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Westwater ResourcesAppendix 4E - Financial Report
Financial year ended 30 June 2018
Paladin Energy Ltd
ABN or equivalent company reference
ACN 061 681 098
Results for announcement to the market
Revenue from sales of uranium oxide
Down
24%
Revenue
Profit/(loss) after tax attributable to
members
Net profit/(loss) for the year attributable
to members
Down
24%
Up
180%
30 June 2018
US$’000
30 June 2017
US$’000
72,917
95,844
72,917
95,844
367,762
(457,785)
to
to
to
Up
180%
to
367,762
(457,785)
Profit/(Loss) per share (US cents)
21.5
(26.7)
Dividends
Amount per security
Franked amount per security
It is not proposed to pay dividends for the year
N/A
Previous corresponding year:
No dividend paid
N/A
N/A
N/A
An explanation of the results is included in the Operating and Financial Review and the Financial
Report attached.
Net tangible assets/(liabilities) per share
US$0.06
US$(0.26)
30 June 2018
30 June 2017
Other
Previous corresponding period is the year ended 30 June 2017.
All foreign subsidiaries are prepared using IFRS.
439138_2.docx
PALADIN ENERGY LTD
ACN 061 681 098
ANNUAL
REPORT
2018
439138_2.docx
CONTENTS
__________________________________________________________________________________
2
CORPORATE VALUES AND PALADIN TODAY .................................................................................. 3
CHAIRMAN’S LETTER ........................................................................................................................... 4
INSIGHTS FROM THE CEO ................................................................................................................... 5
OPERATING AND FINANCIAL REVIEW ............................................................................................... 7
ORE RESERVES AND MINERAL RESOURCES ................................................................................ 17
HEALTH AND SAFETY ........................................................................................................................ 29
SUSTAINABLE DEVELOPMENT ........................................................................................................ 31
COPORATE GOVERNANCE STATEMENT ....................................................................................... 45
DIRECTORS' REPORT......................................................................................................................... 46
REMUNERATION REPORT ............................................................................................................ 54
CONTENTS OF THE FINANCIAL REPORT ........................................................................................ 70
CONSOLIDATED INCOME STATEMENT ........................................................................................... 71
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................... 72
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .............................................................. 73
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................. 74
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................... 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................ 76
DIRECTORS' DECLARATION ........................................................................................................... 134
INDEPENDENT AUDIT REPORT ....................................................................................................... 135
ADDITIONAL INFORMATION ............................................................................................................ 143
CORPORATE DIRECTORY ............................................................................................................... 150
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 WA 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.
439138_2.docx
CORPORATE VALUES AND PALADIN TODAY
__________________________________________________________________________________
3
CORPORATE VALUES
Create stakeholder value by developing the opportunities Paladin has when the uranium
price recovers to a sustainable level.
Operate at global best practice with particular emphasis on safety and the environment.
Maintain financial discipline and a value-minded approach to project management,
investments and capital structure decisions.
Provide employees with an equal and fulfilling work environment.
Contribute to the communities in which we operate.
Act with integrity, honesty and cultural sensitivity in all dealings.
PALADIN TODAY
Overview
Operations
Paladin’s value is based on five key drivers – a strategic tier one core production base, a
globally diversified quality suite of exploration and development assets, experienced
team, uranium industry positioning and sustainability of operations.
Langer Heinrich Mine (LHM)
- a strategic tier one mine in the global uranium industry with circa 5 million pounds per
year of uranium production capacity.
- placed on care and maintenance due to persistent low uranium prices.
-
-
top 10 mine by uranium production with a first quartile position on the cash cost curve.
long-term asset with in excess of 40 million pounds of cumulative historical uranium
production and a remaining productive life in excess of 20 years (at current processing
rates).
- undertaking operational review to assess process optimisation, cost reduction,
production capacity and life of mine alternatives.
- aim to maintain plant, infrastructure and critical aspects of intellectual property and
operational knowhow to allow for a restart, when justified.
Kayelekera Mine (KM)
-
fully-built mine commissioned in 2008 with circa 3 million pounds per year of uranium
production capacity.
- placed on care and maintenance due to persistent low uranium prices.
- maintaining plant, infrastructure and critical aspects of intellectual property and
operational knowhow to allow for a restart, when justified.
Positioning Going Forward
Unhedged, pure-play exposure to uranium.
One of the only independent, publicly listed, large-scale uranium producers in the world.
Leverage to a rising uranium market greatly enhanced by ability to grow organically
through a restart of LHM and KM and quality suite of exploration and development
assets.
Experienced team with respect to uranium project construction, efficient project
management and technical innovation.
Financially disciplined.
439138_2.docx
CHAIRMAN’S LETTER
__________________________________________________________________________________
4
Dear Stakeholders
In my address at the 2017 Annual General Meeting held, for reasons we are all aware, only earlier this
year, I noted the challenges still facing the uranium industry and also the unique position Paladin held
to benefit from a revival in the uranium price.
During the balance of the 2018 financial year and indeed since then, Paladin has taken further
important steps to ensure it is well placed to emerge as a leading uranium producer once the uranium
market normalises. The decision in May 2018 to place the Langer Heinrich Mine into care and
maintenance was not taken lightly, particularly due to its impact on local employees, contractors and
community. However, there was a compelling argument to preserve the valuable uranium resource
and mitigate cash flow losses. I wish to acknowledge the understanding and co-operation from our
joint venture partner CNNC Overseas Uranium Holding Limited and the Government of Namibia in this
regard.
In June this year, we announced the appointment of Scott Sullivan, a mining engineer with
considerable operating experience in several commodities and jurisdictions, as Chief Executive
Officer. Scott will lead a fresh and thorough focus on all our projects, particularly the Langer Heinrich
Mine as part of the Board’s endeavour to guide Paladin to be appropriately positioned for a uranium
price resurgence. Again I thank our outgoing CEO, Alex Molyneux for his leadership, drive and
commitment to Paladin over the past 3 very challenging years.
The restructure of the Company by Deed of Company Arrangement, effectuated in February 2018,
whilst painful for shareholders at the time, has certainly put Paladin in a stronger position to plan for a
restart of production at Langer Heinrich at the appropriate time and consider other opportunities within
its portfolio of projects to increase shareholder value.
I wish to thank our new directors John Hodder, Daniel Harris and David Riekie for the manner in which
they have applied themselves during this post Administration period. Once again, I sincerely thank all
employees and contractors for their hard work despite ongoing uncertainties and personal challenges
for them.
Yours faithfully
Rick Crabb
Chairman
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INSIGHTS FROM THE CEO
__________________________________________________________________________________
5
Dear Stakeholders
I am excited to join the Company as only the third CEO in its 25 year history and I look forward to
working closely with the new Board and the Paladin team in Australia, Africa and Canada and focus on
the many challenges and opportunities that we have in front of us.
I thank my predecessor, Mr Alexander Molyneux and the Paladin workforce for their tireless efforts in
seeing through the financial restructuring and securing Paladin’s future. At the same time, I
acknowledge and sincerely thank those employees affected by necessary cost reduction initiatives the
Company has had to face.
We emerge from this period refreshed with a new Board, a new CEO and a smaller focused
workforce. Moving forward, we will be a leaner organisation with a workforce who act with a strong
sense of ownership and urgency to position Paladin at the starting line ready for a market correction.
The past year of course, has been one of significant change for Paladin. In February this year,
Paladin emerged from voluntary administration and was reinstated to official quotation on the ASX.
Paladin’s debt was restructured with a single bond remaining and maturing in 2023 and Paladin was
left with a healthy cash reserve.
A material decision was made in May to place Paladin’s flagship Tier 1 asset, Langer Heinrich in
Namibia, on care and maintenance. We have subsequently seen further restructuring on the supply
side with the announcement by Cameco in July to extend the suspension of production at its McArthur
River uranium mine and Key Lake uranium mill in Saskatchewan, Canada for an indefinite duration.
We embarked on this strategy to preserve the value of our primary asset in a depressed market. At
the end of September the workforce at Langer Heinrich will be reduced to its final number of 20
people, all significant work will have ceased and stable care and maintenance operations will have
commenced.
This period of closure also presents a unique opportunity which we will capitalise on, to systematically
and objectively examine several potential projects available to us, to further optimise the Langer
Heinrich operation, reducing operating costs, extending its productive life and potentially increasing
throughput. This will be a prime focus for myself and the extended team during this period and I look
forward to reporting on progress throughout the year.
Kayelekera in Malawi remains on care and maintenance and the team recently proudly celebrated 4
years LTI free. The year was free of significant environmental and safety incidents.
With respect to our performance, Langer Heinrich's first full year of mining curtailment before
transitioning towards care and maintenance in May 2018, had a negative impact on operating
performance for FY2018. Uranium production of 2.739Mlb for FY2018 was 34% lower than the
previous year, mainly as a result of a 16% decrease in ore processed and a 22% decrease in grade.
The decrease in ore processed was predominantly due to ore type on the medium grade ore
stockpiles exhibiting poor settling and compaction characteristics. The transition of operations to care
and maintenance also contributed to the decrease in ore processed for the year. The C1 cash cost of
production for the year increased by 39% to US$26.23/lb, largely attributable to the lower production
for the year.
Financial performance for FY2018 was adversely affected by the continued decline in the uranium
spot price as well as Langer Heinrich's reduced operating performance. A 10% decrease in the
company's realised uranium sales price together with a 16% decline in uranium sales volumes
resulted in a 371% decrease in EBITDA for the year.
Although underlying all-in costs increased by 20% to US$37.56/lb in FY2018, primarily as a result of
lower production, we continued to reduce non-Langer Heinrich costs during the year. As a result of
ongoing cost reduction initiatives, Kayelekera care and maintenance, group exploration and corporate
costs have been reduced by 65% since FY2015.
Following the execution of the Deed of Company Arrangement and completion of the capital
restructure in February 2018, the Company’s financial position has strengthened significantly.
Unrestricted group cash and cash equivalents increased by 273% to US$39.1M and net debt reduced
by 88%, from US$665.9M at 30 June 2017 to US$80.7M at 30 June 2018. The Company’s gearing
ratio decreased from 289% at 30 June 2017, to 43% at 30 June 2018.
439138_2.docx
INSIGHTS FROM THE CEO
__________________________________________________________________________________
6
We continue to expect that the uranium market will undergo a fundamental restructuring in the short to
medium term. Primary production and secondary supply continues to be short of forecast growth in
consumption whilst demand continues to grow in existing and new markets, even as some countries
withdraw from nuclear power or reduce the proportion in their energy mix. Today, there are some 57
reactors under construction or commissioning with another 152 at the planning stage with approvals
and/or funding already in place. Growth in the utilisation of nuclear energy is focussed in Asian and
Middle Eastern regions with China, India and Russia leading the argument for stable, reliable, low
emissions nuclear energy.
Notwithstanding improved uranium market activity in the last quarter of FY2018, forward price
indicators remain well below incentive costs for almost all new primary uranium production and as
such, are unlikely to promote a near term commitment to new development. Nonetheless, we are
confident that a nascent market recovery has commenced and that normalisation of long-term
contracting volumes will follow in due course. Similarly, although much has been made of inventory
overhang in the uranium market, we continue to believe that available inventories are less onerous
and that drawdown is well advanced.
The low levels of forward utility contracting witnessed over recent years make current uncommitted
demand higher than any period since 2010. The pace of any market recovery is always difficult to
gauge, but Paladin believes that FY2019 will see marked improvements in market dynamics for
uranium suppliers and developers.
Yours faithfully
Scott Sullivan
Chief Executive Officer
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
7
OVERVIEW OF OPERATIONS
The Group has two uranium mines in Africa1 and uranium exploration projects in Australia, Africa and
Canada. The Company is incorporated under the laws of Western Australia with a primary share
market listing on the Australian Securities Exchange (“ASX”); as well as the Munich, Berlin, Stuttgart
and Frankfurt Stock Exchanges in Europe; and the Namibian Stock Exchange in Africa.
Langer Heinrich Mine (LHM)
LHM is located in the Namib Desert in Namibia, 80km east of the major seaport of Walvis Bay and
about 40km south-east of the large-scale, hard-rock Rössing uranium mine operated by the Rio Tinto
Group.
Following the sale of a 25% equity stake to CNNC Overseas Uranium Holding Limited (CNNC), a
wholly owned subsidiary of China National Nuclear Corporation, Paladin owns 75% of LHM in Namibia
through its Namibian subsidiary, Langer Heinrich Uranium (Pty) Ltd.
History of LHM
1973 The deposit was discovered in 1973 after a government-sponsored airborne radiometric
survey of the area.
1980 Between 1974 and 1980, General Mining Union Corporation Limited (Gencor) undertook
extensive evaluation work at the site and suspended work on the project in the mid-1980s,
following a fall in the prevailing uranium price.
1998 Acclaim Uranium NL acquired the project from Gencor in 1998 and completed a pre-feasibility
2002
study. The project was again put on hold due to prevailing uranium prices.
In August 2002, the Company acquired Langer Heinrich Uranium (Pty) Ltd and its assets from
Aztec Resources Ltd (formerly Acclaim Uranium NL). The purchase consideration was
A$15,000 and a production royalty of 12 Australian cents per kilogram of U3O8 sold.
2007 LHM commenced production in 2007 with a capacity of 2.7Mlb U3O8 pa.
2008 Construction of the Stage 2 expansion to 3.7Mlb U3O8 pa commenced in 2008.
2009 LHM reached the Stage 2 design capacity in December 2009.
2012 Construction of the Stage 3 expansion to 5.2Mlb U3O8 pa commenced at the beginning of
2010 and was completed on 31 March 2012.
2014 On 23 July 2014 the sale process for a 25% interest in LHM to CNNC was completed.
2015 Process
the Bicarbonate Recovery Plant (BRP), which was
focused on
innovation
commissioned in early March 2015 and resulted in significant reagent cost reductions.
2016 Following the continued decline in uranium prices, LHM introduced a mining curtailment
2018
strategy in November 2016.
In May 2018 the Company received the consent of relevant stakeholders to place LHM into
care and maintenance (C&M) and stopped presenting ore to the plant.
FY2018 proved to be a difficult year for the operation. The processing of medium grade ore stockpiles
as a result of the mining curtailment strategy introduced in November 2016 revealed different ore
characteristics to that which the mine had experienced previously. Ore took longer to settle, affecting
production throughput and water recovery from tailings facilities was erratic which also impacted
production output. Lower production together with increased reagent costs were further exacerbated
by the continued decline in the uranium spot price which adversely affected profitability and cash
flows.
In May 2018, the Company received the consent of relevant stakeholders to place LHM into C&M and
LHM stopped presenting ore to the plant. There will be a run-down phase of up to three months where
various stages of the plant will be progressively suspended and cleaned. Once the run-down phase is
complete, operations will have been completely suspended and LHM will be on C&M. The C&M
programme will affect some 600 staff and contractors on the mine, with the bulk leaving at the end of
June and July 2018. A staff of approximately 20 will remain for the C&M period.
1 Langer Heinrich Mine, Namibia (transitioning to care and maintenance). Kayelekera Mine, Malawi (on care and maintenance).
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
8
Negotiations on severance packages, as required by the Namibian Labour Act, 2007 were held with
the Mineworkers Union of Namibia (‘MUN’) and an Agreement with the MUN was reached on 18 June
2018. In terms of the Agreement LHM will pay each staff member a severance package of 2 weeks’
pay for every completed year of service plus 2 months’ salary.
LHM is currently on track with the cleaning of all tanks and is expected to commence C&M in
September 2018. The mine is expected to remain on C&M until the uranium spot price again makes it
economical to restart on a sustainable basis. During this C&M period the mine will ensure that the
plant is properly maintained for a restart and operating processes will be reviewed for potential
optimisation that could result in cost savings once the mine is restarted.
Kayelekera Mine (KM)
KM 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 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, which established the fiscal
regime and development framework for KM.
History of KM
1982 The Central Electricity Generating Board of Great Britain (CEGB) discovered the Kayelekera
sandstone uranium deposit in 1982.
1992 The project was abandoned in 1992 due largely to the poor uranium outlook, as well as
1998
2005
privatisation of CEGB and resultant pressure to return to its core business.
In 1998, the Company acquired a 90% interest in Kayelekera through a joint venture with
Balmain Resources Pty Ltd (Balmain), which then held exploration rights over the Project
area.
In July 2005, the Company acquired the remaining 10% interest in Kayelekera held by
Balmain.
In April 2005, the Company announced the go-ahead of a Bankable Feasibility Study (BFS) as
a result of the improved economics shown by the pre-feasibility work.
2007 After completing the Development Agreement with the Malawi Government, the BFS and a full
Environmental Impact Assessment, the Mining Licence (ML 152) covering 5,550 hectares,
was granted in April 2007 for a period of 15 years.
Construction of KM, with a 3.3Mlb U3O8 pa design capacity, began in June 2007.
2008 Open pit mining commenced in June 2008 to develop initial stockpiles.
2009 Commissioning began in January 2009, with first production achieved in April 2009.
2010 KM continued to ramp-up its production volumes and commercial production was declared
2012
from 1 July 2010.
In 2012, the operation made substantial positive steps toward design capacity of 3.3Mlb U3O8
pa through a programme of plant upgrades aimed at addressing bottlenecks.
The focus at KM turned to production optimisation with the acid recycling project (nano-
filtration technology) representing a key element. The acid recovery plant was operational up
to the cessation of ore processing.
2013 The plant achieved record annual production totalling 2.963Mlb U3O8 for FY2013.
2014 Continuing low uranium prices resulted in a decision to place the project on C&M in February
2014.
On 7 February 2014, the Company announced that it was suspending production at KM and placing
the mine on C&M due to the low uranium price and non-profitability of the operation. The plant
operated until all reagents in the supply chain were consumed to the maximum extent possible and the
plant ceased production on 6 May 2014. After a transition period, during which the site was made
safe, the plant cleaned and all remaining product dispatched to customers, the C&M period
commenced on 26 May 2014. During C&M the project will be maintained and secured with adequate
staffing.
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
9
In FY2018 activities continued to focus on the water treatment programme. The license to treat and
release water was renewed by the Government of Malawi in January 2018 for the 2017/2018 wet
season, with the Government maintaining the prior strict conditions regulating critical water quality
parameters, including the World Health Organisation drinking water guideline for uranium content.
Comprehensive monitoring of samples was undertaken upstream and downstream from KM. At
30 June 2018 water inventories had been reduced in the two major storage ponds and were on track
to reach their pre-wet season targets. A new application to treat and discharge water for the 2018/19
wet season was submitted in July 2018.
EXPLORATION
The Company has uranium exploration projects in Australia, Africa and Canada. Details of these
exploration projects and their Mineral Resources are summarised in the Ore Reserves and Mineral
Resources section on pages 17 to 28.
During the year, the Company has only undertaken the work required to meet minimum tenement
commitments at these exploration projects.
NON-IFRS MEASURES
C1 Cost of Production
C1 cost of production = cost of production excluding product distribution costs, sales royalties and
depreciation and amortisation before adjustment for impairment. C1 cost of production, which is a
non-IFRS measure, is a widely used ‘industry standard’ term. We use this measure as a meaningful
way to compare our performance from period to period. We believe that, in addition to conventional
measures prepared in accordance with IFRS, certain investors use this information to evaluate our
performance. C1 cost information (unaudited) has been extracted from the financial statements. For
an analysis of total cost of sales refer to Note 12 to the financial statements. Refer to page 11 for
reconciliation.
Underlying EBITDA
The Company’s Earnings Before Interest, Tax, Depreciation and Amortisation (Underlying EBITDA)
represents profit before finance costs, taxation, depreciation and amortisation, impairments, foreign
exchange gains/losses, restructure costs and other income. As the mining industry is a capital-
intensive industry, capital expenditures, the level of gearing and finance costs may have a significant
impact on the net profit of companies with similar operating results. Therefore, the Company believes
underlying EBITDA may be helpful in analysing the operating results of a mining company like itself.
Although underlying EBITDA is widely used in the mining industry as a benchmark to reflect operating
performance, financing capability and liquidity, it is not regarded as a measure of operating
performance and liquidity under IFRS. Refer to page 12 for reconciliation.
Underlying All-In Cost
Underlying All-In Cost = total cash cost of production plus non-production costs, capital expenditure,
KM and LHM care and maintenance expenses, exploration costs and corporate costs, excluding one-
off restructuring costs and non-recurring costs. Underlying All-In Cost, which is a non-IFRS measure,
is widely used in the mining industry as a benchmark to reflect operating performance. We use this
measure as a meaningful way to compare our performance from period to period as it provides a more
comprehensive view of costs than the cash cost approach. Refer to page 13 for reconciliation.
439138_2.docx
OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
10
OPERATING PERFORMANCE
The Company’s operating performance during the year was affected by LHM’s first full year of ongoing
mining curtailment before transitioning of the mine towards C&M in May 2018.
Key operating performance metrics
Year ended 30 June
Ore mined
Ore mined - Grade
Ore and waste mined
Strip ratio
Ore processed
Ore processed - Grade
Overall recovery
U3O8 production
C1 cost of production
Production
Mt
ppm
Mt
w:o
Mt
ppm
%
Mlb
US$/lb
2018
-
-
-
-
2.954
475
88.5
2.739
26.23
2017 % Change
1.492
719
7.663
4.14
3.521
610
87.7
4.149
18.91
(100)
(100)
(100)
(100)
(16)
(22)
1
(34)
39
U3O8 production for FY2018 of 2.739Mlb was 34% lower than the previous year mainly as a result of a
16% decrease in ore processed and a 22% decrease in grade. The decrease in ore processed was
predominantly due to ore type on the medium grade ore stockpiles exhibiting poor settling and
compaction characteristics. This was exacerbated by erratic water recovery from tailings facilities and
reduced water supply from the Namibian national water supplier, which was restricted due to sea
water feed stream problems at their desalination plant. The transition of operations to C&M from
13 May 2018 also contributed to the decrease in ore processed for the year.
U3O8 production (Mlb) FY2018 vs. FY2017
4.149
(0.668)
(0.769)
0.027
2.739
FY2017
Ore processed
Grade
Overall recovery
FY2018
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
11
C1 Cost of Production
A reconciliation of C1 cost of production to the Cost of sales reported in the financial statements is set
out below.
C1 cost of production
Depreciation and amortisation
Production distribution costs
Royalties
Inventory movement
Other
Cost of sales
Year ended 30 June
2018
US$’000
71,845
19,061
2,358
2,280
(7,173)
187
88,558
2017
US$’000
78,476
15,209
3,999
3,054
(8,094)
121
92,765
LHM unit C1 cash cost of production for the year increased by 39% from US$18.91/lb in FY2017 to
US$26.23/lb in FY2018. The increase in unit C1 cash costs was largely attributable to lower
production for the year resulting from a decrease in ore processed and grade, as well as the transition
of operations to C&M. These cost increases were partially offset by lower RoM feed, processing and
engineering costs.
C1 cost of production (US$/lb) FY2018 vs. FY2017
9.74
(0.20)
(2.27)
(0.44)
0.50
26.23
18.91
FY2017
Production
(volume and
grade)
RoM feed
Processing and
engineering
Other
Currency
FY2018
439138_2.docx
OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
12
FINANCIAL PERFORMANCE
Key financial performance metrics
Earnings
Average selling price
U3O8 sold
Revenue
Cost of sales
Net profit/(loss) after tax
Underlying EBITDA
Underlying All-in Cost
Cash Flows
Cash flows from operating activities
Capital expenditure
Free cash flows
Financial Position
Unrestricted cash and cash equivalents
Debt (principal amount + accrued interest)
Net debt
Total equity
Gearing ratio (Net debt / (net debt + equity))
Underlying EBITDA
Year ended 30 June
2018
2017 % Change
US$/lb
Mlb
US$’000
US$’000
US$’000
US$’000
US$/lb
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
%
21.45
3.399
72,917
(88,558)
343,413
(13,981)
37.56
(44,805)
(3,688)
(48,493)
39,166
119,905
80,739
23.82
4.023
95,844
(92,765)
(484,182)
5,151
31.37
(51,913)
(11,638)
(63,551)
10,492
676,381
665,889
106,761
(435,799)
43
289
(10)
(16)
(24)
5
171
(371)
20
14
68
24
273
(82)
(88)
124
(246)
Underlying EBITDA for the year was negative US$13,981,000, a decrease of US$19,132,000 from the
underlying EBITDA of US$5,151,000 in FY2017. The reconciliation of Underlying EBITDA to the loss
before interest and tax reported in the financial statements is set out below.
Profit/(loss) before interest and tax
Depreciation and amortisation
Write-down of inventory
Gain on disposal of assets
Proceeds from litigation
Gain on extinguishment of debt
Foreign exchange (gain)/loss
Corporate restructure costs
LHM restructure costs
Impairment of assets
Re-measurement of KM rehabilitation provision
Underlying EBITDA
Note
12
12
12
12
12
12
12
12
Year ended 30 June
2018
US$’000
392,798
15,468
28,119
(13)
(312)
(483,721)
(1,865)
11,208
5,970
8,233
10,134
(13,981)
2017
US$’000
(306,902)
14,794
38,046
(2,437)
-
-
10,244
7,506
-
243,900
-
5,151
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
13
The 371% decrease in underlying EBITDA for the year was mainly attributable to a decrease in the
realised uranium sales price and uranium sales volumes by 10% and 16% respectively.
Underlying EBITDA (US$M) FY2018 vs. FY2017
5.151
(8.055)
(14.871)
(13.981)
4.206
(0.412)
FY2017
Sales price
Sales volume
Cost of sales
Other
FY2018
Underlying All-in Cost
A reconciliation of Underlying All-in Cost to C1 cost of production is set out below.
LHM – C1 cost of production
Increase in RoM stockpiles
Royalties
Product distribution costs
Non-production costs
Capital expenditure
LHM – total cash cost after capex
KM – care and maintenance expenses
Exploration costs
Corporate costs
Underlying All-in Cost
Year ended 30 June
2018
US$/lb
26.23
3.09
0.83
1.05
1.65
0.50
33.35
2.12
0.78
1.31
37.56
2017
US$/lb
18.91
5.04
0.74
1.02
0.52
2.17
28.40
1.53
0.55
0.89
31.37
% Change
39
17
20
The comparatives for the year ended 30 June 2017 have been restated to exclude debt servicing
costs and mandatory repayments and to include movements in ore stockpiles previously excluded as
non-recurring costs.
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
14
Underlying All-in Cost for the year increased by 20% from US$31.37/lb in FY2017 to US$37.56/lb in
FY2018 largely due to lower production resulting from LHM’s first full year of ongoing mining
curtailment, as well as the transitioning of the mine towards C&M in May 2018.
Underlying All-in Cost (US$/lb) FY2018 vs. FY2017
16.16
(4.92)
(2.27)
(2.79)
(0.77)
0.78
37.56
31.37
FY2017
Production
(volume and
grade)
Stockpile and
RoM haulage
Processing
and
engineering
Capital
expenditure
KM C&M,
exploration,
corporate
Currency
FY2018
Cost Reductions
As a result of ongoing costs reduction initiatives, exploration and other controllable costs have been
reduced by 65% since FY2015.
Continued reduction in non-LHM cash costs (US$M)
Reduction of 65%
32.884
11.608
5.315
15.961
19.118
6.086
3.147
9.885
12.309
3.673
2.263
6.373
FY2017
11.522
3.581
2.136
5.806
FY2018
FY2015
FY2016
KM C&M costs
Exploration costs
Corporate costs
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
15
Cash Flows
The Group had unrestricted cash and cash equivalents at 30 June 2018 of US$39,166,000. An
analysis of the cash flows for the year is set out below.
Cash flows for the year ended 30 June 2018 (US$M)
36.921
(24.158)
40.000
(5.471)
(2.300)
(3.664)
(6.963)
(5.691)
39.166
10.492
30 Jun 2017 Net proceeds
from secured
bank loans
Net proceeds
from secured
notes
LHM
KM
Exploration Corporate Restructure
costs
Net finance
costs
30 Jun 2018
Unrestricted cash and cash equivalents increased by US$28,674,000 during the year comprising of
the following cash flows:
Secured bank loans – the Company entered into agreements with Deutsche Bank on
21 July 2017 to refinance the Nedbank Revolving Credit Facility and fund working capital
for LHM and the Company. Deutsche Bank acquired the existing US$20,000,000
Nedbank Revolving Credit Facility and
from
US$20,000,000 to US$60,000,000.
the size of
increased
facility
the
Senior secured notes – as part of the effectuation of a Deed of Company Arrangement
(DOCA) the offer for the US$115,000,000 senior secured notes was fully subscribed and
the new notes were issued. Net proceeds of US$36,921,000 were received by the
Company following a US$63,834,000 payment to Deutsche Bank to acquire the
Company's Deutsche Bank Facility (including fees and advisor costs), a US$10,000,000
payment to cash back Nedbank Limited’s issue of a US$10,000,000 performance bond to
the Government of Malawi for the KM environmental rehabilitation obligations and
payments totalling US$4,245,000 for certain advisors' fees.
LHM – mainly as a result of lower uranium prices and lower sales volumes, LHM utilised
US$24,158,000 in cash flows from operations before finance costs for the year.
KM – ongoing C&M and water treatment resulted in KM utilising US$5,471,000 in cash
flows from operations before finance costs for the year.
Exploration – the Company utilised US$2,300,000 for minimum tenement commitments at
its exploration projects during the year.
Corporate – during the year US$3,664,000 was paid for corporate expenditure.
Restructure costs – the Company incurred US$6,963,000 in restructure costs (excludes
restructure costs of US$4,245,000 for certain advisors' fees included under net proceeds
from senior secured notes), which resulted from the Company being in voluntary
administration for approximately seven months of the current year. Restructure costs
included the Administrators’ fees, as well as legal and other advisors’ costs relating to the
effectuation of the DOCA and completion of the capital restructure.
Net finance costs – during the year the Group paid US$5,691,000 in net finance costs,
most of which related to the Deutsche Bank Facility.
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
16
Financial Position
Following the effectuation of the DOCA and completion of the capital restructure on 1 February 2018,
the Company’s financial position has strengthened significantly. Unrestricted group cash and cash
from
equivalents
US$665,889,000 at 30 June 2017 to US$80,739,000 at 30 June 2018. In addition, the Company’s
gearing ratio decreased from 289% at 30 June 2017 to 43% at 30 June 2018.
to US$39,166,000 and net debt reduced by 88%,
increased by 273%
Net debt (US$M) FY2018 vs. FY2017
665.889
30 Jun 2017
80.739
30 Jun 2018
On 25 January 2018, as part of the effectuation of the DOCA, the Company issued US$115,000,000
9%/10% payment in kind (PIK) toggle senior secured notes repayable on 25 January 2023.
PIK Interest on the notes accrues at a rate of 10% pa and will be deferred on each interest payment
date commencing on 31 March 2018. Each amount of deferred PIK interest also bears interest at the
rate of 10% pa from and including the date on which the payment was deferred. However Paladin shall
be required to pay cash interest (rather than PIK interest) at a rate of 9% pa if (a) the operating cash
flow (determined in accordance with IFRS) minus maintenance capital expenditure of Paladin and its
subsidiaries (on an attributable basis) for the half-year immediately preceding such interest payment
date is no less than US$5,000,000 and (b) Paladin and its subsidiaries (on a consolidated basis) have,
after giving pro forma effect to such cash interest payment, no less than US$50,000,000 of
unrestricted cash and cash equivalents as of the last day falling 15 calendar days before the relevant
interest payment date.
Paladin may also elect to pay cash interest at a rate of 9% pa on each payment date commencing
from 31 March 2018 for interest due in respect of any interest period except for the final interest
period, with respect to 25%, 50%, 75% or 100% of the applicable interest payment (with the relevant
balance being deferred PIK interest), even if the Company is not required to pay cash interest. All
amounts of deferred PIK interest (and any interest accrued thereon) is due and payable (in cash)
when the notes are redeemed.
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ORE RESERVES AND MINERAL RESOURCES
17
PROJECT LOCATIONS AND RESOURCE OVERVIEW
Unless specifically noted, Mineral Resources were prepared and first disclosed under the JORC Code
2004. These estimates have not been updated since to comply with JORC Code 2012 on the basis
that the information that the estimates are derived from has not materially changed since it was last
reported.
Paladin’s attributable Mineral Resources inventory, with effect from 30 June 2018, includes
126,627t U3O8 (279.2Mlb) at 635ppm U3O8 in the Indicated and Measured categories (including ROM
stockpiles) and 37,817t U3O8 (83.4Mlb) at 530ppm U3O8 in the Inferred Resource category. A
summary of the status of each of the advanced projects is detailed in the following table. This table
does not include additional JORC(2004) compliant Mineral Resources from Bikini, Andersons,
Mirrioola, Watta or Warwai deriving from Paladin’s 82.08% ownership of Summit Resources Ltd, nor
from the Duke Batman or Honey Pot deposits.
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ORE RESERVES AND MINERAL RESOURCES
18
Project
Overview
Mining Method/
Deposit Type
Outlook
Mineral Resources
Uranium Production
**Langer Heinrich Mine - 75%
(Namibia, Southern Africa)
The Company’s cornerstone asset commenced production in 2007.
The Stage 3 expansion is complete with production capacity at
5.2Mlb per annum (pa).
Conventional open pit;
calcrete
*Kayelekera Mine – 85%
(Malawi, Southern Africa)
Paladin’s second uranium mine, capable of operating at nameplate
of 3.3Mlb pa.
Conventional open pit;
sandstone
Uranium Exploration
*Michelin Project – 50%
(Labrador, Canada)
Maintained on a minimum activity basis.
**Manyingee Project – 100%
(Western Pilbara, Western Australia)
Maintained on a minimum activity basis.
*Mount Isa Project – 82.08%
(Queensland, Australia)
Maintained on a minimum activity basis.
Open pit -
underground;
metasomatic
In-situ leach;
sandstone
Open pit -
underground;
metasomatic
Project life of 20 years
Currently transitioning to
care and maintenance
due to low uranium prices
M&I (inc
stockpiles):
113.0Mt @ 460ppm (114.5Mlb U3O8)
Inferred:
8.7Mt @ 470ppm (9.0Mlb U3O8)
Currently on care and
maintenance due to low
uranium prices
M&I (inc
stockpiles):
15.0Mt @ 720ppm (23.9Mlb U3O8)
Inferred:
5.4Mt @ 620ppm (7.4Mlb U3O8)
Further work dependent
on market conditions
3 year staged feasibility
study dependent on
market conditions
Development dependent
on market conditions
M&I:
54.4Mt @ 880ppm (105.6Mlb U3O8)
Inferred:
13.1Mt @ 760ppm (22.1Mlb U3O8)
M&I:
13.8Mt @ 680ppm (20.7Mlb U3O8)
Inferred:
22.8Mt @ 410ppm (20.8Mlb U3O8)
M&I:
57.2Mt @ 745ppm (93.7Mlb U3O8)
Inferred:
16.3Mt @ 610ppm (22.0Mlb 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, in addition the Mineral Resources for the Michelin and Jacques Lake deposits conform to the JORC(2012) guidelines.
**Conforms to JORC(2012) 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 Michelin, the Michelin Claimants will receive a 50% participating interest in the Michelin Project.
Langer Heinrich and Kayelekera Mineral Resources have been depleted for mining to the end of June 2018 and June 2014 respectively.
M&I = Measured and Indicated.
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ORE RESERVES AND MINERAL RESOURCES
19
NAMIBIA
Langer Heinrich
Langer Heinrich is a surficial calcrete type uranium deposit containing a Mineral Resource of
51,928t U3O8 at a grade of 460ppm U3O8 in the Measured and Indicated categories (including RoM
stockpiles) in seven mineralised zones designated Detail 1 to 7 (see figure below) along the length of
the Langer Heinrich valley within the 15km length of a contiguous paleo drainage system.
Mineral Resources and Ore Reserves Estimation
Mineral Resources and Ore Reserves conforming to the JORC(2012) code are detailed below.
Mineral Resource Estimate (250ppm U3O8 cut-off)
Measured
Indicated
Measured and Indicated
Stockpiles
Inferred
Mt
60.71
21.48
82.19
30.78
8.70
Grade ppm
U3O8
515
460
500
355
470
t U3O8
Mlb U3O8
31,169
9,854
41,022
10,906
4,073
68.72
21.72
90.44
24.04
8.98
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 2018.
Ore Reserves
Economic analysis on this resource has indicated a break-even cut-off grade of 250ppm.
Ore Reserve Estimate (250ppm U3O8 cut-off)
Proved
Probable
Stockpiles
Total
Mt Grade ppm
t U3O8
Mlb U3O8
41.97
13.14
30.78
85.89
U3O8
525
485
355
455
21,997
6,366
10,906
39,269
48.49
14.04
24.04
86.57
Ore Reserve has been depleted for mining to the end of June 2018.
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ORE RESERVES AND MINERAL RESOURCES
20
MALAWI
Kayelekera
Kayelekera is a sandstone-hosted uranium deposit, associated with the Permian Karoo sediments and
hosted by the Kayelekera member of the North Rukuru sedimentary outcrop of the Karoo System.
The mineralisation is associated with seven variably oxidised, coarse grained arkoses, separated by
shales and mudstones. Uranium mineralisation occurs as lenses, primarily within the arkose layers
and, to a lesser extent, in the mudstone. The lowest level of known mineralisation is at a depth of
approximately 160m below surface.
Paladin operates KM under the provisions of Environmental Certificate 27.3.1, granted in March 2007,
following approval of the Kayelekera Project Environmental Impact Assessment (EIA) and Mining
Licence ML152, granted in April 2007. ML152 covers an area of some 55km² surrounding the
Kayelekera deposit and was granted for a period of 15 years, renewable for further 10-year periods.
Mineral Resources and Ore Reserves Estimation
Mineral Resources and Ore Reserves are unchanged from those reported in 2014.
Mineral Resources and Ore Reserves conforming to the JORC(2004) code are detailed below.
Mineral Resource at 300ppm U3O8 Cut-off
Measured
Indicated
Measured and Indicated
Stockpiles
Mt
0.74
12.71
13.45
1.59
Grade ppm
U3O8
1,010
700
715
755
t U3O8
Mlb U3O8
753
8,901
9,654
1,199
1.66
19.62
21.28
2.64
Inferred
7.35
Figures may not add due to rounding and are quoted inclusive of any Ore Reserves and are depleted for mining
to end of June 2014 when mining ceased.
3,334
5.35
620
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 Mineral Resource has indicated a break-even cut-off grade of 400ppm
U3O8.
Ore Reserve at 400ppm U3O8 Cut-off
Mt
Proved
Probable
Stockpiles
Total Reserves
Figures may not add due to rounding and are depleted for mining to end of June 2014.
0.39
5.34
1.59
7.32
Grade ppm
U3O8
1,170
880
755
870
t U 3O8
Mlb U3O8
457
4,709
1,199
6,365
1.00
10.38
2.64
14.03
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ORE RESERVES AND MINERAL RESOURCES
21
CANADA
MICHELIN PROJECT (Michelin)
Paladin, through its wholly-owned subsidiary Aurora Energy Ltd (Aurora), holds rights to 91,500
hectares of mineral claims within the Central Mineral Belt of Labrador (CMB), Canada, approximately
140km north of Happy Valley-Goose Bay and 40km southwest of the community of Postville.
Several of Paladin’s Canadian subsidiaries have given guarantees and provided security (Michelin
Security) over their 60.1% interest in the Michelin Project in respect of Paladin’s obligations under the
Électricité de France S.A. (EdF) Long Term Supply Agreement between EdF and Paladin dated
8 June 2012. On 29 November 2017 EdF issued a demand under these guarantees and sought to
exercise its security. These claims were sold to Deutsche Bank AG, who subsequently sold down
parts of its interest in the Michelin Security to a number of parties (Michelin Claimants). On 28 May
2018, Paladin finalised terms with the Michelin Claimants for a proposal whereby all existing claims
which the Michelin Claimants have against Paladin’s Canadian subsidiaries and Michelin will be
released and in consideration for the release of these claims, the Michelin Claimants will receive a
50% participating interest in the Michelin Project. There will be a farm out over a five year period
whereby the Michelin Claimants will transfer a 5% participating interest in the Michelin Project to
Paladin on an annual basis in return for Paladin funding all obligations for the Michelin Project over
this period. The Michelin Project proposal was accepted by the creditors of Paladin’s Canadian
subsidiaries at a meeting held on 21 June 2018.
The mineral claims cover a significant area of prospective ground over the CMB. The claims contain
Measured and Indicated Mineral Resources as well as an additional 22Mlb U3O8
105.6Mlb U3O8
Inferred Mineral Resource in 6 deposits. The largest of these deposits is Michelin which contains a
total resource of 92Mlb U3O8, 82.2Mlb of which is classified measured and indicated. Michelin is still
open along strike and at depth. The estimated resources are summarised in the table below. Cut-off
grades for all deposits except Jacques Lake reflect the use of open cut (200ppm) and underground
(500ppm) mining methodologies in the determination of prospects for eventual economic extraction.
For Jacques Lake, there was insufficient Mineral Resources remaining after pit optimisation studies to
warrant any portion being considered for underground mining.
439138_2.docx
ORE RESERVES AND MINERAL RESOURCES
Deposit
Measured Resources
Indicated Resources
Inferred Resources
Cut-off
ppm U3O8
Mt Grade
ppm
t U3O8 Mlb Mt Grade
ppm
t U3O8 Mlb Mt Grade
ppm
t U3O8 Mlb
Michelin
200/500 17.6
965 17,045
37.6 20.6
980 20,225 44.6 4.5
985 4,470 9.9
Jacques Lake
250
13.0
630
8,145 18.0 3.6
550 1,988 4.4
Rainbow
200/500
0.2
920
193
0.4
0.8
Inda
Nash
Gear
200/500
200/500
200/500
1.2
0.7
0.4
860
690
830
770
654
1.4 0.9
810
739 1.6
826
1.8 3.3
670 2,171 4.8
564
1.2 0.5
270
0.6 0.3
720
920
367 0.8
279 0.6
Total Resources
17.8
965 17,238
38.0 36.6
840 30,685 67.6 13.1
765 10,014 22.1
Total Attributable Resources
8.9
965 8,619
19.0 18.3
840 15,342 33.8 6.6
765 5,007 11.0
Figures may not add due to rounding.
22
Paladin
Share
50%
50%
50%
50%
50%
50%
As a consequence of the continuing weakness in the uranium spot price, the project operates on
minimum activity and expenditure, at a level intended to maintain the tenements in good standing.
QUEENSLAND
Paladin has an 82.08% majority shareholding in Summit Resources Limited (Summit) acquired in
2007. Summit’s wholly-owned subsidiary, Summit Resources (Aust) Pty Ltd (SRA), operates the Isa
Uranium Joint Venture (IUJV) and the Mount Isa North Project (MINP). Paladin wholly owns the
Valhalla North Project (VNP) immediately to the north of the MINP area.
The three projects include 10 deposits containing 106.2Mlb U3O8 Measured and Indicated Mineral
Resources as well as 42.2Mlb U3O8 Inferred Mineral Resources. Of this, 95.8Mlb U3O8 Measured and
Indicated Mineral Resources as well as 37.4Mlb U3O8 Inferred Mineral Resources are attributable to
Paladin. 51.4% of the Mineral Resources are located at Valhalla; the rest is distributed over the other
tabled deposits. The table below lists JORC(2004) and NI 43-101 compliant Mineral Resources by
deposit, on a 100% project basis.
Deposit
Measured Resources
Indicated Resources
Inferred Resources
Cut-off
ppm
U3O8
Mt Grade
ppm
t U3O8 Mlb Mt Grade
ppm
t U3O8 Mlb Mt Grade
ppm
t U3O8 Mlb
230 16.0
820 13,116 28.9 18.6
840 15,662 34.5 9.1
640 5,824 12.8
250
250
250
250
250
250
250
250
250
14.3
8.2
5.8
640
555
495
9,177 20.2 1.4
520
708
4,534 10.0 5.8
590 3,430
2,868 6.3 6.7
490 3,324
1.4 1,450
2,079 4.6 0.1 1,640
204
5.6
400 2,260
0.4
360
134
2.0
560 1,132
0.5 1,370
728 1.6 0.3 1,100
325
2.6
700 1,799
1.6
7.6
7.3
0.4
5.0
0.3
2.5
0.7
4.0
Valhalla*
Skal*
Odin*
Bikini*
Andersons*
Watta
Warwai
Mirrioola
Duke Batman*
Honey Pot
Paladin
Share
91%
91%
91%
82%
82%
82%
82%
82%
100%
100%
Total Resources
16.0
820 13,116 28.9 48.8
720 35,048 77.3 33.9
565 19,140 42.2
Total Attributable Resources 14.6
820 11,941 26.3 43.9
720 31,530 69.5 29.8
570 16,983 37.4
Figures may not add due to rounding.
* Deposits estimated using Multiple Indicator Kriging within a wireframe envelope. All other Mineral 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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ORE RESERVES AND MINERAL RESOURCES
23
The exploration is managed through separate projects and operates on minimum activity and
expenditure, at a level intended to maintain the tenements in good standing, as a consequence of the
continuing weakness in the uranium spot price. The locations of the separate projects are shown in
the following map and details are set out below.
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ORE RESERVES AND MINERAL RESOURCES
24
ISA URANIUM JOINT VENTURE (IUJV)
Summit Resources (Aust) Pty Ltd (SRA) 50% and Manager
Mount Isa Uranium Pty Ltd (MIU) 50%
The IUJV, managed by SRA, covers 17.24km2 of ground containing the Valhalla and Odin deposits
and 10km2 of ground containing the Skal uranium deposits and are approximately 40km north of
Mount Isa. Paladin’s effective participating interest in the IUJV is 91.04% through its ownership of
82.08% of the issued capital of Summit and 100% ownership of MIU. Valhalla and Odin are held by
MDL 510 and Skal by MDL 513.
MOUNT ISA NORTH PROJECT (MINP)
The MINP tenements cover 596km2 of area prospective for uranium and base metals and are located
10 to 70km north and east of Mount Isa. The area is 100% held and managed by SRA utilising
Paladin staff and expertise. The MINP includes the Andersons (MDL 509), Watta (MDL 511), Warwai
(MDL 511), Bikini (MDL 513) and Mirrioola (MDL 513) uranium deposits as well as numerous other
uranium prospects.
In late 2017 a 2,500m RC drilling programme at the Round Hill and Elbow prospects was completed
as well as a helicopter borne magnetic and radiometric survey over the Sybella prospect located to the
south west of Valhalla.
VALHALLA NORTH PROJECT (VNP)
The VNP tenements cover 70km2 over EPM 12572, MDLs 507 and MDL 508 and are located
approximately 80km north of the Valhalla deposit. The VNP includes the Duke Batman (MDL 507)
and Honey Pot deposits (MDL 508). 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.
WESTERN AUSTRALIA
MANYINGEE URANIUM PROJECT (Manyingee)
Manyingee is located in the north-west of Western Australia, 1,100km 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 purchased Manyingee in 1998 from Afmeco Mining and Exploration Pty Ltd
(AFMEX), a subsidiary of Cogema from France.
Between 1973 and 1984, approximately 400 holes were drilled by the previous owners to establish the
extent and continuity of the sediment-hosted uranium mineralisation contained in permeable
sandstone in palaeochannels. Field trials by AFMEX demonstrated that the Manyingee sandstone-
hosted uranium deposit is amenable to extraction by in-situ recovery (ISR).
In 2012, Paladin drilled 96 holes for 9,026m of Rotary Mud and 242m of PQ core. The drilling resulted
in a revised geological model and, on 14 January 2014, Paladin announced an updated Mineral
Resource for the Manyingee Project. The Mineral Resource estimate conforms to the JORC(2012)
Code.
Mineral Resource Estimate (250ppm U3O8 and 0.2m cut-off)
Mineral Resources
Category
Indicated
Inferred
Figures may not add due to rounding.
Grade ppm
U3O8
850
850
Mt
8.4
5.4
t U3O8
Mlb U3O8
7,127
4,613
15.71
10.17
As a consequence of the continuing weakness in the uranium spot price, Manyingee operates on
minimum activity and expenditure, at a level intended to maintain the tenements in good standing.
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ORE RESERVES AND MINERAL RESOURCES
25
CARLEY BORE
Carley Bore consists of three contiguous exploration licences that are located approximately 100km
south of Manyingee as shown in the location map below. The Carley Bore deposit, contains an
Indicated Mineral Resource of 5.0Mlb U3O8 grading 420ppm and an Inferred Mineral Resource of
10.6Mlb U3O8 grading 280ppm (JORC (2012)) at a cut-off grade of 150ppm U3O8. Potential exists for
extensions to mineralisation north and south of the estimated Carley Bore resource.
Carley Bore and Manyingee Tenement Package Location
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ORE RESERVES AND MINERAL RESOURCES
26
Mineral Resource Estimate (150ppm U3O8 cut-off)
Mineral Resources Category
Indicated
Inferred
Grade ppm
U3O8
420
280
Mt
5.4
17.4
t U3O8
Mlb U3O8
2,268
4,825
5.00
10.64
The three Carley Bore tenements are coincident with geology similar to that which hosts the Carley
Bore and Manyingee deposits and is also coincident with numerous identified regional targets that
warrant further investigation.
Carley Bore operates on minimum activity and expenditure, at a level intended to maintain the
tenements in good standing, as a consequence of the continuing weakness in the uranium spot price.
MINERAL RESOURCES AND ORE RESERVES SUMMARY
The following tables detail the Company’s Mineral Resources and Ore Reserves and the changes that
have occurred within FY2018. The only changes to Mineral Resources and Ore Reserves information
were due to depletion of stockpiles used for processing and a minor stockpile adjustment at Langer
Heinrich. There were no other material changes to the Company’s Mineral Resources and Ore
Reserves.
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ORE RESERVES AND MINERAL RESOURCES
27
Mineral Resources
Namibia
30 June 2017
Grade
ppm
U3O8
Mlb
U3O8
Mt
30 June 2018
Grade
ppm
U3O8
Mlb
U3O8
Mt
Change
Mlb
U3O8
Mt
Measured
Indicated
Inferred
Stockpiles
Malawi
Measured
Indicated
Inferred
Stockpiles
Canada
Measured
Indicated
Inferred
Australia
Measured
Indicated
Inferred
439138_2.docx
Langer Heinrich
Kayelekera
Michelin
Rainbow
Gear
Inda
Jacques Lake
Michelin
Nash
Rainbow
Gear
Inda
Jacques Lake
Michelin
Nash
Rainbow
Valhalla
Andersons
Bikini
Duke Batman
Odin
Skal
Valhalla
Carley Bore
Manyingee
Andersons
Bikini
Duke Batman
Honey Pot
Mirrioola
Odin
Skal
Valhalla
Watta
Warwai
Carley Bore
Manyingee
60.7
21.5
8.7
33.9
0.7
12.7
5.4
1.6
17.6
0.2
0.4
1.2
13.0
20.6
0.7
0.8
0.3
3.3
3.6
4.5
0.5
0.9
16.0
1.4
5.8
0.5
8.2
14.3
18.6
5.4
8.4
0.1
6.7
0.3
2.6
2.0
5.8
1.4
9.1
5.6
0.4
17.4
5.4
515
460
470
380
68.7
21.7
9.0
60.7
21.5
8.7
28.5
30.8
515
460
470
355
1,010
1.7
0.7
1,010
700
620
755
965
920
770
690
630
980
830
860
920
670
550
985
720
810
820
1,450
495
1,370
555
640
840
420
850
1,640
490
1,100
700
560
590
520
640
400
360
280
850
19.6
12.7
7.4
2.6
5.4
1.6
37.6
0.4
0.6
1.8
18.0
44.6
1.2
1.4
0.6
4.8
4.4
9.9
0.8
1.6
17.6
0.2
0.4
1.2
13.0
20.6
0.7
0.8
0.3
3.3
3.6
4.5
0.5
0.9
28.9
16.0
4.6
6.3
1.6
10.0
20.2
34.5
5.0
15.7
0.4
7.3
0.7
4.0
2.5
7.6
1.6
12.8
5.0
0.3
10.6
10.2
1.4
5.8
0.5
8.2
14.3
18.6
5.4
8.4
0.1
6.7
0.3
2.6
2.0
5.8
1.4
9.1
5.6
0.4
17.4
5.4
700
620
755
965
920
770
690
630
980
830
860
920
670
550
985
720
810
820
1,450
495
1,370
555
640
840
420
850
1,640
490
1,100
700
560
590
520
640
400
360
280
850
68.7
21.7
9.0
24.0
1.7
19.6
7.4
2.6
37.6
0.4
0.6
1.8
18.0
44.6
1.2
1.4
0.6
4.8
4.4
9.9
0.8
1.6
28.9
4.6
6.3
1.6
10.0
20.2
34.5
5.0
15.7
0.4
7.3
0.7
4.0
2.5
7.6
1.6
12.8
5.0
0.3
10.6
10.2
-
-
-
-
-
-
-3.1
-4.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ORE RESERVES AND MINERAL RESOURCES
30 June 2017
Mt
grade
ppm
U3O8
Mlb
U3O8
30 June 2018
grade
ppm
U3O8
Mlb
U3O8
Mt
Langer Heinrich
Ore Reserves
Namibia
Proven
Probable
Stockpiles
Malawi
Proven
Probable
Stockpiles
Figures may not add due to rounding. Mineral Resources and Ore Reserves quoted on a 100% basis.
0.4 1,170
880
5.3
755
1.6
1,170
880
755
1.0
10.4
2.6
48.5
14.0
28.5
42.0
13.1
30.8
42.0
13.1
33.9
525
485
381
525
485
355
0.4
5.3
1.6
Kayelekera
48.5
14.0
24.0
1.0
10.4
2.6
28
Change
Mt
Mlb
U3O8
-
-
-3.1
-
-
-4.4
-
-
-
-
-
-
All of the Company’s Mineral Resources and Ore Reserves are internally peer reviewed at the time of
estimation and are subject to ongoing review, as and when required. Should any Mineral Resources
or Ore Reserves be utilised within a Bankable or Definitive Feasibility Study, it is expected that an
audit by independent experts would be conducted. For both mine sites, ongoing reconciliations
between Mineral Resource, Ore Reserve, Mining Production and Mill Feed tonnes and grade are
completed on a regular basis and, to date, there have been no material differences identified in any of
these processes.
The information above relating to exploration, mineral resources and ore reserves is, except where
stated, based on information compiled by David Princep B.Sc P.Geo FAusIMM(CP) who is an
employee of RPM Advisory Services Pty Ltd (an RPMGlobal Holdings Limited company) and who is
a member of the AusIMM. Mr Princep has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the activity that he/she is undertaking to
qualify as Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves”. Mr Princep consents to the inclusion
of this information in the form and context in which it appears.
439138_2.docx
HEALTH AND SAFETY
29
HEALTH AND SAFETY
Paladin is “committed to provide and maintain a safe and healthy work environment with the aim of
‘Zero Harm’ from occupational injuries and illnesses in the work place”. The Company also “considers
excellence in radiation management essential to our business success and is fully committed to
achieving minimum radiation exposure to its workers, members of the public and the surrounding
natural environment and minimising the potential impact by the safe management of radioactive waste
at its uranium mining and processing operations” as stated in its Occupational Health and Safety
Policy and Radiation Policy respectively.
Paladin’s safety and health performance of its operations is measured through the external
internationally recognised National Occupational Safety Association (NOSA) Five Star System
ensuring transparency and complementing its own internal audit processes. During the year, Paladin
undertook one external NOSA grading audit at the LHM retaining a 4 Star Platinum grade rating.
In addition, the Company’s annual Lost Time Injury Frequency Rate (LTIFR) reduced to 1.25
(2017:1.8). For FY2018, there were two Lost Time Injuries (LTIs) compared to four LTIs for the
previous year.
Operational
Area
Hours
Worked
Lost Time
Injuries
Fatalities
LTIFR
Operational
Area
Hours
Worked
Lost Time
Injuries
Fatalities
LTIFR
Langer Heinrich Mine
Kayelekera Mine
Employees
Mine
Contractors
Other
Contractors
Employees
Mine
Contractors
Other
Contractors
669,904
186,867
325,341
337,696
2
0
1.69
0
0
0
0
0
0
0
0
0
0
0
0
0
49,354
0
0
0
Langer Heinrich Mine
Total LTIFR = 1.7
Duration Rate = 28
Kayelekera Mine
Total LTIFR = 0.0
Duration Rate = 0.0
Perth
Corporate
Office
27,678
0
0
0
Perth LTIFR
= 0.0
Duration
Rate = 0.0
Exploration
Group
Employees
Contractors Paladin Employees All Contractors
0
0
0
0
-
0
0
0
Exploration
LTIFR = 0
Duration Rate = 0
1,233,306
958,003
2
0
1.26
0
0
0
Paladin Group +
All Contractors
LTIFR = 1.26
Duration Rate = 20.75
FY2018 Company Safety Statistics
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.
Lost Time Injury Frequency Rate (LTIFR):
Number of lost time injuries inclusive of fatalities per million hours
worked.
Duration Rate:
Average number of workdays lost per injury.
439138_2.docx
HEALTH AND SAFETY (continued)
30
Langer Heinrich Mine
During this reporting period LHM reported two LTIs. The site’s annual LTIFR decreased from 1.8 to
1.7 with the decrease being attributed to a continued focus on safety, health, environment and
radiation management.
There has been no NOSA conducted after June 2017.
LHM has continued to focus on training, further up-skilling and broadening the employees and
contractors safety and health knowledge base to ensure a safer work environment. The focus also
included improving the permit to work and isolation systems.
The 2017 Annual Radiation Report2 was compiled and delivered to the Namibian Radiation Protection
Authority (NRPA). Radiation doses reported (excluding natural background) showed:
The mean dose to individual Designated Workers was 1.2 mSv, compared with 1.6 mSv
in 2016;
The dose to the Non-Designated Worker Group was 1.0 mSv (compared to 1.6 mSv in
2016);
The dose to a hypothetical group living on the site boundary (Remote Gate) for the entire
2017 year would have been 2.1 mSv (including natural background). This is less than the
mean world member of the public dose as reported by the United Nations Scientific
Committee on the Effects of Atomic Radiation (UNSCEAR) of 2.4 mSv. This year we
have been able to assess that the contribution from the mine to this annual dose was
0.1 mSv. This can be compared to the 1 mSv recommended annual limit to members of
the public from a radiation facility.
Kayelekera Mine
KM continues to operate under care and maintenance. The site did not report any LTIs during the
reporting period. The site’s annual rolling average LTIFR remained 0 from the previous 0 in 2017. KM
has achieved 1456 LTI free days with 2,250,292 man hours worked at 30 June 2018. This outcome is
the result of the continued focus on high risk tasks and an emphasis on risk management of these
tasks. The continued focus on behaviour based safety as well as employees being actively
encouraged to report all potential safety issues and incidents has led to a reduction in workplace
injuries.
Internal NOSA based health, safety and environment audits were conducted for the period July 2017
to June 2018.
KM continues using the “Take 5” risk assessment system which was implemented in the 2016. The
Take 5 system is a straightforward tool used to identify and control hazards before employees start a
task. All site personnel receive ongoing training on the use of this system.
The 20172 Annual Dose Report was compiled and delivered to all employees and contractors at KM.
The mean radiation dose for workers for 2017 was 1.2 mSv, somewhat higher when compared to the
mean dose of 0.88 mSv reported in 2016. This increase is attributed to increased radon
concentrations due to limited dust suppression capacity during the reporting period. This has since
been rectified. All employees or contractors at KM fall into just two similar exposure groups for
monitoring, namely process operators and process maintainers.
The long lived radioactive dust concentrations and radon decay product concentrations are monitored
around the site to provide an indication of ambient conditions and also to provide baseline data for
when production resumes.
Exploration
Paladin’s exploration activities included an exploration and resource confirmation drilling programme
at Carley Bore in Australia, a soil sampling in Canada and limited ground surveys in Malawi. No LTIs
were recorded for the year with the exploration group.
2 Calendar Year (1 January 2017 to 31 December 2017)
439138_2.docx
SUSTAINABLE DEVELOPMENT
31
Paladin is committed to the goal of sustainable development, which is reflected in its corporate values.
The Company’s values include promoting the creation of shared wealth, becoming a major uranium
supplier, operating at global best practice, safety and environmental stewardship, employee welfare
and recognition, and contributing and responding to the attitudes and expectations of local
communities in the countries in which Paladin operates. The Company emphasises acting with
integrity, honesty and cultural sensitivity in all of its dealings. In support of this commitment, Paladin
applies and adheres to established and internationally recognised principles of sustainable
development for all global activities.
In implementing its sustainable development programme, Paladin aims to achieve a balance between
economic, environmental and social needs in all phases of its projects, and takes into consideration its
employees, communities, shareholders and other key stakeholders.
Corporate Sustainability Reporting
Paladin produced its sixth Sustainability Report (FY2017), which can be found on the Company’s
website www.paladinenergy.com.au.
Paladin is continuing the data collection process from LHM and KM for input into future Sustainability
Reports. Data is collected specifically to meet the reporting guidelines of the Global Reporting
Initiative (GRI) Framework applying the G4 requirements. The GRI Sustainability Reporting
Guidelines provide principles for and guidance on defining report content. Paladin’s focus is on those
indicators that are considered material to the Company and have therefore conducted materiality
assessments to define the reporting parameters. .
The following discussion provides an overview of Paladin’s environmental management.
ENVIRONMENT
Our Commitment
Paladin is committed to ensuring 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, which promotes high standards for environmental performance across its
operations. The key points of the Policy include:
Complying with applicable environmental legislation;
Ensuring operations have developed an environmental management system;
Identifying, assessing and managing environmental risks;
Implementing and assigning accountabilities for standards, guidelines and procedures;
Striving to achieve continuous improvement in environmental performance;
Preventing and mitigating pollution;
Communicating environmental responsibility to employees and contractors;
Effective consultation with stakeholders on environmental issues;
Inspections and audits of environmental performance; and
Reporting on environmental performance.
Paladin has established Corporate Sustainable Development Standards for all of its operational
subsidiaries. Operational compliance with Paladin’s Standards forms part of the site based
Environmental Audit Programme.
Environmental Management System
Within the Paladin Environmental Management System (EMS) Standard, each operating site is
required
the requirements of
ISO14001:2015. EMS for LHM was certified until April 2018. Whilst in C&M, LHM will still follow all of
the relevant ISO14001:2015 requirements but will not be audited.
implement an EMS
is consistent with
to develop and
that
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
32
When LHM recommences production
implementation of an EMS at KM is continuing for the care and maintenance phase.
it will re-apply
for registration and certification. The
The Operational Environmental Management Plan (EMP) for LHM is regularly updated and revised as
part of the site’s continual improvement process. A care and maintenance EMP for KM was approved
by the Malawian Government and is being adhered to during the care and maintenance phase.
Environment Regulatory Reporting
Both LHUPL and PAL prepare various environmental reports for the Namibian and Malawi
Governments, respectively. Regulatory reporting for LHM is conducted monthly and annually for water
aspects, and, annually for general environmental reporting. Regulatory environmental reporting at KM
is conducted on a quarterly basis for data provision and for regulatory compliance, and on an annual
basis for general environmental reporting.
Inspection and Audit Programme
The Paladin Environmental Audit Standard requires operating 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.
Energy
Energy requirements at Paladin’s operations are principally in the form of fuel for vehicles and
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 the care
and maintenance activities at KM is generated by a diesel-fuelled power station. Fuel usage at both
sites for vehicles comprises diesel and minor amounts of petrol.
Water
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. Both LHM and KM have implemented water management strategies and maintain
whole-of-site water balances to ensure that the Company’s objectives around water usage, supply and
resource protection are achieved. Reuse and recycling of water is maximised as much as possible at
Paladin’s operations.
A specific care and maintenance water management strategy has been developed for KM which
focuses on reducing stored water in the water collection ponds to ensure sufficient capacity remains in
the ponds to capture rainfall runoff from the mining and processing areas of disturbance. This water
management strategy is reviewed periodically. Water from the ponds is being treated in an on-site
water treatment plant to drinking water standards and a quality suitable for discharge. Treated water
is discharged into the local river under licence conditions.
A comprehensive surface and groundwater monitoring programme is undertaken at LHM and KM. All
water monitoring data are collated in reports that consolidate and summarise the key water aspects
across Paladin’s operations.
Land Use, Biodiversity and Rehabilitation
Land use and understanding land values are important components of sustainable development. Prior
to disturbance for project development or expansions, studies are conducted to determine land use
and land values including for biodiversity, ecological, social and cultural heritage. 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. Progressive rehabilitation of
disturbed areas is undertaken where practicable at all of Paladin’s exploration sites and mining
operations.
Paladin’s aim is to conserve biodiversity by obtaining knowledge of the ecosystems within the regions
in which the Company operates, and to ensure that impacts on biodiversity are minimised and
managed. Data on land use and biodiversity management aspects is being collated from LHM and
KM and will be presented in the 2017 Sustainability Report.
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
33
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; radon, particulate matter
(dust), sulphur oxides (SOX); carbon oxides (CO and CO2), and nitrogen oxides (NOx).
Dust generation during exploration activities and at the mine sites is suppressed using water sprays to
enable a safe working environment and to minimise impacts on the environment and surrounding
communities. Fugitive dust level monitoring is conducted at both the LHM and KM sites and the
results are collated in Annual Environmental Reports and submitted to the respective Governments.
SOX emissions are generated at the operations by the burning of fuel for heating and power
generation, and vehicle emissions. The sulphuric acid plant at KM has been mothballed whilst the site
is on care and maintenance. Ambient ground level concentrations of SO2 are monitored around KM.
Monitoring data are analysed and the results reported in the Annual Environmental Report submitted
to the Malawi Government.
The radon inhalation pathway has been identified in many studies as the main contributor to public
radiation dose received from a practice such as uranium mining and milling. This is particularly true
for permanent habitation occurring on or in the immediate vicinity of a mine site. At KM radon
concentrations in the air are monitored at 9 locations both on and off site and to allow calculation of
dose to the public. Passive radon gas monitors (PRGM) are positioned around the mine site and at
Kayelekera Village. Five polycarbonate track etch radon monitors are deployed at each monitoring
location for a period of three months, after which the radon monitors are collected and returned to the
external radiological laboratory for analyses
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 emissions relate to the energy purchased from the Namibian electricity grid to
power the LHM operations. Greenhouse gas emissions data are collected from the operating sites
and will be calculated as Carbon Dioxide (CO2) equivalent emissions. Paladin’s current Australian
activities are confined to Paladin’s limited exploration activities and the corporate Perth office.
Waste Rock
Overburden is removed to allow access to the uranium ore in the mine pit and placed in dumps.
Waste rock dump location, design and placement are important to the Company in terms of
environmental considerations and cost. The main objectives for the final landform of the dumps are 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 considers other factors such as the physical and geochemical
properties of the material placed in the dumps.
Tailings
Tailings and tailings storage facility (TSF) management continues to be a high priority at the LHM
operational site and also at KM whilst in care and maintenance. Paladin applies measures to ensure
that its TSFs are appropriately designed, operated and managed according to acceptable standards.
Specialist TSF engineers have designed the TSFs at both LHM and KM. The specialists have also
defined the operational practice and management to ensure that the tailings and TSFs are
appropriately managed and any potential environmental impacts from the tailings or the facility are
minimised.
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
34
Non-Mineral Waste
Non-mineral waste includes typical general wastes, sewage and some water that may be considered
hazardous. The LHM and KM operations both have waste management programmes and procedures
in place with the aim of 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 collected and taken to off-site recycling depots whilst the non-recyclables are delivered 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. Shredded office paper is mixed with rice husks and recycled
into energy brickettes for use in cooking. Other waste materials generated at KM require on-site
disposal so the wastes are categorised and segregated into their types and directed to appropriate on
site waste disposal sites. Sewerage treatment plants are installed at both mine sites to treat sewage.
Treated sewage from the plants is directed to the process water pond at LHM, and at KM to the water
pond and TSF. 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 is in place to ensure there is consistency across
the business in terms of incident classification and reporting. Statistics and information on incidents
occurring during the reporting period will be included in the 2017 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. During the reporting period, the LHM Draft Mine Closure
Plan and Closure Strategy were being revised and updated to reflect current and future mine plans. A
Closure Strategy has been prepared for KM and progress continued on the preparation of a Draft Mine
Closure Plan.
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
35
CORPORATE SOCIAL RESPONSIBILITY
Paladin’s purpose is to create value for its shareholders. In pursuit of this goal, the Company
recognises that encompassing economic, environmental and social values are all important
components of corporate success. Paladin stakeholders expect their Company to be a good
corporate citizen, with fair and beneficial business practices focused on: 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 CEO;
Adherence to principles enunciated in Corporate Policy and Procedures;
Programmes aligned with host country Global Goals for Sustainable Development;
Personnel dedicated to achieving CSR objectives;
Compliance with recognised international codes of conduct;
Acknowledgement of voluntary standards; and,
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:
Paladin played an instrumental role in establishing the Australia-Africa Minerals & Energy
Group (AAMEG) – an industry body that facilitates the sharing of knowledge and
experience to create better outcomes on the ground. It partners with Australian and
African governments to promote active engagement and promotes best practice in CSR
among Australian mining companies active in Africa.
Paladin has committed to the principles contained in Enduring Value – the Australian
Minerals Industry Framework for Sustainable Development. This commitment is aligned
with the Ten Sustainable Development Principles of the International Council on Mining
and Metals.
Paladin supports the Extractive Industries Transparency Initiative (EITI) and has
registered as an EITI Supporting Company, endorsing its principles and criteria. Taxes
paid by Paladin to the Malawian and Namibian governments are presented in the
Company's Sustainability Report.
Paladin supports and respects a number of international guiding documents and seeks to
conduct its business in accordance with the spirit and intent of them. These include the
UN International Bill of Human Rights, the UN Guiding Principles on Business and
Human Rights, The UN Global Compact, the ILO Declaration, the Voluntary Principles on
Security and Human Rights, the OECD Guidelines for Multi-National Enterprises and the
Equator Principles. These are embodied in Paladin’s governance framework.
Paladin’s CSR programmes are developed, managed and assessed in compliance with
the Group’s Community Relations Policy.
Paladin contributes significantly to those economies in its countries of operation through a
variety of government taxes. These are detailed below for both Malawi and Namibia,
where the Group’s mines are located. It should be noted that the Kayelekera Mine in
Malawi is currently on care and maintenance.
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
36
Payments to the Government of Namibia for the year
ended 30 June 2018
Rates, Taxes &
Licenses, US$6,776
Telecom Namibia,
US$103,341
Payroll Tax,
US$2,850,572
Royalties,
US$2,198,900
Erongo Regional
Electricity
Distributor,
US$383,451
NamPower,
US$8,837,777
Namibia Training
Authority, US$145,426
Withholding Tax,
US$608,592
NamPost, US$216
NamWater,
US$6,822,793
Payments to the Government of Malawi for the year
ended 30 June 2018
Withholding Tax,
US$38,927
Fringe Benefits Tax,
US$3,794
Payroll Tax,
US$341,256
439138_2.docx
SUSTAINABLE DEVELOPMENT
(continued)
37
Payments to the Australian Government for the year
ended 30 June 2018
Shire of Carnarvon,
US$3,693
ATO - FBT, US$5,992
Shire of Ashburton,
US$55,182
Department of
Environment &
Heritage Protection,
US$2,117
Department of Environment
& Science, US$493
Department of
Mines, US$153,314
Payroll Tax WA,
US$94,188
Mt Isa City Council,
US$5,453
Payroll Tax Qld,
US$2,074
Dept of Transport -
Qld, US$3,679
Dept of Transport,
US$2,389
Department of
Natural Resources &
Mines, US$131,344
Payments to the Canadian Government for the year
ended 30 June 2018
Income Tax, US$68,354
Employment Insurance (EI)
premiums , US$6,215
Canada Pension Plan (CPP)
premiums, US$15,904
Workers Health, Safety & Compensation
Commission (WHSCC) premiums, US$1,397
Fees (i.e. rental, regulatory,
licenses, permits,
concessions), US$285,886
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SUSTAINABLE DEVELOPMENT
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38
Human Rights
Paladin is committed to respecting 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.
The Human Rights Policy provides the overarching framework to assist in achieving Paladin’s
commitment to respect human rights throughout its business. 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.
Training on human rights is conducted across the entire Paladin Group at all levels. This also extends
to key external stakeholders and suppliers with specific training tailored for the security contingents at
each site.
Industry Participation
As a leading participant 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 Australian Uranium Association (AUA) has been integrated into the Minerals Council of Australia
(MCA) and is now represented specifically through the Uranium Forum of the MCA. As such, Paladin
is committed to abiding by and implementing the terms of the Uranium Industry Code of Practice.
Along with the Code, the Group observes the 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.
LHUPL was a founding member of the Swakopmund-based Namibian Uranium Institute (NUI) in 2009.
The NUI 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. The Institute’s aim is to improve the quality of healthcare, environment
management and radiation safety in Namibia.
LHUPL also supports the Namibian Uranium Association (NUA), an advocacy body that represents the
uranium industry exclusively.
Members of the NUA work co-operatively to ensure the Namibian uranium exploration, mining and
exporting industry is able to operate, expand and thrive safely and efficiently. The NUA’s Board of
Directors, of which LHUPL’s Managing Director, Michael Introna, is a member, also governs the NUI,
which is an industry training and research centre. LHUPL is represented on four of its working groups
– Water Quality, Sustainable Development, Radiation Safety and Swakop River Farmers.
LHM continues to provide strong support to the Namibian Chamber of Mines, which organised a
Namibian Mining Expo in April 2016. This very successful conference was attended by almost 500
delegates from all over the country and from South Africa and provided an important forum for
interaction between industry leaders and stakeholders.
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; and
Employees and their representative organisations.
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39
MALAWI
Paladin has continued to fulfil its Social Development responsibilities in Malawi under the terms of the
Kayelekera Development Agreement and Environmental Impact Assessment. Following on from its
decision to place KM on care and maintenance in 2014, Paladin has maintained its community
relations presence in Karonga, albeit at a reduced level of expenditure consistent with Kayelekera’s
non-producing status. Paladin completed the construction and hand over of the clinic at the
Kayelekera village in May 2017.
Paladin has continued its ongoing community programmes focused primarily on health and education.
Through its corporate CSR programmes and projects undertaken and funded by the Paladin staff
charity, Friends and Employees for African Children (FEPAC), the Company social development
footprint extends throughout the Karonga District, so ensuring that villages other than those in the
immediate vicinity of KM benefit from its programmes.
Garnet Halliday Karonga Water Supply Project
The Garnet Halliday Karonga Water Project was built at a cost of more than US$10M and is the
centrepiece of Paladin’s Social Development commitment to Malawi, the objective being to provide a
safe and reliable water supply to the town of Karonga.
The plant was operating as per design until the early part of 2016 when it was decommissioned and
another installed in its place by a third party. The plant was providing Karonga with a safe and reliable
water supply and maintenance support continued to be provided before decommissioning by the third
party.
Community Liaison
Monthly meetings are held with the Kayelekera village leadership and on a more informal basis, with
the Karonga District Commissioner and his/her staff together with traditional authorities and their
advisors. Attendance at the Village Development Committee assists in communicating about current
CSR projects. The Company engages the District Health Administrator and the District Officer from the
Ministry of Agriculture, Irrigation and Water Development.
These forums ensure open communication between local stakeholders and the Company, particularly
with the local CSR team on the ground and operating in the community on agreed schedules.
Community Education and HIV/AIDS Awareness
There are 36 education-through-storybooks in circulation though no longer being issued, covering a
variety of community-focused subjects and have been translated into a number of local languages.
They continue to be a very effective communication medium and remain extremely popular, given the
general lack of reading material in the district, particularly in local languages.
Community Health Care
Paladin continued its support of local health clinics by providing transport for government medical staff
in the region, alleviating the need for local villagers to travel long distances, and facilitating an under-
five clinic.
The construction of the local clinic was completed and handed over to the Government of Malawi on
behalf of the community in May 2017.
Educational Support
Paladin’s Community Relations team continues to assist in the maintenance of local schools and
teacher housing and assistance with teacher wages.
Solar power and a solar powered bore pump was supplied and installed by Paladin which supplies
power and water to the Kayelekera clinic and clinic houses at the Kayelekera village. Paladin
continues providing maintenance to the clinic facilities when the need arises.
Paladin donates all usable second hand vehicle tyres to the Malawi police department on a regular
basis.
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SUSTAINABLE DEVELOPMENT
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40
NAMIBIA
In line with Paladin’s policies and procedures, Langer Heinrich Uranium (Pty) Ltd (‘LHUPL’) continues
to support the Government of Namibia in its endeavours to develop skilled, talented, ambitious and
productive citizens, focusing specifically on its immediate impact areas within the Erongo region, while
also investing in other regions of Namibia.
LHUPL’s core Community Investments focus areas are Education and Skills Development; the
promotion of healthy lifestyles through Sports Development and Food Security; as well as the
promotion of sustainable Environmental practices and Culture. The primary target group of all
LHUPL’s community investments is the Namibian Youth.
We believe that Education and Skills Development are basic enablers for economic progress, without
which sustained development cannot take place. These enablers are acknowledged as key in human
development and critical for economic progression and increased equality.
The development of Sports skills and talents and the support to Food Security allow for the promotion
of healthy lifestyles and a healthy nation. Good health is one of the basic requirements for quality of
life. There is a direct causal relationship between good health and increased productivity and learning
abilities. In addition to improved physical health, sport plays a primarily positive role in youth
development, including improved academic achievement, higher self-esteem, fewer behavioural
problems, and better psychosocial. Food insecurity on the other hand may cause malnutrition, which
leads to bad health. In order to counter the impacts of malnutrition, LHUPL supports two feeding
initiatives.
LHUPL is committed to ensuring effective environmental management across all aspects of its
operation as well as, where possible, outside its immediate impact areas.
During the year under review, LHUPL supported the following programmes:
EDUCATION
Mondesa Youth Opportunities (MYO)
This non-profit organisation, established in 2005 as an after-school programme, offers financially
underprivileged, yet academically able Grades 4 to 8 learners with after-school support in
Mathematics, English, Life skills, Music and Computer skills five days in the week. The Centre
supports 120 learners on an annual basis with its whole child approach, which incorporates academic
and sport performance as well as physical, emotional and nutritional health (through a daily feeding
programme).
LHUPL has been MYO’s the main sponsor for the past eight years and supported the Centre with a
donation of N$800 during the year under review. The funds are utilised for the annual running costs of
the Centre as well as the feeding scheme.
The National Mathematics Congress
Skilled teachers are one of the most critical success factors for effective education, while a focus on
teacher development assures a bigger outreach and impact. LHUPL therefore supports the Annual
Mathematics Congress which targets the development of mathematics and teaching skills of teachers
across Namibia. The 13th Annual Congress was again hosted in Swakopmund and was attended by
280 mathematics educators, including classroom teachers, advisory teachers, UNAM lecturers and
officials from the Ministry of Education, Arts and Culture. LHUPL has been associated with the
National Mathematics Congress since its inception in 2010. During the year under review, LHUPL
donated N$50,000 towards the Congress.
The Mathematics Enrichment and Support Programme
This programme was initiated by LHUPL seven years ago and supports gifted learners in reaching
their full academic potential. Through curriculum-based after school classes provided throughout the
year, it benefits senior secondary learners enrolled for higher level or extended level mathematics.
Other activities include regional mathematics competitions and teacher mathematics workshops. On
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SUSTAINABLE DEVELOPMENT
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41
average, the programme benefits 200 learners on an annual basis. LHUPL’s contribution was
N$121,400 during the past financial year.
The Gobabeb Research and Training Internship Programme (GRTIP)
The Gobabeb Research and Training Programme supports the development of scientific research
skills of young environmental professionals through a five-month field-based internship programme
facilitated at the Gobabeb Research and Training Centre located in the Namib Desert. It aims to build
capacity for the sustainable management of the Namibia’s natural resources.
Students, chosen after an intensive selection process, are expected to design and implement original,
independent research projects focused on the management and restoration of degraded ecosystems.
Close mentorship and supervision to ensure scientific quality is maintained, while critical thinking,
systematic problem solving and improved communication skills are fostered.
LHUPL began its involvement in the GTRIP in 2014 with a pledge of N$1.2 million over a five year
period. This year, the programme concluded its fourth round, with 18 young Namibians (14 female)
successfully completing the programme thus far.
SPORTS DEVELOPMENT
The Blue Waters Sports Club
LHUPL has been in a long-term partnership with Namibia’s second oldest Sports Club, namely the
Blue Waters Sports Club, which was founded in 1936, making it rich with history and culture. LHUPL’s
support goes towards the promotion of youth sports in codes such as boys’ and girls’ soccer, boys’
and girls’ handball, netball, and girls’ and boys’ cricket. On average, 160 young girls and boys, mostly
from schools in low income areas, benefit from the Programme on an annual basis.
Young Namibian athletes gain from national and international exposure during competitions. The Club
also has a programme supporting schools’ sports administration and coaching. N$150,000 was
donated towards the Blue Waters Sports Club during the reporting year.
FOOD SECURITY
The Promiseland Trust
LHUPL has been supporting the Promiseland Trust Feeding Scheme for the past eight years. The
Scheme caters for 250 disadvantaged children in Walvis Bay on a daily basis. The Promiseland Trust
also has a foster child programme and has recently included pre-school classes using the Montessori
Education Model in its activities. LHUPL donated N$180,000 towards the feeding Scheme during the
year under review.
SPECIAL PROJECTS AND SHORT-TERM SUPPORT
Education
Through funds raised during its Annual Charity Golf events, LHUPL has supported various children-
centered projects over the last seven years. During the reporting period, N$1 million was raised for
the construction of five classrooms and one storeroom at the Etoto West Primary School Unit in the
Kunene region.
In addition, N$55,000 was donated towards the successful hosting of the following events: the Annual
Erongo Regional Teachers Awards, prize giving events of all schools in the Erongo region and a
career exhibition.
Culture
LHUPL supported the commemoration of Swakopmund’s 100th birthday.
Safety
LHUPL supported the annual West Coast Road Safety initiative.
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SUSTAINABLE DEVELOPMENT
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42
STAKEHOLDER ENGAGEMENT
LHUPL is a member and active participant in many mining industry bodies including the Chamber of
Mines and the Namibia Uranium Association, while it participates in various local and reginal socio-
economic planning and implementation platforms. This enables LHUPL to contribute to the
discussions and development of public policy initiatives, codes of practice, environmental stewardship
and key industry issues. This also allows LHUPL to understand and remain abreast of key challenges
and opportunities facing the uranium sector as well as Namibia as a whole, and facilitates the
development of LHUPL’s strategies, plans and policies to better reflect and respond to market needs
and stakeholder expectations. During this review period, key engagement sessions took place with
the following stakeholders;
The Ministry of Education, Arts and Culture, the Erongo Regional Council, the Swakopmund and
Walvis Bay Municipalities, the Chamber of Mines, the Namibia Uranium Association, the Erongo
Development Foundation and the Namibia Chamber of Commerce.
We facilitate regular public and interest group site visits to the LHUPL mine site, while LHUPL also
participated in the annual Namibian Chamber of Mines’ Mining Expo as well as the Swakopmund
International Trade Expo (SWAITEX).
EMPLOYEE CHARITABLE FOUNDATION, SUPPORTED BY PALADIN
Friends and Employees of Paladin for African Children (FEPAC) is a charitable foundation established
in 2008 by Paladin employees, as a means of funding some smaller social projects in Malawi that
were outside the scope of the Kayelekera development agreement between Paladin and the
Government of Malawi. In recent years, the focus has shifted towards setting up a number of self-
sustaining projects designed to generate both ongoing food and income for supported organisations
that will exceed FEPAC’s current annual funding contribution and is expected to allow for the winding
up of the trust in the near future.
OUR PEOPLE
The Company has continued to review its workforce throughout all departments and projects with a
view of efficiency, rationalisation and consolidation. This has led to a continued decrease in total
employee numbers seen across the Group.
Turnover for the Group is detailed in the following table.
Location
Australia
- Corporate,
administration, financial &
marketing
- Technical Services
- Exploration
Namibia
- LHM
- KM
Malawi
- Exploration
Canada
- Exploration
Total
Total at
Year-end
Female %
Local
Nationals %
Turnover %*
10
0
3
165***
129
0
4
307
40%
n/a
67%
16%
11%
0%
0%
15%
n/a
n/a
n/a
92%
99%
0%
100%
0%**
n/a
40%**
49%**
3%**
0%
0%
* Employee turnover is based on a 12 month rolling average.
** Due to retrenchments during the financial year
*** Includes LHM Permanent Employees and Paladin employees seconded to LHM.
Diversity overall, and gender diversity specifically, remains a focus and, despite the overall headcount
decreasing over the period, the percentage of female representation within the workforce has
remained reasonably steady. Supporting a diverse workforce remains one of the cornerstones of
Paladin’s strategy with a commitment to equitable gender representation amongst its workforce,
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SUSTAINABLE DEVELOPMENT
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43
balanced with availability of appropriate candidates in the region of operation. Further information on
diversity can be found in the Corporate Governance Statement available on Paladin’s website.
Australia (Head Office & Mount Isa)
The Perth head office currently has 14 employees, a reduction from 15 at the same time last year.
Females within the head office represent 46% of employees.
During the period, the total turnover was 13%. In light of the continued focus on consolidating the
organisational structure and cost reduction one role was made redundant. In instances of natural
attrition only those roles that were deemed essential were replaced.
During the period all Corporate employees and employees seconded to LHM and KM received a 5%
salary increase. There has been no increase in salaries for 4 years with executive management
accepting a 10% reduction in 2014 and 2015.
Exploration
Group-wide the exploration team totals 7 spread across projects based in Australia, Malawi and
Canada. Paladin places a large focus on the development of its geoscience capabilities and has the
benefit of exposing its professionals to a number of different geological terrains and environments
within the global project portfolio. Additionally, a number of senior technical individuals within the
Group are consistently invited to present papers at industry conferences, providing yet another
opportunity to transfer expert knowledge amongst the Group and aid in the development of junior
professionals.
The Perth based exploration team is a small group comprised of senior technical roles focussed on
providing support and guidance across the Group. This small group consistently has minimal
turnover.
When the Company is active in exploration in Canada, it employs up to 30 seasonal staff for each field
season. Of these individuals, generally 80% are employed from the surrounding communities of
Postville, Makkovik and Rigolet with the majority consistently re-employed for the past field seasons.
Currently, programmes that are run in Australia are relatively small and, as a consequence, involve
very limited numbers of outside contractors (mainly drilling and earthworks).
Malawi (Kayelekera Mine)
With Kayelekera Mine remaining on C&M, the focus has continued to be on adapting the workforce
and operations to better suit this change. The current financial year has seen the operation in a
continued settled state within C&M, and further decreases to both the national and expatriate
employee numbers during the year. At year end there were 128 national employees and 1 expatriate
employee.
Namibia (Langer Heinrich Mine)
The relentless depressed uranium spot price together with an uncertain likelihood of improvement in
the foreseeable future resulted in a strategic intervention of operational and human resources
requirements at LHM. In view of the uncertain market and economic constraints the LHUPL Board
resolved to implement a care and maintenance strategy at LHM. The LHM care and maintenance
strategy required amongst others, the regrettable collective retrenchments of the workforce,
commencing June 2018 and retaining only a limited number of staff to maintain the plant and comply
with statutory requirements. It is expected that the mine will remain on care and maintenance until the
uranium price appreciates in value to successfully allow for the profitable restart of operations. The
retrenchments during the financial year end June 2018 resulted in an overall 12 month rolling total
turnover of 53% with further retrenchment to continue during July and August 2018.
The challenging financial constraints mentioned resulted in limiting external training for our human
resources skills development, other than statutory and/or specific technical training interventions.
Notwithstanding, LHUPL contributed to the Namibian Vocational Education & Training Levy, invested
N$70,556 in the training of 18 Namibians, supporting, 7 Graduate students in the fields of Metallurgy,
Chemical Engineering, Environment and Radiation and 11 Artisan Apprentices in Electrical, Fitting &
Turning and Boilermaker Trades. LHM continued with its technical job attachments programme
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SUSTAINABLE DEVELOPMENT
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44
whereby trainee students from the Namibia Institute of Mining and Technology (NIMT) and the
Namibia Training Authority (NTA) receive a 1 year fixed term contract in order to practice and improve
their trade skills before taking employment in the general market.
LHM continued to adhere to the regulatory compliance requirements and received recertification of our
employment equity compliance practises in terms of the Affirmative Action Act. Additionally the
Labour commissioner has issued the compliance certificate for our collective retrenchment process
implemented by LHM.
LHM’s workforce demographics in terms of Employment Equity categories as at 30 June 2018 was as
follows:
% Female Employees
% Historically Racially Disadvantaged Employees*
% Non-Namibians
Total Employees
CY2016
CY2017
CY2018
18%
85%
9%
446**
18%
89%
5%
368**
16%
92%
6%
165**
* As defined in the Affirmative Action (Employment) Act 1998
** Includes FTC employee numbers
The year ahead will continue to require measures to ensure the attraction of skilled artisans, retention
of skilled employees and overall competency building to provide for an engaged and high performing
workforce.
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CORPORATE GOVERNANCE STATEMENT
45
CORPORATE GOVERNANCE FRAMEWORK
The Board of Directors of Paladin Energy Ltd (subject to Deed of Company Arrangement) 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.
This Corporate Governance Statement, dated 30 June 2018, and approved by the Board on 27 August
2018, outlines the key principles and practices of the Company which, taken as a whole, represents
the system of governance.
The ASX Listing Rules require the Company to report on the extent to which it has followed the
Corporate Governance Recommendations contained in the ASX Corporate Governance Council’s
(ASX CGC) 3rd Edition of its Corporate Governance Principles and Recommendations. For FY2018,
Paladin has complied with most of the recommendations and has referenced these throughout this
Corporate Governance Statement.
Paladin’s Corporate Governance Statement can be found in the Corporate Governance section of the
Investor Centre on its website at www.paladinenergy.com.au, along with the ASX Appendix 4G, a
checklist cross-referencing the ASX Principles and Recommendations to disclosures in this statement,
the current Annual Report and the Company website. The Corporate Governance Statement, together
with the 4G, has been lodged with the ASX.
The Company reviews and amends its corporate governance policies as appropriate to reflect the
growth of the Company, current legislation and good practice. Copies or summaries of key corporate
governance policy documents can be found on the Company’s website (www.paladinenergy.com.au).
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DIRECTORS’ REPORT
____________________________________________________________________________________
46
The Directors of Paladin Energy Ltd present their report together with the financial report of 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 2018 and the auditor’s report.
DIRECTORS
The following persons were Directors of Paladin Energy Ltd and were in office for this entire period unless
otherwise stated:
Mr Rick Wayne Crabb B. Juris (Hons), LLB, MBA, FAICD
(Non-executive Chairman)
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 and advised in relation to numerous project
developments in Australia, Asia and Africa. Mr. Crabb now focuses on his public company directorships
and investments. He is also chairman of Eagle Mountain Mining Limited (since 6 September 2017), a
non-executive director of Thundelarra Limited (since November 2017) and was a non-executive director
of Golden Rim Resources Ltd (from August 2001 to November 2017) and was non-executive chairman of
Otto Energy Ltd (from November 2004 to November 2015) and Lepidico Ltd (formerly Platypus Minerals
Ltd) (from September 1999 to October 2015). Mr. Crabb was a councilor on the Western Australian
Division of the Australian Institute of Company Directors from 2008 to 2017.
Mr. Crabb was appointed to the Paladin Board on 8 February 1994 and as Chairman on 27 March 2003.
Special Responsibilities
Chairman of the Board
Chairman of Remuneration Committee from 1 February 2018 (member from 1 June 2005)
Chairman of Nomination and Governance Committee from 1 February 2018 (member from 1 June 2005)
Member of Sustainability Committee from 25 November 2010
Mr David Riekie B. Econ. Dip Acc. CA, MAICD
(Non-executive Director)
Mr Riekie is an experienced ASX director at both the Executive and Non-executive level. He has
operated in a variety of countries globally and throughout Africa; notably Namibia and Tanzania. He is
Managing Director of junior explorer MetalsTech Limited which is focussed on high grade cobalt in
Ontario and Lithium in Quebec Canada. He has throughout his career provided corporate, strategic and
compliance services to a variety of organisations operating in the Resource and Industrial sector, usually
enterprises seeking expansion capital and listing on ASX. He has been directly responsible for
successful capital raising, stakeholder engagement, acquisition and divestment programmes. Additional
experiences were been gained during his time as a corporate reconstruction specialist with Price
Waterhouse. He has overseen, exploration and resource development, scoping and feasibility studies,
production, optimisation and rehabilitation initiatives. He has special interest in the energy and energy
storage sector, primarily through energy storage minerals and commodities with specific knowledge of
uranium (Uranio Limited), oil and gas (Hawkley Oil and Gas), graphite (Battery Minerals Limited) and
cobalt (MetalsTech Limited).
Mr Riekie was appointed to the Paladin Board on 1 February 2018.
Special Responsibilities
Chairman of Audit and Risk Committee from 1 February 2018
Member of Remuneration Committee from 1 February 2018
Member of Nomination and Governance Committee from 1 February 2018
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DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
47
Mr Daniel Harris B.Sc
(Non-executive Director)
Mr Harris is a seasoned and highly experienced mining executive and director. Most recently Mr Harris
held the role of interim CEO and Managing Director of ASX listed Atlas Iron until January 2017 when he
resumed his role as a Non-executive Director and is Chairman of the Audit and Risk Committee. Mr
Harris has been involved in all aspects of the industry for over 40 years and held both COO and CEO
positions in Atlantic Ltd and Strategic Minerals Corporation and was also the former Vice President of
EVRAZ Plc in Moscow. Mr Harris is a consultant and member of the Advisory Board of Black Rock
Metals in Montreal and is a consultant and advisor to GSA Environmental in the UK. Mr Harris currently a
Non-executive Director of Perth based Australian Vanadium Ltd. and is a Non-executive Director of
Queensland Energy and Minerals, based in Brisbane.
Mr Harris was appointed to the Paladin Board on 1 February 2018.
Special Responsibilities
Chairman of Sustainability Committee from 1 February 2018
Member of Remuneration Committee from 1 February 2018
Member of Nomination and Governance Committee from 1 February 2018
Member of Audit and Risk Committee from 1 February 2018
Mr John Hodder B.Sc. B.Com.
(Non-executive Director)
Mr. Hodder is a Geologist by background with a B.Sc. in Geological Sciences and a B.Com. in Finance
and Commerce from the University of Queensland. He spent ten years in the mining and oil and gas
industries before completing a M.B.A. at London Business School. Mr Hodder established the
Commonwealth Development Corporation (CDC) mining, oil and gas investment department in 1995 and
was responsible for its investment activities for some eight years. He has served as a director of a
number of junior mining companies and has significant experience of operating and investing in Africa.
Mr Hodder also worked at Suncorp and Solaris as a Fund Manager focusing on the resources sector
managing an index-linked natural resource portfolio of $1.25bn. In 2014 Mr Hodder was one of three
principals who established Tembo Capital a mining focused private equity fund group.
Mr Hodder was appointed to the Paladin Board on 14 February 2018.
Special Responsibilities
Member of Audit and Risk Committee from 14 February 2018
Member of Nomination and Governance Committee from 14 February 2018
Mr Donald Shumka B.A., MBA (resigned 8 December 2017)
(Non-executive Director)
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 Alterra Energy Corp. (since March 2008), Lumina Gold Corp. (formerly Odin Mining
and Exploration Ltd) (since July 2014), RIWI Corporation (since September 2015) and was a director of
Eldorado Gold Corp. (from May 2005 to May 2016).
Mr Shumka was appointed to the Paladin Board on 9 July 2007.
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DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
48
Mr Peter Mark Donkin BEc, LLB. F Fin (resigned 8 December 2017)
(Non-executive Director)
Mr Donkin has over 30 years’ experience in finance, including 20 years arranging finance in the mining
sector. He was previously 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
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 was previously a
director of Allegiance Coal Ltd, Sphere Minerals Ltd and Carbine Tungsten Ltd.
for mining companies, both
involved arranging
transactions
Mr Donkin was appointed to the Paladin Board on 1 July 2010.
Mr Philip Baily BSc, MSc (resigned 8 December 2017)
(Non-executive Director)
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
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.
the world, many
throughout
located
Mr Baily was appointed to the Paladin Board on 1 October 2010.
Mr Wendong Zhang (resigned 8 December 2017)
(Non-executive Director)
Mr Zhang has over 25 years’ experience in financial services and international capital markets and was
among the first generation Chinese bankers on Wall Street working with Morgan Stanley, UBS and Citi
across New York, Hong Kong and Beijing. He also co-founded two boutique investment advisory firms
focusing on China opportunities. He has completed a number of advisory, financing and investment
transactions and established relationships with leading players in various sectors including conventional
energy, nuclear utilities and natural resources. Mr Zhang graduated from Dartmouth College, New
Hampshire USA, in 1991 with a B.A. in Engineering and Economics.
Mr Zhang was appointed to the Paladin Board on 25 November 2014.
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DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
49
CHIEF EXECUTIVE OFFICER
Mr Alexander Molyneux BEc (resigned on 1 July 2018)
Mr Molyneux is an experienced mining industry executive. He is Co-Founder and Chairing Member of
Azarga Resources Group (2012 – present). Mr. Molyneux currently serves as Non-executive Chairman
of Azarga Metals Corp. (TSX-V:AZR) (May 2016 – present), Non-executive Chairman of Argosy Minerals
Limited (ASX:AGY) (2016 – present) and Non-executive Director of Metalla Royalty & Streaming Ltd
(TSXV:MTA) (2018 – present). He was previously Executive Chairman of Azarga Uranium Corp
(TSX:AZZ) and its predecessor companies (2012 – 2015), Non-executive Director of Goldrock Mines
Corp (TSX-V:GRM) (2012 – 2016) and CEO of SouthGobi Resources Limited (Ivanhoe Mines Group)
(TSX:SGQ / HKEX:1878) (2009 – 2012). Prior to joining SouthGobi, Mr Molyneux was Managing
Director, Head of Metals and Mining Investment Banking, Asia Pacific, with Citigroup. In his position as a
specialist resources investment banker he spent approximately 10 years providing advice and investment
banking services to natural resources corporations.
CHANGE OF CHIEF EXECUTIVE OFFICER
On 12 June 2018, Paladin Energy Ltd announced that Mr Scott Sullivan had been appointed as Chief
Executive Officer commencing on 1 July 2018.
Mr Sullivan brings 30 years of diversified mining experience to Paladin, across multiple commodities and
projects domestically and internationally. His experience spans strategic planning in mines and smelters;
feasibilities; commissioning; mine expansion and restructuring; mine, port and rail infrastructure; project
management; sustainability and government and has a strong emphasis on operational optimisation.
He was most recently General Manager of Newcrest’s large and complex Telfer gold-copper mine in the
Pilbara Western Australia. Prior roles include CEO and Managing Director roles with ASX-listed
companies centered in West Africa and the US and Asset President of NSW Energy Coal at BHP Billiton,
being directly responsible for the operation and rapid expansion of one of Australia’s iconic and highest
producing coal mines, Mt Arthur, along with the Caroona Coal project and BHPB’s share in the NCIG port
infrastructure in Newcastle. Mr Sullivan was also GM of the Wambo Coal OC and UG operations in the
Hunter Valley with Peabody Energy and successfully commissioned the UG mine to be one of the most
productive thin seam Long Wall mines in the world.
Mr Sullivan is a Fellow of the Australian Institute of Mining and Metallurgy (FAusIMM) and Graduate of
the Australian Institute of Company Directors (GAICD). He holds a Bachelor of Engineering in Mining and
an MBA.
JOINT COMPANY SECRETARY
Mr Ranko Matic B.Bus, CA
Mr Matic is a Chartered Accountant with over 25 years’ experience in the areas of financial and executive
management, accounting, audit, business and corporate advisory. Mr Matic serves as a Non-executive
Director and Company Secretary for a number of publicly listed natural resources companies.
Andrea Betti CA, AGIA, BCom, MBA (appointed 6 April 2018)
Ms Betti is an accounting and corporate governance professional with over 20 years’ experience in
accounting, corporate governance, corporate advisory, finance and corporate banking. Ms Betti has
acted as Chief Financial Officer and Company Secretary for companies in the private and publicly listed
sectors, as well as senior executive roles in the banking and finance industry.
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(continued)
____________________________________________________________________________________
50
BOARD AND COMMITTEE MEETINGS
The number of Directors’ meetings and meetings of committees held during the financial year, and the
number of meetings attended by each Director in the period they held office were:
Board of
Directors
Audit
Committee
Remuneration
Committee
Nomination and
Governance
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
Number
attended
Number
eligible
to attend
6
5
5
5
1
1
1
1
6
5
5
5
1
1
1
1
-
1
1
1
-
-
-
-
-
1
1
1
-
-
-
-
1
1
1
-
-
-
-
-
1
1
1
-
-
-
-
-
1
1
1
1
-
-
-
-
1
1
1
1
-
-
-
-
1
-
1
-
-
-
-
-
1
-
1
-
-
-
-
-
Name
Mr Rick Crabb
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
Mr Wendong Zhang
Of the above Board meetings, 2 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.
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
Share rights (issued under
the Paladin Employee Plan)
Mr Rick Crabb
Mr John Hodder (Tembo Capital Management Ltd)*
119,630
223,589,744
Nil
Nil
*Mr John Hodder as a co-founding principal of Tembo Capital Management Ltd controls 223,589,744
shares through its holding in Paladin under the entity Ndovu Capital XII BV.
RESIGNATION OF DIRECTORS
Following the successful resolution in favour of execution of the proposed deed of company arrangement,
Mr Donald Shumka, Mr Peter Donkin, Mr Philip Baily and Mr Wendong Zhang resigned on 8 December
2017.
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 7 to 16 of this report under
the section entitled Operating and Financial Review.
The Group’s profit after tax for the year is US$343,413,000 (2017: loss after tax US$484,182,000)
representing an increase of 171% from the previous year.
Included in the Consolidated Financial Statements for the year ended 30 June 2018 is an independent
auditor’s report which includes an Emphasis of Matter paragraph in regard to the existence of a material
uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern. For
further information, refer to Note 4 in the Consolidated Financial Statements, together with the auditor’s
report.
DIVIDENDS
No dividend has been paid during the financial year and no dividend is recommended for the current year.
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51
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 1 February 2018, a deed of company arrangement was effectuated and a capital restructure was
completed. On 2 February 2018, Paladin emerged from voluntary administration and was reinstated to
official quotation on the ASX on 16 February 2018. In May 2018, the Company received the consent of
relevant stakeholders to place LHM into care and maintenance and LHM stopped presenting ore to the
plant.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Other than disclosed below, since 30 June 2018, 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
periods with the exception of the following, the financial effects of which have not been provided for in the
30 June 2018 Financial Report:
Appointment of Chief Executive Officer
On 12 June 2018, Paladin Energy Ltd announced that Mr Scott Sullivan had been appointed as Chief
Executive Officer (CEO) commencing on 1 July 2018.
Recommended Takeover Offer of Summit Resources Ltd
On 1 August 2018, Paladin Energy Ltd announced an off-market takeover offer for the shares in Summit
Resources Ltd it does not presently own.
Highlights of the takeover offer (Offer):
Consideration of one (1) new Paladin share for every one (1) Summit share held.
Paladin currently holds 82.08% of the ordinary shares in Summit.
If successful, Offer would result in approximately 39.1M new Paladin shares being issued to
third-party shareholders representing approximately 2.28% of Paladin’s shares outstanding.
The Offer consideration is final and will not be increased.
Summit’s Independent Directors unanimously recommend the Offer (in the absence of a
superior offer and subject to the independent expert not concluding that the Offer is not fair
and not reasonable).
The Offer is being made in line with Paladin’s continued cost optimisation initiatives – If the
Offer succeeds, will result in reduced compliance and regulatory costs associated with
having a Paladin majority-owned subsidiary separately listed.
Paladin encourages Summit third-party shareholders to accept in light of the opportunity to
exchange for shares in Paladin, a larger, more comprehensive, more liquid uranium
company.
LIKELY DEVELOPMENTS
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 Operating and Financial Review.
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 (placed on care and maintenance in May 2018 and February 2014, respectively), as well as
exploration projects in Australia, and Canada. The Group’s Policy is to ensure compliance 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 required to conduct the activities 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.
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52
REMUNERATION FOR THE YEAR AT A GLANCE
Executive Remuneration – cash value of earnings realised (unaudited)
Details of the remuneration received by the Key Management Personnel are prepared in accordance with
statutory requirements and accounting standards, and are detailed further in the Remuneration Report.
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 difficult business and operating conditions which
have persisted throughout the year, specifically the continuing poor uranium price, and resulting cash
constraints that the Company faced during the past year, the following initiatives have been implemented:
Paladin reduced its corporate office staff by a further 7% during the year.
Ex-pat numbers at the Kayelekera Mine were reduced by a further 50% during the year.
During the year all Corporate employees and employees seconded to LHM and KM received
a 5% salary increase. Prior to this, there had been no salary increases for 4 years and
executive management had accepted two 10% salary reductions in 2013 and 2015.
Cash bonuses totalling only US$68,286 were paid across the Group this year.
7,500,000(1) Share Appreciation Rights (SARs) were granted during the year.
Long-term incentives on issue at balance date comprise 3,000,000 Options (0.18% of issued
capital) and 14,519,000(1)(2) SARs.
(1) The number of ordinary shares ultimately issuable upon vesting of the SARs will vary as the number of
ordinary shares to be issued is based upon Paladin’s relative share price growth over the relevant vesting
periods.
(2) Based on the closing share price at 30 June 2018 of A$0.175, 1,071,429 shares (0.06% of issued
capital) would be issuable.
In keeping with the Company’s practice since 2011, the tables below set out the cash value of earnings
realised by the CEO and other executives considered to represent Key Management Personnel (KMP) for
2017 and 2018 and the intrinsic value of share-based payments that vested to the executives during the
period. This voluntary disclosure is in addition and different to the disclosures required by the
Corporations Act and Accounting Standards, particularly in relation to share rights. As a general
principle, the Accounting Standards require a value to be placed on share rights based on probabilistic
calculations at the time of grant, which may be reflected in the remuneration report even if ultimately the
share rights do not vest because vesting conditions are not met. By contrast, this table discloses the
intrinsic value of share rights, which represents only those share rights which actually vested and resulted
in shares issued to a KMP. The intrinsic value is the Company’s closing share price on the date of
vesting.
The Company believes that this additional information is useful to investors as recognised by the 2009
Productivity Commission Inquiry Report ‘Executive Remuneration in Australia’. The Commission
recommended that remuneration reports should include actual levels of remuneration received by the
individuals named in the report in order to increase its usefulness to investors.
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 2018 year. The tables do not include the accounting value for share rights, share appreciation
rights and 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
Alexander Molyneux, who was paid in United States dollars), therefore the tables are presented in both
A$ and US$ (being the functional and presentation currency of the Company). The detailed schedules of
remuneration presented later in this report are presented in US$.
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DIRECTORS’ REPORT
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____________________________________________________________________________________
53
REMUNERATION FOR THE YEAR AT A GLANCE (continued)
Executive Remuneration - cash value of earnings realised (unaudited) (continued)
2018 (A$) / (US$)
Name
Base Salary &
Superannuation
US$
A$
Other
Separation
Payment
Total
Cash
A$
US$
A$
US$
A$
US$
Mr Alexander Molyneux
Mr Craig Barnes
-
375,567
-
619,459(1) 480,000(1)
291,016
-
-
371,676(2)
-
288,000(2)
-
991,135
375,567
768,000
291,016
Total
375,567
291,016
619,459
480,000
371,676
288,000
1,366,702
1,059,016
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.
Exchange rate used is average for 2018 financial year US$1 = A$1.29054.
(1) Fees for services as CEO, includes payment of A$123,892 (US$96,000) in lieu of three month notice
period.
(2) Separation payment – conditional upon the effectuation of a deed of company arrangement, payment
equal to nine months’ salary A$371,676 (US$288,000) in full and final satisfaction of all benefits
entitlements arising out of his engagement.
2017 (A$) / (US$)
Name
Base Salary & Superannuation
Other
Total
Cash
A$
US$
A$
US$
A$
US$
Mr Alexander Molyneux
Mr Craig Barnes
-
370,931
-
279,477
509,656(1)
384,000(1)
-
-
509,656
370,931
384,000
279,477
Total
370,931
279,477
509,656
384,000
880,587
663,477
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.
Exchange rate used is average for 2017 financial year US$1 = A$1.32723.
(1) Fees for services as CEO.
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DIRECTORS’ REPORT
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____________________________________________________________________________________
54
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.
Key Management Personnel comprise:
Mr Rick Crabb, Non-executive Chairman
Mr Alexander Molyneux, Chief Executive Officer (resigned 1 July 2018)
Mr Scott Sullivan, Chief Executive Officer (appointed 1 July 2018)
Mr David Riekie, Non-executive Director (appointed 1 February 2018)
Mr Daniel Harris, Non-executive Director (appointed 1 February 2018)
Mr John Hodder, Non-executive Director (appointed 14 February 2018)
Mr Donald Shumka, Non-executive Director (resigned 8 December 2017)
Mr Philip Baily, Non-executive Director (resigned 8 December 2017)
Mr Peter Donkin, Non-executive Director (resigned 8 December 2017)
Mr Wendong Zhang, Non-executive Director (resigned 8 December 2017)
Mr Craig Barnes, Chief Financial Officer
For the purposes of this report, the term ‘Executive’ encompasses the CEO, senior executives, managers
and Company Secretary of the Parent and the Group.
REMUNERATION APPROVAL PROCESS
The Remuneration Committee is charged with assisting the Board by reviewing and making appropriate
recommendations on remuneration packages for the 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 Rick Crabb, held one meeting during the year. Messrs
Riekie and Harris are also Committee members. The CEO is invited to attend those meetings which
consider the remuneration strategy of the Group and recommendations in relation to senior executives.
Having regard to the recommendations made by the CEO, the Committee approves the quantum of any
short-term incentive bonus pool and the total number of any long-term incentive grants to be made and
recommends the same for approval by the Board. Individual awards are then determined by the CEO in
conjunction with senior management, as appropriate. The remuneration for the CEO is determined by the
Remuneration Committee.
Any salary reviews and bonus payments are effective from 1 January in the year.
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DIRECTORS’ REPORT
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____________________________________________________________________________________
55
REMUNERATION REPORT (Audited) (continued)
KEY ELEMENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION STRATEGY
The overall focus of Paladin’s remuneration strategy is to:
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.
The above strategies also need to recognise the economic situation of the Group given the prevailing
uranium prices.
This strategy applies group wide for all employees. Information in relation to the compensation of
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 but must also reflect current
economic conditions. Consideration of the Company’s earnings will be more relevant as the Company
matures from its development and consolidation phase to profitability which is of course highly dependent
on prevailing uranium prices.
The Board is cognisant of general shareholder concern that long-term equity-based remuneration be
linked to Company performance and growth in shareholder value. SARs issued under the LTI
programme have a one to three-year performance period. These SARs will only vest at the end of a one
to three-year period. If a Key Management Personnel/Executive resigns during this period, they will
ordinarily forfeit their shares. This promotes a focus on long-term performance as the value of the shares
is linked to the ongoing performance of the Company. This period represents an appropriate balance
between providing a genuine and foreseeable incentive to Key Management Personnel/Executives and
fostering a long-term view of shareholder interests.
The table below compares the earnings per share to the closing share price for the Company's five most
recently completed financial years.
EPS
Share Price
30 June 2014
US$(0.33)
A$0.29
30 June 2015
US$(0.19)
A$0.245
30 June 2016
US$(0.07)
A$0.185
30 June 2017
US$(0.27)
A$0.047(1)
30 June 2018
US$0.215
A$0.175
(1) The securities of Paladin were suspended from official quotation, at the request of the Company, on
13 June 2017 and were reinstated on 16 February 2018.
The remuneration structure for the Key Management Personnel/Executives has three elements:
Fixed remuneration;
Short-term variable remuneration; and,
Long-term incentives.
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56
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION
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
Expatriate benefits
Statutory % of base salary.
Executives who fulfil their roles as an
benefits
expatriate may
receive
relocation costs, health
including
insurance,
car
housing
allowances, educational fees and tax
advisory services.
and
Foreign assignment allowance An additional % of base salary is
payable
foreign
relation
assignments being 15% for Malawi
and 10% for Namibia.
to
in
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.
performance
Award determined in the September
quarter of each year, based on
and
individual
contribution to team and Company
performance. Vesting dependent on
creation of shareholder value over a
one to 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. 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.
Despite the challenging economic times, there was a general salary increase at LHM as part of the wage
agreement and in an effort to maintain a competitive remuneration structure. There were discretionary
increases at KM to realign salaries to market. During the year all Corporate employees and Company
employees seconded to LHM and KM received a 5% salary increase.
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____________________________________________________________________________________
57
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION (continued)
Variable Remuneration (continued)
Short-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. 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)
(b)
(c)
(d)
(e)
(f)
(g)
health, safety and environmental performance;
production performance;
project development performance;
additional uranium resources delineated;
performance of the Company in meeting its various other objectives;
financial performance of the Company; and
such other matters determined by the Remuneration Committee in its discretion.
The above must, however, be viewed in the context of the operating environment and the priorities in
terms of the allocation and preservation of cash.
Given the priority of cost reduction and cash conservation with the uranium industry continuing to
experience difficult times, cash bonuses totalling only US$68,286 were paid across the Group this year
(FY2017 US$131,124). No bonuses were paid to KMPs.
Short-term incentives will not be reinstated until such time as the operating environment improves and, at
that time, a more structured incentive programme linked both to individual and corporate performance will
be implemented.
Long-term Incentives
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 Company implemented an Employee
Performance Share Rights Plan (the Rights Plan) together with a Contractor Performance Share Rights
Plan (the Contractor Rights Plan). These plans are referred to jointly as the Rights Plans and were
reaffirmed by shareholders at the 2015 Annual General Meeting.
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58
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION (continued)
Variable Remuneration (continued)
Long-term Incentives (continued)
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 in assisting to attract and retain talented people.
SARs are granted under the plan for no consideration. SARs are a right to receive a bonus equal to the
appreciation in the company's share price over a period. SARs benefit the holder with an increase in
share price; the holder is not required to pay the exercise price, but rather just receives the amount of the
increase in shares. The number of ordinary shares ultimately issuable upon vesting of the SARs will vary
as the number of ordinary shares to be issued is based upon Paladin’s relative share price growth over
the relevant vesting periods. SARs granted under the FY2018 LTI Offer were granted in 3 tranches. The
first tranche vested on 16 April 2018. The second and third tranche will only vest if the holder remains
employed at the relevant vesting dates of 16 April 2019 and 16 April 2020.
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 0.85%.
The Board is cognisant of general shareholder concern that long-term equity-based rewards should be
linked to the performance of the Company. The holder of a SAR only receives an amount equivalent to
the share price increase (i.e. the net appreciation amount, which is the market price on exercise date
minus market price on grant date) in shares.
The Company does not offer any loan facilities to assist in the purchase of shares by employees.
The CEO was granted 3,000,000 options upon appointment, on 10 August 2015, as follows:-
Date granted
10 August 2015
10 August 2015
10 August 2015
Total
Exercisable date
10 August 2015
8 November 2015
23 December 2015
Expiry date
10 August 2018
8 November 2018
23 December 2018
Exercise price Number
A$0.20
A$0.30
A$0.40
1,000,000
1,000,000
1,000,000
3,000,000
The options issued to the CEO have different exercise prices and provide a direct link between the CEO’s
reward and shareholder return, and provide a clear line of sight between CEO performance and Company
performance.
Shares Acquired Under the Rights Plan
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.
Change of Control
All SARs 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 SARs relative to total issued shares is very insignificant
(0.85%) and thus are not considered a disincentive to a potential bidder.
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59
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION (continued)
Cessation of Employment
Under the Rights Plan, employees’ SARs 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 SARs cancelled, other than on death at which point the contractor’s legal representative
will be entitled to receive them.
Share Appreciation Rights at 30 June 2018
Date granted
Exercisable date
1 November 2016
1 November 2017
1 November 2018
1 November 2016
1 November 2017
1 November 2018
20 October 2015
20 October 2015
20 October 2015
3 March 2016
3 March 2016
3 March 2016
27 September 2016 11 November 2017
27 September 2016 11 November 2018
27 September 2016 11 November 2019
16 April 2018
16 April 2018
16 April 2018
Total
16 April 2018
16 April 2019
16 April 2020
Expiry date
Exercise
Fair
value
price
A$0.13 A$0.20
1 November 2021
A$0.13 A$0.20
1 November 2022
A$0.13 A$0.20
1 November 2023
A$0.10 A$0.20
1 November 2021
A$0.10 A$0.20
1 November 2022
1 November 2023
A$0.10 A$0.20
11 November 2022 A$0.08 A$0.20
11 November 2023 A$0.08 A$0.20
11 November 2024 A$0.08 A$0.20
A$0.17 A$0.15
16 April 2023
A$0.05 A$0.15
16 April 2024
A$0.07 A$0.15
16 April 2025
Number
2,275,000
1,137,500
1,137,500
157,500
78,750
78,750
718,000
718,000
718,000
3,750,000
1,875,000
1,875,000
14,519,000
In summary, this balance represents 0.85% of the issued capital.
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.
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$1,200,000 (US$929,843) as approved by shareholders at the 2008 AGM.
Fees paid for the year to 30 June 2018 total A$149,000 (US$115,455), a reduction of 59% from 2016.
Remuneration Component Elements
Base Fee
Must
aggregate limit
be
contained within
Superannuation
are
Statutory
included in the fees set out above
contributions
439138_2.docx
Details
(per annum)
Chairman
A$125,000 (US$96,859)
Non-executive Director
A$80,000 (US$61,990)
Statutory % of fees
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
60
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF NON-EXECUTIVE DIRECTOR REMUNERATION (continued)
Other Fees/Benefits
In addition, the Company’s Constitution provides for additional compensation to be paid if any of the
Directors are called upon to perform extra services or make any special exertions on behalf of the
Company or the business of the Company. The Company may compensate such Director in accordance
with such services or exertions, and such compensation may be either in addition to or in substitution for
the Directors’ fees referred to above. No additional fees were paid during the year, other than the
Directors’ fees disclosed.
Non-executive Directors are also entitled to be reimbursed for reasonable expenses incurred whilst
engaged on Company business. There is no entitlement to compensation on termination of non-
executive directorships. Non-executive Directors do not earn retirement benefits (other than the statutory
superannuation) and are not entitled to any form of performance linked remuneration.
439138_2.docx
DIRECTORS’ REPORT (continued)
61
REMUNERATION REPORT (audited) (continued)
Compensation of Key Management Personnel for the year ended 30 June 2018 of the Group.
Short-Term Benefits
Salary
& Fees
US$
36,856
23,588
25,829
23,431
109,704
Other
US$
Cash Separation
Payment
US$
-
-
-
-
-
-
-
-
-
-
Post
Employment
Superannuation
US$
3,501
2,241
-
-
5,742
Share
Based
Payment*
Share
Rights
US$
Total
Total
Total
Performance
Related
Total
Performance
Related
US$
A$
US$
-
-
-
-
-
40,357
25,829
25,829
23,431
52,083
33,333
33,333
30,238
115,446
148,987
-
-
-
-
%
-
-
-
-
-
275,480
480,000(4)
288,000(5)
-
-
-
15,535
-
111,160
768,000
402,175
991,135
519,024
-
111,160
-
27.6
275,480
480,000
288,000
15,535
111,160
1,170,175
1,510,159
385,184
480,000
288,000
21,277
111,160
1,285,621
1,660,146
Directors
Mr Rick Crabb(1)
Mr David Riekie(2)
Mr Daniel Harris(2)
Mr John Hodder(3)
Subtotal
Key Management Personnel
Mr Alexander Molyneux
Mr Craig Barnes
Subtotal
Total
Notes to the Compensation Table
Presentation Currency - 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 2017 more than 51% 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 2018 financial year US$1 = A$1.29054.
(1) Mr Rick Crabb did not receive compensation during the period in which the Company was in voluntary administration.
(2) Appointed 1 February 2018.
(3) Appointed 14 February 2018.
(4) Represents fees paid for services as CEO. Includes payment of US$96,000 in lieu of three month notice period.
(5) Separation payment – conditional upon the effectuation of a deed of company arrangement, payment equal to nine months’ salary US$288,000 (A$371,676) in full and final satisfaction of all benefits arising out of his engagement.
Mr Donald Shumka, Mr Philip Baily and Mr Peter Donkin resigned on 8 December 2017 and did not received any compensation for the year ended 30 June 2018.
* A reconciliation of this figure in A$ follows to enable a clearer understanding of how this number is calculated.
439138_2.docx
DIRECTORS’ REPORT (continued)
62
REMUNERATION REPORT (audited) (continued)
Reconciliation of Share-Based Payment Compensation of Key Management Personnel for the year ended 30 June 2018 of the Group.
Share Appreciation Rights
granted 16 April 2018
(exercisable CY2018 to CY2020)
A$
US$
143,456
143,456
111,160
111,160
Executives
Mr Craig Barnes
TOTAL
It should be noted that service or performance vesting conditions are attached to all of the options and share appreciation rights referred to above. These are
detailed elsewhere in this report.
Exchange rate used as the average for year US$1 = A$1.29054.
439138_2.docx
DIRECTORS’ REPORT (continued)
63
REMUNERATION REPORT (audited) (continued)
Compensation of Key Management Personnel for the year ended 30 June 2017 of the Group.
Total
Total
Total
Performance
Related
Total
Performance
Related
Share
Based
Payment*
Share
Rights
US$
Short-Term Benefits
Post
Employment
Salary
& Fees
US$
83,717
60,276
48,166
48,166
240,325
Other
Superannuation
US$
-
-
-
-
-
US$
7,953
-
4,576
4,576
17,105
US$
A$
US$
-
-
-
-
-
91,670
60,276
52,742
52,742
121,667
80,000
70,000
70,000
257,430
341,667
-
-
-
-
-
264,698
384,000(1)
-
-
14,779
-
17,721
384,000
297,198
509,656
394,451
-
17,721
264,698
384,000
14,779
17,721
681,198
904,107
505,023
384,000
31,884
17,721
938,628
1,245,774
%
-
-
-
-
-
6.0
Directors
Mr Rick Crabb
Mr Donald Shumka
Mr Philip Baily
Mr Peter Donkin
Subtotal
Key Management Personnel
Mr Alexander Molyneux
Mr Craig Barnes
Subtotal
Total
Notes to the Compensation Table
Presentation Currency - 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 2017 more than 58% 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 2017 financial year US$1 = A$1.32723
(1) Represents fees paid for services as CEO.
* A reconciliation of this figure in A$ follows to enable a clearer understanding of how this number is calculated.
439138_2.docx
DIRECTORS’ REPORT (continued)
64
REMUNERATION REPORT (audited) (continued)
Reconciliation of Share-Based Payment Compensation of Key Management Personnel for the year ended 30 June 2017 of the Group.
Share Appreciation Rights
granted 27 September 2016
(exercisable CY2017 to CY2019)
A$
US$
Executives
Mr Craig Barnes
TOTAL
23,520
23,520
17,721
17,721
It should be noted that service or performance vesting conditions are attached to all of the options and share appreciation rights referred to above. These are
detailed elsewhere in this report.
Exchange rate used as the average for year US$1 = A$1.32723.
439138_2.docx
DIRECTORS’ REPORT (continued)
65
REMUNERATION REPORT (audited) (continued)
Options Holdings of Key Management Personnel (Group)
30 June 2018
Executives
Mr Alexander Molyneux
Total
01 Jul 17
number
Granted as
remuneration
number
Fair value at
grant date
US$’000
Vested as
shares
number
30 Jun 18
Lapsed
number Number
3,000,000
3,000,000
-
-
-
-
-
-
3,000,000
-
-
3,000,000
Share Appreciation Rights Holdings of Key Management Personnel (Group)
30 June 2018
Executives
Mr Craig Barnes
01 Jul 17
number
Granted as
remuneration
number
Fair value at
grant date
US$
Vested as
shares
number
Lapsed
30 Jun 18
number Number
1,079,000 1,250,000(1)
111,160
-
-
2,329,000
Total
1,079,000
1,250,000
11,160
-
-
2,329,000
(1) Granted 16 April 2018.
Fair value per right at grant date was US$0.09.
Shares held in Paladin Energy Ltd (number)
30 June 2017
Directors
Mr Rick Crabb
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
Mr Wendong Zhang
Total
Balance
01 Jul 17
On Vesting
of Rights
Net Change
Other
Balance
30 June 18
5,981,528
200,000
22,500
18,000
2,180,000
8,402,028
-
-
-
-
-
(5,861,898)(1)
(200,000)(2)
(18,000)(2)
(22,500)(2)
(2,180,000)(2)
119,630
-
-
-
-
-
(8,282,398)
119,630
(8,282,398)
(1) 98% of shares transferred to creditors and other investors pursuant to the DOCA.
(2) Resigned on 8 December 2017.
No other Key Management Personnel held shares during the year ended 30 June 2018.
439138_2.docx
DIRECTORS’ REPORT (continued)
66
REMUNERATION REPORT (audited) (continued)
All equity transactions with Key Management Personnel have been entered into under terms and
conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
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 three and six 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 rights that have
vested, or that will vest during the notice period, will be released. Rights that have not yet vested will
be forfeited.
Mr Alexander Molyneux, Chief Executive Officer (resigned 1 July 2018)
Monthly fee – US$32,000.
Separation payment – conditional upon the effectuation of a deed of company arrangement,
Mr Molyneux will be entitled to a payment equal to nine months’ salary (US$288,000) in full and final
satisfaction of all benefits or entitlements arising out of his engagement.
Termination – Mr Molyneux’s engagement may be terminated by either party at any time by three
months’ notice.
Mr Scott Sullivan, Chief Executive Officer (appointed 1 July 2018)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$400,000.
Short term incentive: up to a maximum of 50% of the total remuneration package, to be paid in cash
and determined having regard to market relativities, the performance of the Company and
Mr Sullivan’s performance.
Long term incentive: Mr Sullivan will also be issued 5,000,000 Share Appreciation Rights (SARs)
under the Company’s Employee Performance Share Rights Plan. The SARs will have an exercise
price of 0.16 and will vest in accordance with the following vesting conditions:
1,000,000 will vest on 1 July 2019
1,000,000 will vest on 1 July 2020
1,000,000 will vest on 1 July 2021
2,000,000 will vest on 1 July 2022 provided the Langer Heinrich Mine has restarted production.
No termination benefit is specified in the agreement.
Notice period six months.
Mr Craig Barnes, Chief Financial Officer
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$389,477 (2017: A$370,931).
No termination benefit is specified in the agreement.
Notice period six 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.
625,000 Share Appreciation Rights vested to Key Management Personnel during the year ended
30 June 2018. No Share Appreciation Rights were exercised during the year ended 30 June 2018.
439138_2.docx
End of audited Remuneration Report
DIRECTORS’ REPORT (continued)
OPTIONS
The outstanding balance of Options at the date of this report are as follows:
Date granted
10 August 2015
10 August 2015
Total
Exercisable date
8 November 2015
23 December 2015
Expiry date
Fair value Exercise price
A$0.06
8 November 2018
23 December 2018 A$0.06
A$0.30
A$0.40
No shares were issued on the exercise of Options during the year ended 30 June 2018.
SHARE APPRECIATION RIGHTS
The outstanding balance of Share Appreciation Rights at the date of this report are as follows:
67
Number
1,000,000
1,000,000
2,000,000
Date granted
Exercisable date
1 November 2016
1 November 2017
1 November 2018
1 November 2016
1 November 2017
1 November 2018
20 October 2015
20 October 2015
20 October 2015
3 March 2016
3 March 2016
3 March 2016
27 September 2016 11 November 2017
27 September 2016 11 November 2018
27 September 2016 11 November 2019
16 April 2018
16 April 2018
16 April 2018
Total
16 April 2018
16 April 2019
16 April 2020
Expiry date
Exercise
Fair
value
price
1 November 2021
A$0.13 A$0.20
1 November 2022
A$0.13 A$0.20
1 November 2023
A$0.13 A$0.20
1 November 2021
A$0.10 A$0.20
1 November 2022
A$0.10 A$0.20
A$0.10 A$0.20
1 November 2023
11 November 2022 A$0.08 A$0.20
11 November 2023 A$0.08 A$0.20
11 November 2024 A$0.08 A$0.20
A$0.17 A$0.15
16 April 2023
A$0.05 A$0.15
16 April 2024
A$0.07 A$0.15
16 April 2025
Number
2,275,000
1,137,500
1,137,500
157,500
78,750
78,750
718,000
718,000
718,000
3,750,000
1,875,000
1,875,000
14,519,000
No shares were issued on the exercise of Share Appreciation Rights during the year ended 30 June
2018.
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.
INDEMINIFICATION OF AUDITORS
the extent permitted by
its auditors,
To
PricewaterhouseCoopers, as part of the terms of its audit engagement agreement against claims by
third parties arising from the audit (for an unspecified amount). The Directors of Paladin Energy
Limited have not provided PricewaterhouseCoopers with any indemnities. No payment has been made
to indemnify PricewaterhouseCoopers during or since the financial year.
the Company has agreed
indemnify
law,
to
ROUNDING
The amounts contained in this report, the Financial Report and the Operating and Financial Review
have been rounded to the nearest US$1,000 (where rounding is applicable) under the option available
to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191. The Company is an entity to which the Instrument applies.
AUDITOR
PricewaterhouseCoopers were appointed auditors for the Company by shareholders at the 2016
Annual General Meeting on 18 November 2016.
439138_2.docx
DIRECTORS’ REPORT (continued)
68
NON-AUDIT SERVICES
During the year, non-audit and assurance services were provided by the Company’s auditor,
PricewaterhouseCoopers. 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.
Details of amounts paid or payable to PriceWaterhouseCoopers can be found in Note 28.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead Auditor’s Independence Declaration is set out on page 69 of the Financial Report.
Dated this 28th day of August 2018
Signed in accordance with a resolution of the Directors
Rick Crabb
Chairman
Perth, Western Australia
439138_2.docx
69
Auditor’s Independence Declaration
As lead auditor for the audit of Paladin Energy Limited for the year ended 30 June 2018, I declare that
to the best of my knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Paladin Energy Limited and the entities it controlled during the
period.
Ben Gargett
Partner
PricewaterhouseCoopers
Perth
28 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
FINANCIAL REPORT
70
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
CONTENTS OF THE FINANCIAL REPORT
Note
___________________________________________________________________________________
Page Number
Title
CONSOLIDATED INCOME STATEMENT ........................................................................................... 71
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................... 72
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................. 73
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................. 74
CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................... 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ....................................................... 76
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENT
71
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
Revenue
Revenue
Cost of sales
Inventory write-down
Gross loss
Other income
Administration, marketing and non-production
costs
Impairment of exploration assets
Other expenses
Notes
2018
US$’000
2017
US$’000
11
12
18
12
12
12
12
72,917
(88,558)
(28,119)
95,844
(92,765)
(38,046)
(43,760)
(34,967)
486,247
2,641
(25,567)
(13,525)
(2,300)
(244,560)
(21,822)
(16,491)
Profit/(loss) before interest and tax
392,798
(306,902)
Finance costs
12
(49,385)
(141,158)
Net profit/(loss) before
continuing operations
income
tax
from
343,413
(448,060)
Income tax expense
13
-
(37,372)
Net profit/(loss) after tax from continuing
operations
343,413
(485,432)
Profit after tax from discontinued operations
12
-
1,250
Net profit/(loss) after tax
Attributable to:
Non-controlling interests
Members of the parent
Net profit/(loss) after tax
Profit/(loss) per share (US cents)
Profit/(loss) after tax from operations attributable
to ordinary equity holders of the Company
– continuing operations, basic and diluted (US
cents)
– discontinued operations, basic and diluted (US
cents)
14
14
343,413
(484,182)
(24,349)
367,762
343,413
(26,397)
(457,785)
(484,182)
21.5
-
(26.7)
(0.1)
The above Consolidated Income Statement should be read in conjunction with the accompanying
notes.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
72
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
Net profit/(loss) after tax
Other comprehensive income
Items that may be subsequently reclassified to
profit or loss:
Net loss on available-for-sale financial assets
Transfer of realised gains to other income on
disposal of available-for-sale financial assets
2018
US$’000
2017
US$’000
343,413
(484,182)
-
-
(993)
993
Foreign currency translation
(1,498)
(1,724)
Income tax on items of other comprehensive income
-
97
Items that will not be subsequently reclassified
to profit or loss:
Foreign currency translation attributable to non-
controlling interests
(223)
356
Other comprehensive loss for the year, net of tax
(1,721)
(1,271)
Total comprehensive income/(loss) for the year
341,692
(485,453)
Total comprehensive income/(loss) attributable to:
Non-controlling interests
Members of the parent
(24,572)
366,264
(26,041)
(459,412)
341,692
(485,453)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
73
AS AT 30 JUNE 2018
EXPRESSED IN US DOLLARS
Notes
2018
US$’000
2017
US$’000
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Prepayments
Inventories
Assets classified as held for sale
TOTAL CURRENT ASSETS
Non current assets
Trade and other receivables
Property, plant and equipment
Mine development
Exploration and evaluation expenditure
Intangible assets
6a
6b
17
18
19
17
20
21
22
23
39,166
11,072
8,121
1,511
10,717
-
10,492
1,010
13,744
2,350
27,456
165
70,587
55,217
374
223,986
28,142
76,439
10,093
384
244,297
36,396
92,025
10,625
TOTAL NON CURRENT ASSETS
339,034
383,727
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
Unearned revenue
TOTAL CURRENT LIABILITIES
Non current liabilities
Interest bearing loans and borrowings
Other Interest bearing loans - CNNC
Provisions
24
7
25
26
7
8
25
409,621
438,944
12,971
-
5,249
-
18,241
398,199
2,382
278,182
18,220
697,004
103,883
93,330
87,427
-
89,388
88,351
TOTAL NON CURRENT LIABILITIES
284,640
177,739
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Parent interests
Non-controlling interests
TOTAL EQUITY
9
9
30
302,860
874,743
106,761
(435,799)
2,301,286
(62,769)
(2,002,644)
235,873
(129,112)
2,101,085
32,436
(2,464,780)
(331,259)
(104,540)
106,761
(435,799)
The above Consolidated Statement of Financial Position should be read in conjunction with the
accompanying notes.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
Contributed
Equity
US$’000
(Note 9)
Reserve
US$’000
(Note 9)
Accumulated
Losses
US$’000
Attributable to
Owners of the
Parent
US$’000
Non-Controlling
Interests
US$’000
(Note 31)
2,101,085
49,949
(2,023,683)
127,351
(78,500)
74
Total
US$’000
48,851
266
-
-
-
-
-
(16,423)
16,688
265
1
-
(457,785)
(457,785)
(26,397)
(484,182)
(1,627)
-
(1,627)
356
(1,271)
(1,627)
(457,785)
(459,412)
(26,041)
(485,453)
537
-
537
-
537
Balance at 1 July 2016
Transfer of reserves
Loss for the period
Other comprehensive (loss)/income
Total comprehensive loss)for the year net of tax
Share-based payment
Balance at 30 June 2017
2,101,085
32,436
(2,464,780)
(331,259)
(104,540)
(435,799)
Profit/(Loss) for the period
Other comprehensive loss
Total comprehensive income/
(loss) for the year net of tax
-
-
-
Shares transferred under DOCA
200,201
Share-based payment
Convertible bonds settled
-
-
-
367,762
(1,498)
-
(1,498)
367,762
-
667
-
-
(94,374)
94,374
367,762
(1,498)
366,264
200,201
667
-
(24,349)
343,413
(223)
(1,721)
(24,572)
-
-
-
341,692
200,201
667
-
Balance at 30 June 2018
2,301,286
(62,769)
(2,002,644)
235,873
(129,112)
106,761
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CASH FLOWS
75
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Other income
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised exploration expenditure
Payments for property, plant and equipment
Proceeds from sale of subsidiary
Proceeds from sale of tenements
Proceeds from sale of property, plant & equipment
Proceeds from sale of investments
Notes
2018
US$’000
2017
US$’000
72,615
(112,101)
231
(5,922)
372
96,190
(132,890)
165
(15,417)
39
15
(44,805)
(51,913)
(2,300)
(1,388)
-
-
298
-
(2,562)
(9,076)
375
1,499
933
2,609
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
(3,390)
(6,222)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from senior secured notes
Proceeds from secured revolving credit facility
Repayment of borrowings
16
7
NET CASH INFLOW FROM FINANCING ACTIVITIES
36,921
40,000
-
76,921
-
20,000
(10,424)
9,576
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
28,276
(48,559)
Unrestricted cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate changes on cash
and cash equivalents
UNRESTRICTED CASH AND CASH EQUIVALENTS
AT THE END OF THE FINANCIAL YEAR
10,492
58,608
(52)
443
6a
39,166
10,492
The above Consolidated Statement of Cash Flows should be read in conjunction with the
accompanying notes. Non cash investing and financing activities are disclosed in Note 16.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
76
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
BASIS OF PREPARATION ..................................................................................................... 77
CORPORATE INFORMATION .......................................................................... 77
NOTE 1.
STRUCTURE OF THE FINANCIAL REPORT ................................................... 77
NOTE 2.
NOTE 3.
BASIS OF PREPARATION ............................................................................... 77
GOING CONCERN ........................................................................................... 80
NOTE 4.
SEGMENT INFORMATION ..................................................................................................... 81
NOTE 5.
SEGMENT INFORMATION ............................................................................... 81
CAPITAL STRUCTURE ........................................................................................................... 84
CASH AND CASH EQUIVALENTS ................................................................... 84
NOTE 6a.
RESTRICTED CASH ........................................................................................ 84
NOTE 6b
INTEREST BEARING LOANS AND BORROWINGS ........................................ 85
NOTE 7.
OTHER INTEREST BEARING LOANS - CNNC ................................................ 88
NOTE 8.
CONTRIBUTED EQUITY AND RESERVES...................................................... 89
NOTE 9.
NOTE 10.
FINANCIAL RISK MANAGEMENT .................................................................... 92
PERFORMANCE FOR THE YEAR .......................................................................................... 98
REVENUE ......................................................................................................... 98
NOTE 11.
INCOME AND EXPENSES ............................................................................... 98
NOTE 12.
INCOME AND OTHER TAXES ....................................................................... 101
NOTE 13.
EARNINGS PER SHARE ................................................................................ 104
NOTE 14.
RECONCILIATION OF EARNINGS AFTER INCOME TAX TO NET CASH
NOTE 15.
FLOW FROM OPERATING ACTVITIES ......................................................... 105
NON CASH INVESTING AND FINANCING ACTIVITIES ................................ 105
NOTE 16
OPERATING ASSETS AND LIABILITIES ............................................................................. 106
TRADE AND OTHER RECEIVABLES............................................................. 106
NOTE 17.
INVENTORIES ................................................................................................ 107
NOTE 18.
ASSETS CLASSIFIED AS HELD FOR SALE .................................................. 108
NOTE 19.
PROPERTY, PLANT AND EQUIPMENT ......................................................... 109
NOTE 20.
MINE DEVELOPMENT ................................................................................... 112
NOTE 21.
EXPLORATION AND EVALUATION EXPENDITURE ..................................... 114
NOTE 22.
INTANGIBLE ASSETS .................................................................................... 118
NOTE 23.
TRADE AND OTHER PAYABLES ................................................................... 119
NOTE 24.
PROVISIONS .................................................................................................. 120
NOTE 25.
NOTE 26.
UNEARNED REVENUE .................................................................................. 122
OTHER NOTES ..................................................................................................................... 123
KEY MANAGEMENT PERSONNEL ................................................................ 123
NOTE 27.
AUDITORS’ REMUNERATION ....................................................................... 124
NOTE 28.
COMMITMENTS AND CONTINGENCIES ...................................................... 125
NOTE 29.
RELATED PARTIES ....................................................................................... 126
NOTE 30.
GROUP INFORMATION ................................................................................. 127
NOTE 31.
EVENTS AFTER THE BALANCE DATE ......................................................... 129
NOTE 32.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ...................... 130
NOTE 33.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
77
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
BASIS OF PREPARATION
NOTE 1.
CORPORATE INFORMATION
The Financial Report of Paladin for the year ended 30 June 2018 was authorised for issue by the
Directors on 27 August 2018.
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 Munich, Berlin, Stuttgart and Frankfurt Stock
Exchanges in Europe; and the Namibian Stock Exchange in Africa.
The Group’s principal place of business is Level 4, 502 Hay Street, Subiaco, Western Australia. The
nature of the operations and principal activities of the Group are described in the Operating and
Financial Review (unaudited) on pages 7 to 16.
NOTE 2.
STRUCTURE OF THE FINANCIAL REPORT
The Notes to the Consolidated Financial Statements have been grouped into six key categories, which
are summarised as follows:
Basis of Presentation
This section sets out the group’s significant accounting policies that relate to the financial statements
as a whole. Where an accounting policy is specific to one note, the policy is described in the note to
which it relates. Accounting policies determined non-significant are not included in the financial
statements. There have been no changes to the Group’s accounting policies that are no longer
disclosed in the financial statements.
Segment Information
This section compares performance across operating segments.
Capital Structure
This section outlines how the group manages its capital and related financing costs.
Performance for the Year
This section focuses on the results and performance of the group. This covers both profitability and the
resultant return to shareholders via earnings per share combined with cash generation.
Operating Assets and Liabilities
This section shows the assets used to generate the group’s trading performance and the liabilities
incurred as a result. Liabilities relating to the group’s financing activities are addressed in the Capital
Structure section.
Other Notes
This section deals with the remaining notes that do not fall into any of the other categories.
NOTE 3.
BASIS OF PREPARATION
Introduction 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.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
78
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 3. BASIS OF PREPARATION (continued)
Introduction and Statement of Compliance (continued)
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.
The Financial Report is presented in US dollars and all values are rounded to the nearest thousand
dollars (US$1,000) unless otherwise stated under the option available to the Company under
Australian Securities and
in
Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which the Instrument
applies.
Investments Commission
(ASIC) Corporations
(Rounding
Changes in Accounting Policies
Apart from the 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 2017.
Certain prior year amounts have been reclassified for consistency with the current year presentation.
These reclassifications had no effect on the report results of the Group.
The Group has adopted all new and amended Australian Accounting Standards and AASB
Interpretations effective from 1 July 2017. The nature and impact of each new standard and
amendment is described below:
Reference
Title
Impact
AASB 2016-2 Amendments to Australian Accounting
Additional disclosures in the Annual Report.
Standards – Disclosure Initiative Amendments
to AASB 107
The amendment to AASB 107 introduces additional
disclosures
that will enable users of financial
statements to evaluate changes in liabilities arising
from financing activities. The amendment requires
disclosure of changes arising from:
(a) Cash flows, such as drawdowns and
repayments of borrowings; and
(b) Non-cash changes, such as acquisitions,
disposals and unrealised exchange
differences.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
79
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 3. BASIS OF PREPARATION (continued)
Basis of Consolidation
The consolidated financial statements comprise the financial statements of Paladin Energy Ltd and its
subsidiaries as at 30 June 2018 (the Group).
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Consolidation of a subsidiary
begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the statement of comprehensive income from the date the Group gains
control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with the Group’s accounting
policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction.
Foreign Currency Translation
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).
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.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
80
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 3. BASIS OF PREPARATION (continued)
Foreign Currency Translation (continued)
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 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. Upon the sale of a subsidiary the Functional Currency
Translation Reserve (FCTR) attributable to the parent is recycled to the Income Statement.
The functional currency of individual subsidiaries reflects their operating environment.
Significant Accounting Judgements, Estimates and Assumptions
The preparation of the Group’s consolidated financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future periods.
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 dealt with elsewhere in the notes.
NOTE 4. GOING CONCERN
The financial statements have been prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that funds will be available to finance future operations and that the
realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in
the ordinary course of business.
Excluding the one-off gain on extinguishment of debt of US$483,721,000, the Group incurred a net
loss of US$140,308,000 (30 June 2017: loss US$484,182,000) for the year ended 30 June 2018 and a
net cash outflow from operating activities of US$44,805,000 (30 June 2017: outflow US$51,913,000).
As at 30 June 2018, the Group had a net current asset surplus of US$52,367,000 (30 June 2017:
deficit US$641,787,000),
(30 June 2017:
US$10,492,000).
including unrestricted cash of US$39,166,000
On 1 February 2018, the DOCA was effectuated and a capital restructure was completed. In
accordance with the DOCA, 98% of Paladin shares were transferred to certain creditors and other
investors in consideration for the Group’s debt obligations covered by the DOCA and 2% were
retained by shareholders. In addition, an offer for US$115,000,000 senior secured notes resulted in
net proceeds of US$36,921,000 following the repayment of the US$60,000,000 Deutsche Bank facility,
a US$10,000,000 payment to cash back the KM performance bond due to the Government of Malawi
and payments totalling US$8,079,000 for advisors’ fees and other costs relating to the capital
restructure and issue of the notes.
EdF claimants accepted a proposal whereby all existing claims which EdF have against the Michelin
Project will be released and in consideration for the release of these claims, the EdF Claimants will
receive a 50% participating interest in the Michelin Project. There will be a farm out over a five year
period whereby the EdF Claimants will transfer 5% participating interest in the Michelin Project to
Paladin on an annual basis in return for Paladin funding all obligations for the Michelin Project over
this period. A loss on disposal of a 50% interest in the Michelin Project of US$13.9M has been
recognised.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
81
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 4. GOING CONCERN (continued)
In May 2018, the Company received the consent of relevant stakeholders to place LHM into care and
maintenance and LHM stopped presenting ore to the plant. The mine is currently in a run-down phase
of up to three months where various stages of the plant will be progressively suspended and cleaned.
Once the run-down phase is complete, operations will have been completely suspended and LHM will
be on care and maintenance. As a result the Group will no longer have any operating assets and does
not generate cash inflows.
During the next twelve months, there are currently no repayment obligations in respect of interest
bearing loans and borrowings and the Group has a number of options available to it to obtain sufficient
funding to repay the notes by their maturity in 2023. These options include, a combination of:
generating sufficient surplus operating cash flows, which are reliant on a restart of its mines, their
operating performance and the uranium price amongst other factors; the sale of Group assets; raising
new equity; or the refinance of the notes.
As a result of these matters, there is a material uncertainty that may cast significant doubt on the
entity's ability to continue as a going concern and, therefore, that the entity may be unable to realise its
assets and discharge its liabilities in the normal course of business. The financial report does not
include adjustments relating to the recoverability or classification of the recorded assets nor to the
amounts or classification of liabilities that might be necessary should the Company not be able to
continue as a going concern.
The Directors are satisfied that it is appropriate to prepare the financial statements on a going concern
basis on the basis that the above can be reasonably expected to be accomplished.
SEGMENT INFORMATION
NOTE 5.
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(1) and Malawi(2) is the production and sale of uranium from the
mines located in these geographic regions. The Exploration(3) segment is focused on developing
exploration and evaluation projects in Australia 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 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 Group’s customers are major utilities and other entities located mainly in USA, East Asia and
Western Europe. These revenues are attributed to the geographic location of the mines being the
reporting segments Namibia and Malawi.
(1) In May 2018, the Company received the consent of relevant stakeholders to place LHM into care and maintenance and LHM stopped presenting ore to
the plant.
(2) Currently on care and maintenance due to low uranium price. Production ceased on 6 May 2014.
(3)
In FY2018, the Company has only undertaken the work required to meet minimum tenement commitments.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
82
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 5. SEGMENT INFORMATION (continued)
The following table’s present revenue, expenditure and asset information regarding operating
segments for the years ended 30 June 2018 and 30 June 2017.
Year ended
30 June 2018
Sales to external customers
Total consolidated revenue
Cost of sales
Inventory write-down
Gross loss
Other income
Exploration
US$’000
-
-
-
-
-
-
Namibia
US$’000
72,917
72,917
Malawi
US$’000
-
-
Unallocated
US$’000
Consolidated
US$’000
-
-
72,917
72,917
(88,558)
(28,119)
(43,760)
-
-
-
-
-
-
(88,558)
(28,119)
(43,760)
1,913
356
483,979
486,247
Impairment of exploration assets
(2,300)
-
-
-
(2,300)
Other expenses
Restructure costs
-
(7,654)
(5,764)
(3,962)
(17,380)
-
(2,734)
-
(11,208)
(13,942)
Impairment of assets
-
(5,889)
(44)
-
-
(10,134)
(5,933)
(10,134)
-
-
Change in estimate of mine
closure provision
Segment (loss)/profit before income
tax and finance costs
(2,300)
(58,124)
(15,586)
468,808
392,798
Finance costs
-
(16,466)
(59)
(32,860)
(49,385)
(Loss)/profit before income tax
(2,300)
(74,590)
(15,645)
435,948
343,413
Income tax expense
-
-
-
-
-
Net (loss)/profit after tax
(2,300)
(74,590)
(15,645)
435,948
343,413
At 30 June 2018
Segment assets/total assets
77,458
285,002
10,708(1)
36,453(2)
409,621
Australia
US$’000
Canada
US$’000
Namibia
US$’000
Other
US$’000
Consolidated
US$’000
Non current assets (excluding financial
instruments) by country
63,635
14,232
261,167
-
339,034
In 2018, the three most significant customers equated on a proportionate basis to 43%
(US$31,632,000 Namibia), 18% (US$13,125,000 Namibia) and 18% (US$13,032,020 Namibia) of the
Group’s total sales revenue.
(1) Includes US$10,058,000 Kayelekera Performance Bond (restricted cash).
(2) Includes US$34,923,000 in cash and cash equivalents.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
83
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 5. SEGMENT INFORMATION (continued)
Year ended
30 June 2017
Sales to external customers
Total consolidated revenue
Cost of sales
Inventory write-down
Gross loss
Other income
Gain on disposal of investments
Exploration
US$’000
-
-
-
-
-
-
-
Gain on disposal of tenements
766
Namibia
US$’000
95,844
95,844
(92,765)
(38,046)
(34,967)
-
-
-
Malawi
US$’000
Unallocated
US$’000
Consolidated
US$’000
-
-
-
-
-
-
-
-
-
-
95,844
95,844
-
-
(92,765)
(38,046)
-
(34,967)
208
208
1,667
1,667
-
766
Other expenses
Restructure costs
(766)
(12,994)
(6,148)
(2,602)
(22,510)
-
-
-
-
-
(7,506)
(7,506)
-
(244,560)
Impairment of assets
(244,560)
Segment loss before income
tax and finance costs
(244,560)
(47,961)
(6,148)
(8,233)
(306,902)
Finance costs
-
(9,992)
(164)
(131,002)
(141,158)
Loss before income tax
(244,560)
(57,953)
(6,312)
(139,235)
(448,060)
Income tax expense
-
(36,305)
-
(1,067)
(37,372)
Loss after income tax from
continuing operations
Profit after tax from
discontinued operations
(244,560)
(94,258)
(6,312)
(140,302)
(485,432)
-
-
-
1,250
1,250
Net loss after tax
(244,560)
(94,258)
(6,312)
(139,052)
(484,182)
At 30 June 2017
Segment assets/total assets
93,280
332,202
981
12,481(1) 438,944
Australia
US$’000
Canada
US$’000
Namibia
US$’000
Other
US$’000
Consolidated
US$’000
Non current assets (excluding financial
instruments) by country
65,189
28,570
289,968
-
383,727
In 2017, the five most significant customers equated on a proportionate basis to 32% (US$30,283,000
Namibia), 13% (US$12,617,000 Namibia), 12% (US$11,091,000 Namibia), 11% (US$10,125,000
Namibia) and 10% (US$9,704,000 Namibia) of the Group’s total sales revenue.
(1) Includes US$9,089,000 in cash and cash equivalents.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
84
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
CAPITAL STRUCTURE
The group's objectives when managing capital are to safeguard its ability to continue as a going
concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders
and to maintain an efficient capital structure to reduce the cost of capital. Capital includes issued
capital and all other equity reserves attributable to the equity holders of the parent.
In order to maintain or adjust the capital structure, the group may issue new shares or sell assets to
reduce debt.
The group monitors capital on the basis of the level of return on capital and also the level of net
cash/debt. The group manages funds on a group basis with all funds being drawn by the parent entity.
NOTE 6a. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term bank deposits
Total cash and cash equivalents
NOTE 6b. RESTRICTED CASH
Restricted cash at bank
Total restricted cash and cash equivalents
2018
US$’000
2017
US$’000
1,196
37,970
653
9,839
39,166
10,492
11,072
11,072
1,010
1,010
Total cash and cash equivalents includes US$11,072,000 (30 June 2017: US$1,010,000) restricted for
use in respect of environmental and supplier guarantees provided by LHM and the environmental
performance bond at KM.
Recognition and measurement
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value, and bank overdrafts. Cash at bank earns interest at floating rates based on daily bank
deposit rates. Short-term deposits are made for varying periods depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
85
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 7.
INTEREST BEARING LOANS AND BORROWINGS
Maturity
2018
US$’000
2017
US$’000
Current
Secured revolving credit facility(2)
Unsecured convertible bonds(3)
Unsecured convertible bonds(4)
2018
2017
2020
2017
Total current interest bearing loans and
borrowings
Non Current
-
-
-
-
-
19,688
220,544
157,967
398,199
254.3
Senior secured notes(1)
2023
103,883*
Total non current interest bearing loans and borrowings
103,883
* Senior secured notes
Face value of senior secured notes issued
Equity component
Liability component on initial recognition
Transaction costs
Capitalised interest expense (Note 12)
Liability component at 30 June
Fair value disclosures
2017
115,000
(7,475)
107,525
(9,099)
5,457
103,883
-
-
-
-
-
-
-
-
254.3
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 10.
Secured loans and borrowings
(1) On 25 January 2018, as part of the effectuation of the DOCA, the Company issued
US$115,000,000 9%/10% payment in kind (PIK) toggle senior secured notes repayable on 25
January 2023. The notes are secured by all-assets (with the main exceptions including: the
shares in Summit and Paladin’s Canadian subsidiaries that have provided security to the EdF
claimants), security granted by the companies and certain other entities in the Group pursuant
to various security agreements. Subscribers for the notes received a pro-rata allocation of 25%
of the Company’s issued shares. The notes are not convertible and are listed on the Singapore
Stock Exchange. The underwriters of the notes received 3% of the Company’s issued shares.
PIK Interest on the notes accrues at a rate of 10% pa and will be deferred on each interest
payment date commencing on 31 March 2018. No additional notes will be issued in respect of
such deferred PIK interest. Each amount of deferred PIK interest also bears interest at the rate
of 10% pa from and including the date on which the payment was deferred. However Paladin
shall be required to pay cash interest (rather than PIK interest) at a rate of 9% per annum if (a)
the operating cash flows (determined in accordance with IFRS) minus maintenance capital
expenditure of Paladin and its subsidiaries (on an attributable basis) for the half-year
immediately preceding such interest payment date is no less than US$5,000,000 and (b)
Paladin and its subsidiaries (on a consolidated basis) have, after giving pro forma effect to such
cash interest payment, no less than US$50,000,000 of cash and cash equivalents (net of
restricted cash) as of the last day falling 15 calendar days before the relevant interest payment
date.
Paladin may also elect to pay cash interest at a rate of 9% pa on each payment date
commencing from 31 March 2018 for interest due in respect of any interest period except for the
final interest period, with respect to 25%, 50%, 75% or 100% of the applicable interest payment
(with the relevant balance being deferred PIK interest), even if Paladin is not required to pay
cash interest. All amounts of deferred PIK interest (and any interest accrued thereon) is due and
payable (in cash) when the notes are redeemed.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
86
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 7.
INTEREST BEARING LOANS AND BORROWINGS (continued)
Secured loans and borrowings (continued)
(2)
In June 2016, LHM entered into a US$25,000,000 24-month Revolving Credit Facility, which
was subsequently reduced to US$20,000,000 in September 2016. The provider of the
Revolving Credit Facility was Nedbank Limited (Nedbank), through its UK registered subsidiary,
N.B.S.A. Limited. At 30 June 2017 the Company had drawn US$20,000,000 under this facility.
The facility was repayable on 9 June 2018 and bore interest at LIBOR plus 5.17%.
On 21 July 2017, Paladin entered into agreements with Deutsche Bank to refinance the
Nedbank Revolving Credit Facility and fund working capital for LHM and the Paladin Group.
Under the agreements Deutsche Bank acquired the existing Nedbank Revolving Credit Facility
and increased the size of the facility from US$20,000,000 to US$60,000,000. Under the terms of
the Deutsche Bank Facility, LHM drew down US$45,000,000 for its working capital (including
the US$20,000,000 already drawn) and Paladin and Paladin Finance Pty Ltd (PFPL) drew down
US$15,000,000.
Paladin and PFPL are jointly and severally liable for the entire facility and LHM is only liable for
the amounts drawn down. The entire facility is guaranteed by Paladin and PFPL. The term of
the Deutsche Bank Facility was 12 months. Additional security has been given to that provided
under the Nedbank Revolving Credit Facility.
On 1 February 2018, as part of the effectuation of the DOCA, approximately US$60,000,000 of
the cash raised from the issue of senior secured notes was used to acquire the Deutsche Bank
Facility.
Unsecured loans and borrowings
(3)
(4)
On 30 April 2012, the Company issued US$274,000,000 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$1.83 for Company shares. During the year ended 30 June 2016, the
Company repurchased a principal amount of US$62,000,000 thereby reducing the principal
amount outstanding to US$212,000,000. The cash expenditure for the repurchase was
approximately US$57,500,000 (including accrued interest) as the bonds were bought back at an
average price of 91.0 per cent. On 1 February 2018, as part of the effectuation of the DOCA, the
existing Bondholders and other creditors received 70% of all existing Company shares, as part
of a debt for equity swap, pro rata to the value of their claims.
On 31 March 2015, the Company issued US$150,000,000 in convertible bonds with a coupon
rate of 7% (underlying effective interest rate of 12.37%) maturing on 31 March 2020 with a
conversion price of US$0.356 for Company shares. On 1 February 2018, as part of the
effectuation of the DOCA, the existing Bondholders and other creditors received 70% of all
existing Company shares, as part of a debt for equity swap, pro rata to the value of their claims.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
87
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 7.
INTEREST BEARING LOANS AND BORROWINGS (continued)
Recognition and measurement
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.
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 date.
The component of secured notes and 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
secured notes and 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.
Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
Total facilities:
Secured revolving credit facility
Facilities used at reporting date:
Secured revolving credit facility
Facilities unused at reporting date:
Senior secured notes
Unsecured convertible bonds
Secured revolving credit facility
2018
US$’000
2017
US$’000
-
-
-
-
-
-
-
20,000
20,000
20,000
20,000
-
-
-
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
88
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 8. OTHER INTEREST BEARING LOANS - CNNC
Non Current
Maturity
30 June
2018
US$’000
30 June
2017
US$’000
LHM’s loans from CNNC
2018 to 2020
93,330
89,388
The increase in the loan balance during FY2018 is as a result of accrued interest.
As part of the sale of the 25% interest in LHM in 2014, US$96,000,000 (representing 25%) of the
intercompany shareholder loans owing by LHM to PFPL were assigned to CNNC under the same
interest rate (LIBOR plus a margin between 2% and 4.25%) and conditions as those existing at the
time.
Pursuant to the intercompany shareholder loan agreements, repayment dates range from 2018 to
2020, however, under the Shareholders’ Agreement between CNNC and PFPL, each shareholder has
agreed not to demand repayment without the prior written consent of the other shareholder. As neither
CNNC nor PFPL can demand repayment, the repayment of the loans can be deferred. Repayment is
dependent on LHM generating sufficient free cash flows to repay the loans and the loans have not
been guaranteed by Paladin.
All intercompany shareholder loan repayments from LHM will be paid on a pro rata basis against the
outstanding balances.
On consolidation, PFPL’s 75% share of the LHM intercompany shareholder loans are eliminated
against the intercompany shareholder loans receivable recorded in PFPL and therefore, they do not
appear on Paladin’s consolidated statement of financial position. As a result of the consolidation of
100% of LHM’s assets and liabilities, LHM's total liability of US$93,330,000 to CNNC is recognised on
the consolidated statement of financial position.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
89
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 9.
CONTRIBUTED EQUITY AND RESERVES
Issued and Paid Up Capital
Number of Shares
2018
2017
2018
US$’000
2017
US$’000
Ordinary shares
Issued and fully paid
1,712,843,812
1,712,843,812
2,301,286 2,101,085
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Recognition and measurement
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Movements in Ordinary Shares on Issue
Date
Number of Shares
Total
US$’000
Balance at 1 July 2016
1,712,843,812
2,101,085
Balance at 30 June 2017
1,712,843,812
2,101,085
Shares transferred under DOCA (1)
200,201
Balance at 30 June 2018
1,712,843,812
2,301,286
On 1 February 2018, as part of the effectuation of the DOCA, the existing bondholders, certain
creditors, noteholders and underwriters of the new senior secured notes received 98% of all existing
Company shares pro rata to the value of their claims, subscriptions and underwriting of the new senior
secured notes.
(1) Shares transferred under DOCA
Fair value of Paladin shares transferred to creditors
Fair value of Paladin shares transferred to underwriters
Equity component of US$115M secured notes
US$115M secured notes funding costs allocated to equity
Total
185,465
7,893
7,475
(632)
200,201
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
90
NOTE 9. CONTRIBUTED EQUITY AND RESERVES (continued)
Reserves
Consolidation
reserve
US$’000
Listed
option
application
reserve
US$’000
Share-
based
payments
reserve
US$’000
Available
-for-sale
reserve
US$’000
Foreign
currency
translation
reserve
US$’000
Convertible
bond non-
distributable
reserve
US$’000
Premium on
acquisition
reserve
Total
US$’000
US$’000
Balance at 1 July 2016
48,319
137
46,722
(4,673)
(149,846)
94,374
14,916
49,949
Transfer of reserves
Net unrealised movement on
available-for-sale investments
Share-based payments
Foreign currency translation
Transfer of realised gains to Income
Statement (net of tax)
-
-
-
-
-
-
-
-
-
-
-
4,576
(20,999)
-
537
-
993
-
-
-
-
(1,724)
-
(896)
-
-
-
-
-
-
-
-
-
-
-
(16,423)
993
537
(1,724)
(896)
Balance at 30 June 2017
48,319
137
47,259
-
(172,569)
94,374
14,916
32,436
Convertible bonds settled through DOCA
implementation
Share-based payments
Foreign currency translation
-
-
-
-
-
-
-
667
-
-
-
-
-
-
(1,498)
(94,374)
-
-
-
-
-
(94,374)
667
(1,498)
Balance at 30 June 2018
48,319
137
47,926
-
(174,067)
-
14,916
(62,769)
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
91
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 9. 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 in the net
assets of PAL. It also recognises the excess of the proceeds received over the 25% interest in net
assets of Langer Heinrich Mauritius Holdings limited and Langer Heinrich Uranium (Pty) Ltd disposed
of to China Uranium Corporation Limited, a subsidiary of China National Nuclear Corporation, on 28
June 2014 under the Share Sale Agreement dated 18 January 2014.
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.
Available-for-sale reserve
This reserve records the fair value changes on the available-for-sale financial assets.
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.
Convertible bond non-distributable reserve
This reserve records the equity portion of the convertible bonds issued as described in Note 7.
Premium on acquisition reserve
This reserve represents the premium paid on the acquisition of a non-controlling interest in Summit.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
92
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT
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.
Market Risk
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.
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
2018
US$’000
2017
US$’000
2,185
6,498
2,164
12,779
8,683
14,943
(8,952)
(13,806)
(269)
1,137
Based on the Group’s net exposure at the balance date, a reasonably possible change in the
exchange rate would not have a material impact on profit or equity.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
93
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Market Risk (continued)
Interest Rate Risk
Interest rate risk is the risk that the Group’s financial position will be adversely affected by movements
in interest rates that will increase the cost of floating rate debt or opportunity losses that may arise on
fixed rate borrowings in a falling interest rate environment. Interest rate risk on cash and short-term
deposits is not considered to be a material risk due to the short-term nature of these financial
instruments.
The Group’s main interest rate risk arises from long-term debt. Floating rate debt exposes the Group
to cash flow interest rate risk and fixed rate debt exposes the Group to fair value interest rate risk. All
other financial assets and liabilities in the form of receivables, investments in shares, payables and
provisions, are non-interest bearing.
The Group currently does not engage in any hedging or derivative transactions to manage interest rate
risk.
The floating rate financial instruments exposed to interest rate movements are as follows:
Financial assets
Cash and cash equivalents – short-term deposits
Restricted cash
Financial liabilities
Interest-bearing liabilities
Net exposure
2018
US$’000
2017
US$’000
39,166
11,072
50,238
10,492
1,010
11,502
(93,330)
(109,076)
(43,092)
(97,574)
Based on the Group’s net exposure at the balance date, a reasonably possible change in LIBOR
would not have a material impact on profit or equity.
Liquidity Risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet
the Group’s financial commitments in a timely and cost effective manner.
The Group treasury function continually reviews the Group’s liquidity position including cash flow
forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.
Sensitivity analysis is conducted on a range of pricing and market assumptions to ensure the Group
has the ability to meet repayment commitments. This enables the Group to manage cash flows on a
long-term basis and provides the flexibility to pursue a range of funding alternatives if necessary.
Note 7 details the repayment obligations in respect of the amount of the facilities.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
94
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
The maturity profile of the Group’s payables based on contractual undiscounted payments is as
follows:
Payables maturity analysis
Total
<1 year
1-2 years
2-3 years
>3 years
2018
US$’000
US$’000
US$’000
US$’000
US$’000
Trade and other payables
Loans and borrowings
Deferred interest(1)
LHM’s loans from CNNC - principal
Interest payable on CNNC loans(1)
12,971
115,000
4,856
80,928
12,402
12,971
-
-
-
-
-
-
-
-
-
Total payables
-
(1) Interest is not payable unless cash flows permit as disclosed in Note 7.
226,157
12,971
-
-
-
-
-
-
-
115,000
4,856
80,928
12,402
213,186
2017
US$’000
US$’000
US$’000
US$’000 US$’000
Trade and other payables
Loans and borrowings
Deferred interest
LHM’s loans from CNNC - principal
Interest payable on CNNC loans
18,241
382,000
19,071
80,928
8,460
18,241
382,000
19,071
-
-
Total payables
508,700
419,312
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80,928
8,460
89,388
Credit Risk
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, creditworthy 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 a total of US$58,733,000 (2017
US$25,630,000), comprising cash and receivables.
Current
Cash and cash equivalents*
Restricted cash
Trade receivables
Other receivables – other entities
Non Current
Other receivables – other entities
Total
2018
US$’000
2017
US$’000
39,166
11,072
976
7,145
10,492
1,010
674
13,070
58,359
25,246
374
384
58,733
25,630
* The Group’s maximum deposit with a single financial institution represents 68% (2017: 69%) of cash
and cash equivalents. This financial institution has a credit rating of Aa3 (2017: Aa3).
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
95
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Credit Risk (continued)
Total receivables
8,495
8,121
2018
Trade receivables
Other receivables
2017
Trade receivables
Other receivables
Receivables ageing analysis
Current
Total
>1 year
US$’000
US$’000
US$’000
976
7,519
976
7,145
Total
Current
>1 year
US$’000
US$’000
US$’000
674
13,454
674
13,070
-
374
374
-
384
384
Total receivables
14,128
13,744
No receivables are impaired.
Fair Values
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial
instruments, other than those with carrying amounts that are reasonable approximations of fair values
as at 30 June 2018:
Financial liabilities
Interest bearing loans and borrowings:
- Secured revolving credit facility
- Liability component of
unsecured convertible bonds
Total current
Interest bearing loans and borrowings
- Senior secured notes
Total non-current
2018
2017
Carrying
amount
US$’000
Fair
value
US$’000
Carrying
amount
US$’000
Fair
value
US$’000
-
-
-
-
-
-
19,688(1)
19,688
378,511
398,199
259,173
278,861
103,883
103,883
103,751
103,751
-
-
-
-
Total
103,883 103,751
398,199
278,861
(1) This figure includes transaction costs which offset the balance in accordance with the requirements
of Accounting Standards.
The Group uses various methods in estimating the fair value of a financial instrument. The methods
comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
96
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Fair Values (continued)
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on
observable market data.
The fair value of the financial instruments as well as the methods used to estimate the fair value are
summarised in the table below:
Year ended 30 June 2018
Year ended 30 June 2017
(Level 1)
US$’000
(Level 2)
US$’000
(Level 3)
US$’000
Total
US$’000
(Level 1)
US$’000
(Level 2)
US$’000
(Level 3)
US$’000
Total
US$’000
Financial assets measured at fair value
Available-for-sale
investments
Listed investments
-
-
-
-
-
-
-
-
-
-
Financial liabilities for which fair values are disclosed
Interest bearing loans
and borrowings
Liability component of of
convertible bonds (1)
US$115M senior
secured notes (1)
-
-
-
103,751
103,751
-
-
-
-
-
278,861
103,751
103,751
-
278,861
-
-
-
-
-
-
-
-
-
-
-
-
278,861
-
278,861
(1) The fair value has been determined using a valuation technique based on the quoted market price
of the bonds or notes less the estimated fair value.
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.
For financial instruments that are recognised at fair value on a recurring basis, the Group determines
whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end
of each reporting period.
Capital Management
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.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
97
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Capital Management (continued)
The Company utilises a combination of debt and equity 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 compliance with various restrictions and undertakings associated with the
US$115M senior secured notes. At the time of reporting, the Company was in compliance with all of
the facility’s terms and conditions.
Debt (face value plus accrued interest) (1)
Less cash and cash equivalents
Net debt
Total equity
Total Capital
Gearing Ratio
2018
US$’000
2017
US$’000
119,856
(39,166)
676,693
(10,492)
80,739
666,201
106,761
(435,799)
187,500
230,402
43%
289%
(1) Includes EdF prepayment amount but excludes LHM’s loans from CNNC that were assigned by
PFPL to CNNC and form part of CNNC’s 25% interest in LHM as the Group views these as
shareholder loans to LHM.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
98
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
PERFORMANCE FOR THE YEAR
NOTE 11. REVENUE
Sale of uranium
Total
Recognition and Measurement
2018
US$’000
2017
US$’000
72,917
95,844
72,917
95,844
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are net of duties and taxes paid. Revenue from sale of uranium is recognised when risk and
reward of ownership pass, which is when title of the product passes from the Group pursuant to an
enforceable contract, when selling prices are known or can be reasonably estimated and when the
product is in a form that requires no further treatment by the Group.
NOTE 12.
INCOME AND EXPENSES
Cost of Sales
Cost of production
Depreciation and amortisation
Product distribution costs
Royalties
Other
Inventory movement
Total
Other Income
Interest income
Gain on disposal of investments
Gain on disposal of tenements
Gain on disposal of assets
Sundry Income
Gain on extinguishment of debt(1)
Foreign exchange gain (net)
Total
(1) Gain on extinguishment of debt
Fair value of Paladin shares transferred to creditors
Carrying value of EdF creditor
Carrying value of convertible bonds
Loss of 50% interest in Michelin Project to EdF claimants
Total
2018
US$’000
2017
US$’000
(71,845)
(19,061)
(2,358)
(2,280)
(187)
7,173
(88,558)
286
-
-
13
362
483,721
1,865
486,247
(185,465)
290,344
392,726
(13,884)
483,721
(78,476)
(15,209)
(3,999)
(3,054)
(121)
8,094
(92,765)
204
1,667
766
4
-
-
-
2,641
-
-
-
-
-
439138_2.docx
(332.9)
(355.6)
3.0
0.4
3.0
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
99
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 12.
INCOME AND EXPENSES (continued)
Administration, Marketing and Non-Production Costs
Corporate and marketing
Corporate restructure costs
LHM mine site
LHM restructure costs
Canada site
Depreciation and amortisation
Other
Total
2018
US$’000
2017
US$’000
(3,111)
(11,208)
(4,713)
(5,970)
(35)
(70)
(460)
(25,567)
(3,064)
(7,506)
(2,514)
-
(23)
(63)
(355)
(13,525)
Impairment of exploration assets
(2,300)
(243,831)
Impairments of US$2,300,000 (2017: US$243,831,000) were recognised in 2018. The exploration and
evaluation assets were written down at 30 June 2017 after considering the valuation determined by an
independent expert.
Other Expenses
Impairment of assets(1)
LHM & KM stores & consumables obsolescence write off
KM care and maintenance expenses
Foreign exchange loss (net)
Change in estimate of KM mine closure provision
Total
-
(5,933)
(5,755)
-
(10,134)
(48)
(21)
(6,178)
(10,244)
-
(21,822)
(16,491)
(1)
In 2017 the Company made a decision to sell its property at 9 Clarke St, Mt Isa and on 17 June
2017 a contract was signed. The sale was completed and monies were received on 2 August
2017.
Finance Costs
Interest expense:
Deutsche Bank facility
Convertible bonds
Senior Secured Notes
LHM’s loans from CNNC
Accretion expense relating to unearned revenue
Mine closure provision accretion expense
Total
(10,006)
(19,071)
(601)
(3,942)
(12,162)
(3,603)
(1,980)
(52,820)
-
(3,114)
(78,182)
(5,062)
(49,385)
(141,158)
Total depreciation and amortisation expense
(19,131)
(15,272)
Recognition and Measurement
Borrowing Costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period
of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing
costs are expensed as incurred including the unwinding of discounts related to mine closure
provisions. When relevant, the capitalisation rate used to determine the amount of borrowing costs to
be capitalised is the weighted average interest rate applicable to the entity's outstanding borrowings
during the year.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
100
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 12.
INCOME AND EXPENSES (continued)
Profit after tax from discontinued operations
Reclassification of foreign currency translation reserve
Gain on disposal of subsidiary
Total
2018
US$’000
2017
US$’000
-
-
875
375
-
1,250
In December 2016, Paladin sold a subsidiary company, Northern Territory Uranium Pty Ltd, which
holds an interest in the Bigrlyi exploration project located in the Northern Territory, to Uranium Africa
Ltd for approximately US$375,000.
Employee Benefits Expense
Wages and salaries
Defined contribution superannuation
Share-based payments
Other employee benefits
Total
Recognition and Measurement
Superannuation
(17,130)
(1,646)
(667)
(4,321)
(18,056)
(1,624)
(469)
(1,799)
(23,764)
(21,948)
The Company contributes to employees’ superannuation plans in accordance with the requirements of
Occupational Superannuation Legislation. Contributions by the Company represent a defined
percentage of each employee's salary. Employee contributions are voluntary.
Details of the Employee Performance Share Rights Plan for the Company are disclosed in the
Remuneration Report.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
101
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 13.
INCOME AND OTHER TAXES
Income Tax Expense
Current income tax
Current income tax expense
Deferred income tax
Related to the origination and reversal of temporary differences
Income tax expense reported in the Income Statement
Amounts Charged or Credited Directly to Equity
Deferred income tax related to items charged or credited directly to equity:
Foreign currency translation reserve movement
Other and prior period
Income tax benefit reported in equity
Numerical Reconciliation of Income
Tax Benefit to Prima Facie Tax Payable
Profit/(loss) before income tax expense
2018
US$’000
2017
US$’000
-
-
-
-
-
-
-
(37,372)
(37,372)
-
-
-
343,413
(448,060)
Tax at the Australian tax rate of 30% (2017– 30%)
(103,024)
134,418
Difference in overseas tax rates
Non-deductible items
Under/over prior year adjustment
Tax losses utilised
Deferred tax assets on losses not recognised
5,378
(867)
-
107,748
(9,235)
(2,143)
3,004
478
-
(173,129)
Income tax expense reported in the income statement
-
(37,372)
-
Tax Losses
Australian unused tax losses for which no deferred tax asset has been
recognised
Other unused tax losses for which no deferred tax asset has been
recognised
Total unused tax losses for which no deferred tax asset has been
recognised
(52,932)
(412,092)
(599,173)
(490,910)
(652,105)
(903,002)
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
102
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 13.
INCOME AND OTHER TAXES (continued)
Deferred Income Tax
Deferred tax liabilities
Accelerated prepayment deduction for tax purposes
Accelerated depreciation for tax purposes
Foreign currency balances
Exploration expenditure
Inventory / Consumables
Gross deferred tax liabilities
Set off of deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Revenue losses available for offset against future taxable income
Foreign currency balances
Interest bearing liabilities
Deferred tax assets not recognised
Other
Gross deferred tax assets
Set off against deferred tax liabilities
Net deferred tax assets recognised
2018
US$’000
2017
US$’000
(347)
(84,356)
(40,647)
(12,412)
(1,978)
(471)
(90,593)
-
(12,403)
(4,519)
(139,740)
139,740
(107,986)
107,986
-
-
141,903
122,625
-
625
(5,988)
3,200
64,039
24,053
(107,901)
2,799
139,740
(139,740)
105,615
(105,615)
-
-
Paladin and all its wholly-owned Australian resident entities are part of a tax-consolidated group under
Australian tax law.
The net deferred tax assets recognised are in respect of revenue losses expected to be offset against
future taxable income.
This benefit for tax losses will only be obtained if:
(1)
(2)
(3)
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
no changes in tax legislation adversely affect the Consolidated Entities in realising the benefit
from the deductions for the losses.
Recognition and Measurement
Current income tax assets and liabilities for the current period are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantially enacted, at the reporting date in the countries
where the Group operates and generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the
statement of profit or loss. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to integration and establishes
provisions where appropriate.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
103
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 13.
INCOME AND OTHER TAXES (continued)
Recognition and Measurement (continued)
Deferred tax assets and liabilities are recognised using the full liability method 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.
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.
Significant Accounting Estimates and Assumptions
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. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and
the level of future taxable profits, together with future tax planning strategies.
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.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
104
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 14. EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Net profit/(loss) attributable to ordinary equity holders of the
Parent from continuing operations
2018
US$’000
2017
US$’000
367,762
(457,785)
2018
Number
of Shares
2017
Number
of Shares
Weighted average number of ordinary shares used in calculation
of basic earnings per share
1,712,843,812
1,712,843,812
Weighted average number of ordinary shares used in calculation
for diluted earnings per share
1,713,066,904
1,712,843,812
Total number of securities not included in weighted average
calculation due to their antidilutive nature in the current period,
that could potentially dilute basic earnings per share in the future
-
549,806,310
Recognition and Measurement
Basic Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares outstanding during the period.
Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares. Diluted earnings per share is the same as basic earnings per share
in 2018 and 2017 as the number of potentially dilutive shares does not change the result of earnings
per share.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
105
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 15. RECONCILIATION OF EARNINGS AFTER INCOME TAX TO NET CASH
FLOW FROM OPERATING ACTVITIES
Reconciliation of Net Profit/(Loss) After Tax to Net Cash
Flows Used in Operating Activities
Net profit/(loss)
343,413
(484,182)
2018
US$’000
2017
US$’000
Adjustments for
Depreciation and amortisation
Gain on disposal in investments
Gain on Sale of Subsidiary
Gain on Sale of Tenements
Sundry income
Gain on disposal of property, plant and equipment
Gain from discontinued operations
Net exchange differences
Share-based payments
Non-cash financing costs
Inventory write-down
Asset impairments
Gain on extinguishment of debt
Changes in assets and liabilities
Decrease/(increase) in prepayments
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Increase in provisions
Increase in inventories
Decrease in tax reserves
Decrease in deferred tax assets
19,131
-
-
-
3
(13)
-
(1,865)
667
16,307
34,052
12,434
(483,721)
839
5,633
22,794
2,834
(17,313)
-
-
15,272
(1,667)
(375)
(766)
-
(4)
(875)
10,244
469
112,348
38,069
244,608
-
(801)
(685)
8,412
188
(29,540)
1,067
36,305
Net cash flows used in operating activities
(44,805)
(51,913)
NOTE 16. NON CASH INVESTING AND FINANCING ACTIVITIES
The non-cash elements of the issuance of the senior secured notes are reconciled below:
Issue of US$115M Senior Secured Notes
US$115M senior secured notes
Repayment of Deutsche Bank Facility
Deutsche Bank interest and costs
Restructure costs
Nedbank KM environmental performance bond
Net cash proceeds received
2018
US$’000
2017
US$’000
115,000
(60,000)
(3,834)
(4,245)
(10,000)
36,921
-
-
-
-
-
-
Refer to Note 12 for non-cash financing activities relating to the effectuation of the DOCA which
resulted in a gain on extinguishment of debt.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
106
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
OPERATING ASSETS AND LIABILITIES
NOTE 17. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
GST and VAT
Sundry debtors
Interest receivable
Total current receivables
Notes
(a)
(b)
2018
US$’000
2017
US$’000
976
5,537
1,606
2
674
12,164
897
9
8,121
13,744
(a)
Trade receivables are non-interest bearing and are generally on 30 day terms. Carrying value
approximates fair value due to the short-term nature of the receivables. An allowance for
doubtful debts is made when there is objective evidence that a trade receivable is impaired. No
allowance has been recognised for the current year or the previous year.
(b) GST and VAT receivables relates to amounts due from Governments in Australia, Namibia,
Malawi, the Netherlands and Canada.
Non Current
Sundry debtors
Total non current receivables
Recognition and Measurement
Loans and Receivables
374
374
384
384
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise when the Group provides money, goods or services
directly to a debtor with no intention of selling the receivable. They are included in current assets,
except for those with maturities greater than 12 months after the balance date which are classified as
non current assets.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be
uncollectible are written off when identified. An allowance for doubtful debts is raised when there is
objective evidence that the group will not be able to collect the debt. Financial difficulties of the debtor,
default payments or debts more than 60 days overdue are considered objective evidence of
impairment.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
107
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 18. INVENTORIES
Current
Stores and consumables (at cost – refer below)
Work in progress (net realisable value)
Finished goods (net realisable value)
2018
US$’000
2017
US$’000
4,933
232
5,552
9,183
4,840
13,433
Total current inventories at the lower of cost and net realisable value
10,717
27,456
Inventory Expense
Inventories sold recognised as an expense for the year ended 30 June 2018 totalled US$88,558,000
(2017: US$92,765,000) for the Group.
Write-down of Inventories
During 2018, the carrying value of inventories held was reduced to net realisable value resulting in an
inventory write-down of US$28,119,000 (2017: US$38,046,000) for the year. The write-down of
inventories includes:
a. Write-down of ore stockpiles of US$8,457,000 (2017: US$20,933,000) due to continued
low expected uranium prices.
b. Write-down of product-in-circuit of US$6,657,000 (2017: US$8,709,000) due to continued
low expected uranium prices.
c. Write-down of finished product of US$13,005,000 (2017: US$8,404,000) due to continued
low expected uranium prices.
During 2018 stores and consumables held at LHM and KM were written down by US$5,933,000
(2017: US$21,000) due to expected obsolescence as a result of being placed on care and
maintenance.
Recognition and Measurement
Consumable stores inventory are valued at the lower of cost and net realisable value using the
weighted average cost method, after appropriate allowances for redundant and slow moving items.
Finished goods and work in progress inventory are valued at the lower of cost and net realisable value
using the weighted average cost method. Cost is derived on an absorption costing basis, including
both fixed and variable production costs and attributable overheads incurred up to the delivery point
where legal title to the product passes. No accounting value is attributed to stockpiles containing ore
at less than the cut-off grade.
The costs of production include labour costs, materials and contractor expenses which are directly
attributable to the extraction and processing of ore (including any recognised expense of stripping
costs); the depreciation of property, plant and equipment used in the extraction and processing of ore;
and production overheads.
Significant Estimates and Assumptions
Net Realisable Value of Inventories
The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed
net realisable value. In determining net realisable value various factors are taken into account,
including sales prices and costs to complete inventories to their final form.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
108
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE
19. ASSETS CLASSIFIED AS HELD FOR SALE
Plant and equipment
Total assets classified as held for sale
2018
US$’000
2017
US$’000
-
-
165
165
At 30 June 2017, the Company made a decision to sell its property at 9 Clarke St, Mt Isa and on 17
June 2017 a contract was signed. The sale was completed and monies were received on 2 August
2017. An impairment expense of US$49,000 has been recorded in Property, Plant and Equipment.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
109
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment – at cost
Less accumulated depreciation and impairment
2018
US$’000
716,919
(499,420)
2017
US$’000
713,321
(485,801)
Net carrying value plant and equipment
217,499
227,520
Land and buildings - at cost
Less accumulated depreciation and impairment
Net carrying value land and buildings
Construction work in progress – at cost
Less impairment
Net carrying value construction work in
progress
9,958
(4,323)
5,635
852
-
852
Net carrying value property, plant and equipment
223,986
Property, Plant and Equipment Pledged as Security for Liabilities
Refer to Note 7 for information on property, plant and equipment pledged as security.
10,052
(4,013)
6,039
10,738
-
10,738
244,297
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the
beginning and end of the year are set out below:
2018
Net carrying value at start of year
Additions
Depreciation and amortisation expense
Reclassification of assets
Reclassification to mine development
Adjustment
Foreign currency translation
Total
US$’000
Plant
and
Equipment
US$’000
Land and
Buildings
US$’000
Construction
Work in
Progress
US$’000
244,297
1,388
(14,599)
-
(6,584)
(489)
(27)
227,520
15
(14,219)
4,285
-
(99)
(3)
6,039
-
(380)
-
-
-
(24)
10,738
1,373
-
(4,285)
(6,584)
(390)
-
Net carrying value at end of year
223,986
217,499
5,635
852
2017
Net carrying value at start of year
Additions
Depreciation and amortisation expense
Reclassification of assets
Reclassification to assets held for sale
Adjustment (1)
Impairment of assets
Foreign currency translation
256,754
9,092
(12,736)
-
(165)
(8,633)
(48)
33
247,844
30
(12,368)
647
-
(8,633)
-
-
6,576
-
(368)
11
(165)
-
(48)
33
2,334
9,062
-
(658)
-
-
-
-
Net carrying value at end of year
244,297
227,520
6,039
10,738
(1) Reduction of $8,633,000 to previously capitalised costs due to the settlement of the litigation relating
to Stage 3 expansion at LHM.
439138_2.docx
-
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
110
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT (continued)
Recognition and Measurement
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
Leasehold improvements
Mine plant and equipment
20 years
10 years
2-6 years
period of lease
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.
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 of disposal 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).
Significant Estimates and Assumptions
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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
111
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT (continued)
Significant Estimates and Assumptions (continued)
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 of disposal
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows that are largely independent of the cash inflows
from other assets or groups of assets (cash-generating unit or CGU).
The future recoverability of the property, plant and equipment, mine development and intangibles is
dependent on a number of key factors including: uranium price, capex, life of mine, restart date,
discount rates used in determining the estimated discounted cash flows, foreign exchanges rates, tax
rates, the level of proved and probable reserves and measured, indicated and inferred mineral
resources, future technological changes which could impact the cost of production and future legal
changes, including changes to environmental restoration obligations.
The recoverable value of the LHM property, plant and equipment has been determined based on the
higher of an asset’s or CGU‘s fair value less costs of disposal (“FVLCD”) or value in use (“VIU”).
At 30 June 2018, the Company has used a discounted cash flow (DCF) analysis under the FVLCD
approach to assess the recoverable value of the mine.
The following key assumptions were used in the DCF valuation of LHM:
Future production based on a range of life of mine (LOM) scenarios, including potential
optimisation of the plant.
Uranium price forecasts 2018 to 2022 (nominal) ranging from US$26/lb to US$42/lb.
Long term uranium price forecast (real) of US$47/lb.
Average future cost of production ranging from US$22/lb to US$34/lb based on a range of
LOM scenarios.
Discount rate (nominal post tax) applied to cash flow projections of 14.8%.
As part of the assessment of the recoverable value the LHM property, plant and equipment, the
Company also considered that the Administrators engaged an independent expert to prepare an
Independent Expert’s Report which was used to assist the Court to assess the S444GA Application to
implement the proposed DOCA. The Independent Expert’s Report, released on 22 December 2017,
determined LHM’s enterprise value as being
to
US$693,422,000 (midpoint US$614,834,000).
in a valuation range of US$536,245,000
The following key assumptions were used by the independent expert in their valuation of LHM:
Future production based on the latest LOM.
Uranium price forecasts 2017 to 2021 (nominal) ranging from US$28/lb to US$56/lb.
Long term uranium price forecast (real) of US$58/lb.
Average future cost of production of US$26/lb based on the current LOM.
Discount rate (nominal post tax) applied to cash flow projections ranging from 11% to 12%.
The current carrying value of the LHM CGU is US$225,559,000. The Company has assessed the
carrying value of the LHM CGU in light of the continued low spot price of uranium and the decision to
place LHM into C&M. After determining the fair value of LHM using discounted cash flow analysis and
also considering recent independent expert valuations of LHM, the Company has determined that the
recoverable amount of the LHM CGU exceeds its carrying value and therefore no impairment of the
LHM CGU has been recognised at 30 June 2018.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
112
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 21. MINE DEVELOPMENT
Mine development – at cost
Less accumulated depreciation and impairment
Net carrying value – mine development
Net carrying value at start of year
Depreciation and amortisation expense
Reclassification from property, plant and equipment
Adjustment to base amount of mine rehabilitation
Disposals
Net carrying value at end of year
Recognition and Measurement
Mine development
2018
US$’000
220,067
(191,925)
28,142
36,396
(3,927)
6,584
(10,911)
-
28,142
2017
US$’000
213,487
(177,091)
36,396
39,781
(2,456)
-
-
(929)
36,396
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 and depreciated on a units of production basis.
Post-production costs are recognised as a cost of production.
Stripping (waste removal) costs
As part of its mining operations, the Group incurs stripping (waste removal) costs both during the
development phase and production phase of its operations. Stripping costs incurred in the
development phase of a mine, before the production phase commences (development stripping), are
capitalised as part of the cost of constructing the mine and subsequently amortised over its useful life
using a units-of-production method. The capitalisation of development stripping costs ceases when
the mine/component is commissioned and ready for use as intended by management.
Stripping activities undertaken during the production phase of a surface mine (production stripping) are
accounted for as set out below. After the commencement of production, further development of the
mine may require a phase of stripping that is similar in nature to development phase stripping. The
costs of such stripping are accounted for in the same way as development stripping (as outlined
above).
Stripping costs incurred during the production phase are generally considered to create two benefits,
being either the production of inventory or improved access to the ore to be mined in the future.
Where the benefits are realised in the form of inventory produced in the period, the production
stripping costs are accounted for as part of the cost of producing those inventories. Where the benefits
are realised in the form of improved access to ore to be mined in the future, the costs are recognised
as a non-current asset, referred to as a stripping activity asset, if the following criteria are met:
a)
b)
c)
Future economic benefits (being improved access to the ore body) are probable;
The component of the ore body for which access will be improved can be accurately
identified; and
The costs associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the statement of profit or
loss as operating costs as they are incurred.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
113
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 21. MINE DEVELOPMENT (continued)
Recognition and Measurement (continued)
In identifying components of the ore body, the Group works closely with the mining operations
personnel for each mining operation to analyse each of the mine plans. Generally, a component will be
a subset of the total ore body, and a mine may have several components. The mine plans, and
therefore the identification of components, can vary between mines for a number of reasons. These
include, but are not limited to: the geological characteristics of the ore body, the geographical location,
and/or financial considerations.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly
incurred to perform the stripping activity that improves access to the identified component of ore, plus
an allocation of directly attributable overhead costs. If incidental operations are occurring at the same
time as the production stripping activity, but are not necessary for the production stripping activity to
continue as planned, these costs are not included in the cost of the stripping activity asset.
If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a
relevant production measure is used to allocate the production stripping costs between the inventory
produced and the stripping activity asset. This production measure is calculated for the identified
component of the ore body and is used as a benchmark to identify the extent to which the additional
activity of creating a future benefit has taken place. The Group uses the expected volume of waste
extracted compared with the actual volume for a given volume of ore production of each component.
The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset,
being the mine asset, and is presented as part of ’Mine Development’ in the statement of financial
position.
The stripping activity asset is subsequently depreciated using the units-of-production method over the
life of the identified component of the ore body that became more accessible as a result of the
stripping activity. Economically recoverable reserves, which comprise proven and probable reserves,
are used to determine the expected useful life of the identified component of the ore body. The
stripping activity asset is then carried at cost less depreciation and any impairment losses.
Significant Judgements, Estimates and Assumptions
The Group has assessed that the useful lives of the individual identifiable components of the relative
ore bodies are short and that the strip ratio over the life of component is relatively uniform.
Accordingly, the Group has accounted for production stripping costs as a production cost in the years
ended 30 June 2017 and 2018. Refer to Note 20 for assessment of recoverability.
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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
114
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE
The following table details the expenditures on interests in mineral properties by area of interest for the year ended 30 June 2018:
Valhalla
/Skal
Isa North
Carley
Bore
Canada(1)
Manyingee
Fusion
Total
Areas of interest
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance 30 June 2017
40,308
8,500
7,800
28,140
7,277
-
92,025
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Impairment of exploration and
evaluation expenditure
Disposal of interest in Michelin
28
-
102
130
-
169
218
344
731
-
130
(527)
731
(774)
15
3
175
193
-
193
-
300
3
802
1,105
-
1,105
(373)
11
1
20
32
-
32
-
15
-
66
81
-
81
-
538
225
1,509
2,272
-
2,272
(1,674)
(130)
-
(791)
-
(193)
-
(1,105)
(13,884)
-
-
(81)
-
(2,300)
(13,884)
Balance 30 June 2018
39,781
7,666
7,800
13,883
7,309
-
76,439
(1) EdF claimants accepted a proposal whereby all existing claims which EdF have against the Michelin Project will be released and in consideration for the release
of these claims, the EdF Claimants will receive a 50% participating interest in the Michelin Project. There will be a farm out over a five year period whereby the
EdF Claimants will transfer 5% participating interest in the Michelin Project to Paladin on an annual basis in return for Paladin funding all obligations for the
Michelin Project over this period. A disposal of a 50% interest in the Michelin Project of US$13.9M has been recognised.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
115
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE (continued)
The following table details the expenditures on interests in mineral properties by area of interest for the year ended 30 June 2017:
Areas of interest
US$’000
US$’000
US$’000
US$’000
US$’000
Valhalla
/Skal
Isa North
Carley
Bore
Canada
Niger
Manyingee/
Oobagooma/
Other
US$’000
Angela/
Pamela
Bigrlyi (1)
US$’000
Fusion
Total
US$’000
US$’000
Balance 30 June 2016
89,132
9,962
8,431
220,668
-
7,881
-
-
336,074
Project exploration and evaluation
expenditure
Labour
Outside services
Other expenses
Total expenditure
Relinquished tenement expenditure
Expenditure expensed
Expenditure capitalised
Foreign exchange differences
Cost of tenements sold - Oobagooma
Impairment of exploration and
evaluation expenditure
28
1
92
121
-
(121)
56
1
323
380
25
(405)
108
253
299
660
-
-
342
69
634
1,045
-
-
-
(696)
-
(48,128)
-
(337)
-
(1,125)
660
-
-
(1,291)
1,045
(285)
-
(193,288)
Balance 30 June 2017
40,308
8,500
7,800
28,140
-
2
98
100
-
(100)
-
-
-
-
-
41
-
148
189
-
(3)
186
(58)
(732)
-
7,277
10
9
32
51
-
(51)
-
-
-
-
-
6
-
43
49
-
(49)
591
335
1,669
2,595
25
(729)
-
-
-
-
1,891
(1,376)
(732)
(243,832)
-
92,025
(1)
In December 2016, Paladin sold a number of non-core Australian exploration assets to Uranium Africa Ltd for approximately US$1,874,000. The assets sold
included the Oobagooma and Angela/Pamela projects located in Western Australia and the Northern Territory respectively and Paladin’s interest in the Bigrlyi
project located in the Northern Territory.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
116
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE (continued)
Recognition and Measurement
Exploration and evaluation expenditure related to areas of interest is capitalised and carried forward to
the extent that:
1.
2.
rights to tenure of the area of interest are current; and
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.
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 their recoverable amount if the
area of interest’s carrying amount is greater than their estimated recoverable amount.
Significant Estimates and Assumptions
Impairment 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.
In December 2016, Paladin received a notice from EdF requesting security for its prepayment in
addition to its existing security over 60.1% of the Michelin project in Canada. Pursuant to the EdF off-
take agreement, Paladin was required to provide additional security under certain circumstances and
Paladin proposed potential additional security over its Mount Isa, Manyingee, Carley Bore and
Michelin projects.
Paladin and EdF appointed an independent expert to determine the value of the additional security
proposed. On 9 June 2017, the independent expert determined the value of the additional security
was insufficient.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
117
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE (continued)
Significant Estimates and Assumptions (continued)
Impairment of Exploration and Evaluation Expenditure (continued)
After considering the range of implied values contained in the independent expert’s valuation report,
the Company was of the opinion that there was an indication that an impairment was required and
undertook an impairment assessment on all its exploration assets. The independent expert determined
an implied fair value per pound of resource for each project. The Company used the low-end of the
independent expert’s valuation range in the impairment assessment, resulting in the projects being
impaired by US$243,832,000 to a net carrying value of US$92,025,000 at 30 June 2017.
The following key assumptions were used by the independent expert in their valuation of Paladin’s
exploration assets:
An estimate of the Company’s mineral resources
A long-term uranium price of US$55/lb was used to calculate cut-off grades for resource
estimates.
Total resource multiples were derived using the business enterprise values (BEV) of relevant
comparable companies, calculated using market capitalisations, plus book value of minority
interest, plus book value of debt, less total cash and investments. The BEV of each
comparable company was divided by the total reserves and resources (R&R) owned by the
company to calculate the BEV/Total R&R multiple.
Precedent transactions were considered, involving uranium properties with delineated,
measured, indicated, or inferred resources by identifying the implied enterprise value to
resource multiples for non-producing properties with and without proven and probable
reserves, comprised of the price paid per pound of contained uranium equivalent. The
precedent transactions considered were those that most closely resembled each specific
exploration asset, with specific focus on uranium projects with similar geography, political
risk, resource grade, resource size and mining method type.
The fair value measurements, as described above, made by the independent expert, are Level 3 fair
value measurements.
An impairment has been recognised for exploration expenditure capitalised in the current year
amounting to US$2,300,000 (2017: US$ 243,832,000).
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
118
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 23.
INTANGIBLE ASSETS
At 30 June
Intangible assets – at cost
Less accumulated depreciation and impairment
Net carrying value – intangible assets
2018
US$’000
2017
US$’000
27,803
(17,710)
27,803
(17,178)
10,093
10,625
Amortisation of US$532,000 (2017: US$477,000) is included in cost of sales in the Income Statement.
Movements in Intangible Assets
Movements in each group of intangible asset during the financial year are set out below:
Right
to Supply
of Power
US$’000
Right
to Supply
of Water
US$’000
Total
US$’000
2018
Net carrying value at 1 July 2017
Amortisation expense
2,976
(149)
7,649
(383)
10,625
(532)
Net carrying value at 30 June 2018
2,827
7,266
10,093
2017
Net carrying value at 1 July 2016
Amortisation expense
3,110
(134)
7,992
(343)
11,102
(477)
Net carrying value at 30 June 2017
2,976
7,649
10,625
Description of the Group’s Intangible Assets
1.
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.
2.
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.
Recognition and Measurement
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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
119
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 23. INTANGIBLE ASSETS (continued)
Recognition and Measurement (continued)
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.
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.
NOTE 24.
TRADE AND OTHER PAYABLES
Current
Trade and other payables
Onerous contracts
Total current payables
2018
US$’000
2017
US$’000
9,735
3,236
18,241
-
12,971
18,241
Trade payables are non-interest bearing and are normally settled on 30 day terms.
Recognition and Measurement
Trade 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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
120
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 25. PROVISIONS
Current
Employee benefits
Total current provisions
Non Current
Employee benefits
Environmental rehabilitation provision
Demobilisation provision
Total non current provisions
Movements in Provisions
2018
US$’000
2017
US$’000
5,249
5,249
2,382
2,382
-
86,817
610
46
86,933
1,372
87,427
88,351
Movements in each class of provision during the financial year, excluding provisions relating to employee
benefits, are set out below:
Demobilisation
US$’000
Environmental
Rehabilitation
US$’000
At 1 July 2017
Arising during the year
Utilised
Foreign currency movements
Change in estimate of provision - LHM
Change in estimate of provision - KM
1,372
60
(673)
33
(182)
-
86,933
3,430
-
(2,769)
(10,911)
10,134
Total
US$’000
88,305
3,490
(673)
(2,736)
(11,093)
10,134
At 30 June 2018
610
86,817
87,427
2018
Current
Non current
2017
Current
Non current
-
610
610
-
1,372
1,372
-
86,817
86,817
-
86,933
86,933
-
87,427
87,427
-
88,305
88,305
Nature and Timing of Provisions
Environmental rehabilitation
A provision for environmental 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.
Demobilisation
A provision for demobilisation has been recorded in relation to LHM for the costs of demobilising the mining
contractor.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
121
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 25. PROVISIONS (continued)
Recognition and Measurement
Provisions
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.
Employee benefits
Short-term benefits
Liabilities for short-term benefits, including wages and salaries, and accumulating sick leave expected 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.
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 corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Significant Accounting Judgements, Estimates and Assumptions
Environmental 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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
122
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 26. UNEARNED REVENUE
Current
Unearned revenue
Recognition and Measurement
2018
US,000
2017
US$’000
-
278,182
30 June 2017: In 2012, Paladin entered into a six-year Long Term Supply Contract (LTSC) with EdF, a major
electricity generator and distribution company in France, to deliver a total of 13.73Mlb U3O8 in the period
from 2019 to 2024. Under this agreement, a US$200,000,000 cash prepayment was received in 2012. The
Company granted EdF security over 60.1% of the Michelin project in Canada.
On 3 July 2017, EdF informed Paladin that it required payment of the outstanding amount (approximately
US$278,182,000 at 30 June 2017) when due, on 10 July 2017.
Following receipt of the demand from EdF, the Board of Paladin met and resolved to appoint administrators.
On 13 October 2017, Paladin announced that EdF had given notice terminating the LTSC on the basis that
Paladin had failed to repay the outstanding amount (being approximately US$278,182,000 at 30 June 2017)
by 9 October 2017, being the due date for cure of the default.
On 29 November 2017, Paladin announced that EdF had issued a demand under the guarantees given by
three of Paladin’s subsidiaries (Paladin Energy Canada Ltd, Aurora Energy Ltd, and Paladin Canada
Investments (NL) Ltd) (Paladin’s Canadian Subsidiaries), in respect of Paladin’s obligations under the LTSC
and the provision of security and guarantees over their interests in the Michelin Project.
On 21 December 2017, EdF sold its claims in respect of Paladin’s obligations under the LTSC and the
provision of security over their interests in the Michelin Project to Deutsche Bank. Deutsche Bank has sold
some or all of those claims to other third-party investors. Accordingly EdF is no longer a creditor of Paladin
and its subsidiaries.
On 1 February 2018, the DOCA was effectuated. In accordance with the DOCA, 98% of Paladin shares
were transferred to creditors and other investors pursuant to section 444GA of the Corporations Act and 2%
were retained by shareholders. The carrying value of the EdF creditor was US$290,344,000 (refer to
Note 12).
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
123
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
OTHER NOTES
NOTE 27. KEY MANAGEMENT PERSONNEL
Details of Key Management Personnel
(i)
Directors
Mr Rick Crabb
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
Mr Donald Shumka
Mr Peter Donkin
Mr Philip Baily
Mr Wendong Zhang
Chairman (Non-executive)
Director (Non-executive) (appointed 1 February 2018)
Director (Non-executive) (appointed 1 February 2018)
Director (Non-executive) (appointed 1 February 2018)
Director (Non-executive) (resigned 8 December 2017)
Director (Non-executive) (resigned 8 December 2017)
Director (Non-executive) (resigned 8 December 2017)
Director (Non-executive) (resigned 8 December 2017)
(ii) Executives
Mr Alexander Molyneux Chief Executive Officer (resigned 1 July 2018)
Mr Scott Sullivan
Mr Craig Barnes
Chief Executive Officer (appointed 1 July 2018)
Chief Financial Officer
Compensation of Key Management Personnel: Compensation by Category
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2018
US$
2017
US$
1,153,184
21,277
-
111,160
889,023
31,884
-
17,721
1,285,621
938,628
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
124
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 28. AUDITORS’ REMUNERATION
The auditor of the Paladin Energy Ltd Group is PricewaterhouseCoopers.
Amounts received or due and receivable by
PricewaterhouseCoopers (Australia) for:
Audit or review of the financial report of the
consolidated Group
Other services
Taxation services:
Tax compliance services
International tax consulting
Other tax advice
Sub-total
Amounts received or due and receivable by related
practices of PricewaterhouseCoopers (Australia) for:
Audit or review of the financial report of
subsidiaries and audit related services
Other services
Taxation services:
International tax consulting
Sub-total
Total
2018
US$
2017
US$
288,601
103,900
218,901
-
27,382
-
65,816
43,205
77,495
8,816
485,699
348,417
61,085
4,983
48,393
7,236
-
903
66,068
56,532
551,767
404,949
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
125
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 29. 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 2018 other than:
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
2018
US$’000
2017
US$’000
1,055
1,417
869
1,722
10,188
3,493
3,341
15,403
These include commitments relating to tenement lease rentals and the minimum expenditure requirements of
the Namibian, Malawian, Canadian, Western Australian 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 and Canada.
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 34 months. 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
2018
US$’000
2017
US$’000
310
583
-
893
510
915
-
1,425
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
126
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 29. COMMITMENTS AND CONTINGENCIES (continued)
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 commitments
2018
US$’000
2017
US$’000
2,722
-
-
14,985
-
-
2,722
14,985
In relation to the Manyingee Uranium Project, the re-negotiated acquisition terms provide for a payment of
A$750,000 (US$553,890) (2017: A$750,000 (US$574,703)) by the Group to the vendors when all project
development approvals are obtained.
Bank Guarantees
As at 30 June 2018 the Group has outstanding US$166,274 (A$225,145) (2017: US$172,522 / A$225,145))
as a current guarantee provided by a bank for the corporate office lease; a US$121,920 (A$165,086) (2017:
US$130,266 (A$170,000)) guarantee for tenements; a US$49,637 (A$67,212) (2017: US$49,808 /
A$65,000) guarantee for corporate credit cards, and a US$10,000,000 (2017: US$10,000,000) KM
environmental performance bond in favour of the Government of Malawi.
NOTE 30. RELATED PARTIES
Key Management Personnel
The only related party transactions are with Directors and Key Management Personnel. Refer to Note 27.
Details of material controlled entities are set out in Note 31.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
127
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 31. GROUP INFORMATION
Information Relating to Paladin Energy Ltd
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Option application reserve
Share-based payments reserve
Convertible bond non distributable reserve
Total shareholders’ equity
Net loss after tax from operations
Total comprehensive loss
2018
US$’000
2017
US$’000
36,258
235,875
8,534
193,127
1,742
129,517
657,740
681,756
2,301,285
(2,242,991)
137
47,927
-
2,101,085
(2,731,484)
137
47,259
94,374
106,358
488,629
(394,119)
(394,119)
(945,144)
(945,115)
Details of Any Contingent Liabilities of the Parent Entity
Paladin has provided a guarantee of US$34,167,049 for the LHM Environmental Trust Fund.
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.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
128
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 31. GROUP INFORMATION (continued)
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.
Investments in Material Controlled Entities
NAME
COUNTRY OF
INCORPORATION
Paladin Finance Pty Ltd
Paladin Energy Minerals NL
PEM Malawi Pty Ltd
Eden Creek Pty Ltd
Paladin (Africa) Limited
Paladin Netherlands BV
Paladin Netherlands Holdings Cooperatief U.A.
Langer Heinrich Mauritius Holdings Ltd
Langer Heinrich Uranium (Pty) Ltd
Valhalla 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
Paladin Intellectual Property Pty Ltd
Fusion Resources Pty Ltd
NGM Resources Pty 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
Netherlands
Netherlands
Mauritius
Namibia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
PERCENTAGE
INTEREST HELD
2017
%
100
100
100
100
85
100
100
75
75
100
100
100
82
82
82
100
100
100
100
100
100
100
100
100
2018
%
100
100
100
100
85
100
100
75
75
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
Resources Ltd’s shares, which are quoted on the ASX and Paladin Netherlands Holdings Cooperatief U.A.
which issues membership equity.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
129
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 32. EVENTS AFTER THE BALANCE DATE
Other than disclosed below, since 30 June 2018, 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
periods with the exception of the following, the financial effects of which have not been provided for in the 30
June 2018 Financial Report:
Appointment of Chief Executive Officer
On 12 June 2018, Paladin Energy Ltd announced that Mr Scott Sullivan had been appointed as Chief
Executive Officer (CEO) commencing on 1 July 2018.
Recommended Takeover Offer of Summit Resources Ltd
On 1 August 2018, Paladin Energy Ltd announced an off-market takeover offer for the shares in Summit
Resources Ltd it does not presently own.
Highlights of the takeover offer:
Consideration of one (1) new Paladin share for every one (1) Summit share held
Paladin currently holds 82.08% of the ordinary shares in Summit
If successful, Offer would result in approximately 39.1M new Paladin shares being issued to third-party
shareholders representing approximately 2.28% of Paladin’s shares outstanding
The Offer consideration is final and will not be increased
Summit’s Independent Directors unanimously recommend the Offer (in the absence of a superior offer
and subject to the independent expert not concluding that the Offer is not fair and not reasonable)
The Offer is being made in line with Paladin’s continued cost optimisation initiatives – If the Offer
succeeds, will result in reduced compliance and regulatory costs associated with having a Paladin
majority-owned subsidiary separately listed
Paladin encourages Summit third-party shareholders to accept in light of the opportunity to exchange
for shares in Paladin, a larger, more comprehensive and more liquid uranium company.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
130
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 33. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
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 are relevant to the Group but have not been applied by the Group for the annual reporting period
ending 30 June 2018:
Application
date of
standard*
Application
date for
Group*
1 January
2018
1 July 2018
Reference
Title
Summary
AASB 9
Financial
Instruments
439138_2.docx
AASB 9 (December 2014) is a new standard which replaces
AASB 139. This new version supersedes AASB 9 issued in
December 2009 (as amended) and AASB 9 (issued in December
2010) and includes a model for classification and measurement, a
single, forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1
January 2018. However, the Standard is available for early
adoption. The own credit changes can be early adopted in
isolation without otherwise changing the accounting for financial
instruments.
Classification and measurement
AASB 9 includes requirements for a simpler approach for
classification and measurement of financial assets compared with
the requirements of AASB 139. There are also some changes
made in relation to financial liabilities.
The main changes are described below.
Financial assets
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 investment 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.
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities
are limited to the measurement of liabilities designated at fair
value through profit or loss (FVPL) using the fair value option.
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
AASB 9 also removes the volatility in profit or loss that was
caused by changes in the credit risk of liabilities elected to be
measured at fair value. This change in accounting means that
gains or losses attributable to changes in the entity’s own credit
risk would be recognised in OCI. These amounts recognised in
OCI are not recycled to profit or loss if the liability is ever
repurchased at a discount.
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
131
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
Reference
Title
Summary
Application
date of
standard*
Application
date for
Group*
AASB 15
Revenue from
Contracts with
Customers
1 January
2018
1 July 2018
Impairment
The final version of AASB 9 introduces a new expected-loss
impairment model that will require more timely recognition of
expected credit losses. Specifically, the new Standard requires
entities to account for expected credit losses from when financial
instruments are first recognised and to recognise full lifetime
expected losses on a more timely basis.
Hedge accounting
Amendments to AASB 9 (December 2009 & 2010 editions and
AASB 2013-9) issued in December 2013 included the new hedge
accounting requirements, including changes to hedge
effectiveness testing, treatment of hedging costs, risk components
that can be hedged and disclosures.
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, AASB 2010-10 and AASB 2014-1 –
Part E.
AASB 2014-7 incorporates the consequential amendments arising
from the issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of
AASB 9 (AASB 9 (December 2009) and AASB 9 (December
2010)) from 1 February 2015 and applies to annual reporting
periods beginning on after 1 January 2015.
AASB 15 Revenue from Contracts with Customers replaces the
existing revenue recognition standards AASB 111 Construction
Contracts, AASB 118 Revenue and related Interpretations
(Interpretation 13 Customer Loyalty Programmes, Interpretation
15 Agreements for the Construction of Real Estate,
Interpretation 18 Transfers of Assets from Customers,
Interpretation 131 Revenue—Barter Transactions Involving
Advertising Services and Interpretation 1042 Subscriber
Acquisition Costs in the Telecommunications Industry). AASB 15
incorporates the requirements of IFRS 15 Revenue from
Contracts with Customers issued by the International Accounting
Standards Board (IASB) and developed jointly with the US
Financial Accounting Standards Board (FASB).
AASB 15 specifies the accounting treatment for revenue arising
from contracts with customers (except for contracts within the
scope of other accounting standards such as leases or financial
instruments).The core principle of AASB 15 is that an entity
recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises
revenue in accordance with that core principle by applying the
following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the performance
obligations in the contract
(e) Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation
AASB 2015-8 amended the AASB 15 effective date so it is now
effective for annual reporting periods commencing on or after 1
January 2018. Early application is permitted.
AASB 2014-5 incorporates the consequential amendments to a
number Australian Accounting Standards (including
Interpretations) arising from the issuance of AASB 15.
AASB 2014-
10
Amendments to
Australian
Accounting
Standards – Sale or
AASB 2014-10 amends AASB 10 Consolidated Financial
Statements and AASB 128 to address an inconsistency between
the requirements in AASB 10 and those in AASB 128 (August
2011), in dealing with the sale or contribution of assets between an
1 January
2022
1 July 2022
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
132
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
Reference
Title
Summary
Application
date of
standard*
Application
date for
Group*
Contribution of
Assets between an
Investor and its
Associate or Joint
Venture
investor and its associate or joint venture. The amendments
require:
(a) a full gain or loss to be recognised when a transaction involves
a business (whether it is housed in a subsidiary or not)
(b) a partial gain or loss to be recognised when a transaction
involves assets that do not constitute a business, even if these
assets are housed in a subsidiary.
AASB 2014-10 also makes an editorial correction to AASB 10.
AASB 2015-10 defers the mandatory effective date (application
date) of AASB 2014-10 so that the amendments are required to be
applied for annual reporting periods beginning on or after 1
January 2018 instead of 1 January 2016.
AASB 16
Leases
The key features of AASB 16 are as follows:
Lessee accounting
1 January
2019
1 July 2019
• Lessees are required to recognise assets and liabilities
for all leases with a term of more than 12 months,
unless the underlying asset is of low value.
• A lessee measures right-of-use assets similarly to
other non-financial assets and lease liabilities similarly
to other financial liabilities.
• Assets and liabilities arising from a lease are initially
measured on a present value basis. The measurement
includes non-cancellable lease payments (including
inflation-linked payments), and also includes payments
to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the
lease, or not to exercise an option to terminate the
lease.
• AASB 16 contains disclosure requirements for lessees.
Lessor accounting
• AASB 16 substantially carries forward the lessor
accounting requirements in AASB 117. Accordingly, a
lessor continues to classify its leases as operating
leases or finance leases, and to account for those two
types of leases differently.
• AASB 16 also requires enhanced disclosures to be
provided by lessors that will improve information
disclosed about a lessor’s risk exposure, particularly to
residual value risk.
AASB 16 supersedes:
(a) AASB 117 Leases;
(b) Interpretation 4 Determining whether an Arrangement
contains a Lease;
(c) SIC-15 Operating Leases—Incentives; and
(d) SIC-27 Evaluating the Substance of Transactions Involving
the Legal Form of a Lease.
The new standard will be effective for annual periods beginning
on or after 1 January 2019. Early application is permitted,
provided the new revenue standard, AASB 15 Revenue from
Contracts with Customers, has been applied, or is applied at the
same date as AASB 16.
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
439138_2.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
133
FOR THE YEAR ENDED 30 JUNE 2018
EXPRESSED IN US DOLLARS
NOTE 33. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued)
Accounting Standards and Interpretations issued but not yet effective (continued)
The Group has considered what impact AASB 9 Financial Instruments and AASB 15 Revenue from
Contracts will have on the financial statements, when applied next year, and have concluded that they will
have no impact. The Group is in the process of determining what impact AASB 16 Leases will have on the
financial statements when applied in future periods.
The Group expects the adoption of AASB 15 to have no material impact on the timing of recognition, nor on
the measurement of revenue in respect of sales of uranium.
The Group does not expect the application of AASB 9 to have a material impact on the measurement of
financial assets and liabilities.
Information on the undiscounted amount of the Group’s operating lease commitments is disclosed in Note
29. Under AASB 16, the present value of these commitments would be shown as a liability on the balance
sheet together with an asset representing the right-of-use and expenses will be split between amortisation
and interest expense.
The Group has elected not to early adopt these new standards or amendments in the financial statements.
For Standards and Interpretations effective from 1 July 2018, it is not expected that the new Standards and
Interpretations will significantly affect the Group’s financial performance.
439138_2.docx
__________________________________________________________________________________
DIRECTORS’ DECLARATION
134
1.
In the opinion of the Directors’ of Paladin Energy Ltd:
(a)
The consolidated financial statements and notes that are set out on pages 70 to 133, are 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 2017 and of its performance for the financial year ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
(c)
The financial statements and notes also comply with International Financial Reporting
Standards as disclosed in Note 3 to the Financial Statements.
Subject to the matters set out in Note 4 to the Financial Statements, there are reasonable
grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
2.
This declaration has been made after receiving the declarations required to be made in accordance
with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2018 (section
295A Declarations). The section 295A Declarations have been made by the Chief Executive Officer,
Scott Sullivan and the Chief Financial Officer, Craig Barnes.
Dated at Perth on 28th August 2018
On behalf of the board
_______________________________
Rick Crabb
Chairman
439138_2.docx
135
Independent auditor’s report
To the members of Paladin Energy Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Paladin Energy Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
(b)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
financial performance for the year then ended
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2018
the consolidated income statement for the year then ended
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
136
Material uncertainty related to going concern
We draw attention to Note 4 in the financial report, which indicates that, excluding a one-off gain on
the debt restructure, the Group incurred a loss after tax of US$140.3 million, and a net cash outflow
from operations of US$44.8 million during the year ended 30 June 2018.
As a result of the Langer Heinrich Mine being placed into care and maintenance during the financial
year it is expected that the Group will not generate any operating net cash inflows in the short term;
therefore, the Group is dependent on raising new equity and/or a sufficient improvement in the
uranium price to support the recommencement of operations. These conditions, along with other
matters set forth in Note 4, indicate that a material uncertainty exists that may cast significant doubt
on the Group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group owns uranium mining and exploration assets in Namibia, Malawi, Canada and Australia.
Materiality
• For the purpose of our audit we used overall Group materiality of US$4.0 million which represents
approximately 1% of the Group’s total assets.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on
the financial report as a whole.
• We chose total assets as the benchmark because the Group is not currently operating its assets which
are in the care and maintenance or exploration stage. The use of total assets as a benchmark provides a
level of materiality which, in our view, is appropriate for the audit having regard to the expected
requirements of users of the Group’s financial report.
137
• We selected 1% threshold based on our professional judgement, noting it is within the range of
commonly acceptable asset-related thresholds in the mining industry.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
•
In establishing the overall approach to the Group audit, we determined the type of work that needed to
be performed by the group engagement team and by the component auditor in Namibia operating
under our instruction. We structured our audit as follows:
• The component auditor performed audit procedures on the financial information of Langer
Heinrich Uranium (Pty) Ltd.
• The group engagement team performed audit procedures, as required due to their financial
significance, on the financial information of the Group’s remaining subsidiaries.
• The group engagement team and component auditor had active dialogue throughout the year
through discussions, a site visit by the group engagement team to the Langer Heinrich mine, review
of audit working papers and written instructions and reporting.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
In addition to the matter described in the Material uncertainty related to going concern section, we
have determined the matters described below to be the key audit matters to be communicated in our
report.
Key audit matter
Impairment assessments for non-current
assets
(Refer to note 20) US$224.0 million in property,
plant and equipment and US$28.1 million in mine
development
The Group’s financial report includes significant
non-current assets in the form of Mine Development
and Property, Plant and Equipment, relating
primarily to the Group’s Langer Heinrich mine in
Namibia.
How our audit addressed the key audit
matter
We performed the following procedures, amongst
others:
• assessed whether the composition of the Group’s
CGUs, being Langer Heinrich and Kayelekera,
was consistent with our knowledge of the
Group’s operations and internal Group reporting
• evaluated whether the decision to place LHM
into care and maintenance was an indicator of
asset impairment at 30 June 2018 for the Langer
Heinrich CGU taking into consideration the
requirements of Australian Accounting
Standards.
Key audit matter
Due to the decision to cease operations and put the
Langer Heinrich mine on care and maintenance during
the year, the Group identified indications of
impairment for its Langer Heinrich Cash Generating
Unit (CGU) and, as a result, the Group tested the
Langer Heinrich CGU for impairment.
The impairment assessment involved significant
judgements in the assessment, such as:
•
•
•
•
•
Forecast long term uranium prices
Reserve and resource estimates and production
and processing volumes
Discount rates
Operating costs, capital expenditure, foreign
exchange rates and inflation rates
Timing of the expected recommencement of
mining and processing operations.
This was a key audit matter due to the significant
carrying value of the Group’s Langer Heinrich CGU
and the judgements and assumptions outlined above
in determining whether an impairment charge was
required.
138
How our audit addressed the key audit
matter
• assessed whether the Langer Heinrich CGU
appropriately included all directly attributable
assets and liabilities
•
•
considered if the discounted cash flow model
used to estimate the recoverable amount of the
Langer Heinrich CGU on a 'fair value less cost of
disposal' basis (the impairment model) was
consistent with Australian Accounting Standards
compared the forecast cash flows used in the
impairment mode to the most recent budgets
and business plans to restart, optimise and
expand the plant to achieve the highest and best
use of the assets
• assessed whether the forecast cash flows in the
impairment model were reasonable by
comparing:
• medium and long term uranium pricing data
used to current independent industry
forecasts
•
•
•
the Group’s current forecast uranium
production over the life of the mine to the
Group’s most recent reserves and resources
statement
the previously forecast cash flows to actual
cash flows for prior years to assess the
historical accuracy of the Group’s forecasting
foreign exchange rate and inflation rate
assumptions to current independent
economic forecasts, and assessed the Group’s
selection of an asset specific discount rate,
assisted by PwC valuation experts
• performed sensitivity analysis on the key
assumptions used in the impairment model
• performed tests of the mathematical accuracy of
the impairment model
• evaluated the adequacy of the disclosures made
in note 20 including those regarding key
assumptions used in the impairment
assessment, in light of the requirements of
Australian Accounting Standards.
Key audit matter
Closure and rehabilitation provisions
(Refer to note 25) US$87.4 million
As a result of its mining and processing operations,
the Group is obliged to restore and rehabilitate the
environment disturbed by these operations.
Rehabilitation activities are governed by a
combination of legislative and licence requirements.
The Group evaluated the impact of their decision
during the year to place the Langer Heinrich mine
on care and maintenance on the closure and
rehabilitation provision. At 30 June 2018 the
consolidated statement of financial position
included provisions for such obligations across all
sites of US$87.4 million.
This was a key audit matter given the determination
of these provisions required judgement in the
assessment of the nature and extent of future works
to be performed, the future cost of performing the
works, the timing of when the rehabilitation will
take place and economic assumptions such as the
discount rate and inflation rates applied to future
cash outflows associated with rehabilitation
activities to bring them to their present value.
139
How our audit addressed the key audit
matter
We obtained the Group’s assessment of their
obligations to rehabilitate disturbed areas and the
estimated future cost of that work, which forms the
basis for the closure and rehabilitation provision
calculations (the models) for the Langer Heinrich
and Kayelekera mines.
We evaluated and tested key assumptions utilised in
these models by performing the following
procedures:
•
•
•
•
•
compared the rehabilitation costs being
estimated at Langer Heinrich and Kayelekera to
an external expert’s assessment of the
rehabilitation obligations completed during the
year
evaluated the competency and independence of
the experts retained by the Group to assist with
the assessment of the Langer Heinrich and
Kayelekera rehabilitation obligations
examined supporting information for significant
changes in future cost estimates from the prior
year, with a focus on the impact on the timing
and amount of expenditure required as a result
of the Group placing the Langer Heinrich mine
on care and maintenance
assessed the forecast timing of work to be
performed by comparison to mine plans and
environmental rehabilitation plans submitted to
relevant authorities
considered the appropriateness of the discount
rates and inflation rates utilised in calculating
the provision by comparing them to current
market consensus rates.
140
Key audit matter
Capital restructuring (extinguishment of
debt and issuance of new senior secured
notes)
(Refer to note 7 & 12) US$483.7 million gain
On 1 February 2018, the Company effectuated a
Deed of Company Arrangement (DOCA) to
extinguish debts incurred prior to entering into
voluntary administration on 3 July 2017. This
resulted in 98% of the Company’s shares being
transferred to creditors comprising; convertible
bond holders, Électricité de France (the pre-DOCA
debts), investors in a new US$115 million senior
secured notes and the underwriters. As a result of
this transaction, the pre-DOCA debts were
extinguished through the transfer of shares,
resulting in a gain of US$497.6 million being
recorded in the income statement.
During May 2018, the Company extinguished the
final security claims against its Canadian
subsidiaries through the establishment of the
Michelin Joint Venture Agreement under which a
50% interest in the Michelin project was transferred
for no consideration, resulting in a loss of US$13.9
million.
This was a key audit matter given the impact of the
Group’s capital restructure on the consolidated
statement of financial position and the magnitude of
the related realised gain on the extinguishment of
the pre-DOCA debts.
How our audit addressed the key audit
matter
We performed the following procedures, amongst
others:
•
•
•
•
•
•
assessed the appropriateness of the accounting
treatment applied by the Company for
extinguishing the pre-DOCA debts by
transferring the Company’s equity instruments
in light of the requirements of Australian
Accounting Standards
assessed the completeness and carrying value of
liabilities subject to the DOCA, which were
extinguished in exchange for the transfer of
shares by agreeing them to accounting records
and source documents
tested the fair value of shares and carrying value
of interests in other assets, such as the 50%
interest in the Michelin Project, transferred by
the Company and certain subsidiaries in
exchange for the extinguishment of its pre-
DOCA debts and security claims
evaluated the tax advice obtained by the
Company regarding the tax treatment of the
capital restructure
recalculated the gain recorded on
extinguishment of the pre-DOCA debts and
security claims in the income statement
tested the recognition and measurement of the
new senior secured notes by assessing the
allocation of the consideration received by the
Group between the fair value of the financial
liability utilising trading data and recalculating
the residual allocated to equity for the shares
transferred.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, including the
Corporate Values and Paladin Today, Insights from the CEO, Operating and Financial Review,
Reserves and Resources, Health and Safety, Sustainable Development, Environment, Corporate Social
Responsibility, Our People, Corporate Governance Statement, Directors’ Report, Additional
Information and Corporate Directory, but does not include the financial report and our auditor’s
report thereon.
141
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 54 to 66 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Paladin Energy Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
142
Responsibilities
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.
PricewaterhouseCoopers
Ben Gargett
Partner
Perth
28 August 2018
ADDITIONAL INFORMATION
(continued)
143
__________________________________________________________________________________
Pursuant to the Listing Requirements of ASX as at 10 August 2018:
(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
20,847
1,537
398
912
212
23,906
No. of Shares
2,695,806
3,657,462
3,026,390
33,820,817
1,669,643,337
1,712,843,812
21,775 shareholders hold less than a marketable parcel of shares.
(b) The twenty largest shareholders hold 89.84% of the total shares issued.
No. of Shares
Holder
426,619,421
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
223,589,744
NDOVU CAPITAL XII B V
192,171,025
CITICORP NOMINEES PTY LIMITED
141,675,748
JP MORGAN NOMINEES AUSTRALIA LIMITED
115,384,615
HOPU CLEAN ENREGY (SINGAPORE) PTE LTD
63,478,640
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
54,174,984
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – GSCO ECA
49,302,055
NATIONAL NOMINEES LIMITED
THE BANK OF NEW YORK MELLON SA/NV
49,295,507
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
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