ANNUAL
REPORT
2014
Mineral Commodities Ltd
ABN 39 008 478 653
Annual Report 2014
C O R P O R A T E D I R E C T O R Y
D I R E C T O R S
Mark Victor Caruso
Joseph Anthony Caruso
Peter Patrick Torre
James Gerald Leahy
Guy Redvers Walker
Executive Chairman and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
C O M P A N Y S E C R E T A R Y
Peter Patrick Torre
P R I N C I P A L & R E G I S T E R E D
O F F I C E I N A U S T R A L I A
40 Murray Road North
Welshpool
Western Australia 6106
A U D I T O R S
S O L I C I T O R S
B A N K E R S
S H A R E R E G I S T R Y
Telephone: +61 (8) 6253 1100
Facsimile: +61 (8) 9258 3601
Email:
info@mncom.com.au
BDO Audit (WA) Pty Ltd
38 Station St
Subiaco, Western Australia 6008
Steinepreis Paganin
Level 4, Next Building
16 Milligan Street
Perth WA 6000
TDC Legal Pty Ltd
Level 15, 251 Adelaide Terrace
Perth WA 6000
National Australia Bank
Suite 7, 51 Kewdale Road
Welshpool WA 6106
Link Market Services Limited
Level 4, Central Park
152 St Georges Terrace
PERTH WA 6000
S T O C K E X C H A N G E
L I S T I N G
The Company’s shares are listed on the Australian Securities Exchange (ASX) under
ASX Code MRC
W E B S I T E A D D R E S S
www.mineralcommodities.com
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MINERAL COMMODITIES LTD Annual Report 2014
C O N T E N T S
C O R P O R A T E D I R E C T O R Y
C H A I R M A N ’ S R E P O R T
D I R E C T O R S ’ R E P O R T
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
C O N S O L I D A T E D I N C O M E S T A T E M E N T
C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E
C O N S O L I D A T E D B A L A N C E S H E E T
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
D I R E C T O R S ’ D E C L A R A T I O N
I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S
C O R P O R A T E G O V E R N A N C E S T A T E M E N T A N D R E S O U R C E S T A T E M E N T
S H A R E H O L D E R I N F O R M A T I O N
3
7
9
2 7
2 8
2 9
3 0
3 2
3 3
3 4
7 3
7 4
7 6
8 9
The consolidated financial statements are presented in United States Dollars (“$”), unless otherwise stated, which is the
Company’s presentation currency.
5
MINERAL COMMODITIES LTD Annual Report 2014 C H A I R M A N ’ S R E P O R T
Dear Shareholders,
Your Company has recently completed its first full year of production at the Tormin Mineral Sands Project (Tormin), reporting a
maiden profit after income tax benefit of US$8.4 million. It is with immense pleasure that I can make that statement, as it
somewhat vindicates the Boards and shareholders patience and unwavering commitment to bring Tormin into production.
There have been a number of achievements throughout the year, none more prevalent than the impeccable safety record that the
Company maintains. The safety of the workforce is of paramount concern to the Board of the Company and we are proud of the
diligence exercised by all employees at the Company’s operations. The Company is pleased to report that by period end the
safety record amounted to in excess of 758,000 man hours without a lost time injury (LTI) since October 2013.
Group profit before income tax benefit for the period was US$4.0 million with cash on hand as at 31 December 2014 of
US$4.2 million after allowing for debt repayments throughout the year.
After delivery of the development of the Tormin Mine on time and on budget during 2013, I am pleased to advise that production
for the 2014 year was in excess of budget with the following key metrics:
Production – Full Year
Mining: 1,075,408 tonnes mined at a grade of 53.83% Heavy Mineral consisting 31.16% garnet, 17.26% ilmenite, 4.76% zircon
and 0.65% rutile.
Production & Processing: 556,105 tonnes processed through the Secondary Concentrator Plant (“SCP”) to produce:
• 254,816 tonnes garnet concentrate
• 100,437 tonnes ilmenite concentrate
• 42,668 tonnes zircon/rutile concentrate
Sales – Full Year: $33.3m
Zircon/Rutile concentrate: 42,042 wet metric tonnes
Ilmenite concentrate: 21,920 wet metric tonnes
Garnet concentrate: 79,630 wet metric tonnes
Corporate and Cash
Cash: Cash balance of $4.2m as at 31 December 2014, plus $3.1m in trade and other receivables.
Debt: $2.0m Wogen Pre-Financing Facility repaid to a balance of $0.6m as at 31 December 2014. Repaid in full on 2 March
2015. $3.0m Working Capital Facility fully drawn.
The Company was pleased to be able to announce the offtake arrangement for garnet concentrate entered into during the year
with GMA Garnet Australia. The added benefit of being able to sell this product to the extent and volumes now being produced
adds substantially to the overall benefits of the project. The Company anticipates that additional benefits will also flow from the
sale of its additional product, ilmenite, and advanced discussions with potential offtake partners are still ensuing.
The Company is well placed with a world-class deposit in Tormin to take advantage of any incremental increase in zircon pricing
and has significant upside in the sale of ilmenite concentrate.
This combined with the planned processing plant upgrades, the Company is anticipating growth in both sales revenue and
production in 2015.
The Company maintains its perseverance in respect to its Xolobeni Mineral Sands Project (Xolobeni). We continue to complete
all matters within our control to ensure this project moves forward to eventual development. The economic and social benefits of
Xolobeni, including the upliftment of the local Amadiba population, still create a compelling case for its development and show
beyond doubt that responsible mining can make a significant contribution to sustainable development.
The patience of the Company’s shareholders eventually must be repaid through a prudent capital management policy, and the
Board will now consider the payment of dividends at each reporting period, subject to the ongoing capital requirements of its
operations.
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MINERAL COMMODITIES LTD Annual Report 2014 CH A I R M A N’S R E P O R T ( C O N T I N U E D )
On behalf of the Board I would like to thank all the dedicated team on site and at the Company’s respective offices for their efforts
and dedication throughout the year. The company is very proud of its achievements. It has not only delivered the project on time
and on budget but has successfully commissioned and made the transition to a fully operational Mine underpinned by strong key
production metrics in Mining and Processing, and with solid financial performance on the backdrop of a challenging market.
As reported within the accompanying financial statements, I would also like to acknowledge the contribution of our joint
shareholder in the Company’s subsidiary Mineral Sands Resources (Proprietary) Limited and BEE partner, Blue Bantry Investments
255 (Pty) Ltd (“Blue Bantry”), in assisting in bridging the cultural divide that can sometimes exist in managing the expectations
of interests and effected parties and communities. More particularly Blue Bantry’s origins rest in the Transkei in the Eastern Cape
of South Africa, where the Company’s Xolobeni project is located.
Significant credibility has been established through the employment of 22 Xolobeni residents on the Tormin mining operation. Not
only does this employment provide direct economic benefit back to the Xolobeni community but provides a community educational
process through hands on involvement in a live mining project and assists significantly in countering negative lobbying against
mining in Xolobeni.
The Company continues to embrace Black Empowerment Procurement throughout its purchasing and contracting requirements
recognising that this process supports direct and indirect economic benefit flowing through to historically disadvantaged groups.
A clear and transparent commitment to its Social Labour Plan (“SLP”) now that the project is in full operation is measurable and
supported by the Company’s human resources and financial investment via sponsorship of educational learnships, bursaries and
traineeships as well as community infrastructure projects.
We look forward to their continued commitment and drive to ensure the same operational success which we are confident will
translate to a future upliftment in the company’s investment profile and rating.
Mark V. Caruso
Executive Chairman/CEO
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MINERAL COMMODITIES LTD Annual Report 2014 D I R E C T O R S ’ R E P O R T
Your directors present their report on the consolidated entity (referred to hereafter as the “Group”) consisting of Mineral
Commodities Ltd (the “Company”) and the entities it controls at the end of, or during, the year ended 31 December 2014.
The consolidated financial statements are presented in United States Dollars (“$”), unless otherwise stated, which is the
Company’s presentation currency.
D I R E C T O R S
The following persons were directors of the Company during the whole of the financial year and up to the date of this report:
Mark Victor Caruso
Joseph Anthony Caruso
Peter Patrick Torre
James Gerald Leahy
Guy Redvers Walker
P R I N C I P A L A C T I V I T I E S
The principal activities of the Group during the year were mineral sands mining and processing at the Group’s Tormin Mineral
Sands Project (“Tormin” or the “Tormin Project”) in the Western Cape Province of South Africa, undertaking procedures and
evaluation for the future development of the Xolobeni Mineral Sands Project in the Eastern Cape Province of South Africa, and
investigations into other mineral resources.
D I V I D E N D S
No dividends have been paid, declared or recommended for payment, in respect of the current financial year.
R E V I E W O F O P E R A T I O N S
Information on the operations and financial position of the Group and its business strategies and prospects is set out in the review
of operations set out below:
T O R M I N M I N E R A L S A N D S P R O J E C T
The Tormin Project was successfully commissioned in January 2014 and has completed its first 12 months of operations which
have proven to be a success.
The Company is proud of its operational performance for the full year and is pleased to report the following key operating and
financial metrics:
Production – Full Year
Mining: 1,075,408 tonnes mined at a grade of 53.83% Heavy Mineral Concentrate (“HMC”) consisting 31.16% garnet, 17.26%
ilmenite, 4.76% zircon and 0.65% rutile.
Production & Processing: 556,105 tonnes processed through the Secondary Concentrator Plant (“SCP”) to produce:
• 254,816 tonnes garnet concentrate
• 100,437 tonnes ilmenite concentrate
• 42,668 tonnes zircon/rutile concentrate
Sales – Full Year: $33.3m
Zircon/Rutile concentrates: 42,042 wet metric tonnes
Ilmenite concentrate: 21,920 wet metric tonnes
Garnet concentrate: 79,630 wet metric tonnes
Corporate and Cash
Cash: Cash balance of $4.2m as at 31 December 2014, plus $3.1m in trade and other receivables.
Debt: $2.0m Wogen Pre-Financing Facility repaid to a balance of $0.6m as at 31 December 2014. Repaid in full on 2 March
2015. $3.0m Working Capital Facility fully drawn.
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MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
Safety
The Company has now worked in excess of 758,000 man hours without a lost time injury (“LTI”) since operations commenced
in October 2013. The total recordable injury frequency rate (“TRIF”) remained at zero until September 2014 however five minor
incidents in the last four months of the year have detracted from the good performance on site up until that time.
The Company’s safety performance is commendable by any measurable industry standard. This is further supported given that
approximately 25% of the Company’s workforce comes from local communities; the vast amount of whom had never worked on
an industrial site before. It is testament to its commitment to continued organisational enforcement of maintaining a safe work
environment which allows employees to come to work and return home to their families without injury.
Mining
For the full year to 31 December 2014, 1,075,408 tonnes was mined at Tormin (approximately 17% above budget) at a HMC grade
of 53.83%. The most pleasing aspect of this was that certain ore blocks were mined five times after the beach mineral sands
were replenished by normal tidal movements.
The Company initially started mining very high grade Run of Mine (“ROM”) (+80% HM) material which was a result of a historical
deposition and no previous mining of the orebody. During the second half of the year the Company moved to planned mining
techniques and installed additional de-watering pumping equipment, which allowed for the effective dry mining of the orebody
and the ability to extract the full depth of material from each respective ore block.
The Company will be initiating studies with specialised mining consultants in the first quarter of 2015 to explore and develop
mining techniques for the areas between the low tide shore break mining zone covered by the Company’s prospecting permits
and the current mining rights.
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MINERAL COMMODITIES LTD Annual Report 2014 Processing
A total annual production of 330,249 tonnes of HMC was produced through the two Primary Beach Concentrators (“PBC”). This
was 68,396 tonnes (or 26%) above budget. The balance of SCP feed of some 226,000 tonnes was sourced as direct feed from
high grade run of mine material, which required no primary concentration due to its extremely high grade.
The Company processed 556,105 tonnes to 31 December 2014, which was 10% above budget.
SCP plant recoveries were slightly down for the year but were in line with expectations due to the increased SCP feed grade and
additional throughput.
Considering the first quarter of 2014 commissioning ramp-up and other associated issues, including a major coil failure on one of
the Slon magnets, the SCP performed well above its nameplate capacity of 63 tonnes per hour, averaging annually 72 dry tonnes
per hour (14% above nameplate capacity) and reaching peaks of as high as 100 dry tonnes per hour.
The Company completed and commissioned the installation of a Process Plant Instrumentation (“PLC SCADA”) system during
the last quarter of the year. The PLC SCADA system allows the plant to run on a fully monitored and automated basis, which
further enhances the operational efficiencies and performance of the plant. In addition the Company moved to implement the
pumping of all tailings back to the beach by the installation of a tailings return system. This also included the upgrading of the
Company’s seawater intake system which is used for processing.
Annual non-magnetic concentrate production to 31 December 2014 was 42,668 tonnes versus budget of 45,180 tonnes. While
slightly down on budget for the year, the total production for 2014 was above nameplate capacity.
Annual Ilmenite and Garnet concentrate production to December 2014 was 100,437 tonnes and 254,816 tonnes respectively.
Total processing unit cash costs were well within budget.
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MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
Tormin Sales and Marketing
Sales revenue for the year was $33.3m, with annual sales of:
• Zircon/Rutile concentrates: 42,042 wet metric tonnes
•
Ilmenite concentrate: 21,920 wet metric tonnes
• Garnet concentrate: 79,630 wet metric tonnes
All Zircon/Rutile concentrate was shipped to the Company’s offtake partner Wogen Pacific Ltd (“Wogen”) during the year.
During the period, the Company negotiated a Garnet Offtake Agreement (“Agreement”) with GMA Garnet Group of Australia
(“GMA”), the world’s largest producer and global distributor of industrial Garnet abrasives.
Garnet is used in abrasive blasting and waterjet cutting applications, and is a byproduct of the Zircon/Rutile/Ilmenite production
process at Tormin. For every tonne of Zircon concentrate, approximately five tonnes of Garnet concentrate is produced. No
additional mining or processing costs are incurred in the production of Garnet.
Full details of the Agreement were released to the market in an announcement dated 15 July 2014, with further information in
respect to the Resource and mining method in the Company’s quarterly report for the quarter ended 30 June 2014.
The Company continues to explore further options in relation to value adding by final processing all non-magnetic Zircon/Rutile
concentrate, as well as Ilmenite concentrate through a standalone Magnetic Separation Plant (“MSP”), both within South Africa
and abroad.
General product pricing remains in line with expectations with all Zircon/Rutile concentrate production sold forward for the first
quarter of 2015. Garnet concentrate production will continue to be supplied and sold under the contract with GMA and stockpiled
within South Africa. The Garnet concentrate will then be shipped at GMA’s discretion.
The Company established its own 100% controlled trading company, MRC Trading (Aust) Pty Ltd (“MRCT”), which is now
contracted exclusively to sell all product produced from the Tormin mine on behalf of Mineral Sands Resources (Proprietary)
Limited (“MSR”). The arrangement is on an arms-length commercial basis.
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MINERAL COMMODITIES LTD Annual Report 2014 The Company is confident that it will consummate Ilmenite concentrate sales within the first half of 2015. The Company has
received strong enquiries despite weak global Ilmenite pricing. The Company’s Ilmenite concentrate is a high value concentrate
and is a typical slagging ilmenite with ideal iron and TiO2 ratios, suitable for smelting.
Black Economic Empowerment (“BEE”)
The Company acknowledges the contribution of its joint shareholder in its subsidiary MSR and BEE partner, Blue Bantry
Investments 255 (Pty) Ltd (“Blue Bantry”), in assisting in bridging the cultural divide that can sometimes exist in managing the
expectations of interests and effected parties and communities. More particularly Blue Bantry’s origins rest in the Transkei in the
Eastern Cape of South Africa, where the Company’s Xolobeni project is located.
Significant credibility has been established through the employment of 22 Xolobeni residents on the Tormin mining operation. Not
only does this employment provide direct economic benefit back to the Xolobeni community but provides a community educational
process through hands on involvement in a live mining project and assists significantly in countering negative lobbying against
mining in Xolobeni.
The Company continues to embrace Black Empowerment Procurement throughout its purchasing and contracting requirements
recognising that this process supports direct and indirect economic benefit flowing through to historically disadvantaged groups.
A clear and transparent commitment to its Social Labour Plan (“SLP”) now that the project is in full operation is measurable and
supported by the Company’s human resources and financial investment via sponsorship of educational learnships, bursaries and
traineeships as well as community infrastructure projects.
Tormin Resource
Work was completed during the last quarter of the year on the annual Tormin Resource Review.
Approximately 1.075m tonnes has been mined to 31 December 2014, although included in those tonnages are areas which have
been mined up to five times.
The nature of the resource is unique, and as such the Company is unable to report a replenishment grade or quantity under the
JORC code. Resource replenishment is occurring as evident by mining of the same areas, but further data is needed to predict
the long term trend of replenishment.
The Company continues to conduct grade reconciliation and sample grading on a daily basis as part of the mining operation to
correlate between stated resource and actual resource in terms of quantity, grade and replenishment.
The Company has completed its first year of mining and processing at its Tormin Project and further mining and production from
replenished areas will provide greater detail and certainty on the validity of the replenished areas in the current year.
Tormin – Offshore Prospecting Activities
The Company has previously reported that a prospecting right for the offshore area immediately adjacent to Tormin was awarded
towards the end of 2012. The offshore prospecting area covers an area of 12km2 and extends 1km out to sea from the lowwater
mark and covers the full length of the existing 12km Tormin tenement.
The established geology of the region confirms that the source of the Tormin beach deposit is a Heavy Mineral-rich offshore zone
and that the dynamic coastline serves to replenish the beaches by transporting sediment from deeper waters.
As previously reported, 99% of the area mined continues to replenish through normal tidal movements. The Company continues
its work on the replenishment studies to determine the dynamics of the grade and quantum timing of the mineral sands redeposit.
The Company has received a number of proposals to drill and sample the offshore area and re-define the existing beach resource.
The program, which will be subject to final selection of drilling techniques and Contractors to ensure integrity of sampling
collection and prevailing weather. The programme has still not yet commenced due to Management’s focus on operations during
the year.
Based on the Company’s confidence in the extent of this resource, an application was made during the 2014 year to extend the
prospecting area from 1km seawards of the low water mark to 10km offshore. This will increase the prospecting area and
potential resource area available to the Company from 12km2 to 120km2.
The Company has proceeded with the regulatory approval process in relation to the offshore prospecting right application.
The Company proceeded with a public participation process as part of the regulatory prospecting right application. There were
minimal objections to the application during the public participation process.
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MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
X O L O B E N I M I N E R A L S A N D S P R O J E C T
The Company holds the prospecting rights to four of the five blocks in the Xolobeni Mineral Sands Project (“Xolobeni”). The
Company has previously advised that, due to objections received to the prospecting right application to the remaining block, the
Kwanyana block, the Department of Mineral Resources (“DMR”) instructed the Company to undertake additional public
consultation in relation to the project. The public consultation took place in early 2013 and feedback from the meetings was
submitted to the DMR in the second half of that year.
Based on a review of stakeholder engagement reports submitted by the Company, the DMR instructed the Company on
22 January 2014 to undertake a further round of consultation with a number of political stakeholders. These included the local
royal family, the Eastern Cape Cabinet, the district municipality, the local municipality and the local Chamber of Commerce. This
consultation was undertaken and completed during the year and a full report submitted to the DMR.
While the level of consultation undertaken to date has been extensive, the Company has undertaken the work as a display of good
faith and its commitment to develop and operate Xolobeni transparently and sustainably in the interests of all stakeholders. All the
necessary documents were completed and submitted to the DMR during the period and, given this and the substantial amount
of support for the project evident through the consultation, the Company remains optimistic that the DMR will award a new
prospecting right over the Kwanyana block in the next half. Notwithstanding this, the Company is entitled under The Mining Act
Legislation to lodge a Mining Right Application for all Prospecting Permits covering the Xolobeni Project, which it did in March
2015.
In the interim, work has commenced on preparation for the various baseline studies that are required as part of the prospecting
works programme and in preparation for an application for a mining right for Xolobeni. This includes the appointment of a specialist
water expert who has already provided initial feedback from site reviews and engagement with the Department of Water Affairs.
The Company still awaits an outcome on the appeal process.
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MINERAL COMMODITIES LTD Annual Report 2014 C O R P O R A T E A N D F I N A N C I A L
The Company moved during the year to fully integrate and establish its own operations after discontinuing its relationship with
Blastrite Proprietary Limited (“Blastrite”), with all administration functions being streamlined through its offices in Cape Town and
Perth, Western Australia.
As disclosed to the ASX in December 2014, an application was made in the High Court of South Africa (Western Cape Division,
Cape Town) by Blastrite to seek relief for an order that MSR, a subsidiary of the Company, may not deal with any entity or person
other than Blastrite in relation to the discussion and consideration relating to any potential Garnet and/or other abrasive media
resource that may be present in or on the beach deposit located within the Tormin Project; and an order that MSR may not renew
its existing offtake agreement with GMA for the period 1 July 2015 to 30 June 2016. Following the hearing on 19 December 2014,
Blastrite withdrew its application to seek interim relief and were ordered to pay MRC’s costs occasioned by the application.
Blastrite proceeded to make an application for final relief which has been deferred to oral evidence to be heard in June 2015. MRC
will proceed to strenuously oppose the application.
The existing Garnet offtake agreement with GMA and the supply of Garnet concentrate pursuant to that agreement continues
unabated.
The Company is in discussions with downstream processing plant operators to develop joint venture operating arrangements
with a view to optimising the valuable heavy mineral component of its concentrate.
In addition, the Company is looking at financing options for its impending expansion initiatives relating to a Garnet Stripping Plant
(“GSP”) and a Tailings Scavenger Spiral Circuit (“TSP”). Based on the Company’s strong 2015 cash flow projections, these will
be funded by traditional debt financing.
The Company established a facility of up to $4.0m to assist with short term working capital requirements resulting from lower
than forecast sales in the first quarter of the year. Major Shareholders indicated their willingness to support and provided a finance
facility on commercially arms-length terms.
The Company drew down on $3.0m of this facility and was pleased to announce subsequent to year end that the Shareholders
extended the term of the loan to 30 September 2015 to allow the Company to explore all options with traditional financiers.
At 31 December 2014, the Company had $4.2m in cash, a pleasing result after its first year of operations. The Company also
reduced its debt to Wogen down to $0.6m as at 31 December 2014 and repaid the debt in full on 2 March 2015.
Consolidated result and financial position
The profit of the Group after income tax benefit and non-controlling interests was $8.38m (2013: loss of $1.57m). The net assets
of the Group have increased from $25.38m as at 31 December 2013 to $31.21m as at 31 December 2014.
As noted above, the Tormin Project was successfully commissioned in January 2014 and has completed its first 12 months of
operations which have proven to be a success. Revenue for the first year was $33.27m, with profit before income tax benefit of
$3.95m. Given the commencement of production and the positive cashflows forecast, a deferred tax asset has been brought to
account as at 31 December 2014, totalling $4.04m.
Outlook
The Company has undertaken significant test work on a GSP optimisation expansion. If implemented, it will occur in the second
half of 2015. Capital estimates for the GSP, including an upgraded Ilmenite circuit, are approximately $3.5m with a six month
project delivery timeframe.
In addition, the Company has initiated studies on the TSP. This involves the re-processing of the tailings stream which is currently
discharged back onto the beach and will result in another approximately 180,000 tonnes of HMC product being available for
treatment through the SCP. It is likely that this initiative will be implemented prior to the decision to expand through the construction
of the GSP. Capital estimates for the TSP are estimated at $1m.
The Company is in a position to take advantage of any incremental increase in Zircon pricing and has significant upside in the sale
of Ilmenite concentrate.
Operationally the Company will continue to enjoy the benefits of a weakening Rand and the strengthening of a US denominated
sales revenue. In addition, falling energy prices should reflect a reduction in one of the Company’s biggest operating cost
expenses, being diesel fuel, which is used for power generation and mining equipment.
Combined with the planned processing plant upgrades, the Company is anticipating significant growth in both sales revenue and
production in 2015.
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MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
S I G N I F I C A N T C H A N G E S I N T H E S T A T E O F A F F A I R S
Significant changes in the state of affairs of the Group during the financial year were as follows:
• The Company commissioned the Tormin Project. Details of the year’s operational performance and the resulting financial
impact is set out in the Review of Operations above.
No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material
and unusual nature likely, other than what has been disclosed elsewhere in this financial report, in the opinion of the directors of
the Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the
Company or the Group in future financial years unless otherwise disclosed in this Directors’ Report.
E V E N T S S I N C E T H E E N D O F T H E F I N A N C I A L Y E A R
Events since the end of the financial year were as follows:
• As at 31 December 2014, the $2.0m Wogen Pre-Financing Facility was paid down to a balance of $0.6m. On 2 March 2015
this balance was repaid in full.
• On 23 February 2015, the Company extended the term of the loans provided by major shareholders of the Company to
30 September 2015.
• Refer to the Corporate and Financial section on page 5 for details in respect to the current status of the Blastrite action.
• There have been no other material matters arising subsequent to the end of the financial year.
L I K E L Y D E V E L O P M E N T S A N D E X P E C T E D R E S U L T S O F O P E R A T I O N S
Likely developments in the operations of the Group constituted by the Company and the entities it controls from time to time that
were not finalised at the date of this report are included in the Review of Operations above as detailed in the Outlook section.
The Board will continue to review other projects and opportunities in the interest of increasing shareholder value.
E N V I R O N M E N T A L R E G U L A T I O N
The Group is subject to various environmental regulations in respect to its exploration, development and production activities.
In the course of its normal mining and exploration activities, the Group adheres to environmental regulations imposed upon it by
the relevant regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and
endangered flora and fauna.
S C H E D U L E O F M I N I N G T E N E M E N T S
Mining tenements currently held by the Group are:
Country
Location
Number
Type of Right
Status
Interest
South Africa
Tormin
(WC)30/5/1/2/2/163MR
South Africa
Tormin
(WC)30/5/1/2/2/162MR
Mining
Mining
Approved
Approved
South Africa
Tormin
(WC)30/5/1/1/2/10036PR
Prospecting
Approved
South Africa
Xolobeni
EC30/5/1/1/2/6PR
Prospecting
Approved
South Africa
Kwanyana
EC30/5/1/1/2/10025PR
Prospecting
Under Application
100%
100%
100%
100%
100%
Greenhouse gas and energy data reporting requirements
The directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities
to report annual greenhouse gas emissions and energy use in Australia. For the measurement period the directors have assessed
that there are no current reporting requirements, but may be required to do so in the future.
16
MINERAL COMMODITIES LTD Annual Report 2014 I N F O R M A T I O N O N D I R E C T O R S
Mark Victor Caruso
Executive Chairman and Chief Executive Officer
Age 53
Experience and expertise
Mr Caruso has extensive experience in mining, earthmoving and civil engineering construction earthworks. He has been a
director of the Company since September 2000. He was previously Chairman of Allied Gold Mining PLC (AGMP), responsible
for the delivery of the Gold Ridge Project in the Solomon Islands and the Simberi Gold Project in Papua New Guinea. After
resigning from AGMP he transitioned into the position of Executive Chairman of the Company in August 2012.
Other current directorships
Perpetual Resources Limited (appointed September 2013)
Former directorships in the last 3 years
Allied Gold Mining PLC
Special responsibilities
Chairman of the Board
Chief Executive Officer
Interests in shares and options
78,354,014 ordinary shares in the Company – indirect holding 1
15,784 ordinary shares in the Company – direct holding
1,000,000 options over ordinary shares in the Company
Joseph Anthony Caruso
Non-Executive Director
Age 69
Experience and expertise
Mr Caruso was appointed as Non-Executive Director of the Company in September 2000. He is a Director of Zurich Bay
Holdings Pty Ltd and Construction Manager of Simto Australia Pty Ltd, both of which are involved in mining, earthmoving and
civil engineering construction earthworks. He has considerable experience in managing and administration of engineering,
mining, raw materials production operations, earthmoving and related infrastructure utilities services resource contracts.
Other current directorships
None
Former directorships in the last 3 years
None
Special responsibilities
Member of the Remuneration and Nomination committee
Interests in shares and options
77,007,485 ordinary shares in the Company 1
1,000,000 options over ordinary shares in the Company
1 J A Caruso and M V Caruso are both directors of and have a relevant interest in Zurich Bay Holdings Pty Ltd, which holds 77,007,485 shares in the
Company. Mr Mark Caruso also holds shares indirectly through Regional Management Pty Ltd.
17
MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
Peter Patrick Torre CA, AGIA, MAICD
Non-Executive Director and Company Secretary
Age 42
Experience and expertise
Mr Torre was appointed Company Secretary of the Company in July 2006, and as a Director of the Company on 1 April 2010.
He is a Chartered Accountant, a Chartered Secretary and a member of the Australian Institute of Company Directors. He was
previously a partner of an internationally affiliated firm of Chartered Accountants. Mr Torre is the Company Secretary of several
ASX listed companies.
Other current directorships
None
Former directorships in the last 3 years
Neo Resources Limited, Mission New Energy Limited
Special responsibilities
Company Secretary and member of the Audit, Compliance and Risk Committee
Interests in shares and options
625,000 ordinary shares in the Company
1,000,000 options over ordinary shares in the Company
James Gerald Leahy CF30 (FCA), Reg Rep (LSE)
Non-Executive Director
Age 55
Experience and expertise
Following a period on the London Metal Exchange, Mr Leahy has spent 29 years in the mining industry as a specialist corporate
broker, including mining finance, origination and equity sales. He has worked on a wide range of projects, worldwide, ranging
from industrial minerals, precious metals, copper, diamonds, coal, uranium and iron ore. He has substantial experience with
international institutional fund managers, hedge funds and sector specialists. Over the years he has been involved in many IPO’s
and a large number of primary and secondary placings, developing junior companies through to production and beyond.
Other current directorships
Bacanora Minerals Ltd
Forte Energy NL
Bellzone Mining
Geiger Counter Ltd
Former directorships in the last 3 years
Continental Coal Ltd
Alberta Coal
OPI
African Power Ltd
Special responsibilities
Chairman of the Remuneration and Nomination Committee and member of Audit, Compliance and Risk Committee
Interests in shares and options
1,000,000 options over ordinary shares in the Company
18
MINERAL COMMODITIES LTD Annual Report 2014 Guy Redvers Walker BCA, CA, CFA, CMInstD
Non-Executive Director
Age 46
Experience and expertise
Mr Walker is a highly accomplished director and senior investment management executive with over 20 years financial markets
experience. He currently sits on the boards of several listed mining companies including exploration, development and production
companies. He has extensive experience in capital raising through both traditional banks and alternative lenders.
Other current directorships
Bacanora Minerals Ltd
Metals Exploration plc
Former directorships in the last 3 years
ENK plc
Navigator Resources Limited
Special responsibilities
Chairman of the Audit, Compliance and Risk Committee and member of the Remuneration and Nomination Committee
Interests in shares and options
125,000 ordinary shares in the Company
1,000,000 options over ordinary shares in the Company.
M E E T I N G S O F D I R E C T O R S
The number of meetings of the Company’s board of directors and each of the board committees held during the year ended
31 December 2014, and the number of meetings attended by each director were:
Name
Directors’ Meetings
Number of meetings held
A being total of meetings eligible to attend
B being total of meetings actually attended
Mark Victor Caruso
Joseph Anthony Caruso
Peter Patrick Torre
Guy Redvers Walker
James Gerald Leahy
A
4
4
4
4
4
B
4
2
4
4
4
Meetings of committees
Audit
Remuneration
A
–
–
4
4
4
B
–
–
4
4
4
A
–
3
–
3
3
B
–
2
–
3
3
Other matters of board business have been resolved by circular resolutions of directors, which are a record of decisions made
at a number of informal meetings of the directors held to control, implement and monitor the Company’s activities throughout
the year.
19
MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
This remuneration report sets out the remuneration information for the Company’s non-executive directors, executive directors,
other key management personnel and the five highest remunerated executives of the Group and the Company. The remuneration
report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service agreements
D. Share-based compensation
E. Additional information
F. Other transactions with key management personnel
A. Principles used to determine the nature and amount of remuneration
In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company’s
operations, the board reviews the remuneration packages of all key management personnel, if any, on an annual basis and makes
recommendations. Remuneration packages are reviewed with due regard to performance and other relevant factors. No
remuneration consultants have been used due to the small number of employees and Key Management Personnel.
Remuneration packages may contain the following key elements:
(a) Directors’ fees;
(b) Salary and Consultancy; and
(c) Benefits, including the provision of a motor vehicle and superannuation.
Fees payable to non-executive directors reflect the demands which are made on, and the responsibilities of the directors. The
Board reviews non-executive directors’ fees and payments annually.
Executives are offered a competitive base pay that consists of fixed components. Base pay for senior executives, if any, is
reviewed annually to ensure the executive pay is competitive with the market. Total base pay can be structured as a total
employment package which may be delivered as a combination of cash and prescribed non-financial benefits at the board’s
discretion.
There were no short or medium term cash incentives provided to any executives of the Company during the financial year. Short
or medium term cash incentives are not incorporated into any executives’ salary packages as at 31 December 2014. Long-term
incentives are provided to directors and other Key Management Personnel to incentivise them to deliver long-term shareholder
returns. These are determined based on what the Board views as reasonable based on market conditions. Any grant of securities
to directors of the Company must be approved by shareholders in a general meeting.
The directors are not required to hold any shares in the Company under the constitution of the Company; however, to align
directors’ interests with shareholders’ interests the directors are encouraged to hold shares in the Company.
As at 31 December 2014, remuneration is not directly related to Company performance or key performance indicators. Directors’
Fees and the Remuneration of the Chief Executive Officer (“CEO”) are fixed. There is no at risk component of any remuneration
of the Key Management Personnel.
During the 2013 financial year the board appointed a separate remuneration and nomination committee.
Profit / (loss) for the year (USD)
8,376,344
(1,569,980)
(1,233,344)
(2,206,055)
(1,494,207)
Closing Share price (AUD)
11 cents
18.5 cents
9.9 cents
7.5 cents
8.1 cents
2014
2013
2012
2011
2010
Voting and comments made at the Company’s 2014 Annual General Meeting
The Company received the unanimous support of shareholders present on the remuneration report at the Annual General Meeting
(“AGM”) for the 2014 financial year and 99% of proxy votes were in favour of the resolution to approve the remuneration report.
The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
20
MINERAL COMMODITIES LTD Annual Report 2014 B. Details of Remuneration
The key management personnel of the Group are the directors of the Company and Mr Tony Sheard, the Chief Financial Officer
(“CFO”) who was appointed as a full time employee on 1 January 2015. Mr Sheard was acting in his capacity as a consultant up
to 31 December 2014. The amounts disclosed are therefore applicable for both the Company and the Group.
Details of the remuneration of directors and the key management personnel (as defined in AASB 124 Related Party Disclosures)
of the Company and the Group are set out in the following tables. There are no long term benefits amounts due to directors and
key management personnel, other than those disclosed. There were no non-cash benefits provided to Key Management
Personnel during the year. The following fees are applicable to directors and key management personnel of the Company.
Cash
benefits
Post-
employment
benefits
Share-
based
payments
$
$
Executive Chairman
Mark Caruso
2014
293,228
2013
270,108
Non-Executive Directors
Joseph Caruso
2014
50,248
Peter Torre
2013
52,734
2014
135,360
2013
145,170
Guy Walker
2014
63,920
2013
66,066
James Leahy
2014
63,920
2013
66,066
2014
2013
606,676
600,144
Total Director
Remuneration
Other Key Management
Personnel
Tony Sheard ¹
2014
92,045
2013
–
Andrew Lashbrooke ²
2014
270,720
Total key management
personnel
compensation
2013
290,340
2014
2013
969,441
890,484
27,124
20,232
4,648
4,813
–
–
–
–
–
–
31,772
25,045
–
–
–
–
31,772
25,045
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Totals
$
320,352
290,340
54,896
57,547
135,360
145,170
63,920
66,066
63,920
66,066
638,448
625,189
92,045
–
270,720
290,340
1,001,213
915,529
Percentage
performance
based
Share based
payments as a
percentage of
remuneration
%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
¹ Tony Sheard commenced employment as a consultant on 18 August 2014 and received consultancy fees of $92,045 for the year ended 31 December
2014. Effective from 1 January 2015, he entered into a service agreement with the Company. It has no fixed term, with a total remuneration package of
A$275,000 per annum. There are no termination benefits unless made constructively redundant in which case he receives 12 months remuneration. Other
short and long term benefits forming part of the service agreement are detailed below:
21
MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
Cash bonus
The Executive shall be entitled to an annual bonus during the first year of employment of 25% of the Base Remuneration ($68,750), measured against the
following criteria, one third weighting for each:
• Performance against scope of services set out in the Agreement at the sole discretion of the Executive Chairman;
• Board reporting within set timing each month; and
• Achieving EBTIDA against budget taking into account uncontrollable variables at the discretion of the Board.
Future Bonuses will be at the sole discretion of the Board.
Grant of options
The Company to issue 1,000,000 options exercisable at A$0.20 expiring on 31 March 2018, vesting 1/3 each year commencing from date of issue.
² Andrew Lashbrooke resigned on 12 September 2014.
Base Fees
Non-Executive Directors
Additional Fees
Audit Committee Chair
Audit Committee Member
Remuneration and Nomination Committee Chair
Remuneration and Nomination Committee Member
From 1 December 2014
Up to 30 November 2014
$58,656
$53,229
From 9 February 2014
Up to 9 February 2014
$9,024
$4,512
$9,024
$4,512
$9,678
$4,839
$9,678
$4,839
C. Service Agreements
The following service agreements are in effect at 31 December 2014:
Mark Caruso
Commencement date
Term
6 August 2012
No fixed term
Total Remuneration package
A$300,000 per annum
Termination benefits
12 months base salary plus any payment in lieu of notice
Mark Caruso was appointed as the CEO of the Company on 12 September 2014. As at 31 December 2014, the above agreement
remained in place however the Company engaged the services of a remuneration consultant to provide a recommendation on a
proposed remuneration structure for Mr Caruso as Executive Chairman and CEO. The final report was received subsequent to
the end of the financial year. The Company has not yet finalized the terms of the new service agreement and is expected to do
so in the coming period. It is expected that the amended remuneration structure for Mr Caruso will be backdated to 12 September
2014. For this reason an appropriate accrual has been made and disclosed as part of Mr Caruso’s remuneration for 2014 in the
2014 financial statements to account for this.
Peter Torre
Commencement date
1 November 2012
Term
No fixed term
Total Remuneration package
A$150,000 per annum
Termination benefits
12 months base salary plus any payment in lieu of notice
There are no other service agreements.
22
MINERAL COMMODITIES LTD Annual Report 2014 D. Share Based Compensation
There were no options granted or ordinary shares issued as remuneration during the year ended 31 December 2014 (2013: nil).
The relevant interest of each director and key management personnel in the share capital of the Company, shown in the Register
of Directors’ and Key Management Personnel Shareholding at the date of the Directors’ Report is as follows:
Balance as at
1 January 2014
Received as
remuneration
Increase as a
result of options
exercised
Net change
Balance as at
31 December
2014
Mark Caruso
• Indirect
• Direct
Joseph Caruso
Peter Torre
Guy Walker
James Leahy
Tony Sheard ¹
78,354,014
15,784
77,007,485
625,000
125,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78,354,014
15,784
77,007,485
625,000
125,000
–
100,000
100,000
¹ Mr Sheard has an indirect interest in 100,000 ordinary shares in the Company, which were acquired prior him commencing employment with the
Company on 18 August 2014.
Details of options over ordinary shares in the Company provided as remuneration to key management personnel are shown below:
Mark Caruso
Joseph Caruso
Peter Torre
Guy Walker
James Leahy
Tony Sheard
Balance as at
1 January 2014
Received as
remuneration
Options
exercised
Options
lapsed
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance as at
31 December
2014
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
–
E. Additional Information
There is no additional information to be provided in respect to the remuneration of the directors.
F. Other transactions with key management personnel
As announced by the Company on 30 May 2014, the Company obtained an unsecured short term working capital facility of up to
$4m from major shareholders. This included a A$2m facility provided by Regional Management Pty Ltd (“RMS”), a related party
of Mr Mark Caruso, the Executive Chairman of the Company.
Pursuant to the Loan Agreement entered into between the Company and RMS, the lender provided a finance facility capped at
A$2m on the following arm’s-length and commercial terms:
• Loan is unsecured;
•
Interest of 13% per annum;
• Line fee of 1% and establishment fee of 1%;
• Repayment to take in three equal tranches on 31 January 2015, 28 February 2015 and 31 March 2015; and
• Default interest of 10% if not repaid on the repayment date.
23
MINERAL COMMODITIES LTD Annual Report 2014 DI R E C T O R S’ R E P O R T ( C O N T I N U E D )
As announced by the Company on 23 February 2015, RMS agreed to extend the term of the loan it provided to 30 September
2015. The Company is assessing financing options for its impending expansion initiatives relating to a GSP and a TSP. Based on
the Company’s strong 2015 cash flow projections, it is expected that these will be funded by traditional debt financing; therefore,
the extension of the existing shareholder loan provides the Company the flexibility to explore all options.
End of the Audited Remuneration Report
I N S U R A N C E O F O F F I C E R S
During the financial year the Group has paid an insurance premium to insure the directors and secretaries of the Company and its
controlled entities. The annual premium paid was $31,600 representing $6,320 per director. The liabilities insured are legal costs
that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as
directors or officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection
with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else
or to cause detriment to the Group.
P R O C E E D I N G S O N B E H A L F O F T H E G R O U P
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which
the Group is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
N O N - A U D I T S E R V I C E S
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out below.
The board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity
of the auditor;
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
24
MINERAL COMMODITIES LTD Annual Report 2014 During the year the following fees were paid or payable for services provided by BDO Audit (WA) Pty Ltd and BDO Tax (WA) Pty
Ltd, its related practices and non-related firms:
Audit services
Audit and review of financial reports
BDO Audit (WA) Pty Ltd
BDO Cape Town South Africa
Non-audit services
Taxation and company secretarial
BDO Tax (WA) Pty Ltd
BDO Cape Town South Africa
31 Dec 2014
$
31 Dec 2013
$
68,281
32,871
101,152
90,768
5,555
96,323
58,068
18,604
76,672
–
–
–
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page
27 and forms part of this report.
A U D I T O R
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report has been made in accordance with a resolution of the directors.
Mark V. Caruso
Executive Chairman/CEO
Perth, Western Australia
30 March 2015
25
MINERAL COMMODITIES LTD Annual Report 2014 A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF MINERAL COMMODITIES
LTD
As lead auditor of Mineral Commodities Ltd for the year ended 31 December 2014, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Mineral Commodities Ltd and the entities it controlled during the
period.
Brad McVeigh
Director
BDO Audit (WA) Pty Ltd
Perth, 30 March 2015
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
18
27
MINERAL COMMODITIES LTD Annual Report 2014 C O N S O L I D A T E D I N C O M E S T A T E M E N T
Revenue from continuing operations
Sale of product
Other revenue
Other income
Expenses
Mining and processing costs
Other expenses from ordinary activities
Administration expenditure
Exploration and evaluation expenditure written off
Finance costs
Profit / (loss) before income tax benefit
Income tax benefit
Profit / (loss) after income tax benefit
Profit / (loss) is attributable to:
Owners of Mineral Commodities Ltd
Non-controlling interest
Notes
31 Dec 2014
$
31 Dec 2013
$
3
3
4
4
4
4
5
33,270,806
1,689,143
34,959,949
–
222,075
222,075
502
2,903
(27,077,759)
–
(3,425,917)
(1,533,996)
(29,601)
(477,927)
(95,243)
(165,719)
3,949,247
(1,569,980)
4,427,097
–
8,376,344
(1,569,980)
8,376,344
(1,569,980)
–
–
8,376,344
(1,569,980)
Cents
Cents
Earnings / (loss) per share for profit / (loss) from continuing
operations attributable to the ordinary equity holders of the
Company:
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
29
29
2.07
2.01
(0.62)
(0.62)
The above consolidated income statement should be read in conjunction with the accompanying notes.
28
MINERAL COMMODITIES LTD Annual Report 2014FOR THE YEAR ENDED 31 DECEMBER 2014 C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E
31 Dec 2014
$
31 Dec 2013
$
Profit / (loss) for the year
8,376,344
(1,569,980)
Other comprehensive income
Changes in the fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
–
(2,549,618)
(254,047)
(851,827)
Other comprehensive income / (loss) for the year, net of tax
5,826,726
(1,105,874)
Total comprehensive income / (loss) for the year
5,826,726
(2,675,854)
Total comprehensive income / (loss) for the year is attributable to:
Owners of Mineral Commodities Ltd
Non-controlling interest
5,826,726
(2,675,854)
–
–
5,826,726
(2,675,854)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
29
MINERAL COMMODITIES LTD Annual Report 2014FOR THE YEAR ENDED 31 DECEMBER 2014 C O N S O L I D A T E D B A L A N C E S H E E T
A S A T 3 1 D E C E M B E R 2 0 1 4
Notes
31 Dec 2014
$
31 Dec 2013
$
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Available-for-sale financial assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Mine development expenditure
Exploration expenditure
Mine properties
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Unearned revenue
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
30
6
7
8
9
7
10
11
12
13
14
15
16
17
18
18
4,216,052
3,084,929
6,123,021
64,228
1,503,316
1,177,992
771,760
94,495
13,488,230
3,547,563
665,553
737,047
14,642,240
5,030,704
5,003,743
13,606,814
6,019,727
11,008,541
4,617,463
4,036,956
–
–
34,985,682
30,383,106
48,473,912
33,930,669
5,683,843
2,522,315
4,130,000
7,235,413
141,768
–
6,026,124
–
17,191,024
8,548,439
77,167
77,167
–
–
17,268,191
8,548,439
31,205,721
25,382,230
MINERAL COMMODITIES LTD Annual Report 2014 C O N S O L I D A T E D B A L A N C E S H E E T
A S A T 3 1 D E C E M B E R 2 0 1 4
Notes
31 Dec 2014
$
31 Dec 2013
$
19
19
19
19
63,437,092
63,440,327
(10,402,894)
(7,853,276)
(21,942,116)
(30,318,460)
31,092,082
25,268,591
113,639
113,639
31,205,721
25,382,230
Equity
Contributed equity
Reserves
Accumulated losses
Parent entity interest
Non-controlling interest
Total equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
31
MINERAL COMMODITIES LTD Annual Report 2014 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Notes
31 Dec 2014
$
31 Dec 2013
$
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
36,177,065
–
Payments to suppliers & employees
(27,737,444)
(2,208,551)
Net cash inflow / (outflow) from operating activities
20
8,439,621
(2,208,551)
Cash flows from investing activities
Exploration expenditure
Payments for property, plant and equipment
Payments for development expenditure
Payments for general fixed assets
Loan to associated company
Proceeds from sales of investments
Interest received
(96,407)
(142,132)
(1,863,340)
(5,561,109)
(3,198,386)
(14,811,441)
(256,131)
(1,955)
–
(409,591)
17,647
12,889
–
222,075
Net cash outflow from investing activities
(5,383,728)
(20,704,153)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of shares and options (net of costs)
(3,235)
10,491,689
Proceeds from borrowings
Repayment of borrowings
Interest paid on borrowings
Net cash (outflow) / inflow from financing activities
2,907,010
6,026,124
(2,236,045)
–
(944,926)
(165,719)
(277,196)
16,352,094
Net increase / (decrease) in cash and cash equivalents
2,778,697
(6,560,610)
Cash and cash equivalents at beginning of financial year
Exchange rate movement on opening balances
Cash and cash equivalents at end of financial year
6
6
1,503,316
8,057,362
(65,961)
6,564
4,216,052
1,503,316
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
32
MINERAL COMMODITIES LTD Annual Report 2014FOR THE YEAR ENDED 31 DECEMBER 2014 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
Consolidated entity
Contributed
equity
Reserves
Accumulated
losses
For the year ended 31 December 2014
$
$
$
Non-
controlling
interest
$
Totals
$
Total
equity
$
At 1 January 2014
63,440,327
(7,853,276)
(30,318,460)
25,268,591
113,639
25,382,230
Profit for the year
Other comprehensive loss for
the year
Total comprehensive income /
(loss) for the year
Transaction with owners in their
capacity as owners
–
–
–
–
8,376,344
8,376,344
(2,549,618)
–
(2,549,618)
(2,549,618)
8,376,344
5,826,726
(3,235)
–
–
(3,235)
–
–
–
–
8,376,344
(2,549,618)
5,826,726
(3,235)
Balance at the end of the year
63,437,092 (10,402,894)
(21,942,116)
31,092,082
113,639
31,205,721
Consolidated entity
Contributed
equity
Reserves
Accumulated
losses
For the year ended 31 December 2013
$
$
$
Non-
controlling
interest
$
Totals
$
Total
equity
$
At 1 January 2013
52,948,638
(6,747,402)
(28,748,480)
17,452,756
113,639
17,566,395
Loss for the year
Other comprehensive loss for
the year
Total comprehensive income /
(loss) for the year
Contributions of equity net of
transaction costs
–
–
–
–
(1,569,980)
(1,569,980)
(1,105,874)
–
(1,105,874)
–
–
(1,569,980)
(1,105,874)
(1,105,874)
(1,569,980)
(2,675,854)
–
(2,675,854)
10,491,689
–
–
10,491,689
–
10,491,689
Balance at the end of the year
63,440,327
(7,853,276)
(30,318,460)
25,268,591
113,639
25,382,230
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
33
MINERAL COMMODITIES LTD Annual Report 2014 N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of Mineral Commodities Ltd (the “Company”) and its subsidiaries (together are
referred to hereafter as the “Group”). Mineral Commodities Ltd is an Australian domiciled public listed company.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Mineral Commodities
Ltd is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
•
•
•
•
available-for-sale financial assets, financial assets and liabilities (including derivative instruments)
certain classes of property, plant and equipment and investment property – measured at fair value
assets held for sale – measured at fair value less cost of disposal, and
retirement benefit obligations – plan assets measured at fair value.
(iii) New and amended standards adopted by the Group
There were no new standards or amendments to standards, which required adoption for the first time for the annual
reporting period commencing 1 January 2014:
(iv) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2014
reporting periods and have not been early adopted by the Group. It has been determined by the Group that there is no
impact, material or otherwise, of the above standards on its business and, therefore, no change is necessary to the Group
accounting policies. Refer to note 1(z) for further details.
(b) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii) Associates
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the
case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using
the equity method of accounting (see (iii) below), after initially being recognised at cost.
34
MINERAL COMMODITIES LTD Annual Report 2014 (iii) Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of
movements in other comprehensive income of the investee in other comprehensive income. Dividends received or
receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of
the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
reserve within equity attributable to owners of the Company.
(c) Segment reporting
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the directors that make strategic decisions.
(d)
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in United States (US$) dollars, which is the Company’s presentation currency.
The Group has previously reported its consolidated results in Australian dollars. As part of the transition to a mining company
and to provide greater consistency with reporting by other international mining companies listed on the ASX, as of 1 January
2014 the Company adopted United States dollars as its presentation currency. The financial statements are translated from
the individual subsidiaries functional currencies (Australian Dollars and South African Rand) into a presentation currency of
United States dollars. The exchange rates applied during the reporting period were as follows:
Australian dollars (A$) to United States dollars (US$):
Year-to-date average exchange rate
Year-end closing exchange rate
31 December 2014
31 December 2013
0.9024
0.8156
0.9678
0.8873
The basis for presenting the results and financial position from functional currency of Australian dollars into a presentation
currency of United States dollars were as follows:
•
•
the Australian denominated MRC Group balance sheet as at 31 December 2014 was translated at the closing exchange
rate of 0.8156;
income and expenses for the statement of comprehensive income were translated at average daily exchange rates
from 1 January 2014 to 31 December 2014;
• movements in equity and reserves for the comprehensive income and for the financial position were translated at
average daily exchange rates per quarter from 1 January 2014 to 31 December 2014;
35
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
(d)
Foreign currency translation
(i) Functional and presentation currency (continued)
•
assets and liabilities for each balance sheet presented have been translated at the closing rate at the date of that
statement of balance sheet;
•
•
•
results for the cash flow statement were translated at average daily exchange rates from 1 January 2014 to 31 December
2014;
exchange differences on translating income, expenses and movements in equity and reserves at annual average
exchange rates and assets and liabilities at closing exchange rates from functional currency to presentation currency
are taken to the foreign currency translation reserve in the equity section and under other comprehensive income/
(expense) in the statement of comprehensive income; and
comparatives for 31 December 2013 have been re-translated on the same basis as 31 December 2014 using the
exchange rates noted in the above table.
(ii) Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in
profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges
or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs.
All other foreign exchange gains and losses are presented in the income statement on a net basis within other income or
other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part
of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities
held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation
differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other
comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
income and expenses for each income statement and statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions); and
•
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid,
the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
36
MINERAL COMMODITIES LTD Annual Report 2014 (e) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates and amounts collected on behalf of third parties.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
(i) Sale of goods
Revenue from the sale of goods is recognised when there is persuasive evidence indicating that there has been a transfer
of risks and rewards to the customer, generally for the Group, this is based on free-on-board sales where transfer of risks
and rewards passes at port of origin. Sales revenue comprises gross revenue earned from the provision of product to
customers. Sales are initially recognised at estimates sales value when the product is delivered. Adjustments are made for
variations in metals price, assay, weight and moisture content between the time of delivery and the time of final settlement
of sales proceeds.
(ii) Unearned revenue
Unearned revenue represents revenue that has been received by the Group for requested goods where the risks and
rewards have not yet been transferred as the goods have not been substantially provided. Deferred revenue is recognised
as revenue subsequent to this in accordance with the Group’s revenue recognition policy.
(iii) Interest income
Interest and other income are recognised as it accrues on a time proportion basis using the effective interest method.
(f)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when
the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets
are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign
operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable
that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
37
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
The Company and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set
off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
(i)
Investment allowances and similar tax incentives
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets or
in relation to qualifying expenditure (eg the Research and Development Tax Incentive regime in Australia or other investment
allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax
payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as
deferred tax assets.
(g)
Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership
are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property
or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges,
are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance
cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance
leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is
no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease.
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the
lease term. The respective leased assets are included in the balance sheet based on their nature.
(h)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets
are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment
at the end of each reporting period.
(i)
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value,
and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(j)
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
38
MINERAL COMMODITIES LTD Annual Report 2014 (k)
Inventories
Raw materials and stores, ore stockpiles and work in progress and finished stocks are physically measured or estimated
and valued at the lower of cost and net realisable value. Net realisable value less costs to sell is assessed annually based
on the amount estimated to be obtained from sale of the item of inventory in the normal course of business, less any
anticipated costs to be incurred prior to its sale.
Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure and
depreciation and amortisation relating to mining activities, the latter being allocated on the basis of normal operating
capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is
the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
Inventories of consumable supplies and spare parts expected to be used in production are valued at the lower of weighted
average cost, which includes the cost of purchase as well as transportation and statutory charges, or net realisable value.
Any provision for obsolescence is determined by reference to specific stock items identified.
During the exploration, development and production phases, where the cost of extracting the ore exceeds the likely
recoverable amount, work in progress inventory is written down to net realisable value. A portion of the related depreciation,
depletion and amortisation charge is included in the cost of inventory.
(l)
Investments
(i)
Interests in subsidiaries
Investments in subsidiaries are carried in the Company’s financial report at cost less any impairment losses. Dividends and
distributions are brought to account in profit when they are declared by the subsidiaries.
(ii)
Investments in associates
Associates are all entities over which the consolidated entity has significant influence but not control, generally accompanying
a shareholding of between 20%–50% of the voting rights. Investments in associates are accounted for in the parent entity
financial statements using the cost method and in the consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Consolidated entity’s investment in associates includes goodwill
(net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates post acquisition profits or losses are recognised in profit for the year, and its share of
post-acquisition movements in reserves is recognised directly in reserves. The cumulative post acquisition movements are
adjusted against the carrying amount of the investment.
(m) Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Items of plant and equipment are initially recorded at cost and include any expenditure that is directly attributable to
acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as
appropriate. All other repairs and maintenance are charged to the profit for the year in which they are incurred.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An assets
carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its
estimated recoverable amount.
Depreciation of property, plant and equipment
Depreciation and amortisation is provided to expense the cost of mine properties and development, and property, plant and
equipment, over its estimated useful life on a straight line or units of usage (activity) basis.
The basis of depreciation and amortisation of each asset is reviewed annually and changes to the basis of depreciation and
amortisation are made if the straight line or units of production basis is no longer considered to represent the expected
pattern of consumption of economic benefits.
The reserves and life of each mine and the remaining useful life of each class of asset are reassessed at regular intervals
and the depreciation and amortisation rates adjusted accordingly on a prospective basis.
39
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
The estimated useful lives for the main categories of assets are as follows:
Fixed Asset Category
Estimated Useful Life
Mine properties and development
The shorter of applicable mine life or generally 10 years
Land
Mine buildings
Heavy earth moving vehicles
Not depreciated
The shorter of applicable mine life or generally 10 years
Excavators and loaders working in significant salt
exposed conditions
Generally 12,000 hours operation
All other heavy earth moving vehicles
Generally 18,000 hours operation
Light and other mobile vehicles
Generally 5 years
Mine specific machinery, plant and equipment
The shorter of applicable mine life or generally 10 years
Other machinery, plant and equipment
Generally 10 years
Computer hardware
Software acquisitions and development
Generally 4 years
Generally 3 years
Office leasehold fit-outs
Generally lease term, including extensions
Other office furniture and fittings
Generally 10 years
Note: For assets under a finance lease, if there is no reasonable certainty that the lessee will obtain ownership by the end
of the lease term, the asset shall be fully depreciated over the shorter of the lease term or its useful life.
Note: “Generally” implies that if a specific asset or class of assets useful life is reasonably able to be determined as less
than that stipulated above, then the applicable lower estimated useful life is to be used.
Disposal of assets
The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time
of disposal and the proceeds on disposal and is included in profit for the year of disposal.
(n) Exploration and development expenditure
(i) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of
interest. Such expenditure comprises direct costs and does not include general overheads or administrative expenditure
not having a specific nexus with a particular area of interest.
Exploration expenditure for each area of interest is carried forward as an asset provided the rights to tenure of the area of
interest are current and one of the following conditions is met:
•
•
The exploration and evaluation expenditures are expected to be recouped through successful development and
exploitation of the area of interest, or alternatively, by its sale; or
Exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and
significant operations in, or in relation to, the area of interests is continuing.
Exploration expenditure is written off when it fails to meet at least one of the conditions outlined above or an area of interest
is abandoned.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying
amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest
40
MINERAL COMMODITIES LTD Annual Report 2014 that the carrying amount exceeds the recoverable amount the impairment loss will be measured and disclosed in accordance
with AASB 136 Impairment of Assets.
When a decision is made to develop an area of interest, all carried forward exploration expenditure in relation to the area of
interest is transferred to Mine Properties and Development.
(ii) Mine properties and development
Development expenditure represents the accumulated exploration, evaluation, land and development expenditure incurred
by or on behalf of the Group in relation to areas of interest in which mining of a mineral resource has commenced.
When further development expenditure is incurred in respect of a mine property after commencement of production, such
expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby
established, otherwise such expenditure is classified as part of the cost of production.
In some circumstances, where conversion of resources into reserves is expected, some resources may be included.
Development and land expenditure still to be incurred in relation to the current reserves are included in the amortisation
calculation. Where the life of the assets are shorter than the mine life their costs are amortised based on the useful life of
the assets.
The estimated recoverable reserves and life of the mine and the remaining useful life of each class of asset are reassessed
at least annually. Where there is a change in the reserves/resources amortisation rates are correspondingly adjusted.
Please refer to the table in note 1(m) above for basis of amortisation rates used.
(iii) Stripping costs in the production phase of a surface mine
Deferred stripping costs represent certain mining costs, principally those that relate to the stripping of waste, which
provides access so that future economically recoverable ore can be mined. Stripping (i.e. overburden and other waste
removal) costs incurred in the production phase of a surface mine are capitalised to the extent that they improve access to
an identified component of the ore body and are subsequently amortised on a systematic basis over the expected useful
life of the identified component of the ore body. Capitalised stripping costs are disclosed as a component of Mine Properties
and Development.
Components of an ore body are determined with reference to life of mine plans and take account of factors such as the
geographical separation of mining locations and/or the economic status of mine development decisions.
Capitalised stripping costs are initially measured at cost and represent an accumulation of costs directly incurred in
performing the stripping activity that improves access to the identified component of the ore body, plus an allocation of
directly attributable overhead costs.
The amount of stripping costs deferred is based on a relevant production measure which uses a ratio obtained by dividing
the tonnage of waste mined by the quantity of ore mined for an identified component of the ore body. Stripping costs
incurred in the period for an identified component of the ore body are deferred to the extent that the current period ratio
exceeds the expected ratio for the life of the identified component of the ore body. Such deferred costs are then charged
against the income statement on systematic units of production basis over the expected useful life of an identified
component of the ore body. The expected life of mine and component ratio is based on proved and probable reserves of
the mine as per the annual mine plan. These are a function of the mine design and therefore any changes to the design will
generally result in changes to the ratio. Changes in other technical or economic parameters that impact on reserves may
also have an impact on the component ratio even though they may not impact the mine design.
Changes to the life of mine plan, identified components of an ore body, stripping ratios, units of production and expected
useful life are accounted for prospectively.
Deferred stripping costs form part of the total investment in a cash generating unit, which is reviewed for impairment if
events or changes in circumstances indicate that the carrying value may not be recoverable.
Due to the current nature of the operations no amount of stripping costs has been deferred, as there is no overburden or
other production striping required. The full amount of mining cost has been recognised through inventory and costs of
production as incurred.
41
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
(o) Trade and other payables
Trade and other payables are recognised originally at fair value and subsequently measured at amortised cost using the
effective interest rate method. Trade and other payables represent liabilities for goods and services provided to the Group
prior to the end of each reporting period that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of goods and services. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months from the reporting date.
(p)
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being fair value of the consideration received net of issue costs
associated with the borrowing.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or
premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the
amortisation process.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting periods.
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(q) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
(r)
Employee Benefits
(i) Wages and salaries, annual leave, long service and sick leave
Provision is made for the Group’s liability for employee entitlements arising from services rendered by employees
to reporting date. These benefits include annual and long service leave. Sick leave is non-vesting and has not been provided
for. Employee entitlements expected to be settled within one year have been measured at the amounts expected to be paid
when the liabilities are settled and are recognised in other payables.
The contributions made to defined contribution superannuation funds by entities within the consolidated entity are charged
against profits when due.
(ii) Share-based payments
The issue of employee options was approved by shareholders at a general meeting of the Company held on 21 December
2012 and the fair value of these has been expensed. There were no share based payments in either 2014 or 2013.The fair
value at grant date is independently determined using an appropriate option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
(s) Contributed equity
Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
(t)
Earnings / (loss) per share
(i) Basic earnings / (loss) per share
Basic earnings per share is determined by dividing the profit after income tax attributable to members of the Company by
the weighted average number of ordinary shares outstanding during the financial year.
42
MINERAL COMMODITIES LTD Annual Report 2014 (ii) Diluted earnings / (loss) per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account
amounts unpaid on ordinary shares and any reduction in earnings per share would arise from the exercise of options
outstanding at the end of the financial year.
(u) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of
goods & 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 where 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 in the Consolidated Balance Sheet. Cash flows are included in the statements of cash flows 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.
(v)
Financial Instruments
The Group classifies its financial instruments on initial recognition. The classification depends on the purpose for which the
financial instrument was acquired.
(i) Recognition and de-recognition
Regular purchases and sales of financial assets are recognised on trade date; the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are
derecognised when the rights to receive cash flows from the financial assets have expired or been transferred and the
Group has transferred substantially all the risks and rewards of ownership.
(ii) Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to
determine the fair value of all unlisted securities, including recent arm’s length transactions, reference to similar instruments
and other pricing models.
(iii) Loans and receivables
Loans and receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest
rate method. They are included within current assets, except for those with maturities greater than 12 months after the
reporting date which are classified as non-current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are recognised at fair value. Unrealised gains and losses arising from changes in fair value
are taken directly to equity until the instrument is sold at which time any balance in equity relating to the instrument is
recycled to profit or loss as part of the profit or loss on sale.
(v) Financial Liabilities
Financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising original debt less
principal payments and amortisation of transaction costs.
(vi) Impairment
At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired.
In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is
considered to determine whether impairment has arisen. Impairment losses are recognised in profit or loss. Impairment
losses recognised on equity instruments classified as available for sale are not reversed through the income statement.
43
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
(w) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale or transaction rather than continuing use. They are measured at the lower of their carrying amount and fair
value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial
assets, investment property and non-current biological assets that are carried at fair value.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for
sale continue to be recognised.
A discontinued operation is a component of the entity that has been disposed of or has been abandoned, or is classified as
held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-
ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view
to resale. The results of discontinued operations are presented separately on the face of the statement of profit or loss and
other comprehensive income.
(x) Parent entity information
The financial information for the parent entity, Mineral Commodities Ltd, disclosed in note 30 has been prepared on the
same basis as the consolidated financial statements, unless stated otherwise.
(y) Critical accounting estimates and judgements
The Group makes significant estimates and judgements concerning the future. The resulting accounting estimates may not
equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year are discussed below.
The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and
best available current information. Estimates assume a reasonable expectation of future events and are based on current
trends and economic data, obtained both externally and within the Group.
Significant judgements and critical estimate in applying the entity’s accounting policies
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or
written down.
Exploration and development expenditure
Recoupment of the capitalised exploration and evaluation expenditure is dependent on the successful development and
commercial exploitation of the Xolobeni Mineral Sands area of interest in South Africa. The capitalised expenditure in
relation to the Xolobeni project is expected to be fully recoverable once the grant of the mining right has been affirmed by
the Minister of Minerals and Energy in South Africa and the Company proceeds to further develop this project.
Investment in Unlisted Entities
The investments in Africa Uranium Ltd and Petro Ventures International Ltd have been fully impaired at 31 December 2014.
44
MINERAL COMMODITIES LTD Annual Report 2014 Reserves and Resources
In order to calculate ore reserves and mineral resources, estimates and assumptions are required about a range of geological,
technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs,
transport costs, commodity demand, commodity prices and exchange rates. The Group estimates its ore reserves and
mineral resources based on information compiled by Competent Persons (as defined in accordance with the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as revised in 2012 (the JORC code).
As economic assumptions used to estimate reserves change and as additional geological data is generated during the
course of operations, estimates of reserves and mineral resources may vary from period to period. Changes in reported
reserves and mineral resources may affect the Group’s financial results and financial position in a number of ways, including
the following:
• Asset carrying values may be affected due to changes in estimated future cash flows;
• Depreciation and amortisation charges in profit or loss may change where such charges are determined by the units
of production basis, or where the useful economic lives of assets change; and
• Restoration and rehabilitation provision may be affected due to changes in the magnitude of future restoration and
rehabilitation expenditure.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses. As a result of this review, at
balance date, it was determined that losses of $4,427,097 at 30% have been bought to account as it is now probable that
they will be recovered.
Rehabilitation provision
A provision has been made for the present value of anticipated costs for future rehabilitation of land explored or mined. The
Group’s mining and exploration activities are subject to various laws and regulations governing the protection of the
environment. The Group recognises management’s best estimate for assets retirement obligations and site rehabilitations
in the period in which they are incurred. Actual costs incurred in the future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect
the carrying amount of this provision.
45
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 .
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )
(z) Accounting standards not yet effective
Reference
Title
Nature of Change
Application
date of
standard
Impact on entity
financial statements
Application
date for entity
Financial
Instruments
AASB 9
(issued
December
2009 and
amended
December
2010)
Amends the requirements for
classification and measurement of
financial assets. The available-for-
sale and held-to-maturity
categories of financial assets in
AASB 139 have been eliminated.
Under AASB 9, there are three
categories of financial assets:
1 January 2017 Adoption of AASB 9 is
only mandatory for the
year ending 30 June
2018. The entity has
not yet made an
assessment of the
impact of these
amendments.
1 January 2017
• Amortised cost
• Fair value through profit or loss
• Fair value through other
comprehensive income.
AASB 9 requires that gains or
losses on financial liabilities
measured at fair value are
recognised in profit or loss, except
that the effects of changes in the
liability’s credit risk are recognised
in other comprehensive income.
An entity will recognise revenue
to depict the transfer of promised
good or services to customers
in an amount that reflects the
consideration to which the entity
expects to be entitled in exchange
for those goods or services.
This means that revenue will be
recognised when control of goods
or services is transferred, rather
than on transfer of risks and
rewards as is currently the case
under IAS 18 Revenue.
Defers the effective date of AASB
9 to 1 January 2015. Entities are
no longer required to restate
comparatives on first time
adoption. Instead, additional
disclosures on the effects of
transition are required.
IFRS 15
(issued
June 2014)
Revenue from
contracts with
customers
AASB
2012–6
(issued
September
2012)
Amendments
to Australian
Accounting
Standards
– Mandatory
Effective Date
of AASB 9 and
Transition
Disclosures
46
1 January 2017
Annual
reporting
periods
beginning
on or after
1 January 2017
Due to the recent
release of this
standard, the entity
has not yet made a
detailed assessment
of the impact of this
standard.
1 January 2015
1 January 2015 As comparatives are
no longer required to
be restated, there will
be no impact on
amounts recognised
in the financial
statements. However,
additional disclosures
will be required on
transition, including
the quantitative
effects of reclassifying
financial assets on
transition.
MINERAL COMMODITIES LTD Annual Report 2014 Reference
Title
Nature of Change
AASB
2013–9
(issued
December
2013)
Amendments
to Australian
Accounting
Standards
– Conceptual
Framework,
Materiality and
Financial
Instruments
Makes three amendments to
AASB 9:
• Adding the new hedge
accounting requirements into
AASB 9
• Deferring the effective date of
AASB 9 from 1 January 2015
to 1 January 2017, and
• Making available for early
Application
date of
standard
Impact on entity
financial statements
Application
date for entity
1 January 2017 The entity currently
1 January 2017
applies hedge
accounting. It is
expected that the
application of the new
amendments will not
have an impact on the
entity’s financial
statements.
adoption the presentation of
changes in ‘own credit’ in
other comprehensive income
(OCI) for financial liabilities
under the fair value option
without early applying the
other AASB 9 requirements.
Under the new hedge accounting
requirements:
• The 80–125% highly effective
threshold has been removed
• Risk components of non-
financial items can qualify for
hedge accounting provided
that the risk component is
separately identifiable and
reliably measurable
• An aggregated position (i.e.
combination of a derivative and
a non-derivative) can qualify
for hedge accounting provided
that it is managed as one risk
exposure
• When entities designate the
intrinsic value of options, the
initial time value is deferred in
OCI and subsequent changes
in time value are recognised in
OCI
• When entities designate only
the spot element of a forward
contract, the forward points
can be deferred in OCI and
subsequent changes in
forward points are recognised
in OCI. Initial foreign currency
basis spread can also be
deferred in OCI with
subsequent changes be
recognised in OCI
• Net foreign exchange cash
flow positions can qualify for
hedge accounting.
No other standards, interpretations or amendments which have been issued are expected to have an impact on the Group.
47
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 . S E G M E N T I N F O R M A T I O N
(i) Description of segments
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the board of directors which makes strategic
decisions.
There is no goodwill attaching to any of the segments. There has been no impact on the measurement of the assets and
liabilities reported for each segment.
The chief operating decision maker has identified three reportable segments to its business, being:
1. Mineral Sands mining and production (Tormin Mineral Sands project) – Republic of South Africa;
2. Mineral Sands exploration (Xolobeni Mineral Sands project) – Republic of South Africa; and
3. Corporate (management and administration of the Company’s projects) – Australia and Republic of South Africa.
(ii) Segment results
The segment information provided to the chief operating decision maker for the reportable segments for the year ended
31 December 2014 is as follows:
2014
Tormin
project
$
Xolobeni
project
$
Corporate
$
Consolidation
eliminations
$
Total
$
Total segment revenue
Inter-segment revenue
Revenue from external
customers
Adjusted EBITDA
35,218,170
(8,355,814)
26,862,356
4,752,419
Depreciation and amortisation
3,229,243
–
–
–
–
–
8,097,593
–
8,097,593
–
–
–
43,315,763
(8,355,814)
34,959,949
411,773
3,030,088
8,194,280
41,494
3,270,737
Total segment assets
33,779,540
4,635,884
6,949,476
3,109,012
48,473,912
Total segment liabilities
8,323,403
–
9,503,494
(558,706)
17,268,191
48
MINERAL COMMODITIES LTD Annual Report 2014 2013
Total segment revenue
Inter-segment revenue
Revenue from external
customers
Tormin
project
$
Xolobeni
project
$
Corporate
$
Consolidation
eliminations
$
–
–
–
–
–
–
–
–
–
Adjusted EBITDA
(51,765)
(4,647)
(1,196,234)
Depreciation and amortisation
(126,759)
(842)
(24,014)
Total segment assets
25,453,516
6,908,256
1,568,897
Total segment liabilities
2,166,098
–
6,382,341
Adjusted EBITDA reconciles to operating profit before income benefit as follows:
Adjusted EBITDA
Interest expense
Depreciation and amortisation
3 . R E V E N U E
From continuing operations
Sales revenue
Sale of product
Other revenue
Revenue from sub-leasing access road
Interest income
Other
Total
$
–
–
–
(1,252,646)
(151,615)
33,930,669
8,548,439
–
–
–
–
–
–
–
31 Dec 2014
$
31 Dec 2013
$
8,194,280
(1,252,646)
(974,296)
(3,270,737)
(165,719)
(151,615)
3,949,247
(1,569,980)
33,270,806
1,592,893
12,889
83,361
–
–
222,075
–
1,689,143
222,075
49
MINERAL COMMODITIES LTD Annual Report 2014
NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
4 . O T H E R I N C O M E A N D E X P E N S E I T E M S
This note provides a breakdown of the items included in ‘other income’ and an analysis of expenses by nature.
(i)
Other income
Net gain on disposal of available-for-sale financial assets
Other
(ii) Mining and processing costs
Mining and processing costs include the following material
expenditure items:
Transport of product
Fuel
Wages and salaries
Repairs and maintenance
Depreciation and amortisation – mining and processing assets
(iii) Administration expenses
Administration expenses include the following material expenditure
items:
Directors and key management personnel remuneration
Operating lease rentals
Depreciation – corporate assets
(iv)
Finance costs
Interest expense on borrowings
Borrowing facility fee
Bank interest paid
502
–
502
–
2,903
2,903
8,066,438
4,559,406
3,786,958
1,071,589
3,229,243
1,001,213
75,393
41,494
397,751
77,978
2,198
477,927
–
–
–
–
127,600
915,529
73,983
24,015
165,719
–
–
165,719
50
MINERAL COMMODITIES LTD Annual Report 2014 5 .
I N C O M E T A X B E N E F I T
This note provides an analysis of the group’s income tax benefit, shows what amounts are recognised directly in equity and
how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made
in relation to the Group’s tax position.
31 Dec 2014
$
31 Dec 2013
$
The components of income tax benefit comprise:
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax benefit is attributable to:
Profit from continuing operations
Profit from discontinuing operations
Aggregate income tax benefit
Deferred income tax benefit included in income tax benefit
comprises:
Decrease (increase) in deferred tax assets
(Decrease) increase in deferred tax liabilities
–
(4,427,097)
–
(4,427,097)
(4,427,097)
–
(4,427,097)
(4,815,548)
388,451
(4,427,097)
–
–
–
–
–
–
–
–
–
–
Numerical reconciliation of income tax benefit to prima facia
tax benefit
Profit / (loss) from continuing operations before income tax benefit
3,949,247
(1,569,980)
Prima facia tax payable on profit from ordinary activities before at a
rate of 30% (2013: 30%)
Foreign tax rate differential
Tax at consolidated amount
Tax effect of:
Entertainment
Intercompany loan interest reversed
Capital losses realised
Capital losses utilised on sale of shares
Projects discontinued
Transfer pricing tax adjustment
Legal fees
Donations
Amortisation of exploration and evaluation asset
Consulting
Assets written off
Other non-assessable income
Net deferred tax assets not brought to account
1,184,775
(65,760)
(470,994)
–
1,119,015
(470,994)
1,527
523,462
516,430
(150)
8,800
32,786
(863,646)
1,662
112,094
98,775
28,969
(6)
(6,006,815)
(4,427,097)
–
–
–
–
–
–
–
–
–
–
–
(451,227)
922,221
–
51
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
5 .
I N C O M E T A X B E N E F I T ( C O N T I N U E D )
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period
and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
Current tax – credited directly to equity
Net deferred tax – debited (credited) to equity
31 Dec 2014
$
31 Dec 2013
$
–
–
–
–
–
–
Total estimated tax losses of $4,849,434 and R54,297,645 have not been brought to account at year end as their ultimate
recoverability has not yet been assessed as probable. These losses are also subject to final verification in the relevant
jurisdictions.
6 . C A S H A N D C A S H E Q U I V A L E N T S
Cash assets
Cash at bank and in hand
(i)
Interest rate risk exposure
The Group’s exposure to interest rate risk is discussed in note 21.
(ii) Reconciliation to cash flow statement
4,216,052
1,503,316
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year.
7 .
T R A D E A N D O T H E R R E C E I V A B L E S
Current
Trade receivables
Other receivables ¹
Prepayments
Non-current
Security deposits ²
Advance to Blue Bantry ³
1,236,441
1,671,499
176,989
13,600
1,154,105
10,287
3,084,929
1,177,992
235,053
430,500
665,553
260,302
476,745
737,047
¹
Includes $1,031,088 (2013: $959,261) of VAT refundable from the South African Revenue Service.
² Includes a secured deposit of $230,748 (2013: $255,535) with First Rand bank held as security for a performance guarantee issued by the Bank in
favour of the South African Department of Minerals and Energy in respect of Mineral Sands Resources (Pty) Ltd obligations under the Tormin
Mining right.
³ An amount of R 5 million has been advanced to the BEE partner, Blue Bantry. Refer to note 24 for details.
There are no receivables past due and impaired.
52
MINERAL COMMODITIES LTD Annual Report 2014 (i) Fair values and credit risk
Due to the short term nature of these receivables the carrying values represent their respective fair values as at 31 December
2014 and 2013. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables
mentioned above. Refer to note 21 for more information on the risk management policy of the Group and the credit quality
of the entity’s receivables.
(ii) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign exchange and interest rate risk in relation to trade and other receivables
is provided in note 21.
8 .
I N V E N T O R I E S
Raw materials at cost
Finished product at cost
Spare parts and consumables at cost
31 Dec 2014
$
31 Dec 2013
$
162,186
5,660,311
300,524
6,123,021
338,026
318,284
115,450
771,760
The costs of individual items of inventory are determined using weighted average cost.
9 . A V A I L A B L E - F O R - S A L E F I N A N C I A L A S S E T S
Available-for-sale financial assets include the following classes of financial assets:
Listed securities
Equity securities
Unlisted securities:
Equity securities
64,228
94,495
–
64,228
–
94,495
(i) Classification of financial assets as available-for-sale
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable
payments, and management intends to hold them for the medium to long term. Financial assets that are not classified into
any of the other categories (at Fair Value Through Profit and Loss, loans and receivables or held-to-maturity investments)
are also included in the available-for-sale category.
(ii)
Impairment indicators for available-for-sale financial assets
A security is considered to be impaired if there has been a significant or prolonged decline in the fair value below its cost.
See note 1 for further details about the Group’s impairment policies for financial assets.
53
MINERAL COMMODITIES LTD Annual Report 2014 Year ended 31 December 2013
Cost at fair value
As at 1 January 2013
Additions
Exchange differences
As at 31 December 2013
Accumulated depreciation
As at 1 January 2013
Depreciation charge
As at 31 December 2013
Net book amount
Cost at fair value
Accumulated depreciation
Year ended 31 December 2014
Cost at fair value
As at 1 January 2014
Additions
Re-classifications
Exchange differences
As at 31 December 2014
Accumulated depreciation
and amortisation
NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 0 . P R O P E R T Y , P L A N T A N D E Q U I P M E N T
Freehold
land and
buildings
$
Furniture,
fittings
and
equipment
$
Plant and
machinery
$
Mine
vehicles
$
Decom-
missioning
asset
$
Total
$
154,625
5,561,109
(450,155)
5,265,579
(83,260)
(151,615)
(234,875)
5,265,579
(234,875)
5,030,704
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
154,625
–
1,955
5,559,154
(12,332)
(437,823)
144,248
5,121,331
(83,260)
–
(24,167)
(127,448)
(107,427)
(127,448)
144,248
5,121,331
(107,427)
(127,448)
36,821
4,993,883
–
144,248
5,121,331
–
–
–
–
–
–
–
–
–
–
–
23,663
256,131
1,828,759
10,918
75,637
–
(1,096)
22,567
–
9,713,992
(18,550)
(772,070)
–
(506)
381,829
15,892,012
10,412
–
(3,504)
72,133
2,195,108
9,713,992
(795,726)
16,378,953
–
5,265,579
As at 1 January 2014
–
(107,427)
(127,448)
–
–
(234,875)
Depreciation and amortisation
charge
As at 31 December 2014
Net book amount
Cost at fair value
Accumulated depreciation and
amortisation
54
(795)
(795)
(76,041)
(1,408,631)
(183,468)
(1,536,079)
(8,807)
(8,807)
(7,564)
(7,564)
(1,501,838)
(1,736,713)
22,567
381,829
15,892,012
10,412
72,133
16,378,953
(795)
(183,468)
(1,536,079)
21,772
198,361
14,355,933
(8,807)
1,605
(7,564)
(1,736,713)
64,569
14,642,240
MINERAL COMMODITIES LTD Annual Report 2014 Leased assets
The carrying amounts above include the following amounts where the Group is a lessee under a finance lease:
31 Dec 2014
$
31 Dec 2013
$
3,912,664
4,429,012
Details of amounts due under equipment acquisition agreements are detailed under borrowings, refer to note 17.
1 1 . M I N E D E V E L O P M E N T E X P E N D I T U R E
As at 1 January
Expenditure during the year
Re-classification: transfer to property, plant and equipment
Amortisation expense
Exchange differences
1 2 . E X P L O R A T I O N E X P E N D I T U R E
As at 1 January
Expenditure during the year
Write off discontinued projects
Re-classification: transfer to Mine properties
Exchange differences
1 3 . M I N E P R O P E R T I E S
As at 1 January
Expenditure during the year
Re-classification: transfer from Exploration expenditure
Amortisation expense
Exchange differences
31 Dec 2014
$
31 Dec 2013
$
13,606,814
–
3,198,386
14,811,441
(9,713,992)
(1,298,411)
–
–
(789,054)
(1,204,627)
5,003,743
13,606,814
11,008,541
13,496,769
96,407
(51,297)
(4,299,929)
142,132
(95,243)
–
(733,995)
(2,535,117)
6,019,727
11,008,541
–
1,115,159
4,299,929
(470,487)
(327,138)
4,617,463
–
–
–
–
–
–
55
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 4 . D E F E R R E D T A X A S S E T S
Recognised deferred tax assets
Tax losses
Provisions/accrued expenditure
Business related expenditure and borrowing costs
Unrealised foreign exchange loss
Property, plant and equipment
Set-off against deferred tax liabilities
Business
related
expenditure
and
borrowing
costs
$
Provisions/
accrued
expenditure
$
Tax
losses
$
–
–
–
Movements
At 1 January 2014
(charged) / credited
– to profit or loss
3,158,290
58,082
235,828
31 Dec 2014
$
31 Dec 2013
$
3,158,290
58,082
235,828
440,212
495,631
4,388,043
(351,087)
4,036,956
–
–
–
–
–
–
–
–
Unrealised
foreign
exchange
losses
$
Property,
plant and
equipment
$
Total
$
–
–
–
–
495,631
3,947,831
– to other comprehensive income
–
–
–
440,212
–
440,212
At 31 December 2014
3,158,290
58,082
235,828
440,212
495,631
4,388,043
Recognised deferred tax liabilities
Prepayments
Interest receivable
Set-off against deferred tax assets
56
31 Dec 2014
$
31 Dec 2013
$
4,571
346,515
(351,086)
–
–
–
–
–
–
MINERAL COMMODITIES LTD Annual Report 2014 Movements
At 1 January 2014
(charged) / credited
– to profit or loss
– to other comprehensive income
At 31 December 2014
1 5 . T R A D E A N D O T H E R P A Y A B L E S
Trade payables
Other payables and accruals
1 6 . U N E A R N E D R E V E N U E
Prepayments
$
Interest
receivable
$
Total
$
–
–
–
4,571
–
4,571
346,515
351,086
–
–
346,515
351,086
31 Dec 2014
$
31 Dec 2013
$
4,013,390
1,785,406
1,670,453
736,909
5,683,843
2,522,315
Unearned revenue from product sales
4,130,000
–
1 7 . B O R R O W I N G S
Short term borrowings – unsecured ¹
Amounts due under equipment acquisition agreements ²
3,291,363
2,074,349
3,944,050
7,235,413
3,951,775
6,026,124
¹ Short term borrowings includes a pre finance and marketing agreement facility of US$2.0 million which was drawn down in September 2013. This
facility was repayable over a twelve month period in quarterly instalments commencing three months after production has commenced.
As at 31 December 2014 the outstanding balance was $0.6m and was repaid in full on 2 March 2015.
² The Group entered into three Master Rental Agreements to acquire mobile mining equipment and generators. Under the terms of these
agreements there is an option to purchase which the Group intends to exercise.
Commitments in relation to equipment acquisition agreements are as follows:
Within one year
Later than one year but no later than five years
3,944,050
–
3,944,050
791,422
3,160,353
3,951,775
(i) Fair values and credit risk
Due to the short term nature of these payables the carrying values represent their respective fair values as at 31 December
2014 and 2013.
57
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 7 . B O R R O W I N G S ( C O N T I N U E D )
(ii) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign exchange and interest rate risk in relation to trade and other payables is
provided in note 21.
1 8 . P R O V I S I O N S
Current
Annual leave provision
Non-current
Environmental rehabilitation provision ¹
31 Dec 2014
$
31 Dec 2013
$
141,768
77,167
–
–
¹ The provision has been raised to ensure that adequate provision has been made for the environmental rehabilitation and decommissioning
obligation of the Tormin mine.
1 9 . E Q U I T Y
(a) Contributed equity
(i) Share capital
Ordinary shares
Fully paid
(ii) Movements in ordinary share capital
Details
At 1 January 2013
Conversion of listed options
Placement of ordinary shares
Proceeds from rights issue
Share issue costs
At 31 December 2013
Transaction costs arising on share issue
At 31 December 2014
58
2014
Number of
shares
2013
Number of
shares
2014
$
2013
$
404,941,935
404,941,935
63,437,092
63,440,327
Number of
shares
$
274,008,385
52,948,638
8,322
1,746
49,937,000
4,418,367
80,988,228
6,399,584
–
(328,008)
404,941,935
63,440,327
–
(3,235)
404,941,935
63,437,092
MINERAL COMMODITIES LTD Annual Report 2014 (iii) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion
to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
(iv) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can
continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets in order to maintain
sufficient funds necessary to continue its operations.
(b) Reserves
The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these
reserves during the year. A description of the nature and purpose of each reserve is provided below the table.
Financial
asset
revaluation
reserve
$
Foreign
currency
translation
reserve
$
General
reserve
$
Listed
option
reserve
$
Total
$
At 1 January 2013
1,363,393
21,139
(8,448,982)
317,048
(6,747,402)
Exchange differences on translation of
foreign operations
Change in fair value of available-for-sale
financial assets
–
–
(851,827)
(254,047)
–
–
–
(851,827)
(254,047)
At 1 January 2014
1,363,393
(232,908)
(9,300,809)
317,048
(7,853,276)
Exchange differences on translation of
foreign operations
–
–
(2,549,618)
–
(2,549,618)
At 31 December 2014
1,363,393
(232,908)
(11,850,427)
317,048
(10,402,894)
Nature and purpose of reserves
General reserve
The General reserve arose from the issue of shares in MRC Resources (Proprietary) Limited to an entity outside the
economic entity.
Financial asset revaluation reserve
The financial asset revaluation reserve arises from the revaluation at reporting date of available-for-sale financial assets.
Foreign currency translation reserve
The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of
operations into the presentation currency of the Group.
59
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
1 9 . E Q U I T Y ( C O N T I N U E D )
Listed options reserve
Records the amounts received in a prior year from the issue of listed options.
(c) Accumulated losses
At 1 January
Profit / (loss) for the year
At 31 December
(d) Non-controlling interest
At 1 January
Movement for the year
At 31 December
31 Dec 2014
$
31 Dec 2013
$
(30,318,460)
(28,748,480)
8,376,344
(1,569,980)
(21,942,116)
(30,318,460)
113,639
113,639
–
–
113,639
113,639
2 0 . C A S H F L O W I N F O R M A T I O N
(a) Reconciliation of profit / (loss) after income tax to cash flow from operating activities
Profit / (loss) for the year
Depreciation and amortisation
Proceeds from the sale of available-for-sale investments
Interest income
Impairment loss
Finance costs
Provision
31 Dec 2014
$
31 Dec 2013
$
8,376,344
(1,569,980)
3,270,737
151,615
(502)
–
(12,889)
(222,075)
7,896
477,927
–
157,861
165,718
(22,673)
Net exchange differences
(1,206,251)
(603,574)
Change in operating assets and liabilities:
(Increase) / decrease in trade debtors
(Increase) / decrease in inventories
(5,842,132)
(1,012,141)
(5,351,261)
(771,098)
Increase / (decrease) in trade payables and unearned revenue
8,500,817
1,517,796
Increase / (decrease) in provisions
218,935
–
8,439,621
(2,208,551)
60
MINERAL COMMODITIES LTD Annual Report 2014 (i) Non-cash investing and financing activities
During the period the Group entered into a new Master Rental Agreements to acquire mobile mining equipment. Under the
terms of these agreements there is an option to purchase which the Group intends to exercise. Refer to note 17 for further
details.
The Group has no available finance facilities as at reporting date.
2 1 . F I N A N C I A L R I S K M A N A G E M E N T
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial
performance. Current year profit or loss information has been included where relevant to add further context.
The Group’s activities expose it to a variety of financial risks, as detailed in the below table:
Risk
Exposure arising from
Measurement
Management
Market risk – foreign
exchange risk
Future commercial transactions
Cash flow forecasting
Recognised financial assets and
liabilities not denominated in US$
Sensitivity analysis
Monitoring the prevailing
exchange rates and entering into
forward foreign exchange
contracts, if deemed necessary
by the Board of Directors
Market risk – interest
rate risk
The Company’s borrowings are at
fixed interest rates, therefore, it is
not exposed to changes in variable
interest rates
N/A
N/A
Market risk – price risk Investments in equity securities
Sensitivity analysis
Portfolio diversification
Credit risk
Cash and cash equivalents and
trade and other receivables
Aging analysis
Credit ratings
Credit limits, retention of title over
product sold and letters of credit
Liquidity risk
Borrowings and other liabilities
Rolling cash flow
forecasts
Availability of committee credit
lines and borrowing facilities
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the group. Risk management is carried out by the Board of
Directors.
The Group does not hold any derivative financial instruments.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures.
As detailed in note 1(d)(i), items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in United States dollars, which is the Company’s presentation currency.
The Group has previously reported its consolidated results in Australian dollars. As part of the transition to a mining company
and to provide greater consistency with reporting by other international mining companies listed on the ASX, as of 1 January
2014 the Company adopted United States dollars as its presentation currency. The financial statements are translated from
the individual subsidiaries functional currencies of Australian Dollars (A$) and South African Rand (ZAR) into a presentation
currency of United States Dollars ($). As a consequence of converting from functional currency to presentational currency,
any increase or decrease in exchange rates used would impact on equity.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in United States Dollars, was
as follows:
61
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 1 . F I N A N C I A L R I S K M A N A G E M E N T ( C O N T I N U E D )
Borrowings
Sensitivity
31 December 2014
31 December 2013
A$
GBP
1,396,819
1,336,192
A$
–
GBP
–
Impact on
post tax profits
Impact on other
components of equity
2014
$
2013
$
2014
$
2013
$
USD/AUD exchange rate – increase 10%
139,681
USD/AUD exchange rate – decrease 10%
(139,681)
USD/GBP exchange rate – increase 10%
133,619
USD/GBP exchange rate – decrease 10%
(133,619)
–
–
–
–
–
–
–
–
–
–
–
–
The Group does not hold any derivatives or foreign exchange contracts to hedge its foreign exchange risk exposure.
Based on the financial instruments held at the reporting date, the sensitivity of the Group’s profits after tax for the year and
equity at the reporting date to movements in the United States Dollar to South African Rand was:
(ii)
Interest rate risk
The Group’s exposure to interest rate risk relates primarily to the Group’s floating interest rate cash balance which is subject
to movements in interest rates. The Board monitors its cash balance on an ongoing basis and liaises with its financiers
regularly to mitigate cash flow interest rate risk. Interest is charged on the loans from the parent company to the South
African subsidiaries at rates permitted by the South African Reserve Bank. This interest is eliminated on consolidation.
(iii) Price risk
The Group has an exposure to equity securities price risk. This arises from investments held by the Group and classified on
the balance sheet as available-for-sale financial assets. However, as detailed in note 9, the Company’s investment in equity
securities (available-for-sale financial assets) is $64,228 (2013: $94,495), which is monitored by the Board of Directors. Any
investment in equity securities, which formed part of any portfolio diversification strategy, would require approval by the
Board of Directors.
The Group is also exposed to commodity price risk as a result of fluctuations in the market price of commodities, however,
the commodities that the Company produces and sells are not quoted on any recognised exchange.
(iv) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well
as credit exposures including outstanding receivables and investments in unlisted entities.
All cash balances held at banks are held at internationally recognised institutions. The majority of receivables held are with
related parties and within the Group. Given this, the credit quality of financial assets that are neither past due or impaired
can be assessed by reference to historical information about default rates. The carrying amount of financial assets recorded
in the financial statements, net of any provisions for losses, represents the economic entity’s maximum exposure to credit
risk without taking account of the value of any collateral or other security obtained.
62
MINERAL COMMODITIES LTD Annual Report 2014 (v) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash to meet obligations when due. At the end of the
reporting period the Group held cash and cash equivalents totalling $4,216,052 (2013: $1,503,316). Management monitors
rolling forecasts of the Group’s liquidity reserve (comprising of cash and cash equivalents, note 6) on the basis of expected
cash flows. This is carried out at the corporate level for all active companies of the Group in accordance with practice and
limits set by the Group.
Financing arrangements
As detailed in note 17, the Company had access to a pre finance and marketing agreement facility of US$2.0 million which
was drawn down in September 2013. This facility was repayable over a twelve month period in quarterly instalments
commencing three months after production has commenced. As at 31 December 2014 the outstanding balance was
$0.6m and was repaid in full on 2 March 2015.
In addition to the above and as announced by the Company on 30 May 2014, the Company obtained an unsecured short
term working capital facility of up to $4m from two major shareholders. Pursuant to the Loan Agreement entered into
between the Company and the two major shareholders, the lenders provided a finance facility capped at $2m each on the
following arm’s-length and commercial terms:
•
•
•
Loan is unsecured;
Interest of 13% per annum;
Line fee of 1% and establishment fee of 1%;
• Repayment to take in three equal tranches on 31 January 2015, 28 February 2015 and 31 March 2015; and
• Default interest of 10% if not repaid on the repayment date.
As announced by the Company on 23 February 2015, the two major shareholders agreed to extend the term of the loan
they provided to 30 September 2015.
Maturity of financial liabilities
The Group manages liquidity risk by maintaining sufficient cash reserves and through the continuous monitoring of
budgeted and actual cash flows. At the reporting date there is no significant liquidity risk. The table below analyses the
Group’s maturity of financial liabilities:
31 December 2014
< 6 months
$
6–12 months
$
1–5 years
$
5+ years
$
Total
$
Trade and other payables
5,683,843
Unearned revenue
4,130,000
–
–
Borrowings:
• Short term borrowings
558,352
2,733,011
• Equipment acquisition
agreements
2,963,469
980,581
Total financial liabilities
13,335,664
3,713,592
–
–
–
–
–
–
–
–
–
–
5,683,843
4,130,000
3,291,363
3,944,050
17,049,256
63
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 1 . F I N A N C I A L R I S K M A N A G E M E N T ( C O N T I N U E D )
31 December 2013
< 6 months
$
6–12 months
$
1–5 years
$
5+ years
$
Total
$
Trade and other payables
2,522,315
–
–
Borrowings:
• Short term borrowings
518,587
1,037,175
518,587
• Equipment acquisition
agreements
1,975,887
1,975,888
–
Total financial liabilities
5,016,789
3,013,063
518,587
–
–
–
–
2,522,315
2,074,349
3,951,775
8,548,439
(vi) Fair value hierarchy
AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or
indirectly (level 2); and
•
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The Group’s only assets and liabilities held at fair value are its available for sale financial assets with a current carrying value
of $64,228 (2013: $94,495). These are measured using quoted active market prices and are therefore Level 1 instruments.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at
31 December 2014 and did not transfer any fair value amounts between the fair value hierarchy during the year ended
31 December 2014.
Valuation techniques used to derive level 2 and level 3 fair values
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. These valuation techniques maximise the use of observable market data where it
is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in level 2. The Group did not have any Level 2 instruments at year end.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
•
•
•
The use of quoted market prices or dealer quotes for similar instruments;
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves;
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the reporting date;
and
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial
instruments.
The Group does not have any level 3 assets or liabilities.
64
MINERAL COMMODITIES LTD Annual Report 2014 2 2 . I N T E R E S T S I N O T H E R E N T I T I E S
(i) Material subsidiaries
The Group’s principal subsidiaries at 31 December 2014 are set out below. Unless otherwise stated, they have share capital
consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held
equals the voting rights held by the group. The country of incorporation or registration is also their principal place of
business.
Ownership interest held
by the Group
Ownership interest held
by non-controlling
interests
Place of business /
country of
incorporation
2014
%
2013
%
2014
%
2013
%
Name of entity
Rexelle Pty Ltd
MRC Trading (Aust) Pty Ltd ¹
MRC Cable Sands Pty Ltd
Blackhawk Oil & Gas Ltd
Queensland Minex NL
Q Smelt Pty Ltd
Mincom Waste Pty Ltd
MRC Africa Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
90
100
100
100
–
100
100
100
90
100
100
Skeleton Coast Resources (Pty) Ltd
Namibia
100
100
MRC Resources (Proprietary) Limited
South Africa
Mineral Sands Resources (Proprietary)
Limited
South Africa
Tormin Mineral Sands (Proprietary)
Limited
Transworld Energy & Minerals
Resources (SA) Proprietary Limited
Nyati Titanium Eastern Cape
Proprietary Limited
MRC Metals (Pty) Ltd
South Africa
South Africa
South Africa
South Africa
100
50
100
56
100
100
100
50
100
56
100
100
¹ MRC Trading (Aust) Pty Ltd was incorporated during the 2014 financial year.
–
–
–
–
–
–
–
–
–
–
10
10
–
–
–
–
50
–
44
–
–
–
–
–
–
50
–
44
–
–
65
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 2 . I N T E R E S T S I N O T H E R E N T I T I E S ( C O N T I N U E D )
(ii) Non-controlling interest (NCI)
Transworld Energy &
Minerals Resources (SA)
Proprietary Limited
Mineral Sands Resources
Proprietary Limited
Q Smelt Pty Ltd
2014
$
2013
$
2014
$
2013
$
2014
$
2013
$
Summarised balance sheet
Current assets
Current liabilities
3,700
3,115
9,794,472
1,846,809
–
–
(13,051,611)
(5,914,296)
Current net assets
3,700
3,115
(3,257,139)
(4,067,487)
Non-current assets
4,632,184
5,591,620
27,206,600
22,919,922
Non-current liabilities
(4,511,266)
(4,895,186)
(21,504,746)
(18,101,885)
Non-current net assets
120,918
696,434
5,701,854
4,818,037
Net assets
124,618
699,549
2,444,715
750,550
2
–
2
–
–
–
2
2
–
2
–
–
–
2
Accumulated NCI
58,781
65,095
–
–
48,544
48,544
Summarised statement of
comprehensive income
Revenue
Profit / (loss) for the period
Other comprehensive income
Total comprehensive income
Profit / (loss) attributable to NCI
Summarised cash flows
–
–
–
–
–
–
35,218,171
–
3,201
1,627,043
125,334
–
–
–
3,201
1,627,043
125,334
–
–
–
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase / (decrease) in cash
and cash equivalents
(950)
950
–
–
(3,021)
(769,529)
(1,950,304)
3,021
(5,580,422)
(20,382,382)
–
–
7,179,795
22,367,550
829,844
34,864
66
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
MINERAL COMMODITIES LTD Annual Report 2014 As noted above, the Company, via its wholly owned subsidiary MRC Resources (Proprietary) Limited (“MRCR”), has a 50%
interest in the issued capital in Mineral Sands Resources (Proprietary) Limited (“MSR”). Whilst the Group controls 50% of
the share voting power, it has been determined that the Group effectively has 100% control due to its control over the
relevant activities for accounting purposes, controls the management of MSR, and also controls the board of MSR due to
provisions set out in the Shareholders Agreement entered into between the shareholders of MSR.
Therefore these financial statements include 100% of the results of MSR. In addition to the holding of the issued capital,
the Group also holds Class A and B Preference Shares in MSR which effectively provides for the repayment of the capital
investment and deemed investment by the Company’s Black Empowerment partner. Due to the terms attached to these
A and B Preference Shares, they are categorised as an equity instrument. As the A Preference Shares and B Preference
Shares would be redeemed out of distributable profits and net assets of MSR before all other ordinary shareholders, until
such time as the net assets exceed the value of the unredeemed A and B Preference shares, no value has been attributed
to the non-controlling interest. Until that time, the non-controlling interest has no rights to the assets or results of the
Company, and therefore has not been allocated any value in these financial statements.
2 3 . C O N T I N G E N T A S S E T S A N D C O N T I N G E N T L I A B I L I T I E S
There are no contingent assets and contingent liabilities as at the reporting date.
2 4 . C O M M I T M E N T S
(i) Blue Bantry funding support
The Company, via MRCR and Blue Bantry are both 50% shareholders in MSR, the entity which owns the Tormin Project.
The Company has agreed to provide Blue Bantry access to an amount of funding to support the original objective by
advancing through the Loan certain benefits Blue Bantry would expect to receive from Tormin. The Loan consists of an
upfront amount of ZAR 5 million, which has already been paid with a further ZAR 9 million, which was to be payable no later
than 31 December 2012. Blue Bantry will repay the Loan from distributions that it will receive in the future from MSR. The
additional ZAR 9 million was outstanding at 31 December 2014.
(ii) Exploration tenement leases – commitments for expenditure
In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to outlay lease
rentals and to meet the minimum expenditure requirements which are not considered to be material.
2 5 . E V E N T S S I N C E T H E E N D O F T H E F I N A N C I A L Y E A R
Events since the end of the financial year were as follows:
As at 31 December 2014, the $2.0m Wogen Pre-Financing Facility was paid down to a balance of $0.6m. On 2 March 2015
this balance was repaid in full.
On 23 February 2015, the Company extended the term of the Loans provided by major shareholders of the Company to 30
September 2015.
As disclosed to the ASX in December 2014, an application was made in the High Court of South Africa (Western Cape
Division, Cape Town) by Blastrite to seek relief for an order that MSR, a subsidiary of the Company, may not deal with any
entity or person other than Blastrite in relation to the discussion and consideration relating to any potential garnet and/or
other abrasive media resource that may be present in or on the beach deposit located within the Tormin Project; and an
order that MSR may not renew its existing offtake agreement with GMA for the period 1 July 2015 to 30 June 2016.
Following the hearing on 19 December 2014, Blastrite withdrew its application to seek interim relief and were ordered to
pay MRC’s costs occasioned by the application. Blastrite proceeded to make an application for final relief which has been
deferred to oral evidence to be heard in June 2015. MRC will proceed to strenuously oppose the application.
There have been no other material matters arising subsequent to the end of the financial year.
67
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 6 . R E L A T E D P A R T Y T R A N S A C T I O N S
(i) Parent entity
Transactions between the Company and other entities in the Group during the years ended 31 December 2014 and
31 December 2013 consisted of loans advanced and payments received and made on inter-company accounts.
These transactions were made on normal commercial terms and conditions and at market rates.
(ii) Subsidiaries
Interests in subsidiaries are set out in note 22(i).
Detailed remuneration disclosures are provided in the remuneration report on page 20.
(iii) Transactions with other related parties
Mine Site Construction Services Pty Ltd (“MSCS”), a company associated with Mr Mark Caruso and Mr Joseph Caruso
has provided the followings services to the Company during 2014 and 2013:
•
•
Provision of office space.
The amount paid by the Company to MSCS for the year ended 31 December 2014 was $54,144 (2013: $52,261). This
is considered to be an arm’s length commercial rent. There is no formal sub lease in place;
•
Provision of Secretarial staff to the Executive Chairman.
The amount paid by the Company to MSCS for the year ended 31 December 2014 was $46,564 (2013: $49,938). The
amounts payable are pursuant to an Executive Service Agreement and have been reimbursed on an arm’s length basis
at normal commercial rates.
•
Provision of technical staff.
The amount paid by the Company to MSCS for the year ended 31 December 2014 was $150,144 (2013: $52,552). The
amounts payable have been in respect to the provision of technical staff at the Groups’ head office and at the Tormin
project and have been reimbursed on an arms–length basis at normal commercial rates.
During the year ended 31 December 2013, Zurich Bay Holdings Pty Ltd a Company associated with Mr Mark Caruso and
Mr Joseph Caruso participated in an underwriting agreement on the Rights Issue for which it received a fee of $95,756.
As announced by the Company on 30 May 2014, the Company obtained an unsecured short term working capital facility of
up to $4m from major shareholders. This included a A$2m facility provided by Regional Management Pty Ltd (“RMS”), a
related party of Mr Mark Caruso, the Executive Chairman of the Company.
Pursuant to the Loan Agreement entered into between the Company and RMS, the lender provided a finance facility
capped at A$2m on the following arm’s-length and commercial terms:
•
•
•
Loan is unsecured;
Interest of 13% per annum;
Line fee of 1% and establishment fee of 1%;
• Repayment to take in three equal tranches on 31 January 2015, 28 February 2015 and 31 March 2015; and
• Default interest of 10% if not repaid on the repayment date.
As announced by the Company on 23 February 2015, RMS agreed to extend the term of the loan they provided to
30 September 2015. The Company is assessing financing options for its impending expansion initiatives relating to a Garnet
Stripping Plant and a Tailings Scavenger Spiral Circuit. Based on the Company’s strong 2015 cash flow projections, it is
expected that these will be funded by traditional debt financing. The extension of the existing shareholder loan provides the
Company the flexibility to explore all options.
68
MINERAL COMMODITIES LTD Annual Report 2014 2 7 . S H A R E B A S E D P A Y M E N T S
No employee shares/options have been issued/granted in the year ended 31 December 2014 or in the year ended
31 December 2013.
The last employee options to be granted were approved by shareholders at a general meeting of the Company held on
21 December 2012. The Employee Option Plan (the “Plan”) is designed to provide long-term incentives for senior managers
and above (including directors) to deliver long-term shareholder returns.
Options granted under the Plan carry no dividend or voting rights. When exercisable each option is convertible into one
ordinary share at the predetermined exercise.
Set out below are summaries of options granted under the Plan:
Grant Date
2012
Expiry date
Exercise
price
Fair Value at
grant date
Options at
the start of
the year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Vested at
the end of
the year
21 Dec 2012 31 Dec 2015
20 cents¹
3.35 cents
10,000,000
21 Dec 2012 31 Dec 2015
35 cents²
2.23 cents
1,000,000
11,000,000
–
–
–
–
–
–
–
–
–
10,000,000
10,000,000
1,000,000
1,000,000
11,000,000
11,000,000
Fair value of options granted
The assessed fair value at grant date of options during the year ended 31 December 2012 was independently determined
using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and
the risk free interest rate for the term of the option. The total Share Based payment expense for the year ended 31 December
2014 was $nil (2013: $nil).
The model inputs for options granted during the year ended 31 December 2012 included:
(a) Options granted for no consideration with the expectation that the majority of these Options would be exercised
towards the end of the term of the Options and there are no market based vesting conditions.
(b) Exercise price
(c) Grant date
¹ 20 cents
² 35 cents
¹ 21 December 2012
² 21 December 2012
(d) Risk-free interest rate
¹ 2.50%
² 2.57%
(e) Exercise date 31 December 2015
(f) Share price at grant date 8.08 cents
(g) Expected price volatility of the company’s shares: 86%
(h) Expected dividend yield – nil
The expected price volatility is based on the historic volatility and the general trend in share prices of the companies in
similar businesses and trading on the ASX over the past 4 and 12 months.
69
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
2 8 . R E M U N E R A T I O N O F A U D I T O R S
During the year the following fees were paid or payable for services provided by BDO Audit (WA) Pty Ltd and BDO Tax
(WA) Pty Ltd, its related practices and non-related firms:
31 Dec 2014
$
31 Dec 2013
$
Audit services
Audit and review of financial reports
BDO Audit (WA) Pty Ltd
BDO Cape Town South Africa
Non-audit services
Taxation and company secretarial
BDO Tax (WA) Pty Ltd
BDO Cape Town South Africa
2 9 . E A R N I N G S / ( L O S S ) P E R S H A R E
(a) Basic earnings/(loss) per share
From continuing operations attributable to the ordinary
equity holders of the Company
Total basic earnings / (loss) per share attributable to the
ordinary equity holders of the Company
(b) Diluted earnings/(loss) per share
From continuing operations attributable to the ordinary
equity holders of the Company
Total diluted earnings/(loss) per share attributable to the
ordinary equity holders of the Company
70
68,281
32,871
101,152
90,768
5,555
96,323
58,068
18,604
76,672
–
–
–
2014
Cents
2013
Cents
2.07
2.07
2.01
2.01
(0.62)
(0.62)
(0.62)
(0.62)
MINERAL COMMODITIES LTD Annual Report 2014 2014
$
2013
$
(c) Reconciliation of earnings used in the calculation of
earnings / (loss) per share
Basic earnings / (loss) per share
Profit / (loss) attributable to the ordinary equity holders of
the Company used in calculating basic earnings per share:
From continuing operations
8,376,344
(1,569,980)
Diluted earnings / (loss) per share
Profit / (loss) attributable to the ordinary equity holders of the
Company used in calculating diluted earnings per share:
From continuing operations
8,376,344
(1,569,980)
(d) Weighted average number of shares used as the
denominator
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings / (loss) per share
Adjustment for calculation of diluted earnings / (loss) per
share:
2014
Number
2013
Number
404,941,935
251,763,939
Options
11,000,000
–
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating
diluted earnings / (loss) per share
415,941,935
251,763,939
The table below details the number of options that have been granted and are on issue as at 31 December 2014.
These potential ordinary shares are considered dilutive and accordingly were used to calculate dilutive earnings
per share.
Number of options
Exercise price
Expiry date
10,000,000
1,000,000
AUD $0.20
AUD $0.35
31 December 2015
31 December 2015
71
MINERAL COMMODITIES LTD Annual Report 2014 NO T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
( C O N T I N U E D )
3 0 . P A R E N T E N T I T Y F I N A N C I A L I N F O R M A T I O N
The individual financial statements for the parent entity show the following aggregate numbers:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Issued capital
Reserves
Accumulated losses
Total equity
2014
$
2013
$
1,534,560
1,729,002
31,863,780
28,241,178
33,398,340
29,970,180
3,802,725
2,430,549
2,366,711
–
6,169,436
2,430,549
27,228,904
27,539,631
63,437,092
63,440,327
(8,928,563)
(7,684,917)
(27,279,625)
(28,215,779)
27,228,904
27,539,631
Profit / (loss) for the year
936,152
(860,004)
72
MINERAL COMMODITIES LTD Annual Report 2014 D I R E C T O R S ’ D E C L A R A T I O N
The Directors of the Company declare that:
1. The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in
equity and accompanying notes, are in accordance with the Corporations Act 2001 including;
(a) complying with Australian Accounting Standards and the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(b) give a true and fair view of the consolidated entity’s financial position as at 31 December 2014 and of its performance for
the year ended on that date.
2. The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with
International Financial Reporting Standards.
3. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors:
Mark V. Caruso
Executive Chairman/CEO
Dated at Perth, Western Australia this 30th day of March 2015
73
MINERAL COMMODITIES LTD Annual Report 2014 I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of Mineral Commodities Ltd
Report on the Financial Report
We have audited the accompanying financial report of Mineral Commodities Ltd, which comprises the
consolidated balance sheet as at 31 December 2014, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility 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 Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view 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 company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
74
65
MINERAL COMMODITIES LTD Annual Report 2014 Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of Mineral Commodities Ltd, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a)
the financial report of Mineral Commodities Ltd is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 31 December
2014 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 31
December 2014. 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.
Opinion
In our opinion, the Remuneration Report of Mineral Commodities Ltd for the year ended 31 December
2014 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Brad McVeigh
Director
Perth, 30 March 2015
66
75
MINERAL COMMODITIES LTD Annual Report 2014 C O R P O R AT E G O V E R N A N C E S TAT E M E N T A N D R E S O U R C E S TAT E M E N T
The Board of Directors (referred to hereafter as the “Board”) of Mineral Commodities Ltd (referred to hereafter as the “Company”
or “MRC”) is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs
of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.
In accordance with the Australian Securities Exchange (ASX) Corporate Governance Council’s (“CGC”) “Principles of Good
Corporate Governance and Best Practice Recommendations” the Corporate Governance Statement must contain certain specific
information and must disclose the extent to which the Company has followed the guidelines during the period. Where a
recommendation has not been followed that fact must be disclosed together with the reasons for the departure.
The Company’s corporate governance practices were in place throughout the year and are compliant, unless otherwise stated,
with the Corporate Governance Council’s principles and recommendations (2nd Edition), which are noted below.
Principle 1.
Lay solid foundations for management and oversight
Principle 2.
Structure the Board to add value
Principle 3.
Promote ethical and responsible decision making
Principle 4.
Safeguard integrity in financial reporting
Principle 5. Make timely and balanced disclosure
Principle 6.
Respect the rights of shareholders
Principle 7.
Recognise and manage risk
Principle 8.
Remunerate fairly and responsibly
A summary of the corporate governance policies and practices adopted by MRC is set out below.
R O L E O F T H E B O A R D O F D I R E C T O R S
The Board of MRC is responsible for setting the Company’s strategic direction and providing effective governance over MRCs’
affairs in conjunction with the overall supervision of the Company’s business with the view of maximising shareholder value. The
Board’s key responsibilities are to:
(a) chart the direction, strategies and financial objectives for MRC and monitor the implementation of those policies, strategies
and financial objectives;
(b) monitor compliance with regulatory requirements, ethical standards and external commitments;
(c) appoint, evaluate the performance of, determine the remuneration of, plan for the succession of and, where appropriate,
remove the Chief Executive Officer (“CEO”) if in place or similar person acting in the executive capacity; and
(d) ensure that the Board continues to have the mix of skills and experience necessary to conduct MRCs’ activities, and that
appropriate directors are selected and appointed as required.
In accordance with MRCs’ Constitution, the Board delegates responsibility for the day-to-day management of MRC to the
Executive Chairman and CEO (subject to any limits of such delegated authority as determined by the Board from time to time).
Management as a whole is charged with reporting to the Board on the performance of the Company.
B O A R D S T R U C T U R E A N D C O M P O S I T I O N
The Board currently is comprised of six directors, three of which are independent non-executive directors who were appointed in
December 2012. Details of each director’s skill, expertise and background are contained within the directors’ report included with
the Company’s annual financial statements, or released to the ASX if appointed subsequent to the end of the financial year.
Independence, in this context, is defined to mean a non-executive director who is free from any interest and any business or other
relationship that could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best
interests of MRC. The definition of independence in ASX Recommendation 2.1 is taken into account for this purpose.
In the absence of any significant scale in the Company’s existing operations, the Board did not believe that the existence of
further independent non-executive directors would be of any additional benefit to the Company. Subsequent to the first full year
of operation, the Board has assessed its skill-set and has resolved to appoint one further director with relevant technical
experience. As stated above, the Board will ensure that it continues to have the mix of skills and experience necessary to conduct
MRCs’ activities, and that appropriate directors are selected and appointed as required.
Details of directors’ shareholdings are disclosed in the directors’ report and financial report. There are no retirement schemes
other than the payment of statutory superannuation contributions.
76
MINERAL COMMODITIES LTD Annual Report 2014 Any equity based compensation of directors is required to be approved in advance by shareholders.
Presently, the roles of Chairman and CEO have not been separated. The roles were separated up to 12 September 2014 at which
time the CEO resigned and Mr Mark Caruso, the Chairman of the Company, was appointed to the role of CEO. The Remuneration
and Nomination Committee and Board consider that Mr Caruso’s experience in the industry and in managing mining operations
position him well to manage the affairs of the Company. The Board is assessing its governance structure to mitigate any potential
issues with the one person fulfilling the dual roles of Chairman and CEO. This has led to the appointment of a Senior Non-
Executive Director appointed from amongst the existing non-executive directors of the Company. The present Chairman of the
Company is not considered to be an independent director. Notwithstanding this, all directors of the Company are, and were during
the reporting period, independent in character and judgment.
The CEO is responsible for supervising the management of the business as designated by the Board.
MRCs’ non-executive directors may not hold office for a continuous period in excess of three years or past the third annual
general meeting following their appointment, whichever is longer, without submitting for re-election. Directors are elected or re-
elected, as the case may be, by shareholders in a general meeting. Directors may offer themselves for re-election. A director
appointed by the directors (e.g., to fill a casual vacancy) will hold office only until the conclusion of the next annual general meeting
of MRC but is eligible for re-election at that meeting.
Under MRCs’ Constitution, voting requires a simple majority of the Board. The Chairman holds a casting vote.
The Company has procedures enabling any director or committee of the Board to seek external professional advice as considered
necessary, at the Company’s expense subject to prior consultation with the Chairman. A copy of any advice sought by a director
would be made available to all directors.
B O A R D A N D M A N A G E M E N T E F F E C T I V E N E S S
Responsibility for the overall direction and management of MRC, its corporate governance and the internal workings of MRC
rests with the Board notwithstanding the delegation of certain functions to the Executive Chairman and CEO and management
generally (such delegation effected at all times in accordance with MRC’s Constitution and its corporate governance policies).
An evaluation procedure in relation to the Board, individual directors, Board Committees and Company executives has been
adopted by the Board. An evaluation procedure took place immediately following the year end. The evaluation of the Board as a
whole is facilitated through the use of a questionnaire required to be completed by each Board Member, the results of which were
summarized and discussed with the Chairman of the Board and tabled for discussion at a Board Meeting. Similarly each individual
director was required to self-assess his performance and to discuss the results with the Chairman. The same procedure is
undertaken for the Audit, Compliance and Risk Committee and the Remuneration and Nomination Committee.
To ensure management, as well as Board effectiveness, the Board, through the Remuneration and Nomination Committee has
direct responsibility for evaluating the performance of the CEO. A formal evaluation of the CEO will be undertaken at the end of
the 2015 financial year, subsequent to his first year in office as CEO.
F I N A N C I A L R E P O R T I N G , I N T E R N A L C O N T R O L A N D R I S K M A N A G E M E N T
The Board has overall responsibility for MRC’s systems of internal control. These systems are designed to ensure effective and
efficient operations, including financial reporting and compliance with laws and regulation, with a view to managing risk of failure
to achieve business objectives. It must be recognized however that internal control systems provide only reasonable and not
absolute assurance against the risk of material loss.
The Board reviews the financial position of MRC on a monthly basis. For annual financial statements, the CEO and the Chief
Financial Officer (“CFO”) are required to state in writing that:
•
the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and
operational results in accordance with the relevant accounting standards; and
• are founded on a system of risk management and internal compliance and control and the Company’s risk management and
internal compliance and control system is operating efficiently and effectively in all material respects.
Management has not formally reported to the Board on the effectiveness of the Company’s management of material business
risk, however risk reports are provided to the Board via the Audit, Compliance and Risk Committee. Each reportable risk is
discussed ensuring appropriate mitigation strategies are implemented by the Group. Management and the Board interact on a
day to day basis and risk is currently being considered across the financial, operational and organisation aspects of the Company’s
business. The Company will continue to monitor, assess and report its business risks.
77
MINERAL COMMODITIES LTD Annual Report 2014 CO R P O R AT E GO V E R N A N C E S TAT E M E N T A N D R E S O U R C E S TAT E M E N T ( C O N T I N U E D )
C O M M I T T E E S O F T H E B O A R D O F D I R E C T O R S
The Board established two permanent Board committees in February 2013 to assist the Board in the performance of its functions:
(a) the Audit, Compliance and Risk Committee; and
(b) the Remuneration and Nomination Committee.
Each committee has a charter, which sets out the Committee’s purpose and responsibilities. The Committees are described
further below.
A U D I T , C O M P L I A N C E A N D R I S K C O M M I T T E E
The purpose of the Audit, Compliance and Risk Committee is to provide assistance to the Board in its review of:
(a) MRC’s financial reporting, internal control structure and risk management systems;
(b) the internal and external audit functions; and
(c) MRC’s compliance with legal and regulatory requirements in relation to the above.
The Audit, Compliance and Risk Committee has specific responsibilities in relation to MRC’s financial reporting process; the
assessment of accounting, financial and internal controls; the appointment of external auditor; the assessment of the external
audit; the independence of the external auditor; and setting the scope of the external audit.
The Audit, Compliance and Risk Committee must comprise at least three non-executive directors that have diverse, complementary
backgrounds, with two independent non-executive directors. The Chairman of the Audit, Compliance and Risk Committee must
be an independent non-executive director.
The members of the Audit, Compliance and Risk Committee are: Mr Walker (Chairman), Mr Leahy, and Mr Torre.
R E M U N E R A T I O N A N D N O M I N A T I O N C O M M I T T E E
The purpose of the Remuneration and Nomination Committee is to discharge the Board’s responsibilities relating to the nomination
and selection of directors and the compensation of the Company’s executives and directors.
The key responsibilities of the Remuneration and Nomination Committee are to:
(a) ensure the establishment and maintenance of a formal and transparent procedure for the selection and appointment of new
directors to the Board; and
(b) establish transparent and coherent remuneration policies and practices, which will enable MRC to attract, retain and motivate
executives and directors who will create value for shareholders and to fairly and responsibly reward executives.
The Remuneration and Nomination Committee must comprise at least three non-executive directors, two of which must be
independent non-executive Directors. The Chairman of the Remuneration and Nomination Committee must be an independent
non-executive director.
The members of the Remuneration and Nomination Committee are: Mr Leahy (Chairman), Mr Walker, and Mr Joseph Caruso.
The remuneration policy which sets out the terms and conditions for the CEO and other senior executives is set out in the
Remuneration Report included in the Directors’ Report.
T I M E L Y A N D B A L A N C E D D I S C L O S U R E
MRC is committed to promoting investor confidence and ensuring that shareholders and the market have equal access to
information and are provided with timely and balanced disclosure of all material matters concerning the Company. Additionally,
MRC recognises its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act.
The Company’s shareholders are responsible for voting on the appointment of directors. The Board informs shareholders of all
major developments affecting the Company by:
• Preparing half yearly and annual financial reports and making these available to all shareholders;
• Preparing quarterly activity and cash flow reports;
• Advising the market of matters requiring disclosure under Australian Securities Exchange Continuous Disclosure Rules;
78
MINERAL COMMODITIES LTD Annual Report 2014 • Maintaining a record of significant ASX announcements on the Company’s website;
• Submitting proposed major changes in the Company’s affairs to a vote of shareholders, as required by the Corporation Law;
and
• Reporting to shareholders at annual general meetings on the Company’s activities during the year. All shareholders that are
unable to attend these meetings are encouraged to communicate issues or ask questions by writing to the Company.
The Company has adopted a formal disclosure policy. The Board and management are aware of their responsibilities in respect
of identifying material information and coordinating disclosure of that information where required by the ASX Listing Rules.
E T H I C A L A N D R E S P O N S I B L E D E C I S I O N - M A K I N G
Code of Conduct
The Board has created a framework for managing the Company including internal controls, business risk management processes
and appropriate ethical standards.
The Board has adopted practices for maintaining confidence in the Company’s integrity including promoting integrity, trust,
fairness and honesty in the way employees and directors conduct themselves and MRCs’ business, avoiding conflicts of interest
and not misusing company resources. A formal Code of Conduct was adopted in February 2013.
Diversity
The Company employs a broad mix of individuals reflecting its philosophy of hiring the best candidate for all positions at all levels
irrespective of race, religion or gender. In terms of the composition of the Board and Board nominations, the Board will consider
the requirements of the Davies Report and the Australian Securities Exchange Corporate Governance Principles as part of the
overall Board appointment process of determining the composition of the Board that is the most appropriate for the Group.
The Company implemented a diversity policy subsequent to year end. The objective of the policy is for the Company to embrace
the diversity of skills, ideas and experiences of an individual and recognise that a workforce is made up of people with differences
in age, gender, sexual orientation, disability, religion or national origin or social origin contributes to MRC’s success and
organizational strength. It ensures all employees are treated with fairness and respect.
MRC is committed to embedding a corporate culture that embraces diversity through:
• Recruitment on the basis of competence and performance and selection of candidates from a diverse pool of qualified
candidates;
• Maintaining selection criteria that does not indirectly disadvantage people from certain groups;
• Providing equal employment opportunities through performance and flexible working practices;
• Maintaining a safe working environment and supportive culture by taking action against inappropriate workplace and business
behaviour that is deemed as unlawful (discrimination, harassment, bullying, vilification and victimization);
• Promoting diversity across all levels of the business;
• Undertaking diversity initiatives and measuring their success;
• Regularly surveying our work climate; and
• The Board establishing measurable objectives in achieving gender diversity.
The Company currently employs 229 staff, with 64 females, representing 26%. There are no female directors. The Company has
not yet set any measurable objectives however it has an extensive social and labour plan which addresses these diversity
objectives.
The development of people is the fundamental principle; enshrined in the business strategy. The Company provides opportunities
and resources for employees to be fully developed in job disciplines that form part of the occupational structures of the operating
subsidiaries. These opportunities pervade throughout and are not limited to a specific department or level.
The Company ensures that the highest caliber of management is of great importance to sustain the business.
The Company will assist employees in achieving their potential by supporting and mentoring them in their development. At the
same time, meticulous attention is given to the requirements of the Legislation applicable thereto.
79
MINERAL COMMODITIES LTD Annual Report 2014 CO R P O R AT E GO V E R N A N C E S TAT E M E N T A N D R E S O U R C E S TAT E M E N T ( C O N T I N U E D )
R E G I O N A L A N D L O C A L E C O N O M I C D E V E L O P M E N T / S O C I O - E C O N O M I C D E V E L O P M E N T
The Companys’ wholly owned subsidiary, Mineral Sands Resources (Proprietary) Ltd (MSR) is committed towards contributing
to the socio-economic activities of the immediate community and the region. Although the primary objective is to mine Heavy
Minerals for the international and local markets, the business is managed in a manner that embodies value added compliance
with all relevant legislative requirements and socio-economic responsibilities.
MSR’s management will always endeavour to offer job opportunities to the local community and the labour sending area from
which labour is sourced, Xolobeni by the creation of direct and indirect jobs wherever the required skills and experience are
present or developed. MSR will continue to afford job opportunities to the members of the local community and the labour
sending area were such individuals meet the necessary recruitment criteria.
The promotion of local and Xolobeni sustainable development is a core objective of MSR’S Social & Labour Plan (SLP) and, as
such, may be used as a general indicator to measure the success of this SLP. This performance indicator should focus particularly
on the prevalence of livelihood opportunities for local people and Xolobeni people after mine closure, compared with the situation
before the commencement of the operation
S E C U R I T I E S T R A D I N G P O L I C Y
A Securities Trading Policy has been adopted by the Board to set a standard of conduct, which demonstrates MRC’s commitment
to ensuring awareness of the insider trading laws, and that employees and directors comply with those laws. The Securities
Trading Policy imposes additional share trading restrictions on directors, the Company Secretary, executives and employees
involved in monthly financial accounting processes (“specified persons”).
Under the Securities Trading Policy, specified persons are only permitted to buy and sell securities if they do not possess non-
public price sensitive information and trading occurs outside of specified restricted periods. These periods are the periods
commencing on the first day of the month before the end of the half-year or full year period and ending on the next business day
after the announcement of the results for that period. In addition, before a specified person can deal in MRC’s securities they
must obtain clearance from the appropriate officer, confirming that there is no reason why they cannot trade.
O T H E R I N F O R M A T I O N
The ASX guidelines also prescribe that the Company should maintain a dedicated corporate governance information section on
its website. Such a dedicated information section is not presently available on the Company’s website, although the annual
financial report will be posted to the website and the Statement of Corporate Governance can be viewed there.
M I N E R A L R E S O U R C E S T A T E M E N T
The Company holds the following mining and prospecting rights:
Country
Location
Number
Type of
Right
Status
Change
since last
Quarter
Beneficial
Interest
South Africa
Tormin
(WC)30/5/1/2/2/163MR
Mining
Approved
Tormin
Tormin
Tormin
(WC)30/5/1/2/2/162MR
Mining
Approved
(WC)30/5/1/1/2/10036PR
Prospecting
Approved
(WC)30/5/1/1/2/10199PR
Prospecting
Under
Application
Xolobeni
EC30/5/1/1/2/6PR
Prospecting
Approved
Kwanyana
EC30/5/1/1/2/10025PR
Prospecting
Under
Application
N/A
N/A
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
The Company has no interests held in any farm-in or farm-out agreements.
80
MINERAL COMMODITIES LTD Annual Report 2014
TORMIN is located on the west coast of South Africa, approximately 400km north of Cape Town.
XOLOBENI is located in the Eastern Cape Province of South Africa approximately 300km north of East London and 200km south
of Durban.
The Company reviews its Resources as at 31 December each year.
The Company considers any additional exploration or depletion of its Resources which would have a bearing on the total resource
reported.
No exploration or production activity has been carried out at the Xolobeni Minerals Sands Project during the year. The Company
is not aware of any new information or data that materially affects the information presented herein and confirms that all material
assumptions and technical parameters underpinning the estimates in relation to the Xolobeni Mineral Sands Project continue to
apply and have not materially changed. There were no additional Resources added to Xolobeni during the year. As such, the
mineral resources for Xolobeni as at 31 December 2014 remain consistent with 31 December 2013.
The Company commissioned the Tormin Mineral Sands Project in January 2014. The Company has previously reported that a
prospecting right for the offshore area immediately adjacent to Tormin was awarded towards the end of 2012. The offshore
prospecting area covers an area of 12km2 and extends 1km out to sea from the low water mark and covers the full length of the
existing 12km Tormin tenement.
The established geology of the region confirms that the source of the Tormin beach deposit is eroded paleo strandlines and
Heavy Mineral-rich offshore zones. The dynamic tides and wave action serves to replenish the beaches by transporting sediment
from deeper waters and concentrating the Heavy Mineral Sands (HMS) below the high water mark.
As previously noted, to date 99% of the beach mined has replenished through normal tidal movements.
Approximately 1.075m tonnes has been mined at the Tormin Mineral Sands Project to 31 December 2014, although included in
those tonnages are areas which have been mined up to five times.
The nature of the resource replenishment is typical of modern day beach placer deposits found along the West Coast of South
Africa and e.g. the Southeastern Tamilnadu coast of India. The Company is unable to report a replenishment grade or quantity
under the 2012 JORC code. Resource replenishment is occurring as evident by mining of the same areas, but further data is
needed to predict the long term trend of replenishment.
The Company continues to conduct grade reconciliation and sample grading on a daily basis as part of the mining operation to
correlate between stated resource and actual resource in terms of quantity, grade and replenishment.
The Company has completed its first year of mining and processing at its Tormin Mineral Sands Project and further mining and
production from replenished areas will provide greater detail and certainty on the validity of the replenished areas in the current
year.
A reconciliation of the Tormin Resource is as follows: The remaining grade is based on 108 samples from exploration pits in
unmined areas as well as 25 pit/trench samples from mined areas that has undergone replenishment. Note individual minerals
reported as percentage of the total resource.
Category
Indicated Resource – Dec 2013
Tonnes Mined
Inferred Resource – Dec 2014
Resource
Million
Tonnes
2.70
1.07
2.70
Total
(%HM)
49.4%
55.3%
Ilmenite
(%HM)
Zircon
(%HM)
Rutile
(%HM)
Garnet
(%HM)
10.6%
16.9%
3.4%
5.02%
2.21%
0.7%
0.65%
0.46%
25.3%
32.55%
25.22%
38.14%
10.05%
This inferred resource is based on the reasonable prospect for the economic extraction of the material, as has occurred during
the past year. Remining of the area, that has undergone replenishment has been successfully done on the Tormin mine site up to
5 times, but remains untested outside this operation. The current replenishment dataset is of insufficient size and timeframe to
allow this potential replenished resource to be classified and is therefore not JORC compliant.
Whilst initial exploration work has been undertaken on the replenished areas, the fact remains that the beach constantly changes
with both tidal movement and mining.
81
MINERAL COMMODITIES LTD Annual Report 2014 CO R P O R AT E GO V E R N A N C E S TAT E M E N T A N D R E S O U R C E S TAT E M E N T ( C O N T I N U E D )
The Tormin and Xolobeni Mineral Resources based on mined material reconciliation as at 31 December 2014 for the Tormin
Resource is as follows – note individual minerals reported as a percentage of the total heavy mineral concentration.
PROJECT
Category
Ore Mt
HM%
Ilmenite
(% in HM)
Zircon
(% in HM)
Rutile
(%in HM)
Garnet
(%i HM)
Tormin
Inferred
Xolobeni
Measured
Indicated
Inferred
Total MRC
2.7
224.0
104.0
18.0
346.0
348.7
38.14%
26.35%
5.8%
1.22%
66.11%
5.7%
4.1%
2.3%
5.0%
5.3%
54.5%
53.7%
69.6%
54.0%
51.7%
M I N E R A L R E S O U R C E A N D O R E R E S E R V E G O V E R N A N C E
Mineral Resources and where applicable, Ore Reserves, are estimated by suitable qualified MRC personnel in accordance with
the JORC Code, using industry standard techniques.
All Mineral Resource estimates and supporting documentation are reviewed by external Competent Persons. Any amendments
to the Mineral Resource Statement to be included in the Annual Report is reviewed by a suitably qualified Competent Person.
The mineral resource estimations previously reported under JORC 2004 for the Tormin Resource, are re-presented with updated
disclosure of Table 1 from JORC 2012.
C O M P E T E N T P E R S O N
The information in this announcement which relates to Exploration Results, Mineral Resources or Ore Reserves for Xolobeni is
based on information compiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosciences (“AIG”), a
Corporate Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) and independent consultant to the Company.
Mr Maynard is the Director and principal geologist of Al Maynard & Associates Pty Ltd and has over 35 years of exploration and
mining experience in a variety of mineral deposit styles. Mr Maynard has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent
Person as defined in the 2004 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral
Resources and Ore Reserves” (JORC Code). This information was prepared and first disclosed under the JORC Code 2004. It
has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed
since it was last reported. Mr Maynard consents to inclusion in the report of the matters based on this information in the form
and context in which it appears.
The information in this announcement which relates to Exploration Results, Mineral Resources or Ore Reserves for Tormin is
based on information compiled by Mr Adriaan du Toit, who is a Member of the Australian Institute of Mining & Metallurgy
(AusIMM) and an independent consultant to the Company. Mr du Toit is the Director and principle geologist of AEMCO PTY LTD
and has over 23 years of exploration and mining experience in a variety of mineral deposits and styles. Mr du Toit has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking 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 (JORC Code, 2012 Edition). The information from Mr du Toit was prepared under
the JORC Code 2012 Edition. Mr du Toit consents to inclusion in the report of the matters based on this information in the form
and context in which it appears.
82
MINERAL COMMODITIES LTD Annual Report 2014 s
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87
MINERAL COMMODITIES LTD Annual Report 2014
S H A R E H O L D E R I N F O R M A T I O N
Additional information required by the Australian Securities Exchange Ltd Listing Rules and not disclosed elsewhere in this report.
This information is current as at 16th March 2015.
T W E N T Y L A R G E S T S H A R E H O L D E R S
Rank
Name
AU MINING LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
ZURICH BAY HOLDINGS PTY LTD
16 Mar 2015
95,619,402
87,790,803
59,001,731
50,000,000
ZURICH BAY HOLDINGS PTY LTD
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