ACN 010 441 666
MAGONTEC LIMITED
2023
Global Locations and Activities
Rhode Island
Rhode Island
Charlotte
Charlotte
Bottrop
Bottrop
Santana
Santana
Golmud
Golmud
Xi’an
Xi’an
Production
Production
Sales
Sales
Office
Office
Technology
Technology
Centre
Centre
Cast House
Cast House
Project
Project
Contents
Xi’an
Tokyo
Sydney
Melbourne
Headquarters
2
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10
14
18
22
26
34
36
38
57
58
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60
61
62
62
66
68
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96
Income Taxes
Summary of Accounting Policies
Executive Chair’s Letter
Chief Financial Officer’s Report
Letter from the Chair of the Remuneration Committee
Metals
Anodes – Cathodic Corrosion Protection
Business Risks
Environmental, Social and Governance (ESG)
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 Assets and Liabilities
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
Authorisation:
Nicholas Andrews, Executive Chair of Magontec Limited has authorised
the release of this document to the ASX on 27 February 2024.
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 2023 Executive Chair’s Letter
Executive Chair’s Letter
Nicholas Andrews
Over the last
three years
we have been
reminded that
markets can
move abruptly.
As the pandemic
began to recede in
2021, magnesium
prices experienced an
extraordinary surge
that lifted earnings for
all magnesium material
suppliers.
This continued for nearly 20 months
and fundamentally changed the
underlying economics of the
industry while it lasted. Traditionally
lower margin products became
more profitable and new sales
opportunities emerged.
In the second half of 2022 the surge
abated and by the second quarter of
2023 prices and margins had largely
returned to where they started.
Magontec’s financial
position transformed
and de-risked
What did not change was the
very positive financial position
that Magontec established
in that period. Six quarters of
strong earnings and robust cash
flow transformed the Group’s
balance sheet. At the beginning
of 2021 Magontec’s net debt
stood at $11.7m on net working
capital1 of $31.7 million. At the
end of 2023 Magontec had
net cash of $8.7 million on net
working capital of $42.6 million,
a $20.4 million improvement. In
2021 Magontec commenced the
year with net tangible assets per
share of 32.5 cents. At the end of
2023 net tangible assets per share
were 67.8 cents, a rise of 109%.
Because the Group is now in a
much stronger financial position,
an inaugural dividend of 1.2 cents
per share (unfranked) was paid
with respect to 2022. This has
been maintained through 2023
and a 0.6 cent per share dividend
(unfranked) will be paid for the
six months to 31 December 2023,
bringing the total 2023 dividend
to 1.2 cents per share (unfranked).
By any measure Magontec has
been financially de-risked and
is in a strong position to look at
opportunities for growth.
Actively looking for
non-organic growth
opportunities
As I have discussed in previous
notes to shareholders, for some
period we have been actively
seeking avenues to expand.
Hitherto our targets have been
excessively priced or unattainable
for other reasons. This process is
ongoing, and we will continue to
approach potential acquisition
and growth targets with the
same rigour and focus on value.
1
Net Working Capital = Receivables + Inventory + Prepayments - Payables
2
Magontec LimitedAnnual Report 2023 Executive Chair’s Letter (continued)
Continuing positive
cashflow
Despite lower prices for our volume
Mg alloy products and broadly
lower levels of activity, Magontec’s
underlying cash generation2 in
2023 was still a relatively strong
$6.1 million, albeit down from
$28 million in the exceptional year
of 2022. Through the year net
cash on the balance sheet rose
from $2.0 million to $8.7 million.
Net tangible assets per share
remained stable at 67.8 cents
as at 31 December 2023.
Market and Operational
Performance
Over the 9 months to 31 December
2023 our businesses have
encountered more difficult markets
in most sectors. The turn in the
economic cycle through 2022
and 2023, as interest rates rose
and consumer activity declined,
was keenly felt in all OEM supplier
industries. Magontec and its
customers held inventories that
matched expected demand levels.
When demand declined, inventories
rose sharply as offtake volumes
reduced.
Through the latter part of 2023
Magontec was exposed to inventory
congestion through its supply
chain into major customers in
the automotive, power tool and
hot water appliance industries.
In some instances, the drop off in
demand has been quite abrupt,
in others there has been a slower
decline. Suffice to say that at the
end of 2023 we find our activities
in Europe and China at a lower ebb.
At the end of 2023 Magontec’s
inventories were still higher than
current business activity levels
require and given a steady market
in 2024, we could expect working
capital to fall again and further
boost cash reserves.
While the second half of 2023
was slower in both key businesses,
it was also impacted by one-off
events that reduced output and
profitability. In Romania we closed
the magnesium metal recycling
factory through the northern
summer months to replace the roof
and upgrade other parts of the
facility. As anyone who has visited
a magnesium melting environment
will know, battling corrosion is a
constant process.
In China at our Xi’an magnesium
anode facility, we also endured a
four-week production and profit
hiatus as the entire facility was
upgraded with new equipment
to increase automation levels and
raise production capacity to around
4,000 metric tonnes per annum.
Across all our businesses, including
the high-volume Mg alloy and Mg
anode production units, powered
anodes and specialist metals units,
there has been considerable activity
through the year to upgrade and
expand. While this activity is driven
in part by the need to renew and
replace equipment, it is also driven
by the desire to diversify away
from a historical dependency on
traditional lower margin and higher
volume businesses and move into
higher margin and less cyclical
activities.
In addition to the generic
magnesium alloys produced for
the automotive and power tool
industries, we also produce rising
volumes of specialist magnesium
alloys for the aerospace industry
and for emerging casting
technologies that are expected
to open supply opportunities for
new magnesium alloy products.
In China we have also developed
new production capacity for
alternative anode production.
By developing new product lines
and entering new markets, many of
them relatively small at this time, we
have been able to start building a
more robust earnings base that we
plan to further develop in the year
ahead.
Consistent strategy
While broadening our suite of
related magnesium operating
activities has been profitable and
offers avenues for future growth,
Magontec’s central strategic
initiative remains the development
of a high volume, low emission
primary magnesium alloy
production capacity at Golmud
in Qinghai province PRC.
Up until 2018 we manufactured
primary magnesium alloys at a plant
in Shanxi province. As part of our
agreement with Qinghai Salt Lake
Magnesium Co Ltd (QSLM) we
closed that plant and shifted our
efforts to the new factory adjacent
to their 100,000 metric tonne per
annum electrolytic magnesium
facility.
Qinghai Salt Lake
Magnesium Co Ltd
(QSLM)
A series of technical and corporate
issues, as well as COVID, have
delayed the supply of liquid pure
magnesium to our magnesium
alloying plant over the last few years.
However, QSLM’s remediation
team have worked steadily through
2023 and have made significant
progress in addressing the key
technical issues that have stalled
the production process.
In a letter to the Board of Magontec
dated 20 February 2024, Mr Xing
Cai Li repeated his comments from
November last year that “qualified
pure magnesium products will
be produced in the second half
of 2024”.
2
Underlying Operating Cash = Operating Cashflow excluding working capital movements, interest and tax paid
3
Magontec LimitedAnnual Report 2023 Executive Chair’s Letter (continued)
As frustrating as this long delay has
been for both management and
shareholders, no other comparable
project has emerged in another
location around the world. The
QSLM facility is constructed
and awaits commissioning. It will
have very low CO2 emissions by
comparison with its competitors in
the global magnesium production
industry at a time when our
customers are increasingly focused
on environmental provenance.
When production recommences
and Magontec can offer low
emission Qinghai magnesium
alloys to customers in China, Japan,
Canada, Mexico and Europe, we
expect to find ready markets for a
definitively superior product. Selling
Mg alloys into Europe will also have
the effect of filling the Magontec
Mg alloy supply pipeline. That
pipeline leads directly through our
magnesium alloy recycling activities
in Germany and Romania where
volumes have declined since we
closed our Shanxi province primary
magnesium alloy factory and
reduced primary Mg alloy exports
to Europe.
Cathodic Corrosion
Products - Anodes
Magontec’s other business is the
production and supply of cathodic
corrosion products to the hot water
appliance industry. This business
includes the supply of magnesium
and powered anodes. Magnesium
anodes establish a galvanic current
between the anode and the steel
tank while the powered anode
is a much more sophisticated
technology with an impressed
current from a mains power supply.
The hot water appliance industry
is present in every developed and
developing market around the
world. Around 80% of the product
supplied by the industry is sold
as a replacement for tanks that
have passed their use by date. The
other 20% are supplied to the new
build industry.
Image: Magontec Mg alloy recycling factory, Santana, Romania
4
Magontec LimitedAnnual Report 2023 Executive Chair’s Letter (continued)
Over the last few years, we have
seen a rapid shift in focus towards
heat pump devices that are
environmentally more efficient
and play a growing role in climate
abatement programs in Europe
and North America. Heat pumps
are generally more expensive than
conventional water heaters and
require a higher anode specification
(longer lasting), usually a powered
anode. Magontec is a leading
manufacturer of powered anodes
and has been a strong beneficiary
of this trend, particularly in Europe
over the last few years. In the
coming 10 years we think this
product will experience continued
strong growth.
In the last quarter of 2023 and
perhaps for the first half of 2024, the
inventory cycle for the magnesium
and powered anodes has reduced
offtake and profitability for the
product. Despite this short-term
lull, the hot water appliance
industry has an enviable long-term
growth trajectory with momentum
in both new home construction
(there is a shortage across most
developed countries) and from
the rapidly developing switch to
environmentally acceptable heat
pump products.
Looking to the future
Magontec’s CCP businesses
in China and Europe are well
poised to benefit from this growth
with new factory capacity in
China and new powered anode
product development in Germany
positioning Magontec as an industry
leader for customers in Europe and
North America.
At Magontec we have an
experienced and stable Board that
includes a wide variety of skills.
These include relevant industry
experience, legal experience
and knowledge acquired over
many years of serving on the
Boards of other listed companies.
We also have two Chinese directors
who are closely associated with the
magnesium industry in that country,
one of whom is the senior officer
of Magontec’s largest shareholder
QSLM. I would like to take the
opportunity to thank my fellow
directors for their hard work and
advice through the year.
Over the years Magontec has
developed an increasingly
sophisticated Board oversight
process that reviews the static
and dynamic risks of the Group
and, through management, has
developed a range of policies that
ensure that the Group is compliant
in all its operating and financial
activities and prepared for future
compliance requirements. In
the coming years there will be
increasingly onerous environmental
requirements for all companies to
understand their Scope 1, 2 and 3
emissions among other initiatives in
the regions in which we operate.
While our key strategic initiative is
yet to fully engage, Magontec has a
developing suite of small and large
enterprises that service growing
global industries. The Group has a
strong balance sheet, cash reserves
and positive cash flow. In 2024
we look forward to our patience
and focus being rewarded by the
commencement of the Qinghai
project. At the same time we
continue to pursue other significant
objectives that will enhance
financial returns, some of which
we hope to be able to share with
stakeholders in the near future.
Nicholas Andrews
Executive Chair
5
Magontec LimitedAnnual Report 2023 Chief Financial Officer’s Report
Chief Financial Officer’s Report
Derryn Chin
Key financial overview
Equity and Earnings
Gross Profit
Gross Margin (%)
Reported EBITDA
Reported Net Profit After Tax
Net Profit After Tax excluding unrealised FX
Return on Equity (%)
Return on Invested Capital (%)
Net tangible assets per share (cents)
Earnings per share (cents)
Dividend declared per share (cents, unfranked)
Borrowings
Net debt/(net cash)
Net debt to net debt + equity (%)
Cashflow
Reported Operating Cashflow
Underlying Operating Cashflow*
Free Cashflow (excluding working capital movements)**
12 months to
31 Dec 2023
$’000
12 months to
31 Dec 2022
$’000
% chg
19,224
38,595
(50.2%)
18.8%
5,470
466
1,746
0.8%
1.9%
67.8
0.6
1.2
(8,717)
(18.2%)
11,396
6,145
(1,792)
24.3%
27,263
16,515
17,818
35.7%
35.3%
67.9
21.5
1.2
(1,964)
(3.6%)
10,746
28,030
2 3 , 2 1 1
(79.9%)
(97.2%)
(90.2%)
(0.1%)
343.9%
6.0%
(78.1%)
(107.7%)
* Underlying Operating Cashflow = Operating Cashflow excluding working capital movements, interest and tax paid
**
Free Cashflow (excluding working capital movements) = Operating Cashflow excluding working capital movements, interest paid, tax paid
and net capital expenditure on PP&E and intangible assets
6
Magontec LimitedAnnual Report 2023
Chief Financial Officer’s Report (continued)
Highlights
Earnings and cashflow
Balance sheet and capital management
Net Profit After Tax of $1.7 million
excluding unrealised FX for the year to
31 December 2023 (31 December 2022:
$17.8 million).
Operating cashflow for the year to
31 December 2023 was $11.4 million.
(31 December 2022: $10.7 million). This
was mainly driven by cash released from
working capital following the lower pure
Mg price in 2023.
2023 saw falling return on capital and
return on equity in line with the lower
earnings profile.
Following the earnings uplift in the
prior year, the balance sheet remains
in a net cash position. The Group’s net
cash position improved year on year
to $8.7 million as at 31 December
2023 (31 December 2022: net cash
$2.0 million).
Net tangible assets per share were
67.8 cents as at 31 December 2023
(31 December 2022: 67.9 cents per share).
Dividend for the December 2023
half declared of 0.6 cents per share
(unfranked). This brings the dividend to
1.2 cents per share (unfranked) for the
full year to 31 December 2023.
Financial Results
Net profit for the year to 31 December 2023 was
$1.7 million excluding unrealised FX. This was down
on the prior corresponding period reflecting inter
alia a decline in pure Mg prices from record high
levels in 2022.
In addition to the weaker macro environment, the
2023 year also saw significant disrupting factors
including:
– Closure of the PRC anodes factory in Xi’an in April
and most of May to allow for the installation of
new equipment and utilities.
– Production shutdown in Romania to allow for roof
repair during the Northern Hemisphere summer.
– Lower delivered recycling volumes from a major
customer in Europe throughout most of the year.
Correspondingly, Gross Profit in 2023 of $19.2
million was below the prior corresponding period
($38.6 million). The 2023 Gross Profit margin of 18.8%
was also lower than in 2022 (24.3%). As can be seen
on the gross profit by segment chart, the reversion
on Metals Gross Profit was a key driver of this result.
Gross Profit (A$m) by Segment
and GP margin (%)
60
50
40
30
20
10
0
19.0
24.0
53%
17.0
13.0
10.0
11.0
10.0
43%
57%
40%
60%
40%
60%
33%
67%
29%
22%
71%
47%
78%
2017
2018
2019
2020
2021
2022
2023
Metal
Anodes GP margin (%)
30
25
20
15
10
5
0
G
r
o
s
s
M
a
r
g
n
i
7
Magontec LimitedAnnual Report 2023
Chief Financial Officer’s Report (continued)
Magontec Limited Net Asset Bridge Analysis
12 months to 31 December 2023
+ $2.5 m
+ $0.6 m
($8.1m)
+ $6.8 m
$56.1 m
$56.6 m
($1.0m)
($0.2m)
31 Dec 22
Net cash/
(net debt)
Income tax
liability
Fixed and
intangible
assets
Working
capital
Pension
liability
Other net
assets
31 Dec 23
Balance Sheet
Summary
31 Dec 2023
31 Dec 2022
% chg
Net cash/(net debt)
8,717
1,964
343.8%
Working capital
Pension liability
42,630
50,715
(15.9%)
(10,048)
(9,024)
11.3%
3.0%
Fixed and intangible assets
20,763
20,158
Income tax liability
Other net assets
Net assets
(5,448)
(7,963)
(31.6%)
34
279
(87.8%)
56,647
56,129
0.9%
Working Capital
Summary
31 Dec 2023
31 Dec 2022
% chg
Trade and other receivables
16,043
24,797
(35.3%)
Prepayments and other current
assets
532
2,017
(73.6%)
Inventory
32,805
35,928
(8.7%)
Trade and other payables
(6,751)
(12,026)
(43.9%)
Net assets
42,630
50,715
(15.9%)
Balance Sheet and
Working Capital
During the 12 months to
31 December 2023, net assets
increased slightly to $56.6 million
(31 December 2022: $56.1 million).
The bridge across the page shows
a $6.8 million increase to the
net cash position, mostly driven
by the release of cash tied up in
working capital.
Working capital
Working capital requirement
(as shown in the table below)
has decreased over the year in
line with the falling pure Mg price,
standing at $42.6 million as at
31 December 2023 (31 December
2022: $50.7 million).
Compared with the decrease in
receivables and payables over the
course of the year, the inventory
balance remains relatively high
due to elevated stock levels in our
European business (which makes
up most of the inventory). Weak
demand in EU markets for all
products has slowed the process
of unwinding this inventory and
the Group made a write down of
$1.25 million to bring the cost of
inventory down to its assessed net
realisable value as at 31 December
2023. Although the cash and
banking position is comfortable
enough to support this elevated
inventory level, the optimisation
of this will remain a key focus for
the Group in the coming months.
Dividend and DRP
Participation
The Board has declared a
dividend of 0.6 cents per share
(unfranked) for the 6 months ended
31 December 2023. Although
participation in the Dividend
Reinvestment Plan decreased in
the June 2023 half, the balance
sheet of the Group remained
in a net cash position.
8
Magontec LimitedAnnual Report 2023 Chief Financial Officer’s Report (continued)
Bank Borrowing Interest Rate Profile
(%)
Magontec Limited Bank Borrowing Interest Rate Profile
Total weighted average
Zheshang Bank Facility
Unicredit Romania
Borrowing Base
4.0%
4.4%
3.18%
3.00%
8.31%
7.34%
Commerzbank Factoring
3.33%
5.14%
Commerzbank Term Loan
1.85%
1.85%
Commerzbank
Borrowing Base
3.68%
5.49%
2022
2023
Bank Borrowings Maturity Profile
(Years to maturity as at 31 December 2023)
2.9
1.2
0.2
0.4
0.4
Commerzbank
Borrowing
Base
Commerzbank
Factoring
Unicredit
Romania
Borrowing Base
Zheshang
Bank Facility
Total
weighted
Average
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Banking
The weighted average estimated
interest rate as at 31 December
2023 for the group increased
slightly over the year to 4.4%
(31 December 2022: 4.0%). A key
factor impacting this calculation
is that the relatively low cost
Magontec Xi’an bank facility from
Zheshang Bank was only drawn to
the extent of RMB 15 million as at
31 December 2023, compared with
RMB 31 million as at 31 December
2022. Overall, the Group’s relatively
low borrowings have continued to
provide an offset against the impact
of rising interest rates.
In Germany, the Borrowing
Base Facility was renewed until
30 November 2026 to the extent
of EUR 10 million, an increase
on the previous limit of EUR 7.5
million. Magontec maintains a
strong working relationship with
Commerzbank and the facility
renewal provides the Group with
working capital certainty for at least
another 3-year period.
Both the Romanian (Unicredit) and
Xi’an (Zheshang) bank facilities
are available on 12-month terms.
The relatively stable operating
results of both entities means that
the Magontec Romania Unicredit
Facility has been extended for
a further 12 months through to
February 2025 and similarly we
anticipate the Magontec Xi’an
Zheshang facility will be renewed
on or before June 2024.
9
Magontec LimitedAnnual Report 2023 Letter from the Chair of the Remuneration Committee
Letter from the Chair of the Remuneration Committee
Robert Kaye
This was a very pleasing result and
an endorsement by shareholders
of the remuneration approach and
alignment of the remuneration
framework with shareholder
expectations. The Committee
and Board will continue to ensure
this alignment is maintained as
the business environment and
shareholder expectations change
in future years.
Our governance approach
Throughout the year, the Board
and Remuneration & Nominations
Committee continued to
develop and improve the Group’s
remuneration practices with the
aim of maintaining 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) was unchanged
from 2022 and comprises of 3
members, the majority of whom
are independent directors,
and is Chaired by me as Lead
Independent Director.
Full details of the governance
process are contained in the
Remuneration Report.
Independent Review of
Remuneration Framework and
KMP remuneration.
During 2023, a full review was
undertaken to improve the
Remuneration framework, policies
and processes. The objective of
the review was to ensure improved
linkage between the overarching
remuneration framework to the
expectations of shareholders,
strategic objectives of Magontec
and changing compliance
environment that we operate
under with particular reference
to environmental, social and
governance (ESG) expectations.
On behalf of
the Magontec
Limited Board
of Directors,
I am pleased
to present
the 2023
Remuneration
Report.
Dear Shareholders,
On behalf of the Magontec Limited
Board of Directors, I am pleased to
present the 2023 Remuneration
Report.
2023 AGM Remuneration
Report
The 2022 Remuneration Report was
passed by 91.4% of shareholders
voting in favour at the AGM held
in May 2023, together with over
90% in favour of the issue of
performance rights to the executive
chair/CEO. This followed the failure
of the 2021 Remuneration Report
resolution to reach the required
75% approval rate under the
Corporations Act 2001.
Robert Kaye, SC
10
Magontec LimitedAnnual Report 2023 Letter from the Chair of the Remuneration Committee (continued)
These actions included
independent external review of:
– The remuneration framework
compared to current market
practice trends, and
– KMP remuneration quantum
compared with market
benchmarks covering fixed,
short-term and long-term
incentives.
The Remuneration & Nominations
Committee reviewed the advice
and recommendations received
which were subsequently approved
by the Board.
The reviews have resulted in new
plans for variable remuneration
that the Board believes are
better aligned with shareholder
performance expectations. The
new plans will be implemented
through 2024 (STI) and 2025 (LTI)
and come at a critical time for
the Group and its strategic focus
for the next 3 years.
2023 Group performance
The Board is pleased with the
overall outcomes of the 2023 year
when considering the changes
in the overall global market and
trading conditions.
Management has responded
well to these conditions and has
maintained its balance sheet
strength throughout 2023.
Working capital management has
been adjusted to meet these new
conditions delivering a strong cash
position, increasing from a net cash
position of $2.0 million at the end
of 2022, to a net cash position of
$8.7 million at the end of 2023.
Non-financial metrics have also
been strong, with a key highlight
being reduced safety incidents
incurred during the year.
Management has also kept a focus
on strategic deliverables for the
next 3 years, refining its direction,
looking for opportunities and
adjusting the plan to reflect the
new trading conditions post COVID
and changing global environmental
risks.
Total Shareholder Return (TSR)
was strong with the Magontec
share price ending the year at 39.0
cents per share compared to prior
year close of 32.5 cents per share.
Furthermore, an additional 0.6 cent
per share final dividend (unfranked)
for the half to December 2023 was
declared bringing total dividends to
1.2 cents per share (unfranked) over
the year.
Remuneration and
Incentives approved by
the Board during 2023
CY23 Executive reward
outcomes: Fixed
During 2023, following the
independent review of the
remuneration framework, no fixed
increases in remuneration were
provided to the KMP.
Details of KMP fixed remuneration
are contained in the Remuneration
Report.
CY23 Executive reward
outcomes: STI
The 2023 short-term incentive was
based on the “Governing Document
for the Short and Long-Term
Incentive Plan for the Magontec
management Group – Shareholder
approved plan” (2023 AGM 11 May
2023).
The Short-Term Incentive was
calculated according to a formula
which measures the extent
of outperformance between
actual financial performance
compared with budget.
Under the 2023 plan rules, no STI
was payable on the performance of
2023 to any members of the Global
Management Group, including the
executive chair/CEO.
Details of the 2024 STI Plan are
contained in the Remuneration
Report.
CY23 Executive reward
outcomes: LTI
Performance Rights issued in
January 2021 for the 3-year period
to 31 December 2023 failed to reach
their share price vesting hurdles
(Tier 2), and subsequently 1,966,677
Performance rights were cancelled.
The Remuneration & Nominations
Committee also assessed KPI
achievement over the 2021-2023
period (Tier 1) and as a result
approved the vesting of 842,862
Performance Rights to the Global
Management Group. At the date of
this report, the vested Performance
Rights had not yet been converted
to ordinary shares.
Following shareholder approval at
the 2023 AGM, the Board issued
3,021,042 performance rights (PRs)
during the year with respect to
the 3-year period to 31 December
2025. As of 31 December 2023,
6,146,254 PRs were on issue to
the executive team.
Subsequent to year end and
following shareholder approval
at the 2023 AGM, 3,417,420
Performance rights were approved
for issue covering the period 1
January 2024 to 31 December 2026
at the date of this report. Once
issued, this will result in 9,563,674
Performance Rights on issue to the
Global Management Group.
Details of the LTI Performance
Rights issue are contained in the
Remuneration Report.
11
Magontec LimitedAnnual Report 2023 Letter from the Chair of the Remuneration Committee (continued)
In Summary
2023 was a year of review and
resetting the remuneration
framework of the group and
ensuring it is ‘fit for purpose’ in
formulating the incentives required
to deliver on the 2024 objectives,
the strategic direction of the group
and balancing this with improved
shareholder value and expectations.
The remuneration outcomes
for 2023, whilst reflecting the
underlying financial performance
of the group under the old plan, do
not reflect the extent of change and
contribution from the executive
management team and strong
balance sheet position the group
enters 2024 with.
This achievement and foundation
that has been built bodes well for
2024 and ensuing years.
I would like to take this opportunity
to thank shareholders for their
ongoing support.
Robert Kaye SC
Lead Independent Director
Chair - Remuneration
& Nomination Committee
Non-executive director fees
The Board reviewed the fees
payable to the non-executive
directors having regard to
benchmark data, market position
and relative fees. Following
consideration, no changes were
made to the main Board fee or any
of the Board committee fees for the
2023 financial year.
In September 2023, Mr Andre
Labuschagne, Independent
non-executive director, accepted
the role as Chair of the Business
Risk Committee. No increase in
fees were received by Mr Andre
Labuschagne for this appointment.
2024 Outlook
It is the Committee’s intention to
annually review the remuneration
framework each year to test its
ongoing effectiveness in supporting
the Group’s overall strategy.
In accordance with this policy, the
Committee will review the executive
fixed remuneration and directors’
fees with comparisons to external
market data and make appropriate
recommendations to the Board if
required.
The Board have a greater focus on
risk management and as a result,
the committee will be developing in
2024 a focus on employee related
risks, particularly employee turnover
and succession planning.
The new STI Plan will become
effective for 2024, with shareholder
approval to be requested at the
2024 AGM for a new LTI Plan which,
if approved, will be effective from
2025.
12
Magontec LimitedAnnual Report 2023
Image: Solar panel array in Qinghai province (Qilai Chen)
13
Magontec LimitedAnnual Report 2023 Metals
Magnesium Alloys
Image: Mg alloy ingot casting
Magontec’s
magnesium
alloy business
reflects volatile
automotive
markets as the
industry moves
towards greater
electrification.
In the longer run we
expect magnesium, as
the lightest structural
metal, to continue
to prove attractive
to automotive
manufacturers
struggling with vehicle
range issues.
14
Following a strong year in 2022,
activity, prices and profitability in
the global magnesium industry
reduced in 2023.
The key consumer sector for
Magontec’s magnesium alloys, the
automotive industry, experienced
anaemic growth in North America
and Western Europe and a
decline in Chinese sales, while
the important power tool industry
continues to suffer from a COVID
overhang, having experienced high
sales volumes during the pandemic.
Performance at Magontec’s
three magnesium alloy plants in
Germany, Romania and China
echoed these industry dynamics.
Volume throughput, particularly at
the Group’s European magnesium
alloy recycling plants, remained at
low levels. These businesses are
unlikely to experience a substantive
rise in activity in advance of
the commencement of volume
supply from Magontec’s primary
magnesium alloy cast house in
Qinghai province, PRC.
Profitability from Magontec’s
European magnesium alloy
activities in 2023 contrasted sharply
with the previous corresponding
period. In 2022 Magontec’s
German and Romanian recycling
plants enjoyed optimal conditions
with high magnesium prices in
all markets, particularly the USA,
allowing us to source and process
scrap that is financially inaccessible
in a period of lower material prices.
Stronger global markets for
magnesium products in 2022 were
principally driven by the shuttering
of a major US magnesium producer.
US-based customers, in particular
aluminium alloying companies for
whom magnesium is a minor raw
material input, were forced to bid
up prices of all magnesium grades,
crowding out specialist magnesium
alloy buyers in the die casting sector
and raising prices precipitously.
Through 2023 magnesium
markets returned to lower levels
as US aluminium consumers,
the key marginal pricing sector,
found new sources of magnesium
material supply while broader
economic activity reduced in all
global markets in the face of rising
interest rates. Other negative
issues include a long period of
labour unrest that impacted US
automotive sector volumes in the
3rd quarter, while sales in China
and Japan were down sharply on
expectations for a second year.
Magontec LimitedAnnual Report 2023 Metals (continued)
Metals (continued)
There has been a small bump in
2023 automotive sales following
a weak 2022 in Europe, while
other Asian markets, such as
India (+17%) and Indonesia (+11%),
have experienced stronger than
anticipated automotive sales
in 2023.
The price of magnesium,
which continues to be largely
manufactured in China (>90%)
using the Pidgeon process, is
typically driven at a raw material
level by the prices of dolomite (the
Mg host rock), ferro silicon (the
reagent material) and coal (the
power source).
Other critical influences prominent
in 2023 are emission abatement
regulations imposed by the Chinese
government, and low levels of
export demand. In the first half of
2023 a large proportion of the Fugu
region, China’s (and the world’s)
largest magnesium manufacturing
base, was partially shuttered by
regulators and required to upgrade
equipment to reduce emissions.
Through the second half of 2023
those producers began to come
back on stream. At the same time
markets to whom China exports
magnesium alloys have been weak.
Light Vehicle Sales in Global Markets
(AUD mil)
25
20
15
10
5
0
Rest of World
Asia ex-China
Europe
North America
China
2022
2023
Magontec Metal Volumes
– 14% YOY (tonnes)
Magontec Metal Gross Profit
(AUD mil)
15,000
13,588
11,646
10,000
5,000
0
25
20
15
10
5
0
20.5
4.3
4.0
40
30
20
10
0
FY22
FY23
2020
FY22
2021
FY23
2022
Gross Profit GP margin RHS (%)
These issues, combined with the
re-start of Fugu Pidgeon plants,
added to downward pressure on
magnesium prices.
Through the second half of 2023
pure magnesium producers in
China struggled to maintain prices
around ¥20,000 per tonne as
inventories were high and demand
weak. The outlook for magnesium
prices is likely to continue to reflect
lower international and possibly
domestic PRC demand from the
automotive sector and high levels of
supply. Until the interest rate cycle
turns to a more positive direction
and automotive sales begin to
recover more sharply (at 80m
annual sales units, automotive sales
are still 10m below the 2017/18
peak), magnesium prices appear
likely to remain at lower levels.
In China the Group’s Qinghai
primary magnesium alloy facility has
continued to operate at lower levels
of production and at a cash break-
15
Magontec LimitedAnnual Report 2023
Metals (continued)
PRC Magnesium & Coal prices
Falling coal prices have pushed Mg prices down
e
c
i
r
p
g
M
40,000
30,000
20,000
10,000
0
Mg
Coal
1H21
2H21
1H22
2H22
1H23
2H23
1,500
1,000
500
0
P
R
C
C
o
a
l
p
r
i
c
e
even level. We expect the cast
house to maintain this production
and profit profile until the Qinghai
magnesium smelter re-commences
production. As we have discussed
in the past, we have maintained
our presence at the Qinghai site
through some difficult years, and
we now have an experienced local
team that is fully prepared for higher
levels of production. Qinghai is a far
western province of China and the
city of Golmud, where the plant is
located, is a small city at an elevation
of nearly 3,000 metres. Having
built a strong production and
administration team in a relatively
remote location, and in anticipation
of supply of liquid pure magnesium
in the latter half of 2024, the Board
continues to support operations at
the Magontec Qinghai cast house.
In Europe, where Magontec
has two magnesium alloy
manufacturing facilities with a
principal focus on recycling local
scrap flows, volumes have fallen in
2023 from higher levels in 2022.
While market effects have had a
strong influence there have also
been operational constraints. In
Romania the building that houses
the recycling facility underwent
a major refurbishment program
in the second half that reduced
operating capacity for some weeks.
16
In Germany operational availability
has also been constrained, in
this instance by high levels of
absenteeism heavily impacting
profitability, particularly in the
fourth quarter of 2023 as a further
COVID wave affected regional
communities.
Over the last two years in Europe
the management team have
completed the development of a
new recycling process for waste
products that were previously
disposed of at a cost to the business.
This beneficiation process now
produces a new product for sale into
the steel desulphurisation industry
and we anticipate volumes and
revenues from this business to grow
in 2024 and beyond.
Magontec also produces a variety
of specialist metals products.
These include volume magnesium
alloys with rare earth and other less
common alloying elements, as well
as lower volume metal products for
highly specialised applications in
the aerospace industry and other
demanding applications. Earnings
from these higher margin products
have been important contributors
to Magontec’s metals divisions
and we expect volumes of these
products to grow again in 2025.
Magontec’s metals business is
heavily constrained by the absence
of primary magnesium alloy flows
from China. Prior to the closure
of Magontec’s Shanxi primary
magnesium alloy business in 2018,
the Group produced nearly 35,000
tonnes of magnesium alloy products
from three production facilities.
The Shanxi plant was closed in
the lead up to the opening of the
Qinghai plant in 2018 as part of our
agreement with QSLM and volumes
were initially replaced with material
from Qinghai. However operational
inefficiencies within the Qinghai
electrolytic process (not operated
by Magontec) caused QSLM to
cease supply of pure magnesium to
Magontec in March 2019. A series
of corporate and pandemic issues
then further delayed the re-start of
the Qinghai electrolytic facility.
Without supply of primary
magnesium alloy from our Chinese
facility to customers in Europe, our
German and Romanian magnesium
scrap recycling businesses have
struggled to maintain volumes as
recycling contracts are typically tied
to primary magnesium alloy supply.
Magontec LimitedAnnual Report 2023
Metals (continued)
PRC Mg Alloy Exports
Export volumes have been weaker in 2023
2022
2023
s
e
n
n
o
t
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Jan
Feb Mar
Apr May
Jun
Jul
Aug
Sep Oct
Nov
Dec
Magontec has around 24,000
tonnes of magnesium alloy recycling
capacity in Europe that is currently
operating at low utilisation levels.
The re-commencement of primary
magnesium alloy sales into Europe
from the Qinghai facility will not only
elevate profitability in Magontec’s
Chinese business but also at both
European recycling plants.
The status of the Qinghai
electrolytic magnesium facility,
operated by QSLM (Magontec’s
largest shareholder), continues
to move forward towards
recommencement of operations
and production. Through the
last 12 months there has been a
constant level of activity at the
Qinghai site. The QSLM team
have been addressing two critical
issues: the operational stability
of the dehydration process and
the economic performance of the
electrolysis process.
The former issue now appears
to have been resolved. The
dehydration process was run for
a 40-day trial period in 4Q23 and
passed its critical tests. Work on
remediation of the electrolytic
process was delayed until the
dehydration process was seen to
be successful and commenced
in late 2023. The QSLM team are
now embarked on the process of
upgrading the electrolysis process
to reduce power consumption
and improve chlorine gas
concentrations. It is their current
expectation that this will be
completed by the end of the second
quarter of 2024 and that production
(and supply to Magontec) will
commence in the third quarter of
the current year. By the end of 2024
our current expectation is that we
will have processed a few thousand
tonnes of liquid pure magnesium
from the Qinghai electrolytic facility
through the Magontec primary
magnesium alloy cast house.
Metals Outlook
Magontec has a very strong global
metals platform. The Group
moved to secure an arrangement
with QSLM for supply of liquid pure
magnesium from their planned
electrolytic smelter over ten years
ago. The logic of that corporate
move remains as robust today as
it was then.
Well over 90% of globally traded
magnesium comes from Chinese
Pidgeon process manufacturing
operations. CO2 emissions from
this sector (between 20 and
25 tonnes of CO2 per tonne of
magnesium produced), even
with the application of scrubbers
and other emission reduction
equipment, remains unsustainable
in the long term. Emissions come
from the heating process (mostly
off-gas from coke making activities
and temperatures of 1,200 c), and
the host rock/reagent briquetting
process. Changes to the Pidgeon
process and alternative thermal
reduction processes that will
reduce emissions to the levels
that are accessible by electrolytic
magnesium manufacturers, have
yet to be devised.
In 2024 there are no other
announced electrolytic magnesium
projects that can offer low emission
magnesium production that will
compete with the product that
Qinghai can produce. QSLM’s
production is estimated to be
around 5 tonnes of CO2 per tonne
of magnesium produced from a
plant that has over 90% renewable
energy supply.
17
Magontec LimitedAnnual Report 2023 Metals (continued)
Anodes – Cathodic Corrosion Protection
The global consumer industries,
the automotive and powertool
companies, are already able to
source low emission aluminium
and will have increasing access
to low emission steel. The
emergence of low emission
magnesium will be a game-
changer for the magnesium
industry and allow the metal
to compete on a more even
playing field. Magontec, through
its association with QSLM, is
uniquely placed to participate
in this changing dynamic, both
through its primary magnesium
alloy plant in Qinghai and
through its downstream activities
at its Mg alloy recycling plants
in Germany and Romania and
at its Mg anode plants in China
and Romania.
In 2024 Magontec will continue
to pursue the same strategy of
maintaining its existing recycling
and primary magnesium
alloy activities in Europe and
China in preparation for the
recommencement of supply
of liquid pure magnesium from
QSLM. Our current expectation
is that there will be a slow
increase in supply through the
second half of the year, rising
through 2025 to optimal levels
of production in 2026.
While this means that
profitability and volumes are
likely to continue to run at lower
levels, the profit impact of the
restart at QSLM will have a
profound positive impact on
profitability and cash generation
across the group.
18
Anodes –
Cathodic
Corrosion
Protection
Magnesium Anodes
FY2023
was another
solid year for
Magontec’s
magnesium
anodes
business.
While volumes were
7% below FY2022,
margins were
maintained at a similar
level to the prior year.
Magontec’s magnesium anode
products are sold into the global
hot water appliance industry and
provide corrosion protection for
steel water tanks. Most of these
products go into regional domestic
housing markets with around 80%
sold as replacement units. While
the exposure to new housing starts
is thus relatively low, the volume of
new homes built in the China and
European countries has been below
trend levels in 2023.
The travails of the Chinese
property sector have been
headline news in financial markets
for some years, with the major
development companies revealed
to be overextended and in need
of substantial new financial and
government support. The slowdown
in this sector in many regions
has dented sales in the hot water
appliance market in 2023 and the
sales volumes of parts suppliers to
that industry, such as Magontec.
Image: Magontec Mg anode sales and management team in Xi’an
Magontec LimitedAnnual Report 2023
Anodes – Cathodic Corrosion Protection (continued)
Despite these efforts, costs across
eastern Europe have been rising
more sharply than in other parts of
the continent. Inflation has been
running at ~10% for 2 straight years
in Romania while regional labour
costs have risen by around 50% over
the last 4 years.
In the Chinese market we have
largely retained our high overall
market share despite the decline in
home building and a competitive
environment. In the USA, where
Magontec has a small foothold,
we have retained a similar volume
to 2022 and continue to push for
greater penetration. The US market
is one of the largest in the world
and presents Magontec with a
significant opportunity for growth.
In 2023 our Chinese facility at Xi’an
underwent a major reorganisation.
We introduced new finishing
equipment, new extrusion presses
and changed the factory layout to
increase efficiencies. This facility
now has capacity to produce
some 4,000 metric tonnes of Mg
anodes per annum and is poised to
accommodate new volumes from
the US and the growing markets in
Asian countries, where GDP is rising
more quickly than in other parts of
the world.
Magontec has a strong reputation
for both product quality and
innovation coupled with a
sophisticated global marketing
network. Our customers,
particularly the largest hot water
appliance manufacturers in China
and the USA, demand rapid
changes in anode types and large
inventories to be maintained in
warehouses close to production
units. While the Mg anode industry
is small in the context of the hot
water sector, the dynamics of
the industry increasingly favour
companies who have a transparent
and predictable supply chain and
access to capital to manage a just-
in-time inventory supply system.
All these trends play to Magontec’s
strengths.
19
The volume of Chinese home
completions (as opposed to starts)
in 2023 was slightly higher than in
2022 (+17%) suggesting the home
building recession may be coming
to an end. Underlying demand
for new homes in China is likely to
remain steady in the longer term as
much of the existing stock is lower
quality and will require upgrading
for many years to come.
Higher interest rates, construction
material prices and labour costs
have reduced home construction
activity in markets all over the
western world despite acute
home building shortages in many
countries.
Over the 12 months to the end
of December 2023 Magontec’s
European volumes returned to the
levels of 2020, a reflection of this
global trend, but also, to a lesser
degree, reflecting a slight loss in
market share to competitors that
had suffered through the supply
chain crisis of the pandemic period.
Magontec’s superior access to raw
material and our co-location of
Mg alloy recycling with Mg anode
manufacturing had provided
customers with a high level of
supply certainty in that period. In
2023 some of that competitive
edge was eroded at the margin
by aggressive pricing from other
European manufacturers.
It remains the case that Magontec’s
Romanian Mg anode manufacturing
facility is one of the most reliable
and efficient in Europe. As in past
years we have sought to maintain
the cost of converting raw materials
into Mg anodes through innovation
and sourcing. Handling of liquid
magnesium alloys to produce
qualified Mg anode rods requires
high standards of material handling
and the application of robotics is
complex and often unique to the
industry. Over the last few years, we
have continued to increase robotic
application and other handling
automation.
Magontec LimitedAnnual Report 2023 Anodes – Cathodic Corrosion Protection (continued)
Magontec Global Mg Anode
Sales down 7% on pcp
China Housing Starts (Million
Square Metres) 2023 was
53% lower than 2021
4,000
2,000
1,500
1,463
3,255
3,018
1,000
881
693
500
0
0
FY22
FY23
Magontec Global CCP
(Mg and powered)
32.5%
18.1
30.6%
14.9
3
20
16
12
8
4
0
30
25
20
15
10
5
0
2021
2022
2023
2020
FY22
2021
FY23
2022
Gross Profit (AUD mil) GP margin RHS (%)
As we will discuss elsewhere in
this report, our customers are also
focussed on the environmental
quality of their supply chain. Over
the coming years Magontec’s
European and Chinese Mg anode
manufacturing facilities will
develop the required emission
benchmarks for measuring Scope 1
and 2 emissions so that our product
will remain qualified in all global
markets at the highest emission
standards.
Already our melting furnaces
and processing equipment are
electrically powered and in
Romania the majority of our power
comes from renewable resources.
In Xi’an there is some renewable
electricity supply and in all regions
we are focussed on developing
supply agreements with companies
who are able to offer the largest
renewable component.
Powered Anodes
In Germany Magontec
manufactures a series of powered
anodes for the European and North
American markets. Corrosion
protection is provided by a constant
current via a mains power supply
rather than a galvanic cell.
The technical sophistication of
powered anodes that allows them
to operate safely and efficiently
has been developed by Magontec
over many years and our products
represent a large share of the
global market.
Powered anodes are becoming
increasingly popular in line with the
sophistication and cost of modern
hot water systems. As countries
all over the world seek to address
and reach emission targets, home
heating systems have been very
much in focus. Older heating
systems, such as gas, oil and electric,
are considered inefficient compared
with modern heat pump devices.
The price of heat pump devices is
considerably higher than traditional
hot water systems and the quality
of the heat pump product is also of
a much higher specification. Not
only do powered anodes provide
more efficient corrosion protection
but they also have a much longer
lifespan.
In 2023 there was much anticipation
that heat pump hot water systems
sales would rise sharply and
Magontec customers in Europe
and North America built significant
inventories in anticipation. The
German Government (the largest
market in Europe), in a failed
political manoeuvre, withdrew
direct funding from a raft of energy
policies and sought to replace that
with funding originally targeted at
pandemic era projects. The German
courts blocked the funding transfer
and left the home heating sector
without the funds anticipated. In
the second half of 2023 demand
for heat pumps in Europe’s largest
market has collapsed leaving
manufacturers overstocked.
20
Magontec LimitedAnnual Report 2023
Anodes – Cathodic Corrosion Protection (continued)
The trend in European heat pump
take up has been extraordinary
in the last 5 years and is likely to
resume its upward trajectory in the
second half of 2024. In the short-
term, a product that has delivered
strong earnings growth for
Magontec for many years will be a
little quieter in the first half of 2024.
CCP Outlook
Magontec’s magnesium and
powered anodes continue to
be a source of steady earnings.
Over many years the combined
profits of the three businesses,
magnesium anodes from Xi’an and
Santana and powered anodes from
Bottrop, have risen steadily. The
market for our customers, the hot
water appliance industry, is one
that experiences high turnover as
failure rates in installed applications
typically forms around 80% of new
appliance demand.
as societies become increasingly
wealthy. Growth in demand for
Magontec’s magnesium and
powered anode products will
continue to reflect these global
dynamics.
Magontec is one of the largest
magnesium anode manufacturers
in the world in an industry where
volume is a critical metric. It is also
a leading producer of powered
anodes supplying the fastest
growing segment of the global
hot water appliance industry with
manufacturing facilities in low-cost
locations, and with experienced
and skilled workforces. The Group’s
global sales and marketing teams
cover every region of the world
and combine with expert research
and development teams in Europe
and China that appraise each
newly OEM developed appliance
and offer tailor-made corrosion
control solutions.
In many regions of the western
world there is a critical housing
shortage and across Asia there are
rapidly growing new markets for
heating and hot water appliances
In addition to supply to OEMs,
Magontec also supplies products
to the plumbing industry in
Europe. While this is a smaller part
of the overall business, there is
rising demand for regular anode
replacement to ward off the effects
of ageing installed devices. It is also
a cheaper and environmentally
more acceptable alternative to
replacing the entire appliance at
a later date. A large proportion
of Magontec’s powered anode
sales are sold to plumbers who use
these products to replace installed
magnesium anodes. The plumbing
network also buy replacement
magnesium anodes. All Magontec’s
CCP solutions are now available
online through the Magontec
German website’s #unrostbar tab,
which offers the full array of anode
products and online ordering for
immediate delivery. Completed in
2022 this is currently limited to the
German speaking regions of Europe
with a plan to progressively roll out
the product to other regions in the
coming years. The growth of the
plumber network is highly accretive
to the overall anode product margin
and a focus for the group in 2024.
European Hydronic Heat Pump Installations
up to 400kW
The market for Magontec’s powered anodes
is growing quickly, driven by Government
incentives and the climate emergency.
+380% in the 11 years to 2023
1,600,000
1,200,000
800,000
400,000
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
21
Magontec LimitedAnnual Report 2023 Business Risks
Business Risks
Magontec operates in
volatile global markets
and is exposed to
constant changes
in demand, pricing
and costs.
Magontec and the global magnesium market are not
alone in these challenging times. All businesses must
adapt to the post COVID economic environment and,
at the same time, seek to transition to cleaner energy
sources and combat climate change.
These two generational impacts are raising global risks
associated with supply chains, the availability of clean
energy, people resources and the impact of rising
inflation on costs and corporate compliance complexity.
During 2023, Magontec has reviewed and enhanced
its risk management processes to address and mitigate
these risks.
Our Material Risks
Magontec’s risks are becoming increasingly
complex because of changes in global markets and
its widespread geographical locations. Addressing
these risks requires a practical and straightforward
approach that is regularly reviewed, assessed, and
where necessary, adjusted on a continual basis.
The Group’s risk management framework guides
its approach to managing risks and is continually
refined. We think about our risks in the following
way:
– Strategic: risks that should they materialise
could impact our ability to deliver our
strategic goals.
– Operational: risks we manage as part of our
daily business activities.
– Future: risks that could materialise over time.
Magontec is working toward ensuring that risk
management practices are embedded in all
processes and operations. This year we updated our
Board approved risk appetite statements to better
align with our strategy, operational environment and
ways-of-working.
The table below outlines the material risks that could
impact the Group’s ability to achieve its financial
objectives. These risks are identified through a
robust risk management framework, prepared by
management with independent oversight from the
Business Risk Committee and the Board.
Our most significant risks, those that if not managed
effectively would have a significant impact on
our financial performance, form our Material
Risks. These risks are formally monitored through
the committee structure and by the executive
management team.
22
Magontec LimitedAnnual Report 2023 Business Risks (continued)
Material Risk
Mitigated Risk
Assessment
Risk
Movement
Risk in detail
Supply chain Moderate
Neutral
People skill
retention
Low
Increasing
Employee
Safety
Low
Reducing
Privacy
and data
management
Moderate
Increasing
There is a risk that the Group may
not be able to source key raw
materials on an ethical and carbon
neutral basis, at the required quality
and price, and in a timely manner.
As part of a specialised industry,
employee retention is critical to
our success. We must attract,
retain, and develop team members
with diverse skills, capabilities and
backgrounds.
There is a risk that the Group
does not provide a safe working
environment for its people,
contractors and the community.
An unsafe working environment
may result in injury, harm or illness
to our employees. If we are unable
to meet our requirements, we may
be subject to regulatory impacts,
claims, and reputational damage.
The quality of data is critical
for investment, strategic, and
operational decision making. There
is a risk that confidential or sensitive
information can be accessed and
disclosed by unauthorised parties.
Risk Management Approach
Risk addressed through use
of multiple suppliers, a diverse
geographic manufacturing
base and multiple distribution
routes. Our European supply
chain process has implemented
additional measures because
of the war in Ukraine and the
increase in energy prices.
Risk addressed through reward
and recognition programs,
talent management strategies,
employee value propositions and
ongoing compliance monitoring
of employment laws (including
wage compliance).
Refer Remuneration Report
for further detail.
Risk addressed through robust
internal work health and safety
practices, the implementation
of initiatives and education
programs with a focus on
preventative measures with
enhanced dedicated support
in high-risk areas to ensure the
wellbeing of our employees.
Risk addressed through
increasing external assurance
activities and continually
enhancing cyber control
framework, technology processes
and employee awareness,
supported by investment in
systems and infrastructure.
Low
Reducing
Financial
Balance
Sheet
Management
There is a risk that working capital
and cash is not efficiently managed.
This may result in insufficient
funds to support future growth
opportunities and dividend
payments.
Risk addressed by monitoring
and working with the regional
teams adjusting working capital
to demand and ensure that no
excess or surplus inventory is in
existence.
Sustainability Moderate
Increasing
Compliance
Low
Increasing
Environmental, Social and
Governance risks, if not managed
appropriately, could impact
business operations, and fall
short of stakeholder and societal
expectations.
We are subject to a global range of
legal and regulatory requirements,
in relation to health and safety,
employment and corporate
regulation, that require regular
monitoring and updating.
Risk addressed by increasing
governance and risk management
processes, supported by regular
reporting and inspections.
Refer Sustainability commentary
for further detail.
Risk addressed by monitoring
regulatory changes and their
impacts on the group and
obtaining advice from external
lawyers where required.
23
Magontec LimitedAnnual Report 2023 Business Risks (continued)
Strategic Project Risks - Qinghai Project
The Qinghai Project is classified as a Strategic Project Risk rather than a supply chain risk. The inability of QSLM to
supply Magontec’s Qinghai cast house has had a significant impact on the profitability and cashflows of the Group’s
other magnesium alloy businesses.
The Qinghai Project is part of Magontec’s longer-term growth strategy in the global magnesium metals market. It is
expected to be transformative for the wider magnesium industry due to its low carbon emissions and high volumes
from a continuous process facility. It stands in contrast to the existing high CO2 emission industrial model for
magnesium in China.
While QSLM’s technology is not ground-breaking, the scale of the production is significant (100,000 tonnes
per annum).
Constructing both the plant and developing the required technology at the Qinghai site presented several
manufacturing challenges. In addition to generalised business disruption caused by the COVID-19 pandemic,
the project has suffered from corporate changes in its parent company structure.
QSLM, under the new leadership of Xing Cai Li (Mr Li has electrolysis experience in the aluminium industry), have
methodically worked through problems that have occurred in commissioning and production trials. The elevation
of the site (3,000 metres) and the change from calcined dolomite (used by Hydro Magnesium as feedstock for its
Quebec plant that used the same dehydration technology) to purified brine (QSLM in Qinghai) required the project
engineering team to re-configure key dehydration settings and prill delivery systems. QSLM have completed
rectification of the dehydration processes and are currently focussed on electrolysis and other features of the facility
to ensure the efficiency of the plant and long-term profitable operation. They have indicated to Magontec that they
currently anticipate production of magnesium in the second half of 2024.
Specific Financial and Technological risks associated with the Qinghai project are covered in the following commentary.
Material Risk
Mitigated Risk
Assessment
Risk
Movement
Risk in detail
Financial
Low
Neutral
Technical
Moderate
Neutral
The risk exists that QSLM will not
have sufficient funding to resolve
the technical issues that support
the scaling of production to
100,000 tonnes per annum.
There is a risk that technical
problems are not overcome and
the supply of magnesium from
the QSLM plant to Magontec’s
magnesium alloy cast house does
not occur or is insufficient and
Magontec is unable to deliver
forecast financial returns.
Risk Management Approach
Risk addressed through
continual management updates
from QSLM representative on
Magontec Board.
Magontec has no ongoing
financial obligations for the
project and no commitments
if the project fails to proceed.
Risk addressed through
management communication
and meetings with QSLM to
monitor technical progress.
Regular updates are provided to
the Board by the non-executive
director representing QSLM’s
shareholding regarding technical
and production progress as well
as other commercial issues.
24
Magontec LimitedAnnual Report 2023 Business Risks (continued)
Business risks managed
through a Governance
structure
Magontec operates 3 levels of
defence to manage business risks.
Overall enterprise risk management
is aligned with International
Standards Organisation ISO
31000:2018 with a strong focus
on management accountability.
The first line of defence is at the
local level, where management
take responsibility for all day-
to-day operational risks and
ensure compliance with local
environmental and safety
obligations.
These local risks are shared across
regions and reviewed by the
executive management team to
ensure that the strategic approach
is assessed to manage risk on a
consistent basis.
Business Risks are overseen by
the Board through the Business
Risk Committee, chaired by an
independent non-executive
director. The committee is
responsible for monitoring the
enterprise framework, assessing
risk appetite, and ensuring the
adequacy of the enterprise
framework to manage risk.
In addition to this, business
risks are a permanent agenda
item for the Remuneration and
Nominations Committee (RemCo).
Each committee is chaired by
an independent non-executive
director.
Image: Research at Application and Engineering Centre, Bottrop, Germany
25
Magontec LimitedAnnual Report 2023 Environmental, Social and Governance (ESG)
Sustainability
Magontec is committed to developing a
sustainable global business and minimising
its impact on the environment through
a socially responsible approach that is
effectively and efficiently monitored
and governed.
Image: Team building in Germany
26
Magontec LimitedAnnual Report 2023 Environmental, Social and Governance (ESG) (continued)
For the 2023 and 2024 financial
years, Magontec has no
sustainability reporting obligations.
In Europe, obligations based on
European Sustainability Reporting
Standards (ESRS) are likely to be
mandatory from 2025. In Australia
reporting obligations will likely arise
from 2027 based on ISSB S1 and S2.
Magontec’s 2024 plan is to develop
a foundation that is integrated
across the group, compliant with
all jurisdictions and transparent to
stakeholders.
Over the next 2 years this will be
a major project for the group.
To emphasise this priority, KPIs
have been incorporated within
the 2024-2026 Strategic Plan
and 2024 annual budget for the
leadership team.
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.
Whilst there are clear industry
challenges to reach net-zero
emissions, Magontec is well
placed to progress towards these
targets through expansion of its
core recycling business and the
development of its China Qinghai
facility that uses high levels of
renewable energy and sets a new
low-emission benchmark for the
global magnesium industry.
Environmental,
Social and
Governance
Throughout 2023 there has been a
marked change in the importance of
global climate change issues in the
corporate sphere. A rising focus on
ESG principles has led to improved
global alignment and acceptance of
reporting metrics and transparency.
The International Magnesium
Association’s (IMA) working
committee on sustainability
issued a roadmap in January
2024, outlining the path and key
milestones to net-zero carbon
emissions for the magnesium
industry by 2050.
Magontec, as a long-term member
of the IMA, has established a
senior leadership team to work
on developing an appropriate
strategy and roadmap to net-zero.
The roadmap will be integrated
within business practices and fully
compliant with relevant legislations
spanning our geographical
locations.
Magontec is well positioned
to progress towards these
IMA targets because our
core business focusses on
magnesium recycling where
we already have low emission
production capacity and the
ability to rapidly increase
global volumes.
The working group reports through
to the Business Risk Committee,
chaired by independent non
executive director Andre
Labuschagne. The Magontec
Sustainability Roadmap will be
completed in 2024 with a plan to
net-zero including clear milestones
and methods, with explanations of
built-in assumptions.
Environmental
Magontec’s most prominent
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 with recycling
capacity of 25,000 metric tonnes
per annum. As lower emission
magnesium becomes available
from Magontec’s Qinghai plant
over the coming years, the Group’s
low emission recycling assets will
become an increasingly valuable
regional environmental resource.
Magontec’s manufacturing
operations, at Santana in Romania,
Bottrop in Germany and Xi’an and
Qinghai in China, have significant
non-carbon energy inputs and
actively seek to grow the proportion
of power sourced from renewable
energy.
Magontec’s commitment to
reducing its carbon emissions
through 2023 saw a further decline
in carbon-based energy usage at
both the European and Chinese
operations and a pronounced shift
towards renewables.
At all Magontec operations we use
electricity as the key power source
rather than gas. This gives us the
ability to access renewable power
at all locations. This is particularly
important in Europe where we
recycle magnesium alloy scrap
and manufacture magnesium
anodes. At all locations we are able
to preference energy suppliers
that source power from renewable
technologies and in Europe this has
provided some protection against
higher gas prices over recent years.
27
Magontec LimitedAnnual Report 2023 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
29.6
1.2
69.2
2019
2020
2021
2022
2023
Renewable
Nuclear
Carbon
Although the Qinghai project has
had challenges associated with
scaling the production process,
solutions to these problems have
been identified and positive
progress was made through 2023.
When the Qinghai project comes
on stream it will have significantly
lower CO2 emissions compared to
Pidgeon process pure magnesium
production (less than 7 tonnes
of CO2 compared with more
than 20 tonnes of CO2 per
tonne of magnesium produced
respectively). Under agreements
between Magontec and QSLM
this facility will deliver the majority
of its output (agreed at 56%) to
Magontec’s Qinghai magnesium
alloy cast house, making Magontec
the world’s most environmentally
advanced, high volume primary
magnesium alloy producer.
Social
Health & Safety
The Group has in place a rigorous
system of workplace injury
monitoring. This system allows
Magontec operations managers to
closely oversee critical employee
actions and habits, particularly in
the magnesium alloy cast house
operations where molten metal
is stored, alloyed, or otherwise
processed and transferred between
one activity and another.
A task of management is to
continually review and challenge
the processes and structures that
are in place to ensure that accidents
are avoided wherever possible.
In 2023 there was one lost-
time injury (LTI) sustained
among 311 Magontec
employees of whom 204 work
in manufacturing operations
and 107 in administrative and
management roles.
Overall kW h consumed was down
by 5.6 % across the Magontec
business, largely due to lower levels
of production. There was also a
14% shift to renewable energy in
terms of kW h consumed (up from
10.7m kW h in 2022 to 12.2m kW
h in 2023). Renewable sources in
2023 comprised almost 70% of
Magontec’s energy consumption,
representing a large increase on
2022 (57%).
Magontec’s processing operations
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
programs have assumed even
greater importance through 2023.
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.
28
Magontec LimitedAnnual Report 2023
Environmental, Social and Governance (ESG) (continued)
Total Accidents and Lost Time Injuries - 2010 to 2023
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
2023
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
1
1
Diversity
The Group’s Code of Conduct
details the manner in which
employees are expected to
behave and how employees
should be treated by the Group,
by management and by each other
without discrimination in any form.
As a multi-national organisation
there is a high level of geographic
and ethnic diversity with 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.
Geographic Diversity
(%)
1.3
1.3
47.0
2023
51.7
48.1
2022
50.6
There was one significant accident
in 2023. An employee in our Xi’an
plant was injured and required
hospitalisation. This employee has
since returned to work.
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.
Retention and Satisfaction
Magontec has a strong record of
staff retention among its operations
employees and in administrative
and management roles. The Group’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 Group 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.
Asia
Europe
Australia
29
Magontec LimitedAnnual Report 2023
Environmental, Social and Governance (ESG) (continued)
Gender Diversity
(%)
16.8
16.9
2023
2022
83.2
83.1
Male
Female
Pay equality
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
historically attracted a gender-
diverse labour force.
In Europe we evaluate the
specific function of a job based on
established criteria. Fixed salary
levels are assigned to a range of
points for 13 salary groups. 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.
Global supply chains
The Business Risk Committee (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 initiatives, 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 and supply risks.
Cyber, data privacy,
Information Technology
and Fraud
Cyber security and data protection,
as for all companies, continues to
present unique challenges for the
Magontec business and is a critical
metric in all locations.
Over recent years, considerable
investment has been incurred to
implement integrated ERP systems
and infrastructure in both Europe
and China. These investments were
a major milestone for the group, but
as with all IT investment, they are
required to be maintained to ensure
ongoing benefits are derived and
data is protected from cyber threats.
In FY23, we continued to upgrade
and monitor security policy and
architecture, user access and
vulnerability management. All
employees are made aware of
privacy and data risk policies and
processes. We have engaged third
parties to review risk management
practices, undertake external
penetration testing and data
management initiatives to improve
controls and enhance compliance.
In 2024 a full review of Magontec’s
IT infrastructure and its strategic
competence will be completed,
detailing requirements to meet new
challenges and evolve the platform
for future challenges. Increased
data requirements for Sustainability
reporting will be a critical part of the
Group’s future review process.
Our European and US subsidiaries
access additional risk protection
through cyber insurance policies.
These policies offer insurance
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. We
continue to explore our options with
respect to similar insurance policies
in China.
30
Magontec LimitedAnnual Report 2023
Environmental, Social and Governance (ESG) (continued)
Magontec engages external parties
in China and Europe to test the
Group’s defences against external
threats. Reports on these business
units are provided to the BRC and
recommendations are made to
strengthen the Group’s defences.
In 2023, all committees undertook
detailed internal reviews to assess
their effectiveness relative to their
Charter. No material deficiencies
were identified, however where
improvements were identified,
these have been implemented.
Governance
The Magontec Board and
Management are committed to
maintaining the highest ethical
standards in our business activities.
The Group’s Code of Conduct
outlines the standards of behaviour
expected from all Magontec’s
employees and is aligned with
values that are essential to our
continued success in the short,
medium and long term.
As an ASX-listed corporation,
we respect and support the
integrity of our shareholders and
key stakeholders critical to our
success. An overview of Magontec’s
Governance is set out in a
Corporate Governance statement,
published at www.magontec.com.
Other governance policies relating
to whistleblowers, securities trading,
how and when we communicate
externally with our stakeholders
(continuous disclosure),
remuneration, risk management,
modern slavery, diversity and
inclusion and the protection of
personal information are also
available at www.magontec.com.
To support successful oversight and
management of our Governance
policies, Magontec operates three
independently chaired committees
that provide Governance oversight
of the Group’s operating activities.
Remuneration and
Nominations Committee
(RemCo)
The Remuneration and
Nominations Committee is chaired
by Robert Kaye, Magontec’s Lead
Independent Director. All members
are independent or non executive
and include Independent Director
Atul Malhotra and Non-Executive
Director Zhong Jun Li as committee
members.
The committee is established under
a charter and its responsibilities
include:
– Ensuring remuneration policies
and practices are consistent
with the Group’s goals and
objectives,
– Ensuring 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 Chair 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) as requested by
the Board, Chair 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 Group.
In 2023 the Remunerations and
Nominations Committee formally
met on 2 occasions.
Finance, Audit & Compliance
Committee (FAC)
The Finance, Audit & Compliance
Committee (FAC) is Chaired by
Atul Malhotra, an Independent
Director of Magontec. The
committee’s 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 Group’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.
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.
31
Magontec LimitedAnnual Report 2023 Environmental, Social and Governance (ESG) (continued)
The FAC is specifically responsible
for review of the interim and full
year Group audits including the
appointment of the auditor and
approval of changes to accounting
policies.
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.
In 2023 the FAC met on 2
occasions.
Further, the BRC seeks to ensure
that Management has:
Business Risk Committee
(BRC)
The Business Risk Committee
(BRC) provides additional oversight
to the Board and Committee
functions through review of
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.
In September 2023, Andre
Labuschagne, an Independent
Director, was appointed as the
Chair of the committee. Members
include Independent Director Atul
Malhotra and Nicholas Andrews,
Magontec’s Executive Chair. Other
Independent and Non-Executive
Directors are invited to attend.
This committee reviews the Group’s
risk settings through the prism
of a Risk Register, a document
that is updated half yearly for
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.
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 the relevant regional authority.
During the year, a review of the
risk process was conducted with
recommendations to update
the risk management process
aligned with ISO 31000:2018 and
the ASX Corporate Governance
Principles and Recommendations
(4th Edition).
These changes placed emphasis
on the involvement of senior
management and the integration
of risk management into the
organisation. The overarching goal
was to develop a risk management
culture where employees and
stakeholders are aware of the
importance of monitoring and
managing risk.
The recommendations of the review
were that:
–
–
–
risk management should be part
of the organisation’s structure
insofar as processes, objectives,
strategy and other related
principles reflect a people-
centred as well as a system-
centred discipline,
leadership/senior management
play an important role in
integrating risk management
through the whole organisation,
starting with the governance of
the organisation, and
risk management is an
iterative process, rather than
purely consequential, as new
knowledge and analysis leads
to revision of processes, actions
and controls.
The review also recommended an
update to the risk appetite of the
organisation.
All recommendations were adopted
by the Board and implemented.
This committee meets on two
occasions each year, immediately
prior to the key Interim and Annual
Reports to shareholders.
32
Magontec LimitedAnnual Report 2023 Image: Qinghai salt lake retention ponds (Qilai Shen)
33
Magontec LimitedAnnual Report 2023 Board of Directors
Board of Directors
Nicholas Andrews
Executive Chair
Member of the Business Risk
Committee (BRC)
B Ec.(Syd)
Robert Kaye SC
Lead Independent Director
(re-appointed 11 May 2023)
Xing Cai Li
Non-Executive Director
(re-appointed 11 May 2023)
Chair 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)
Graduate of Chongqing University
Andre Labuschagne
Independent Director
(re-appointed 25 May 2022)
Chair of the Business Risk
Committee (BRC)
Member of the Finance, Audit and
Compliance Committee (FAC)
B. Comm (Potchefstroom
University)
Mr Labuschagne is the
Executive Chair of Aeris
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.
Mr Andrews serves as the
Executive Chair 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.
In November 2023, Mr
Andrews was appointed as a
Non-Executive Director of
CarbonXT Group Limited.
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.
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 Chair and
a Non-Executive Director of
Collins Foods Limited and a
Non-Executive Director at
FAR Limited. Mr Kaye was
previously the Chair of Spicers
Limited, the Chair of the
Macular Disease Foundation
Australia and was formerly a
Non-Executive Director with
UGL Limited, Electro Optic
Systems Holdings Limited
and HT&E Limited.
Mr 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 28.9% 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.
34
Magontec LimitedAnnual Report 2023 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.
Chair 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)
Mr 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.
35
Magontec LimitedAnnual Report 2023 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 holds 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.
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.
36
Magontec LimitedAnnual Report 2023
Executive Management (continued)
Dean Taylor
Company Secretary
CA, FGIA, FCIS, MAICD
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 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.
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.
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 over 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 (then HZG,
now Helmholtz-Zentrum
Hereon) in Germany where he
was a senior research fellow.
He serves on various industrial
and academic committees
and organisations, including
the International Magnesium
Association, the China
Magnesium Association
and the Chinese Materials
Research Society (C-MRS).
He is the winner of the
International Magnesium
Science and Technology
Award for 2023 bestowed by
the International Mg Society.
37
Magontec LimitedAnnual Report 2023 Financial Report
Directors’ Report
for the year ended 31 December 2023
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 2023 were authorised for issue in accordance with a resolution of
the directors on 27 February 2024. 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 28.89% 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 Li Zhong Jun,
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 totals 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.
38
Magontec LimitedAnnual Report 2023 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 2023. 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 Chair)
– Mr Robert Kaye (Lead Independent Director)
– Mr Atul Malhotra (Independent Director)
– Mr Andre Labuschagne (Independent Director)
– Mr Li Zhong Jun (Non-Executive Director)
– Mr Li Xing Cai (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 Nicholas Andrews is a Non Executive Director of CarbonXT Group Limited.
– Mr Robert Kaye is Chair and a Non-Executive Director of Collins Foods Limited and a Non-Executive Director of
FAR Limited. During the relevant 3 year period, he also previously served as a Non-Executive Director of Electro Optic
Systems Holdings Limited.
– Mr Andre Labuschagne is Executive Chair of Aeris Resources Limited.
Company Secretary
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 Fellow 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.
39
Magontec LimitedAnnual Report 2023Financial 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
Mr Robert Kaye
Mr Atul Malhotra
Mr Andre Labuschagne
Mr Li Zhong Jun
Mr Li Xing Cai
10
10
10
10
8
6
10
10
10
10
10
10
(1) Finance, Audit & Compliance Committee
(2) Remuneration & Nominations Committee
(3) Business Risk Committee
1
2
2
2
2
2
2
2
2
2
2
2
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 Li Zhong Jun
Mr Atul Malhotra
Mr Robert Kaye
Mr Andre Labuschagne
Mr Li Xing Cai
Ordinary
Shares
1,567,582
3,875,307
–
242,350
–
–
Performance
Rights
1,802,249*
–
–
–
–
–
*
This amount consists of 1,602,249 performance rights on issue and 200,000 performance rights which have vested with respect to the 2021-
2023 LTI period that are yet to convert into Magontec ordinary shares.
Remuneration Report
The Remuneration Report is set out on pages 42 to 56 and forms part of the Directors Report for the financial year ended
31 December 2023.
Financial Report
Refer to ‘Financial Report’ section.
Operations Report
Refer to Operations Reports.
Dividends
During the year to 31 December 2023, the Directors declared an unfranked dividend of 0.6 cents per share with respect to the
6 months ended 30 June 2023. The Directors have declared a further unfranked dividend of 0.6 cents per share with respect
to the 6 month period ended 31 December 2023.
Subsequent Events
Subsequent events are detailed in Note 27.
40
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
Future Developments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial
years and the expected results of those operations are likely to result in unreasonable prejudice to the consolidated entity.
Accordingly, this information has not been disclosed in this report.
Non-Audit Services
Camphin Boston (the Group’s auditors) provided tax and other services during the financial year. Aggregate fees for non audit
services paid in the financial year were $8,980.
Auditor’s Independence Declaration
The Auditor’s independence declaration is included on page 57 of this Annual Report.
Indemnification of Officers and Auditors
The Group paid premia to insure certain officers of the Company and related bodies corporate in relation to performance of
their duties as officers of the Company. The officers of the Group covered by this insurance include directors or secretaries of
controlled entities.
The Company has not otherwise, during or since the financial year except to the extent permitted by law, indemnified or
agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an
officer or auditor.
On behalf of the Board of Directors
Mr N Andrews
Executive Chair
Signed on the 27 February 2024 in accordance with a resolution of the Directors made pursuant to Section 298(2) of the
Corporations Act 2001.
41
Magontec LimitedAnnual Report 2023Financial Report (continued)
Directors’ Report
continued
Remuneration Report (audited)
The Directors of Magontec Limited are pleased to
present the Remuneration Report for the financial
year ended 31 December 2023. The Remuneration
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. 2023 Remuneration at a glance
i. Remuneration objectives
ii. Remuneration policy
iii. KMP remuneration mix
3. Group performance and the link to remuneration
4. Governance of remuneration framework
i. Role of the Board
ii. Role of the Remuneration and Nominations
Committee
iii. Remuneration Approval Process
iv. Remuneration benchmarking and use of
Remuneration Consultants
5. 2023 KMP Remuneration
i. Current service arrangements for Executive
KMP
ii. 2023 KMP remuneration
iii. Loans to Members of Key Management
Personnel
iv. 2024 outlook
6. Independent & Non-Executive Director
Remuneration arrangements
7. 2023 KMP statutory disclosures
i. 2023 Fixed Remuneration (TFR)
ii. 2023 Short-term incentive (STI)
iii. 2023 Long-term incentive (LTI)
iv. Valuation of LTI
v. KMP Equity Holdings
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. Key management personnel holding office in 2023 are:
Type
Name
Position
Appointed
Committee
Robert Kaye
Atul Malhotra
Lead Independent
Non-Executive Director
19 Jul 2013
Independent
Non-Executive Director
1 Jan 2019
Andre Labuschagne
Independent
Non-Executive Director
22 Jan 2014
Non-Executive
KMP
Chair – REM
Member - FAC
Chair - FAC
Member – REM
Member - BRC
Chair – BRC
Member - FAC
Li Zhong Jun
Non-Executive Director
31 Aug 2009
Member - REM
Li Xing Cai
Non-Executive Director
28 Sep 2022
–
Nicholas Andrews
Executive Chair
14 May 2007
Member - 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 & Compliance Committee
REM – Remuneration & Nominations Committee
BRC – Business Risk Committee
42
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
2. 2023 Remuneration at a Glance
Remuneration Objectives
I.
The Group's remuneration objectives seek to ensure that
there is an alignment between the outcomes desired by
shareholders with those of the employee with a clear vision
and focus on the agreed strategic direction and priorities
of the Group.
Magontec’s Values
Magontec 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 target outcomes, provides stability in the executive
team and focus on the priorities that will 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 an evolving market environment.
Remuneration policy objectives will be achieved by ensuring
remuneration is reflective of relevant market conditions,
the Group's statutory obligations, the level of accountability
(responsibility, objectives, goals) assigned and the provision
of incentives to deliver outstanding performance, whilst
providing organisational flexibility and operational efficiency.
III. 2023 KMP remuneration mix
The Group’s remuneration framework includes a mix of
fixed and variable at-risk remuneration and comprises the
following three components:
a. Fixed remuneration (TFR),
b. Short-term incentive (STI) in the form of cash, and
c. Long-term incentive (LTI) in the form of equity.
The table below outlines the target remuneration mix and
actual remuneration received for the Executive Chair and
other key management personnel relative to the 2023 year.
Executive Chair
$
1,200,000
$
1,000,000
$
800,000
$
600,000
$
400,000
$
200,000
$
0
100.0%
63.3%
0.0%
27.9%
Fixed
STI
LTI
Total
Nicholas Andrews Actual
Nicholas Andrews Target
Executive KMP - other
The Remuneration Policy aims to retain key employees
and align employee interests with Group performance and
shareholders’ interests.
$
2,500,000
$
2,000,000
The policy is designed to:
– motivate members of the Global Management Group to
–
–
originate innovative 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.
$
1,500,000
100.0%
63.7%
$
1,000,000
$
500,000
$
0
0.0%
29.2%
Fixed
STI
LTI
Total
KMP - other Actual
KMP - other Target
1. TFR includes base salary, statutory superannuation
and allowances.
2. STI target based on 30% of TFR.
3. LTI target based on 50% of 2023 TFR
4. LTI Actual Amount = $ Amount Vested based on the
closing share price at 31 December 2023 of 39 cents
per share.
43
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
2.
2023 Remuneration at a Glance (continued)
Total Fixed Remuneration (TFR)
Executive contracts of employment include base salary and post-employment benefits (statutory superannuation and certain
social benefits relative to region) and do not include any guaranteed base pay increases. These are assessed annually by the
Remuneration & Nominations Committee and approved by the Board with further independent assistance of remuneration
specialists where deemed necessary.
The annual review considers such factors as:
– Role responsibilities and complexity
– Geographic region and size of role
– Experience and skills
–
Strategic value of the role
When an executive or an employee is recruited, the Group’s aim is to reward its staff at Quartile 2 (50%) market rates within the
industry, geographic region and their experience in the role appointed as determined and in consultation with a remuneration
specialist where appropriate.
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 Chair or Board (as appropriate) on an annual basis.
The KPIs reflect the executive’s ability to add value to the Group 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 form 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 & Nominations Committee. Where appropriate, recommendations to the Board for variations will be made.
The Board believes that the balance between short-term and long-term remuneration is appropriate and encourages
long-term value creation.
The STI LTI Governing Document is available on the website: www.magontec.com
2023 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.
What STI Plan was used
to measure the 2023 STI
performance?
The 2023 STI was based on the rules outlined in the “Governing Document for the Short
and Long-Term Incentive Plan for the Magontec Management Group – Shareholder
approved plan”.
How is performance
measured?
The Board determines the size of the pool based on actual financial metrics achieved relative
to the 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%
44
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
2.
2023 Remuneration at a Glance (continued)
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 to 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.
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 to 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.
2023 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?
The plan uses absolute total shareholder return (TSR) as the basis for setting share price
targets (based on the 30-day VWAP) for each three-year LTI performance period ended
31 December.
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 total fixed remuneration (TFR) at that date;
ii. 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.
45
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
2.
2023 Remuneration at a Glance (continued)
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.
How is the LTI
governed?
The 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 maximum 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 to the Board 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. If the vesting conditions are met, the Performance
rights will convert to fully paid ordinary shares in Magentec Limited.
What happens if the
executive leaves?
Performance rights will automatically lapse in the event of the death, dismissal, retrenchment,
retirement or resignation of the executive, unless otherwise determined by the Board having
regard to the nature of the contribution to the Company by and circumstances of, the
particular executive.
46
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
3. Group Performance and the Link to Remuneration
Remuneration outcomes are intrinsically linked with achieving the short-term and long-term performance targets. The targets
are directly linked with financial and non-financial KPIs and established within the annual Business Plan/Budget and 3-year
Strategic Plan approved by the Board.
YEAR
Sales
2019
2020
2021
2022
2023
130,617
95,068
115,151
158,600
102,357
Net Profit after Tax attributable to shareholders
(1,370)
(717)
5,008
16,515
466
ACTUAL OUTCOMES - KMP
Actual STI % of TFR
Actual LTI Vest % of Grant
0.0%
0.0%
0.0%
0.0%
13.6%
0.0%
32.2%
0.0%
0.0%
28.8%
Note: In 2022, some additional bonuses above the formula were paid in the EU Business in light of the extraordinary performance in that year.
Details of KMP Remuneration are provided elsewhere in this Report.
ACTUAL OUTCOMES - Shareholders
Net tangible assets per share (cents)
Share Price closing (cents)
Dividend declared per share (cents, unfranked)
2019
35.2
24.0
-
2020
32.5
28.5
-
2021
42.4
45.0
-
2022
67.9
32.5
1.2
2023
67.8
39.0
1.2
4. Governance of Remuneration Framework
During 2023, the Board reviewed the governance structure for remuneration and refined the framework to ensure its
appropriateness to current market practice.
I. 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
II. Role of the Remuneration & Nominations Committee (REM)
The Remuneration & Nominations Committee is responsible for the 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 Chair 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 Executive Chair/CEO
excluding the Company Secretary) as requested by the Board.
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
III. Remuneration Approval Process
The board approves the remuneration arrangements of the Executive Chair and executives following recommendations from
the Remuneration & Nominations committee.
47
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
4. Governance of Remuneration Framework (continued)
IV. Remuneration benchmarking and use of Remuneration Consultants
From time-to-time external independent advice is sought to provide information that is relevant for remuneration
recommendations of the REM Committee and decisions by the Board. The advisors are engaged by the REM Committee and
are independent of management.
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 2023, the Group engaged the following services:
– Mercer Pty Limited undertook an Executive Remuneration Benchmarking review covering Australia, Germany and China,
which also included a review of the STI and LTI components. The Group paid Mercer $15,000 excluding GST during
the 12 months to 31 December 2023. The Board was satisfied that the advice obtained was free from undue influence
of management.
– Gilbert & Tobin undertook a review of the STI and LTI plans and provided services relating to preparation of new STI and LTI
Rules and preparation of new employment contract for the Executive Chair/CEO of Magontec Limited. The Group paid
Gilbert & Tobin $20,478 excluding GST during the 12 months to 31 December 2023. The Board was satisfied that the advice
obtained was free from undue influence of management.
In 2017, an external consultant (KPMG Australia) provided limited assistance to the Group with respect to compiling a binomial
options pricing model which was used to determine the fair value of performance rights issued to executives for market
based conditions. During the current year ended 31 December 2023, the Group engaged KPMG to assist in updating this LTI
valuation model primarily to account for the commencement of dividend payments. The Group paid $8,600 excluding GST to
KPMG Australia. KPMG Australia did not specifically express any opinions regarding assumptions or inputs to the model.
5.
KMP Remuneration Arrangements
I. Current Service Arrangements for Executive KMP
The table below sets out the current service arrangements of the Executive KMP.
Executive Contractual Arrangements
Name
Position
31 Dec 2023
Fixed
Remuneration
Contract
Term
Contract
Expiry
Notice Period
For Termination
Payment in
Lieu of Notice
Mr N Andrews Executive Chair
$559,013
3 years
30-Jun-26 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
$415,996
5 years
14-Aug-27
Employer initiated - 12 mths
Employee initiated - 12 mths
12 months’ pay
$388,166
No fixed term or expiry Employer initiated - 6 mths
Employee initiated - 6 mths
6 months’ pay
Mr D Chin
Chief Financial Officer $333,857
3 years
30-Jun-26 Employer initiated - 6 mths
Employee initiated - 6 mths
6 months’ pay
48
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
5. KMP Remuneration Arrangements (continued)
II. KMP Remuneration for the year ended 31 December 2023
The Remuneration for Directors and Executive KMP in the current reporting period has been prepared according to
accounting standards as required by the Corporations Act 2001.
Non-Performance Related
Performance Related
Key Management
Personnel Remuneration
12 months ended 31 Dec
2023 and 31 Dec 2022
Salary &
Allowances
$
Termination
Payment
$
Super &
Statutory
Pension
Benefits
$
Share
based
payments
$
Motor
Vehicle
& Other
Allow-
ances
$
-
-
16,210
15,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,210
Non cash
accrual
LTI
Rights**
$
LTI
shares*
$
STI
$
Total
$
-
164,437
-
152,894
-
109,349
-
97,516
-
-
-
-
-
-
-
-
-
-
-
- 140,576
62,875
-
699,589
768,061
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110,013
50,314
526,008
586,220
96,543
43,443
82,263
37,066
-
-
-
-
-
-
-
-
-
-
484,709
537,542
416,120
455,266
80,000
67,308
60,497
60,393
60,000
60,000
60,000
60,000
-
-
- 429,395 2,386,923
15,184
524,196
-
193,698 2,594,790
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mr N Andrews
(Exec Chair)
2023 531,513
513,249
2022
Mr C Klein-Schmeink
379,821
(President Magontec Europe) 2022 350,894
2023
Mr X Tong
(President Magontec Asia)
2023 365,333
363,210
2022
Mr D Chin
(Chief Financial Officer)
2023 306,357
293,184
2022
Mr R Kaye
(Lead Independent Dr)
2023 80,000
67,308
2022
2023
2022
60,497
60,393
2023 60,000
60,000
2022
2023 60,000
60,000
2022
2023
2022
-
-
1,843,521
Mr A Malhotra
(Independent Dr)
Mr A Labuschagne
(Independent Dr)
Mr Z Li
(Non Exec Dr)
Mr X Li
(Non Exec Dr)(1)
Total year ended
31 December 2023
Total year ended
31 December 2022
(1) Joined 28 September 2022
*
LTI shares
- 27,500
27,500
-
-
-
19,964
16,934
- 22,833
21,540
-
- 27,500
27,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
97,797
1,768,238
- 93,474
This reflects the expense related to actual shares vesting to the employee from the scheme not otherwise recorded
previously. With respect to the 3-year period from 2021-2023, 842,862 performance rights vested to the Global
Management Group out of the total 2,809,539 performance rights issued. Refer to the Remuneration Report for
further details.
** 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.
III. Loans to Members of Key Management Personnel
As at 31 December 2023, there was one employee loan outstanding to Mr Christoph Klein-Schmeink for a total of $55,158
(2022: $53,557).
The loan has a term of 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% (2022: 1.81%) is attached to the loan.
There were no other employee loans to key management personnel outstanding as at 31 December 2023.
49
Magontec LimitedAnnual Report 2023Financial Report (continued)
Directors’ Report
continued
5. KMP Remuneration Arrangements (continued)
IV. 2024 Outlook
Each year the Board through the Remuneration & Nominations Committee, assess the overall appropriateness of the STI and
LTI Plans and establish appropriate targets to be achieved that align with the Group's strategic objectives.
2024 Remuneration Changes
During 2023, the REM Committee reviewed executive fixed remuneration and directors’ fees with comparisons to external
market data. No significant changes were recommended to the Board.
The Board has a greater focus on risk management and as a result, the committee will be developing in 2024 a focus on
employee related risks, particularly employee turnover and succession planning.
2024 Short-Term Incentive (STI) changes
A new STI Plan will become effective for 2024 which is summarised as follows:
How is performance
measured?
The STI is measured based on successful achievement of financial and non-financial KPIs
based on certain performance criteria and minimum hurdles.
How is the STI
calculated for each
KMP?
Short-Term Incentive
Structure
The STI is calculated as a percentage of the KMP fixed remuneration and is capped for over
achievement.
The Short-Term Incentive will contain 3 elements to encourage participant engagement
at a group and regional level and recognises both financial and non-financial performance
measures:
i. Group Performance achievement
i. Regional Performance achievement
i. Non-Financial Performance achievement
Short-Term Incentive
Hurdles
In order to qualify for Group and Regional Financial Performance award, a minimum Return on
Equity (ROE) is required for the Group and for Regional performance.
Group and/or Regional
Over-achievement
Where the Group and /or Regional over-achieves the ROE Target by more than 50%, an
additional STI amount will be paid up to a maximum of 150% of the STI element.
How is the STI
governed?
The payments are subject to approval by the Board upon the recommendation of the
Remuneration and Nominations Committee.
How is risk managed
to prevent excessive
payment when there is
under performance?
What period does the
STI relate to?
There are several ways that risk is managed with the STI:
– Minimum ROE hurdles required to be achieved. The ROE hurdles are aligned to exceed
–
–
–
–
market TSR returns for similar ASX listed entities.
The STI is capped as a % of fixed remuneration.
The Board has discretion relating to an assessment of the eligible executive’s contribution
to regional and Group performance, satisfaction of KPIs laid down to 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 are 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.
50
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
5. KMP Remuneration Arrangements (continued)
2025 Long-Term Incentive (STI)
A new LTI Plan will be tabled at the 2024 AGM for approval which, if approved, will be effective from 2025. Full details of the
new plan to be approved will be contained in the AGM’s Notice of Meeting.
Macroeconomic outlook and target setting
With global economic markets remaining unpredictable and high inflation and cost of business placing pressures on
customers, the 2024 STI and 2024-2026 LTI targets have been set to recognise this ongoing uncertainty.
6.
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 NED’s 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.
7. 2023 KMP Statutory disclosures
2023 Fixed Remuneration (TFR)
I.
During 2023, following the independent review of remuneration by Mercer, no increases in fixed remuneration were received
by Key Management Personnel (KMP).
The Remuneration Framework aims to reward KMP at the 50th percentile of the relative benchmark for each Executive
(measured independently). The benchmarking includes review of fixed and variable components in the relevant industry and
region, relative to the Board approved remuneration mix.
II. 2023 Short-Term Incentive (STI)
In accordance with the Group’s Remuneration Policy and Executive KMP employment arrangements for the current year
ended 31 December 2023, performance KPIs were not achieved and subsequently no provision has been made in the
Financial Statements as a result of financial performance for the year.
III. 2023 Executive Long-Term Incentive (LTI)
LTI grants vested during 2023
Performance Rights granted in January 2021, for the period 1 January 2021 to 31 December 2023 totalling 2,809,539
Performance Rights contained two vesting conditions. The share price target condition was not achieved on the vesting date
and consequently, Performance Rights of 1,966,677 lapsed.
The remaining KPI vesting condition was assessed by the Board and deemed to have been met, and 842,862 Performance
Rights vested, but at the time of this report had not been exercised.
No other LTI grants for Executive KMP vested nor converted to shares during 2023.
LTI granted during 2023
During the year ended 31 December 2023, a total of 3,021,042 performance rights were granted with respect to the three-year
period 1 January 2023 to 31 December 2025.
No other LTIs were granted to Executive KMP during the 2023 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.
51
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
7. 2023 KMP Statutory disclosures (continued)
LTI grants to be issued in 2024
In accordance with the Group’s Remuneration Policy, Executive KMP employment arrangements and approval received at
the 2023 AGM, 3,417,420 performance rights were approved by the Board on 27 February 2024. These were granted for the
3-year LTI for the period from 1 January 2024 to 31 December 2026.
Summary of current LTI grants
The table below summarises the current LTI grants provided to eligible executives which includes current approved LTI grants.
Calculation of Performance Rights Issued to Global Management Group
3 Year LTI Performance Period
1 Jan 21 to
31 Dec 2023
1 Jan 22 to
31 Dec 2024
1 Jan 23 to
31 Dec 25
1 Jan 24 to
31 Dec 26
Aggregate salaries of eligible participants at commencement
of 3 year LTI period
Multiplication factor
Value (1 x 2)
$1,896,436
$2,109,518 $2,039,203 $2,039,203
50%
50%
50%
50%
$948,218
$1,054,759
$1,019,602
$1,019,602
Share price assumed at commencement of 3 year LTI period
$0.450
$0.450
$0.450
$0.398
1.
2.
3.
4.
5.
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
Performance Rights Issued to Global Management Group
2,809,539
3,125,212
3,021,042
3,417,420
01-Jan-21
01-Jan-22
01-Jan-23
01-Jan-24
31-Dec-23
31-Dec-24
31-Dec-25
31 -Dec-26
3 year LTI Performance Period
Nicholas Andrews
Derryn Chin
Christoph Klein-Schmeink
Xunyou Tong
John Talbot
Patrick Look
Zisheng Zhen
1 Jan 21 to
31 Dec 2023
1 Jan 22 to
31 Dec 2024
1 Jan 23 to
31 Dec 25
Total
Rights
2022
Value $
2023
Value $
666,667
774,074
828,175
2,268,916
373,112
455,556
494,620
1,323,288
563,304
485,356
185,186
322,972
212,942
620,594
535,755
185,185
321,075
232,973
591,401
1,775,299
539,889
1,561,000
-
332,190
234,767
370,371
976,237
680,682
195,232
114,897
156,522
135,124
46,706
80,979
58,759
136,495
81,521
97,471
88,982
-
54,750
38,693
Total Performance Rights
2,809,539
3,125,212
3,021,042
8,955,793
788,219
497,912
2021-2023 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%
52
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
7. 2023 KMP Statutory disclosures (continued)
2022-2024 LTI Plan Vesting Schedule
Performance Level
Below threshold
Threshold range
Target range
Stretch
Share price <
Share price =
Share price =
Share price >=
2023-2025 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
60.0
60.0
70.0
80.0
0%
25%
50%
100%
Share Price
% of Performance
Rights vesting
45.0
45.0
51.8
59.6
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 2023 LTI and 2022 LTI fair value at grant date awarded relates to the 2023-25 Plan and 2022-24 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
Non Market Vesting Probability at grant date (%)
2023 STI
awarded
$
2023 LTI fair
value awarded
at grant date
$
2022 STI
awarded
$
2022 LTI fair
value awarded
at grant date
$
-
-
-
-
-
136,495
97,471
88,982
81,521
164,437
152,894
109,349
97,516
195,232
156,522
135,124
114,897
404,469
524,196
601,775
100%
100%
53
Magontec LimitedAnnual Report 2023Financial Report (continued)
Directors’ Report
continued
7. 2023 KMP Statutory disclosures (continued)
The following table details the number of LTI performance rights granted, lapsed or exercised during the year ended
31 December 2023, by plan participant and in aggregate.
Performance Rights Issued to Global Management Group
Name
Grant date
Holding at
1 Jan 23
Granted in
2023
Lapsed
in 2023
Vested
in 2023
Holding at
31 Dec 2023
(vested, not
excerised) at
the date of this
report
Holding at
31 Dec 2023
(unvested)
1-Jan-21
1-Jan-22
1-Jan-23
666,667
774,074
-
–
-
828,175
(466,667)
(200,000)
-
200,000
–
–
–
–
774,074
828,175
-
-
1,440,741
828,175
(466,667)
(200,000)
1,602,249
200,000
1-Jan-21
1-Jan-22
1-Jan-23
373,112
455,556
-
–
-
494,620
(261,178)
(111,934)
-
111,934
–
–
–
–
455,556
494,620
950,176
-
-
111,934
828,668
494,620
(261,178)
(111,934)
1-Jan-21
1-Jan-22
1-Jan-23
1-Jan-21
1-Jan-22
1-Jan-23
1-Jan-21
1-Jan-22
1-Jan-23
1-Jan-21
1-Jan-22
1-Jan-23
563,304
620,594
-
1,183,898
485,356
535,755
-
1,021,111
185,186
185,185
-
370,371
322,972
321,075
-
–
591,401
591,401
-
–
539,889
539,889
-
–
-
–
-
–
-
332,190
(394,313)
(168,991)
-
168,991
–
–
–
–
620,594
591,401
-
-
(394,313)
(168,991)
1,211,995
168,991
(339,749)
(145,607)
-
145,607
–
–
–
–
535,755
539,889
-
-
(339,749)
(145,607)
1,075,644
145,607
(129,631)
(55,555)
-
55,555
–
–
–
–
185,185
-
-
-
(129,631)
(55,555)
185,185
55,555
(226,080)
(96,892)
-
96,892
–
–
–
–
321,075
332,190
-
-
644,047
332,190
(226,080)
(96,892)
653,265
96,892
Nicholas Andrews
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
Derryn Chin
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
Christoph
Klein-Schmeink
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
Xunyou Tong
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
John Talbot
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
Patrick Look
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
54
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
7. 2023 KMP Statutory disclosures (continued)
Performance Rights Issued to Global Management Group
Name
Grant date
Holding at
1 Jan 22
Granted in
2023
Lapsed
in 2023
Vested
in 2023
Holding at
31 Dec 2023
(vested, not
excerised) at
the date of this
report
Holding at
31 Dec 2023
(unvested)
Zisheng Zhen
2021-23 Plan
2022-24 Plan
2023-25 Plan
Subtotal
Aggregate
2021-23 Plan
2022-24 Plan
2023-25 Plan
Total
1-Jan-21
1-Jan-22
1-Jan-23
212,942
232,973
-
–
-
234,767
(149,059)
(63,883)
-
63,883
–
–
–
–
232,973
234,767
-
-
445,915
234,767
(149,059)
(63,883)
467,740
63,883
1-Jan-21
2,809,539
1-Jan-22
3,125,212
-
–
1-Jan-23
-
3,021,042
(1,966,677)
(842,862)
-
842,862
–
–
–
–
3,125,212
3,021,042
-
-
5,934,751
3,021,042
(1,966,677)
(842,862)
6,146,254
842,862
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 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
Total Grant
Share Price at grant date
Share Price Target (cents)
Volatility %
Discount rate (risk free) p.a.
Dividend Yield p.a.
Fair Value (cents)
2021
Approved
2022
Approved
2023
Approved
01 January 2021
01 January 2022
01 January 2023
01 January 2021
to 31 December 2023
01 January 2022
to 31 December 2024
01 January 2023
to 31 December 2025
31 December 2023
31 December 2024
31 December 2025
3 years
666,667
2,142,872
2,809,539
27.0c
59.6c
52.2%
0.11%
0.0%
11.0c
3 years
774,074
2,351,138
3,125,212
45.0c
80.0c
62.3%
0.93%
0.0%
25.2c
3 years
828,175
2,192,867
3,021,042
32.5c
59.6c
64.8%
3.19%
3.7%
16.5c
55
Magontec LimitedAnnual Report 2023Financial Report (continued) Directors’ Report
continued
7. 2023 KMP Statutory disclosures (continued)
V. KMP Equity Holdings
Fully paid ordinary shares of Magontec Limited - 31 Dec 2023
Total balance
(held directly
and indirectly)
01-Jan-23
Granted as
remuneration
Acquired On
Market
Issued under
Dividend
Reinvestment
Plan
Total balance
(held directly
and indirectly)
31 Dec 2023
Balance held
nominally
(indirectly)
No.
No.
No.
No.
No.
No.
3,792,907
1,520,364
102,565
467,686
668,765
100,936
6,653,223
-
-
-
-
-
-
-
-
-
139,785
-
-
-
139,785
82,400
47,218
-
12,337
17,637
3,135
162,727
3,875,307
1,567,582
242,350
480,023
686,402
104,071
6,955,735
3,847,524
1,185,536
242,350
-
-
-
5,275,410
Mr Z Li (1)
Mr N Andrews (2)
Mr R Kaye (3)
Mr C Klein-Schmeink
Mr X Tong
Mr D Chin
Total
(1) 3,847,524 shares held via KWE (HK) Investment Development Co Limited and 27,783 shares are held directly
(2) 1,185,536 shares are held via DEWBERRI PTY LIMITED as trustee for Andrews Superannuation Fund and 382,046 are held directly
(3) 242,350 shares held indirectly through Bella Rebecca Kaye
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
56
Magontec LimitedAnnual Report 2023Financial 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 2023 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
Justin Woods
Lead Audit Partner
Sydney
Dated this 28th day of February 2024
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Russell Bedford
International - a global network
of independent professional
services firms
57
Magontec LimitedAnnual Report 2023Financial Report (continued) Consolidated Statement of Profit & Loss
and Other Comprehensive Income
for the year ended 31 December 2023
Sale of goods
Cost of sales
Gross profit
Other income
Interest expense
Impairment - inventory, fixed assets, doubtful debts
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 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)
12 months to
31 Dec 2023
$’000
12 months to
31 Dec 2022
$’000
102,357
158,600
(83,133)
(120,005)
19,224
2,682
38,595
1,450
(495)
(1,471)
(803)
(1,123)
(77)
(402)
(9,114)
(730)
(626)
(4,307)
(772)
1,985
(1,519)
466
(650)
(25)
(459)
(825)
(180)
(403)
(9,094)
(605)
(586)
(3,314)
(66)
23,837
(7,322)
16,515
542
484
(461)
548
2,806
19,805
12 months to
31 Dec 2023
cents per
share
12 months to
31 Dec 2022
cents per
share
0.6
0.5
21.5
19.7
Note
2(a)
2(b)
2(c)
2(d)
2(d)
3(a)
17
17
Note
19
19
58
Magontec LimitedAnnual Report 2023Financial Report (continued)
Consolidated Balance Sheet
as at 31 December 2023
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 2023
$’000
31 Dec 2022
$’000
25(d)
6
7
8
9
10
3(c)
11
12
13
14
13
15
16
17
18
13,136
16,043
32,805
532
11,259
24,797
35,928
2,017
62,516
74,001
307
17,786
1,582
2,977
22,652
85,168
6,751
4,418
6,691
334
17,099
1,830
3,059
22,322
96,323
12,026
9,295
9,259
17,860
30,580
221
-
10,440
10,661
28,521
56,647
254
-
9,360
9,614
40,195
56,129
59,524
15,255
59,174
15,554
(18,133)
(18,599)
56,647
56,129
59
Magontec LimitedAnnual Report 2023Financial Report (continued)
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
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-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)
-
-
3,766
2,750
(3,373)
1,637
373
36,275
-
-
-
484
-
-
-
-
-
-
-
-
-
2,806
-
-
-
-
-
-
-
-
-
-
16,515
-
(460)
3,290
253
509
Balance 31-Dec-22
59,174
(18,599)
6,857
4,250
2,750
(567)
1,637
627
56,129
Balance 1-Jan-23
59,174
(18,599)
6,857
4,250
2,750
(567)
1,637
627
56,129
Profit/(Loss) attributable to
members of parent entity
Transfer between Reserves
Dividends
Comprehensive income
-
–
-
-
Issue of shares (net)
350
466
–
-
-
-
-
–
(935)
-
-
-
–
-
542
-
-
–
-
-
-
-
–
-
(461)
-
-
-
490
(490)
-
-
-
-
-
555
466
–
(935)
82
905
Balance 31-Dec-23
59,524
(18,133)
5,922
4,793
2,750
(1,028)
2,127
691
56,647
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.
60
Magontec LimitedAnnual Report 2023Financial Report (continued) Consolidated Cash Flow Statement
for the year ended 31 December 2023
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 2023
$’000
12 months to
31 Dec 2022
$’000
Note
1,985
23,837
555
2,990
1,281
(666)
253
2,776
1,303
(139)
Cash generated from/(utilised in) underlying operating activities
6,145
28,030
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
10,727
3,790
(5,297)
2,352
(11,537)
(5,191)
15,365
13,654
(271)
(3,698)
11,396
(632)
(2,276)
10,746
Net cash out on purchase/disposal of property, plant & equipment
(3,823)
(1,891)
Group information technology software
Security deposits
Other
Net cash provided by/(used in) investing activities
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)
(143)
(68)
38
(20)
151
(16)
(3,996)
(1,776)
(563)
5,375
(191)
19,387
(10,116)
(21,252)
(219)
(21)
(284)
(13)
(5,544)
(2,353)
1,856
6,617
21
11,259
13,136
7
4,636
11,259
61
Magontec LimitedAnnual Report 2023Financial Report (continued)
Notes to the Financial Statements
for the year ended 31 December 2023
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 27 February 2024. 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 2023.
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 Policies
There were no changes in significant accounting policies
during the period.
Significant Accounting Policies
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. Provisions made in
62
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 2023Financial 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
amounts paid or payable between the parent entity and the
63
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
1.
Summary of Accounting Policies
(continued)
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.
64
Magontec LimitedAnnual Report 2023Financial 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.
65
Magontec LimitedAnnual Report 2023Financial 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
Gain/(Loss) on disposal of fixed assets
Compensation received including insurance
Write back of provisions
Other adjustments
66
12 months to
31 Dec 2023
$’000
12 months to
31 Dec 2022
$’000
53,607
102,752
48,750
55,848
102,357
158,600
(49,285)
(82,292)
(33,848)
(37,713)
(83,133)
(120,005)
4,322
20,460
14,902
18,135
19,224
38,595
179
643
(37)
126
182
1,294
295
30
224
67
-
430
647
51
2,682
1,450
Magontec LimitedAnnual Report 2023Financial 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
Inventory write down expense
Fixed 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 2023
$’000
12 months to
31 Dec 2022
$’000
(264)
(555)
(1,160)
(7,135)
(354)
(253)
(1,107)
(7,380)
(9,114)
(9,094)
(260)
(248)
(1,251)
(200)
(20)
(1,471)
–
–
(25)
(25)
31 Dec 2022
$’000
Cash Flows
$’000
Non Cash
incl FX
$’000
31 Dec 2023
$’000
9,295
444
(4,741)
(219)
9,739
(4,960)
(136)
218
82
4,418
443
4,861
Executive LTI plan
Under the executive LTI plan, awards are made to executives and other key talent who have an impact on the Group'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.
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 2023
$’000
31 Dec 2022
$’000
(555)
(555)
(253)
(253)
67
Magontec LimitedAnnual Report 2023Financial 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
Utilisation/(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.
Adjustments - changes in deductible temporary differences, tax losses
Actual tax benefit/(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 2023
$’000
12 months to
31 Dec 2022
$’000
(1,000)
(7,802)
52
(571)
(519)
46
434
480
(1,519)
(7,322)
1,985
23,837
(595)
(7,151)
66
(340)
(650)
24
(766)
571
(1,519)
(7,322)
12 months to
31 Dec 2023
$
12 months to
31 Dec 2022
$
(688)
227
4,188
(1,382)
31 Dec 2023
$’000
31 Dec 2022
$’000
1,263
319
1,582
1,557
273
1,830
Note: The Group has revenue losses in its PRC segment which have given rise to a deferred tax asset as at 31 December 2023. The utilisation of
these losses in the PRC is subject to a 5 year time limit.
68
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
31 Dec 2022
$’000
81,581
38,453
29,019
81,581
37,736
29,019
149,053
148,336
271,936
271,936
128,177
125,786
96,732
96,732
496,845
494,454
*
The 31 December 2022 numbers were updated subsequent to the release of the 2022 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 for the Australian Tax Consolidated Group 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 $128.2 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 2023.
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
69
Magontec LimitedAnnual Report 2023Financial Report (continued)
Notes to the Financial Statements
continued
3.
Income Taxes (continued)
Based on testing performed by MGL and its advisors, MGL’s pre consolidation losses should satisfy the loss integrity rules at
31 December 2023 subject to further testing and continued compliance with loss integrity rules. No detailed Available Fraction
calculations have been performed as at 31 December 2023, 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 2023 and neither is any assessment
expected to be received which will result in a tax liability for the period to 31 December 2023. Accordingly, there are no
franking credits available for distribution in the year ended 31 December 2023.
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 2023
$’000
12 months to
31 Dec 2022
$’000
1,844
2,292
98
16
429
93
15
194
2,387
2,595
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 2023
$’000
12 months to
31 Dec 2022
$’000
100
9
81
57
247
109
8
80
37
234
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.
70
Magontec LimitedAnnual Report 2023Financial 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
Notes and other receivables due to operating entities (2)
Derivative Fair Value
Total receivables
31 Dec 2023
$’000
31 Dec 2022
$’000
10,381
18,324
(342)
(658)
10,039
17,666
314
72
225
-
5,591
6,847
27
6,004
60
7,131
16,043
24,797
(1)
(2)
Trade receivables represent 37.0 days sales at 31 Dec 23 (42.2 days sales at 31 Dec 22)
Notes receivable are issued by customers and their banks as consideration for services provided and can be redeemed prior to maturity for
cash at a discount. These notes are limited to a 6-month term. Refer also to Note 25(j) for further detail.
7. Current Inventories
Inventory of finished goods 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 2023
$’000
31 Dec 2022
$’000
12,348
16,667
(1,573)
(179)
10,775
13,397
8,633
16,488
13,016
6,424
32,805
35,928
31 Dec 2023
$’000
31 Dec 2022
$’000
532
532
2,017
2,017
31 Dec 2023
$’000
31 Dec 2022
$’000
304
3
307
332
2
334
71
Magontec LimitedAnnual Report 2023Financial Report (continued)
Notes to the Financial Statements
continued
10. Property Plant & Equipment
Gross carrying amount
Balance at 1 January 2022
Additions
Adjustments, reclassifications, right of use additions
Disposals and write offs
Net foreign currency exchange differences
Balance at 31 December 2022
Additions
Transfer from CWIP to PP&E
Adjustments, reclassifications, right of use additions
Impairment
Disposals
Net foreign currency exchange differences
Balance at 31 December 2023
Accumulated depreciation/amortisation and impairment
Balance at 1 January 2022
Disposals
Write offs
Adjustments and reclassifications
Depreciation expense
Net foreign currency exchange differences
Balance at 31 December 2022
Disposals
Write offs
Adjustments and reclassifications
Depreciation expense
Net foreign currency exchange differences
Balance at 31 December 2023
Net Book Value As at 31 Dec 22
Net Book Value As at 31 Dec 23
Capital WIP
$’000
Land &
Buildings
$’000
Plant &
Equipment
$’000
Total
$’000
651
52
(50)
-
(12)
641
1,105
(724)
679
(186)
(84)
(15)
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
36
–
(139)
(5)
(3)
340
2,833
724
(814)
–
(5,272)
228
3,974
–
(274)
(191)
(5,359)
553
1,417
19,729
37,298
58,443
-
-
-
–
-
-
-
-
–
-
-
-
-
641
1,417
11,950
28,696
40,646
(3)
–
–
574
23
(57)
(449)
16
2,006
(114)
(59)
(449)
16
2,579
(91)
12,544
30,097
42,641
-
–
-
583
225
13,351
6,957
6,378
(5,072)
(5,072)
(174)
(2)
2,176
282
(174)
(2)
2,758
506
27,306
40,657
9,502
9,992
17,099
17,786
During the year to 31 December 2023 significant progress was made by QSLM in its remediation of the Pure Mg facility that is
set to supply the Magontec Qinghai Plant.
However, at balance date this was not complete and thus indicators of impairment remain present at the Magontec China
Metals CGU due to the lack of supply from QSLM and associated losses with using more expensive outsourced pure
Magnesium.
Accordingly, the PRC Metals CGU (which includes the value of the plant and equipment located at Qinghai) was tested for
impairment at balance date as required by AASB 136. The recoverable amount was estimated based on its value in use.
The value in use of the Magontec China Metals Segment was determined using forward projections drawing upon both the
Group’s extensive experience in operating similar assets and the contractual agreements with QSLM. To reflect conservatism,
the volumes assumed in the value in use calculation were substantially below the target capacity of the Magontec Qinghai
facility. Profitability assumptions were also similarly reduced to below target levels that the Group believes are reasonably
achievable.
72
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
10. Property Plant & Equipment (continued)
The value in use calculation started with a Base Scenario which assumed a pre-tax discount rate of 8.6% (2022: 8.9%), a zero
growth rate beyond year 5 and a terminal decline rate of -3.0% (2022: -4.7%) upon expiry of the known term of the contractual
arrangements with QSLM.
Following this, the Group used the Expected Cashflow Approach whereby a probability weighted analysis of possible
expected cashflow scenarios surrounding this Base Scenario ranging from most pessimistic to most optimistic was compiled to
arrive at the final value in use estimate used to obtain an estimate of the Recoverable Amount.
As the Recoverable Amount determined on this basis was higher than the carrying value of the PRC Metals CGU, no
impairment expense was recorded during the year ended 31 December 2023.
11.
Intangibles
Gross carrying amount
Balance at 31 Dec 2022
Net foreign currency exchange differences
Additions
Balance at 31 Dec 2023
Accumulated depreciation/amortisation and impairment
Balance at 31 Dec 2022
Depreciation/amortisation expense
Net foreign currency exchange differences
Balance at 31 Dec 2023
Net Book Value As at 31 Dec 22
Net Book Value As at 31 Dec 23
Indefinite
Life (1)
$’000
Finite Life
$’000
Total
$’000
2,800
2,449
5,249
-
-
70
143
70
143
2,800
2,662
5,462
-
-
-
-
2,800
2,800
2,189
2,189
232
64
2,485
259
177
232
64
2,485
3,059
2,977
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 9.52% (2022: 8.65%) 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 5% (2022:11.1%) per annum thereafter. The value
in use was found to be in excess of the carrying amount and thus no impairment loss was recorded during the year ended 31
December 2023.
12. Current Trade and Other Payables
Trade creditors (1)
Other creditors and accruals
(1) Trade creditors represent 22.5 days cost of goods sold at 31 Dec 23 (23.8 days cost of goods sold at 31 Dec 22)
31 Dec 2023
$’000
31 Dec 2022
$’000
5,131
1,620
6,751
7,841
4,185
12,026
73
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
13. Borrowings
Bank & Institutional
Borrowings
31 Dec 2023
Notes
$’000
31 Dec 2023
Maturity
Date
31 Dec 2023
Interest
pa
31 Dec 2022
$’000
31 Dec 2022
Maturity
Date
31 Dec 2022
Interest
pa
Magontec GmbH (Bank Loan) (1)
Magontec GmbH (Bank Loan) (1)
25(i)
25(i)
- 30-Nov-26
– 31-Dec-23
5.49%
1.85%
- 30-Nov-23
788 31-Dec-23
3.68%
1.85%
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
528 28-Feb-25
5.14%
1,203 28-Feb-25
3.33%
1,312 28-Feb-24
7.34%
1,923 28-Feb-23
8.31%
3,106 06-Jun-24
3.00%
6,584
12-Jun-23
3.18%
Various
4,946
4,418
4,418
–
–
10,498
9,295
9,295
–
–
–
Various
(1)
These borrowings are secured by a charge over MAB's trade debtors to the extent of €612,000 ($993,000) and inventory of €4,878,000
($7,914,000) plus land & buildings.
(2) These borrowings are secured by a charge over MAR's trade debtors and inventory to the extent of RON25,630,000 ($8,378,000) plus land &
buildings. Subsequent to balance date, this facility was renewed through to 28 February 2025.
(3) 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 and interest rate swaps
Total
15. Non-Current Provisions
Provision for defined benefit pension obligation
Other provisions
Total
74
31 Dec 2023
$’000
31 Dec 2022
$’000
650
5,448
593
-
548
7,963
716
32
6,691
9,259
31 Dec 2023
$’000
31 Dec 2022
$’000
10,048
392
9,024
337
10,440
9,360
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
Year Ended
31 Dec 2022
$’000
9,024
13,111
111
355
(399)
269
688
10,048
217
169
(367)
83
(4,188)
9,024
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. The converse is also true. 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 2023
$’000
Year Ended
31 Dec 2022
$’000
3.45%
2.75%
2.20%
3.90%
2.75%
2.20%
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 2023
$’000
Year Ended
31 Dec 2022
$’000
(696)
785
26
(25)
613
(562)
467
(615)
692
24
(23)
541
(496)
383
75
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
16. Share Capital
31 Dec 2023
$’000
31 Dec 2022
$’000
Opening balance of share capital attributable to members of MGL
59,174
58,918
Dividend Reinvestment Plan
Various costs associated with issue of shares
372
(21)
269
(13)
Share capital on issued ordinary shares 78,515,474 (2022: 77,521,835)
59,524
59,174
A reconciliation of the movement in fully paid ordinary shares during the period is set out below.
CONSOLIDATED/PARENT ENTITY
31 Dec 2023
31 Dec 2022
No.
$’000
No.
$’000
Fully paid ordinary shares
Balance at beginning of financial year
77,521,835
59,174
76,729,210
58,918
Dividend reinvestment plan
Expenses of various issues
993,639
-
372
(21)
792,625
-
269
(13)
78,515,474
59,524
77,521,835
59,174
During the year to 31 December 2023, the Group offered a Dividend Reinvestment Plan to shareholders, resulting in the issue
of 993,639 new shares (2022: 792,625 new shares). 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 shares issues for the 12 months to 31 December 2023
$935,000
Dividend amount per share (unfranked)
$0.012
In addition to the dividend declared of 0.6 cents per share (unfranked) with respect to the 6 months ended 30 June 2023,
a further dividend amount of 0.6 cents per share (unfranked) has been declared with respect to the 6 months to
31 December 2023.
76
Magontec LimitedAnnual Report 2023Financial 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
Movement in Expired Options Reserve
Balance at end of financial year
Share Issue Reserve
Balance at beginning of financial year
Transfer to Expired Options Reserve
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 Profit Reserve
Dividends Paid
Balance at end of financial year
Total reserves
31 Dec 2023
$’000
31 Dec 2022
$’000
2,750
2,750
4,250
542
4,793
(567)
227
(688)
(1,028)
1,637
490
2,127
627
(490)
555
691
6,857
–
(935)
5,922
15,255
2,750
2,750
3,766
484
4,250
(3,373)
(1,382)
4,188
(567)
1,637
–
1,637
373
–
253
627
–
7,317
(460)
6,857
15,554
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 actuarial assessments
Total Other Comprehensive Income
542
(461)
82
484
2,806
3,290
Notes
(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.
The profit reserve represents profits from prior periods transferred into this reserve instead of against accumulated retained losses. This is in
order to preserve their nature as being available for distribution as dividends in future years.
77
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
31 Dec 2022
$’000
(18,599)
(27,796)
-
466
(7,317)
16,515
(18,133)
(18,599)
12 months to
31 Dec 2023
cents per
share
12 months to
31 Dec 2022
cents per
share
0.6
0.5
21.5
19.7
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 2023
$’000
12 months to
31 Dec 2022
$’000
466
16,515
78,089,812
76,846,475
8,435,052
7,047,063
Weighted average number of ordinary securities on issue (for diluted earnings
calculation)
86,524,864
83,893,539
20. Contingent Assets and Liabilities
At 31 December 2023 a contingent liability exists in relation to the items 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 was made against
the company, the company continues to contest this matter.
Claim against MAB by Germany Tax Authority
During the year to 31 December 2021, the shares in the Group's German subsidiary Magontec GmbH were transferred from
the Group's fully owned Cyprus subsidiary Varomet Holdings Limited to the Parent Company, Magontec Limited.
The Group received tax advice at the time of the transfer that this transaction would not be subject to German Real Estate
Transfer Tax. Subsequently the amount of EUR 91,000 ($148,000) has been levied by the Germany Tax Authority.
The Group's advisers have lodged an appeal on the Group's behalf. The Group intends to contest the matter vigorously.
78
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
31 Dec 2022
$’000
449
218
(232)
13
448
502
232
(288)
3
449
31 Dec 2023
$’000
31 Dec 2022
$’000
222
221
443
190
254
444
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 2023
$’000
12 months to
31 Dec 2022
$’000
15
14
(234)
(298)
Low value items
c.
During the year to 31 December 2023, the expense relating to leases of low value was $27,000 (2022: $23,000)
d. Capital Expenditure Commitments
There are no material capital commitments for the Group as at 31 December 2023.
79
Magontec LimitedAnnual Report 2023Financial 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 2023
Ownership
interest
31 Dec 2022
Australia
100%
100%
Directly Controlled Subsidiaries Of Parent
Advanced Magnesium Technologies Pty Ltd (a)
Magontec Limited
Australia
Magontec GmbH
Varomet Holdings Limited
Magontec Qinghai Co. Ltd.
Magontec US LLC
AML China Ltd (b)
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
(a) Entities included in the Australian tax consolidated Group.
(b) Dormant from 30 June 2012
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80
Magontec LimitedAnnual Report 2023Financial Report (continued)
Notes to the Financial Statements
continued
22. Controlled Entities (continued)
b. Corporate Structure as at 31 December 2023
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)
c. Acquisition of Controlled Entities
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 2023, segment information is presented in respect of the three main departments
within the Group.
–
’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).
81
Magontec LimitedAnnual Report 2023Financial Report (continued)
Notes to the Financial Statements
continued
23. Segment Information (continued)
Statement of Comprehensive Income
12 months to 31 December 2023
12 months to 31 December 2022
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
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
-
-
-
-
-
3
-
58,017
44,380
102,397
(40)
58,017
44,380 102,357
(41,999)
(41,174)
(83,173)
40
(41,999)
(41,174)
(83,133)
16,018
3,206
19,224
1,777
(319)
902
(176)
2,682
(495)
Impairment - inventory, fixed assets,
doubtful debts
(1)
(1,270)
Travel accommodation and meals
(162)
(417)
Research, development, licensing
and patent costs
Promotional activity
Information technology
Personnel
Depreciation & amortisation
Office expenses
Corporate and other
(200)
(225)
(1,471)
(803)
(695)
(1,123)
(5)
–
(25)
(423)
(77)
(299)
–
(78)
(1,550)
(6,099)
(1,464)
–
(82)
(681)
(264)
(49)
(279)
(77)
(402)
(9,114)
(730)
(626)
-
-
-
-
-
-
(1)
-
(95)
(10)
–
(19)
96,433
63,037
159,469
(869)
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)
–
(125)
(438)
–
(66)
1,450
(650)
(25)
(459)
(825)
(180)
(403)
(1,611)
(5,764)
(1,719)
(9,094)
(27)
(70)
(522)
(270)
(56)
(245)
(637)
(224)
(605)
(586)
(3,314)
(66)
(750)
(2,876)
(680)
(4,307)
(676)
(2,002)
Foreign exchange gain/(loss)
(42)
(457)
(274)
(772)
130
28
Profit/(Loss) before income tax
expense
Income tax expense
Profit/(Loss) after income tax
expense
Other Comprehensive Income
(2,615)
4,612
–
(1,506)
(12)
(13)
1,985
(2,379)
25,532
684
23,837
(1,519)
–
(7,365)
44
(7,322)
(2,615)
3,106
(25)
466
(2,379)
18,167
728
16,515
Movement in actuarial assessments
–
(461)
–
(461)
–
2,806
–
2,806
FX differences taken to Reserves –
translation of overseas entities
88
923
Total Comprehensive Income
(2,527)
3,568
(468)
(494)
542
9
824
(350)
484
548
(2,370)
21,797
378
19,805
82
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
23. Segment Information (continued)
Statement of Comprehensive Income (continued)
12 months to 31 December 2023
12 months to 31 December 2022
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
$’000
Admin
$’000
EUR
$’000
PRC
$’000
TOTAL
Segment Disclosures
Segment assets
Segment liabilities
3,229
48,020
33,919
85,168
3,562
54,152
38,609
96,323
814
20,937
6,770
28,521
987
27,962
11,245
40,195
Segment net assets
2,415
27,083
27,149
56,647
2,575
26,190
27,364
56,129
Acquisition of segment fixed assets
–
2,285
1,538
3,823
–
1,638
301
1,939
Non-cash share based payments
expense
Provisioning
- Inventory Increase/(Decrease)
- Doubtful debts Increase/
(Decrease)
247
170
138
555
115
76
62
253
–
–
1,394
(316)
–
–
1,394
(316)
–
–
(364)
352
–
–
(364)
352
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
2023
2022
–
–
–
–
–
–
–
–
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.
83
Magontec LimitedAnnual Report 2023Financial 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 Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes.
84
Magontec LimitedAnnual Report 2023Financial 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 2023.
31 December 2023
Notes
Weighted
average
effective
interest rate
%
Variable
interest rate
$’000
Fixed
interest rate
$’000
Non-interest
bearing
$’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
2.46%
4,998
-
-
-
-
-
4,998
-
13
13
4.38%
4,946
-
-
4,946
-
-
-
-
-
-
-
-
8,138
16,043
532
24,713
6,751
-
-
Total
$’000
13,136
16,043
532
29,711
6,751
4,946
-
6,751
11,697
The following table details the consolidated entity’s exposure to interest rate risk as at 31 December 2022.
31 December 2022
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
0.37%
6,838
Trade & other receivables (net of provision for loss)
Other
Financial liabilities:
Trade & other payables
Current Borrowings
Non-Current Borrowings
-
-
-
-
-
6,838
-
13
13
4.22%
10,498
-
-
10,498
-
-
-
-
-
-
-
-
4,421
11,259
24,797
24,797
2,017
2,017
31,235
38,073
12,026
12,026
-
-
10,498
-
12,026
22,525
85
Magontec LimitedAnnual Report 2023Financial 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
Foreign Currency Monetary Assets & Liabilities Table
Assets
Liabilities
31 Dec 2023
$’000
31 Dec 2022
$’000
31 Dec 2023
$’000
31 Dec 2022
$’000
13,058
16,045
304
11,091
27,900
332
7,151
16,536
4,418
11,712
18,135
9,295
Other net assets and liabilities
55,761
57,000
416
1,052
Total
85,168
96,323
28,521
40,195
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.
86
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
31 Dec 2022
$’000
Effect on Profit/Loss and other equity of a 10% increase in USD rate
Effect on Profit/Loss and other equity of a 10% decrease in USD rate
Effect on Profit/Loss and other equity of a 10% increase in EUR rate
Effect on Profit/Loss and other equity of a 10% decrease in EUR rate
(i)
(ii)
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
USD impact
533
(533)
1,209
(1,209)
EUR impact
(713)
713
(1,526)
1,526
RMB impact
534
(534)
634
(634)
RON impact
(224)
224
(300)
300
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 3.6 million as at 31-Dec-23 (Net monetary assets of USD 8.2 million as at
31-Dec-22)
Exposure to EUR is represented by net monetary liabilities of EUR 4.4 million as at 31-Dec-23 (Net monetary liabilities of EUR 9.7 million as at
31-Dec-22)
Exposure to RMB is represented by net monetary assets of RMB 25.8 million as at 31-Dec-23 (Net monetary assets of RMB 29.9 million as at
31-Dec-22)
(ii)
(iii)
(iv) Exposure to RON is represented by net monetary liabilities of RON 6.8 million as at 31-Dec-23 (Net monetary liabilities of RON 9.4 million as at
31-Dec-22)
Derivatives and hedging
The Group engages in foreign exchange hedges primarily to manage risks associated with its USD receivables and securing
the EUR-USD rate on real metal purchases of pure magnesium. The gains and losses on the market value of these hedges are
recognised directly in the profit and loss statement. There were no open FX hedges as at 31 December 2023.
Notes
Carrying value
$’000
Market value
$’000
Cash flow due
within 1 year
$’000
Cash flow due
after 1 year
$’000
31 December 2023
FX hedges
Interest rate swaps
31 December 2022
FX hedges
Interest rate swap
6
6
6
14
–
27
60
(32)
–
27
(32)
59
–
-
(32)
-
-
27
-
59
87
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
25. Financial Instruments (continued)
The sensitivity of FX and interest rate 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 2023
$’000
31 Dec 2022
$’000
-
-
4
(4)
438
(438)
6
(6)
(i) Capital Management and Interest rate risk management
Management remains confident that Commerzbank will continue offering its facilities as the Group'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 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.
The Group also receives notes receivable (promissory notes) 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. Upon maturity, these are converted into cash at no charge. Early redemption of Notes Receivable for
cash can be requested, however an interest charge will apply on a pro rata basis for the remaining term of the receivable. As the
term of the Notes Receivables are limited to 6 months, these are recorded at the undiscounted value and classified as a current
asset on the balance sheet.
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
88
EU & NA
PRC
0.01%
0.02%
0.03%
0.04%
0.06%
0.02%
0.05%
0.07%
0.09%
0.12%
Magontec LimitedAnnual Report 2023Financial 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 - fixed assets, doubtful debts
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
Magontec Limited
12 months to
31 Dec 2023
$’000
12 months to
31 Dec 2022
$’000
–
–
–
2
-
290
-
(5)
-
-
(30)
-
(14)
(681)
(21)
(458)
-
–
–
–
6,395
-
1,077
(22)
(10)
-
-
(36)
-
-
(642)
555
7,317
-
Profit/(Loss) after income tax expense/benefit from continuing operations
(458)
7,317
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 actuarial assessments
Total Comprehensive Income
-
-
-
-
-
-
(458)
7,317
89
Magontec LimitedAnnual Report 2023Financial 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 2023
$’000
31 Dec 2022
$’000
23
–
76
99
11,324
11,718
8,314
31,356
31,455
14
1
74
89
11,674
11,718
8,314
31,706
31,795
89
89
36
36
2,196
2,196
2,285
29,170
1,547
1,547
1,583
30,212
59,233
58,883
7,559
8,494
(37,623)
(37,165)
29,170
30,212
Note: During the prior year to 31 December 2022, 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 2023.
Capital commitments - Property, plant and equipment
The parent entity had no material capital commitments for property, plant and equipment as at 31 December 2023.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1.
90
Magontec LimitedAnnual Report 2023Financial Report (continued) Notes to the Financial Statements
continued
27. Subsequent Events
To the best of the Group's knowledge there have been no other material subsequent events that require disclosure that have
not been otherwise disclosed in this report.
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
Fax: 61 2 9252 8960
91
Magontec LimitedAnnual Report 2023Financial 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 58 to 92 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 Chair
27 February 2024
Mr A Malhotra
Non-Executive Director
92
Magontec LimitedAnnual Report 2023Financial Report (continued)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGONTEC LIMITED
Report on the Audit of the Financial Report
Auditor’s Opinion
We have audited the accompanying financial report of Magontec Limited and Controlled Entities (the
‘Group’), which comprises the Consolidated Balance Sheet as at 31 December 2023, 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 the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group’s financial position as at 31 December 2023 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.
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
How our audit addressed the key audit matter
Impairment of Assets
The Company’s assets include plant &
equipment in the MAQ and MAR
subsidiary entities. We focused on this
area due to the:
Delays in providing liquid metal
from the facility in China to MAQ;
Customer concentration risk at
MAR;
Our procedures included, amongst others,
Assessing management’s determination of the
relevant CGU;
Reviewing an independent valuation report,
dated August 2023, providing an opinion on
the fair value of the fixed assets held by MAQ;
Reviewing correspondence from the PRC
partner on the progress in rectifying technical
issues at the Golmud project;
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Russell Bedford
International - a global network
of independent professional
services firms
93
Magontec LimitedAnnual Report 2023Financial Report (continued)
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.
Management conducts a test for
impairment on an annual basis using a
value in use model. This model requires
the application of significant judgements
and estimates.
Management commissioned an
independent valuation of the MAQ fixed
assets to test impairment on a fair value
less cost to sell basis. This basis is not
subject to the same estimation
uncertainty in respect of the supply of
liquid metal to MAQ compared to the
value in use method.
Valuation and Existence of Inventory
We focused on this area as a key audit
matter due to the:
Quantum of amounts involved;
Sensitivity of the Company’s
margins to changes in the
underlying price of Magnesium;
Multiple geographical areas; and
Declining prices for the Group’s
products presenting a risk that
inventory may not be recorded at a
recoverable value.
Management recorded an inventory
write-down as disclosed in Note 2(d).
Evaluating the integrity of the cash flow model
used to calculate the value in use at MAQ and
MAR and its compliance with Accounting
Standards;
Challenging management with respect to key
forward looking assumptions including future
production volumes, the forecast period and
discount rates applied, and compare these
assumptions with internally reported metrics
and external information;
Discuss the operations at MAQ and MAR with
Magontec’s local management and auditors
and review the local audit work papers;
Retrospective review of historical results
against budgets and forecasts to identify any
indications of management bias;
Assessing the sensitivity of the value in use
model to variances in key inputs.
Our procedures included, amongst others,
Attendance at stock takes by subsidiary
auditors for all significant locations to conduct
test counts and assess internal controls;
Reviewing the work papers of the subsidiary
auditors comparing the carrying value of a
sample of inventory items to subsequent sales
price;
Review of costing methodology applied by
entities within the group for compliance with
the Group accounting policy;
Discuss the inventory processes used at MAB,
MAX and MAR with Magontec’s local
management and auditors and review the
local audit work papers.
Other Information
The Directors are responsible for the other information in the Annual Report. The other information
comprises the pages spanning from the Executive Chair’s Letter through to and including the
Directors’ Report and the Shareholder Information, but does not include the financial report,
Directors’ Declaration and our Auditor’s Report thereon.
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.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
94
Magontec LimitedAnnual Report 2023Financial Report (continued) 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.
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 going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibility
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an Auditor’s Report that
includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/Home.aspx. This
description forms part of our auditor’s report.
Report on the Remuneration Report
Auditor’s Opinion
We have audited the Remuneration Report included in pages 42 to 56 of the Annual Report for the
year ended 31 December 2023.
In our opinion the Remuneration Report of Magontec Limited for the year ended 31 December 2023
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Camphin Boston
Chartered Accountants
Justin Woods
Partner
Level 5, 179 Elizabeth Street, Sydney NSW 2000
Dated: this 28th day of February 2024
95
Magontec LimitedAnnual Report 2023Financial 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 & LI ZHONG JUN
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 MR SHAUN WILLIAM SAINSBURY DRABSCH
12 MIENGROVE PTY LTD
13 MR XUNYOU TONG
14 MRS PAMELA ELIZABETH DRABSCH
15 DALSIZ PTY LTD
16 BRIAN GORMAN SELF MANAGED SUPER FUND PTY LTD
17 DR ANDREW DUNCAN MACLAINE-CROSS
18 MR JOHN MICHAEL PATRICK O'REILLY
19 ESCOR EQUITIES CONSOLIDATED
20 MR PETER FABIAN HELLINGS
TOTAL
Distribution of Shareholders as at End Date of Current Reporting Period
22,681,940
9,807,650
3,913,386
3,875,307
3,332,844
2,595,385
2,006,091
1,567,582
1,313,315
1,237,268
9 19,579
752,565
686,402
678 ,9 75
668, 310
650,000
602,528
560,000
533,334
520,000
28.89
12.49
4.98
4.94
4.24
3.31
2.56
2.00
1.67
1.58
1.17
0.96
0.87
0.86
0.85
0.83
0.77
0.71
0.68
0.66
58,902,461
75.02
Holders
No. of Securities
Percentage
608
761
205
261
63
90,534
1,718,720
1,470,509
7,810,987
0.12
2.19
1.87
9.95
67,424,724
85.87
1,898
78,515,474
100.00
Number Held
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
TOTAL
96
Magontec LimitedAnnual Report 2023Financial 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
22,681,940
15,109,260
28.89%
19.24%
As at 31-Dec-2023 a marketable parcel of securities ($500) is a holding of at least 1,282 securities.
This is based on a closing share price of $0.390
Issued Capital and Securities
Ordinary Shares fully paid
On Issue at
31 Dec 2023
78,515,474
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
97
Magontec LimitedAnnual Report 2023Financial Report (continued) Suite 1.03 | 46A Macleay Street | Potts Point | 2011 NSW Australia
T. +61 2 8084 7813 | www.magontec.com