Peabody Energy Annual Report 2012

Plain-text annual report

ANNUAL REPORT 2012 XXXXXXX 1 For personal use onlyANNUAL GENERAL MEETING OF SHAREHOLDERS To be held at 10am on Tuesday 20 November 2012: Exchange Centre, 20 Bridge Street, Sydney All $ amounts referred to in this report are expressed in $AUD unless otherwise noted www.bathurstresources.co.nz For personal use only“OVER THE NEXT DECADES, WE’LL BE SHARING THE BENEFITS OF OUR BUSINESS WITH HUNDREDS OF NEW ZEALAND FAMILIES AND BUSINESSES AND CONTRIBUTING TO THE LONG- TERM PROTECTION OF THE CONSERVATION ESTATE IN THE SOUTH ISLAND”. SECTION ONE Year In Review SECTION TWO SECTION THREE Financial Statements Other Information Chairman and Managing Director’s Report 4 Review of Operations 6 16 Sustainability 24 Our People 26 Coal Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement 28 44 45 ASX Principles Compliance Statement 51 Financial Statements Directors’ Declaration Independent Auditor’s Report 54 100 101 ASX additional information Tenement Schedule Coal Resources and Reserves Corporate Directory 104 106 107 109 1 For personal use onlyABOUT BATHURST RESOURCES Bathurst Resources Limited was ﬂ oated on the Australian Securities Exchange in December 2007 and listed on the New Zealand Exchange in November 2010. The company is now well positioned as a modern New Zealand mining company with producing assets in the South Island and an operations oﬃ ce in Wellington. The company is already a producer of coal for the domestic thermal markets and is ﬁ rmly focussed on becoming a leading exporter of high quality coking coal from its Buller Coal Project, near Westport, on the West Coast. HIGHLIGHTS 2011/2012 ‧ Settlement of Coalbrookdale acquisition ‧ Opening of new operations ofﬁ ce in Wellington ‧ First shipment of Cascade coal leaves Westport ‧ Successful mediation of Residents’ appeal against resource consents ‧ Execution of a Deed of Ground Lease for Port Taranaki ‧ Heads of Agreement signed with Westport Harbour Limited ‧ Increase in Reserves and Resources for the Buller Coal Project ORGANISATIONAL STRUCTURE BATHURST GROUP BULLER COAL LIMITED EASTERN COAL LIMITED EASTERN COAL SUPPLIES TAKITIMU (AND COALDALE) OHAI ALBURY SOUTH BULLER CASCADE COALBROOKDALE ESCARPMENT WHAREATEA WEST DEEP CREEK NORTH BULLER BLACKBURN MILLERTON NORTH BULLER Below: The Cascade mine, on the edge of the Denniston Plateau 2 For personal use onlySECTION ONE Year In Review Chairman and Managing Director’s Report 4 6 Review of Operations 16 Sustainability 24 Our People 26 Coal For personal use onlyCHAIRMAN AND MANAGING DIRECTOR’S REPORT WE ARE PLEASED TO PRESENT OUR ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE 2011/12 YEAR - A PERIOD OF SIGNIFICANT PLANNING, GROWTH AND PRODUCTION FOR BATHURST RESOURCES AS WE MOVE TOWARDS OUR GOAL OF BECOMING A LEADING NEW ZEALAND COAL PRODUCER. L: Craig Munro, Non-Executive Chair, R: Hamish Bohannan, Managing Director. Below L to R: Craig Munro, Rt Hon John Key, Hon Phil Heatley, Hamish Bohannan In March 2012, the New Zealand Prime Minister, the Rt Hon John Key, opened our new operations oﬃ ce in Wellington. Joined by a number of his parliamentary colleagues, and our business partners and supporters, the Prime Minister reinforced his support for organisations such as Bathurst that are providing jobs and economic beneﬁ ts to the country while carefully managing environmental impacts. Our new ofﬁ ce reinforces our commitment to being a long-term member of the New Zealand community. We are a New Zealand- focussed company, listed on both the NZX and the ASX. All our operating assets are in New Zealand, with our primary asset, the Buller Coal Project, based at the epicentre of the country’s proud mining heritage on the West Coast of the South Island. During the year the company continued to focus on gaining full approvals for the development of its ﬂ agship Escarpment project, on the Denniston Plateau near Westport. At the beginning of the reporting period, Escarpment was granted its resource consents. However, shortly after, the consents were subject to three appeals: one on the location of the proposed mine’s infrastructure, one on the basis that climate change effects should be considered and one on environmental grounds. The ﬁ rst appeal was resolved through mediation and withdrawn. The Environment Court ruled that climate change effects were irrelevant in relation to the second appeal and the High Court has subsequently upheld that ruling. At the time of writing, leave for a further appeal to the Court of Appeal has just been granted and we are working with the other parties to have that appeal heard as quickly as possible. 4 For personal use onlyCHAIRMAN AND MANAGING DIRECTOR’S REPORT The remaining appeal on environmental grounds is due to be heard in New Zealand’s Environment Court during November with a ruling expected early next year. Although we are conﬁ dent of a positive ruling our preference is to reach a settlement with the remaining appellants prior to a court hearing and we are working hard to achieve that outcome. We remain committed to the Buller Coal Project, which is expected to provide 225 new direct jobs on the West Coast and inject about NZ$1 billion into the New Zealand economy over six years. We are optimistic we will be in production by mid-2013. Key to this development is Escarpment which has the potential to produce 1 million tonnes per annum of high-quality coking coal for export to overseas customers. In the coming year we will be focussing on developing adjoining projects in South Buller and, later, bringing our North Buller tenements into operation. As the full Buller Coal Project comes on line we are targeting an increase in production to approximately 4 million tonnes per annum by 2018. Meanwhile the Buller Coal Project continues to produce modest amounts of export coal and coal for domestic cement production from the Cascade mine, which is now ramping up to an annualised rate of 150,000 tonnes. In anticipation of increased production from Buller when Escarpment FINANCIAL RESULTS comes into production, the company established coal facilities at the deep-water Port of Taranaki on the North Island and is close to completing its Stage 1 port upgrade of the Westport coal handling facilities. During the reporting period, we also commenced production at our With A$53.8 million of cash in the bank and some earnings from small, existing coal operations, Bathurst is well-funded for the near term. Total coal sales revenue reported for the year was $16.5 million, derived from both the Buller Coal and Eastern Coal operations. new Coaldale block at the Takitimu mine near Nightcaps. Production Our earnings showed a net loss for the group of $21.5 million for from the Cascade mine at Buller and the Takitimu mine at Nightcaps the year to 30 June 2012 (2011: $13.5 million). This was due to the continues to provide positive operational cash ﬂ ow for the business. impairment of the Eastern assets, unrealised foreign exchange losses As a company, our focus is not just on growth, but also on responsible development. During the year we established the independent Kaitiaki on the deferred consideration for the L&M aquisition, and expensing of normal project development costs. Environmental Reference Group to monitor our environmental With our ﬁ rst full year of operations behind us we look forward to performance and ensure that our programmes and systems comply continued growth with a strong balance sheet to support our with best practice. development and expansion activities. More recently we were pleased to be invited to join New Zealand’s In closing, we would like to acknowledge the efforts of our fellow Sustainable Business Council, an organisation established to directors, management and staff. promote business leadership in sustainability and focused, through its membership, on the balanced pursuit of economic growth, ecological integrity and social progress. We would also like to extend our thanks to our shareholders. We appreciate your continued support in a year that has seen some setbacks, but has also seen the company ﬁ rmly cement its position In March 2012, Bathurst was pleased to welcome on board our new in New Zealand. We remain committed to returning value to all Chief Operating Ofﬁ cer, Richard Tacon. Richard has over 30 years’ our stakeholders as we move towards becoming a pre-eminent experience in both the New Zealand and Australian coal industries. coal producer. Richard joined Bathurst from Centennial Coal where he was General Manager Western Operations. Originally from New Zealand, Richard has now returned to be based in our Wellington ofﬁ ce. With our focus clearly on New Zealand, we are currently in the process CRAIG MUNRO | Non-Executive Chair HAMISH BOHANNAN | Managing Director of building up a strong Wellington based management team. 5 For personal use onlyREVIEW OF OPERATIONS THE 2012 FINANCIAL YEAR WAS A SIGNIFICANT ONE FOR BATHURST WITH THE COMPANY CEMENTING ITS PRESENCE IN NEW ZEALAND, BEING WELL PLACED TO ACHIEVE ITS GOAL OF BECOMING A MAJOR COAL PRODUCER. The company’s operations are focussed on New Zealand’s South Island with the Buller Coal Project near Westport on the West Coast, the Takitimu mine at Nightcaps in Southland and a coal handling and distribution centre in Timaru. In March 2012, Bathurst underpinned its commitment to New Zealand when the Prime Minister, the Right Hon. John Key, ofﬁ ciated at the opening of the company’s ofﬁ ce in Wellington. OPERATIONAL Bathurst’s ﬂ agship development is the Buller Coal Project, a high quality export coking coal operation, targeting a 4 million tonne per annum production proﬁ le by 2018. The ﬁ rst substantive stage of the Buller Coal Project is Escarpment, located on the historic Denniston Plateau adjacent to the Cascade mine. The plateau has long been recognised as one of New Zealand’s most signiﬁ cant coal areas with a proud history of mining dating back to the 1800’s. It produces valuable hard coking coal, sought by steel makers all over the world. Below: The Buller Coal Project 1, Seddonville, 2, North Buller, 3, Millerton, 4, Blackburn, 5, Deep Creek, 6, Coalbrookdale, 7 Whareatea West, 8, Cascade, 9, Escarpment 1 2 3 4 5 6 8 7 9 WESTPORT 6 For personal use onlyREVIEW OF OPERATIONS Resource consents were granted for the Escarpment permit in August 2011. Whilst the consents were appealed, the company was successful in resolving the ﬁ rst of these through mediation and is now in the process of working through the remaining two appeals. The Buller Coal Project currently produces modest amounts of coal from the Cascade mine on the edge of the Denniston Plateau, part of the Eastern Resources Group acquisition which was ﬁ nalised in March 2011. The Cascade mine was previously a small volume mine producing coal for the local cement market. Production is now ramping up to 150,000 tonnes per annum of semi soft coking coal targeting the export market. The coal from the Cascade mine is also in demand by the ferro silicon metals market and trial shipments have already commenced to an end user in Australia. Drilling in the areas surrounding the Cascade mine has identiﬁ ed further coal adjacent to the current Mining Permit (MP), which will extend the life of mine by up to eight years. During 2012 the company completed the acquisition of the Coalbrookdale assets, a strategic tenement package at South Buller also adjacent to the company’s Escarpment permit and operating Cascade mine. An access arrangement and wildlife permit authority have been issued by the Department of Conservation for ongoing exploration at Coalbrookdale. During the year, and subsequent to year end, a total of 79 holes were drilled across the Coalbrookdale permits. Coalbrookdale is currently fully consented for underground mining. The company however the company is reviewing its development plans with a view to making an application for open cast mining. Drilling produced encouraging results at Bathurst’s Whareatea West Exploration Permit (“EP”), concentrating on the western area, and the adjacent West Plateau EP. An appraisal extension for a further two years was granted for the Whareatea West EP. Bathurst has continued exploration on the North Buller Project during the year, with two rigs committed to an extensive programme to delineate the extent of the resource across several permits in the area. This programme is ongoing to prove up reserves with an aim of bringing the ﬁ rst permits into production in late 2016. The results of an independent scoping study on North Buller are currently being reviewed. Bathurst has now commenced infrastructure upgrades at the Ports of Taranaki and Westport, securing a route to the export markets of South East Asia and India. Coal facilities were installed at the deep water port of Taranaki during the year. Similar facilities are currently being constructed at Westport for completion in December 2012. In Southland, mining operations at the Takitimu mine extended into the adjoining Coaldale block to access a further six years of resource. A new mining permit was granted as part of that extension. At Albury, near Timaru, Bathurst holds Prospecting Permit 52484 over an area of 838 square kilometres which is prospective for thermal coal. During the year, desktop studies and trenching were undertaken to deﬁ ne areas of interest prior to making application for an EP. 7 L to R: Craig Pilcher, Eastern GM, , Pat McManus, Buller District Mayor, Richard Tacon, Bathurst COO, For personal use onlyREVIEW OF OPERATIONS Eastern Coal Takitimu Coal Limited (ML 37079) The Takitimu mine is located at Nightcaps, north of Invercargill. Mining operations originally commenced at Nightcaps in 1881. Sub-bituminous coal from the open cut operations is railed to a number of major industrial customers in the Southland, Otago and South Canterbury areas. The resource in the main Takitimu pit will deplete by the end of the 2012 calendar year and operations have now expanded into the adjacent Coaldale block. The original pit is progressively being backﬁ lled and rehabilitated as ﬁ nal coal winning takes place. A tender for mining services for the Coaldale block was awarded to NZ mining contractor, Stevenson Mining Limited. The resource consent for the Coaldale extension was granted in July 2011, with approvals for a 24 hour/7 day a week operation if required. MP 53614 was issued in June 2012 to cover a small tonnage of Crown coal within the area. Stripping commenced in the block in April 2012 in conjunction with the construction of haul roads, and water treatment and sediment control ponds. Coal winning from the Coaldale block commenced in May 2012. Access to the area was initially by way of a royalty agreement with the landowner. In February 2012 an offer was made to acquire the property on which Coaldale is located. For Bathurst, this was a strategic acquisition that would substantially improve the project economics at Takitimu. Having access to the complete area of the property will also enable the company to realise the full potential of the coal resource that exists there. Further, it will result in a signiﬁ cant reduction in the operating costs of handling overburden and eventual rehabilitation. Under the landowner agreement, overburden had to be transported to segregated stockpiles at an area some distance away, incurring onerous haul costs. The ability to locate overburden stockpiles in the immediate vicinity of the pit will greatly reduce those costs. Additionally Bathurst will no longer be required to make ongoing royalty payments to the land owner. Full ownership of the land will also allow for access into other adjacent areas prospective for quality sub bituminous coal. It also gives the company an asset that can be sold when operations are completed. In July 2012, subsequent to year end, Overseas Investment Ofﬁ ce (“OIO”) approval was received to acquire the property and the transaction will complete in December 2012. 8 L to R: John Low, Takitimu Coal operator, Mike Borthwick, consultant, Sam Aarons, Bathurst GM Corporate Relations PRODUCTION Bathurst operates two coal mines in New Zealand, the Takitimu Mine (Eastern Coal) and the Cascade Mine (Buller Coal). Production ﬁ gures of Takitimu and Cascade for the year ended 30 June 2012 are set out below. OPERATION Eastern Coal Buller Coal TOTAL PRODUCTION OVERBURDEN (Tonnes) 148,071 59,285 207,356 (BCM) 1,322,033 1,583,963 2,905,996 For personal use onlyREVIEW OF OPERATIONS 9 For personal use onlyREVIEW OF OPERATIONS In April 2012, Deputy Prime Minister and Southland MP, the Hon BULLER COAL PROJECT Bill English, visited the Takitimu mine site to gain an insight into the expansion plans which will see the production of over two million tonnes of sub bituminous coal, creating jobs in the local community and meeting the energy needs of the region. Buller Coal Cascade Coal Limited (MP 41455) The Cascade mine is the ﬁ rst production block in the South Buller operation and is adjacent to the Escarpment and Coalbrookdale blocks. The Cascade mine has historically produced approximately 45,000 tonnes per annum of high value, low contaminant coal for the local industrial market. During the year drilling identiﬁ ed a signiﬁ cant tonnage of coal in the EP adjacent to the Cascade mine. Subsequent to period end, an application was granted for an Extension of Land (“EOL”) to include the area of additional resource under the existing MP. Production is now planned to be ramped up to 150,000tpa by increasing the workforce, introducing a 24 hour/ 7 day a week roster, and commissioning new plant and equipment. This will open up the opportunity for export sales in addition to fulﬁ lling contracted commitments in New Zealand. Escarpment Resource Consents Buller Coal Limited, Bathurst’s wholly owned subsidiary, was granted resource consents for Escarpment by an independent panel of commissioners representing the West Coast Regional Council and the Buller District Council in August 2011. The resource consents were appealed by three parties; the West Coast Environmental Network Incorporated (“WCENT”), the Fairdown- Whareatea Residents’ Association Incorporated (“Residents”) and the Royal Forest & Bird Protection Society of New Zealand Incorporated (“Forest & Bird”). In December 2011, Bathurst entered into mediation with the Residents. Concurrently with the mediation, Bathurst undertook a comprehensive review of the Escarpment project which resulted in a revised plan, resolving the Residents’ issues and incorporating improvements to the infrastructure layout, further reducing the environmental impact of the project on the plateau. The resultant changes have the support of the Residents who withdrew their appeal on 27 April 2012 and published a letter conﬁ rming their full support of the project. The other parties who “co-joined” in the Residents’ appeal agreed with the Residents’ Initial shipments of coal from the Cascade mine took place out of application being withdrawn. Westport in November through to Port Taranaki, New Plymouth. Coal was also sent via the Port of Lyttelton to a ferro silicon producer in Australia. Shipments through Westport have since halted whilst the company constructs covered storage and improved coal handling facilities there as the ﬁ rst stage of its planned port upgrades. Bathurst regards engagement on a local basis as fundamental to its on-going operations, and was pleased to see a successful mediation which turned community opposition into community support. 10 For personal use onlyREVIEW OF OPERATIONS L: Denniston Plateau On 27 March 2012, Bathurst attended a hearing in relation to the Revised plan for Buller Coal Project appeals before the New Zealand Environment Court. The purpose During the mediation process with the Residents, Bathurst was able of the hearing was to determine the validity of considering climate to review the existing infrastructure plan for Escarpment, the ﬁ rst stage change as a factor in granting resource consents. On 30 April 2012, of the Buller Coal Project. The company has now put in place an Bathurst received a positive decision from Judge L J Newhook, the improved plan which both addresses the Residents’ concerns and Acting Principal Environment Judge. The Court granted the declaration sought by the company that, in considering applications for consent for the Escarpment project, the Court cannot have any regard to the effects on climate change provides greater long term beneﬁ ts for the company. These include an optimised mining schedule, more efﬁ cient use of resources and infrastructure, lower operating costs and a signiﬁ cant reduction in environmental effects. of discharges into the air of greenhouse gases. The climate change In creating the revised plan for the project, Bathurst tested the declaration was appealed by Forest & Bird and WCENT. The appeal assumptions on which Bathurst’s predecessor, L&M Coal Holdings was heard by the High Court subsequent to the year end on 30 July Limited’s (“L&M”) planning and permitting applications were made 2012, and on 24 August 2012 a decision was handed down upholding whilst acknowledging the previous constraints upon L&M. the original decision made by Judge Newhook. The original proposal was based on mining the Escarpment block, A further appeal was lodged by WCENT on 11 September 2012. At the constructing a coal washing plant on the plateau and transporting time of writing this report, an application for Leave to Appeal has been the coal via a pipeline to a stockpile facility on the lowland at Fairdown. made to the High Court. A decision is yet to be handed down on this. Since the original proposal, Bathurst has acquired the Cascade, Should the appeal be accepted, the parties should also receive an Coalbrookdale and Whareatea West blocks, adjacent to Escarpment , indication of a hearing date at the same time. The Environment Court has delivered a timetable for the hearing of the remaining appeal. In accordance with the timetable, Buller Coal Limited lodged its evidence with the Court on 18 June 2012. The hearing will commence in Christchurch on Monday, 29 October 2012. The Court has set aside four weeks for the hearing, as well as a two week break. The ﬁ nal week of the hearing will commence on Monday, 3 December 2012. and is looking to acquire additional land on the coastal plain, which has given the company more options for the location of infrastructure. 11 For personal use onlyREVIEW OF OPERATIONS The revised plan eliminates the technical risk associated with the Coal will be trucked from the North Buller sites to the stockpile area for pipeline, commits to an aerial system of coal transportation, delivers a beneﬁ ciation and loading onto rail for export through the ports of better capital proﬁ le and signiﬁ cantly reduces the environmental effects Westport or Lyttelton. of the Buller Coal Project. In conjunction with the review of a scoping study of the area, two It also incorporates an improved mine schedule for the Escarpment drill rigs have been dedicated to drilling in North Buller during the year. block based on the data from the recent drilling programme. The These have been concentrated in the Seddonville area, mainly on land schedule now provides for mining low ash virgin coal from the western held by the Ngai Tahu Forest Estates Limited. Bathurst is also making side of the mining area in the ﬁ rst stages rather than the original plan application for an Access Arrangement to drill the areas of Crown land which was to ﬁ rst recover coal from the old underground workings held by the Department of Conservation within its North Buller permits. where contamination with rocks and overburden is likely to have occurred. Mining in this sequence will defer the immediate need for a washplant as the virgin coal is saleable in its raw state. Bathurst has employed a leading environmental consulting group to commence a study of the environmental values of the Buller region. The study will assess the known ecological, historical, recreational, Initial production rates from Escarpment are expected to be cultural and social values of the area. This information will be mapped approximately 500,000 tpa as the coal will be trucked from the plateau and the outcomes will feed into a planning process to assist Bathurst until the new aerial transport infrastructure has been constructed and to develop a long term strategic plan for the region. permitted. Additionally some 150,000 tpa will continue to be trucked from Cascade. North Buller The Buller Coal Project is expected to be fully funded, after allowing for existing cash reserves and an anticipated US$90 million in borrowing facilities available under agreements that Bathurst aims to conclude North Buller is the next development target at the Buller Coal Project. with its offtake partners in the coming months. The North Buller prospects comprise Seddonville, Ngakawau, Millerton, Fly Creek and Blackburn. Part of Seddonville is held under the Coal Creek EP and the remaining deposits fall under the Buller EP. Preliminary analysis indicates that the low ash, higher sulphur coal from this area can be blended with South Buller coal to produce a premium product. The revised location of the washplant for South Buller at the new stockpile site on the coastal plain negates the requirement for duplicated infrastructure for coal handling from the North Buller region. Below L: Tammy Livermore, Cascade Coal truck driver Below R: Jasmine Hoetjes, Buller Coal exploration geologist 12 For personal use onlyREVIEW OF OPERATIONS Development of Buller Coal Project The group comprises independent representatives with experience In the last year Bathurst has signiﬁ cantly developed the logistics plan in the particular environmental needs and challenges posed by for the Buller Coal Project. In January 2012, the company announced operations in New Zealand. It also includes Mr Rob Lord, the execution of a Deed of Ground Lease with Port Taranaki. This an independent and non-executive director of Bathurst. agreement marks a signiﬁ cant milestone for the Buller Coal Project, forming a key step in the logistics chain and further securing the route to market. The lease allowed Bathurst to construct storage sheds adjacent to a deep water berth to accept the incoming coal from the The US operations of the company have now been wound up with the State of Delaware cancelling the incorporation of Bathurst Resources USA LLC on 1 June 2012. port of Westport. The overall facility is large enough to allow for future expansion as the company continues to develop and enter new projects. FINANCIAL Another key step in the logistics chain was secured in the previous The group made a net loss before tax for the year of $25.9 million ﬁ nancial year by signing a Heads of Agreement with Westport Harbour (2011: $15.1 million). The net loss before tax comprised of the following Limited to give Bathurst exclusive use of a coal handling facility to ship key items: the coal from the Buller project. Bathurst will also enter into a joint venture arrangement with Westport Harbour Limited to facilitate a NZ$30 million (A$23.5 million) redevelopment of the existing port into Operating mines an efﬁ cient bulk coal handling facility. Bathurst is currently ﬁ nalising Impairment loss the documentation for this transaction. Construction has recently commenced on stage one of this redevelopment, with the building of a NZ$5 million (A$3.9 million) 9,000 tonne capacity storage facility which is expected to be completed by December 2012. This facility will have the capability to receive coal Deferred consideration fair value, foreign exchange, and unwinding adjustments (see table below) Project development costs expensed, administration & support costs Share based payments by truck and later, by rail via an overhead conveyor. The new upgraded Net interest revenue facility will eventually have the ability to load vessels at either the river wharf or the inner wharf. Nelson based ﬁ rm, Brightwater Engineering, has been engaged to design and construct the facility. Net loss before tax Income tax beneﬁ t Loss for the year after income tax $’000 (895) (6,365) (8,893) (13,193) 95 3,378 (25,873) 4,353 (21,520) CORPORATE Bathurst’s Wellington ofﬁ ce was ofﬁ cially opened by New Zealand Prime Minister, Rt Hon John Key on 21 March 2012. The Wellington ofﬁ ce underpins the company’s long term commitment to New Zealand and will be the main ofﬁ ce for the New Zealand operations. The Prime Minister acknowledged Bathurst’s activities as important in economic terms for New Zealand. Bathurst also has project ofﬁ ces at Westport and Nightcaps in the South Island and a coal handling and distribution centre in Timaru. In March 2012, Richard Tacon commenced as the company’s Chief Operating Ofﬁ cer. Mr Tacon is based in the Wellington ofﬁ ce and is Included in the $8.9 million loss relating to deferred consideration adjustments (shown in the table below) is $7.0 million of unrealised foreign exchange losses due to a weakening NZ dollar relative to the US dollar (the deferred consideration is payable in US dollars). The deferred consideration only becomes payable upon sales targets as set out in note 17 to the ﬁ nancial statements and as such is considered to be naturally hedged against US dollar sales receipts expected at the time the deferred consideration falls due. ADJUSTMENT TO DEFERRED CONSIDERATION Fair value gain (through income statement) responsible for Bathurst’s existing coal mines and the development of Foreign Exchange loss on deferred consideration the high quality coking coal projects on the Denniston Plateau. Mr Tacon Unwinding of discount rate was born in New Zealand and has signiﬁ cant experience in the local and international coal industry in both underground and open cast operations. Total income statement impact of deferred consideration $’000 1,905 (6,987) (3,811) (8,893) During the year Bathurst announced the formation of an Environmental Reference Group, chaired by eminent New Zealand conservationist, Mr Guy Salmon. The group is called the “Kaitiaki Group”. Kaitiaki is a Maori name which embodies the concept of guardianship of the natural environment. It has been established to actively monitor and guide Bathurst’s environmental performance and reports to the Bathurst board. In addition, the deferred consideration adjustment includes a $1.9 million fair value gain and $3.8 million of ﬁ nance charges. The accounting standards require deferred consideration to be deﬂ ated to reﬂ ect the time value of money, as the repayment date for the deferred consideration draws nearer the effect of this deﬂ ation is unwound to the income statement. 13 For personal use onlyREVIEW OF OPERATIONS During the year a review and analysis of the Eastern Coal business was undertaken which noted a coal supply contract with negative margins. As a result of this review an impairment loss of $6.4 million was recorded against the assets of the Eastern Coal business. The review of the Eastern Coal business continues and business improvement initiatives are to be implemented. The cash outﬂ ow for the group for the year was $33.9 million (2011: $79.0m inﬂ ow) which included operating cash outﬂ ows of $7.1 million (2011: $6.0 million). The operational cash out ﬂ ow comprised: Operating mines Net interest received Project development, administration & support costs paid Income taxes paid Cash out ﬂ ow from operations $’000 504 3,711 (10,224) (1,081) (7,090) Operating mine cash ﬂ ows were adversely impacted during the year as the operations extinguished current mining blocks and moved into new areas at both the Cascade and Takitimu operations. When steady state export sales from Buller are established, the cash ﬂ ows from mining operations are expected to improve. Income taxes paid related to proﬁ ts generated in the 2011 ﬁ nancial year. Other signiﬁ cant cash ﬂ ows for the year include the settlement of the Coalbrookdale asset acquisition for $7.4 million, payments for property, plant and equipment of $8.5 million and exploration, evaluation, and consenting costs of $8.2 million. During the year, $3.0 million was raised on the issue of shares on the exercise of options, including $0.1 million received for shares issued in July 2012. The consolidated entity had $53.8 million cash on hand at 30 June 2012 (30 June 2011: $87.4 million). Top: Ainsley Ferrier, Buller Coal mine planning manager Bottom: Tony Fox, Cascade Coal mine manager 14 For personal use onlyREVIEW OF OPERATIONS BATHURST RESOURCES PLACES A STRONG EMPHASIS ON ENGAGEMENT – WITH OUR STAFF, CONTRACTORS AND STAKEHOLDERS, WITH OUR SHAREHOLDERS, AND WITH THE COMMUNITIES IN WHICH WE WORK. The company is committed to regular communications through newsletters, website updates, and presentations to investors, and business and community interest groups. Click on www.youtube.com/bathurstresources to view our YouTube site for video clips on the Escarpment project, our people, and local community stakeholders. Visit our website on www.bathurstresources.co.nz Email the company direct on info@bathurstresources.co.nz 15 For personal use onlySUSTAINABILITY THE COMPANY’S APPROACH TO SUSTAINABILITY IS BASED ON A MODERN DEFINITION OF SUSTAINABLE DEVELOPMENT, WHICH IS “ENSURING A BETTER QUALITY OF LIFE FOR EVERYONE, NOW AND FOR GENERATIONS TO COME. The South Island iwi of Ngai Tahu eloquently capture this principle in their vision: - - - Mo tatou, a, mo ka uri a muri ake nei: For us and our children after us. - - - Bathurst supports this vision and is committed to delivering positive outcomes for present and future generations through careful stewardship of its assets, resources and activities. PEOPLE, COMMUNITIES, ENVIRONMENT At the heart of the Bathurst family of businesses is the safety and wellbeing of its people as well as the health and welfare of those in the communities in which it works. Sound environmental management is also paramount to Bathurst’s values. As a miner, Bathurst is immersed in understanding environmental impacts through geological surveys, environmental planning, management of infrastructure, and extraction of natural resources, regeneration of natural landforms and habitats, and reinvestment in the conservation estate. ENVIRONMENT OUR PEOPLE COMMUNITIES OUR PEOPLE The wellbeing of Bathurst’s people, both employees and contractors, and those who live near its operations, is the company’s ﬁ rst priority. Every person who joins the company is provided with comprehensive training in health and safety practices, resulting in a workforce that emphasises trust, respect and safety awareness. Bathurst constantly monitors its health and safety performance to ensure safe working practices are understood and followed, and looks for ways to achieve continuous improvement. “Bathurst is committed to the responsible care of its employees, contractors and local communities” 16 For personal use onlySUSTAINABILITY COMMUNITIES Bathurst is focused on being a good neighbour and sharing the beneﬁ ts of its projects with the communities in which it operates through business partnerships and community- based initiatives. Supporting local businesses Community sponsorship Throughout 2011-12, Bathurst continued to develop its community involvement in a number of areas, including: ‧ Inaugural Buller Coal scholarship for Buller High School graduate Renee Straker to study science at the University of Canterbury ‧ Sponsorship of the Denniston Chaingrinder mountain bike event Through its Buller Coal subsidiary in Westport, Bathurst has formed in Westport alliances with West Coast businesses that provide services to the ‧ Support for the Denniston Hill Climb motorcar rally in Westport company’s mine sites. “Bathurst works with neighbours, employees, community groups and other stakeholders to add value to the communities in the company’s operational areas” Community liaison At its Takitimu mine at Nightcaps in Southland, Bathurst Resources subsidiary, Eastern Coal has established a successful relationship with the local Community Development Association and has regular interaction with neighbours, local residents and businesses of the region to anticipate and assist in resolving issues relating to the company’s mining activities. Buller Coal is in the process of establishing a similar group in Westport as an integral component of the Buller Coal Project. ‧ Sponsorship of Buller Rugby Union ‧ Eastern Coal’s sponsorship of NZ Safety’s 1,300km Tour of New Zealand cycle race ‧ Support for Timaru’s Caroline Bay Aquatic Centre ‧ Support for Nightcap’s primary schools ‧ Sponsorship of the Gowan Mountain Bike race Below: Buller Coal mountain bike team L to R: Jasmine Hoetjes, Michael Kingsbury, Marianne Rogers, GM Buller Coal, Howie Wilson Below R: Renee Straker, scholarship winner 17 For personal use only SUSTAINABILITY “ WE ARE WORKING TO ACHIEVE BEST PRACTICE IN MANAGING THE ENVIRONMENTAL AND SOCIAL IMPACTS OF OUR MINING AND PROCESSING OPERATIONS.” ENVIRONMENT Bathurst understands the importance New Zealanders place on the natural environment. The group reports to the Bathurst board of directors and is tasked with delivering commentary and advice on the company’s performance to achieve the following outcomes: The company shares this view, and has laid the foundations for best practice in environmental management of its mining activities. ‧ environmental best practice by management and staff ‧ best practice environmental decision-making processes and policies ‧ responsiveness to the changing needs and expectations This includes the establishment of the Kaitiaki Environmental Reference Group to monitor the company’s environmental performance, ensuring that rehabilitation is a central part of operations. Bathurst is also proposing a range of biodiversity oﬀ sets and compensation to protect plants and animals in and around the Denniston Plateau to ensure an overall and ongoing net beneﬁ t to the conservation estate. Kaitiaki Environmental Reference Group In September 2011, Bathurst established the Kaitiaki Environmental Reference Group - an independent body charged with actively monitoring and guiding Bathurst’s environmental performance. Kaitiaki is a Maori term which embodies the concept of guardianship of the natural environment. The Kaitiaki Group is an initiative by Bathurst to ensure that the company applies best practice in its environmental management by providing a forum for discussion between the company and its relevant stakeholders on environmental issues. of stakeholders ‧ assurance of Bathurst’s record of responsible, environmental stewardship The Kaitiaki Group is chaired by Guy Salmon – a renowned New Zealand conservationist and Executive Director of the Ecologic Foundation, an independent sustainability think tank, based in Nelson, New Zealand. Other members include Dr Colin Meurk, an ecologist and restoration specialist at Lincoln University’s Landcare Research; Peter Hansen, a Brisbane-based specialist in the environmental management of coal mines; Toko Kapea, a lawyer and iwi liaison specialist; and Rob Lord, a graduate in chemistry and zoology from the University of Waikato, and a non-executive director of Bathurst. At Buller, the Kaitiaki Group aims to work with other interested parties to deﬁ ne areas of the Denniston Plateau that should be protected for their biodiversity value, as a large conservation reserve. This underpins Bathurst’s belief that mining activity and a conservation reserve can successfully co-exist. 18 For personal use onlySUSTAINABILITY 19 For personal use onlySUSTAINABILITY Environmental rehabilitation As part of its commitment to best practice environmental management, Bathurst has devised a carefully-phased rehabilitation programme that enables ecosystems to thrive during operations, and after mining activities have ended. The overall goal is to create environmental conditions that are compatible with the natural landscape, and from which an indigenous ecosystem can thrive post mining. Bathurst’s approach involves the staged application of rehabilitation activities during exploration and development phases as well as during the actual mining activities, as opposed to undertaking large-scale rehabilitation works at the conclusion of mining. The aim is to disturb as little area as possible for the shortest period of time. One of the rehabilitation techniques employed on the Denniston Plateau will be Vegetation Direct Transfer (VDT), where vegetation and soil is moved directly from one site to another. This process has already been used by Bathurst to rehabilitate parts of its Coalbrookdale stockpile site. A digger lifts the vegetation and immediate subsoil in one intact layer and transfers it to another site, resulting in immediate cover. Supplementary seeding and planting is undertaken to boost the overall recovery of the transferred shrubs and plants. This technique, as practised by Bathurst and other companies, has been used exten- sively with excellent results in the rehabilitation of indigenous bush in high At Escarpment, the company has proposed a programme of predator altitude plateau environments similar to that of the Denniston Plateau. Bathurst is also committed to undertaking appropriate biodiversity offset and compensation programmes to ensure a net enviromental gain. management over 5,620 hectares of the Heaphy region with the Department of Conservation for at least 35 years to help protect and monitor populations of the Great Spotted Kiwi. “Bathurst is dedicated to the responsible extraction and use of the mineral resource in a manner that respects the historical, cultural and environmental associations in the local area of operation and that has a positive impact on both the regional and national economies.” Image, below: ‘Cut and Cover’ mining operations and mine rehabilitation. At Takitimu, whilst mining and associated land disturbance is all on agricultural land, rehabilitation is still of high importance and an integral part of the mining process. Overburden material is stored in segregated stockpiles which are revegetated whilst in storage for erosion and dust mitigation. The soil is reinstated in its original layers and reformed to follow the pre-mining contours as close as practicable. After site stabilisation, topsoils are reinstated and sown in pasture, at which point the land use can revert back to farming. VV Vegetation Direct Transfer VV Vegetation Removal Removing Overburden Mining Coal Seam Replacing Overburden Overburden Covered With Capping Material VV Vegetation Direct Transfer VV Vegetation Placement COAL SEAM 20 For personal use onlySUSTAINABILITY THE FUTURE In mid-2012, Bathurst was invited to join the Sustainable Business Council – a partnership between Business New Zealand’s Sustainable Business Forum and the Business Council for Sustainable Development. The SBC is New Zealand’s peak business sustainability body. In future, Bathurst Resources will report on its sustainable development progress, using the SBC’s framework for Sustainable Development Reporting (SDR), which takes into account economic, environmental and social impacts. “Bathurst looks forward to continuing to make signiﬁ cant positive contributions to the economy and community, while mitigating its environmental impacts and ensuring the company delivers a net environmental gain to New Zealand’s conservation estate for generations to come.” Above: Plant nursery at Westport - As part of Buller Coal’s rehabilitation programme, local plants are propagated from seed, cuttings and wildings. Once the plants reach a certain size, they are then planted in areas for restoration. ENVIRONMENT ECONOMIC SOCIAL 21 For personal use onlySUSTAINABILITY BULLER COAL WORKS CLOSELY WITH THE DEPARTMENT OF CONSERVATION TO ENSURE THE PROTECTION OF NEW ZEALAND’S UNIQUE SPECIES. PROTECTING THE KIWI The Great Spotted Kiwi is endemic to the South Island of New Zealand. Once numerous, there are now less than 16,000 in total, almost all of which are found in the higher altitude areas of northwest Nelson, the Paparoa Range, and near Arthur’s Pass. Their population is estimated to be declining at about 2% per annum and their main threat is predation from stoats. The Great Spotted Kiwi is the tallest kiwi, at about 45 centimetres tall. The birds have only one mate at a time and generally mate for life. One pair’s territory can be 25 hectares in size. The breeding season begins in June and ends in March, so any mining related activities that are undertaken during this period in areas known to be kiwi habitats are preceded by a search to identify any evidence of breeding. If any eggs or chicks are discovered in areas that may be impacted by activity, they are removed to a safe rearing facility. Once the chicks attain a predator proof size of around 1kg they are released back into the wild. In September, a search for Great Spotted Kiwi nests was conducted in the area marked for the expansion of the Cascade mine. Buller Coal staff worked alongside contractors, James Fraser and Natasha Coad from consultancy ‘With a Nose for Conservation’. This company specialises in locating threatened bird species using a specially trained and certiﬁ ed dog team. They found no evidence of nests or dependent chicks. A male kiwi call was heard and an adult female bird was located. She showed no signs of breeding and was released. The proposed area for disturbance was only a small part of the pair’s overall territory and the birds identiﬁ ed will easily relocate to the undisturbed areas without any impact on their breeding cycle. Top L: James Fraser, consultant, Top R: ‘Percy’ Middle from L: Nathasha Coad and James Fraser, consultants, with dogs, ‘Percy’ and ‘Breeze’ Bottom R: Cascade mine site Opp Page: Trish Costelloe, Buller Coal environmental planner 22 For personal use onlySUSTAINABILITY 23 For personal use onlyOUR PEOPLE EXECUTIVE MANAGEMENT TEAM RICHARD TACON Chief Operating Ofﬁ cer Since starting his career in the 1970s, Richard has worked in almost The business was bought by Eastern Corporation in 2006, and Craig joined the company as Marketing Manager and then Operations Manager, playing a key role in the establishment and growth of the Takitimu and Cascade coal mines. every role in the coal mining industry. Craig joined Bathurst as General Manager of Eastern Coal when the His ﬁ rst job in the industry was at Greymouth’s Liverpool State Mine, owned by the New Zealand Government. He moved to Australia to further his mining career. Following his work at the coalface, he went on to hold several management roles in mines around Australia, working his way from undermanager to general manager. Richard has held senior leadership roles for the past decade. Eastern assets were aquired in March 2011. He is based in Timaru at Bathurst’s coal handling and distribution centre. MARIANNE ROGERS General Manager, Buller Operations Marianne was a recipient of the State Coal Mines scholarship in New Zealand and since then has spent over 20 years in the mining Richard holds ﬁ rst, second and third class coal mining qualiﬁ cations sector. She was the ﬁ rst female to graduate with a Bachelor of and studied at the Otago School of Mining. He has also spent 15 years Engineering in Mining from the University of Auckland. on a rescue crew, making him familiar with the principles and practice of mine safety. After graduating in 1991, Marianne began her career as an underground miner for Mount Isa Mines in Queensland. Since then she has worked as After living and working in Australia for 32 years, Richard returned a Senior Leaching Engineer for Adelaide Brighton Cement Limited, to New Zealand to take up his current post with Bathurst. a registered Underground Mine Manager for Australian Resources CRAIG PILCHER General Manager, Eastern Coal Limited Craig has extensive engineering experience with both coal and oil-ﬁ red steam boiler installations and maintenance, as well as refrigeration, marine, plant maintenance and general engineering. Born in South Canterbury, Craig’s ﬁ rst career was as an A-grade ﬁ tter and welder, undertaking regular coal and oil steam boiler installations. After a period as plant engineer and construction diver at the Port of Timaru, Craig became owner and director of a South Island coal supply business in 1997. Limited and as a Senior Mining Engineer for International Mining Consultants Pty Limited. In 2005, Marianne completed a Bachelor of Law with First Class Honours at Queensland University of Technology and after working at Minter Ellison, returned to mining with Peabody Energy before joining Bathurst. Marianne returned to New Zealand to take up her position with Bathurst, based in Westport. Top L: Sam Aarons, Middle: Craig Pilcher, Top R: Marianne Rogers, Bottom R: Tim Manners, Bottom L: Richard Tacon. 24 For personal use onlyOUR PEOPLE GERALD COOPER Executive General Manager Engineering & Construction Gerry has 35 years’ experience in the marine, mining and electricity generation industries and is a member of the Australian Institute of Company Directors. After graduating as a Marine Engineer in London in 1976, he travelled the world, working as a seagoing engineer before moving onto the power generation ﬁ eld. Gerry has held engineering and maintenance roles for Monadelphous Engineering, Cyprus Gold, Arimco, Copper Mines of Tasmania, Pegasus Gold, Acacia Resources and WMCF Phosphate Hill. He has been Engineering Manager for AshantiGold in Guinea and Iluka Resources in the United States, Group Engineering Manager for IAMGold, and Vice President, Engineering and Maintenance with Braemore Resources in Australia. Gerry is based in Bathurst’s Wellington ofﬁ ce. TIM MANNERS Chief Financial Ofﬁ cer/Company Secretary Tim has 20 years’ experience in ﬁ nance and accounting in the mining industry and is a Fellow of the Institute of Chartered Accountants in Australia. After graduating with a Bachelor of Business, he began his career at Ernst & Young, where he gained his professional qualiﬁ cations. He then spent seven years with Sons of Gwalia in Western Australia, moving from junior accountant to accounting general manager. He has been Chief Financial Ofﬁ cer for Western Areas NL, where he played a leading role in establishing a dual listing for the company on the Toronto Stock Exchange, and CFO of Perilya the base metals miner in NSW, before joining Bathurst. Tim is also a member of the Institute of Company Directors and the Chartered Institute of Company Secretaries in Australia. He is based in the company’s Perth ofﬁ ce. SAM AARONS General Manager Corporate Relations Sam’s background is advertising, marketing and commercial management. She worked with several major advertising agencies in Melbourne, before spending 14 years as a Divisional General Manager Top L: Craig Munro, Top R; Hamish Bohannan, Middle: Gerry Cooper, Bottom R: Malcolm McPherson, Bottom L: Rob Lord. for Henry Walker Eltin, a large civil and mining contracting company (now Leighton’s Contracting). During this period she also served with the Royal Australian Navy Reserves as Public Relations Ofﬁ cer for the Darwin Port Division. She joined Eastern Resources Group as Manager, Corporate Relations & Business Development, a position she held for 8 years. Her role with Eastern focussed on growing the company’s mining operations in New Zealand, developing existing tenements and sourcing new projects. BOARD OF DIRECTORS Craig Munro – Non-Executive Chair Hamish Bohannan – Gerald Cooper – Executive Director Rob Lord – Non-Executive Director Malcolm McPherson – Non-Executive Director Proﬁ les of the board members can be found on pages 30-32 Sam joined the Bathurst team following its acquisition of the Eastern of the Directors’ Report – Information on Directors. assets and relocated to Wellington in 2011. 25 For personal use onlyCOAL COAL FORMS THE FOUNDATION FOR MANY OF THE MODERN PRODUCTS AND SERVICES IN THE WORLD TODAY AND TOUCHES ALL ASPECTS OF MODERN LIVING. COAL A foundation stone for modern living. ENERGY Hard coking (metallurgical) coal is used in iron smelters to create hard, ﬂ exible steel, which in turn forms the basis of buildings and bridges, automobiles and aeroplanes, and even wind turbines. In short, coal is pervasive. It can be found associated with almost everything that can be seen, heard, touched, and consumed. And it’s a natural resource – the result of plant matter that’s been buried and compacted for millions of years. The resource is mined, washed, reﬁ ned and blended with other materials to generate products that contribute to increased quality of life and living standards around the world. The following list outlines the main uses of coal through modern products and services. SHELTER Steel and cement for construction of buildings and structures WARMTH Direct heat and through electricity generation Heating in food processing, swimming pools, hospitals PROCESSING Coal is integral to wool processing and leather tanning FOOD PRODUCTION Fertilisers and nitric acid TRANSPORT Aeroplanes, bridges, buses, cars, ships, and trains PERSONAL HYGIENE Silicones for soap, toothpaste, shampoo and cosmetics MEDICAL EQUIPMENT Surgical instruments and carbon ﬁ lters, e.g. For dialysis machines COMPUTERS Silicon chips for computers RENEWABLE ENERGY Steel for wind turbines and plastics for solar panels SPORTING EQUIPMENT Carbon ﬁ bre for bicycles, ﬁ shing rods, golf clubs, and tennis racquets 26 For personal use onlySECTION TWO Financial Statements Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement 28 44 45 ASX Principles Compliance Statement 51 Financial Statements Directors’ Declaration Independent Auditor’s Report 54 100 101 2727 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 DIRECTORS’ REPORT Your directors present their report on the consolidated entity (“the group”) consisting of Bathurst Resources Limited (“Bathurst” or “the company”) and the entities it controlled at the end of, or during, the year ended 30 June 2012. DIRECTORS The following persons were directors of Bathurst Resources Limited at any time during the whole of the ﬁ nancial year and up to the date of this report: Craig Munro Non-Executive Chair Hamish Bohannan Managing Director Gerald Cooper Executive Director Rob Lord Non-Executive Director Malcolm Macpherson Non-Executive Director PRINCIPAL ACTIVITIES During the year the principal continuing activities of the group consisted of: ‧ the production of coal in New Zealand; and ‧ the exploration and development of coal mining assets in New Zealand. DIVIDENDS No dividend was paid or declared during the current or prior ﬁ nancial year and the directors do not recommend the payment of a dividend. REVIEW OF OPERATIONS & SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS As per Class Order 98/2395 issued by Australian Securities and Investments Commission, information on the review of operations and ﬁ nancial position of the group is set out in the ‘Review of Operations’ on pages 6 to 14 of this annual report. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Bathurst’s wholly owned subsidiary, Takitimu Coal Limited, completed the strategic acquisition of the adjoining property at its Takitimu operations at Nightcaps for NZ$14.2 million (A$11.1 million), following successful negotiations with the landowner. The purchase of the land received the required approval from the Overseas Investment Ofﬁ ce of New Zealand on 25 July 2012. Overall Bathurst considers the purchase of the land to be a key strategic acquisition which will substantially improve the economics of the Takitimu operations that continue to generate positive operational cash ﬂ ows. It also gives the company an asset that can be sold when operations are completed. 28 For personal use onlyDIRECTORS’ REPORT LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The operations of the group are expected to expand over the next year with the construction of infrastructure to support the Buller Coal Project and the resolution of the appeals against the resource consents for the Escarpment project. ENVIRONMENTAL REGULATION The Bathurst group’s exploration and mining activities are subject to a range of environmental regulations which govern how the group carries out its business. These regulations are set out below. Mine development approvals Bathurst is required to obtain resource consents under the Resource Management Act 1991 (“RMA”). A resource consent is required for mining activities and the construction / development of infrastructure within the permit area. In addition to this, under the Crown Minerals Act 1991 and the Conservation Act 1987, Bathurst must enter into concession agreements and access arrangements with New Zealand’s Department of Conservation to enter and operate on Crown land. The relevant authorities are consulted throughout the approvals process, and to the best of the directors’ knowledge, all approval activities have been undertaken in compliance with the requirements of the RMA, Crown Minerals Act and Conservation Act. Exploration activities In order to enter Crown land and engage in exploration activities, Bathurst must enter into an Access Arrangement Concession Agreement with New Zealand’s Department of Conservation, as required under the Crown Minerals Act 1991 and the Conservation Act 1987. Bathurst has, to the best of the directors’ knowledge, entered into all of the appropriate agreements and acted in accordance with those agreements in regards to engaging in exploration activities on Crown land. Mining activities The mining activities of the group are regulated by the resource consents that grant Bathurst the right to engage in the mining activity. The resource consents involve both the District and Regional Councils. In addition to this, a mining permit or licence is required to engage in mining activities on Crown land. These permits/licences are issued by the Ministry of Economic Development under the Crown Minerals Act 1991. Conditions around water and air discharges that result from the mining operations are governed by the resource consent that the operation is operating under. The mining operations of Bathurst are inspected on a regular basis and no instances of non-compliance have been noted. Hazardous substances Mining activities involve the storage and use of hazardous substances, including fuel. Bathurst must comply with the Hazardous Substances and New Organisms Act 1996 when handling hazardous materials. To the best of the directors’ knowledge, no instances of non-compliance have been noted. Emissions Trading Scheme The New Zealand Emissions Trading Scheme (“NZ ETS”) came into effect from 1 July 2010 which essentially makes Bathurst liable for greenhouse gas emissions associated with coal sold in New Zealand and for the fugitive emissions from coal seams exposed in New Zealand. Bathurst’s liability is based on the type and quantity of coal tonnes sold, with the cost of such being passed onto Bathurst’s customers. 29 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 INFORMATION ON DIRECTORS Mr Craig Munro FCPA, FAusIMM, FAICD Non-Executive Chair Experience and expertise Craig Munro is a Certiﬁ ed Practicing Accountant with over 40 years’ experience in the mining industry. He was previously Senior Vice President Corporate & Finance and Chief Financial Ofﬁ cer of Anvil Mining Limited. He has been both an executive director and non-executive director of a number of listed companies since 1990. He is currently a director of Energy and Minerals Australia Limited and was previously a director of Humanis Group Limited and Pegasus Metals Limited. Other current directorships of listed companies Energy and Minerals Australia Limited – Non-Executive Director Former directorships in last 3 years of listed companies Humanis Group Limited – Non-Executive Director Pegasus Metals Limited Special responsibilities Chair of the board Member of remuneration & nomination committee Member of audit committee Interests in shares and options 462,526 fully paid ordinary shares in Bathurst Resources Limited 4,500,000 unlisted options over ordinary shares in Bathurst Resources Limited Mr Hamish Bohannan BEngSc Hons Mining, MEngSc Rock Mechanics, MBA, FAusIMM, CEng, MIMM, MAICD Managing Director Experience and expertise Hamish Bohannan is a Mining Engineer with over 35 years’ experience in the resources industry, starting as a miner with Gold Fields Limited in South Africa before completing a degree at the Royal School of Mines. Whilst much of his experience has been in underground mining, he has been actively involved in many areas of the industry including dredging and open cut mining, processing and smelting having worked around the globe in various metals from copper and gold to nickel and mineral sands. Previously Chief Executive Ofﬁ cer of Braemore Resources, Mr Bohannan has also held executive positions with Cyprus Minerals, WMC Limited, Iluka Resources and IAMGold. Mr Bohannan is a director of Straterra, the New Zealand resource sector industry association and of the Coal Association of New Zealand. Other current directorships of listed companies Nil Former directorships in last 3 years of listed companies Phillips River Mining Limited (previously Tectonic Resources NL) – Non-Executive Chair Special responsibilities Managing Director Interests in shares and options 10,605,000 fully paid ordinary shares in Bathurst Resources Limited 10,000,000 unlisted options over ordinary shares in Bathurst Resources Limited 30 For personal use onlyDIRECTORS’ REPORT Mr Gerald Cooper MAICD Executive Director Experience and expertise Gerald Cooper is a qualiﬁ ed Marine Engineer who served for a number of years as a seagoing engineer before moving onto the power generation ﬁ eld. Following emigration to Australia, he worked within the mining industry in engineering & maintenance related roles for Monadelphous Engineering, Cyprus Gold, Arimco, Copper Mines of Tasmania, Pegasus Gold, Acacia Resources and WMCF Phosphate Hill. Mr Cooper subsequently moved overseas to work for AshantiGold in Guinea and Iluka Resources in the United States. Mr Cooper was group engineering manager for IAMGold before returning to Australia in 2007 and taking up a position as VP Engineering & Maintenance with Braemore Resources. Other current directorships of listed companies None Former directorships in last 3 years of listed companies None Special responsibilities General Manager – Engineering & Construction Interests in shares and options 560,000 fully paid ordinary shares in Bathurst Resources Limited 7,500,000 unlisted options over ordinary shares in Bathurst Resources Limited Mr Rob Lord BSc, MBA Non-Executive Director Experience and expertise Rob Lord is currently Regional Director Oceania for Wallenius Wilhelmsen Logistics AS, a global shipping and logistics company specialising in the movement of vehicles and heavy and specialised cargo such as – mining and construction equipment, rail cars and power generators. Prior to this he was the Managing Director and Chief Executive Ofﬁ cer of Gloucester Coal Ltd a successful ASX 200 publically listed company specialising in coal mining and marketing. Before his appointment at Gloucester Coal, Mr Lord worked in the pulp and paper industry for many years, most recently as executive vice president responsible for the Australasian operations of Norwegian-based Norske Skog. Mr Lord has also worked in a variety of senior international marketing and sales roles including head of marketing and sales roles at Norske Skog Australasia, Fletcher Challenge Paper Australasia and Tasman Pulp and Paper in New Zealand. Mr Lord is a director of Norske Skog Industries Australia Limited which is an unlisted public company. Other current directorships of listed companies None Former directorships in last 3 years of listed companies Gloucester Coal Limited – Managing Director Special responsibilities Member of remuneration & nomination committee Chair of audit committee Interests in shares and options 530,938 fully paid ordinary shares in Bathurst Resources Limited 3,500,000 unlisted options over ordinary shares in Bathurst Resources Limited 31 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 INFORMATION ON DIRECTORS (CONTINUED) Mr Malcolm Macpherson BSc, Cert.Acctg, FAICD, FAusIMM, FTSE Non-Executive Director Experience and expertise Malcolm Macpherson is an experienced business leader in the resources sector in Australia and overseas. Mr Macpherson held a successful seven year tenure as Managing Director and Chief Executive Ofﬁ cer of Iluka Resources Limited. Mr Macpherson has held board positions with other notable companies and organisations such as Portman Limited, Eltin Limited, and Western Power Corporation (as chair). Mr Macpherson has also had active roles in research and innovation, including an advisory role to the CSIRO. Other current directorships of listed companies Pluton Resources Limited – Non-Executive Chair Titanium Corporation Limited – Non-Executive Director Former directorships in last 3 years of listed companies Minara Resources Limited – Non-Executive Chair Range River Gold Limited – Non-Executive Director Special responsibilities Chair of remuneration & nomination committee Member of audit committee Interests in shares and options 100,000 fully paid ordinary shares in Bathurst Resources Limited 2,000,000 unlisted options over ordinary shares in Bathurst Resources Limited COMPANY SECRETARY Mr Tim Manners BBus, FCA, ACIS, MAICD is a Joint Company Secretary and the Chief Financial Ofﬁ cer. Mr Manners became the Joint Company Secretary upon the appointment of Laura McMahon Blechynden on 27 March 2012. Mr Manners has over 18 years’ experience in senior ﬁ nancial positions within the resources sector. Miss Laura McMahon Blechynden, BA, LLB was appointed as a Joint Company Secretary and Legal Counsel on 27 March 2012. Laura has extensive experience in a wide range of corporate and commercial matters within the resources sector including public and private equity fund raisings, due diligence, mergers, acquisitions and divestments. 32 For personal use onlyDIRECTORS’ REPORT MEETINGS OF DIRECTORS The number of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2012, and the numbers of meetings attended by each director were: Full meetings of directors Meetings of committees Audit Remuneration / Nomination A 14 14 13 14 14 B 14 14 14 14 14 A 6 ** ** 6 6 B 6 ** ** 6 6 A 3 ** ** 3 3 B 3 ** ** 3 3 Craig Munro Hamish Bohannan Gerald Cooper Rob Lord Malcolm Macpherson A = number of meetings attended B = number of meetings held during the time the director held ofﬁ ce or was a member of the committee during the year ** = not a member of the relevant committee REMUNERATION REPORT This remuneration report sets out the remuneration information for Bathurst Resources Limited’s non-executive directors, executive directors, and other key management personnel. Directors and executives disclosed in this report Other key management personnel Name R Tacon T Manners Position Chief Operating Ofﬁ cer Chief Financial Ofﬁ cer / Joint Company Secretary L McMahon Blechynden Joint Company Secretary / Legal Counsel M Rogers A Thom C Pilcher M Brunsdon General Manager – Buller operations General Manager – Corporate development* General Manager – Eastern operations General Manager – Marketing* * A Thom and M Brunsdon ceased employment with Bathurst on 30 April 2012 and 7 June 2012 respectively. For information on non-executive and executive directors – refer to pages 30 to 32. 33 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 REMUNERATION REPORT (CONTINUED) Role of the remuneration & nomination committee The remuneration & nomination committee (“R&N committee”) is a sub-committee of the Bathurst board. The R&N committee is responsible for making recommendations to the board on remuneration matters such as non-executive director fees, executive remuneration for directors and other executives, and the over-arching executive remuneration policy and incentive schemes. The objective of the R&N committee is to ensure that the company’s remuneration policies and structures are fair and competitive and aligned with the long-term interests of the company. The R&N committee draws on its own experience in remuneration matters and seeks advice from independent remuneration consultants. The Corporate Governance Statement provides further information on the role of the R&N committee. Principles used to determine the nature and amount of remuneration Non-executive directors The fees and payments the company makes to its non-executive directors reﬂ ect the level of responsibility attributed to board members and the demands which are made on the directors’ time. Non-executive directors’ fees and payments are reviewed annually by the board. The board has also considered the advice of independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line with industry standards. The fees paid to the chair are determined independently to the fees of non-executive directors. The chair is not present at any discussions relating to determination of his own remuneration. In previous years the company has granted non-executive directors unlisted options over ordinary shares in the company as a part of their remuneration packages. The issue of options was to align the interests of directors and shareholders and compensate for reduced fees during the company’s start-up phase. However, in the 2011 ﬁ nancial year the company ceased the practice of issuing options to non-executive directors with the company’s continued growth and its inclusion in the relevant ASX indices. Directors’ fees The current base fees were last reviewed with effect from 1 January 2011 and are inclusive of committee fees. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $800,000 per annum and was approved by shareholders at the general meeting on 18 April 2011. The following fees have applied: Base fees Chair Other non-executive directors From 1 January 2011 1 July 2010 to 31 December 2010 $160,000 $80,000 $60,000 $36,000 Superannuation contributions required under the Australian superannuation guarantee legislation are made to directors and are deducted from their overall fee entitlements. Executive remuneration The objective of the group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with industry practice. The R&N committee ensures that executive pay is competitive and reasonable, as well as, acceptable to shareholders. The company ensures that an executive’s remuneration is linked to that executive’s performance to ensure that the interests of the company and its executives are aligned. The R&N committee determines executive remuneration to ensure transparency and to effectively manage capital. In consultation with external remuneration consultants, the company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. 34 For personal use onlyDIRECTORS’ REPORT The company believes that the policy for determining executive’s remuneration is aligned to shareholders’ interests because it focuses on sustained growth in shareholder wealth by pushing growth in share price and delivering constant return on assets, as well as, focusing the executive on key non-ﬁ nancial drivers of value. Most importantly, the company ensures that its remuneration policy attracts and retains high calibre executives, who in turn add value to the company and to the shareholders. The company also believes that its remuneration policy for executives is aligned to the interests of its executives. The executive remuneration policy rewards capability and experience and reﬂ ects competitive reward for contribution to growth in shareholder wealth. The policy is transparent so it provides a clear structure for earning rewards and provides recognition for contribution. The framework provides a mix of ﬁ xed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the group, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards. The executive remuneration and reward framework has three components: ‧ base pay and beneﬁ ts, including superannuation ‧ short-term performance incentives, and ‧ long-term incentives. The combination of these comprises an executive’s total remuneration. Base pay and beneﬁ ts Executives are offered a competitive base pay that comprises the ﬁ xed component and rewards. External remuneration consultants provide analysis and advice to ensure base pay is set to reﬂ ect the market for a comparable role. Base pay for executives is reviewed annually to ensure the executive’s remuneration is competitive with the market. An executive’s remuneration is also reviewed on promotion. There are no guaranteed base pay increases included in any executives’ contracts. Superannuation Superannuation contributions required under the Australian superannuation guarantee legislation are made to executives and are in addition to the base pay and beneﬁ ts. Short-term incentives Bathurst’s short-term incentive plan is to provide cash bonuses to executives who exceed performance expectations. All payments under the short term incentive scheme are made at the discretion of the R&N committee or the board. The short term incentives are determined according to the executive’s performance during the preceding year. At the end of every ﬁ nancial year the executives meet with their immediate manager to discuss performance and set individual goals and targets for the coming year. Following meetings, the Managing Director will make recommendations for cash bonuses for any executives who have performed exceptionally. The list of suggested short term incentives is then presented to the R&N committee and must be approved before they are paid. The Managing Director’s performance is reviewed by the board. Depending on the results of the review the board may award a short term incentive. Long-term incentives Long-term incentives have been previously provided to certain employees via the Bathurst Resources Limited Employee Share Option Plan which was approved by shareholders at the 2010 Annual General Meeting (“AGM”). This plan is under review by the R&N committee. The participants and the quantum of the long term incentive schemes are currently determined in the same manner as the short–term incentives. However, for the 2013 ﬁ nancial year onwards the R&N committee has established a matrix of performance criteria that will be used to assess and award long term incentive payments to senior staff. 35 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 REMUNERATION REPORT (CONTINUED) Use of remuneration consultants In February 2011, the Chair employed the services of PwC to review its existing Employee Share Option Plan (“ESOP”) and to provide recommendations in respect the ESOP. Under the terms of the engagement, PwC provided remuneration recommendations as deﬁ ned in section 9B of the Corporations Act 2001 and were paid $9,500 for these services in the 2012 ﬁ nancial year. PwC has conﬁ rmed that the above recommendations have been made free from undue inﬂ uence by members of Bathurst’s key management personnel. The following arrangements were made to ensure that the remuneration recommendation was made free from undue inﬂ uence: ‧ PwC was engaged by, and reported directly to Craig Munro, the chair of the company; ‧ the remuneration recommendation was provided by PwC directly to Craig Munro; and ‧ PwC did not provide any member of management with a copy of the remuneration recommendation. As a consequence, the board is satisﬁ ed that the recommendations were made free from undue inﬂ uence from any members of the key management personnel. Voting and comments made at the Company’s 2011 Annual General Meeting Bathurst’s remuneration report for the 2011 ﬁ nancial year was passed by a show of hands. Over 80% of the proxy votes received by Bathurst were in favour of the remuneration report. Bathurst did not receive any speciﬁ c feedback at the AGM or throughout the year on its remuneration practices. 36 For personal use onlyDIRECTORS’ REPORT Details of remuneration Amounts of remuneration Details of the remuneration of the directors and the key management personnel of the group for the current and previous ﬁ nancial year are set out Short-term employee beneﬁ ts Post-employment beneﬁ ts Share based payments Cash salary and fees Cash bonus Non-monetary beneﬁ ts Superannuation $ $ $ - - - 36,209 - - - - - - - - 160,000 73,395 73,395 545,004 350,000 100,470 350,000 43,077 556,364 250,981 300,000 193,456 - - - - - - - - - - - - - Options / Shares Total $ $ 32,843 192,843 32,843 112,843 - 80,000 65,686 646,899 52,549 434,049 - 109,512 48,025 429,525 - 46,954 $ - 6,605 6,605 - 31,500 9,042 31,500 3,877 - (294,152) 262,212 18,975 31,432 3,451 - 269,956 48,025 379,457 - 196,907 36,209 142,987 (14,181) 3,161,157 in the following tables. 2012 Name NON-EXECUTIVE DIRECTORS Craig Munro - Chair Rob Lord Malcolm Macpherson EXECUTIVE DIRECTORS Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL Richard Tacon Timothy Manners Laura McMahon Blechynden Max Brunsdon Alan Thom Marianne Rogers Craig Pilcher Total key management personnel compensation 2,996,142 Notes: Directors and other key management personnel had the following appointment & resignation dates: Richard Tacon Laura McMahon Blechynden Max Brunsdon Alan Thom Appointed Appointed Resigned Resigned 26 March 2012 27 March 2012 7 June 2012 30 April 2012 All other directors and key management personnel were in ofﬁ ce for the full ﬁ nancial year. 37 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 REMUNERATION REPORT (CONTINUED) Details of remuneration (continued) 2011 Name Short-term employee beneﬁ ts Post-employment beneﬁ ts Share based payments Cash salary and fees Cash bonus Non-monetary beneﬁ ts Superannuation Options Total NON-EXECUTIVE DIRECTORS Craig Munro - Chair Rob Lord Malcolm Macpherson EXECUTIVE DIRECTORS Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL Timothy Manners Graham Anderson Max Brunsdon Alan Thom Marianne Rogers Craig Pilcher $ 110,000 50,149 37,568 628,678 $ - - - - 317,979 100,000 347,750 29,750 395,455 61,647 192,116 53,739 - - - - - - $ - - - $ - 4,513 3,381 $ $ 785,566 895,566 996,166 1,050,828 1,122,000 1,162,949 21,809 - 1,681,833 2,332,320 - - - - - - - 39,321 1,179,416 1,636,716 25,575 1,054,752 1,428,077 - - 5,548 17,291 947 344,700 374,450 939,852 1,335,307 970,000 1,037,195 923,252 1,132,659 - 54,686 Total key management personnel compensation 2,224,831 100,000 21,809 96,576 9,997,537 12,440,753 Notes: Directors and other key management personnel had the following appointment dates: Timothy Manners Alan Thom Marianne Rogers Craig Pilcher Rob Lord Malcolm Macpherson Graham Anderson Appointed Appointed Appointed Appointed Appointed Appointed Resigned 23 August 2010 17 March 2011 18 October 2010 18 March 2011 17 August 2010 5 January 2011 3 February 2011 All other directors and key management personnel were in ofﬁ ce for the full ﬁ nancial year. 38 For personal use onlyDIRECTORS’ REPORT The relative proportions of remuneration that are linked to performance and those that are ﬁ xed are as follows: Fixed remuneration At risk – STI At risk – LTI* 2012 2011 2012 2011 2012 2011 EXECUTIVE DIRECTORS OF BATHURST RESOURCES LIMITED Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Richard Tacon Timothy Manners Laura McMahon Blechynden Graham Anderson Max Brunsdon Alan Thom Marianne Rogers Craig Pilcher 90% 88% 100% 89% 100% - 100% 100% 87% 100% 28% 22% - 26% - 8% 30% 6% 18% 100% - - - - - - - - - - - 6% - - - - - - - - 10% 12% - 11% - - - - 13% - 72% 72% - 74% - 92% 70% 94% 82% - * Since long term incentives are provided exclusively by way of options, the percentages disclosed reﬂ ect the value of remuneration consisting of options, based on the value of options expensed during the year. Service Agreements On appointment to the board, all non-executive directors enter into a service agreement with the company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the ofﬁ ce of director. Remuneration and other terms of employment for the Managing Director, Chief Financial Ofﬁ cer and the other key management personnel are also formalised in service agreements. All contracts with executives may be terminated early by either party with one to three months’ notice, subject to termination payments due when terminated by the company as detailed below. Name Hamish Bohannan Gerald Cooper Richard Tacon Timothy Manners Laura McMahon Blechynden Marianne Rogers Craig Pilcher Termination beneﬁ t 3 months base salary 2 months base salary 3 months base salary 2 months base salary 1 months base salary 2 months base salary 1 months base salary Term of agreement Base salary including superannuation $545,000 $381,500 $407,173 $381,500 $174,400 $327,000 $240,316 Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing 39 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 REMUNERATION REPORT (CONTINUED) Share based compensation The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date Vesting date Expiry date Exercise price Value per option at grant date 29 Nov 2010 Upon ﬁ rst 25kt from Buller Coal Project 31 Dec 2013 6 Dec 2010 Upon ﬁ rst 25kt from Buller Coal Project 31 Dec 2013 $0.40 $0.40 $0.276 $0.252 % Vested 0% 0% During the year no options over ordinary shares in the company were provided as remuneration to directors or other key management personnel of Bathurst Resources Limited. Further information on the options is set out in note 31 to the ﬁ nancial statements. The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Shares provided on exercise of remuneration options Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of Bathurst Resources Limited and other key management personnel of the group are set out below. Date of exercise of options Number of ordinary shares issued on exercise of options during the year Value at exercise date EXECUTIVE DIRECTORS OF BATHURST RESOURCES LIMITED H Bohannan G Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Timothy Manners Timothy Manners Max Brunsdon Max Brunsdon 31 Aug 2011 14 Oct 2011 10 Jan 2012 7 Feb 2012 28 Mar 2012 11 Apr 2012 2,400,000 500,000 300,000 1,700,000 1,000,000 2,000,000 $1,372,800 $196,000 $162,600 $1,091,400 $642,000 $540,000 Notes: The value at the exercise date of options that were granted as part of the remuneration and were exercised during the year has been determined as the intrinsic value of the options at that date. 40 For personal use onlyDIRECTORS’ REPORT The amount paid per ordinary share by each key management personnel on the exercise of options at the date of exercise was as follows: Exercise date 31 August 2011 14 October 2011 10 January 2012 7 February 2012 28 March 2012 11 April 2012 Amount paid per share 37.8c 37.8c 10.8c 10.8c 10.8c 40.0c No amounts are unpaid on any shares issued on the exercise of options. Details of remuneration: Bonuses and share-based compensation beneﬁ ts For each cash bonus and grant of options included in the tables on pages 37-40, the percentage of the available bonus or grant that was paid, or that vested, in the ﬁ nancial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonus is payable in future years. The options issued in the 2011 ﬁ nancial year which have not vested immediately, vest upon the shipment of the ﬁ rst 25,000 tonnes from the Buller Coal Project. None of these options will vest if the conditions are not satisﬁ ed, hence the minimum value of the option yet to vest is nil. The maximum value of the options yet to vest has been determined as the amount of the grant date fair value of the options that is yet to be expensed. Bonus Share-based compensation beneﬁ ts (options) Name Paid Year granted Vested Forfeited Financial year in which options are expected to vest Maximum total value of grant yet to vest % % % NON-EXECUTIVE DIRECTORS Craig Munro - Chair Rob Lord Malcolm Macpherson EXECUTIVE DIRECTORS Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL Timothy Manners Marianne Rogers - - - - - - - 2011 2011 2011 2011 2011 2011 2011 - - - - - - - - - - - - - - 30 June 2014 30 June 2014 - 30 June 2014 30 June 2014 30 June 2014 30 June 2014 $ 110,845 110,845 - 221,691 177,753 162,084 162,084 41 For personal use onlyDIRECTORS’ REPORT DIRECTORS’ REPORT 30 JUNE 2012 Loans to directors and executives Information on loans to directors and executives, including amounts, interest rates and repayment terms are set out in Note 24 to the ﬁ nancial statements. Shares under option Unissued ordinary shares of Bathurst Resources Limited under options at the date of this report are as follows: Date granted Expiry date Issue price of shares Number under option 22 Oct 2008 22 Oct 2008 16 Jun 2010 18 Aug 2010 20 Aug 2010 20 Aug 2010 5 Nov 2010 29 Nov 2010 29 Nov 2010 6 Dec 2010 18 April 2011 18 April 2011 3 Sept 2012 31 Oct 2012 31 Oct 2013 16 Jun 2013 30 Sept 2013 30 Sept 2013 30 Sept 2013 15 Nov 2013 30 Sept 2013 31 Dec 2013 31 Dec 2013 31 Dec 2013 31 Dec 2013 20 Aug 2014 $0.378 $0.378 $0.155 $0.108 $0.168 $0.108 $0.36 $0.21 $0.40 $0.40 $1.13 $0.85 $0.38 500,000 500,000 666,667 9,500,000 1,000,000 5,500,000 14,344,109 1,000,000 14,000,000 8,200,000 2,000,000 2,000,000 2,000,000 61,210,776 No option holder has any right under the options to participate in any other share issue of the company or any other entity. Shares issued on the exercise of options During the year ended 30 June 2012 a total of 12,840,000 shares of Bathurst Resources Limited were issued on the exercise of options raising a total of $2,895,600. Subsequent to 30 June 2012 and up to the date of this report, a further 1,000,000 shares of Bathurst Resources Limited were issued on the exercise of options raising a total of $108,000. Insurance of ofﬁ cers During the ﬁ nancial year, Bathurst Resources Limited paid a premium of $39,387 to insure the directors and secretaries of the company. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the ofﬁ cers in their capacity as ofﬁ cers of entities in the group, and any other payments arising from liabilities incurred by the ofﬁ cers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the ofﬁ cers or the improper use by the ofﬁ cers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Non-audit services The company engaged the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers “PwC”) for audit and non-audit services provided during the year are set out on the next page. 42 For personal use onlyDIRECTORS’ REPORT The board of directors has considered the position and is satisﬁ ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisﬁ ed that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: ‧ all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor ‧ none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity and its related practices: OTHER ASSURANCE SERVICES PwC Australian ﬁ rm: Due diligence services PwC New Zealand ﬁ rm: Due diligence services Total remuneration for other assurance services TAXATION SERVICES PwC Australian ﬁ rm: Tax compliance services Consulting advice on mergers and other structuring PwC New Zealand ﬁ rm: Tax compliance services Consulting advice on mergers and structuring Total remuneration for taxation services OTHER SERVICES PwC Australian ﬁ rm: ESOP & Remuneration structuring advice Total remuneration for other services Total remuneration for non-audit services Auditor’s independence declaration 2012 $ 2011 $ - - - 26,000 182,341 57,682 118,849 384,872 52,648 29,621 82,269 23,700 9,000 28,418 49,091 110,209 9,500 9,500 10,000 10,000 394,372 202,478 A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 44. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the directors’ report. Amounts in the directors’ report have been rounded off to the nearest thousand dollar, or in certain cases, to the nearest dollar. This report is made in accordance with a resolution of directors. CRAIG MUNRO | Chair Perth 27 September 2012 43 For personal use onlyAUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION 30 JUNE 2012 44 For personal use onlyCORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT 30 JUNE 2012 CORPORATE GOVERNANCE Bathurst Resources Limited has a strong focus on corporate governance and has worked hard during the year to administer and improve its corporate governance procedures and policies. This statement reports on Bathurst’s key governance framework, principles and practices as at the date of this report. The board are committed to achieving and demonstrating the highest standards of corporate governance. The board continues to review its corporate governance framework and practices to ensure they meet the interests of shareholders. Bathurst and its controlled entities together are referred to as the group in this statement. Further information about the company’s corporate governance practices may be found on the company’s website at www.bathurstresources.co.nz, under the section marked “Corporate Governance”. ASX PRINCIPLES OF GOOD CORPORATE GOVERNANCE ASX Listing Rule 4.10.3 requires that ASX listed companies report on the extent to which they have followed the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 2nd edition (“ASX Principles”) during the reporting period. Where companies have not followed all of the recommendations contained in the ASX Principles, they must identify the recommendations they have not followed and give reasons for the departure. Bathurst has followed each recommendation where the board has considered the recommendation to be appropriate for its corporate governance practices. Where Bathurst has adopted a recommendation this report sets out the appropriate statements regarding the adoption. In the case that, after due consideration, the company’s corporate governance practices depart from a recommendation, the board has offered full disclosure and an explanation for the adoption of its own practice in order to comply with the “if not, why not” reporting regime. A checklist cross referencing the ASX Principles to the relevant section of this statement and to other sections of the directors’ report is provided on pages 51 to 53 of this report. As detailed in this Corporate Governance Statement, Bathurst considers that its governance practices comply with the ASX Principles, subject to the qualiﬁ cations noted in the Compliance Statement. 1. BOARD OF DIRECTORS Principle 1: Lay solid foundations for management and oversight Principle 2: Structure the board to add value (a) Board composition and expertise The board has an extensive range of relevant industry experience, ﬁ nancial and other skills and expertise to meet its objectives. The current board composition comprises three independent, non-executive directors (including the chair) and two executive directors. The board considers that the non-executive directors collectively bring the range of skills, knowledge and experience necessary to direct the company. A proﬁ le of each director setting out their skills, experience, expertise and period of ofﬁ ce is set out in the directors’ report. Bathurst’s constitution states that at each AGM one third of its directors (excluding the managing director) and any director who has held ofﬁ ce for three of more years since their last election, must retire. Directors who retire under this rotation mechanism are eligible to offer themselves for re-election by shareholders at the AGM subject only to the point below. A director should, subject to circumstances prevailing at the time and the company’s ability to ﬁ nd a suitable replacement, aim to retire from the board at the conclusion of the AGM occurring after the tenth anniversary of the director’s ﬁ rst appointment or election to the board. (b) Board role and responsibilities The central role of the board is to oversee and approve the company’s strategic direction, to select and appoint a managing director, to oversee the company’s management and business activities and report to shareholders. The relationship between the board and senior management is critical to the group’s long-term success. The directors are responsible to the shareholders for the performance of the group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the group as a whole. 45 For personal use onlyCORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT 30 JUNE 2012 1. BOARD OF DIRECTORS (CONTINUED) The roles and responsibilities of the board are formalised in the Board Charter, which deﬁ nes in detail the matters that are reserved for the board and its committees, and those that the board has delegated to management. The chair is responsible for leadership of the board, for the efﬁ cient organisation and conduct of the board’s function and for the promotion of relations between board members and between board and management that are open, cordial and conducive to productive cooperation. The managing director is responsible for implementing group strategies and policies. The board charter speciﬁ es that these are separate roles to be undertaken by separate people. The Bathurst Board Charter states: ‧ the board is to be comprised of both executive and non-executive directors with a majority of non-executive directors. Non-executive directors bring a fresh perspective to the board’s consideration of strategic, risk and performance matters; ‧ in recognition of the importance of independent views and the board’s role in supervising the activities of management, the chair must be an independent non-executive director; ‧ the majority of the board must be independent of management and all directors are required to exercise independent judgement and review and constructively challenge the performance of management; ‧ the chair is elected by the full board and is required to meet regularly with the managing director; and ‧ the chair of the board is responsible for determining the process for evaluating board performance. Such evaluations are to be conducted at least annually and will focus on the effectiveness of the board function and whether there continues to exist an appropriate mix of skills required by the board to maximise its effectiveness and its contribution to the group. The Board Charter is available in the corporate governance section of Bathurst’s website. In addition to matters required by law to be approved by the board, the following powers are reserved to the board for decision: ‧ Strategy – providing strategic oversight and approving strategic plans and initiatives; ‧ Board performance and composition – evaluating the performance of non-executive directors, and determining the size and composition of the board as well as recommending to shareholders the appointment and removal of directors; ‧ Leadership selection – evaluating the performance of, and selection of, the CEO and those key executives reporting directly to the CEO. Review on a regular basis appropriate succession planning for the CEO; ‧ Corporate responsibility – considering the social, safety, ethical and environmental impacts of the group’s activities, and setting policy and monitoring compliance with safety, corporate and social policies and practices; ‧ Financial performance – approving Bathurst’s annual operating plans and budget, monitoring management, ﬁ nancial and operational performance; ‧ Continuous Disclosure - ensuring processes are established to capture issues for the purposes of continuous disclosure to both the ASX and the NZX; ‧ Financial reports to shareholders – approving annual and half year reports and disclosures to the market that contain, or relate to, ﬁ nancial projections, statements as to future ﬁ nancial performance or changes to the policy or strategy of the company; and ‧ Establishing procedures – ensuring that the board is in a position to exercise its power and to discharge its responsibilities as set out in the Board Charter. (c) Director Independence The independent directors of the company during the reporting period were Craig Munro (chair), Rob Lord and Malcolm Macpherson. These directors are independent as they are non-executive directors who are not members of management and who are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgment. The roles of Managing Director / CEO and Chair are ﬁ lled by Hamish Bohannan and Craig Munro respectively. They are not exercised by the same individual. 46 For personal use onlyCORPORATE GOVERNANCE STATEMENT The board has approved a policy on independence of directors, a copy of which is available in the corporate governance section of Bathurst’s website. On appointment, each director is required to provide information to the chair to assess and conﬁ rm their independence as part of their consent to act as a director. At the date of this report the chair considers that the three non-executive directors on the board are independent. The chair considers the independence of directors having regard to the relationships listed in Box 2.1 of the ASX Principles. (d) Board and senior executive performance evaluation The board, in conjunction with the R&N committee, reviews the size and composition of the board and the mix of existing and desired competencies across members from time to time. Criteria considered by the directors when evaluating prospective candidates are contained in the Board’s Charter. The chair of the board is responsible for ensuring a regular review of the performance of the board, committees and individual directors occurs at least annually. The chair is responsible for determining the process under which this evaluation takes place. The board reviews annually the size and composition of the board and the mix of existing and desired competencies across members. The board may engage an independent recruitment ﬁ rm to undertake a search for suitable candidates if and when an additional member is considered appropriate. The board is responsible for evaluating the performance of senior executives. In 2012, the company implemented a performance review procedure. Pursuant to the procedure the board will evaluate the performance of senior executives via an ongoing process of assessment and a formal annual review in December. During the formal review the senior executive’s performance is measured against their role’s assessment criteria. The ﬁ rst formal reviews will take place in December 2012. (e) Nominations and appointment of new directors and succession planning Recommendations for nomination of new directors are considered by the R&N committee and approved by the board as a whole. The R&N committee review director appointments having regard to the candidate’s commercial experience, skills and other qualities. External consultants may be used from time to time to access a wide base of potential directors. The board recognises the impact of board tenure on succession planning and that board renewal is critical to performance. Each director other than the managing director, must not hold ofﬁ ce (without re-election) past the third annual general meeting of the company following the director’s appointment or three years following that director’s last election or appointment (whichever is the longer). However, a director appointed to ﬁ ll a casual vacancy or as an addition to the board must not hold ofﬁ ce (without re-election) past the next annual general meeting of the company. At each annual general meeting a minimum of one director or a third of the total number of directors must resign. A director who retires at an annual general meeting is eligible for re-election at that meeting and the re-appointment of directors is not automatic. (f) Professional advice Directors may, in carrying out their company related duties, seek external professional advice. If external professional advice is sought a director is entitled to reimbursement of all reasonable costs where such a request for advice is approved in writing by the chair. In the case of a request by the chair, approval is required by at least two other directors. (g) Conﬂ icts of interest The board has approved directors’ Conﬂ ict of Interest Guidelines (contained in the Board code of conduct) which applies if there is, or may be, a conﬂ ict between the personal or other interests of a director. A director with an actual or potential conﬂ ict of interest in relation to a matter before the board does not receive the board papers relating to that matter and when the matter comes before the board for discussion, the director withdraws from the meeting for the period the matter is considered and takes no part in the discussion or decision-making process. (h) Board Meetings The chair sets the agenda for each meeting in conjunction with the chief executive ofﬁ cer and the company secretary. Any director may request additional matters be added to the agenda. Board and committee papers are provided to directors, where possible, ﬁ ve (5) business days prior to the relevant meeting. Copies of board papers are circulated in either electronic or hard copy form. Directors are entitled to request additional information where they consider the information is necessary to support informed decision-making. Details of the number of meetings of the board of directors of Bathurst, and each board committee, held and attended by each director during the 12 months ended 30 June 2012 are shown on page 33 of the directors’ report. 47 For personal use onlyCORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT 30 JUNE 2012 2. BOARD COMMITTEES Principle 2: Structure the board to add value Principle 4: Safeguard integrity in ﬁ nancial reporting (a) Board committees and membership The board has established two committees to assist in the discharge of its responsibilities. These are: ‧ remuneration & nomination committee (“R&N committee”); and ‧ audit committee. The charters of all board committees detailing the roles and duties of each are available in the corporate governance section of Bathurst’s website. All board committee charters are reviewed at least annually. At the date of this report the membership of each board committee is shown in the relevant section below. The executive directors can attend the audit committee meetings by invitation. All papers considered by the committees are available on request to directors who are not on that committee. Following each committee meeting, generally at the next Board meeting, the board is given a verbal update by the chair of each committee. In addition, minutes of all committee meetings are available to all directors. (b) Remuneration and nomination committee The R&N committee consists of the following non-executive independent directors: ‧ M Macpherson (Chair); ‧ R Lord; and ‧ C Munro. Details of these directors’ qualiﬁ cations and attendance at R&N committee meetings are set out in the directors’ report on pages 30-33. The board has adopted an R&N committee Charter which describes the role, composition, functions and responsibilities of the R&N committee. A copy of the R&N committee Charter is available on the company’s website. (c) Audit committee The audit committee consists of the following non-executive directors: ‧ R Lord (Chair); ‧ M Macpherson; and ‧ C Munro. The audit committee comprises three non-executive and independent directors of the company. The chair of the board is not the chair of the committee. The chair and members of the committee are appointed by the board and may be appointed for speciﬁ ed terms. Membership of the committee is reviewed annually by the board. Details of these directors’ qualiﬁ cations and attendance at audit committee meetings are set out in the directors’ report on pages 30-33. The external auditors, the chief ﬁ nancial ofﬁ cer and the ﬁ nancial controller attend committee meetings by invitation. The role of the audit committee is to assist the board to meet its oversight responsibilities in relation to the company’s ﬁ nancial reporting, internal control structure, corporate governance policies and practices, ﬁ nancial risk management procedures and the external audit function. In doing so, it is the committee’s responsibility to maintain free and open communication between the audit committee and the external auditors and the management of Bathurst. The audit committee operates in accordance with a charter which is available on the company’s website. 48 For personal use onlyCORPORATE GOVERNANCE STATEMENT The audit committee may consult independent experts and institute special investigations if it considers it necessary in order to fulﬁ l its responsibilities. Furthermore, the audit committee shall have the authority to seek any information it requires from any ofﬁ cer or employee of the company or its controlled entities and such ofﬁ cers or employees shall be instructed by the board of the company employing them to respond to such enquiries. The company has established procedures for the selection, appointment and rotation of its external auditor. The board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the audit committee. Candidates for the position of external auditor must demonstrate complete independence from the company through the engagement period. The board may otherwise select an external auditor based on criteria relevant to the company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the audit committee and any recommendations are made to the board. The company and audit committee policy is to appoint external auditors who demonstrate experience and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. PwC was appointed as the external auditor in 2010. It is PwC’s policy to rotate audit engagement partners on listed companies at least every ﬁ ve years. An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors’ report and in note 25 to the ﬁ nancial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the audit committee. The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. 3. RISK MANAGEMENT Principle 7: Recognise and Manage Risk The board, through the audit committee and senior management, are responsible for overseeing and implementing the company’s Risk Management Policy. The company is committed to effective risk management to achieve its business objectives. The company aims to continually improve the management of risk, to make better decisions to achieve its objectives and to reduce the likelihood and consequences of adverse effects to tolerable levels. At all levels of the business senior management is responsible for the development, implementation and maintenance of risk management systems that will effectively allow the group to: ‧ identify, assess and manage risks in an effective and efﬁ cient manner; ‧ use risk management to help make better decisions; ‧ reduce the risk of not meeting business objectives; ‧ meet relevant corporate governance requirements; and ‧ identify and evaluate opportunities based on their risk/reward balance. The goals of risk management are achieved by: ‧ implementing a comprehensive and systematic risk assessment and reporting system across the organisation; ‧ training employees in the use of the system, and in suitable risk assessment methodologies for their business and work applications; ‧ developing a risk proﬁ le for each business unit, and then providing risk funding to reduce risk and maintain a suitable risk/reward balance; ‧ embedding risk management into the way we work; and ‧ auditing the system. 49 For personal use onlyCORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT 30 JUNE 2012 3. RISK MANAGEMENT (CONTINUED) The board receives monthly reports about the ﬁ nancial condition and operational results of Bathurst and its controlled entities. The CEO and CFO provide, at the end of each six monthly period, a formal statement (in accordance with section 295A of the Corporations Act) to the board conﬁ rming that the company’s ﬁ nancial reports present a true and fair view, in all material respects, and that the group’s ﬁ nancial condition and operational results have been prepared in accordance with the relevant accounting standards. The statement also conﬁ rms the integrity of the company’s ﬁ nancial statements and notes to the ﬁ nancial statements, is founded on a sound system of risk management and internal compliance and control which implements the policies approved by the board, and that Bathurst’s risk management and internal compliance and control systems, to the extent they relate to ﬁ nancial reporting, are operating efﬁ ciently and effectively in all material respects. 4. CODE OF CONDUCT, SHARE TRADING POLICY AND DIVERSITY POLICY Principle 3: Promote Ethical and Responsible Decision Making (a) Codes of Conduct The board has approved a code of conduct for directors and for employees, which describes the standards of ethical behaviour that directors and employees are required to maintain. The company promotes the open communication of unethical behaviour within the organisation. Compliance with the code of conduct assists Bathurst in effectively managing its operating risks and meeting its legal and compliance obligations. As well as enhancing the company’s corporate reputation. The code of conduct describes the company’s requirements on matters such as conﬁ dentiality, conﬂ icts of interest, use of company information, sound employment practices, compliance with laws and regulations and the protection and safeguarding of company assets. A copy of the company’s code of conduct is available on Bathurst’s website. (b) Share trading policy The company’s share trading policy is binding on all directors and employees. The policy provides a brief summary of the law on insider trading and other relevant laws, sets out the restrictions on dealing in securities by people who work for, or are associated with, Bathurst and is intended to assist in maintaining market conﬁ dence in the integrity of dealings in the company’s securities. The policy stipulates that the only appropriate time for a director or employee to deal in the company’s securities is when he or she is not in possession of ‘price sensitive information’ that is not generally available to the share market. A director wishing to deal in the company’s securities may only do so after ﬁ rst having advised the chair of his or her intention. A senior executive wishing to deal must ﬁ rst notify the company secretary. Conﬁ rmation of any dealing must also be given by the director or senior executive within two business days after the dealing. Directors and senior executives’ dealings in the company’s securities are also subject to speciﬁ ed closed periods which are set out in the company’s share trading policy or as otherwise determined by the board from time to time. A copy of the company’s share trading policy is available on the corporate governance section of Bathurst’s website. (c) Diversity policy The company values diversity and recognises the beneﬁ ts it can bring to the organisation’s ability to achieve its goals. Accordingly the company has developed a diversity policy. This policy outlines the company’s diversity objectives in relation to gender, age, cultural background and ethnicity. The policy includes requirements for the board to establish measurable objectives and appropriate strategies for achieving diversity. The policy provides for the board to assess annually both the objectives, and the company’s progress in achieving them. The proportion of female employees in the whole organisation is currently 28% with 38% at senior management and nil % at board level. 50 For personal use onlyASX PRINCIPLES COMPLIANCE STATEMENT ASX PRINCIPLES COMPLIANCE STATEMENT 30 JUNE 2012 ASX Corporate Governance Council’s Best Practice Recommendations Reference (1) Compliance PRINCIPLE 1: Lay solid foundations for management and oversight 1.1 1.2 1.3 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions. Companies should disclose the process for evaluating the performance of senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 1. 1(b) Comply 1(d), Remuneration report Comply 1(a), 1(b), 1(d) Comply PRINCIPLE 2: Structure the board to add value 2.1 2.2 2.3 2.4 2.5 2.6 A majority of the board should be independent directors. The chair should be an independent director. The roles of chair and chief executive ofﬁ cer should not be exercised by the same individual. The board should establish a nomination committee. Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. 1(c) 1(c) 1(c) 1(e), 2(b) 1(b), 1(d) Companies should provide the information indicated in the Guide to reporting Principle 2. 1(a), 1(d), 1(f), 2(b) & Directors’ report Comply Comply Comply Comply Comply Comply PRINCIPLE 3: Promote ethical and responsible decision-making 3.1 3.2 3.3 3.4 3.5 Companies should establish a code of conduct and disclose the code or a summary of the code as to: ‧ The practices necessary to maintain conﬁ dence in the company’s integrity; ‧ The practices necessary to take into account their legal obligations and the 4 (a) Comply reasonable expectations of their stakeholders; and ‧ Responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Companies should establish a policy concerning diversity and disclose the policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and the progress in achieving them. Companies should disclose in each annual report the measurable objectives 4(c) Comply for achieving gender diversity set by the board in accordance with the diversity 4(c) Comply policy and progress towards achieving them. Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions 4(c) Comply and women on the board. Companies should provide the information indicated in the Guide to reporting on Principle 3. 4(a), 4(b), 4(c) Comply 51 For personal use onlyASX PRINCIPLES COMPLIANCE STATEMENT ASX PRINCIPLES COMPLIANCE STATEMENT 30 JUNE 2012 ASX Corporate Governance Council’s Best Practice Recommendations Reference (1) Compliance PRINCIPLE 4: Safeguard integrity in ﬁ nancial reporting 4.1 4.2 4.3 4.4 The board should establish an audit committee. 2(c) Comply The audit committee should be structured so that it: ‧ consists only non-executive directors; ‧ consists of a majority of independent directors; ‧ is chaired by an independent chairperson who is not chairperson of the board; and ‧ has at least three members. 2(c) Comply The audit committee should have a formal charter. 2(c) Comply Companies should provide the information indicated in Guide to reporting on principle 4. 2(c), Directors’ report Comply PRINCIPLE 5: Make timely and balanced disclosure 5.1 5.2 Companies should establish written policies designed to ensure compliance with ASX Listing Rules disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in Guide to reporting on Principle 5. PRINCIPLE 6: Respect the rights of shareholders 6.1 6.2 Companies should design and disclose a communications policy for promoting effective communication with shareholders and encourage their participation at general meetings and disclose their policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 6. PRINCIPLE 7: Recognise and manage risk 6 6 6 6 Comply Comply Comply Comply 7.1 7.2 7.3 7.4 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board should require management to design and implement the risk management and internal control system to manage the company’s material 2(b), 3 Comply business risks and report to it on whether those risks are being management 3 Comply effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risk. The board should disclose whether it has received assurance from the chief executive ofﬁ cer (or equivalent) and the chief ﬁ nancial ofﬁ cer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁ nancial reporting risks. Companies should provide the information indicated in Guide to Reporting on Principle 7. 3 3 Comply Comply 52 For personal use onlyASX PRINCIPLES COMPLIANCE STATEMENT ASX Corporate Governance Council’s Best Practice Recommendations Reference (1) Compliance PRINCIPLE 8: Remunerate fairly and responsibly 8.1 8.2 8.3 8.4 The board should establish a remuneration committee. The remuneration committee should be structured so that it: ‧ consists of a majority of independent directors ‧ is chaired by an independent chair ‧ has at least three members 2(b) 2(b) Companies should clearly distinguish the structure of non-executive directors’ 1(b), 2(b), 2(d), remuneration from that of executive directors and senior executives. Remuneration report Companies should provide the information indicated in Guide to Reporting 2(b), Remuneration on Principle 8. report Comply Comply Comply Comply (1) The default reference refers to the relevant sections of this Corporate Governance Statement. Reference to the Directors’ report and the Remuneration Report is shown where applicable. 53 For personal use onlyFINANCIAL STATEMENTS CONTENTS CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 55 55 56 57 58 59 100 101 These ﬁ nancial statements are the consolidated ﬁ nancial statements of the consolidated entity consisting of Bathurst Resources Limited and its subsidiaries. The ﬁ nancial statements are presented in Australian dollars. Bathurst Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered ofﬁ ce and principal place of business is: Bathurst Resources Limited Ground Floor, 1306 Hay Street West Perth WA 6005 A description of the nature of the consolidated entity’s operations and its principal activities is included on page 28 of the directors’ report and on pages 6 to 14 of this Annual Report, both of which do not form part of these ﬁ nancial statements. The ﬁ nancial statements were authorised for issue by the directors on 27 September 2012. The directors have the power to amend and reissue the ﬁ nancial statements. Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, ﬁ nancial reports and other information is available at our Investors’ Information section of our website: www.bathurstresources.co.nz 54 For personal use onlyFINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 REVENUE FROM OPERATIONS EXPENSES Changes in inventories of ﬁ nished goods Raw materials, mining costs, and consumables used Freight expense Employee beneﬁ ts expense Depreciation and amortisation expense Acquisition related costs Consultants Other expenses Finance costs Foreign exchange (loss) / gain Share based payments Impairment loss Fair value adjustment – deferred consideration Loss before income tax Income tax beneﬁ t Loss for the year after income tax Earnings per share for loss attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share Notes 4 5 5 5 5 31 5 17 6 30 30 2012 $’000 29,697 916 (14,402) (7,476) (8,580) (2,432) (1,148) (1,864) (5,084) (4,052) (7,083) 95 (6,365) 1,905 (25,873) 4,353 (21,520) 2011 $’000 8,758 78 (2,643) (1,655) (3,789) (688) (2,318) (891) (3,174) (3,185) 8,216 (11,641) - (2,176) (15,108) 1,633 (13,475) Cents Cents (3.12) (3.12) (2.76) (2.76) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012 Loss for the year Other comprehensive income Exchange differences on translation of foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income for the year attributable to the owners of Bathurst Resources Limited Notes 2012 $’000 2011 $’000 (21,520) (13,475) 21 1,028 1,028 141 141 (20,492) (13,334) (20,492) (13,334) The above consolidated income statement and consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 55 For personal use onlyFINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2012 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Financial assets Other assets Total current assets Non-current assets Property, plant and equipment Mine licences, properties, exploration and evaluation assets Financial assets Other assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Deferred consideration Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Deferred consideration Deferred tax liabilities Provisions Total non-current liabilities Total liabilities NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY Notes 2012 $’000 2011 $’000 7 8 9 10 11 12 13 10 11 15 16 17 6 (e) 18 16 17 19 18 20 21 53,823 2,615 2,014 136 181 87,418 3,987 1,058 - 537 58,769 93,000 12,953 314,416 3,305 1,759 10,046 281,641 282 3,897 332,433 295,866 391,202 388,866 5,561 2,013 - - 637 8,211 - 138,583 70,597 1,745 210,925 4,682 831 41,052 942 509 48,016 1,988 89,387 75,027 668 167,070 219,136 215,086 172,066 173,780 211,063 15,963 (54,960) 172,066 192,190 15,030 (33,440) 173,780 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 56 For personal use onlyFINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 CONSOLIDATED Balance at 1 July 2010 Loss for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Exercise of options Share-based payments Balance at 30 June 2011 Balance at 1 July 2011 Loss for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Exercise of options Share-based payments Balance at 30 June 2012 Contributed Equity $’000 Option Reserve $’000 Notes 32,958 1,148 - - - 154,602 4,630 - 159,232 192,190 - - - 2,069 - 11,641 13,710 14,858 192,190 14,858 - - - 15,978 2,895 - 18,873 211,063 - - - - - (95) (95) 20 20 31 20 20 31 Foreign Currency Translation Reserve $’000 31 - 141 141 - - - - 172 172 - 1,028 1,028 - - - - Accumulated Losses $’000 Total Equity $’000 (19,965) (13,475) - 14,172 (13,475) 141 (13,475) (13,334) - - - - (33,440) (33,440) (21,520) - (21,520) - - - - 156,671 4,630 11,641 172,942 173,780 173,780 (21,520) 1,028 (20,492) 15,978 2,895 (95) 18,778 172,066 14,763 1,200 (54,960) The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 57 For personal use onlyFINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest and other ﬁ nance costs paid Income taxes paid Net cash outﬂ ow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment for acquisition of subsidiary, net of cash acquired Payments for property, plant and equipment Payments for exploration assets Payments for acquisition of mining permits Proceeds from the sale of property, plant & equipment Advances to third parties Other Net cash outﬂ ow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares Repayment of borrowings Repayment of loans to external parties Payments for share issue costs Net cash inﬂ ow from ﬁ nancing activities NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the year Non-cash ﬁ nancing and investing activities Notes 2012 $’000 2011 $’000 31,347 (41,067) 3,897 (186) (1,081) (7,090) 10,137 (18,062) 2,108 (121) (28) (5,966) - (61,888) (8,527) (8,221) (7,382) 93 (3,117) (1,751) (28,905) 3,004 (842) - (64) (2,890) (2,051) (3,815) - - (380) (71,024) 170,532 (207) (5,076) (9,230) 2,098 156,019 (33,897) 87,418 302 53,823 79,029 8,276 113 87,418 29 10 7 29(a) The above consolidated statement of cash ﬂ ows should be read in conjunction with the accompanying notes. 58 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated ﬁ nancial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁ nancial statements are for the consolidated entity consisting of Bathurst Resources Limited and its subsidiaries. (a) Basis of preparation These general purpose ﬁ nancial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Bathurst Resources Limited is a for-proﬁ t entity for the purposes of preparing the ﬁ nancial statements. (i) Compliance with IFRS The consolidated ﬁ nancial statements of the Bathurst Resources Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of available-for-sale ﬁ nancial assets, ﬁ nancial assets and liabilities (including derivative instruments) at fair value through proﬁ t or loss. (iii) Critical accounting estimates The preparation of ﬁ nancial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁ cant to the ﬁ nancial statements are disclosed in note 2. (b) Principles of consolidation The consolidated ﬁ nancial statements incorporate the assets and liabilities of all subsidiaries of Bathurst Resources Limited (”company” or ”parent entity”) as at 30 June 2012 and the results of all subsidiaries for the year then ended. Bathurst Resources Limited and its subsidiaries together are referred to in this ﬁ nancial report as the group or the consolidated entity. Subsidiaries are all entities over which the group has the power to govern the ﬁ nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group (refer to note 1(h)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identiﬁ ed as the board of directors. (d) Foreign currency translation (i) Functional and presentation currency Items included in the ﬁ nancial 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 ﬁ nancial statements are presented in Australian dollars, which is Bathurst Resources Limited’s functional and presentation currency. 59 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Foreign currency translation (continued) (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in proﬁ t or loss, except when they are deferred in equity as qualifying cash ﬂ ow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses are presented on the face of the income statement. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through proﬁ t or loss are recognised in proﬁ t or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classiﬁ ed as available-for-sale ﬁ nancial assets are recognised in other comprehensive income. (iii) Group Companies The results and ﬁ nancial position of foreign operations (none of which has the currency of a hyperinﬂ ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: ‧ assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; ‧ income and expenses for each income statement and statement of comprehensive income are translated at monthly average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and ‧ all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other ﬁ nancial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange difference is reclassiﬁ ed to proﬁ t or loss, as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. (e) Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic beneﬁ ts will ﬂ ow to the group and the revenue can be reliably measured. The following speciﬁ c recognition criteria must also be met before revenue is recognised: (i) Sale of goods Revenue from the sale of goods is recognised when there is an executed sales agreement at the time of delivery of the goods to customer, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity and quality of the goods has been determined, the price is ﬁ xed and when title has passed. (ii) Freight income Revenue from freight services is recognised in the accounting period in which the services are provided. Revenue is not recognised until the service has been completed. (iii) Interest income Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a ﬁ nancial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁ nancial asset to the net carrying amount of the ﬁ nancial asset. 60 For personal use onlyFINANCIAL STATEMENTS (f) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁ nancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁ t or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in proﬁ t or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulﬁ lment of the arrangement is dependent on the use of a speciﬁ c asset or assets and the arrangement conveys a right to use the asset. Finance leases are capitalised at the lease’s inception at the fair value of the leased property, or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of ﬁ nance charges, are included in other short-term and long-term payables. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. 61 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identiﬁ able assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identiﬁ able assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the group’s share of the net identiﬁ able assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identiﬁ able assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in proﬁ t or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the risk free rate, being the long term government borrowing rate. This is then adjusted for an estimated risk premium to reﬂ ect the rate at which a similar borrowing could be obtained from an independent ﬁ nancier under comparable terms and conditions. Contingent consideration is classiﬁ ed as a ﬁ nancial liability (deferred consideration). Amounts classiﬁ ed as a ﬁ nancial liability are subsequently remeasured to fair value with changes in fair value recognised on the face of the income statement as “revaluation of deferred consideration”. (i) Impairment of assets Goodwill and intangible assets that have an indeﬁ nite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁ able cash inﬂ ows which are largely independent of the cash inﬂ ows from other assets or groups of assets (cash-generating units). Non-ﬁ nancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (j) Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and on hand and short- term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement cash and cash equivalents consist of cash and cash equivalents as deﬁ ned above, net of outstanding bank overdrafts. (k) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Signiﬁ cant ﬁ nancial difﬁ culties of the debtor, probability that the debtor will enter bankruptcy or ﬁ nancial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows, discounted at the original effective interest rate. Cash ﬂ ows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in proﬁ t or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in proﬁ t or loss. 62 For personal use onlyFINANCIAL STATEMENTS (l) Inventories Raw materials and stores, work in progress and ﬁ nished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and ﬁ xed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost includes the reclassiﬁ cation from equity of any gains or losses on qualifying cash ﬂ ow hedges relating to purchases of raw material but excludes borrowing costs. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (m) Waste in advance Waste removed in advance (overburden) costs incurred in the development of a mine are capitalised as parts of the costs of constructing the mine and subsequently amortised over the life of the mine. Waste removal normally continues through the life of the mine. The company defers waste removal costs incurred during the production stage of its operations and discloses it within “other current assets”. The amount of waste removal costs deferred is based on the ratio obtained by dividing the volume of waste removed by the tonnage of coal mined. Waste removal costs incurred in the period are deferred to the extent that the current period ratio exceeds the life of mine ratio. Such deferred costs are then charged against the income statement to the extent that, in subsequent periods, the ratio falls short of the life of mine ratio. The life of mine ratio is based on proven and probable reserves of the operation. Waste moved in advance costs form part of the total investment in the relevant cash generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. Changes to the life of mine stripping ratio are accounted for prospectively. (n) Investment and other ﬁ nancial assets Classiﬁ cation The group classiﬁ es its ﬁ nancial assets in the following categories: loans and receivables, held-to-maturity investments and available-for-sale ﬁ nancial assets. The classiﬁ cation depends on the purpose for which the investments were acquired. Management determines the classiﬁ cation of its investments at initial recognition and, in the case of assets classiﬁ ed as held-to-maturity, re-evaluates this designation at the end of each reporting date. Loans and receivables Loans and receivables are non-derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classiﬁ ed as non-current assets. Loans and receivables are included in trade and other receivables (note 8) in the balance sheet. Recognition and derecognition Regular way purchases and sales of ﬁ nancial assets are recognised on trade-date – the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash ﬂ ows from the ﬁ nancial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. When securities classiﬁ ed as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassiﬁ ed to proﬁ t or loss as gains and losses from investment securities. Measurement At initial recognition, the group measures a ﬁ nancial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the ﬁ nancial asset. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest rate method. 63 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Investment and other ﬁ nancial assets (continued) Impairment The group assesses at the end of each reporting period whether there is objective evidence that a ﬁ nancial asset or group of ﬁ nancial assets is impaired. A ﬁ nancial asset or a group of ﬁ nancial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash ﬂ ows of the ﬁ nancial asset or group of ﬁ nancial assets that can be reliably estimated. (i) Assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows (excluding future credit losses that have not been incurred) discounted at the ﬁ nancial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in proﬁ t or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in proﬁ t or loss. Impairment testing of trade receivables is described in note 1(k). (o) Property, plant and equipment All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash ﬂ ow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to proﬁ t or loss during the reporting period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term as follows: ‧ Buildings 25 years ‧ Mine infrastructure 3 – 8 years ‧ Plant & machinery 2 - 25 years ‧ Plant & machinery leased – units of use ‧ Furniture, ﬁ ttings and equipment 3-8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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 (note 1(i)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in proﬁ t or loss. 64 For personal use onlyFINANCIAL STATEMENTS (p) Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is capitalised to the extent that the expenditure is expected to be recovered through the successful development and exploitation of the area of interest, or the exploration and evaluation activities in the area of interest have not yet reached a point where such an assessment can be made. All other exploration and evaluation expenditure is expensed as incurred. Capitalised costs are accumulated in respect of each identiﬁ able area of interest. Costs are only carried forward to the extent that tenure is current and they are expected to be recouped through the successful development of the area (or, alternatively by its sale) or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and operations in relation to the area are continuing. Accumulated costs in relation to an abandoned area are written off in full against proﬁ t in the period in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. (q) Mining and development properties Mining and development properties include the cost of acquiring and developing mining properties, mineral rights and exploration, evaluation and development expenditure carried forward relating to areas where production has commenced. These assets are amortised using the unit of production basis over the proven and probable reserves. Amortisation starts from the date when commercial production commences. 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. (r) Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of ﬁ nancial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (s) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in proﬁ t or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the balance sheet when the obligation speciﬁ ed in the contract is discharged, cancelled or expired. The difference between the carrying amount of a ﬁ nancial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in proﬁ t or loss as other income or ﬁ nance costs. Where the terms of a ﬁ nancial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in proﬁ t or loss, which is measured as the difference between the carrying amount of the ﬁ nancial liability and the fair value of the equity instruments issued. Borrowings are classiﬁ ed as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. 65 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) Provisions Provision for rehabilitation Provisions are made for site rehabilitation costs relating to areas disturbed during the mine’s operation up to reporting date but not yet rehabilitated. The provision is based on management’s best estimate of future costs of rehabilitation. When the provision is recognised, the corresponding rehabilitation costs are recognised as part of mining property and development assets. At each reporting date, the rehabilitation liability is re-measured in line with changes in the timing or amount of the costs to be incurred. Changes in the liability relating to rehabilitation of mine infrastructure and dismantling obligations are added to or deducted from the related asset. If the change in the liability results in a decrease in the liability that exceeds the carrying amount of the asset, the asset is written down to nil and the excess is recognised immediately in the income statement. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new carrying value is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is performed with the write down recognised in the income statement in the period in which it occurs. The net present value of the provision is calculated using an appropriate discount rate, the unwinding of the discount applied in calculating the net present value of the provision is charged to the income statement in each reporting period and is classiﬁ ed as a ﬁ nance cost. (u) Employee beneﬁ ts (i) Short-term obligations Liabilities for wages and salaries, including non-monetary beneﬁ ts, and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee beneﬁ ts. All other short-term employee beneﬁ t obligations are presented as payables. (ii) Other long-term employee beneﬁ t obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee beneﬁ ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outﬂ ows. (iii) Share-based payments Share-based compensation beneﬁ ts are provided to employees via the Bathurst Resources Limited Employee Share Option Plan. Information relating to these schemes is set out in note 31. The fair value of options granted under the Bathurst Resources Limited Employee Share Option Plan is recognised as an employee beneﬁ ts expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the speciﬁ ed vesting conditions are to be satisﬁ ed. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in proﬁ t or loss, with a corresponding adjustment to equity. (v) Contributed equity Ordinary shares are classiﬁ ed as equity. Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. 66 For personal use onlyFINANCIAL STATEMENTS (w) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: ‧ the proﬁ t attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares ‧ by the weighted average number of ordinary shares outstanding during the ﬁ nancial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account: ‧ the after income tax effect of interest and other ﬁ nancing costs associated with dilutive potential ordinary shares, and ‧ the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (x) Deferred Consideration The fair value of deferred consideration payments are calculated periodically with adjustments through proﬁ t and loss. The portion of the fair value adjustment due to the time value of money (unwinding of discount) is recognised as a ﬁ nance cost. For further information on deferred consideration refer to note 17. (y) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authorities, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash ﬂ ows are included in the Cash Flow Statement on a gross basis and the GST component of cash ﬂ ows arising from investing and ﬁ nancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁ ed as operating cash ﬂ ows. (z) Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the ﬁ nancial statements. Amounts in the ﬁ nancial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. (aa) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. The group’s assessment of the impact of these new standards and interpretations is set out below. (i) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013) In August 2011, the AASB issued a suite of ﬁ ve new and amended standards which address the accounting for joint arrangements, consolidated ﬁ nancial statements and associated disclosures. AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single deﬁ nition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns. Power is the current ability to direct the activities that signiﬁ cantly inﬂ uence returns. Returns must vary and can be positive, negative or both. Control exists when the investor can use its power to affect the amount of its returns. There is also new guidance on participating and protective rights and on agent/principal relationships. The group does not expect the new standard to have a signiﬁ cant impact on its composition. 67 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (aa) New accounting standards and interpretations (continued) AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classiﬁ ed as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control. As the group is not a party to any joint venture arrangements, AASB 11 will not have any impact on the amounts recognised in its ﬁ nancial statements. AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the group will not affect any of the amounts recognised in the ﬁ nancial statements, but will impact the type of information disclosed in relation to the group’s investments. Amendments to AASB 128 provide clariﬁ cation that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a “partial disposal” concept. The group does not expect this will impact its ﬁ nancial reporting. The group does not expect to adopt the new standards before their operative date. They would therefore be ﬁ rst applied in the ﬁ nancial statements for the annual reporting period ending 30 June 2014. (ii) AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine and AASB 2011-12 Amendments to Australian Accounting Standards arising from Interpretation 20 (effective 1 January 2013) Interpretation 20 sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. It states that these costs can only be recognised as an asset if they can be attributed to an identiﬁ able component of the ore body, the costs relating to the improved access to that component can be measured reliably and it is probable that future economic beneﬁ ts associated with the stripping activity (improved access to the orebody) will ﬂ ow to the entity. The costs will be amortised over the life of the identiﬁ ed component of the ore body. This is different to the consolidated entity’s current accounting policy which is to capitalise stripping costs based on a general waste-to-ore stripping ratio and amortise the costs over the life of the mine. The interpretation must be applied retrospectively and the group will have to write off existing stripping cost asset balances to retained earnings on the date of transition, unless they relate to an identiﬁ able component of the ore body. The total carrying amount of deferred waste capitalised as at 30 June 2012 was $nil. The group expects to adopt the interpretation from 1 July 2013. (iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013) AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the ﬁ nancial statements. However, application of the new standard will impact the type of information disclosed in the notes to the ﬁ nancial statements. The group does not intend to adopt the new standard before its operative date, which means that it would be ﬁ rst applied in the annual reporting period ending 30 June 2014. (ab) Parent entity ﬁ nancial information The ﬁ nancial information for the parent entity, Bathurst Resources Limited, disclosed in note 32 has been prepared on the same basis as the consolidated ﬁ nancial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the ﬁ nancial statements of Bathurst Resources Limited. (ii) Financial guarantees Where the parent entity has provided ﬁ nancial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment. 68 For personal use onlyFINANCIAL STATEMENTS NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a ﬁ nancial impact on the entity and that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by deﬁ nition, seldom equal the related actual results. The estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁ nancial year are discussed below. (i) Impairment The future recoverability of the assets recorded by the group is dependent upon a number of factors, including whether the group decides to exploit its mine property itself or, if not, whether it successfully recovers the related asset through sale. Factors that could impact future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes, and changes to commodity prices and foreign exchange rates. (ii) Valuation of deferred consideration In valuing the deferred consideration payable under business acquisitions management uses estimates and assumptions. This includes future coal prices, discount rates, coal production, and the timing of payments. The amounts of deferred consideration are reviewed at each balance date and updated based on best available estimates and assumptions at that time. The carrying amount of deferred consideration is set out in note 17. (iii) Reserves and Resources Reserves and resources are based on information compiled by a Competent Person as deﬁ ned in accordance with the Australasian Code of Mineral Resources and Ore Reserves of December 2004 (the JORC code). There are numerous uncertainties inherent in estimating reserves and assumptions that are valid at the time of estimation but that may change signiﬁ cantly when new information becomes available. Changes in forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status and may, ultimately, result in the reserves being restated. Such changes in reserves could impact on depreciation and amortisation rates, asset carrying values and provisions for rehabilitation. (iv) Provision for rehabilitation In calculating the estimated future costs of rehabilitating and restoring areas disturbed in the mining process certain estimates and assumptions have been made. (Refer to Note 1(t)). The amount the group is expected to incur to settle these future obligations includes estimates in relation to the appropriate discount rate to apply to the cash ﬂ ow proﬁ le, expected mine life, application of the relevant requirements for rehabilitation, and the future expected costs of rehabilitation. Changes in the estimates and assumptions used could have a material impact on the carrying value of the rehabilitation provision and related asset. The provision is reviewed at each reporting date and updated based on the best available estimates and assumptions at that time. The carrying amount of the rehabilitation provision is set out in Note 18. (v) Waste in advance Waste moved in advance is calculated with reference to the stripping ratio (waste moved over coal extracted) of the area of interest and the excess of this ratio over the estimated stripping ratio for the area of interest expected to incur over its life. Management estimates this life of mine ratio based on geological and survey models as well as reserve information for the areas of interest. The carrying amount of the waste moved in advance is set out in Note 11. (vi) Taxation The group’s accounting policy for taxation requires management judgement in relation to the application of income tax legislation. There are many transactions and calculations undertaken during the ordinary course of business where the ultimate tax determination is uncertain. The group recognises liabilities for tax, and if appropriate taxation investigation or audit issues, based on whether taxation will be due and payable. Where the taxation outcome of such matters is different from the amount initially recorded, such difference will impact the current and deferred tax position in the period in which the assessment is made. 69 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) In addition, certain deferred tax assets for deductible temporary differences and carried forward taxation losses have been recognised. In recognising these deferred tax assets assumptions have been made regarding the group’s ability to generate future taxable proﬁ ts. Utilisation of the tax losses also depends on the ability of the tax entities to satisfy certain tests at the time the losses are recouped. If the entities fail to satisfy the tests, the carried forward losses that are currently recognised as deferred tax assets would have to be written off to income tax expense. There is an inherent uncertainty in applying these judgements and a possibility that changes in legislation will impact upon the carrying amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet. NOTE 3 SEGMENT INFORMATION (a) Description of segments Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The board reviews the business from both a mine and geographic perspective and has identiﬁ ed two reportable segments. The Buller Coal segment relates to the mining, development and ultimate exploitation of permits under the Buller Coal management team in the Buller region of New Zealand. The Eastern Coal segment refers to the Takitimu mine and Timaru coal handling and distribution centre under the Eastern management team. The ﬁ nancial performance of these segments is monitored and operated separately from each other. All other operations of the group are classiﬁ ed within “Corporate” section of the segment note which encompasses the administration and treasury management of the group. During the period the deﬁ nitions of the operating segments have changed to align to changes in the management structure of the group. The Cascade mine and Whareatea West permit area now fall under the Buller Coal management team and are reported under the Buller Coal segment. This mine and permit area previously fell under Eastern Resources Group. The Eastern Resources Group segment has been renamed Eastern Coal to reﬂ ect the rebranding initiatives undertaken by the group. Comparative information has been restated to reﬂ ect the changes discussed above. 70 For personal use onlyFINANCIAL STATEMENTS (b) Segment information provided to the board The segment information provided to the board for the reportable segments for the year ended 30 June 2012 is as follows: 2012 Sales revenue Interest income Other income Total segment revenue Inter segment revenue Revenue from operations Total revenue per the income statement Loss before tax Loss before tax includes: Depreciation and amortisation Impairment loss Total segment assets Total assets per the balance sheet Total segment liabilities Total liabilities per the balance sheet 2011 Sales revenue Interest income Other income Total segment revenue Inter segment revenue Revenue from operations Total revenue per the income statement Proﬁ t / (loss) before tax Proﬁ t / (loss) before tax includes: Depreciation and amortisation Total segment assets Total assets per the balance sheet Total segment liabilities Total liabilities per the balance sheet Buller Coal Eastern Coal $’000 $’000 Corporate $’000 6,666 19,663 - 7 6,673 (780) 5,893 59 510 20,232 - 20,232 - 3,560 12 3,572 - 3,572 Total $’000 26,329 3,619 529 30,477 (780) 29,697 29,697 (14,893) (7,789) (3,191) (25,873) 1,093 - 332,446 1,238 6,365 4,609 101 - 54,147 215,034 3,279 823 Buller Coal Eastern Coal $’000 $’000 Corporate $’000 1,682 - - 1,682 (470) 1,212 4,744 28 153 4,925 - 4,925 - 2,621 - 2,621 - 2,621 2,432 6,365 391,202 391,202 219,136 219,136 Total $’000 6,426 2,649 153 9,228 (470) 8,758 8,758 4,833 144 (20,085) (15,108) 486 181 21 688 291,061 11,924 85,881 209,432 5,084 570 388,866 388,866 215,086 215,086 71 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 3 SEGMENT INFORMATION (CONTINUED) (c) Other segment information (i) Segment revenue Interest income between the segments is carried out at arm’s length and is eliminated on consolidation. The revenue from external parties reported to the board is measured in a manner consistent with that in the income statement. Revenues from external customers are derived from the sale of coal and freight services. Interest income from external parties is earned on cash deposits. (ii) Segment assets The amounts reported to the board with respect to total assets are measured in a manner consistent with that of the ﬁ nancial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. The total of non-current assets other than ﬁ nancial instruments and deferred tax assets located in Australia is $340,324 (2011: $343,915), and the total of these non-current assets located in New Zealand is $327,028,375 (2011: $295,522,798). Segment assets are allocated to countries based on where the assets are located. (iii) Segment liabilities The amounts reported to the board with respect to total liabilities are measured in a manner consistent with that of the ﬁ nancial statements. These liabilities are allocated based on the operations of the segment. NOTE 4 REVENUE Sales revenue Coal sales Freight Other revenue Interest income Other Total revenue from operations 2012 $’000 16,454 9,095 25,549 3,619 529 4,148 29,697 2011 $’000 4,045 1,911 5,956 2,649 153 2,802 8,758 72 For personal use onlyFINANCIAL STATEMENTS NOTE 5 EXPENSES LOSS BEFORE INCOME TAX INCLUDES THE FOLLOWING SPECIFIC EXPENSES: 2012 $’000 2011 $’000 Employee beneﬁ t expenses Deﬁ ned contribution post-employment expense Other employee beneﬁ ts expense Total employee beneﬁ ts expenses Depreciation Buildings Mine infrastructure Plant & machinery Furniture, ﬁ ttings, and equipment Plant & machinery under ﬁ nance leases Amortisation Mining licences Mining properties Total depreciation and amortisation Impairment losses (a) Property, plant, and equipment Mine licences, properties, and exploration & evaluation assets Waste in advance Total impairment loss Finance costs Interest expense Provisions: unwinding of discount rate (note 18) Deferred consideration: unwinding of discount rate (note 17) Total ﬁ nance costs Foreign exchange loss / (gain) Foreign exchange on intercompany loans Foreign exchange on deferred consideration (note 17) Realised foreign exchange Total foreign exchange loss / (gain) Net loss on disposal of property, plant and equipment Minimum lease payments expense relating to operating leases 73 230 8,350 8,580 37 207 425 301 469 1,439 827 166 993 2,432 3,877 2,013 475 6,365 187 54 3,811 4,052 - 6,987 96 7,083 27 516 141 3,648 3,789 8 75 120 46 125 374 143 171 314 688 - - - - 181 - 3,004 3,185 (1,626) (6,613) 23 (8,216) 6 188 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 5 EXPENSES (CONTINUED) (a) Impairment loss During the year a review and analysis of the Eastern Coal business was undertaken which indicated that the assets of the Eastern Coal business were impaired. The main driver of this impairment was a coal supply contract with negative margins. The Eastern Coal Cash Generating Unit (“CGU”) is the Takitimu mine and Timaru coal handling and distribution centre. The recoverable amount of the CGU was determined using its fair value less costs to sell. The fair value less costs to sell was determined on a discounted cash ﬂ ow basis. Forecast cash ﬂ ows were based on existing mining contracts, coal sales contracts and a discount rate the company would expect a market participant to apply to future cash ﬂ ows. The resulting cash ﬂ ows were discounted using a post-tax real cost of capital. The review of the business continues and business improvement initiatives are to be implemented. NOTE 6 INCOME TAX BENEFIT (A) INCOME TAX EXPENSE / (BENEFIT) Current tax Deferred tax Adjustments for current tax of prior periods Deferred income tax (beneﬁ t) / expense included in the income tax beneﬁ t comprises: Increase in deferred tax assets (note 14) Increase in deferred tax liabilities (note 19) (B) NUMERICAL RECONCILIATION OF INCOME TAX BENEFIT TO PRIMA FACIE TAX PAYABLE Loss from continuing operations before income tax beneﬁ t Tax at the standard Australian rate of 30% Tax effect of amounts that are not deductible / (assessable) in calculating taxable income: Non-deductible expenses Revaluation of deferred consideration Non-deductible amortisation of fair value adjustments Unwinding of discount rates Unrealised foreign exchange losses / (gains) Other Potential tax beneﬁ ts not recognised Difference in overseas tax rates Adjustments for current tax of prior periods Adjustments to previously unrecognised tax losses Effect of change in tax rate on recognised carried forward tax losses Income tax beneﬁ t (C) TAX LOSSES 2012 $’000 - (4,721) 368 (4,353) (5,051) 330 (4,721) 2011 $’000 (32) (1,601) - (1,633) (1,737) 136 (1,601) (25,873) (7,762) (15,108) (4,532) 438 (572) - 1,160 2,095 392 105 (4,144) 278 368 (855) - (4,353) 775 653 51 902 (2,419) 29 2,777 (1,764) - - - 131 (1,633) Unused tax losses for which no deferred tax asset has been recognised Potential tax beneﬁ t at 30% 15,885 4,766 10,641 3,192 74 For personal use onlyFINANCIAL STATEMENTS The potential tax beneﬁ ts relate to the following tax jurisdictions: Australia (D) UNRECOGNISED TEMPORARY DIFFERENCES Temporary difference relating to investments in subsidiaries for which deferred tax liabilities have not been recognised: Foreign currency translation Unrecognised deferred tax (assets) / liabilities relating to the above temporary differences 2012 $’000 2011 $’000 4,766 3,192 1,028 308 141 42 A deferred tax liability has not been recognised in respect of temporary differences of $308,000 (2011: $42,000) arising as a result of the translation of the ﬁ nancial statements of the consolidated entity’s subsidiaries in New Zealand. The deferred tax asset will only arise in the event of disposal of the subsidiary, and no such disposal is expected in the foreseeable future. (E) CURRENT TAX PAYABLE Payable assumed on acquisition of subsidiary Current tax expense Exchange differences Total current tax payable NOTE 7 CASH AND CASH EQUIVALENTS Cash at bank and on hand Deposits at call (a) Risk exposure 2012 $’000 2011 $’000 - - - - 2012 $’000 9,450 44,373 53,823 925 (32) 49 942 2011 $’000 9,231 78,187 87,418 The group’s exposure to interest rate risk is discussed in note 23. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. NOTE 8 TRADE AND OTHER RECEIVABLES Trade receivables Provision for impairment of receivables Loans to key management personnel * GST Receivable Interest receivable Other receivables * Further information relating to loans to key management personnel is set out in note 24. 75 2012 $’000 1,435 (1) 1,434 380 331 274 196 2,615 2011 $’000 1,765 (4) 1,761 380 1,250 550 46 3,987 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 8 TRADE AND OTHER RECEIVABLES (CONTINUED) (a) Impaired trade receivables and past due but not impaired Ageing information on impaired trade receivables and trade receivables that are past due but not impaired has not been provided as the amounts are not material to the group. Impaired receivables at 30 June 2012 totalled $542 and trade receivables past due but not impaired at 30 June 2012 totalled $1,223. (b) Foreign exchange and interest rate risk Information about the group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 23. (c) Fair value and credit risk Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above. Refer to note 23 for more information on the risk management policy of the group and the credit quality of the entity’s trade receivables. NOTE 9 INVENTORIES Raw materials and stores Finished goods * 2012 $’000 71 1,943 2,014 2011 $’000 53 1,005 1,058 * Finished goods are recorded at the lower of cost and net realisable value as per note 1(l). (a) Inventory expense Inventories recognised as expense during the year ended 30 June 2012 amounted to $14,412,680 (2011 – $2,849,910). Write downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2012 amounted to $1,024,195 (2011 – nil). The expense has been included in “Changes in inventories of ﬁ nished goods” in the income statement. NOTE 10 FINANCIAL ASSETS CURRENT Advances to third parties NON-CURRENT Security bonds and deposits Advances to third parties 2012 $’000 136 136 309 2,996 3,305 2011 $’000 - - 282 - 282 Security bonds and deposits have been provided to third parties in relation to rental properties and mine / permit access arrangements. Advances to third parties have been made under construction contracts to provide working capital assistance to the engaged contractor. The advance made attracts an interest rate of 5.75% and is secured by a bank guarantee in favour of Buller Coal Limited. 76 For personal use onlyFINANCIAL STATEMENTS NOTE 11 OTHER ASSETS CURRENT Waste moved in advance Impairment of Waste in advance (see note 5) Prepayments NON-CURRENT Deposits paid 2012 $’000 2011 $’000 475 (475) 181 181 398 - 139 537 1,759 1,759 3,897 3,897 The deposits paid in the 2011 year relate to the acquisition of the Coalbrookdale assets. This acquisition was completed on 21 July 2011. The deposit formed part of the consideration for the asset purchase which is classiﬁ ed as ‘Mine licences & properties’ at 30 June 2012. The deposits paid in the 2012 year relate to the acquisition of strategic land holdings for the Eastern Coal business. The acquisition was approved by the Overseas Investment Ofﬁ ce of New Zealand on 25 July 2012 and is planned to be completed by December 2012. See note 28. NOTE 12 PROPERTY, PLANT AND EQUIPMENT Freehold Land $’000 Buildings $’000 Mine Infrastructure $’000 Plant & Machinery $’000 Plant & Machinery under ﬁ nance lease $’000 Furniture, ﬁ ttings and equipment $’000 YEAR ENDED 30 JUNE 2011 Opening net book amount Acquisition of subsidiary Additions Disposals Exchange differences Depreciation charge Closing net book amount AT 30 JUNE 2011 Cost or fair value Accumulated depreciation Net book amount - 550 599 - 42 - 1,191 1,191 - 1,191 - 362 - - 19 (8) 373 488 (115) 373 - 707 2,834 - 97 (75) - 2,435 171 (1) 122 (120) 3,563 2,607 4,340 (777) 3,563 4,173 (1,566) 2,607 - 1,649 - - 83 (125) 1,607 2,371 (764) 1,607 36 115 606 (16) 10 (46) 705 819 (114) 705 Total $’000 36 5,818 4,210 (17) 373 (374) 10,046 13,382 (3,336) 10,046 77 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 12 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Freehold Land $’000 Buildings $’000 Mine Infrastructure $’000 Plant & Machinery $’000 Plant & Machinery under ﬁ nance lease $’000 Furniture, ﬁ ttings and equipment $’000 YEAR ENDED 30 JUNE 2012 Opening net book amount Additions Disposals Impairment loss (Note 5 ) Exchange differences Depreciation charge Closing net book amount AT 30 JUNE 2012 Cost or fair value Accumulated depreciation Net book amount 1,191 411 - - 19 - 373 741 (2) (66) 9 (37) 1,621 1,018 1,621 - 1,621 1,145 (127) 1,018 3,563 5,802 (192) (1,924) 69 (207) 7,111 7,779 (668) 7,111 2,607 579 (35) (1,847) 30 (425) 909 1,773 (864) 909 1,607 - - - 20 (469) 1,158 2,404 (1,246) 1,158 705 848 (83) (40) 7 (301) 1,136 1,448 (312) 1,136 2012 $’000 Total $’000 10,046 8,381 (312) (3,877) 154 (1,439) 12,953 16,170 (3,217) 12,953 2011 $’000 (a) Assets in the course of construction The carrying amounts of the assets disclosed above include the following expenditure recognised in relation to property, plant and equipment which is in the course of construction: Mine infrastructure 6,926 2,869 (b) Non-current assets pledged as security Refer to note 16 for information on non-current assets pledged as security by the group. 78 For personal use onlyFINANCIAL STATEMENTS NOTE 13 MINING LICENCES, PROPERTIES, EXPLORATION, AND EVALUATION ASSETS 30 JUNE 2011 Opening net book amount Acquisition of subsidiary Additions Amortisation charge Exchange differences Closing net book amount 30 JUNE 2012 Opening net book amount Additions Effect of prior period adjustments (see note 17 & 19) Amortisation charge Impairment loss (see note 5 ) Exchange differences Closing net book amount NOTE 14 DEFERRED TAX ASSETS THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Tax losses Impairment loss Accruals Employee beneﬁ ts Property, plant and equipment Provisions Total deferred tax assets Exploration & evaluation expenditure $’000 Mining licences & properties $’000 Total $’000 - 5,336 2,962 - 100 - - 272,741 278,077 - (314) 816 2,962 (314) 916 8,398 273,243 281,641 8,398 8,507 - - (1,191) 163 273,243 281,641 27,488 (3,713) (993) (822) 3,336 35,995 (3,713) (993) (2,013) 3,499 15,877 298,539 314,416 2012 $’000 4,092 1,789 29 53 42 849 6,854 2011 $’000 1,747 - 19 56 10 249 2,081 Set-off of deferred tax liabilities pursuant to set-off provisions (see note 19) (6,854) (2,081) Net deferred tax assets Deferred tax assets expected to be recovered within 12 months Deferred tax assets expected to be recovered after 12 months - 475 6,379 6,854 - 2,081 - 2,081 79 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 14 DEFERRED TAX ASSETS (CONTINUED) MOVEMENTS Tax losses $’000 Accruals $’000 AT 30 JUNE 2011 Movement to the proﬁ t or loss Tax losses utilised Reclassiﬁ ed (see note 19) Exchange differences At 30 June 2012 1,747 2,619 (335) - 61 4,092 19 10 - - - 29 Employee beneﬁ ts $’000 Property, plant and equipment $’000 Provisions $’000 Impairment Loss $’000 56 (4) - - 1 53 10 67 - (35) - 42 249 576 - 18 6 849 - 1,783 - - 6 1,789 6,854 Total $’000 2,081 5,051 (335) (17) 74 The group has recognised a deferred tax asset in relation to the tax losses of the New Zealand entities on the basis that these losses can be utilised by future proﬁ t generating New Zealand operations. NOTE 15 TRADE AND OTHER PAYABLES 2012 $’000 3,631 1,930 5,561 2011 $’000 4,201 481 4,682 2012 $’000 2011 $’000 1,405 608 2,013 - - - 273 558 831 1,385 603 1,988 Trade payables Other payables (a) Risk exposure Information on the group’s exposure to foreign exchange risk is provided in note 23. NOTE 16 BORROWINGS CURRENT Secured Bank loans Lease liabilities (note 26) NON-CURRENT Secured Bank loans Lease liabilities (note 26) 80 For personal use onlyFINANCIAL STATEMENTS (a) Breach of covenant The group has a ﬁ nance facility (encompassing a bank loan, ﬁ nance lease facility, and bank overdraft facility (unused at 30 June 2012)) with Westpac New Zealand Limited. Debt covenants relating to this facility were breached during the year and as such Westpac New Zealand Limited has the option to call on these facilities at any time. Accordingly, the ﬁ nance leases and bank loans with Westpac New Zealand Limited have been classiﬁ ed as current. Westpac New Zealand waived their rights to take action in respect of the breach on 24 September 2012. (b) Security The bank loans are secured by an all obligations General Security Agreement given by Eastern Coal Limited and its subsidiaries (“Eastern”) under which each member of Eastern grants to the bank a ﬁ rst ranking security interest over all its present and future acquired property (including proceeds) and a ﬁ rst ranking security interest over any of the Eastern assets. In addition to this, the bank has a registered ﬁ rst and exclusive mortgage over the property at Timaru owned by a subsidiary company, Eastern Coal Supplies Limited. Lease liabilities are effectively secured as the rights to the leased assets recognised in the ﬁ nancial statements revert to the lessor in the event of default. The carrying amount of assets pledged as security for current and non-current borrowings are: CURRENT General Security Agreement Cash and cash equivalents Receivables Inventories Total current assets pledged as security NON-CURRENT First and exclusive mortgage Freehold land and buildings Finance lease Plant and equipment General Security Agreement Plant and equipment Total non-current assets pledged as security Total assets pledged as security (c) Fair value Bank loans Lease liabilities (d) Risk exposures 2012 $’000 2011 $’000 1,166 1,497 2,014 4,677 2,935 1,801 1,058 5,794 874 876 1,158 1,607 886 2,918 7,595 3,250 5,733 11,527 2012 Carrying amount $’000 1,405 608 2,013 Fair value $’000 1,405 608 2,013 2011 Carrying amount $’000 1,658 1,161 2,819 Fair value $’000 1,658 1,161 2,819 Details of the group’s exposure to risks arising from current and non-current borrowings are set out in note 23. 81 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 17 DEFERRED CONSIDERATION CURRENT Acquisition of subsidiary deferred consideration NON-CURRENT Acquisition of subsidiary deferred consideration Total deferred consideration MOVEMENTS Balance as at 30 June 2011 Unwinding of discount rate Foreign exchange loss Fair value adjustments to deferred consideration Effect of prior period adjustment Exchange differences At 30 June 2012 (a) Details on deferred consideration Unwinding of discount rate 2012 $’000 - - 138,583 138,583 138,583 2011 $’000 41,052 41,052 89,387 89,387 130,439 Deferred consideration $’000 130,439 3,811 6,987 (1,905) (2,673) 1,924 138,583 The unwinding of discount rate adjustment relates to the fair value impact on the deferred consideration calculation of the time value of money. Prior period adjustment During the year an error was noted in the calculation of the fair value of deferred consideration at the time of acquisition. As this adjustment was noted within the 12 months after the acquisition date it has been reﬂ ected in the carrying amount of assets acquired rather than through the proﬁ t or loss. Deferred consideration The acquisition of Buller Coal Limited (formerly L&M Coal Limited) in November 2010 contained two components of deferred consideration, cash and royalties. Deferred cash consideration The deferred cash consideration is made up of two payments of US$40,000,000 , the ﬁ rst being payable upon 25,000 tonnes of coal being shipped from the Buller Coal Project and the second payable upon 1 million tonnes of coal being shipped from the Buller Coal Project. The potential undiscounted amount of all future cash payments that the group could be required to make under these arrangements is between US$nil and US$80,000,000. The deferred cash consideration is valued at each reporting date based on expected timing of the cash payment and an appropriate discount rate. In accordance with Australian Accounting Standards the revaluations are taken to the income statement. 82 For personal use onlyFINANCIAL STATEMENTS Royalties As part of the consideration Bathurst was party to a royalty agreement with L&M Coal Holdings Limited. The amounts that are payable in the future under this royalty agreement are required, under the Australian Accounting Standards, to be recognised as part of the consideration paid for Buller Coal Limited The fair value of the future royalty payments is estimated using an appropriate discount rate, production proﬁ le, and forecasted US dollar coal prices (estimated using forecasts from leading investment banks). In accordance with Australian Accounting Standards the revaluations are taken to the income statement. Foreign exchange Both elements of the deferred consideration are denominated in US dollars and as such are exposed to movements in foreign exchange rates (notably New Zealand dollar / US dollar rates) with the effect of changes in the foreign exchange rates being recognised in the income statement in the period the change occurs. Refer to note 23 for discussion on the sensitivity of the income statement to ﬂ uctuations in the New Zealand dollar / US dollar exchange rate. The deferred consideration only becomes payable upon sales targets and as such is considered to be naturally hedged against US dollar sales receipts expected at the time the deferred consideration falls due. Payment timing The production targets that trigger the performance payments and royalties are not expected to be met within the next 12 months, as such deferred consideration is classiﬁ ed as non-current at 30 June 2012. (b) Security Pursuant to a deed of guarantee and security the two performance payments of US$40 million included in the deferred consideration above are secured by way of a ﬁ rst-ranking security interest in all of Buller’s present and future assets (and present and future rights, title and interest in any assets). In addition to this, Buller Coal Limited has guaranteed the payment of all amounts under the Sale and Purchase Agreement with L&M Coal Holdings Limited. The performance payments are due on the production targets discussed above; until these production targets are met no amounts are due or payable under the Sale and Purchase Agreement with L&M Coal Holdings Limited. NOTE 18 PROVISIONS CURRENT Employee beneﬁ ts Rehabilitation NON-CURRENT Rehabilitation Total provisions 2012 $’000 442 195 637 1,745 1,745 2,382 2011 $’000 286 223 509 668 668 1,177 83 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 18 PROVISIONS (CONTINUED) (a) Rehabilitation Provision is made for the future rehabilitation of areas disturbed in the mining process. Management estimates the provision based on expected levels of rehabilitation, areas disturbed and an appropriate discount rate. Refer to note 1(t) for the group’s accounting policy on rehabilitation. (b) Movements in provisions Movements in each class of provision during the ﬁ nancial year, other than employee beneﬁ ts, are set out below: Rehabilitation Provision $’000 891 54 974 21 1,940 2012 $’000 2011 $’000 76,077 76,261 315 611 448 77,451 (6,854) 70,597 191 77,260 77,451 290 350 207 77,108 (2,081) 75,027 2,068 75,040 77,108 Total $’000 77,108 330 (1,040) (17) 1,070 77,451 Carrying amount at start of year Unwinding of discount rate Additional provisions recognised Exchange differences Carrying amount at the end of the year NOTE 19 DEFERRED TAX LIABILITIES THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Mining licences Waste moved in advance Exploration and evaluation expenditure Property, plant and equipment Total deferred tax liabilities Set-off of deferred tax assets pursuant to set-off provisions (see note 14) Net deferred tax liabilities Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after 12 months MOVEMENTS AT 30 JUNE 2011 Movement to the proﬁ t or loss Effect of prior period adjustment Reclassiﬁ cation (see note 14) Exchange differences At 30 June 2012 Mining licences $’000 Waste in advance $’000 Exploration & evaluation $’000 Property, plant and equipment $’000 76,261 (233) (1,040) 18 1,071 76,077 290 36 - - (11) 315 350 255 - - 6 611 207 272 - (35) 4 448 84 For personal use onlyFINANCIAL STATEMENTS NOTE 20 CONTRIBUTED EQUITY (a) Share capital Ordinary fully paid shares Cost of capital raising (b) Movements in ordinary share capital DETAILS OPENING BALANCE 1 JULY 2010 Issue of shares Rights issue (including shortfall) Conversion of listed and unlisted options Issue of shares Less: cumulative costs of capital raising Balance 30 June 2011 Issue of shares for Coalbrookdale purchase Conversion of unlisted options Less: cumulative costs of capital raising Balance 30 June 2012 (c) Ordinary shares 2012 Shares 2011 Shares 695,747,997 667,907,997 695,747,997 667,907,997 (c) (e) (d) (c) Number of shares 224,924,333 253,333,334 116,269,357 20,980,973 52,400,000 667,907,997 2012 $’000 224,497 (13,434) 211,063 Issue price $0.30 $0.30 various $1.05 (f) (d) 15,000,000 12,840,000 $1.07 Various 695,747,997 2011 $’000 205,560 (13,370) 192,190 $’000 32,958 76,000 34,881 4,630 55,020 205,560 (13,370) 192,190 16,042 2,895 224,497 (13,434) 211,063 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held. Every ordinary share is entitled to one vote. (d) Options Information relating to the Bathurst Resources Limited Employee Share Option Plan, including details on options issued and exercised during the ﬁ nancial year and options outstanding at the end of the reporting period is set out in note 31. (e) Rights issue On 7 October 2010 the company invited shareholders to subscribe to a rights issue of 116,269,357 ordinary shares at an issue price of $0.30 per share on the basis of 1 share for every 2 fully paid ordinary shares held. The issue was fully subscribed. (f) Coalbrookdale assets On 21 July 2011 the group completed the acquisition of the Coalbrookdale assets. As part of the acquisition 15,000,000 shares in Bathurst Resources Limited were issued to the vendor. (g) Capital risk management The board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market conﬁ dence and to sustain the future development of the business. Given the stage of the company’s development there are no formal targets set for return on capital. There were no changes to the company’s approach to capital management during the year. The company is not subject to externally imposed capital requirements. 85 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 21 RESERVES Option issue reserve Foreign currency translation reserve 2012 $’000 14,763 1,200 15,963 2011 $’000 14,858 172 15,030 The movements in the reserves for the year are shown in the consolidated statement of changes in equity. Nature and purpose of reserves Option issue reserve The option reserve is used to recognise the fair value of options issued. Foreign currency translation reserve Exchange differences arising on the translation of foreign controlled entities and from the translation of ‘quasi equity’ inter-company loans in foreign operations are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. NOTE 22 DIVIDENDS No dividend was paid or declared during the ﬁ nancial year and the directors do not recommend the payment of a dividend. NOTE 23 FINANCIAL RISK MANAGEMENT The group’s activities expose it to a variety of ﬁ nancial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of ﬁ nancial markets and seeks to minimise potential adverse effects on the ﬁ nancial performance of the group. The group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk. Risk management is carried out by the management team under policies approved by the board of directors. Management identiﬁ es and evaluates ﬁ nancial risks on a regular basis. The group holds the following ﬁ nancial instruments: FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Other ﬁ nancial assets FINANCIAL LIABILITIES Trade and other payables Borrowings Deferred consideration 86 2012 $’000 2011 $’000 53,823 2,615 3,441 59,879 5,561 2,013 138,583 146,157 87,418 3,987 282 91,687 4,682 2,819 130,439 137,940 For personal use onlyFINANCIAL STATEMENTS (a) Market risk (i) Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash ﬂ ow forecasting. Due to the stage that the group is in regards to its development, management has not set up formal foreign exchange risk policies. As certainty around the timing of the cash ﬂ ows required and generated by the project become clearer an appropriate foreign exchange risk management policy will be introduced. The group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows: Deferred consideration Sensitivity 30 June 2012 USD $’000 30 June 2011 USD $’000 (138,583) (130,439) Proﬁ t is sensitive to movements in the NZ dollar / US dollar exchange rates due to the US dollar denominated deferred consideration shown in the table above. Had the NZ dollar weakened / strengthened by 10% against the US dollar with all other variables held constant, the group’s post-tax proﬁ t for the year would have been $15,544,000 lower / $12,718,000 higher (2011: $14,520,000 lower / $16,090,000 higher) due only to the conversion of the US dollar denominated deferred consideration payments. (ii) Cash ﬂ ow and fair value interest rate risk The group’s main interest rate risk arises from long term borrowings. Borrowings that are issued at variable interest rates expose the group to cash ﬂ ow interest rate risk. Borrowings issued at ﬁ xed rates expose the group to fair value interest rate risk if the borrowings are carried at fair value. The group has limited debt and as such there is no formal policy around levels of ﬁ xed and variable borrowings to be maintained. During 2012, the group’s borrowings (both ﬁ xed and variable) were denominated in NZ dollars. As at the end of the reporting period, the group had the following variable rate borrowings: Bank loans An analysis by maturities is provided in (c) below. 30 June 2012 30 June 2011 Weighted avg interest rate % 5.5% Balance $’000 1,405 Weighted avg interest rate % 4.2% Balance $’000 1,658 The group’s ﬁ xed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate risk as deﬁ ned in AASB 7. Due to the relatively low borrowings of the group the group does not regularly analyse its interest rate exposure and cash ﬂ ow interest rate risk. As the group matures and the borrowings increase management will develop appropriate polices and manage the risk accordingly. Sensitivity At 30 June 2012, if interest rates had been 100 basis points higher or lower during the year with all other variables held constant, post-tax proﬁ t for the year would have been $619,000 higher / lower (2011: $300,000 higher / lower), mainly as a result of higher/lower interest income from cash and cash equivalents. Proﬁ t is more sensitive to movements in the interest rates in 2012 than 2011 because the average cash balance for 2012 was higher than 2011. 87 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 23 FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents as well as credit exposures to our customers, including outstanding receivables. For banks and ﬁ nancial institutions, only S&P rated parties with a minimum rating of ‘A-1+’ are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its ﬁ nancial position, past experience and other factors. The compliance with credit limits by corporate customers is regularly monitored by management. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. The credit quality of ﬁ nancial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: TRADE RECEIVABLES Counterparties with an external credit rating (S&P) A-1 A-2 Counterparties without external credit rating Group 1* Total trade receivables Cash at bank and short-term deposits A-1+ *Group 1 – existing customers (more than 6 months) with no defaults in the past. (c) Liquidity risk 2012 $’000 2011 $’000 122 590 712 723 1,435 201 640 841 920 1,761 53,823 87,418 Prudent liquidity risk management implies maintaining sufﬁ cient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when they fall due. At the end of the reporting period the group held deposits at call of $44,372,630 (2011– $78,187,202) that are expected to readily generate cash inﬂ ows for managing liquidity risk. Due to the dynamic nature of the project, the group maintains ﬂ exibility in liquidity through the use of rolling deposit maturity cycles and by maintaining availability under committed credit lines. Given the large cash reserves of the business the focus of management is to maximise returns on this cash rather than adopt a formal liquidity management policy. Financing arrangements The group had access to the following undrawn borrowing facilities at the end of the reporting period: FLOATING RATE Bank overdraft (expiring within one year) The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. 2012 $’000 2011 $’000 422 416 88 For personal use onlyFINANCIAL STATEMENTS Maturities of ﬁ nancial liabilities The tables below analyse the group’s ﬁ nancial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash ﬂ ows. Balances due within 12 months equal their carrying balances as the impact of discounting is not signiﬁ cant. CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES Less than 6 months 6 – 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cash ﬂ ows Carrying amount At 30 June 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Trade payables Borrowings (exc. ﬁ nance leases) Finance leases Deferred consideration Total 5,561 1,405 608 - 7,574 - - - - - - - - - - - - - - 43,506 43,506 60,031 60,031 82,650 82,650 5,561 1,405 608 186,187 193,761 5,561 1,405 608 138,583 146,157 CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES Less than 6 months 6 – 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cash ﬂ ows Carrying amount At 30 June 2011 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Trade payables Borrowings (exc. ﬁ nance leases) Finance leases Deferred consideration Total (d) Fair value measurements 4,682 170 321 575 5,748 - 167 321 41,176 41,664 - 1,390 383 46,053 47,826 - - 287 36,190 36,477 - - - 17,383 17,383 4,682 1,727 1,312 141,377 149,098 4,682 1,658 1,161 130,439 137,940 The fair value of ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) (b) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and (c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the groups assets and liabilities measured and recognised at fair value at 30 June 2012 and 30 June 2011: At 30 June 2012 LIABILITIES Deferred consideration (see note 17) At 30 June 2011 LIABILITIES Deferred consideration (see note 17) 89 Level 3 $’000 Total $’000 138,583 138,583 Level 3 $’000 Total $’000 130,439 130,439 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 23 FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Fair value measurements (continued) The fair value of the deferred consideration is calculated as the present value of the expected cash ﬂ ows using a discount rate that reﬂ ects the speciﬁ c risk to the expected payment proﬁ le. If the risk adjusted discount rate was 10% higher or lower, the fair value of the deferred consideration would decrease by $3,446,122 / increase by $3,669,214. If the expected cash ﬂ ows from the royalty component of the deferred consideration were 10% higher or lower, the fair value of the deferred consideration would increase by $6,267,096 / decrease by $6,267,096. NOTE 24 KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Key management personnel compensation Short-term employee beneﬁ ts Post-employment beneﬁ ts Share based payments 2012 $ 2011 $ 3,032,349 2,346,640 142,987 96,576 (14,181) 9,997,537 3,161,155 12,440,753 Detailed remuneration disclosures are provided in the remuneration report on pages 33 to 41. (b) Equity instrument disclosures relating to key management personnel (i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with the terms and conditions of such options, can be found in the remuneration report on pages 33 to 41. (ii) Option holdings 2012 NAME DIRECTORS OF BATHURST RESOURCES LIMITED Craig Munro Rob Lord Malcolm Macpherson Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Richard Tacon Timothy Manners Marianne Rogers Craig Pilcher Laura McMahon Blechynden Balance at start of year Exercised Other Balance at end of year Vested and exercisable Unvested 4,500,000 3,500,000 2,000,000 - - - 12,400,000 (2,400,000) 8,000,000 (500,000) - - 5,700,000 (2,000,000) 5,000,000 - - - - - - - - - - - - - - - 4,500,000 3,250,000 1,250,000 3,500,000 2,250,000 1,250,000 2,000,000 2,000,000 - 10,000,000 7,500,000 2,500,000 7,500,000 5,500,000 2,000,000 - - - 3,700,000 1,700,000 2,000,000 5,000,000 3,000,000 2,000,000 - - - - - - All vested options are exercisable at the end of the year. 90 For personal use onlyFINANCIAL STATEMENTS 2011 NAME DIRECTORS OF BATHURST RESOURCES LIMITED Craig Munro Rob Lord Malcolm Macpherson Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Timothy Manners Max Brunsdon Alan Thom Marianne Rogers Craig Pilcher Balance at start of year Granted as compensation Exercised Balance at end of year Vested and exercisable Unvested - - - 2,400,000 1,500,000 4,500,000 3,500,000 2,000,000 10,000,000 6,500,000 - - - - - 4,500,000 3,500,000 2,000,000 12,400,000 8,000,000 - - - - - 6,000,000 5,000,000 2,000,000 5,000,000 - 300,000 - - - - 5,700,000 5,000,000 2,000,000 5,000,000 - 3,250,000 2,250,000 2,000,000 9,900,000 6,000,000 3,700,000 3,000,000 2,000,000 3,000,000 - 1,250,000 1,250,000 - 2,500,000 2,000,000 2,000,000 2,000,000 - 2,000,000 - All vested options are exercisable at the end of the year. (iii) Share holdings The number of shares in the company held during the ﬁ nancial year by each director of Bathurst Resources Limited and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. 2012 NAME DIRECTORS OF BATHURST RESOURCES LIMITED Craig Munro Rob Lord Malcolm Macpherson Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Richard Tacon Timothy Manners Marianne Rogers Craig Pilcher Laura McMahon Blechynden Balance at start of year Received during the year on exercise of options Other changes during the year Balance at end of year - - - - 70,000 60,000 462,526 530,938 100,000 2,400,000 500,000 (1,465,658) 10,605,000 (240,000) 560,000 - - - 2,000,000 (1,862,498) 600,000 - - - - 90,000 9,027 - 102,000 9,027 462,526 460,938 40,000 9,670,658 300,000 - 462,498 - 12,000 - 91 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 24 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (iii) Share holdings (continued) 2011 NAME DIRECTORS OF BATHURST RESOURCES LIMITED Craig Munro Rob Lord Malcolm Macpherson Hamish Bohannan Gerald Cooper OTHER KEY MANAGEMENT PERSONNEL OF THE GROUP Timothy Manners Max Brunsdon Alan Thom Marianne Rogers Craig Pilcher Balance at start of year Received during the year on exercise of options Other changes during the year Balance at end of year 200,000 - - 5,645,000 200,000 351,000 1,002,000 - - - - - - - - 300,000 - - - - 262,526 460,938 40,000 4,025,658 100,000 (188,502) (100,000) - - 462,526 460,938 40,000 9,670,658 300,000 462,498 902,000 - - 12,000 12,000 (c) Loans to key management personnel Details of loans made to directors of Bathurst Resources Limited and other key management personnel of the group, including their personally related parties are set out below. (i) Aggregates for loans to key management personnel Balance at the start of the year Interest paid and payable for the year Interest not charged Balance at the end of the year Number in the group at the end of the year $ 380,000 - $ 47,630 31,363 $ - - $ 380,000 380,000 1 1 2012 2011 (ii) Individuals with loans above $100,000 during the ﬁ nancial year Balance at the start of the year Interest paid and payable for the year Interest not charged Balance at the end of the year Highest indebtedness during the year $ 380,000 $ 47,630 $ - $ $ 380,000 380,000 H Bohannan The loan outstanding at the end of the year to H Bohannan is an unsecured loan which is repayable on 31 October 2012. Interest is payable on the loan at a rate of 12.5%. 92 For personal use onlyFINANCIAL STATEMENTS NOTE 25 REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit ﬁ rms: 2012 $ 2011 $ 203,033 - 203,033 26,000 182,341 208,341 9,500 9,500 225,000 52,648 277,648 23,700 9,000 32,700 10,000 10,000 420,874 320,348 41,696 - 41,696 57,682 118,849 176,531 - 29,621 29,621 28,418 49,091 77,509 218,227 107,130 15,675 15,675 41,000 41,000 654,776 468,478 PWC AUSTRALIA (i) Audit and other assurance services Audit and review of ﬁ nancial statements Due diligence services Total remuneration for audit and other assurance services (ii) Taxation services Tax compliance services Consulting advice on mergers and other structuring Total remuneration for taxation services (iii) Other services ESOP & remuneration structuring advice Total remuneration for other services Total remuneration of PwC Australia PWC NEW ZEALAND (i) Audit and other assurance services Audit and review of ﬁ nancial statements Due diligence services Total remuneration for audit and other assurance services (ii) Taxation services Tax compliance services Consulting advice on mergers and other structuring Total remuneration for taxation services Total remuneration of PwC New Zealand NON-PWC AUDIT FIRMS BDO NEW ZEALAND (i) Audit and other assurance services Audit and review of ﬁ nancial statements Total remuneration for audit and other assurance services of non-PwC audit ﬁ rms Total auditors’ remuneration 93 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 26 COMMITMENTS (a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Property, plant & equipment Within one year (b) Lease commitments (i) Non-cancellable operating leases 2012 $’000 2011 $’000 13,183 1,009 The group leases various ofﬁ ces, accommodations, and equipment under non-cancellable operating leases expiring within one to six years. The leases have varying terms, escalation clauses and renewal rights. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than ﬁ ve years Later than ﬁ ve years (ii) Finance leases 2012 $’000 444 781 121 1,346 2011 $’000 306 532 104 942 The group leases various plant and equipment with a carrying amount of $1,158,000 (2011: $1,607,000) under ﬁ nance leases expiring within one to four years. Commitments in relation to ﬁ nance leases are payable as follows: Within one year Later than one year but not later than ﬁ ve years Later than ﬁ ve years Minimum lease payments Future ﬁ nance charges Recognised as a liability The present value of ﬁ nance lease liabilities is as follows: Within one year Later than one year but not later than ﬁ ve years Later than ﬁ ve years Minimum lease payments (c) Exploration expenditure commitments The group holds various exploration permits which have as part of their conditions minimum work programs. Commitments in relation to exploration permits are payable as follows: Within one year Later than one year but not later than ﬁ ve years Later than ﬁ ve years 94 2012 $’000 608 - - 608 - 608 608 - - 608 2012 $’000 224 1,585 37 1,846 2011 $’000 642 670 - 1,312 (151) 1,161 558 603 - 1,161 2011 $’000 720 1,961 965 3,646 For personal use onlyFINANCIAL STATEMENTS NOTE 27 RELATED PARTY TRANSACTIONS (a) Parent entity The parent entity within the group is Bathurst Resources Limited. (b) Subsidiaries The consolidated ﬁ nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b). Name of entity Bathurst New Zealand Limited Bathurst Coal Limited Buller Coal Limited Eastern Coal Limited Cascade Coal Limited Somervilles Land Holdings Limited Cascade West Limited Cascade East Limited Takitimu Coal Limited Rochfort Coal Limited Eastern Coal Supplies Limited Bathurst Resources USA, LLC (c) Key management personnel Country of incorporation Class of shares 2012 % 2011 % Equity holding New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand USA Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 Disclosures relating to key management personnel are set out in note 24. (d) Transactions with other related parties The following transactions occurred with other parties: Rental Income Other related parties 2012 $ 2011 $ 11.700 - 95 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 28 EVENTS OCCURRING AFTER THE REPORTING PERIOD Acquisition of Strategic Land Holding On 25 July 2012 the company received Overseas Investment Ofﬁ ce of New Zealand approval for the acquisition of a strategic land holding adjoining the Takitimu operation for NZ$14 million (A$11 million). A deposit of NZ$2 million (A$1.8 million) had been paid before the reporting date with a further NZ$5 million (A$4 million) being paid in August 2012. The transaction is expected to complete by December 2012. NOTE 29 RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Loss for the year Share based payments Unrealised foreign exchange gain / (loss) Unwinding of discount rate Revaluation of deferred consideration Impairment loss Depreciation and amortisation Loss on disposal of property, plant and equipment Write off of capital works in progress Changes in operating assets and liabilities: Decrease in trade debtors Increase in other operating assets Increase in inventories Increase / (decrease) in trade and other payables Decrease in other liabilities Increase in other provisions Decrease in income taxes payable Decrease in deferred tax liabilities Net cash outﬂ ow from operating activities (a) Non-cash ﬁ nancing and investing activities Acquisition of Coalbrookdale 2012 $’000 (21,520) (95) 6,987 3,865 (1,905) 6,365 2,432 27 192 353 (104) (943) 1,673 - 1,137 (956) (4,598) (7,090) 2011 $’000 (13,475) 11,641 (8,239) 3,004 2,176 - 688 6 - 2,586 (1,683) (67) (94) (1,006) 130 (30) (1,603) (5,966) During the 2012 ﬁ nancial year shares were issued to the vendor of the Coalbrookdale assets as part of the settlement for the assets. The value of the shares issued was $16,041,500. Options issued on Capital Raising During the 2011 ﬁ nancial year options were issued to Helmsec Global Capital Limited in satisfaction of capital raising fees. The value of the options issued was $2,069,475 - refer to note 31 for further information. 96 For personal use onlyFINANCIAL STATEMENTS NOTE 30 EARNINGS PER SHARE 2012 cents 2011 cents (a) Basic earnings per share Total basic earnings per share attributable to the ordinary equity holders of the company (3.12) (2.76) (b) Diluted earnings per share Total diluted earnings per share attributable to the ordinary equity holders of the company (3.12) (2.76) (c) Reconciliation of earnings used in calculating earnings per share Earnings used in the calculation of basic and dilutive Earnings per share: Earnings from continued operations Total earnings (d) Weighted average number of shares used as the denominator $’000 $’000 (21,520) (21,520) (13,475) (13,475) Shares Shares Weighted average number of ordinary shares during the period used in the calculation of basic and dilutive earnings per share 689,327,339 488,234,924 Adjustments for calculation of diluted earnings per share: Options (1) Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 66,245,132 37,703,440 755,572,471 525,938,364 (1) Options that could potentially dilute earnings per share in the future, but were not included in the calculation per share because they are anti – dilutive for the periods presented. (e) Rights issue During the 2011 ﬁ nancial year a two for one rights issue was made to existing shareholders at an offer price below the quoted share price on the day the issue was made. Under AASB 113 Earnings Per Share such an issue results in an implied bonus which is applied retrospectively to the earnings per share calculations. NOTE 31 SHARE-BASED PAYMENTS (a) Employee share option plan The Bathurst Resources Limited Employee Share Option Plan (“ESOP”) was approved by shareholders at the 2010 AGM. The ESOP is designed to provide directors, senior executives, employees, and consultants with an opportunity to participate in the company’s future growth and gives them an incentive to contribute to that growth. The ESOP has been established to enable the company to attract and retain skilled and experienced directors, senior executives, employees, and consultants and to provide them with the motivation to make the company more successful and deliver long-term shareholder returns. Under the plan, participants are granted units in the ESOP Trust, some of which only vest upon the shipment of the ﬁ rst 25,000 tonnes from the Buller Coal Project. Participation in the ESOP is at the board’s discretion. Options granted under the plan carry no dividend or voting rights. When exercised each option coverts into one fully paid ordinary share. 97 For personal use onlyFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 NOTE 31 SHARE-BASED PAYMENTS (CONTINUED) (a) Employee share option plan (continued) 30 June 2012 Issue Grant date Expiry date Exercise Price Balance at start of year Forfeited during the year Exercised during the year Balance at the end of the year Vested and exercisable at the end of the year A B C D E F G H Total 18 Aug 10 30 Sept 13 10.8 cents 20 Aug 10 30 Sept 13 16.8 cents 9,500,000 1,000,000 20 Aug 10 30 Sept 13 10.8 cents 11,000,000 29 Nov 10 30 Sept 13 29 Nov 10 31 Dec 13 6 Dec 10 31 Dec 13 21 cents 40 cents 40 cents 18 Apr 11 31 Dec 13 113 cents 18 Apr 11 31 Dec 13 85 cents 1,000,000 14,000,000 14,700,000 2,000,000 2,000,000 55,200,000 32.7 cents Weighted average exercise price 30 June 2011 - - - - - - - - - - - - 9,500,000 9,500,000 1,000,000 1,000,000 4,500,000 6,500,000 6,500,000 - - 1,000,000 1,000,000 14,000,000 7,000,000 2,000,000 12,700,000 5,200,000 - 2,000,000 2,000,000 2,000,000 2,000,000 6,500,000 48,700,000 34,200,000 19.8 cents 34.4 cents 32 cents Issue Grant date Expiry date Exercise Price Balance at start of year Granted during the year Exercised during the year Balance at the end of the year Vested and exercisable at the end of the year A B C D E F G H Total 18 Aug 10 30 Sept 13 15(1) cents 20 Aug 10 30 Sept 13 21(2) cents 20 Aug 10 30 Sept 13 15(1) cents 29 Nov 10 30 Sept 13 29 Nov 10 31 Dec 13 6 Dec 10 31 Dec 13 21 cents 40 cents 40 cents 18 Apr 11 18 Apr 11 31 Dec 13 113 cents 31 Dec 13 85 cents Weighted average exercise price - - - - - - - - - - 9,500,000 1,000,000 11,000,000 1,000,000 14,000,000 15,000,000 2,000,000 2,000,000 - - - - - 9,500,000 9,500,000 1,000,000 1,000,000 11,000,000 11,000,000 1,000,000 1,000,000 14,000,000 7,000,000 300,000 14,700,000 7,200,000 - - 2,000,000 2,000,000 2,000,000 2,000,000 55,500,000 300,000 55,200,000 40,700,000 32.6 cents 40 cents 32.7 cents 30.1 cents (1) As a result of the rights issue in November 2010 the exercise price of these options was adjusted to 10.8 cents (2) As a result of the rights issue in November 2010 the exercise price of these options was adjusted to 16.8 cents The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2012 was $0.74 (2011 – $1.22). The weighted average remaining contractual life of share options outstanding at the end of the reporting period was 1.41 years (2011 – 2.40 years). Fair value of options granted No options were issued during the year ended 30 June 2012. 98 For personal use onlyFINANCIAL STATEMENTS (b) Other option issues No options were issued during the year ended 30 June 2012. As at 30 June 2012 there were 16,010,776 options on issue outside the ESOP which have an expiry date of between 31 October 2012 and 15 November 2013 along with an exercise price of between 15.5 cents and 37.8 cents. (c) Expenses arising from the share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period were as follows: Options issued under the employee option plan recognised in the income statement Options issued recognised in the income statement Vesting and forfeiture adjustments from unvested options Other options issued recognised directly in equity as costs of equity raising NOTE 32 PARENT ENTITY INFORMATION (a) Summary of ﬁ nancial information The individual ﬁ nancial statements for the parent entity show the following aggregate amounts: BALANCE SHEET Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves Option issue reserve Foreign currency translation reserve Accumulated losses Total shareholders’ equity Proﬁ t / (Loss) for the year Total comprehensive income (b) Contractual commitments No later than one year Later than one but not later than ﬁ ve years 2012 $’000 - - (95) - (95) 2012 $’000 37,004 197,240 823 823 2011 $’000 11,191 450 - 2,069 13,710 2011 $’000 85,491 175,850 570 570 211,063 192,190 14,763 32 (29,441) 196,417 2,359 2,359 158 164 322 14,858 32 (31,800) 175,280 (11,835) (11,835) 146 269 415 (c) Guarantees entered into by the parent entity The parent entity has provided ﬁ nancial guarantees in respect of bank loans of subsidiaries amounting to $4,665,000 (2011: $4,665,000). This loan is secured by registered mortgages over the freehold properties of Eastern Coal Limited (and its subsidiaries) as well as a ﬁ rst ranking security interest over Eastern Coal Limited (and its subsidiaries) present and future acquired property (including proceeds). 99 For personal use onlyDIRECTORS’ DECLARATION In the directors’ opinion: (a) the ﬁ nancial statements and notes set out on pages 55 to 99 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s ﬁ nancial position as at 30 June 2012 and of its performance for the ﬁ nancial year ended on that date, and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Note 1(a) conﬁ rms that the ﬁ nancial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the chief executive ofﬁ cer and chief ﬁ nancial ofﬁ cer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. CRAIG MUNRO | Chair Perth 27 September 2012 100 For personal use onlyINDEPENDENT AUDITOR’S REPORT 101 For personal use onlyINDEPENDENT AUDITOR’S REPORT 102 For personal use onlySECTION THREE Other Information ASX additional information Tenement Schedule Coal Resources and Reserves Corporate Directory 104 106 107 109 X For personal use onlyASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 27 September 2012. A. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Ordinary shares 422 972 778 1,761 403 4,336 There were 452 holders of less than a marketable parcel of ordinary shares. B. Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: Name Number held Percentage of issued shares Ordinary shares National Nominees Limited J P Morgan Nominees Australia Limited HSBC Custody Nominees JP Morgan Nominees Australia Limited Bell Potter Nominees Limited Merrill Lynch (Australia) Nominees Pty Limited Mr RJ Grifﬁ ths & Mrs JD Grifﬁ ths Citicorp Nominees Pty Limited RBC Investor Services Australia Nominees Pty Limited Mr H Bohannan & Ms J Bohannan BNP Paribas Noms Pty Limited Passio Pty Limited UBS Wealth Management Aust Nominees Pty Limited CTS Funds Pty Limited Citicorp Nominees Pty Limited AMP Life Limited HSBC Custody Nominees Mrs Vicky Teoh Mr Michael Kable Bond Street Custodians Limited 109,397,168 99,692,232 74,060,996 70,400,419 34,553,255 20,043,704 15,000,000 11,412,462 6,529,394 6,300,000 4,161,199 4,000,000 3,995,187 3,146,000 3,089,475 3,003,108 2,786,799 2,600,000 2,541,000 2,415,017 15.70 14.31 10.63 10.10 4.96 2.88 2.15 1.64 0.94 0.90 0.60 0.57 0.57 0.45 0.44 0.43 0.40 0.37 0.36 0.35 479,127,415 68.77 104 For personal use onlyASX ADDITIONAL INFORMATION B. Equity security holders (continued) Unquoted equity securities Unquoted options on issue C. Substantial holders Substantial holders in the company are set out below: Bank of America Corporation * L1 Capital Pty Ltd Mathews Capital Partners Pty Limited * Coupland Cardiff Asset Management JP Morgan Chase & Co Number on issue Number of holders 61,210,776 24 Number held Percentage of issued shares 83,066,099 78,924,030 52,849,280 43,532,420 34,850,398 11.92 11.33 7.59 6.25 5.00 * The shares held by Mathews Capital Partners Pty Limited (‘Mathews”) are subject to hypothecation with Bank of America Corporation (“Bank of America”) and as such Bank of America is required to report these holdings in their notice of substantial holdings. This has resulted in the shares of Mathews being double counted in the above table. D. Voting rights The voting rights attached to each class of equity securities are set out below: (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (b) Options No voting rights. 105 For personal use onlyTENEMENT SCHEDULE TENEMENT SCHEDULE Permit Number Permit Number MP51279 MP41455 MP41274 MP41456 MP41332 MP53614 EP40591 EP51078 EP40628 EP53047 EP53756 EP54031 EP51260 PP52484 Location Location Escarpment Cascade Creek Denniston Denniston Denniston Coaldale Whareatea West Coal Creek Buller Charleston Mokihinui 10 Mile Creek Ohai Albury Registered Holder Registered Holder Buller Coal Limited Cascade Coal Limited Buller Coal Limited Buller Coal Limited Buller Coal Limited Takitimu Coal Limited Rochfort Coal Limited Buller Coal Limited Buller Coal Limited Buller Coal Limited Buller Coal Limited Buller Coal Limited Rochfort Coal Limited Rochfort Coal Limited Bathurst Interest Bathurst Interest Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% Bathurst 100% 106 For personal use onlyCOAL RESOURCES AND RESERVES TABLE 1 - RESOURCES TABLE 2 - RESERVES (ALL SOUTH BULLER) AREA Measured Resource Indicated Resource Inferred Resource Total Resource ROM COAL (MT) (Mt) (Mt) (Mt) (Mt) Proved Probable Total Escarpment Deep Creek Whareatea West Coalbrookdale Cascade Total PRODUCT COAL (MT) Escarpment Deep Creek Whareatea West Coalbrookdale Cascade Total 2.7 5.8 5.0 - 0.4 13.9 1.9 2.7 10.6 1.8 0.2 17.2 4.6 8.5 15.6 1.8 0.6 31.1 Proved Probable Total 2.2 5.1 3.6 - 0.4 11.3 1.6 2.4 6.7 1.6 0.2 12.5 3.8 7.5 10.3 1.6 0.6 23.8 SOUTH BULLER Escarpment Deep Creek Whareatea West Coalbrookdale Cascade Totals NORTH BULLER Millerton North North Buller Blackburn Totals Buller Coal Project TAKITIMU Coaldale GRAND TOTAL 2.8 6.2 5 - 0.5 14.5 - - - - 2.1 3.1 12.4 2.3 0.3 20.2 1.9 4.9 5.8 12.6 0.9 1.6 8.1 4.9 0.7 16.2 3.6 10.2 14.1 27.9 5.8 10.9 25.5 7.2 1.5 50.9 5.5 15.1 19.9 40.5 14.5 32.8 44.1 91.4 1.2 15.7 1.2 34.0 0.7 44.8 3.1 94.5 Note 1 Resources are inclusive of reserves 2 All resources and reserves quoted in this release are reported in terms as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council Of Australia (“JORC”). 107 For personal use onlyCOAL RESOURCES AND RESERVES RESERVES QUALITY – PRODUCT COAL (AT 15% MOISTURE) AREA Ash % CSN Volatile Matter Sulphur Escarpment Deep Creek (coking) Deep Creek (thermal) Whareatea West Coalbrookdale Cascade Average Range Average Range Average Range Average Range 8.2 5.0 11.8 10.5 7.9 2.0 2.1 – 11.4 4.9 – 5.2 6.4 - 16.5 3.2 – 11.8 2.1 – 11.2 0.3 - 2.1 8 >9 N/A 9 5.5 4.5 6 – 9+ 5 – 9++ 28.4 25.9 – 31.3 37.0 18.0 – 38.0 N/A N/A N/A 8 – 9++ 29.7 23.9 – 31.7 5 – 8 2 – 5 32.0 29.1 – 32.1 34.9 31.3 – 34.9 0.6 2.5 1.7 0.8 1.0 1.5 0.4 – 0.8 2.0 - 3.1 0.9 - 2.0 0.8 – 0.9 0.3 – 1.4 0.3 – 1.9 RESOURCES QUALITY The company is not aware of any information to indicate that The information on this report that relates to exploration results and they quality of the identiﬁ ed resources will fall outside the range mineral resources for Millerton North, North Buller, Blackburn and of speciﬁ cations for reserves as indicated in the above table. Coaldale is based on information compiled by Hamish McLauchlan Further resource and reserve information can be found on the company’s website at www.bathurstresources.co.nz who is a full time employee of Buller Coal Limited and is a member of the Australasian Institute of Mining and Metallurgy. Mr McLauchlan has sufﬁ cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he COMPETENT PERSON STATEMENTS: is undertaking to qualify as a Competent Person as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McLauchlan consents to the inclusion in this report of the matters based on his information in the form and context in which it appears above. The information on this report that relates to mineral resources and reserves for Deep Creek is based on information compiled by Neil Fraser who is a full time employee of Golder Associates Pty Ltd and is a member of the Australasian Institute of Mining and Metallurgy. Mr Fraser has sufﬁ cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Fraser consents to the inclusion in this report of the matters based on his information in the form and context in which it appears above. The information on this report that relates to mineral reserves for Escarpment, Cascade, Coalbrookdale and Whareatea West is based on information compiled by Ainsley Ferrier who is a full time employee of Buller Coal Limited and is a member of the Australasian Institute of Mining and Metallurgy. Ms Ferrier has sufﬁ cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ms Ferrier consents to the inclusion in this report of the matters based on her information in the form and context in which it appears above. 108 For personal use only CORPORATE DIRECTORY Directors CRAIG MUNRO | Non – Executive Chair HAMISH BOHANNAN | Managing Director GERALD COOPER | (Executive) ROB LORD | (Non-Executive) MALCOLM MACPHERSON | (Non-Executive) Secretaries TIMOTHY MANNERS LAURA MCMAHON BLECHYNDEN Registered ofﬁ ce Ground Floor, 1306 Hay Street, West Perth, WA 6005, + 61 8 9481 2100 New Zealand ofﬁ ce Level 12, 1 Willeston Street, Wellington 6011 New Zealand, +64 4 499 6830 Share registry Computershare Investor Services Pty Limited Level 2, 45 St Georges Terrace, Perth, WA 6000 1300 557 010 (within Australia) + 61 3 9415 4000 (outside Australia) Auditor PricewaterhouseCoopers QV1, 250 St Georges Terrace, Perth, WA 6000 Solicitors Allion Legal Level 2, 50 Kings Park Road, West Perth, WA 6005 Bell Gully Level 21, 171 Featherston Street, Wellington 6140, New Zealand Banker Westpac Banking Corporation Stock exchange listings Bathurst Resources Limited shares are listed on the Australian Securities Exchange (ASX) and the New Zealand Exchange (NZX), under the code BTU. Website address www.bathurstresources.co.nz www.bathurstresources.co.nz For personal use only www.bathurstresources.co.nz For personal use only

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