OZ MINERALS
ANNUAL REPORT
ABN 40 005 482 824
2008
CONTENTS
RESULTS FOR ANNOUNCEMENT TO THE MARKET
COMMENTARY ON RESULTS AND OUTLOOK
CORPORATE GOVERNANCE STATEMENT
DIRECTORS’ REPORT
REMUNERATION REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED INCOME STATEMENTS
CONSOLIDATED STATEMENTS OF RECOGNISED
INCOME AND EXPENSE
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
SHAREHOLDER INFORMATION
1
2
4
10
23
44
45
46
47
48
49
115
116
119
RESULTS FOR ANNOUNCEMENT TO THE MARKET
IN ACCORDANCE WITH ASX LISTING RULE 4.3A AND APPENDIX 4E
The key information for the consolidated entity is set out below:
Consolidated entity results
Revenue from ordinary activities from
continuing operations – A$m
Revenue from ordinary activities from
discontinued operations – A$m
Consolidated revenue – A$m
(Loss)/profit after tax attributable to equity
holders of OZ Minerals Limited – A$m
Net tangible assets per share – cents
Dividends paid on:
29 September 2008
9 April 2008
4 October 2007
30 April 2007
Highlights
12 months ended
31 December 2008
12 months ended
31 December 2007
879.2
602.6
339.2
1,218.4
(2,501.7)
103.3
156.1
61.8
–
–
523.8
1,126.4
305.8
98.3
–
–
61.5
76.3
Movement
Movement
A$m
276.6
(184.6)
92.0
%
46%
(35%)
8%
(2,807.5)
(918%)
Cents per share
Record date
5.0
4.0
4.0
5.0
3 September 2008
19 March 2008
20 September 2007
17 April 2007
•
•
•
•
•
•
•
•
•
•
Revenue of A$1,218.4 million and net loss after tax and before asset write-downs and other one-off items of A$66.4 million.
Revenues from operations were lower due mainly to significant falls in commodity prices.
Results were impacted by a number of one-off costs associated with the merger of Oxiana and Zinifex and significant
impairment and other write-downs.
After these post-tax write-downs of A$2,537.8 million and one-off post-tax costs of A$37.5 million, the net loss after tax was
A$2,484.9 million.
2008 production performance remained strong at all operations.
Operating cash costs of all operations remain competitive.
Significant reduction in forecast capital and operating costs for 2009.
Refinancing solutions advancing with announcement of recommended offer of acquisition by China Minmetals.
Agreement reached to extend facilities due on 27 February 2009 to 31 March 2009 subject to finalization of documents.
No dividend declared as a result of lower earnings.
1
COMMENTARY ON RESULTS AND OUTLOOK
Dear Shareholders
Reviewing the results
2008 has been an extraordinary year for the global economy, the base metals industry and for OZ Minerals. On 1 July 2008, the
merger of Oxiana Limited and Zinifex Limited to form OZ Minerals Limited was implemented, creating Australia’s third largest
diversified mining company and the world’s second largest producer of zinc as well as a substantial producer of copper, lead, gold
and silver.
During the first half of 2008, the LME copper price rose by 31.4 per cent to US$8,776 per tonne – a record level. Zinc weakened in the
first half of the year by 19.1 per cent to US$1,903 per tonne, but was still at historically high levels.
During the second half of the year, the zinc price fell by a further 38 per cent, and closed the year at US$1,180 per tonne – almost 50
per cent below the level at the end of December 2007. The copper price collapsed by 67 per cent in the second half of 2008, and
closed the year at US$2,902 per tonne, some 56.5 per cent lower than 12 months earlier and the lowest monthly closing level since
late 2004.
Throughout this challenging period OZ Minerals maintained its focus on operational excellence, and a number of its sites generated
record or near-record production results. The Company also successfully completed the integration of the Oxiana and Zinifex
operations and, in this process, identified approximately A$50 million of permanent annual synergy benefits.
Revenue from continuing and discontinuing operations of A$1,218.4 million, generated a net loss after tax of A$66.4 million, before
asset write-downs and one-off items of A$2,575.3 million. This performance was overwhelmingly determined by the collapse in
commodity prices and further exacerbated by the severe downturn in global credit markets that manifested itself from September
2008.
Immediately following implementation of the merger in July, OZ Minerals was actively negotiating the restructure of its banking
facilities but had not been able to complete that process when the commodity price collapse and the global financial crisis occurred
almost simultaneously. This combination of factors led directly to the situation of OZ Minerals seeking a voluntary suspension of
trading in the Company’s shares on the ASX from early December.
The Company reacted quickly to the rapid deterioration of market conditions, implementing a number of cash saving measures to
immediately reduce costs and suspend or defer a number of projects. The consolidated entity has also been actively pursuing an
asset sale program as part of its overall refinancing process. However, because of its importance to the future growth and viability of
OZ Minerals, significant resources were directed to completion of the Prominent Hill copper-gold project in South Australia, which
came into production in February 2009.
The consolidated entity has also initiated an ongoing Business Improvement Challenge to identify and implement further
maintainable savings and efficiencies. This initiative is aimed at maximising cash flow while positioning OZ Minerals as a sustainable,
lean business for the longer term.
On 16 February 2009, OZ Minerals announced that it had entered into a Scheme Implementation Agreement for the proposed
acquisition through a scheme of arrangement of all outstanding shares in OZ Minerals by China Minmetals at a cash price of 82.5
cents per share.
The transaction is unanimously recommended by OZ Minerals’ Board of Directors who believe that it is the best outcome for
shareholders given the options available to the company.
Strategy
2008 was an extraordinary year for the world economy, characterised by the rapid deterioration in global economic conditions and
the flow-on effects of this on the resources sector. While OZ Minerals’ broad objectives remains unchanged, the events of the past 12
months have significantly guided the short to mid term direction of our strategy.
Accordingly, OZ Minerals’ strategy can be viewed as four distinct pillars:
1. Completion of the Merger of the two companies
Generating significant operational and cost synergies from the integration of Zinifex and Oxiana. Integration formally completed in
November 2008 with an annual synergy saving of approximately A$50 million.
2.
Platform for growth – projects, cash, exploration
Creating a strong platform for growth from the development projects of Oxiana, the cash from Zinifex and the combined exploration
portfolios.
3.
Responding to the changing financial and market conditions
Responding to the rapidly deteriorating market conditions, reprioritising capital and operational expenditure whilst ensuring that key
strategic investment still occurs.
4.
Pursue all options for resolving refinancing of our debt facilitation
Extensive efforts directed towards refinancing the company’s debt facilities including ongoing negotiations with our banking
syndicate partners, the undertaking of a comprehensive asset sales program and an examination of all equity raising opportunities.
2
COMMENTARY ON RESULTS AND OUTLOOK
Safety and environment
During 2008 despite continuing emphasis and initiatives to improve safety, our safety and health performance was not satisfactory.
We suffered two fatalities and one serious permanent disabling injury. In July 2008, an employee at Sepon was killed when a
lightning strike occurred during installation of a radio tower. In September 2008, a contractor at Prominent Hill was killed in a light
vehicle rollover and a contractor at Century sustained a serious permanent disabling injury while conducting drill rig maintenance.
Thorough investigations of these incidents were conducted by the consolidated entity and external agencies. The consolidated entity
is in the process of implementing all recommendations that came out of these investigations. Additional focus has been placed on
safety management at all of our operations.
In August 2008 the consolidated entity adopted the OZ Minerals Sustainability Standards, a comprehensive set of standards for
management of the safety and health, environmental and social aspects of the consolidated entity’s business. These standards apply
to all phases of mine life and will be subject to periodic review to ensure they continue to meet the needs of the consolidated entity
and are aligned with industry best practice standards such as the International Council on Mining and Metals (“ICMM”) Sustainable
Development Framework and the Minerals Council of Australia’s (“MCA”) Enduring Value. The consolidated entity also adopted a
new Sustainability Policy in 2008.
The number of environmental non-compliances in 2008 was 61 and included exceedences of specified water discharge limits at the
Avebury and Golden Grove mines and at the Karumba Port Facility, and two chemical spills at the Golden Grove mine. These events
were reported to the relevant authorities and none were judged to have had a major environmental impact. Actions were
implemented to address each of these events.
The consolidated entity continues to participate in the Australian government’s Energy Efficiency Opportunities and Greenhouse
Challenge programs, and is well advanced in its preparations for reporting under National Greenhouse and Energy Reporting Act
2007 (“NGERS”).
Independent audit report
The accounts upon which this Appendix 4E is based, have been audited and the Independent Audit Report to the members of OZ
Minerals Limited is included in the attached financial report.
B L Cusack
Chairman
Melbourne
27 February 2009
A G Michelmore
Managing Director and Chief Executive Officer
Melbourne
27 February 2009
3
CORPORATE GOVERNANCE
The Board is committed to following the ASX Corporate
Governance Council Corporate Governance Principles and
Recommendations (ASX Recommendations) and the Board
and Management regularly reviews the Company’s policies
and practices to ensure that the Company continues to
maintain and improve its governance standards.
The specific aspects that support the implementation of this
approach are described below in accordance with the ASX
Recommendations.
Details of the main policies of corporate governance adopted
by the Company and referred to in this statement are
available on the Company’s website www.ozminerals.com.
Principle 1
Lay Solid Foundations for Management and Oversight
The Board operates in accordance with the broad principles
set out in its charter which can be downloaded from the
corporate governance section of the Company’s website.
Role
The Board is responsible for the overall operation and
stewardship of the Company. The Board’s specific
responsibilities include:
•
•
Input into and approval of the strategic direction of the
Company
Approving and monitoring capital expenditure
• Monitoring of financial performance including the
review and approval of significant financial and other
reporting
•
•
•
•
Reviewing and ratifying the systems in place that
manage the material risks to the Company
Appointing, removing and setting succession policies
for the CEO, Directors and Senior Executives
Establishing and monitoring the achievement of
management’s goals
Encouraging ethical behaviour throughout the
organisation
Delegation
Clause 6 of the Board Charter sets out the Boards’ delegation
of responsibility to allow the CEO and executive management
team to carry on the day-to-day operation and
administration of the Company. In carrying out this
delegation the CEO reports routinely to the Board on the
Company’s progress on achieving the short, medium and
long term plans of the Company. The CEO is accountable to
the Board for the authority that is delegated by the Board.
The Board Charter supports all delegations of responsibility
by formally defining the specific functions reserved for the
Board and its Committees, and those matters delegated to
management.
Performance Review of Senior Executives
In accordance with clause 5.5 of its Charter, each year the
Board approves the criteria for assessing the performance of
the CEO and Senior Executives.
The performance of the Chief Executive Officer (CEO) is
evaluated and assessed by the Board. The last review of the
performance of the CEO was conducted in October 2008.
After the merger between Oxiana and Zinifex on 1 July 2008
the Board established new key performance indicators for the
CEO to reflect the new challenges of the merged
organisation. The Board will review the CEO’s performance
against these performance criteria later on in the year.
In addition, performance reviews of Senior Executives are
conducted regularly during the year by the CEO. The
performance of Senior Executives is reviewed by comparing
performance against agreed measures, examining the
effectiveness and quality of the individual, assessing key
contributions, identifying areas of potential improvement
and assessing whether various expectations of shareholders
have been met.
The Company is in the process of conducting these reviews
with the direct reports to the CEO and their direct reports.
Further details of how the Company assesses the
performance of the CEO and Senior Executives are set out in
the Remuneration Report on page 26.
Principle 2
Structure the Board to Add Value
Board Composition
The Board strives to ensure that it is comprised of strongly
performing individuals of utmost integrity whose
complementary skills, experience, qualifications and personal
characteristics are suited to the Company’s needs.
The Company’s Constitution provides for a minimum of
three, and a maximum of fifteen Directors.
At the commencement of the 2008 financial year, the Board
comprised five Directors. As part of the terms of the merger
of Oxiana Limited (renamed OZ Minerals Limited) and Zinifex
Limited (renamed OZ Minerals Holdings Limited), the size of
the Board was increased to eleven Directors to include all
former Zinifex Directors on the Board.
This number has reduced to eight Directors in line with the
stated objective of the Board to reduce the number of
Directors, once the key elements of the integration had been
established and implemented. The Board has determined
that currently the appropriate number of Directors is eight –
comprising the CEO, who is also Managing Director, and
seven independent non-executive Directors. In selecting the
Directors for retirement, the Board and Nomination &
Remuneration Committee had regard to the optimal
composition of the Board having regard to the on–going
needs of the Company, the skills and experience of the
Directors, their potential conflicts of interests, and the length
of time the Directors have held office.
A profile of each Director, including their skills, experience,
relevant expertise, special responsibilities and the date each
Director was appointed to the Board of the Company is set
out on page 13.
Independence
In accordance with the Board Charter and the ASX
Recommendations the Board is comprised of a majority of
independent Non-Executive Directors. The Board has
determined that all Non-Executive Directors including the
Chairman are independent and free of any relationship which
may conflict with the interests of the Company. The Board
defines ‘independence’ in accordance with the ASX
Recommendations.
4
CORPORATE GOVERNANCE
In order to ensure that any ‘interests’ of a Director in a matter
to be considered by the Board are known by each Director,
each Director has contracted with the Company to disclose
any relationships, duties or interests held that may give rise
to a potential conflict. Directors are required to adhere
strictly to constraints on their participation and voting in
relation to any matters in which they may have an interest.
Each Director is required by the Company to declare on an
annual basis the details of any financial or other relevant
interests that they may have in the Company.
The Chair
Our Chairman Mr. Barry Cusack is an independent Non-
Executive Director. The Chair is responsible for the
leadership of the Board and to ensure that the Board
functions effectively. The Chair’s role is separate to the
duties and responsibilities carried out by the Company’s CEO,
Mr Andrew Michelmore.
The Nomination and Remuneration Committee
The Board has a Nomination and Remuneration Committee.
The duties and membership details of the Committee are set
out in this section on page 6.
Selection and Appointment of Directors
The Nomination and Remuneration Committee assists the
Board in identifying candidates who may be qualified to
become Directors. The nomination of all new Directors
including the CEO recommended by the Nomination and
Remuneration Committee are considered by the full Board.
The Board assesses the nominees against a range of specific
criteria including their experience, professional skills,
potential conflicts of interest and the requirement for
independence. All new appointments to the Board are
subject to shareholder approval.
Retirement and Re-election of Directors
The Company’s constitution requires one-third of the
Directors (rounded down to the next lowest number) to retire
by rotation at each annual general meeting (AGM). In
selecting the Directors to retire the Board has regard to a
number of factors including the optimal composition of the
Board having regard to the on–going needs of the Company,
the skills and experience of the Directors, their potential
conflicts of interests, and the length of time the Directors
have held office.
A Director must retire in any event at the third AGM since he
or she was last elected or re-elected. Retiring Directors may
offer themselves for re-election.
The CEO is not subject to retirement by rotation and is not to
be taken into account in determining the number of
Directors required to retire by rotation.
Director Induction and Education
The Company has a process to educate new Directors about
the nature of the business, current issues, the corporate
strategy and the expectations of the Company concerning
the performance of Directors. Directors are given access to
continuing education opportunities to update and enhance
their skills and knowledge.
It has been the practice of Directors to visit the Company’s
mining operations and meet with management to gain a
better understanding of the business on a regular basis.
During 2008, the members of the Board’s Sustainability
Committee (previously known as the Compliance Committee)
visited the Prominent Hill site.
5
New Directors also receive a letter of appointment which
outlines their main responsibilities together with an Induction
Pack that provides new Directors with a broad range of
information about the Company.
Independent Professional Advice and Access to Company
information
Directors have right of access to all relevant Company
information and to the Company’s Executives and, subject to
prior consultation with the Chairperson, may seek
independent advice from a suitably qualified advisor at the
Company’s expense.
Evaluating Board Performance
As the new Board was only formed in late June 2008 and
there have been changes to the composition of the Board
since then, the Board determined that a formal review of
their performance should only be conducted after the new
Board had been operating for at least 12 months.
It has however, reviewed the performance of each Director,
including those standing for re-election in order for the
Board to make a recommendation as to the re-election of the
relevant Director or Directors.
The criterion for the evaluation of each Director is their
contribution to specific Board objectives, including the
following:
•
•
Setting corporate strategies
Identification, analysis and responses to risks and issues
• Monitoring of the Company’s progress against its
business objectives
•
•
Understanding and analysis of the Board papers
presented by management
Use of industry, financial and broad knowledge to add
value to the deliberations of the Board
Board Committees
To facilitate the execution of its responsibilities, the Board’s
Committees provide a forum for a more detailed analysis of
key issues.
Each Committee is entitled to the resources and information
it requires to carry out its duties, including direct access to
advisers and employees.
The Charter of each of the Company’s Board Committees
requires the Committee and subsequently the Board to
review the performance of the Committee annually. In light
of recent events and the fact that the composition of the
Committees changed during the year, each of the
Committees resolved to defer review of their performance
until July 2009.
Details of the number of meetings of the Board and each
Committee held during the year, and each Director’s
attendance at those meetings are set out on page 17 of this
Report.
Each Committee reports its deliberations to the following
month’s Board Meeting. The current Committees of the
Board are the Audit Committee, Sustainability Committee
and Nomination and Remuneration Committee. Their
membership and functions are set out as follows:
CORPORATE GOVERNANCE
Nomination and Remuneration Committee
Current Members: Peter Mansell (Chairman), Ronald Beevor
and Anthony Larkin.
Changes during 2008: The membership of the Committee
changed during the year in accordance with the terms of the
merger between the Company and Zinifex. The changes to
the composition of the Committee during the year ended
2008 were as follows:
•
•
•
Peter Mansell was appointed to the Committee and
succeeded Ronald Beevor as Chairman of the
Committee on 20 June 2008
Anthony Larkin was appointed as a member on 20 June
2008
Barry Cusack and Brian Jamieson were members until 20
June 2008
Function: The Committee assists the Board in discharging its
responsibilities in relation to remuneration of executives and
non-executive Directors and determining the composition
and performance of the Board. Committee duties include:
•
•
•
•
•
regularly reviewing the size and composition of the
Board and making recommendations to the Board for
the appointment and removal of Directors
ensuring that an effective and up-to-date induction and
education program is implemented
reviewing Board and Senior Executive Succession Plans
on a regular basis to ensure an appropriate balance of
skill and experience is maintained
reviewing all aspects of the remuneration (including
base pay, incentive payments and equity awards) and
any proposed change to the terms of employment of
the Directors, the CEO and Senior Executives
regularly reviewing the Company’s remuneration
framework to ensure it is linked to the Company’s
performance and that it motivates Directors and Senior
Executives to pursue the long term growth of the
Company.
Audit Committee
Current Members: Anthony Larkin (Chairman), Ronald
Beevor and Brian Jamieson
Changes during 2008: The membership of the Committee
changed during the year in accordance with the terms of the
merger between the Company and Zinifex. The changes to
the composition of the Committee during the year ended
2008 were as follows:
•
Anthony Larkin was appointed to the Committee and
succeeded Brian Jamieson as Chairman of the
Committee on 20 June 2008
•
Ronald Beevor remains a member
• Michael Eager was a member until 20 June 2008
Function: The Audit Committee assists the Board in the
effective discharge of its responsibilities in relation to
financial reporting and disclosure processes, internal financial
controls, funding, financial risk management and the internal
and external audit functions.
The Audit Committee reviews the financial statements,
accounting policies (including conformance to relevant
reporting standards), adequacy of Group policies relating to
financial reporting and controls (including compliance with
laws, regulations and ethical guidelines) and the annual audit
arrangements, both internal and external. It monitors the
ability of the Company to fund its activities and reviews all
funding strategies of the Group.
The Committee also liaises with the Company’s internal and
external auditors, reviews the scope of their activities, reviews
their performance and independence and advises the Board
on their remuneration, appointment and removal.
The Audit Committee comprises three independent Non-
Executive Directors. The Board has determined that all
Committee members have appropriate experience and
financial expertise to discharge the responsibilities of the
Committee.
Sustainability Committee (previously known
as the Compliance Committee)
Current Members: Dean Pritchard (Chairman), Michael Eager
and Brian Jamieson
Changes during 2008: The membership of the Committee
changed during the year in accordance with the terms of the
merger between the Company and Zinifex. The changes to
the composition of the Committee during the year ended
2008 were as follows:
•
•
•
•
Dean Pritchard was appointed to the Committee and
succeeded Michael Eager as Chairman of the Committee
on 20 June 2008
Owen Hegarty was a member until 20 June 2008
Peter Cassidy was appointed to the Committee on 20
June 2008 and remained a member until his resignation
from the Board on 30 January 2009
Richard Knight was appointed a member of the
Committee on 20 June 2008 until his resignation from
the Board on 31 December 2008.
Function: The Sustainability Committee’s role is to assist the
Board in the effective discharge of its responsibilities in
relation to safety, health, environmental and community
issues for the OZ Minerals Group, and the oversight of risks
relating to these issues and other non-financial risks.
Integration Committee
Current Members: There are no current members as this
Committee was formed in July 2008 following the merger
and disbanded in late November 2008. The Chairman of the
Committee was Owen Hegarty and the other members of the
Committee were Brian Jamieson and Ronald Beevor.
Function: The function of the Integration Committee was to
assist the Board in overseeing the overall integration of
Oxiana and Zinifex as a merger of equals and to facilitate the
smooth transition to a merged entity.
Monitoring of the Integration Plan to ensure that the key
deadlines and milestones of the integration plan and
framework are met and achieved.
Assess whether appropriate short term management plans
are in place to ensure smooth continuation of the business
(i.e. whilst synergies and improvements are being identified
and acted upon).
6
CORPORATE GOVERNANCE
Ensure synergy opportunities are included in the Integration
Plan and implemented.
Advise the Board of the development and implementation of
the communication plan.
Principle 3
Promote Ethical and Responsible Decision Making
The Board and the Company’s employees are expected to
uphold the highest levels of integrity and professional
behaviour in their relationships with all of the Company’s
stakeholders. Below is a summary of the Company’s core
codes and policies which apply to Directors and employees.
The policies were updated and reviewed during 2008
following the merger with Zinifex. All policies are available
on the Company’s website.
Code of Conduct
The Code describes standards for appropriate ethical and
professional behavior for all Directors, employees and
contractors working for the Company. The Code of Conduct
requires all Directors, employees and contractors to conduct
business with the highest ethical standards including
compliance with the law and to report any interest that may
give rise to a conflict of interest. Breaches of the Code of
Conduct are taken seriously by the Company and may be
reported using the Company’s Whistleblower Program. The
Code of Conduct is made available to all employees.
Values
The Company has also implemented a set of values designed
to guide the Directors and all employees in their day-to-day
dealings with each other, competitors, customers and the
community. The values established are summarised under
the headings Respect, Integrity, Action and Results.
Whistleblower Policy
The Company is committed to ensuring the Company’s
employees and contractors can raise concerns regarding
illegal conduct or malpractice in good faith without being
subject to victimisation, harassment or discriminatory
treatment, and to have such concerns properly investigated.
The Whistleblower Policy provides a mechanism by which all
employees can confidentially report improper or illegal
conduct without fear of discrimination.
Trading in the Company’s Shares
To safeguard against insider trading the Company’s
Securities Trading policy prohibits Directors and employees
from trading the Company’s securities if they are aware of
any information that would be expected to have a material
effect on the price of Company securities.
The policy also establishes ‘black out periods‘during which
Directors and employees must not trade in the Company’s
securities:
•
•
14 days immediately before the release of each
quarterly activities report i.e. during the months of
January, April, July and October; and
31 days immediately before release of half yearly and
annual results.
Further it is recognised that Directors and Senior Executives
are more likely to be in possession of price sensitive
information. As a result Directors must notify the Chairman
and Company Secretary of any intended trade and confirm
that he or she is not in possession of any price sensitive
information. The same notification process applies to Senior
Executives; however, Senior Executives must notify the
Company Secretary and the Chief Executive Officer.
The policy also prohibits Directors, Executives and Employees
from entering into any hedging arrangement over unvested
securities issued pursuant to any share scheme, performance
rights plan or option plan.
In addition, the Company has processes in place to
determine whether Directors have entered into any margin
loans in relation to their holdings in the Company’s securities,
and to determine whether these arrangements are material
pursuant to the Company’s disclosure obligations. Each
Director is required to advise the Chairman of any fact or
circumstance about himself, or affecting him, which, if known
may have a material impact on the Company, which includes
the possibility of margin loans to materially affect the price of
the Company’s securities. Directors have been asked by the
Company from time to time to provide relevant information
and confirmations to assist the Company to verify that it
complies with its disclosure requirements.
The Company discloses to ASX any transaction conducted by
the Directors in the Company’s securities in accordance with
the ASX Listing Rules.
Principle 4
Safeguard Integrity in Financial Reporting
Audit Committee
The Board has an Audit Committee to assist the Board to
safeguard integrity in the Company’s financial reporting. The
duties and membership details of the Committee are set out
in this section on page 6.
Principle 5
Make Timely and Balanced Disclosure
The Company is committed to providing relevant up-to-date
information to its shareholders and the broader investment
community in accordance with the continuous disclosure
requirements under the ASX Listing Rules and the
Corporations Act.
Following the merger with Zinifex the Board updated its
Continuous Disclosure Policy and introduced some new
measures (as explained below) to ensure that information
considered material by the Company is immediately
disclosed.
The Board has authorised the Company Secretary and the
Executive General Manager of Business Support as the
Disclosure Officers, to ensure that information is released by
the Company in a timely and accurate fashion.
To supplement the Continuous Disclosure Policy the Board
has also approved Disclosure Protocols and Procedures to
provide further guidance to staff on understanding and
complying with the Company’s continuous disclosure
obligations.
7
CORPORATE GOVERNANCE
Principle 6
Respect the Rights of Shareholders
The Board aims to ensure that shareholders are informed of
all information necessary to assess the performance of the
Company. To achieve this during 2008 the Board adopted a
Shareholder Communication Policy which outlines the
process through which the Company will endeavour to
ensure timely and accurate information is provided equally to
all shareholders.
Information is communicated to Shareholders through:
•
•
•
•
the annual report which is available to all shareholders
(in both hardcopy and electronic form)
the release to the ASX and on the Company’s website,
of the half yearly financial report, quarterly production
and activities report and other information, including
ASX releases in accordance with the Company’s
continuous disclosure obligations
providing information on the Company’s website about
the Company, including the Charters that govern the
Board and Board Committees, the Company’s key
policies, statutory reports of the last 2 years and
releases to the ASX from 2008 onwards
the release to ASX and the Company’s website of all
Company presentations made during briefings
conducted with analysts and institutions from time to
time.
Shareholders are also encouraged to attend the AGM and
use the opportunity to ask questions. Shareholders can also
view the AGM via a webcast available on the Company’s
website. Questions can be lodged prior to the meeting by
completing the relevant form accompanying the notice of
meeting. The Company makes every endeavor to respond to
the most commonly asked questions. The external auditor
attends the meeting and is available to answer questions in
relation to the conduct of the audit.
Principle 7
Recognise and Manage Risk
The Company is exposed to numerous risks across its
business, most of which are common to the mining industry.
The Company’s commitment and approach to managing
these risks is outlined in the Company’s Risk Management
Policy and is available on the Company’s website.
Both the Sustainability Committee and Audit Committee
assist the Board in monitoring the Company’s risks.
The Sustainability Committee monitors the Company’s non-
financial risks. The Committee receives reporting on the
control mechanisms which are designed and implemented by
management to ensure that the safety, environmental, legal
and reputation risks faced by the Company are identified,
assessed and managed.
The Audit Committee monitors the Company’s financial risks.
The Audit Committee reviews and assesses the adequacy of
the Company’s internal control and financial management
systems and accounting and business policies. The Audit
Committee is given further assurance on the Company’s
financial management systems through the Company’s
independent internal audit function.
During 2008 the Company managed the additional risks
associated with its merger with Zinifex. The Integration
Committee, which is mentioned earlier in this report on page
6 reviewed and monitored the key integration risks that arose
as a result of the merger. The Integration Committee was
assisted and given further assurance by the special purpose
steering integration committee, which provided assistance on
a day to day basis to the business and reported on steps
undertaken to mitigate and treat the key integration risks
identified.
The Company has an internal audit function that assists with
the identification and control of financial risks of the
Company. The internal audit function for 2008 was
outsourced to two external firms. Prior to the merger
between the Company and Zinifex, the internal audit function
of the Company was outsourced to Deloitte and the internal
audit function of Zinifex was conducted by Protiviti. After the
merger both firms continued to conduct the internal audit
functions of the respective Oxiana and Zinifex operations.
The internal audit function has independent status within the
Company and conducts regular audits and reviews in
accordance with an audit plan approved by the Audit
Committee. The Audit Committee reviews the mission and
charter of the internal audit function and ensures that its
scope of work is appropriate in relation to the key financial
risks facing the Company. The main areas of focus of internal
audit include; assessing the design and operating
effectiveness of financial controls, reviewing compliance with
statutory regulations and Company policies as appropriate,
and fraud awareness and prevention. Internal Audit also
recommends improvements in management and control
practices to assist in risk mitigation. Internal audit
recommendations and key findings are reported to the Audit
Committee.
Senior management are responsible for risk management in
their respective areas of accountability. They ensure that
procedures exist to monitor risks and, through observation
and audit, gain assurance that effective controls are
implemented and consistently applied.
The heritage risk management frameworks that operated for
Zinifex and Oxiana continued in operation for 2008. Both
frameworks apply enterprise wide, thereby considering risks
from all sources. They are supported by risk management
systems that record the risks identified, their rating,
associated controls and follow up actions.
The Board has recognised the need to implement a common
risk management framework across the group. The Company
is in the process of developing this framework and it will be
rolled out during 2009. This process includes the
implementation at all sites of the Company’s Sustainability
Standards. These are a comprehensive set of standards that
provide a systematic approach to the management of Safety,
Health, Environmental and Community related risks.
Management Reporting and Certifications
Management reports to the Board and its
Committees on the material business risks faced by the
Company, the effectiveness of the Company’s risk
management and internal control system, and the
Company’s management of its material business risks.
During the financial year, the Audit Committee was provided
with independent reports from the Company’s internal
financial auditors. The reports provided the Audit Committee
with an appraisal of the internal controls, and a summary of
recommendations made to management for the audits
conducted.
8
CORPORATE GOVERNANCE
The CEO and Chief Financial Officer have each declared in
writing to the Board that the financial records of the
Company for 2008 have been properly maintained and
present a true and fair view of the Company’s financial
position and financial results, in accordance with the
Corporations Act and the relevant accounting standards.
Their reports were supported by underlying certification from
the General Managers at sites, and employees responsible for
key functional areas.
The reporting and control mechanisms together with the
assurances of the Sustainability and Audit Committees
support the written certifications given by the CEO and the
Chief Financial Officer to the Board annually, that the
Company’s financial reports are based on a sound system of
risk management and internal control and that the system is
operating effectively in all material respects in relation to
financial reporting risks.
Principle 8
Remunerate Fairly and Responsibly
The Nomination and Remuneration Committee provides
recommendations and direction for the Company’s
remuneration practices. The Committee ensures that a
significant proportion of each Senior Manager’s
Remuneration is linked to his or her performance and the
Company’s performance. Performance reviews are
conducted regularly to assess the performance of Senior
Managers and to determine the proportion of remuneration
that will be ‘at risk’ for the upcoming year. The Company’s
executives participate in a long term incentive program that
is linked to the Company’s performance against the
Company’s peers in the resources industry. For further details
on this see the Remuneration Report.
Board Remuneration
The total annual remuneration paid to Non-Executive
Directors may not exceed the limit set by the shareholders at
an Annual General Meeting (currently $2.7 million). The
remuneration of the Non-Executive Directors is fixed rather
variable.
Further details in relation to Director and executive
remuneration are set out in the Remuneration Report.
9
FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2008
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity comprising OZ Minerals Limited (‘the Company’) and its controlled
entities for the year ended 31 December 2008 (the ‘financial year’). OZ Minerals Limited is a company limited by shares that is
incorporated and domiciled in Australia.
Directors
The Directors of the Company during the year ended 31 December 2008 and up to the date of this report were:
Barry L Cusack (Chairman)
Andrew G Michelmore (appointed as Managing Director and Chief Executive Officer on 20 June 2008)
Ronald H Beevor
Peter W Cassidy (appointed as Non-Executive Director on 20 June 2008 – resigned on 30 January 2009)
Michael A Eager
Owen L Hegarty (retired as Managing Director and Chief Executive Officer and appointed as Non-Executive Director on 20 June 2008 –
resigned on 19 December 2008)
Brian Jamieson
Richard Knight (appointed as Non-Executive Director on 20 June 2008 – resigned on 31 December 2008)
Anthony C Larkin (appointed as Non-Executive Director on 20 June 2008)
Peter J Mansell (appointed as Non-Executive Director on 20 June 2008)
Dean A Pritchard (appointed as Non-Executive Director on 20 June 2008)
Principal activities
The principal activities of the consolidated entity during the financial year were mining of zinc, copper, lead, gold, silver and nickel
and various exploration and development projects.
The consolidated entity acquired Zinifex Limited, a zinc and lead mining, exploration and development company, by way of a Scheme
of Arrangement completed on 1 July 2008. Information relating to the acquisition is set out in Note 4 to the financial statements.
The consolidated entity also classified certain operations as held for sale and as discontinued operations as set out in Note 5 to the
financial statements.
Consolidated results
Consolidated entity (loss)/profit attributable to equity holders of OZ Minerals Limited
Dividends
Dividends on ordinary shares provided for or paid on:
29 September 2008 – unfranked
9 April 2008 – unfranked
4 October 2007 – fully franked
30 April 2007 – 46 per cent franked
Significant changes in the state of affairs
2008
A$m
(2,501.7)
2007
A$m
305.8
Cents per share
Consolidated
A$m
5.0
4.0
4.0
5.0
156.1
61.8
61.5
76.3
On 3 March 2008, the Directors of Oxiana Limited (which was renamed OZ Minerals Limited) and Zinifex Limited (which was renamed
OZ Minerals Holdings Limited), announced that they had reached an agreement for the merger of Oxiana Limited and Zinifex Limited
("the merger"). Following approval of the merger by the Zinifex Limited shareholders and the Court on 16 June 2008 and 20 June
2008 respectively, the merger was implemented on 1 July 2008 by way of scheme of arrangement between Zinifex Limited and its
shareholders. Under the terms of the merger, Zinifex Limited shareholders received 3.1931 Oxiana Limited ordinary shares for each
Zinifex Limited ordinary share held, resulting in Zinifex Limited shareholders receiving ordinary shares in Oxiana Limited equivalent to
approximately a 50 per cent interest in the merged company called OZ Minerals Limited. Accordingly, since 1 July 2008 OZ Minerals
Limited and Zinifex Limited have operated as one consolidated group and transactions between these entities treated as related
party transactions. Zinifex Limited became a wholly owned subsidiary of OZ Minerals Limited on 1 July 2008 and was delisted from
the Australian Securities Exchange (“ASX”) on 2 July 2008. Information relating to the acquisition is set out in Note 4 to the financial
statements.
The review of operations (see below) sets out a number of other matters that have had an effect on the state of affairs of the
consolidated entity. Other than these matters, there were no other significant changes in the state of affairs of the Company during
the financial year.
10
DIRECTORS’ REPORT
Review of operations
2008 has been an extraordinary year for the global economy, the base metals industry and for OZ Minerals. On 1 July 2008, the
merger of Oxiana and Zinifex to form OZ Minerals was implemented, creating Australia’s third largest diversified mining company
and the world’s second largest producer of zinc as well as a substantial producer of copper, lead, gold and silver. OZ Minerals was
formed with a substantial pipeline of development and exploration projects and the financial capacity, based on conditions applying
at that time, to bring those projects into production.
But 2008 was a year of two very distinct halves, as demonstrated by the price performance of copper and zinc, OZ Minerals’ two
most important minerals. During the first half of 2008, the LME copper price rose by 31.4 per cent to US$8,776 per tonne – a record
level. Zinc weakened in the first half of the year by 19.1 per cent to US$1,903 per tonne, but was still at historically high levels.
During the second half of the year, the zinc price fell by a further 38 per cent, and closed the year at US$1,180 per tonne – almost 50
per cent below the level at the end of December 2007. The copper price collapsed by 67 per cent in the second half of 2008, and
closed the year at US$2,902 per tonne, some 56.5 per cent lower than 12 months earlier and the lowest monthly closing level since
late 2004.
Throughout this challenging period OZ Minerals maintained its focus on operational excellence, and a number of its sites generated
record or near-record production results. The Company also successfully completed the integration of the Oxiana and Zinifex
operations and, in this process, identified approximately A$50 million of permanent annual synergy benefits.
Revenue from continuing and discontinuing operations of A$1,218.4 million, generated a net loss after tax of A$66.4 million, before
asset write-downs and one-off items of A$2,575.3 million. This performance was overwhelmingly determined by the collapse in
commodity prices and further exacerbated by the severe downturn in global credit markets that manifested itself from September
2008.
OZ Minerals financial performance in 2008 was overwhelmingly determined by the collapse in commodity prices in the second half of
the year – the major component of which occurred in the fourth quarter – and was exacerbated by the severe downturn in global
credit markets that manifested itself from September 2008.
Immediately following implementation of the merger in July, OZ Minerals was actively negotiating the restructure of the banking
facilities it inherited from Oxiana and Zinifex, but had not been able to complete that process when the commodity price collapse
and the global financial crisis occurred almost simultaneously. This combination of factors led directly to the situation of OZ Minerals
seeking a voluntary suspension of trading in the Company’s shares on the ASX from early December.
The consolidated entity reacted quickly to the rapid deterioration of market conditions, implementing a number of cash saving
measures to immediately reduce costs and suspend or defer a number of projects (see Review of Results and Operations below).
The consolidated entity has also been actively pursuing an asset sale program as part of its overall refinancing process. However,
because of its importance to the future growth and viability of OZ Minerals, significant resources were directed to completion of the
Prominent Hill copper-gold project in South Australia, which came into production in February 2009.
The consolidated entity has also initiated an ongoing Business Improvement Challenge to identify and implement further
maintainable savings and efficiencies. This initiative is aimed at maximising cash flow while positioning OZ Minerals as a sustainable,
lean business for the longer term.
On 16 February 2009, OZ Minerals announced that it had entered into a Scheme Implementation Agreement for the proposed
acquisition through a scheme of arrangement of all outstanding shares in OZ Minerals by China Minmetals at a cash price of 82.5
cents per share.
The transaction is unanimously recommended by OZ Minerals’ Board of Directors who believe that it is the best outcome for
shareholders given the options available to the company. It provides shareholders with a significant premium to the last price the
company’s shares traded. It is also significantly higher than the price at which the Board believes OZ Minerals shares would trade in
the absence of the offer.
Completion of the transaction is subject to a number of conditions including the approval of regulatory authorities in Australia and
China as well as the approval of OZ Minerals’ current banking syndicates. Furthermore, an independent expert will be appointed to
confirm whether the transaction is in the best interests of OZ Minerals’ shareholders.
OZ Minerals shares resumed trading on the ASX on 17 February 2009 following the announcement of the proposed transaction with
Minmetals.
11
DIRECTORS’ REPORT
Review of results
Cost reduction measures
In response to current market conditions, OZ Minerals instigated a number of initiatives designed to significantly reduce the
company’s cost base. On 25 November 2008 OZ Minerals announced that it would defer capital expenditure of approximately A$495
million (net) and reduce operating expenditure budgets in 2009 by approximately A$185 million. This included:
•
•
•
•
•
•
The suspension of the Martabe gold silver project in Indonesia;
The suspension of the Sepon copper expansion;
Deferral of surface facility renewal at Rosebery;
Delaying the development of the open pit copper prospect at Golden Grove;
Deferring the Feasibility Study into the Izok Lake and High Lake projects in Canada; and
Deferring the Dugald River project.
OZ Minerals subsequently announced that it was putting both its Avebury Nickel mine in Tasmania and Scuddles mine at Golden
Grove in Western Australia on care and maintenance until further notice. It has also established a Business Improvement Challenge
to deliver further cost savings in 2009 and further imbed a low-cost business structure.
Between November 2008 and January 2009 these initiatives, combined with the ongoing review of OZ Minerals’ business and cost
structure, have resulted in a reduction of over 1,200 employee and contractor positions - a 17% decrease in the total workforce.
Century concentrates production
During the full-year period the Century operations produced 513,571 tonnes of zinc concentrates, 4,178,964 ounces of silver in
concentrates and 56,387 tonnes of lead concentrate. For the period 1 July to 31 December 2008 this produced revenue of A$267.5
million and a segment operating result of a loss of A$2.9 million.
Golden Grove concentrates production
During the full-year period the Golden Grove operations produced 139,900 tonnes of zinc concentrates, 18,467 tonnes of copper
concentrates, 47,755 ounces of gold in concentrates, 3,157,837 ounces of silver in concentrates and 13,300 tonnes of lead
concentrate. This produced revenue of A$266.2 million and a segment operating result of A$72.1 million.
Rosebery concentrates production
During the full-year period the Rosebery operations produced 84,939 tonnes of zinc concentrates, 2,062 tonnes of copper
concentrates, 30,675 ounces of gold in concentrates, 2,984,502 ounces of silver in concentrates and 28,674 tonnes of lead
concentrate. For the period 1 July to 31 December 2008 this produced revenue of A$73 million and a segment operating result of
A$1 million.
Sepon copper production
During the full-year period the Sepon Copper operation produced 64,075 tonnes copper cathode. This produced revenue of A$504
million and a segment operating result of A$330 million.
Sepon gold production
During the full-year period the Sepon Gold operation produced 93,072 ounces of gold and 55,942 ounces of silver. This produced
revenue of A$94.8 million and a segment operating result of A$27.4 million.
Prominent Hill mine development
Development and construction of the copper and gold mining operation at Prominent Hill in South Australia was 97 per cent
complete as at 31 December 2008. Final work was completed in the beginning of 2009 with first copper gold concentrate delivered
on 26 February 2009.
Martabe Gold Project
As part of its program to defer projects and reduce operating and capital expenditures, OZ Minerals announced on 25 November
2008 that the Martabe project would be suspended and capital expenditure of approximately US$225 million deferred until after
2009.
Exploration activities
OZ Minerals has continued the near-mine exploration activity at all operations and is exploring both in its own right and in
partnerships with other companies in Australia, Asia and the America’s.
12
DIRECTORS’ REPORT
Likely developments and expected results of operations
Further information about likely developments in the operations of the consolidated entity and the expected results of those
operations in future financial years, has not been included in this report because disclosure of the information would be likely to
result in unreasonable prejudice to the consolidated entity.
Information on Directors
Particulars of the qualifications, experience and special responsibilities of each person who was a Director during the year ended 31
December 2008 are set out below:
Barry L Cusack Chairman (Independent)
BE(Hons), M.Eng.Sci., FTSE, FAusIMM, FAIM, MAICD
Experience and expertise
Mr Cusack was the Managing Director of Rio Tinto Australia (1997-2001) and is currently a Non-Executive Director of Toll Holdings
Limited and MacMahon Holdings Limited. Mr Cusack also held the position of Chairman of Coal and Allied Limited (1997-2001),
Bougainville Copper Limited (1997-2003) and ERA Limited (2000-2002), was a Director of Smorgon Steel Group Limited (2002-2007)
and is a former president of the Minerals Council of Australia (2001-2003). Mr Cusack is an Honorary Life Member of the Chamber of
Minerals and Energy of Western Australia Inc.
Other current listed entity directorships
Non-Executive Director of MacMahon Holdings Limited (since 2002) and Non-Executive Director of Toll Holdings Limited (since
October 2007).
Former listed entity directorships in last three years
Non-Executive Director of Smorgon Steel Group Limited (from June 2002 to August 2007) and Future Directions International (from
September 2003 to September 2008).
Special responsibilities during the year
Chairman of the OZ Minerals Limited Board.
Member of the OZ Minerals Limited Board’s Nomination and Remuneration Committee prior to 20 June 2008.
Andrew G Michelmore Managing Director and Chief Executive Officer (appointed 20 June 2008)
BE (Chem), MA (Oxon.), FIE Aust., FIChemE, FTSE, MAICD
Experience and expertise
Mr Michelmore was appointed as the OZ Minerals Limited Managing Director and Chief Executive Officer in June 2008 in anticipation
of the merger with Zinifex Limited. He joined Zinifex Limited as Chief Executive Officer in February 2008 and became Managing
Director in March 2008, upon his return from two years working in London and Russia as Chief Executive Officer of EN+ Group. Mr
Michelmore has more than 27 years experience in the metals and mining industry. He spent 12 years at WMC Resources Limited
where he was Chief Executive Officer (from December 2002 to June 2005) and prior to that, held senior roles in the company’s nickel,
gold, alumina, copper, uranium and fertiliser businesses.
Mr Michelmore joined CRA in 1981, leading to a position as General Manager of Nilcra Ceramics Pty Ltd in 1985. He held the
position of General Manager of Nabalco Pty Ltd, the Gove Joint Venture from 1989 to December 1992 and also held the concurrent
position of Chief Executive Officer of Swiss Aluminium Australia from 1991. He commenced his career with ICI Australia in 1975.
He is also a member of the Board and Executive Committee of the International Zinc Association, Council Member of the
International Council of Mining & Metals and a member of the Business Council of Australia. He is a Director of the Minerals Council
of Australia.
Other current listed entity directorships
None.
Former listed entity directorships in last three years
Chief Executive Office of WMC Resources Limited (from December 2002 to June 2005) and Managing Director and Chief Executive
Officer of Zinifex Limited (from February 2008 to June 2008).
Special responsibilities during the year
Managing Director and Chief Executive Officer of OZ Minerals Limited (from 20 June 2008).
13
DIRECTORS’ REPORT
Ronald H Beevor Non-Executive Director (Independent)
B.A (Hons)
Experience and expertise
Mr Beevor is a former investment banker and was head of investment banking at NM Rothschild & Sons (Australia) Limited between
1997 and 2002. He has had an extensive involvement with the natural resources industry, both in Australia and overseas.
Other current listed entity directorships
Non-Executive Director Bendigo Mining Limited (since 2002) and Chairman EMED Mining Public Limited (Non-Executive Director
since 2004).
Former listed entity directorships in last three years
None.
Special responsibilities during the year
Chairman of the OZ Minerals Limited Board’s Nomination and Remuneration Committee prior to 20 June 2008.
Member of OZ Minerals Limited Board’s Nomination and Remuneration Committee from 20 June 2008.
Member of OZ Minerals Limited Board’s Audit Committee.
Peter W Cassidy Non-Executive Director (Independent) – resigned on 30 January 2009
BSc (Eng), PhD, DIC, ARSM, CEng, FAusIMM, FIMM, FAICD
Experience and expertise
Dr Cassidy was appointed to the OZ Minerals Limited Board in June 2008 in anticipation of the merger with Zinifex Limited. He joined
the Zinifex Limited Board in March 2004. Dr Cassidy has 35 years of experience in the resource sector, both in Australia and
internationally. He was Chief Executive Officer of Goldfields Ltd from 1995 until its merger with Delta Gold in January 2002 to form
AurionGold Limited. He remained a Director of AurionGold until January, 2003. Prior to 1995, he was Executive Director – Operations
of RGC Limited.
Other current listed entity directorships
Non-Executive Director of Energy Developments Limited (since April 2003) and was Chairman (from December 2008), Lihir Gold Ltd
(since January 2003) and Sino Gold Mining Limited (since October 2002).
Former listed entity directorships in last three years
Chairman of Sino Gold Limited (from November 2005 to November 2006) and Non-Executive Director of OZ Minerals Limited (from
April 2002 to November 2007).
Chairman of Allegiance Mining NL (from 1 April 2008 to 17 July 2008).
Director of Zinifex Limited (from March 2004 to August 2008).
Special responsibilities during the year
Member of the OZ Minerals Limited Board’s Audit Committee.
Member of the OZ Minerals Limited Board’s Compliance Committee (from 20 June 2008 until 30 January 2009).
Michael A Eager Non-Executive Director (Independent)
BE (Mining), FAusIMM
Experience and expertise
Mr Eager is a mining engineer with more than 40 years experience covering a wide range of mining operations and exploration and
development activity. He retired from the position of managing director of Aberfoyle Limited in 1998, as director of MIM Holdings
and Austminex NL in 2003, and the Australasian Institute of Mining and Metallurgy (AusIMM) in 2004. Mr Eager recently concluded
his term as a director and deputy chairman of the Australian Nuclear Science Technology Organisation (ANSTO), positions he held
since 2002. His term as deputy chairman concluded on 29 February 2008 and from 1 March 2008 he ceased to be a director of
ANSTO.
Other current listed entity directorships
None.
Former listed entity directorships in last three years
None.
Special responsibilities during the year
Chairman of OZ Minerals Limited Board’s Compliance Committee (prior to 20 June 2008).
Member of OZ Minerals Limited Board’s Compliance Committee (from 20 June 2008).
Member of OZ Minerals Limited Board’s Audit Committee (prior to 20 June 2008).
14
DIRECTORS’ REPORT
Owen L Hegarty Non-Executive Director – resigned on 19 December 2008
BEc (Hons), FAusIMM
Experience and expertise
Mr Hegarty resigned as Managing Director and Chief Executive Officer of OZ Minerals Limited on 20 June 2008. He has over 35 years
direct experience in the mining industry, including 24 years with the Rio Tinto Group where from 1988 to 1993 he was Managing
Director of Rio Tinto’s copper and gold mining and smelting business unit. Mr Hegarty became Managing Director of OZ Minerals
Limited in 1995. Mr Hegarty is Deputy Chairman of the Minerals Council of Australia. Mr Hegarty is a fellow of the Australasian
Institute of Mining and Metallurgy (AusIMM) and was elected a Director of AusIMM in October 2008. He assumed the role in January
2009. Mr Hegarty was awarded the 2005 AusIMM Institute Medal for his leadership and achievements in the mining industry and in
2008 he was awarded the GW Stokes Memorial Award for his distinguished service to the mining industry.
He is a fellow of the Australian Institute of Company Directors and is a member of the South Australian Minerals and Petroleum
Export Group advising the Premier.
Other current listed entity directorships
Non-executive director Range River Gold Limited (since 1994) and Fortescue Metals Group Limited (since 2008).
Former listed entity directorships in last three years
Managing Director and Chief Executive Officer of OZ Minerals Limited (from September 1994 to June 2008).
Special responsibilities during the year
Managing Director and Chief Executive Officer of OZ Minerals Limited (prior to 20 June 2008).
Member of OZ Minerals Limited Board’s Compliance Committee (prior to 20 June 2008).
Chairman of OZ Minerals Limited Board’s Integration Committee (from 20 June 2008 to 19 December 2008).
Brian Jamieson Non-Executive Director (Independent)
FCA
Experience and expertise
Mr Jamieson was Chief Executive of Minter Ellison Melbourne from 2002 to 2005. He retired as Chief Executive of Minter Ellison on
31 December 2005. Prior to joining Minter Ellison, he was with KPMG and its antecedent firms for over 30 years. During his time at
KPMG, Mr Jamieson held the position of Chief Executive Officer Australia from 1998 to 2000, Managing Partner of KPMG Melbourne
and southern regions from 1993 to 1998 and Chairman of KPMG Melbourne from 2001 to 2002. He was also a KPMG Board Member
in Australia and Asia Pacific and a member of the KPMG USA Management Committee. Mr Jamieson is a fellow of the Institute of
Chartered Accountants in Australia.
Other current listed entity directorships
Non-Executive Chairman Mesoblast Limited (since November 2007), Non-Executive Director of Sigma Pharmaceuticals Limited (since
2005) and Tattersall’s Limited (since 2003).
Former listed entity directorships in last three years
None.
Special responsibilities during the year
Chairman of OZ Minerals Limited Board’s Audit Committee (prior to 20 June 2008).
Member of OZ Minerals Limited Board’s Audit Committee (from 20 June 2008).
Member of OZ Minerals Limited Board’s Compliance Committee.
Member of OZ Minerals Limited Board’s Integration Committee (from 20 June 2008 until 31 December 2008).
Richard Knight Non-Executive Director, appointed 20 June 2008 (Independent) – resigned on 31 December 2008
MSc (Eng), DIC, ARSM, CEng, FAICD, MAusIMM, MCIM
Experience and expertise
Mr Knight was appointed to the OZ Minerals Limited Board in June 2008 in anticipation of the merger with Zinifex Limited. He joined
the Zinifex Limited Board in March 2004. Mr Knight is a mining engineer with more than forty years experience, both in Australia and
internationally. He was previously Chief Executive Officer of Energy Resources of Australia Limited, an Executive Director of North
Limited and Managing Director of Inco Australia Management Pty Ltd. He is currently the Non-Executive Chairman of Heuris
Partners, a Melbourne-based advisory and strategic planning practice.
Other current listed entity directorships
Non-Executive Director of Northern Orion Resources Inc. (since September 2005) and Non-Executive Director of Newcrest Mining
Limited (since February 2008).
Former listed entity directorships in last three years
Non-Executive Director of St Barbara Mines Ltd (from May 2005 to December 2006).
Non-Executive Director of Portman Limited (from October 2002 to April 2005).
Non-Executive Director of Asian Pacific Resources Ltd (TSX) (from May 2002 to September 2003).
Non-Executive Director of Zinifex Limited (from March 2004 to August 2008).
15
DIRECTORS’ REPORT
Special responsibilities during the year
Member of the OZ Minerals Limited Board’s Compliance Committee (from 20 June 2008 to 31 December 2008).
Anthony C Larkin Non-Executive Director, appointed 20 June 2008 (Independent)
FCPA, FAICD
Experience and expertise
Mr Larkin was appointed to the OZ Minerals Limited Board in June 2008 in anticipation of the merger with Zinifex Limited. He joined
the Zinifex Limited Board in March 2004. Mr Larkin was Executive Director – Finance of Orica Limited from 1998 to 2002. Prior to that
he had a successful career with BHP spanning 39 years, during which he held various senior finance executive roles including Group
General Manager Finance, BHP Minerals, for seven years and Corporate Treasurer. In 1993, he was seconded to the position of Chief
Financial Officer of Foster’s Brewing Group until 1997.
Other current listed entity directorships
Non-Executive Director of Corporate Express Australia Limited (since July 2004), Incitec Pivot Ltd (since May 2003) and Eyecare
Partners Limited (since August 2007).
Former listed entity directorships in last three years
Chairman of Ausmelt Ltd (from November 2004 to November 2007, having been appointed Non-Executive Director since June 2003)
and Non-Executive Director of Zinifex Limited (from March 2004 to August 2008).
Special responsibilities during the year
Chairman of the OZ Minerals Limited Board’s Audit Committee (from 20 June 2008).
Member of the OZ Minerals Limited Board’s Nomination and Remuneration Committee (from 20 June 2008).
Member of the OZ Minerals Limited Board’s Integration Committee from (20 June 2008 to 31 December 2008).
Peter J Mansell Non-Executive Director, appointed 20 June 2008 (Independent)
BCom, LLB, FAICD
Experience and expertise
Mr Mansell was appointed to the OZ Minerals Limited Board in June 2008 in anticipation of the merger with Zinifex Limited. He
joined the Zinifex Limited Board as Chairman in March 2004. Mr Mansell has a broad range of experience in the management,
direction, development and governance of listed entities. He was a corporate and resources partner in the law firm Freehills from
1988 until February 2004. At various times he has been the Freehills National Chairman, Managing Partner of the Perth office and a
member of the National Board. He is a fellow of the Australian Institute of Company Directors. He was President of its Western
Australian division in 2002 to 2003 and sat on the National Board of that body during his presidency. He is also a Director of Nyrstar
NV.
Other current listed entity directorships
Chairman of ThinkSmart Limited (since April 2007), Non-Executive Director of Great Southern Plantations Limited (since November
2005), and Bunnings Property Management Limited, which is the responsible entity of Bunnings Warehouse Property Trust (since
June 1998).
Former listed entity directorships in last three years
Non-Executive Director Hardman Resources Limited (from May 2006 to December 2006).
Non-Executive Director of Tethyan Copper Company Limited (from February 2005 to May 2006).
Non-Executive Chairman of Zinifex Limited (from March 2004 to August 2008).
Chairman of West Australian Newspapers Holdings Limited (from November 2006 to December 2008), having been a Director from
September 2001 to December 2008.
Special responsibilities during the year
Chairman of the OZ Minerals Limited Board’s Nomination and Remuneration Committee (from 20 June 2008).
Dean A Pritchard Non-Executive Director, appointed 20 June 2008 (Independent)
BE, FIE Aust, CP Eng, FAICD
Experience and expertise
Mr Pritchard was appointed to the OZ Minerals Limited Board in June 2008 in anticipation of the merger with Zinifex Limited. He
joined the Zinifex Limited Board in March 2004. Mr Pritchard has over 30 years experience in the engineering and construction
industry. He was Chief Executive Officer of Baulderstone Hornibrook from 1991 to 1997.
Other current listed entity directorships
Non-Executive Director of Spotless Group Limited (since May 2007) and OneSteel Ltd (since October 2000). He is also the Chairman
of Steel & Tube Holdings Limited (since May 2005), which is a New Zealand subsidiary of OneSteel Limited.
Former listed entity directorships in last three years
Chairman of ICS Global Limited (from June 1999 to June 2007).
Non-Executive Director of Zinifex Limited (from March 2004 to August 2008).
Special responsibilities during the year
Chairman of the OZ Minerals Limited Board’s Compliance Committee from 20 June 2008.
16
DIRECTORS’ REPORT
Ms Francesca Lee General Counsel and Company Secretary
BCom, LLB (Hons), LLM, Grad Dip CSP, ACIS
Ms Lee was appointed as the General Counsel and Company Secretary in June 2008 in anticipation of the merger with Zinifex
Limited. Prior to the merger, Ms Lee was General Counsel and Company Secretary of Zinifex Limited. She is a member of the OZ
Minerals Limited Executive Committee and the Sustainable Development Committee. Before joining Zinifex Limited she was a Group
Counsel at BHP Billiton and has also held a number of senior positions at Rio Tinto Limited including General Manager Legal, and
General Manager Internal Audit and Risk Review, and was Vice President of Structured Finance at Citibank Limited. She is currently
on the Board of Metropolitan Waste Management Group, a Victorian Statutory Authority.
Attendance at meetings
The number of meetings of OZ Minerals Limited’s Board of Directors and of each Board committee held from the beginning of the
financial year until 31 December 2008, and the number of meetings attended by each Director is set out below:
Board Meetings
Board Committee Meetings
Audit
Nomination &
remuneration
Compliance
Integration
A
23
16
22
16
23
21
21
14
14
15
16
B
23
16
23
16
23
21
23
16
16
16
16
C
–
–
1
–
–
–
2
2
2
1
–
A
1(b)
2(b)
4
2
3
3(b)
5
–
2
–
–
B
–
–
5
2
3
–
5
–
2
–
–
A
4(c)
4(b)
7
–
–
2(b)
3(c)
–
4
4
–
B
3
–
7
–
–
–
3
–
4
4
–
A
–
3(b)
–
3
4
1
4
2
–
–
3
B
–
–
–
3
4
1
4
3
–
–
3
A
–
5(b)
–
–
–
6
6
–
6
–
–
B
–
–
–
–
–
6
6
–
6
–
–
B L Cusack
A G Michelmore (a)
R H Beevor
P W Cassidy (a)
M A Eager
O L Hegarty
B Jamieson
R Knight (a)
A C Larkin (a)
P J Mansell (a)
D A Pritchard (a)
A = Number of meetings attended.
B = Number of meetings held during the time the Director held office (in the case of Board meetings) or was a member of the
relevant committee during the year. In addition, a Board Refinancing Subcommittee met regularly from late November to be
informed on the progress of, and to liaise with, management in relation to the negotiations for refinancing of the Company and
consolidated entity’s various debt facilities.
C = Number of absences from out of session Board meetings attributable to the short notice of the meetings or due to a conflict of
interest. There was only one instance where the out of session Board meeting was not attended by a Director due to a conflict of
interest.
(a) Mr Michelmore, Dr Cassidy, Mr Knight Mr Larkin, Mr Mansell and Mr Pritchard joined the consolidated entity in June 2008.
(b)
(c)
Indicates meetings attended at the open invitation of the Committee.
Indicates that one of the meetings attended was attended at the open invitation of the Committee at a time when the Director
was not a member of the Committee.
17
DIRECTORS’ REPORT
Directors interests
The relevant interests of each Director in the ordinary shares of OZ Minerals Limited at the date of this report are set out below:
Director
Shares
Share options
Performance rights
2,024,113
285,795
3,289,058
2,115,699
1,085,267
135,579
259,838
127,191
–
2,980,392
–
894,118
–
–
–
–
–
–
–
–
–
–
–
–
Long-term incentive
opportunities
–
582,776
–
–
–
–
–
–
Barry Cusack
Andrew Michelmore
Ronald Beevor
Michael Eager
Brian Jamieson
Anthony Larkin
Peter Mansell
Dean Pritchard
Total
9,322,540
2,980,392
894,118
582,776
This represents the number of shares that would vest based upon a conversion rate of 3.1931.
Environmental regulation
The consolidated entity is subject to significant environmental regulation in respect of its activities in both Australia and overseas. In
addition to the licensing and permit arrangements which apply to its operations outside Australia, the consolidated entity’s
Australian operating sites hold various environmental licences and permits under the laws of the Commonwealth and States and
Territories.
Compliance with the consolidated entity’s licenses and permits is monitored on a regular basis and in various forms, including
environmental audits conducted by regulatory authorities and by the consolidated entity, either through internal or external
resources. A documented process is used by the consolidated entity to classify and report any exceedence of a licence condition or
permit condition, as well as any incident reportable to the relevant authorities. These events are also reported to senior management.
As part of the consolidated entity’s internal processes, all reportable environmental non-compliances and significant incidents are
reviewed by the Executive Sustainability Committee and the Compliance Committee of the consolidated entity’s Board of Directors.
These incidents require a formal report to be prepared identifying the factors that contributed to the incident or non-compliance and
the actions being taken to prevent any reoccurrence.
The number of environmental non-compliances in 2008 was 61 and included exceedences of specified water discharge limits at the
Avebury and Golden Grove mines and at the Karumba Port Facility, and two chemical spills at the Golden Grove mine. These events
were reported by the consolidated entity to the relevant authorities and none were judged to have had a major environmental
impact. Steps have been taken by the consolidated entity to ensure that these events do not occur in the future.
The consolidated entity continues to focus on improving its environmental performance. Significant environmental improvement
programs and other initiatives undertaken in this reporting period to meet site licence and consent conditions included:
• Monitoring of town rainwater tanks and improvements to plant, equipment and procedures at the Karumba Port Facility to
minimise the release of mineral concentrate dust;
•
•
Upgrade of the water treatment system at the Golden Grove mine to address exceedances of discharge limits, principally related
to cadmium; and
Progressive improvements to the water treatment plant at the Karumba Port Facility to address exceedances of certain water
quality discharge parameters.
The consolidated entity is currently working with environmental authorities to review operations and activities in order to ensure
compliance with regulatory requirements and practices, and in some cases, to seek modifications to those requirements and
practices. In particular:
•
•
Prior to the merger of Oxiana Limited and Zinifex Limited, the Environmental Protection Agency (“EPA”) issued Zinifex Limited
with an Environmental Protection Order dated 6 June 2007 (the first EPO) in relation to the Karumba Port Facility. The EPA is
currently investigating potential non-compliances with the first EPO. This investigation is ongoing, and the consolidated entity is
continuing to work cooperatively with the EPA to assist with its investigation. A further EPO was issued by the EPA to the
consolidated entity on 7 March 2008 (the second EPO). The consolidated entity is continuing to work closely with the EPA to
ensure compliance with the second EPO is achieved. In response to a notice from the EPA, the consolidated entity has also
prepared a transitional environmental program (“TEP”) relating to levels of certain contaminants in discharges from the
Karumba Port Facility into the Norman River.
An application for a new Development Permit was lodged by the consolidated entity in October 2008 to correct the invalidity of
the current Development Permit in respect of the operations at the Karumba Port Facility, whilst at the same time addressing
matters related to the management of mineral concentrate dust and water discharge quality. Due to changes in the law, the
current Development Application (which is currently under assessment) will likely be replaced by a new application which
reflects these changes; and
18
DIRECTORS’ REPORT
•
At the consolidated entity’s Avebury mine, which it acquired in July 2008, the consolidated entity is liaising closely with the
regulatory authority to review the water discharge quality management program including the appropriateness of the current
water discharge limits in the context of the local environmental conditions and actual potential for environmental impact.
There is a risk that past, present or future operations have not met or will not meet environmental or related regulatory requirements
and that the approvals or modifications that the consolidated entity is currently seeking, or may need to seek in the future, will not
be granted. If the consolidated entity is unsuccessful in these efforts or otherwise breaches these environmental requirements it may
incur fines or penalties, be required to curtail or cease operations and/or be subject to significantly increased compliance costs or
significant costs for rehabilitation or remediation works, which have not been previously planned at one or more of the sites.
Insurance and indemnity
Article 7.3 of OZ Minerals Limited’s Constitution requires the Company to indemnify each Director and secretary of the Company, to
the extent permitted by law, against liability incurred in or arising out of the conduct of the business of the Company or the
discharge of the duties of the Director or Secretary.
The consolidated entity has entered into Deeds of Indemnity with each of its current Non-Executive Directors and with the members
of the Executive Committee, the Company Secretary, the Treasurer and each employee who is a Director of a controlled entity of the
consolidated entity in conformity with Article 7.3.
In particular, since the date of the previous Directors’ Report, the consolidated entity entered into new Deeds of Indemnity with each
of Andrew G Michelmore, Peter W Cassidy, Richard Knight, Anthony C Larkin, Peter J Mansell and Dean A Pritchard on their
appointment as Directors, and Francesca Lee on her appointment as Company Secretary, and each of the members of the Executive
Committee of the Company, the Treasurer and each person who was appointed a Director or Secretary of controlled entities since
the date of the last report. In conformity with Article 7.3, each Deed of Indemnity indemnifies the relevant Director, Officer or
employee to the full extent permitted by law. The consolidated entity was not liable during the 2008 financial year under any such
indemnities to its Directors, Officers or employees.
The consolidated entity has a policy that it will, as a general rule, support and hold harmless an employee who, while acting in good
faith, incurs personal liability to others as a result of working for the consolidated entity.
No indemnity has been granted to an auditor of the consolidated entity in their capacity as auditors of the consolidated entity.
The consolidated entity has paid a premium for a contract insuring all Directors and Officers of the consolidated entity and each of
its controlled entities against certain liabilities and expenses arising as a result of work performed in their respective capacities, to the
extent permitted by law. The Directors have not included details of the nature of the liabilities covered or the amount of the premium
paid in respect of the Directors’ and Officers’ liability insurance contract, as (in accordance with normal commercial practice) such
disclosure is prohibited under the terms of the contract. This contract replaces the Directors’ and Officers’ liability insurance contracts
of Oxiana Limited and Zinifex Limited which existed at the time of the merger with Zinifex Limited, which contracts now provide run-
off cover that insures Directors and Officers of those consolidated entities and each of their controlled entities for events prior to the
merger.
There is also an insurance policy that covers the Directors, Officers and employees of Zinifex Limited (now renamed OZ Minerals
Holdings Limited) against certain liabilities that they may incur in connection with the disclosure documents relating to the Initial
Public Offering for the sale of shares in Zinifex Limited. The premium for this policy was paid by the Zinifex Group and not the
consolidated entity. Following the merger, this contract was replaced with a contract for run-off cover insuring Directors and
Executive Officers of Zinifex Limited and each of its controlled entities for events prior to the merger. An insurance policy for the
Directors, Officers and employees of Allegiance Limited was also replaced with a contract for run-off cover for events prior to the
acquisition of Allegiance by Zinifex Limited.
Proceedings on behalf of the consolidated entity
At the date of this report there are no leave applications or proceedings brought on behalf of the consolidated entity under section
237 of the Corporations Act 2001.
19
DIRECTORS’ REPORT
Audit and non-audit services
The Company, with the prior approval of the Audit Committee, may decide to employ the external auditor on assignments additional
to their statutory audit duties where the auditor’s expertise and experience with the OZ Minerals Group are important, and where
these services will not impair the external auditor’s independence.
Details of the amounts paid or payable to the external auditor (KPMG) and its related parties for audit and non-audit services
provided during the year are set out below.
Audit services
Audit and review of financial reports and other audit work under the Corporations Act 2001 including audit
of subsidiary financial statements
KPMG Australia (i)
Overseas KPMG firms
Non-audit services
Assurance services
Due diligence services
Other assurance services
Taxation services
Taxation compliance and other advisory services
Total fees
Consolidated 2008
A$’000
1,417
226
1,643
533
25
558
84
2,285
(i)
The 2008 fee also includes an amount for the audit of 2007 local statutory financial reports in relation to entities acquired in 2007.
The Board has considered the position and in accordance with the advice received from the Audit Committee is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of all non-audit services by the auditor, as set out above, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
•
•
All non-audit services have been reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of
the external auditor; and
None of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1,
including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for OZ Minerals
Limited or its controlled entities, acting as advocate for the Company or jointly sharing economic risk and rewards.
20
DIRECTORS’ REPORT
Matters subsequent to the end of the financial year
(i) Minmetals cash offer
On 16 February 2009 the consolidated entity announced to the ASX that the Company and China Minmetals Non-ferrous Metals
Company Limited (“Minmetals”) had entered into a Scheme Implementation Agreement (“SIA”) for a proposed acquisition through a
scheme of arrangement of all outstanding shares in OZ Minerals Limited by Minmetals at a cash price of 82.5 cents per share.
As announced to the market on 16 February 2009, completion of the transaction is subject to regulatory approvals and other
conditions, including:
•
•
•
•
•
completion of confirmatory due diligence by Minmetals by 23 February 2009. This was satisfactorily completed as announced to
the ASX on 24 February 2009;
the approval by 27 February 2009, of the consolidated entity’s current lenders, to extend the debt arrangements until at least 31
March 2009. The consolidated entity has been successful in obtaining from the lenders whose facilities fall due on 27 February
2009, approval to extend the termination date to 31 March 2009. The approvals are subject to completion of documentation to
give effect to the extension;
the approval prior to 1 April 2009, to extend the debt arrangements until at least 2 weeks after the scheduled scheme
implementation date;
there being no material adverse change (US$100 million threshold) in OZ Minerals’ consolidated net assets or net present value
between the date on which Minmetals completes its due diligence and the second Court date, excluding anything arising as a
result of a change in general economic business or political conditions, securities markets, interest rates, exchange rates or
commodity prices;
the approval of regulatory authorities in Australia (including the Foreign Investment Review Board and the Department of
Defence) and the People’s Republic of China and shareholder and Court approval.
Whilst there can be no certainty that the conditions precedent will be met, both the consolidated entity and Minmetals have agreed
to use their reasonable endeavours to procure the satisfaction of the conditions precedent relevant to them.
The transaction is unanimously recommended by the Board, subject to no superior competing proposal and confirmation by an
independent expert that the transaction is in the best interests of the consolidated entity’s shareholders. Under the terms of the SIA
the Company has undertaken not to dispose of any interest in a material asset, although the Company is able to proceed with its
asset sale program in relation to Martabe and Golden Grove. Further details are set out in the ASX announcements made on 16 and
18 February 2009.
Following the above announcement, on 17 February 2009 the suspension in trading of the Company’s shares ceased.
(ii) Asset sales
The consolidated entity disposed of its entire shareholding of 7,791,622 shares in Nyrstar NV, a publicly listed entity on Euronext
Brussels, in January 2009 for a consideration of A$33.7 million. This asset was classified as held for sale at 31 December 2008 as set
out in Note 5. The fair value of the consolidated entity’s investment in Nyrstar at 31 December 2008 was A$34.7 million.
(iii) Refinancing of borrowings
As noted in Note 1(c)(i), as at 31 December 2008, the consolidated entity had four major bank facilities. Three of these facilities
matured, or were required to be refinanced by 31 December 2008. Prior to the end of the financial year the relevant lenders agreed
to extend the termination dates of various debt facilities provided to a number of the consolidated entity’s subsidiaries to 27
February 2009. In addition, as announced to the ASX on 22 January 2009, three subsidiaries of the consolidated entity obtained from
certain of the consolidated entity’s lenders a new short term facility of A$140,000,000 with a termination date of 27 February 2009.
The consolidated entity has been successful in obtaining from the lenders whose facilities fall due on 27 February 2009, approval to
extend the termination date to 31 March 2009. The approvals are subject to completion of documentation to give effect to the
extension.
The consolidated entity granted security over certain of its Australian and overseas assets to Societe Generale (the lender under
Facility C), and its Martabe assets to the lenders of the new short term facility, during January and February, in accordance with
agreements reached in relation to the above refinancing discussions. The consolidated entity was also required to grant security over
certain of its other overseas assets in favour of Societe Generale but Societe Generale has now waived the latter requirement.
The consolidated entity was also pursuing asset sales and was examining expressions of interests for a number of its assets to repay
or reduce the facilities as at 31 December 2008. This process continued after the end of the financial year.
There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may
significantly affect the consolidated entity’s operations, results or state of affairs in future years.
21
DIRECTORS’ REPORT
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission, relating
to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ report have been rounded off in accordance with
the Class Order to the nearest million dollars to one decimal place, or in certain cases, to the nearest thousand dollars. All amounts
are in Australian dollars only, unless otherwise stated.
External auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001. A copy of the external auditor’s independence
declaration as required under section 307C of the Corporations Act 2001 is set out on page 44. Details of the amounts paid or
payable to KPMG and its related parties for audit and non-audit services provided during the year are set out in Note 35 of the
financial statements.
Remuneration report
The remuneration report which has been audited by KPMG is set out on pages 23 to 43.
This report is made in accordance with a resolution of the Directors.
B L Cusack
Chairman
Melbourne
27 February 2009
A G Michelmore
Managing Director and Chief Executive Officer
Melbourne
27 February 2009
22
REMUNERATION REPORT
This Remuneration Report comprises five sections as follows:
1. Organisational context
2.
3.
4.
Summary of directors and specified executives
Principles of OZ Minerals’ approach to remuneration
Remuneration - questions and answers
5. Details of directors’ and senior executives’ remuneration
The report has been prepared for the Company and the Group for the year ended 31 December 2008 in accordance with section
300A of the Corporations Act, associated regulations and the Australian Accounting Standard AASB 124 Related Party Disclosures. All
sections of the Remuneration Report have been audited by the Company’s auditor as required by section 308(3C) of the Corporations
Act. The Remuneration Report forms part of the Directors’ Report.
1
1.1
Organisational context
Business performance
A summary of OZ Minerals’ business performance, as measured by a range of financial indicators, is outlined in the table below. For
a further discussion relating to these measures, refer to the Review of Operations in the Directors’ Report. Other key measures
including safety, health and environmental performance will be available in the OZ Minerals Sustainability Report 2008.
(Loss)/profit before net financing (expense)/income, depreciation and
amortisation, impairment of assets and income tax from continuing
operations (A$m)
2008
2007
2006
2005
2004
240.6
404.5
827.2
168.2
12.6
(Loss)/profit before net financing (expense)/income and income tax from
continuing operations (A$m)
(1,353.5)
342.3
721.8
116.1
(2.5)
(Loss)/profit for the year attributable to members of OZ Minerals Limited
(A$m)
(2,501.7)
305.8
553.2
71.2
(8.8)
Cash and cash equivalents from continuing operations (A$m)
Net cash (outflow)/inflow from operating activities (A$m)
Share price at year end A$
Basic (loss)/earnings per share from continuing and discontinued
operations (cents)
69.8
(98.6)
0.55
(104.6)
246.1
466.7
3.48
20.2
670.9
167.8
793.0
178.2
3.17
40.1
1.74
5.4
10.3
17.1
0.99
(0.7)
Dividends paid per share (cents)
5.0
8.0
8.0
1.0
-
1.2
Remuneration at OZ Minerals
OZ Minerals Limited (formerly Oxiana Limited) was formed following the merger of Oxiana Limited and Zinifex Limited (now OZ
Minerals Holdings Limited) on 1 July 2008. Whilst both Oxiana Limited and Zinifex Limited had similar overall remuneration
strategies, some differences existed between the companies’ specific remuneration programs and policies. Following the merger, the
Board of OZ Minerals Limited decided that OZ Minerals would adopt a uniform approach to remuneration across the Company, with
a plan to achieve consistency by the beginning of 2009. The Board targeted the annual remuneration review, scheduled for the
beginning of 2009, as a key milestone, at which point all key programs and policies would be aligned.
In December 2008 the Board approved management’s recommendation for an immediate and indefinite remuneration freeze in
response to the Company’s financial position. In the short term, the impact of this decision was that no salary increases were made
as a result of the annual remuneration review and no short term incentives were paid for the 2008 performance period (1 July 2008
to 31 December 2008 for Zinifex originating employees) other than to former senior executives where such a payment was stipulated
and required by their contract of employment in the case of redundancy.
The Board also agreed to delay the implementation of a uniform OZ Minerals remuneration structure until such time as when the
Company’s financial situation has improved. While a common remuneration framework, including incentive structures, has been
implemented for senior executives for the performance period commencing 1 July 2008, the Company is managing a remuneration
structure still based on the legacy systems of the two companies for all other employees, albeit during a remuneration freeze.
The major remuneration challenge now facing OZ Minerals is to strike a balance between the Company’s ability to pay, a volatile
employment market and employee expectations. In meeting this challenge, the Board will continue to maintain alignment with
shareholders’ interests, whilst ensuring that remuneration remains competitive to retain and attract talented people, who are vital to
delivering a sustainable and prosperous future for OZ Minerals.
23
REMUNERATION REPORT
2
Summary of directors and specified executives
Specific remuneration disclosures for the following personnel are included in this report:
•
•
•
Directors.
Current senior executives.
Former senior executives.
Throughout this Remuneration Report we use the term “senior executive” to refer to:
•
•
The five most highly remunerated Group executives; and
All other executives who fall within the definition of key management personnel of the Group (being those persons with
authority and responsibility for planning, directing and controlling the activities of the Group).
Additionally, throughout this report we use the term “equity rights” to refer to share based payment arrangements which include
options, performance rights and long term incentive opportunities. Details of these arrangements are outlined in section 4.5.1 of this
report.
2.1
Directors
During 2008 the non-executive directors of the Company were:
•
•
•
Barry Cusack, Chairman of the Board.
Ronald Beevor.
Peter Cassidy from 20 June 2008 until 30 January 2009.
• Michael Eager.
• Owen Hegarty from 20 June 2008.
•
•
•
•
•
Brian Jamieson.
Richard Knight from 20 June 2008 until 31 December 2008.
Anthony Larkin from 20 June 2008.
Peter Mansell from 20 June 2008.
Dean Pritchard from 20 June 2008.
During 2008 the executive directors of the Company were:
• Owen Hegarty, Managing Director and Chief Executive Officer (CEO) of OZ Minerals Limited (then Oxiana Limited) until 20 June
2008. Following the merger Mr Hegarty became a non-executive Director of OZ Minerals until 19 December 2008. Throughout
the tables of this Remuneration Report, Mr Hegarty has been included as a former senior executive.
•
Andrew Michelmore, Managing Director and CEO from 20 June 2008.
There have been no new appointments to the Board between the balance date and the date of this report.
2.2
Current senior executives
In addition to the Managing Director and CEO, the following persons are current senior executives and key management personnel
of the Group:
•
•
•
•
•
Chief Operating Officer, Brett Fletcher appointed 1 July 2008.
Chief Financial Officer, David Lamont appointed 6 October 2008.
Executive General Manager Corporate Development, Peter Lester.
Executive General Manager Exploration, Antony Manini.
Executive General Manager Projects and Technical Services, John Nitschke appointed to his current position on 1 July 2008.
In addition the following senior executives were regarded as key management personnel during the year but ceased being regarded
as key management personnel from 1 July 2008:
•
•
General Manager Sepon Operations, Phil Dunstan.
General Manager Marketing, Russell Griffin.
2.3
Former senior executives
The following senior executives were key management personnel during the period but are no longer in the employment of the
Group as at 31 December 2008:
•
•
•
•
•
Executive General Manager Asia, Peter Albert until 10 December 2008.
Company Secretary, David Forsyth until 20 June 2008. Mr Forsyth continued working for OZ Minerals until 31 December 2008.
General Manager Human Resources, Stephen Mullen until 20 June 2008. Mr Mullen continued working for OZ Minerals until 31
August 2008.
Chief Financial Officer, Jeff Sells until 30 June 2008. Mr Sells continued as Acting Chief Financial Officer until 9 September 2008.
General Manager Sepon Projects, Jim Smith until 28 March 2008.
24
REMUNERATION REPORT
3
3.1
Principles of OZ Minerals’ approach to remuneration
Overview of strategy and remuneration policy
In the current volatile business environment OZ Minerals’ approach to remuneration is underpinned by an understanding that the
company must be responsive to market conditions and the financial and business context in which the Company operates. This
approach particularly applies to executive remuneration.
The integrity of the OZ Minerals remuneration strategy is strengthened by the determination and measurement of demanding
annual performance measures and rewarding contribution to the business through Company and individual performance, subject to
the Company’s capacity to pay. Remuneration arrangements are compared to the external remuneration market on an annual basis;
adjustments are made to the remuneration framework and individual remuneration when deemed appropriate and approved by the
Board. No salary increases were made as the result of the annual remuneration review and no short term incentives were paid for
the 2008 performance period (1 July 2008 to 31 December 2008 for Zinifex originating employees).
The remuneration policy is structured around fixed fees for non-executive directors (NEDs) and fixed and at-risk elements for senior
executives. The following table depicts the elements of the remuneration for the NEDs and the senior executives.
Fixed remuneration
At-risk remuneration
Elements of Remuneration
Fees
Salary
Superannuation
Other benefits
Incentives
• Short term
• Long term
• Service based sign-on retention benefit (b)
Discretionary recognition
Spot bonus
Termination benefits
Termination payments to former executives
NEDs
Yes
No
Yes
Yes (a)
No
No
No
Senior executives
No
Yes
Yes
Yes
Yes (c)
Yes
Yes
Yes
Yes
(a) These benefits relate to interstate, directors’ spouse travel where spouse attendance is required for Company related functions.
(b) During the year OZ Minerals made a one-off grant of performance Rights to Mr Lamont as a retention benefit. Refer to section
4.8 of this report for further details. A one-off grant of long term incentive opportunities, which was made to Mr Michelmore as
a retention benefit in his role as Managing Director and CEO of Zinifex, continues on foot. Refer to section 4.7.5 of this report
for further details. Details with regard to OZ Minerals policy on granting these incentives are found in 3.3.2.
(c) STI payments were not made for the 2008 performance period being 1 January 2008 to 31 December 2008 for OZ Minerals
(Oxiana) originating employees, and 1 July 2008 to 31 December 2008 for Zinifex originating employees, other than to former
senior executives who received a STI bonus for the 2008 financial year, where such payment was stipulated and required by
their contract of employment in the case of redundancy.
3.2
Non-executive directors
In the first half of the year, the fees payable to NEDs were those applicable prior to the merger. The annual fee payable to the
Chairman was A$360,000 (plus 9% superannuation) and to each NED was A$120,000 (plus 9% superannuation). In addition, each
NED (except the Chairman) received additional fees for membership of Board Committees. The total remuneration received by the
NEDs (Mr Cusack, Mr Beevor, Mr Eager and Mr Jamieson) for the first half of the year prior to the merger was A$441,305. This
includes Board fees and other benefits, committee fees, retirement benefit adjustment and contributions to superannuation. Refer to
table 5.1 of this report for further detail.
As a consequence of the merger, the number of NEDs increased to ten (refer to section 2.1 of this report for further details) and a
different fee structure was set by the new Board, having regard to advice obtained from an independent external remuneration
advisor, the size of the Board, the time commitments required of directors and market practices among comparable companies.
As approved at the OZ Minerals General Meeting on 18 July 2008, the maximum aggregate fees payable per annum is A$2,700,000.
As can be seen from the summary of fees below, the aggregate amount of fees paid in 2008 was well below this figure. The fees that
applied as from 20 June 2008, being the date on which the new Board was formed, are as outlined below. The Chairman was paid a
flat fee, with no additional fees for service on Committees.
Amounts disclosed for remuneration of directors and senior executives exclude insurance premiums paid by the Group in respect of
directors’ and officers’ liability insurance contracts which cover current and former directors and officers, including executive officers
of the Company and directors, executive officers and secretaries of its controlled entities. The amount has not been allocated to the
individuals covered by the insurance policy as, based on all available information, the directors believe that no reasonable basis for
such allocation exists.
25
REMUNERATION REPORT
3.2.1
Details of non-executive director remuneration
Chairman
A$ per annum (a)
Non-executive director
A$ per annum (a)
Base fee rate
450,000
150,000
Plus additional fees for non-executive directors other than the Chairman (b):
Audit and Finance
Compliance
Nomination and Remuneration
Integration (c)
Committee Chair A$
Committee member A$
40,000
40,000
25,000
20,000
20,000
12,500
40,000 for six months
10,000 for six months
(a)
In addition to the fees specified above, all directors (including the Chairman) are entitled to superannuation contributions equal
to 9%, and are entitled to be reimbursed for travelling and other expenses properly incurred by them in attending any meeting
or otherwise in connection with the business or affairs of the Company, in accordance with the Company’s Constitution.
(b) All NEDs (other than the Chairman) receive a fee for being a director of the Board and additional fees for either chairing or
being a member of a Board Committee.
(c) The Integration Committee had its last meeting on 17 November 2008 and completed its duties in December 2008.
Details of the committee or committees on which each NED served are disclosed in the Directors’ Report. Full details of the NEDs’
remuneration are set out in the table in section 5.1 of this report.
NEDs are encouraged to hold a minimum shareholding of at least the equivalent of one years’ annual fees in the form of shares and,
if necessary, that this holding be built up over a five year period.
Consistent with best practice, NEDs do not receive any form of performance based remuneration (including bonuses, options, other
incentive payments) or retirement benefits. In the past Oxiana Limited (now OZ Minerals Limited) paid retirement benefits to NEDs.
These benefits were frozen at 31 December 2005 and the value at that date is adjusted each year at a bank interest rate. Further
details are set out in section 5.1 of this report.
3.3
Executive remuneration
The Company’s specific arrangements and programs for executive remuneration are designed to be rigorous, competitive and
adaptable to ensure alignment with and linkage to volatile external conditions, business plans and strategic imperatives. Currently
total remuneration for executives consists of fixed and at-risk components, with the latter having numerous elements – a short-term
incentive (STI), a long-term incentive (LTI), and for selected senior executives, a one off sign-on retention benefit. Other selected non
executive Oxiana originating employees received a one-off retention bonus during the merger process which was paid in December
2008 or January 2009. As a general principle, more senior positions have a greater proportion of their remuneration as at-risk reward.
The quantum of total fixed and at-risk remuneration at a company and individual level targets strategically agreed percentile points
of the Australian mining remuneration market. The annual remuneration review is conducted with the assistance of external
remuneration analysts and advisors. A consistent approach is applied to:
•
•
•
evaluating the core skills and experience requirements of each role in order to grade positions accurately;
annually reviewing and updating remuneration benchmarks using salary survey data from the Australian All Industrials and
Minerals sectors; and
adjusting each person’s total fixed remuneration having regard to individual performance against key job objectives as specified
in the person’s annual performance contract, and with comparison against their peers. No salary increases were made as a
result of the annual remuneration review.
3.3.1
Fixed remuneration
The fixed element of remuneration provides a regular base reward that reflects the size of the role and the applied professional
competence of each executive, according to his/her knowledge, experience and accountabilities. Specific details of payments to
senior executives and the Managing Director and CEO are provided in table 5.2 of this report.
3.3.2
At-risk remuneration
The at-risk element of remuneration comprises a short term incentive reward for achieving annual financial and business targets and
a long term incentive, which is an equity based reward linked to the Company’s medium to long term total shareholder return. The
details of the Company’s short term incentive and long term incentive are outlined in sections 4.4 and 4.5 of this report respectively.
OZ Minerals granted sign-on retention benefits to certain senior executives whose role and contribution were identified as critical to
the continued success of OZ Minerals. The grants are intended to “lock in” the services of the selected senior executives for a
continuous period and are outlined in sections 4.7.5 and 4.8 of this report.
26
REMUNERATION REPORT
3.3.3 Service agreements and contracts of employment
Senior executives are employed under either a service agreement or contract of employment. The key details of these agreements
are listed in the following table:
Name
Term of contract
Notice period by either party
Termination benefit
(a) (b)
Andrew Michelmore
Ongoing executive
service agreement
6 months on the part of the
executive, 12 months on the part of
the Company
52 weeks of total fixed remuneration plus
incentives at the discretion of the Board
Brett Fletcher
David Lamont
Peter Lester
Antony Manini
John Nitschke
Russell Griffin
Peter Albert
Stephen Mullen
Jeffrey Sells
Owen Hegarty
Ongoing contract of
employment
Ongoing contract of
employment
3 months
52 weeks of total fixed remuneration
3 months
39 weeks of total fixed remuneration
Ongoing contract of
employment
3 months
A minimum of 9 months severance plus a
pro rata STI payment calculated to the senior
executive’s final date of employment plus an
amount equal to the STI calculated on the
notice period and the minimum severance
period
Three years until 31
December 2009
6 months other than in the case of
redundancy where the notice
period is 3 months
1 month per year of service plus a pro rata
STI payment calculated with reference the
final date of employment including the
notice period
David Forsyth
Ongoing contract of
employment
3 months
1 month per year of service with a minimum
of 9 months plus a pro rata STI payment
calculated to the senior executive’s final date
of employment plus an amount equal to the
STI calculated on the notice period and the
minimum severance period
(a) Executives are eligible for a termination benefit, other than if dismissed for gross misconduct.
(b) The contracts of Oxiana Limited originating senior executives outline the entitlements due to the senior executive in the case of
redundancy. The contracts of Zinifex Limited originating and other senior executives refer to the Company Redundancy Policy.
27
REMUNERATION REPORT
4
Remuneration – questions and answers
This section aims to address potential questions that shareholders may have in relation to OZ Minerals’ executive remuneration
strategy. It has been framed in a question and answer format for clarity and ease of reference.
4.1
Remuneration strategy
OZ Minerals has maintained a remuneration strategy which has resulted in no significant movement away from the overall
remuneration strategy of either heritage company.
4.1.1
What is the company’s approach to fixed remuneration?
OZ Minerals continues to target a competitive position as compared with remuneration reported for the mining market. See section
4.2 of this report for more detail.
4.1.2
What is the company’s approach to short term incentives?
The framework for short term incentives offered to senior executives was aligned in relation to incentives for the performance period
commencing 1 July 2008. The terms of the short term incentive offered to these executives were based on the Zinifex Short Term
Incentive Plan, further detail of which is provided in section 4.4 of this report.
Short term incentives that were offered to employees other than senior executives for the 2008 performance period were based on
programs already in place in 2008. A consistent annual incentive plan, designed to replace the Short Term Incentive Plan for
employees other than senior executives was scheduled to be implemented from 2009. However, this implementation has been
postponed due to the remuneration freeze and until the Company’s financial situation has been resolved.
4.1.3
What is the company’s approach to long term incentives?
Following the implementation of the merger the Board approved the design of the OZ Minerals Long Term Incentive Plan. The value
of equity rights to be granted was confirmed on 1 October 2008 and the actual grant was made on 24 November 2008 (using the
share price on 1 October 2008). Further details relating to the OZ Mineral Long Term Incentive Plan are provided in section 4.5 of this
report. Long term incentives are only offered to General Managers and equivalent level employees.
4.2
4.2.1
Fixed remuneration
What comprises fixed remuneration?
A senior executive’s fixed remuneration comprises salary and other benefits (including statutory superannuation contributions) that
may be taken in an agreed form, including cash, leased motor vehicles and additional superannuation, provided that no extra cost is
incurred by the Company.
4.2.2
How are fixed remuneration costs controlled?
A number of internal controls are used to ensure that employment costs at all levels are justified and appropriate. They involve:
•
•
•
business plans and budgets plus organisational reviews to ensure that OZ Minerals has the right structure and workforce
numbers;
job evaluation and grading, remuneration planning and performance management to ensure OZ Minerals pays for
performance; and
skill needs analysis and sourcing, talent audits, professional development programs and succession planning to ensure that our
people capability remains continually at the standard we need and provides a pipeline of internal recruits to minimise our
external recruitment costs.
4.3
4.3.1
At-risk remuneration
What is at-risk remuneration?
At-risk remuneration is that part of total remuneration for senior executives and other employees that is tied to the achievement of
performance objectives (including Company, site, team and individual), to the creation of shareholder value and for some senior
executives, the satisfaction of retention conditions. More senior positions have a greater proportion of at-risk remuneration.
4.3.2
Why does the Board consider at-risk remuneration to be appropriate for senior executives?
At-risk remuneration strengthens the link between pay and performance. The purpose of these programs is to make a large
proportion of the total market remuneration package subject to meeting various targets linked to OZ Minerals’ business objectives.
The use of incentives avoids much higher levels of fixed remuneration. Incentives are designed to focus and motivate employees to
achieve outcomes beyond the applied professional competence expected as a normal course of ongoing employment. A
remuneration structure that includes at-risk elements is also necessary as a competitive package in the Australian and global
marketplace for executives.
28
REMUNERATION REPORT
4.3.3
What are the proportions of at-risk remuneration for executives at the ‘threshold’, ‘target’ and exceptional or ‘stretch’
performance levels?
The relative proportions of a senior executive’s total 2008 remuneration that is “at-risk” (including the relative proportion that is
performance based) is set out in the table below. The proportion of at-risk remuneration for ‘threshold’ performance is undefined.
Name
Current senior executives
Andrew Michelmore (a) (c)
Brett Fletcher (c)
David Lamont (c)
Peter Lester (d)
Antony Manini (d)
John Nitschke (d)
Russell Griffin (d)
Former senior executives (g)
Owen Hegarty (b) (e)
Peter Albert (d)
David Forsyth (e) (f)
Jeffrey Sells (e) (f)
Stephen Mullen (e) (f)
At-risk remuneration
(% of total fixed remuneration)
Short term incentive
reward opportunity
(at target)
Short term incentive
reward opportunity
(at stretch)
Long term incentive reward
opportunity
50
40
40
40
40
40
30
50
40
30
30
30
100
80
80
80
80
80
60
50
80
30
30
30
160
80
80
80
80
80
60
Refer footnote (h)
80
90
90
75
(a) Details with regard to incentives offered to Mr Michelmore are found in section 4.7 of this report.
(b) Details with regard to incentives offered to Mr Hegarty are found in section 4.6 of this report.
(c) Equity rights granted under the OZ Minerals Long Term Incentive Plan in November 2008 were calculated at 80% of individual
total fixed remuneration for Executive General Managers and 160% of individual total fixed remuneration for the Managing
Director and CEO.
(d) Equity rights granted in November 2008 were a pro rata grant, calculated with regard to equity rights granted under the OZ
Minerals Long Term Incentive Plan (granted in February 2008).
(e) Under the OZ Minerals Short Term Incentive Plan prior to the merger, incentives offered to General Managers and Executive
General Managers were up to a maximum of 30% of total fixed remuneration only and up to a maximum of 50% of total fixed
remuneration only for the former Managing Director and CEO.
(f)
Equity rights granted under the OZ Minerals Long Term Incentive Plan in February 2008 were calculated for Executive General
Managers as 90%, and General Managers as 75%, of the average total fixed remuneration of General Managers and the Global
Executive Team (not including Mr Hegarty, former Managing Director and CEO).
(g) Phil Dunstan and Jim Smith were not considered key management personnel in 2008 and therefore have been excluded from
this table.
(h)
In line with his contract of employment Mr Hegarty was granted 2,000,000 options per annum under the terms of the Oxiana
Long Term Incentive Plan the details of which are outlined in section 4.6.4 of this report.
4.4
4.4.1
Short term incentive and bonus
What is the short term incentive (STI)?
The STI is designed to deliver the annual business plan and it is based on an annual at-risk cash reward opportunity, based
predominantly on a mix of individual and group financial and non financial targets broadly based on:
(i)
(ii)
(iii)
(iv)
operational performance, including production rates, quality and cost reduction;
safety, as measured by reductions in injury frequency rates and environmental compliance;
team or departmental projects; and
individual performance objectives including, behavioural criteria around leadership, communications and alignment with
planned cultural change.
Each senior executive’s performance targets are agreed with the Managing Director and CEO on an annual basis and are determined
in relation to the business plan and the senior executive’s area of responsibility.
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REMUNERATION REPORT
4.4.2
Are there any additional bonuses paid?
In addition to the STI, there is a discretionary recognition and spot bonus plan developed and administered in accordance with the
OZ Minerals Delegation of Authority Manual. This provides employees, at any level (including executives), with special rewards for
outstanding and substantial accomplishments beyond and additional to the responsibilities of the recipients’ roles. This spot bonus
is only granted in what are clearly exceptional circumstances and, naturally, only very few such awards are made in any year. They
are principally directed towards employees who are not part of the executive team. There were no spot bonuses paid to senior
executives in 2008 and the spot bonus program has been withdrawn for 2009.
Other selected non-executive Oxiana originating employees received a one off retention bonus during the merger process which was
paid in December 2008 or January 2009.
4.4.3
Why do you identify ‘threshold’, ‘target’ and ‘exceptional/stretch’ performance levels? Shouldn’t all STI reward be
dependent on ‘exceptional/stretch’ performance?
The acceptable ‘threshold’ of performance to qualify for a STI reward acts to provide some small reward for commendable results
that merit recognition. It is expected that executives should have an 80 per cent chance of attaining threshold. Achieving the ‘target’
outcomes means that it is expected that executives should have a 60 per cent chance of reaching target. The exceptional or ‘stretch’
reward opportunity is for those circumstances, where outstanding achievements have been delivered. It is expected that executives
should have a 20 per cent chance of securing the maximum reward.
4.4.4
Who assesses the performance of the Managing Director and CEO?
The Chairman, on the recommendation of the Nomination and Remuneration Committee, approves realistic but challenging targets
for the Managing Director and CEO at the outset of the performance year. The Managing Director and CEO’s performance is then
assessed by the Board against the agreed targets at the end of the performance period.
4.4.5
Who assesses the performance of other senior executives?
The Managing Director and CEO assesses the business performance of his executive team continually throughout the year, for
progress and improvement, to arrive at a summary assessment at year end, for discussion with the Board.
As a higher level review, the Board also reviews the performance assessment of the senior executives who report directly to the
Managing Director and CEO, with a view to understanding, endorsing and/or discussing individual circumstances and potential.
4.4.6
How were the STI payments for the performance period ending 30 June 2008 treated?
STI payments were paid to Zinifex originating executives in October 2008. These payments related to the performance period 1 July
2007 to 30 June 2008. Expenses related to these payments were accrued over the performance period which occurred prior to the
merger and, therefore, have not been included in this report. OZ Minerals (Oxiana) originating employees were not eligible for a STI
payment at the end of June 2008.
4.4.7
How were the STI payments for the performance period ending 31 December 2008 for all employees treated?
STI payments were not paid for the 2008 performance period being 1 January 2008 to 31 December 2008 for OZ Minerals (Oxiana)
originating employees and 1 July 2008 to 31 December 2008 for Zinifex originating employees, other than to former senior
executives who received a STI bonus for the 2008 financial year, where such payment was stipulated and required by their contract of
employment in case of redundancy.
The Board has decided to defer the STI program for 2009 and will review its position with regard to remuneration and the STI
program later in year, considering company performance, economic conditions and cash flow.
4.5
4.5.1
Long term incentives
What is the Company’s Long Term Incentive Plan (LTIP) and how has it changed over time?
The Company has an ongoing commitment to providing a long term incentive plan for executives to:
•
•
•
ensure that business decisions and strategic planning have regard to the Company’s long term performance;
be consistent with contemporary remuneration governance standards and guidelines; and
be consistent and competitive with current practices of comparable companies.
OZ Minerals has established a LTIP which uses the framework of the Oxiana LTIP. Existing equity rights granted under the legacy
plans of both Oxiana Limited and Zinifex Limited continue on foot. The details of these plans are outlined in the table below. The
performance hurdle for all three plans is relative TSR as measured against a comparator group. The Board considers that Total
Shareholder Return (TSR) is an appropriate performance hurdle to determine vesting because it ensures that a proportion of each
participant’s remuneration is linked to the generation of profits and shareholder value and ensures that participants only receive a
benefit where there is a corresponding direct benefit to shareholders. TSR reflects benefits received by shareholders through share
price growth and dividend yield and is the most widely used long term incentive hurdle in Australia. To ensure an objective
assessment of the relative TSR comparison the Company employs an independent organisation to calculate the TSR ranking. Details
of the TSR performance requirements are outlined in section 4.5.8 of this report.
30
REMUNERATION REPORT
Element
Equity rights granted under
the OZ Minerals LTIP -
November 2008
Equity rights granted under the
Oxiana LTIP - February 2008 &
2007
Equity rights granted under the Zinifex
Executive Share Plan
Type of equity
rights granted
50% options
50% performance rights
50% options
50% performance rights
Amount of equity
rights granted
160%, 80% or 60% of the
executive’s total fixed
remuneration, according to
job grade
Grant date
24 November 2008 based on
the OZ Minerals share price
on 1 October 2008
Performance
Period
1 July 2008 – 30 June 2011 (3
year vesting)
90% or 75% of average total fixed
remuneration of all General
Managers and the Global Executive
Team (not including Owen Hegarty
who was the Managing Director
and CEO at that time)
1 March 2007 and 26 February 2008
1 March 2007 to 28 February 2009
(2 year vesting)
1 March 2007 to 28 February 2010
(3 year vesting)
26 February 2008 to 25 February
2011 (3 year vesting)
100% Long Term Incentive Opportunities
(LTIOs) which are a conditional entitlement
to OZ Minerals shares subject to the
satisfaction of vesting conditions and
performance criteria
160%, 80% or 40% of the executive’s total
fixed remuneration, according to job grade
1 July 2006 (allocation date 1 November
2006)
1 July 2007 (allocation date 1 November
2007)
1 July 2006 to 30 June 2009 (3 year vesting)
1 July 2007 to 30 June 2010 (3 year vesting)
Exercise price –
options
35% above the volume
weighted average share price
over the week up to and
including the date of grant
35% above the volume weighted
average share price over the week
up to and including the date of
grant
Not applicable
Not applicable – provided at
no cost
Not applicable – provided at no
cost
Not applicable – provided at no cost
The assumptions underlying
the Black-Scholes
methodology are used to
produce a Monte-Carlo
simulation model
The assumptions underlying the
Black-Scholes methodology are
used to produce a Monte-Carlo
simulation model
The assumptions underlying the Black-
Scholes methodology are used to produce
a Monte-Carlo simulation model
Exercise price –
performance rights
and LTIOs
Fair valuation
methodology
4.5.1.1 Options
All options were granted for no consideration and existing allocations have maximum terms of five years from the date of grant.
Options granted under the plan carry no dividend or voting rights. Each option is a conditional entitlement to one ordinary OZ
Minerals Limited share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in
all respects with previously issued fully paid ordinary shares. Option holders cannot participate in new issues of capital which may be
offered to shareholders prior to exercise. Prior to any new pro rata issue of shares to shareholders, option holders are notified by the
Company and are allowed ten business days before the record date to exercise their vested options.
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REMUNERATION REPORT
4.5.1.2
Performance rights
All performance rights were granted for no consideration and have maximum terms of ten years from the date of grant. The
performance measurement period is two and three years as noted in the table in section 4.5.1 of this report. Performance rights
granted under the plan carry no dividend or voting rights. Each performance right is a conditional entitlement to one ordinary OZ
Minerals Limited share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in
all respects with previously issued fully paid ordinary shares.
4.5.1.3
LTIOs granted under the Zinifex Executive Share Plan
Equity rights granted under the Zinifex Executive Share Plan are in the form of Long Term Incentive Opportunities (LTIOs). Each LTIO
is a conditional entitlement to 3.1931 ordinary OZ Minerals Limited shares at no cost, subject to satisfying vesting conditions and
performance criteria. This conditional entitlement does not carry a right to vote, nor to dividends nor, in general, to participate in
corporate actions such as bonus issues during the period prior to vesting.
The shares allocated on the vesting of LTIOs are held in trust on the executive’s behalf until the Board or its delegate approves their
release. During the period in which the shares are in trust the executive is entitled to all dividends and other distributions, bonus
issues or other benefits payable in respect of the shares.
4.5.1.4
Comparator groups
Comparator group details for equity rights granted under the OZ Minerals LTIP, Oxiana LTIP and the Zinifex Executive Share Plan are
outlined in 4.5.7 of this report.
4.5.2
Why does the Board consider the LTIP to be appropriate?
The LTIP is aimed at creating an immediate ownership mindset among the executive participants, linking a substantial portion of
their potential total reward to OZ Minerals’ ongoing share price and returns to shareholders over at least a three-year period looking
forward from the time of each grant of equity rights.
4.5.3
What happens to equity rights granted under the LTIP when an executive ceases employment?
If a senior executive ceases employment with OZ Minerals before the performance condition is tested, then his or her unvested
equity rights will generally lapse. If cessation is due to death or redundancy, or where the Board consents, some or all of the senior
executive’s unvested equity rights may vest at the Board’s discretion (having regard to such factors as the Board determines and
there could be pro-rata awards). In the case of termination of employment for reasons of gross misconduct all equity rights lapse
immediately.
4.5.4
What happens in the event of a change of control?
In the event of a takeover or change of control of OZ Minerals, any unvested equity rights may vest at the Board’s discretion.
4.5.5
Does the Company have a policy in relation to hedging of unvested equity rights?
Under the Company’s Securities Trading Policy, executives are prohibited from entering into hedging arrangements in relation to
unvested equity rights. Once vested, executives must comply with the Company’s Securities Trading Policy in relation to any dealings
in OZ Minerals shares. The Company treats compliance with this policy as a serious issue, and takes appropriate measures to ensure
the policy is adhered to. Any employee found to have breached this policy will be subject to appropriate sanctions.
4.5.6
What are the comparator companies for the TSR assessment for equity rights granted under the LTIP arrangements?
Performance rights granted under the Oxiana LTIP (2007 and February 2008) vest according to TSR performance compared to the
ASX 200.
32
REMUNERATION REPORT
All options, performance rights granted under the OZ Minerals LTIP and LTIOs granted under the Zinifex Executive Share Plan vest in
accordance with TSR performance compared with the following comparator groups:
Companies
Alumina Limited
Aquarius Platinum Limited
BHP Billiton Limited
Boliden AB
Centennial Coal Company Limited
Consolidated Minerals Limited
Equinox Minerals Limited
First Quantum
Freeport McMoran Copper and Gold Inc.
Iluka Resources Limited
Inmet Mining Corporation
Ivanhoe Australia Limited
Kagara Ltd
Lihir Gold Limited
Lundin Mining Corp
Minara Resources Limited
Newcrest Mining Limited
Paladin Energy Ltd
PanAust Limited
Penoles SA de VC
Perilya Limited
Rio Tinto Limited
Sino Gold Mining Limited
Southern Copper Corporation
Teck Cominco Ltd
Umicore SA/NV
Vedanta Resources
Western Areas NL
Xstrata plc
OZ Minerals
LTIP
Oxiana LTIP (2007 &
February 2008
options) (a)
Zinifex LTIOs
(2006/2007) (b)
Zinifex LTIOs
(2007/2008) (b)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(a) Western Areas (WSA) and Freeport McMoran Copper and Gold Inc replaced Zinifex Limited and Jubilee Mines Limited. This
comparator group also applies to options granted to Mr Hegarty in 2008.
(b) Western Areas replaced Oxiana Limited.
33
REMUNERATION REPORT
4.5.7
What are the TSR performance requirements for equity granted under the LTIP arrangements?
OZ Minerals LTIP and Oxiana LTIP
TSR performance
Percentage of equity granted to vest
75th percentile or greater
100%
Between the 50th and 75th percentile
Between 50% and 75%
50th percentile
Less than 50th percentile
Zinifex Executive Share Plan
50%
0%
TSR ranking compared to comparator group
Percentage of equity granted to vest
2nd or better
3rd
4th
5th
6th
7th
Less than 50th percentile (8th or worse)
100%
78%
55%
47%
38%
30%
0%
Further details relating to TSR assessment are outlined in section 4.5.1 of this report.
4.5.8
What equity rights have been granted under the LTIP arrangements?
Details of total number of equity rights that have been granted under the OZ Minerals LTIP, Oxiana LTIP and Zinifex Executive Share
Plan are set out in Note 32 to the financial statements. Details of grants made to senior executives during 2008 are set out in section
5.4 of this report.
4.5.9
What methodology is used to determine the fair value of long term incentives?
The fair value of equity rights is determined at the time of grant and is included in remuneration, progressively allocated over the
vesting period. Further details relating to the fair valuation methodology are outlined in the table in section 4.5.1 of this report. The
fair value calculated and included in the remuneration disclosures may differ to the value the senior executive actually receives.
4.6
4.6.1
Former Oxiana Managing Director and CEO – Owen Hegarty
What was the total remuneration framework for Mr Hegarty?
Until his retirement from the position of Managing Director and CEO on 20 June 2008, Mr Hegarty received a package consistent
with the OZ Minerals remuneration policy and structure. His employment conditions, including remuneration, were recommended
by the Nomination and Remuneration Committee, and approved by the Board.
4.6.2
What were the details of Mr Hegarty’s fixed remuneration?
Mr Hegarty’s total fixed remuneration was set at A$1,500,000 per annum inclusive of superannuation with effect from 1 January
2008.
4.6.3
What were the details of Mr Hegarty’s short term incentive?
Mr Hegarty was eligible for up to fifty per cent of total fixed remuneration as a STI. STI payments for the Managing Director and CEO
were proposed by the Nomination and Remuneration Committee and approved by the Board in light of assessed performance
against targets.
4.6.4
What were the details of Mr Hegarty’s long term incentive?
In line with his contract of employment, Mr Hegarty was granted 2,000,000 options on 18 April 2008. These options were subject to
the achievement of a TSR performance hurdle as outlined in 4.5.8 of this report. The comparator companies were those listed in
4.5.7 of this report for Oxiana LTIP (2007 and February 2008).
4.6.5
What were the details of retention shares granted to Mr Hegarty?
In line with Mr Hegarty’s contract of employment, Mr Hegarty was granted a retention incentive of 750,000 shares (250,000 shares
per annum) vested if Mr Hegarty was in continuous service on each of the first, second and third anniversaries of his contract
commencement.
34
REMUNERATION REPORT
4.6.6
What were the circumstances of Mr Hegarty’s departure?
Mr Hegarty agreed to step aside and retire from the position of Managing Director and CEO on 20 June 2008 to allow Mr
Michelmore to assume the role. Mr Hegarty continued as a non-executive Director of OZ Minerals and the Chairman of the
Integration Committee until 19 December 2008.
4.6.7
What were the costs and entitlements paid out to Mr Hegarty upon his departure?
In accordance with his contractual arrangements, Mr Hegarty received a payment equal to six months of his total fixed remuneration
(A$750,000) together with all accrued and statutory entitlements (A$955,610). Additionally the Board determined that it was
appropriate to make an ex-gratia payment (A$8,350,000) to Mr Hegarty to recognise Mr Hegarty’s outstanding contribution to OZ
Minerals’ growth and success over the fourteen years since 1994 and his salary compensation in recent years relative to his peers.
The payment was made within the limits of the Corporations Act and, in the Board’s opinion, was consistent with ‘reasonable
remuneration’ standards in light of Mr Hegarty’s significant contribution to OZ Minerals and its shareholders. The payments fall
within the statutory limits and restrictions imposed on termination benefits that could be authorised by the Board without
shareholder approval.
All of Mr Hegarty’s unvested options under the Company’s long term incentive plan (4,000,000) and retention shares (500,000)
lapsed. Mr Hegarty did not receive any short term incentive payments or further equity rights grants.
4.7
4.7.1
Current OZ Minerals Managing Director and CEO – Andrew Michelmore
What was the total remuneration framework for Mr Michelmore?
Mr. Michelmore commenced employment as the Managing Director and CEO of Zinifex on 1 February 2008. The terms of his
employment were set following an independent market survey of resources companies, in particular, similarly capitalised companies
by external remuneration consultants. He was appointed to the position of Chief Executive Officer and Managing Director of OZ
Minerals on 20 June 2008, on the same terms and conditions that prevailed at the time of the commencement of his employment
with Zinifex on 1 February 2008. These conditions continue to apply.
4.7.2
What were the details of Mr Michelmore’s fixed remuneration?
Mr Michelmore’s fixed remuneration rate is A$1,900,000 per annum inclusive of superannuation.
4.7.3
What were the details of Mr Michelmore’s short term incentive?
In line with his executive service agreement Mr Michelmore is eligible for an annual cash payment as a STI of up to a maximum of
100% of total fixed remuneration for satisfying performance conditions linked to both OZ Minerals and his personal performance.
The STI which may be earned is in accordance with the following schedule:
•
•
•
30% of total fixed remuneration for ‘threshold performance’ being the minimum acceptable level
50% of total fixed remuneration for ‘target’ performance
100% of total fixed remuneration for ‘stretch’ performance
Performance objectives are set and assessed by the Board. At the recommendation of the Nomination and Remuneration
Committee, the Board has determined to defer the review and payment of any STI until the financial position of OZ Minerals has
improved.
4.7.4
What were the details of Mr Michelmore’s long term incentive?
In line with his executive service agreement, Mr Michelmore is eligible to participate in the OZ Minerals LTIP and previously the
Zinifex Executive Share plan. Mr Michelmore is eligible for a grant of equity rights equivalent to 160% of his total fixed remuneration.
Under the terms and conditions of the Zinifex Executive Share Plan, Mr Michelmore was granted 114,943 LTIOs which entitled him
originally to 114,943 Zinifex Limited shares (now 367,024 OZ Minerals’ shares) subject to satisfaction of the vesting conditions. The
terms of the grant including the comparator group and vesting conditions are outlined in section 4.5.1.3 of this report. Any shares
granted upon vesting will be satisfied by purchases on-market.
4.7.5
What were the details of the sign on, restraint and retention benefit granted to Mr Michelmore?
Mr Michelmore was granted 67,568 Zinifex LTIOs as a retention and restraint of trade benefit on 1 February 2008. These were
granted in accordance with the terms of his performance contract and Zinifex Executive Share plan, which originally entitled him to
receive 67,568 Zinifex shares on the terms specified below. As a consequence of the merger, Mr Michelmore is conditionally entitled
to 3.1931 OZ Minerals shares for each Zinifex LTIO resulting in a total of 215,751 OZ Minerals shares, subject to the satisfaction of
vesting conditions. The terms of the grant including the comparator group and vesting conditions are outlined in section 4.5.1.3 of
this report. Any shares granted upon vesting will be satisfied by purchases on-market.
One third of the sign-on LTIOs will vest on each of the first three anniversaries of Mr. Michelmore’s continuous employment with the
Company. Unvested LTIOs lapse if Mr Michelmore ceases to be employed by the Company prior to each anniversary.
The terms of Mr Michelmore’s contract specify that any unvested sign-on LTIOs will vest immediately upon change of control of the
Company or if his employment ceases following a fundamental change. Mr. Michelmore agreed to waive this requirement upon a
change of control associated with the merger of OZ Minerals Limited and Zinifex Limited.
35
REMUNERATION REPORT
4.8
What were the details of the retention benefit granted to Mr Lamont?
Mr Lamont was granted 139,752 sign on equity rights as a retention benefit on 24 November 2008. These equity rights were granted
in accordance with the terms of Mr Lamont’s contract of employment and the OZ Minerals Performance Rights Plan rules. Each
equity right conditionally entitles Mr Lamont to one OZ Minerals share, subject to the satisfaction of vesting conditions. Equity rights
are granted for no consideration and do not carry a right to vote nor to dividends nor, in general, to participate in corporate actions
such as bonus issues. The shares when allocated rank pari passu in all respects with previously issued fully paid ordinary shares.
One third of the retention equity rights will vest on each of the first three anniversaries of Mr. Lamont’s continuous employment with
the Company. Unvested equity rights lapse if Mr Lamont ceases to be employed by the Company prior to each anniversary. Any
unvested retention equity rights will vest immediately upon change of control of the Company or if Mr Lamont’s employment ceases
following a fundamental change.
36
REMUNERATION REPORT
5
5.1
Details of directors’ and senior executives’ remuneration
Total remuneration paid or payable to non-executive directors (NEDs)
Total remuneration received by NEDs in 2008 was A$1,554,075 (2007: A$777,316). Payments and non monetary benefits received by
NEDs individually are set out in the following table:
Director’s fees
Post-employment benefits
Board fees
$
Committee fees
$
Non monetary
benefits
$
Retirement benefit
adjustment (a)
$
Company
contributions to
superannuation
$
Total fixed
remuneration
$
In AUD
Directors
Barry Cusack
2008
2007
Ronald Beevor
2008
2007
Peter Cassidy
2008
2007 (b)
Michael Eager
2008
2007
Brian Jamieson
2008
2007
444,398
288,850
135,917
90,000
84,124
84,986
135,902
90,000
135,902
90,000
-
-
32,500
15,000
17,889
27,183
25,874
25,000
54,007
17,500
Richard Knight (c) (d)
2008
80,153
8,944
Anthony Larkin (d)
2008
78,822
27,646
Peter Mansell (d)
2008
88,961
11,181
Dean Pritchard (d)
2008
79,141
17,889
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,647
8,839
3,417
3,950
-
3,738
5,790
6,692
1,300
1,503
-
-
-
-
-
-
15,158
-
2,210
4,050
14,560
10,350
17,092
9,675
452,045
297,689
186,992
108,950
104,223
119,957
182,126
132,042
208,301
118,678
6,791
95,888
7,129
113,597
6,539
106,681
7,192
104,222
(a) Retirement benefits were adjusted for 2008 at a bank interest rate of 5.4% per annum (2007: 6.7%). Refer to section 3.2.1 of this
report for further details. Retirement benefits, including the retirement benefit adjustment for 2008 disclosed in the table above,
have been accrued for Mr Cusack (A$148,223), Mr Beevor (A$66,236), Mr Eager (A$112,220) and Mr Jamieson (A$25,195).
(b) Dr Cassidy was a director of Oxiana Limited until his resignation effective 27 November 2007. An accrued retirement benefit of
A$62,607 was paid to Dr Cassidy on resignation at 27 November 2007. Dr Cassidy became a director of OZ Minerals on 20 June
2008 and resigned effective 30 January 2009.
(c) Mr Knight resigned from the Board effective 31 December 2008.
(d) Represents fees from the date of appointment being 20 June 2008.
37
REMUNERATION REPORT
5.2
Total remuneration paid or payable to senior executives
The amount of disclosed remuneration represents remuneration paid or payable to the executive for the period during which they
were considered key management personnel.
Short-term benefits
Long-
term
benefit
Post
employment
benefits
Cash
Salary
$
Incentive
& bonus
payments
(a)
$
Non
monetary
benefits
$
Other
$
Company
contributions
to Super-
annuation
$
Terminatio
n benefits
(b)
$
Share-based payments
Value of
options,
performance
rights &
LTIOs
$
Value of
retention
shares
$
Total fixed
& at-risk
remun-
eration
$
Options,
performance
rights, LTIOs as
% of total
fixed & at-risk
remuneration
88,545
164,228
1,285,523
20%
In AUD
Current senior executives
Andrew Michelmore
2008
1,000,782
Brett Fletcher
2008
344,770
David Lamont (c)
2008
226,564
Peter Lester
-
-
-
-
7,821
16,873
7,274
38,943
48,848
6,872
2,456
3,853
3,436
2008
2007
431,193
7,311
51,754
366,972 101,376
-
-
Antony Manini
2008
2007
431,193
-
4,644
57,219
366,972 116,294
-
-
John Nitschke
2008
2007
Phil Dunstan
517,725
-
3,827
39,668
327,780
98,293
48,000
2007
310,000
86,500
-
Russell Griffin
2008 (d)
128,718
-
21,396
20,389
2007
231,023
67,661
-
-
Former senior executives
Owen Hegarty
38,945
42,151
38,807
33,234
42,275
24,426
-
11,282
25,066
-
-
-
-
-
-
-
-
-
-
-
-
13,807
453,240
3,815
10,656
250,780
190,500
71,278
189,861
71,278
193,842
71,278
-
-
-
-
-
-
719,703
581,777
721,724
587,778
797,337
569,777
720,000
-
1,116,500
104,435
132,884
-
-
286,220
456,634
Peter Albert
2008
2007
499,718 232,000
425,000 117,250
David Forsyth
2008
2007
2008
2007
325,024 102,044
-
Stephen Mullen
2008
2007
142,355
60,550
12,016
264,563
84,943
-
Jeffrey Sells
2008
2007
Jim Smith
260,255
83,000
2,885
325,229 102,250
-
-
-
-
-
745,103 (e)
-
44,572
378,136
53,892 (e) 9,100,000 (f)
-
- 10,321,703
1,192,940 606,450
107,060
-
1,708,812
1,413,333
5,028,595
82,810
-
- 831,087 (g)
235,517 (h)
-
-
71,278
165,813 115,500
25,048
83,419
14,923 628,901 (g)
213,903 (h)
-
-
-
-
-
-
-
-
1,881,132
613,528
1,247,507
523,528
881,141
446,428
1,134,070
523,528
25,182
-
71,278
12,149 429,000 (g)
225,071(h)
25,644
-
71,278
17,423 520,000 (g)
250,507 (h)
71,278
24,771
18,478
-
-
2007
286,728
84,294
610,000
- 999,500
(a) No short term incentives were paid to current senior executives for the performance period ending 31 December 2008 other
than to former senior executives who received a STI bonus where such payment was stipulated and required by their contract
of employment in the case of redundancy. Refer to sections 4.4.6 and 4.4.7 of this report for more detail.
38
3%
6%
26%
12%
26%
12%
24%
13%
64%
36%
29%
0%
62%
13%
12%
17%
14%
26%
16%
22%
14%
61%
-
-
-
-
-
-
-
-
REMUNERATION REPORT
(b)
Termination benefits exclude:
•
•
Annual leave and long service leave entitlements. Long service leave is disclosed separately and annual leave has been
included in remuneration disclosures for previous periods. Annual leave and long service leave entitlements were paid
out to Mr Hegarty (A$955,610), Mr Albert (A$315,996), Mr Forsyth (A$224,088), Mr Mullen (A$65,670) and Mr Sells
(A$59,695).
Value of options, which in accordance with direction from the Board, were vested and cash settled. These amounts are
disclosed in table 5.4.2 and included in the total value of options, performance rights and LTIOs in table 5.2 of this report.
Refer to table 5.4.2 of this report for further details.
Cash salary, non monetary benefits, other benefits and superannuation contributions are for the period 1 October 2008 to 31
December 2008.
Includes remuneration received during the time the senior executive was considered key management personnel being 1
January 2008 to 30 June 2008.
Includes director and committee fees of A$119,098 and superannuation contributions of A$10,719 for the period that Mr
Hegarty was a non-executive director.
(c)
(d)
(e)
(f) Mr Hegarty received 6 months remuneration (A$750,000) plus an ex-gratia payment of A$8.35 million on his retirement as
Managing Director and CEO of Oxiana Limited.
(g)
Includes statutory obligations and a payment equivalent to the STI calculated on the employee’s notice period and the number
of months used to determine the employee’s minimum severance payment.
(h) Represents share based payment expense for the year ended 31 December 2008. In the case of former executives who were
made redundant during the period, vesting conditions on options were accelerated and the awards were cash settled based on
their fair value at the date of redundancy.
5.3
STI Bonus that was paid or forfeited
As discussed in section 4.4.6, due to the remuneration freeze no STI payments were paid for the 2008 performance period for current
senior executives. Former senior executives only received a STI bonus for the 2008 financial year where such payment was stipulated
and required by their contract of employment in case of redundancy.
The amount of the maximum STI paid or forfeited for 2008 is detailed in the table below:
Senior executives
Current senior executives
Andrew Michelmore
Brett Fletcher
David Lamont
Peter Lester
Anthony Manini
John Nitschke
Phil Dunstan
Russell Griffin
Former senior executives (b)
Owen Hegarty
Peter Albert
David Forsyth
Stephen Mullen
Jeffrey Sells
Jim Smith
Actual STI payment A$
(a)
Actual STI payment as % of
maximum STI
% of maximum STI payment
forfeited
-
-
-
-
-
-
-
-
-
232,000
115,500
60,550
83,000
-
-
-
-
-
-
-
-
-
-
100
100
67
69
-
100
100
100
100
100
100
100
100
100
-
-
33
31
-
(a) As outlined in section 4.4 above, a minimum level of performance must be achieved before any STI is paid. Therefore, the
minimum potential value of the STI which was granted in respect of the year was nil. For current senior executives, the notional
maximum value of grants under the STI is the maximum potential STI that could have been earned assuming stretch
performance, as set out in table 4.3.3 of this report.
(b)
Former senior executives received an STI bonus upon cessation of their employment with OZ Minerals. Under each former
senior executive’s employment contract, the relevant executive was entitled to a pro rata amount of their STI bonus.
39
REMUNERATION REPORT
5.4
Equity rights granted to senior executives
As part of its remuneration strategy, the Company granted equity rights to senior executives during the year, as set out in table 5.4.1
below.
In addition, table 5.4.2 sets out details of the movement in the number and value of equity rights held by senior executives during
the year. Further details are set out in Note 32 of the financial statements.
5.4.1
Equity rights granted as remuneration to senior executives
Senior
executives
Instrument
Current senior executives
Grant date Number of options /
performance rights /
LTIOs granted (a)
Vesting
date
Fair value per option
/ performance right
/ LTIO A$ (b)
Maximum
value of grant
A$ (c)
Andrew
Michelmore
Options
24/11/2008
2,980,392
30/06/2011
Performance rights
24/11/2008
894,118
30/06/2011
Sign on LTIOs(d)
01/02/2008
71,917
71,917
71,917
01/02/2009
01/02/2010
01/02/2011
Brett Fletcher
Options
24/11/2008
533,333
30/06/2011
Performance rights
24/11/2008
160,000
30/06/2011
David Lamont
Options
24/11/2008
541,176
30/06/2011
Performance rights
24/11/2008
162,353
30/06/2011
Sign on equity rights
24/11/2008
Peter Lester
Options
Performance rights
Anthony Manini
Options
Performance rights
John Nitschke
Options
Performance rights
Russell Griffin
Options
Performance rights
Former senior executives
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
24/11/2008
46,584
46,584
46,584
170,530
233,333
73,970
70,000
170,530
233,333
73,970
70,000
170,530
374,510
73,970
112,353
142,110
91,176
61,640
27,353
06/10/2009
06/10/2010
06/10/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
26/02/2011
30/06/2011
0.07
0.34
2.53 (d)
2.47 (d)
2.41 (d)
0.07
0.34
0.07
0.34
0.51 (e)
0.49 (e)
0.48 (e)
1.04
0.07
2.32
0.34
1.04
0.07
2.32
0.34
1.04
0.07
2.32
0.34
1.04
0.07
2.32
0.34
208,627
304,000
181,986 (d)
177,481 (d)
173,202 (d)
37,333
54,400
37,882
55,200
23,758
22,826
22,360
177,351
16,333
171,610
23,800
177,351
16,333
171,610
23,800
177,351
26,216
171,610
38,200
147,794
6,382
143,005
9,300
Owen Hegarty
Options
18/04/2008
2,000,000(f)
01/06/2011
0.85
1,700,000
Performance rights
-
Peter Albert
Options
Performance rights
David Forsyth
Options
26/02/2008
24/11/2008
26/02/2008
24/11/2008
26/02/2008
-
170,530
296,078
73,970
88,824
-
26/02/2011
30/06/2011
26/02/2011
30/06/2011
170,530
26/02/2011
Performance rights
26/02/2008
73,970
26/02/2011
Stephen Mullen
Options
26/02/2008
142,110
26/02/2011
Performance rights
26/02/2008
61,640
26/02/2011
Jeffrey Sells
Options
26/02/2008
170,530
26/02/2011
Performance rights
26/02/2008
73,970
26/02/2011
-
1.04
0.07
2.32
0.34
1.04
2.32
1.04
2.32
1.04
2.32
-
177,351
20,725
171,610
30,200
177,351
171,610
147,794
143,005
177,351
171,610
40
REMUNERATION REPORT
(a)
The grants made to senior executives constituted 100% of the grants available for the year and were made on the terms
summarised in section 4.5 above. The exercise price for options granted on 26 February 2008, 18 April 2008 and 24 November
2008 is A$4.93, A$5.25 and A$2.30, respectively. The expiry date for LTIOs, options and performance rights granted during are:
Equity right
Options
Performance rights
LTIOs
Granted 1
February 2008
Not applicable
Not applicable
Expiry dates
Granted 26
February 2008
26/02/2013
26/02/2018
Granted 18
April 2008
18/04/2013
Not applicable
Granted 24
November 2008
30/09/2013
30/09/2018
01/02/2018
Not applicable
Not applicable
Not applicable
As options and performance rights only vest on satisfaction of performance conditions which are to be tested in future
financial periods, none of the senior executives forfeited options or performance rights during 2008, except for Owen Hegarty
who forfeited unvested options (including those granted in 2008) upon retirement (4,000,000) and as the result of performance
hurdle testing (1,000,000). See table 5.4.2. In line with direction from the Board, unvested options held by Mr Albert, Mr
Forsyth, Mr Mullen and Mr Sells were vested and cash settled as a result of redundancy. See table 5.2 for further details.
The fair values were calculated as at the grant dates. An explanation of the pricing model used to calculate these values is set
out in section 4.5.1 of this report and in note X to the financial statements.
The maximum value of the grant has been estimated based on the fair value per instrument. The minimum total value of the
grant, if the applicable performance conditions are not met, is nil.
The LTIOs granted to Mr Michelmore were granted by Zinifex Limited on 1 February 2008 in accordance with the Zinifex
Executive Share Plan. Further information in relation to this grant is included in section 4.7.5 of this report.
The terms of the LTIOs granted under the Zinifex Executive Share Plan were altered on 1 July 2008. Full terms are set out in
section 4.5 and 4.7 above. The share price of Zinifex at the valuation date was A$8.20 and the share price of OZ Minerals at the
valuation date was A$2.47. The change in fair values is as follows:
(b)
(c)
(d)
Grant
date
Vesting
date
Fair value per LTIO
immediately before
alteration A$
Fair value per LTIO
immediately after
alteration A$
Equivalent fair value
per OZ Minerals share
received A$
Maximum value of grant
(based on fair value per
LTIO immediately before
alteration) A$
01/02/2008
01/02/2008
01/02/2008
01/02/2009
01/02/2010
01/02/2011
8.08
7.88
7.69
7.79
7.60
7.44
2.53
2.47
2.41
181,986
177,481
173,202
As of 1 February 2009, 71,917 sign on LTIOs have vested and, as soon as the Company is able to, it will purchase the shares on-
market for allocation to Mr Michelmore.
(e) Mr Lamont was granted performance rights to the value of A$225,000 calculated with reference to the VWAP of the Company’s
shares for the 5 business day period up to and including the day prior to Mr Lamont’s commencement being 6 October 2008.
Further information in relation to this grant is included in section 4.8 of this report.
41
REMUNERATION REPORT
5.4.2
Movement in equity rights granted as remuneration (by value and number)
Other than amounts granted (refer table 5.4.1) there were no other movements in the equity rights of current senior executives in
2008. Movement in the equity rights of former senior executives during 2008 is as follows:
Senior executives Instrument
Vested
Exercised (a)
Forfeited/Lapsed
Number
Value A$
Number
Value A$ (b)
Number
Value A$
Former senior executives
Owen Hegarty
Options
Performance rights
Retention shares
-
-
-
-
Peter Albert
Options
616,608
24,035 (d)
Performance rights
- (e)
-
-
-
-
-
-
-
-
-
David Forsyth
Options
320,530
2,421 (d)
300,000
417,000
Performance rights
- (e)
-
Stephen Mullen
Options
292,110
42,194 (d)
Performance rights
- (e)
-
Jeffrey Sells
Options
320,530
39,025 (d)
Performance rights
Jim Smith
Options
Performance rights
- (e)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000,000 (c)
1,732,000 (c)
-
-
500,000 (c)
1,244,750 (c)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a)
(b)
For each option and performance right exercised during the year the relevant executive received 1 fully paid ordinary share in
OZ Minerals.
The value of each option exercised during the year is based on the difference between the closing market price of OZ Minerals
shares on the ASX on the preceding trading day and the relevant exercise price. The value of each performance right exercised
during the year is based on the closing market price of OZ Minerals shares on the ASX on the preceding trading day.
Details of the relevant exercise price for options exercised are as follows:
Senior Executive
David Forsyth
Exercise Price
Closing share price on preceding trading day
A$1.25
A$2.64
(c) Half of the options (1,000,000) granted to Mr Hegarty on 21 April 2006 did not meet performance hurdles and therefore did
not vest. The fair value on the date of lapse, 1 June 2008, was A$0.00.
All of Mr Hegarty’s unvested options granted 3 May 2007 (2,000,000) and 18 April 2008 (2,000,000) lapsed. The respective fair
values on date of lapse, 20 June 2008, were A$0.398 and A$0.468. See 4.6.7 for further detail.
All of Mr Hegarty’s unvested retention shares granted 1 January 2007 and due to vest 1 January 2009 and 1 January 2010
lapsed. The fair value per share on date of lapse, 20 June 2008 was A$2.519 and A$2.462 respectively. The value of retention
shares granted to Mr Hegarty which have lapsed have been valued using a discounted cash flow technique.
42
REMUNERATION REPORT
(d)
In line with direction from the Board vesting of unvested options was accelerated and cash settled on redundancy. The value
for the cash payment was calculated on the fair value, as determined by the Black-Scholes pricing model, of the options using
the 5 working day Volume Weighted Average (Share) Price up to and including the senior executive’s final date of
employment.
Senior Executive
Fair value on date of vesting
Peter Albert
Granted 01/03/2007 (originally scheduled to vest 01/03/2009) - A$0.000 on 10 December 2008
Granted 01/03/2007 (originally scheduled to vest 01/03/2010) - A$0.005 on 10 December 2008
Granted 28/02/2008 - A$0.012 on 10 December 2008
Granted 24/11/2008 – A$0.073 on 10 December 2008
David Forsyth
Granted 01/03/2007 (originally scheduled to vest 01/03/2009) - A$0.000 on 31 December 2008
Granted 01/03/2007 (originally scheduled to vest 01/03/2010) - A$0.005 on 31 December 2008
Granted 28/02/2008 – A$0.012 on 31 December 2008
Stephen Mullen
Granted 01/03/2007 (originally scheduled to vest 01/03/2009) - A$0.075 on 29 August 2008
Granted 01/03/2007 (originally scheduled to vest 01/03/2010) - A$0.156 on 29 August 2008
Granted 28/02/2008 - A$0.175 on 29 August 2008
Jeff Sells
Granted 01/03/2007 (originally scheduled to vest 01/03/2009) - A$0.048 on 9 September 2008
Granted 01/03/2007 (originally scheduled to vest 01/03/2010) - A$0.129 on 9 September 2008
Granted 28/02/2008 - A$0.151 on 9 September 2008
(e)
In accordance with direction from the Board, performance rights granted remain on foot following the termination of senior
executive’s employment for reasons of redundancy. Performance rights remain subject to usual performance hurdles until the
usual expiry date 10 years from the date of grant. Further details relating to outstanding holdings of performance rights are set
out in Note 32 to the financial statement.
43
AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of OZ Minerals Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 December 2008 there
have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to
the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Michael Bray
Partner
Melbourne
27 February 2009
44
CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Revenue from continuing operations
Net foreign exchange gains
Other income
Changes in inventories of finished goods and work in
progress
Raw materials, consumables and other direct costs
Employee benefit expenses
Contracting and consulting expenses
Freight expenses
Royalties expense
Share of net loss of associates and joint ventures accounted
for using the equity method
Other expenses
Profit before net financing (expense)/income, depreciation
and amortisation, impairment of assets and income tax from
continuing operations
Depreciation and amortisation expenses
Impairment of assets
(Loss)/profit before net financing (expense)/income and
income tax from continuing operations
Financing income
Financing expenses
Net financing (expense)/income
(Loss)/profit before income tax from continuing operations
Income tax (expense)/benefit
(Loss)/profit from continuing operations
6
7
10
9
9
9
11
(Loss)/profit from discontinued operations – net of income tax
5
(Loss)/profit for the year
Attributable to:
Equity holders of the parent
Minority interest
(Loss)/profit for the year
(Loss)/earnings per share
(a) Basic (loss)/earnings per share
From continuing operations
From discontinued operations
(b) Diluted (loss)/earnings per share
From continuing operations
From discontinued operations
24(c)
26
26
26
26
879.2
602.6
–
–
87.7
4.1
16.7
(182.7)
(202.2)
(145.1)
(71.2)
(39.8)
(5.5)
(100.6)
240.6
(212.5)
(1,381.6)
50.8
–
(2.0)
(74.6)
(81.7)
(31.5)
(12.6)
(26.9)
(1.9)
(17.7)
404.5
(60.7)
(1.5)
26.2
133.2
–
–
(40.1)
(0.7)
–
–
–
67.5
348.3
–
–
(24.3)
(7.0)
–
–
–
(33.5)
(1.3)
85.1
(2.6)
(3,857.9)
383.2
(1.8)
–
(1,353.5)
342.3
(3,775.4)
381.4
19.2
(42.8)
(23.6)
(1,377.1)
(113.4)
(1,490.5)
(994.4)
(2,484.9)
(2,501.7)
16.8
(2,484.9)
7.1
(22.8)
(15.7)
326.6
(86.2)
240.4
77.8
318.2
305.8
12.4
318.2
9.5
(26.9)
(17.4)
(3,792.8)
22.4
(3,770.4)
–
(3,770.4)
(3,770.4)
–
(3,770.4)
17.9
(11.4)
6.5
387.9
10.5
398.4
–
398.4
398.4
–
398.4
Cents
Cents
(63.0)
(41.6)
(104.6)
(63.0)
(41.6)
(104.6)
15.1
5.1
20.2
13.7
5.1
18.8
The above income statements should be read in conjunction with the accompanying notes.
45
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Total recognised income and expense for the year
Items recognised directly in equity – net of income tax
Foreign exchange translation differences
24(a)
362.6
(90.8)
1,747.0
(113.3)
Net change in fair value of available-for-sale financial assets,
net of tax
Changes in fair value of cash flow hedges, net of tax
Net (expense)/income recognised directly in equity
24(a)
24(a)
Net (loss)/profit for the year after income tax
Total recognised income and expense for the year
Attributable to:
Equity holders of the parent
Minority interest
Total recognised income and expense for the year
(11.2)
4.2
355.6
(2,484.9)
(2,129.3)
(2,146.1)
16.8
(2,129.3)
6.7
(8.7)
(2.3)
–
0.6
–
(92.8)
1,744.7
(112.7)
318.2
225.4
(3,770.4)
(2,025.7)
398.4
285.7
213.0
(2,025.7)
285.7
12.4
–
–
225.4
(2,025.7)
285.7
The above statements of recognised income and expense should be read in conjunction with the accompanying notes.
46
CONSOLIDATED BALANCE SHEETS
AS AT 31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Current assets
Cash and cash equivalents
Trade and other receivables
Receivable from controlled entities
Inventories
Current tax asset
Other financial assets
Prepayments
Assets classified as held for sale
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Payable to controlled entities
Interest-bearing liabilities
Current tax payable
Provisions
Other financial liabilities
Liabilities classified as held for sale
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity attributable to equity holders of the parent
Minority interest
Total equity
13
14
34
15
17
5
16
18
19
11(c)
17
20
34
21
22
5
21
11(c)
22
23
24(a)
24(b)
24(c)
25
69.8
46.3
–
223.6
77.1
–
15.9
2,512.6
2,945.3
28.7
2,053.2
4.6
262.4
21.7
2,370.6
5,315.9
164.7
–
1,005.1
122.0
37.6
–
421.0
1,750.4
144.7
17.6
173.2
–
335.5
2,085.9
3,230.0
246.1
111.7
–
88.1
–
0.4
5.7
–
452.0
148.3
1,739.7
46.8
0.5
40.1
1,975.4
2,427.4
141.2
–
154.4
101.7
14.1
1.6
–
13.7
0.9
–
–
29.1
–
0.9
1,004.7
1,049.3
–
19.6
2.4
40.2
2,872.1
2,934.3
3,983.6
10.1
414.7
207.3
–
2.2
–
–
413.0
634.3
59.1
35.3
635.8
–
–
–
0.1
–
730.3
–
6.6
1.2
26.7
791.4
825.9
1,556.2
17.0
–
–
–
3.0
–
–
20.0
266.4
119.7
58.5
4.5
449.1
862.1
138.0
104.1
–
0.3
–
138.3
772.6
–
0.6
–
104.7
124.7
1,565.3
3,211.0
1,431.5
5,107.1
227.0
(2,152.0)
3,182.1
47.9
3,230.0
1,056.7
(99.8)
566.1
1,523.0
42.3
1,565.3
5,107.1
1,603.5
(3,499.6)
3,211.0
–
1,056.7
(112.4)
487.2
1,431.5
–
3,211.0
1,431.5
The above balance sheets should be read in conjunction with the accompanying notes.
47
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income taxes paid
Financing costs and interest paid
Interest received
Net cash (outflows)/inflows from operating activities
27
Cash flows from investing activities
Payments for property, plant and equipment and major
cyclical maintenance
Acquisition of subsidiary, net of cash acquired
Proceeds from sale of property, plant and equipment
Proceeds from disposal of discontinued operations, net of
cash disposed and selling costs
4
5
Payments for investments
Proceeds from disposal of investments
Dividends received
Loans (advanced) by controlled entities
1,369.6
(1,326.9)
(118.1)
(50.3)
27.1
(98.6)
(1,412.6)
1,130.5
–
–
(18.3)
–
–
–
1,132.7
(533.2)
(120.5)
(33.9)
21.6
466.7
(713.5)
(8.6)
0.7
3.1
(3.3)
0.1
–
–
Net cash (outflows)/inflows from investing activities
(300.4)
(721.5)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Dividends paid to shareholders
Dividends paid to minority shareholder
Payments for shares purchased on-market
Proceeds from issue of shares
Proceeds from issue of shares by partly owned subsidiary
Payments for capitalised borrowing costs
Repayments of finance lease liabilities
Payments for derivatives
Net cash inflows/(outflows) from financing activities
Net (decrease) in cash held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on foreign currency
denominated cash balances
Cash and cash equivalents at the end of the year
13
Non-cash financing and investing activities – refer Note 28
Financing arrangements – refer Note 29
522.0
(89.0)
(155.3)
(11.2)
(14.5)
–
–
–
(2.3)
–
249.7
(149.3)
246.1
22.0
118.8
228.1
(220.0)
(96.5)
–
–
3.9
6.1
(10.7)
(0.7)
(18.3)
(108.1)
(362.9)
670.9
(61.9)
246.1
The above statements of cash flows should be read in conjunction with the accompanying notes.
–
(20.3)
(34.8)
(26.9)
9.5
(72.5)
(2.2)
(43.0)
–
–
(1.9)
–
110.6
(79.1)
(15.6)
202.0
–
(155.3)
–
(14.5)
–
–
–
–
–
–
(61.3)
(58.7)
(5.6)
5.2
(120.4)
(6.4)
(15.7)
0.9
–
(1.5)
0.1
240.3
(42.0)
175.7
–
–
(96.5)
–
–
3.9
–
–
–
–
32.2
(92.6)
(55.9)
59.1
10.5
13.7
(37.3)
105.9
(9.5)
59.1
48
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
Contents of the notes to the financial statements
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Summary of significant accounting policies ............................................................................................................................................................ 50
Critical accounting estimates and judgements....................................................................................................................................................... 61
Operating segments.......................................................................................................................................................................................................... 63
Acquisition of business..................................................................................................................................................................................................... 66
Discontinued operations and assets held for sale ................................................................................................................................................. 69
Revenue from continuing operations......................................................................................................................................................................... 72
Other income from continuing operations .............................................................................................................................................................. 72
Expenses from continuing operations........................................................................................................................................................................ 72
Net financing (expense)/income from continuing operations.......................................................................................................................... 72
Individually significant items.......................................................................................................................................................................................... 72
Income tax............................................................................................................................................................................................................................. 74
Dividends ............................................................................................................................................................................................................................... 77
Cash and cash equivalents.............................................................................................................................................................................................. 77
Trade and other receivables........................................................................................................................................................................................... 78
Inventories............................................................................................................................................................................................................................. 78
Investments accounted for using the equity method .......................................................................................................................................... 78
Other financial assets........................................................................................................................................................................................................ 79
Property, plant and equipment..................................................................................................................................................................................... 82
Intangible assets ................................................................................................................................................................................................................. 84
Trade and other payables ............................................................................................................................................................................................... 85
Interest-bearing liabilities................................................................................................................................................................................................ 85
Provisions............................................................................................................................................................................................................................... 86
Issued capital........................................................................................................................................................................................................................ 87
Reserves and retained earnings.................................................................................................................................................................................... 88
Total equity ........................................................................................................................................................................................................................... 89
Earnings and net tangible assets per share.............................................................................................................................................................. 90
Reconciliation of (loss)/profit after income tax to net cash flows from operating activities................................................................. 91
Non-cash investing and financing activities ............................................................................................................................................................ 91
Financial risk management ............................................................................................................................................................................................. 91
Commitments for expenditure ....................................................................................................................................................................................100
Contingent liabilities .......................................................................................................................................................................................................100
Key management personnel ........................................................................................................................................................................................101
Share-based payments...................................................................................................................................................................................................108
Related parties...................................................................................................................................................................................................................111
Remuneration of auditors .............................................................................................................................................................................................112
Deed of cross guarantee ...............................................................................................................................................................................................112
Events occurring after reporting date ......................................................................................................................................................................114
49
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1 Summary of significant accounting policies
(a) Reporting entity
OZ Minerals Limited (“the Company”) is a company domiciled in
Australia. The address of the Company is Level 29 Freshwater
Place, 2 Southbank Boulevard, Southbank, 3006, Victoria,
Australia. The consolidated financial statements of the Company
as at and for the financial year ended 31 December 2008 comprise
the Company and its subsidiaries (“consolidated entity”) and the
consolidated entity’s interest in associates and jointly controlled
entities. The consolidated entity is primarily involved in the
exploration for, and the mining, processing and sale of zinc,
copper, lead, gold, silver, nickel and other minerals into both
metal and metal in concentrates.
(b) Statement of compliance
This financial report is a general purpose financial report which
has been prepared in accordance with Australian Accounting
Standards (AASBs) including Australian interpretations adopted by
the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. The consolidated financial report of the
consolidated entity and the financial report of the parent entity
comply with International Financial Reporting Standards (IFRSs)
and interpretations adopted by the International Accounting
Standards Board (IASB).
This financial report was authorised for issue by the Directors on
27 February 2009.
(c) Basis of preparation of financial information
(i)
Going concern
An entity is a going concern when it is considered to be able to
pay its debts as and when they are due, and continue in operation
without any intention or necessity to liquidate or otherwise wind
up its operations. The current economic environment of volatile
exchange rates, low and volatile commodity prices and tight credit
markets presents significant variability and risk to the
consolidated entity’s ongoing profitability due to the fluctuations
in selling prices and input costs. Whilst the Directors have
undertaken a thorough review of all operations, instituted
measures to improve operating costs and deferred several capital
projects to preserve cash, there are still material uncertainties over
the future operating results and cash flows.
As at 31 December 2008, the consolidated entity had four major
bank facilities. Three of these facilities matured, or were required
to be refinanced by 31 December 2008. Agreement was obtained
from the lenders on 29 December 2008 to extend the refinancing
date on these facilities to 27 February 2009 and, in accordance
with the accounting standards, these three facilities were classified
as current liabilities at 31 December 2008 – refer to Note 21.
On 22 January 2009, a bridging finance facility of up to A$140
million was established with the lenders of Facility A. The new
short-term facility terminates on 27 February 2009. As part of the
terms and conditions for the extension of the Societe Generale
Facility to 27 February 2009, it was agreed to grant security to the
lenders over the assets of certain former Zinifex entities.
The consolidated entity has been successful in obtaining from the
lenders whose facilities fall due on 27 February 2009, approval to
extend the termination dates of these facilities to 31 March 2009.
The approvals are subject to completion of documentation to give
effect to the extension. Based on the proactive discussions the
consolidated entity has been having with its lenders, the progress
made with asset sales to date, and the existence of the Minmetals
proposal, the Directors have a reasonable expectation that these
facilities will be extended to at least two weeks after the
scheduled scheme implementation date.
The consolidated entity was also pursuing asset sales and was
examining expressions of interest for a number of these assets to
repay or reduce the facilities at 31 December 2008. These assets
have been classified as held for sale at 31 December 2008 – refer
Note 5.
Since 31 December 2008, the consolidated entity has disposed of
its investment in Nyrstar NV that was classified as held for sale at
31 December 2008, as set out in Notes 5 and 37.
In addition, on 16 February 2009 China Minmetals Non-ferrous
Metals Company Limited (‘Minmetals’) and the consolidated entity
announced that they have entered into a Scheme Implementation
Agreement for Minmetals to acquire all outstanding shares of the
Company in a scheme of arrangement at a cash price of 82.5 cents
per share, valuing the consolidated entity’s equity at
approximately A$2.6 billion. As part of the agreement, Minmetals
will also refinance the consolidated entity’s outstanding debt at
scheme completion. Whilst there are still conditions precedent to
be met for implementation to occur, in accordance with the terms
of the agreement, the proposed acquisition provides increased
certainty for the consolidated entity’s key stakeholders, including
its shareholders, financiers, employees and suppliers – refer to
Note 37. Completion of the transaction is subject to a number of
conditions as set out in Note 37.
Whilst there can be no certainty that the conditions precedent will
be met, both the consolidated entity and Minmetals have agreed
to use their reasonable endeavours to procure the satisfaction of
the conditions precedent to them.
The Directors are aware that a material uncertainty exists due to
the above events which may cast doubt upon the consolidated
entity’s ability to continue as a going concern. After making
enquiries, the Directors have a reasonable expectation that the
consolidated entity has potential sources of financing, through
asset sales and alternative funding proposals (including the
‘Minmetals’ proposal above), and expected future operating
cashflows to adopt the going concern basis in preparing the
annual financial statements.
(ii) Historical costs
These financial statements have been prepared under the going
concern basis as set out above and the historical cost convention,
except for the following which are measured at fair value:
•
•
•
Derivative financial instruments;
Financial instruments at fair value through profit and loss;
Available-for-sale financial assets.
(iii) Early adoption of standards
The consolidated entity has elected to early adopt the following
accounting standards in the annual reporting period beginning 1
January 2008:
•
•
•
AASB 8 Operating Segments has resulted in a significant
change in the approach to segment reporting, as it requires
adoption of a management approach to reporting on
financial performance;
Revised AASB 123 Borrowing Costs has removed the option
to expense all borrowing costs and requires the
capitalisation of all borrowing costs directly attributable to
the acquisition, construction or production of a qualifying
asset; and
AASB 2008-7 Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate requires dividend receipts to
be recognised as income.
50
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
In accordance with AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors, comparative information was
restated, except for Borrowing Costs as the standard was applied
from 1 January 2008. Application of these standards has not had a
significant impact on the amounts recognised in the financial
report of the consolidated entity and the Company, except for
A$18.0 million of financing costs capitalised during the year
following adoption of Revised AASB 123 Borrowing Costs.
(iv)
Issued standards not early adopted
The following standards and amendments were available for early
adoption but have not been applied by the consolidated entity in
these financial statements:
•
•
•
•
•
Revised AASB 3 Business Combinations changes the
application of acquisition accounting for business
combinations and the accounting for non-controlling
(minority) interests. The revised standard is applicable for
annual reporting periods beginning on or after 1 January
2009.
Revised AASB 101 Presentation of Financial Statements
introduces as a financial statement the ‘statement of
comprehensive income’. The standard will not change the
recognition, measurement or disclosure of transactions and
events that are required by other AASBs. The standard is
applicable for annual reporting periods beginning on or
after 1 January 2009.
Amended AASB 127 Consolidated and Separate Financial
Statements requires accounting for changes in ownership
interests by the consolidated entity in a subsidiary, while
maintaining control, to be recognised as an equity
transaction. The standard is applicable for annual reporting
periods beginning on or after 1 January 2009.
AASB 2008-1 Amendments to Australian Accounting
Standard – Share-based Payment: Vesting Conditions and
Cancellations changes the measurement of share-based
payments that contain non-vesting conditions. The standard
is applicable for annual reporting periods beginning on or
after 1 January 2009.
AASB 2008-5 Amendments to Australian Accounting
Standards arising from the Annual Improvements Process
and 2008-6 Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Process
affect various AASBs resulting in minor changes for
presentation, disclosure, recognition and measurement
purposes. The standard is applicable for annual reporting
periods beginning on or after 1 January 2009.
Initial application of these standards would not have a significant
impact on the amounts recognised in the financial report, but may
change the disclosures presently made in relation to the
consolidated entity and the Company. Other standards issued and
available for early adoption but not applied by the consolidated
entity have not been included above as they are not expected to
have any material impact on the financial report of the consolidated
entity and the Company.
The consolidated entity will adopt these standards during the
applicable mandatory annual reporting periods.
(v)
Critical accounting estimates and judgements
The preparation of financial statements in conformity with AASBs
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the consolidated entity’s accounting policies. The estimates
and underlying assumptions are reviewed on an ongoing basis.
51
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision
affects both current and future periods. Refer Note 2 for more detail
on critical accounting estimates and judgements.
(d) Basis of consolidation
(i) Subsidiaries
Subsidiaries are all those entities (including special purpose entities)
over which the consolidated entity has the power to govern the
financial and operating policies, generally accompanying a
shareholding of more than one-half of the voting rights. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether
the consolidated entity controls another entity.
Subsidiaries are consolidated from the date on which control is
transferred to the consolidated entity until the date that control
ceases. The purchase method of accounting is used to account for
the acquisition of subsidiaries by the consolidated entity.
Intercompany transactions, balances and unrealised gains on
transactions between consolidated entity companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred.
Whilst the intercompany balances are eliminated on consolidation,
any related foreign exchange gains or losses arising between
entities that do not have the same functional currency, will not be
eliminated. This is because the consolidated entity has a real
exposure to a foreign currency since one of the entities will need to
obtain or sell foreign currency in order to settle the obligation or
realise the proceeds received.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies of the
consolidated entity. Investments in subsidiaries are carried at their
acquisition cost in the individual financial statements of the
Company, less any impairment.
(ii) Associates
Associates are all entities over which the consolidated entity has
significant influence, but not control, of the financial and
operating policies. Significant influence is presumed to exist when
the consolidated entity holds between twenty and fifty per cent of
the voting power of another entity.
Associates are accounted for using the equity method and are
initially recognised at cost. The consolidated entity’s investment
includes goodwill identified on acquisition, net of any
accumulated impairment losses. The consolidated financial
statements include the consolidated entity’s share of the income
and expenses and equity movements of the equity accounted
investees, after adjustments to align the accounting policies with
those of the consolidated entity, from the date that significant
influence commences until the date that significant influence
ceases. Dividends receivable from associates reduce the carrying
amount of the investment.
When the consolidated entity’s share of losses exceeds its interest
in an equity accounted investee, the carrying amount of that
interest is reduced to nil and the recognition of further losses is
discontinued except to the extent that the consolidated entity has
a legal or constructive obligation or has made payments on behalf
of the investee.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
(iii)
Joint ventures
Joint ventures are those entities over whose activities the
consolidated entity has joint control, established by contractual
arrangement.
Jointly controlled assets
Where material, the proportionate interests in the assets, liabilities
and expenses of a joint venture operation have been incorporated
in the financial statements under the appropriate headings.
Joint venture entities
Where material, the interest in a joint venture entity is accounted
for in the consolidated financial statements using the equity
method and is carried at cost in the consolidated entity’s financial
statements. Under the equity method, the share of the profits or
losses of the joint venture entities are recognised in the income
statement, and the share of movements in reserves is recognised
in reserves in the balance sheet.
Profits or losses on transactions establishing the joint venture and
transactions with the joint venture are eliminated to the extent of
the consolidated entity’s ownership interest until such time as
they are realised by the joint venture on consumption or sale,
unless they relate to an unrealised loss that provides evidence of
the impairment of an asset transferred
(e) Non-derivative financial instruments
Classification
The consolidated entity classifies its financial assets in the following
categories:
•
•
•
•
Financial assets at fair value through profit or loss;
Loans and receivables;
Held-to-maturity investments; and
Available-for-sale financial assets.
The classification depends on the purpose for which the investments
were acquired. Management determines the classification of its
investments at initial recognition and in the case of assets classified
as held-to-maturity investments, re-evaluates this designation at
each reporting date.
(i)
Financial assets at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it
is held for trading or is designated as such upon initial recognition.
Financial instruments at fair value through profit or loss are
measured at fair value, and changes therein are recognised in profit
or loss. Attributable transaction costs are recognised in profit or loss
when incurred. Fair value is determined by reference to the quoted
price at the reporting date.
(ii) Available-for-sale financial assets
The consolidated entity’s investment in equity securities, excluding
financial assets at fair value through profit or loss discussed in Note
1(e)(i) and investments accounted for using the equity method
discussed in Note 1(d)(ii), are classified as available-for-sale financial
assets. Subsequent to initial recognition, they are measured at fair
value and changes therein, other than impairment losses, are
recognised as a separate component of equity, net of related tax.
Impairment losses are recognised in the income statement. When
an investment is derecognised, the cumulative gain or loss in equity
is transferred to the income statement. Fair value is determined by
reference to the quoted price at the reporting date.
(iii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for those with maturities
greater than twelve months after the balance sheet date which are
classified as non-current assets. Loans and receivables are included
in receivables in the balance sheet.
(iv) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the
consolidated entity’s management has the positive intention and
ability to hold to maturity, and is classified as held-to-maturity.
Recognition and derecognition
Regular purchases and sales of investments and other financial
assets are recognised on trade-date being the date on which the
consolidated entity commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction
costs for all financial assets not carried at fair value through profit or
loss. Financial assets carried at fair value through profit or loss are
initially recognised at fair value and transaction costs are expensed
in the income statement. Financial assets are derecognised when
the rights to receive cash flows from the financial assets have
expired or have been transferred and the consolidated entity has
transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the
accumulated fair value adjustments recognised in equity are
included in the income statement as gains and losses from
investment securities.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried
at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value
through profit and loss are subsequently carried at fair value (refer
to Note 1(m)).
Gains or losses arising from changes in the fair value of the 'financial
assets at fair value through profit or loss' category are presented in
the income statement within other income or other expenses in the
period in which they arise. Dividend income from financial assets at
fair value through profit and loss is recognised in the income
statement as part of revenue when the consolidated entity’s right to
receive payments is established.
Changes in the fair value of monetary securities denominated in a
foreign currency and classified as available-for-sale are analysed
between translation differences resulting from changes in amortised
cost of the security and other changes in the carrying amount of the
security. The translation differences are recognised in the income
statement and other changes are recognised in equity. Changes in
the fair value of other monetary and non-monetary securities
classified as available-for-sale are recognised in equity.
The consolidated entity assesses at each balance date whether there
is objective evidence that a financial asset or group of financial
assets is impaired. Refer to Note 1(m).
(f) Derivative financial instruments
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The accounting for
subsequent changes in fair value depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the
item being hedged. The consolidated entity designates certain
derivatives as either:
•
•
hedges of the fair value of recognised assets or liabilities or
a firm commitment (fair value hedge); or
hedges of the cash flows on recognised assets and liabilities
and highly probable forecast transactions (cash flow
hedges).
52
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
The consolidated entity documents at the inception of the
transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy
for undertaking various hedge transactions. The consolidated entity
also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging
transactions have been and will continue to be highly effective in
offsetting changes in fair values or cash flows of hedged items.
Movements in the hedging reserve in equity are shown in Note 24.
The full fair value of a hedging derivative is classified as a non-
current asset or liability when the remaining maturity of the
instrument is more than twelve months; it is classified as a current
asset or liability when the remaining maturity of the instrument is
less than twelve months. Trading derivatives are classified as a
current asset or liability.
(i)
Fair values
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk.
The gain or loss relating to the ineffective portion is recognised in
the income statement within other income or other expenses. The
gain or loss relating to the effective portion of interest rate swaps
hedging fixed rate borrowings is recognised in the income
statement within other income or other expense together with the
gain or loss relating to the ineffective portion and changes in the fair
value of the hedged fixed rate borrowings attributable to the
interest rate risk.
If the hedge no longer meets the criteria for hedge accounting, the
adjustment to the carrying amount of a hedged item for which the
effective interest method is used is amortised to profit or loss over
the period to maturity.
(ii) Cash flow hedges
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in
equity in the hedging reserve. The gain or loss relating to the
ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in equity are recycled in the income
statement in the periods when the hedged item will affect profit or
loss (for instance when the forecast interest payment that is hedged
impacts profit or loss). The gain or loss relating to the effective
portion of interest rate swaps hedging variable rate borrowings is
recognised in the income statement within ‘finance costs’.
For option contracts, the fair value is apportioned between the
intrinsic value and time value. The gain or loss arising from the
change in intrinsic value is recognised in equity in the hedging
reserve. Amounts accumulated in equity are recycled in the income
statement in the periods in which the hedged item will affect profit
or loss (e.g. when the forecast sale that is hedged will take place).
Any gain or loss arising from the change in time value of option
contracts is recognised immediately in the income statement.
When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in
equity and is recognised when the forecast transaction is ultimately
recognised in the income statement.
When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting.
Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in the
income statement and are included in other income or expenses.
Where an embedded derivative is identified and the derivative’s
risks and characteristics are not considered to be closely related to
the underlying host contract, the fair value of the derivative is
recognised on the balance sheet and changes in the fair value of the
embedded derivative are recognised in the income statement.
(g)
(i)
Foreign exchange
Functional and presentation currency
The consolidated financial statements are presented in Australian
dollars. Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates, the ‘functional
currency’. The functional currency of OZ Minerals Limited is US
dollars. For those entities in the consolidated entity which do not
have a functional currency of US dollars, the functional currency is
mainly Australian dollars.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except
when deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date the fair value
was determined. Translation differences on non-monetary assets
and liabilities are reported as part of the fair value gain or loss.
Translation differences on non-monetary financial assets and
liabilities, such as equities held at fair value through profit or loss,
are recognised in profit and loss as part of the fair value gain or
loss. Translation differences on non-monetary items, such as
equities classified as available-for-sale financial assets, are
included in the fair value reserve in equity.
(iii) Group companies
The results and financial position of all entities within the
consolidated entity (none of which has the currency of a
hyperinflationary economy) that have a functional currency different
from the presentation currency are translated into the presentation
currency as follows:
•
•
•
assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
income and expenses for each income statement are
translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions);
all resulting exchange differences are recognised as a
separate component of equity in the foreign currency
translation reserve; and
53
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
Summary of significant accounting policies (continued)
1
•
on consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and of
borrowings and other currency instruments designated as
hedges of such investments, are taken to equity. When a
foreign operation is sold a proportionate share of such
exchange differences is recognised in the income statement
as part of the gain or loss on sale where applicable.
Whilst intercompany balances are eliminated on consolidation, any
related foreign exchange gains or losses arising between entities
that do not have the same functional currency, will not be
eliminated. This is because the consolidated entity has a real
exposure to a foreign currency since one of the entities will need to
obtain or sell foreign currency in order to settle the obligation or
realise the proceeds received. Goodwill and fair value adjustments
arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to
control the timing of the reversal of the temporary differences and it
is probable that the differences will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset when the entity has a
legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability
simultaneously.
Income taxes have not been provided on undistributed overseas
earnings of controlled entities to the extent the earnings are
intended to remain indefinitely invested in those entities.
(h)
Inventories
Tax consolidation
Raw materials and stores and consumables, work in progress and
finished goods are stated at the lower of cost and net realisable
value. Cost comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Costs are assigned to individual items of inventory on the basis of
weighted average costs. Cost includes direct material, overburden
removal, mining, processing, labour, related transportation cost to
the point of sale, mine rehabilitation costs incurred in the extraction
process and other fixed and variable costs directly related to mining
activities.
(i)
Income tax
Income tax expense or benefit for the period is the tax
payable/recoverable on the current period’s taxable income based
on the national income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities
and their carrying amounts in the financial statements, and to
unused tax losses. Current and deferred tax expense attributable to
amounts recognised directly in equity is also recognised directly in
equity.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not accounted for
if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred tax asset
is realised or the deferred tax liability is settled.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which
are enacted or substantively enacted for each jurisdiction. The
relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the
deferred tax asset or liability.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.
54
OZ Minerals Limited and its wholly-owned Australian controlled
entities elected to form a tax consolidation group as of 1 July 2004
and have been taxed as a single entity from that date. The Australian
entities of Zinifex Limited joined the OZ Minerals Limited Australian
tax consolidated group upon implementation of the merger on 1
July 2008.
The head entity, OZ Minerals Limited, and the controlled entities in
the tax consolidated group continue to account for their own
current and deferred tax amounts. These tax amounts are measured
as if each entity in the tax consolidated group continues to be a
stand alone tax payer in its own right. In addition to its own current
and deferred tax amounts, OZ Minerals Limited also recognises the
current tax liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the
tax consolidated entities are recognised as amounts receivable from
or payable to other entities in the consolidated entity.
Any difference between the amounts assumed and amounts
receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-
owned tax consolidated entities.
(j)
Leases
Leases of property, plant and equipment where the consolidated
entity has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease
inception at the lower of the fair value of the leased property and
the present value of the minimum lease payments. The
corresponding rental obligations, net of finance charges, are
included as interest bearing liabilities. Each lease payment is
allocated between the liability and finance cost. The finance cost is
charged to the income statement over the lease period so as to
produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The property, plant and
equipment acquired under finance lease are depreciated over the
shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
(k) Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any impairment losses recognised.
Historical cost includes expenditure that is directly attributable to
the acquisition of the items and costs incurred in bringing the asset
into use. Cost also includes transfers from equity of any gains/losses
on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will
flow to the consolidated entity and the cost of the item can be
measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the
income statement during the financial period in which they are
incurred.
Mine property and development assets include costs transferred
from exploration and evaluation assets once technical feasibility and
commercial viability of an area of interest are demonstrable, and
also includes subsequent costs to develop the mine to the
production phase.
Amortisation of mine property and development assets is calculated
on the basis of units of production. Amortisation is based on
assessments of proven and probable reserves and a proportion of
resources available to be mined by the current production
equipment to the extent that such resources are considered to be
economically recoverable.
The amortisation of mine, property and development assets
commences when the mine starts commercial production. Other
assets are depreciated over the shorter of the asset’s useful life and
the life of mine.
Gains and losses on disposals are determined by comparing
proceeds with asset carrying amounts. These are included in the
income statement.
(i) Overburden and waste removal
Overburden and other waste removal costs (stripping costs)
incurred in the development of a mine before production
commences are capitalised as part of the construction of the mine
as mine property and development assets. These costs include
direct costs and an allocation of relevant overhead expenditure.
These development stripping costs are subsequently amortised over
the life of mine.
Removal of waste costs incurred once an operation commences
production activity (production stripping costs) are capitalised as
mine property and development assets. A proportion of these
deferred mine development costs, including both development
stripping costs and production stripping costs, is charged to the
income statement as an operating cost on the basis of the quantity
of ore mined or the quantity of the minerals contained in the ore, as
a proportion of the known mineral reserves of the operation.
Changes in the technical and or other economic parameters that
impact on reserves will also have an impact on the depreciation of
capitalised mine property and development assets. These changes
are accounted for prospectively from the date of change.
Amortisation of deferred stripping costs is included in depreciation
of property, plant and equipment.
(ii)
Exploration and evaluation expenditure
Exploration and evaluation costs, including costs of acquiring
licences, are capitalised as exploration and evaluation assets on an
area of interest basis. Costs incurred before the consolidated entity
has obtained the legal right to explore an area are recognised in the
income statement.
55
Exploration and evaluation assets are classified as tangible (as part
of property plant and equipment) or intangible according to the
nature of the assets. As the assets are not yet ready for use they are
not depreciated.
Exploration and evaluation assets are only recognised if the rights to
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 alternatively by its sale; 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 otherwise 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 (see recoverable amount and
fair value estimation accounting policy Note 1(m)).
•
For the purposes of the impairment testing, exploration and
evaluation assets are allocated to cash-generating units to which the
exploration activity relates. The cash generating units shall not be
larger than the area of interest.
Once the technical feasibility and commercial viability of the
extraction of mineral reserves 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 to mine property and development assets within
property, plant and equipment.
(l)
Intangibles
(i) Acquired mineral rights
Acquired mineral rights comprise identifiable exploration and
evaluation assets including mineral reserves and mineral resources,
which are acquired as part of a business combination and are
recognised at fair value at date of acquisition. The acquired mineral
rights are reclassified as mine property and development from
commencement of development and amortised when commercial
production commences on a unit of production basis over the
estimated economic reserve of the mine.
(ii) Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the consolidated entity’s share of the identifiable assets
acquired and liabilities and contingent liabilities assumed of the
acquired subsidiary at the date of acquisition. Goodwill on
acquisition of subsidiaries is included in intangible assets. Goodwill
is not amortised. Instead, goodwill is tested for impairment annually
or more frequently if events of changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of
impairment testing.
(iii) Computer software
Costs incurred in developing information technology systems and
costs incurred in acquiring software and licences that will contribute
to future period financial benefits through cost reduction are
capitalised to software and systems.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
Costs capitalised include external direct costs of materials and
services and direct payroll related costs of employees’ time spent
on the project. Amortisation is calculated on a straight line basis
over the useful life, ranging from three to five years.
(m) Recoverable amount and fair value estimation
Goodwill and intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for impairment
or more frequently if events or changes in circumstances indicate
that they might be impaired. Assets that have a finite life are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to
sell and value in use.
The asset’s value in use is the net amount expected to be recovered
through the cash flows arising from its continued use and
subsequent disposal. 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.
The asset’s fair value less costs to sell is the amount obtainable from
the sale of an asset or cash-generating unit in an arm’s length
transaction between knowledgeable, willing parties, less the costs of
disposal.
For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non-financial assets
other than goodwill that have been impaired are reviewed for
possible reversal of impairment at each reporting date.
Any impairment to the carrying amount of an asset is recognised as
an expense in the income statement in the reporting period in
which the recoverable amount write down occurs. Where this
assessment of impairment indicates a loss in value of the assets of
an operation, an appropriate write down is made. No assets are
carried in excess of their recoverable amount. The recoverable
amount of the consolidated entity’s operations is subject to
variation because of changes in internationally determined metal
prices and exchange rates.
Financial assets and liabilities
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure
purposes. The fair value of financial instruments traded in active
markets (such as publicly traded derivatives, and available-for-sale
securities), excluding investments in associates, is based on quoted
market prices at the balance sheet date. The quoted market price
used for financial assets held by the consolidated entity is the
current bid price; the appropriate quoted market price for financial
liabilities is the current ask price.
The fair value of financial instruments that are not traded in an
active market (for example, over-the-counter derivatives) is
determined using recognised valuation techniques. The
consolidated entity uses a variety of methods and makes
assumptions that are based on market conditions existing at each
balance date. Option contracts are fair valued using an option
pricing model and prevailing market quoted economic variables
existing at the balance date. Interest rate swaps are fair valued by
determining the theoretical gain or loss had the swap contracts
been terminated on market at the balance date. Other techniques,
such as estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments.
56
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the
current market interest rate that is available to the consolidated
entity for similar financial instruments.
Impairment of financial assets
The consolidated entity assesses at each balance date whether there
is objective evidence that a financial asset or group of financial
assets is impaired. In the case of equity securities classified as
available-for-sale, a significant or prolonged decline in the fair value
of a security below its cost is considered objective evidence in
determining whether the security is impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss -
measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset
previously recognised in the income statement - is removed from
equity and recognised in the income statement. Impairment losses
recognised in the income statement on equity instruments classified
as available-for-sale are not reversed through the income
statement.
(n)
Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits
and annual leave expected to be settled within 12 months of the
reporting date are recognised in provisions in respect of
employees' services up to the reporting date and are measured at
the amounts expected to be paid, inclusive of on costs, when the
liabilities are settled. The expense for non-accumulating sick leave
is recognised when the leave is taken and measured at the rates
paid or payable.
(ii)
Long-term employee benefits
The liability for long service leave is recognised in the provision for
employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit
method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to
maturity and currency that match, as closely as possible, the
estimated future cash outflows.
(iii) Defined contribution plans
Contributions are made by the consolidated entity to individual
defined contribution superannuation plans of each Director and
employee and are charged as an expense in the income statement
when incurred.
(iv)
Employee bonuses
A provision is recognised for the amount expected to be paid under
short-term bonus entitlements if the consolidated entity has a
present legal or constructive obligation to pay this amount as a
result of past service provided by the Director or employee and the
obligation can be estimated reliably.
(v)
Share-based payment transactions
Share-based compensation benefits are provided to Managing
Director and certain employees via the Executive Share Option Plan,
Performance Rights Plan, OZ Minerals Employee Share Plan and
Long-Term Incentive Scheme. Information relating to these
schemes is set out in Note 33.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
The fair value of options granted under OZ Mineral’s Executive
Share Option Plan and equity instruments granted under the Long-
Term Incentive Scheme are recognised as an employee benefit
expense with a corresponding increase in equity. The fair value is
measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the
options.
The fair value at grant date is independently determined using an
option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the share price at grant
date and expected price volatility of the underlying share, the
expected dividend yield and the risk-free interest rate for the term
of the option.
The fair value of the options granted is adjusted to reflect market
vesting conditions, but excludes the impact of any non-market
vesting conditions (for example, profitability and sales growth
targets). Non-market vesting conditions are included in assumptions
about the number of options that are expected to become
exercisable. At each balance sheet date, the entity revises its
estimate of the number of options that are expected to become
exercisable. The employee benefit expense recognised each period
takes into account the most recent estimate. The impact of the
revision to original estimates, if any, is recognised in the income
statement with a corresponding adjustment to equity.
The market value of shares issued to employees for no cash
consideration under the Performance Rights Plan and OZ Minerals
Employee Share Plan are recognised as an employee benefits
expense with a corresponding increase in equity over the vesting
period.
(o) Workers’ compensation
Provision is made for outstanding claims, including any incurred but
not reported claims, where any controlled entity self-insures for risks
associated with workers’ compensation. Outstanding claims are
recognised when an incident occurs that may give rise to a claim
and are measured at the cost that the entity expects to incur in
settling the claims, discounted using a rate that reflects current
market assessments of the time value of money and risks specific to
the liability. An independent actuary provides the calculation of the
value of outstanding claims. Each period the impact of the unwind
of discounting is recognised in the income statement as a financing
cost.
(p) Mine rehabilitation, restoration and dismantling
obligations
Provisions are made for the estimated cost of rehabilitation,
decommissioning and restoration relating to areas disturbed during
the mine’s operations up to reporting date but not yet rehabilitated.
Provision has been made in full for all the disturbed areas at the
reporting date based on current estimates of costs to rehabilitate
such areas, discounted to their present value based on expected
future cash flows. The estimated cost of rehabilitation includes the
current cost of recontouring, topsoiling and revegetation to meet
legislative requirements. Changes in estimates are dealt with on a
prospective basis as they arise.
Significant uncertainty exists as to the amount of rehabilitation
obligations which will be incurred due to the impact of changes in
environmental legislation, and many other factors, including future
developments, changes in technology, price increases and changes
in interest rates. The amount of the provision relating to mine
rehabilitation, restoration and dismantling obligations is recognised
at the commencement of the mining project and/or construction of
the assets where a legal or constructive obligation exists at that
time.
The provision is recognised as a liability, separated into current
(estimated costs arising within twelve months) and non-current
components based on the expected timing of these cash flows. A
corresponding asset is included in mine property and development
assets, only to the extent that it is probable that future economic
benefits associated with the restoration expenditure will flow to the
entity. The capitalised cost of this asset is recognised in property,
plant and equipment and is amortised over the life of the mine.
At each reporting date the rehabilitation liability is re-measured in
line with changes in discount rates, and timing or amounts of the
costs to be incurred. Rehabilitation, restoration and dismantling
provisions are adjusted for changes in estimates. Adjustments to the
estimated amount and timing of future rehabilitation and
restoration cash flows are a normal occurrence in light of the
significant judgements and estimates involved. Changes in the
liability relating to mine rehabilitation, restoration and dismantling
obligations are added to or deducted from the related asset (where
it is probable that future economic benefits will flow to the entity),
other than the unwinding of the discount which is recognised as a
finance cost in the income statement. Changes to capitalised cost
result in an adjustment to future depreciation charges.
The provisions referred to above do not include any amounts
related to remediation costs associated with unforeseen
circumstances.
(q) Provisions
Provisions for legal claims and other liabilities are recognised when:
•
•
•
The consolidated entity has a present legal or constructive
obligation as a result of past events;
It is probable that an outflow of resources will be required to
settle the obligation; and
The amount has been reliably estimated.
Provisions are not recognised for future operating losses. Where there
are a number of similar obligations, the likelihood that an outflow will
be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the same class
of obligations may be small.
Provisions are measured at the present value of the best estimate
of the expenditure required to settle the present obligation at
balance sheet date. The discount rate used to determine the
present value reflects current market assessments of the time
value of money and the risks specific to the liability. The increase
in the provision due to the passage of time is recognised as a
finance cost in the income statement.
A provision for onerous contracts is recognised when the
expected benefits to be derived by the consolidated entity from a
contract is lower than the unavoidable cost of meeting its
obligations under the contract. The provision is measured at the
present value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with the
contract.
(r)
Sales revenue
Revenue from the sale of goods and disposal of other assets is
recognised when persuasive evidence of an arrangement exists,
usually in the form of an executed sales agreement, indicating there
has been a transfer of risks and rewards to the customer, no further
processing is required by the consolidated entity, the quantity and
quality of the goods has been determined with reasonable accuracy,
the price is fixed or determinable, and collectability is probable. This
is generally when title passes which for the majority of commodity
sales represents the bill of lading date when the commodity is
delivered for shipment.
57
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1
Summary of significant accounting policies (continued)
Revenue on provisionally priced sales is recognised at the estimated
fair value of the total consideration received or receivable.
Revenue is reported net of discounts and pricing adjustments.
Royalties paid and payable, and premium expense on minimum
price put options over gold production are separately reported as
expenses.
Specific revenue recognition policies for major business activities are
as follows:
(vi)
Sales of concentrates and metals
Contract terms for many of the consolidated entity’s zinc, copper,
lead, silver, nickel and metal in concentrate sales allow for a price
adjustment based on a final assay of the goods by the customer to
determine content. Recognition of the sales revenue for these
commodities is based on the most recently determined estimate of
product specifications with a subsequent adjustment made to
revenue upon final determination.
The terms of concentrate sales contracts with third parties contain
provisional pricing arrangements whereby the selling price for metal
in concentrate is based on prevailing spot prices on a specified
future date after shipment to the customer. Adjustments to the sales
price occur based on movements in quoted market prices up to the
date of final settlement. The period between provisional invoicing
and final settlement is typically between 60 and 180 days.
These provisionally priced sales contracts contain an embedded
derivative that is required to be separated from the host contract for
accounting purposes. Accordingly, the embedded derivative, which
does not qualify for hedge accounting, is recognised at fair value,
with subsequent changes in fair value recognised in the income
statement in each period until final settlement, as an adjustment to
revenue. Changes in fair value over the quotational period and up
until final settlement are estimated by reference to forward market
prices.
(s)
Financial income and expenses
Financial income includes:
interest income on cash and cash equivalents;
dividend income; and
•
•
•
The capitalisation rate used to determine the amount of finance
expenses to be capitalised is the weighted average interest rate
applicable to the consolidated entity’s outstanding borrowings.
(t)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits
with an original maturity of three months or less. Bank overdrafts are
repayable on demand and are shown within borrowings in current
liabilities on the balance sheet. For the purposes of the statement of
cash flows, cash includes cash on hand and deposits at call which are
readily convertible to cash and are subject to an insignificant risk of
changes in value, net of any outstanding bank overdrafts which are
recognised at their principal amounts.
(u) Trade and other payables
These amounts represent liabilities for goods and services provided
to the consolidated entity prior to the end of the financial year
which are unpaid. The amounts are non interest bearing, unsecured
and are usually paid within 30 days of recognition.
(v) Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less impairment. Trade receivables other than
concentrate sales receivables are due for settlement within 30 days
from the date of recognition. Concentrate sales receivables are
recognised in accordance with Note 1(r).
Collectability of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off. An
impairment is established when there is objective evidence that the
consolidated entity will not be able to collect all amounts due
according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or
delinquency in payments (more than 30 days overdue) are
considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The amount
of the impairment is recognised in the income statement.
gains on the disposal of available-for-sale financial assets.
(w)
Interest-bearing loans and borrowings
Interest income is recognised as it accrues using the effective interest
method. Dividend income is recognised when the right to receive
payment is established.
Financial expenses includes:
•
•
•
•
•
•
•
interest on short-term and long-term borrowings;
amortisation of discounts or premiums relating to
borrowings;
accretion of the conversion option in the convertible note;
amortisation of ancillary costs incurred in connection with
the arrangement of borrowings;
finance lease charges;
the impact of the unwind of discount on long-term
provisions for mine rehabilitation, restoration and
dismantling and workers’ compensation; and
changes in the fair value of financial asset at fair value through
profit or loss.
Finance expenses are calculated using the effective interest method.
Finance expenses incurred for the construction of any qualifying asset
are capitalised during the period of time that is required to complete
and prepare the asset for its intended use or sale. Other finance
expenses are expensed as incurred.
Borrowings, including the liability component of the consolidated
entity’s convertible bond, 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.
The fair value of the liability portion of the convertible note is
determined using a market interest rate for an equivalent non-
convertible note. This amount is recorded as a liability on an amortised
cost basis using the effective interest method until extinguished on
conversion or maturity of the bonds. The remainder of the proceeds is
allocated to the conversion option. This is recognised and included in
equity, net of income tax effects.
Borrowings are removed from the balance sheet when the obligation
specified in the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial liability that has
been extinguished and the consideration paid, including any non-cash
assets transferred or liabilities assumed, is recognised in other income
or other expenses.
Borrowings are classified as current liabilities unless the consolidated
entity has an unconditional right to defer settlement of the liability for
at least twelve months after the balance sheet date.
58
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1 Summary of significant accounting policies (continued)
(x)
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at
the time the guarantee is issued. The liability is initially measured at
fair value and subsequently at the higher amount determined in
accordance with AASB 137 Provisions, Contingent Liabilities and
Contingent Assets and the amount initially recognised less cumulative
amortisation, where appropriate.
The fair value of financial guarantees is determined as the present
value of the theoretical cash flows arising if each subsidiary were to
source each guarantee on market as an arms length transaction.
Where guarantees in relation to loans of subsidiaries or associates are
provided for no consideration, the fair values are accounted for as
contributions and recognised as part of the cost of the investment.
(y)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares or options, for
the acquisition of a business, are included in the cost of the
acquisition as part of the purchase consideration.
When share capital recognised as equity is repurchased, the amount
of the consideration paid, which includes directly attributable costs,
is recognised as a deduction from equity, net of any tax effects.
Repurchased shares are classified as treasury shares and are
presented as a deduction from total equity.
When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity reserve, and the
resulting surplus or deficit on the transaction is transferred to / from
accumulated profits.
(z) Dividends payable
Provision is made for the amount of any dividend declared, being
appropriately authorised and no longer at the discretion of the entity,
on or before the end of the financial year but not distributed at
balance date.
(aa) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of
goods and services tax (“GST”), unless the GST incurred is not
recoverable from taxation authorities. In this case it is recognised as
part of the cost of acquisition of the asset or as part of an item of the
expense.
Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from, or
payable to, taxation authorities is included with other receivables or
payables in the balance sheet.
Cash flows are included in the statement of cash flows inclusive of
GST. The GST 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. Commitments and
contingencies are disclosed net of the amount of GST recoverable
from, or payable to taxation authorities. The net of GST payable and
receivable is remitted to the appropriate tax body in accordance with
legislative requirements.
(ab) Operating segments
Operating segments are components of the consolidated entity
about which separate financial information is available that is
evaluated regularly by the consolidated entity’s key management
personnel in deciding how to allocate resources and in assessing
performance.
Segment information that is evaluated by key management is
prepared in conformity with the accounting policies adopted for
preparing the financial statements of the consolidated entity.
The division of the consolidated entity’s results and assets into
segments has been ascertained by reference to direct identification
of assets and revenue/cost centres and where interrelated segment
costs exist, an allocation has been calculated on a pro rata basis of
the identifiable assets and/or costs. The assets and liabilities of the
reportable segments does not include receivables and payables to
related parties. It includes deferred tax assets and liabilities that are
attributable to the segments. The additions to mine, property,
property, plant and equipment and intangible assets as presented in
the segment note are measured on an accruals basis.
(ac) Assets and liabilities held for sale and discontinued
operations
Non-current assets (or disposal groups) are classified as held for sale
and stated at the lower of their carrying amount and fair value less
costs to sell if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use.
An impairment loss is recognised for any initial or subsequent write-
down of the asset (or disposal group) to fair value less costs to sell.
A gain is recognised for any subsequent increases in fair value less
costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss
not previously recognised by the date of the sale of the non-current
asset (or disposal group) is recognised at the date of de-recognition.
Non-current assets are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable
to the liabilities of a disposal group classified as held for sale
continue to be recognised. Non-current assets classified as held for
sale and the assets of a disposal group classified as held for sale are
presented separately from other assets in the balance sheet.
The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and represents a separate
major line of business or geographical area of operations, is part of
a single co-ordinated plan to dispose of such a line of business or
area of operations, or is a subsidiary acquired exclusively with a view
to resale. The results of discontinued operations are presented
separately on the face of the income statement.
(ad) Business combinations
The purchase method of accounting is used to account for all
business combinations, including business combinations involving
entities or businesses under common control, regardless of whether
equity instruments or other assets are acquired. Cost is measured as
the fair value of the assets given, shares issued or liabilities and
contingent liabilities assumed at the date of exchange plus costs
directly attributable to the acquisition. Where equity instruments are
issued in an acquisition, the fair value of the instruments is their
published market price as at the date of exchange unless, in rare
circumstances, it can be demonstrated that the published price at
the date of exchange is an unreliable indicator of fair value and that
other evidence and valuation methods provide a more reliable
measure of fair value. Transaction costs arising on the issue of
equity instruments are recognised directly in equity.
59
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
1 Summary of significant accounting policies (continued)
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair
value of the consolidated entity's share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less
than the fair value of the net assets of the subsidiary acquired, the
difference is recognised directly in the income statement, but only
after a reassessment of the identification and measurement of the
net assets acquired.
Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity's
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
(ae) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable
to equity holders of the parent, excluding any costs of servicing equity
other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
(af) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100 dated 10
July 1998, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the
financial report. Amounts in the financial report have been rounded
off in accordance with that Class Order in millions of dollars to one
decimal place except where rounding to the nearest one thousand
dollars is required.
(ag) Comparatives
When required by Australian Accounting Standards, comparative
figures have been adjusted to conform to changes in presentation
for the current financial year.
The consolidated income statements for comparative period and
notes thereto have been restated to present results from continuing
operations only. Results from discontinued operations are presented
separately.
The consolidated entity adopted AASB 8 Operating Segments from
1 January 2008 which required restatement of comparative
information in the segment note.
60
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
2 Critical accounting estimates and judgements
Estimates and judgements used in developing and applying the consolidated entity’s accounting policies are continually evaluated
and are based on experience and other factors, including expectations of future events that may have a financial impact on the entity
and that are believed to be reasonable under the circumstances. The consolidated entity makes estimates and assumptions
concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates
and underlying assumptions are reviewed on an ongoing basis. The critical estimates and judgements that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Critical judgements in applying the consolidated entity’s accounting policies
(i) Going concern assumption
A key assumption underlying the preparation of financial statements is that the consolidated entity will continue as a going concern.
An entity is a going concern when it is considered to be able to pay its debts as and when they are due, and continue in operation
without any intention or necessity to liquidate or otherwise wind up its operations. A significant amount of judgement is required in
assessing whether the consolidated entity is a going concern as set out in Note 1(c)(i).
(ii)
Functional currency
An entity’s functional currency is the currency of the primary economic environment in which the entity operates in accordance with
accounting policy 1(g)(i). Determination of an entity’s functional currency requires management judgement when considering a
number of factors including the currency that mainly influences sales prices, costs of production, and competitive forces and
regulations which impact sales prices. In addition, consideration must be given to the currency in which financing and operating
activities are undertaken.
(iii) Discontinued operations and assets held for sale
In accordance with accounting policy 1(ac) for operations to be classified as discontinued and held for sale, an assessment of
whether the sale transaction is highly probable is required. The discontinued operations and assets held for sale are discussed in
Note 5.
(b) Critical accounting estimates and assumptions
(i)
Recoverability of assets
The recoverable amount of each ‘cash-generating unit’ is determined as the higher of the asset’s fair value less costs to sell and its
value in use in accordance with the accounting policy in Note 1(m). These value in use calculations require the use of estimates and
assumptions including discount rates, exchange rates, commodity prices, future capital requirements and future operating
performance. Refer to Note 10 for additional details in relation to recoverability of assets.
(ii) Mine rehabilitation, restoration and dismantling obligations
Provision is made for the anticipated costs of future restoration and rehabilitation of mining areas from which natural resources have
been extracted in accordance with the accounting policy in Note 1(p). These provisions include future cost estimates associated with
reclamation, plant closures, waste site closures, monitoring, demolition, decontamination, water purification and permanent storage
of historical residues. These future cost estimates are discounted to their present value. The calculation of these provision estimates
requires assumptions such as application of environmental legislation, plant closure dates, available technologies, engineering cost
estimates and discount rates. A change in any of the assumptions used may have a material impact on the carrying value of mine
rehabilitation, restoration and dismantling provisions.
(iii) Ore reserves and resources estimates
The estimated quantities of economically recoverable reserves and resources are based upon interpretations of geological and
geophysical models and require assumptions to be made regarding factors such as estimates of short and long-term exchange rates,
estimates of short and long-term commodity prices, future capital requirements and future operating performance. Changes in
reported reserves and resources estimates can impact the carrying value of property, plant and equipment, intangible assets,
provisions for mine rehabilitation, restoration and dismantling obligations, the recognition of deferred tax assets, as well as the
amount of depreciation and amortisation charged to the income statement.
61
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
2 Critical accounting estimates and judgements (continued)
(iv) Determination of fair values in business combination
The consolidated entity has applied estimates and judgements in order to determine the fair value of assets acquired and liabilities,
and contingent liabilities assumed by way of a business combination.
The value of the assets, liabilities and contingent liabilities recognised at acquisition date are recognised at fair value. In determining
fair value the consolidated entity has utilised valuation methodologies including discounted cash flow analysis. The assumptions
made in performing this valuation include assumptions as to discount rates, foreign exchange rates, commodity prices, the timing of
development, capital costs, and future operating costs. Any significant change in key assumptions may cause the acquisition
accounting to be revised including recognition of additional goodwill or a discount on acquisition. Additionally, the determination of
the acquirer and the acquisition date also require significant judgement to be made by the consolidated entity.
(v)
Income tax, deferred tax assets and liabilities
The consolidated entity is subject to income taxes of Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining the group provision for income taxes. There are many transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises
provisions for potential tax issues based on estimates of amounts that were initially recorded. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provision
in the period in which the determination is made.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable profits will be available to utilise those temporary differences and losses, and the tax losses continue to be available having
regard to the nature and timing of their origination and compliance with the relevant tax legislation associated with their
recoupment.
62
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
3 Operating segments
The consolidated entity’s divisions are managed on a site-by-site basis and the operating segments were as noted below. The
consolidated entity has built a portfolio of exploration and development projects in Australia, Canada, Tunisia, Sweden, Mexico, Laos,
Thailand, Cambodia, Indonesia and China. Other than Canada and Dugald River, the other exploration and development projects are
not required to be disclosed as a separate segment at this stage, and accordingly these amounts are included within ‘other
continuing operations’. Other continuing operations also includes head office entities. Other discontinued operations comprise the
investment in Nyrstar.
The consolidated entity acquired Zinifex Limited on 1 July 2008 as set out in Note 4. Accordingly, the segment results for Century
Mine, Avebury Mine, Canadian Project, Dugald River Project and Rosebery Mine show results only for the second half of the financial
year (2007: nil).
(a) Segments
Continuing segments
Century Mine
The Century Mine is an open-cut zinc and lead mine located approximately 250 kilometres north of Mount Isa, near to the Gulf of
Carpentaria in Queensland.
Sepon Copper Mine
The Sepon Copper operation is an open-cut copper mine located approximately 40 kilometres north of the town of Sepon, in
Savannakhet Province of Lao People’s Democratic Republic (‘Laos’).
Sepon Gold Mine
The Sepon Gold operation is an open-cut gold mine located approximately 40 kilometres north of the town of Sepon, in
Savannakhet Province of the Laos.
Avebury Mine
The Avebury Mine is an underground nickel mine located on the west coast of Tasmania in Australia. On 19 December 2008, the
company announced the Avebury Mine would be placed on care and maintenance at the end of the first quarter, 2009.
Canadian Project
The Canadian Operations represent zinc and copper exploration projects located in Canada’s Territory of Nunavut.
Dugald River Project
The Dugald River deposit is one of the world’s largest undeveloped zinc sources, located in north-west Queensland approximately 65
kilometres north-west of Cloncurry and 85 kilometres north-east of Mount Isa.
Discontinued segments
Golden Grove Mine
Golden Grove is a volcanic hosted massive sulphide base and precious metals deposit of zinc, copper, lead, silver and gold, located
approximately 450 kilometres north-east of Perth and 280 kilometres east of Geraldton in Western Australia.
Rosebery Mine
The Rosebery Mine is a medium-scale underground zinc, lead, silver, gold and copper mine located on the west coast of Tasmania in
Australia.
Prominent Hill Mine
The Prominent Hill copper-gold project is located in the Gawler Craton of South Australia, approximately 650 kilometres north-west
of Adelaide and 130 kilometres south-east of Coober Pedy in South Australia.
Martabe Project
The Martabe gold-silver development and exploration project is located in North Sumatra, Indonesia.
(b) Geographical areas
Although the consolidated entity’s divisions are managed on a site-by-site basis, they operate in two main geographical areas:
Australia
The country of the parent entity and the area in which the Century, Golden Grove, Rosebery, Prominent Hill and Avebury mines
operate and the Dugald River project is located. It also includes the corporate head office and shared service operations.
Asia
Comprises the operations associated with the Sepon Gold and Sepon Copper mines and Martabe project.
The carrying value of the Canadian Project at 31 December 2008 was not significant.
63
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
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S
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
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t
n
i
o
t
s
n
o
i
t
i
d
d
A
t
n
e
m
p
u
q
e
i
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
3 Operating segments (continued)
Geographical areas
31 December 2008
Sales to external customers
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
31 December 2007
Sales to external customers
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
4 Acquisition of business
(a) Zinifex Limited
Australia
A$m
Asia
A$m
Group
A$m
629.1
28.7
589.3
1,218.4
–
28.7
3,159.3
1,005.1
4,164.4
4.6
–
4.6
523.8
148.3
1,089.3
2.4
602.6
–
650.4
44.4
1,126.4
148.3
1,739.7
46.8
On 3 March 2008, the Directors of OZ Minerals Limited (formerly Oxiana Limited) and Zinifex Limited, which was renamed OZ
Minerals Holdings Limited, announced that they had reached an agreement for the merger of OZ Minerals Limited and Zinifex
Limited (“the merger”). Following approval of the merger by the Zinifex Limited shareholders and the Court on 16 June 2008 and 20
June 2008 respectively, the merger was implemented on 1 July 2008 by way of a scheme of arrangement between Zinifex Limited and
its shareholders. Under the terms of the merger, OZ Minerals Limited paid Zinifex Limited shareholders 3.1931 ordinary shares for
each Zinifex Limited ordinary share held, resulting in Zinifex Limited shareholders receiving ordinary shares in OZ Minerals Limited
equivalent to approximately a 50 per cent interest in the merged company called OZ Minerals Limited. Zinifex Limited became a
wholly owned subsidiary of OZ Minerals Limited on 1 July 2008 and was delisted from the ASX on 2 July 2008.
Zinifex Limited was a zinc and lead mining, exploration and development company. Refer to Note 1(ad) for the accounting policy for
business combinations.
The provisional values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values at the
date of acquisition. Accounting standards permit up to 12 months for provisional acquisition accounting to be finalised following the
acquisition date if any subsequent information provides better evidence of the item’s fair value at the date of acquisition.
The consolidated entity undertook a detailed review to determine the fair value of assets, liabilities and contingent liabilities
recognised on the date of acquisition. This review included engaging an external third party to determine the fair values of the cash-
generating units (‘CGUs’) of Zinifex, resulting in the reallocation of mineral rights within CGUs, the recognition of a deferred tax
liability and goodwill at the date of acquisition.
The details of the provisional fair values at the date of acquisition and additional fair value adjustments made at 31 December 2008
are set out below:
66
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
4 Acquisition of business (continued)
(a) Zinifex Limited (continued)
Book values
reflected by
Zinifex at
1-Jul-08
A$m
Provisional
fair value
adjustments at
1-Jul-08
A$m
Provisional
values
recognised on
acquisition at
1-Jul-08
A$m
Adjustments to
provisional fair
values at
1-Jul-08
A$m
Adjusted fair
values at
1-Jul-08
A$m
Cost of acquisition
Fair value of issued shares (1,554,756,421 shares)
Acquisition costs
Total cost of acquisition
Fair values of assets and liabilities
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Trade and other payables
Current tax payable
Provisions
Deferred tax liabilities
Interest-bearing liabilities
Goodwill
Cash flow attributable to acquisition of
Zinifex Limited
Acquisition costs
Net cash acquired
Net cash inflow
Pro-forma results
3,980.2
43.0
4,023.2
1,173.5
98.2
153.3
30.6
150.1
1,646.0
226.0
311.2
(214.0)
(37.3)
(148.2)
(47.7)
(164.3)
3,177.4
–
3,177.4
(43.0)
1,173.5
1,130.5
–
–
–
–
–
–
–
–
541.5
304.3
–
–
–
–
–
–
845.8
–
845.8
–
–
–
3,980.2
43.0
4,023.2
1,173.5
98.2
153.3
30.6
150.1
2,187.5
530.3
311.2
(214.0)
(37.3)
(148.2)
(47.7)
(164.3)
4,023.2
–
4,023.2
(43.0)
1,173.5
1,130.5
–
–
–
–
–
–
–
–
(152.0)
152.0
–
–
–
–
(60.0)
–
(60.0)
60.0
–
3,980.2
43.0
4,023.2
1,173.5
98.2
153.3
30.6
150.1
2,035.5
682.3
311.2
(214.0)
(37.3)
(148.2)
(107.7)
(164.3)
3,963.2
60.0
4,023.2
–
–
–
(43.0)
1,173.5
1,130.5
A pro-forma consolidated results of operations of the consolidated entity for continuing operations for the year ended 31 December
2008, assuming, as required by the accounting standards, that the acquisition of Zinifex occurred as at 1 January 2008 and not 1 July
2008 is set out below. The pro-forma financial information does not necessarily represent what would have occurred if the transaction
had taken place on 1 January 2008, and should not be taken as representative of the consolidated entity’s future consolidated results
of operations or financial position. The pro-forma information does not include all costs relating to the integration of Zinifex and the
consolidated entity.
The pro-forma information includes the historical operating results of the consolidated entity, adjusted to give effect to the
acquisition of Zinifex Limited at 1 January 2008. The net loss after tax included in the consolidated results relating to Zinifex entities
from continuing operations since acquisition date amounted to A$1,433.6 million, including an impairment loss of A$1,054.0 million.
Revenue from continuing operations
879.2
370.6
1,249.8
Profit before net financing (expense)/income, depreciation and amortisation,
impairment of assets and income tax from continuing operations
Loss for the period from continuing operations
240.6
(1,490.5)
(46.9)
128.8
193.7
(1,361.7)
OZ Minerals
consolidated
A$m
Pro-forma
adjustments for
Zinifex A$m
Pro-forma
consolidated
entity A$m
67
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
4 Acquisition of business (continued)
(b) Agincourt Resources Limited
The consolidated entity acquired Agincourt Resources Limited (“Agincourt”) in the previous financial period. The date of acquisition
was 21 March 2007. At the date of acquisition, the acquired entities were involved in mining, exploration and evaluation activities.
On 1 August 2007 the consolidated entity sold the Wiluna gold mining and processing operation acquired as part of the Agincourt
acquisition to Apex Minerals NL (“Apex”) in exchange for cash and shares in Apex.
In October 2007 the consolidated entity accepted an off-market takeover offer by Toro Energy Limited (“Toro”) and disposed of all of
its shares in Nova Energy Limited (“Nova”), a controlled entity acquired as part of the acquisition of Agincourt. As a result the
consolidated entity received 191,517,860 shares in Toro which increased its holdings to a 46 per cent investment in Toro. Refer to
Note 16 for accounting of the investment in Toro.
The provisional values of assets, liabilities and contingent liabilities recognised on acquisition were their estimated fair values at the
date of acquisition. Accounting standards permit up to 12 months for provisional acquisition accounting to be finalised following the
acquisition date if any subsequent information provides better evidence of the item’s fair value at the date of acquisition. The details
of the final fair values, which were equal to the provisional fair values at the date of acquisition, are set out below:
Book values reflected
by Agincourt
A$m
Fair value
adjustments
A$m
Final
fair values
A$m
Cost of acquisition
Fair value of issued shares (144,764,528 shares)
Cash paid
Acquisition costs
Total cost of acquisition
Fair values of assets and liabilities
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Property, plant and equipment
Trade and other payables
Derivative financial instruments
Provisions
Deferred tax liabilities
Interest-bearing liabilities
Minority interest
Goodwill
Cash flow attributable to acquisition of Agincourt
Resources Limited
Cash paid
Acquisition costs accrual
Acquisition costs outstanding
Net cash acquired
Net cash outflow
401.9
13.5
11.9
427.3
7.4
8.5
6.7
0.7
177.6
(12.3)
(16.4)
(11.1)
–
(11.6)
(2.2)
147.3
–
147.3
(13.5)
(11.9)
9.4
7.4
(8.6)
–
–
–
–
–
–
(2.8)
–
382.2
–
–
–
(113.7)
–
(99.4)
166.3
113.7
280.0
–
–
–
–
–
401.9
13.5
11.9
427.3
7.4
8.5
3.9
0.7
559.8
(12.3)
(16.4)
(11.1)
(113.7)
(11.6)
(101.6)
313.6
113.7
427.3
(13.5)
(11.9)
9.4
7.4
(8.6)
68
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
5 Discontinued operations and assets held for sale
(a) Discontinued operations
(i) Operations classified as held for sale and discontinued operations during current period
The consolidated entity was pursuing asset sales and was examining expressions of interest for a number of its assets to repay or
reduce its debt facilities at 31 December 2008, as stated in Note 1(c)(i). Management was committed to a plan to sell the following
assets. Except for the investment in Nyrstar, these assets formed individual operating segments at 31 December 2008:
-
-
Prominent Hill operating segment
Golden Grove operating segment
- Martabe operating segment
-
-
Rosebery operating segment
Investment in Nyrstar
At 31 December 2008, these assets have been classified as discontinued operations and represent assets held for sale.
Results of discontinued operations
Revenue
Impairment of assets
Expenses
(Loss)/profit before net financing costs and income tax
Net financing income/(costs)
(Loss)/profit before income tax
Income tax benefit/(expense)
Net (loss)/profit attributable to discontinued operations
Net (loss) attributable to discontinued operations for Wiluna as set out in Note 5(a)(ii)
Total
Total discontinued operations
2008
A$m
2007
A$m
339.2
(1,084.4)
(273.6)
(1,018.8)
3.9
(1,014.9)
20.5
(994.4)
–
(994.4)
523.8
–
(375.0)
148.8
(2.4)
146.4
(62.3)
84.1
(6.3)
77.8
The Company did not have any discontinued operations for the years ended 31 December 2007 and 31 December 2008.
69
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
5 Discontinued operations and assets held for sale (continued)
(a) Discontinued operations (continued)
Carrying amount of asset and liabilities held for sale
Consolidated
Cash and cash equivalents
Trade and other receivables – external entities
Inventories
Other financial assets
Prepayments
Property, plant and equipment
Intangible assets
Total assets
Trade and other payables – external entities
Borrowings payable to continuing operations
Current tax payable
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Cash flow attributable to discontinued operations
Net cash (outflows) from operating activities
Net cash (outflows) from investing activities – external
Net cash (outflows) from investing activities with continuing operations
Net cash (outflows) from financing activities
Net cash provided by discontinued operations
Net cash inflows from operating activities
Net cash (outflows) from investing activities – external
Net cash (outflows) from investing activities with continuing operations
Net cash (outflows) from financing activities
Net cash provided by discontinued operations
Total discontinued
operations before
eliminations
Eliminations
between continuing
& discontinued
operations
Total
discontinued
operations after
eliminations
2008
A$m
49.0
72.4
240.9
34.7
3.6
2,111.2
0.8
2,512.6
160.6
2,089.4
30.5
136.6
93.3
2,510.4
2.2
2008
A$m
(50.9)
(1,146.0)
1,161.0
–
(35.9)
2007
A$m
225.5
(684.6)
426.0
(170.9)
(204.0)
2008
A$m
2008
A$m
–
–
–
–
–
–
–
–
–
(2,089.4)
–
–
–
(2,089.4)
2,089.4
2008
A$m
–
–
(1,161.0)
–
49.0
72.4
240.9
34.7
3.6
2,111.2
0.8
2,512.6
160.6
–
30.5
136.6
93.3
421.0
2,091.6
2008
A$m
(50.9)
(1,146.0)
–
–
(1,161.0)
(1,196.9)
2007
A$m
–
–
(426.0)
–
(426.0)
2007
A$m
225.5
(684.6)
–
(170.9)
(630.0)
The discontinued operations do not have any external borrowings at 31 December 2008. They are financed by the continuing
operations which have external borrowings as set out in Note 21.
Company
Receivables from controlled entities due to continuing operations
Other financial assets and liabilities
Net assets
Assets held for sale
before
eliminations
Eliminations
between continuing
& discontinued
operations
Assets held for
sale after
eliminations
997.5
7.2
1,004.7
–
–
–
997.5
7.2
1,004.7
The cash flows attributable to discontinued operations did not have any impact on the statement of cash flows of the Company for
the years ended 31 December 2007 and 31 December 2008.
70
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
5 Discontinued operations and assets held for sale (continued)
(ii) Operations classified as held for sale and discontinued operations during prior period
During the prior period, the consolidated entity sold the Wiluna gold mining and processing operation on 1 August 2007, which was
acquired as part of the Agincourt Resources Ltd acquisition to Apex Minerals NL (“Apex”) in exchange for cash, receivables and shares
in Apex. Financial information relating to the discontinued operations is as follows:
Results of discontinued operations
Revenue
Expenses
Loss before net financing costs and income tax
Net financing income
Loss before income tax
Income tax benefit
Net loss attributable to discontinued operations
Gain on sale
Consideration received – cash
Consideration received – shares in Apex Minerals NL
Total consideration
Less carrying amount of net assets sold
Gain on sale of discontinued operations after income tax
Total loss after tax from discontinued operations
Carrying amount of asset and liabilities disposed of
Property, plant and equipment
Other assets
Total assets
Provisions
Other liabilities
Total liabilities
Net assets
Cash flow attributable to discontinued operations
Net cash outflows from operating activities
Net cash outflows from investing activities
Net cash outflows from financing activities
Net cash provided by discontinued operations
Net proceeds from disposal of discontinued operations
Total consideration received or receivable
Less non-cash consideration (shares in Apex Minerals NL)
Net proceeds from disposal of discontinued operations
(b) Disposal of controlled entities
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28.9
(37.9)
(9.0)
–
(9.0)
2.7
(6.3)
19.2
10.0
29.2
(29.2)
–
(6.3)
34.7
2.0
36.7
(6.7)
(0.8)
(7.5)
29.2
(5.8)
(14.4)
–
(20.2)
29.2
(10.0)
19.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
In March 2007, the consolidated entity acquired a 57 per cent interest in Nova Energy Limited (“Nova”), as part of the acquisition of
Agincourt Resources Limited and subsequently disposed of Nova during October 2007 in an off-market takeover bid for shares in
Toro Energy Limited. Refer to Note 4. Financial information relating to the disposal of Nova is as follows:
Consideration received – shares in Toro Energy Limited
Carrying amount of net assets sold
–
–
–
143.3
(143.3)
–
–
–
–
–
–
–
71
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
6 Revenue from continuing operations
Sale of concentrate and metal
879.2
602.6
–
–
7 Other income from continuing operations
Net loss on disposal of property, plant and equipment
Other income
Dividends from controlled entities
8 Expenses from continuing operations
Loss before income tax includes the following specific expenses:
Exploration and evaluation expenditure
Fair value losses on interest-rate swaps
Contributions to defined contribution plans
(0.4)
4.5
–
4.1
48.3
16.3
6.5
9 Net financing (expense)/income from continuing operations
Financing income
Interest income from cash and cash equivalents
Total financing income
Financing expenses
Interest and finance charges paid/payable
Unwind of discount on long-term provisions
Total financing expenses
Net financing (expenses)/income
–
–
–
–
37.7
1.4
5.2
7.1
7.1
20.2
2.6
22.8
–
22.6
110.6
133.2
–
0.3
348.0
348.3
0.7
–
1.7
9.5
9.5
26.9
–
26.9
(17.4)
7.0
–
1.1
17.9
17.9
11.4
–
11.4
6.5
19.2
19.2
36.9
5.9
42.8
(23.6)
(15.7)
10 Individually significant items
The individually significant items for the consolidated entity were as follows:
Consolidated entity
2008
Impairment of property, plant and equipment
Impairment of intangible mineral rights
Impairment of goodwill
Impairment of available-for-sale financial assets
Impairment of equity accounted investments
Total impairment
Derecognition of tax losses
Expenses incurred in relation to the restructure
Expenses incurred in relation to the integration
Continuing operations
Discontinued operations
Pre-tax
A$m
447.7
715.8
60.0
32.0
126.1
Tax
impact
A$m
–
(111.8)
–
–
–
Post tax
A$m
Pre-tax
A$m
Tax
impact
A$m
Post tax
A$m
447.7
604.0
60.0
32.0
126.1
897.0
(44.4)
852.6
–
44.4
143.0
–
–
–
–
–
–
44.4
143.0
–
1,381.6
(111.8)
1,269.8
1,084.4
(44.4)
1,040.0
–
30.8
21.7
228.0
(9.3)
(6.5)
228.0
21.5
15.2
–
1.1
–
–
(0.3)
–
–
0.8
–
Total of individually significant items
1,434.1
100.4
1,534.5
1,085.5
(44.7)
1,040.8
The total post-tax impairment for the continuing and discontinued operations was $2,309.8 million. The total post-tax individually
significant items for the continuing and discontinued operations was $2,575.3 million.
72
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
10 Individually significant items (continued)
Total impairment by asset is as follows:
2008
Continuing operations
Canada
Dugald River
Sepon Gold
Avebury
Century
Sepon Copper
Investment in Toro
Other investments and other
corporate assets
Sub-total continuing
operations
Discontinued operations
Rosebery
Golden Grove
Martabe
Prominent Hill
Investment in Nyrstar
Sub-total discontinued
operations
Total impairment
Pre-tax
impairment
A$m
Tax impact
A$m
Post-tax
impairment
A$m
Method of valuation
506.8
281.7
35.0
135.0
265.0
–
126.1
32.0
(111.8)
–
–
–
–
–
–
–
395.0
281.7
Value in use, using a discount rate of 8% (real post-tax)
Value in use, using a discount rate of 8% (real post-tax)
35.0
Value in use, using a discount rate of 8% (real post-tax)
135.0
265.0
Fair value less cost to sell, based on bids received
Value in use, using a discount rate of 8% (real post-tax)
–
Value in use, using a discount rate of 8% (real post-tax)
126.1
32.0
Based on Toro share price
Based on share price and internal assessment
1,381.6
(111.8)
1,269.8
245.0
229.0
216.4
251.0
143.0
–
–
(44.4)
–
–
245.0
229.0
172.0
251.0
143.0
Fair value less cost to sell, based on bids received
Fair value less cost to sell, based on bids received
Fair value less cost to sell, based on bids received
Fair value less cost to sell, based on internal valuation,
using a discount rate of 8% (real post-tax)
Based on Nyrstar share price
1,084.4
2,466.0
(44.4)
(156.2)
1,040.0
2,309.8
The consolidated entity performs an impairment assessment when there is an indication of a possible impairment and annual
impairment testing for goodwill and intangible assets with indefinite useful lives, regardless of whether there is a triggering event. A
detailed impairment assessment was performed at 31 December 2008, which was triggered by the fall in the consolidated entity’s
market capitalisation below its net assets value coupled with the adverse market conditions in the second half of 2008.
The majority of assets were analysed for asset impairment purposes on a cash-generating unit basis.
For the cash-generating units that are continuing operations, the impairment assessment was performed using a variety of data,
including valuations provided by an external party engaged by the consolidated entity and internal valuations based on Board
approved budgets. In assessing the recoverable amount of these assets, the consolidated entity makes a number of important
assumptions, including assumptions regarding commodity prices, foreign exchange rates and risk adjustments to future cash flows.
Commodity price expectations, exchange rates, reserves and resources, and expectations regarding future operating performance can
change significantly over short periods of time, which can have a significant impact on the carrying amount of assets. In the current
economic environment of volatile exchange rates, low and volatile commodity prices and, constrained capital availability the
consolidated entity considered information available from industry analysts, commentators and analysis performed by an external
valuer in relation to short and long-term commodity prices and forward exchange rates.
The projected cash flows for these cash-generating units were discounted to present values using discount rates specific to the asset
as shown above. These discount rates were selected having regard to estimates of costs of capital and the rates of return that may
be required by equity market investors, and reflect real, post-tax discount rates.
For the cash-generating units that were classified as held for sale at 31 December 2008, the impairment assessment was based on the
asset’s fair value less costs to sell. The fair value less costs to sell was based on bid prices received, or internal valuation in the case of
Prominent Hill of the amount that could be obtained from the disposal of the cash-generating unit in an arm’s length transaction.
The consolidated entity’s investment in available-for-sale financial assets (including the investment in Nyrstar) and the investment
accounted for using the equity method (investment in Toro) are in publicly listed entities. The recoverable amounts of these assets
were determined based on the listed entity’s share price at 31 December 2008.
Pursuant to the impairment of the cash-generating units as set out above, the parent entity also recognised an impairment loss of
A$3,857.9 million in relation to its investments in its controlled entities of A$3,738.8 million and receivables from controlled entiites of
A$119.1 million.
The impairment recognised by the consolidated entity in 2007 was A$1.5 million and by the parent company was nil.
73
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the
year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
11 Income tax
(a)
Income tax benefit/(expense) recognised in the income statement
Current income tax (expense)/benefit
Deferred income tax (expense)/benefit
(Under)/over provision from prior year
Income tax benefit/(expense)
Income tax benefit/(expense) is attributable to:
(Loss)/profit from continuing operations
(Loss)/profit from discontinuing operations
Income tax benefit/(expense)
Deferred income tax benefit/(expense) included in income tax
(expense)/benefit comprises:
Increase/(decrease) in deferred tax assets
Decrease/(increase) in deferred tax liabilities
Total deferred income tax benefit/(expense)
(144.3)
40.4
11.0
(92.9)
(113.4)
20.5
(92.9)
(76.1)
116.5
40.4
(b) Numerical reconciliation of income tax (expense)/benefit to pre-tax net profit
(Loss)/profit from continuing operations before income tax
(Loss)/profit from discontinued operations before income tax
Total (loss)/profit before income tax
(1,377.1)
(1,014.9)
(2,392.0)
(61.6)
(88.4)
1.5
(148.5)
(86.2)
(62.3)
(148.5)
5.8
(94.2)
(88.4)
326.6
140.1
466.7
(16.0)
30.7
7.7
22.4
22.4
–
22.4
18.5
12.2
30.7
(3,792.8)
–
(3,792.8)
5.8
3.2
1.5
10.5
10.5
–
10.5
7.3
(4.1)
3.2
387.9
–
387.9
Income tax benefit/(expense) at the Australian tax rate of 30 per cent
717.6
(140.0)
1,137.8
(116.4)
Tax effect of amounts which are not (deductible)/taxable in calculating
taxable income:
Non-taxable/(deductible) amounts
Non-taxable dividends
Difference in overseas tax rates
Over provision for previous years
Derecognition of tax losses
Derecognition of deferred tax assets in relation to impairment of assets
Write-back of net deferred tax liabilities
Other
Income tax benefit/(expense)
(c) Deferred tax assets and liabilities
(8.2)
–
709.4
(10.0)
11.0
(228.0)
(739.8)
164.5
–
(2.2)
–
–
33.1
(142.2)
1,170.9
(10.7)
1.5
–
–
2.9
–
–
7.7
–
(1,157.4)
–
1.2
22.4
(92.9)
(148.5)
(0.5)
104.4
(12.5)
–
1.5
–
–
–
21.5
10.5
The deferred tax assets and liabilities for the consolidated entity are set out in the table below.
The consolidated entity recognises deferred tax assets for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
A detailed assessment was performed at 31 December 2008 having regard to the recent adverse market conditions in the second half
of 2008. The assessment was based on internal cash flow models using Board approved budgets and assumptions regarding
commodity prices, foreign exchange rates and risk adjustments to future cash flows. Pursuant to this assessment, the consolidated
entity derecognised tax losses of $228.0 million (tax-effected) associated with carry forward tax losses and derecognised $739.8
million (tax-effected) of deferred tax asset with respect to deductible temporary differences.
74
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
11 Income tax (continued)
(c)
Deferred tax assets and liabilities (continued)
Consolidated
Opening
balance
Recognised
in profit or
loss
Recognised
in equity
Acquired
through
business
combination
Closing
balance
Included in
assets held
for sale
Continued
operations
Consolidated 2008 A$m
Deferred tax assets
Employee benefits
Debt instruments
Investments
Inventories
Capital raising costs
Provisions
Unrealised foreign exchange
Tax losses
Other
Set–off of deferred tax liabilities
Net recognised deferred tax assets
Deferred tax liabilities
29.6
–
–
–
3.6
5.8
(1.9)
6.5
5.3
48.9
(48.4)
0.5
Depreciation and amortisation
153.2
Capital raising costs
Convertible note option
Unrealised foreign exchange
Mineral rights
Other
Set–off against deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Employee benefits
Debt instruments
Investments
Inventories
Capital raising costs
Provisions
Unrealised foreign exchange
Tax losses
Other
Set–off of deferred tax liabilities
Net recognised deferred tax assets
Deferred tax liabilities
Depreciation and amortisation
Capital raising costs
Convertible note option
Mineral rights
Other
Set–off against deferred tax assets
Net deferred tax liabilities
2.6
7.1
–
–
5.2
168.1
(48.4)
119.7
2.1
(2.1)
–
–
3.6
4.9
1.1
2.1
4.9
16.6
(11.0)
5.6
63.8
1.7
7.1
–
1.2
73.8
(11.0)
62.8
4.2
–
6.0
(2.7)
(2.5)
(13.2)
35.6
(86.3)
(17.2)
(76.1)
(3.4)
–
(8.9)
7.3
(111.8)
0.3
(116.5)
1.0
2.1
–
–
–
0.9
(3.0)
4.4
0.4
5.8
89.4
0.9
–
–
3.9
94.2
(19.0)
–
–
–
–
–
–
–
(2.6)
(21.6)
–
(2.6)
(2.5)
–
–
–
(5.1)
12.2
–
–
1.9
–
31.5
–
244.3
21.3
311.2
(4.4)
–
–
–
111.8
0.3
107.7
27.0
–
6.0
(0.8)
1.1
24.1
33.7
164.5
6.8
262.4
–
262.4
145.4
–
(4.3)
7.3
–
5.8
–
–
–
–
–
–
–
–
–
–
–
–
(129.1)
–
–
(7.3)
–
(0.2)
154.2
(136.6)
–
–
154.2
(136.6)
Consolidated 2007 A$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29.6
–
–
–
3.6
5.8
(1.9)
6.5
5.3
48.9
(48.4)
0.5
153.2
2.6
7.1
–
5.2
168.1
(48.4)
119.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26.5
–
–
–
–
–
–
–
–
26.5
–
–
–
–
0.1
0.1
75
27.0
–
6.0
(0.8)
1.1
24.1
33.7
164.5
6.8
262.4
–
262.4
16.3
–
(4.3)
–
–
5.6
17.6
–
17.6
29.6
–
–
–
3.6
5.8
(1.9)
6.5
5.3
48.9
(48.4)
0.5
153.2
2.6
7.1
–
5.2
168.1
(48.4)
119.7
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
11 Income tax (continued)
(c) Deferred tax assets and liabilities (continued)
Company
Opening
balance
Recognised
in profit or
loss
Recognised
in equity
Acquired
through
business
combination
Closing
balance
Included in
assets held
for sale
Continued
operations
Company 2008 A$m
Deferred tax assets
Employee benefits
Debt instruments
Capital raising costs
Investments
Tax losses
Other
Set–off of deferred tax liabilities
Net recognised deferred tax
assets
Deferred tax liabilities
Debt instruments
Capital raising costs
Unrealised foreign exchange
Convertible note option
Other
Set–off against deferred tax
assets
Net recognised deferred tax
liabilities
Deferred tax assets
Employee benefits
Debt instruments
Capital raising costs
Investments
Tax losses
Other
28.0
0.3
3.6
–
6.5
2.3
40.7
(14.0)
26.7
2.2
3.0
1.7
7.1
–
(7.0)
(0.1)
(2.5)
4.3
24.0
(0.2)
18.5
(2.2)
1.3
(1.7)
(9.6)
–
14.0
(12.2)
(19.0)
–
–
–
–
–
(19.0)
–
–
–
(1.8)
–
(1.8)
(14.0)
–
1.1
0.2
3.6
–
2.1
–
7.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Set–off of deferred tax liabilities
(7.0)
Net recognised deferred tax
assets
Deferred tax liabilities
Debt instruments
Capital raising costs
Unrealised foreign exchange
Convertible note option
Other
Set–off against deferred tax
assets
Net recognised deferred tax
liabilities
–
(0.4)
2.3
–
7.1
0.7
9.7
(7.0)
2.7
Company 2007 A$m
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
0.1
–
2.3
4.4
–
7.3
2.6
0.7
1.7
–
(0.9)
4.1
26.4
–
–
–
–
–
26.4
–
–
–
–
0.2
0.2
76
2.0
0.2
1.1
4.3
30.5
2.1
40.2
–
40.2
–
4.3
–
(4.3)
–
–
–
–
28.0
0.3
3.6
2.3
6.5
–
40.7
(14.0)
26.7
2.2
3.0
1.7
7.1
–
14.0
(14.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.0
0.2
1.1
4.3
30.5
2.1
40.2
–
40.2
–
4.3
–
(4.3)
–
–
–
–
28.0
0.3
3.6
2.3
6.5
–
40.7
(14.0)
26.7
2.2
3.0
1.7
7.1
–
14.0
(14.0)
–
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31
December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
11 Income tax (continued)
(d) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Tax losses (tax-effected)
Deductible temporary differences (tax-effected)
12 Dividends
(a) Ordinary shares
Unfranked dividend for the year ended 31 December 2008 of 5.0 cents
per fully paid share, paid on 29 September 2008
Unfranked dividend for the year ended 31 December 2007 of 4.0 cents
per fully paid share, paid on 9 April 2008
Fully franked dividend for the year ended 31 December 2007 of 4.0
cents per fully paid share, paid on 4 October 2007
46 per cent franked dividend for the year ended 31 December 2006 of
5.0 cents per fully paid share, paid on 30 April 2007
Total
(b) Franking account for OZ Minerals Limited
Franking account balance at beginning of year
Franking credits acquired through business combinations
Franking credits attached to dividends paid during the year
Franking credits from income tax payments made during the year
Franking account balance at end of year
246.4
741.1
987.5
156.1
61.8
–
–
217.9
18.4
1.3
19.7
246.4
1,158.7
1,405.1
18.4
1.3
19.7
–
–
61.5
76.3
137.8
156.1
61.8
–
–
217.9
22.1
4.2
–
19.5
45.8
–
–
61.5
76.3
137.8
5.1
–
(41.4)
58.4
22.1
The above amounts represent the balance of the franking account as at the end of the financial year, and do not include franking
credits/(debits) that will arise from income tax payments/(refunds) made subsequent to the end of the year.
The dividend for the year of A$217.9 million was settled by a cash payment of A$155.3 million and by issuing shares under the
dividend reinvestment plan of A$62.6 million.
In addition to the dividends paid by the Company as set out above, a controlled entity of the parent Company paid a dividend of
A$11.2 million (2007: A$10.9 million) directly to its minority shareholder (Note 24(c)).
13 Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Total cash and cash equivalents
Amounts classified as held for sale
Total cash and cash equivalents as per statements of cash flow
38.3
31.5
69.8
49.0
118.8
57.6
188.5
246.1
–
246.1
4.2
9.5
13.7
–
13.7
24.9
34.2
59.1
–
59.1
Refer Note 29 for details of cash and cash equivalents not available for use by the consolidated entity.
77
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
14 Trade and other receivables
Trade receivables
Other receivables
Total trade and other receivables
15 Inventories
Finished goods
Work in progress
Raw materials, stores and consumables
Total inventories
26.8
19.5
46.3
68.7
31.5
123.4
223.6
49.9
61.8
111.7
29.9
5.8
52.4
88.1
–
0.9
0.9
–
–
–
–
–
35.3
35.3
–
–
–
–
Total inventories of $223.6 million are made up of inventories valued at cost of $156.7 million (2007: $88.1 million) and at net realisable
value of $66.9 million (2007: nil).
16 Investments accounted for using the equity method
Toro Energy Limited
28.7
148.3
–
–
The consolidated entity held a 46 per cent interest in Toro Energy Limited (“Toro”) at the beginning of the financial year, as discussed
in Note 4(b). In November 2008, the consolidated entity’s ownership in Toro increased to 52 per cent pursuant to subscribing to a
renounceable rights issue. The consolidated entity has assessed that there are exceptional circumstances that demonstrate that the
ownership in Toro does not constitute control. Therefore the investment in Toro was accounted for using the equity method. The key
factors that led to the assessment that the investment in Toro does not constitute control was the Deed of Undertaking the
consolidated entity had entered into with Toro whereby OZ Minerals undertook not to exercise any increase in its voting power which
it was entitled to pursuant to subscribing to a renounceable rights issue. This undertaking expired in February 2009 and has been
extended to 30 June 2009. In addition, Toro has an independent Board of Directors and control of Toro is exercised through that
Board. The consolidated entity has two Directors out of the six Directors on Toro’s Board and therefore does not have the majority of
the voting power at the Toro meetings.
Toro is a uranium exploration company listed on the Australian Securities Exchange. The recoverable amount of the investment in
Toro was determined based on its share price at 31 December 2008 of 10 cents per share resulting in the consolidated entity
recognising an impairment loss of A$126.1 million during the financial year (2007: nil).
(a) Movement in carrying amounts of associate and share of losses
Toro Energy Limited
Opening carrying amount
Acquisitions
Share of losses after income tax
Impairment of investment
Closing carrying amount
Consolidated
2008 A$m
2007 A$m
148.3
12.0
(5.5)
(126.1)
28.7
6.6
143.6
(1.9)
–
148.3
(b) Summarised financial information of associate
At the date of this report, Toro has yet to complete its financial statements as at 31 December 2008 and therefore summarised
financial information on Toro at 31 December 2008 is not included in these financial statements. The following information is based
on the Toro financial statements for the year ended 30 June 2008, which are Toro’s latest audited financial statements:
Toro Energy Limited
Assets
A$m
142.8
Liabilities
Revenue
Profit or (loss)
A$m
9.6
A$m
1.1
A$m
(4.8)
78
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
17 Other financial assets
Current
Foreign exchange put options
Total current other financial assets
Non-current
Available-for-sale financial assets (a)
Other investments held by the parent company
Investment in controlled entities (b)
Other investments
Other assets
Total non-current other financial assets
(a) Movement in carrying value of available-for-sale financial assets
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
Impairment of available-for-sale financial assets
4
5
10
Revaluations
Exchange rate differences
Closing carrying amount
(b) Movement in carrying value of investment in controlled entities
Opening carrying amount
Acquisitions through business combinations
Additions
Transfers to assets held for sale
Impairment of investments
Exchange rate differences
Closing carrying amount
4
5
–
–
17.6
–
–
1.2
2.9
21.7
38.5
150.1
5.1
(34.7)
(175.0)
–
33.6
17.6
–
–
–
–
–
–
–
0.4
0.4
38.5
–
–
–
1.6
40.1
14.8
–
16.5
–
–
7.3
(0.1)
38.5
–
–
–
–
–
–
–
–
–
3.5
4.7
2,863.9
–
–
–
–
13.1
9.0
769.3
–
–
2,872.1
791.4
13.1
–
–
–
(9.6)
–
–
3.5
769.3
4,023.2
17.7
(7.2)
(3,725.8)
1,786.7
2,863.9
10.8
–
1.5
–
–
0.9
(0.1)
13.1
186.3
427.3
186.0
–
(2.2)
(28.1)
769.3
79
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
17 Other financial assets (continued)
Unquoted investments of the parent entity in controlled entities comprise the following:
Country of
Incorporation
Class of
Share
Equity holding
2008 % 2007 %
Investment of
OZ Minerals Ltd
2008 A$m
Investment of
OZ Minerals Ltd
2007 A$m
Agincourt Resources (Singapore) Pte Ltd
Allegiance Exploration Pty Ltd
Allegiance Metals Pty Ltd
Allegiance Mining NL
Allegiance Mining Operations Pty Ltd
Allegiance Mining Processing Pty Ltd
AML (Bielsdown) Pty Ltd
AML Holdings Pty Ltd
Aoning Minerals Company Limited
Central Inca Gold Pty Ltd
Champa Mining Laos Pte Ltd
Eastren Pty Ltd
Erawan Mining Limited
Geothermal Energy Tasmania Exploration Pty Ltd
Geothermal Energy Tasmania Holdings Pty Ltd
Geothermal Energy Tasmania Pty Ltd
Geothermal Energy Tasmania West Coast Pty Ltd
Gowit Developments Pty Ltd (i)
Heazle Pty Ltd
Investment Co Pty Ltd
Ionex Pty Ltd
Lane Xang Minerals Limited
Lupin Mines Inc.
Minotaur Resources Holdings Pty Ltd
Navakun Mining Co. Ltd
Oxiana (Cambodia) Ltd
Oxiana Exploration Singapore (Number One) Pte Ltd
OZ Minerals (USA) Limited
OZ Minerals Agincourt Holdings Pty Ltd
OZ Minerals Agincourt Pty Ltd
OZ Minerals Australia Limited
OZ Minerals Canada Management Inc.
OZ Minerals Canada Operations Inc.
OZ Minerals Canada Resources Inc.
OZ Minerals Century Limited
OZ Minerals Equity Pty Ltd
OZ Minerals Europe Ltd
OZ Minerals Exploration Pty Ltd
OZ Minerals Exploration Singapore (Number Two) Pte Ltd
OZ Minerals Finance (Holdings) Pty Ltd
OZ Minerals Finance Pty Ltd
OZ Minerals Golden Grove (Finance) Pty Ltd
OZ Minerals Golden Grove (Holdings) Pty Ltd
OZ Minerals Golden Grove Pty Ltd
OZ Minerals Group Treasury Pty Ltd
OZ Minerals Holdings Limited
OZ Minerals Insurance Singapore Pte Ltd
OZ Minerals Laos Holdings Limited
OZ Minerals International (Holdings) Pty Ltd
OZ Minerals International Enterprises Pty Ltd
OZ Minerals Investments Pty Ltd
OZ Minerals Martabe Pty Ltd
OZ Minerals Mexico SA de CV
OZ Minerals Netherlands Holdings Cooperative UA
OZ Minerals Prominent Hill Operations Pty Ltd
OZ Minerals Prominent Hill Pty Ltd
OZ Minerals Reliance Exploration Pty Ltd
OZ Minerals Super Metals Pty Ltd
OZ Minerals Superannuation Pty Ltd
Singapore Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
China Ordinary
Australia Ordinary
Singapore Ordinary
Australia Ordinary
Thailand Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Laos Ordinary
Canada Ordinary
Australia Ordinary
Thailand Ordinary
Cambodia Ordinary
Singapore Ordinary
USA Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Canada Ordinary
Canada Ordinary
Canada Ordinary
Australia Ordinary
Australia Ordinary
Channel Islands Ordinary
Australia Ordinary
Singapore Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Singapore Ordinary
Cayman Islands Ordinary
Australia Ordinary
Australia Ordinary
Singapore Ordinary
Australia Ordinary
Mexico Ordinary
Netherlands Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
Australia Ordinary
80
100
100
100
100
100
100
100
100
80
100
100
100
50
100
100
100
100
–
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
–
–
–
90
–
100
100
100
100
–
100
100
–
–
–
–
–
100
100
100
–
100
100
100
100
100
–
–
100
100
–
–
100
100
–
–
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.3
–
–
–
–
–
–
210.0
0.5
0.8
–
–
–
–
–
–
–
–
–
–
–
1.3
–
–
–
0.6
330.9
–
–
–
–
–
–
–
100.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
427.6
–
–
–
–
–
–
–
–
–
–
–
–
–
1.0
–
–
–
0.5
260.9
–
–
–
–
–
–
–
79.3
–
–
–
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
17 Other financial assets (continued)
Country of
Incorporation
Class of
Share
OZ Minerals Wiluna Pty Ltd
Australia
Ordinary
OZ Minerals Zinifex Holdings Limited
Australia
Ordinary
PCML SPC Pty Ltd
PPTV Pty Ltd
PT Agincourt Resources
PT Artha Nugraha Agung
PT Bintang Sumberdaya
PT Explorasi Indonesia Jaya
PT Multi Mineral Explorsi
PT Oxindo Exploration
PT Panah Emas
Australia
Ordinary
Australia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Indonesia
Ordinary
Southern Laos Mining Pte Ltd
Singapore
Ordinary
SPC (Nominees) Pty Ltd
SPC 1 Pty Ltd
SPC 2 Pty Ltd
Swedish Enterprises AB
Taswest Nickel Pty Ltd
Yunnan Jinlong Minerals Co. Ltd
Zeemain Pty Ltd
Zinifex Insurance Pte Ltd
Zinifex UK (Holdings) Ltd
Zinifex UK Ltd
ZRUS Holdings Pty Ltd
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Sweden
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Singapore
Ordinary
UK
UK
Ordinary
Ordinary
Australia
Ordinary
Equity holding
2008
%
100
100
100
100
100
(ii)
(ii)
(ii)
(ii)
(ii)
(ii)
100
100
100
100
100
100
100
50
100
100
100
100
2007
%
100
–
–
–
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Investment of
OZ Minerals Ltd
2008 A$m
Investment of
OZ Minerals
Ltd 2007 A$m
–
2,213.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total investments in controlled entities
(i) This entity was liquidated during the year.
2,863.9
769.3
(ii) These Indonesian entities are controlled by OZ Minerals Limited via a corporation agreement with the Directors and shareholders
of the entities.
81
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
18 Property, plant and equipment
Freehold land and buildings (a)
Plant and equipment (b)
Mine property and development (c)
Exploration and evaluation assets (d)
Construction in progress (e)
Carrying amount (f)
(a) Freehold land and buildings
At cost
Accumulated depreciation
Carrying amount
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
Other transfers
Disposals
Depreciation charge
Exchange rate differences
Closing carrying amount
(b) Plant and equipment
At cost
Less: Accumulated depreciation
Carrying amount
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
Other transfers
Disposals
Depreciation charge
Impairment of plant and equipment
Exchange rate differences
Closing carrying amount
(c) Mine property and development
At cost
Less: Accumulated amortisation
Carrying amount
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
Other transfers
Disposals
Depreciation charge
Impairment of mine property and development
Exchange rate differences
Closing carrying amount
156.3
874.2
897.6
41.3
83.8
81.6
342.0
408.3
313.8
594.0
–
19.6
–
–
–
2,053.2
1,739.7
19.6
208.8
(52.5)
156.3
81.6
29.0
146.8
(77.2)
(16.2)
–
(17.1)
9.4
156.3
1,403.2
(529.0)
874.2
342.0
546.1
221.1
(309.0)
153.0
(0.4)
(98.4)
(81.8)
101.6
874.2
1,608.8
(711.2)
897.6
408.3
1,189.4
718.5
(788.6)
428.9
–
(199.4)
(1,251.3)
391.8
897.6
110.6
(29.0)
81.6
84.4
0.7
23.7
–
(2.8)
(1.0)
(17.4)
(6.0)
81.6
461.3
(119.3)
342.0
374.3
15.7
47.6
–
(3.6)
(17.3)
(38.7)
–
(36.0)
342.0
502.2
(93.9)
408.3
373.5
25.5
176.4
–
12.8
(35.4)
(44.2)
–
(100.3)
408.3
–
–
–
–
–
–
–
–
–
–
–
–
23.2
(3.6)
19.6
6.6
–
0.3
–
–
–
(1.5)
–
14.2
19.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.6
–
–
–
6.6
–
–
–
–
–
–
–
–
–
–
–
–
8.0
(1.4)
6.6
2.5
–
5.5
–
–
–
(1.0)
–
(0.4)
6.6
–
–
–
–
–
0.8
–
–
(0.8)
–
–
–
–
82
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the
year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
18 Property, plant and equipment (continued)
(d) Exploration and evaluation assets
At cost
Less: Accumulated amortisation
Carrying amount
Opening carrying amount
Acquisitions through business combination
Additions
Transfers
Disposals
Impairment of exploration and evaluation assets
Exchange rate differences
Closing carrying amount
(e) Construction in progress
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
Other transfers
Exchange rate differences
Closing carrying amount
(f) Total property, plant and equipment
Opening carrying amount
Acquisitions through business combination
4
Additions
Disposals
Depreciation charge
41.3
–
41.3
313.8
219.2
25.0
(511.7)
–
(11.6)
6.6
41.3
594.0
51.8
389.3
(936.4)
(54.0)
39.1
83.8
1,739.7
2,035.5
1,500.7
(0.4)
(314.9)
Impairment of property, plant and equipment
10
(1,344.7)
Exchange rate differences
Total
Transfers to assets held for sale
5
Closing carrying amount for continuing operations
548.5
4,164.4
(2,111.2)
2,053.2
313.8
–
313.8
19.6
517.6
28.4
(6.4)
(234.4)
–
(11.0)
313.8
77.4
–
450.5
–
–
66.1
594.0
929.2
559.5
726.6
(288.1)
(100.3)
–
(87.2)
1,739.7
–
1,739.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.6
–
0.3
–
(1.5)
–
14.2
19.6
–
19.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.5
–
6.3
(0.8)
(1.0)
–
(0.4)
6.6
–
6.6
Refer Note 29 for details of the consolidated entity’s property, plant and equipment pledged as security.
83
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the
year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
19 Intangible assets
Mineral rights (a)
Goodwill (b)
Computer software (c)
Closing carrying amount
(a) Mineral rights
At cost
Impairment losses
Carrying amount
Opening carrying amount
Acquisitions through business combination
Impairment of mineral rights
Exchange rate differences
Closing carrying amount
4
10
–
–
4.6
4.6
715.8
(715.8)
–
–
682.3
(715.8)
33.5
–
–
44.4
2.4
46.8
–
–
–
–
–
–
–
–
–
–
2.4
2.4
–
–
–
–
–
–
–
–
–
–
1.2
1.2
–
–
–
–
–
–
–
–
After initial recognition, mineral rights acquired in a business combination are carried at cost less any accumulated impairment losses.
The mineral rights relate to assets which have not commenced development and therefore mineral rights are not amortised but are
subject to impairment testing on an annual basis or wherever there is an indication of impairment.
(b) Goodwill
At cost
Impairment losses
Carrying amount
Opening carrying amount
Acquisitions through business combination
Disposals
Impairment of goodwill
Closing carrying amount
4
10
104.4
(104.4)
–
44.4
60.0
–
(104.4)
–
–
–
–
–
113.7
(69.3)
–
44.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
After initial recognition, goodwill acquired in a business combination is carried at cost less any accumulated impairment losses.
Goodwill is not amortised but is subject to impairment testing on an annual basis or wherever there is an indication of impairment.
(c) Computer software
At cost
Less: Accumulated amortisation
Carrying amount
Opening carrying amount
Acquisitions through business combination
Additions
Transfers to assets held for sale
5
Amortisation charge
Exchange rate differences
Closing carrying amount
11.4
(6.8)
4.6
2.4
2.2
2.9
(0.8)
(2.7)
0.6
4.6
4.8
(2.4)
2.4
2.7
0.3
0.9
–
(1.2)
(0.3)
2.4
5.8
(3.4)
2.4
1.2
–
1.9
–
(1.2)
0.5
2.4
2.7
(1.5)
1.2
2.3
–
0.1
–
(0.9)
(0.3)
1.2
Computer software includes capitalised development costs being an internally generated intangible asset.
84
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
20 Trade and other payables
Trade payables and accruals
Other payables
Total trade and other payables
21 Interest-bearing liabilities
Current
Bank loans
Lease liabilities – secured
Total current interest-bearing liabilities
Non–current
Bank loans
Convertible notes
Lease liabilities – secured
Total non-current interest-bearing liabilities
(a) Aggregate of current and non–current interest-bearing liabilities
Bank loans
Convertible notes
Lease liabilities (b)
Aggregated interest-bearing liabilities
(b) Finance lease liabilities
Commitments in relation to finance leases are payable as follows:
Within one year
Later than one year but not later than five years
Future finance charges
Recognised as a liability
157.2
7.5
164.7
988.8
16.3
1,005.1
–
137.4
7.3
144.7
988.8
137.4
23.6
1,149.8
18.3
9.1
27.4
(3.8)
23.6
138.6
2.6
141.2
154.2
0.2
154.4
162.3
104.1
–
266.4
316.5
104.1
0.2
420.8
0.2
0.1
0.3
(0.1)
0.2
4.8
5.3
10.1
202.4
4.9
207.3
–
137.4
0.6
138.0
202.4
137.4
5.5
345.3
5.5
–
5.5
–
5.5
14.6
2.4
17.0
–
–
–
–
104.1
–
104.1
–
104.1
–
104.1
–
–
–
–
–
Refer Note 29 for details of the consolidated entity’s financing arrangements and debt repayment schedule.
85
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
22 Provisions
Current
Employee benefits
Restructure (a)
Workers’ compensation
Mine rehabilitation, restoration and dismantling (b)
Total current provisions
Non–current
Employee benefits
Workers’ compensation
Mine rehabilitation, restoration and dismantling (b)
Other
Total non–current provisions
Aggregate
Employee benefits
Restructure (a)
Workers’ compensation
Mine rehabilitation, restoration and dismantling (b)
Other
Total provisions
(a) Restructure
Opening carrying amount
Additional provisions recognised
Closing carrying amount
(b) Mine rehabilitation, restoration and dismantling
Opening carrying amount
Acquisition through business combination
Additional provisions recognised
Reversal of provision against property, plant and equipment
Transfers to assets held for sale
Disposals
Unwind of discount
Exchange rate differences
Closing carrying amount
20.3
13.1
2.9
1.3
37.6
0.7
4.7
167.8
–
173.2
21.0
13.1
7.6
169.1
–
210.8
–
13.1
13.1
55.8
124.4
55.4
(11.7)
(74.1)
–
8.5
10.8
169.1
13.4
–
–
0.7
14.1
3.0
–
55.1
0.4
58.5
16.4
–
–
55.8
0.4
72.6
–
–
–
40.0
9.9
13.0
–
–
(7.4)
2.6
(2.3)
55.8
2.2
–
–
–
2.2
0.3
–
–
–
0.3
2.5
–
–
–
–
2.5
–
–
–
–
–
–
–
–
–
–
–
–
3.0
–
–
–
3.0
0.3
–
–
0.3
0.6
3.3
–
–
–
0.3
3.6
–
–
–
–
–
–
–
–
–
–
–
–
86
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
23 Issued capital
(a)
Issued and fully paid up ordinary shares:
3,121,339,800 (2007: 1,545,427,293)
5,107.1
1,056.7
5,107.1
1,056.7
The Company does not have authorised capital or par value in respect of its issued shares. Ordinary shares entitle the holder to
participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of
hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each holder
is entitled to one vote per share.
(b) Movements in ordinary share capital
Date
Details
01/01/2007
Opening balance
01/01/2007 to 31/12/2007
Exercise of share options and rights
01/01/2007 to 31/12/2007
Shares issued – dividend reinvestment plan
01/01/2007 to 31/12/2007
Shares issued – acquisition of Agincourt
Number of
Shares
1,384,777,602
3,426,328
12,458,835
144,764,528
A$m
608.5
5.5
40.8
401.9
31/12/2007
Closing balance
1,545,427,293
1,056.7
01/07/2008
Shares issued – acquisition of Zinifex
1,554,757,053
3,980.2
01/01/2008 to 31/12/2008
Exercise of share options and rights
01/01/2008 to 31/12/2008
Shares issued – dividend reinvestment plan
31/12/2008
Closing balance
(c) Capital risk management
1,092,768
20,062,686
7.6
62.6
3,121,339,800
5,107.1
The maintenance of the consolidated entity’s capital base is important for its ability to continue as a going concern in the interests of the
consolidated entity, its shareholders and other stakeholders. Monitoring the capital base is performed using cash flow analysis, the
budgeting process and monitoring the gearing ratio.
During the unforeseeable economic turmoil which emerged during the financial year, the consolidated entity has been unable to
maintain a sufficient capital base due to of the significant decline in the prices for its products, the significant decline in demand for the
consolidated entity’s products and the severe restrictions on the availability of credit. Refer to Note 1(c)(i) for further discussions.
The gearing ratio from continuing operations is determined as net debt divided by equity plus net debt. Net debt includes interest-
bearing liabilities, the debt portion of the convertible notes, less cash and cash equivalents. Equity includes issued capital, retained
earnings and reserves and excludes minority interest.
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Interest-bearing liabilities
Less cash and cash equivalents
Net debt position
21
13
Equity attributable to members of OZ Minerals Limited
Equity and net debt
Gearing ratio
1,149.8
(69.8)
1,080.0
3,182.1
4,262.1
25%
420.8
(246.1)
174.7
1,523.0
1,697.7
10%
345.3
(13.7)
331.6
3,211.0
3,542.6
9%
104.1
(59.1)
45.0
1,431.5
1,476.5
3%
87
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
24 Reserves and retained earnings
Reserves (a)
Retained earnings (b)
Minority interest (c)
Total reserves and retained earnings
(a) Reserves
Movements in foreign currency translation reserve:
Foreign currency translation reserve at beginning of year
Net exchange differences on translation to presentation currency
Foreign currency translation reserve at end of year
Movements in equity compensation reserve:
Equity compensation reserve at beginning of year
Exercise of share options and rights
Deferred tax adjustment
Share based payments expense during the year
Transfers from treasury shares reserve
Equity compensation reserve at end of year
Movements available-for-sale asset reserve:
Available-for-sale asset reserve at beginning of year
Change in fair value of available-for-sale assets, net of tax
Available-for-sale asset reserve at end of year
Movements in hedging reserve:
Hedging reserve at beginning of year
Establishment of minority interest
Fair value movements
Hedging reserve at end of year
Movements in treasury shares reserve:
Treasury shares reserve at beginning of year
Acquisition of shares
Transfers to equity compensation reserve
Treasury shares reserve at end of year
(b) Retained earnings
Movements in retained earnings:
Retained earnings at beginning of year
Net (loss)/profit after tax attributable to members of OZ Minerals
Limited
Dividends declared and paid
Acquisition of minority interest
Exercise of share options and rights
Retained earnings at end of year
88
227.0
(2,152.0)
47.9
(1,877.1)
(137.7)
362.6
224.9
38.0
(7.6)
(19.0)
12.3
(2.8)
20.9
8.9
(11.2)
(2.3)
(6.4)
–
4.2
(2.2)
(2.6)
(14.5)
2.8
(14.3)
(99.8)
566.1
42.3
508.6
1,603.5
(3,499.6)
–
(1,896.1)
(46.9)
(90.8)
(137.7)
(150.1)
1,747.0
1,596.9
10.4
(8.0)
26.4
9.2
–
38.0
2.2
6.7
8.9
2.6
(0.3)
(8.7)
(6.4)
–
(2.6)
–
(2.6)
38.0
(7.6)
(19.0)
12.3
(2.8)
20.9
2.3
(2.3)
–
–
–
–
–
(2.6)
(14.5)
2.8
(14.3)
(112.4)
487.2
–
374.8
(36.8)
(113.3)
(150.1)
10.4
(8.0)
26.4
9.2
–
38.0
1.7
0.6
2.3
–
–
–
–
–
(2.6)
–
(2.6)
566.1
427.9
487.2
232.1
(2,501.7)
(217.9)
–
1.5
(2,152.0)
305.8
(3,770.4)
(137.8)
(217.9)
(23.0)
(6.8)
566.1
–
1.5
(3,499.6)
398.4
(137.8)
–
(5.5)
487.2
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31
December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
24 Reserves and retained earnings (continued)
(c) Minority interest
Movements in minority interest:
Minority interest at beginning of year
Acquisition of shares
Disposal of controlled entity
Shares issued – controlled entity
Acquisition of minority interest
Net profit after tax attributable to minority interest
Dividend payments
Minority interest at end of year
42.3
–
–
–
–
16.8
(11.2)
47.9
–
101.6
(107.5)
6.5
40.2
12.4
(10.9)
42.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The minority interest has an interest in Lang Xang Minerals Limited which includes Sepon Copper and Sepon Gold, which constitute
operating segments as set out in Note 3.
(d) Nature and purpose of reserves
Foreign currency translation reserve
Exchange differences arising on the translation of foreign controlled entities liabilities that hedge the consolidated entity’s net
investment in a foreign subsidiary and of entities with a functional currency differing from the consolidated entity’s presentation
currency, are taken to the foreign currency translation reserve as described in accounting policy Note 1(g).
Equity compensation reserve
The equity compensation reserve is used to recognise the fair value of equity instruments granted to senior executives and other
employees under OZ Mineral’s long-term incentive plan, Oxiana long-term incentive plan and Zinifex Executive Share Plan. When
options or rights vest, the cost of shares bought back on-market are also recognised in the share-based payments reserve. When
options or rights are exercised or lapse, the related fair value amount is transferred to contributed equity.
Available-for-sale asset reserve
The available-for-sale asset reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until
the investment is derecognised or impaired.
Hedging reserve
The hedging reserve is used to record gains or losses on cash flow hedges that are recognised directly in equity, as described in
accounting policy Note 1(f). Amounts are recognised in the income statement when the associated hedged transaction affects the
income statement.
Treasury shares reserve
The treasury shares reserve for the Company’s own shares represents the cost of shares held to meet the consolidated entity’s
obligation to provide shares to employees in accordance with the terms of their employment contracts and employee share plans.
25 Total equity
Total equity at the beginning of the financial year
Total changes in retained earnings
Exercise of share options and rights
Shares issued – dividend reinvestment plan
Shares issued – acquisition of businesses – Note 4
Total changes in reserves – Note 24
Total changes in minority interest – Note 24
1,565.3
(2,718.1)
7.6
62.6
3,980.2
326.8
5.6
1,004.7
1,431.5
138.2
(3,986.8)
5.5
40.8
401.9
(68.1)
42.3
7.6
62.6
3,980.2
1,715.9
–
815.9
255.1
5.5
40.8
401.9
(87.7)
–
3,230.0
1,565.3
3,211.0
1,431.5
89
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
26 Earnings and net tangible assets per share
(a) Basic earnings per share
From continuing operations – cents
From discontinued operations – cents
(b) Diluted earnings per share
From continuing operations – cents
From discontinued operations – cents
(c) Reconciliation of earnings used in calculating basic and diluted earnings per share
Net (loss)/earnings used in basic earnings per share for continuing operations – A$ million
Net (loss)/earnings used in basic earnings per share for discontinued operations – A$ million
Consolidated
2008
Consolidated
2007
(63.0)
(41.6)
(104.6)
(63.0)
(41.6)
(104.6)
(1,507.3)
(994.4)
(2,501.7)
15.1
5.1
20.2
13.7
5.1
18.8
228.0
77.8
305.8
Weighted average number of ordinary shares on issue used in the calculation of basic earnings per
share – number
2,393,451,971
1,510,859,127
Convertible notes
Options and rights
–
–
109,717,868
32,829,399
Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per
share – number
2,393,451,971
1,653,406,394
The convertible notes as set out in Note 21 and the share options and performance rights as set out in Note 33 that existed at 31
December 2008 were not included in the calculation of diluted earnings per share because they were antidilutive.
(d) Net tangible assets per share (i)
Net tangible assets per share – cents
103.3
98.3
Number of ordinary shares on issue used in the calculation of net tangible assets per share – number
3,121,339,800
1,545,427,293
(i) In accordance with Chapter 19 of the ASX listing rules, net tangible assets per share represent total assets less intangible assets
less liabilities ranking ahead of, or equally with, ordinary share capital, divided by number of ordinary shares on issue at year-
end.
90
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for
the year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
27 Reconciliation of (loss)/profit after income tax to net cash flows from operating activities
(Loss)/profit for the year
Depreciation and amortisation
Non-cash borrowing costs
Non-cash foreign exchange (gains)/losses
Impairment losses
Other non-cash items
(Gain)/loss on disposal of property, plant and equipment
Dividends classified as investing activity
Share of net loss of associates
Equity settled share based payment transactions
Change in assets and liabilities:
Trade and other receivables
Prepayments
Inventories
Trade and other payables
Current tax assets
Deferred tax assets
Current tax liabilities
Deferred tax liabilities
Net cash (outflow)/inflow from operating activities
(2,484.9)
317.6
8.9
(132.8)
2,466.0
5.7
0.4
–
5.5
13.8
89.9
(13.8)
(223.1)
(75.9)
(46.5)
30.3
13.5
(73.2)
(98.6)
318.2
114.7
3.9
27.5
–
10.0
2.1
–
1.9
22.8
(62.3)
(1.4)
(16.7)
12.3
14.6
7.8
–
11.3
466.7
(3,770.4)
398.4
2.7
–
(26.3)
3,857.9
(4.7)
–
1.8
2.0
(68.7)
–
(20.8)
–
(110.6)
(107.6)
–
13.8
34.4
(0.8)
–
(6.9)
–
(32.5)
(29.1)
–
–
24.2
(292.8)
(0.9)
–
(1.5)
(24.9)
(26.7)
–
(2.9)
(72.5)
(120.4)
28 Non-cash investing and financing activities
Acquisition of subsidiary by issue of shares 4
3,980.2
401.9
3,980.2
401.9
Refer Note 29 for details of the consolidated entity’s financing arrangements.
29 Financial risk management
The consolidated entity’s activities expose it to a variety of financial risks such as:
• Market risk consisting of commodity price risk, foreign currency exchange risk, interest rate risk and equity securities price risk
(refer Note 29(a) below);
•
•
Credit risk (refer Note 29(b) below); and
Liquidity risk (refer Note 29(c) below).
This note presents information about the consolidated entity’s exposure to each of the above financial instrument risks, its objectives,
policies and processes for measuring and managing risk and quantitative disclosures.
The economic environment in the second half of 2008 of volatile and low commodity prices and exchange rates and tight credit
markets posed significant challenges to the consolidated entity. Accordingly, the consolidated entity reassessed its processes for
managing financial risk.
91
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the
year ended 31 December 2008
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
29 Financial risk management (continued)
Financial risk management is carried out by the consolidated entity’s Group Treasury Function under policies approved by the Board
of Directors. Group Treasury identifies, evaluates and manages financial risks in close co-operation with the consolidated entity’s
operating units. The Board approves written principles for overall risk management, as well as policies covering specific areas, such as
those identified above.
The consolidated entity and the parent entity hold the following financial instruments at the reporting date from continuing
operations:
Financial assets
Cash and cash equivalents
Trade receivables
Investments accounted for using the equity method
Available-for-sale financial assets
Other investments held by the parent company
Financial liabilities
Trade payables
Interest-bearing liabilities
Interest rate swaps
(a) Market risk management
13
14
16
17
17
20
21
69.8
26.8
28.7
17.6
–
142.9
157.2
1,149.8
–
1,307.0
246.1
49.9
148.3
38.5
–
482.8
138.6
420.8
6.1
565.5
13.7
59.1
–
–
3.5
4.7
21.9
4.8
345.3
–
350.1
–
–
13.1
9.0
81.2
14.6
104.1
–
118.7
The consolidated entity’s activities expose it primarily to financial risks of changes in commodity prices, foreign currency exchange
rates, interest rates and equity securities prices.
(i) Commodity price risk management
The consolidated entity is exposed to commodity price volatility on commodity sales made by the mines. This arises from sale of
metal and metal in concentrate products such as zinc, copper, lead, gold and silver, which are priced on, or benchmarked to, open
market exchanges.
In accordance with the requirements of the Australian Accounting Standards, the sensitivity analysis provided below discloses the
consolidated entity’s exposure to the risk on the outstanding balance of financial assets and liabilities at the reporting date.
Commodity price sensitivity analysis
The following table details the consolidated entity’s sensitivity to movement in commodity prices. At reporting date, if the commodity
prices increased/(decreased) by the historical average 5-year annual commodity price movement as per the London Metals Exchange
(“LME”), and all other variables were held constant, the consolidated entity’s after tax profit/(loss) and equity would have
increased/(decreased) as set out below.
In accordance with Australian Accounting Standards, the sensitivity analysis includes the impact of the movement in commodity
prices only on the outstanding trade receivables at the end of the period, which were A$26.8 million (2007: A$49.9 million) and does
not include the impact of the movement in commodity prices on the total sales for the period. The outstanding trade receivables by
commodity at the reporting date are set out in Note 29(b).
Commodity
2008
2007
Average 5-year annual
commodity price
movement as per LME
Increase
profit A$m
Decrease
profit A$m
Average 5-year annual
commodity price
movement as per LME
Increase
profit A$m
Decrease
profit A$m
Zinc
Copper
Lead
Gold
Silver
Total
21%
13%
15%
18%
16%
0.6
1.0
–
1.5
–
3.1
(0.6)
(1.0)
–
(1.5)
–
(3.1)
23%
31%
36%
19%
25%
0.3
3.6
0.5
1.1
0.3
5.8
(0.3)
(3.6)
(0.5)
(1.1)
(0.3)
(5.8)
92
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(a) Market risk management (continued)
(ii)
Foreign currency exchange risk management
The consolidated entity operates internationally and is exposed to foreign currency exchange risk.
The carrying amount of the consolidated entity’s financial assets and financial liabilities by its denominated currency (presented in
Australian dollars) at the reporting date is presented below. The predominant functional currencies employed by the entities within
the Group are US dollars and Australian dollars. The consolidated entity’s foreign currency exchange risk arises predominantly from
US dollars for Australian dollar functional currency entities and Australian dollars for US dollar functional currency entities.
Consolidated
31 December 2008
Financial assets
Cash and cash equivalents
Trade receivables
Investments accounted for using the equity method
Available-for-sale financial assets
Financial liabilities
Trade payables
Interest-bearing liabilities
Interest-rate swaps
Total
31 December 2007
Financial assets
Cash and cash equivalents
Trade receivables
Investments accounted for using the equity method
Available-for-sale financial assets
Financial liabilities
Trade payables
Interest-bearing liabilities
Interest rate swaps
Total
Company
31 December 2008
Financial assets
Cash and cash equivalents
Available-for-sale financial assets
Other investments held by the parent company
Financial liabilities
Trade payables
Interest-bearing liabilities
Total
31 December 2007
Financial assets
Cash and cash equivalents
Available-for-sale financial assets
Other investments held by the parent company
Financial liabilities
Trade payables
Interest-bearing liabilities
Total
Notes Denominated in
AUD
Denominated in
USD
Denominated in
Other
Total A$m
13
14
16
17
20
21
13
14
16
17
20
21
13
17
17
20
21
13
17
17
20
21
26.8
11.9
28.7
17.6
(86.8)
(110.6)
–
(112.4)
40.2
0.7
148.3
30.0
(102.3)
–
–
116.9
13.2
3.5
4.7
(4.8)
(5.5)
11.1
20.0
13.1
9.0
(14.6)
–
27.5
93
41.2
14.9
–
–
(63.1)
(1,039.2)
–
(1,046.2)
205.4
49.2
–
–
(28.7)
(420.8)
(6.1)
(201.0)
0.5
–
–
–
(339.8)
(339.3)
39.1
–
–
–
(104.1)
(65.0)
1.8
–
–
–
(7.3)
–
–
69.8
26.8
28.7
17.6
(157.2)
(1,149.8)
–
(5.5)
(1,164.1)
0.5
–
–
8.5
(7.6)
–
–
1.4
–
–
–
–
–
–
–
–
–
–
–
–
246.1
49.9
148.3
38.5
(138.6)
(420.8)
(6.1)
(82.7)
13.7
3.5
4.7
(4.8)
(345.3)
(328.2)
59.1
13.1
9.0
(14.6)
(104.1)
(37.5)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(a) Market risk management (continued)
(ii) Foreign currency exchange risk management (continued)
The predominant functional currencies employed by the entities within the Group are US dollars and Australian dollars. The
consolidated entity’s foreign currency exchange risk arises predominantly from US dollars for Australian dollar functional currency
entities and Australian dollars for US dollar functional currency entities. The following US dollar exchange rates were applied during
the year:
AUD:USD
Foreign currency sensitivity analysis
Average rate
31 December spot rate
2008
2007
2008
2007
0.8354
0.8391
0.6914
0.8767
The sensitivity analysis includes only outstanding foreign currency denominated monetary items at the reporting date and adjusts
their translation for a 10 per cent change in the foreign currency rate (2007: 12.4 per cent). This percentage change reflects the
historical average annual movements in the foreign currency exchange rates over the last 5 years based on the year-end spot rates.
At reporting date, if the foreign currency exchange rates strengthened/(weakened) against the functional currency by 10 per cent
(2007: 12.4 per cent), and all other variables were held constant, the consolidated entity’s after tax profit/(loss) would have
increased/(decreased) by $0.4 million (2007: A$1.7 million) and equity would have increased/(decreased) by approximately nil (2007:
A$1.7 million). The Company’s after tax profit/(loss) would have increased/(decreased) by $1.1 million (2007: A$1.7 million) and equity
would have increased/(decreased) by approximately nil (2007: A$0.2 million).
(iii)
Interest rate risk management
The consolidated entity is exposed to interest rate volatility on deposits, borrowings and interest-rate swaps. Deposits and
borrowings at variable rates expose the consolidated entity to cash flow interest rate risk. Deposits and borrowings at fixed rates
expose the consolidated entity to fair value interest rate risk. Any decision to hedge interest rate risk will be assessed at the inception
of each floating rate debt facility in light of the overall consolidated entity’s exposure, the prevailing interest rate market and any
funding counterparty requirements.
Consolidated
Notes
Effective
average interest
rate %
6 months
or less
A$m
6 to 12
months
A$m
1 to 2
years
A$m
2 to 5
years
A$m
More than
5 years
A$m
Total
A$m
31 December 2008
Financial assets
Cash at bank
Short-term deposits
Financial liabilities
Bank loans
Convertible notes
Lease liabilities
Other financial liabilities
31 December 2007
Financial assets
Cash at bank
Short-term deposits
Financial liabilities
Bank loans
Convertible notes
Lease liabilities
Other financial liabilities
13
21
13
21
–
–
–
–
–
(8.2)
–
(8.2)
(8.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.0)
–
(2.0)
(2.0)
–
–
–
–
–
(0.2)
–
(0.2)
(0.2)
–
–
–
–
(137.4)
(5.3)
–
(142.7)
(142.7)
–
–
–
–
(104.1)
–
(191.3)
(295.4)
(295.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38.3
31.5
69.8
(988.8)
(137.4)
(23.6)
–
(1,149.8)
(1,080.0)
57.6
188.5
246.1
(316.5)
(104.1)
(0.2)
–
(420.8)
(174.7)
3.96
5.77
4.67
5.25
6.45
–
5.42
5.42
7.37
5.25
–
4.83
38.3
31.5
69.8
(988.8)
–
(8.1)
–
(996.9)
(927.1)
57.6
188.5
246.1
(316.5)
–
–
191.3
(125.2)
120.9
94
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(a)
Market risk management (continued)
(iii) Interest rate risk management (continued)
Company
Notes
Effective
average
interest rate
%
6 months
or less
A$m
6 to 12
months
A$m
1 to 2
years
A$m
2 to 5
years
A$m
More
than 5
years
A$m
Total
A$m
31 December 2008
Financial assets
Cash at bank
Short-term deposits
Financial liabilities
Bank loans
Convertible notes
Lease liabilities
Net interest-bearing financial
assets and liabilities
31 December 2007
Financial assets
Cash at bank
Short-term deposits
Financial liabilities
Bank loans
Convertible notes
Lease liabilities
Net interest-bearing financial
assets and liabilities
Interest rate swaps
13
21
13
21
3.96
5.77
4.32
5.25
6.45
5.53
5.53
–
5.25
–
4.2
9.5
13.7
(202.4)
–
(4.9)
(207.3)
(193.6)
24.9
34.2
59.1
–
–
–
–
59.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(137.4)
–
(137.4)
(0.6)
(0.6)
(0.6)
(137.4)
–
–
–
–
–
–
–
–
–
–
–
–
(104.1)
–
(104.1)
(104.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.2
9.5
13.7
(202.4)
(137.4)
(5.5)
(345.3)
(331.6)
24.9
34.2
59.1
–
(104.1)
–
(104.1)
(45.0)
The consolidated entity has amortising interest rate swaps in place to swap a portion of floating rate debt to fixed rate. The details of
the swaps are set out below:
Terms
Maturity
Fixed rate %
Notional 2008
Amortising swaps (receive floating and pay fixed), semi-annual interest
31 December 2010
Amortising swaps (receive floating and pay fixed), semi-annual interest
31 December 2012
4.20
5.50
Total
A$m
38.9
110.0
148.9
95
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(a) Market risk management (continued)
(iii) Interest rate risk management (continued)
Interest rate sensitivity analysis
The following table details the consolidated entity’s sensitivity to movement in the interest rates. The sensitivity analysis has been
determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of
the financial year and held constant throughout the reporting period.
At reporting date, if the interest rate increased/(decreased) by 100 basis points, and all other variables were held constant, the
consolidated entity’s after tax profit/(loss) and equity would have increased/(decreased) as follows:
2008
2007
+100 bps
-100 bps
+100 bps
-100 bps
Profit
A$m
Equity
A$m
Profit
A$m
Equity
A$m
Profit
A$m
Equity
A$m
Profit
A$m
Equity
A$m
0.5
(6.9)
–
(6.4)
–
–
–
–
(0.5)
6.9
–
6.4
–
–
–
–
2.5
(4.2)
–
(1.7)
–
–
(2.7)
(2.7)
(2.5)
–
4.2
–
1.7
–
2.7
2.7
Financial assets
Cash and cash equivalents
Financial liabilities
Bank loans
Interest rate swaps
Total
At reporting date, if the interest rate increased/(decreased) by 100 basis points, and all other variables were held constant, the
Company’s after tax profit/(loss) and equity would have (decreased)/increased by A$1.4 million (2007: A$1.0 million).
(iv) Equity securities price risk management
The consolidated entity is exposed to equity securities price risk which arises from investments held and classified on the balance
sheet either as available-for-sale or investments accounted for using the equity method, as set out in the table below:
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Financial assets
Investments accounted for using the equity method
Available-for-sale financial assets
Other investments held by the parent company
16
17
17
Total
28.7
17.6
–
46.3
148.3
38.5
–
186.8
–
3.5
4.7
8.2
–
13.1
9.0
22.1
The consolidated entity’s investments accounted for using the equity method relates to the investment in Toro. Refer to Note 16. This
investment is publicly traded on the Australian Securities Exchange.
The consolidated entity’s available-for-sale financial assets relates to investments in publicly listed entities. The consolidated entity
does not actively trade these investments.
The other investments held by the parent company are not considered significant.
Equity securities sensitivity analysis
The carrying value of the investment in Toro equals its fair value at 31 December 2008.
The carrying value of the available-for-sale financial assets equals its fair value at 31 December 2008. None of the investments in the
available-for-sale financial assets category are individually significant to warrant a sensitivity analysis.
96
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(b) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated
entity. The consolidated entity is exposed to counterparty credit risk through sales of metal products on normal terms of trade,
through deposits of cash, derivative mark-to-market gains and settlement risk on foreign exchange transactions.
At the reporting date, the carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure
which was as follows:
Cash and cash equivalents
Trade receivables
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
13
14
69.8
26.8
96.6
246.1
49.9
296.0
13.7
–
13.7
59.1
–
59.1
The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies and the amount of funds that can be invested with a single counterparty is limited in accordance
with the Credit Risk Management Policy. The consolidated entity had A$11.5 million (2007: nil) cash and cash equivalents not
available for use at 31 December 2008.
Credit risk in trade receivables is managed by the consolidated entity by undertaking a regular risk assessment process with credit
limits imposed on customers. As there are a relatively small number of transactions, transactions are monitored to ensure payments
are made on time.
The consolidated entity’s most significant customer, Nyrstar, accounts for A$8.7 million of the trade receivables carrying amount at 31
December 2008 (2007: nil). The revenue earned from Nyrstar by the consolidated entity from continuing operations was
approximately 24 per cent (2007: nil) of consolidated revenue as at the reporting date.
Credit risk arising from sales to Nyrstar and other large customers are managed by contracts that stipulate a provisional payment of
at least 90 per cent of the estimated value of each sale. This is payable either promptly after vessel loading or upon vessel arriving at
the discharge port. Title to the concentrate does not pass to the buyer until this provisional payment is made. The balance
outstanding is received within 60 days of the vessel arriving at the port of discharge. Sales to the remaining customers are
predominantly covered by a letter of credit with approved financial institutions.
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Australia
Europe
Asia
USA
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
Zinc
Copper
Lead
Gold
Silver
2008
A$m
2007
A$m
10.2
10.4
3.9
2.3
26.8
17.6
11.0
13.4
7.9
49.9
2008
A$m
2007
A$m
4.4
10.5
–
11.9
–
26.8
18.9
0.5
19.7
8.8
2.0
49.9
The consolidated entity does not have any significant receivables which are past due at the reporting date. Total impairment losses
for the consolidated entity at the reporting period were A$3.3 million (2007: nil) and are not considered significant for further credit
risk management disclosure.
97
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(c) Liquidity risk management
Liquidity risk is the risk that the consolidated entity will encounter difficulty in meeting obligations associated with financial liabilities.
The information provided below summarises the consolidated entity’s position at 31 December 2008. Notes 1(c)(i) and 37 to the
financial statements sets out details regarding the consolidated entity’s financing arrangements at the date of this report.
The following are the contractual maturities of the consolidated entity’s financial liabilities as at 31 December 2008. The contractual
cash flows reflect the undiscounted amounts and includes both interest and principal cash flows based on the terms of the financing
arrangements that existed at 31 December 2008 and does not incorporate amendments to financing arrangements made subsequent
to year-end which are summarised in Notes 1(c)(i) and 37.
Notes
Balance Sheet
carrying
amount A$m
Contractual principal and interest cash flows
6 months
or less
A$m
6 to 12
months
A$m
1 to 2
years
A$m
2 to 5
years
A$m
More than
5 years
A$m
Total
A$m
Consolidated
31 December 2008
Bank loans
Convertible notes
Lease liabilities
Trade payables
31 December 2007
Bank loans
Convertible notes
Lease liabilities
Trade payables
Company
31 December 2008
Bank loans
Convertible notes
Lease liabilities
Trade payables
31 December 2007
Bank loans
Convertible notes
Lease liabilities
Trade payables
21
21
21
20
21
21
21
20
21
21
21
20
21
21
21
20
988.8
137.4
23.6
157.2
1,307.0
316.5
104.1
0.2
138.6
559.4
202.4
137.4
5.5
4.8
1,003.0
4.0
9.2
157.2
1,173.4
25.5
3.1
0.1
138.6
167.3
202.4
4.0
4.9
4.8
350.1
216.1
–
104.1
–
14.6
118.7
–
3.1
–
14.6
17.7
–
4.0
9.2
–
–
8.0
3.4
–
–
161.3
5.7
–
13.2
11.4
167.0
47.8
3.1
0.1
–
216.4
6.3
–
–
94.9
135.5
–
–
51.0
222.7
230.4
–
4.0
–
–
4.0
–
3.1
–
–
3.1
–
8.0
0.6
–
8.6
–
6.3
–
–
6.3
–
161.3
–
–
161.3
–
135.5
–
–
135.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,003.0
177.3
27.5
157.2
1,365.0
384.6
148.0
0.2
138.6
671.4
202.4
177.3
5.5
4.8
390.0
–
148.0
–
14.6
162.6
The consolidated entity’s liquidity risk has the following financing arrangements in place at reporting date:
Notes
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Bank loan facilities – available
Bank loan facilities – unused
Bank loan facilities – used
Convertible note facilities – available
Convertible note facilities – unused
Convertible note facilities – used
Lease facilities – available
Lease facilities – unused
Lease facilities – used
988.8
–
988.8
137.4
–
137.4
23.6
–
23.6
568.3
(251.8)
316.5
104.1
–
104.1
0.2
–
0.2
202.4
–
202.4
137.4
–
137.4
5.5
–
5.5
–
–
–
104.1
–
104.1
–
–
–
21
21
21
98
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
The consolidated entity’s debt repayment schedule and terms for the facilities held at 31 December 2008 are set out below:
Facility
Currency
Nominal
interest rate
Year of
maturity
2008 A$m
2007 A$m
Carrying
amount
Fair value
Carrying
amount
Fair value
Consolidated
Facility A
Facility B
Facility C
Facility D
Convertible notes
Finance lease liabilities
Company
Secured bank loan
Convertible notes
Finance lease liabilities
USD
USD
AUD
USD
USD
AUD
USD
USD
AUD
LIBOR + 5.00%
LIBOR + 5.00%
BBSY + 3.50%
LIBOR + 2.50%
5.25%
6.45%
LIBOR + 5.00%
5.25%
6.45%
2009
2009
2009
2009
2012
2009
2009
2012
2009
607.5
202.4
85.8
93.1
137.4
23.6
607.5
202.4
85.8
93.1
177.3
23.6
1,149.8
1,189.7
202.4
137.4
5.5
345.3
202.4
177.3
5.5
385.2
218.1
218.1
–
–
98.4
104.1
0.2
420.8
–
104.1
–
104.1
–
–
102.2
119.8
0.2
440.3
–
119.8
–
119.8
Facility A, which had a carrying amount of A$607.5 million at 31 December 2008, is fully drawn and due to be refinanced by 27
February 2009. Facility A is provided by a syndicate of banks comprising ANZ Banking Group, Bank of Scotland International, BNP
Paribas, Commonwealth Bank of Australia, Bayerische Hypo-und Vereinsbank AG (Singapore Branch), National Australia Bank and the
Royal Bank of Scotland. The facility is secured on all the property, plant and equipment of Prominent Hill of A$1,460.6 million and
Golden Grove of A$226.9 million.
Facility B, which has a carrying amount of A$202.4 million at 31 December 2008, is fully drawn and due to be refinanced by 27
February 2009. Facility B is provided by a syndicate of two lenders comprising ANZ Banking Group and The Royal Bank of Scotland.
The facility is secured on all the property, plant and equipment of Prominent Hill of A$1,460.6 million and Golden Grove of A$226.9
million.
Facility C, which has a carrying amount of A$85.8 million at 31 December 2008, is fully drawn and due to be refinanced by 27
February 2009. The facility is provided by Societe Generale.
The consolidated entity has been successful in obtaining from the lenders for Facilities A, B and C, approval to extend the termination
date of these facilities from 27 February 2009 to 31 March 2009. The approvals are subject to completion of documentation to give
effect to the extension.
Facility D, which has a carrying amount of A$93.1 million at 31 December 2008, is a project finance facility in respect of the
consolidated entity's operations in Laos. It is an amortising loan and is fully drawn. Facility D matures in June 2011 and is provided by
a syndicate of banks comprising ANZ Banking Group, BNP Paribas, Banque Pour Le Commerce Exterieur Lao, Commonwealth Bank of
Australia, Macquarie Bank and Investec. The facility is secured on all the property, plant and equipment of Lane Xang Minerals Limited
of A$793.8 million. The consolidated entity has classified all of the debt payable under Facility D as a current liability, notwithstanding
that the repayment schedule states that the amount of A$55.1 million is due and payable after 31 December 2009. This classification
has been adopted because of the potential implications of the interrelationship between Facility D and the consolidated entity's other
borrowing facilities.
The convertible notes had a carrying amount of A$137.4 million at 31 December 2008 and were issued in April 2005 (due in 2012), at
an interest rate of 5.25 per cent. The convertible notes had a conversion price of US$0.9180 or A$1.0893 and are subject to
adjustment under certain events such as the declaration of a dividend. Holders of the consolidated entity’s convertible notes have the
option to convert the US$105 million notes into ordinary shares of the consolidated entity until 9 April 2012, while the consolidated
entity has the right to redeem the convertible notes from 29 April 2009. Unless previously redeemed, converted or purchased and
cancelled, the convertible notes will be redeemed at their principal amount on 15 April 2012. Note holders may require the issuer to
redeem their notes on 14 April 2010 at their principal amount, together with interest accrued to the date fixed for redemption.
99
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
29 Financial risk management (continued)
(d) Fair values
The carrying amount of all financial assets and liabilities recognised on the balance sheet approximates their fair value, except for the
following:
Consolidated
Convertible notes
Company
Convertible notes
30 Commitments for expenditure
(a) Capital and non-capital commitments
Carrying amount
Fair value
2008 A$m
2007 A$m
2008 A$m
2007 A$m
137.4
104.1
177.3
119.8
137.4
104.1
177.3
119.8
Commitments by continuing and discontinued operations for acquisition of capital and non-capital commitments contracted for at
the reporting date but not recognised as liabilities, payable are set out in the table below. The total commitments of A$544.6 million
is made up of:
•
•
Commitments for continuing operations and discontinued operations of A$351.0 million and A$193.6 million respectively; and
Commitments for capital commitments and non-capital commitments of A$246.8 million and A$297.8 million respectively.
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
288.0
177.4
79.2
544.6
287.4
12.9
–
300.3
–
–
–
–
–
–
–
–
(b) Operating lease commitments
Commitments by continuing operations in relation to operating leases contracted for at the reporting date but not recognised as
liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
2.1
15.7
16.0
33.8
5.7
14.5
6.5
26.7
2.1
15.7
16.0
33.8
1.1
5.3
–
6.4
31 Contingent liabilities
On 9 December 2008, IMF Australia Ltd (‘IMF’) announced that it proposed to fund claims that certain current and former
shareholders may have against the consolidated entity, relating to alleged misleading and deceptive conduct and alleged breaches
by OZ Minerals Limited of its continuous disclosure obligations between 28 February 2008 and 3 December 2008. IMF has stated its
funding of the claim is subject to a sufficient level of shareholder participation. In the absence of any detailed legal claim being
provided to the consolidated entity or filed in Court, it is not possible for the consolidated entity to provide a reliable estimate of its
potential exposure, if any. IMF has released a statement to the ASX stating that the value of its claim could be up to a maximum of
A$50 million. The basis for this statement is unclear. Slater & Gordon has posted a statement on its website indicating that it is
investigating the commercial viability of a class action against the consolidated entity on behalf of shareholders, which overlaps the
same time period suggested by IMF. No value is ascribed to the possible claim suggested. Management has assessed that the claim
does not meet the criteria for recognition of a provision as there is no present legal or constructive obligation, it is unlikely that there
will be an outflow of benefits and the amounts cannot be estimated reliably.
100
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
31 Contingent liabilities (continued)
The consolidated entity received claims for cost increases incurred by unrelated parties performing various supply and construction
contracts relating to the construction of the Prominent Hill mine. These claims are being investigated. While the liability is not being
admitted, should these claims be upheld, a liability estimated at A$21.5 million (2007: A$14.7 million) would arise. Management has
assessed that the claim does not meet the criteria for recognition of a provision as there is no present legal or constructive
obligation, it is unlikely that there will be an outflow of benefits and the amounts cannot be estimated reliably.
OZ Minerals Limited and its controlled entities are defendants from time to time in legal proceedings, in addition to those set out
above, arising from the conduct of their business. The consolidated entity does not consider that the outcome of any of these
proceedings ongoing at balance date, either individually or in aggregate, is likely to have a material effect on its financial position.
Where appropriate, provisions have been made.
Certain bank guarantees have been provided in connection with the operations of the controlled entities of OZ Minerals Limited,
primarily associated with the terms of mining leases in respect of which OZ Minerals Limited is obliged to indemnify the banks. At
the end of the financial year, no claims have been made under these guarantees. The amount of these guarantees may vary from
time to time depending upon the requirements of the relevant regulatory authority. These guarantees amount to A$119.5 million
(2007: A$16.1 million). Provision is made in the financial statements for the anticipated costs of the mine rehabilitation obligations
under the mining leases (refer Note 22).
The Company has entered into Deeds of Indemnity with each of its Non-Executive Directors, members of the Executive Committee,
the Company Secretary, the Treasurer and certain other consolidated entity employees who act as Directors of Group companies,
indemnifying them against any liability incurred in discharging their duties as Directors or officers of the consolidated entity. The
deeds also extend to any liability incurred in relation to the initial offering of shares in Zinifex Limited by Pasminco Holdings Limited
to the Australian public and offshore institutions and, in the case of the Executive Committee, the Company Secretary and certain
other OZ Minerals Limited Group employees who act as Directors of OZ Minerals Limited Group Companies, also indemnify them in
relation to any liabilities incurred by them as former employees of Pasminco Limited Group.
The consolidated entity has agreed to indemnify certain third parties in relation to certain claims that may be made against them or
loss suffered by them in connection with the Zinifex initial public offering in April 2004. At the end of the financial period, no claims
have been made under any such indemnities and, accordingly, it is not possible to quantify the potential financial obligation of the
Company or the consolidated entity under these indemnities.
32 Key management personnel
(a) Key management personnel remuneration
The key management personnel remuneration for the consolidated entity and Company were as follows:
Short-term employee benefits
Other long-term benefits
Post-employment benefits
Termination benefits
Share-based payments
Total
2008
A$
2007
A$
7,015,408
5,998,582
782,969
342,103
11,508,988
–
356,332
–
1,884,687
3,753,975
21,534,155
10,108,889
Information regarding individual directors’ and executives’ compensation and some equity instrument disclosures as required by
Corporations Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report. Apart from the details
disclosed in Note 34, no Director has entered into a material contract with the consolidated entity since the end of the previous
financial year and there were no material contracts involving directors’ interests existing at year-end.
101
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel
(i)
Shareholdings
The movements in the number of shareholdings of each Key Management Personnel (“KMP”) of the consolidated entity during the
period are detailed in the table below:
2008
Directors
Andrew Michelmore
Anthony Larkin
Barry Cusack
Brian Jamieson
Dean Pritchard
Michael Eager
Owen Hegarty (c)
Peter Mansell
Peter Cassidy
Richard Knight
Ronald Beevor
Current senior executives
Antony Manini
Brett Fletcher
David Lamont
John Nitschke
Peter Lester
Former senior executives
Jeffrey Sells
Peter Albert
David Forsyth
Russell Griffin
Stephen Mullen
Total
Balance at 1-Jan-08
or date of becoming
KMP (a)
Shares received on
exercise of options,
performance rights
Other changes during
the year
Balance at 31-Dec-08
or date of ceasing to
be KMP (b)
50,250
8,494
1,930,337
1,068,256
–
2,115,699
27,021,224
–
734,375
–
3,238,436
5,678,491
374,562
–
2,154
1,045,204
12,500
2,646,541
3,770,000
11,325
–
49,707,848
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
235,545
127,085
93,776
17,011
127,191
–
285,795
135,579
2,024,113
1,085,267
127,191
2,115,699
(9,750,000)
17,271,224
259,838
126,777
402,866
50,622
(169,456)
–
–
104
26
2,443
52,893
(70,000)
149
–
259,838
861,152
402,866
3,289,058
5,509,035
374,562
–
2,258
1,045,230
14,943
2,699,434
3,700,000
11,474
–
(8,493,130)
41,214,718
(a) The balance of shareholdings for Andrew Michelmore, Peter Cassidy and Brett Fletcher was at 20 June 2008, which was the date
these Directors and Executives became key management personnel of the Company.
(b) The balance of shareholdings for the former senior executives was at 20 June 2008, which was the date when these employees
ceased being regarded as key management personnel of the Company, except for Jeffrey Sells and Peter Albert which are at 9
September 2008 and 10 December 2008 respectively, being the dates these Executives ceased employment with the
consolidated entity.
(c) Owen Hegarty was Managing Director and Chief Executive Officer of the Company until 20 June 2008 and a Non-Executive
Director of the Company until 19 December 2008.
102
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
(i) Shareholdings (continued)
2007
Balance at 1-Jan-07
or date of becoming
KMP
Shares received on
exercise of options,
performance rights
Other changes during
the year
Balance at 31-Dec-07
or date of ceasing to
be KMP
Directors
Barry Cusack
Brian Jamieson
Michael Eager
Owen Hegarty
Peter Cassidy (a)
Ronald Beevor
Current senior executives
Antony Manini
John Nitschke
Peter Lester
Former senior executives
Jeffrey Sells
Peter Albert
David Forsyth
Russell Griffin
Stephen Mullen
Total
2,027,683
40,000
2,115,699
27,021,224
984,375
3,210,229
4,659,102
4,000
1,385,150
12,500
2,384,375
3,495,000
69,176
–
–
1,000,000
–
–
–
–
1,000,000
–
–
–
500,000
400,000
–
–
(97,346)
28,256
–
–
(250,000)
28,207
19,389
(1,846)
(339,946)
–
(237,834)
(125,000)
(57,851)
–
1,930,337
1,068,256
2,115,699
27,021,224
734,375
3,238,436
5,678,491
2,154
1,045,204
12,500
2,646,541
3,770,000
11,325
–
47,408,513
2,900,000
(1,033,971)
49,274,542
(a) The balance of shareholdings for Peter Cassidy was at 27 November 2007, which was the dated that Peter Cassidy ceased being
a Director of the Company.
103
Vested and
exercisable
at 31-Dec or
date ceasing
to be KMP
(b)
–
–
5,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
(ii) Options holdings
The movement in the number of options held by to the Managing Director and Chief Executive Officer and other key management
personnel of the consolidated entity during the period are set out below:
Balance at
1-Jan
Granted
during the
year
Exercised
during the
year (a)
Lapsed
during the
year
Balance at
31–Dec or
date ceasing
to be KMP
Vested
during the
year (a)
31 December 2008
Directors
Andrew Michelmore
Brian Jamieson
–
–
2,980,392
–
Owen Hegarty
8,000,000
2,000,000
Current senior
executives
Antony Manini
1,150,000
–
–
2,150,000
1,150,000
403,863
533,333
541,176
545,040
403,863
Brett Fletcher
David Lamont
John Nitschke
Peter Lester
Former senior
executives
Jeffrey Sells
Peter Albert
David Forsyth
Russell Griffin
–
–
–
–
–
–
–
–
–
–
2,980,392
–
(5,000,000)
5,000,000
1,553,863
533,333
541,176
2,695,040
1,553,863
–
–
–
–
–
–
–
–
–
–
2,150,000
170,530
(320,530)
1,150,000
466,608
(616,608)
750,000
300,000
170,530
(620,530)
142,110
–
2,000,000
(320,530)
2,000,000
1,000,000
(616,608)
1,000,000
300,000
(320,530)
300,000
442,110
–
–
2,000,000
(292,110)
2,000,000
Stephen Mullen
2,150,000
142,110
(292,110)
Total
18,950,000
8,499,555
(1,849,778)
(5,000,000)
20,599,777
(1,549,778)
10,300,000
(a)
In line with direction from the Board of Directors, unvested options held by Jeffrey Sells, Peter Albert, David Forsyth and
Stephen Mullen were vested and cash settled as a result of redundancy, based on their fair value at the date of redundancy.
(b) The balance of option holdings for the former senior executives was at 20 June 2008, which was the date when these employees
ceased being regarded as key management personnel of the Company, except for Jeffrey Sells and Peter Albert which are at 9
September 2008 and 10 December 2008 respectively, being the dates these employees ceased employment with the Company.
The number of vested options at 31 December 2008 that were unexercisable was nil (2007: nil).
104
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
(ii) Options holdings (continued)
Balance at
1-Jan
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
Balance at
31–Dec or
date ceasing
to be KMP
Vested
during the
year
Vested and
exercisable
at 31-Dec or
date ceasing
to be KMP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,000,000
2,000,000
4,000,000
1,150,000
–
–
2,150,000
1,150,000
2,150,000
1,150,000
750,000
300,000
2,150,000
–
–
–
–
–
–
–
–
–
–
1,000,000
–
–
2,000,000
1,000,000
2,000,000
1,000,000
600,000
–
2,000,000
18,950,000
2,000,000
13,600,000
31 December 2007
Directors
Andrew Michelmore
–
Brian Jamieson
1,000,000
–
–
–
(1,000,000)
Owen Hegarty
6,000,000
2,000,000
–
Current senior
executives
Antony Manini
2,000,000
150,000
(1,000,000)
Brett Fletcher
David Lamont
John Nitschke
Peter Lester
Former senior
executives
Jeffrey Sells
Peter Albert
David Forsyth
Russell Griffin
–
–
–
–
2,000,000
1,000,000
150,000
150,000
2,000,000
150,000
–
–
–
–
–
1,500,000
150,000
(500,000)
1,000,000
150,000
(400,000)
–
300,000
150,000
–
–
Stephen Mullen
2,000,000
Total
18,500,000
3,350,000
(2,900,000)
105
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
(iii)
Performance right holdings
The movement in the number of performance rights for the Managing Director and Chief Executive Officer and other key
management personnel of the Company during the period are detailed in the table below:
Balance at 1
January
Granted during
the year
Exercised during
the year
Lapsed during
the year
Balance at 31
December or date
of ceasing to be
KMP (b)
31 December 2008
Director
Andrew Michelmore
–
894,118
Current senior
executives
Antony Manini
Brett Fletcher
David Lamont (a)
John Nitschke
Peter Lester
Former senior
executives
Jeffrey Sells
Peter Albert
David Forsyth
Russell Griffin
Stephen Mullen
Total
31 December 2007
Current senior
executives
Antony Manini
John Nitschke
Former senior
executives
Jeffrey Sells
Peter Albert
David Forsyth
Peter Lester
Russell Griffin
Stephen Mullen
Total
65,000
–
–
65,000
65,000
65,000
65,000
65,000
65,000
65,000
143,970
160,000
302,105
186,323
143,970
73,970
162,794
73,970
61,640
61,640
520,000
2,264,500
–
–
–
–
–
–
9,100
–
9,100
65,000
65,000
65,000
65,000
65,000
65,000
55,900
65,000
510,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
894,118
208,970
160,000
302,105
251,323
208,970
138,970
227,794
138,970
126,640
126,640
2,784,500
65,000
65,000
65,000
65,000
65,000
65,000
65,000
65,000
520,000
(a) The balance of performance rights granted during the year to David Lamont includes sign-on performance rights of 139,725
which were granted as a retention benefit on 24 November 2008.
(b) The balance of performance right holdings for the former senior executives was at 20 June 2008, which was the date when these
employees ceased being regarded as key management personnel of the Company, except for Jeffrey Sells and Peter Albert
which are at 9 September 2008 and 10 December 2008 respectively, being the dates these employees ceased employment with
the Company.
The number of vested rights that were exercisable at 31 December 2008 was nil (2007: nil) and the number of vested options that
were unexercisable at 31 December 2008 was nil (2007: nil).
106
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
32 Key management personnel (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
(iv) Long-term incentive opportunity holdings
The movement in the number of long-term incentive opportunities allocated to the chief executive officer and other key
management personnel of the consolidated entity during the period are detailed in the table below:
Balance at 1
January
Adjustments relating
to the acquisition of
Zinifex Limited (a)
Vested during
the year
Lapsed during
the year
Balance at 31
December
31 December 2008
Director
Andrew Michelmore
Executive
Brett Fletcher
–
–
–
582,776
98,172
680,948
–
–
–
–
–
–
582,776
98,172
680,948
(a) Andrew Michelmore and Brett Fletcher were granted equity rights under the Zinifex Executive Share Plan in the form of long-term
incentive opportunities (“LTIOs”). On acquisition of Zinifex Limited, each LTIO was converted to 3.1931 ordinary OZ Minerals
Limited shares at no cost, subject to satisfying vesting conditions and performance criteria.
107
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
33 Share-based payments
The consolidated entity has an ongoing commitment to providing a Long-Term Incentive Plan (“LTIP) for Executives and employees
to:
•
•
•
ensure that business decisions and strategic planning have regard to the consolidated entity’s long term performance;
be consistent with contemporary remuneration governance standards and guidelines; and
be consistent and competitive with current practices of comparable companies.
The consolidated entity has established a Long-Term Incentive Program (“LTIP”) which uses the framework of the former Oxiana
Limited LTIP. Existing equity rights granted under the legacy plans of both Oxiana Limited and Zinifex Limited continue on foot. The
details of these plans are outlined in the table below:
Element
Equity rights granted under the:
OZ Minerals LTIP - November
2008
Oxiana LTIP - February 2008 & 2007
Zinifex Executive Share Plan
Type of equity
rights granted
50% options
50% options
50% performance rights
50% performance rights
Amount of
equity rights
granted
160%, 80% or 60% of the
executive’s total fixed
remuneration, according to job
grade
Grant date
24 November 2008 based on the
OZ Minerals share price on 1
October 2008
90% or 75% of average total fixed
remuneration of all General Managers
and the Global Executive Team (not
including Owen Hegarty who was the
Managing Director and CEO at that
time)
1 March 2007 and 26 February 2008
100% Long Term Incentive
Opportunities (LTIOs) which are a
conditional entitlement to OZ
Minerals shares subject to the
satisfaction of vesting conditions and
performance criteria.
160%, 80% or 40% of the executive’s
total fixed remuneration, according to
job grade
1 July 2006 (allocation date 1
November 2006)
1 July 2007 (allocation date 1
November 2007)
Performance
Period
1 July 2008 – 30 June 2011 (3
year vesting)
1 March 2007 to 28 February 2009 (2
year vesting)
1 July 2006 to 30 June 2009 (3 year
vesting)
1 March 2007 to 28 February 2010 (3
year vesting)
1 July 2007 to 30 June 2010 (3 year
vesting)
26 February 2008 to 25 February 2011
(3 year vesting)
Exercise price –
options
35% above the volume weighted
average share price over the
week up to and including the
date of grant
35% above the volume weighted
average share price over the week up
to and including the date of grant
Not applicable
Exercise price –
performance
rights and LTIOs
Fair valuation
methodology
Not applicable – provided at no
cost
Not applicable – provided at no cost
Not applicable – provided at no cost
The assumptions underlying the
Black-Scholes methodology are
used to produce a Monte-Carlo
simulation model
The assumptions underlying the Black-
Scholes methodology are used to
produce a Monte-Carlo simulation
model
The assumptions underlying the
Black-Scholes methodology are used
to produce a Monte-Carlo simulation
model
The performance hurdle for all three plans is relative Total Shareholder Return (“TSR”) as measured against a comparator group. The
Board considers that TSR is an appropriate performance hurdle to determine vesting because it ensures that a proportion of each
participant’s remuneration is linked to the generation of profits and shareholder value and ensures that participants only receive a
benefit where there is a corresponding direct benefit to shareholders. TSR reflects benefits received by shareholders through share
price growth and dividend yield and is the most widely used long term incentive hurdle in Australia. To ensure an objective
assessment of the relative TSR comparison the consolidated entity employs an independent organisation to calculate the TSR
ranking. Details of the TSR performance requirements are outlined in the Remuneration Report.
108
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
33 Share-based payments (continued)
The following tables set out the movements in the number of equity instruments granted to eligible employees during the current
and prior period, in relation to the share options, performance rights and long-term incentive plan. These balances include those
long-term incentive opportunities granted to the Chief Executive Officer, key management personnel and other eligible employees.
(a) Share options
All share options were granted for no consideration and existing allocations have maximum terms of five years from the date of
grant. Options granted under the plan carry no dividend or voting rights. Each option is a conditional entitlement to one ordinary OZ
Minerals Limited share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all
respects with previously issued fully paid ordinary shares. Share option holders cannot participate in new issues of capital which may
be offered to shareholders prior to exercise. Prior to any new pro rata issue of shares to shareholders, option holders are notified by
the consolidated entity and are allowed ten business days before the record date to exercise their vested options.
The following table sets out the movement in the number of share options granted to the CEO and Managing Director and other
senior executives during the current and prior period:
Consolidated and company
Weighted average exercise price
Number of shares
Opening balance
Options granted during the period
Options exercised during the period
Options forfeited during the year
Closing balance
Options exercisable at year-end
2008
2007
2008
2007
2.58
3.66
3.43
4.39
2.65
1.76
4.28
1.23
–
2.58
27,000,000
25,100,000
15,310,784
6,900,000
(2,800,000)
(5,000,000)
(6,490,550)
–
33,020,234
27,000,000
18,550,000
20,100,000
The aggregate proceeds received from employees on exercise of options and recognised as issued capital by OZ Minerals is A$0.4
million (2007: A$4.1 million).
The fair value of share options issued to employees on exercise of options at their issue date is A$5.7 million (2007: A$15.6 million),
which is based on the weighted average share price at grant date of options exercisable at year-end of A$2.04 (2007: A$3.12)
multiplied by the number of options exercised during the period of 2,800,000 shares (2007: 5,000,000 shares).
Details of the share options outstanding at 31 December 2008 are detailed below:
Grant Date
Expiry date
Exercise price
at grant date
Number
2008
Number
2007
1 January 2003 to 31 December 2003
28 October 2008
0.86
–
500,000
1 January 2004 to 31 December 2004
1 January 2009 to 31 December 2009
1.20 to 1.25
4,000,000
4,000,000
1 January 2005 to 31 December 2005
1 January 2010 to 31 December 2010
1.10 to 1.60
8,300,000
8,600,000
1 January 2006 to 31 December 2006
1 January 2011 to 31 December 2011
2.50 to 4.65
5,000,000
7,000,000
1 January 2007 to 31 December 2007
1 January 2012 to 31 December 2012
3.98 to 4.60
1,000,000
6,900,000
1 January 2007 to 31 December 2007
1 January 2013 to 31 December 2014
3.98 to 4.60
1,150,000
1 January 2007 to 31 December 2007
1 January 2013 to 31 December 2015
3.98 to 4.60
1,150,000
1 January 2008 to 31 December 2008
1 January 2013 to 31 December 2013
24 November 2008
30 June 2011
4.93
2.30
2,051,115
10,369,119
–
–
–
–
33,020,234
27,000,000
109
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
33 Share based payments (continued)
(b) Performance rights
All performance rights were granted for no consideration and have maximum terms of ten years from the date of grant. The
performance measurement period is two and three years as detailed in the Remuneration Report. Performance rights granted under
the plan carry no dividend or voting rights. Each performance right is a conditional entitlement to one ordinary OZ Minerals Limited
share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all respects with
previously issued fully paid ordinary shares.
The following table sets out the movement in the number of performance rights granted to the CEO and Managing Director and
other senior executives during the current and prior period:
Consolidated and company
Opening balance
Rights granted during the period
Rights exercised during the period
Rights forfeited during the year
Closing balance
(c) Long-term incentive opportunities
2008
Number
3,796,430
6,774,098
2007
Number
4,292,400
2,514,810
(1,176,614)
(2,651,389)
(387,809)
(359,391)
9,006,105
3,796,430
Equity rights granted under the Zinifex Executive Share Plan are in the form of Long-term Incentive Opportunities (“LTIOs”). Each
LTIO is a conditional entitlement to 3.1931 ordinary OZ Minerals Limited shares at no cost, subject to satisfying vesting conditions
and performance criteria. This conditional entitlement does not carry a right to vote, nor to dividends nor, in general, to participate in
corporate actions such as bonus issues during the period prior to vesting.
The shares allocated on the vesting of LTIOs are held in trust on the Executive’s behalf until the Board of Directors or its delegate
approves their release. During the period in which the shares are in trust the Executive is entitled to all dividends and other
distributions, bonus issues or other benefits payable in respect of the shares.
Consolidated and company
Opening balance
Adjustments relating to acquisition of Zinifex Limited
Amounts forfeited for employees who have left during the year
Closing balance
(d) Expenses arising from share-based payment transactions
2008
Number
–
1,613,658
(96,548)
1,517,110
2007
Number
–
–
–
–
OZ Minerals Limited and its controlled entities for the year ended
31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expenses
were as follows:
Performance rights
Share options
Long-term incentive plan
10.1
1.6
0.6
12.3
3.6
6.1
–
9.7
10.1
1.6
0.6
12.3
3.6
6.1
–
9.7
110
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
Company
2008 A$m
Company
2007 A$m
34 Related parties
(a) Parent entity
The ultimate parent entity within the consolidated entity is OZ Minerals Limited (formerly Oxiana Limited).
(b) Subsidiaries
The parent entity’s interest in subsidiaries is set out in Note 17.
(d) Transactions with related parties
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities. A number of these entities transacted with the
consolidated entity during the reporting period. The terms and conditions of the transactions with key management personnel and
their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar
transactions to non-key management personnel related entities on an arm’s length basis.
Transactions between OZ Minerals and other entities within the wholly owned group during the year consisted of:
Loans to related parties
Recharges and fees to subsidiaries
Loans advanced to controlled entities
Loans repaid from controlled entities
Dividends
Dividend revenue from controlled entities
–
–
–
–
–
–
–
–
(22.6)
–
–
–
0.5
(0.3)
110.6
348.0
(e) Outstanding balances with related parties
The following balances are outstanding at the reporting date in relation to transactions between related parties:
Controlled entities – receivables
Controlled entities – payables
Loans to controlled entities are non-interest bearing and repayable
on demand
–
–
–
–
–
–
–
414.7
635.8
–
(414.7)
635.8
111
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year
ended 31 December 2008
Consolidated
2008 A$’000
Consolidated
2007 A$’000
Company
2008 A$’000
Company
2007 A$’000
35 Remuneration of auditors
Audit services
Audit and review of financial reports and other audit work under
the Corporations Act 2001, including audit of subsidiary financial
statements
KPMG Australia (i)
Overseas KPMG firms
Assurance services
Due diligence services
Other assurance services
Taxation services
Taxation compliance and other advisory services
Advisory services
Other advisory services
Total fees
1,417
226
1,643
533
25
558
84
84
–
2,285
385
148
533
33
38
71
149
149
18
771
709
–
709
533
25
558
84
84
–
1,351
385
–
385
33
35
68
144
144
18
615
(i) The 2008 fee also includes an amount for the audit of 2007 local statutory financial reports in relation to entities acquired in 2007.
36 Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the controlled entities listed below are relieved from the
Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Directors’ report.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee (‘the Deed’).
The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any
of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act,
the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also
given similar guarantees in the event that the Company is wound up.
OZ Minerals Limited and the following subsidiaries became party to the Deed on 24 December 2007:
•
OZ Minerals Prominent Hill Pty Ltd
• Minotaur Resources Holdings Pty Ltd
•
•
•
•
•
•
OZ Minerals Prominent Hill Operations Pty Ltd
OZ Minerals Finance (Holdings) Pty Ltd
OZ Minerals Finance Pty Ltd
OZ Minerals Golden Grove (Holdings) Pty Ltd
OZ Minerals Golden Grove Pty Ltd
OZ Minerals Golden Grove (Finance) Pty Ltd
112
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
Consolidated
2008 A$m
Consolidated
2007 A$m
36 Deed of cross guarantee (continued)
A condensed consolidated income statement and consolidated balance sheet, comprising the Company and controlled entities which
are a party to the Deed, after eliminating all transactions between parties to the Deed is set out below:
(a) Condensed income statement and retained earnings
(Loss)/profit before income tax and dividends received
Dividends received from controlled entities outside the controlled group
Income tax benefit/(expense)
(Loss)/profit for the year
Retained earnings at beginning of year
Transfers to and from reserves
Dividends recognised during the year
Retained earnings at end of year attributable to members of OZ Minerals Limited
(b) Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
(4,376.0)
110.6
38.0
(4,227.4)
510.1
1.5
(217.9)
(3,933.7)
61.7
54.5
232.4
2.6
351.2
358.5
–
(51.2)
307.3
346.8
(6.2)
(137.8)
510.1
101.8
566.6
31.5
1.3
701.2
Property, plant and equipment
1,709.7
1,016.5
Intangible assets
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
113
0.5
30.8
2,770.5
4,511.5
4,862.7
825.2
814.8
6.8
–
1,646.8
137.4
23.8
45.9
–
207.1
1,853.9
3,008.8
5,107.1
1,835.4
(3,933.7)
3,008.8
1.2
–
283.3
1,301.0
2,002.2
109.7
125.5
6.7
1.7
243.6
196.8
71.9
37.9
4.1
310.7
554.3
1,447.9
1,056.7
(118.9)
510.1
1,447.9
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2008
OZ Minerals Limited and its controlled entities for the year ended 31 December 2008
37 Events occurring after reporting date
(i) Minmetals cash offer
On 16 February 2009 the consolidated entity announced to the ASX that the Company and China Minmetals Non-ferrous Metals
Company Limited (“Minmetals”) had entered into a Scheme Implementation Agreement (“SIA”) for a proposed acquisition through a
scheme of arrangement of all outstanding shares in OZ Minerals Limited by Minmetals at a cash price of 82.5 cents per share.
As announced to the market on 16 February 2009, completion of the transaction is subject to regulatory approvals and other
conditions, including:
•
•
•
•
•
completion of confirmatory due diligence by Minmetals by 23 February 2009. This was satisfactorily completed as announced to
the ASX on 24 February 2009;
the approval by 27 February 2009, of the consolidated entity’s current lenders, to extend the debt arrangements until at least 31
March 2009. The consolidated entity has been successful in obtaining from the lenders whose facilities fall due on 27 February
2009, approval to extend the termination date to 31 March 2009. The approvals are subject to completion of documentation to
give effect to the extension;
the approval prior to 1 April 2009, to extend the debt arrangements until at least 2 weeks after the scheduled scheme
implementation date;
there being no material adverse change (US$100 million threshold) in OZ Minerals’ consolidated net assets or net present value
between the date on which Minmetals completes its due diligence and the second Court date, excluding anything arising as a
result of a change in general economic business or political conditions, securities markets, interest rates, exchange rates or
commodity prices;
the approval of regulatory authorities in Australia (including the Foreign Investment Review Board and the Department of
Defence) and the People’s Republic of China and shareholder and Court approval.
Whilst there can be no certainty that the conditions precedent will be met, both the consolidated entity and Minmetals have agreed
to use their reasonable endeavours to procure the satisfaction of the conditions precedent relevant to them.
The transaction is unanimously recommended by the Board, subject to no superior competing proposal and confirmation by an
independent expert that the transaction is in the best interests of the consolidated entity’s shareholders. Under the terms of the SIA
the Company has undertaken not to dispose of any interest in a material asset, although the Company is able to proceed with its
asset sale program in relation to Martabe and Golden Grove. Further details are set out in the ASX announcements made on 16 and
18 February 2009.
Following the above announcement, on 17 February 2009 the suspension in trading of the Company’s shares ceased.
(ii) Asset sales
The consolidated entity disposed of its entire shareholding of 7,791,622 shares in Nyrstar NV, a publicly listed entity on Euronext
Brussels, in January 2009 for a consideration of A$33.7 million. This asset was classified as held for sale at 31 December 2008 as set
out in Note 5. The fair value of the consolidated entity’s investment in Nyrstar at 31 December 2008 was A$34.7 million.
(iii) Refinancing of borrowings
As noted in Note 1(c)(i), as at 31 December 2008, the consolidated entity had four major bank facilities. Three of these facilities
matured, or were required to be refinanced by 31 December 2008. Prior to the end of the financial year the relevant lenders agreed
to extend the termination dates of various debt facilities provided to a number of the consolidated entity’s subsidiaries to 27
February 2009. In addition, as announced to the ASX on 22 January 2009, three subsidiaries of the consolidated entity obtained from
certain of the consolidated entity’s lenders a new short term facility of A$140,000,000 with a termination date of 27 February 2009.
The consolidated entity has been successful in obtaining from the lenders whose facilities fall due on 27 February 2009, approval to
extend the termination date to 31 March 2009. The approvals are subject to completion of documentation to give effect to the
extension.
The consolidated entity granted security over certain of its Australian and overseas assets to Societe Generale (the lender under
Facility C), and its Martabe assets to the lenders of the new short term facility, during January and February, in accordance with
agreements reached in relation to the above refinancing discussions. The consolidated entity was also required to grant security over
certain of its other overseas assets in favour of Societe Generale but Societe Generale has now waived the latter requirement.
The consolidated entity was also pursuing asset sales and was examining expressions of interests for a number of its assets to repay
or reduce the facilities as at 31 December 2008. This process continued after the end of the financial year.
There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may
significantly affect the consolidated entity’s operations, results or state of affairs in future years.
114
DIRECTORS’ DECLARATION
Directors’ declaration
1
In the opinion of the Directors of OZ Minerals Limited (‘the Company’):
(a)
the financial statements and notes of the Company on pages 45 to 114 and the remuneration disclosures that are
contained in the remuneration report on pages 23 to 43, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company and consolidated entity as at 31 December 2008
and of their performance, as represented by the results of their operations and their cash flows, for the year ended on
that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due and
payable. As noted in Note 1(c)(i), whilst approvals from the consolidated entity’s lenders have been obtained to extend the
necessary facilities to 31 March 2009, a degree of uncertainty remains as documentation to give effect to the extension,
has not yet been entered into. There also exists material uncertainty about the ability of the consolidated entity to further
extend the refinancing date or refinance by 31 March 2009. Notwithstanding this, the Directors consider that there are
reasonable grounds to believe that the lenders will agree, as they have in the past, to extend those facilities having regard
to the constructive negotiations that are ongoing with the lenders and prospective purchasers of certain of the
consolidated entity’s assets. This prospect may be further positively influenced by the Company’s announcement on 16
February 2009 of the takeover offer by China Minmetals Non-ferrous Metals Company Limited via a scheme of
arrangement.
2
3
There are reasonable grounds to believe that the Company and the consolidated entities identified in Note 36 will be able to
meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee
between the Company and those consolidated entities pursuant to ASIC Class Order 98/1418.
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 2008.
Signed in accordance with a resolution of the Directors.
B L Cusack
Chairman
Melbourne
27 February 2009
A G Michelmore
Managing Director and Chief Executive Officer
Melbourne
27 February 2009
115
INDEPENDENT AUDIT REPORT
Independent auditor’s report to the members of OZ Minerals Limited
Report on the financial report
We have audited the accompanying financial report of OZ Minerals Limited (the Company), which comprises the balance sheets as at
31 December 2008, and the income statements, statements of recognised income and expense and cash flow statements for the year
ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 37 and the directors’ declaration
set out on pages 45 to 115 of the Group comprising the Company and the entities it controlled at the year’s end or from time to
time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with
Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This
responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial
report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances. In Note 1(b), the directors also state, in accordance with
Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial
statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is
consistent with our understanding of the Company’s and the Group’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
Whilst we draw attention to the material uncertainty noted below, in our opinion:
(a) the financial report of OZ Minerals Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s and the Group’s financial position as at 31 December 2008 and of their
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(b).
116
INDEPENDENT AUDIT REPORT
Material uncertainty regarding continuation as a going concern
Without qualification to the above opinion, we draw attention to the following matters within the notes to the financial statements
and the Directors Declaration in relation to the financial statements.
Notes 1(c)(i) and 37 to the financial statements note that:
•
•
•
As at 31 December 2008, the Group had four major bank facilities. Three of these facilities matured, or were required to be
refinanced by 31 December 2008 (refer Note 29(c)). Agreement was obtained from the lenders on 29 December 2008 to extend
the refinancing date on these facilities to 27 February 2009 and, in accordance with the accounting standards, these three
facilities were classified as current liabilities at 31 December 2008 (refer to Note 21).
On 29 January 2009, a bridging finance facility of up to A$140 million was established with the lenders of Facility A (refer Note
29(c)). The new short term facility terminates on 27 February 2009.
On 27 February 2009, the Group received approval from the lenders to extend the termination dates of the facilities until 31
March 2009, subject to completion of documentation to give effect to the extension. The Group will subsequently seek a further
extension from 31 March 2009, as described in Note 37.
Accordingly, there exists material uncertainty about the completion of this documentation and the ability of the Group to further
extend the refinancing date or refinance these facilities by 31 March 2009.
Note 1(c)(i) states that whilst the Directors have undertaken a thorough review of all operations, instituted measures to improve
operating costs and deferred several capital projects to preserve cash, material uncertainties exist over the future operating results
and cash flows of the Company and the Group. In addition, the Group continues to pursue certain financing alternatives, including
potential asset sales, to address its short term cash requirements and allow it to work with its lenders towards extending or
refinancing its banking facilities as follows:
•
•
On 16 February 2009 China Minmetals Non-ferrous Metals Company Limited (‘Minmetals’) and the Group announced that they
have entered into a conditional agreement for Minmetals to acquire all outstanding shares of the Company (refer to Note 37 for
a summary of the conditions). As part of the agreement, Minmetals will refinance the Group’s outstanding debt at scheme
completion.
Since 31 December 2008, the Group has disposed of its investment in Nyrstar NV that was classified as held for sale at 31
December 2008, as set out in Notes 5 and 37. The Group continues to pursue other asset sales as indicated in Notes 1(c)(i) and
37.
Note 1(c)(i) and the Directors Declaration in relation to the financial statements state that the Directors are aware that a material
uncertainty exists due to the above events which may cast doubt upon the Group’s ability to continue as a going concern. After
making enquiries, the Directors have stated in Note 1(c)(i) and their Declaration that there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they become due and payable and that they have a reasonable expectation that
the Group has potential sources of financing, through asset sales and alternative funding proposals (including the Minmetals
proposal), and expected future operating cashflows, to adopt the going concern basis in preparing the annual financial statements.
Whilst the Directors note material uncertainty about the ability of the Group to extend the refinancing date or refinance the Group’s
bank facilities by 31 March 2009, the Directors state in their Declaration that constructive negotiations are ongoing with the Group’s
lenders and prospective purchasers of certain of the Group’s assets, and that, as at the date of their declaration, there are reasonable
grounds to believe that those lenders will agree, as they have in the past, to extend those facilities.
These conditions and future events, in relation to the completion of documentation to give effect to the extension of banking
facilities given by the Group’s lenders on 27 February 2009, the further extension of the facilities by 31 March 2009, the Minmetals
agreement, potential asset sales and future operating cash flows, indicate the existence of a material uncertainty which casts
significant doubt about the Group’s ability to continue as a going concern and therefore its ability to realise its assets and discharge
its liabilities in the normal course of business at the amounts recognised in the financial statements. In particular, the carrying value
of assets classified as held for sale (Note 5), property, plant and equipment (Note 18) and deferred tax assets (Note 11) may not be
fully recoverable, and liabilities classified as non-current may become current, should the Group not be able to continue as a going
concern.
117
INDEPENDENT AUDIT REPORT
Report on the remuneration report
We have audited the remuneration report included in pages 23 to 43 of the directors’ report for the year ended 31 December 2008.
The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with
Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of OZ Minerals Limited for the year ended 31 December 2008 complies with Section 300A of
the Corporations Act 2001.
KPMG
Michael Bray
Partner
Melbourne
27 February 2009
118
SHAREHOLDER INFORMATION
Capital
Share capital comprised 3,121,339,800 fully paid ordinary shares on 27 March 2009.
Shareholder details
At 27 March 2009 the Company had 122,637 shareholders. There were 17,204 shareholdings with less than a marketable parcel of
$500 worth of ordinary shares.
Top 20 investors at 27 March 2009
Name
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
HSBC Custody Nominees (Australia) Limited – GSCO ECA
Romadak Pty Ltd
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
AMP Life Limited
UBS Nominees Pty Ltd
Queensland Investment Corporation
Debortoli Wines Pty Limited
Yarraandoo Pty Ltd
Citicorp Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Yarraandoo Pty Ltd
Total
Substantial shareholders at 27 March 2009
Holder Giving Notice
Morgan Stanley Investment Management Limited
Merrill Lynch & Co., Inc.
Blackrock Group
Investor Categories at 27 March 2009
Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and Over
Total
Number of shares
Issued capital %
485,570,615
350,774,578
317,240,491
113,934,002
103,608,727
34,386,415
32,210,850
25,400,000
22,659,779
22,463,615
22,270,070
21,282,510
14,856,542
14,468,260
14,194,014
12,712,569
12,586,399
12,201,811
11,265,079
10,297,750
15.56
11.24
10.16
3.65
3.32
1.10
1.03
0.81
0.73
0.72
0.71
0.68
0.48
0.46
0.45
0.41
0.40
0.39
0.36
0.33
1,654,384,076
52.66
Number of shares
% of issued capital
reported in notice
Date of notice
214,987,557
214,970,416
192,557,792
6.89
6.89
6.17
2 December 2008
23 July 2008
13 March 2009
Number of investors
Number of shares
Issued capital %
22,288
51,603
22,961
24,414
1,371
12,578,175
141,058,585
172,980,730
621,512,418
2,173,209,892
0.40
4.52
5.54
19.91
69.63
122,637
3,121,339,800
100.00
119
SHAREHOLDER INFORMATION
Voting rights
On a show of hands, every member present in person or by attorney or by proxy or by representative shall have one vote for every
share held by the member. Upon a poll, every member present in person or by attorney or by proxy or by representative shall have
one vote for every share held by the member. Where more than one proxy, representative or attorney is appointed, none may vote
on a show of hands.
Other securities on issue
The Company has a number of other securities on issue in addition to ordinary shares. The details of the securities held as at 27
March 2009 are as follows:
Class of security
Options
Performance rights
Sign on equity rights
Zinifex Long Term Incentive Opportunities
Number of holders
Number of securities
40
1,022
1
18
19,272,288
6,678,822
139,752
340,105
The Zinifex Long Term Incentive Opportunities (LTIO) are convertible, upon the satisfaction of vesting conditions, to 3.1931 OZ
Minerals shares for each LTIO held. The Company also has 1,050 Convertible Bonds on issue that are convertible into OZ Minerals
shares at US$0.9180 per share representing 114,379,085 shares to be issued.
No voting rights attach to the above securities, however, any ordinary shares that are allotted to the holders of the securities upon
vesting or conversion of the above mentioned securities will have the same voting rights as all other ordinary OZ Minerals shares.
Dividends
The Company did not declare a final dividend for the year ended 31 December 2008. The Company previously declared an interim
dividend with respect to the six months ended 30 June 2008 of 5 cents per share unfranked, which was paid to shareholders on 29
September 2008.
Dividend payments
Your dividend payments may be credited directly into any nominated bank, building society or credit union account in Australia.
Share registry information
The OZ Minerals share registry is maintained by Link Market Services Limited.
Visit Link Market Services’ website www.linkmarketservices.com.au and access a wide variety of holding information, change your
personal details and download forms. You can:
•
•
•
•
•
•
•
•
•
check your current and previous holding balances
elect to receive financial reports electronically
update your address details
update your bank details
confirm whether you have lodged your Tax File Number (TFN), Australian Business Number (ABN) or exemption
check transaction and dividend history
enter your email address
check the share prices and graphs
download a variety of instruction forms.
You can access this information via a security login using your Security Holder Reference Number (SRN) or Holder Identification
Number (HIN) as well as your surname (or company name) and postcode (must be the postcode recorded on your holding record).
Contact information
Shareholder enquiries about their shareholding should be addressed to Link Market Services. You can also contact the Company’s
share registry by calling 1300 306 089 or from outside Australia +61 2 8280 7763. Share registry contact details are contained in the
inner back cover of this report.
120
CONTACT
DETAILS
Head Offi ce
Level 23
28 Freshwater Place
Southbank VIC 3006
GPO Box 1291K
Melbourne VIC 3001 Australia
Tel 61 3 9288 0333
Fax 61 3 9288 0406
Email info@ozminerals.com
Share Registry
Link Market Services
Level 1, 333 Collins Street
Melbourne VIC 3000
Australia Tel 1300 306 089
International Tel 61 2 8280 7763
Fax 61 2 9287 0303
Website www.linkmarketservices.com.au
ADR Depositary
The Bank of New York
101 Barclay Street
New York, NY 10286
United States of America
Tel +1 (212) 815 3700
Fax +1 (212) 571 3050
Toll Free US Callers: 1-888-BNY-ADRS
CUSIP 692476104
ISIN Number: AU000000OZL8
Email shareowners@bankofny.com
Website www.stockbny.com
Investor enquiries
Richard Hedstrom
Group Manager – Investor Relations
richard.hedstrom@ozminerals.com
Media enquiries
Natalie Worley
Group Manager – External Relations
natalie.worley@ozminerals.com
Careers at OZ Minerals
careers@ozminerals.com
Product Marketing enquiries (Sales)
Russell Griffi n
General Manager – Sales and Marketing
russell.griffi n@ozminerals.com
Sustainability
Peter Plavina
General Manager – Sustainability
peter.plavina@ozminerals.com
Community Relations
Matthew Foran
Group Manager – Community
and Stakeholder Relations
matthew.foran@ozminerals.com