
including Emperor Gold
Mines, DRD Gold and
AngloGold Ashanti. Mr
Labuschagne was previously
Managing Director of ASX
listed gold company, Norton
Gold Fields Limited.
Chairman of the Remuneration and
Nominations Committee (REM)
Member of the Finance, Audit and
Compliance Committee (FAC)
LLB (Syd), LLM (Cambridge) (Hons)
MBA, (Qinghai Nationalities Minzu
University)
Mr Kaye was admitted to legal
practice in 1978 and employed
as a solicitor at Allen, Allen
& Hemsley Solicitors.
Thereafter he pursued his
legal career at the NSW Bar
and was appointed Senior
Counsel in 2003, practising
in commercial law.
He has been involved in
an array of commercial
matters both advisory and
litigious in nature and served
on a number of NSW Bar
Association committees
including the Professional
Conduct Committee.
He has also served as a
director for various private
companies. In the conduct of
his practice as a barrister, he
has acted for many financial
institutions and commercial
enterprises, both public and
private and given both legal
and strategic advice. He has
had significant mediation
experience and been involved
in the successful resolution of
complex commercial disputes.
Mr Kaye is currently Chairman
of Collins Foods Limited and a
non-executive director at FAR
Limited and Electro Optic
Systems Holdings Limited.
Mr Kaye was previously the
Chairman of Spicers Limited,
the Chairman of the Macular
Disease Foundation Australia
and also was formerly a
non-executive director with
both UGL Limited and HT&E
Limited.
Xing Cai Li is General
Manager of Qinghai Huixin
Asset Management Co
Ltd (QHAM), the owner
of Qinghai Salt Lake
Magnesium Co Ltd (QSLM),
which operates the Qinghai
electrolytic magnesium
smelter complex in which
Magontec’s Magnesium Alloy
Cast House is based.
Mr Li has held previous
positions as the Deputy
Director of Finance at the
Shanghai and Hong Kong
listed Aluminium Corporation
of China (Chalco), one of the
world’s largest producers
of alumina and aluminium.
Prior to that Mr Li was Vice
President at Western Mining
Co Ltd, responsible for overall
financial management,
fund raising and investment
management as well as
being secretary to the Board.
Western Mining is a ¥23
billion company listed on the
Shanghai Stock Exchange
engaged in the mining,
smelting, and trading of metal
minerals, including copper,
lead, zinc, iron, gold and silver.
QSLM is a 28.85% substantial
shareholder in Magontec
Limited and the company
with whom Magontec Limited
has entered into a number
of agreements in relation to
the Magontec Qinghai alloy
production facility at Golmud
in Qinghai Province PRC.
Magontec LimitedAnnual Report 2022 Board of Directors (continued)
Atul Malhotra
Independent Director
(re-appointed 25 May 2022)
Zhong Jun Li
Non-Executive Director
(re-appointed 25 May 2021)
Member of the Remuneration and
Nominations Committee (REM)
Graduate of Wuhan University
of Technology
Mr Li is the owner of Tianjin
Keweier Metal Material Co Ltd
(KWE (TJ)) in China. He is a
graduate of Wuhan University
of Technology and spent 10
years at Tianjin Auto Industry
Company Ltd. For more than
10 years, Mr Li has built a
trading and manufacturing
business that specialises in
magnesium products. KWE
(TJ) has facilities located in
Hong Kong and Tianjin and a
broad experience of the global
magnesium industry. Mr Li is a
major beneficial shareholder
in Magontec Limited.
Chairman of the Finance, Audit and
Compliance Committee (FAC)
Member of the Remuneration and
Nominations Committee (REM)
Member of the Business Risk
Committee (BRC)
MBA (Delhi University)
Atul Malhotra has an extensive
professional background
in Procurement, Supply
Management, Strategy,
Business Development and
other functions. During his
career spanning over 40
years, he has held executive
roles at ABB, Bombardier
Transportation, Adtranz and
Continental with responsibility
for projects and operations in
Europe, Asia and Australia.
For over 10 years till October
2013, Mr Malhotra was the
Head of Purchasing and
a Member of the Group
Management at Georg
Fischer Automotive Group,
Schaffhausen, Switzerland, a
leading global supplier of cast
metal (including magnesium)
parts with an annual turnover
of approximately 1,200m
Euro and 11 production units
located in Europe and China.
As Head of Purchasing, his
main responsibilities included
establishing procurement
strategy and managing the
procurement function. As
part of the Group’s senior
management team, he also
held co-responsibility for
providing strategic direction
to, and oversight of, the
business units with reporting
responsibilities to the
Corporate division.
Since January 2014 he has
been acting as an independent
adviser to various corporate
clients and businesses.
29
Magontec LimitedAnnual Report 2022 Executive Management
Executive Management
Tong Xunyou
President, Magontec Asia
Derryn Chin
Chief Financial Officer
Patrick Look
Vice President, Finance & HR
B Chem (Dalian University),
MBA (Hong Kong Polytechnic
University)
B Com (University of New South
Wales) CA, CFA
Business Economist VWA
Mr Tong joined Magontec
Limited (then Hydro
Magnesium) in 2003 in the
role of Production Manager,
Finance Manager and Deputy
General Manager. In 2006
Mr Tong was appointed
General Manager and
assumed responsibility for all
of Magontec’s Chinese metal
and anode activities.
Prior to joining Magontec
Limited Mr Tong spent
eight years with the Henkel
Adhesive Company Limited
where he was Production and
Branch Manager.
Mr Tong holds a Bachelor’s
degree in Chemistry from
Dalian University of Science
and Engineering and an MBA
from Hong Kong Polytechnic
University.
Mr Chin joined Magontec
Limited in 2014 and was
appointed as the Chief
Financial Officer in 2016.
Prior to joining Magontec, Mr
Chin was an equity research
analyst at Macquarie Group in
Australia and prior to that held
roles in both the audit and
financial advisory divisions
of KPMG.
He is a member of Chartered
Accountants Australia
and New Zealand, a CFA
charterholder and speaks
Mandarin. He graduated with
a Bachelor of Commerce from
the University of New South
Wales with a double major in
Accounting and Finance.
Mr Look is the Vice-President
of Finance & HR, with primary
finance and operating
oversight responsibilities
for the Group’s divisions
in Europe, North America
and the Middle East. Mr
Look started his career at
Magontec GmbH (then Hydro
Magnesium) in 1998 as part
of the industrial business
management trainee program.
Over the last 20 years, after
assuming various finance
roles in the Group including
accounting, purchasing and
logistics and graduating as a
Business Economist (VWA)
he was appointed Finance
Manager in 2009 and Vice-
President Finance & HR
in 2012.
Christoph Klein-
Schmeink
President Magontec
Europe, North America
and Middle East
MBA (Münster University)
Mr Klein-Schmeink joined
Magontec Limited (then
Hydro Magnesium) in 2000 as
Sales and Marketing Manager
responsible for global sales of
the Group’s anode products.
He was appointed Head of
Sales and Marketing in 2007
and Vice-President of Global
Sales and Marketing in 2011.
In 2012 Mr Klein-Schmeink
was appointed President of
Magontec GmbH and has
responsibility for the Group’s
activities in Europe, North
America and the Middle East.
Prior to joining Magontec,
Mr Klein- Schmeink held the
position of Sales Director Asia
Pacific with the global mining
services company Terex
Mining Corp.
Mr Klein-Schmeink holds
a Master’s of Business
Administration degree from
Münster University.
30
Magontec LimitedAnnual Report 2022
Executive Management (continued)
John Talbot
Company Secretary
Dean Taylor
Company Secretary
B Bus, Accounting (UTS)
CA, FGIA, FCIS
Dr Zisheng Zhen
Technical Director (R&D
and Quality Management),
Magontec Asia
PhD, Materials Processing
Engineering (The University of
Science and Technology Beijing)
Prof Trevor Abbott
Director, Research and Development
B App Sc Metallurgy (SAIT/UniSA)
PhD (Monash)
Adjunct Professor, University of
Queensland Adjunct Professor,
Swinburne University of Technology
Adjunct Professor, RMIT University
Adjunct Fellow, Monash University
Mr Talbot has been the
Company Secretary for
Magontec since February
2008, a role he has previously
combined with that of
Chief Financial Officer.
Mr Talbot relinquished his
responsibilities as CFO
in 2016.
From 1988 to September
2000 Mr Talbot was a
senior executive at a leading
Australian bank, where he
headed the Bank’s Project
and Infrastructure Finance
Division.
Prior to 1988 his other
responsibilities within the
bank included capital markets
activity and income tax
compliance. From 2000 to
his appointment in February
2008 with Magontec, he
undertook various corporate
advisory roles in Australia
and overseas.
Mr Talbot resigned from
the position of Company
Secretary in January 2023.
Mr Dean Taylor was appointed
to the position of Company
Secretary in January 2023.
Mr Taylor is a Chartered
Secretary and member of
the Governance Institute of
Australia. He has previously
acted as Chief Financial
Officer, Company Secretary
and a Board member for
an extensive range of
organisations including
Standards Australia,
LifeHealthcare and HPM
Legrand.
Dr Zhen joined Magontec
Limited in 2009 as the R&D
manager of Magontec Xi’an
Co. Ltd., and was appointed
as the technical director
of Magontec Asia in 2011,
responsible for R&D activities
as well as quality management
for all facilities in China.
Dr Zhen has almost 20 years
of research and technical
development experience in
magnesium. He gained his
PhD in Materials Processing
Engineering from The
University of Science and
Technology Beijing, China
in 2003. He then conducted
further research works
on magnesium alloys and
processing technologies
at Oxford University and
Brunel University in England,
and at the Magnesium
Innovation Center in GKSS
(now HZG) in Germany. Prior
to joining Magontec he was
a senior research fellow at
the Magnesium Innovation
Center in Germany.
Prof Abbott completed
his PhD in 1987 and has
extensive experience in the
metals industry including
aluminium alloys (PhD topic),
steel (BHP in Melbourne and
Wollongong throughout the
1990’s) and magnesium alloys
(CASTAMT- Magontec).
Since 2000 he has developed
strong industry-academia
collaborations through the
CAST Cooperative Research
Centre and ARC Linkage
grants. During the period
2000-2004 he held an
academic position at Monash
University where he led the
magnesium applications
activities within CAST. He
then transferred to AMT /
Magontec and continued
the collaborative role from
the industry side. In 2013 he
established Abbottics Pty Ltd
and consults in metallurgical
fields, particularly magnesium,
aluminium and scandium
alloys.
31
Magontec LimitedAnnual Report 2022 Financial Report
Directors’ Report
for the year ended 31 December 2022
1. Corporate information
The consolidated financial statements of Magontec Limited and its controlled subsidiaries as listed in Note 22 herein
(collectively, the Group) for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of
the directors on 23 February 2023. Magontec Limited is a company limited by shares incorporated in Australia. The shares are
publicly traded on the Australian Securities Exchange (ASX) under the code “MGL”.
2. Glossary of entities referred to in this report
Formal Name of Entity
Description of Entity
Referred to as
Head Office Entities
Magontec Limited
The ultimate parent/holding company of the Group.
Advanced Magnesium Technologies
Pty Limited
Varomet Holdings Limited
Wholly owned subsidiary of Magontec Limited that acts
as the administrative operating entity.
The wholly owned holding entity that owns the Group’s
operating businesses at Xi’an (PRC) and Suzhou (PRC).
Operating Entities
Magontec GmbH
Magontec SRL
Magontec Xi’an Co. Ltd.
Magontec Qinghai Co. Ltd.
Magontec US LLC
Magontec Suzhou Co. Ltd.
Major related shareholders
Qinghai Salt Lake Magnesium Co. Ltd.
KWE (HK) Investment Development
Co Ltd
The wholly owned entity that owns the Group’s operations
in Bottrop, Germany.
The wholly owned entity that owns the Group’s operations
in Santana, Romania.
The wholly owned entity that owns the Group’s
operations in Xi’an, PRC.
The wholly owned entity that owns the Group’s
operations in Qinghai, PRC.
The wholly owned entity that acts as the Group’s
distributor located in the United States of America.
The wholly owned entity that owned the Group’s
operations in Suzhou, PRC. Production ceased at this
facility in 2016.
QSLM is a 28.85% shareholder in MGL at the date
of this report. QSLM is a subsidiary of Qinghai Huixin
Asset Management (QHAM). QHAM is in turn owned
by 3 Chinese state-owned enterprises. Its shareholders
include the state of Haixi (a region of Qinghai province
that includes Golmud) and two other Qinghai based
investment entities.
Shareholder in Magontec Limited. Mr Zhong Jun Li,
a director of Magontec Limited is also a director and
shareholder of KWE (HK) Investment Development
Co. Ltd.
MGL, the
Company or the
Parent Entity
AMT
VHL
MAB
MAR
MAX
MAQ
MAU
MAS
QSLM
KWE (HK)
3. Rounding errors
The tables in this report may indicate apparent errors to the extent of one unit (being $1,000) in:
–
–
the addition of items comprising total and sub totals; and
the comparative balances of items from the financial accounts for the prior period.
Such differences arise from the process of:
–
–
converting foreign currency amounts to two decimal places in AUD; and
subsequent rounding of the AUD amounts to one thousand dollars.
32
Magontec LimitedAnnual Report 2022 Directors’ Report
continued
The Directors of Magontec Limited submit herewith the Annual Financial Report of the Group for the twelve-month period
ended 31 December 2022. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:
Directors who held office during and since the end of the financial year were:
– Mr Nicholas Andrews (Executive Chairman)
– Mr Robert Kaye SC (Lead Independent Director)
– Mr Atul Malhotra (Independent Director)
– Mr Andre Labuschagne (Independent Director)
– Mr Zhong Jun Li (Non-Executive Director)
– Mr Xing Cai Li (Non-Executive Director)
Directorships of other Listed Companies
Directors who have held a Directorship position in another publicly listed company in the three years immediately before
the end of the financial year are as follows:
– Mr Robert Kaye is Chairman of Collins Foods Limited, a Non-Executive Director of FAR Limited and a Non-Executive
Director of Electro Optic Systems Holdings Limited.
– Mr Andre Labuschagne is Executive Chairman of Aeris Resources Limited
Company Secretary
Mr John Talbot
B Bus (Acctg)
Mr Talbot has been the Company Secretary for Magontec since February 2008, a role he has previously combined with
that of Chief Financial Officer. Mr Talbot relinquished his responsibilities as Chief Financial Officer in 2016. Prior to 2008 he
was engaged as a financial consultant in the corporate finance field. Prior to 2000 he was a senior executive with a leading
Australian bank. Mr Talbot has resigned from the position of Company Secretary in January 2023.
Mr Dean Taylor
Member, Institute of Chartered Accountants Australia & New Zealand (CA ANZ), Institute of Chartered Secretaries (FCG),
Governance Institute of Australia (FGIA), Australian Institute of Company Directors (MAICD)
Mr Dean Taylor was appointed to the position of company secretary in January 2023. Mr Taylor is a Chartered Secretary and
member of the Governance Institute of Australia. He has previously acted as Chief Financial Officer, Company Secretary and a
Board member for a range of organisations including Standards Australia, LifeHealthcare and HPM Legrand.
Principal Activities
The principal activities of the consolidated entity during the course of the financial year consisted of:
– Manufacture and sale of generic and specialist alloys (including both primary alloy manufacture and recycling);
– Manufacture and distribution of magnesium and titanium cathodic corrosion protection products (anodes);
– Research and development of new proprietary magnesium alloys and technologies;
– Research and development of cathodic corrosion protection products (CCP); and
– Creating markets for new magnesium alloys and technologies by supporting demonstration trials and programs for
developing new applications.
33
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
Directors’ Meetings
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the
financial year and the number of meetings attended by each director while they were a director or committee member.
Director
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Board Meetings
FAC Meetings (1)
REM Meetings (2)
BRC Meetings (3)
Mr Nicholas Andrews
10
Mr Zhong Jun Li
Mr Atul Malhotra
Mr Robert Kaye
Mr Andre Labuschagne
Mr Xing Cai Li
9
9
8
6
2
10
10
10
10
10
2
(1) Finance, Audit & Compliance Committee
(2) Remuneration & Nominations Committee
(3) Business Risk Committee
2
-
2
2
1
2
3
3
3
3
3
3
2
2
2
2
2
2
Directors’ Shareholdings
The following table sets out the relevant interest (direct and indirect) of each serving director in shares, debentures, and rights
or options in shares or debentures of the Company or a related body corporate as at the date of this report
Director
Mr Nicholas Andrews
Mr Zhong Jun Li
Mr Atul Malhotra
Mr Robert Kaye
Mr Andre Labuschagne
Mr Xing Cai Li
Ordinary
Shares
1,520,364
3,792,907
–
102,565
–
–
Performance
Rights
1,440,741
–
–
–
–
–
Remuneration Report
The Remuneration Report is set out on Pages 35 to 48 and forms part of the Directors Report for the financial year ended
31 December 2022.
34
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
Remuneration Report (audited)
4. KMP Remuneration arrangements
The Directors of Magontec are pleased to present the
Remuneration Report for the financial year ended
31st December 2022. The report forms part of the
Directors Report and has been audited in accordance
with section 300A of the Corporations Act 2001.
The remuneration report is presented under the
following sections:
1. Key Management Personnel (KMP) covered by this
Report
2. Remuneration at a glance
i. Remuneration objectives
ii. Remuneration policy
iii. Executive KMP remuneration mix
3. Governance of remuneration framework
i. Current service arrangements for Executive
KMP
ii. KMP remuneration for the year ended
31 December 2022
iii. Loans to Members of Key Management
Personnel
5. Group performance and the link to remuneration
6. 2022 Executive KMP Remuneration in detail
i. 2022 Fixed Remuneration
ii. 2022 Short-term incentive (STI)
iii. 2022 Long-term incentive (LTI)
iv. Valuation of Performance Rights
v. KMP Equity Holdings
7.
Independent & Non-executive Director
Remuneration arrangements
1.
Key Management Personnel (KMP) Covered by this Report
The Remuneration Report details the remuneration arrangements for key management personnel (KMP) who are defined
as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group,
whether directly or indirectly.
Directors and those executives with a direct reporting responsibility to the Executive Chairman (excluding the Company
Secretary) are deemed to be such individuals. Details of Directors and KMP are set out below.
Type
Name
Position
Appointed
Committee
Robert Kaye SC
Lead Independent Director
19 Jul 2013
Atul Malhotra
Independent Director
1 Jan 2019
Non-Executive
KMP
Andre Labuschagne
Independent Director
22 Jan 2014
Chair – Rem
Member - FAC
Chair - FAC
Member – REM
Member - BRC
Member - FAC
Member - BRC
Zhong Jun Li
Non-Executive Director
31 Aug 2009
Member - REM
Xing Cai Li
Non-Executive Director
28 Sep 2022
Nicholas Andrews
Executive Chairman
14 May 2007
Chair - BRC
Christoph Klein-Schmeink
Executive KMP
President Magontec
Europe, North America
and Middle East
7 May 2012
Tong Xunyou
President Magontec Asia
7 May 2012
Derryn Chin
Chief Financial Officer
1 Mar 2016
FAC – Finance & Audit Committee
REM – Remuneration & Nominations Committee
BRC – Business Risk Committee
35
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
2. Remuneration at a Glance
Remuneration Objectives
I.
Magontec’s remuneration objectives are to ensure that
there is an alignment between the outcomes desired by
shareholders with those of the employee with a clear focus
on the agreed strategic direction and priorities of the Group.
Magontec’s Vision is that it seeks to entrench itself as a
leading global manufacturer and recycler of magnesium
alloys and magnesium alloy products, to be known as a fair
and safe workplace, for its embrace of technology, high
environmental standards, efficient execution of global
logistics and high standards of corporate governance.
By ensuring this alignment between shareholders and
management, it creates the right environment to deliver
on the outcomes, providing a stability in the executive
team and focus on the right priorities that drive total
shareholder returns.
The Remuneration objectives are not singularly focused
on financial issues, but are balanced with environmental,
social and governance-based stakeholder expectations.
II. Remuneration Policy
The Remuneration Policy is reviewed on an annual basis by
the Remuneration & Nominations Committee to ensure that
the principles and expected outcomes are matched with the
business strategy and rapidly evolving market environment.
The remuneration policy aims to retain key employees and
align employee interests with Group performance and
shareholders’ interests.
In addition to base salary, remuneration for the Global
Management Group comprises cash based short term
incentives and equity based long term incentives.
The implementation of these plans is utilised to:
– motivate members of the Global Management Group
–
–
to originate innovate strategies for growth;
reward the Global Management Group for the
satisfaction of positive strategic and financial outcomes;
and
to provide an adjunct to cash remuneration to preserve
cash resources.
The Group uses a combination of cash and non-cash
mechanisms to remunerate key management personnel.
At the Company’s 2017 Annual General Meeting
shareholders approved a plan for the Global Management
Group comprising cash based short term incentives
and equity based long term incentives in the form of
performance rights. This was subsequently amended and
approved by shareholders at the Group’s AGM on 29 July
2020. This Plan is now known as the 2020 Shareholder
Approved Plan. This forms the broad basis for the plans
approved in subsequent periods.
36
III. Executive KMP Remuneration Mix
The Group’s remuneration framework includes a mix of fixed
and variable at-risk remuneration. It is deemed that the mix
provides the appropriate balance between guaranteed
remuneration and at-risk to the employee which is aligned
with shareholders and the current employment market
conditions.
Remuneration for the Global Management Group comprises
three components:
i. Fixed remuneration (TFR);
ii. Short-term incentive (STI) in the form of cash; and
iii. Long-term incentive (LTI) in the form of performance rights.
The chart below outlines the target remuneration mix
for the Executive Chairman and other key management
personnel based on latest estimates of maximum possible
remuneration at the date of this report.
Remuneration Mix Target (%)
100
80
60
40
20
0
46.0
12.5
41.5
46.2
12.4
41.4
Executive Chairman
Other KMP
Fixed
STI
LTI
Variable at-risk Remuneration
Each member of the Global Management Group has a set
of key performance indicators (KPIs) mutually agreed by the
employee with the Regional CEO, Executive Chairman or
Board (as appropriate) on an annual basis.
The KPIs reflect the executive’s ability to add value to
the entity and increase shareholder wealth by ensuring
productive gains such as increasing efficiencies, reduction
in costs and increased profitability by maximising sales
volumes and margins on sale revenues. Performance
against these KPIs forms a component of the assessment
of both STI and LTI amounts as outlined below.
The Board retains discretion to adjust final remuneration
outcomes for all Executives. Board Policy is reviewed
periodically by the Remuneration and Nominations
Committee. Where appropriate, recommendations to
the Board for variations will be made.
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
2.
Remuneration at a Glance (continued)
The Board believes that the balance between short-term and long-term remuneration is appropriate and encourages long-
term value creation. High short-term remuneration mix has a tendency to encourage short term reactionary decisions that are
not in the best interests of shareholders.
The STI LTI Governing Document is available on the Magontec website.
I. Total Fixed Remuneration (TFR)
Executive contracts of employment include post-employment benefits (superannuation and certain social benefits for
Chinese personnel) but do not include any guaranteed base pay increases. These are assessed periodically with the assistance
of external consultants where deemed necessary.
When an executive or an employee is recruited, the Group’s aim is to reward its staff at Quartile 1 (25%) market rates within the
manufacturing technology industry as determined and in consultation with a remuneration specialist where appropriate.
The Board believes that providing fixed remuneration (TFR) at the first quartile and providing a higher weighting to LTI
provides the right reward/risk balance for the executive team with focus on strategic priorities which generate long term value
creation for shareholders.
II. Short-Term Incentive (STI)
The STI plan rewards executives according to a set policy with reference to group profitability. This includes provisions to limit
the overall maximum pool according to constraints inherent in the policy.
How is performance
measured?
The Board determines the size of the pool based on actual financial metrics achieved relative
to a board approved budget and has discretion to adjust payment depending on the particular
circumstances of the Group and other qualitative factors as it sees appropriate.
How is the pool
calculated?
The STI pool available for distribution is calculated as being equal to 25% of the excess of the
actual net operating profit after tax (Actual NOPAT) over budgeted net operating profit after
tax (Budgeted NOPAT) – the resultant figure being referred to as “The Pool”.
To limit the amount of The Pool when profitability is low, the 25% ratio of excess Actual NOPAT
over Budgeted NOPAT on which the Pool is calculated would be reduced according to the
principles in the following table:
1. If Pool as a % of Actual
NOPAT is equal to:
2. The Pool is Modified to this
% of excess Actual NOPAT
over Budget NOPAT
From 0.0% to 12%
Over 12.0% to 20%
Over 20.0%
25.0%
15.0%
8.0%
How is the pool
allocated to executives?
Executives in the Global Management Group participate in The Pool on a pro rata basis
according to the percentage that their salary represents of the aggregate of salaries of eligible
executives, the resultant figure being referred to as “The Provisional Payment”.
Eligible executives will receive:
– 45% of the Provisional Payment by way of a fixed component as determined by the formula
described above; and
– Up to 55% of the Provisional Payment by way of a residual discretionary component
determined according to an assessment of the eligible executive’s contribution to regional
and Group performance, satisfaction of KPIs laid down by management; and other
subjective factors identified by the Remuneration and Nominations Committee.
How is the STI
governed?
The payments are subject to approval by the Board upon the recommendation of the
Remuneration and Nominations Committee.
37
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
2.
Remuneration at a Glance (continued)
How is risk managed in
context to the STI Pool?
What period does the
STI relate to?
There are several ways that risk is managed with the STI pool:
–
–
–
–
–
–
The STI Pool is created to the extent that the group is profitable.
The STI Pool is only created when actual NOPAT exceeds the Board Approved Annual
Budget.
The STI Pool % allocation is reduced if pool as % of actual NOPAT is over certain criteria
which is assessed periodically by the Remuneration and Nominations Committee.
The Board has discretion with 55% of the pool allocation with consideration relating to an
assessment of the eligible executive’s contribution to regional and Group performance,
satisfaction of KPIs laid down by management; and other subjective factors identified by
the Remuneration and Nominations Committee.
The commencement date of the STI plan is 1 January annually.
The STI performance period is the one-year period from the relevant commencement
date.
– Net operating profit after tax (NOPAT) is defined as reported net profit after tax adjusted
for specific items as deemed appropriate by the board for the relevant year completed.
How is it paid?
STI remuneration is 100% cash settled annually and paid subsequent to completion of the
Approved Audited Financial Statements for the relevant year.
What happens if the
executive leaves?
If an executive resigns or is terminated for cause before the end of the financial year, or prior to
payment of the STI, no STI is awarded for that year unless otherwise determined by the Board
III. Long-Term Incentive (LTI)
Long term incentives are provided via the issue of performance rights (a form of option) to the Global Management Group
which may convert into Magontec ordinary shares subject to the achievement of pre-determined share price targets in
addition to non-market-based conditions as detailed below.
How is performance
measured?
Performance is measured according to a combination of non-market based KPIs (Tier 1) and
Market-based Share Price Targets (Tier 2). With respect to share price targets, performance
is measured on the basis of a 30 day VWAP absolute total shareholder return (TSR) for each
three-year LTI performance period ended 31 December.
How is the TSR
calculated?
TSR comprises the percentage change in the Company’s share price, plus the value of any
future dividends during the period and is measured over the 3-year LTI performance period.
The performance condition of TSR is deemed as being the most appropriate by the Board. It
aligns the interests of employees in the management group with those of shareholders.
How is LTI granted?
From the 2021-23 Plan onwards, at the commencement date of the relevant 3-year LTI
performance period an eligible executive will receive Performance Rights –
i. equal in value to 50% of the eligible executive’s gross salary at that date;
i. equal in number to the value in i. divided by 75% of the greater of the market value of
Magontec ordinary shares on the same date and the market value adopted under this
provision at the commencement date of the immediately prior 3-year LTI performance
period; and
iii. at nil consideration.
How do Performance
Rights Vest?
Performance Rights which are granted may convert into Magontec ordinary shares according
to the two tests below:
1. Tier 1 – Individual KPIs (30%)
The executive’s performance is rated against multiple KPIs prescribed by the individual and
approved by the Board.
2. Tier 2 – Group Level Share Price (70%)
Under Tier 2, further performance rights may vest upon achievement of the relevant absolute
share price targets above (market-based vesting conditions).
The number of performance rights vesting under Tier 2 performance rights is only incremental
to the Tier 1 entitlement.
38
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
2.
Remuneration at a Glance (continued)
How do Performance
Rights Vest? continued
If, at the end date of the 3-year LTI performance period, the Performance Rights have not
otherwise lapsed or vested then, at that date, an individual eligible executive’s entitlement to –
i.
ii.
the number of Performance Rights will be adjusted for any dilution caused by capital
restructures during the relevant 3-year LTI performance period; and
the adjusted number of Performance Rights will vest as Magontec ordinary shares.
Performance Right share prices targets are assessed according to the 30-day VWAP to
31 December in the year of vesting.
The percentage of Performance Rights that will vest as Magontec ordinary shares according
to share price target Market Based Conditions are determined according to the vesting %
tables on page 45.
How is the LTI
governed?
The resultant payments are subject to approval by the Board upon the recommendation
of the Remuneration and Nominations Committee.
How is risk managed in
context to the LTI?
What are the terms of
the LTI?
There are several ways that risk is managed with the LTI pool:
–
–
The absolute value of the LTI benefit is restricted to 50% of the employees TFR.
The determination of the vesting conditions are recommended by the Remuneration and
Nominations Committee and are aligned with exceeding the share price of the previous
period.
The Performance Rights will lapse after 3 years if the vesting conditions are not achieved.
–
– Performance Rights will automatically lapse in the event of the death, dismissal,
retrenchment, retirement or resignation of the eligible executive prior to the end date
of the 3-year LTI performance period unless otherwise determined by the Board.
The commencement date of the LTI plan is 1 January annually.
–
–
The LTI performance period is the 3-year period from the relevant commencement date.
– A Performance Right is a conditional right granted by the Company to an eligible executive
whereby that conditional right may, subject to the relevant terms and conditions, vest as
Magontec ordinary shares.
– Performance Rights will automatically lapse in the event of the death, dismissal,
retrenchment, retirement or resignation of the eligible executive prior to the end date
of the 3-year LTI performance period unless otherwise determined by the Board.
– Performance Rights will vest immediately in the event of a takeover (being the acquisition
of control over the voting shares) of the Company.
– Performance Rights may not be transferred, assigned or novated except with the approval
of the Remuneration and Nominations Committee.
– Eligible executives will not grant any security interest in or over or otherwise dispose of
or deal with any Performance Rights or any interest in them until the relevant Magontec
ordinary shares are issued to that eligible executive, and any such security interest or
disposal or dealing will not be recognised in any manner by the Company.
– Performance Rights do not confer on a participant the right to participate in new issues
of shares by the Company, including by way of bonus issue, rights issue or otherwise.
The number of Performance Rights is rounded down to the next whole number if it is not
a whole number. Performance rights issued to executives do not have escrow periods.
–
– No entitlement to Performance Rights accrues to the eligible executive until an
appropriate confirmation from the Company has been received by the eligible executive.
How is it paid?
Performance Rights are granted annually . In the event that the vesting conditions are met,
the Performance rights will convert to fully paid ordinary shares in Magontec Limited.
What happens if the
executive leaves?
In the event of the death, dismissal, retrenchment, retirement or resignation of the executive,
Performance Rights will automatically lapse unless otherwise determined by the Board
having regard to the nature of the contribution to the Company by and circumstances of,
the particular executive.
39
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
3. Governance of Remuneration Framework
During 2022, the Board reviewed the governance structure for remuneration and refined the framework to ensure its
appropriateness to current market practice.
Role of the Board
The Board maintains overall responsibility for the remuneration strategy and outcomes for executives and non-executive
directors and reviews and approves the recommendations received from the Remuneration and Nominations Committee.
The Board Charter is available on the website: www.magontec.com
Remuneration & Nominations Committee (REM)
The Remuneration & Nominations Committee is responsible for oversight of the Remuneration Framework and ensures that
the appropriate remuneration and retention strategies are established. The Committee will make recommendations to the
board on the remuneration arrangements for non-executive directors (NEDs) and executives.
The Committee is responsible for making recommendations to the Board on all aspects of appointment, remuneration and
termination for the Chairman and Chief Executive Officer (or equivalent) and to review the appointment, remuneration or
termination of key management personnel (defined as those senior executives reporting directly to the CEO excluding the
Company Secretary) as requested by the Board, Chairman or Chief Executive Officer (or their equivalents).
The committee assesses the appropriateness of the nature and amount of remuneration of NEDs and executives periodically
by reference to relevant employment market conditions, with the overall objective of ensuring maximum benefit from the
retention of its directors and executive team.
The REM Committee Charter is available on the website: www.magontec.com
Remuneration Approval Process
The board approves the remuneration arrangements of the Executive Chairman and executives following recommendations
from the Remuneration & Nominations committee.
Remuneration Benchmarking and Use of Remuneration Consultants
From time to time, external independent information is obtained that is relevant for remuneration recommendations by
the REM Committee and decisions by the Board. This advice includes, but is not limited to, advice on current remuneration
practices, remuneration trends, regulatory and governance updates and market data.
During the current year ended 31 December 2022, the Group engaged the following external remuneration consultants:
– Egan Associates Pty Limited undertook a review of fees paid to Magontec Directors, having regard to their varying
obligations, including the roles of Lead Independent Director and Non-Executive Director. The Group paid Egan $6,000
excluding GST during the 12 months to 31 December 2022.
4
KMP Remuneration Arrangements
I. Current Service Arrangements for Executive KMP
The table below sets out the remuneration of the Executive KMP.
Executive Contractual Arrangements
Name
Position
31 Dec 2022
Fixed
Remuneration
Contract
Term
Contract
Expiry
Notice Period
For Termination
Payment in
Lieu of Notice
Mr N Andrews Executive Chairman
$559,018
3 years
30-Jun-23 Employer initiated - 6 mths
Employee initiated - 6 mths
6 months’ pay
Mr C Klein-
Schmeink
Mr X Tong
President Magontec
Europe & North
America
President Magontec
Asia
$382,505
5 years
14-Aug-27
Employer initiated - 12 mths
Employee initiated - 12 mths
12 months’ pay
$436,830
No fixed term or expiry Employer initiated - 6 mths
Employee initiated - 6 mths
6 months’ pay
Mr D Chin
Chief Financial Officer $333,869
3 years
30-Jun-23
Employer initiated - 6 mths
Employee initiated - 6 mths
6 months’ pay
40
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
4. KMP Remuneration Arrangements (continued)
II. KMP Remuneration for the year ended 31 December 2022
Remuneration for Directors and Executive KMP in the current reporting period prepared according to accounting standards is
shown below.
Non-Performance Related
Performance Related
Key Management
Personnel Remuneration
12 months ended 31 Dec
2022 and 31 Dec 2021
Salary &
Allowances
$
Termination
Payment
$
Super &
Statutory
Pension
Benefits
$
Share
based
payments
$
Motor
Vehicle
& Other
Allow-
ances
$
Non cash
accrual
LTI
Rights**
$
LTI
shares*
$
STI
$
Mr N Andrews
(Exec Chairman)
2022 513,249
459,994
2021
Mr C Klein-Schmeink
2022 350,894
(President Magontec Europe) 2021 340,395
Mr X Tong
(President Magontec Asia)
2022 363,210
341,532
2021
Mr D Chin
(Chief Financial Officer)
2022 293,184
254,998
2021
- 27,500
26,250
-
-
-
16,934
27,561
- 21,540
19,571
-
- 27,500
24,675
-
Mr R Kaye
(Lead Independent Dr)
Mr A Malhotra
(Independent Dr)
Mr A Labuschagne
(Independent Dr)
Mr Z Li
(Non Exec Dr)
Mr X Li
(Non Exec Dr) (1)
Mr K Xie
(Non Exec Dr) (2)
Mr S Li
(Alternative Dr) (3)
Total year ended
31 December 2022
Total year ended
31 December 2021
2022
2021
2022
2021
67,308
60,000
60,393
59,756
2022 60,000
60,000
2021
2022 60,000
60,000
2021
2022
2021
2022
2021
2022
2021
-
-
-
-
-
–
-
-
-
-
-
-
-
-
-
-
-
-
–
–
-
-
-
-
-
-
-
-
-
-
-
-
–
–
1,768,238
- 93,474
1,636,675
- 98,057
(1) Appointed 28 September 2022
(2) Departed 28 October 2021
(3) Departed 28 October 2021
*
LTI shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
–
–
-
-
-
-
164,437
66,534
- 62,875
56,402
-
15,184
31,775
152,894
54,539
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
–
–
109,349
48,072
97,516
37,940
-
-
-
-
-
-
-
-
-
-
-
-
–
–
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
–
–
50,314
47,603
43,443
40,937
37,066
31,566
-
-
-
-
-
-
-
-
-
-
-
-
–
–
Total
$
768,061
609,180
586,220
501,873
537,542
450,112
455,266
349,179
67,308
60,000
60,393
59,756
60,000
60,000
60,000
60,000
-
-
-
-
–
–
15,184
524,196
-
193,698 2,594,790
31,775 207,085
- 176,508 2,150,100
This reflects the expense related to actual shares vesting to the employee from the scheme.
No performance rights issued were converted to shares in the current year with respect to the 3-year period from 2020-
2022 to members of the Global Management Group.
** LTI Rights - Long Term Incentive rights explanatory note
The values listed in the table above under the column LTI rights are non-cash. This accounting expense represents the
estimated fair value that the employee obtains from participation in the LTI scheme as required by Australian accounting
standards and does not represent an amount that has been received by the employee.
41
Magontec LimitedAnnual Report 2022Financial Report (continued)
Directors’ Report
continued
4. KMP Remuneration Arrangements (continued)
III. Loans to Members of Key Management Personnel
As at 31 December 2022, there was one employee loan outstanding to Mr Christoph Klein-Schmeink for a total of A$53,557
(2021: A$53,224).
The loan has a term of either 10 years or repayable in full on termination of employment or sale of shares in part or full held
in Magontec Limited. Interest of 1.81% is attached to the loan. There were no other employee loans to key management
personnel outstanding as at 31 December 2022.
5. Group Performance and the Link to Remuneration
In summary, resources have been directed to the following high-level tasks:
restructure and redirect manufacturing resources to improve production efficiencies.
rationalise inventories.
–
–
– planning for the installation of manufacturing plant and equipment at Qinghai.
–
– monitoring manufacturing operations at all centres with a view to efficiency improvements; and
– negotiating the group debt position and working capital requirements among other financial imperatives.
initial marketing of production output from the Qinghai plant;
Rewards are directed to those personnel who can directly or indirectly further the Group’s objectives of:
– developing and executing strategic initiatives.
cost efficiency; and
–
– market development.
Outcomes with respect to financial performance over the last 5 years are summarised below.
Summary of financial performance
$'000 unless otherwise stated
Sales
Gross Profit
Margin (%)
Net Profit After Tax attributable to members
12 months to
31 Dec 18
12 months to
31 Dec 19
12 months to
31 Dec 20
12 months to
31 Dec 2021
12 months to
31 Dec 2022
130,793
130,617
95,068
115,151
158,600
14,803
13,119
12,195
19,232
38,595
11.3%
776
10.0%
12.8%
16.7%
24.3%
(1,370)
(717)
5,008
16,515
Ordinary shares on issue at end of year*
76,004,899 76,004,899 76,728,320 76,729,210 77,521,835
Basic EPS (cents)
Diluted EPS (cents)
Net tangible assets per share (cents)
Share price at end of year (cents)
Change in share price (cents)
Return on Equity (%)
Dividends declared per share (cents) - unfranked
Dividend Paid during the year
* Adjusted for 15 to 1 share consolidation in August 2021
1.0
1.0
40.9
30.0
(24.0)
(1.8)
(1.7)
35.2
24.0
(6.0)
(0.9)
(0.9)
32.5
27.0
+ 3.0
6.5
6.3
42.4
45.0
+ 18.0
21.5
19.7
67.9
32.5
(12.5)
2.3%
(4.2)%
(2.4)%
15.4%
35.7%
-
-
-
-
-
-
-
-
1.2
460
With respect to the LTI scheme, the share price targets approved by shareholders for the 3-year assessment period ended
31 December 2022 were not achieved. Similarly, non-market based targets during this period were not achieved.
During the 3-year period ended 31 December 2022, the share price (adjusted for the share consolidation in 2021) of the
Company increased from 24.0 cents per share as at 1 January 2020 to 32.5 cents per share at 31 December 2022 giving rise
to an increase in the market capitalisation of Magontec Limited from $18.2 million to $25.2 million.
After adjusting for new capital raised, dividends paid and return of capital (nil) during the 3-year assessment period, total
shareholder wealth remained at an adjusted total of $25.2 million, representing an increase of $6.9 million during the LTI
assessment period. However, as this fell short of the targets as outlined in the 2020-22 plan, no performance rights with respect
to this period were eligible for vesting and thus have lapsed.
42
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
6. 2022 Executive Remuneration in detail
2022 Fixed Remuneration
i.
During 2022, fixed increases in remuneration of 4 members of Key Management Personnel (KMP) were provided which align
with the 25th Percentile of their relative benchmark. Details of the increases are included in the Remuneration Report.
The Remuneration Framework aims to reward KMP at the 25th percentile of the relative benchmark for each Executive
(measured independently) which is low to market but offset by higher at-risk component in form of variable remuneration
(STI, LTI).
The increases during the year 2021 and 2022 reflect:
– Catch-up adjustments as Executives were being paid below these benchmarks for several years prior.
– Key Management Personnel (along with all staff in the EU and Australian business as well as each Non-Executive Director)
taking a significant pay reduction during the 2020 year to manage cashflow during the COVID pandemic. This allowed the
Group to maintain its existing personnel numbers and ultimately laid the platform for the results seen in 2021 and 2022.
2022 Short-Term Incentive (STI) - Performance against STI measures
ii.
In accordance with the Group’s Remuneration Policy and Executive KMP employment arrangements, for the current year
ended 31 December 2022, an STI provision of $693,945 has been provided for in the Financial Statements as a result of
financial performance for the year.
This represents the “Provisional Payment” of 45% of the total STI pool available for eligible executives to receive. The Board,
upon recommendation of the REM Committee, did not allocate the remaining “Residual Discretionary Component” due to
the abnormal magnesium price conditions assisting the 2022 financial result.
iii. 2022 Executive Long-Term Incentive (LTI) - Performance against LTI measures
LTI grants vested during the year
No LTI grants for Executive KMP have vested during 2022 because the vesting conditions for the Performance Period
1 January 2020 to 31 December 2022 were not achieved.
Consequently, total Performance Rights of 1,275,809 on issue for this period lapsed.
No LTI grants have vested since 31 December 2016.
LTI granted during the year
During the year ended 31 December 2022, a total of 3,125,212 Performance Rights were granted with respect to the three-year
period 1 January 2022 to 31 December 2024.
No other Performance Rights were granted to Executive KMP during the 2022 financial period.
The calculation of these Performance Rights was included in previously released Notices of AGMs and ASX announcements
with the number of performance rights by employee summarised in the table below.
LTI grants to be issued in 2023
In accordance with the Group’s Remuneration Policy and Executive KMP employment arrangements and subject to
shareholder approval at the 2023 AGM, it is anticipated that 3,021,042 performance rights will be granted in 2023 reflecting
the 3-year LTI incentive for the period 1 January 2023 to 31 December 2025.
43
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
6. 2022 Executive Remuneration in detail (continued)
Summary of current LTI grants
The table below summarises the current LTI grants provided to eligible executives.
Calculation of Performance Rights Issued to Global Management Group
3 Year LTI Performance Period
1.
2.
3.
4.
5.
Aggregate salaries of eligible participants at commencement of 3 year
LTI period
Multiplication factor
Value (1 x 2)
Share price assumed at commencement of 3 year LTI period to calculate
number of Performance Rights to issue*
Performance Rights issued at commencement = Amount in step 3 / 75% *
share price in step 4
Date of issue of Performance Rights
Date for conversion to ordinary shares
* Adjusted for 15-1 share consolidation in August 2021
1 Jan 20 to
31 Dec 2022
1 Jan 21 to
31 Dec 2023
1 Jan 22 to
31 Dec 24
$1,913,712
$1,896,436
$2,109,518
30%
50%
50%
$574,114
$948,218
$1,054,759
$0.600
$0.450
$0.450
1,275,809
2,809,539
3,125,212
01-Jan-20
01-Jan-21
01-Jan-22
31 Dec 2022
31-Dec-23
31-Dec-24
Performance Rights Issued to Global Management Group
3 year LTI Performance Period
1 Jan 20 to
31 Dec 2022
1 Jan 21 to
31 Dec 2023
1 Jan 22 to
31 Dec 24
Total
Rights
Nicholas Andrews
Derryn Chin
300,000
666,667
774,074
1,740,741
167,900
373,112
455,556
996,568
Christoph Klein-Schmeink
255,195
563,304
620,594
1,439,093
Xunyou Tong
John Talbot
Patrick Look
Zisheng Zhen
224,548
485,356
535,755
1,245,659
83,333
146,317
98,516
185,186
322,972
212,942
185,185
321,075
232,973
453,704
790,364
544,431
2021*
Value $
90,000
50,370
76,046
65,523
25,001
43,601
28,747
2022
Value $
195,232
114,897
156,522
135,124
46,706
80,979
58,759
Total Performance Rights
1,275,809
2,809,539
3,125,212
7,210,560
379,288
788,219
* Updated since 2021 Annual Report. Impact not material
44
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
6. 2022 Executive Remuneration in detail (continued)
2021-2023 LTI Plan Vesting Schedule
Performance Level
Below threshold
Threshold range
Target range
Stretch
Share price <
Share price =
Share price =
Share price >=
2022-2024 LTI Plan Vesting Schedule
Performance Level
Below threshold
Threshold range
Target range
Stretch
Share price <
Share price =
Share price =
Share price >=
Share Price
% of Performance
Rights vesting
45.0
45.0
51.8
59.6
0%
25%
50%
100%
Share Price
% of Performance
Rights vesting
60.0
60.0
70.0
80.0
0%
25%
50%
100%
The table below summarises the STI and LTI awards for key management personnel at their fair value at initial grant date.
Subsequently, this can differ from the disclosures in the remuneration report table above due to changes in the assessed
probability of achieving non market based targets or other adjustments as required by accounting standards.
The 2022 LTI and 2021 LTI fair value at grant date awarded relate to the 2022-24 Plan and 2021-23 Plan respectively.
Summary of STI and LTI awarded to key management personnel
Current KMP executives
Nicholas Andrews
Christoph Klein-Schmeink
Xunyou Tong
Derryn Chin
Total
2022 STI
awarded
$
2022 LTI fair
value awarded
at grant date
$
2021 STI
awarded
$
2021 LTI fair
value awarded
at grant date*
$
164,437
152,894
109,349
97,516
195,232
156,522
135,124
114,897
66,534
54,539
48,072
37,940
90,000
76,046
65,523
50,370
524,196
601,775
207,085
281,939
Non Market Vesting Probability at grant date (%)
100%
100%
* Updated since 2021 Annual Report. Impact not material
45
Magontec LimitedAnnual Report 2022Financial Report (continued)
Directors’ Report
continued
6. 2022 Executive Remuneration in detail (continued)
The following table details the number of LTI performance rights granted, lapsed or exercised during the year ended
31 December 2022, by plan participant and in aggregate.
Performance Rights Issued to Global Management Group
Grant date
Holding at
1 Jan 22
Granted in
2022
Lapsed in
2022
Holding at
31 Dec
2022
Vested at
31 Dec
2022
–
–
–
1-Jan-20 300,000
1-Jan-21
666,667
1-Jan-22
–
774,074
– (300,000)
–
–
–
666,667
774,074
966,667
774,074 (300,000) 1,440,741
1-Jan-20
167,900
1-Jan-21
1-Jan-22
373,112
–
455,556
(167,900)
–
–
–
373,112
455,556
541,012
455,556 (167,900) 828,668
1-Jan-20
255,195
1-Jan-21
563,304
–
–
1-Jan-22
–
620,594
(255,195)
–
–
–
563,304
620,594
818,499
620,594 (255,195) 1,183,898
1-Jan-20
224,548
1-Jan-21
485,356
–
–
1-Jan-22
–
535,755
(224,548)
–
–
–
485,356
535,755
709,904
535,755 (224,548)
1,021,111
1-Jan-20
1-Jan-21
1-Jan-22
83,333
185,186
–
–
–
185,185
(83,333)
–
–
–
185,186
185,185
268,519
185,185
(83,333)
370,371
1-Jan-20
146,317
1-Jan-21
322,972
–
–
1-Jan-22
–
321,075
(146,317)
–
–
–
322,972
321,075
469,289
321,075 (146,317) 644,047
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Name
Nicholas Andrews
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
Derryn Chin
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
Christoph Klein-Schmeink
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
Xunyou Tong
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
John Talbot
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
Patrick Look
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
46
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
6. 2022 Executive Remuneration in detail (continued)
Performance Rights Issued to Global Management Group
Name
Zisheng Zhen
2020-22 Plan
2021-23 Plan
2022-24 Plan
Subtotal
Aggregate
2020-22 Plan
2021-23 Plan
2022-24 Plan
Total
Grant date
Holding at
1 Jan 22
Granted in
2022
Lapsed in
2022
Holding at
31 Dec 2022
Vested at
31 Dec 2022
1-Jan-20
1-Jan-21
1-Jan-22
98,516
212,942
–
311,458
–
–
232,973
232,973
(98,516)
–
–
–
212,942
232,973
(98,516)
445,915
1-Jan-20
1,275,809
1-Jan-21
2,809,539
–
–
1-Jan-22
–
3,125,212
(1,275,809)
–
–
–
2,809,539
3,125,212
4,085,348
3,125,212 (1,275,809)
5,934,751
–
–
–
–
–
–
–
–
iv. Valuation of performance rights
The fair value of performance rights granted as consideration by the Group has been estimated by reference to the fair value
of the equity instruments granted. The group uses a binomial options pricing model which was used to determine the fair value
of performance rights issued to executives for market-based conditions.
The fair value of the equity instruments granted for market-based conditions is calculated assuming a 0% probability of
forfeiture before grant date (i.e., it is assumed all participants remain employed by Magontec during the period) and is
expensed on a straight-line basis over the vesting period.
Tier 1 Non-Market Based Conditions are based on % of KPI achievement x 30%. The expense recorded assumes 100% KPI
achievement and 100% of eligible members will be still eligible at the end of the 3-year period.
As the LTI payout under Tier 2 is only incremental to Tier 1, the valuation has thus been calculated as being the higher of:
a. the existing market-based binomial valuation model (Tier 2); or
b. the pay-out that would be owing by satisfaction of the non-market based conditions (Tier 1)
Grant Year
Status
Grant Date
Performance Period
Vesting Date
Vesting Period
Performance Rights Awarded – Exec Chair
Performance Rights Awarded – other KMP
Share price at grant date
Share Price Target 100% Vesting
Volatility %
Discount rate (risk free) p.a.
Dividend Yield p.a.
Fair Value (cents)
2021
Approved
2021 AGM
2022
2023 (For approval)
Approved
2022 AGM
To Be Approved
2023 AGM*
1 January 2021
1 January 2022
1 January 2023
1 January 2021
to 31 December 2023
1 January 2022
to 31 December 2024
1 January 2023
to 31 December 2025
31 December 2023
31 December 2024
31 December 2025
3 years
666,667
2,142,872
27.0c
59.6c
52.2%
0.11%
0.0%
11.0c
3 years
774,074
2,351,138
45.0c
80.0c
62.3%
0.93%
0.0%
25.2c
3 years
828,175
2,192,867
32.5c
59.6c
64.8% (estimate)
3.19% (estimate)
0.0% (estimate)
19.2c (estimate)
47
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Report
continued
6. 2022 Executive Remuneration in detail (continued)
v. Key Management Personnel Equity Holdings
Fully paid ordinary shares of Magontec Limited - 31 Dec 2022
Total balance
(held directly
and indirectly)
01-Jan-22
Granted as
remuneration
Acquired On
Market
Issued under
Dividend
Reinvestment
Plan
Total balance
(held directly
and indirectly)
31 Dec 2022
Balance held
nominally
(indirectly)
No.
No.
No.
No.
No.
No.
3,746,487
1,493,962
102,565
460,763
658,865
92,308
6,554,950
-
-
-
-
-
-
-
-
-
-
-
-
7,692
7,692
46,420
26,402
-
6,923
9,900
936
90,581
3,792,907
1,520,364
102,565
467,686
668,765
100,936
6,653,223
3,765,840
1,149,826
102,565
-
-
-
5,018,231
Mr Z Li (1)
Mr N Andrews (2)
Mr R Kaye (3)
Mr C Klein-Schmeink
Mr X Tong
Mr D Chin
Total
(1) 3,765,840 shares held via KWE (HK) Investment Development Co Limited and 27,067 shares are held directly
(2) 1,149,826 shares are held via DEWBERRI PTY LIMITED as trustee for Andrews Superannuation Fund and 370,538 are held directly
(3) 102,565 shares held indirectly through Bella Rebecca Kaye
Fully paid ordinary shares of Magontec Limited - 31 Dec 2021
Mr Z Li (1)
Mr N Andrews (2)
Mr R Kaye (3)
Mr C Klein-Schmeink
Mr X Tong
Mr D Chin
Total balance
(held directly
and indirectly)
01-Jan-21
Granted as
remuneration
Adjustment
for share
consolidation
Acquired On
Market or
Under Share
Purchase Plan
Total balance
(held directly
and indirectly)
31 Dec 2021
Balance held
nominally
(indirectly)
No.
No.
No.
No.
No.
No.
56,197,298
22,409,414
1,538,461
6,911,442
9,882,973
1,384,615
98,324,203
(52,450,811)
–
(20,915,452)
–
(1,435,896)
–
(6,450,679)
–
(9,224,108)
–
(1,292,307)
–
– (91,769,253)
-
-
-
-
-
-
-
3,746,487
1,493,962
102,565
460,763
658,865
92,308
6,554,950
3,719,820
1,129,858
102,565
-
-
-
4,952,243
(1) 3,719,820 shares held via KWE (HK) Investment Development Co Limited and 26,667 shares are held directly
(2) 1,129,858 shares are held via DEWBERRI PTY LIMITED as trustee for Andrews Superannuation Fund and 364,104 are held directly
(3) 102,565 shares held indirectly through Bella Rebecca Kaye
7.
Independent & Non-Executive Director Remuneration Arrangements
The remuneration of Independent and Non-Executive Directors (NED) consists of Directors’ fees. The aggregate amount of
independent and NEDs fees are approved by Shareholders and is currently limited to $600,000 per annum. Any increase to
the aggregate amount must be approved by Shareholders.
The Board decides how the aggregate amount, or a lesser amount is divided between the Directors.
Within the aggregate $600,000 fees approved by Shareholders for Independent and NEDs, compensation is set at $60,000
per annum for each Independent and NED and at $80,000 for the Lead Independent Director inclusive of any payments for
superannuation.
There are currently no additional fees being paid to those directors serving on the Finance, Audit & Compliance Committee,
Remuneration & Nominations Committee or the Business Risk Committee.
Independent and NEDs are reimbursed for all reasonable travel costs and other expenses properly incurred by them in
attending any meetings of committees of the Board, in attending any general meetings or otherwise in connection with the
affairs of the Group
Equity based compensation including the issue of options is generally avoided for Independent and NEDs. However, this
can be provided to directors as long as any such issue complies with the requirements of the Corporations Act and the ASX
Listing Rules.
48
Magontec LimitedAnnual Report 2022Financial Report (continued) The Board of Directors
Magontec Limited
Suite 1.03, 46A Macleay St
Potts Point NSW 2011
Dear Board Members,
Lead Auditor’s Independence Declaration
Under Section 307C of the Corporations Act 2001
We hereby declare, that to the best of our knowledge and belief, during the financial year ended
31 December 2022 there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Camphin Boston
Chartered Accountants
Lead Auditor’s Independence
Declaration
Justin Woods
Lead Audit Partner
Sydney
Dated this 23rd day of February 2023.
49
Magontec LimitedAnnual Report 2022Financial Report (continued) Consolidated Statement of Profit & Loss
and Other Comprehensive Income
for the year ended 31 December 2022
Sale of goods
Cost of sales
Gross profit
Other income
Interest expense
Impairment of inventory, receivables & other financial assets
Travel accommodation and meals
Research, development, licensing and patent costs
Promotional activity
Information technology
Personnel
Depreciation & amortisation
Office expenses
Corporate
Foreign exchange gain/(loss)
Profit/(Loss) before income tax expense
Income tax (expense)/benefit
Profit/(Loss) after income tax expense
Other Comprehensive Income - that may later emerge in the Profit and
Loss Statement
Exchange differences taken to reserves in equity – translation of overseas entities
Other Comprehensive Income - that will not emerge in the Profit and
Loss Statement
Movement in various actuarial assessments
Total Comprehensive Income
Profit/(Loss) after income tax expense for the year
Members of the parent entity - Basic (cents per share)
Members of the parent entity - Diluted (cents per share)
Note
2(a)
2(b)
2(c)
2(d)
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
158,600
115,151
(120,005)
(95,919)
38,595
1,450
(650)
(25)
(459)
(825)
(180)
(403)
19,232
1,747
(525)
4
(209)
(880)
(65)
(443)
2(d)
(9,094)
(7,934)
(605)
（(586)（
(3,314)
(66)
23,837
(7,322)
16,515
(642)
(640)
(3,114)
198
6,730
(1,722)
5,008
484
1,203
2,806
19,805
933
7,144
12 months to
31 Dec 2022
cents per
share
12 months to
31 Dec 2021
cents per
share
21.5
19.7
6.5
6.3
3(a)
17
17
Note
19
19
Earnings per share numbers in 2021 have been adjusted to capture the impact of the 15 for 1 share consolidation conducted in August 2021.
50
Magontec LimitedAnnual Report 2022Financial Report (continued)
Consolidated Balance Sheet
as at 31 December 2022
Current assets
Cash and cash equivalents
Trade & other receivables
Inventory
Other
Total current assets
Non-current assets
Other receivables
Property, plant & equipment
Deferred tax asset
Intangibles
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade & other payables
Bank borrowings
Provisions
Total current liabilities
Non-current liabilities
Other payables
Bank borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity attributable to members of MGL
Share capital
Reserves
Accumulated (losses)/profits
Total equity
Note
31 Dec 2022
$’000
31 Dec 2021
$’000
25(d)
6
7
8
9
10
3(c)
11
12
13
14
13
15
16
17
18
11,259
24,797
35,928
2,017
4,636
21,317
23,689
8,840
74,001
58,482
334
17,099
1,830
3,059
22,322
96,323
12,026
9,295
9,259
316
17,753
2,720
3,241
24,030
85,512
17,570
7,309
3,491
30,580
28,370
254
–
9,360
9,614
40,195
56,129
255
4,217
13,395
17,867
46,237
36,275
59,174
15,554
58,918
5,153
(18,599)
(27,796)
56,129
36,275
51
Magontec LimitedAnnual Report 2022Financial Report (continued)
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share
Capital
Ordinary
Retained
Earnings
Profits
Reserve
Foreign
Currency
Translation
Reserve
Capital
Reserve
Actuarial
Reserve
Expired
Options
Reserve
Employee
Share
Issue
Reserve
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Total
Equity
$’000
Balance 1-Jan-21
58,918 (32,804)
Profit/(Loss) attributable to
members of parent entity
Comprehensive income
Issue of shares (net)
–
–
–
5,008
–
–
Balance 31 Dec 2021
58,918
(27,796)
Balance 1-Jan-22
58,918
(27,796)
Profit/(Loss) attributable to
members of parent entity
Transfer to Profits Reserve
Dividends
Comprehensive income
–
–
–
–
Issue of shares (net)
256
16,515
(7,317)
–
–
–
–
–
–
–
–
–
–
7,317
(460)
–
–
2,563
2,750
(4,306)
1,637
136
28,893
–
1,203
–
–
–
–
–
933
–
–
–
–
–
–
237
5,008
2,137
237
3,766
2,750
(3,373)
1,637
373
36,275
3,766
2,750
(3,373)
1,637
373
36,275
–
–
–
484
–
–
–
–
–
–
–
–
–
2,806
–
–
–
–
–
–
–
–
–
–
253
627
16,515
–
(460)
3,290
509
56,129
Balance 31 Dec 2022
59,174 (18,599)
6,857
4,250 2,750
(567)
1,637
Note: Amounts transferred to the Profits Reserve characterise profits available for distribution as dividends in future years and
reflects the amounts transferred by individual entities in the Group. Therefore it is not equivalent to Consolidated Group profit.
52
Magontec LimitedAnnual Report 2022Financial Report (continued) Consolidated Cash Flow Statement
for the year ended 31 December 2022
Cash flows from operating activities
Profit before taxation
Adjustments for:
– Non-cash equity expense
– Depreciation & amortisation
– Foreign currency effects
– Other non-cash items
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
Note
23,837
6,730
253
2,776
1,303
(139)
237
2,823
(582)
1,249
Cash generated from/(utilised in) underlying operating activities
28,030
10,457
Movement in working capital balance sheet accounts
– Trade receivables and other current assets
– Inventory
– Trade payables and other current liabilities
Cash generated from/(utilised in) underlying operational cash flow and net
working capital assets
– Net Interest paid
– Income tax paid
Cash generated from/(utilised in) operating activities
Cash flows from investing activities
2,352
(11,537)
(5,191)
(6,324)
(1,810)
4,514
13,654
6,837
(632)
(2,276)
(492)
(522)
10,746
5,823
Net cash out on purchase/disposal of property, plant & equipment
(1,891)
(878)
Group information technology software
Security deposits
Other*
(20)
151
(16)
(9)
(4)
46
Net cash provided by / (used in) investing activities
(1,776)
(844)
Cash flows from financing activities
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Cashflow from leasing activities
Other
Net cash provided by financing activities
Net increase / (decrease) in cash and cash equivalents
Foreign exchange effects on total cash flow movement
Cash and cash equivalents at the beginning of the reporting period
Cash and cash equivalents at the end of the reporting period
2(e)
2(e)
2(e)
25(d)
25(d)
(191)
19,387
(21,252)
(284)
(13)
–
16,905
(22,214)
(353)
–
(2,353)
(5,661)
6,617
7
4,636
11,259
(682)
360
4,958
4,636
53
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
for the year ended 31 December 2022
1. Summary of Accounting Policies
Statement of Compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
the Corporations Act 2001, Australian Accounting
Standards, Australian Accounting Interpretations and other
authoritative pronouncements of the Australian Accounting
Standards Board.
Australian Accounting Standards set out accounting policies
that the AASB has concluded would result in a financial
report containing relevant and reliable information about
transactions, events and conditions. Compliance with
Australian Accounting Standards ensures that the financial
statements and notes also comply with International
Financial Reporting Standards. Material accounting policies
adopted in the preparation of this financial report are
presented below and have been consistently applied unless
otherwise stated.
The audited accounts were authorised for issue by the
Directors on 23 February 2023. The Group has assessed
that there are no new standards with a material impact to be
adopted with a date of initial application of 1 January 2022.
Basis of Preparation
The financial report has been prepared on an accruals basis
and is based on historical cost, modified where applicable,
by the measurement at fair value of selected non-current
assets, financial assets and financial liabilities. Cost is based
on the fair values of the consideration given in exchange
for assets. All amounts are presented in Australian dollars,
unless otherwise noted.
The accounts are prepared on a going concern basis. The
Group, having made appropriate enquiries have a reasonable
expectation that Magontec Limited has adequate
resources to continue in operational existence for the
foreseeable future.
Changes in Significant Accounting Polices
There were no changes in significant accounting policies
during the period.
Significant Accounting Polices
The following significant accounting policies have been
adopted in the preparation and presentation of the
financial report:
a. Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, cash in
banks, at call and on deposit.
b. Employee Benefits
Provision is made for benefits accruing to employees in
respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required
and they are capable of being measured reliably.
Provisions made in respect of employee benefits
expected to be settled within 12 months are measured
at their nominal values using the remuneration
rate expected to apply at the time of settlement.
54
Provisions made in respect of employee benefits which are
not expected to be settled within 12 months are measured
at the present value of the estimated future cash outflows
to be made by the consolidated entity in respect of services
provided by employees up to reporting date.
Contributions by the Group to superannuation plans
on behalf of Australian employees and other defined
contribution payments on behalf of employees are expensed
when incurred.
Provision is made for any long term defined benefit
pension obligations the Group has to employees in foreign
jurisdictions. The required amount of the provision is
actuarially assessed having regard to such matters as future
interest rates, the date at which pension payments might
commence and the likely period over which pensions may
be paid.
c. Financial Assets
Subsequent to initial recognition, investments in subsidiaries
are measured at cost less any allowance for impairment.
Other financial assets are classified into the following
categories in accordance with AASB 9 Financial Instruments
being ‘amortised cost‘, ‘fair value through profit or loss’
and ‘ fair value through other comprehensive income’. The
classification depends on the nature and purpose of the
financial asset.
Receivables
Trade receivables and other receivables are recognised
initially at their fair value and subsequently at amortised
cost less impairment in accordance with the Expected
Credit Loss method.
d. Financial Instruments Issued by the Company
Debt and Equity Instruments
Debt and equity instruments are classified as either liabilities
or as equity in accordance with the substance of the
contractual arrangement.
Transaction Costs on the Issue of Equity Instruments
Transaction costs arising on the issue of equity instruments
are recognised directly in equity as a reduction of the
proceeds of the equity instruments to which the costs relate.
Transaction costs are the costs that are incurred directly in
connection with the issue of those equity instruments and
which would not have been incurred had those instruments
not been issued.
e. Foreign Currency
Foreign Currency Transactions
All foreign currency transactions during the financial year are
brought to account using the exchange rate in effect at the
date of the transaction. Foreign currency monetary items
are translated at the exchange rate prevailing at the end of
the reporting period. Non-monetary items measured at fair
value are reported at the exchange rate prevailing at the date
when the fair value was determined.
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
1.
Summary of Accounting Policies
(continued)
Foreign Operations
On consolidation, the assets and liabilities of the
consolidated entity’s overseas operations are translated at
exchange rates prevailing at the reporting date. Income and
expense items are translated at the average exchange rates
for the period unless exchange rates fluctuate significantly.
Exchange differences arising, if any, are recognised in the
foreign currency translation reserve, and recognised in profit
or loss on disposal of the foreign operation.
f. Goods and Services Tax and Value Added Tax
Revenues, expenses, assets and liabilities are recognised
net of the amount of goods and services tax (GST) or value
added tax (VAT) for certain foreign jurisdictions, except
where the GST or VAT is not recoverable from the relevant
tax authority. In these circumstances the GST or VAT is
recognised as part of the cost of acquisition of the asset or as
part of an item of the expense. Receivables and payables in
the balance sheet are shown inclusive of GST.
Cash flows are included in the cash flow statement on a gross
basis. The GST or VAT component of cash flows arising from
investing and financing activities which is recoverable from,
or payable to, the taxation authority is classified as operating
cash flows.
g. Impairment of Assets
At each reporting date, the consolidated entity reviews
the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those
assets have been impaired. If any such indication exists,
the recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value in use,
is compared to the asset’s carrying value. Any excess of
the asset’s carrying value over its recoverable amount is
expensed to the income statement.
Where it is not possible to estimate the recoverable amount
of an individual asset, the consolidated entity estimates the
recoverable amount of the cash generating unit to which the
asset belongs.
h. Income Tax
Current Tax
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the taxable
profit or loss for the period. It is calculated using tax rates and
tax laws that have been enacted or substantively enacted by
reporting date. Current tax for current and prior periods is
recognised as a liability to the extent that it is unpaid.
Deferred Tax
Deferred tax assets and liabilities are ascertained based on
temporary differences arising from differences between
the carrying amount of assets and liabilities in the financial
statements and the corresponding tax base of those items. In
principle, deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised to
the extent that it is probable that sufficient taxable amounts
will be available against which deductible temporary
differences or unused tax losses and tax offsets can be
utilised. However, deferred tax assets and liabilities are not
recognised if the temporary differences giving rise to them
arise from the initial recognition of assets and liabilities (other
than as a result of a business combination) which affects
neither taxable income nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, branches,
associates and joint ventures except where the consolidated
entity is able to control the reversal of the temporary
differences and it is probable that the temporary differences
will not reverse in the foreseeable future. Deferred tax assets
arising from deductible temporary differences associated
with these investments and interests are only recognised
to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in
the foreseeable future.
Deferred tax assets and liabilities are calculated at the
tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax
rates enacted or substantively enacted at reporting date.
Their measurement also reflects the manner in which
management expects to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation authority
and the Group intends to settle its current tax assets and
liabilities on a net basis.
Current and Deferred Tax for the Period
Current and deferred tax is recognised as an expense or
income in the income statement, except when it relates to
items credited or debited directly to equity, in which case
the deferred tax is recognised directly in equity, or where it
arises from the initial accounting for a business combination,
in which case it is taken into account in the determination of
goodwill or excess.
Tax Consolidation
The Parent Entity and all its wholly-owned Australian
subsidiaries are part of a tax-consolidated group under
Australian tax consolidation legislation. Magontec Limited is
the head entity in the tax-consolidated group. Tax expense/
income, deferred tax liabilities and deferred tax assets
arising from temporary differences of the members of the
tax-consolidated group are recognised in the separate
financial statements of the members of the tax-consolidated
group using the ‘stand-alone taxpayer’ approach. Current
tax liabilities and assets and deferred tax assets arising from
unused tax losses and tax credits of the members of the tax
consolidated group are recognised by the Company (as head
entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between
the entities in the tax-consolidated group, amounts are
recognised as payable to or receivable by the Company and
each member of the group in relation to the tax contribution
55
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
1.
Summary of Accounting Policies
(continued)
amounts paid or payable between the parent entity and the
other members of the tax-consolidated group in accordance
with the arrangement. Further information about the
tax funding arrangement is detailed in the notes to the
financial statements. Where the tax contribution amount
recognised by each member of the tax-consolidated group
for a particular period is different to the aggregate of the
current tax liability or asset and any deferred tax asset arising
from unused tax losses and tax credits in respect of that
period, the difference is recognised as a contribution from
(or distribution to) equity participants.
i.
Intangible Assets
Patents, Trademarks and Licences
Patents, trademarks and licences are recorded at cost of
acquisition. Patents and trademarks have an indefinite useful
life and are carried at cost. Carrying values are subject to
impairment testing as outlined above.
Research and Development Costs
Expenditure on the research phase of a project is recognised
as an expense when incurred. Development costs are
capitalised only when technical feasibility studies identify
that the project is expected to deliver future economic
benefits and these benefits can be measured reliably.
Inventories
j.
Inventory is measured at the lower of cost and net realisable
value. Costs are assigned to inventory using a weighted
average cost method. Net realisable value represents
the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and
distribution.
k. Leases
Leases are recognised by recording a lease liability at
inception and a corresponding “right of use” asset on the
balance sheet.
The lease liability is unwound over time, with each lease
payment apportioned between an interest expense
component and a principal reduction component. The right
of use asset is depreciated over the useful life of the asset.
l. Non-current Assets Held for Sale
Non-current assets (and disposal groups) classified as
held for sale are measured at the lower of carrying amount
and fair value less costs to sell. Non-current assets and
disposal groups are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather
than through continuing use. This condition is regarded
as met only when the sale is highly probable and the asset
(or disposal group) is available for immediate sale in its
present condition. The sale of the asset (or disposal group) is
expected to be completed within one year from the date of
classification.
m. Payables
Trade payables and other accounts payable are recognised
when the consolidated entity becomes obliged to make
future payments resulting from the purchase of goods and
services.
n. Presentation Currency
The presentation currency of the Group is Australian dollars.
o.
Principles of Consolidation and Investments
in Subsidiaries
The consolidated financial statements are prepared by
combining the financial statements of all the entities that
comprise the consolidated entity, being the Company (the
parent entity) and its subsidiaries as defined in Accounting
Standard AASB 127 ‘Consolidated and Separate Financial
Statements.’ A list of subsidiaries appears in the notes to
the financial statements. Consistent accounting policies
are employed in the preparation and presentation of the
consolidated financial statements. On acquisition, the
assets, liabilities and contingent liabilities of a subsidiary are
measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill.
Similarly, any excess of the fair market value over the cost of
acquisition is recognised as a discount upon acquisition.
The consolidated financial statements include the
information and results of each subsidiary from the date on
which the Company obtains control and until such time as
the Company ceases to control such entity. In preparing the
consolidated financial statements, all intercompany balances
and transactions, and unrealised profits arising within the
consolidated entity are eliminated in full.
p. Plant and Equipment
Plant and equipment is stated at cost less accumulated
depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the item.
In the event that settlement of all or part of the purchase
consideration is deferred, cost is determined by discounting
the amounts payable in the future to their present value as at
the date of acquisition.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset only when it is
probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period
in which they are incurred.
Depreciation is provided on plant and equipment and is
calculated on a straight-line basis so as to write off the
net cost or other revalued amount of each asset over its
expected useful life to its estimated residual value. Useful life
is determined having regard to the nature of the plant and
equipment, the environment in which it operates (including
geographical and climatic conditions) and an expectation
that maintenance is conducted on a scheduled basis.
56
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
1.
Summary of Accounting Policies
(continued)
Leasehold improvements are depreciated over the period
of the lease or estimated useful life, whichever is the shorter,
using the straight-line method. The assets’ estimated
useful lives and residual values are reviewed, and adjusted if
appropriate, at the end of each annual reporting period. The
estimated useful lives of significant items of property, plant
and equipment are as follows:
Land & Buildings
4 - 60 years
Plant & Equipment
3 - 20 years
q. Provisions
Provisions are recognised when the consolidated entity has a
legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will
result and that outflow can be reliably measured.
r. Revenue Recognition
Sale of Goods
Revenue from the sale of goods is recognised when the
consolidated entity has satisfied performance obligations in
transferring to the buyer the significant risks and rewards of
ownership of the goods. The Group’s activities involve the
sale and delivery of a variety of products including primary
and recycled magnesium ingots, as well as both magnesium
and titanium anodes.
As it relates to Magontec specifically, the timing of revenue
recognition and satisfaction of performance obligations
is determined with reference to the INCO shipping terms
(e.g. FOB, CIF, DDP, DAP) that apply to each delivery.
Invoices are issued and revenue is recognised at the point
where the transfer of the significant risks and rewards of
ownership of the goods are determined to have passed to
the customer in line with this framework. For example, under
FOB shipping terms, the Group recognises revenue at the
point when goods have arrived at the port of departure and
has received the bill of lading.
Rendering of Services
Revenue from a contract to provide services is recognised by
reference to the stage of completion of the contract.
Interest Revenue
Interest revenue is recognised on a time proportionate basis
that takes into account the effective yield on the financial asset.
s. Share-based Payments
Senior executives of the Group receive remuneration in
the form of share-based payments, whereby employees
render services as consideration for equity instruments
(equity-settled transactions).
Equity-settled Transactions
The cost of equity-settled transactions is determined by the
fair value at the date when the grant is made using a binomial
options pricing valuation model. The fair value determined at
the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period,
based on the Company’s estimate of shares that will
eventually vest.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired
and the Company’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit
in the statement of profit or loss for a period represents
the movement in cumulative expense recognised as at the
beginning and end of that period.
Service and non-market performance conditions are not
taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being
met is assessed as part of the Company’s estimate of the
number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an
award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and lead
to an immediate expensing of an award unless there are also
service and/or performance conditions.
No expense is recognised for awards that do not ultimately
vest because non-market performance and/or service
conditions have not been met. Where awards include
a market or non-vesting condition, the transactions are
treated as vested irrespective of whether the market or
non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified,
the minimum expense recognised is the grant date fair value
of the unmodified award, provided the original terms of
the award are met. Any additional expense, measured as at
the date of modification, is recognised for any modification
that increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the
employee. Where an award is cancelled by the entity or by
the counterparty, any remaining element of the fair value
of the award is expensed immediately through profit or
loss. The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of diluted
earnings per share.
Cash-settled Transactions
A liability is recognised for the fair value of cash-settled
transactions. The fair value is measured initially and at each
reporting date up to and including the settlement date,
with changes in fair value recognised in employee benefits
expense. The fair value is expensed over the period until the
vesting date with recognition of a corresponding liability.
t.
Critical Accounting Judgements and
Key Sources of Estimation Uncertainty
In the application of the Group’s accounting policies,
which are described in this note, management is required
to make judgements, estimates and assumptions about
carrying values of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and various
other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of
making the judgements. Actual results may differ from
these estimates.
57
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
1. Summary of Accounting Policies (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision
and future periods if the revision affects both the current and future periods.
Material examples of management applying critical accounting judgements and key sources of estimation uncertainty include:
–
–
–
–
–
valuation of Long Term Incentive Expenses;
impairment assessments;
actuarial assessment of future pension liabilities;
value of trade debtors; and
valuation of intellectual property acquired
New Accounting Standards for Application in Future Periods
u.
The AASB has issued new and amended standards and interpretations that have mandatory application dates for future
reporting periods. The Group has not early adopted any of these standards.
2. Results from Operations
(a) Sales Revenue:
Metal
Anodes - Cathodic Corrosion Protection
(b) Cost of Sales:
Metal
Anodes - Cathodic Corrosion Protection
Gross Profit:
Metal
Anodes - Cathodic Corrosion Protection
(c) Other Income in Comprehensive Income Statement
Interest revenue
Government grants
Derivative market re-valuation
Compensation (non recurring) received including from insurance
Compensation from resolution of MAR VAT issue
Write back of provisions
Other
58
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
102,752
72,123
55,848
43,028
158,600
115,151
(82,292)
(66,534)
(37,713)
(29,385)
(120,005)
(95,919)
20,460
5,589
18,135
13,643
38,595
19,232
30
224
67
430
–
647
51
35
716
–
248
468
239
41
1,450
1,747
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
2. Results from Operations (continued)
(d)
Significant expenses in Comprehensive Income Statement
(not detailed elsewhere)
Personnel Costs
Consultancies
Share based payments
Defined contribution payments recognised as an expense
Other staff payments
Total personnel costs
Director fees
Asset impairment expense
Write down of trade debtors
Total asset impairment expense
(e) Financing cash flows reconciliation
Bank Borrowings
Lease liabilities
Total liabilities from financing activities
(f) Share-Based Payments
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
(354)
(253)
(1,107)
(7,380)
(190)
(237)
(1,070)
(6,437)
(9,094）)
(7,934)
(248)
(240)
(25)
(25)
4
4
31 Dec 2021
$’000
Cash Flows
$’000
Non cash
FX
$’000
31 Dec 2022
$’000
11,526
496
12,021
(1,865)
(284)
(2,149)
(365)
232
(133)
9,295
444
9,739
Executive LTI plan
Under the executive LTI plan, awards are made to executives and other key talent who have an impact on the consolidated
entity’s performance. LTI awards are delivered in the form of performance rights which vest into shares upon achievement of
share price targets (market based) and or operational outcomes (non-market based).
For market based targets, the Board uses absolute total shareholder return (TSR) as the key performance measure. TSR
comprises the percentage change in the company’s share price, plus the value of any future dividends received during the
period and is measured over a 3 year period.
The fair value of this scheme is recorded as an expense in the profit and loss statement. Refer to the Remuneration Report for
further detail.
(Expense)/Writeback recognised from equity-settled share-based payments
Total (Expense)/Writeback - share-based payments
31 Dec 2022
$’000
31 Dec 2021
$’000
(253)
(253)
(237)
(237)
59
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
3.
Income Taxes
(a)
Income tax recognised in profit and loss
Tax expense comprises:
Current tax expense
Deferred tax expense*
Increase/(write down) of tax losses
Change in recognised deductible temporary differences
Subtotal deferred tax expense
Total tax expense
The prima facie income tax expense on pre-tax accounting profit/(loss) from operations
reconciles to the income tax expense in the financial statements as follows:
Profit/(Loss) from total operations before tax
Nominal Income tax benefit/(expense) calculated at 30%
Nominal tax benefit (expense) effected by:
Adjusted for effect of tax rates in foreign jurisdictions
Tax effect - P & L items not assessable or deductible for tax purposes.
Changes in deductible temporary differences, tax losses and other items
Actual tax benefit/(expense)
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
(7,802)
(2,008)
46
434
480
(15)
301
287
(7,322)
(1,722)
23,837
6,730
(7,151)
(2,019)
24
(766)
571
382
(335)
250
(7,322)
(1,722)
*
The 2021 split of deferred tax expense has been updated from the last Annual Report. No change to overall subtotal of deferred tax expense.
(b)
Income tax amounts recognised in OCI
Revaluation of defined benefit pension plan
Tax effect (expense)/benefit through OCI
(c) Deferred Tax Asset
Non–Current
Timing differences
Carryforward tax losses
Total
12 months to
31 Dec 2022
$
12 months to
31 Dec 2021
$
4,188
(1,382)
1,392
(460)
31 Dec 2022
$’000
31 Dec 2021
$’000
1,557
273
1,830
2,488
232
2,720
Note: The Group has revenue losses in its PRC segment which have given rise to a deferred tax asset as at 31 December 2022. The utilisation of
these losses in the PRC is subject to a 5 year time limit. A portion of MAQ tax losses were written during the year to 31 December 2022 due to
the potential expiration of this limit before they can be fully utilised.
The deferred tax asset split between timing difference and carry forward tax losses in 2021 has been updated since the last Annual Report.
No change to the overall total of Deferred Tax Asset.
60
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
3.
Income Taxes (continued)
Tax Consolidation
The parent Company and its wholly-owned Australian subsidiary (AMT) have formed a tax-consolidated group with effect
from 1 February 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated
group is Magontec Limited.
The members of the tax-consolidated group are identified at Note 22.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group ensure that inter-company transactions are conducted at fair market value and
at arm’s length. Magontec Limited has not entered into a tax funding arrangement or tax sharing agreement with AMT.
(d) Unrecognised deferred tax balances
The following deferred tax assets have not been brought to account as assets:
Australian Tax Consolidated Group
Deferred Tax Asset (DTA) on pre-tax consolidation revenue losses
DTA on post-tax consolidation revenue losses*
DTA on capital losses
Sub Total Australian Tax Consolidated Group
These are based on the following tax losses:
Aust consolidated group Tax losses – revenue pre-tax consolidation
Aust consolidated group Tax losses – revenue post-tax consolidation*
Aust consolidated group Tax losses – capital
Consolidated Group Total
Consolidated Parent Entity
31 Dec 2022
$’000
31 Dec 2021
$’000
81,581
40,309
29,019
81,581
38,987
29,019
150,909
149,587
271,936
271,936
134,364
129,957
96,732
96,732
503,032
498,625
*
The 31 December 2021 numbers were updated subsequent to the release of the 2021 Annual Report following the finalisation of the Tax
Return for the Australian Tax Consolidated Group.
The benefit from the Australian deferred tax asset in respect of unused tax losses will only be obtained if:
a. the tax consolidated group derives future Australian assessable income of a nature and amount sufficient to enable the
benefits to be realised;
b. the consolidated group continues to comply with the conditions for deductibility imposed by the tax law; and
c. no changes in tax legislation adversely affect the consolidated group in realising the benefit of the losses.
No deferred tax asset has been brought to account as an asset because it is not probable that taxable profit will be available
against which such an asset could be utilised.
Unused tax losses incurred after the formation of the former Advanced Magnesium Limited (the former name of Magontec
Limited) consolidated group are $134.4 million. These losses will be fully available to offset future taxable income to the extent
MGL continues to satisfy the loss integrity rules (i.e. Continuity of Ownership Test and Same Business Test).
Based on testing performed by MGL and its advisors, these losses should satisfy the loss integrity rules as at 31 December 2022.
Unused tax losses incurred prior to the formation of the former Advanced Magnesium Limited (the former name of Magontec
Limited) consolidated group were $271.9 million. These losses will be subject to restricted use (Available Fraction rules).
These restrictions on use are in addition to the loss integrity rules. Broadly, the Available Fraction rules limit the amount of
losses that can be used each year by applying the following formula:
Available Fraction x Taxable income for year = Pre consolidation losses available for use for year
61
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
3.
Income Taxes (continued)
No detailed Available Fraction calculations have been performed as at 31 December 2022, however it is unlikely that the
Available Fraction applying to pre-consolidation tax losses will be greater than 0.2.
The Australian tax consolidated entity has not paid income tax up to 31 December 2022 and neither is any assessment
expected to be received which will result in a tax liability for the period to 31 December 2022. Accordingly, there are no franking
credits available for distribution in the year ended 31 December 2022.
Tax outside of Australian tax consolidation regime
The Group has overseas entities which are not subject to Australian tax consolidation and are therefore not sheltered by
Australian tax losses. Those entities may incur income tax based on local corporate tax law and are subject to the local
jurisdiction.
4. Key Management Personnel Remuneration
The aggregate compensation of the key management personnel of the Group is set out below:
Short term employee benefits
Post-employment benefits
Motor vehicle
Equity based payment
Total Remuneration KMP
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
2,292
1,844
93
15
194
98
32
177
2,595
2,150
Individual directors and executives compensation disclosures
Information regarding individual directors' and executives' compensation and some equity instruments disclosures as required
by Corporations Regulations 2M.3.03 is provided in the remuneration report section of the Directors' Report.
5. Remuneration of Auditors
Group auditor
– Audit or review of the financial report
– Accounting/taxation services
Auditors of subsidiaries
– Audit or review of the financial reports
– Accounting/taxation services
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
109
8
80
37
234
98
11
92
23
224
The auditor of Magontec Limited is Camphin Boston Chartered Accountants. Magontec GmbH, Magontec Xi’an Co Limited,
Magontec Qinghai Co Limited and Magontec Romania are all audited by local auditors who supply information as requested
by the Group Auditor Camphin Boston.
62
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
6. Current Trade and Other Receivables
Trade receivables (1)
Allowance for doubtful debts
Net GST/VAT recoverable
Security deposits
Derivative Fair Value
Notes and other receivables due to operating entities (2)
Total receivables
31 Dec 2022
$’000
31 Dec 2021
$’000
18,324
18,747
(658)
(306)
17,666
18,441
225
–
60
6,847
7,131
666
141
–
2,069
2,875
24,797
21,317
(1)
(2)
Trade receivables represent 42.2 days sales at 31 Dec 2022 (59.4 days sales at 31 Dec 2021).
Notes receivable are issued by customers as consideration for services provided, and are redeemable for cash at a discount.
7. Current Inventories
Inventory of finished alloy at cost
Provision for Inventory loss
Net value of finished goods inventory
Raw materials
Work in progress
Current inventories at net realisable value
8. Other Current Assets
Other prepayments
9. Non Current Trade and Other Receivables
Pension asset
Security deposits and prepayments
31 Dec 2022
$’000
31 Dec 2021
$’000
16,667
10,387
(179)
(543)
16,488
13,016
6,424
9,844
8,105
5,740
35,928
23,689
31 Dec 2022
$’000
31 Dec 2021
$’000
2,017
8,840
2,017
8,840
31 Dec 2022
$’000
31 Dec 2021
$’000
332
2
334
314
2
316
63
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
10. Property Plant & Equipment
Gross carrying amount
Balance at 1 January 2021
Additions
Adjustments, reclassifications, right of use additions
Disposals and write offs
Net foreign currency exchange differences
Balance at 31 December 2021
Additions
Adjustments, reclassifications, right of use additions
Disposals
Net foreign currency exchange differences
Balance at 31 December 2022
Accumulated depreciation/amortisation and impairment
Balance at 1 January 2021
Disposals and write offs
Adjustments and reclassifications
Depreciation expense
Net foreign currency exchange differences
Balance at 31 December 2021
Disposals
Write Offs
Adjustments and reclassifications
Depreciation expense
Net foreign currency exchange differences
Balance at 31 December 2022
Net Book Value As at 31 Dec 2021
Net Book Value As at 31 Dec 2022
Capital WIP
$’000
Land &
Buildings
$’000
Plant &
Equipment
$’000
Total
$’000
550
19,262
37,242
57,054
67
(16)
-
50
651
52
(50)
-
(12)
641
–
–
-
–
–
–
–
–
–
–
–
–
651
641
9
16
(14)
(19)
802
326
(1,057)
1,182
878
326
(1,071)
1,212
19,254
38,495
58,399
209
(1)
(10)
49
1,678
214
(562)
(226)
1,939
163
(572)
(190)
19,500
39,599
59,740
11,296
26,690
37,986
–
-
617
38
(631)
2
1,999
636
(631)
2
2,616
673
11,950
28,696
40,646
(3)
–
–
574
23
(57)
(449)
16
2,006
(114)
12,544
30,097
7,305
6,957
9,798
9,502
(59)
(449)
16
2,579
(91)
42,641
17,753
17,099
During the year to 31 December 2022, indicators of impairment were present at the Magontec China Metals Segment due to
the lack of supply from QSLM and associated losses with using more expensive outsourced pure Magnesium. Therefore the
value of the plant and equipment located at Qinghai was tested for impairment at balance date.
The value in use of the Magontec China Metals Segment was calculated using appropriate forward projections and assumed a
discount rate of 8.9% and a terminal decline rate of -4.7%. As the value in use was higher than the carrying value, no impairment
loss was deemed necessary as at 31 December 2022.
64
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
11.
Intangibles
Gross carrying amount
Balance at 31 Dec 2021
Net foreign currency exchange differences
Additions
Balance at 31 Dec 2022
Accumulated depreciation/amortisation and impairment
Balance at 31 Dec 2021
Depreciation/amortisation expense
Net foreign currency exchange differences
Balance at 31 Dec 2022
Net Book Value As at 31 Dec 2021
Net Book Value As at 31 Dec 2022
Indefinite
Life (1)
$’000
Finite Life
$’000
Total
$’000
2,800
2,413
5,213
–
–
16
20
16
20
2,800
2,449
5,249
–
–
–
–
2,800
2,800
1,973
1,973
197
20
2,189
441
259
197
20
2,189
3,241
3,059
Note 1 - Indefinite Life Intangible Assets - Patents in relation to “AE44“ and “Correx“.
The indefinite life intangible assets comprise the patents over the “AE” alloys and the “Correx” anode system. Both products
enjoy technical superiority over possible alternatives and continue to earn high margins. In testing this asset for impairment,
an average discount rate of 8.65% (2021: 5.8%) to management cash flow forecasts was applied. A zero growth rate has been
assumed over the initial 5 year period, with an average terminal decline rate of 11.1% per annum thereafter. The value in use was
found to be in excess of the carrying amount and thus no impairment loss was recorded.
12. Current Trade and Other Payables
Trade creditors (1)
Other creditors and accruals
31 Dec 2022
$’000
31 Dec 2021
$’000
7,841
4,185
13,740
3,829
12,026
17,570
(1)
Trade creditors represent 23.8 days cost of goods sold at 31 Dec 2022 (52.3 days cost of goods sold at 31 Dec 2021).
65
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
13. Borrowings
Bank & Institutional
Borrowings
31 Dec 2022
Notes
$’000
31 Dec 2022
Maturity
Date
31 Dec 2022
Interest
pa
31 Dec 2021
$’000
31 Dec 2021
Maturity
Date
31 Dec 2021
Interest
pa
Magontec GmbH (Bank Loan) (1)
Magontec GmbH (Bank Loan) (1)
25(i)
25(i)
– 30-Nov-23
788 31-Dec-23
3.68%
1.85%
2,651 30-Nov-23
1,565 31-Dec-23
Magontec GmbH (Factoring
Facility) (3)
Magontec SRL (Working Capital
Facility) (2)
Magontec Xi’an Limited
(Bank Loan)
Total Bank Borrowings
Current Borrowings
Bank borrowings as above
(excluding factoring facility)
Total Current Borrowings
Non-Current Borrowings
Bank borrowings as above
Total Non-Current borrowings
1.55%
1.85%
0.95%
1,203 28-Feb-25
3.33%
1,947
2021
31 Dec
1,923 28-Feb-23
8.31%
1,896 28-Feb-22
4.49%
6,584
12-Jun-23
3.18%
5,413
16-Jul-22
3.90%
Various
10,498
9,295
9,295
–
–
13,473
7,309
7,309
4,217
4,217
–
Various
(1)
(2)
(3)
These borrowings are secured by a charge over MAB's trade debtors to the extent of €888,000 ($1,398,778) and inventory of €4,612,000
($7,264,822) plus land & buildings.
These borrowings are secured by a charge over MAR's trade debtors and inventory to the extent of RON27,331,574 ($8,666,842) plus land &
buildings.
This factoring facility is set off against trade debtors, and thus is not shown in 'Borrowings' on the balance sheet.
14. Current Provisions
Provision for annual & long service leave and employee costs
Provision for income tax payable
Other current provisions
Provision for loss on FX hedges
Total
15. Non-Current Provisions
Provision for defined benefit pension obligation
Other provisions
Total
66
31 Dec 2022
$’000
31 Dec 2021
$’000
548
7,963
716
32
581
2,171
739
–
9,259
3,491
31 Dec 2022
$’000
31 Dec 2021
$’000
9,024
337
13,111
285
9,360
13,395
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
15. Non-Current Provisions (continued)
Reconciliation of the defined benefit pension obligation
Defined benefit obligation beginning of year
Current service cost
Interest cost
Total benefits paid - actual
Foreign currency exchange rate changes
Actuarial (gains)/ losses due to change of assumptions
Defined benefit obligation end of year
Year Ended
31 Dec 2022
$’000
Year Ended
31 Dec 2021
$’000
13,111
14,714
217
169
(367)
83
250
107
(372)
(196)
(4,188)
(1,393)
9,024
13,111
The extent of the Provision for the Defined Benefit Obligation is assessed annually based on actuarial calculations which take
into account such matters as:
– number of participants in the plan;
–
–
–
likely retirement salaries of participants in the pension plan;
their life expectancy beyond retirement; and
implied interest earnings on the extent of the fund
The defined benefit plan is an unfunded plan which has been provided to certain employees in the European business.
Increasing interest rates will act to decrease the Provision. A summary of the key assumptions underpinning the actuarial
calculation and a sensitivity analysis is provided below.
Key actuarial assumptions used in calculation of the defined benefit obligation
Discount rate
Expected salary increase per annum
Expected pension increase per annum
Year Ended
31 Dec 2022
$’000
Year Ended
31 Dec 2021
$’000
3.90%
2.75%
2.20%
1.30%
2.75%
1.75%
Key sensitivities of actuarial assumptions used in calculation of defined benefit obligation
Discount rate (%)
Salary increase (%)
Pension increase (%)
Life expectancy (years)
% chg
+0.5%
(0.5)%
+0.5%
(0.5)%
+0.5%
(0.5)%
+ 1 year
Year Ended
31 Dec 2022
$’000
Year Ended
31 Dec 2021
$’000
(615)
692
24
(23)
541
(496)
383
(1,135)
1,310
59
(56)
949
(859)
705
67
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
16. Share Capital
31 Dec 2022
$’000
31 Dec 2021
$’000
Opening balance of share capital attributable to members of MGL
58,918
58,918
Dividend Reinvestment Plan
Various costs associated with issue of shares
269
(13)
–
–
Share capital on issued ordinary shares 77,521,835 (2021: 76,729,210)
59,174
58,918
A reconciliation of the movement in fully paid ordinary shares during the period is set out below.
CONSOLIDATED / PARENT ENTITY
31 Dec 2022
31 Dec 2021
No.
$’000
No.
$’000
Fully paid ordinary shares
Balance at beginning of financial year
76,729,210
58,918 1,150,924,806
58,918
Dividend reinvestment plan
Expenses of various issues
792,625
269 (1,074,195,596)
-
(13)
-
-
-
77,521,835
59,174
76,729,210
58,918
During the year to 31 December 2022, the Group offered a Dividend Reinvestment Plan to shareholders, resulting in the issue
of 792,625 new shares.
During the year to 31 December 2021, the Group undertook a 15 for 1 share consolidation.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Performance rights
Performance rights carry no rights to dividends and no voting rights until converted into ordinary shares.
Further details of the share-based payment schemes are contained in the Remuneration Report.
Total dividends distributed including both cash and share issues plus related taxes for the
6 months to 30 June 2022
Dividend amount per share
$460,000
$0.006
A further dividend amount per share of 0.6 cents per share has been declared with respect to the 6 months to
31 December 2022.
All dividends are unfranked.
68
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
17. Reserves
Capital reserve
Balance at beginning of financial year
Balance at end of financial year
Foreign currency translation reserve
Balance at beginning of financial year
Movement in VHL Consolidated accounts
Balance at end of financial year
Actuarial Reserves
Balance at beginning of financial year
Deferred tax assets
Employee pensions
Balance at end of financial year
Expired Options Reserve
Balance at beginning of financial year
Balance at end of financial year
Share Issue Reserve
Balance at beginning of financial year
Fair value of performance rights issued for future periods
Balance at end of financial year
Profits Reserve
Balance at beginning of financial year
Transfer to Profits Reserve
Dividends paid
Balance at end of financial year
Total reserves
Other Comprehensive Income - that may later emerge in the Profit and
Loss Statement
Exchange differences taken to reserves in equity – translation of overseas entities
Movement in various actuarial assessments
Total Other Comprehensive Income
Notes
31 Dec 2022
$’000
31 Dec 2021
$’000
2,750
2,750
2,750
2,750
3,766
484
4,250
(3,373)
(1,382)
4,188
2,563
1,203
3,766
(4,306)
(460)
1,392
(567)
(3,373)
1,637
1,637
1,637
1,637
373
253
627
–
7,317
(460)
6,857
15,554
484
2,806
3,290
136
237
373
–
–
–
–
5,153
1,203
933
2,137
(1)
The capital reserve is a historical reserve from 2002 that arose after calculation of the outside equity interest in the (as it was then) Australian
Magnesium Investments Pty Ltd consolidated entity.
The foreign currency translation reserve arises as a result of translating overseas subsidiaries from their functional currency to the
presentation currency of Australian dollars.
The expired options reserve captures the balance of unexercised options on their expiry date from the appropriate share capital account.
The actuarial reserve represents the cumulative amount of actuarial gains / (losses) on the Group’s unfunded defined benefit pension
obligation that needs to be recognised in “Other comprehensive income” (OCI) as well as movements attributable to the market value of
derivatives and deferred tax assets where relevant.
69
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
18. Accumulated Losses
Balance at beginning of financial year
Transfer to Profit Reserve during the financial year
Profit/(Loss) attributable to members of Magontec Limited
19. Earnings/(Loss) Per Share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
31 Dec 2022
$’000
31 Dec 2021
$’000
(27,796)
(32,804)
(7,317)
–
16,515
5,008
(18,599)
(27,796)
12 months to
31 Dec 2022
cents per
share
12 months to
31 Dec 2021
cents per
share
21.5
19.7
6.5
6.3
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share are as
follows:
Profit/(Loss) after income tax expense/benefit from continuing operations
Members of the parent entity
Weighted average number of ordinary securities on issue (for basic earnings
calculation)
Performance rights
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
16,515
5,008
76,846,475
76,729,210
7,047,063
2,606,240
Weighted average number of ordinary securities on issue (for diluted earnings
calculation)
83,893,538
79,335,450
20. Contingent Liabilities and Assets
At 31 December 2022 a contingent liability exists in relation to the item below.
Claim Against MAS
A claim was made against the Magontec Suzhou company with respect to restoration costs on the property formerly occupied
by this plant. The company does not believe there is a reasonable basis for this claim. Although a judgement against the
company, the company continues to contest this matter.
70
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
21. Capital and Leasing Commitments
a. Right of use assets
The Group recognises a right of use lease asset at inception in the Property, Plant & Equipment caption on the balance sheet,
which includes equipment and vehicles as well as a corresponding lease liability in the Current and Non Current Provisions on
the balance sheet.
The right of use asset is depreciated on a straight-line basis per the term of the lease
The lease liability is unwound over the term of the lease, with interest expense recorded in the income statement
The movement in the right of use assets balance during the period is summarised below.
RIGHT OF USE ASSETS SUMMARY
Opening balance
Add new leased assets
Depreciation charge
FX movements
Closing balance
Lease liabilities
b.
The total lease liabilities recorded on the balance sheet are as follows:
Lease liabilities recognised in the balance sheet
Current
Non Current
Total lease liabilities recognised in the balance sheet
31 Dec 2022
$’000
31 Dec 2021
$’000
502
232
(288)
3
449
518
326
(335)
(8)
502
31 Dec 2022
$’000
31 Dec 2021
$’000
190
254
444
240
255
496
Interest charges and amounts recognised in interest payments in the cash flow statement during the period were as follows:
Amounts recognised in the profit and loss statement
Interest charge on lease liabilities
Amounts recognised in the cash flow statement
Total cash inflow/(outflow) for leases
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
14
12
(298)
(353)
Low value items
c.
During the year to 31 December 2022, the expense relating to leases of low value was $23,000 (2021: $13,000)
d. Capital Expenditure Commitments
There are no material capital commitments for the Group as at 31 December 2022.
71
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
22. Controlled Entities
a. Consolidated Controlled Entities
Name of entity
Parent entity
Magontec Limited (a)
Ownership
Entity
Country of
Incorporation
Ownership
interest
31 Dec 2022
Ownership
interest
31 Dec 2021
Australia
100%
100%
Directly Controlled Subsidiaries Of Parent
Advanced Magnesium Technologies Pty Ltd (a)
Magontec Limited
Australia
Magontec GmbH (b)
Varomet Holdings Limited
Magontec Qinghai Co. Ltd.
Magontec US LLC
AML China Ltd (c)
Magontec Limited
Germany
Magontec Limited
Cyprus
Magontec Limited
China
Magontec Limited
United States
Magontec Limited
China
Indirectly Controlled Subsidiaries of Parent
- Level 1
Magontec SRL
Magontec Xi’an Co Ltd.
Magontec SuZhou Co Ltd
Magontec GmbH
Romania
Varomet Holdings Ltd China
Varomet Holdings Ltd China
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(a) Entities included in the Australian tax consolidated Group.
(b) Ownership of Magontec GmbH transferred to Magontec Limited during the year to 31 December 2021 (previously Varomet Holdings Limited).
(c) Dormant from 30 June 2012.
72
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
22. Controlled Entities (continued)
b. Corporate Structure as at 31 December 2022
Parent
Entity
Administration
Entities
Magontec Limited Corporate Structure
Magontec Limited
(Australia)
100%
100%
Varomet Holdings Limited
(Cyprus)
Advanced Magnesium
Technologies Pty Limited
(Australia)
100%
100%
100%
Magontec GmbH
(Germany)
Magontec US LLC
(United States)
Magontec Qinghai Co Ltd
(China)
Operating
Entities
100%
Magontec SRL
(Romania)
100%
100%
Magontec Xi’an Co Ltd
(China)
Magontec Suzhou Co Ltd
(China)
Acquisition of Controlled Entities
c
There were no acquisitions of controlled entities made during the relevant period.
d Disposal of Controlled Entities
There were no disposals of controlled entities made during the relevant period.
23. Segment Information
Identification of reportable segments
The consolidated entity comprises the entities as described in Note 22.
In respect of the period to 31 December 2022, segment information is presented in respect of the three main departments
within the company.
–
’Admin Units’ = Magontec administrative entities performing a Head Office function comprising -
Magontec Limited (Australia), Advanced Magnesium Technologies Pty Limited (Australia), Varomet Holdings
Limited (Cyprus)
–
’EUR’ = Magontec operating entities in Europe comprising -
Magontec GmbH (Germany), Magontec SRL (Romania), Magontec LLC (United States)
–
’PRC’ = Magontec operating entities in the People’s Republic of China comprising -
Magontec Xi’an Co. Ltd. (China), Magontec Qinghai Co. Ltd. (China), Magontec Suzhou Co. Ltd. (China)
Types of products and services
The principal operating activities comprise:
– Magnesium alloy production
– Magnesium alloy recycling
– Manufacture of cathodic corrosion protection products
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 1 to the
accounts. Magontec GmbH (Bottrop, Germany) is the entity through which alloy production at Magontec Qinghai Co Limited
(Golmud) is sold in Europe. The segment data below is presented net of intergroup transactions (other than sales).
73
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
23. Segment Information (continued)
Statement of Comprehensive Income
Sale of goods
Less Inter-company sales
Net Sales
Cost of sales
Less Inter-company sales
Net Cost of Sales
Gross Profit
Other income
Interest expense
Impairment of inventory,
receivables & other financial assets
Research, development, licensing
and patent costs
Promotional activity
Information technology
Personnel
Depreciation & amortisation
Office expenses
Corporate and other
Foreign exchange gain/(loss)
Profit/(Loss) before income tax
expense
12 months to 31 December 2022
12 months to 31 December 2021
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
–
96,433
63,037
159,469
–
71,001
48,006
119,007
(869)
(3,856)
–
–
–
–
–
(1)
–
(10)
–
(19)
96,433
63,037 158,600
(62,134)
(58,740)
(120,874)
869
(62,134) (58,740) (120,005)
34,298
4,296
38,595
1,197
(294)
(25)
(239)
(377)
(180)
(319)
252
(356)
1,450
(650)
–
(125)
(438)
–
(66)
(25)
(459)
(825)
(180)
(403)
–
–
–
–
–
(1)
4
(19)
(9)
–
(43)
71,001
48,006
115,151
(54,981)
(44,794)
(99,775)
3,856
(54,981)
(44,794)
(95,919)
16,021
3,211
19,232
974
(251)
–
(110)
(554)
(65)
(332)
773
(273)
–
(80)
(316)
–
(68)
1,747
(525)
4
(209)
(880)
(65)
(443)
(1,611)
(5,764)
(1,719)
(9,094)
(1,410)
(4,962)
(1,562)
(7,934)
(27)
(70)
(522)
(270)
(676)
(2,002)
130
28
(56)
(245)
(637)
(224)
(605)
(586)
(35)
(61)
(526)
(312)
(3,314)
(685)
(1,693)
(66)
301
186
(81)
(266)
(736)
(289)
(642)
(640)
(3,114)
198
(2,379) 25,532
684
23,837
(1,959)
8,376
313
6,730
Travel accommodation and meals
(95)
Income tax expense
–
(7,365)
44
(7,322)
–
(1,748)
27
(1,722)
Profit/(Loss) after income tax
expense
Other Comprehensive Income
Movement in actuarial assessments
FX difference taken to Reserves -
translation of overseas entities
(2,379)
18,167
728
16,515
(1,959)
6,629
339
5,008
–
9
2,806
–
2,806
–
933
–
933
824
(350)
484
(15)
(223)
1,441
1,203
Total Comprehensive Income
(2,370)
21,797
378
19,805
(1,975)
7,339
1,780
7,144
74
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
23. Segment Information (continued)
Statement of Comprehensive Income (continued)
12 months to 31 December 2022
12 months to 31 December 2021
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
Segment Disclosures
Segment assets
Segment liabilities
3,562
54,152
38,609
96,323
3,185
40,287
39,039
82,512
987
27,962
11,245
40,195
809
32,050
13,378
46,237
Segment net assets
2,575
26,190
27,364
56,129
2,377
8,237
25,661
36,275
Acquisition of segment fixed assets
–
1,638
301
1,939
–
673
205
878
Non-cash share based payments
expense
Provisioning
- Inventory Increase/(Decrease)
- Doubtful debts Increase/
(Decrease)
115
76
62
253
237
–
–
–
(364)
352
–
–
(364)
352
–
–
242
(7)
–
–
–
237
242
(7)
24. Related Party Disclosures
a
Equity interests in related parties
Equity interest in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 22 to the financial statements.
Transactions with Key Management Personnel including Loans
b
Details of KMP compensation are disclosed in Note 4 to the financial statements and in the Remuneration Report.
c Group Entity
The parent entity is Magontec Limited. Members of the group are set out in Note 22. Transactions during the financial year
between group entities included:
Investment in controlled entities;
–
– Repayment of interest free funds from controlled entities to the parent entity; and
–
Incurring expenditure on behalf of other entities for office rental and related costs, travel costs, seconded employees and
other sundry costs.
The entity is fully reimbursed for these costs on an actual cost basis.
d
Transactions with Related Parties apart from Directors and Key Management Personnel
Sales to
Related
Parties
$’000
Purchases
from
Related
Parties
$’000
Amounts
owed by
Related
Parties
$’000
Amounts
owed to
Related
Parties
$’000
Entity with significant influence
Qinghai Salt Lake Magnesium Co. Ltd
2022
2021
–
–
–
–
–
–
–
–
Nature of related party transactions with Qinghai Salt Lake Magnesium Co. Ltd
During the year, there were no purchases from Qinghai Salt Lake Magnesium Co. Ltd. (QSLM), the largest shareholder of
Magontec Limited as at the balance date.
Outstanding balances owing to QSLM are unsecured and are on an interest free basis. Settlement occurs in cash, with no
guarantees provided for any related party receivable or related party payable balance outstanding between the parties.
75
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
25. Financial Instruments
AASB 9 - classification and measurement of financial assets and financial liabilities
AASB 9 provides three categories for classification of financial assets, being amortised cost, fair value through other
comprehensive income and fair value through profit and loss. This is assessed in accordance with the contractual cash flows
and nature of the underlying asset. The table below summarises the classifications under AASB 9.
The main financial impact of adopting AASB 9 related to the application of the impairment of trade receivables arising from
Lifetime Expected Credit Losses as can be seen below. The Group did not apply hedge accounting to derivatives during the
reporting period.
Financial assets:
Cash and cash equivalents
Trade & other receivables
Other
Financial liabilities:
Trade & other payables
Current Bank Borrowings
Non-Current Bank Borrowings
Category per AASB 9
Fair value
hierarchy
where applicable*
Amortised cost
Amortised cost
Amortised cost
Not applicable
Not applicable
Not applicable
Other financial liabilities
Not applicable
Other financial liabilities
Level 2
Other financial liabilities
Level 2
*
Fair value information is not provided where carrying amounts are assumed to be a reasonable approximation of fair value.
AASB 9 - Impairment of Financial Assets
The Group adopts an "Expected Credit Loss" model to assess impairment of financial assets. The Group has elected to apply
the practical expedient with respect to impairment losses on trade receivables with the use of a provision matrix which takes
into account historical bad debt losses as well as estimates of future losses where considered material. More detail is provided
in the credit risk section below.
(a) Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising
the potential future return to stakeholders through the development and marketing of the Group’s technologies and its
production facilities.
The capital structure of the Group consists of cash and cash equivalents, equity attributable to equity holders of the parent,
comprising issued capital, reserves and accumulated losses as disclosed in Note 16, Note 17 and Note 18 respectively and debt
funding provided by Chinese and European banks (Note 13).
The Group’s main financial risk management issues are ensuring the integrity of debtors, planning for production capacity
expansion in China and continued availability of debt funding. The Group operates globally, primarily through subsidiary
companies established in the markets in which the Group trades.
None of the Group’s entities are subject to externally imposed capital requirements.
(b) Financial risk management objectives
The magnesium alloy industry operates with a disparity of trade terms on the purchase of production inputs and the sale
of output. The Group’s senior management effort is aimed at firstly, arranging funding for working capital and secondly,
negotiating with purchasers and buyers the best available terms.
The Group’s senior management team co-ordinates access to domestic and international financial markets and monitors and
manages the financial risks relating to the operations of the Group in line with the Group’s policies. These risks include market
risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes.
76
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
25. Financial Instruments (continued)
(c) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 1 to the financial statements.
(d) Categories and maturity profile of financial instruments and interest rate risk
The following table details the consolidated entity’s exposure to interest rate risk as at 31 December 2022.
31 December 2022
Notes
Weighted
average
effective
interest rate
%
Variable
interest rate
$’000
Fixed
interest rate
$’000
Non-interest
bearing
$’000
Total
$’000
Financial assets:
Cash and cash equivalents
Trade & other receivables (net of provision for loss)
Other
Financial liabilities:
Trade & other payables
Current Bank Borrowings
Non-Current Bank Borrowings
0.37%
6,838
–
–
–
–
–
6,838
–
13
13
4.22%
10,498
–
–
10,498
–
–
–
–
–
–
–
–
4,421
24,797
2,017
11,259
24,797
2,017
31,235
38,073
12,026
–
–
12,026
10,498
–
12,026
22,525
The following table details the consolidated entity’s exposure to interest rate risk as at 31 December 2021.
31 December 2021
Financial assets:
Weighted
average
effective
interest rate
%
Notes
Variable
interest rate
$’000
Fixed
interest rate
$’000
Non-
interest
bearing
$’000
Total
$’000
Cash and cash equivalents
0.90%
4,636
Trade & other receivables (net of provision for loss)
Other
Financial liabilities:
Trade & other payables
Current Borrowings
Non-Current Borrowings
–
–
–
–
–
4,636
–
13
13
3.40%
9,256
1.66%
4,217
13,473
–
–
–
–
–
–
–
–
–
4,636
21,317
21,317
8,840
8,840
30,157
34,793
17,570
17,570
–
–
9,256
4,217
17,570
31,043
77
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
25. Financial Instruments (continued)
(e) Market risk
Refer comments under headings a and b of Note 25.
(f) Liquidity risk management
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and banking facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
(g) Fair value of financial instruments
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
(h) Foreign currency risk management
The Group has exposure to four main currencies – the United States Dollar (USD), the Euro (EUR), the Chinese Yuan (RMB)
and the Romanian Leu (RON).The carrying amount of the Group’s foreign currency denominated monetary assets and
monetary liabilities at the reporting date are as follows.
Foreign currency monetary assets and liabilities
Cash and cash equivalents
Trade and other receivables
Other non-current receivables
Trade and other payables
Provisions
Borrowings
Other
Other net assets and liabilities
Total
Foreign Currency Monetary Assets & Liabilities Table
Assets
Liabilities
31 Dec 2022
$’000
31 Dec 2021
$’000
31 Dec 2022
$’000
31 Dec 2021
$’000
11,091
27,900
332
4,599
22,647
314
11,712
18,135
9,295
17,453
16,411
11,526
57,000
96,323
54,951
1,052
847
82,512
40,195
46,237
The Group undertakes sales transactions denominated in RMB, USD and EUR and incurs manufacturing input costs
denominated in EUR, RMB and RON. Additionally certain Head Office overheads are incurred in AUD and the Group reports
in AUD. The objective is to centralise treasury risk and cash management so that foreign exchange risk washes through to a
single point.
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10% increase and 10% decrease in relevant foreign currency monetary
items against the Australian Dollar. 10% is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the possible change in foreign exchange rates over the
medium term. The sensitivity analysis includes foreign currency monetary items and adjusts their translation at the period end
for a 10% change in foreign currency rates.
78
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
25. Financial Instruments (continued)
A positive number in the table below indicates an increase in profit or a decrease in loss and other equity where the foreign
currency strengthens against the Australian dollar. A negative number in the table below indicates a decrease in profit or an
increase in loss and other equity where the foreign currency weakens against the Australian dollar.
Notes
31 Dec 2022
$’000
31 Dec 2021
$’000
Effect on Profit/Loss and other equity of a 10% increase in USD rate
(i)
Effect on Profit/Loss and other equity of a 10% decrease in USD rate
USD impact
1,209
(1,209)
732
(732)
EUR impact
Effect on Profit/Loss and other equity of a 10% increase in EUR rate
(ii)
(1,526)
(2,268)
Effect on Profit/Loss and other equity of a 10% decrease in EUR rate
1,526
2,268
Effect on Profit/Loss and other equity of a 10% increase in RMB rate
(iii)
Effect on Profit/Loss and other equity of a 10% decrease in RMB rate
Effect on Profit/Loss and other equity of a 10% increase in RON rate
(iv)
Effect on Profit/Loss and other equity of a 10% decrease in RON rate
RMB impact
634
(634)
RON impact
(300)
300
24
(24)
(270)
270
A positive number in the above table represents a reduction in the operating profit/loss and or other equity
(i)
Exposure to USD is represented by net monetary assets of USD 8.2 million as at 31 Dec 2022 (Net monetary assets of USD 5.3 million as at
31 Dec 2021).
Exposure to EUR is represented by net monetary liabilities of EUR 9.7 million as at 31 Dec 2022 (Net monetary liabilities of EUR 14.5 million as at
31 Dec 2021).
Exposure to RMB is represented by net monetary assets of RMB 29.9 million as at 31 Dec 2022 (Net monetary assets of RMB 1.1 million as at
31 Dec 2021).
(ii)
(iii)
(iv) Exposure to RON is represented by net monetary liabilities of RON 9.4 million as at 31 Dec 2022 (Net monetary liabilities of RON 8.5 million as at
31 Dec 2021).
Derivatives and hedging
During the period, the Company engaged in foreign exchange hedges primarily to manage risks associated with securing the
EUR:USD rate on real metal purchases of pure magnesium in USD. The gains and losses on the market value of these hedges
are recognised directly in the profit and loss statement.
Notes
Carrying value
$’000
Market value
$’000
Cash flow due
within 1 year
$’000
Cash flow due
after 1 year
$’000
31 December 2022
FX hedges
Interest rate swaps
31 December 2021
FX hedges
Interest rate swap
6
14
6
14
60
(32)
–
–
(32)
59
–
7
(32)
–
–
–
–
59
–
7
79
Magontec LimitedAnnual Report 2022Financial Report (continued)
Notes to the Financial Statements
continued
25. Financial Instruments (continued)
The sensitivity of FX hedges to a 10% movement in the relevant exchange rate is outlined below:
FX hedges
Sensitivity to +10% change in USD EUR rate
Sensitivity to -10% change in USD EUR rate
Interest rate swaps
Sensitivity to +0.5% change in interest rates
Sensitivity to -0.5% change in interest rates
AUD impact of change
31 Dec 2022
$’000
31 Dec 2021
$’000
438
(438)
6
(6)
–
–
8
(8)
(i) Capital Management and Interest rate risk management
The Group has bank loans outstanding of $787,600 (refer Note 13) owing to Commerzbank globally (excluding the factoring
facility). Management remains confident that Commerzbank will continue offering its facilities as the Company’s relationship
with the bank is strong and significant headroom exists compared with facilities drawn.
(j) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has adopted a policy of as far as possible dealing with creditworthy counterparties – an ideal not always possible in
a product development environment. The use of collateral or other contributions can act as a means of mitigating the risk of
financial loss from defaults. Credit exposure is controlled by limits that are continually reviewed.
The Group’s alloy sales to European customers are, for the most part, centralised through Magontec GmbH in Bottrop
Germany. Magontec GmbH has insurance cover in place to cover its exposure to debtors secured under the Commerzbank
facility. The insured percentage cover for ’named’ debtors is 90% and for ’unnamed’ debtors is 80% but with individual claims
in respect of ’unnamed’ debtors limited to EUR 10,000.
The Group also receives notes receivable as consideration for goods and services provided from a limited number of
counterparties in China. The majority of these are guaranteed by a bank, and the Group only accepts these from specific
large customers.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents
the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.
Provision matrix
The Group applies a provision matrix in order to determine Expected Credit Losses in accordance with AASB 9 Financial
Instruments. This provision matrix is based on:
– Historical experiences of bad debts in the last 5 years (which have been low as a percentage of sales)
– Where deemed material, estimates to incorporate the Group’s forward looking expectations on future operating and
economic conditions
Provision Matrix
Due Date
1-30 days overdue
31-60 days overdue
61-90 days overdue
90 days + overdue
80
EU & NA
PRC
0.01%
0.02%
0.03%
0.04%
0.05%
0.01%
0.02%
0.03%
0.04%
0.05%
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
26. Parent Entity Information Magontec Limited
Statement of Comprehensive Income
Sale of goods
Cost of sales
Gross profit
Other income
Interest expense
Impairment of inventory, receivables & other financial assets
Travel accommodation and meals
Research, development, licensing and patent costs
Promotional activity
Information technology
Personnel
Depreciation & amortisation
Office expenses
Corporate
Foreign exchange gain/(loss)
Profit/(Loss) before income tax expense/benefit from continuing operations
Income tax (expense)/benefit
Profit/(Loss) after income tax expense/benefit from continuing operations
Other Comprehensive Income - that may later emerge in the Profit and Loss Statement
Exchange differences taken to reserves in equity – translation of overseas entities
Other Comprehensive Income - that will not emerge in the Profit and Loss Statement
Movement in various actuarial assessments
Total Comprehensive Income
Magontec Limited
12 months to
31 Dec 2022
$’000
12 months to
31 Dec 2021
$’000
–
–
–
6,395
–
1,077
(22)
(10)
–
–
(36)
–
–
(642)
555
7,317
–
7,317
–
–
–
–
–
–
4
–
276
–
–
–
(32)
(7)
–
–
(641)
547
146
–
146
–
–
–
7,317
146
81
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
26. Parent Entity Information Magontec Limited (continued)
Balance Sheet
Cash and cash equivalents
Trade & other receivables
Other
Total current assets
Non-current assets
Inter Company Loan Receivables (net of provisioning)
Investment in shares of subsidiaries (net of provisioning)
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade & other payables
Total current liabilities
Non-current liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to members of MGL
Share capital
Reserves
Accumulated losses
Total equity
Magontec Limited
31 Dec 2022
$’000
31 Dec 2021
$’000
14
1
74
89
11,674
11,718
8,314
14
(5)
62
71
11,139
11,718
8,314
31,706
31,171
31,795
31,243
36
36
88
88
1,547
1,547
1,583
8,055
8,055
8,144
30,212
23,099
58,883
58,627
8,494
1,637
(37,165)
(37,165)
30,212
23,099
Note: There was a $6.9m transfer (net of dividends) of 2022 Profits to the Profit Reserve instead of accumulated losses.
Amounts transferred to the Profits Reserve characterise profits available for distribution as dividends in future years.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2022.
Capital commitments - Property, plant and equipment
The parent entity had no material capital commitments for property, plant and equipment as at 31 December 2022.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1.
82
Magontec LimitedAnnual Report 2022Financial Report (continued) Notes to the Financial Statements
continued
27. Subsequent Events
Subsequent to 31 December 2022, the Group has received an approved offer to extend the Magontec SRL (Romania) Working
Capital Facility from Unicredit SA for the amount of RON 15.0 million (A$4.8 million) to 28 February 2024.
Formal documentation is being reviewed and is expected to be finalised in the coming weeks.
To the best of the Group's knowledge there have been no other material subsequent events that require disclosure.
ADDITIONAL COMPANY INFORMATION
Magontec Limited (MGL) is a listed public company and is incorporated in Australia. The MGL Group operates globally
including subsidiaries in Australia, Europe and China.
Registered Office and Principal Place of Business
Suite 1.03
46A Macleay St
Potts Point, NSW 2011
Tel: 61 2 8084 7813
83
Magontec LimitedAnnual Report 2022Financial Report (continued) Directors’ Declaration
The Directors declare as follows -
a.
b.
in the Directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when
they become due and payable;
in the Directors’ opinion, the financial statements and notes thereto set out on pages 50 to 84 of this Annual Report, are in
accordance with the Corporations Act 2001, including compliance with accounting standards and give a true and fair view
of the financial position and performance of the Group; and
c. the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors made pursuant to s.295A of the Corporations Act 2001.
On behalf of the Board of Directors
Mr N Andrews
Executive Chairman
23 February 2023
Mr A Malhotra
Non-executive Director
84
Magontec LimitedAnnual Report 2022Financial Report (continued)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGONTEC LIMITED
Report on the Financial Report
Auditor’s Opinion
We have audited the accompanying financial report of Magontec Limited and Controlled Entities, which
comprises the Consolidated Balance Sheet as at 31 December 2022, and the Consolidated Statement
of Profit & Loss and Other Comprehensive Income, Consolidated Statement of Changes in Equity and
Consolidated Cash Flow Statement for the year ended on that date, a statement of accounting policies,
other explanatory notes and the Directors’ Declaration.
In our opinion the financial report of Magontec Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December
2022 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
Independent Auditor’s Report to the
Members of Magontec Limited
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
same time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matter
Impairment of Assets
How our audit addressed the key audit matter
The Company’s significant assets include
plant & equipment in both China and
Europe. We focused on this area due to
the:
Delays in providing liquid metal
from the facility in China;
Customer concentration risk in the
Romanian operation;
Our procedures included, amongst others,
Assessing management’s determination of the
relevant CGU;
Evaluating the integrity of the cash flow model
used to calculate the value in use and its
compliance with Accounting Standards;
Understand the Group’s process and internal
controls related to its impairment assessment;
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Russell Bedford
International - a global network
of independent professional
services firms
85
Magontec LimitedAnnual Report 2022Financial Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGONTEC LIMITED
Report on the Financial Report
Auditor’s Opinion
We have audited the accompanying financial report of Magontec Limited and Controlled Entities, which
comprises the consolidated balance sheet as at 31 December 2021, and the consolidated statement
of profit & loss and other comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year ended on that date, a statement of accounting
policies, other explanatory notes and the directors’ declaration.
The Group’s Net Assets exceeding
its Market Capitalisation; and
Extent of management judgment
involved in assessing impairment
indicators and determining the
assumptions used in evaluating
these indicators.
Retrospective
In our opinion the financial report of Magontec Limited is in accordance with the Corporations Act 2001,
including:
Challenging management with respect to key
forward looking assumptions including future
revenue amounts and discount rates applied,
and compare these assumptions with internally
reported metrics and external information;
results
against previous forecasts to identify any
indications of management bias;
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December
review of historical
Assessing the sensitivity of the model to
variances in key inputs.
2021 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards (including the Australian Accounting Interpretations)
Management conducts a test for
and the Corporations Regulations 2001.
impairment on an annual basis using a
value in use model. This model requires
the application of significant judgements
and estimates.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
Valuation and Existence of Inventory
Our procedures included, amongst others,
We focused on this area as a key audit
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
matter due to the:
same time of this auditor’s report.
Quantum of amounts involved;
Sensitivity
margins
in
underlying price of Magnesium;
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
the Company’s
for our opinion.
the
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Multiple geographical areas; and
A rapid increase in the spot price for
raw magnesium during the year.
changes
to
of
Attendance at stock takes by subsidiary
to
auditors
conduct test counts and assess internal
controls;
for all significant locations
Comparing the carrying value of a sample
of inventory items to subsequent sales price
and cost;
How our audit addressed the key audit matter
Review of costing methodology applied by
entities within the group for compliance with
the Group accounting policy;
Key audit matter
Impairment of Assets
Our procedures included, amongst others,
Assessing management’s determination of the
The Company’s significant assets include
plant & equipment in both China and
Other Information
Europe. We focused on this area due to
the:
Evaluating the integrity of the cash flow model
The Directors are responsible for the other information in the Annual Report. The other information
Delays in providing liquid metal
used to calculate the value in use and its
comprises the pages spanning from the Executive Chairman’s Letter through to and including the
from the facility in China;
compliance with Accounting Standards;
Directors’ Report and the shareholder information, but does not include the financial report, Directors’
Understand the Group’s process and internal
controls related to its impairment assessment;
Declaration and our auditor’s report thereon.
Customer concentration risk in the
relevant CGU;
Romanian operation;
The Group’s Net Assets exceeding
its Market Capitalisation; and
Our opinion on the financial report does not cover the other information, except for the Remuneration
Report, and accordingly we do not express any form of assurance conclusion thereon.
Member of Russell Bedford
International - a global network
of independent professional
services firms
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
Liability limited by a scheme approved under Professional Standards Legislation.
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ Responsibility for the Financial Report
The Directors of Magontec Limited are responsible for the preparation and fair presentation of the
financial report in accordance with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing
and maintaining internal controls relevant to the preparation and fair presentation of the financial report
that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
86
Magontec LimitedAnnual Report 2022Financial Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGONTEC LIMITED
Report on the Financial Report
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
Auditor’s Opinion
We have audited the accompanying financial report of Magontec Limited and Controlled Entities, which
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
comprises the consolidated balance sheet as at 31 December 2021, and the consolidated statement
operations, or has no realistic alternative but to do so.
of profit & loss and other comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year ended on that date, a statement of accounting
Auditor’s Responsibility
policies, other explanatory notes and the directors’ declaration.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
In our opinion the financial report of Magontec Limited is in accordance with the Corporations Act 2001,
free from material misstatement, whether due to fraud or error, and to issue an Auditor’s Report that
including:
includes our opinion.
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December
2021 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it
Basis for Opinion
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
those standards are further described in the Auditor’s Responsibilities section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the
on the basis of this financial report.
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
A further description of our responsibilities for the audit of the financial report is located at the Auditing
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
and Assurance Standards Board website at: http://www.auasb.gov.au/Home.aspx. This description
in accordance with the Code.
forms part of our auditor’s report.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
Report on the Remuneration Report
same time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
Auditor’s Opinion
for our opinion.
We have audited the Remuneration Report included in pages 35 to 48 of the Annual Report for the
Key Audit Matters
year ended 31 December 2022.
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
In our opinion the Remuneration Report of Magontec Limited for the year ended 31 December 2022
a separate opinion on these matters.
complies with section 300A of the Corporations Act 2001.
Key audit matter
Impairment of Assets
Responsibilities
The Company’s significant assets include
The directors of the company are responsible for the preparation and presentation of the Remuneration
plant & equipment in both China and
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
Europe. We focused on this area due to
the:
Evaluating the integrity of the cash flow model
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Delays in providing liquid metal
used to calculate the value in use and its
Auditing Standards.
from the facility in China;
compliance with Accounting Standards;
Assessing management’s determination of the
How our audit addressed the key audit matter
Our procedures included, amongst others,
relevant CGU;
Customer concentration risk in the
Romanian operation;
Camphin Boston
The Group’s Net Assets exceeding
Chartered Accountants
its Market Capitalisation; and
Understand the Group’s process and internal
controls related to its impairment assessment;
Member of Russell Bedford
International - a global network
of independent professional
services firms
Liability limited by a scheme approved under Professional Standards Legislation.
Justin Woods
Partner
Level 5, 179 Elizabeth Street, Sydney NSW 2000
Dated: this 24th day of February 2023.
87
Magontec LimitedAnnual Report 2022Financial Report (continued) Shareholder Information
Class:
Ordinary shares fully paid
ASX Code:
MGL
Voting Rights:
Voting rights of members are governed by the Company’s constitution. In summary, every member present in
person or by proxy, attorney or representative has one vote on a show of hands and one vote for each share on
a poll.
Twenty Largest Holders of Ordinary Shares as at End Date of Current Reporting Period
Name of Holder
No. Of Shares
%
1 QINGHAI SALT LAKE MAGNESIUM CO LTD
2 CITICORP NOMINEES PTY LIMITED
3 J P MORGAN NOMINEES AUSTRALIA
4 KEWEIER METAL CO LTD & Zhong Jun Li
5 YELLOW ZONE SUPER FUND
6 BNP PARIBAS NOMINEES PTY LTD
7 NATIONAL NOMINEES LIMITED
8 MR NICHOLAS WILLIAM ANDREWS & DEWBERRI PTY LTD
9 MR SCOTT PARHAM
10 BELLINO PTY LTD
11 EST MRS DAWN PATRICIA DAVIS
12 MIENGROVE PTY LTD
13 MR XUNYOU TONG
14 BRIAN GORMAN SELF MANAGED SUPER FUND PTY LTD
15 DALSIZ PTY LTD
16 DR ANDREW DUNCAN MACLAINE-CROSS
17 ESCOR EQUITIES CONSOLIDATED
18 MR PETER FABIAN HELLINGS
19 MR JOHN DAVID TALBOT
20 MR CHRISTOPH KLEIN-SCHMEINK
TOTAL
Distribution of Shareholders as at End Date of Current Reporting Period
22,366,742
9,751,252
3,847,720
3,792,907
3,216,931
2,576,448
1,973,375
1,520,364
1,273,756
1,200,000
906,667
752,565
668,765
650,000
648,180
584,379
533,334
520,000
470,668
467,686
57,721,739
28.85
12.58
4.96
4.89
4.15
3.32
2.55
1.96
1.64
1.55
1 .17
0.97
0.86
0.84
0.84
0.75
0.69
0.67
0.61
0.60
74.46
Holders
No. of Securities
Percentage
617
796
206
277
59
91,593
1,797,247
1,464,701
8,447,831
65,720,463
0.12
2.32
1.88
10.90
84.78
1,955
77,521,835
100.00
Number Held
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
TOTAL
88
Magontec LimitedAnnual Report 2022Financial Report (continued) Shareholder Information
continued
Substantial shareholders
Magontec Limited has been notified of the following substantial shareholdings:
Holder
Qinghai Salt Lake Magnesium Co. Ltd (QSLM)
Allan Gray Australia Pty Limited
Number of
ordinary shares
% of issued
ordinary share
capital
22,366,742
15,109,260
28.85%
19.49%
As at 31-Dec-2022 a marketable parcel of securities ($500) is a holding of at least 1,538 securities.
This is based on a closing share price of $0.325
Issued Capital and Securities
Ordinary Shares fully paid
On Issue at
31 Dec 2022
77,521,835
Share Registry: Boardroom Pty Limited
Postal:
Local:
International
Address: Level 8,
210 George Street
SYDNEY, NSW 2000
GPO Box 3993,
Tel: 1300 737 760
Tel: +61 2 9290 9600
SYDNEY NSW 2001
Fax: 1300 653 459 Fax: +61 2 9279 0664
Website: www.boardroomlimited.com.au
89
Magontec LimitedAnnual Report 2022Financial Report (continued) Suite 1.03 | 46A Macleay Street | Potts Point | 2011 NSW Australia
T. +61 2 8084 7813 | www.magontec.com