National HealthCare Corporation
Annual Report 2016

Plain-text annual report

2016 Annual Report CONTENTS Chairman’s Letter Financial Summary Directors’ Report Auditor’s Independence Declaration Financial Report Directors’ Declaration Independent auditor’s report to the members of New Hope Corporation Limited Shareholder Information i 1 2 26 27 78 79 81 NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES CORPORATE DIRECTORY DIRECTORS Robert D. Millner Chairman of Directors Todd J. Barlow Non Executive Director William H. Grant Non Executive Director Thomas C. Millner Non Executive Director Sue J. Palmer Non Executive Director Ian M. Williams Non Executive Director MANAGING DIRECTOR Shane O. Stephan COMPANY SECRETARY Janelle S. Moody AUDITORS Deloitte Touche Tohmatsu Level 25, Riverside Centre 123 Eagle Street BRISBANE QLD 4000 PRINCIPAL ADMINISTRATION & REGISTERED OFFICE 3/22 Magnolia Drive BROOKWATER QLD 4300 Telephone: (07) 3418 0500 Facsimile: (07) 3418 0355 SHARE REGISTER Computershare Investor Services Pty Limited 117 Victoria Street WEST END QLD 4101 Telephone: 1300 552 270 www.computershare.com WEBSITE ADDRESS www.newhopegroup.com.au ASX Code: NHC CHAIRMAN’S REVIEW Dear Shareholders, The past year was one in which the company exhibited its resilience to difficult market conditions for both coal and oil. With the completion of the acquisition of a 40% interest in the Bengalla Joint Venture on 1 March 2016, New Hope Corporation Limited (New Hope) has positioned itself well to take advantage of Asia’s significant growth in coal consumption. The high quality coal that New Hope produces will be demanded for many decades to come in the growing economies of North and South East Asia. New Hope’s overall production totalled 6.6 million tonnes of clean coal during FY2016, an increase of 15.8% on FY2015’s total production of 5.7 million tonnes. Total coal sales for FY2016 were 6.9 million tonnes, well above the 5.7 million tonnes sold in FY2015. Directors have approved a final dividend of 2 cents per share taking total dividends per share for the year to 4 cents. Financial Performance Despite tough market conditions in what was a difficult year for the entire Australian coal sector, New Hope has reported a net profit after tax (NPAT) and before non regular items of $5.0 million for the year ended 31 July 2016. Revenue from operations totalled $531.5 million, up $25.7 million or 5% from the 2015 financial year. Cash generation remained solid with Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and non regulars of $81.3 million. The Company produced a positive cash operating surplus of $61.2 million (before acquisition costs, interest and income tax). Non regular items before tax, including $52.1 million acquisition costs expensed (largely stamp duty) and $33.1 million of impairments, negatively impacted the group’s results. Non-cash significant items impacting the 2016 result included: • $10.5 million impairment of oil producing assets • $8.4 million impairment of oil exploration assets • $5.0 million impairment of available for sale financial assets (being shares in IGas and Planet Gas) • $3.4 million de-recognition of Petroleum Resource Rent Tax deferred tax balances. Although Bridgeport Energy’s oil production increased 20.8% on FY2015 to 191,993 barrels, the continued drop in Brent oil price for the majority of the year saw sales revenue down 7% at $10.5 million against FY2015 of $11.9 million. Despite this Bridgeport Energy managed to limit its EBITDA loss to $1.9 million before non regular items. Bridgeport Energy posted a loss of $26.5 million after tax and non regular items. Acquisition Timing New Hope has had a history of buying and selling assets at the right time in the cycle. In recent history, New Hope has been patiently analysing many potential acquisitions over a number of years before acquiring a 40% interest in the Bengalla coal mine in the Hunter Valley of New South Wales. This disciplined approach to investing is a company hallmark. Investing a significant proportion of available cash funds into a 40% interest in the Bengalla coal mine at a time when prices were at a low, has had an immediate positive impact on New Hope’s cash flows. 160.00 Newcastle Thermal Coal Price FOB Bengalla Transaction Completed 01 Mar 16 Bengalla Transaction Announced 30 Sept 15 140.00 120.00 100.00 80.00 60.00 E N N O T R E P $ S U 40.00 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Source: globalCOAL The Bengalla transaction was announced in September 2015 and it completed on 1 March this year when the benchmark Newcastle Spot price was US$51/tonne. Since the beginning of July there has been a significant rise in coal prices with the Newcastle Spot price currently at US$70/tonne. In five months of New Hope’s ownership of Bengalla production has contributed 1.5 million tonnes to our coal sales providing EBITDA of $21.3 million to the group result. i New Hope Corporation Limited and Controlled Entities | 2016 Annual Report Sustainability New Oakleigh Mine Rehabilitation Our extensive rehabilitation efforts at Acland and West Moreton, and associated cattle grazing trials, have drawn nationwide interest and acclaim. We seek to continue to grow the operations of the Acland Pastoral Company as a profitable part of our business concentrating on cattle breeding and grazing. November 2012 September 2013 VALUES INTEGRITY We are ethical, honest and can be trusted to do the right thing. RESPECT We listen to our stakeholders and treat others as we expect to be treated ourselves. ACCOUNTABILITY We act in accordance with our obligations, deliver on our commitments and take responsibility for our actions. SAFETY We share a mutual responsibility to prevent harm and promote wellbeing. RESILIENCE We strive to achieve long-term sustainability by navigating through change and uncertainty. SUCCESS We take pride in the achievement of our goals, being innovative and making a positive difference. July 2015 March 2016 ii This operational performance was consistent with our pre-acquisition expectations and it is expected that in the next financial year Bengalla should increase New Hope’s equity production of thermal coal by approximately 3.5 million tonnes to a total of approximately 8.9 million tonnes. Likewise acquisitions by the company’s oil subsidiary, Bridgeport Energy has positioned it well to improve production and financial performance to take advantage of any increase in future oil prices. After finalising the acquisition of the Moonie oil fields in South East Queensland from Santos in December 2015, Bridgeport Energy also completed due diligence on Beach Energy Queensland’s Kenmore – Bodalla and surrounding production and exploration assets in FY2016. This transaction should finalise late calendar 2016. These acquisitions make Bridgeport Energy the second largest conventional oil producer in Queensland. Highlights A major positive for the company’s coal operations was the delivery of the Queensland Competition Authority’s final decision on Queensland Rail’s 2015 Draft Access Undertaking for below rail users of the Western System. Once implemented, this decision will result in an approximate 12% reduction in below rail tariffs going forward. Other highlights for the year included your Company receiving two national awards. We’re immensely proud of winning the Australian Business Awards ABA100 2016 Sustainability award for our industry leading rehabilitation work. Additionally the company’s “Live Well, Work Well” program won the inaugural Australian Mines & Metals Association (AMMA) Industry Award for Health & Wellbeing. These awards are recognition that the corporate values which drive our positive business culture are being recognised and are making your company an employer of choice within the resources industry. Significant Milestones The revised New Acland Coal Mine Stage 3 Project continued to progress through its approval process with Land Court hearings commencing in March 2016. It is anticipated that the Land Court recommendations should be delivered to the relevant Minister by end of calendar year 2016. The company is exploring various options for current operations, plan of operations and project construction that seeks to preserve the current workforce for as long as possible and seamlessly transition them from Stage 2 to Stage 3, however the reality is, the longer the decision takes the more likely it is that we may have to adjust our workforce according to changing circumstances. It is vitally important to the economic and social benefits of the local, regional and greater Queensland economy that the mining lease is granted early 2017. Importantly, our employees are also locals, with more than 80% of our people living and contributing to the communities in the vicinity of our operations. The revised Stage 3 project would provide direct employment for up to 435 people with an economic contribution to south east Queensland of $300m with $100m of that going into the Darling Downs region. The Stage 3 Project will extend the life of the operation through until 2029, delivering significant positive benefits to the community in and around the operation. Social Responsibility New Hope places a high importance on adopting a socially responsible approach to business. We do this through managing and mitigating the social impacts our business activities may have on local stakeholders and the community. We endeavour to build trust through communication and engagement with local communities and landholders and share the benefits of our activities through significant social investment and community development programs. Some of the highlights from the past reporting period include our partnership with LifeFlight (previously known as CareFlight) which continues to deliver critical and valuable medical services to rural areas. This year we also partnered with the Cancer Council Qld, delivering the QUEST program aimed at educating school kids on healthy lifestyles across our local communities. Some of the Company’s employees also assisted to build the Oakey Hospital Community Gardens. Conclusion Unlike many of our competitors, New Hope has maintained its corporate capabilities in resource and project development during the downturn over the past few years. Having made the investments in both resources and corporate capability during the recent years of cyclical downturn, the Company is now in a prime position to take advantage of potential increases in future coal and oil prices. I would like to thank my board colleagues for their efforts and commitment during the year. I would also like to thank the management and staff of the Company for their hard work in a challenging market and congratulate them on their success. Cognisant of the current stage of the coal price cycle, both the board and management have undertaken appropriate restraint of their fees and salaries. Finally I would like to thank you, the shareholders, for your continued support. R D Millner Chairman iii New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportFINANCIAL SUMMARY New Hope Corporation Limited and Controlled Entities Financial Summary 2016 $000 2015 $000 2014 $000 2013 $000 Total revenue 531,459 505,781 548,959 652,097 Profit before tax (before non regular items) Profit after tax (before non regular items) Profit/(loss) before tax Income tax and petroleum resource rent tax expense Profit/(loss) after tax Loss attributable to minority interests Net profit/(loss) attributable to NHCL members 6,116 5,029 (74,112) 20,432 (53,680) (1) (53,679) 71,578 51,749 (24,709) 2,888 (21,821) (1) (21,820) 53,665 41,490 71,047 (12,598) 58,449 (1) 58,450 172,575 124,955 121,984 (47,856) 74,128 (1) 74,129 Total assets employed Shareholders' funds 2,018,549 1,750,412 2,075,158 1,852,625 2,185,842 1,973,859 2,268,564 2,016,456 Dividends paid during the financial year 66,484 78,944 132,928 257,466 2016 2015 2014 2013 Weighted average shares on issue 831,050,306 830,999,449 830,836,913 830,551,140 Net profit/(loss) attributable to NHCL members as a % of shareholders' funds -3.07% -1.18% 2.96% 7.42% Earnings per share (cents) before non regulars (Loss)/Earnings per share (cents) Normal dividends per share (cents) Special dividends per share (cents) 0.6 (6.5) 4.00 - 6.2 (2.6) 6.50 3.50 5.0 7.0 8.00 3.50 15.0 8.9 11.00 5.00 Net tangible asset backing per share (cents) 203.45 220.56 234.55 239.66 1 1  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Directors The following persons were Directors of New Hope Corporation Limited during the whole of the financial year and up to the date of this report: Mr R.D. Millner Mr T.J. Barlow Mr W.H. Grant Ms S.J. Palmer Mr I.M. Williams Mr S.O. Stephan Mr D.J. Fairfull was a Director until his retirement on 19 November 2015. Mr T.C. Millner was appointed Director on 16 December 2015. Consolidated results Revenue from operations Profit before income tax (before non regular items)* Land access compensation Acquisition costs expensed Impairment of oil producing assets Impairment of oil exploration assets Impairment of available for sale financial assets Impairment of coal to liquids facility Gain on sale of Dart Energy Limited Impairment of goodwill Loss before income tax (after non regular items) Profit after income tax (before non regular items)* Land access compensation Acquisition costs expensed Impairment of oil producing assets Impairment of oil exploration assets Impairment of available for sale financial assets Petroleum resource rent tax (derecognition due to recoverability) Impairment of coal to liquids facility Gain on sale of Dart Energy Limited shares Impairment of goodwill Loss after income tax (after non regular items) Non-controlling interests Loss attributable to New Hope Shareholders Basic earnings per share (cents) (before non regular items)* Land access compensation Acquisition costs expensed Impairment of oil producing assets Impairment of oil exploration assets Impairment of available for sale financial assets Petroleum resource rent tax (derecognition due to recoverability) Impairment of coal to liquids facility Gain on sale of Dart Energy Limited Impairment of goodwill Basic loss per share (cents) (after non regular items) 2016 $000 531,459 2015 $000 505,781 6,116 5,000 (52,104) (15,029) (13,117) (4,978) - - - (74,112) 5,029 5,000 (36,473) (10,520) (8,388) (4,978) (3,350) - - - (53,680) (1) (53,679) 0.6 0.6 (4.4) (1.3) (1.0) (0.6) (0.4) - - - (6.5) 71,578 - - (51,456) - (17,558) (24,267) 1,151 (4,157) (24,709) 51,749 - - (36,019) - (17,558) - (16,987) 1,151 (4,157) (21,821) (1) (21,820) 6.2 - - (4.3) - (2.1) - (2.0) 0.1 (0.5) (2.6) % Change + 5.1% - 91.5% - 199.9% - 90.3% - 146.0% - 90.3% - 150.0% * The profit before non regular items and the earnings per share before non regular items contained within this Directors' Report have not been audited in accordance with Australian Auditing Standards. 2 2 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Principal activities The principal activities of the Group consisted of: h h h h Coal mining - exploration, development, production and processing in Queensland and New South Wales; Marketing and logistics; Oil and gas - exploration, development, production and processing; and Investments. Dividends paid to members during the financial year were: h h h A final dividend for the year ended 31 July 2015 of 2.50 cents per share paid on 3 November 2015 A special dividend for the year ended 31 July 2015 of 3.50 cents per share paid on 3 November 2015 An interim ordinary dividend for the year ended 31 July 2016 of 2.0 cents per share paid on 3 May 2016 $000 20,766 29,087 16,621 In addition to the above dividends, since the end of the financial year, the Directors have declared a final ordinary dividend of 2.0 cents per share. This dividend is fully franked, to be paid on 1 November 2016 out of retained profits at 31 July 2016 with the record date for such dividend to be 18 October 2016. This will provide shareholders of New Hope with total dividends for the year of 4.0 cents per share (2.0 cents interim) compared with total dividends for the 2015 year of 10.0 cents per share, including a special dividend of 3.5 cents per share. Operating and Financial Review New Hope Corporation Limited (the Company) has reported a net profit after tax and before non regular items of $5.0 million for the year ended 31 July 2016. The result comprises a loss of $3.6 million from coal mining, marketing and logistics operations; a loss of $4.1 million from oil operations and a profit of $12.7 million from treasury. The result is down 90.3% on the 2015 result of $51.7 million. After non regular items the Company reported a net loss after tax of $53.7 million for the year ended 31 July 2016. The result comprises a loss of $34.9 million from coal mining, marketing and logistics operations; loss of $26.5 million from oil operations and profit of $7.7 million from treasury. The result is down 146% on the 2015 loss of $21.8 million. During the year the company generated a positive cash operating surplus of $61.2 million (including receipts from customers and payments to suppliers) and received interest of $25.4 million from held to maturity investments (term deposits). Cash outflows from investing activities rose due to the acquisition of a 40% interest in the Bengalla project ($898 million including acquisition costs). Before non regular items, basic earnings for 2016 were 0.6 cents per share, compared to 6.2 cents per share in 2015. After non regular items basic losses per share were (6.5) cents per share for 2016 against (2.6) cents in 2015. Directors have declared a final dividend of 2.0 cents per share (2015 – 2.5 cents per share and 3.5 cents per share special dividend). This dividend is fully franked and payable on 1 November 2016 to shareholders registered as at 18 October 2016. Compared to the previous corresponding period, the 2016 full year result was affected by: h h h h Increased production and sales due to the inclusion of Bengalla for the period 1 March 2016 – 31 July 2016; Lower average unit coal and oil revenues due to market conditions; Acquisition of a 40% interest in the Bengalla thermal coal mine; and A non regular impairment on oil producing and oil exploration assets. Operations Coal production for the year was 6.6 million tonnes compared to 5.7 Million tonnes produced in 2015. Bengalla contributed 1.4 million tonnes during the five months of New Hope’s ownership and the Queensland mining operations produced 5.2 million tonnes compared to 5.7 million tonnes produced in 2015. Coal sales for 2016 totalled 6.9 million tonnes (including 1.5 million tonnes from Bengalla) which was well above the 5.7 million tonnes sold in 2015. 3 3 DIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 New Acland Coal Mine The New Acland open cut mine produced 4.6 million tonnes of coal in 2016. This was 0.5 million tonnes lower than 2015. Production was somewhat hampered by localised geological conditions that increased raw coal ash and negatively impacted on clean coal yield. These localised geological conditions have now been worked through. As the operation reaches the end of the Stage 2 reserves, there is less operational flexibility due to a reduction in the number of mining faces available. New Acland improved its safety performance over the year as measured by lagging safety performance indicators. During the year the New Acland health and wellness program was embraced by the workforce and this innovative program received recognition through industry awards at both state and national levels. Key achievements in 2016 have included: h Continued focus on cost management and productivity improvements with improved unit mining costs (6.6% reduction year on year); h h h h h h h Increased loading unit and truck productivity across the majority of the fleet; Undertaking the planning and initial works in conjunction with equipment manufacturers for a natural gas fuel trial on a rear dump truck, the first operational trial of this technology in a mining environment; Installation of sound attenuation equipment on major mobile plant to reduce noise levels and allow for greater operational flexibility; Positive results from cattle grazing trials which demonstrated that cattle raised on rehabilitated land achieved growth rates and meat quality comparable to cattle raised on un-mined land; The Queensland Competition Authority decision requiring Queensland Rail to provide an amended draft access undertaking which when implemented, will result in both a lower access charge to apply to the Western Rail Corridor until 2021 as well as an adjustment for over- recovery of revenue for the period between 1 July 2013 and the commencement date of the new regulatory period; New Acland Community Reference Group continued to provide a forum for community engagement and the allocation of funds to local community projects; and New Acland hosted numerous site tours for community, business and industry groups, as well as representatives from educational, environmental and agricultural organisations. New Acland Stage 3 Development (NAC03) Pre-construction works undertaken during the year included relocation of Telstra assets, site survey, geotechnical investigations, flora surveys and trial crushing of basalt reserves to confirm suitability for construction purposes. The relocation of Ergon power infrastructure has commenced and engineering design for the rail, road and water management infrastructure is well advanced. The approvals process for the NAC03 mining leases progressed with the Queensland Land Court expected to deliver a recommendation by December 2016, approximately six months later than anticipated. Construction of NAC03 is planned to commence in Q1 2017 pending grant of the Mining Leases and Environmental Authority. Federal Government approval is expected in 2016. Due to the continued delays in the approval process it is possible that there will be a time interval between the exhaustion of stage 2 coal production and the commencement of stage 3 coal production. A range of mitigating measures are being progressed to minimise this timing interruption. A number of key project plans are complete and in use including the Local Procurement Plan, Australian Industry Participation Plan, the Social Impact Management Plan and various project management plans. A number of other supporting plans are in various stages of development including the Operational Readiness Plan, the Site Security Plan and various environmental management plans. West Moreton Operations West Moreton operations (comprising Jeebropilly Mine and rehabilitation sites at New Oakleigh and Chuwar), produced 0.6 million tonnes of product coal in 2016 which was similar to the production volumes in 2015. Key achievements in 2016 included: h h h h Continued cost management initiatives assisted to keep production costs close to budget for the year; Mine plan revisions that optimised the mine with current market conditions; Continued rehabilitation of the New Oakleigh and Chuwar sites with further work planned during 2017; and Investigation into final land form and alternative land uses at the completion of coal mining at Jeebropilly. 4 4 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Queensland Bulk Handling (QBH) QBH, New Hope Corporation’s 100% owned coal terminal at the Port of Brisbane, exported 7 million tonnes of coal on 90 vessels. This result was similar to last year. QBH remains essentially a demurrage free port. Key activities at QBH in 2016 included: h h h 4 years Lost Time Injury (LTI) free safety milestone achieved; Continuation of engineering and other studies required for upgrades of existing infrastructure and to allow for future expansion potential; and Business improvement programs aimed at reducing costs and improving operational efficiencies were commenced with several key stages completed. Bengalla Joint Venture New Hope’s acquisition of a 40% interest in the Bengalla open cut coal mine in New South Wale’s Hunter Valley region from Coal and Allied settled on 1 March 2016. Since settlement New Hope has played an active role in the transition from Coal and Allied and the ongoing management of the Bengalla operation in conjunction with the other joint venture participants (Wesfarmers 40%, Mitsui 10% and Taipower 10%). The operational performance of the Bengalla mine has been consistent with our pre-acquisition expectations with key activities and achievements including: h h h h h Production of 3.5 million tonnes of coal in the period 1 March 2016 – 31 July 2016 (100% basis); Appointment of a new CEO; Strategy reset and identification of a range of cost reduction initiatives; Strong performance in safety, environmental compliance and community engagement; and Significant progress in the construction and commissioning of the Dry Creek Diversion Project. New Hope Exploration and Development Projects An active exploration program utilising the company's own drill rigs was advanced during the past year. Exploration activities during 2016 focused on resource definition in and around the New Acland project area (MDL244 for the revised New Acland Coal Mine Stage 3 Project). The drilling operations were supported by gravity and geochemical surveys. The New Acland drilling program consisted of 18 water monitoring bore holes, 175 open holes and 91 core holes totalling 16,553 meters. The exploration team incurred no recordable injuries during the year and is currently over two years LTI free. The current group Resources and Reserves are tabled below. 2016 Total 424 186 Coal Resources (million tonnes) (Coal resources are inclusive of the reserves reported below) Inferred 2015 Total 699 39 - 80 - - 208 - 187 60 73 94 126 - 5 872 Indicated Measured 213 57 - - 68 - 14 - 108 43 158 84 - 745 - - 380 - 240 76 286 276 433 84 13 2,398 - - 741 - 240 76 286 276 433 84 13 2,848 172 49 - - 104 - 39 16 105 139 149 - 8 781 Deposit New Acland 1 Bengalla* 2 Ownaview West Moreton* Lenton* 3 Bee Creek Yamala 4 Colton Elimatta* Collingwood* Taroom Woori Ashford 5 Total 5 Status Mine Mine Exploration Mine Exploration Exploration Exploration Exploration Exploration Exploration Exploration Exploration Exploration 5 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 1 2 3 4 5 6 Notes: Resources have mainly been reduced due to finer discrimination of parting material, additional exploration around faulting and basalt edges, as well as mining reduction during the year. Figures shown are 100% of total resources. New Hope share is 40%. The Resource is exclusive of area covered by Reserves. Figures shown are 100% of total resources. New Hope share is 90%. Resources have mainly been reduced due to a cut of 150m for low yielding coals. Figures shown are 100% of total resources. New Hope share is 70%. Figures shown are 100% of total resources. New Hope share is 50%. * denotes the Resource estimations that have been reviewed against and have followed the 2012 JORC Code, all other resource estimations are scheduled to be reviewed against and follow the 2012 JORC Code. JORC Declaration - Coal Resources The estimates of coal resources herein have been prepared in accordance with the guidelines of the “Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Resources – The JORC Code. These resources are inclusive of the reserves reported in the Reserves Statement. The work has been undertaken internally and reviewed by Mr Patrick Tyrrell who is a Member of AusIMM. Mr Tyrrell has sufficient experience which is relevant to the style of mineralization 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. Mr Tyrrell consents to the inclusion in this report of the matter based on this information in the form and context in which it appears. Coal Reserves (million tonnes) Deposit New Acland 1 Lenton 2 Elimatta Colton3 Bengalla4 Total Status Mine Exploration Exploration Exploration Mine Recoverable Reserves Probable 136 Proved 263 Total 2016 399 Total 2015 Probable 74 410 Marketable Reserves5 Proved 142 Total 2016 216 12 29 23 96 11 - 106 294 147 529 35 125 11 52 125 11 7 17 14 66 5 - 21 83 5 253 - 823 587 103 222 325 Notes on Reserves: 37Mt of Recoverable Reserves are located in the Far East deposit which could be influenced by strategic cropping land legislation. Figures shown are 100% of total Reserves. New Hope share is 90%. The financial model is based off a mine plan that has 85% of the scheduled tonnes at a Resource classification of Inferred status or lower. Figures shown are 100% of total Reserves. New Hope share is 40%. The JORC report did not identify the Marketable Reserves. Marketable Reserves are based on modelled washplant yields based off reconciled data for the operating mines, or simulated product yields for the exploration areas. 1 2 3 4 5 JORC Declaration – Coal Reserves The information in this Coal Reserves Statement that relates to coal reserves for New Acland, Lenton and Elimaatta is based on information compiled by Mr Brett Domrow, who is a Member of AusIMM. Mr Domrow is a full time employee of the company. The information in this Coal Reserves Statement that relates to coal reserves for Bengalla is based on information compiled by Tony O’Connell, who is a Member of the AusIMM. Mr O’Connell is a consultant working with Optimal Mining Solutions Pty Ltd. Mr Domrow and Mr O’Connell have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent person as defined in the 2012 Edition of the ‘Australian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves’. Mr Domrow and Mr O’Connell consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. Details of the 2016 exploration program and development projects including approvals are as follows: New Acland The exploration program consisted of 18 water monitoring bore holes, 175 open holes and 91 core holes totalling 16,553 meters. The Willeroo Resource Area, Manningvale coring campaign and the ground water monitoring program was completed on New Acland tenements and surrounding areas. This allowed improved resource definition for the current operation and the NAC03 Project. A gravity survey was completed and preliminary results suggest that there will be a significant reduction in basalt delineation drilling. A full review of the modelling process was undertaken providing a better correlation between the geological model and operational observations. A relinquishment program of non-prospective tenure across the Darling Downs and the West Moreton Regions has commenced 6 6 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Colton Exploration focused on ground water studies and coal seam correlation seams across the deposit. On completion of the coal seam correlation work the area will be remodelled and geostatistics will be undertaken to provide the necessary data for reporting under the 2012 JORC code. The Mining Lease Application process continued with public objections heard subsequent to the end of the financial year in the Land Court during August 2016. Bee Creek (EPC777) Limited work was undertaken in 2016. A 2-D seismic explorations program is planned to be undertaken in 2017. This survey will target the Rangal Coal Measures sub-cropping on the western edge of the Hail Creek Syncline. North Surat Projects A Concept Study was completed for the four North Surat Projects (Elimatta, Taroom, Collingwood and Woori) to outline key capital, operating and marketing aspects of the projects. A Pre-Feasibility Study will be undertaken to further advance the opportunities identified in the concept study. The Elimatta Mining Lease Application was progressed with all objections having been withdrawn. Lenton (EPC 766, EPC 865, EPC1675 and ML 70337) A review of coal quality has been undertaken and the structural and quality model was updated. Field work was limited and consisted of completing groundwater monitoring for the purposes of the Environmental Impact Statement (EIS). Mineral projects On ground activities on the mineral projects was limited to an Induced Polarisation survey at Courtney in order to better delineate drilling targets. A review was undertaken of the Cloncurry regional structure to better understand the interactions between the regional and local geological structure. This review observed a number of trends which can be identified between large regional structures and locations of known mining operations which should improve the accuracy of drill hole targeting. Pastoral Operations The implementation of the Acland Pastoral’s five year plan was essentially completed with the transition to a cow/calf breeding enterprise. The last of the back-grounding steers were sold in May 2016. During the year 489 calves were produced on the property. A water network and fencing renewal (wire and water) capital program was completed which now covers 75% of the Acland Pastoral usable land. As a result of good seasonal rainfall the cropping program yielded excellent outcomes for the year. Stage 3 of the grazing trial was completed. This stage of the program was structured to provide data to evaluate aspects of the sustainability of the program. Bridgeport Oil production for the year totalled 191,993 barrels, an average of 563 barrels of oil per day against prior year results of 158,884 barrels representing an increase in production of 20.8%. Sales revenue for the year was $10.5 million against prior year of $11.9 million, a decrease of 11.8%, despite the higher production levels. The reduction in sales revenue was entirely a consequence of the continued drop in the oil price through the first half of the year which reached a low in Jan 2016 of US$27/bbl. The price subsequently increased and stabilised at circa US$45/bbl at year end. The decline in oil prices in USD terms was partially offset by a declining AUD:USD exchange rate. The average price realised for the 2016 year was A$56.6/bbl (compared to A$74.3/bbl in 2015). Despite difficult trading conditions, Bridgeport was able to limit is EBITDA loss to $1.9 million before non regular items. Non regulars during the year, included impairments of oil producing assets of $10.5 million (after tax), impairments of oil exploration assets of $8.4 million (after tax) for two exploration tenements the company expects to withdraw from and two tenements subject to an extended moratorium period as well as $3.4 million resulting from the de-recognition of PRRT balances. 7 7 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Strategic focus during the year, primarily in response to the drop in oil price from mid-2015 to January 2016, included: h h h h Reduce operating expenditures within the company (achieving 17% below budget expenditures for the year); Move one field to “not normally manned” improving operating costs by some 25% at that field; Defer drilling of operated production wells in alignment with the oil price drop (five wells deferred); and Focus on well workover activities and the Moonie field acquisition, which has increased production by 22%. Production Bridgeport’s production rate increased during the year from an average of 435 bopd to a production rate of 563 bopd at the end of the financial year, through a combination of the acquisition of the PL 1 (Moonie field) tenements and production enhancement workover activities across the company production portfolio. Cuisinier (PL 303: 15% (Santos operated)) During the year, hydraulic fracture stimulation of five low productivity wells in the field was completed resulting in a gross production improvement of 390 bopd at the field. The drilling of five wells (3 development, 1 appraisal and 1 exploration) in PL 303 commenced in the last month of the financial year with Cuisinier 22 cased and suspended for production and Cuisinier 23 drilling at the end of the period. Gross production decreased from the prior year by 7.8% due to deferral of development wells and at year end, the field was producing at circa 1,567 bopd (BEL net: 235 bopd) down from 1,700 bopd (Bridgeport net: 255 bopd) at prior year end. Inland (PL 98: 100%) During the year, production enhancement work on five wells at the field utilising the Bridgeport owned service rig resulted in an increase in production rate of 60 bopd. Field debottlenecking at the main production facility also improved production and at year end production had improved 43% from 102 bopd to 146 bopd. Average daily field production for the year was 4,300 bopm (140 bopd). Utopia (PL 214: 100%) In the third quarter of the financial year, Bridgeport acquired Bounty’s 40% interest, which increased its net interest from 60% to 100%. Capital expenditure was restricted to only repair and maintenance capital comprising workovers and facility changes to allow for not normally manned operations. Production through the year declined 28% from 1,800 barrels per month to 1,294 barrels per month, partly offset by service work undertaken on critical wells. Average daily field production for the year was 1,271bopm (42bopd). Moonie (PL 1: 100%) At mid-year Bridgeport acquired 100% of the Moonie field and commenced integration of the operation. During the second half, downhole pump and flowline repairs were carried out on four wells. Average daily field production for the half year from acquisition was 3,480 bopm (116 bopd). 8 8 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Naccowlah Assets (2%) This holding provides access to production infrastructure in the eastern Cooper Eromanga Basin. The interest delivered annual gross production of 1,679 bopd (net: 36 bopd). Capital expenditure on producing assets (excluding the cost of the Moonie field acquisition) during the year was similar to the prior year at $7.9 million and down on planned budget due to deferral of development wells at Inland and Utopia fields. Exploration – Cooper Basin PEL 630 (100%) 415 km2 of seismic data were acquired and processed over the West and East blocks of the tenement. Interpretation and mapping has been completed on the West block, where several material oil prospects have been assessed and the best two have been prepared for drilling next financial year. The hydrocarbon resource potential of the East block is still under assessment but, based on play based exploration work to date is expected to identify oil and gas-liquids resource potential. Other tenement activities included: Tenement Activities ATP 794 (88%) 80 km2 of 3D seismic data were acquired over the Barcoo Junction discovery area. A substantial prospect has been mapped, which is up dip of existing wells and is being readied for drilling next financial year. ATP 944 (100%) Rationalisation of the tenement area is in progress with the Department of Natural Resources and Mines (DNRM) through application for a formal work programme reduction combined with partial relinquishment of the permit area. PELA 641 (100%) A Native Title agreement has been negotiated with the Dieri people. ATP 752 (15%) The Santos operated joint venture has submitted a partial relinquishment of acreage to comply with regulatory requirements. ATP 736/737/738 (20%) (Senex operated) Senex (operator) and Bridgeport are finalising a Joint Operating Agreement for these newly-granted permits. Bridgeport is in discussion with various parties interested in farming into selected tenements held within the Cooper Basin portfolio. Exploration – Surat Basin ATP 805 (100%) 32 km2 of 3D seismic were acquired over the Donga discovery area, which will now be used to support a conversion of the exploration permit to a longer term petroleum lease (PL) or a potential commercial area (PCA). ATP 608 (100%) Bridgeport has submitted an application to the DNRM for a Special Amendment to reduce the work programme combined with an early partial relinquishment. An application for a PCA over the Rookwood oil discovery will be lodged with the DNRM in late August. Exploration – Otway Basin PEP 150 (15%) and PEP 151 (100%) - remains under moratorium by the Victorian State Government. Capital expenditure against exploration assets during the year was $9.7 million, principally related to moving the exploration portfolio forward towards the drilling of wells with the acquisition of 3D seismic. 9 9 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 New Hope Group Outlook During the past year a material capital investment decision was made to invest a significant proportion of available cash funds into a 40% interest in the Bengalla coal mine located in the Hunter Valley, New South Wales. During the next financial year Bengalla should increase New Hope’s equity production of thermal coal by approximately 3.5 million tonnes to a total of approximately 8.9 million tonnes . New Hope is working with its joint venture partners and the Bengalla management team to improve operational efficiency and effectiveness at the Bengalla operation. The New Hope management team is focused on achieving the grant of the New Acland Stage 3 mining leases as expeditiously as possible in order to avoid the negative impacts of any delays in transition from mining Stage 2 reserves into Stage 3. Bridgeport continues to seek opportunities to grow its production base. It is now the second largest conventional oil producer in Queensland. Following significant investment in seismic studies of its extensive exploration portfolio, Bridgeport is identifying drilling targets for oil exploration to take advantage of any increase in oil prices in future. New Hope believes that Asia will continue to demand significant amounts of energy in order to continue its long term growth trajectory and that both coal and oil will be required in order to meet that demand. The high quality coals that New Hope produces will be demanded for many decades to come in particular in the growing economies of North Asia. New Hope has a significant suite of coal growth projects in the North Surat as well as at Lenton, Colton and Yamala. Unlike many of our competitors, New Hope has maintained its corporate capabilities in resource and project development during the downturn which has occurred in both coal and oil pricing over the past few years. We have refined our ability to operate safe low cost operations whilst maintaining excellent standards of mine rehabilitation. Having made the investments in both resources and corporate capability during the recent years of cyclical downturn the company is now in a prime position to take advantage of potential increases in future coal and oil prices. Since 31 July 2016 prices for Australian thermal coal on the seaborne market have reached levels around US$70 per tonne. This represents approximately a 40% increase from the lows of just under US$50 per tonne which prevailed during the 2016 financial year. Risk Management The operations of the Company span a number of industries and geographical locations, all of which are subject to specific risks. The Company has a robust and well documented risk management framework which is overseen by the board of Directors and embedded into all levels of the organisation. The framework assists the organisation to identify, classify, document, manage and report on the risks facing the Company. Each identified risk is tracked in a risk register and allocated to an accountable individual who is discharged with managing and reporting on the risk. Maintenance of the risk register has been delegated to the Risk Manager and Internal Auditor. The perceived likelihood and potential consequence of each risk are used to determine the risk level, which in turn determines the actions required to manage the risk and reporting obligations. The risk management framework requires that all significant risks have a specific documented action plan, and that updates are provided to the board of Directors on a periodic basis. A summary of the significant risks facing the entity include the following: Safety The nature of the Company’s operations comes with an inherent risk of accidents which have the potential to cause harm to individuals. These risks are proactively managed using comprehensive safety management systems as well as a continual focus on a strong safety culture. Social License A number of stakeholders have an interest in the impact our operations have on the surrounding environment and the communities in which we operate. In addition, the Company is subject to stringent regulation and reporting obligations spanning multiple government jurisdictions and departments. 10 10 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Failure to adequately acknowledge and address the interests of these stakeholders could negatively impact the operations of the Company and potentially result in an inability to secure, maintain or renew the regulatory approvals required to continue the operations of the Company. The Company engages appropriately qualified experts to both manage the underlying risks and to engage proactively with stakeholder groups. The Company also utilises a variety of systems to manage and report upon the Company’s performance against those obligations. The Company is currently in the process of securing approvals for the NAC03 expansion. Timing of these approvals is critical to ensure continuity of operations as reserves on the existing lease are expected to be consumed in 2018. Project Development The Company is actively pursuing growth through both developments of existing assets and the acquisition of complimentary assets. Such activities will ultimately require the deployment of significant capital. To ensure that capital is deployed in an optimal manner, the company undertakes rigorous and well document due diligence using a mix of internal and external subject matter experts prior to making any investment decisions. All significant project development and acquisition transactions require approval from the Board of Directors. Bengalla Joint Venture The Bengalla mine faces many of the same risks as the New Acland and Jeebropilly mining operations. Bengalla mine management is charged with discharging these duties day to day but the Company provides oversight and governance via participation in the Bengalla Joint Venture management committee and by monitoring operational performance. Failure of Infrastructure The company is highly dependent upon the availability and effectiveness of key infrastructure in order to produce and bring products to market. The company undertakes timely and effective preventative maintenance as well as regular third party inspections of key infrastructure to minimise the risk of unforeseen failure. Market Forces The Group's activities expose it to a variety of financial risks including but not limited to commodity price risk and foreign currency risk. 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. The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures. Insurance of officers In accordance with the provisions of the Corporations Act 2001 , New Hope Corporation Limited (the Company, Corporation or parent entity) has a Directors' and Officers' Liability policy covering Directors and Officers of the Group. The insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. Proceedings on behalf of the Corporation No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Corporation, or to intervene in any proceedings to which the Corporation is a party, for the purpose of taking responsibility on behalf of the Corporation for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Corporation with leave of the Court under section 237 of the Corporations Act 2001 . Significant changes in the state of affairs Except as disclosed in the review of operations, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the parent entity, to affect substantially the operations or results of the consolidated entity in subsequent financial years. 11 11 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Matters subsequent to the end of financial year Since the end of the financial year no matters or circumstances not referred to elsewhere in this report have arisen that have or will significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years. Likely developments and expected results of operations The activities of the consolidated entity in the next financial year are expected to be similar to those of the financial year just ended. The consolidated entity will continue to pursue a policy of increasing its strength in its major business sectors including the development and operation of additional mineral resource projects in Australia and is regularly reviewing potential new opportunities. The Group will disclose further information on likely developments in the operations of the consolidated entity and the expected results of operations as appropriate. However, Directors are mindful that premature release of information may be prejudicial to the best interests of the Company and its shareholders. Corporate Governance Statement The Company's Corporate Governance statement can be accessed on New Hope Corporation Website at: www.newhopegroup.com.au/content/investors/corporate-governance. Work place compliance The company has complied with the Workplace Gender Equality Act 2012 and has lodged its report with the Workplace Gender Equality Agency. The report can be accessed on New Hope Corporation Website at www.newhopegroup.com.au/content/investors/corporate-governance. Environmental compliance During the 2016 financial year, the Group has not been prosecuted for any breach of environmental laws. Environmental performance The majority of the Company’s operations which include coal mining operations and exploration tenements, the Jondaryan rail loading facility, the Queensland Bulk Handling (QBH) coal export port facility and oil & gas operations are in Queensland. The key piece of environmental legislation in Queensland is the Environmental Protection Act 1994 (EP Act). The EP Act protects our environment with a focus on ecologically sustainable development. The Company’s operations have proactively undertaken initiatives to improve their environmental performance. Environmental systems During prior financial year the New Hope Group adopted a new Environmental policy aligned with the requirements of the ISO 14001 standard and the Company’s operations have continued the embedding of the Environmental Management System (EMS) in 2016. The EMS assists the Company to improve its environmental performance by increasing environmental awareness, optimising operational control, monitoring compliance and facilitating continuous improvement. Environmental reporting The Group’s operational sites have submitted reports under the National Pollutant Inventory program. For the purposes of National Greenhouse and Energy Reporting the Group reports as part of the corporate group of Washington H. Soul Pattinson and Company Limited. 12 12 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Information on Directors Mr R.D. MILLNER (Non-executive Chairman) Experience Mr Millner is Chairman of the Company's holding company, Washington H. Soul Pattinson and Company Limited. Mr Millner joined the Board of New Hope Corporation Limited in 1995 and was appointed Chairman in 1998. Appointed 1984 Chairman since 1998 Appointed 2000 Appointed 2000 Appointed 2003 Chairman since 2003 Appointed 1997 Chairman since 1999 Appointed 1998 Chairman since 2002 Appointed 2000 Other current listed Directorships Washington H. Soul Pattinson and Company Limited Apex Healthcare Berhad Australian Pharmaceutical Industries Limited BKI Investment Company Limited Brickworks Limited Milton Corporation Limited TPG Telecom Limited Former listed Directorships in last 3 years Nil Special responsibilities Chairman of the Board Interests in shares and options 3,781,962 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr T.J. Barlow - BBus, LLB (Non-executive Director) Experience Mr Barlow is the Managing Director of Washington H. Soul Pattinson and Company Limited. Prior to that Mr Barlow was Managing Director of Pitt Capital Partners for 8 years. He has extensive experience in corporate finance across a range of industries. Mr Barlow joined the Board of New Hope Corporation Limited on 22 April 2015. Other current listed Directorships Washington H. Soul Pattinson and Company Limited Washington H. Soul Pattinson and Company Limited PM Capital Asian Opportunities Fund Limited TPI Enterprises Limited Clover Corporation Limited Appointed 2015 Appointed 2014 Appointed 2015 Former listed Directorships in last 3 years Nil Special responsibilities Member of the Remuneration Committee, Chair of the Nomination Committee (from August 2016) and member of the Audit Committee. Interests in shares and options Nil ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited 13 13 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Information on Directors (continued) Mr D.J. FAIRFULL - BCom, ACIS, CPA, ASIA (Non-executive Director) (retired 19 November 2015) Experience Mr Fairfull has extensive experience in finance, investment and merchant banking. He was appointed to the New Hope Corporation Limited Board in 1997 and retired in November 2015. Other current listed Directorships Nil Former listed Directorships in last 3 years Washington H. Soul Pattinson and Company Limited Appointed 1997 Resigned 2014 Special responsibilities Member of the Audit Committee (retired 2015) Interests in shares and options 11,000 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr W.H. GRANT - OAM, FAICD, ALGA (Non-executive Director) Experience Mr Grant has over 35 years experience in project management, corporate and fiscal governance, local government administration and strategic planning. He was the CEO of the South Bank Corporation in Brisbane from 1997 to 2005 and prior to that he was the General Manager/CEO of the Newcastle City Council from 1992 to 1997. He is currently chairman of Brisbane Airport Corporation. He joined the Board of New Hope Corporation Limited in 2006. Other current listed Directorships Nil Former listed Directorships in last 3 years Nil Special responsibilities Chairman of the Remuneration Committee and Chairman of the Nomination Committee (until 24 August 2016) and a member of the Audit Committee Interests in shares and options 30,000 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr T.C. MILLNER - (Non-executive Director) Experience Mr Millner is the Chief Executive Officer of BKI Investment Company Limited (BKI). He joined BKI in 2008 from Souls Funds Management Limited where he was responsible for the investment portfolio of BKI. He is currently a non-executive Director of Washington H Soul Pattinson and Company Limited and PM Capital Global Opportunities Fund Limited. Mr Millner’s experience includes management of listed equities and business development. Mr Millner joined the Board of New Hope investment portfolios, research and analysis of Corporation Limited on 16 December 2015. Other current listed Directorships Washington H. Soul Pattinson and Company Limited PM Capital Global Opportunities Fund Limited Appointed 2011 Appointed 2013 14 14 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Information on Directors (continued) Mr T.C. MILLNER (continued) Former listed Directorships in last 3 years Nil Special responsibilities Nil Interests in shares and options 3,774,368 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Ms S.J. PALMER - Bcom, CA, FAICD (Non-executive Director) Experience Ms Palmer is a Chartered Accountant with over 30 years of extensive experience in the financial and resources fields. Ms Palmer brings a current knowledge to the New Hope board in all aspects of accounting, finance, financial reporting, risk management and corporate governance. Prior to becoming a professional director, Sue was Chief Financial Officer and Executive Director with Thiess Pty Ltd. She is also a non-executive director of METS Ignited, an industry-led, government-funded growth centre for the mining equipment, technology and services sector. Ms Palmer was appointed to the New Hope Corporation Limited Board on 1 November 2012. Appointed 2015 Appointed 2014 Other current listed Directorships Charter Hall Retail REIT RCR Tomlinson Ltd Former listed Directorships in last 3 years Nil Special responsibilities Chair of the Audit Committee Interests in shares and options 15,000 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr I.M. WILLIAMS - BEc, LLB (Non-executive Director) Experience As a legal and strategic adviser to International investors in the energy and resources sectors, Mr Williams has been involved in every aspect of the Australian coal industry. Mr Williams was appointed to the New Hope Corporation Limited Board on 1 November 2012. Other current listed Directorships Nil Former listed Directorships in last 3 years Nil Special responsibilities Member of the Remuneration Committee and Member of Nomination Committee Interests in shares and options 38,087 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited 15 15 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Information on Directors (continued) Mr S.O. STEPHAN - BBus (Dist), MBA (AGSM), MAusIMM, MAICD (Managing Director) Experience Mr Stephan has over 25 years experience in the coal mining industry including senior line management roles, experience as a District Inspector of Mines in Queensland and as a member of the Coal Industry Health and Safety Advisory Council. He has also held executive roles in the corporate finance division of an investment bank. He commenced with New Hope as Chief Financial Officer in 2009. He was appointed Managing Director on 20 November 2014. Other current listed Directorships Nil Former listed Directorships in last 3 years Nil Special responsibilities Managing Director Interests in shares and options 241,021 ordinary shares in New Hope Corporation Limited 338,310 Performance rights in New Hope Corporation Limited Company Secretary Appointed 2014 Ms Janelle Moody was appointed to the role of Company Secretary on 31 May 2016. Ms Moody has extensive legal experience, specifically in the area of corporate and commercial matters in the mining industry. Most recently Ms Moody has been running her own legal practice, and has previously been a Partner in the law firm McCullough Robertson. 16 16 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. a. Remuneration governance The performance of the Group depends upon the quality of its Directors and Executives. appropriately qualified and experienced Directors and executives. It is the Company’s objective to attract and retain The Remuneration Committee comprises Messrs Grant (Chair), Barlow and Williams. The Remuneration Committee is responsible for reviewing and setting the remuneration packages for Directors and executives on an annual basis. The Remuneration Committee engages independent consultants, utilises data from independent surveys and reviews other market information and reports to ensure that remuneration is consistent with current industry practices. The Corporate Governance Statement provides further information on this Committee. b. Key management personnel Name Mr R.D. Millner Mr T.J. Barlow Mr D.J. Fairfull Mr W.H. Grant Mr T.C. Millner Ms S.J. Palmer Mr I.M. Williams Mr S.O. Stephan Mr B.D. Denney Mr A.L. Boyd Mr M.J. Busch Positions Held Chairman and Non-executive Director. Non-executive Director. Chairman of the Remuneration Committee (appointed 24 August 2016). Non-executive Director (retired 19 November 2015). Independent Non-executive Director, Chairman of the Remuneration Committee (until 24 August 2016) and Chairman of the Nominations Committee. Non-executive Director (appointed 16 December 2015). Independent Non-executive Director and Chairman of the Audit Committee. Independent Non-executive Director. Managing Director. Chief Operating Officer (retired 18 December 2015). Chief Operating Officer (appointed 21 December 2015). Chief Financial Officer. c. Executive remuneration policy and framework The Company aims to ensure that remuneration packages properly reflect the person's duties, experience and responsibilities and are aligned so that management is rewarded in creating value for shareholders. Remuneration of senior executives is reviewed annually after taking into consideration the executives’ performance, the Company’s performance, market rates and level of responsibility. As a result of the current year review, there will be no increase to Executive Remuneration for the 2017 financial year. Executive remuneration comprises a mix of base remuneration, short term incentives (STIs) and long term incentives (LTI's). Target remuneration mix (based on the entitlement to 100% of the available STI and LTI which is at risk and subject to performance hurdles) for the year ended 31 July 2016 is: Target remuneration mix CEO COO CFO 62% 62% 66% 19% 19% 19% 19% 17% 17% 0% 20% 40% 60% 80% 100% Base remuneration STI LTI 17 17 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) c. Executive remuneration policy and framework (continued) The detail of each component is as follows: Base remuneration Base remuneration for senior executives is fixed annually by the Remuneration Committee. It comprises a cash salary, superannuation, and other non-cash benefits such as a company vehicle. Executives may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other benefits. Base remuneration for the 2017 financial year remains the same as the 2016 financial year. Short Term Incentives STI's are designed to motivate and reward senior executives to achieve the short term goals of the Company as set by the Board. Maximum allowable STI's are provided for in senior executive employment contracts and are paid in the form of an annual cash bonus. At the end of each period the Remuneration Committee will award executives a percentage of their maximum allowable STI's having regard to the performance of the executive and the Company during the period. The Key Performance Indicators (KPI's) set by the Remuneration Committee and their respective weightings for the 2016 financial year are detailed below. Short Term Incentives KPI's Group Profit, Sales and Investment Performance Group Compliance – Safety, Environment and Risk Management Group Production Cost, Project Development and M&A Activities Weighting 60% 20% 20% Given the historically low coal price and profit performance of New Hope, it was recommended by executive management that no STI be paid for the 2016 financial year. The Remuneration Committee accepted this proposal resulting in no STI being payable for the 2016 financial year, including the Managing Director. Long Term Incentives LTI’s are designed to motivate and reward senior executives to achieve the strategic goals set by the Board, align shareholder and executive objectives, and to retain the services of senior executives. Maximum allowable LTI’s are provided for in senior executive employment contracts. At the end of each period the Remuneration Committee will award executives a percentage of their maximum allowable LTI having regard to the performance of the executive and the Company during the period. LTI’s are paid in the form of Performance Rights at the discretion of the Remuneration Committee. The value of an executive’s LTI is converted into Performance Rights by reference to the 5 day volume weighted average share price of the Company over the 5 days immediately preceding issue. The Remuneration Committee has the discretion to select alternative equity instruments for the award of LTI’s in the event that Performance Rights do not align to the strategic goals set by the Remuneration Committee or Board. 18 18 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) c. Executive remuneration policy and framework (continued) Performance Rights are issued subject to performance and service conditions. The service condition requires that the executive remain an employee of the Company for the duration of the 3 year vesting period. The performance conditions attaching to the rights are measured over three years. The Remuneration Committee will determine the percentage of rights that will vest based on the performance of the executive and the Company during the three year period. The KPI's set by the Remuneration Committee and their respective weightings relevant for the 2016 financial year are detailed below. Long Term Incentives KPIs Shareholder Value Project Development and M&A Activities Strategic Plan (including Succession Planning and Stakeholder Management) Weighting 50% 25% 25% The Shareholder Value KPI compares the total shareholder return (TSR) of the Company against the ASX 200 TSR over the three year period. The details of the amount of rights vesting, given the relative TSR performance, are detailed below: % of 3 year Company TSR vs ASX 200 TSR < 100% 100% 105% 110% 115% 120% > 125 % % Vesting 0% 25% 30% 35% 40% 45% 50% Subject to the employee satisfying the above service and performance conditions, a percentage of the Performance Rights will vest three years after their grant date in accordance with the above table. d. Consequences of performance on shareholder wealth The Company's performance is not only impacted by market factors, but also by employee performance. The financial performance for the last five years is shown below. Net profit/(loss) attributable to shareholders Profit/(loss) after tax Net profit after tax before non regular items Earnings per share Dividends paid during the year Share price as at 31 July Shareholders' funds Year ended 31 July A$000's A$000's A$000's cents/share cents/share $/share A$000's 2016 (53,679) (53,680) 5,029 (6.50) 8.00 1.60 1,750,412 2015 (21,820) (21,821) 51,749 (2.60) 9.50 1.91 1,852,625 2014 58,450 58,449 41,490 7.00 16.00 3.00 1,973,859 2013 74,129 74,128 124,955 8.90 31.00 3.76 2,016,456 2012 167,126 167,125 171,080 20.10 26.00 4.07 2,252,916 e. Non-executive director remuneration policy It is intended that remuneration paid to non-executive Directors reflects the demands and responsibilities of Directors. Non-Executive Directors fees are reviewed annually after taking into consideration the Company’s performance, market rates and level of responsibility. Non-executive Directors receive a fixed fee that is paid within an aggregate limit as approved by the shareholders from time to time. The current maximum aggregate is set at $1,750,000 (2015 - $1,750,000) per annum. There is no proposal to increase Directors’ Fees for the 2017 financial year. f. Voting made at the Company’s 2015 Annual General Meeting The Company received 99% “yes” votes on its remuneration report for the 2015 financial year. 19 19 DIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) g. Details of remuneration Details of remuneration of Directors and the key management personnel of New Hope Corporation Limited are set out below for the current and previous financial years. Short-term employee benefits Cash salary and fees $ Cash bonus 8 $ Non cash benefits 9 $ Long-term benefits LSL $ Post employment benefits Super- annuation $ Termination Benefits $ Share-based payments Rights $ Total $ 2016 Non-executive Directors Mr R.D. Millner Mr T.J. Barlow 1 Mr D.J. Fairfull Mr W.H. Grant Mr T.C. Millner 2 Ms S.J. Palmer Mr I.M. Williams Total Non-executive Directors Executive Directors Mr S.O. Stephan Key Management Personnel Mr B.D. Denney3 Mr A. L. Boyd4 Mr M.J. Busch 293,000 135,000 41,250 150,000 84,620 160,000 135,000 998,870 1,247,833 312,686 389,709 546,028 Total Key Management Personnel 1,248,423 Total Remuneration - 2016 3,495,126 2015 Non-executive Directors Mr R.D. Millner Mr P.R. Robinson6 Mr D.J. Fairfull Mr W.H. Grant Ms S.J. Palmer Mr I.M. Williams 5 Mr T.J. Barlow 293,000 90,000 135,000 150,000 160,000 135,000 37,330 Total Non-executive Directors 1,000,330 Executive Directors 7 Mr S.O. Stephan Key Management Personnel Mr B.D. Denney Mr M.J. Busch - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 19,308 12,825 5,344 14,250 8,039 15,200 12,825 87,791 9,740 11,520 19,385 - - - - - - - - - - - - - - - - - 312,308 147,825 46,594 164,250 92,659 175,200 147,825 1,086,661 127,574 1,416,052 9,930 38,728 (990) 47,668 10,682 22,327 9,796 42,805 7,111 14,370 19,305 40,786 136,316 - - 136,316 (66,010) - 61,686 (4,324) 410,715 465,134 635,825 1,511,674 57,408 54,325 147,962 136,316 123,250 4,014,387 - - - - - - - - - - - - - - - - 18,783 8,550 12,825 14,250 15,200 12,825 3,546 85,979 - - - - - - - - - - - - - - - - - - - - - 311,783 98,550 147,825 164,250 175,200 147,825 40,876 1,086,309 43,056 1,307,272 75,539 48,492 832,487 626,544 124,031 1,459,031 167,087 3,852,612 1,209,630 (24,967) 42,778 17,860 18,915 Total Key Management Personnel 1,187,724 (24,968) 117,890 673,774 513,950 (15,605) (9,363) 72,920 44,970 6,944 9,716 16,660 18,915 18,779 37,694 Total Remuneration - 2015 3,397,684 (49,935) 160,668 34,520 142,588 1 2 3 4 5 Mr D.J. Fairfull retired as a director on 19 November 2015. Mr. T. Millner was appointed a director on 16 December 2015. Mr. B. D Denney resigned as Chief Operating officer on 18 December 2015. The negative share based payments amount reflects Rights forfeited. Mr. A. L. Boyd was appointed as Chief Operating Officer on 21 December 2015. Mr. T.J. Barlow was appointed a director on 22 April 2015. 6 Mr. P.R. Robinson retired as a director on 31 March 2015. 7 Mr. S.O. Stephan was promoted from Chief Executive Officer to Managing Director from 20 November 2014. 8 Cash Bonus for 2015 represents the difference between the accrual of the 2014 STI to the actual payment made during the 2015 financial year. 9 Non Cash Benefits include movements in annual leave provisions. 20 20 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Name Mr S.O. Stephan Mr B.D. Denney Mr A. L. Boyd Mr M.J. Busch Fixed Remuneration 2016 2015 97% 91% 91% 116% 0% 100% 92% 90% At Risk - STI At Risk - LTI 2016 0% 0% 0% 0% 2015 0% 0% 0% 0% 2016 9% -16% 0% 10% 2015 3% 9% 0% 8% Since the long-term incentives are provided exclusively by way of rights, the percentages disclosed reflect the value of remuneration consisting of rights, based on the value of rights expensed during the year. h. Employment contracts The agreements with the senior executives provide for a cash salary, superannuation and a fully maintained motor vehicle. Executives may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other benefits. Name Mr S.O. Stephan Mr A.L. Boyd Mr M.J. Busch Term of agreement and Base remuneration including Superannuation 2 notice period 1 Termination Payments 3 No fixed term 6 months' notice period No fixed term 3 months' notice period No fixed term 3 months' notice period $1,300,000 6 months’ base remuneration $650,000 3 months’ base remuneration $600,000 3 months’ base remuneration 1 This notice applies equally to either party. 2 Base remuneration quoted is for the year ended 30 June 2016; they are reviewed annually by the remuneration committee. 3 Base salary payable if the company terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance). i. Details of share based compensation Rights Rights are granted under the New Hope Corporation Limited Employee Performance Rights Share Plan (Rights Plan). Membership of the Rights Plan is open to those senior employees and those Directors of New Hope Corporation Limited, its subsidiaries and associated bodies corporate whom the Directors believe have a significant role to play in the continued development of the Group’s activities. Rights will be granted for no consideration. Rights to be granted in accordance with the Rights Plan will be allotted at the sole discretion of the Directors of the Company and in accordance with the Group’s reward and retention strategy. Rights will vest and automatically convert to ordinary shares in the Company following the satisfaction of the relevant performance and service conditions. Performance and service conditions applicable to each issue of Rights are determined by the Board at the time of grant. The assessed fair value at grant date of Rights granted to the individuals is allocated equally over the period from grant date to vesting date and the amount will be included in the remuneration of the executive. The fair value of the rights is determined based on the market price of shares at the grant date, with an adjustment made to take into account the vesting period, expected dividends during that period that will not be received by the participants and the probability that the performance conditions will be met. 21 21 DIRECTORS’ REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) i. Details of share based compensation (continued) Rights The terms and conditions of each grant of rights affecting remuneration of key management personnel in the current or future reporting periods and the associated pricing model inputs are as follows: Performance Period to which LTI relates Grant Date Vesting Date Value of a Right at Grant Date ($) 2011 2012 2012 2014 - 2016 2014 - 2016 2015 - 2018 December 2011 December 2012 December 2012 December 2014 November 2015 November 2015 August 2015 August 2015 August 2016 August 2017 August 2017 August 2018 5.84 4.08 4.08 1.58 1.91 2.17 Rights granted under the plan carry no dividend or voting rights. Details of Rights over ordinary shares in the Company as at 31 July 2016, provided as remuneration to each Director of New Hope Corporation Limited and each of the key management personnel of the Group are set out below. Upon satisfaction of the service and performance conditions each right will automatically vest and convert into one ordinary share in New Hope Corporation Limited. The minimum value of the rights yet to vest is nil, as the rights will be forfeited if the vesting conditions are not met. The maximum value in future periods has been determined as the amount of the grant date fair value of the right that is yet to be expensed. Name Grant date Vesting date Number granted Value per share Number vested Vested % Number forfeited Forfeited % Mr S.O.Stephan December 2011 August 2015 December 2012 December 2012 November 2015 November 2015 Mr B.D. Denney December 2011 December 2012 December 2012 December 2014 Mr M.J. Busch December 2011 December 2012 December 2012 December 2014 August 2015 August 2016 1 August 2017 August 2018 August 2015 August 2015 August 2016 August 2017 August 2015 August 2015 August 2016 1 August 2017 November 2015 August 2018 8,432 11,211 11,210 134,228 204,082 8,010 11,211 11,210 83,893 4,005 8,408 8,408 50,336 76,531 5.84 4.08 4.08 1.91 2.17 5.84 4.08 4.08 1.58 5.84 4.08 4.08 1.58 2.17 8,432 11,211 100% 100% - - - - - - 8,010 11,211 100% 100% - - - - - - - - - - - - - - - - - - (11,210) (83,893) 100% 100% 4,005 8,408 100% 100% - - - - - - - - - - - - - - - - 1 The August 2016 vesting rights do not have a maximum value at 31 July as they vest in August 2016. The fair value of the rights is determined based on the market price of the company’s shares at the grant date. Maximum value in future periods - - - 73,297 160,750 - - - - - - - 29,839 60,281 22 22 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Remuneration report (continued) j. Equity instruments held by Key Management Personnel The tables below show the number of rights and shares in the Company that were held during the financial year by key management personnel of the Group, including their close family members and entities related to them. There were no shares granted during the reporting period as remuneration. Rights holdings Name Mr S.O. Stephan Mr B.D. Denney Mr A. L. Boyd Mr M.J. Busch Share holdings Balance at the start of the year Granted as remuneration Vested Forfeited Balance at the end of the year Unvested 30,853 114,324 - 71,157 338,310 - - (19,643) (19,221) - 76,531 (12,413) - (95,103) - - 349,520 349,520 - - - - 135,275 135,275 Name Balance at the start of the year Purchased / (sold) Received on the vesting of rights Other changes during the year1 Balance at the end of the year Mr R.D. Millner Mr T.J. Barlow Mr D.J. Fairfull Mr W.H. Grant Mr T.C. Millner Ms S.J. Palmer Mr I.M. Williams Mr S.O. Stephan Mr B.D. Denney Mr A.L. Boyd Mr M.J. Busch 3,781,962 - 11,000 30,000 - 15,000 38,087 162,078 46,452 - 698,911 - - - - - - - - - - - - - - 59,300 - - - 19,643 19,221 - 12,413 - - (11,000) - 3,781,962 - - 30,000 3,774,368 3,774,368 - - - (65,673) 15,438 - 15,000 38,087 241,021 - 15,438 711,324 1 Other changes for Mr D.J. Fairfull and Mr B.D. Denney represent balance of final holdings upon retirement. Other changes also reflect share holdings upon appointment. k. Other transactions with Key Management Personnel Mr R.D. Millner, Mr P.R. Robinson and T.J. Barlow are Directors of WHSP, the ultimate parent entity of New Hope Corporation Limited and Pitt Capital Partners Limited. Pitt Capital Partners Limited acted as financial advisor to the Group for various corporate transactions during the 2016 and 2015 financial years. All transactions are at normal commercial terms. Aggregate amounts of each of the above types of transactions were as follows: Financial advice $ 6,488,295 Directors are required to take all reasonable steps to manage actual, potential or perceived conflicts of interest. Directors are required to consider and notify the Company of any potential or actual conflicts of interest and Related Party transactions. Directors do not participate in any negotiations of transactions with related parties. 23 23 DIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 Shares issued on the vesting of rights Since the end of the financial year 19,618 rights have vested and will be converted to ordinary shares in the Company. Loans to directors and executives There were no loans to directors and executives granted during the reporting period, nor were there any outstanding loans as at balance date. Non-audit services Deloitte Touche Tohmatsu has acted as auditor for the Group for the entire 2016 year. 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 are important. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non- related audit firms (refer note 33): Audit services Audit and review of financial reports and other audit work under the Corporations Act 2001 : Deloitte Touche Tohmatsu (Australian firm) Other audit firms for the audit or review of financial reports of any entity in the Group Total remuneration for audit services Other services Deloitte Touche Tohmatsu (Australian firm) Audit of joint operations Accounting advisory services PricewaterhouseCoopers (Australian firm) Audit of joint operations Total remuneration for non-audit services Consolidated 2016 $ 2015 $ 433,000 240,000 - - 433,000 240,000 24,000 33,000 18,000 75,000 23,000 - - 23,000 Total auditors remuneration 508,000 263,000 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 26. 24 24 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ REPORT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors' Report - 31 July 2016 2016/191 The Company is of a kind referred to in Corporations Instrument 2016/19 1, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Meetings of Directors The following table sets out the number of meetings of the Company's Directors held during the year ended 31 July 2016 and the number of meetings attended by each Director: Mr R.D. Millner Mr T.J Barlow Mr W.H. Grant Mr T.C. Millner Ms S.J. Palmer Mr I.M. Williams Mr S.O. Stephan Mr D.J. Fairfull (retired 19 November 2015) Full meetings Held 12 12 12 7 12 12 12 5 Attended 11 12 12 7 12 12 12 5 Audit Committee Held - 3 4 - 4 - - 2 Attended - 2 4 - 4 - - 2 Remuneration Held - 1 1 - - 1 - - Attended - 1 1 - - 1 - - Nomination Held - 2 2 - - 2 - - Attended - 2 2 - - 1 - - Signed at Sydney this 19th day of September 2016 in accordance with a resolution of Directors. R.D. Millner Director S.J. Palmer Director 25 25 DIRECTORS’ REPORT for the year ended 31 July 2016Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Riverside Centre Level 25 123 Eagle Street GPO Box 1463 Brisbane QLD 4001 Australia DX 115 Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7001 www.deloitte.com.au D D e e l l o o i i t t t t e e T T o o u u c c h h The Board of Directors New Hope Corporation Limited 3 / 22 Magnolia Drive Brookwater QLD 4300 19 September 2016 Dear Board Members Independence Declaration In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of New Hope Corporation Limited. As lead audit partner for the audit of the financial statements of New Hope Corporation Limited for the financial year ended 31 July 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours sincerely, DELOITTE TOUCHE TOHMATSU Richard Wanstall Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 26 26 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportAUDITOR’S INDEPENDENCE DECLARATION for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Financial Report - Contents for the year ended 31 July 2016 Contents Financial Report Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the financial statements Basis of preparation and Basis of consolidation Results for the year 1. Financial reporting segments Operating assets and liabilities 8. Receivables 2. Revenue 9. Accounts payable 3. Other income 10. Inventories 4. Expenses 11. Property, plant and equipment 5. Income taxes 12. Intangibles 6. Reconciliation of net operating cashflow 13. Exploration and evaluation Page 28 29 30 31 32 Capital Risk Other 15. Cash and cash equivalents 23. Financial risk management 29. Related party transactions 16. Held to maturity investments 17. Available for sale financial assets 18. Lease liabilities Group structure 30. Share based payments 24. Business combination 31. Parent entity financial information 25. Interests in other entities 32. Deed of Cross Guarantee 19.Derivative financial instruments Unrecognised items 20. Dividends 26. Contingent liabilities 33. Remuneration of Auditors 34. Other accounting policies 7. Earnings per share 14. Provisions 21. Contributed equity 27.Commitments 22. Reserves 28. Subsequent events Signed reports Directors' declaration Independent audit report to the members of New Hope Corporation Limited 78 79 New Hope Corporation Limited is a company limited by shares on the Australian Securities Exchange (ASX). The Company is incorporated and domiciled in Australia and its registered office and principal place of business is: New Hope Corporation Limited 3/22 Magnolia Drive BROOKWATER QLD 4300 A description of the nature of the consolidated entity's operations and its principal activities is included in the Directors' report on pages 3 to 12, which is not part of this financial report. The financial report was authorised for issue by the Directors on 19 September 2016. The Company has the power to amend and reissue the financial report. Through the use of the internet, the Company has ensured that corporate reporting is timely, complete and available globally at minimum cost to the Company. All financial reports and other announcements to the ASX are available on the Investor Relations pages of the website: www.newhopegroup.com.au. 27 FINANCIAL REPORT for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Consolidated Statement of Comprehensive Income for the year ended 31 July 2016 Revenue from operations Other income Expenses Cost of sales Marketing and transportation Administration Other expenses Acquisition costs expensed Impairment of assets Loss before income tax Petroleum resource rent tax (expense)/benefit Income tax benefit Loss after income tax for the year Loss attributable to: New Hope Shareholders Non-controlling interests Other comprehensive income/(loss) Items that may be reclassified to profit and loss: Changes to the fair value of cash flow hedges, net of tax Transfer to profit and loss for cash flow hedges, net of tax Exchange differences on translation of foreign operation Changes to the fair value of available for sale financial assets, net of tax Transfer to profit and loss - available for sale financial assets, net of tax Other comprehensive income/(loss) for the year, net of tax Total comprehensive loss for the year Total comprehensive loss attributable to: New Hope Shareholders Non-controlling interests Notes 2016 $000 2015 $000 2 3 4 4 5(a) 5(a) 22 22 22 22 22 531,459 4,846 536,305 (353,196) (150,278) (8,152) (13,563) (52,104) (33,124) (74,112) (3,574) 24,006 (53,680) 505,781 1,177 506,958 (279,219) (137,409) (9,010) (8,591) - (97,438) (24,709) 961 1,927 (21,821) (53,679) (1) (53,680) (21,820) (1) (21,821) 2,455 15,294 (258) - 355 17,846 (35,834) (35,833) (1) (35,834) (33,861) 18,225 71 (3,894) (1,151) (20,610) (42,431) (42,430) (1) (42,431) Earnings per share for loss attributed to ordinary equity holders of the Company Basic loss per share (cents/share) Diluted loss per share (cents/share) 7 7 (6.5) (6.5) (2.6) (2.6) The above statement of comprehensive income should be read in conjunction with the accompanying notes. 28 28 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportSTATEMENT OF COMPREHENSIVE INCOME for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Consolidated Balance Sheet as at 31 July 2016 Current assets Cash and cash equivalents Receivables Inventories Held to maturity investments Current tax assets Derivative financial instruments Total current assets Non-current assets Receivables Available for sale financial assets Property, plant and equipment Exploration and evaluation assets Intangible assets Total non-current assets Total assets Current liabilities Accounts payable Lease liabilities Current tax liabilities Derivative financial instruments Provisions Total current liabilities Non-current liabilities Lease liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained profits Capital and reserves attributable to New Hope Shareholders Non-controlling interests Total equity Notes 2016 $000 2015 $000 15 8 10 16 5(d) 19 8 17 11 13 12 9 18 5(d) 19 14 18 5(e) 14 21 22 22(b) 91,162 83,254 53,518 116 1,486 2,313 231,849 1,200 3,364 1,340,415 382,048 59,673 1,786,700 2,018,549 64,604 2,272 - - 45,733 112,609 12,588 51,575 91,365 155,528 268,137 1,750,412 95,692 24,353 1,630,362 1,750,407 5 1,750,412 24,789 43,296 57,613 1,040,480 - - 1,166,178 2,029 7,986 502,113 377,120 19,732 908,980 2,075,158 42,512 - 4,732 23,144 32,262 102,650 - 60,186 59,697 119,883 222,533 1,852,625 95,444 6,632 1,750,525 1,852,601 24 1,852,625 The above balance sheet should be read in conjunction with the accompanying notes. 29 29 BALANCE SHEET as at 31 July 2016  New Hope Corporation Limited and Controlled Entities Consolidated Statement of Changes in Equity for the year ended 31 July 2016 Contributed Equity Notes $000 Reserves $000 Retained Earnings Non-controlling Interests Total $000 $000 $000 Balance at 1 August 2014 95,119 27,400 1,851,289 51 1,973,859 Loss for the year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Dividends provided for or paid Special dividend paid Transfer from share based payment reserve to equity Net movement in share based payment reserve Share of non-controlling interests equity contributions Balance at 31 July 2015 Loss for the year Other comprehensive profit Total comprehensive loss for the year Transactions with owners in their capacity as owners Dividends provided for or paid Special dividend paid Transfer from share based payment reserve to equity Net movement in share based payment reserve Share of non-controlling interests equity contributions 20 20 22 22 20 20 22 22 - - - - - 325 - - 325 - (20,610) (20,610) - - (325) 167 - (158) (21,820) - (21,820) (49,859) (29,085) - - - (78,944) (1) - (1) - - - - (26) (26) (21,821) (20,610) (42,431) (49,859) (29,085) - 167 (26) (78,803) 95,444 6,632 1,750,525 24 1,852,625 - - - - - 248 - - 248 - 17,846 17,846 - - (248) 123 - (125) (53,679) - (53,679) (37,397) (29,087) - - - (66,484) (1) - (1) - - - - (18) (18) (53,680) 17,846 (35,834) (37,397) (29,087) - 123 (18) (66,379) Balance at 31 July 2016 95,692 24,353 1,630,362 5 1,750,412 The above statement of changes in equity should be read in conjunction with the accompanying notes. 30 30 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportSTATEMENT OF CHANGES IN EQUITY for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Consolidated Cash Flow Statement for the year ended 31 July 2016 Cash flows from operating activities Receipts from customers inclusive of GST Payments to suppliers and employees inclusive of GST Acquisition costs expensed Interest paid Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Payments for acquisition of business - Bengalla Payments for acquisition of business - Other Payments for exploration and evaluation assets Receipt from available for sale financial assets Refunds of/(payments for) security and bond guarantees Net proceeds from held to maturity investments Proceeds from sale of property, plant and equipment Interest received Net cash inflow from investing activities Cash flows from financing activities Repayment of finance leases Dividends paid Net cash outflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year Notes 2016 $000 2015 $000 532,081 (470,896) 61,185 (52,104) (249) (2,104) 6,728 (66,257) (38) (846,048) (3,482) (17,774) - 9 1,032,412 822 25,363 125,007 (985) (66,484) (67,469) 64,266 24,789 2,107 91,162 6 24 24 15 475,908 (380,524) 95,384 - - (6,929) 88,455 (62,442) - - - (53,215) 8,622 (98) 23,792 333 38,390 (44,618) - (78,944) (78,944) (35,107) 57,015 2,881 24,789 The above cash flow statement should be read in conjunction with the accompanying notes. 31 31 CASH FLOW STATEMENT for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 The financial report covers New Hope Corporation Limited and its subsidiaries as the consolidated entity and together are referred to as the Group or the consolidated entity in this financial report. Basis of preparation This financial report is a general purpose financial report which: h h h h h h h Has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. Complies with IFRS as issued by the International Accounting Standards Board (IASB). For the purposes of preparing the consolidated Financial Statements, the company is a for profit entity. Adopts policies which are consistent with those of the previous financial year and corresponding interim reporting period. Has been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets, derivative instruments carried at fair value, agricultural assets carried at fair value and inventory carried at net realisable value. Does not adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective (such as AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments (December 2010) as amended by 2013-9). Refer to note 34 for more information on this and other accounting policies. Is for a company which is of a kind referred to in Corporations Instrument 2016/191 , issued by the Australian Securities and Investment Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Presents comparative information that has been reclassified where appropriate to enhance comparability. Subsidiaries Basis of consolidation (i) The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of New Hope Corporation Limited (Company or parent entity) as at 31 July 2016 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities (including special purpose 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. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. 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 statement of comprehensive income, statement of changes in equity and balance sheet respectively. Joint Arrangements (ii) For information on Joint Arrangements refer to note 25. 32 32 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 Other accounting policies Significant and other accounting policies relevant to gaining an understanding of the financial statements have been grouped with the relevant notes to the financial statements. Key judgements and estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed within the following notes: Note 5 Note 11 Note 11 Note 11 Note 11 Note 12 Note 13 Note 13 Note 14 Note 17 Note 24 Note 25 Deferred Tax Assets Impairment assessment Estimation of coal reserves and resources New Acland Stage 3 approvals Impairment of property, plant and equipment Impairment of goodwill Exploration and evaluation expenditure Impairment of oil exploration assets Provisions - rehabilitation Impairment of available for sale financial assets Business combination - fair value Classification of joint arrangements Page 41 47 47 47 49 51 51 51 53 55 66 67 33 33 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 1. FINANCIAL REPORTING SEGMENTS Accounting policy Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as comprising the Board, Managing Director (MD), Chief Operating Officer (COO) and Chief Financial Officer (CFO). a. Description of segments The Group has four reportable segments, namely Coal mining in Queensland (including mining related exploration, development, production, processing, transportation, port operations and marketing), Coal mining in New South Wales (including mining production, processing, transportation and marketing), Oil and gas (including oil and gas related exploration, development, production and processing) and Treasury and investments (including cash, held to maturity investments and available for sale financial assets). Operating segments have been determined based on the analysis provided in the reports reviewed by the Board, CEO, COO and CFO (being the CODM). The reportable segments reflect how performance is measured, and decisions regarding allocations of resources are made by the CODM. Other immaterial coal mining and related operations that do not meet the quantitative thresholds requiring separate disclosure in AASB 8 Operating Segments have been combined with the Queensland coal mining operations. Segment information is presented on the same basis as that used for internal reporting purposes. Sales between segments are carried out at arm’s length and are eliminated on consolidation. b. Segment information Notes Coal mining QLD Coal mining NSW Oil and gas Treasury and investment $000 $000 $000 $000 Total $000 Year ended 31 July 2016 Revenue from external customers EBITDA Interest expense Depreciation and amortisation Profit/(loss) before tax and non regular items Non regular items before tax ^ Profit/(loss) before tax after non regular items Less Income tax benefit/(expense) Less Petroleum resource rent tax expense Profit/(loss) after tax after non regular items Total segment profit before tax includes: Interest revenue Reportable segment assets Total segment assets includes: Additions to non-current assets 2 4 406,231 97,411 10,522 17,295 531,459 43,832 (248) (54,523) (10,940) 5,000 (5,940) 3,889 - (2,051) 21,271 (1) (16,234) 5,036 (51,862) (46,826) 13,975 - (32,851) (1,901) - (4,148) (6,049) (28,388) (34,437) 11,506 (3,574) (26,505) 18,068 - - 18,068 (4,978) 13,090 (5,363) - 7,727 81,270 (249) (74,905) 6,116 (80,228) (74,112) 24,006 (3,574) (53,680) 2 519 25 23 17,295 17,862 925,832 907,347 88,422 96,948 2,018,549 82,745 877,467 26,839 - 987,051 ^ Non regular items relate to land access compensation income, impairment charges for oil producing and exploration assets, derecognition of petroleum resource rent tax, impairment of available for sale financial assets and acquisition costs expensed in relation to business combinations during the year. 34 34 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 1. FINANCIAL REPORTING SEGMENTS (continued) b. Segment information (continued) Notes Coal mining QLD Coal mining NSW Oil and gas Treasury and investment $000 $000 $000 $000 Total $000 Year ended 31 July 2015 Revenue from external customers EBITDA Interest expense Depreciation and amortisation Profit/(loss) before tax and non regular items Non regular items before tax Profit/(loss) before tax after non regular items Less Income tax benefit/(expense) Less Petroleum resource rent tax benefit Profit/(loss) after tax after non regular items 2 453,465 93,420 (1) (57,624) 35,795 (24,267) 11,528 (2,505) - 9,023 Total segment profit before income tax includes: Interest revenue 2 168 Reportable segment assets Total segment assets includes: Additions to non-current assets 921,737 108,460 - - - - - - - - - - - - - 11,955 40,361 505,781 (692) - (3,557) (4,249) (55,613) (59,862) 16,442 961 (42,459) 40,033 - - 40,033 (16,408) 23,625 (12,010) - 11,615 132,761 (1) (61,181) 71,579 (96,288) (24,709) 1,927 961 (21,821) 62 35,191 35,421 88,118 1,065,303 2,075,158 16,401 - 124,861 ^ The prior year segment note has been restated due to the change in reporting in the current year to enhance comparability. c. Other segment information (i) Segment revenue Total segment revenue by geographical location Japan Taiwan/China Chile Korea/Indonesia Other Australia Investment income - Australia 2016 $000 2015 $000 208,261 205,371 12,331 9,104 24,650 54,448 514,165 17,294 531,459 173,104 240,590 8,443 - - 48,453 470,590 35,191 505,781 Included within revenue for the Coal mining - QLD segment is one customer that represents more than 10% of the Group's total revenue. For the year ended 31 July 2016, one customer contributed $182,520,000 (2015 - 240,590,000) in sales revenue, whilst in 2015 another customer contributed $62,952,000. (ii) Segment assets The amounts provided to the CODM with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment. All non-current assets are located in Australia. 35 35 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 2. REVENUE Accounting policy - 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. The Group recognises revenue where the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue is recognised for the major business activities as follows: h h h h h h Coal sales revenue is recognised at the time the risks and benefits of ownership have been transferred to the customer in accordance with the sales terms. For export sales this is normally at the time of loading the shipment, and for domestic sales this is generally at the time the coal is delivered to the customer. Oil sales revenue is recognised at the time the risks and benefits of ownership have been transferred to the customer in accordance with the sales terms. For oil sales this is normally when the oil is delivered to the customer. Service fee income and management fee income is recognised as the services are performed. Interest income is recognised as it accrues using the effective interest method. Rental income is recognised on a straight line basis over the lease term. Dividend income is taken into profit when the right to receive payment is established. Sales revenue Sale of goods Services Other revenue Property rent Interest Sundry revenue 3. OTHER INCOME Gain on sale of investments held for sale - Dart Energy Limited Land access compensation Gain/(loss) on sale of property, plant and equipment 4. EXPENSES Profit/(loss) before income tax includes the following specific expenses: Foreign exchange gains and losses Net foreign exchange gains Depreciation Buildings Plant and equipment 2016 $000 2015 $000 486,220 22,358 508,578 1,048 17,862 3,971 531,459 - 5,000 (154) 4,846 441,009 23,305 464,314 865 35,421 5,181 505,781 1,151 - 26 1,177 (2,107) (2,881) 11 11 752 50,238 50,990 619 51,588 52,207 36 36 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 4. EXPENSES (continued) Amortisation Mining reserves, leases and mine development Software Oil producing assets Mining information Water rights Doubtful debt expense^ Other charges against assets Impairment of available for sale investments (IGas Plc and Planet Gas Limited) Impairment of oil producing assets (Bridgeport) Impairment of oil exploration assets (Bridgeport) Impairment of non current assets (Jeebropilly Coal to Liquids Facility) Impairment of goodwill (Bridgeport) Notes 11 12 11 12 12 8 17 11 13 11 12 Acquisition costs expensed Exploration costs expensed Employee benefits expensed Superannuation expensed* Operating lease costs expensed - 2015 $000 4,555 1,426 2,993 - - 8,974 - 17,558 51,456 - 24,267 4,157 97,438 - 2016 $000 18,600 1,027 3,593 585 110 23,915 6,377 4,978 15,029 13,117 - - 33,124 52,104 14,150 15,976 100,782 86,513 7,131 4,718 6,031 4,168 ^ Doubtful debt expense is included in Other expenses. * Superannuation expensed is included in Employee benefits expensed. 5. INCOME TAXES Accounting policy The income tax expense or revenue for the period is the tax payable on the current period's taxable income, based on the relevant 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 jurisdictions where the company’s subsidiaries and associates operate and generate taxable income. 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, the deferred income tax is 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 balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 37 37 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 5. INCOME TAXES (continued) Accounting policy (continued) Tax consolidation legislation New Hope Corporation Limited and its wholly owned Australian controlled entities implemented the tax consolidation legislation as of 1 August 2003. All entities within the group are party to both Tax Sharing and Funding Agreements (TSA and TFA). The TSA, in the opinion of the Directors, limits the joint and several liability of each entity in the case of default by New Hope Corporation Limited. The TFA provides the basis to account for compensation for tax related items transferred between the subsidiaries and the head entity of the group. The head entity, New Hope Corporation Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidation group continues to be a stand alone tax payer in its own right. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under TFAs with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the TFA are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. Petroleum Resource Rent Tax (PRRT) The Group accounts for current and deferred tax arising from PRRT in accordance with the requirements in relation to income tax as detailed above. New Hope Corporation Limited, as head company of the income tax consolidated group has made a PRRT consolidation election and as such the Group currently includes three PRRT consolidated groups at 31 July 2016 (two at 31 July 2015). The Group has accounted for its PRRT tax balances in accordance with the stand alone taxpayer method in alignment with its TFA. a. Income Tax Expense Income tax - Current tax expense Income tax - Deferred tax benefit Income tax - Adjustments for current tax of prior periods Petroleum resource rent tax - Deferred tax expense/(benefit) Effective tax rate Effective tax rate (excluding PRRT) 2016 $000 2015 $000 - (19,827) (4,179) 3,574 (20,432) 18,692 (17,349) (3,270) (961) (2,888) 27.6% 32.4% 11.7% 7.8% 38 38 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 5. INCOME TAXES (continued) b. Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax Income tax calculated at 30% (2015 - 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-taxable entities Effect of previously unrecognised capital losses Gain on sale of available for sale financial assets Impairment of available for sale financial assets Impairment of goodwill Income tax on petroleum resource rent tax Sundry items Over provided in prior year Petroleum resource rent tax (benefit)/expense Income tax benefit c. Tax expense relating to items of other comprehensive income Cash flow hedges (note 22) d. Reconciliation of income tax payable/(receivable) Loss before income tax Income tax calculated at 30% (2015 - 30%) Tax effected adjustments to taxable income: Non-taxable entities Non temporary differences Non assessable income Gain on sale of investments available for sale Impairment of available for sale financial assets Impairment of goodwill Other non temporary items Temporary differences: Taxable income at 30% (2015 - 30%) Tax losses generated Current tax liability Less: Tax instalments paid Tax (refundable)/payable - 2016 $000 2015 $000 (74,112) (24,709) (22,234) (7,413) (104) (1,500) - 1,493 - (1,072) 205 (23,212) (794) 3,574 (20,432) (7,606) (7,606) 543 - (345) 5,267 1,247 288 (220) (633) (1,294) (961) (2,888) 6,701 6,701 (74,112) (24,709) (22,234) (7,413) (104) 543 (1,500) - 1,493 - 205 13,575 (8,565) (8,565) - (1,486) (1,486) - (345) 5,267 1,247 (220) 19,575 18,654 - 18,654 (13,922) 4,732 39 39 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016 s e i t i t n E d e l l o r t n o C d n a d e t i i m L n o i t a r o p r o C e p o H w e N s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 6 1 0 2 y l u J 1 3 d e d n e r a e y e h t r o f 0 0 0 $ ' s e i t i l i b a i l x a t d e r r e f e D - ) 2 6 6 , 9 ( ) 7 3 9 , 1 9 ( - ) 4 9 6 ( ) 9 1 6 , 6 ( 9 1 2 , 1 - - ) 4 3 9 , 3 ( - - ) 7 2 6 , 1 1 1 ( - ) 5 0 5 , 7 ( ) 0 0 4 , 9 8 ( - - ) 2 8 3 ( ) 3 3 9 , 6 ( - - - ) 2 6 8 , 3 ( ) 2 8 0 , 8 0 1 ( s t e s s a 0 0 0 $ ' x a t d e r r e f e D 1 5 6 , 9 2 - - - - - - 9 3 6 1 8 4 , 1 1 - 1 8 7 , 6 1 0 0 5 , 1 2 5 0 , 0 6 6 9 6 - 4 7 5 , 3 3 4 9 , 6 6 3 7 , 8 1 - - 4 7 4 0 7 4 5 8 , 8 5 1 3 , 8 6 9 8 , 7 4 t e N 0 0 0 $ ' 1 5 6 , 9 2 ) 2 6 6 , 9 ( ) 7 3 9 , 1 9 ( - ) 4 9 6 ( ) 9 1 6 , 6 ( 9 3 6 9 1 2 , 1 1 8 4 , 1 1 ) 4 3 9 , 3 ( 1 8 7 , 6 1 0 0 5 , 1 ) 5 7 5 , 1 5 ( 6 3 7 , 8 1 ) 9 0 8 , 6 ( ) 0 0 4 , 9 8 ( 4 7 5 , 3 2 1 9 , 6 ) 3 3 9 , 6 ( ) 2 8 3 ( 4 0 7 4 5 8 , 8 ) 7 5 7 , 3 ( 5 1 3 , 8 ) 6 8 1 , 0 6 ( 0 0 0 $ ' s s e n s u b i n i d e r i u q c A n o i t a n b m o c i 6 0 9 , 8 ) 6 8 1 , 0 1 ( - - - - ) 9 6 6 ( 3 1 1 6 3 8 , 1 - - - - - - - - - - - - - - - n i i d e s n g o c e R n i i d e s n g o c e R 1 t a e c n a l a b t e N ) d e u n i t n o c ( S E X A T E M O C N I . 5 s e c n a l a b x a t d e r r e f e D . e I C O 0 0 0 $ ' - - - - ) 6 0 6 , 7 ( - - - - - - ) 6 0 6 7 ( , - - - - 1 0 7 , 6 - - - - - - 1 0 7 , 6 0 0 0 $ ' s s o l r o t i f o r p 0 0 0 $ ' t s u g u A 9 0 0 , 2 3 3 3 , 7 ) 7 3 5 , 2 ( ) 4 7 5 , 3 ( - 4 1 3 0 7 2 , 2 ) 8 7 1 ( 1 9 7 ) 7 7 1 ( 5 6 5 , 8 1 0 4 , 1 7 1 2 , 6 1 8 4 9 , 2 7 0 4 , 9 1 ) 8 3 6 , 3 ( 0 6 9 - ) 3 ( 2 5 2 ) 0 0 2 ( 2 9 2 ) 2 0 7 ( ) 6 0 0 , 1 ( 0 1 3 , 8 1 0 4 6 3 7 , 8 1 ) 9 0 8 6 ( , ) 0 0 4 , 9 8 ( 4 7 5 , 3 2 1 9 , 6 ) 3 3 9 6 ( , ) 2 8 3 ( 4 0 7 4 5 8 , 8 ) 7 5 7 3 ( , 6 1 2 , 8 9 9 ) 6 8 1 , 0 6 ( 8 8 7 , 5 1 ) 6 1 2 , 6 2 ( ) 2 6 7 , 5 8 ( 1 1 2 4 1 6 , 2 ) 5 8 1 , 7 ( ) 9 7 3 ( 4 0 9 2 6 5 , 8 ) 5 5 0 , 3 ( 1 2 3 , 9 ) 7 9 1 , 5 8 ( i i n o s v o r p n o i t a t i l i b a h e r e t i s e n M i 6 1 0 2 i t n e m p u q e d n a t n a p l , y t r e p o r P n o i t a r o p x e l d e s i l a t i p a C x a t t n e r e c r u o s e r l m u e o r t e p n o g n s i r i A i i n o s v o r p s e s n e p x e d e u r c c A s t i f e n e b e e y o p m E l r e h t O s e s s o l x a t e u n e v e R s e s s o l l a t i p a C n o i t a t i l i b a h e r e t i s e n M i 5 1 0 2 i t n e m p u q e d n a t n a p l , y t r e p o r P n o i t a r o p x e l d e s i l a t i p a C l e b a v e c e r i s t n u o c c a r e h t O s e i r o t n e v n I s e g d e h w o l f h s a C x a t t n e r e c r u o s e r l m u e o r t e p n o g n s i r i A l e b a v e c e r i s t n u o c c a r e h t O s e i r o t n e v n I s e g d e h w o l f h s a C s e s n e p x e d e u r c c A s t i f e n e b e e y o p m E l s e s s o l x a T r e h t O 40 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 5. INCOME TAXES (continued) Deferred tax balances (continued) e. Accounting policy Deferred tax assets are recognised for the deductible temporary differences and unused tax losses only when 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 controlled entities where the company is able to control the timing of the reversal of the temporary difference 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. f. Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items Tax losses (Capital) PRRT (net of income tax) Temporary differences associated with available for sale financial assets 2016 $000 2015 $000 9,549 57,702 7,717 74,968 10,068 17,586 7,409 35,063 Significant judgements and estimates The deferred taxation benefits will only be obtained if, assessable income is derived of a nature and of an amount sufficient to enable the benefit from the deductions to be realised, conditions for deductibility imposed by the law are complied with, and no changes in tax legislation adversely affect the realisation of the benefit from the deductions. The recognised deferred tax assets include carried forward transferred losses from previous acquisitions and current period Group revenue losses. The deferred tax assets will be recoverable against future taxable income based on the current forecasts for the Group. The deferred tax assets will be recoverable against future taxable income over the estimated life of the Group’s assets based on the current forecasts. Key judgements and estimates underpinning these forecasts are the estimated cash flows and reserves and resources detailed in note 11. Revenue tax losses do not expire and are deemed to be low risk of denial of utilisation. Capital tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is uncertain when future capital gains will be available against which the Group can utilise the benefits from these assets. 41 41 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 6. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT AFTER INCOME TAX Loss after income tax Depreciation and amortisation Non-cash employee benefit expense - share based payments Impairment of non current assets Impairment of goodwill Impairment of available for sale financial assets Impairment of oil producing assets Impairment of oil exploration assets Net foreign exchange gain Net profit on sale of held for sale assets Net profit/(loss) on sale of non-current assets Interest income Income taxes paid Income tax benefit Changes in operating assets and liabilities (Increase)/decrease in receivables* (Increase)/decrease in other receivables* (Increase)/decrease in inventories* (Increase)/decrease in prepayments* (Increase)/decrease in other assets* Increase/(decrease) in payables* Increase/(decrease) in provisions and employee entitlements* Net cash provided by operating activities - 2015 $000 (21,821) 61,181 167 24,267 4,157 17,558 51,456 - (2,881) (1,151) (26) (35,421) (6,929) (2,888) (33) 92 (1,094) (182) 546 (84) 1,541 88,455 2016 $000 (53,680) 74,905 123 - - 4,978 15,029 13,117 (2,107) - 154 (17,549) (2,104) (20,432) (20,729) (2,954) 16,559 (475) - 2,748 (855) 6,728 *The above net movement excludes the increase associated with the acquisition of the Bengalla joint operation interest. Non-cash investing and financing activities Acquisition of plant and equipment by means of finance leases 15,845 - 7. EARNINGS PER SHARE Accounting policy Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus element in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 42 42 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 7. EARNINGS PER SHARE (continued) a. Basic earnings/(loss) per share attributable to ordinary equity holders of the Company b. Diluted earnings/(loss) per share attributable to ordinary equity holders of the Company c. Reconciliation of adjusted profits Loss attributable to the ordinary equity holders of the Company d. Weighted average number of shares used as the denominator Weighted average number of ordinary shares (basic) Rights Weighted average number of ordinary shares (diluted) Earnings per share (cents) 2016 (6.5) (6.5) 2015 (2.60) (2.60) Basic and Diluted 2016 $000 2015 $000 (53,679) (21,820) Consolidated 2016 2015 831,050,306 438,136 831,488,442 830,999,449 167,423 831,166,872 e. Rights granted to employees are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The rights have not been included in the determination of basic earnings per share. Details relating to the rights are set out in note 30. 8. RECEIVABLES Accounting policy Trade receivables are recognised initially at fair value and subsequently at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than forty five days from the date of recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value, and subsequently at amortised cost less provisions for doubtful debts. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for doubtful debts) is used when there is objective evidence that the Group will not be able to collect all of the amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. 43 43 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 8. RECEIVABLES (continued) Current Trade receivables (a) Less: Provision for doubtful debts Other receivables (b) Prepayments Non-current Prepayments Other receivables - 2015 $000 26,108 - 13,454 3,734 43,296 213 1,816 2,029 2016 $000 60,659 (6,377) 24,209 4,763 83,254 - 1,200 1,200 a. Recoverable receivable As of 31 July 2016, trade receivables past due but not impaired were $14,251,000 (2015: $6,498,000). This receivable relates solely to invoices issued by Queensland Bulk Handling Pty Ltd (QBH) (a wholly owned subsidiary of New Hope Corporation Limited) to Peabody (Willkie Creek) Pty Limited for coal port services. The amounts invoiced to Peabody were the subject of an action in the Supreme Court of Queensland brought by QBH. An initial decision in favour of QBH was handed down on 27 February 2015. A subsequent appeal by Peabody was heard on 30 July 2015 and was dismissed. QBH commenced a further action against Peabody in the Supreme Court of Queensland on 8 December 2015. Subsequent to 31 July 2016, an agreed settlement (in principle conditional upon the execution of a Settlement Deed which is currently being negotiated) for an amount of $12,950,000 plus GST has been achieved. A doubtful debt expense of $6,377,000 (refer note 4) has been recognised against the total amount initially invoiced and recognised as a receivable in order to bring the amount outstanding at 31 July 2016 in line with the in principle settlement amount. While the amount is past due, it is considered recoverable at year end. b. Other receivables These amounts relate to long service leave payments recoverable from the Coal Mining Industry Long Service Leave Fund, diesel fuel rebates receivable, GST refunds receivable and security deposits. None of these receivables are impaired or past due but not impaired. c. Foreign exchange and interest rate risk Information about the Group's exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 23. In both the current and prior year all non-current receivables are non-interest bearing. d. Fair value and credit risk Due to the short term nature of current receivables, their carrying value is assumed to approximate their fair value. The fair value of non- current receivables approximates their carrying amounts. Information about the Group's exposure to fair value and credit risk in relation to trade and other receivables is provided in note 23. 9. ACCOUNTS PAYABLE Accounting policy These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and usually paid within forty five days of recognition. Trade payables and accruals 2016 $000 2015 $000 64,604 42,512 44 44 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 10. INVENTORIES Accounting policy Coal stocks are valued at the lower of cost and net realisable value in the normal course of business. Cost comprises the weighted average costs of direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Inventories of consumable supplies and spare parts expected to be used in production are valued at weighted average cost. Coal stocks Self-generating and regenerating assets Raw materials and stores at cost 2016 $000 26,818 2,076 24,624 53,518 2015 $000 33,482 1,305 22,826 57,613 Inventory expense a. Coal stocks recognised as an expense during the year ended 31 July 2016 amounted to $211,394,000 (2015 - $200,357,000). The cost of inventories recognised includes $79,000 resulting from the reversal of write-downs to net realisable value in the prior period. Previous write-downs have been reversed as a result of increased selling prices in the current market. Raw materials recognised as an expense during the year ended 31 July 2016 amounted to $72,310,000 (2015 - $58,802,000). 45 45 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 11. PROPERTY, PLANT AND EQUIPMENT Accounting policy Property, plant and equipment is stated at historical cost less applicable depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which it is incurred. Depreciation is calculated so as to write off the cost of each item of property, plant and equipment over its expected economic life to the consolidated entity. Each item's useful life has due regard both to its own physical life limitations and to present assessments of economically recoverable resources of the mine property at which the item is located. Estimates of residual values and remaining useful lives are made on an annual basis. Straight line method is predominately used. The expected useful life of plant and equipment is 4 to 20 years, buildings is 25 to 40 years and motor vehicles is 4 -8 years. Land is not depreciated. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. Mine properties, development costs, reserves and leases and oil producing assets Development expenditure incurred by the consolidated entity is accumulated separately for each area of interest in which economically recoverable mineral and oil resources have been identified to the satisfaction of the Directors. Direct development expenditure, pre-operating start-up costs and an appropriate portion of related overhead expenditures are capitalised as development costs up until the relevant area of interest is ready for use. The cost of acquiring mineral and oil reserves and resources are capitalised on the statement of financial position as incurred. Mining reserves, leases and development costs are amortised over the estimated productive life of each applicable mine on either a unit of production basis or years of operation basis, as appropriate. Amortisation commences when an area of interest is ready for use. Oil producing assets are amortised on a unit of production basis. The method uses the actual costs of the asset to date plus all its projected future costs. Amortisation commences when an area of interest is ready for use. Deferred stripping costs The Group does not recognise any deferred stripping costs. Based on the nature of the Group's mining operations and the stripping ratio for the components of its operations, the recognition criteria of a deferred stripping asset are not satisfied. Further, it is anticipated that the In the operations will maintain a consistent stripping ratio at the component level and as such no overburden in advance should be recognised. event that a stripping campaign is undertaken in the future a deferred stripping asset will be recognised at that time and amortised in accordance with the requirements of IFRIC 20. An asset will be recognised for stripping activity where the following criteria are met: h h h It is probable that future economic benefits (improved access to the ore body) associated with the stripping activity will flow to the entity; The entity can identify the component of the ore body for which access has been improved; and The costs relating to the stripping activity associated with that component can be measured reliably. Impairment 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 cost to sell and its value in use. For the purposes of assessing impairment under value in use testing, 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). Annual assessments of impairments reversals are undertaken. 46 46 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 11. PROPERTY, PLANT AND EQUIPMENT (continued) Significant judgements and estimates - impairment of assets (a) Impairment assessment All property, plant and equipment allocated to cash generating units (CGU’s) containing goodwill must be tested for impairment at the CGU level on an annual basis. Other property, plant and equipment assets must also be tested for impairment when impairment indicators are identified. Judgement is involved in assessing whether there are indicators of impairment of property, plant and equipment including in relation to the impact of events or changes in circumstances. For coal mining and oil production assets, key judgements include external factors such as forecast commodity prices and foreign exchange rates. Judgement is also required in relation to the estimation of coal and oil reserves and resources (refer (b) below for further information in relation to the estimation of coal reserves and resources). Where the recoverable amounts of the Group’s CGU’s are tested for impairment using analyses of discounted cash flows, the resulting valuations are also sensitive to changes in estimates of long-term commodity prices, production timing and recovery rates, exchange rates, operating costs, reserve and resource estimates, closure costs and discount rates. Estimates in respect of the timing of project expansions and the cost to complete asset construction are also critical to determining the recoverable amounts for cash-generating units (refer (c) below in relation to specific considerations related to Acland Stage 3 approvals). (b) Estimation of coal reserves and resources The Group estimates its coal reserves and 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 of December 2012 (the JORC code, which is produced by the Australasian Joint Ore Reserves Committee). The estimation of reserves and resources requires judgment to interpret available geological data and then to select an appropriate mining method and establish an extraction schedule. It also requires assumptions about future commodity prices, exchange rates, production costs, recovery rates and discount rates and, in some instances, the renewal of mining licences. There are many uncertainties in the estimation process and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in coal reserves could have an impact on: the calculation of depreciation, amortisation and impairment charges; the timing of the payment of closedown and restoration costs; and the recovery of deferred tax assets. Changes in coal resources could have an impact on the recoverability of Exploration and evaluation costs capitalised (refer note 13). (c) New Acland Stage 3 approvals There remain a number of uncertainties associated with the approvals timeline and ultimate conditionality of the New Acland Stage 3 project. The lengthy duration of the approval process may result in a delay to the commencement of stage3 operations. The financial statements have been prepared on the basis of a reasonable expectation the Group will be successful in securing approval for the Acland Stage 3 expansion during the next financial year. If this was not to occur, it could impact the assessment of recoverable amount for property, plant and equipment at the New Acland site as well as the calculation of depreciation, amortisation and rehabilitation provisions. 47 47 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016 l a t o T 0 0 0 $ ' 4 6 9 , 0 3 9 ) 0 5 4 , 4 6 3 ( 4 1 5 , 6 6 5 - 7 2 1 ) 0 7 1 ( ) 2 1 3 ( 0 3 4 , 1 7 ) 3 2 7 , 5 7 ( ) 3 5 7 , 9 5 ( ) 6 2 9 , 9 9 4 ( 3 1 1 , 2 0 5 9 3 0 , 2 0 0 , 1 9 8 6 , 6 8 8 7 7 , 1 1 2 3 5 , 9 2 8 - ) 9 2 5 ( ) 6 2 1 ( ) 0 3 8 ( ) 9 2 0 , 5 1 ( ) 3 8 1 , 3 7 ( 3 5 5 , 8 2 9 , 1 ) 8 3 1 , 8 8 5 ( 5 1 4 , 0 4 3 , 1 0 0 0 $ ' 5 8 7 , 1 3 - 5 8 7 , 1 3 - ) 0 7 1 ( 4 2 4 , 5 1 ) 7 6 2 , 3 2 ( - - - 2 7 7 , 3 2 - 2 7 7 , 3 2 1 5 4 , 6 2 3 3 , 7 3 - ) 2 1 4 , 3 1 ( - ) 6 2 1 ( - - - 7 1 0 , 4 5 - 7 1 0 , 4 5 r e d n u t n a l P n o i t c u r t s n o c 0 0 0 $ ' s t e s s A 3 1 1 , 4 9 ) 9 3 0 , 3 ( 4 7 0 , 1 9 ) 6 1 6 ( 7 2 1 8 0 2 , 1 1 - - ) 3 9 9 , 2 ( ) 6 5 4 , 1 5 ( 2 3 8 , 4 0 1 ) 8 8 4 , 7 5 ( 4 4 3 , 7 4 7 7 2 , 4 - 3 8 4 , 1 1 1 9 8 1 - - ) 3 9 5 , 3 ( ) 9 2 0 , 5 1 ( 2 8 7 , 0 2 1 ) 0 1 1 , 6 7 ( 2 7 6 , 4 4 0 0 0 $ ' 8 3 7 , 3 6 ) 5 5 6 , 0 5 ( 3 8 0 , 3 1 0 0 0 $ ' 3 1 8 , 9 ) 0 8 1 8 ( , 3 3 6 , 1 t n e m p o e v e D l s e s a e L 7 3 9 , 8 0 3 5 - - - - - - - - - - ) 2 7 0 , 4 ( ) 3 8 4 ( 5 7 6 , 2 7 ) 7 2 7 , 4 5 ( 8 4 9 , 7 1 1 9 1 , 4 2 3 9 , 7 1 - 4 5 3 , 1 - - - - 3 4 3 , 0 1 ) 3 6 6 8 ( , 0 8 6 , 1 - - ) 0 3 5 ( 2 0 6 7 6 2 , 3 3 6 - - - 0 0 0 $ ' 0 8 4 , 3 7 5 ) 3 4 8 , 9 9 2 ( 7 3 6 , 3 7 2 d n a t n a P l t n e m p u q E i 3 0 7 , 3 2 1 6 6 , 0 2 - - ) 2 1 3 ( ) 0 0 4 , 1 2 ( ) 8 8 5 , 1 5 ( 2 3 5 , 7 1 6 ) 1 3 8 , 2 7 3 ( 1 0 7 , 4 4 2 0 0 7 , 9 3 6 5 9 , 6 5 1 7 3 2 9 3 7 , 1 1 - - ) 8 6 ( - 0 0 0 $ ' 6 2 6 , 1 1 ) 4 5 9 1 ( , 2 7 6 , 9 8 6 2 2 2 , 3 - - - ) 7 8 4 ( ) 7 6 8 , 2 ( 6 1 9 , 4 1 ) 8 0 3 5 ( , 8 0 6 , 9 0 1 - - 1 3 2 - - - - i g n n m i ) 3 8 8 , 7 ( ) 7 1 7 , 0 1 ( ) 8 3 2 , 0 5 ( ) 7 4 4 ( 2 5 1 , 6 9 ) 0 1 6 , 2 6 ( 2 4 5 , 3 3 2 8 6 , 3 4 6 ) 0 8 3 , 9 1 ( 2 0 3 , 4 2 6 6 9 0 , 6 2 8 ) 9 6 0 , 3 2 4 ( 7 2 0 , 3 0 4 8 4 7 5 1 , 5 1 ) 5 5 7 5 ( , 2 0 4 , 9 i g n n M i 0 0 0 $ ' 9 0 4 , 6 4 1 ) 9 7 7 ( 0 3 6 , 5 4 1 0 6 5 , 1 1 - - - - - ) 0 3 1 ( 9 6 9 , 7 5 1 ) 9 0 9 ( 0 6 0 , 7 5 1 8 5 ) 1 0 1 ( 7 7 5 6 2 9 , 4 1 - - ) 2 6 7 ( - ) 5 0 3 ( 7 6 6 , 2 7 1 ) 4 1 2 , 1 ( 3 5 4 , 1 7 1 ) 3 1 e t o n ( n o i t a u a v e l d n a n o i t a r o p x E m o r f l s r e f s n a r T n o i t a s i t r o m a / n o i t a c e r p e d i l d e t a u m u c c A 4 1 0 2 t s u g u A 1 t A t s o C 5 1 0 2 y l u J 1 3 d e d n e r a e Y t n u o m a k o o b t e N ) t u o ( / n i s r e f s n a r T s n o i t i d d A ) 4 2 e t o n ( a l l a g n e B r e h t O - - s s e n s u b i f o n o i t i s u q c A i s s e n s u b i f o n o i t i s u q c A i ) t u o ( / n i s r e f s n a r T s n o i t i d d A n o i t a s i t r o m a / n o i t a c e r p e d i l d e t a u m u c c A 6 1 0 2 y l u J 1 3 d e d n e r a e Y t n u o m a k o o b t e N e s n e p x e n o i t a s i t r o m a / n o i t a c e r p e D i s t e s s a f o t n e m r i a p m I s t e s s a f o l a s o p s D i 5 1 0 2 y l u J 1 3 t A t s o C ) 3 1 e t o n ( n o i t a u a v e l d n a n o i t a r o p x E o t l s r e f s n a r T ) 2 1 e t o n ( l i s e b g n a t n I o t s r e f s n a r T ) 2 1 e t o n ( l i s e b g n a t n I o t s r e f s n a r T e s n e p x e n o i t a s i t r o m a / n o i t a c e r p e D i s t e s s a f o t n e m r i a p m I s t e s s a f o l a s o p s D i 6 1 0 2 y l u J 1 3 t A t s o C n o i t a s i t r o m a / n o i t a c e r p e d i l d e t a u m u c c A t n u o m a k o o b t e N 48 s e i t i t n E d e l l o r t n o C d n a d e t i i m L n o i t a r o p r o C e p o H w e N s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 6 1 0 2 y l u J 1 3 d e d n e r a e y e h t r o f g n i c u d o r P l i O e n M i d n a s e v r e s e R i g n n M i d n a d n a L - n o N s g n d i l i u B d n a d n a L s g n d i l i u B ) d e u n i t n o c ( T N E M P U Q E D N A T N A L P I , Y T R E P O R P . 1 1 e t o N New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 11. PROPERTY, PLANT AND EQUIPMENT (continued) Finance leases Accounting policy Plant, fixtures and motor vehicles includes the following amounts where the Group is a lessee under a finance lease (refer to note 18 for further details). Leasehold equipment Cost Accumulated depreciation 2016 $000 15,845 (1,346) 14,499 2015 $000 - - - Significant judgements and estimates The Group has made significant judgements and estimates in relation to the recoverability of the coal to liquids facility proof of concept plant and oil producing assets and associated goodwill. Impairment charges to property, plant and equipment are as follows: Land and buildings (non-mining) (a) Plant, fixtures and motor vehicles (a) Oil producing assets (b) 2016 $000 - - 15,029 15,029 2015 $000 2,867 21,400 51,456 75,723 (a) Impairment of land and buildings (non-mining) and plant In 2015, it was evident that the carrying value of the proof of concept plant exceeded the recoverable amount of the plant and as such a decision was taken to fully impair the carrying value of the asset. (b) Impairment of oil producing assets and associated goodwill The Group has determined that due to the continued significant decline in global oil prices there is an indicator that the carrying value of certain oil producing assets are impaired. The Group has classified its Cooper Basin assets as separate Cash Generating Units (CGU) on a per field basis and has measured the recoverable amount of each CGU using the Fair value less cost of disposal (FVLCD) method with all fair value measurements categorised as Level 3 in the fair value hierarchy. All CGUs are included in the Oil and gas segment. The Group has estimated the future cash flows of each CGU making assumptions in respect of key variables including: economically recoverable reserves, future production profiles, commodity prices, foreign exchange rates, operating costs and future development costs necessary to produce the reserves. The commodity price and foreign exchange assumptions have been based on consensus market data in the range of oil prices of USD41-USD85 (2015: USD62-USD91) (before escalation) and AUD/USD exchange rates of 0.72-0.75 (2015: 0.75-0.93). The future cashflows have been discounted using an after tax discount rate of 10% (2015: 10%). The recoverable amount and impairment loss calculated under the FVLCD method of the CGUs determined to be impaired are: 2015 2016 Recoverable amount $000 6,901 1,383 Impairment Recoverable amount $000 12,869 6,719 loss $000 8,342 5,673 Impairment loss $000 51,410 1,545 (1,097) - 7,187 1,014 - 15,029 (277) - 19,311 1,613 1,045 55,613 Cooper Basin PL98 Cooper Basin PL214 Cooper Basin PL24-26, 35, 36,62, 76-79, 82, 87, 105, 107, 109, 133, 149, 175, 181, 182, 189 and 302 Cooper Basin PL15 49 49 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 12. INTANGIBLES Accounting policy IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised are external direct costs of materials and services. Amortisation is calculated on a straight line basis over periods generally ranging from 3 to 5 years. Water rights and Mining information The Group benefits from water rights associated with its mining operations through the efficient and cost effective operation of the mine. These rights are amortised on a straight line basis over the life of the mine. The value of exploration, pre-feasibility and feasibility costs necessary for regulatory, reporting and internal control purposes have been recognised as a mining information intangible asset. The total value is amortised over the estimated life of the mine. Goodwill Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Goodwill is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an is allocated to cash-generating units for the purpose of entity include the carrying amount of goodwill relating to the entity sold. Goodwill impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Impairment 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. Refer to note 11 for details of impairment testing. Goodwill impairments are not reversible. At 1 August 2014 Cost Accumulated amortisation and impairment Net book amount Year ended 31 July 2015 Additions Transfers in/(out) (note 11) Impairment of assets Amortisation charge At 31 July 2015 Cost Accumulated amortisation and impairment Net book amount Year ended 31 July 2016 Additions Acquisition of business - Bengalla (note 24) Transfers in/(out) (note 11) Amortisation charge At 31 July 2016 Cost Accumulated amortisation and impairment Net book amount Software $'000 Goodwill $'000 Water rights $'000 Mining information $'000 22,024 - 22,024 - - (4,157) - 22,024 (4,157) 17,867 - - - - 22,024 (4,158) 17,866 12,853 (9,996) 2,857 264 170 - (1,426) 13,224 (11,359) 1,865 38 40 126 (1,027) 13,428 (12,386) 1,042 50 - - - - - - - - - - - 6,560 - (110) 6,560 (110) 6,450 - - - - - - - - - - - 34,900 - (585) 34,900 (585) 34,315 Total $'000 34,877 (9,996) 24,881 264 170 (4,157) (1,426) 35,248 (15,516) 19,732 38 41,500 126 (1,722) 76,912 (17,239) 59,673 50 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 12. INTANGIBLES (continued) Critical estimate - Goodwill impairment assessment Goodwill cost relates to the acquisition of Queensland Bulk Handling Pty Ltd ($5,596,000) and Northern Energy Corporation Limited (NEC) ($12,271,000). The recoverable amount of the CGU to which NEC goodwill is attributable has been based on FVLCD using a comparable resource transaction multiple multiplied by the resources attributable to this CGU. This assessment is determined under Level 2 of the fair value hierarchy based on observable external market data for reserve and resource transaction multiples, rather than quoted prices. Observable transactions included in the assessment of an appropriate multiple are comparable transactions in the last 3 years for Australian coal exploration projects with the same coal type as the CGU's assets. The estimation of the resources used to determine the recoverable amount requires judgement and assumptions as detailed in note 11. The recoverable amount of the QBH CGU has been based on value in use calculations using a discounted cashflow model. The future cashflows have been discounted using a post tax rate of 10% (31 July 2015: 10%). a. Goodwill impairment There was an impairment of goodwill recognised in the year ended 31 July 2015 of $4,157,000. This impairment related to the goodwill on the Bridgeport acquisition in 2012. Details of the FVLCD impairment assessment are included in note 11. 13. EXPLORATION AND EVALUATION Accounting policy Exploration, evaluation and relevant acquisition costs are accumulated separately for each area of interest. They comprise acquisition costs, direct exploration and evaluation costs and an appropriate portion of related overhead expenditure. Costs are carried forward only if they relate to an area of interest for which rights of tenure are current and such costs are expected to be recouped through successful development and exploitation or from sale of the area. Exploration and evaluation expenditure which does not satisfy these criteria are expensed. Critical judgements in applying the entity's accounting policy Exploration and evaluation expenditure During the year the entity capitalised various items of expenditure to the exploration expenditure asset. The relevant items of expenditure were deemed to be part of the capital cost of developing future mining operations, which will subsequently be amortised over the life of the mine. The key judgement applied in considering whether the costs should be capitalised, is that costs are expected to be recovered through either successful development or sale of the relevant mining interest. Exploration and evaluation at cost Exploration and evaluation - mining reserves acquired Reconciliation Carrying amount at beginning of year Additions Impairment of assets Transfers in/(out) (note 11) Carrying amount at end of year 2016 $000 124,616 257,432 382,048 377,120 17,514 (13,117) 530 382,048 2015 $000 120,219 256,901 377,120 323,816 53,431 - (127) 377,120 Critical estimate - impairment oil exploration assets There are two oil exploration tenements which will shortly be required to commence renewal processes. Due to the prospectivity of these oil exploration tenures it is currently anticipated that a full relinquishment will arise in respect of these tenures and management have no intention of further exploring or development the resource. As such, it has been determined that the recoverable amount for these tenures is nil and a full impairment has been recognised for the carrying value of $8,998,000. In addition, there are two further Victorian oil exploration tenures which are subject to government moratorium until at least 2020. With the uncertainty of future exploitation of these tenures a full impairment of $4,119,000 has been recognised in respect of the exploration asset. 51 51 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 14. PROVISIONS Accounting policy Short-term employee benefit obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave expected to be settled within twelve months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period. These are measured at the amounts expected to be paid when the liabilities are settled. The liability of annual leave and accumulating sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within twelve months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on a high quality corporate bonds rate with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Restoration, rehabilitation and environmental expenditure Provisions are raised for restoration, rehabilitation and environmental expenditure as soon as an obligation exists, with the cost being charged to profit or loss in respect of ongoing rehabilitation. Where the obligation relates to decommissioning of assets and restoring the sites on which they are located, the costs are carried forward in the value of the asset and amortised over its useful life. Provisions are measured at the present value of expected future cash outflows with future cash outflows reassessed on a regular basis. The present value is determined using an appropriate discount rate. The obligations include profiling, stabilisation and revegetation of the completed area, with cost estimates based on current statutory requirements and current technology. 2016 Current Non-current 2015 Current Non-current Employee benefits Rehabilitation Total $000 $000 $000 34,160 5,269 39,429 27,415 3,351 30,766 11,573 86,096 97,669 4,847 56,346 61,193 45,733 91,365 137,098 32,262 59,697 91,959 52 52 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 14. PROVISIONS (continued) a. Mining restoration and rehabilitation Movements Carrying amount at beginning of year Provision capitalised/(written down) Provision credited to profit and loss Provision arising on acquisition Charged to profit and loss - unwinding of discount Carrying amount at end of year - 2015 $000 52,486 8,624 (2,348) - 2,431 61,193 2016 $000 61,193 (3,118) (578) 37,982 2,190 97,669 Significant estimate - determination of coal reserves estimates and rehabilitation costs Provision is made for rehabilitation, restoration and environmental costs when the obligation arises, based on the net present value of estimated future costs. The ultimate cost of rehabilitation and restoration is uncertain, and management uses its judgment and experience to provide for these costs over the life of the operations. The Group makes estimates about the future cost of rehabilitating tenements which are currently disturbed, based on legislative requirements and current costs. Cost estimates take into account past experience and expectations of future events that are expected to alter past experiences. Any changes to legislative requirements could have a significant impact on the expenditure required to restore these areas. The estimation of coal reserves and resources are also a key judgement that affects the timing of the payment of closedown and restoration costs as detailed in note 11. b. Employee benefits Long service leave obligations expected to be settled after 12 months 2016 $000 10,478 2015 $000 7,187 The current provision for employee benefits includes accrued annual leave, vested sick leave and long service leave for all unconditional settlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payment in certain circumstances. The entire amount is presented as current, since the group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. 15. CASH AND CASH EQUIVALENTS Accounting policy Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, excluding funds on deposit for which there is no short term identified use in the operating cash flows of the Group. Cash at bank and on hand 2016 $000 2015 $000 91,162 24,789 53 53 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 15. CASH AND CASH EQUIVALENTS (continued) a. Cash at bank and on hand Cash at bank and on hand includes deposits for which there is a short term identified use in the operating cash flows of the Group, and attracts interest at rates between 0% and 1.9% (2015 - 0% to 2.93%). b. Risk exposure Information about the Group's exposure to foreign exchange risk and credit risk is detailed in note 23. 16. HELD TO MATURITY INVESTMENTS Accounting policy Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. Held to maturity investments are carried at amortised cost using the effective interest method. Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. Such assets are impaired and impairment losses incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition (a "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Term Deposits 2016 $000 116 2015 $000 1,040,480 The term deposits are held to their maturity of less than one year and carry a weighted average fixed interest rate of 2.44% (2015 - 2.77%). Information about the Group's exposure to credit risk is Due to their short-term nature the carrying value is assumed to approximate fair value. disclosed in note 23. 17. AVAILABLE FOR SALE FINANCIAL ASSETS Accounting policy Available for sale financial assets, comprising principally marketable securities, are non-derivatives that are either designated in this category or not classified in any other category. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Available for sale financial assets are initially recognised at fair value. Unrealised gains and losses arising from changes in the fair value of non- monetary securities classified as available for sale are recognised in equity in the available for sale investments revaluation reserve. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. Such assets are impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. If there is objective evidence of impairment of available for sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. 54 54 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 17. AVAILABLE FOR SALE FINANCIAL ASSETS (continued) Listed equity securities Unlisted equity securities - 2015 $000 7,983 3 7,986 2016 $000 3,361 3 3,364 During the year equity securities held were impaired by $4,622,000 (2015 - $17,558,000). In addition $356,000 was transferred from reserves to profit or loss. Critical judgements in applying the accounting policy In the 2016 financial statements, the Group made a significant judgement about the impairment of one of its available for sale financial assets. As a result of a prolonged decline in the fair value of the security it was considered to be impaired and a loss recognised in profit and loss. 18. LEASE LIABILITIES Accounting policy 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. 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 the income statement on a straight line basis over the period of the lease. a. Secured - finance lease liabilities Current Non-current 2016 $000 2,272 12,588 14,860 2015 $000 - - - The group leases various plant and equipment with a carrying amount of $14,499,000 (2015: $nil) under finance leases expiring within four to five years. Refer to note 11 for further detail on these assets. Commitments in relation to finance lease are payable as follows: Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liability The present value of finance lease liabilities is as follows: Within one year Later than one year but not later than five years Minimum lease payments 2,767 13,653 16,420 (1,560) 14,860 2,272 12,588 14,860 - - - - - - - - Secured liability Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. No other assets are pledged as security for borrowings. Risk exposures Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 23. 55 55 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 19. DERIVATIVE FINANCIAL INSTRUMENTS Accounting policy Forward foreign exchange contracts Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivatives as hedges of highly probable forecast transactions (cash flow hedges). The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged, results in the recognition of a non- financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss. Current assets Forward foreign exchange contracts Current liabilities Forward foreign exchange contracts 2016 $000 2,313 2015 $000 - - 23,144 56 56 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 19. DERIVATIVE FINANCIAL INSTRUMENTS (continued) Instruments used by the Group a. New Hope Corporation Limited and certain controlled entities are parties to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. When the cash flows occur, the Group reclassifies the gain or loss into the income statement. At balance date these contracts represented an asset with a fair value of $2,313,000 (2015 - liability with a fair value of $23,144,000). At balance date the details of outstanding contracts are: Maturity 0 to 6 months 6 to 12 months Sell US Dollars Buy Australian Dollars Average exchange rate 2016 $000 7,297 21,831 29,128 2015 $000 82,116 84,188 166,304 2016 2015 0.68520 0.68709 0.84027 0.80771 b. Credit risk exposures Credit risk also arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. A material exposure arises from forward exchange contracts and the consolidated entity is exposed to loss in the event that counterparties fail to deliver the contracted amount. At balance date $29,128,000 (2015 - $166,305,000) was receivable (AUD equivalents). 20. DIVIDENDS Accounting policy Provision is made for any dividend declared on or before the end of the financial year but not distributed at balance date. a. Ordinary dividend paid 2014 final dividend at 2.00 cents per share - 100% franked (tax rate - 30%) (paid on 4 Nov 2014) 2014 special dividend at 3.50 cents per share - 100% franked (tax rate - 30%) (paid on 4 Nov 2014) 2015 interim dividend at 4.00 cents per share - 100% franked (tax rate - 30%) (paid on 5 May 2015) 2015 final dividend at 2.50 cents per share - 100% franked (tax rate - 30%) (paid on 3 Nov 2015) 2015 special dividend at 3.50 cents per share - 100% franked (tax rate - 30%) (paid on 3 Nov 2015) 2016 interim dividend at 2.00 cents per share - 100% franked (tax rate - 30%) (paid on 3 May 2016) Total dividends paid b. Proposed dividends 2016 $000 - - - 20,776 29,087 16,621 66,484 2015 $000 16,619 29,085 33,240 - - - 78,944 In addition to the above dividends, since the end of the financial year, the Directors have declared a final dividend of 2.0 cents (2015 - 2.5 cents per share final dividend and a 3.5 cents per share special dividend). The dividend is fully franked based on tax paid at 30%. The proposed dividend expected to be paid on 1 November 2016 but not recognised as a liability at year end is $16,621,000 (2015 - $49,860,000). c. Franked dividends The franked portions of the final dividend recommended after 31 July 2016 will be franked out of existing franking credits. Franking credits available for subsequent financial years based on a tax rate of 30% (2015 - 30%) 467,998 497,414 57 57 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 20. DIVIDENDS (continued) Franked dividends (continued) c. The above amounts represent the balances of the franking account as at the end of the financial year, adjusted for franking debits that will arise from the payment/refund of income tax, franking debits that will arise from the payment of dividends recognised as a liability at the reporting date and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $7,123,000 (2015 - $21,369,000). d. Dividend There were no dividend reinvestment plans in operation at any time during or since the end of the financial year. reinvestment plans 21. CONTRIBUTED EQUITY Accounting policy Ordinary shares are classified as equity. deduction net of tax, from the proceeds. The amounts of any capital returns are applied against contributed equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a Ordinary shares a. 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. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. Rights b. Information relating to the New Hope Corporation Employee Performance Rights Share Plan, including details of rights granted, vested and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in note 30. c. Share Capital Issued and paid up capital d. Movements in share capital 2016 No. of shares 831,050,676 2016 $000 95,692 2015 No. of shares 830,999,449 2015 $000 95,444 Date 1 August 2013 1 August 2013 1 December 2013 1 January 2014 31 January 2014 31 July 2014 1 August 2014 31 July 2015 31 July 2015 Details Opening Balance Vesting of performance rights Vesting of performance rights Vesting of performance rights Vesting of performance rights Transfer from SBP reserve to Equity (note 22) Vesting of performance rights Transfer from SBP reserve to Equity (note 22) Balance 4 August 2015 31 July 2016 31 July 2016 Vesting of performance rights Transfer from SBP reserve to Equity (note 22) Balance Number of Shares 830,563,352 151,873 52,317 52,317 113,253 - 66,337 - 830,999,449 51,227 - 831,050,676 Issue Price $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $000 93,342 - - - - 1,777 - 325 95,444 - 248 95,692 Capital risk management e. 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 for 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 adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or source debt to fund growth projects. 58 58 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016 l a t o T 0 0 0 $ 0 0 4 , 7 2 4 6 8 , 5 2 ) 0 1 7 , 7 ( 1 7 ) 6 1 3 , 3 5 ( 0 9 7 , 6 1 8 4 , 4 1 7 6 1 ) 5 2 3 ( 2 3 6 , 6 2 3 6 , 6 3 0 2 , 2 2 ) 4 5 5 , 6 ( ) 8 5 2 ( 7 0 5 , 3 ) 2 5 0 , 1 ( 8 7 4 , 4 2 3 2 1 ) 8 4 2 ( 3 5 3 , 4 2 - - - - - ) 9 2 0 , 6 ( - - ) 9 2 0 , 6 ( ) 9 2 0 , 6 ( - - - - - 0 0 0 $ ) 9 2 0 , 6 ( I ^ C N n o d i a p m u m e r P i - - - 1 7 - - 1 7 - - 1 7 1 7 - - ) 8 5 2 ( - - 0 0 0 $ * R T C F ) 9 2 0 , 6 ( ) 7 8 1 ( - - - - ) 9 2 0 , 6 ( ) 7 8 1 ( 9 4 5 0 0 0 $ - - - - - 9 4 5 7 6 1 ) 5 2 3 ( 1 9 3 1 9 3 - - - - - 1 9 3 3 2 1 ) 8 4 2 ( 6 6 2 ) 5 6 5 ( 0 0 0 $ 4 6 8 , 5 2 ) 0 1 7 , 7 ( - ) 1 7 2 , 8 4 ( 1 8 4 , 4 1 ) 1 0 2 , 6 1 ( - - 0 0 0 $ 2 1 4 , 7 2 - - - - - 2 1 4 , 7 2 - - ) 1 0 2 , 6 1 ( 2 1 4 , 7 2 ) 1 0 2 , 6 1 ( 8 4 8 , 1 2 ) 4 5 5 , 6 ( - 7 0 5 , 3 ) 2 5 0 , 1 ( 8 4 5 , 1 - - - - - - - 2 1 4 , 7 2 2 1 4 , 7 2 - - 8 4 5 , 1 2 1 4 , 7 2 0 0 0 $ 0 9 6 , 4 - - - - ) 5 5 3 ( ) 5 4 0 , 5 ( - - ) 5 5 3 ( ) 5 5 3 ( 5 5 3 - - - - - - - - t n e m y a p d e s a b - e r a h S i g n g d e H n o i t a u a v e R l s t e s s a l a i c n a n i f S F A 0 0 0 $ 3 4 3 , 1 l a t i p a C s t i f o r p - - - - - 3 4 3 , 1 - - 3 4 3 , 1 3 4 3 , 1 - - - - - 3 4 3 , 1 - - 3 4 3 , 1 s e t o N ) c ( 5 5 ) e ( 9 2 ) d ( 1 2 ) c ( 5 5 ) e ( 9 2 ) d ( 1 2 s e i t i t n E d e l l o r t n o C d n a d e t i i m L n o i t a r o p r o C e p o H w e N s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 6 1 0 2 y l u J 1 3 d e d n e r a e y e h t r o f s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T e s n e p x e t n e m y a p d e s a b e r a h S y t i u q e d e t u b i r t n o c o t r e f s n a r T 5 1 0 2 y l u J 1 3 t A e m o c n i i e v s n e h e r p m o c r e h t O x a t d e r r e f e d s s o r g - - n o i t a u a v e R l n o i t a u a v e R l s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T e m o c n i i e v s n e h e r p m o c r e h t O x a t d e r r e f e d s s o r g - - n o i t a u a v e R l n o i t a u a v e R l e s n e p x e t n e m y a p d e s a b e r a h S y t i u q e d e t u b i r t n o c o t r e f s n a r T 6 1 0 2 y l u J 1 3 t A s e v r e s e r f o e s o p r u p d n a e r u t a N s t i f o r p l a t i p a C x a t d e r r e f e d s s o r g i y r a d s b u s i - - t i f o r p t e n o t r e f s n a r T t i f o r p t e n o t r e f s n a r T - l n o i t a s n a r t y c n e r r u C 5 1 0 2 t s u g u A 1 t A x a t d e r r e f e d s s o r g i y r a d s b u s i - - t i f o r p t e n o t r e f s n a r T t i f o r p t e n o t r e f s n a r T - l n o i t a s n a r t y c n e r r u C 4 1 0 2 t s u g u A 1 t A S E V R E S E R . 2 2 59 9 5 . e r u t a n l a t i p a c a f o s t i f o r p e r e w t a h t s t i f o r p i d e n a t e r m o r f d e t a c o l l a s t n u o m a s t n e s e r p e r e v r e s e r i s h T . t s e r e n t i g n i l l o r t n o c - n o N - I C N ^ . e v r e s e r l n o i t a s n a r t y c n e r r u c i n g e r o F - R T C F * NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 22. RESERVES (continued) Available for sale investments revaluation Changes in the fair value of investments classified as available for sale financial assets are taken to this reserve. Amounts are recognised in profit and loss when the associated assets are sold or impaired. Property, plant and equipment revaluation This reserve represents the revaluation arising on the fair value uplift of property, plant and equipment on the initial holding of Queensland Bulk Handling Pty Ltd further to the acquisition of the remaining 50% of this company. Hedging The hedging reserve is used to record the gains and losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 19. Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss. Share based payment reserve The share based payment reserve is used to recognise the fair value of options and rights issued, but not yet exercised. Fair values at grant date are independently determined using the Black-Scholes options 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 volatility of the underlying share, the expected dividend yield and risk free interest rate for the term of the option. Premium paid on non-controlling interest acquisition The premium paid on non-controlling interest acquisition is used to recognise any excess paid on the acquisition of a non-controlling interest in a subsidiary. Foreign currency translation reserve (FCTR) Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 34(a) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. b. Retained profits Carrying amount at beginning of year Net profit/(loss) after income tax Dividends paid (note 20) Carrying amount at end of year 23. FINANCIAL RISK MANAGEMENT 2016 $000 2015 $000 1,750,525 (53,679) (66,484) 1,630,362 1,851,289 (21,820) (78,944) 1,750,525 Accounting policy The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. 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. The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures. Derivatives are used exclusively for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk. 60 60 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 23. FINANCIAL RISK MANAGEMENT (continued) Risk management is carried out in accordance with written policies approved by the Board of Directors. These written policies cover specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of forward exchange contracts and investment of excess liquidity. The Group holds the following financial instruments: Financial assets 2016 Cash and cash equivalents Trade and other receivables Available for sale financial assets Held to maturity investments Derivative financial instruments 2015 Cash and cash equivalents Trade and other receivables Available for sale financial assets Held to maturity investments Other financial assets Financial liabilities 2016 Borrowings Trade and other payables 2015 Trade and other payables Derivative financial instruments Available for Sale Hedging Derivatives Amortised at cost $000 $000 $000 Total $000 - - 3,364 - - 3,364 - - 7,986 - - 7,986 - - - - - - - - - - 2,313 2,313 - - - - - - - - - - 23,144 23,144 91,162 78,491 - 116 - 169,769 24,789 41,009 - 1,040,480 369 1,106,647 14,860 64,604 79,464 42,512 - 42,512 91,162 78,491 3,364 116 2,313 175,446 24,789 41,009 7,986 1,040,480 369 1,114,633 14,860 64,604 79,464 42,512 23,144 65,656 a. Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. The Group is exposed to foreign exchange risk arising from currency exposures to the US dollar. Forward contracts are used to manage foreign exchange risk. Senior management is responsible for managing exposures in each foreign currency by using external forward currency contracts. Contracts are designated as cash flow hedges. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific future transactions. The Group's risk management policy is to hedge up to 65% of anticipated transactions (export coal sales) in US dollars for the subsequent year, up to 57% of anticipated revenue beyond a year but less than two years and up to 50% for revenue beyond two years but less than three years. All hedges of projected export coal sales qualify as "highly probable" forecast transactions for hedge accounting purposes. 61 61 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 23. FINANCIAL RISK MANAGEMENT (continued) a. Market risk (continued) The Group's exposure to foreign currency risk at the reporting date was as follows: Cash and cash equivalents Trade receivables Forward exchange contracts - sell foreign currency (cash flow hedges) Trade payables - 2015 USD $000 3,586 11,299 137,000 11 2016 USD $000 9,135 13,501 20,000 389 Group sensitivity Based on the trade receivables, cash and trade payables held at 31 July 2016, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the Group's post-tax profit for the year would have increased/(decreased) by $2,300,000/($1,882,000) (2015 - $1,588,000/($1,300,000)), mainly as a result of foreign exchange gains/losses on translation of US dollar receivables and cash balances as detailed in the above table. The Group's equity as at balance date would have increased/(decreased) by the same amounts. Based on the forward exchange contracts held at 31 July 2016, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, (2015 - $21,075,000/($17,208,000)). There is no effect on post-tax profits. the Group's equity would have increased/(decreased) by $2,961,000/($2,419,000) (ii) Price risk The Group is exposed to equity securities price risk arising from certain investments held by the Group and classified on the balance sheet as available for sale and held for sale. The majority of the Group's equity investments are publicly traded. The table below summarises the impact of increases/decreases in the financial instrument on the Group's equity as at balance date. The analysis is based on the assumption that the equity instrument had increased/decreased by 10% with all other variables held constant. Index All Ordinaries - 10% increase All Ordinaries - 10% decrease Impact on post-tax profit 2015 2016 $000 $000 - - - - Impact on equity 2016 $000 306 (306) 2015 $000 593 (593) The price risk for unlisted securities is immaterial in terms of the possible impact on total equity. sensitivity analysis. It has therefore not been included in the (iii) Fair value interest rate risk Refer to (e) below. b. Credit risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to export and domestic customers, including outstanding receivables and committed transactions. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The majority of customers, both export and domestic have long term relationships with the Group and sales are secured with long term supply contracts. Sales are secured by letters of credit when deemed appropriate. Derivative counterparties, held to maturity investments and cash transactions are limited to financial institutions with a rating of at least BBB. The Group has policies that limit the maximum amount of credit exposure to any one financial institution. 62 62 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 23. FINANCIAL RISK MANAGEMENT (continued) b. Credit risk (continued) Credit risk further arises in relation to financial guarantees given to certain parties (see note 26). Such guarantees are only provided in exceptional circumstances and are subject to specific board approval. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates. The table below summarises the assets which are subject to credit risk. Trade receivables Cash at bank and short term bank deposits Held to maturity investments Derivative financial instruments c. Liquidity risk 2016 $000 83,254 91,162 116 2,313 2015 $000 42,927 24,789 1,040,480 - Prudent liquidity risk management is adopted through maintaining sufficient cash and marketable securities, the ability to borrow funds from credit providers and to close-out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets. Financing arrangements The Group's only significant external borrowings relate to finance leases detailed in note 18. The maturity of these finance leases are shown in (d) below. d. Maturity of financial liabilities The maturity groupings of derivative financial instruments are detailed in note 19. Trade and other payables (note 9) are normally settled within 45 days of recognition. The Group's borrowings (note 18) comprise finance leases payable over a period of four to five years. The finance lease are fixed rate leases with a weighted average interest rate of 3.58%.The table below details the contractual maturities of finance lease liabilities: Finance leases 0 to 6 months $000 1,383 6 to 12 months 1 to 2 years 2 to 5 years Total Carrying amount $000 $000 $000 $000 $000 1,384 2,767 10,886 16,420 14,860 63 63 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 23. FINANCIAL RISK MANAGEMENT (continued) e. Cash flow and fair value interest rate risk The Group currently has significant interest-bearing assets which are placed with reputable investment counterparties for up to 12 months. The Group has a treasury investment policy approved by the Board which stipulates the maximum dollar exposure to each financial institution, and the maximum percentage of funds that can be invested with an individual institution. Significant changes in market interest rates may have an effect on the Group's income and operating cash flows. The Group manages its cash flow interest rate risk by placing excess funds in term deposits and other fixed interest bearing assets. Refer to notes 15 and 16 for details. Based on the deposits held at balance date, the sensitivity to a 1% increase or decrease in interest rates would increase/(decrease) after tax profit by $1,000 (2015 - $7,228,000). f. Fair value measurements Accounting policy - fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement for disclosure purposes. 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. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The carrying value less the estimated credit adjustments of trade receivables and payables is assumed to approximate their fair values due to their short term nature. The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: a. b. 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 (as prices) or indirectly (derived from prices) (level 2); and c. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Group's assets measured and recognised at fair value as at 31 July 2016 and 31 July 2015. 2016 Assets Derivatives used for hedging Available for sale financial assets Equity securities Total assets Level 1 $000 Level 2 $000 Level 3 $000 Total $000 - 2,313 - 2,313 3,364 3,364 - 2,313 - - 3,364 5,677 64 64 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 23. FINANCIAL RISK MANAGEMENT (continued) f. Fair value measurements (continued) 2015 Assets Available for sale financial assets Equity securities Total assets Liabilities Derivatives used for hedging Total liabilities Level 1 $000 Level 2 $000 Level 3 $000 Total $000 7,986 7,986 - - - - 7,986 7,986 - - 23,144 23,144 - - 23,144 23,144 The fair value of financial instruments traded in active markets (such as available for sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the last sale price. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. 24. BUSINESS COMBINATION Accounting policy The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured at fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which similar borrowings could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial remeasured to fair value with changes in fair value recognised in profit or loss. liability. Amounts classified as a financial liability are subsequently 65 65 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 24. BUSINESS COMBINATION (continued) a. Summary of acquisition - joint operation On 1 March 2016, New Hope Corporation Limited’s wholly owned subsidiary, New Hope Bengalla Pty Ltd, acquired 40% of the assets and liabilities of the Bengalla Joint Venture. The Bengalla Joint Venture is a coal mining and extraction operation producing thermal coal in the Hunter Valley, New South Wales. Details of the purchase consideration and the net assets acquired are as follows: Purchase Consideration (refer b below) Cash Paid – Current Year Purchase price adjustment receivable Total Purchase Consideration The fair value of assets and liabilities recognised as a result of the acquisition are as follows: Cash Receivables Inventories Property, Plant and Equipment (note 11) Intangibles (note 12) Accounts Payables & Accruals Provisions Net assets acquired There were no acquisitions in the year ended 31 July 2015. 2016 $000 850,796 (1,668) 849,128 4,748 15,079 12,464 829,532 41,500 (18,386) (35,809) 849,128 Revenue and profit contribution The acquired business contributed revenues of $97,411,000 and profit before tax since acquisition $5,036,000 (i.e. before non regulars) to the Group for the period 1 March 2016 to 31 July 2016. Due to the variability in key market factors and operational variations it is considered impractical to disclose an estimated revenue and profit/(loss) assuming the acquisition had occurred 1 August 2015. The anticipated increase in production and sales tonnes annually are 3,360,000 tonnes. b. Purchase Consideration Outflow of cash to acquire subsidiary, net of cash acquired Total cash consideration Less: Balances acquired Cash Outflow of cash – investing activities 850,796 (4,748) 846,048 It is noted that incidental costs of acquisition have been incurred of $51,863,000 (stamp duty $44,738,000, financial advice $6,388,000 and other costs of $737,000) and these cashflows are recognised as outflows from operating activities. Summary of acquisition - oil producing asset business c. During the year ended 31 July 2016, the Group acquired a business constituting the Moonie oil producing and exploration fields and also the previously unowned 40% joint operation interest in the Utopia oil producing and exploration fields. These transactions constitute business combinations. The acquisitions resulted in cash outflows of $3,482,000 for the acquisition of oil producing assets and assumption of rehabilitation related provisions. Significant judgement and estimate - Acquisition fair value The determination of the fair values of net identifiable assets acquired, and of any goodwill, involves significant judgment. The allocation of fair value between intangible assets, and the tangible assets with which they are used, is also judgmental. The Group engages third-party valuers to advise on the purchase price allocation for significant acquisitions. 66 66 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 25. INTERESTS IN OTHER ENTIITIES Accounting policy a. Subsidiaries Significant New Hope 100% owned subsidiaries are as per note 32. In addition, the company also holds 100% ownership in New Hope Bengalla Pty Ltd, Bridgeport Energy Limited and Northern Energy Corporation Limited. b. Joint arrangements Accounting policy Under AASB 11 Joint Arrangements , classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. investments in joint arrangements are classified as either joint operations or joint ventures. The Joint operations The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Joint ventures Interests in joint ventures are accounted for using the equity method , after initially being recognised at cost in the consolidated balance sheet. (i) Bengalla Joint Venture On 1 March 2016 New Hope Corporation Limited acquired indirectly through New Hope Bengalla Pty Ltd, from a subsidiary of Rio Tinto, a 40 percent interest in the Bengalla thermal coal mine in New South Wales. This joint operation is managed by Bengalla Mining Company Pty Limited (BMC). BMC is owned proportionately by the Bengalla Joint Venture participants. (ii) Lenton Joint Venture A subsidiary of New Hope Corporation Limited has entered into a joint operation to develop the Lenton project. The subsidiary has a 90% participating interest in this joint operation and is entitled to 90% of the output of the Lenton project. The Group's interests employed in the joint operations are included in the balance sheet, in accordance with the accounting policy described above. (iii) Yamala Joint Venture A subsidiary of New Hope Corporation Limited has entered into a joint operation to develop the Lenton project. The subsidiary has an 70% participating interest in this joint operation and is entitled to 70% of the output of the Yamala project. The Group's interests employed in the joint operations are included in the balance sheet, in accordance with the accounting policy described above. (iv) Cuisinier Joint Venture A subsidiary of New Hope Corporation Limited entered into a joint operation in relation to the Cuisinier project. The principal activity of this joint operation is to extract oil from PL303. This project also includes the Barta and Wompi projects conduct oil exploration on ATP752. The subsidiary has a 15% participating interest in the Cuisinier and Barta projects and 17.5% in the Wompi project and is entitled to 15% and 17.5% of the output respectively. The Group’s interests in the joint operation are included in the balance sheet in accordance with the accounting policy described above. Critical judgement - classification of joint arrangements as a joint operation The Group assesses whether it has the power to direct the relevant activities of the investee by considering the rights it holds with respect to the work programme and budget approval, investment decision approval, voting rights in joint operating committees and changes to joint arrangement participant holdings. Where the Group has control judgement is also required to assess whether the arrangement is a joint operation or a joint venture. 67 67 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 26. CONTINGENT LIABILITIES Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows: Controlled entities The bankers of the consolidated entity have issued undertakings and guarantees to the Department of Natural Resources and Mines, Statutory Power Authorities and various other entities. - 2015 $000 2016 $000 14,249 15,968 The bankers of the consolidated entity have issued undertakings and guarantees in relation to stage 1 of the Wiggins Island Coal Export Terminal expansion project and expansion of rail facilities. 12,494 9,095 No losses are anticipated in respect of any of the above contingent liabilities. Lines of credit Unrestricted access was available at balance date to the following lines of credit: Guarantee facility - available Guarantee facility - utilised Unused at balance date The parent entity has given unsecured guarantees in respect of: (i) Mining restoration and rehabilitation The liability has been recognised by the Group in relation to its rehabilitation obligations. (ii) Statutory body suppliers No liability was recognised by the consolidated entity in relation to these guarantees as no losses are foreseen on these contingent liabilities. 27. COMMITMENTS a. Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Property plant and equipment Within one year The Group's share of the Bengalla Joint Venture capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Within one year 135,000 118,411 16,589 100,000 75,899 24,101 91,667 50,836 26,744 25,063 8,705 7,002 6,004 - b. Lease commitments: Group as lessee Non-cancellable operating leases The Group leases port facilities under non-cancellable operating leases expiring within five to fifteen years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group leases office space and small items of office equipment under operating leases. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years The Bengalla Joint Venture leases property, plant and equipment. The Group's share of commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 68 4,622 19,769 36,434 60,825 5,765 7,732 732 14,229 4,081 18,105 41,321 63,507 - - - - 68 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 27. COMMITMENTS (continued) c. Take or pay commitments The Group has purchase obligations in relation to take or pay agreements which are legally binding and enforceable with Queensland Rail (QR), Aurizon, Wetalla Water and Wiggins Island Coal Export Terminal. In relation to access charges payable for use of the Western System rail line, the Queensland Competition Authority (QCA) has assessed QR's draft access undertaking and made a final decision to refuse to approve it. In the final decision the QCA provided a mechanism for an adjustment amount to address the disparity between tariffs which have been charged since 1 July 2013 and the tariffs in the QCA's final decision. QR must submit an amended draft access undertaking for review by the QCA by 15 September 2016. In light of the fact that there is not yet an approved access undertaking in place, these financial statements do not reflect any adjustment amount. 28. EVENTS OCCURRING AFTER THE REPORTING PERIOD On 3 August 2016, Bridgeport (Cooper Basin) Pty Ltd entered a contract to acquire oil producing and exploration assets in the Cooper Basin from Beach Energy Limited. The acquisition is in the greater Kenmore Bodalla region and is expected to produce synergies with the Bridgeport Group's existing oil producing fields in South West Queensland in relation to operational and transportation activities. The acquisition is expected to represent an increase of approximately 145,000 barrels per annum to Bridgeport production and is expected to be complete by the end of the calendar year. 29. RELATED PARTY TRANSACTIONS a. Parent entities The parent entity within the Group is New Hope Corporation Limited. The ultimate Australian parent entity and controlling entity is Washington H. Soul Pattinson and Company Limited (WHSP) which at 31 July 2016 owned 59.65% (2015 - 59.65%) of the issued ordinary shares of New Hope Corporation Limited. b. Transactions with related parties Reimbursement of travel related expenses paid to Australian controlling entity (WHSP) Dividends paid to ultimate Australian controlling entity (WHSP) 2016 $ 2015 $ 3,098 39,655,713 12,251 47,091,160 c. Outstanding balances arising from sales/purchases of goods and services No provision for impairment of receivables has been raised to any outstanding balances and no impairment expense has been recognised in the books of the parent entity in respect of amounts owing from subsidiaries. d. Terms and conditions Transactions relating to dividends were on the same terms and conditions that applied to other shareholders. e. Key management personnel (i) Directors The following persons were Directors of New Hope Corporation Limited during the financial year: Chairman - Non-executive Mr R.D. Millner Non-executive Directors Mr D.J. Fairfull (retired 19 November 2015) Mr T.J Barlow Mr W.H. Grant Mr T.C. Millner (appointed 16 December 2015) Ms S.J. Palmer Mr I.M. Williams Executive Directors Mr S.O. Stephan 69 69 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 29. RELATED PARTY TRANSACTIONS (continued) e. Key management personnel (continued) (ii) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Mr S.O. Stephan Mr B.D. Denney Mr A.L Boyd Mr M.J. Busch Position Managing Director Employer New Hope Corporation Limited Chief Operating Officer (retired 18 December 2015) New Hope Corporation Limited Chief Operating Officer (appointed 21 December 2015) New Hope Corporation Limited Chief Financial Officer New Hope Corporation Limited (iii) Key management personnel compensation Short-term employee benefits Long-term employee benefits Post employment benefits Termination benefit Share based payment 2016 $ 2015 $ 3,552,534 3,508,417 54,325 147,962 136,316 123,250 4,014,387 34,520 142,588 - 167,087 3,852,612 Detailed remuneration disclosures can be found in sections (a) to (j) of the remuneration report on pages 17 to 25. f. Other transactions of key management personnel Mr R.D. Millner, Mr P.R. Robinson and T.J. Barlow are Directors of WHSP, the ultimate parent entity of New Hope Corporation Limited and Pitt Capital Partners Limited. Pitt Capital Partners Limited acted as financial advisor to the Group for various corporate transactions during the 2016 and 2015 financial years. All transactions are at normal commercial terms. Aggregate amounts of each of the above types of transactions with the above were as follows: Financial advice^ 2016 $ 6,488,295 2015 $ 379,269 ^ The increase in financial advice costs is predominantly attributable to a success fee paid on the Bengalla acquisition (refer note 24). Directors are required to take all reasonable steps to manage actual, potential or perceived conflicts of interest. Directors are required to consider and notify the Company of any potential or actual conflicts of interest and Related Party transactions. Directors do not participate in any negotiations of transactions with related parties. g. Loans to key management personnel No loans have been made available to the key management personnel of the Group. 30. SHARE-BASED PAYMENTS Accounting policy Share-based compensation benefits are provided to employees via the New Hope Corporation Limited Employee Share Option Plan and the New Hope Corporation Limited Employee Performance Rights Share Plan. The fair value of options granted under the New Hope Corporation Limited Employee Share Option Plan and Rights granted under the New Hope Corporation Limited Employee Performance Rights Share Plan are recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employee becomes unconditionally entitled to the options or rights. Options and rights are exercisable by current employees during the nominated vesting period or by Directors' consent. Rights vest at the nominated vesting date upon successful completion of applicable service and performance conditions. Detailed vesting conditions are set out in the Directors' report. 70 70 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 30. SHARE-BASED PAYMENTS (continued) The fair value of rights at grant date is calculated as the number of rights offered at the share price at offer date. The fair value of options at grant date is independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting criteria, the impact of dilution, the non-tradeable nature of the option, 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 fair value of the options granted is adjusted to reflect the market vesting condition, but excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to the original estimates, is recognised in profit or loss with a corresponding adjustment to equity. Rights are granted under the New Hope Corporation Limited Employee Performance Rights Share Plan (Rights Plan). Membership of the Plan is open to those senior employees and those Directors of New Hope Corporation Limited, its subsidiaries and associated bodies corporate whom the Directors believe have a significant role to play in the continued development of the Group's activities. Rights are granted for no consideration. Rights will vest and automatically convert to ordinary shares in the company following the satisfaction of the relevant service and performance conditions. Service and performance conditions applicable to each issue of rights are determined by the Directors at the time of grant. Total expense arising from rights issued under the Rights Plan during the financial year was $123,000 (2015 - $167,000). Rights Set out below are the summaries of rights granted under the plan: As at 1 August Granted during the year Forfeited during the year Vested during the year As at 31 July 2016 2015 Average price per share Number of rights Average price per share Number of rights $2.696 $2.084 $1.875 $4.782 $2.112 216,334 414,841 (95,103) (51,277) 484,795 $4.694 $1.581 - $5.047 $2.696 148,442 134,229 - (66,337) 216,334 The weighted average share price at the date of vesting of rights during the 2016 year was $2.08 (2015 - $2.95). Share rights outstanding at the end of the year have the following expiry date and fair value at grant date: Grant Date 17 Dec 2011 17 Dec 2012 17 Dec 2012 12 Dec 2014 20 Nov 2015 20 Nov 2015 Total Vesting Date Value of Right at Grant Date Share rights 2016 2015 1 Aug 2015 1 Aug 2015 1 Aug 2016 1 Aug 2017 1 Aug 2017 1 Aug 2018 $5.840 $4.080 $4.080 $1.581 $1.911 $2.166 - - 19,618 50,336 134,228 280,613 20,447 30,830 30,828 134,229 - - 484,795 216,334 Weighted average remaining contractual life of rights outstanding at end of period 1.5 years 1.4 years 71 71 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 31. PARENT ENTITY FINANCIAL INFORMATION Accounting policy The financial information for the parent entity, New Hope Corporation Limited, has been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries, associates and joint ventures Investments in subsidiaries, subsidiaries and joint ventures are accounted for at cost in the financial report of New Hope Corporation Limited. Dividends received from subsidiaries are recognised in the parent entity’s income statement rather than being deducted from the carrying amount of these investments. a. Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: 2016 $000 2015 $000 Balance Sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Shareholders' equity Issued capital Reserves Share-based payment Retained earnings Profit/(loss) for the year Total comprehensive income/(loss) b. Guarantees entered into by parent entity Bank guarantees issued in relation to rehabilitation and utility obligations 172,305 1,388,053 1,560,358 282,443 1,700 284,143 2,202,683 28,647 2,231,330 815,607 3,770 819,377 95,692 95,444 266 1,180,257 1,276,215 391 1,316,118 1,411,953 (69,378) 56,735 (69,378) 56,735 91,667 91,667 50,936 50,936 The parent entity has given unsecured guarantees in respect of mining restoration and rehabilitation. The liability has been recognised in the consolidated accounts of the parent entity in relation to its rehabilitation obligations. See notes 14 and 26. Further guarantees are provided in respect of statutory body suppliers with no liability being recognised by the parent entity as no losses are foreseen on these contingent liabilities. 72 72 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 31. PARENT ENTITY FINANCIAL INFORMATION (continued) c. Contingent liabilities of the parent entity Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows: Controlled entities The bankers of the consolidated entity have issued undertakings and guarantees to the Department of Natural Resources and Mines, Statutory Power Authorities and various other entities. 2016 $000 2015 $000 14,249 15,968 The bankers of the consolidated entity have issued undertakings and guarantees in relation to stage 1 of the Wiggins Island Coal Export Terminal expansion project and expansion of rail facilities. 12,494 9,095 No losses are anticipated in respect of any of the above contingent liabilities. d. Contractual commitments for the acquisition of property, plant and equipment As at 31 July 2016, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling $Nil (2015 - $Nil). 32. DEED OF CROSS GUARANTEE During 2012, a number of entities within the Group entered into a deed of cross guarantee. New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. a. Consolidated statement of comprehensive income The above companies represent a "closed group" for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by New Hope Corporation Limited, they also represent the "extended closed group". Set out below is the consolidated statement of comprehensive income for the year ended 31 July 2016 for the closed group consisting of New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd. Revenue from operations Other income Expenses Cost of sales Marketing and transportation Administration Debt forgiveness Other expenses Profit/(loss) before income tax Income tax expense Profit/(loss) after income tax for the year Other comprehensive income Items to be reclassified to profit and loss Changes in the fair value of cash flow hedges, net of tax Transfer to profit and loss for cash flow hedges, net of tax Other comprehensive income for the year, net of tax Total comprehensive income/(loss) for the year 73 73 2016 $000 443,784 164 443,948 (283,149) (131,302) (6,118) (97,862) (6,377) (80,860) (5,022) (85,882) 2015 $000 491,625 185 491,810 (261,778) (137,164) (7,847) - - 85,021 (24,756) 60,265 2,455 15,294 17,749 (68,133) (33,790) 18,225 (15,565) 44,700 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 32. DEED OF CROSS GUARANTEE (continued) Consolidated balance sheet b. Set out below is a consolidated balance sheet as at 31 July 2016 of the closed group consisting of New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd. Current assets Cash and cash equivalents Trade and other receivables Inventories Held to maturity investments Derivative financial instruments Total current assets Non-current assets Receivables Other financial assets Property, plant and equipment Exploration and evaluation assets Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Current tax liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 2016 $000 2015 $000 58,737 138,120 43,843 22 1,029 241,751 1,104,999 248,506 399,570 50,766 15,393 6,510 1,825,744 2,067,495 93,778 2,272 18,203 40,295 - 154,548 - 44,498 12,588 57,086 211,634 1,855,861 91,596 37,457 1,726,808 1,855,861 23,348 459,954 57,447 1,010,267 - 1,551,016 2,029 248,183 376,808 47,104 14,004 7,223 695,351 2,246,367 130,852 - 20,481 31,128 23,143 205,604 - 49,367 - 49,367 254,971 1,991,396 91,348 20,731 1,879,317 1,991,396 74 74 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 33. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the parent a. Audit services Audit and review of financial reports and other audit work under the Corporations Act 2001: Deloitte Touche Tohmatsu (Australian firm) Other audit firms for the audit or review of financial reports of any entity in the Group Total remuneration for audit services b. Other services Deloitte Touche Tohmatsu (Australian firm) Audit of joint ventures Accounting advisory services PricewaterhouseCoopers (Australian firm) Audit of joint ventures Total remuneration for other services Total auditors' remuneration 34. OTHER ACCOUNTING POLICIES a. Foreign currency translation - 2015 $ 2016 $ 433,000 240,000 - - 433,000 240,000 24,000 33,000 18,000 23,000 - - 75,000 23,000 508,000 263,000 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 Australian dollars, which is New Hope Corporation Limited's functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available for sale financial assets, are included in the fair value reserve in equity. Group companies The results and financial position of all of the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: h h Assets and liabilities for each balance sheet presented are translated at the closing rates 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 h All resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net in foreign entities, are recognised in other comprehensive income. When a foreign operation is sold, a proportionate share of such exchange differences is reclassified to profit or loss as part of the gain or loss on sale where applicable. investment 75 75 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 34. OTHER ACCOUNTING POLICIES (continued) b. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. c. Borrowings Interest bearing liabilities are initially recognised at fair value, net of any transactions costs incurred. These balances are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the liability using the effective interest method. Interest bearing liabilities 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 period. Borrowing costs Borrowing costs incurred for the construction of a 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 recognised as expenses in the period in which they are incurred. d. New and amended standards adopted by the Group A number of new and revised standards became effective for the first time to annual periods beginning on or after 1 August 2015. None of these had a significant effect on the Group. New accounting standards and interpretations not yet adopted e. Certain new accounting standards and interpretations have been published that are not mandatory for 31 July 2015 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below: (i) AASB 15 Revenue from Contracts with Customers - AASB 15 outlines a single comprehensive model for entities to use in accounting for It supersedes current revenue recognition guidance including AASB 118 Revenues, AASB revenue arising from contracts with customers. 111 Construction Contracts and related Interpretations. The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard also allows costs associated with obtaining a contract to be capitalised and amortised over the life of the new contract. The Group has not yet assessed how its own revenue recognition would be affected by the new rule. The Group does not intend on adopting the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 31 July 2019. (ii) AASB 9 Financial Instruments - AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. Since December 2013, it also sets out new rules for hedge accounting. There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The new hedging rules align hedge accounting more closely with the Group's risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. The Group has not yet assessed how its own hedging arrangements would be affected by the new rules. The Group does not intend on adopting the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 31 July 2019. 76 76 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportNOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31 July 2016 - 34. OTHER ACCOUNTING POLICIES (continued) e. New accounting standards and interpretations not yet adopted (continued) (iii) AASB 16 Leases replaces AASB 117 Leases and some lease-related Interpretations and requires that all leases to be accounted for ‘on- balance sheet’ by lessees, other than short-term and low value asset leases. The standard provides new guidance on the application of the definition of lease and on sale and lease back accounting. It largely retains the existing lessor accounting requirements in AASB 117. It requires new and different disclosures about leases. The Group is yet to undertake a detailed assessment of the impact of AASB 16 owing to the fact that the AASB will be first reported on at 31 July 2020. There are no other standards that are not yet effective and that are expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. 77 77 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2016  New Hope Corporation Limited and Controlled Entities Directors Declaration In the Directors' opinion: a. the financial statements and notes set out on pages 28 to 77 are in accordance with the Corporations Act 2001 , including: (i) (ii) complying with Accounting Standards , requirements; and the Corporations Regulations 2001 and other mandatory professional reporting giving a true and fair view of the consolidated entity's financial position as at 31 July 2016 and of their performance, for the financial year ended on that date; and b. there are reasonable grounds to believe that the Company will be able to pay its debts, as and when they become due and payable; and The Basis of preparation on page 32 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. 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. At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order applies, as detailed in note 32 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. This declaration is made in accordance with a resolution of the Directors. R.D. Millner Director S.J. Palmer Director Sydney 19 September 2016 78 78 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportDIRECTORS’ DECLARATION Deloitte Touche Tohmatsu ABN 74 490 121 060 Riverside Centre Level 25 123 Eagle Street Brisbane QLD 4000 GPO Box 1463 Brisbane QLD 4001 Australia DX 115 Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7001 www.deloitte.com.au Independent Auditor’s Report to the members of New Hope Corporation Limited Report on the Financial Report We have audited the accompanying financial report of New Hope Corporation Limited, which comprises the consolidated balance sheet as at 31 July 2016, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the year ended on that date, 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 as set out on pages 28 to 78. 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. On page 32, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated 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 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. Auditor’s Independence Declaration 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 New Hope Corporation Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 79 79 INDEPENDENT AUDITOR’S REPORT to the Members of New Hope Corporation Limited Opinion In our opinion: (a) the financial report of New Hope Corporation 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 July 2016 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 consolidated financial statements also comply with International Financial Reporting Standards as disclosed on page 32. Report on the Remuneration Report We have audited the Remuneration Report included in pages 17 to 23 of the directors’ report for the year ended 31 July 2016. 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 New Hope Corporation Limited for the year ended 31 July 2016, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU Richard Wanstall Partner Chartered Accountants Sydney, 19 September 2016 80 80 New Hope Corporation Limited and Controlled Entities | 2016 Annual ReportINDEPENDENT AUDITOR’S REPORT to the Members of New Hope Corporation Limited New Hope Corporation Limited Shareholder Information as at 12 September 2016 As at 12 September 2016 there were 7,027 holders of ordinary shares in the Company. Voting entitlement is one vote per fully paid ordinary share. Distribution of equity securities 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Number of shareholders 1,712 2,570 1,559 1,096 90 7,027 Fully paid ordinary shares 888,533 7,625,192 11,015,341 29,116,113 782,405,547 831,050,726 Number of rights holders Ordinary rights - - - - 2 2 - - - 484,795 - 484,795 Holding less than a marketable parcel 597 76,865 The names of substantial shareholders as disclosed in substantial shareholder notices received by the Company: Shareholder Washington H Soul Pattinson And Company Limited Mitsubishi Materials Corporation Perpetual Limited and subsidiaries 20 largest shareholders as disclosed on the share register as at 12 September 2016 Washington H Soul Pattinson And Company Limited Mitsubishi Materials Corporation RBC Investor Services Australia Nominees Pty Limited (Pi Pooled A/C) J P Morgan Nominees Australia Limited UBS Nominees Pty Ltd Farjoy Pty Ltd HSBC Custody Nominees (Australia) Limited Domer Mining Co Pty Limited BKI Investment Company Limited Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd (Drp) BNP Paribas Nominees Pty Ltd (Agency Lending Drp A/C) Taiheiyo Kouhatsu Inc National Nominees Limited RBC Investor Services Australia Nominees Pty Limited (Piselect) RBC Investor Services Australia Nominees Pty Limited (PIIC A/C) UBS Nominees Pty Ltd J S Millner Holdings Pty Limited Robert Charles Neale Milton Corporation Limited Number of shares 495,696,418 91,490,000 95,829,674 495,696,418 93,240,000 27,794,978 27,771,340 16,606,087 15,500,000 15,316,754 15,000,000 14,815,952 10,177,903 7,002,972 4,942,699 4,054,000 3,256,794 2,572,162 2,377,955 2,288,388 2,109,197 1,400,000 1,290,107 763,213,706 % 59.65% 11.01% 11.53% 59.65% 11.22% 3.34% 3.34% 2.00% 1.87% 1.84% 1.80% 1.78% 1.22% 0.84% 0.59% 0.49% 0.39% 0.31% 0.29% 0.28% 0.25% 0.17% 0.16% 91.83% Unquoted equity securities Rights issued under the New Hope Corporation Limited Employee Performance Rights Share Plan to take up ordinary shares Number on issue Number of holders 484,795 2 81 81 SHAREHOLDER INFORMATION as at 31 July 2016 

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