www.mtgibsoniron.com.au
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201620162016AnnualReport
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.
Headquartered 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
Corporate Directory
All information correct as at 30 June 2016
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 9 November 2016 at City West
Function Centre, 45 Plaistowe Mews,
West Perth WA
Easy Access to
Information
See our website at
www.mtgibsoniron.com.au
for all Company announcements,
including quarterly reports and
financial results. Shareholders or
interested parties may also register
to receive emailed updates shortly
after the company makes any regular
or major announcement.
MOUNT GIBSON IRON LIMITED 2016 Annual Report
99
2 Contents
2015/16 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
Directors’ Report
Corporate Governance
Additional ASX Information
Corporate Directory
3
4
5
6
7
10
11
13
14
93
94
99
2015/16 Performance Summary
(cid:63)Lost Time Injury Frequency Rate of Zero for second consecutive year
(cid:63)Total ore sales revenue of $240 million on ore sales of 5.0 million tonnes
(cid:63)Underlying $19.4 million gross profit*, comprising an underlying $13.4 million
gross profit from continuing operations and $6.0 million profit from the
discontinued Tallering Peak operation
(cid:63)Reported statutory net profit after tax of A$86.3 million
(cid:63)Year-end cash, term deposits and liquid investments of $400 million
(cid:63)Total Cost of Goods Sold reduced 29% to $44/wmt FOB, including non-cash
costs, royalties and before impairments
(cid:63)$86 million settlement agreed for property damage component of insurance claim
for failure of Main Pit seawall at Koolan Island
(cid:63)Successfully completed satellite mining on Koolan Island and transitioned site to
care and maintenance
(cid:63)Positive conditional EPA recommendation for Iron Hill Project
(cid:63)Net assets of $392 million and negligible debt
*The underlying basis is an unaudited non-IFRS measure that in the opinion of the
Directors provides useful information to assess the Company’s financial performance.
2
MOUNT GIBSON IRON LIMITED 2016 Annual Report
3 In the circumstances and the potential
capital demands of our business, the Board
determined it would be prudent not to
declare a dividend for the 2015/16 year.
However, we 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
over the year. I look forward to reporting an
even more successful year in 2017.
Lee Seng Hui
Chairman
Chairman’s Report
It is with great pleasure that I present to you
Mount Gibson Iron’s 2016 Annual Report.
It was highly satisfying to return to
profitability in 2015/16, recording a
statutory net profit after tax of $86.3 million
in a year that was again characterised by
extremely challenging market conditions.
Iron ore prices remained volatile, declining
to ten-year lows during December 2015 and
averaging 29% less over the twelve month
period compared with the prior year.
Looking to the year ahead, the Board has
determined the following key business
objectives for the 2016/17 financial year:
(cid:159)
Extension Hill – finalise necessary
regulatory government approvals for the
development of the Iron Hill deposit to
extend production beyond the current
end of the reserve life.
(cid:159)
(cid:159)Koolan Island – maintain the site on
care and maintenance, and undertake
the detailed work required to assess the
Our strong financial result reflected the
viability of reinstating the Main Pit
Company’s continued diligent focus on cost
seawall and recommencing production.
reduction and financial discipline. This (cid:159)Koolan Island seawall insurance
approach was fundamental to achieving an
underlying gross profit of $19.4 million,
comprising an underlying gross profit from
continuing operations of $13.4 million and a
$6.0 million gross profit from the
discontinued Tallering Peak operation.
claim – progress and finalise the
business interruption component of the
claim.
Cost reductions – continue to drive for
sustainable cost improvements across
the existing business.
Treasury returns – maintain the
increased yield on the Group’s cash
reserves.
Our headline result was also buoyed by the
successful $86 million cash settlement of
the property damage component of our
insurance claim for the failure of the Main
Pit seawall at Koolan Island in late 2014. By (cid:159)Growth projects – continuation of the
the end of the financial year, we had
received $50 million of the settlement
proceeds, while the remainder was received
in July. I note that this successful settlement
is completely independent of the business
interruption component of our claim, which
is ongoing.
search for business development
opportunities in the resources sector.
By focusing on these priorities, we are
confident that Mount Gibson can continue
to navigate the uncertain market conditions
and capitalise on our financial strength to
deliver strong long term returns for our
shareholders.
(cid:159)
Consequently, our cash and liquid
investments rose strongly over the year to
$400 million at the end of June, a very
significant increase of $66 million compared
with our cash position at the end of the
prior financial year.
This performance positions Mount Gibson
extremely well to deliver on the Board’s
overarching strategic objective of creating
long term value through investment in
exploration, development, and efficient
operational extraction of mineral resources.
Given our financial strength we are looking
to the future with renewed optimism and
confidence, particularly as we work to bring
Iron Hill into production, finalise our
assessment of the potential to restart
operations at Koolan Island, and consider
external investment opportunities in the
broader resources sector.
4 Chief Executive Officer's Report
As the Chairman has stated, Mount
Gibson’s performance in 2015/16 year
was very satisfying in the face of
significantly lower iron ore prices and
extremely challenging market conditions.
The safety of our people remains our
absolute priority, so it is of great credit to
our workforce that in this challenging
period Mount Gibson again reported
improved safety performance.
The Total Recordable Injury Frequency Rate
(TRIFR) declined by 27.7% to 6.8, and our
Lost Time Injury Frequency Rate (LTIFR)
was zero for a second consecutive year.
Significantly, at the end of June 2016, the
Extension Hill site passed 1000 days
without an LTI. This is a tremendous
achievement of which everyone at Mount
Gibson can be proud and which sets a
great example for the entire business to
follow. Of course, safety performance can
never be taken for granted and we will
always strive for further improvement.
Our financial and operating performance
was also very satisfying given the
challenging market conditions, as was the
successful $86 million settlement of the
property damage component of the Koolan
Island insurance claim, which has further
bolstered our very strong financial position.
Our ongoing focus on business efficiency
was reflected in a 29% reduction in our
Total Cost of Goods Sold to $44 per wet
metric tonne Free on Board (FOB),
including non-cash costs, royalties and
before impairments, compared with
$62/wmt in the prior year. All-in group
cash costs, which include all operating,
capital, royalties and head office costs,
were reduced by 26% to $46/wmt FOB.
Both Extension Hill and Koolan Island, where
the Acacia East satellite pit was completed in
the March 2016 quarter, contributed to the
positive cashflow from operations of $5.7
million achieved in the year. Site cash costs,
which are before corporate cost allocations,
averaged just $44/wmt at Extension Hill and
$37/wmt at Koolan Island. Our operational
agility also enabled the Company to take
advantage of improved prices in the June
quarter to monetise remnant low grade
material at the closed Tallering Peak site.
and production scheduling to achieve a
material reduction in the average strip
ratio and also a marked increase in
product grade. Mount Gibson expects to
conclude this detailed evaluation work in
the March 2017 quarter.
Our healthy balance sheet and substantial
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 ongoing support, guidance and
counsel as we navigate these uncertain
times. Their input is greatly valued and is
certainly of assistance as we seek to
achieve the best possible outcome for our
shareholders.
Finally, I must thank all of Mount Gibson’s
hard working employees and contractors for
their efforts and commitment. 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
On the back of the efficiency measures
implemented by the Company, we are
confident of maintaining competitive
group production costs in the 2016-17
year, based on sales from our Mid West
business alone.
Importantly, we are also now looking to the
future with renewed optimism and
confidence, underpinned by our robust
balance sheet and proven ability to deliver
strong performance in challenging conditions.
In the Mid West, we significantly
progressed permitting for the Iron Hill
deposit, located 3km south of the current
Extension Hill open pit, in order to extend
production beyond the current end of the
reserve life. Mining in the current
Extension Hill pit is scheduled to conclude
by early in the December quarter of 2016,
while sales will continue into early 2017.
Significantly, in July 2016 the Office of the
Environmental Protection Authority of
Western Australia released a positive
conditional recommendation for Iron Hill.
The timing of a final determination by the
WA Government remains subject to the
outcome of appeals lodged during the
public comment period, and other
necessary regulatory requirements,
however progress to date remains
consistent with the Company’s timing
objectives for the project.
Meanwhile at Koolan Island, which
remains a high quality asset that offers
significant long term value, we are
extremely encouraged by the progress of
our evaluation of the potential to reinstate
the Main Pit seawall and restart
production. To that end, we committed to
invest $1.5 million to undertake detailed
design for the seawall, and mine design
5 Health and Safety
A further reflection of our safety
management is evident in the
outstanding achievement of 1000
consecutive days without a LTI at
Extension Hill, a mark achieved on 30
June 2016.
For details of the Company’s safety
performance, including statistics for each
site, please refer to Mount Gibson Iron’s
2016 Sustainability Report, published on
the Mount Gibson website.
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
2015/16, the second consecutive year
without a LTI. The Total Recordable
Injury Frequency Rate (TRIFR) also
declined very strongly, falling by 27.7% to
6.8, compared with 9.4 in 2014/15 and
13.31 in 2013/14.
TRIFR
15.01
13.31
9.40
6.80
FY2013
FY2014
FY2015
FY2016
16
14
12
10
8
6
4
2
0
6
5
4
3
2
1
0
LTIFR
5.57
3.43
FY2013
FY2014
FY2015
FY2016
0.00
0.00
9.40
6.80
FY2013
FY2014
FY2015
FY2016
TRIFR
15.01
13.31
LTIFR
5.57
3.43
16
14
12
10
8
6
4
2
0
6
5
4
3
2
1
0
FY2013
FY2014
FY2015
FY2016
0.00
0.00
6 The settlement is independent of any
decision the Group may take to rebuild
the Main Pit seawall and is also separate
to the ongoing discussions between
Mount Gibson and its insurers in relation
to the 12 month business interruption
component of the insurance claim. The
full value of the business interruption
claim is yet to be quantified by the
insurers and will be assessed subject to
any relevant policy and limitations. These
discussions remain in progress and it is
premature to comment as to the likely
outcome of this component of the claim.
Operational Review
During 2015/16, Mount Gibson achieved
total ore sales of 5.0 million wmt,
representing a 14% decrease from the
previous year. This decline reflected the
transition of Koolan Island to care and
maintenance following completion of
production and sales from the Acacia East
satellite pit in the March quarter of 2016.
Based on preliminary work to date and
taking into account recent mining history
at Koolan Island, Mount Gibson considers
it would need to have confidence that the
project could achieve the following key
technical and operating parameters:
(cid:159)Main Pit seawall reinstated in a safe
and economically feasible manner;
KOOLAN ISLAND
Koolan Island is located approximately
140km north of Derby, in the Kimberley (cid:159)sufficient Ore Reserves to support
region of Western Australia.
total redevelopment capital and restart
costs of less than $90 million;
(cid:159)
production of at least 15 million tonnes
of hematite over a period of 3–4
years, grading above 62% Fe;
Ore shipments from Koolan Island for the
year totalled 1.5 million wmt, with all
production and sales from the Acacia East (cid:159)an average life of mine strip ratio less
satellite pit, which were concluded in the
March quarter of 2016. The site was then
transitioned to care and maintenance.
This compares with sales of 2.1 million
wmt in the prior year, when ore was also
sourced from the Main Pit prior to the
failure of the seawall in late 2014.
(cid:159)total material movement costs of less
than $7/tonne moved.
than 3:1; and
Average all-in site cash costs at Koolan
Island for the full year, inclusive of the
care and maintenance costs incurred in
the final quarter, were $37/wmt FOB,
slightly below the Company's public
guidance reflecting solid operational
performance on site.
All activity is now focused primarily on the
ongoing evaluation of the potential to
reinstate the Main Pit seawall and
recommence production. Geotechnical
drilling at the Main Pit seawall to provide
technical data for the evaluation of
potential rebuild options was completed in
January 2016. Mount Gibson has now
committed $1.5 million to undertake
detailed design for the seawall, and mine
design and production scheduling to
achieve a material reduction in the average
strip ratio and also a marked increase in
product grade. Mount Gibson expects to
conclude this detailed evaluation work in
the March 2017 quarter.
The Company has yet to establish
whether it can reasonably achieve these
key parameters but, based on historical
mining performance, believes it is sensible
to continue with its assessment of this
potential opportunity. However, until such
time as Mount Gibson has completed the
detailed engineering design and capital
estimates for reconstruction of the Main
Pit seawall, and obtained confirmation
that all other potential requirements for
development can be met, it is not possible
to state that a viable redevelopment plan
is achievable.
A key focus of management during
2015/16 was the Company's insurance
claim relating to the seawall failure.
Constructive discussions with the
Company's insurers resulted in the
successful settlement in June 2016 of the
property damage component of the claim
for $86 million, inclusive of an initial
progress payment of $1.85 million received
in July 2015. All funds from the settlement
were received by early July 2016.
7 Operational Review Continued
for iron ore prices on the basis of what is
in the best interests of the Company and
all shareholders. This includes closely
monitoring the viability of continuing
operations at Extension Hill with regard to
mine cashflows as well as to historical
fixed infrastructure and transport
obligations that would become payable on
early closure. These obligations, which
reduce with cumulative sales tonnage,
totalled approximately $15 million at 30
June 2016.
TALLERING PEAK
The Tallering Peak mine site closed in late
2014, with activity since then primarily
related to final rehabilitation works.
However, in the June quarter of 2016,
Mount Gibson also monetised some
remnant material remaining at the mine
site. These opportunistic sales, totalling
125,000 wmt of low grade lump material,
generated a modest cash margin and
assisted with environmental rehabilitation
at the Tallering Peak mine site. Final site
rehabilitation and environmental
monitoring activities remain ongoing.
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 again performed
strongly in 2015/16, recording ore sales of
3.4 Mwmt and achieving an average all-in
site cash cost of $46/wmt for the year, in
line with guidance.
As previously indicated, Mount Gibson
expects to complete mining operations in
the current Extension Hill pit early in the
December quarter of 2016, with sales
from the current pit expected to conclude
in early 2017 by which time the Company
plans to have secured approvals for
development of the adjacent Iron Hill
deposit, located 3km south of the
Extension Hill Main Pit. In the event that
a gap between ore sales from the
Extension Hill pit and Iron Hill appears
likely, Mount Gibson will evaluate the
financial merits of selling ore from existing
low grade stockpiles, totalling
approximately 3.5 Mwmt of material
grading 50-55% Fe, until Iron Hill material
is available.
Mount Gibson continually reviews its
activities in the context of prevailing
market conditions and the future outlook
8 Exploration and Development
Assuming development of Iron Hill
proceeds as planned, one-off
development capital costs of
approximately $2-3 million are anticipated
for construction of a haul road and mine
pre-stripping. Operational costs and
product grades at Iron Hill are expected
to be consistent with current operations
at Extension Hill.
Shine Iron Ore Project
Development of the Shine Iron Ore
Project, 85km north of Extension Hill,
was deferred in August 2014 in light of
prevailing market conditions. However,
the project remains a potentially viable
development opportunity when iron ore
market conditions improve. Total Mineral
Resources at Shine are estimated at 15.9
Million tonnes grading 58.1% Fe as at 30
June 2016.
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 2016. Total Group Mineral Resources
were estimated at 89.5 million tonnes of
iron ore at an average grade of 61.4% Fe.
Total Group Ore Reserves were estimated
at 1.2 million tonnes grading 58.0% Fe.
All Mineral Resources and Ore Reserves
are considered as direct shipping grade
(DSO) with no beneficiation or enrichment
process required. All of the Company's
Ore Reserves relate to the Extension Hill
Operation.
Iron Hill Deposit
The Iron Hill Deposit, on granted Mining
Leases immediately adjacent to the
Extension Hill mine, was a primary focus
of activity in 2015/16, following
estimation of total Mineral Resources at
Iron Hill of 8.8 Million tonnes grading
58.3% Fe late in the previous financial
year.
In late December 2014, the Office of
Environmental Protection Authority of
Western Australia (OEPA) set a Public
Environmental Review (PER) level of
assessment for future mining at Iron Hill.
The PER was submitted in November
2015, and released for public comment in
January 2016.
Encouragingly, in July 2016 the OEPA
released a positive conditional
recommendation for Iron Hill, though the
timing of a final determination by the WA
Environment Minister remains subject to
the outcome of any appeals lodged
during the public comment period. The
Company also continues to progress other
necessary regulatory requirements for
Iron Hill.
9 Environment and Community
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 Company 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 2015/16 year.
This includes always putting the health,
safety and wellbeing of our people first.
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 $434,630 in
direct contributions to community
organisations and projects. This compares
with an equivalent investment of
$490,400 in the prior year.
For details of Mount Gibson Iron's
community investment activities and
engagement with communities and
stakeholders, including information relating
to each site, please refer to Mount Gibson
Iron's 2016 Sustainability Report,
published on the Mount Gibson website.
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 greenhouse gas
emissions and energy consumption of
approximately 30% in 2015/16, reflecting
reduced activity, and the cessation of
operations at Koolan Island.
For details of the Company's
environmental performance, including
information relating to each site, please
refer to Mount Gibson Iron's 2016
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.
10 Resources and Reserves
Total Mineral Resources and Ore Reserves by Project as at 30 June 2016
Koolan Island
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2016
Total at 30 June 2015
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2016
Total at 30 June 2015
Extension Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2016
Total at 30 June 2015
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2016
Total at 30 June 2015
Iron Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2016
Total at 30 June 2015
Tallering Peak
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2016
Total at 30 June 2015
Shine
Tonnes
millions
7.69
41.93
10.89
60.51
61.62
Nil
Nil
Nil
0.87
2.10
0.34
0.20
2.64
6.97
1.10
0.05
1.15
6.19
0.00
1.47
7.33
8.80
8.80
0.41
1.03
0.20
1.65
1.65
Fe
%
59.1
64.4
60.2
63.0
62.9
Nil
Nil
Nil
60.0
56.73
57.32
56.61
56.80
58.1
58.0
56.8
58.0
58.2
0.0
60.5
57.9
58.3
58.3
58.9
58.1
54.7
57.9
57.9
SiO
2
%
13.53
6.36
12.48
8.38
8.43
Nil
Nil
Nil
13.27
8.13
10.31
10.49
8.59
6.82
7.09
9.87
7.21
6.77
0.00
8.35
8.65
8.60
8.60
6.26
11.70
17.89
11.10
11.10
Al O
3
2
%
1.16
0.76
0.79
0.82
0.81
Nil
Nil
Nil
0.45
2.41
1.60
1.66
2.25
2.18
2.10
1.91
2.09
2.17
0.00
1.02
1.74
1.62
1.62
3.50
1.66
1.93
2.15
2.15
P
%
0.018
0.014
0.015
0.015
0.014
Nil
Nil
Nil
0.010
0.077
0.072
0.055
0.076
0.076
0.088
0.087
0.088
0.076
0.000
0.047
0.069
0.065
0.065
0.082
0.066
0.056
0.069
0.069
Mineral Resources, above 50% Fe
5.73
Measured
6.57
Indicated
3.59
Inferred
15.89
Total at 30 June 2016
Total at 30 June 2015
15.89
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
9.04
10.01
9.61
9.57
9.57
58.9
58.0
56.8
58.1
58.1
1.81
1.35
1.18
1.48
1.48
0.076
0.070
0.063
0.071
0.071
Attributions overleaf
11 Total Group Mineral Resources and Ore Reserves at 30 June 2016 (above 50% Fe)
Tonnes
millions
Fe
%
Si0
2
%
Al 0
2 3
%
P
%
89.5
Total Mineral Resources at 30 June 2016
1.2
Total Ore Reserves at 30 June 2016
94.9
Total Mineral Resources at 30 June 2015
Total Ore Reserves at 30 June 2015
7.1
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
8.67
7.21
8.57
7.57
61.4
58.0
61.2
58.4
1.08
2.09
1.12
1.96
0.032
0.088
0.034
0.068
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 Brett Morey, a Competent Person who is a member of the Australian Institute of Mining and Metallurgy. Brett Morey is
a full-time employee of 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”. Brett Morey 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:
The information in this report relating to Mineral Resources for the Koolan Island, Extension Hill (including Iron Hill), and Tallering Peak and
Shine deposits 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. Elizabeth Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron
Limited. Elizabeth 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'. Elizabeth 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 Ore Reserves:
The information in this report relating to Ore Reserves at Extension Hill 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. Paul 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’. Paul 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.
The detailed Annual Statement of Mineral Resources and Ore Reserves is available via Mount Gibson Iron's website.
12 Financial Report
MOUNT GIBSON IRON LIMITED AND CONTROLLED ENTITIES
ABN 87 008 670 817
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
30 JUNE 2016
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
32
33
34
35
36
37
38
90
91
13 Directors’ Report
Your Directors submit their report for the year ended 30 June 2016 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 Shaofeng 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 43 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
Chief Financial Officer of Wizard Mortgage Corporation. He was also Chief Executive Officer of ASX-listed King Island Scheelite Limited,
a former Managing Director of Sovereign Gold Limited, a former Chairman of Rawson Resources Limited and a former Director of CPA
Australia Limited. Mr Bird is currently a director of ASX-listed company Pacific American Coal Limited.
14 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. 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 a former
Non-Executive Director of Beacon Foundation and 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 15 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 a former 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
19 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 2016 was as follows:
15
Nature of Operations and Principal Activities
The principal activities of the entities within the Group during the year were:
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 126 employees (excluding contractors) as at 30 June 2016 (2015: 213 employees).
OPERATING AND FINANCIAL REVIEW
Introduction
The Board presents the 2015/16 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 2015/16 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 2016 and has been prepared in accordance
with Regulatory Guidance 247 published by the Australian Securities and Investments Commission (“ASIC”).
Overview of the 2015/16 Financial Year
Although the Group’s financial performance for the year ended 30 June 2016 was adversely impacted by weaker iron ore prices
compared with the previous year, the Company’s management and operating teams continued to implement their planned strategies
at both the Extension Hill and Koolan Island mine sites to achieve strong sales and further unit cost reductions over the year. In
addition, the Company successfully settled the property damage component of its insurance claim arising from the late-2014 failure of
the Koolan Island Main Pit seawall. As a result, the Company ended the year in a very robust financial position.
At the beginning of the year the Platts Index for delivery of 62% Fe iron ore fines to northern China was US$59 per dry metric tonne
(“dmt”) and, following steady weakness to a low of US$38.50/dmt late in the first half and a very brief recovery to US$70/dmt in
April, finished the year at US$55/dmt. The average price for the year was US$51/dmt. Compounding these weaker iron ore prices
was an exchange rate which averaged the year at A$1.00/US$0.728 but was materially higher in the final quarter of the year,
averaging A$1.00/US$0.745.
Group ore sales totalled 5.0 million wet metric tonnes (“Mwmt”) for the year reflecting a steady operational performance at Extension
Hill and the Acacia East satellite pit at Koolan Island, as well as sales of low grade remnant material from the closed Tallering Peak
mine site late in the year. The Extension Hill operation performed well and, as planned, the Koolan Island operation was placed onto
care and maintenance upon completion of the final shipments of mined material from the Acacia East satellite pit in April 2016. Work
at Koolan Island is now focused upon the evaluation of the potential to reinstate the seawall and recommence production.
Total sales revenue in the 2015/16 financial year was $240,534,000 comprising $235,188,000 from continuing operations at Extension
Hill and Koolan Island, and $5,346,000 from the discontinued Tallering Peak operation. Mount Gibson achieved an average realised
price for standard iron ore fines product for the year of US$34/dmt Free On Board (“FOB”) after grade and provisional pricing
adjustments and penalties for impurities. This price, which excludes sales of medium grade material from the Acacia East satellite pit
on Koolan Island, compares with an average of US$54/dmt achieved in the previous 2014/15 financial year. The weighted average
realised price received for all products sold, on a wet tonnes basis, was $48/wmt FOB, compared with $56/wmt in the previous year.
Cost reduction initiatives resulted in the Company’s average cost of goods sold for its continuing operations (including non-cash costs
but before impairments and impairment write-backs) reducing significantly from $62/wmt FOB in the 2014/15 financial year to
$44/wmt FOB in the 2015/16 financial year.
Cashflow from operations for the year totalled positive $5,653,000 being a significant improvement on the previous financial year’s
operational cashflow of negative $91,099,000 which reflected the severe adverse impacts of the Koolan Island Main Pit seawall failure
in late 2014.
Towards the end of the 2015/16 financial year, the Company also reported the successful settlement of the property damage
component of the Koolan Island seawall insurance claim for $86,000,000. This amount included the interim payment of $1,850,000
made by the Company’s insurers in mid-2015 and, by 30 June 2016, the Company had received $49,592,000 of the balance. The
remainder of the settlement amount was fully received from the Company’s insurers in July 2016.
The Group’s total cash reserves, including term deposits and tradeable investments, as well as the insurance settlement proceeds
received by year-end, totalled $400,087,000 as at 30 June 2016, an increase of $66,084,000 over the balance of $334,003,000 as at
30 June 2015.
16 Operating Results for the Financial Year
The summarised operating results for the Group for the year ended 30 June 2016 are tabulated below:
Year ended: 30 June 2016* 30 June 2015*
30 June 2014
30 June 2013 30 June 2012**
Net profit/(loss) before tax
Taxation benefit/(expense)
Net profit/(loss) after tax
$’000
$’000
$’000
85,536
(1,008,505)
163,698
128,440
224,621
761
97,083
86,297
(911,422)
(67,345)
96,353
8.84
28,902
157,342
14.45
(62,605)
162,016
14.96
Earnings/(loss) per share
cents/share
7.91
(83.56)
*
The figures for net profit/(loss) before tax and taxation benefit/(expense) for the years ended 30 June 2016 and 2015 are shown inclusive of
discontinued operations. Refer the attached financial statements for further details.
** Restated to reflect adjustments made on the adoption of AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine.
Consolidated quarterly operating and sales statistics for the 2015/16 financial year are tabulated below:
Unit
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
Consolidated Group
Mining & Crushing
Total waste mined
Total ore mined#
Total ore crushed
Shipping/Sales*
Standard DSO Lump
Standard DSO Fines
Low Grade DSO
RSP
Total
Ave. Platts 62% Fe
CFR northern China price
MGX Free on Board (FOB) average
realised fines price^
kwmt = thousand wet metric tonnes
US$/dmt = USD per dry metric tonne
Sept
Quarter
2015
Dec
Quarter
2015
Mar
Quarter
2016
Jun
Quarter
2016
2015/16
2014/15
1,763
1,510
1,294
2,362
1,882
1,540
549
513
-
-
962
558
-
-
684
1,583
1,384
781
765
-
-
1,061
1,520
1,547
486
1,001
962
478
240
125
-
843
56
37
5,295
5,976
5,180
2,770
2,076
125
-
4,971
51
34
16,630
5,876
5,394
2,708
2,783
58
287
5,836
72
54
US$/dmt
US$/dmt
55
40
47
35
48
27
#
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.
*
Includes mine gate sales totalling 72kwmt of DSO lump and 34kwmt of DSO fines in 2014/15, and no mine gate sales in 2015/16.
^ 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.
17 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 continued to perform well in 2015/16, with shipments through Geraldton Port totalling 3,382,000 wmt,
comprising 1,963,000 wmt of lump product and 1,419,000 wmt of fines product.
The mine was cashflow positive for the year, reflecting the ongoing focus on cost reduction and efficiency improvements, and the
strong contribution from lump sales. However, cash margins were generally under pressure throughout the year due to weaker iron
ore prices.
All-in site cash costs1 averaged $46/wmt sold FOB for the year.
With the sustained weakness in iron ore prices, the Company implemented a number of operational changes at Extension Hill
identified through the ongoing business efficiency programme to reduce gross expenditure and preserve value in the prevailing low
price environment. As part of this programme, the Company standardised two-and-one rosters across all of its Mid-West roles.
Regretfully, this resulted in reductions in total full time positions across the mine, the Perenjori rail siding and the Company’s loading
facilities at Geraldton Port.
As at 30 June 2016, approximately 239,000 wmt of crushed finished product was stockpiled at the mine. Uncrushed product
stockpiled at the mine totalled approximately 187,000 wmt. Mine-site stockpiles of uncrushed lower grade material totalled 3.5
Mwmt. Crushed ore stockpiles at the Perenjori rail siding totalled approximately 394,000 wmt.
Production and shipping statistics for Extension Hill for the 2015/16 financial year are tabulated below:
Extension Hill
Production Summary
Unit
Sept
Quarter
2015
’000
Dec
Quarter
2015
’000
Mar
Quarter
2016
’000
Jun
Quarter
2016
’000
Year
2015/16
’000
Year
2014/15
’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
539
487
461
486
1,973
2,202
(10)
969
206
1,175
619
420
1,039
600
422
1,022
520
320
840
474
292
766
-
-
-
474
292
766
1,034
182
1,216
590
436
1,026
589
430
1,019
572
442
1,014
590
412
1,002
-
-
-
590
412
1,002
1,013
189
1,203
847
153
1,001
518
350
868
504
359
863
439
343
782
421
475
896
-
-
-
421
475
896
575
387
962
514
287
801
454
255
709
478
240
718
-
-
-
478
240
718
3,864
731
4,595
2,303
1,592
3,895
2,207
1,498
3,705
1,985
1,360
3,345
1,963
1,419
3,382
-
-
-
3,369
864
4,233
15
(16)
9
2,054
1,458
3,512
2,007
1,579
3,586
1,809
1,420
3,229
1,823
1,381
3,204
12
9
11
10
(5)
3
10
(4)
4
8
3
6
72
132
204
(100)
(100)
(100)
1,963
1,419
3,382
1,895
1,513
3,408
4
(6)
(1)
* Low grade ore is material grading 50-55% Fe considered to be potentially 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.
1
All-in site cash costs are reported FOB and include royalties and capex but are before corporate cost allocations. Cash cost figures are unaudited.
18 Koolan Island
Ore shipments from Koolan Island during the year totalled 1,465,000 wmt, with all ore sourced from the Acacia East satellite pit. This
compares to the previous 2014/15 financial year where ore was also sourced from the Main Pit prior to the failure of the Main Pit
seawall in late 2014 and shipments totalled 2,136,000 wmt.
Mining within the Acacia East satellite pit and ore sales were completed as planned during the March 2016 quarter. Koolan Island
transitioned to care and maintenance status in the June 2016 quarter.
The average all-in site cash costs2 at Koolan Island for the full year, inclusive of the care and maintenance costs incurred in the final
quarter, were $37/wmt FOB, slightly below the Company’s public guidance reflecting solid operational performance on site.
Production and shipping statistics for Koolan Island for the 2015/16 financial year are tabulated below:
Koolan Island
Production Summary
Unit
Sept
Quarter
2015
’000
Dec
Quarter
2015
’000
Mar
Quarter
2016
’000
Jun
Quarter
2016
’000
Year
2015/16
’000
Year
2014/15
’000
%
Incr/
(Decr)
Mining
Waste mined
Ore mined
Crushing
Lump
Fines
Rizhao Special Product (RSP)
Shipping
Lump
Fines
RSP
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
1,225
335
1,874
666
181
75
-
256
74
221
-
295
341
173
-
514
372
146
-
518
223
380
334
183
-
517
361
290
-
651
-
-
-
-
-
-
-
-
-
-
3,322
1,381
14,428
1,643
(77)
(16)
855
431
-
1,286
807
658
-
1,465
621
817
443
1,882
697
1,152
287
2,136
38
(47)
(100)
(32)
16
(43)
(100)
(31)
Minor discrepancies may appear due to rounding.
Tallering Peak
Rehabilitation activities continued throughout the year, significantly reducing the provision for rehabilitation. Final site rehabilitation
and environmental monitoring activities remain ongoing.
In the final quarter of the 2015/16 financial year, Mount Gibson monetised some remnant material remaining at the mine site. These
opportunistic sales, totalling 125,000 wmt of low grade lump material, generated a modest cash margin and assisted with
environmental rehabilitation at the Tallering Peak mine site.
Production and shipping statistics for Tallering Peak in the 2015/16 financial year are tabulated below:
Tallering Peak
Production Summary
Unit
Sept
Quarter
2015
’000
Dec
Quarter
2015
’000
Mar
Quarter
2016
’000
Jun
Quarter
2016
’000
Year
2015/16
’000
Year
2014/15
’000
%
Incr/
(Decr)
Transported to Mullewa
Railhead
- Lump
- Fines
Transported to Geraldton Port
- Lump
- Fines
Shipping
- Standard DSO Lump
- Standard DSO Fines
- Low Grade DSO Lump
- Low Grade DSO Fines
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
Minor discrepancies may appear due to rounding.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
159
-
159
-
-
125
-
125
-
-
-
159
-
159
-
-
125
-
125
7
9
16
43
193
236
116
118
-
58
292
(100)
(100)
(100)
270
(100)
(33)
(100)
(100)
100
(100)
(57)
2
All-in site cash costs are reported FOB and include royalties and capex but are before corporate cost allocations. Cash cost figures are unaudited.
19 EXPLORATION AND DEVELOPMENT
Iron Hill (Extension Hill South)
In November 2015, the Public Environmental Review for the Iron Hill Deposit at Extension Hill South, immediately adjacent to the
Company’s operating Extension Hill mine, was released for public comment. A total of 11 submissions were received by the Office of
the Environmental Protection Authority (“OEPA”) of Western Australia.
Subsequent to the end of the year, the OEPA released a positive conditional recommendation for Iron Hill, with a period for public
comment due to close in August 2016. The timing of a final determination remains subject to the outcome of any appeals lodged
during the public comment period.
Mount Gibson also continues to progress other necessary regulatory requirements for Iron Hill.
Shine Project
In August 2015 Mount Gibson released an updated mineral resource estimate for the Shine Project, located 85km north of Extension
Hill, following resource modelling work undertaken in mid-2015. The project remains a potentially viable development opportunity
when iron ore market conditions improve.
CORPORATE
Financial Position
The Group’s cash, term deposit and tradeable investments balances totalled $400,087,000 at 30 June 2016, an increase of
$66,084,000 from the balance of $334,003,000 as at 30 June 2015.
As at the balance date, the Company’s current assets totalled $463,818,000 and its current liabilities totalled $42,441,000. As at the
date of this report, the Group has sufficient funds in addition to access to further equity and debt funding to maintain its existing
operations and to advance its exploration and growth objectives.
Impairment
As a result of the continued weakness in iron ore prices in the first half of the 2015/16 financial year, the Group recorded an
impairment expense in its December 2015 half-year financial statements of $23,613,000.
After adjustments to the recorded impairment expense in the second half of the year, including the write-back of previously-impaired
iron ore inventories, the Group recorded a total impairment expense for the 2015/16 financial year of $15,413,000 before tax. This
amount comprises impairments of consumables inventories (by $8,122,000 including obsolescence adjustments for continuing and
discontinued operations), mine properties (by $2,135,000), deferred acquisition, exploration and evaluation assets (by $3,037,000)
and property, plant and equipment (by $12,377,000), net of the write-back of previously-impaired iron ore inventories which were
sold or contracted for future sale during the year (by $3,442,000 for continuing operations and by $6,816,000 for discontinued
operations).
Foreign Exchange Hedging
As at 30 June 2016, the Group held foreign exchange collar option contracts covering the conversion of US$15,000,000 of anticipated
future US dollar denominated revenues into Australian dollars over the five month period to 28 November 2016, with a cap price of
A$1.00/US$0.750 and floor price of A$1.00/US$0.685. As at 30 June 2016, the marked-to-market unrealised gain on the total
outstanding US dollar foreign exchange hedge book of US$15,000,000 was A$231,000.
Koolan Island Seawall Insurance Claim
During the year, Mount Gibson’s investigation into the cause of the late-2014 failure of the Koolan Island Main Pit seawall 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.
Mount Gibson maintains insurance policies for a variety of circumstances, including property damage and business interruption cover.
Discussions with the Group’s insurers in relation to the seawall failure commenced in December 2014 and, following an extensive
claims preparation and negotiation process, final agreement was reached in June 2016 for a cash settlement of $86,000,000 for the
property damage component of the claim. The settlement amount included the $1,850,000 interim payment received in mid-2015.
By 30 June 2016, Mount Gibson had received $49,592,000 of the balance, with the remainder received in full shortly after year end.
Mount Gibson retains substantial carry-forward tax losses and other available tax deductions, and therefore does not expect any tax
outflow on the settlement proceeds.
The settlement is independent of any decision the Group may take to rebuild the Main Pit seawall and is also separate to the ongoing
discussions between Mount Gibson and its insurers in relation to the 12 month business interruption component of the insurance
claim. The full value of the business interruption claim is yet to be quantified by the insurers and will be assessed subject to any
relevant policy and limitations.
20 Koolan Island Logistics Base
In May 2015, Mount Gibson announced an agreement with specialist logistics provider Qube Holdings Limited of a framework to
progress the potential establishment of the Koolan Island Logistics Base (“KILB”) for the nearby offshore oil and gas industry, in
collaboration with the Dambimangari Traditional Owners. The KILB proposal remains at an early conceptual stage and, during the
2015/16 financial year, significant falls in global oil and gas prices resulted in delays to the expected plans for assessment of the KILB
opportunity, with activities currently suspended.
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 grow its
profile as a successful and profitable supplier of raw materials.
Key influences on the success of Mount Gibson are not only iron ore prices and foreign exchange rates 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’s corporate objective is to grow the Company’s cash reserves and continue to pursue an appropriate balance between the
retention and utilisation of cash reserves for value-accretive investments. The Board has determined the following key business
objectives for the 2016/17 financial year:
•
Extension Hill - pursue necessary regulatory government approvals for the development of the Iron Hill deposit to extend the
operational life of the Extension Hill operation beyond the current end of the reserve life, currently expected in the first half of
2017.
• Koolan Island – maintain the site on care and maintenance, and undertake the detailed work required to assess the viability of
reinstating the Main Pit seawall and recommencing production.
• Koolan Island seawall insurance claim - progress and finalise the business interruption component of the claim.
• Cost reductions - continue to drive for sustainable cost improvements across the existing business.
•
Treasury returns – maintain the increased 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 continues to implement operational changes at Extension Hill to reduce gross expenditure and allow potential to flex
short term production while limiting the impact on unit costs. Guidance for all-in site cash costs3 remains at $44-46/wmt for the
2016/17 financial year.
As previously indicated, Mount Gibson expects to complete mining operations in the current Extension Hill pit early in the December
quarter of 2016, with sales from the current pit expected to conclude in early 2017 by which time the Company plans to have secured
approvals for development of the adjacent Iron Hill deposit, located 3km south of the Extension Hill Main Pit. In the event that a gap
between ore sales from the Extension Hill pit and Iron Hill appears likely, Mount Gibson will evaluate the financial merits of selling ore
from existing low grade stockpiles until Iron Hill material is available.
Mount Gibson continually reviews its activities in the context of prevailing market conditions and the future outlook for iron ore prices
on the basis of what is in the best interests of the Company and all shareholders. This includes closely monitoring the viability of
continuing operations at Extension Hill with regard to mine cashflows as well as to historical fixed infrastructure and transport
obligations that would become payable on early closure. These obligations, which reduce with cumulative sales tonnage, totalled
approximately $15 million at 30 June 2016.
Koolan Island Outlook
Following completion of shipments from the Acacia East satellite pit in the second half of the year, Koolan Island transitioned to care
and maintenance status.
Activity at Koolan Island is now focused primarily on the ongoing evaluation of the potential to reinstate the Main Pit seawall and
recommence production. Geotechnical drilling at the Main Pit seawall to provide technical data for the evaluation of potential rebuild
options was completed in January 2016. Mount Gibson has now committed $1.5 million to undertake detailed design for the seawall,
and mine design and production scheduling to achieve a material reduction in the average strip ratio and also a marked increase in
product grade. Mount Gibson expects to conclude this detailed evaluation work in the March 20-17 quarter.
Group Sales Guidance and Cash Costs Guidance
Mount Gibson expects its annual sales for the 2016/17 financial year to be between 2.8 and 3.1 million wmt of iron ore at an average
all-in group cash cost4 of $48-52/wmt FOB, equivalent to US$36-39/wmt at an exchange rate of A$1.00/US$0.75.
3
4
All-in site cash costs are reported FOB and include royalties and capex but are before corporate cost allocations.
All-in group cash costs are reported FOB and include cash operating expenditure, royalties, capital expenditure and corporate costs.
21 SIGNIFICANT EVENTS AFTER BALANCE DATE
A total of 533,625 Performance Rights vested and were exercised after the end of the financial year ended 30 June 2016 in
accordance with their terms.
Except for the above, 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
There were no dividends paid during the financial year ended 30 June 2016.
A final dividend for the 2015/16 financial year has not been declared given the presently depressed iron ore price environment and
the Group’s continued search for business acquisition opportunities.
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
contracts.
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 AND PERFORMANCE RIGHTS
There were no options exercised or forfeited during the financial year or prior to the date of this Report. There are no options over
ordinary shares in the Company on issue as at balance date and as at the date of this Report.
There were 474,350 Performance Rights vested and exercised during the financial year, with 711,500 Performance Rights remaining
on issue as at balance date. Following the vesting and exercise of 533,625 Performance Rights immediately after balance date, there
were 177,875 Performance Rights on issue as at the date of this Report.
Refer to the Remuneration Report for further details of options and Performance Rights outstanding.
DIRECTORS’ INTERESTS IN THE SHARES, OPTIONS AND PERFORMANCE RIGHTS 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 Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
Ordinary Shares
Options over Shares
Performance Rights
over Shares
-
300,000
-
-
20,000
284,944
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
For the purposes of Corporations Act Regulation 2M.3.03(1)-Item 18, Mr Lee does not have a disclosable shareholding. However, we note that for
purposes of ASX Listing Rule 3.19A2A, Mr Lee has previously declared an indirect “relevant interest” in 323,780,748 ordinary shares in the Company
through his association with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 27 June 2016.
22 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 Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
9
7
9
8
9
9
8
1
4
3
4
-
-
4
-
-
4
3
4
-
4
-
-
-
4
-
-
-
4
4
4
-
-
-
-
-
-
-
-
-
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, Environmental
Protection Authority and, where applicable, Department of Parks and Wildlife and the Department of Health. In addition, plans
associated with specific species have been approved by the Federal Department of the Environment.
The Environmental Protection Authority has also granted approval for the sites’ management systems and plans. In addition, the
Department of Environmental Regulation has granted approval of works to allow construction and operation of “prescribed” facilities
and the Department of Mines and Petroleum has granted approval for Mining Proposals at each of the mine sites.
The Group holds various environmental licences and authorities, issued under both State and Federal law, to regulate its mining and
exploration activities in Australia. These licences include conditions and regulations in relation to specifying limits on activities in 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, permits and approvals.
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.
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 Corporations (Rounding in Financial/Directors’ Report)
Instrument 2016/191. The Company is an entity to which the instrument 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 20 which forms part of this Report.
23 NON-AUDIT SERVICES
The following non-audit services were provided by the Company’s auditor, EY, during the financial year ended 30 June 2016. 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
2016
$
3,600
24 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 Chairman of the Board.
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.
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 $451,856 were paid
in the 2015/16 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.
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
2015/16 financial year.
25 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”)
Senior executives may receive variable remuneration in the form of STI of up to 30-50% 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 improve Company performance. The total potential STI available for award is ultimately at the Board’s discretion and 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 typically 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.
On an annual basis, the performance of each senior executive is reviewed immediately prior to or just after the reporting date. The
NRGC then determines the amount of STI to be allocated to each executive. Payments are made in cash after the reporting date.
Following its decision not to award an STI for the previous financial year, the Board exercised its discretion to make an award for the
2015/16 financial year based on the continuing improved operational performance and positive outcome of the Company’s $86 million
settlement of the property damage component of the Koolan Island seawall insurance claim.
Accordingly, a total STI cash incentive of $626,869 was awarded to Key Management Personnel for the 2015/16 financial year,
representing 80% of the total STI cash incentive available to each of Messrs Beyer, Kerr and Stokes, and 33% of the operational
bonus available to Mr de Kruijff. The respective balances of 20% and 67% for these individuals were forfeited. The amount of the
STI is included in the Company’s financials for the year and was payable after year end.
Long-term Incentive (“LTI”) for 2016 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 iron ore companies over a 2-3 year period. The comparator group of companies comprises
Rio Tinto Limited, Fortescue Metals Group Limited, Grange Resources Limited, Arrium Limited, Atlas Iron Limited, BC Iron Limited,
Gindalbie Metals Limited and Western Desert Resources Limited. 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 and subject to Board discretion,
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.
In line with the Company’s cost reduction strategy, no Performance Rights were issued by the Company to senior executives in
respect of the 2015/16 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.
26 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;
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 previous financial year, Mr Beyer agreed to a significant reduction in his annual base salary (including
superannuation) from $764,400 to $500,000 for the 12 month period to 1 March 2016. During this time the mandatory CPI
adjustment was also waived. The Board also 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, with the timing of
payment of the deferred bonus at the Board’s discretion. Following review by the Board, agreement was reached with Mr Beyer
for the waiver of this conditional deferred bonus and for his annual salary (including superannuation) to be increased from
$500,000 to $670,000 with effect from 1 March 2016, and subject to future CPI adjustment.
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;
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 previous financial year, Mr Kerr agreed to a significant reduction in his annual base salary (including superannuation)
from $474,116 to $365,000 for the 12 month period to 1 March 2016. During this time the mandatory CPI adjustment was also
waived. The Board also 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, with the timing of payment of the
deferred bonus at the Board’s discretion. Following review by the Board, agreement was reached with Mr Kerr for the waiver of
this conditional deferred bonus and for his annual salary (including superannuation) to be increased from $365,000 to $450,000
with effect from 1 March 2016, and subject to future CPI adjustment.
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;
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.
Scott de Kruijff
The key terms of his contract include:
Commenced as General Manager Koolan Island on 17 September 2013 and subsequently appointed as General Manager –
Operations on 1 July 2015 with no set term;
Annual Salary review subject to performance;
Operational incentive of up to 30% of Annual Salary Package;
Employee can terminate upon one month’s notice and the Company upon six weeks’ notice, or immediately for any serious
misconduct.
27 Details of directors and key management personnel disclosed in this report
[i] Directors
Lee Seng Hui
A Jones
Li Shaofeng
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
D Stokes
S de Kruijff
Chief Executive Officer
Chief Financial Officer
Company Secretary and General Counsel
General Manager - Operations (from 1 July 2015)
Remuneration of Key Management Personnel for the year ended 30 June 2016
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 2016
Directors
Lee Seng Hui
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
85,617
80,937
-
80,937
-
-
-
-
87,786
9,102
69,064
-
-
-
-
-
-
-
-
-
-
-
8,134
7,689
-
7,689
8,340
6,561
-
38,413
Sub-total
404,341
9,102
Other KMP
J Beyer
P Kerr
548,269
24,561
144,779
48,295
379,096
24,087
136,971
33,253
D Stokes
323,253
11,989
138,869
S de Kruijff
371,245
13,155
40,000^
30,120
35,245
Sub-total
1,621,863
73,792
460,619
146,913
Totals
2,026,204
82,894
460,619
185,326
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,859
2,684
1,918
1,474
14,935
14,935
31,026
19,430
13,696
-
64,152
64,152
%
Perform-
ance
Related
Total
$
93,751
-
-
-
-
-
-
-
22
26
29
9
88,626
-
88,626
105,228
75,625
-
451,856
805,789
595,521
519,845
461,119
2,382,274
2,834,130
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
Cash incentives for Messrs Beyer and Kerr are shown net of the reversal of the Conditional Deferred Bonuses disclosed for the prior year
ended 30 June 2015. These Conditional Deferred Bonuses were not paid by the Company. The gross STI cash incentives for the year
ended 30 June 2016 were $268,000 for Mr Beyer and $180,000 for Mr Kerr.
** 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.
^ Deferred cash incentive related to the Group’s Koolan Island main pit seawall insurance claim.
Options granted as part of remuneration for the year ended 30 June 2016
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 2016 and there are no options outstanding
as at 30 June 2016.
28 Performance Rights granted as part of remuneration for the year ended 30 June 2016
There were no performance rights granted as part of remuneration during the year ended 30 June 2016.
Performance Rights vested
The following Performance Rights vested during the financial year:
J Beyer
P Kerr
D Stokes
30 June 2016
30 June 2015
243,450
121,340
109,560
-
-
-
A total of 474,350 Performance Rights vested and were exercised during the 2015/16 financial year upon the Board exercising its
discretion under the Company’s Performance Rights Plan.
A total of 533,625 Performance Rights vested to Messrs Beyer (258,075 Performance Rights), Kerr (161,625 Performance Rights) and
Stokes (113,925 Performance Rights) and were exercised after the end of the financial year ended 30 June 2016 in accordance with
their terms.
In accordance with the PRP, no amounts were paid, or remain unpaid, on the exercise of these Performance Rights.
Performance Rights benefits
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).
Year
Granted
2012/13
2013/14
2012/13
2013/14
2012/13
2013/14
Vested
%
Forfeited/
Lapsed
%
Financial Years Performance
Rights May Vest
100
-
100
-
100
-
-
-
-
-
-
-
-
2016/17
-
2016/17
-
2016/17
J Beyer
J Beyer
P Kerr
P Kerr
D Stokes
D Stokes
Performance Rights holdings by Key Management Personnel as at 30 June 2016
30 June 2016
Directors
Lee Seng Hui
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
Other KMP
J Beyer
P Kerr
D Stokes
S de Kruijff
Total
Balance
1 July 2015
Granted as
Remuneration
Exercised during
the year
Lapsed/
forfeited
during the year
Balance
30 June 2016
-
-
-
-
-
-
-
587,550
336,840
261,460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(243,450)
(121,340)
(109,560)
-
1,185,850
-
(474,350)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
344,100
215,500
151,900
-
711,500
At 30 June 2016, there were 711,500 Performance Rights on issue, of which 533,625 Performance Rights vested on 1 July 2016 in
accordance with their terms.
Shares issued on exercise of Options and Performance Rights for the year ended 30 June 2016
There were no shares issued on the exercise of options during the year ended 30 June 2016 (2015: nil).
There were 474,350 shares issued on the exercise of 474,350 Performance Rights on 4 January 2016.
There were 533,625 shares issued on the exercise of 533,625 Performance Rights on 1 July 2016 in accordance with their terms.
29 Shareholdings of Key Management Personnel as at 30 June 2016
30 June 2016
Directors
Lee Seng Hui*
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
Other KMP
J Beyer
P Kerr
D Stokes
S de Kruijff
Total
Balance
1 July 2015
Ord
Granted as
Remuneration
Ord
Exercise of
Performance Rights
Ord
Net Change
Other
Ord
Balance
30 June 2016
Ord
-
100,000
-
-
20,000
284,944
-
240,654
-
-
-
645,598
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
243,450
121,340
109,560
-
-
200,000
-
-
-
-
-
-
-
-
-
-
300,000
-
-
20,000
284,944
-
484,104
121,340
109,560
-
474,350
200,000
1,319,948
* For the purposes of Corporations Act Regulation 2M.3.03(1)-Item 18, Mr Lee does not have a disclosable shareholding. However, we note that for
purposes of ASX Listing Rule 3.19A2A, Mr Lee has previously declared an indirect “relevant interest” in 323,780,748 ordinary shares in the Company
through his association with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 27 June 2016.
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
89,540
A Jones
103,387
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson
-
103,387
111,758
93,341
-
Sub-total
501,413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,506
9,822
-
9,822
10,617
8,867
-
47,634
Other KMP
J Beyer
P Kerr
662,475
12,207
123,221
36,560
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
30,061
34,516
22,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,316
990
1,667
1,250
5,223
5,223
-
-
-
-
-
-
-
-
158,562
58,610
$
-
-
-
-
-
-
-
-
-
-
%
Perform-
ance
Related
Total
$
98,046
-
113,209
-
113,209
122,375
102,208
-
549,047
994,341
551,370
-
-
-
-
-
-
28
18
2
12
21,782
471,229
1,036,968
47,257
-
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 were in certain circumstances entitled to a deferred bonus. Refer “Employment Contracts” above.
Loans to Key Management Personnel
There were no loans to key management personnel during the years ended 30 June 2016 and 30 June 2015.
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 2016 and 30 June
2015.
30 Company Pe
erformance
The table bel
low shows the p
performance of
the Group over
r the last 5 year
s:
30 June 2016
30 June 20
015
30 Ju
ne 2014
30 June 2013
3
Net profit/(lo
oss) after tax
$’000
Earnings/(los
ss) per share
$/share
Closing share
e price
$
86,297
0.0791
0.26
2)
(911,422
)
(0.8356
0.20
6,353
96
0.
0884
0.69
0
157,342
0.1445
0.47
Restated
30 June 20
d*
012
162,016
0.1496
0.86
* Restated to
reflect adjustme
ents made on the
e adoption of AA
ASB Interpretation
n 20 Stripping Co
osts in the Produ
uction Phase of a
a Surface Mine.
End of remun
neration report.
Signed in acc
cordance with a
resolution of th
he Directors.
LEE SENG H
Chairman
HUI
Sydney, 16 A
August 2016
31
Auditor's Independence Declaration
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:MGI:218
POSITIONAL ONLY
32 Consolidated Income Statement
For the year ended 30 June 2016
CONTINUING OPERATIONS
Sale of goods
Interest revenue
TOTAL REVENUE
Cost of sales
Impairment write-back/(loss) on 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
Net unrealised marked-to-market gain/(loss)
Administration expenses
Notes
2[a]
3[b]
9[iii]
2[b]
9[i]
9[ii]
15
15
13
13
3[c]
3[d]
2016
$’000
2015
$’000
235,188
9,667
315,644
12,209
244,855
327,853
(213,681)
(341,742)
3,442
(3,442)
34,616
(17,331)
91,848
(31)
(8,111)
(2,135)
7,874
(9,048)
(339)
(712,917)
(12,377)
(203,213)
(3,037)
(77)
512
(19,219)
(1,014)
-
(19,903)
(31,279)
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
81,305
(986,486)
Finance costs
3[a]
(1,760)
(2,929)
PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE TAX
79,545
(989,415)
Tax benefit/(expense)
4
761
99,908
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS
80,306
(889,507)
DISCONTINUED OPERATIONS
Profit/(loss) after tax for the year from discontinued operations
30[a]
5,991
(21,915)
PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
86,297
(911,422)
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
24
24
24
24
7.91
7.91
7.36
7.36
(83.56)
(83.56)
(81.55)
(81.55)
33
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2016
2016
$’000
2015
$’000
PROFIT/(LOSS) FOR THE PERIOD AFTER TAX
86,297
(911,422)
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 gain/(loss) on cash flow hedges transferred to
the Income Statement
Deferred income tax on cash flow hedges
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF TAX
(231)
231
-
-
5,334
(7,729)
719
(1,676)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
86,297
(913,098)
34
Consolidated Balance Sheet
As at 30 June 2016
Notes
2016
$’000
2015
$’000
ASSETS
Current Assets
Cash and cash equivalents
Term deposits and subordinated notes
Financial assets held for trading
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
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
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
5
6
7
8
9
10
12
13
14
16
17
18
18
17
19
21
20
43,316
337,000
19,771
41,546
20,017
1,887
231
50
91,003
243,000
-
15,354
21,078
3,304
-
-
463,818
373,739
8,744
-
-
8,744
472,562
36,229
421
5,791
42,441
38,186
-
38,186
80,627
391,935
31,494
2,924
3,205
37,623
411,362
49,664
2,619
13,802
66,085
39,584
119
39,703
105,788
305,574
568,328
568,328
(1,157,500)
(1,243,797)
981,107
391,935
981,043
305,574
35 Consolidated Cash Flow Statement
For the year ended 30 June 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Income tax refund received
Notes
2016
$’000
2015
$’000
245,957
356,090
(240,670)
(454,467)
(345)
711
(680)
7,958
NET CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES
5[b]
5,653
(91,099)
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 and subordinated notes
Payment for financial assets held for trading
Payment for acquisition costs for exploration and evaluation assets
Proceeds from sale of exploration and evaluation assets
Payment for deferred exploration and evaluation expenditure
Payment for mine properties
Proceeds from seawall property insurance
9,834
4,530
(2,643)
(94,000)
(19,467)
-
650
(840)
-
51,142
13,409
2,686
(52,145)
206,300
-
(521)
-
(5,407)
(338)
300
NET CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES
(50,794)
164,284
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of lease liabilities
Proceeds from/(repayment of) insurance premium funding facility
Payment of borrowing costs
Dividends paid
(2,162)
317
(306)
-
(6,660)
(657)
(705)
(43,632)
NET CASH FLOWS (USED IN) FINANCING ACTIVITIES
(2,151)
(51,654)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Net foreign exchange difference
Cash and cash equivalents at beginning of year
(47,292)
(395)
91,003
21,531
(999)
70,471
CASH AND CASH EQUIVALENTS AT END OF YEAR
5[a]
43,316
91,003
36 Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
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
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
At 1 July 2015
Profit for the period
Other comprehensive profit
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
- Dividends paid
Share-based payments
Transfer of profits
At 30 June 2016
Issued Capital
$’000
568,328
-
-
-
-
-
-
675,519
(911,422)
-
(911,422)
(43,632)
-
(964,262)
19,687
-
-
-
-
286
-
568,328
(1,243,797)
19,973
568,328
(1,243,797)
19,973
-
-
-
-
-
-
86,297
-
86,297
-
-
-
-
-
-
-
64
-
568,328
(1,157,500)
20,037
1,676
-
(1,676)
(1,676)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
964,262
964,262
(3,192)
1,262,018
-
-
-
-
-
-
(911,422)
(1,676)
(913,098)
(43,632)
286
-
(3,192)
305,574
964,262
(3,192)
-
-
-
-
-
-
-
-
-
-
-
-
305,574
86,297
-
86,297
-
64
-
964,262
(3,192)
391,935
37 Notes to the Consolidated Financial Report
For the year ended 30 June 2016
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 2016, were authorised for issue in accordance with a resolution of the Directors on 16 August 2016.
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 and financial assets held for trading 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”)
Instrument 2016/191. The Company is an entity to which the instrument 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.
38 Notes to the Consolidated Financial Report (continued)
From 1 July 2015 the Group has adopted all new and amended accounting standards mandatory for annual periods beginning on or
after 1 July 2015 including:
Reference
Title
Application
date of
standard
Application
date for
Group
AASB 2013-9
Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments
1 January
2015
1 July 2015
The Standard contains three main parts and makes amendments to a number of Standards
and Interpretations.
Part A of AASB 2013-9 makes consequential amendments arising from the issuance of
AASB CF 2013-1.
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.
AASB 2015-3
Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031
Materiality.
The Standard completes the AASB’s project to remove Australian guidance on materiality
from Australian Accounting Standards.
1 July 2015
1 July 2015
Changes to accounting policies due to adoption of these standards and interpretations are not considered significant for the Group.
39 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 2016 are outlined in the table below:
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
Reference
Title
Summary
AASB 9
Financial Instruments
AASB 9 (December 2014) is a new standard which replaces AASB 139.
This new 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 adoption. The
entity’s own credit changes can be early adopted in isolation without
otherwise changing the accounting for financial instruments.
Classification and measurement
AASB 9 includes requirements for a simpler approach for classification
and measurement of financial assets compared with the requirements
of AASB 139. There are also some changes made in relation to
financial liabilities.
The main changes are described below.
Financial assets
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; and (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.
significantly
Financial assets can be designated and measured at fair value
through profit or loss at initial recognition if doing so eliminates
or
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
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities are
limited to the measurement of liabilities designated at fair value
through profit or loss (FVPL) using the fair value option.
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 or losses
attributable to changes in the entity’s own credit risk would be
recognised in OCI. These amounts recognised in OCI are not recycled
to profit or loss if the liability is ever repurchased at a discount.
40 Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
Application
date of
standard
Application
date for
Group
Impairment
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.
Hedge accounting
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.
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.
AASB 2014-3 amends AASB 11 Joint Arrangements to provide
guidance on the accounting for acquisitions of interests in joint
in which the activity constitutes a business. The
operations
amendments require:
1 January
2016
1 July 2016
(a)
(b)
the acquirer of an interest in a joint operation in which the
activity constitutes a business, as defined in AASB 3 Business
Combinations, to apply all of the principles on business
combinations accounting in AASB 3 and other Australian
Accounting Standards except for those principles that conflict
with the guidance in AASB 11; and
the acquirer to disclose the information required by AASB 3 and
other Australian Accounting
business
combinations.
Standards
for
This Standard also makes an editorial correction to AASB 11.
AASB 116 Property Plant and Equipment and AASB 138 Intangible
Assets 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.
1 January
2016
1 July 2016
AASB 2014-3
Amendments to
Australian Accounting
Standards –
Accounting for
Acquisitions of
Interests in Joint
Operations
[AASB 1 & AASB 11]
AASB 2014-4
Clarification of
Acceptable Methods
of Depreciation and
Amortisation
(Amendments to
AASB 116 and AASB
138)
41 Notes to the Consolidated Financial Report (continued)
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
1 January
2018
1 July 2018
Reference
Title
Summary
AASB 15
Revenue from
Contracts with
Customers
AASB 2014-
10
Amendments to
Australian Accounting
Standards – Sale or
Contribution of Assets
between an Investor
and its Associate or
Joint Venture
related
AASB 15 Revenue from Contracts with Customers replaces the
existing revenue recognition standards AASB 111 Construction
Contracts, AASB 118 Revenue and
Interpretations
(Interpretation 13 Customer Loyalty Programmes, Interpretation 15
Agreements for the Construction of Real Estate, Interpretation 18
Transfers of Assets from Customers, Interpretation 131 Revenue—
Barter Transactions Involving Advertising Services and Interpretation
1042 Subscriber Acquisition Costs
the Telecommunications
Industry). AASB 15 incorporates the requirements of IFRS 15 Revenue
from Contracts with Customers issued by the International Accounting
Standards Board (IASB) and developed jointly with the US Financial
Accounting Standards Board (FASB).
in
AASB 15 specifies the accounting treatment for revenue arising from
contracts with customers (except for contracts within the scope of
other accounting standards such as leases or financial instruments).
The core principle of AASB 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)
(e)
Step 4: Allocate the transaction price to the performance
obligations in the contract.
Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
AASB 2015-8 amended the AASB 15 effective date so it is now
effective for annual reporting periods commencing on or after
1 January 2018. Early application 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 2016-3 Amendments to Australian Accounting Standards –
Clarifications to AASB 15 amends AASB 15 to clarify the requirements
on
identifying performance obligations, principal versus agent
considerations and the timing of recognising revenue from granting a
licence and provides further practical expedients on transition to
AASB 15.
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 venture. The amendments require:
(a)
(b)
A full gain or loss to be recognised when a transaction involves
a business (whether it is housed in a subsidiary or not); and
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.
AASB 2014-10 also makes an editorial correction to AASB 10.
AASB 2015-10 defers the mandatory effective date (application date)
of AASB 2014-10 so that the amendments are required to be applied
for annual reporting periods beginning on or after 1 January 2018
instead of 1 January 2016.
42 Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
Application
date of
standard
Application
date for
Group
AASB 2015-1
Amendments to
Australian Accounting
Standards – Annual
Improvements to
Australian Accounting
Standards 2012–2014
Cycle
AASB 2015-2
Amendments to
Australian Accounting
Standards –
Disclosure Initiative:
Amendments to AASB
101
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 for Sale and Discontinued
Operations:
•
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 visa versa), an entity shall not follow
the guidance in paragraphs 27–29 to account for this change.
AASB 7 Financial Instruments: Disclosures:
•
•
Servicing contracts - clarifies how an entity should apply the
guidance in paragraph 42C of AASB 7 to a servicing contract to
decide whether 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
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.
for all
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.
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
43 Notes to the Consolidated Financial Report (continued)
Application
date of
standard
Application
date for
Group
1 January
2019
1 July 2019
Reference
Title
Summary
AASB 16
Leases
The key features of AASB 16 are as follows:
Lessee accounting
•
•
•
Lessees are required to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the
underlying asset is of low value.
A lessee measures right-of-use assets similarly to other non-
financial assets and lease liabilities similarly to other financial
liabilities.
Assets and liabilities arising from a lease are initially measured on
a present value basis. The measurement includes non-cancellable
lease payments (including inflation-linked payments), and also
includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or
not to exercise an option to terminate the lease.
•
AASB 16 contains disclosure requirements for lessees.
Lessor accounting
•
•
AASB 16 substantially carries forward the lessor accounting
requirements in AASB 117. Accordingly, a lessor continues to
classify its leases as operating leases or finance leases, and to
account for those two types of leases differently.
AASB 16 also requires enhanced disclosures to be provided by
lessors that will improve information disclosed about a lessor’s
risk exposure, particularly to residual value risk.
AASB 16 supersedes:
(a) AASB 117 Leases;
(b) Interpretation 4 Determining whether an Arrangement contains a
Lease;
(c) SIC-15 Operating Leases—Incentives; and
(d) SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease.
The new standard will be effective for annual periods beginning on or
after 1 January 2019. Early application is permitted, provided the new
revenue standard, AASB 15 Revenue from Contracts with Customers,
has been applied, or is applied at the same date as AASB 16.
2016-1
2016-2
Amendments to
Australian Accounting
Standards –
Recognition of
Deferred Tax Assets
for Unrealised Losses
[AASB 112]
This Standard amends AASB 112 Income Taxes (July 2004) and AASB
112 Income Taxes (August 2015) to clarify the requirements on
recognition of deferred tax assets for unrealised losses on debt
instruments measured at fair value.
1 January
2017
1 July 2017
Amendments to
Australian Accounting
Standards –
Disclosure Initiative:
Amendments to AASB
107
This Standard amends AASB 107 Statement of Cash Flows (August
2015) to require entities preparing financial statements in accordance
with Tier 1 reporting requirements to provide disclosures that enable
users of financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from cash
flows and non-cash changes.
1 January
2017
1 July 2017
44 Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
IFRS 2
(Amendments)
Classification and
Measurement of
Share-based Payment
Transactions
[Amendments to IFRS
2]
This standard amends to IFRS 2 Share-based Payment, clarifying how
to account for certain types of share-based payment transactions. The
amendments provide requirements on the accounting for:
►
►
►
The effects of vesting and non-vesting conditions on the
measurement of cash-settled share-based payments
Share-based payment transactions with a net settlement
feature for withholding tax obligations
A modification to the terms and conditions of a share-based
payment that changes the classification of the transaction from
cash-settled to equity-settled
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
A number of new accounting standards have been issued but were not effective as at 30 June 2016. The Group has elected not to
early adopt any of these new standards or amendments in these financial statements. In view of the current state of operations,
the Group has yet to fully assess the impact these accounting standards and amendments will have on the financial statements,
when applied in future periods.
While in early stages of assessment, the adoption of AASB 16 Leases in financial year 2020 is not expected to have a significant
impact on the Group’s balance sheet and income statement, given the low value of the Group’s lease arrangements.
(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.
45 Notes to the Consolidated Financial Report (continued)
Notes
2016
$’000
2015
$’000
2. Revenue and Other Income
[a] Revenue
Sale of ore
Realised gain/(loss) on foreign exchange hedges
[b] Other income
Net realised gain on foreign exchange transactions
Net gain on disposal of property, plant and equipment
Net gain on sale of financial assets held for trading
Arbitration settlement income
Insurance proceeds – seawall property damage
[i]
Insurance proceeds - other
Other income
234,806
382
235,188
603
3,486
23
25
86,000
117
1,594
91,848
323,422
(7,778)
315,644
4
1,167
-
-
-
-
6,703
7,874
[i] During the year, Mount Gibson reached final agreement with its insurers for a cash settlement of $86,000,000 for the property
damage component of its insurance claim relating to the failure of the Koolan Island Main Pit seawall in late 2014. The
settlement amount comprises the $1,850,000 interim payment received in mid-2015 (of which $300,000 was received in the
prior financial year and $1,550,000 was received in the current year), the A$49,592,000 received in cash in the current year and
the remaining balance of A$34,558,000 recorded as a receivable as at 30 June 2016.
The settlement is independent of any decision the Group may take to rebuild the Main Pit seawall and is also separate to the
ongoing discussions between Mount Gibson and its insurers in relation to the 12 month business interruption component of the
insurance claim. The full value of the business interruption claim is yet to be quantified by the insurers and will be assessed
subject to any relevant policy and limitations.
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
2016
$’000
2015
$’000
661
82
743
1,017
1,760
1,347
340
1,687
1,242
2,929
46 Notes to the Consolidated Financial Report (continued)
Notes
2016
$’000
2015
$’000
3. Expenses (Continued)
[b] Cost of Sales
Mining and site administration costs
Depreciation – mining and site 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
Rehabilitation revised estimate adjustments
[c] Net Unrealised Marked-to-Market Gain/(Loss)
Foreign exchange derivatives marked-to-market gain
Financial assets held for trading marked-to-market gain
[d] Administration Expenses include:
Depreciation
Share-based payments expense
Impairment of debtors
Net unrealised loss on foreign exchange balances
Seawall insurance claim and related site works expenses
Insurance premiums
Business development expense
[e] 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
14
14
14
23
8
69,834
6,545
-
-
1,070
11,174
1,212
90,686
1,410
17,697
2,055
18,520
(4,377)
(2,145)
213,681
231
281
512
700
64
1,278
395
1,300
1,666
1,852
184,295
19,221
(92,683)
20,117
14,208
25,908
4,212
88,848
6,326
21,810
5,638
29,760
14,289
(207)
341,742
-
-
-
735
286
964
999
2,970
1,211
-
29,789
1,476
73,383
11,950
The Group’s accounting policy for liabilities associated with employee benefits is set out in note 18. The policy relating to share-based
payments is set out in note 23.
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 12 and 14 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 15 for further details on impairment.
47 Notes to the Consolidated Financial Report (continued)
4. Taxation
Major components of tax (benefit)/expense for the years ended 30 June 2016 and
2015 are:
Income Statement
Current tax
Current income tax charge
Refund in respect of previous return
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
2016
$’000
2015
$’000
-
(761)
-
-
-
-
-
1,703
(144,785)
45,999
Tax (benefit)/expense reported in Income Statement
(761)
(97,083)
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 2016 and 2015 is as follows:
Accounting profit/(loss) before tax
At the statutory income tax rate of 30% (2015: 30%)
Expenditure not allowed for income tax purposes
Unrecognised deferred tax assets
Recognition of previously unrecognised deferred tax assets
Adjustments in respect of current income tax of previous year
Adjustments in respect of deferred tax
Other
Minerals resource rent tax expense
Tax (benefit)/expense
Effective tax rate
Tax (benefit)/expense reported in Income Statement
(761)
-
(761)
(99,908)
2,825
(97,083)
-
-
(719)
(719)
85,536
25,661
214
-
(36,016)
-
7,601
1,779
-
(761)
(0.9%)
(761)
(1,008,505)
(302,551)
160
158,720
-
1,703
-
(1,114)
45,999
(97,083)
9.6%
(97,083)
48 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:
CONSOLIDATED
Accrued liabilities
Capital raising costs
Deferred expense
Deferred income
Foreign exchange contracts
Inventory
Prepaid expenditure
Fixed assets, mine properties and
exploration expenditure
Provisions
Borrowing cost
Tax losses
Tax (assets)/liabilities
Set off of tax
Assets
Liabilities
Net
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
(547)
(294)
(445)
-
(49)
(7,299)
(4)
-
-
(300)
(2,745)
(2,891)
-
-
(35,793)
(70,748)
(16,429)
(19,215)
(510)
(797)
(66,698)
(58,065)
(123,510)
(159,319)
-
-
-
-
-
783
-
-
23
-
-
-
-
806
-
-
-
-
592
-
-
7
-
-
-
-
(547)
(294)
(445)
783
(49)
(7,299)
(4)
-
592
(300)
(2,745)
(2,891)
23
7
(35,793)
(70,748)
(16,429)
(19,215)
(510)
(797)
(66,698)
(58,065)
599
(122,704)
(158,720)
-
-
-
Derecognition of deferred tax asset
123,510
159,319
(806)
(599)
122,704
158,720
Net tax (assets)/liabilities
-
-
-
-
-
-
Movement in temporary differences during the
financial year ended 30 June 2016
Accrued liabilities
Capital raising costs
Deferred expense
Deferred income
Foreign exchange contracts
Inventory
Prepaid expenditure
Fixed assets, mine properties and exploration
expenditure
Provisions
Borrowing cost
Tax losses
Derecognition of deferred tax asset
Balance
1 July 2015
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2016
$’000
(7,299)
(4)
-
592
(300)
(2,891)
7
(70,748)
(19,215)
(797)
(58,065)
158,720
-
6,752
(290)
(445)
191
251
146
16
34,955
2,786
287
(8,633)
(36,016)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(547)
(294)
(445)
783
(49)
(2,745)
23
(35,793)
(16,429)
(510)
(66,698)
122,704
-
49 Notes to the Consolidated Financial Report (continued)
4. Taxation (Continued)
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
-
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Non-current assets
Tax losses
2016
$’000
2015
$’000
56,006
66,698
122,704
100,655
58,065
158,720
50 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.
Tax consolidation
Mount Gibson and its wholly-owned Australian controlled entities have formed an income tax consolidated group under the Tax
Consolidation Regime. Using the Group allocation approach, each entity in the group recognises its own current and deferred tax
liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed by
the parent entity in addition to its own current and deferred tax amounts. The current tax liability of each group entity is then
subsequently assumed by the parent entity.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from
or payable to other entities in the Group. Details of the tax funding agreement are disclosed below.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as
a contribution to (or distribution from) wholly-owned tax consolidated entities.
Members of the tax consolidated group have entered into a tax sharing agreement that provides for the allocation of income tax
liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the
financial statements in respect of this agreement on the basis that the possibility of default is remote.
The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax
amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred
taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic
manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed
further below.
In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated
group.
Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement, the funding of tax
within the Group is based on accounting profit. The tax funding agreement requires payments to/from the head entity to be
recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount
charged under the tax funding agreement and the allocation under the accounting policy, the head entity accounts for these as equity
transactions with the subsidiaries.
The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year.
The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
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.
51 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 on hand
Short-term deposits
2016
$’000
2015
$’000
43,316
-
46,003
45,000
43,316
91,003
Cash at bank earns interest at floating 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
86,297
(911,422)
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
Borrowing costs
Consumables stock obsolescence
Net ore inventory movement
Impairment of debtors
Impairment of consumables inventories
Impairment of ore inventories
Impairment of mine properties
Impairment of property, plant and equipment
Impairment of deferred acquisition, exploration and evaluation
Unrealised loss on foreign exchange balances
Unrealised marked-to-market gain on foreign exchange derivatives
Unrealised marked-to-market gain on financial assets held for trading
Realised gain on sale of financial assets held for trading
Proceeds from seawall property insurance
Capitalised expenses
Changes in assets and liabilities
Decrease in trade and other receivables
Decrease in inventory
(Increase)/decrease in prepayments and deposits
(Increase) in income tax receivable
Decrease in deferred tax assets
(Increase) in capitalised deferred waste
Increase/(decrease) in trade and other payables
Increase/(decrease) in current income tax liabilities
11,971
-
1,070
(3,486)
(9,667)
77
64
398
11
1,005
1,278
8,111
(10,258)
2,135
12,377
3,037
395
(231)
(281)
(23)
(86,000)
(730)
7,087
2,193
1,417
(50)
-
-
(13,135)
-
36,866
20,117
14,208
(1,167)
(12,209)
1,014
286
1,009
6,464
24,349
964
339
9,526
712,917
203,213
19,219
999
-
-
-
-
1,457
36,685
5,816
163
-
45,999
(92,683)
(75,835)
9,661
52 Notes to the Consolidated Financial Report (continued)
5. Cash and Cash Equivalents (Continued)
Changes in assets and liabilities (continued)
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in restructure provision
Increase in road sealing provision
Increase/(decrease) in employee benefits
Increase/(decrease) in decommissioning provision
Increase in other provisions
Net Cash Flow from/(used in) Operating Activities
2016
$’000
2015
$’000
-
(144,786)
(3,520)
(233)
(1,267)
(4,209)
(180)
5,653
(1,990)
1,278
(5,161)
1,242
363
(91,099)
[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 2016 (2015: nil). The Group disposed of items of property, plant and equipment with an aggregate fair value of
$99,120 (2015: $42,932) which were originally financed by means of hire purchase agreements.
6. Term Deposits and Subordinated Notes
Current
Term deposits
Subordinated notes
2016
$’000
2015
$’000
250,000
87,000
210,000
33,000
337,000
243,000
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. These instruments are held
in order to supplement the Group’s treasury returns, and the Group intends and is able to realise these instruments as and when the
Group’s cash needs require.
Term deposits and subordinated notes are with various financial institutions with credit ratings from BBB+ to AA- (S&P) to minimise the
risk of default of counterparties.
Recognition and measurement
Term deposits are classified as receivables and are recorded at amortised cost using the effective interest method less impairment, with
revenue recognised on an effective yield basis.
7. Financial Assets Held for Trading
Current
Tradeable corporate bonds
2016
$’000
2015
$’000
19,771
19,771
-
-
Financial assets held for trading comprise corporate bonds which are traded in active markets. The portfolio of bond investments is
managed by a professional funds management entity. Mount Gibson is able to vary or terminate the portfolio management mandate at
any time, with applicable notice periods.
Recognition and measurement
Financial assets held for trading are acquired principally for the purpose of selling or repurchasing in the short term. These are
managed as part of a portfolio of identified financial instruments and are measured at fair value through profit or loss. Gains or losses
from the sale of the financial assets are recognised in the income statement. Interest earned at market bond rates is recognised in the
income statement on an effective yield basis.
53 Notes to the Consolidated Financial Report (continued)
8. Trade and Other Receivables
Current
Trade debtors
Allowance for impairment
Sundry debtors
Other receivables
Notes
2016
$’000
2015
$’000
[a][i]
[b]
[a][ii],[c]
5,404
(2,242)
3,162
37,120
1,264
11,366
(964)
10,402
2,990
1,962
41,546
15,354
[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 2016, trade debtors of $2,242,000 (2015: $964,000) in the Group were impaired.
At 30 June 2016, trade debtors of $52,000 (2015: $402,000) 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 16 August 2016, $32,000 of this amount
remains outstanding.
With respect to trade debtors that are neither impaired nor past due, there are no indications as at the reporting date that the relevant
debtors will not meet their payment obligations.
[c] Insurance receivable
As noted in note 2[b][i], the Company recognised a receivable as at 30 June 2016 of $34,558,000 in relation to outstanding settlement
amounts for the Koolan seawall property insurance claim settled with the Company’s insurers during the period.
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
2016
$’000
-
28
23
1
52
3,110
3,162
2015
$’000
-
398
3
1
402
10,000
10,402
Trade receivables are recognised and carried at amortised cost less any allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be
uncollectible are written off when identified. An allowance for impairment of trade receivables is made when there is objective evidence
that the Group will not be able to collect the debts. Indicators of impairment would include financial difficulties of the debtor, likelihood
of the debtor’s insolvency and default in payment. Any impairment is recognised in the income statement.
The vast majority of sales revenue is invoiced and received in US dollars (US$). The balance is invoiced and received in A$.
Generally, on presentation of shiploading documents and the 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.
54 Notes to the Consolidated Financial Report (continued)
9.
Inventories
Consumables – at cost
Allowance for stock obsolescence
Allowance for impairment of consumables inventories
Ore – at cost
Allowance for impairment of ore inventories
Notes
2016
$’000
2015
$’000
[i]
[ii]
[iii]
19,445
(8,546)
(8,424)
2,475
27,992
(10,450)
17,542
22,828
(9,702)
(339)
12,787
28,999
(20,708)
8,291
20,017
21,078
[i]
During the year, the Group raised an allowance for stock obsolescence of $31,000 (2015: $9,048,000) for consumables inventories
that are considered slow moving and obsolete at Koolan Island and Extension Hill. Obsolete consumables inventories totalling
$1,187,000 were written off during the year.
[ii] Consumables inventories held at Koolan Island and Extension Hill which are not considered obsolete have been assessed and written
down to their recoverable values. 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, relating primarily to the Company’s
Koolan Island site (now on care and maintenance), was $8,111,000 (2015: $339,000).
[iii] At 30 June 2016, 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 impairment write-backs/(loss) on ore inventories were recorded during the financial
period:
Tallering Peak
Extension Hill
Koolan Island
Total write-backs / (loss) on impairment
Recognition and measurement
Inventories are valued at the lower of cost and net realisable value.
2016
$’000
6,816
-
3,442
10,258
2015
$’000
(6,084)
-
(3,442)
(9,526)
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.
Key estimate
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
2016
$’000
2015
$’000
10. Derivative Financial Assets
Current
Foreign currency forward contracts and options
33[b][i]
Refer note 33 for details on derivative financial instruments.
231
231
-
-
55 Notes to the Consolidated Financial Report (continued)
11. 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 Shipping Pty Ltd
Brockman Minerals Pty Ltd
Koolan Iron Ore Pty Ltd
KIO SPV Pty Ltd
Entities subject to Class Order relief
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2016
%
100
100
100
100
100
100
100
2015
%
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
Interest 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
Net unrealised marked-to-market gain/(loss)
Exploration expenses
Administration expenses
LOSS FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
Finance costs
LOSS FROM CONTINUING OPERATIONS BEFORE TAX
Tax benefit/(expense)
LOSS) AFTER TAX FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Profit/(loss) after tax for the year from discontinued operations
LOSS AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
2016
$’000
2015
$’000
235,188
9,667
244,855
(195,448)
3,442
52,849
91,783
(31)
(7,719)
(2,135)
(7,955)
(3,037)
(150,808)
512
(77)
(19,906)
(46,524)
(1,760)
(48,284)
(5,496)
(53,780)
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)
-
(1,014)
(30,979)
(1,073,391)
(2,929)
(1,076,320)
91,583
(984,737)
5,991
(21,915)
(47,789)
(1,006,652)
56 Notes to the Consolidated Financial Report (continued)
Consolidated Balance Sheet of the Closed Group
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Term deposits
Financial assets held for trading
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
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
Other payables
Provisions
Interest-bearing loans and borrowings
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
2016
$’000
2015
$’000
42,419
337,000
19,771
41,176
19,940
1,742
231
50
89,878
243,000
-
14,972
20,616
3,190
-
-
462,329
371,656
-
8,595
-
-
8,595
470, 924
31,062
421
5,629
37,112
3,701
38,176
-
41,877
78,989
391,935
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
568,328
(1,157,500)
(1,243,797)
981,107
391,935
981,043
305,574
57 Notes to the Consolidated Financial Report (continued)
12. Property, Plant and Equipment
Land
Plant and equipment
Plant and equipment
under lease
Buildings
Capital works in
progress
Total
2016
2015
$’000
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Cost
654
654
293,444
308,894
57,050
73,657
138,708
138,047
2,166
2,420
492,022
523,672
Accumulated depreciation and impairment
(549)
(519)
(284,934)
(285,054)
(57,022)
(72,586)
(138,607)
(132,681)
(2,166)
(1,338)
(483,278)
(492,178)
Net carrying amount
105
135
8,510
23,840
28
1,071
101
5,366
-
1,082
8,744
31,494
Reconciliation
Carrying amount at the beginning of the year
135
654
23,840
119,398
1,071
12,953
5,366
75,462
-
-
-
-
-
-
-
-
-
-
515
757
45,132
11,455
(883)
(1,249)
(9,583)
(23,927)
-
(22)
-
-
(99)
(567)
-
-
(205)
(42)
386
60
-
2,683
798
-
(6,773)
(1,821)
(6,166)
-
-
-
1,082
1,679
14,719
31,494
223,186
4,125
2,580
51,940
(817)
(12,048)
-
-
-
-
-
-
-
-
(982)
(1,291)
(11,971)
(36,866)
-
(22)
Additions
Transfers
Disposals
Depreciation expense
Depreciation capitalised
Impairment loss
(30)
(519)
(6,136)
(126,947)
(377)
(4,862)
(3,890)
(67,411)
(1,944)
(3,474)
(12,377)
(203,213)
Transfers to mine properties
-
-
-
-
Carrying amount at the end of the year
105
135
8,510
23,840
-
28
-
-
-
1,071
101
5,366
Assets pledged as security
105
135
8,510
23,840
28
1,071
101
5,366
Refer note 17 for details of security arrangements.
-
-
-
(2,240)
-
(2,240)
1,082
8,744
31,494
1,082
8,744
31,494
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 and Extension Hill operations written down to
their fair values less costs to sell. The fair values of the property, plant and equipment have been assessed on a standalone basis 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 sites and the estimated removal, demobilisation and selling costs.
58 Notes to the Consolidated Financial Report (continued)
12. 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
Leasehold improvements
Impairment
5 - 20 years
4 - 5 years
3 - 5 years
Shorter of lease term or useful life of 5 – 10 years
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 15 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 judgement, 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, 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 units 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.
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.
59
Notes to the Consolidated Financial Report (continued)
13. Deferred Acquisition, Exploration and Evaluation
Costs
Deferred acquisition, exploration and evaluation – at cost
Allowance for impairment
Reconciliation
Carrying amount at beginning of the year
Additions
Write-back of accrued acquisition costs
Impairment loss
Disposals
Exploration expenditure written off
Carrying amount at the end of the year
Notes
2016
$’000
2015
$’000
20,669
(20,669)
22,143
(19,219)
-
2,924
2,924
840
-
21,863
4,294
(3,000)
(3,037)
(19,219)
(650)
(77)
-
-
(1,014)
2,924
[i]
[ii]
[i]
The Group reviews the carrying value of its assets at each balance date. During the year, impairment losses totalling $3,037,000
were recognised in relation to the Shine Project ($29,000), the Fields Find Project ($42,000) and the Iron Hill Project
($2,966,000).
An assessment of the Shine Project indicated that the carrying amount of the asset was unlikely to be recovered from its
development or sale at current iron ore prices and exchange rates. Accordingly, the carrying amount for the Shine Project was
fully impaired as at 30 June 2016.
The Group’s deferred acquisition, exploration and evaluation costs for the Iron Hill Project were assessed at 30 June 2016. The
Company continues to evaluate possible mine plans for the Iron Hill Project and, at balance date, had concluded that the potential
future economics of the Project would likely be similar to those of the Extension Hill Main Pit given Iron Hill’s similar mineralisation
and, other than the need for a new 3km haul road, planned usage of the same processing and transport infrastructure. Given that
the carrying value of the Extension Hill operation is being impaired (refer notes 14 and 15), the Company has determined that the
existing Iron Hill carrying value is not recoverable at current iron ore prices and exchange rates, either through its development or
sale, and therefore should be fully impaired. Accordingly, the carrying amount for the Iron Hill Project of $2,966,000 was fully
impaired as at 30 June 2016.
[ii] During the year, the Group sold the Fields Find Project to a third party for $650,000. The carrying value of the Fields Find Project
was impaired to $650,000 at the time of sale, resulting in no gain or loss recognised on the sale of this asset for the year ended
30 June 2016.
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.
60 Notes to the Consolidated Financial Report (continued)
14. Mine Properties
Mine development expenditure
Accumulated amortisation and impairment
2016
$’000
2015
$’000
1,537,337
1,537,337
(1,537,337)
(1,534,132)
-
3,205
Reconciliation
Deferred waste
Carrying amount at the beginning of the
period
Deferred waste capitalised
Amortisation expensed
Impairment loss (note 15)
Carrying amount at the end of the period
Other mine properties
Carrying amount at the beginning of the
period
Additions
Mine rehabilitation – revised estimate
adjustment
Transferred from capital works in
progress
Amortisation expensed
Impairment loss (note 15)
Carrying amount at the end of the period
Total mine properties
Koolan Island
Tallering Peak
Extension Hill
Total
2016
2015
2016
2015
2016
2015
2016
2015
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
354,204
92,683
(20,117)
(426,770)
-
276,877
-
181
2,240
(8,392)
(270,906)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
354,204
92,683
(20,117)
(426,770)
-
3,205
24,650
3,205
301,527
-
-
-
-
(388)
-
-
-
-
-
(207)
2,240
(1,070)
(5,816)
(1,070)
(14,208)
(2,135)
(15,241)
(2,135)
(286,147)
-
-
3,205
3,205
-
-
3,205
3,205
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 17).
61
Notes to the Consolidated Financial Report (continued)
14. 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 15 for further details on impairment.
Key judgement and estimate
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.
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.
62 Notes to the Consolidated Financial Report (continued)
15. Impairment of Assets
The Group reviews the carrying value of the assets of each Cash Generating Unit (“CGU”) at each balance date. During the year ended
30 June 2016, the following material events occurred which were considered indicators of impairment:
the benchmark price of iron ore, being the Company’s sole product, remained at depressed levels; and
as at 30 June 2016, the market capitalisation of the Group was below the book value of its equity.
In respect of the Koolan Island CGU, a recoverable amount of nil was previously determined at 30 June 2015 and an impairment expense
of $844,430,000 recognised in the 2014/15 financial year. The Group has not identified any indicators of impairment reversal in respect
of the Koolan Island CGU as at 30 June 2016.
Accordingly, the Group has performed an impairment assessment on the Extension Hill CGU which comprises assets used in the mining,
crushing, transport and sale of iron ore. Based on this assessment, along with the fair value less cost to dispose (“FVLCD”) assessment
of property, plant and equipment at both CGUs (refer note 12), the following impairment amounts have been recognised in the financial
report:
Koolan Island
Extension Hill
Total loss on impairment of non-current assets
2016
$’000
2,893
11,619
14,512
2015
$’000
844,430
71,700
916,130
The above impairment values have been allocated proportionately to each CGU’s non-current assets as follows:
Koolan Island
Extension Hill
Total
Deferred waste
Other mine properties
Total mine properties
2016
$’000
-
-
-
2015
$’000
426,770
270,906
697,676
Property, plant and equipment
2,893
146,754
2016
$’000
-
2,135
2,135
9,484
2015
$’000
-
15,241
15,241
56,459
2016
$’000
-
2,135
2,135
12,377
2015
$’000
426,770
286,147
712,917
203,213
Total impairment of
non-current assets
2,893
844,430
11,619
71,700
14,512
916,130
The Group assessed the recoverable amount of the Extension Hill CGU as at 30 June 2016 which is considered to be the higher of the
FVLCD and Value-In-Use (“VIU”).
Extension Hill
The Group has used the VIU method for the Extension Hill CGU where VIU is assessed as the present value of the future cash flows
expected to be derived from the operation. The following key assumptions were used in determining the VIU for the Extension Hill CGU:
Cashflow forecasts were made based on recent actual performance, budgets and anticipated revenues and estimated operating and
capital costs over the relatively short remaining life of the mine;
Discount rate of 12% (nominal, before and after tax);
Revenue and cost inflation estimates of 2.0% 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$0.73, with sensitivities undertaken for a range of these inputs.
As at 30 June 2016, the recoverable amount of the Extension Hill CGU calculated on this basis is nil.
The cashflow estimates for the Extension Hill CGU are most sensitive to changes in iron ore prices and the A$/US$ foreign exchange rate.
It is estimated that changes in these key assumptions would impact recoverable amounts as 30 June 2016 as follows:
An increase in the benchmark 62% Fe fines CFR iron ore price by 10% to US$60.50/dmt would increase the recoverable amount by
approximately $16 million; and
A reduction in the A$/US$ exchange rate by 10% to A$1.00/US$0.657 would increase the recoverable amount by approximately
$14 million.
Koolan Island
The Koolan Island CGU had a recoverable amount of nil as at 30 June 2015 and an impairment expense of $844,430,000 was recognised
in the 2014/15 financial year. As noted above, there have been no indicators of impairment reversal as at 30 June 2016 and as such an
impairment assessment has not been performed.
Refer to note 12 for details regarding the FVLCD of the Group’s property, plant and equipment.
63 Notes to the Consolidated Financial Report (continued)
15. 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.
In allocating an impairment loss, the carrying amount of an individual asset is not taken below the highest of:
(a)
(b)
Its fair value less costs of disposal (if measurable); and
Its value-in-use (if determinable).
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.
64 Notes to the Consolidated Financial Report (continued)
16. Trade and Other Payables
Current
Trade creditors
Accruals and other payables
Notes
2016
$’000
2015
$’000
[a]
[a]
13,734
22,495
17,967
31,697
36,229
49,664
[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
2016
$’000
2015
$’000
17. Interest-Bearing Loans and Borrowings
Current
Hire purchase facility
Insurance premium funding facility
Non-Current
Hire purchase facility
Financing facilities available
[a]
[b]
[a]
At reporting date, the following financing facilities had been negotiated and were available:
[a]
[b]
[c]
Total facilities:
Hire purchase facility
Insurance premium funding facility
Performance bonding facility
Facilities used at reporting date:
Hire purchase facility
Insurance premium funding facility
Performance bonding facility
Facilities unused at reporting date:
Hire purchase facility
Insurance premium funding facility
Performance bonding facility
-
421
421
-
-
-
421
55,000
55,421
-
421
25,829
26,250
-
-
29,171
29,171
2,044
575
2,619
119
119
2,163
575
65,000
67,738
2,163
575
41,788
44,526
-
-
23,212
23,212
65 Notes to the Consolidated Financial Report (continued)
17. 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 the Group via Master Lease agreements with Komatsu Corporate Finance Pty
Limited and National Australia Bank Limited. At 30 June 2016, all of the hire purchase liabilities have been repaid.
[b]
Insurance Premium Funding Facility
Insurance premium arrangements have been entered into by the Group to fund its annual insurance premiums. Interest is charged
at 1.86% pa. The loan is repayable monthly with the final instalment due in July 2016.
[c] 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
$55.0 million and was drawn to $25.9 million as at 30 June 2016, 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.
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.
66 Notes to the Consolidated Financial Report (continued)
18. 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
[i]
[ii]
[iii]
[iii]
2016
$’000
2015
$’000
2,708
1,878
-
1,100
105
3,995
2,111
3,520
4,008
168
5,791
13,802
191
37,917
78
171
39,218
195
38,186
39,584
2,111
96
(329)
1,878
833
1,278
-
2,111
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
3,520
-
(3,520)
-
5,510
5,272
(7,262)
3,520
This provision relates to the forecast costs associated with release of personnel on the wind down and/or closure of mining sites.
[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
43,226
(4,563)
(663)
1,017
39,017
44,802
(1,707)
(1,111)
1,242
43,226
This provision represents the present value of decommissioning and rehabilitation costs for the Tallering Peak, Koolan Island and
Extension Hill sites. The cost estimates forming the basis of the provisions were prepared as at the balance date by independent
consultants Preston Consulting Pty Ltd which specialise in mine closure planning and mine rehabilitation cost estimates. 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 the future.
Tallering Peak
Koolan Island
Extension Hill
1,100
29,115
8,802
39,017
4,008
31,670
7,548
43,226
67 Notes to the Consolidated Financial Report (continued)
18. 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 estimate : 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.
68 Notes to the Consolidated Financial Report (continued)
19. Issued Capital
[a] Ordinary shares
Issued and fully paid
2016
$’000
2015
$’000
568,328
568,328
2016
Number of
Shares
$’000
2015
Number of
Shares
$’000
[b] Movement in ordinary shares on issue
Beginning of the financial year
1,090,805,085
568,328
1,090,584,232
568,328
Exercise of Performance Rights
[i]
474,350
-
220,853
-
End of the financial year
1,091,279,435
568,328
1,090,805,085
568,328
[i] On 4 January 2016, 474,350 shares were issued as a result of the vesting and exercise of the equivalent number of Performance
Rights.
[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 2016, there were no options on issue (2015: nil) – see note 23(b).
Share options carry no right to dividends and no voting rights.
[e] Performance rights
During the year ended 30 June 2016, no Performance Rights were issued.
A total of 474,350 Performance Rights vested during the year upon the Board exercising it discretion under the Company’s Performance
Rights Plan and, accordingly, 474,350 ordinary shares were issued on 4 January 2016.
As at 30 June 2016, there were 711,500 Performance Rights on issue (2015: 1,185,850) – see note 23(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 2016 and 30 June
2015.
69 Notes to the Consolidated Financial Report (continued)
20. Reserves
Share based payments reserve
Net unrealised gains reserve
Dividend distribution reserve
Other reserves
Notes
2016
$’000
2015
$’000
[a]
[b]
[c]
[d]
20,037
-
964,262
(3,192)
19,973
-
964,262
(3,192)
981,107
981,043
[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.
19,973
64
20,037
19,687
286
19,973
-
-
-
-
1,676
(2,395)
719
-
Balance at the beginning of the year
Transferred from retained earnings
Balance at the end of the year
[d] Other reserves
21
964,262
-
964,262
-
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
21. 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
(3,192)
(3,192)
-
-
(3,192)
(3,192)
25[a]
20[c]
(1,243,797)
-
-
86,297
675,519
(43,632)
(964,262)
(911,422)
(1,157,500)
(1,243,797)
70 Notes to the Consolidated Financial Report (continued)
Notes
2016
$’000
2015
$’000
22. 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]
17
17
[iv]
[v]
886
1,423
1,042
3,351
1,814
1,982
-
3,796
-
-
-
-
-
-
-
-
264
-
264
1,351
3,320
1,780
6,451
1,334
3,052
-
4,386
2,129
120
2,249
(86)
2,163
2,044
119
2,163
198
-
198
24,764
-
24,764
61,047
2,689
63,736
71 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 5 years and leases for machinery which have an average
term of 5 years.
[iii] During the year ended 30 June 2016, the Group paid out all of its hire purchase liabilities.
[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 2016, these early termination obligations were
estimated to total approximately $15,000,000 (2015: $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
2016
$’000
2015
$’000
23. Share-Based Payment Plans
(a) Recognised share-based payment expense
Expense arising from equity-settled share-based payment transactions
3[d]
64
286
The share-based payment plans are described below. There have been no cancellations of any of the plans during 2016 and 2015.
(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 years
ended 30 June 2015 or 2016. As at balance date, no options over unissued shares were on issue.
(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%
Information with respect to the number of performance rights granted and issued is as follows:
2016
2015
No. of Performance
Rights
No. of Performance
Rights
Balance at beginning of year
1,185,850
1,832,688
- granted
- exercised
- lapsed/forfeited
Balance at year end
-
(474,350)
-
-
(220,853)
(425,985)
711,500
1,185,850
At 30 June 2016, there were 711,500 Performance Rights on issue, of which 533,625 Performance Rights vested on 1 July 2016 in
accordance with the terms of the vesting conditions.
72 Notes to the Consolidated Financial Report (continued)
23. Share-Based Payment Plans (Continued)
Recognition and measurement
Share-based payment transactions
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 increase 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.
73 Notes to the Consolidated Financial Report (continued)
24. 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:
Profit/(loss) used in calculating basic and diluted earnings/(loss) per share:
Continuing operations
Discontinued operations
Profit/(loss) attributable to ordinary equity holders of the Company
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
2016
$’000
2015
$’000
80,306
5,991
(889,507)
(21,915)
86,297
(911,422)
Number of
Shares
Number of
Shares
1,091,037,076
1,090,805,085
533,625
-
1,091,570,701
1,090,805,085
7.91
7.91
(83.56)
(83.56)
Conversions, calls, subscriptions or issues after 30 June 2016
No options were outstanding at 30 June 2016. On 1 July 2016, 533,625 ordinary shares were issued upon vesting and exercising of the
equivalent number of Performance Rights in accordance with the terms of the vesting conditions. 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.
A total of 177,875 performance rights on issue as at 30 June 2016 were not included in the calculation of diluted earnings per share as
they have not met the vesting test as at the date 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.
74 Notes to the Consolidated Financial Report (continued)
25. Dividends Paid and Proposed
Declared and paid during the year:
[a] Dividends on ordinary shares:
Final fully franked dividend for 2014: 4.0 cents per share
[b] Dividends not recognised at the end of the reporting period:
A final dividend for the 2015/16 financial year has not been declared.
[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%.
26. Contingent Liabilities
2016
$’000
2015
$’000
-
-
43,632
43,632
60,774
61,485
-
-
60,774
61,485
-
-
60,774
61,485
1.
2.
The Group has a Performance Bonding facility drawn to a total of $25,829,000 as at balance date (2015: $41,788,000). The
performance bonds secure the Group’s obligations relating primarily to environmental matters and historical infrastructure
upgrades.
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.
75 Notes to the Consolidated Financial Report (continued)
27. Key Management Personnel
[a] Compensation of Key Management Personnel
Short-term
Post employment
Long-term
Share-based payment
Termination payment
2016
$
2015
$
2,569,717
2,602,432
185,326
14,935
64,152
-
171,361
5,223
286,211
471,229
2,834,130
3,536,456
[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.
28. 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 were in place with director-related entities during the period:
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 of the life of mine.
One ad hoc spot sale of iron ore from Extension Hill.
Pursuant to these sales agreements, during the financial year, the Group:
Sold 290,196 WMT (2015: 394,327 WMT) of iron ore to APAC; and
Sold 1,234,131 WMT (2015: 1,364,123 WMT) of iron ore to SCIT.
76 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
Net Sales Revenue
Net sales revenue – APAC
Net sales revenue – SCIT
Total Net Sales Revenue
2016
$’000
2015
$’000
819
-
819
819
-
-
-
-
14,281
48,559
62,840
-
2,105
2,105
2,105
129
-
129
129
25,921
66,857
92,778
Apart from the above, there are no director-related entity transactions other than those specified in note 27.
2016
$
2015
$
29. 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
202,395
222,480
Other services in relation to the entity and any other entity in the consolidated entity
3,600
3,600
205,995
226,080
77 Notes to the Consolidated Financial Report (continued)
30. Discontinued Operations
The Tallering Peak operation is reported as a discontinued operation in this financial report. Mining was completed in June 2014
however sale of the remnant low grade ore is ongoing.
2016
$’000
2015
$’000
[a] Profit/(loss) from discontinued operations
The financial results of Tallering Peak operation for the year are presented below:
Revenue
Cost of sales
Impairment write-back/(loss) on ore inventories
Gross profit/(loss)
Impairment/obsolescence write-back/(loss) on consumables inventories
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
5,346
(6,191)
6,816
5,971
20
5,991
-
5,991
-
5,991
0.55
0.55
8,987
(21,113)
(6,084)
(18,210)
(878)
(19,088)
(2)
(19,090)
(2,825)
(21,915)
(2.01)
(2.01)
1,568
(18,196)
-
-
-
(231)
1,568
(18,427)
78 Notes to the Consolidated Financial Report (continued)
31. 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.
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 with the final shipment in March 2016,
thereafter the site has been 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 2016, 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
Other
2016
$’000
85,757
48,613
33,845
66,591
234,806
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
Other
2015
$’000
102,471
65,966
64,174
90,811
323,422
Revenue from external customers by geographical location is based on location of the customer. All iron ore has been shipped to China
during the year ended 30 June 2016. In the 2015 financial year, approximately 2% of the iron ore sales revenue was sold on a mine
gate sale basis to a local buyer, with the vast majority of the balance shipped to China.
All segment assets are located within Australia.
79 Notes to the Consolidated Financial Report (continued)
31. Segment Information (Continued)
Extension Hill
Koolan Island
Unallocated*
Consolidated
Segment revenue
Revenue from sale of iron ore
Interest revenue
Segment revenue
Segment result
Earnings/(loss) before impairment, interest, tax, depreciation
and amortisation
Impairment losses
Earnings/(loss) before interest, tax, depreciation and
amortisation
Depreciation and amortisation
Segment result
Finance costs
Profit/(loss) before tax and discontinued operations
Items included in segment result:
Impairment of consumables inventories
Impairment (write-backs)/loss on ore inventories
Impairment of property, plant and equipment
Impairment of mine development
Impairment of exploration and evaluation expenditure
2016
$’000
2015
$’000
175,214
204,307
-
-
2016
$’000
59,974
-
175,214
204,307
59,974
111,337
111,337
-
-
9,667
9,667
-
12,209
235,188
9,667
315,644
12,209
12,209
244,855
327,853
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
25,558
(13,443)
12,115
(7,068)
5,047
1,824
-
9,484
2,135
-
13,443
32,306
(71,700)
(39,394)
(22,921)
8,210
(5,738)
2,472
(5,224)
535
(848,211)
(847,676)
(46,801)
82,747
(3,037)
79,710
(700)
(9,740)
116,515
23,101
(19,219)
(22,218)
(939,130)
(28,959)
94,297
(916,029)
(735)
(12,992)
(70,457)
(62,315)
(2,752)
(894,477)
79,010
(29,694)
81,305
(986,486)
(1,760)
(2,929)
79,545
(989,415)
-
-
56,459
15,241
-
71,700
6,287
(3,442)
2,893
-
-
339
3,442
146,754
697,676
-
5,738
848,211
-
-
-
-
-
-
-
-
3,037
3,037
19,219
19,219
8,111
(3,442)
12,377
2,135
3,037
22,218
339
3,442
203,213
712,917
19,219
939,130
*
‘Unallocated’ includes interest revenue ($9,667,000), Koolan seawall property damage insurance settlement ($86,000,000) and corporate expenses such as head office salaries and wages.
80
Notes to the Consolidated Financial Report (continued)
31. Segment Information (Continued)
Segment assets
Current financial assets
Other current assets
Property, plant and equipment
Deferred acquisition, exploration and evaluation
Mine properties
Total assets
Segment liabilities
Financial liabilities
Other liabilities
Total liabilities
Extension Hill
Koolan Island
Unallocated
Consolidated
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
5,838
17,747
1,752
-
-
12,424
9,500
7,897
2,274
3,205
4,932
1,839
5,912
-
-
6,331
12,452
15,306
-
-
431,094
330,602
2,368
1,080
-
-
2,430
8,291
650
-
441,864
21,954
8,744
-
-
349,357
24,382
31,494
2,924
3,205
25,337
35,300
12,683
34,089
434, 542
341,973
472,562
411,362
23,958
11,179
32,362
9,916
1,652
29,397
35,137
42,278
31,049
11,641
35,777
47,418
11,040
3,401
14,441
8,399
7,693
36,650
43,977
52,402
53,386
16,092
80,627
105,788
Net assets/(liabilities)
(9,800)
(6,978)
(18,366)
(13,329)
420,101
325,881
391,935
305,574
Capital expenditure
2,126
2,983
409
47,914
45
6,330
2,580
57,227
81 Notes to the Consolidated Financial Report (continued)
32. 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.
33. 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, and financial assets held for trading.
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 and in accordance with the Company’s Financial Risk Management Policy.
[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 and collar option contracts that meet the criteria of cash flow hedges.
During the year ended 30 June 2016, there were no US dollar foreign exchange forward contract deliveries.
At 30 June 2016, the notional amount of the foreign exchange hedge book totalling US$15,000,000 is made up exclusively of collar option
contracts with maturity dates due in the 5 months ended 28 November 2016 and with a cap price of A$1.00/US$0.7500 and a floor price
of A$1.00/US$0.6850.
As at 30 June 2016, the marked-to-market unrealised gain on the total outstanding US dollar foreign exchange hedge book of
US$15,000,000 was A$231,000.
It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge
effectiveness.
The Group uses the following derivative instruments to manage foreign currency risk from time to time as business needs and conditions
dictate:
Instrument
Type of Hedging
Objective
Forward exchange contracts
Cash flow hedge
Collar options
Cash flow hedge
To hedge sales receipts against cash flow volatility arising from the
fluctuation of the A$/US$ exchange rate.
To hedge sales receipts against cash flow volatility arising from the
fluctuation of the A$/US$ exchange rate by limiting exposure to exchange
rates within a certain range of acceptable rates.
82 Notes to the Consolidated Financial Report (continued)
33. 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:
2016
2015
Average
Contract
Rate
A$/US$
Contract
Amount
US$
$’000
Contract
Amount
A$
$’000
Fair
Value
A$
$’000
Average
Contract
Rate
A$/US$
Contract
Amount
US$
$’000
Contract
Amount
A$
$’000
Fair
Value
A$
$’000
Collar Option Contracts
- within one year
0.75
15,000
20,000
231
call strike price 0.750
put strike price 0.685
Total
0.75
15,000
20,000
231
-
-
-
-
-
-
As balance date, the following foreign exchange contracts were recognised on the balance sheet and income statement:
Current assets
Total collar option 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
10
2016
$’000
231
231
-
(231)
231
-
-
231
-
-
2015
$’000
-
-
2,395
5,334
(7,778)
49
-
-
The following table details the effect on profit and other comprehensive income after tax of a 10% change in the A$ against the US$ from
the spot rates at 30 June 2016 and 30 June 2015 due to changes in the fair value of monetary assets and liabilities.
Net Profit
Other Comprehensive Income
2016
$’000
2015
$’000
2016
$’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
(580)
(781)
710
955
-
-
-
-
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.
83 Notes to the Consolidated Financial Report (continued)
33. 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 8)
Financial Liabilities
Trade payables
Net exposure
[c] Interest rate risk
(included within note 16)
2016
$’000
7,164
2,862
(901)
9,125
2015
$’000
3,919
9,193
(841)
12,271
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 (as appropriate).
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:
84 Notes to the Consolidated Financial Report (continued)
33. Financial Instruments (Continued)
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
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
%
2015
%
Subordinated notes – available-for-sale
87,000
33,000
CONSOLIDATED
i) Financial assets
Cash
Short-term deposits (< 3 months maturity)
Term deposits - receivables
Financial assets held for trading
Trade and other receivables
Derivative financial assets
Total financial assets
ii) Financial liabilities
Trade and other payables
Hire purchase liabilities
Insurance premium funding
Total financial liabilities
43,315
46,001
-
-
-
-
-
-
-
45,000
250,000
210,000
-
-
-
-
-
-
-
19,771
-
-
-
-
-
-
130,315
79,001
269,771
255,000
-
-
-
-
-
-
-
-
-
-
421
421
-
2,044
575
2,619
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119
-
119
1
-
-
-
-
2
-
-
-
-
41,546
231
15,354
-
43,316
-
46,003
45,000
250,000
210,000
87,000
19,771
41,546
231
33,000
-
15,354
-
41,778
15,356
441,864
349,357
36,229
49,664
36,229
-
-
-
-
421
49,664
2,163
575
1.86
36,229
49,664
36,650
52,402
0.78
-
2.94
3.74
4.78
-
-
-
-
2.07
2.59
3.14
3.83
-
-
-
-
7.66
1.69
85 Notes to the Consolidated Financial Report (continued)
33. Financial Instruments (Continued)
[i] Interest rate sensitivity
The following table details the effect on profit and other comprehensive income after tax of a 0.25% change in interest rates at 30
June 2016 and 1.0% change in interest rate at 30 June 2015.
1% increase in interest rate with all other
variables held constant
0.25% increase in interest rate with all
other variables held constant
1% decrease in interest rate with all other
variables held constant
0.25% decrease in interest rate with all
other variables held constant
Net Profit
Other Comprehensive Income
2016
$’000
-
624
-
(624)
2015
$’000
2,016
-
(2,016)
-
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
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 the estimated 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 3 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.
86 Notes to the Consolidated Financial Report (continued)
33. 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 2016, the Group had unutilised performance bonding facilities totalling $29,171,000 (2015: $23,212,000). Refer note 17.
Tabulated below is an analysis of the Group’s financial liabilities according to 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.
30 June 2016
30 June 2015
Less
than 6
months
$’000
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
Financial Liabilities
Trade and other payables
36,229
Hire purchase liabilities
Insurance premium funding
Derivatives – inflow
Derivatives - outflow
-
423
(20,231)
20,000
36,421
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,229
-
423
(20,231)
20,000
49,664
1,234
577
-
-
-
895
-
-
-
-
120
-
-
-
36,421
51,475
895
120
-
-
-
-
-
-
Total
$’000
49,664
2,249
577
-
-
52,490
[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 quoted notes and bonds (classified as either financial assets held for trading or available-for-sale) are determined
using Level 1 method based on market price quotations at the reporting date.
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.
87 Notes to the Consolidated Financial Report (continued)
33. Financial Instruments (Continued)
The carrying amounts and fair values of the financial assets and financial liabilities for the Group as at 30 June 2016 are shown below.
2016
2015
Carrying Amount
$’000
Fair Value
$’000
Carrying Amount
$’000
Fair Value
$’000
Financial assets - current
Cash
Short-term deposits
Term deposits – receivables
Subordinated notes – available-for-sale
Financial assets held for trading
Trade debtors
Other receivables
Derivatives
Financial liabilities – current
Trade and other payables
Hire purchase liabilities
Insurance premium funding
Financial liabilities – non current
Hire purchase liabilities
Net financial assets
Recognition and measurement
Derivative financial instruments and hedging
43,316
-
250,000
87,000
19,771
3,162
38,384
231
441,864
36,229
-
421
36,650
43,316
-
250,000
87,000
19,771
3,162
38,384
231
441,864
36,229
-
421
36,650
46,003
45,000
210,000
33,000
-
10,402
4,952
-
349,357
49,664
2,044
575
52,283
46,003
45,000
210,000
33,000
-
10,402
4,952
-
349,357
49,664
2,044
575
52,283
-
-
405,214
-
-
405,214
119
119
296,955
119
119
296,955
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 and collar 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.
88 Notes to the Consolidated Financial Report (continued)
34. Parent Entity Information
[a]
Information relating to Mount Gibson Iron Limited:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Dividend distribution reserve
Share based payments reserve
Total Shareholder’s Equity
2016
$’000
2015
$’000
47,701
759,577
464
367,642
568,328
(590,736)
394,306
20,037
391,935
423
606,434
306
300,860
568,328
(282,727)
-
19,973
305,574
Net profit/(loss) after tax of the parent entity
Total comprehensive profit/(loss) of the parent entity
86,296
86,296
(109,432)
(109,432)
[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 11 and
17.
The parent entity has further provided bank guarantees in respect of obligations to various authorities. Refer to note 17.
[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 26. 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 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.
89 Director
rs’ Declar
ration
In accordanc
ce with a resolut
tion of the direc
ctors of Mount G
Gibson Iron Lim
ited, I state tha
t:
1.
In
the opinion of th
he Directors:
a.
b.
c.
the financial
the Group ar
statements, no
e in accordance
tes and the add
e with the Corpo
ditional disclosu
orations Act 200
res included in
01, including:
the Directors Re
Report designate
f
ed as audited of
i)
ii)
giving
the y
g a true and fai
ear ended on th
r view of the fin
hat date; and
nancial position
of the Group a
as at 30 June 20
016 and of its p
r
performance for
comp
plying with Acco
unting Standard
ds and the Corp
porations Regula
d
ations 2001; and
the financial s
statements and
notes also comp
ply with Internat
tional Reporting
Standards as di
isclosed in Note
1; and
there are rea
payable.
asonable ground
ds to believe tha
at the Group wi
ll be able to pay
y its debts as an
nd when they b
d
become due and
2.
Th
295
is declaration ha
5A of the Corpo
as been made af
orations Act 2001
fter receiving th
1 for the financia
e declarations re
al year ended 30
equired to be m
0 June 2016.
ade to the Direc
ctors in accorda
n
nce with section
Signed in acc
cordance with a
resolution of the
e directors.
LEE SENG H
Chairman
HUI
Sydney, 16 A
August 2016
90 Independent Audit Report
POSITIONAL ONLY
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:MGI:217
91 POSITIONAL ONLY
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:MGI:217
92 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 recently released 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 2016. The
Corporate Governance Statement has been approved by the Board.
93 Additional ASX Information
The information is current as at 5 September 2016.
(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
1,873
3,964
2,027
3,350
383
11,597
2,635
988,875
11,547,489
16,188,948
104,512,388
963,324,816
1,096,562,516
1,995,625
0.09
1.05
1.48
9.53
87.85
100.00
0.182%
(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
ZERO NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SUN HUNG KAI INVESTMENT SERVICES LTD
10. DEBORTOLI WINES PTY LIMITED
11. NATIONAL NOMINEES LIMITED
12. MR ALESSANDRO LUIGI PICCININI
13. DEBORTOLI WINES PTY LTD (SUPERANNUATION) PTY LTD
5,328,171
14. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
15. TRUE PLUS LIMITED
16.
JB LEMAR PTY LTD
17. RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
18.
INKESE PTY LTD
19. ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
20. DYNAMIC SUPPLIES INVESTMENTS PTY LTD
Top 20 holders
Total Remaining Holders Balance
Total Issued Ordinary Shares
4,853,425
4,700,000
4,550,000
4,540,654
4,000,000
3,787,636
3,635,733
838,699,800
257,862,716
1,096,562,516
Number of Shares
% of Shares Held
159,166,874
151,523,460
114,144,204
82,900,000
63,134,745
49,219,978
48,889,705
43,217,127
40,053,818
34,246,165
8,808,105
8,000,000
14.52
13.82
10.41
7.56
5.76
4.49
4.46
3.94
3.65
3.12
0.80
0.73
0.49
0.44
0.43
0.41
0.41
0.36
0.35
0.33
76.48
23.52
100.00
94 (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.
2.
3.
APAC Resources Limited and its subsidiaries
Allied Group Limited and its subsidiaries
Shougang Corporation and Shougang Concord International Enterprises
Company Limited and each of their controlled entities
323,780,748
323,780,748
154,166,874
4.
Shougang Fushan Resources Group Limited, True Plus Limited and its subsidiaries
154,166,874
29.53%
29.53%
14.06%
14.06%
Number of Shares
% of Current
Issued Shares
Note: Substantial shareholdings 1 and 2, and also separately 3 and 4,
are not cumulative and arise through common shareholdings.
(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
Extension Hill
Extension Hill
Extension Hill
Jasper Hill
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan South
Piawaning
Piawaning
Piawaning
Piawaning
Wellstead
Silver Hills
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
Tenement
Status
Percentage Held
L70/133
G70/232
G70/238
E59/1355-I
M04/416-I
M04/417-I
E04/1266-I
L04/29
L04/68
E04/1407-I
E70/3059-I
E70/4509-I
E70/4510-I
E70/4511-I
E70/4424-I
E70/4670-I
M70/1062-I
M70/896-I
E70/3732
L70/60
L70/69
L70/73
L70/74
G70/192
G70/201
G70/202
G70/203
G70/204
G70/205
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Pending
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%
100%
100%
95 (e) Schedule of interests in mining tenements (continued)
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
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
2
Fields Find
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
E59/1268-I
E59/1938-I
E59/1939-I
E59/1940-I
E59/1984-I
E59/1996-I
E59/1997-I
E59/2064-I
E59/2065-I
E59/2066-I
E59/2067-I
M59/63-I
P59/1991-I
P59/1997-I
P59/1998-I
P59/2035-I
Live
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Tenements are held by another party. MGX has rights to Hematite, Goethite and Limonite.
Tenements are held by another party. MGX has rights to Iron on a portion of these tenements.
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96 Notes
97 Notes
98 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.
Headquartered 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
Corporate Directory
All information correct as at 30 June 2016
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 9 November 2016 at City West
Function Centre, 45 Plaistowe Mews,
West Perth WA
Easy Access to
Information
See our website at
www.mtgibsoniron.com.au
for all Company announcements,
including quarterly reports and
financial results. Shareholders or
interested parties may also register
to receive emailed updates shortly
after the company makes any regular
or major announcement.
MOUNT GIBSON IRON LIMITED 2016 Annual Report
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99MOUNT GIBSON IRON LIMITED 2016 Annual Report www.mtgibsoniron.com.au
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