Appendix 4E - Financial Report
Financial year ended 30 June 2019
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
71%
Revenue
(Loss)/profit after tax attributable to
members
Net (loss)/profit for the year attributable
to members
Down
71%
Down
108%
30 June 2019
US$’000
30 June 2018
US$’000
to
to
to
21,491
72,917
21,491
72,917
(30,345)
367,762
Down
108%
to
(30,345)
367,762
(Loss)/profit per share (US cents)
(1.7)
21.5
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$0.04
US$0.06
30 June 2019
30 June 2018
Other
Previous corresponding period is the year ended 30 June 2018.
All foreign subsidiaries are prepared using IFRS.
446675_10.docx
PALADIN ENERGY LTD
ACN 061 681 098
ANNUAL
REPORT
2019
446675_10.docx
CONTENTS
__________________________________________________________________________________
2
CHAIRMAN’S LETTER ........................................................................................................................... 3
INSIGHTS FROM THE CEO ................................................................................................................... 4
OPERATING AND FINANCIAL REVIEW ............................................................................................... 6
ORE RESERVES AND MINERAL RESOURCES ................................................................................ 10
HEALTH AND SAFETY / SUSTAINABLE DEVELOPMENT ............................................................... 15
COPORATE GOVERNANCE STATEMENT ....................................................................................... 16
DIRECTORS' REPORT......................................................................................................................... 17
REMUNERATION REPORT ............................................................................................................ 24
CONTENTS OF THE FINANCIAL REPORT ........................................................................................ 38
CONSOLIDATED INCOME STATEMENT ........................................................................................... 39
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................... 40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .............................................................. 41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................. 42
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................... 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................ 44
DIRECTORS' DECLARATION ............................................................................................................. 90
INDEPENDENT AUDIT REPORT ......................................................................................................... 91
ADDITIONAL INFORMATION .............................................................................................................. 98
CORPORATE DIRECTORY ............................................................................................................... 103
The annual report covers the Group consisting of Paladin Energy Ltd (referred throughout as
the Company or Paladin) and its controlled entities (the Group).
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.
446675_10.docx
CHAIRMAN’S LETTER
__________________________________________________________________________________
3
Dear Stakeholders
Paladin Energy is recognised as being uniquely placed within the ranks of listed uranium focussed
companies, to benefit from the expected substantial increase in the uranium price. The timing of such
increase however, still remains elusive due to a number of factors known and some unknowns given a
degree of opaqueness in this market.
The Company’s unique position is largely due to its 75% ownership of the Langer Heinrich Mine in
Namibia. A proven past producer under Paladin Energy’s management, with reserves that will support
many more years production when taken off care and maintenance.
To ensure compliance with environmental and other legal obligations during care and maintenance
and also to ensure a timely and effective re-start when appropriate, it is important that essential
technical reviews, planning and test work is undertaken now. To do nothing but the bare minimum to
retain the mine and facilities, would risk significant delay and substantially increased costs for future
restart.
Of course, the Board and management are conscious of the need for cost control. The level and
relevance of preparatory work undertaken is regularly reviewed, having regard to factors such as
results from work undertaken and uranium market developments.
On behalf of the Board, I thank shareholders for your continued support and trust you appreciate our
efforts to achieve the right balance between cost control and the desire to remain relevant and
uniquely placed during a volatile uranium market.
Our CEO Scott Sullivan, during his first year, has led a fresh focus on understanding the Company’s
various uranium assets, the broader uranium market and the essential systems, policies and
procedures under which we operate. The team (although greatly reduced in number) is energised to
achieve success and share in the mission to again produce uranium for nuclear power generation to
help reduce global emissions. The Board thanks all employees in Australia, Namibia, Malawi and
Canada for their continued loyal work.
Yours faithfully
Rick Crabb
Chairman
446675_10.docx
INSIGHTS FROM THE CEO
__________________________________________________________________________________
4
Dear Stakeholders
The past year has continued to be a formative one for Paladin. The Paladin Board and Executive
aligned early in the financial year on a strategy to deliver renewed and significant focus on our flagship
Tier 1 asset, Langer Heinrich in Namibia. We have successfully commissioned a talented study team
to undertake feasibility studies into restart and process improvement options for Langer Heinrich to
map out a path back into production and identify process improvement options to improve
performance, lower costs and potentially increase production, particularly in the later stages of mine
life.
We have also focused on lowering our remaining asset holding costs to the greatest extent possible,
and where it would be value accretive, looked at monetising our extensive resource base. To this end,
Langer Heinrich was transitioned into care and maintenance in August 2018 and in June 2019 we also
announced the conditional sale of our Kayelekera Mine in Malawi, delivering significant value to the
business and reducing ongoing costs.
With an absence of operating cash flow for the majority of the year, we are conscious of our budgeting
and expenditure. We have kept discretionary spending focused on value adding strategies, such as
the Langer Heinrich study and Kayelekera divestment.
The successful transition of Langer Heinrich into care and maintenance had a positive impact on cash
flows for FY2019. Group net cash outflows from operating activities decreased by US$32.0M
compared to the previous year. In the first half of FY2019, Paladin purchased US$10.8M of uranium
inventory on market for a final term contract delivery in December 2018 which generated additional net
cash flows of US$4.1M.
During the year, unrestricted group cash and cash equivalents decreased by US$13.7M to US$25.4M
and net debt increased by US$26M, from US$80.7M at 30 June 2018 to US$106.8M at 30 June 2019.
The Company’s gearing ratio increased from 43% at 30 June 2018, to 58% at 30 June 2019.
The Company settled the last remaining creditor’s claims following the execution of the Deed of
Company Arrangement and completion of the capital restructure in early 2018. On 31 August 2018,
all existing claims against Paladin’s Canadian subsidiaries and the Michelin Project were irrevocably
extinguished, released and discharged and in consideration for the release of these claims, the
claimants received a 50% participating interest in the Michelin Project. Paladin has an earn back right
of 5% pa, up to 75%, by funding basic project holding costs for a five-year period and received the first
transfer of an additional 5% participating interest in the Michelin Project on 31 May 2019.
In line with its continued cost optimisation initiatives, Paladin completed the takeover of Summit
Resources Ltd (Summit) on 16 November 2018 and the Company now owns 100% (previously
82.08%) of Summit. Compliance and regulatory cost savings will now be realised as a result of this
transaction.
Consistent with the Company’s strategy of developing opportunities to monetise non-core assets,
Paladin executed an agreement to sell its 85% interest in Paladin (Africa) Ltd (PAL) for A$200K cash,
A$4.8M in Hylea Metals Ltd (Hylea) shares, a 5% royalty capped at A$5M and repayment of the
US$10M environmental performance bond funds over 3 years. Completion of the transaction is
dependent on Hylea shareholder approval, Paladin noteholder consent and Government of Malawi
approvals.
The Uranium Market showed early signs of a recovery in the later stages of CY2018, mainly driven by
traders buying into new physical storage funds and Cameco buying to fulfil contracts after closure of
Macarthur River. A lack of clarity over the outcome of the Department of Commerce Section 232
investigation into US uranium imports has weighed over the market for the last eighteen months and
was only resolved in July with a rejection of quotas by the US President. A three-month Nuclear Fuel
Cycle Review was initiated and as a result some uncertainty still exists in the market and utilities
continue to remain out of the term market compared to historical levels. Whilst primary production has
continued to be short of forecast growth, the uranium price recovery has retracted and temporarily
stalled in the shadow of this market uncertainty.
446675_10.docx
INSIGHTS FROM THE CEO
__________________________________________________________________________________
5
Notwithstanding, market restructuring has continued with conversion and particularly enrichment
seeing notable price increases during the first half of 2019. We believe that these improvements will
feed across into the uranium market once the outcome of the Nuclear Fuel Cycle Review has been
announced and its impact absorbed by the industry during the course of FY20.
Nuclear power growth remains focussed in Asian and Middle Eastern economies with important
developments seen in China, India and Saudi Arabia over recent months. Development of new
uranium supply necessary to support these programmes continues to be elusive, with forward uranium
price indicators well below incentive prices. Long-term contracting levels have not recovered, further
increasing forward uncommitted demand and ultimately improving the future prospects of uranium
suppliers and developers. Supporting the case for growth, we have also seen the deferral of closure
plans for older reactors in many countries including France, Britain, America and India with the
realisation that emissions targets cannot be met with these retirements and we have seen changing
positive nuclear sentiment in countries such as Taiwan and South Korea driven by the population who
are concerned about energy security.
In February 2019, we released the results from our Concept Study at Langer Heinrich and announced
the Board approval for commencement of a Pre-feasibility Study that would detail a rapid restart
scenario for Langer Heinrich, whilst outlining plans for further cost reduction opportunities and
vanadium production.
I look forward to the challenges of 2020 and not only in continuing to guide Langer Heinrich back into
production when a suitable uranium incentive price is reached, but also leveraging off Langer
Heinrich’s potential and building growth plans for the Company once again. As I emphasised last
year, re-positioning Paladin as a leading global uranium producer remains my primary long-term
objective.
Yours faithfully
Scott Sullivan
Chief Executive Officer
446675_10.docx
OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
6
OVERVIEW OF OPERATIONS
The Group has two uranium mines in Africa1 and uranium exploration projects in Australia 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.
LHM transitioned into care and maintenance (C&M) in August 2018. During C&M the project will be
properly maintained and secured.
In March 2019, Paladin commenced with a two-stage Pre-feasibility Study (PFS) for the possible
restart of LHM. The first stage of the PFS will examine a rapid, low-risk restart and is on track to be
completed in September 2019. The second stage of the PFS is expected to be completed by March
2020 and involves a more detailed study, including process optimisation aimed at lowering costs,
recovering vanadium and potentially increasing production in the later stages of the mine life.
A restart of the Langer Heinrich Mine will be considered only if forecast cash flows from uranium sales
provide an appropriate return on investment.
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.
KM 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.
KM transitioned into C&M on 26 May 2014. During C&M the project will be maintained and secured.
In FY2019 activities continued to focus on the water treatment programme.
On 24 June 2019, Paladin announced it had entered into an agreement to sell its 85% interest in
Paladin (Africa) Ltd (PAL) to Hylea Metals Limited’s (Hylea) subsidiary, Lotus Resources Pty Ltd, a
joint venture with Chichewa Resources Pty Ltd. The transaction is subject to Hylea shareholder
approval, Paladin Noteholder consent and customary terms and conditions, including Government of
Malawi approvals, as well as containing standard representations and warranties. Completion is
expected to occur in late 2019.
EXPLORATION
The Company has uranium exploration projects in Australia and Canada. Details of these exploration
projects and their Mineral Resources are summarised in the Ore Reserves and Mineral Resources
section on pages 10 to 14.
During the year, the Company has only undertaken the work required to meet minimum tenement
commitments at these exploration projects.
1 Langer Heinrich Mine, Namibia and Kayelekera Mine, Malawi both on care and maintenance due to current uranium market
conditions.
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OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
7
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 below for
reconciliation.
OPERATING PERFORMANCE
Key operating performance metrics
Year ended 30 June
Ore processed
Ore processed - Grade
Overall recovery
U3O8 production
C1 cost of production
Production
Mt
ppm
%
Mlb
US$/lb
2019
-
-
-
-
-
2018 % Change
(100)
2.954
(100)
475
(100)
88.5
2.739
26.23
(100)
(100)
There was no production during the year ended 30 June 2019 as LHM stopped presenting ore to the
plant on 13 May 2018 and transitioned to care and maintenance in August 2018.
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.
Year ended 30 June
2019
US$’000
-
-
209
181
5,748
-
10,813
16,951
2018
US$’000
71,845
19,061
2,358
2,280
(7,173)
187
-
88,558
C1 cost of production
Depreciation and amortisation
Production distribution costs
Royalties
Inventory movement
Other
Inventory purchased
Cost of sales
446675_10.docx
OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
8
FINANCIAL PERFORMANCE
Key financial performance metrics
Earnings
Average selling price
U3O8 sold
Revenue
Cost of sales
Net (loss)/profit after tax
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
US$/lb
Mlb
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Gearing ratio (Net debt / (net debt + equity))
%
Earnings
Year ended 30 June
2019
2018 % Change
28.96
0.742
21,491
(16,951)
(42,992)
(12,805)
(1,353)
(14,158)
25,360
132,178
106,818
76,638
58
21.45
3.399
72,917
(88,558)
343,413
(44,805)
(3,688)
(48,493)
39,166
119,856
80,690
106,761
43
35
(78)
(71)
81
(113)
71
63
71
(35)
10
(32)
(28)
15
Net loss after tax increased by 113%, mainly as a result of a one-off gain on extinguishment of debt in
2018 of US$483,721,000, which resulted from the effectuation of the Deed of Company Arrangement
on 1 February 2018.
446675_10.docx
OPERATING AND FINANCIAL REVIEW
__________________________________________________________________________________
9
Cash Flows
The Group had unrestricted cash and cash equivalents at 30 June 2019 of US$25,360,000. An
analysis of the cash flows for the year is set out below.
Cash flows for the year ended 30 June 2019 (US$M)
Unrestricted cash and cash equivalents decreased by US$13,806,000 during the year comprising of
the following cash flows:
• Uranium sales – during the year the Group received US$22,467,000 from customers for
uranium sales.
• Uranium purchased – to meet delivery commitments during the year the Company purchased
439,339lb of uranium at a cost of US$10,812,000.
• LHM expenditure – transitioning to C&M, LHM utilised US$3,734,000 in cash flows from
operations for the year.
• LHM study expenditure – the Group incurred US$1,682,000 in restart study expenditure during
the year.
• KM expenditure – ongoing C&M resulted in KM utilising US$4,773,000 in cash flows from
operations for the year.
• Exploration expenditure – the Company utilised US$1,319,000 for minimum tenement
commitments at its exploration projects during the year.
• Corporate expenditure – during the year US$5,551,000 was paid for corporate expenditure.
• Restructure costs – the Group incurred US$8,319,000 in restructure costs which resulted from
LHM transitioning into C&M, including employee retrenchment costs and contract termination
costs.
• Cash and cash equivalents of US$82,000 held at KM transferred to ‘Assets Classified as Held
for Sale’, refer to Note 19.
Financial Position
Unrestricted group cash and cash equivalents decreased by 35% to US$25,360,000 and net debt
increased by 32%, from US$80,739 at 30 June 2018 to US$106,835 at 30 June 2019. In addition, the
Company’s gearing ratio increased from 43% at 30 June 2018 to 58% at 30 June 2019.
446675_10.docx
ORE RESERVES AND MINERAL RESOURCES
10
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.
NAMIBIA
Langer Heinrich
Langer Heinrich is located in central western Namibia approximately 80km west of Swakopmund.
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 along the length of the Langer Heinrich
valley within the 15km length of a contiguous paleo drainage system.
Langer Heinrich transitioned to care and maintenance in August 2018.
446675_10.docx
ORE RESERVES AND MINERAL RESOURCES
11
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 of
northern Malawi. 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 Kayelekera under the provisions of Environmental Certificate 27.3.1, granted in
March 2007, following approval of the Kayelekera Project Environmental Impact Assessment 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.
Kayelekera transitioned to care and maintenance in May 2014.
CANADA
Michelin Project
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.
Paladin holds a 55% interest in a special purpose joint venture (Michelin Joint Venture) which owns
the Michelin Project. The Michelin Joint Venture includes a farm out over a five year period whereby
Paladin will receive an additional 5% participating interest in the Michelin Project on an annual basis in
return for Paladin funding all obligations for the Michelin Project over this period.
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 six deposits. The largest of these deposits is Michelin which contains a
total Mineral Resource of 92Mlb U3O8, 82.2Mlb of which is classified Measured and Indicated.
Michelin is still open along strike and at depth. 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.
QUEENSLAND
Mount Isa Project
The Mount Isa Project, which is now wholly-owned by Paladin, is located 40km north of Mount Isa and
consists of three Exploration Permits for Minerals and six Mineral Development Licences.
The Mount Isa Project includes 10 deposits containing 106.2Mlb U3O8 Measured and Indicated
Mineral Resources as well as 42.2Mlb U3O8 Inferred Mineral Resources.
WESTERN AUSTRALIA
Manyingee Project
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. Field trials by AFMEX demonstrated that the Manyingee sandstone-hosted uranium deposit
is amenable to extraction by in-situ recovery (ISR) in 1985.
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 a JORC (2012) compliant
Mineral Resource for Manyingee. Manyingee contains an Indicated Mineral Resource of 15.0Mlb
U3O8 grading 850ppm and an Inferred Mineral Resource of 10.2Mlb U3O8 grading 850ppm (JORC
(2012)) at a cut-off grade of 250ppm U3O8.
446675_10.docx
ORE RESERVES AND MINERAL RESOURCES
12
Carley Bore
Carley Bore is located approximately 100km south of Manyingee in Western Australia. Carley Bore
consists of two contiguous exploration licences with granted retention status.
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.
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 FY2019. There were no material changes to the Company’s Mineral Resources
and Ore Reserves.
446675_10.docx
ORE RESERVES AND MINERAL RESOURCES
13
Mineral Resources
Namibia
Measured
Langer Heinrich
Indicated
Inferred
Stockpiles
Malawi
Measured
Kayelekera
Indicated
Inferred
Stockpiles
Canada
Measured
Indicated
Inferred
Michelin
Rainbow
Gear
Inda
Jacques Lake
Michelin
Nash
Rainbow
Gear
Inda
Jacques Lake
Michelin
Nash
Rainbow
Australia
Measured
Valhalla
Indicated
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
Inferred
446675_10.docx
30 June 2018
Grade
ppm
U3O8
Mlb
U3O8
Mt
30 June 2019
Grade
ppm
U3O8
Mlb
U3O8
Mt
Change
Mlb
U3O8
Mt
60.7
21.5
8.7
30.8
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
355
68.7
21.7
9.0
60.7
21.5
8.7
24.0
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ORE RESERVES AND MINERAL RESOURCES
Ore Reserves
Namibia
Langer Heinrich
Proven
Probable
Stockpiles
Malawi
Proven
Probable
Kayelekera
Mt
42.0
13.1
30.8
0.4
5.3
30 June 2018
grade
ppm
U3O8
Mlb
U3O8
30 June 2019
grade
ppm
U3O8
Mlb
U3O8
Mt
525
485
355
1,170
880
48.5
14.0
24.0
1.0
10.4
42.0
13.1
30.8
525
485
355
48.5
14.0
24.0
0.4
5.3
1,170
1.0
880
10.4
Stockpiles
Figures may not add due to rounding. Mineral Resources and Ore Reserves quoted on a 100% basis.
755
755
1.6
2.6
1.6
2.6
14
Change
Mt
Mlb
U3O8
-
-
-
-
-
-
-
-
-
-
-
-
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.
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
independent consultant 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.
446675_10.docx
HEALTH AND SAFETY / SUSTAINABLE DEVELOPMENT
15
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.
The concept of proactive Lead Safety Indicators such as planned task observations were introduced in
2018 to further improve safety outcomes.
The Company’s annual Lost Time Injury Frequency Rate (LTIFR) reduced to 0.00 (2018:1.25). For
FY2019, there were no Lost Time Injuries (LTIs) compared to two LTIs for the previous year.
SUSTAINABLE DEVELOPMENT
Paladin is committed to the goal of sustainable development, which is reflected in its corporate values.
The Company also 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 seventh Sustainability Report (FY2018), which can be found on the Company’s
website www.paladinenergy.com.au. The Report summarises Paladin’s key sustainability issues, its
approach to managing them and its related performance across the Company’s two operations; the
Langer Heinrich Mine (LHM) in Namibia and the Kayelekera Mine (KM) in Malawi.
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) Reporting Standards, Core Option. The GRI Sustainability Reporting Standards
provide the standards 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.
Sustainability reporting reflects Paladin’s commitment to be accountable to its internal and external
stakeholders with regard to the Company’s sustainability performance and future direction.
Paladin has been reporting on its approach to sustainable development within its Annual Reports
since 2008. Paladin produced its first stand-alone annual Sustainability Report for 2012. Paladin now
has an established comprehensive process to systematically collect data for various sustainability
metrics at its mining operations in Namibia and Malawi. The process involves the collection and
consolidation of site-level data in accordance with the GRI Standards.
446675_10.docx
CORPORATE GOVERNANCE STATEMENT
16
CORPORATE GOVERNANCE FRAMEWORK
The Board of Directors of Paladin Energy Ltd is responsible for the corporate governance of the
Group.
Paladin has adopted systems of control and accountability as the basis for the administration of
corporate governance.
This Corporate Governance Statement, dated 30 June 2019, and approved by the Board on 27 August
2019, 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 FY2019,
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).
446675_10.docx
DIRECTORS’ REPORT
____________________________________________________________________________________
17
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 2019 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 with Robison Cox (now Clayton Utz) and Blakiston & Crabb (now Gilbert + Tobin) specialising in
mining, energy, corporate and commercial law and advised in relation to numerous project developments
in Australia, Asia and Africa. He is also non-executive chairman of Eagle Mountain Mining Limited (since
6 September 2017) and non-executive chairman of Ora Gold Limited (director since November 2017). He
was a non-executive director of Golden Rim Resources Ltd (from August 2001 to November 2017) and
has held numerous other public listed company directorships over the past 30 years. 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
Current Directorships: Eagle Mountain Mining Limited, Ora Gold Limited
Former Directorships (last three years): Golden Rim Resources Ltd
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 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, oil and gas, graphite, lithium, nickel, copper and
cobalt. Mr Riekie is a Non-Executive Director of remote power generation and energy solutions
specialist, ASX listed Zenith Energy 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
Current Directorships: Zenith Energy Limited
Former Directorships (last three years): MetalsTech Limited
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
18
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 and then
resumed his role as a Non-executive Director and Chairman of the Audit and Risk Committee until March
2019. 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
Current Directorships: Australian Vanadium Ltd, QEM Ltd
Former Directorships (last three years): Atlas Iron Limited
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 an 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
Current Directorships: Strandline Resources Limited
Former Directorships (last three years): Regal Resources Ltd
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
19
CHIEF EXECUTIVE OFFICER
Mr Scott Sullivan BEng (Hons1), MBA, FAusIMM), GAICD.
Mr Sullivan is an experienced mining industry executive with over 30 years of diversified mining
experience, 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 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 commenced 1 July 2018.
JOINT COMPANY SECRETARY
Andrea Betti CA, AGIA, BCom, MBA
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.
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.
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 and Risk
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
7
7
7
7
7
7
7
7
-
3
3
3
-
3
3
3
3
3
3
-
3
3
3
-
1
1
1
1
1
1
1
1
2
-
2
-
2
-
2
-
Name
Mr Rick Crabb
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
Of the above Board meetings, 4 were face to face with the remainder held via electronic means.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
20
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
Mr Rick Crabb
Mr John Hodder (Tembo Capital Management Ltd)*
219,630
223,589,744
Share rights (issued under
the Paladin Employee Plan)
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.
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 and Canada.
REVIEW AND RESULTS OF OPERATIONS
A detailed operational and financial review of the Group is set out on pages 6 to 9 of this report under the
section entitled Operating and Financial Review.
The Group’s loss after tax from continuing operations for the year is US$42,992,000 (2018: profit after tax
US$343,413,000) representing a decrease of 113% from the previous year.
Included in the Consolidated Financial Statements for the year ended 30 June 2019 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.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year not
otherwise dealt with in this report. Please refer to ‘Significant Events After The Balance Date below.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Other than disclosed below, since 30 June 2019, 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 2019 Financial Report:
Appointment of Chief Financial Officer
On 13 June 2019, Paladin Energy Ltd announced that Ms Anna Sudlow had been appointed as Chief
Financial officer (CFO) commencing on 1 July 2019.
Noteholder Consent: Sale of 85% Interest in Paladin (Africa) Ltd
On 20 August 2019, Paladin Energy Ltd announced that holders of more than 50% of the Senior Secured
Notes due 2023 (Notes) outstanding had submitted voting instructions in favour of the resolution set out in
the consent solicitation, which sought noteholder consent to certain waivers and releases under the terms
of the Notes in order to facilitate the sale of its 85% interest in Paladin (Africa) Ltd to Hylea. As a result,
the resolution will be passed without the meeting of Noteholders which was scheduled for 29 August
2019. The waivers and releases will become effective on execution of documentation by the Note
Trustee which Paladin expects will occur on or about 28 August 2019.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
21
Paladin also referred to its previous announcements:
(a) dated 23 July 2019 regarding the launch of a consent solicitation to its Noteholders pursuant to
which Paladin sought Noteholder consent to certain waivers and releases under the terms of the
Notes in order to facilitate the sale of its shares in Paladin (Africa) Limited to Hylea; and
(b) dated 8 August 2019 regarding an amendment to the consent solicitation to introduce a consent
fee equal to 1% of the aggregate principal amount of the Notes outstanding to that noteholder.
Payable to each noteholder who votes in favour of the resolution. The consent fee is payable only
if the waivers and releases in the consent solicitation are approved by the requisite majority of
noteholders and if the share sale completes.
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 (both on care and maintenance due to current uranium market conditions), 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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
22
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:
•
•
•
•
•
Following a large reduction in the number of staff since 2016, at Paladin’s corporate office,
head count remained unchanged.
Following a salary benchmarking review, a small number of Corporate employees received a
salary increase to realign salaries to market.
Cash bonuses totalling US$142,943 were awarded this year.
7,500,000(1) Share Appreciation Rights (SARs) were granted during the year.
Long-term incentives on issue at balance date comprise 19,585,500(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 2019 of A$0.125, no shares (0% 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
2018 and 2019 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 2019 year. The tables do not include the accounting value for 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$.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
23
REMUNERATION FOR THE YEAR AT A GLANCE (continued)
Executive Remuneration - cash value of earnings realised (unaudited) (continued)
2019 (A$) / (US$)
Name
Base Salary &
Superannuation
US$
A$
Other
Total
Cash
A$
US$
A$
US$
Mr Scott Sullivan
Mr Craig Barnes
Mr Michael Drake
400,000
389,477
128,892
285,885
278,364
92,121
200,000(1) 142,943(1)
-
-
82,250(2) 58,785(2)
600,000
389,477
211,142
428,828
278,364
150,906
Total
918,369
656,370
282,250
201,728
1,200,619
858,098
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 2019 financial year US$1 = A$1.39916.
(1) Bonus awarded for FY2019.
(2) Fees for services as a consultant prior to commencing as an employee on 11 February 2019.
2018 (A$) / (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) 371,676(2)
288,000(2)
291,016
-
-
-
-
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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
24
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 Scott Sullivan, Chief Executive Officer (appointed 1 July 2018)
Mr David Riekie, Non-executive Director
Mr Daniel Harris, Non-executive Director
Mr John Hodder, Non-executive Director
Mr Craig Barnes, Chief Financial Officer
Mr Michael Drake, General Manager, Business Development and Projects (appointed 11
February 2019)
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 three meetings 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 July in the year.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
25
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 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$0.175
30 June 2019
US$(1.7)
A$0.125
(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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
26
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 July 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, granted
under
the Rights Plan as
equity or paid as a cash bonus
Long-term incentive, granted
under the Rights Plan
Rewards Executives for performance
over a short period, being the year
Bonuses are
ending 30 June.
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 no increases at
KM. Following a salary benchmarking review, a small number of Corporate employees received a salary
increase to realign salaries to market.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
27
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION (continued)
Variable Remuneration (continued)
Short-term Incentives
Following the implementation of a structured incentive programme linked to both individual and corporate
performance, specific targets for individuals have been set for FY2020. The short-term incentives
comprise a bonus to Executives of up to 50% of base salary to be paid in cash or shares (or a
combination of both at the Company’s election). The objective of the bonus is to focus 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. 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 US$142,943 were awarded this year (FY2018
US$68,286).
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 2018 Annual General Meeting.
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.
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 five years (with certain exclusions
under the Australian corporate legislation).
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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
28
REMUNERATION REPORT (Audited) (continued)
COMPONENTS OF KEY MANAGEMENT PERSONNEL/EXECUTIVE REMUNERATION (continued)
Variable Remuneration (continued)
Long-term Incentives (continued)
The CEO was granted 5,000,000 SARs upon appointment, on 1 July 2018, as follows:-
Date granted
Exercisable date
Expiry date
1 July 2018
1 July 2018
1 July 2018
1 July 2018
Total
1 July 2019
1 July 2020
1 July 2021
1 July 2022
1 July 2024
1 July 2025
1 July 2026
1 July 2027
Exercise
price
Fair
value
A$0.04 A$0.1775
A$0.06 A$0.1775
A$0.07 A$0.1775
A$0.08 A$0.1775
Number
1,000,000
1,000,000
1,000,000
2,000,000
5,000,000
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
and thus are not considered a disincentive to a change of control.
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
1 July 2018
1 July 2018
1 July 2018
1 July 2018
11 February 2019
11 February 2019
11 February 2019
Total
16 April 2018
16 April 2019
16 April 2020
1 July 2019
1 July 2020
1 July 2021
1 July 2022
1 March 2020
1 March 2021
1 March 2022
Expiry date
Exercise
price
Fair
value
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
A$0.04 A$0.1775
1 July 2024
A$0.06 A$0.1775
1 July 2025
A$0.07 A$0.1775
1 July 2026
A$0.08 A$0.1775
1 July 2027
A$0.05 A$0.20
1 March 2025
A$0.07 A$0.20
1 March 2026
A$0.09 A$0.20
1 March 2027
Number
1,842,500
921,250
921,250
75,000
37,500
37,500
561,000
561,000
561,000
3,067,500
1,750,000
1,750,000
1,000,000
1,000,000
1,000,000
2,000,000
700,000
700,000
1,100,000
19,585,500
In summary, this balance represents 1.12% of the issued capital.
446675_10.docx
DIRECTORS’ REPORT
(continued)
____________________________________________________________________________________
29
REMUNERATION REPORT (Audited) (continued)
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$857,656) as approved by shareholders at the 2008 AGM.
Fees paid for the year to 30 June 2019 total A$365,000 (US$260,870).
Remuneration Component Elements
Base Fee
Must
aggregate limit
be
contained within
Superannuation
Statutory
are
included in the fees set out above
contributions
Details
(per annum)
Chairman
A$125,000 (US$89,339)
Non-executive Director
A$80,000 (US$57,177)
Statutory % of fees
Other Fees/Benefits
In addition, the Company’s Constitution provides for additional compensation to be paid if any of the
Directors are called upon to perform extra services or make any special exertions on behalf of the
Company or the business of the Company. The Company may compensate such Director in accordance
with such services or exertions, and such compensation may be either in addition to or in substitution for
the Directors’ fees referred to above. No additional fees were paid during the year, other than the
Directors’ fees disclosed.
Non-executive Directors are also entitled to be reimbursed for reasonable expenses incurred whilst
engaged on Company business. There is no entitlement to compensation on termination of non-
executive directorships. Non-executive Directors do not earn retirement benefits (other than the statutory
superannuation) and are not entitled to any form of performance linked remuneration.
446675_10.docx
DIRECTORS’ REPORT (continued)
30
REMUNERATION REPORT (audited) (continued)
Compensation of Key Management Personnel of the Group for the years ended 30 June 2019 and 2018.
Directors
Mr Rick Crabb
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
Year
2019
2018(1)
2019
2018(2)
2019
2018(2)
2019
2018(3)
Salary
& Fees
US$
81,588
36,856
52,216
23,588
57,177
25,829
57,177
23,431
Key Management Personnel
Mr Scott Sullivan
Mr Craig Barnes
Mr Michael Drake
Mr Alexander Molyneux
2019(4)
2019
2018
2019(6)
2018(8)
271,211
263,690
275,480
85,576
-
142,943(5)
-
-
58,785(7)
480,000(9)
Total - 2019
Total - 2018
Notes to the Compensation Table
868,635
385,184
201,728
480,000
-
288,000
Short-Term Benefits
Other
US$
Cash Separation
Payment
US$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
288,000(10)
Post
Employment
Superannuation
US$
7,751
3,501
4,961
2,241
-
-
-
-
14,674
14,674
15,535
6,545
-
48,605
21,277
Share
Based
Payment
Share
Rights
US$
-
-
-
-
-
-
-
-
80,643
-
111,160
24,768
-
105,411
111,160
Total
Total
Total
Performance
Related
Total
Performance
Related
US$
A$
US$
%
89,339
40,357
57,177
25,829
57,177
25,829
57,177
23,431
509,471
278,364
402,175
175,674
768,000
125,000
52,083
80,000
33,333
80,000
33,333
80,000
30,238
712,833
389,477
519,024
245,797
991,135
1,224,379
1,285,621
1,713,107
1,660,146
-
-
-
-
-
-
-
-
223,586
-
111,160
24,768
-
-
-
-
-
-
-
-
-
43.9
-
27.6
14.1
-
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 2019 100% 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 2019 financial year US$1 = A$1.39916 (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) Appointed 1 July 2018.
(5) Bonus awarded for FY2019.
(6) Appointed 11 February 2019.
(7) Fees for services as a consultant prior to commencing as an employee on 11 February 2019.
(8) Resigned 1 July 2018.
(9) Represents fees paid for services as CEO. Includes payment of US$96,000 in lieu of three month notice period.
(10) Separation payment – conditional upon the effectuation of a deed of company arrangement, payment equal to nine months’ salary US$288,000 (A$371,676)
in full and final satisfaction of all benefits arising out of his engagement.
446675_10.docx
DIRECTORS’ REPORT
(continued)
31
____________________________________________________________________________________
REMUNERATION REPORT (audited) (continued)
Options Holdings of Key Management Personnel (Group)
30 June 2019
Executives
Mr Alexander Molyneux
Total
30 June 2018
Executives
Mr Alexander Molyneux
Total
01 Jul 18
number
Granted as
remuneration
number
Fair value at
grant date
US$’000
Vested as
shares
number
Lapsed
number
30 Jun 19
Number
3,000,000
3,000,000
-
-
-
-
-
(3,000,000)
-
(3,000,000)
-
-
01 Jul 17
number
Granted as
remuneration
number
Fair value at
grant date
US$’000
Vested as
shares
number
Lapsed
number
30 Jun 18
Number
3,000,000
3,000,000
-
-
-
-
-
-
-
-
3,000,000
3,000,000
Share Appreciation Rights Holdings of Key Management Personnel (Group)
01 Jul 18
number
Granted as
remuneration
number
Fair value at
grant date
US$
Vested as
shares
number
Lapsed
number
30 Jun 19
Number
- 5,000,000(1)
2,329,000
-
- 2,500,000(2)
216,386
-
129,335
-
-
-
Total
2,329,000
7,500,000
345,721
-
(1) Granted 1 July 2018. Fair value per right at grant date was US$0.04.
(2) Granted 11 February 2019. Fair value per right at grant date was US$0.05.
01 Jul 17
number
Granted as
remuneration
number
Fair value at
grant date
US$
Vested as
shares
number
Lapsed
number
30 Jun 18
Number
30 June 2019
Executives
Mr Scott Sullivan
Mr Craig Barnes
Mr Michael Drake
30 June 2018
Executives
Mr Craig Barnes
-
-
-
-
5,000,000
2,329,000
2,500,000
9,829,000
-
-
2,329,000
2,329,000
1,079,000 1,250,000(1)
111,160
-
Total
1,079,000
1,250,000
111,160
-
(1) Granted 16 April 2018. Fair value per right at grant date was US$0.09.
446675_10.docx
DIRECTORS’ REPORT
(continued)
32
____________________________________________________________________________________
REMUNERATION REPORT (audited) (continued)
Shares held in Paladin Energy Ltd (number)
30 June 2019
Directors
Mr Rick Crabb
Executives
Mr Scott Sullivan
Balance
01 Jul 18
On Vesting
of Rights
Net Change
Other
Balance
30 June 19
119,630
-
-
-
100,000(1)
219,630
100,000(1)
100,000
Total
119,630
-
200,000
319,630
(8,282,398)
(1) On market purchase.
No other Key Management Personnel held shares during the year ended 30 June 2019.
30 June 2018
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.
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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
33
____________________________________________________________________________________
REMUNERATION REPORT (audited) (continued)
CONTRACTS FOR SERVICES (continued)
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/bonus: up to a maximum of 50% of the total annual 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 was 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
A$0.1775 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 (2018: A$389,477).
Short term incentive/bonus: up to a maximum of 40% of the total annual remuneration package, to be
paid in cash or shares (or a combination of both at the Company’s election) and determined having
regard to market relativities, the performance of the Company and Mr Barnes’ performance.
No termination benefit is specified in the agreement.
Notice period six months.
Mr Michael Drake, General Manager, Business Development and Projects (appointed 11 February
2019)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$330,000.
Short term incentive/bonus: up to a maximum of 40% of the total annual remuneration package, to be
paid in cash or shares in the Company (or a combination of both at the Company’s election) and
determined having regard to market relativities, the performance of the Company and Mr Drake’s
performance.
Long term incentive: Mr Drake was issued 2,500,000 Share Appreciation Rights (SARs) under the
Company’s Employee Performance Share Rights Plan. The SARs will have an exercise price of
A$0.20 and will vest in accordance with the following vesting conditions:
• 700,000 will vest on 1 March 2020
• 700,000 will vest on 1 March 2021
• 1,100,000 will vest on 1 March 2022
No termination benefit is specified in the agreement.
Notice period three months.
446675_10.docx
DIRECTORS’ REPORT
(continued)
34
____________________________________________________________________________________
REMUNERATION REPORT (audited) (continued)
CONTRACTS FOR SERVICES (continued)
Ms Anna Sudlow, Chief Financial Officer (appointed 1 July 2019)
Term of agreement – no fixed term.
Base salary, inclusive of superannuation of A$320,000.
Short term incentive/bonus: up to a maximum of 40% of the total annual remuneration package, to be
paid in cash or shares in the Company (or a combination of both at the Company’s election) and will
be determined having regard to market factors, the performance of the Company and Ms Sudlow’s
performance.
Long term incentive: Ms Sudlow was issued 2,500,000 Share Appreciation Rights (SARs) under the
Company’s Employee Performance Share Rights Plan. The SARs will have an exercise price of
A$0.1226 and will vest in accordance with the following vesting conditions:
• 700,000 will vest on 1 July 2020
• 700,000 will vest on 1 July 2021
• 1,100,000 will vest on 1 July 2022
No termination benefit is specified in the agreement.
Notice period six months.
Remuneration for all parties referred to above includes provision of an initial and ongoing discretionary
participation in the Company’s long-term incentive plans.
605,500 (2018: 625,000) Share Appreciation Rights vested to Key Management Personnel during the
year ended 30 June 2019. 682,500 (2018: Nil) Share Appreciation Rights were exercised during the
year ended 30 June 2019.
End of audited Remuneration Report
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DIRECTORS’ REPORT
(continued)
35
____________________________________________________________________________________
OPTIONS
There are no outstanding Options at the date of this report as all outstanding Options expired during
the year. No shares were issued on the exercise of Options during the year ended 30 June 2019.
SHARE APPRECIATION RIGHTS
The outstanding balance of Share Appreciation Rights at the date of this report are as follows:
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
1 July 2018
1 July 2018
1 July 2018
1 July 2018
11 February 2019
11 February 2019
11 February 2019
7 June 2019
7 June 2019
7 June 2019
Total
16 April 2018
16 April 2019
16 April 2020
1 July 2019
1 July 2020
1 July 2021
1 July 2022
1 March 2020
1 March 2021
1 March 2022
1 July 2020
1 July 2021
1 July 2022
Expiry date
Exercise
price
Fair
value
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
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
A$0.04 A$0.1775
1 July 2024
A$0.06 A$0.1775
1 July 2025
A$0.07 A$0.1775
1 July 2026
A$0.08 A$0.1775
1 July 2027
A$0.05 A$0.20
1 March 2025
A$0.07 A$0.20
1 March 2026
A$0.09 A$0.20
1 March 2027
A$0.05 A$0.1226
1 July 2025
A$0.06 A$0.1226
1 July 2026
A$0.07 A$0.1226
1 July 2027
Number
1,842,500
921,250
921,250
75,000
37,500
37,500
561,000
561,000
561,000
3,067,500
1,750,000
1,750,000
1,000,000
1,000,000
1,000,000
2,000,000
700,000
700,000
1,100,000
700,000
700,000
1,100,000
22,085,500
170,373 shares were issued on the exercise of Share Appreciation Rights during the year ended
30 June 2019.
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
To
its auditors,
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.
446675_10.docx
DIRECTORS’ REPORT
(continued)
36
____________________________________________________________________________________
AUDITOR
PricewaterhouseCoopers were appointed auditors for the Company by shareholders at the 2016
Annual General Meeting on 18 November 2016.
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 27.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead Auditor’s Independence Declaration is set out on page 37 of the Financial Report.
Dated this 27th day of August 2019
Signed in accordance with a resolution of the Directors
Rick Crabb
Chairman
Perth, Western Australia
446675_10.docx
Auditor’s Independence Declaration
As lead auditor for the audit of Paladin Energy Ltd for the year ended 30 June 2019, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Paladin Energy Ltd and the entities it controlled during the period.
Ben Gargett
Partner
PricewaterhouseCoopers
Perth
27 August 2019
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
38
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
CONTENTS OF THE FINANCIAL REPORT
Note
___________________________________________________________________________________
Page Number
Title
CONSOLIDATED INCOME STATEMENT ........................................................................................... 39
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................... 40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................. 41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................. 42
CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................... 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ....................................................... 44
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENT
39
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
Notes
2019
US$’000
2018
US$’000
Revenue
Revenue
Cost of sales
Inventory write-down
Gross profit/(loss)
Other income
Administration, marketing and non-production
costs
Impairment of exploration assets
Other expenses
(Loss)/profit before interest and tax
Finance costs
(loss)/profit before
Net
continuing operations
income
tax
from
Income tax expense
Net (loss)/profit after tax from continuing
operations
11
12
18
12
12
12
12
12
13
21,491
(16,951)
-
4,540
1,028
72,917
(88,558)
(28,119)
(43,760)
485,891
(32,190)
(25,567)
-
-
(2,300)
(5,880)
(26,622)
408,384
(22,500)
(49,326)
(49,122)
359,058
-
-
(49,122)
359,058
Profit/(loss) after
operations
tax
from discontinued
19
6,130
(15,645)
Net (loss)/profit after tax
Attributable to:
Non-controlling interests
Members of the parent
Net (loss)/profit after tax
(Loss)/profit per share (US cents)
(Loss)/profit after tax from operations attributable
to ordinary equity holders of the Company
– continuing operations, basic and diluted
(US cents)
– discontinued operations, basic and diluted
(US cents)
(42,992)
343,413
(12,647)
(30,345)
(42,992)
(24,349)
367,762
343,413
14
14
(1.7)
0.4
21.5
(0.9)
The above Consolidated Income Statement should be read in conjunction with the accompanying
notes.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
40
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
Net (loss)/profit after tax
Other comprehensive income
Items that may be subsequently reclassified to
profit or loss:
2019
US$’000
2018
US$’000
(42,992)
343,413
Foreign currency translation
(1,247)
(1,498)
Income tax on items of other comprehensive income
-
-
Items that will not be subsequently reclassified
to profit or loss:
Foreign currency translation attributable to non-
controlling interests
(242)
(223)
Other comprehensive loss for the year, net of tax
(1,489)
(1,721)
Total comprehensive (loss)/income for the year
(44,481)
341,692
Total comprehensive (loss)/income attributable to:
Non-controlling interests
Members of the parent
(12,889)
(31,592)
(24,572)
366,264
(44,481)
341,692
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
41
AS AT 30 JUNE 2019
EXPRESSED IN US DOLLARS
Notes
2019
US$’000
2018
US$’000
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Prepayments
Inventories
Assets classified as held for sale
6a
6b
17
18
19
25,360
1,023
1,017
1,224
5,363
10,829
39,166
11,072
8,121
1,511
10,717
-
TOTAL CURRENT ASSETS
44,816
70,587
Non current assets
Trade and other receivables
Property, plant and equipment
Mine development
Exploration and evaluation expenditure
Intangible assets
20
21
22
23
338
206,599
22,958
90,523
9,462
374
223,986
28,142
76,439
10,093
TOTAL NON CURRENT ASSETS
329,880
339,034
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Unearned revenue
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
Non current liabilities
Interest bearing loans and borrowings
Other Interest bearing loans - CNNC
Provisions
24
25
19
7
8
25
374,696
409,621
2,350
697
146
42,394
12,971
5,249
-
-
45,587
18,220
118,149
98,264
36,058
103,883
93,330
87,427
TOTAL NON CURRENT LIABILITIES
252,471
284,640
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Parent interests
Non-controlling interests
TOTAL EQUITY
9
9
298,058
302,860
76,638
106,761
2,306,925
(71,598)
(2,025,649)
209,678
(133,040)
2,301,286
(62,769)
(2,002,644)
235,873
(129,112)
76,638
106,761
The above Consolidated Statement of Financial Position should be read in conjunction with the
accompanying notes.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
Contributed
Equity
(Note 9)
US$’000
Reserves
(Note 9)
US$’000
Accumulated
Losses
US$’000
Attributable to
Owners of the
Parent
US$’000
Non-Controlling
Interests
Total
US$’000
US$’000
42
Balance at 1 July 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
Balance at 30 June 2018
Loss for the period
Other comprehensive loss
Total comprehensive loss for the year net of tax
SARS exercised
Share-based payment
-
-
2,301,286
-
-
-
90
-
Acquisition of 17.92% interest in Summit Resources Ltd
5,549
Summit Resources Ltd change in functional currency
Earn in of 5% share of Michelin Project
Acquisition of control of Michelin Project
-
-
-
-
367,762
367,762
(24,349)
343,413
(1,498)
-
(1,498)
(223)
(1,721)
(1,498)
367,762
-
667
(94,374)
(62,769)
-
-
94,374
(2,002,644)
366,264
200,201
667
-
(24,572)
-
-
-
341,692
200,201
667
-
235,873
(129,112)
106,761
-
(30,345)
(30,345)
(12,647)
(1,247)
-
(1,247)
(242)
(42,992)
(1,489)
(1,247)
(30,345)
(31,592)
(12,889)
(44,481)
-
26
(1,652)
(5,956)
-
-
-
-
-
5,952
1,388
-
90
26
3,897
(4)
1,388
-
-
-
(3,897)
-
(1,388)
14,247
(133,040)
90
26
-
(4)
-
14,247
76,638
Balance at 30 June 2019
2,306,925
(71,598)
(2,025,649)
209,678
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CASH FLOWS
43
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Exploration and evaluation expenditure
Other income
Interest received
Interest paid
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised exploration expenditure
Payments for property, plant and equipment
Proceeds from sale of property, plant & equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from senior secured notes
Proceeds from secured revolving credit facility
16
NET CASH INFLOW FROM FINANCING ACTIVITIES
Notes
2019
US$’000
2018
US$’000
22,467
(35,950)
(16)
314
380
-
72,615
(112,101)
-
372
231
(5,922)
15
(12,805)
(44,805)
(1,303)
(50)
402
(951)
-
-
-
(2,300)
(1,388)
298
(3,390)
36,921
40,000
76,921
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS
(13,756)
28,726
Unrestricted cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate changes on cash
and cash equivalents
Cash and cash equivalents transferred to
‘Assets Classified as Held for Sale’
39,166
10,492
32
(82)
(52)
-
UNRESTRICTED CASH AND CASH EQUIVALENTS
AT THE END OF THE FINANCIAL YEAR
6a
25,360
39,166
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
BASIS OF PREPARATION ..................................................................................................... 45
CORPORATE INFORMATION .......................................................................... 45
NOTE 1.
STRUCTURE OF THE FINANCIAL REPORT ................................................... 45
NOTE 2.
NOTE 3.
BASIS OF PREPARATION ............................................................................... 45
GOING CONCERN ........................................................................................... 48
NOTE 4.
SEGMENT INFORMATION ..................................................................................................... 49
NOTE 5.
SEGMENT INFORMATION ............................................................................... 49
CAPITAL STRUCTURE ........................................................................................................... 52
CASH AND CASH EQUIVALENTS ................................................................... 52
NOTE 6a.
RESTRICTED CASH ........................................................................................ 52
NOTE 6b
INTEREST BEARING LOANS AND BORROWINGS ........................................ 53
NOTE 7.
OTHER INTEREST BEARING LOANS - CNNC ................................................ 54
NOTE 8.
CONTRIBUTED EQUITY AND RESERVES...................................................... 55
NOTE 9.
NOTE 10.
FINANCIAL RISK MANAGEMENT .................................................................... 58
PERFORMANCE FOR THE YEAR .......................................................................................... 63
REVENUE ......................................................................................................... 63
NOTE 11.
INCOME AND EXPENSES ............................................................................... 64
NOTE 12.
INCOME AND OTHER TAXES ......................................................................... 66
NOTE 13.
EARNINGS PER SHARE .................................................................................. 68
NOTE 14.
RECONCILIATION OF EARNINGS AFTER INCOME TAX TO NET CASH
NOTE 15.
FLOW FROM OPERATING ACTVITIES ........................................................... 69
NON CASH INVESTING AND FINANCING ACTIVITIES .................................. 69
NOTE 16
OPERATING ASSETS AND LIABILITIES ............................................................................... 70
TRADE AND OTHER RECEIVABLES............................................................... 70
NOTE 17.
INVENTORIES .................................................................................................. 71
NOTE 18.
DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES
NOTE 19.
CLASSIFIED AS HELD FOR SALE ................................................................... 72
PROPERTY, PLANT AND EQUIPMENT ........................................................... 74
NOTE 20.
MINE DEVELOPMENT ..................................................................................... 77
NOTE 21.
EXPLORATION AND EVALUATION EXPENDITURE ....................................... 78
NOTE 22.
INTANGIBLE ASSETS ...................................................................................... 79
NOTE 23.
TRADE AND OTHER PAYABLES ..................................................................... 81
NOTE 24.
NOTE 25.
PROVISIONS .................................................................................................... 81
OTHER NOTES ....................................................................................................................... 84
KEY MANAGEMENT PERSONNEL .................................................................. 84
NOTE 26.
AUDITORS’ REMUNERATION ......................................................................... 85
NOTE 27.
COMMITMENTS AND CONTINGENCIES ........................................................ 86
NOTE 28.
RELATED PARTIES ......................................................................................... 87
NOTE 29.
GROUP INFORMATION ................................................................................... 87
NOTE 30.
EVENTS AFTER THE BALANCE DATE ........................................................... 88
NOTE 31.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ........................ 89
NOTE 32.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
45
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
BASIS OF PREPARATION
NOTE 1.
CORPORATE INFORMATION
The Financial Report of Paladin Energy Ltd (Paladin) for the year ended 30 June 2019 was authorised
for issue by the Directors on 27 August 2019.
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 6 to 9.
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.
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
46
FOR THE YEAR ENDED 30 JUNE 2019
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. 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.
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 2018.
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 2018. The nature and impact of each new standard and
amendment is described below:
Reference
Summary
Impact
AASB 9
Financial Instruments
AASB 15
AASB 9 (December 2014) is a new standard which replaces
AASB 139.
AASB 9 simplifies the model for classifying and recognising
financial instruments and aligns hedge accounting more
closely with common risk management practices. Changes in
own credit risk in respect of liabilities designated at fair value
through profit or loss shall now be presented with Other
Comprehensive Income.
Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers replaces
the existing revenue recognition standards AASB 111
Construction Contracts, AASB 118 Revenue and related
Interpretations.
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.
There was no change in the classification or
measurement of financial assets or liabilities.
(Refer to Note 10).
There was no material impact on the timing of
recognition, nor on
the measurement of
revenue in respect of sales of uranium. (Refer
to Note 11).
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
47
FOR THE YEAR ENDED 30 JUNE 2019
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 2019 (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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
48
FOR THE YEAR ENDED 30 JUNE 2019
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.
Following Paladin’s acquisition of the outstanding shares in Summit Resources Ltd and its subsequent
delisting from the ASX, the functional currency of the Summit group of companies was changed to
United States dollars from Australian dollars in line with the Paladin Energy Group. The decision was
made by management to change the entity’s functional currency to one which most faithfully
represents the economic effects of the underlying transactions, events and conditions that are relevant
to the Company.
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.
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.
The Group incurred a net loss after tax from operations attributable to the ordinary equity holders of
US$30,345,000 (30 June 2018: loss US$115,959,000, excluding the one-off gain on extinguishment of
debt of US$483,721,000,) for the year ended 30 June 2019 and a net cash outflow from operating
activities of US$12,805,000 (30 June 2018: outflow US$44,805,000). As at 30 June 2019, the Group
had a net current asset surplus of US$41,414,000 (excluding non current Kayelekera Mine (KM)
environmental rehabilitation provision of US$42,185,000 disclosed as part of liabilities directly
associated with assets classified as held for sale) (30 June 2018: surplus US$52,367,000). The
Group has unrestricted cash of US$25,360,000 (30 June 2018: US$39,166,000).
During the next twelve months, there are currently no repayment obligations in respect of interest
bearing loans and borrowings of US$118,149,000 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: the
sale of Group assets (such as the announced sale of Paladin (Africa) Ltd); raising new financing
and/or renegotiating the tenure or terms of the senior secured notes or raising additional equity.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
49
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 4. GOING CONCERN (continued)
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, Malawi and Australia,
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 this country’s geographic regions. Australia is an operating segment
in the current period as a result of marketing activity whereby a significant portion of the Group’s
revenue is in this segment. In the comparative year this was not the case and the segment was not
separately disclosed. The Australian segment includes the Company’s sales and marketing, treasury,
corporate and administration and also includes revenue from stock purchased to fulfil a sales order.
The Exploration(3) segment is focused on developing exploration and evaluation projects in Australia
and Canada.
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 Australia.
The Group’s customers are major utilities and other entities located mainly in USA, East Asia and
Western Europe.
(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 FY2019, the Company has only undertaken the work required to meet minimum tenement
commitments.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
50
FOR THE YEAR ENDED 30 JUNE 2019
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 2019 and 30 June 2018.
Year ended
30 June 2019
Sales to external customers
Total consolidated revenue
Cost of sales
Gross profit
Other income
Exploration
US$’000
-
-
-
-
-
Namibia
US$’000
6,573
6,573
(5,157)
1,416
Malawi
US$’000
-
-
-
-
Australia
US$’000
14,918(3)
14,918
Consolidated
US$’000
21,491
21,491
(11,794)
(16,951)
669
571
359
3,124
4,540
1,599
Other expenses
(16)
(26,009)
(4,906)
(6,165)
(37,096)
Change in estimate of mine
closure provision
Segment (loss)/profit before income
tax and finance costs
-
-
10,465
-
10,465
(16)
(23,924)
6,130
(2,682)
(20,492)
Finance costs
-
(8,235)
-
(14,265)
(22,500)
(Loss)/profit before income tax
(16)
(32,159)
6,130
(16,947)
(42,992)
Income tax expense
-
-
-
-
-
Net (loss)/profit after tax
(16)
(32,159)
6,130
(16,947)
(42,992)
At 30 June 2019
Segment assets/total assets
91,334
249,727
10,829(1)
22,806(2)
374,696
Australia
US$’000
Canada
US$’000
Namibia
US$’000
Other
US$’000
Consolidated
US$’000
Non current assets (excluding financial
instruments) by country
62,773
28,956
238,151
Additions to non current assets by country
Property, Plant and Equipment
Exploration and Evaluation Expenditure
50
2
639 664
-
-
-
-
-
329,880
52
1,303
In 2019, the two most significant customers equated on a proportionate basis to 69% (US$14,948,250
Taiwan) and 31% (US$6,578,598 China) of the Group’s total sales revenue.
(1) Includes US$10,220,000 Kayelekera Performance Bond (restricted cash).
(2) Includes US$21,587,000 in cash and cash equivalents.
(3) During the year, the Groups parent company, Paladin Energy Ltd purchased stock to fulfil a sales
order.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
51
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 5. SEGMENT INFORMATION (continued)
Year ended
30 June 2018
Sales to external customers
Total consolidated revenue
Cost of sales
Inventory write-down
Gross loss
Other income
Exploration
US$’000
-
-
-
-
-
-
Namibia
US$’000
72,917
72,917
Malawi
US$’000
-
-
(88,558)
(28,119)
(43,760)
-
-
-
Australia
US$’000
-
-
-
-
-
Consolidated
US$’000
72,917
72,917
(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
Impairment of assets
Change in estimate of mine
closure provision
Segment (loss)/profit before income
tax and finance costs
-
-
-
-
(7,654)
(5,764)
(3,962)
(17,380)
(2,734)
-
(11,208)
(13,942)
(5,889)
(44)
-
(10,134)
-
-
(5,933)
(10,134)
(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
Additions to non current assets by country
Property, Plant and Equipment
Exploration and Evaluation Expenditure
7
1,167 1,105
8 1,373
-
- 1,388
- 2,272
In 2018, the three most significant customers equated on a proportionate basis to 43%
(US$31,632,000 China), 18% (US$13,125,000 Germany) and 18% (US$13,032,020 Taiwan) of the
Group’s total sales revenue.
(1) Includes US$10,058,000 Kayelekera Performance Bond (restricted cash).
(2) Includes US$34,923,000 in cash and cash equivalents.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
52
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
CAPITAL STRUCTURE
The group's objectives when managing capital are to safeguard its ability to continue as a going
concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders
and to maintain an efficient capital structure to reduce the cost of capital. Capital includes issued
capital and all other equity reserves attributable to the equity holders of the parent.
In order to maintain or adjust the capital structure, the group may issue new shares or sell assets to
reduce debt.
The group monitors capital on the basis of the level of return on capital and also the level of net
cash/debt. The group manages funds on a group basis with all funds being drawn by the parent entity.
NOTE 6a. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term bank deposits
Total cash and cash equivalents
NOTE 6b. RESTRICTED CASH
Restricted cash at bank
Total restricted cash and cash equivalents
2019
US$’000
2018
US$’000
7,297
18,063
1,196
37,970
25,360
39,166
1,023
1,023
11,072
11,072
The cash is restricted for use in respect of environmental and supplier guarantees provided by LHM.
The 2018 restricted cash also includes the environmental performance bond at KM which has been
transferred to assets classified as held for sale (Note 19).
Recognition and measurement
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value, and bank overdrafts. Cash at bank earns interest at floating rates based on daily bank
deposit rates. Short-term deposits are made for varying periods depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
53
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 7.
INTEREST BEARING LOANS AND BORROWINGS
Maturity
2019
US$’000
2018
US$’000
Non Current
Senior secured notes(1)
2023
118,149
103,883
Total non current interest bearing loans and borrowings
118,149
103,883
Senior secured notes
Face value of senior secured notes issued
Equity component
Liability component on initial recognition
Transaction costs
Accretion expense
Capitalised interest
Liability component at 30 June
Fair value disclosures
2017
115,000
(7,475)
107,525
(9,099)
2,545
17,178
118,149
-
115,000
(7,475)
107,525
(9,099)
601
4,856
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 the majority of the Group’s assets, with the main
exceptions being the Group’s shares in Summit Resources Limited and the Canadian subsidiaries.
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% p.a. 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%
p.a. 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% p.a. 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 (31 March and 30 September).
Paladin may also elect to pay cash interest at a rate of 9% p.a. 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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
54
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 7.
INTEREST BEARING LOANS AND BORROWINGS (continued)
Recognition and measurement
Loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Loans
and 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 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, 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.
NOTE 8. OTHER INTEREST BEARING LOANS - CNNC
Non Current
LHM’s loans from CNNC
30 June
2019
US$’000
30 June
2018
US$’000
98,264
93,330
The increase in the loan balance during FY2019 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.
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.
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$98,264,000 to CNNC is recognised on
the consolidated statement of financial position.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
55
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 9.
CONTRIBUTED EQUITY AND RESERVES
Issued and Paid Up Capital
Number of Shares
2019
2018
2019
US$’000
2018
US$’000
Ordinary shares
Issued and fully paid
1,752,084,272
1,712,843,812
2,306,925 2,301,286
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Recognition and measurement
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
2,101,085
200,201
2,301,286
-
4,854
695
90
Movements in ordinary shares on issue
Date
Number of Shares
Balance at 1 July 2017
1,712,843,812
Shares transferred under DOCA(1)
Balance 30 June 2018
1,712,843,812
Issue
Price
A$
Exchange
Rate
US$: A$
Total
US$’000
September 2018
October 2018
November 2018
SARs exercised
Acquisition of Summit
Acquisition of Summit
Transfer from share-
based payment reserve
170,373
34,291,724
4,778,363
-
0.20
0.20
-
1.39668
1.37493
Balance 30 June 2019
1,752,084,272
2,306,925
(1) 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.
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$115M secured notes funding costs allocated to equity
Total
US$’000
185,465
7,893
7,475
(632)
200,201
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
56
NOTE 9. CONTRIBUTED EQUITY AND RESERVES (continued)
Reserves
Consolidation
reserve
US$’000
Listed
option
application
reserve
US$’000
Share-
based
payments
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 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)
-
-
Balance at 30 June 2018
48,319
137
47,926
(174,067)
Balance at 1 July 2018
48,319
137
47,926
(174,067)
Acquisition of 17.92% interest in
Summit Resources Ltd
Share-based payments
Foreign currency translation
-
-
-
-
-
-
-
26
-
-
-
(8,025)
Balance at 30 June 2019
48,319
137
47,952
(182,092)
-
-
-
-
-
-
-
-
-
(94,374)
667
(1,498)
14,916
(62,769)
14,916
(62,769)
(830)
-
-
(830)
26
(8,025)
14,086
(71,598)
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
57
FOR THE YEAR ENDED 30 JUNE 2019
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 CNNC, 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.
Premium on acquisition reserve
This reserve represents the premium paid on the acquisition of an interest in Summit.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
58
FOR THE YEAR ENDED 30 JUNE 2019
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
2019
US$’000
2018
US$’000
2,196
663
2,859
2,185
6,498
8,683
(178)
(8,952)
2,681
(269)
Based on the Group’s net exposure at the balance date, a reasonably possible change in the
exchange rate would not have a material impact on profit or equity.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
59
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Market Risk (continued)
Interest Rate Risk
Interest rate risk is the risk that the Group’s financial position will be adversely affected by movements
in interest rates that will increase the cost of floating rate debt or opportunity losses that may arise on
fixed rate borrowings in a falling interest rate environment. Interest rate risk on cash and short-term
deposits is not considered to be a material risk due to the short-term nature of these financial
instruments.
The Group’s main interest rate risk arises from long-term debt. Floating rate debt exposes the Group
to cash flow interest rate risk and fixed rate debt exposes the Group to fair value interest rate risk. All
other financial assets and liabilities in the form of receivables, investments in shares, payables and
provisions, are non-interest bearing.
The Group currently does not engage in any hedging or derivative transactions to manage interest rate
risk.
The floating rate financial instruments exposed to interest rate movements are as follows:
Financial assets
Cash and cash equivalents – short-term deposits
Restricted cash
Financial liabilities
Interest-bearing liabilities
Net exposure
2019
US$’000
2018
US$’000
25,360
1,023
39,166
11,072
26,383
50,238
(98,264)
(93,330)
(71,881)
(43,092)
Based on the Group’s net exposure at the balance date, a reasonably possible change in LIBOR
would not have a material impact on profit or equity.
Liquidity Risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet
the Group’s financial commitments in a timely and cost effective manner.
The Group treasury function continually reviews the Group’s liquidity position including cash flow
forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.
Sensitivity analysis is conducted on a range of pricing and market assumptions to ensure the Group
has the ability to meet repayment commitments. This enables the Group to manage cash flows on a
long-term basis and provides the flexibility to pursue a range of funding alternatives if necessary.
Note 7 details the repayment obligations in respect of the amount of the facilities.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
60
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
The maturity profile of the Group’s payables based on contractual undiscounted payments is as
follows:
Payables maturity analysis
Total
<1 year
1-2 years
2-3 years
>3 years
2019
US$’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)
2,350
115,000
17,178
80,928
17,335
2,350
-
-
-
-
-
-
-
-
-
Total payables
(1) Interest is not payable unless cash flows permit as disclosed in Note 7 and Note 8.
232,791
2,350
-
-
-
-
-
-
-
-
115,000
17,178
80,928
17,335
230,441
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
226,157
12,971
-
-
-
-
-
-
-
-
-
-
-
-
-
115,000
4,856
80,928
12,402
213,186
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.
Cash and cash equivalents are also subject to the impairment requirements of AASB 9.
The maximum exposure to credit risk at the reporting date was a total of US$27,738,000 (2018
US$58,733,000), comprising cash and receivables.
Current
Cash and cash equivalents*
Restricted cash
Trade receivables
Other receivables – other entities
Non Current
Other receivables – other entities
Total
2019
US$’000
2018
US$’000
25,360
1,023
-
1,017
39,166
11,072
976
7,145
27,400
58,359
338
374
27,738
58,733
* The Group’s maximum deposit with a single financial institution represents 81% (2018: 68%) of cash
and cash equivalents. This financial institution has a credit rating of Aa3 (2018: Aa3).
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
61
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Credit Risk (continued)
2019
Trade receivables
Other receivables
Receivables ageing analysis
Current
Total
>1 year
US$’000
US$’000
US$’000
-
1,355
-
1,017
Total receivables
1,355
1,017
2018
Trade receivables
Other receivables
976
7,519
976
7,145
Total receivables
8,495
8,121
No receivables are impaired.
Fair Values
-
338
338
-
374
374
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 2019:
2019
2018
Carrying
amount
US$’000
Fair
value
US$’000
Carrying
amount
US$’000
Fair
value
US$’000
Interest bearing loans and borrowings
- Senior secured notes
Total non current
118,149
118,149
105,546
105,546
103,883
103,883
103,751
103,751
Total
118,149
105,546
103,883 103,751
The Group uses various methods in estimating the fair value of a financial instrument. The methods
comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on
observable market data.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
62
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Fair Values (continued)
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 2019
Year ended 30 June 2018
(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 liabilities for which fair values are disclosed
Interest bearing loans
and borrowings
US$115M senior
secured notes(1)
105,546
105,546
-
-
-
-
105,546
105,546
103,751
103,751
-
-
-
-
103,751
103,751
(1) The fair value has been determined using a valuation technique based on the quoted market price
of the notes.
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.
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$115M senior secured notes. At the time of reporting, the Company was in compliance with all of
the facility’s terms and conditions.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
63
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 10. FINANCIAL RISK MANAGEMENT (continued)
Capital Management (continued)
Debt (face value plus accrued interest)(1)
Less cash and cash equivalents
Net debt
Total equity
Total Capital
2019
US$’000
2018
US$’000
132,178
(25,360)
119,856
(39,166)
106,818
80,690
76,638
106,761
183,456
187,451
Gearing Ratio (defined as net debt/total capital)
58%
43%
(1) 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.
PERFORMANCE FOR THE YEAR
NOTE 11. REVENUE
Sale of uranium
Total
Recognition and Measurement
21,491
72,917
21,491
72,917
Amounts disclosed as revenue are net of duties and taxes paid. The Group’s main source of revenue
being is the sale of uranium. Revenue is measured based on the consideration specified in a contract
with a customer. The Group’s sales arrangements with its customers are pursuant to enforceable
contracts that indicate the nature and timing of satisfaction of performance obligations, including
payment terms and where payment due dates. Each delivery is considered a separate performance
obligation under the contract.
The Group recognises revenue when it transfers control over a good or service to a customer. The
Group has concluded that this occurs on the delivery of the product at the converter. When uranium is
delivered to converters, the converter will credit the Group’s account for the volume of accepted
uranium. Based on delivery terms in the sales contract with its customer, the converter will transfer the
title of a contractually specified quantity of uranium to the customer’s account at the converter’s facility.
At this point, control has been transferred and the Group recognises revenue for the uranium supply.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
64
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 12.
INCOME AND EXPENSES
Cost of Sales
Cost of production
Depreciation and amortisation
Product distribution costs
Royalties
Other
Inventory movement
Inventory purchased
Total
Other Income
Other 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
Administration, Marketing and Non-Production Costs
Corporate and marketing
Corporate restructure costs
LHM mine site
LHM depreciation
LHM restart study
LHM restructure costs
Other
Total
2019
US$’000
2018
US$’000
-
-
(209)
(181)
-
(5,748)
(10,813)
(16,951)
(71,845)
(19,061)
(2,358)
(2,280)
(187)
7,173
-
(88,558)
466
-
562
1,028
305
483,721
1,865
485,891
-
-
-
-
-
(185,465)
290,344
392,726
(13,884)
483,721
(5,505)
(670)
(1,651)
(22,251)
(1,751)
(174)
(188)
(32,190)
(3,111)
(11,208)
(4,713)
-
-
(5,970)
(565)
(25,567)
Impairment of exploration assets
-
(2,300)
Impairments of US$2,300,000 were recognised in 2018. The exploration and evaluation assets were
written down at 30 June 2018 after considering the valuation determined by an independent expert.
Other Expenses
LHM stores & consumables obsolescence write off
-
(5,880)
Finance Costs
Interest expense:
Deutsche Bank facility
Convertible bonds
Senior Secured Notes
LHM’s loans from CNNC
Accretion expense relating to Unearned Revenue
Accretion expense relating to Senior Secured Notes
Mine closure provision accretion expense
Total
-
-
(12,321)
(4,934)
-
(1,944)
(3,301)
(10,006)
(14,215)
(4,856)
(3,942)
(12,162)
(601)
(3,544)
(22,500)
(49,326)
Total depreciation and amortisation expense
(22,279)
(19,131)
446675_10.docx
(355.6)
392,726
0.4
3.0
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
65
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 12.
INCOME AND EXPENSES (continued)
Recognition and Measurement
Borrowing Costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period
of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing
costs are expensed as incurred including the unwinding of discounts related to mine closure
provisions. When relevant, the capitalisation rate used to determine the amount of borrowing costs to
be capitalised is the weighted average interest rate applicable to the entity's outstanding borrowings
during the year.
Employee Benefits Expense
Wages and salaries
Defined contribution superannuation
Share-based payments
Other employee benefits
Total
2019
US$’000
2018
US$’000
(5,401)
(451)
(116)
(778)
(17,130)
(1,646)
(667)
(4,321)
(6,746)
(23,764)
The table above sets out personnel costs expensed during the year and are included within
Administration, Marketing and Non-Production Costs within the Consolidated Income Statement.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
66
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 13.
INCOME AND OTHER TAXES
Income Tax Expense
Current income tax
Current income tax expense
Deferred income tax
Related to the origination and reversal of temporary differences
Income tax expense reported in the Income Statement
Amounts Charged or Credited Directly to Equity
Deferred income tax related to items charged or credited directly to equity:
Foreign currency translation reserve movement
Other and prior period
Income tax benefit reported in equity
2019
US$’000
2018
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
Numerical Reconciliation of Income
Tax Benefit to Prima Facie Tax Payable
(Loss)/profit before income tax expense from continuing operations
(49,122)
359,058
Tax at the Australian tax rate of 30% (2018– 30%)
14,736
(107,717)
Difference in overseas tax rates
Non-deductible items
Under/over prior year adjustment
Tax losses utilised
Deferred tax assets on losses not recognised
3,317
143
-
-
(18,196)
5,378
(867)
-
112,441
(9,235)
Income tax expense reported in the income statement
-
-
Tax Losses
Australian unused tax losses for which no deferred tax asset has been
recognised2
Other unused tax losses for which no deferred tax asset has been
recognised3
Total unused tax losses for which no deferred tax asset has been
recognised
(62,097)
(52,932)
(368.231)
(354,525)
(430,328)
(407,457)
2 Including tax losses transferred from SRL on consolidation
3 Excluding tax losses from discontinued operation
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
67
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 13.
INCOME AND OTHER TAXES (continued)
Deferred Income Tax
Deferred tax liabilities
Accelerated prepayment deduction for tax purposes
Accelerated depreciation for tax purposes
Foreign currency balances
Exploration expenditure
Inventory / Consumables
Gross deferred tax liabilities
Set off of deferred tax assets
Net deferred tax liabilities
Deferred tax assets
Revenue losses available for offset against future taxable income
Foreign currency balances
Interest bearing liabilities
Deferred tax assets not recognised
Other
Gross deferred tax assets
Set off against deferred tax liabilities
Net deferred tax assets recognised
2019
US$’000
2018
US$’000
(283)
(77,484)
(42,225)
(10,042)
(3,198)
(347)
(84,356)
(40,647)
(12,412)
(1,978)
(133,232)
133,232
(139,740)
139,740
-
-
142,827
141,903
-
10,918
(20,651)
138
-
625
(5,988)
3,200
133,232
(133,232)
139,740
(139,740)
-
-
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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
68
FOR THE YEAR ENDED 30 JUNE 2019
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.
NOTE 14. EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Net (loss)/profit attributable to ordinary equity holders of the
Parent from continuing operations
2019
US$’000
2018
US$’000
(30,345)
367,762
2019
Number
of Shares
2018
Number
of Shares
Weighted average number of ordinary shares used in calculation
of basic earnings per share
1,739,349,593
1,712,843,812
Weighted average number of ordinary shares used in calculation
for diluted earnings per share
1,740,156,128
1,712,893,481
Total number of securities not included in weighted average
calculation due to their antidilutive nature in the current period,
that could potentially dilute basic earnings per share in the future
806,535
49,669
Recognition and Measurement
Basic Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares outstanding during the period.
Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares. Diluted earnings per share is the same as basic earnings per share
in 2019 and 2018 as the number of potentially dilutive shares does not change the result of earnings
per share.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
69
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 15. RECONCILIATION OF EARNINGS AFTER INCOME TAX TO NET CASH
FLOW FROM OPERATING ACTVITIES
Reconciliation of Net (Loss)/Profit After Tax to Net Cash
Flows Used in Operating Activities
Net (loss)/profit
(42,992)
343,413
2019
US$’000
2018
US$’000
Adjustments for
Depreciation and amortisation
Sundry income
Gain on disposal of property, plant and equipment
Change in estimate of environmental rehabilitation
provision - KM
Net exchange differences
Share-based payments
Non-cash financing costs
Inventory write-down
Asset impairments
Gain on extinguishment of debt
Changes in operating assets and liabilities
Decrease in prepayments
Decrease in trade and other receivables
Decrease/(increase) in inventories
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
(Increase) in assets classified as held for sale
Increase in liabilities directly associated with assets
classified as held for sale
22,279
143
(25)
(10,465)
(562)
116
22,500
-
-
-
287
7,140
5,354
(11,710)
(4,552)
(527)
209
19,131
3
(13)
-
(1,865)
667
16,307
34,052
12,434
(483,721)
839
5,633
(17,313)
22,794
2,834
-
-
Net cash flows used in operating activities
(12,805)
(44,805)
NOTE 16.
NON CASH INVESTING AND FINANCING ACTIVITIES
The non-cash elements of the issuance of the senior secured notes are reconciled below:
Acquisition of outstanding shares (17.92%) in
Summit Resources Ltd
25 October 2018 issue of 34,291,724 shares
16 November 2018 issue of 4,778,363 shares
Acquisition of non-controlling interest (refer to Note 9)
Transfer of 50% participating interest in Michelin Project
Consolidation of Michelin Project
Disposal of interest in Michelin Project
Transfer of participating interest (refer to Note 22)
4,854
695
5,549
14,247
-
14,247
-
-
-
-
(13,884)
(13,884)
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
70
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 16.
NON CASH INVESTING AND FINANCING ACTIVITIES (continued)
Issue of US$115M Senior Secured Notes
US$115M senior secured notes
Repayment of Deutsche Bank Facility
Deutsche Bank interest and costs
Restructure costs
KM environmental performance bond
Net cash proceeds received
2019
US$’000
2018
US$’000
-
-
-
-
-
-
115,000
(60,000)
(3,834)
(4,245)
(10,000)
36,921
Refer to Note 12 for non-cash financing activities relating to the effectuation of the DOCA which
resulted in a gain on extinguishment of debt.
OPERATING ASSETS AND LIABILITIES
NOTE 17. TRADE AND OTHER RECEIVABLES
Current
Trade receivables and other receivables
GST and VAT
Total current receivables
Notes
(a)
(b)
687
330
1,017
2,584
5,537
8,121
(a)
Trade receivables are non-interest bearing and are generally on 30 day terms. Carrying value
approximates fair value due to the short-term nature of the receivables. An expected credit loss
model is used for calculating an allowance for doubtful debts. No allowance has been
recognised for the current year or the previous year.
(b) GST and VAT receivables relates to amounts due from Governments in Australia, Namibia,
Malawi, the Netherlands and Canada.
Recognition and Measurement
Trade Receivables
Receivables are initially recognised at fair value and subsequently at the amounts considered
receivable. Trade receivables are amounts due from customers for goods sold or services performed
in the ordinary course of business. They are generally due for settlement within 30 days and therefore
are all classified as current.
Due to the short-term nature of the current receivables, their carrying amount is assumed to
approximate fair value.
AASB 9 includes revised guidance on a new expected credit loss model for calculating impairment on
financial assets. As both our mines are currently in care and maintenance, this change did not have a
material impact on the consolidated financial statements.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
71
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 18. INVENTORIES
Current
2019
US$’000
2018
US$’000
Stores and consumables (at cost – refer below)
Work in progress and finished goods (net realisable value)
5,363*
-
4,933
5,784
Total current inventories at the lower of cost and net realisable value
5,363
10,717
* Stores and consumables held at KM have been transferred to ‘Assets Classified as Held for Sale’.
(Refer to Note 19).
Inventory Expense
Inventories sold recognised as an expense for the year ended 30 June 2019 totalled US$16,951,000
(2018: US$88,558,000) for the Group.
Write-down of Inventories
No write down of inventories during 2019.
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 for the year. The write-down of inventories includes:
a. Write-down of ore stockpiles of US$8,457,000 due to continued low expected uranium
prices.
b. Write-down of product-in-circuit of US$6,657,000 due to continued low expected uranium
prices.
c. Write-down of finished product of US$13,005,000 due to continued low expected uranium
prices.
During 2019 the provision for obsolete stock at LHM was revised based on the actual usage during the
first year of care and maintenance, which resulted in the reduction of the provision and an increase of
stores and consumables by US$3,735,000. (2018 stores and consumables held at LHM and KM were
written down by US$5,933,000 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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
72
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 19. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS
HELD FOR SALE
On 24 June 2019, Paladin announced that it had entered into an agreement to sell its 85% interest in
Paladin (Africa) Ltd (PAL) to a Hylea Metals Limited (Hylea) led joint venture. This is the Malawi
operating segment (refer to Note 5)
The consideration for the sale of Paladin’s 85% shareholding in PAL is A$5M (US$3.6M), comprising
A$200,000 (US$143,000) cash, A$4.8M (US$3.4M) in Hylea shares to be issued to Paladin (A$1.8M
(US$1.3M) on completion, subject to a 12-month voluntary escrow, and A$3M (US$2.1M) on the third
anniversary of completion). The issue price will be based on the lower of the 30-day VWAP at the time of
issue, or the price of a Hylea capital raising in the 90 days preceding. Paladin is entitled to receive a 3.5%
royalty based on revenues derived from future production at Kayelekera, capped at A$5M (US$3.6M).
Paladin is also entitled to receive the funds advanced to provide security for the US$10M environmental
performance bond issued to the Government of Malawi for KM. The repayments will occur in four tranches:
US$4M on completion, US$1M on the first anniversary, US$2M on the second anniversary, and the final
US$3M on the third anniversary.
The transaction is subject to Hylea shareholder approval, Paladin Noteholder consent and customary terms
and conditions, including Government of Malawi approvals, as well as containing standard representations
and warranties. Completion is expected to occur in late Q2 FY2020.
Assets and liabilities of disposal group classified as held for sale
The following assets and liabilities were reclassified as held for sale in relation to the discontinued
operation as at 30 June 2019:
2019
US$’000
2018
US$’000
Assets classified as held for sale
Cash and cash equivalents (Note 6a)
Restricted cash (Note 6b)
Trade and other receivables (Note 17)
Prepayments
Inventories (Note 18)
Total assets of disposal group classified as held for sale
Liabilities directly associated with assets classified
as held for sale
Trade and other payables (Note 24)
Provisions (Note 25)
Environmental rehabilitation provision (Note 25)
Total liabilities of disposal group classified as held for sale
Net liabilities classified as held for sale
83
10,220
130
65
331
10,829
140
69
42,185
42,394
31,565
Financial performance and cash flow information of discontinued operations
-
-
-
-
-
-
-
-
-
-
Profit/(loss) after tax from discounted operations
Other income
Change in estimate of KM mine closure provision
Care and maintenance expenses
Profit/(loss) after tax from discontinued
operations
Cash Flows
Net cash outflow from operating activities
Net cash inflow from investing activities
Net decrease in cash and cash equivalents
446675_10.docx
571
10,465
(4,906)
356
(10,134)
(5,867)
6,130
(15,645)
(4,280)
295
(3,985)
(4,700)
-
(4,700)
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
73
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 19. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS
HELD FOR SALE (continued)
Recognition and Measurement
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use and a sale is
considered highly probable. They are measured at the lower of their carrying amount and fair value
less costs to sell, except for assets such as deferred tax assets, assets arising from employee
benefits, financial assets and investment property that are carried at fair value and contractual rights
under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal
group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value
less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss
previously recognised. A gain or loss not previously recognised by the date of the sale of the
noncurrent asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised
while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a
disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for
sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal
group classified as held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held
for sale and that represents a separate major line of business or geographical area of operations, is
part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a
subsidiary acquired exclusively with a view to resale. The results of discontinued operations are
presented separately in the statement of profit or loss.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
74
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT
Total
US$’000
Plant
and
Equipment
US$’000
Land and
Buildings
US$’000
Construction
Work in
Progress
US$’000
2019
Net carrying value
At 1 July 2018
Additions
Depreciation and amortisation expense
Reclassification of assets
Disposals
Adjustment
Foreign currency translation
223,986
52
(17,108)
-
(35)
(272)
(24)
217,499
52
(16,688)
74
(13)
(272)
1
5,635
-
(420)
-
-
-
(25)
At 30 June 2019
206,599
200,653
5,190
Cost*
Accumulated depreciation*
380,844
(174,245)
370,228
(169,575)
9,860
(4,670)
852
-
-
(74)
(22)
-
-
756
756
-
* Property, Plant and Equipment of net carrying value US$Nil (US$341,529,306 cost and
US$341,529,306 accumulated depreciation) at KM have been transferred to ‘Assets Classified as Held
for Sale’. (Refer to Note 19).
2018
Net carrying value
At 1 July 2017
Additions
Depreciation and amortisation expense
Reclassification of assets
Reclassification to mine development
Adjustment
Foreign currency translation
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)
-
At 30 June 2018
223,986
217,499
5,635
852
Cost
Accumulated depreciation
727,729
(503,743)
716,919
(499,420)
9,958
(4,323)
852
-
Property, Plant and Equipment Pledged as Security for Liabilities
Refer to Note 7 for information on property, plant and equipment pledged as security.
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
75
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT (continued)
Recognition and Measurement
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 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
remaining useful life of the assets
The estimates of useful lives, residual values and depreciation method are reviewed at the end of
each reporting period with the effect of any changes in estimate accounted for on a prospective basis.
Change in accounting estimate
There has been a change in the basis for depreciating the LHM Plant during care and maintenance.
Previously the plant was depreciated using the Units of Production method which would have resulted
in zero depreciation during care and maintenance. The basis of depreciation has changed
prospectively to the straight line method over the remaining useful life of the assets. This resulted in
depreciation charges of US$14.6M in FY2019.
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.
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
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
76
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 20. PROPERTY, PLANT AND EQUIPMENT (continued)
Significant Estimates and Assumptions (continued)
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 2019, 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 life of asset (LOA) scenario determined by a concept study,
including potential optimisation of the plant.
Uranium price forecasts 2019 to 2043 (real) ranging from US$29/lb to US$48/lb.
Long term uranium price forecast (real) of US$48/lb.
Average future cost of production (real) US$30/lb.
Discount rate (real post tax) applied to cash flow projections of 10.5% (2018: 12.5%).
The current carrying value of the LHM CGU is US$206,611,000. The Company has assessed the
carrying value of the LHM CGU in light of the continued low spot price of uranium and the decision to
place LHM into C&M. After determining the fair value of LHM using discounted cash flow analysis and
also considering recent independent expert valuations of LHM, the Company has determined that the
recoverable amount of the LHM CGU exceeds its carrying value and therefore no impairment of the
LHM CGU has been recognised at 30 June 2019.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
77
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 21. MINE DEVELOPMENT
2019
US$’000
2018
US$’000
Mine development – at cost
Less accumulated depreciation and impairment
108,267*
(85,309)*
220,067
(191,925)
Net carrying value – mine development
Net carrying value at start of year
Depreciation and amortisation expense
Reclassification from property, plant and equipment
Adjustment to base amount of mine rehabilitation
Disposals
Net carrying value at end of year
22,958
28,142
(4,461)
-
(723)
-
22,958
28,142
36,396
(3,927)
6,584
(10,911)
-
28,142
* Mine Development of net carrying value US$Nil (US$111,800,648 cost and US$111,800,648
accumulated depreciation) at KM have been transferred to ‘Assets Classified as Held for Sale’. (Refer
to Note 19).
Recognition and Measurement
Mine development
Pre-production costs are deferred as development costs until such time as the asset is capable of
being operated in a manner intended by management and depreciated on a straight line basis. Post-
production costs are recognised as a cost of production.
Change in accounting estimate
There has been a change in the basis for depreciating the LHM mine development during care and
maintenance. Previously the mine development was depreciated using the Units of Production method
which would have resulted in zero depreciation during care and maintenance. The basis of
depreciation has changed prospectively to the straight line method over the remaining useful life of the
assets. This resulted in depreciation charges of US$4.5M in FY2019.
Significant Judgements, Estimates and Assumptions
The Group has assessed that the useful lives of the individual identifiable components of the relative
ore bodies are short and that the strip ratio over the life of component is relatively uniform.
Accordingly, the Group has accounted for production stripping costs as a production cost in the years
ended 30 June 2018 and 2019. Refer to Note 20 for assessment of recoverability.
Proved and Probable Reserves
The Group uses the concept of a life of mine as an accounting value to determine such things as
depreciation rates and the appropriate period to discount mine closure provisions. In determining life
of mine, the proved and probable reserves measured in accordance with the 2012 edition of the JORC
Code specific to a mine are taken into account which by their very nature require judgements,
estimates and assumptions.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
78
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE
The following table details the expenditures on interests in mineral properties by area of interest for the year ended
30 June 2019:
Valhalla
/Skal
Isa North
Carley
Bore
Canada
Manyingee
Fusion
Total
Areas of interest
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance 1 July 2017
40,308
8,500
7,800
28,140
7,277
-
92,025
Expenditure capitalised
Foreign exchange differences
Impairment
Disposal of interest in Michelin
Project(1)
130
(527)
(130)
-
731
(774)
(791)
-
193
-
(193)
-
1,105
(373)
(1,105)
(13,884)
32
-
-
-
81
-
(81)
-
2,272
(1,674)
(2,300)
(13,884)
Balance 30 June 2018
39,781
7,666
7,800
13,883
7,309
-
76,439
Expenditure capitalised
Foreign exchange differences
Acquisition of control of
Michelin Project(2)
112
(546)
337
(802)
47
-
664
(118)
-
-
-
14,247
45
-
-
98
-
1,303
(1,466)
-
14,247
Balance 30 June 2019
39,347
7,201
7,847
28,676
7,354
98
90,523
(1) EdF claimants accepted a proposal whereby all existing claims which EdF had against the Michelin Project
would be released and in consideration for the release of these claims, the EdF Claimants received a 50%
participating interest in the Michelin Project. A disposal of a 50% interest in the Michelin Project of
US$13.9M was recognised.
(2) Recognises Paladin’s control over the Michelin JV resulting in the consolidation of 100% of the Canadian
assets with a non-controlling interest recognised for Michelin Nominees Limited’s 50% interest in the
Michelin Project. There is 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.
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.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
79
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 22. EXPLORATION AND EVALUATION EXPENDITURE (continued)
Recognition and Measurement (continued)
When a decision to proceed to development is made, the exploration and evaluation capitalised to that area
is transferred to mine development. All costs subsequently incurred to develop a mine prior to the start of
mining operations within the area of interest are capitalised and carried at cost. These costs include
expenditure incurred to develop new ore bodies within the area of interest, to define further mineralisation in
existing areas of interest, to expand the capacity of a mine and to maintain production.
Capitalised amounts for an area of interest may be written down to their recoverable amount if the area of
interest’s carrying amount is greater than their estimated recoverable amount.
Since 30 June 2018, there have been no events or changes in circumstances to indicate that the carrying
value may not be recoverable.
NOTE 23.
INTANGIBLE ASSETS
At 30 June
Intangible assets – at cost
Less accumulated depreciation and impairment
Net carrying value – intangible assets
2019
US$’000
2018
US$’000
17,803*
(8,341)*
27,803
(17,710)
9,462
10,093
* Intangible assets of net carrying value US$Nil (US$10,000,000 cost and US$10,000,000 accumulated
depreciation) at KM have been transferred to ‘Assets Classified as Held for Sale’. (Refer to Note 19).
Amortisation of US$631,000 (2018: US$532,000) is included in cost of sales in the Consolidated Income
Statement.
Movements in Intangible Assets
Movements in each group of intangible asset during the financial year are set out below:
Right
to Supply
of Power
US$’000
Right
to Supply
of Water
US$’000
Total
US$’000
2019
Net carrying value at 1 July 2018
Amortisation expense
2,827
(177)
7,266
(454)
10,093
(631)
Net carrying value at 30 June 2019
2,650
6,812
9,462
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
Description of the Group’s Intangible Assets
1.
Right to supply of power
LHM 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 straight line basis.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
80
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 23.
INTANGIBLE ASSETS (continued)
2.
Right to supply of water
LHM 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 straight line 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.
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
Straight line method over the remaining useful life (16 years). The
amortisation method is reviewed at each financial year-end.
Impairment testing
Annually and more frequently when an indication of impairment exists.
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.
Change in accounting estimate
There has been a change in the basis for depreciating the LHM intangible assets during care and
maintenance. Previously the intangible assets were depreciated using the Units of Production method which
would have resulted in zero depreciation during care and maintenance. The basis of depreciation has
changed prospectively to the straight line method over the remaining useful life of the assets. This resulted
in depreciation charges of US$0.6M in FY2019.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
81
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 24.
TRADE AND OTHER PAYABLES
Current
Trade and other payables
Onerous contracts
Total current payables
2019
US$’000
2018
US$’000
2,271
79
9,735
3,236
2,350
12,971
Trade payables are non-interest bearing and are normally settled on 30 day terms.
Recognition and Measurement
Trade and other payables are carried at amortised cost and represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group
becomes obliged to make future payments in respect of the purchase of these goods and services. The
amounts are unsecured and are usually paid within 30 days of recognition.
NOTE 25. PROVISIONS
Current
Employee benefits
Total current provisions
Non Current
Environmental rehabilitation provision
Demobilisation provision
Total non current provisions
697
697
5,249
5,249
36,058
-
86,817
610
36,058
87,427
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
82
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 25. PROVISIONS (continued)
Movements in Provisions
Movements in each class of provision during the financial year, excluding provisions relating to employee
benefits, are set out below:
Demobilisation
US$’000
Environmental
Rehabilitation
US$’000
At 1 July 2018
Unwinding of discount rate
Utilised
Foreign currency movements
Change in estimate of provision - LHM
Change in estimate of provision - KM
Transfer to liabilities classified as
held for sale
At 30 June 2019
2019
Current
Non current
2018
Current
Non current
610
-
(314)
(24)
(272)
-
-
-
-
-
-
-
610
610
86,817
3,301
-
(687)
(723)
(10,465)(1)
Total
US$’000
87,427
3,301
(314)
(711)
(995)
(10,465)
(42,185)
(42,185)
36,058
36,058
-
36,058
36,058
-
86,817
86,817
-
36,058
36,058
-
87,427
87,427
(1) A revised mine closure plan for KM was prepared and presented various options for rehabilitation.
Following a review of the different options presented in the mine closure plan, management decided on the
option that was the most likely to be implemented at KM which resulted in a decrease of the provision by
US$10,465,000 to US$42,185,000 at 30 June 2019.
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.
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
83
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 25. PROVISIONS (continued)
Recognition and Measurement (continued)
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
84
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
OTHER NOTES
NOTE 26. KEY MANAGEMENT PERSONNEL
Details of Key Management Personnel
(i)
Directors
Mr Rick Crabb
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
Chairman (Non-executive)
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
(ii) Executives
Mr Scott Sullivan
Mr Craig Barnes
Mr Michael Drake
Ms Anna Sudlow
Chief Executive Officer (appointed 1 July 2018)
Chief Financial Officer (resigned 1 July 2019)
General Manager, Business Development and Projects (appointed
11 February 2019)
Chief Financial Officer (appointed 1 July 2019)
Compensation of Key Management Personnel: Compensation by Category
Short-term employee benefits
Post-employment benefits
Share-based payments
2019
US$
2018
US$
1,070,363
48,605
105,411
1,153,184
21,277
111,160
1,224,379
1,285,621
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
85
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 27. 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:
Tax compliance services
Sub-total
Total
2019
US$
2018
US$
124,406
-
288,601
103,900
25,660
110,090
16,766
27,382
-
65,816
276,922
485,699
63,365
585
61,085
4,983
2,169
-
66,119
66,068
343,041
551,767
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
86
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 28. 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 2019 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
2019
US$’000
2018
US$’000
337
848
644
1,829
1,055
1,417
869
3,341
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.
Other Commitments
Commitments for transport, capital, purchase order commitments, fuel and utilities and other supplies
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
2,756
366
1,372
4,494
2,722
-
-
2,722
In relation to the Manyingee Project, the re-negotiated acquisition terms provide for a payment of A$750,000
(US$527,144) (2018: A$750,000 (US$553,890)) by the Group to the vendors when all project development
approvals are obtained.
Bank Guarantees
As at 30 June 2019 the Group has outstanding US$158,245 (A$225,145) (2018: US$166,274 (A$225,145))
as a current guarantee provided by a bank for the corporate office lease; a US$110,700 (A$157,500) (2018:
US$121,920 (A$165,086)) guarantee
tenements; a US$45,686 (A$65,000) (2018: US$49,637
(A$67,212)) guarantee for corporate credit cards, and a US$10,000,000 (2018: US$10,000,000) KM
environmental performance bond in favour of the Government of Malawi (pending renewal approval at 30
June 2019).
for
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
87
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 29. RELATED PARTIES
Key Management Personnel
The only related party transactions are with Directors and Key Management Personnel. Refer to Note 26.
Details of material controlled entities are set out in Note 30.
Loans from related parties – LHM’s loans from CNNC (refer to Note 8)
Non Current
At 1 July 2018
Interest charged
At 30 June 2019
Revenue from sale of uranium
NOTE
30. GROUP INFORMATION
Information Relating to Paladin Energy Ltd (parent)
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Option application reserve
Share-based payments reserve
Total shareholders’ equity
Net loss after tax from operations
Total comprehensive loss
2019
US$’000
2018
US$’000
93,330
4,934
89,388
3,942
98,264
93,330
6,579
31,632
20,421
205,784
36,258
238,597
1,107
131,899
1,742
118,355
2,306,925
(2,281,130)
137
47,953
2,301,285
(2,229,107)
137
47,927
73,885
120,242
(52,023)
(52,023)
408,003
408,003
Details of Any Contingent Liabilities of the Parent Entity
Paladin has provided a guarantee of US$36,057,945 for the LHM Environmental Trust Fund.
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.
446675_10.docx
PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
88
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE
30. GROUP INFORMATION (continued)
Investments in Material Controlled Entities
NAME
COUNTRY OF
INCORPORATION
Paladin Energy Minerals NL
Paladin (Africa) Limited
Langer Heinrich Mauritius Holdings Ltd
Langer Heinrich Uranium (Pty) Ltd
Valhalla Uranium Pty Ltd
Summit Resources Ltd
Summit Resources (Aust) Pty Ltd
Paladin Energy Canada Ltd
Michelin Uranium Ltd
Paladin Canada Investment (NL) Ltd
Paladin Canada Holdings (NL) Ltd
Aurora Energy Ltd
Australia
Malawi
Mauritius
Namibia
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
PERCENTAGE
INTEREST HELD
2018
%
100
85
75
75
100
82
82
100
100
100
100
100
2019
%
100
85
75
75
100
100
100
100
100
100
100
100
All investments comprise ordinary shares and all shares held are unquoted.
NOTE 31. EVENTS AFTER THE BALANCE DATE
Other than disclosed below, since 30 June 2019, 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 2019 Financial Report:
Appointment of Chief Financial Officer
On 13 June 2019, Paladin Energy Ltd announced that Ms Anna Sudlow had been appointed as Chief
Financial officer (CFO) commencing on 1 July 2019.
Noteholder Consent: Sale of 85% Interest in Paladin (Africa) Ltd
On 20 August 2019, Paladin Energy Ltd announced that holders of more than 50% of the Senior Secured
Notes due 2023 (Notes) outstanding had submitted voting instructions in favour of the resolution set out in
the consent solicitation, which sought noteholder consent to certain waivers and releases under the terms of
the Notes in order to facilitate the sale of its 85% interest in Paladin (Africa) Ltd to Hylea. As a result, the
resolution will be passed without the meeting of Noteholders which was scheduled for 29 August 2019. The
waivers and releases will become effective on execution of documentation by the Note Trustee which
Paladin expects will occur on or about 28 August 2019.
Paladin also referred to its previous announcements:
(a) dated 23 July 2019 regarding the launch of a consent solicitation to its Noteholders pursuant to
which Paladin sought Noteholder consent to certain waivers and releases under the terms of the
Notes in order to facilitate the sale of its shares in Paladin (Africa) Limited to Hylea; and
(b) dated 8 August 2019 regarding an amendment to the consent solicitation to introduce a consent fee
equal to 1% of the aggregate principal amount of the Notes outstanding to that noteholder. Payable
to each noteholder who votes in favour of the resolution. The consent fee is payable only if the
waivers and releases in the consent solicitation are approved by the requisite majority of noteholders
and if the share sale completes.
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PALADIN ENERGY LTD AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
89
FOR THE YEAR ENDED 30 JUNE 2019
EXPRESSED IN US DOLLARS
NOTE 32. 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 2019:
Reference/ Title
Summary
AASB 16 Leases
Narrow scope amendments to
IFRS 9 and IAS 28 (AASB
2017-7)
Annual Improvements 2015–
2017 Cycle (AASB 2018-1)
Amendments to AASB 19 –
plan amendment, curtailment
or settlement (AASB 2018 -2)
IASB amends the definition of
material
IASB amends the definition of
a business (IFRS 3)
Sale or contribution of assets
between an investor and its
associate or joint venture
(AASB 2014-10)
AASB 16 will primarily affect the accounting by lessees
and will result in the recognition of almost all leases on
the balance sheet. The standard removes the current
distinction between operating and financing leases and
requires recognition of an asset (the right to use the
leased item) and a financial liability to pay rentals for
almost all lease contracts. The accounting by lessors,
however, will not significantly change.
The IASB has issued amendments to IFRS 9 Financial
Instruments and to IAS 28 Investments in Associates and
Joint Ventures to aid with the implementation of IFRS 9.
Equivalent amendments to the respective Australian
Standards are expected to be issued shortly.
This standard makes amendments to AASB 3 Business
Combinations, AASB 11 Joint Arrangements, AASB 112
Income Taxes and AASB 123 Borrowing Costs.
The AASB has issued amendments to the guidance in
AASB 119 Employee Benefits in connection with
accounting for plan amendments, curtailments and
settlements.
The IASB has made amendments to IAS 1 Presentation
of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors and
consequential amendments to other IFRSs which: i) use
a consistent definition of materiality throughout IFRSs
and the Conceptual Framework for Financial Reporting;
ii) clarify when information is material; and iii) incorporate
some of the guidance in IAS 1 about immaterial
information.
The IASB has issued amendments to the guidance in
IFRS 3 Business Combinations that revises the definition
of a business.
The amendments clarify the accounting treatment for
sales or contribution of assets between an investor and
its associates or joint ventures. They confirm that the
accounting depends on whether the contributed assets
constitute a business or an asset.
Application
date of
standard*
Application
date for
Group*
1 January
2019
1 July 2019
1 January
2019
1 July 2019
1 January
2019
1 January
2019
1 July 2019
1 July 2019
1 January
2020
1 July 2020
1 January
2020
1 January
2022*
1 July 2020
1 July 2022
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
The Group has considered what impact AASB 16 Leases will have on the financial statements, when applied
next year, and have concluded that they will have no impact the Group currently has minimal leases and are
considered immaterial.
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 2019, it is not expected that the new Standards and
Interpretations will significantly affect the Group’s financial performance.
446675_10.docx
__________________________________________________________________________________
DIRECTORS’ DECLARATION
90
1.
In the opinion of the Directors’ of Paladin Energy Ltd:
(a)
The consolidated financial statements and notes that are set out on pages 38 to 89, 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 2019 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 2019 (section
295A Declarations). The section 295A Declarations have been made by the Chief Executive Officer,
Scott Sullivan and the Chief Financial Officer, Anna Sudlow.
Dated at Perth on 27th August 2019
On behalf of the board
_______________________________
Rick Crabb
Chairman
446675_10.docx
Independent auditor’s report
To the members of Paladin Energy Ltd
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Paladin Energy Ltd (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its
financial performance for the year then ended
(b)
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 2019
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 consolidated income statement for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies, and
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.
Material uncertainty related to going concern
We draw attention to Note 4 in the financial report, which indicates that the Group incurred a net loss
after tax attributable to ordinary equity holders of US$30,345,000, and a net cash outflow from
operations of US$12,805,000 during the year ended 30 June 2019.
The Group has senior secured notes of US$118,149,000 which have no repayment obligations until
their maturity in 2023. While the Langer Heinrich Mine remains on care and maintenance, the Group
will not generate any cash to fund its operations or to repay its senior secured notes.
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$3.75 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.
• We utilised a 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’s 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:
o The component auditor performed audit procedures on the financial information of Langer
Heinrich Uranium (Pty) Ltd
o The Group engagement team performed audit procedures, as required due to their financial
significance, on the financial information of the Group’s remaining subsidiaries, and
o The Group engagement team and component auditor had active dialogue throughout the year
through discussions, 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 matters 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
How our audit addressed the key audit
matter
Impairment assessments for non-current
assets
We performed the following procedures, amongst
others:
(Refer to note 20, 21 and 23) US$206.6 million in
Property, Plant and Equipment, US$23.0 million
in Mine Development and US$9.5 million in
Intangible Assets
The Group’s financial report includes significant
non-current assets in the form of Property, Plant
and Equipment, Mine Development and
Intangible Assets relating primarily to the Group’s
Langer Heinrich mine (LHM) in Namibia.
•
•
assessed whether the composition of the
Langer Heinrich CGU was consistent with
our knowledge of the Group’s operations and
internal Group reporting
evaluated the Group’s assessment that there
were indicators of impairment as at 30 June
2019 for the Langer Heinrich CGU, taking
into consideration the requirements of
Australian Accounting Standards.
The Group identified an indicator for impairment
for its Langer Heinrich Cash Generating Unit
•
assessed whether the Langer Heinrich CGU
appropriately included all directly
Key audit matter
(CGU). As a result, the Group tested the Langer
Heinrich CGU for impairment. The impairment
assessment involved significant judgements, such
as:
•
forecasting long term uranium prices
• determining Reserve and resource estimates
and production and processing volumes
• determining an appropriate discount rate
estimating future operating costs, capital
•
expenditure, foreign exchange rates and
inflation rates, and
•
estimating the 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.
How our audit addressed the key audit
matter
•
•
•
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 model 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:
o medium and long term uranium pricing
data used to current independent
industry forecasts
o
o
o
o
the Group’s current forecast uranium
production over the life of the mine to
the Group’s most recent reserves and
resources statement
the forecasted cash flows to historical
cash flows to assess the accuracy of the
Group’s forecasting
the forecasted operating costs and
capital expenditure to internal budgets
and the most recently completed
concept study
foreign exchange rate and inflation rate
assumptions to current external
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 on a
sample basis, and
•
evaluated the adequacy of the disclosures
made in note 20 including those
Key audit matter
Closure and rehabilitation provisions
(Refer to note 19 and 25) US$42.2 million in
Liabilities Classified as Held for Sale and $36.1
million in Non-current Provisions
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. At 30 June 2019 the consolidated
statement of financial position included
provisions for such obligations across all sites of
US$78.3 million of which $US42.2m in classified
as Liabilities Classified as Held for Sale as a
result of the announced sale of the Group’s
interest in the Kayalekera mine in Malawi.
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.
How our audit addressed the key audit
matter
regarding key assumptions used in the
impairment assessment, in light of the
requirements of Australian Accounting
Standards.
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:
•
•
•
•
•
evaluated the competency and objectivity
of the experts retained by the Group to
assist with the assessment of the Langer
Heinrich and Kayelekera rehabilitation
obligations
compared the rehabilitation costs being
estimated at Langer Heinrich and
Kayelekera to an external expert’s
assessment of the rehabilitation
obligations
examined the Group’s assessment 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
assessed the forecast timing of work to be
performed by comparison to mine plans
and environmental rehabilitation plans
submitted to relevant authorities, and
considered the appropriateness of the
discount rates and inflation rates utilised
in calculating the provision by comparing
them to current market consensus rates.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
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
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 on the other information that we obtained prior to the date of
this auditor’s report, 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 the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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 24 to 34 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Paladin Energy Ltd for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
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
27 August 2019
__________________________________________________________________________________
ADDITIONAL INFORMATION
98
Pursuant to the Listing Requirements of ASX as at 6 August 2019:
(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
19,425
1,596
639
1,471
305
23,436
No. of Shares
2,346,826
4,266,318
4,970,319
53,330,253
1,687,170,556
1,752,084,272
20,617 shareholders hold less than a marketable parcel of shares.
(b)
The twenty largest shareholders hold 91.02% of the total shares issued
Holder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NDOVU CAPITAL XII B V
CITICORP NOMINEES PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
HOPU CLEAN ENERGY (SINGAPORE) PTE LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – GSCO ECA
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
BNP PARIBAS NOMS PTY LTD
CS THIRD NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
WASHINGTON H SOUL PATTINSON & CO LTD
NATIONAL NOMINEES LIMITED
SACHEM COVE SPECIAL OPPORTUNITIES FUND LP
AMP LIFE LIMITED
LEXBAND PTY LTD
HOPU CLEAN ENERGY (SINGAPORE) PTE LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MS SEND BEE TEOH + MR SIN MONG WONG
No. of Shares
604,643,437
223,589,744
172,039,018
147,056,971
115,384,615
80,199,021
51,644,145
41,503,047
32,048,979
23,528,299
20,727,361
16,616,051
16,288,679
13,891,547
10,500,000
7,863,004
5,000,000
4,997,767
4,528,423
2,631,108
%
34.51
12.76
9.82
8.39
6.59
4.58
2.95
2.37
1.83
1.34
1.18
0.95
0.93
0.79
0.60
0.45
0.29
0.29
0.26
0.15
1,594,681,216
91.02
Substantial shareholders as disclosed in substantial shareholder notices given to the Company are as follows:
Tembo Capital Mining Fund II LP and related entities
Paradice Investment Management Pty Ltd
Value Partners Greater China High Yield Income Fund and related funds
HOPU Clean Energy (Singapore) Pte Ltd
China Investment Corporation (CIC) and its controlled entities
Royal Bank of Canada (RBC) and its related bodies corporate
223,589,744
170,303,351
158,031,317
120,382,383
96,131,600
94,834,237
(c)
Voting Rights
Ordinary Shares
For all shares, voting rights are one vote per member on a show of hands and one vote per share in a poll.
Share Appreciation Rights
There are no voting rights attached to share appreciation rights.
(d) Securities Subject to Voluntary Escrow
There are no ordinary fully paid shares subject to voluntary escrow.
(e) Unquoted securities
Unlisted Share Appreciation Rights
The Company has 22,085,500 share appreciation rights on issue, issued in accordance with the Share Rights
Plan approved by shareholders in November 2018. The number of beneficial holders of share appreciation
rights totals 23.
446675_10.docx
ADDITIONAL INFORMATION
(continued)
99
__________________________________________________________________________________
Tenements held
URANIUM PROJECTS
Project
Tenements
Interest %
JV Partner/s
Operator Note
NAMIBIA – AFRICA
Langer Heinrich
2 MLI
100%
MALAWI – AFRICA
Kayelekera
1 MLI
5 EPL
100%
100%
LABRADOR/NEWFOUNDLAND – CANADA
Central Mineral Belt 21 MLC
55%
QUEENSLAND
Mount Isa
3 EPMs
6 MDLs
100%
100%
WESTERN AUSTRALIA
-
-
-
-
Manyingee
3 MLs
Carley Bore 2 ELs
100%
100%
-
-
NON-URANIUM PROJECTS
QUEENSLAND
Western Isa Joint Venture
Mount Isa
11 EPMs
20%
Aeon Metals Limited
1 EPM
18%
2%
Aeon Metals Limited
Centaurus Metals Limited
LHUPL 1
PAL
PAL
2
2
AUR
PDN
PDN
PDN
PDN
AML
AML
3
3
SOUTH AUSTRALIA
Reaphook JV
1 EL
7.5%
Perilya Limited
Signature Resources NL
Perilya
446675_10.docx
ADDITIONAL INFORMATION
(continued)
100
__________________________________________________________________________________
Tenements held (continued)
Operators
Paladin Equity
(direct and indirect)
Note
AUR
CNNC
LHUPL
PAC
PAL
SRA
PDN
Notes
1.
2.
3.
Aurora Energy Ltd
CNNC Overseas Uranium Holding Limited
Langer Heinrich Uranium (Pty) Ltd
Pacific Mines Pty Ltd
Paladin (Africa) Ltd
Summit Resources (Aust) Pty Ltd
Paladin Energy Ltd
50%
0%
75%
100%
85%
100%
1
1
2
3
Paladin holds an ultimate 75% interest in LHUPL with 25% held by CNNC.
Paladin holds 85% equity in PAL with 15% equity having been issued to the Government of Malawi
pursuant to the terms of the Development Agreement for KM between the Government of Malawi, PAL and
Paladin Energy Minerals NL.
Aeon Metals Limited earned 80% equity in the Western Isa Joint Venture tenements through expenditure of
A$8M within three years of commencement (10 December 2007). SRA and Pacific Mines Pty Ltd have
retained up to 20% equity in each of these tenements. Aeon Metals Limited were formally known as Aston
Metals (Qld) Limited.
Tenement Types
EL
EPL
EPM
MDL
ML
MLI
MLC
Exploration Licence (Australia)
Exclusive Prospecting Licence (Africa)
Exploration Permit for Minerals (Australia)
Mineral Development Licence (Australia)
Mining Lease (Australia)
Mining Licence (Africa)
Mineral Licence (Newfoundland/Labrador)
446675_10.docx
ADDITIONAL INFORMATION
(continued)
101
__________________________________________________________________________________
LIST OF ABBREVIATIONS
A$
Australian dollars
C&M
care and maintenance
feet
gram
ft
g
ISO
International Organisation
Standardisation
for
NOSA
Mlb
m
mm
mSv
million pounds
metres
millimetres
millisiverts
National
Association
Occupational
Safety
ISR
in situ recovery
NPV
net present value
JORC
Joint Ore Reserves Committee
pa
per annum
K
kg
KM
lb
thousand
kilogram
Kayelekera Mine
pounds
LHM
Langer Heinrich Mine
PAL
PFS
ppm
t
t/m3
Paladin (Africa) Limited
pre-feasibility study
parts per million
tonnes
tonnes per cubic metre
LHUPL
Langer Heinrich Uranium (Pty) Ltd
U
uranium
LTI
lost time injury
U3O8
uranium oxide
LTIFR
lost time injury frequency rate
M
million
US$
w:o
US dollars
waste to ore ratio
446675_10.docx
ADDITIONAL INFORMATION
(continued)
102
__________________________________________________________________________________
SHAREHOLDER REPORTING TIMETABLE
Please note the lodgement dates are proposed,
with applicable due dates provided, as appropriate.
and reports may be released early.
Important Dates
2019
21 October 2019
30 September 2019 ASX Quarterly Activities Report (due 31 October 2019)
25 October 2019
30 September 2019 ASX Appendix 5B (due 31 October 2019)
15 November 2019
Annual General Meeting to be held in Perth, Western Australia
2020
20 January 2020
31 December 2019 ASX Quarterly Activities Report (due 31 January 2020)
24 January 2020
31 December 2019 ASX Appendix 5B (due 31 January 2020)
28 February 2020
Half Yearly Financial Statements for the six months ended 31 December 2019
(Appendix 4D)
20 April 2020
31 March 2020 ASX Quarterly Activities Report (due 30 April 2020)
24 April 2020
31 March 2020 ASX Appendix 5B (due 30 April 2020)
20 July 2020
30 June 2020 ASX Quarterly Activities Report (due 31 July 2020)
24 July 2020
30 June 2020 ASX Appendix 5B (due 31 July 2020)
28 August 2020
Audited Annual Financial Statements for the year ended 30 June 2020
(Appendix 4E)
19 October 2020
30 September 2020 ASX Quarterly Activities Report (due 31 October 2020)
23 October 2020
30 September 2020 ASX Appendix 5B (due 31 October 2020)
13 November 2020
Annual General Meeting to be held in Perth, Western Australia
446675_10.docx
CORPORATE DIRECTORY
103
Directors
Investor Relations
Australia – Corporate Office
Ms Karen Oswald
Level 4, 502 Hay Street
Subiaco Western Australia 6008
(PO Box 201, Subiaco, 6904)
Telephone: (+61 8) 9381 4366
Facsimile: (+61 8) 9381 4978
Email: karen.oswald@paladinenergy.com.au
Auditors
PricewaterhouseCoopers
125 St Georges Terrace
Perth Western Australia 6000
Stock Exchange Listings
Australian Securities Exchange
Code: PDN
Munich, Berlin, Stuttgart
and Frankfurt Stock Exchanges
Code: PUR
Namibian Stock Exchange
Code: NM-PDN
Non-executive Chairman
Mr Rick Crabb
Non-executive Directors
Mr David Riekie
Mr Daniel Harris
Mr John Hodder
CEO
Mr Scott Sullivan
Company Secretary
Mr Ranko Matic
Ms Andrea Betti
Registered Office
Level 4, 502 Hay Street
Subiaco Western Australia 6008
Telephone: (+61 8) 9381 4366
Facsimile: (+61 8) 9381 4978
Email: paladin@paladinenergy.com.au
Web: www.paladinenergy.com.au
Share Registries
Australia
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth Western Australia 6000
Telephone: 1300 850 505 (within Australia)
or (+61 3) 9415 4000 (outside Australia)
Facsimile: (+61 3) 9473 2500
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.
446675_10.docx