2015 Annual Report
Table of contents
1
Corporate directory
2 Chairman’s report
5 Directors’ report
21 Financial statements
22 Consolidated income statement
23 Consolidated statement of comprehensive income
24 Consolidated balance sheet
25 Consolidated statement of cash flows
26 Consolidated statement of changes in equity
27 Notes to the consolidated financial statements
63 Directors’ declaration
64 Auditor’s independence declaration
65
Independent auditor’s report to the members
67 Statement of corporate governance
82 Shareholder information
The consolidated financial statements are presented in United States Dollars (“$”), unless otherwise stated,
which is the Company’s presentation currency.
Corporate directory
DIRECTORS
Mark Victor Caruso
Executive Chairman and Chief Executive Officer
Joseph Anthony Caruso
Non-Executive Director
Peter Patrick Torre
Non-Executive Director and Company Secretary
Guy Redvers Walker
Senior Independent Non-Executive Director
Colin Ross Hastings
Independent Non-Executive Director
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
40 Murray Road North
Welshpool WA 6106
Telephone: +61 (8) 6253 1100
Facsimile: +61 (8) 9258 3601
Email:
info@mncom.com.au
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
SOLICITORS
TDC Legal Pty Ltd
Level 15, 251 Adelaide Terrace
Perth WA 6000
ENSafrica
150 West Street
Sandton
Johannesburg 2196
South Africa
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
Perth WA 6000
BANKERS
National Australia Bank
Suite 7, 51 Kewdale Road
Welshpool WA 6106
SHARE REGISTRY
Link Market Services Limited
Level 4, Central Park
152 St Georges Terrace
Perth WA 6000
STOCK EXCHANGE LISTING
The Company’s shares are listed on the Australian
Securities Exchange (ASX) under ASX Code MRC
WEBSITE ADDRESS
www.mineralcommodities.com
COMPETENT PERSON STATEMENT
The information, if any, in this report which relates to
exploration results, mineral resources or ore reserves
for Xolobeni Mineral Sands Project 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 Mineral Commodities Ltd.
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, if any, in this report which relates
to exploration results, mineral resources or ore
reserves for Tormin Mineral Sands Project is based on
information compiled by Mr Adriaan du Toit, who is a
Member of the AusIMM and an independent consultant
to Mineral Commodities Ltd. Mr du Toit is the director
and principal 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 JORC Code. 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.
1
Chairman’s report
Dear Shareholders,
On behalf of the Board of your Company, it is with
pleasure that I present the annual report for the year
ended 31 December 2015.
Is was another solid year of operational performance
at the Tormin Mineral Sands Project (Tormin) and
it is pleasing to report a net profit after tax of
US$10.6 million. The key metrics contained within
the accompanying report, coupled with the Board’s
optimistic view on future periods, underpin the
Board’s decision to declare a maiden dividend of
one Australian cent per share.
As I commented at the time of the dividend
declaration, it was a long and arduous process in
getting the Tormin Project to development stage, and
the operating performance to date has somewhat
vindicated the Board’s resolve to continue its strategy
of developing this asset. The Board expects its capital
management strategy, which includes returns to
shareholders to continue in the coming periods as it
rolls out the existing expansion initiatives, which will
further optimise the operating performance of the
Company.
The Company’s impeccable safety record continues
to be industry best standard, with the Company
celebrating 1,000,000 lost time injury free hours
during the year.
The Company positioned itself during the year,
through the cancellation of the Wogen offtake
agreement, to sell its non-magnetic heavy mineral
concentrate to buyers on an unrestricted basis.
This was of benefit to the Company and provided
for the opportunity to directly market its product
in order to achieve the best economic outcome.
The legacy issues associated with Blastrite were
also resolved during the year, with the High Court of
South Africa dismissing Blastrites’ Court Application.
Garnet concentrate production continued to be
supplied and sold unabated under the contract with
GMA and stockpiled within South Africa. The Garnet
concentrate will then be shipped at GMA’s discretion.
In addition, the Company has cemented its long
held belief in the potential of the Tormin offshore
and onshore resource enhancement by entering
into an agreement to purchase the Geelwal Karoo
farm totaling some 1741 hectares from Tronox, where
its existing processing operations are based. This
underpins future spatial area for any expansion
initiatives.
2
The Company continued its investment in
optimisation and expansion to increase production
of its current processing capabilities. During the year,
it commissioned the first phase of these processing
upgrades on time and on budget, being the Tailings
Scavenger Plant (TSP) and the Tailings Return
System to the beach. The second stage GSP will be
commissioning in the second half of 2016 and will
substantially increase finished concentrate production
and contained valuable heavy zircon, rutile, ilmenite
and garnet in the respective finished concentrates.
Resource development and tenure is always a
matter of importance for a mining company. In the
2014 Annual Report, we were pleased to be able
to report a replenishment of the mined resource,
albeit resulting in a reclassification into the inferred
category. Given the nature of the deposit the
Company is mining, despite the Company’s best
endeavours, it is difficult to be able to report anything
greater than an inferred resource due to the constant
changes occurring on the beach. We can however
report that the tonnes mined have again replenished.
A full update on this replenishment is included in the
Corporate Governance Section of this Annual Report.
The Company’s impeccable safety record
continues to be industry best standard,
with the Company celebrating 1,000,000
lost time injury free hours during the year.
The Company was pleased to advise that it’s South
African subsidiary, Mineral Sands Resources Pty Ltd
(“MSR”), was granted a new prospecting right by
the Department of Mineral Resources – South Africa.
The awarded prospecting right represents an area
~10,500ha in size seaward from the Tormin mine area.
In addition to the awarded rights, MSR has lodged
two new prospecting applications along the beach
and surf zone north of its current mining operations
as well as over the whole of the newly acquired
Geelwal Karoo farm. This first application represents a
target area of ~24km (398 ha) along the coastline and
the second application an area of 1741 ha. Historical
and in-house exploration work have indicated both
areas to be prospective for heavy mineral sand
deposits. These applications are currently under
review for approval by the Department of Mineral
Resources – South Africa.
A mining right application for the Xolobeni Mineral
Sands Project was also lodged in March 2015. The
Company holds the prospecting rights to four of the
five blocks in the Xolobeni Mineral Sands Project.
The mining right application has been lodged
notwithstanding the previously advised objections
received to the prospecting right application to the
remaining block, the Kwanyana block. The Company
continues to follow due process in respect to its
development of the Xolobeni Project. Despite this,
it has been an unenviable task with opponents to
the development casting all kinds of dispersions
about the activities of the Company in order to
support their cause. We reiterate on every occasion,
that the Company simply continues to follow the
proper process and we are happy to engage in the
appropriate forums.
We see the tangible benefits provided to members
of the Xolobeni community through their involvement
with the Tormin project and we continue to act within
the spirit of the Black Economic Empowerment
model to socially uplift disadvantaged people. The
contribution of our 50% BEE joint shareholder in the
Company’s subsidiary MSR in assisting in bridging the
cultural divide that can sometimes exist in managing
the expectations of interested and effected parties
and communities is significant. We thank them for
their patience and guidance and we hope to be
able to deliver on their dream of bringing economic
benefits to their community.
The Company respects that whilst it has legal
tenure to conduct various studies under its mining
rights application, no piece of paper issued by a
Government regulator derogates the requirement
of an approved social licence to operate. Without a
healthy engagement and presence in the community,
we are unable to effectively manage economic,
environmental and social expectations.
The Company accepts that some environmental
and social impacts are not acceptable to certain
stakeholders, and that uncertainty through vague or
limited information about the Xolobeni project exists.
It also accepts that some people will be ideologically
opposed. The Company will continue to actively seek
to engage with all interest and affected parties (IAP)
members of the local community of Xolobeni.
In the interim, the Company continues to advocate
negotiating a peaceful site access to complete its
environmental impact assessment studies, so that we
can provide the local community with the necessary
information they need to adequately assess for
themselves the benefits of future mining operations
in Xolobeni.
3
There were some changes in the Board through
the year. Following an internal review, the Board
identified that with the development of the Tormin
Mineral Sands Project and progression of its Xolobeni
project, a further director appointment with the
appropriate technical and geological experience
was warranted. Following a process of nomination
and interviews conducted by the Remuneration
and Nomination Committee, Mr Ross Hastings was
offered and accepted the position.
The Board also appointed one of its existing
Independent Non-Executive Directors, Mr Guy Walker,
to the position of Senior Independent Non-Executive
Director. Following the aforementioned internal review
and the appointment of myself as the CEO of the
Company in addition to my Executive Chairmanship.
Mr James Leahy decided not to stand for election
at the Company’s last Annual General Meeting and
therefore retired by rotation. The Board thanks James
for his efforts once again, and the contribution he
made throughout his tenure as a director of the
Company.
The Company was pleased to advise that
it’s South African subsidiary, Mineral Sands
Resources Pty Ltd (“MSR”), was granted a
new prospecting right by the Department
of Mineral Resources – South Africa.
On behalf of the Board I would again like to thank
all the dedicated team on site and at the Company’s
respective offices for their efforts and dedication
throughout the year. It is through these efforts that
you as shareholders are now benefiting and we must
continue to acknowledge and reward the efforts of
our employees.
We look forward to being able to report the continued
growth and development of the Company and to
thank you, our shareholders, for your support not only
throughout the year, but for the entire journey to date.
Mark V. Caruso
Chairman
4
Directors’ report
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 2015. The consolidated financial
statements are presented in United States Dollars
(“$”), unless otherwise stated, which is the Company’s
presentation currency.
DIRECTORS
The following persons were Directors of the
Company during the whole of the financial year
and up to the date of this report, unless otherwise
indicated:
Mark Victor Caruso
Joseph Anthony Caruso
Peter Patrick Torre
Guy Redvers Walker
Colin Ross Hastings - appointed 2 April 2015
James Gerald Leahy - resigned 27 May 2015
PRINCIPAL ACTIVITIES
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 (“Xolobeni” or the “Xolobeni Project”)
in the Eastern Cape Province of South Africa, and
investigations into other mineral resources.
DIVIDENDS
Subsequent to year end, the Directors declared a final
unfranked dividend for the year ended 31 December
2015 of 1 Australian cent per ordinary share, a total
distribution of A$4,049,416 based on the number
of ordinary shares on issue as at 31 December 2015.
As the dividend is unfranked, there are income
tax consequences for the owners of the Company
relating to this dividend.
REVIEW OF OPERATIONS
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:
The Tormin Project successfully completed its second
full year of production achieving the following key
operating and financial metrics:
Production – Full Year
Mining: 1,624,636 tonnes mined at a grade of 49.57%
Heavy Mineral Concentrate (“HMC”) consisting of:
• 28.94% Garnet;
• 16.15% Ilmenite;
• 3.88% Zircon; and
• 0.60% Rutile.
Production and Processing: 597,950 tonnes processed
through the Secondary Concentrator Plant (“SCP”) to
produce:
• 284,990 tonnes Garnet concentrate;
• 109,959 tonnes Ilmenite concentrate; and
• 44,489 tonnes Zircon/Rutile concentrate.
Sales – Full Year: $46.2m
Zircon/Rutile concentrate: 45,240 wet metric tonnes
Ilmenite concentrate: Nil wet metric tonnes
Garnet concentrate: 372,466 wet metric tonnes
Corporate and Cash
Cash: Cash balance of $4.2 million as at 31 December
2015, plus $7.0 million in trade and other receivables.
Debt: The balance of $0.6 million owing on the
Wogen Pacific Limited pre-financing facility was
repaid in full on 2 March 2015.
$1.2 million of shareholder loans repaid and a balance
of $1.2 million as at 31 December 2015, repayable by
30 September 2016.
SAFETY
During the year, the Company celebrated 1 million lost
time injury (“LTI”) free hours. The Company has now
worked in excess of 1,270,000 man hours without an
LTI since operations commenced in October 2013.
The Company’s safety record continues to be industry
best standard.
5
MINING
For the full year to 31 December 2015, 1,624,636
tonnes were mined at Tormin (approximately 1%
above budget) at a HMC grade of 49.57%.
Mining continued to perform in line with all Key
Performance Indicators (“KPIs”) in terms of production
with significant reductions in operating costs in the
second half of the year due to the depreciating Rand
and diesel fuel costs as a result of global depressed
crude oil pricing.
During the year, the Company has gained access to
the previously deemed excised Conservation area on
the mining lease. This area, totalling some additional
2.8 kilometres of accessible mining area, had
previously been unmined and not only allowed higher
grade Zircon to be accessed, but also gave additional
replenishment time to other areas under the Run of
Mine (“ROM”) plan.
Mining techniques also evolved to deal with the
ongoing replenishment process of the beach.
The mobilisation in the latter half of the year of
a specialised larger Caterpillar D8T low ground
pressure (“LGP”) bulldozer allowed a surface mining
technique to be developed which involves stripping
of the lower grade silica deposition from the
replenished areas thus exposing high grade lenses
of HM bearing ore. This process allows a much more
flexible mining approach which optimises and limits
beach excavation below sea level and limits total
material movement.
The commissioning of the tailings return pumping
system mitigated and alleviated the loading and
haulage of Primary Beach Concentrator (“PBC”) and
Secondary Concentrator Plant (“SCP”) processing
tails to the beach by traditional earth moving
methods. This resulted in much better utilisation of
truck and loader mining equipment.
PROCESSING
PBC budgeted production was not achieved due to
the delay in the installation and commissioning of
the Garnet Stripping Plant (“GSP”) caused by the
Blastrite (Pty) Ltd litigation.
A total annual production of 473,445 tonnes of HMC
was produced through the two PBCs.
The Company processed 597,950 tonnes through
the SCP for the 2015 year, being 8% below budget.
The balance of SCP feed of 124,505 tonnes was
sourced as direct feed from high grade ROM material,
which required no primary concentration due to its
extremely high grade.
The annualized processing throughput for the SCP
continued at 80 tonnes per hour (“tph”), well above
nameplate capacity of 63 tph. On an adjusted basis
for the delay in the GSP, the SCP continued to
operate above budget.
SCP plant recoveries were slightly down for the year,
after adjusting for the delay in the GSP, but were in
line with expectations due to the increased SCP feed
grade and additional throughput.
Annual non-magnetic Zircon/ Rutile concentrate
production to 31 December 2015 was 44,489 tonnes.
Annual Ilmenite and Garnet concentrate production
to 31 December 2015 was 109,959 tonnes and
284,990 tonnes respectively.
Total processing unit cash costs were within budget
after adjusting for the budget assumption that the GSP
would be commissioned by the start of October 2015.
All aspects of primary and secondary processing
production through the PBCs and the SCP were
also affected by industrial action during the year,
which effectively resulted in five to six weeks of
subdued production due to unavailability of the full
labour force and strike action from Union members
preventing access at times to processing plant on a
full time basis.
In addition there was a total main power station
failure which resulted in 4 days lost time.
The Company also delivered the Tailings Scavenger
Plant (“TSP”) expansion, the tailings return system
capital project and is well advanced with the
implementation of the GSP project. It is also well
advanced with progressing the engineering design
for the installation of Eskom Mains Power to the
site, which will significantly reduce operating costs.
Collectively these projects, when commissioned,
will deliver not only maximum optimization of the
processing routes but lift the production profile of
the Company in ranking amongst its peers.
The focus in 2016 will now turn to optimising recoveries
from both the PBC and SPC processing circuits, which
will be much easier to control with the commissioning
and operation of the two TSPs and the GSP.
TORMIN SALES AND MARKETING
Sales revenue for the year was $46.2m, with annual
sales of:
• Zircon/Rutile concentrates: 45,240 wet metric
tonnes
• Ilmenite concentrate: Nil wet metric tonnes
• Garnet concentrate: 372,466 wet metric tonnes
6
6
The Company terminated the Pre-Finance and
Marketing Agreement between the Company and
Wogen Pacific Limited during the first half of the year.
This allowed the Company to freely market and sell its
non-magnetic Zircon/Rutile concentrate to buyers on
an unrestricted basis for the remainder of the year.
Garnet concentrate production was supplied and sold
under contract with GMA Garnet Group (“GMA”) and
stockpiled within South Africa. The Garnet concentrate
will be shipped at GMA’s discretion. The revenue for
stockpile Garnet is initially lower with full sales value
received upon shipment.
Although the Company continued to receive active
enquiries for its Ilmenite product throughout the
year, it was unable to secure an offtake partner for
this product. This is not a function of the quality of
the product, rather a function of the global Ilmenite
product throughout the period. The Company will
continue to engage with potential off takers during
the course of 2016.
BLACK ECONOMIC EMPOWERMENT (“BEE”)
The Company worked closely with its joint shareholder
in its South African subsidiary Mineral Sands
Resources Pty Ltd (“MSR”) and BEE partner, Blue
Bantry Investments 255 (Pty) Ltd (“Blue Bantry”), in
continuing to assist in bridging the cultural divide that
can sometimes exist in managing the expectations of
interests and effected parties and communities.
Investment continues in personal development
through programmes that are focused on education,
training and gainful employment, including internships
Supplementary, nutritional food programme
in the Perth Corporate office for mentoring and
training in management reporting and accounting.
The completion of the upgrade on the local
Koekenaap School / Community Resource Centre,
which includes a new library and computer classroom,
was achieved during the second half of the year and
was officially opened in January 2016. In addition to
its Social Labour Plan (“SLP”) commitments at Tormin,
the Company also continues to provide support to the
Xolobeni community through the building of nurseries
and supporting cattle and poultry programmes which
will result in sustainable provision of basic food needs.
TORMIN RESOURCE
Work was undertaken during February 2016 on the
annual Tormin Resource Review.
Approximately 1.625 million tonnes were mined
for the year ended 31 December 2015. The beach
replenishment continues with multiple mining of
designated ore blocks occurring up to five times.
Since commencement, the Company has mined circa
2.7 million tonnes at greater than 4% contained zircon.
This tonnage and grade exceeds the original LOM
stated in the JORC Resources and Reserve statement
and is consistent with the beach replenishment
process which is currently occurring. The updated
2015 Inferred JORC Resource and Reserve confirms
that 2.7 million tonnes of material at a 28.01% Heavy
Mineral is remaining.
7
7
TORMIN - PROSPECTING ACTIVITIES
The Company was pleased to advise late in the year
that MSR has been granted a new prospecting right
by the Department of Mineral Resources – South
Africa (“DMR”).
The awarded prospecting right represents an area
of approximately 10,500 ha in size seaward from its
current mining (Tormin mine) and prospecting areas.
The awarding of this right extends MSR’s prospecting
area up to 10km offshore from its current mining
area. The prospecting area is to be investigated
for its offshore heavy mineral sand potential that is
currently the source of replenishment taking place on
the beach held under mining rights.
MSR has conducted a bathymetric and sub-bottom
sea floor profiling geophysical survey over the
surf zone area held under PR 10036. The survey,
conducted by an independent firm, will provide
detailed information that is to be used to plan an
underwater exploration drill sampling campaign.
This survey is in support of the aeromagnetic and
radiometric aerial survey work done during 2014 by
Xcalibur Geophysics. The 2014 survey identified off-
shore heavy mineral sand exploration targets.
In conjunction with offshore bathymetric studies,
the Company finalised the selection of a specialised
offshore drilling and mining sampler contractor who
will mobilise to site in the second quarter of 2016 to
conduct resource drilling and sampling of the surf
zone area i.e. the area between the low tide and the
wave crest formation. The objective of this program
is to achieve an offshore Inferred JORC resource.
8
In addition to the awarded rights, MSR has lodged a
new prospecting and bulk sampling application (WC
30/5/1/2/10226 PR) along the beach and surf zone
north of its current mining operations. This application
represents a target area of approximately 24km along
the coastline. Historical exploration work by non-
related parties has indicated the area is prospective
for heavy mineral sand deposits. This application is
subject to a full public participation process and an
environmental impact assessment for bulk sampling
as is required under South African legislation.
The above activities are indicative of the long term
plans of MSR to extend the heavy mineral sand
resource of its Tormin mining operation and underpin
the economic viability of its current operations.
XOLOBENI MINERAL SANDS PROJECT
The Company holds the prospecting rights to four of
the five blocks in the Xolobeni Mineral Sands Project.
A Mining Right Application was accepted in April
2015 and triggered the Public Participation Process
for the Environmental Scoping Report Submission.
The Public Participation Process resulted in the
submission of the Environmental Scoping Report
during the first half of 2015.
The Company made good progress throughout the
year with its consultants to conduct all necessary
baseline and technical studies to move the project
through to the submission of an Environmental
Impact Assessment (“EIA”) Report, which is required
as part of the Mining Right Application process.
An extension for the submission of the final EIA
has been granted to the Company until April 2016.
A reassessment of the Mining Right Application will
take place in the March 2016 quarter, which may
delay the final submission of the EIA.
The Company is maintaining its efforts to conclude
baseline studies within the regulatory timeframes.
CORPORATE AND FINANCIAL
It was an active year for the Company corporately.
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 (Pty) Ltd (“Blastrite”) to seek relief for
an order that MSR 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 a hearing on 19 December 2014, Blastrite
withdrew its application to seek interim relief and
were ordered to pay the Company’s costs occasioned
by the application. Blastrite proceeded to make an
application for final relief which was deferred to oral
evidence and heard in June 2015.
In October 2015, the Company was pleased to advise
that Blastite’s Court Application had been dismissed.
The dismissal follows Blastrite’s withdrawal of its
initial application to seek interim relief in December
2014. Blastrite has been ordered to pay MRC’s costs
occasioned by the employment of two legal counsel,
all of the costs occasioned by the referral to oral
evidence, the costs occasioned by the discovery
applications, including the costs occasioned by the
Company’s parties discovery applications.
As stated when the initial application was made
by Blastrite in December 2014, the Company’s
view was that the Application was an abuse of the
Court process, founded on incorrect facts and was
of no merit and, as such, the Company and other
respondents strenuously opposed the Application.
The Company was very pleased with the Blastrite
litigation outcome.
The Shareholder loans obtained in 2014 were extended
to 30 September 2015, and then subsequently paid
down by 50% later in the year with the balance
extended to 30 September 2016.
The reduction of shareholder debt is part of the
Company’s overall capital management strategy.
Whilst the Company had the capacity to repay the
debt in total, its preferred position was to retain
50% to provide further flexibility in working capital
management.
The Company assessed financing options for its
Garnet Stripping Plant (“GSP”) expansion initiative
and was pleased to advise, subsequent to year end,
that it had entered into a $4.5 million financing
arrangement with GMA.
The Company also concluded the purchase
agreement of the 1,787 hectare farm on which
its Tormin processing facilities are located. The
purchase removes all restrictions that were formally
in place under the previous Land Use agreement
and increases the available land usage from the
existing 9.89 hectares which, subject to regulatory
authority, provides significantly more land to expand
the processing facility’s footprint and stockpiling
area, allowing for optimisation of the operational
performance.
CONSOLIDATED RESULT AND FINANCIAL POSITION
The profit of the Group after income tax and non-
controlling interests was $10.6m (2014: $8.4m). The net
assets of the Group have increased from $31.2m as at
31 December 2014 to $31.7m as at 31 December 2015.
Revenue for the year was $46.5m (2014: $35.0m),
with profit before income tax expense of $12.9m
(2014: $3.9m).
OUTLOOK
The Company will proceed to complete the
construction of the GSP by June 2016.
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 weaker Rand on its South African
cost base in conjunction with US denominated sales
revenue.
With the GSP processing plant upgrade, the
Company is anticipating significant growth in
production in 2016.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
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.
9
EVENTS SINCE THE END OF THE FINANCIAL YEAR
The Company was pleased to advise, in February 2016, that MSR has secured $4.5 million via a loan facility from
GMA to fund the completion of its GSP. The GSP will be installed at the front of the existing SCP. The installation
of the GSP will increase the non-magnetic feed grade to the SCP by removing the Garnet fraction from the HMC
prior to the SCP. This, in turn, will allow a high grade Zircon concentrate to be fed to the existing magnetic circuit,
and thereby increase non-magnetic concentrate production.
Completion of the GSP is expected on or around 30 June 2016.
The loan agreement entered into with GMA provides for $4.5 million funding with 3 year repayment terms
commencing on the re-start of shipping of garnet concentrate product to GMA (planned for January 2017).
The offtake agreement previously entered into with GMA has also been amended to increase the term of the
agreement to the life of mine, and an increase in the annual offtake tonnage to 210,000 tonnes up from 150,000
tonnes with an option to take all other remaining Garnet concentrate production. The Company produced
approximately 285,000 tonnes of Garnet for the year ended 31 December 2015.
There have been no other material matters arising subsequent to the end of the financial year.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations of the Group that were not finalised at the date of this report are included
in the Review of Operations above and as detailed in the Outlook section.
The Board will continue to review other projects and opportunities in the interests of increasing shareholder value.
ENVIRONMENTAL REGULATION
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.
SCHEDULE OF MINING AND PROSPECTING TENEMENTS
Mining and prospecting tenements currently held or under application 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
Tormin
(WC)30/5/1/1/2/10199PR
Prospecting
Approved
South Africa
Tormin
(WC)30/5/1/1/2/10226PR
Prospecting
Under Application
South Africa
Tormin
(WC)30/5/1/1/2/10229PR
Prospecting
Under Application
South Africa
Xolobeni
EC30/5/1/1/2/6PR
Prospecting
Approved
South Africa
Xolobeni
EC30/5/1/1/2/10025PR
Prospecting
Under Application
South Africa
Xolobeni
EC 10025 MR
Mining
Under Application
100%
100%
100%
100%
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.
10
INFORMATION ON DIRECTORS
Mark Victor Caruso
Executive Chairman and Chief Executive Officer
Age 54
Joseph Anthony Caruso
Non-Executive Director
Age 70
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.
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
Perpetual Resources Limited
Other current directorships
None
Former directorships in the last 3 years
None
Former directorships in the last 3 years
None
Special responsibilities
Chairman of the Board
Chief Executive Officer
Special responsibilities
Member of the Remuneration and Nomination
Committee
Interests in shares and options
78,554,014 ordinary shares in the Company – indirect
holding1
15,784 ordinary shares in the Company – direct holding
5,000,000 options over ordinary shares in the
Company
Interests in shares and options
77,007,485 ordinary shares in the Company1
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.
11
Peter Patrick Torre
CA, AGIA, MAICD
Non-Executive Director and Company Secretary
Age 44
Colin Ross Hastings
BSc (Geology), MSc (Economic Geology), MAusIMM
Independent Non-Executive Director
Age 65
Experience and expertise
Mr Hastings was appointed as a non-executive
Director in April 2015. He is a geologist with over 30
years’ experience in mining and exploration, project
generation and project development, covering
Australia and overseas. He has a strong geotechnical
background with 10 years’ experience in this field and
has extensive experience in mining related disciplines
and processes. From 1996 to 2014, Mr Hastings was
involved with Allied Gold PLC’s Simberi Gold Project
where his roles included management of exploration
and the feasibility and pre-development studies for
mine construction. Mr Hastings then progressed
to General Manager Resource Development and
concluded his tenure at St Barbara subsequent to the
merger between it and Allied Gold Mining PLC.
Other current directorships
Perpetual Resources
Former directorships in the last 3 years
None
Special responsibilities
Chairman of the Remuneration and Nomination
Committee and member of the Audit, Compliance and
Risk Committee since his appointment on 2 April 2015.
Interests in shares and options
Nil
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
Guy Redvers Walker
BCA, CA, CFA, CMInstD
Senior Independent 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
and in the past has sat on the boards of 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
Metals Exploration plc
Former directorships in the last 3 years
Bacanora Minerals Ltd
ENK plc
Navigator Resources Limited
Special responsibilities
Senior Independent Non-Executive Director,
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
12
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and each of the Board committees held during the
year ended 31 December 2015, and the number of meetings attended by each Director were:
Name
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 (resigned 27 May 2015)
Colin Ross Hastings (appointed 2 April 2015)
Meetings of committees
Directors’
Meetings
Audit, Compliance
and Risk
Remuneration
and Nomination
A
5
5
5
5
3
4
B
5
4
5
5
2
4
A
-
-
4
4
2
2
B
-
-
4
4
1
2
A
-
4
-
4
2
2
B
-
4
-
4
2
2
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.
REMUNERATION REPORT (AUDITED)
This remuneration report sets out the remuneration information for the Company’s non-executive Directors,
executive Directors, other key management personnel and the key 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.
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 on annual basis.
Executives are offered a competitive base pay which is reviewed annually to ensure the pay is competitive with
the market.
There were short term cash incentives provided to both the Executive Chairman and Chief Financial Officer
(“CFO”). 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.
13
As at 31 December 2015, the short term cash bonus incentives are up to 25% of base pay calculated on Company
performance and other key performance indicators. Directors’ fees are fixed.
Profit /(loss) for the year after tax (USD)
10,576,785
8,376,344 (1,569,980) (1,233,344) (2,206,055) (1,494,207)
Closing share price (AUD)
10.0 cents
11.0 cents
18.5 cents
9.9 cents
7.5 cents
8.1 cents
2015
2014
2013
2012
2011
2010
Voting and comments made at the Company’s 2015 Annual General Meeting
The Company received the unanimous support of shareholders present on the remuneration report at the AGM for
the 2014 financial year and 99.7% 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.
B. DETAILS OF REMUNERATION
The key management personnel of the Group are the Directors of the Company and Mr Tony Sheard, the CFO.
Mr Tony Sheard 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 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. Non-cash
benefits in the form of options were provided to key management personnel during the year. The following fees
are applicable to Directors and key management personnel of the Company.
Name
Year
Cash salary
(A$)
Cash bonus
(A$)
Annual and
long service
leave
(A$)
Post-
employment
benefits
(A$)
Share-based
payments
(Options)
(A$)
Percentage
performance
based
(%)
Share based
payments as a
percentage of
remuneration
(%)
Totals
(A$)
Directors
Executive Chairman
Mark Caruso (*)
2015
547,945
150,000
43,882
52,055
149,590 943,472
15.9
15.9
2014 293,228
Non-Executive Director
Joseph Caruso
2015
63,934
2014
50,248
2015
150,000
2014
135,360
2015
80,000
2014
63,920
2015
2014
52,311
-
2015
32,667
2014
63,920
Peter Torre
Guy Walker
Ross Hastings
(appointed 2 April 2015)
James Leahy
(resigned 27 May 2015)
Total Director
Remuneration
-
-
-
-
-
-
-
-
-
-
-
86,534
27,124
- 406,886
-
-
-
-
-
-
-
-
-
-
6,066
4,648
-
-
-
-
4,828
-
-
-
-
-
-
-
-
-
-
-
-
-
70,000
54,896
150,000
135,360
80,000
63,920
57,139
-
32,667
63,920
2015 926,856 150,000
43,882
62,949
149,590 1,333,278
2014 606,676
-
86,534
31,772
-
724,982
Other Key Management Personnel
Tony Sheard (**)
2015
251,142
59,813
9,981
23,858
26,182
370,976
16.1
Andrew Lashbrooke
(resigned 12 Sept 2014)
Total Key Management
Personnel Remuneration
2014
92,045
2015
-
2014
270,720
-
-
-
-
-
-
-
-
-
-
-
-
92,045
-
270,720
2015 1,177,998
209,813
53,863
86,808
175,773 1,704,254
2014
969,441
-
86,534
31,772
-
1,087,747
-
-
-
12.3
-
14
-
-
-
-
-
-
-
-
-
-
-
11.3
-
-
-
-
-
-
-
-
-
-
-
-
11.2
-
7.1
-
-
-
10.3
-
* Mark Caruso’s comparative remuneration has been
re-stated to include annual leave and long service leave
previously not included.
**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 agreements are detailed below:
Cash bonus
The Executive Chairman was entitled to an
annual bonus of 25% of the Base Remuneration,
measured against the following criteria, 20%
weighting for each:
1. Mine production against budget;
2. Securing and entering into an offtake
agreement for Ilmenite;
3. Achieving Budget Earnings before Interest,
Tax, Depreciation and Amortisation
(“EBITDA”) taking into account uncontrollable
variables at the discretion of the Board;
4. Completion of replenishment studies on
mined areas sufficient to allow results to be
reported to the ASX; and
5. Submission of a Mining Right Application in
2015 for the Xolobeni Mineral Sands Project.
Future bonuses will be at the sole discretion of
the Board.
The measurable objectives were chosen to ensure
the Executive Chairman was incentivised to meet
budgeted production and EBITDA; secure offtake
agreements for the Company’s remaining product
not currently being sold into the market; to
continue to expand and replenish the Company’s
Resources, and to progress the Company’s other
mineral sands project in South Africa.
The Chairman of the Remuneration and Nomination
Committee assessed the performance of the
Executive Chairman, and reviewed his performance
against the above set measurable objectives, taking
into account other mitigating factors throughout
the year. Objectives 1,3,4 and 5 were assessed
as being met. Objective 2 was not met, however
the Executive Chairman also achieved other key
strategic and operational objectives throughout the
year which were not set by the Remuneration and
Nomination Committee and the Committee has
used its discretion to award the full bonus of 25%
of base remuneration due to the significant efforts
of the Executive Chairman throughout the year.
The CFO was entitled to an annual bonus of 25%
of the Base Remuneration, measured against the
following criteria, one third weighting for each:
1. Performance against scope of services set
out in the employment contract at the sole
discretion of the Executive Chairman;
2. Board Reporting within set timing each
month; and
3. 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.
The measurable objectives were chosen to align
the two key executives incentives in terms of
meeting budgeted EBITDA, this is to ensure the
CFO performed each of the tasks outlined in his
employment contract which are typical of that for
a CFO position, and timely reporting to the Board
to ensure business decisions can be made on a
timely and informed basis.
The Executive Chairman assessed the
performance of the CFO against the above
measurable objectives and awarded 33% for
objective 1, 20% for objective 2 and 34 % for
objective 3, being a total of 87% of the total
achievable bonus.
Grant of options
The following options were issued during the year:
•
•
5,000,000 Unlisted Options to the Executive
Chairman exercisable at A$0.20 on or before
30 May 2018 and subject to the following
vesting conditions:
(i) 1,666,668 vesting immediately;
(ii) 1,666,666 vesting on 8 June 2016; and
(iii) 1,666,666 vesting on 8 June 2017.
1,000,000 Unlisted Options to the CFO
exercisable at A$0.20 on or before 31 March
2018 and subject to the following vesting
conditions:
(i) 333,334 vesting immediately;
(ii) 333,333 vesting on 31 March 2016; and
(iii) 333,333 vesting on 31 March 2017.
Relative proportions of fixed vs variable
remuneration expense
The following table shows the relative proportions
of remuneration that are linked to performance
and those that are fixed, based on the amounts
disclosed as statutory remuneration expense in
the previous table:
15
Name
Directors
Executive Chairman
Mark Caruso
Non-Executive Directors
Joseph Caruso
Peter Torre
Guy Walker
James Leahy
Ross Hastings
Other Key Management Personnel
Tony Sheard
Andrew Lashbrooke
Fixed Remuneration
At Risk - STI
At Risk - LTI
2015
2014
2015
2014
2015
2014
68%
100%
16%
100%
100%
100%
100%
100%
71%
n/a
100%
100%
100%
100%
n/a
100%
100%
0%
0%
0%
0%
0%
23%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
16%
0%
0%
0%
0%
0%
6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The Company paid a fee of A$10,000 to Sherwood
Love and Associates for their report on Mr Mark
Caruso’s remuneration.
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
Tony Sheard
Commencement date
1 January 2015
Term
No fixed term
Total Remuneration package
A$275,000 per annum (inclusive of 9.5%
superannuation) and cash bonus as set out above
Termination benefits
Nil unless constructive redundancy in which case 12
months’ salary
There are no other service agreements.
C. SERVICE AGREEMENTS
No formal service contract was signed with the
Executive Chairman however, the following were
the terms under which the Executive Chairman was
employed throughout the year:
Mark Caruso
Commencement date
6 August 2012
Term
No fixed term
Total Remuneration package
A$600,000 per annum, effective from 12 September
2014, (inclusive of 9.5% superannuation) and cash
bonus as set out above
Termination benefits
12 months’ base salary plus any payment in lieu of
notice
The Remuneration and Nomination Committee
engaged the services of a remuneration consultant,
Sherwood Love and Associates, to provide a
recommendation in respect to Mr Mark Caruso’s
remuneration. Mr Caruso’s remuneration was set
based on the recommendation made by Sherwood
Love and Associates.
The remuneration recommendations were free
from undue influence as they were made to and
directed by the Remuneration and Nomination
Committee under the direction of the Chairman
of that Committee. The Board is satisfied that the
remuneration recommendation was made free from
undue influence by the relevant member of the key
management personnel as he did not have any input
into the recommendations. The recommendations
were made to the Remuneration and Nomination
Committee and Sherwood Love and Associates only
took instructions from the Committee.
16
D. SHARE BASED COMPENSATION
The following options were granted as remuneration during the year ended 31 December 2015 (2014: Nil):
Mark Caruso
5,000,000
Tony Sheard
1,000,000
The terms and conditions of each grant of options are as follows:
Grant Date
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
Lapsed
during the
year
Balance
at the end
of the year
Vested
at the end
of the year
21 Dec 2012
31 Dec 2015
20 cents
3.35 cents
10,000,000
21 Dec 2012
31 Dec 2015
35 cents
2.23 cents
1,000,000
-
-
27 May 2015
30 May 2018
20 cents
4.90 cents
07 Sept 2015
31 Mar 2018
20 cents
5.40 cents
-
-
5,000,000
1,000,000
Total
11,000,000 6,000,000
-
-
-
-
-
- (10,000,000)
(1,000,000)
-
-
-
-
-
-
5,000,000
1,666,668
1,000,000
333,334
-
-
-
- (11,000,000)
6,000,000
2,000,002
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 2015
Received as
remuneration
Increase as a
result of options
exercised
Balance as at
31 December
2015
Net change
Mark Caruso
• Indirect
78,354,014
• Direct
Joseph Caruso
Peter Torre
Guy Walker
Ross Hastings
James Leahy
Tony Sheard
15,784
77,007,485
625,000
125,000
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
78,554,014
-
-
-
-
-
-
15,784
77,007,485
625,000
125,000
-
-
50,000
150,000
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
Ross Hastings
Tony Sheard
Total
Balance as at 1
January 2015
Received as
remuneration
Options
exercised
Options
lapsed
Balance as at
31 December
2015
1,000,000
5,000,000
1,000,000
1,000,000
1,000,000
1,000,000
-
-
-
-
-
-
-
1,000,000
5,000,000
6,000,000
-
-
-
-
-
-
-
-
(1,000,000)
5,000,000
(1,000,000)
(1,000,000)
(1,000,000)
(1,000,000)
-
-
-
-
-
-
-
1,000,000
(5,000,000)
6,000,000
17
E. OTHER TRANSACTIONS WITH KEY MANAGEMENT
PERSONNEL
Mine Site Construction Services (“MSCS”), a company
associated with Mr Mark Caruso and Mr Joseph Caruso
has provided the followings services to the Company
during 2015:
Provision of office space.
The amount paid by the Company to MSCS for the
year ended 31 December 2015 was $47,734. 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 2015 was $57,784.
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 2015 was $299,422.
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.
As at 31 December 2015, amount payable to MSCS is
$92,105.
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$2 million 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$2 million 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 it
provided to 30 September 2015. As announced by
the Company on 5 August 2015, RMS agreed to than
repayment of 50% of the principal and to extend
the term of the remaining balance of the loan to
30 September 2016 to provide the Company with
flexibility with its funding arrangements for the GSP.
As at 31 December 2015, the balance (including
interest payable) outstanding is $597,872. Interest
paid amounted to $159,246 in 2015.
End of the audited remuneration report
18
INSURANCE OF OFFICERS
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 $49,703 representing
$9,940 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.
PROCEEDINGS ON BEHALF OF THE GROUP
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.
NON-AUDIT SERVICES
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, Compliance and Risk 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, Compliance and Risk Committee to ensure
they do not impact the impartiality and objectivity
of the auditor; and
• none of the services undermine the general
principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional
Accountants.
19
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 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 (South African entities)
BDO Tax (WA) Pty Ltd
BDO Cape Town South Africa
31 Dec 2015
$
31 Dec 2014
$
60,790
48,588
109,378
80,366
6,964
87,330
68,281
32,871
101,152
90,768
5,555
96,323
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001
is set out on page 64 and forms part of this report.
Auditor
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 Caruso
Executive Chairman
Perth, Western Australia
29 February 2016
20
Financial statements
22 Consolidated income statement
23 Consolidated statement of comprehensive income
24 Consolidated balance sheet
25 Consolidated statement of cash flows
26 Consolidated statement of changes in equity
27 Notes to the consolidated financial statements
63 Directors’ declaration
64 Auditor’s independence declaration
65
Independent auditor’s report to the members
21
Consolidated income statement
For the year ended 31 December 2015
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
Impairment charge
Finance costs
Profit before income tax
Income tax (expense) / benefit
Profit after income tax
Profit is attributable to:
Owners of Mineral Commodities Ltd
Non-controlling interest
Notes
31 Dec 2015
$
31 Dec 2014
$
3
3
4
4
4
4
5
46,180,153
33,270,806
278,384
1,689,143
46,458,537
34,959,949
-
502
(30,546,945)
(27,077,759)
(2,411,730)
(3,425,917)
-
(29,601)
(172,398)
(396,315)
12,931,149
(2,354,364)
-
(477,927)
3,949,247
4,427,097
10,576,785
8,376,344
10,576,785
8,376,344
-
-
10,576,785
8,376,344
Cents
Cents
Earnings per share for profit from continuing operations attributable
to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
28
28
2.61
2.57
2.07
2.01
The above consolidated income statement should be read in conjunction with the accompanying notes.
22
Consolidated statement of comprehensive income
For the year ended 31 December 2015
Notes
31 Dec 2015
$
31 Dec 2014
$
Profit for the year
10,576,785
8,376,344
Other comprehensive income
Changes in the fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
18
18
6,387
-
(10,240,709)
(2,549,618)
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
342,463
342,463
5,826,726
5,826,726
Total comprehensive income for the year is attributable to:
Owners of Mineral Commodities Ltd
Non-controlling interest
342,463
5,826,726
-
-
342,463
5,826,726
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
23
Consolidated balance sheet
as at 31 December 2015
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
Long term borrowings
Deferred tax liabilities
Total non-current Liabilities
Total Liabilities
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
Parent entity interest
Non-controlling interest
Total equity
Notes
31 Dec 2015
$
31 Dec 2014
$
6
7
8
7
9
10
11
12
13
14
15
16
17
17
16
13
18
18
18
18
4,227,444
4,216,052
2,348,737
2,301,803
63,866
3,084,929
6,123,021
64,228
8,941,850
13,488,230
4,650,398
665,553
11,302,408
14,642,240
5,217,072
5,003,743
5,323,062
2,372,287
6,019,727
4,617,463
3,517,369
4,036,956
32,382,596
34,985,682
41,324,446
48,473,912
3,153,297
-
2,970,210
252,938
5,683,843
4,130,000
7,235,413
141,768
6,376,445
17,191,024
78,086
988,584
2,204,851
3,271,521
77,167
-
-
77,167
9,647,966
17,268,191
31,676,480
31,205,721
63,437,092
63,437,092
(20,508,920)
(10,402,894)
(11,365,331)
(21,942,116)
31,562,841
31,092,082
113,639
113,639
31,676,480
31,205,721
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
24
Consolidated statement of cash flows
For the year ended 31 December 2015
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
37,475,013
36,177,065
Payments to suppliers and employees
(28,336,874)
(27,737,444)
Net cash inflow from operating activities
19
9,138,139
8,439,621
Notes
31 Dec 2015
$
31 Dec 2014
$
Cash flows from investing activities
Exploration expenditure
Payments for property, plant and equipment
Payments for development expenditure
Payments for general fixed assets
Proceeds from sales of investments
Interest received
(845,318)
(96,407)
(3,356,090)
(1,863,340)
(1,869,848)
(3,198,386)
-
-
8,113
(256,131)
17,647
12,889
Net cash outflow from investing activities
(6,063,143)
(5,383,728)
Cash flows from financing activities
Proceeds from the issue of shares and options (net of costs)
Proceeds from borrowings
Repayment of borrowings
Interest paid on borrowings
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of financial year
6
6
-
(3,235)
3,203,052
2,907,010
(5,139,048)
(2,236,045)
(669,586)
(944,926)
(2,605,582)
(277,196)
469,414
2,778,697
4,216,052
(458,022)
4,227,444
1,503,316
(65,961)
4,216,052
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
25
Consolidated statement of changes in equity
For the year ended
31 December 2015
Contributed
equity
$
Reserves
$
Accumulated
losses
$
Non-
controlling
interest
$
Totals
$
Total equity
$
At 1 January 2015
63,437,092 (10,402,894)
(21,942,116)
31,092,082
113,639
31,205,721
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
Contribution of equity net
of transactions
Issue of unlisted options
-
-
-
-
-
10,576,785
10,576,785
-
10,576,785
(10,234,322)
- (10,234,322)
- (10,234,322)
(10,234,322)
10,576,785
324,463
128,296
-
128,296
-
-
324,463
128,296
Balance at the end of the year
63,437,092 (20,508,920)
(11,365,331)
31,562,841
113,639
31,676,480
For the year ended 31
December 2014
Contributed
equity
Reserves
Accumulated
losses
$
$
$
Non-
controlling
interest
Total equity
$
$
Totals
$
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
Contribution of equity net of
transactions
-
-
-
-
8,376,344
8,376,344
(2,549,618)
-
(2,549,618)
(2,549,618)
8,376,344
5,826,726
Issue of unlisted options
(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
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
26
Notes to the consolidated financial statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING
(b) Principles of consolidation
POLICIES
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
(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 2015.
(iv) New standards and interpretations not yet
adopted
Certain new accounting standards and
interpretations have been published that are
not mandatory for 31 December 2015 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(x) for further details.
(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.
As noted in note 21(ii), 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.
27
(ii) Associates
Associates are 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.
(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.
28
(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 (USD) dollars,
which is the Company’s presentation currency.
•
•
•
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 2015 to 31 December 2015; and
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.
(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.
(ii) 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.
(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) Stockpiled Revenue
Revenue from the stockpiling of goods is
recognised when there is evidence that there
has been a transfer of risks and rewards to
the customer. This is based on a contractual
obligation of the customer to take final delivery
and make full and final payment for all amounts
delivered to the stockpile.
(iii) 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.
(iv) 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
29
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.
From 1 January 2014, the Company and its wholly-
owned Australian controlled entities have formed
an income tax consolidated group under the tax
consolidation regime with Mineral Commodities
Ltd as the head entity. The head entity and each
subsidiary in the tax consolidated group continue
to account for their own current and deferred tax
amounts. The tax consolidated group has applied
the “separate taxpayer within group” approach in
determining the appropriate amount of taxes to
allocate to members of the tax consolidated group.
In addition to its own current and deferred tax
amount, the head entity also recognises the
current tax liabilities (or assets) and the deferred
tax assets arising from unused tax losses and
unused tax credits assumed from each subsidiary
in the tax consolidated group.
Assets or liabilities arising under the tax funding
agreements with the tax consolidated entities
are recognised as amounts receivable from or
payable to other entities in the tax consolidated
group. The tax funding arrangement ensure that
the intercompany charge equals the current tax
liability or benefit of each tax consolidated group
member, resulting in neither a contribution by the
head entity to the subsidiaries nor a distribution
by the subsidiaries to the head entity.
(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
30
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.
(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. Weighted average cost includes direct costs
and an appropriate portion of fixed and variable
overhead expenditure, including depreciation and
amortisation. As a result of mineral sands being co-
products from the same mineral separation process,
costs are allocated to inventory on the basis of the
relative sales value of the finished goods produced.
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 property, plant and equipment,
and mine properties and development, over its
estimated useful life on a straight line or units of
usage (activity) basis.
31
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.
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 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 development expenditure.
32
(ii) Mine Properties and development expenditure
Mine properties relates to capitalised restoration
costs expected to be incurred.
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 development
expenditure 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.
(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.
33
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
Equity-settled share-based compensation
benefits are provided to certain senior employees.
Equity-settled transactions are awards of options
over shares that are provided to employees in
exchange for the rendering of services.
The cost of equity-settled transactions is
measured at fair value at grant date. Fair value
is independently determined using the 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
34
and the risk free interest rate for the term of the
option. No account is taken of any other vesting
conditions.
The cost of equity-settled transactions is
recognised as an expense with a corresponding
increase in equity over the vesting period. The
cumulative change to profit or loss is calculated
based on the grant date fair value of the award,
the best estimate of the number of awards that
are likely to vest and the expired portion of the
vesting period. The amount recognised in profit
or loss for the period is the cumulative amount
calculated at each reporting date less amounts
already recognised in previous periods.
(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.
(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 and services is
not recoverable from the taxation authority, in
which case the GST is recognised as part of the
cost of acquisition of the asset or as part of the
expense item as applicable; and 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
(w) Parent entity information
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.
The financial information for the parent entity,
Mineral Commodities Ltd, disclosed in note 29
has been prepared on the same basis as the
consolidated financial statements, unless stated
otherwise.
(x) 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 estimates
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.
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.
35
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 $Nil (2014: $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.
(y) Accounting standards not yet effective
Reference
Title
Nature of Change
Financial
Instruments
AASB 9
(issued
December
2014)
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:
• 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.
Application
date for
entity
1 January
2018
Application
date of
standard
Annual
reporting
periods
beginning
on or after
1 January
2018
Impact on entity financial
statements
Adoption of AASB 9 is only
mandatory for the year ending
31 December 2018. The entity
has not yet made an assessment
of the impact of these
amendments.
The entity has financial assets
classified as available-for-sale.
When AASB 9 is first adopted,
the entity will reclassify these
into the fair value through profit
or loss category. On 1 January
2018, the cumulative fair value
changes in the available-for-
sale reserve will be reclassified
into retained earnings and
subsequent fair value changes
will be recognised in profit or
loss. The change is applied
retrospectively, however
comparatives need not be
retrospectively restated.
Instead, the cumulative effect
of applying the change for the
first time will be recognised as
an adjustment to the opening
balance of retained earnings on
1 January 2018.
36
Reference
Title
Nature of Change
Application
date of
standard
Impact on entity financial
statements
Application
date for
entity
AASB15
IFRS 15
(issued
June 2014)
Revenue
from
contracts
with
customers
Impairment
The new impairment model in
AASB 9 is now based on an
‘expected loss’ model rather
than an ‘incurred loss’ model.
A complex three stage model
applies to debt instruments at
amortised cost or at fair value
through other comprehensive
income for recognising
impairment losses.
A simplified impairment model
applies to trade receivables
and lease receivables with
maturities that are less than 12
months.
For trade receivables and
lease receivables with maturity
longer than 12 months, entities
have a choice of applying the
complex three stage model or
the simplified model.
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.
Annual
reporting
periods
beginning
on or after
1 January
2018.
The entity has both long
term and short term trade
receivables. When this standard
is adopted, the entity’s loss
allowance on trade receivable
will increase.
The change is applied
retrospectively, however
comparatives need not be
retrospectively restated.
Instead, the cumulative effect
of applying the change for
the first time is recognised as
an adjustment to the opening
balance of retained earnings on
1 January 2018.
The entity operates in
the mining industry and
recognises revenue for sale
of mineral sands per note 1(e)
(i). When this standard is first
adopted, revenue for sale of
mineral sands will instead
be recognised when control
of goods is transferred. The
entity has not yet made an
assessment of the impact of
these amendments.
Comparatives will need to
be retrospectively restated,
either back to 1 January
2017 if the full retrospective
transitional requirements are
applied, or to 1 January 2018
if the modified retrospective
transitional requirements are
applied. Modified retrospective
restatement requires that the
cumulative effect of applying
AASB 15 for the first time be
recognised as an adjustment to
the opening balance of retained
earnings on 1 January 2018.
1 January
2017
No other standards, interpretations or amendments which have been issued are expected to have an impact on
the Group.
37
2. SEGMENT INFORMATION
(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) – South Africa;
2. Mineral Sands exploration (Xolobeni Mineral Sands project) – South Africa; and
3. Corporate (management and administration of the Company’s projects) – Australia and 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 2015 is as follows:
2015
Tormin
project
$
Xolobeni
project
$
Corporate
$
Consolidation
eliminations
$
Total
$
Total segment revenue
Inter-segment revenue
45,773,169
(45,534,579)
Revenue from external customers
238,590
1
-
1
46,219,946
-
46,219,946
-
-
-
91,993,116
(45,534,579)
46,458,537
Adjusted EBITDA
14,487,488
(6,147)
(2,981,878)
6,390,035
17,889,498
Depreciation and amortisation
4,178,968
-
53,960
-
4,232,928
Total segment assets
14,424,727
4,242,685
62,878,801
(40,221,767)
41,324,446
Total segment liabilities
6,932,933
4,154,609
37,552,832
(38,992,408)
9,647,966
2014
Tormin project
$
Xolobeni
project
$
Corporate
$
Consolidation
eliminations
$
Total
$
Total segment revenue
Inter-segment revenue
35,218,170
(8,355,814)
Revenue from external customers
26,862,356
Adjusted EBITDA
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
38
Adjusted EBITDA reconciles to operating profit before income tax as follows:
Adjusted EBITDA
Interest expense
Depreciation and amortisation
Operating profit before income tax
3. REVENUE
From continuing operations
Sales revenue
Sale of product
Other revenue
Revenue from sub-leasing access road
Interest income
Other
31 Dec 2015
$
31 Dec 2014
$
17,889,498
(725,421)
8,194,280
(974,296)
(4,232,928)
(3,270,737)
12,931,149
3,949,247
46,180,153
33,270,806
-
1,592,893
18,759
259,625
278,384
12,889
83,361
1,689,143
4. OTHER INCOME AND EXPENSE ITEMS
This note provides a breakdown of the items included in ‘other income’ and an analysis of expenses by nature.
(i) Other income
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:
-
-
502
502
4,743,839
8,066,438
3,499,106
4,559,406
5,558,319
3,637,970
4,178,968
3,786,958
1,071,589
3,229,243
Directors and key management personnel remuneration
2,939,786
1,001,213
Operating lease rentals
Depreciation – corporate assets
(iv) Finance costs
Interest expense on borrowings
Borrowing facility fee
Bank interest paid
68,073
53,960
75,393
41,494
319,529
76,785
-
396,315
397,751
77,978
2,198
477,927
39
5. INCOME TAX EXPENSE / (BENEFIT)
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.
The components of income tax expense / (benefit) comprise:
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax expense / (benefit) is attributable to:
Profit from continuing operations
Aggregate income tax benefit
Deferred income tax benefit included in income tax expense / (benefit) comprises:
Decrease / (increase) in deferred tax assets
(Decrease) / increase in deferred tax liabilities
31 Dec 2015
$
31 Dec 2014
$
-
-
2,385,999
(4,427,097)
(31,635)
-
2,354,364
(4,427,097)
2,354,364
(4,427,097)
2,354,364
(4,427,097)
1,492,770
(4,815,548)
(128,263)
388,451
1,364,507
(4,427,097)
Numerical reconciliation of income tax expense / (benefit) to prima facia tax expense / (benefit)
Profit from continuing operations before income tax expense / (benefit)
12,931,149
3,949,247
Prima facia tax payable on profit from ordinary activities before at a rate
of 30% (2014: 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
Share based payment
Other non-assessable income
Net deferred tax assets not brought to account
Adjustment for current tax of prior period
Income tax expense / (benefit)
40
3,879,345
1,184,775
(53,892)
3,825,453
(65,760)
1,119,015
1,886
-
-
-
-
-
1,527
523,462
516,430
(150)
8,800
32,786
182,628
(863,646)
943
97,448
726
27,572
39,676
(1,790,333)
1,662
112,094
98,775
28,969
-
(6)
-
(6,006,815)
(31,635)
-
2,354,364
(4,427,097)
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 2015
$
31 Dec 2014
$
-
-
-
-
-
-
Total estimated revenue tax losses of A$Nil and ZAR54,376,151 (2014: A$4,849,434 and ZAR54,297,645) 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.
Mineral Commodities Ltd (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income
tax consolidated group under the tax consolidation regime effective from 1 January 2014. The head entity
and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax
amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining
the appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each
subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement
ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group
member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the
subsidiaries to the head entity.
6. CASH AND CASH EQUIVALENTS
Cash assets
Cash at bank and in hand
4,227,444
4,216,052
(i) Interest rate risk exposure
The Group’s exposure to interest rate risk is discussed in note 20(a)(ii).
(ii) Reconciliation to cash flow statement
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the
financial year.
7. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Less: Provision for impairment of receivables
Other receivables (i)
Prepayments
Non-current
Trade receivables (ii)
Security deposits (iii)
Advance to Blue Bantry (iv)
1,842,030
(172,398)
1,669,632
654,389
24,716
1,236,441
-
1,236,441
1,671,499
176,989
2,348,737
3,084,929
3,937,487
182,088
530,823
4,650,398
-
235,053
430,500
665,553
41
Includes $223,507 (2014: $1,031,088) of VAT refundable from the South African Revenue Service.
(i)
(ii) The amount has been recorded at amortised cost as payment is expected when shipment occurs from April
2017.
(iii) Includes a secured deposit of $182,088 (2014: $230,748) 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.
(iv) An amount of ZAR 8.25 million (2014: ZAR 5 million) has been advanced to the BEE partner, Blue Bantry.
Refer to note 23(d) for details.
Impairment of receivables
The Group has recognised a loss of $172,398 (2014: $Nil) in profit or loss in respect of impairment of receivables
for the year ended 31 December 2015.
Fair values and credit risk
Except for the non-current trade receivables, due to the short term nature of these receivables the carrying
values represent their respective fair values as at 31 December 2015 and 2014. The maximum exposure to
credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. The non-
current receivables have a fair value of $3,937,487 as at 31 December 2015, compared to a carrying amount of
$4,200,000 (2014: fair value of $Nil and carrying amount of $Nil).
The fair values were calculated based on cash flows discounted using a current lending rate. Refer to note 20 for
more information on the risk management policy of the Group and the credit quality of the entity’s receivables.
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 20.
8. INVENTORIES
Raw materials at cost
Finished product at cost
Spare parts and consumables at cost
31 Dec 2015
$
31 Dec 2014
$
84,121
857,157
1,360,525
2,301,803
162,186
5,660,311
300,524
6,123,021
The costs of individual items of inventory are determined using weighted average cost.
42
9. PROPERTY, PLANT AND EQUIPMENT
Freehold
land and
buildings
$
Furniture,
fittings and
equipment
$
Plant and
machinery
$
Mine
vehicles
$
Decom-
missioning
asset
$
Capex
work in
progress
$
Total
$
Year ended 31 December 2015
Cost at fair value
As at 1 January 2015
22,567
381,829
15,892,012
10,412
72,133
-
16,378,953
Additions
Re-classifications
-
-
111,536
2,271,263
41,698
-
(109,412)
-
-
-
1,887,976
4,312,473
-
(109,412)
Exchange differences
(6,054)
(65,228) (4,554,465)
14,356
(19,349)
(323,391)
(4,954,131)
As at 31 December 2015
16,513
428,137 13,499,398
66,466
52,784
1,564,585
15,627,883
Accumulated depreciation
and amortisation
As at 1 January 2015
(795)
(183,468) (1,536,079)
(8,807)
(7,564)
Depreciation and amortisation
Disposal
Re-classifications
-
-
-
(127,153) (2,943,844)
(11,420)
(6,424)
-
10,941
(1,858)
(716,948)
-
-
-
-
Exchange differences
240
72,949
1,132,384
(1,060)
3,431
As at 31 December 2015
(555)
(239,530) (4,053,546)
(21,287)
(10,557)
-
-
-
-
-
-
(1,736,713)
(3,088,841)
10,941
(718,806)
1,207,944
(4,325,475)
Net book amount
Cost at fair value
Accumulated depreciation and
amortisation
16,513
428,137 13,499,398
66,467
52,784
1,564,585
15,627,883
(555)
(239,530) (4,053,546)
(21,287)
(10,557)-
(4,325,475)
Net book amount
15,958
188,607
9,445,852
45,180
42,227
1,564,585
11,302,408
Year ended 31 December 2014
Cost at fair value
As at 1 January 2014
Additions
Re-classifications
-
144,248
5,121,331
-
-
23,663
256,131
1,828,759
10,918
75,637
-
-
9,713,992
-
-
Exchange differences
(1,096)
(18,550)
(772,070)
(506)
(3,504)
As at 31 December 2014
22,567
381,829
15,892,012
10,412
72,133
Accumulated depreciation
and amortisation
As at 1 January 2014
-
(107,427)
(127,448)
-
-
Depreciation and amortisation
(795)
(76,041)
(1,408,631)
(8,807)
(7,564)
As at 31 December 2014
(795)
(183,468) (1,536,079)
(8,807)
(7,564)
Net book amount
Cost at fair value
Accumulated depreciation and
amortisation
22,567
381,829
15,892,012
10,412
72,133
(795)
(183,468) (1,536,079)
(8,807)
(7,564)
Net book amount
21,772
198,361
14,355,933
1,605
64,569
-
-
-
-
-
-
-
-
-
-
-
5,265,579
2,195,108
9,713,992
(795,726)
16,378,953
(234,875)
(1,501,838)
(1,736,713)
16,378,953
(1,736,713)
14,642,240
43
Leased assets
The carrying amounts above include $3,134,220 (2014: $3,912,664) where the Group is a lessee under a finance lease.
Details of amounts due under equipment acquisition agreements are detailed under borrowings. Refer to note 16.
10. MINE DEVELOPMENT EXPENDITURE
9
12
11
10
11
31 Dec 2015
$
31 Dec 2014
$
5,003,743
13,606,814
918,578
718,806
947,134
(785,962)
(1,585,227)
5,217,072
3,198,386
(9,713,992)
-
(1,298,411)
(789,054)
5,003,743
6,019,727
11,008,541
876,641
-
-
(1,573,306)
5,323,062
96,407
(51,297)
(4,299,929)
(733,995)
6,019,727
4,617,463
-
-
1,115,159
(947,134)
-
(365,246)
(932,796)
2,372,287
-
4,299,929
(470,487)
(327,138)
4,617,463
1,842,733
3,158,290
142,773
75,412
1,646,220
-
58,082
235,828
440,212
495,631
3,707,138
4,388,043
(189,769)
3,517,369
(351,087)
4,036,956
As at 1 January
Expenditure during the year
Re-classification: transfer from/ (to) property, plant and equipment
Re-classification: transfer from mine properties
Amortisation expense
Exchange differences
11. EXPLORATION EXPENDITURE
As at 1 January
Expenditure during the year
Write off discontinued projects
Re-classification: transfer to mine properties
Exchange differences
As at 31 December
12. MINE PROPERTIES
As at 1 January
Expenditure during the year
Re-classification: transfer to mine development expenditure
Re-classification: transfer from exploration expenditure
Amortisation expense
Exchange differences
As at 31 December
13. DEFERRED TAX ASSETS / LIABILITIES
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
44
Provisions/
accrued
expenditure
$
Tax losses
$
Business
related
expenditure
and
borrowing
costs
$
Unrealised
foreign
exchange
losses
$
Property,
plant and
equipment
$
Total
$
2015
At 1 January 2015
3,158,290
58,082
235,828
440,212
495,631
4,388,043
(charged) / credited
- to profit or loss
(1,315,557)
84,691
(160,416)
1,206,008
(495,631)
(680,905)
- to other comprehensive income
-
-
-
-
At 31 December 2015
1,842,733
142,773
75,412
1,646,220
-
-
-
3,707,138
Provisions/
accrued
expenditure
$
Tax losses
$
Business
related
expenditure
and
borrowing
costs
$
-
-
-
2014
At 1 January 2014
(charged) / credited
- to profit or loss
3,158,290
58,082
235,828
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
Unrealised foreign exchange gain
Property, plant and equipment
Prepayments
Interest receivable
Set-off against deferred tax assets
31 Dec 2015
$
31 Dec 2014
$
1,761,557
443,295
2,462
187,306
2,394,620
(189,769)
2,204,851
-
-
4,572
346,515
351,087
(351,087)
-
45
2015
At 1 January 2015
(charged) / credited
- to profit or loss
Unrealised
foreign
exchange gain
$
Property, plant
and equipment
$
Prepayments
$
Interest
receivable
$
Total
$
-
-
4,572
346,515
351,087
1,761,557
443,295
(2,110)
(159,209)
2,043,533
- to other comprehensive income
-
-
-
At 31 December 2015
1,761,557
443,295
2,462
187,306
2,394,620
2014
At 1 January 2014
(charged) / credited
- to profit or loss
- to other comprehensive income
At 31 December 2014
Unrealised
foreign
exchange gain
$
Property, plant
and equipment
$
Prepayments
$
Interest
receivable
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
4,572
-
4,572
346,515
351,087
-
-
346,515
351,087
Mineral Commodities Ltd and its wholly owned Australian subsidiaries have applied the tax consolidation
legislation which means these entities are taxed as a single entity. As a consequence, the deferred tax assets and
deferred tax liabilities of these entities has been offset in the consolidated financial statements.
14. TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
31 Dec 2015
$
31 Dec 2014
$
2,310,593
842,704
4,013,390
1,670,453
3,153,297
5,683,843
(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 2015 and 2014.
(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 20.
15. UNEARNED REVENUE
Unearned revenue from product sales
-
4,130,000
46
16. BORROWINGS
Current
Short term borrowings – unsecured (1)
Amounts due under equipment acquisition agreements (2),(3)
31 Dec 2015
$
31 Dec 2014
$
1,263,416
3,291,363
1,706,794
3,944,050
2,970,210
7,235,413
Non-current
Amounts due under equipment acquisition agreements (2),(3)
988,584
-
(1) Short term borrowings included a pre finance and marketing agreement facility of USD2.0 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 2015, the
outstanding balance on this facility was Nil. The short term borrowings at 31 December 2015 was in relation to
shareholder loans (note 25(vi)). Repayment of the outstanding balance of these loans has been extended to
30 September 2016.
(2) The Group entered into Master Rental Agreements to acquire mobile mining equipment and generators.
Under the terms of these agreements, there is an option to purchase with the Group intends to exercise for
the mobile mining equipment.
(3) The Group entered into Instalment Sale Agreements to acquire mobile mining equipment. Under the terms of
these agreement, the Group will become the owner of the mobile mining equipment on final payment under
the agreements.
17. PROVISIONS
Current
Annual leave provision
Non-current
Environmental rehabilitation provision (1)
Long service leave provision
252,938
141,768
63,000
15,086
78,086
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.
18. EQUITY
(a) Contributed equity
(i) Share capital
Ordinary shares
Fully paid
2015
Number of shares
2014
Number of shares
2015
$
2014
$
404,941,581
404,941,581*
63,437,092
63,437,092
*The comparative figure has been amended to align with the total number of shares recorded on the Share Register.
47
(ii) Movements in ordinary share capital
Details
At 1 January 2015
Conversion of listed options
Placement of ordinary shares
Proceeds from rights issue
Share issue costs
At 31 December 2015
Transaction costs arising on share issue
At 31 December 2015
Number of shares
$
404,941,581
63,437,092
-
-
-
-
-
-
-
-
404,941,581
63,437,092
-
-
404,941,581
63,437,092
(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.
General reserve
$
Financial asset
revaluation
reserve
$
Foreign currency
translation
reserve
$
Listed option
reserve
$
Total
$
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 1 January 2015
1,363,393
(232,908)
(11,850,427)
317,048
(10,402,894)
Issue of unlisted options
Exchange differences on
translation of foreign operations
Change in fair value of available-
for-sale financial assets
-
-
-
-
-
(10,240,709)
6,387
-
-
128,296
128,296
-
-
(10,240,709)
6,387
At 31 December 2015
1,363,393
(226,521)
(22,091,136)
445,344
(20,508,920)
48
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.
Listed options reserve
Records the amounts received in a prior year together with the amounts amortised for employee options in the
current year from the issue of listed options.
(c) Accumulated losses
At 1 January
Profit for the year
At 31 December
(d) Non-controlling interest
At 1 January
Movement for the year
At 31 December
19. CASH FLOW INFORMATION
(a) Reconciliation of profit after income tax to cash flow from operating activities
Profit for the year
Depreciation and amortisation
Proceeds from the sale of available-for-sale investments
Interest income
Assets written off
Impairment loss
Finance costs
Share based payments
Net exchange differences
Change in operating assets and liabilities:
Decrease / (increase) in trade debtors
Decrease / (increase) in inventories
31 Dec 2015
$
31 Dec 2014
$
(21,942,116)
(30,318,460)
10,576,785
8,376,344
(11,365,331)
(21,942,116)
113,639
113,639
-
-
113,639
113,639
31 Dec 2015
$
31 Dec 2014
$
10,575,064
8,376,344
4,232,928
3,270,737
-
(8,113)
98,471
172,398
668,002
132,252
(502)
(12,889)
-
7,896
477,927
-
(6,464,912)
(1,206,251)
2,866,394
(5,842,132)
2,773,023
(5,351,261)
(Decrease) / increase in trade payables and unearned revenue
(6,082,914)
8,500,817
Increase in provisions
175,546
9,138,139
218,935
8,439,621
49
(i) Non-cash investing and financing activities
During the period the Group entered into Instalment Sale Agreements to acquire mobile mining equipment.
Under the terms of these agreements the Group will become the owner of the mobile mining equipment on final
payment under the agreement. Refer to note 16 for further details.
The Group has available and unutilised, as at 31 December 2015, a United States denominated Foreign Currency
Overdraft Facility of $0.5 million.
20. FINANCIAL RISK MANAGEMENT
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 USD
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
Market risk –
commodity price risk
Sale of products
Cash flow forecasting
Sensitivity analysis
Credit risk
Cash and cash equivalents and
trade and other receivables
Aging analysis
Credit ratings
Monitoring the prevailing
commodity prices and entering
into longer term fixed price sales
contracts, if deemed necessary by
the Board of Directors
Credit limits, retention of title over
product sold and letters of credit
Liquidity risk
Borrowings and other liabilities
Rolling cash flow
forecasts
Availability of committed 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 with assistance from the Audit, Risk and Compliance Committee.
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.
50
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in United States
Dollars, was as follows:
Borrowings
Sensitivity
31 December 2015
31 December 2014
A$
GBP
A$
GBP
597,872
665,544
1,396,819
1,336,192
Impact on
post tax profits
Impact on other
components of equity
2015
$
2014
$
2015
$
2014
$
USD/AUD exchange rate – increase 10%
USD/AUD exchange rate – decrease 10%
USD/GBP exchange rate – increase 10%
USD/GBP exchange rate – decrease 10%
59,787
(59,787)
66,554
(66,554)
139,681
(139,681)
133,619
(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 (ZAR) was:
Sensitivity
Impact on
post tax profits
Impact on other
components of equity
2015
$
2014
$
USD/ZAR exchange rate – increase 10%
USD/ZAR exchange rate – decrease 10%
769,511
(769,511)
733,107
(733,107)
2015
$
-
-
2014
$
-
-
(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, the Company’s investment in
equity securities (available-for-sale financial assets) is $63,866 (2014: $64,228), 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.
51
(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 Group has a strict code
of credit and requires the majority of its customers to have letters of credit in place. The maximum exposure to
credit risk at the reporting date to trade receivables is the carrying amount, net of any provisions for impairment
of those assets, as disclosed in the balance sheet and notes to the financial statements. The Group does not hold
any collateral.
(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 $4,227,444 (2014: $4,216,052).
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 16, the Company had access to a pre finance and marketing agreement facility of USD2.0
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. The outstanding balance was
fully repaid 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
Agreements entered into between the Company and the two major shareholders, the lenders provided a finance
facility capped at $2.0m 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 shareholders agreed to extend the term of the
loan they provided to 30 September 2015. As announced by the Company on 5 August 2015, the Shareholders
agreed to a repayment of 50% of the Principal and to extend the term of the remaining balance of the loan to 30
September 2016.
On 2 February 2016, the Company announced debt funding arrangements for its expansion initiatives relating to
a Garnet Stripping Plant (“GSP”) at its Tormin mine.
Maturity of financial assets
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 assets:
31 December 2015
< 6 months
$
6 – 12 months
$
1 – 5 years
$
5+ years
$
Total
$
Trade and other receivables
2,240,647
Total financial assets
2,240,647
-
-
4,200,0000
4,2000,000
-
-
6,440,647
6,440,647
52
31 December 2014
< 6 months
$
6 – 12 months
$
1 – 5 years
$
5+ years
$
Total
$
Trade and other receivables
2,907,940
Total financial assets
2,907,940
-
-
-
-
-
-
2,907,940
2,907,940
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 2015
< 6 months
$
6 – 12 months
$
1 – 5 years
$
5+ years
$
Total
$
Trade and other payables
3,153,297
-
Borrowings:
• Short term borrowings
• Equipment acquisition
agreements
-
1,263,416
994,764
994,764
1,268,110
-
-
Total financial liabilities
4,779,769
1,626,472
1,268,110
-
-
-
-
3,153,297
1,263,416
3,257,638
7,674,351
31 December 2014
< 6 months
$
6 – 12 months
$
1 – 5 years
$
5+ years
$
Total
$
Trade and other payables
Unearned revenue
Borrowings:
5,683,843
4,130,000
-
-
• 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
(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 $63,866 (2014: $64,228). 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 2015 and did not transfer any fair value amounts between the fair value hierarchy during the year
ended 31 December 2015.
53
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.
21. INTERESTS IN OTHER ENTITIES
(i) Material subsidiaries
The Group’s principal subsidiaries at 31 December 2015 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.
Name of entity
Rexelle Pty Ltd
Place of
business /
country of
incorporation
Australia
MRC Trading (Aust) Pty Ltd (1)
Australia
MRC Cable Sands Pty Ltd
Blackhawk Oil and Gas Ltd
Queensland Minex NL
Q Smelt Pty Ltd
Mincom Waste Pty Ltd
MRC Africa Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Skeleton Coast Resources (Pty) Ltd Namibia
MRC Resources Proprietary Limited South Africa
Mineral Sands Resources Proprietary
Limited
South Africa
Tormin Mineral Sands Proprietary
Limited (2)
South Africa
Nyati Titanium Eastern Cape
Proprietary Limited
MRC Metals (Pty) Ltd
South Africa
South Africa
Transworld Energy and Minerals
Resources (SA) Proprietary Limited South Africa
Ownership interest held by
the Group
Ownership interest held by
non-controlling interests
2015
%
2014
%
2015
%
2014
%
100
100
100
100
100
90
100
100
100
100
50
50
100
100
56
100
100
100
100
100
90
100
100
100
100
50
50
100
100
56
-
-
-
-
-
10
-
-
-
-
50
50
-
-
44
-
-
-
-
-
10
-
-
-
-
50
50
-
-
44
(1) MRC Trading (Aust) Pty Ltd was incorporated during the 2014 financial year
(2) Tormin Mineral Sands Proprietary Limited is a wholly owned subsidiary of Mineral Sands Resources Proprietary Limited
54
(ii) Non-controlling interest (“NCI”)
Transworld Energy
and Minerals
Resources (SA)
Proprietary Limited
Mineral Sands
Resources
Proprietary Limited
Tormin Mineral Sands
Proprietary Limited
Q Smelt Pty Ltd
2015
$
2014
$
2015
$
2014
$
2015
$
2014
$
2015
$
2014
$
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
56,303
4,405
60,708
3,700 20,854,641
9,794,472
- (12,846,360)
(13,051,611)
3,700
8,008,281
(3,257,139)
-
-
-
-
-
-
4,186,382
4,632,184
19,732,050
27,206,600
5,218,099
5,218,099
(4,118,529)
(4,511,266) (18,091,240) (21,504,746)
-
-
67,853
120,918
1,640,810
5,701,854
5,218,099
5,218,099
Net assets
128,561
124,618
9,649,091
2,444,715
5,218,099
5,218,099
Accumulated NCI
Summarised statement
of comprehensive income
Revenue
Profit/ (loss) for the period
Other comprehensive income
Total comprehensive income
Profit attributable to NCI
Summarised cash flows
-
-
(6,147)
-
(6,147)
-
58,781
-
-
-
-
-
-
-
45,773,169
35,218,171
6,894,449
1,627,043
-
-
6,894,449
1,627,043
-
-
Cash flows from operating activities
(34,808)
(950) (21,195,262)
(769,529)
Cash flows from investing activities
35,199
950 (5,189,526)
(5,580,422)
Cash flows from financing activities
Net increase in cash and cash equivalents
-
391
- 27,699,986
7,179,795
-
1,315,198
829,844
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
1
-
-
-
1
2
-
2
-
-
-
2
39,933
48,544
-
-
-
-
-
-
-
-
-
As noted above, the Company, via its wholly owned subsidiary MRC Resources Proprietary Limited (“MRCR”),
has a 50% interest in the issued capital in 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.
-
-
-
-
-
-
-
-
-
55
22. CONTINGENT ASSETS AND CONTINGENT LIABILITIES
a) Contingent assets
Blastrite sought interdictory relief against MSR, MRC and seven others in the High Court (Cape Town) in terms
of which, Blastrite sought, inter alia, an order that: (a) MSR not deal with any entity or person other than
Blastrite in relation to the discussion and consideration by the parties of ideas, plans products, formulations etc.
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 Mineral Sands Project; and (b) that MSR not renew the written Garnet offtake
agreement to which it and MRC and others were a party for the period 1 July 2015 to 30 June 2016 or thereafter.
The interdictory relief sought both interim and final relief. The matter was opposed. Both Blastrite’s interim and
final relief was dismissed with costs. An amount of ZAR170 000 was paid by Blastrite towards costs in respect
of the interim relief. An amount of approximately ZAR3 million is being claimed for costs for the final relief. It is
anticipated that less than 100% of this latter amount will be recovered from Blastrite and that the monies due will
be paid within the course of 2016.
b) Contingent liabilities
Bank guarantees
FirstRand Bank Ltd has issued a Bank Guarantee, in favour of the South African Department of Mineral
Resources, in respect of MSR’s obligations under the Tormin Mining Right for an amount of ZAR2,730,000
(USD175,539) (2014: ZAR2,730,000 (USD230,748)).
There have been no other changes to contingent assets or liabilities since 31 December 2015.
23. COMMITMENTS
31 Dec 2015
$
31 Dec 2014
$
a) Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
1,117,471
-
b) Finance lease commitments
Commitments in relation to minimum lease repayments under equipment acquisition agreements:
Within one year
Later than one year but no later than five years
Greater than 5 years
Minimum lease payments
Less: Future Finance Charges
1,989,527
3,944,050
1,268,110
-
-
-
3,257,637
3,944,050
(225,658)
-
3,031,979
3,944,050
Finance lease commitments includes contracted amounts for various plant and equipment with a written down
value of $3,134,220 (2014: $3,912,664) secured under finance leases expiring within one to five years. Under
the terms of the leases, the Group has the option to acquire certain leased assets on the expiry of the leases,
under master rental agreements and will become the owner of certain leased assets on the final payment under
instalment sale agreements.
c) Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised in the accounts:
Within one year
Later than one year but no later than five years
Greater than 5 years
741,445
3,944,050
2,166,578
-
-
-
2,908,023
3,944,050
56
Operating lease commitments includes contracted amounts for offices and plant and equipment under non-
cancellable operating leases expiring within one to five years with, in some cases, options to extend. The leases
have various escalation clauses. On renewal, the terms of the leases are renegotiated.
d) 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 agreed to provide Blue Bantry access to an amount of funding to support the original Tormin
Project objectives by advancing through a loan, certain benefits Blue Bantry would expect to receive from the
Tormin Project. Blue Bantry will repay the ZAR 8.25 million loan from dividend distributions that it will receive in
the future from MSR.
24. EVENTS SINCE THE END OF THE FINANCIAL YEAR
Events since the end of the financial year were as follows:
(i) On 2 February 2016, the Company advised that MSR has secured USD4.5 million via a loan facility from GMA
to fund the completion of its GSP. The GSP will be installed at the front of the existing SCP. The installation of
the GSP will increase the non-magnetic feed grade to the SCP by removing the Garnet fraction from the HMC
prior to the SCP. This, in turn, will allow a high grade zircon concentrate to be fed to the existing magnetic
circuit, and thereby increase non-magnetic concentrate production. Completion of the GSP is expected on or
around 30 June 2016.
The loan agreement entered into with GMA provides for USD4.5 million funding with 3 year repayment terms
commencing on the re-start of shipping of garnet concentrate product to GMA (planned for January 2017).
The offtake agreement previously entered into with GMA has also been amended to increase the term of the
agreement to life of mine, and an increase in the annual offtake tonnage to 210,000 tonnes up from 150,000
tonnes with an option to take all other remaining Garnet concentrate production. The Company produced
approximately 285,000 tonnes of Garnet for the year ended 31 December 2015.
(ii) Subsequent to year end, the Directors declared a final unfranked dividend for the year ended 31 December
2015 of 1 Australian cent per ordinary share, a total distribution of A$4,049,416 based on the number
of ordinary shares on issue as at 31 December 2015. As the dividend is unfranked, there are income tax
consequences for the owners of the Company relating to this dividend.
Except for the above, there have been no other material matters arising subsequent to the end of the financial year.
57
25. RELATED PARTY TRANSACTIONS
(i) Parent entity
Transactions between the Company and other entities in the Group during the years ended 31 December 2015 and
31 December 2014 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 21(i).
(iii) Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
31 Dec 2015
$
31 Dec 2014
$
1,387,810
86,808
53,863
175,773
969,441
31,772
86,534
-
1,704,254
1,087,747
Detailed remuneration disclosures are provided in the remuneration report in the director’s report on page 13.
(iv) Transactions with other related parties
Mine Site Construction Services (“MSCS”), a company associated with Directors Mark Caruso and Joseph Caruso
has provided the followings services to the Company during 2015 and 2014:
• Provision of office space.
The amount paid by the Company to MSCS for the year ended 31 December 2015 was $47,734 (2014:
$54,144). 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 2015 was $57,784 (2014:
$46,564). 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 2015 was $299,422 (2014: $150,144).
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.
(v) Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
31 Dec 2015
$
31 Dec 2014
$
92,105
46,568
MSCS
58
(vi) Loans to / from related parties
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$2 million facility provided by Regional Management Pty Ltd (“RMS”),
a related party of 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$2 million on the following arm’s-length and commercial terms:
Interest of 13% per annum;
• Loan is unsecured;
•
• 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. As announced by the Company on 5 August 2015, RMS agreed to repayment of 50% of
the Principal and to extend the term of the remaining balance of the loan to 30 September 2016.
26. SHARE BASED PAYMENTS
The issue of employee options was 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 price.
On 27 May 2015, at the AGM of the Company, shareholders approved the issue of 5,000,000 employee options
to the Executive Chairman, Mr Mark Caruso. The options were issued in three tranches exercisable at 20 cents
each and subject to the following vesting conditions:
(i) 1,666,668 vesting immediately;
(ii) 1,666,666 vesting in 12 months; and
(iii) 1,666,666 vesting in 24 months.
Pursuant to his employment contract, the Board approved the issue of 1,000,000 employee options to the CFO,
Mr Tony Sheard. The options were issued in three tranches exercisable at 20 cents each and subject to the
following vesting conditions:
(i) 333,334 vesting immediately;
(ii) 333,333 vesting on 31 March 2016; and
(iii) 333,333 vesting on 31 March 2017.
Set out below are summaries of options granted under the Plan and unexpired at 31 December 2015:
Grant date
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
Lapsed
during
the year
Balance at
the end of
the year
Vested at
the end of
the year
21 Dec 2012
31 Dec 2015
20 cents
3.35 cents
10,000,000
21 Dec 2012
31 Dec 2015
35 cents
2.23 cents
1,000,000
-
-
27 May 2015
30 May 2018
20 cents
4.90 cents
07 Sept 2015
31 Mar 2018
20 cents
5.40 cents
-
-
5,000,000
1,000,000
11,000,000
6,000,000
-
-
-
-
-
- (10,000,000)
(1,000,000)
-
-
-
-
-
-
5,000,000
1,666,668
1,000,000
333,334
-
-
-
- (11,000,000)
6,000,000
2,000,002
59
Fair value of options granted
The assessed fair value at grant date of options during the year ended 31 December 2015 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 2015 was $128,296 (2014: $Nil).
The model inputs for options granted during the period, as well as prior periods, included:
1
2
3
4
(a) Options granted for no consideration with the expectation that the majority of the options would be exercised
towards the end of the term of the options and there are no market based vesting conditions.
(b) Exercise price (AUD)
20 cents
35 cents
20 cents
20 cents
(c) Grant date
21 December 2012
21 December 2012
27 May 2015 7 September 2015
(d) Risk-free interest rate
2.50%
2.57%
2.06%
1.77%
(e) Exercise date
31 December 2015
31 December 2015
30 May 2018
31 March 2018
(f) Share price at grant date (AUD)
8.1 cents
8.1 cents
11.0 cents
12.5 cents
(g) Expected price volatility of the shares
(h) Expected dividend yield
86%
Nil
86%
Nil
90%
Nil
90%
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 12 months.
27. REMUNERATION OF AUDITORS
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 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 (South African entities)
BDO Tax (WA) Pty Ltd
BDO Cape Town South Africa
31 Dec 2015
$
31 Dec 2014
$
60,790
48,588
109,378
80,366
6,964
87,330
68,281
32,871
101,152
90,768
5,555
96,323
60
28. EARNINGS PER SHARE
(a) Basic earnings per share
From continuing operations attributable to
the ordinary equity holders of the Company
Total basic earnings per share attributable to
the ordinary equity holders of the Company
(b) Diluted earnings per share
From continuing operations attributable to
the ordinary equity holders of the Company
Total diluted earnings per share attributable to
the ordinary equity holders of the Company
2015
US Cents
2014
US Cents
2.61
2.61
2.57
2.57
2015
$
2.07
2.07
2.01
2.01
2014
$
(c) Reconciliation of earnings used in the calculation of earnings per share
Basic earnings per share
Profit attributable to the ordinary equity holders of the
Company used in calculating basic earnings per share:
From continuing operations
10,576,785
8,376,344
Diluted earnings/(loss) per share
Profit attributable to the ordinary equity holders of the
Company used in calculating diluted earnings per share:
From continuing operations
10,576,785
8,376,344
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as
the denominator in calculating basic earnings per share
2015
Number
2014
Number
404,941,581
404,941,581
Adjustment for calculation of diluted earnings per share:
Options
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share
6,000,000
11,000,000
410,941,581
415,941,581
The table below details the number of options that have been granted and are on issue as at 31 December 2015.
These potential ordinary shares are considered dilutive and accordingly were used to calculate dilutive earnings
per share.
Number of options
5,000,000
1,000,000
Exercise price
Expiry date
AUD $0.20
30 May 2018
AUD $0.20
31 March 2018
61
29. PARENT ENTITY FINANCIAL INFORMATION
The individual financial statements for the parent entity show the following aggregate numbers:
2015
$
2014
$
546,439
1,534,560
35,327,540
31,863,780
35,873,979
33,398,340
1,840,821
3,802,725
7,425,240
9,266,061
2,366,711
6,169,436
26,607,918
27,228,904
63,437,092
63,437,092
(11,719,886)
(8,928,563)
(25,109,288)
(27,279,625)
26,607,918
27,228,904
2,170,337
936,152
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
Profit for the year
62
Directors’ declaration
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 2015 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 Caruso
Executive Chairman
Dated at Perth, Western Australia
this 29th day of February 2016
63
Auditor’s independence declaration
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 IAN SKELTON TO THE DIRECTORS OF MINERAL COMMODITIES
LIMITED
As lead auditor of Mineral Commodities Limited for the year ended 31 December 2015, 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 Limited and the entities it controlled during the
period.
Ian Skelton
Director
BDO Audit (WA) Pty Ltd
Perth, 29 February 2016
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
64
19
Independent auditor’s report to the members
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 Limited
Report on the Financial Report
We have audited the accompanying financial report of Mineral Commodities Limited, which comprises
the consolidated balance sheet as at 31 December 2015, the consolidated income statement,
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, 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
67
65
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 Limited, 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 Limited 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
2015 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.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report on pages 13 to 18, for
the year ended 31 December 2015. 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 Limited for the year ended 31
December 2015 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Ian Skelton
Director
Perth, 29 February 2016
66
68
Statement of corporate governance
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, which are noted below.
Principle 1.
Lay solid foundations for management
and oversight
Principle 2.
Structure the Board to add value
Principle 3. Act ethically and responsibly
Principle 4.
Safeguard integrity in corporate reporting
Principle 5. Make timely and balanced disclosure
Principle 6. Respect the rights of security holders
(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.
All directors have unrestricted access to the
Company Secretary, all employees of the group, and,
subject to the law, access to all Company records and
information held by group employees and external
advisers. The Board receives regular detailed financial
and operational reports from senior management to
enable it to carry out its duties.
Each director may, with the prior written approval
of the Chairman, obtain independent professional
advice to assist the director in the proper exercise of
powers and discharge of duties as a director or as a
member of a Board Committee. The Company will
reimburse the director for the reasonable expense of
obtaining that advice.
The Company Secretary is accountable directly to
the Board, through the Chairman, on all matters to do
with the proper functioning of the Board. The role of
the Company Secretary includes:
• Advising the Board and its Committees on
governance matters;
Principle 7.
Recognise and manage risk
• Monitoring that Board and Committee policy and
Principle 8. Remunerate fairly and responsibly
procedures are followed;
A summary of the corporate governance policies and
practices adopted by MRC is set out below.
ROLE OF THE BOARD OF DIRECTORS
The Board of MRC is responsible for setting the
Company’s strategic direction and providing effective
governance over MRC’s 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
• Coordinating, in unison with the Company, the
timely completion and despatch of Board and
Committee papers;
• Ensuring that the business at Board and
Committee meetings is accurately captured in the
minutes; and
• Helping to organise and facilitate the induction
and professional development of directors.
BOARD STRUCTURE AND COMPOSITION
The Board currently is comprised of five directors, two
of which are independent non–executive directors.
Details of each director’s skill, expertise and background
are contained within the directors’ report included with
the Company’s annual financial statements.
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 2.3 is taken into account for this
purpose.
67
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. 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.
The following table sets out the mix of skills and
diversity that the Board currently has:
No# of
Directors
Expertise
Senior Executive Experience
Governance
Financially Knowledgeable
Mining
Contracting
Technical (Geological / Engineering)
Mergers and Acquisitions
In-Country Experience
Resource Development
Competencies
Strategic Leadership
Vision and Mission
Governance
2
2
4
3
2
2
3
2
2
5
5
5
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.
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 assessed
its governance structure to mitigate any potential
issues with the one person fulfilling the dual roles of
Chairman and CEO. This led to the appointment of
a Senior Non-Executive Director, Mr Guy Walker, an
existing non-executive director of the Company. The
present Chairman of the Company is not considered
to be an independent director. Notwithstanding this,
68
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.
MRC’s 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.
The process for retirement by rotation and re-
election of a director is set down in the Company’s
constitution. If a retiring director nominates for re-
election, the Board, through the Remuneration and
Nomination Committee will assess the performance
of that director in their absence, and determine
whether the Board will recommend a shareholder
vote in favour of the re-election, or otherwise.
Details of each director standing for re-election,
including their biographical details, relevant
qualifications, experience and the skills, and other
material directorships they bring to the Board are
provided to shareholders to assess prior to voting on
their re-election.
For new appointments, the Board, through the
Remuneration and Nomination Committee identifies
candidates with the appropriate expertise and
experience, having regard to the weighted list of
required directors’ competencies as maintained
by the Company. The Board will appoint the most
suitable candidate, but the shareholders at the next
annual general meeting of the Company must ratify
the appointment. Shareholders are provided with all
material information in the Notice of Annual General
Meeting relevant to a decision on whether or not to
elect of re-elect a director.
The Board will ensure appropriate checks are
undertaken prior to making any new Board
appointments. These will include checks as to the
person’s character, experience, education, criminal
record and bankruptcy history.
The key terms, conditions and requirements are set
out in a standard letter of appointment. New directors
will be provided with an induction program specifically
tailored to the needs of individual appointees. The
program includes meetings with major shareholders,
one-on-one meetings with the members of the
management team and visits to key sites.
Directors are also encouraged to participate in
continual improvement programs and are expected
to highlight areas of activity that could potentially be
improved.
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.
BOARD AND MANAGEMENT EFFECTIVENESS
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 during the year.
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 was undertaken in respect to
the 2015 financial year. The review was undertaken by
the Chairman of the Remuneration and Nomination
Committee and involved the review of the CEO’s
performance against set criteria and discussed with
the CEO. The results of the review were then tabled
at a meeting of the Remuneration and Nomination
Committee and a summary provided to the Board of
the Company.
FINANCIAL REPORTING, INTERNAL CONTROL AND
RISK MANAGEMENT
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 reports to the Board on the
effectiveness of the Company’s management of
material business risk through the provision of
regular risk reports 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 continually considered across the
financial, operational and organisation aspects of the
Company’s business. The Company considers the
overall risk framework at each Audit Compliance and
Risk Committee Meeting and will continue to monitor,
assess and report its business risks.
The following are key risk areas that could have a
material impact on the Company and its ability to
achieve its objectives. These are not the only risks
associated with the Company and there may be
others from time to time that may also adversely
affect future performance.
• Country Risk: The Company’s primary assets
are located in South Africa. Potential changes
in fiscal or regulatory regimes in South Africa
may adversely affect the Company. The
Company must also comply with local laws and
administrative process which are subject to
potential amendments from time to time. The
Company adopts processes to mitigate these
risks and continues to explore other opportunities
in other jurisdictions to diversify its asset holdings.
69
• Business Continuance Risk: Various circumstances
may arise which may lead to shut downs in
operations, including plant failure, industrial
action, in-country unrest, natural disasters, and
continuance of licenses. Management and the
Board continually assess these risks and ensure
all appropriate mitigating actions are put in place.
This is underpinned by various policies currently
in place, and in respect to licenses, continued
stakeholder engagement.
• Financial Risks: Like all mining entities, the
Company faces risks relating to movement in
interest rates, foreign exchange rates, and access
to funds. The Company maintains tight treasury
controls and budget processes. Other financial
risks are reported in the financial statements.
• Product Risk: The pricing of the Company
products are subject to many global factors.
The Company actively markets its products
itself in order to achieve the maximum possible
value based on the prevailing market conditions.
The Company is also assessing investment in
downstream processing to add value to its
concentrate products.
• Development Risk: The Company continues to
assess other projects and in particular is actively
seeking the development of its Xolobeni Mineral
Sands Project. A failure to develop the project or
seek alternate projects could impact the long term
profitability and financial position of the Company.
The Board continues to assess the progress of the
Xolobeni project and will continue to review other
opportunities in order to extend the Company’s
operations beyond the existing assets.
The Company does not presently have an internal
audit function. This is mitigated by the Board,
through the Audit, Compliance and Risk Committee
implementing the matters set out above in respect
to risk and management, and having a primary
responsibility to ensure that:
• The Company presents and publishes accounts,
which present a true and fair view of its results
and financial position;
• The accounting methods adopted are appropriate
to the Company and consistently applied in
accordance with relevant accounting standards
and the applicable laws; and
• The appointment and performance of the external
auditor is appropriately monitored to ensure
independence and the serving of the interests of
shareholders.
This requirement is assisted by the formal sign off
from the CEO and CFO as noted above.
70
COMMITTEES OF THE BOARD OF DIRECTORS
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.
Audit, Compliance and Risk Committee
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 Company’s external auditor is required to attend
to the Company’s annual general meeting and make
themselves available to answer questions from
security holders relevant to the 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 Hastings,
and Mr Torre.
Remuneration and Nomination Committee
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 Hastings (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.
TIMELY AND BALANCED DISCLOSURE
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 reports;
• Advising the market of matters requiring
ETHICAL AND RESPONSIBLE DECISION–MAKING
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 considers 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 has implemented a diversity policy.
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.
disclosure under Australian Securities Exchange
Continuous Disclosure Rules;
MRC is committed to embedding a corporate culture
that embraces diversity through:
• 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;
• 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;
• Security holders are given the option to receive
communications from and send communications
to the Company’s and its share registry
electronically; and
• Undertaking various presentations to discuss the
Company’s activities.
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.
• 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.
71
Securities Trading Policy
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.
Other Information
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 available on the Company’s
website.
The Company currently employs 209 staff, with
48 females, representing 23%. There are no female
directors. The Company has not yet set any
measurable objectives however it has an extensive
social and labour plan in South Africa 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 calibre 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.
Regional and local economic development/Socio-
economic Development
The Companys’ wholly owned subsidiary, Mineral
Sands Resources (Pty) 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.
72
MINERAL RESOURCE STATEMENT
The Company holds the following mining and prospecting rights:
Country
Location
Number
Type of Right
Status
South Africa
Tormin
(WC)30/5/1/2/2/163MR
Mining
Mining
(WC)30/5/1/2/2/162MR
(WC)30/5/1/1/2/10036PR
Prospecting
(WC)30/5/1/1/2/10199PR
Prospecting
Active
Active
Active
Active
Tormin
Tormin
Tormin
Tormin
Tormin
(WC)30/5/1/1/2/10226PR
Prospecting
Under application
(WC)30/5/1/1/2/10229PR
Prospecting
Under application
Xolobeni
EC30/5/1/1/2/6PR
Prospecting
Approved
Kwanyana
EC30/5/1/1/2/10025PR
Prospecting
Under Application
Xolobeni
EC30/5/1/1/2/10025 MR
Mining
Under Application
Beneficial
Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
The Company has no interests held in any farm-in or farm-out agreements.
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 2015
remain consistent with 31 December 2014.
During 2015 the company lodged a new mining right application (on 03/03/2015) over the whole Xolobeni
resource area. As part of the application a full EIA investigation was started with considerable input and
consultation with interested and affected parties. This process is currently ongoing but has been delayed due to
intimidation by local opposition groups.
TORMIN is located on the west coast of South Africa, approximately 400km north of Cape Town.
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, extends 1km out to sea from the low water
mark and covers the full length of the existing 12km Tormin tenement. A new offshore prospecting right (1-10km
offshore) was awarded on 11 September 2015 (PR 10119). Exploration drilling on the nearshore area is planned to
start in June 2016.
Two new onshore prospecting rights were lodged during 2015 (PR 10226 & 10229). These areas have historical
drilled resources of heavy mineral sands and will complement the existing long term plans for the Tormin mine.
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 2.7m tonnes has been mined at the Tormin Mineral Sands Project to 31 December 2015, although
included in those tonnages are areas which have been mined up to ten times or more.
The nature of the resource replenishment is typical of modern day beach placer deposits found along the West
Coast of South Africa and the Southeastern Tamil Nadu 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.
73
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 second 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 80 pit samples taken at
the end of 2015 from mined areas that has undergone replenishment representing 83% of the resource blocks.
Note individual minerals reported as percentage of the total resource.
Category
Indicated Resource – Dec 2013
Tonnes Mined - 2014
Inferred Resource – Dec 2014
Tonnes Mined – 2015
Inferred Resource – Dec 2015
Resource
Million
Tonnes
Total Heavy
Mineral
%
Ilmenite
(% in
Resource)
Zircon
(% in
Resource)
Rutile
(% in
Resource)
Garnet
(% in
Resource)
2.70
1.07
2.70
1.62
2.70
49.4%
53.83%
38.14%
49.57%
28.01%
10.6%
17.26%
10.05%
16.15%
6.97%
3.4%
4.76%
2.21%
3.88%
1.56%
0.7%
0.65%
0.46%
0.60%
0.55%
25.3%
31.16%
25.22%
28.94%
18.54%
This inferred resource is based on the reasonable prospect for the economic extraction of the material, as has
occurred during the past year. Re-mining of the area, that has undergone replenishment has been successfully
done on the Tormin mine site up to 10 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.
The Tormin and Xolobeni Mineral Resources based on mined material reconciliation as at 31 December 2015 for
the Tormin Resource is as follows – note individual minerals reported as a percentage of the total heavy mineral
concentration.
Project
Tormin
Category
Inferred
Xolobeni
Measured
Indicated
Inferred
Total Xolobeni
Total MRC
Resource
Million Tonnes
Total Heavy
Mineral %
Ilmenite
(% in HM)
Zircon
(% in HM)
Rutile
(% in HM)
Garnet
(% in HM)
2.7
224
104
18
346.0
348.7
28.01%
24.89%
5.56%
1.97%
66.19%
5.7%
4.1%
2.3%
5.0%
5.3%
54.5%
53.7%
69.6%
54.0%
53.8%
74
MINERAL RESOURCE AND ORE RESERVE
GOVERNANCE
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.
COMPETENT PERSON
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 24
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.
75
JORC CODE – 2012 EDITION Table 1 : Section 3 Estimation and Reporting of Mineral Resources
Criteria
JORC Code explanation
Commentary
Database integrity
• Measures taken to ensure that data has not
• All field and lab results obtained and entered
been corrupted by, for example, transcription
or keying errors, between its initial collection
and its use for Mineral Resource estimation
purposes.
• Data validation procedures used.
Site visits
Geological
interpretation
• Comment on any site visits undertaken by
the Competent Person and the outcome of
those visits.
• If no site visits have been undertaken indicate
why this is the case.
• Confidence in (or conversely, the uncertainty
of ) the geological interpretation of the
mineral deposit.
• Nature of the data used and of any
assumptions made.
• The effect, if any, of alternative interpretations
on Mineral Resource estimation.
into the onsite database is verified by a
supervisor. All results are double checked
and verified. A standard is made on the site
and sent to the laboratory with each batch of
samples as a quality check. External calibration
is done every 6 months.
• The current mine grade database for 2015
consist of 322 volume and grades analyses
suites for each mined blocks and 228 grade
control sample suites taken to verify remaining
grades over the resource area.
• A site visit was undertaken by the competent
person to the mine, geology department, mine
laboratory and head office during October
2015. Open pits, in situ samples, ROM and
product were reviewed during the site visits.
• Resource volume reconciliation from 2015
production data compare favourable with
earlier resource estimates by Steemson, 2006 &
2007 and work done by the Trans Hex Group.
• RC drilling data undertaken by Trans Hex was
used and compared with 21 bulk samples to
produce the 2007 resource statement.
• The use of geology in guiding and controlling
• Mine production grade data from 2014 was
Mineral Resource estimation.
• The factors affecting continuity both of grade
and geology.
compared with resource data and a regression
analysis done on the XY plots. A very low
correlation was found (R2=0.006).
• The average total HMS mined grade during
2015 was 30% higher than that of the
December 2014 inferred resource statement
(49.81% mined against 38.14% inferred).
• The average Zircon grade mined during 2015
was 75% higher than that of the December
2014 inferred resource statement (3.88%
mined against 2.21% inferred).
• Continuity of grade outside the block model
is not proven and has therefore not been
included in the resource model.
• The bottom of the resources (being a placer
deposit) is limited by the bedrock contact and
coastal cliffs. The resource is open towards the
ocean surf zone.
Dimensions
• The extent and variability of the Mineral
• The deposit has a strike length along the
Resource expressed as length (along strike
or otherwise), plan width, and depth below
surface to the upper and lower limits of the
Mineral Resource.
coastline within the mining lease of ~9000m
and an average width from the cliff to within
the surf zone of 123m. It is developed from
surface to a maximum depth of 6.25m. The
average resource thickness is 3.5m.
76
Criteria
JORC Code explanation
Commentary
Estimation
and modelling
techniques
• The nature and appropriateness of the
• The 2007 Steemson resource was interpreted
estimation technique(s) applied and key
assumptions, including treatment of extreme
grade values, domaining, interpolation
parameters and maximum distance of
extrapolation from data points. If a computer
assisted estimation method was chosen
include a description of computer software
and parameters used.
using the data and results from 236 hand
auger holes (402.3m) and 336 reverse
circulation holes (1049.35m) drilled during
1989 to 1991 by Trans Hex. The current resource
was signed off on 31 October 2011 by Mr Allen
Maynard as the competent person. Mr Maynard
is the director and principle geologist of Al
Maynard & Associates Pty Ltd (Perth, WA).
• The availability of check estimates, previous
estimates and/or mine production records
and whether the Mineral Resource estimate
takes appropriate account of such data.
• The assumptions made regarding recovery of
by-products.
• Estimation of deleterious elements or other
non-grade variables of economic significance
(eg sulphur for acid mine drainage
characterisation).
• In the case of block model interpolation, the
block size in relation to the average sample
spacing and the search employed.
• Any assumptions behind modelling of
selective mining units.
• Any assumptions about correlation between
variables.
• Description of how the geological
interpretation was used to control the
resource estimates.
• Discussion of basis for using or not using
grade cutting or capping.
• The process of validation, the checking
process used, the comparison of model data
to drill hole data, and use of reconciliation
data if available.
• All original analyses were conducted by MINTEK
using microscopic point counting-, x-ray and
scanning electron microprobe techniques.
• Bulk sampling done by MSR in 2005 were sent
to SGS Johannesburg for grain counting. Bulk
sampling was used to confirm the historical
Trans Hex drill data and results. The bulk
sample results were generally the same or
better than the Trans Hex drilling results.
• An analysis cut off of 0.1% zircon (MINTEK)
was used and a resource cutoff grade of 0.3%
zircon (Steemson, 2007).
• Resource modeling was done using only RC
drilling results using a polygonal method.
Resource blocks were constructed in the
southern mining area so that they were
orthogonal to the drill traverses. In the
northern area, resource block are trapezoidal
in plan view. Resource blocks were extended
half way between drill lines and 10m from the
drill holes in section.
• Recovery studies (three stage spiral circuit)
by Multotec and Mintek in 2012 showed that
an overall circuit can produce a concentrate of
11.66% Zircon into 60.8% of the feed mass with
a Zircon recovery of 86.6%. Metallurgical sizing
work was done in 2005 by Bateman Minerals
Ltd.
• Mine production during 2015 achieved a 62-
67% Zircon recovery (32,422 tonnes from a
head feed containing ~52,458 tonnes).
• Reconciliation of 2015 mine production data
(January to December 2015) with the 2014
resource model data indicate a 30% higher
HMS concentrate (49.57%) than the average
38.14% HMS grade predicted.
Moisture
• Whether the tonnages are estimated on a dry
basis or with natural moisture, and the method
of determination of the moisture content.
• The resource tonnages are based on a dry
basis. Most of the material is fully saturated
when mined but are free draining.
Cut-off parameters
• The basis of the adopted cut-off grade(s) or
quality parameters applied.
• The original Steemson resource 0.3% zircon
cut-off grade was based on a 70% zircon
recovery and a zircon price of U$ 700/tonne.
77
Criteria
JORC Code explanation
Commentary
Mining factors or
assumptions
• Assumptions made regarding possible mining
methods, minimum mining dimensions and
internal (or, if applicable, external) mining
dilution. It is always necessary as part of
the process of determining reasonable
prospects for eventual economic extraction
to consider potential mining methods, but
the assumptions made regarding mining
methods and parameters when estimating
Mineral Resources may not always be
rigorous. Where this is the case, this should
be reported with an explanation of the basis
of the mining assumptions made.
• A definitive feasibility study on the deposit
was done in 2006 by K’Enyuka and a BFS
study review by HBH consultants
• The dynamic beach environment results
in a cyclic depositional and erosion of the
beach surface. Historical studies by Trans
Hex have found a weighted average change
over 9 months of up to ~9% loss or up to ~7%
increase. This variability is also evident in the
replenishment rate and grade of material
observed.
• Mining is opencast using coffer type dams
constructed with excavators. The pits generally
only remain open during low tide, except
where beach conditions allow larger more
stable protection bunding to be constructed.
Construction and mining methods are similar
to that being used for beach diamond mining
along the west coast of South Africa and
Namibia.
• There is no stripping ratio as material is from
surface onto bedrock.
• Natural replenishment of the resource is taking
place as the open pits are filled with HMS
material from the surf zone during the next
high tide. Current data indicates no correlation
(R2=0.04) between the original resource grade
and the replenishment grade for the same
mine block area.
• In general it appears that replenishment is
erratic and unpredictable. Is some areas zircon
grade replenishment may only be 35%, while
in other areas there are a 34% increase over
and above the original zircon concentration.
Replenishment appear to be mainly a function
of time and the number of sea storm events.
Given enough time between mining events the
resources is currently still replenishing although
the long term trend is a lowering in grade.
• Over the past 2 years some mining blocks
have now been mined up to 10 times or more.
• During 2015 there was a 0.29% difference
between mined zircon grade and processed
material grade. This is insignificant over a long
period as the zircon variance is below 0.5% on
an annual basis.
78
Criteria
JORC Code explanation
Commentary
Metallurgical factors
or assumptions
• The basis for assumptions or predictions
regarding metallurgical amenability. It is
always necessary as part of the process
of determining reasonable prospects for
eventual economic extraction to consider
potential metallurgical methods, but the
assumptions regarding metallurgical
treatment processes and parameters made
when reporting Mineral Resources may not
always be rigorous. Where this is the case, this
should be reported with an explanation of the
basis of the metallurgical assumptions made.
• Extensive metallurgical testing has been done
before the current processing plant that is now
in operation were designed. These include the
following studies:
• 2002 -2003 Spiral test work and trials by
Multotec Process Equipment (Pty) Ltd and
Mintek – Johannesburg.
• 2003 Grain analysis by SGS Lakefield including
THM, Magnetic Separation and XRF analyses.
Also ilmenite fraction analyses for smelter
feedstock.
• 2003 Magnetic separation work by Diamantina
Environmental
factors or
assumptions
• Assumptions made regarding possible waste
and process residue disposal options. It is
always necessary as part of the process
of determining reasonable prospects for
eventual economic extraction to consider
the potential environmental impacts of the
mining and processing operation. While at
this stage the determination of potential
environmental impacts, particularly for a
greenfields project, may not always be well
advanced, the status of early consideration of
these potential environmental impacts should
be reported. Where these aspects have not
been considered this should be reported
with an explanation of the environmental
assumptions made.
Bulk density
• Whether assumed or determined. If assumed,
the basis for the assumptions. If determined,
the method used, whether wet or dry, the
frequency of the measurements, the nature,
size and representativeness of the samples.
• The bulk density for bulk material must have
been measured by methods that adequately
account for void spaces (vugs, porosity, etc),
moisture and differences between rock and
alteration zones within the deposit.
• Discuss assumptions for bulk density
estimates used in the evaluation process of
the different materials.
laboratory in Perth
• 2005 Bateman Minerals (Pty) Ltd electrostatic
separation study
• 2007 Processing and recovery tests by
Titanatek Pty Ltd - Queensland
• 2007 & 2009 Metallurgical testwork by
AMMTEC Ltd – Australia
• 2007 Metallurgical upgrade test work by
Multotec Process Equipment Pty Ltd –
Kempton Park, RSA.
• The mine has an approved environmental
management programme and has been subject
to an environmental impact assessment. There
are no environmental directives in place against
the mining operation.
• There is a 10m stability buffer zone between
the coastal cliffs and the beach where no
mining is allowed. It would appear that the
original resource model allowed for at least a
5m buffer zone.
• Two conservation areas have been proposed
in the mining area where no mining is allowed.
This has not resulted in any part of the current
indicated resource being sterilized.
• All mining voids get naturally filled with beach
sand material during high tide and there is
therefore no rehabilitation liability in this regard.
• Tailings get dumped onto the beach where it
is distributed and settled along the coastline
under natural wave and sea current action.
There are no pollutants introduced with the
tailings and the material is inert.
• The bulk density is based on an accurate
calculation of the specific gravity of the silica
and heavy mineral sand content fraction of
each sample. It is therefore not a fixed density
and appears to fluctuate between 1.9 and 2.4
as per the formula below:
• SG=1.5+(0.009 x HM).
79
Criteria
JORC Code explanation
Commentary
Classification
• The basis for the classification of the Mineral
Resources into varying confidence categories.
• Whether appropriate account has been taken
of all relevant factors (ie relative confidence
in tonnage/grade estimations, reliability
of input data, confidence in continuity of
geology and metal values, quality, quantity
and distribution of the data).
• The original resource classification was an
indicated resource.
• It was based on historical drilling and bulk
sampling.
• The original resource were signed off in
2011 by Mr Allen Maynard of Al Maynard &
Associates Pty Ltd as the competent person
on the resource statement.
• Whether the result appropriately reflects the
• A review of the resource during 2014 by du Toit
Competent Person’s view of the deposit.
of AEMCO resulted in the resource being
downgraded into an inferred category due to
the impact from mining and replenishment.
Audits or reviews
• The results of any audits or reviews of Mineral
• The current inferred JORC resource of 2.7
Resource estimates.
million tonnes compares very favourably with
the June 1992 Historical Foreign Estimate
(HFE) by A van den Westhuizen and PD
Danchin that classified the Geelwal (Steenvas)
and Karoo (Geelwal) area into 3,003,881
tonnes proven, 221,088 tonnes indicated and
891,528 tonnes inferred. A total HFE resource
of 4.1 million tonnes @ 30% HM.
• Another HFE in 1998 by Trans Hex (Barnex
– RBM) reported an estimated resource of
6 million tonnes @ 2.78% zircon.
• Anglovaal reported in 1983 a resource of
11.8 million tonnes @ 8.4% zircon over 5m
depth over the same area.
• The latest resource statement by du Toit in
December 2014 has been reviewed and the
resource will remain in the inferred category
with the same resource tonnage but the grades
have been adjusted as per the resource table.
• Over the past two years 2.70 million tonnes of
material have been mined. This material has
been replaced through beach replenishment.
• The current inferred zircon resource grade of
1.56% HM is lower than the 2014 grade of 2.21%
and the 2013 grade of 3.4%.
80
Criteria
JORC Code explanation
Commentary
Discussion of
relative accuracy/
confidence
• Where appropriate a statement of the
• The Geelwal Karoo HMS deposit have been
relative accuracy and confidence level in
the Mineral Resource estimate using an
approach or procedure deemed appropriate
by the Competent Person. For example, the
application of statistical or geostatistical
procedures to quantify the relative accuracy
of the resource within stated confidence
limits, or, if such an approach is not deemed
appropriate, a qualitative discussion of the
factors that could affect the relative accuracy
and confidence of the estimate.
known and investigated over the past 57 years
with the earliest detailed investigation by Trans
Hex in 1989. The deposit was first documented
in 1931 by Haughton.
• The deposit is well understood but due to
the dynamic nature of the environment and
movement of the upper part of the deposit (due
to erosion and wave action deposition) and
variable nature of the deposit, grade different
resource estimates have been produced e.g.
Geological Survey Bulletin #25 of 1957.
• The statement should specify whether it
relates to global or local estimates, and, if
local, state the relevant tonnages, which
should be relevant to technical and economic
evaluation. Documentation should include
assumptions made and the procedures used.
• These statements of relative accuracy
and confidence of the estimate should be
compared with production data, where
available.
• The current JORC resource statement represent
the lowest tonnage reported in comparison to
HFE and appear to be conservative. Estimated
resource grades also appear to be conservative
as production grades of HMS during 2015
is 30% higher than the 2014 resource grade
(49.57% against 38.14%).
81
Shareholder information
Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere
in this report. This information is current as at 8 April 2016.
TWENTY LARGEST SHAREHOLDERS
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
13
14
14
15
16
17
18
18
19
AU MINING LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
ZURICH BAY HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ZURICH BAY HOLDINGS PTY LTD
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