www.mtgibsoniron.com.au
2018 Annual Report
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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/Iron Hill operations in the
Mount Gibson Range south east of Geraldton in Western Australia, and the high grade
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 2018
Board of Directors
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
Bankers
HSBC Bank Australia Ltd
188-190 St George’s Terrace
Perth 6000, Western Australia
Stock Exchange Listing
ASX Code: MGX
The company’s shares are listed on the Australian Securities Exchange.
Share Registry
Computershare Investor Services Pty Ltd
Level 11, 172 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 9.30am on 14 November 2018
at the Parmelia Hilton Hotel, 14 Mill St, Perth WA.
Easy Access to Information
See our website at www.mtgibsoniron.com.au for regular quarterly
reports and financial results. Additionally, shareholders or interested
parties can register to receive emailed updates shortly after the
company makes any regular or major announcement.
2018 Annual Report
Contents
2017/18 Performance Summary
Chairman’s Report
Chief Executive Officer’s Report
Health & Safety
Operational Review
Environment and Community Affairs
Resources and Reserves Statement
Financial Report
Directors’ Report
Corporate Governance
Additional ASX Information
Corporate Directory
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2017/18 Performance Summary
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Strong safety performance, recording no Lost Time Injuries and a Total Recordable Injury
Frequency Rate (TRIFR) of 5.6 (incidents per million manhours).
Total sales revenue of $192 million Free on Board on ore sales of 3.6 million tonnes.
Gross profit before tax from continuing operations of $48.7 million.
Net profit after tax of $99.1 million.
Year-end cash, term deposits and liquid investments of $457.5 million.
All-in group cash costs* of $45/wmt FOB.
Fully franked final dividend of 3.0 cents per share.
Net assets increased to $496.8 million at 30 June 2018, from $419 million the prior year.
Underlying operating cashflow of $34.9 million from Mid West operations, with Mid West
sales on track to conclude in early 2019.
High Grade Koolan Island Ore Reserves increased to 21Mt @ 65.5% Fe.
Koolan Island Restart Project on track to commence ore sales in March 2019 Quarter,
becoming Australia’s highest grade DSO hematite mine.
*All-in group cash costs are reported FOB and include all operating, capital, royalties and corporate costs
excluding development capital related to the Koolan Island Restart Project.
departed Mount Gibson to take on a new
challenge, and congratulate Peter Kerr on his
appointment as Mr Beyer’s successor.
Lee Seng Hui
Chairman
Chairman’s Report
It is with pleasure that I present to you Mount
Gibson Iron’s 2018 Annual Report.
It was satisfying to report further improvement
in profitability by our core operating business
during the year, especially given the heavy
discounts applied to lower and medium grade
ores. Our net profit after tax totalled $99.1
million in 2017/18, representing a significant
improvement on the total $26.3 million net
profit reported for the prior year. The full year
total comprised a net profit from continuing
operations of $34.8 million and $64.3 million
from the business interruption insurance
proceeds received early in the financial year.
Our financial result reflected the Company’s
continued focus on cost reduction and financial
discipline. Consequently, our cash and liquid
investments rose by $10 million to $457.5
million at the end of June, even after investing
$81.7 million to progress work on our high
grade Koolan Island Restart Project.
The Company also achieved several milestones
which have added value to our business.
Our focus on cost and efficiency enabled us to
generate cashflow, totalling $34.9 million, from
our Mid West business despite the very
significant price discounts being applied to
lower and medium grade ores. Mining at Iron
Hill is on track to end later this year, with last ore
sales expected in early 2019, drawing the
curtain on our Mid West business after 15
successful years.
Our high-grade Koolan Island Restart Project
also progressed on track with our schedule to
achieve first ore sales in the March Quarter of
2019. This progress enabled us to complete the
critical impermeable seepage barrier just after
the end of the financial year, after which we
commenced dewatering Main Pit.
In addition, in April 2018 the Company
announced high grade Ore Reserves at Koolan
Island had been increased by almost two thirds
to 21 Million tonnes grading 65.5% Fe. This has
added material value to the project by
significantly extending its life at a time of
growing demand and increasing price
premiums for high grade ores. This is
important, given Koolan Island will be the
highest grade hematite mine in Australia.
The Company is now positioned to deliver on
the Board’s objective of creating long term
value through investment in exploration,
development, and efficient operational
extraction of mineral resources. Looking to the
year ahead, the Board has determined the
following key business objectives for the
2018/19 financial year.
! Mid-West operations – continue to mine
the final stages of the Iron Hill deposit while
optimising production rates and controlling
costs, to maximise margins and prepare the
site for its ultimate closure in early 2019.
! Koolan Island – successfully rebuild the
Main Pit seawall, dewater the pit and
commence commercial production, with
initial ore sales anticipated in the March
2019 quarter.
! Cost reductions - continue to drive for
sustainable cost improvements across the
existing business.
! Treasury returns - maintain the increased
yield on the Group’s cash and investment
reserves while seeking opportunities for
further improvement.
! Growth projects - continuation of the
search for acquisition opportunities in the
resources sector.
By focusing on these priorities, we are
confident that Mount Gibson can continue to
navigate fluid market conditions and capitalise
on our financial strength to deliver strong long
term returns for our shareholders.
Our financial strength also enables us to look to
the future with optimism and confidence,
particularly as our business transitions from the
Mid West to our high grade Koolan Island mine
in the Kimberley.
In light of these factors, and the strong
underlying performance by our existing
business in 2017/18, the Board was pleased to
declare a fully franked final dividend of 3.0
cents per share for the year. On payment,
M o u n t G i b s o n w i l l h a v e d i s t r i b u t e d
approximately $229 million in fully franked
dividends since late 2011, whilst retaining
substantial capital for reinvestment in our
existing business and new resources
opportunities.
In summary, I would like to thank my fellow
Directors and the employees of Mount Gibson
for their contributions and dedication over the
year. I look forward to reporting another
successful year in 2019.
I would also like to acknowledge the
contribution of CEO Jim Beyer, who recently
Chief Executive Officer’s Report
His contribution has been fundamental to our
success over that period and I am honoured to
be appointed to lead Mount Gibson in the next
exciting stage of its evolution.
Finally, I 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 the
year ahead.
Peter Kerr
Chief Executive Officer*
*Mr Kerr commenced as CEO on 1 October 2018.
Mount Gibson’s performance in 2017/18, from
a safety, operating and financial perspective,
was very satisfying in a year of further
operational transition and diverging market
conditions for premium and lesser quality iron
ore products.
The safety of our people remains our absolute
priority, so it is of credit to our workforce that
Mount Gibson was once more able to report no
Lost Time Injuries (LTI) for the 2017/18 year,
after having recorded its first LTI in almost
three years during the prior financial year.
It is however disappointing that the Total
Recordable Injury Rate (TRIFR) increased
slightly to 5.6 incidents per million manhours in
the period, up from 5.3 the previous year,
ending five consecutive years of improvement.
This in part reflected increased manpower and
c o m p l e x i t y a s s o c i a t e d w i t h s e a w a l l
construction activity at Koolan Island, but
nonetheless provides a timely reminder that
safety can never be taken for granted, and that
we must continually seek to improve our safety
performance.
Our financial and operating performance was
also very satisfying in the conditions. The
Company generated an improved gross profit
from continuing operations of $48.7 million.
Sales tonnage increased 12.5% to 3.6 million
tonnes, while sales revenue increased 14% to
$196.5 million Free on Board (FOB).
Mount Gibson also continued to demonstrate
its ability to manage costs, achieving a further
reduction in all-in group cash costs to $45/wmt,
compared with $52/wmt in the prior year,
which underpinned our healthy operating
cashflow.
The Iron Hill mine delivered a strong
performance in line with plan, and mining is on
track for completion in late 2018. Ore sales are
scheduled to conclude in early 2019, after
which our Mid West operations will transition to
closure.
Additionally, we have earned the right to
generate ongoing income from the region by
fulfilling our contracted life of mine rail volumes
from Extension Hill during the year. This right
will commence on completion of our current rail
contract, and represents a partial refund of
historical rail access charges paid by Mount
Gibson, capped at $35 million, conditional upon
the rate of certain third party rail volumes on
the Perenjori-Geraldton railway.
As has been noted, a key focus in the year was
on progressing our high-grade Koolan Island
Restart Project, which will underpin our
business well into the next decade. It is
therefore very pleasing to have completed
seawall construction and commenced
dewatering, whilst also significantly increasing
the Ore Reserves and value of the Project. Cash
expenditure in the year totalled $81.7 million
and $89 million from commencement, in line
with forecast, representing about half the
projected peak cash draw prior to cashflow of
$175 million.
Importantly, we remain on track to achieve first
sales by the end of the March Quarter of 2019,
enabling us to capitalise on the structural
change in pricing and demand in favour of
higher grade, premium quality products. At
even our very conservative price and premium
assumptions, Koolan Island represents a highly
compelling value proposition due to its
extremely high quality ore and attractive cost
profile.
The Koolan Island project also complements our
continuing efforts to utilise our healthy balance
sheet and substantial cash to grow and diversify
our business through quality resources
development opportunities outside of iron ore.
We therefore enter the new financial year in
excellent shape and with confidence of
continuing to deliver value for shareholders.
I would like to take this opportunity to thank the
Chairman and the Board for their ongoing
support, guidance and counsel. Their input is
greatly valued and is certainly of assistance as
we seek to achieve the best possible outcome
for our shareholders.
As the newly appointed CEO, on behalf of the
Mount Gibson team, I would also like to offer
my sincere thanks and best wishes to my
predecessor Jim Beyer, who led Mount Gibson
with distinction for almost seven years before
taking up a new opportunity in October 2018.
Health and Safety
Mount Gibson’s ongoing commitment to
maintaining a safe work environment and
taking responsibility for the safety of ourselves
and our colleagues remains a primary focus,
with the Company committed to achieving
continuous improvement in every facet of its
safety performance.
The Company was pleased to once again
achieve 12 months without a Lost Time Injury
(LTI), having in the previous year recorded its
first LTI in almost three years. The Total
Recordable Injury Frequency Rate (TRIFR)
increased slightly to 5.6 incidents per million
manhours, from 5.3 in the prior year, but has
declined significantly over the least six years.
Fo r d e t a i l s o f t h e C o m p a ny ’s s a fe ty
performance, including statistics for each site,
please refer to Mount Gibson Iron’s 2018
Sustainability Report, published on the Mount
Gibson website.
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TRIFR
15.01
13.31
9.40
6.806.80
5.30
5.60
FY2013
FY2014
FY2015
FY2016
FY2016
FY2017
FY2018
LTIFR
5.57
3.43
1.80
0.00
0.00
0.00
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
*LTIFR and TRIFR each represent incidents per million manhours
party mining volumes on the Perenjori-
Geraldton railway line. This entitlement
commences on completion of the Company’s
existing rail agreements, expected to occur in
2019, and is calculated at various volume-
related rates, and capped at a total of
approximately $35 million (subject to
indexation) and a time limit expiring in 2031.
Receipt of this potential future refund is not
certain and is fully dependent on the volumes
railed by third parties on the specified rail
segments.
Operational Review
During 2017/18, Mount Gibson achieved total
ore sales of 3.6 million wet metric tonnes
(Mwmt), representing a 12.5% increase from
the previous year, reflecting increased
production from the Iron Hill mine in the Mid
West. A more detailed summary is contained in
the Directors Report.
KOOLAN ISLAND
Koolan Island is located approximately 140km
north of Derby, in the Kimberley region of
Western Australia.
Following approval for the restart of the Koolan
Island operation in May 2017, construction
activity commenced during the first half of the
2017/18 financial year. The seawall starter
embankment was completed in the September
2017 quarter, after which work focused on
installation of drains and monitoring
instrumentation, and the construction of the
impermeable cement seepage barrier.
Construction of the impermeable barrier was
completed subsequent to the end of the year in
mid July 2018. Footwall refurbishment activities
commenced in July, followed by the start of pit
dewatering.
The Project remains on track to achieve
targeted first ore sales in the March 2019
quarter. Ore sales from Koolan Island are
expected to total between 0.7 and 1.0 Mwmt in
2018/19.
During the year the Company announced that
Ore Reserves at Koolan Island had been
increased by 64% to 21.0 Mt grading 65.5% Fe.
This upgrade increased the expected mine life
to over 5 years, compared with the original life
of 3.5 years, and followed geotechnical
evaluation to confirm a viable method to safely
access approximately 8 Mt of high grade iron
ore at the eastern end of Main Pit. The selected
option involves building a ramp to access and
remove a 10-15 metres wide bench of relatively
unstable rock stretching approximately 400
metres along the footwall at the eastern end of
the Main Pit.
The upgraded life-of-mine plan includes the
purchase of one additional excavator and the
hire of four additional haul trucks. Peak cash
draw continues to be estimated at up to
approximately $175 million. As at 30 June
2018, approximately $89 million had been
invested in the Koolan Island Restart Project
since the commencement of work in May 2017.
MID WEST OPERATIONS -
EXTENSION HILL/IRON HILL
The Mid West Operations comprise the
Extension Hill mine and adjacent Iron Hill
Deposit are 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 and was completed in
late 2016. Mining operations transitioned to the
nearby Iron Hill deposit in early 2017, and first
sales were achieved in June 2017.
The operations recorded another sound
operational performance in the year.
Shipments from Geraldton Port totalled 3.6
Mwmt, comprising 1.6 Mwmt of DSO lump, 1.6
Mwmt of Direct Ship Ore (DSO) fines and 0.4
Mwmt of low grade lump material from
stockpiles at Extension Hill.
The Mid West operations generated earnings
before interest and tax of $36.5 million
reflecting the successful ramp-up of mining in
the Iron Hill open pit in the first half of the year,
and the ongoing focus on cost control and
efficiency improvements.
Mining in the Iron Hill open pit is scheduled to
be completed in late 2018, following which the
site will process, transport and export the
remaining ore stockpiles, with final shipments
expected in the March 2019 quarter. The site
and Mid-West logistics workforce will be
reduced over this time and the site ultimately
placed into closure mode. Total ore sales from
the Mid West are forecast to be between 2.0 and
2.3 million tonnes in 2018/19. Early site
rehabilitation activities will also be undertaken
where use of the existing workforce and site
equipment is justified. Total closure and
rehabilitation costs are provisioned at
a p p r ox i m a t e l y $ 1 5 m i l l i o n , o f w h i c h
approximately $8 million is expected to be spent
during 2018/19.
Following achievement of a contractual rail
volume threshold at Extension Hill during the
year, the Company earned the right to receive a
partial refund of historical rail access charges
from Arc Infrastructure, based upon future third
Environment and Community
For details of the Company’s environmental
performance, including information relating to
each site, please refer to Mount Gibson Iron’s
2018 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.
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 provided
approximately $440,000 in direct contributions
to community organisations and projects,
compared with approximately $460,000 in the
prior year.
For details of Mount Gibson Iron’s community
investment activities and engagement with
communities and stakeholders, including total
expenditure and information relating to each
site, please refer to Mount Gibson Iron’s 2018
Sustainability Report, published on the Mount
Gibson website.
The key elements of health and safety,
environment and community affairs form the
basis for Mount Gibson’s drive towards
sustainable outcomes.
Sustainability refers to the conditions under
which humans and nature can coexist in a
p r o d u c t i v e m a n n e r a n d p e r m i t t h e
e n v i r o n m e n t a l , s o c i a l a n d e c o n o m i c
requirements of present and future generations.
The social perspective has also had significant
focus over the 2017/18 year. This includes
always putting the health, safety and wellbeing
of our people first.
ENVIRONMENT
Mount Gibson has placed significant emphasis
on environmental management at its operations
over the past year. From an environmental
perspective, Mount Gibson has focused strongly
on continuous improvement and innovation,
always performing in an environmentally
responsible manner and ensuring a high
standard of environmental management at all of
its locations.
Environmental reporting is a significant element
of environmental management with many
regulatory organisations requiring quarterly or
annual reports. These include the federal
Department of the Environment, the state
Environmental Protection Authority, the
Department of Environmental Regulation and
the Department of Mines, Industry Regulation
and Safety.
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 reflects the
ramp-up to full production at Iron Hill and
increased activity associated with the Koolan
Island Restart Project, including seawall
construction works.
The Group holds various environmental licences
and authorities, issued under both State and
Federal law, to regulate its mining and
exploration activities in Australia. There were no
material breaches of the Group’s licences,
permits and approvals during the period.
Resources and Reserves
Total Mineral Resources and Ore Reserves by Project as at 30 June 2018
Koolan Island
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2018
Total at 30 June 2017
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2018
Total at 30 June 2017
Extension Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2018
Total at 30 June 2017
Iron Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2018
Total at 30 June 2017
Tallering Peak
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2018
Total at 30 June 2017
Tonnes
millions
3.71
38.23
9.97
51.91
60.51
0.1
20.9
21.0
12.82
1.27
0.31
0.20
1.79
1.79
0.00
3.63
1.54
5.17
8.07
0.41
1.03
0.20
1.65
1.65
Fe
%
60.2
65.1
60.6
63.9
63.0
63.4
65.5
65.5
66.02
55.3
57.3
56.6
55.8
55.8
54.3
56.3
56.1
56.2
58.3
58.9
58.1
54.7
57.9
57.9
2
SiO
%
13.29
5.48
12.21
7.33
8.38
7.25
4.53
4.58
3.71
9.16
10.42
10.49
9.53
9.53
10.29
12.85
9.08
11.73
8.71
6.26
11.70
17.89
11.10
11.10
3
Al O
2
%
0.30
0.65
0.59
0.62
0.82
1.11
0.88
0.89
0.93
2.76
1.62
1.66
2.44
2.44
2.94
1.53
2.42
1.79
1.62
3.50
1.66
1.93
2.15
2.15
P
%
0.007
0.013
0.013
0.013
0.015
0.013
0.012
0.012
0.009
0.077
0.076
0.055
0.074
0.074
0.057
0.073
0.081
0.076
0.068
0.082
0.066
0.056
0.069
0.069
Resources and Reserves Continued
Shine
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2018
Total at 30 June 2017
Tonnes
millions
5.73
6.57
3.59
15.89
15.89
Fe
%
58.9
58.0
56.8
58.1
58.1
SiO
%
9.04
10.01
9.61
9.57
9.57
Al O
%
1.81
1.35
1.18
1.48
1.48
P
%
0.076
0.070
0.063
0.071
0.071
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
Total Group Mineral Resources and Ore Reserves as at 30 June 2018 (above 50% Fe)
Total Mineral Resources at 30 June 2018
Total Ore Reserves at 30 June 2018
Total Mineral Resources at 30 June 2017
Total Ore Reserves at 30 June 2017
Tonnes
millions
76.4
21.0
87.9
12.82
Fe
%
61.8
65.5
61.4
66.02
SiO
%
8.23
4.58
8.70
3.71
Al O
%
0.95
0.89
1 .07
0.93
P
%
0.032
0.012
0.032
0.009
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
Material Change
The signicant changes to occur in the annual reporting period, other than depletion by mining at Iron Hill, was an increase in total Ore Reserves at the
Koolan Island Operation to a total of 21.0Mt @ 65.5% Fe (30 June 2017: 12.8Mt @ 66% Fe) due to the successful completion of evaluation of the
technical and nancial viability of accessing additional high grade Mineral Resources at the eastern end of Main Pit. Full details of the increase were
announced on 20 April 2018. As part of the Koolan Island Restart Project, total Koolan Island Mineral Resources were reduced to 51.9Mt @ 63.9% Fe,
from 60.5Mt @ 63.0% Fe previously, to reect in pit waste dumping which sterilised remnant resources at the Eastern Barramundi, Barramundi West
and Mullet-Acacia deposits. The Koolan Island Restart Project is on track to commence ore sales in the March quarter of 2019.
Competent Persons and Responsibilities
Mineral Resources:
The information in this report relating to Mineral Resources 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 and a member of the Australian Institute of Geoscientists. Ms Haren
was previously a full-time employee of, and is now a consultant to, Mount Gibson Iron Limited, and has sufcient 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 dened in the 2012
Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ms Haren consents to the inclusion in this
report of the matters based on her information in the form and context in which it appears.
Ore Reserves:
The information in this report relating to Ore Reserves at Koolan Island is based on information compiled by Brett Morey, a Competent Person who is a
member of the Australasian Institute of Mining and Metallurgy. Mr Morey is a full-time employee of Mount Gibson Iron Limited and has sufcient
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 dened in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr
Morey consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Refer to the Company’s 2018 Annual Statement of Mineral Resources and Ore Reserves for more information.
Financial Report
MOUNT GIBSON IRON LIMITED AND CONTROLLED ENTITIES
ABN 87 008 670 817
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
30 JUNE 2018
Directors’ Report
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
12
28
29
30
31
32
33
82
83
Directors’ Report
Your Directors submit their report for the year ended 30 June 2018 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.
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 enterprise management and
investments. He holds a bachelor degree in Automation from University of Science and Technology Beijing. Mr. Li was appointed an
Executive Director and the Managing Director of Shougang Concord International Enterprises Co. Ltd in May 2010 and was re-designated
as the Vice Chairman of the Board from 6 January 2018. Mr. Li is the managing director of Shougang Fushan Resources Group Limited
(“Shougang Resources”), a substantial shareholder of Mount Gibson, and an executive director of BeijingWest Industries International
Limited. Mr. Li was the chairman of Shougang Resources from October 2011 to January 2018, the chairman of Shougang Concord
Century Holdings Limited (“Shougang Century”) from March 2000 to January 2018, the chairman of each of Shougang Concord Grand
(Group) Limited (“Shougang Grand”) and Global Digital Creations Holdings Limited (“GDC”) from May 2010 to June 2017, all of which
are companies listed on the Hong Kong Stock Exchange.
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 44 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 and a Non-Executive Director of Lithium Power International Limited.
Simon Bird B.Acc.Science (Hons) CA, 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 over 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 ASX-listed Sovereign Gold Limited, a former Chairman of ASX-listed 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.
Paul Dougas B.Eng (Chem), M.Eng.Science, FAICD, CEng., Hon Fellow Engineers Australia, FATSE
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 a Non-Executive
Director of Epworth Healthcare and is a former Chairman of the Global Carbon Capture and Storage Institute and a former Non-Executive
Director of Beacon Foundation and Calibre Group Limited.
Kin Chan (resigned 5 January 2018)
Independent Non-Executive Director
Mr Chan was appointed a director on 22 September 2016 and subsequently retired as a director on 5 January 2018. Mr Chan has more
than 25 years’ experience in international capital markets, investment banking, corporate advisory and major transactions, particularly
in Asia. He is the founding shareholder of successful Hong Kong-based investment institution Argyle Street Management Limited (Argyle),
and has been the Chief Investment Officer since inception in 2002. Mr Chan is also the Chairman of TIH Limited and Non-Independent
Non-Executive Director of OUE Limited, both listed in Singapore. Through Argyle, Mr Chan has invested in mines in Asia and Australia
and most recently has had a central role in the acquisition and planned recapitalisation of PT Berau Coal, a major Indonesian mining
interest. Prior to founding Argyle, Mr Chan was Chief Executive and Managing Director of Lazard Asia Limited from 2000 to 2001 and
managed the firm’s advisory business in Asia outside of Japan. Prior to joining Lazard, Mr Chan was an Executive Director at Goldman,
Sachs & Co. where he worked in Hong Kong, New York and Singapore from 1992 to 1999. Mr Chan holds an A.B. degree from Princeton
University and an MBA degree from the Wharton School of the University of Pennsylvania where he was a Palmer Scholar.
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 over 20 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, commercial and governance experience having worked at a corporate and operational level in the energy and resources sectors
for over 20 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 2018 was as follows:
Nature of Operations and Principal Activities
The principal activities of the entities within the Group during the year were:
mining of hematite iron ore in the Iron Hill deposit at the Extension Hill mine site in the Mid-West region of Western Australia, and
haulage of the ore via road and rail for export from the Geraldton Port;
reconstruction of the Koolan Island Main Pit seawall, in the Kimberley region of Western Australia, with ore sales targeted to
resume in early 2019;
treasury management; and
the pursuit of mineral resources acquisitions and investments.
Employees
The Group employed 163 employees (excluding contractors) as at 30 June 2018 (2017: 168 employees).
OPERATING AND FINANCIAL REVIEW
Introduction
The Board presents the 2017/18 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 2017/18 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 2018 and has been prepared in accordance
with Regulatory Guidance 247 published by the Australian Securities and Investments Commission (“ASIC”).
Overview of the 2017/18 Financial Year
The Group’s financial performance for the year ended 30 June 2018 was steady reflecting the ramp-up of mining in the Iron Hill deposit
at Extension Hill, expenditure on the high grade Koolan Island Restart Project, including an expansion of the declared Ore Reserve
estimate and completion of the seawall and seepage barrier, and continued management of the Group’s treasury reserves. The Group
recorded a net profit after tax of $99,129,000 comprising underlying earnings of $34,842,000 plus proceeds from the settlement of the
Koolan Island business interruption insurance claim of $64,287,000.
At the beginning of the year, the Platts Index for delivery of 62% Fe iron ore fines to northern China was approximately US$65 per dry
metric tonne (“dmt”) and, after trading within a band of US$58-80/dmt, including a strong March 2018 quarter, finished the year slightly
lower at US$64/dmt. The average for the full year was US$69/dmt. Over the year, the A$/US$ exchange rate traded between
A$1.00/US$0.735 and US$0.81, with an average of US$0.775. However, although the high grade benchmark iron ore price (for 62%
Fe fines material) remained at solid levels, in both US$ and A$ terms, market prices for lower and medium grade iron ore were adversely
impacted by significantly increased discounts against the Platts 62% Fe benchmark index, a situation which many commentators now
believe is a permanent structural change to global iron ore pricing.
Group ore sales for the year totalled 3.6 million wet metric tonnes (“Mwmt”) and sales revenue totalled $250,341,000 ($192,675,000
net of shipping freight) from sales of high grade Iron Hill ore and stockpiled low grade Extension Hill material, plus $3,788,000 of realised
foreign exchange and commodity hedging gains. Mount Gibson achieved an average realised price for standard iron ore fines product
for the year of US$30/dmt Free On Board (“FOB”) after grade and provisional pricing adjustments and penalties for impurities, compared
with an average of US$44/dmt in the 2016/17 financial year. The weighted average realised price received (including realised foreign
exchange and commodity hedging gains) for all products sold, including low grade products, was $54/wmt FOB in the year compared
with $55/wmt FOB in the 2016/17 financial year.
Total cash reserves, comprising cash and cash equivalents, term deposits and subordinated notes, and financial assets held for trading,
increased by $10,755,000 over the year to a total of $457,534,000 as at 30 June 2018. The cashflow movement was primarily
attributable to settlement of the Koolan seawall business interruption insurance claim, operating cashflows from the Mid-West business,
expenditure on the rebuild of the Koolan Main Pit seawall, and payment of a final dividend for the 2016/17 financial year.
Operating Results for the Financial Year
The summarised operating results for the Group for the year ended 30 June 2018 are tabulated below:
Year ended: 30 June 2018* 30 June 2017* 30 June 2016* 30 June 2015* 30 June 2014
Net profit/(loss) before tax
Taxation benefit/(expense)
Net profit/(loss) after tax
$’000
$’000
$’000
99,129
-
99,129
Earnings/(loss) per share
cents/share
9.08
24,841
1,481
26,322
2.41
85,536
(1,008,505)
163,698
761
97,083
(67,345)
86,297
(911,422)
96,353
7.91
(83.56)
8.84
* The figures for net profit/(loss) before tax and taxation benefit/(expense) for the years ended 30 June 2018, 2017, 2016 and 2015 are shown inclusive
of discontinued operations. Refer the attached financial statements for further details.
Consolidated quarterly operating and sales statistics for the 2017/18 financial year are tabulated below:
Consolidated Group
Mining & Crushing
Total waste mined
Total ore mined#
Total ore crushed
Shipping/Sales
Standard DSO Lump
Standard DSO Fines
Low Grade DSO
Total
Ave. Platts 62% Fe
CFR northern China price
MGX Free on Board (FOB) average
realised fines price^
kwmt = thousand wet metric tonnes
US$/dmt = USD per dry metric tonne
Unit
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
US$/dmt
US$/dmt
Sept
Quarter
2017
Dec
Quarter
2017
Mar
Quarter
2018
Jun
Quarter
2018
2017/18
2016/17
420
1,104
821
514
1,112
742
294
366
181
841
71
34
481
300
60
841
66
24
397
994
953
492
426
59
977
74
35
327
875
992
361
485
118
963
65
26
1,659
4,085
3,507
1,627
1,576
419
3,622
69
30
658
1,899
3,292
1,259
766
1,142
3,167
70
44
#
Includes low-grade ore at Extension Hill with grading 50-55% Fe that is considered to be saleable. This material is being stockpiled for future
sale but continues to be treated as waste for accounting purposes.
^ Reflects the realised fines price for standard DSO fines ore only, after adjustments for shipping freight, grade, provisional invoicing adjustments
and penalties for impurities.
Minor discrepancies may appear due to rounding.
Mid-West Operations - Extension Hill/Iron Hill
The Extension Hill mine and adjacent Iron Hill Deposit are 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 achieved another sound operational performance in the year. Shipments from Geraldton Port totalled
3,622,000 wmt, comprising 1,627,000 wmt of lump ore, 1,576,000 wmt of fines ore and 419,000 wmt of low grade lump material from
existing Extension Hill stockpiles. Shipments were stronger in the second half, reflecting the adverse impact of customer defaults in the
first half.
The mine generated earnings before interest and tax of $36,527,000 reflecting the successful ramp-up of mining in the Iron Hill open
pit in the first half of the year, and the ongoing focus on cost control and efficiency improvements.
Extension Hill’s cost of sales for the year was $44/wmt FOB compared with the average for the 2016/17 financial year of $47/wmt FOB.
At the end of the year, approximately 60,000 wmt of crushed high grade product was stockpiled at the mine. Stockpiles of uncrushed
high grade Iron Hill material totalled 254,000 wmt and stockpiles of uncrushed lower grade material totalled 2.9 Mwmt grading
50-55% Fe. Crushed ore stockpiles at the Perenjori rail siding totalled approximately 190,000 wmt of high grade ore.
The average grade of Iron Hill lump ore sold during the year was 61.0% Fe, and the average grade of the fines ore was 59.6% Fe.
Production and shipping statistics for Extension Hill for the 2017/18 financial year are tabulated below:
Extension Hill
Production Summary
Unit
Sept
Quarter
2017
’000
Dec
Quarter
2017
’000
Mar
Quarter
2018
’000
Jun
Quarter
2018
’000
Year
2017/18
’000
Year
2016/17
’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
Low Grade Lump
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
420
514
879
225
1,104
961
151
1,112
449
372
821
440
339
779
464
287
751
294
366
181
841
386
356
742
392
350
742
515
371
886
481
300
60
841
397
898
97
994
543
410
953
546
407
953
619
361
980
492
426
59
977
327
746
129
875
497
495
992
489
526
1,015
460
563
1,023
361
485
118
963
1,659
658
152
3,484
601
4,085
1,874
1,633
3,507
1,867
1,622
3,489
2,058
1,582
3,640
1,627
1,576
419
3,622
1,508
391
1,899
131
54
115
1,978
1,313
3,292
1,981
822
2,803
1,939
801
2,740
1,259
766
726
2,751
(5)
24
7
(6)
97
24
6
97
33
29
106
(42)
32
* 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.
Koolan Island
Following approval for the restart of the Koolan Island operation in May 2017, construction activity commenced during the first half of
the 2017/18 financial year. After successful completion of the starter embankment of the Main Pit seawall in the September quarter,
activity focused on installation of vertical drains and in-ground monitoring instrumentation, as well as construction of the seepage
barrier. Activity in the second half of the year was focused on completion of the seepage barrier and preparations for footwall
refurbishment and dewatering. The seepage barrier was successfully completed shortly after year end, in mid-July.
The Project remains on track to achieve targeted first ore sales in the March 2019 quarter.
During the year the Company also announced that Ore Reserves at Koolan Island had been increased by 64% to 21.0 million tonnes
grading an average of 65.5% Fe. This upgrade has increased the expected mine life to over 5 years, compared with the original life of
3.5 years based on the initial Ore Reserves of 12.8 million tonnes grading 66.0% Fe. The Ore Reserves increase was the result of
geotechnical evaluation to confirm a viable method to safely access approximately 8 million tonnes of high grade iron ore at the eastern
end of Main Pit. The selected option involves building a ramp to mine out a 10-15 metres wide bench of relatively unstable rock
stretching approximately 400 metres along the footwall at the eastern end of the Main Pit.
The upgraded life-of-mine plan includes the purchase of one additional excavator and the hire of four additional haul trucks to avoid
any substantive delays to the start of sales. The extra equipment will also allow improvements in future mining rates and continuity.
Peak cash draw continues to be estimated at up to approximately $175 million.
Expenditure (cash and non-cash) on the Koolan restart project in the year totalled $83,894,000 including various items of plant and
equipment. Expenditure from inception in May 2017 to 30 June 2018 totals approximately $89 million.
Financial Position
The Group’s cash and cash equivalents, term deposits and subordinated notes and financial assets held for trading totalled $457,534,000
at 30 June 2018, an increase of $10,755,000 from the balance at 30 June 2017 of $446,779,000.
The key components of the increase included underlying operating cashflows (net of corporate costs) of $34,940,000, settlement
proceeds of $64,287,000 from the business interruption component of the Koolan Island insurance claim, interest income of
$12,205,000, Koolan Island Restart Project expenditure (including plant and equipment) totalling $81,731,000, and payment of a
$21,859,000 fully franked dividend to shareholders.
As at the balance date, the Company’s current assets totalled $492,072,000 and its current liabilities totalled $52,278,000. 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.
Derivatives
As at 30 June 2018, the Group held foreign exchange collar option contracts covering the conversion of US$12,000,000 into Australian
dollars over the period July 2018 to October 2018 with an average cap price of A$1.00/US$0.7813 and an average floor price of
A$1.00/US$0.7474. These collar contracts had a marked-to-market loss at balance date of $325,000.
During the year, the Group entered into forward sales contract covering six shipments totalling 330,000 tonnes of iron ore, with maturity
dates spread over the period October 2017 to May 2018. The average price for 62% Fe fines (CFR) at each maturity date was between
US$72 and US$75 per tonne, with each contract maturing for positive cash settlement proceeds.
Koolan Island Seawall Insurance Claim
In July 2017 the Company reached final agreement with 14 insurers, representing 92.5% of the Company’s underwriting cover for the
Koolan business interruption insurance cover, for a cash settlement of the business interruption component of the Koolan Island
insurance claim for $64,287,000. Proceeds of the settlement were received in July 2017. Negotiations are continuing with one further
insurer representing the remaining 7.5% of the Company’s business interruption insurance cover.
This settlement takes total cash proceeds from Mount Gibson’s insurance claim relating to the seawall failure to just over $150 million,
including the $86 million cash settlement received for property damage in mid-2016.
Iron Hill Offtake Agreement
On 21 December 2017, the Company announced it had entered a second offtake agreement with SCIT Trading Limited (“SCIT”), a
wholly-owned subsidiary of China’s Shougang Concord International Enterprises Company Limited, for the sale of iron ore from Iron Hill.
This second agreement was approved by Mount Gibson’s shareholders on 23 March 2018.
The new offtake agreement increased the total production committed to SCIT, under both offtake contracts, to approximately 82% of
available lump and 83% of fines ore up until 8 July 2018 when the first offtake agreement expired, and thereafter 75% of available
lump and fines ore.
Terms of the new offtake agreement include market reflective pricing referenced to relevant S&P Global Platts pricing indices, and
market-typical lump premium and impurity penalties, on a Cost and Freight (CFR) basis for delivery in China.
Extension Hill Rail Refund/Credit – Contingent Asset
Following achievement of a contractual rail volume threshold at Extension Hill during the year, the Group has a contingent asset in the
form of an entitlement to receive a partial refund of historical rail access charges from Arc Infrastructure, based upon the future usage
by certain third parties of specific segments of the Perenjori to Geraldton railway line. This entitlement commences upon termination
of the Group’s existing rail agreements – which is now expected to occur in 2019 – and is calculated at various volume-related rates,
and capped at a total of approximately $35 million (subject to indexation) and a time limit expiring in 2031. Receipt of this potential
future refund is not certain and is fully dependent on the volumes railed by third parties on the specified rail segments.
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 2018/19 financial year:
• Extension Hill/Iron Hill – continue to mine the final stages of the Iron Hill deposit while optimising production rates and controlling
costs, to maximise margins and prepare the site for its ultimate closure in 2019.
• Koolan Island – successfully rebuild the Main Pit seawall, dewater the pit and commence commercial production, with initial ore
sales anticipated in the March 2019 quarter.
• Cost reductions - continue to drive for sustainable cost improvements across the existing business.
• Treasury returns – maintain the increased yield on the Group’s cash and investment reserves.
• Growth projects - continuation of the search for acquisition opportunities in the resources sector.
Extension Hill Outlook
Mining in the Iron Hill open pit at the Extension Hill mine site will continue to late 2018, following which the site will process, transport
and export the remaining ore stockpiles, with final shipments expected in the March 2019 quarter. Opportunistic sales of existing
stockpiles of low grade material will be undertaken if economically justified. The site and Mid-West logistics workforce will be reduced
over this time and the site ultimately placed into closure mode. Early site rehabilitation activities will also be undertaken where use of
the existing workforce and site equipment is justified.
Koolan Island Outlook
Following recent completion of the seepage barrier within the reconstructed Main Pit seawall, activity at Koolan Island is now focused
on dewatering of the Main Pit, refurbishment of the footwall, and ramp-up to the recommencement of commercial production, with first
ore sales targeted for the March 2019 quarter.
Based on the recently increased Ore Reserve estimate for the operation, to 21.0 million tonnes at an average grade of 65.5% Fe, the
expected mine life has increased to over 5 years. The high grade and low impurities of the Koolan Island Main Pit ore mean that the
operation will benefit from the substantial high grade premiums that exist in today’s iron ore market. In order to reduce the risk of
substantive delays to the start of ore sales, the upgraded life-of-mine plan includes the purchase of an additional excavator and the hire
of four additional haul trucks which will also allow improvements in future mining rates and continuity. Peak cash draw for the restart
project continues to be estimated at up to approximately $175 million.
Life of mine all-in cash costs are projected at $48/wmt FOB, including development capital expenditure and final closure costs, resulting
in an estimated breakeven Platts 62% Fe price of US$40/dmt including capital and closure costs.
Group Sales Guidance and Cash Costs Guidance
Mount Gibson expects its annual sales for the 2018/19 financial year to be between 2.7 and 3.3 Mwmt of iron ore at an average all-in
group cash cost of $52-57/wmt. All-in group cash costs are reported FOB and include cash operating expenditure, royalties, sustaining
capital expenditure and corporate costs, and exclude Koolan Restart Project capital expenditure.
DIVIDENDS
During the year, a final dividend of $0.02 per share fully franked in respect of the 2016/17 financial year was paid in cash totalling
$21,859,000.
On 14 August 2018, the Company declared a final dividend on ordinary shares in respect of the 2017/18 financial year of $0.03 per
share fully franked, payable either in cash or in shares to eligible shareholders as part of the Company’s Dividend Reinvestment Plan.
The total amount of the dividend is $32,987,000. The dividend has not been provided for in the 30 June 2018 financial statements.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Other than the final dividend declared by the Company on 14 August 2018 noted 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.
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, PERFORMANCE RIGHTS AND RESTRICTED SHARES
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 no Performance Rights vested and exercised during the year. There are no Performance Rights on issue as at balance date
and as at the date of this Report.
There were no restricted shares issued during the year. There were 4,749,456 restricted shares on issue at balance date and, following
an issue made after balance date, there are 7,747,807 restricted shares on issue as at the date of this report.
Refer to the Remuneration Report for further details of options, Performance Rights and restricted shares 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(i)
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson (Alternate for Mr Lee)
Ordinary Shares
Options over Shares
Performance Rights
over Shares
-
300,000
-
-
20,000
284,944
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) 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 3.19A.2, Mr Lee has previously declared an indirect “relevant interest” in 353,043,237 ordinary shares in the Company through his association
with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 30 May 2018.
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
K Chan (resigned 5 January 2018)
A Ferguson (Alt. for Mr Lee)
7
7
7
5
7
7
7
3
-
4
3
4
-
-
4
-
-
-
ENVIRONMENTAL REGULATION AND PERFORMANCE
4
3
4
-
4
-
-
-
-
5
-
-
-
4
4
5
-
-
3
-
-
-
3
3
3
2
-
The Group has developed Environmental Management Plans for its various operating and development sites. The Environmental
Management Plans have been approved where applicable by various Western Australian Government agencies including Department of
Mines, Industry Regulation and Safety, the Department of Water & Environmental Regulation (including the EPA), Department of
Biodiversity Conservation and Attractions and the Department of Health. In addition, plans associated with specific species have been
approved by the Federal Department of the Environment.
In addition, the Department of Environmental Regulation had granted approval and licensing of works to allow construction and operation
of facilities on “prescribed” premises and the Department of Mines, Industry Regulation and Safety has granted approval for Mining
Proposals at each of the mines.
The Group holds various environmental licences and authorities, issued under both State and Federal laws, to regulate its mining and
exploration activities in Australia. Along with Regulations, these licences include conditions in relation to specifying limits on emissions
into the environment, rehabilitation of areas disturbed during the course of mining, exploration activities, tenement conditions associated
with exploration and mining, and the storage of hazardous substances.
There have been no material breaches of the Group’s licences, permits and approvals.
The Group continues to report under the National Greenhouse and Energy Reporting (NGER) Act 2009. Diesel combustion is the group’s
single 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 17 which forms part of this Report.
NON-AUDIT SERVICES
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. There were no non-audit services provided by EY during the financial year ended 30 June 2018.
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 $538,758 were paid
in the 2017/18 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 comprises 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 toward key Company objectives;
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.
During the year, the NRGC sought advice from BDO Reward (WA) Pty Ltd (“BDO”) regarding market data in relation to senior executives’
remuneration packages and incentive structure, and Non-Executive Director fees. The recommendations were provided directly to the
NRGC as an input to the decision making process, and the NRGC considered these recommendations, along with other factors, in making
its remuneration decisions and recommendations to the Board. The fees payable to BDO during the year totalled $9,750 and no other
services were provided by BDO. The NRGC and Board are satisfied the advice received was free from undue influence from senior
executives to whom the remuneration recommendations applied, and BDO confirmed this in writing to the NRGC.
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 50% of their annual salary package. STI payments are
based on the Board’s assessment of the executive’s performance towards achieving key Company objectives over the relevant period.
For the 2017/18 financial year, the primary focus was on achieving key milestones towards restart of the Koolan Island operation. The
total potential STI available for award is ultimately at the Board’s discretion.
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 with approval from the Board. Payments are made in cash
after the reporting date.
For the 2017/18 financial year, the Board decided to defer the consideration of STI awards to Key Management Personnel until late
2018 to take into account the activities associated with completion of the Koolan Island Main Pit seawall and return of the site to
operational status. As such, no STI cash incentives were paid to Key Management Personnel for the year ended 30 June 2018. However,
the Board did decide, for the reasons set out below, to pay in cash the assessed award of each senior executive’s Long Term Incentive
under the Loan Share Plan, rather than have those incentives issued in the usual form of restricted shares.
Long-term Incentives (“LTI”)
The Company previously established a 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 last grant of performance rights under the PRP
was made in the 2015/16 financial year. There were no performance rights on issue at the start of the 2017/18 financial year, and no
grants of new performance rights under the PRP were made during the year.
A new LTI plan, known as the Loan Share Plan (“LSP”), was established in August 2016. Under the LSP, ordinary shares in the Company
may be issued to eligible participants, with vesting of the shares being subject to the satisfaction of stipulated performance conditions.
The shares are issued at their market value with the recipient required to pay this market value in order to take up the share offer. The
Company or any of its subsidiaries will provide a loan to fund the acquisition price. The loan is interest-free and is secured against the
shares in the form of a holding lock preventing all dealing in the shares. The loan is limited recourse such that if the shares do not
ultimately vest and are therefore forfeited, this is treated as full repayment of the loan balance. While the loan balance remains
outstanding, any dividends paid on the shares, net of the tax on the dividends, will be automatically applied towards repayment of the
loan. In making the loan in respect of the newly issued shares, there is no cash cost to the Company as the shares are newly issued.
On 24 August 2016 the Company issued a total of 4,749,456 shares to Messrs Beyer, Kerr and Stokes under the LSP, representing their
full entitlement for LTI awards equating to one third of their base salaries (including superannuation). In accordance with the terms of
the LSP, the shares were issued at a market price of $0.316 per share with the participants responsible for associated limited recourse
loans totalling $1,500,828. The shares subsequently vested in July 2017 as the participants had remained continuously employed by
the Group since issue and the Company’s share price, as measured by a rolling five day volume weighted average price of the Company’s
shares traded on the ASX, on 1 July 2017 (or at any time in the following four year period) was above a 10% premium to the issue price
of the shares. The award was accounted for as an in-substance option award, with the fair value at grant date assessed at $0.104 per
share.
No LTI share issue was made under the LSP in the 2017/18 financial year because the Board was prevented from making such an issue
as a result of trading restrictions applied in accordance with the law. The Board however, having regard to the performance of the
Company against its internal budgets and the performance of the executives, exercised its discretion to pay to Messrs Beyer, Kerr,
Stokes and de Kruijff the total cash amount of $612,151, representing 75% of their LTI entitlements for the 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.
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.
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.
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 Package review subject to performance;
STI Bonus of up to one half of Annual Salary Package;
LTI Bonus of up to one third of Annual Salary Package; and
Employee can terminate upon one month’s notice and the Company upon six weeks’ notice, or immediately for any serious
misconduct.
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
K Chan
A Ferguson
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Lead Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned 5 January 2018)
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
Remuneration of Key Management Personnel for the year ended 30 June 2018
Short Term
Post
Employment
Long Term
Salary &
Fees
$
Non
Monetary(a)
$
Cash
Incentives(b)
$
Accrued
Annual
Leave(c)
$
Super-
annuation
$
Long
Service
Leave(d)
$
Loan Share
Plan(e)
$
30 June 2018
Directors
Lee Seng Hui
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
K Chan
A Ferguson (Alt)
95,548
90,868
-
90,868
97,717
86,500
37,987
-
Sub-total
499,488
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other KMP
J Beyer
P Kerr
D Stokes
S de Kruijff
Sub-total
Totals
624,171
434,045
323,426
374,710
17,510
12,778
10,566
11,750
170,865
114,760
88,537
237,989
1,756,352
52,604
612,151
2,255,840
52,604
612,151
4,788
(3,216)
4,962
(4,312)
2,222
2,222
Total
$
104,625
99,500
-
99,500
107,000
86,500
41,633
-
538,758
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,409
13,641
11,249
4,468
75,767
75,767
43,378
29,134
22,477
966,417
626,142
491,942
-
660,202
94,989 2,744,703
94,989 3,283,461
9,077
8,632
-
8,632
9,283
-
3,646
-
39,270
59,296
25,000
30,725
35,597
150,618
189,888
%
Perform-
ance
Related
-
-
-
-
-
-
-
-
22
23
23
36
(a) Non-Monetary items include the value (where applicable) of benefits such as group life insurance that are available to all employees of Mount Gibson and car
parking, and are inclusive of Fringe Benefits Tax where applicable.
(b) Cash incentives for 2017/18 represent the cash value of the executives’ long term incentive awards vested and paid in the period. Refer to Long Term Incentives
above.
(c) Annual leave has been separately categorised and is measured on an accrual basis and reflects the movement in the accrual over the twelve-month period. Any
reduction in accrued leave reflects more leave taken or cashed out than that which accrued in the period.
(d) Represents the accrual for long service leave over the twelve-month period.
(e) The amounts for 2017/18 reflect the value of dividends received on the Loan Share Plan (LSP) shares held by the relevant recipients. In accordance with the
terms of the LSP, dividends are paid to the recipients to the extent required to cover the taxable value of the dividends, with the balance utilised to reduce the
amount of the associated limited recourse loans attaching to the LSP shares. The LSP shares are accounted for as in-substance options. Refer to the description
of Long Term Incentives in this Remuneration Report for details of the LSP. The amount included as remuneration in the above table is not related to or indicative
of the benefit (if any) that individual executives may in fact ultimately receive.
Options
There were no options granted to Directors and Executives during the year ended 30 June 2018 and there are no options outstanding
as at 30 June 2018. There were no shares issued on the exercise of options during the year ended 30 June 2018 (2017: nil).
Shares
There were no shares granted to Directors and Executives during the year ended 30 June 2018.
During the year ended 30 June 2018, there were no alterations to the terms and conditions of LSP shares after their grant date.
Performance Rights
There were no performance rights granted as part of remuneration, or vested and exercised, during the year ended 30 June 2018. At
30 June 2018, there were no Performance Rights on issue. There were no shares issued on the exercise of Performance Rights during
the year ended 30 June 2018 (2017: 533,625).
Shareholdings and Rights of Key Management Personnel as at 30 June 2018
Directors
Lee Seng Hui(i)
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
A Ferguson (Alt. for Mr Lee)
Other KMP(ii)
J Beyer
P Kerr
D Stokes
S de Kruijff
Total
Balance
1 July 2017
Ord
Granted as
Remuneration
Ord
Exercise of
Performance
Rights
Ord
Net Change
Other
Ord
Balance
30 June 2018
Ord
-
300,000
-
-
20,000
284,944
-
2,911,068
1,739,681
1,347,336
-
6,603,029
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
-
-
20,000
284,944
-
2,911,068
1,739,681
1,347,336
-
6,603,029
(i) 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 3.19A.2, Mr Lee has previously declared an indirect “relevant interest” in 353,043,237 ordinary shares in the Company through his association
with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 30 May 2018.
(ii) The shareholdings at balance date for the Other KMP include 4,749,456 Loan Share Plan (LSP) shares held by Messrs Beyer (2,168,889 LSP shares), Kerr
(1,456,716 LSP shares) and Stokes (1,123,851 LSP shares) which all vested in the year ended 30 June 2018.
Remuneration of Key Management Personnel for the year ended 30 June 2017
Short Term
Post
Employment
Long Term
Share
Based
Payment
Salary &
Fees
$
Non
Monetary(a)
$
Cash
Incentives(b)
$
Accrued
Annual
Leave(c)
$
Super-
annuation
$
Long
Service
Leave(d)
$
Loan Share
Plan(e)
$
30 June 2017
Directors
Lee Seng Hui
A Jones
Li Shaofeng
R Barwick
S Bird
P Dougas
K Chan
A Ferguson (Alt)
102,854
105,479
-
105,479
112,329
101,875
57,534
-
Sub-total
585,550
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other KMP
J Beyer
P Kerr
D Stokes
S de Kruijff
Sub-total
Totals
627,776
424,500
320,645
371,245
15,618
11,219
9,401
8,507
338,350
227,250
175,322
121,874
1,744,166
44,745
862,796
2,329,716
44,745
862,796
28,444
9,552
-
1,423
39,419
39,419
Total
$
112,625
115,500
-
115,500
123,000
102,500
63,000
-
632,125
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,282
225,564 1,304,958
5,099
4,230
2,045
151,498
859,118
116,881
656,479
-
540,094
31,656
493,943 3,360,649
31,656
493,943 3,992,774
9,771
10,021
-
10,021
10,671
625
5,466
-
46,575
48,924
30,000
30,000
35,000
143,924
190,499
%
Perform-
ance
Related
-
-
-
-
-
-
-
-
43
44
45
23
(a) Non-Monetary items include the value (where applicable) of benefits such as group life insurance that are available to all employees of Mount Gibson and car
parking, and are inclusive of Fringe Benefits Tax where applicable.
(b) Cash incentives represent short term incentives awarded during the year and paid after year-end.
(c) Annual leave has been separately categorised and is measured on an accrual basis and reflects the movement in the accrual over the twelve-month period. Any
reduction in accrued leave reflects more leave taken or cashed out than that which accrued in the period.
(d) Represents the accrual for long service leave over the twelve-month period.
(e) The fair values of the awards under the Loan Share Plan were calculated as at the grant date and represent the accounting expense incurred by the Company for
the stated financial period, reflecting the terms of the awards. The amount included as remuneration is not related to or indicative of the benefit (if any) that
individual executives may in fact ultimately receive.
Loans to Key Management Personnel
There were no loans made to key management personnel during the year ended 30 June 2018.
Limited recourse loans totalling $1,500,828 were made to Key Management Personnel during the year ended 30 June 2017 under the
terms of the Company’s LSP and, after the partial repayment of these loans arising from the dividend paid during the year, the total
balance of these loans was $1,428,908 as at 30 June 2018.
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 2018 and 30 June 2017.
Company Performance
The table below shows the performance of the Group over the last 5 years:
30 June 2018
30 June 2017
30 June 2016
30 June 2015
30 June 2014
Net profit/(loss) after tax
$’000
Earnings/(loss) per share $/share
Closing share price
$
99,129
0.0908
0.43
26,322
0.0241
0.33
86,297
0.0791
0.26
(911,422)
(0.8356)
0.20
96,353
0.0884
0.69
End of remuneration report.
Signed in accordance with a resolution of the Directors.
LEE SENG HUI
Chairman
Sydney, 14 August 2018
Competent Persons Statement:
Ore Reserves:
The information in this report relating to Ore Reserves at Koolan Island is based on information compiled by Brett Morey, a Competent Person
who is a member of the Australasian Institute of Mining and Metallurgy. Mr Morey is a full-time employee of Mount Gibson Iron Limited and has
sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken
to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves’. Mr Morey consents to the inclusion in the report of the matters based on his information in the form and context in which it
appears.
GB:EH:MGI:241
Consolidated Income Statement
For the year ended 30 June 2018
CONTINUING OPERATIONS
Sale of goods
Interest revenue
TOTAL REVENUE
Cost of sales
GROSS PROFIT
Other income
Administration and other expenses
PROFIT FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
Finance costs
PROFIT FROM CONTINUING OPERATIONS BEFORE TAX
Tax benefit
Notes
3[a]
2018
$’000
2017
$’000
254,129
12,140
182,688
12,113
266,269
194,801
4[a]
(217,542)
(158,343)
48,727
36,458
3[b]
4[c]
4[b]
5
66,483
(14,823)
100,387
(1,284)
99,103
-
5,866
(17,072)
25,252
(1,134)
24,118
1,481
PROFIT AFTER TAX FROM CONTINUING OPERATIONS
99,103
25,599
DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations
32[a]
26
723
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
99,129
26,322
Earnings per share (cents per share)
basic earnings per share
diluted earnings per share
Earnings per share (cents per share) for continuing operations
basic earnings per share
diluted earnings per share
26
26
26
26
9.08
9.04
9.08
9.04
2.41
2.40
2.34
2.34
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
PROFIT FOR THE PERIOD AFTER TAX
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit or loss
Change in fair value of cash flow hedges
Reclassification adjustments for loss on cash flow hedges transferred to the
Income Statement
Change in fair value of available for sale financial assets
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
2018
$’000
2017
$’000
99,129
26,322
(325)
(86)
982
571
341
(109)
-
232
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
99,700
26,554
Consolidated Balance Sheet
As at 30 June 2018
Notes
2018
$’000
2017
$’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
Total Current Assets
Non-Current Assets
Property, plant and equipment
Mine properties
Prepayments
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Employee benefits
Derivative financial liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Employee benefits
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
6
7
8
9
10
11
13
15
17
19
20
20
21
23
22
46,547
377,030
33,957
7,843
23,321
3,374
-
48,756
365,500
32,523
9,528
20,736
1,953
341
492,072
479,337
7,734
87,781
2,370
97,885
589,957
42,078
3,336
325
6,539
52,278
489
40,366
40,855
93,133
5,919
10,891
-
16,810
496,147
31,477
2,966
-
3,651
38,094
334
38,736
39,070
77,164
496,824
418,983
568,328
568,328
(1,053,908)
(1,131,178)
982,404
496,824
981,833
418,983
Consolidated Cash Flow Statement
For the year ended 30 June 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Proceeds from Koolan Island seawall business interruption insurance claim
Interest paid
Income tax refund received
Notes
2018
$’000
2017
$’000
255,814
192,533
(220,566)
(188,493)
64,287
(308)
-
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
6[b]
99,227
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Payment for term deposits
Proceeds from sale of subordinated notes
Payment for subordinated notes
Proceeds from sale of financial assets held for trading
Payment for financial assets held for trading
Payment for deferred exploration and evaluation expenditure
Payment for mine development
Proceeds from Koolan Island seawall property insurance claim
12,205
128
(5,998)
(10,500)
10,020
(10,047)
23,889
(25,104)
(324)
(74,005)
-
NET CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES
(79,736)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of insurance premium funding facility
Payment of borrowing costs
Dividends paid
NET CASH FLOWS (USED IN) FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Net foreign exchange difference
Cash and cash equivalents at beginning of year
-
(124)
(21,859)
(21,983)
(2,492)
283
48,756
CASH AND CASH EQUIVALENTS AT END OF YEAR
6[a]
46,547
48,756
-
(191)
1,532
5,381
11,484
2,586
(3,863)
(28,500)
-
-
10,344
(22,863)
(663)
(2,126)
34,558
957
(421)
(303)
-
(724)
5,614
(174)
43,316
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A
Notes to the Consolidated Financial Report
For the year ended 30 June 2018
1.
Introduction
(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 2018, were authorised for issue in accordance with a resolution of the Directors on 14 August 2018.
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 and export of hematite iron ore in the Mid-West region
of Western Australia, reconstruction of the Koolan Island Main Pit seawall and restart of operations in the Kimberley region of
Western Australia, treasury management and the pursuit of mineral resources acquisitions and 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”)
(Rounding in Financial/Directors’ Report) 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.
Notes to the Consolidated Financial Report (continued)
2. Other Significant Accounting Policies
(a)
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.
(b) Other taxes
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (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.
(c) 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.
(d) 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.
Notes to the Consolidated Financial Report (continued)
Notes
2018
$’000
2017
$’000
3. Revenue and Other Income
[a] Revenue
Sale of ore – continuing operations
Realised gain on foreign exchange hedges and commodity forward sales contracts
[b] Other income
Net realised gain on foreign exchange transactions
Net unrealised foreign exchange gain on balances
Net gain on disposal of property, plant and equipment
Net gain on sale of financial assets held for trading
Unrealised marked-to-market gain on financial assets held for trading
Insurance proceeds – Koolan Island seawall business interruption insurance claim
Insurance proceeds – other
Other income
250,341
3,788
254,129
1,172
283
128
95
145
64,287
20
353
66,483
182,527
161
182,688
-
-
2,201
246
-
-
9
3,410
5,866
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.
The Group enters into provisionally priced ore sales contracts for which price finalisation is referenced to relevant market indices at specified
future dates. Provisional pricing mechanisms contained within these sales arrangements are considered to be an embedded derivative reflecting
the forward contract for which the underlying sale is subsequently adjusted. The embedded derivative is recognised at the date of shipment at
fair value by reference to forecast iron ore prices.
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.
4. Expenses
[a] Cost of sales – continuing operations
Mining and site administration costs
Depreciation – mining and site administration
Amortisation of mine properties
Crushing costs
Depreciation – crushing
Transport costs
Depreciation – transport
Port costs
Depreciation – port
Royalties
Net ore inventory movement
Impairment (write-back)/loss on ore inventories
Rehabilitation revised estimate adjustments
Cost of sales – FOB
Shipping freight
Cost of sales – CFR
Notes
2018
$’000
2017
$’000
15
10[i]
35,518
761
4,125
5,313
32
83,852
612
16,538
139
14,485
944
(2,443)
-
159,876
57,666
217,542
31,702
3,780
402
4,135
762
70,952
399
15,215
97
12,078
(2,571)
3,153
(2,406)
137,698
20,645
158,343
Notes to the Consolidated Financial Report (continued)
Notes
2018
$’000
2017
$’000
4. Expenses (Continued)
[b] Finance costs
Finance charges on banking facilities
Non-cash interest accretion on rehabilitation provision
[c] Administration and other expenses include:
Depreciation
Share-based payments expense
Impairment of debtors
Net realised loss on foreign exchange transactions
Net unrealised loss on foreign exchange balances
Koolan seawall insurance claim
Insurance premiums (net of refunds)
Business development expenses
Koolan restart feasibility study
Impairment (write-back)/impairment of consumables inventories
Impairment (write-back) of deferred acquisition, exploration and evaluation
Exploration expenses
Unrealised marked-to-market loss on foreign exchange derivatives
Unrealised marked-to-market loss on financial assets held for trading
[d] Cost of sales and Administration and other expenses above include:
Salaries, wages expense and other employee benefits
Operating lease rental – minimum lease payments
Recognition and measurement
Employee benefits expense
Wages, salaries, sick leave and other employee benefits
20
25(a)
14
14
439
845
1,284
276
-
50
-
-
448
1,002
467
-
61
(62)
38
255
-
25,789
3,198
495
639
1,134
593
494
3,142
39
174
502
26
2,281
2,124
(2,479)
(2,507)
90
123
14
23,549
1,667
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.
Redundancy
Provision is made for redundancy payments where positions have been identified as excess to requirements, the Group has communicated a
detailed and formal plan, and a reliable estimate of the amount payable can be determined. Refer to note 20 for further details on redundancy
(restructure) provision.
Annual leave and long service leave
The Group expects its annual leave benefits to be settled wholly within 12 months of each reporting date. The obligation is 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 high quality
corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
The policy relating to share-based payments is set out in note 25.
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 for borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset which 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 13 and 15 for details on depreciation and amortisation.
Impairment
Impairment expenses are recognised to the extent that the carrying amounts of assets exceed their recoverable amounts. Refer to note 16 for
further details on impairment.
Notes to the Consolidated Financial Report (continued)
5. Taxation
Major components of tax benefit for the years ended 30 June 2018 and 2017 are:
Income Statement
Current tax
Current income tax charge
Refund in respect of previous return
Deferred tax
Relating to origination and reversal of temporary differences:
Income tax
Tax benefit reported in Income Statement
Tax benefit relating to continuing operations
Tax benefit 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
A reconciliation of tax benefit applicable to accounting profit before tax at the
statutory income tax rate to tax expense at the Group’s effective tax rate for the
years ended 30 June 2018 and 2017 is as follows:
Accounting profit before tax
At the statutory income tax rate of 30% (2017: 30%)
Expenditure not allowed for income tax purposes
Recognition of previously unrecognised deferred tax assets
Adjustments in respect of current income tax of previous year
Adjustments in respect of deferred tax
Other
Tax benefit
Effective tax rate
Tax benefit reported in Income Statement
2018
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
99,129
29,739
46
(29,749)
17
(53)
-
-
0.0%
-
-
(1,481)
-
(1,481)
(1,481)
-
(1,481)
-
-
24,841
7,452
266
(8,548)
(654)
-
3
(1,481)
(6.0%)
(1,481)
Notes to the Consolidated Financial Report (continued)
5. 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
Donations
Foreign exchange contracts
Inventory
Prepaid expenditure
Fixed assets, mine properties and
exploration expenditure
Provisions
Borrowing cost
Research and development carried forward
tax offset
Tax losses
Tax (assets)/liabilities
Derecognition of deferred tax asset
Net tax (assets)/liabilities
Assets
Liabilities
Net
2018
$’000
(3,158)
(645)
(949)
-
(22)
(45)
(230)
-
2017
$’000
(1,743)
(1,015)
-
(1)
(10)
(89)
(1,211)
-
(16,593)
(23,545)
(16,198)
(194)
(15,416)
(298)
(1,063)
(1,063)
(45,496)
(84,593)
84,593
-
(69,818)
(114,209)
114,209
-
2018
$’000
2017
$’000
-
-
-
123
-
-
-
63
-
-
-
-
-
186
(186)
-
-
-
-
-
-
-
-
53
-
-
-
-
-
53
(53)
-
2018
$’000
(3,158)
(645)
(949)
123
(22)
(45)
(230)
63
2017
$’000
(1,743)
(1,015)
-
(1)
(10)
(89)
(1,211)
53
(16,593)
(23,545)
(16,198)
(194)
(15,416)
(298)
(1,063)
(1,063)
(45,496)
(84,407)
84,407
-
(69,818)
(114,156)
114,156
-
Balance
1 July 2017
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2018
$’000
Movement in temporary differences during the
financial year ended 30 June 2018
Accrued liabilities
Capital raising costs
Deferred expense
Deferred income
Donations
Foreign exchange contracts
Inventory
Prepaid expenditure
Fixed assets, mine properties and exploration
expenditure
Provisions
Borrowing cost
Research and development carried forward tax offset
Tax losses
Derecognition of deferred tax asset
(1,743)
(1,015)
-
(1)
(10)
(89)
(1,211)
53
(23,545)
(15,416)
(298)
(1,063)
(69,818)
114,156
-
(1,415)
370
(949)
124
(12)
97
981
10
6,952
(782)
104
-
24,322
(29,802)
-
-
-
-
-
-
(53)
-
-
-
-
-
-
-
53
-
(3,158)
(645)
(949)
123
(22)
(45)
(230)
63
(16,593)
(16,198)
(194)
(1,063)
(45,496)
84,407
-
Notes to the Consolidated Financial Report (continued)
Balance
1 July 2016
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2017
$’000
5. Taxation (Continued)
Movement in temporary differences during the
financial year ended 30 June 2017
Accrued liabilities
Capital raising costs
Deferred expense
Deferred income
Donations
Foreign exchange contracts
Inventory
Prepaid expenditure
Fixed assets, mine properties and exploration
expenditure
Provisions
Borrowing cost
Research and development carried forward tax offset
Tax losses
Derecognition of deferred tax asset
(547)
(294)
(445)
783
-
(49)
(2,745)
23
(35,793)
(16,429)
(510)
-
(66,698)
122,704
-
(1,196)
(721)
445
(784)
(10)
(40)
1,534
30
12,248
1,013
212
(1,063)
(3,120)
(8,548)
-
Unrecognised deferred tax assets (calculated at 30%)
Deferred tax assets have not been recognised in respect of the following items:
Temporary differences
Tax losses
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2018
$’000
38,911
45,496
84,407
(1,743)
(1,015)
-
(1)
(10)
(89)
(1,211)
53
(23,545)
(15,416)
(298)
(1,063)
(69,818)
114,156
-
2017
$’000
44,338
69,818
114,156
Notes to the Consolidated Financial Report (continued)
5. Taxation (Continued)
Recognition and measurement
Income Tax
Deferred income tax is provided for using the full liability balance sheet approach.
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.
Notes to the Consolidated Financial Report (continued)
6. 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
2018
$’000
2017
$’000
46,547
-
46,547
33,756
15,000
48,756
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 short-term deposit rates.
Recognition and measurement
Cash and short-term deposits in the balance sheet comprise cash at bank and on 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, if any.
[b] Reconciliation of the net profit after tax to the net cash flows from operations
Net profit after tax
Adjustments to reconcile profit after tax to net cash flows:
Depreciation of non-current assets
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
Interest accretion on rehabilitation provision
Net ore inventory movement
Impairment of debtors
Impairment/(write-back) and obsolescence of consumables inventories
Impairment/(write-back) of ore inventories
Impairment/(write-back) of deferred acquisition, exploration and evaluation
Unrealised (gain)/loss on foreign exchange balances
Unrealised marked-to-market loss on foreign exchange derivatives
Unrealised marked-to-market (gain)/loss on financial assets held for trading
Realised (gain) on sale of financial assets held for trading
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase) in inventory
(Increase)/decrease in prepayments and deposits
Decrease in income tax receivable
Increase/(decrease) in trade and other payables
Increase in employee benefits
Increase in provision for restructure
Decrease in other provisions
Net Cash Flow from Operating Activities
[c] Non-cash financing activities
There were no non-cash financing activities during the year ended 30 June 2018 (2017: nil).
99,129
26,322
1,842
4,125
(128)
(12,140)
38
-
131
845
944
154
61
(2,443)
(62)
(283)
255
(145)
(95)
1,461
(1,144)
(281)
-
3,551
524
3,559
(671)
99,227
5,674
402
(2,201)
(12,113)
90
494
304
639
2,240
3,142
(2,479)
(225)
(2,507)
174
123
14
(246)
(5,053)
(255)
492
50
(8,185)
401
-
(1,916)
5,381
Notes to the Consolidated Financial Report (continued)
7. Term Deposits and Subordinated Notes
Current
Term deposits – receivables
Subordinated notes – available for sale investment
Notes
2018
$’000
2017
$’000
[i]
[ii]
279,000
98,030
377,030
268,500
97,000
365,500
[i] Term deposits are made for varying periods of between three and twelve months depending on the cash requirements of the Group,
and earn interest at market term deposit rates. Term deposits are held with various financial institutions with short term credit ratings
of A-2 or better (S&P).
[ii] 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.
Recognition and measurement
Term deposits are classified as receivables and recorded at amortised cost using the effective interest method less impairment, with revenue
recognised on an effective yield basis. Subordinated notes are classified as available for sale investments and are carried at fair value through
other comprehensive income.
8.
Financial Assets Held for Trading
Current
Tradeable corporate bonds at fair value
Share investments at fair value
2018
$’000
2017
$’000
32,420
1,537
33,957
31,217
1,306
32,523
Financial assets held for trading comprise corporate bonds and equity securities which are traded in active markets. The portfolio of
tradeable corporate bonds is managed by a professional funds management entity, and 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 the income statement. 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.
9. Trade and Other Receivables
Current
Trade debtors
Allowance for impairment
Sundry debtors
Other receivables
Notes
[a][i]
[b]
[a][ii]
2018
$’000
2017
$’000
6,087
(3,374)
2,713
2,763
2,367
7,843
9,176
(5,384)
3,792
4,486
1,250
9,528
[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.
Notes to the Consolidated Financial Report (continued)
9. Trade and Other Receivables (Continued)
[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. The table
below reconciles the allowance for impairment loss for the years ended 30 June 2018 and 2017.
Balance at the beginning of the year
Charge for the year
Utilised
Balance at the end of the year
2018
$’000
5,384
154
(2,164)
3,374
2017
$’000
2,242
3,142
-
5,384
At 30 June 2018, trade debtors of $131,000 (2017: $789,000) 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 14 August 2018, 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.
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
2018
$’000
-
-
124
7
131
2,582
2,713
2017
$’000
-
413
245
131
789
3,003
3,792
Trade receivables are recognised and carried at amortised cost less any allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectible
are written off when identified. An allowance for impairment of trade receivables is made when there is objective evidence that the Group will not
be able to collect the debts. Indicators of impairment would include financial difficulties of the debtor, likelihood of the debtor’s insolvency and
default in payment. Any impairment is recognised in the income statement.
The vast majority of sales revenue is invoiced and received in US dollars (US$). The balance is invoiced and received in Australian dollars (A$).
Generally, on presentation of shiploading documents and the provisional invoice, the customer settles 95% of the provisional sales invoice value
within 10 days of receipt of shiploading documents and provisional invoice, and the remaining 5% is settled within 30 days of presentation of the
final invoice. The final value is subject to adjustments for final pricing and other 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.
Notes to the Consolidated Financial Report (continued)
10. Inventories
Consumables – at cost
Allowance for obsolescence and impairment of consumables inventories
Ore – at cost
Allowance for impairment of ore inventories
At lower of cost and net realisable value
Notes
2018
$’000
2017
$’000
13,833
(7,539)
6,294
17,737
(710)
17,027
23,321
12,813
(7,604)
5,209
18,680
(3,153)
15,527
20,736
[i]
[i]
At 30 June 2018, the Group assessed the carrying values of ore inventories stockpiled at the Extension Hill mine site. 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.
Impairment write-backs were recorded for ore inventories that were impaired and sold during the period.
Based on these assumptions, the following impairment write-backs/(loss) on ore inventories were recorded during the financial period:
Tallering Peak – discontinued operation
Extension Hill
Koolan Island
Total write-backs on impairment
2018
$’000
-
2,443
-
2,443
2017
$’000
3,378
(3,153)
-
225
Recognition and measurement
Inventories are valued at the lower of cost and net realisable value.
Cost comprises direct material, labour and expenditure in getting such inventories to their existing location and condition, based on weighted
average costs incurred during the period in which such inventories were produced.
Consumable materials for plant and equipment are recognised as inventory. Consumable stocks are carried at the lower of cost and net realisable
value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
Key estimate
Inventories are written down 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.
11. Derivative Financial Assets
Current
Foreign currency option contracts
Refer note 35 for details on derivative financial instruments.
Notes
2018
$’000
2017
$’000
35[b][i]
-
-
341
341
Notes to the Consolidated Financial Report (continued)
12. Interest in Subsidiaries
Name
Mount Gibson Mining Limited
Geraldton Bulk Handling Pty Ltd
Gibson Minerals Ltd
Aztec Resources Limited
Koolan Shipping Pty Ltd
Brockman Minerals Pty Ltd
Koolan Iron Ore Pty Ltd
KIO SPV Pty Ltd
Country of
Incorporation
Percentage of Equity Interest Held by the
Group
2018
%
100
100
100
100
100
100
100
100
2017
%
100
100
100
100
100
100
100
100
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Entities subject to Class Order relief
Pursuant to ASIC Instrument 2016/785, 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 2008. 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
GROSS PROFIT
Other income
Impairment of non-current other receivables
Administration and other expenses
PROFIT FROM CONTINUING OPERATIONS BEFORE TAX AND FINANCE COSTS
Finance costs
PROFIT FROM CONTINUING OPERATIONS BEFORE TAX
Tax expense
PROFIT AFTER TAX FROM CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
Profit after tax for the year from discontinued operations
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
2018
$’000
2017
$’000
254,129
12,140
266,269
(202,446)
63,823
66,480
(14,864)
(15,052)
100,387
(1,284)
99,103
-
99,103
182,688
12,113
194,801
(142,840)
51,961
5,760
(12,204)
(17,206)
28,311
(1,134)
27,177
(1,578)
25,599
26
99,129
723
26,322
Notes to the Consolidated Financial Report (continued)
Consolidated Balance Sheet of the Closed Group
Notes
2018
$’000
2017
$’000
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Term deposits
Financial assets held for trading
Trade and other receivables
Inventories
Prepayments
Derivative financial assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Mine properties
Prepayments
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Employee benefits
Derivative financial liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other payables
Employee benefits
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
[i] Accumulated losses
Balance at the beginning of the year
Net profit attributable to members of the closed group
Dividends paid
Balance at the end of the year
46,430
377,030
32,420
7,674
23,116
3,224
-
489,894
7,483
87,781
2,370
97,634
587,528
39,847
3,083
325
6,144
49,399
461
478
40,366
41,305
90,704
496,824
48,612
365,500
31,217
9,380
20,592
1,815
341
477,457
5,679
10,891
-
16,570
494,027
29,532
2,778
-
3,651
35,961
38
309
38,736
39,083
75,044
418,983
[i]
568,328
(1,053,908)
982,404
496,824
568,328
(1,131,178)
981,833
418,983
(1,131,178)
99,129
(21,859)
(1,053,908)
(1,157,500)
26,322
-
(1,131,178)
7
1
0
2
0
0
0
$
’
8
1
0
2
0
0
0
$
’
7
1
0
2
0
0
0
$
’
9
1
9
5
,
4
3
7
7
,
1
0
3
,
8
3
4
2
4
4
,
3
4
4
)
2
8
3
,
2
3
4
(
)
8
0
7
,
5
3
4
(
-
4
4
7
,
8
5
5
8
,
3
)
7
7
3
(
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Notes to the Consolidated Financial Report (continued)
13. 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 depreciated 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 and its 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 and 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.
Individual assets in the cash-generating units are not written down below their recoverable amount. Refer note 16 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. Refer note 16 for further details on impairment.
Notes to the Consolidated Financial Report (continued)
14. 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
Transferred to mine properties
Net impairment reversal
Write-back of accruals
Exploration expenditure written off
Carrying amount at the end of the year
Recognition and measurement
Acquisition costs
Notes
2018
$’000
2017
$’000
18,100
(18,100)
-
-
46
-
62
(70)
(38)
-
18,162
(18,162)
-
-
1,010
(3,427)
2,507
-
(90)
-
15
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.
Notes to the Consolidated Financial Report (continued)
15. Mine Properties
Gross carrying amount at cost
Accumulated amortisation and impairment
2018
$’000
2017
$’000
1,629,644
(1,541,863)
1,548,630
(1,537,739)
87,781
10,891
Koolan Island
Extension Hill
Total
Reconciliation
Other mine properties
Carrying amount at the beginning of the period
Additions
Mine rehabilitation – revised estimate
adjustment
Transferred from deferred acquisition,
exploration and evaluation costs (note 14)
Amortisation expensed
2018
$’000
4,988
79,963
578
-
-
2017
$’000
2018
$’000
-
5,903
267
207
4,988
-
-
-
2017
$’000
-
411
2018
$’000
10,891
80,230
2,467
785
-
3,427
-
(4,125)
(402)
(4,125)
2017
$’000
-
5,399
2,467
3,427
(402)
Carrying amount at the end of the period
85,529
4,988
2,252
5,903
87,781
10,891
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 18).
Notes to the Consolidated Financial Report (continued)
15. 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 16 for further details on impairment.
Key judgement and estimate
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 and exchange rates.
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. Refer note 16 for further details on impairment.
Notes to the Consolidated Financial Report (continued)
16. Impairment of Non-Current Assets
The Group reviews the carrying value of the assets of each Cash Generating Unit (“CGU”) at each balance date. As at 30 June 2018, the
market capitalisation of the Group was below the book value of its equity, representing a potential indicator of impairment.
Accordingly, the Group has performed an impairment assessment of both the Koolan Island and Extension Hill CGUs. As both of these CGUs
have previously been impaired, the assessment also considered the potential for any reversal of impairment recorded in prior periods. Based
on this assessment, no impairment expenses or reversals have been recognised during the reporting period for the Koolan Island CGU.
Details of the prior period impairment write-back recognised are tabulated below:
Koolan Island
Extension Hill
Total impairment (write-back) of non-current assets
2018
$’000
-
-
-
2017
$’000
-
(2,966)
(2,966)
The above impairment values have been allocated proportionately to each CGU’s non-current assets as follows:
Deferred acquisition, exploration and
evaluation costs (Iron Hill)
Other mine properties
Property, plant and equipment
Total impairment/(write-back) of
non-current assets
Koolan Island
Extension Hill
Total
2018
$’000
2017
$’000
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
2017
$’000
(2,966)
-
-
(2,966)
2018
$’000
-
-
-
-
2017
$’000
(2,966)
-
-
(2,966)
The Group assessed the recoverable amount of the Extension Hill and Koolan Island CGUs as at 30 June 2018 using the Fair Value Less
Costs of Disposal (“FVLCD”) approach. The FVLCD is assessed as the present value of the future cash flows expected to be derived from
the operation less disposal costs (level 3 in the fair value hierarchy), utilising the following key assumptions for each CGU:
Cashflow forecasts were made based on recent actual performance, budgets and anticipated revenues and estimated operating and
capital costs over the remaining life of the mine;
Discount rate of 12% (nominal, after tax);
Iron ore price forecasts for the 62% Fe benchmark fines CFR prices (northern China), expressed in real 2018 terms, of US$65/dmt, at
an exchange rate of A$1.00/US$0.75, with sensitivities undertaken for a broad range of these inputs; and
Cost inflation estimate of 2.0% per year.
Reasonable variations in the above assumptions do not materially impact the outcome of the impairment analysis.
Notes to the Consolidated Financial Report (continued)
16. 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.
17. Trade and Other Payables
Current
Trade creditors
Accruals and other payables
Notes
2018
$’000
2017
$’000
[i]
[i]
15,289
26,789
42,078
10,102
21,375
31,477
[i]
Current trade creditors and other payables are non-interest bearing and are normally settled on 30 day terms.
Recognition and measurement
Trade payables and accruals 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 to the Consolidated Financial Report (continued)
Notes
2018
$’000
2017
$’000
18. Performance Bond Facility
The following off-balance sheet financing facility had been negotiated and was available at the reporting date:
Performance bonding facility
Used at reporting date
Unused at reporting date
9,444
10,556
20,000
11,608
8,392
20,000
Terms and conditions relating to the above financial facilities:
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 April 2013. The Performance Bonding facility was reduced in size from $55,000,000 to
$20,000,000 in June 2017 and extended to 30 June 2021. As at balance date, bonds and guarantees totalling $9,444,000 were drawn
under the Performance Bond Facility.
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.
19. Derivative Financial Liabilities
Current
Foreign currency option contracts
Refer note 35 for details on derivative financial instruments.
Notes
2018
$’000
2017
$’000
35[b][i]
325
325
-
-
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Notes to the Consolidated Financial Report (continued)
20. Provisions (Continued)
The following table summarises the decommissioning rehabilitation provision by mine site:
Tallering Peak
Koolan Island
Extension Hill
Recognition and measurement
Rehabilitation costs
2018
$’000
2017
$’000
980
28,542
11,824
41,346
1,115
27,331
11,405
39,851
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 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 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 factors that will affect the ultimate liability payable to rehabilitate
the mine site. These 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 differences will impact the mine
rehabilitation provision in the period in which they change or become known.
Notes to the Consolidated Financial Report (continued)
21. Issued Capital
[a] Ordinary shares
Issued and fully paid
[b] Movement in ordinary shares on issue
Beginning of the financial year
Exercise of Performance Rights
Restricted shares – executive loan share plan issues
End of the financial year
[c] Terms and conditions of contributed equity
2018
$’000
2017
$’000
568,328
568,328
2018
Number of
Shares
1,096,562,516
-
1,096,562,516
-
1,096,562,516
$’000
568,328
-
568,328
-
568,328
2017
Number of
Shares
1,091,279,435
533,625
1,091,813,060
4,749,456
1,096,562,516
$’000
568,328
-
568,328
-
568,328
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 2018, there were no options on issue (2017: nil). See note 25(b).
Share options carry no right to dividends and no voting rights.
[e] Performance rights
During the year ended 30 June 2018, no Performance Rights were issued.
No Performance Rights vested during the year (2017: 533,625).
As at 30 June 2018, there were no Performance Rights on issue (2017: nil) – see note 25(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, buy back shares or issue
new shares or other securities.
No changes were made in the objectives, policy or processes for managing capital during the year ended 30 June 2018.
Notes to the Consolidated Financial Report (continued)
22. Reserves
Share based payments reserve
Net unrealised gains reserve
Dividend distribution reserve
Other reserves
Notes
2018
$’000
2017
$’000
[a]
[b]
[c]
[d]
20,531
803
964,262
(3,192)
20,531
232
964,262
(3,192)
982,404
981,833
[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 gain/(loss) on cash flow hedges
Change in fair value of available for sale financial assets
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.
Balance at the beginning of the year
Movement during the period
Balance at the end of the year
[d] Other reserves
20,531
-
20,531
20,037
494
20,531
232
(411)
982
-
803
-
232
-
-
232
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
(3,192)
-
(3,192)
(3,192)
-
(3,192)
23. Accumulated Losses
Balance at the beginning of the year
Dividends paid during the period
Net profit attributable to members of the Company
Balance at the end of the year
27[a]
(1,131,178)
(21,859)
99,129
(1,157,500)
-
26,322
(1,053,908)
(1,131,178)
Notes to the Consolidated Financial Report (continued)
Notes
2018
$’000
2017
$’000
24. 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] 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
[d] 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]
[iv]
470
1,401
2,088
3,959
1,496
3,119
-
4,615
5,246
-
5,246
9,485
-
9,485
520
1,011
863
2,394
1,817
3,125
946
5,888
1,326
-
1,326
8,282
600
8,882
[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, Industry Regulation
and Safety.
[ii] Operating leases relate to leases for office space and land with an initial term of 5 years, and leases for equipment which have an
average term of 3.4 years.
[iii] The Group has contractual commitments to purchase property, plant and equipment at Koolan Island and Extension Hill.
[iv] Amounts disclosed as contractual commitments relate primarily to supplier arrangements at the Group’s Extension Hill and Koolan
Island sites where financial obligations, including minimum notice periods, apply in the case of termination.
Notes to the Consolidated Financial Report (continued)
Notes
2018
$’000
2017
$’000
25. Share-Based Payment Plans
(a) Recognised share-based payment expense
Expense arising from equity-settled share-based payment transactions
4[c]
-
494
The share-based payment plans are described below. There have been no cancellations of any of the plans during 2018 and 2017.
(b) Employee Option Scheme
An Employee Option Scheme has been established where the Company may, at the discretion of the Board, grant options over the ordinary
shares of the Company. The options, issued for nil consideration, are granted in accordance with performance guidelines established by
the Directors of the Company. All Directors, officers and employees are eligible for this scheme. No options were issued during the year
ended 30 June 2018. 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,
including those 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
> 51st percentile and ≤76th percentile
51st percentile
<51st percentile
100%
Pro rata allocation
50%
0%
Information with respect to the number of performance rights granted and issued is as follows:
Balance at beginning of year
- granted
- exercised
- lapsed/forfeited
Balance at year end
2018
2017
No. of Performance
Rights
No. of Performance
Rights
-
-
-
-
-
711,500
-
(533,625)
(177,875)
-
At 30 June 2018, there were no Performance Rights on issue.
(d) Loan Share Plan
The Company previously established a Loan Share Plan (“LSP”) under which ordinary shares in the Company may be issued to eligible
participants, with vesting of the shares being subject to the satisfaction of stipulated market conditions. The shares are issued at their
market value with the recipient required to pay this market value in order to take up the share offer. The Company or any of its subsidiaries
will provide a loan to fund the acquisition price. The loan is interest-free and is secured against the shares in the form of a holding lock
preventing all dealing in the shares. The loan is limited recourse such that if the shares do not ultimately vest and are therefore forfeited,
this is treated as full repayment of the loan balance. While the loan balance remains outstanding, any dividends paid on the shares, net
of the tax on the dividends, will be automatically applied towards repayment of the loan. In making the loan in respect of the newly
issued shares, there is no cash cost to the Company as the shares are newly issued.
On 24 August 2016 the Company issued 4,749,456 shares under the LSP. In accordance with the terms of the LSP, the shares were
issued at a market price of $0.316 per share. These shares subsequently vested in July 2017 as the participants remained continuously
employed by the Group and the Company’s share price, as measured by a rolling five day volume weighted average price of the Company’s
shares traded on the ASX, on 1 July 2017 (or at any time in the following four year period) was above a 10% premium to the issue price
of the shares. The award was accounted for as an in-substance option award, with the fair value at grant date assessed at $0.104 per
share. In calculating this fair value, a Monte Carlo simulation model was utilised over several thousand simulations to predict the share
price at each vesting test date and whether the 10% hurdle was satisfied, with the resultant values discounted back to the grant date.
The underlying share price and the exercise price were assumed at $0.31 per share, the period to exercise was assumed as three years
(being half way between the first possible vesting date and the expiry of the LSP shares), the risk free rate was 1.40% based on Australian
Government bond yields with three year lives, the estimated volatility was 50% based on historical share price analysis, and the dividend
yield was assumed as nil.
The exercise price of the LSP shares, being in-substance options, was $0.301 per share at balance date.
No share issue was made under LSP in the year ended 30 June 2018.
Notes to the Consolidated Financial Report (continued)
25. 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 any options issued under this plan is measured by reference to their fair value at the date at which they are granted. The fair value is
typically determined by using a binomial model. 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 Performance Rights issued under the PRP is measured by reference to their 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.
Loan share plan
There is a Mount Gibson Iron Limited Loan Share Plan (“LSP”). The LSP 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 share rights is measured by reference to the fair value at the date at which they are granted. The fair value is measured by
reference to the quoted market price on the Australian Stock Exchange and using a Monte Carlo simulation model.
Equity-Settled Transactions Generally
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, both 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, Performance Rights and LSP shares is reflected as additional share dilution in the computation of
earnings per share.
Notes to the Consolidated Financial Report (continued)
26. 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 used in calculating basic and diluted earnings per share:
Continuing operations
Discontinued operations
Profit attributable to ordinary equity holders of the Company
Weighted average number of ordinary shares used in calculating basic earnings per
share
Effect of dilution
- Restricted shares (in-substance options)
Weighted average number of ordinary shares used in calculating diluted earnings
per share
Earnings per Share (cents per share):
Basic earnings per share
Diluted earnings per share
2018
$’000
99,103
26
99,129
2017
$’000
25,599
723
26,322
Number of
Shares
Number of
Shares
1,091,813,060
1,091,813,060
4,749,456
4,037,038
1,096,562,516
1,095,850,098
9.08
9.04
2.41
2.40
Conversions, calls, subscriptions or issues after 30 June 2018
Immediately after year end, on 2 July 2018, an issue of 2,998,351 restricted shares was made under the LSP. In accordance with the terms
of the LSP, the shares were issued at a market price of $0.443 per share. In order for the shares to vest, the participants must remain
continuously employed with the Group to at least 1 July 2019 and the Company’s share price, as measured by a rolling five day volume
weighted average price of the Company’s shares traded on the ASX, must on 1 July 2019 or at any time in the following four year period be
above a 10% premium to the issue price of the shares.
Other than as described above, there have been no issues of shares or exercises, conversions or realisations of options, performance rights
or restricted LSP shares under any of the Company’s share-based payment plans since 30 June 2018.
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.
Notes to the Consolidated Financial Report (continued)
2018
$’000
2017
$’000
27. Dividends Paid and Proposed
Declared and paid during the year:
[a] Dividends on ordinary shares:
During the year ended 30 June 2018, a final dividend of $0.02 per share fully franked in respect of the 2016/17 financial year was paid in
cash totalling $21,859,000.
[b] Dividends not recognised at the end of the reporting period:
On 14 August 2018, the Company declared a final dividend on ordinary shares in respect of the 2017/18 financial year of $0.03 per share
fully franked, payable either in cash or in shares to eligible shareholders as part of the Company’s Dividend Reinvestment Plan. The total
amount of the dividend is $32,987,000. The dividend has not been provided for in the 30 June 2018 financial statements.
[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%.
28. Contingent Assets and Liabilities
49,843
59,243
-
-
49,843
59,243
(14,137)
(9,400)
35,706
49,843
1.
2.
3.
Following achievement of a contractual rail volume threshold at Extension Hill during the year, the Group has a contingent asset in
the form of an entitlement to receive a partial refund of historical rail access charges from Arc Infrastructure, based upon the future
usage by certain third parties of specific segments of the Perenjori to Geraldton railway line. This entitlement commences upon
termination of the Group’s existing rail agreements – which is now expected to occur in 2019 – and is calculated at various volume-
related rates, and capped at a total of approximately $35 million (subject to indexation) and a time limit expiring in 2031. Receipt
of this potential future refund is not certain and is fully dependent on the volumes railed by third parties on the specified rail segments.
The Group has a Performance Bonding facility drawn to a total of $9,444,000 as at balance date (2017: $11,608,000). The
performance bonds secure the Group’s obligations relating primarily to environmental matters and infrastructure assets.
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.
Notes to the Consolidated Financial Report (continued)
29. Key Management Personnel
[a] Compensation of Key Management Personnel
Short-term
Post employment
Long-term
Share-based payment
Loan Share Plan - dividend
2018
$
2,922,817
189,888
75,767
-
94,989
3,283,461
2017
$
3,276,676
190,499
31,656
493,943
-
3,992,774
[b] Loans to Specified Key Management Personnel
There were no new loans to key management personnel during the year.
Limited recourse loans totalling $1,500,828 were made to key management personnel during the prior year under the terms of the Company’s
Loan Share Plan (LSP). The loans were paid down to $1,428,908 as at 30 June 2018 as a result of the dividend paid on ordinary shares in
the period. Refer note 25(d) for details of the LSP.
[c] Other Transactions and Balances with Key Management Personnel
There were no other transactions and balances with key management personnel during the year.
30. 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.
The sale to SCIT of approximately 25% initially, and then later 80%, of the iron ore produced from the Iron Hill deposit at the
Extension Hill mine site.
9 ad hoc spot sales of iron ore to SCIT from Extension Hill.
6 ad hoc spot sales of iron ore to APAC from Extension Hill.
Pursuant to these sales agreements, during the financial year, the Group:
Sold 1,678,072 wet metric tonnes (WMT) (2017: nil WMT) of iron ore to SCIT; and
Sold 366,940 WMT (2017: 182,167 WMT) of iron ore to APAC.
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
Sales Revenue
Sales revenue – APAC
Sales revenue – SCIT
Total Sales Revenue (before shipping freight)
Apart from the above, there are no director-related entity transactions other than those specified in note 29.
2018
$’000
2017
$’000
(53)
1,961
1,908
1,908
-
-
-
-
2,566
-
2,566
2,566
-
-
-
-
18,893
130,278
149,171
11,612
-
11,612
2018
$
2017
$
31. 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
192,095
192,095
Other services in relation to the entity and any other entity in the consolidated entity
-
3,605
192,095
195,700
Notes to the Consolidated Financial Report (continued)
32. Discontinued Operations
The Tallering Peak operation is reported as a discontinued operation in this financial report. Mining was completed in June 2014 and the
final shipment of remnant low grade ore occurred in March 2017. Ongoing costs relate to rehabilitation and minor holding activities.
[a] Profit from discontinued operations
The financial results of Tallering Peak operation for the year are presented below:
2018
$’000
2017
$’000
Revenue
Cost of sales
Impairment write-back on ore inventories
Gross profit
Impairment of debtors
Revised estimate adjustment – road resealing provision
Other expenses
Profit before tax and finance costs from discontinued operations
Finance costs
Profit before tax from discontinued operations
Income tax benefit/(expense)
Net profit after tax from discontinued operations
Earnings per share (cents per share):
basic earnings per share
diluted earnings per share
[b] Cash flow from discontinued operations
The net cash flows incurred by Tallering Peak operation are as follows:
Operating
Investing
Financing
-
-
-
-
(104)
613
(483)
26
-
26
-
26
0.00
0.00
16,078
(18,733)
3,378
723
-
-
-
723
-
723
-
723
0.07
0.07
(653)
2,399
-
-
-
-
Net cash inflow/(outflow) from discontinued operations
(653)
2,399
Notes to the Consolidated Financial Report (continued)
33. 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 from the Extension Hill and
Iron Hill iron ore deposits.
Koolan Island segment – this segment includes the reconstruction of the main pit seawall and activities for a re-start of operations.
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.
For the purposes of segment reporting, revenue is disclosed net of shipping freight costs, on a Free on Board (FOB) basis.
There have been no inter-segment revenues.
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 on investments
Interest revenue
Foreign exchange gains / (losses)
Corporate costs
Operating results for discontinued operations (Tallering Peak) have been excluded from the segment results below, and are set out in
note 32.
During the year ended 30 June 2018, 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
2018
$’000
105,439
26,697
19,583
40,956
192,675
During the year ended 30 June 2017, 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
Other
2017
$’000
53,669
38,672
69,541
161,882
Revenue from external customers by geographical location is based on the port of delivery. All iron ore has been shipped to China during
the year ended 30 June 2018.
All segment assets are located within Australia.
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Notes to the Consolidated Financial Report (continued)
34. Events After the Balance Sheet Date
On 14 August 2018, the Company declared a final dividend on ordinary shares in respect of the 2017/18 financial year of $0.03 per share
fully franked, payable either in cash or in shares to eligible shareholders as part of the Company’s Dividend Reinvestment Plan. The total
amount of the dividend is $32,987,0000. The dividend has not been provided for in the 30 June 2018 financial statements.
Apart from the above, as at the date of this report there are no significant events after balance date of the Company or of the Group that
require adjustment of or disclosure in this report.
35. Financial Instruments
[a] Financial risk management objectives
The Group’s principal financial instruments, other than derivatives, comprise bank and equipment finance arrangements, cash and short-
term deposits, and financial assets held for trading.
The main purpose of these financial instruments is to raise finance for the Group’s operations.
The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.
The Group also enters into derivatives transactions, principally forward currency contracts, and from time to time also enters into foreign
currency collar options and interest rate swaps. The purpose is to manage the currency and interest rate risks arising from the Group’s
operations and its sources of finance.
The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, credit risk, commodity price risk
and liquidity risk. The Board reviews and agrees management’s recommended policies for managing each of these risks, as summarised
below and in accordance with the Company’s Financial Risk Management Policy.
[b] Foreign currency risk
The Group is exposed to the risk of adverse movement in the A$ 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 2018, there were no US dollar foreign exchange forward contract deliveries.
At 30 June 2018, the notional amount of the foreign exchange hedge book totalling US$12,000,000 is made up exclusively of collar option
contracts with maturity dates due in the 4 months ended 29 October 2018 and with an average cap price of A$1.00/US$0.7813 and an
average floor price of A$1.00/US$0.7474.
As at 30 June 2018, the marked-to-market unrealised loss on the total outstanding US dollar foreign exchange hedge book of US$12,000,000
was $325,000.
It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge
effectiveness.
The Group uses the following derivative instruments to manage foreign currency risk from time to time as business needs and conditions
dictate:
Instrument
Type of Hedging
Objective
Forward exchange contracts
Cash flow hedge
Collar options
Cash flow hedge
To hedge sales receipts against cash flow volatility arising from the
fluctuation of the A$/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.
Notes to the Consolidated Financial Report (continued)
35. 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:
2018
2017
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:
- call strike price
- put strike price
Within one year:
- call strike price
- put strike price
Within one year:
- call strike price
- put strike price
Total
-
-
-
-
12,000
15,894
341
3,000
3,822
(143)
0.7550
0.7205
-
9,000
11,538
(182)
-
-
-
-
-
-
-
12,000
15,360
(325)
12,000
15,894
341
0.7850
0.7667
0.7800
0.7410
As balance date, the following foreign exchange contracts were recognised on the balance sheet and income statement:
Current assets
Current liabilities
Total collar option contracts
[ii] Foreign currency sensitivity
Notes
11
19
2018
$’000
-
(325)
(325)
2017
$’000
341
-
341
The following table details the effect on profit and other comprehensive income after tax of a 10% change in the A$ against the US$ from
the spot rates at 30 June 2018 and 30 June 2017 due to changes in the fair value of monetary assets and liabilities.
Net Profit
Other Comprehensive Income
2018
$’000
2017
$’000
2018
$’000
2017
$’000
10% appreciation in the A$ spot rate with all other
variables held constant
10% depreciation in the A$ spot rate with all other
variables held constant
(770)
(767)
468
1,167
942
938
(1,362)
(526)
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.
Notes to the Consolidated Financial Report (continued)
35. 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 6)
Trade receivables
(included within note 9)
Financial Liabilities
Trade payables
Net exposure
[c] Interest rate risk
(included within note 17)
2018
$’000
10,204
2,621
(716)
12,109
2017
$’000
6,729
6,440
(1,116)
12,053
The Group’s exposure to market interest rates relates primarily to the Group’s cash and cash equivalents, term deposits and subordinated
notes, and financial assets held for trading (tradeable corporate bonds).
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:
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Notes to the Consolidated Financial Report (continued)
35. 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, in absolute
terms.
0.25% increase 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
2018
$’000
748
(748)
2017
$’000
721
(721)
2018
$’000
2017
$’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 and collar exchange contracts is the full amount of the foreign currency it will be required to pay or purchase when
settling the forward or collar 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 95% 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 & Poor’s credit rating and within credit limits
assigned to each counterparty. Counterparty credit limits are reviewed by the Board on an ongoing 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 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. “Lump” iron ore typically receives a premium to the published Platts Index “fines” price.
The Group enters into provisionally priced ore sales contracts, for which price finalisation is referenced to relevant market indices at
specified future dates. The Group’s exposure at balance date to the impact of movements in the iron ore price upon provisionally
invoiced sales volumes is set out below:
Sensitivity of Ore Sales Revenue
for Provisionally Priced
Sales Volumes at Balance Date
Ore Sales Revenue:
- 10% increase in iron ore prices
- 10% decrease in iron ore prices
Year ended 30 June 2018
$’000
Year ended 30 June 2017
$’000
3,839
(3,839)
839
(839)
The sensitivities have been determined as the dollar impact on ore sales revenues of a 10% increase and decrease in benchmark iron
ore prices (including lump premiums) at each reporting date, while holding all other variables, including foreign exchange rates,
constant. The relationship between iron ore prices and exchange rates is complex, and movements in exchange rates can impact
commodity prices. The above sensitivities should therefore be used with caution.
Notes to the Consolidated Financial Report (continued)
35. Financial Instruments (Continued)
During the period, the Group entered into forward sales agreements covering six shipments totalling 330,000 tonnes of iron ore, with
maturity dates spread over the period October 2017 to May 2018. The contracts were stated in US$ per dry metric tonne and were
cash settled against the average daily CFR benchmark price for 62% Fe fines ores for delivery to northern China. The average price of
the forward contracts at each maturity date was between US$72 and US$75 per tonne. Movements in the market value of the forward
sale contracts are taken to the income statement. There were no outstanding iron ore forward contracts as at 30 June 2018.
[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 2018, the Group had unutilised performance bonding facilities totalling $10,556,000 (2017: $8,392,000). Refer note 18.
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.
Financial Liabilities
Trade and other payables
Derivatives – inflow
Derivatives – outflow
Less
than 6
months
$’000
42,078
(15,035)
15,360
42,403
30 June 2018
30 June 2017
6 to 12
months
$’000
1 to 5
years
$’000
Over 5
years
$’000
Total
$’000
Less
than 6
months
$’000
6 to 12
months
$’000
1 to 5
years
$’000
Over 5
years
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
42,078
31,477
(15,035)
(16,235)
15,360
15,894
42,403
31,136
-
-
-
-
-
-
-
-
-
-
-
-
31,477
(16,235)
15,894
31,136
[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.
Notes to the Consolidated Financial Report (continued)
35. Financial Instruments (Continued)
The carrying amounts and fair values measurement hierarchy of the financial assets and financial liabilities for the Group as at 30 June 2018
and 30 June 2017 are shown below.
2018
2017
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 and other receivables
Derivatives
Financial liabilities – current
Trade and other payables
Derivatives
Net financial assets
Recognition and measurement
Derivative financial instruments and hedging
46,547
-
279,000
98,030
33,957
7,843
-
465,377
42,078
325
42,403
422,974
46,547
-
279,000
98,030
33,957
7,843
-
465,377
42,078
325
42,403
422,974
33,756
15,000
268,500
97,000
32,523
9,528
341
456,648
31,477
-
31,477
425,171
33,756
15,000
268,500
97,000
32,523
9,528
341
456,648
31,477
-
31,477
425,171
The Group uses foreign currency to hedge its risks associated with foreign currency and commodity price 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 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.
Notes to the Consolidated Financial Report (continued)
36. Parent Entity Information
[a]
Information relating to Mount Gibson Iron Limited:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Issued capital – restricted shares under Loan Share Plan
Accumulated losses
Dividend distribution reserve
Share based payments reserve
Total Shareholder’s Equity
Net profit after tax of the parent entity
Total comprehensive profit of the parent entity
2018
$’000
2017
$’000
11,055
902,753
217,552
405,929
568,328
1,501
17,134
799,833
2,095
380,850
568,328
1,501
(487,842)
(565,683)
394,306
20,531
496,824
99,700
99,700
394,306
20,531
418,983
25,053
25,053
[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 note 12 and
note 18.
The parent entity has further provided bank guarantees in respect of obligations to various authorities. Refer to note 18.
[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 28. 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.
Notes to the Consolidated Financial Report (continued)
37. New and Amended Accounting Standards
and Interpretations
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.
From 1 July 2017 the Group has adopted all new and amended Accounting Standards and Interpretations mandatory for annual periods
beginning on 1 July 2017 including:
Reference Title
Summary
Application
date of
standard
Application
date for
Group
AASB 2016-
1
AASB 2016-
2
AASB 2017-
2
Amendments to
Australian
Accounting
Standards –
Recognition of
Deferred Tax
Assets for
Unrealised
Losses
Amendments to
Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments to
AASB 107
Amendments to
Australian
Accounting
Standards –
Further Annual
Improvements
2014-2016
Cycle
This Standard amends AASB 112 Income Taxes to clarify the
accounting for deferred tax assets for unrealised losses on debt
instruments measured at fair value.
1 January
2017
1 July 2017
The amendments to AASB 107 Statement of Cash Flows are part of
the IASB’s Disclosure Initiative and help users of financial statements
better understand changes in an entity’s debt. The amendments
require entities to provide disclosures about changes in their liabilities
arising from financing activities, including both changes arising from
cash flows and non-cash changes (such as foreign exchange gains or
losses).
1 January
2017
1 July 2017
This Standard clarifies the scope of AASB 12 Disclosure of Interests in
Other Entities by specifying that the disclosure requirements apply to
an entity’s interests in other entities that are classified as held for sale
or discontinued operations in accordance with AASB 5 Non-current
Assets Held for Sale and Discontinued Operations.
1 January
2017
1 July 2017
Changes to accounting policies due to adoption of these standards and interpretations are not considered significant for the Group.
Notes to the Consolidated Financial Report (continued)
Other Australian Accounting Standards and Interpretations relevant to the Group that have recently been issued or amended but are
not yet effective, have not been adopted by the Group for the period ended 30 June 2018 are outlined in the table below:
Reference
Title
Summary
Application
date of
standard
Application
date for
Group
AASB 9, and
relevant
amending
standards
Financial
Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and
Measurement.
1 January
2018
1 July 2018
Except for certain trade receivables, an entity initially measures a
financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss (FVTPL), transaction costs.
Debt instruments are subsequently measured at FVTPL, amortised
cost, or fair value through other comprehensive income (FVOCI),
on the basis of their contractual cash flows and the business model
under which the debt instruments are held.
There is a fair value option (FVO) that allows financial assets on
initial recognition to be designated as FVTPL if that eliminates or
significantly reduces an accounting mismatch.
Equity instruments are generally measured at FVTPL. However,
entities have an irrevocable option on an instrument-by-instrument
basis to present changes in the fair value of non-trading
instruments
income (OCI) without
subsequent reclassification to profit or loss.
in other comprehensive
For financial liabilities designated as FVTPL using the FVO, the
amount of change in the fair value of such financial liabilities that is
attributable to changes in credit risk must be presented in OCI. The
remainder of the change in fair value is presented in profit or loss,
unless presentation in OCI of the fair value change in respect of the
liability’s credit risk would create or enlarge an accounting mismatch
in profit or loss.
All other AASB 139 classification and measurement requirements
for financial liabilities have been carried forward into AASB 9,
including the embedded derivative separation rules and the criteria
for using the FVO.
The incurred credit loss model in AASB 139 has been replaced with
an expected credit loss model in AASB 9.
The requirements for hedge accounting have been amended to
more closely align hedge accounting with risk management,
establish a more principle-based approach to hedge accounting and
address inconsistencies in the hedge accounting model in AASB
139.
This standard amends to AASB 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.
1 January
2018
1 July 2018
AASB 2016-5 Amendments to
Australian
Accounting
Standards –
Classification and
Measurement of
Share-based
Payment
Transactions
Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
AASB 15 and
relevant
amending
standards
Revenue from
Contracts with
Customers
AASB Int 22
Foreign Currency
Transactions and
Advance
Consideration
AASB 2017-1 Amendments to
Australian
Accounting
Standards –
Transfers of
Investments
Property, Annual
Improvements 2014-
2016 Cycle and
Other Amendments
AASB 15 replaces all existing revenue requirements in Australian
Accounting Standards (AASB 111 Construction Contracts, AASB 118
Revenue, AASB Interpretation 13 Customer Loyalty Programmes,
AASB Interpretation 15 Agreements for the Construction of Real
Estate, AASB Interpretation 18 Transfers of Assets from Customers
and AASB Interpretation 131 Revenue – Barter Transactions
Involving Advertising Services) and applies to all revenue arising
from contracts with customers, unless the contracts are in the scope
of other standards, such as AASB 117 Leases (or AASB 16 Leases,
once applied).
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 an entity
expects to be entitled in exchange for those goods or services. An
entity recognises revenue in accordance with the core principle by
applying the following steps:
► Step 1: Identify the contract(s) with a customer
► Step 2: Identify the performance obligations in the contract
► Step 3: Determine the transaction price
► 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.
The Interpretation clarifies that in determining the spot exchange
rate to use on initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non-monetary asset
or non-monetary liability relating to advance consideration, the date
of the transaction is the date on which an entity initially recognises
the non-monetary asset or non-monetary liability arising from the
advance consideration. If there are multiple payments or receipts in
advance, then the entity must determine a date of the transactions
for each payment or receipt of advance consideration.
The amendments clarify certain requirements in:
► AASB 1 First-time Adoption of Australian Accounting Standards
– deletion of exemptions for first-time adopters and addition
of an exemption arising from AASB Interpretation 22 Foreign
Currency Transactions and Advance Consideration
► AASB 12 Disclosure of Interests in Other Entities – clarification
of scope
► AASB 128 Investments in Associates and Joint Ventures –
measuring an associate or joint venture at fair value
► AASB 140 Investment Property – change in use.
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
1 January
2018
1 July 2018
1 January
2018
1 July 2018
Notes to the Consolidated Financial Report (continued)
Reference
Title
Summary
AASB 16
Leases
AASB 2017-6 Amendments to
Australian
Accounting
Standards-
Prepayment
Features with
Negative
Compensation
AASB 2018-1 Annual
Improvements to
IFRS Standards
2015-2017 Cycle
AASB Int 23,
and relevant
amending
standards
Uncertainty over
Income Tax
Treatments
AASB 16 requires lessees to account for all leases under a single on
balance sheet model in a similar way to finance leases under AASB
117 Leases. The standard includes two recognition exemptions for
lessees – leases of ’low-value’ assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or
less). At the commencement date of a lease, a lessee will recognise
a liability to make lease payments (i.e., the lease liability) and an
asset representing the right to use the underlying asset during the
lease term (i.e., the right-of-use asset).
Lessees will be required to separately recognise the interest
expense on the lease liability and the depreciation expense on the
right-of-use asset.
Lessees will be required to remeasure the lease liability upon the
occurrence of certain events (e.g., a change in the lease term, a
change in future lease payments resulting from a change in an index
or rate used to determine those payments). The lessee will
generally recognise the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use asset.
is substantially unchanged
Lessor accounting
from today’s
accounting under AASB 117. Lessors will continue to classify all
leases using the same classification principle as in AASB 117 and
distinguish between two types of leases: operating and finance
leases.
This Standard amends AASB 9 Financial Instruments to permit
entities to measure at amortised cost or fair value through other
comprehensive income particular financial assets that would
otherwise have contractual cash flows that are solely payments of
principle and interest but do not meet that condition only as a result
of a prepayment feature. This is subject to meeting other
conditions, such as the nature of the business model relevant to the
financial asset. Otherwise, the financial assets would be measured
at fair value through profit or loss.
The Standard also clarifies in the Basis for Conclusion that, under
AASB 9, gains and losses arising on modifications of financial
liabilities that do not result in derecognition should be recognised in
profit or loss.
The amendments clarify certain requirements in:
► AASB 3 Business Combinations and AASB 11 Joint
Arrangements – previously held interest in a joint operation
► AASB 112 Income Taxes – income tax consequences of
payments on in financial instruments classified as equity
► AASB 123 Borrowing Cost – borrowing costs eligible for
capitalisation.
The Interpretation clarifies the application of the recognitions and
measurement criteria in AASB 112 Income Taxes when there is
uncertainty over income tax treatments. The Interpretation
specifically addresses the following:
► Whether an entity considers uncertain tax treatments
separately
► The assumptions an entity makes about the examination of tax
treatments by taxation authorities
► How an entity determines taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates
► How an entity considers changes in facts and circumstances.
Application
date of
standard
Application
date for
Group
1 January
2019
1 July 2019
1 January
2019
1 July 2019
1 January
2019
1 July 2019
1 January
2019
1 July 2019
Notes to the Consolidated Financial Report (continued)
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 full impact of the below accounting standards, when applied in future
periods:
AASB 15 Revenue from Contracts with Customers changes the timing (and in some case, the quantum) of revenue recognised
from customers. The standard does not apply mandatorily before 1 January 2018 and applies to the Group from 1 July 2018.
The Group plans to adopt the new standard using the modified retrospective approach.
The Group has made a preliminary assessment of the potential impacts of AASB 15 as at the reporting date and formed an initial
view that the new standard may operate to require the deferral of the recognition of certain Cost and Freight (CFR) revenues
apportioned to the remaining sea voyages of “in transit” vessels to their destination ports where iron ore cargoes are discharged.
Based on the limited number of vessels expected to be in transit at any reporting date, the new standard is unlikely to have a
material future impact on the Group’s financial results.
All of the Group’s CFR sales agreements are expected to end by 30 June 2019, after which all sales will be on a Free on Board
(FOB) basis.
AASB 9 Financial Instruments brings together all three aspects of the accounting for financial instruments: classification and
measurement, impairment and hedge accounting. This standard does not apply before 1 January 2018 and the application date
for the Group is 1 July 2018. The Group continues to assess the impacts of AASB 9 and has formed the view that there will be
no material differences in the carrying amounts of financial assets and financial liabilities when it is first adopted for the year
ended 30 June 2019.
AASB 16 Leases eliminates the distinction between operating and finance leases, and brings all leases (other than short term
leases) onto the balance sheet. The standard does not apply mandatorily before 1 January 2019. The Group has yet to fully
assess the impact on the Group’s financial results when it is first adopted for the year ending 30 June 2020.
38. Reclassification of Prior Period Revenue
The Group has entered into contracts for the sale of iron ore from the Iron Hill deposit at its Extension Hill mine site, predominantly on
a Cost and Freight (CFR) basis, with the Group responsible for organising and paying for shipping freight services. These contracts
formed the vast majority of the Group’s sales in the year ended 30 June 2018. Revenues for the year ended 30 June 2018 have been
presented on a gross CFR basis with the accompanying shipping freight costs included in Cost of Sales.
The Group has in previous years disclosed its Revenue and Cost of Sales on a net Free on Board (FOB) basis and, for prior year
comparison purposes, has now reclassified its reported Revenue and Cost of Sales for the year ended 30 June 2017, to show Revenues
on a CFR basis and Cost of Sales inclusive of shipping freight. Similarly, in its Cash Flow Statement the Group has reclassified the prior
year Receipts from Customers and Payments to Suppliers and Employees, as follows:
Year ended 30 June 2017
Original
$’000
Reclassification
$’000
Year ended 30 June 2017
Reclassified
$’000
Consolidated Income Statement:
Sale of Goods
Interest Revenue
Total Revenue
Cost of Sales
Gross Profit
Consolidated Cash Flow Statement:
Receipts from customers
Payments to suppliers and employees
Interest paid
Income tax refund received
Net Cash Flows from Operations
162,043
12,113
174,156
(137,698)
36,458
167,906
(163,866)
(191)
1,532
5,381
20,645
-
20,645
(20,645)
-
24,627
(24,627)
-
-
-
182,688
12,113
194,801
(158,343)
36,458
192,533
(188,493)
(191)
1,532
5,381
The reclassification adjustment does not impact accumulated losses at 30 June 2016 nor does it impact the profit or earnings per share
for the year ended 30 June 2017.
Directors’ Declaration
In accordance with a resolution of the directors of Mount Gibson Iron Limited, I state that:
1.
In the opinion of the Directors:
a.
the financial statements, notes and the additional disclosures included in the Directors Report designated as audited of
the Group are in accordance with the Corporations Act 2001, including:
i)
ii)
giving a true and fair view of the financial position of the Group as at 30 June 2018 and of its performance for
the year ended on that date; and
complying with Accounting Standards and the Corporations Regulations 2001; and
b.
c.
the financial statements and notes also comply with International Reporting Standards as disclosed in Note 1; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section
295A of the Corporations Act 2001 for the financial year ended 30 June 2018.
Signed in accordance with a resolution of the directors.
LEE SENG HUI
Chairman
Sydney, 14 August 2018
Independent Audit Report
GB:EH:MGI:241
GB:EH:MGI:241
GB:EH:MGI:241
GB:EH:MGI:241
GB:EH:MGI:241
GB:EH:MGI:241
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 2018. The Corporate Governance Statement has been approved by the Board.
Additional ASX Information
The informa on is current as at 3 September 2018.
(a) Distribu on of equity securi es
The number of Shareholders, by size of holding, in each class of Share, are as follows:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001
- 999,999,999
TOTAL
The number of Shareholders holding less
than a marketable parcel of Shares are:
(b) Equity security holders
The names of the twenty largest holders of quoted Shares are:
Number of holders
Number of Shares
% of Issued Capital
Ordinary Shares
1,707
3,475
1,780
2,881
377
10,204
991
863,695
10,040,248
14,239,616
88,949,150
985,468,158
1,099,560,867
0.08
0.91
1.30
8.09
89.62
100.0
1,341
497.710
Number of Shares
% of Shares Held
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20
SUN HUNG KAI INVESTMENT SERVICES LIMITED
APAC RESOURCES INVESTMENTS LIMITED
TRUE PLUS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
DEBORTOLI WINES PTY LIMITED
NATIONAL NOMINEES LIMITED
ZERO NOMINEES PTY LTD
180,785,949
172,257,288
163,866,874
109,719,891
64,613,226
57,426,773
34,246,165
32,005,585
20,395,000
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12,405,164
ECAPITAL NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
DE BORTOLI WINES (SUPERANNUATION) PTY LIMITED
MR JAMES BEYER
ACN 139 886 025 PTY LTD
BRAZIL FARMING PTY LTD
MR PETER KERR
MR TIMOTHY BRYCE KLEEMANN
CROSSWIND TRUSTEE COMPANY LIMITED
MR DAVID STOKES
Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
Total Remaining Holders Balance
Total Issued Ordinary Shares
8,015,848
5,185,804
4,850,000
3,965,890
3,351,402
3,200,000
2,461,443
2,154,000
2,000,000
1,904,171
884,810,473
214,750,394
1,099,560,867
16.44
15.67
14.90
9.98
5.88
5.22
3.11
2.91
1.85
1.13
0.73
0.47
0.44
0.36
0.30
0.29
0.22
0.20
0.18
0.17
80.45
19.55
100.00
Additional ASX Information Continued
(c) Substan al Shareholders
The names of Substan al Shareholders who have no fied the Company in accordance with sec on 671B of the Corpora ons Act 2001 are:
1. APAC Resources Limited and its subsidiaries
Number of Shares
353,043,237
2. Allied Proper es Investments (1) Company Limited and its related corporate en es
353,043,237
Note: Substan al shareholdings 1 and 2 are not cumula ve and arise through common shareholdings.
3.
Shougang Corpora on and Shougang Concord Interna onal Enterprises
154,166,874
Company Limited and each of their controlled en es
% of Current
Issued Shares
32.10%
32.10%
14.02%
4.
Shougang Fushan Resources Group Limited, True Plus Limited and its subsidiaries
154,166,874
14.02%
5.
6.
Note: Substan al shareholdings 3 and 4 are not cumula ve and arise through common shareholdings.
Spheria Asset Management Pty Limited
Pinnacle Investment Management Group Limited and its subsidiaries
Note: Substan al shareholdings 5 and 6 are not cumula ve and arise through common shareholdings.
55,672,393
55,583,831
5.06%
5.05%
(d) Vo ng rights
All ordinary Shares carry one vote per Share without restric on.
No vo ng rights a ach to op ons.
(e) Schedule of interests in mining tenements
Loca on
Tenements Held by MGX
Extension Hill
Extension Hill
Extension Hill
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan Island
Koolan Island
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
M04/416-I
M04/417-I
E04/1266-I
L04/29
L04/68
L04/101
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
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%
(e) Schedule of interests in mining tenements (con nued)
Loca on
MGX Has Interests In
Tenement
Status
Percentage Held
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
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Shine2
Shine2
Shine2
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
E59/1938-I
E59/1939-I
E59/1940-I
E59/1984
E59/1268-I
M59/63-I
P59/2035
E59/1996
E59/1997
E59/2064
E59/2065
E59/2066
E59/2067
M59/406-I
M59/421-I
M59/731-I
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Tenements are held by another party. MGX has rights to Hematite, Goethite and Limonite.
1
Tenements are held by another party. MGX has rights to Iron on a portion of these tenements.
2
Notes
Notes
Notes
Notes
Notes
Notes
www.mtgibsoniron.com.au
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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/Iron Hill operations in the
Mount Gibson Range south east of Geraldton in Western Australia, and the high grade
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
Make timely decisions
Genuine care for self
and others
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 2018
Board of Directors
Auditors
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:
Website: www.mtgibsoniron.com.au
admin@mtgibsoniron.com.au
Solicitors
Herbert Smith Freehills
Level 36, QV1 Building
250 St George’s Terrace
Perth 6000, Western Australia
Ernst & Young
Ernst & Young Building
11 Mounts Bay Road
Perth 6000, Western Australia
Bankers
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 11, 172 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 9.30am on 14 November 2018
at the Parmelia Hilton Hotel, 14 Mill St, Perth WA.
Easy Access to Information
See our website at www.mtgibsoniron.com.au for regular quarterly
reports and financial results. Additionally, shareholders or interested
parties can register to receive emailed updates shortly after the
company makes any regular or major announcement.
2018 Annual Report
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www.mtgibsoniron.com.au
2018 Annual Report