2015AnnualReport
2015
2015
Mount Gibson Iron Limited is an established Australian
producer and exporter of iron ore. The Company was
incorporated in 1996 and was listed on the Australian
Securities Exchange in 2002.
Head-quartered in Perth, Mount Gibson owns the
Extension Hill mine in the Mount Gibson Range south east
of Geraldton, and the Koolan Island mine off the
Kimberley coast in the remote north-west of the State.
The Company seeks to provide sustainable, long-term
returns to shareholders by optimising its existing
operations and growing long-term profitability through the
discovery, development, participation in and acquisition of
mineral resources.
Our MGX Values provide us with a behavioural guide on how to sustainably deliver shareholder value. It
includes always putting the health and safety of our people first, working together with the communities in
which we operate, and undertaking our activities in an environmentally responsible and sustainable manner.
MGX Values
COURAGE
INTEGRITY
SAFETY
AGILITY
RESPECT
Taking and giving feedback
Do what you say you will do
Genuine care for self
and others
Make timely decisions
Be approachable and open
to other points of view
Be prepared to admit
being wrong
Do the right thing, even
when no one is looking
Constant concern
(hazard identification)
Be dynamic and
embrace change
Treat others as you would
expect to be treated
Challenge the norm
constructively
“walk the talk”
Actively intervene
to improve
Grab the opportunity
Encourage and develop
people
Make the hard calls
2MOUNT GIBSON IRON LIMITED 2015 Annual Report Contents
2014/15 Performance Summary
Chairman’s Report
Chief Executive Officer’s Report
Health and Safety
Operational Review
Environment and Community Affairs
Resources and Reserves Statement
Financial Report
Corporate Governance
Additional ASX Information
Corporate Directory
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2014/15 Performance Summary
(cid:63)Lost Time Injury Frequency Rate of Zero, compared with 3.43 in previous year
(cid:63)Total ore sales of 5.8 million tonnes
(cid:63)Total ore sales revenue of A$325 million
(cid:63)Total Cost of Goods Sold reduced 17% to A$62/wmt FOB, including non-cash costs,
royalties and before impairments
(cid:63)Year-end cash and term deposits of A$334 million (A$0.30/share)
(cid:63)Reported net loss after tax of A$911.4 million after non-cash impairments of A$945.2
million and non-cash tax benefit of A$99.9 million
(cid:63)Successfully closed and rehabilitated Tallering Peak mine
(cid:63)Underlying gross loss from continuing operations of A$13.9 million
(cid:63)Net assets of A$306 million
(cid:63)Negligible debt, A$2.7 million in equipment leases
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100
100
By focusing on these priorities, we are
confident that Mount Gibson will be able
to navigate the uncertain market
conditions and capitalise on our financial
strength to deliver strong long term
returns for our shareholders. It is
important to remember that, despite the
disappointing results of the last year,
Mount Gibson remains in a strong position
relative to many miners with substantial
cash reserves and minimal debt.
In the circumstances, the Board sensibly
determined it would be inappropriate to
declare a dividend for the 2014/15 year.
However, we remain proud of our record
of returning capital to shareholders when
appropriate and will continue to consider
the payment of dividends based on our
financial performance every six months.
In summary, I would like to thank my
fellow Directors and the employees of
Mount Gibson for their tireless
contributions and dedication in difficult
circumstances. I look forward to reporting
a more successful year in 2016.
Lee Seng Hui
Chairman
Chairman’s Report
Without question, the 2014/15 year was
one of the most challenging in Mount
Gibson Iron's history.
The Board has determined the following
key business objectives in the 2016
financial year:
(cid:159)
Cost reductions – continue to drive
for sustainable cost improvements
across the existing business through
further supplier cost reductions and
productivity gains.
The Company faced a convergence of
extreme events, notably the significant
and sustained decline in iron ore prices
and the failure of the Main Pit seawall at
Koolan Island part-way through a
substantial investment program to (cid:159)Extension Hill – operate the mine at
increase the mine's production capacity
an increased output rate and progress
and operating efficiency.
development of the nearby Iron Hill
Mineral Resource to extend the
operational life of the Extension Hill
mine beyond the current end of the
reserve life in late 2016.
These events were clearly reflected in our
poor financial results for the year: a
statutory net loss after tax of A$911.4
million, after total non-cash impairments
of A$945.2 million and a non-cash tax (cid:159)Koolan Island – complete mining of
benefit of A$99.9 million. Our substantial
remnant ore in the Acacia East satellite
cash reserves also declined materially,
pit in the first half of 2015-16 and
from A$520 million in June 2014 to A$334
thereafter place the site on care and
million at the end of June 2015.
maintenance, and undertake the
detailed work required to investigate
the redevelopment potential of the
Koolan Island Main Pit orebody.
The Board undertook a thorough review of
the existing business and worked closely
with management to realign the business
with the evolving conditions. This (cid:159)Koolan Island seawall insurance
approach fundamentally reduced costs,
reshaped the business consistent with its
changed circumstances and re-positioned
the Company to move forward in a low
iron ore price environment.
claim – progress and finalise the
insurance claim relating to property
damage and business interruption.
(cid:159)
The Board's overarching strategic
objective continues to be the creation of
long term value through investment in
exploration, development, and efficient
operational extraction of mineral
resources.
Koolan Island Logistic Base (KILB)
– progress the business case for a
logistics services base to support oil
and gas activity in the Browse Basin
with end-users and formalise the
commercial arrangements with Qube
Holdings Limited while ensuring the
capability for future re-start of mining
operations.
Looking to the year ahead, the Board has
determined a very specific plan to position (cid:159)Treasury returns – increase the yield
the business for a return to profitability
and to establish a platform to deliver long
term value for all our shareholders.
on the Company’s cash reserves.
(cid:159)
Growth projects – continue the
search for attractive business
development opportunities in the
resources sector.
The Board's corporate objective for 2016
financial year is to grow the Company's
cash reserves and continue to pursue an
appropriate balance between the retention
and utilisation of cash for value-accretive
investments.
MOUNT GIBSON IRON LIMITED 2015 Annual Report
4MOUNT GIBSON IRON LIMITED 2015 Annual Report
Mid West Highlights
20%
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2013
2014
2015
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Chief Executive Officer's Report
As the Chairman has stated, the 2014/15
year was an extremely challenging and
disappointing one for Mount Gibson Iron.
The safety of our people remains our
absolute priority, so it is of great credit to
our workforce that in this extremely
challenging period, Mount Gibson
recorded a significantly improved safety
performance. The Total Recordable Injury
Frequency Rate (TRIFR) declined by
almost 30% to 9.4, and our Lost Time
Injury Frequency Rate (LTIFR) declined
to zero, compared with 3.43 in the
previous year, with improvements
recorded at all sites. We will continue to
strive for further improvement.
Significantly, the Company’s incident
management procedures and diligent
response to the seawall failure ensured
that all personnel remained safe, and
minimised any environmental risk posed
by the event. The Company worked
closely with the relevant regulatory
agencies to implement appropriate
monitoring and reporting procedures,
which have to date identified no
significant marine impacts from the
seawall failure.
While this safety result was very satisfying
the financial performance of the company
suffered due to the combined impacts of a
40% decline in iron ore prices, volatile
market conditions and the unforeseen
failure of the Main Pit seawall at the
Koolan Island mine in late 2014. These
events combined to have a devastating
impact on the cashflow generating
capacity of the business, and resulted in
very substantial losses.
However, the responses initiated by the
Company were critical in preserving capital
and returning the business to a more
stable footing in the second half of the
year with a significantly lower cost base.
Consistent with the reduced operational
requirements of the business following the
failure of the seawall at Koolan Island and
the final closure of Tallering Peak mine in
September 2014, the Company’s total
headcount was reduced by approximately
68% by the end of June. This reduction
was a difficult but necessary action which
contributed to a 50% reduction in
corporate costs during the year.
Total Cost of Goods Sold was also reduced
by 17% to A$62 per wet metric tonne
Free on Board (FOB), including non-cash
costs, royalties and before impairments.
Site cash costs at the Extension Hill mine,
now the Company’s primary operating
asset, were reduced by 15% to A$44/wmt
FOB in the June quarter, including
royalties and sustaining capital but
excluding corporate cost allocations.
Extension Hill remained cashflow positive
in every quarter.
The short campaign of low-cost remnant
mining at the Acacia East satellite pit at
Koolan Island, which is scheduled for
completion in late 2015, also helped
Mount Gibson increase its cash reserves
by A$10 million in the final quarter of
2014/15 – the quarter in which iron ore
prices were at their lowest for the
financial year.
On the back of the efficiency measures
implemented by the Company, the
Company is confidently targeting a further
reduction in total group production costs
for the 2015-16 year and position Mount
Gibson to generate positive cashflow in
the absence of any further significant and
sustained deterioration in market
conditions.
Importantly, we are also now looking to
the future with renewed optimism.
Koolan Island remains a high quality asset
that offers significant long term optionality
value. To that end, we are continuing our
technical assessment of potential options
to reinstate the Koolan Island seawall and
ultimately resume production if a safe and
viable solution is identified and market
conditions are favourable.
In the Mid West, we have confirmed a
substantial hematite Mineral Resource at
Iron Hill, adjacent to the Extension Hill
mine, for which we are progressing
permitting in order to secure mining
approvals by the time the existing
Extension Hill pit is complete in 2016-17.
We also increased total Mineral Resource
at the Shine Iron Ore Project, which has
enhanced its future potential when market
conditions ultimately improve.
Separately, the Company is working on an
innovative proposal to potentially establish
an aviation logistics base at Koolan Island
to support oil and gas activity in the
offshore Browse.
Our strong balance sheet and cash
reserves give us the flexibility to progress
these opportunities as well as to grow and
diversify our business through quality
resources development opportunities
outside of iron ore.
I would like to take this opportunity to
thank the Chairman and the Board for
their support, guidance and counsel as we
navigated these very trying times. Their
support while constructive was also
challenging and through this combination
I am certain we achieved the best
possible overall outcome.
Finally, I must thank all of Mount Gibson’s
hard working employees and contractors
for their efforts and commitment in these
difficult times. They have, with their
combined efforts, delivered on some key
improvements. I am proud of what the
team has achieved and look forward to
their ongoing efforts to deliver a
continuously improving performance for
shareholders in the year ahead.
Jim Beyer
Chief Executive Officer
MOUNT GIBSON IRON LIMITED 2015 Annual Report
MOUNT GIBSON IRON LIMITED 2015 Annual Report5
Health and Safety
Mount Gibson’s ongoing commitment to
maintaining a safe work environment and
taking responsibility for the safety of
ourselves and our colleagues remains a
primary focus, with the Company
committed to achieving continuous
improvement in every facet of its safety
performance.
The Company achieved a Lost Time
Injury Frequency Rate (LTIFR) of 0.0 for
2014/15, a very significant improvement
compared with an LTIFR of 3.43 recorded
in the previous year. The Total Recordable
Injury Frequency Rate (TRIFR) was
29.4% lower at 9.4, compared with 13.31
in 2013/14. Significant improvements
were recorded at each of the Company’s
operating sites.
A further reflection of our safety
management is evident in the Koolan
seawall failure where although a
catastrophic failure occurred - at no time
were personnel harmed or put at risk.
This was a direct result of the safety
protocols enacted by the Company.
Environmental monitoring and
assessment has been conducted since the
event and no significant marine impacts
from the seawall failure have been
identified to date.
For details of the Company’s safety
performance, including statistics for each
site, please refer to Mount Gibson Iron’s
2015 Sustainability Report, published on
the Mount Gibson website.
20
15
10
5
0
15.01
13.31
TRIFR
9.40
2012/13
2013/14
2014/15
6
5
4
3
2
1
0
LTIFR
5.57
3.43
2012/13
2013/14
2014/15
0.00
6MOUNT GIBSON IRON LIMITED 2015 Annual Report Operational Review
During 2014/15, Mount Gibson achieved
total ore sales of 5.8 million tonnes,
representing a 40% decrease from the
previous year. This decline reflected the
final closure of Tallering Peak after ten
years continuous operation in September
2014 and the suspension of large scale
production at Koolan Island following the
failure of the Main Pit sea wall in
November 2014.
KOOLAN ISLAND
Koolan Island is located approximately
140km north of Derby, in the Kimberley
region of Western Australia.
Ore shipments from Koolan Island for the
year totalled 2.1 million wmt, including
the final shipments of Rizhao Special
Product totalling 287,000 wmt.
Following an initial slump in the Main Pit
seawall on 24 October 2014, and before
remediation efforts could be completed, a
major failure of the seawall occurred on
26 November 2014. The Main Pit was
inundated with sea water as a result of
this breach of the seawall. All non-
essential activities on the island were
suspended following the seawall failure in
order to reduce expenditure and preserve
capital while detailed identification and
assessment of potential redevelopment
options could be undertaken.
A key requirement of the Company's prior
business strategy to expand Koolan Island
to a rate of 4Mtpa was to increase waste
stripping along with a mining fleet
replacement programme. This cash
expenditure programme saw A$83 million
invested in planned capitalised waste
stripping, A$45 million invested in mining
fleet and mine development, and a further
A$3 million on footwall ground
stabilisation in the Main Pit. All this
expenditure was incurred prior to the
seawall failure event in late October 2014.
The failure of the seawall necessitated
significant one-off restructuring and
mitigation costs. The resulting suspension
of ore sales from November 2014 meant
Koolan Island incurred almost a full
quarter of costs with limited ore sales.
The suspension of major operations also
resulted in significant costs, including
approximately A$26 million to clear the
majority of Koolan Island's outstanding
trade creditors and suppliers.
In the March 2015 quarter, a short term
mining campaign commenced in the
Acacia East satellite pit to recover
approximately 400,000 wmt of low-cost
remnant material. Subsequent to the end
of the financial year, Mount Gibson
announced a further campaign of remnant
mining to recover approximately 700,000
wmt of additional remnant material at
Acacia East. Mining is expected to
conclude in the first half of 2015-16, after
which Koolan Island will be placed on care
and maintenance. Further technical work
to aid evaluation of potential options for
the future reconstruction of the Main Pit
seawall is planned in 2016.
A key focus of management during the
second half of 2014/15 was the
Company's insurance claim relating to the
seawall failure. Constructive discussions
with the Company's insurers progressed
during the period, and included a
conditional confirmation that the
Company's existing policies would
respond, subject to the insurers' further
reviews. The majority of insurers agreed
to make an initial early-stage progress
payment on account of approximately
A$1.85 million, which was received in July
2015. However, the insurers have
reserved their rights with respect to
making a final determination.
MOUNT GIBSON IRON LIMITED 2015 Annual Report7
Extension Hill
performed
strongly during
the year
Total ore sales increased
by 12%.
Total material movement
increased by 40%.
Sales of lump ore totalled
1.9 million wmt.
Sales of fines ore totalled
1.5 million tonnes.
EXTENSION HILL
The Extension Hill mine is located in the
Mount Gibson Ranges, 85km east of
Perenjori and 260km east south east of
Geraldton in the Mid-West region of
Western Australia.
The Extension Hill mine performed
strongly in 2014/15, reflecting steady
operations and opportunistic mine-gate
sales that allowed utilisation of available
third party rail capacity in excess of the
Company's allocated train paths from the
Perenjori rail siding.
Total ore sales increased 12% to a record
3.4 million wmt, including 204,000 wmt of
mine gate sales, while total material
movement increased by 40% to 6.4
million wmt. Sales of lump ore totalled
1.9 million wmt, while sales of fines ore
totalled 1.5 million tonnes.
Reflecting the Company's focus on cost
reduction and improved operating
efficiencies, site cash costs, (including
royalties and capital but excluding
corporate cost allocations) were reduced by
approximately 15% during the year to
average A$44/wmt FOB in the June quarter
2015. The site generated positive pre-tax
cashflow of A$34.9 million for the year.
The Company intends to ramp up
production at Extension Hill to between
3.5Mtpa and 4.0Mtpa in 2015-16 in order
to pursue cost reductions through
economies of scale and to bring forward
operating cashflows. Accordingly, Mount
Gibson expects all-in site cash costs of the
Extension Hill operation to be in line with
the strong June quarter performance.
Advancing development of the Iron Hill
deposit, immediately to the south of
Extension Hill, is a key priority in the
coming year with a view to extending the
life of Extension Hill operation when
reserves in the current pit are exhausted
in late 2016. More information is detailed
in the Exploration and Development
section of this report.
TALLERING PEAK
Following the completion of mining in the
June 2014 quarter, Tallering Peak
completed five shipments totalling
292,000 wmt during the first half of the
2014/15 financial year. Sales comprised
two cargoes of lump ore totalling 116,000
wmt, two cargoes of remnant medium
grade fines ore totalling 118,000 wmt and
one cargo of remnant low grade fines ore
totalling 58,000 wmt.
The site closed in late 2014, with activity
during the year limited to final
rehabilitation works.
8MOUNT GIBSON IRON LIMITED 2015 Annual Report Exploration and Development
Mineral Resources and Ore Reserves
Subsequent to year-end, Mount Gibson
released its annual statement of Mineral
Resources and Ore Reserves as at 30
June 2015. Total Group Mineral Resources
were estimated at 94.9 million tonnes
grading 61.2% Fe, and total Group Ore
Reserves were estimated at 7.1 million
tonnes grading 58.4% Fe. All Mineral
Resources and Ore Reserves are
considered as direct shipping grade (DSO)
with no beneficiation or enrichment
process required. The majority of the
Company’s Ore Reserves relate to the
Extension Hill Operation.
Extension Hill South Project
The Extension Hill South Project, on
granted Mining Leases immediately
adjacent to the Extension Hill mine, was
the primary focus of Mount Gibson’s
exploration activity in 2014/15. Following
substantial reverse circulation and
diamond drilling at the Iron Hill and
Gibson Hill Prospects in the prior year,
work in the 2015 financial year focussed
on progressing approvals and evaluating
data for preparation of a Mineral
Resource estimate.
Subsequent to the end of the reporting
period, Mount Gibson reported total
Mineral Resources of 8.8 Million tonnes
grading 58.3% Fe for the Iron Hill Deposit
as at 30 June 2015.
In late December 2014, the Office of
Environmental Protection Authority of
Western Australia set a Public
Environmental Review (PER) level of
assessment for future mining at Iron Hill.
Progressing permitting for Iron Hill is a
key priority for the Company in 2015-16,
in order to extend the life of the Extension
Hill mine when mining in the existing pit is
completed in late 2016.
Shine Iron Ore Project
Development of the Shine Iron Ore
Project, 85km north of Extension Hill,
acquired in early 2014, was deferred in
August 2014 in light of prevailing market
conditions. However, Shine remains a
valuable asset that provides the
Company with substantial optionality to
establish production within a relatively
short start-up time frame, when market
conditions improve.
Total Mineral Resources at Shine were
increased to 15.9 Million tonnes grading
58.1% Fe as at 30 June 2015.
Koolan Island Logistics Base
In May 2015, Mount Gibson announced
an agreement with specialist logistics
provider Qube Holdings Limited that
provides a framework to progress the
potential establishment of a logistical
services base for the offshore oil and gas
industry at Koolan Island, in
collaboration with the Dambimangari
Traditional Owners.
The Koolan Island Logistics Base (KILB)
proposal remains at an early stage but
envisages staged development of
helicopter refuelling and maintenance
facilities, air search and rescue facilities,
an all weather runway suitable for large-
scale passenger jet aircraft,
accommodation facilities and a marine
terminal servicing the Browse Basin.
Development of the KILB would not
restrict the potential to repair the Main Pit
seawall and resume iron ore production at
Koolan Island should a technically and
economically robust solution be identified.
Furthermore, Mount Gibson considers that
the KILB development would provide
operating cost benefits to future mining
operations on the island.
MOUNT GIBSON IRON LIMITED 2015 Annual Report9 Environment and Community
Investing in the creativity, education and
health of our local communities is an
important component of Mount Gibson’s
community engagement program. In line
with our commitments the company
invested heavily in these areas and in the
last 12 months and provided A$490,400 in
direct contributions to community
organisations and projects. This compares
with an equivalent investment of
A$629,117 in the prior year, with the
change reflecting reduced commitments
in the Mid West following the closure of
the Tallering Peak mine.
For details of the Company’s community
investment activities and engagement
with communities and stakeholders,
including information relating to each site,
please refer to Mount Gibson Iron's 2015
Sustainability Report, published on the
Mount Gibson website.
The Company’s comprehensive
emergency response and incident
Sustainability refers to the conditions
under which humans and nature can
coexist in a productive manner and permit
the environmental, social and economic
requirements of present and future
generations.
The key elements of health and safety,
environment and community affairs form
the basis for Mount Gibson's drive towards management procedures were critical in
mitigating the potential risks associated
sustainable outcomes.
with the failure of the Main Pit seawall at
Koolan Island in late 2014. The Company
worked closely with relevant regulatory
agencies, led by the WA Department of
Mines and Petroleum (DMP), which co-
ordinated the regulatory assessment
process. Ongoing environmental
monitoring and assessment since the
event has to date identified no significant
marine impacts from the seawall failure.
Importantly, no Mount Gibson personnel
were harmed or put at risk as a result of
the safety protocols enacted by the
Company.
The social perspective has also had
significant focus over the 2014/15 year.
This includes always putting the health,
safety and wellbeing of our people first.
ENVIRONMENT
Mount Gibson has placed significant
emphasis on environmental management
at its operations over the past year. From
an environmental perspective, Mount
Gibson has focused strongly on
continuous improvement and innovation,
always performing in an environmentally
responsible manner and ensuring a high
standard of environmental management
at all of its locations.
Environmental reporting is a significant
element of environmental management
with many regulatory organisations
requiring quarterly or annual reports.
These include the federal Department of
the Environment, the state Environmental
Protection Authority, the Department of
Environmental Regulation and the
Department of Mines and Petroleum.
A key reporting obligation is the National
Energy and Greenhouse Reporting
Scheme which provides data on
greenhouse gas emissions and energy
production. The latest report for Mount
Gibson shows a significant decrease in
both greenhouse gas emissions of 43%
and energy consumption of 44%
respectively, which is in line with the
Company’s reduced production in
2014/15.
For details of the Company’s
environmental performance, including
information relating to each site, please
refer to Mount Gibson Iron’s 2015
Sustainability Report, published on the
Mount Gibson website.
COMMUNITY AFFAIRS
Mount Gibson values its relationship with
key stakeholders and works to ensure a
clear mutual understanding of its impacts
from current and future operations. To do
this, the company has an ongoing
program of stakeholder consultation
working together with the general
communities in which we operate with an
additional emphasis on the recognition of
the traditional owners at our locations and
areas of special heritage and cultural
significance.
Mount Gibson’s stakeholders include our
customers, shareholders, employees,
suppliers, landowners, traditional owners,
regulators, local governments, interest
groups and the broader community. The
level of consultation is dependent on the
interest noted by stakeholders and the
proximity of a site to closure.
10MOUNT GIBSON IRON LIMITED 2015 Annual Report Resources and Reserves
Total Mineral Resources and Ore Reserves by Project as at 30 June 2015
Koolan Island
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2015
Total at 30 June 2014
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2015
Total at 30 June 2014
Extension Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2015
Total at 30 June 2014
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2015
Total at 30 June 2014
Tallering Peak
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2015
Total at 30 June 2014
Shine
Tonnes
millions
8.14
42.60
10.89
61.62
62.7
0.38
0.49
0.87
28.2
6.28
1.96
7.54
15.77
11.2
5.88
0.31
6.19
10.5
0.41
1.03
0.20
1.65
1.65
Fe
%
59.1
64.3
60.2
62.9
62.9
59.1
60.6
60.0
63.9
58.2
59.8
57.8
58.2
58.4
58.2
57.3
58.2
58.3
58.9
58.1
54.7
57.9
57.9
SiO
2
%
13.55
6.42
12.48
8.43
8.44
14.86
12.05
13.27
7.16
6.47
8.73
8.70
7.81
6.77
6.55
10.92
6.77
6.90
6.26
11.70
17.89
11.10
11.10
Al O
3
2
%
1.11
0.76
0.79
0.81
0.80
0.28
0.58
0.45
0.72
2.25
1.13
1.74
1.87
2.02
2.22
1.26
2.17
2.02
3.50
1.66
1.93
2.15
2.15
P
%
0.017
0.014
0.015
0.014
0.01
0.009
0.011
0.010
0.01
0.077
0.053
0.069
0.070
0.07
0.077
0.071
0.076
0.07
0.082
0.066
0.056
0.069
0.07
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2015
Total at 30 June 2014, above 55% Fe
Ore Reserves, above 50% Fe
Nil
Proved
Nil
Probable
Nil
Total at 30 June 2015
5.60
Total at 30 June 2014, above 55% Fe
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
5.73
6.57
3.59
15.89
7.76
9.04
10.01
9.61
9.57
8.69
58.9
58.0
56.8
58.1
59.0
1.81
1.35
1.18
1.48
1.85
Nil
Nil
Nil
2.00
Nil
Nil
Nil
8.12
Nil
Nil
Nil
59.3
0.076
0.070
0.063
0.071
0.08
Nil
Nil
Nil
0.08
Total Group Mineral Resources and Ore Reserves at 30 June (above 50% Fe)
Tonnes
millions
Fe
%
Si0
2
%
Al 0
2 3
%
P
%
94.93
Total Mineral Resources at 30 June 2015
7.06
Total Ore Reserves at 30 June 2015
83.3
Total Mineral Resources at 30 June 2014
Total Ore Reserves at 30 June 2014
44.3
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
8.57
7.57
8.29
7.22
1.12
1.96
1.09
1.20
61.2
58.4
61.8
62.0
0.034
0.068
0.03
0.03
Attributions overleaf
MOUNT GIBSON IRON LIMITED 2015 Annual Report11 Material Change
A significant change in the annual reporting period has been the removal of most of the Ore Reserves from the Koolan Island Operation to
0.9Mt @ 60% Fe (30 June 2014: 28.2Mt @ 63.9% Fe) due to the inundation of the Main Pit in late 2014 with the failure of a seawall. At Koolan
Island, a reduced Ore Reserve has been retained at the Acacia East deposit, where mining continues, while the Ore Reserve for Barramundi
West has been removed. An optimisation review of the Shine Iron Ore project has determined that at current and predicted near term Iron
Ore pricing, mining is not currently considered economically feasible. Consequently, the Ore Reserve for the Shine Iron Ore Project,
previously reported as 5.6Mt @ 59.3% Fe, has been removed for the 30 June 2015 reporting.
Mineral Resources and Ore Reserves Governance
The Mineral Resources and Ore Reserves as at 30 June 2015 are reported in accordance with JORC (2012) guidelines and ASX listing rules.
Further information supporting the Mineral Resource and Ore Reserve position is available in Mount Gibson Iron’s ASX announcement dated
17 August 2015 entitled ‘Mineral Resources and Ore Reserves Statement as at 30 June 2015’.
The Mineral Resources estimates follow standard industry methodology using geological interpretation and assay results from samples won
through drilling. Ore Reserves estimates use the Mineral Resources and apply modifying factors in line with standard company practices
suitable to the industry.
The Mineral Resources and Ore Reserves estimates are completed or overseen by suitably qualified Mount Gibson Iron personnel, with
competent persons completing the estimates. A review of the estimates and the estimation process for the Mineral Resources and Ore
Reserves respectively is conducted by an employee or consultant who also has sufficient experience to qualify as a Competent Person.
The Mineral Resources and Ore Reserves statement included in the Annual Report is reviewed and approved by a suitably qualified Mount
Gibson Iron Competent Person prior to its announcement.
Competent Persons and Responsibilities
Mount Gibson Iron Exploration Results:
The information in this report that relates to Exploration Results including sampling techniques and data management is based on
information compiled by Gregory Hudson, a Competent Person who is a member of the Australian Institute of Geoscientists. Mr Hudson was a
full-time employee of, and is a consultant to, Mount Gibson Iron Limited, and he has sufficient experience relevant to the style of
mineralisation and type of deposits under consideration and to the activity being undertaken, to qualify as a Competent Person as defined in
the December 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Hudson
consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.
Mount Gibson Iron Mineral Resources for the Shine, Extension Hill (excluding Iron Hill), all Tallering
Peak deposits and all Koolan Island deposits other than the Main Deposit:
The information in this report relating to Mineral Resources for the Shine, Extension Hill (excluding Iron Hill), and Tallering Peak deposits as
well as the Acacia East, Mullet Acacia, Barramundi West, Eastern Barramundi and Mangrove Mineral Resources at Koolan Island, is based on
information compiled by Elizabeth Haren, a Competent Person who is a member and Chartered Professional of the Australasian Institute of
Mining and Metallurgy. Ms Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron Limited. Ms Haren has sufficient
experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to
qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves’. Ms Haren consents to the inclusion in this report of the matters based on her information in the form and context in which it
appears. The Mineral Resource estimates comply with recommendations in the Australasian Code for Reporting of Mineral Resources and Ore
Reserves (2012) by the Joint Ore Reserves Committee (JORC). Therefore they are suitable for public reporting.
Mount Gibson Iron Mineral Resources for the Koolan Island Main deposit and the Iron Hill deposit at
Extension Hill South:
The information in this report relating to the Mineral Resources of Main Deposit at Koolan Island and the Iron Hill deposit at Extension Hill
South is based on information compiled by Jani Kalla, a Competent Person who is a member and Chartered Professional of the Australasian
Institute of Mining and Metallurgy. Jani Kalla was a full-time employee of Mount Gibson Iron Limited and is now a full time employee of First
Quantum Minerals Limited. Mr Kalla has sufficient experience that is relevant to the style of mineralisation and type of deposits under
consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Kalla consents to the inclusion in this report of the matters
based on his information in the form and context in which it appears. The Mineral Resource estimates comply with recommendations in the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012) by the Joint Ore Reserves Committee
(JORC). Therefore they are suitable for public reporting.
Koolan Island, Extension Hill and Shine Ore Reserves:
The information in this report relating to Ore Reserves at Koolan Island, Extension Hill and Shine is based on information compiled by Paul
Salmon, a Competent Person who is a member and a Chartered Professional of the Australasian Institute of Mining and Metallurgy. Mr Salmon
is a full-time employee of Mount Gibson Iron Limited. Mr Salmon has sufficient experience that is relevant to the style of mineralisation and type
of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the
‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Salmon consents to the inclusion in the report
of the matters based on his information in the form and context in which it appears. The Ore Reserve estimates comply with recommendations
in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012) by the Joint Ore Reserves Committee
(JORC). Therefore they are suitable for public reporting.
12MOUNT GIBSON IRON LIMITED 2015 Annual Report Financial Report
MOUNT GIBSON IRON LIMITED AND CONTROLLED ENTITIES
ABN 87 008 670 817
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
30 JUNE 2015
Directors’ Report
Auditor’s Independence Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Report
Directors’ Declaration
Independent Audit Report
14
35
36
37
38
39
40
41
92
93
MOUNT GIBSON IRON LIMITED 2015 Annual Report13 Directors’ Report
Your Directors submit their report for the year ended 30 June 2015 for Mount Gibson Iron Limited (“Company” or “Mount Gibson”)
and the consolidated entity incorporating the entities that it controlled during the financial year (“Group”).
DIRECTORS
The names and details of the Company’s Directors in office during the financial period and until the date of this report are set out
below. Directors were in office for the entire period unless otherwise stated.
Names, Qualifications, Experience and Special Responsibilities
Lee Seng Hui LLB (Hons)
Chairman, Non-Executive Director
Mr Lee was appointed as a Non-Executive Director on 29 January 2010, Non-Executive Deputy Chairman on 14 December 2012, and
Chairman on 18 February 2014. Mr Lee graduated with Honours from the University of Sydney Law School. Mr Lee is the Chief
Executive and an Executive Director of Allied Group Limited and Allied Properties (H.K.) Limited both of which are listed on the Hong
Kong Stock Exchange. He is also the Chairman and a Non-Executive Director of Tian An China Investments Company Limited and a
Non-Executive Director of APAC Resources Limited, one of Mount Gibson’s substantial shareholders. Mr Lee was previously a
Non-Executive Director of Tanami Gold NL.
Alan Jones CA
Independent Non-Executive Director
Mr Jones was appointed as an Independent Non-Executive Director on 28 July 2006 and is the current Chairman of the Nomination,
Remuneration and Governance Committee. Mr Jones is a Chartered Accountant with extensive senior management and board
experience in listed and unlisted Australian public companies, particularly in the construction, engineering, finance and investment
industries. Mr Jones has been involved in the successful merger and acquisition of a number of public companies in Australia and
internationally. He is a Non-Executive Director of Mulpha Australia Ltd, Sun Hung Kai & Co Ltd (Hong Kong), Allied Group Ltd (Hong
Kong), Allied Properties (H.K.) Limited and Air Change International Limited.
Li Shao Feng B.Automation
Non-Executive Director
Mr Li was appointed as a Non-Executive Director on 23 February 2012. Mr Li has extensive experience in the management of and
investments in various listed companies, sino-foreign joint ventures and steel industry entities. He holds a bachelor degree in
Automation from University of Science and Technology Beijing. He is the vice chairman and managing director of Shougang Holding
(Hong Kong) Limited. Mr Li is an executive director and the managing director of Shougang Concord International Enterprises
Company Limited, the chairman of each of Shougang Fushan Resources Group Limited, a substantial shareholder of Mount Gibson,
Shougang Concord Century Holdings Limited, Shougang Concord Grand (Group) Limited and Global Digital Creations Holdings Limited,
and an executive director of BeijingWest Industries International Limited, all of which are companies listed on the Hong Kong Stock
Exchange. He is also a non-executive director of China Dynamics (Holdings) Limited (formerly known as Sinocop Resources (Holdings)
Limited), a Hong Kong listed company.
Russell Barwick Dip.Min.Eng., FAICD, FAusIMM
Independent Non-Executive Director
Mr Barwick was appointed as an Independent Non-Executive Director on 16 November 2011 and is Chairman of the Operational, Risk
and Sustainability Committee. Mr Barwick is a mining engineer with 40 years of technical, operational, managerial and corporate
experience in international mining companies covering various commodities. He has worked for Bougainville Copper Limited (CRA),
Pancontinental Mining Ltd (Jabiluka Uranium) and CSR Limited (coal). He spent 17 years with Placer Dome Asia Pacific in key
development, operational and corporate roles in numerous countries culminating in his appointment as Managing Director of Placer
Niugini Ltd. He then served as Managing Director of Newcrest Mining Limited (2000 to 2001). For the four years to the end of 2006,
Mr Barwick was the Chief Operating Officer of Wheaton River Minerals Ltd and Goldcorp Inc., based in Vancouver, Canada. He was
subsequently the Chief Executive Officer of Canada-based Gammon Gold Inc. before returning to Australia in 2008. He is currently the
Chairman of Red Metal Ltd.
Simon Bird B.Acc.Science (Hons) FCPA, FAICD
Lead Independent Non-Executive Director
Mr Bird was appointed as an Independent Non-Executive Director on 23 February 2012. Mr Bird is the Lead Independent Director and
Chairman of the Audit and Financial Risk Management Committee. Mr Bird has 30 years of international corporate experience,
including holding the positions of General Manager Finance at Stockland Limited, Chief Financial Officer of GrainCorp Limited, and
Wizard Mortgage Corporation. He was also Chief Executive Officer of ASX-listed King Island Scheelite Limited and a former Director of
CPA Australia Limited. Mr Bird is currently a Director of ASX-listed companies Pacific American Coal Limited, Rawson Resources
Limited and Sovereign Gold Company Limited.
14MOUNT GIBSON IRON LIMITED 2015 Annual Report
Professor Paul Dougas B.Eng (Chem), M.Eng.Science, FAICD, CEng., Hon Fellow Engineers Australia
Independent Non-Executive Director
Professor Dougas was appointed as an Independent Non-Executive Director on 16 November 2011 and is Chairman of the Contracts
Committee. He has 40 years of design, process, project engineering, managerial, commercial and corporate experience having
commenced his career in the Melbourne & Metropolitan Board of Works before joining engineering firm Sinclair Knight Merz ("SKM")
in 1978. From initial technical roles, he assumed leadership roles in Sydney before returning to Melbourne as Associate Director and
Victorian Branch Manager in 1985. In 1995 he was appointed Managing Director Elect and Director of Marketing before becoming
Chief Executive Officer and Managing Director in 1996. For the following 15 years, he led a significant expansion of SKM locally and
internationally involving more than 50 local and international acquisitions. He also oversaw SKM’s expansion into South-East Asia with
the opening of offices in over 20 Asian locations including Shanghai and Hong Kong. During his leadership, SKM developed strong
project alliances with major mining companies including BHP Billiton, Rio Tinto and Vale Metals Group. Professor Dougas was a Non-
Executive Director of ConnectEast Ltd from 2009 until its takeover in September 2011 and was also on the SKM Board from 1990 until
2011. He is currently Chairman of the Global Carbon Capture and Storage Institute, Non-Executive Director of Epworth Healthcare
and Non-Executive Director of Calibre Group Limited.
Andrew Ferguson
Alternate Director to Lee Seng Hui
Mr Ferguson was appointed Alternate Director to Lee Seng Hui on 24 September 2012. Mr Ferguson is Chief Executive Officer and an
Executive Director of APAC Resources Ltd, one of Mount Gibson’s substantial shareholders. Mr Ferguson holds a Bachelor of Science
Degree in Natural Resource Development and worked as a mining engineer in Western Australia in the mid 1990’s. He has 14 years of
experience in the finance industry specialising in global natural resources. In 2003, Mr Ferguson co-founded New City Investment
Managers in the United Kingdom. He was the former co-fund manager of City Natural Resources High Yield Trust, and managed New
City High Yield Trust Ltd and Geiger Counter Ltd. He has also worked as Chief Investment Officer for New City Investment Managers
CQS Hong Kong. Mr Ferguson is currently a Non-Executive Director of Metals X Limited and ABM Resources NL, both of which are
listed on the Australian Securities Exchange.
COMPANY SECRETARY
David Stokes B.Bus, LLB, ACIS
Company Secretary & General Counsel
Mr Stokes was appointed Company Secretary and General Counsel on 2 April 2012. He is a corporate lawyer with a diverse range of
mining and governance experience having worked at a corporate and operational level in the energy and resources sectors for over
18 years. Prior to joining Mount Gibson, Mr Stokes was General Counsel and Company Secretary at Gindalbie Metals Limited,
Corporate Counsel for Iluka Resources Limited and Resolute Mining Limited, and has also worked in private practice for a number of
years.
CORPORATE INFORMATION
Corporate Structure
Mount Gibson is a company limited by shares that is incorporated and domiciled in Australia. It is the ultimate parent entity and has
prepared a consolidated financial report incorporating the entities that it controlled during the financial year. The structure of the
Group as at 30 June 2015 was as follows:
MOUNT GIBSON IRON LIMITED
ABN: 87 008 670 817
100%
100%
100%
MOUNT GIBSON MINING LIMITED
AZTEC RESOURCES LIMITED
GERALDTON BULK HANDLING
PTY LTD
ABN: 32 074 575 885
ABN: 45 078 548 562
ABN: 45 100 105 388
100%
100%
100%
BROCKMAN MINERALS PTY LTD
KOOLAN IRON ORE PTY LTD
KOOLAN SHIPPING PTY LTD
ABN: 75 094 634 401
ABN: 87 099 455 277
ACN: 110 647 848
MOUNT GIBSON IRON LIMITED 2015 Annual Report15
Nature of Operations and Principal Activities
The principal activities of the entities within the Group are:
mining and shipment of hematite iron ore at Koolan Island in the Kimberley region of Western Australia;
mining of hematite iron ore deposits at the Extension Hill mine site in the Mid-West region of Western Australia and haulage of
the ore via road and rail for sale from the Geraldton Port; and
exploration and development of hematite iron ore deposits at Koolan Island and in the Mid-West region of Western Australia.
Employees
The Group employed 213 employees (excluding contractors) as at 30 June 2015 (2014: 668 employees).
OPERATING AND FINANCIAL REVIEW
Introduction
The Board presents the 2014/15 Operating and Financial Review which has been prepared to provide shareholders with a clear and
concise overview of Mount Gibson’s operations, financial position, business strategies and prospects. This review also provides a
summary of the impact of key events which occurred in 2014/15 and the material business risks so that shareholders can make an
informed assessment of the results and prospects of the Group.
The review complements Mount Gibson’s financial statements for the year ended 30 June 2015 and has been prepared in accordance
with Regulatory Guidance 247 published by the Australian Securities and Investments Commission (“ASIC”).
Overview of the 2014/15 Financial Year
The Group’s financial performance for the year ended 30 June 2015 was severely impacted by a steady and significant decline in the
iron price and by the unexpected failure of the Koolan Island Main Pit seawall in the December 2014 quarter.
At the beginning of the financial year, the iron ore price was US$95 per dry metric tonne (“dmt”) for the 62% Fe fines Platts Index
and by the end of the financial year this had fallen to US$59/dmt, a reduction of 40%. The price touched a low of US$47/dmt in April
2015. The lower prices had a devastating effect on the cash flow generating capacity of the Group’s business and, when combined
with the Koolan Main Pit seawall failure, the Company experienced extremely difficult operating conditions and consequently suffered
a material reduction in its cash reserves.
Group ore sales totalled 5.8 million wet metric tonnes (“wmt”) during the financial year, a decrease of 40% from the record sales
volume achieved in the preceding year. Total sales revenue, including Tallering Peak (discontinued operation), declined 63% to
$324,631,000, while year-end cash reserves, including term deposits, decreased by $185,768,000 to $334,003,000 at 30 June 2015.
The Company’s Extension Hill operation achieved record sales for the year totalling 3.4 million wmt, an increase of 12% over the
previous year. Mining at the Tallering Peak mine was completed at the end of the previous financial year following ten years of
successful operation, with the final ore sales completed in the December 2014 quarter. Sales from Koolan Island, while running at an
annualised rate of 3.7 million wmt per year in the September 2014 quarter, reduced significantly following the Main Pit seawall failure
and the retreat of mining to only the Acacia East satellite pit.
Mount Gibson achieved an average realised price for standard Direct Shipping Ore (“DSO”) fines for the year of US$54/dmt Free On
Board (“FOB”), after penalties and provisional pricing adjustments. This compared with an average of US$95/dmt in 2013/14.
Through the year, substantial reductions were achieved in both operating and head office costs. These reductions were obtained
through productivity improvements, supplier cost savings and workforce reductions. The Company’s total workforce reduced by
approximately 68% since June 2014, from 668 employees to 213 at 30 June 2015.
Strong cost reduction efforts have resulted in the Company’s average cost of goods sold (including non-cash costs but before
impairments) reducing by 19% from $80/wmt FOB in 2013/14 to $65/wmt FOB in 2014/15. This ongoing cost reduction focus is
central to Mount Gibson’s approach to maximising cash flow and profitability in a volatile commodities market.
16MOUNT GIBSON IRON LIMITED 2015 Annual Report
Operating Results for the Financial Year
The summarised operating results for the Group for the year ended 30 June 2015 are tabulated below. These reflect significant
impairment expenses totalling $945,214,000 as a result of depressed iron ore prices and the failure of the Koolan Island Main Pit
seawall in the period.
Year ended: 30 June 2015* 30 June 2014*
30 June 2013
Restated**
30 June 2012
30 June 2011
Net profit/(loss) before tax
Taxation benefit/(expense)
Net profit/(loss) after tax
$’000
$’000
$’000
Earnings/(loss) per share
cents/share
(1,008,505)
163,698
128,440
224,621
342,888
97,083
(911,422)
(83.56)
(67,345)
96,353
8.84
28,902
157,342
14.45
(62,605)
(103,388)
162,016
239,500
14.96
22.14
* The figures for net profit/(loss) before tax and taxation benefit/(expense) for the years ended 30 June 2014 and 2015 are shown inclusive
of discontinued operations. Refer the attached financial statements for further details.
** Restated to reflect adjustments made on the adoption of AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine.
In accordance with the transitional provisions of the Interpretation, amounts in prior years were not restated.
Consolidated quarterly operating and sales statistics for the 2014/15 financial year are tabulated below:
Consolidated Group
Unit
Sept
Quarter
2014
Dec
Quarter
2014
Mar
Quarter
2015
Jun
Quarter
2015
2014/15
2013/14
Mining & Crushing
Total waste mined
Total ore mined#
Total ore crushed
Shipping/Sales*
Standard DSO Lump**
Standard DSO Fines
Low Grade DSO**
RSP
Total
Ave. Platts 62% Fe
CFR northern China price
MGX Free on Board (FOB)
average realised fines
price^
kwmt = thousand wet metric tonnes
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
US$/dmt
US$/dmt
9,016
1,920
1,862
643
1,074
-
146
1,863
90
65
5,761
1,299
1,040
586
450
58
142
1,267
1,381
1,106
573
500
-
-
587
1,276
1,386
906
758
-
-
1,236
1,073
1,664
74
60
62
47
58
38
16,630
5,876
5,394
2,708
2,783
58
287
5,836
72
54
30,863
7,927
8,996
3,567
3,992
1,377
768
9,703
123
95
*
Includes mine gate sales totalling 72kwmt of DSO lump and 34kwmt of DSO fines in the September 2014 quarter, 46kmwt of DSO fines
in the March 2015 quarter, and 52kwmt of DSO fines in the June 2015 quarter.
** DSO Lump Sales were previously reported inclusive of lower grade lump ore sales from Tallering Peak. DSO sales are now reported as
Standard Lump, Standard Fines and Low Grade DSO.
#
Includes low-grade ore at Extension Hill with grading 50-55% Fe that is considered to be saleable. This material is being stockpiled for
future sale but continues to be treated as waste for accounting purposes.
^ Reflects the realised fines price for standard DSO fines ore only, after adjustments for shipping freight, grade, provisional invoicing
adjustments and penalties for impurities. Contract pricing in the year was based on a mix of lagging-monthly and month-of-shipment
averages. Mine gate sales, when they occur, are priced on a Free on Train basis, reflecting market prices less the cost of rail, port and
shipping.
Minor discrepancies may appear due to rounding.
MOUNT GIBSON IRON LIMITED 2015 Annual Report17
Koolan Island
Ore shipments from Koolan Island for the year ended 30 June 2015 totalled 2.1 million wmt, including the final shipments of Rizhao
Special Product (“RSP”) totalling 287,000 wmt.
As reported during the period, following an initial slump in the Main Pit seawall on 24 October 2014, and before remediation efforts
could be completed, a major failure of the seawall occurred on 26 November 2014. The Main Pit was inundated with sea water as a
result of this breach of the seawall. All non-essential activities on the island were suspended following the seawall failure in order to
reduce expenditure and preserve capital while detailed identification and assessment of potential redevelopment options are
undertaken. Force majeure notices were issued to major offtake customers and suppliers.
Importantly, no Mount Gibson personnel were harmed or put at risk as a result of the safety protocols enacted by the Company.
Environmental monitoring and assessment has been conducted since the event and no significant marine impacts from the seawall
failure have been identified to date.
At the start of the financial year, the Group pursued the planned expansion of the Koolan Island operation to a production rate of
4 million wmt per year. A key requirement of this expansion was to increase the waste stripping along with a mining fleet
replacement program. This expenditure program saw $83 million invested in planned capitalised waste stripping, $45 million invested
in mining fleet and mine development, and a further $3 million on footwall ground stabilisation in the Main Pit. All this expenditure
was incurred prior to the seawall failure.
The failure of the seawall also necessitated significant one-off restructuring and mitigation costs. The resulting suspension of ore sales
from November 2014 meant Koolan Island incurred almost a full quarter of costs with limited ore sales. The subsequent requirement
to put the mine site to care and maintenance status, while options for its long term future are assessed, also resulted in significant
costs, including approximately $26 million to clear the majority of Koolan Island’s outstanding trade creditors and suppliers.
Site operations recommenced in the March 2015 quarter with mining focused on the Acacia East satellite pit. All sales made in the
second half of the year were from the Acacia East pit which was of lower iron grade and quality than the Main Pit ore.
As at 30 June 2015, crushed DSO stockpiles at Koolan Island totalled approximately 89,000 wmt.
Koolan Island
Production Summary
Unit
Sept
Quarter
2014
’000
Dec
Quarter
2014
’000
Mar
Quarter
2015
’000
Jun
Quarter
2015
’000
Year
2014/15
’000
Year
2013/14
’000
%
Incr/
(Decr)
Mining
Waste mined
Ore mined
Crushing
Lump
Fines
RSP*
Shipping
Lump**
Fines**
RSP*
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
8,409
668
5,171
425
152
313
443
908
210
568
146
923
48
249
-
297
42
147
142
331
783
406
176
97
-
273
149
148
-
297
66
144
245
158
-
403
296
288
-
585
14,428
1,643
25,181
2,848
621
817
443
1,882
697
1,152
287
2,136
792
1,716
1,238
3,746
661
2,274
768
3,702
(43)
(42)
(22)
(52)
(64)
(50)
5
(49)
(63)
(42)
*
Rizhao Special Product (“RSP”).
** Mining at Koolan Island in the March and June 2015 quarters was only from Acacia East satellite pit with lump material grading ~58% Fe
and fines material grading ~57% Fe.
Minor discrepancies may appear due to rounding.
In accordance with the Company’s stated accounting policy, deferred waste expenditure for the period was capitalised in the Group’s
balance sheet and will be amortised on a units of production basis. Expenditure on waste development at Koolan Island during the
financial year was as follows. This deferred expenditure has been fully impaired as at 30 June 2015.
Koolan Island
Waste mined
Waste mined
Ore mined
Ore mined
Deferred waste capitalised
Amortisation of deferred waste
Year ended
30 June 2015
Year ended
30 June 2014
5.44
14.43
0.46
1.64
92.68
20.12
9.49
25.18
0.74
2.85
151.03
76.02
mill bcm
mill wmt
mill bcm
mill wmt
$ mill
$ mill
18MOUNT GIBSON IRON LIMITED 2015 Annual Report
Extension Hill
The Extension Hill mine is located in the Mount Gibson Ranges, 85km east of Perenjori and 260km east south east of Geraldton in the
Mid-West region of Western Australia. Ore is mined, crushed and screened on-site, transported by sealed road 85km to Perenjori,
where it is loaded onto rail wagons and railed 240km to the Geraldton Port. Mining commenced at Extension Hill in the 2011/12
financial year.
The Extension Hill mine performed strongly in 2014/15, reflecting steady operations and opportunistic mine-gate sales that allowed
utilisation of available third party rail capacity in excess of the Company’s allocated train paths from the Perenjori rail siding.
Total ore sales increased 12% to a record 3.4 million wmt, including 204,000 wmt of mine gate sales, while total material movement
increased by 40% to 6.4 million wmt. Sales of lump ore totalled 1.9 million wmt, while sales of fines ore totalled 1.5 million tonnes.
Mine gate sales were priced on a Free on Train basis, reflecting the prevailing market price less rail, port and shipping costs (which
are incurred by the purchaser). These sales delivered Mount Gibson a cash margin comparable to conventional shipments from the
Geraldton Port.
As at 30 June 2015, approximately 47,000 wmt of crushed standard product were stockpiled at the mine. Uncrushed standard
product stockpiled at the mine totalled approximately 48,000 wmt. Mine-site stockpiles of uncrushed lower grade material totaled 3.0
million wmt. Crushed standard product stockpiled at the Perenjori rail siding totalled approximately 120,000 wmt.
Extension Hill
Production Summary
Unit
Sept
Quarter
2014
’000
Dec
Quarter
2014
’000
Mar
Quarter
2015
’000
Jun
Quarter
2015
’000
Year
2014/15
’000
Year
2013/14
’000
% Incr/
(Decr)
Mining
Waste mined*
Standard Ore mined
Low Grade Ore mined*
Total Ore Mined
Crushing
Lump
Fines
Transported to
Perenjori Railhead
Lump
Fines
Transported to
Geraldton Port
Lump (Rail)
Fines (Rail)
Shipping
Lump
Fines
Mine Gate Sales
Lump
Fines
Total Sales
Lump
Fines
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
607
973
279
1,252
562
392
954
531
456
987
359
375
734
245
354
599
72
34
106
317
388
705
590
619
255
874
437
306
743
430
331
761
406
305
711
544
303
847
-
-
-
544
303
847
485
817
158
975
479
354
833
465
365
830
481
328
809
424
306
730
-
46
46
424
352
776
521
2,202
1,673
960
172
1,132
576
406
982
581
427
1,008
563
412
975
610
418
1,028
-
52
52
610
470
1,080
3,369
864
4,233
2,054
1,458
3,512
2,007
1,579
3,586
1,809
1,420
3,229
1,823
1,381
3,204
72
132
204
1,895
1,513
3,408
2,248
669
2,917
1,573
1,162
2,735
1,635
1,104
2,739
1,643
1,094
2,737
1,680
1,063
2,743
239
59
298
1,919
1,122
3,041
32
50
29
45
31
25
28
23
43
31
10
30
18
9
30
17
(70)
124
(32)
(1)
35
12
* Waste mined was previously reported inclusive of low grade ore, which is now reported separately as Low Grade ore mined. Low grade
ore is material grading 50-55% Fe considered to be saleable. This material is being stockpiled for future sale but continues to be treated
as waste for accounting purposes.
Minor discrepancies may appear due to rounding.
MOUNT GIBSON IRON LIMITED 2015 Annual Report19
Expenditure on waste development at Extension Hill during the financial year was as follows:
Waste mined
Waste mined
Ore mined
Ore mined
Deferred waste capitalised
Amortisation of deferred waste
mill bcm
mill wmt
mill bcm
mill wmt
$ mill
$ mill
Tallering Peak
Year ended
30 June 2015
Year ended
30 June 2014
1.17
3.07
1.08
3.37
-
-
0.92
2.34
0.78
2.25
-
-
Following the completion of mining in the June 2014 quarter, Tallering Peak completed five shipments totalling 292,000 wmt during
the first half of 2014/15 financial year. Sales comprised two cargoes of lump ore totalling 116,000 wmt, two cargoes of remnant
medium grade fines ore totalling 118,000 wmt and one cargo of remnant low grade fines ore totalling 58,000 wmt.
Tallering Peak
Production Summary
Unit
Sept
Quarter
2014
’000
Dec
Quarter
2014
’000
Mar
Quarter
2015
’000
Jun
Quarter
2015
’000
Year
2014/15
’000
Year
2013/14
’000
%
Incr/
(Decr)
Mining
- Waste mined
- Ore mined
Crushing
- Lump
- Fines
Transported to
Mullewa Railhead
- Lump
- Fines
Transported to
Geraldton Port
- Lump
- Fines
Shipping
- Standard DSO Lump
- Standard DSO Fines
- Low Grade DSO
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
-
-
-
-
-
7
9
16
43
176
219
116
118
-
234
-
-
-
-
-
-
-
-
-
17
17
-
-
58
58
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
9
16
43
193
236
116
118
58
292
4,009
2,162
(100)
(100)
1,437
1,079
2,516
(100)
(100)
(100)
1,376
841
2,217
2,187
622
2,809
986
597
1,377
2,960
(99)
(99)
(99)
(98)
(69)
(92)
(88)
(80)
(96)
(90)
Minor discrepancies may appear due to rounding.
In accordance with the Company’s stated accounting policy, deferred waste expenditure for the period was capitalised in the Group’s
balance sheet and amortised on a units of production basis. Expenditure on waste development at Tallering Peak during the financial
year was as follows:
Waste mined
Waste mined
Ore mined
Ore mined
Deferred waste capitalised
Amortisation of deferred waste
mill bcm
mill wmt
mill bcm
mill wmt
$ mill
$ mill
Year ended
30 June 2015
Year ended
30 June 2014
-
-
-
-
-
-
1.36
4.01
0.55
2.16
1.10
13.67
Closure and rehabilitation activities continued throughout the year, with the last remaining equipment removed from site in the June
2015 quarter. Final rehabilitation works in 2015/16 are expected to relate to road repairs, minor earthworks and site monitoring.
20MOUNT GIBSON IRON LIMITED 2015 Annual Report
EXPLORATION AND DEVELOPMENT
Mineral Resources and Ore Reserves
Subsequent to year-end, Mount Gibson released its annual statement of Mineral Resources and Ore Reserves as at 30 June 2015.
Total Group Mineral Resources were estimated at 94.9 million tonnes grading 61.2% Fe, and total Group Ore Reserves were estimated
at 7.1 million tonnes grading 58.4% Fe. Mount Gibson has 12 iron ore Mineral Resources across four project locations and two Ore
Reserves. All Mineral Resources and Ore Reserves are considered as direct shipping grade (DSO) with no beneficiation or enrichment
process required. The majority of the Company’s Ore Reserves relate to the Extension Hill Operation.
Extension Hill South
Mount Gibson completed a programme of reverse circulation drilling, comprising 63 holes for 3,072 metres, at the Iron Hill and Gibson
Hill Prospects at Extension Hill South. This program of infill and extensional drilling was a follow up to RC drilling conducted at Iron Hill
in December 2013 and a four hole diamond core programme drilled in August 2014. In late December 2014, the Office of
Environmental Protection Authority of Western Australia set a Public Environmental Review (PER) level of assessment for future
mining at Iron Hill. Work in the second half of the financial year was focussed on progressing approvals and evaluating data for
preparation of an initial Mineral Resource estimate.
CORPORATE
Minerals Resource Rent Tax (“MRRT”)
During the year, the Australian Senate repealed the MRRT, effective 1 October 2014. Consequently, as previously disclosed, Mount
Gibson recorded a non-cash write-off of approximately $46 million in its financial results for the year ended 30 June 2015. This
amount represents the remaining balance of the MRRT deferred tax asset which was previously required to be recorded in accordance
with applicable accounting standards to reflect the technical tax value of the Company’s MRRT starting base allowances. This is a
non-cash technical accounting adjustment that has no impact on the Company’s underlying business or cashflows. Mount Gibson has
not paid any MRRT.
Koolan Island insurance
Mount Gibson’s investigation into the cause of the Koolan Island seawall failure continued and the majority of the work has now been
completed. At this stage, the investigation has identified the following technical factors as potentially relevant to the incident:
•
•
•
the sensitivity and structure of the natural marine sediments that formed the base of the seawall;
the extent that water pressure within the marine sediments had dissipated effectively; and
the impact of planned excavation on the landward side of the seawall.
As indicated previously, Mount Gibson has insurance policies for a variety of circumstances, including property damage and business
interruption. Constructive discussions with the Company’s insurers progressed during the June quarter. This included a conditional
confirmation that the Company’s existing policies would respond, subject to the insurers’ further reviews. The insurers’ own separate
investigation, which has been running parallel to Mount Gibson’s, is well advanced. The majority of insurers have indicated they are
prepared to make an initial early-stage progress payment on account of approximately $2 million. However, the insurers have
reserved their rights with respect to making a final determination. The full value of the business interruption and property damage
claims are also yet to be quantified by the insurers and will be assessed subject to any relevant policy and limitations. Mount Gibson
remains in discussions with the insurers in respect of those matters.
Corporate office restructuring
Consistent with Mount Gibson’s ongoing focus on cost reduction and business efficiency, corporate costs and staffing levels have been
progressively reducing to match changing operational support requirements following the seawall failure and ramp-down at Koolan
Island. Corporate cash expenditure, including centralised site-support services, exploration and business development, has reduced
by more than 50% from approximately $2.5 million per month at the start of the financial year to $1.2 million per month at the end of
the year (before one-off charges, including redundancies). Costs are anticipated to reduce further in 2015/16 to a targeted level of
less than $1 million per month.
This reduction includes significant cost reductions relating to the Board and executive management. In early 2014, the Board size was
reduced from eight to six and in February 2015 annual fees paid to each director were reduced by an average of 25%. In addition,
the total number of senior roles in the company’s Executive Committee was reduced from seven to four. The annualised base
remuneration of the Chief Executive Officer and the Chief Financial Officer has also been reduced by an average of approximately
30%, and both the short and long term incentive bonus schemes have been suspended at the Board’s discretion.
Financial Position
At 30 June 2015, the Group’s cash and term deposit balances totalled $334,003,000, a decrease of $185,768,000 from 30 June 2014
of $519,771,000. The decrease was due to the payment of $43,632,000 in cash dividends, $52,145,000 for fixed assets, $7,317,000
in the repayment of lease liabilities and other borrowings, the mining of waste material at the Koolan Island mine, and the impacts of
the failure of the Koolan Island Main Pit seawall.
As at the balance date, the Company’s current assets totalled $373,739,000 and its current liabilities totalled $66,085,000. As at the
date of this report, the Group has sufficient funds as well as access to further equity and debt funding to operate the Koolan Island
and Extension Hill mines, and to advance its exploration and growth objectives.
MOUNT GIBSON IRON LIMITED 2015 Annual Report21
Impairment
As disclosed in the Company’s financials for the year ended 30 June 2015, a significant impairment expense has been recorded as a
result of the impact of substantially lower iron ore prices and the failure of the Main Pit seawall at the Company’s Koolan Island
operation. The Group has recorded a total impairment expense of $945,214,000 before tax comprising impairments of iron ore
inventories (by $9,526,000), consumables inventories (by $339,000), mine properties (by $712,917,000), deferred acquisition,
exploration and evaluation assets (by $19,219,000) and property, plant and equipment (by $203,213,000).
Foreign Exchange Hedging
As at 30 June 2015, the Company did not hold any forward foreign exchange contracts. During the year, the Company satisfied in full
all of its forward foreign exchange contracts with US$ revenues from ore sales.
Koolan Island Logistics Base
In May 2015, Mount Gibson announced an agreement with specialist logistics provider Qube Holdings Limited (“Qube”) that provides
a framework to progress the potential establishment of a logistical services base for the offshore oil and gas industry at Koolan Island,
in collaboration with the Dambimangari Traditional Owners.
The Koolan Island Logistics Base (“KILB”) proposal remains at an early stage but envisages staged development of helicopter
refuelling and maintenance facilities, air search and rescue facilities, an all-weather runway suitable for large-scale passenger jet
aircraft, accommodation facilities and a marine terminal servicing the Browse Basin.
Development of the KILB would not restrict the potential to repair the Main Pit seawall and resume iron ore production at Koolan
Island should a technically and economically robust solution be identified. Furthermore, Mount Gibson considers that the KILB
development would provide operating cost benefits to future mining operations on the island.
Likely Developments and Expected Results
Mount Gibson’s overall objective is to maintain and grow long-term profitability through the discovery, development, operation and
acquisition of mineral resources. As an established producer and seller of hematite iron ore, Mount Gibson’s strategy is to maintain
and grow its profile as a successful and profitable supplier of raw materials.
Following recent iron ore price falls and the failure of the Koolan Island Main Pit seawall, Mount Gibson management continues to
focus on productivity gains and supplier arrangements in order to reduce costs and to drive cashflows to ensure the Company can
perform well in volatile commodity and foreign exchange markets.
Key influences on the success of Mount Gibson are not only iron ore and foreign exchange prices but also consistency in government
policy, the continued attainment of regulatory approvals, the ability to delineate new mineral resources and ore reserves, and the
continued control of operating and capital costs.
The Board has undertaken a thorough review of the existing business in light of the significant events of 2014/15 and the uncertain
iron ore market outlook. The Board’s strategic objective continues to be the creation of long term value for shareholders through
investment in exploration, development, and efficient operational extraction of mineral resources.
The Board’s 2015/16 corporate objective is to grow the Company’s cash reserves and continue to pursue an appropriate balance
between the retention and utilisation of cash for value-accretive investments. The Board has determined the following key business
objectives for the coming financial year:
•
•
•
•
•
•
•
Extension Hill - operate the mine at an increased output rate and pursue necessary regulatory government approvals for the
development of the Extension Hill South project area to extend the operational life of the Extension Hill mine beyond the current
end of the reserve life in late 2016.
Koolan Island – recommence mining of remnant ore in the Acacia East satellite pit in the first half of FY2016 and thereafter
place the site on care and maintenance, and undertake the detailed work required to investigate the redevelopment potential of
the Koolan Island Main Pit orebody.
Koolan Island seawall insurance claim - progress and finalise the insurance claim.
Koolan Island Logistic Base – progress the business case with end-users and formalise the commercial arrangements with
partner Qube Holdings Limited while ensuring the capability for future re-start of mining operations.
Cost reductions - continue to drive for sustainable cost improvements across the existing business through further supplier
cost reductions and productivity gains.
Treasury returns - increase the yield on the Group’s cash reserves.
Growth projects - continuation of the search for business development opportunities in the resources sector.
Extension Hill Outlook
The Company intends to ramp up production from the current rate of approximately 3.0Mtpa to between 3.5Mtpa and 4.0Mtpa. The
purpose of the ramp up is to pursue cost reductions through economies of scale and to bring forward operating cashflows.
Accordingly, Mount Gibson expects all-in site cash costs of the Extension Hill operation to be in line with the strong June 2015 quarter
performance.
The volatility in iron ore prices necessitates ongoing assessment of possible early closure of the Extension Hill mine in the event that
price conditions deteriorate to the point that the business faces being in a cash-loss making position for a sustained period. This
assessment considers the trade-off between the possible ongoing cash loss of continuing to operate against the option of closing
immediately which results in the triggering of early contract termination obligations. At 30 June 2015, these early closure obligations
were estimated to total approximately $45 million and related mostly to fixed infrastructure and transport commitments. These
obligations reduce with cumulative sales tonnage over the scheduled life of the Extension Hill mine.
22MOUNT GIBSON IRON LIMITED 2015 Annual Report
Koolan Island Outlook
Pit optimisation work completed at the end of the financial year has enabled the Company to proceed with a second stage mining
campaign at the Acacia East satellite pit to recover a further 0.7Mt of ore. The mining sequence requires two months of up-front
waste stripping prior to ore sales occurring, with the sales and cash generation biased to the December 2015 quarter. All mining and
sales will be completed by the end of December 2015. The all-in cash cost of the Acacia East material, before royalties, is expected to
be between A$38-40/wmt which, at prevailing iron ore prices will generate a modest cash margin. This decision will continue to be
reviewed in light of prevailing iron ore prices. Once this mining program is completed, the island will be placed on care and
maintenance pending commencement of the KILB activities.
The technical evaluation and assessment of the likely timing and cost of options to rebuild the Main Pit seawall and resume production
progressed. Technical information generated by the insurance investigation and assessment process continues to provide data that is
critical for determining whether a viable reconstruction option can be identified. Separately, mine optimisation work has identified
options to redesign the Main Pit mine plan and potentially significantly reduce future waste stripping ratios, offset by a reduction in
the likely volume of recoverable material. This work has been very encouraging, however technical complexity and the uncertain
outlook for iron ore prices continues to make any immediate decision on reconstruction of the seawall and resumption of Main Pit
production challenging. Additional technical field work is required in order to determine the viability of seawall options and to establish
a clear understanding of the resulting risk and cost profile. The program of work includes detailed bathymetric surveying and
additional geotechnical drilling in and around the area in which the failure occurred. At the earliest, this work would commence in
early 2016 after the upcoming cyclone season.
Group Sales Guidance and Cash Costs Profile
Based on forecast production for 2015/16 of 4.0-4.5 Mwmt, Mount Gibson expects its all-in group cash costs, inclusive of all site
operating and capital costs, royalties, closure and head office costs, to be in the range of $50-54/wmt, equivalent to US$37-40/wmt at
an exchange rate of A$1.00/US$0.74.
SIGNIFICANT EVENTS AFTER BALANCE DATE
As at the date of this report there are no significant events after balance date of the Company or of the Group that require adjustment
of or disclosure in this report.
DIVIDENDS
During the financial year, a final dividend of 4 cents per share fully franked in respect of the 2013/14 financial year was paid by way
of $43,632,203 in cash (2014: $21,811,685).
With the payment of this final dividend for the 2013/14 financial year, Mount Gibson has now paid $173.9 million in dividends since its
maiden dividend in September 2011.
A final dividend for the 2014/15 financial year has not been declared given the presently depressed iron ore price environment and
the recent failure of the Main Pit seawall at the Group’s Koolan Island operation.
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS
The Company has, during current or previous financial periods, entered into deeds of access and indemnity with certain Directors.
These deeds provide access to documentation and indemnification against liability for loss suffered, as a result of any act or omission,
to the extent permitted by the Corporations Act 2001, from conduct of the Group’s business.
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company
Secretary and all Executive Officers of the Company and of any related body corporate against a liability incurred as such a Director,
Company Secretary or Executive Officer to the extent permitted by the Corporations Act 2001.
The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the
directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the
contract.
The Company has agreed to indemnify its auditors, Ernst & Young, to the fullest extent possible as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been
made to indemnify Ernst & Young during or since the financial year.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify an officer or auditor of the Company or any related body corporate against a liability incurred as such an officer
or auditor.
SHARE OPTIONS
Unissued shares
There are no Options over Ordinary Shares in the Company on issue as at balance date and at the date of this report.
Shares issued as a result of the exercise of options
There were no options exercised or forfeited during the financial year or to the date of this report.
MOUNT GIBSON IRON LIMITED 2015 Annual Report23
DIRECTORS’ INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the interests of the Directors in the Shares and Options of the Company were:
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
Ordinary Shares
Options over Shares
Performance Rights
over Shares
-
100,000
-
-
20,000
284,944
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
DIRECTORS’ MEETINGS
The number of meetings of Directors (including meetings of Committees of Directors) held during the year and the number of
meetings attended by each Director were as follows:
Directors’
Meetings
Audit and Risk
Management
Committee
Meetings
Nomination,
Remuneration
and Governance
Committee
Operational
Risk and
Sustainability
Committee
Contracts
Committee
Number of Meetings Held
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
9
9
9
8
9
9
9
-
4
4
4
-
-
4
-
-
4
4
4
-
3
-
-
-
4
-
-
-
3
4
4
-
2
-
2
-
1
2
2
-
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group has developed Environmental Management Plans for its various operating and development sites. The Environmental
Management Plans have been approved by the Western Australian Government Departments’ of Mines and Petroleum, Environment
and Conservation and where applicable the Department of Health. In addition, plans associated with specific species have been
approved by the federal Department of Sustainability, Environment, Water, Population and Communities.
The Environmental Protection Authority (EPA) has also granted approval for the sites Environmental Management Plans. In addition,
the Department of Environment & Conservation has granted approval of environmental works to allow construction of “prescribed”
facilities and the Department of Mines and Petroleum has granted approval for Mining Proposals at each of the three mine sites.
The Group holds various environmental licenses and authorities, issued under both State and Federal law, to regulate its mining and
exploration activities in Australia. These licenses include conditions and regulations in relation to specifying limits on discharges into
the environment, rehabilitation of areas disturbed during the course of mining, exploration activities, tenement conditions associated
with exploration and mining and the storage of hazardous substances.
There have been no material breaches of the Group’s licences.
The Group continues to report under the National Greenhouse and Energy Reporting (NGER) Act 2009. Diesel combustion is the
largest source of greenhouse gas emissions.
24MOUNT GIBSON IRON LIMITED 2015 Annual Report
PROCEEDINGS ON BEHALF OF THE COMPANY
There are no proceedings on behalf of the Company under section 237 of the Corporations Act 2001 in the financial year or at the
date of this report.
ROUNDING
Amounts in this report and the accompanying financial report have been rounded to the nearest thousand dollars ($’000) unless
otherwise stated under the option available to the company under ASIC Class Order 98/0100. The Company is an entity to which the
class order applies.
CURRENCY
Amounts in this report and the accompanying financial report are presented in Australian dollars unless otherwise stated.
CORPORATE GOVERNANCE
The Company’s Corporate Governance Statement is contained in the Additional ASX Information section of the Annual Report.
AUDITOR’S INDEPENDENCE DECLARATION
In accordance with section 307C of the Corporations Act 2001, the Directors received the attached Independence Declaration from the
auditor of the Company on page 35 which forms part of this Report.
NON-AUDIT SERVICES
The following non-audit services were provided by the Company’s auditor, EY, during the financial year ended 30 June 2015. The
Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor
independence was not compromised. EY received or is due to receive the following amounts for the provision of non-audit services:
Native title royalty audit
2015
$
3,600
MOUNT GIBSON IRON LIMITED 2015 Annual Report25
REMUNERATION REPORT (AUDITED)
This Remuneration Report outlines the remuneration arrangements in place for Directors and Key Management Personnel of the
Group in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any directors of
the Company.
Nomination, Remuneration and Governance Committee (“NRGC”)
The NRGC comprises two independent Non-Executive Directors, being Messrs Jones (Chairman) and Barwick, and one
non-independent Non-Executive Director, being Mr Lee.
The NRGC of the Board of Directors of the Company is responsible for determining and reviewing remuneration arrangements for the
Board and Key Management Personnel.
The NRGC assesses the appropriateness of the nature and amount of remuneration of Key Management Personnel on a periodic basis
by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the
retention of a high quality, high performing Board and executive team.
Remuneration Policy
The Remuneration Policy of the Group has been put in place to ensure that:
remuneration policies and systems support the Company’s wider objectives and strategies;
Directors’ and senior executives’ remuneration is aligned to the long-term interests of shareholders within an appropriate control
framework; and
there is a clear relationship between the executives’ performance and remuneration.
Remuneration Structure
In accordance with best practice corporate governance, the structure of Non-Executive Director and senior executive management
remuneration is separate.
Non-Executive Director Remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors
of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Board agreed to salary cuts of 25% for
Directors during the 2015 financial year. In addition, prior to this, Mr Li Shao Feng elected to waive his Director fees entirely and Mr
Lee Seng Hui elected to receive Chairman fees at a level substantially less than previously payable for that particular role.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined
from time to time by a general meeting of shareholders. An amount not exceeding the amount determined is then divided between
the Non-Executive Directors as agreed. The latest determination was at the Annual General Meeting held on 16 November 2011 when
Shareholders approved an aggregate remuneration of $1,250,000 per year. Total Non-Executive Director fees of $549,047 were paid
in the 2014/15 financial year.
Each Non-Executive Director receives a fee for being a Director of the Company.
Non-Executive Directors should be adequately remunerated for their time and effort and the risks involved. Non-Executive Directors
are remunerated to recognise the responsibilities, accountabilities and associated risks of Directors.
Each Non-Executive Director’s performance and remuneration is reviewed on an annual basis by the Chairman and NRGC.
Non-Executive Directors’ fixed remuneration will comprise the following elements:
cash remuneration; and
superannuation contributions made by the Company.
Board operating costs do not form part of Non-Executive Directors’ remuneration.
26MOUNT GIBSON IRON LIMITED 2015 Annual Report
Senior Executives’ Remuneration
Objective
The Company aims to reward senior executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:
reward senior executives for Company and individual performance against targets set by reference to appropriate benchmarks;
align the interests of senior executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.
Use of Remuneration Consultants
The NRGC from time to time seeks advice from independent remuneration consultants regarding senior executives’ remuneration
structures and levels. Such consultants are engaged by, and report directly to, the NRGC, and are required to confirm in writing their
independence from the Group’s senior and other executives. No remuneration consultants were appointed for this purpose during the
2015 financial year given a decision was made by the Board and recommended by management that there be no salary increases or
awards of long-term incentives or short-term incentives bonuses.
Fixed Remuneration
The components of the senior executives’ fixed remuneration are determined individually and may include:
cash remuneration;
superannuation;
accommodation and travel benefits;
motor vehicle, parking and other benefits; and
reimbursement of entertainment, home office and telephone expenses.
The senior executives’ remuneration is reviewed on an annual basis by the Chief Executive Officer, whose remuneration is reviewed
annually by the NRGC.
In determining the remuneration package, the NRGC reviews the individual’s remuneration with the use of market data for positions
with comparable companies. Where appropriate, the package is adjusted so as to keep pace with market trends and ensure
continued remuneration competitiveness. In conducting a comparative analysis, the Company’s expected performance for the year is
considered in the context of the Company’s capacity to fund remuneration budgets.
Variable Remuneration
Short-term Incentives (“STI”)
The senior executives may receive variable remuneration in the form of STI of up to one half of their annual salary package. STI
payments are linked to defined performance measures and provide rewards for completing actions and objectives that are expected to
materially improved Company performance. The total potential STI available for award is ultimately at the Board’s discretion but is
measured to provide sufficient incentive to the senior executives to achieve the objectives set, such that the cost to the Group is
reasonable in the circumstances.
The performance measures comprise a combination of group and individual measures, chosen to align the interests of senior
executives with shareholders, representing the key drivers for short term success of the business and providing a framework for
delivering long term value.
MOUNT GIBSON IRON LIMITED 2015 Annual Report27
Group and individual performance measures are weighted and specify performance required to meet or exceed expectations. The
Group performance measures for the 2014/15 STI were:
Safety: objectives relate to reduction in the Total Recordable Injury Frequency Rate (TRIFR) and implementation of corporate
risk and safety management processes and projects.
Production: objectives relate to delivering at or beyond planned ore sales.
Costs: objectives relate to delivering at or below planned cost levels and implementation of cost management and operational
efficiency programs.
Capital: objectives relate to delivering at or below the agreed program of expenditure.
Ore Reserve/Mineral Resource addition: objectives relate to maintaining and growing the mineral resource and ore reserve base.
Organisation Development: objectives relate to organisational reviews and implementation of performance management and
talent management programs designed to improve organisational effectiveness.
Corporate Growth: objectives relate to the development of growth options.
These Group measures are cascaded into individual performance measures for each senior executive, depending upon the executive’s
role and area of responsibility. In addition to these cascaded group measures, executives have personal performance measures which
are role-specific and focus on areas or projects above and beyond the performance expected on a day to day basis. The focus of the
personal measures is to improve business effectiveness. Individual performance measures are agreed annually and documented in
the Company’s performance review process.
On an annual basis, the individual performance of each senior executive is reviewed after consideration of the executive’s
performance against individual performance measures. This process usually occurs prior to or just after the reporting date. The
NRGC then determines the amount of STI to be allocated to each executive. Payments made are delivered as a cash bonus after the
reporting date.
For the 2015 financial year, no STI cash incentive was awarded to Key Management Personnel in line with the Company’s cost
reduction strategy.
Long-term Incentive (“LTI”) for 2015 financial year
The Company established the Mount Gibson Iron Limited Performance Rights Plan (“PRP”) in the 2008 financial year. Under the PRP,
the Board may invite eligible executives to apply for performance rights, which are an entitlement to receive ordinary shares in the
Company, subject to satisfaction by the executive of specified performance hurdles set by the Board. The rights are granted at no
cost to the executives and will convert into ordinary shares on completion by the executive of approximately three years’ continuous
service, subject to satisfaction of specified performance hurdles, unless such conditions are waived by the Board exercising its
discretion. Current LTI awards are issued and tested for vesting against the Company's Total Shareholder Return ("TSR") relative to
the TSR of a comparator group of companies over a 2-3 year period. The PRP provides its executives with long term incentives linked
between the delivery of value to shareholders, financial performance and rewarding and retaining the executives.
The employment contracts for the Chief Executive Officer, Mr Beyer, the Company Secretary & General Counsel, Mr Stokes, and the
Chief Financial Officer, Mr Kerr, incorporate payment of a LTI. Under their employment contracts, these executives may each year be
invited to apply for, and the Company will grant, a number of performance rights equivalent to up to one third of their respective base
salaries (including superannuation) divided by the volume weighted average price of the Company’s shares as traded on ASX for the
30 day period prior to 30 June for the relevant year.
At 30 June 2015, in line with the Company’s cost reduction strategy, no performance rights were issued by the Company to senior
executives in respect of the 2014/15 financial year.
The Company has a policy restricting executives from entering into arrangements to protect the value of unvested LTI entitlements
under equity-based remuneration plans.
28MOUNT GIBSON IRON LIMITED 2015 Annual Report
Employment Contracts
As at the date of this report, the Group had entered into employment contracts with the following executives:
Jim Beyer
The key terms of his contract include:
Commenced as Chief Operating Officer on 2 November 2011 and was appointed as Chief Executive Officer on 14 May 2012, with
no set term;
Annual Salary Package increase by minimum of CPI from 1 July every year, subject to the agreed suspension outlined below;
STI Bonus of up to one half of Annual Salary Package;
LTI Bonus of up to one third of Annual Salary Package; and
If the Company wishes to terminate the contract other than if Mr Beyer is guilty of any grave misconduct, serious or persistent
breach of the terms of the contract or wilful neglect in the discharge of his duties, the Company is obliged to pay out 12 months
Annual Salary Package plus any other accrued entitlements and bonuses. If Mr Beyer wishes to terminate the contract, he must
provide six months’ notice.
During the 2015 financial year, Mr Beyer agreed to a reduction in his base salary from $764,400 to $500,000 for a 12 month
period to 1 March 2016 subject to further review and mutual agreement. During this time the mandatory CPI adjustment has
also been suspended. The Board has agreed to pay a conditional deferred bonus to Mr Beyer as part of the restructuring
arrangement to compensate for the reduced remuneration and loss of leave entitlements during this period. The timing of
payment of the deferred bonus is at the Board’s discretion. However, in the event that Mr Beyer and the Company are unable to
reach agreement on his revised salary at 1 March 2016, Mr Beyer may elect to take a redundancy, in which case he would
become entitled to the deferred bonus. Similarly, if the Company elects to terminate Mr Beyer’s contract during this period, and
the deferred bonus has not yet been paid, the deferred bonus will be automatically payable in addition to the existing termination
rights payable to Mr Beyer under his executive contract. As at 30 June 2015, the conditional accrued deferred bonus totalled
$123,221.
Peter Kerr
The key terms of his contract include:
Commenced 19 September 2012 with no set term;
Annual Salary Package increase by minimum of CPI from 1 July every year, subject to the agreed suspension outlined below;
STI Bonus of up to one half of Annual Salary Package;
LTI Bonus of up to one third of Annual Salary Package; and
If the Company wishes to terminate the contract other than if Mr Kerr is guilty of any grave misconduct, serious or persistent
breach of the terms of the contract or wilful neglect in the discharge of his duties, the Company is obliged to pay out 12 months
Annual Salary Package plus any other accrued entitlements and bonuses. If Mr Kerr wishes to terminate the contract, he must
provide six months’ notice.
During the 2015 financial year, Mr Kerr agreed to a reduction in his base salary from $474,116 to $365,000 for a 12 month
period to 1 March 2016 subject to further review and mutual agreement. During this time the mandatory CPI adjustment has
also been suspended. The Board has agreed to pay a conditional deferred bonus to Mr Kerr as part of the restructuring
arrangement to compensate for the reduced remuneration and loss of leave entitlements during this period. The timing of
payment of the deferred bonus is at the Board’s discretion. However, in the event that Mr Kerr and the Company are unable to
reach agreement on his revised salary at 1 March 2016, Mr Kerr may elect to take a redundancy, in which case he would become
entitled to the deferred bonus. Similarly, if the Company elects to terminate Mr Kerr’s contract during this period, and the
deferred bonus has not yet been paid, the deferred bonus will be automatically payable in addition to the existing termination
rights payable to Mr Kerr under his executive contract. As at 30 June 2015, the conditional accrued deferred bonus totalled
$43,029.
David Stokes
The key terms of his contract include:
Commenced 2 April 2012 with no set term;
Annual Salary Package increase by minimum of CPI from 1 July every year, such increase agreed to be suspended for the
2015/16 financial year;
STI Bonus of up to one half of Annual Salary Package;
LTI Bonus of up to one third of Annual Salary Package; and
If the Company wishes to terminate the contract other than if Mr Stokes is guilty of any grave misconduct, serious or persistent
breach of the terms of the contract or wilful neglect in the discharge of his duties, the Company is obliged to pay out 12 months
Annual Salary Package plus any other accrued entitlements and bonuses. If Mr Stokes wishes to terminate the contract, he must
provide six months’ notice.
Andrew Thomson (position made redundant as at 30 June 2015)
The key terms of his contract include:
Commenced 18 September 2012 with no set term;
Annual Salary Package increase by minimum of CPI from 1 July every year;
STI Bonus of up to one half of Annual Salary Package;
LTI Bonus of up to one third of Annual Salary Package; and
If the Company wishes to terminate the contract other than if Mr Thomson is guilty of any grave misconduct, serious or
persistent breach of the terms of the contract or wilful neglect in the discharge of his duties, the Company is obliged to pay out
12 months Annual Salary Package plus any other accrued entitlements and bonuses. If Mr Thomson wishes to terminate the
contract, he must provide six months’ notice.
MOUNT GIBSON IRON LIMITED 2015 Annual Report29
Details of directors and key management personnel disclosed in this report
[i] Directors
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Lead Non-Executive Director
Non-Executive Director
Alternate Director to Mr Lee
[ii] Key Management Personnel
J Beyer
P Kerr
A Thomson
D Stokes
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer until 30 June 2015
Company Secretary and General Counsel
Remuneration of Key Management Personnel for the year ended 30 June 2015
Short Term
Post Employment
Long Term
Share Based
Payment*
Termination
Payment
Salary &
Fees
$
Non
Monetary
$
Conditional
Deferred
Bonus**
$
Super-
annuation
$
Retirement
Benefits
$
Long
Service
Leave
$
Options and
Performance
Rights
$
30 June 2015
Directors
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
89,540
103,387
-
103,387
111,758
93,341
-
Sub-total
501,413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other KMP
J Beyer
P Kerr
662,475
12,207
123,221
407,683
10,997
43,029
A Thomson
495,934
11,840
D Stokes
324,583
9,050
-
-
Sub-total
1,890,675
44,094
166,250
123,727
Totals
2,392,088
44,094
166,250
171,361
8,506
9,822
-
9,822
10,617
8,867
-
47,634
36,560
30,061
34,516
22,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,316
990
1,667
1,250
5,223
5,223
-
-
-
-
-
-
-
-
158,562
58,610
21,782
47,257
$
-
-
-
-
-
-
-
-
-
-
%
Perform-
ance
Related
Total
$
98,046
-
113,209
-
113,209
122,375
102,208
-
549,047
994,341
551,370
-
-
-
-
-
-
-
28
18
2
12
471,229
1,036,968
-
404,730
286,211
471,229
2,987,409
286,211
471,229
3,536,456
* Share based payments represent the accounting expense incurred by the Company for the stated financial period, reflecting the terms of
the particular options or performance rights.
** Mr Beyer and Mr Kerr are in certain circumstances entitled to a deferred bonus. Refer “Employment Contracts” above.
Options granted as part of remuneration for the year ended 30 June 2015
There is currently a Directors, Officers, Employees and Other Permitted Persons option plan. Options issued pursuant to this plan do
not have performance conditions but do contain a vesting condition requiring the employee to remain employed by the Group until a
certain date. The cost of these options is measured by reference to their fair value at the date at which they are granted. The fair
value is determined by using a binomial model.
There were no options granted to Directors and Executives during the year ended 30 June 2015 and there are no options outstanding
as at 30 June 2015.
30MOUNT GIBSON IRON LIMITED 2015 Annual Report
Performance Rights granted as part of remuneration for the year ended 30 June 2015
There were no performance rights granted as part of remuneration during the year ended 30 June 2015.
Performance Rights vested
There were no performance rights vested during the financial year ended 30 June 2015.
J Beyer
Performance Rights benefits
30 June 2015
30 June 2014
-
220,853
For each grant of performance rights, the percentage of the available grant that vested, in the financial year, and the percentage that
was forfeited because the person did not meet the service and performance criteria is set out below. The performance rights vest
after two to three years, providing the vesting conditions are met (refer above).
J Beyer
J Beyer
J Beyer
P Kerr
P Kerr
A Thomson
A Thomson
D Stokes
D Stokes
Year
Granted
2012
2013
2014
2013
2014
2013
2014
2013
2014
Vested
%
81
-
-
-
-
-
-
-
-
Forfeited/
Lapsed
%
Financial Years Performance
Rights May Vest
19
-
-
-
-
100
100
-
-
-
2016
2017
2016
2017
-
-
2016
2017
Performance Rights holdings by Key Management Personnel as at 30 June 2015
30 June 2015
Directors
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
Other KMP
J Beyer
P Kerr
A Thomson
D Stokes
Total
Balance
1 July 2014
Granted as
Remuneration
Exercised during
the year
Lapsed/
forfeited
during the year
Balance
30 June 2015
-
-
-
-
-
-
-
858,868
336,840
375,520
261,460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(220,853)
-
-
-
(50,465)
-
(375,520)
-
587,550
336,840
-
261,460
1,832,688
-
(220,853)
(425,985)
1,185,850
No performance rights had vested and were exercisable at 30 June 2015.
Shares issued on exercise of options and rights for the year ended 30 June 2015
There were no shares issued on exercise of options and rights by the Directors and Executives during the year ended 30 June 2015
(2014: nil). There were 220,853 shares issued on the exercise of 220,853 performance rights on 9 July 2014 for nil consideration.
These performance rights had vested to Mr Beyer in the previous year.
MOUNT GIBSON IRON LIMITED 2015 Annual Report31
Shareholdings of Key Management Personnel as at 30 June 2015
30 June 2015
Directors
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
A Ferguson
Other KMP
J Beyer
P Kerr
A Thomson
D Stokes
Total
Balance
1 July 2014
Ord
Granted as
Remuneration
Ord
Exercise of
Performance Rights
Ord
Net Change
Other
Ord
Balance
30 June 2015
Ord
-
100,000
-
-
20,000
103,866
-
19,801
-
-
-
243,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*220,853
-
-
-
220,853
-
-
-
-
-
181,078
-
-
-
-
-
-
100,000
-
-
20,000
284,944
-
240,654
-
-
-
181,078
645,598
* A total of 220,853 ordinary shares were issued to Mr Beyer on 9 July 2014 in relation to the equivalent number of performance rights vested
in the year ended 30 June 2014.
Remuneration of Key Management Personnel for the year ended 30 June 2014
Short Term
Post Employment
Long Term
Share Based
Payment*
Termination
Payment
Salary &
Fees
$
Non
Monetary
$
Cash
Incentives
$
Super-
annuation
$
Retirement
Benefits
$
Long
Service
Leave
$
Options and
Performance
Rights
$
30 June 2014
Directors
Lee Seng Hui
A Jones
Li Shao Feng
R Barwick
S Bird
P Dougas
G Hill**
Chen Z***
103,128
111,060
58,696
110,298
116,400
101,144
140,275
65,561
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total
806,562
Other KMP
J Beyer
P Kerr
710,000
7,922
294,000
439,285
3,828
195,630
A Thomson
490,000
6,209
193,125
D Stokes
299,278
3,900
137,896
Sub-total
1,938,563
21,859
820,651
96,205
Totals
2,745,125
21,859
820,651
170,811
9,539
10,273
5,429
10,203
10,767
9,356
12,975
6,064
74,606
25,000
21,023
25,000
25,182
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,831
363,051
462
517
359
3,169
3,169
47,257
58,610
65,141
534,059
534,059
%
Perform-
ance
Related
Total
$
112,667
-
-
-
-
-
-
-
-
47
34
33
38
121,333
64,125
120,501
127,167
110,500
153,250
71,625
881,168
1,401,804
707,485
773,461
531,756
3,414,506
4,295,674
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Share based payments represent the accounting expense incurred by the Company for the stated financial period, reflecting the terms of
the particular options or performance rights.
** Chairman until 18 February 2014 and Non-Executive Director until 29 April 2014.
*** Non-Executive Director until 29 April 2014.
Options granted as part of remuneration for the year ended 30 June 2014
There were no options granted to Directors and Executives during the year ended 30 June 2014 and there are no options outstanding
at 30 June 2014.
32MOUNT GIBSON IRON LIMITED 2015 Annual Report
Performance Rights granted as part of remuneration for the year ended 30 June 2014
Grant Date
for
Accounting
Purposes
01-Jul-13
01-Jul-13
J Beyer
P Kerr
A Thomson
01-Jul-13
D Stokes
01-Jul-13
Total
Number
Granted
Value of Performance
Rights Granted During the
Year
$
% of Remuneration
344,100
215,500
241,100
151,900
952,600
92,907
58,185
65,097
41,013
257,202
7
8
8
8
The estimated maximum and minimum possible total value of these performance rights is $257,202 and $nil respectively.
Performance Rights granted above as part of remuneration are valued using the Monte Carlo methodology which considers the
incorporation of the market-based hurdles. The value per performance right at grant date was calculated using the following
assumptions:
Effective grant date for accounting purposes
01-Jul-13
Share price on effective grant date
Risk free interest rate
Volatility factor
Value of Performance Right on effective grant date
$0.46
2.90%
50%
$0.27
The vesting of these Performance Rights is subject to a relative TSR hurdle to be measured on 1 July 2016 and re-measured on 31
December 2016.
Mount Gibson’s TSR performance is ranked relative to a comparator group consisting of resource companies listed on ASX. The
comparator group comprises various iron ore producers listed on the Australian Securities Exchange, as follows: Atlas Iron Limited,
Gindalbie Metals Limited, Rio Tinto Limited, BC Iron Limited, Fortescue Metals Group Limited, Grange Resources Limited, Arrium
Limited and Western Desert Resources Limited. The vesting scale is as follows:
Percentile Rank Achieved
Proportion of Target Award Vesting
>76th percentile
100%
> 51st percentile and ≤76th percentile
Pro rata allocation
51st percentile
<51st percentile
50%
0%
Loans to Key Management Personnel
There were no loans to key management personnel during the years ended 30 June 2015 and 30 June 2014.
Other Transactions and Balances with Key Management Personnel
There were no other transactions and balances with key management personnel during the years ended 30 June 2015 and 30 June
2014.
Company Performance
The table below shows the performance of the Group over the last 5 years:
30 June 2015
30 June 2014
30 June 2013
Restated*
30 June 2012
30 June 2011
Net profit/(loss) after tax
$’000
(911,422)
Earnings/(loss) per share
$/share
(0.8356)
Closing share price
$
0.20
96,353
0.0884
0.69
157,342
0.1445
0.47
162,016
0.1496
0.86
239,500
0.2214
1.84
* Restated to reflect adjustments made on the adoption of AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine.
In accordance with the transitional provisions of the Interpretation, amounts in prior years were not restated.
End of remuneration report.
Signed in accordance with a resolution of the Directors.
SIMON BIRD
Lead Independent Non-Executive Director
Sydney, 18 August 2015
MOUNT GIBSON IRON LIMITED 2015 Annual Report33
Competent Persons Attribution:
Exploration Targets and Exploration Results
The information in this report that relates to Exploration Targets and Exploration Results are based on information compiled by
Gregory Hudson, who is a member of the Australian Institute of Geoscientists. Mr Hudson is a consultant to Mount Gibson Iron
Limited, and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the
activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves. Mr Hudson consents to the inclusion in this report of the matters based on
his information in the form and context in which it appears.
Mineral Resources for the Shine, Extension Hill (excluding Iron Hill), all Tallering Peak deposits and all Koolan Island
deposits other than the Main Deposit:
The information in this report relating to Mineral Resources for the Shine, Extension Hill (excluding Iron Hill), and Tallering Peak
deposits as well as the Acacia East, Mullet Acacia, Barramundi West, Eastern Barramundi and Mangrove Mineral Resources at Koolan
Island, is based on information compiled by Elizabeth Haren, a Competent Person who is a member and Chartered Professional of the
Australasian Institute of Mining and Metallurgy. Ms Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron
Limited. Ms Haren has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and
to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ms Haren consents to the inclusion in this report of the
matters based on her information in the form and context in which it appears. The Mineral Resource estimates comply with
recommendations in the Australasian Code for Reporting of Mineral Resources and Ore Reserves (2012) by the Joint Ore Reserves
Committee (JORC). Therefore they are suitable for public reporting.
Mineral Resources for the Koolan Island Main deposit and the Iron Hill deposit at Extension Hill South:
The information in this report relating to the Mineral Resources of Main Deposit at Koolan Island and the Iron Hill deposit at Extension
Hill South is based on information compiled by Jani Kalla, a Competent Person who is a member and Chartered Professional of the
Australasian Institute of Mining and Metallurgy. Mr Kalla was a full-time employee of Mount Gibson Iron Limited and is now a full time
employee of First Quantum Minerals Limited. Mr Kalla has sufficient experience that is relevant to the style of mineralisation and type
of deposits under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition
of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Kalla consents to the inclusion
in this report of the matters based on his information in the form and context in which it appears. The Mineral Resource estimates
comply with recommendations in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(2012) by the Joint Ore Reserves Committee (JORC). Therefore they are suitable for public reporting.
Koolan Island, Extension Hill and Shine Ore Reserves:
The information in this report relating to Ore Reserves at Koolan Island, Extension Hill and Shine is based on information compiled by
Paul Salmon, a Competent Person who is a member and a Chartered Professional of the Australasian Institute of Mining and
Metallurgy. Mr Salmon is a full-time employee of Mount Gibson Iron Limited. Paul Salmon has sufficient experience that is relevant to
the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves’. Mr Salmon consents to the inclusion in the report of the matters based on his information in the form and context in which
it appears. The Ore Reserve estimates comply with recommendations in the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (2012) by the Joint Ore Reserves Committee (JORC). Therefore they are suitable for public
reporting.
34MOUNT GIBSON IRON LIMITED 2015 Annual Report
Auditor's Independence Declaration
MOUNT GIBSON IRON LIMITED 2015 Annual Report35 Consolidated Income Statement
For the year ended 30 June 2015
CONTINUING OPERATIONS
Sale of goods
Other revenue
TOTAL REVENUE
Cost of sales
Impairment of ore inventories
GROSS PROFIT/(LOSS)
Other income
Consumables stock obsolescence
Impairment of consumables inventories
Impairment of mine properties
Impairment of property, plant and equipment
Impairment of deferred acquisition, exploration and evaluation
Exploration expenses
Administration expenses
Re-presented
[1]
2015
$’000
2014
$’000
315,644
12,209
660,161
15,549
327,853
675,710
(341,742)
(502,737)
(3,442)
-
(17,331)
172,973
7,874
(9,048)
(339)
(712,917)
(203,213)
(19,219)
(1,014)
(31,279)
8,180
-
-
-
-
-
(116)
(27,958)
Notes
2[a]
2[a]
3[b]
8[iii]
2[b]
8[i]
8[ii]
14
14
12
3[c]
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
(986,486)
153,079
Finance costs
3[a]
(2,929)
(5,627)
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX
(989,415)
147,452
Tax benefit/(expense)
4
99,908
(57,280)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS
(889,507)
90,172
DISCONTINUED OPERATIONS
Profit/(loss) after tax for the year from discontinued operations
29[a]
(21,915)
6,181
PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
(911,422)
96,353
Earnings/(loss) per share (cents per share)
basic earnings/(loss) per share
diluted earnings/(loss) per share
Earnings/(loss) per share (cents per share) for continuing operations
basic earnings/(loss) per share
diluted earnings/(loss) per share
23
23
23
23
(83.56)
(83.56)
(81.55)
(81.55)
8.84
8.83
8.27
8.27
[1]
In accordance with applicable accounting standards, certain numbers shown here do not correspond to the 30 June 2014 financial statements as
they reflect adjustments made in respect of discontinued operations, as detailed in note 29.
36MOUNT GIBSON IRON LIMITED 2015 Annual Report
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2015
2015
$’000
2014
$’000
PROFIT/(LOSS) FOR THE PERIOD AFTER TAX
(911,422)
96,353
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be subsequently reclassified to profit or loss
Change in fair value of cash flow hedges
Reclassification adjustments for losses on cash flow hedges transferred to the
Income Statement
Deferred income tax on cash flow hedges
5,334
(7,729)
6,837
165
719
(2,101)
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF TAX
(1,676)
4,901
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
(913,098)
101,254
MOUNT GIBSON IRON LIMITED 2015 Annual Report37
Consolidated Balance Sheet
As at 30 June 2015
Notes
2015
$’000
2014
$’000
ASSETS
Current Assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Prepayments
Derivative financial assets
Income tax receivable
Total Current Assets
Non-Current Assets
Property, plant and equipment
Deferred acquisition, exploration and evaluation
Mine properties
Deferred tax assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Interest-bearing loans and borrowings
Deferred tax liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Retained earnings / (accumulated losses)
Reserves
TOTAL EQUITY
5
6
7
8
9
11
12
13
4
15
16
17
17
16
4
18
20
19
91,003
243,000
15,354
21,078
3,304
-
-
70,471
449,300
53,004
67,573
3,468
2,395
9,661
373,739
655,872
31,494
2,924
3,205
-
223,186
21,863
655,731
45,999
37,623
946,779
411,362
1,602,651
49,664
2,619
13,802
66,085
39,584
119
-
39,703
105,788
305,574
568,328
(1,243,797)
981,043
305,574
125,201
7,294
15,270
147,765
45,202
2,162
145,504
192,868
340,633
1,262,018
568,328
675,519
18,171
1,262,018
38MOUNT GIBSON IRON LIMITED 2015 Annual Report
Consolidated Cash Flow Statement
For the year ended 30 June 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Income tax received/(paid)
Notes
2015
$’000
2014
$’000
356,090
902,056
(454,167)
(606,234)
(680)
7,958
(2,040)
(55,819)
NET CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES
5[b]
(90,799)
237,963
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from/(payment for) term deposits
Payment for acquisition costs for exploration and evaluation assets
Payment for deferred exploration and evaluation expenditure
Payment for mine properties
13,409
2,686
(52,145)
206,300
(521)
(5,407)
(338)
14,597
1,098
(49,119)
(135,300)
(12,000)
(4,484)
(80)
NET CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES
163,984
(185,288)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of lease liabilities
Repayment of borrowings
Payment of borrowing costs
Dividends paid
(6,660)
(657)
(705)
(43,632)
(19,120)
(485)
(1,584)
(21,812)
NET CASH FLOWS (USED IN) FINANCING ACTIVITIES
(51,654)
(43,001)
NET INCREASE IN CASH AND CASH EQUIVALENTS
Net foreign exchange difference
Cash and cash equivalents at beginning of year
21,531
(999)
70,471
9,674
(1,221)
62,018
CASH AND CASH EQUIVALENTS AT END OF YEAR
5[a]
91,003
70,471
MOUNT GIBSON IRON LIMITED 2015 Annual Report39
Consolidated Statement of Changes in Equity
For the year ended 30 June 2015
Issued Capital
$’000
568,328
-
-
-
-
-
568,328
568,328
-
-
-
-
-
-
Attributable to Equity Holders of the Parent
Total Equity
Retained Earnings/
(Accumulated
Losses)
$’000
Share Based
Payments
Reserve
$’000
Net Unrealised
Gains / (Losses)
Reserve
$’000
Dividend
Distribution
Reserve
$’000
Other
Reserves
$’000
$’000
19,160
(3,225)
600,978
96,353
-
96,353
(21,812)
-
675,519
675,519
(911,422)
-
(911,422)
(43,632)
-
(964,262)
-
-
-
-
527
19,687
19,687
-
-
-
-
286
-
-
4,901
4,901
-
-
1,676
1,676
-
(1,676)
(1,676)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
964,262
964,262
(3,192)
1,182,049
-
-
-
-
-
96,353
4,901
101,254
(21,812)
527
(3,192)
1,262,018
(3,192)
-
-
-
-
-
-
1,262,018
(911,422)
(1,676)
(913,098)
(43,632)
286
-
(3,192)
305,574
568,328
(1,243,797)
19,973
At 1 July 2013
Profit for the period
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
- Dividends paid
Share-based payments
At 30 June 2014
At 1 July 2014
Loss for the period
Other comprehensive loss
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
- Dividends paid
Share-based payments
Transfer of prior year profits
At 30 June 2015
40MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report
For the year ended 30 June 2015
1. Summary of Significant Accounting Policies
(a) Corporate information
The consolidated financial statements of the Group, comprising the Company and the entities that it controlled during the year
ended 30 June 2015, were authorised for issue in accordance with a resolution of the Directors on 18 August 2015.
The Company is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange.
The nature of operations and principal activities of the Group are the mining of hematite iron ore deposits at Koolan Island and
Extension Hill, the exploration and development of hematite deposits in Western Australia and elsewhere, treasury management
and the pursuit of mineral resources investments.
The address of the registered office is Level 1, 2 Kings Park Road, West Perth, Western Australia, 6005, Australia.
(b) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, applicable Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for derivative
financial instruments that have been measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless
otherwise stated, under the option available to the Company under Australian Securities and Investment Commission (“ASIC”)
Class Order 98/0100. The Company is an entity to which the class order applies.
For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its controlled entities.
The financial statements of controlled entities are prepared for the same reporting period as the Company, using consistent
accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
Controlled entities are consolidated from the date on which control is transferred to the Group and cease to be consolidated from
the date on which control is transferred out of the Group.
Where there is loss of control of a controlled entity, the consolidated financial statements include the results for the part of the
reporting period during which the Company has control.
(d) Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board.
MOUNT GIBSON IRON LIMITED 2015 Annual Report41
Notes to the Consolidated Financial Report (continued)
From 1 July 2014 the Group has adopted all new and amended accounting standards mandatory for annual periods beginning on or
after 1 July 2014 including:
Reference
Title
Application
date of
standard
Application
date for
Group
AASB 2012-3
Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial
Liabilities
1 January
2014
1 July 2014
AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to
address inconsistencies identified in applying some of the offsetting criteria of AASB 132,
including clarifying the meaning of "currently has a legally enforceable right of set-off" and
that some gross settlement systems may be considered equivalent to net settlement.
AASB 2013-3
Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. The
amendments include the requirement to disclose additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less
costs of disposal.
1 January
2014
1 July 2014
AASB 2013-4
Amendments to Australian Accounting Standards – Novation of Derivatives and
Continuation of Hedge Accounting [AASB 139]
1 January
2014
1 July 2014
AASB 2013-4 amends AASB 139 to permit the continuation of hedge accounting in specified
circumstances where a derivative, which has been designated as a hedging instrument, is
novated from one counterparty to a central counterparty as a consequence of laws or
regulations.
AASB 1031
Materiality
The revised AASB 1031 is an interim standard that cross-references to other Standards and
the Framework (issued December 2013) that contain guidance on materiality.
AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and
Interpretations have been removed.
AASB 2014-1 Part C issued in June 2014 makes amendments to eight Australian Accounting
Standards to delete their references to AASB 1031. The amendments are effective from 1
July 2014.
AASB 2013-9
Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments
The Standard contains three main parts and makes amendments to a number Standards
and Interpretations.
1 January
2014
1 July 2014
AASB 2014-1
Part A -Annual
Improvements
2011–2013 Cycle
Part A of AASB 2013-9 makes consequential amendments arising from the issuance of
AASB CF 2013-1.
30 June 2014
30 June 2014
Part B makes amendments to particular Australian Accounting Standards to delete
references to AASB 1031 and also makes minor editorial amendments to various other
standards.
1 July 2014
1 July 2014
Annual Improvements to IFRSs 2011–2013 Cycle addresses the following items:
1 July 2014
1 July 2014
► AASB13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all
contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet
the definitions of financial assets or financial liabilities as defined in AASB 132.
AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of
investment property is solely the acquisition of an investment property or whether it is the
acquisition of a group of assets or a business combination in the scope of AASB 3 that
includes an investment property. That judgment is based on guidance in AASB 3.
42MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
Reference
Title
AASB 2014-1
Part A -Annual
Improvements
2010–2012 Cycle
AASB 2014-1 Part A: This standard sets out amendments to Australian Accounting
Standards arising from the issuance by the International Accounting Standards Board
(IASB) of International Financial Reporting Standards (IFRSs) Annual Improvements to
IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle.
Application
date of
standard
Application
date for
Group
1 July 2014
1 July 2014
Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items:
► AASB 2 - Clarifies the definition of 'vesting conditions' and 'market condition' and
introduces the definition of 'performance condition' and 'service condition'.
► AASB 3 - Clarifies the classification requirements for contingent consideration in a
business combination by removing all references to AASB 137.
► AASB 8 - Requires entities to disclose factors used to identify the entity's reportable
segments when operating segments have been aggregated. An entity is also required
to provide a reconciliation of total reportable segments' asset to the entity's total
assets.
► AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation
does not depend on the selection of the valuation technique and that it is calculated as
the difference between the gross and net carrying amounts.
AASB 124 - Defines a management entity providing KMP services as a related party of the
reporting entity. The amendments added an exemption from the detailed disclosure
requirements in paragraph 17 of AASB 124 for KMP services provided by a management
entity. Payments made to a management entity in respect of KMP services should be
separately disclosed.
Amendments to
Australian
Accounting
Standards - Part
B Defined Benefit
Plans: Employee
Contributions
(Amendments to
AASB 119)
Amendments to
AASB 1053 –
Transition to and
between Tiers,
and related Tier 2
Disclosure
Requirements
[AASB 1053]
AASB 2014-Part B makes amendments in relation to the requirements for contributions
from employees or third parties that are set out in the formal terms of the benefit plan and
linked to service.
1 July 2014
1 July 2014
The amendments clarify that if the amount of the contributions is independent of the
number of years of service, an entity is permitted to recognise such contributions as a
reduction in the service cost in the period in which the related service is rendered, instead
of attributing the contributions to the periods of service.
The Standard makes amendments to AASB 1053 Application of Tiers of Australian
Accounting Standards to:
1 July 2014
1 July 2014
clarify that AASB 1053 relates only to general purpose financial statements;
make AASB 1053 consistent with the availability of the AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors option in AASB 1 First-time Adoption of
Australian Accounting Standards;
clarify certain circumstances in which an entity applying Tier 2 reporting requirements
can apply the AASB 108 option in AASB 1; permit an entity applying Tier 2 reporting
requirements for the first time to do so directly using the requirements in AASB 108
(rather that applying AASB 1) when, and only when, the entity had not applied, or only
selectively applied, applicable recognition and measurement requirements in its most
recent previous annual special purpose financial statements; and
specify certain disclosure requirements when an entity resumes the application of Tier 2
reporting requirements.
The main impact of the adoption of new standards and interpretations effective 1 July 2014 was disclosure changes. Changes to
accounting policies due to adoption of these standards and interpretations are not considered significant for the Group.
MOUNT GIBSON IRON LIMITED 2015 Annual Report43
Notes to the Consolidated Financial Report (continued)
Other Australian Accounting Standards and Interpretations relevant to the Group that have recently been issued or amended, are not
yet effective and have not been adopted by the Group for the period ended 30 June 2015 are outlined in the table below:
Reference
Title
Summary
AASB 2014-4
Clarification of
Acceptable Methods
of Depreciation and
Amortisation
(Amendments to
AASB 116 and AASB
138)
AASB 15
Revenue from
Contracts with
Customers
AASB 2014-9
Amendments to
Australian Accounting
Standards – Equity
Method in Separate
Financial Statements
AASB 116 and AASB 138 both establish the principle for the basis of
depreciation and amortisation as being the expected pattern of
consumption of the future economic benefits of an asset.
The IASB has clarified that the use of revenue-based methods to
calculate the depreciation of an asset is not appropriate because
revenue generated by an activity that includes the use of an asset
generally reflects factors other than the consumption of the economic
benefits embodied in the asset.
The amendment also clarified that revenue is generally presumed to
be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset. This presumption,
however, can be rebutted in certain limited circumstances.
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with
Customers, which replaces IAS 11 Construction Contracts, IAS 18
Revenue and related Interpretations (IFRIC 13 Customer Loyalty
Programmes, IFRIC 15 Agreements for the Construction of Real
Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31
Revenue—Barter Transactions Involving Advertising Services).
The core principle of IFRS 15 is that an entity recognises revenue to
depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. An entity
recognises revenue in accordance with that core principle by applying
the following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the performance
obligations in the contract
(e) Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation
Early application of this standard is permitted.
AASB 2014-5 incorporates the consequential amendments to a
number Australian Accounting Standards (including Interpretations)
arising from the issuance of AASB 15.
AASB 2014-9 amends AASB 127 Separate Financial Statements, and
consequentially amends AASB 1 First-time Adoption of Australian
Accounting Standards and AASB 128 Investments in Associates and
Joint Ventures, to allow entities to use the equity method of
accounting for investments in subsidiaries, joint ventures and
associates in their separate financial statements.
AASB 2014-9 also makes editorial corrections to AASB 127.
AASB 2014-9 applies to annual reporting periods beginning on or after
1 January 2016. Early adoption permitted.
Application
date of
standard
Application
date for
Group
1 January
2016
1 July 2016
1 January
2017
1 July 2017
1 January
2016
1 July 2016
44MOUNT GIBSON IRON LIMITED 2015 Annual Report
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
AASB 9
Financial Instruments
AASB 9 (December 2014) is a new Principal standard which replaces
AASB 139. This new Principal version supersedes AASB 9 issued in
December 2009 (as amended) and AASB 9 (issued in December 2010)
and includes a model for classification and measurement, a single,
forward-looking ‘expected loss’ impairment model and a substantially-
reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1 January
2018. However, the Standard is available for early application. The
own credit changes can be early applied in isolation without otherwise
changing the accounting for financial instruments.
The final version of AASB 9 introduces a new expected-loss
impairment model that will require more timely recognition of
expected credit losses. Specifically, the new Standard requires entities
to account for expected credit losses from when financial instruments
are first recognised and to recognise full lifetime expected losses on a
more timely basis.
Amendments to AASB 9 (December 2009 & 2010 editions and AASB
2013-9) issued in December 2013 included the new hedge accounting
requirements, including changes to hedge effectiveness testing,
treatment of hedging costs, risk components that can be hedged and
disclosures.
AASB 9 includes requirements for a simpler approach for classification
and measurement of financial assets compared with the requirements
of AASB 139.
The main changes are described below.
a.
b.
c.
Financial assets that are debt instruments will be classified based
on (1) the objective of the entity's business model for managing
the financial assets; (2) the characteristics of the contractual
cash flows.
Allows an irrevocable election on initial recognition to present
gains and losses on investments in equity instruments that are
not held for trading in other comprehensive income. Dividends in
respect of these investments that are a return on investment can
be recognised in profit or loss and there is no impairment or
recycling on disposal of the instrument.
Financial assets can be designated and measured at fair value
through profit or loss at initial recognition if doing so eliminates
or significantly
recognition
inconsistency that would arise from measuring assets or
liabilities, or recognising the gains and losses on them, on
different bases.
reduces a measurement or
d. Where the fair value option is used for financial liabilities the
change in fair value is to be accounted for as follows:
►
The change attributable to changes in credit risk are
presented in other comprehensive income (OCI)
►
The remaining change is presented in profit or loss
AASB 9 also removes the volatility in profit or loss that was caused
by changes in the credit risk of liabilities elected to be measured at
fair value. This change in accounting means that gains caused by
the deterioration of an entity’s own credit risk on such liabilities are
no longer recognised in profit or loss.
Consequential amendments were also made to other standards as a
result of AASB 9, introduced by AASB 2009-11 and superseded by
AASB 2010-7, AASB 2010-10 and AASB 2014-1 – Part E.
AASB 2014-7 incorporates the consequential amendments arising from
the issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of AASB 9
(AASB 9 (December 2009) and AASB 9 (December 2010)) from 1
February 2015 and applies to annual reporting periods beginning on
after 1 January 2015.
MOUNT GIBSON IRON LIMITED 2015 Annual Report45
Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
AASB 2014-
10
Amendments to
Australian Accounting
Standards – Sale or
Contribution of Assets
between an Investor
and its Associate or
Joint Venture
AASB 2015-1
Amendments to
Australian Accounting
Standards – Annual
Improvements to
Australian Accounting
Standards 2012–2014
Cycle
Application
date of
standard
Application
date for
Group
1 January
2016
1 July 2016
AASB 2014-10 amends AASB 10 Consolidated Financial Statements
and AASB 128 to address an inconsistency between the requirements
in AASB 10 and those in AASB 128 (August 2011), in dealing with the
sale or contribution of assets between an investor and its associate or
joint
require:
(a) a full gain or loss to be recognised when a transaction involves a
business (whether it is housed in a subsidiary or not); and
(b) a partial gain or loss to be recognised when a transaction involves
assets that do not constitute a business, even if these assets are
housed in a subsidiary.
amendments
venture.
The
AASB 2014-10 also makes an editorial correction to AASB 10.
AASB 2014-10 applies to annual reporting periods beginning on or
after 1 January 2016. Early adoption permitted.
The subjects of the principal amendments to the Standards are set
out below:
1 January
2016
1 July 2016
AASB 5 Non-current Assets Held
Operations:
for Sale and Discontinued
• Changes in methods of disposal – where an entity
reclassifies an asset (or disposal group) directly from being
held for distribution to being held for sale (or vice versa),
an entity shall not follow the guidance in paragraphs 27–29
to account for this change.
AASB 7 Financial Instruments: Disclosures:
to decide whether a servicing contract
• Servicing contracts - clarifies how an entity should apply
the guidance in paragraph 42C of AASB 7 to a servicing
contract
is
‘continuing involvement’ for the purposes of applying the
disclosure requirements in paragraphs 42E–42H of AASB 7.
• Applicability of the amendments to AASB 7 to condensed
interim financial statements - clarify that the additional
disclosure required by the amendments to AASB 7
Disclosure–Offsetting Financial Assets and Financial
Liabilities is not specifically required for all interim periods.
However, the additional disclosure is required to be given
in condensed interim financial statements that are prepared
in accordance with AASB 134 Interim Financial Reporting
when its inclusion would be required by the requirements
of AASB 134.
AASB 119 Employee Benefits:
• Discount rate: regional market issue - clarifies that the high
quality corporate bonds used to estimate the discount rate
for post-employment benefit obligations should be
denominated in the same currency as the liability. Further it
clarifies that the depth of the market for high quality
corporate bonds should be assessed at the currency level.
AASB 134 Interim Financial Reporting:
• Disclosure of information ‘elsewhere in the interim financial
report’ -amends AASB 134 to clarify the meaning of
disclosure of information ‘elsewhere in the interim financial
report’ and to require the inclusion of a cross-reference
from the interim financial statements to the location of this
information.
46MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
AASB 2015-2
Amendments to
Australian Accounting
Standards –
Disclosure Initiative:
Amendments to AASB
101
The Standard makes amendments to AASB 101 Presentation of
Financial Statements arising from the IASB’s Disclosure Initiative
project. The amendments are designed to further encourage
companies to apply professional judgment in determining what
information to disclose in the financial statements. For example, the
amendments make clear that materiality applies to the whole of
financial statements and that the inclusion of immaterial information
can inhibit the usefulness of financial disclosures. The amendments
also clarify that companies should use professional judgment in
determining where and in what order information is presented in the
financial disclosures.
1 January
2016
1 July 2016
AASB 2015-3
AASB 2015-5
Amendments to
Australian Accounting
Standards arising
from the Withdrawal
of AASB 1031
Materiality
Amendments to
Australian Accounting
Standards –
Investment Entities:
Applying the
Consolidation
Exception
The Standard completes the AASB’s project to remove Australian
guidance on materiality from Australian Accounting Standards.
1 July 2015
1 July 2015
This makes amendments to AASB 10, AASB 12 Disclosure of Interests
in Other Entities and AASB 128 arising from the IASB’s narrow scope
amendments associated with Investment Entities.
1 July 2015
1 July 2015
The Group has yet to fully assess the impact of these new and amended Accounting Standards and Interpretations.
(e) Foreign currency
The functional currency of the Company and its controlled entities is Australian dollars (A$).
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date. All such exchange differences are taken to the income statement in the consolidated financial report.
(f) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the
GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(g) Other accounting policies
Other significant accounting policies that summarise the measurement basis used and are relevant to an understanding of the
financial statements are provided throughout the notes to the financial statements.
(h) Key accounting judgements, estimates and assumptions
In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates
of future events. Significant judgements and estimates which are material to the financial statements are provided throughout the
notes to the financial statements.
Other significant accounting judgements, estimates and assumptions not provided in the notes to the financial statements are as
follows:
Determination of mineral resources and ore reserves
The Group estimates its mineral resources and ore reserves in accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves 2012 (the “JORC Code”). The information on mineral resources and ore reserves
was prepared by or under the supervision of Competent Persons as defined in the JORC Code. The amounts presented are based
on the mineral resources and ore reserves determined under the JORC Code.
There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the
time of estimation may change significantly when new information becomes available.
Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status
of reserves and may, ultimately, result in the ore reserves being restated. Such changes in the ore reserves could impact on
depreciation and amortisation rates, asset carrying values, deferred stripping costs and provisions for decommissioning and
restoration.
MOUNT GIBSON IRON LIMITED 2015 Annual Report47
Notes to the Consolidated Financial Report (continued)
Re-presented
2015
$’000
2014
$’000
Notes
2. Revenue and Other Income
[a] Revenue
Sale of ore
Realised gain/(loss) on foreign exchange hedges
Other revenue
Interest income
[b] Other income
Net realised gain on foreign exchange transactions
Net gain on disposal of property, plant and equipment
Other income
[i]
323,422
(7,778)
315,644
12,209
12,209
4
1,167
6,703
7,874
659,655
506
660,161
15,549
15,549
-
46
8,134
8,180
[i] Mount Gibson received an interim distribution of $8.050 million during the year ended 30 June 2014 and a final distribution
of $4.379 million in March 2015 from the liquidators of Pioneer Iron & Steel Group Company Limited, a former customer.
Recognition and measurement
Revenue
Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that the
economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
The Group generates a significant proportion of revenue from the sale of iron ore. Revenue is recognised when the significant risks
and rewards of ownership of the goods have passed to the buyer and can be measured reliably.
Interest
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a
financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
3. Expenses
[a] Finance costs
Finance charges on banking facilities
Finance charges payable under finance leases
Non-cash interest accretion on rehabilitation provision
Re-presented
2015
$’000
2014
$’000
1,347
340
1,687
1,242
2,929
1,902
1,308
3,210
2,417
5,627
48MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
3. Expenses (Continued)
[b] Cost of Sales
Mining and administration costs
Depreciation – mining and administration
Mining waste costs deferred
Amortisation of mining waste costs deferred
Amortisation of mine properties
Crushing costs
Depreciation – crushing
Transport costs
Depreciation – transport
Port costs
Depreciation – port
Royalties
Net ore inventory movement
[c] Administration Expenses include:
Depreciation
Share-based payments expense
Impairment of debtors
Net unrealised loss on foreign exchange balances
Net realised loss on foreign exchange transactions
[d] Cost of Sales and Administration expenses above include:
Salaries, wages expense and other employee benefits
Operating lease rental – minimum lease payments
Recognition and measurement
Employee benefits expense
Re-presented
2015
$’000
2014
$’000
Notes
13
13
13
22
184,088
19,221
(92,683)
20,117
14,208
25,908
4,212
88,848
6,326
21,810
5,638
29,760
14,289
275,678
29,477
(151,028)
76,017
37,768
33,727
6,320
77,512
6,579
19,636
11,400
56,061
23,590
341,742
502,737
735
286
964
999
-
545
527
-
1,221
4
73,383
11,950
87,213
24,178
The Group’s accounting policy for liabilities associated with employee benefits is set out in note 17. The policy relating to share-based
payments is set out in note 22.
Superannuation
Contributions made by the Group to employee superannuation funds, which are defined contribution plans, are charged as an expense
when incurred.
Borrowing costs
Borrowing costs are recognised as an expense when incurred except when borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset.
Operating Leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of
ownership of the leased item, are recognised as an expense in the income statement on a straight-line basis over the lease term.
Contingent rentals are recognised as an expense in the financial year in which they are incurred.
Depreciation and amortisation
Refer to notes 11 and 13 for details on depreciation and amortisation.
Impairment
Impairment expenses are recognised to the extent that the carrying amount of assets exceed their recoverable amount. Refer to note
14 for further details on impairment.
MOUNT GIBSON IRON LIMITED 2015 Annual Report49
Notes to the Consolidated Financial Report (continued)
4. Taxation
Major components of tax (benefit)/expense for the years ended 30 June 2015 and
2014 are:
Income Statement
Current tax
Current income tax charge
Adjustments in respect of current income tax of previous year
Deferred tax
Relating to origination and reversal of temporary differences:
Income tax
Minerals resource rent tax
Tax (benefit)/expense reported in Income Statement
Tax (benefit)/expense relating to continuing operations
Tax (benefit)/expense relating to discontinued operations
Statement of Changes in Equity
Deferred income tax
Remeasurement of foreign exchange contracts
Deferred income tax (benefit)/liability reported in equity
Reconciliation of tax (benefit)/expense
A reconciliation of tax (benefit)/expense applicable to accounting profit/(loss)
before tax at the statutory income tax rate to tax expense at the Group’s effective
tax rate for the years ended 30 June 2015 and 2014 is as follows:
Accounting profit/(loss) before tax
At the statutory income tax rate of 30% (2014: 30%)
Expenditure not allowed for income tax purposes
Unrecognised deferred tax assets
Adjustments in respect of current income tax of previous year
Other
Minerals resource rent tax expense
Tax (benefit)/expense
Effective tax rate
Tax (benefit)/expense reported in Income Statement
2015
$’000
2014
$’000
-
1,703
23,530
(4,764)
(144,785)
45,999
27,228
21,351
(97,083)
67,345
(99,908)
2,825
(97,083)
57,280
10,065
67,345
(719)
(719)
719
719
(1,008,505)
(302,551)
160
158,720
1,703
(1,114)
45,999
(97,083)
9.6%
(97,083)
163,698
49,109
572
-
(4,764)
1,077
21,351
67,345
41.1%
67,345
50MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
4. Taxation (Continued)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
CONSOLIDATED
Accrued liabilities
Capital raising costs
Deferred income
Foreign exchange contracts
Inventory
Minerals resource rent tax
Prepaid expenditure
Fixed assets, mine properties and
exploration expenditure
Provisions
Borrowing cost
Tax losses
Tax (assets)/liabilities
Set off of tax
(7,299)
(1,100)
(4)
-
(300)
(2,891)
-
-
(70,748)
(17)
-
-
-
(45,999)
-
-
(19,215)
(20,070)
(797)
(838)
(58,065)
-
-
-
-
-
592
1,270
(7,299)
(1,100)
(4)
592
(300)
(2,891)
(17)
1,270
353
254
-
7
(45,999)
192
353
254
-
192
165,460
(70,748)
165,460
-
-
-
(19,215)
(20,070)
(797)
(58,065)
(838)
-
-
-
-
7
-
-
-
-
(159,319)
(68,024)
599
167,529
(158,720)
99,505
-
22,025
-
(22,025)
-
-
-
Derecognition of deferred tax asset
159,319
-
(599)
-
158,720
Net tax (assets)/liabilities
-
(45,999)
-
145,504
-
99,505
Movement in temporary differences during the
financial year ended 30 June 2015
Accrued liabilities
Capital raising costs
Deferred income
Foreign exchange contracts
Inventory
Minerals resource rent tax
Prepaid expenditure
Fixed assets, mine properties and exploration
expenditure
Provisions
Borrowing cost
Tax losses
Derecognition of deferred tax asset
Balance
1 July 2014
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2015
$’000
(1,100)
(6,199)
(17)
1,270
353
254
(45,999)
192
165,460
(20,070)
(838)
-
-
13
(678)
66
(3,145)
45,999
(185)
(236,208)
855
41
(58,065)
158,720
-
-
-
(719)
-
-
-
-
-
-
-
-
99,505
(98,786)
(719)
(7,299)
(4)
592
(300)
(2,891)
-
7
(70,748)
(19,215)
(797)
(58,065)
158,720
-
MOUNT GIBSON IRON LIMITED 2015 Annual Report51
Notes to the Consolidated Financial Report (continued)
4. Taxation (Continued)
Movement in temporary differences during the
financial year ended 30 June 2014
Accrued liabilities
Capital raising costs
Deferred income
Foreign exchange contracts
Interest receivable
Inventory
Lease liability
Minerals resource rent tax
Prepaid expenditure
Fixed assets, mine properties and exploration
expenditure
Provisions
Borrowing cost
Balance
1 July 2013
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2014
$’000
(2,201)
342
-
(1,602)
740
3,898
(885)
(67,350)
48
145,386
(27,437)
(732)
50,207
1,101
(359)
1,270
1,236
(740)
(3,644)
885
21,351
144
20,074
7,367
(106)
48,579
-
-
-
719
-
-
-
-
-
-
-
-
719
2015
$’000
(1,100)
(17)
1,270
353
-
254
-
(45,999)
192
165,460
(20,070)
(838)
99,505
2014
$’000
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Minerals resource rent tax – mine properties (net of income tax)
[1]
-
419,504
Non-current assets
Tax losses
100,655
58,065
158,720
-
-
419,504
[1] Deferred tax assets relating to minerals resource rent tax have not been recognised on the basis that it is not probable they will
be utilised in the future and therefore they are considered not to be recoverable.
52MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
4. Taxation (Continued)
Recognition and measurement
Income Tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable differences:
•
•
except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the
carry-forward of unused tax assets and unused tax losses can be utilised:
•
•
except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in controlled entities, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
Mineral Resource Rent Tax (MRRT)
MRRT is considered, for accounting purposes, to be a tax based on income. Accordingly, current and deferred MRRT tax expense is
measured and disclosed on the same basis as income tax.
The Group previously recognised deferred income tax assets in respect of the tax base of MRRT assets to the extent that the Group
estimates these deferred income tax assets will be utilised in the future.
On 1 October 2014, the Australian Senate repealed the MRRT. Consequently, the Group wrote off to the income statement all of the
deferred income tax assets relating to MRRT.
Key estimate: recoverability of potential deferred tax assets
The Group recognises deferred tax assets in respect of tax losses to the extent that the future utilisation of these losses is
considered probable. Assessing the future utilisation of these losses requires the Group to make significant estimates related to
expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws. To the extent that future cash flows and taxable income differ significantly from estimates, this
could result in significant changes to the deferred tax assets recognised, which would in turn impact future financial results.
MOUNT GIBSON IRON LIMITED 2015 Annual Report53
Notes to the Consolidated Financial Report (continued)
5. Cash and Cash Equivalents
[a] Reconciliation of cash
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June:
Cash at bank and in hand
Short-term deposits
2015
$’000
2014
$’000
46,003
45,000
55,471
15,000
91,003
70,471
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of
between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
Recognition and measurement
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity
period of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
[b] Reconciliation of the net profit/(loss) after tax to the net cash flows from operations
Net profit/(loss) after tax
(911,422)
96,353
Adjustments for:
Depreciation of non-current assets
Amortisation of deferred waste
Amortisation of other mine properties
Net (gain) on disposal of property, plant and equipment
Interest received
Exploration expenses written off
Share based payments
Interest accretion on rehabilitation provision
Borrowing costs
Impairment of debtors
Impairment of mine properties
Impairment of property, plant and equipment
Impairment of deferred acquisition, exploration and evaluation
Unrealised loss on foreign exchange
Capitalised expenses
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
Decrease in inventory
(Increase)/decrease in prepayments and deposits
Decrease in deferred tax assets
(Increase) in capitalised deferred waste
Increase/(decrease) in trade and other payables
Increase/(decrease) in current income tax liabilities
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in restructure provision
Increase in road sealing provision
Increase/(decrease) in employee benefits
Increase in other provision
36,866
20,117
14,208
(1,167)
(12,209)
1,014
286
1,242
1,009
964
712,917
203,213
19,219
999
1,457
36,686
46,495
163
45,999
(92,683)
(75,537)
9,661
(144,786)
(1,990)
1,278
(5,161)
363
67,311
89,690
40,338
(46)
(15,549)
116
527
2,417
1,241
-
-
-
-
1,221
(4,710)
(5,703)
84,400
(736)
21,351
(152,127)
19,465
(35,671)
25,846
73
200
1,956
-
Net Cash Flow from/(used in) Operating Activities
(90,799)
237,963
54MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
[c] Non-cash financing activities
The Group did not acquire property, plant and equipment by means of finance leases or hire purchase agreements during the financial
year ended 30 June 2015 (2014: nil). The Group disposed of items of property, plant and equipment with an aggregate fair value of
$42,932 (2014: $1,029,696) which were financed by means of hire purchase agreements.
6. Term Deposits
Current
Receivables – term deposits
Receivables – subordinated notes
2015
$’000
2014
$’000
210,000
33,000
434,300
15,000
243,000
449,300
Term deposits are made for varying periods of between three and twelve months depending on the term cash requirements of the
Group, and earn interest at market term deposit rates.
Subordinated notes comprise tradeable floating interest rate instruments with maturities of up to ten years.
Recognition and measurement
Commercial bills and subordinated notes with fixed or determinable payments and fixed maturity dates that the Group has the positive
intent and ability to hold to maturity are classified as term deposits. Term deposits are recorded at amortised cost using the effective
interest method less impairment, with revenue recognised on an effective yield basis.
7. Trade and Other Receivables
Current
Trade debtors
Allowance for impairment
Sundry debtors
Other receivables
Notes
2015
$’000
2014
$’000
[a][i]
[b]
[a][ii]
11,366
(964)
10,402
2,990
1,962
41,802
-
41,802
5,819
5,383
15,354
53,004
[a] Terms and conditions
Terms and conditions relating to the above financial instruments:
[i] Details of terms and conditions of trade debtors and credit sales are set out in the “recognition and measurement” note below.
[ii] Sundry debtors are non-interest bearing and have repayment terms between 30 and 90 days.
[b] Impaired or past due financial assets
An allowance for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. At 30
June 2015, trade debtors of $964,000 (2014: $nil) in the Group were impaired.
At 30 June 2015, trade debtors of $402,000 (2014: $800,176) in the Group were past due but not impaired. These relate to a number
of customers for whom there is no recent history of default or other indicators of impairment. At 18 August 2015, $4,000 of this
amount remains outstanding.
With respect to trade debtors that are neither impaired nor past due, there are no indications as of the reporting date that the relevant
debtors will not meet their payment obligations.
MOUNT GIBSON IRON LIMITED 2015 Annual Report55
Notes to the Consolidated Financial Report (continued)
7. Trade and Other Receivables (Continued)
The ageing of trade debtors past due but not impaired is as follows:
Less than 30 days overdue
Between 30 and 60 days overdue
Between 60 and 90 days overdue
Greater than 90 days overdue
Trade debtors not impaired and not past due
Recognition and measurement
Trade receivables
2015
$’000
2014
$’000
-
398
3
1
402
10,000
10,402
-
(597)
(63)
1,460
800
41,002
41,802
Trade receivables are recognised and carried at amortised cost less any allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be
uncollectible are written off when identified. An allowance for impairment of trade receivables is made when there is objective evidence
that the Group will not be able to collect the debts. Indicators of impairment would include financial difficulties of the debtor, likelihood
of the debtor’s insolvency and default in payment. Any impairment is recognised in the income statement.
The vast majority of sales revenue is invoiced and received in US dollars (US$). The balance is invoiced and received in A$.
Generally, on presentation of shiploading documents and provisional invoice, the customer settles 90-95% of the provisional sales
invoice value within 10 days of receipt of shiploading documents and provisional invoice, and the remaining 5-10% is settled within 30
days of presentation of the final invoice. The final value is subject to minor adjustments based on the final analyses of weight, chemical
and physical composition, and moisture content.
Other receivables
Other receivables are recorded at amortised cost, using the effective interest rate method, less any impairment. Interest is recognised
by applying the effective interest rate method.
56MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
8. Inventories
Consumables – at cost
Allowance for stock obsolescence
Allowance for impairment of consumables inventories
Ore – at cost
Allowance for impairment of ore inventories
Notes
2015
$’000
2014
$’000
[i]
[ii]
[iii]
22,828
(9,702)
(339)
12,787
28,999
(20,708)
8,291
28,645
(3,237)
-
25,408
55,705
(13,540)
42,165
21,078
67,573
[i]
During the year, the Group raised an allowance for stock obsolescence of $9,048,000 (2014: $1,400,000) for consumables inventory
that is considered slow moving and obsolete at Koolan Island.
[ii] Consumables inventory held at Koolan Island which is not considered obsolete but as a result of reduced mining activity may not be
used and may potentially be sold has been assessed and written down to its recoverable value. In determining the recoverable
value, factors such as current market pricing from suppliers, current location and condition have been considered. The impairment
realised for the year was $339,000 (2014: $nil).
[iii] At 30 June 2015, the Group assessed the carrying values of ore inventories stockpiled at each of the three mine sites. Assumptions
used in the assessment include prevailing and anticipated iron ore prices and exchange rates, ore specifications, estimated costs to
make the ore inventories available for sale, and associated sales and shipping freight costs.
Based on these assumptions, the following impairments on ore inventories were recognised during the financial period:
Tallering Peak
Extension Hill
Koolan Island
Total loss on impairment
2015
$’000
6,084
-
3,442
9,526
2014
$’000
-
-
-
-
Recognition and measurement
Inventories are valued at the lower of cost and net realisable value.
Cost comprises direct material, labour and expenditure in getting such inventories to their existing location and condition, based on
weighted average costs incurred during the period in which such inventories were produced.
Consumable materials for plant and equipment are recognised as inventory. Consumable stocks are carried at the lower of cost and net
realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
Inventories are written down below cost to net realisable value if considered damaged, have become wholly or partially obsolete, or if
their selling prices have declined. A new assessment is made of net realisable value in each subsequent period.
Notes
2015
$’000
2014
$’000
9. Derivative Financial Assets
Current
Foreign currency forward contracts
32[b][i]
Refer note 32 for details on derivative financial instruments.
-
-
2,395
2,395
MOUNT GIBSON IRON LIMITED 2015 Annual Report57
Notes to the Consolidated Financial Report (continued)
10. Interest in Subsidiaries
Name
Country of
Incorporation
Percentage of Equity Interest
Held by the Group
Mount Gibson Mining Limited
Geraldton Bulk Handling Pty Ltd
Aztec Resources Limited
Koolan Iron Ore Pty Ltd
Koolan Shipping Pty Ltd
Brockman Minerals Pty Ltd
Entities subject to Class Order relief
Australia
Australia
Australia
Australia
Australia
Australia
2015
%
100
100
100
100
100
100
2014
%
100
100
100
100
100
100
Pursuant to Class Order 98/1418, relief has been granted to Mount Gibson Mining Limited, Aztec Resources Limited and Koolan Iron Ore
Pty Ltd from the Corporations Act 2001 requirements for the preparation, audit and lodgement of financial reports. As a condition of the
Class Order, Mount Gibson Iron Limited, Mount Gibson Mining Limited, Aztec Resources Limited and Koolan Iron Ore Pty Ltd (“Closed
Group”) entered into a Deed of Cross Guarantee on 1 May 2009. The effect of this deed is that Mount Gibson Iron Limited has
guaranteed to pay any deficiency in the event of winding up of these controlled entities or if they do not meet their obligations under the
terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee
in the event that Mount Gibson Iron Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases
or other liabilities subject to the guarantee.
The Consolidated Income Statement and Balance Sheet of the Closed Group are set out below:
Consolidated Income Statement of the Closed Group
CONTINUING OPERATIONS
Sale of goods
Other revenue
TOTAL REVENUE
Cost of sales
Impairment of ore inventories
GROSS PROFIT
Other income
Stock obsolescence
Impairment of consumables inventories
Impairment of mine properties
Impairment of property, plant and equipment
Impairment of deferred acquisition, exploration and evaluation
Impairment of non-current other receivables
Administration expenses
Exploration expenses
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
Finance costs
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX
Tax benefit/(expense)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Re-presented
2015
$’000
2014
$’000
315,644
12,209
327,853
(319,109)
(3,442)
5,302
7,536
(9,048)
(339)
(712,917)
(178,544)
(19,219)
(134,169)
(30,979)
(1,014)
(1,073,391)
(2,929)
(1,076,320)
91,583
(984,737)
660,161
15,547
675,708
(465,454)
-
210,254
8,180
-
-
-
-
-
-
(27,952)
(116)
190,366
(5,627)
184,739
(68,879)
115,860
Profit/(loss) after tax for the year from discontinued operations
PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
(21,915)
(1,006,652)
6,181
122,041
58MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
Consolidated Balance Sheet of the Closed Group
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Prepayments
Derivative financial assets
Income tax receivable
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other receivables
Property, plant and equipment
Deferred acquisition, exploration and evaluation costs
Mine properties
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
Interest-bearing loans and borrowings
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Retained earnings / (accumulated losses)
Reserves
TOTAL EQUITY
2015
$’000
2014
$’000
89,878
243,000
14,972
20,616
3,190
-
-
67,369
449,300
51,948
67,123
3,350
2,395
9,661
371,656
651,146
3,865
24,889
2,924
3,205
-
34,883
406,539
45,087
2,619
13,561
61,267
39,579
119
-
39,698
100,965
305,574
568,328
(1,243,797)
981,043
305,574
130,757
187,522
21,863
655,731
37,557
1,033,430
1,684,576
120,226
7,294
15,030
142,550
45,197
2,162
137,420
184,779
327,329
1,357,247
568,328
770,748
18,171
1,357,247
MOUNT GIBSON IRON LIMITED 2015 Annual Report59
Notes to the Consolidated Financial Report (continued)
11. Property, Plant and Equipment
Land
Plant and equipment
Plant and equipment
under lease
Buildings
Capital works in
progress
Total
2015
2014
$’000
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
Cost
Accumulated depreciation and impairment
Net carrying amount
654
(519)
135
654
308,894
265,791
73,657
94,615
138,047
141,364
2,420
14,719
523,672
517,143
-
(285,054)
(146,393)
(72,586)
(81,662)
(132,681)
(65,902)
(1,338)
-
(492,178)
(293,957)
654
23,840
119,398
1,071
12,953
5,366
75,462
1,082
14,719
31,494
223,186
Reconciliation
Carrying amount at the beginning of the year
654
654
119,398
127,990
12,953
31,445
75,462
14,719
19,373
223,186
247,924
Additions
Transfers
Disposals
Depreciation expense
Depreciation capitalised
Impairment loss
Transfers to mine properties
-
-
-
-
-
(519)
-
-
-
-
-
-
-
-
45,132
11,455
(1,249)
25,658
(56)
(22)
-
(205)
(42)
-
-
(1,030)
2,683
798
-
(23,927)
(34,172)
(6,773)
(17,462)
(6,166)
(15,677)
(22)
(126,947)
-
-
-
-
-
(4,862)
-
-
-
-
-
(67,411)
-
-
-
-
68,462
22,524
-
153
(12,048)
4,125
-
-
-
(3,474)
936
(97)
51,940
49,118
-
-
-
-
-
-
(1,291)
(1,052)
(36,866)
(67,311)
(22)
(203,213)
-
-
(2,240)
(5,493)
(2,240)
(5,493)
Carrying amount at the end of the year
135
654
23,840
119,398
1,071
12,953
5,366
75,462
1,082
14,719
31,494
223,186
Assets pledged as security
135
654
23,840
119,398
1,071
12,953
5,366
75,462
1,082
14,719
31,494
223,186
Refer note 16 for details of security arrangements
Property, plant and equipment has been assessed for impairment at balance date, with the carrying values of property, plant and equipment associated with the Koolan Island operation written down to their fair values less
costs to sell. These fair values have been assessed by reference to market prices for similar assets and to the Group’s recent experiences with asset sales (Level 3 on the fair value hierarchy). The write-downs reflect the
current depressed market for plant and equipment sales, the isolation of the site and the estimated removal, demobilisation and selling costs.
60MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
11. Property, Plant and Equipment (Continued)
Recognition and measurement
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation and amortisation
The cost of owned property, plant and equipment directly engaged in mining operations is written off over its expected economic life on
a units-of-production method, in the establishment of which due regard is given to the life of the related area of interest. Plant and
equipment under hire purchase or finance lease directly engaged in mining operations is written down to its residual value over the
lesser of the hire purchase or finance lease term or useful life. Other assets which are depreciated or amortised on a basis other than
the units-of-production method typically are depreciated on a straight-line basis over the estimated useful life of the asset as follows:
Buildings
Motor vehicles
Office equipment
5 - 20 years
4 - 5 years
3 - 5 years
Leasehold improvements
Shorter of lease term or useful life of 5 – 10 years
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying
value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating
unit to which the asset belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating
units are written down to their recoverable amount. Refer note 14 for further details on impairment.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in the income statement in the period the item is derecognised.
Key estimates and assumptions: units of production method of depreciation and amortisation
The Group applies the units of production method of depreciation and amortisation of its mine assets based on ore tonnes mined.
These calculations require the use of estimates and assumptions. Significant judgement is required in assessing the available ore
reserves and mineral resources and the production capacity of the operations to be depreciated under this method. Factors that are
considered in determining ore reserves, mineral resources and production capacity include the Group’s history of converting mineral
resources to ore reserves and the relevant timeframes, the complexity of metallurgy, markets and future developments. The Group
uses economically recoverable mineral resources (comprising proven and probable ore reserves) to depreciate assets on a unit of
production basis. However, where a mineral property has been acquired and an amount has been attributed to the fair value of
mineral resources not yet designated as ore reserves, the additional mineral resources may be taken into account. When these
factors change or become known in the future, such differences will impact pre-tax profit and carrying values of assets.
MOUNT GIBSON IRON LIMITED 2015 Annual Report61
Notes to the Consolidated Financial Report (continued)
Notes
2015
$’000
2014
$’000
12. Deferred Acquisition, Exploration and Evaluation
Costs
Deferred acquisition, exploration and evaluation – at cost
Allowance for impairment
[i]
Reconciliation
Carrying amount at beginning of the year
Additions
Write back of accrued acquisition costs
Impairment loss
Exploration expenditure written off
Carrying amount at the end of the year
22,143
(19,219)
21,863
-
2,924
21,863
21,863
4,294
(3,000)
(19,219)
(1,014)
2,924
861
21,118
-
-
(116)
21,863
[i]
The Group reviews the carrying value of its assets at each balance date. During the year, as set out in note 14, a number of
material events occurred which, for the purposes of the Company’s deferred acquisition, exploration and evaluation costs for the
Shine Project, indicated that the carrying amount of the asset was unlikely to be recovered from its development or
sale. Accordingly, the carrying amount for the Shine Project of $17,674,000 was assessed on the basis of its fair value less costs
to sell by reference to forecast future cashflows (Level 3 on the Fair Value hierarchy), and fully impaired as at 30 June 2015. The
following assumptions were used in assessing the impairment for the Shine Project carrying value:
Cashflow forecasts were based on the latest internal estimates for the life of mine;
Discount rate of 21.4% (nominal, before tax) and 15.0% (nominal, after tax);
Revenue and cost inflation estimates of 2.5% per year; and
Base case iron ore price forecast for the 62% Fe benchmark fines CFR price (northern China) of US$55/dmt at an exchange
rate of A$1.00/US$0.72, with sensitivities undertaken for a range of these inputs.
It is estimated that changes in key assumptions would impact recoverable amounts at 30 June 2015 as follows:
An increase in the benchmark 62% Fe fines CFR iron ore price by 10% to US$60/dmt would not impact the impairment.
A reduction in the A$/US$ exchange rate by 10% to A$1.00/US$0.65 would not impact the impairment.
The Group’s deferred acquisition, exploration and evaluation costs for the Fields Find Project with a carrying amount of $2,196,000
was assessed based on fair value less costs to sell by reference to a recent offer (Level 3 on the Fair Value hierarchy), and was
impaired to $650,000 as at 30 June 2015.
Recognition and measurement
Acquisition costs
Exploration and evaluation costs arising from acquisitions are carried forward where exploration and evaluation activities have not, at
balance date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves.
Exploration and evaluation costs
Costs arising from exploration and evaluation activities are capitalised if activities in the area of interest have not yet reached a stage
which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is
determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in
which this determination is made.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off
to the income statement or provided against.
Key estimates and assumptions : impairment of capitalised exploration and evaluation expenditure
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether
the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation
asset through sale.
Factors which could impact the future recoverability include the level of mineral resources and ore reserves, future technological
changes which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and
changes to commodity prices.
To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, this will reduce
profits and net assets in the period in which this determination is made.
In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable ore reserves. To the extent that it is
determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in
which this determination is made.
62MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
13. Mine Properties
Mine development expenditure
Accumulated amortisation and impairment
2015
$’000
2014
$’000
1,537,337
(1,534,132)
1,442,621
(786,890)
3,205
655,731
Reconciliation
Deferred waste
Koolan Island
Tallering Peak
Extension Hill
Total
2015
2014
2015
2014
2015
2014
2015
2014
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Carrying amount at the beginning of the
period
354,204
279,193
Deferred waste capitalised
92,683
151,028
Amortisation expensed
(20,117)
(76,017)
Impairment loss (note 14)
(426,770)
-
Carrying amount at the end of the period
-
354,204
Other mine properties
Carrying amount at the beginning of the
period
Additions
Mine rehabilitation – revised estimate
adjustment
Transferred from capital works in
progress
276,877
336,715
-
-
181
(32,853)
2,240
5,493
Amortisation expensed
(8,392)
(32,478)
Impairment loss (note 14)
(270,906)
-
Carrying amount at the end of the period
-
276,877
Total mine properties
-
631,081
-
-
-
-
-
-
-
-
-
-
-
-
-
12,574
1,099
(13,673)
-
-
-
-
-
-
-
-
-
-
-
-
354,204
291,767
92,683
152,127
(20,117)
(89,690)
(426,770)
-
-
354,204
2,559
24,650
30,172
301,527
369,446
11
-
-
-
11
-
-
(388)
(232)
(207)
(33,085)
-
-
2,240
5,493
(2,570)
(5,816)
(5,290)
(14,208)
(40,338)
-
-
-
(15,241)
-
(286,147)
-
3,205
24,650
3,205
301,527
3,205
24,650
3,205
655,731
The security pledged for financing facilities includes mining mortgages over the mining tenements and contractual rights to mine
hematite deposits owned by the Group. Refer note 16.
MOUNT GIBSON IRON LIMITED 2015 Annual Report63
Notes to the Consolidated Financial Report (continued)
13. Mine Properties (Continued)
Recognition and measurement
Deferred stripping
As part of its mining operations, the Group incurs mining stripping (waste removal) costs both during the development and production
phase of its operations.
When stripping costs are incurred in the development phase of a mine before the production phase commences (development
stripping), such expenditure is capitalised as part of the cost of constructing the mine and subsequently amortised over its useful life
using a units of production method, in accordance with the policy applicable to mine properties. The capitalisation of development
stripping costs ceases when the mine or relevant component thereof is commissioned and ready for use as intended by management.
Waste development costs incurred in the production phase creates two benefits, being either the production of inventory or improved
access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the
production stripping costs are accounted for as part of the cost of producing those inventories. Where production stripping costs are
incurred and the benefit is improved access to ore to be mined in the future, the costs are recognised as a stripping activity asset within
mine properties.
If the costs of the inventory produced and the stripping asset are not separately identifiable, the allocation is undertaken based on the
waste-to-ore stripping ratio for the particular ore component concerned. If mining of waste in a period occurs in excess of the expected
life-of-component waste-to-ore strip ratio, the excess is recognised as part of the stripping asset. Where mining occurs at or below the
expected life-of-component stripping ratio in a period, the entire production stripping cost is allocated to the cost of the ore inventory
produced.
Amortisation is provided on the units-of-production method over the life of the identified orebody component. The units-of-production
method results in an amortisation charge proportional to the depletion of the economically recoverable mineral resources (comprising
proven and probable reserves).
Other mine properties
Other mine properties represent the accumulation of all acquisition, exploration, evaluation and development expenditure incurred by or
on behalf of the Group in relation to areas of interest in which the mining of mineral resources has commenced. When further
development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried
forward as part of the cost of that mine property only when substantial future economic benefits are established, otherwise such
expenditure is classified as part of the cost of production.
Amortisation is provided on the units-of-production method over the life of the mine, with separate calculations being made for each
mineral resource. The units-of-production method results in an amortisation charge proportional to the depletion of the economically
recoverable mineral resources (comprising proven and probable reserves).
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. Impairment expenses are recognised to the extent that the carrying amount of the mine properties asset
exceeds its estimated recoverable amount. Refer to note 14 for further details on impairment.
Key judgement: deferred waste
Significant judgement is required in determining the waste capitalisation ratio for each component of the mine. Factors that are
considered include:
Any proposed changes in the design of the mine;
Estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic
extraction;
Identifiable components of orebody;
Future production levels;
Impacts of regulatory obligations and taxation legislation;
Future commodity prices; and
Future cash costs of production.
64MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
14. Impairment of Assets
The Group reviews the carrying value of its assets at each balance date. During the year ended 30 June 2015, the following material
events occurred which were considered indicators of impairment:
the benchmark price of iron ore, being the Company’s sole product, decreased significantly from US$93 per dry metric tonne (dmt)
as at 30 June 2014 to US$59.50/dmt as at 30 June 2015, a reduction of 36%, and has declined further since period end;
the Company’s Koolan Island operation suffered a major failure of the Main Pit seawall resulting in the pit being inundated with
seawater from the adjacent channel, and the cessation of mining activities in the pit. Assessment of potential engineering solutions
is underway, and discussions with the Group’s insurers are continuing; and
as at 30 June 2015, the market capitalisation of the Group was below the book value of its equity.
Koolan Island and Extension Hill Cash Generating Units (“CGU”) comprise assets used in the mining, crushing and sale of iron ore.
Accordingly, the Group has performed an impairment assessment on both the Koolan Island and Extension Hill CGU. Based on this
assessment, the following impairment amounts have been recognised in the financial report for each CGU:
Koolan Island
Extension Hill
Total loss on impairment of non-current assets
2015
$’000
844,430
71,700
916,130
2014
$’000
-
-
-
The above impairment values have been allocated proportionately to each CGU’s non-current assets as follows:
Deferred waste
Other mine properties
Total mine properties
Property, plant and equipment
Total impairment of
non-current assets
Koolan Island
Extension Hill
Total
2015
$’000
426,770
270,906
697,676
146,754
844,430
2014
$’000
-
-
-
-
2015
$’000
-
15,241
15,241
56,459
71,700
2014
$’000
-
-
-
-
2015
$’000
426,770
286,147
712,917
203,213
916,130
2014
$’000
-
-
-
-
The Group assessed the recoverable amount of each CGU as at 30 June 2015 which is considered to be the higher of the fair value less
cost to sell and Value-In-Use (“VIU”). The Group has used the VIU method where VIU is assessed as the present value of future cash
flows expected to be derived from the relevant CGU under review.
The following assumptions were used in determining the VIU for each CGU:
Cashflow forecasts for the life of each CGU were made based on recent actual performance, budgets and anticipated revenues
and estimated operating and capital costs over the relevant life of mine. For Koolan Island, the VIU is assessed based on
anticipated mining in the Acacia East satellite pit, to be completed in the 2015/16 financial year;
Discount rate for Extension Hill and Koolan Island of 12% (nominal, before and after tax);
Revenue and cost inflation estimates of 2.5% per year; and
Base case iron ore price forecast for the 62% Fe benchmark fines CFR price (northern China) of US$55/dmt at an exchange rate
of A$1.00/US$0.72, with sensitivities undertaken for a range of these inputs.
The cashflow estimates for the Koolan Island and Extension Hill CGUs are most sensitive to changes in iron ore prices and the A$/US$
foreign exchange rate. It is estimated that changes in key assumptions would impact recoverable amounts as 30 June 2015 as follows:
An increase in the benchmark 62% Fe fines CFR iron ore price by 10% to US$60/dmt would not impact the impairment for Koolan
Island and would reduce the impairment for Extension Hill by approximately $26 million.
A reduction in the A$/US$ exchange rate by 10% to A$1.00/US$0.65 would not impact the impairment for Koolan Island and would
reduce the impairment for Extension Hill by approximately $24 million.
As at 30 June 2015, the recoverable amount of the Koolan Island CGU is nil and Extension Hill CGU is $23,000,000. Refer to note 11 for
fair value less costs to sell of property, plant and equipment at Koolan Island.
MOUNT GIBSON IRON LIMITED 2015 Annual Report65
Notes to the Consolidated Financial Report (continued)
14. Impairment of Assets (Continued)
Recognition and measurement
Recoverable amount of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of
impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value-in-use. Recoverable amount is determined for an individual
asset, unless the asset’s value-in-use cannot be estimated to be close to its fair value less cost to sell and it does not generate cash
inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.
An assessment is also made at each reporting date as to whether there is any indication that a previously recognised impairment loss may
no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only where there has been a change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in
which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Key judgement and estimates
Impairment of capitalised mine development expenditure
The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level of mineral
resources and ore reserves, future technological changes which could impact the cost of mining, future legal changes (including changes
to environmental restoration obligations) and changes to commodity prices.
The Group regularly reviews the carrying values of its mine development assets in the context of internal and external consensus forecasts
for commodity prices and foreign exchange rates, with the application of appropriate discount rates for the assets concerned.
To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, this will reduce profits and
net assets in the period in which this determination is made. Capitalised mine development expenditure is assessed for recoverability
along with property, plant and equipment as described below.
Impairment of property, plant and equipment
The carrying value of property, plant and equipment is reviewed for impairment if there is any indication that the carrying amount may
not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of value-
in-use (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less costs to sell’.
In determining value-in-use, future cash flow forecasts for each cash generating unit (i.e. each mine) are prepared utilising management’s
latest estimates of mine life, mineral resource and ore reserve recovery, operating and development costs, royalties and taxation, and
other relevant cash inflows and outflows. Cash flow scenarios for a range of commodity prices and foreign exchange rates are assessed
using internal and external market forecasts, and the present value of the forecast cash flows is determined utilising a discount rate based
on industry weighted average cost of capital.
The Group’s cash flows are most sensitive to movements in iron ore prices, the discount rate and key operating costs. Variations to the
expected future cash flows, and the timing thereof, could result in significant changes to any impairment assessment or losses recognised,
if any, which could in turn impact future financial results.
66MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
15. Trade and Other Payables
Current
Trade creditors
Accruals and other payables
Notes
2015
$’000
2014
$’000
[a]
[a]
17,967
31,697
46,356
78,845
49,664
125,201
[a] Current trade creditors and other payables are non-interest bearing and are normally settled on 30 day terms.
Recognition and measurement
Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group
prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of
the purchase of these goods and services.
Notes
2015
$’000
2014
$’000
16. Interest-Bearing Loans and Borrowings
Current
Hire purchase facility
Non-Current
Hire purchase facility
[a]
[a]
Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
[a]
[b]
Total facilities:
Hire purchase facility
Performance bonding facility
Facilities used at reporting date:
Hire purchase facility
Performance bonding facility
Facilities unused at reporting date:
Hire purchase facility
Performance bonding facility
2,619
2,619
119
119
2,738
65,000
67,738
2,738
41,788
44,526
-
23,212
23,212
7,294
7,294
2,162
2,162
9,456
65,000
74,456
9,456
57,221
66,677
-
7,779
7,779
MOUNT GIBSON IRON LIMITED 2015 Annual Report67
Notes to the Consolidated Financial Report (continued)
16. Interest-Bearing Loans and Borrowings
(Continued)
Terms and conditions relating to the above financial facilities:
[a] Hire Purchase Facility
Hire purchase arrangements have been entered into by Koolan Iron Ore Pty Ltd and Mount Gibson Mining Ltd via Master Lease
agreements with Komatsu Corporate Finance Pty Limited and National Australia Bank Limited. Hire purchase amounts are repayable
monthly with final instalments due in August 2016. Interest is charged at an average rate of 7.66% pa. The facilities are secured by
a first mortgage over the assets the subject of the hire purchase agreements and a guarantee from the Company. This facility is
drawn and repayable in A$.
[b] Performance Bonding Facility
In May 2011, the Company entered into a Facility Agreement comprising a Corporate Loan facility and a Performance Bonding
facility. The undrawn Corporate Loan facility was cancelled in full in April 2013. The Performance Bonding facility, which totals
$65.0 million and was drawn to $41.8 million as at 30 June 2015, expires on 30 June 2017 unless extended prior to this date.
The security pledge for the Performance Bonding Facility is a fixed and floating charge over all the assets and undertakings of Mount
Gibson Iron Limited, Mount Gibson Mining Limited, Geraldton Bulk Handling Pty Ltd, Koolan Iron Ore Pty Ltd and Aztec Resources
Limited together with mining mortgages over the mining tenements owned by Mount Gibson Mining Limited and Koolan Iron Ore Pty
Ltd and the contractual rights of Mount Gibson Mining Limited to mine hematite iron ore at Extension Hill.
Subsequent to the end of the financial period, the Group and the Performance Bond Facility provider agreed to a reduction in the
amount of the facility from $65.0 million to $55.0 million and terms allowing the Group, at its option, to provide revolving cash
collateral in exchange for significantly reduced facility fees.
Recognition and measurement
Finance leases
Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the Group are
capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease
payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly to the income statement.
Capitalised leased assets are depreciated over the estimated useful life of the asset or where appropriate, over the estimated life of the
mine.
The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the
unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
rate method. Fees paid on the establishment of loan facilities are included as part of the carrying amount of the loans and borrowings.
Gains and losses are recognised in the profit or loss when the liabilities are derecognised.
68MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
17. Provisions
Current
Employee benefits
Road resealing
Restructure
Decommissioning rehabilitation
Other
Non-Current
Employee benefits
Decommissioning rehabilitation
Other
Movement in provisions:
[i] Road Resealing
Carrying amount at beginning of the year
Provision for period
Amounts utilised during the period
Carrying amount at end of the year
This provision relates to the forecast cost of roadworks associated with the Tallering
Peak and Extension Hill mine sites. Payments to the relevant local government
authorities are made annually.
[ii] Restructure
Carrying amount at beginning of the year
Provision for period
Amounts utilised during the period
Carrying amount at end of the year
This provision relates to the forecast costs associated with release of personnel on the
wind down of Koolan Island operations and Head Office, which is expected to occur by
30 June 2016.
[iii] Decommissioning Rehabilitation
Carrying amount at beginning of the year
Revised estimate adjustment
Amounts utilised during the period
Interest accretion on rehabilitation provision
Carrying amount at end of the year
This provision represents the present value of decommissioning and rehabilitation costs
on closure of the Tallering Peak, Koolan Island and Extension Hill mines. The timing of
decommissioning and rehabilitation expenditure is dependent on the life of the mines
and on the timing of the rehabilitation requirements, which may vary in future.
Tallering Peak (2015: current; 2014: non-current)
Koolan Island
Extension Hill
2015
$’000
2014
$’000
3,995
2,111
3,520
4,008
168
8,927
833
5,510
-
-
13,802
15,270
171
39,218
195
400
44,802
-
39,584
45,202
[i]
[ii]
[iii]
[iii]
833
1,278
-
2,111
5,510
5,272
(7,262)
3,520
44,802
(1,707)
(1,111)
1,242
43,226
4,008
31,670
7,548
43,226
633
400
(200)
833
5,437
693
(620)
5,510
77,580
(33,085)
(2,110)
2,417
44,802
6,472
30,640
7,690
44,802
MOUNT GIBSON IRON LIMITED 2015 Annual Report69
Notes to the Consolidated Financial Report (continued)
17. Provisions (Continued)
Recognition and measurement
Employee benefits
Wages, salaries, sick leave and other employee benefits
Liabilities for wages and salaries, including non-monetary benefits and other employee benefits expected to be settled within 12 months of
the reporting date are recognised in other payables in respect of employees' services up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled. Liabilities for sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.
Annual leave and long service leave
The Group expects its annual leave benefits to be settled wholly within 12 months of each reporting date. They are measured at the
amount expected to be paid when the liabilities are settled.
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of future
payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to future wage and
salary levels, experience of employee departures, and periods of service. Future payments are discounted using market yields at the
reporting date on corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash
outflows.
Rehabilitation costs
Long-term environmental obligations are based on the Group’s environmental management plans, in compliance with current
environmental and regulatory requirements.
Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred
up to the balance sheet date. Increases due to additional environmental disturbances, relating to the development of an asset, are
capitalised and amortised over the remaining lives of the area of interest.
Annual increases in the provision relating to the change in the net present value of the provision are accounted for in the income
statement as borrowing costs.
The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other
circumstances. Cost estimates are not reduced by potential proceeds from the sale of assets.
Restructuring provision
Restructuring provisions are recognised by the Group only when a detailed formal plan identifies the business or part of the business
concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline, and
the employees affected have been notified of the plan’s main features.
Other Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A provision for dividends is not recognised as a liability unless the dividends have been declared, determined or publicly recommended on
or before the balance date.
Key judgement : mine rehabilitation provision
The Group assesses its mine rehabilitation provision annually in accordance with the accounting policy stated above. Significant judgement
is required in determining the provision for mine rehabilitation as there are many transactions and other factors that will affect the ultimate
liability payable to rehabilitate the mine site. Factors that will affect this liability include future development, changes in anticipated
rehabilitation activities and costs, changes in technology, commodity price changes and changes in interest rates. When these factors
change or become known in the future, such difference will impact the mine rehabilitation provision in the period in which they change or
become known.
70MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
18. Issued Capital
[a] Ordinary shares
Issued and fully paid
2015
$’000
2014
$’000
568,328
568,328
2015
Number of
Shares
$’000
2014
Number of
Shares
$’000
[b] Movement in ordinary shares on issue
Beginning of the financial year
Exercise of performance rights
Deferred income tax on capital raising cost
1,090,584,232
568,328
1,090,584,232
568,328
[i]
220,853
-
-
-
-
-
-
-
End of the financial year
1,090,805,085
568,328
1,090,584,232
568,328
[i] On 9 July 2014, 220,853 shares were issued as a result of the vesting of the equivalent number of performance rights for the year
ended 30 June 2014.
[c] Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared, and in the event of winding up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle
their holder to one vote, either in person or by proxy, at a meeting of the Company.
Effective from 1 July 1998, the Corporations legislation abolished the concept of authorised capital and par values. Accordingly, the
Company does not have authorised capital nor a par value in respect of its issued shares.
[d] Share options
As at 30 June 2015, there were no options on issue (2014: nil) – see note 22(b).
Share options carry no right to dividends and no voting rights.
[e] Performance rights
As at 30 June 2015, there were 1,185,850 performance rights on issue (2014: 1,832,688) – see note 22(c).
[f] Capital management
The primary objectives of the Group’s capital management program are to safeguard the Group’s ability to continue as a going concern,
so that it can provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to
reduce the cost of capital.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares or
other securities.
No changes were made in the objectives, policy or processes for managing capital during the years ended 30 June 2015 and 30 June
2014.
MOUNT GIBSON IRON LIMITED 2015 Annual Report71
Notes to the Consolidated Financial Report (continued)
19. Reserves
Share based payments reserve
Net unrealised gains reserve
Dividend distribution reserve
Other reserves
Notes
2015
$’000
2014
$’000
[a]
[b]
[c]
[d]
19,973
-
964,262
(3,192)
981,043
19,687
1,676
-
(3,192)
18,171
[a] Share based payments reserve
This reserve is used to record the value of equity benefits provided to employees and
directors as part of their remuneration.
Balance at the beginning of the year
Share based payments
Balance at the end of the year
[b] Net unrealised gains reserve
This reserve records movement for available-for-sale financial assets to fair value and gains
and losses on hedging instruments classified as effective cash flow hedges.
Balance at the beginning of the year
Net gains/(losses) on cash flow hedges
Deferred income tax on cash flow hedges
Balance at the end of the year
[c] Dividend distribution reserve
This reserve is used to record profits from prior income years for the purpose of future
dividend distribution by the Company.
19,687
286
19,973
19,160
527
19,687
1,676
(2,395)
719
-
(3,225)
7,002
(2,101)
1,676
Balance at the beginning of the year
Transferred from retained earnings
Balance at the end of the year
[d] Other reserves
20
-
964,262
964,262
-
-
-
This reserve is used to record the gain or loss arising from the sale or acquisition of non-
controlling interests to or from third party investors.
Balance at the beginning of the year
Movement during the period
Balance at the end of the year
(3,192)
(3,192)
-
-
(3,192)
(3,192)
20. Retained Earnings / (Accumulated Losses)
Balance at the beginning of the year
Dividends paid during the period
Transferred to reserve
Net profit/(loss) attributable to members of the Company
Balance at the end of the year
24(a)
19[c]
675,519
(43,632)
(964,262)
(911,422)
600,978
(21,812)
-
96,353
(1,243,797)
675,519
72MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
Notes
2015
$’000
2014
$’000
21. Expenditure Commitments
[a] Exploration Expenditure Commitments
Minimum obligations not provided for in the financial report and are payable:
Not later than one year
Later than one year but not later than five years
Later than five years
[b] Operating Lease Commitments
Minimum lease payments
Not later than one year
Later than one year but not later than five years
Later than five years
[c] Hire Purchase Commitments
Minimum lease payments
Not later than one year
Later than one year but not later than five years
Total minimum lease payments
Future finance charges
Total hire purchase liability accrued for:
Current
Hire purchase facility
Non-Current
Hire purchase facility
[d] Property, plant and equipment commitments
Commitments contracted for at balance date but not recognised as liabilities
Not later than one year
Later than one year but not later than five years
[e] Contractual commitments
Commitments for the payment of other mining and transport contracts:
Not later than one year
Later than one year but not later than five years
[i]
[ii]
[iii]
16
16
[iv]
[v]
1,351
3,320
1,780
6,451
1,334
3,052
-
4,386
2,706
120
2,826
(88)
2,738
1,159
3,121
2,221
6,501
6,562
3,026
-
9,588
7,637
2,249
9,886
(430)
9,456
2,619
7,294
119
2,738
2,162
9,456
198
-
198
6,504
-
6,504
61,047
2,689
63,736
57,268
41,443
98,711
MOUNT GIBSON IRON LIMITED 2015 Annual Report73
Notes to the Consolidated Financial Report (continued)
[i]
In order to maintain current rights to explore and mine the tenements at its various mines and projects, the Group is required to
perform minimum exploration work to meet the expenditure requirements specified by the Department of Mines and Petroleum.
[ii] Operating leases relate to leases for office space with an initial term of 6 years and leases for machinery which have an average
term of 5 years.
[iii] Hire purchase liabilities have an average term of 4.7 years with, in certain cases, the option to purchase the asset at the
completion of the lease term for a pre-agreed amount. The average discount rate implicit in the hire purchase arrangements is
7.66% pa (2014: 7.43% pa). Hire purchase liabilities are secured by a charge over the relevant assets.
[iv] The Group has contractual commitments to purchase property, plant and equipment at Koolan Island and Extension Hill.
[v] Amounts disclosed as contractual commitments relate primarily to contracts in respect of mining and transport that are not
recognised as liabilities. The Group has various supplier agreements in place for its Extension Hill operation, some of which contain
financial obligations for the Group upon early termination thereof. As at 30 June 2015, these early termination obligations were
estimated to total approximately $45,000,000 related mostly to infrastructure access and ore transport. These obligations reduce
progressively with cumulative transport tonnages over the life of the Extension Hill operation.
Notes
2015
$’000
2014
$’000
22. Share-Based Payment Plans
(a) Recognised share-based payment expense
Expense arising from equity-settled share-based payment transactions
3[c]
286
527
The share-based payment plans are described below. There have been no cancellations of any of the plans during 2015 and 2014.
(b) Employee option scheme
An employee option scheme has been established where the Company may, at the discretion of the Board, grant options over the ordinary
shares of the Company. The options, issued for nil consideration, are granted in accordance with performance guidelines established by
the Directors of the Company. All Directors, officers and employees are eligible for this scheme. No options were issued during the year
ended 30 June 2015. As at balance date, no options over unissued shares were on issue. Information with respect to the number of
options granted and issued under the employee share scheme is as follows:
2015
2014
No. of Options
Weighted
average
exercise price
(cents)
No. of
Options
Weighted
average
exercise price
(cents)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at beginning of year
- granted
- forfeited
- exercised
Balance at year end
Exercisable at year end
(c) Performance Rights Plan
The Company has established a Performance Rights Plan. Rights are granted at no cost to recipients and convert (vest) into ordinary
shares on completion by the recipient of minimum periods of continuous service and the satisfaction of specified performance hurdles
related to the Company's Total Shareholder Return ("TSR") measured against a comparator group of companies over specified periods.
The vesting scale applicable to the Company’s TSR performance is as follows:
Percentile Rank Achieved
Proportion of Target Award Vesting
>76th percentile
100%
> 51st percentile and ≤76th percentile
Pro rata allocation
51st percentile
<51st percentile
50%
0%
74MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
22. Share-Based Payment Plans (Continued)
Information with respect to the number of performance rights granted and issued is as follows:
Balance at beginning of year
- granted
- exercised
- lapsed/forfeited
Balance at year end
2015
2014
No. of Performance
Rights
No. of Performance
Rights
1,832,688
-
(220,853)
(425,985)
904,908
952,600
-
(24,820)
1,185,850
1,832,688
The following table lists the inputs used for valuation of the performance rights issued under the Performance Rights Plan:
Accounting grant date
Share price at accounting grant date
Risk free interest rate
Volatility factor
Value of Performance Right on effective grant date
Recognition and measurement
Share-based payment transactions
2015
-
-
-
-
-
2014
01-Jul-13
$0.46
2.90%
50%
$0.27
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (“equity-settled transactions”).
Options
There is currently a Directors, Officers, Employees and Other Permitted Persons option plan.
The cost of these options is measured by reference to their fair value at the date at which they are granted. The fair value is
determined by using a binomial model.
In valuing these options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of
the Company.
Performance rights
There is a Mount Gibson Iron Limited Performance Rights Plan (“PRP”). The PRP enables the Company to provide its executives with
long term incentives which create a link between the delivery of value to shareholders, financial performance and rewarding and
retaining the executives.
The cost of these performance rights is measured by reference to the fair value at the date at which they are granted. The fair value is
determined using either a Black-Scholes or Monte Carlo option valuation model.
The cost of equity-settled transactions is recognised, together with a corresponding in crease in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting
date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Group, will ultimately
vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of
market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as
measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options and performance rights is reflected as additional share dilution in the computation of
earnings per share.
MOUNT GIBSON IRON LIMITED 2015 Annual Report75
Notes to the Consolidated Financial Report (continued)
23. Earnings Per Share
Basic earnings per share is calculated by dividing net profit for the year attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts is calculated by dividing the net profit attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
2015
$’000
2014
$’000
Profit/(loss) used in calculating basic and diluted earnings/(loss) per share
(1,008,505)
96,353
Weighted average number of ordinary shares used
earnings/(loss) per share
Effect of dilution
in calculating basic
- Performance rights
Weighted average number of ordinary shares used in calculating diluted
earnings/(loss) per share
Earnings/(loss) per Share (cents per share):
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Number of
Shares
Number of
Shares
1,090,805,085
1,090,584,232
-
220,853
1,090,805,085
1,090,805,085
(83.56)
(83.56)
8.84
8.83
Conversions, calls, subscriptions or issues after 30 June 2015
No options were outstanding at 30 June 2015. There have been no other conversions to, calls of, or subscriptions for ordinary shares or
issues of potential ordinary shares since the balance date and before the completion of this report.
Recognition and measurement
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity
(other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any
bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the company, adjusted for:
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses;
and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary
shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
76MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
24. Dividends Paid and Proposed
Declared and paid during the year:
(a) Dividends on ordinary shares:
Final fully franked dividend for 2013: 2.0 cents per share
Final fully franked dividend for 2014: 4.0 cents per share
2015
$’000
2014
$’000
-
43,632
43,632
21,812
-
21,812
(b) Dividends not recognised at the end of the reporting period:
A final dividend for the 2014/15 financial year has not been declared given the presently depressed iron ore price environment and the
recent failure of the Main Pit seawall at the Group’s Koolan Island operation.
(c) Franked dividends:
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 30%
Franking credits that will arise from the payment of income tax payable as at the
end of the financial year
The amount of franking credits available for future reporting periods:
Impact on the franking account of dividends proposed or declared before the
financial report was authorised for issue but not recognised as a distribution to
equity holders during the period
Tax rates
The tax rate at which paid dividends have been franked is 30%.
25. Contingent Liabilities
2015
$’000
2014
$’000
61,485
-
88,142
15,488
61,485
103,630
-
(18,700)
61,485
84,930
1. The Group has a Performance Bonding facility drawn to a total of $41,788,000 (2014: $57,221,000). The performance bonds
secure the Group’s obligations relating primarily to environmental matters and historical infrastructure upgrades.
2. Certain claims arising with customers, employees, consultants, and contractors have been made by or against certain controlled
entities in the ordinary course of business, some of which involve litigation or arbitration. The Directors do not consider the
outcome of any of these claims will have a material adverse impact on the financial position of the consolidated entity.
MOUNT GIBSON IRON LIMITED 2015 Annual Report77
Notes to the Consolidated Financial Report (continued)
26. Key Management Personnel
[a] Compensation of Key Management Personnel
Short-term
Post employment
Long-term
Share-based payment
Termination payment
2015
$
2014
$
2,602,432
3,587,635
171,361
5,223
286,211
471,229
170,811
3,169
534,059
-
3,536,456
4,295,674
[b] Loans to Specified Key Management Personnel
There were no loans to key management personnel during the year.
[c] Other Transactions and Balances with Key Management Personnel
There were no other transactions and balances with key management personnel during the year.
27. Related Party Transactions
Ultimate parent
Mount Gibson Iron Limited is the ultimate Australian parent company.
Director-related entity transactions
Sales
During all or part of the year Mr Li was a director of Shougang Concord International Trading Pty Ltd (SCIT), and Mr Lee and
Mr Ferguson were directors of APAC Resources Limited (APAC).
The following sale agreements are in place with director-related entities:
The sale to SCIT of 80% of iron ore from Tallering Peak’s production over the life of mine after 0.65 million (+/-10%) wet
metric tonnes (“WMT”) per year is provided to other customers.
The sale to a subsidiary of APAC of 20% of iron ore from Tallering Peak’s production over the life of mine after 0.65 million (+/-
10%) WMT per year is provided to other customers.
The sale to SCIT of 80% of iron ore from Koolan Island’s available mined production over the life of mine.
The sale to a subsidiary of APAC of 20% of iron ore from Koolan Island’s available mined production over the life of mine.
Pursuant to these sales agreements, during the financial year, the Group:
Sold 394,327 WMT (2014: 1,024,088 WMT) of iron ore to APAC; and
Sold 1,364,123 WMT (2014: 4,205,210 WMT) of iron ore to SCIT.
78MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
Amounts recognised at the reporting date in relation to director-related entity transactions:
Assets and Liabilities
Current Assets
Trade receivables – APAC
Trade receivables – SCIT
Total trade receivables
Total Assets
Current Liabilities
Trade payables – APAC
Trade payables – SCIT
Total trade payables
Total Liabilities
Revenues and Expenses
Sale of goods – APAC
Sale of goods – SCIT
Total Sale of Goods
2015
$’000
2014
$’000
-
2,105
2,105
2,105
129
-
129
129
6,562
16,609
23,171
23,171
-
-
-
-
25,921
66,857
92,778
87,683
418,482
506,165
Apart from the above, there are no director-related entity transactions other than those specified in note 26.
2015
$
2014
$
28. Auditor’s Remuneration
Amounts received or due and receivable by EY for:
An audit or review of the financial report of the entity and any other entity in the
consolidated entity
222,480
247,200
Other services in relation to the entity and any other entity in the consolidated entity
3,600
4,000
226,080
251,200
MOUNT GIBSON IRON LIMITED 2015 Annual Report79
Notes to the Consolidated Financial Report (continued)
29. Discontinued Operations
The Tallering Peak operation is reported as a discontinued operation in this financial report. Mining was completed in June 2014 with
the final ore shipment sold in December 2014.
[a] Profit/(loss) from discontinued operations
The financial results of Tallering Peak operation for the year are presented below:
2015
$’000
2014
$’000
Revenue
Cost of sales
Impairment of ore inventories
Gross profit/(loss)
Other expenses
Profit/(loss) before tax and finance costs from discontinued operations
Finance costs
Profit/(loss) before tax from discontinued operations
Income tax benefit/(expense)
Net profit/(loss) after tax from discontinued operations
Earnings/(loss) per share (cents per share):
basic earnings/(loss) per share
diluted earnings/(loss) per share
[b] Cash flow from discontinued operations
The net cash flows incurred by Tallering Peak operation are as follows:
Operating
Investing
Financing
Net cash inflow/(outflow) from discontinued operations
8,987
(21,113)
(6,084)
(18,210)
(878)
(19,088)
(2)
(19,090)
(2,825)
(21,915)
(2.01)
(2.01)
237,808
(221,491)
-
16,317
-
16,317
(71)
16,246
(10,065)
6,181
0.57
0.57
(18,196)
-
(231)
(18,427)
95,167
(1,074)
(3,283)
90,810
80MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
30. Segment Information
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer
and the executive management team in assessing performance and in determining the allocation of resources.
Previously, management had determined that all operating segments qualified to be aggregated to form one reportable segment on the
basis that they had similar economic characteristics. In the current year, due to the change in economic characteristics at Koolan Island
arising from the Main Pit seawall failure, the change in focus to remnant mining in the Acacia East satellite pit and the planned
placement onto care and maintenance, and pursuit of the seawall insurance claim, management has determined that the operating
segments do not meet the criteria for aggregation. 2014 comparative information has been re-presented in line with this change.
For management purposes, the Group has organised its operating segments into two reportable segments as follows:
Extension Hill segment – this segment includes the mining, crushing, transportation and sale of iron ore.
Koolan Island segment – this segment includes the mining, crushing and sale of iron ore. Activities are presently expected to be
completed by December 2015, following which the site will be placed on care and maintenance.
Operating results for each reportable segment are reviewed separately by management for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured
consistently with operating profit or loss in the consolidated financial statements.
The accounting policies applied for internal reporting purposes are consistent with those applied in the preparation of the financial
statements.
There have been no inter-segment transactions.
Items that are managed on a Group basis and are not allocated to segments as they are not considered part of core operations of any
segment are as follows:
Finance costs and revenue
Interest revenue
Foreign exchange gains / (losses)
Corporate costs
Operating results for discontinued operations have been excluded from the segment results below.
During the year ended 30 June 2015, revenue received from the sale of iron ore comprised purchases by the following buyers who each
on a proportionate basis equated to greater than 10% of total sales for the period:
Customer
# 1
# 2
# 3
# 4
Other
2015
$’000
102,471
65,966
64,174
26,517
64,294
323,422
During the year ended 30 June 2014, revenue received from the sale of iron ore comprised purchases by the following buyers who each
on a proportionate basis equated to greater than 10% of total sales for the period:
Customer
# 1
# 2
# 3
# 4
Other
2014
$’000
268,289
155,456
107,985
56,158
71,767
659,655
Revenue from external customers by geographical location is based on location of the customer. In the year ended 30 June 2015,
approximately 2% (2014: 2%) of the iron ore sales revenue was sold on a mine gate basis to a local buyer, with the vast majority of the
balance shipped to China.
All segment assets are located within Australia.
MOUNT GIBSON IRON LIMITED 2015 Annual Report81
Notes to the Consolidated Financial Report (continued)
30. Segment Information (Continued)
Segment revenue
Revenue from sale of iron ore
Other revenue
Segment revenue
Segment result
Earnings/(loss) before impairment, interest, tax, depreciation
and amortisation
Extension Hill
Koolan Island
Other*
Consolidated
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
204,307
307,727
111,337
352,434
-
-
-
-
204,307
307,727
111,337
352,434
-
12,209
12,209
-
15,549
315,644
12,209
660,161
15,549
15,549
327,853
675,710
32,306
130,143
535
193,258
(9,740)
(2,215)
23,101
321,186
Impairment losses
(71,700)
-
(848,211)
-
(19,219)
-
(939,130)
-
Earnings/(loss) before interest, tax, depreciation and
amortisation
(39,394)
130,143
(847,676)
193,258
(28,959)
(2,215)
(916,029)
321,186
Depreciation and amortisation
(22,921)
(28,139)
(46,801)
(139,423)
(735)
(545)
(70,457)
(168,107)
Segment result
Finance costs
Profit/(loss) before tax and discontinued operations
Items included in segment result:
Impairment of consumables inventories
Impairment of ore inventories
Impairment of property, plant and equipment
Impairment of mine development
Impairment of exploration and evaluation expenditure
(62,315)
102,004
(894,477)
53,835
(29,694)
(2,760)
(986,486)
153,079
(2,929)
(5,627)
(989,415)
147,452
-
-
56,459
15,241
-
71,700
-
-
-
-
-
-
339
3,442
146,754
697,676
-
848,211
-
-
-
-
-
-
-
-
-
-
19,219
19,219
-
-
-
-
-
-
339
3,442
203,213
712,917
19,219
939,130
-
-
-
-
-
-
*
‘Other’ includes interest revenue and corporate expenses such as head office salaries and wages.
82MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
30. Segment Information (Continued)
Segment assets
Current financial assets
Other current assets
Property, plant and equipment
Deferred acquisition, exploration and evaluation
Mine properties
Tax assets
Total assets
Segment liabilities
Financial liabilities
Tax liabilities
Other liabilities
Total liabilities
Extension Hill
Koolan Island
Other
Consolidated
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
12,424
9,500
7,897
2,274
3,205
-
27,811
10,221
48,242
1,194
24,650
19,389
6,331
12,452
15,306
-
-
-
22,954
39,390
135,453
308
631,081
108,363
330,602
534,066
349,357
2,430
8,291
650
-
-
21,430
39,491
20,361
-
(81,753)
24,382
31,494
2,924
3,205
-
584,831
71,041
223,186
21,863
655,731
45,999
35,300
131,507
34,089
937,549
341,973
533,595
411,362
1,602,651
32,362
-
9,916
38,454
568
9,897
11,641
-
35,777
64,458
194,669
34,521
8,399
31,745
52,402
-
(49,733)
-
7,693
16,054
53,386
134,657
145,504
60,472
42,278
48,919
47,418
293,648
16,092
(1,934)
105,788
340,633
Net assets/(liabilities)
(6,978)
82,588
(13,329)
643,901
325,881
535,529
305,574
1,262,018
Capital expenditure
2,983
5,815
47,914
40,793
6,330
2,510
57,227
49,118
MOUNT GIBSON IRON LIMITED 2015 Annual Report83
Notes to the Consolidated Financial Report (continued)
31. Events After the Balance Sheet Date
As at the date of this report there are no significant events after balance date of the Company or of the Group that require adjustment of
or disclosure in this report.
32. Financial Instruments
[a] Financial risk management objectives
The Group’s principal financial instruments, other than derivatives, comprise bank and equipment finance arrangements, cash and short-
term deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations.
The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.
The Group also enters into derivatives transactions, principally forward currency contracts, and from time to time also enters into foreign
currency collar options and interest rate swaps. The purpose is to manage the currency and interest rate risks arising from the Group’s
operations and its sources of finance.
The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, credit risk, commodity price risk
and liquidity risk. The Board reviews and agrees management’s recommended policies for managing each of these risks, as summarised
below.
[b] Foreign currency risk
The Group is exposed to the risk of adverse movement in the A$ compared to the US$ as its iron ore sales receipts are predominantly
denominated in US$. The Group has used derivative financial instruments to manage specifically identified foreign currency exposures by
hedging a proportion of forecast US$ sales transactions in accordance with its risk management policy. The primary objective of using
derivative financial instruments is to reduce the volatility of earnings and cashflows attributable to changes in the A$/US$ exchange rate
and to protect against adverse movements in this rate.
The Group recognises derivative financial instruments at fair value at the date the derivative contract is entered into. The Group applies
hedge accounting to forward foreign currency contracts that meet the criteria of cash flow hedges.
During the year ended 30 June 2015, the Group delivered into US dollar foreign exchange forward contracts totalling US$155,000,000 at a
weighted average exchange rate of A$1.00/US$0.9035.
At 30 June 2015, the notional amount of the foreign exchange hedge book was $nil. The Group will consider entering into new foreign
exchange hedging contracts as the business need arises.
It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge
effectiveness.
The Group uses the following derivative instruments to manage foreign currency risk from time to time as business needs and conditions
dictate:
Instrument
Type of Hedging
Objective
Forward exchange contracts
Cash flow hedge
To hedge sales receipts against cash flow volatility arising from the
fluctuation of the A$/US$ exchange rate.
84MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
[i] Foreign exchange contracts – cash flow hedges
At balance date, the following foreign exchange contracts designed as a hedge of anticipated future receipts that will be denominated in
US$ were outstanding:
2015
2014
Average
Contract
Rate
A$/US$
Contract
Value
A$
$’000
Fair
Value
A$
$’000
Average
Contract
Rate
A$/US$
Contract
Value
A$
$’000
Fair
Value
A$
$’000
US$
$’000
US$
$’000
Forward Exchange
Contracts
- within one year
Total
-
-
-
-
-
-
-
-
0.9118
81,000
88,839
2,395
0.9118
81,000
88,839
2,395
Current assets
Total forward exchange contracts
Movement in forward exchange contract cash flow hedge reserve:
Opening balance
Change in fair value of cash flow hedges net of tax
Transferred from/(to) revenue in Income Statement net of tax
- Continuing operations
- Discontinued operations
Closing balance
Cash flow hedge ineffectiveness recognised immediately in profit and loss
[ii] Foreign currency sensitivity
Notes
9
2015
$’000
-
-
2014
$’000
2,395
2,395
2,395
5,334
(4,607)
6,837
2[a]
(7,778)
49
-
-
506
(341)
2,395
-
The following table details the effect on profit and other comprehensive income after tax of a 10% change in the A$ against the US$ from
the spot rates at 30 June 2015 and 30 June 2014 due to changes in the fair value of monetary assets and liabilities.
Net Profit
Other Comprehensive Income
2015
$’000
2014
$’000
2015
$’000
10% appreciation in the A$ spot rate with all other
variables held constant
10% depreciation in the A$ spot rate with all other
variables held constant
(781)
(2,559)
955
3,128
-
-
2014
$’000
7,148
(5,010)
The sensitivity analysis of the Group’s exposure to the foreign currency risk at balance date has been determined based on the change in
value due to foreign exchange movement based on exposures at balance sheet date. A positive number indicates an increase in profit
and other comprehensive income.
MOUNT GIBSON IRON LIMITED 2015 Annual Report85
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
At balance date, the Group’s exposure to foreign currency risks on financial assets and financial liabilities, excluding derivatives, are as
follows:
Financial Assets
Cash
(included within note 5)
Trade receivables
(included within note 7)
Financial Liabilities
Trade payables
Net exposure
[c] Interest rate risk
(included within note 15)
2015
$’000
3,919
9,193
(841)
12,271
2014
$’000
2,227
38,009
(22)
40,214
The Group’s exposure to market interest rates relates primarily to the Group’s equipment financing obligations, cash and cash equivalents
and term deposits.
The Group’s policy is to manage its interest costs using a mix of fixed and variable rate debt.
The Group regularly analyses its interest income rate exposure. Within this analysis, consideration is given to potential renewals of
existing positions and alternative financing arrangements.
At balance date, the Group’s exposure to interest rate risks on financial assets and financial liabilities was as follows:
86MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
CONSOLIDATED
i) Financial assets
Cash
Floating interest rate
1 year or less
Over 1 to 5 years
Non-interest bearing
Fixed interest rate maturing in:
Total carrying amount
per balance sheet
Weighted Average
Interest
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
%
2014
%
46,001
55,466
-
-
Short-term deposits (< 3 months maturity)
-
-
45,000
15,000
Term deposits (> 3 months maturity)
33,000
15,000
210,000
434,300
Trade and other receivables
Derivative financial assets
Total financial assets
ii) Financial liabilities
Trade and other payables
Hire purchase liabilities
Total financial liabilities
-
-
-
-
-
-
-
-
79,001
70,466
255,000
449,300
-
-
-
-
-
-
-
2,619
2,619
-
7,294
7,294
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119
119
2,162
2,162
2
-
-
5
-
-
46,003
45,000
55,471
15,000
243,000
449,300
15,354
-
53,004
2,395
15,354
-
53,004
2,395
15,356
55,404
349,357
575,170
2.07
2.59
3.23
-
-
49,664
125,201
49,664
125,201
-
-
-
2,738
9,456
7.66
49,664
125,201
52,402
134,657
1.58
3.50
3.57
-
-
-
7.43
MOUNT GIBSON IRON LIMITED 2015 Annual Report87
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
[i] Interest rate sensitivity
The following table details the effect on profit and other comprehensive income after tax of a 1% change in interest rates at 30 June
2015 and 30 June 2014.
Net Profit
Other Comprehensive Income
2015
$’000
2014
$’000
2015
$’000
2014
$’000
1% increase in interest rate with all other
variables held constant
1% decrease in interest rate with all other
variables held constant
2,016
3,250
(2,016)
(3,250)
-
-
-
-
The sensitivity analysis of the Group’s exposure to Australian variable interest rates at balance date has been determined based on
exposures at balance sheet date. A positive number indicates an increase in profit and equity.
[d] Credit risk
The Group’s maximum exposures to credit risk at balance date in relation to each class of recognised financial assets, other than
derivatives, is the carrying amount of those assets as indicated in the balance sheet.
In relation to derivative financial instruments, whether recognised or unrecognised, credit risk arises from the potential failure of
counterparties to meet their obligations under the contract or arrangement. The Group’s maximum credit risk exposure in relation to
forward exchange contracts is the full amount of the foreign currency it will be required to pay or purchase when settling the forward
exchange contract, should the counterparty not pay the currency it is committed to deliver to the Group.
The Group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of
customers and by the use of advance payments and letters of credit which effectively protect at least 90% of receivable amount at
the time of sale.
Credit risk from balances with banks and financial institutions is managed in accordance with a Board approved policy. Investments of
surplus funds are made only with approved counterparties with an acceptable Standard & Poors short term credit rating and within
credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Board on an annual basis, and may be
updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through
potential counterparty failure. No material exposure is presently considered to exist by virtue of the possible non-performance of the
counterparties to financial instruments.
There are no significant concentrations of credit risk within the Group.
[e] Commodity price risk
The Group’s operations are exposed to commodity price risk as the Group sells iron ore to its customers. The majority of the Group’s
sales revenue is derived under long term sales contracts for the life of mine at each of its operations. The pricing mechanism in these
contracts reflects a market based clearing index. The pricing mechanism adopts the Platts Iron Ore Index Price (“Platts Index”)
which is published daily for iron ore “fines” with Fe content ranging from 52% to 65% and is quoted on a US$ per dry metric tonne
“Cost and Freight” North China basis. The price to be paid by Mount Gibson’s customers is based on the applicable Platts Index for
the type and quality of ore delivered and reflects the average Platts Index for the preceding or the actual calendar month of the iron
ore shipment. The average monthly Platts Index is converted to a “Free On Board” price per dry metric tonne by deducting the
calculated shipping freight costs utilising corresponding shipping average monthly indices for Panamax vessels from the ports of
Geraldton and Koolan Island to China. “Lump” iron ore receives a premium to the published Platts Index “fines” price and is
determined every 1 to 6 months depending on the relevant sales contract.
Revenue on sales is recognised based on provisional priced sales and is subject to final adjustments between 30 to 120 days after
shipment and delivery. There are limited available financial instruments available to hedge the iron ore price and the Group has yet to
enter into such arrangements.
88MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
[f] Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of its cash reserves and
equipment financing arrangements. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and
matching maturity profiles of financial assets and liabilities.
The Group’s capital risk management objectives are to safeguard the business as a going concern, to provide appropriate returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure in order to reduce the cost of capital
(being equity and debt).
Mount Gibson does not have a target debt/equity ratio but has a policy of maintaining a flexible financing structure so as to be able to
take advantage of new investment opportunities that may arise.
At 30 June 2015, the Group had unutilised performance bonding facilities totalling $23,212,000 (2014: $7,779,000). Refer note 16.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the
balance sheet date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash
flows, these balances will not necessarily agree with the amounts disclosed in the balance sheet.
Less
than 6
months
$’000
49,664
1,811
-
-
Financial Liabilities
Trade and other payables
Hire purchase liabilities
Derivatives – Gross Inflow
Derivatives – Gross Outflow
30 June 2015
30 June 2014
6 to 12
months
$’000
1 to 5
years
$’000
Over
5
years
$’000
Less
than 6
months
$’000
Total
$’000
6 to 12
months
$’000
1 to 5
years
$’000
Over
5
years
$’000
Total
$’000
-
895
-
-
-
120
-
-
-
-
-
-
-
49,664
125,201
-
-
2,826
5,556
2,082
2,248
-
-
(91,252)
88,857
-
-
-
-
52,490 128,362
2,082
2,248
-
-
-
-
-
125,201
9,886
(91,252)
88,857
132,692
51,475
895
120
[g] Fair value of financial assets and financial liabilities
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 – quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2 – valuation techniques (for which the lowest level of input that is significant to the fair value measurement is directly or
indirectly observable)
Level 3 – valuation techniques (for which the lowest level of input that is significant to the fair value measurement is unobservable)
The fair values of derivative financial instruments are determined using the Level 2 method requiring fair value to be calculated using
short and long term observable market inputs. The Group’s fair values under the Level 2 method are sourced from an independent
valuation by the Group's treasury advisors. The valuation techniques use prevailing market inputs sourced from Reuters/Bloomberg to
determine an appropriate mid price valuation.
The fair values of cash, short-term deposits, trade and other receivables, trade and other payables and other interest-bearing
borrowings approximate their carrying values, as a result of their short maturity or because they carry floating rates of interest.
MOUNT GIBSON IRON LIMITED 2015 Annual Report89
Notes to the Consolidated Financial Report (continued)
32. Financial Instruments (Continued)
The carrying amounts and fair values of the financial assets and financial liabilities for the Group as at 30 June 2015 are shown below.
2015
2014
Carrying Amount
$’000
Fair Value
$’000
Carrying Amount
$’000
Fair Value
$’000
Financial assets - current
Cash
Short-term deposits
Term deposits
Trade debtors
Other receivables
Derivatives
Financial liabilities – current
Trade and other payables
Hire purchase liabilities
Financial liabilities – non current
Hire purchase liabilities
Net financial assets
46,003
45,000
243,000
10,402
4,952
-
349,357
49,664
2,619
52,283
119
119
296,955
46,003
45,000
243,000
10,402
4,952
-
349,357
49,664
2,619
52,283
119
119
296,955
55,471
15,000
449,300
41,802
11,202
2,395
575,170
125,201
7,294
132,495
2,162
2,162
440,513
55,471
15,000
449,300
41,802
11,202
2,395
575,170
125,201
7,294
132,495
2,162
2,162
440,513
Recognition and measurement
Derivative financial instruments and hedging
The Group uses foreign currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial
instruments are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to
fair value.
Any gains and losses arising from changes in the fair value of derivatives, except those that qualify as cash flow hedges, are taken
directly to net profit or loss for the year.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles.
For the purpose of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the
fair value of a recognised asset or liability, or cash flow hedges where they hedge exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. All hedges are currently
classified as cash flow hedges.
In relation to cash flow hedges (forward foreign currency contracts) to hedge firm commitments which meet the conditions for hedge
accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in
equity and the ineffective portion is recognised in the income statement.
When the hedged firm commitment results in the recognition of an asset or a liability, then, at the time the asset or liability is
recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the
acquisition cost or other carrying amount of the asset or liability.
For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the income statement in the same
year in which the hedged firm commitment affects the net profit and loss, for example when the future sale actually occurs.
Effectiveness is tested at inception of each hedge and monthly thereafter until the hedge expires. The cumulative dollar offset method is
applied in the measurement of effectiveness. The cumulative approach involves comparing the cumulative change (to date from
inception of the hedge) in the hedging instrument’s fair values to the cumulative change in the hedged item’s (or USD cash flow)
attributable to the risk being hedged.
Effectiveness of the forward exchange contracts is monitored by comparing the forward net present value of the underlying cash flows to
the forward net present value of the fair value associated with the hedging instrument. Prospective and retrospective testing is
undertaken by the Group’s treasury advisors.
At each balance date, the Group measures ineffectiveness using the ratio offset method. For foreign currency cash flow hedges if the
risk is over hedged, the ineffective portion is taken immediately to other income or expense in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity
until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income
statement.
90MOUNT GIBSON IRON LIMITED 2015 Annual Report
Notes to the Consolidated Financial Report (continued)
33. Parent Entity Information
[a]
Information relating to Mount Gibson Iron Limited:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Share based payments reserve
Total Shareholder’s Equity
Net loss after tax of the parent entity
Total comprehensive loss of the parent entity
2015
$’000
2014
$’000
423
606,434
306
300,860
568,328
(282,727)
19,973
305,574
(109,432)
(109,432)
10,388
672,723
444
246,320
568,328
(161,612)
19,687
426,403
(2,132)
(2,132)
[b]
Details of any guarantees entered into by the parent entity
There are cross guarantees given by Mount Gibson Iron Limited in relation to the debts of its subsidiaries as described in notes 10 and
16.
The parent entity has further provided bank guarantees in respect of obligations to various authorities. Refer to note 16.
[c]
Details of any contingent liabilities of the parent entity
The parent entity had contingent liabilities as at reporting date as set out in note 25. For information about guarantees given by the
parent entity, refer [b] above.
Mount Gibson Iron Limited guarantees the performance of Mount Gibson Mining Limited’s obligations to Aurizon entities under the
Transport Access Agreement made on 26 June 2008 as amended and restated on 30 June 2009. In accordance with this agreement,
Mount Gibson Mining Limited agrees to reimburse Aurizon for track access charges properly due and payable to Brookfield, the rail
infrastructure owner.
[d]
Details of any contractual commitments by the parent entity for the acquisition of property, plant and
equipment
There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment as at reporting date.
[e]
Tax Consolidation
The Company and its 100% owned entities have formed a tax consolidated group. Members of the Group entered into a tax sharing
arrangement in order to allocate income tax expense to the wholly owned controlled entities. The agreement provides for the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date,
the possibility of default is remote. The head entity of the tax consolidated group is Mount Gibson Iron Limited.
MOUNT GIBSON IRON LIMITED 2015 Annual Report91
Directors’ Declaration
In accordance with a resolution of the directors of Mount Gibson Iron Limited, I state that:
1.
In the opinion of the Directors:
a.
the financial statements, notes and the additional disclosures included in the Directors Report designated as audited of
the Group are in accordance with the Corporations Act 2001, including:
i)
giving a true and fair view of the financial position of the Group as at 30 June 2015 and of its performance for
the year ended on that date; and
ii)
complying with Accounting Standards and the Corporations Regulations 2001; and
b.
c.
the financial statements and notes also comply with International Reporting Standards as disclosed in Note 1; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section
295A of the Corporations Act 2001 for the financial year ended 30 June 2015.
Signed in accordance with a resolution of the directors.
SIMON BIRD
Lead Independent Non-Executive Director
Sydney, 18 August 2015
92MOUNT GIBSON IRON LIMITED 2015 Annual Report
Independent Audit Report
MOUNT GIBSON IRON LIMITED 2015 Annual Report93 94MOUNT GIBSON IRON LIMITED 2015 Annual Report Corporate Governance
The Company's Board is committed to protecting and enhancing shareholder value and conducting the Company's business ethically and in
accordance with high standards of corporate governance. In determining those standards the Company has had reference to the ASX Corporate
Governance Council's Corporate Governance Principles and Recommendations 3rd Edition (“ASX Recommendations”) during the reporting period.
The Company believes that its practices are substantially consistent with the ASX Recommendations and will continue to adapt its governance
practices to be consistent with them and make changes as appropriate, having regard to the nature and scale of the Company's business.
A description of the Company's main corporate governance practices is set out in its Corporate Governance Statement available online at
www.mtgibsoniron.com.au. The practices reflect the Company's existing corporate governance policies and is current as at 30 September 2015.
The Corporate Governance Statement has been approved by the Board.
MOUNT GIBSON IRON LIMITED 2015 Annual Report95 Additional ASX Information
The following information is current as at 3 September 2015.
(a) Distribution of equity securities
The number of Shareholders, by size of holding, in each class of Share, are as follows:
1,000
5,000
10,000
100,000
-
-
-
-
-
1
1,001
5,001
10,001
100,001
TOTAL
The number of Shareholders holding less
than a marketable parcel of Shares are:
Number of holders
Number of Shares
% of Issued Capital
Ordinary Shares
1,964
4,351
2,270
3,651
424
12,660
4,524
1,051,127
12,761,573
18,129,387
113,789,186
945,073,812
1,090,805,085
6,228,000
0.10%
1.17%
1.66%
10.43%
86.64%
100.00
0.57%
(b) Equity security holders
The names of the twenty largest holders of quoted Shares are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
TRUE PLUS LIMITED
SUN HUNG KAI INVESTMENT SERVICES LIMITED
CITICORP NOMINEES PTY LIMITED
APAC RESOURCES INVESTMENTS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ZERO NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
SUN HUNG KAI INVESTMENT SERVICES LTD
DEBORTOLI WINES PTY LIMITED
10. NATIONAL NOMINEES LIMITED
11. BNP PARIBAS NOMS PTY LTD
12. CS FOURTH NOMINEES PTY LTD
13. DEBORTOLI WINES PTY LTD (SUPERANNUATION) PTY LTD
5,328,171
14. MR ALESSANDRO LUIGI PICCININI
15. TRUE PLUS LIMITED
16. ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD (CUSTODIAN)
17. MR MENG LUO & MRS LAN LIU
18.
JB LEMAR PTY LTD
19. UBS NOMINEES PTY LTD
20. DYNAMIC SUPPLIES INVESTMENTS PTY LTD
Top 20 holders
Total Remaining Holders Balance
Total Issued Ordinary Shares
5,000,000
4,700,000
4,631,443
4,620,000
4,550,000
4,163,202
3,635,733
822,420,548
268,384,537
1,090,805,085
Number of Shares
% of Shares Held
159,166,874
151,523,460
116,085,006
82,900,000
56,111,645
52,513,000
48,458,308
40,053,818
34,246,165
20,073,833
18,590,767
6,069,123
14.59
13.89
10.64
7.60
5.14
4.81
4.44
3.67
3.14
1.84
1.70
0.56
0.49
0.46
0.43
0.42
0.42
0.42
0.38
0.33
75.40
24.60
100.00
96MOUNT GIBSON IRON LIMITED 2015 Annual Report
(c) Substantial Shareholders
The names of Substantial Shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
1.
APAC Resources Limited and its subsidiaries
2. Ms Shirley Chong Suk Un
Number of Shares
279,877,774
290,218,342
% of Current
Issued Shares
25.66%
26.61%
Note: Substantial shareholdings 1 and 2 are not cumulative and arise through
common shareholdings.
3.
Shougang Corporation and Shougang Concord International Enterprises
Company Limited and each of their controlled entities
154,166,874
14.14%
4.
Shougang Fushan Resources Group Limited, True Plus Limited and its subsidiaries
154,166,874
14.14%
Note: Substantial shareholdings 3 and 4 are not cumulative and arise through
common shareholdings.
5.
Argyle Street Management Limited
54,540,256
5.00%
(d) Voting rights
All ordinary Shares carry one vote per Share without restriction.
No voting rights attach to options.
(e) Schedule of interests in mining tenements
Location
Tenements Held by MGX
Brockman
Extension Hill
Extension Hill
Extension Hill
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Fields Find
Jasper Hill
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan South
Tenement
Status
Percentage Held
E80/3087-I
L70/133
G70/232
G70/238
E59/1938-I
E59/1939-I
E59/1940-I
E59/1984
E59/1268-I
M59/63-I
P59/1997-I
P59/1998-I
P59/1991
P59/2035
E59/1996
E59/1997
E59/2064
E59/2065
E59/2066
E59/2067
E59/1355-I
M04/416-I
M04/417-I
E04/1266-I
L04/29
L04/68
E04/1407-I
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Pending
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
MOUNT GIBSON IRON LIMITED 2015 Annual Report97
(e) Schedule of interests in mining tenements (continued)
Location
Tenements Held by MGX
Tenement
Status
Percentage Held
Piawaning
Piawaning
Piawaning
Piawaning
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Tallering Peak
Wellstead
Yalgoo
E70/3059-I
E70/4509-I
E70/4510-I
E70/4511-I
M70/1062-I
M70/1063-I
M70/1064-I
M70/896-I
E70/3732
L70/60
L70/69
L70/73
L70/74
G70/192
G70/193
G70/201
G70/202
G70/203
G70/204
G70/205
E70/4424
E59/2072
Live
Live
Live
Live
Live
Live
Live
Live
Pending
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Pending
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Location
MGX Has Interests In
Tenement
Status
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Extension Hill
1
Shine
2
Shine
2
Shine
2
M59/339-I
M59/338-I
M59/454-I
M59/455-I
M59/550-I
M59/526-I
M59/609-I
L59/63
G59/30
G59/31
G59/45
G59/33
G59/34
G59/35
G59/36
G59/41
M59/406-I
M59/421-I
M59/731-I
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
1 Tenements are held by another party. MGX has rights to Hematite, Goethite and Limonite.
2 Tenements are held by another party. MGX has rights to Iron on a portion of these tenements.
98MOUNT GIBSON IRON LIMITED 2015 Annual Report
Corporate Directory
Board of Directors
Bankers
Lee Seng Hui
Chairman, Non-Executive Director
Alan Jones
Non-Executive Director
Li Shaofeng
Non-Executive Director
Russell Barwick
Non-Executive Director
Paul Dougas
Non-Executive Director
Simon Bird
Non-Executive Director
Company Secretary
David Stokes
Registered Office
Level 1, 2 Kings Park Road
West Perth 6005, Western Australia
Telephone:+61 8 9426 7500
Facsimile:+61 8 9485 2305
Email:admin@mtgibsoniron.com.au
Website:www.mtgibsoniron.com.au
Solicitors
Herbert Smith Freehills
Level 36, QV1 Building
250 St George’s Terrace
Perth 6000, Western Australia
Auditors
Ernst & Young
Ernst & Young Building
11 Mounts Bay Road
Perth 6000, Western Australia
HSBC Bank Australia Ltd
188-190 St George’s Terrace
Perth 6000, Western Australia
Stock Exchange Listing
The company’s shares are listed on
the Australian Securities Exchange.
ASX Code: MGX
Share Registry
Computershare Investor
Services Pty Ltd
Level 2, Reserve Bank Building
45 St George’s Terrace
Perth 6000, Western Australia
Telephone:+61 8 9323 2000
Facsimile:+61 8 9323 2033
Annual General Meeting
of Shareholders
Scheduled to be held at 10.00am
on 11 November 2015 at City
West Function Centre, 45 Plaistowe
Mews, West Perth WA
Easy Access to
Information
See our website at
www.mtgibsoniron.com.au
for regular quarterly reports and
financial results. Additionally,
shareholders or interested parties
can register to receive emailed
updates shortly after the company
makes any regular or major
announcement.
MOUNT GIBSON IRON LIMITED 2015 Annual Report99 www.mtgibsoniron.com.au