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Annual Report 2012
Paladin Energy Ltd
Corporate Values and Key Achievements
Chairman’s Letter
A Conversation with the Managing Director/CEO
Nuclear Power – Growth Reassured
Management Discussion and Analysis
Review of Operations
Health & Safety
Financial Review
Sustainable Development
Environment
Corporate Social Responsibility
Our People
Corporate Governance Statement
Directors’ Report
Remuneration Report
02
07
08
10
12
13
31
35
43
44
47
55
58
66
74
88
Contents of the Financial Report
Consolidated Income Statement
89
Consolidated Statement of Comprehensive Income 90
91
Consolidated Statement of Financial Position
92
Consolidated Statement of Changes in Equity
94
Consolidated Statement of Cash Flows
95
Notes to the Consolidated Financial Statements
165
Directors’ Declaration
166
Independent Audit Report
171
Additional Information
176
Corporate Directory
The Annual Report covers the
Group consisting of Paladin
Energy Ltd (referred throughout as
the Company or Paladin) and its
controlled entities.
Paladin Energy Ltd is a company
limited by shares, incorporated
and domiciled in Australia. Its
registered office and principal
place of business is:
Paladin Energy Ltd
Level 4
502 Hay Street
Subiaco
Western Australia 6008
Through the use of the internet,
we have ensured that our
corporate reporting is timely,
complete, and available globally
at minimum cost to the Company.
All press releases, financial
statements and other information
are available on our website
www.paladinenergy.com.au
Paladin Energy Ltd
ACN 061 681 098
LANGER HEINRICH MINE, NAMIBIA
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PALADIN ENERGY LTD ANNUAL REPORT 2012
ENTERING THE
NEXT PHASE
MUCH HAS BEEN ACHIEVED AT PALADIN OVER THE PAST 14 YEARS. DURING THIS PERIOD OF RAPID GROWTH
WE HAVE BUILT TWO MAJOR URANIUM MINES THAT ARE NOW AT, OR NEAR, NAMEPLATE PRODUCTION. THESE
WERE THE FIRST NEW CONVENTIONAL URANIUM MINES BUILT ANYWHERE IN 20 YEARS. WE’VE ESTABLISHED A
SIGNIFICANT PIPELINE OF QUALITY URANIUM ASSETS TO UNDERPIN ONGOING GROWTH, CREATED A WORLD-
LEADING IN-HOUSE TEAM OF URANIUM EXPERTS WITH A TRACK RECORD IN MINING INNOVATION, AND EARNED
OURSELVES A UNIQUE INDUSTRY POSITIONING.
TODAY, WE SUPPLY AROUND 4% OF THE WORLD’S MINED URANIUM AND ARE THE ONLY INDEPENDENT,
PURE-PLAY URANIUM PRODUCER.
PALADIN IS NOW ENTERING THE NEXT PHASE OF THE COMPANY’S LONG-TERM STRATEGIC PLAN. OUR FOCUS
HAS SHIFTED FROM DEVELOPMENT TO OPTIMISING OUR PRODUCING MINES THROUGH TECHNICAL INNOVATION
AND COST REDUCTION, ESTABLISHING KEY STRATEGIC PARTNERSHIPS AND DRIVING ORGANIC GROWTH FROM
OUR URANIUM INVENTORY.
WE ARE POSITIONED TO OPTIMISE.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
CORPORATE VALUES
AND KEY ACHIEVEMENTS
CORPORATE VALUES
Create shareholder wealth by developing the considerable opportunities
Paladin has and continues to generate.
Become a major player in the global uranium supply market.
Operate at global best practice with particular emphasis on safety and
the environment.
Reward employee performance and provide a fulfilling work environment.
Contribute to the growth and prosperity of the countries in which
Paladin operates by conducting operations in an efficient and effective
manner and by seeking out opportunities for expansion.
Respond to the attitudes and expectations of the communities in which it
operates as part of its corporate social responsibility obligations.
Act with integrity, honesty and cultural sensitivity in all of its dealings.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
A SOLID PLATFORM
PALADIN’S STRATEGIC VALUE IS BASED
ON FOUR KEY PILLARS:
PRODUCING MINES
A portfolio of early-life cycle,
technologically advanced,
mining operations.
INDUSTRY POSITION
Unique industry position as
the only significant non-aligned
pure play producer.
QUALITY PIPELINE
A geographically diversified,
high-quality project pipeline.
PROVEN TEAM
Proven technical and
management team: strong
technical innovation with
ability to advance projects
from development through
to production.
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PALADIN TODAY
OPERATIONS
> Strong production growth delivered, all underpinned by early life cycle mines.
> Development and building of producing assets has been successfully completed.
> Project ramp-ups completed and operating at nameplate capacity.
INNOVATION & PROJECT PIPELINE
> Proven track record in mining and processing innovation.
> Established in-house technical strength.
> Consolidating a unique, geographically diversified asset base.
POSITIONING GOING FORWARD
> Only non-aligned pure play uranium producer.
> Long-term business strategy and vision will provide added strength through establishment of key partnerships.
> Paladin is now recognised as a partner of choice.
> Focus shifting from development to optimisation of producing mines. Progress underway through technical
innovation and cost optimisation.
> Project pipeline to continue driving organic growth as planned.
KEY ANNUAL DATA
LTIFR
POUNDS U3O8 SOLD
«
18%
»39%
Lost Time Injury Frequency Rate decreased
from 1.1 to 0.9 from FY2011 to FY2012
6.70Mlb U3O8 sold up from
4.81Mlb, a 39% increase
KEY ACHIEVEMENTS FOR THE YEAR
2011
August 2011
2012
April 2012
> Execution of US$141M project finance facility for Langer
Heinrich Mine Stage 3 expansion.
> Group wide cost rationalisation programme commenced.
September 2011
> Successful raising of US$274M through the issue of
senior, unsecured convertible bonds due 2017.
May 2012
> Repurchase of US$191M convertible bonds due 2013.
> Successful raising of A$68.2M through institutional
June 2012
placement of shares.
December 2011
> Kayelekera Mine achieves nameplate and record
monthly production of 265,563lb U3O8.
> Moratorium on uranium development and production lifted
in Labrador, Canada - allowing progress on Aurora uranium
assets.
> Quarterly record production at both Langer Heinrich
and Kayelekera mines of 2.049Mlb combined – an
increase of 15.3% above the March quarter.
December 2011
> Completion of Langer Heinrich Mine Stage 3 expansion.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
WHAT WE SET OUT TO DO IN 2012
Complete Stage 3 expansion at Langer Heinrich Mine with commissioning September quarter 2011.
Ramp up production to design levels at Kayelekera Mine.
Deliver Stage 4 Langer Heinrich Mine feasibility study by end of CY2011.
(deliberately delayed to implicate positive performance from Stage 3 works)
X
2012 production guidance in the range of 7.4 to 7.9Mlb U3O8.
(8% downgrade caused by delay in Stage 3 construction and Kayelekera ramp-up)
Resource update for Kayelekera Mine
(delayed due to geochemical verification taking longer than anticipated)
Continue to advance NOSA health and safety system rating for Langer Heinrich and Kayelekera Mines.
Commence sustainability reporting.
Ongoing commitment to global exploration.
Expand production through organic growth.
Seek value increase in existing pipeline projects through joint venture and M&A.
Optimise production and costs at Langer Heinrich and Kayelekera Mines.
(nameplate achieved in latter half of year, cost optimisation ongoing)
Achieved
X Not achieved
Ongoing
REVENUE
PRODUCTION
»
37%
»21%
Sales revenue up 37% from
US$266.8M to US$365.8M
Production up 21% from
5.7Mlb to 6.9Mlb U3O8
WHAT WE PLAN TO DO IN 2013
2013 production guidance in the range of 8.0 to 8.5Mlb U3O8.
Optimise production costs at Langer Heinrich and Kayelekera mines.
Issue resource update for Kayelekera Mine.
Continue to improve NOSA health and safety system rating for Langer Heinrich and Kayelekera mines.
Consolidate sustainability reporting.
Drive organic growth through project pipeline.
Initiate resource upgrade programmes at Michelin and Manyingee Projects.
Increase value in future term supply contracts.
Seek value increase in existing pipeline projects through joint venture and M&A.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
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PALADIN ENERGY LTD ANNUAL REPORT 2012
TARGET PRODUCTION
LEVELS REACHED
Rick Crabb
Chairman
Dear Fellow Shareholders
Against the backdrop of a continuing flat uranium price and
extreme volatility of world capital markets, Paladin has focussed
on improving production levels, efficiency and cost control. In all
respects, this focus has achieved impressive results.
At both Langer Heinrich and Kayelekera, production levels are
near or over nameplate. During a year when substantial plant
expansion (Stage 3 at Langer Heinrich) and a major upgrade
(at Kayelekera) were completed, the production and technical
services teams are to be congratulated for systematically
eliminating bottlenecks, improving recovery efficiencies and
applying innovative solutions to achieve the near or on target
production levels. Shareholders are reminded that both Paladin
uranium plants are the first new facilities of this nature for some
20 years and each apply unique solutions to achieve modern
best practice production outcomes.
In a challenging uranium spot and term price environment, the
Paladin uranium marketing team has worked to ensure that,
once an appropriate working inventory level was achieved, all
uranium production was sold via a combination of spot sales
and delivery into variously structured term contracts with
customers in the US and Asia. As a result, the average sales
price over the financial year was a commendable US$55/lb
U3O8 (spot price ranged from US$51/lb to US$53/lb).
To address balance sheet concerns, particularly around
the US$325M convertible bonds maturing March 2013, the
Company undertook a timely raising in April 2012 of US$274M
with convertible bonds of which US$191M was applied to buy
back March 2013 bonds (leaving a balance of US$134M).
As announced on 15 August 2012 the Company entered
into an historic long-term off-take contract for the period
2019 to 2024 featuring a US$200M prepayment. These two
initiatives have therefore ensured that repayment of the March
2013 convertible bonds is completely covered and provided
additional working capital.
As discussed elsewhere in this Annual Report, contrary to
uninformed predictions from anti-nuclear voices, there are
today more new nuclear reactors planned and proposed
than pre-Fukushima. The nuclear industry will continue to
grow and make a significant contribution to the world’s clean
energy requirements. It is the view of Paladin’s Board and
management, based on careful analysis of the uranium supply
industry, that future supply growth will struggle to meet demand
in the mid to later part of this decade. The specific nature of
the long-term off-take contract mentioned above, leveraging off
forward production, is in itself a strong indication of the uranium
industry’s future supply challenges. In this context, Paladin’s
suite of two operating mines, significant project pipeline,
expertise and improved balance sheet, means it is uniquely
placed to benefit from this resultant supply/demand scenario.
Reflecting the importance the Board and management place on
safety, the environment and sustainability, this Annual Report
details our improving practices in these areas. To be soon
released through Paladin’s website is a considerable amount of
sustainability information under the Global Reporting Initiative,
including carbon emissions. I appreciate the effort that all
staff have made to enable this important reporting regime to
be adopted.
On behalf of my Board and fellow shareholders, I extend my
thanks to John Borshoff and all Paladin staff for continuing to
focus on the business of the Company and steer it through an
extremely difficult period.
Yours faithfully
Rick Crabb
Chairman
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PALADIN ENERGY LTD ANNUAL REPORT 2012
AFTER 8 YEARS OF CONTINUOUS BUILDING, PALADIN IS NOW VERY MUCH FOCUSSED ON OPTIMISING
ITS PRODUCTION AND UNIT COSTS, REDUCING DEBT AND STRENGTHENING THE BALANCE SHEET.
John Borshoff
Managing Director/CEO
Q
A
Q
A
IT HAS BEEN 15 MONTHS SINCE THE FUKUSHIMA
INCIDENT. WHAT HAVE BEEN THE IMPACTS ON
THE NUCLEAR INDUSTRY?
PALADIN HAS PRODUCED AT ITS NAMEPLATE
PRODUCTION RATE OF 8.5MLB PER ANNUM IN
THE JUNE QUARTER. IS THE RATE SUSTAINABLE?
Although the media has focussed on the materially
insignificant decisions of Germany and Switzerland
to phase out nuclear power, the reality is that the
nuclear industry has, 15 months after Fukushima,
completely reaffirmed its permanent existence, after having
been scrutinised and fully stress tested. It is important to note
that there are more reactors planned and proposed today than
there were prior to the Fukushima incident.
The two sites are now effectively de-risked with
the Kayelekera Mine producing above 90% of its
designed capacity of 3.3Mlb per annum for the past
nine months. We have a strong management and
operational team on the ground that are delivering the results
we need and the whole Paladin team is focussed on pushing
ahead with stable production and cost reduction. We are very
confident these goals will be achieved.
Demand will still be driven primarily by nuclear growth in China,
Russia, India and the new entrants to the nuclear industry, UAE
and Saudi Arabia outweighing the lost demand in the future
from Germany and Switzerland. All told, the impact on uranium
demand has been negligible.
The Langer Heinrich Mine Stage 3 expansion has proven that
it has the capability to produce above its nameplate rate of
5.2Mlb per annum. We expect to see further refinements in cost
and recoveries as the LHM team optimise performance of the
impressive Stage 3 plant.
The impact on uranium supply however is potentially devastating.
Even prior to Fukushima there were already signs that production
growth was not going to meet the demand. Aggressive uranium
purchasing from China in late 2010 immediately prior to
Fukushima drove spot prices above US$70/lb.
The fall in uranium prices following Fukushima and the ever
increasing capex and operating costs in the industry has
stifled investment in new uranium projects and has adversely
affected investor sentiment at the equity level. Explorers are
in survival mode and cutting their spending to bare minimum,
developers cannot raise the required capital for new projects
and producers are deferring or cancelling growth projects while
facing declining production from existing aging projects.
I can’t stress enough the significance of this important milestone
Paladin has achieved. For the first time since LHM started
production in 2007, the sites are enjoying a period without
construction, commissioning or ramp up. Now that the steep
climb to nameplate production is over, both sites can focus
on production and cost optimisation without the interference
of construction crews and dramatic changes in both plant and
modus operandi. We are operating in “clean air” for once and
will be taking advantage of the opportunity to optimise the
operations.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Q
A
WHAT ARE THE SHORT AND LONG-TERM GOALS
FOR PALADIN?
After 8 years of continuous building, Paladin is now
very much focussed on optimising its production
and unit costs, reducing debt and strengthening the
balance sheet with the focus now definitely shifting
to return on capital investment considerations.
Paladin’s development history to date has been focussed on
building a four pillared platform. These include:
>
>
>
>
producing uranium mines;
future new production through utilisation of its project
pipeline;
its people and their expertise; and
industry positioning.
The medium to long-term focus will be to enhance and leverage
from these key pillars.
Paladin has been forthright in its vision to become a Tier 1
uranium producer. The next phase of growth will be achieved
by utilising the Company’s unparalleled technical expertise and
its high quality project pipeline to develop the Company even
further from the substantial production platform it has already
established.
include;
further expansion
three pipeline projects
The Company has flagged
for
development in this decade if the uranium price increases
sufficiently. These
to Langer
Heinrich, the development of the Manyingee ISR project in
Western Australia and the development of the Michelin project
in Labrador, Canada. Both Manyingee and Michelin are the
in highly prospective,
premier, most developed projects
currently non-producing regions. Paladin aims to exploit its
dominant position to build the controlling production centres in
both locations. This next phase of growth will establish Paladin in
the top five or six global uranium producers giving the Company
considerable market share.
Q
A
WHAT CHALLENGES DOES PALADIN FACE IN
RESPECT TO ACHIEVING ITS GOALS?
The decrease and stagnation of the uranium price
post-Fukushima has most certainly been challenging.
Our analysis shows that there is a near-term looming
supply deficit and the next wave of projects required
to meet demand need incentive prices in excess of US$85/lb.
Our perspective on supply/demand and incentive price has been
echoed by numerous uranium sector analysts. In the meantime
we need to remain vigilant in driving down costs at both site and
corporate levels to maintain efficiency until conditions improve.
Our journey to become a Tier 1 uranium producer includes not
only the development of our own pipeline but also the timely
acquisition of new projects. I can honestly say that there are
only a handful of available projects globally that meet Paladin’s
technical and economic criteria. When the uranium price
recovers we need to be well positioned with both the economic
capability and strategic relationships to capitalise. Our proven
technical capabilities make Paladin a clear partner of choice for
both producers and consumers seeking a strategic association.
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A
YOU ANNOUNCED AN INTERESTING LONG-TERM
SALES CONTRACT RECENTLY. WHAT ENCOURAGED
THIS TO INCLUDE A PREPAYMENT COMPONENT OF
US$200M?
The significant issue of being able to negotiate such
a beneficial uranium sales contract has implications
at many levels. Firstly it confirms that some major
nuclear utilities see that supply problems will exist in
the period starting late this decade and to ensure security and
supply they were willing to include a large prepayment to make
it attractive for Paladin. We see this shortage of supply will start
to take effect much earlier from 2013/14.
Secondly and as importantly, they see Paladin as an established
producer that can be relied upon to deliver in a period 6 to 12
years ahead and beyond.
On the third level this sends a clear signal into the market that
future supply growth is uncertain at current pricing and that
Paladin is strategically very well positioned to take advantage
of this situation.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NUCLEAR POWER
GROWTH REASSURED
Dustin Garrow
Executive General Manager - Marketing
Last year’s Annual Report dealt extensively with the Fukushima
nuclear incident in Japan and the global impact on nuclear
power programmes which resulted from government-mandated
reviews of design, site selection, and safety of operating and
planned nuclear power stations.
With the marked exception of Japan itself, and Germany which
announced the immediate closure of eight of its 17 operating
nuclear power plants, the world’s nuclear power programmes
are now operating normally and the foreshadowed growth in
nuclear power is reassured.
This comparison of the World Nuclear Association’s table of
nuclear power reactors classified by status (“operable”, “under
construction”, “planned”, and “proposed”) demonstrates the
resilience of the nuclear industry.
Status at 30/6/11
Operable*:
Under Construction:
Planned:
Proposed:
440
61
154
343
* includes 17 reactors in Germany and 51 reactors in Japan.
Status at 30/6/12
Operable*:
Under Construction:
Planned:
Proposed:
433
63
160
329
376,442 MWe
63,334 MWe
171,445 MWe
391,355 MWe
371,745 MWe
62,174 MWe
177,915 MWe
369,915 MWe
* includes 50 reactors in Japan although all off-line at June 30 2012.
Source: World Nuclear Association
In the year since the Fukushima incident, the number of reactors
“under construction” has increased by two, and the number in
the “planned” category has increased by six. The reduction in
the “proposed” category is due to long-term plan adjustments
in Ukraine (-9), USA (-9), Vietnam (-6) and Russia (-6), offset by
the announcement of an aggressive new nuclear programme by
Saudi Arabia (+16).
In Japan, all nuclear power plants were progressively taken
offline as they became due for periodic maintenance and
inspection and, at the time of writing, only two plants owned
by Kansai Electric Power Company, Ohi reactors numbers 3
and 4, have been brought back into service. The Japanese
Government has announced plans to overhaul the national
nuclear regulatory system with the formation of a new,
independent Nuclear Regulatory Authority (NRA) as part of a
process to re-establish trust and integrity in the safety of the
country’s reactors in anticipation of further re-starts, which
are essential to overcome the significant electricity shortages
experienced during the summer. The formation of the NRA
will be a vital component in the review of Japan’s longer term
dependence on nuclear power, which historically has supplied
over 30% of the nation’s electricity.
In Europe the European Nuclear Safety Regulators Group
has completed its extensive peer review and stress tests for
all nuclear power plants in the EU with a generally favourable
outcome.
Apart from the policy decision taken by Germany to accelerate
its phase-out of nuclear power by closing eight reactors
immediately, no reactors in Europe have been shut down.
Belgium and Switzerland have adopted qualified nuclear phase-
out policies which are unlikely to have any near term effect on
their nuclear programmes.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
GLOBAL URANIUM PRODUCTION (Mlb U308)
HISTORICAL URANIUM PRICE
140
120
100
80
60
40
20
0
)
b
l
/
$
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U
$160
$140
$120
$100
$80
$60
$40
$20
$0
2000 2001 2003 2004 2005 2005 2006 2007 2008 2009 2010 2011
2
0
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2
0
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3
0
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3
0
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4
0
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J
4
0
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J
5
0
n
a
J
5
0
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J
6
0
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a
J
6
0
l
u
J
7
0
n
a
J
7
0
l
u
J
8
0
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a
J
8
0
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J
9
0
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a
J
9
0
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0
1
n
a
J
0
1
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u
J
1
1
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1
1
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J
2
1
n
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2
1
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u
J
Source: World Nuclear Association
Source: Ux Consulting
NEW BUILDS
URANIUM PRODUCTION AND THE MARKET
The impetus for significantly increased world nuclear generating
capacity arises from aggressive plans in Asia (excluding Japan)
and the Middle East.
China currently has 15 operating reactors which contribute less
than 2% of the country’s electricity production, and another
26 reactors under construction. China’s national energy
policy calls for nuclear power production to double by 2020 to
between 60-70 GWe and then triple to at least 200 GWe by
2030. Some adjustment in the near term plan is expected after
post-Fukushima design reviews, but rapid growth is assured as
China strives for a cleaner energy sector.
In the Middle East, the United Arab Emirates has begun
construction on four nuclear power plants for commissioning
from 2017 and has announced plans for up to another 10 plants
once the first group is completed. Saudi Arabia is proceeding
with an evaluation of their plan to build at least 16 nuclear plants
to replace its inefficient use of oil for domestic power generation.
Elsewhere, reactor new builds are continuing in Russia (33
in operation and 10 under construction), South Korea (23
in operation and three under construction), and India (20
in operation and seven under construction). If these trends
continue then, by 2030, more than half of world nuclear
electricity production will be outside Western Europe and North
America, which currently account for 63% of world capacity.
In November 2011 the International Energy Agency (IEA)
released its latest “World Energy Outlook – 2011” which was
its first opportunity to revise its nuclear power forecasts since
the Fukushima incident. The IEA lowered slightly its forecast of
nuclear production to 70% growth by 2035, driven by China,
India, and Korea. The striking statistic is that according to the
IEA, 90% of world projected energy demand growth arises from
non-OECD economies, of which China alone will account for
more than 30%. This has significant implications for all energy
sources and it is difficult to envisage an energy future which
does not involve a substantial increase in nuclear generated
electricity once climate change policies become internationally
entrenched.
The Company has consistently drawn attention to the state of
the uranium supply industry, pointing out that global uranium
production is below annual reactor requirements and that the
supply deficit, which is temporarily filled by the consumption of
inventories and the Russian Highly Enriched Uranium agreement
(HEU) which terminates in 2013 will have to be closed by
commissioning new uranium production at an increasing rate
over the next eight years. As outlined above, the Fukushima
incident has not significantly reduced current or future reactor
requirements. However, investor reaction to Fukushima has
potentially frustrated the financing of some new uranium
production which will further exacerbate future supply constraints.
Uranium production increased from 93.7Mlb U3O8 in 2002
to 142.0Mlb U3O8 in 2011. On the basis that world reactor
requirements in 2011 were approximately 164Mlb U3O8, and by
the Company’s estimates will rise to over 260Mlb U3O8 by 2020,
it is apparent there is still a uranium supply shortfall. As noted in
the 2010 Annual Report, much of the recent growth in uranium
production is attributable to a single country, Kazakhstan,
where production rose from less than 7.8Mlb U3O8 in 2002
to 50.6Mlb U3O8 in 2011, a 545% increment. The traditional
major uranium producers, Canada and Australia, struggled to
maintain historical production levels, as did Namibia, despite
the Company’s significant new production at Langer Heinrich.
The attenuated price weakness in the uranium market since the
Fukushima incident is at risk of sending a false signal to the
nuclear power industry about the perceived abundance of new
uranium production. Mining costs are increasing worldwide,
as are construction capital costs. Some governments are
looking to additionally tax the extractive industries by levying
extra royalties or imposing profit or resource rent taxes without
recognising that those incremental costs may well discourage
new investment as well as impair some existing operations.
Internal work undertaken by the Company with the assistance
of external analysts indicates that the next level of sustainable
uranium production will not be achieved until prices rise by at
least 70% from current low levels. Even with that inevitable
price inducement, new production will experience delays and
cost pressures which will threaten a “higher for longer” market
outlook instead of the more orderly price and production run-up
which some participants wishfully predict.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
MANAGEMENT DISCUSSION
AND ANALYSIS
Darryl Butcher
Executive General Manager - Project Development
The following Management Discussion and Analysis (MD&A) for
Paladin Energy Ltd (Paladin or the Company) should be read in
conjunction with the Directors’ Report and the audited Financial
Report for the year ended 30 June 2012. The effective date of
this report is 30 August 2012.
The Financial Report has been prepared in accordance with
International Financial
Australian Accounting Standards,
Reporting Standards (IFRS), other authoritative pronouncements
of the Australian Accounting Standards and the Corporations
Act 2001.
In addition to these Australian requirements further information
has been included in the Consolidated Financial Statements for
the year ended 30 June 2012 in order to comply with applicable
Canadian securities law, as the Company is listed on the Toronto
Stock Exchange.
Additional information relating to the Company, including public
announcements, is available at www.paladinenergy.com.au.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this MD&A, including those
relating to strategies and other statements, are predictive in nature,
and depend upon or refer to future events or conditions, or include
words such as “expects”, “intends”, “plans”, “anticipates”, “believes”,
“estimates” or similar expressions that are forward looking statements.
Forward looking statements include, without limitation, the information
concerning possible or assumed further results of operations as set forth
herein. These statements are not historical facts but instead represent
only expectations, estimates and projections regarding future events
and are qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations generally.
The forward looking statements contained in this MD&A are not
guarantees of future performance and involve certain risks and
uncertainties that are difficult to predict. The future results of the
Company may differ materially from those expressed in the forward
looking statements contained in this MD&A due to, among other factors,
the risks and uncertainties inherent in the business of the Company.
The Company does not undertake any obligation to update or release
any revisions to these forward looking statements to reflect events or
circumstances after the date of this MD&A or to reflect the occurrence
of unanticipated events.
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12
PALADIN ENERGY LTD ANNUAL REPORT 2012
REVIEW OF OPERATIONS
CANADA
AUSTRALIA
Michelin
Advanced Exploration
Postville
LABRADOR
Happy Valley - Goose Bay
Quebec
Oobagooma
Exploration
Manyingee
Advanced Exploration
NEWFOUN DLAN D
0
300
Kilometres
St. John’s
Perth
0
1000
Kilometres
Bigrlyi
Advanced Exploration
Darwin
NT
Alice Springs
Mount Isa Projects
Pre Development
Angela / Pamela
Advanced Exploration
WA
QLD
SA
Brisbane
NSW
Adelaide
Sydney
VI C
Melbourne
Paladin 100%
Paladin 41.71%
Paladin 50% JV Cameco
Mount Isa Projects 82%/91%/100%
Resources and Reserves shown above
represent 100% of the resource or reserve -
not the participant’s share, and are depleted
for mining where appropriate
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NIGER
NAMIBIA
MALAWI
Angola
Zambia
Tanzania
Langer Heinrich
Operating Mine plus Expansion
Karonga
Zambia
Mzuzu
Kayelekera
Operating Mine
Swakopmund
Walvis Bay
Windhoek
Botswana
NA MIB IA
Lake
Malawi
M AL AWI
Lilongwe
Mozambique
Algeria
Libya
Takardeit
Exploration
Arlit
Agadez
NIGER
Chad
Mali
Niamey
Burkina
Faso
Benin
Nigeria
0
300
Kilometres
Atlantic
Ocean
Blantyre
South Africa
0
300
Kilometres
Zimbabwe
0
300
Kilometres
In addition to the resources illustrated above, the Company has a 23.43% interest in Deep Yellow Ltd (ASX: “DYL”) which has projects located near
Langer Heinrich in Namibia and Mount Isa in Australia.
Paladin’s total Mineral Resource inventory includes 181,514t U3O8 (400.2Mlb of U3O8) at 0.07% U3O8 in the Indicated and Measured categories
(including ROM stockpiles), an 11% increase from that reported in the previous year. Paladin also holds 81,744t of U3O8 (180.2Mlb of U3O8) at 0.06%
U3O8 in the Inferred Resource category, an 8% increase from that reported for the previous year. A summary of the status of each of the advanced
projects is detailed in the following table. This table does not include Mineral Resources from Bikini, Andersons, Mirrioola and Watta derived from
Paladin’s 82.08% ownership of Summit Resources Limited, or the Duke Batman and Honey Pot deposits.
P A L A D I N E N E R G Y LT D A N N U A L R E P O R T 2 012
13
URANIUM PRODUCTION
Project
Overview
*Langer Heinrich Mine
– 100%
(Namibia, Southern Africa)
The Company’s cornerstone asset
commenced production in 2007. The
Stage 3 expansion is complete with
production at 5.2Mlb per annum (pa).
Studies are underway for a further
expansion to 10Mlb pa.
Mining Method/
Deposit Type
Conventional open
pit; calcrete
*Kayelekera Mine –
100%(a)
(Malawi, Southern Africa)
Paladin’s second operational
uranium mine announced commercial
production in July 2010. Producing
near 3.3Mlb pa nameplate.
Conventional open
pit; sandstone
Outlook
Resources
Project life in
excess of 20
years
Exploration
to identify
additional
resources
for mine life
extension
M&I (inc
stockpiles):
Inferred:
M&I (inc
stockpiles):
Inferred:
127.3Mt
@0.053%
(147.8Mlb U3O8)
18.5Mt @0.06%
(24.1Mlb U3O8)
17.5Mt @ 0.08%
(30.4Mlb U3O8)
5.4Mt @ 0.06%
(7.5Mlb U3O8)
URANIUM DEVELOPMENT
Project
Overview
*Michelin Project –
100%
(Labrador, Canada)
Paladin’s first entry into Canada.
Resource definition and additional
exploration will commence in the
second half of calendar year (CY) 2012.
Mining Method/
Deposit Type
Open pit -
underground;
metasomatic
**Manyingee Project –
100%
(Western Pilbara,
Western Australia)
Resource definition and extension
drilling has been planned and expected
to commence in the September 2012
quarter.
In-situ leach;
sandstone
Outlook
Resources
Resource
definition and
extension
drilling to
commence
M&I:
Inferred:
3 year staged
feasibility study
required
M&I:
Inferred:
40.2Mt @ 0.09%
(83.8Mlb U3O8)
29.1Mt @ 0.08%
(53.0Mlb U3O8)
7.9Mt @ 0.102%
(17.8Mlb U3O8)
5.5Mt @ 0.05%
(6.2Mlb U3O8)
A key pipeline asset for Paladin.
In-situ leach;
sandstone
3 year reserve/
resource drilling
required
Exploration
target:
8.0Mt @ 0.12%-
0.14% U3O8
Oobagooma Project –
100%
(West Kimberley,
Western Australia)
*Valhalla Skal & Odin
Deposits – 91.04%(b)
(Queensland, Australia)
Paladin’s primary Australian asset.
A large effort is being made to
expand the current resource, continue
environmental studies and move
towards a Feasibility Study.
Open pit -
underground;
metasomatic
*Bigrlyi Deposit –
41.71%
(Northern Territory,
Australia)
Drill planning in progress to expand
resources within the JV tenements. Co-
operative arrangement to assess nearby
regional targets.
Open pit -
underground;
sandstone
*Angela Deposit – 50%
(Northern Territory,
Australia)
Planning is underway for resource
extension and development drilling.
Open pit -
underground;
sandstone
Development
dependent on
Queensland
Government U
Policy changes
and market
conditions
Mining and
engineering
studies
underway.
Additional
drilling to
expand
resources
planned
Future direction
of project to be
determined by
the JV partners
M&I:
Inferred:
57.2Mt @ 0.07%
(93.7Mlb U3O8)
16.3Mt @ 0.06%
(22.0Mlb U3O8)
M&I:
Inferred:
4.7Mt @ 0.14%
(14.1Mlb U3O8)
2.8Mt @ 0.11%
(7.1Mlb U3O8)
Inferred:
10.7Mt @ 0.13%
(30.8Mlb U3O8)
Mineral Resources are quoted inclusive of any Ore Reserves that may be applicable.
Mineral Resources detailed above in all cases represent 100% of the resource – not the participant’s share.
* Conforms to JORC(2004) guidelines & is NI 43-101 Compliant.
** Conforms to JORC(1999) guidelines.
(a) For Kayelekera, the Government of Malawi holds a 15% equity interest in the subsidiary, Paladin (Africa) Limited, the holder of the Kayelekera Mining Licence.
(b) For Valhalla, Skal & Odin, Paladin’s interest is based on 50% deriving from the Isa Uranium Joint Venture and 41.04% via Paladin’s 82.08% ownership of Summit
Resources Ltd.
Langer Heinrich and Kayelekera Mineral Resources have been depleted for mining to the end of June 2012.
M&I = Measured and Indicated.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
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PALADIN ENERGY LTD ANNUAL REPORT 2012
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LANGER HEINRICH MINE, NAMIBIA
PALADIN ENERGY LTD ANNUAL REPORT 2012
The mine ramped-up to meet Stage 3 ore feed requirements
with the mining of 6,577,560 tonnes of ore at an average grade
of 681ppm U3O8. This resulted in total mined tonnages (ore and
waste) of 30,007,211 tonnes with an annualised stripping ratio
of 3.56:1.
Ore feed into the plant for the year totalled 2,649,139 tonnes at
an average grade of 909ppm U3O8 at an average recovery of
83.2%. Production from the plant during the course of the year
resulted in progressively increased tonnage feed rates, reducing
grades and increasing recoveries as the various components of
Stage 3 equipment came on line and were commissioned.
The Stage 4 expansion study was also advanced, assessing the
feasibility of increasing production up to 10Mlb U3O8 pa. At the
end of the financial year, the Environmental Impact Assessment
(EIA) approvals for the Stage 4 expansion were received from
the Namibian Government and the project could be advanced
without any significant remaining regulatory approvals. For the
interim, however, LHUPL will hold off the final completion of
the Feasibility Study until all aspects of the Stage 3 equipment
have been fully optimised and understood and above design
performance can be incorporated into the Stage 4 expansion
study. This is expected by the end of CY2012.
Mark Chalmers
Executive General Manager - Production
NAMIBIA
LANGER HEINRICH MINE (LHM)
LHM in Namibia is owned 100% by Paladin through its wholly
owned Namibian subsidiary, Langer Heinrich Uranium (Pty)
Ltd (LHUPL). Paladin purchased the Langer Heinrich project
in August 2002 and, following development and construction,
commenced producing from the open pit mine with annual
production of 2.7Mlb of U3O8 achieved in 2008/2009. Soon
afterwards, the Stage 2 expansion increased production to
3.7Mlb pa U3O8 in the 2010 financial year. Construction and
commissioning of the Stage 3 expansion was completed in the
2011/2012 financial year with the project achieving nameplate of
5.2Mlb pa U3O8 in the final quarter.
Langer Heinrich is a surficial, calcrete type uranium deposit
containing a Mineral Resource of 77,980t U3O8 at a grade of
0.054% U3O8 (250ppm U3O8 cut-off grade) in seven mineralised
zones designated Detail 1 to 7, within the 15km length of a
contiguous paleodrainage system. The deposit is located in
the Namib Desert, 80km from the major seaport of Walvis Bay.
The Detail 1 to 7 figure below shows the location of the uranium
mineralisation along the length of the Langer Heinrich valley.
OPERATIONS
During
totalled
the 2011/2012 financial year production
4.417Mlb (2,004t) U3O8, up 25% from the previous year’s result
of 3.525Mlb (1,599t) U3O8. This significant increase in production
over the previous period reflected the progressive availability of
various Stage 3 equipment and the increases in efficiency as
this equipment was commissioned. The project was consistently
producing at Stage 3 production rates with production in the
last quarter reaching 102% of the Stage 3 design rate of 5.2 Mlb
U3O8 pa. This solid conclusion to the financial year places the
operation in a very strong position going forward. FY2013 will be
the first year for the project where there has not been any major
construction and/or expansions underway and that design feed
rates have already been established in advance.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
24000E
28000E
32000E
36000E
40000E
-88000N
To Gawib Flats
& Swakopmund
EPL 3500
-92000N
Legend
D7
D2
D1
D5
D3
D6
D4
Current
Reserve Base
-88000N
Old airstrip
ML 140
Plant
Ri ver
Airstrip
Camp
-92000N
To Tikos Flats
& Main Road
Surficial Cover
Ore Reserves >250ppm U3O8
Mineral Resource >250ppm U3O8
Crystalline rock
D7
Detail Grid
Area of 2010 Resource Drilling
Area of 2009 Infill Drilling
N
0
20
Kilometres
24000E
28000E
32000E
36000E
40000E
MINERAL RESOURCE ESTIMATE (DEPLETED FOR MINING AT
END OF JUNE 2012) FOR DETAILS 1 TO 7:-
250ppm Cut-off
Measured Resources
Indicated Resources
Mt
29.5
72.8
Grade
% U3O8
t U3O8
0.054
15,893
0.055
40,320
Mlb
U3O8
35.04
88.90
Measured + Indicated
102.3
0.055
56,213
123.93
Stockpiles
Inferred Resources
25.1
18.5
0.043
10,842
23.90
0.06
10,926
24.1
(Figures may not add due to rounding and are quoted inclusive of any Ore Reserves,
and have been depleted for mining to the end of June 2012)
ORE RESERVE
Economic analysis on this resource has indicated a break-even
cut-off grade of 250ppm.
ORE RESERVE ESTIMATE (250PPM U3O8 CUT-OFF)
250ppm Cut-off
Proved Ore Reserve
Probable Ore Reserve
Stockpiles
Mt
24.2
62.1
25.1
Grade
% U3O8
t U3O8
0.054
13,135
0.057
35,207
0.043
10,842
Mlb
U3O8
29.0
77.6
23.9
Total Ore Reserve
111.3
0.053
59,184
130.5
Ore Reserve has been depleted for mining to the end of June 2012
The Ore Reserve base is unchanged from that reported
previously and has only been depleted for mining to 30 June
2012. The underlying Mineral Resource estimate is based on
Multi Indicator Kriging and incorporates a specific adjustment
based on parameters derived from mining activities. As a result,
additional dilution and mining recovery are not included in the
Ore Reserve estimation.
The cost, processing, mining and pricing parameters used in the
2010 Ore Reserve estimation are essentially unchanged and, as
such, their inclusion can reasonably be justified. The revenue
rate used in the Ore Reserve estimate was US$60/lb and is still
regarded as appropriate when compared to the current blend of
UxC spot price and existing term contracts.
These reserves form the basis of the life of mine planning for
the project. The updated mine model defines a project life of
in excess of 20 years based on a processing throughput of
3.45Mt/pa.
EXPLORATION (EPL3500)
Exploration Licence (EPL) 3500 abuts the Langer Heinrich Mining
Lease to the west and includes the alluvial covered western
extension of the mineralised Langer Heinrich palaeochannel.
Following on from previous drilling, areas close to the mining
lease which remained open were the subject of a drilling
programme completed in August 2011. This data will be
incorporated into a review of the Mineral Resource model
expected to be completed late in the second half of 2012. At this
stage, only limited additional drilling is expected to be carried
out on the western portion of the exploration lease.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
LANGER HEINRICH PROCESS FLOW DIAGRAM
Alkaline Leach
(heat)
Barren Waste
Scrubbing
Crushing
Tailings Disposal
Run-of-mine Ore
Ion Exchange
Adsorption and
concentration
of uranium on
ion-exchange
resin from solution
Counter-Current
Decantation
Truck to
Walvis Bay
Ship to
Converter
Elution
Desorption of
uranium from
resin into
solution
Packaging
Precipitation
Precipitation
of uranium
from solution
Drying
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P A L A D I N E N E R G Y LT D A N N U A L R E P O R T 2 012
19
19
PALADIN ENERGY LTD ANNUAL REPORT 2012
MALAWI
KAYELEKERA MINE (KM)
Kayelekera is located in northern Malawi, 52km west (by road) of
the provincial town of Karonga and 12km south of the main road
that connects Karonga with the township of Chitipa to the west.
Kayelekera is a sandstone hosted uranium deposit associated
with the Permian Karoo sediments and is hosted by the
Kayelekera member of the North Rukuru sediments of the
Karoo. The mineralisation is associated with seven variably
oxidised, coarse grained arkoses, separated by shales and
chocolate coloured mudstones. Uranium mineralisation occurs
as lenses within primarily the arkose units and to a lesser extent
in the mudstone units. The lowest level of known mineralisation
currently is at a depth of approximately 160m below surface.
Kayelekera is owned 100% by Paladin (Africa) Limited (PAL),
a subsidiary of Paladin. In July 2009, Paladin issued 15% of
equity in PAL to the Government of Malawi under the terms
of the Development Agreement signed between PAL and the
Government in February 2007.
The Mining Licence, ML 152, covering 5,520 hectares was
granted in April 2007 for a period of 15 years, following the
completion of a Development Agreement with the Government
of Malawi. A Bankable Feasibility Study and EIA followed and
construction started in June 2007 with completion in early 2009.
After a number of early project commissioning challenges,
targeted upgrades and modifications the operations made
a step change improvement in obtaining near nameplate
production rates in the last 6 months of FY2012.
OPERATIONS
The mine produced 2.478Mlb (1,124t) U3O8 in FY2012, an
increase of 14% from 2.169Mlb (984t) U3O8 the previous year.
While the project did not reach nameplate production for the
year, the project was operating consistently at 90% of nameplate
for the last 8 months of the year with indications that further
increases in production are imminent.
A number of technical challenges and bottlenecks to production
were addressed and solved during the year with a planned
shutdown to address known areas in August 2011. The main
improvement from this work was the replacement of the leach
launders and addressing various constraints in the front-end of
the plant. The upgrades made during August were successful
and resulted in significant increases in throughputs and
improved operability for future operation.
The largest impediment to production was the extended
unplanned shut down that occurred following the planned
upgrades in September 2011, to make substantial repairs
to the acid plant and required the complete relocation of the
packaging and drying facility which were both damaged by
localised land movement. During this period, an interim measure
was put in place to ship a yellow cake paste to LHM in Namibia
for final drying and packaging. The relocation and operational
re-start of the packaging and drying plant was completed in
November 2011. The issue of land movement has since been
managed by remedial measures which have proved successful.
Unfortunately, the combination of both of these planned and
unplanned events resulted in almost two months of down time
for the plant which resulted in a 400,000 – 500,000lbs U3O8
shortfall in production for the year.
The open cut mine produced 1,993,651t of ore at an average
grade of 1,103 ppm U3O8 with total tonnes of ore and waste
totalling 4,548,207t. This resulted in an annualised stripping ratio
of 1.28:1 and Run of Mine (ROM) stockpiles of approximately six
months ahead of the processing plant.
Feed into the plant for the year totalled 1,201,533t at an average
grade of 1,183 ppm U3O8 at an average recovery of 82.1%,
which reflects increased tonnes, reduced grades and increasing
recoveries from the previous financial year. In addition, the plant
is consistently processing in the order of 20% mudstone ores
without any difficulties.
Cost optimisation remained a major focus with the continued
targeted savings on acid, electric power, reagents, diesel and
transport being the main opportunities. A combination of new
technologies and ore blend management are seen as the major
management tools for reducing costs in the near term.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
KAYELEKERA MINE, MALAWI
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Kayelekera
Zambia
Karonga
MzuzuMzuzu
Tanzania
MAL AWI
Lilongwe
Lake
Malawi
Mozambique
Blantyre
Zimbabwe
0
300
Kilometres
33°40’
34°00’
Kayelekera
ML152
Mwankenja
Mpata
Karonga
Mpata
EPL0170
10°00’
Minesite
Mapambo
EPL225/07
Juma
Mazongoni
Nthalire North
Mlali
10°20’
Nthalire South
Chilongo
EPL0169
Chilumba
EPL0168
Chilumba
M AL A W I
N
Chilumba
Livingstonia
Zambia
10°40’
0
20
Kilometres
Chiwerewere
Chimpamba
© Paladin Energy Ltd
In May 2012, there was an industrial action initiated by the
National employees, which lasted seven days and resulted
in reduced production of approximately 35,000lb U3O8. The
company is well advanced with developing an Industrial
Relations strategy and programme as a means of preventing
a re-occurrence and strengthening company relations in a
number of areas with its workforce.
MINERAL RESOURCES AND ORE RESERVES ESTIMATION
An updated Joint Ore Reserves Committee (JORC) and Canadian
National Instrument 43-101 (NI 43-101) Mineral Resources and
Ore Reserves are in the process of being estimated for the
Kayelekera ore body. The estimates will include all data from
the 2010 and 2011 drilling programmes that targeted westward
extensions of the mineralisation at depth. The Company has
recently received the delayed final validation assays which will
be used to confirm the downhole radiometric logging results.
Details for the current Mineral Resource are as follows:
MINERAL RESOURCE AT 300PPM U3O8 CUT-OFF
Mt
Grade ppm
U3O8
t U3O8
Measured Resources
1.02
1,200
1,226
Indicated Resources
14.63
749
10,962
Mlb
U3O8
2.7
24.2
Total Measured &
Indicated
15.65
779
12,188
26.9
Stockpiles
Inferred Resources
1.82
5.4
877
624
1,598
3,390
3.5
7.5
(Figures may not add due to rounding and are quoted inclusive of any Ore Reserves
and are depleted for mining to end of June 2012)
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PALADIN ENERGY LTD ANNUAL REPORT 2012
KAYELEKERA PROCESS FLOW DIAGRAM
Acid Leach
Extraction of uranium into
solution using acid liquor
Milling
Size reduction of crushed ore
Crushing
Tailings Disposal
Run-of-mine Ore
Elution
Desorption of
uranium from
resin into
solution
Precipitation
Precipitation
of uranium
from solution
Drying
Packaging
Resin-in-Pulp
Adsorption and concentration of
uranium on ion-exchange resin from slurry
Truck to
Walvis Bay
Ship to
Converter
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P A L A D I N E N E R G Y LT D A N N U A L R E P O R T 2 012
23
23
PALADIN ENERGY LTD ANNUAL REPORT 2012
The Mineral Resource is unchanged from that previously
reported except for depletion due to mining activities to 30
June 2012. The Mineral Resource estimate is based on Multi
Indicator Kriging techniques with a specific adjustment based
on parameters derived from the mining process.
ORE RESERVES
Economic analysis on this Resource has indicated a break-even
cut-off grade of 400ppm U3O8.
ORE RESERVE AT 400PPM U3O8 CUT-OFF
Ed Becker
Executive General Manager - Geology and Exploration
NIGER
PROJECT AGADEZ
Project Agadez is located in northern Niger, north-west
Africa, 30km west and north-west of the township of Agadez.
It includes three exploration concessions, Tagait 4 (TAG4),
Toulouk 1 (TOU1) and Terzemazour 1 (TER1), totalling 1,480km2.
Paladin completed the takeover of NGM Resources Ltd (NGM),
the owner of the local company Indo Energy Ltd which holds the
concessions, in December 2010 and owns 100% of the project.
The tenements are located in the Tim Mersoï Basin and are
prospective for sandstone type uranium mineralisation in
Carboniferous, Permian and Jurassic sediments. To the north,
the basin has historically produced in excess of 280Mlb U3O8
from two mines (Somair and Cominak) held by Areva.
The Project contains a low grade Inferred Mineral Resource of
11Mlb U3O8 at 210ppm U3O8 at a cut-off grade of 120ppm U3O8,
defined by the previous owners, in shallow sediments. Paladin,
however, is targeting higher grade uranium mineralisation in the
lower stratigraphies of the area. In early 2011, Paladin carried out
a drilling programme which further defined targets for follow-up
in the prospective strata. A 15,000m follow-up drilling programme
was planned to start in November 2011. This, however, has
been delayed until late 2012, pending evaluation of the security
situation in the Agadez area.
The Company’s local personnel, having received training in
Malawi, have been carrying out geological and geophysical
ground surveys to prepare for a possible drilling campaign to
start late in CY2012 or early CY2013.
Proved Reserve
Probable Reserve
Stockpiles
Total Ore Reserve
Mt
0.62
7.08
1.82
9.52
Grade ppm
U3O8
t U3O8
1,388
859
Mlb
U3O8
1.9
14.6
3.5
6,614
1,598
935
877
953
9,071
20.0
(Figures may not add due to rounding and are depleted for mining to end of June 2012)
The underlying Ore Reserve is unchanged from the one
announced in 2008 and has only been depleted for mining until
30 June 2012. The updated Mineral Resource estimate, which is
based on all drilling to date, is expected to result in the estimation
of additional Measured and Indicated category material.
The cost, processing, mining and pricing parameters used in
the Ore Reserve estimation are now well understood and as
such their use in any updated Ore Reserve estimation can be
reasonably justified. The revenue rate used in the current Ore
Reserve estimate was US$60/lb and is regarded as appropriate
when compared to the present blend of UxC spot price and
existing term contracts.
The 2010 drilling showed that the mineralisation was not fully
delineated, particularly at depth with additional mineralisation
identified below the current mine units. The 2011 drilling
programme was completed at the end of September 2011 and
further defined this mineralisation. Initial validation assays were
received late in CY2012 and will be used to confirm the existing
downhole radiometric values used as input into the mineral
resource model.
EXPLORATION
Work concentrated at the mine site targeting deep mineralisation
to the west of the previous resource area and involved 9,554m
of drilling in 62 holes.
Regional exploration drilling completed 37 holes totalling
6,656m. Drilling was terminated early due to the onset of the
rainy season. Regional exploration work continues to expand
along the North Rukuru Basin, south of the mine site into the
Mazongoni and Nthalire areas. Although only sub-economic
uranium mineralisation was identified at Mazongoni, geological
mapping and ground radiometrics located prospective targets
for follow-up drilling in 2012 in the Nthalire area.
Scout drilling at Mwankenja, Mlowo and Mpata, all approximately
15km east of the mine site, identified uranium mineralisation in
two arkose units of up to 10m at 600ppm eU3O8 (MP0317). This
will be the early focus of drilling expected to start in August 2012.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
103Mlb U3O8. Jacques Lake is a smaller mineralised zone and
contained within a breccia system. The geometry of the deposit
makes a large portion of it conducive to open cut mining. More
detailed evaluation will be required to identify any potential for a
Mineral resource increase.
At this stage the Nash/Kitts type deposits are considered possible
future development targets but are not currently included in
the development plans for the albitite deposits. Geological
investigations indicate that other types of uranium mineralisation
may well be found within the substantially underexplored CMB.
The CMB offers excellent potential for additional discoveries.
Substantial resource increases can be expected in the mid to long-
term and within the tenement package with the uranium moratorium
lifted fieldwork and camp establishment have commenced.
Drilling is expected to start in the September 2012 quarter.
Detailed field work within the larger CMB area is expected to
start next northern spring.
Exploration will aim initially at increasing the resources within the
Michelin “mineralised trend”, located inside a 5 to 10km radius
of the Michelin site to expand the known resources sufficiently
to develop a significant mining operation.
U3O8 Mineral Resources, conforming to the JORC guidelines,
reported by Aurora for the Michelin Project are as follows:
The resources are reported at cut-off grades that contemplated
underground (0.05% U3O8 cut-off) and open pit (0.02% U3O8
cut-off) mining, based on preliminary economic assumptions.
Following the decision by the Nunatsiavut Government to define
a process for lifting the moratorium on uranium processing,
Paladin considers the mineral resources associated with the
Michelin project to be current mineral resources as defined in
NI 43-101. A technical report titled ‘Michelin Uranium Project,
Labrador, Canada, NI 43-101 Technical Report on Preliminary
Assessment’ with an effective date of 1 August 2009 was
previously filed by Fronteer Development Group Inc (the previous
owner of Aurora) on Sedar. The technical report has been
reviewed by David Princep, Principal Geologist – Resources
with Paladin. To the best of Paladin’s knowledge there is no
new information that would make this disclosure of the mineral
resources inaccurate or misleading.
In December 2011, the Nunatsiavut Government voted to lift
the three year moratorium of the mining development and
production of uranium on Labrador Inuit land. In March 2012,
the Government enacted an amendment to the Labrador Inuit
Lands Act, finally lifting that moratorium. The Nunatsiavut
Government is a regional, aboriginal government formed in
2005. Five of Paladin’s six deposits fall within the Labrador Inuit
Lands, the area administered by the Nunatsiavut Government.
Bruce Dumville
President/CEO - Aurora Energy Ltd
CANADA
MICHELIN PROJECT
The Michelin Project is located 140km north-east of Goose Bay,
Labrador, Canada, and 40km south-west of the community of
Postville. This project is held 100% through the Aurora Energy
Ltd group, wholly owned by Paladin.
Paladin completed the acquisition of the uranium assets of
Aurora Energy Resources Inc. (Aurora) from Fronteer Gold Inc.
(TSX-FRG, AMEX-FRG) in February 2011. Paladin now holds
title to significant uranium assets within the highly prospective
Central Mineral Belt (CMB) of Eastern Canada.
The CMB contains 83.9Mlb U3O8 Measured and Indicated
Mineral Resources as well as an additional 86.6Mlb U3O8
Inferred Mineral Resource in 12 deposits owned by various
parties. The largest of these deposits is Michelin, the star of
Aurora’s CMB project and one of the world’s top five albitite-
hosted resources. Seven of the deposits, with 83.9Mlb U3O8
Measured and Indicated Mineral resources and 66.7Mlb U3O8
of Inferred Mineral resource, are within 50km of the potential
Michelin mill site. With the exception of one, Aurora owns all of
these deposits. The table below summarises Aurora’s uranium
resources in Labrador.
Michelin contains the bulk of the Mineral Resource and
studies indicate that up to one third could be mined by open
pit methods. Michelin is hosted within an E-W trending, 50°
south dipping, mylonite in felsic metamorphic rocks. The ore is
confined to two 45° west plunging shoots and has been drilled
to 600m depth. The mineralisation contains minimal carbonate
which is expected to result in a low acid consumption.
Metallurgical testing indicates consistent recoveries in excess of
90%. There is good potential along strike of the Michelin deposit
to appreciably increase the resource base from the current
Deposit
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Mt
Grade %
t U3O8
Mt
Grade %
t U3O8
Mt
Grade %
t U3O8
Cut-off 0.05%
& 0.02% U3O8
Michelin
Jacques Lake
Rainbow
Inda
Nash
Gear
Total
5,926
23.0
7.1
0.9
0.2
0.08
0.09
0.09
747
193
8.1
0.08
6,866
(15.1Mlb)
6.0
0.8
1.2
0.7
0.4
32.0
0.11
0.07
0.09
0.07
0.08
0.08
0.10
24,522
4,327
655
826
564
270
31,164
(68.7Mlb)
16.0
8.1
0.9
3.3
0.5
0.3
29.1
0.10
0.05
0.08
0.07
0.07
0.09
0.08
16,370
4,103
739
2,171
367
279
24,029
(53.0Mlb)
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PALADIN ENERGY LTD ANNUAL REPORT 2012
QUEENSLAND
ISA URANIUM JOINT VENTURE
Summit Resources (Aust) Pty Ltd (SRA), a wholly owned
subsidiary of Summit Resources Limited (Summit), operates the
Isa Uranium Joint Venture (IUJV) as well as the Mount Isa North
Uranium Project. Paladin has an 82.08% majority shareholding
in Summit. These areas cover approximately 1,356km2 and
host a number of uranium deposits and resources including the
Valhalla and Skal deposits.
In January 2009, Paladin completed the takeover of Fusion
Resources Ltd (Fusion). This added Fusion’s Valhalla North
Project uranium resources, including Honey Pot and Duke
Batman, on 361km2 of prospective ground to the suite of
Queensland uranium properties.
320000mE
340000mE
360000mE
Gunpowder
Honey Pot
Sunshine
Project
Valhalla North -
Fusion
Isa North - Summit
Isa Uranium
Joint Venture
EPM12572
EPM16006
EPM16006
EPM16006
Uranium
Prospect
Mine
Station
EPM16006
7820000mN
EPM12572
7800000mN
EPM12572
Duke Batman
Joker
EPM17513
7780000mN
Calton
Watta Hills
EPM16921
3
1
5
7
1
M
P
E
Warwai
EPM17513
7760000mN
EPM17519
Odin
Valhalla
7740000mN
EPM17514
Mirriooal
Rich John
Bikini
Skal
New May Downs
7720000mN
N
0
10
Kilometres
EPM17511
Andersons
Red Alpha
MOUNT ISA
© Paladin Energy Ltd
Mount Isa
Mount Isa
QLD
Brisbane
SUMMIT RESOURCES (AUST) PTY LTD 50% AND MANAGER
MOUNT ISA URANIUM PTY LTD 50%
The IUJV covers ground containing the Valhalla, Odin and Skal
uranium deposits 40km north of Mount Isa in Queensland.
Participants in the Joint Venture are SRA and Mount Isa Uranium
Pty Ltd (MIU), each holding a 50% interest with SRA as manager.
MIU is a wholly owned subsidiary of Valhalla Uranium Pty Ltd
(VUL), a formerly listed public company and now a wholly owned
subsidiary of Paladin. Following Paladin’s successful takeover of
VUL in 2006 and Paladin’s acquisition of 82.08% of the issued
capital in Summit, Paladin’s effective participating interest in the
IUJV is now 91.04%.
Ground subject to the IUJV covers 17km2 at Valhalla and 10km2
at Skal. These two areas lie within a much larger holding of
contiguous tenements of 1,717km2 held 100% and managed by
SRA and Paladin.
Work on the Joint Venture in 2011/12 concentrated on drilling
and upgrading the resources at Odin and Skal, while work on
Valhalla included mineralogical and metallurgical testing.
VALHALLA URANIUM DEPOSIT
The Valhalla uranium deposit is located 40km north-west of
Mount Isa on Exploration Permit for Minerals (EPM) 17514. The
deposit is located in albite-carbonate-hematite breccias and
mylonites as well as altered mafic rocks. Strike length of the
deposit is 1,100m and the true width can reach 90m with an
average of about 50m.
A Mineral Resource estimate in 2010, conforming to both the
JORC (2004) guidelines and the requirements of NI 43-101, at a
230ppm cut-off indicated a combined Measured and Indicated
Mineral Resource of 63.4Mlb U3O8 at 830ppm and an Inferred
Mineral Resource of 12.8Mlb U3O8 at 640ppm (see table at the
end of this section for more detail).
ODIN URANIUM DEPOSIT
The Odin uranium deposit is located 1km north of Valhalla at
EPL 17514. At Odin, resource delineation drilling was completed
for 2011 with an additional 28 reverse circulation (RC) holes.
Mineralisation plunging 20-30° to the south was drilled over
widths of 20-30m with grades in the range of 300-6,000ppm
eU3O8 about 400m north of Valhalla. This mineralisation was
highlighted by hole VR0432 (340m-371m/31m @ 1,006ppm
eU3O8). High-grade intervals occur within brecciated and
albitised sandstones near contacts with basalt. Down-dip
drilling to the east identified thick (40-70m) mineralised zones
that flatten from -70°E to -40°E; grades in this area range
from 200-700ppm eU3O8. A mineral resource update has now
been completed and is stated in the table below. The Mineral
Resource update represents a 70.3% increase on the previous
Mineral Resource and for the first time Indicated Mineral
Resources have now been defined.
SKAL URANIUM DEPOSIT
The Skal uranium deposit is located 30km north of Mount
Isa. Skal resource drilling was completed in September 2011,
totalling 57 holes and 9,592m. The objective was to complete
40m x 40m resource drill outs at Skal South, East, North and Far
North and to test new targets at Skal Southwest and Grendel.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
The Skal deposit contains a number of ore lenses which are
concentrated in four zones within an area of approximately
2km2. The mineralised lenses that comprise Skal vary in
strike from 035° to 045° and dip steeply from -85°E to -75°W.
Individual lenses can be up to 50m thick and have a combined
strike length of over 1,300m. High grade intervals are associated
with quartz veins within brecciated and albitised siltstones and
basalts. The deposit area is structurally complex, and orebodies
are truncated and offset by faults.
In March 2012, a Mineral Resource update was completed
and is stated in the table below. The Mineral Resource update
represents a 50% increase on the previous Mineral Resource.
The Mineral Resource estimate was undertaken using Kriging
methodologies with search radii dependant on variography
results and drill hole spacing. Approximately 72% of the dataset
was derived from downhole radiometrically logged equivalent
U3O8 grades. The remainder was from geochemical assays.
Downhole logging was carried out using Company owned
and calibrated equipment, with derived grades being validated
against assays in a number of drill holes. All recent holes were
downhole surveyed for deviation and collars were located using
DGPS equipment.
MOUNT ISA NORTH URANIUM PROJECT
SUMMIT RESOURCES (AUST) PTY LTD 100% AND OPERATOR
The project is located 10km to 70km north and east of Mount
Isa and contains numerous uranium anomalies, most of which
still have to be investigated thoroughly. Exploration continues on
Summit’s 100% owned Mount Isa North Project where Summit
holds 1,356km2 of granted tenements that are prospective for
uranium, copper and base metals. The tenements are centred
on the city of Mount Isa. The project includes the Bikini, Watta,
Mirrioola and Andersons uranium deposits in addition to
numerous other uranium prospects.
Work during the year concentrated on Andersons and Mirrioola
and their resource status is shown in the table below. Regional
exploration identified numerous targets for future follow-up drilling.
VALHALLA NORTH PROJECT
PALADIN 100%
The Valhalla North Project is located on two tenements currently
totalling 361km2, situated 40 to 75km north of the Valhalla
deposit. The geological setting is similar to the Summit/Paladin
projects to the south where albitised basalts with interbedded
metasediments are mineralised along east-west and north-
south structures in Eastern Creek Volcanics.
Ground work and drilling of the Duke Batman prospect in 2010
did not extend the mineralisation; however, it did confirm and
refine the geological model. Mineral Resources are listed in the
table at the end of this section.
RESOURCE AND DEVELOPMENT STATUS MOUNT
ISA REGION - ALL PROJECTS
Recent metallurgical testwork indicates that the ore is amenable
to high temperature and pressure alkaline leach. Previous
mineralogical and metallurgical work showed the ore to be of
a very fine grained and sometimes refractory nature, containing
increased gangue carbonate minerals. This explains a high
acid consumption by such leach tests resulting in marginal
economics at current uranium prices. Alkaline leaching the ore,
however, showed acceptable recoveries of 80 to 90% at high
temperature and pressure at normal chemical consumption.
Radiometric sorting of the ore showed further encouraging
results. Testwork in 2012/13 will aim at confirming an economic
flowsheet based on alkaline leach and radiometric sorting.
Total Resources under Paladin’s and Summit’s management in
the Mount Isa region increased by 14% over the 2011/12 year.
Total Measured and Indicated Mineral Resources now include
106.2Mlb at 743ppm U3O8 and Inferred Resources of 40.7Mlb at
574ppm U3O8. Details are as follows:-
Deposit
Measured Resources
Indicated Resources
Inferred Resources
Cut-off
ppm U3O8
Mt
Grade
ppm
t U3O8
16.0
819
13,116
Mt
18.6
14.3
8.2
5.8
1.4
Grade
ppm
840
640
555
497
1,449
t U3O8
15,662
9,177
4,534
2,868
2,079
0.5
1,370
728
Mt
9.1
1.4
5.8
6.7
0.1
4.2
2.0
0.3
2.6
Grade
ppm
t U3O8
643
519
590
493
1,639
410
555
1,100
700
574
5,824
708
3,430
3,324
204
1,720
1,132
325
1,799
18,466
Paladin
Attribution
91.0%
91.0%
91.0%
82.0%
82.0%
82.0%
82.0%
100%
100%
16.0
819
13,116
48.8
718
35,048
32.2
14.6
819
11,940
(26.3Mlb)
43.9
719
31,530
(69.5Mlb)
28.4
579
16,430
(36.2Mlb)
230
250
250
250
250
230
250
250
250
Valhalla*
Skal*
Odin*
Bikini*
Andersons*
Watta
Mirrioola*
Duke Batman*
Honey Pot
Total
Total Resource
Attributable to
Paladin
(Figures may not add due to rounding)
* Deposits estimated using Multiple Indicator Kriging within a wireframe envelope.
All other resources are estimated using Ordinary Kriging with an appropriate top
cut. Data for all deposits is a combination of geochemical assay and downhole
radiometric logging.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NORTHERN TERRITORY
BIGRLYI JOINT VENTURE
ENERGY METALS LIMITED 53.29% AND MANAGER
NORTHERN TERRITORY URANIUM PTY LTD 41.71%
SOUTHERN CROSS EXPLORATION NL 5%
The Bigrlyi Joint Venture (BJV) covers ten granted Exploration
Retention Licences located approximately 320km north-west
of Alice Springs in the Northern Territory. Participants in the
Joint Venture are Energy Metals Limited (53.29% and Manager),
Northern Territory Uranium Pty Ltd (a wholly owned subsidiary
of Paladin) (41.71%) and Southern Cross Exploration NL (5%).
Energy Metals Limited, as the Manager of the BJV, announced
in June 2011 the completion of a Pre-Feasibility Study (PFS)
for the Bigrlyi Project. The PFS showed that the project is
technically feasible, however, the key finding was that a
substantial increase in the resource base is required to improve
the project economics.
In late June 2011, Energy Metals Ltd released an updated
Mineral Resource estimate based on all drilling to date. The
revised geological model and estimation parameters based
on the close spaced drilling completed previously has resulted
in a slightly reduced total Mineral Resource than previously
announced. The breakdown of Mineral Resource category is
detailed below and is reported at a 500ppm U3O8 cut-off grade.
In November 2006, Cameco Australia Pty Ltd (Cameco) and
Paladin Energy Minerals NL (PEM) on invitation of the Northern
Territory Government submitted an Exploration Licence
application for 12 blocks covering the Angela and Pamela
uranium prospects south of Alice Springs for a total of 37.67km2.
In 2 October 2008, Exploration Licence 25758 was granted to
the Cameco (50%) and PEM (50%) Joint Venture for a period
of six years. The project was managed by Cameco during the
2009 and 2010 drilling programmes. Management of the project
was handed over to PEM in September 2011.
Following extensive compilation and validation of historic data
and drilling programmes in 2009 and 2010 PEM has undertaken
an initial estimate of U3O8 mineral resource at Angela-Pamela,
Australia. This estimate is in compliance with the NI43-101 and
the JORC guidelines.
The Mineral Resource estimate is based on 794 holes totalling
180,468m and covers the Angela (1 to 5) and Pamela deposits.
The mineralisation plunges shallowly, approximately 9°, to the
west and the larger of the deposits, Angela 1, has been defined
up to 4.3km to the west at depths up to 600m and remains open.
The mineralisation is contained within nine individual stratigraphic
sequences with mineralised thicknesses of up to 10.4m.
The cut-off for the Mineral Resource is a combination of grade
greater than or equal to 300ppm U3O8 and thickness greater
than 0.5m. In addition, areas of low grade probability were
removed from the model.
Mineral
Resource
Classification
Indicated
Inferred
Tonnes
Mt
4.7
2.8
Grade
ppm
U3O8
1,366
1,144
Metal
t U3O8
Metal
Mlb U3O8
6,400
3,200
14.0
7.1
Mineral
Resource
Classification
Tonnes
Mt
Grade
ppm
U3O8
Metal
t U3O8
Metal
Mlb U3O8
Inferred
10.7
1,310
13,980
30.8
(Figures in the table above may not add due to rounding)
All data will be collated to develop an updated geological model and update the
resource estimate.
ANGELA JOINT VENTURE
PALADIN ENERGY MINERALS NL 50% AND MANAGER
CAMECO AUSTRALIA PTY LTD 50%
formed at geochemical
The Angela-Pamela deposits contain sandstone hosted
uranium mineralisation
(redox)
boundaries by deposition of uranium from groundwater. It is
located approximately 25km south of the central business
district of Alice Springs, and straddles the Old South Road and
the Central Australian Railway.
Uranerz Australia Ltd (Uranerz) defined a resource on the
Angela-Pamela deposit after working extensively on the
property between 1972 and 1983. Uranerz closed its Australian
operations in 1991.
The Mineral Resource estimation was completed using a two
dimensional conditional simulation with the dataset being
derived predominantly from recent and historic downhole
logging. The radiometric grades have been
radiometric
extensively validated against laboratory assays.
This updated Mineral Resource estimate improves on the
historic resources previously announced providing a 10%
increase in both grade and tonnage U3O8.
As part of the licence conditions, baseline groundwater and
dust monitoring were completed prior to the commencement of
drilling activities. This programme is ongoing as part of a series
of environmental studies, including water, fauna and flora, dust,
radiation, meteorology and soils.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
WESTERN AUSTRALIA
MANYINGEE URANIUM PROJECT
Manyingee (held 100%) is located in the north-west of Western
Australia, 1,060km north of Perth and 85km inland from the
coastal township of Onslow. The property is comprised of three
mining leases covering 1,307 hectares. Paladin also holds one
granted EPL 08/1496 totalling 89km2 at Spinifex Well, 25km
north-east of Manyingee. Paladin purchased Manyingee in
1998 from Afmeco Mining and Exploration Pty Ltd (AFMEX), a
subsidiary company of Cogema of France.
Manyingee is an in-situ recovery amenable sandstone-type
uranium deposit occurring in a palaeochannel of Cretaceous
age in the West Pilbara region of Western Australia. The Inferred
and Indicated Mineral Resource at Manyingee totals 10,890
tonnes (24Mlb) of U3O8 at 0.09% and Paladin’s geological
analysis has identified an exploration target of at least another
5,030 tonnes (11Mlb) of U3O8 at 0.1%.
The mineralisation was first identified in 1974 and was followed
by resource drilling to 1984 and a field leach trial in 1985 carried
out by AFMEX. Although the field leach trial, at that time,
did not prove economically successful, it did prove that the
mineralisation is amenable to solution mining.
Paladin acquired the project in June 1998. The evaluation
showed that new experience since the previous operator’s work
could substantially improve on the existing results, making the
project economically viable.
Late 2011 Paladin’s Programme of Works was approved by
the Western Australian Department of Mines and Energy. After
completing archaeological clearance of the proposed work
areas, Paladin commenced drilling in August 2012.
Paladin proposes to develop the project over a 4-5 year period
starting with drilling, metallurgical testwork and engineering
studies leading to a Field Leach Trial and subsequent BFS. The
proposed timeline includes sufficient time to obtain regulatory
approvals for mining. The current development model for the
project is to produce approximately 900 tonnes (2Mlb) of U3O8
per year with a mine life in excess of 10 years.
Manyingee contains JORC (1999) Code compliant Mineral
Resources as shown below at a cut-off grade of 300ppm U3O8:
Mineral
Resource
Classification
Indicated
Inferred
Tonnes
Mt
7.9
5.5
Grade
ppm
U3O8
1,000
500
Metal
t U3O8
Metal
Mlb U3O8
8,080
2,810
17.8
6.2
(Figures may not add due to rounding)
Note: for NI 43-101 requirements, previous tonnages, grades,
assays and other technical data relating to the Manyingee deposit
are taken from historical records prior to the implementation of the
current NI 43-101. While the data are believed to have been acquired,
processed and disclosed by persons believed to be technically
competent, they were estimated prior to the implementation of NI
43-101 and are therefore regarded as historic resources. A Qualified
Person as defined in NI 43-101 has not done sufficient work to
classify the historical estimate as current Mineral Resources. Paladin
is not treating the historical estimates as current Mineral Resources
as defined in NI 43-101 and for this reason the historical estimates
should not be relied upon. The mineral resource classifications used
in this estimate would be equivalent in nature to those defined in NI
43-101 as there has been no substantive change in the JORC Code
definition of Indicated or Inferred Mineral Resources subsequent to
the JORC (1999) Code. The historical information is presented on the
basis that it may be of interest to investors.
OOBAGOOMA URANIUM PROJECT
Oobagooma is located in the West Kimberley region of Western
Australia, 1,900km north-north-east of Perth and 75km north-east
of the regional centre of Derby. The project comprises two long-
standing applications for exploration licences covering 452km2.
In 1998, Paladin acquired a call option in relation to the
purchase of Oobagooma and, in turn, granted a put option
to the original holder of the project. Exercise of both options
is subject to the exploration licences being granted by the
State. The exploration licences are situated on freehold land
owned by the Commonwealth Government and used by the
military for training purposes. Consent of the Commonwealth
Government and the Department of Defence will be required
before the exploration access can be granted. Negotiations with
the relevant government bodies were initiated in the first half of
2010. Government and defence representatives have indicated
their support for the Oobagooma Project and an access
agreement has been proposed to permit Paladin’s exploration
activities on the military training area.
The Oobagooma project area was explored by AFMEX in the
period from 1983 to 1986 during which time extensive zones
of uranium mineralisation were discovered. Exploration for
sandstone hosted uranium targets focused on the Lower
Carboniferous Yampi Sandstone. The uranium mineralisation is
largely controlled by a package of reduced sediments located
centrally in the Yampi Sandstone at 45 to 80m depth to the north
and 80 to 120m in the south of the prospect area. Following
detailed examination of the work done by AFMEX, the Company
has formulated an exploration target for the prospect of
approximately 8Mt at a grade of between 0.12% and 0.14% U3O8.
Previous tonnages, grades, assays and other technical data
for Oobagooma are taken from historical records prior to the
implementation of JORC or NI 43-101. While the data are believed
to have been acquired, processed and disclosed by persons
believed to be technically competent, it is unverifiable at present. A
Competent Person as defined under the JORC Code or Qualified
Person as defined under NI 43-101 has not done sufficient work to
classify the historical estimate as current Mineral Resources. Paladin
is not treating any historical estimates as current Mineral Resources
as defined in either the JORC Code or NI 43-101 and the historical
estimates should not be relied upon.
The information above relating to exploration, mineral resources and
ore reserves is, except where stated, based on information compiled
by Eduard Becker B.Sc, David Princep B.Sc and Andrew Hutson
B.E, all of whom are members of the AusIMM. Messrs Becker,
Princep and Hutson each have sufficient experience that is relevant
to the style of mineralisation and type of deposit under consideration
and to the activity that he is undertaking to qualify as Competent
Persons as defined in the 2004 Edition of the “Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore
Reserves”, and Messrs Princep and Hutson as a Qualified Person
as defined in NI 43-101. Messrs Becker, Princep and Hutson are full-
time employees of Paladin Energy Ltd and consent to the inclusion of
this information in the form and context in which it appears.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
The library also holds a large collection of topical industry reference
material and country specific information such as mining laws or
investment conditions comprising an estimated 60,000 individual
monographs and conference papers, project evaluation and
exploration reports, documents, reprints, maps and technical
journals kept in hardcopy, microfiche and a rapidly increasing
number of resources in electronic format, including networked or
internet databases and full-text resources. The library is managed
through online information management and retrieval systems
enabling the sharing of knowledge throughout the Company and
allowing for rapid research of uranium prospects, deposits and
mineralisation on a country by country basis.
The geology resource database is managed in an integrated
relational database system readily available for processing of
exploration and mining data. The data continues to be utilised
by the Company as an asset for project generation to evaluate
opportunities and generate new uranium prospects and
projects for acquisition and exploration.
INVESTMENTS
DEEP YELLOW LTD (DYL)
PALADIN 23.43%
DYL is an ASX-listed, advanced stage uranium exploration
company with a portfolio of exploration projects in the southern
African nation of Namibia and in Australia. It also has a listing on
the Namibian Stock Exchange (NSX).
DYL’s focus is in Namibia where its operations are conducted
by its wholly owned subsidiary Reptile Uranium Namibia (Pty)
Ltd (RUN). RUN holds 100% of four EPLs covering 2,872km2
and three joint venture EPLs covering 1,323km2 (in which
it has earned 65% from Nova Energy (Namibia) (Pty) Ltd). All
seven tenements are situated in the Namib Naukluft Desert
Park inland from Walvis Bay and south and west of Paladin’s
LHM. Its flagship is the Omahola Project currently under PFS
with concurrent resource drill-outs on the high grade Ongolo
– MS7 Alaskite trend. It is also evaluating a stand-alone project
for its low grade Tubas Sand uranium deposit utilising physical
beneficiation techniques it successfully tested in 2011.
In Australia the company owns the Napperby Uranium Project
and numerous exploration tenements in the Northern Territory
and the Mount Isa District in Queensland.
AUSTRALIA’S URANIUM POLITICS
At the national level of Australian politics, both the Federal Labor
Party and the Federal Coalition parties support development of
the uranium industry, however, the granting of licences to mine
uranium is a decision made within the residual jurisdiction of
each state government.
The state based Labor Government of South Australia supports
existing mines and is receptive to new uranium projects.
The state based Labor Government of the Northern Territory
also supports existing mines and is receptive to new uranium
projects, although this is qualified by the Government’s
announcement on 28 September 2010 that it would not
support mining of the Angela and Pamela deposits south of
Alice Springs. The opposition Country Liberal Party supports
uranium mining.
The Liberal-National Party Coalition Government of the State
of Western Australia supports uranium mining in Western
Australia and several uranium mining projects have progressed
to environmental assessment since that Government was
elected in late 2008. At its State Conference in June 2011, the
opposition Labor Party reaffirmed its stance against uranium
mining. The next Western Australian state election must be held
no later than April 2013.
A state election held in Queensland on 24 March 2012 resulted
in a change of government from Labor to a Liberal-National
Party (“LNP”). The previous state Labor Government in
Queensland would not grant a licence to mine uranium. Prior to
the election, and in the context of the LNP’s desire for uranium
mining not to be an election issue, the incoming Liberal-National
Premier, Campbell Newman, had said that his government had
“no plans or desire to approve uranium mines in Queensland at
this time”. Subsequent to the election, the LNP has maintained
that position. To progress the currently defined uranium mineral
resources in the Mount Isa region to mineral reserve status
will require a state government policy change in Queensland.
Through membership of industry bodies, such as the Australian
Uranium Association and the Queensland Resources Council,
Paladin is involved in debate and research to facilitate a change
in government policy.
URANIUM DATABASE
Paladin owns a substantial uranium database, compiled over
30 years of investigations by the international uranium mining
house Uranerzbergbau of Germany, incorporating all aspects
of the uranium mining and exploration industry worldwide and
including detailed exploration data for Africa and Australia.
Uniquely among Australian companies, the primary focus of
Paladin’s activities for the past years has been uranium. In that
time the Company has maintained and expanded its library
of databases consisting of extensive collections of technical,
geological, metallurgical, geophysical and geochemical
resources, which include resource evaluations, drill hole data,
downhole logging data, airborne radiometric surveys results,
open-file data, and photographic archives.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
HEALTH AND SAFETY
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P A L A D I N E N E R G Y LT D A N N U A L R E P O R T 2 012
31
Simon Solomons
Senior General Manager - Technical Services
Paladin is committed to achieving the highest performance in
Occupational Health and Safety and Radiation to create and
maintain a safe and healthy workplace. Our approach to health
and safety management is guided by our policy which states that
the safety, health and well being of employees, contractors and
the community reflect the core value to Paladin’s operations in
line with Paladin’s aim for zero injuries in the work place. Paladin
is fully committed to achieving minimum radiation exposure to
its workers, members of the public and the surrounding natural
environment. The Company is also committed to minimising
the potential long-term environmental impact of radiation by
the safe management of radioactive waste rock material at its
sites (exploration, construction, mining and processing). These
objectives will ensure that:
>
>
radiation doses to workers and the general public are
less than internationally accepted limits and are as low as
reasonably achievable; and
there are no adverse effects on the regional communities
or their environment.
During the year, Paladin undertook two external National
Occupational Safety Association (NOSA) grading audits of
its operations – LHM and KM – and is pleased to report the
following health and safety external audit results:
>
LHM: the site achieved a 5 Star NOSA Platinum rating; and
> KM: the site achieved an improved 4 Star NOSA Platinum
rating.
In addition, the Company’s Lost Time Injury Frequency Rate
(LTIFR) was reduced to 0.9 from 1.1 the previous year. This
compares favourably with West Australian metalliferous surface
mining LTIFR of 3.0.
Langer Heinrich Mine
Kayelekera Mine
Operational
Area
Employees
Mine
Contractors
Contractors incl
Construction
Employees
Mine
Contractors
Contractors incl
construction
Hours Worked
705,000
956,155
2,191,238
2,580,806
666,795
82,036
Lost Time Injuries
Fatalities
LTIFR
5
0
7.1
0
0
0
0
0
0
2
0
0.8
0
0
0
0
0
0
Langer Heinrich Mine
Total LTIFR = 1.3
Duration rate = 26.2
Kayelekera Mine Total LTIFR = 0.6
Duration rate = 47.0
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Perth
Exploration
Group
Operational Area Corporate Office
Employees
Contractors
Paladin Employees
All Contractors
Hours Worked
135,826
199,130
26,026
4,287,557
3,922,250
Lost Time Injuries
Fatalities
LTIFR
0
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Duration rate: 0
Paladin Group +
All Contractors LTIFR = 0.9
Lost Time Injury (LTI):
Work injury that results in an absence from work for at
least one full day or shift, any time after the day or shift
on which the injury occurred.
Frequency Rate (FR):
Number of lost time injuries per million hours worked.
Duration Rate:
Average number of workdays lost per injury.
LANGER HEINRICH MINE
LHM continues to focus on safety, health, environmental and
radiation (SHER) management. The third NOSA grading audit
was conducted in November, 2011 and the operation improved
its NOSA rating from a ‘4’ to a ‘5’ Star Platinum (health, safety
and environment) grade.
During the year, LHM reported five LTIs with four of the five
occurring in the final four months of the year. The site annual
LTIFR increased from 0.8 to 1.3. No LTIs were reported
for the mining contractor Karibib Mining and Construction
Company (KMCC), which also maintained its NOSA 5 Star
rating. The mining contractor is in the process of obtaining
the international OHSAS 18001 certification which will further
assist in occupational health and safety performance while
accommodating diverse geographical, cultural and social
conditions. The Stage 3 contractors finished the expansion
project surpassing 500 days ‘Lost Time Incident Free’.
A Safety Action Plan is being implemented to address an upward
LTI trend evident in the latter part of FY12. Key components of the
plan include increased and formalised workplace inspections
and work observations by supervisors, hazard identification
for all site activities. This includes the implementation of a
behaviour-based safety approach that investigates the current
culture and the need to change behaviours. During the year, a
finger swipe time card and access control system and a remote
access control point to ensure effective security measures for
the increased mining and processing activities were introduced.
In terms of occupational monitoring, the radiation programme
continues to focus on the monitoring of dust, gamma, radon
progeny and radon to ensure that all potential pathways are
considered when calculating the total effective dose and also
to ensure the principles of ALARA (As Low As Reasonably
Achievable) are being maintained. The results obtained continue
to be very consistent and all employees’ personal exposures are
well below the allowable regulatory limit of 20 mSv pa.
Langer Heinrich continues to be actively involved with the
Chamber of Mines Uranium Institute in Namibia, a leading source
of advocacy, training and research on uranium related issues,
which continues to have positive influence on the uranium
sector, specifically in SHER. It is a reliable source of knowledge
and support for a never-ending campaign to improve health,
environment and radiation safety.
KAYELEKERA MINE
Like LHM, KM put a concentrated effort into its SHER
management during the year via the continued implementation
of the NOSA safety system. The second NOSA grading audit
was conducted in June 2012 and the operation maintained its
4 Star Platinum (health, safety and environment) rating with an
improved preliminary score of 89%. An improvement over the
next year to a score of greater than 90% and maintaining the
current LTIFR would see the rating increased to 5 star.
During the year, continued implementation of the site safety
system involved the introduction of job observations, further
training and development of local employees and extensive
work on completing all necessary OH&S documentation. One
key focus area throughout the year was vehicle/road transport
and included a gradient reduction of the mine access roads,
increased signage, active speed enforcement, truck escorts
and pre-site entry driver awareness.
The site reported two LTIs for the year – both to Kayelekera
employees. No LTIs were reported for the mining contractor
Mota-Engil. The site annual LTIFR remained unchanged at 0.6.
During the year, the radiation focus was the implementation of the
newly revised Radiation Management Plan with the continued
training of local employees on new radiation equipment and
establishing an extensive database of radiation monitoring data.
A template for analysing and reporting radiation monitoring data
has been developed. This analysis indicates that all employees’
personal exposures are well below the allowable regulatory limit
of 20 mSv pa.
EXPLORATION
Paladin’s exploration continued to be diverse during the year
with programmes undertaken across Queensland, Western
Australia, Malawi and Niger. All exploration programmes
involved drilling activities and work being undertaken in remote
locations. Exploration reported no LTIs for the year and this vastly
improved result came from an increased safety awareness and
training effort.
An Exploration OH&S Management System was developed to
provide consistency across all Paladin exploration sites. This
system was reduced to ten elements for simplicity and is being
implemented in Malawi on a staged approach. This Malawian
implementation programme involves significant training in
all basic aspects of health and safety from an exploration
perspective. In 2012/13,
the Paladin Exploration OH&S
Management System will be implemented for the Manyingee
(Western Australia) and Aurora (Canada) projects.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
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PALADIN ENERGY LTD ANNUAL REPORT 2012
FINANCIAL REVIEW
Alan Rule
Chief Financial Officer
SUMMARISED INCOME STATEMENT
Year Ended 30 June
Revenue
Gross profit
Exploration and evaluation expenses
Administration, marketing and site
non-production costs
Other expenses and income
Loss before interest and tax
Finance costs
Income tax benefit
Loss after tax
Loss after tax attributable to:
Non-controlling interests
Members of the parent
2012
US$M
367.4
26.7
(2.5)
(49.8)
(197.2)
(222.8)
(56.7)
78.7
(200.8)
(28.0)
(172.8)
(200.8)
2011
US$M
268.9
20.3
(3.0)
(54.0)
(6.9)
(43.6)
(61.5)
16.6
(88.5)
(6.2)
(82.3)
(88.5)
Loss per share – basic and diluted
(US cents)
(21.1)
(11.1)
Construction of KM, with a 3.3Mlb design capacity,
commenced in 2007 and after a two-year construction phase
the mine entered its production ramp-up phase in CY2009. KM
continued to ramp-up its production volumes through to July
2010. Commercial production was declared from 1 July 2010.
KM made its first delivery of uranium to customers in December
2009. The operation made substantial positive steps toward the
design of 3.3Mlb pa through a programme of plant upgrades
to address bottlenecks. The plant achieved record production
during the June 2012 quarter, despite being impacted by an
unplanned shutdown of approximately 2 months, due to land
movement in September 2011 (impact 400,000 – 500,000lbs)
and by industrial action in May 2012 which lasted 7 days and
resulted in reduced production of approximately 35,000 to
45,000lb.
(References below to 2012 and 2011 refer to the equivalent
twelve months ended 30 June 2012 and 2011 respectively.)
Cash cost of sales (C1 cost) = cost of sales excluding product
distribution costs, sales
royalties and depreciation and
amortisation before adjustment for impairment. C1 cost is a
widely used ‘industry standard’ term. C1 cost information has
been extracted from the audited financial statements. For an
analysis of total cost of sales refer to Note 5(b) to the financial
statements.
OPERATIONAL OVERVIEW
ANALYSIS OF INCOME STATEMENT
LHM commenced production in 2007 with a capacity of 2.7Mlb
pa. After operating at this level for a sustained period of time,
construction of the Stage 2 expansion to 3.7Mlb pa commenced
in CY2008. LHM reached the Stage 2 design capacity in
December 2009. The plant has consistently operated at the
3.7Mlb pa rate from the beginning of CY2010. Construction of
the Stage 3 expansion to 5.2Mlb commenced at the beginning
of CY2010 and was completed at 31 March 2012. Commercial
production was declared from 1 April 2012. The plant has
achieved Stage 3 design performance and further optimisation
work is ongoing.
ANALYSIS OF REVENUE AND GROSS PROFIT
Revenue from sales
of uranium oxide
Gross profit
Total sales volume
Total production
Up
Up
Up
Up
37%
32%
39%
21%
Year Ended 30 June
2012
US$M
2011
US$M
365.8
26.7
266.8
20.3
Mlb U3O8 Mlb U3O8
6.698
6.895
4.812
5.694
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Revenue increased from US$268.9M to US$367.4M in 2012 as
a result of increased sales of uranium from US$365.8M (2011:
US$266.8M). Total sales volume for the year was 6.698Mlb U3O8
(2011: 4.812Mlb U3O8). LHM sold 4.518Mlb U3O8 (2011: 3.222Mlb
U3O8), including 0.650Mlb U3O8 of LHM material sold through
Paladin Energy Ltd and KM sold 2.180Mlb U3O8 (2011: 1.590Mlb
U3O8). Total production for the year was 6.895Mlb U3O8 (2011:
5.694Mlb U3O8). LHM produced 4.417Mlb U3O8 (2011: 3.525Mlb
U3O8) and KM produced 2.478Mlb U3O8 (2011: 2.169Mlb U3O8).
The average realised uranium sales price in 2012 was US$55/lb
U3O8 (2011: US$55/lb U3O8) compared to the average UxC spot
price for the year of US$52/lb U3O8.
Gross Profit in 2012 of US$26.7M is higher than in 2011
(US$20.3M) due to higher sales volumes. The average C1 cost
of sales increased to US$39/lb (2011: US$35/lb). The C1 cost
of sales for LHM in 2012 increased to US$31/lb U3O8 (2011:
US$28/lb U3O8) due to production disruptions associated with
Stage 3 tie-ins. The C1 cost of sales for KM in 2012 (excluding
impact of impairment) increased to US$54/lb U3O8 (2011:
US$50/lb U3O8) due to disruption problems with the plant
shutdown, unscheduled remediation work and the industrial
dispute. The benefits of increased production levels and cost
benefits from the cost optimisation programme will be realised
in the 2013 financial year. Cost optimisation continues to be a
key focus, with specific target areas including acid, reagents,
diesel, transport and providing increased opportunities for
local workers. Major benefits from these costs reductions are
expected over the next 18 months.
Exploration and Evaluation Expenditure of US$2.5M in 2012
relates to early stage work and project generation activities in
Australia and Malawi and remains relatively unchanged from
2011 (US$3.0M).
Administration, Marketing Expenses and Site Non-production
Costs have decreased from US$54.0M to US$49.8M.
ANALYSIS OF ADMINISTRATION, MARKETING EXPENSES
& SITE NON-PRODUCTION COSTS
Corporate & marketing
Down
21%
Minesites (LHM & KM)
Canadian operations
Up
Up
17%
92%
Year Ended 30 June
2012
US$M
(21.0)
(10.9)
(2.5)
2011
US$M
(26.5)
(9.3)
(1.3)
Non-cash – share-
based payments
Non-cash –
depreciation
Royalties
LHM Stage 4
expansion project
Total
Down
41%
(6.9)
(11.6)
Up
Up
110%
27%
Up
71%
(2.1)
(2.8)
(3.6)
(49.8)
(1.0)
(2.2)
(2.1)
(54.0)
Corporate and marketing cost savings of US$5.5M were
achieved through the cost rationalisation programme that was
announced to the market in the latter half of 2011. Tighter control
has led to a reduction in corporate overheads including travel
costs and outsourced work. Labour costs have reduced as
the high capital investment phase has largely been completed.
Additionally there has been a decrease of US$4.7M in non-
cash share-based payments expense as there was a reduction
in number of share rights granted compared to 2011. These
savings have been partially offset by an increase in expenditure
of US$1.6M relating to non production costs at LHM and KM,
US$0.6M relating to the KM royalties, due to the increase in sales,
US$1.2M relating to the addition of the Canadian operations as
activity increases due to the lifting of the moratorium on mining,
development and production of uranium and US$1.5M relating
to the LHM Stage 4 expansion evaluation project.
Other Expenses and Income have increased from US$33.3M
to US$197.2M due predominantly to an impairment charge
of the KM assets, announced in September 2011 quarterly
Financial Report, of US$178.0M, the write off of the fixed costs
of KM during the plant shutdown of US$9.7M in September
2011 and an impairment of available-for-sale financial assets
of US$8.0M. The continued deterioration of the uranium price
post-Fukushima resulted in a reduction of the recoverable
value of the KM assets, resulting in an impairment charge of
US$132.1M (US$178.0M before tax reduced by a tax benefit of
US$45.9M) (2011: US$Nil) in the September 2011 quarter. The
KM plant shutdown expenses are a result of the planned plant
upgrade shutdown in August and the unscheduled shutdown
of the drying and packaging plant and the acid plant caused by
localised ground movement. The plant upgrade and remedial
work has been completed and the KM plant recommenced
production on 14 October 2011. Following remedial measures
localised ground movement has abated with conditions
continuing to be stable. The impairment of available-for-sale
financial assets expense of US$8.0M is predominantly due to
the recognition of an impairment of the investment in DYL. Under
the accounting standards, the Company was required to write
down the carrying value of its investment in the listed company
DYL to its market price of US$0.047 per share at 30 June 2012.
This does not in any way reflect the Board’s confidence in DYL’s
potential and outlook.
Finance Costs have decreased from US$61.5M by US$4.8M to
US$56.7M due to a portion of the LHM Stage 3 project finance
loan being capitalised as part of the Stage 3 construction costs
and in 2011 finance costs included the US$4.6M loss on the
US$250M convertible bond buyback. Finance costs relate
primarily to interest payable and accretion on the US$325M
convertible bonds issued 11 March 2008, the US$300M
convertible bonds issued 5 November 2010, the US$274M
convertible bonds issued 30 April 2012, the US$98.0M project
finance loan for KM and the US$118.5M project finance loan
for LHM Stage 3. On 29 May 2012, pursuant to its tender offer
the Company repurchased and cancelled US$191M of the
US$325M convertible bonds issued 11 March 2008, leaving a
balance of US$134M.
Income Tax Benefit of US$78.7M for the year to 30 June 2012
is as expected, based on the loss before tax, once factoring the
adjustment for differing tax rates in foreign jurisdictions. Included
in the income tax benefit however are additional amounts arising
on previously unrecognised losses of Summit being recognised
to partially offset the deferred tax liabilities arising from the fair
value adjustment of Summit exploration and a larger tax benefit
in Namibia arising due to the foreign exchange movements.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
These are effectively offset by the tax losses for the Australian
tax group not being recognised (as the non-producing assets
are not yet sufficiently advanced to provide certainty, at this
point in time, of recovery against future income) and a net tax
expense arising on movements in the convertible bond. Malawi
similarly had a significant foreign exchange movement, however
the unrealised losses recognised on the US$ loans were offset
by the foreign exchange impact on carried forward losses, with
a small net tax expense arising.
Non-controlling Interest in net losses of US$28.0M is attributable
to the 18.0% interest in Summit held by third parties and the
15% interest in PAL held by the Government of Malawi.
The Loss after Tax attributable to the members of the parent for
2012 of US$172.8M was higher than the loss after tax for 2011
of US$82.3M predominantly as a result of the recognition of the
KM impairment expenses discussed earlier.
The Loss per Share noted on the Income Statement reflects
the underlying result for the specific reported periods and the
additional shares issued in 2012 compared to 2011.
SUMMARY OF QUARTERLY FINANCIAL RESULTS
Total revenues
(Loss)/profit after tax attributable to members of the parent
Basic and diluted (loss)/profit per share (US cents)
Total revenues
Loss after tax attributable to members of the parent
Basic and diluted loss per share (US cents)
2012
Jun Qtr
US$M
126.2
(35.2)
(4.2)
2011
Jun Qtr
US$M
60.2
(47.7)
(6.3)
2012
Mar Qtr
US$M
67.8
(17.5)
(2.0)
2011
Mar Qtr
US$M
92.9
(13.5)
(1.8)
2011
Dec Qtr
US$M
70.4
3.2
0.4
2010
Dec Qtr
US$M
66.7
(17.6)
(2.5)
2011
Sep Qtr
US$M
103.0
(123.3)
(15.3)
2010
Sep Qtr
US$M
49.1
(3.5)
(0.5)
Total revenues for the quarters ended June 2012, December
2011, September 2011 have increased when compared to
the equivalent comparative quarter as a result of higher sales
volumes of uranium.
Total revenues for the quarter ended March 2012 is lower
than the comparative quarter due to lower sales of uranium
as inventory was held in order to deliver into sales contracts
in excess of 2Mlb for the June 2012 quarter. Uranium sales
tend to fluctuate quarter-on-quarter due to the uneven timing
of contractual commitments and resultant delivery scheduling
by utility customers.
Loss after tax for the quarter ended June 2012 of US$35.2M
is lower than the comparative quarter loss of US$47.7M
predominantly as a result of higher revenues due to higher sales
volumes of uranium.
Loss after tax for the quarter ended March 2012 of US$17.5M
is higher than the comparative quarter loss of US$13.5M
predominantly as a result of a US$11.9M impairment of KM
finished goods inventory discussed earlier.
Profit after tax for the quarter ended December 2011 of
US$3.2M is a turnaround from the loss of US$17.6M in the
comparative quarter predominantly as a result of higher sales
volumes and prices, a higher proportion of LHM sales which
has a lower cost of production than KM, lower finance costs in
2011 as the 2010 finance costs included the US$4.6M loss on
the US$250M convertible bond buy back, other income in 2011
of US$2.1M relating to a foreign exchange gain (2010: US$2.3M
foreign exchange loss) and the recognition of an income tax
benefit of US$10.8M (2010: US$6.4M) predominantly due to
previously unrecognised losses of Summit being recognised to
partially offset the deferred tax liability arising on the fair value
adjustment of Summit exploration.
Loss after tax for the quarter ended September 2011 of
US$123.3M is higher than the loss after tax for 2010 of
US$3.5M predominantly as a result of the recognition of the KM
impairment expense of US$132.1M.
SEGMENT DISCLOSURE (REFER TO NOTE 4 IN THE FINANCIAL
STATEMENTS)
The profit before tax and finance costs of US$60.4M in the
Namibian segment of the Company increased by US$15.5M
(2011: US$44.9M) due to higher sales volumes. In the Malawian
segment the Company reflected a loss before tax and finance
costs of US$242.6M compared to a loss of US$37.4M in
2011 due to the recognition of the KM impairment expense,
announced in September 2011 quarterly Financial Report,
detailed earlier and the impairment of inventory. Exploration
activities have remained relatively consistent from 2011 to
2012. In the Unallocated portion, the Company reflected the
remaining Income Statement activities which for 2012 comprise
mainly marketing, corporate, finance and administration costs.
This area has reduced from a net loss before finance costs
of US$49.7M to a net loss of US$39.5M, which includes the
impairment of available for sale financial assets expense of
US$8.0M.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
SEGMENT GROSS PROFIT
Year ended 30 June 2012
Year ended 30 June 2011
LHM
KM
Total
LHM
KM
Total
Volume Sold (lb)
4,518,345(1)
2,180,000
6,698,345
3,222,135(2)
1,590,000
4,812,135
Average Sales Prices/lb
Revenue
US$55/lb
US$365.8M
US$55/lb
US$266.8M
Cost of Sales (C1)
US$139.0M
US$117.7M
US$256.7M
US$91.1M
US$79.8M
US$170.9M
Cost of Sales/lb (C1)
US$31/lb
US$54/lb
US$39/lb
US$28/lb
US$50/lb
US$35/lb
Profit after C1 costs
Impairment of inventory
Other revenue and costs,
mainly depreciation
Gross profit
US$109.1M
US$39.0M
US$43.4M
US$26.7M
US$95.9M
US$26.4M
US$49.2M
US$20.3M
(1)
(2)
Includes 650,000lb of LHM produced U3O8 sold by Paladin Energy Ltd as part of marketing arrangements.
Includes 200,000lb of LHM produced U3O8 sold by Paladin Nuclear Ltd, Paladin Energy Ltd’s marketing company.
Sales of 6,698,345lb U3O8 at an average of US$55/lb U3O8
generated revenue of US$365.8M in the year ended 30 June
2012. By comparison sales in the year ended 30 June 2011 were
4,812,135lb U3O8 at an average of US$55/lb U3O8 generating
revenue of US$266.8M. Average C1 cost of sales increased to
US$39/lb U3O8 (30 June 2011: US$35/lb U3O8).
C1 cost of sales for LHM in the year ended 30 June 2012
increased to US$31/lb U3O8 (30 June 2011: US$28/lb U3O8) due
to production disruptions associated with Stage 3 tie-ins.
C1 cost of sales for KM (excluding the impact of impairment)
increased to US$54/lb U3O8 in the year ended 30 June 2012
(30 June 2011: US$50/lb U3O8) due to disruption problems with
the plant shutdown, unscheduled remediation work and the
industrial dispute. The benefits of increased production levels
and cost benefits from the cost optimisation programme will be
realised in the 2013 financial year. Cost optimisation continues
to be a key focus, with specific target areas including acid,
reagents, diesel, transport and providing increased opportunities
for local workers. Major benefits from these costs reductions
are expected over the next 18 months. Specific targeted costs
saving areas include acid, reagents, diesel, transport and
providing increased opportunities for local workers.
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
Year Ended 30 June
Net loss after tax
Net (loss)/gain on available-for-
sale financial assets
Transfer of available-for-sale
reserve on acquisition
Transfer of impairment loss to
income statement
Foreign currency translation
Income tax on items of other
comprehensive income
Total comprehensive (loss)/
income for the year
2012
US$M
(200.8)
(25.8)
-
8.0
(44.0)
3.3
(259.3)
2011
US$M
(88.5)
10.8
(3.2)
-
141.1
(3.7)
56.5
Net Loss after Tax is discussed under the Summarised Income
Statement section and is an increase from the loss in the
comparative year.
The increase in other revenue and costs reflects the higher
depreciation expense, included in cost of sales, due to the
larger volume of sales in 2012 compared to 2011.
Net Loss on Available-for-Sale Financial Assets in 2012 of
US$25.8M primarily relates to the fair value decrement in DYL
attributable to the decrease in the DYL share price.
Transfer of impairment loss to income statement US$8.0M
relates to the recognition of an impairment of the investment in
DYL described earlier.
Foreign Currency Translation relates to the foreign currency
translation reserve movement as a result of the translation of
subsidiaries with Australian and Canadian dollar functional
currencies into the Company presentation currency of US
dollars on an ongoing basis and for the comparative year.
Income Tax on Items of Other Comprehensive Income in 2012
relates to tax on movements in available-for-sale financial
assets.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
SUMMARISED STATEMENT OF FINANCIAL POSITION
As at 30 June
Total current assets
Total non current assets
Total assets
Total current liabilities
Total non current liabilities
Total liabilities
Net Assets
2012
US$M
391.6
1,956.1
2,347.7
253.9
899.0
1,152.9
1,194.8
2011
US$M
329.4
2,074.3
2,403.7
118.9
929.6
1,048.5
1,355.2
Current Assets have increased to US$391.6M at 30 June
2012 due to an increase in trade and other receivables and
inventories which has been partially offset by a decrease in cash
and prepayments.
Cash and cash equivalents have decreased slightly to US$112.1M
at 30 June 2012 as a result of the repayment of the LHM Stage 1
project finance facility, expenditure on the Stage 3 expansion at
LHM, principal repayments for the KM project finance facility and
LHM Stage 3 project finance facility, exploration and evaluation
project expenditure as well as finance costs, corporate costs
and an increase in trade and other receivables and inventories
for the year ended 30 June 2012. This has been partially offset
by the net drawdown of US$139.0M under the LHM Stage 3
project finance facility, the US$62.6M net proceeds from the
capital raising and net funds raised of US$77.1M from the issue
of the US$274M convertible bond net of the repayment of the
US$191M convertible bonds.
Trade and other receivables have increased from US$20.5M to
US$82.8M at 30 June 2012 as a result of the timing of US$52.0M
of sales in June 2012 and an increase in the VAT receivable in
Namibia due to the higher Stage 3 production. The debt was
received in July 2012.
Inventories have increased from US$177.7M to US$186.5M at
30 June 2012 due to sales volumes for the year of 6.698Mlb
U3O8, being lower than production volumes of 6.895Mlb U3O8.
Additionally a higher proportion of finished goods are being held
at KM, which has a higher cost than LHM finished goods.
Non Current Assets have decreased to US$1,956.1M at 30 June
2012 primarily as a result of property, plant and equipment,
mine development and intangible assets decreasing due
to the KM impairment expense, announced in September
2011 quarterly Financial Report and through amortisation.
This has been partially offset by capital expenditure on the
Stage 3 expansion at LHM. The US$34.7M decrease in the
exploration assets is due to the foreign exchange movement
on the Australian and Canadian dollar denominated exploration
assets because of the increase in value of the US dollar against
both currencies. There was a decrease in the fair value of other
financial assets primarily attributable to the decrease in the DYL
share price and the foreign exchange movement due to the
appreciation of the US dollar against the Australian currency.
ROM stockpiles increased as planned ahead of the Stage 3
production expansion in order to meet the future mine plan ore-
blend requirements. An increase in deferred tax assets from
US$19.7M to US$81.2M mainly relates to the tax effect of the
impairment of the KM assets.
Current Liabilities have increased from US$118.9M to US$253.9M
at 30 June 2012 primarily as a result of an increase in the current
portion of interest bearing loans and borrowings of US$139.5M.
This is due to the US$134M convertible bonds maturing on 11
March 2013 now being disclosed as current and US$22.1M
drawn down under the LHM Stage 3 project finance facility which
has partially been offset by the repayment of the current portion
of US$15.7M of the LHM Stage 1 project finance facility.
Non Current Liabilities have decreased from US$929.6M to
US$899.0M at 30 June 2012 primarily due the decrease in the
non current portion of interest bearing loans and borrowings of
US$20.7M. This is predominantly as a result of the US$134M
convertible bonds maturing on 11 March 2013 now being
disclosed as current, the repayment of the non current portion
of US$8.6M of the LHM Stage 1 project finance facility, a
US$29.9M repayment of the KM project finance facility and
a US$22.5M repayment of the LHM Stage 3 project finance
facility. This has been partially offset by the drawdown under
the LHM Stage 3 project finance facility of US$118.5M. The
deferred tax liabilities have largely decreased due to the foreign
exchange movement on the US dollar loans in Namibia. As
detailed earlier, there were also significant foreign exchange
movements in Malawi on the US dollar loans however these
were effectively offset by the foreign exchange impact on the
carried forward tax losses.
SEGMENT DISCLOSURE (REFER TO NOTE 4 IN THE FINANCIAL
STATEMENTS)
In the Statement of Financial Position as at 30 June 2012, the
Company reflected an increase in assets for the Namibian
segment in the year predominantly due to the Stage 3 expansion.
For the Malawian segment, a decrease in assets occurred in
the year predominantly as a result of impairment of assets at
KM, announced in September 2011 quarterly Financial Report
and the impairment of inventory. The Exploration segment has
decreased due to the strengthening of the US dollar against
the Australian dollar which has resulted in a decrease in the US
dollar value of exploration assets within Australian and Canadian
dollar functional currency subsidiaries which has been partially
offset by capitalised exploration expenditure.
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Total equity at the beginning of
the financial year
Total comprehensive (loss)/
income for the year
Recognised value of unlisted
employee options and
performance share rights
Movement in other reserves
Contributions of equity, net of
transaction costs
Total equity at the end
of the financial year
Year ended 30 June
2012
US$M
2011
US$M
1,355.2
970.9
(259.3)
56.5
7.4
25.1
66.4
14.6
21.5
291.7
1,194.8
1,355.2
Total Comprehensive Loss for the Year Ended 30 June 2012
is discussed under the Statement of Comprehensive Income
section.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Recognised Value of Unlisted Employee Options and
Performance Rights in 2012 totals US$7.4M (2011: US$14.6M).
During the year 4,014,462 employee options expired or were
forfeited (2011: 4,536,004) with an exercise price ranging from
A$4.50 to A$5.37 per share (2011: A$2.07 to A$8.77). During
the year 1,980,400 performance share rights were granted with
vesting dates ranging from 1 September 2012 to 1 September
2014 (2011: 4,292,117), 1,113,275 performance share rights
vested (2011: 1,300,580) and 928,580 performance share rights
were cancelled (2011: 1,058,700).
Movement in Other Reserves in 2012 of US$25.1M relates to
the creation of the non-distributable reserve of US$27.9M from
the issue of $274M of convertible bonds on 30 April 2012 and a
US$2.8M charge to the convertible bond reserve as a result of
the US$191M convertible bond buyback. In 2011 the movement
of US$21.5M relates to the creation of the non-distributable
reserve of US$28.1M from the issue of $300M of convertible
bonds on 5 November 2010 and a US$6.6M charge to the
convertible bond reserve as a result of the US$250M convertible
bond buyback.
Contributions of Equity in 2012 of US$66.4M relates to the share
placement of 56,866,232 shares at A$1.20 each. Contributions
of Equity in 2011 of US$291.7M relates to the issue of
7,155,938 shares to acquire NGM, the non-controlling interest’s
participation in Summit’s renounceable rights issue and the
issue of 52,097,937 shares to acquire the uranium assets of
Fronteer Gold Ltd. The number of fully paid ordinary shares on
issue at 30 June 2012 is 835,645,290, an increase of 57,947,073
during the year. Share options of 4,217,329 and performance
rights of 6,885,882 remain outstanding at 30 June 2012 to the
employees and consultants directly engaged in corporate, mine
construction, operations, exploration and evaluation work.
SUMMARISED STATEMENT OF CASH FLOWS
Net cash outflow from
operating activities
Net cash outflow from
investing activities
Net cash inflow from
financing activities
Net decrease in cash
and cash equivalents
Cash and cash equivalents at
the beginning of financial year
Effects of exchange rate
changes on cash and cash
equivalents
Cash and cash equivalents at
the end of the financial year
Year ended 30 June
2012
US$M
2011
US$M
(125.8)
(102.0)
(82.2)
(132.5)
201.5
1.3
(6.5)
(233.2)
117.4
347.9
1.2
2.7
112.1
117.4
Net Cash Outflow from Operating Activities was US$125.8M
in 2012 primarily due to the investment in working capital
associated with the increase in production levels at LHM and
KM and the timing of sales. The LHM and KM operations
generated US$113.3M in cash in 2012 before investment in
working capital required to support higher production levels and
payments for administration, marketing and site non-production
costs of US$50.2M, exploration of US$2.5M and net interest
paid of US$36.6M.
Net Cash Outflow from Investing Activities was US$82.2M in
2012 and US$132.5M in 2011 is due primarily to the Stage 3
expansion at LHM and capitalised exploration expenditure.
Net Cash Inflow from Financing Activities of US$201.5M in 2012
is attributable to the US$139.0M net drawdown proceeds of
project financing for LHM and net proceeds of US$62.6M from
the share placement, net funds raised of US$77.1M from the
issue of the US$274M convertible bond net of the repayment of
the US$191M convertible bonds, partially offset by US$77.2M
repayment of project financing for both LHM and KM. The
net cash inflow of US$1.3M in 2011 was attributable to the
US$300M convertible bond receipt partially offset by the full
repayment of the $250M convertible bond and repayment of
the project financing for LHM and KM.
Net Decrease in Cash and Cash Equivalents in 2012 was
US$6.5M, as compared to the net decrease in cash over the
previous corresponding period in 2011 of US$233.2M. The
change is predominantly the result of the higher level of fundraising
in 2012 through the US$139M net proceeds from the drawdown
of LHM Stage 3 project finance facilities, the US$62.6M net
proceeds received from the share placement and net funds
raised of US$77.1M from the issue of the US$274M convertible
bond net of the repayment of the US$191M convertible bonds
compared with the net cash inflow of US$1.3M in 2011 arising
from the funds raised from the issue of the US$300M convertible
bond net of the repayment of the US$250M convertible bond
and repayment of project financing for both LHM and KM. The
completion of the high capital investment phase resulted in
capital expenditure reducing significantly.
Effect of Exchange Rate Changes on cash balances is a gain of
US$1.2M for 2012.
LIQUIDITY AND CAPITAL RESOURCES
The Group’s principal source of liquidity as at 30 June 2012
is cash of US$112.1M (30 June 2011: US$117.4M). Any cash
available to invest is held with Australian banks with a minimum
AA- Standard & Poor’s credit rating over a range of maturities.
Of this US$94.5M is held in US dollars.
The Group’s principal sources of cash for the year ended 30 June
2012 were uranium sales receipts, net proceeds of US$62.6M
from the share placement, net proceeds from the drawdown of
US$139M under the LHM Stage 3 Project Finance Facility and
net proceeds from the issue of US$274M Convertible Bonds
following the repurchase and cancellation of US$191M of the 11
March 2013 bonds.
The remaining amount outstanding at 30 June 2012 on the LHM
project finance facilities was US$118.5M and for the KM project
finance facility, US$98M.
The Group’s consolidated financial statements have been
prepared on a going concern basis which contemplates the
continuity of normal business activities and the realisation of
assets and the settlement of liabilities in the ordinary course of
business.
During the year ended 30 June 2012, the Group incurred net
losses after tax of US$172.8M (2011: US$82.3M) and had net
cash outflow of US$6.5M (2011: US$233.2M). At balance date
the Group had a net working capital surplus of US$137.7M
(2011: US$210.5M) including cash on hand of US$112.1M (2011:
US$117.4M). Included within this cash on hand is US$26.2M
(2011: US$19.5M) which is restricted for use in respect of the
LHM and KM project finance facilities.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Repayment obligations, during the next 12 months, in respect
of interest bearing loans and borrowings are summarised as
follows:
The Company has no other material off balance sheet
arrangements.
> Secured bank loans principal repayments of US$53.1M for
OUTSTANDING SHARE INFORMATION
LHM and KM project financing;
>
>
Interest payments of US$40.5M for LHM and KM project
financing and Convertible Bonds; and
The final US$134.0M payment on
Convertible Bond which matures on 11 March 2013.
the US$325.0M
As set out in Note 27, the Group announced on 15 August 2012
that it had entered into a six year sales off-take agreement with
a leading international utility to sell a total of 13.73Mlb U3O8
in the period from 2019 to 2024. Pursuant to this agreement,
prepayment of US$200M will be made to Paladin in respect of
part of the future U3O8 product deliveries.
In addition, in arriving at its position in relation to going concern,
the Directors have given consideration to the following:
> Paladin has been in discussions with a select group of
nuclear industry parties on strategic initiatives; and
> Paladin has a history of refinancing some of its debt.
Accordingly, the Directors believe that the Group will obtain
sufficient funding to enable the Group to continue as a going
concern and that it is appropriate to adopt that basis of
accounting in the preparation of the financial report.
The following is a summary of the Group’s outstanding
commitments as at 30 June 2012:
Total Less than
1 yr
1 to 5yrs
5yrs + or
unknown
US$M
US$M
US$M
US$M
36.8
1.5
5.2
35.5
5.4
1.5
1.4
33.0
0.8
-
4.8
-
3.8
2.5
-
26.6
-
-
-
0.8
Payments due
by period
Tenements
Mine
construction
Operating leases
Other
Manyingee
acquisition costs
Total
commitments
As at 30 August 2012 Paladin had 835,645,290 fully paid
ordinary shares issued. The following table sets out the fully
paid ordinary outstanding shares and those issuable under
the Company Executive Share Option Plan, the Company
Employee Performance Share Rights Plan and in relation to the
Convertible Bonds:
As at 30 August 2012
Outstanding shares
Number
835,645,290
Issuable under Executive Share Option Plan
4,217,329
Issuable under Employee Performance Share
Rights Plan
Issuable in relation to the US$134 million
Convertible Bonds
Issuable in relation to the US$300 million
Convertible Bonds
Issuable in relation to the US$274 million
Convertible Bonds
Total
6,853,882
20,542,695
53,495,007
125,114,155
1,045,868,358
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Financial Report requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during
the reporting period. Significant areas requiring the use of
management estimates relate to the determination of the
following: carrying value or impairment of inventories, financial
investments, property, plant and equipment,
intangibles,
mineral properties and deferred tax assets; carrying value of
rehabilitation, mine closure, sales contracts provisions and
deferred tax liabilities; and the calculation of share-based
payments.
79.8
41.3
11.1
27.4
FINANCIAL INSTRUMENTS
In relation to the Manyingee Uranium Project, the acquisition
terms provide for a payment of A$0.75M (US$0.8M) by the
Company to the vendors when all project development
approvals are obtained.
In addition to the outstanding commitments above, the
Company acquired a call option on 19 June 1998 in relation
to the purchase of the Oobagooma Uranium Project and, in
turn, granted a put option to the original holder of the project.
Both the call and put options have an exercise price of A$0.75M
US$0.8M) and are subject to the Western Australian Department
of Minerals & Energy granting tenements comprising two
exploration licence applications. The A$0.75M (US$0.8M) is
payable by the Company within 10 business days of the later
of the grant of the tenements or the exercise of either the call or
put option. The options will expire three months after the date
the tenements are granted.
At 30 June 2012 the Group has exposure to interest rate
risk, which is the risk that the Group’s financial position will
be adversely affected by movements in interest rates that
will increase the cost of floating rate project finance debt or
opportunity losses that may arise on fixed rate convertible
bonds in a falling interest rate environment. Interest rate risk on
cash and short-term deposits is not considered to be a material
risk due to the historically low US dollar interest rates of these
financial instruments.
The Group has no significant monetary foreign currency assets
and liabilities apart from Namibian dollar cash, receivables,
payables, deferred tax liabilities and provisions and Australian
dollar cash, payables and deferred tax liabilities and Canadian
payables.
The Group currently does not engage in any hedging or
derivative transactions to manage uranium price movements,
interest rate or foreign currency risks.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
The Group’s credit risk is the risk that a contracting entity will
not complete its obligation under a financial instrument that will
result in a financial loss to the Group. The carrying amount of
financial assets represents the maximum credit exposure. The
Group trades only with recognised, credit worthy third parties.
In addition, receivable balances are monitored on an ongoing
basis with the result that the Group’s exposure to bad debts is
not material.
The Group’s treasury function is responsible for the Group’s
capital management, including management of the long-term
debt and cash as part of the capital structure. This involves
the use of corporate forecasting models which enable analysis
of the Group’s financial position including cash flow forecasts
to determine the future capital management requirements.
To ensure sufficient funding for operational expenditure and
growth activities, a range of assumptions are modelled so as to
provide the flexibility in determining the Group’s optimal future
capital structure.
OTHER RISKS AND UNCERTAINTIES
RISK FACTORS
The Group is subject to other risks that are outlined in the
Annual Information Form 51-102F2 which is available on SEDAR
at sedar.com
TRANSACTIONS WITH RELATED PARTIES
During the year ended 30 June 2012 no payments were made
to Director related entities. Directors of the Company receive
compensation based on their personal contracts.
DISCLOSURE CONTROLS
The Company has applied its Disclosure Control Policy to the
preparation of the Consolidated Financial Report for the year
ended 30 June 2012, associated Management Discussion
and Analysis and Report to Shareholders. An evaluation of the
Company’s disclosure controls and procedures used has been
undertaken and concluded that the disclosure controls and
procedures were effective.
INTERNAL CONTROLS
The Company has designed appropriate Internal Controls Over
Financial Reporting (ICFR) and ensured that these were in place
for the year ended 30 June 2012. An evaluation of the design
of ICFR has concluded that it is adequate to prevent a material
misstatement of the Company’s Consolidated Financial Report
as at 30 June 2012.
function externally contracted
During the year the Company continued to have an internal
to Deloitte Touche
audit
Tohmatsu. Internal audit reports and follow-up reviews were
completed during the year and the Company continues to
address their recommendations. The resultant changes to the
internal controls over financial reporting have improved and
will continue to improve the Company’s framework of internal
control in relation to financial reporting.
SUBSEQUENT EVENTS
DEEP YELLOW LTD ENTITLEMENT ISSUE
On 30 July 2012 DYL announced the results of its entitlement
issue. Paladin purchased 72,263,821 ordinary shares at a cost
of A$3M. Following this issue the Group has an investment in
DYL of 297,198,282 fully paid ordinary shares. The holding of
these ordinary shares represents a 23.43% interest (30 June
2012: 19.9%) in the ordinary shares in DYL.
LONG-TERM OFF-TAKE CONTRACT WITH A US$200M PREPAYMENT
On 15 August 2012, the Company announced that it had
entered into a six year off-take agreement with a major utility to
deliver a total of 13.73Mlb U3O8 in the period from 2019 to 2024.
A prepayment of US$200M will be made to the Company in
respect of part of the future U3O8 product deliveries. Delivery of
the future U3O8 product will be at the Company’s option either
from its current African mining operations or from a project yet
to be developed from the Company’s significant existing project
pipeline or from a combination of both. Uranium delivered under
the long-term off-take contract will be sold at the market prices
prevailing at the time of delivery bounded by escalating floor and
ceiling prices.
To secure the Company’s obligation to deliver product
representing the prepayment amount, the utility will hold security
over 60.1% of the Company’s Michelin project in Canada. The
percentage of Michelin secured will be reduced as the value
of that project is enhanced by the Company’s ongoing work.
The Michelin security can also be replaced by other appropriate
security if required.
Subject to formalities to be put in place between the Company
and the utility, expected to occur in September 2012, such
as required registration of the security documentation (which
documentation is in agreed form) the US$200M prepayment
will be made in tranches to be completed by no later than 31
January 2013.
The US$200M prepayment will be applied to repayment of the
balance of the March 2013 convertible notes with the remainder
retained for balance sheet strength as working capital.
MID-TERM SALES CONTRACTS SECURED
On 24 August 2012, the Company announced it had secured two
mid-term off-take agreements for U3O8 production originating
from its mining operations at Langer Heinrich in Namibia and
Kayelekera in Malawi.
These agreements are for the purchase of a total of 6.3Mlb U3O8
to be delivered from late 2012 to end 2015 at approximately 2Mlb
pa. Pricing will be determined predominately by the market price
at the time of delivery(without floor or ceiling limitations) while
a minority portion of the delivery prices will be in accordance
with a series of specified fixed prices which exceed current spot
uranium prices.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
SUSTAINABLE
DEVELOPMENT
KAYELEKERA SENIOR HIGH SCHOOL, MALAWI
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43
Paladin is committed to the goal of sustainable development,
commonly defined as “to meet the needs of the present without
compromising the ability of future generations to meet their own
needs.” Paladin applies and adheres to the established and
recognised principles of sustainable development for all of its
activities across the world.
The commitment to sustainable development is also reflected
in Paladin’s corporate values. Paladin aims to achieve a
balance between the economic, environmental and social
needs in all phases of its projects and considers its employees,
community and all other stakeholders for this achievement.
These components are intertwined in Paladin’s sustainable
development programme.
CORPORATE SUSTAINABILITY REPORTING
Paladin is in the process of collecting data from LHM and KM for
input into Corporate Sustainability Reporting. The basis for the
data collected is on meeting the reporting guidelines of the Global
Reporting Initiative (GRI) Framework. The GRI Sustainability
Reporting Guidelines provide principles and guidance on defining
report content. The four principles applied are:
> Materiality
> Stakeholder Inclusiveness
> Sustainability Context
> Completeness
The Materiality principle is defined as topics and indicators
that reflect the organisations potential significant economic,
environmental and social impacts or that would substantively
influence the assessments and decisions of stakeholders.
During the reporting period Paladin conducted an internal
materiality test on the GRI aspects and indicators to determine
the topics of most significance to the Company. The materiality
test process involved workshops with technical personnel
and management, the Company Secretary, Chairman and
a Board Director to provide a broad Company perspective
of significance of the various indicators. The GRI categories
comprise the broad groups of Economic, Environment and
Social with the Social sub-categories of Human Rights, Labour
Practices and Product Responsibility. Each of these categories
and sub–categories have aspects and performance indicators
on which to report. Paladin’s initial focus will be on those that are
considered material to the Company.
The information and data collected from the two mining
operations will be assessed and then used in Paladin’s
Sustainability Report. It is intended that the Report will be web
based and be placed on the Paladin website for public access.
To allow sufficient time for data collection, assessment and
reporting for the financial year period the report is expected to
be available on the website towards the end of the CY2012.
ENVIRONMENT
OUR COMMITMENT
Paladin is committed to ensure that effective environmental
management is planned and undertaken for all aspects of
its operations. The approach to environmental management
is guided by Paladin’s Environmental Policy that promotes a
standard of excellence for environmental performance across
its operations. The key points of the Policy include:
>
compliance with applicable environmental legislation;
>
>
>
>
>
>
>
developing standards, systems and plans to identify,
assess and manage environmental risk;
implementing and assigning accountabilities
standards, guidelines and procedures;
for
the
striving to achieve continuous improvement in environmental
performance;
communicating environmental responsibility to employees
and contractors;
effective consultation with stakeholders;
inspections and audits of environmental performance; and
reporting on environmental performance.
In addition to Paladin’s Environmental Policy, LHM and KM each
have Environmental Policies applied at the sites which include
consideration of the above points as a minimum.
Paladin has established Corporate Sustainable Development
Standards for all of its operational subsidiaries. Operational
compliance with Paladin’s Standards forms part of the
Corporate Environmental Audit Programme.
ENVIRONMENTAL MANAGEMENT SYSTEM
Within the Paladin Environmental Management System (EMS)
Standard each operating site is required to develop and
implement an EMS that is consistent with the requirements of
ISO14001:2004. LHM has EMS certification initially obtained
in 2009 and was recertified in 2012. KM is continuing in the
development of an EMS for its operations.
(EMP)
Operational Environmental Management Plans
for
both LHM and KM have been submitted to and reviewed by
the Namibian and Malawian Governments, respectively, other
stakeholders and international financial lending institutions
as part of the project financing agreement conditions. The
Operational EMPs are regularly updated and revised as part
of the sites’ continual improvement process. EMPs for both
operations were reviewed and updated during the reporting
period and submitted to the respective Governments.
ENVIRONMENTAL IMPACT ASSESSMENT
The Environmental Impact Assessment for the LHM Stage
4 Expansion and the conversion of EPL3500 to a ML was
submitted to the Namibian Government and other stakeholders
for review in early 2012 with approval obtained in July 2012.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
ENVIRONMENT REGULATORY REPORTING
ENERGY
Both LHM and KM prepare various environmental reports for
the Namibian and Malawi Governments, respectively. The
frequency of regulatory reporting for LHM is bi-annual for
general environmental reports and annual for aspects such as
water. Regulatory environmental reporting at KM is conducted
on a quarterly and annual basis. The regulatory reports include
raw monitoring data reports, specific aspect reviews, general
environmental reports summarising the environmental activities
undertaken on the site, analyses of the monitoring data collected
and assessment of trends for the reporting period.
Energy requirements at Paladin’s operations are principally in
the form of fuel or electricity generation. Electricity at LHM is
purchased from the Namibian grid which can be supplemented,
if necessary, with power generated from the on-site power plant.
Power for operations at KM is generated by a diesel-fuelled
power station. Fuel usage at both sites for vehicles comprises
diesel and minor amounts of petrol. Emulsion is used at both
sites as the explosive for blasting. The volume of the fuels used
during the reporting period is being collated and will be reported
in the Sustainability Report.
INSPECTION AND AUDIT PROGRAMME
WATER
The Paladin Environmental Audit Standard requires sites to
establish and implement environmental inspection and audit
programmes to ensure that the environmental performance of
the operations is reviewed, audited and reported to the Board.
Internal and external environmental audits are undertaken to
ensure that there is not only compliance with regulatory and
Paladin requirements but also with the World Bank Equator
Principles and other industry standards, in particular those
specified for the uranium industry. Inspections and audits were
undertaken for both the LHM and KM operations during the
reporting period with the findings documented and actions
developed to rectify and manage the issues identified.
Paladin applies a Standard for Water Use and Water Quality at its
operations to ensure that there is efficient, safe and sustainable
use of water and that water resources and ecosystems
around its sites are protected. Paladin’s operations have water
management strategies, detailed flow diagrams, working water
balances, and have implemented water management measures
to ensure that water management objectives are achieved.
The reuse and recycling of water is maximised as much as
possible at Paladin’s operations. Data on water supply and use
for the reporting period are being collected from the operations,
which will then be applied to estimate volume of water used to
produce the uranium product. Both LHM and KM are managed
as non-discharge sites under normal operating conditions.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
is
implemented at each site. Water
A comprehensive surface and groundwater monitoring
programme
level
measurements, water abstraction and samples are routinely
recorded and/or collected according to a monitoring schedule
designed to meet regulatory requirements. Data is regularly
assessed and compared to baseline and upstream sampling
points to determine any impacts of operations on local water
resources and to ensure licenced limits/guidelines are not
exceeded. All water monitoring data are collated in an Annual
Water Report that consolidates and summarises the key water
aspects across all Paladin’s exploration projects and operations.
LAND USE AND BIODIVERSITY
Land use and understanding land values is an important
component of sustainable development. Prior to construction
activities, studies are conducted to determine land use and land
values of the area proposed for disturbance. Relevant baseline
studies are conducted to determine the biodiversity, ecological,
social and cultural heritage values of the area. Land clearing
approval processes are in place at all Paladin sites with the aim
of minimising the area of disturbance, and ensuring areas are
surveyed to assess impacts prior to clearing.
Paladin’s objective is to conserve biodiversity by obtaining
knowledge of the ecosystems within the regions in which it operates
and to ensure that impacts on biodiversity are minimised and
managed. Extensive biodiversity studies have been conducted
in the area of LHM, which is located in the Namib Naukluft
National Park, to establish biodiversity composition, structure
and processes. Baseline biological studies were conducted in the
area of KM, which prior to mining was extensively modified by
agricultural and burning practices to allow subsidence farming.
Aquatic invertebrate monitoring is undertaken to assess the
health of the rivers, located in the area of KM.
REHABILITATION
The objective of rehabilitation is to return disturbed land to a stable,
self-sustaining landform that is compatible with the surrounding
environment and has similar land use and ecological values as
existed prior to the commencement of operations. Progressive
rehabilitation of disturbed areas is undertaken at all of Paladin’s
exploration sites and mining operations, where practicable.
Rehabilitation Plans are developed and implemented at the
sites to ensure disturbed areas are rehabilitated appropriately
and in a timely manner.
AIR EMISSIONS
Paladin has an Air Quality Standard in place with the intent to
ensure that air pollutant emissions generated by any of Paladin’s
activities are identified, impacts assessed and management
measures established and implemented. The common air
pollutants generated by Paladin activities which have the
potential to impact on human health and/or the environment
include; particulate matter, sulphur oxides (SOx); carbon oxides
(CO and CO2); and nitrogen oxides (NOx).
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Dust generation during exploration activities and at the mine
sites is suppressed to enable a safe working environment
and to minimise impacts on the environment and surrounding
communities. This together with the progressive rehabilitation
of disturbed areas minimises dust generation and
the
associated impacts. Dust level monitoring and dust collection is
undertaken at both the LHM and KM sites. The dust levels and
sample analyses results for the reporting period are collated
in Environmental Reports and submitted to their respective
Governments.
SOx emissions are generated at the operations by the burning
of fuel for heating and power generation, and also from the on-
site production of sulphuric acid at KM. The SOx emissions from
the acid plant stack are monitored as are the environmental
ground level concentrations. Monitoring data are analysed and
the results reported in the Environmental Reports submitted to
the Government.
The principal direct greenhouse gas emissions from Paladin’s
operations are those from fuel burning for power generation,
boilers, burners, emulsions for explosives and automotive
exhausts. The key indirect greenhouse gas emission relate to
the energy purchased from the Namibian electricity grid to
power the LHM operations. Greenhouse gas emission data
are being collected from the operating sites to be calculated
(CO2) equivalent emissions. Paladin’s
as Carbon Dioxide
current Australian activities are confined to exploration and the
Corporate Perth office. Initial estimations of diesel consumption
and purchased electricity in Australia indicate that Paladin does
not meet threshold levels to require registration and reporting in
Australia under the National Greenhouse Emissions Reporting
Act (NGER) 2007.
WASTE ROCK
Large quantities of waste rock must be removed to allow access
to the ore at both LHM and KM, which is placed into dumps.
Waste rock dump location, design and placement is important
to the Company in terms of environmental considerations and
cost. The main objectives for the final landform of the dumps is
to be stable, blend in with the surrounding landscape and be
capable of supporting a self sustaining ecosystem.
Studies have been conducted at both mine sites to determine
the best locations for the waste rock dumps taking haulage
costs and environmental aspects into consideration. The design
of the dumps and the placement of waste rock also consider
other factors such as the physical and geochemical properties
of the material placed in the dumps.
TAILINGS
Tailings management continues to be a high priority at Paladin’s
operational sites. Paladin applies measures to ensure that its
tailings storage facilities (TSF) are appropriately designed,
operated and managed according to acceptable standards.
Specialist TSF engineers have designed the TSFs at both LHM
and KM and defined the operational practice and management
to ensure that the tailings are managed in an acceptable manner,
and any potential environmental impacts from the tailings and
TSF are minimised. Internationally recognised independent
uranium tailings experts conduct peer reviews of the design,
construction and operations of the TSF’s and continue to
provide an ongoing external review role.
PALADIN ENERGY LTD ANNUAL REPORT 2012
NON-MINERAL WASTE
Non-mineral waste includes typical general wastes, sewage
and some that may be considered hazardous. The LHM and
KM operations both have waste management programmes and
procedures with the aim at applying the principles of reduce,
reuse and recycle wherever possible. At LHM domestic solid
wastes are separated into recyclable and non recyclable.
Recyclable domestic waste is delivered to recycling depots and
the non recyclables taken to the municipal landfill sites. Facilities
for the recycling of waste materials in Malawi are very limited
as are suitable off site waste disposal locations. The majority of
the waste materials generated at KM require on-site disposal
so the wastes are classified and separated into their types and
directed to appropriate on site waste disposal sites. Sewerage
treatment plants are installed at both mine sites to treat sewage
which is then directed to process water pond at LHM and
the tailings storage facility at KM. Waste oils are collected by
licensed contractors in both Namibia and Malawi and taken off
site for recycling or disposal.
ENVIRONMENTAL INCIDENTS
A standardised Paladin Incident Reporting Procedure was
implemented across the sites for the 2011- 2012 reporting period
to ensure there is consistency across the business in terms of
incident classification and reporting. There were no significant
environmental incidents reported during the reporting period.
Statistics and information on incidents occurring during the
reporting period are being collected from the sites and will be
included in the Sustainability Report.
CLOSURE
Mine closure planning is a key component of Paladin’s
commitment to Sustainable Development. A Closure Standard
is in place for all of Paladin’s developing and operational sites.
The intent of the Standard is to ensure that Paladin’s sites
are left in a safe and stable manner and that environmental
and social impacts are minimised so that tenements can be
relinquished without future liability to the Company, government
or the community. LHM has a Draft Mine Closure Plan in place
which is in the process of being reviewed and updated to reflect
current and future mine plans. The closure planning process at
KM progressed during the reporting period with the preparation
of a Draft Mine Closure Plan.
CORPORATE SOCIAL RESPONSIBILITY
Paladin exists to create value for its shareholders. In pursuit
of this goal, the Company recognises that measurement of
corporate success encompasses economic, environmental
and social values. Paladin stakeholders expect their Company
to be a good corporate citizen with fair and beneficial
business practices; operating to the highest ethical standards;
contributing to the growth and prosperity of host countries
and responding positively to community needs. Paladin’s
approach to Corporate Social Responsibility (CSR) – as with its
commitment to sustainability – involves:
>
Top-level support of the Board of Directors and Managing
Director/CEO
> Adherence to principles enunciated in Corporate Policy
and Procedures
> Programmes aligned with host country Millennium
Development Goals
> Personnel dedicated to achieving CSR objectives
> Compliance with recognised international codes of conduct
> Acknowledgement of voluntary standards
> Reporting in accordance with the Global Reporting Initiative.
Paladin seeks to achieve these objectives by example, both
through its own actions and by its active participation in industry
and community-based organisations that foster and promote
these values and aspirations. Below is a summary of the
organisations in which the Company participates.
in establishing
the
instrumental role
Paladin played an
Australia-Africa Mining Industry Group (AAMIG) – an industry
body that promotes best practice in CSR among Australian
mining companies active in Africa. Paladin supports AAMIG
in promoting best practice in CSR in Africa and is seeking to
ensure compliance in its own endeavours.
Paladin has committed to the principles contained in Enduring
Value – the Australian Minerals Industry Framework for
Sustainable Development. This commitment is aligned to the 10
Sustainable Development Principles of the International Council
on Mining and Metals.
Paladin has registered as an EITI Supporting Company and
upholds the Voluntary Principles on Security and Human Rights.
The Company already complies with the Equator Principles and
has strengthened its internal compliance regime in relation to
anti-bribery and corruption issues.
Paladin CSR programmes are developed, managed and
assessed in compliance with a Corporate Community Relations
Policy. Business unit Social Sustainability Management Plans
(SSMP) provide a strategy to manage social and cultural
aspects, impacts and risks associated with the mining and
processing operations and provide a mechanism to ensure
compliance with regulatory legislation, corporate policies,
standards, guidelines and procedures. Compliance is subject to
regular internal and external audit.
Paladin contributes significantly to those economies in its
countries of operation through a variety of government taxes.
In Malawi and Namibia, where the Group’s mines are located
US$9.6M and US$11.1M were paid respectively, during the
FY2012 to those governments.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
The Company also uses local suppliers where possible at both
operations. During the year US$48M or 31% of the total spend
was paid to local suppliers in Malawi and US$217M or 87% of
the total spend to local suppliers in Namibia.
HUMAN RIGHTS
Paladin is committed to respect for human rights and
fundamental freedoms. The Company’s overall approach to
human rights issues is reflected in its Human Rights Policy
which can be found on the Paladin website. On the 2012 Human
Rights Risk Atlas – Namibia and Malawi are rated as medium
risk countries; Niger is rated a high risk country, while Australia
and Canada are rated low risk countries.
The aim of the Human Rights Policy is to provide the overarching
framework for the business in respecting human rights. The
Board reviews this regularly to ensure that it is current and that
the requirements of the Policy reflect Paladin’s commitment to
human rights principles.
INDUSTRY PARTICIPATION
leading participant
As a
in the global uranium sector,
Paladin plays an active and responsible role in public policy
development, both corporately in Australia and through Group
subsidiary companies in their respective constituencies.
The Company is a participating member of the Australian
Uranium Association (AUA) and, as such, is committed to
abide by and implement the terms of the AUA Industry Code of
Practice. Along with the Code, the Group observes the AUA’s
Charter and Principles of Uranium Stewardship, which provide
a guide to doing business ethically, responsibly and safely.
Together, the Code, Charter and Stewardship Principles make
up a vital standards framework for the uranium industry.
The Company is also a member of the Minerals Council of
Australia (MCA) which represents Australia’s exploration, mining
and minerals processing industry, nationally and internationally,
in its contribution to sustainable development and society. As a
member, Paladin supports the Enduring Value principles as a
framework for sustainable development.
Senior management across the Group are actively involved in
a number of industry and policy making organisations at both
board and committee level. These include the AUA, MCA,
Uranium Council of Australia, Advisory Group for IAEA, AAMIG
and the Chamber of Mines and Energy of Namibia. In addition,
Mr Greg Walker, General Manager - International Affairs, who
is resident in Malawi, was appointed as Australia’s Honorary
Consulate to Malawi. Mr Walker will provide consular assistance
to the growing Australian community in Malawi, as well as
assisting the Australian Embassy in Harare to promote Australia’s
political and commercial interests in Malawi. Paladin’s Lilongwe
office serves as Australia’s Honorary Consulate in Malawi.
LHM was a founding member of the Swakopmund-based
Uranium Institute in 2010. The Institute provides support and
advice for industry members, operates a Uranium Information
Centre and engages with the public and scientific community
through hosting training and information events, meetings and
workshops. More than 3100 visitors – an average of 200 per
month - have called at the Uranium Information Centre during
the past 18 months.
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49
The Australian Government handbook on Social Responsibility
in the Mining and Metals Sector in Developing Countries draws
on examples of Australian leading practice in Corporate Social
Responsibility in Africa. Paladin’s Social Management Plan for
KM was selected as a case study in the handbook.
Projects undertaken during the year included:
LOCAL BUSINESS DEVELOPMENT PROGRAMME
local
to promote
A programme
involvement, economic
growth and capacity building in communities is in progress.
Opportunities are being explored for skills transfer and technical
advice from Kayelekera’s experienced workforce to local
businesses. KM has introduced a work experience programme
for young Malawian undergraduates with the first participant,
a Karonga-based accountancy student, spending three weeks
gaining hands-on-experience with KM’s Commercial and
Administration Department in June.
Paladin is also supporting the UK-based MicroLoan Foundation
by funding an expansion of the foundation’s activities in the
Karonga region to provide micro-loans to 23 groups totalling
around 300 local rural women for small scale co-operative
business ventures in the Karonga region which will boost
farming family incomes by encouraging expansion of small
business initiatives.
COMMUNITY LIAISON
Paladin engages formally with the Government of Malawi and
with local communities via committees established for that
purpose. These committees include the:
> Government Liaison Committee (GLC) – this is the
peak forum for formal interaction between PAL and the
Government of Malawi;
> Karonga District Assembly, through quarterly District
Executive Committee (DEC) stakeholder’s meetings; and
> Kayelekera Village Elders – regular meeting are held
with the Kayelekera Village Traditional Authority (village
headman) and village elders to discuss social issues.
GARNET HALLIDAY KARONGA WATER SUPPLY PROJECT
Paladin continues to provide technical support and assistance
to the Northern Region Water Board (NRWB) in the maintenance
of the Garnet Halliday Karonga Water Supply Plant in Karonga.
This project was constructed by Paladin in 2010 for a cost of
approximately US$10M as part of its undertaking under the
Development Agreement. The NRWB has experienced some
difficulties with the plant’s water intake system due to the
severe conditions on Lake Malawi. In order to secure a long-
term solution, PAL appointed a South African marine engineer,
to review the intake system and recommend modifications.
Upgrade work is proposed for 2013. The Company has also
assisted the NRWB to overcome a lack of critical spares
caused by Malawi’s foreign exchange shortage by sourcing and
supplying spare parts.
The Company supports the Uranium Institute financially, through
the participation and commitment of LHM senior personnel and
by providing internal auditing services to the Institute. LHM is
an active member of the Institute’s Health, Environment and
Radiation Safety and Security Committee, which addresses
industry-related environmental health and radiation issues.
LHM leads the Institute’s Water Committee and actively
supports its radiation training programme by providing lecturers,
instrumentation and on-site training. In 2011-12, Langer Heinrich
also donated a commuter bus used to transport the members
of the public to and from the Uranium Institute.
Paladin also undertook the following activities during the year:
> Participation in the Nunatsiavut Government review of
the moratorium on uranium exploration and development
on Labrador Inuit lands in Canada, resulting in the lifting
of the moratorium in March 2012. This has allowed for a
resumption of exploration on Aurora Energy’s Michelin
Project after a three and a half year delay.
> Sponsorship of and participation in the Niger Investment
Forum held in London, United Kingdom, in June 2012 during
a state visit to the UK by Nigerian President Mahamadou
Issoufou and senior ministers of the Government of Niger.
> Participation in the National Dialogue on Malawi’s Economy
summit called by President, Mrs Joyce Banda, in June
2012.
STAKEHOLDER INTERACTION
Regular meetings are conducted with the stakeholder groups
in countries where Paladin has interests. These interactions
include regular and/or informal meetings with:
> Community groups
>
Environmental groups
> Host nation government ministers and senior civil servants
>
Indigenous groups
> Civil Society Organisations
>
Employees
INTERNATIONAL INITIATIVES
MALARIA TREATMENT FOR CHILDREN
Paladin has provided funding support to Eastland Medical
Systems Limited for Eastland’s development of ArTiMist™,
an under the tongue spray for the treatment of severe and
complicated malaria in children. After completion of a successful
clinical trial involving 30 children that confirmed the effectiveness
of the malaria treatment in young children, Eastland has moved
on to a 150-patient multi centre superiority study in Africa.
At the end of July 2012 85% of the patients had been enrolled
and the trial was on track to be completed in the September
quarter of 2012.
MALAWI
Paladin continues to fulfil its social development undertakings
under the terms of the Kayelekera Mine Development Agreement.
The Company has developed a SSMP to ensure that social and
cultural environmental aspects and impacts associated with
the operation of KM are identified and appropriately managed.
Paladin’s social development initiatives in Malawi are based on
the principles set forth in the SSMP.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
KARONGA AIRPORT IMPROVEMENTS
EMPLOYEE CHARITABLE FOUNDATION, SUPPORTED BY PALADIN
Paladin funded a 400m extension of the runway at Karonga
Airport, in conjunction with the Malawi Department of Civil
Aviation (DCA). This has enabled the Company’s aircraft to
operate safely into Karonga, but has also upgraded facilities
for third party users by enabling larger aircraft to use Karonga
Airport. Together with Paladin’s fuel supplier, Puma Energy
(Malawi) Ltd, the Company is donating two reconditioned fire
engines, sourced from the United Kingdom, to DCA for use
at Karonga Airport. This will substantially upgrade fire fighting
capabilities – both at Karonga Airport and in the district, as the
airport fire tender also serves community needs. Paladin has
also carried out minor repairs and refurbishment to the airport
passenger terminal.
Friends and Employees of Paladin for African Children (FEPAC)
is a charitable foundation established in 2008 by Paladin
employees to fund smaller social projects in Malawi that
are outside the scope of the Company’s CSR programmes.
Paladin supports the involvement of its employees in FEPAC
and donates 25c for every A$1 raised and also provides
administrative support. To date, FEPAC has raised $633,000
through employee donations, an annual golf day and quiz night.
The charity supports six projects that assist orphaned children
with educational needs and vocational training courses, such
as brick laying, carpentry and tailoring. Sixty teenagers have
completed these courses and have been provided with tools to
enable them to earn money to support their younger siblings.
COMMUNITY HEALTH CARE
Following completion of the Karonga Water Supply Project,
Karonga District Hospital (KDH) was identified as the local
public service institution most in need of support under
Paladin’s Infrastructure Development Programme. The 187-bed
hospital services a regional population of 250,775 and is the
main referral hospital in the District. Renovations carried out
during the reporting period included replacement of ceilings,
windows, screens and plumbing fixtures.
Responding to a long standing request of the Karonga Town
Planning Department and local public, Paladin upgraded a
guardians’ compound adjacent to KDH. It is normal practice
in Malawi for rural patients’ families to camp near a hospital to
provide food and support for their relatives. At KDH, an average
of 100 patients’ guardians at any time camp in a designated
area outside the hospital walls, with minimal support services.
Paladin constructed a large, sheltered cooking area, toilets and
bathing stalls. A dilapidated four-room guardian accommodation
unit was repaired and painted.
In April Lab Without Walls founder, Prof. Tim Inglis handed over
a complete field microscope set to Paladin Energy staff for
use in Malawi. This was the latest addition to the community
health services provided by Paladin and will be used to confirm
malaria, tuberculosis and other infectious diseases.
Lab Without Walls is a not-for-profit organisation that develops
clinical laboratory methods for remote and rural health services
in resource-limited settings.
This partnership between Paladin and Lab Without Walls,
supported by PathWest and the School for Pathology and
Laboratory Medicine of the University of Western Australia
continues with Lab Without Walls providing capability-building
assistance with microscope training and reagent supply.
EDUCATIONAL SUPPORT
In addition to supporting a number of employees in their
external studies, Paladin also continues to support education
for children in Kayelekera and nearby villages through paying
for nine teachers, supply of materials and teaching initiatives. In
September, a teacher’s house was completed in Viraule village
and in October two new classrooms were completed at Ipiana
village on the M26 highway. Repairs were carried out on the
Kayelekera Primary School and window screens were replaced
with strong metal lattice. Paladin also sponsors nine volunteer
educators who supplement regular teaching staff at schools in
villages near KM.
During the year, FEPAC financed construction of a girls’
dormitory, a kitchen/dining building and a teacher’s house at
the School for Deaf Children in Karonga.
An inaugural Charity Golf Day was also held in Namibia,
organised by local employees, raising N$60,000. This amount
was matched by LHUPL with the funds divided between two
local children’s charities.
HIV/AIDS AWARENESS AND HEALTH CAMPAIGNS
Paladin HIV/AIDS Awareness programmes continued in local
communities. Four new booklets written by Paladin Social
Development Officer Robyn Nottingham have been translated
into three local languages and distributed to KM employees
and the community. A total of 22 booklets have been published,
covering social topics including HIV/AIDS prevention; malaria
and chest infection management, dealing with alcohol abuse;
care of the new born; prevention of diarrhoea; combating
deforestation; theft and corruption and wise use of wages.
These booklets have proven hugely popular due to the highly
relevant subject matter and the novelty of having reading
material available in local languages. In the past 12 months,
Paladin has distributed more than 70,000 copies to employees,
students and local communities.
Paladin continues to use drama – a traditional art and teaching
form – to promote social messaging through its sponsorship
of the Nyange Nyange Drama Group, which regularly perform
HIV dramas and in the community. During the past year, the
Company sponsored Nyange Nyange to perform for 59 primary
schools in the Karonga District, reaching 43,300 students.
The Company’s social development team has established co-
operative relationships with locally-active NGOs with expertise
in HIV/AIDS community engagement.
In the interests of improving access to medical facilities in
Kayelekera Village, Paladin and the Department of Health
entered into discussions to expand upon the Paladin-supported
weekly outpatient clinic in the village.
The outcome was a commitment from the Department to
establish a sub-clinic in Kayelekera to provide access to the
full range of government programmes. Paladin will facilitate
establishing the clinic and provide housing for two clinic staff in
the village. Land has been allocated for this purpose.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NAMIBIA
Key undertakings during the year included:
LHUPL continued to play an active and leading role in the
positive interface between the mining industry and community
in Namibia, through its support for the Chamber of Mines and
Energy of Namibia and the Chamber’s Uranium Institute and
through Langer Heinrich’s own social development programme.
SOCIAL DEVELOPMENT PROGRAMME
LHUPL’s social development programme complies with Paladin’s
Corporate Community Relations Policy; is cognisant of the
Namibia’s Millennium Development Goals and was determined
in consultation with community stakeholder groups. Langer
Heinrich’s programme focuses on the key areas of education,
youth development and community needs. These initiatives
respond primarily to Namibia’s most chronic problem, endemic
unemployment, which is exacerbated by poor education results
and substandard skill levels.
MONDESA YOUTH OPPORTUNITIES
LHUPL continued as principal sponsor of the Mondesa Youth
Opportunities (MYO) organisation which provides educational
assistance to promising but underprivileged students drawn
from five disadvantaged schools located near Swakopmund.
MYO’s objective is to encourage completion of secondary
education as a precursor to further academic or vocational
study by improving student skills in English, mathematics and
computer studies. MYO currently has 120 pupils enrolled in its
classes and computers donated by Langer Heinrich are used in
MYO’s library resource centre.
MONDESA YOUTH OPPORTUNITIES, NAMIBIA
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NATIONAL MATHEMATICS CONGRESS
Support continued
for Namibia’s National Mathematics
Congress, which has become a major in-service training
conference in Namibia and was again the principal sponsor
of the seventh congress attended by some 290 mathematics
educators
included
from throughout Namibia. Attendees
primary and secondary teachers, officials from the National
Institute of Educational Development and representatives of the
Ministry of Education. International teaching experts conducted
workshops during the three-day Congress. The objective of the
Congress is to improve the standard of mathematics education
at primary and secondary levels across Namibia. Participation
in the Congress is highly prized and has become the highlight in
the professional life of Namibian mathematics teachers.
In collaboration with the Namibian tourism industry, LHUPL is
examining ideas for the development and enhancement of a
specific tourist attraction in the NNNP in the vicinity of LHM.
This initiative is aimed at demonstrating that mining and tourism
industries can co-exist and cooperate to produce positive
outcomes for both parties.
HIV/AIDS PROGRAMME
LHUPL has a group of externally trained HIV/AIDS Peer
Educators among its employees. In recent years, very successful
HIV/AIDS campaigns have been run among LHM employees
and contractors. LHM’s Peer Educators also embarked on an
education programme to address other health issues including
education on alcohol and drug abuse and good hygiene.
COASTAL REGION MATHEMATICS SUPPORT PROGRAMME
OTHER COMMUNITY INITIATIVES
Langer Heinrich has increased its support for two feeding
programmes for underprivileged children in Walvis Bay and
Swakopmund in addition to supporting various small scale
community projects during the year, reaffirming its commitment
to the local community.
AUSTRALIAN INITIATIVES
In 2011, Paladin made a five-year financial commitment to
the Hammond-Nisbet Geoscience Fund administered by the
University of Western Australia (UWA). The fund supports the
creation of an endowed professorship within UWA’s Centre for
Exploration Targeting (CET). This research-intensive position
will focus on mentoring new generations of geoscientists in
interpretation of fieldwork and structural geophysics and in
applying this understanding to mineral systems and exploration
targeting.
Paladin also continued its involvement with the ASX Thomson
Reuters Charity Foundation. Along with other companies listed
on the S&P ASX 200 Index, Paladin contributed to the creation
of a share portfolio which was auctioned off at a major charity
fundraiser organised by the Foundation. Proceeds from the
fundraiser go to a set of pre-determined charities, the main
focus being medical research for children.
Support of the Group’s activities in Mount Isa, Queensland
included sponsorship of local school and sporting activities
and support of the local indigenous Injilinji Youth Centre (part
of the Kalkadoon community) with monetary and equipment
donations.
CANADA
Aurora Energy continued its commitment to community-
focused events on the north coast of Labrador and in the
Upper Lake Melville area including support of local sporting
events and participation in the 18th Annual Labrador Inuit Youth
Symposium held in Postville.
Aurora also supported community initiatives which distributed
Christmas hampers to needy families in Coastal Labrador.
Another initiative LHUPL supports is designed to improve
mathematics performance of grade 10–12 pupils at local
schools in the Namibian Coastal Region. This scheme was
established in 2011 and of 47 learners who regularly attended
the programme, 27 received awards for their performance in
Coastal Mathematics Competitions. The programme will be
continued and expanded in 2012-13.
SCHOOL SUPPORT PROJECT
LHUPL continued its local School Support Project providing
text books for grade 12 pupils in various schools in the Coastal
Region. The project is in collaboration with the Ministry of
Education in order to ensure that the correct needs are identified
in support of the Government’s Vision 2030.
NAMIBIAN INSTITUTE FOR MINING AND TECHNOLOGY
LHUPL is a key supporter of the Namibian Institute of Mining
Technology (NMIT), one of the largest vocational training centres
in Namibia, offering courses related to mining, manufacturing
and engineering. Since 2007, more than 200 students have
undertaken their practical training at LHM. In response to
the poor quality transportation available to students, LHUPL
donated a 65-seat bus and a 14-seat minibus to NIMT to
transport students to and from the college.
NAMIB-NAUKLUFT NATIONAL PARK DEVELOPMENT
LHUPL funds two environmental projects in Namib-Naukluft
National Park (NNNP) carried out by the Namib Ecological
Restoration and Monitoring Unit (NERMU) of the Gobabeb
Research and Training Centre. In the past year, NERMU has
measured zebra movements over large distances in the NNNP
utilising satellite imagery. The “learning” modelling procedure
currently underway will produce a habitat suitability map. In
the next phase, the preliminary results will be refined based on
movement data collected with radio collars. The results will allow
a high-confidence assessment of risks to the zebra species and
identify options to mitigate real and potential impacts on the
park’s zebra population.
two
The second NERMU project, comprising
related
experiments, was a study of water absorption and retention
by desert soils, to develop an understanding of the capacity
of the desert ecology to support local plant life and a study
of the organic properties (fertility) of different stockpiled soils.
Understanding factors influencing water infiltration into desert
soils is essential for successful post-mining rehabilitation.
Results of both experiments will be published in scientific
literature.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
OUR PEOPLE
The Company continues to focus on utilising the depth of the
Group’s human capital in order to achieve efficiencies and
global transfer of skills and experience. This strategy includes
facilitating transfers or short-term assignments of employees
across the Group between Namibia, Malawi, Canada and
Australia. This approach has enriched the experience and
development of employees and facilitated cross-pollination of
ideas and efficiencies.
With the movement of staff from site to site, a key focus is
building on the consistency and efficiency of global human
resources’ processes. In addition, the strengthening of retention
programmes is a priority ensuring that with the global boom and
talent shortage, Paladin continues to retain its people.
During the year employee relations and communication has
been a key focus area. Langer Heinrich implemented the
INVOCOM (Employee Involvement through Communication
for Commitment and Innovation) methodology which is a
delivery vehicle for improved business performance through
organisation, operational and service excellence. This ensures
that employees are involved through effective communication
and information sharing. This resulted in a huge improvement
in communication while complementing the established open
door and positive working atmosphere. This initiative is now
being rolled out at Kayelekera with an initial 3 day workshop
held encompassing employees from all divisions and levels. The
response was extremely positive with further workshops and
training to be held to encompass all site based personnel.
Recruitment processes are carried out in a fair and consistent
manner to ensure everyone is given a fair chance without any
discrimination on any basis. The Company’s strategy continued
to focus on the recruitment and retention of competent staff.
Voluntary turnover for the Group is detailed in the following
table. The average annual rate for large companies was 12.2%
as reported in the Australian Institute of Management National
Salary Survey 2012. The Australian based voluntary turnover
sits at 14.7% (combined head office and exploration) which
reflects the challenges faced in respect to the competition being
experienced in the recruitment and retention of high quality
mining professionals. Exit interviews are undertaken to further
understand the causes of voluntary turnover with those who
leave typically doing so to pursue new challenges and advance
their careers.
In line with the promotion policy and procedure, internal
employees are given an equitable chance at promotion and this
has seen a number of employees being promoted during the year.
The Company continues to pay competitive remuneration to
all its employees, ensuring it is competitive in its market place
by conducting annual salary surveys using reputable survey
companies and using the survey results to benchmark within
the mining industry.
In line with its Diversity Policy, Paladin is conscious of the
importance of equitable gender balance in its workforce, with
the percentage of females shown in the table below:
Location
Total Female
%
Local
Nationals
%
Turnover
%
Australia Corporate,
46
50%
n/a
18.3%
administration,
financial &
technical
services
Exploration
Namibia
LHM
Malawi
KM
Exploration
Canada
Exploration
Exploration
Niger
Total
29%
19%
9%
5%
38%
33%
31
329
741
18
13
3
1181
n/a
97%
84%
100%
23%
100%
8.0%
7.5%
7.9%
5.0%
-
-
AUSTRALIA (HEAD OFFICE & MOUNT ISA)
This year, Australian based employees total 77 with females
representing 41.6%. The Australian voluntary turnover rate
was 14.7%, a slight increase from last year’s rate of 13%. This
reflects the ongoing pressure on staff retention strategies as the
booming global mining economy presents many opportunities
for our staff, some of which cannot be controlled.
Industry training is encouraged and a number of employees
receive educational assistance in the furtherance of their career
objectives. Standardisation of relevant policies and processes
across the Group has been a focus for the year together
with ongoing development of diversity in the work place.
Further information on diversity can be found in the Corporate
Governance Statement.
EXPLORATION
Paladin’s exploration group has grown significantly over the
past few years from two to three full time geologists in 2005,
supported by external contractors and consultants, to a team of
23 geologists, three geophysicists and three full time database
administrators located on three continents and six project sites.
Paladin has exploration teams located at both mine sites in
Africa who’s focus is near mine resource extension and regional
resource development as well as regional exploration teams in
Niger, Mount Isa and Canada. An exploration team is also based
in the Perth office and is currently focussed on the Manyingee and
Spinifex Well projects in Western Australia as well as supporting
the Company’s projects in the Northern Territory.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Paladin has an enviable track record in retaining geoscience
professionals with the vast majority of staff having a minimum of
three years with the Company with a number employed directly
after graduation from universities around the world. During
the year the Company undertook a development programme
for exploration geologists by seconding a number of them to
either Africa or Canada to gain experience in different geological
terrains and settings as well as mine site development. In order
to retain and mentor the exploration group, the Company
undertakes regular workshops, both regionally and globally,
to update geoscience staff in the latest techniques and
processes. At these events geologists are encouraged to
present their own work to promote a wider understanding of
local and regional geological issues affecting their projects.
The Company also uses these workshops to transfer learnings
from expert professionals in various geoscience disciplines
and to enable Company geologists to share their experiences
with their colleagues. During the year a number of Company
geoscientists gave presentations at various national and
international conferences and technical meetings.
MALAWI (KAYELEKERA MINE)
Employee numbers totalled 759 at year end, an overall reduction of
seven over the previous year, with female employees comprising
9% of the total workforce. Contractor numbers reduced to 31,
down from 54 in the previous year, following a rigorous review of
the use of this type of employment on the mine.
Expatriate staff comprised 118 of the total employees, however
during the June quarter this figure was reduced by 13% through
natural attrition with further reductions expected during the next
year as the localisation plan is implemented.
Turnover amongst expatriate staff amounted to 13.5%, a
significant decrease from 25% reported last year.
> Review and sign off organisational charts which reflect
succession plans.
> Set, monitor and audit succession planning targets.
> Measure managers on progress made against their
respective targets.
>
Encourage and foster a culture of learning, mentorship,
coaching and high level performance.
> Develop competency based modular training schemes,
incorporating continuous development for plant operators
and artisans.
>
Ensure that all contractors support the localisation strategy.
The majority of expatriate roles will be localised when
Malawi candidates have been certified to the correct level of
competence and are able to assume the responsibility and
authority of the role.
to attract and
recruitment strategies
Additional
retain
experienced Malawians have also been put in place. In the
processing department a competency based modular training
scheme is being used and in the engineering department,
the responsibility and authority of the job is aligned to the
South African International Artisan Standard. Certification
to perform at the correct level will result from artisan training
and development, identified following completion of a skills
assessment aligned with Paladin’s requirements.
PAL has a training framework that recognises and addresses its
business goals. They are as follows:
> On the job training – provided by coaches and mentors
>
>
>
In-house training – provided by skilled experts
External training – provided by external vendors
External studies – provided by educational institutions
The following initiatives are in place:
Training and development initiatives targeted at Malawian
Nationals continued. Kayelekera is a complex mining operation
which requires skills not historically used in the country and
therefore in short supply. PAL is therefore implementing a
systematic plan to develop and build the skills of its Malawi
workforce. The aim is to develop a high-performance workforce
capable of ensuring, the sustainable and safe operation of the
mine whilst maximising opportunities for all.
>
>
28 Employees with Personal Development Plans.
13 Employees with funded external studies in the following
departments:
- human resources (3)
- commercial & administration (7)
- environment (2)
- mining (1)
In pursuit of this, KM subscribes to the following philosophies:
> Succession Planning
>
>
Transferring of Skills
Training and Development
> Mentoring and Coaching
> Performance Management
>
Localisation Planning
The goal is to:
> Provide Malawi employees with development opportunities
and challenges.
>
>
Identify Malawi talent, within the company as well as
externally, and implement realistic time bound Personal
Development Plans.
Implement rigorous succession planning to create a pool
of able candidates with the required competencies that
ensure continued high levels of performance.
>
45 local employees who have been identified through the
succession plan methodology to take on more senior roles.
PAL subscribes to the philosophy of developing employees with
further education and will pay for tertiary training and studies
in accordance with appropriate guidelines. Promotion of
employees into positions of greater responsibility and authority
is the outcome of training and development and is a natural,
ongoing process.
Labor relations on the mine continued to develop and mature
along positive lines with monthly meetings between staff
representatives and management, the sharing of information
and discussion on matters of common interest.
This relationship suffered an unfortunate setback in May
when employees embarked on strike action to press for their
demands that salaries be increased to offset the effects of the
substantial devaluation of the local currency following changes
in government policy in this regard.
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LHUPL recently initiated the process operator qualification
framework in consultation with the Namibian Chamber of
Mines. This initiative forms part of the Namibian Qualifications
Framework and is therefore internationally recognised. Through
this programme/initiative, process operator training will be
standardised throughout the Namibian mining industry. This
standardised training will facilitate and shorten the recruitment
process while general employee competency levels, safety
awareness and personal development will be enhanced.
LHUPL is committed to, and fully supports the policy of
equal opportunity employment and non-discrimination and
therefore embarked on an Affirmative Action Programme. This
commitment has been incorporated into a positive, practical
and results oriented Affirmative Action Plan. To this end, the
following are being performed:
>
>
>
to enhance
Implementation of positive measures
employment opportunities for persons in designated
groups in support of advancement opportunities for
individuals or groups of individuals of any of the designated
groups.
Implementation of procedures to communicate to and
consult with all stakeholders, as well as strategies to
ensure the implementation of the policy.
Ensuring the administration of personnel actions (i.e.
compensation, benefits, layoffs and recruitment) in a fair
and non-discriminatory manner.
Employee wellness remains an important aspect with the health
and well-being of all employees important to corporate success.
The position of Occupational Health Administrator was created
during the year providing a dedicated resource to, amongst
other duties, initiate and drive wellness programmes.
The HIV/AIDS Peer Educators Team’s activities improved
over the past year. A total of 18 Peer Educators underwent
HIV training and they will continue with HIV/AIDS education
and counselling throughout the organisation to ensure that
awareness is elevated.
In collaboration with the Society for Family Health and the
Ministry of Health and Social Services a two week voluntary HIV
testing campaign involving all employees and contractors was
undertaken. Approximately 530, more than 60% of employees
and contractors, were tested during this time.
Discussions on this and other employee concerns have since
been resumed through the established channels and plans are
underway for a Performance Improvement Process - aimed at a
Prosperity Partnership – commencing early in the new financial
year with a view to creating a shared vision for the future
success of the mine.
NAMIBIA (LANGER HEINRICH MINE)
The number of permanent employees has increased by 9% from
303 to 329 since the last reporting period mainly attributable
to the manning for the Stage 3. LHUPL remains focused on its
endeavour to recruit more females therefore ensuring a gender
balanced workforce whenever possible. Female employees
currently represents 19% of the total permanent employees, an
increase from 17% the previous year. The permanent workforce
is largely represented by Namibians with only 3% being
non-Namibian.
Filling of some positions remains a challenge due to skills
shortage experienced in Namibia. The average voluntary
turnover rate is currently 8% with 24 permanent employees
leaving the company during the year, mainly as a result of
resignations. The company endeavours to retain its employees
by ensuring that continuous training and development are
taking place, employees are paid at the 75th percentile and a
harmonious relationship is maintained. Whenever possible,
vacancies arising in management levels are filled with persons
from designated groups in support of the LHUPL Affirmative
Action Policy.
Capacity development remains a focal point and a number
of employees undertook training, both internal and external,
during the year. Five employees from the Specialised and Middle
Management level, all previously disadvantaged, successfully
their Management Development Programmes
completed
through the University of Stellenbosch.
The fulltime bursary scheme introduced for Namibians has seen
six students benefiting: a geologist who graduated through this
programme was offered employment and is currently being
developed internally, while another is expected to complete
studies and commence employment in January 2013. The
two mining engineer bursary students are also expected to
graduate by end of 2012 and commence employment in 2013.
The company has committed to extend invitations for further
bursaries for 2013, and in light of the shortage still being
experienced in this particular field, concentrating on mining
engineers.
In collaboration with NIMT, approximately 60 students were
trained at the mine as part of their curriculum. This programme
resulted in a number of employees being recruited after
completion of their studies, while others are absorbed by other
mining and engineering companies assisting in curbing the
skills scarcity problem currently being experienced in Namibia.
The relationship which currently exists between NIMT, the
company and the Ministry of Education has proved to be
beneficial to all stakeholders over the years and will continued
to be maintained to ensure that students are accommodated for
practical “hands on” training.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
CORPORATE GOVERNANCE
STATEMENT
Gillian Swaby
Company Secretary/Executive General Manager - Corporate Services
CORPORATE GOVERNANCE FRAMEWORK
Information will be communicated to shareholders by:
>
>
>
>
>
>
>
ensuring that published financial and other statutory
reports are prepared in accordance with applicable laws
and industry best practice;
ensuring the disclosure of full and timely information about
the Company’s activities in accordance with the general
and continuous disclosure principles in the ASX Listing
Rules, the Corporations Act in Australia and all relevant
legislation in Canada;
providing detailed
the
Managing Director/CEO and other senior executives at the
Annual General Meeting (AGM);
the Chairman,
reports
from
placing all material information released to the market
(including notices of meeting and explanatory materials)
on the Company’s website as soon as practical following
release;
placing the Company’s market announcements and
financial data for the preceding seven years on its website;
providing the Annual Report in a “user friendly” electronic
format on its website; and
providing quarterly conference calls incorporating Q&A
together with investor updates.
In addition, the website includes a facility to allow interested
parties to subscribe to receive, electronically, public releases
and other relevant material concerning the Company.
Shareholders are encouraged to attend AGM’s and ask
questions of Directors, senior management and the Company’s
external auditors, who are required to be in attendance. In the
event that shareholders are unable to attend meetings, they
are encouraged to lodge proxies signifying their approval or
otherwise of the business to be considered. Shareholders
are able to directly lodge their votes online via the Company’s
website and the Computershare voting platform.
The Board of Directors of Paladin Energy Ltd is responsible for
the corporate governance of the Group.
Paladin has adopted systems of control and accountability as
the basis for the administration of corporate governance.
the key
This Corporate Governance Statement outlines
principles and practices of the Company which, taken as a
whole, is the system of governance.
Shareholders are reminded that Paladin operates with a
dual listing in Australia on the ASX and in Canada on the
Toronto Stock Exchange (TSX). In formulating the governance
framework, the regulatory requirements in both Australia and
Canada have been taken into account.
the Eight
The Company has complied with each of
Corporate Governance Principles and the corresponding
Recommendations as published by
the ASX Corporate
Governance Council. Further the Company also complies with
the Ontario Securities Commission’s corporate governance
requirements as set out in National Instrument 58-101.
The Company reviews and amends its corporate governance
policies as appropriate to reflect the growth of the Company,
current legislation and good practice. The Company’s website
(www.paladinenergy.com.au) includes copies or summaries
of key corporate governance policy documents.
RELATIONSHIP WITH SHAREHOLDERS
The Company places a high priority on communications with,
and accountability to shareholders. The Board recognises that
shareholders, as the ultimate owners of the Company, are
entitled to receive timely and relevant high quality information
about their investment. Similarly, prospective investors should
be able to make an informed decision when considering the
purchase of shares in Paladin.
To safeguard the effective dissemination of information, a
Continuous Disclosure Communications Policy is in place.
This reinforces the Company’s commitment to its continuous
disclosure obligations imposed by law.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
BOARD OF DIRECTORS
MEETINGS OF THE BOARD
ROLE OF THE BOARD
The Board guides and monitors the business of Paladin on behalf
of shareholders, by whom they are elected and to whom they
are accountable. The Board is responsible for setting corporate
direction, defining policies and monitoring the business of the
Company, to ensure it is conducted appropriately and in the
best interests of shareholders.
The role of the Board is to oversee and guide the management
of the Company with the aim of protecting and enhancing the
interests of its shareholders, taking into account the interests of
other stakeholders including employees, customers, suppliers
and the wider community.
The Board operates under a Charter and has a written Code of
Conduct (Code) which establishes guidelines for its conduct.
The purpose of the Code is to ensure that Directors act honestly,
responsibly, legally and ethically and in the best interests of the
Company.
The Board is responsible for setting the strategic direction and
establishing goals for management and the monitoring of the
achievements against these goals. The Board evaluates the
performance of senior executives and is also responsible for
CEO succession planning.
COMPOSITION OF THE BOARD
The Board comprises five Non-executive Directors, including
the Chairman and one Executive Director, being the Managing
Director/CEO. The names of the Directors, both in office at the
date of this report and those who held the position during the
past year, are set out in the Directors’ Report. This information
includes their status as Non-executive, executive or independent,
their qualifications and experience and length of service.
The structure of the Board has evolved over time to reflect the
changing needs of the Company to ensure an appropriate mix
of skills and experience are available to oversee the growth of
Paladin to its full potential.
Skill sets represented at Board level include managerial,
technical, financial, corporate, legal and commercial. Particularly,
members have a broad range of experience and expertise in the
uranium business.
DIRECTOR INDEPENDENCE
Directors are expected to bring independent views and
judgement to the Board’s deliberations. All of the Non-executive
Directors, including the Chairman, are considered by the
Board to be independent. In considering whether a Director
is independent, the Board has regard to the independence
criteria set out in the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations and
the Corporate Governance Guidelines developed by the Ontario
Securities Commission pursuant to National Policy 58-201 and
other facts, information and circumstances that the Board
considers relevant.
The Board assesses the independence of new Directors prior
to appointment and reviews the independence of all Directors
as appropriate.
The Board meets formally face to face at least four times a year
(each over a three day period). Video conferencing facilities
have been installed to provide greater ease of communications
between face to face meetings and meetings are held at a six
week intervals between face to face meetings, via this means.
Additional ad-hoc meetings are held as required. Members
of senior management attend and make presentations to the
Board covering all aspects of the Company’s operations. This
provides an excellent opportunity for dialogue and networking,
with management from all operations present. Non-executive
Directors meet together without the Managing Director/CEO
and management being present, prior to each of the four
principal Board meetings.
The entire Board is required (as stated in their Letters of
Appointment) to attend the AGM of the Company and all
attended the 2011 AGM.
The Board holds an annual strategic planning session with
management at which the Company’s strategic plans for each
operating activity and the Group as a whole are presented. This
is held as part of the budget review process. The Managing
Director/CEO encourages full access to executive managers by
the Board to ensure transparency at a senior management level.
Non-executive Directors are encouraged to visit the Company’s
operations annually and these visits provide the Non-executive
Directors with unlimited access to all site personnel.
RETIREMENT AND RE-ELECTION
The Constitution of the Company requires one third of the
Directors, other than the Managing Director, to retire from office
at each AGM. Directors who have been appointed by the Board
are required to retire from office at the next AGM and are not
taken into account in determining the number of Directors to
retire by rotation at that AGM. Directors cannot hold office for
a period in excess of three years or later than the third AGM
following their appointment without submitting themselves
for re-election. Retiring Directors are eligible for re-election by
shareholders. Donald Shumka and Peter Donkin will seek re-
election at the 2012 AGM, following their retirement by rotation.
The Board does not believe that any Director has served on the
Board for a period which could, or be perceived to, materially
interfere with his ability to act in the best interests of the Company.
In reaching this conclusion, the Board has noted that each
of R Crabb (the Chairman) and J Borshoff (the Managing
Director/CEO) will have each served on the Board for 18 years.
Notwithstanding their period of service, the Board concluded
that both Directors retain independence of character and
judgement and continue to make outstanding contributions
at Board level. Both bring their unique skills to the Board and
participate in robust constructive debate. The Board considers
that Mr Borshoff’s uranium experience and knowledge of the
nuclear industry and Mr Crabb’s international resource law
experience remains valuable at Board level. The Board further
agrees that time in office should only be considered from 2004,
as the period prior to 2004 the Company was a junior explorer.
It is also noted that the Company did not enter the ASX/S&P
200 until June 2005.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NOMINATION AND APPOINTMENT OF NEW DIRECTORS
If it is necessary to appoint a new Director to fill a vacancy on the
Board or to complement the existing Board, a wide and diverse
potential base of possible candidates is considered and external
consultants are engaged to assist in the selection process, if
required. The Board assesses the qualifications of the proposed
new Director against a range of criteria including background,
experience, professional skills, personal qualities, the potential
for the candidate’s skills to augment the existing Board and
the candidate’s availability to commit to the Board’s activities. If
these criteria are met and the Board appoints the candidate as
a Director, that Director must retire at the next AGM and will be
eligible for re-election by shareholders at that AGM.
New Directors appointed to the Board are invited to participate
in an
includes provision of
comprehensive written material regarding the Company such as:
induction programme which
>
>
>
information on the financial, strategic and operational
position of the Company;
a comprehensive letter of appointment which sets out the
Company’s expectations on acceptance of the position;
a written statement which sets out the duties, rights and
responsibilities they undertake on becoming a Director
together with material detailing the operations, policies and
practices of the Company; and
>
access to previous Board papers together with recent
Annual Reports and interim financial statements.
Furthermore, new Directors are invited to attend briefing
sessions with the Managing Director/CEO and key members of
the senior management team where they may ask questions
and direct any queries they may have to the Chairman and/
or the Managing Director/CEO or obtain any other briefings
they feel necessary from the Chairman and/or the Managing
Director/CEO. They are encouraged to attend site visits in liaison
with the Managing Director/CEO, at appropriate times. Directors
agree to participate in continuous improvement programmes
from time to time, as considered appropriate.
EVALUATION OF BOARD PERFORMANCE
Improvement in Board processes and effectiveness is a
continuing objective and the primary purpose of Board
evaluation is to identify ways to improve performance. The
Chairman is responsible for conducting an annual review of the
Board performance.
An evaluation of the performance of the Board has been
carried out. This process involved completion of individual
questionnaires focused on process, structure, effectiveness
and contributions and addresses the performance of each
Director individually. Responses to the questionnaire were
collated and discussed by the Board in an open forum and
recommendations for improvement considered.
KNOWLEDGE, SKILLS AND EXPERIENCE
To assist Directors to maintain an appropriate level of knowledge,
skill and experience in the operations of the Company, Directors
have the opportunity to undertake site visits to familiarise
themselves with the Company’s operations.
Directors are also provided with papers, presentations and
briefings on the Company’s operations and on matters which
may affect the Company. These are provided in addition to
Board papers and are designed to assist the Directors to gain
relevant and timely information to assist in their decision making
process. The Company has implemented a secure electronic
information repository to facilitate access to past and present
Board documentation and other relevant reference material.
Directors are encouraged to undertake continuing education
relevant to the discharge of their obligations as Directors of the
Company. Subject to prior approval by the Company Secretary,
the reasonable cost of such education is met by the Company.
POSITION DESCRIPTIONS
The Board has developed and adopted written position
descriptions for the Non-executive Chairman of the Board, the
Chairman of each Board Committee, the Managing Director/
CEO and the Company Secretary.
These delineate the role and responsibility of each position
and provide clarity on the expectations for those individuals
occupying these key positions within the Company.
CONFLICTS OF INTEREST
The Code of Conduct for Directors, a copy of which is available
on the Company’s website, sets out the procedure to be
followed if there is, or may be, a conflict between the personal or
other interests of a Director and the business of the Company. A
Director with an actual or potential conflict of interest in relation
to a matter before the Board does not receive the Board papers
relating to that matter and when the matter comes before the
Board for discussion, the Director withdraws from the meeting
for the period the matter is considered and takes no part in the
discussions or decision-making process.
Minutes reporting on matters in which a Director is considered
to have a conflict of interest are not provided to that Director,
however, the Director is given notice of the nature of the matter
for discussions and, as much as practicable, of the general
nature of the discussion or decision reached.
REMUNERATION
Details of the remuneration policies and practices of the
Company and the remuneration paid to the Directors (Executive
and Non-executive) and senior executives are set out in the
Remuneration Report
in the Directors’ Report.
Shareholders will be invited to consider and to approve the
Remuneration Report at the AGM in November 2012.
included
In relation to the Non-executive Directors, there are no
termination or retirement benefits other than those contained in
statutory superannuation plans.
INDEPENDENT ADVICE
The Board and its Committees may seek advice from
independent experts whenever it is considered appropriate.
With the consent of the Chairman, individual Directors may
seek independent professional advice, at the expense of the
Company, on any matter connected with the discharge of their
responsibilities. No Director availed himself of this right during
the course of the year.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
BOARD COMMITTEES
The Board has established Audit, Nomination, Remuneration,
and Sustainability Committees which assist in the discharge of
the Board’s responsibilities. In addition to a review by the Board,
each committee reviews its performance and Charter on an
annual basis.
The external auditors are Ernst & Young who were appointed
as the Company’s auditors in June 2005. In November 2008,
the audit partner was changed as part of the partner rotation
process.
The external auditors meet with the Audit Committee without
management present at each meeting.
Board approved charters set out the terms of reference and
rules governing these Committees.
NOMINATION COMMITTEE
AUDIT COMMITTEE
The Audit Committee assists the Board in discharging its
responsibilities to ensure that the Company complies with
appropriate and effective accounting, auditing, internal control
and compliance and reporting practices in accordance with
the Audit Committee Charter. The Audit Committee Charter is
reviewed annually by the Board and no changes were made to
the charter during the financial year.
The role of the Audit Committee is to:
> monitor the integrity of the financial statements of the
reporting
significant
reviewing
financial
Company,
judgments;
The responsibilities of the Nomination Committee include:
>
>
reviewing the size and composition of the Board and
making recommendations to the Board on any appropriate
changes;
developing and planning for identifying, assessing and
enhancing Director competencies;
> making recommendations on the appointment and removal
of Directors;
>
>
evaluating Board performance so that individual and
collective performance is regularly and fairly assessed; and
providing new Directors with an induction into the Company
and provide all Directors with access to ongoing education
relevant to their position.
>
review the Company’s internal financial control system and,
unless expressly addressed by a separate risk committee
or by the Board itself, risk management systems;
> monitor and review the effectiveness of the Company’s
Sean Llewelyn chairs the Nomination Committee. The Board
considers that given the importance of Board composition, it is
appropriate that all members of the Board are members of the
Nomination Committee.
internal audit function;
> monitor and review the external audit function including
remuneration,
matters concerning appointment and
independence and non-audit services; and
>
perform such other functions as assigned by law, the
Company's constitution, or the Board.
The Audit Committee comprises three members, all of whom
are independent Non-executive Directors. The current members
of the Audit Committee are:
> Donald Shumka
Committee Chairman, Non-executive,
Independent Director
> Sean Llewelyn
Non-executive, Independent Director
> Peter Donkin
Non-executive, Independent Director
The Audit Committee meets at least once a quarter and at any
other time requested by a Board member, Company Secretary
or external auditor. The external auditors attend each quarterly
meeting and on other occasions where circumstances warrant.
At the discretion of the Chairman, having regard to the nature of
the agenda, relevant members of management may be invited
to attend meetings.
The number of meetings of the Audit Committee during the
reporting period and the names on the attendance record is set
out in the Directors’ Report. The Audit Committee carries out
periodic self evaluation of its effectiveness and performance.
The Chairman of the Board includes an evaluation of the Audit
Committee’s effectiveness and performance within his overall
Board evaluation.
The number of meetings of the Nomination Committee during
the reporting period and the names on the attendance record is
set out in the Directors’ Report.
The Chairman of the Board includes an evaluation of the
Nomination Committee’s effectiveness and performance within
his overall Board evaluation.
REMUNERATION COMMITTEE
role of
the Committee,
The
the
Remuneration Committee Charter, is to assist the Board with
respect to remuneration by reviewing and making appropriate
recommendations on:
in accordance with
>
>
remuneration packages of executive Directors, Non-
executive Directors and senior executives; and
employee incentive and equity based plans including
the appropriateness of performance hurdles and total
payments proposed.
The ASX Listing Rules and the Constitution require that the
maximum aggregate amount of remuneration to be allocated
among the Non-executive Directors be approved by the
shareholders in a general meeting. In proposing the maximum
amount for consideration by shareholders, and in determining the
allocation, the Remuneration Committee will take into account
the time demands made on Directors given the increasing
complexity of the Paladin Group and such factors as fees paid
to Non-executive Directors in comparable Australian companies.
The remuneration paid to Directors and senior executives is
shown in the Directors’ Report.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
The Sustainability Committee meets at least twice a year,
with further meetings as required. At the discretion of the
Chairperson, having regard to the nature of the agenda, relevant
members of management and external consultants may be
invited to attend meetings.
The number of meetings of the Sustainability Committee during
the reporting period and the names on the attendance record is
set out in the Directors’ Report.
The Chairman of the Board includes an evaluation of the
Sustainability Committee’s effectiveness and performance
within his overall Board evaluation.
FINANCIAL REPORTING
CEO AND CFO CERTIFICATION
(Safeguard
In accordance with the Corporations Act 2001, ASX Corporate
Governance Principle 4
in Financial
Reporting) and Canadian Securities Law, relevant declarations,
statements and certifications have been provided by the
Managing Director/CEO and the Chief Financial Officer in
relation to the Company’s 30 June 2012 Annual Report,
including financial statements.
Integrity
DISCLOSURE CONTROLS
Paladin is committed to ensuring that shareholders and the
market are provided with full and timely information and that
all stakeholders have equal and timely access to material
information concerning the Company.
covering
underlying
procedures
The Company understands and respects that timely disclosure
of price sensitive information is central to the efficient operation
of the ASX’s and Toronto Stock Exchange’s securities market
and has adopted a Continuous Disclosure and Communications
Policy with
public
announcements, the prevention of selective or inadvertent
disclosure, conduct of investor and analysts briefings, and
media communications. This Policy reflects the commitment
of the Directors and management to promoting consistent
disclosure practices aimed at accurate, timely and broadly
disseminated disclosure of material information to the market.
The Company has formed a Disclosure Control Committee
which has responsibility for overseeing and co-ordinating
disclosure of all public information. Members of this Committee
are the Managing Director/CEO, Company Secretary and Chief
Financial Officer.
RISK MANAGEMENT
The Company has established policies on risk oversight and
management and has a risk management and internal control
system to manage the Company’s material business risks. The
Company has developed its risk management policy in line with
the implementation of the risk management system and a risk
management framework.
The Remuneration Committee comprises three members,
all of whom are independent Directors. Sean Llewelyn is the
Chairman of the Remuneration Committee.
The current members of the Remuneration Committee are:
> Sean Llewelyn
Committee Chairman, Non-executive, Independent
Director
> Rick Crabb
Non-executive, Independent Director, Board Chairman
> Donald Shumka
Non-executive, Independent Director
The number of meetings of the Remuneration Committee during
the reporting period and the names on the attendance record is
set out in the Directors’ Report.
The Chairman of the Board includes an evaluation of the
Remuneration Committee’s effectiveness and performance
within his overall Board evaluation.
SUSTAINABILITY COMMITTEE
The role of the Sustainability Committee is to provide the Board
with an overview of Paladin’s performance in the areas of health,
safety, environment, social responsibility and sustainability and
to provide the Board with advice and recommendations where
relevant significant incidents occur.
The responsibilities of the Committee are to:
>
periodically review Paladin’s policies and guidelines in
the area of radiation, health, safety, environment, social
responsibility and sustainability to ensure they continue to
reflect the latest international standards;
> monitor Paladin’s performance and the effectiveness of the
implementation of the relevant guidelines and policies;
>
>
>
>
>
>
>
receive and consider reports on significant accidents,
environmental
incidents, community concerns and
breaches of Policy or system failure;
receive and consider any major relevant internal or
consultant reports;
receive and consider relevant internal audit reports;
review relevant external audit reports and consider their
independence and effectiveness;
obtain assurances
compliance with all relevant legislation;
that Paladin’s operations are
in
refer matters of concern to the Board as appropriate; and
exercise such other powers and perform such other duties
and responsibilities as are incidental to the purposes,
duties and responsibilities of the Committee pursuant to
the Charter and as may be delegated by the Board to the
Committee from time to time.
The Sustainability Committee comprises three members, the
majority of whom are independent Non-executive Directors.
The current members of the Sustainability Committee are:-
> Philip Baily – Committee Chairman
Non-executive, Independent Director
> Rick Crabb
Non-executive, Independent Director, Board Chairman
>
John Borshoff
Managing Director/CEO
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The Company’s Risk Management Policy is to identify, assess,
evaluate, monitor and mitigate risks which are considered
unacceptable to the Company. Operational business controls
have been identified and are in place to ensure unwanted
threats to the business are managed. Paladin has also
developed the business environment for managers and senior
personnel to assess risks and make sound business decisions.
Whilst all personnel have a responsibility to identify and report
to management risks which may materially affect the Company,
the Managing Director/CEO has the overall responsibility for the
management of risk in the Company. The Managing Director/
CEO is assisted by the heads of operational business units who
“champion” risks within the business unit. Paladin has adopted
the Australian and New Zealand Standard ISO 31000:2009 -
“Risk Management” in managing the risk management process.
The risk management system is designed and implemented
by the Managing Director/CEO, with assistance from senior
executives, and is subject to the review of the Board of Directors.
A report is provided annually to the Board of Directors detailing
the management process in relation to the Group’s material
business risks.
The Company maintains a Risk Register, which sets out all
of the enterprise risks that have been identified and includes
an assessment of the risk (risks analysed and evaluated), and
treatment plans to mitigate risks. The risk register has been
compiled and is subject to regular review by the Managing
Director/CEO and senior management to ensure adequate
risk control measures have been identified. An operational
risk assessment system is in place at the Langer Heinrich and
Kayelekera operations, which is continuously reviewed and
updated.
Paladin is committed to continual improvement of the risk
management process and procedures to ensure the highest
return to shareholders and stakeholders.
The Company has developed a Crisis and Emergency
Management System with individual site plans for LHM and
KM. The Company also conducts scenario-based exercises to
practise crisis and emergency response.
ENVIRONMENT
for
The Company promotes a standard of excellence
environmental performance across its operations. The Company
seeks to prevent, minimise, mitigate and remediate any adverse
impacts of its operations on the environment and strives to
achieve continuous improvement in environmental performance.
The Company has an Environmental Policy that endorses
compliance with all applicable environmental legislation as a
minimum, development and implementation of Environmental
Standards and all components of an Environmental Management
System, the assessment and management of environmental
risks, ensuring that its employees and contractors are aware
of their environmental responsibilities, effective stakeholder
consultation in relation to the Company’s operations and
proposed projects, and undertaking regular audits and reviews
and reporting on environmental performance.
HEALTH AND SAFETY
The safety, health and wellbeing of employees, contractors
and the community are of core value to Paladin’s operations.
A healthy workforce contributes to business success and the
Company’s aim is for zero injuries. The Company encourages
safe behaviour by employees and contractors, establishes a
mindset that injuries are preventable, provides safety education
and training, and conducts safety risk assessments. The safety
and health performance of Paladin is measured through internal
and external internationally recognised auditing and reporting
processes.
During the year external health and safety audits were carried
out at LHM and KM.
SECURITIES OWNERSHIP AND DEALINGS
The Company has a Policy for Trading in Company Securities
which is binding on all Directors and employees. The Policy was
updated in August 2010. This was due to the Company’s largely
expanded workforce and, rather than specific approvals to
trade required from all employees, the amended policy restricts
this requirement to a group of Restricted Employees. This group
consists of all Directors and officers and other key personnel
as nominated by the Chairman and Company Secretary and
is reviewed on a regular basis to take into account changes in
personnel. Prescribed ‘blackout’ periods are included, during
which all Directors, officers and Restricted Employees will be
prohibited from dealing in the Company’s securities. This is
in addition to the overriding prohibition against dealing in the
Company’s securities when a person is in possession of inside
information. In addition, all Directors, officers and Restricted
Employees are required to complete an application form to gain
the written acknowledgement of either the Chairman, Managing
Director/CEO or the Company Secretary before they deal in the
Company’s securities.
The Company’s Policy also prohibits hedging of options granted
under share options plans. This relates to both vested and
unvested options. Prohibited hedging practices include put/call
arrangements over “in money” options to hedge against a future
drop in share price. The Board considers such hedging to be
against the spirit of a share option plan and inconsistent with
shareholder objectives.
The Company uses an online compliance training module to
assist in monitoring understanding of this Policy. Training is
completed on a bi-annual basis with new employees completing
the training and assessment as part of the induction process.
CODES OF CONDUCT
The Board has approved a Code of Conduct for Directors
(incorporating underlying Guidelines for the Interpretation of
Principles) together with a Code of Business Conduct and
Ethics, which applies to all Directors, officers and employees
including those employed by subsidiaries, in all countries where
Paladin does business. A copy of the Code is available on the
Company’s website.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
These Codes demonstrate and codify Paladin’s commitment to
appropriate and ethical corporate practices. Compliance with
the Codes will also assist the Company to effectively manage its
operating risks and meet its legal and compliance obligations,
as well as enhancing Paladin’s corporate reputation.
The principles outlined in this document are intended to:
establish a minimum global standard of conduct by which
all Paladin employees are expected to abide;
To assist in the understanding of this Policy by the local Malawian
workforce due to language and cultural differences, a storybook
has been written and translated into the local language dealing
with the issues of fraud and corruption and whistleblowing. This
has been distributed to all local employees. In addition, the local
acting troupe has been employed in presenting small plays to
the workforce on these subjects. Both mediums have been
extremely well received and effective in presenting the message.
>
>
protect the business interests of Paladin, its employees
and customers;
PRIVACY POLICY
> maintain Paladin’s reputation for integrity; and
>
facilitate compliance by Paladin employees with applicable
legal and regulatory obligations.
The Code of Business Conduct and Ethics addresses
honesty and integrity, following the law, conflicts of interest,
confidentiality, protection of Company assets, dealing with public
officials, responsibility for international operations, employment
practices, record keeping and community relations.
The Board has appointed the Company Secretary as the
Company’s compliance officer in the case of employees, and
the Chairman of the Audit Committee in the case of Directors
and officers, as the person responsible for receiving reports
of breaches of the Code and this is the mechanism by which
compliance with the Code is monitored.
HUMAN RIGHTS POLICY
Paladin is committed to respect for human rights and
fundamental freedoms. The aim of the Human Rights Policy
is to provide the overarching framework for the business in
respecting human rights.
Paladin commits to uphold the human rights’ principles
outlined in the International Bill of Rights, which includes the
Universal Declaration of Human Rights, the International
Covenant on Economic, Social and Cultural Rights and the
International Covenant on Civil and Political Rights. Additionally,
Paladin respects the International Labor Organisation’s Core
Conventions.
Human rights are fundamental principles of personal dignity
and universal equality. Respect for human rights fosters social
progress, better standards of life and larger freedom for
individuals.
WHISTLEBLOWER POLICY
The Board has also approved a Whistleblower Policy which
documents commitment to maintaining an open working
environment in which employees and contractors are able to
report instances of unethical, unlawful or undesirable conduct
without fear of intimidation or reprisal.
The purpose of the Whistleblower Policy is to:
>
>
>
help detect and address unacceptable conduct;
help provide employees and contractors with a supportive
working environment in which they feel able to raise issues
of legitimate concern to them and to the Company; and
help protect people who report unacceptable conduct in
good faith.
The Company has a firm commitment to protecting the privacy
of any personal information that it collects and holds and
recognises its obligations under the existing privacy legislation.
It has adopted a Privacy Policy which provides details on the
collection and use of personal information, circumstances
under which it can be disclosed, management and security of
personal information and how it can be accessed.
DIVERSITY POLICY
The Board has approved a Diversity Policy which documents the
Company’s commitment to workplace diversity and recognises
the benefits arising from the recruitment, development and
retention of a talented, diverse and motivated workforce.
Diversity within the Company means all the things that make
individuals different to one another, including, but not limited to,
gender, ethnicity, religion, culture, language, disability and age.
It involves a commitment to equality and treating one another
with respect.
Responsibility for review of all matters contained within the
Diversity Policy rests with the Board as a whole and is reflected
accordingly in its Charter.
The ASX Corporate Governance Council’s Principles and
Recommendations requires the Company to set ‘measurable
objectives’ for achieving gender diversity and to report against
them on an annual basis. A number of objectives were put in
place since the Board approved the Diversity Policy and the
Board will continually review these objectives and update them
as necessary.
In respect to gender diversity specifically, 14% of the total
workforce globally are female. This statistic is somewhat skewed
due to the cultural and educational challenges faced with
increasing the female component of the workforce in Malawi
at KM, which is also the largest division of the Group with a
total of 741 employees. Here, females represent 9% (as for 2011)
compared to 42% (an increase from 33% in 2011) with Australian
based employees. Details across the Group are included in the
table set out in the “Our People” section on page 55.
It is worth noting that female participation in the workforce
has increased from 17% in 2011 to 19% at LHM. At a senior
management level, females are represented by 21% in Australia,
20% at KM and 17% at LHM. At minesite level at Kayelekera
female expatriates hold 10% of the supervisory roles and female
nationals hold 16%. At Langer Heinrich, female nationals hold
24% of such roles.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
MEASURABLE OBJECTIVES
Objective
Promote and publish a Diversity Policy.
Undertake an annual gender pay audit to ensure equity in
remuneration practices.
Outcome
The Diversity Policy, adopted by the Board, is published on the
Company’s website and intranet and forms part of the employee
induction process.
This was undertaken as part of the annual salary review process.
Establish baseline data across the Group for ongoing diversity
reporting.
Completed, with results detailed in the 2012 Annual Report.
Encourage training and development to assist in furthering career
goals.
105 females participated in educational initiatives during
the year.
Develop and implement flexible working arrangements to support
employees’ personal or family commitments whilst continuing in
employment.
The Company provides employees with flexible working arrangements
and paid parental leave together with a financial incentive paid on
return to work.
When the Board next recruits for an independent non-executive
director, at least one woman must be included in the list of potential
candidates.
Ongoing.
Further information on diversity within the Company can be
found in the Our People section of this Annual Report.
ANTI-BRIBERY AND CORRUPTION COMPLIANCE
Paladin does not operate in any country rated an extreme risk
for corruption in the latest Transparency International Global
Corruption Index – Australia and Canada are in the top quartile
and rank 8th and 10th respectively (out of 183 countries
surveyed); Namibia is in the second quartile and ranks 57th;
Malawi and Niger are in the third quartile, ranked 100th and
134th respectively.
Paladin opposes corruption and honours the OECD Convention
on Combating Bribery of Foreign Public Officials in International
Business Transactions (OECD Convention). Paladin is committed
to conducting its business in accordance with applicable laws,
rules and regulations, and the highest standards of business
ethics, and to full and accurate disclosure in compliance with
applicable laws, rules and regulations. The Company operates
under a Code of Business Conduct and Ethics and a Code
of Conduct for its Directors. An Anti-Bribery and Corruption
Compliance Guide provides practical advice on ethical business
conduct for Paladin Directors, employees and third parties. A
Whistleblower Policy and procedure are also in place to facilitate
disclosure of any alleged corrupt practices.
The Company has established a Compliance Committee to
oversee training of all Paladin Group employees and to ensure
compliance with the Company’s standards. The Committee
has been trained by external legal counsel expert in the field.
It is intended to roll out unified anti-corruption training across
the Group during 2012-13 with the objective of 100 per cent
attendance by management and employees. Paladin will also
engage significant suppliers and contractors in regard to its
stance on Anti-Bribery and Corruption.
Both LHM and KM operations have been independently
assessed for risks related to corruption by a specialist fraud
and corruption analyst from Australia and relevant corruption
risks have been identified and included in the Corporate Risk
Assessment Register.
Any changes to the above Codes and Policies are considered
by the Board for approval.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
,
DIRECTORS
REPORT
THE DIRECTORS PRESENT THEIR REPORT ON THE GROUP CONSISTING OF
PALADIN ENERGY LTD (COMPANY) AND THE ENTITIES (GROUP) IT CONTROLLED
AT THE END OF, OR DURING, THE YEAR ENDED 30 JUNE 2012.
Mr John Borshoff
Managing Director/Chief Executive Officer
Mr Peter Donkin
Non-executive Director
Mr Donald Shumka
Non-executive Director
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Mr Philip Baily
Non-executive Director
Mr Sean Llewelyn
Non-executive Director
Ms Gillian Swaby
Company Secretary/
Executive General Manager -
Corporate Services
Mr Rick Crabb
Non-executive Chairman
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PALADIN ENERGY LTD ANNUAL REPORT 2012
DIRECTORS
The following persons were Directors of Paladin Energy Ltd and
were in office for this entire period unless otherwise indicated:
MR RICK WAYNE CRABB
B. Juris (Hons), LLB, MBA, FAICD
(Non-executive Chairman) Age 55
Mr Crabb holds degrees of Bachelor of Jurisprudence
(Honours), Bachelor of Laws and Master of Business
Administration from the University of Western Australia. He
practised as a solicitor from 1980 to 2004 specialising in
mining, corporate and commercial law. He has advised on
all legal aspects, including financing, marketing, government
agreements and construction contracts, of many resource
development projects in Australia and Africa. Mr Crabb now
focuses on his public company directorships and investments.
He has been involved as a director and strategic shareholder
in a number of successful public companies. He is also the
non-executive chairman of Golden Rim Resources Ltd (since
2001), Ashburton Minerals Ltd (since 1999) and Otto Energy Ltd
(since 2004). Mr Crabb is a councillor on the Western Australian
Division of the Australian Institute of Company Directors.
Mr Crabb was appointed to the Paladin Board on 8 February
1994 and as Chairman on 27 March 2003.
MR JOHN BORSHOFF
B.Sc., F.AusIMM, FAICD
(Managing Director/Chief Executive Officer) Age 67
Mr Borshoff is a geologist who has been involved in the Australian
and African exploration and mining industry for over 30 years.
Mr Borshoff worked for International Nickel and Canadian
Superior Mining before joining a German mining group, Uranerz
from 1976 to 1991. He became Chief Geologist/Exploration
Manager during the period 1981-1986 and served as its chief
executive from 1987 to mid-1991 when the German parent of
Uranerz made the decision to close its Australian operations.
The primary focus of the Uranerz Group was the search and
development of uranium with the company operating extensively
throughout Australia, North America and Africa.
Mr Borshoff has extensive knowledge of the uranium industry
and experience in company management and strategic
planning. He serves on a number of industry organisations
including the Board of the Minerals Council of Australia and
the Board of the Australian Uranium Association of which he is
the chairman of its Code of Practice working committee and a
member of its Executive Committee.
Mr Borshoff founded Paladin and was appointed to the Paladin
Board on 24 September 1993.
Special Responsibilities
Former directorships of listed companies in last three years
Managing Director/Chief Executive Officer
Royal Resources Limited from 2004 to 11 August 2009
Port Bouvard Ltd from 1996 to 30 March 2009
Member of Nomination Committee from 1 June 2005
Member of Sustainability Committee from 25 November 2010
Special Responsibilities
Chairman of the Board
Member of Remuneration Committee from 1 June 2005
MR SEAN REVEILLE LLEWELYN
Member of Nomination Committee from 1 June 2005
LL.B
Member of Sustainability Committee from 25 November 2010
(Non-executive Director) Age 64
Mr Llewelyn originally qualified, and practised, as a solicitor in
Australia and then re-qualified in England. He has subsequently
worked in the finance and merchant banking industries for
more than 20 years in Australia, the UK, the United States and
South Africa. His considerable finance experience has been
in derivatives (a founder, President and CEO of Capital Market
Technology Inc.), structured finance and early stage investment
relating to the metal markets. He has been involved with the
uranium industry for many years and has a comprehensive
understanding of the uranium market.
Mr Llewelyn was the instigator and driving a force in the
formation of Nufcor International Ltd, a major uranium
marketing company, jointly owned between Anglo Gold and
First Rand International.
Mr Llewelyn was appointed to the Paladin Board on 12 April
2005.
Special Responsibilities
Member of Audit Committee from 12 April 2005
Chairman of Remuneration Committee from 26 November 2008
(member from 1 June 2005)
Chairman of Nomination Committee from 26 November 2008
(member from 1 June 2005)
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PALADIN ENERGY LTD ANNUAL REPORT 2012
MR DONALD SHUMKA
B.A., MBA
MR PHILIP BAILY
BSc, MSc
(Non-executive Director) Age 70
(Non-executive Director) Age 68
Mr Shumka is a Vancouver based Corporate Director with
more than 40 years’ experience in financial roles. From
2004 to 2011, he was President and Managing Director of
Walden Management, a consulting firm specialising in natural
resources. From 1989 to 2004, he was Managing Director,
Investment Banking with CIBC World Markets and Raymond
James Ltd. Prior to 1989, Mr Shumka was Vice President,
Finance and Chief Financial Officer of West Fraser Timber
Co. Ltd., one of Canada’s largest forest products companies.
He holds a Bachelor of Arts Degree in Economics from the
University of British Columbia and a Master of Business
Administration Degree from Harvard University. Mr Shumka
is also a director of Eldorado Gold Corp. (since May 2005),
Alterra Energy Corp. (since March 2008), Lumina Copper
Corp. (since January 2009) and Anfield Nickel Corp. (since
December 2010).
Mr Baily is a metallurgist with more than 40 years’ experience
in the mining industry, including some 11 years in the uranium
sector. Throughout his career, he has been involved in the
design, construction, commissioning and operation of mineral
processing plants including two uranium plants. Project
locations have varied from the deserts of Australia to the tropics
of Papua New Guinea and the high altitudes of Argentina. He
has extensive experience, at senior management level, in the
evaluation of projects from grass roots development to the
acquisition of advanced projects and operating companies.
These projects have been located throughout the world, many
in developing countries and environmentally sensitive areas.
Mr Baily holds a Bachelor of Science and a Master of Science
degree in Metallurgy from the University of NSW.
Mr Baily was appointed to the Paladin Board on 1 October
2010.
Mr Shumka was appointed to the Paladin Board on 9 July
2007.
Special Responsibilities
Chairman of Sustainability Committee from 25 November 2010
Special Responsibilities
Chairman of Audit Committee from 9 July 2007
Member of Remuneration Committee from 10 August 2007
COMPANY SECRETARY
Member of Nomination Committee from 10 August 2007
MS GILLIAN SWABY
B.Bus, FCIS, FAICD
(Company Secretary/Executive General Manager -
Corporate Services) Age 52
Ms Swaby has been involved in financial and corporate
administration for listed companies, as both Director and
Company Secretary covering a broad range of industry
sectors, for over 30 years. Ms Swaby has extensive experience
in the area of secretarial practice, management accounting
and corporate and financial management.
Ms Swaby is past Chair of the Western Australian Council of
Chartered Secretaries of Australia, a former Director on their
National Board and a lecturer for the Securities Institute of
Australia. Ms Swaby is the principal of a corporate consulting
company and was a member of the Paladin Board for a period
of 10 years.
Ms Swaby was appointed acting Chief Financial Officer during
the interim period after Mr Garry Korte resigned with effect
from 24 May 2012 and Mr Alan Rule assumed the position on
23 July 2012.
MR PETER MARK DONKIN
BEc, LLB., F Fin, MAICD
(Non-executive Director) Age 55
Mr Donkin has over 30 years’ experience in finance, including
20 years arranging finance in the mining sector. Prior to leaving
in early 2010 he was the Managing Director of the Mining
Finance Division of Société Générale in Australia, having
worked for that bank for 21 years in both their Sydney and
London offices. Prior to that he was with the corporate and
international banking division of the Royal Bank of Canada.
His experience has
for
mining companies, both in Australia and internationally in a
wide variety of financial products, including project finance,
corporate finance, acquisition finance, export finance and
early stage investment capital. Mr Donkin holds a Bachelor of
Economics degree and a Bachelor of Law degree from the
University of Sydney. He is a director of Allegiance Coal Ltd
(since 2010) and was previously a director of Sphere Minerals
Ltd (from March 2010 to November 2010).
involved arranging transactions
Mr Donkin was appointed to the Paladin Board on 1 July 2010.
Special Responsibilities
Member of Audit Committee from 25 November 2010
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PALADIN ENERGY LTD ANNUAL REPORT 2012
BOARD AND COMMITTEE MEETINGS
The number of Directors’ meetings and meetings of committees
held in the period each Director held office during the financial
year, and the number of meetings attended by each Director
were:
Name
Board of Directors
Audit Committee
Remuneration
Committee
Sustainability
Committee
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
17
16
17
17
16
17
17
17
17
17
17
17
-
-
4
4
4
-
-
-
4
4
4
-
3
-
3
3
-
-
3
-
3
3
-
-
2
2
-
-
-
2
2
2
-
-
-
2
Of the above Board meetings, only 4 were face to face with
the remainder held via electronic means. The Board meeting
schedule also includes a scheduled conference call mid quarter
between the face to face meetings.
17 Board meetings were held. By way of reference, an
independent survey by CRA Plan Manager Pty Ltd states the
average number of board meetings is 11 for small companies
and around 21 for larger companies.
INTERESTS IN THE SECURITIES OF THE COMPANY
As at the date of this report, the interests of the Directors in the
securities of Paladin Energy Ltd were:
Director
Paladin
Shares
Options
(issued
under the
Paladin
EXSOP)
Mr John Borshoff
21,877,394
*657,000
Mr Rick Crabb
4,881,528
Mr Sean Llewelyn
100,000
Mr Donald Shumka
100,000
Mr Peter Donkin
Mr Philip Baily
15,000
12,000
Nil
Nil
Nil
Nil
Nil
Share
Rights
(issued
under the
Paladin
Employee
Plan)
**300,000
***500,000
Nil
Nil
Nil
Nil
Nil
exercisable at A$4.50 on or before 29 January 2013
*
** due to vest on 26 March 2013 subject to performance conditions
*** due to vest on 5 November 2013 subject to performance conditions
RESIGNATION, ELECTION AND CONTINUATION IN
OFFICE OF DIRECTORS
In accordance with the Constitution of the Company, Mr Donald
Shumka and Mr Peter Donkin will seek re-election at the 2012
Annual General Meeting, following their retirement by rotation.
PRINCIPAL ACTIVITY
The principal activity of the Group was the development and
operation of uranium mines in Africa, together with global
exploration and evaluation activities in Africa, Australia and
Canada.
REVIEW AND RESULTS OF OPERATIONS
A detailed operational and financial review of the Group is set
out on pages 12 to 42 of this report under the section entitled
Management Discussion and Analysis.
The Groups’ loss after tax for the year is US$172.8M
(2011: US$82.3M) representing an increase of 110% from the
previous year.
DIVIDENDS
No dividend has been paid during the financial year and no
dividend is recommended for the current year.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the
Group during the financial year not otherwise dealt with in this
report.
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SIGNIFICANT EVENTS AFTER THE BALANCE DATE
LIKELY DEVELOPMENTS
Other than disclosed below, since the end of the year, the
Directors are not aware of any other matter or circumstance
not otherwise dealt with in this report, that has significantly
or may significantly affect the operations of the Group, the
results of those operations or the state of affairs of the Group
in subsequent years with the exception of the following, the
financial effects of which have not been provided for in the 30
June 2012 Financial Report:
DEEP YELLOW LTD ENTITLEMENT ISSUE
On 30 July 2012 DYL announced the results of its entitlement
issue. Paladin purchased 72,263,821 ordinary shares at a cost
of A$3M. Following this issue the Group has an investment in
DYL of 297,198,282 fully paid ordinary shares. The holding of
these ordinary shares represents a 23.43% interest (30 June
2012: 19.9%) in the ordinary shares in DYL.
LONG-TERM OFF-TAKE CONTRACT WITH A US$200M
PREPAYMENT
On 15 August 2012, the Company announced that it had
entered into a six year off-take agreement with a major utility to
deliver a total of 13.73Mlb U3O8 in the period from 2019 to 2024.
A prepayment of US$200M will be made to the Company in
respect of part of the future U3O8 product deliveries. Delivery of
the future U3O8 product will be at the Company’s option either
from its current African mining operations or from a project yet
to be developed from the Company’s significant existing project
pipeline or from a combination of both. Uranium delivered under
the long-term off-take contract will be sold at the market prices
prevailing at the time of delivery bounded by escalating floor and
ceiling prices.
To secure the Company’s obligation to deliver product
representing the prepayment amount, the utility will hold security
over 60.1% of the Company’s Michelin project in Canada. The
percentage of Michelin secured will be reduced as the value
of that project is enhanced by the Company’s ongoing work.
The Michelin security can also be replaced by other appropriate
security if required.
Subject to formalities to be put in place between the Company
and the utility, expected to occur in September 2012, such
as required registration of the security documentation (which
documentation is in agreed form) the US$200M prepayment
will be made in tranches to be completed by no later than 31
January 2013.
The US$200M prepayment will be applied to repayment of the
balance of the March 2013 convertible notes with the remainder
retained for balance sheet strength as working capital.
MID-TERM SALES CONTRACTS SECURED
On 24 August 2012, the Company announced it had secured two
mid-term off-take agreements for U3O8 production originating
from its mining operations at Langer Heinrich in Namibia and
Kayelekera in Malawi.
These agreements are for the purchase of a total of 6.3Mlb U3O8
to be delivered from late 2012 to end 2015 at approximately 2Mlb
pa. Pricing will be determined predominately by the market price
at the time of delivery(without floor or ceiling limitations) while
a minority portion of the delivery prices will be in accordance
with a series of specified fixed prices which exceed current spot
uranium prices.
Likely developments in the operations of the Group constituted
by the Company and the entities it controls from time to time
are set out under the section entitled Management, Discussion
and Analysis.
ENVIRONMENTAL REGULATIONS
The Group is subject to significant environmental regulation
in respect to its exploration, evaluation, development and
operational activities for uranium projects under the laws of
the countries in which its activities are conducted. The Group
currently has mining and processing operations in Namibia and
Malawi, and exploration projects in Africa, Australia, Niger and
Labrador. The Group’s Policy is to comply with all applicable
environmental laws and regulations in the countries in which it
conducts business.
Specific environmental regulations, approvals and licences
for the exploration, development and operation are applied to
the activities conducted at each site. In addition many other
international and industry standards are also applied to the
Group’s activities, including those specified for the global
uranium industry. These environmental laws, regulations and
standards relate to environmental factors such as radiation,
water, flora, fauna, air quality, noise, waste management and
pollution control.
The Directors are not aware of any environmental matters which
would have a significant adverse effect on the Group.
REMUNERATION FOR THE YEAR AT A GLANCE
The disclosure below aims to provide an overall picture of the
group-wide remuneration platform and not simply focus on Key
Management Personnel. Given the difficulties being currently
experienced in attracting and retaining quality staff in the global
resource sector and, more particularly, in the much narrower
uranium sector, the focus is on policies to assist in attraction,
motivation and retention of staff across the Group.
>
The Managing Director/CEO voluntarily reduced his salary
by 25% from 1 December 2011 to 30 November 2012
(which he later extended to 30 June 2013) setting the tone
for the cost rationalisation programme undertaken across
the Group.
> Salary increases across the Group were broadly based on
Consumer Price Index (CPI) increases (3.1% for Australia).
Certain adjustments for parity were made to ensure
individual market competitiveness was maintained. This
philosophy extended throughout the Group worldwide,
with CPI adjustments relative to the country of operations.
>
>
The cash bonus pool available for distribution was
extremely limited this year as a result of continuing poor
uranium prices and delayed ramp-up of Kayelekera Mine
and paid only to those personnel who demonstrated
exceptional performance and contribution.
Total bonuses paid across the Group totalled A$404,421
(US$417,054), against A$1,009,000 (US$1,040,517) for the
prior year.
> Site based employees accrued bonuses quarterly, based
on a system linked to mine performance criteria, payable
after the end of the financial year.
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EXECUTIVE REMUNERATION
Details of the remuneration received by the Key Management
Personnel prepared in accordance with statutory requirements
and accounting standards are detailed
the
Remuneration Report.
further
in
The following tables set out the cash value of earnings realised
by the Managing Director/CEO and other executives considered
to represent Key Management Personnel for 2012 and 2011 and
the intrinsic value of share-based payments that vested to the
executives during the period. The intrinsic value of share rights
represents the Company’s share price at vesting date, whilst the
intrinsic value of options represents the difference between the
exercise price of the award and the Company’s share price at
vesting date. Neither reflects the accounting value determined
in accordance with the accounting standards upon which the
preparation of the financial statements is based.
The cash value of earnings realised include cash salary and
fees, superannuation, cash bonuses and other benefits
received in cash during the year and the intrinsic value of long-
term incentives vesting during the 2012 year. The tables do not
include the accounting value for share rights or options granted
in the current and prior years, as this value may or may not be
realised as they are dependent on the achievement of certain
performance hurdles. The accounting value of other long-term
benefits which were not received in cash during the year have
also been excluded.
All cash remuneration is paid in Australian dollars to those
parties listed below (with the exception of Mr D Garrow who
is paid in US$) therefore the tables are presented in both A$
and US$ being the functional and presentation currency. The
detailed schedules of remuneration presented later in this report
are presented in US$.
> A further annual grant of share rights was made under the
long-term incentive plan totalling 1,984,400 share rights
(2011: 4,202,117), 0.24% of issued capital (2011: 0.54%).
This is a reduction in number of share rights granted of
53% over 2011.
> A total of 1,082,641 share rights vested during the year
(0.13% of issued capital).
> Having remained at the same level for the past three years,
Non-executive Directors’ remuneration increased by 4%.
> During the year, as part of a general review of balance
sheet provisions, a review was undertaken of all material
accrued long service leave and annual leave with a view to
reducing this liability as long as the entitlement did not then
fall below 20 days. This resulted in a number of employees
cashing out such entitlements. In accordance with this
policy, the Managing Director/CEO cashed out 140 days
of annual leave and 80 days of long service leave totalling
A$1,717,000 (US$1,771,000). The Board did not consider it
practical or in the interests of the Company, to require the
Managing Director/CEO to use this accrued leave, or for
the Company to continue to retain the liability.
>
Long-term incentives on issue at balance date comprise
the following:
- 3,467,329 options on issue from grants made prior
to June 2009, exercisable in the range of A$4.50 to
A$5.37. The expiry dates range from January to April
2013. A further 750,000 options exercisable at A$2.54
will be re-tested for vesting on 14 October 2012 with an
expiry date of 14 October 2013; and,
- 6,885,882 Performance Share Rights representing
0.82% of the issued capital.
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CASH VALUE OF EARNINGS REALISED
2012 (A$’000) / (US$’000)
Name
Base Salary &
Superannuation
Cash
Bonus
Other
Total Cash
LTIP
26 March
2010(1)
LTIP
5 Nov 2010(2)
LTIP
15 Feb 2011(3)
Total
A$
US$
A$
US$
A$
US$
A$
US$
A$
US$
A$
US$
A$
US$
A$
US$
Mr John Borshoff 1,747 1,802
Mr Dustin Garrow
654
674
Ms Gillian Swaby
-.
-.
-.
-.
-.
Mr Garry Korte(6)
497
513
30
Mr Mark
Chalmers
Total
500
516
3,398 3,505
30
60
-
-
31
31
- 1,717.(4) 1,771.(4) 3,464 3,573
-. 3,464 3,573
-.
-.
654
554.(5)
571.(5) 554
674
571
-.
-.
527
544
-.
61
55
27
-.
63
57
28
61.(7)
63.(7) 591
610
-.
-
-.
17
13
10
-.
-.
-.
-.
180
186
-.
-.
-.
-.
731
801
564
754
827
582
591
610
62 2,332 2,405 5,790 5,972
143
148
40
180
186 6,151 6,346
-.
16
12
10
-.
38
Refer to the Compensation of Key Management Personnel table later in the Remuneration Report for audited information required in accordance with the Corporations Act
2001 and its regulations.
(1) Value of share rights granted on 26 March 2010 and vesting on 1 September 2011 at a market price of A$2.03.
(2) Value of share rights granted on 5 November 2010 and vesting on 1 September 2011 at a market price of A$2.03.
(3) Value of share rights granted on 15 February 2011 and vesting on 15 February 2012 at a market price of A$1.665.
(4) Other represents accrued annual leave (140 days) and accrued long service leave (80 days) paid out.
(5) Fees for Company Secretarial services paid to a company of which Ms Gillian Swaby is a director and shareholder. Ms Swaby was appointed acting Chief Financial
Officer during the interim period after Mr Garry Korte resigned with effect from 24 May 2012 and Mr Alan Rule assumed the position on 23 July 2012.
(6) Mr Garry Korte resigned with effect from 24 May 2012.
(7) Living away from home allowance.
(8) Exchange rate used is average for year US$1 = A$0.96971.
2011 (A$’000) / (US$’000)
Name
Base Salary &
Superannuation
Cash
Bonus
Other
Total Cash
LTIP
2008(1)
LTIP
26 March 2010(2)
Total
A$
US$
Mr John Borshoff
2,032
2,002
Mr Dustin Garrow
661
651
Ms Gillian Swaby
Mr Garry Korte
Mr Wyatt Buck
-.
460
448
-.
453
442
Mr Mark Chalmers
88.(5)
87.(5)
A$
234
US$
231
72
50
55
-.
-.
71
49
54
-.
-.
A$
US$
A$
US$
2,266
2,233
-.
-.
-.
-.
733
520.(3)
512.(3)
570
-.
-.
515
51.(4)
50.(4)
499
-.
-.
88
A$
256
US$
252
55
53
-.
41
-.
54
52
-.
40
-.
A$
US$
A$
US$
-.
76
68
34
61
-.
-.
2,522
2,485
75
67
33
59
-.
864
691
549
601
88
851
680
540
591
87
722
561
507
492
87
Total
3,689
3,635
411
405
571
562
4,671
4,602
405
398
239
234
5,315
5,234
(1) Value of long-term incentive options granted on 29 January 2008 and vesting on 29 January 2011 at an exercise price of A$4.50 vs market price at vesting of A$4.89.
(2) Value of share rights granted on 26 March 2010 and vesting on 1 September 2010 at a market price of A$3.80.
(3) Fees for Company Secretarial services paid to a company of which Ms Gillian Swaby is a director and shareholder.
(4) School fees and accrued leave paid on resignation being 6 May 2011.
(5) Employment commenced 27 April 2011.
(6) Exchange rate used is average for year US$1 = A$1.01512.
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Having regard to the recommendations made by the Managing
Director/CEO, the Committee approves the quantum of the
short-term incentive bonus pool and the total number of the long-
term incentive grants to be made and recommends the same
for approval by the Board. Individual awards are then determined
by the Managing Director/CEO in conjunction with senior
management, as appropriate. The remuneration for the Managing
Director/CEO is determined by the Remuneration Committee.
KEY ELEMENTS OF KEY MANAGEMENT PERSONNEL/
EXECUTIVE REMUNERATION STRATEGY
The overall focus of Paladin’s remuneration strategy is to:
>
attract and retain talented, qualified and effective Executives;
> motivate short and long-term performance and reward
>
>
>
>
past performance;
provide competitive and fair reward;
be flexible and responsive in line with market expectations;
align Executive interests with those of the Company’s
shareholders; and
comply with applicable legal requirements and appropriate
standards of governance.
This strategy applies group wide for all employees. Information
in relation to the compensation on Non-executive Directors is
detailed later in this Remuneration Report.
The overall level of compensation takes into account the
Company’s earnings and growth in shareholder wealth of
the Company together with the achievement of strategic
goals. Consideration of the Company’s earnings will be more
relevant as the Company matures from its development and
consolidation phase to profitability.
The Board is cognisant of general shareholder concern that
long-term equity-based remuneration be linked to Company
performance and growth in shareholder value. The Share Rights
plan addresses this with performance conditions including
reference to Earnings per Share (EPS), Total Shareholder
Return (TSR) and Market Price conditions. A review of the
performance conditions is currently in process to determine
the appropriateness to the business. This is considered in more
detail further in this report.
The chart below compares, assuming an initial investment of
A$100, the yearly percentage change in the cumulative total
shareholder return on the Company’s Ordinary Shares against the
cumulative total shareholder return of the S&P/ASX 200 Index for
the Company's five most recently completed financial years.
REMUNERATION REPORT (AUDITED)
This Remuneration Report outlines the Director and executive
remuneration arrangements of the Company and the Group
in accordance with the requirements of the Corporations Act
2001 (Cth) and its Regulations. For the purposes of this report,
Key Management Personnel of the Group are defined as
those persons having authority and responsibility for planning,
directing and controlling the major activities of the Group,
directly or indirectly, including any Director whether executive or
otherwise of the parent company.
In addition to the Group’s Directors, Key Management Personnel
comprise:
> Mr John Borshoff
Managing Director/CEO
> Ms Gillian Swaby
Company Secretary and Executive General Manager –
Corporate Services
> Mr Dustin Garrow
Executive General Manager - Marketing
> Mr Garry Korte
Chief Financial Officer (Resigned 24 May 2012)
> Mr Mark Chalmers
Executive General Manager – Production
> Mr Alan Rule
Chief Financial Officer (Commenced 23 July 2012)
the purposes of
For
‘Executive’
encompasses the Managing Director/CEO, senior executives,
managers and company secretary of the Parent and the Group.
report,
term
this
the
REMUNERATION APPROVAL PROCESS
The Remuneration Committee is charged with assisting the
Board by reviewing and making appropriate recommendations
on remuneration packages for the Managing Director/CEO,
Non-executive Directors and senior executives. In addition,
it makes recommendations on long-term incentive plans and
associated performance hurdles together with the quantum of
grants made, taking into account both the individual’s and the
Company’s performance.
The Remuneration Committee, chaired by Mr Sean Llewelyn,
held three meetings during the year. Messrs Crabb and
Shumka are also Committee members. The Managing Director/
CEO is invited to attend those meetings which consider the
remuneration strategy of the Group and recommendations in
relation to senior executives.
)
0
0
1
=
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s
a
B
(
x
e
d
n
I
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100
80
60
40
20
0
June 07
June 08
June 09
June 10
June 11
June 12
Paladin Energy Limited
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74
PALADIN ENERGY LTD ANNUAL REPORT 2012
Paladin Energy Ltd
S&P/ASX 200 Index
EPS
30 June 2008
30 June 2009
30 June 2010
30 June 2011
30 June 2012
A$78
A$83
A$60
A$63
A$43
A$69
A$31
A$73
A$15
A$65
US$(0.06)
US$(0.78)
US$(0.08)
US$(0.11)
US$(0.21)
The share price of the Company at 29 June 2012 was A$1.25
(30 June 2011: A$2.52)
The remuneration structure for the Key Management Personnel/
Executives has three elements:
>
>
>
fixed remuneration;
short-term variable remuneration; and
long-term incentives.
These are detailed as follows:
Remuneration Component Elements
Details
Fixed Remuneration
Annual base salary determined as at 1
January each year
The ‘not at risk’ cash component which may include certain salary
sacrifice packaging.
Statutory superannuation contributions
Statutory % of base salary.
Expatriate benefits
Executives who fulfill their roles as an expatriate may receive benefits
including relocation costs, health insurance, housing and car
allowances, educational fees and tax advisory services.
Foreign assignment allowance
An additional % of base salary is payable in relation to foreign
assignments being 15% for Malawi and 10% for Namibia.
Variable Performance Linked
Remuneration
(“at risk” remuneration)
Short-term incentive, paid as a cash
bonus
Long-term incentive, granted under the
Rights Plan
Rewards Executives for performance over a short period, being
the year ending 31 December. Bonuses are awarded at the same
time as the salary reviews. Assessment is based on the individual’s
performance and contribution to team and Company performance.
Award determined in the September quarter of each year, based
on individual performance and contribution to team and Company
performance. Vesting dependent on creation of shareholder value
over a three year period, together with a retention element.
FIXED REMUNERATION
This is reviewed annually with consideration given to both the
Company and the individual’s performance and effectiveness.
As competition in the global resource sector continues to grow,
and given an even narrower sector of uranium expertise, a key to
attracting and retaining talent is to maintain relevant and globally
competitive remuneration packages. Market data focused on the
mining industry is analysed with a focus on maintaining parity or
above with companies of similar complexity and size operating in
the resources sector and becoming an employer of choice. The
Company did not engage remuneration consultants, however
it subscribes to a number of remuneration surveys and reports
including Boardroom Remuneration Review (Connect 4), GRG
Resources KMP Remuneration Guide (Godfrey Remuneration
Group Pty Ltd), The Resource Report (CRA Plan Managers Pty
Ltd) and the AIM National Salary Survey (Australian Institute of
Management). The Company also takes into consideration the
annual Executive and Board Remuneration Report produced by
Ernst & Young.
During the past year, salaries, as a general rule, were increased
in accordance with the movements of the CPI only (as for the
previous year), other than in cases where there was a role
change or an anomalous situation relevant to labour market
conditions. For Australian employees this amounted to 3.1%.
For foreign operations, any CPI adjustment was relative to that
country.
By way of comparison, salaries in the mining industry in Australia
increased on average 5.75%. Whilst the level of increase was
below the average, Paladin’s long-term incentive scheme which
operates through all levels provides a generous component of
remuneration.
Mr John Borshoff is referred to as both Managing Director/
CEO to clarify the understanding of his position in both North
America and Australia, given Paladin’s stock exchange listings
in each jurisdiction.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
MANAGING DIRECTOR/CEO
There was no increase in the fixed remuneration (inclusive of
superannuation) of A$2,044,224 (US$2,108,078). Base salary
was voluntarily reduced by 25% to A$1,533,600 (US$1,581,503)
from 1 December 2011 to 30 November 2012 (which he later
extended to 30 June 2013). The remuneration level reflects
the extensive knowledge and experience Mr John Borshoff
has in the uranium sector gained over the past 40 years, as a
recognised global authority. Expertise at this level is in extremely
limited supply, particularly given the period of over 20 years of
non activity in the uranium sector and the very small number of
uranium producers worldwide. His knowledge and expertise of
the sector have been key to the growth and acquisition strategy
of the Company and integral to its development from a junior
explorer to a uranium producer with two operating mines.
In addition, his contract provides for payment of a benefit on
retirement or early termination by the Company, other than
for gross misconduct, equal to two times base salary for
the two years immediately preceding the termination date.
This benefit reflects approximately 19 years of service to the
Company by John Borshoff, being the founder in 1993. As a
comparison to retirement benefits generally seen in the North
American markets (in which the Company is listed and a market
from which executive staff are sourced), this benefit is not
considered excessive by the Board. This benefit was approved
by shareholders on 9 November 2005 at a time when retirement
benefits generally were set at a much higher threshold.
VARIABLE REMUNERATION
A bonus of up to 100% of base salary can be achieved under
the terms of his contract, having consideration to outcomes
achieved during the year, to be determined by the Remuneration
Committee. For the calendar year 2011 no bonus was awarded
(compared to 12% in the previous year). Matters to be considered
as key outcomes for the CY2012 when considering payment of
a bonus to J Borshoff fall within the following parameters which
the Board considers best capture the essential elements for
increasing shareholder returns:
Factor
1 Production and financial performance meeting
or exceeding expectations.
2 Sustainability matters achieving expectations.
3 Organic and inorganic growth progressing in
accordance with strategy.
4 Organisational factors meeting expectations.
5 Other factors at the discretion of the
Remuneration Committee.
Indicative
Weighting
35%
20%
30%
5%
10%
The Remuneration Committee may, in its discretion, vary
the weighting to account for unusual/unexpected events or
outcomes during the year. Any bonus payable, relating to the
2012 financial year, would be paid out in CY2013.
SHORT-TERM INCENTIVES
LONG-TERM INCENTIVES
The Company provides short-term incentives comprising a
cash bonus to Executives of up to 30% of base salary. The
bonus is entirely discretionary with the goal of focusing attention
on short-term strategic and financial objectives. The amount
is dependent on the Company’s performance in its stated
objectives and the individual’s performance, together with the
individual’s position and level of responsibility. Bonuses in 2011
were paid in only very limited circumstances across the Group
rewarding only those personnel who demonstrated exceptional
performance and contribution having regard to continuing poor
uranium prices and delays in the ramp-up of KM. Bonuses
totalled A$404,421 (US$417,054) for the year against a total of
A$1,009,000 (US$1,040,517) for the prior year. All cash bonuses
granted have been paid during the year.
This component is an “at risk” component of overall remuneration
designed to encourage exceptional performance whilst adhering
to the Company values. Specific targets for individuals have not
been set due to the philosophy of achieving a common goal for
the Company, however, the following measures are taken into
account where these are applicable to the Key Management
Personnel and individual Executives and have been selected to
align their interests to those of shareholders:
(a) health, safety and environmental performance;
(b) production performance;
(c) project development performance;
(d) additional uranium resources delineated;
(e) performance of the Company in meeting its various other
objectives;
(f)
financial performance of the Company; and
(g) such other matters determined by the Remuneration
Committee in its discretion.
The Company believes that encouraging its employees to
become shareholders is the best way of aligning their interests
with those of its shareholders.
In 2009, the Directors determined that a share rights plan
was the most appropriate form of long-term incentive plan for
the Group and at the 2009 AGM, shareholders approved the
adoption of the Employee Performance Share Rights Plan (the
Rights Plan).
Approval was also given to implement a share rights plan to
reward a small number of key individual contractors who provide
similar services to employees, the Contractor Performance
Share Rights Plan (the Contractor Rights Plan). These plans are
referred to jointly as the Rights Plans.
As the approval is only valid for a 3 year period, shareholders
will be asked to re-approve the adoption of the Rights Plans at
the 2012 AGM.
As a consequence of adopting the Rights Plans, no further
grants will be made under the previous Executive Share Option
Plan with the last option grant made on 24 June 2009. It was
determined that this plan had a number of limitations and did
not provide an appropriate incentive.
The Rights Plans are long-term incentive plans aimed at
advancing the interests of the Company by creating a stronger
link between employee performance and reward and increasing
shareholder value by enabling participants to have a greater
involvement with, and share in the future growth and profitability
of the Company. They are an important tool to assist in attracting
and retaining talented people.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Share Rights are granted under the plan for no consideration.
Share Rights are rights to receive fully paid ordinary shares
in the capital of the Company (Shares) in the future if certain
individual and/or corporate performance metrics (Performance
Conditions) are met in the measurement period.
The number of Share Rights able to be issued under the Plans is
limited to 5% of the issued capital. The 5% limit includes incentive
grants under all plans made in the previous 5 years (with certain
exclusions under the Australian corporate legislation). This
percentage now stands at 0.31%.
The Board is cognisant of general shareholder concern that
long-term equity-based rewards should be linked to the
achievement by the Company of a performance condition.
Share Rights granted under the Rights Plan are subject to
certain vesting and performance conditions as determined by
the Board from time to time. The Company does not offer any
loan facilities to assist in the purchase of shares by employees.
VESTING AND PERFORMANCE CONDITIONS
The performance conditions of all share rights granted to
Managing Director/CEO are:
Proportion of
Share Rights
to which
performance
hurdle applies
50%
50%
Performance measure
Total Shareholder Return (TSR) relative to
mining companies in ASX S&P 200 Index*
Earnings Per Share (EPS) Measuring the
increase in earnings over the period
*The initial measurement date of the Share Rights subject to the
relative TSR condition is at the end of year three, calculated from
the date of grant. At the end of year three, Mr John Borshoff
can either:
The Share Rights issued in April 2012 and those from previous
grants are subject to a range of vesting and performance
conditions:
>
>
accept the vesting outcome achieved; or
elect to have his Share Rights retested at the end of year
four (in which case the same vesting schedule applies but
the retest period covers the entire four year period from the
date the Share Rights were granted).
He is not permitted to “double dip”, so by electing to have his
Share Rights retested at the end of year four he forfeits any
entitlement to Share Rights which otherwise would have vested
at the end of year three. All Share Rights subject to the relative
TSR condition will expire at the end of year four.
The Remuneration Committee allows one retest to reflect the
volatile nature of the industry. The way in which the retest is
applied maintains alignment with shareholder interests.
WHY WERE THESE VESTING CONDITIONS SELECTED?
The Board considered the measures reflected an appropriate
balance in terms of alignment between comparative shareholder
return and individual reward, a market based performance
measure and the encouragement of long-term retention. A
review is currently underway to consider whether the various
performance conditions, other than time based vesting, are
the most appropriate for the Group. It is likely that, in future,
performance measures related more to internal hurdles that
support the Group’s strategic objectives may be adopted.
Proportion of
Share Rights
to which
performance
hurdle applies
10%
15%
25%
20%
30%
Vesting and Performance Condition
Time based – must remain in employ for 1
year from date of grant
Time based – must remain in employ for 2
years from date of grant
Time based – must remain in employ for 3
years from date of grant
Total Shareholder Return (TSR) relative to
mining companies in ASX S&P 200 Index
Market Price Performance (MPP) measuring
the increase in share price over the period
MANAGING DIRECTOR/CEO
The Share Rights issued to the Managing Director/CEO have
different vesting hurdles to reflect the “at risk” nature of 100%
of this component of his remuneration and provide a direct
link between Managing Director/CEO reward and shareholder
return, and provide a clear line of sight between Managing
Director/CEO performance and Company performance. No
Share Rights were granted to Mr J Borshoff during the year
ended 30 June 2012.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Details of the various vesting and performance conditions follow:
Time-based Vesting
50% of the Share Rights will vest based on the participant continuing to be employed with the Group. These are staggered over time and this
condition is designed to assist in long-term retention of staff. Such benefits also assist in recruitment of suitably qualified personnel in a market
place where both mining, and more particularly uranium experience, are in particularly short supply. Paladin competes in the global recruitment
market and must offer competitive benefits to be successful and attract quality candidates. The available talent pool with uranium expertise is
both small and internationally focussed and competition is high for quality personnel. Costs for replacement of personnel and the hidden costs of
disruption to the business can be substantial. This vesting criteria does not apply to the Managing Director/CEO.
Total Shareholder Return (TSR)
20% of the Share Rights will vest based on the Company’s TSR relative to the TSRs of a peer group of companies. This measure represents
the change in the Company’s share price over the measurement period, plus dividends (if any) notionally reinvested in the Company’s shares,
expressed as a percentage of the opening value. The peer group will comprise of mining companies in the S&P/ASX 200 Index as at the date of
the offer, excluding steel companies and any companies that pay a dividend during any year of the performance period.
The limited number of uranium development and production companies globally presents difficulties in determining a suitable peer group. It was
therefore decided that, as the primary listing is on the ASX and the majority of share trading takes place in that market, the peer group set out
above is the most appropriate. This also reflects the Group’s competitors for capital and talent.
Relative TSR is independent of market conditions and is considered a more relevant measure of management performance in terms of value
delivered to shareholders over the medium to long-term.
50% of the Share Rights granted to the Managing Director/CEO will vest based on the Company’s Relative TSR.
Mining companies are companies under the Global Industry Classification Standard (GICS) sub-industries: Oil & Gas – Coal & Consumable
Fuels (10102050), Metals & Mining – Aluminium (15104010), Metals & Mining – Diversified Metals & Mining (15104020), Metals & Mining – Gold
(15104030), Metals & Mining – Precious Metals & Minerals (15104040) and Metals & Mining – Steel (15104050).
The base and stretch targets for the TSR performance condition are as follows:
Relative TSR percentile ranking
Less than 50th percentile
At 50th percentile
Percentage of Share Rights that may vest if the relative TSR
performance condition is met
0% of the Share Rights subject to the TSR condition
50% of the Share Rights subject to the TSR condition
Greater than the 50th percentile but less than the 75th percentile
Pro-rated vesting between 51% and 99% of the Share Rights subject to
the TSR condition
At 75th percentile or greater
100% of the Share Rights subject to the TSR condition
Market Price Performance (MPP)
30% of the Share Rights are subject to MPP vesting condition which measures the increase in share price of the Company. Share Rights will vest
if, at the end of the measurement period, the share price of the Company is 25% above the market price at the date of the offer. As part of the
mix of performance conditions this provides a market based performance measure. The base price for each grant is detailed in the table on the
following page.
This does not apply to the Managing Director/CEO.
Earnings Per Share (EPS)
EPS is determined by dividing the operating profit or loss attributable to members of Paladin Group by the weighted average number of ordinary
shares outstanding during the financial year. In the event that EPS is negative (representing a loss per share) a reduction of the loss per share is,
for this purpose, treated as a growth in EPS. Growth in EPS will be measured by comparing the EPS in the base year (being the full financial year
ending prior to the date of grant) and the measurement year. EPS has been chosen as a performance condition because it provides a clear line
of sight between Managing Director/CEO performance and Company performance. It is also a generally recognised and understood measure of
performance.
50% of the Share Rights granted to the Managing Director/CEO will vest based on the Company’s EPS.
The base and stretch targets for the Share Rights subject to the EPS conditions are as follows:
Average compound growth EPS over the performance period
Less than 10% pa
At 10% pa
More than 10% pa but less than 20% pa
Percentage of performance rights that may vest if the EPS
hurdle is met
0% of the Performance Rights subject to the EPS condition
50% of the Performance Rights subject to the EPS condition
Pro rated vesting between 51% and 99% of the Performance Rights
subject to the EPS condition
At 20% pa or greater
100% of the Performance Rights subject to the EPS condition
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PALADIN ENERGY LTD ANNUAL REPORT 2012
SHARES ACQUIRED UNDER THE RIGHTS PLAN
EXECUTIVE SHARE OPTION PLAN (EXSOP)
Shares to be allocated to participants on vesting are currently
issued from equity. No consideration is paid on the vesting of
the Share Rights and resultant shares carry full dividend and
voting rights.
Prior to the implementation of the Share Rights Plan, the
EXSOP was the basis for the long-term incentive remuneration,
approved by shareholders in November 2006. Grants under this
plan ceased in June 2009.
CHANGE OF CONTROL
All Share Rights will vest on a change of control event. The
Remuneration Committee considers that this is appropriate
given that shareholders (or a majority thereof) would have
collectively elected to accept a change of control event.
Moreover the number of Performance Rights relative to total
issued shares is not significant and thus are not considered a
disincentive to a potential bidder.
CESSATION OF EMPLOYMENT
Under the Rights Plan, employees’ Share Rights will be cancelled
on cessation of employment, unless special circumstances
exist such as retirement, total and permanent disability,
redundancy or death. Contractors will have their Share Rights
cancelled, other than on death at which point the contractor’s
legal representative will be entitled to receive them.
Under the EXSOP, the exercise price of the options was set at the
market price of the shares on the date of grant and performance
is measured by comparing the Company’s TSR (share price
appreciation plus dividends reinvested) with a group of peer
companies. The Company has chosen relative TSR, or how a
company performs relative to its peers, as it believes that this
is the most effective measure of the Company’s performance
and long-term shareholder value creation. The Company’s
performance will be measured over three years from the date of
grant. To the extent that maximum performance is not achieved
under the performance condition, performance will be retested
every six months following the first three years until the end of
the fourth year to allow for the effect of market factors beyond
the individual’s control.
BALANCE OF SHARE RIGHTS AT 30 JUNE 2012
Date rights granted
Vesting date
Vesting performance conditions
26 March 2010
26 March 2010
26 March 2010
26 March 2010
26 March 2010
26 March 2013
26 March 2013
TSR
EPS
1 September 2012
Time based
1 September 2012
TSR
1 September 2012
Market Price (base price A$3.82)
5 November 2010
5 November 2013
5 November 2010
5 November 2013
5 November 2010
1 September 2012
5 November 2010
1 September 2013
TSR
EPS
Time based
Time based
5 November 2010
1 September 2013
TSR
5 November 2010
1 September 2013
Market price (base price A$3.62)
15 February 2011
15 February 2013
15 February 2011
15 February 2014
1 September 2012
1 September 2013
31 December 2013
1 September 2014
Time based
Time based
Time based
Time based
Time based
Time based
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
Total
1 September 2014
TSR
1 September 2014
Market price (base price A$1.94)
* Managing Director/CEO grant
In summary, this balance represents 0.82% of the issued capital
whilst the proportion of time based Share Rights represents
0.33%.
Number
*150,000
*150,000
759,850
607,880
911,820
*250,000
*250,000
250,132
416,888
333,510
500,265
154,633
185,504
189,540
284,310
20,000
523,850
379,080
568,620
6,885,882
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PALADIN ENERGY LTD ANNUAL REPORT 2012
In assessing whether the TSR hurdle for each grant has been
met, the Group receives independent data from an external
advisor, who provides both the Group’s TSR growth from the
commencement of each grant and that of the pre-selected peer
group. The peer group chosen for comparison is the mining
companies in the S&P/ASX200 Index at the date of grant. This
peer group reflects the Group’s competitors for capital and talent.
The Group’s performance against the hurdle is determined
according to Paladin’s ranking against the peer group TSR
growth over the performance period:
> when Paladin is ranked over the 75th percentile, 100% of
the share options will vest;
>
for rankings above the 50th and below the 75th percentile,
the percentage of options to vest will be pro-rata between
50% and 100%;
> when Paladin is ranked at the 50th percentile, 50% of the
share options will vest; and
> when Paladin is ranked below the 50th percentile the share
options will not vest.
When a participant ceases employment prior to the vesting
of their share options, the share options are cancelled unless
cessation of employment is due to termination initiated by the
Group other than for misconduct or death. In the event of a
change of control all the awards will vest and may be exercised
by the participant.
A summary of the options remaining on issue under the EXSOP
at 30 June 2012 is set out below:
RETENTION PROGRAMME
As a component of the strategy for retention of key personnel,
certain executives and staff participate in a retention bonus
programme. Participation extends to a limited number of
selected individuals that have been identified as possessing the
requisite skills, expertise and experience in the uranium sector
and those with specialist corporate and commercial skills that
the Company requires to achieve its aggressive goals over
coming years. This initiative is driven by a desire to retain the
intellectual properly pool considered necessary to ensure the
continued success of the Company. The programme entitles
the participants to receive a cash award at the end of the three
year retention period. In the event employment is terminated for
any of retirement, disablement, redundancy or death, after the
first anniversary one third will be payable and after the second
anniversary two thirds will be payable. The cash award varies
between 50 and 100% of the average annual salary over the 3
year period. The first grant under this programme was on 1 July
2010 (payment date 1 July 2013) with a second on 1 January
2012 (payment date 1 January 2015). No proportion of these
bonuses vested or were paid in the financial year ended 30 June
2012 (30 June 2011: US$Nil).
Garry Korte resigned with effect from 24 May 2012 and forfeited
100% of his retention bonus.
In addition, from time to time, the Board will make specific
grants of share rights subject only to time vesting as part of
the Company’s retention strategy for key individuals. This has
proved to be an important tool when seeking to fill senior
management roles.
Number of Options
Exercise Price A$
Expiry Date
3,013,849
203,820
249,660
750,000
4.50
5.37
4.59
2.54
29 January 2013
15 February 2013
18 April 2013
14 October 2013*
Total
4,217,329
* Subject to retesting on 14 October 2012
KEY ELEMENTS OF NON-EXECUTIVE DIRECTOR
REMUNERATION STRATEGY
The focus of the remuneration strategy is to:
> Attract and retain talented and dedicated directors.
> Remunerate appropriately to reflect the:
- size of the Company;
-
-
-
the nature of its operations;
the time commitment required; and
the responsibility the Directors carry.
3,041,746 options that could no longer vest were cancelled on
29 June 2012. These options were out of the money and had no
intrinsic value at cancellation date.
COMPONENTS OF NON-EXECUTIVE DIRECTOR
REMUNERATION
HEDGING OF INCENTIVE GRANTS PROHIBITED
The Company’s policy prohibits hedging of equity
compensation grants. Prohibited hedging practices include put/
call arrangements over “in money” options to hedge against a
future drop in share price. The Board considers such hedging to
be against the spirit of such remuneration and inconsistent with
shareholder objectives.
METHOD OF VALUATION OF LONG-TERM INCENTIVES
Refer to Note 25(g) and 25(k) of the financial statements to see
the key inputs used for valuation of the long-term incentives.
In accordance with corporate governance principles, Non-
executive Directors are remunerated solely by way of fees and
statutory superannuation. The aggregate annual remuneration
permitted to be paid to Non-executive Directors is A$1.2M
(US$1.2M) as approved by shareholders at the 2008 AGM.
Fees paid for the year to 30 June 2012 total A$1,023,000
(US$1,054,955). A number of independent surveys looking
at companies from a market capitalisation, (A$1bn - $3bn)
perspective show Non-executive Director’s fees from A$154,000
(62.5th percentile) to A$208,000 (90th percentile). In relation to
Non-executive Chairman, the analysis ranges from A$194,000
(50th percentile) to A$406,000 (90th percentile). The median
Audit Committee Chair fee is A$27,500.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Remuneration
Component
Elements
Base Fee
Must be contained
within aggregate limit
Details
(per annum)
Chairman
A$338,000
(US$348,558)
Non-executive Director
A$166,000 (US$171,185)
A$21,000 (US$21,656)
Statutory % of fees
Committee
Fees*
Superannuation
Paid to the Chairman
of the Audit
Committee
Statutory
contributions are
included in the fees
set out above
* This is the only fee paid to any committee member. All other duties are remunerated
as part of the base fee.
The following graph is provided to give a clearer understanding
of the Non-executive Directors’ remuneration.
OTHER FEES/BENEFITS
In addition, the Company’s Constitution provides for additional
compensation to be paid if any of the Directors are called
upon to perform extra services or make any special exertions
on behalf of the Company or the business of the Company.
The Company may compensate such Director in accordance
with such services or exertions, and such compensation may
be either in addition to or in substitution for the Directors’ fees
referred to above. No additional fees were paid during the year,
other than the Directors’ fees disclosed.
is no entitlement
Non-executive Directors are also entitled to be reimbursed for
reasonable expenses incurred whilst engaged on Company
business. There
to compensation on
termination of non-executive directorships. Non-executive
Directors do not earn retirement benefits (other than the
statutory superannuation) and are not entitled to any form of
performance linked remuneration.
ROTATION OF DIRECTORS
NON-EXECUTIVE DIRECTOR REMUNERATION
Mr Donald Shumka and Mr Peter Donkin will retire by rotation
and seek re-election at the 2012 Annual General Meeting.
1200
1000
800
600
400
200
0
0
0
0
,
$
A
m
u
n
n
a
r
e
p
Maximum Fee Cap A$1.2M
120
160
160
180
65
325
166
166
166
187
338
160
180
160
325
2010
2011
2012
P Baily
S Llewelyn
I Noble
P Donkin
D Shumka*
Chairman
* Includes A$21K in relation to Audit Committee Chair fees
REMUNERATION ACROSS THE GROUP
The strategies outlined for Executive remuneration apply across
the Group. This extends to the provision of relevant short-term
and long-term incentives. Site based employees at Langer
Heinrich accrued bonuses quarterly based on a system linked
to mine performance criteria covering production, safety,
environmental performance and attendance. At Kayelekera,
the bonus scheme will not be fully established until steady
state nameplate production is achieved, however, to recognise
the efforts made in working towards this, a bonus was paid in
December 2011. To reflect the needs of local employees, their
bonus took the form of shopping vouchers.
Permanent employees at LHM also participated in the allocation
of Share Rights during the year. The vesting of a portion of these
over time is well received, considered to be a tangible benefit
and further cements the concept of broad employee share
ownership, assisted by the Company’s listing on the Namibian
Stock Exchange. This is seen by employees as an extremely
valuable benefit, particularly by the local national employees,
and enables them to build up a shareholding in the Company
over time.
At KM in Malawi, the allocation of Share Rights was limited to a
small number of senior employees because of delays in ramp-
up. Due to difficulties associated with local share ownership of
Paladin shares given the absence of a local stock exchange on
which Paladin could trade, an alternative reward system will be
established for local nationals in that country once the mine
reaches consistent design production levels. Senior employees
will participate in the Rights Plan to a greater extent as mine
production progresses.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
COMPENSATION OF KEY MANAGEMENT PERSONNEL FOR THE YEAR ENDED 30 JUNE 2012 OF THE GROUP
Short-Term Benefits
Post Employment
Long-Term Benefits
Salary &
Fees
Cash
Bonus
US$’000
US$’000
Other
Company
Benefits
US$’000
Other
Super-
annuation
Retirement
Benefits
US$’000
US$’000
US$’000
Long-Term
Incentive
Plan
US$’000
Long
Service
Leave
US$’000
Total
Total
Total
Performance
Related
Total
Performance
Related
Share-
Based
Payment*
Share
Rights
US$’000
US$’000
A$’000
US$’000
%
Directors
Mr Rick Crabb
332
Mr John Borshoff
1,830.(1)
Mr Sean Llewelyn
Mr Donald Shumka
Mr Philip Baily
Mr Peter Donkin
157
193
157
157
Subtotal
2,826
Key Management
Personnel
Ms Gillian Swaby
Mr Garry Korte(4)
Mr Dustin Garrow
Mr Mark Chalmers
Subtotal
Total
-.
496
714.(1)
520.(1)
1,730
4,556
-.
-.
-.
-.
-.
-.
-.
-.
31
-.
31
62
62
Notes to the Compensation Table
Presentation Currency
-.
-.
-.
-.
-.
-.
-.
-.
-.
-.
63.(6)
63
63
-.
-.
-.
-.
-.
-.
-.
571.(2)
-.
-.
-.
571
571
16
16
14
-
14
14
74
-
16
-
16
32
-.
839.(3)
-.
-.
-.
-.
839
-.
-.
-.
-.
-.
106
839
-.
-.
-.
-.
-.
-.
-.
239
(99)
281
81
502
502
-.
104
-.
-.
-.
-.
-.
348
338
-.
894
3,683
3,573
894
-.
-.
-.
-.
171
193
171
171
166
187
166
166
-.
-.
-.
-.
104
894
4,737
4,596
894
-.
-.
-.
-.
-.
1,162
1,972
1,912
(139).(5)
305
296
328
30
1,323
1,283
741
719
1,381
4,341
4,210
128
(46)
150
35
267
104
2,275
9,078
8,806
1,161
-
24.3
-
-
-
-
6.5
(15.1)
11.3
4.8
The compensation table has been presented in US$, the Company’s functional and
presentation currency. The A$ value has also been shown as this is considered to be
the most relevant comparator between years, given that in 2011 more than 90% of
KMP’s contracts for services were denominated in A$ and this eliminates the effects
of fluctuations in the US$ and A$ exchange rate. Exchange rate used is average for
year US$ 1 = A$0.96971
(3) This is the present value of the amount required to be accrued in 2012 for the
payment at a future date (as yet undetermined) of a retirement benefit to Mr
Borshoff under the terms of his Services Contract.
(4) Mr Garry Korte – resigned 24 May 2012.
(5) Includes a credit of US$150,000 relating to Share Rights forfeited upon resignation.
(6) Living away from home allowance.
(1) Includes accrued annual leave.
(2) Other represents fees paid for company secretarial services to a company of
* A reconciliation of this figure in A$ follows to enable a clearer understanding of how
this number is calculated.
which Ms Gillian Swaby is a director and shareholder.
RECONCILIATION OF SHARE-BASED PAYMENT COMPENSATION OF KEY MANAGEMENT PERSONNEL FOR THE YEAR ENDED 30 JUNE 2012
OF THE GROUP
Share Rights
granted 26 March 2010
(vesting 2010 to 2013)
Share Rights
granted 5 November 2010
(vesting 2011 to 2013)
Share Rights
granted 15 February 2011
(vesting 2012 to 2014)
Share Rights
granted 2 April 2012
(vesting 2012 to 2014)
Total
Share-Based
Payment
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
Directors
Mr John Borshoff
Subtotal
Executives
Ms Gillian Swaby
Mr Garry Korte
Mr Dustin Garrow
Mr Mark Chalmers
Subtotal
Total
297
297
173
(97)
192
-.
268
565
306
306
178
(100)
198
-.
276
582
570
570
83
(38)
111
-.
156
726
588
588
86
(39)
114
-.
161
749
-.
-.
-.
-.
856.(1)
883.(1)
-.
-.
-.
856
856
-.
-.
-.
883
883
-.
-.
14
-.
16
-.
-.
15
-.
16
29.(3)
30.(3)
59
59
61
61
867
867
894
894
1,126
1,162
(135).(2)
(139).(2)
319
29
1,339
2,206
328
30
1,381
2,275
It should be noted that time or performance vesting conditions are attached to all
of the Share Rights referred to above. These are detailed elsewhere in this report.
Exchange rate used as the average for year US$1 = A$0.96971
(1) Issued pursuant to retention programme, vesting time based only.
(2) Includes a credit of A$146,000 relating to Share Rights forfeited upon resignation.
(3) Includes A$9,000 relating to 50,000 time-based shares negotiated as a sign-on
bonus to assist in attracting quality personnel.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
COMPENSATION OF KEY MANAGEMENT PERSONNEL FOR THE YEAR ENDED 30 JUNE 2011 OF THE GROUP
Short-Term Benefits
Post Employment
Long-Term Benefits
Salary &
Fees
Cash
Bonus
US$’000
US$’000
Other
Company
Benefits
US$’000
Other
Super-
annuation
Retirement
Benefits
US$’000
US$’000
US$’000
Long-Term
Incentive
Plan
US$’000
Long
Service
Leave
US$’000
Share-Based
Payment*
Total(2)
Total
Total
Performance
Related
Total
Performance
Related
Options
Share
Rights
US$’000
US$’000
US$’000
A$’000
US$’000
%
Directors
Mr Rick Crabb
305
-.
Mr John Borshoff
2,226.(10)
231
Mr Sean Llewelyn
145
Mr Ian Noble(3)
59
Mr Donald Shumka
177
Mr Philip Baily(4)
Mr Peter Donkin(5)
108
145
-.
-.
-.
-.
-.
Subtotal
3,165
231
Key Management
Personnel
Ms Gillian Swaby
-.
Mr Garry Korte
Mr Wyatt Buck(6)
Mr Dustin Garrow
438
427
651
Mr Mark Chalmers(7)
83
Subtotal
Total
1,599
4,764
49
54
-
71
-
174
405
Notes to the Compensation Table
Presentation Currency
-.
-.
-.
-.
-.
-.
-.
-.
-.
-.
50
-.
-.
50
50
-.
-.
-.
-.
-.
-.
-.
-.
512.(1)
-.
-.
-.
-.
512
512
15
15
13
5
-
10
13
71
-
15
15
-
4
34
-.
584.(8)
-.
-.
-.
-.
-.
584
-.
-.
-.
-.
-.
-.
105
584
-.
-.
-.
-.
-.
-.
-.
-.
114
95
-.
146
-.
355
355
-.
99
-.
-.
-.
-.
-.
-.
-.
320
325
-.
688
655
4,498
4,567
1,574
-.
-.
-.
-.
-.
-.
-.
-.
-.
-.
158
64
177
118
158
160
65
180
120
160
-.
-.
-.
-.
-.
99
688
655
5,493
5,577
1,574
-.
-.
-.
-.
-.
-.
131
-.
102
134
-.
718
186
(35).(9)
1,524
1,547
788
559
799
567
376
1,378
1,399
-.
87
88
289
115
80
330
-.
367
1,245
4,336
4,400
814
99
1,055
1,900
9,829
9,977
2,388
-
35.0
-
-
-
-
-
18.9
14.6
14.3
23.9
-
The compensation table has been presented in US$, the Company’s functional and
presentation currency. The A$ value has also been shown as this is considered to
be the most relevant comparator between years, given that in 2011 more than 90%
of KMP’s contracts for services were denominated in A$ and this eliminates the
effects of fluctuations in the US$ and A$ exchange rate.
(1) Other represents fees paid for company secretarial services to a company of
which Ms Gillian Swaby is a director and shareholder.
(2) Exchange rate used is average for year US$ 1 = A$1.01512
(3) Mr Ian Noble – retired 25 November 2010.
(4) Mr Philip Baily – appointed 1 October 2010.
(5) Mr Peter Donkin – appointed 1 July 2010.
(6) Mr Wyatt Buck – resigned 6 May 2011.
(7) Mr Mark Chalmers - appointed 27 April 2011.
(8) This is the present value of the amount required to be accrued in 2011 for the
payment at a future date (as yet undetermined) of a retirement benefit to Mr
Borshoff under the terms of his Services Contract.
(9) Includes a credit of US$58,000 relating to Share Rights forfeited upon resignation.
(10) Adjusted from previously disclosed amount by US$239,000 for accrued annual
leave that had been omitted in the prior year.
* A reconciliation of this figure in A$ follows to enable a clearer understanding of how
this number is calculated.
RECONCILIATION OF SHARE-BASED PAYMENT COMPENSATION OF KEY MANAGEMENT PERSONNEL FOR THE YEAR ENDED 30 JUNE 2011
OF THE GROUP
A$4.50 Options
(expiring 29/1/2013)
Share Rights
granted 26 March 2010
(vesting 2010 to 2013)
Share Rights
granted 5 November 2010
(vesting 2011 to 2013)
Share Rights
granted 15 February 2011
vesting 2012 to 2014)
Total
Share-Based
Payment
% of Total
Remuneration
Consisting of Options
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
A$’000
US$’000
Directors
Mr John Borshoff
Subtotal
Executives
Ms Gillian Swaby
Mr Garry Korte
Mr Wyatt Buck
Mr Dustin Garrow
Subtotal
Total
698
698
133
-.
103
136
372
688
688
131
-.
102
134
367
1,070
1,055
292
292
257
128
287
287
253
127
(35).(2)
(35).(2)
285
635
927
281
626
913
374
374
72
60
-.
96
228
602
368
368
71
59
-.
95
225
593
-.
-.
-.
-.
1,364
1,364
1,343
1,343
400.(1)
394.(1)
862
188
68
517
849
186
67
510
-.
-.
-.
394
394
1,635
2,999
1,612
2,955
-.
-.
-.
400
400
16.2
8.6
0.0
17.0
9.8
When a long-term incentive is granted to an employee, it is valued at the grant date
and that value is allocated as an expense over the financial years up to the date
of vesting. The A$4.50 options were expensed up to 29/1/2011 and therefore no
expense will be recognised for these in future years.
It should be noted that time or performance vesting conditions are attached to all
of the Options and Share Rights referred to above. These are detailed elsewhere in
this report, however for Options, to the extent that maximum performance is not
achieved under the performance condition, performance will be retested every six
months following the first three years until the end of the fourth year. If performance
conditions are still not met then the Options will lapse.
(1) Issued pursuant to retention programme, vesting time based only.
(2) Includes a credit of A$59,000 relating to Share Rights lapsing upon resignation.
(3) Exchange rate used as the average for year US$1 = A$1.01512.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
Mr Garry Korte
Chief Financial Officer (Resigned 24 May 2012)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$503,500.
No termination benefit is specified in the agreement.
Notice period 3 months.
Retention bonus – 100%.
Mr Mark Chalmers
Executive General Manager – Production
Term of agreement – no fixed term.
Base salary, of A$490,000 increased to A$514,500 effective 1
January 2012.
No termination benefit is specified.
Notice period 3 months
Retention bonus – 100%.
Mr Alan Rule
Chief Financial Officer (Commenced 23 July 2012)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$500,000.
No termination benefit is specified in the agreement.
Notice period 6 months.
Remuneration for all parties referred to above includes provision
of an annual discretionary bonus and initial and ongoing
discretionary participation in the Company’s long-term incentive
plans.
CONTRACTS FOR SERVICES
Remuneration and other terms of employment for the Key
Management Personnel are normally formalised in contracts for
services.
All contracts with Key Management Personnel may be terminated
early by either party providing between 3 to 6 months written
notice or providing payments in lieu of the notice period (based
on fixed component of remuneration). On termination notice by
the Company, any options or rights that have vested, or that will
vest during the notice period, will be released. Options or rights
that have not yet vested will be forfeited.
Mr John Borshoff
Managing Director/CEO
Term of agreement – 4 years commencing 27 November 2009.
Base salary, inclusive of superannuation, A$2,044,244. Base
salary was voluntarily reduced by 25% to A$1,533,600 from 1
December 2011 to 30 November 2012, and further extended by
him to 30 June 2013.
3 months long service leave after 5 years continual service.
Payment of a benefit on retirement or early termination by the
Company, other than for gross misconduct, equal to 2 times
base salary for the two years immediately preceding the
termination date. This benefit was approved by the Company
shareholders on 9 November 2005.
Ms Gillian Swaby
Company Secretary and Executive General Manager –
Corporate Services
Fees are paid in the ordinary course of business for company
secretarial services to a company of which Ms Gillian Swaby is
a director and shareholder.
Consultancy agreement with no fixed term.
Annual fee A$567,000.
Notice period 3 months.
No termination benefit is specified in the agreement.
Retention bonus – 100%.
Mr Dustin Garrow
Executive General Manager - Marketing
Term of agreement – no fixed term.
Base salary, of US$664,125 increased to US$683,385 effective
1 January 2012.
No termination benefit is specified in the agreement.
Notice period 6 months.
Retention bonus – 100%.
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PALADIN ENERGY LTD ANNUAL REPORT 2012
GRANTS AND VESTING OF LONG-TERM INCENTIVES
During the year ended 30 June 2012, no options were granted
as equity compensation benefits under the long-term incentive
plan to Key Management Personnel. No options vested during
the year ended 30 June 2012:
Share Rights awarded and shares issued on vesting of share
rights to Key Management Personnel during the year ended 30
June 2012 (Consolidated and Company) are set out below:
Fair value per share
right at award date
Shares issued on vesting
of share rights(2)
30 June 2012
Grant No.
Grant date
Directors
Mr John Borshoff
-.
-
Executive
Ms Gillian Swaby
Mr Dustin Garrow
55,000
60,000
2 April 2012
2 April 2012
Mr Mark Chalmers
125,000.(1)
2 April 2012
Mr Garry Korte
-.
-
Total
240,000
A$
-
1.46
1.46
1.60
-
US$
Vesting date
No.
%
-
1.51
1.51
1.65
-
-
-.
-.
1 Sept 2012 to 1 Sept 2014
141,333
1 Sept 2012 to 1 Sept 2014
38,000
1 Sept 2012 to 1 Sept 2014
-.
-
18,500
197,833
100
100
-.
100
(1) Includes 50,000 time-based sign-on shares vesting on 1 September 2014.
(2) Vesting of share rights issued on 26 March 2010, 5 November 2010 and 15 February 2011.
30 June 2011
Grant No.
Grant date
A$
US$
Vesting date
No.
%
Directors
Mr John Borshoff
500,000
5 November 2010
3.82
3.85
5 November 2013
-.
-.
Fair value per share
right at award date
Shares issued on vesting
of share rights(1)
Executive
Ms Gillian Swaby
60,000
5 November 2010
Ms Gillian Swaby
325,000
15 February 2011
Mr Garry Korte
50,000
5 November 2010
Mr Wyatt Buck
50,000
5 November 2010
Mr Dustin Garrow
80,000
5 November 2010
3.73
5.41
3.73
3.73
3.73
3.76
5.43
3.76
3.76
3.76
Total
1,065,000
1 Sept 2011 to 1 Sept 2013
18,000
15 Feb 2012 to 15 Feb 2014
-.
1 Sept 2011 to 1 Sept 2013
1 Sept 2011 to 1 Sept 2013
1 Sept 2011 to 1 Sept 2013
9,000
16,000
20,000
63,000
100
-.
100
100
100
(1) Vesting of share rights issued on 26 March 2010.
END OF AUDITED REMUNERATION REPORT
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PALADIN ENERGY LTD ANNUAL REPORT 2012
SHARES UNDER OPTION
Unissued ordinary shares of the Company under option at the date of this report are as follows:
Date options granted
Date of initial performance
condition test
Expiry date
Exercise price
of options(A$)
Number under
option
29 January 2008
29 January 2011
29 January 2013
15 February 2008
15 February 2011
15 February 2013
18 April 2008
18 April 2011
18 April 2013
14 October 2008
14 October 2011*
14 October 2013
4.50
5.37
4.59
2.54
Total
* Subject to retesting on 14 October 2012
3,013,849
203,820
249,660
750,000
4,217,329
Since the end of the financial year, no options were forfeited due to the cessation of employment.
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
The outstanding balance of Performance Share Rights at the date of this report are as follows:
Date rights granted
Vesting date
Vesting performance conditions
26 March 2010
26 March 2010
26 March 2010
26 March 2010
26 March 2010
26 March 2013
26 March 2013
TSR
EPS
1 September 2012
Time based
1 September 2012
TSR
1 September 2012
Market Price (base price A$3.82)
5 November 2010
5 November 2013
5 November 2010
5 November 2013
5 November 2010
1 September 2012
5 November 2010
1 September 2013
TSR
EPS
Time based
Time based
5 November 2010
1 September 2013
TSR
5 November 2010
1 September 2013
Market price (base price A$3.62)
15 February 2011
15 February 2013
15 February 2011
15 February 2014
1 September 2012
1 September 2013
31 December 2013
1 September 2014
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
Total
* Managing Director/CEO grant
Time based
Time based
Time based
Time based
Time based
Time based
1 September 2014
TSR
1 September 2014
Market price (base price A$1.94)
Number
*150,000
*150,000
756,100
604,880
907,320
*250,000
*250,000
249,007
415,013
332,010
498,015
154,633
185,504
188,140
282,210
20,000
520,350
376,280
564,420
6,853,882
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PALADIN ENERGY LTD ANNUAL REPORT 2012
NON-AUDIT SERVICES
The following non-audit and assurance services were provided
by the Company’s auditor, Ernst & Young. The Directors are
satisfied that the provision of non-audit and assurance services
is compatible with the general standard of independence for
auditors imposed by the Corporations Act. The nature and
scope of each type of non-audit and assurance service provided
means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following
amounts for the provision of non-audit services:
Tax compliance services
International tax consulting
Tax advice on mergers and acquisitions
Other tax advice
Total
US$’000
121
545
67
48
781
Signed in accordance with a resolution of the Directors.
Mr John Borshoff
Managing Director/CEO
Perth, Western Australia
30 August 2012
No shares were issued on the exercise of options. 1,080,841
shares were issued on the vesting of Share Rights during the
year ended 30 June 2012. 972,716 options at an exercise price
of A$4.50 were forfeited. At the date of lapse, these options had
zero value. In addition, 3,041,746 options were cancelled having
failed to achieve performance conditions.
DIRECTORS’ INDEMNITIES
During the year the Company has incurred premiums to insure
the Directors and/or officers for liabilities incurred as costs and
expenses that may be incurred in defending civil or criminal
proceedings that may be brought against the officers in their
capacity as officers of the Company and or its controlled entities.
Under the terms and conditions of the insurance contract, the
nature of liabilities insured against and the premium paid cannot
be disclosed.
ROUNDING
The amounts contained in this report, the Financial Report and
the Management, Discussion and Analysis have been rounded to
the nearest US$100,000 (where rounding is applicable) under the
option available to the Company under ASIC Class Order 98/0100.
The Company is an entity to which the Class Order applies.
AUDITOR
Ernst & Young were appointed auditors for the Company on 21
June 2005, which was approved by shareholders at the 2005
Annual General Meeting on 9 November 2005.
AUDITOR INDEPENDENCE AND
NON-AUDIT SERVICES
The Directors received the following declaration from the auditor
of Paladin Energy Ltd.
AUDITOR’S INDEPENDENCE DECLARATION TO THE
DIRECTORS OF PALADIN ENERGY LTD
In relation to our review of the financial report of Paladin
Energy Ltd for the year ended 30 June 2012, to the best of my
knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act
2001 or any applicable code of professional conduct.
Ernst & Young
G H Meyerowitz
Partner
30 August 2012
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PALADIN ENERGY LTD ANNUAL REPORT 2012
CONTENTS OF THE
FINANCIAL REPORT
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CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTE 1.
NOTE 2.
NOTE 3.
NOTE 4.
NOTE 5.
NOTE 6.
NOTE 7.
NOTE 8.
NOTE 9.
CORPORATE INFORMATION
GOING CONCERN
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEGMENT INFORMATION
REVENUES AND EXPENSES
INCOME TAX
CASH AND CASH EQUIVALENTS
TRADE AND OTHER RECEIVABLES
INVENTORIES
NOTE 10.
OTHER FINANCIAL ASSETS
NOTE 11.
PROPERTY, PLANT AND EQUIPMENT
NOTE 12.
MINE DEVELOPMENT
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE
NOTE 14.
INTANGIBLE ASSETS
NOTE 15.
TRADE AND OTHER PAYABLES
NOTE 16.
INTEREST BEARING LOANS AND BORROWINGS
NOTE 17.
PROVISIONS
NOTE 18.
CONTRIBUTED EQUITY AND RESERVES
NOTE 19.
FINANCIAL INSTRUMENTS
NOTE 20.
KEY MANAGEMENT PERSONNEL
NOTE 21.
AUDITORS’ REMUNERATION
NOTE 22.
COMMITMENTS AND CONTINGENCIES
NOTE 23.
EMPLOYEE BENEFITS
NOTE 24.
RELATED PARTIES
NOTE 25.
SHARE-BASED PAYMENT PLANS
NOTE 26.
INTERESTS IN JOINTLY CONTROLLED ASSETS
NOTE 27.
EVENTS AFTER THE BALANCE DATE
NOTE 28.
NON-CASH FINANCING AND INVESTMENT ACTIVITIES
NOTE 29.
EARNINGS PER SHARE
NOTE 30.
PARENT ENTITY INFORMATION
89
90
91
92
94
95
95
95
115
118
119
121
122
123
124
124
125
126
132
133
133
136
137
140
148
152
153
154
155
155
160
161
161
162
163
88
P A L A D I N E N E R G Y LT D A N N U A L R E P O R T 2 012
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2012
Revenue
Revenue
Cost of sales
Impairment – inventory and stores and consumables
Gross profit
Other income
Exploration and evaluation expenses
Administration, marketing and non-production costs
Other expenses
Loss before interest and tax
Finance costs
Net loss before income tax
Income tax benefit
Net loss after tax
Attributable to:
Non-controlling interests
Members of the parent
Loss per share (US cents)
Loss after tax from operations attributable to ordinary equity holders
of the Company
– basic and diluted (US cents)
CONSOLIDATED
2012
US$M
2011
US$M
367.4
(301.7)
(39.0)
26.7
2.6
(2.5)
(49.8)
(199.8)
(222.8)
(56.7)
268.9
(222.2)
(26.4)
20.3
1.9
(3.0)
(54.0)
(8.8)
(43.6)
(61.5)
NOTES
5(a)
5(b)
5(c)
13
5(d)
5(e)
5(f)
(279.5)
(105.1)
6(a)
78.7
(200.8)
(28.0)
(172.8)
16.6
(88.5)
(6.2)
(82.3)
29
(21.1)
(11.1)
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
89
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
Net loss after tax from operations
Other comprehensive income
Net (loss)/gain on available-for-sale financial assets
Transfer of available-for-sale reserve on acquisition of entity
Transfer of impairment loss to income statement
Foreign currency translation
Income tax on items of other comprehensive income
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income attributable to:
Non-controlling interests
Members of the parent
NOTES
CONSOLIDATED
2012
US$M
2011
US$M
(200.8)
(88.5)
(25.8)
-
8.0
(44.0)
3.3
(58.5)
(259.3)
(31.3)
(228.0)
(259.3)
10.8
(3.2)
-
141.1
(3.7)
145.0
56.5
9.2
47.3
56.5
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
90
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
TOTAL CURRENT ASSETS
Non current assets
Trade and other receivables
Inventories
Other financial assets
Property, plant and equipment
Mine development
Exploration and evaluation expenditure
Deferred tax asset
Intangible assets
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITIES
Non current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Parent interests
Non-controlling interests
TOTAL EQUITY
NOTES
CONSOLIDATED
2012
US$M
2011
US$M
7
8
9
8
9
10
11
12
13
6(d)
14
15
16
17
16
6(d)
17
18 (a)
18 (c)
112.1
82.8
10.2
186.5
391.6
0.1
114.2
15.5
491.7
88.3
1,143.2
85.0
18.1
117.4
20.5
13.8
177.7
329.4
1.5
73.6
41.8
630.1
106.6
1,177.9
19.7
23.1
1,956.1
2,074.3
2,347.7
2,403.7
67.1
183.4
3.4
253.9
655.1
203.5
40.4
899.0
69.7
43.9
5.3
118.9
675.8
217.5
36.3
929.6
1,152.9
1,048.5
1,194.8
1,355.2
1,839.2
177.8
(874.6)
1,142.4
52.4
1,768.1
205.2
(701.8)
1,271.5
83.7
1,194.8
1,355.2
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
91
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
Notes
Contributed
Equity
Available -for-
Sale Reserve
Share-Based
Payments
Reserve
Convertible
Bond Non-
Distributable
Reserve
Foreign
Currency
Revaluation
Reserve
Premium on
Acquisition
Reserve
Application
Reserve
Option
Consolidated
Accumulated
Reserve
Losses
Attributable
to Owners
of the Parent
Non-
Controlling
Interests
Total
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
38.0
38.9
(56.8)
14.9
0.1
(0.2)
(619.5)
897.7
73.2
970.9
49.5
60.4
68.8
14.9
0.1
(0.2)
(701.8)
1,271.5
83.7
1,355.2
68.8
14.9
0.1
(0.2)
(701.8)
1,271.5
83.7
1,355.2
125.6
125.6
(40.7)
(40.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6.2)
15.4
9.2
1.3
-
-
-
-
(88.5)
145.0
56.5
14.6
-
291.7
28.1
(6.6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(82.3)
(82.3)
-
-
-
-
-
-
-
-
-
-
-
-
(82.3)
129.6
47.3
14.6
-
290.4
28.1
(6.6)
7.4
-
66.4
27.9
(2.8)
(172.8)
(172.8)
(55.2)
(28.0)
(3.3)
(200.8)
(58.5)
(172.8)
(228.0)
(31.3)
(259.3)
-
-
-
-
-
7.4
-
66.4
27.9
(2.8)
28.1
14.9
0.1
(0.2)
(874.6)
1,142.4
52.4
1,194.8
CONSOLIDATED
Balance at 1 July 2010
1,474.6
Loss for the period
Other comprehensive income
Total comprehensive income/(loss) for the year
net of tax
Share-based payment
Vesting performance rights
Contributions of equity, net of transaction costs
Convertible bonds – equity component, net of
tax and transaction costs
Convertible bonds – buyback
-
-
-
-
3.1
290.4
-
-
7.7
-
4.0
4.0
-
-
-
-
-
Balance at 30 June 2011
1,768.1
11.7
49.5
Balance at 1 July 2011
1,768.1
Loss for the period
Other comprehensive income
Total comprehensive income/(loss) for the year
net of tax
Share-based payment
Vesting performance rights
Contributions of equity, net of transaction costs
Convertible bonds – equity component, net of
tax and transaction costs
Convertible bonds – buyback
-
-
-
-
4.7
66.4
-
-
11.7
-
(14.5)
(14.5)
-
-
-
-
-
-
-
-
14.6
(3.1)
-
-
-
-
-
-
7.4
(4.7)
-
-
-
-
-
-
-
-
-
28.1
(6.6)
60.4
-
-
-
-
-
-
27.9
(2.8)
85.5
Balance at 30 June 2012
1,839.2
(2.8)
52.2
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
92
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
Notes
Contributed
Equity
Available -for-
Sale Reserve
Share-Based
Payments
Reserve
Convertible
Bond Non-
Distributable
Reserve
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
Foreign
Currency
Revaluation
Reserve
Premium on
Acquisition
Reserve
Option
Application
Reserve
Consolidated
Reserve
Accumulated
Losses
Attributable
to Owners
of the Parent
Non-
Controlling
Interests
Total
Balance at 1 July 2010
1,474.6
38.0
38.9
(56.8)
14.9
0.1
(0.2)
(619.5)
897.7
73.2
970.9
Balance at 30 June 2011
1,768.1
11.7
49.5
68.8
14.9
0.1
(0.2)
(701.8)
1,271.5
83.7
1,355.2
Balance at 1 July 2011
1,768.1
11.7
49.5
60.4
68.8
14.9
0.1
(0.2)
(701.8)
1,271.5
83.7
1,355.2
-
125.6
125.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(82.3)
-
(82.3)
-
-
-
-
-
(82.3)
129.6
47.3
14.6
-
290.4
28.1
(6.6)
(6.2)
15.4
9.2
-
-
1.3
-
-
(88.5)
145.0
56.5
14.6
-
291.7
28.1
(6.6)
Balance at 30 June 2012
1,839.2
(2.8)
52.2
28.1
14.9
0.1
(0.2)
(874.6)
1,142.4
52.4
1,194.8
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
-
(40.7)
(40.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(172.8)
-
(172.8)
-
-
-
-
-
(172.8)
(55.2)
(228.0)
7.4
-
66.4
27.9
(2.8)
(28.0)
(3.3)
(31.3)
-
-
-
-
-
(200.8)
(58.5)
(259.3)
7.4
-
66.4
27.9
(2.8)
CONSOLIDATED
Total comprehensive income/(loss) for the year
Loss for the period
Other comprehensive income
net of tax
Share-based payment
Vesting performance rights
Contributions of equity, net of transaction costs
Convertible bonds – equity component, net of
tax and transaction costs
Convertible bonds – buyback
Total comprehensive income/(loss) for the year
Loss for the period
Other comprehensive income
net of tax
Share-based payment
Vesting performance rights
Contributions of equity, net of transaction costs
Convertible bonds – equity component, net of
tax and transaction costs
Convertible bonds – buyback
7.7
-
4.0
4.0
-
-
-
-
-
-
-
-
-
-
-
(14.5)
(14.5)
-
-
-
-
-
-
-
-
-
-
-
-
3.1
290.4
4.7
66.4
-
-
-
-
-
-
-
-
-
-
-
-
14.6
(3.1)
7.4
(4.7)
-
-
-
-
-
-
-
-
-
-
-
-
28.1
(6.6)
60.4
27.9
(2.8)
85.5
93
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Exploration and evaluation expenditure
Other income
NOTES
CONSOLIDATED
2012
US$M
2011
US$M
313.9
(401.1)
1.4
(38.0)
(2.5)
0.5
281.0
(348.6)
1.6
(33.2)
(3.0)
0.2
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
7(a)
(125.8)
(102.0)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised exploration expenditure
Payments for property, plant and equipment
Payments for controlled entities net of cash acquired
Proceeds from sale of property, plant & equipment
Proceeds from sale of tenements
Proceeds from sale of investments
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible bonds
Repayment of convertible bonds
Convertible bond finance costs
Share placement
Rights issue
Equity fundraising costs
Project finance facility establishment costs
Repayment of borrowings
Proceeds from borrowings
NET CASH INFLOW FROM FINANCING ACTIVITIES
(12.1)
(70.1)
-
-
-
-
(82.2)
274.0
(191.0)
(5.9)
64.7
-
(2.1)
(2.0)
(77.2)
141.0
201.5
(17.6)
(129.4)
(3.5)
11.7
3.0
3.3
(132.5)
300.0
(253.3)
(6.4)
-
1.3
(0.5)
-
(51.8)
12.0
1.3
NET DECREASE IN CASH AND CASH EQUIVALENTS
(6.5)
(233.2)
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
7
117.4
1.2
112.1
347.9
2.7
117.4
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
94
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 1.
CORPORATE INFORMATION
The Financial Report of Paladin for the year ended 30 June 2012 was authorised for issue in accordance with a
resolution of the Directors on 24 August 2012.
Paladin is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded
on the ASX with additional listings on the Toronto Stock Exchange in Canada as well as Munich, Berlin, Stuttgart
and Frankfurt Stock Exchanges in Europe; and the Namibian Stock Exchange in Africa.
The nature of the operations and principal activities of the Group are described in the Management Discussion
and Analysis on pages 12 to 42.
NOTE 2.
GOING CONCERN
The Group’s consolidated financial statements have been prepared on a going concern basis which
contemplates the continuity of normal business activities and the realisation of assets and the settlement of
liabilities in the ordinary course of business.
During the year ended 30 June 2012, the Group incurred net losses after tax attributable to the members of
US$172.8M (2011: US$82.3M) and had net cash outflow of US$6.5M (2011: US$233.2M). At balance date the
Group had a net working capital surplus of US$137.7M (2011: US$210.5M) including cash on hand of US$112.1M
(2011: US$117.4M). Included within this cash on hand is US$26.2M (2011: US$19.5M) which is restricted for use
in respect of the LHM and KM project finance facilities.
Repayment obligations, during the next 12 months, in respect of interest bearing loans and borrowings are
summarised as follows:
›
›
›
Secured bank loans principal repayments of US$53.1M for LHM and KM project financing;
Interest payments of US$40.5M for LHM and KM project financing and Convertible Bonds; and
The final US$134.0M payment on the US$325.0M Convertible Bond which matures on 11 March 2013.
As set out in Note 27, the Group announced on 15 August 2012 that it had entered into a six year sales off-take
agreement with a leading international utility to sell a total of 13.73Mlb U3O8 in the period from 2019 to 2024.
Pursuant to this agreement, prepayment of US$200M will be made to Paladin in respect of part of the future
U3O8 product deliveries.
In addition, in arriving at its position in relation to going concern, the Directors have given consideration to the
following:
›
›
Paladin has been in discussions with a select group of nuclear industry parties on strategic initiatives; and
Paladin has a history of refinancing some of its debt.
Accordingly, the directors believe that the Group will obtain sufficient funding to enable the Group to continue
as a going concern and that it is appropriate to adopt that basis of accounting in the preparation of the financial
report.
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Preparation and Statement of Compliance
The Financial Report is a general purpose Financial Report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The Financial Report complies with International
Financial Reporting Standards as issued by the International Accounting Standards Board. The Financial Report
has also been prepared on a historical cost basis, except for available-for-sale investments, which have been
measured at fair value. Where necessary, comparatives have been reclassified and repositioned for consistency
with current year disclosures. For the purposes of preparing the consolidated financial statements, the Company
is a for-profit entity.
In addition to these Australian requirements further information has been included in the Consolidated Financial
Statements for the year ended 30 June 2012 in order to comply with applicable Canadian securities law, as the
Company is listed on the Toronto Stock Exchange.
95
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of Preparation and Statement of Compliance (continued)
The Financial Report is presented in US dollars and all values are rounded to the nearest hundred thousand
dollars (US$100,000) unless otherwise stated under the option available to the Company under Australian
Securities and Investments Commission (ASIC) Class Order 98/100. The Company is an entity to which the class
order applies.
Apart from changes in accounting policies noted below, the accounting policies adopted are consistent with
those disclosed in the Financial Report for the year ended 30 June 2011. Certain comparative information has
been reclassified to be presented on a consistent basis with the current year’s presentation.
(b)
New accounting Standards and Interpretations
(i) Changes in accounting policy and disclosures
The Group has adopted all new and amended Australian Accounting Standards and AASB interpretations
effective from 1 July 2011, including:
Reference
Title
AASB 124
(Revised)
The revised AASB 124 Related Party Disclosures (December 2009) simplifies the definition
of a related party, clarifying its intended meaning and eliminating inconsistencies from the
definition, including:
(a) The definition now identifies a subsidiary and an associate with the same investor as related
parties of each other.
(b) Entities significantly influenced by one person and entities significantly influenced by a close
member of the family of that person are no longer related parties of each other.
(c) The definition now identifies that, whenever a person or entity has both joint control over
a second entity and joint control or significant influence over a third party, the second and
third entities are related to each other.
AASB 2009-12 Amendments to Australian Accounting Standards
[AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039
& 1052]
Makes numerous editorial changes to a range of Australian Accounting Standards and
Interpretations.
In particular, it amends AASB 8 Operating Segments to require an entity to exercise
judgement in assessing whether a government and entities known to be under the control
of that government are considered a single customer for the purposes of certain operating
segment disclosures. It also makes numerous editorial amendments to a range of Australian
Accounting Standards and Interpretations, including amendments to reflect changes made to
the text of IFRS by the IASB.
AASB 2010-4
Amendments to Australian Accounting Standards arising from the Annual Improvements
Project
[AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]
Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the
nature and extent of risks associated with financial instruments.
Clarifies that an entity will present an analysis of other comprehensive income for each
component of equity, either in the statement of changes in equity or in the notes to the
financial statements.
Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant
events and transactions.
Clarifies that when the fair value of award credits is measured based on the value of the
awards for which they could be redeemed, the amount of discounts or incentives otherwise
granted to customers not participating in the award credit scheme, is to be taken into account.
96
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(i) Changes in accounting policy and disclosures (continued)
Reference
Title
AASB 2010-5
Amendments to Australian Accounting Standards
[AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and
Interpretations 112, 115, 127, 132 & 1042]
This Standard makes numerous editorial amendments to a range of Australian Accounting
Standards and Interpretation including amendments to reflect changes made to the text of
IFRS by the IASB.
These amendments have no major impact on the requirements of the amended
pronouncements.
AASB 1054
Australian Additional Disclosures
This Standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project
of the AASB and FRSB.
This Standard, with AASB 2011-1 relocates all Australian specific disclosures from other
standards to one place and revises disclosures in the following areas:
(a) Compliance with Australian Accounting Standards.
(b) The statutory basis or reporting framework for financial statements.
(c) Whether the entity is a for-profit or not-for-profit entity.
(d) Whether the financial statements are general purpose or special purpose.
(e) Audit fees.
(f)
Imputation credits.
AASB 2010-6
Amendments to Australian Accounting Standards – Disclosures on Transfer of Financial Assets
[AASB 1 & AASB 7]
The amendments increase the disclosure requirements for transactions involving transfers of
financial assets but which are not derecognised and introduce new disclosures for assets that
are derecognised but the entity continues to have a continuing exposure to the asset after the
sale.
The new and amended Standards and Interpretations had no impact on the financial position or performance of
the Group.
(ii) Accounting Standards and Interpretations issued but not yet effective
The following Australian Accounting Standards that have recently been issued or amended but are not yet
effective and have not been applied by the Group for the annual reporting period ending 30 June 2012, outlined
in the table below:
Reference
Title
Summary
AASB 2011-9 Amendments to
Australian Accounting
Standards -
Presentation of Other
Comprehensive Income
[AASB 1, 5, 7, 101, 112,
120, 121, 132, 133, 134,
1039 & 1049]
This Standard requires entities to group
items presented in other comprehensive
income on the basis of whether they
might be reclassified subsequently to
profit or loss and those that will not.
Application
Date of
Standard*
Application
Date for
Group*
1 July 2012 1 July 2012
97
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Application
Date of
Standard*
Application
Date for
Group*
1 January
2013**
1 July 2013
Reference
Title
Summary
AASB 9
Financial Instruments
AASB 9 includes requirements for the
classification and measurement of financial
assets. It was further amended by AASB
2010-7 to reflect amendments to the
accounting for financial liabilities.
These requirements improve and simplify
the approach for classification and
measurement of financial assets compared
with the requirements of AASB 139. The
main changes are described below.
(a) Financial assets that are debt
instruments will be classified based on
(1) the objective of the entity’s business
model for managing the financial
assets; (2) the characteristics of the
contractual cash flows.
(b) Allows an irrevocable election on initial
recognition to present gains and losses
on investments in equity instruments
that are not held for trading in other
comprehensive income. Dividends
in respect of these investments that
are a return on investments can be
recognised in profit or loss and there is
no impairment or recycling on disposal
of the instrument.
(c) Financial assets can be designated
and measured at fair value through
profit or loss at initial recognition if
doing so eliminates or significantly
reduces a measurement or recognition
inconsistency that would arise from
measuring assets or liabilities, or
recognising the gains and losses on
them, on different bases.
(d) Where the fair value option is used
for financial liabilities the change in fair
value is to be accounted for as follows:
- The change attributable to changes
in credit risk are presented in other
comprehensive income (OCI).
The remaining change is presented
-
in profit or loss.
If this approach creates or enlarges an
accounting mismatch in the profit or loss,
the effect of the changes in credit risk are
also presented in profit or loss.
Consequential amendments were also
made to other standards as a result of
AASB 9, introduced by AASB 2009-11 and
superseded by AASB 2010-7 and 2010-10.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Reference
Title
Summary
AASB 10
Consolidated Financial
Statements
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests in
Other Entities
AASB 10 establishes a new control that
applies to all entities. It replaces parts of
AASB 127 Consolidated and Separate
Financial Statements dealing with the
accounting for consolidated financial
statements and UIG-112 Consolidation –
Special Purpose Entities.
The new control model broadens the
situations when an entity is considered
to be controlled by another entity and
includes new guidance for applying the
model to specific situations, including
when acting as a manager may give
control, the impact of potential voting
rights and when holding less than a
majority voting rights may give control.
Consequential amendments were also
made to other standards via AASB 2011-7.
AASB 11 replaces AASB 131 Interests
in Joint Ventures and UIG-113 Jointly-
controlled Entities – Non-monetary
Contributions by Ventures. AASB 11
uses the principle of control in AASB
10 to define joint control, and therefore
the determination of whether joint
control exists may change. In addition
it removes the option to account for
jointly controlled entities (JCEs) using
proportionate consolidation. Instead,
accounting for a joint arrangement is
dependent on the nature of the rights and
obligations arising from the arrangement.
Joint operations that give the venturers
a right to the underlying assets and
obligations themselves is accounted for
by recognising the share of those assets
and obligations. Joint ventures that give
the venturers a right to the net assets is
accounted for using the equity method.
Consequential amendments were also
made to other standards via AASB 2011-7
and amendments to AASB 128.
AASB 12 includes all disclosures relating
to an entity’s interests in subsidiaries,
joint arrangements, associates and
structures entities. New disclosures have
been introduced about the judgments
made by management to determine
whether control exists, and to require
summarised information about joint
arrangements, associates and structured
entities and subsidiaries with non-
controlling interests.
Application
Date of
Standard*
Application
Date for
Group*
1 January
2013
1 July 2013
1 January
2013
1 July 2013
1 January
2013
1 July 2013
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Application
Date of
Standard*
Application
Date for
Group*
1 January
2013
1 July 2013
1 January
2013
1 July 2013
Reference
Title
Summary
AASB 13
Fair Value Measurement AASB 13 establishes a single source of
AASB 119
Employee Benefits
guidance for determining the fair value of
assets and liabilities. AASB 13 does not
change when an entity is required to use
fair value, but rather, provides guidance on
how to determine fair value when fair value
is required or permitted. Application of this
definition may result in different fair values
being determined for the relevant assets.
AASB 13 also expands the disclosure
requirements for all assets or liabilities
carried at fair value. This includes
information about the assumptions
made and the qualitative impact of those
assumptions on the fair value determined.
Consequential amendments were also
made to other standards via AASB 2011-8.
The main change introduced by this
standard is to revise the accounting for
defined benefit plans. The amendment
removes the options for accounting for
the liability, and requires that the liabilities
arising from such plans is recognised
in full with actuarial gains and losses
being recognised in other comprehensive
income. It also revised the method of
calculating the return on plan assets.
The revised standard changes the
definition of short-term employee benefits.
The distinction between short-term and
other long-term benefits is now based on
whether the benefits are expected to be
settled wholly within 12 months after the
reporting date.
Consequential amendments were also
made to other standards via AASB 2011-10.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Reference
Title
Summary
Interpretation
20
Stripping Costs in the
Production Phase of a
Surface Mine
This interpretation applies to stripping
costs incurred during the production
phase of a surface mine.
Application
Date of
Standard*
Application
Date for
Group*
1 January
2013
1 July 2013
Production stripping costs are to be
capitalised as part of an asset, if an entity
can demonstrate that it is probable future
economic benefits will be realised, the
costs can be reliably measured and the
entity can identify the component of an ore
body for which access has been improved.
This asset is to be called the “stripping
activity asset”.
The stripping activity asset shall be
depreciated or amortised on a systematic
basis, over the expected useful life of the
identified component of the ore body
that becomes more accessible as a
result of the stripping activity. The units of
production method shall be applied unless
another method is more appropriate.
Consequential amendments were also
made to other standards via AASB 2011-12.
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Application
Date of
Standard*
Application
Date for
Group*
1 January
2013
1 July 2013
1 July 2013 1 July 2013
Reference
Title
Summary
Amendments to Australian Accounting
Standards arising from this standard
sets out amendments to International
Financial Reporting Standards (IFRSs)
and the related bases for conclusions and
guidance made during the International
Accounting Standards Board’s
Annual Improvements process. These
amendments have not yet been adopted
by the AASB.
The following items are addressed by this
Standard:
AASB 1 First-time Adoption of International
Financial Reporting Standards
› Repeated application of IFRS 1.
› Borrowing costs.
AASB 2 Presentation of Financial
Statements
› Clarification of the requirements for
comparative information.
AASB 116 Property, Plant and Equipment
› Classification of servicing equipment.
AASB 132 Financial Instruments:
Presentation
› Tax effect of distribution to holders of
equity instruments.
AASB 134 Interim Financial Reporting
›
Interim financial reporting and segment
information for total assets and liabilities.
This Amendment deletes from AASB 124
individual key management personnel
disclosure requirement for disclosing
entities that are not companies.
AASB 2012-5 Annual Improvements
2009-2011 Cycle
AASB 2011-4 Amendments to
Australian Accounting
Standards to Remove
Individual Key
Management Personnel
Disclosure Requirements
[AASB 124]
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
New accounting Standards and Interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Application
Date of
Standard*
Application
Date for
Group*
1 July 2013 1 July 2013
Reference
Title
Summary
AASB 1053
Application of Tiers of
Australian Accounting
Standards
This Standard establishes a differential
financial reporting framework consisting
of two Tiers of reporting requirements
for preparing general purpose financial
statements:
(a) Tier 1: Australian Accounting
Standards.
(b) Tier 2: Australian Accounting
Standards – Reduced Disclosure
Requirements.
Tier 2 comprises the recognition,
measurement and presentation
requirements of Tier 1 and substantially
reduced disclosures corresponding to
those requirements.
The following entities apply Tier 1
requirements in preparing general
purpose financial statements:
(a) For-profit entities in the private sector
that have public accountability (as
defined in this Standard).
(b) The Australian Government and State,
Territory and Local Governments.
The following entities apply either Tier
2 or Tier 1 requirements in preparing
general purpose financial statements:
(a) For-profit private sector entities that do
not have public accountability.
(b) All not-for-profit private sector
activities.
(c) Public sector entities other than the
Australian Government and State,
Territory and Local Governments.
Consequential amendments to other
standards to implement the regime were
introduced by AASB 2010-2, 2011-2,
2011-6, 2011-11 and 2012-1.
*
Designates the beginning of the applicable annual reporting period unless otherwise stated.
AASB ED 215 Mandatory effective date of IFRS 9 proposes to defer the mandatory effective date of
**
AASB 9 to annual periods beginning on or after 1 January 2015, with early application permitted. At the time of
preparation, finalisation of ED 215 is still pending by the AASB. However, the IASB has deferred the mandatory
effective date IFRS 9 to annual periods beginning on or after 1 January 2015, with early application permitted.
The potential effect of these Standards is yet to be fully determined.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Basis of Consolidation
The consolidated financial statements comprise the financial statements of Paladin Energy Ltd and its
subsidiaries as at and for the period ended 30 June each year (the Group). Interests in associates are equity
accounted and are not part of the consolidated Group.
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating
policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether a group controls another entity.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies. In preparing the consolidated financial statements, all intercompany
balances and transactions, income and expenses and profit and losses resulting from intra-group transactions
have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be
consolidated from the date on which control is transferred out of the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition
method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets
acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired
and the liabilities assumed are measured at their acquisition date fair values (refer to Note 3(j)).
The difference between the above items and the fair value of the consideration (including the fair value of any
pre-existing investment in the acquiree) is goodwill or a discount on acquisition.
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an
equity transaction.
Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive
income and are presented within equity in the consolidated statement of financial position, separately from the
equity of the owners of the parent.
Losses are attributed to the non-controlling interest even if that results in a deficit balance.
If the Group loses control over a subsidiary, it:
›
›
›
›
›
›
›
Derecognises the assets (including goodwill) and liabilities of the subsidiary;
Derecognises the carrying amount of any non-controlling interest;
Derecognises the cumulative translation differences, recorded in equity;
Recognises the fair value of the consideration received;
Recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss and;
Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit
or loss.
(d)
Significant Accounting Judgements, Estimates and Assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions
of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of certain assets and liabilities within the next annual reporting period are:
(i) Net Realisable Value of Inventories
The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed net
realisable value. In determining net realisable value various factors are taken into account including sales prices
and costs to complete inventories to their final form.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d)
Significant Accounting Judgements, Estimates and Assumptions (continued)
(ii)
Impairment of Property, Plant and Equipment; Mine Development and Intangibles
Property, plant and equipment; mine development and intangibles are tested for impairment whenever events or
changes in circumstances indicate that the carrying value may not be recoverable.
The Group conducts an internal review of asset values at each reporting date, which is used as a source of
information to assess for any indicators of impairment. Factors, such as changes in uranium prices, production
performance and mining and processing costs are monitored to assess for indicators of impairment. If any
indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets
(cash-generating units).
(iii) Available-for-Sale Financial Assets and Financial Assets Held for Trading
The Group measures the fair value of available-for-sale financial assets by reference to the fair value of the equity
instruments at the date at which they are valued. The fair value of the unlisted securities is determined using
valuation techniques. Such techniques include using recent arm’s length market transactions, net asset values
and by an external valuer using the Black-Scholes valuation model.
(iv) Carrying Value of Exploration and Evaluation Expenditure
The Group reviews the carrying value of exploration and evaluation expenditure at each reporting date. This
requires judgement as to the status of the individual projects and their future economic value.
(v) Deferred Tax Assets and Liabilities
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining deferred tax assets and liabilities. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
(vi) Rehabilitation Provision
The value of this provision represents the discounted value of the present obligation to rehabilitate the mine
and to restore, dismantle and close the mine. The discounted value reflects a combination of management’s
assessment of the cost of performing the work required, the timing of the cash flows and the discount rate. A
change in any, or a combination, of the three key assumptions (estimated cash flows, discount rates or inflation
rates), used to determine the provision could have a material impact to the carrying value of the provision.
(vii) Share-Based Payment Transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an external valuer using
either the Black-Scholes valuation model or Monte-Carlo simulation model as appropriate, using assumptions
detailed in Note 25.
(viii) Proved and Probable Reserves
The Group uses the concept of a life of mine as an accounting value to determine such things as depreciation
rates and the appropriate period to discount mine closure provisions. In determining life of mine the proved and
probable reserves measured in accordance with the 2004 edition of the JORC Code specific to a mine are taken
into account which by their very nature require judgements, estimates and assumptions.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d)
Significant Accounting Judgements, Estimates and Assumptions (continued)
(ix) Production Start Date
The Group assesses the stage of each mine under construction to determine when a mine moves into the
production stage. The criteria used to assess the start date are determined based on the unique nature of
each mine construction project, such as the complexity of a plant and its location. The Group considers
various relevant criteria to assess when the mine and the processing plant is substantially complete, ready for
its intended use. At this time, any costs capitalised to ‘construction work in progress’ are reclassified to ‘mine
development’ and ‘property, plant and equipment’. Some of the criteria will include, but are not limited, to the
following:
›
›
›
›
availability of the plant
completion of a reasonable period of testing of the mine plant and equipment
ability to produce metal in saleable form (within specifications)
ability to sustain ongoing production of metal at commercial rates of production
When a mine construction project moves into the production stage, the capitalisation of certain mine
construction costs ceases and costs are either regarded as inventory or expensed, except for costs that qualify
for capitalisation relating to mine asset additions or improvements, mine development or mineable reserve
development. It is also at this point that depreciation / amortisation commences.
(e)
Segment Reporting
An operating segment is a component of an entity that engages in business activities from which it may earn
revenue and incur expenses (including revenues and expenses relating to transactions with other components of
the same entity), whose operating results are regularly reviewed by the Group’s executive management team (the
chief operating decision makers) to make decisions about resources to be allocated to the segment and assess
its performance and for which discrete financial information is available. This includes start-up operations which
are yet to earn revenues. Management will also consider other factors in determining operating segments such
as the existence of a line manager and the level of segment information presented to the executive management
team.
Operating segments have been identified based on the information provided to the chief operating decision
makers, being the executive management team.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately.
However, an operating segment that does not meet the quantitative criteria is still reported separately where
information about the segment would be useful to users of the financial statements.
The Company has identified its operating segments to be Exploration, Namibia and Malawi on the basis of the
nature of activity and geographical location and different regulatory environments.
(f)
Foreign Currency Translation
(i)
Functional and Presentation Currency
Items included in the Financial Statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated
Financial Statements are presented in United States dollars (US dollars), which is the Company’s functional and
presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are converted 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. Translation differences on available-for-sale
financial assets are included in the available-for-sale reserve.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Foreign Currency Translation (continued)
(iii) Group Companies
Some Group entities have a functional currency of US dollars which is consistent with the Group’s presentational
currency. For all other Group entities the functional currency has been translated into US dollars for presentation
purposes. Assets and liabilities are translated using exchange rates prevailing at the balance sheet date;
revenues and expenses are translated using average exchange rates prevailing for the income statement year;
and equity transactions are translated at exchange rates prevailing at the dates of transactions. The resulting
difference from translation is recognised in a foreign currency translation reserve. Foreign currency translation
reserves upon the sale of a subsidiary is recycled to the Income Statement.
The following material operating subsidiaries have a US dollar functional currency:
›
›
›
›
›
Paladin Finance Pty Ltd
Paladin (Africa) Limited
Langer Heinrich Uranium (Pty) Ltd
Paladin Nuclear Ltd
Indo Energy Ltd
The following material operating subsidiaries have an Australian dollar functional currency:
›
Northern Territory Uranium Pty Ltd
› Mount Isa Uranium Pty Ltd
›
›
›
Paladin Energy Minerals NL
Summit Resources (Aust) Pty Ltd
Fusion Resources Pty Ltd
The following material operating subsidiaries have a Canadian dollar functional currency:
›
Aurora Energy Ltd
› Michelin Uranium Ltd
›
›
Paladin Canada Holdings (NL) Ltd
Paladin Canada Investments (NL) Ltd
(g)
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of duties and taxes paid. Revenue is recognised for the major business activities as follows:
(i) Sale of Uranium
Revenue from sale of uranium is recognised when risk and reward of ownership pass which is when title of the
product passes from the Group pursuant to an enforceable contract, when selling prices are known or can be
reasonably estimated and when the product is in a form that requires no further treatment by the Group.
(ii)
Interest Revenue
Interest revenue from investments in cash is recognised in the Income Statement as interest accrues using the
effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating
the interest income over the relevant period using the effective interest rate, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of the financial asset.
(iii) Database Licence Revenue
Licence revenue generated from granting third parties access to proprietary database information on mineral
property regions is recognised in the Income Statement on a straight line basis over the licence term.
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h)
Income Tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income
based on the 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.
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. An exception is made for certain
temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability
is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised
directly in equity. Deferred tax assets and liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
Paladin and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian
tax law.
(i)
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use the asset.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases.
Incentives received on entering into operating leases are recognised as liabilities. Lease payments are allocated
between rental expense and reduction of the lease incentive liability on a straight line basis over the period of the
lease.
(j)
Business Combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a
business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-
date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners
of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the
acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree
either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs
are expensed as incurred. Prior to 1 July 2009 the purchase method of accounting was used to account for
business combinations.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group’s
operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the
separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset
or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive
income. If the contingent consideration is classified as equity, it shall not be remeasured.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)
Impairment of Assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation 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. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash
generating units).
(l)
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other
short-term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
(m)
Trade and Other Receivables
Trade receivables, which generally have 30 day terms, are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less an allowance for any uncollectible amounts.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are
written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the
group will not be able to collect the debt. Financial difficulties of the debtor, default payments or debts more than
60 days overdue are considered objective evidence of impairment.
(n)
Inventories
Consumable stores inventory are valued at the lower of cost and net realisable value using the weighted average
cost method, after appropriate allowances for redundant and slow moving items.
Finished goods and work in progress inventory are valued at the lower of cost and net realisable value using the
weighted average cost method. Cost is derived on an absorption costing basis including both fixed and variable
production costs and attributable overheads incurred up to the delivery point where legal title to the product
passes. No accounting value is attributed to stockpiles containing ore at less than the cut-off grade.
Any inventory produced during the development phase is initially recognised at its deemed cost, being net
realisable value and deducted from capitalised development costs.
The costs of production include labour costs, materials and contractor expenses which are directly attributable
to the extraction and processing of ore (including any recognised expense of stripping costs); the depreciation of
property, plant and equipment used in the extraction and processing of ore; and production overheads.
Inventory held for trading by Paladin Energy Ltd and Paladin Nuclear Ltd, the Group’s marketing entity, is valued
at the lower of actual cost and net realisable value, using a blend of spot and long-term prices.
(o)
Investments and Other Financial Assets
The Group classifies its investments and other financial assets in the following categories: loans and receivables,
held-to-maturity investments, available-for-sale financial assets and financial assets held for trading. The
classification depends on the purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition.
Classification
(i)
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 arise when the Group provides money, goods or services directly to a debtor
with no intention of selling the receivable. They are included in current assets, except for those with maturities
greater than 12 months after the balance sheet date which are classified as non current assets. Loans and
receivables are included in receivables in the Statement of Financial Position. Loans and receivables are carried
at amortised cost using the effective interest method.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
Investments and Other Financial Assets (continued)
Classification (continued)
(ii) Held-to-Maturity Investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. Held-to-maturity
investments are carried at amortised cost using the effective interest method.
(iii) Available-for-Sale Financial Assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that
are either designated in this category or not classified in any of the other categories. They are included in non
current assets unless management intends to dispose of the investment within 12 months of the balance date.
Purchases and sales of investments are recognised on trade-date which is the date on which the Group
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs.
Financial assets are de-recognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Available-for-Sale financial assets are subsequently carried at fair value. Unrealised gains and losses which arise
from changes in the fair value of non monetary securities classified as available-for-sale are recognised in other
comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair
value adjustments are included in the Income Statement as gains and losses from investment securities.
(iv) Financial Assets Held for Trading
Financial assets are classified as held for trading if they are derivative instruments or acquired for the purpose
of selling in the near term. Gains or losses on investments held for trading are recognised in the Statement of
Comprehensive Income.
(v) Fair value of Financial Instruments
The fair values of quoted investments are based on current bid prices. If the market for a financial asset or
liability is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.
These include reference to the fair values of recent arm’s length transactions, involving the same instruments
or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models
refined to reflect the issuer’s specific circumstances.
The nominal value less estimated adjustments of trade receivables and payables are assumed to approximate
their fair values.
(vi)
Impairment of Financial Instruments
The Group 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 in determining whether the security
is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss which is
measured as the difference between the acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognised in profit and loss is removed from equity and recognised in the Income
Statement. Any subsequent increase in value is recognised in equity.
(p)
Interests in Jointly Controlled Assets
The Group has interests in joint ventures that are jointly controlled assets. A joint venture is a contractual
arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A
jointly controlled asset involves use of assets and other resources of the venturers rather than establishment of
a separate entity. The Group recognises its interest in jointly controlled assets by recognising its interest in the
assets and the liabilities of the joint venture. The Group also recognises the expenses that it incurs and its share
of the income that it earns from the sale of goods or services by jointly controlled assets.
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q)
Property, Plant and Equipment
All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment
losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income
Statement during the financial period in which they are incurred.
Property, plant and equipment costs include both the costs associated with construction of equipment
associated with establishment of an operating mine, and the estimated costs of dismantling and removing the
asset and restoring the site on which it is located.
Land is not depreciated. Depreciation on other assets is calculated using either the unit of production basis or
the straight line method to allocate their cost amount, net of their residual values, over their estimated useful
lives, as follows:
›
›
›
›
Buildings
Databases
Plant and equipment
20 years
10 years
2-6 years
Leasehold improvements
7 years
› Mine plant and equipment
lesser of life of asset and unit of production basis
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are
included in the Income Statement. When revalued assets are sold, it is Group policy to transfer the amounts
included in other reserves in respect of those assets to retained earnings.
(r)
Mine Development
Pre-production costs are deferred as development costs until such time as the asset is capable of being
operated in a manner intended by management. Post-production costs are recognised as a cost of production.
Overburden cost is capitalised and depreciated on a units of production basis. Stripping costs are recognised as
a production cost as incurred.
(s)
Exploration and Evaluation Expenditure
Exploration and evaluation expenditure related to areas of interest is capitalised and carried forward to the extent
that:
(i)
rights to tenure of the area of interest are current; and
(ii) costs are expected to be recouped through successful development and exploitation of the area of interest or
alternatively by its sale.
Exploration and evaluation expenditure is allocated separately to specific areas of interest. Such expenditure
comprises net direct costs and an appropriate portion of related overhead expenditure directly related to
activities in the area of interest.
Costs related to the acquisition of properties that contain Mineral Resources are allocated separately to specific
areas of interest.
If costs are not expected to be recouped through successful development and exploitation of the area of interest
or alternatively by sale, costs are expensed in the period in which they are incurred.
Exploration and evaluation expenditure that is capitalised is included as part of cash flows from investing
activities whereas exploration and evaluation expenditure that is expensed is included as part of cash flows from
operating activities.
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Exploration and Evaluation Expenditure (continued)
When a decision to proceed to development is made the exploration and evaluation capitalised to that area is
transferred to mine development. All costs subsequently incurred to develop a mine prior to the start of mining
operations within the area of interest are capitalised and carried at cost. These costs include expenditure
incurred to develop new ore bodies within the area of interest, to define further mineralisation in existing areas of
interest, to expand the capacity of a mine and to maintain production.
Capitalised amounts for an area of interest may be written down to its recoverable amount if the area of
interest’s carrying amount is greater than its estimated recoverable amount.
(t)
Intangibles
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of
an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not
capitalised and expenditure is recognised in the Income Statement in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives
are amortised over the useful life and tested for impairment whenever there is an indication that the intangible
asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite
useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by
changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The
amortisation expense on the intangible assets with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the
cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an
indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change
in an accounting estimate and is thus accounted for on a prospective basis.
A summary of the policies applied to the Group’s intangible assets is as follows:
Right to use water and power supply
Useful lives
Life of mine
Amortisation method used
Amortised over the life of the mine on a unit of production basis
Impairment testing
Annually and more frequently when an indication of impairment exists. The
amortisation method is reviewed at each financial year-end.
The rights to use water and power supply have been granted for a minimum of 17 years from April 2007 by the
relevant utilities with the option of renewal without significant cost at the end of this period.
Kayelekera Mining Lease
Useful lives
Finite
Amortisation method used
Amortised over the life of the mine on a straight-line basis.
Impairment testing
Annually and more frequently when an indication of impairment exists. The
amortisation method is reviewed at each financial year-end.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Comprehensive
Income when the asset is derecognised.
(u)
Trade and Other Payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes
obliged to make future payments in respect of the purchase of these goods and services. The amounts are
unsecured and are usually paid within 30 days of recognition.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Interest Bearing Loans and Borrowings
Bank loan borrowings are initially recognised at fair value, net of transaction costs incurred. Bank loan
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 component of convertible bonds that exhibits characteristics of debt is recognised as a liability in the
Statement of Financial Position, net of transaction costs. On issue of convertible bonds, the fair value of the
liability component is determined using a market rate for an equivalent non-convertible bond and this amount is
carried as a liability on the amortised cost basis until extinguished on conversion or redemption. The increase
in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds is
allocated to the equity component and is recognised in shareholders’ equity. The carrying amount of the equity
component is not remeasured in subsequent years.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.
(w)
Borrowing Costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time
that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are
expensed as incurred including the unwinding of discounts related to mine closure provisions. The capitalisation
rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate
applicable to the entity’s outstanding borrowings during the year.
(x)
Employee Benefits
(i) Wages and Salaries, Annual Leave and Sick Leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due
to be settled within 12 months of the reporting date are recognised as a current liability in respect of employees’
services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are
settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the
rates paid or payable.
(ii) Long Service Leave
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. 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) Long-Term Incentive Plan
The liability for the retention programme is recognised in the provision for employee benefits as the present value
of expected future payments to be made in respect of the retention bonus programme. Consideration is given to
expected future salary levels and experience of employee departures. Expected future payments are discounted
using market yields at the reporting date on national government bonds with terms of maturity and currency that
match, as closely as possible, the estimated future cash outflows. Projected unit credit method has been used
to calculate the provision.
(iv) Share-Based Payments
Share-based compensation benefits were provided to employees via the Paladin Executive Share Option Plan
(EXSOP). Following the implementation of the Employee Performance Share Rights Plan and the Contractor
Performance Share Rights Plan (Rights Plans) detailed in Note 25, no further options will be granted pursuant to
the EXSOP.
The fair value of options granted under both the EXSOP and rights under the Rights Plans 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 or rights.
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(x)
Employee Benefits
(iv) Share-Based Payments (continued)
The fair value of options and rights at grant date is independently determined using the Black-Scholes valuation
model that takes into account the exercise price, the term of the option or right, the vesting and performance
criteria, the impact of dilution, the non-tradeable nature of the option or right, 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 Monte-Carlo model is used to model the future value of the Company’s shares
and the movement of the comparator companies’ Total Shareholder Return (TSR) on the various vesting dates
associated with vesting requirements of the options.
The rights with a non-market based performance condition (time based and EPS) were valued using a Black-
Scholes valuation model. The rights that contained a market based performance condition (TSR and market
price) were valued using a Monte-Carlo simulation model.
Non-market vesting conditions are included in assumptions about the number of options or rights that are
expected to become exercisable or granted. At each balance date, the entity revises its estimate of the number
of options and rights that are expected to become exercisable. The employee benefit expense recognised each
period takes into account the most recent estimate.
Upon the exercise of options or the grant of rights, the balance of the share-based payments reserve relating to
those options is transferred to share capital.
The Group measures the cost of equity-settled transactions with other parties by reference to the fair value of
the goods or services received. Where the fair value of the goods or services cannot be reliably determined, or
where the goods or services cannot be identified, the Group measures the cost of the transaction by reference
to the fair value of the equity instruments granted.
(y)
Mine Closure and Rehabilitation
Mine closure and restoration costs include the costs of dismantling and demolition of infrastructure or
decommissioning, the removal of residual material and the remediation of disturbed areas specific to the
infrastructure. Mine closure costs are provided for in the accounting period when the obligation arising from the
related disturbance occurs, whether this occurs during the mine development or during the production phase,
based on the net present value of estimated future costs.
As the value of the provision for mine closure represents the discounted value of the present obligation to
restore, dismantle and close the mine, the increase in this provision due to the passage of time is recognised as
a finance cost. The discount rate used is a pre-tax rate that reflects the current market assessment of the time
value of money and the risks specific to the liability.
Provision is made for rehabilitation work when the obligation arises and this is recognised as a cost of
production or development. The rehabilitation costs, provided for are the present value of the estimated costs to
restore operating locations. The value of the provision represents the discounted value of the current estimate to
restore and the discount rate used is the pre-tax rate that reflects the current market assessments of the time
value of money and the risks specific to the liability.
(z)
Onerous Contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from
a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is
stated at the present value of the future net cash outflows expected to be incurred in respect of the contract.
(aa)
Contributed Equity
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.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(ab)
Earnings Per Share
(i) Basic Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by
the weighted average number of ordinary shares outstanding during the period.
(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 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.
NOTE 4.
SEGMENT INFORMATION
Identification of Reportable Segments
The Company has identified its operating segments to be Exploration, Namibia and Malawi, on the basis of
the nature of the activity and geographical location and different regulatory environments. The main segment
activity in Namibia and Malawi is the production and sale of uranium from the mines located in these geographic
regions. The Exploration segment is focused on developing exploration and evaluation projects in Australia,
Niger and Canada. Unallocated portion covers the Company’s sales and marketing, treasury, corporate and
administration.
Discrete financial information about each of these operating segments is reported to the Group’s executive
management team (chief operating decision makers) on at least a monthly basis.
The accounting policies used by the Group in reporting segments internally are the same as those contained in
note 3 to the accounts and in the prior period.
Inter-entity sales are priced with reference to the spot rate.
Corporate charges comprise non-segmental expenses such as corporate office expenses. A proportion of the
corporate charges are allocated to Namibia and Malawi on the basis of timesheet allocations with the balance
remaining in Unallocated.
The following items are not allocated to segments as they are not considered part of the core operations of any
segment:
›
›
›
Interest revenue
Non project finance interest and borrowing expense
Unallocated corporate and labour costs
The Group’s customers are major utilities and other entities located mainly in USA, Australia, China, Taiwan
and UK. These revenues are attributed to the geographic location of the mines being the reporting segments
Namibia and Malawi.
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 4.
SEGMENT INFORMATION (CONTINUED)
The following tables present revenue, expenditure and asset information regarding operating segments for the
years ended 30 June 2012.
Exploration
US$M
Namibia
US$M
Malawi
Unallocated
Consolidated
US$M
US$M
US$M
Year ended 30 June 2012
Sales to external customers
Other revenue
Inter segment sales
Total segment revenue
Elimination of inter segment sales
Total consolidated revenue
Impairment of inventory
Segment (loss)/profit before income tax
and finance costs and impairments
Impairment for available for sale asset
Impairment of asset
Finance costs
Loss before income tax
Income tax benefit/(expense)
Loss after income tax
Segment assets/total assets
-
-
-
-
-
-
-
(1.3)
-
-
-
(1.3)
0.4
(0.9)
1,148.0
239.2
-
15.1
254.3
(15.1)
239.2
126.6
-
-
126.6
-
126.6
-
(39.0)
60.4
-
-
(7.8)
52.6
(4.2)
48.4
628.7
(64.6)
-
(178.0)
(7.5)
(250.1)
65.2
(184.9)
465.1
-
1.6
-
1.6
-
1.6
-
(31.3)
(8.0)
-
(41.4)
(80.7)
17.3
(63.4)
105.9
365.8
1.6
15.1
382.5
(15.1)
367.4
(39.0)
(36.8)
(8.0)
(178.0)
(56.7)
(279.5)
78.7
(200.8)
2,347.7
Australia
US$M
Canada
US$M
Malawi
US$M
Namibia
US$M
Other
Consolidated
US$M
US$M
Non current assets
by country*
863.4
260.0
233.5
461.9
36.8
1,855.6
In 2012, the two most significant customers equated on a proportionate basis to 22% (US$79.9M Namibia,
Malawi) and 11% (US$41.0M Namibia, Malawi) of the Group’s total sales revenue.
* Excluding deferred tax assets and financial instruments.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 4.
SEGMENT INFORMATION (CONTINUED)
The following tables present revenue, expenditure and asset information regarding operating segments for the
years ended 30 June 2011.
Exploration
US$M
Namibia
US$M
Malawi
Unallocated
Consolidated
US$M
US$M
US$M
Year ended 30 June 2011
Sales to external customers
Other revenue
Inter segment sales
Total segment revenue
Elimination of inter segment sales
Total consolidated revenue
Impairment of inventory
Segment (loss)/profit before income tax
and finance costs
Finance costs
Loss before income tax
Income tax benefit/(expense)
Loss after income tax
Segment assets/total assets
-
-
-
-
-
-
-
166.5
-
26.9
193.4
(26.9)
166.5
100.3
-
-
100.3
-
100.3
-
(26.4)
(1.4)
-
(1.4)
0.5
(0.9)
1,184.0
44.9
(3.6)
41.3
(15.7)
25.6
498.4
(37.4)
(8.8)
(46.2)
22.3
(23.9)
576.7
-
2.1
-
2.1
-
2.1
-
(49.7)
(49.1)
(98.8)
9.5
(89.3)
144.6
266.8
2.1
26.9
295.8
(26.9)
268.9
(26.4)
(43.6)
(61.5)
(105.1)
16.6
(88.5)
2,403.7
Australia
US$M
Canada
US$M
Malawi
US$M
Namibia
US$M
Other
Consolidated
US$M
US$M
Non current assets
by country*
892.9
270.2
427.9
385.7
36.1
2,012.8
In 2011, the two most significant customers equated on a proportionate basis to 14% (US$37.4M Namibia,
Malawi) and 14% (US$36.5M Malawi) of the Group’s total sales revenue.
* Excluding deferred tax assets and financial instruments.
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 5.
REVENUES AND EXPENSES
Revenue
(a)
Sale of uranium
Interest income from non-related parties
Database licence revenue
Other revenue
Total
Cost of Sales
(b)
Production costs before depreciation and amortisation
Depreciation and amortisation
Impairment loss in prior year relating to inventory sold during the year
Product distribution costs
Royalties
CONSOLIDATED
2012
US$M
365.8
1.4
-
0.2
367.4
(256.7)
(49.3)
23.4
(11.6)
(7.5)
2011
US$M
266.8
1.4
0.2
0.5
268.9
(170.9)
(36.1)
-
(9.2)
(6.0)
Total
(301.7)
(222.2)
Other Income
(c)
Foreign exchange gain (net)
Gain on disposal of investment
Profit on convertible bond buyback
Gain on disposal of available for sale investments
Total
Administration, Marketing and Non-Production Costs
(d)
Corporate and marketing
Mine sites (LHM & KM)
Canadian operations
Non-cash – share-based payments
Non-cash - depreciation
Royalties
LHM Stage 4 expansion project
Total
Other Expenses
(e)
Loss on disposal of property, plant and equipment
Foreign exchange loss (net)
Impairment for available for sale financial assets
KM fixed costs during plant shutdown
Impairment of asset (1)
KM Slope remediation (2)
KM medical expenses (3)
Total
1.4
-
1.2
-
2.6
(21.0)
(10.9)
(2.5)
(6.9)
(2.1)
(2.8)
(3.6)
(49.8)
-
-
(8.0)
(9.7)
(178.0)
(3.3)
(0.8)
(199.8)
-
0.8
-
1.1
1.9
(26.5)
(9.3)
(1.3)
(11.6)
(1.0)
(2.2)
(2.1)
(54.0)
(0.9)
(6.0)
-
-
-
(1.9)
-
(8.8)
(1) September 2011 – the continued deterioration of the uranium price post-Fukushima has resulted
in a reduction of the carrying value to the recoverable amount of US$337M of the KM assets from
US$470M resulting in an impairment charge of US$132.1M (US$178.0M before tax reduced by a
tax benefit of US$45.9M) (2011: US$Nil).
(2) Slope remediation expenditure expensed pending the outcome of the insurance claim currently with the
underwriter’s loss adjustor.
(3) KM medical expenditure expensed pending the outcome of an insurance claim currently with the underwriter.
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 5.
REVENUES AND EXPENSES (CONTINUED)
Finance Costs
(f)
Interest expense
Accretion relating to convertible bonds (non-cash)
Loss on convertible bond buyback
Mine closure provision discount interest expense
Facility costs
Total
CONSOLIDATED
2012
US$M
(36.4)
(12.9)
-
(1.8)
(5.6)
(56.7)
2011
US$M
(36.4)
(11.9)
(4.6)
(2.0)
(6.6)
(61.5)
Total depreciation and amortisation expense for the year included in the Consolidated Income Statement is
US$51.4M (2011: US$37.1M).
NOTE 6.
INCOME TAX
(a)
Current income tax
Income Tax Benefit
Current income tax expense
Deferred income tax
Related to the origination and reversal of temporary differences
Tax benefits previously not recognised now recognised
Adjustments relating to prior period
Income tax benefit reported in the Income Statement
(b)
Amounts Charged or Credited Directly to Equity
Deferred income tax related to items charged or credited directly to equity:
Unrealised (loss)/gain on available-for-sale investments
Convertible bonds
Changes in foreign exchange on exploration
Other and prior period
Income tax (benefit)/expense reported in equity
CONSOLIDATED
2012
US$M
2011
US$M
0.1
0.1
(59.7)
(11.9)
(7.2)
(78.7)
(3.3)
13.3
(5.6)
(4.9)
(0.5)
20.3
(37.0)
-
(16.6)
2.8
10.7
35.3
1.1
49.9
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 6.
INCOME TAX (CONTINUED)
(c)
Numerical Reconciliation of Income Tax Benefit to Prima Facie
Tax Payable
Loss before income tax expense
Tax at the Australian tax rate of 30% (2011 – 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable
income:
Share-based payments
Convertible bonds
Permanent foreign exchange differences
Other expenditure not allowable
Difference in overseas tax rates
Under/over prior year adjustment
Losses not recognised/(derecognised)
Temporary foreign exchange differences
Other
Income tax benefit reported in the Income Statement
(d)
Deferred Income Tax
Deferred tax liabilities
Accelerated prepayment deduction for tax purposes
Accelerated depreciation for tax purposes
Exploration expenditure
Recognition of acquired exploration expenditure
Foreign currency balances
Capitalised interest
Recognition of convertible bond for accounting purposes
Gross deferred tax liabilities
Set off of deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Revenue losses available for offset against future taxable income
Equity raising costs
Provisions for employee benefits
Inventory
Available for sale securities
Accruals
Foreign currency balances
Interest bearing liabilities
Other
Gross deferred tax assets
Set off against deferred tax liabilities
Net deferred tax assets recognised
CONSOLIDATED
2012
US$M
2011
US$M
(279.5)
(105.1)
(83.8)
(31.5)
1.8
-
(114.9)
1.5
(195.4)
9.5
(7.2)
1.7
111.3
1.4
(78.7)
(0.9)
(157.8)
(23.7)
(175.2)
-
(6.1)
(20.5)
(384.2)
180.7
3.5
(1.0)
4.6
1.1
(23.3)
3.8
-
14.4
(5.2)
(6.3)
(16.6)
(0.4)
(155.1)
(21.2)
(180.8)
(17.5)
(10.8)
(12.6)
(398.4)
180.9
(203.5)
(217.5)
167.5
1.8
0.5
1.8
9.2
5.2
13.4
66.0
0.3
167.1
2.7
0.8
18.3
1.4
4.3
-
5.7
0.3
265.7
(180.7)
200.6
(180.9)
85.0
19.7
The net deferred tax assets recognised are in respect of revenue losses expected to be offset against future
taxable income.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 6.
INCOME TAX (CONTINUED)
Tax Losses
(e)
Australian unused tax losses for which no deferred tax asset has been
recognised
Other unused tax losses for which no deferred tax asset has been recognised(1)
Total unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at the Australian tax rate of 30%
(1)Includes US$5.3M losses in Canada with expiry dates commencing in 2032
This benefit for tax losses will only be obtained if:
CONSOLIDATED
2012
US$M
2011
US$M
208.7
206.5
6.2
214.9
64.5
4.6
211.1
63.3
(i)
(ii)
the Consolidated Entities derive future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised;
the Consolidated Entities continue to comply with the conditions for deductibility imposed by tax legislation;
and
(iii) no changes in tax legislation adversely affect the Consolidated Entities in realising the benefit from the
deductions for the losses.
NOTE 7.
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term bank deposits
CONSOLIDATED
2012
US$M
21.8
90.3
2011
US$M
27.6
89.8
Total cash and cash equivalents
112.1
117.4
Total cash and cash equivalents includes US$26.2M (2011: US$19.5M) restricted for use in respect of the LHM
and KM project finance facilities (refer to Note 16).
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for
varying periods depending on the immediate cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 7.
CASH AND CASH EQUIVALENTS (CONTINUED)
(a)
Reconciliation of Net Loss After Tax to Net Cash Flows Used
in Operating Activities
Net loss
Adjustments for
Depreciation and amortisation
(Gain)/loss recognised on re-measurement to fair value
Gain on disposal of investments
Database licence revenue
Net exchange differences
Share-based payments
Non-cash financing costs
Inventory impairment and obsolescence expense
Asset impairment
Available for sale asset impairment
Interest capitalised as property, plant and equipment
Loss on disposal of property, plant and equipment
Changes in assets and liabilities
Decrease in prepayments
(Increase)/decrease in trade and other receivables
Decrease in trade and other payables
Increase in provisions
Increase in inventories
(Decrease)/increase in deferred tax liabilities
Increase in deferred tax assets
CONSOLIDATED
2012
US$M
2011
US$M
(200.8)
(88.5)
51.4
(1.2)
-
-
(1.7)
7.2
20.4
39.0
178.0
8.0
(3.3)
-
5.5
(61.9)
(0.8)
1.5
(88.4)
(16.7)
(62.0)
37.1
4.6
(1.8)
(0.2)
6.0
11.6
20.2
26.4
-
-
-
0.9
0.2
9.5
(11.3)
0.5
(106.9)
5.3
(15.6)
Net cash flows used in operating activities
(125.8)
(102.0)
NOTE 8.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
GST and VAT
Sundry debtors
Total current receivables
NOTES
(a)
(b)
CONSOLIDATED
2011
US$M
52.0
22.9
7.9
82.8
2010
US$M
-
11.9
8.6
20.5
(a) Trade receivables are non-interest bearing and are generally on 30 day terms. Carrying value approximates fair
value due to the short-term nature of the receivables. An allowance for doubtful debts is made when there is
objective evidence that a trade receivable is impaired. No expense has been recognised for the current year or
the previous year.
(b) GST and VAT debtor relates to Australia, Namibia, Malawi and Canada.
Non Current
Sundry debtors
Total non current receivables
0.1
0.1
1.5
1.5
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 9.
INVENTORIES
Current
Stores and consumables (at cost)
Stockpiles (at cost)
Stockpiles (at net realisable value)
Work-in-progress (at cost)
Work-in-progress (at net realisable value)
Finished goods (at cost)
Finished goods (at net realisable value)
CONSOLIDATED
2012
US$M
39.4
0.4
4.2
2.2
11.3
72.2
56.8
2011
US$M
30.3
2.5
7.3
3.1
4.6
78.5
51.4
Total current inventories at the lower of cost and net realisable value
186.5
177.7
(a)
Inventory Expense
Inventories sold recognised as an expense for the year ended 30 June 2012 totalled US$301.7M (2011:
US$222.2M) for the Group as part of cost of goods sold.
(b)
Impairment of Inventory Expense
During 2012 inventory held at KM was reduced to net realisable value resulting in an impairment loss of
US$31.9M (2011: US$26.4M) for the year, recognised in cost of sales.
(c)
Stores and Consumables Obsolescence Expense
During 2012 stores and consumables held at KM were reduced by US$3.3M (2011: US$Nil) due to
obsolescence. This resulted in an obsolescence expense recognised in cost of sales.
Non Current
Stockpiles (at cost)
Stockpiles (at net realisable value)
Total non current inventories at the lower of cost and net realisable value
112.3
1.9
114.2
71.2
2.4
73.6
Stockpiles at LHM and KM that are unlikely to be processed within 12 months of the balance date.
(a)
Impairment of Inventory Expense
During 2012 inventory held at KM was reduced to net realisable value resulting in an impairment loss of
US$3.8M (2011: US$Nil) for the year, recognised in cost of sales.
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 10.
OTHER FINANCIAL ASSETS
Non Current
Available-for-sale financial assets
Total non current other financial assets
Available-for-Sale Financial Assets
CONSOLIDATED
2012
US$M
15.5
15.5
2011
US$M
41.8
41.8
The Group has an investment in DYL and at 30 June 2012 held 224,934,461 (2011: 224,934,461) fully paid
ordinary shares.
The holding of these fully paid ordinary shares represents a 19.9% interest at 30 June 2012 (2011: 19.9%) of the
ordinary shares of DYL, a uranium explorer listed on ASX. The market value of the shares in DYL at 30 June
2012 is A$10.3M (US$10.5M) (2011: A$33.7M / US$35.7M) based on a share price of 4.6 Australian cents per
share (2011: 15.0 Australian cents).
On 19 June 2012 DYL announced a non-renounceable entitlement issue. Paladin Energy Ltd committed to a
general sub underwriting of A$4M. From July 2012 the investment will be accounted for as an associate. At 30
June 2012, the Group had subscribed A$2M for a convertible note issued by DYL (included in Sundry debtors
in Note 8). The convertible note formed part of the underwriting of the DYL non-renounceable entitlement issue
and was converted into DYL shares in July 2012. Refer to Note 27 for the results of the entitlement issue.
The Group also holds minor investments in other companies.
NOTE 11.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment – at cost
Less accumulated depreciation and impairment
Total plant and equipment
Land and buildings - at cost
Less accumulated depreciation
Total land and buildings
Construction work in progress – at cost
Less impairment
Total construction work in progress
Total property, plant and equipment
CONSOLIDATED
2012
US$M
700.6
(223.1)
477.5
11.4
(1.8)
9.6
5.3
(0.7)
4.6
491.7
2011
US$M
566.6
(80.6)
486.0
11.4
(1.5)
9.9
134.2
-
134.2
630.1
Property, plant and equipment pledged as security for liabilities
Refer to Note 16 for information on property, plant and equipment pledged as security.
The continued deterioration of the uranium price post-Fukushima resulted in an impairment loss of US$178.0M
in September 2011 which represents the write-down of KM assets including plant and equipment, construction
work in progress, mine development and intangible assets to recoverable amount which is based on value
in use. In determining the value in use the cash flows were discounted at a rate of 10.8% on a pre-tax basis,
consensus pricing was used and specific committed targeted cost optimisation were included.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 11.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end
of the year are set out below:
Total
Plant and
Equipment
Land and
Building
Construction
Work in
Progress
US$M
US$M
US$M
US$M
Consolidated – 2012
Carrying amount at start of year
Additions
Depreciation and amortisation expense
Impairment of assets
Reclassification of assets
Reclassification to mine development (1)
Reclassification to exploration
Profit/(loss) on disposal of asset
Foreign currency translation
630.1
60.0
(41.8)
(132.2)
-
(23.3)
(0.8)
(0.1)
(0.2)
486.0
13.0
(41.5)
(131.5)
175.7
(23.3)
(0.8)
(0.1)
-
Carrying amount at end of year
491.7
477.5
Consolidated – 2011
Carrying amount at start of year
Additions
Depreciation and amortisation expense
Reclassification of assets
Reclassification to mine development
Foreign currency translation
Carrying amount at end of year
541.1
132.6
(44.4)
-
(0.2)
1.0
630.1
495.8
25.0
(43.9)
9.0
-
0.1
486.0
9.9
0.1
(0.3)
-
0.1
-
-
-
(0.2)
9.6
8.7
-
(0.5)
0.8
-
0.9
9.9
134.2
46.9
-
(0.7)
(175.8)
-
-
-
-
4.6
36.6
107.6
-
(9.8)
(0.2)
-
134.2
(1) Tailings Dam at LHM transferred from plant & equipment to mine development of $23.3M
NOTE 12. MINE DEVELOPMENT
Mine development – at cost
Less accumulated depreciation and impairment
Total mine development
Carrying amount at start of year
Additions
Depreciation and amortisation expense
Effects in changes of underlying assumptions & discount rates
Reclassification from exploration
Reclassification from property, plant and equipment(1)
Impairment
Carrying amount at end of year
CONSOLIDATED
2012
US$M
167.7
(79.4)
88.3
106.6
11.1
(14.5)
3.6
0.1
23.3
(41.9)
88.3
2011
US$M
122.4
(15.8)
106.6
119.2
1.4
(10.2)
(5.5)
1.5
0.2
-
106.6
(1) Tailings Dam at LHM transferred from plant & equipment to mine development of $23.3M
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 12. MINE DEVELOPMENT (CONTINUED)
Canadian securities law requires the following description of the Group’s interests in mineral property
tenements:
Langer Heinrich Mine (Namibia) - Paladin 100%
LHM consists of one mining licence – ML 140 - covering 4,375 hectares in the Namib Naukluft Desert 180km
west of Windhoek, the capital of Namibia, and 80km east of the major seaport of Walvis Bay. The licence was
granted on 26 July 2005 for a 25 year term expiring on 25 August 2030. Rights conferred by the licence include
the right to mine and sell base and rare metals and nuclear fuel groups of minerals and to carry out prospecting
operations. The project was purchased from Acclaim Uranium NL in August 2002. LHM is owned through a
wholly owned Namibian entity, LHUPL.
Construction of the processing plant was commenced in late 2005 with staged commissioning being completed
in December 2006. Following an extended ramp-up phase the plant and mine achieved nameplate production
in 2007. Construction of the Stage 2 expansion to 3.7Mlb pa commenced in CY2008 and design capacity was
reached in December 2009. The plant consistently operated at the 3.7Mlb pa rate from the beginning of CY2010.
Construction of the Stage 3 expansion to 5.2Mlb commenced at the beginning of CY2010 and was completed at
31 March 2012. Commercial production was declared from 1 April 2012. The plant has achieved Stage 3 design
and further optimisation work will continue.
LHUPL also holds an exclusive prospecting licence, EPL 3500, covering 30km² to the west of the mining licence.
Kayelekera Mine (Malawi) - Paladin 85%
KM consists of one mining licence - ML 152 - covering 5,550 hectares in northern Malawi 650km north of
Lilongwe, the capital of Malawi, and 52km west of the provincial town of Karonga on the shore of Lake Malawi. The
licence was granted on 2 April 2007 for a 15 year term expiring on 1 April 2022. Rights conferred by the licence
include the exclusive right to mine and sell uranium and associated minerals. The Group acquired its interest in the
Kayelekera project in February 1998 when it entered into a joint venture with Balmain Resources Pty Ltd, a private
company based in Perth, Western Australia. In 2000 the Group increased its interest in the Kayelekera project to
90% and in July 2005 acquired the remaining 10% interest held by Balmain Resources Pty Ltd. Paladin’s interest in
KM is held through a Malawian entity, PAL, in which the Government of Malawi has a 15% interest.
A Development Agreement was entered into between the Government of Malawi and PAL in which the
Government of Malawi received a 15% interest in PAL. Subsequent to the Development Agreement and the
acceptance of the project’s Environmental Impact Assessment the Government of Malawi granted the mining
licence covering the project area to PAL. Construction of the plant was commenced in 2007 and the mine was
officially opened in April 2009. The processing facility achieved commercial production at the end of June 2010.
Additional resource definition drilling has been carried out to the west of the current pit design to confirm the
final pit limits with an updated mineral resource and ore reserve expected during the second half of 2011.
PAL also holds four exclusive prospecting licences in northern Malawi covering 1,298km² surrounding and to the
south of the KM mining licence and these are being actively explored.
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE
Canadian securities law requires the following description of the Group’s interests in mineral property tenements:
Michelin Project (Canada) - Paladin 100%
On 1 February 2011 the Company completed the acquisition of the uranium assets of Aurora Energy Resources
Inc. (Aurora) from Fronteer Gold Inc. The project covers approximately 81,200ha. Included in the total are 28
map staked licences and 6 quarry licences. An additional 4 map staked licences were staked along a proposed
infrastructure corridor from the settlement of North West River. All licences are held in the name of Aurora. All
licences are in good standing.
The Labrador Inuit Land Claims agreement was ratified by the Inuit in May 2004 leading to the formation of
the Inuit Government on 1 December 2005. The agreement created two categories of land: the Labrador Inuit
Settlement Area (LISA) and Labrador Inuit Lands (LIL). A significant portion of the project area is covered by
LISA lands. During 2008 the Nunatsiavut Government imposed a 3 year moratorium on mining uranium on
properties located within the LISA, effective initially until the 31 March 2011. In December 2011, the Nunatsiavut
Government voted to lift the three year moratorium of the mining development and production of uranium on
Labrador Inuit land. In March 2012, the Government enacted an amendment to the Labrador Inuit Lands Act,
finally lifting that moratorium.
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE
Michelin Project (Canada) - Paladin 100%
The project area has a 2% net sales royalty from uranium production and a 2% net smelter return (NSR) on base
and precious metals payable to Altius Resources Inc.
Exploration commenced in the project area in the mid 1950’s. By 1980, British Newfoundland Exploration
Limited (Brinex) had completed geological mapping, 290 core holes at the Michelin deposit, a decline of
approximately 580m in length and a mineral resource estimation. Brinex ceded its exploration concession in
1980 but held mining leases over a number of deposits in the area until 1994. Work undertaken in 2003-2005
by the Fronteer – Altius Alliance commenced with a re-evaluation of the area for Cu-Au-U targets. The Alliance
subsequently acquired a number of mineral licences. The uranium interests in the licences were transferred
to Aurora in 2005. Fronteer completed a number of exploration programmes between 2005 and 2008 which
culminated with mineral resource estimations in 2007 with an update in 2008. The Company expects to re-
commence active exploration early in the second half of CY2012.
Niger Project (Niger) - Paladin 100%
Following the completion of the takeover of NGM in December 2010 the Company took possession of the wholly
owned British Virgin Islands company, Indo Energy Ltd. Indo Energy Ltd holds 3 exploration concessions in the
Tim Mersoi basin, Tagait 4 (TAG4), Tolouk 1 (TOU1) and Terzemazour 1 (TER1), covering an area of 1,480km².
The concessions are located approximately 30km to the north and north west of the township of Agadez in
northern Niger. Prior to acquisition, NGM had completed a mineral resource estimation conforming to the
JORC (2004) guidelines for the Takardeit deposit in the central portion of concession TER1. The concessions
were originally granted on the 21 May 2007 for a period of 3 years, however in view of the political and security
situation then prevailing in the country, in June 2010 the concessions were given a 27 month extension of the
permits until December 2012. After the 2011 drilling programme was evaluated in July/August 2011, a 15,000m
follow-up drilling programme was developed which was planned to start in November 2011. This, however, has
been delayed until late 2012 In addition the Company is actively pursuing an extension to the permits in the light
of the current security situation.
The concessions are located in the Tim Mersoi Basin and are prospective for sandstone type uranium
mineralisation in Carboniferous, Permian and Jurassic sediments. The basin has historically produced in excess
of 280Mlb U3O8 from two Areva mines (Somair and Cominak) and a third mine Imouraren is under construction.
Due to the security situation caused by Al-Qaeda activities, especially in the northern desert region where the
project is located, no experienced expatriate personnel from the company are permitted to visit the project site
or directly supervise the exploration effort. On-ground exploration and mapping has been carried out during
2011 and 2012, with guidance from Perth head office, by local personnel.
Manyingee Uranium Project (Australia) - Paladin 100%
The Manyingee Uranium Project consists of three granted mining leases – M08/86, M08/87 and M08/88
- covering 1,307 hectares in the north-west of Western Australia, 1,100km north of Perth, the state capital
and 90km south of the township of Onslow on the north-west coast. The Group purchased the Manyingee
Uranium Project in 1998 from Afmeco Mining and Exploration Pty Ltd (AFMEX), a subsidiary company of
Cogema of France. Under the terms (as amended) of the purchase agreement a final payment of A$0.75M is
payable to AFMEX when all development approvals have been obtained. Royalties of 2.5% for the first 2,000t of
uranium oxide and 1.5% for the following 2,000t of uranium oxide are also payable to AFMEX and associated
companies which formerly held interests in the project. The three mining leases were granted on 18 May 1989
for a 21-year term to 17 May 2010. The leases have now been renewed for a further 21-year term to 17 May
2031. Rights conferred by the three mining leases include the exclusive right to explore and mine minerals,
subject to environmental and other approvals. The interest in Manyingee is held through the wholly owned
entity, PEM. Following the lifting of the ban on uranium mining in Western Australia in late 2008 exploration
planning has been undertaken with the intention of undertaking a drilling programme. By the end of 2011 the
Company’s Programme of Works was approved by the Western Australian Department of Mines and Energy.
After completing archaeological clearance of the proposed work areas in April 2012, the Company plans to start
drilling in August 2012.
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)
Oobagooma Uranium Project (Australia) - Paladin 100%
The Oobagooma Uranium Project consists of four applications for exploration licences covering 452km² in the
West Kimberley region of northern Western Australia, 1,900km north-north-east of Perth, the state capital and
70km north-east of the regional town of Derby. The four applications for exploration licences are 04/145 and
04/146 lodged on 28 December 1983 and 04/776 and 04/777 lodged on 28 November 1991 which largely
overlie the earlier applications. The Group purchased the Oobagooma Project in 1998 from AFMEX. Under
the terms of the purchase agreement a final payment of A$0.75M is payable to AFMEX when the tenements
are granted. A gross royalty of 1.0% on production is also payable to AFMEX. The applications for exploration
licences remain in the name of Afmeco Pty Ltd (a company associated with AFMEX) until the date that they are
granted after which title will be transferred. The interest in Oobagooma is held through the wholly owned entity,
PEM. Following the change of government in Western Australia in late 2008 the granting of the lease applications
is being actively pursued with both the Federal and State Governments.
Valhalla North Uranium Project (Australia) - Paladin 100%
The Valhalla North Uranium Project consists of two granted exploration permits – Exploration Permit for Minerals
12572 (EPM 12572) and EPM 16006 - covering 457km² to the north of Mount Isa in north-western Queensland.
The Group acquired the Valhalla North Uranium Project following the successful takeover of Fusion in February
2009. EPM 12572 was granted on 11 January 2006 and EPM 16006 was granted on 26 March 2008, each for
a period of five years with the potential to be renewed for further five year periods. The renewal of EPM 12572
for a further period of five years has been lodged and is awaiting grant. The area was investigated during the
1950’s and resulted in the discovery of the Duke and Batman deposits, with limited mining of surface high grade
mineralisation being undertaken with subsequent treatment at the Mary Kathleen mine. During the 1970’s the
area was explored by both Queensland Mines Limited and Agip Australia Pty Ltd. Prior to the completion of
the takeover, Fusion announced Mineral Resources conforming to the JORC guidelines on two deposits, Duke
Batman and Honeypot. Drilling at the Duke Batman deposit did not extend the mineralisation but identified a high
grade core to the mineralisation and significantly added to the geological understanding of the deposit.
Bigrlyi Uranium Project (Australia) - Paladin 41.71%
The Bigrlyi Uranium Project lies in the Northern Territory of Australia approximately 320km north-west of Alice
Springs and is comprised of ten exploration retention licences (ERLs 46-55) covering 1,214 hectares. These
tenements were originally granted in 1983 and have been subject to five yearly renewals since 1988. The project
is now a joint venture between Energy Metals Limited 53.29%, Southern Cross Exploration NL 5.00% and
Northern Territory Uranium Pty Ltd 41.71% (100% owned by Paladin) with Energy Metals Limited being operator
and manager.
The Bigrlyi uranium deposit was originally discovered by Agip Australia Pty Ltd in the mid 1970’s before being
transferred to Central Pacific Minerals NL in the early 1980’s. The deposit was subject to extensive drilling
between 1974 and 1982 which Ore Reserve studies carried out during the 1980’s and 1990’s. During 2005/2006
a drilling campaign was undertaken by the Joint Venture partners which resulted in an initial JORC Resource.
Resource definition drilling is ongoing at the project and an Initial Scoping Study was released in November
2007 and an Updated Scoping Study released in July 2008. Resource updates were released in April and July
2009 with additional drilling completed in late 2009 and 2010. In June 2011 an increased Indicated and Inferred
Mineral Resource totalling 21.1Mlb U3O8 at a cut-off grade of 500ppm was announced. In the second half of
2011, Energy Metals Limited carried out infill and resource extension drilling followed by detailed geological
mapping early in 2012. Currently all data are being collated to develop an updated geological model and update
the resource estimate.
Isa Uranium Joint Venture (Australia) - Paladin 91.04%
The IUJV in Northern Queensland is a 50:50 joint venture between SRA (Paladin 82.08% effective ownership)
and MIU (Paladin 100% ownership) with SRA being the operator and manager. The IUJV covers two defined
blocks of land totalling 27km² containing the Valhalla and Skal uranium deposits. Paladin’s effective equity in the
IUJV was increased from 50% to 91.03% following the acquisition of 81.9% of Summit in 2007.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)
Valhalla Uranium Deposit (Australia) - Paladin 91.04%
The Valhalla Uranium Deposit is situated on EPM 17514 granted in January 2010 for a five year term to 5
January 2015. The Valhalla Uranium Deposit is located approximately 40km north of Mount Isa and straddles
the Barkly Highway. The ground was previously worked on by Mount Isa Mines Limited and Queensland Mines
Limited from the mid 1950’s to the early 1970’s. Queensland Mines Limited, in particular, conducted extensive
exploration over the Valhalla ground between 1968 and 1972 including the estimation of resources and reserves.
Queensland Mines Limited allowed the tenement to lapse in 1991 and the ground was subsequently acquired
by SRA in 1992, with EPM 9221 being granted in 1993. During 2008 resource definition drilling was commenced
to enable completion of a detailed scoping study. As a result of the scoping study additional resource drilling
was undertaken with the updating of the Mineral Resource being announced in October 2010. Geotechnical and
metallurgical studies are ongoing.
Odin Uranium Deposit
The Odin Uranium Deposit is located 1km north of Valhalla at EPL 17514. The deposit is essentially ‘blind’
with little or no surface expression and its discovery is a result of an extensive regional prospectivity mapping
exercise undertaken by the Company since 2009. Following a number of drilling programmes in 2009, 2010 and
2011 an Indicated and Inferred category Mineral Resource has now been estimated.
Skal Uranium Deposit (Australia) - Paladin 91.04%
The Skal Uranium Deposit is situated on EPM 17519, granted in January 2010 for a five year term to 5 January
2015. The Skal Uranium Deposit is located approximately 8km south-east of the Valhalla Uranium Deposit and
32km north of Mount Isa. The ground was previously held by SRA as EPM 14048 granted in 2005. Skal was
originally discovered by Mount Isa Mines Limited in the mid 1950’s and was subject to mapping and drilling at
that time. Queensland Mines Limited acquired the project in the 1960’s and conducted further drilling resulting in
an estimation of a resource for the project. The deposit is situated on EPM 14048 and the IUJV re-commenced
drilling in 2005. An initial JORC compliant resource estimate was completed in mid 2008, with an updated
resource reported in early 2009. Additional resource definition drilling was undertaken in 2009 and followed
up with a resource update in October 2009. Resource definition drilling was completed on all the individual
mineralised zones in late 2011 and an updated mineral resource estimate was released in March 2012.
Summit Resources Ltd (Australia) - Paladin 82.08%
Paladin acquired an 81.9% interest in Summit as a result of a takeover bid which closed on 1 June 2007. SRA,
which is a wholly owned subsidiary of Summit, holds a large number of exploration tenements surrounding and
to the north of Mount Isa in Northern Queensland. Other than the Andersons, Bikini and Watta Projects, for which
JORC Inferred Mineral Resource estimates have been completed, limited exploration activities have taken place
on these tenements in recent years and as such they are not considered material to Paladin at this point in time.
Following the completion of regional drilling programmes in 2010 and 2011 the Mineral Resources at Andersons
and Bikini have been updated along with a maiden Mineral Resource estimate for the Mirrioola deposit.
Angela and Pamela Projects (Australia) - Paladin 50%
In early 2008, the Northern Territory Government advised that the Angela Project Joint Venture (Paladin 50% and
Cameco Australia Pty Ltd 50%) had been selected to explore the Angela and Pamela uranium deposits located
near Alice Springs in the Northern Territory. Exploration Licence 25758 covering 3,767 hectares was granted on 3
October 2008 for a six year term with the potential for further renewal. Exploration and resource definition drilling
was planned. Drilling programmes were completed in 2009 and 2010 and these are being evaluated to determine
the future direction of the project. A successful mud rotary drilling trial was undertaken in early 2011 which is now
expected to reduce overall drilling costs and improve drilling rates. An initial Mineral Resource estimate has now
been completed and reported. Paladin assumed the management of the project in September 2011.
Other Mineral Property Interests
The Group holds various other mineral property interests, however, these are not considered material and as
a result no further disclosure of mineral property tenement information has been included in the consolidated
financial statements.
Environmental Contingency
The Group’s exploration, evaluation, development and operation activities are subject to various national,
federal, provincial and local laws and regulations governing the protection of the environment. These laws and
regulations are continually changing and generally becoming more restrictive. The Group has made, and expects
to make in the future, expenditures to comply with such laws and regulations. The impact, if any, of future
legislative or regulatory changes cannot be determined.
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)
The following table details the expenditures on interests in mineral properties by area of interest for the year
ended 30 June 2012:
Area of Interest
Balance 30 June 2011
Acquisition property payments
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Transferred to Mine Development
Transferred from Property, Plant & Equipment
Valhalla
/Skal (1)
US$M
663.1
-
0.9
1.3
1.2
3.4
-
3.4
(27.1)
-
-
Isa North
Fusion
US$M
US$M
156.5
-
12.3
-
0.8
0.7
1.1
2.6
-
2.6
(6.6)
-
-
0.1
-
0.1
0.2
(0.1)
0.1
(0.5)
-
-
Balance 30 June 2012
639.4
152.5
11.9
Angela
Pamela
US$M
6.9
-
0.1
0.1
0.2
0.4
(0.2)
0.2
(0.3)
-
-
6.8
(1) Summit has a 50% interest in the Valhalla/Skal Projects with the other 50% interest held by the Paladin Group.
As a consequence of the takeover of the Summit Group, the above table now reflects 100% of the Valhalla/Skal
Projects with the non-controlling interest reflected on the face of the Statement of Financial Position.
The following table details the expenditures on interests in mineral properties by area of interest for the year
ended 30 June 2011:
Area of Interest
Balance 30 June 2010 as previously stated
Effect of accounting policy change
Balance 30 June 2010 - restated
Acquisition property payments
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Transferred to Mine Development
Balance 30 June 2011
Valhalla
/Skal (1)
US$M
529.1
-
529.1
-
0.9
2.5
2.0
5.4
-
5.4
128.6
-
663.1
Isa North
Fusion
US$M
US$M
Angela
Pamela
US$M
KM
LHM
Canada
Other Uranium
US$M
US$M
US$M
Projects
US$M
126.0
-
126.0
-
1.2
1.7
0.8
3.7
-
3.7
26.8
-
8.5
1.0
9.5
-
0.2
0.2
0.2
0.6
(0.1)
0.5
2.3
-
156.5
12.3
-
4.5
4.5
-
0.2
0.7
0.4
1.3
-
1.3
1.1
-
6.9
(1) Summit has a 50% interest in the Valhalla/Skal Projects with the other 50% interest held by the Paladin Group.
As a consequence of the takeover of the Summit Group, the above table now reflects 100% of the Valhalla/Skal
Projects with the non-controlling interest reflected on the face of the Statement of Financial Position.
130
30.7
36.8
5.4
1,143.2
Bigrlyi
US$M
29.4
-
0.9
0.7
1.0
2.6
2.6
(1.3)
-
-
-
Bigrlyi
US$M
15.2
6.3
21.5
-
0.4
1.4
0.7
2.5
-
-
2.5
5.4
NGM
US$M
36.0
-
-
-
-
-
-
0.4
0.4
0.8
0.8
NGM
US$M
-
-
-
34.0
0.2
1.4
0.4
2.0
2.0
-
-
-
KM
LHM
Canada
Other Uranium
US$M
US$M
US$M
Total
US$M
1,177.9
-
6.3
3.9
5.6
15.8
(2.5)
13.3
(48.7)
(0.1)
0.8
Total
US$M
680.0
15.1
695.1
295.8
5.5
8.7
5.9
20.1
(3.0)
17.1
171.6
(1.7)
Projects
US$M
4.6
-
1.1
0.1
0.8
2.0
(1.0)
1.0
(0.2)
-
-
1.2
1.8
3.0
-
1.7
0.3
0.7
2.7
(2.0)
0.7
0.9
-
4.6
-
-
-
-
-
-
-
-
0.1
0.1
0.1
(0.1)
-
1.5
1.5
-
-
-
-
-
-
0.2
0.2
0.2
(1.7)
269.1
-
1.6
0.4
0.5
2.5
-
-
2.5
(12.7)
0.8
259.7
261.8
-
-
-
-
-
-
0.5
0.3
0.8
0.8
6.5
0.4
0.5
0.3
1.2
(1.2)
0.2
0.3
0.4
0.9
(0.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29.4
36.0
269.1
1,177.9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 13.
EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)
The following table details the expenditures on interests in mineral properties by area of interest for the year
ended 30 June 2012:
Area of Interest
Balance 30 June 2011
Acquisition property payments
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Transferred to Mine Development
Transferred from Property, Plant & Equipment
Balance 30 June 2010 as previously stated
Effect of accounting policy change
Balance 30 June 2010 - restated
Acquisition property payments
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Transferred to Mine Development
Valhalla
/Skal (1)
US$M
663.1
-
0.9
1.3
1.2
3.4
-
-
-
3.4
(27.1)
Valhalla
/Skal (1)
US$M
529.1
-
-
-
-
0.9
2.5
2.0
5.4
5.4
128.6
Isa North
Fusion
US$M
US$M
156.5
-
12.3
-
0.8
0.7
1.1
2.6
2.6
(6.6)
-
-
-
US$M
126.0
-
-
-
-
1.2
1.7
0.8
3.7
3.7
26.8
0.1
-
0.1
0.2
(0.1)
0.1
(0.5)
-
-
US$M
8.5
1.0
9.5
-
0.2
0.2
0.2
0.6
(0.1)
0.5
2.3
-
529.1
126.0
Angela
Pamela
US$M
6.9
-
0.1
0.1
0.2
0.4
(0.2)
0.2
(0.3)
-
-
6.8
Angela
Pamela
US$M
-
4.5
4.5
-
0.2
0.7
0.4
1.3
-
-
1.3
1.1
6.9
Balance 30 June 2012
639.4
152.5
11.9
(1) Summit has a 50% interest in the Valhalla/Skal Projects with the other 50% interest held by the Paladin Group.
As a consequence of the takeover of the Summit Group, the above table now reflects 100% of the Valhalla/Skal
Projects with the non-controlling interest reflected on the face of the Statement of Financial Position.
The following table details the expenditures on interests in mineral properties by area of interest for the year
ended 30 June 2011:
Area of Interest
Isa North
Fusion
Bigrlyi
US$M
29.4
-
0.9
0.7
1.0
2.6
-
2.6
(1.3)
-
-
30.7
Bigrlyi
US$M
15.2
6.3
21.5
-
0.4
1.4
0.7
2.5
-
2.5
5.4
-
NGM
US$M
36.0
-
0.4
-
0.4
0.8
-
0.8
-
-
-
36.8
NGM
US$M
-
-
-
34.0
0.2
1.4
0.4
2.0
-
2.0
-
-
Balance 30 June 2011
663.1
156.5
12.3
29.4
36.0
(1) Summit has a 50% interest in the Valhalla/Skal Projects with the other 50% interest held by the Paladin Group.
As a consequence of the takeover of the Summit Group, the above table now reflects 100% of the Valhalla/Skal
Projects with the non-controlling interest reflected on the face of the Statement of Financial Position.
KM
LHM
Canada
Other Uranium
Projects
US$M
US$M
US$M
US$M
-
-
0.4
0.5
0.3
1.2
(1.2)
-
-
-
-
-
-
-
-
0.1
-
0.1
-
0.1
-
(0.1)
-
-
269.1
-
1.6
0.4
0.5
2.5
-
2.5
(12.7)
-
0.8
259.7
4.6
-
1.1
0.1
0.8
2.0
(1.0)
1.0
(0.2)
-
-
5.4
KM
LHM
Canada
Other Uranium
Projects
US$M
US$M
US$M
US$M
-
-
-
-
0.2
0.3
0.4
0.9
(0.9)
-
-
-
-
-
1.5
1.5
-
-
0.2
-
0.2
-
0.2
-
(1.7)
-
-
-
-
261.8
0.5
-
0.3
0.8
-
0.8
6.5
-
269.1
1.2
1.8
3.0
-
1.7
0.3
0.7
2.7
(2.0)
0.7
0.9
-
4.6
Total
US$M
1,177.9
-
6.3
3.9
5.6
15.8
(2.5)
13.3
(48.7)
(0.1)
0.8
1,143.2
Total
US$M
680.0
15.1
695.1
295.8
5.5
8.7
5.9
20.1
(3.0)
17.1
171.6
(1.7)
1,177.9
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 14.
INTANGIBLE ASSETS
At 30 June
Cost
Accumulated amortisation
Impairment
Net carrying amount of non current intangible assets
CONSOLIDATED
2012
US$M
27.8
(5.9)
(3.8)
18.1
2011
US$M
27.8
(4.7)
-
23.1
Amortisation of US$1.2M (2011: US$1.5M) is included in costs of sales in the Income Statement.
Movements in Intangible Assets
Movements in each group of intangible asset during the financial year are set out below:
Consolidated – 2012
Carrying amount at 1 July 2011
Amortisation expense
Impairment
Carrying amount at 30 June 2012
Consolidated - 2011
Carrying amount at 1 July 2010
Amortisation expense
Carrying amount at 30 June 2011
Right
to Supply
of Power
US$M
Right
to Supply
of Water
US$M
Kayelekera
Mining Lease
Total
US$M
US$M
4.1
(0.1)
-
4.0
4.3
(0.2)
4.1
9.8
(0.4)
-
9.4
10.3
(0.5)
9.8
9.2
(0.7)
(3.8)
4.7
10.0
(0.8)
9.2
23.1
(1.2)
(3.8)
18.1
24.6
(1.5)
23.1
(c)
Description of the Group’s Intangible Assets
(i) Right to supply of power
LHUPL has entered into a contract with NamPower in Namibia for the right to access power at LHM. In order to
obtain this right, the power line connection to the mine was funded by LHM. However, ownership of the power
line rests with NamPower. The amount funded is being amortised on a unit of production basis.
(ii) Right to supply of water
LHUPL has entered into a contract with NamWater in Namibia for the right to access water at LHM. In order
to obtain this right, the water pipeline connection to the mine was funded by LHM. However, ownership of the
pipeline rests with NamWater. The amount funded is being amortised on a unit of production basis.
(iii) Kayelekera Mining Lease
In exchange for the Mining Lease, PEM and PAL have entered into a Development Agreement with the
Government of Malawi for the development of the Garnet Halliday Karonga Water Supply Project and other social
development projects. In terms of the Development Agreement PAL has spent US$10M on agreed community
infrastructure projects. This amount has been recognised as an intangible asset and is being amortised over the
life of the mine estimated to be 9 years on a straight-line basis.
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 15.
TRADE AND OTHER PAYABLES
Current
Trade and other payables
Total current payables
Trade payables are non-interest bearing and are normally settled on 30 day terms.
NOTE 16.
INTEREST BEARING LOANS AND BORROWINGS
Current
Secured bank loans
Unsecured convertible bonds (1)
Total current interest bearing loans and borrowings
Non Current
Unsecured convertible bonds (1)
Unsecured convertible bonds (2)
Unsecured convertible bonds (3)
Secured bank loan
Secured bank loan
Secured bank loan
Total non current interest bearing loans and borrowings
MATURITY
2013
2013
2015
2017
amortised to 2012
amortised to 2015
amortised to 2017
CONSOLIDATED
2012
US$M
67.1
67.1
2011
US$M
69.7
69.7
CONSOLIDATED
2012
US$M
51.0
132.4
183.4
-
267.0
229.0
-
65.3
93.8
655.1
2011
US$M
43.9
-
43.9
315.6
258.6
-
8.1
93.5
-
675.8
The above figures include transaction costs which offset the balance in accordance with the requirements of
Accounting Standards.
Fair value disclosures
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 19(g).
Unsecured convertible bonds
(1) On 11 March 2008, the Company issued US$325M in convertible bonds with a coupon rate of 5.0%
(underlying effective interest rate of 7.13%), maturity 11 March 2013 and a conversion price of US$6.52 for
Company shares. On 29 May 2012, pursuant to its tender offer the Company repurchased and cancelled
US$191M bonds. At 30 June 2012 US$134M bonds remain.
(2) On the 5 November 2010, the Company issued US$300M in convertible bonds with a coupon rate of 3.625%,
(underlying effective interest rate of 7.47%) maturing on 5 November 2015 with a conversion price of US$5.61, for
Company shares.
(3) On 30 April 2012, the Company issued US$274M in convertible bonds with a coupon rate of 6% (underlying
effective interest rate of 10.68%) maturing on 30 April 2017 with a conversion price of US$2.19 for Company
shares.
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 16.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Unsecured convertible bonds (continued)
Pursuant to the terms of the Bonds the prevailing Conversion Price is subject to adjustment where any new
issue of shares is at less than 95% of the Current Market Price. Following the completion of the Placement on 6
October 2011, the Conversion Prices have been adjusted as follows:
›
›
Convertible bonds due 2013: US$6.523 (previously US$6.59)
Convertible bonds due 2015: US$5.608 (previously US$5.665)
In disclosing the convertible bonds in the Consolidated Financial Statements, the Company has accounted for
them in accordance with Australian Accounting Standards. Under these standards the convertible bonds consist
of both a liability (underlying debt) and equity component (conversion rights into Company shares).
Secured bank loans
Langer Heinrich Mine, Namibia - US$71M Stage 1 Project Finance Facility
On 26 May 2006 the Company entered into a project financing facility amounting to US$71M for the construction
of LHM. The financing was provided by Société Générale Australia Branch (as lead arranger), Nedbank Capital
and Standard Bank Limited and consisted of a seven year project finance facility of US$65M and a standby cost
overrun facility of US$6M.
Part of the proceeds of the LHM - US$141M Stage 3 project finance facility (see below) have been used to repay
this facility in full. At 30 June 2012 US$Nil (30 June 2011: US$24.8M) was outstanding under the LHM Stage 1
project finance facility.
Kayelekera Mine, Malawi - US$167M Project Finance Facility
On 30 March 2009, the Company entered into a project financing facility amounting to US$167M for the
construction of KM. The project finance consists of a six year project finance facility of US$145M, a standby
cost overrun facility of US$12M and a performance bond facility of US$10M. The facilities are being provided by
Société Générale Corporate and Investment Banking (as inter-creditor agent and commercial lender), Nedbank
Capital a division of Nedbank Limited (ECIC lender) and Standard Bank Limited (as ECIC facility agent and
lender). The facilities are secured over the assets of PAL. The commercial bank tranche bears interest at the
London Interbank Offered Rate (LIBOR) plus 3.0% and reduces to LIBOR plus 2.5% post the completion date.
The ECIC tranche bears interest at LIBOR plus 2.5% whilst the cost overrun facility bears interest at LIBOR plus
3.5%. The facilities are repayable on a four monthly basis over the term of the loan. The Company has provided
a project completion guarantee as part of the facilities.
At 30 June 2012 US$98.0M (30 June 2011: US$127.9M) was outstanding under the KM project finance facility.
Langer Heinrich Mine, Namibia - US$141M Stage 3 Project Finance Facility
On 26 August 2011 the Company entered into a project financing facility amounting to US$141M for the
construction of Stage 3 of LHM. The financing is provided by Société Générale (as Agent), Nedbank Capital,
Standard Bank Plc, Barclays Capital (the investment banking division of Barclays Bank PLC) and Rand Merchant
Bank, a division of FirstRand Bank Limited. The facility consists of a six year US$135M project financing facility
and a US$6M cost overrun facility. The facility was fully drawn down during the December 2011 quarter. The
facility bears interest at the London Interbank Offered Rate (LIBOR) plus 3.75% and reduces to LIBOR plus
3.25% post the completion date. The facilities are repayable on a six monthly basis over the term of the loan.
The facilities are secured with fixed and floating charges over the assets of LHUPL and its immediate holding
companies.
At 30 June 2012 US$118.5M (30 June 2011: US$Nil) was outstanding under the LHM Stage 3 project finance
facility.
Deferred Borrowing costs relating to the establishment of the facilities have been included as part of interest
bearing loans and borrowings.
Borrowing costs capitalised during the year as part of the LHM Stage 3 expansion US$3.3M (2011: US$Nil). The
rate used to determine the amount of borrowing costs eligible for capitalisation was LIBOR plus 3.75% (2011:N/A)
which is the effective interest rate of the specific borrowing.
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 16.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
Total facilities:
Unsecured convertible bonds
Secured bank loans
Facilities used at reporting date:
Unsecured convertible bonds
Secured bank loans
Facilities unused at reporting date:
Unsecured convertible bonds
Secured bank loans
Assets pledged as security
CONSOLIDATED
2012
US$M
708.0
216.5
924.5
708.0
216.5
924.5
-
-
-
2011
US$M
625.0
152.7
777.7
625.0
152.7
777.7
-
-
-
The carrying amounts of assets pledged as security for current and non current interest bearing liabilities
(secured bank loans) are:
Current
Floating charge
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets pledged as security
Non Current
Inventories
Property, plant and equipment
Mine development
Deferred tax asset
Intangible assets
Total non current assets pledged as security
54.0
74.1
191.6
319.7
118.0
454.4
88.3
38.3
18.1
717.1
65.3
31.4
149.8
246.5
73.6
573.5
106.6
19.7
23.1
796.5
Total assets pledged as security
1,036.8
1,043.0
Assets pledged include both LHM and KM.
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 17.
PROVISIONS
Current
Employee benefits
Total current provisions
Non Current
Employee benefits
Rehabilitation provision
Demobilisation provision
Total non current provisions
NOTES
23
23
CONSOLIDATED
2012
US$M
3.4
3.4
6.5
31.9
2.0
40.4
2011
US$M
5.3
5.3
3.3
30.6
2.4
36.3
For a description of the nature and timing of cash flows associated with the above provisions, refer to section (b)
of this note.
(a)
Movements in Provisions
Movements in each class of provision during the financial year, excluding provisions relating to employee
benefits, are set out below:
Consolidated
At 1 July 2011
Arising during the year
Effects of changes in discount rates
Foreign currency movements
At 30 June 2012
2012
Current
Non current
2011
Current
Non current
Demobilisation
Rehabilitation
US$M
US$M
2.4
0.2
(0.1)
(0.5)
2.0
-
2.0
2.0
-
2.4
2.4
30.6
1.4
3.7
(3.8)
31.9
-
31.9
31.9
-
30.6
30.6
Total
US$M
33.0
1.6
3.6
(4.3)
33.9
-
33.9
33.9
-
33.0
33.0
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 17.
PROVISIONS (CONTINUED)
(b)
Nature and Timing of Provisions
(i) Rehabilitation
A provision for rehabilitation and mine closure has been recorded in relation to LHM and KM. A provision
is made for rehabilitation work when the obligation arises and this is recognised as a cost of production or
development as appropriate. Additionally the provision includes the costs of dismantling and demolition of
infrastructure or decommissioning, the removal of residual material and the remediation of disturbed areas
specific to the infrastructure to a state acceptable to various authorities. The provision is estimated using the
assumption that remediation will not take place until 10 to 20 years’ time.
(ii)
Employee benefits
Refer to Note 23.
(iii) Demobilisation
A provision for demobilisation has been recorded in relation to LHM for the costs of demobilising the mining
contractor.
NOTE 18.
CONTRIBUTED EQUITY AND RESERVES
(a)
Issued and Paid Up Capital
NUMBERS OF SHARES
CONSOLIDATED
2012
2011
2012
US$M
2011
US$M
Ordinary shares
Issued and fully paid
835,645,290
777,698,217
1,839.2
1,768.1
Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par
value shares. Accordingly, the Company does not have authorised capital or par value in respect of its issued
shares.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 18.
CONTRIBUTED EQUITY AND RESERVES (CONTINUED)
(b)
Movements in Ordinary Shares On Issue
Date
Balance 30 June 2010
August 2010
September 2010
November 2010
January 2011
February 2011
February 2011
Rights vested
Rights vested
NGM acquisition
Options exercised
Aurora takeover
Rights vested
Transfer from reserves
Transaction costs
Number of
Shares
Issue
Price
A$M
Exchange
Rate
US$: A$
717,142,802
750,000(1)
530,580
7,155,938
960
52,097,937
20,000
-
-
4.28
4.50
5.04
-
-
-
1.01557
1.00415
1.00670
-
Balance 30 June 2011
777,698,217(1)
Total
US$M
1,474.6
-
-
30.1
-
260.6
-
3.1
(0.3)
1,768.1
(1) Includes 250,000 shares held in trust, vesting variously over time up to 1 January 2012 subject to conditions
and 125,000 shares held by Paladin Employee Plan Pty Ltd.
777,698,217
827,515
56,866,232
37,500
54,600
1,980
159,246
-
1.20
-
-
-
-
-
1.04459
-
-
-
-
Balance 30 June 2011
September 2011
October 2011
October 2011
November 2011
January 2012
February 2012
Rights vested
Share placement
Rights vested
Rights vested
Rights vested
Rights vested
Transfer from share-
based payments
reserves
Tax effect on prior
period
Transaction costs
1,768.1
-
65.3
-
-
-
-
4.7
3.2
(2.1)
Balance 30 June 2012
835,645,290(1)
1,839.2
(1) Includes 217,566 shares held by Paladin Employee Plan Pty Ltd.
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 18.
CONTRIBUTED EQUITY AND RESERVES (CONTINUED)
(c)
Reserves
Consol-
idation
reserve
Listed
option
application
reserve
Share
-based
payments
reserve
Available
-for-sale
reserve
Foreign
currency
translation
reserve
Convertible
bond non-
distributable
reserve
Premium on
acquisition
reserve
Total
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
CONSOLIDATED
At 1 July 2010
Net unrealised movement
on available-for-sale
investments
Share-based payments
Foreign currency
translation
Income tax
Transfer to statement of
financial position
Convertible bonds, equity
component net of tax and
transaction costs
Convertible bonds, buy
back
At 30 June 2011
At 1 July 2011
Net unrealised movement
on available-for-sale
investments
Share-based payments
Foreign currency
translation
Income tax
Transfer of impairment
loss to income statement
Convertible bonds, equity
component net of tax and
transaction costs
Convertible bonds, buy
back
(0.2)
0.1
38.0
7.7
(56.8)
38.9
14.9
42.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11.5
-
-
-
-
-
(0.2)
(0.2)
0.1
0.1
49.5
49.5
10.9
-
-
(3.7)
(3.2)
-
-
11.7
11.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.7
(25.8)
-
-
-
-
-
-
-
3.3
8.0
-
-
-
-
125.6
-
-
-
-
68.8
68.8
-
-
(40.7)
-
-
-
-
-
-
-
-
-
28.1
(6.6)
60.4
60.4
-
-
-
-
-
27.9
(2.8)
-
-
-
-
-
-
-
10.9
11.5
125.6
(3.7)
(3.2)
28.1
(6.6)
14.9
205.2
14.9
205.2
-
-
-
-
-
-
-
(25.8)
2.7
(40.7)
3.3
8.0
27.9
(2.8)
At 30 June 2012
(0.2)
0.1
52.2
(2.8)
28.1
85.5
14.9
177.8
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 18.
CONTRIBUTED EQUITY AND RESERVES (CONTINUED)
Nature and Purpose of Reserves
Consolidation reserve
This reserve recognises the difference between the fair value of the 15% interest in PAL allotted to the
Government of Malawi, at the net present value of the Kayelekera Project on the date the Development
Agreement was signed (22 February 2007), and the non-controlling interest share of the net assets of PAL.
Listed option application reserve
This reserve consists of proceeds from the issue of listed options, net of expenses of issue. These listed options
expired unexercised and no restriction exists for the distribution of this reserve.
Share-based payments reserve
This reserve is used to record the value of equity benefits provided to Directors, employees and consultants as
part of their remuneration. Refer to Note 25 for further details on share-based payments.
Available-for-sale reserve
This reserve records the fair value changes on the available-for-sale financial assets as set out in Note 10.
Foreign currency translation reserve
This reserve is used to record exchange differences arising on translation of the group entities that do not have
a functional currency of US dollars and have been translated into US dollars for presentation purposes, as
described in Note 3(f).
Convertible bond non-distributable reserve
This reserve records the equity portion of the convertible bonds issued as described in Note 16.
Acquisition reserve
This reserve represents the premium paid on the acquisition of a non-controlling interest in Summit.
NOTE 19.
FINANCIAL INSTRUMENTS
(a)
Financial Risk Management Objectives and Policies
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to:
› meet all its financial commitments; and
› maintain the capacity to fund corporate growth activities
The Group monitors its forecast financial position on a regular basis.
Market, liquidity and credit risk (including foreign exchange, commodity price and interest rate risk) arise in
the normal course of the Group’s business. These risks are managed under Board approved directives which
underpin treasury practices and processes. The Group’s principal financial instruments comprise interest bearing
debt, cash and short-term deposits and available for sale financial assets. Other financial instruments include
trade receivables and trade payables, which arise directly from operations.
The Group’s forecast financial risk position with respect to key financial objectives and compliance with treasury
practice is regularly reported to the Board.
(b)
Market Risk
(i)
Foreign Exchange Risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures.
Foreign exchange risk arises from future commitments, assets and liabilities that are denominated in a currency
that is not the functional currency of the relevant Group company.
The Group’s borrowings and deposits are largely denominated in US dollars. Currently there are no foreign
exchange hedge programmes in place. However, the Group treasury function manages the purchase of foreign
currency to meet operational requirements.
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(b)
Market Risk (continued)
(i)
Foreign Exchange Risk (continued)
The financial instruments exposed to movements in the Australian dollar are as follows:
CONSOLIDATED
Financial assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Financial liabilities
Trade and other payables
Net exposure
The financial instruments exposed to movements in the Namibian dollar are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Net exposure
2012
US$M
4.0
1.3
7.7
13.0
(8.5)
4.5
0.8
25.0
25.8
(23.4)
2.4
2011
US$M
3.8
3.2
26.0
33.0
(9.3)
23.7
6.1
17.2
23.3
(31.8)
(8.5)
The following table summarises the sensitivity of financial instruments held at balance date to movements in the
exchange rate of the Australian dollar to the US dollar and the Namibian dollar to the US dollar, with all other
variables held constant. The 5% sensitivity is based on reasonably possible changes, over a financial year, using
the observed range of actual historical rates for the preceding five year period.
IMPACT ON PROFIT/LOSS
IMPACT ON EQUITY
CONSOLIDATED
CONSOLIDATED
2012
US$M
2011
US$M
2012
US$M
(0.1)
0.1
0.1
(0.1)
(0.1)
0.1
(0.3)
0.3
0.3
(0.3)
-
-
2011
US$M
0.9
(1.0)
-
-
Post-Tax Gain/(Loss)
AUD/USD +5% (2011: +5%)
AUD/USD -5% (2011: -5%)
NAD/USD +5% (2011: +5%)
NAD/USD -5% (2011: -5%)
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(b)
Market Risk (continued)
(ii)
Interest Rate Risk
Interest rate risk is the risk that the Group’s financial position will be adversely affected by movements in interest
rates that will increase the cost of floating rate debt or opportunity losses that may arise on fixed rate borrowings
in a falling interest rate environment. Interest rate risk on cash and short-term deposits is not considered to be a
material risk due to the short-term nature of these financial instruments.
The Group’s main interest rate risk arises from long-term debt. Floating rate debt exposes the Group to cash
flow interest rate risk and fixed rate debt exposes the Group to fair value interest rate risk. All other financial
assets and liabilities in the form of receivables, investments in shares, payables and provisions, are non interest
bearing.
The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk.
The floating rate financial instruments exposed to interest rates movements are as follows:
Financial assets
Cash and cash equivalents
Financial liabilities
Interest-bearing liabilities
Net exposure
CONSOLIDATED
2012
US$M
2011
US$M
90.3
89.8
(216.5)
(152.7)
(126.2)
(62.9)
The following table summarises the cash flow sensitivity of cash and cash equivalent financial instruments held
at balance sheet date following a movement in LIBOR, with all other variables held constant. The sensitivity is
based on reasonably possible changes over a financial year, using the observed range of actual historical rates
for the preceding five year period.
Post-Tax Gain/(Loss)
LIBOR +1% (2011: +1%)
LIBOR -0.1% (2011: -0.1%)
IMPACT ON PROFIT/LOSS
CONSOLIDATED
2012
US$M
(0.9)
0.1
2011
US$M
(0.4)
-
142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(b)
Market Risk (continued)
(iii) Market Price Risk
Price risk is the risk that the Group’s financial position will be adversely affected by movements in the market
value of its available-for-sale financial assets.
The financial instruments exposed to movements in market value are as follows:
Financial assets
Other financial assets
CONSOLIDATED
2012
US$M
2011
US$M
15.5
41.8
The following table summarises the sensitivity of financial instruments held at balance date to movements in the
market price of available-for-sale financial instruments, with all other variables held constant. The 25% sensitivity
is based on reasonable possible changes, over a financial year, using the observed range of actual historical
prices for 2012 and 2011.
Post-tax gain/(loss)
Market price +25% (2011: +25%)
Market price -25% (2011: -25%)
Post-tax impact on reserve
Market price +25% (2011: +25%)
Market price -25% (2011: -25%)
(c)
Liquidity Risk
IMPACT ON PROFIT/LOSS
IMPACT ON EQUITY
CONSOLIDATED
2012
US$M
2011
US$M
-
(0.9)
2.7
(1.8)
-
-
7.3
(7.3)
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet the Group’s
financial commitments in a timely and cost effective manner.
The Group treasury function continually reviews the Group’s liquidity position including cash flow forecasts
to determine the forecast liquidity position and maintain appropriate liquidity levels. Sensitivity analysis is
conducted on a range of pricing and market assumptions to ensure the Group has the ability to meet repayment
commitments. This enables the Group to manage cash flows on a long-term basis and provides the flexibility to
pursue a range of funding alternatives if necessary. Note 16 details the repayment obligations in respect of the
amount of the facilities.
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(c)
Liquidity Risk (continued)
The maturity analysis of payables at the reporting date was as follows:
PAYABLES MATURITY ANALYSIS
TOTAL
<1 YEAR 1-2 YEARS 2-3 YEARS >3 YEARS
US$M
US$M
US$M
US$M
US$M
2012
Consolidated
Trade and other payables
Loans and borrowings
Interest payable
Total payables
2011
Consolidated
Trade and other payables
Loans and borrowings
Interest payable
67.1
924.5
143.2
67.1
187.1
40.5
1,134.8
294.7
-
53.7
32.1
85.8
69.7
777.7
85.5
69.7
46.1
31.4
-
363.5
25.5
Total payables
932.9
147.2
389.0
(d)
Credit Risk
-
62.0
30.4
92.4
-
29.9
12.9
42.8
-
621.7
40.2
661.9
-
338.2
15.7
353.9
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument that will
result in a financial loss to the Group. The carrying amount of financial assets represents the maximum credit
exposure. The Group trades only with recognised, credit worthy third parties. In addition, receivable balances are
monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
The maximum exposure to credit risk at the reporting date was as follows:
Current
Cash and cash equivalents*
Trade receivables
Other receivables – other entities
Non Current
Other receivables – other entities
Total
CONSOLIDATED
2012
US$M
112.1
52.0
30.8
194.9
2011
US$M
117.4
-
20.5
137.9
0.1
1.5
195.0
139.4
* The Group’s maximum deposit with a single financial institution represents 34% (2011: 25%) of cash and
cash equivalents.
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(d)
Credit Risk (continued)
The ageing of receivables at the reporting date was as follows:
2012
Consolidated
Trade receivables
Other receivables
Total receivables
2011
Consolidated
Trade receivables
Other receivables
Total receivables
RECEIVABLES AGEING ANALYSIS
TOTAL
CURRENT
<1 YEAR 1-2 YEARS >2 YEARS
US$M
US$M
US$M
US$M
US$M
52.0
30.9
82.9
-
22.0
22.0
52.0
30.8
82.8
-
20.5
20.5
-
0.1
0.1
-
1.5
1.5
-
-
-
-
-
-
-
-
-
-
-
-
No receivables are past due or impaired.
(e)
Financial Instruments Measured at Fair Value
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market
data.
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised
in the table below:
YEAR ENDED 30 JUNE 2012
YEAR ENDED 30 JUNE 2011
Quoted
market
price
(Level 1)
Valuation
technique-
market
observable
inputs
(Level 2)
Valuation
technique-
non market
observable
inputs
(Level 3)
Total
Quoted
market
price
(Level 1)
Valuation
technique-
market
observable
inputs
(Level 2)
Valuation
technique-
non market
observable
inputs
(Level 3)
Total
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
Consolidated
Financial assets
Available-for-sale
investments
Listed investments
Unlisted investments
14.0
-
14.0
-
-
-
-
1.5
1.5
14.0
1.5
40.8
-
15.5
40.8
-
-
-
-
1.0
1.0
40.8
1.0
41.8
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(e)
Fair Value of Financial Instruments Measured at Fair Value (continued)
Quoted market price represents the fair value determined based on quoted prices on active markets as at the
reporting date without any deduction for transaction costs. The fair value of the listed equity investments are
based on quoted market prices.
For financial instruments not quoted in active markets, the Group uses valuation techniques such as present
value techniques, comparison to similar instruments for which market observable prices exist and other relevant
models used by market participants. These valuation techniques use both observable and unobservable market
inputs.
The fair value of unlisted debt and equity securities, as well as other investments that do not have an active
market, are based on latest private share placement price before 30 June 2012.
Reconciliation for Level 3 Fair Value Movements
Opening balance
Other comprehensive income
Additions
Disposals
Closing balance
Total gain or loss stated in the table above for assets held at the end
of the period
(f)
Capital Management
CONSOLIDATED
2012
US$M
2011
US$M
1.0
0.6
-
(0.1)
1.5
0.6
3.5
-
0.5
(3.0)
1.0
-
When managing capital, management’s objective is to ensure adequate cash resources to meet the Company’s
commitments are maintained, as well as to maintain optimal returns to shareholders through ensuring the lowest
cost of capital available to the entity.
The Company utilises a combination of debt, equity and convertible bonds to provide the cash resources
required. Management reviews the capital structure from time to time as appropriate.
The Group treasury function is responsible for the Group’s capital management, including management of the
long-term debt and cash as part of the capital structure. This involves the use of corporate forecasting models
which enable analysis of the Group’s financial position including cash flow forecasts to determine the future
capital management requirements. To ensure sufficient funding for operational expenditure and growth activities,
a range of assumptions are modelled so as to provide the flexibility in determining the Group’s optimal future
capital structure.
Group treasury monitors gearing and compliances with various contractual financial covenants. The Company’s
project finance facility is subject to various financial undertakings including a negative pledge, debt service
coverage ratio, loan life coverage ratio and project life coverage ratio. At the time of reporting, the Company was
in compliance with all of the facility’s financial undertakings.
146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 19.
FINANCIAL INSTRUMENTS (CONTINUED)
(f)
Capital Management (continued)
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total Capital
Gearing Ratio
CONSOLIDATED
2012
US$M
838.5
(112.1)
2011
US$M
719.7
(117.4)
726.4
602.3
1,194.8
1,355.2
1,921.2
1,957.5
38%
31%
(g)
Fair Value of Financial Assets and Financial Liabilities Carried at Amortised Cost
The fair value representing the mark to market of a financial asset or a financial liability is the amount at which
the asset could be exchanged or liability settled in a current transaction between willing parties after allowing for
transaction costs.
The fair values of cash and cash equivalents, trade and other receivables and trade and other payables
approximate to their carrying values, as a result of their short maturity or because they carry floating rates of
interest.
The fair value of the debt component of the convertible bonds has been determined using a valuation technique
based on the quoted market price of the convertible bonds.
All financial assets and liabilities where the fair value does not approximate to the carrying value are as follows:
CONSOLIDATED
2012 US$M
2011 US$M
CARRYING
AMOUNT
FAIR
VALUE
CARRYING
AMOUNT
FAIR
VALUE
Convertible bonds – debt component
639.9
609.7
583.1
566.1
(h)
Commodity Price Risk
Uranium is not traded in any significant volume on global commodity exchanges. The Group has customer sales
contracts in place for delivery over the period 2012 to 2024.
The contracted selling price is determined by a formula which references common industry published prices for
spot and term contracts and is subject to an escalating floor price and also escalating ceiling prices.
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 20. KEY MANAGEMENT PERSONNEL
(a)
Details of Key Management Personnel
(i) Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
(ii) Executives
Ms Gillian Swaby
Mr Garry Korte
Mr Dustin Garrow
Mr Mark Chalmers
Mr Alan Rule
Chairman (Non-executive)
Managing Director/CEO
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Company Secretary and Executive General Manager – Corporate Services
Chief Financial Officer (resigned 24 May 2012)
Executive General Manager – Marketing
Executive General manager – Production
Chief Financial Officer (commenced 23 July 2012)
(b)
Compensation of Key Management Personnel: Compensation by Category
Short-term employee benefits
Post employment benefits
Long-term benefits
Share-based payment
CONSOLIDATED
2012
2011
US$’000
US$’000
5,252
945
606
2,275
9,078
5,492
689
454
2,955
9,590
Average exchange rate used for year to 30 June 2012, US$1 = A$0.96971 (2011 US$1 = A$1.01512).
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 20. KEY MANAGEMENT PERSONNEL (CONTINUED)
(c)
Option Holdings of Key Management Personnel (Group)
30 June 2012
01 Jul 11
Granted as
remuneration
Options
exercised
Net change
other (1)
30 Jun 12
Vested/
exercisable
Not vested/
not
exercisable
Directors
Mr John Borshoff
Executives
Ms Gillian Swaby
Mr Dustin Garrow
Total
1,250,000
258,785
266,199
1,774,984
-
-
-
-
-
-
-
-
(593,000)
657,000
657,000
(122,767)
(126,284)
136,018
139,915
136,018
139,915
(842,051)
932,933
932,933
-
-
-
-
(1) Options that could no longer vest were cancelled on 29 June 2012. These options were out of the money and
had no intrinsic value at cancellation date.
30 June 2011
01 Jul 10
Granted as
remuneration
Options
exercised
Net change
other
30 Jun 11
Vested/
exercisable
Not vested/
not
exercisable
Directors
Mr John Borshoff
Executives
Ms Gillian Swaby
Mr Wyatt Buck
Mr Dustin Garrow
Total
2,750,000
333,785
351,533
344,769
3,780,087
-
-
-
-
-
-
-
-
-
-
(1,500,000)(2) 1,250,000
657,000
593,000
(75,000)(2)
(351,533)(1)
(78,570)(2)
258,785
-
266,199
136,018
-
139,915
122,767
-
126,284
(2,005,103)
1,774,984
932,933
842,051
No other Key Management Personnel held options during the year ended 30 June 2011.
(1) Mr Wyatt Buck resigned on 6 May 2011. 105,926 options lapsed on 6 June 2011 and 95,607 were forfeited on
6 May 2011. 150,000 lapsed during the year as the vesting conditions were not met.
(2) Lapsed during the year as the vesting conditions were not met.
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 20. KEY MANAGEMENT PERSONNEL (CONTINUED)
(d)
Share Rights Holdings of Key Management Personnel (Group)
30 June 2012
Directors
Mr John Borshoff
Executives
Ms Gillian Swaby
Mr Garry Korte
Mr Dustin Garrow
Mr Mark Chalmers
01 Jul 11
Granted as
remuneration
Vested as
shares
Forfeited
30 Jun 12
800,000
-
-
547,000
131,000
260,000
-
55,000
-
60,000
125,000
(141,333)
(18,500)
(38,000)
-
-
-
(112,500)(1)
-
-
800,000
460,667
-
282,000
125,000
Total
1,738,000
240,000
(197,833)
(112,500)
1,667,667
(1) Mr Garry Korte resigned on 24 May 2012 and his outstanding share rights were forfeited.
30 June 2011
Directors
Mr John Borshoff
Executives
Ms Gillian Swaby
Mr Garry Korte
Mr Dustin Garrow
Mr Wyatt Buck
01 Jul 10
Granted as
remuneration
Vested as
shares
Forfeited
30 Jun 11
300,000
500,000
-
180,000
90,000
200,000
160,000
385,000
50,000
80,000
50,000
(18,000)
(9,000)
(20,000)
(16,000)
-
-
-
-
(194,000)(1)
800,000
547,000
131,000
260,000
-
Total
930,000
1,065,000
(63,000)
(194,000)
1,738,000
No other Key Management Personnel held share rights during the year ended 30 June 2011.
(1) Mr Wyatt Buck resigned on 6 May 2011 and his outstanding share rights were forfeited.
150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 20. KEY MANAGEMENT PERSONNEL (CONTINUED)
(e)
Shareholdings of Key Management Personnel (Group)
Shares held in Paladin Energy Ltd (number)
30 June 2012
Balance
01 Jul 11
On Exercise
of Options
On Vesting
of Rights
Net Change
Other
Balance
30 June 12
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Sean Llewelyn
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
Executives
Ms Gillian Swaby
Mr Garry Korte(1)
Mr Dustin Garrow
Total
4,881,528
21,877,394
100,000
100,000
15,000
12,000
3,586,655
9,000
-
30,581,577
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,881,528
21,877,394
100,000
100,000
15,000
12,000
141,333
18,500
38,000
(3,609,655)
(27,500)
(38,000)
118,333
-
-
197,833
(3,675,155)
27,104,255
No other Key Management Personnel held shares during the year ended 30 June 2012.
(1) Mr Garry Korte resigned on 24 May 2012. No longer required to disclose shareholdings.
30 June 2011
Balance
01 Jul 10
On Exercise
of Options
On Vesting
of Rights
Net Change
Other
Balance
30 June 11
Directors
Mr Rick Crabb
Mr John Borshoff
Mr Ian Noble(1)
Mr Sean Llewelyn
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
Executives
Ms Gillian Swaby
Mr Wyatt Buck(2)
Mr Garry Korte
Mr Dustin Garrow
Mr Mark Chalmers
Total
4,881,528
21,877,394
21,000
100,000
50,000
-
-
5,036,655
110,000
-
-
-
32,076,577
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(21,000)
-
50,000
15,000
12,000
18,000
16,000
9,000
20,000
-
(1,468,000)
(126,000)
-
(20,000)
-
4,881,528
21,877,394
-
100,000
100,000
15,000
12,000
3,586,655
-
9,000
-
-
63,000
(1,558,000)
30,581,577
No other Key Management Personnel held shares during the year ended 30 June 2011.
(1) Mr Ian Noble retired on 25 November 2010. No longer required to disclose shareholdings.
(2) Mr Wyatt Buck resigned on 6 May 2011. No longer required to disclosure shareholdings.
All equity transactions with Key Management Personnel other than those arising from the exercise of
remuneration options have been entered into under terms and conditions no more favourable than those the
Group would have adopted if dealing at arm’s length.
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 20. KEY MANAGEMENT PERSONNEL (CONTINUED)
(f)
Other Transactions and Balances with Key Management Personnel
Fees paid in the normal course of business in 2012 for company secretarial services totalling US$571,000 (2011:
US$561,000) were paid/payable (balance outstanding at 30 June 2012 and included in trade creditors US$Nil
(2011: US$Nil)) to a company of which Ms Gillian Swaby is a director and shareholder. All amounts are excluding
GST.
NOTE 21.
AUDITORS’ REMUNERATION
The auditor of the Paladin Energy Ltd Group is Ernst & Young.
Amounts received or due and receivable by Ernst & Young (Australia) for:
› Audit or review of the financial report of the consolidated Group
› Other services
› Taxation services:
Tax compliance services
International tax consulting
Tax advice on mergers and acquisitions
Other tax advice
CONSOLIDATED
2012
2011
US$’000
US$’000
658
146(1)
81
406
67
31
741
327(2)
97
165
232
51
Sub-total
1,389
1,613
(1) $121,000 relates to services performed in relation to the issue of Convertible Bonds.
(2) $98,000 relates to services performed in relation to the issue of Convertible Bonds.
Amounts received or due and receivable by related practices of Ernst & Young
(Australia) for:
› Audit or review of the financial report of subsidiaries and audit
related services
› Taxation services:
Tax compliance services
International tax consulting
Other
Sub-total
231
40
139
17
427
389
4
-
-
393
The level of non-audit related fees was driven by the tax compliance requirements of multiple jurisdictions and by
the specialist advice requirements of potential acquisitions and group restructures.
Whilst always striving to meet the highest corporate governance standards, Paladin is also cognisant of the
need to retain the value of the best available specialist advice. Paladin engaged Ernst & Young because of their
specialised experience in both Africa and the mining sector and Ernst & Young’s detailed understanding of the
Paladin Group.
In terms of the Company’s Corporate Governance Policy all non-audit services are reviewed and approved
by the Audit Committee prior to commencement to ensure that they do not adversely affect the integrity and
objectivity of the auditor and that the nature of the services provided does not compromise the Code of Ethics
for Professional Accountants APES 110 issued by the Accounting Professional and Ethical Standards Board.
All non-audit services provided by Ernst & Young were allowable services that received the sign off of the audit
partner confirming that, in his professional opinion, they do not in any way impair the independence of the firm.
Where any service might be perceived to be subjective, Ernst & Young policy requires approval by the Oceania
Independence and Conflicts Leader.
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 22.
COMMITMENTS AND CONTINGENCIES
There were no outstanding commitments or contingencies, which are not disclosed in the Financial Report of the
Group as at 30 June 2012 other than:
(a)
Tenements
Commitments for tenements contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
Total tenements commitment
CONSOLIDATED
2012
US$M
5.4
4.8
26.6
36.8
2011
US$M
19.0
17.0
28.4
64.4
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of
the Namibian, Malawian, Nigerian, Canadian, Western Australian, South Australian, Northern Territorian and
Queensland Mines Departments attaching to the tenements and are subject to re-negotiation upon expiry of the
exploration leases or when application for a mining licence is made.
These are necessary in order to maintain the tenements in which the Group and other parties are involved. All
parties are committed to meet the conditions under which the tenements were granted in accordance with the
relevant mining legislation in Namibia, Malawi, Australia, Canada and Niger.
(b)
Mine Construction Commitments
Commitments for mine construction contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
Total mine construction
CONSOLIDATED
2012
US$M
1.5
-
-
1.5
2011
US$M
18.8
-
-
18.8
These commitments in 2012 relate to construction of Stage 3 at LHM (2011: construction of Stage 3 at LHM).
(c)
Operating Lease Commitments
The Group has entered into various property leases relating to rental of offices and residential accommodation.
These non-cancellable leases have remaining terms of between 1 month and 10 years. All leases include a
clause to enable upward revision of rental charge on an annual basis according to prevailing market conditions.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
Later than one year but not later than 5 years
More than 5 years
Total operating lease commitment
CONSOLIDATED
2012
US$M
1.4
3.8
-
5.2
2011
US$M
1.5
5.3
0.1
6.9
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 22.
COMMITMENTS AND CONTINGENCIES (CONTINUED)
(d)
Other Commitments
Commitments for mining, transport and reagents contracted for at the reporting date but not recognised as
liabilities, payable:
Within one year
Later than one year but not later than 5 years
More than 5 years
Total other commitment
(e)
Acquisition Costs
CONSOLIDATED
2012
US$M
33.0
2.5
-
35.5
2011
US$M
47.9
3.1
-
51.0
The Group acquired a call option on 19 June 1998 in relation to the purchase of the Oobagooma Uranium
Project and, in turn, granted a put option to the original holder of the project. Both the call and put options have
an exercise price of A$0.75M (US$0.76M) (2011: A$0.75M (US$0.79M)) and are subject to the Department of
Minerals & Energy granting tenements comprising two exploration licence applications. The A$0.75M is payable
by the Group within 10 business days of the later of the grant of the tenements or the exercise of either the call
or put option. The options will expire three months after the date the tenements are granted.
In relation to the Manyingee Uranium Project, the re-negotiated acquisition terms provide for a payment of
A$0.75M (US$0.76M) (2011: A$0.75M (US$0.79M)) by the Group to the vendors when all project development
approvals are obtained.
(f)
Bank Guarantees
As at 30 June 2012 the Group has outstanding US$889,944 (A$876,016) (2011: US$911,837 / A$860,619) as
a current guarantee provided by a bank for the corporate office lease and a US$270,960 (A$266,719) (2011:
US$289,700 / A$273,428) guarantee for tenements.
(g)
Contingent Liability
A dispute has arisen between a Group company and a contractor in relation to the contract for the Stage 3
expansion at LHM. The contractor is seeking payment of the disputed sum of US$32M. The Group denies the
claim and will vigorously defend it. The Group is also counterclaiming damages from the contractor and cross-
claiming from another contractor. The precise quantum of the counter-claim and cross claim has not yet been
established but is expected to exceed the contractor’s claim.
NOTE 23.
EMPLOYEE BENEFITS
Provision for annual leave and long service leave aggregate employment
benefit liabilities
Employee Benefits Expense
Wages and salaries
Defined contribution superannuation
Share-based payments
Other employee benefits
Total employee benefits expense
CONSOLIDATED
2012
US$M
2011
US$M
9.9
8.6
72.3
4.4
8.7
5.3
90.7
62.7
3.9
14.3
5.1
86.0
154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 23.
EMPLOYEE BENEFITS (CONTINUED)
Superannuation
The Company contributes to employees’ superannuation plans in accordance with the requirements of
Occupational Superannuation Legislation. Contributions by the Company represent a defined percentage of each
employee’s salary. Employee contributions are voluntary.
Employee Share Incentive Option Plan and Employee Performance Share Rights Plan
Details of the Employee Share Incentive Option Plan and Employee Performance Share Rights Plan for the
Company are disclosed in Note 25.
NOTE 24. RELATED PARTIES
Key Management Personnel
Details relating to Key Management Personnel can be found at Note 20.
NOTE 25.
SHARE-BASED PAYMENT PLANS
Share-based payment expense
The share-based payment plans are described below.
(a)
Types of Share-Based Payment Plans
Executive Share Option Plan (EXSOP)
CONSOLIDATED
2012
US$M
7.0
2011
US$M
11.9
On 21 November 2006, the EXSOP was approved by shareholders at the Company’s Annual General Meeting.
The number of shares that may be issued under the EXSOP must not exceed 5% of the total number of shares
on issue.
Share options are granted to employees under the EXSOP which is designed to create a stronger link between
increasing shareholder value and employee reward. Under the EXSOP, the exercise price of the options is set at
the market price of the shares on the date of grant and performance is measured by comparing the Company’s
TSR (share price appreciation plus dividends reinvested) with a group of peer companies. The Company’s
performance will be measured over three years from the date of grant. To the extent that maximum performance
is not achieved under the performance condition, performance will be retested every six months following the
first three years until the end of the fourth year.
In assessing whether the TSR hurdle for each grant has been met, the Group receives independent data from
an external advisor, who provides both the Group’s TSR growth from the commencement of each grant and that
of the pre-selected peer group. The peer group chosen for comparison is the resource companies in the S&P/
ASX200 Index at the date of grant. This peer group reflects the Group’s competitors for capital and talent.
The Group’s performance against the hurdle is determined according to Paladin’s ranking against the peer group
TSR growth over the performance period:
› when Paladin is ranked over the 75th percentile, 100% of the share options will vest;
›
for rankings above the 50th and below the 75th percentile, the percentage of options to vest will be pro-rata
between 50% and 100%;
› when Paladin is ranked at the 50th percentile, 50% of the share options will vest; and
› when Paladin is ranked below the 50th percentile the share options will not vest.
When a participant ceases employment prior to the vesting of their share options, the share options are forfeited
unless cessation of employment is due to termination initiated by the Group other than for misconduct or death.
In the event of a change of control all the awards will vest and may be exercised by the participant.
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 25.
SHARE-BASED PAYMENT PLANS (CONTINUED)
Executive Share Option Plan (EXSOP) (continued)
The contractual life of each option granted is five years. There are no cash settlement alternatives.
Following the adoption of the Rights Plan referred to below, no further grants will be made under the EXSOP.
The last grant under this Plan was made on 24 June 2009.
(b)
Types of Share-Based Payment Plans
Employee Performance Share Rights Plan
The Employee Performance Share Rights Plan (Rights Plan) was approved by shareholders on 25 November
2009. The Rights Plan replaces the EXSOP and no further options will be granted under the EXSOP.
The Rights Plan is a long-term incentive plan aimed at advancing the interests of the Company by creating
a stronger link between employee performance and reward and increasing shareholder value by enabling
participants to have a greater involvement with, and share in the future growth and profitability of the Company.
It is an important tool to assist in attracting and retaining talented people.
Share Rights are granted under the plan for no consideration. Share Rights are rights to receive fully paid
ordinary shares in the capital of the Company (Shares) in the future if certain individual and/or corporate
performance metrics (Performance Conditions) are met in the measurement period.
The Board is cognisant of general shareholder concern that long-term equity based reward for staff should be
linked to the achievement by the Company of a performance condition. Share Rights granted under the Rights
Plan are subject to performance conditions as determined by the Board from time to time.
The Share Rights issued are subject to a combination of Performance Conditions:-
›
›
Time-based Performance conditions which prescribe a period of time that the employee must stay
employed by the Company prior to automatic vesting.
The Total Shareholder Return (TSR) measure which represents the change in the Company’s Share price
over the relevant period, plus dividends (if any) notionally reinvested in the Company’s Shares, expressed as a
percentage of the opening value.
The TSR of the Company from the date of the offer to the measurement date will be compared with the TSR
of all mining companies in the ASX S&P 200 Index for the same period excluding, for such time as Paladin
does not pay a dividend, all companies that paid a dividend during any year of the measurement period.
The number of Share Rights that vest depends on the TSR percentile ranking of the Company, as set out
below:
Relative TSR Percentile Ranking
Percentage of share rights that may vest if the
relative TSR performance condition is met
Less than 50th percentile
0% of the Share Rights subject to the TSR condition
At 50th percentile
50% of the Share Rights subject to the TSR condition
Greater than the 50th percentile but less
than the 75th percentile
Pro-rated vesting between 51% and 99% of the Share
Rights subject to the TSR condition
At 75th percentile or greater
100% of the Share Rights subject to the TSR
condition
156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 25.
SHARE-BASED PAYMENT PLANS (CONTINUED)
(b)
Types of Share-Based Payment Plans (continued)
Employee Performance Share Rights Plan (continued)
›
›
The Market Price Performance condition measures the increase in share price of the Company. Share
Rights subject to the Market Price Performance Condition will vest if, at the end of the measurement period,
the Share price of the Company is 25% above the market price as at the date of the offer.
The Earnings Per Share (EPS) Performance condition, which is determined by dividing the operating
profit attributable to members of the Paladin Group by the weighted average number of Ordinary Shares
outstanding during the financial year. Growth in EPS will be measured by comparing the EPS in the base year
and the measurement year.
Vesting will only occur if the Company achieves average compound growth in EPS of at least 10% pa over
the three year performance period, calculated from the date of the grant of the Share Rights.
The vesting schedule of the Share Rights subject to the EPS conditions is as follows:
Average compound growth EPS over the
performance period
Percentage of share rights that may vest if the
EPS condition is met
Less than 10% pa
At 10% pa
More than 10% pa but less than 20% pa
0% of the Share Rights subject to the EPS condition
50% of the Share Rights subject to the EPS condition
Pro-rated vesting between 51% and 99% of the Share
Rights subject to the EPS condition
At 20% pa or greater
100% of the Share Rights subject to the EPS conditio
When a participant ceases employment prior to the vesting of their Share Rights, the Share Rights lapse unless
cessation of employment is due to retirement, total and permanent disablement, redundancy or death. In the
event of a change of control all the Share Rights will vest.
Contractor Performance Share Rights Plan
The Company has also implemented a plan to reward a small number of key individual contractors, who provide
similar services to employees. This plan and the Rights Plan applicable to employees, as detailed above,
differ only in respect of the class of individuals who are eligible for participation. This Plan was approved by
shareholders on 25 November 2009.
(c)
Summaries of Options Granted Under EXSOP
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements
in share options issued during the year:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year(1)
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2012
NO.
8,231,791
(972,716)
-
(3,041,746)(2)
4,217,329
3,467,329
2012
WAEP
A$
4.36
4.50
-
4.53
4.20
4.56
2011
NO.
12,768,755
(1,841,734)
(960)
(2,694,270)
8,231,791
4,032,078
2011
WAEP
A$
5.26
4.13
4.50
8.77
4.36
4.55
(1) The weighted average share price at the date of exercise is A$N/A (2011: A$5.35).
(2) Options that can no longer vest were cancelled on 29 June 2012.
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 25.
SHARE-BASED PAYMENT PLANS (CONTINUED)
(c)
Summaries of Options Granted Under EXSOP (continued)
The outstanding balance as at 30 June 2012 is represented by:
Dates options granted
Exercisable
Expiry date
Exercise price
of options
Number under
option
29 January 2008
15 February 2008
18 April 2008
14 October 2008
Total
29 January 2011
15 February 2011
18 April 2011
14 October 2011
29 January 2013
15 February 2013
18 April 2013
14 October 2013
4.50
5.37
4.59
2.54
3,013,849
203,820
249,660
750,000
4,217,329
Please refer to Outstanding Share Information table in the Management Discussion & Analysis for movements
since the year end.
(d)
Weighted Average Remaining Contractual Life
The weighted average remaining contractual life for the share options outstanding as at 30 June 2012 is 0.7
years (2011: 1.7 years).
(e)
Range of Exercise Price
The range of exercise prices for options outstanding at the end of the year was A$2.54 – A$5.37 (2011: A$2.54 –
A$5.37).
(f)
Weighted Average Fair Value
There were no options granted during 2011 or 2012.
(g)
Option Pricing Model: EXSOP
The fair value of the equity-settled share options granted under the option plan is estimated as at the date of
grant using a Black-Scholes valuation model taking into account the terms and conditions upon which the
options were granted. There were no options granted during 2011 or 2012.
(h)
Summaries of Performance Share Rights Granted Under the Rights Plans
The following table illustrates the number (No.) of and movements in share rights issued during the year:
Outstanding at the beginning of the year
Granted during the year *
Forfeited during the year
Vested during the year(1)
2012
NO.
6,947,337
1,980,400
(928,580)
(1,113,275)
2011
NO.
5,014,500
4,292,117
(1,058,700)
(1,300,580)
Outstanding at the end of the year
6,885,882
6,947,337
* Includes 145,000 rights granted under the Contractor Performance Share Rights Plan (2010: 490,000).
(1) The weighted average share price at the vesting date is A$1.93 (2011: A$3.80).
158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 25.
SHARE-BASED PAYMENT PLANS (CONTINUED)
(h)
Summaries of Performance Share Rights Granted Under the Rights Plans (continued)
The outstanding balance as at 30 June 2012 is represented by:
Dates rights granted
Vesting date
Vesting Performance Conditions
26 March 2010
26 March 2010
26 March 2010
26 March 2010
26 March 2010
5 November 2010
5 November 2010
5 November 2010
5 November 2010
5 November 2010
5 November 2010
15 February 2011
15 February 2011
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
2 April 2012
Total
26 March 2013
26 March 2013
1 September 2012
1 September 2012
1 September 2012
5 November 2013
5 November 2013
1 September 2012
1 September 2013
1 September 2013
1 September 2013
15 February 2013
15 February 2014
1 September 2012
1 September 2013
31 December 2013
1 September 2014
1 September 2014
1 September 2014
Relative total shareholder return
Earnings per share
Time based
Relative total shareholder return
Market price
Earnings per share
Relative total shareholder return
Time based
Time based
Relative total shareholder return
Market price
Time based
Time based
Time based
Time based
Time based
Time based
Relative total shareholder return
Market price
Number
150,000
150,000
759,850
607,880
911,820
250,000
250,000
250,132
416,888
333,510
500,265
154,633
185,504
189,540
284,310
20,000
523,850
379,080
568,620
6,885,882
Please refer to Outstanding Share Information table in the Management Discussion & Analysis for movements
since the year end.
(i)
Weighted Average Remaining Contractual Life
The weighted average remaining contractual life for the share rights outstanding as at 30 June 2012 is 1.0 years
(2011: 1.5 years).
(j)
Weighted Average Fair Value
The weighted average fair value of share rights granted during the year was A$1.47 (2011: A$3.86).
(k)
Rights Pricing Model
The fair value of the equity-settled share rights granted under the plan is estimated as at the date of grant using
either the Black-Scholes valuation model for rights with non-market based performance conditions (time based
and EPS) or the Monte-Carlo simulation model for rights that contained a market based performance condition
(TSR and market price).
The following table lists the inputs to the model used for the years ended 30 June 2012 and 30 June 2011.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of right (years)
Closing share price at grant date (A$)
2012
2011
Nil
53%
3.57%
0.4 - 2.4 years
A$1.80
Nil
39%
4.77% - 5.03%
0.8 - 4 years
A$4.48
The expected volatility was determined using an historical sample of 1 year’s historic data.
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 26.
INTERESTS IN JOINTLY CONTROLLED ASSETS
(a)
Joint Venture Details
Bigrlyi Joint Venture
The Bigrlyi Joint Venture is involved in the identification of and exploration for uranium resources in the Northern
Territory, Australia. The joint venture is between Energy Metals Ltd 53.29%, Southern Cross Exploration NL 5.0%
and Northern Territory Uranium Pty Ltd (NTU) 41.71% (NTU is 100% owned by Paladin) with Energy Metals Ltd
as manager and operator of the joint venture.
Angela Joint Venture
The Angela Joint Venture is involved in the identification of and exploration for uranium resources on tenements
to the south of Alice Springs in the Northern Territory, Australia. The joint venture is between Cameco Australia
Pty Ltd (Cameco) 50% and Paladin NT Pty Ltd (PNT) 50% (PNT is 100% owned by Paladin) with Paladin as
manager and operator of the joint venture.
Other Joint Ventures
The Group also has a number of other interests in joint ventures to explore for uranium and other minerals.
The Group’s share of expenditure in respect of these exploration activities is expensed in accordance with the
accounting policy stated in Note 3(s) and no revenue is generated. The Group’s share of the assets and liabilities
in respect of these joint ventures is not material.
(b)
Assets Utilised in the Bigrlyi and Angela Joint Ventures
The Group’s share of the assets utilised in these jointly controlled assets, which are included in the Consolidated
Financial Statements, is as follows:
Non Current Assets
Exploration and evaluation expenditure
Total assets
CONSOLIDATED
2012
US$M
37.6
37.6
2011
US$M
36.3
36.3
The interest of NTU in the Bigrlyi Joint Venture was acquired on 7 September 2006 and includes the allocation of
the acquisition value.
The interest of PNT in the Angela Project joint venture was acquired on 20 February 2008.
(c)
Commitments Relating to the Joint Venture
Share of tenement commitments (Note 22(a))
(d)
Impairment
CONSOLIDATED
2012
US$M
1.5
2011
US$M
2.7
No assets employed in the jointly controlled assets were impaired during the year (2011: US$Nil).
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 27.
EVENTS AFTER THE BALANCE DATE
Other than disclosed below, since the end of the financial year, the Directors are not aware of any other matter
or circumstance not otherwise dealt with in this report, that has significantly or may significantly affect the
operations of the Group, the results of those operations or the state of affairs of the Group in subsequent years
with the exception of the following, the financial effects of which have not been provided for in the 30 June 2012
Financial Report:
Deep Yellow Ltd Entitlement Issue
At 30 June 2012, the Group had subscribed A$2M for a convertible note issued by DYL. The convertible note
formed part of the underwriting of the DYL non-renounceable issue and was converted into DYL shares on 30
July 2012. In total Paladin purchased 72,263,821 ordinary shares at a cost of A$3M. Following this issue the
Group has an investment in DYL of 297,198,282 (30 June 2012: 224,934,461) fully paid ordinary shares. The
holding of these ordinary shares represents a 23.43% interest (30 June 2012: 19.9%) in the ordinary shares in
DYL.
Long-term Off-take Contract with a US$200M Prepayment
On 15 August 2012, the Company announced that it had entered into a six year off-take agreement with a
major utility to deliver a total of 13.73Mlb U3O8 in the period from 2019 to 2024. A prepayment of US$200M will
be made to the Company in respect of part of the future U3O8 product deliveries. Delivery of the future U3O8
product will be at the Company’s option either from its current African mining operations or from a project yet to
be developed from the Company’s significant existing project pipeline or from a combination of both. Uranium
delivered under the long-term off-take contract will be sold at the market prices prevailing at the time of delivery
bounded by escalating floor and ceiling prices.
To secure the Company’s obligation to deliver product representing the prepayment amount, the utility will hold
security over 60.1% of the Company’s Michelin project in Canada. The percentage of Michelin secured will be
reduced as the value of that project is enhanced by the Company’s ongoing work. The Michelin security can
also be replaced by other appropriate security if required.
Subject to formalities to be put in place between the Company and the utility, expected to occur in September
2012, such as required registration of the security documentation (which documentation is in agreed form) the
US$200M prepayment will be made in tranches to be completed by no later than 31 January 2013.
The US$200M prepayment will be applied to repayment of the balance of the March 2013 convertible notes with
the remainder retained for balance sheet strength as working capital.
Mid-term Sales Contracts Secured
On 24 August 2012, the Company announced it had secured two mid-term off-take agreements for U3O8
production originating from its mining operations at Langer Heinrich in Namibia and Kayelekera in Malawi.
These agreements are for the purchase of a total of 6.3Mlb U3O8 to be delivered from late 2012 to end
2015 at approximately 2Mlb pa. Pricing will be determined predominately by the market price at the time of
delivery(without floor or ceiling limitations) while a minority portion of the delivery prices will be in accordance
with a series of specified fixed prices which exceed current spot uranium prices.
NOTE 28. NON-CASH FINANCING AND INVESTMENT ACTIVITIES
Issue of shares to acquire 100% of NGM
Issue of shares to acquire the Aurora uranium assets
CONSOLIDATED
2012
US$M
-
-
2011
US$M
30.1
260.6
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
NOTE 29.
EARNINGS PER SHARE
(i) Basic Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by
the weighted average number of ordinary shares outstanding during the period.
(ii) Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary
shares. Diluted earnings per share is the same as basic earnings per share in 2012 and 2011 as the Group is in
a loss position.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
CONSOLIDATED
2012
US$M
2011
US$M
Net loss attributable to ordinary equity holders of the Parent from continuing
operations
(172.8)
(82.3)
2012
2011
NUMBER
OF SHARES
NUMBER
OF SHARES
Weighted average number of ordinary shares for basic and diluted earnings
per share
820,299,671
744,054,692
Total number of securities not included in weighted average calculation due
to their antidilutive nature in the current period, that could potentially dilute
basic earnings per share in the future
210,255,068
117,453,027
162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 30.
PARENT ENTITY INFORMATION
(a)
Information Relating to Paladin Energy Ltd
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Option application reserve
Share-based payments reserve
Available-for-sale investment revaluation reserve
Convertible bond non distributable reserve
Total shareholders’ equity
Net loss after tax from operations
Total comprehensive loss
2012
US$M
158.1
1,740.3
142.0
671.7
1,839.2
(908.8)
0.1
52.2
0.4
85.5
2011
US$M
146.2
1,768.6
12.7
613.9
1,768.1
(734.3)
0.1
49.5
10.9
60.4
1,068.6
1,154.7
(174.4)
(180.9)
(50.4)
(45.0)
(b)
Details of Any Guarantees Entered Into by the Parent in Relation to the Debts of its Subsidiaries
As part of the Project Finance Facility for the construction of KM, Paladin has provided a guarantee for the loan
outstanding to the lenders until satisfaction of the Bankers Completion Test.
(c)
Details of Any Contingent Liabilities of the Parent Entity
Paladin has provided the following guarantees:
i. Guarantee of US$21.5M for the LHM Environmental Trust Fund.
(d)
Details of Any Contractual Commitments by the Parent Entity for the Acquisition of Property,
Plant and Equipment
There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment
as at reporting date.
(e)
Tax Consolidation
Paladin and its 100% owned Australian resident subsidiaries formed a tax consolidated group (the Group) with
effect from 1 July 2003. Paladin is the head entity of the Group. Members of the Group have entered into a tax
sharing agreement that provides that the head entity will be liable for all taxes payable by the Group from the
consolidation date. The parties have agreed to apportion the head entity’s taxation liability within the Group
based on each contributing member’s share of the Group’s taxable income and losses.
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 NOTE 30.
PARENT ENTITY INFORMATION (CONTINUED)
(f)
Investments in Material Controlled Entities
COUNTRY OF
INCORPORATION
INVESTMENT
PERCENTAGE
INTEREST HELD
2012
%
2011
%
Paladin Finance Pty Ltd
Paladin Energy Minerals NL
PEM Malawi Pty Ltd
Eden Creek Pty Ltd
Paladin (Africa) Limited
Kayelekera Holdings SA
Paladin Netherlands BV
Paladin Netherlands Holdings Cooperatief U.A.
Langer Heinrich Mauritius Holdings Ltd
Langer Heinrich Uranium (Pty) Ltd
Valhalla Uranium Pty Ltd
Northern Territory Uranium Pty Ltd
Mount Isa Uranium Pty Ltd
Paladin Nuclear Ltd
Summit Resources Ltd
Summit Resources (Aust) Pty Ltd
Pacific Mines Pty Ltd
Paladin NT Pty Ltd
Fusion Resources Pty Ltd
NGM Resources Pty Ltd
Indo Energy Ltd
Paladin Energy Canada Ltd
Michelin Uranium Ltd
Paladin Canada Investment (NL) Ltd
Paladin Canada Holdings (NL) Ltd
Aurora Energy Ltd
Australia
Australia
Australia
Australia
Malawi
Switzerland
Netherlands
Netherlands
Mauritius
Namibia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
B.V.I.
Canada
Canada
Canada
Canada
Canada
100
100
100
100
85
100
100
100
100
100
100
100
100
100
82
82
82
100
100
100
100
100
100
100
100
100
100
100
100
100
85
100
100
100
100
100
100
100
100
100
82
82
82
100
100
100
100
100
100
100
100
100
All investments comprise ordinary shares and all shares held are unquoted, with the exception of Summit’s
shares which are quoted on the ASX and Paladin Netherlands Holdings Cooperatief U.A. which issues
membership equity.
164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Paladin Energy Ltd, I state that:
In the opinion of the Directors:
(a) the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s financial position as at 30 June 2012 and of its performance for the year
ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 3(a);
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
(d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ending 30 June 2012.
On behalf of the Board
Mr John Borshoff
Managing Director/CEO
Perth, Western Australia
30 August 2012
165
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
Report on the financial report
We have audited the accompanying financial report of Paladin Energy Ltd, which comprises the consolidated statement of
financial position as at 30 June 2012, the consolidated statement of income and statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes
comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of
the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the
financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the
directors determine are necessary to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 3, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgment, 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 controls
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
controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have
given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the
Directors’ Report.
Liability limited by a scheme approved under Professional Standards Legislation
166
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
Opinion
In our opinion:
a. the financial report of Paladin Energy Ltd is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the
year ended on that date; and
ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 3.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 74 to 85 of the Directors’ Report for the year ended 30 June
2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Paladin Energy Ltd for the year ended 30 June 2012, complies with section 300A of
the Corporations Act 2001.
Ernst & Young
G H Meyerowitz
Partner
Perth
30 August 2012
167
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
We have audited the accompanying financial report of Paladin Energy Ltd, prepared for the purposes of complying with
Canadian securities regulatory requirements, which comprises the statement of financial position as at 30 June 2012 and
the consolidated income statement and statement of comprehensive income, statement of changes in equity and cash flow
statement for the year ended 30 June 2012, a summary of significant accounting policies, other explanatory notes and the
directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year 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
the International Accounting Standards (including the Interpretations). This responsibility includes establishing and maintaining
internal controls 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.
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 International Standards on Auditing. 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 our judgment, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls 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 controls. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have met the independence requirements of the Australian professional accounting bodies. We
have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the
Directors’ Report.
Liability limited by a scheme approved under Professional Standards Legislation
168
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
AUDITOR’S OPINION
In our opinion:
1. the financial report of Paladin Energy Ltd, prepared for the purposes of complying with Canadian securities regulatory
requirements, presents fairly, in all material respects, the financial position of the consolidated entity at 30 June 2012 and of
its performance for the year ended 30 June 2012; and
2. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting
Standards Board.
Ernst & Young
Perth
30 August 2012
169
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PALADIN ENERGY LTD
PALADIN ENERGY LTD
Comments by auditor for Canadian readers
Reporting standards under Canadian generally accepted auditing standards may differ from those under International
Standards on Auditing in the form and content of the auditor's report, depending on the circumstances.
Ernst & Young
Perth
30 August 2012
170
FINANCIAL REPORTPALADIN ENERGY LTD ANNUAL REPORT 2012 ADDITIONAL INFORMATION
Pursuant to the Listing Requirements of ASX as at 7 September 2012:
(A)
DISTRIBUTION AND NUMBER OF HOLDERS
Range
1
1,001
5,001
10,001
100,001
-
-
-
-
-
1,000
5,000
10,000
100,000
maximum
Total Holders
11,251
12,052
3,478
3,058
239
30,078
4,620 shareholders hold less than a marketable parcel of shares.
(B)
THE TWENTY LARGEST SHAREHOLDERS HOLD 75.56% OF THE TOTAL SHARES ISSUED.
Holder
CDS & Co
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
CEDE & Co
Mr J Borshoff*
JP Morgan Nominees Australia Limited
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