NICKEL MINES LIMITED
and its controlled entities
A.B.N. 44 127 510 589
A N N U A L R E P O R T 2 0 2 0
CONTENTS
Chairman’s Letter
Review of Operations
Corporate Governance Statement
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional ASX Information
Corporate Directory
1
2
12
13
23
24
25
26
27
28
58
59
63
65
CH AI R MAN’S
L ET TER
Dear Fellow Shareholders,
It is with great pleasure I present to you the Nickel Mines Limited
(‘the Company’ or ‘Nickel Mines’) Annual Report for the financial year
ended 31 December 2020.
The onset of the global COVID-19 pandemic in late January 2020 has
had far reaching implications across every facet of our lives with its
impact still being felt to this day. It goes without saying the pandemic
has created numerous operational and logistical challenges for nearly
all businesses, including ours.
It is against the backdrop of these enormous challenges that I am
pleased to report on what was a landmark year for Nickel Mines.
The year saw the Company embark on two material transactions
both of which have delivered enormous value for shareholders. The
first was the Company electing to exercise its contractual rights to
increase its equity interests in the Hengjaya Nickel and Ranger Nickel
RKEF projects from 60% to 80%. With both projects operating at
approximately 30% above nameplate capacity, the increase to an
80% interest in each saw the Company’s attributable nickel metal
production comfortably surpass 30,000 tonnes per annum and firmly
establish Nickel Mines as a globally significant nickel producer.
The second transaction was the Company’s agreement to acquire an
80% interest in the Angel Nickel project, a development project within
the Indonesia Weda Bay Industrial Park (‘IWIP’) on Halmahera Island
in Indonesia’s North Maluku province. Comprising 4 next generation
RKEF lines and a 380MW captive power plant, Angel Nickel represent
a transformative opportunity for Nickel Mines that will see the
Company geographically diversify its operations and more than double
its existing nameplate nickel metal production capacity.
I am also delighted to report on the successful expansion activities
undertaken at the Hengjaya mine over the last 12 months. A
modernised camp facility for our valued workers, the establishment
of operations at the Central Pit and a significantly expanded jetty
capacity are just some of the initiatives that will enable us to
significantly increase production levels and unlock the full strategic
value of the world class Hengjaya mine nickel laterite resource.
Record levels of mine production in the December quarter are
testament to the level of work that has gone into transforming the
Hengjaya mine into an operation now capable of being a multi-decade
supplier of nickel ore to the Indonesia Morowali Industrial Park.
The significant growth we have seen across both our mine and RKEF
interests this year would of course not have been possible without
you, our shareholders. Across two separate rights issues, shareholders
committed nearly A$600M in new equity funding which enabled us to
embark on the abovementioned opportunities and initiatives that have
delivered tremendous value to the Company. We sincerely thank you
for your support.
This year also marked the payment of the Company’s maiden interim
dividend of A$0.01 per share which has recently been followed up
with a final dividend payment of A$0.02 per share. With the strong
operational cash flows being generated from the Company’s RKEF
projects we are delighted to now be in a position to share with our
shareholders, in the form of dividend payments, some of the success
of the Company’s operations.
The last 12 months were remarkably busy but highly rewarding.
With our RKEF assets now well established, a development project
underway and a broadly positive outlook across the global nickel
market we have every reason to look forward to 2021 with great
optimism.
Yours sincerely
Robert Neale
Chairman
Nickel Mines Limited Annual Report 2020 1
REV IEW OF OPER ATIO NS
RE VIEW O F
OPER ATI ONS
Aerial view showing Hengjaya Nickel and Ranger Nickel’s RKEF lines
Principal Activities and Review of Operations
(All amounts in US$ unless otherwise stated)
The operating profit of Nickel Mines Limited and its controlled entities
(together ‘the Group’) for the year ended 31 December 2020 after
income tax was $153,698,840 (6 months to 31 December 2019:
$91,280,434).
Nickel Mines Limited (‘the Company’ or ‘Nickel Mines’) was
incorporated on 12 September 2007, under the laws of the State
of New South Wales, Australia. The Group has become a globally
significant, low cost producer of nickel pig iron (‘NPI’), a key
ingredient in the production of stainless steel. The Group’s principal
operations, located in Central Sulawesi, Indonesia, are the Hengjaya
Nickel and Ranger Nickel rotary kiln electric furnace (‘RKEF’) projects
located within the Indonesia Morowali Industrial Park (‘IMIP’), and
the Hengjaya mine. At year end, the Company held an 80% interest
in each RKEF project and the Hengjaya mine, a large tonnage, high
grade nickel laterite deposit in close proximity to the IMIP. Additionally,
the Company has executed an agreement to acquire an 80% interest
in an additional four RKEF lines and a 380MW captive power plant
(‘Angel Nickel’).
2 Nickel Mines Limited Annual Report 2020
RE VI EW OF OPE RATIONS
During and following the year ended 31 December 2020 significant milestones were achieved as follows:
HIGHLIGHTS
• The Company’s Hengjaya Nickel and Ranger Nickel projects produced a combined 295,896.7 tonnes of NPI, containing 43,621.1 tonnes of
nickel metal equivalent. A total of 43,708.3 tonnes of nickel metal equivalent were sold during the year. EBITDA from RKEF operations for
2020 was $196.7M.
•
•
In January 2020, Hengjaya Nickel commenced routine monthly repatriation of funds to its Singaporean holding company, Hengjaya Holdings
Private Limited, which, in turn, distributes the funds to its shareholders, Nickel Mines and Shanghai Decent. During the year, $61.5M was
repatriated to Nickel Mines and $26.9M was repatriated to Shanghai Decent.
In April 2020, Ranger Nickel commenced routine monthly repatriation of funds to its Singaporean holding company, Ranger Investment
Private Limited, which, in turn, distributes the funds to its shareholders, Nickel Mines and Shanghai Decent. During the year $46.0M was
repatriated to Nickel Mines and $16.5M was repatriated to Shanghai Decent.
• At the Company’s AGM held in May 2020, the Company’s shareholders approved the increase in the Company’s interest in the Hengjaya
Nickel and Ranger Nickel projects from 60% to 80% for $120M, plus 20% of undistributed retained earnings attributable to Shanghai Decent
Investment (Group) Co., Ltd and its associates (‘Shanghai Decent’). Consideration was funded via the completion of a A$231M (equivalent
to approximately $155M) 1 for 3.6 accelerated non-renounceable entitlements offer (‘ANREO’), completed in June 2020. The Company
completed these acquisitions on 30 June 2020.
•
In August 2020 the Company declared a maiden interim dividend of A$0.01 per share, being a distribution of A$21.3M. Subsequent to year
end the Company declared a final dividend of A$0.02 per share, being a distribution of A$50.3M.
• A total of 870,503 wet metric tonnes (‘wmt’) of nickel ore were mined at the Hengjaya mine, with an average stripping ratio of 1.6:1 BCM/
wmt. A total of 795,650 wmt were sold during the year at an average grade of 1.82% nickel. Additionally, a further 368,958 wmt of limonite
were stockpiled for eventual delivery to HPAL plants being built at the Indonesia Morowali Industrial Park.
• During the year, the Company made capital repayments of $20M against the Ranger debt facility, reducing the outstanding facility balance to
$45M at year end. Subsequent to the end of the year, the Company fully repaid the Ranger debt facility, approximately 41 months ahead
of schedule.
•
In November 2020, the Company executed a binding Definitive Agreement with Shanghai Decent for Nickel Mines to acquire a 70% equity
interest in the Angel Nickel project, which consists of four 54 KVA RKEF lines with an annual nameplate production capacity of 36,000
tonnes of nickel metal and a 380MW captive power plant for total payment of $490M. To fund its initial 30% interest in Angel Nickel, in
December 2020 the Company successfully completed a fully underwritten 2 for 11 ANREO at A$0.94 per share to raise A$364M (equivalent
to approximately $275M). The entitlement offer resulted in the issue of 386,929,409 new fully paid ordinary shares in the Company. The
transaction was approved by Shareholders at a General Meeting held on 19 January 2021. Subsequently, the Company secured the right
to acquire an additional 10% interest in Angel Nickel for $70M and a $6M discount for early payment of the second tranche acquisition
consideration if paid before 30 June 2021. In February 2021, the Company completed the initial acquisition of a 30% interest in Angel Nickel
by payment of $180M which, together with a $30M deposit which had been paid from existing cash reserves, completed the first acquisition
consideration payment of $210M.
RKEF OPERATIONS (80% interest held by Nickel Mines)
For the first six months of 2020, Nickel Mines held a 60% interest in the Hengjaya Nickel and Ranger Nickel RKEF projects. Following the
completion of an ANREO in June 2020, Nickel Mines exercised its option to acquire a further 20% of the shareholder loans and issued and
paid-up share capital of Hengjaya Holdings Private Limited and Ranger Investment Private Limited, being the respective Singaporean domiciled
holding companies that wholly own PT Hengjaya Nickel Industry and PT Ranger Nickel Industry, the Indonesian PMA1 companies that in turn own
100% of the Hengjaya Nickel and Ranger Nickel projects.
A summary of production from the Hengjaya Nickel and Ranger Nickel projects for the year ended 31 December 2020 is as follows:
NPI Production
NPI Grade
Nickel Metal Production
Nickel Metal Production
Attributable to Nickel Mines
Nickel Metal Sold
tonnes
%
tonnes
tonnes
tonnes
Hengjaya Nickel
Ranger Nickel
145,926.7
14.7
21,514.1
15,080.9
21,880.0
149,970.0
14.7
22,107.0
15,536.9
21,828.3
Total
295,896.7
14.7
43,621.1
30,617.8
43,708.3
1 PMA company means a ‘Penanaman Modal Asing’, an Indonesian foreign investment company in which foreign share ownership of up to 100% is allowed.
Nickel Mines Limited Annual Report 2020 3
REV IEW OF OPER ATIO NS
Hengjaya Nickel (80% interest held by Nickel Mines)
During the year, Hengjaya Nickel produced 21,514.1 tonnes of nickel metal at an average NPI grade of 14.7% at a weighted average cash cost
of $7,340/tonne of nickel metal.
HENGJAYA NICKEL
NPI Production
NPI Grade
Nickel Metal Production
Cash Costs
Nickel Metal Sold
tonnes
%
tonnes
US$/t Ni
tonnes
March 2020
Quarter
40,076.8
14.2
5,671.7
7,247
6,293.2
June 2020
Quarter
34,078.3
14.6
4,980.2
7,342
4,150.4
September 2020
Quarter
December 2020
Quarter
Total
33,381.0
38,390.6
145,926.7
15.4
5,143.3
7,139
5,781.6
14.9
5,718.9
7,612
5,654.8
14.7
21,514.1
7,340
21,880.0
Nickel Mines’ attributable nickel metal production from Hengjaya Nickel for the year ended 31 December 2020 was 15,080.9 tonnes.
For the year ended 31 December 2020, Hengjaya Nickel recorded sales of $260.3M for 21,880.0 tonnes of nickel metal sold. EBITDA for the
year was $97.6M.
Ranger Nickel (80% interest held by Nickel Mines)
During the year, Ranger Nickel produced 22,107.0 tonnes of nickel metal at an average NPI grade of 14.7% at a weighted average cash cost of
$7,327/tonne of nickel metal.
RANGER NICKEL
NPI Production
NPI Grade
tonnes
%
Nickel Metal Production
tonnes
Cash Costs
Nickel Metal Sold
US$/t Ni
tonnes
March 2020
Quarter
39,321.1
14.3
5,619.6
7,216
5,619.6
June 2020
Quarter
35,523.6
14.4
5,123.7
7,392
4,273.5
September 2020
Quarter
December 2020
Quarter
Total
36,449.3
38,675.0
149,969.0
15.3
5,555.6
7,258
6,188.6
15.0
5,808.1
7,442
5,746.6
14.7
22,107.0
7,327
21,828.3
Nickel Mines’ attributable nickel metal production from Ranger Nickel for the year ended 31 December 2020 was 15,537.8 tonnes.
For the year ended 31 December 2020, Ranger Nickel recorded sales of $263.2M for 21,828.3 tonnes of nickel metal sold. EBITDA for the year
was $99.1M.
RKEF - Monthly Producti on Performance
HNI
RNI
HNI Cash Costs
RNI Cash Costs
2,500
2,000
1,500
1,000
50 0
0
2,500
2,000
s
e
n
n
o
T
l
t
n
e
a
v
i
u
q
E
l
e
k
c
i
N
s
e
n
n
o
T
l
t
n
e
a
v
i
u
q
E
l
e
k
c
i
N
1913.5
1924.8
1824.7
1787.6
1933.6
1907.2
1894.8
1698.6
1661.2
7,206
7,389
7,230
7,291
7,155
7,289
7,129
7,375
1580.8
7,418
7,362
1622.4
1648.1
7,381
7,380
Jan-20
Feb-20
Mar-20
Ap r-20
May-20
June -20
1,817.1
1,818.8
1,823.8
1,869.81
1,915.7
1,961.1
,872.0
7,244
7,240
7,302
7,100
7,128
7,375
1,500
1,454.7
7,292
7,202
1,000
50 0
0
7,913
1,957.5
1,956. 4
7,674
1,889.4
1,890.6
7,536
7,347
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Production and cost performance from the Hengjaya Nickel and Ranger Nickel RKEF projects in 2020.
4 Nickel Mines Limited Annual Report 2020
)
t
/
D
S
U
(
s
t
s
o
C
h
s
a
C
)
t
/
D
S
U
(
s
t
s
o
C
h
s
a
C
7,90 0
7,700
7,50 0
7,30 0
7,100
6,90 0
6,700
6,500
7,90 0
7,700
7,50 0
7,30 0
7,100
6,90 0
6,700
6,500
RE VI EW OF OPE RATIONS
Nickel ore being trucked to the jetty at the Hengjaya Mine.
Cash operating costs across the year generally ranged between $7,200 and $7,500 per tonne of nickel metal. Costs in the December quarter
were modestly higher than the rest of the year reflecting elevated nickel ore prices that are now more closely indexed to LME nickel price
movements since the Indonesian Government’s adoption of a new benchmark ore pricing regime in May 2020. For several months, the IMIP’s
large stockpiles of ore provided a buffer to it having to purchase ore under the new regime, however, new ore purchases in recent months have
been subject to the new pricing regime and resulted in a modest increase in ore costs into the IMIP. The notable increases in the December cash
operating costs across both Hengjaya Nickel and Ranger Nickel were largely attributable to some end-of-year adjustments relating to port and
NPI processing charges and labour bonus/holiday payments.
HENGJAYA MINE (80% interest held by Nickel Mines)
The Company holds an 80% interest in PT Hengjaya Mineralindo, the owner of 100% of the Hengjaya mine, with the remaining 20% interest
owned by the Company’s Indonesian partner.
The mine is located approximately 12 kilometres from the IMIP in the Morowali Regency, Central Sulawesi, Indonesia. The Hengjaya mine tenement
covers 5,983 hectares and holds a 20 year mining operation/production licence (issued May 2012) with two further 10 year extension periods.
Map showing the Hengjaya mine and proximity to the IMIP.
Nickel Mines Limited Annual Report 2020 5
REV IEW OF OPER ATIO NS
Resources
In August 2020, an updated JORC 2012 compliant resource estimate for the Hengjaya mine was reported as follows:
Category
Measured
Indicated
Inferred
Total
Dry Tonnes
(million)
20
109
56
185
Ni (%)
Co (%)
Fe (%)
1.3
1.3
1.3
1.3
0.08
0.08
0.07
0.08
28
29
27
28
The 185 million dry metric tonnes at 1.3% nickel and 0.08% cobalt (cut-off 0.8% nickel), representing 2,405,000 tonnes of nickel and 148,500
tonnes of cobalt, is from an area of 1,144 hectares of the 5,983 hectare Hengjaya mine tenement area.
The updated resource exceeds the previous resource estimate reported in December 2018 which covered an area of 1,919 hectares. Further,
Measured and Indicated resources have increased 185% and 117% respectively with a 49% decrease in Inferred resources, demonstrating a
strong conversion rate from Indicated and Inferred to Measured and the quality of the Hengjaya mine ore body.
In addition to the updated Mineral Resource, at least five significant Exploration Targets, covering a further 1,500 hectares within the Hengjaya
mine licence area have been identified in locations where similar type nickel laterite deposits of between 60 - 120 million wet metric tonnes is
postulated. In these areas nickel laterite has already been identified by surface mapping and wide spaced drilling.
An Exploration Target is a statement or estimate of the exploration potential of a mineral deposit in a defined geological setting where the
statement or estimate, quoted as a range of tonnes and a range of grade, relates to mineralisation for which there has been insufficient
exploration to estimate a Mineral Resource. The potential quantity and grade of the Exploration Target is conceptual in nature, as there has been
insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource.
Aerial view of the Bete Bete pit at the Hengjaya Mine.
6 Nickel Mines Limited Annual Report 2020
RE VI EW OF OPE RATIONS
Mining
The production results achieved across the December quarter at the Hengjaya mine were the result of numerous mine expansion initiatives
implemented over the year focused on increasing production and lowering costs. After a challenging and extended wet season, the December
quarter saw Hengjaya mine achieve record levels of production with the costs of ore production falling significantly.
Saprolite ore production totalled 870,503 wmt for the year ended 31 December 2020, at an average stripping ratio of 1.6:1.0. Sales for the year
totalled 795,650 wmt at an average grade of 1.81%.
The cost of mining limonite ore, which has been stockpiled adjacent to waste dumps at both Bete Bete and Central Pits in readiness for
anticipated eventual supply to the IMIP’s HPAL projects, is included as an overburden cost and is expensed. At 31 December 2020, 463,954 wmt
of limonite ore grading approximately 1.2% nickel had been stockpiled.
March 2020
Quarter
June 2020
Quarter
September
2020 Quarter
December
2020 Quarter
Tonnes mined
Overburden mined
Limonite mined
Overburden and limonite mined
Strip ratio(1)
Tonnes sold
Average grade sold
Average price received
wmt
BCM
BCM
BCM
BCM/wmt
wmt
%
US$/t
Average cost of production(2)
CIF US$/t
149,958
142,250
41,750
187,000
1.2
155,599
1.83
24.32
29.70
62,610
155,852
87,069
242,921
3.9
54,029
1.80
23.79
44.73
158,058
200,439
240,589
441,028
2.8
129,264
1.85
31.39
40.68
499,877
266,960
294,717
561,678
1.1
456,758
1.81
32.58
25.30
(1) Strip ratio includes limonite as overburden.
(2) Average cost of production includes amortisation and depreciation costs for the 12 months of $1.61/t.
Total
870,503
797,740
664,125
1,432,626
1.6
795,650
1.82
29.98
30.30
Mine Expansion
Over the course of 2020, numerous expansion initiatives were undertaken with the underlying objective being to unlock the strategic value
of Hengjaya mine’s large scale resource. While having the immediate effect of scaling up production levels and reducing costs, many of the
expansion initiatives are designed to prepare the mine to be a future material supplier of both saprolite and limonite ore to the IMIP.
These expansion initiatives included:
• developing the Central Pit as both an additional production area to the existing Bete Bete Pit with a shorter haul road distance to the jetty;
• developing dedicated haul roads from the Bete Bete Pit through the Central Pit to the jetty to facilitate the use of larger 40 tonne haul trucks;
• expanding the jetty capacity to allow for the simultaneous loading of multiple 10,000 tonne barges;
• building a modernised campsite and auxiliary facilities to cater for an expanded and upskilled workforce;
• upgrading of onsite ore preparation and analytical laboratories;
• construction of an ore scalping grizzly to allow faster separation of oversized rock from ore to increase ore recovery; and
• commencing the design and construction of a direct haul road between Hengjaya mine and the IMIP to facilitate the increased supply of both
saprolite and limonite ore into the IMIP.
First ore from the Central Pit was mined and trucked to the expanded jetty for barging in early April 2020, however, mine production across the
June quarter and well into the September quarter was severely impacted by an extended and above average wet season. Drier conditions in the
December quarter saw record mine production of nearly 500,000 tonnes for the quarter demonstrating the expanded production capabilities of
the Hengjaya mine.
Nickel Mines Limited Annual Report 2020 7
REV IEW OF OPER ATIO NS
Exploration
Drilling during 2020 consisted of exploration and infill holes totalling 19,045 metres, including exploration and infill drilling at the Central Pit area
to enhance mine planning, scheduling, resource optimisation and to assist with planning for the separation of saprolite and limonite ore.
Hengjaya mine current drilling targets for infill and exploration areas.
Additional strategic exploration drill targets have been identified in the southern extents of the current IUP where there will be a focus on
delineating new resources.
Aerial view of the camp at the Hengjaya Mine.
8 Nickel Mines Limited Annual Report 2020
RE VI EW OF OPE RATIONS
Mine site rehabilitation and sediment controls.
Safety, Environment and Community
There were no lost time injuries or high potential incidents reported during the year. Early recognition of the potential impacts of COVID-19 and
the prompt implementation of strict access controls and health and safety measures to protect the health and wellbeing of all workers have
ensured the continuation of normal, uninterrupted operations to date.
Training of staff and contractors in safe operating practices continues on a regular and routine basis. Additional safe operating procedures
continue to be developed including the review of all incoming mining fleet, associated risk management assessments and requirements.
No environmental incidents were reported during 2020 and the environmental team completed all required compliance monitoring and reporting.
During the December quarter, the Hengjaya mine was assessed by the Indonesian Ministry of Energy and Mineral Resources (‘ESDM’) and
awarded a “Blue” status rating confirming full compliance with the mine’s operational licence in respect to associated rehabilitation programs
and commitments.
There was continuing work to complete final landform in the Bete Bete Pit waste dumps. Construction and installation of additional water
management and associated drainage systems at the new Central Pit area was also completed.
Site rehabilitation continued at the Bete Bete waste dump areas. Elsewhere on site, various environmental impact monitoring programs were
completed and new environmental controls were installed at the Central Pit, camp and associated haul road systems.
The Hengjaya “DAS” rehabilitation program on substitution areas located at Bomba and Ensa in Central Sulawesi is required as part of the
license conditions for IPPKH 1 and 2. By the end of December 2020, a total of 973 hectares have been seeded and established. The DAS
rehabilitation program includes nursery, delivery, plantation, replacement of dead plants and installation of new production forests.
The Hengjaya mine continues to work to establish personal development and training programs with both local and regional stakeholders,
including the Tangofa, Bete Bete, Markati, Labota, Tanga Oreo and Bahodopi village regions. Whilst most local and regional activities remained
postponed due to COVID-19 travel restrictions, social distancing and Company restricted access procedures and travel protocols, the Hengjaya
mine still managed to assist in various local initiatives involving education, wellbeing, and medical programs.
Nickel Mines Limited Annual Report 2020 9
REV IEW OF OPER ATIO NS
CORPORATE
Exercise of option to move to 80% ownership of the Hengjaya Nickel Project
In accordance with the Collaboration and Subscription Agreement (‘CSA’) governing the Hengjaya Nickel project, the Company elected to
increase (from 60% to 80%) its holding (comprising equity and shareholder loans) of Hengjaya Holdings Private Limited, the Singaporean
domiciled holding company that wholly owns PT Hengjaya Nickel Industry (‘HNI’), an Indonesian PMA company that owns 100% of the Hengjaya
Nickel project.
Under the terms of the CSA and its subsequent supplementary agreements, the Company had until 30 November 2020 to exercise this option.
The exercise price of the option was $60M, based on a valuation of $300M for Hengjaya Nickel on a 100% basis.
Exercise of option to move to 80% ownership of the Ranger Nickel Project
In accordance with the Collaboration Agreement (‘CA’) governing the Ranger Nickel project, the Company elected to increase (from 60% to 80%)
its holding (comprising equity and shareholder loans) of Ranger Investment Private Limited, the Singaporean domiciled holding company that
wholly owns PT Ranger Nickel Industry (‘RNI’), an Indonesian PMA company that owns 100% of the Ranger Nickel project.
Under the terms of the CA and its subsequent supplementary agreements, the Company had until 30 November 2020 to exercise this option.
The exercise price of the option was $60M, based on a valuation of $300M for RNI on a 100% basis.
Managing Director Justin Werner visiting the site where Angel Nickel is being constructed.
10 Nickel Mines Limited Annual Report 2020
RE VI EW OF OPE RATIONS
Participation in Angel Nickel
In October 2020, the Company signed a Memorandum of Understanding (‘MoU’) and subsequently a Definitive Agreement with Shanghai Decent
to acquire a 70% interest in Angel Capital Private Limited, the Singaporean domiciled holding company that wholly owns PT Angel Nickel
Industry (‘ANI’), an Indonesian PMA company that owns 100% of the Angel Nickel project, a development project within the Indonesia Weda Bay
Industrial Park (‘IWIP’) on Halmahera Island in Indonesia’s North Maluku province. Subsequent to year end, it was agreed by both parties that the
Company’s equity participation in the Angel Nickel project would increase to 80%.
The Angel Nickel project is a joint collaboration with Shanghai Decent, the Company’s largest shareholder, and will comprise:
•
four next generation 54 KVA1 RKEF lines with an annual nameplate production capacity of 36,000 tonnes of nickel metal (in nickel pig iron); and
• a 380MW captive power plant, with ownership of the power plant to provide the benefits of a secure, integrated power supply and lower NPI
operating costs.
Under the amended terms of the Definitive Agreement the Company will acquire an 80% interest in Angel Nickel in accordance with the following
staged payments:
• Stage 1 - $210M by 31 March 2021 to secure an initial 30% interest. In February 2021, the Company completed the Stage 1 acquisition of
a 30% interest in Angel Nickel.
• Stage 2 - $350M by 31 December 2021 to secure a further 50% interest. If the Stage 2 acquisition is completed by 30 June 2021, the
purchase price will be discounted to $344M.
On signing the MoU, the Company paid a $10M ‘good faith deposit’ to Shanghai Decent and upon execution of the Definitive Agreement made
a further $20M ‘down payment’ to Shanghai Decent. In February 2021, the Company completed the Stage 1 acquisition of a 30% interest in
Angel Nickel by payment of $180M which, together with the $30M deposit which had been paid from existing cash reserves, completed the first
acquisition consideration payment of $210M.
Accelerated Non-Renounceable Entitlements Offers (ANREOs)
In May/June 2020, to fund its increased interests in the Hengjaya Nickel and Ranger Nickel projects, the Company successfully completed a fully
underwritten 1 for 3.6 ANREO at A$0.50 per share to raise A$231M (equivalent to approximately $155M). The entitlement offer resulted in the
issue of 462,631,313 new fully paid ordinary shares in the Company.
In December 2020, to fund its initial 30% interest in the Angel Nickel project, the Company successfully completed a fully underwritten 2 for 11
ANREO at A$0.94 per share to raise A$364M (equivalent to approximately $275M). The entitlement offer resulted in the issue of 386,929,409
new fully paid ordinary shares in the Company.
Retirement of Ranger Debt Facility
During the year, the Company made repayments of $20M against the Ranger debt facility, reducing the outstanding facility balance to $45M at
year end. Subsequent to the end of the year, the Company fully repaid the Ranger debt facility, approximately 41 months ahead of schedule,
leaving the Company debt free.
With the Company committed to debt funding a portion of the Stage 2 acquisition of Angel Nickel, the full retirement of the Ranger debt facility is
seen as providing the optimal platform from which to commence future debt negotiations.
Appointment of Dasa Sutantio
Mr Stephanus (Dasa) Sutantio was appointed as a Non-Executive Director of the Company on 29 May 2020.
Mr Sutantio graduated with a Bachelor of Commerce degree from the Australian National University in 1987 and has been involved in the Asian
financial sector for more than 20 years, holding various senior positions at Citibank N.A., Bank Tiara Asia Tbk., the Indonesian Bank Restructuring
Agency and PT Bank Mandiri Tbk.
He joined the Indonesian Tanito Group in 2010 and is currently a Director and CFO responsible for overseeing the Tanito Group’s investments
in the financial, mining support, marine logistics/shipping, property and hospitality sectors. Within the Tanito Group, Mr Sutantio is a Director
of PT Karunia Bara Perkasa, the Company’s second largest shareholder, which fully supported the Company’s recent capital raising to fund the
Company’s increased interests in the Hengjaya Nickel and Ranger Nickel projects.
Declaration and payment of maiden interim and final dividends
In August 2020 the Nickel Mines’ Board resolved to declare a maiden A$0.01 dividend. The dividend was paid on 14 September 2020, totalling
A$21.2M (US$15.4M). Subsequent to year end the Company declared a A$0.02 final dividend. The dividend was paid on 11 February 2021,
totalling A$50.3M (US$39.0M).
1
KVA (Kilo-volt amps) is a measure of ‘apparent power’. The Company’s existing HNI and RNI RKEF Projects comprise 33 KVA kilns.
Nickel Mines Limited Annual Report 2020 11
REV IEW OF OPER ATIO NS
Competent Persons Statement
The information provided in this report that relates to Mineral resources, the Exploration Target and Exploration Results is based on information
provided by Daniel Madre of PT Danmar Explorindo. Mr Madre is a member of the Australian Institute of Mining and Metallurgy (AusIMM) and
has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activities which are
being undertaken to qualify as a Competent Person as defined in the 2012 edition of the “Australian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves”. Mr Madre is an independent consulting geologist and consents to the inclusion of the matters based on
his information in the form and context in which it appears. Mr Madre has more than 18 years experience in exploration and mining of nickel
laterites in Indonesia.
Corporate Governance Statement
The Board is committed to maintaining standards of Corporate Governance. Corporate Governance is about having a set of core values and
behaviours that underpin the Company’s activities and ensure transparency, fair dealing and protection of the interests of stakeholders. The
Company has reviewed its corporate governance practises against the Corporate Governance Principles and Recommendations (4th edition)
published by the ASX Corporate Governance Council.
The Corporate Governance Statement is dated as at 19 February 2021, reflecting the corporate governance practises throughout the 2020
financial year and was approved by the Board of Directors of the Company on 19 February 2021. A description of the Company’s current
corporate governance practises is set out in the Company’s Corporate Governance Statement which can be viewed at www.nickelmines.com.au/
corporate-governance/.
12 Nickel Mines Limited Annual Report 2020
DIRE CT ORS’ REPORT
The Directors present their report together with the financial report of Nickel Mines Group, being Nickel Mines Limited (‘the Company’ or ‘Nickel
Mines’) and its controlled entities (‘the Group’), for the year ended 31 December 2020 and the auditor’s report thereon:
Directors and Company Secretary
The names and particulars of the Directors of the Company at any time during or since the end of the year are:
Robert Charles Neale – Non-Executive Chairman
Director since 16 April 2018.
Mr Neale graduated from the University of Queensland with a First Class Honours Degree in Geology and
Mineralogy with an additional major in Chemistry. Mr Neale is currently the Non-Executive Chairman of Mayur
Resources Limited, an industrial minerals and energy company with assets in Papua New Guinea.
Mr Neale is the former Managing Director of New Hope Corporation Limited (‘NHC’) and non-executive director
of Planet Gas Limited (now Sky Metals Limited) until February 2016. He joined NHC in 1996 as General Manager
and was appointed as an executive officer in 2005 and to the Board of Directors in 2008 until his retirement in
2014. Mr Neale has more than 45 years’ experience in the mining, oil and gas and exploration industries covering
base metals, gold, coal, synthetic fuels and conventional oil and gas, bulk materials shipping, and power generation. Prior to NHC he spent 23
years with Esso Australia and EXXON Coal and Minerals Company.
Norman Alfred Seckold – Executive Deputy Chairman
Executive Chairman to 16 April 2018. Director since 12 September 2007.
Norman Seckold graduated with a Bachelor of Economics degree from the University of Sydney and has spent
more than 30 years in the full time management of natural resource companies, both in Australia and overseas.
Mr Seckold has been the Chairman of a number of publicly listed companies including Moruya Gold Mines (1983)
N.L., which acquired the Golden Reward heap leach gold deposit in South Dakota, USA, Pangea Resources
Limited, which acquired and developed the Pauper’s Dream gold mine in Montana, USA, Timberline Minerals, Inc.
which acquired and completed a feasibility study for the development of the MacArthur copper deposit in Nevada,
USA, Perseverance Corporation Limited, which discovered and developed the Nagambie gold mine in Victoria,
Valdora Minerals N.L., which developed the Rustler’s Roost gold mine in the Northern Territory and the Ballarat East Gold Mine in Victoria, Viking
Gold Corporation, which discovered a high grade gold deposit in northern Sweden, Mogul Mining N.L., which drilled out the Magistral and
Ocampo gold deposits in Mexico and Bolnisi Gold N.L, which discovered and developed the Palmarejo and Guadalupe gold and silver mines in
Mexico.
Mr Seckold is currently Chairman of Alpha HPA Limited, a company planning to produce high purity alumina and operating in Australia and
Indonesia, Santana Minerals Ltd., a precious metals exploration company, Sky Metals Limited, exploring for gold, tin and tungsten in NSW,
Australia and unlisted public company Mekong Minerals Limited.
Justin Charles Werner – Managing Director
Director since 23 August 2012.
Mr Werner, holds a Bachelor of Management from the University of Sydney and has been involved in the mining
industry for 20 years. He was a founding partner of PT Gemala Borneo Utama, a private Indonesian exploration
and mining company, which developed a heap leach gold mine in West Kalimantan and also discovered the
highly prospective Romang Island with then ASX listed Robust Resources Limited which was acquired in 2012 by
Indonesian business tycoon Anthony Salim.
Prior to developing projects in Indonesia, Justin worked as a consultant, leading many successful turnaround
projects for blue chip mining companies around the world including Freeport McMoran (Grasberg deposit,
Indonesia where he spent 2 years), Lihir Gold (Lihir mine, Papua New Guinea), Placer Dome (Nevada, USA), BHP Billiton (Ingwe Coal, South
Africa), Rio Tinto (West Angeles Iron Ore, Australia), Nickel West (Western Australia) and QNI Yabulu refinery (Queensland, Australia).
Mr Werner is currently a non-executive director of ASX Listed Alpha HPA Limited and unlisted public company Far East Gold Limited.
Nickel Mines Limited Annual Report 2020 13
DIRECTO RS’ REPORT
Peter James Nightingale – Executive Director and Chief Financial Officer
Director since 12 September 2007.
Peter Nightingale graduated with a Bachelor of Economics degree from the University of Sydney and is a member
of the Institute of Chartered Accountants Australia and New Zealand. He has worked as a chartered accountant in
both Australia and the USA.
As a director or company secretary Mr Nightingale has, for more than 30 years, been responsible for the
financial control, administration, secretarial and in-house legal functions of a number of private and public listed
companies in Australia, the USA and Europe including Pangea Resources Limited, Timberline Minerals Inc.,
Perseverance Corporation Limited, Valdora Minerals N.L., Mogul Mining N.L., Bolnisi Gold N.L, and Planet Gas
Limited (now Sky Metals Limited). Mr Nightingale is currently a director of ASX Listed Alpha HPA Limited and Prospech Limited.
James Crombie – Non-Executive Director
Director since 23 May 2008.
Jim Crombie graduated from the Royal School of Mines, London, with a B.Sc. (Hons) in Mining Engineering,
having been awarded an Anglo American Scholarship. Mr. Crombie held various positions with DeBeers
Consolidated Mines and the Anglo American Corporation in South Africa and Angola between 1980 and 1986. He
spent the next thirteen years as a Mining Analyst and Investment Banker with Shepards, Merrill Lynch, James
Capel & Co. and finally with Yorkton Securities. Mr. Crombie was the Vice President, Corporate Development of
Hope Bay Mining Corporation Inc. from February 1999 through May 2002 and President and CEO of Ariane Gold
Corp. from August 2002 to November 2003. Mr. Crombie was President, CEO and a director of Palmarejo Silver
and Gold Corporation until the merger with Coeur d’Alene Mines Corporation, one of the world’s leading silver
companies, in December 2007. He was a director of Sherwood Copper Corporation until its business combination with Capstone Mining Corp. in
November 2008. Currently, Mr. Crombie is President and CEO of Odyssey Resources Corp., and a director of Torex Gold Resources Inc.
Weifeng Huang – Non-Executive Director
Director since 26 April 2018.
Mr Huang has graduated with a Bachelor of Engineering degree from Zhejiang University and a Masters of
Business Administration from Zhejiang University.
Mr Huang began his career in several industrial enterprises and has broad management experiences from
serving as the Plant Manager of Wenzhou Tractor Plant, the General Manager of Wenzhou Machinery Industrial
Corporation, the Vice Mayor of Wenzhou and the Executive Chairman of China Perfect Machinery Industry
Corp., Ltd. Mr Huang also served as the Deputy Director of the Management Committee of Shanghai Jinqiao
Export Processing Zone, where he was appointed as a Director of Shanghai Jinqiao Export Processing Zone
Development Co., Ltd, a publicly-listed company on the Shanghai Stock Exchange and the Deputy CEO of Shanghai Jinqiao Group. Mr Huang was
also a former Chairman of the board of Harbin High Tech (Group) Co., Ltd, another publicly-listed company on the Shanghai Stock Exchange.
Mr Huang is currently the Chairman of Shanghai Decent Investment (Group) Co., Ltd, a flagship company within the Tsingshan group which led in
the development of the IMIP and he is a Director of PT Indonesia Morowali Industrial Park.
14 Nickel Mines Limited Annual Report 2020
DIRE CT ORS’ REPORT
Mark Hamish Lochtenberg – Non-Executive Director
Director since 10 March 2017.
Mr Lochtenberg graduated with a Bachelor of Law (Hons) degree from Liverpool University, U.K. and has been
actively involved in the coal industry for more than 25 years. He was the Executive Chairman and founding
Managing Director of ASX-listed Cockatoo Coal Limited.
He was also formerly the co-head of Glencore International AG’s worldwide coal division, where he spent 13
years overseeing a range of trading activities including the identification, due diligence, negotiation, acquisition
and aggregation of the coal project portfolio that would become Xstrata Coal. Prior to this Mr Lochtenberg
established a coal “swaps” market for Bain Refco, (Deutsche Bank) after having served as a senior coal trader for
Hansen Neuerburg AG and as coal marketing manager for Peko Wallsend Limited.
Mr Lochtenberg is currently Chairman of ASX listed Equus Resources Limited, a minerals exploration company with operations in Chile and a
Director of Australian Transport Energy Corridor Pty Ltd and Montem Resources Limited.
Dasa Sutantio – Non-Executive Director
Director since 29 May 2020.
Mr Sutantio graduated with a Bachelor of Commerce degree from the Australian National University in 1987
and has been involved in the Asian financial sector for more than 20 years, holding various senior positions at
Citibank N.A., Bank Tiara Asia Tbk., the Indonesian Bank Restructuring Agency and PT Bank Mandiri Tbk. He
joined the Indonesian Tanito Group in 2010 and is currently a Director and CFO responsible for overseeing the
Tanito Group’s investments in the financial, mining support, marine logistics/shipping, property and hospitality
sectors. Within the Tanito Group, Mr Sutantio is a Director of PT Karunia Bara Perkasa, currently the Company’s
second largest shareholder.
Yuanyuan Xu – Non-Executive Director
Director since 26 April 2018.
Ms Yuanyuan Xu graduated with a Bachelor’s Degree in Fashion Business & Fashion Design from Instituto
Marangoni. Since graduation, Ms Xu has focused on marketing, public relations and procurement activities.
She is currently an Executive Director of Shanghai Wanlu Investment Co., Ltd.
Richard James Edwards – Company Secretary
Company Secretary since 28 March 2012.
Richard Edwards graduated with a Bachelor of Commerce degree from the University of New South Wales, is
a Fellow of the Governance Institute of Australia, a member of CPA Australia and holds a Graduate Diploma of
Applied Finance and Investment from FINSIA. Mr Edwards has worked for over fifteen years providing financial
reporting and company secretarial services to a range of publicly listed companies in Australia with a focus on
the mining sector. He is also Company Secretary of ASX listed Alpha HPA Limited and Prospech Limited.
Nickel Mines Limited Annual Report 2020 15
DIRECTO RS’ REPORT
Directors’ Meetings
The number of Directors’ meetings held and number of meetings attended by each of the Directors of the Company, while they were a Director,
during the year are:
Board meetings
Audit Committee
meetings
Nomination Committee
meetings
Remuneration
Committee meetings
Director
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Robert Neale
Norman Seckold
Justin Werner
Peter Nightingale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio*
Yuanyuan Xu
5
5
5
5
5
5
5
2
5
5
5
5
4
5
4
3
2
4
* Appointed as a Director on 29 May 2020.
Directors’ Interests
2
-
-
-
2
2
2
-
-
2
-
-
-
2
2
2
-
-
1
1
-
-
-
-
1
-
-
1
1
-
-
-
-
1
-
-
1
-
-
-
1
-
1
-
-
1
-
-
-
1
-
1
-
-
The beneficial interests of each Director of the Company in the issued share capital of the Company are:
Key management personnel
1 January 2020
Purchased
Sold
Date of this report
Robert Neale
Norman Seckold
Justin Werner
Peter Nightingale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio*
Yuanyuan Xu
500,000
123,715,661
25,016,297
22,265,654
6,580,000
-
11,693,333
-
149,258,258
200,000
-
4,193,376
5,336,341
-
4,450,000
22,845,251
-
-
-
-
-
-
-
3,000,000
-
-
700,000
123,715,661
29,209,673
27,601,995
6,580,000
1,450,000
34,538,584
-
28,000,000
121,258,258
* Number held at date of appointment as Director on 29 May 2020.
16 Nickel Mines Limited Annual Report 2020
DIRE CT ORS’ REPORT
Dividends
On 31 August 2020, at the time of release of the Half Year Report the Company declared a maiden interim dividend of A$0.01 per share, being
a distribution of A$21.3M. Subsequent to year end, on 28 January 2021 the Company declared a final dividend of A$0.02 per share, being a
distribution of A$50.3M
Significant Changes in State of Affairs
In the opinion of the Directors, significant changes in the state of affairs of the Group that occurred during the year ended 31 December 2020
were as follows:
•
•
In accordance with the CSA governing the Hengjaya Nickel Project, the Company elected to increase (from 60% to 80%) its holding
(comprising equity and shareholder loans) of Hengjaya Holdings Private Limited, the Singaporean domiciled holding company that wholly
owns PT Hengjaya Nickel Industry (‘HNI’), an Indonesian PMA company that owns 100% of the Hengjaya Nickel project.
In accordance with the CA governing the Ranger Nickel project, the Company elected to increase (from 60% to 80%) its holding (comprising
equity and shareholder loans) of Ranger Investment Private Limited, the Singaporean domiciled holding company that wholly owns PT
Ranger Nickel Industry (‘RNI’), an Indonesian PMA company that owns 100% of the Ranger Nickel project.
• To fund its increased interests in the Hengjaya Nickel and Ranger Nickel projects, the Company successfully completed a fully underwritten
1 for 3.6 entitlement offer at A$0.50 per share to raise A$231M (equivalent to approximately US$155M). The entitlement offer resulted in the
issue of 462,631,313 new fully paid ordinary shares in the Company.
• Mr Stephanus (Dasa) Sutantio was appointed as a Non-Executive Director of the Company on 29 May 2020.
•
In November 2020 the Company executed a Definitive Agreement with Shanghai Decent for Nickel Mines to acquire a 70% equity interest in
the Angel Nickel Project, which consists of four 54 KVA RKEF lines with an annual nameplate production capacity of 36,000 tonnes of nickel
metal and a 380MW captive power plant.
• To fund its initial acquisition of a 30% interest in Angel Nickel, the Company successfully completed a fully underwritten 2 for 11
entitlement offer at A$0.94 per share to raise A$364M (equivalent to approximately US$275M). The entitlement offer resulted in the issue of
386,929,409 new fully paid ordinary shares in the Company.
In the opinion of the Directors, there were no other significant changes in the state of affairs of the Group during the year ended 31 December
2020 other than as disclosed in this Directors’ Report, or in the financial statements.
Impact of Legislation and Other External Requirements
On 12 January 2014 the Indonesian Government introduced a ban on the export of unprocessed minerals. As a consequence, the mining
operations at the Hengjaya mine ceased. Whilst the ban on the export of unprocessed minerals remains in place, mining operations were
recommenced in October 2015 following the signing of a series of ore offtake agreements to supply ore to Tsingshan group companies within
the IMIP as detailed above. There were no environmental or other legislative requirements during the year that have significantly impacted the
results or operations of the Group.
Environmental Regulations
The Group’s operations are subject to environmental regulations in the Republic of Indonesia.
The Board of Directors regularly monitors compliance with environmental regulations. The Directors are not aware of any significant breaches of
these regulations during the period covered by this report.
Likely Developments
Information as to likely developments in the operations of the Group and the expected results of those operations in subsequent years has not
been included in this report because disclosure of this information would be likely to result in unreasonable prejudice to the Group.
Nickel Mines Limited Annual Report 2020 17
DIRECTO RS’ REPORT
Indemnification of Officers and Auditors
During or since the end of the year, the Company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the
Company against a liability incurred by such an officer or auditor. In addition, the Company has not paid or agreed to pay, a premium in respect
of a contract insuring against a liability incurred by an officer or auditor.
Non-audit Services
During the year KPMG, the Group’s auditor, did not provide any services outside of audit services.
Events Subsequent to Balance Date
•
•
•
•
In January 2021, the Company secured the right to acquire an additional 10% interest in Angel Nickel. In February 2021, the Company
completed the initial acquisition of a 30% interest in Angel Nickel, following payment of US$180M, completing the first acquisition
consideration of US$210M.
At an Extraordinary General Meeting of shareholders held on 19 January 2021, 100% approval for the acquisition of 70% of Angel Nickel
was given by shareholders.
In January 2021, the Company made further voluntary early repayments of the Ranger senior debt facility, fully repaying the outstanding
facility amount at 31 December 2020 of $45M.
In January 2021, the Company declared a A$0.02 final dividend for the year ended 31 December 2020. The dividend was paid on 11
February 2021, totalling A$50.3M (US$39.0M).
Other than the matters outlined above, here has not arisen in the interval between the end of the financial year and the date of this report any
other item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
Remuneration Report - (Audited)
All amounts in this remuneration report are in Australian Dollars unless otherwise stated.
Principles of Compensation - (Audited)
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group. Key management
personnel comprise the Directors of the Company. No other employees have been deemed to be key management personnel. The policy of
remuneration of Directors and senior executives is to ensure the remuneration package properly reflects the person’s duties and responsibilities,
and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. Compensation levels have been, and
will be, set to be in line with Australian listed entities of equivalent size and comparable operations in order to attract and retain suitably qualified
and experienced key management personnel but also having regard to the prevailing financial capacity of the Company.
The Board is responsible for reviewing and evaluating its own performance. The evaluation process is intended to assess the Group’s business
performance, whether long term strategic objectives are being achieved and the achievement of individual performance objectives.
Remuneration generally consists of salary payments. The remuneration disclosed below represents the cost to the Group for the services
provided under these arrangements.
Consultancy Agreements with key management personnel
The Company has entered into an executive consultancy agreement with a company associated with Norman Seckold. Under this executive
consultancy agreement, the consultancy company of Mr Seckold agrees to make Mr Seckold available to perform the duties and responsibilities
of the position of Executive Chairman up to the IPO and Executive Deputy Chairman after the IPO. During the year ended 31 December 2020, the
consultancy company received a fee of A$12,500 per month, equating to $150,000 per annum. The consultancy agreement commenced on 1
May 2018 and continues until terminated in accordance with its terms. Prior to 1 May 2018 there was no formal contract with Mr Seckold.
The Company has entered into an executive consultancy agreement with a company associated with Justin Werner. Under this executive
consultancy agreement, the consultancy company of Mr Werner agrees to make Mr Werner available to perform the duties and responsibilities of
the position of Managing Director.
18 Nickel Mines Limited Annual Report 2020
DIRE CT ORS’ REPORT
During the year ended 31 December 2020, the consultancy company received a fee of US$29,167 per month, equating to US$350,000 per
annum, at the equivalent of A$524,553. The consultancy agreement commenced on 1 April 2018 and continues until terminated in accordance
with its terms. Prior to 1 April 2018 there was no formal contract with Mr Werner.
The Company has entered into an executive consultancy agreement with a company associated with Peter Nightingale. Under this executive
consultancy agreement, the consultancy company of Mr Nightingale agrees to make Mr Nightingale available to perform the duties and
responsibilities of the position of Chief Financial Officer and Executive Director. During the year ended 31 December 2020, the consultancy
company received a fee of A$25,000 per month, equating to $300,000 per annum. The consultancy agreement commenced on 1 April 2018 and
continues until terminated in accordance with its terms. Prior to 1 April 2018 there was no formal contract with Mr Nightingale.
Each Executive Director is entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of
the Board and any committee on which he or she serves. The consultancy agreements may be terminated by the Company or the consultancy
company by either party giving three months’ notice. The Company may terminate the consultancy agreements without notice in certain
circumstances, including but not limited to a breach of contract, criminal activity or serious misconduct by the consultancy company or the key
management personnel.
Each of the Company’s Non-Executive Directors have entered into Letters of Appointment with the Company to serve as Non-Executive Directors.
Each of the Letters of Appointment provide that amongst other things, in consideration for their services, the Company will pay the following fees
to the Non-Executive Directors:
Name
Robert Neale
James Crombie
Weifeng Huang
Position
Annual fee (A$)
Non-Executive Chairman
150,000
Non-Executive Director
Non-Executive Director
Mark Lochtenberg
Non-Executive Director
Dasa Sutantio
Yuanyuan Xu
Non-Executive Director
Non-Executive Director
50,000
50,000
50,000
50,000
50,000
No Directors or senior executives received performance related remuneration during the year ended 31 December 2020. There were no
remuneration consultants used by the Group during the year ended 31 December 2020, or in the prior period.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the Board has regard to the following indices in respect of the
current year ended 31 December 2020 and the previous five financial periods.
USD
Net profit/(loss) attributable to owners
of the Company
Dividends paid
12 Months to
31 December
2020
$
6 Months to
31 December
2019
$
2019
$
2018
$
2017
$
2016
$
110,610,841
56,504,374
65,525,988
(3,311,526)
(3,831,761)
(1,377,084)
15,441,648
-
-
-
-
-
The Board also considers non-financial indices in assessing the Group’s performance and the shareholders wealth. This includes obtaining
the permits and approvals to further develop the mining operations, identifying opportunities for potential strategic business partnerships and
ventures and the success of fund raising ventures.
Nickel Mines Limited Annual Report 2020 19
DIRECTO RS’ REPORT
Details of Remuneration for the Year Ended 31 December 2020 - (Audited)
Details of Director remuneration and the nature and amount of each major element of the remuneration of each Director of the Company are set
out below. All balances included are denominated in Australian dollars.
Remuneration for year ended 31 December 2020:
Short term
Post-
employment
Share based
payments
Salary and fees
A$
Superannuation
A$
Shares
A$
Total
A$
Proportion of
remuneration
performance
related
%
Value of
options as a
proportion of
remuneration
%
150,000
524,553
300,000
-
-
-
136,986
13,014
50,000
50,000
50,000
29,578
50,000
-
-
-
-
-
A$1,341,117
A$13,014
-
-
-
-
-
-
-
-
-
-
150,000
524,553
300,000
150,000
50,000
50,000
50,000
29,578
50,000
A$1,354,131
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Key management
personnel
Executive Directors
Norman Seckold
Justin Werner
Peter Nightingale
Non-Executive Directors
Robert Neale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio*
Yuanyuan Xu
Total
* Remuneration paid subsequent to his becoming a Director on 29 May 2020.
Remuneration for six months ended 31 December 2019:
Short term
Post-
employment
Share based
payments
Salary and fees
A$
Superannuation
A$
Shares
A$
Total
A$
Proportion of
remuneration
performance
related
%
Value of
options as a
proportion of
remuneration
%
75,000
255,675
150,000
68,493
25,000
25,000
25,000
25,000
-
-
-
6,507
-
-
-
-
A$649,168
A$6,507
-
-
-
-
-
-
-
-
-
75,000
255,675
150,000
75,000
25,000
25,000
25,000
25,000
A$655,675
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Key management
personnel
Executive Directors
Norman Seckold
Justin Werner
Peter Nightingale
Non-Executive Directors
Robert Neale
James Crombie
Weifeng Huang
Mark Lochtenberg
Yuanyuan Xu
Total
The total remuneration expense for the year ended 31 December 2020 of A$1,354,131 (six months to December 2019: A$655,675) has been
recognised in the Statement of Profit or Loss at the US$ equivalent of $937,929 (six months to December 2019: $448,785).
20 Nickel Mines Limited Annual Report 2020
DIRE CT ORS’ REPORT
Movement in Shares - (Audited)
The movement during the reporting year in the number of ordinary shares in the Company held directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
Robert Neale
Norman Seckold
Justin Werner
Peter Nightingale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio
Yuanyuan Xu
1 January 2020
Purchased
Sold
31 December 2020
500,000
123,715,661
25,016,297
22,265,654
6,580,000
-
11,693,333
-*
149,258,258
200,000
-
4,193,376
5,336,341
-
4,450,000
22,845,251
-
-
-
-
-
-
-
3,000,000
-
-
700,000
123,715,661
29,209,673
27,601,995
6,580,000
1,450,000
34,538,584
-
28,000,000
121,258,258
* Number held at date of his becoming a Director on 29 May 2020.
Robert Neale
Norman Seckold
Justin Werner
Peter Nightingale
James Crombie
Weifeng Huang
Mark Lochtenberg
Yuanyuan Xu
1 July 2019
500,000
123,715,661
25,016,297
22,265,654
6,580,000
-
11,693,333
149,258,258
Purchased
Sold
31 December 2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
123,715,661
25,016,297
22,265,654
6,580,000
-
11,693,333
149,258,258
Transactions with Key Management Personnel - (Audited)
Norman Seckold and Peter Nightingale hold a controlling interest in an entity, MIS Corporate Pty Limited, which provided full administrative
services, including administrative, accounting, company secretarial and investor relations staff both within Australia and Indonesia, rental
accommodation, services and supplies to the Group. Fees charged by MIS Corporate Pty Limited during the year ended 31 December 2020
amounted to A$600,625 (six months to 31 December 2019: A$290,250) which included a fee of A$35,000 per month and reimbursement of
consultant expenses incurred on behalf of the Group. At 31 December 2020 A$16,250 (31 December 2019: A$15,000) remained outstanding.
Nickel Mines Limited Annual Report 2020 21
DIRECTO RS’ REPORT
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
The lead auditor’s independence declaration is set out on page 23 and forms part of the Directors’ Report for the year ended 31 December 2020.
Signed at Sydney this 24th day of February 2021 in accordance with a resolution of the Board of Directors:
Robert Neale
Chairman
Norman Seckold
Deputy Chairman
22 Nickel Mines Limited Annual Report 2020
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
L EAD AUDIT OR’ S I NDEP ENDENCE DE CLAR ATION
To the Directors of Nickel Mines Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Nickel Mines Limited
for the year ended 31 December 2020 there have been:
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
To the Directors of Nickel Mines Limited
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
KPMG
PAR_POS_01
I declare that, to the best of my knowledge and belief, in relation to the audit of Nickel Mines Limited
for the year ended 31 December 2020 there have been:
PAR_DAT_01
PAR_CIT_01
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Stephen Board
Partner
KPM_INI_01
Brisbane
24th February 2021
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Stephen Board
Partner
Brisbane
24th February 2021
23
KPMG, an Australian partnership and a member firm of the KPMG
global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by
guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of
the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
23
KPMG, an Australian partnership and a member firm of the KPMG
global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by
guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of
the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
Nickel Mines Limited Annual Report 2020 23
Liability limited by a scheme approved under
Professional Standards Legislation.
CONSOLIDATED STATEMENT OF P RO FI T OR L OS S
AND OT HER COMP REH EN SIVE INCOM E
For the year ended 31 December 2020
USD
Sales revenue
Cost of sales
Depreciation and amortisation expense
Gross profit
Directors’ fees and consultants’ expenses
Share of profit of equity accounted investees
Other expenses
Results from operating activities
Financial income
Financial expense
Net financial (expense)/income
Profit before income tax
Income tax expense
Profit for the year/period
Other comprehensive income
Notes
22
4
5
5
8
12 months to
31 December 2020
$
6 months to
31 December 2019
$
523,492,413
(321,565,521)
(36,786,945)
165,139,947
(4,068,152)
-
(3,403,452)
157,668,343
2,166,484
(5,268,152)
(3,101,668)
154,566,675
236,059,160
(136,207,419)
(16,419,372)
83,432,369
(2,893,410)
1,239,032
(1,023,527)
80,754,464
13,035,913
(2,336,467)
10,699,446
91,453,910
(867,835)
(173,476)
153,698,840
91,280,434
Items that may be classified subsequently to profit or loss
(2,487)
(22,393)
Total comprehensive profit for the year/period
153,696,353
91,258,041
Profit attributable to:
Owners of the Company
Non-controlling interest
Profit for the year/period
Total comprehensive profit attributable to:
Owners of the Company
Non-controlling interest
110,610,841
43,087,999
56,504,374
34,776,060
153,698,840
91,280,434
110,608,851
43,087,502
56,486,460
34,771,581
Total comprehensive profit for the year/period
153,696,353
91,258,041
Earnings per share
Basic and diluted profit per share (cents) for the year/period
9
5.68
3.46
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
24 Nickel Mines Limited Annual Report 2020
USD
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Other current assets
Total current assets
Non-current assets
Other non-current assets
Property, plant and equipment
Deposit
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax payable
Provision
Borrowings
Total current liabilities
Non-current liabilities
Provision – rehabilitation
Deferred income tax liability
Other non-current liability
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity attributable to equity holders of the Company
Non-controlling interest
Total equity
CONSOLI DATE D STATEMENT
OF FI NANCIAL P OSITION
As at 31 December 2020
31 December 2020
$
31 December 2019
$
Notes
18
6
10
7
7
11
16
15
12
13
8
13
14
351,445,322
117,758,937
61,285,049
8,150,977
538,640,285
9,868,209
600,763,595
30,000,000
55,404,895
696,036,699
49,820,013
97,208,882
56,238,558
1,293,301
204,560,754
9,014,394
628,516,578
-
55,404,895
692,935,867
1,234,676,984
897,496,621
40,259,761
3,751,344
841,243
12,857,143
57,709,491
1,929,408
55,404,895
1,261,425
32,142,857
90,738,585
52,489,262
652,704
662,427
4,333,333
58,137,726
149,919
55,404,895
1,018,309
60,666,667
117,239,790
148,448,076
175,377,516
1,086,228,908
722,119,105
732,929,135
19,204,534
187,927,099
940,060,768
146,168,140
315,501,048
19,206,524
92,757,906
427,465,478
294,653,627
1,086,228,908
722,119,105
The above consolidated statement of financial position should be read in conjunction with accompanying notes.
Nickel Mines Limited Annual Report 2020 25
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2020
USD
Notes
Share capital
$
Retained profits
$
Reserves
$
Total
$
Non-controlling interest
$
Total equity
$
Balance at 1 July 2019
Total comprehensive income for the period
Profit for the period
Remeasurement of defined benefit obligation
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Issue of shares
Costs of issue
Non-controlling interest arising on acquisition
Transaction with non-controlling interest without a change of control
275,938,304
36,253,532
(639,437)
311,552,399
143,214,479
454,766,878
-
-
-
56,504,374
-
56,504,374
-
56,504,374
(17,914)
(17,914)
(17,914)
56,486,460
14
40,000,000
(437,256)
-
-
-
-
-
-
-
-
-
40,000,000
(437,256)
-
19,863,875
19,863,875
34,776,060
(4,479)
34,771,581
-
-
136,531,442
(19,863,875)
91,280,434
(22,393)
91,258,041
40,000,000
(437,256)
136,531,442
-
Balance at 31 December 2019
315,501,048
92,757,906
19,206,524
427,465,478
294,653,627
722,119,105
Balance at 1 January 2020
Total comprehensive income for the year
Profit for the year
Remeasurement of defined benefit obligation
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Issue of shares
Costs of issue
Dividends
Transaction with non-controlling interest without a change of control
Distributions to non-controlling interest
315,501,048
92,757,906
19,206,524
427,465,478
294,653,627
722,119,105
-
-
-
110,610,841
-
110,610,841
43,087,999
153,698,840
-
110,610,841
(1,990)
(1,990)
(1,990)
(497)
(2,487)
110,608,851
43,087,502
153,696,353
14
14
14
15
430,033,781
(12,605,694)
-
-
-
-
-
(15,441,648)
-
-
-
-
-
-
-
430,033,781
(12,605,694)
(15,441,648)
-
-
-
-
-
(147,018,262)
(44,554,727)
430,033,781
(12,605,694)
(15,441,648)
(147,018,262)
(44,554,727)
Balance at 31 December 2020
732,929,135
187,927,099
19,204,534
940,060,768
146,168,140
1,086,228,908
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
26 Nickel Mines Limited Annual Report 2020
CONSOLI DATE D STATEMENT
OF CASH FLOWS
For the year ended 31 December 2020
12 months to 31
December 2020
$
6 months to 31
December 2019
$
Notes
517,640,552
(358,863,954)
301,618
(9,123,479)
USD
Cash flows from operating activities
Cash receipts from customers
Cash payments to employees and suppliers
Interest received
Taxes and fees paid
Net cash from operating activities
18
149,954,737
Cash flows from investing activities
Payments for property, plant and equipment
Payments for deposit
Payments for investments in controlled entities
Payments for acquisition of controlled entity
Cash on acquisition of controlled entity
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Costs of issue
Dividend distributions
Contribution by/(distributions to) non-controlling interest
Repayment of borrowings and interest changes
Net cash from/(used in) financing activities
Net increase in cash and cash equivalents
Effect of exchange rate adjustments on cash held
Cash and cash equivalents at the beginning of the year/period
16
15
15
15
14
14
14
13
(7,387,864)
(30,000,000)
(147,018,262)
-
-
(184,406,126)
430,033,781
(12,359,577)
(15,441,648)
(43,330,951)
(25,268,152)
333,633,453
299,182,064
2,443,245
49,820,013
212,696,681
(169,899,088)
89,507
(4,677,776)
38,209,324
(29,617,317)
-
-
(1,400,000)
7,244,743
(23,772,574)
-
(444,893)
-
16,986,235
(29,886,953)
(13,345,611)
1,091,139
(274,103)
49,002,977
Cash and cash equivalents at the end of the year/period
351,445,322
49,820,013
Non-cash financing and investing activities:
The acquisition of a controlled entity disclosed in Note 15 included a non-cash transaction of $120,000,000 which was funded through the
issue of $40,000,000 in shares and $80,000,000 in debt.
Non-cash investing activities
Payments for acquisition of controlled entity
Total non-cash investing activities
Non-cash financing activities
Proceeds from issue of shares
Proceeds from borrowings
Total non-cash financing activities
15
14
13
-
-
-
-
-
(120,000,000)
(120,000,000)
40,000,000
80,000,000
120,000,000
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Nickel Mines Limited Annual Report 2020 27
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 1 - REPORTING ENTITY
Nickel Mines Limited (the ‘Company’) is a company domiciled in Australia. The consolidated financial report for the year ended 31 December
2020 comprises the Company and its subsidiaries (together referred to as the ‘Group’). The Group is a for-profit entity and is involved in nickel
ore mining and nickel pig iron production operations.
NOTE 2 - BASIS OF PREPARATION
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (‘AASBs’)
adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The consolidated financial report of the Group
complies with International Financial Reporting Standards (‘IFRS’) and interpretations adopted by the International Accounting Standards Board
(‘IASB’).
The financial report was authorised for issue by the Directors on 24 February 2021.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are
measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in United States dollars, which is the Company’s functional currency.
Change of financial year end
The financial year of the Company was changed from 30 June to 31 December in 2019 to align the year end date of the Company with that of
its subsidiary companies in both Indonesia and Singapore to improve the efficiency of the Company’s financial reporting and planning cycles.
Accordingly, the financial period reported in these financial statements covers the twelve month period from 1 January 2020 to 31 December
2020. Comparative figures for these financial statements cover the six month period from 1 July 2019 to 31 December 2019. The results for the
current period are therefore not directly comparable with the results for the prior period.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the
most significant effect on the amount recognised in the financial statements are described in the following notes:
• Note 8 – Income tax expense and the recoverability of deferred tax assets.
• Note 15 – Impairment of goodwill.
28 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Non-controlling interest
The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. Acquisitions of
non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is
recognised as a result of such transactions.
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in
preparing the consolidated financial statements. Where a controlled entity issues shares to minority interests which does not result in loss of
control by the Group, any gain or loss arising on the Group’s interest in the controlled entity is recognised directly in equity.
Investments in equity-accounted investees
The Group’s interests in equity-accounted investees comprise interests in associates.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating
policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes
transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other
comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases.
Nickel ore and nickel pig iron sales revenue
Nickel ore and nickel pig iron sales revenue is measured based on the consideration specified in a contract with a customer. The Group
recognises revenue when it transfers control over goods or a service to a customer.
Invoices for nickel ore sales are generated once a month upon receipt of assay results and are usually payable within 10 working days. Pro-
forma invoices for exports of nickel pig iron are generated based on the loading inspection report and a final invoice is issued based on the
nickel content delivered, following receipt of third party assay results. They are usually payable within 60 days. No discounts are provided for
nickel ore and nickel pig iron products, but adjustments are made to the final sale price for items including final nickel grade, moisture content
and nickel content.
Nickel Mines Limited Annual Report 2020 29
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to United States dollars at the foreign exchange rate ruling at that
date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair value are translated to United States dollars at foreign exchange
rates ruling at the dates the fair value was determined.
The Group transacts in the following foreign currencies: Australian dollars (A$ or AUD), Indonesian Rupee (IDR) and Singapore Dollars (SGD).
Financial statements of foreign operations
The assets and liabilities of foreign entities are translated to United States dollars at the foreign exchange rates ruling at the reporting date. The
revenues and expenses of foreign operations are translated to United States dollars at rates using a monthly average rate for the month in which
the transaction occurred. Foreign exchange differences arising on retranslation are recognised directly in the foreign currency translation reserve
(‘FCTR’), a separate component of equity.
Foreign exchange gains and losses arising from a monetary item receivable or payable to a foreign operation, the settlement of which is neither
planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in
the FCTR.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to United
States dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to United States dollars
using a monthly average rate for the month in which the transaction occurred. When a foreign operation is disposed of, in part or in full, the
relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal.
At 31 December 2020, the functional currency of all components in the Group is United States dollars. The FCTR represents the foreign exchange
differences which arose on retranslation in prior years on subsidiaries which have not yet been disposed.
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Depreciation and amortisation
Mining properties’ amortisation rate is applied on a straight-line basis over the remaining term of the mining licence. The amortisation is
included in the costs of conversion of inventories.
Depreciation is charged to the income statement using a reducing balance method from the date of acquisition using the following rates:
•
•
Furniture and fittings and plant and machinery are depreciated at 25%.
Buildings and infrastructure are depreciated at 5%.
• Mine infrastructure assets are depreciated at 5%.
• Office equipment is depreciated at rates of between 25% and 40%.
•
Plant and machinery are depreciated at rates if between 6.25% and 12.5%.
• Motor vehicles are depreciated at 25%.
30 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Impairment
Financial assets
The Group recognises expected credit losses (‘ECLs’), where material, on financial assets measured at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12 month ECLs:
• Other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are measured at an amount equal to lifetime ECLs. At each reporting date, the Group
assesses whether financial assets carried at amortised cost and debt securities at fair value through profit or loss are credit impaired.
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its
entirety or a portion thereof.
Non-financial assets
The carrying amounts of the Group’s assets, other than deferred tax assets and inventories, are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Goodwill,
being an indefinite life intangible asset, is subject to annual impairment testing, in which the goodwill is allocated to a cash generating unit
(‘CGU’) for impairment testing and the value-in-use is compared to the carrying value of goodwill.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is
recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Reversals of impairment
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised. Any impairment charges taken up against goodwill
balances are not reversed.
Nickel Mines Limited Annual Report 2020 31
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Share capital
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Finance income and finance costs
The Group’s finance income and finance costs include:
•
•
interest income;
interest expense;
• dividend income;
•
•
the foreign currency gain or loss on financial assets and financial liabilities; and
the gain on the remeasurement to fair value of any pre-existing interest in an acquiree in a business combination.
Interest income or interest expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date
on which the Group’s right to receive payment is established.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the
financial instrument to:
•
•
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
In calculating interest income and interest expense, the effective interest rate is applied to the gross carrying amount of the asset (when the
asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent
to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset
is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings 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 borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.
Borrowing costs which are directly attributable to the Group’s exploration and evaluation and development activities are capitalised in relation to
qualifying assets.
32 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Income tax
Income tax on the income statement for the year comprises current and deferred tax. Income tax is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for:
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
Goods and services tax and Value Added Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’) or value added tax (‘VAT’), except where the
amount of GST or VAT incurred is not recoverable from the taxation authority. In these circumstances, the GST or VAT is recognised as part of the
cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST or VAT included. The net amount of GST or VAT recoverable from, or payable to
taxation authorities is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST or VAT components of cash flows arising from investing and
financing activities which are recoverable from, or payable to taxation authorities are classified as operating cash flows.
Employee benefits
Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at undiscounted
amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as
workers compensation insurance and payroll tax.
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on average costs over the relevant period
of production, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing
them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling
expenses.
Nickel Mines Limited Annual Report 2020 33
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when
appropriate, the risks specific to the liability.
Site restoration
In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration in respect of disturbed
land, and the related expense, is recognised when the land is disturbed.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets
and liabilities. Fair values have been determined for measurement and/or disclosure purposes by refencing the acquisition cost of assets
and liabilities on the date of acquisition and if available the findings of Independent Expert’s Reports who prepared a valuation on a recent
comparable transaction basis. Where applicable, further information about the assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
Exploration, evaluation and development expenditure
Exploration and evaluation costs, including the costs of acquiring licences, are capitalised at cost or fair value, as exploration and evaluation
assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the
statement of comprehensive income.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
•
the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
• activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or
other wise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability
and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing,
exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall
not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration
and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation
expenditure to mining property and development assets within property, plant and equipment.
34 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Leases accounting policy
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration. The Group applies a single measurement recognition and approach for all
leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-
of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the
lease, if the lease term reflects the Group’s exercising the option to terminate. Variable lease payments that do not depend on an index or a
rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the
interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index
or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Nickel Mines Limited Annual Report 2020 35
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated at
fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive
the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset
or liability.
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the
Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously.
On initial recognition, a financial asset is classified as measured at:
•
•
•
amortised cost;
fair value through other comprehensive income (‘FVOCI’) – equity investment; or
fair value through profit or loss (‘FVTPL’).
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing
financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the
business model.
A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as fair value through profit or loss
if:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in
the investment’s fair value through other comprehensive income. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or fair value through other comprehensive income as described above
are measured at fair value through profit or loss. This includes all derivative financial assets. On initial recognition, the Company may
irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other
comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would
otherwise arise.
36 Nickel Mines Limited Annual Report 2020
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
Subsequent measurement and gains and losses
Financial assets at amortised cost
Equity instruments at FVOCI
Financial assets at FVTPL
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss. Any gain or
loss on derecognition is recognised in profit or loss.
These assets are subsequently measured at fair value. Dividends
are recognised as income in profit or loss unless the dividend clearly
represents a recovery of part of the cost of the investment. Other net
gains and losses are recognised in other comprehensive income and
are never reclassified to profit or loss.
These assets are subsequently measured at fair value. Net gains and
losses, including any interest or dividend income, are recognised in
profit or loss.
Changes in significant accounting policies
All new standards and interpretations effective for periods after 1 January 2019 have been adopted by the Group in the preparation of these
financial statements and have not had any material effect on the financial statements presented.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are able to be early adopted for annual periods beginning after 1
January 2020 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant
effect on the financial statements of the Group.
NOTE 4 - OTHER EXPENSES
Audit fees – KPMG audit of financial reports
Travel
Legal fees
Withholding tax expense
Other
NOTE 5 - FINANCIAL INCOME AND FINANCE EXPENSE
Interest income
Interest expense
Net change in fair value of investment in associate
Foreign exchange gain
12 months to
31 December 2020
$
6 months to
31 December 2019
$
336,757
70,265
64,158
2,795,999
136,273
3,403,452
518,573
(5,268,152)
-
1,647,911
(3,101,668)
232,490
191,119
167,804
-
432,114
1,023,527
228,603
(2,336,467)
7,400,232
5,407,078
10,699,446
Nickel Mines Limited Annual Report 2020 37
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 6 - TRADE AND OTHER RECEIVABLES
Sales taxes receivable
Trade receivables
NOTE 7 - OTHER ASSETS
Current
Prepayments
Non-current
Prepayments
Other
31 December 2020
$
31 December 2019
$
23,352,812
94,406,125
117,758,937
12,539,843
84,669,039
97,208,882
8,150,977
1,293,301
8,466,970
1,401,239
9,868,209
8,629,570
384,824
9,014,394
12 months to
31 December 2020
$
6 months to
December 2019
$
NOTE 8 - INCOME TAX EXPENSE
Profit before tax – continuing operations
154,566,675
91,453,910
Prima facie income tax expense/(benefit) at the Australian tax rate of 30%
(31 December 2019: 30%)
46,370,003
27,436,173
Increase in income tax expense/(benefit) due to:
- Effect of tax rates in foreign jurisdictions
- Non-deductible/non-assessable income
- Effect of deferred tax assets for tax losses not brought to account
- Effect of net deferred tax assets not brought to account
- Effect of foreign currency conversion
Income tax expense – current and deferred
Deferred tax liabilities have been recognised in respect of the following items:
Net deductible temporary differences – property, plant and equipment
Deferred tax assets have not been recognised in respect of the following items:
Net deductible temporary differences
Tax losses
(50,130,131)
6,249,619
(211,341)
(1,621,656)
211,341
867,835
(28,714,598)
2,002,293
123,125
(570,391)
(103,127)
173,476
55,404,895
55,404,895
55,404,895
55,404,895
4,802,482
1,065,326
5,867,808
1,826,485
872,118
2,698,603
The deductible temporary differences and tax losses do not expire under the current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise
the benefits of the deferred tax asset. The Company does not have any franking credits.
38 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
12 months to
31 December 2020
$
6 months to
31 December 2019
$
NOTE 9 - PROFIT PER SHARE
Basic and diluted profit per share have been calculated using:
Net profit for the year attributable to equity holders of the Company
110,610,841
56,504,374
Weighted average number of ordinary shares (basic and diluted)
Issued ordinary shares at the beginning of the year
- Effect of shares issued on 14 August 2019
- Effect of shares issued on 29 May 2020
- Effect of shares issued on 16 June 2020
- Effect of shares issued on 14 December 2020
- Effect of shares issued on 24 December 2020
Nº of shares
Nº of Shares
1,665,468,329
1,525,495,624
-
105,740,250
211,367,737
56,522,197
13,569,602
1,812,806
-
-
-
-
Weighted average number of shares at the end of the year
1,948,740,671
1,631,235,874
NOTE 10 - INVENTORY
Inventory – nickel ore stockpiles
Inventory – nickel pig iron production raw materials
Inventory – nickel pig iron
31 December 2020
$
31 December 2019
$
661,338
54,079,991
6,543,720
61,285,049
237,071
43,306,276
12,695,211
56,238,558
During the year ended 31 December 2020, the Company’s 80% subsidiary PT Hengjaya Mineralindo supplied nickel ore to the Company’s
subsidiaries PT Hengjaya Nickel Industry and PT Ranger Nickel Industry under monthly contracts to supply 100,000 wmt per month between
each entity for the year ended 31 December 2020.
Nickel pig iron production raw materials includes nickel ore acquired by PT Hengjaya Nickel Industry and PT Ranger Nickel Industry from PT
Hengjaya Mineralindo, operator of the Hengjaya mine. This continues to be valued at the PT Hengjaya Mineralindo cost of production.
Inventories are measured at the lower of cost and net realisable value.
Nickel Mines Limited Annual Report 2020 39
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 11 - PROPERTY, PLANT AND EQUIPMENT
Furniture and fittings
Furniture and fittings – cost
Accumulated depreciation
Net book value
Mine infrastructure assets
Mine infrastructure assets – cost
Accumulated depreciation
Net book value
Buildings and land
Buildings – cost
Accumulated depreciation
Net book value
Mining properties
Mining properties – cost
Accumulated amortisation
Net book value
Office equipment
Office equipment – cost
Accumulated depreciation
Net book value
Plant and machinery
Plant and machinery – cost
Accumulated depreciation
Net book value
Motor vehicles
Motor vehicles – cost
Accumulated depreciation
Net book value
31 December 2020
$
31 December 2019
$
313,144
(99,830)
213,314
7,306,786
(1,356,267)
5,950,519
65,843,834
(5,449,163)
60,394,671
31,324,712
(4,045,761)
27,278,951
1,145,295
(518,962)
626,333
173,726
(58,398)
115,328
5,900,493
(1,187,941)
4,712,552
63,285,275
(2,200,715)
61,084,560
27,991,023
(2,540,425)
25,450,598
749,743
(316,015)
433,728
557,548,908
(51,620,499)
505,928,409
556,552,301
(20,097,968)
536,454,333
663,136
(291,738)
371,398
459,293
(193,814)
265,479
Total property, plant and equipment
600,763,595
628,516,578
Impairment
After consideration of both internal and external factors, the Directors believe that no indicators of impairment existed at 31 December 2020
and have therefore not completed an impairment assessment over the carrying value of the Group’s property, plant and equipment assets at 31
December 2020.
40 Nickel Mines Limited Annual Report 2020
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below.
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
Furniture and fittings
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Mine infrastructure assets
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Buildings and land
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Mining properties
Carrying amount at beginning of year
Additions
Amortisation
Net book value
Office equipment
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Plant and machinery
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Motor vehicles
Carrying amount at beginning of year
Additions
Depreciation
Net book value
12 months to
31 December 2020
$
6 months to
31 December 2019
$
115,328
139,418
(41,432)
213,314
4,712,552
1,406,293
(168,326)
5,950,519
61,084,560
2,558,560
(3,248,449)
60,394,671
25,450,598
3,333,690
(1,505,337)
27,278,951
433,728
395,551
(202,946)
626,333
23,784
103,815
(12,271)
115,328
2,359,157
2,374,449
(21,054)
4,712,552
30,055,046
32,627,666
(1,598,152)
61,084,560
26,264,813
154,052
(968,267)
25,450,598
349,763
130,496
(46,531)
433,728
536,454,333
996,606
(31,522,530)
505,928,409
280,713,488
270,525,421
(14,784,576)
536,454,333
265,479
203,843
(97,924)
371,398
324,443
110,455
(169,419)
265,479
Total property, plant and equipment
600,763,595
628,516,578
Nickel Mines Limited Annual Report 2020 41
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 12 - TRADE AND OTHER PAYABLES
Current
Creditors
Accruals
Other
NOTE 13 - BORROWINGS
Current
Ranger debt facility
Non-current
Ranger debt facility
Ranger debt facility
31 December 2020
$
31 December 2019
$
33,633,284
3,161,092
3,465,385
40,259,761
50,156,272
2,150,921
182,069
52,489,262
12,857,143
4,333,333
32,142,857
60,666,667
In August 2019, as part of the financing package to increase the Company’s interest in the Ranger Nickel project from 17% to 60% the Company
secured a senior debt facility agreement with a Shanghai Decent associated company. Key terms of the Ranger debt facility agreement are
outlined on the following page:
Key terms:
• Facility amount of $80,000,000.
•
•
Interest rate of 6% plus the greater of (i) 3-month US$ LIBOR or (ii) 2.5% per annum.
Interest is payable on the last day of each interest period of one month.
• Principal to be repaid in quarterly instalments by repaying on the last business day of November, February, May and August (beginning on 30
November 2020) an amount equal to 1/15th of the amount borrowed under the debt facility.
• Nickel Mines granted security over its equity interests in Ranger Investment Private Limited, the Singaporean entity which holds a 100%
indirect interest in the Ranger Nickel project, and its equity interest in Hengjaya Holdings Private Limited, the Singaporean entity which holds
a 100% indirect interest in the Hengjaya Nickel project. Due to acquisition of additional interest in controlled entities, on 30 June 2020 the
Company’s interest in the Hengjaya Nickel and Ranger Nickel projects increased to 80% in each. Refer to Note 15 for further details.
Prior to 31 December 2020, the Company made prepayments against the Ranger debt facility totalling $35,000,000 since inception of the loan,
which includes $29,666,667 of voluntary early prepayments and includes $20,000,000 paid in the year ended 30 December 2020. Prepayments
are applied on a pro rata basis against all repayment dates following the prepayment. Subsequent to year end the Company made repayments
totalling US$45,000,000 against the Ranger Debt Facility, extinguishing the Debt Facility.
42 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
Number of shares
$
1,525,495,624
139,972,705
-
1,665,468,329
849,560,722
-
2,515,029,051
275,938,304
40,000,000
(437,256)
315,501,048
430,033,781
(12,605,694)
732,929,135
NOTE 14 - ISSUED CAPITAL
Ordinary shares on issue at 30 June 2019 - fully paid
Issue of shares - cash
Costs of issue
Ordinary shares on issue at 31 December 2019 - fully paid
Issue of shares - cash
Costs of issue
Ordinary shares on issue at 31 December 2020 - fully paid
Year ended 31 December 2020
In December 2020, through an Accelerated Non-Renounceable Entitlement Offer, the Group issued 386,929,409 shares for cash totalling
A$363,713,644 (equivalent to $274,927,849). There were no amounts unpaid on the shares issued and share issue costs amounted to
$5,646,064.
In May and June 2020, through an Accelerated Non-Renounceable Entitlement Offer, the Group issued 462,631,313 shares for cash totalling
A$231,315,657 (equivalent to $155,105,932). There were no amounts unpaid on the shares issued and share issue costs amounted to
$6,959,630.
6 months to 31 December 2019
In August 2019, the Group issued 139,972,705 shares for cash totalling A$57,388,809 (equivalent to $40,000,000). There were no amounts
unpaid on the shares issued and share issue costs amounted to $437,256.
Options
There were no options granted, exercised or lapsed unexercised during the year ended 31 December 2020 or the period ended 31 December
2019.
Dividends
The company paid maiden interim unfranked dividend of A$0.01 per share during the year ended 31 December 2020 amounting to $15,441,648.
There was no dividend paid or declared during the period ended 31 December 2019. Subsequent to year end the Company declared a final
dividend of A$0.02 per share, being a distribution of $38,987,980.
Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. The holders of
ordinary shares are entitled to receive dividends as declared from time to time.
Nickel Mines Limited Annual Report 2020 43
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 15 - CONTROLLED ENTITIES
Acquisition of controlled entities
In June 2020 Nickel Mines notified Shanghai Decent of its intention to exercise its option to acquire a further 20% of the issued and paid-up
share capital of Hengjaya Holdings Private Limited and Ranger Investment Private Limited, being the respective Singaporean domiciled holding
companies that wholly own PT Hengjaya Nickel Industry and PT Ranger Nickel Industry, the Indonesian PMA companies that in turn own 100%
of the Hengjaya Nickel and Ranger Nickel Projects. The acquisitions were completed on 30 June 2020, with the Company paying Shanghai
Decent and its nominees US$120M for the additional 20% interest in the two Projects, plus a settlement of $23,268,607 for the 20% of the
undistributed retained earnings attributable to Shanghai Decent remaining in both PT Hengjaya Nickel Industry and PT Ranger Nickel Industry
to the end of April 2020. A final settlement of the undistributed retained earnings at 30 June 2020 of $3,749,655 was made in September 2020
following the release of the reviewed half year financial statements.
Particulars in relation to controlled entities:
Ordinary shares – Group interest
31 December 2020
%
Ordinary shares – Group interest
31 December 2019
%
Parent entity
Nickel Mines Limited
Controlled entities
PT Hengjaya Mineralindo (incorporated in Indonesia)
Hengjaya Holdings Private Limited (incorporated in Singapore)
Hengjaya Nickel Private Limited (incorporated in Singapore)
PT Hengjaya Nickel Industry (incorporated in Indonesia)
Ranger Investment Private Limited (incorporated in Singapore)
Ranger Nickel Private Limited (incorporated in Singapore)
PT Ranger Nickel Industry (incorporated in Indonesia)
80
80
80
80
80
80
80
80
60
60
60
60
60
60
44 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 15 - CONTROLLED ENTITIES (Cont’d)
Non-controlling interests
The following table summarises the information relating to the Group’s subsidiaries that have a material non-controlling interest, before any
intra-group eliminations.
Hengjaya Holdings
Private Limited and
its controlled entities
PT Hengjaya Mineralindo
Ranger Investment
Private Limited and
its controlled entities
31 December
2020
$
31 December
2019
$
31 December
2020
$
31 December
2019
$
31 December
2020
$
31 December
2019
$
Non-controlling interest percentage
20%
40%
20%
20%
20%
40%
Current assets
Non-current assets
Current liabilities
106,417,123
99,544,279
16,066,904
5,887,486
105,522,401
76,216,530
319,827,057
336,509,990
39,200,203
31,198,951
306,193,652
322,589,337
(24,271,607)
(19,833,708)
(9,657,655)
(7,547,875)
(25,007,858)
(26,352,730)
Non-current liabilities
(29,227,624)
(29,219,349)
(38,992,219)
(23,560,781)
(26,188,637)
(26,185,546)
Net assets
372,744,949
387,001,212
6,617,234
5,977,781
360,519,558
346,267,591
Carrying amount of non-controlling
interest (2)
74,730,150
155,131,585
1,323,446
1,015,006
70,114,545
138,507,036
Revenue
Profit
260,273,425
132,292,676
25,139,9191)
12,829,854 (1)
263,218,988
103,766,484
72,768,662
48,294,053
1,544,688
1,368,492
77,137,207
38,661,314
Other comprehensive income
-
-
(2,487)
-
-
-
Total comprehensive income
72,768,662
48,294,053
1,542,201
1,368,492
77,137,207
38,661,314
Profit/(loss) allocated to
non-controlling interest (2)
20,996,983
19,317,621
309,435
(6,087)
21,781,581
15,464,526
Other comprehensive income
allocated to non-controlling interest
(1)
-
-
(497)
-
-
-
Includes nickel ore sales from the Company’s controlled entity PT Hengjaya Mineralindo to the Company’s controlled entities PT Hengjaya
Nickel Industry and PT Ranger Nickel Industry.
(2)
After intra-group eliminations.
Nickel Mines Limited Annual Report 2020 45
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 15 - CONTROLLED ENTITIES (Cont’d)
Goodwill
Opening balance
Goodwill arising on acquisition of Ranger Investment Private Limited
12 months to
31 December 2020
$
6 months to
31 December 2019
$
55,404,895
-
55,404,895
29,219,349
26,185,546
55,404,895
During the year the goodwill balance was allocated to a cash generating unit (‘CGU’) for impairment testing. The Directors consider there to be
no impairment on the basis that the recoverable value, determined based on value-in-use, is higher than the carrying value of goodwill. The
underlying cash flows of each CGU (RKEF plant) have outperformed the original valuation prepared for the CGU’s on their acquisition.
The key assumptions used in the original cash flow forecasts are set out below:
RKEF Project
Carrying
amount
of goodwill
NPI
production
(tpa)
Hengjaya Nickel
$29,219,349
Ranger Nickel
$26,185,545
150,000
150,000
NPI
Grade
(%)
11.0
11.0
Nickel
Production
(tpa)
16,500
16,500
Nickel
Price
(p/t)
$13,370
$13,370
Cash
costs
($/t)
$8,142
$8,174
Discount
Rate
(%)
Model
Period
(years)
10
10
37
37
NOTE 16 - DEPOSIT
In October 2020, the Company signed a Memorandum of Understanding (‘MoU’) and subsequently a Definitive Agreement with Shanghai
Decent to acquire a 70% interest in Angel Capital Private Limited, the Singaporean domiciled holding company that wholly owns PT Angel
Nickel Industry, an Indonesian PMA company that owns 100% of the Angel Nickel project, a development project within the Indonesia Weda
Bay Industrial Park on Halmahera Island in Indonesia’s North Maluku province. Subsequent to year end, it was agreed by both parties that the
Company’s equity participation in the Angel Nickel project would increase to 80%.
Under the amended terms of the Definitive Agreement the Company will acquire an 80% interest in Angel Nickel in accordance with the following
staged payments:
• Stage 1 - $210M by 31 March 2021 to secure an initial 30% interest. In February 2021, the Company completed the Stage 1 acquisition of a
30% interest in Angel Nickel.
• Stage 2 - $350M by 31 December 2021 to secure a further 50% interest. If the Stage 2 acquisition is completed by 30 June 2021, the
purchase price will be discounted to $344M.
On signing the MoU, the Company paid a $10M ‘good faith deposit’ to Shanghai Decent and upon execution of the Definitive Agreement made
a further $20M ‘down payment’ to Shanghai Decent. In February 2021, the Company completed the Stage 1 acquisition of a 30% interest in
Angel Nickel by payment of $180M which, together with the $30M deposit which had been paid from existing cash reserves, completed the first
acquisition consideration payment of $210M.
46 Nickel Mines Limited Annual Report 2020
NOTE 17 - RELATED PARTIES
Key management personnel of the Group are the following:
Robert Neale
Justin Werner
James Crombie
Mark Lochtenberg
Yuanyuan Xu
Chairman (Non-Executive)
Managing Director
Director (Non-Executive)
Director (Non-Executive)
Director (Non-Executive)
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
Norman Seckold
Peter Nightingale
Weifeng Huang
Dasa Sutantio
Deputy Chairman
Director and Chief Financial Officer
Director (Non-Executive)
Director (Non-Executive)
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the
Group’s key management personnel for the year ended 31 December 2020. The total remuneration paid to key management personnel of the
Group during the year is as follows:
Key Management Personnel compensation
Short term employee benefits
Key Management Personnel transactions
12 months to
31 December 2020
$
6 months to
31 December 2019
$
937,929
448,785
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or joint control
over the financial or operating policies of those entities. A number of these entities transacted with the Group during the year. The aggregate
value of transactions and outstanding balances (excluding the compensation noted above) relating to key management personnel and entities
over which they have control or joint control were as follows:
Norman Seckold and Peter Nightingale hold an interest in an entity, MIS Corporate Pty Limited (‘MIS’), which provided full administrative
services, including administrative, accounting, company secretarial and investor relations staff both within Australia and Indonesia, rental
accommodation, services and supplies, to the Group. On 1 January 2019 MIS agreed to provide these services for a fee of A$35,000 per month.
This fee will be reviewed quarterly by the Company and MIS. Fees charged by MIS during the year amounted to A$600,625 (6 months to 31
December 2019: A$290,250) which included the agreed monthly fee and the reimbursement of consultant expenses incurred by MIS on behalf
of the Group. At 31 December 2020 A$16,250 (31 December 2019: A$15,000) remained outstanding.
Apart from the details disclosed in this note, no Director or other related party has entered into a material contract with the Group during the year
and there were no material contracts involving Director’s interests subsisting at year end.
Nickel Mines Limited Annual Report 2020 47
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 18 - STATEMENT OF CASH FLOWS
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents as shown in the Statement of Cash Flows is
reconciled to the related items in the Statement of Financial Position as follows:
Bank balances
(b) Reconciliation of net loss from ordinary activities after
tax to net cash used in operating activities
Profit from ordinary activities after tax
Non-cash items
Depreciation and amortisation
Foreign exchange gain
Interest expense
Net change in fair value of investment in associate
Changes in assets and liabilities
Trade receivables and other assets
Inventory
Provisions
Trade and other payables
Net cash from operating activities
12 months to
31 December 2020
$
6 months to
31 December 2019
$
351,445,322
49,820,013
153,698,840
91,280,434
36,786,945
(1,647,911)
5,268,152
-
(27,407,730)
(5,046,491)
1,958,305
(13,655,373)
149,954,737
16,419,372
(5,407,078)
2,336,467
(7,400,232)
(53,212,581)
(47,321,083)
116,150
41,397,875
38,209,324
48 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 18 - STATEMENT OF CASH FLOWS (Cont’d)
(c) Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Loans and borrowings
$
Share capital
$
Total
$
Opening balance at 1 January 2020
65,000,000
315,501,048
380,501,048
Changes from financing activities
Proceeds from issue of shares
Costs of issue
Repayment of borrowings
Repayment of interest
Total changes from financing cash flows
Other changes
Finance expenses
Total other changes
Closing balance at 31 December 2020
-
-
(20,000,000)
(5,268,152)
(25,268,152)
5,268,152
5,268,152
45,000,000
430,033,781
(12,605,694)
-
-
417,428,087
-
-
430,030,354
(12,602,267)
(20,000,000)
(5,268,152)
392,159,935
5,268,152
732,929,135
777,929,135
NOTE 19 - FINANCIAL INSTRUMENTS DISCLOSURE
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management
policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and
adherence to limits. These policies are reviewed regularly to reflect changes in market conditions and the Group’s activities.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, currency risk and interest rate risk. The summaries
below present information about the Group’s exposure to each of these risks, their objectives, policies and processes for measuring and
managing risk, the management of capital and financial instruments.
Credit risk
Credit risk arises mainly from the risk of counterparties defaulting on the terms of their agreements. The carrying amounts of the following
assets represent the Group’s maximum exposure to credit risk in relation to financial assets:
Cash and cash equivalents
Trade and other receivables
Cash and cash equivalents
Note
18
6
31 December 2020
$
31 December 2019
$
351,445,322
117,758,937
469,204,259
49,820,013
97,208,882
147,028,895
The Group mitigates credit risk on cash and cash equivalents by dealing with regulated banks in Australia, China, Indonesia and Singapore.
Trade and other receivables
Credit risk of trade and other receivables is low as it consists predominantly of nickel ore and nickel pig iron sales. Nickel ore sales are currently
all either to the Company’s 80% owned PT Hengjaya Nickel Industry or the Company’s 80% owned PT Ranger Nickel Industry or and nickel pig
iron trade receivables in 2020 were all from sales to one customer, Shanghai Decent and amounts recoverable from Australian and Indonesian
Taxation Authorities. None of the Group’s material trade and other receivables are past due.
Nickel Mines Limited Annual Report 2020 49
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 19 - FINANCIAL INSTRUMENTS DISCLOSURE (Cont’d)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Consolidated
31 December 2020
Trade and other payables (including tax)
Borrowings
31 December 2019
Trade and other payables (including tax)
Borrowings
Carrying
amount
$
Contractual
cash flows
$
Less than
one year
$
Between one
and five years
$
More than
five years
$
40,257,761
45,000,000
85,257,761
40,257,761
51,763,571
92,021,332
53,141,966
65,000,000
53,141,966
73,410,278
118,141,966
126,552,244
40,257,761
16,049,196
56,306,957
53,141,966
14,252,033
67,393,999
-
35,714,375
35,714,375
-
59,158,245
59,158,245
-
-
-
-
-
-
Ultimate responsibility for liquidity management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate
funding where possible and monitoring of future rolling cash flow forecasts of its operations, which reflect management’s expectations of
expected settlement of financial assets and liabilities.
Currency risk
The functional currency in 2020 was assessed as being United States dollars for all group entities. The Group is exposed to foreign currency
risks due to the fact that the domestic ore sales of its subsidiaries PT Hengjaya Mineralindo, PT Hengjaya Nickel Industry and Ranger Nickel
Industry are in Indonesian Rupiah (although the underlying sale price is denominated in US dollars), liabilities of the Group are denominated in
both Indonesian Rupiah and Australian dollars and the issues of shares during the year were denominated in Australian dollars.
50 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 19 - FINANCIAL INSTRUMENTS DISCLOSURE (Cont’d)
The Group’s gross financial position exposure to foreign currency risk at 31 December is as follows:
31 December 2020
31 December 2019
Foreign currency
USD
Foreign currency
USD
IDR
Cash at bank
Accounts receivable
Other current assets
Provisions
Taxes payable
IDR 37,420,778,576
IDR 18,000,000
IDR 8,233,155,900
IDR 38,927,632,500
IDR 36,141,595,813
Trade and other payables
IDR 484,596,425,369
$2,663,401
$1,281
$585,278
$2,770,651
$2,572,356
$34,562,023
IDR 46,974,621,253
IDR 89,013,638,068
-
IDR 11,277,393,345
IDR 8,366,066,505
$3,383,729
$6,411,931
-
$812,346
$602,634
IDR 607,578,601,916
$43,765,792
AUD
Cash at bank
Receivables
Trade and other payables
SGD
Cash at bank
A$117,727,957
$90,579,890
A$25,390,739
$17,829,377
A$ 199,924
A$ 128,028
$153,822
$98,505
A$ 32,131
A$ 362,602
$22,562
$254,619
SGD 17,321
$13,107
-
-
The following significant exchange rates applied during the year:
Average rate
Reporting date spot rate
USD
IDR
AUD
SGD
12 months to
31 December 2020
6 months to
31 December 2019
31 December 2020
31 December 2019
14,513
1.4474
1.3791
14,090
1.4610
1.3691
14,050
1.2997
1.3209
13,883
1.4242
1.3450
The following sensitivity analysis is based on the exchange rate risk exposures at balance date. At balance date, if the exchange rate between
the United States dollar and the Indonesian Rupiah, the Australian dollar or the Singaporean dollar had moved, as illustrated in the table below,
with all other variables held constant, the post-tax loss and equity would have been affected as follows:
Judgement of reasonable possible movements:
Post tax loss
(Higher)/Lower
31 December 2020
$
Total equity
(Higher)/Lower
31 December 2020
$
Post tax loss
(Higher)/Lower
31 December 2019
$
Total equity
(Higher)/Lower
31 December 2019
$
+ 10% higher USD to IDR exchange rate
(3,551,803)
- 5% lower USD to IDR exchange rate
+ 10% higher USD to AUD exchange rate
- 5% lower USD to AUD exchange rate
+ 10% higher USD to SGD exchange rate
- 5% lower USD to SGD exchange rate
1,775,901
9,063,521
(4,531,760)
1,311
(655)
(3,551,803)
1,775,901
9,063,521
(4,531,760)
1,311
(655)
(3,538,511)
1,769,256
1,759,732
(879,866)
-
-
(3,538,511)
1,769,256
1,759,732
(879,866)
-
-
Nickel Mines Limited Annual Report 2020 51
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 19 - FINANCIAL INSTRUMENTS DISCLOSURE (Cont’d)
Interest rate risk
The Group’s exposure to market interest rate relates to cash assets.
At balance date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk:
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Sensitivity analysis
31 December 2020
$
31 December 2019
$
18
13
351,445,322
49,820,013
45,000,000
65,000,000
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit for the period by the amounts shown
below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for the comparative period.
Profit for the year
Capital management
12 months to
31 December 2020
$
6 months to
30 December 2019
$
1,456,327
84,557
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business.
The Board ensures, where possible, costs are not incurred in excess of available funds and will seek to raise additional funding through issues of
shares for the continuation of the Group’s operation. There were no changes in the Group’s approach to capital management during the year.
The Group is not subject to externally imposed capital requirements.
52 Nickel Mines Limited Annual Report 2020
NOTE 20 - PARENT ENTITY DISCLOSURES
As at, and throughout the financial year ended 31 December 2020, the parent entity of the Group was Nickel Mines Limited.
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
Result of the parent entity
Net profit/(loss)
Other comprehensive income
Total comprehensive profit/(loss)
Financial position of the parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Share capital
Retained profits
Total Equity
Parent Entity
12 months to
31 December 2020
$
Parent Entity
6 months to
31 December 2019
$
(5,918,126)
4,355,503
-
-
(5,918,126)
4,355,503
31 December 2020
$
31 December 2019
$
321,513,844
457,091,382
778,605,226
13,099,767
32,142,857
45,242,624
24,143,940
378,549,158
402,693,098
4,732,142
60,666,667
65,398,809
733,362,602
337,294,289
732,929,135
433,467*
733,362,602
315,501,048
21,793,241
337,294,289
* During 2020 the Company made a maiden interim dividend payment totaling $15,441,648 which is included within retained profits.
At balance date, the Company has no capital commitments or contingencies (31 December 2019: $nil).
Nickel Mines Limited Annual Report 2020 53
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 21 - SEGMENT INFORMATION
Segment information is presented in respect of the Group’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items comprise interest bearing loans, borrowings and expenses, and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than
one period in that geographic region.
Operating segments
For the year ended 31 December 2020, the Group had two segments, being nickel ore mining in Indonesia and the RKEF projects in Indonesia
and Singapore.
Nickel ore mining
$
RKEF Projects
$
Unallocated
$
Total
$
12 months to 31 December 2020
External revenues
- (1)
(523,492,413)
-
(523,492,413)
Reportable segment profit/(loss) before tax
1,216,424
173,045,571
(19,695,320)
154,566,675
Interest income
Interest expense
90,510
-
378,840
55,664
Depreciation and amortisation
1,434,100
34,358,790
49,223
5,212,488
994,054
518,573
5,268,152
36,786,945
Reportable segment assets
33,097,749
880,065,390
321,513,845
1,234,676,984
Reportable segment liabilities
12,837,122
90,368,329
45,242,624
148,448,075
6 months to 31 December 2019
External revenues
- (1)
236,059,160
-
236,059,160
Reportable segment profit/(loss) before tax
1,042,957
96,385,556
(5,974,603)
91,453,910
Interest income
Interest expense
Depreciation and amortisation
9,882
-
496,175
(8,098)
127,648
15,922,402
104,338
2,208,819
795
106,122
2,336,467
16,419,372
Reportable segment assets
35,735,798
837,616,883
24,143,940
897,496,621
Reportable segment liabilities
8,716,103
101,262,603
65,398,810
175,377,516
(1) From 1 April 2019, sales of nickel ore are internal to the Group and so are eliminated on consolidation.
54 Nickel Mines Limited Annual Report 2020
NOTE 21 - SEGMENT INFORMATION (Cont’d)
Reconciliations of reportable segment revenues and profit or loss
Profit or loss
Total profit for reportable segments
Unallocated amounts:
Net other corporate expenses
Consolidated profit before tax
Reconciliations of reportable assets and liabilities
Assets
Total assets for reportable segments
Unallocated corporate assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated corporate liabilities
Consolidated total liabilities
Geography of reportable segment assets
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
12 months to
31 December 2020
$
6 months to
31 December 2019
$
174,261,995
97,428,513
(19,695,320)
154,566,675
(5,974,603)
91,453,910
31 December 2020
31 December 2019
913,163,139
321,513,845
1,234,676,984
(103,205,451)
(45,242,624)
(148,448,075)
873,352,681
24,143,940
897,496,621
(109,978,706)
(65,398,810)
(175,377,516)
Indonesia
$
Singapore
$
Total
$
31 December 2020
Reportable segment assets
902,697,958
10,465,181
913,163,139
31 December 2019
Reportable segment assets
873,150,905
201,776
873,352,681
Revenue
All sales during the year were to customers located in either Indonesia or China.
Major customers
All sales of nickel pig iron during the year ended 31 December 2020 were exported sales to Shanghai Decent in China.
All sales of nickel ore during the year ended 31 December 2020 were to the Company’s 80% owned subsidiaries PT Hengjaya Nickel Industry
and PT Ranger Nickel Industry, under a series of offtake agreements to supply 100,000 wmt per month between each entity.
Nickel Mines Limited Annual Report 2020 55
NOTES TO THE CONSO L ID ATED
FINANCIAL STAT EMENTS
For the year ended 31 December 2020
NOTE 22 - REVENUE
Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by major production and timing of revenue recognition. The table
also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments.
Nickel pig iron
Nickel ore
12 months to
31 December 2020
$
6 months to
31 December 2019
$
12 months to
31 December 2020*
$
6 months to
31 December 2019*
$
Major products
523,492,413
236,059,160
25,139,919
12,829,854
Timing of revenue recognition
Products transferred at a point in time
Revenue from contracts with customers
External revenue as reported in Note 21
523,492,413
523,492,413
523,492,413
236,059,160
236,059,160
236,059,160
25,139,919
25,139,919
25,139,919
12,829,854
12,829,854
12,829,854
*
From 1 April 2019 sales of nickel ore are internal to the Group and so are eliminated on consolidation.
The extent to which an entity’s revenue is disaggregated for the purposes of this disclosure depends on the facts and circumstances of the
entity’s contracts with customers.
NOTE 23 - AUDITOR REMUNERATION
During the year ended 31 December 2020, KPMG, the Company’s auditor, has not performed any other services in addition to their statutory
audit duties.
Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services provided during the year
and prior period are set out below:
Auditors of the Company
Audit and review of financial reports – KPMG Australia
Audit and review of financial reports – KPMG Indonesia
12 months to
31 December 2020
$
6 months to
31 December 2019
$
195,880
140,877
336,757
170,453
62,037
232,490
56 Nickel Mines Limited Annual Report 2020
NOTE S T O THE CONSOLIDATED
F INANCI AL STAT EMENTS
For the year ended 31 December 2020
NOTE 24 - SUBSEQUENT EVENTS
•
In January 2021, Company secured the right to acquire an additional 10% interest in Angel Nickel. In February 2021, the Company
completed the initial acquisition of a 30% interest in Angel Nickel, following payment of $180M, completing the first acquisition
consideration of $210M.
• At a General Meeting of shareholders held on 19 January 2021, 100% approval for the acquisition of 70% of Angel Nickel was given by
shareholders.
•
•
In January 2021, the Company made further voluntary early repayments of the Ranger senior debt facility, fully repaying the outstanding
facility amount at 31 December 2020 of $45M.
In January 2021, the Company declared a A$0.02 final dividend for the year ended 31 December 2020. The dividend was paid on 11
February 2021, totalling A$50.3M (equivalent to approximately $39.0M).
Other than the matters outlined above, there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
NOTE 25 - COMMITMENTS AND CONTINGENCIES
There are no contingent liabilities existing at 31 December 2020 (31 December 2019: $nil)
Nickel Mines Limited Annual Report 2020 57
DIRECTO RS’ DECL ARATION
1.
In the opinion of the Directors of Nickel Mines Limited (‘the Company’):
(a)
the consolidated financial statements and notes set out on pages 24 to 57 and the Remuneration report on pages 18 to 21 in the
Directors’ report, are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for the year ended
on that date; and
complying with Australian Accounting Standards, (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in note 2.
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and
chief financial officer for the financial year ended 31 December 2020.
Signed at Sydney this 24th day of February 2021 in accordance with a resolution of the Board of Directors:
Robert Neale
Chairman
Norman Seckold
Deputy Chairman
58 Nickel Mines Limited Annual Report 2020
I NDE PENDENT AUDIT OR’ S REPORT
Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Nickel Mines Limited
To the shareholders of Nickel Mines Limited
Report on the audit of the Financial Report
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Nickel Mines Limited (the Company).
Opinion
The Financial Report comprises:
• Consolidated statement of financial position as at 31
We have audited the Financial Report of
Nickel Mines Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
•
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Group’s financial position as at 31
December 2020 and of its financial
performance for the year ended on
that date; and
giving a true and fair view of the
Group’s financial position as at 31
December 2020 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
•
•
•
Basis for opinion
December 2020
The Financial Report comprises:
• Consolidated statement of financial position as at 31
• Consolidated statement of profit or loss and other
December 2020
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
• Notes including a summary of significant accounting
cash flows for the year then ended
policies
• Notes including a summary of significant accounting
• Directors’ Declaration.
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified
were:
Key Audit Matters
• Consolidation of subsidiaries; and
The Key Audit Matters we identified
were:
• Acquisition of non-controlling
• Consolidation of subsidiaries; and
interests.
• Acquisition of non-controlling
interests.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
58
KPMG, an Australian partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG International
58
Limited, a private English company limited by guarantee. All rights reserved. The
KPMG name and logo are trademarks used under license by the independent
member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The
KPMG name and logo are trademarks used under license by the independent
member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
Nickel Mines Limited Annual Report 2020 59
INDEPENDENT AUDITO R’S REP O RT
Consolidation of subsidiaries
Refer to Note 15 Controlled Entities
The key audit matter
How the matter was addressed in our audit
Nickel Mines Limited consolidates its
investments in subsidiaries as outlined in Note
15 to the financial statements. In doing so, they
are required to make a number of adjustments
to the underlying financial information to ensure
alignment to Australian Accounting Standards
and the Group’s accounting policies.
This is a key audit matter because certain
adjustments are material and technical in
nature.
Our procedures included:
•
Interacting with Group management and
the relevant component audit team, we
developed an understanding of local
accounting policies of the subsidiaries and
the nature and extent of any accounting
standard or accounting policy adjustments
required to align with those of the
Group’s. We sample tested that the
adjustments made by the Group were
consistent with this understanding; and
• Upon receipt of the audited balance
sheets and income statemenst of PT
Hengjaya Mineralindo, PT Hengjaya Nickel
Industry and PT Ranger Nickel Industry, all
incorporated in Indonesia, which are the
material subsidiaries in the Group’s
operations, reperforming management’s
calculations of adjustments impacting
Nickel Mines Limited’s consolidated
statement of comprehensive income and
consolidated statement of financial
position, and reperforming management’s
calculation of adjustments impacting the
Group and non-controlling interests share
of net profits and comparing to those
calculated by the Group.
Acquisition of non-controlling interests ($147m)
Refer to Note 15 Controlled Entities
The key audit matter
How the matter was addressed in our audit
The Group’s investment in Ranger Investment
Private Limited (Ranger Investment) and
Hengjaya Holdings Private Limited (Hengjaya
Investment) each increased from 60% to 80%
during the financial year. The Group previously
had control over each investment and therefore
represented acquisition of non-controlling
interests.
This was as key audit matter due to the size of
the transaction as the consideration paid to
Our procedures included:
• Reading the acquisition agreements to
understand the key terms and conditions of
the agreements and the obligations of each
party to the agreements;
Testing the acquisition consideration to
acquire the non-controlling interest to the
underlying accounting records of the
respective entities;
•
59
60 Nickel Mines Limited Annual Report 2020
I NDE PENDENT AUDIT OR’ S REPORT
increase the 20% interest in each investment
totalled $147m.
•
•
•
Testing the acquisition payments made to
bank statements;
Verifying the accuracy of the calculation of the
change in non-controlling interests, and
considering whether the treatment adopted in
those calculations complied with the
requirements of the accounting standards;
Evaluating the Group’s disclosures in the
Financial Report against the requirements of
accounting standards.
Other Information
Other Information is financial and non-financial information in Nickel Mines Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Renumeration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
•
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error; and
assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
60
Nickel Mines Limited Annual Report 2020 61
INDEPENDENT AUDITO R’S REP O RT
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Nickel Mines Limited for year ended 31
December 2020, complies with Section
300A of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 18 to 21 of the Directors’ report for the year
ended 31 December 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
NI_01
KPMG
62 Nickel Mines Limited Annual Report 2020
Stephen Board
Partner
Brisbane
24th February 2021
61
ADDIT IONAL AS X I NF ORMATION
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The
information is current as at 31 January 2021.
Distribution of Equity Securities
ORDINARY SHARES
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Above 100,001
Number of Holders
Number of Shares
942
1,924
990
1,962
477
6,295
648,333
5,299,910
7,718,876
63,789,570
2,437,572,362
2,515,029,051
The number of shareholders holding less than a marketable parcel is 114.
Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are:
Nº
SHAREHOLDER
Number of Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Decent Investment International Private Limited
Citicorp Nominees Pty Limited
Shanghai Decent Investment (Group) Co., Ltd
Shanghai Wanlu Investment Co Ltd
PT Harum Energy TBK
Altinova Nominees Pty Limited
Permgold Pty Ltd
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