www.mtgibsoniron.com.au
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2021 Annual Report
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. The Company was readmitted to the Standard & Poor's ASX-300
Index in March 2019.
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.
Headquartered in Perth, Mount Gibson's primary operating assets are the Koolan Island
mine off the Kimberley coast in the remote north-west of the State, and the Shine Iron
Ore operation near Yalgoo, east of Geraldton.
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 2021
Board of Directors
Lee Seng Hui
Chairman, Non-Executive Director
Alan Jones
Non-Executive Director
Ding Rucai
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@mgx.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: 1300 787 272
Facsimile: +61 8 9323 2033
Annual General Meeting of Shareholders
Due to COVID-19 travel restrictions, Mount Gibson will hold an online
virtual AGM at 10.30am AWST (1.30pm AEDT) on Wednesday 10
November 2021. Shareholders will not be able to attend in person at
the AGM.
Information explaining how shareholders may access, vote and ask
questions within the online meeting room is provided in the Company’s
Notice of AGM released to the ASX in October 2021.
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.
2
MOUNT GIBSON IRON LIMITED 2021 Annual Report
MOUNT GIBSON IRON LIMITED 2021 Annual Report
99
Contents
20
20/21
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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2020/21 Performance Summary
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Lost Time Injury Frequency Rate (LTIFR) of 4.4 incidents per million manhours and a
Total Recordable Injury Frequency Rate (TRIFR) of 13.8.
Total sales revenue of $311.7 million Free on Board from ore sales of 3.0 million tonnes.
Net profit after tax of $64.0 million.
Year-end cash, term deposits and liquid investments of $364.7 million.
Fully franked final dividend of 2.0 cents per share.
Net assets of $719.7 million at 30 June 2021.
Significant progress achieved in elevated stripping program at Koolan Island to prepare
for increased sales and cashflow in future years.
Mid-West business life extended by development of the Shine Iron Ore mine.
Extension Hill low-grade sale program successfully concluded.
MOUNT GIBSON IRON LIMITED 2021 Annual Report3
Chairman’s Report
It is with pleasure that I present to you Mount
Gibson Iron's 2021 Annual Report.
The 2020/21 financial year was one of
significant investment in our existing business
to enable increased sales and cashflow in
future years, whilst also managing operational
and external challenges, including the ongoing
Coronavirus (COVID-19) global pandemic and
tight labour market in Western Australia.
Ore sales revenue totalled $311.7 million Free
on Board ("FOB") from the sale of 3.0 million
wet metric tonnes ("Mwmt") of ore from the
Koolan Island and Extension Hill operations in
the Kimberley and Mid-West regions of
Western Australia. This compared with
revenue of $415 million FOB on sales of
4.9 Mwmt in the preceding year reflecting the
Ÿ
completion of the successful low grade sales
program in the Mid-West during the year and
continued focus on progressing the bulk waste
stripping program at Koolan Island.
Ÿ
Profit before tax totalled $92.1 million and
profit after tax totalled $64.0 million. At year
end, the Company's cash and investments
totalled $364.7 million, a reduction of
$59.1 million over the year, reflecting the
Company's investment commitments, lower
ore sales in the year, and the $16.3 million
cash component of the previous year's
final dividend paid to shareholders in
September 2020.
Operational milestones during the year
included substantial progress toward
completion of the bulk stripping program at
Koolan Island, and in the Mid-West, the
successful completion of the Extension Hill
low-grade sales program and the development
of the new Shine iron ore operation.
The ongoing COVID-19 pandemic continued
to impact our business and our workforce
over the year. Effectively managing these
impacts was pivotal to the Company's
performance, and I commend Mount Gibson's
employees for their commitment and
resilience during this time.
The Board was pleased to declare a fully
franked final dividend of 2.0 cents per share for
the year. On payment, Mount Gibson will have
distributed approximately $332 million in fully
franked dividends since late 2011, whilst
retaining substantial capital for reinvestment
in our existing business and new resources
investment opportunities.
Looking ahead, the Board has determined the
following key business objectives for the
2021/22 financial year:
Ÿ Koolan Island – c omplete the processing
plant upgrade and the Main Pit waste
stripping and footwall support programs to
regain access to high grade ore as
scheduled, in order to maximise sales and
cashflow over the remainder of the mine life
as shipments rise and the waste/ore
stripping ratio and costs decline.
Ÿ Shine – complete commissioning and
r a m p - u p p r o d u c t i o n a n d s a l e s i n
accordance with the development and
production schedule.
E x t e n s i o n H i l l – c o m p l e t e fi n a l
rehabilitation of the mine site.
Ÿ Cost reductions – continue to drive for
sustainable cost improvements across all
business units.
T r e a s u r y r e t u r n s – m a i n t a i n a n
appropriate yield on the Group's cash and
investment reserves while preserving
capital for future deployment.
Ÿ Growth projects – continue the search
for acquisition opportunities in the
resources sector.
By focusing on these priorities, we are
confident that Mount Gibson can continue to
navigate variable market conditions and
capitalise on its sound financial base to deliver
strong long term returns for our shareholders.
Since the end of the financial year, iron ore
prices have significantly weakened, and the
Company's Board and management team
remain focused on those changes necessary to
preserve and increase shareholder value.
In summary, I would like to thank my fellow
Directors and the employees of Mount Gibson
for their efforts over the year. I look forward to
reporting another successful year in 2022.
Lee Seng Hui
Chairman
4MOUNT GIBSON IRON LIMITED 2021 Annual Report Chief Executive Officer’s Report
The safety of our people remains our priority
and we will continue to seek substantial
improvement in the coming year. Amid
increased activity levels and personnel
numbers at Koolan Island, the Company
recorded a moderately reduced Lost Time
I n j u r y F r e q u e n c y R a t e ( " LT I F R " ) o f
4.4 incidents per million manhours in the
12 months to the end of June 2021, compared
with 4.7 in the prior year, and a reduced Total
Recordable Injury Frequency Rate ("TRIFR") of
13.8 incidents per million manhours compared
with 14.9 previously.
Our activities in the coming year will again
involve substantial investment, mainly at
Koolan Island to complete the bulk stripping
program and upper footwall ground support
works in Main Pit and to conclude the major
processing capacity upgrade. These projects
together are intended to deliver increased ore
production from late 2021 and early 2022 as we
progressively regain mining access to high-
grade ore zones in the base of the Main Pit and
significantly increased sales quality and
volumes over the remainder of the mine life.
Since early 2020, the COVID-19 global
pandemic has necessitated significant and
e v o l v i n g r e s p o n s e s b y i n d u s t r y a n d
government to slow the transmission rate of
the virus, including periodic restrictions on the
movement of people into and within Australia,
and strict social distancing requirements.
These restrictions, in particular the interstate
border and quarantine restrictions, reduced
the availability of skilled fly-in-fly-out
(FIFO) personnel and resulted in disruption
and increased costs to Mount Gibson's
operating activities.
Mount Gibson maintains a range of general site
and travel protocols to reduce the risk of virus
transmission and stands ready to respond
promptly in the event of any escalation of
government restrictions. The Company's
personnel have responded positively to
changing circumstances throughout the
pandemic and no instances of COVID-19 were
reported at any Mount Gibson workplaces
during the reporting period.
At the Shine operation in the Mid-West, we will
continue the production ramp-up as economic
conditions permit, and seek to utilise our
existing infrastructure.
I would like to take this opportunity to thank the
Mount Gibson Board members for their ongoing
support, guidance and counsel as we navigate
these uncertain times and seek to maximise
outcomes for our shareholders.
Finally, I thank all Mount Gibson's hard working
employees and contractors for their efforts and
commitment throughout the last year, in
particular with the major waste stripping
program at Koolan Island and development of
the Shine operation. I am proud of what the
team has achieved and look forward to their
ongoing efforts in the year ahead.
Peter Kerr
Chief Executive Officer
Mount Gibson delivered a steady financial and
operating performance in 2020/21 whilst
investing substantial capital in response to
current operational requirements and in
support of its long term objectives.
Cashflow from operations increased modestly
to $165.2 million, aided by rising iron ore
prices, before mine development expenditure
of $185.0 million at the Koolan Island mine in
the Kimberley and the new Shine iron ore
operation in the Mid-West, and $30.0 million on
purchases of plant and equipment.
The majority of this investment was incurred at
Koolan Island, notably to progress the bulk
waste stripping program in Main Pit but also to
complete the site's new airstrip and the first
stage of the major upgrade of the crushing
plant capacity. The Company's investment at
Shine enabled the operation to export its first
cargo in August 2021.
Ore sales totalled 3.0 million wet metric
tonnes (Mwmt), lower than the prior year and
in line with guidance, despite restricted mining
access to high grade ore in Koolan Island's
Main Pit following a localised rockfall in late
2020. This limited production to lower grade
material from other areas at the operation
while the Company commenced a substantial
ground support program on the upper footwall
to enable the safe resumption of high grade
ore production in Main Pit from late 2021
onwards. Sales also reflected completion of
the low-grade sales program at Extension Hill
as planned in December 2020, after which
activity in the Mid-West was focused on
development of the Shine operation.
The Group's cost of sales averaged $65/wmt
sold Free on Board (FOB) compared with
$60/wmt FOB in the prior year, reflecting
reduced ore sales from the major waste
stripping program at Koolan Island and the
completion of sales from Extension Hill half way
during the year.
MOUNT GIBSON IRON LIMITED 2021 Annual Report5 Health and Safety
Mount Gibson is committed to maintaining a
safe work environment and safety oriented
culture in which all personnel consider both
their own wellbeing and that of their
c o l l e a g u e s . A c h i e v i n g c o n t i n u o u s
improvement in safety performance remains
a primary focus of the Company.
Performance during the 2020/21 year
improved moderately compared with the
preceding year with further improvements
targeted in safety leadership, culture and
performance in the current year.
The rolling 12 month Total Recordable Injury
F r e q u e n c y R a t e ( T R I F R ) d e c l i n e d
moderately to 13.8 incidents per one million
manhours worked as at 30 June 2021 from
14.9 at the end of the prior year. Similarly,
the Lost Time Injury Frequency Rate (LTIFR)
declined to 4.4 incidents per one million
manhours worked from 4.7 at the end of the
prior year.
Seven Lost Time Injuries (LTIs) were
recorded during the year compared with
eight in the previous year. Six LTIs were
recorded at Koolan Island and one at the
Extension Hill site. The Company's port
operations at Geraldton Port were again
LTI-free and have remained so for more
than eleven years, having recently passed
4,300 consecutive LTI-free days.
Overall safety performance is subject to
ongoing assessment by executive and site
management. This has resulted in the
implementation of a substantial program of
i m p r o v e m e n t i n i t i a t i v e s , i n c l u d i n g a
comprehensive safety audit, safety culture
survey, and increased focus on hazard
o b s e r va t i o n s a n d t a s k- s p e c i fi c s a fe ty
protocols.
The Company will be actively working to
achieve continuing improvements in the
coming year.
F o r d e t a i l s o f t h e C o m p a n y ’s s a f e t y
performance, including statistics for each site,
please refer to Mount Gibson Iron’s 2021
Sustainability Report, as published on the
Mount Gibson website.
TRIFR
15
10
5
0
6
4
2
0
FY2017
FY2018
FY2019
FY2020
FY2021
LTIFR
FY2017
FY2018
FY2019
FY2020
FY2021
1.80
*LTIFR and TRIFR each represent incidents per million manhours
6MOUNT GIBSON IRON LIMITED 2021 Annual Report Operational Review
During 2020/21, Mount Gibson achieved total
ore sales of 3.0 million wet metric tonnes
(Mwmt), reflecting the continued progress of
the waste stripping program at Koolan Island
and the planned completion of low grade
sales from the Extension Hill operation in
December 2020. A more detailed review is
contained in the Directors' Report.
Koolan Island
Koolan Island is located approximately 140km
north of Derby in the Kimberley region of
Western Australia. Development activities
necessary for the restart of the Koolan Island
operation commenced in May 2017, and ore
sales resumed in April 2019.
Activities during the year focussed on
progression of the bulk waste stripping
program and cutback of the Main Pit as well as
remedial upper footwall support works and an
upgrade to the crushing circuit, all of which
are intended to facilitate increased ore
production, sales and cashflow from the end
of 2021 onwards.
Total material movement increased by 33% to
20.1 Mwmt of waste and ore mined during the
year. Ore production totalled 1.4 Mwmt in the
year, while sales totalled 1.8 Mwmt. The
average grade of ore shipped for the year was
61% Fe.
The mine generated earnings before interest
and tax of $104.1 million in 2020/21,
reflecting the sales made as well as progress
of the Main Pit waste stripping and cutback
program, disruption from extreme wet season
weather and restricted mining access to high
grade ore following a rockfall in the west end
of Main Pit in late 2020.
As reported in November 2020, the rockfall did
not result in any injuries to personnel or
damage to equipment, and the seawall side of
the Main Pit was not impacted by this event.
In-ground instrumentation continues to
de mons trate that the s e awal l, which
incorporates the installed impermeable
seepage barrier, is performing to design
expectations.
To ensure safe access for future mining in the
western end of the Main Pit, Mount Gibson has
engaged a specialist contractor to undertake
geotechnical footwall ground support bolting
in the impacted areas. Mobilisation of
personnel and equipment to site commenced
in April 2021, with initial works started in May.
Work is progressing but efforts are currently
being impacted by interstate COVID travel
restrictions. The program is forecast to cost
approximately $20 million, with both Mount
Gibson and the contractor seeking ways to
increase productivity and decrease cost.
This geotechnical footwall program will
progressively allow mining access to the high
grade ore zones in the lower western end and
central parts of the Main Pit, from late 2021
onwards. In the interim, lower and medium
grade ore will continue to be sourced from
zones within Main Pit and from the Acacia
satellite pit. These areas provided the bulk of
ore production in the second half of the
2020/21 financial year. Consequently, the
average grade of material shipped in the June
2021 half year was 58% Fe, compared with an
average sales grade of 63% Fe in the
December 2020 half year.
In addition to the Company's significant
investment in advanced waste stripping, which
totalled $138.2 million in the year, and the
ongoing footwall support program, Mount
Gibson is also part-way through an upgrade of
the mine's processing plant. The first stage of
the upgrade was completed in May, with the
final stage on track for completion in the
December 2021 quarter. The total capital
investment for the project is estimated at
$20-25 million, of which $11.4 million was
invested to the end of the financial year. The
upgrade will ensure the crushing circuit is
capable of processing the significantly
increased high grade ore throughput scheduled
to occur from the end of 2021 onwards.
Reflective of the above factors, the average
cash cost of sales was $70/wmt Free on Board
(FOB) for the year. Cash costs are stated
before the capitalised waste stripping
investment and $22.4 million invested in
various capital improvement projects,
including the processing plant upgrade, upper
footwall ground support program and
completion of the site's new jet-suitable
airstrip. Direct FIFO flights from Perth
utilising Fokker 100 jet aircraft commenced in
October 2020.
The planned elevated stripping phase of the
mine, during which overburden movement
and operating costs are at their highest and
ore production is at its lowest, remains
scheduled to be substantially completed over
the second half of calendar 2021. Thereafter,
sales are anticipated to rise and unit cash
costs to decline in step with the significantly
reduced waste to ore stripping ratio.
Mid West Operations
- Extension Hill & Shine
The Mid-West Operations delivered a solid
financial and operating performance during the
year and generated earnings before interest
and tax of $19.5 million.
Extension Hill
The low grade sales program from Extension
Hill was successfully completed in late
December 2020, with sales totalling 1.2 Mwmt
for the first half of the 2020/21 financial year, at
the upper end of guidance, after which the site
transitioned to final closure.
The Extension Hill operation generated
e a r n i n g s b e f o r e i n t e r e s t a n d t a x o f
$20.9 million in the year, while cashflow totalled
$10 million, excluding proceeds from the rail
credit refund.
Mount Gibson commenced the low-grade
(51-54% Fe) sales program from Extension Hill
in June 2019 with an initial sales target of
approximately 1 Mwmt. Following that time,
stronger iron ore prices supported extensions
to the program which resulted in total sales of
approximately 4.1 Mwmt for operating
cashflows of over $30 million.
The accounting provision for rehabilitation of
the Extension Hill mine site was $5.7 million at
30 June 2021, reduced from $9.8 million at the
end of the preceding financial year and
reflecting the work undertaken.
Infrastructure remaining on site includes the
crushing plant and accommodation camp.
Expressions of interest have been received
from various parties regarding the site and the
remaining assets, which could offset future
rehabilitation costs.
Shine
The Shine mine is located approximately 85km
north of the now-closed Extension Hill mine.
Shine has an initial Ore Reserve of 2.8Mt
grading 59.4% Fe in the proposed “Stage 1” pit.
Annual production is forecast at approximately
1.5 Mwmt over an initial two year period.
Should market conditions justify, there is
potential to extend the life of the Shine
operation for a further two years by proceeding
with a “Stage 2” pit, based on Measured and
Indicated Mineral Resources within the
modelled pit shells. The Shine project has total
Measured, Indicated and Inferred Hematite
Resources of 10.8Mt grading 58.2% Fe.
Continued
MOUNT GIBSON IRON LIMITED 2021 Annual Report7 Shine Continued
Extension Hill Rail Refund/Credit
Following achievement of a contractual rail
volume threshold at Extension Hill during the
2017/18 financial year, the Group has an
entitlement to receive a partial refund of
historical rail access charges from the Mid-West
rail leaseholder based upon the future usage by
certain third parties of specific segments of the
Perenjori to Geraldton railway line.
This entitlement commenced in early 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 fully dependent on the
volumes railed by third parties on the
specified rail segments. The entitlement is
currently accruing at a rate of approximately
$2.0 million per quarter, with payments due
every six months. The total amount received
during the year was $7.6 million, taking
cumulative total proceeds received since first
payment to $15.9 million.
Clearing of the Shine open pit footprint was
completed in February 2021 followed by the
commencement of blasting and mining of
overburden in late March 2021. Total material
movement amounted to 1.9 Mwmt in the year,
including approximately 55,000 wmt of sales
grade ore stockpiled at year end. The first
shipment of Shine iron ore was exported from
Geraldton Port subsequent to the end of the
period in August 2021.
Mount Gibson is self-performing mining
activities at the Shine Project consistent with its
current and prior operations in the Mid-West
and Kimberley regions. Crushing and
stockpiling is being undertaken by a crushing
services contractor.
Ore is initially being road hauled from Shine
approximately 300km to Mount Gibson's ore
storage and loadout facilities at Geraldton Port.
M o u n t G i b s o n i s a l s o c o n s i d e r i n g a
recommissioning of its existing Ruvidini rail
siding at the town of Mullewa to facilitate a
reduced road haul distance from Shine and a
rail journey for the remaining 100km to
Geraldton Port. The Ruvidini siding was
established some years ago for the nearby
Tallering Peak mine which closed in 2014 after
ten years of operation, with access for Shine
material requiring some road and rail crossing
modifications.
Capital development and pre-production
expenditure at Shine during the 2020/21
financial year totalled $28.9 million, in line with
guidance. Mount Gibson anticipates cost
pressures during the initial trucking-only
phase, notably while haulage volumes rise
towards the targeted 1.5Mtpa rate, and will
seek to ramp up production as economic
conditions permit.
With production now underway, and as a
condition of the original purchase of Shine
in 2013, Mount Gibson is obliged to make
a number of vendor payments totalling
$4.5 million within the next year. The first of
these, which was paid after year-end upon
the initial shipment, is a deferred purchase
payment of $3 million. In addition, Mount
Gibson is obligated to pay a price participation
royalty of A$0.20/dmt of ore sold for every
A$1/dmt the 62% Fe index price trades
above the equivalent of A$115/dmt CFR. The
$3 million deferred purchase payment is
offset against this royalty.
8MOUNT GIBSON IRON LIMITED 2021 Annual Report Environment and Community
For details of the Company's environmental
performance, including information relating to
each site, please refer to Mount Gibson Iron's
2021 Sustainability Report, as published on the
Mount Gibson website.
Community Affairs
Mount Gibson values its relationship with key
stakeholders and works hard to ensure a clear
mutual understanding of its impacts from
current and future operations. To do this, the
Company has an ongoing program of
s t a k e h o l d e r c o n s u l t a t i o n w i t h i n t h e
c o m m u n i t i e s n e a r t o i t s m i n i n g a n d
infrastructure operations, and with an
additional emphasis on the recognition of
Traditional Owners and areas of special
heritage and cultural significance.
Mount Gibson's stakeholders include its
c u s t o m e r s , s h a re h o l d e r s , e m p l oye e s ,
suppliers, landowners, Traditional Owners,
regulators, local governments, interest groups
and the broader community. The Company
works throughout each year with each of
these stakeholder groups, whether through
formal agreements and meetings or through
i n f o r m a l u p d a t e s , w i t h t h e l e v e l o f
c o n s u l t a t i o n d e p e n d e n t o n s p e c i fi c
stakeholder interests.
Mount Gibson's approach is to actively support
its local communities, with a particular focus
on youth and education. In line with our
commitments, Mount Gibson invested in these
areas in the last 12 months, including through
d i r e c t c o n t r i b u t i o n s t o c o m m u n i t y
organisations, sponsorships, educational
scholarships and direct support for community
events and initiatives.
For specific details of Mount Gibson Iron's
c o m m u n i t y i n v e s t m e n t a c t i v i t i e s a n d
e n g a g e m e n t w i t h c o m m u n i t i e s a n d
stakeholders, including total expenditure and
information relating to each site, please refer to
Mount Gibson Iron's 2021 Sustainability Report,
as published on the Mount Gibson website.
Mount Gibson recognises that it is critical for any
successful mining organisation to have a key
focus on environmental management and
rehabilitation, and on being a responsible
community citizen. These matters 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 and community perspective remained
a significant focus for Mount Gibson during the
2020/21 financial year.
Environment
Mount Gibson places significant emphasis on
environmental management and compliance.
The Company has focused strongly on
continuous improvement and innovation in its
environmental management activities, always
performing in a responsible manner and
ensuring a high standard of environmental
performance and compliance.
Environmental reporting is a core component of
successful environmental management with
many regulatory organisations requiring
extensive periodic reports. These include
various Western Australian Government
agencies including the Department of Mines,
Industry Regulation and Safety (DMIRS), the
Department of Water & Environmental
Regulation (DWER), the 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
Agriculture, Water and Environment (DAWE).
No notices of non-compliance, letters of warning
nor any other materially adverse findings were
tabled by any regulatory authority in relation to
the Group's operations.
A key reporting obligation is the National
Greenhouse and Energy Reporting Scheme
(NGERS) which provides data on greenhouse
gas emissions and energy production. Diesel
combustion is Mount Gibson's single largest
source of greenhouse gas emissions from its
mining operations. Mount Gibson's latest
NGERS report reflects the significant increase
in mining activity during the temporary bulk
waste stripping phase of operations at Koolan
Island, and the transition of activity in the Mid-
West from Extension Hill, where low grade
sales are now completed and the site moved
to final closure, to development of the new
Shine operation.
MOUNT GIBSON IRON LIMITED 2021 Annual Report9 Resources and Reserves
Total Mineral Resources and Ore Reserves by Project as at 30 June 2021
Koolan Island
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2021
Total at 30 June 2020
Ore Reserves, above 50% Fe
Proved
Probable
Total at 30 June 2021
Total at 30 June 2020
Extension Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2021
Total at 30 June 2020
Iron Hill
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2021
Total at 30 June 2020
Shine
Mineral Resources, above 50% Fe
Measured
Indicated
Inferred
Total at 30 June 2021
Total at 30 June 2020
Ore Reserves, above 55% Fe
Proved
Probable
Total at 30 June 2021
Total at 30 June 2020
Tonnes
millions
2.9
32.5
9.9
46.2
48.0
-
17.5
17.5
18.7
1.3
0.3
0.2
1.8
1.8
-
2.7
1.1
3.7
3.7
5.6
6.5
3.6
15.7
15.9
2.0
0.7
2.7
-
Fe
%
60.2
64.9
60.5
63.7
63.7
-
65.3
65.3
65.2
55.3
57.3
56.6
55.8
55.8
-
55.0
55.0
55.0
55.0
59.0
58.0
56.8
58.1
58.1
59.9
58.4
59.5
-
2
SiO
%
13.36
5.71
12.30
7.59
7.63
-
4.80
4.80
4.96
9.16
10.42
10.49
9.53
9.53
-
13.94
9.86
12.76
12.76
8.98
10.00
9.61
9.55
9.57
7.32
9.72
7.94
-
3
Al O
2
%
0.30
0.65
0.59
0.61
0.61
-
0.88
0.88
0.88
2.76
1.62
1.66
2.44
2.44
-
1.74
2.61
1.99
1.99
1.75
1.33
1.18
1.44
1.48
2.28
2.12
2.24
-
P
%
0.007
0.013
0.013
0.013
0.013
-
0.013
0.013
0.013
0.077
0.076
0.055
0.074
0.074
-
0.074
0.081
0.076
0.076
0.077
0.070
0.063
0.071
0.071
0.087
0.057
0.079
-
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
10MOUNT GIBSON IRON LIMITED 2021 Annual Report
Resources and Reserves Continued
Total Group Mineral Resources and Ore Reserves as at 30 June 2021 (above 50% Fe)
Total Mineral Resources at 30 June 2021
Total Ore Reserves at 30 June 2021
Total Mineral Resources at 30 June 2020
Total Ore Reserves at 30 June 2020
Tonnes
millions
67.4
20.3
69.4
18.7
Fe
%
61.7
64.5
61.7
65.2
2
SiO
%
8.39
5.23
8.40
4.96
3
Al O
2
%
0.94
1.06
0.93
0.88
P
%
0.032
0.022
0.031
0.013
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been
estimated as dry tonnages.
Material Change
There were no material changes in the annual reporting period other than depletion by mining at Koolan Island and the addition of the Shine Ore
Reserves. Full details of the Shine Ore Reserve were announced on 9 October 2020, and comprised initial Proved and Probable Ore Reserves totalling
2.8 Mt grading 59.4% Fe. The Shine Ore Reserve estimate as at 30 June 2021 reflects minor depletion by mining during the reporting period. The
Company confirms that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially
changed.
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 member of the Australian Institute of Geoscientists.
Ms Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron Limited. Ms Haren has sufficient experience that is relevant to the style
of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012
Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves', and 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 member of the Australasian
Institute of Mining and Metallurgy. Mr Morey is a full-time employee of Mount Gibson Iron Limited. Mr Morey 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', and 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.
For more information, refer to Mount Gibson’s Annual Statement of Mineral Resources and Ore Reserves at 30 June 2021 on the Mount Gibson website.
MOUNT GIBSON IRON LIMITED 2021 Annual Report11 Financial Report
MOUNT GIBSON IRON LIMITED AND CONTROLLED ENTITIES
ABN 87 008 670 817
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021
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
Impairment of Non-Current Assets
Introduction
Other Significant Accounting Policies
Revenue and Other Income
Expenses
Taxation
Cash and Cash Equivalents
Term Deposits and Subordinated Notes
Financial Assets Held for Trading
Trade and Other Receivables
Inventories
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11. Derivative Financial Assets
12.
Interests in Subsidiaries
13. Property, Plant and Equipment
14. Right-of-use Assets
15. Deferred Acquisition, Exploration and Evaluation Costs
16. Mine Properties
17.
18. Trade and Other Payables
19.
20. Derivative Financial Liabilities
21. Provisions
22.
23. Reserves
24. Accumulated Losses
25. Expenditure Commitments
26. Share-Based Payment Plans
27. Earnings Per Share
28. Dividends Paid and Proposed
29. Contingent Liabilities
30. Key Management Personnel
31. Related Party Transactions
32. Auditor’s Remuneration
33. Segment Information
34. Events After the Balance Sheet Date
35. Financial instruments
36. Parent Entity Information
37. New and Amended Accounting Standards and Interpretations
Interest-Bearing Loans and Borrowings
Issued Capital
Directors’ Declaration
Independent Audit Report
13
33
34
35
36
37
38
38
39
40
42
44
48
49
49
49
50
51
51
53
55
55
56
58
59
59
60
61
63
64
65
65
66
68
69
69
69
70
70
71
74
74
82
84
87
88
12MOUNT GIBSON IRON LIMITED 2021 Annual Report
Directors’ Report
Your Directors submit their report for the year ended 30 June 2021 for Mount Gibson Iron Limited (Company or Mount Gibson) and
the consolidated group 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 which is listed on the Hong Kong Stock Exchange. He is also the Chairman and a
Non-Executive Director of Tian An China Investments Company Limited, and a Non-Executive Director of APAC Resources Limited, one
of Mount Gibson’s substantial shareholders. Mr Lee was previously the Chairman and a Non-Executive Director of Asiasec Properties
Limited. Mr Lee has not served as a director of any other ASX or Hong Kong listed companies during the past three years.
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.
Ding Rucai
Non-Executive Director
Mr Ding was appointed to the Board on 12 December 2019. Mr Ding is the Chairman and executive director of Hong Kong listed
Shougang Fushan Resources Group Limited (“Shougang Fushan”). Shougang Fushan is Mount Gibson’s second largest shareholder
with a 13.8% shareholding. Shougang Fushan also holds a 17.6% share interest in APAC Resources Limited, Mount Gibson’s largest
shareholder with a 36.3% shareholding. Mr. Ding is also a director of Shougang Holding (Hong Kong) Limited, a company wholly owned
by Shougang Group Co., Ltd (“Shougang Group”). A senior engineer with a doctoral degree in ferrous metallurgy from the University
of Science and Technology Beijing, Mr Ding has more than 30 years’ experience in the steel and coal resources industry, having held a
variety of senior management and executive roles since joining the Shougang Group in 1989.
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 45 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 has spent 16 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. His extensive
geographic and corporate mining experience ranges from: Latin America, North America, Europe, Africa and Asia Pacific. He is currently
the Chairman of ASX-listed Red Metal Ltd, a non-executive director of ASX-listed Regis Resources Ltd and of ASX-listed Lithium Power
International and its unlisted associate Minera Salar Blanco S.A. (Chile).
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 ASX-
listed Tubi Group and a former Director of CPA Australia Limited. Mr Bird is a Director of ASX-listed Pacific American Holdings Limited.
MOUNT GIBSON IRON LIMITED 2021 Annual Report13
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
Norman, Disney & Young and a former Non-Executive Director of Beacon Foundation and Calibre Group Limited. Professor Dougas is
also a Professorial Fellow in the School of Engineering at Melbourne University and a staff member.
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.
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.
14MOUNT GIBSON IRON LIMITED 2021 Annual Report 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 2021 was as follows:
Nature of Operations and Principal Activities
The principal activities of the entities within the Group during the year were:
processing of hematite iron ore at the Extension Hill and Shine mine sites in the Mid-West region of Western Australia, and haulage
of the ore via road and rail for export from the Geraldton Port;
mining and direct shipment of hematite iron ore at the Koolan Island mine site in the Kimberley region of Western Australia;
treasury management; and
the pursuit of mineral resources acquisitions and investments.
Employees
The Group employed 355 employees (excluding contractors) as at 30 June 2021 (2020: 307 employees).
OPERATING AND FINANCIAL REVIEW
Introduction
The Board presents the 2020/21 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 2020/21 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 2021 and has been prepared in accordance
with Regulatory Guidance 247 published by the Australian Securities and Investments Commission (ASIC).
MOUNT GIBSON IRON LIMITED 2021 Annual Report15
Overview of the 2020/21 Financial Year
The Company delivered a steady financial performance for the year ended 30 June 2021, with elevated iron ore prices partly offsetting
disruption associated with adverse weather events and geotechnical challenges at Koolan Island in the Kimberley and changing travel
and operating restrictions necessitated by the Coronavirus (COVID-19) global pandemic. The financial focus in the year was the
Company’s substantial capital investment program to enable growing sales and cashflows in future years. At Koolan Island, the focus
was progressing the bulk waste stripping program and cutback of Main Pit while commencing remedial upper footwall support works
and a major crushing circuit upgrade, all of which are intended to facilitate increased ore production, sales and cashflow from the second
half of financial year 2021/22 onwards. In the Mid-West, the focus in the first half of the year was on completing the successful sale of
recoverable low-grade material from the Extension Hill deposit and progressing the site to closure. In the second half, the focus was to
substantially complete development of the Shine Iron Ore Project to commence ore sales in the September quarter of 2021. The
Company also continued to carefully manage the Group’s treasury reserves. The Group recorded a net profit before tax of $92,133,000
and a net profit after tax of $64,006,000.
The Company’s performance was assisted by continued strong iron ore prices over the year. At the beginning of the financial year, the
Platts Index for delivery of 62% Fe iron ore fines to northern China was approximately US$101 per dry metric tonne (dmt), reflecting
the continued impacts of supply disruption in Brazil and rapid demand growth in China as it recovered from the COVID-19 pandemic.
The price progressively rose over the remainder of the year, peaking at US$233/dmt in May 2021, ending the year at US$218/dmt to
average US$154/dmt for the twelve month period. The price of 65% Fe grade ore averaged US$174/dmt for the year, reflecting an
average grade-adjusted premium to the Platts 62% Fe Index of approximately 8%, while ores grading 58% Fe averaged US$128/dmt,
reflecting an average discount of approximately 11%.
Higher prices were negatively offset by a significantly stronger Australia dollar, which averaged A$1.00/US$0.747 over the year (from
US$0.66 the prior year) reflecting Australia’s economic recovery from the early stages of the global pandemic.
Group ore sales for the year totalled 3.0 million wet metric tonnes (Mwmt) consistent with guidance. Sales revenue totalled
$327,698,000 including shipping freight services and provisional pricing adjustments, and $309,623,000 on a Free on Board (FOB) basis
(excluding shipping freight services), before $2,029,000 of realised gains from foreign exchange hedging and commodity collar option
contracts.
Mount Gibson achieved an average realised price for all products sold in the year (including realised foreign exchange hedging and
commodity forward contract net gains) of $103/wmt Free on Board (FOB), net of shipping freight, compared with $84/wmt FOB in
2019/20. This reflected the sale of high grade ore from Koolan Island and lower grade material from the Mid-West in the first half of
the financial year, followed by the reduced volumes and grades from Koolan Island in the second half of the financial year as the waste
stripping program progressed and access to high grade ore from Main Pit remained restricted. Sales from Koolan Island realised an
average price of US$104/dmt FOB for the year. All sales from the Mid-West comprised stockpiled low-grade material from Extension
Hill, which was sold on a fixed price basis and realised an average price of US$30/dmt FOB for fines and US$43/dmt FOB for lump.
The total cost of sales for the year was $214,830,000 including royalties and shipping freight costs. On an FOB basis, excluding shipping
freight, the total cost of sales was $196,755,000 which equated to $65/wmt sold, compared with $60/wmt sold in the prior financial
year. This increase primarily reflected higher costs at Koolan Island due to elevated waste stripping requirements and additional costs
associated with disruption from wet weather, restricted mining access to high grade ore in Main Pit and the impact of COVID-19
restrictions on operating efficiencies and labour availability.
Total cash reserves, comprising cash and cash equivalents, term deposits and subordinated notes, financial assets held for trading and
derivative financial assets, decreased by $59,059,000 over the year to a total of $364,723,000 as at 30 June 2021.
COVID-19 Business Response
From early March 2020, the COVID-19 global pandemic necessitated significant and evolving responses by industry and government to
slow the transmission rate of the virus, including restrictions on the movement of people into and within Australia, and strict social
distancing requirements. These measures particularly impacted availability of labour from interstate, necessitating a freeze on interstate
recruitment. While normal fly-in-fly-out (FIFO) rosters and travel within WA resumed from mid 2020, Mount Gibson continues to
maintain a range of general site and travel protocols to reduce the risk of virus transmission and stands ready to respond promptly in
the event of any reinstatement of government restrictions. This readiness was demonstrated in the March and June quarters during
which the Western Australian Government initiated three brief lockdowns in the Perth and Peel metropolitan region of the State following
reported cases of community transmission. This included the reinstatement of certain regional travel restrictions, mandatory mask-
wearing requirements and site social distancing protocols. These restrictions, in particular the interstate border and quarantine
restrictions applying to FIFO personnel, reduced the availability of skilled personnel and resulted in some disruption to Mount Gibson’s
operating activities.
Mount Gibson personnel have responded positively to changing circumstances throughout the pandemic and no instances of COVID-19
were reported at any Mount Gibson workplaces during the reporting period.
Operating Results for the Financial Year
The summarised operating results for the Group for the year ended 30 June 2021 are tabulated below:
Year ended: 30 June 2021
30 June 2020
30 June 2019
30 June 2018
30 June 2017
Net profit before tax
Taxation (expense)/benefit
Net profit after tax
$’000
$’000
$’000
92,133
(28,127)
64,006
120,717
(36,519)
70,462
62,907
84,198
133,369
Earnings per share
cents/share
5.46
7.35
11.98
99,129
-
99,129
9.08
24,841
1,481
26,322
2.41
16MOUNT GIBSON IRON LIMITED 2021 Annual Report Consolidated quarterly operating and sales statistics for the 2020/21 financial year are tabulated below:
Consolidated Group
Mining & Crushing
Total waste mined
Total ore mined
Total ore crushed
Shipping/Sales
Standard DSO Fines
Low Grade Lump
Low Grade Fines
Total
Ave. Platts 62% Fe
CFR northern China price
MGX Free on Board (FOB) average
realised fines price – Koolan*
MGX Free on Board (FOB) average
realised lump price – Mid-West^
MGX Free on Board (FOB) average
realised fines price – Mid-West^
kwmt = thousand wet metric tonnes
US$/dmt = USD per dry metric tonne
Unit
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
kwmt
US$/dmt
US$/dmt
US$/dmt
US$/dmt
Sept
Quarter
2020
Dec
Quarter
2020
Mar
Quarter
2021
Jun
Quarter
2021
Year
2020/21
Year
2019/20
4,544
827
1,363
672
416
285
1,373
118
104
41
30
5,259
4,255
6,513
20,572
12,426
607
610
396
472
61
930
134
149
45
34
260
242
370
415
2,064
2,629
232
481
1,781
-
-
232
167
106
-
-
-
-
481
200
65
-
-
888
346
3,016
154
104
43
30
2,765
4,696
2,352
1,417
1,174
4,942
93
87
36
27
^ Reflects the realised price after shipping freight and specification adjustments and penalties.
*
Reflects the realised fines price for Koolan comprising a mix of month of shipping (M), M+1 and M+2 averages, referencing the Platts 65% Fe
Index. Realised prices are shown after shipping freight, provisional pricing adjustments and specification adjustments/penalties.
Minor discrepancies may appear due to rounding.
Koolan Island
The Koolan Island mine is located in the Buccaneer Archipelago, approximately 140km north of Derby, in the Kimberley region of
Western Australia. The main focus in the year was progressing the bulk waste stripping program and cutback of Main Pit while
commencing remedial upper footwall support works and a major crushing circuit upgrade, all of which are intended to facilitate increased
ore production, sales and cashflow from the second half of financial year 2021/22 onwards.
As previously indicated, the planned elevated stripping phase of the mine, during which waste movement and operating costs are at
their highest and ore production is most variable, is scheduled to be completed in the December 2021 half year. Thereafter, sales will
rise and cash costs will decline in step with the significantly reduced waste to ore stripping ratio.
The mine generated earnings before interest and tax of $104,115,000 in the financial year reflecting the progress of the Main Pit waste
stripping and cutback program, disruption from extreme wet season weather, and restricted mining access to high grade ore following
a rockfall in the west end of Main Pit in late 2020. Operating efficiency was also adversely impacted by intermittent government
restrictions on travel and workforce mobility related to COVID-19 outbreaks around Australia.
Consistent with the waste stripping schedule, total material movement (TMM) increased by 33% to 20.1 Mwmt of waste and ore mined
during the year. This stripping program is required to access significantly greater volumes of high grade iron ore in Main Pit from the
second half of 2021 onwards.
However, mining operations were adversely impacted by significant disruption related to the heaviest wet season rainfall since Mount
Gibson acquired the operation in 2007, with 1,850mm of rain falling between late November 2020 and the end of March 2021. Extreme
rainfall typically causes significant interruptions due to water damage to haul roads and ramps, working faces, localised flooding, poor
visibility and is associated with frequent lightning.
Material movement was also impacted by amendments to mine scheduling and sequencing to accommodate continued restricted access
in the western end of the Main Pit affected by the localised rockfall on the upper western end of the Main Pit footwall. As reported in
November 2020, the rockfall did not result in any injuries to personnel or damage to equipment, and the seawall side of the Main Pit
was not impacted by this event.
On the southern side of the Main Pit, in-ground instrumentation continues to demonstrate that the seawall, which incorporates the
installed impermeable seepage barrier, is performing to design expectations.
To ensure safe access for future mining, Mount Gibson has engaged a specialist contractor to undertake geotechnical footwall ground
support bolting in the impacted areas. Mobilisation of personnel and equipment to site commenced in April 2021, with initial works
started in May. Work is progressively increasing but efforts are currently being impeded by interstate COVID travel restrictions. The
program is forecast to cost approximately $20 million, with both Mount Gibson and the contractor seeking ways to increase productivity
and decrease cost.
This geotechnical footwall program will progressively allow mining access to high grade ore zones in the lower western end and central
parts of the Main Pit, from the end of September onwards. In the interim, lower and medium grade ore will continue to be sourced
from zones within Main Pit and from the Acacia satellite pit. These areas provided the bulk of ore production in the June half-year, and
as previously reported, are significantly lower in grade and more variable in quality. Consequently, the average grade of material shipped
in the June 2021 half was 58% Fe. This compared with an average sales grade of 63% Fe in the December half-year, when access to
high grade was less restricted.
MOUNT GIBSON IRON LIMITED 2021 Annual Report17
Ore production totalled 1.4 Mwmt in the year, while sales totalled 1.8 Mwmt consistent with guidance. The majority of the final shipment
for the year was loaded at year end and is included in the annual sales. The average grade of ore shipped for the year was 61% Fe.
As previously indicated, production and sales will be limited to blended lower and medium grade material until the upper footwall
geotechnical works have progressed to facilitate the safe mining of high grade iron ore in the western end of the Main Pit. This mining
is scheduled for the December quarter.
In addition to the Company’s significant investment in waste stripping, which totalled $138,233,000 in the year, and the ongoing footwall
support program, Mount Gibson is also part-way through a major upgrade of the mine’s processing plant. The first stage of the upgrade
commenced in March and was completed in May, with the second final stage on track for completion in the December quarter. The
existing crushing plant is being maintained to handle the forecast near-term volumes. The total capital investment for the project is
estimated at $20-25 million, of which $11,430,000 was invested to the end of the financial year. The upgrade will ensure the crushing
circuit is capable of processing the significantly increased high grade ore throughput scheduled to occur from later this year onwards.
Reflective of the above factors, the average cash cost of sales was $70/wmt FOB for the year. Cash costs are stated before the
capitalised waste investment and $22,363,000 invested in various capital improvement projects, including the processing plant upgrade,
upper footwall ground support program and completion of the site’s new jet-suitable airstrip. Direct FIFO flights from Perth utilising
Fokker 100 jet aircraft commenced in October 2020.
The planned elevated stripping phase of the mine, during which overburden movement and operating costs are at their highest and ore
production is at its lowest, is scheduled to be substantially completed over the second half of calendar 2021. Thereafter, sales are
anticipated to rise and cash costs to decline in step with the significantly reduced waste to ore stripping ratio.
Exploration and Resource Development
Mount Gibson continues to actively assess potential opportunities to extend the mine life of the Koolan Island operation. Preparations
and permitting are progressing to enable drilling later this year at the Mangrove deposit, along strike to the east of the Main Pit and
directly adjacent to the processing and ore stockpile areas.
Production and shipping statistics for Koolan Island for the 2020/21 financial year are tabulated below:
Koolan Island
Production Summary
Unit
Sept
Quarter
2020
’000
Dec
Quarter
2020
’000
Mar
Quarter
2021
’000
Jun
Quarter
2021
’000
Year
2020/21
’000
Year
2019/20
’000
% Incr/
(Decr)
Mining
Waste mined
Standard Ore mined
Crushing
Lump
Fines
Shipping
Fines
wmt
wmt
4,544
672
5,259
184
4,182
260
4,720
314
18,706
1,431
12,426
2,765
51
(48)
wmt
wmt
wmt
152
531
683
672
672
75
211
285
396
396
86
156
242
232
232
153
252
405
481
481
465
1,150
1,615
1,781
1,781
646
1,725
2,371
2,352
2,352
(28)
(33)
(32)
(24)
(24)
Minor discrepancies may appear due to rounding.
18MOUNT GIBSON IRON LIMITED 2021 Annual Report Mid-West Operations - Extension Hill/Shine
The Mid-West operations comprise the recently closed Extension Hill mine, the Shine mine and the Company’s bulk storage and export
facilities at the port of Geraldton.
The Mid-West operations generated earnings before interest and tax of $19,542,000 for the financial year.
Extension Hill
The low-grade sales program from Extension Hill was successfully completed in late December 2020 and rehabilitation of the Extension
Hill site is now well advanced in line with the mine closure plan, while redeployment of site personnel and equipment to the Shine mine
has been undertaken where appropriate.
Sales totaling 1.2 Mwmt for the financial year were at the upper end of guidance and comprised 0.3 Mwmt of low-grade fines and 0.9
Mwmt of low-grade lump material taken from the last remaining stockpiles at the site, and also from recoverable low-grade detrital
gravels adjacent to the Extension Hill pit.
The Extension Hill operation generated earnings before interest and tax of $20,907,000 in the year. Cashflow for the year totalled $10
million, excluding proceeds from the rail credit refund.
The average cash cost of sales during the first half while shipments were occurring was $40/wmt FOB, at the lower end of guidance,
compared with $41/wmt FOB in the 2019/20 financial year.
Mount Gibson commenced the low-grade (51-54% Fe) sales program from Extension Hill in June 2019 with an initial sales target of
approximately 1 Mwmt. Following that time, stronger iron ore prices supported extensions to the program which resulted in total sales
of approximately 4.1 Mwmt for operating cashflows of over $30 million.
The accounting provision for rehabilitation of the Extension Hill mine site was $9,797,000 million at 30 June 2020 and, reflecting the
activities completed to date, has reduced to $5,733,000 as at 30 June 2021.
Infrastructure remaining on site includes the crushing plant and accommodation camp. Expressions of interest have been received from
various parties regarding the site and the remaining assets, which could offset future rehabilitation costs.
Shine
The Shine mine is located approximately 85km north of the now-closed Extension Hill mine. Shine has an initial Ore Reserve1 of 2.8Mt
grading 59.4% Fe in the proposed “Stage 1” pit. Annual production is forecast at approximately 1.5 Mwmt over an initial two-year
period. Should market conditions remain supportive, there is potential to extend the life of the Shine operation for a further two years
by proceeding with a “Stage 2” pit, based on Measured and Indicated Mineral Resources within the modelled pit shells. The Shine
project has total Measured, Indicated and Inferred Hematite Resources1 of 10.8Mt grading 58.2% Fe.
Clearing of the Shine open pit footprint was completed in February followed by the commencement of blasting and mining of overburden
in late March 2021. First ore was mined and stockpiled in early April. Total material movement amounted to 1.9 Mwmt since the
commencement of mining, including approximately 55,000 wmt of sales-grade ore.
Site construction activities are largely complete, including installation and commissioning of the administration and workshop facilities
and the commissioning of electrical and water supplies. Approximately 10,000 wmt of crushed lump ore was stockpiled at year end
following start-up and commissioning of the crushing plant in late June.
Mount Gibson is self-performing mining activities at the Shine Project consistent with its current and prior operations in the Mid-West
and Kimberley regions. Crushing and stockpiling is being undertaken by a specialist crushing services provider.
Ore is initially being road hauled from Shine approximately 300km to Mount Gibson’s ore storage and loadout facilities at Geraldton Port.
Mount Gibson is seeking to recommission its existing Ruvidini rail siding at the town of Mullewa which will facilitate a reduced road haul
distance from Shine and a rail journey for the remaining 100km to Geraldton Port. Mount Gibson established the Ruvidini siding for its
nearby Tallering Peak mine which closed in 2014 after ten years of operation, with access for Shine material requiring some road and
rail crossing modifications.
Current trucking activities will progressively increase over coming months as drivers and trucks become available in a tight market for
trucking contractors.
Mount Gibson is targeting its first shipment from Geraldton Port in August, following the buildup of stocks.
Capital development and pre-production expenditure at Shine during the 2020/21 financial year totaled $28,859,000, consistent with
guidance.
Mount Gibson anticipates cost pressures during the initial trucking-only phase, notably while haulage volumes rise towards the targeted
1.5Mtpa rate.
Now that production is underway, and as a condition of the original purchase of Shine in 2013, Mount Gibson is obliged to make a
number of vendor payments totalling $4.5 million within the next 6-12 months. The first of these, payable upon the initial shipment, is
a deferred purchase payment of $3 million. In addition, Mount Gibson is obligated to pay a price participation royalty of A$0.20/dmt of
ore sold for every A$1/dmt the 62% Fe index price trades above the equivalent of A$115/dmt CFR. The $3 million deferred purchase
payment is offset against this royalty.
1 Refer ASX release dated 9 October 2020, and Competent Person attributions at the end of this report.
MOUNT GIBSON IRON LIMITED 2021 Annual Report19
Production and shipping statistics for Mid-West for the 2020/21 financial year are tabulated below:
Mid-West
Production Summary
Unit
Sept
Quarter
2020
’000
Dec
Quarter
2020
’000
Mar
Quarter
2021
’000
Jun
Quarter
2021
’000
Year
2020/21
’000
Year
2019/20
’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 (Road)
Lump (Rail)
Fines (Rail)
Shipping
Low Grade Lump
Low Grade Fines
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
wmt
Minor discrepancies may appear due to rounding.
Financial Position
-
-
155
155
415
265
680
372
296
668
-
384
301
686
416
285
701
-
73
1,793
1,866
-
423
423
324
-
324
413
-
413
-
416
12
428
472
61
534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55
-
55
5
4
10
-
-
-
3
-
-
3
-
-
-
55
578
633
745
269
1,014
785
296
1,081
3
800
314
1,117
888
346
1,234
-
-
-
-
1,456
869
2,325
1,487
1,192
2,679
-
1,428
1,148
2,576
1,417
1,174
2,590
-
-
-
-
(49)
(69)
(56)
(47)
(75)
(60)
-
(44)
(73)
(57)
(37)
(71)
(52)
The Group’s cash and cash equivalents, term deposits and subordinated notes, financial assets held for trading and derivative financial
assets totalled $364,723,000 at 30 June 2021, a decrease of $59,059,000 from the balance at 30 June 2020 of $423,782,000.
The key components of the decrease include positive operating cashflows of $135,264,000 (after head office costs, sustaining capital
expenditure and working capital movements), interest received of $6,915,000, Koolan Island and Shine mine development expenditure
of $184,967,000 and payment of the $16,271,000 cash component of a fully franked dividend to shareholders for the 2019/20 financial
year.
As at balance date, the Company’s current assets totalled $411,831,000 and its current liabilities totalled $122,997,000. Accordingly,
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 growth objectives.
Derivatives
As at 30 June 2021, the Group held foreign exchange collar option contracts covering the conversion of US$32,500,000 into Australian
dollars over the period July 2021 to January 2022 with an average cap price of A$1.00/US$0.7850 and an average floor price of
A$1.00/US$0.7452. These collar contracts had a marked-to-market unrealised net loss at balance date of A$549,000.
As at 30 June 2021, the Group also held dual currency deposits totalling US$10,000,000 that will mature in July 2021 with a strike price
of A$1.00/US$0.7585. These dual currency deposits had a marked-to-market unrealised net loss at balance date of A$158,000.
During the period, the Group also entered into iron ore collar option contracts totalling 270,000 tonnes of iron ore, with maturity dates
over the period July to December 2021. The contracts have floor price protection of US$100-110/tonne (for 62% Fe CFR) and cap
prices, above which Mount Gibson does not participate, of US$107-133/tonne. With the significant rise in the iron ore price, these
contracts had a marked-to-market unrealised loss of $27,359,000 as at balance date.
Extension Hill Rail Refund/Credit
Following achievement of a contractual rail volume threshold at Extension Hill during the 2017/18 financial year, the Group has an
entitlement to receive a partial refund of historical rail access charges from the Mid-West rail leaseholder, Arc Infrastructure, based upon
the future usage by certain third parties of specific segments of the Perenjori to Geraldton railway line. This entitlement commenced
upon termination of the Group’s then existing rail agreements in early 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 entitlement is
currently accruing as a receivable at a rate of approximately $2.0 million per quarter, with payments due every six months. The total
amount received during the year was $7,573,000, taking cumulative total proceeds received since first payment to $15,920,000.
20MOUNT GIBSON IRON LIMITED 2021 Annual Report 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 operational performance,
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 2021/22 financial year:
• Koolan Island – complete the processing plant upgrade and the Main Pit elevated stripping and footwall support programs to
regain access to high grade ore as scheduled, in order to maximise sales and cashflow over the remainder of the mine life as ore
shipments increase and the waste/ore stripping ratio and costs decline.
Shine - complete commissioning and ramp-up production and sales in accordance with the development and production schedule.
Extension Hill – complete final rehabilitation of the mine site.
Cost reductions - continue to drive for sustainable cost improvements across all business units.
• Treasury returns – maintain an appropriate yield on the Group’s cash and investment reserves while preserving capital for future
deployment.
• Growth projects - continue the search for acquisition opportunities in the resources sector.
Group Sales Guidance and Cash Costs Guidance
As indicated, the focus for the 2021/22 financial year at Koolan Island is to complete the planned open pit waste stripping phase, the
upper footwall support program and the crusher upgrade in order to resume high grade ore production and enable significantly increased
ore shipment levels from the end of 2021 onwards. At the Shine operation, the objective is to successfully ramp up production and
sales and advance the waste stripping program.
On a Group basis over the full year, Mount Gibson is targeting total iron ore sales of 3.0-3.2 Mwmt.
Koolan Island is expected to contribute iron ore sales of 2.0-2.2 Mwmt in the year, with site cash operating costs expected to average
$75-80/wmt FOB before royalties, advanced waste stripping investment of approximately $100 million and Koolan capital projects of
approximately $25 million. Sales volumes, ore quality and cashflow will be heavily weighted to the second half of the financial year,
when ore is scheduled to come primarily from the high-grade orebody in Main Pit.
The Shine operation in the Mid-West is expected to contribute iron ore sales of approximately 1.0 Mwmt at an average site cash operating
cost of $75-80/wmt FOB once shipments have ramped up, before advanced waste stripping (approximately $20 million) and government
and vendor royalties.
DIVIDENDS
During the year, a final dividend of $0.03 per share fully franked ($34,807,000) in respect of the 2019/20 financial year was distributed
by way of $16,271,000 in cash and the issue of 25,688,736 new shares under the Company’s Dividend Reinvestment Plan.
The Company has declared a final dividend on ordinary shares in respect of the 2020/21 financial year of $0.02 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 $23,760,000. The dividend has not been provided for in the 30 June 2021 financial statements.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Other than the final dividend declared by the Company as 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 its 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, EY, 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
EY 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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report21
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.
On 1 July 2020, the Company issued 2,986,400 restricted shares (including 440,500 shares reallotted) as part of its Executive Loan
Share Plan. There were 6,175,428 restricted shares on issue at balance date and, following an issue made after balance date, there
are 8,238,528 restricted shares on issue under the Executive Loan Share Plan as at the date of this report.
Refer to the Remuneration Report for further details of 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:
SH Lee(i)
A Jones
R Barwick
S Bird
P Dougas
R Ding
A Ferguson (Alternate for Mr Lee)
Ordinary Shares
Options over Shares
Performance Rights
over Shares
-
300,000
-
49,933
774,765
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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 431,819,861 ordinary shares in the Company through his association
with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 2 November 2020.
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
SH Lee
A Jones
R Barwick
S Bird
P Dougas
R Ding
A Ferguson (Alt. for Mr Lee)
6
6
6
5
6
6
5
1
4
4
4
-
4
-
-
-
4
4
4
3
-
-
-
-
4
-
-
3
4
4
-
-
-*
-
-
-
-
-
-
-
* Committee members did not formally meet during the financial year but reviewed and approved a number of offtake agreements during the period.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group has developed Environmental Management Plans for its various operating and development sites. The Environmental
Management Plans have been approved where applicable by various Western Australian Government agencies including the Department
of Mines, Industry Regulation and Safety (DMIRS), the Department of Water & Environmental Regulation (DWER), the 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 Agriculture, Water and Environment (DAWE).
DWER has granted approval and licensing of works to allow construction and operation of facilities on “prescribed” premises and DMIRS
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 and exploration activities, consumption of water,
tenement conditions associated with exploration and mining, and the storage of hazardous substances. The Group examines its
performance through detailed monitoring and reports against these approval conditions regularly to government. No notices of non-
compliance, letters of warning nor any other materially adverse findings was tabled by any regulatory authority in relation to the Group’s
operations.
The Group continues to report under the National Greenhouse and Energy Reporting (NGER) Act 2009. Diesel consumption is the
Group’s single largest source of greenhouse gas emissions as its combusted in vehicles and power generators.
22MOUNT GIBSON IRON LIMITED 2021 Annual Report PROCEEDINGS ON BEHALF OF THE COMPANY
There are no proceedings on behalf of the Company under section 237 of the Corporations Act 2001 in the financial year or at the date
of this report.
ROUNDING
Amounts in this report and the accompanying financial report have been rounded to the nearest thousand dollars ($’000) unless
otherwise stated under the option available to the Company under ASIC 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 21 which forms part of this Report.
AUDIT PARTNER ROTATION
On 13 November 2018, the Board granted approval pursuant to section 324DAC of the Corporations Act 2001 (Cth), for Mr Gavin
Buckingham of EY to play a significant role in the audit of the Company for an additional two financial years through to and including
the financial year ending 30 June 2021.
The Board considered the matters set out in section 324DAB(3) of the Act and is satisfied that the approval:
[i]
is consistent with maintaining the quality of the audit provided to the Company; and
[ii] would not give rise to a conflict of interest situation.
Reasons supporting this decision include:
o
o
o
the benefits associated with the continued retention of knowledge regarding key audit matters;
the Board being satisfied with the quality of EY and Mr Buckingham’s work as auditor; and
the Company’s ongoing governance processes to ensure the independence of the auditor is maintained.
NON-AUDIT SERVICES
The Directors are satisfied that the provision of non-audit services (where provided) is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. There were no non-audit services provided by EY during the financial
year ended 30 June 2021.
MOUNT GIBSON IRON LIMITED 2021 Annual Report23
REMUNERATION REPORT (AUDITED)
Introduction
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.
The Company received a "first strike" against its 2020 Remuneration Report at the Annual General Meeting of shareholders on
11 November 2020 with a vote of slightly more than 25% voting against the 2020 Remuneration Report. If there is a "second strike"
at the 2021 Annual General Meeting, then shareholders will be able to vote on a "spill resolution" requiring shareholders to consider
whether all of the existing Directors should be required to stand for re-election within 90 days, and if so, a further meeting convened
for that purpose.
The Company has considered the comments raised by certain proxy advisors and shareholder representatives in respect of the 2020
Remuneration Report, particularly in respect of Short Term Incentive (STI) and Long Term Incentive (LTI) awards.
One of the key observations was the lack of fixed performance criteria in assessing the awards. Historically Mount Gibson has had
periods where it had very rigid performance and assessment criteria that have been overridden by the Board in times of deteriorating
economic and pricing conditions. On balance, the Board believes that it is better to retain discretion over the awards of STIs and LTIs
to give flexibility in times of market volatility and changing circumstances. The current discretionary approach is supported by the Board
and considered appropriate for the Company particularly given the relatively short remaining mine life of 5 years for Mount Gibson's key
mining project. However, based on the feedback it has received, the Board agrees that it would be helpful for investors if the 2021
Remuneration Report had greater explanation and transparency of the factors influencing the Board's discretion when making STI and
LTI awards. To that end a table has been included below detailing the relevant metrics considered in the STI award. The same metrics
are considered in the LTI award but with less weight as the LTI award opportunity is modest by comparison to peers and also acts
primarily as a retention mechanism. An additional table has also been included showing the variation in grants of LTI interests over the
last 5 years and shares that have been forfeited or yet to vest.
In addition, the Board acknowledges comments that the retention aspect of the LTI award could be enhanced by extending the timing
for vesting of the LTI awards. Accordingly, going forward, vesting has been restricted for a further 12 months (i.e. for a minimum of
two years) before the LTI shares may be dealt with by the relevant employee. This has been included in the LTI awards for the
2021/2022 financial year as further explained in the LTI section below.
With respect to the LTI structure, the Board received comments from a proxy group that it would be preferable that the loans supporting
the award of the LTI shares were recourse (full liability) rather than non-recourse loans (liability to value of shares). A recourse loan
structure effectively acts as a margin loan rather than a performance reward. The Board considers that from a risk/reward perspective,
non-recourse loans are to be preferred given the scheme is intended to act as an incentive to drive Executive performance rather than
create the risk of a substantial financial burden for the executive. In a declining market scenario, the overhang of this type of financial
burden is not consistent with good governance as it gives rise to potential conflicts of interests in terms of future decision making and
acceptable levels of risk. The Board does not support that particular proposal.
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 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
24MOUNT GIBSON IRON LIMITED 2021 Annual Report Shareholders approved an aggregate remuneration of $1,250,000 per year. Total Non-Executive Director fees of $526,125 were paid
in the 2020/21 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 contributing towards key Company objectives;
align the interests of senior executives with those of shareholders;
link reward with the strategic goals and performance of the Company;
be appropriately structured given the presently limited remaining mine life of the Company’s key operating assets; and
ensure total remuneration is competitive by market standards.
Use of Remuneration Consultants
The NRGC from time to time seeks advice from independent remuneration consultants regarding senior executives’ remuneration
structures and levels. Such consultants are engaged by, and report directly to, the NRGC, and are required to confirm in writing their
independence from the Group’s senior and other executives. No remuneration consultants were appointed for this purpose during the
2020/21 financial year.
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. The Company seeks to position the overall fixed remuneration
for senior management at around the 50th percentile level when compared to its peers for equivalent positions.
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.
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. The total potential STI
available for award is ultimately at the Board’s discretion. Payments are made in cash after the reporting date. Where an executive
resigns during or after the relevant financial year, it remains at the discretion of the Board as to whether any of the STI is payable for
the relevant financial year. However, STI's are generally not paid upon resignation of an executive unless there are exceptional
circumstances.
The focus for the 2020/21 financial year was on the Company's operational safety performance and on achieving the annual budget
outcomes related to sales and costs. These parameters were chosen as they reflected the Company’s and senior executives’ key
objectives for the year.
The Board assessed the Company’s and senior executives’ performances based on the actual results achieved to the end of May 2021
and forecasts for the month of June 2021. The Board also exercised its discretion taking into account the individual efforts of senior
executives over the period.
MOUNT GIBSON IRON LIMITED 2021 Annual Report25
The outcomes of the target reviews are summarised in the following table:
Item
Safety
Target
Actual
TRIFR < 14.9
TRIFR 13.8
Iron ore sales (Mwmt):
Koolan
Mid-West
Group
Unit cash costs (A$/wmt):
Koolan
Mid-West
Group
2.0
1.0
3.0
56
40
58
1.8
1.2
3.0
57
36
56
Comment
Marginal TRIFR gain but further improvements in safety leadership,
culture and performance are being sought. The Company’s executive
team and workforce are thanked for their efforts in implementing the
required COVID practices.
Sales below target but in line with lower end of guidance.
Low grade sales exceeded target.
Broadly on target but total waste movement below target.
Favourable to target.
Favourable but with Koolan below target on mining volumes.
Notes: TRIFR represents Total Recordable Injury Frequency Rate and measures the number of reportable injuries per one million manhours worked, on a
rolling 12 month look-back basis. Unit cash costs are expressed before royalties and exclude advanced waste stripping and capital development projects.
For the 2020/21 financial year, a total STI cash incentive of $473,500 was awarded to Key Management Personnel, representing 50%
of the total STI cash incentives available to Mr Kerr, Mr Mitchell, Mr Stokes and Ms Dobson. The amount of the STI is included in the
Company’s financials for the year and will be paid in September 2021.
For the 2021/22 financial year, the Board will continue to refine the STI key performance indicators and the following allocation will be
used in assessing the award of the executives’ STI:
Description / KPI measure
Weighting
Area
Safety
Safety performance - TRIFR & site culture/observations and COVID practices
Environment
No critical incidents, compliance (minimal reported issues) and innovations
Sales volumes
By reference to budgeted levels - wmt shipped
Cash costs
By reference to budgeted levels - $/total material moved (TMM), $/wmt sold
Earnings/Cashflow
By reference to budgeted levels
Growth
Acquisition reviews, equity investments, resource and reserve growth, exploration activities
Performance
Personal leadership, communications and technical performance
15%
10%
10%
10%
10%
15%
30%
100%
Long-term Incentives (LTI)
The Company’s 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. Historically the key performance metric for LSP shares vesting has been linked to share price performance based on a 5 day
volume-weighted average price (VWAP) calculation at any stage after the first 12 months of issue and within the following 4 year period.
At the time of grant, 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
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. The Board considers
that from a risk/reward perspective, non-recourse loans are to be preferred to recourse loans given the scheme is intended to act as an
incentive to drive executive performance rather than create a structure that in a declining market imposes a financial burden on the
executive and giving rise to a conflict of interests.
Where an executive resigns prior to the vesting of the LSP shares, it remains at the discretion of the Board as to whether any of the
LSP shares remain on issue. To date, if an employee resigns prior to vesting, the LSP shares are forfeited and sold or reallocated into
future LSP or Dividend Reinvestment Plan share issues.
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
other than the associated ASX listing fees.
On 1 July 2020, the Company issued 2,986,400 shares (including 440,500 shares reallotted) under the LSP. In accordance with the
terms of the LSP, the shares were issued at a market price of $0.617 per share and pursuant to the vesting conditions, these shares do
not vest unless a share price target of a 10% premium to the issue price is met between 1 July 2021 and 1 July 2025 and the participants
remain continuously employed by the Group to 1 July 2021. The award was accounted for as an in-substance option award and the
fair value at grant date assessed at $0.201 per loan-funded 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 would be
satisfied, with the resultant values discounted back to the grant date. The underlying share price and the exercise price were assumed
at $0.61 and $0.62 per share respectively, the period to exercise was assumed as three years (being the mid-point between the first
possible vesting date and the expiry of the LSP shares), the risk free rate was 0.26% 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.
All of these shares vested after balance date in July 2021 as the Company’s share price, as measured by a rolling five day VWAP of the
Company’s shares traded on the ASX on 1 July 2021, was above a 10% premium to the issue price of the shares, and all executives
have remained continuously employed.
26MOUNT GIBSON IRON LIMITED 2021 Annual Report The Company has a policy restricting executives from entering into arrangements to protect the value of unvested LTI entitlements
under equity-based remuneration plans.
As noted earlier, the Board has modified the terms of the LSP shares issued such that LSP awards issued for the 2021/22 financial year
have an increased two year vesting period during which the relevant executive must remain continuously employed by the Group. Any
dividends accruing during this period will be used, net of tax on the dividend, to pay down the LSP loan. In addition, the Board will take
into account the executive team's performance against the STI performance metrics, in conjunction with the overall retention objectives
of the LTI scheme, in determining the appropriate number of LSP shares to award for future periods.
A summary of the historical status of LSP share awards as at 30 June 2021 is provided in the table below:
Financial
Year
Award
Shares
2020/21
2,986,400
Vesting Metrics
Term
Status
Forfeited
10% Share Price Incr* above $0.617 and
minimum 12 months continuous employment
1 July 2020 – 30 June 2025
Unvested
-
2019/20
1,705,800
10% Share Price Incr above $1.03 and
minimum 12 months continuous employment
2018/19
2,998,351
10% Share Price Incr above $0.443 and
minimum 12 months continuous employment
1 July 2019 – 30 June 2024
Unvested
440,500
1 July 2018 – 30 June 2023
Vested
1,074,623
2017/18
No award
-
-
-
2016/17
4,749,456
10% Share Price Incr above $0.316 and
minimum 12 months continuous employment
1 July 2016 – 30 June 2021
Vested
-
-
* “10% Share Price Incr” means a 10% share price increase from date of grant - based on a 5 day VWAP – any time after the first 12 months of the Term.
Employment Contracts
As at the date of this report, the Group had entered into employment contracts with the following executives:
Peter Kerr
The key terms of his contract include:
Commenced as Chief Financial Officer on 19 September 2012 and subsequently appointed as Chief Executive Officer 1 October 2018
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.
Gillian Dobson
The key terms of her contract include:
Commenced as Group Commercial Manager on 23 April 2013 and subsequently appointed as Chief Financial Officer on 1 October
2018 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 Ms Dobson 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 six months
Annual Salary Package plus any other accrued entitlements and bonuses. If Ms Dobson wishes to terminate the contract, she must
provide three months’ notice.
Mark Mitchell
The key terms of his contract include:
Commenced as Chief Operating Officer on 28 October 2019 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
MOUNT GIBSON IRON LIMITED 2021 Annual Report27
If the Company wishes to terminate the contract other than if Mr Mitchell 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 six months
Annual Salary Package plus any other accrued entitlements and bonuses. If Mr Mitchell wishes to terminate the contract, he must
provide three months’ notice.
Details of directors and key management personnel disclosed in this report
[i] Directors
SH Lee
A Jones
Chairman
Non-Executive Director
R Barwick
Non-Executive Director
S Bird
Lead Non-Executive Director
P Dougas
Non-Executive Director
R Ding
Non-Executive Director
A Ferguson
Alternate Director to Mr Lee
[ii] Key Management Personnel
P Kerr
D Stokes
G Dobson
M Mitchell
Chief Executive Officer
Company Secretary and General Counsel
Chief Financial Officer
Chief Operating Officer
Remuneration of Key Management Personnel for the year ended 30 June 2021
Short Term
Post
Employment
Long Term
Share
Based
Payment
Salary &
Fees
$
Non
Monetary(a)
$
Accrued
Annual
Leave(c)
$
Super-
annuation
$
Long
Service
Leave(d)
$
Loan Share
Plan(e)
$
30 June 2021
Directors
SH Lee
A Jones
R Barwick
S Bird
P Dougas
R Ding
A Ferguson (Alt)
100,114
96,343
96,343
103,192
92,500
-
-
Sub-total
488,492
Cash
Incentives
(b)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other KMP
P Kerr
D Stokes
G Dobson
M Mitchell
Sub-total
Totals
635,000
336,855
365,000
453,512
16,910
11,409
11,305
18,989
165,000
20,807
92,200
97,500
6,460
-
118,800
1,664
1,790,367
58,613
473,500
28,931
2,278,859
58,613
473,500
28,931
Total
$
109,625
105,500
105,500
113,000
92,500
-
-
526,125
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,236
7,217
10,257
577
202,950
1,083,903
120,419
121,766
155,132
606,561
633,271
770,309
36,287
600,267
3,094,044
36,287
600,267
3,620,169
%
Perform-
ance
Related(f)
-
-
-
-
-
-
-
34
35
35
36
-
-
-
-
-
-
-
-
9,511
9,157
9,157
9,808
-
-
-
37,633
25,000
32,001
27,443
21,635
106,079
143,712
(a) Non-Monetary items include the value (where applicable) of benefits such as group life insurance cover 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 the cash value of the executives’ short-term incentive awards for the 2020/21 year. Refer to “Short-term Incentives” section 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 fair values of the awards under the Loan Share Plan (restricted shares) 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 particular restricted shares. The amount included as remuneration is not related to or indicative of the benefit (if
any) that individual executives may in fact receive (refer the Long-term Incentives (LTI) section of this report).
(f)
Performance related remuneration reflects the proportion of the total remuneration relating to cash incentives (STI) and share based payments (LTI).
Options
There were no options granted to Directors or Executives during the year ended 30 June 2021 and there were no options outstanding
as at 30 June 2021. There were no shares issued on the exercise of options during the year ended 30 June 2021 (2020: nil).
28MOUNT GIBSON IRON LIMITED 2021 Annual Report Shares
On 1 July 2020, a total of 2,986,400 restricted shares were granted under the LSP. The award has been accounted for as an in-substance
option award with the fair value assessed at grant date as $0.201 per LSP share. Refer section above titled “Long-term Incentives” for
details of the shares issued under the LSP.
Grant
Date
1-Jul-20
1-Jul-20
1-Jul-20
1-Jul-20
LSP
Shares
Granted
(#)
1,009,700
599,100
605,800
771,800
2,986,400
Fair Value
at Grant
Date1
($/LSP
share)
Value of
LSP
Shares
Granted
($)
Exercise
Price
($)
Vesting
Date &
Condit-
ions
$0.201
$0.201
$0.201
$0.201
202,950
120,419
121,766
155,132
600,267
$0.62
$0.62
$0.62
$0.62
Note 2
Note 2
Note 2
Note 2
P Kerr
D Stokes
G Dobson
M Mitchell
Total
LSP
Shares
Vested in
Year
(#)
Value of
LSP
Shares
Vested in
Year3
($)
-
-
-
-
-
-
-
-
Expiry
Date
1-Jul-25
1-Jul-25
1-Jul-25
1-Jul-25
1. Determined at the time of grant per AASB 2, refer note 26(d) in the financial statements.
2. In order for the LSP shares to vest, participants must remain continuously employed by the Group to at least the end of the financial year and the Company’s
share price, as measured by a rolling 5-day volume weighted average price of the Company’s shares traded on the ASX, must on 1 July 2021 or at any time prior
to expiry, be above a 10% premium to the issue price of the LSP shares.
3. Determined at the time of exercise at the intrinsic value of the LSP share.
During the year ended 30 June 2021, 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 2021. At
30 June 2021, there were no Performance Rights on issue. There were no shares issued on the exercise of Performance Rights during
the year ended 30 June 2021 (2020: nil).
Shareholdings of Key Management Personnel as at 30 June 2021
Balance
1 July 2020
Ord
Granted as
Remuneration
Ord
Forfeited
Ord
Net Change
Other
Ord
Balance
30 June 2021
Ord
Directors
SH Lee(i)
A Jones
R Barwick
S Bird
P Dougas
R Ding
A Ferguson (Alt. for Mr Lee)
Other KMP(ii)
P Kerr
D Stokes
G Dobson
M Mitchell
Total
-
300,000
-
47,919
732,389
-
-
3,038,343
2,246,471
346,100
-
-
-
-
-
-
-
-
1,009,700
599,100
605,800
771,800
6,711,222
2,986,400
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,014
42,376
-
-
(1,336,940)
(1,347,336)
-
-
-
300,000
-
49,933
774,765
-
-
2,711,103
1,498,235
951,900
771,800
(2,639,886)
7,057,736
(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 431,819,861 ordinary shares in the Company through his association
with Allied Group Limited, a substantial shareholder of the Company – refer ASX announcement dated 2 November 2020.
(ii) The closing balance at 30 June 2021 for Other KMP includes 6,175,428 LSP shares (in-substance options) held by Mr. Kerr (2,308,362 LSP shares), Mr. Stokes
(1,498,235 LSP shares), Mr. Mitchell (771,800 LSP shares) and Ms. Dobson (951,900 LSP shares), none of which had vested as at balance date. 2,986,400 of the
LSP shares vested shortly after balance date.
MOUNT GIBSON IRON LIMITED 2021 Annual Report29
Remuneration of Key Management Personnel for the year ended 30 June 2020
Short Term
Post
Employment
Accrued
Annual
Leave(c)
$
Super-
annuation
$
Share
Based
Payment
Loan Share
Plan(e)
$
Termination
Payment
$
30 June 2020
DDirectors
SH Lee
A Jones
R Barwick
S Bird
P Dougas
R Ding
Li Shaofeng
A Ferguson (Alt)
Salary &
Fees
$
95,548
92,694
92,694
99,543
88,500
-
-
-
Sub-total
468,979
Non
Monetary
(a)
Cash
Incentives
(b)
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
Long
Term
Long
Service
Leave(d)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,327
-
9,077
8,806
8,806
9,457
-
-
-
-
36,146
25,000
31,343
25,000
27,536
16,808
-
-
-
-
-
-
-
-
-
Total
$
104,625
101,500
101,500
109,000
88,500
-
-
-
505,125
991,648
597,888
617,576
452,854
-
-
-
-
-
-
-
-
-
-
-
-
-
%
Perform-
ance
Related(f)
-
-
-
-
-
-
-
-
36
35
34
26
-
50,188
256,862
50,188 2,916,828
50,188 3,421,953
OOther KMP
P Kerr
D Stokes
G Dobson
M Mitchell
S de Kruijff
Sub-total
Totals
583,870
329,927
340,321
289,854
176,926
16,719
152,200
13,023
11,982
90,300
91,300
2,176
116,300
16,845
12,940
-
-
13,098
7,848
28,530
143
-
200,761
119,120
120,443
-
-
1,720,898
56,840 450,100
23,172
125,687
49,619
440,324
2,189,877
56,840 450,100
23,172
161,833
49,619
440,324
(a) Non-Monetary items include the value (where applicable) of benefits such as group life insurance cover 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 the cash value of the executives’ short-term incentive awards for the 2019/20 year. Refer to “Short-term Incentives” section 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 fair values of the awards under the Loan Share Plan (restricted shares), which are inclusive of an assumed dividend yield, 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 particular restricted shares. The amount included as remuneration is
not related to or indicative of the benefit (if any) that individual executives may in fact receive (refer the Long-term Incentives (LTI) section of this report).
(f) Performance related remuneration reflects the proportion of the total remuneration relating to cash incentives (STI) and share based payments (LTI).
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 2021 and 30 June 2020.
Company Performance
The table below shows the performance of the Group over the last 5 years:
30 June 2021
30 June 2020
30 June 2019
30 June 2018
30 June 2017
Net profit after tax
Earnings per share
Closing share price
$$’000
$$/share
$$
64,006
0.0546
0.95
84,198
0.0735
0.61
133,369
0.1198
1.02
99,129
0.0908
0.43
26,322
0.0241
0.33
End of remuneration report.
Signed in accordance with a resolution of the Directors.
LEE SENG HUI
Chairman
Date: 24 August 2021
30MOUNT GIBSON IRON LIMITED 2021 Annual Report Competent Person Statements
Mineral Resources:
The information in this report relating to Mineral Resources is based on information compiled by Ms Elizabeth Haren, a Competent
Person who is a member and Chartered Professional of the Australasian Institute of Mining and Metallurgy and member of the
Australian Institute of Geoscientists. Ms Haren was previously a full-time employee of, and is a consultant to, Mount Gibson Iron
Limited, and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to
the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves’. 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 is based on information compiled by Mr Brett Morey, 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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report31
Ernst & Young
11 Mounts Bay Road
Perth WA 6000, Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s independence declaration to the directors of Mount Gibson
Iron Limited
As lead auditor for the audit of Mount Gibson Iron Limited for the financial year ended 30 June 2021,
I declare to the best of my knowledge and belief, there have been:
a.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Mount Gibson Iron Limited and the entities it controlled during the
financial year.
Ernst & Young
Gavin Buckingham
Partner
24 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:AJ:MGI:009
32MOUNT GIBSON IRON LIMITED 2021 Annual Report Consolidated Income Statement
For the year ended 30 June 2021
Revenue
Interest revenue
TOTAL REVENUE
Cost of sales
GROSS PROFIT
Other income
Net foreign exchange loss
Net unrealised marked-to-market loss
Administration and other expenses
PROFIT BEFORE TAX AND FINANCE COSTS
Finance costs
PROFIT BEFORE TAX
Tax expense
Notes
2021
$’000
2020
$’000
3[a]
3[b]
329,727
6,290
445,165
7,132
336,017
452,297
4[a]
(214,830)
(328,998)
3[c]
4[c]
4[d]
4[e]
121,187
123,299
14,604
(6,467)
(21,871)
(14,480)
17,738
(2,195)
(3,192)
(13,431)
92,973
122,219
4[b]
(840)
(1,502)
92,133
120,717
5
(28,127)
(36,519)
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
64,006
84,198
Earnings per share (cents per share)
basic earnings per share
diluted earnings per share
27
27
5.46
5.45
7.35
7.34
MOUNT GIBSON IRON LIMITED 2021 Annual Report33
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
PROFIT FOR THE PERIOD AFTER TAX
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be subsequently reclassified to profit or loss
Change in fair value of cash flow hedges
Reclassification adjustments for loss on cash flow hedges transferred to the
Income Statement
Change in fair value of debt instruments classified as financial assets designated
at fair value through other comprehensive income
Deferred income tax
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF TAX
2021
$’000
2020
$’000
64,006
84,198
400
(800)
504
(31)
73
(400)
800
(525)
(220)
(345)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
64,079
83,853
34MOUNT GIBSON IRON LIMITED 2021 Annual Report
Consolidated Balance Sheet
As at 30 June 2021
ASSETS
Current Assets
Cash and cash equivalents
Term deposits and subordinated notes
Financial assets held for trading
Derivative financial assets
Trade and other receivables
Inventories
Prepayments
Total Current Assets
Non-Current Assets
Property, plant and equipment
Right-of-use assets
Deferred acquisition, exploration and evaluation costs
Mine properties
Prepayments
Deferred tax assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Employee benefits
Interest-bearing loans and borrowings
Derivative financial liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Employee benefits
Interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
Notes
2021
$’000
2020
$’000
6
7
8
11
9
10
13
14
15
16
5
18
19
20
21
19
21
5
22
24
23
95,283
198,361
57,936
13,143
12,553
26,530
8,025
111,661
275,157
36,407
557
19,236
39,800
3,908
411,831
486,726
63,464
17,910
-
403,983
1,047
-
486,404
898,235
72,500
5,639
11,573
27,908
5,377
44,593
12,017
3
233,785
1,488
26,165
318,051
804,777
60,915
4,826
6,846
-
8,515
122,997
81,102
113
6,530
46,887
1,994
55,524
178,521
719,714
620,948
(850,161)
948,927
719,714
228
5,382
47,340
-
52,950
134,052
670,725
602,030
(914,167)
982,862
670,725
MOUNT GIBSON IRON LIMITED 2021 Annual Report35
Consolidated Cash Flow Statement
For the year ended 30 June 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Proceeds from rail credit
Proceeds from arbitration settlement
Proceeds from business interruption insurance
Payments to suppliers and employees
Interest paid
Notes
2021
$’000
2020
$’000
338,412
7,573
-
802
454,141
8,347
8,542
-
(181,190)
(310,197)
(404)
(746)
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
6[b]
165,193
160,087
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from 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 derivative financial assets
Payment for deferred exploration and evaluation expenditure
Payment for mine development
NET CASH FLOWS (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares
Repayment of insurance premium funding facility
Payment of lease liabilities
Payment of borrowing costs
Dividends paid
6,915
600
8,038
170
(29,970)
(26,279)
64,100
32,000
(18,800)
16,663
(29,732)
(13,301)
(146)
26,000
10,000
(14,200)
9,553
(11,074)
-
(69)
(184,967)
(64,285)
(156,638)
(62,146)
581
-
(10,145)
(122)
(16,271)
-
(1,753)
(6,612)
(218)
(26,380)
NET CASH FLOWS (USED IN) FINANCING ACTIVITIES
(25,957)
(34,963)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Net foreign exchange difference
Cash and cash equivalents at beginning of year
(17,402)
1,024
111,661
62,978
(167)
48,850
CASH AND CASH EQUIVALENTS AT END OF YEAR
6[a]
95,283
111,661
36MOUNT GIBSON IRON LIMITED 2021 Annual Report 0
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MOUNT GIBSON IRON LIMITED 2021 Annual Report37
Notes to the Consolidated Financial Report
For the year ended 30 June 2021
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 2021, were authorised for issue in accordance with a resolution of the Directors on 24 August 2021.
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 from the Mid-West
region of Western Australia and Koolan Island 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 complies with Australian Accounting Standards as issued by the Australian
Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board. The financial report has been prepared on a historical cost basis, except for derivative financial instruments and
certain financial assets that have been measured at fair value.
The Group has adopted all Accounting Standards and Interpretations mandatory to annual periods beginning on or before
1 July 2020. Adoption of these standards and interpretations did not have a material effect on the financial position or performance
of the Group at the date of initial application. The accounting policies adopted are consistent with those followed in the preparation
of the Group’s annual consolidated financial statements for the year ended 30 June 2020, except for the adoption of new standards
and interpretations as of 1 July 2020.
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.
38MOUNT GIBSON IRON LIMITED 2021 Annual Report 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 which (or and) 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
depreciation and amortisation rates, asset carrying values, deferred stripping costs and provisions for decommissioning and
restoration.
MOUNT GIBSON IRON LIMITED 2021 Annual Report39 Notes to the Consolidated Financial Report (continued)
Notes
2021
$’000
2020
$’000
3. Revenue and Other Income
[a] Revenue
Revenue from contracts with customers – sale of iron ore
Revenue from contracts with customers – freight/shipping services
Other revenue:
Quotation period price adjustments – relating to prior year shipments
Quotation period price adjustments – relating to current year shipments
Realised gain on foreign exchange and commodity collar option sales contracts
[b]
Interest revenue
Interest revenue – calculated using the effective interest method
Interest revenue – other
[c] Other income
Net unrealised gain on foreign exchange balances
Net gain on disposal of property, plant and equipment
Net realised gain on financial assets held for trading
Rail credit income
Arbitration settlement income
Insurance proceeds – business interruption
Insurance proceeds - other
Other income
[i]
[ii]
282,388
18,075
300,463
3,823
23,412
2,029
329,727
1,078
5,212
6,290
1,043
569
2,091
7,768
-
802
439
1,892
14,604
425,396
30,162
455,558
(4,773)
(6,756)
1,136
445,165
3,662
3,470
7,132
-
20
3
8,276
8,542
-
835
62
17,738
[i]
The Group has an entitlement to receive a partial refund of historical rail access charges from the Mid-West rail leaseholder, Arc
Infrastructure, based upon the future usage by certain third parties of specific segments of the Perenjori to Geraldton railway
line. This entitlement commenced upon termination of the Group’s then existing rail agreements in early 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. As at 30 June 2021, total proceeds received since first payment was $15,920,000.
[ii]
In April 2020, settlement was achieved following an arbitration process in relation to a historic contractual dispute with a former
offtake customer resulting in receipt of $8,542,000.
40MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
Recognition and measurement
Revenue from contracts with customers
The Group adopted AASB 15 using the modified retrospective method of adoption with an initial application date of 1 July 2018.
The Group generates a significant proportion of revenue from the sale of iron ore. In some instances, the Group provides freight/shipping
services. Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer and at the
amount that reflects the consideration which the Group expects to receive in exchange for those goods or services.
The Group has generally concluded that it is the principal in its revenue contracts because it typically controls the goods or services before
transferring them to the customer.
Iron ore sales
Each iron ore shipment is governed by a sales contract with the customer, including spot sales agreements and long-term offtake agreements.
For the Group’s iron ore sales not sold under Cost and Freight (CFR) Incoterms, the performance obligation is the delivery of the iron ore. A
proportion of the Group’s iron ore sales are sold under CFR Incoterms, whereby the Group is also responsible for providing freight/shipping
services. In these situations, the freight/shipping service represents a separate performance obligation.
Revenue from iron ore sales is recognised when control of the iron ore passes to the customer, which generally occurs at a point in time when
the iron ore is physically transferred onto a vessel. This is the point where title passes to the customer together with significant risks and rewards
of ownership.
A proportion of the Group’s sales are provisionally priced, where the final price is referenced to a future market-based (Platts) index price.
Adjustment to the sales price occurs based on movements in the index price up to the end of the quotational period (QP). These are referred
to as provisional pricing arrangements and are such that the selling price for the iron ore is determined on a specified future date after shipment
to the customer. Adjustments to the sales price therefore occur up until the end of the QP. The period between provisional pricing and the end
of the QP is generally between two and three months. Revenue is measured at the amount to which the Group expects to be entitled at the end
of the QP, being the estimated forward price at the date the revenue is recognised. For those arrangements subject to CFR shipping terms, a
portion of the transaction price is allocated to the separate freight/shipping services provided. For provisional pricing arrangements, any future
changes that occur over the QP are embedded within trade receivables. Given the exposure to the commodity price, these provisionally priced
trade receivables are measured at fair value through profit or loss (see note 9). Subsequent changes in the fair value of provisionally priced
trade receivables are recognised in revenue but are presented separately to revenue from contracts with customers.
Changes in fair value over the term of the provisionally priced trade receivable are estimated by reference to movements in the index price as
well as taking into account relevant other fair value consideration including interest rate and credit risk adjustments.
Freight/shipping services
For CFR arrangements, the Group is responsible for providing freight/shipping services (as principal) after the date that the Group transfers
control of the iron ore to its customers. The Group, therefore, has a separate performance obligation for freight/shipping services which is
provided solely to facilitate the sale of the commodities it produces.
The transaction price (as determined above) is allocated to the iron ore and freight/shipping services using the relative stand-alone selling price
method. Under these arrangements, revenue is recognised over time using an output basis to measure progress towards complete satisfaction
of the service as this best represents the Group’s performance. This is on the basis that the customer simultaneously receives and consumes
the benefits provided by the Group as the services are being provided. The costs associated with the freight/shipping services are also recognised
over the same time period as shipping occurs.
Interest Revenue
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.
Key estimates and judgments
For the Group’s CFR customers, the Group is responsible for providing freight/shipping services. While the Group does not actually provide nor
operate the vessels, the Group has determined that it is principal in these arrangements because it has concluded it controls the specified services
before they are provided to the customer. The terms of the Group’s contract with the service provider gives the Group the ability to direct the
service provider to provide the specified services on the Group’s behalf.
The Group has also concluded that revenue for freight/shipping services is to be recognised over time because the customer simultaneously
receives and consumes the benefits provided by the Group. The fact that another entity would not need to re-perform the freight/shipping
services that the Group has provided to date demonstrates that the customer simultaneously receives and consumes the benefits of the Group’s
performance as it is performed. The Group determined that the output method is the best method for measuring progress of the freight/shipping
services because there is a direct relationship between the Group’s effort and the transfer of service to the customer. The Group recognises
revenue on the basis of the time elapsed relative to the total expected time to complete the service.
MOUNT GIBSON IRON LIMITED 2021 Annual Report41 Notes to the Consolidated Financial Report (continued)
Notes
2021
$’000
2020
$’000
4. Expenses
[a] Cost of sales
Mining and site administration costs
Depreciation of property, plant and equipment – mining and site administration
Depreciation of right-of-use assets – mining and site administration
Capitalised deferred stripping costs
Amortisation of capitalised deferred stripping costs
Amortisation of mine properties
Pre-production expenditure capitalised
Crushing costs
Depreciation of property, plant and equipment – crushing
Depreciation of right-of-use assets – crushing
Transport costs
Port costs
Depreciation of property, plant and equipment – port
Depreciation of right-of-use assets - port
Royalties
Net ore inventory movement
(Reversal of)/write down to net realisable value on ore inventories
Rehabilitation revised estimate adjustments
Cost of sales – Free on Board (FOB) basis
Shipping freight
Cost of sales – Cost and Freight (CFR) basis
16
16
16
10[i]
21
[b] Finance costs
Finance charges on banking facilities
Finance charges on lease liabilities
Non-cash interest accretion on rehabilitation provision
21
[c] Net foreign exchange loss
Net realised loss on foreign exchange transactions
Net unrealised loss on foreign exchange balances
[d] Net unrealised marked-to-market loss
Unrealised marked-to-market (gain)/loss on foreign exchange derivatives
Unrealised marked-to-market loss on commodity collar option derivatives
Unrealised marked-to-market (gain)/loss on financial assets held for trading
[e] Administration and other expenses include:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Share-based payments expense
Koolan Island seawall insurance claim and related site work expenses
Insurance premiums (net of refunds)
Business development expenses
Reversal of expected credit loss on debtors
Reversal of write down to net realisable value on consumables inventories
Exploration expenses
26(a)
15
[f]
Cost of sales and Administration and other expenses above include:
Salaries, wages expense and other employee benefits
Lease expense – short-term
Lease expense – low value assets
Lease expense – variable
207,432
10,023
8,868
(148,630)
11,074
11,591
(4,538)
18,099
1,300
620
26,298
10,594
94
139
27,142
14,383
4,062
(1,796)
196,755
18,075
214,830
202
377
579
261
840
6,467
-
6,467
863
27,359
(6,351)
21,871
142
538
600
943
1,589
35
-
(680)
146
59,767
7,615
248
1,365
172,892
5,321
5,908
(44,564)
12,150
19,073
-
21,754
1,125
330
59,194
20,987
26
-
35,416
(10,123)
(570)
(83)
298,836
30,162
328,998
464
514
978
524
1,502
2,028
167
2,195
(123)
-
3,315
3,192
124
585
440
1,224
1,091
6
(28)
(962)
69
52,238
9,474
212
1,533
42MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
Recognition and measurement
Employee benefits expense
Wages, salaries, sick leave and other employee benefits
Liabilities for wages and salaries, including non-monetary benefits and other employee benefits expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees' services up to the reporting date. They are measured at the amounts
expected to be paid when the liabilities are settled. Liabilities for sick leave are recognised when the leave is taken and are measured at the
rates paid or payable.
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 21 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.
Share-Based Payment Plans
The policy relating to share-based payments is set out in note 26.
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.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of plant, machinery and equipment (leases that have a
lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption to leases of plant and equipment that are considered of low value. Lease payments on short-term lease and leases
of low-value assets are recognised as an expense on a straight-line basis over the lease term.
Depreciation and amortisation
Refer to notes 13 and 16 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 17 for
further details on impairment.
MOUNT GIBSON IRON LIMITED 2021 Annual Report43 Notes to the Consolidated Financial Report (continued)
5. Taxation
Major components of tax expense/(benefit) for the years ended 30 June 2021 and
2020 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 benefit recognised from previously unrecognised tax losses and
deductible temporary differences
Deferred tax relating to movement in temporary differences
Tax expense reported in Income Statement
Tax expense relating to continuing operations
Tax expense/(benefit) relating to discontinued operations
Statement of Changes in Equity
Deferred income tax
Remeasurement of foreign exchange contracts
Deferred income tax expense reported in equity
Reconciliation of tax expense
A reconciliation of tax expense 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 2021 and 2020 is as follows:
Accounting profit before tax
At the statutory income tax rate of 30% (2020: 30%)
Expenditure not allowed for income tax purposes
Other
Tax expense reported in Income Statement
2021
$’000
2020
$’000
(1)
(3)
-
-
28,128
28,127
28,127
-
28,127
-
36,522
36,519
36,627
(108)
36,519
31
31
220
220
92,133
27,640
489
(2)
28,127
120,717
36,215
307
(3)
36,519
44MOUNT GIBSON IRON LIMITED 2021 Annual Report 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
Net tax (assets)/liabilities
Assets
Liabilities
Net
2021
$’000
(8,912)
(41)
-
-
(53)
(7,903)
-
-
2020
$’000
(3,024)
(199)
(878)
-
(5)
-
-
-
2021
$’000
2020
$’000
-
-
-
1,028
-
-
1,451
104
-
-
-
-
-
207
1,785
71
2021
$’000
(8,912)
(41)
-
1,028
(53)
(7,903)
1,451
104
-
-
85,287
27,860
85,287
2020
$’000
(3,024)
(199)
(878)
-
(5)
207
1,785
71
27,860
(15,987)
(107)
(15,787)
(116)
(1,063)
(1,063)
-
-
-
-
-
-
(15,987)
(107)
(15,787)
(116)
(1,063)
(1,063)
(51,810)
(85,876)
(35,016)
(56,088)
-
87,870
-
29,923
(51,810)
1,994
(35,016)
(26,165)
Balance
1 July 2020
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2021
$’000
Movement in temporary differences during the
financial year ended 30 June 2021
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
(3,024)
(199)
(878)
-
(5)
207
1,785
71
27,860
(15,787)
(116)
(1,063)
(35,016)
(26,165)
(5,888)
158
878
1,028
(48)
(8,141)
(334)
33
57,427
(200)
9
-
(16,794)
28,128
-
-
-
-
-
31
-
-
-
-
-
-
-
31
(8,912)
(41)
-
1,028
(53)
(7,903)
1,451
104
85,287
(15,987)
(107)
(1,063)
(51,810)
1,994
MOUNT GIBSON IRON LIMITED 2021 Annual Report45 Notes to the Consolidated Financial Report (continued)
5. Taxation (Continued)
Movement in temporary differences during the
financial year ended 30 June 2020
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
Balance
1 July 2019
$’000
Recognised
in Income
$’000
Recognised
in Equity
$’000
Balance
30 June 2020
$’000
(5,268)
(417)
-
117
(13)
(1,831)
754
82
6,899
(13,059)
(119)
(1,063)
(48,989)
(62,907)
2,244
218
(878)
(117)
8
1,818
1,031
(11)
20,961
(2,728)
3
-
13,973
36,522
-
-
-
-
-
220
-
-
-
-
-
-
-
220
(3,024)
(199)
(878)
-
(5)
207
1,785
71
27,860
(15,787)
(116)
(1,063)
(35,016)
(26,165)
46MOUNT GIBSON IRON LIMITED 2021 Annual Report 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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report47 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
2021
$’000
2020
$’000
95,283
95,283
111,661
111,661
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 property, plant and equipment
Depreciation of right-of-use assets
Amortisation of capitalised deferred stripping costs
Amortisation of other mine properties
Net (gain) on disposal of property, plant and equipment
Interest revenue
Exploration expenses written off
Share based payments
Borrowing costs
Interest accretion on rehabilitation provision
Net ore inventory movement
Rehabilitation provision revised estimate adjustment
Reversal of expected credit loss on debtors
Reversal of write down to net realisable value on consumables inventories
(Reversal of)/write down to net realisable value on ore inventories
Unrealised (gain)/loss on foreign exchange balances
Unrealised marked-to-market (gain)/loss on foreign exchange derivatives
Unrealised marked-to-market (gain)/loss on commodity collar option 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:
Decrease in trade and other receivables
(Increase) in inventory
(Increase)/decrease in prepayments
Decrease in deferred tax assets
Increase in trade and other payables
Increase in employee benefits
(Decrease) in provision for restructure
(Decrease) in other provisions
Increase in deferred tax liabilities
Net Cash Flow from Operating Activities
[c] Non-cash financing activities
64,006
84,198
11,559
10,165
11,074
11,591
(569)
(6,290)
146
600
122
261
14,383
(1,796)
-
(680)
4,062
(1,043)
863
27,359
(6,351)
(2,091)
7,822
(4,493)
(3,678)
26,165
2,288
698
(521)
(2,421)
1,962
165,193
6,596
6,823
12,150
19,073
(20)
(7,132)
69
440
218
524
(10,123)
(83)
(28)
(962)
(570)
167
(123)
(6,039)
3,315
(3)
14,519
(3,856)
733
36,522
3,290
1,275
(5)
(881)
-
160,087
There were $16,936,000 of non-cash financing activities relating to leases of right-of-use assets during the year ended 30 June 2021.
48MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
7. Term Deposits and Subordinated Notes
Current
Term deposits – financial assets at amortised cost
Subordinated notes – financial assets at fair value through OCI
Notes
2021
$’000
2020
$’000
[i]
[ii]
118,500
79,861
198,361
182,600
92,557
275,157
[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 (Standard & Poors). As these instruments have maturity dates of less than twelve months, the Group has assessed
the credit risk on these financial assets using life-time expected credit losses. In this regard, the Group has concluded that the
probability of default on the term deposits is relatively low. Accordingly, no impairment allowance has been recognised for expected
credit losses on the term deposits.
[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. Subordinated notes are held with various financial institutions with short-term and long-term credit
ratings of A or better (Standard & Poors). The Group has assessed the credit risk on these financial assets and determined that the
credit risk exposure has not increased significantly since initial recognition. In determining the expected credit loss for the next twelve
months, the Group considers the probability of default to be relatively low. Accordingly, no impairment allowance has been recognised
for expected credit losses on these notes.
Recognition and measurement
See note 35 for the accounting policy for financial assets classified as financial assets at amortised cost and financial assets at fair value through
Other Comprehensive Income (OCI).
8.
Financial Assets Held for Trading
Current
Tradeable corporate bonds at fair value through profit or loss
Quoted share investments at fair value through profit or loss
2021
$’000
2020
$’000
45,470
12,466
57,936
33,291
3,116
36,407
Financial assets held for trading comprise corporate bonds and equity securities which are traded in active markets. These financial assets
are acquired principally for the purpose of selling or repurchasing in the short term. 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
See note 35 for the accounting policy for financial assets classified as financial assets at fair value through profit and loss.
9. Trade and Other Receivables
Current
Trade debtors – at amortised cost
Expected credit loss
Trade debtors – at fair value through profit or loss
Sundry debtors
Other receivables
Notes
[a][i]
[a][i]
[a][ii]
2021
$’000
2020
$’000
684
(42)
642
5,108
4,053
2,750
160
(42)
118
12,001
4,780
2,337
12,553
19,236
MOUNT GIBSON IRON LIMITED 2021 Annual Report49 Notes to the Consolidated Financial Report (continued)
[a] Terms and conditions
Terms and conditions relating to the above financial instruments:
[i] Generally, on presentation of ship loading documents and the provisional invoice, the customer settles 95% of the provisional sales
invoice value within 10 days and the remaining 5% is settled within 30 days of presentation of the final invoice. The vast majority
of sales are invoiced and received in US dollars (US$). The balance of other trade debtors is invoiced and received in Australian
dollars (A$).
[ii] Sundry debtors are non-interest bearing and have repayment terms between 30 and 90 days. There is an insignificant probability of
default as sundry debtors are short term, have no history of default and customers have passed the Group’s internal credit assessment.
Recognition and measurement
See note 35 for the accounting policy for financial assets.
10. Inventories
Consumables – at cost
Write down to net realisable value (NRV)
Ore – at cost
Write down to NRV
At lower of cost and NRV
Total inventories
Notes
2021
$’000
2020
$’000
25,100
(3,655)
21,445
9,147
(4,062)
5,085
26,530
20,748
(4,478)
16,270
23,530
-
23,530
39,800
[i] At 30 June 2021, the Group assessed the carrying values of ore inventories stockpiled at Mid-West and Koolan Island mine sites.
Assumptions used in the assessment include prevailing and anticipated iron ore prices and exchange rates, ore specifications,
estimated costs to make the ore inventories available for sale, and associated sales and shipping freight costs.
Based on these assumptions, the following (write down) / reversals of write down on ore inventories were recorded during the financial
period:
Extension Hill
Koolan Island
Total (write down) / reversal of write down to NRV
Recognition and measurement
Inventories are carried at the lower of cost and net realisable value.
2021
$’000
-
(4,062)
(4,062)
2020
$’000
570
-
570
For iron ore, 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.
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.
Consumables relating to plant and equipment are recognised as inventory. Consumable stocks are carried at cost less accumulated impairment.
Key estimate
Consumables are written down to net realisable value if considered damaged or, have become wholly or partially obsolete. A new assessment is
made of the write down in each subsequent period.
50MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
11. Derivative Financial Assets
Current
Foreign currency option contracts
Dual currency deposits
Notes
2021
$’000
2020
$’000
35[b][i]
35[b][ii]
-
13,143
13,143
557
-
557
During the year, the Group invested in dual currency deposits (DCD) derivative contracts where investments in USD were made with the
purpose of earning interest at a higher rate than the money market rate and potentially have the USD converted to AUD if the spot rate
is equal to or lower than the strike rate at expiry time. At 30 June 2021, the Group held US$10,000,000 in DCD with an expiry date of
6 July 2021 and a marked-to-market unrealised loss of $158,000 recognised in the profit or loss. Refer note 35 for further details on
derivative financial instruments.
12. Interests 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
2021
%
100
100
100
100
100
100
100
100
2020
%
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
Revenue
Interest revenue
TOTAL REVENUE
Cost of sales
GROSS PROFIT
Other income
Impairment write-backs/(loss) of non-current other receivables
Administration and other expenses
PROFIT BEFORE TAX AND FINANCE COSTS
Finance costs
PROFIT BEFORE TAX
Tax expense
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY
2021
$’000
329,727
6,290
336,017
(207,360)
128,657
10,788
2,085
(49,465)
92,065
(829)
91,236
(27,230)
64,006
2020
$’000
445,165
7,132
452,297
(318,492)
133,805
17,738
(9,267)
(16,097)
126,179
(1,502)
124,677
(40,479)
84,198
MOUNT GIBSON IRON LIMITED 2021 Annual Report51 Notes to the Consolidated Financial Report (continued)
Consolidated Balance Sheet of the Closed Group
Notes
2021
$’000
2020
$’000
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Term deposits and subordinated notes
Financial assets held for trading
Derivative financial assets
Trade and other receivables
Inventories
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other receivables
Property, plant and equipment
Right-of-use assets
Deferred acquisition, exploration and evaluation costs
Mine properties
Prepayments
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Employee benefits
Interest-bearing loans and borrowings
Derivative financial liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee benefits
Interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
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
95,010
198,361
45,470
13,143
12,095
26,407
7,815
398,301
16,941
63,239
16,418
-
403,983
1,047
-
501,628
899,929
71,817
5,381
11,166
27,908
5,377
121,649
102
5,440
46,887
6,137
58,566
180,215
719,714
620,948
(850,161)
948,927
719,714
(914,167)
64,006
-
(850,161)
111,468
275,157
33,291
557
19,090
39,710
3,708
482,981
7,153
44,593
12,017
3
233,785
1,488
19,926
318,965
801,946
58,500
4,632
6,846
-
8,325
78,303
196
5,382
47,340
-
52,918
131,221
670,725
602,030
(914,167)
982,862
670,725
(953,350)
84,198
(45,015)
(914,167)
[i]
52MOUNT GIBSON IRON LIMITED 2021 Annual Report 0
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MOUNT GIBSON IRON LIMITED 2021 Annual Report53
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, with due regard given to the life of the related area of interest. Leased plant and equipment directly engaged in mining
operations is written down to its residual value over the lesser of the 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 17 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 either the ‘value-in-use’ (being the
net present value of expected future cash flows of the relevant cash generating unit) or ‘fair value less cost of disposal’.
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 17 for further details on impairment.
54MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
14. Right-of-use Assets
Leased Property
2021
$’000
4,897
(531)
4,366
1,170
-
4,897
(878)
(823)
4,366
2020
$’000
1,755
(585)
1,170
-
1,755
-
-
(585)
1,170
Leased Plant and
Equipment
2021
$’000
2020
$’000
Total
2021
$’000
2020
$’000
29,124
(15,580)
13,544
17,085
(6,238)
10,847
34,021
(16,111)
17,910
18,840
(6,823)
12,017
10,847
-
12,039
-
(9,342)
13,544
-
17,085
-
-
(6,238)
10,847
12,017
-
16,936
(878)
(10,165)
17,910
-
18,840
-
-
(6,823)
12,017
Gross carrying amount at cost
Accumulated depreciation and impairment
Net carrying amount
Reconciliation
Carrying amount at the beginning of the year
Recognised at 1 July 2019 on adoption of AASB 16
Additions
Disposals
Depreciation
Carrying amount at the end of the year
Recognition and measurement
The Group adopted AASB 16 using the modified retrospective method of adoption with an initial application date of 1 July 2019.
The group recognises right-of-use assets at the commencement date of the lease (ie. the date the underlying asset is available for use). Right-of-
use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before
the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the lease asset at the
end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and
the lease term. Right-of-use assets are subject to impairment.
15. 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
Exploration expenditure written off
Transferred to mine properties
Carrying amount at the end of the year
Recognition and measurement
Acquisition costs
Notes
2021
$’000
2020
$’000
-
-
-
18,106
(18,103)
3
3
4,703
(146)
(4,560)
-
-
72
(69)
-
3
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 or sale. 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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report55 Notes to the Consolidated Financial Report (continued)
16. Mine Properties
Mine properties - at cost
Accumulated amortisation and impairment
2021
$’000
2020
$’000
1,642,506
(1,238,523)
1,431,540
(1,197,755)
403,983
233,785
Koolan Island
Mid-West
Total
Reconciliation
Deferred stripping costs
Carrying amount at the beginning of the period
Capitalised deferred stripping costs
2021
$’000
96,990
138,233
2020
$’000
64,576
44,564
2021
$’000
-
10,397
Amortisation expensed
(10,998)
(12,150)
(76)
Carrying amount at the end of the period
224,225
96,990
10,321
Other mine properties
Carrying amount at the beginning of the period
136,795
130,418
-
Additions
28,657
18,812
10,130
Mine rehabilitation – revised estimate
adjustment
Transferred from deferred acquisition,
exploration and evaluation costs
(2,743)
6,638
3,629
-
-
4,560
Amortisation expensed
(11,377)
(19,073)
(214)
Carrying amount at the end of the period
151,332
136,795
18,105
Total mine properties
375,557
233,785
28,426
2020
$’000
-
-
-
-
-
-
-
-
-
-
-
2021
$’000
96,990
148,630
2020
$’000
64,576
44,564
(11,074)
(12,150)
234,546
96,990
136,795
130,418
38,787
18,812
886
6,638
4,560
-
(11,591)
(19,073)
169,437
136,795
403,983
233,785
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 19).
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).
56MOUNT GIBSON IRON LIMITED 2021 Annual Report
Notes to the Consolidated Financial Report (continued)
16. Mine Properties (Continued)
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 17 for further details on impairment.
Key judgement and estimate
Determining the beginning of production
Judgement is required to determine when capitalisation of development costs ceases and amortisation of mine assets commences upon the start
of commercial production. This is based on the specific circumstances of the project, and considers when the specific asset is substantially complete
and becomes ‘available for use’ as intended by management which includes consideration of the following factors:
completion of reasonable testing of the mine plant and equipment;
mineral recoveries, availability and throughput levels at or near expected levels;
the ability to produce iron ore in saleable form (where more than an insignificant amount is produced); and
the achievement of continuous production.
Stripping activity assets
Judgment is required to identify a suitable production measure to be used to allocate production stripping costs between inventory and any stripping
activity asset(s) for each orebody component. The Group considers that the ratios of the expected volume of waste to be stripped for an expected
volume of ore to be mined for a specific component of orebody, to be the most suitable production measure.
In identifying and defining the orebody components, judgment is required to determine the expected volumes of waste to be stripped and ore to
be mined in each of these components. These assessments are based on the information available in the mine plan which will vary between mines
for various reasons, including, the geological characteristics of the orebody, the geographical location and/or financial considerations.
Stripping ratio
Significant judgment is required in determining the waste capitalisation ratio for each component of the mine. Factors that are considered include:
any proposed changes in the design of the mine;
estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction;
identifiable components of the orebody;
future production levels;
impacts of regulatory obligations and taxation legislation; and
future cash cost of production
Impairment of capitalised mine development expenditure
The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level of mineral resources
and ore reserves, future technological changes which could impact the cost of mining, future legal changes (including changes to environmental
restoration obligations) and changes to commodity prices 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 17 for further details on impairment.
MOUNT GIBSON IRON LIMITED 2021 Annual Report57 Notes to the Consolidated Financial Report (continued)
17. Impairment of Non-Current Assets
The Group reviews the carrying value of the assets of each Cash Generating Unit (CGU) at each balance date for indicators of potential
impairment or reversal thereof. Where such indicators exist, the Company utilises the approaches under applicable accounting
pronouncements for assessment of any impairment expenses or reversals.
The Group performed an impairment reversal trigger assessment of the Shine CGU at 30 June 2021 as this CGU had previously been impaired
in prior periods. Impairment reversal triggers were identified for the Shine CGU at 30 June 2021.
Accordingly, the Group assessed the recoverable amount of the Shine CGU as at 30 June 2021 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 the CGU:
Cashflow forecasts were made based on historical performance from similar Mid-West operations, budgets and anticipated revenues
and estimated operating and capital costs over the life of the mine;
Discount rate of 10.0% (nominal, after tax);
Iron ore price forecasts for the 62% Fe benchmark fines CFR prices (northern China), expressed in real 2021 terms, of US$135/dmt in
2021/22 (falling over the following two years to US$82/dmt), at an exchange rate of A$1.00/US$0.783 in 2021/22 (rising to US$0.80
thereafter) with sensitivities undertaken for a broad range of these inputs; and
Revenue and cost inflation estimates of 2.0% per year.
The Group’s assessment of the Shine asset has concluded that no impairment reversal is required as at 30 June 2021.
The cashflow estimates for Shine are most sensitive to changes in iron ore prices and the A$/US$ exchange rate. It is estimated that
changes in these key assumptions would impact the recoverable amount of the CGU as at 30 June 2021 as follows:
An increase in the benchmark 62% Fe CFR fines iron ore price by 10% would increase the CGU’s recoverable amount by approximately
$18.7 million; and
A reduction in the A$/US$ exchange rate by 10% would increase the CGU’s recoverable amount by approximately $17.3 million.
As at 30 June 2021, there were no indicators of impairment or impairment reversal present in relation to the Koolan Island CGU. No
impairment expenses or impairment reversals thereof have been recognised during the period (2020: nil) for either of the Company’s CGUs.
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 its individual recoverable amount.
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 and amortisation, 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 or amortisation charges are 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.
58MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
18. Trade and Other Payables
Current
Trade creditors
Accruals and other payables
Notes
2021
$’000
2020
$’000
[i]
[i]
30,705
41,795
72,500
25,523
35,392
60,915
[i]
Current trade creditors and other payables are non-interest bearing and are normally settled on 30 day terms.
Recognition and measurement
All financial liabilities are recognised initially as fair value and, in the case of payables, net of directly attributable transaction costs. Trade payables,
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.
19. Interest-Bearing Loans and Borrowings
Current
Lease liabilities
Non-Current
Lease liabilities
[i] Lease liabilities
Minimum lease payments for right-of-use assets:
Not later than one year
Later than one year but not later than five years
Total minimum lease payments
Future finance charges
Notes
2021
$’000
2020
$’000
[i],[a]
[i],[a]
11,573
11,573
6,530
6,530
11,811
6,653
18,464
(361)
18,103
6,846
6,846
5,382
5,382
7,142
5,457
12,599
(371)
12,228
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
Terms and conditions relating to the above financing facilities:
[a]
Lease facility
[b]
7,495
12,505
20,000
6,587
13,413
20,000
The Group has lease liabilities for right-of-use assets which are repayable monthly with final instalments due in June 2025. Interest
is applied at a weighted average incremental borrowing rate of 2.52%.
[b] Performance bonding facility
In May 2011, the Company entered into a Facility Agreement comprising a Corporate Loan Facility and a Performance Bonding
Facility. The undrawn Corporate Loan facility was cancelled in April 2013. The Performance Bonding Facility was reduced in size
from $55,000,000 to $20,000,000 in June 2017 and in June 2021, extended to 30 June 2024. As at balance date, bonds and
guarantees totalling $7,495,000 were drawn under the Performance Bonding 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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report59 Notes to the Consolidated Financial Report (continued)
Recognition and measurement
The Group adopted AASB 16 using the modified retrospective method of adoption with an initial application date of 1 July 2019.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of
an identifiable asset for a period of time in exchange for consideration.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payment of penalties for terminating a lease, if
the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are
recognised as an expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest
rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset.
Other loans and borrowings
All other loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
Fees paid on the establishment of loan facilities are included as part of the carrying amount of the loans and borrowings.
Gains and losses are recognised in the profit or loss when the liabilities are derecognised.
20. Derivative Financial Liabilities
Current
Foreign currency option contracts
Iron ore collar option contracts
Notes
35[b][i]
35[e]
2021
$’000
2020
$’000
549
27,359
27,908
-
-
-
60MOUNT GIBSON IRON LIMITED 2021 Annual Report 0
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MOUNT GIBSON IRON LIMITED 2021 Annual Report61
Notes to the Consolidated Financial Report (continued)
21. Provisions (Continued)
The following table summarises the decommissioning rehabilitation provision by mine site:
Tallering Peak
Extension Hill
Shine
Koolan Island
Recognition and measurement
Rehabilitation costs
2021
$’000
2020
$’000
491
5,733
3,629
41,923
51,776
617
9,797
-
44,420
54,834
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 that 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.
62MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
22. Issued Capital
[a] Ordinary shares
Issued and fully paid
2021
$’000
2020
$’000
620,948
602,030
Notes
2021
Number of
Shares
$’000
2020
Number of
Shares
$’000
[b] Movement in ordinary shares on issue
Balance at the beginning of the financial year
Shares issued under Dividend Reinvestment Plan
Shares fully paid under LSP
Restricted shares – reserved for Loan Share Plan:
Balance at the beginning of the financial year
Shares issued under LSP
Shares forfeited under LSP
Conversion of fully paid shares under LSP
Shares reallotted from treasury shares
Balance at the end of the financial year
Treasury shares:
Balance at the beginning of the financial year
Shares forfeited under LSP, not reallotted
Shares reallotted under LSP
[f]
[f]
[f]
1,151,472,447
25,688,736
2,580,567
1,179,741,750
602,030
18,337
581
620,948
1,123,865,435
27,607,012
-
1,151,472,447
583,395
18,635
-
602,030
5,769,595
2,545,900
-
(2,580,567)
440,500
6,175,428
-
-
-
-
-
-
4,504,295
1,705,800
(440,500)
-
-
5,769,595
-
-
-
-
-
-
1,185,917,178
620,948
1,157,242,042
602,030
440,500
-
(440,500)
-
-
-
-
-
-
440,500
-
440,500
-
-
-
-
[c] Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared, and in the event of winding up the Company, to participate in the proceeds
from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder
to one vote, either in person or by proxy, at a meeting of the Company.
Effective from 1 July 1998, the Corporations legislation abolished the concept of authorised capital and par values. Accordingly, the
Company does not have authorised capital nor a par value in respect of its issued shares.
[d] Share options
As at 30 June 2021, there were no options on issue (2020: nil).
Share options carry no right to dividends and no voting rights.
[e] Performance rights
During the year ended 30 June 2021, no Performance Rights were issued.
No Performance Rights vested during the year (2020: nil).
As at 30 June 2021, there were no Performance Rights on issue (2020: nil) – see note 26(c).
[f] Loan Share Plan (in-substance options)
During the year ended 30 June 2021, 2,986,400 shares (including 440,500 shares reallotted) were issued under the LSP.
No shares under the LSP vested during the year (2020: 1,923,728).
[g] 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 2021.
MOUNT GIBSON IRON LIMITED 2021 Annual Report63 Notes to the Consolidated Financial Report (continued)
23. Reserves
Share based payments reserve
Net unrealised gains reserve
Dividend distribution reserve
Equity reserves
Notes
2021
$’000
2020
$’000
[a]
[b]
[c]
[d]
21,877
588
929,654
(3,192)
21,277
515
964,262
(3,192)
948,927
982,862
[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 financial assets classified as fair value through other
comprehensive income and gains and losses on hedging instruments classified as effective
cash flow hedges.
Balance at the beginning of the year
Change in fair value of cash flow hedges
Loss on cash flow hedges transferred to the Income Statement
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
Dividends paid during the period
Balance at the end of the year
[d] Equity reserves
21,277
600
21,877
20,837
440
21,277
515
400
(800)
504
(31)
588
860
(400)
800
(525)
(220)
515
964,262
(34,608)
929,654
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)
64MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
Notes
2021
$’000
2020
$’000
24. 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
25. 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] 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
[c] 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
[d] Short-term lease commitments
Commitments for the payment of short-term leases:
Not later than one year
[i]
[ii]
[iii]
[iv]
(914,167)
-
64,006
(953,350)
(45,015)
84,198
(850,161)
(914,167)
482
1,280
1,903
3,665
7,664
-
7,664
446
1,182
1,542
3,170
2,399
-
2,399
10,812
-
10,812
12,578
270
12,848
181
181
101
101
[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] The Group has contractual commitments to purchase property, plant and equipment at Koolan Island and in the Mid-West.
[iii] Amounts disclosed as contractual commitments relate primarily to supplier arrangements at the Group’s Koolan Island and Mid-West
sites where financial obligations, including minimum notice periods, apply in the case of termination.
[iv] Leases of plant and equipment with lease terms of 12 months or less.
MOUNT GIBSON IRON LIMITED 2021 Annual Report65 Notes to the Consolidated Financial Report (continued)
Notes
2021
$’000
2020
$’000
26. Share-Based Payment Plans
(a) Recognised share-based payment expense
Expense arising from equity-settled share-based payment transactions
4[e]
600
440
The share-based payment plans are described below. There have been no cancellations of any of the plans during 2021 or 2020.
(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 2021. 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 measured against a comparator group of companies over specified
periods.
There were no Performance Rights issued during the year and there were no Performance Rights on issue as at 30 June 2021.
(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 1 July 2020, the Company issued 2,986,400 shares (including 440,500 shares reallotted) under the LSP. In accordance with the terms
of the LSP, the shares were issued at a market price of $0.617 per share and pursuant to the vesting conditions, these shares do not vest
unless a share price target of a 10% premium to the issue price is met between 1 July 2021 and 1 July 2025 and the participants remain
continuously employed by the Group to 1 July 2021. The award was accounted for as an in-substance option award and the fair value at
grant date assessed at $0.201 per loan-funded 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 would be satisfied, with the
resultant values discounted back to the grant date. The underlying share price and the exercise price were assumed at $0.61 and $0.62
per share respectively, 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 0.26% 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 following table shows the number and weighted average exercise prices (WAEP) of, and movements in, LSP shares during the year:
Balance at beginning of the year
granted during the year
-
exercised during the year
-
-
forfeited during the year
Balance at end of the year
2021
Number of
LSP Shares
5,769,595
2,986,400
(2,580,567) 2
-
6,175,428
WAEP1
$0.46
$0.62
$0.23
-
$0.60
2020
Number of
LSP Shares
4,504,295
1,705,800
-
(440,500)
5,769,595
WAEP1
$0.34
$1.03
-
$1.03
$0.46
1 Weighted average exercise price at balance date after dividend adjustments.
2 The weighted average share price at the date of exercise of these LSP shares was $0.89.
66MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
26. 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. This plan is
accounted for as an in-substance option award.
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.
MOUNT GIBSON IRON LIMITED 2021 Annual Report67 Notes to the Consolidated Financial Report (continued)
27. Earnings Per Share
Basic earnings per share are 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 are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
Profit/(loss) used in calculating basic and diluted earnings per share:
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
2021
$’000
2020
$’000
64,006
84,198
Number of
Shares
1,172,259,464
Number of
Shares
1,145,072,362
1,634,672
1,173,894,136
2,349,915
1,147,422,277
5.46
5.45
7.35
7.34
Conversions, calls, subscriptions or issues after 30 June 2021
Immediately after year end, on 1 July 2021, an issue of 2,063,100 restricted shares was made under the LSP. In accordance with the terms
of the LSP, the shares were issued at an index share price of $0.931 per share. In order for the shares to vest, the participants must remain
continuously employed with the Group until at least 1 July 2023 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 2022 or at any time in the following four year period be
above a 10% premium to the index price of the shares. 2,986,400 LSP shares vested after balance date in July 2021.
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 2021.
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 are calculated as net profit attributable to members of the company, adjusted for:
i)
ii)
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
iii) 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.
68MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
2021
$’000
2020
$’000
28. Dividends Paid and Proposed
Declared and paid during the year:
[a] Dividends on ordinary shares:
During the year ended 30 June 2021, a final dividend of $0.03 per share fully franked ($34,807,000) in respect of the 2019/20 financial
year was distributed by way of $16,271,000 in cash and the issue of 25,688,736 new shares under the Company’s Dividend Reinvestment
Plan.
[b] Dividends not recognised at the end of the reporting period:
On 24 August 2021, the Company declared a final dividend on ordinary shares in respect of the 2020/21 financial year of $0.02 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 $23,760,000. The dividend has not been provided for in the 30 June 2021 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
1,416
-
16,333
-
1,416
16,333
(10,183)
(14,917)
(a)
(8,767)
1,416
(a)
It is anticipated that income tax instalments will be paid prior to 30 June 2022 which will
eliminate the franking credit deficit at that time.
Tax rates
The tax rate at which paid dividends have been franked is 30%.
29. Contingent Liabilities
1.
2.
The Group has a Performance Bonding facility drawn to a total of $7,495,000 as at balance date (2020: $6,587,000). 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.
30. Key Management Personnel
[a] Compensation of Key Management Personnel
Short-term
Post employment
Long-term
Share-based payment
Termination
[b] Other Transactions and Balances with Key Management Personnel
There were no other transactions and balances with key management personnel during the year.
2021
$
2,839,903
143,712
36,287
600,267
-
3,620,169
2020
$
2,719,989
161,833
49,619
440,324
50,188
3,421,953
MOUNT GIBSON IRON LIMITED 2021 Annual Report69 Notes to the Consolidated Financial Report (continued)
31. 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 Lee and Mr Ferguson were directors of APAC Resources Limited (APAC) which has a 35.83% beneficial
shareholding in Mount Gibson Iron Ltd, Mr Li was a director of Shougang Concord International Trading Pty Ltd (SCIT), and Mr Ding was a
director of Shougang Fushan Resources Group Limited (Shougang Fushan) which has a 13.81% beneficial shareholding in Mount Gibson
Iron Ltd.
During the period, sale agreements that were in place with director-related entities include the sale of 20% of iron ore from Koolan Island’s
available mined production over the life of mine to APAC. There were no sale agreements in place with SCIT during the year (refer footnote
below).
Pursuant to these sales agreements, during the financial year, the Group:
Sold 386,996 wmt (2020: 488,987 wmt) of iron ore to APAC; and
Sold nil wmt (2020: 146,900 wmt) of iron ore to SCIT.
Amounts recognised at the reporting date in relation to director-related entity transactions:
Assets and Liabilities
Current Assets
Receivables – APAC
Receivables – SCIT
Total trade receivables
Total Assets
Current Liabilities
Payables – APAC
Payables – SCIT
Total trade payables
Total Liabilities
Sales Revenue
Sales revenue – APAC
Sales revenue – SCIT*
Total Sales Revenue (before shipping freight)
2021
$’000
-
-
-
-
1,797
-
1,797
1,797
49,486
-
49,486
2020
$’000
1,325
-
1,325
1,325
-
-
-
-
61,511
12,568
74,079
* On 31 May 2019 Shougang Concord International Enterprise Company Limited and its wholly-owned subsidiary SCIT novated their
respective interests as guarantor and buyer under the sales agreement for 80% of iron ore from Koolan Island’s available mined
production over the life of mine to HKSE-listed entity Newton Resources Ltd and its subsidiary Ace Profit Investment Limited (Ace),
subject to transitional arrangements which were satisfied on 23 July 2019. Ace is not considered to be a related party and only those
sales to SCIT during the transition period are included above.
Apart from the above, there are no director-related entity transactions other than those specified in note 30.
2021
$
2020
$
32. Auditor’s Remuneration
Amounts received or due and receivable by EY for:
Fees for auditing the statutory financial report of the parent covering the group and auditing
the statutory financial reports of any controlled entities
219,908
204,175
Other services in relation to the entity and any other entity in the consolidated entity
3,109
3,744
223,017
207,919
70MOUNT GIBSON IRON LIMITED 2021 Annual Report 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:
Mid-West segment – this segment includes the crushing, transportation and sale of iron ore from the Extension Hill and Shine iron ore
deposits and the port facilities at Geraldton Port.
Koolan Island segment – this segment includes the mining, crushing and sale of iron ore from the Koolan Island iron ore operation.
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.
Except as noted below, 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 and includes
quotation period price adjustments and realised gains and losses on foreign exchange and commodity forward sale contracts.
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)
Unrealised gains/(losses) on derivatives
Corporate costs
During the year ended 30 June 2021, revenue received from the sale of iron ore comprised purchases by the following (unnamed) buyers
who each on a proportionate basis equated to greater than 10% of total sales for the period:
Customer
# 1
# 2
# 3
Other
2021
$’000
194,927
71,362
49,486
13,952
329,727
During the year ended 30 June 2020, revenue received from the sale of iron ore comprised purchases by the following (unnamed) buyers
who each on a proportionate basis equated to greater than 10% of total sales for the period:
Customer
# 1
# 2
# 3
# 4
Other
2020
$’000
219,716
104,597
61,511
45,157
14,184
445,165
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 2021.
All segment assets are located within Australia.
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MOUNT GIBSON IRON LIMITED 2021 Annual Report73
Notes to the Consolidated Financial Report (continued)
34. Events After the Balance Sheet Date
On 24 August 2021, the Company declared a final dividend on ordinary shares in respect of the 2020/21 financial year of $0.02 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 $23,760,000. The dividend has not been provided for in the 30 June 2021 financial statements.
Apart from the above, as at the date of this report there are no significant events after balance date of the Company or of the Group that
require adjustment of or disclosure in this report.
35. Financial Instruments
[a] Financial risk management objectives
The Group’s principal financial instruments, other than derivatives, comprise bank, cash and short-term deposits, financial assets held for
trading, trade and other receivables, trade and other payables, and lease liabilities.
The main purpose of these financial instruments is to manage short term cash flows for the Group’s operations.
The Group has various other financial instruments such as trade receivables and trade creditors, which arise directly from its operations.
The Group also enters into derivatives transactions, principally forward currency contracts, and from time to time also enters into foreign
currency collar options and iron ore swaps. The purpose is to manage the currency and commodity price risks arising from the Group’s
operations.
The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, credit risk, commodity price risk
and liquidity risk. The Board reviews and agrees management’s recommended policies for managing each of these risks, as summarised
below and in accordance with the Company’s Financial Risk Management Policy.
[b] Foreign currency risk
The Group is exposed to the risk of adverse movement in the A$ 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.
At 30 June 2021, the notional amount of the foreign exchange hedge book totalling US$32,500,000 is made up exclusively of collar option
contracts with maturity dates in the 7 months ended 27 January 2022 and with an average cap price of A$1.00/US$0.7850 and an average
floor price of A$1.00/US$0.7452.
As at 30 June 2021, the marked-to-market unrealised loss on the total outstanding US dollar foreign exchange hedge book of US$32,500,000
was $549,000. This was recognised in the profit or loss as balance date.
At 30 June 2021, the Group held dual currency deposits totalling US$10,000,000 with an expiry of 6 July 2021. The marked-to-market
unrealised loss of $158,000 on the dual currency deposits was recognised in the profit or loss at balance date.
It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge
effectiveness.
The Group uses the following derivative instruments to manage foreign currency risk from time to time as business needs and conditions
dictate:
Instrument
Type of Hedging
Objective
Forward exchange contracts
Cash flow hedge
Collar options
Cash flow hedge
To hedge sales receipts against cash flow volatility arising from the
fluctuation of the A$/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.
74MOUNT GIBSON IRON LIMITED 2021 Annual Report 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:
2021
2020
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
0.7850
0.7470
0.7850
0.7453
0.7850
0.7449
2,500
3,185
(26)
3,000
4,348
50
15,000
19,108
(234)
15,000
19,108
(289)
0.6900
0.6358
0.6550
0.5950
0.6700
0.6033
2,000
3,053
157
6,000
8,955
350
32,500
41,401
(549)
11,000
16,356
557
At 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] Dual currency deposits
Notes
11
20
2021
$’000
-
549
549
2020
$’000
557
-
557
At balance date, the following dual currency deposit contracts were outstanding:
Strike
Rate
A$/US$
Contract
Amount
US$
$’000
2021
Contract
Amount
A$
$’000
Fair
Value
A$
$’000
Carrying
Amount
A$
Strike
Rate
$’000 A$/US
$
Contract
Amount
US$
$’000
2020
Contract
Amount
A$
$’000
Fair
Value
$’000
Carrying
Amount
A$
$’000
Within one year:
Total
0.7585
10,000
10,000
13,301
13,301
(158)
(158)
13,143
13,143
-
-
-
-
-
-
-
-
-
[iii] Foreign currency sensitivity
The following table details the effect on profit and other comprehensive income after tax of a 10% change in the A$ against the US$ from
the spot rates at 30 June 2021 and 30 June 2020.
Sensitivity to a 10% change in A$ against US$ at
balance date
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
Net Profit
Other Comprehensive Income
2021
$’000
2020
$’000
2021
$’000
2020
$’000
(5,226)
(4,178)
1,530
1,302
6,387
5,107
(3,201)
(172)
The sensitivity analysis of the Group’s exposure to the foreign currency risk at balance date has been determined based on the change in
value due to foreign exchange movement based on exposures at balance sheet date. A positive number indicates an increase in profit and
other comprehensive income.
MOUNT GIBSON IRON LIMITED 2021 Annual Report75
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, which are
primarily denominated in US dollars, are as follows:
Financial Assets
Cash
(included within note 6)
Trade and other receivables
(included within note 9)
Dual currency deposits
(included within note 11)
Financial Liabilities
Trade and other payables
(included within note 18)
Net exposure
2021
$’000
67,368
5,108
13,301
(3,655)
82,122
2020
$’000
56,058
12,001
-
(2,398)
65,661
The net exposure in US dollars at balance date is U$61,740,000 (2020: U$45,319,000).
[c] Interest rate risk
The Group’s exposure to market interest rates relates primarily to the Group’s cash and cash equivalents, term deposits and subordinated
notes, trade debtors, financial assets at fair value through profit or loss 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:
76MOUNT GIBSON IRON LIMITED 2021 Annual Report %
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MOUNT GIBSON IRON LIMITED 2021 Annual Report77
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.
Sensitivity of a 0.25% change in interest rates
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
2021
$’000
462
(462)
2020
$’000
614
(614)
2021
$’000
2020
$’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 majority of the Group’s customers are located in China. 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. 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.
During the period, the Group entered into collar option contracts totalling 270,000 dry metric tonnes (“dmt”) of iron ore, with maturity
dates spread over the period July 2021 to December 2021. The contracts have floor price protection for Mount Gibson of US$100-110/dmt
(62% Fe CFR) and cap prices, above which Mount Gibson does not participate, of US$107-133/dmt.
At balance date, these contracts remained outstanding with a fair value loss of $27,359,000 (2020: $nil). The fair value of the collar
contracts has been recognised in the balance sheet as derivative financial liabilities and the marked-to-market unrealised loss has been
recognised in the profit or loss at balance date.
78MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
35. Financial Instruments (Continued)
The Group enters into provisionally priced ore sales contracts and iron ore collar option 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 and iron ore collar derivatives is set out below:
Sensitivity at Balance Date
Ore Sales Revenue:
- 10% increase in iron ore prices
- 10% decrease in iron ore prices
Iron Ore Collar Options:
- 10% increase in iron ore prices
- 10% decrease in iron ore prices
2021
$’000
5,078
(5,078)
(7,089)
7,089
2020
$’000
4,311
(4,311)
-
-
The sensitivities have been determined as the dollar impact of a 10% increase and decrease in benchmark iron ore prices on trade
receivables subject to provisional pricing and on derivatives financial liabilities 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.
[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. 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 2021, the Group had unutilised performance bonding facilities totalling $12,505,000 (2020: $13,413,000). Refer note 19.
Tabulated below is an analysis of the Group’s financial liabilities according to relevant maturity groupings based on the remaining period
from the balance sheet date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash
flows, these balances will not necessarily agree with the amounts disclosed in the balance sheet.
30 June 2021
30 June 2020
Less
than 6
months
$’000
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
Financial Liabilities
Trade and other payables
Interest-bearing loans and
borrowings
Derivatives
72,500
-
-
7,040
4,771
6,653
27,807
101
-
107,347
4,872
6,653
-
-
-
-
72,500
60,915
-
-
18,464
3,571
3,571
5,457
27,908
-
-
-
118,872
64,486
3,571
5,457
-
-
-
-
Total
$’000
60,915
12,599
-
73,514
MOUNT GIBSON IRON LIMITED 2021 Annual Report79 Notes to the Consolidated Financial Report (continued)
35. Financial Instruments (Continued)
[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 (including dual currency deposits) are sourced from an independent valuation by the
Group’s treasury advisors using the valuation techniques with prevailing short and long term observable market inputs sourced from
Reuters/Bloomberg to determine an appropriate mid-price valuation (level 2).
The fair values of quoted notes and bonds (classified as either financial assets held for trading or at fair value through other comprehensive
income) are determined based on market price quotations at the reporting date (level 1).
The fair values of trade receivables classified as financial assets at fair value through profit or loss are determined using a discounted cash
flow model incorporating market observable inputs sourced from Platts index pricing (level 2). This model also incorporates interest rate
and credit risk adjustments.
The fair values of cash, short-term deposits, 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.
The carrying amounts and fair values of the financial assets and financial liabilities for the Group as at 30 June 2021 and 30 June 2020 are
shown below.
Notes
6
7
7
8
11
9
18
19
20
2021
Carrying
Amount
$’000
Fair Value
$’000
2020
Carrying
Amount
$’000
Fair Value
$’000
95,283
118,500
79,861
57,936
13,143
12,553
377,276
72,500
18,103
27,908
118,511
258,765
95,283
118,500
79,861
57,936
13,143
12,553
377,276
72,500
18,103
27,908
118,511
258,765
111,661
182,600
92,557
36,407
557
19,236
443,018
60,915
12,228
-
73,143
369,875
111,661
182,600
92,557
36,407
557
19,236
443,018
60,915
12,228
-
73,143
369,875
Financial assets
Cash
Term deposits
Subordinated notes
Financial assets held for trading
Derivatives
Trade debtors and other receivables
Financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivatives
Net financial assets
Recognition and measurement
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income
(OCI), or fair value through profit or loss.
The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics
and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient, the Group 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, transaction costs. Trade receivables that do not contain a significant financing component or for which
the Group has applied the practical expedient for contracts that have a maturity of one year or less, are measured at the transaction price determined
under the revenue accounting policy (see note 3).
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest’ (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed
at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place
(regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
80MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest
received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognised
in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include term deposits, trade receivables (not subject to provisional pricing) and other receivables (see
notes 7 and 9).
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading (see note 8), financial assets designated upon initial
recognition at fair value through profit or loss or financial assets mandatorily required to be measured at fair value, i.e., where they fail the SPPI test.
Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets
with cash flows that do not pass the SPPI test are required to be classified and measured at fair value through profit or loss, irrespective of the
business model.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value
recognised in profit or loss.
As the Group applies the SPPI test to determine the classification of financial assets, the requirements relating to the separation of embedded
derivatives is no longer needed for financial assets. An embedded derivative will often make a financial asset fail the SPPI test thereby requiring the
instrument to be measured at fair value through profit or loss in its entirety. This is applicable to the Group’s trade receivables subject to provisional
pricing (see note 9). These receivables relate to sales contracts where the selling price is determined after delivery to the customer, based on an
index price at the end of the relevant quotational period stipulated in the contract. This exposure to the market-based index price causes such trade
receivables to fail the SPPI test. As a result, these receivables are measured at fair value through profit or loss from the date of recognition of the
corresponding sale, with subsequent movements being recognised in other revenue (see note 3).
Financial assets at fair value through OCI
The Group measures debt instruments at fair value though OCI if both of the following conditions are met: -
The financial asset is held with a business model with both the objective of both holding to collect contractual cash flows and selling; and
The contractual terms meet the SPPI test.
For debt instruments at fair value through OCI, interest income and impairment losses are recognised in profit and loss and computed in the same
manner as for financial assets carried at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative
fair value change recognised in OCI is recycled to profit and loss.
The Group’s debt instruments at fair value through OCI includes the subordinated notes (see note 7).
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are
based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to
receive, discounted at an approximation of the original EIR. ECLs are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12-months (12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition,
a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (lifetime
ECL).
For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach
in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s
lifetime ECL at each reporting date. The Group has established a provision matrix for trade receivables that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment. For any other financial assets carried at
amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL when there has not been a significant increase in
credit risk since origination. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are
possible within 12 months after the reporting date.
When there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether
the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and
supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and
analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information. The Group considers a
financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset
to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before
taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering
the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.
MOUNT GIBSON IRON LIMITED 2021 Annual Report81 Notes to the Consolidated Financial Report (continued)
Derivative financial instruments and hedging
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.
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.
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
2021
$’000
2020
$’000
3,900
1,254,459
289
534,745
11,926
1,158,381
230
487,656
620,948
4,328
602,030
3,067
(286,938)
(349,955)
359,499
21,877
719,714
63,017
63,017
394,306
21,277
670,725
82,724
82,724
82MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
[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 19.
The parent entity has further provided bank guarantees in respect of obligations to various authorities. Refer to note 19.
[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 29. For information about guarantees given by the
parent entity, refer [b] above.
[d]
Details of any contractual commitments by the parent entity for the acquisition of property, plant and
equipment
There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment as at reporting date.
[e]
Tax Consolidation
The Company and its 100%-owned entities have formed a tax consolidated group. Members of the Group entered into a tax sharing
arrangement in order to allocate income tax expense to the wholly-owned controlled entities. The agreement provides for the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date, the possibility
of default is remote. The head entity of the tax consolidated group is Mount Gibson Iron Limited.
MOUNT GIBSON IRON LIMITED 2021 Annual Report83 Notes to the Consolidated Financial Report (continued)
37. New and Amended Accounting Standards
and Interpretations
A.
New and amended Accounting Standards and Interpretations adopted from 1 July 2020
Since 1 July 2020, the Group has adopted all Accounting Standards and Interpretations mandatory to annual periods beginning on or
before 1 July 2020. Adoption of these standards and interpretations did not have a material effect on the financial position or
performance of the Group.
B.
New and amended Accounting Standards and Interpretations issued but not yet effective
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 2021 are outlined in the table below:
Reference
Title
Summary
AASB 2020-8 Amendments to
AASs – Interest Rate
Benchmark Reform –
Phase 2
AASB 2020-3 Amendments to
AASB 3 – Reference
to the Conceptual
Framework
The second phase of the project in addressing the financial
reporting effects of IBOR reform has been completed recently. This
phase focuses on issues that might affect financial reporting upon
replacement of existing interest rate benchmarks, and amends the
requirements in AASB 9, AASB 139, AASB 7, AASB 4 Insurance
Contracts and AASB 16 Leases.
The objective of the amendments is to minimise financial reporting
consequences of a change in benchmark interest rates that
Australian Accounting Standards may otherwise require, such as the
derecognition or remeasurement of financial instruments, and the
discontinuation of hedge accounting.
Provided that the interest rate will be substantially similar before
and after the replacement, the amendments:
► Require changes to future cash flows that are directly required
by the IBOR reform to be treated as if they were changes to a
floating interest rate. Applying this expedient would not affect the
carrying amount of the financial instrument. It also relieves entities
of the need to assess whether modification or derecognition
accounting applies under AASB 9 and AASB 139.
► Require changes to lease payments that are directly required by
the IBOR reform to be accounted for as a remeasurement of lease
liability using the original discount rate with a corresponding
adjustment to the right-of-use-asset. This expedient exempts
entities from remeasuring the lease liability using a new discount
rate under AASB 16.
Entities would not have to discontinue hedge accounting due to
IBOR reform, provided that the hedge continues to meet other
hedge accounting criteria.
Insurers who are still applying AASB 139 would also be subject to
the same mandatory reliefs.
Entities are required to provide disclosures that help readers
understand the effect of the IBOR reform on the financial
statements and risk management strategies, including the progress
in completing the transition to alternative benchmark rates and how
such transition is being managed.
These amendments apply retrospectively. However, restatement of
prior periods is not required but permitted only if such restatement
is possible without the use of hindsight. Earlier application of the
amendments is permitted.
in
liabilities
the Conceptual Framework
The IASB’s assessment of applying the revised definitions of assets
and
to business
combinations showed that the problem of day 2 gains or losses
would be significant only for liabilities that an acquirer accounts for
after the acquisition date by applying IAS 37 Provisions, Contingent
Liabilities and Contingent Assets or IFRIC 21 Levies. The Board
updated IFRS 3 in May 2020 for the revised definitions of an asset
and a liability and excluded the application of the Conceptual
Framework to liabilities and contingent liabilities within the scope of
IAS 37 or IFRIC 21.
Application
date of
standard
Application
date for
Group
1 January
2021
1 July 2021
1 January
2022
1 July 2022
84MOUNT GIBSON IRON LIMITED 2021 Annual Report Notes to the Consolidated Financial Report (continued)
Application
date of
standard
Application
date for
Group
1 January
2022
1 July 2022
1 January
2022
1 July 2022
1 January
2022
1 July 2022
Reference
Title
Summary
AASB 2020-3 Amendments to
AASB 137 Onerous
Contracts – Cost of
Fulfilling a Contract
AASB 2020-3 Amendments to
AASB 116 Property,
Plant and Equipment
- Proceeds before
Intended Use
AASB 137 defines an onerous contract as a contract in which the
unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
Unavoidable cost is the lower of the cost of fulfilling the contract
and any compensation or penalties arising from failure to fulfil it.
AASB 137 does not specify which costs to include in determining
the cost of fulfilling a contract. Consequently, AASB 137 was
amended to clarify that when assessing whether a contract is
onerous, the cost of fulfilling the contract comprises all costs that
relate directly to the contract, which includes both the:
► Incremental costs of fulfilling that contract (e.g., materials and
labour); and
► An allocation of other costs that relate directly to fulfilling
contracts (e.g., depreciation of property, plant and equipment)
An entity shall apply these amendments to contracts for which it
has not yet fulfilled all its obligations at the beginning of the annual
reporting period in which it first applies the amendments (the date
of initial application). Comparative information is not restated.
Instead, the cumulative effect of initially applying the amendments
is recognised as an adjustment to the opening balance of retained
earnings or other component of equity, as appropriate, at the date
of initial application. Earlier application is permitted.
in
interpreting
indicated practical diversity
Under AASB 116 Property, Plant and Equipment, net proceeds from
selling items produced while constructing an item of property, plant
and equipment are deducted from the cost of the asset. The IASB’s
this
research
requirement. As a result, AASB 116 was amended to prohibit an
entity from deducting from the cost of an item of property, plant
and equipment, the proceeds from selling items produced before
that asset is available for use. An entity is also required to measure
production costs of the sold items by applying AASB 112
Inventories. Proceeds from selling any such items, and the cost of
those items, are recognised in profit or loss in accordance with
applicable standards.
These amendments are applied retrospectively, but only to items of
property, plant and equipment that are ‘ready to use’ on or after
the beginning of the earliest period presented in the financial
statements in which the entity first applies the amendments —
‘ready to use’ meaning the asset is in the location and condition
necessary to be capable of operating in the manner intended by
management. Earlier application is permitted.
AASB 2020-3 Amendments to
AASB 9 Financial
Instruments – Fees
in the ’10 per cent’
Test for
Derecognition of
Financial Liabilities
(Part of Annual
Improvements 2018-
2020 Cycle)
Under AASB 9, an existing financial liability that has been modified
or exchanged is considered extinguished when the contractual
terms of the new liability are substantially different, measured by
the “10 per cent” test. That is, when the present value of the cash
flows under the new terms, including any fees paid or received, is
at least 10 per cent different from the present value of the
remaining cash flows of the original financial liability.
The amendment to AASB 9 clarifies that fees included in the 10 per
cent test are limited to fees paid or received between the borrower
and the lender, including amounts paid or received by them on the
other’s behalf. When assessing the significance of any difference
between the new and old contractual terms, only the changes in
contractual cash flows between the lender and borrower are
relevant. Consequently, fees incurred on the modification or
exchange of a financial liability paid to third parties are excluded
from the 10 per cent test.
These amendments are applied prospectively. Earlier application is
permitted.
MOUNT GIBSON IRON LIMITED 2021 Annual Report85 Notes to the Consolidated Financial Report (continued)
Application
date of
standard
Application
date for
Group
1 January
2022
1 July 2022
1 January
2023
1 July 2023
Reference
Title
Summary
AASB 2014-
10
Amendments to
Australian
Accounting
Standards – Sale or
Contribution of
Assets between an
Investor and its
Associate or Joint
Venture
The amendments to AASB 10 Consolidated Financial Statements
and AASB 128 Investments in Associates and Joint Ventures clarify
that a full gain or loss is recognised when a transfer to an associate
or joint venture involves a business as defined in AASB 3. Any gain
or loss resulting from the sale or contribution of assets that does
not constitute a business, however, is recognised only to the extent
of unrelated investors’ interests in the associate or joint venture.
These amendments are applied prospectively. Earlier application is
permitted.
AASB 2020-1 Amendments to
Australian
Accounting
Standards –
Classification of
Liabilities as Current
or Non-current
A liability is classified as current if the entity has no right at the end
of the reporting period to defer settlement for at least 12 months
after the reporting period. The AASB recently issued amendments
to AASB 101 to clarify the requirements for classifying liabilities as
current or non-current. Specifically:
► The amendments specify that the conditions which exist at the
end of the reporting period are those which will be used to
determine if a right to defer settlement of a liability exists.
► Management
classification of liabilities.
► In cases where an instrument with a conversion option is
classified as a liability, the transfer of equity instruments would
constitute settlement of the liability for the purpose of classifying it
as current or non-current.
These amendments are applied retrospectively. Earlier application
is permitted.
intention or expectation does not affect
The Group has elected not to early adopt any of these new standards or amendments in these financial statements. The Group intends
to adopt these standards when they become effective. An impact assessment of the standards issued but not yet effective has not
been performed.
86MOUNT GIBSON IRON LIMITED 2021 Annual Report 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 2021 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 2021.
Signed in accordance with a resolution of the directors.
LEE SENG HUI
Chairman
Date: 24 August 2021
MOUNT GIBSON IRON LIMITED 2021 Annual Report87 Ernst & Young
11 Mounts Bay Road
Perth WA 6000, Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor’s report to the members of Mount Gibson Iron
Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Mount Gibson Iron Limited (the Company) and its subsidiaries (collectively
the Group), which comprises the consolidated balance sheet as at 30 June 2021, the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of changes in
equity and the consolidated cash flow statement for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
a.
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its
consolidated financial performance for the year ended on that date; and
b.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial report of the current year. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters.
For the matters below, our description of how our audit addressed each matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial report. The results of our audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:AJ:MGI:008
88MOUNT GIBSON IRON LIMITED 2021 Annual Report 1.
Provision for rehabilitation
Why significant
How our audit addressed the key audit matter
As a consequence of its operations the Group incurs
obligations to rehabilitate and restore its mine sites.
Rehabilitation activities are governed by local
legislative requirements. As at 30 June 2021 the
Group’s consolidated balance sheet includes
provisions of $52.3 million (including the road
resealing provision) in respect of these obligations
(refer to note 21).
We focused on this matter because estimating the
costs associated with these future activities
requires judgment and estimation for factors such
as timing of when rehabilitation will take place, the
extent of the rehabilitation and restoration activities
and economic assumptions such as inflation rates
and discount rates which are used to determine the
provision amount.
We evaluated the assumptions and methodologies
used by the Group in arriving at their rehabilitation
cost estimates. In doing so we:
►
►
►
Involved our climate change and sustainability
services specialists to assess the objectivity,
qualifications and competence of the Group’s
external experts whose work formed the basis
of the Group’s cost estimate.
Tested the reasonableness of the timing of the
rehabilitation cashflows and the resultant
inflation and discount rate assumptions used in
the Group’s provision estimates, having regard
to available economic data on future inflation
and discount rates.
Evaluated the adequacy of the Group’s
disclosures relating to rehabilitation
obligations in the financial report and
considered the treatment applied to changes in
the rehabilitation and restoration provision.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MOUNT GIBSON IRON LIMITED 2021 Annual Report89
2.
Impairment reversal assessment for the Shine Cash Generating Unit (“CGU”)
Why significant
How our audit addressed the key audit matter
The Group in prior years had previously impaired its
Shine CGU by $18.1 million and under accounting
standards all of this previous impairment remains
available for reversal at 30 June 2021.
We assessed the reasonableness of the Group’s
impairment assessment process and the resultant
recoverable value determination for the Shine CGU.
Our audit procedures included the following:
The Group assessed whether any indicators of
impairment reversal were present at 30 June 2021
and concluded that an impairment reversal indicator
was present in respect of the Shine CGU.
Accordingly, the Group performed an impairment
reversal assessment for the Shine CGU at 30 June
2021 and based on this assessment concluded that
an impairment reversal was not required (refer to
Note 17).
We considered this to be a key audit matter because
of the:
►
►
►
Significant judgment involved in determining if
there was an indicator that an impairment loss
recognised in prior periods may either need to
be reversed in full or in part.
Significant judgment and estimates involved in
the determination of the recoverable amount
of the Shine CGU including assumptions
relating to future iron ore prices, exchange
rates, operating and capital costs and an
appropriate discount rate to reflect the risk
associated with the forecast cash flows having
regard to the current status of the project.
Significant judgment involved in determining
whether the assessed recoverable amount and
a range of sensitivities applied to the assessed
recoverable amount supported the reversal of
some or all of the previous impairment
recognised for the Shine CGU.
►
►
►
►
►
►
Evaluated the assumptions and methodologies
used by the Group, in particular, those relating
to forecast cash flows and inputs used to
formulate them. This included assessing, with
involvement from our valuation specialists,
where appropriate, the foreign exchange rates
and iron ore price assumptions with reference
to market prices (where available), market
research, market practice, market indices,
broker consensus, historical performance and
the discount rate assumption.
Tested the mathematical accuracy of the
Group’s discounted cash flow impairment model
and agreed relevant data, including
assumptions on timing and future capital and
operating expenditure, to the Group’s feasibility
analysis of the project and the latest Board
approved life of mine plan.
Assessed the work of the Group’s internal and
external experts with respect to the capital and
operating assumptions used in the cash flow
forecasts. This included understanding the
underlying cost estimation process, information
in Board reports and releases to the market. We
also examined the competence, qualifications
and objectivity of the experts and assessed
whether key capital and operating expenditure
assumptions were consistent with information
in Board reports and releases to the market.
Assessed the work of the Group’s experts with
respect to the reserve assumptions used in the
cash flow forecasts. This included
understanding the reserve estimation process.
We also examined the competence,
qualifications and objectivity of the Group’s
experts, and assessed whether key reserve
economic assumptions were consistent with
those used elsewhere in the financial report.
Assessed the impact of a range of sensitivities
to the economic assumptions underpinning the
Group’s impairment reversal assessment.
Evaluated the adequacy of the Group’s
disclosures in the financial report with respect
to their impairment reversal assessment for the
Shine CGU.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
90MOUNT GIBSON IRON LIMITED 2021 Annual Report
Information other than the financial statements and auditor’s report
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2021 Annual Report other than the financial report and our auditor’s report thereon.
We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s
report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s
report.
Our opinion on the financial report does not cover the other information and we do not and will not express any
form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance
opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MOUNT GIBSON IRON LIMITED 2021 Annual Report91
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
►
►
►
►
►
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated to the directors, we determine those matters that were of most significance in
the audit of the financial report of the current year and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
92MOUNT GIBSON IRON LIMITED 2021 Annual Report
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2021.
In our opinion, the Remuneration Report of Mount Gibson Iron Limited for the year ended 30 June 2021,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Gavin Buckingham
Gavin Buckingham
Partner
Perth
24 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MOUNT GIBSON IRON LIMITED 2021 Annual Report93
Corporate Governance Statement
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 4d 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
2021. The Corporate Governance Statement has been approved by the Board.
94MOUNT GIBSON IRON LIMITED 2021 Annual Report Additional ASX Information
(a) Distribution of equity securities
As at 10 September 2021 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 Over
TOTAL
Unmarketable parcels
Number of holders
Number of Shares
% of Issued Capital
Ordinary Shares
1,811
3,529
1,792
2,883
378
935,268
9,956,322
14,150,705
87,627,311
1,075,310,672
0.08
0.84
1.19
7.38
90.52
10,393
1,187,980,278
100.00
The minimum $500 parcel size at $0.480 per share is 1,042 shares. 1,843 shareholders hold unmarketable parcels comprising a total of
968,009 shares.
(b) Equity security holders
As at 10 September 2021 the names of the twenty largest holders of shares are:
Ordinary Shares
Number of Shares
% of Shares Held
1. SUN HUNG KAI INVESTMENT SERVICES LIMITED
2. APAC RESOURCES INVESTMENTS LIMITED
3. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
4. TRUE PLUS LIMITED
5. CITICORP NOMINEES PTY LIMITED
6. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
7. DEBORTOLI WINES PTY LIMITED
8. NATIONAL NOMINEES LIMITED
9. BNP PARIBAS NOMS PTY LTD
10. BNP PARIBAS NOMINEES PTY LTD
211,916,283
201,919,034
179,621,521
163,866,874
65,220,842
59,003,728
34,546,165
18,322,394
7,174,219
6,993,146
11. DE BORTOLI WINES (SUPERANNUATION) PTY LIMITED
4,850,000
12. NATIONAL NOMINEES LIMITED
13. MR PETER WALKER KERR
14. BNP PARIBAS NOMINEES PTY LTD
15. MANGO & CHUBB PTY LTD
16. SAVIVE PTY LTD
4,742,102
3,430,003
2,541,144
2,491,877
2,482,262
17. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2,401,623
18. NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
19. MR SAM SABOUNEBNP
20. PARIBAS NOMINEES PTY LTD SIX SIS LTD
2,106,257
2,000,000
1,904,450
17.84
17.00
15.12
13.80
5.49
4.97
2.91
1.54
0.60
0.59
0.41
0.40
0.29
0.21
0.21
0.21
0.20
0.18
0.17
0.16
Top 20 Holders
Total Remaining Holders Balance
Total Issued Ordinary Shares
977,533,924
210,446,354
1,187,980,278
82.29
17.71
100.00
MOUNT GIBSON IRON LIMITED 2021 Annual Report95
Additional ASX Information Continued
(c) Substantial Shareholders
The names of Substantial Shareholders who have notified the Company in accordance with section 671B of the Corporations Act
2001 are provided below, together with details, as at the date of the Substantial Shareholder notification:
1.
APAC Resources Limited and its subsidiaries
Allied Properties Investments (1) Company Limited and its related corporate entities
2.
Note: Substantial shareholdings 1 and 2 are not cumulative and arise through common shareholdings.
Number of
Shares
424,991,530
424,991,530
% of current
issued share
capital
35.84%
35.84%
3.
4.
Shougang Corporation and Shougang Concord International Enterprises Company Limited
and each of their controlled entities
154,166,874
13.64%
Shougang Fushan Resources Group Limited, True Plus Limited
and its subsidiaries
Note: Substantial shareholdings 3 and 4 are not cumulative and arise through common shareholdings.
5.
FMR LLC and related entities
154,166,874
13.64%
71,888,974
6.06%
(d) Voting rights
All ordinary Shares carry one vote per Share without restriction.
No voting rights attach to options.
(e) Schedule of interests in mining tenements
Location
Tenements Held by MGX
Extension Hill
Extension Hill
Extension Hill
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
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
M70/1062-I
M70/896-I
E70/3732
E70/5298
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%
96MOUNT GIBSON IRON LIMITED 2021 Annual Report (e) Schedule of interests in mining tenements (continued)
Location
MGX Has Interests In
Tenement
Status
Percentage Held
Extension Hill
1
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
Extension Hill
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Fields Find
1
Shine
2
Shine
2
Shine
2
Murchison
3
Murchison
3
M59/338-I
M59/339-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
E59/1268-I
M59/63-I
E59/1996
E59/1997
E59/2067
M59/406-I
M59/421-I
M59/731-I
E09/2266
E09/2499
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
Pending
Tenements are held by another party. MGX has rights to Hematite, Goethite and Limonite.
Tenements are held by another party. MGX has rights to Iron on a portion of these tenements.
Tenements are held by another party. MGX is in a Farm-in and JV to earn 75% of these tenements.
1
2
3
MOUNT GIBSON IRON LIMITED 2021 Annual Report97
Notes
98MOUNT GIBSON IRON LIMITED 2021 Annual Report 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. The Company was readmitted to the Standard & Poor's ASX-300
Index in March 2019.
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.
Headquartered in Perth, Mount Gibson's primary operating assets are the Shine Iron Ore
operation near Yalgoo east of Geraldton, and the Koolan Island mine off the Kimberley
coast in the remote north-west of the State.
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 2021
Board of Directors
Auditors
Lee Seng Hui
Chairman, Non-Executive Director
Alan Jones
Non-Executive Director
Ding Rucai
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@mgx.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: 1300 787 272
Facsimile: +61 8 9323 2033
Annual General Meeting of Shareholders
Due to COVID-19 travel restrictions, Mount Gibson will hold an online
virtual AGM at 10.30am AWST (1.30pm AEDT) on Wednesday 10
November 2021. Shareholders will not be able to attend in person at
the AGM.
Information explaining how shareholders may access, vote and ask
questions within the online meeting room is provided in the Company’s
Notice of AGM released to the ASX in October 2021.
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.
2
MOUNT GIBSON IRON LIMITED 2021 Annual Report
MOUNT GIBSON IRON LIMITED 2021 Annual Report
99
www.mtgibsoniron.com.au
2021 Annual Report
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