Syrah Resources Ltd Annual Report 2015

Plain-text annual report

ANNUAL REPORT 2015 For the 6 month period ended 31 December 2015 For personal use onlyCORPORATE DIRECTORY COMPANY PROFILE Directors James Askew Non-Executive Chairman Tolga Kumova Managing Director Sam Riggall Non-Executive Director Rhett Brans Non-Executive Director José Manuel Caldeira Non-Executive Director Company secretary Melanie Leydin Registered and corporate oﬃce Melbourne oﬃce Level 9, 356 Collins Street Melbourne VIC 3000 Telephone: +61 3 9670 7264 Email: enquiries@syrahresources.com.au Website: www.syrahresources.com.au Perth oﬃce Ground Floor, 10 Kings Park Road West Perth WA 6005 Mozambique oﬃce Pemba, Av. 1º Maio, Rua XII, Cabo Delgado, Moçambique Telephone: +285 2722 0713 Email: twigg.admin@syrahresources.com.au Share registry Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria 3067 Telephone: 1300 850 505 (within Australia) +61 3 9415 4000 (overseas) Email: web.queries@computershare.com.au Website: www.computershare.com.au Auditors PricewaterhouseCoopers Level 19, 2 Southbank Blvd Southbank VIC 3006 Solicitors Gilbert + Tobin Level 22, 101 Collins Street Melbourne VIC 3000 Stock exchange listing Australian Securities Exchange (ASX Code: SYR) American Depository Receipts (Ticker Symbol: SRHYY) OVERVIEW Syrah Resources Limited is currently developing its world class Balama Project in Mozambique and is focussed on its vision of becoming the leading supplier of superior quality graphite products to industrial and emerging technologies globally. OUR VISION Syrah’s vision is to be the leading supplier of superior quality graphite products, working closely with our customers and supply chain to innovate and bring enhanced value to industrial and emerging technology markets globally. OUR VALUES Syrah is committed to: > WORKING SAFELY at all times > PARTNERING WITH STAKEHOLDERS for community and environmental sustainability INTEGRITY and FAIRNESS in all our business dealings > > Being ACCOUNTABLE for our decisions and actions > SETTING GOALS and supporting people to achieve them We will work as a team and act like owners. CONTENTS 2 4 6 8 HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 CHAIRMAN’S LETTER MANAGING DIRECTORS REPORT REVIEW OF OPERATIONS 24 DIRECTORS’ REPORT 46 AUDITOR’S INDEPENDENCE DECLARATION 47 FINANCIAL STATEMENTS 93 DIRECTORS’ DECLARATION 94 INDEPENDENT AUDITOR’S REPORT 96 SHAREHOLDER INFORMATION For personal use only SYRAH RESOURCES IS AN AUSTRALIAN RESOURCE COMPANY COMMITTED TO THE DEVELOPMENT OF THE WORLD CLASS BALAMA GRAPHITE PROJECT IN MOZAMBIQUE BALAMA LOCATION MAP MONTEPUEZ BALAMA NAMPULA APURA PEMBA Morrola Turn Main Lurio river crossing NACALA LUMBO Nampula Junction AFRAFR AFRICA AFRICAARRICA MOZAZAMBBIQ MOZAMBIQUE ZAMB QUE 1 1 S S Y Y R R A A H H R R E E S S O O U U R R C C E E S S > > A A N N N N U U A A L L R R E E P P O O R R T T 2 2 0 0 1 1 5 6 For personal use only HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 Syrah completed a fully underwritten $211 million capital raising in August 2015, commenced development and construction of the Balama Project and has set the foundation for the successful delivery of this world class in early 2017. 2 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 FUNDING > Successfully completed a fully underwritten $211 million capital raising in August 2015 BALAMA GRAPHITE PROJECT Commenced the development and construction of the Balama Project by: > Commencing detailed engineering and design > Commencing pre-stripping of the Balama West orebody > Placing orders for all principal mechanical equipment and long lead items which are now in various stages of production > Completing bulk earthworks and preparing the processing plant site for the commencement of concrete work in early 2016 > Substantially completing the construction of a 7 km sealed access road into site > Commencing with an expansion to the existing accommodation camp at Balama > Tendering of key operational service contracts including laboratory services, product transport, fuel supply and bulk storage contracts > Relocating farm lots from the Mining Concession and being recognised in Mozambique as a leading example as to how such programs should be implemented > Progressively recruiting key construction and operational staﬀ with a number of positions being awarded to highly qualiﬁed Mozambican nationals Continued product marketing eﬀorts and product qualiﬁcation testwork to secure > Statement of sales intent for up to 15,000 tonnes per annum of ﬂake graphite with one of the world’s largest refractory producers > Statement of sales intent for between 25,000 tonnes and 35,000 tonnes per annum of Balama natural graphite recarburisers (Balama recarburisers) with Hiller Carbon Subsequent to 31 December 2015: > Three year oﬀtake agreement for 20,000 tonnes per annum of ﬂake graphite for Japanese and Korean markets with Marubeni Corporation PROPOSED SPHERICAL GRAPHITE PROJECT > Securing access to proprietary spherical graphite coating technology by entering into a 20 year exclusive licensing agreement with Morgan AM&T Hairong Co., Ltd (Hairong Morgan) > Signing various oﬀtake agreement with Hairong Morgan after a period of extensive testwork on Balama spherical graphite including: • Three year Product Sales Agreement for 2,000 tonnes per annum of uncoated spherical graphite • Three year Marketing Agreement for 5,000 tonnes per annum of uncoated spherical graphite and 2,000 tonnes per annum of coated spherical graphite Subsequent to 31 December 2015: > Entered into a Memorandum of Understanding with Marubeni Corporation to secure spherical graphite oﬀtake agreements with anode and battery producers in Japan and Korea by 30 June 2016 For personal use only OVER S40 R A E Y OF MINE LIFE WITH FURTHER GROWTH OPPORTUNITIES OVER TPA 350K GRAPHITE CONCENTRATE PRODUCTION OVER THE FIRST 10 YEARS COMPLETED A$211m CAPITAL RAISING IN AUGUST 2015 BALAMA PROJECT CONSTRUCTION ACTIVITIES WELL UNDERWAY 3 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only CHAIRMAN’S LETTER Your Board and management are strategizing the best ways to deliver shareholder value, while preserving a conservative balance sheet and capacity to accommodate challenges created by the very scale of our endeavour. 4 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Dear Shareholders, This report for the “shortened” ﬁnancial period of six months to 31 December 2015 is an interim update, following the Company’s decision to switch to a calendar year reporting period and thus has some brevity of content. Your new management team has settled into the mission of building the Balama Graphite Project and evaluating ways to optimise the project. Few will appreciate that the scale of this project is an order of magnitude larger than any other graphite project ever constructed. This brings with it the advantages of operating cost eﬃciency and capacity to produce multiple graphite products, which necessitate careful attention to supply chain management and product qualiﬁcation, essential to long term satisfaction of our global customers. These latter aspects are now being addressed in great detail and represent a very substantial barrier to entry for many of our competitors striving to enter the production supply chain. It is not enough to successfully build and operate the worlds’ largest graphite project; we must ensure the high grade ore is turned into a global brand of premium grade graphite concentrate, which redeﬁnes the expectations of customers and is cost- competitive across all product speciﬁcations. Syrah is focused on traditional industrial markets and the emerging battery industry. Our planned scale of production at over 350,000 tonnes of +95% graphite concentrate per year will challenge established paradigms of graphite consumption and pricing. This excludes the potential of further expanding output to match demand from a broader customer community. Your Board and management are strategizing the best ways to deliver shareholder value, while preserving a conservative balance sheet and capacity to accommodate challenges created by the very scale of our endeavour. This will also require the capacity of our markets to appreciate the “game changing” that will be created by the scale and quality of Balama planned production. I need to share with you the Board’s appreciation of how the management team has developed. Some fourteen months ago, when I joined the Board, the management team could euphemistically have been described as a “skeleton crew”. It is now a fully functional group, with a small Melbourne head oﬃce, the technical team and Chief Operating Oﬃcer based in Perth, and the Balama project team based in Mozambique. Systems essential to the management and construction activities are well established. In 2016, we are assembling a marketing, quality control and logistics management team to compliment the operations contingent. The culture and values of an organization are key to its’ long term success. In this, Syrah is evolving into a high performance group with focus on creating and maintaining shareholder value, while building a reputation for excellent community relations, with transparency. These are aspects which are based on real behaviours and are earnt, rather than “bought”. Your Board is impressed that the management team holds these as key tenets of their mission to deliver the production and products which global customers demand. Sincerely, James Askew Chairman 31 March 2016 For personal use only 5 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only MANAGING DIRECTOR’S REPORT The past 6 months has been a transformational period for Syrah Resources and its shareholders, following the completion of a $211 million capital raising in August 2015 and commencing the development of the Balama Project in Mozambique. 6 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Dear Shareholders, Syrah has just completed a “shortened ﬁnancial year” as a result of moving its ﬁnancial reporting year to a calendar basis, commencing 1 January 2016. As a result, this Annual Report covers the six month period from 1 July 2015 to 31 December 2015. The past six months has been a transformational period for Syrah Resources and its shareholders, following the completion of a $211 million capital raising in August 2015 and commencing the development of the Balama Project in Mozambique. BALAMA PROJECT At the start of this shortened ﬁnancial year, Syrah had a world class project with a completed feasibility study. Today, the development of the project is well underway with production targeted to commence in early 2017. In terms of development activities at Balama we have successfully built the foundations for signiﬁcant construction activities during 2016 by recruiting an experienced and talented team, progressing detailed design, committing to long lead items and commencing works on site including pre-stripping, bulk earthworks, access road construction and camp expansion projects. With an increase in the level of activity at Balama, the team continues to focuss on strictly adhering to our core value of Working Safely. We have successfully established a strong culture of safety awareness and have progressively implemented leading health and safety standards, management systems and education programs into our daily work schedules. To deliver the Balama Project, we also recognise the importance of maintaining strong ties with local communities and provincial and national government departments. To this end we are committed to local training and recruitment, local procurement and local economic development. It is satisfying to report that our Company and team in Mozambique has been recognised as a leading example for the delivery of its farmland resettlement program. In addition, we continue to recruit some highly qualiﬁed Mozambique employees to join our team. SALES AND MARKETING Graphite is an industrial mineral and we understand that a key success factor in this market is to develop strong relationships with major end users and traders in order to thoroughly understand and meet their speciﬁc requirements. During the ﬁnancial period, the Company signed a Statement of Sales Intent with a major global refractory producer for 15,000 tpa of ﬂake graphite. Subsequent to year end, a Statement of Sales Intent was signed with Hiller Carbon for between 25,000 tpa and 35,000 tpa of recarburiser, and an oﬀtake ﬁnalised with Marubeni for 20,000 tpa of ﬂake graphite. We believe these agreements validate our sales and marketing strategy, and the Syrah team are continuing to progress and ﬁnalise discussions with various other parties globally. PROPOSED SPHERICAL GRAPHITE PROJECT While our primary focus remains on successfully delivering the Balama Project we continue to progress our future growth opportunities including a proposed spherical graphite project in the USA. The growing global trend in the use of lithium ion batteries for energy storage and automotive electriﬁcation represents a unique and compelling opportunity for the downstream processing of Balama natural graphite. To ensure that we position ourselves to become a key supplier to this growing market, we ﬁnalised an exclusive licensing agreement with Hairong Morgan for its proprietary spherical graphite coating technology. This will provide us with the capacity to operate an integrated supply chain from mine to battery anode material and is anticipated to provide a signiﬁcant competitive advantage. We have also been working extensively with potential customers in order ensure that Balama spherical graphite satisﬁes their product qualiﬁcation process. We are pleased to report that our eﬀorts allowed us secure our ﬁrst spherical graphite oﬀtake and marketing agreements For personal use only with Hairong Morgan. This represents a strong vote of conﬁdence for our product in China, which is currently the largest and fastest growing lithium ion battery market in the world. We continue to receive positive feedback from potential customers and subsequent to year end, a number of major global battery material manufacturers have advised that they have qualiﬁed Balama spherical graphite for their automotive customers’ requirements. Accordingly, we have ﬁnalised a Memorandum of Understanding with Marubeni Corporation to secure spherical graphite oﬀtake agreements with anode and battery producers in Japan and Korea prior to 30 June 2016. Finally, we would like to take the opportunity to thank shareholders for their continued support and sharing our vision of becoming the leading graphite producer globally. We look forward to the exciting year ahead and the commencement of commissioning at the Balama processing plant in late 2016. Tolga Kumova Managing Director 31 March 2016 7 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only REVIEW OF OPERATIONS In August 2015, Syrah successfully completed a fully underwritten $211 million capital raising which allowed for the development of the Balama Project to commence. 8 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 CAPITAL RAISING During August 2015, Syrah successfully completed a fully underwritten capital raising of approximately $211 million via an institutional placement and a pro rata accelerated renounceable entitlement oﬀer. The proceeds from this capital raising will predominantly be used to fund the development of the Company’s Balama Project in Mozambique as well as general and administrative costs and further studies in relation to future potential projects including a potential spherical graphite facility in the United States. The capital raising consisted of the two components and resulted in the issuance of 64.9 million new shares: > > Institutional Placement at $3.25 per share to raise $98 million; and Pro-rata accelerated renounceable Entitlement Oﬀer to eligible shareholders to subscribed for 4 new Syrah shares for every 19 existing Syrah shares at an oﬀer price of $3.25 per share to raise $113 million. The completion of this capital raising provided an opportunity for a number of new specialist funds and institutions to join the register and sees us funded through to late 2016. BALAMA PROJECT Development Activities With the completion of the capital raising, development and construction activities are now well underway with production targeted to commence in early 2017. Key development and construction activities for the Balama Project during the period include: > Detailed engineering and design > > > > > > > > Pre-stripping of the Balama West orebody Placed orders for all principal mechanical equipment and long lead items which are now in various stages of manufacture. A power station contract has been awarded for the delivery of a 10 MW facility that will supply power to the processing plant and all other infrastructure Completed bulk earthworks and prepared the processing plant site for the commencement of concrete work in early 2016. The ﬁrst signiﬁcant concrete pour will be for the run-of-mine ore silo foundations Substantially completed the construction of a 7km bitumen access road into site Commenced an expansion to the existing accommodation camp at Balama to increase occupancy levels from 70 to 286 people. Progressively upgrading on-site medical facilities which included the refurbishment of a second on-site ambulance Tendered key operational service contracts including laboratory services, product transport, fuel supply and bulk storage contracts Relocated farm lots from the Mining Concession is now substantially complete. This relocation program has been recognised in Mozambique as a leading example as to how such programs should be implemented Progressively recruited key construction and operational staﬀ with a number of positions being awarded to highly qualiﬁed Mozambican nationals For personal use only 9 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Figure 1: Cleared processing plant site at Balama For personal use only RREEVVIIEEWW OOFF OOPPEERRAATTIIOONNSSS CONTINUED 10 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 DEVELOPMENT AND CONSTRUCTION ACTIVITIES ARE NOW WELL UNDERWAY AT BALAMA For personal use only Figure 2: Pre-stripping of Balama West orebody 11 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Figure 3: First excavation for ore silo foundations Figure 4: Pouring of ﬂoor slab for the construction of a larger accommodation camp For personal use only REVIEW OF OPERATIONS CONTINUED 12 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 SALES AND MARKETING Syrah’s strategy is to partner with major end users or key regional commodity traders to leverage oﬀ their existing relationships and distribution channels. A three year oﬀtake agreement with Chalieco for 80,000 tonnes per annum has been signed and a Memorandum of Understanding for the sale of nature ﬂake graphite with Asmet. During November 2015, Syrah signed a Statement of Sales Intent with one of the world’s largest refractory producers. This leading refractory producers intends to purchase up to 15,000 tonnes per annum of natural graphite for its production facilities around the world. Initial concentrate samples have been provided to this party and have satisﬁed their internal product qualiﬁcation process. Balama graphite concentrate will be used for refractory bricks and parts for industrial high-temperature processes exceeding 1,200⁰C. Subsequent to the year end, Syrah also ﬁnalised a three year oﬀtake agreement with Marubeni for 20,000 tonnes per annum. Marubeni will have exclusive rights to import and sell Balama graphite in Japan and Korea (Territory), and product prices will be negotiated on a quarterly basis between the parties with reference to the market prices prevailing in the Territory. In addition, Syrah also appointed subsequent to year end Antonio Assis as General Manager – Sales and Marketing. Antonio was previously the Worldwide Sales and Marketing Manager for Nacionale de Graﬁte and has 28 years of international sales and marketing experience. His in depth knowledge of the graphite market and signiﬁcant industry networks will be invaluable in assisting Syrah with successfully executing its sales and marketing strategies. SUSTAINABILITY Health and Safety Working safely at all times is a core value of Syrah and the Company has implemented industry leading health and safety standards and systems of work at the Balama Project. The Balama medical clinic on site, operated by International SOS and licensed in Mozambique, is indicative of these standards and is available to all employees and contractors working on the project. The medical clinic provides primary, occupational and emergency evacuation care supported by a Doctor, an Advanced Life Support Paramedic, and a Nurse. The Company has implemented a Health and Safety Management System which is being used to monitor and report all health and safety metrics. The management team engages with the workforce to ensure a transparent reporting culture is maintained. There is also a strong emphasis on educating employees to eﬀectively identify hazards in the workplace. A total of 18 incidents were reported during the six month period ended 31 December 2015 with minor hand injuries being the most frequently reported incident type requiring ﬁrst aid treatment. Resettlement Action Plan During the six month ﬁnancial period ended 31 December 2015, a total of 201 farms located on the Mining Concession were resettled as part of the Resettlement Action Plan (RAP). These aﬀected farms consisted farming ﬁelds only, with no dwellings impacted. A Resettlement Committee was established by the Balama District Government and a Technical Working Group (TWG) was Figure 5: Ongoing engagement with local communities at Balama For personal use only developed consisting of two members from each aﬀected village. The TWG’s primary role is to convey grievances to the Resettlement Committee and the Company, and to oversee the clearing and allocation of 697 hectares of resettlement land. Aﬀected farmers were allocated new farming land, provided seeds for the planting of new crops and received compensation for the loss of their original farms as well as associated economic trees and structures. A Compensation Desk consisting of representatives from Syrah, the Mozambican government, civil society, the Resettlement Committee and community leaders was established to ensure all compensation payments were administered in accordance with legal requirements. Due to Syrah’s strong relationship with the local communities and associated key stakeholders, the Company was able to complete all planned RAP activities prior to the planting season. This has resulted in minimal disruption to the local food supply and will ensure that construction activities commence on schedule. The RAP Program has been and remains recognised as a leading example of industry best practice in Mozambique. Figure 6: Traditional ceremony performed prior to the clearing of resettlement land Figure 7: Refurbished ambulances 13 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only REVIEW OF OPERATIONS CONTINUED 14 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 SYRAH IS COMMITTED TO THE DEVELOPMENT OF THE LOCAL COMMUNITIES SURROUNDING AT THE BALAMA PROJECT For personal use only SUSTAINABILITY (CONTINUED) Community Development Syrah is committed to the development of the local communities surrounding the Balama Project. The Company has identiﬁed eight communities that are the focus of all community development and local employment initiatives. During the period, numerous projects were completed including: > > Several solar powered water supply systems were constructed and commissioned Solar panels were installed at a number of schools and at a medical clinic > Mechanical water boreholes were constructed and commissioned. Syrah is also committed to the employment and development of people residing in the local communities and ensuring that Mozambique employees occupy key leadership roles across the business. Currently, Mozambique employees hold senior roles in the following disciplines: General Management, Social and Environment; Finance; Public Aﬀairs, Procurement; Health & Safety and Human Resources. Figure 9: Mechanical water boreholes 15 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Figure 8: Water supply systems For personal use only REVIEW OF OPERATIONS CONTINUED SUSTAINABILITY (CONTINUED) Environment Syrah has successfully obtained its Environmental License and is in the process of implementing an Environmental Monitoring Program in line with licence requirements. A number of baseline monitoring programs have commenced to measure surface and ground water quality, ambient noise, dust levels, geo-hydrology and background radiation. Air quality monitoring, ichthyofaunal and terrestrial fauna surveys will commence in 2016. During December 2015, Syrah’s inaugural Annual Environmental Management Report was submitted to the Ministry of Land, Environment & Rural Development (MITADER) in Maputo, Mozambique. Figure 10: Installation of dust bucket at Balama 16 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only SYRAH IS COMMITTED TO THE ENVIROMENT AND IS IMPLEMENTING AN ENVIRONMENTAL MONITORING PROGRAM IN LINE WITH LICENCE REQUIREMENTS 17 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only REVIEW OF OPERATIONS CONTINUED 18 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 GRAPHITE MINERAL RESOURCES AND ORE RESERVES ESTIMATE A JORC Code (2012 edition) compliant Mineral Resource estimate using a 3% TGC cut-oﬀ (constrained within a pit shell) has been determined by Snowden Mining Industry Consultants (Snowden) as shown in the following table. CLASSIFICATION TONNES (MT) DENSITY (T/M3) TGC (%) Balama West Measured Indicated Inferred Balama East Indicated Inferred TOTAL Measured Indicated Inferred 75.0 110.0 460.0 76.0 470.0 75.0 186.0 930.0 2.5 2.6 2.7 2.6 2.7 2.5 2.6 2.7 11.0 8.1 11.0 14.0 10.0 11.0 11.0 11.0 CONTAINED GRAPHITE (MT) 8.4 9.1 51.0 11.0 49.0 8.4 20.1 100.0 Table 1 – Mineral Resource estimate at 3% TGC cut-oﬀ grade (constrained within a pit shell) The Proved and Probable Ore Reserve estimated by Snowden is based on, and inclusive of, the above Measured and Indicated Mineral Resources only, as Inferred Mineral Resources are not suﬃciently reliable to be used in Ore Reserve estimates. The Balama Project currently hosts a combined Proved and Probable Reserve of 81.4 Mt at an average grade of 16.2% TGC (using a 9% TGC cut-oﬀ grade) as shown in the following table. This reserve constitutes 13.2 Mt of contained ﬂake graphite. Snowden notes that the deposit is open along strike at both Balama East and Balama West, to the south as well as at depth. CLASSIFICATION ORE (MT) TGC (%) Balama West Proved Probable SUB TOTAL Balama East Probable SUB TOTAL TOTAL Proved Probable 20.0 2.6 22.5 58.8 58.8 20.0 61.4 81.4 19.2 17.5 19.0 15.1 15.1 19.2 15.2 16.2 CONTAINED GRAPHITE (MT) 3.8 0.4 4.3 8.9 8.9 3.8 9.3 13.2 Table 2 – Ore Reserve estimate at 9% TGC cut-oﬀ grade A detailed statement of the Mineral Resources and Ore Reserves for the Balama Project can be found in ASX announcement by the company dated 29 May 2015. For personal use only Competent Person’s Statement The information in this annual report that relates to Mineral Resources and Ore Reserves is extracted from the report titled “Syrah ﬁnalises Balama Graphite study and declares maiden ore reserve” released to the ASX on 29 May 2015 and available to view at www. syrahresources.com.au and for which Competent Person’s consents were obtained. The Competent Person’s consent remain in place for subsequent releases by the Company of the same information in the same form and context, until the consent is withdrawn or replaced by a subsequent report and accompanying consent. The Company conﬁrms that it is not aware of any new information or data that materially aﬀects the information included in the original ASX announcement released on 29 May 2015, and in the case of estimates of Mineral Resources and Ore Reserves, that all material assumptions and technical parameters underpinning the estimates ion the original ASX announcement continue to apply and have not materially changed. The Company conﬁrms that the form and context in which the Competent Person’s ﬁndings are presented have not been materially modiﬁed from the original ASX announcement. Full details are contained in the ASX release dated 29 May 2015 “Syrah ﬁnalises Balama Graphite study and declares maiden ore reserve” available at www.syrahresources.com.au. 19 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only REVIEW OF OPERATIONS CONTINUED PROPOSED SPHERICAL GRAPHITE PROJECT Further downstream processing of graphite concentrate presents a major potential opportunity to accrue additional value for shareholders. Spherical graphite is a high value, processed graphite product which is used to manufacture anodes for lithium ion batteries. As a result of increasing demand from electric vehicle and grid storage applications, the lithium ion battery market is expected to see signiﬁcant growth over the medium term. Syrah continues to advance its spherical graphite development with the achievement of several signiﬁcant milestones during the period. The Company has completed an Internal Economic Assessment on a Proposed Spherical Graphite Facility in the United States which showed encouraging indicative results. Subsequent to year end, detailed work has commenced on the technical aspects of the Proposed Graphite Facility as well as due diligence on the regulatory approvals in the United States. 20 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Figure 11: Puriﬁed, coated Balama spherical graphite Technology Licensing Agreement During November 2015, Syrah signed a 20 year technology licensing agreement with Morgan Hairong which grants Syrah the exclusive right to use its proprietary spherical graphite coating technology globally (excluding China) in any potential Spherical Graphite Project developed by Syrah. Morgan Hairong is a leading coated spherical graphite producer in China, with customers that include the largest and fastest growing battery producers in the country. The company has been working closely with Syrah in regards to its spherical graphite development for over 10 months. As consideration, the Company will issue Hairong Morgan with US$968,000 of fully paid ordinary shares to be issued in two tranches. The ﬁrst tranche was issued during December 2015 and the second tranche will be issued when the parties agreeing that Syrah is ready to begin commercial production of natural spherical graphite product. Morgan Hairong will also be entitled to a royalty on all future gross sales of coated spherical graphite by the Company. The technology licensing agreement represents a key milestone in Syrah’s spherical graphite development by providing the Company with the capability of operating an integrated supply chain from mine to battery anode material. It should also provide Syrah with a signiﬁcant competitive advantage in securing oﬀtake agreements with lithium ion battery producers. Sales and Marketing Hairong Morgan – Product Sales and Marketing Agreement In addition to the technology licensing agreement, Syrah also signed its ﬁrst spherical graphite Product Sales Agreement and Marketing Agreement with Hairong Morgan. Morgan Hairong has plans for a signiﬁcant expansion in production capability in order to satisfy the expected future growth in demand for coated spherical graphite. The company has the capability to supply coated spherical graphite for a wide range of lithium ion battery applications including electric vehicles, grid storage and consumer electronics. The Product Sales Agreement has a duration of three years and will be for 2,000 tpa of uncoated spherical graphite. Morgan Hairong intends to coat Balama spherical graphite at its facility for sale domestically in China. Prices will be negotiated quarterly between Syrah and Morgan Hairong based on market prices which have prevailed in China during the preceding three months. The Marketing Agreement has a duration of three years and will be for a total of 7,000 tpa (consisting of 5,000 tpa of uncoated spherical graphite and 2,000 tpa of coated spherical graphite). Under this agreement, Morgan Hairong will market Balama spherical graphite to lithium ion battery producers headquartered in China. Morgan Hairong will also receive a commission based on the gross sales price of the Balama spherical graphite that it markets. Hiller Carbon – Statement of Sales Intent Subsequent to the year end, Syrah also ﬁnalised a Statement of Sales Intent with Hiller Carbon, a leading supplier of raw materials to North American electric arc furnace (EAF) steel producers and other industrial customers. Hiller Carbon intends to purchase between 25,000 tonnes and up to 35,000 tonnes of Balama recarburiser per annum for resale. Both parties expect that these volumes will continue to grow over time. Hiller Carbon will be granted exclusive rights to sell Balama recarburiser in the United States, Canada and Mexico. The parties will work together towards a binding agreement as development of the Balama Project advances. For personal use only This agreement supports Syrah’s belief that Balama natural graphite is an ideal product for the EAF steel industry, which requires a high quality carbon additive with low impurities. In addition, this agreement is also highly synergistic with Syrah’s Proposed Spherical Graphite Facility in the United States, which will produce recarburiser manufactured speciﬁcally to exacting standards to exacting standards of EAF steel customers. The ability to access the North American recarburiser market will create another revenue stream for the Proposed Spherical Graphite Facility. Marubeni – Memorandum of Understanding Subsequent to the year end, Syrah was advised by a number of major global battery material manufacturers that it has qualiﬁed Balama spherical graphite for automotive customers’ requirements. The Company has signed a new Memorandum of Understanding for Marubeni Corporation to secure spherical graphite oﬀtake agreements with anode and battery producers in the Territory prior to 30 June 2016. Figure 12: High quality, low impurity Balama natural graphite recarburiser (each approximately 5mm long) 21 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only REVIEW OF OPERATIONS CONTINUED 22 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 BALAMA VANADIUM PROJECT In addition to Balama Project’s substantial graphite Ore Reserves, the deposit also hosts a signiﬁcant vanadium resource. The Company has completed a Scoping Study on the Balama Vanadium Project which demonstrated the viability of the project. Due to the technical and processing requirements of vanadium, which is more complex than graphite, Syrah will only develop Balama’s vanadium resource after graphite production has commenced. Pilot plant work is currently ongoing in preparation for future feasibility studies and 50 kg of 99% and 99.9% V2O5 has been produced to provide samples for potential customers around the world. Vanadium Mineral Resources Estimate A JORC Code (2004 edition) compliant Mineral Resource estimate using a 5% TGC cut-oﬀ has been estimated by The MSA Group Pty Ltd as shown in the following table. CLASSIFICATION Balama West Inferred Balama East Inferred TOTAL Inferred TONNES (MT) V2O5 (%) CONTAINED V2O5 (MT) 568 579 1,150 1,150 0.21 0.26 0.24 0.24 1.17 1.49 2.70 2.70 Table 3 – Mineral Resource estimate at 5% TGC cut-oﬀ grade A detailed statement of the Vanadium Mineral Resources for the Balama Project can be found in ASX announcements by the Company dated 23 January 2013 and 27 May 2013. Competent Person’s Statement The information in this annual report as it relates to geological, geochemical and geophysical exploration results was compiled by Mr Grant McLatchie MAIG, who is a Competent Person pursuant to the requirements of ASX Listing Rules and the JORC Code (2012) and a Member of the Australian Institute of Geoscientists. Mr McLatchie has more than 20 years of experience in the activities being reported on and has suﬃcient expertise which is relevant to the style of mineralisation and type of deposit under consideration. He consents to the inclusion of this information and context in which it appears in this presentation. The information in this annual report as it relates to mineral processing and metallurgical testing was compiled by Mr Michael T.N. Chan, MAusIMM, who is a Competent Person and General Manager of Project Development at Syrah Resources Ltd and a Member of the Australian Institute of Mining and Metallurgy. Mr Chan has more than 20 years of experience in the activities being reported on and has suﬃcient expertise which is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as deﬁned in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Chan consents to the inclusion of this information in the form and context in which it appears in this presentation. For personal use only 23 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only DIRECTORS’ REPORT The Directors present their report on Syrah Resources Limited (“Syrah”, “the Group”, “the Company” or “the consolidated entity”), consisting of Syrah and the entities it controlled at the end of, or during, the six month period ended 31 December 2015. The Board of Directors resolved to change the Company’s ﬁnancial year end from 30 June to 31 December eﬀective from 1 July 2015. This change was made to align the Company’s ﬁnancial year end with that of its wholly owned subsidiary, Twigg Exploration and Mining Limitada, which holds the Balama Graphite and Vanadium Project in Mozambique. This change means that the current reporting period is a six month transitional ﬁnancial period beginning on 1 July 2015 and ending on 31 December 2015. Future ﬁnancial periods will then revert to a twelve month ﬁnancial year, commencing on 1 January and ending on 31 December. DIRECTORS The following persons were directors of Syrah Resources Limited during the six month ﬁnancial period and up to the date of this report, unless otherwise stated: James Askew Tolga Kumova Sam Riggall Rhett Brans Jose Caldeira Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director 24 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 INFORMATION ON DIRECTORS The information on Directors in oﬃce as at the date of this report is as follows: James Askew, Non-Executive Chairman Experience and expertise Mr Askew is a mining engineer with over 40 years of broad international experience as a Director and Chief Executive Oﬃcer for a wide range of Australian and international publicly listed mining, mining ﬁnance and other mining related companies. He has had a continuous involvement with the African mining industry since 1985. Other current directorships Chairman of OceanaGold Limited Chairman of Asia Minerals Resources Limited Non-Executive Director of Evolution Mining Limited Non-Executive Director of Nevada Copper Corporation Former directorships in last 3 years Non-Executive Director of Inova Resources Limited (formerly Ivanhoe Australia Limited) Non-Executive Director of Golden Star Resources Limited Non-Executive Chairman of PMI Gold Limited Special responsibilities Member of the Audit, Financial Risk and Compliance Committee Member of the Remuneration and Nomination Committee Interest in shares and options Ordinary shares – SYR Options over Ordinary Shares – SYR Length of service – 600,000 1 year and 5 months For personal use only Tolga Kumova, Managing Director Experience and expertise Mr Kumova is one of the founding shareholders of Jacana Resources Pty Ltd, which held the Balama Graphite and other projects subsequently vended into Syrah in late 2011. He has 15 years of experience in ﬁnancial markets, corporate advisory and stockbroking. Other current directorships Former directorships in last 3 years Special responsibilities Interest in shares, rights and options Ordinary Shares – SYR Options over Ordinary Shares – SYR Length of service None None Managing Director 14,522,215 2,000,000 2 years and 10 months Rhett Brans, Non-Executive Director Experience and expertise Mr Brans has over 40 years of experience in the design and construction of mineral treatment facilities. His experience extends across the full spectrum of development activities, ranging from mining feasibility studies through to commissioning operations. He has also managed the development of several gold and base metal projects. Other current directorships Non-Executive Director of Carnavale Resources Limited Non-Executive Director of RMG Limited Non-Executive Director of Monument Mining Limited Former directorships in last 3 years Executive Director of Persus Mining Limited Special responsibilities Chairman of the Remuneration and Nomination Committee Member of the Audit, Financial Risk and Compliance Committee Interest in shares, rights and options Ordinary shares – SYR Options over ordinary shares – SYR Length of service – 650,000 2 years and 9 months 25 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Sam Riggall, Non-Executive Director Experience and expertise Mr Riggall was previously Executive Vice-President of Business Development and Strategic Planning at Ivanhoe Mines Limited. Prior to that he worked in a variety of roles in Rio Tinto Limited for over a decade covering industrial minerals, project generation and evaluation, business development and capital market transactions. Other current directorships Chairman and Chief Executive Oﬃcer of CleanTeq Holdings Limited Former directorships in last 3 years Special responsibilities Chairman of the Audit, Financial Risk and Compliance Committee Member of the Remuneration and Nomination Committee Interest in shares, rights and options Ordinary shares – SYR Options over ordinary shares – SYR Length of service – 400,000 1 year and 5 months None José Caldeira, Non-Executive Director Experience and expertise Mr Caldeira is a highly experienced legal and regulatory professional with over 25 years experience in the legal industry. He is one of the prominent lawyers in Mozambique. He is currently a senior partner at Sal & Caldeira Advogados, Lda in Mozambique, one of the leading law ﬁrms in Mozambique. Other current directorships Former directorships in last 3 years Special responsibilities Interest in shares, rights and options Ordinary shares – SYR Options over Ordinary Shares – SYR Length of service – 400,000 1 year and 7 months None None None For personal use only DIRECTORS’ REPORT CONTINUED ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships in all other types of entities, unless otherwise stated. REVIEW OF OPERATIONS Information on the operations of the group is set out on pages 8 to 22 of this annual report. 26 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 ‘Former directorships in the last 3 years’ quoted above are directorships held in the last three years for listed entities only and excludes directorships in all other types of entities, unless otherwise stated. COMPANY SECRETARY Melanie Leydin has over 25 years experience in the accounting profession and is a Director and Company Secretary for a number of oil and gas, junior mining and exploration entities listed on the Australian Securities Exchange. She is a Chartered Accountant and a Registered Company Auditor. She graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 has been the principal of chartered accounting ﬁrm, Leydin Freyer specialising in outsourced company secretarial and ﬁnancial duties for the resources and biotechnology sectors. PRINCIPAL ACTIVITIES The principal continuing activities of the consolidated entity consisted of: > > > the development and construction of the Balama Graphite Project in Mozambique; continued assessment of the use of high quality graphite from the Balama Graphite Project as an input into the production of spherical graphite and recarburiser products; and ongoing exploration and evaluation studies, including further technical investigations into the potential to extract and produce vanadium from the Balama Graphite Project ore body. DIVIDENDS There were no dividends paid, recommended or declared during the current ﬁnancial period or previous ﬁnancial year. Operating and Financial Review Statement of comprehensive income The loss for the consolidated entity after providing for income tax amounted to $3.3 million during the six month ﬁnancial period ended 31 December 2015 (12 month period to 30 June 2015 loss: $11.6 million). The loss for the year comprised mainly of corporate oﬃce, compliance and employee beneﬁts expenses. During the period there was an increase in general business activities following the successful completion of a fully underwritten $211 million capital raising during August 2015 and the commencement of the development and construction of the Balama Graphite Project in Mozambique. The loss for the period included a net foreign exchange gain of $6.0 million (12 month period to 30 June 2015: $0.9 million) associated with proceeds from the equity raising that were transferred into United States Dollars to fund the development expenditure for the Balama Graphite Project. Non-cash items of expenditure included share-based payment expenditures of $4.2 million (12 month period to 30 June 2015: $5.7 million) associated with issuance of shares, options and performance rights to directors, executives and selected senior employees; and impairment charges of $1.2 million (12 month period to 30 June 2015: $0.1 million) comprising a loss on mobile equipment ($1.1 million) that is no longer expected to be used to the extent originally planned, and on available-for-sale ﬁnancial assets ($0.1 million) associated with a decline in the fair value of shares held in Strandline Resources Limited. The consolidated entity also made a non-cash loss of $7.1 million recognised in other comprehensive income during the six month period ended 31 December 2015 (12 months to 30 June: $0.3 million gain) on translation of foreign subsidiaries, speciﬁcally Syrah Resources and Trading DMCC and Twigg Exploration and Mining Limitada. Statement of ﬁnancial position The net assets of the consolidated entity increased during the six month period ended 31 December 2015 to $253.2 million (30 June 2014: $56.4 million) principally as a result of the successful completion of a fully underwritten A$211 million capital raising in August 2015 by way of the following: > > Institutional placement at $3.25 per share which raised $97.5 million; and Pro-rata accelerated renounceable Entitlement Oﬀer to eligible shareholders to subscribe for 4 new Syrah shares for every 19 existing Syrah shares at an oﬀer price of $3.25 per share which raised $113.3 million For personal use only 27 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 The consolidated entity’s cash and cash equivalents were $191.6 million as at 31 December 2015 (30 June 2014: $8.9 million) and working capital, being current assets less current liabilities, was $188.1 million (30 June 2014: $8.6 million). The completion of the capital raising allowed the development and construction of the Balama Graphite Project in Mozambique to commence, resulting in project expenditures of $19.8 million and further commitments of $44.7 million being made during the six month period ended 31 December 2015. These investments have allowed for a number of key achievements and set the foundations for the successful development and construction of the Balama Project during 2016, including: > > > > > Commencement of detailed engineering and design Placement of orders for all principal mechanical equipment and long lead items which are all now in the various stages of ﬁnal design and manufacture Completion of bulk earthworks at the processing plant site and signiﬁcant progress on the construction of the main access road into site Commencement of an expansion to the existing accommodation camp at Balama Commencement of pre-stripping of the Balama West orebody Statement of cash ﬂows Cash ﬂow from operating activities Net cash ﬂows used in operating activities were $3.7 million during the six month period ended 31 December 2015 (12 month period to 30 June 2015: $6.1 million) and principally consisted of corporate oﬃce, compliance and employee beneﬁts expenses. Interest received during the period was $0.2 million and is increasing as a result of an increase in cash and cash equivalents following the successful capital raising in August 2015. Cash ﬂow from investing activities Net cash ﬂows used in investing activities were $16.2 million during the six month period ended 31 December 2015 (12 month period to 30 June 2015: $18.0 million) and principally consisted of development and construction works for the Balama Graphite Project. Cash ﬂow from ﬁnancing activities Net cash inﬂows from ﬁnancing activities were $202.2 million during the six month period ended 31 December 2015 (12 month period to 30 June 2015: $4.3 million) and principally consisted of proceeds received from the successful capital raising, net of costs, in August 2015. Future Outlook The likely developments and outlook in the operations of the Group in future ﬁnancial years include: Project Development > Continue with the development and construction of the Balama Graphite Project, targeting to commence commissioning in early 2017 > > Conduct further technical work and due diligence for a spherical graphite facility in the United States Progress oﬀtake discussions and arrangements with targeted customers and end-users of natural ﬂake and spherical graphite products Exploration and Evaluation > Further evaluate the vanadium project at Balama, and conduct exploration and evaluation activities on other tenements as required Material Business Risks The Group continues to assess and manage various business risks that could impact the Group’s operating and ﬁnancial performance and its ability to successfully deliver strategic priorities. The material business risks that may have an impact on the Group include: Commodity price risk and movements in foreign exchange rates The Group’s operational and ﬁnancial performance, as well as the economic viability of its projects, are heavily reliant on the prevailing global price of graphite products and the US dollar and Mozambique metical foreign exchange rates. Volatility in commodity and ﬁnancial markets may therefore materially aﬀect proﬁtability and ﬁnancial performance and requires careful management to ensure the ability of the group to successfully deliver its strategic priorities. In addition, any sustained low global price for graphite products can also impact operations by requiring a reassessment of an exploration or development project and possibly limiting the Company’s ability to fund its planned capital expenditure commitments and exploration and evaluation activities. Mineral Resources and Ore Reserves The JORC Code (2012 Edition) compliant statements relating to Ore Reserves and Mineral Resources are estimates only. An estimate is an expression of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter signiﬁcantly when new information or techniques become available. For personal use only DIRECTORS’ REPORT CONTINUED 28 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. This may result in alterations to development and mining plans or changes to the quality or quantity of Ore Reserves and Mineral Resources which may, in turn, adversely aﬀect operations and ﬁnancial results. No assurance can be given that the anticipated tonnages or grade of minerals will be achieved during exploration or production or that the indicated level of recovery rates will be realised. Additionally, material price ﬂuctuations, as well as increased anticipated production costs or reduced anticipated recovery rates, may render any potential mineral resources or reserves containing relatively lower grades uneconomic and may ultimately result in a restatement of such resource or reserve. Funding risk The Company is expected to require additional ﬁnancing, in addition to that achieved money raised under the capital raising during August 2015, to meet its project development and working capital requirements, general and administrative expenditure and studies relating to future potential projects. While the Directors believe the Company has a number of alternatives to raise the necessary funding (which may include both debt and equity sources of funding), there can be no guarantee that Syrah will be able to raise suﬃcient funding on acceptable terms or at all. An inability to obtain ﬁnance on acceptable terms or at all may cause substantial delays in, or prevent, the construction and development of the Balama Project and/or the pursuit of future potential projects. Counterparty risk The Company has entered into an oﬀtake agreement with Chalieco. Under this agreement Chalieco’s payment obligations are subject to the satisfaction of certain conditions precedent; including requiring Syrah to give a notice of intended commercial production, and requiring the parties to execute a written agreement in respect of any matters arising after the date of the agreement which the parties consider necessary to give eﬀect to the terms and principles set out in the agreement. The Company is also in discussions with a number of parties in relation to additional oﬀtake agreements for the Balama Project. While some of these discussions are well progressed and taking place under non-binding memoranda of understanding, there is no guarantee that they will result in the execution of formal oﬀtake agreements on acceptable terms or at all. There is also no guarantee that the conditions precedent under the oﬀtake agreement with Chalieco will be satisﬁed. Failure to achieve any of these outcomes would adversely impact the Group’s revenue and proﬁtability. Development of Balama Project and Construction Risk The Group has commenced the development of the Balama Graphite Project. The development of any resources project comes with inherent risks, such as the risks associated with construction of a mineral processing plant and associated infrastructure, the processing and separation of heavy mineral concentrate and other construction and production related activities. There is no guarantee that anticipated or forecast timeframes or the anticipated production proﬁle of the Balama Project will be met. The construction of the Balama Project may be impacted by risks associated with the performance of a large- scale construction project, including but not limited to weather, availability of materials, availability of skilled and experienced workers and contractors, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of labour, consumables, spare parts, plant and equipment. Health and safety Health and safety regulations aﬀect the Company’s activities. Exploration and mining are potentially hazardous activities. If any injuries or accidents occur in a mine for example, this could have ﬁnancial implications for the Company including potential delays or stoppages in construction or mining activities. Remote operating environment Due to the remoteness of the Balama Graphite Project, the Company is subject to an increased number of risks, which include a lack of access to key infrastructure, unexpected transportation and fuel costs, unexpected delays and accidents that could, singly or collectively, materially negatively impact upon the Company’s ﬁnancial performance and position. Any prolonged interruption to access to key infrastructure could have signiﬁcant adverse eﬀects on the Company’s ability to sell product and therefore generate revenue. Environmental and other regulatory approvals Environmental regulation in the jurisdictions in which the Company has operations impose signiﬁcant obligations on companies that conduct the exploration for and mining of commodities. The Company must comply with all known standards, existing laws, and regulations in each case which may entail greater or lesser costs and delays depending on the nature of the activity to be permitted and how the regulations are administered by the local authorities. In addition, changes in environmental laws and regulations or their interpretation or enforcement may adversely aﬀect the Company’s operations, including the potential proﬁtability of its operations. For personal use only 29 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 The maintaining of tenements, obtaining renewals, or the grant of tenements or permits (including for both construction and mining operations) depends on the Company being successful in obtaining statutory approvals for its proposed activities. While the Company anticipates that all regulatory approvals will be given as and when sought, there can be no assurance that such renewals or approvals will be given as a matter of course and there is no assurance that new conditions or unexpected conditions will not be imposed. Sovereign risk The Company operations could be adversely aﬀected by government actions in Mozambique or other countries or jurisdictions in which it has operational exposures or investment or exploration interests. The Company’s businesses are subject, in each of the countries in which it operates, to various national and local laws and regulations relating to, among other things, construction and mining exploration activities. A change in the laws which apply to Company’s businesses or the way in which they are regulated could have a material adverse eﬀect on the carrying value of material assets or otherwise have a material adverse eﬀect on the Company’s businesses and ﬁnancial condition. Risk Management The Company manages the risks listed above and other day-to-day risks using risk reporting and control mechanisms which are designed to ensure strategic, operational, legal, ﬁnancial, reputational and other risks are identiﬁed, assessed and appropriately managed on an ongoing basis. The Executive Management team, the Audit, Financial Risk and Compliance Committee and the Board regularly review the Group’s risks and the eﬀectiveness of the Company’s management of those risks. Signiﬁcant Changes in State of Aﬀairs There were no other signiﬁcant changes in the nature of activities or the state of aﬀairs during the current ﬁnancial period other than those included in the Operating and Financial Review. Matters Subsequent to the End of the Financial Year No matter or circumstance has arisen since 31 December 2015 that has signiﬁcantly aﬀected, or may signiﬁcantly aﬀect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of aﬀairs in future ﬁnancial years. Likely Developments and Expected Results of Operations Commentary on likely developments and expected results of operations is set out in the Operating and Financial Review. Environmental Regulation Syrah’s holdings are subject to environmental regulations in the jurisdictions in which it operates; these include Mozambique, Australia, Zambia and Botswana. Within each jurisdiction the granting of mining and/or exploration tenements require the holder to comply with the terms of the grant of the tenement and all directions given to it under those terms. There have been no known breaches of tenement conditions in any jurisdiction in which the Company operates and no such breaches have been notiﬁed by any Government agency for the period ended 31 December 2015. During April 2015, Twigg Exploration and Mining Limitada was granted an Environmental Licence (5 year period and renewable) for the Balama Project. The regulations with which the Company must comply are set out in Mozambican Environmental Law No 20/97 and the Environmental Impact Study submitted by the Company and signed oﬀ by the Mozambican Government. These requirements include mitigation measures and monitoring programs outlined by the study to comply with relevant laws and regulations. The Company has employed an Environmental Manager to ensure all programs and measures are implemented appropriately and that the Company complies with all regulatory requirements under the law. For personal use only DIRECTORS’ REPORT CONTINUED 30 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 MEETINGS OF DIRECTORS The number of meetings of the Company’s Board of Directors and of each Board Committee held during the six month period ended 31 December 2015, and the number of meetings attended by each Director was: BOARD MEETINGS COMMITTEE MEETINGS AUDIT, FINANCIAL RISK AND COMPLIANCE COMMITTEE REMUNERATION AND NOMINATION COMMITTEE A 5 5 5 5 3 B 5 5 5 5 5 A 2 - 2 2 - B 2 - 2 2 - A 2 - 2 2 - B 2 - 2 2 - NAME J Askew T Kumova S Riggall R Brans J Caldeira (A) Number of meetings attended. (B) Number of meetings held during the time the Director held oﬃce or was a member of the committee during the six month period ended 31 December 2015. INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY The relevant interest of each Director in the share capital and options of the Company as at the date of this report is: NAME J Askew T Kumova S Riggall R Brans J Caldeira FULLY PAID ORDINARY SHARES - 14,522,215 (3) - - - SHARE OPTIONS 600,000 (1) 2,000,000 (2) (3) 400,000 (4) 650,000 (5) 400,000 (6) (1) 600,000 unlisted options exercisable at $4.71 and expiring 30 November 2018. (2) 2,000,000 unlisted options exercisable at $6.26 and expiring 2 October 2019. (3) The Board of Directors has resolved to issue T Kumova with 142,745 shares and 1,000,000 unlisted options exercisable at $4.58 and expiring three years from the date of grant. The issuance of these shares and options remain subject to shareholder approval and they are therefore not included in the above schedule of relevant interests. (4) 400,000 unlisted options exercisable at $4.71 and expiring 30 November 2018. (5) 250,000 unlisted options exercisable at $2.81 and expiring 12 June 2016 and 400,000 unlisted options exercisable at $6.26 and expiring on 2 October 2019. (6) 400,000 unlisted options exercisable at $6.26 and expiring 2 October 2019. For personal use only REMUNERATION REPORT The Remuneration Report contains details of remuneration paid to the Non-Executive Directors, Executive Directors and Key Management Personnel (“KMP”) of the Group as well as the remuneration strategy and policies that were applicable in the six month ﬁnancial period ended 31 December 2015. The remuneration report is structured as follows: a) Remuneration Governance b) Director and Key Management Personnel Details c) Remuneration Strategy and Philosophy d) Remuneration Components e) Details of Remuneration Expenses f) Executive Service Agreements g) Terms and Conditions of Share-Based Payment Arrangements h) Director and Key Management Personnel Equity Holdings i) Other transactions with Directors and Key Management Personnel j) Additional information 31 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 a) Remuneration Governance Remuneration and Nomination Committee The Board has established a Remuneration and Nomination Committee consisting solely of Non-Executive Directors to assist the Board in achieving its objectives in relation to the following: > > > > > > having a Board of Directors of an eﬀective composition, size and commitment to adequately discharge its responsibilities and duties; having coherent remuneration policies and practices to attract and retain executives and directors who will create value for shareholders; observing those remuneration policies and practices; fairly and responsibly rewarding executives having regard to the performance of the Group, the performance of the executives and industry remuneration conditions; the preparation of the Remuneration Report to be included in the Company’s Annual Report; and communicating the Company’s remuneration policy to shareholders and any proposed changes to that remuneration policy and the Committee’s work on behalf of the Board. The Remuneration and Nomination Committee is comprised of Rhett Brans (Committee Chairperson); James Askew and Sam Riggall. b) Director and Key Management Personnel Details Directors The following persons were directors of Syrah Resources Limited during the six month period ended 31 December 2015 and up to the date of this report, unless otherwise stated: EXECUTIVE AND NON-EXECUTIVE DIRECTORS NAME James Askew Tolga Kumova Sam Riggall Rhett Brans Jose Caldeira POSITION Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director For personal use only DIRECTORS’ REPORT CONTINUED 32 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 d) Remuneration Components Non-Executive Director Fees Non-Executive Directors receive a Board fee and do not receive additional fees for chairing or participating on Board Committees. Except for participation in the Share Option Plan or Long Term Incentive Plan, Non-Executive Directors do not receive performance-based pay or retirement allowances. The annual Non-Executive Director remuneration packages (inclusive of superannuation contribution amounts where applicable) for the six month ﬁnancial period ended 31 December 2015 were as follows: NAME POSITION ANNUAL FEES J Askew Non-Executive Chairman $142,350 S Riggall Non-Executive Director R Brans Non-Executive Director J Caldeira Non-Executive Director $93,075 $93,075 $93,075 Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically reviewed for adequacy. Any increase to the aggregate Directors’ fee pool is submitted to shareholders for approval. The maximum currently stands at $750,000 per annum and was approved by shareholders at the Annual General Meeting on 13 November 2015. All Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter of appointment summarises the Board policies and terms, including remuneration, relevant to the oﬃce of director of the Company. To align the Non-Executive Directors’ interests with shareholder interests, the Non-Executive Directors are able to participate in the Share Option Plan and Long Term Incentive Plan. Key Management Personnel The following persons were Key Management Personnel of Syrah Resources Limited during the six month period ended 31 December 2015 and up to the date of this report, unless otherwise stated: KEY MANAGEMENT PERSONNEL NAME POSITION Darrin Strange Chief Operating Oﬃcer David Corr Chief Financial Oﬃcer c) Remuneration Strategy and Philosophy Non-Executive Director Remuneration The Board policy is to remunerate Non-Executive Directors at market rates for time, commitment and responsibilities. The Board determines payments to Non-Executive Directors and annually reviews their remuneration taking into account comparable roles, comparative market data and, if required, the advice of independent remuneration consultants. Executive Remuneration The Board in consultation with the Remuneration and Nomination Committee, reviews the Company’s Executive Remuneration Strategy annually to ensure that the executive remuneration framework remains appropriate and aligned to the business needs. The Board aims to ensure the Company’s Remuneration Practices are performance based and designed to: > Motivate executives to pursue the Group’s long term growth and success; and > Demonstrate a clear relationship between the Group’s overall performance and the performance of executives. Remuneration Consultants The Company engages the services of independent and specialist remuneration consultants from time to time to provide recommendations on the remuneration of Directors and Key Management Personnel. During the six month ﬁnancial period ended 31 December 2015 the Company did not engage the services of independent and specialist remuneration consultants for Directors or Key Management Personnel (30 June 2015: NIL). For personal use only Executive remuneration The Company’s remuneration policy for Executives incorporates a Total Fixed Remuneration (“TFR”) component and ‘at risk’ performance based short term incentive (‘STI’) and long term incentive (‘LTI’) based components. The following table sets out the relative mix of ﬁxed and performance related remuneration for Executive Directors and Key Management Personnel for the current and prior ﬁnancial period: NAME Executive Directors T Kumova (1) P Kehoe (2) Key Management Personnel D Strange D Corr TOTAL FIXED REMUNERATION AT RISK REMUNERATION STI LTI (3) DEC-2015 JUN-2015 DEC-2015 JUN-2015 DEC-2015 JUN-2015 100% - 61% 61% 100% 100% 61% 61% - - 11% 11% - - 11% 11% - - 28% 28% - - 28% 28% (1) (2) (3) T Kumova did not participate in the group’s ‘at risk’ remuneration plans for the year ended 31 December 2015. P Kehoe resigned as Managing Director of the Company on 2 October 2014. The Company’s Long Term Incentive Plan was approved by shareholders at the Annual General Meeting on 13 November 2015 allowing for performance rights to be issued to D Strange and D Corr for the year ended 31 December 2015. Total Fixed Remuneration The Remuneration and Nomination Committee annually reviews and determines the ﬁxed remuneration, inclusive of superannuation contribution amounts and salary sacriﬁce arrangements, for Executive Directors and Key Management Personnel with oversight from the Board of Directors. The process consists of a review of group and individual performance, relevant comparative remuneration and, where appropriate, external advice from remuneration consultants. Total ﬁxed remuneration for Key Management Personnel for six month period ended 31 December 2015 is set out in section (e). 33 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only DIRECTORS’ REPORT CONTINUED 34 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Performance Based Remuneration Short Term Incentive The Board introduced a Short Term Incentive Plan (“STI”) for Executives from 1 January 2015. The objective of the STI is to align reward of Executives with the attainment of Key Performance Indicators (“KPI’s”) which drive short to medium term outcomes for the business incorporating a mixture of business development; operational and investor relations performance indicators. The STI is paid in cash. The following table shows details of the STI as a percentage of Total Fixed Remuneration (exclusive of the required superannuation contribution), the relative weightings between Company KPIs and Individual KPIs and the amounts granted and forfeited for the year ended 31 December 2015: NAME Executive Director T Kumova (1) Key Management Personnel D Strange D Corr MAXIMUM AMOUNT ATTAINMENT WEIGHTINGS % OF TFR $ AMOUNT COMPANY KPI’S INDIVIDUAL KPI’S AMOUNT GRANTED % AMOUNT FORFEITED % - 20% 20% - $64,000 $50,000 - 40% 40% - 60% 60% - 100% 100% - - - (1) T Kumova did not participate in the group’s STI plan for the year ended 31 December 2015. Company and Individual KPIs are set and agreed annually by the Remuneration and Nomination Committee with oversight from the Board of Directors. Other discretionary bonuses The Board in its discretion has resolved to award an additional bonus to selected senior employees in recognition of the signiﬁcant contribution made to ensure the ﬁnalisation of the feasibility study, the success of the Company’s fundraising activities, the commencement of mine development and the ongoing work to establish key sales and market targets as the mine moves towards commissioning. Accordingly, a once-oﬀ bonus of 142,745 shares was awarded to T Kumova (subject to shareholder approval), 36,056 shares to D Strange and 28,169 shares to D Corr for the period to 31 December 2015. Long Term Incentive The Group has a Long Term Incentive Plan (“LTI Plan”) and a Share Option Plan (“SOP”) in existence. The SOP is now eﬀectively dormant following the approval of the LTI Plan by shareholders at the Annual General Meeting on 13 November 2015. There will be no new options issued under the SOP. A new LTI Plan allows for the issue performance rights, options and shares to directors and employees of the Company (or a subsidiary). The grant of performance rights, options and shares is subject to such conditions (if any) as determined by a committee established by the Board to administer the LTI Plan (or, if no such committee has been established, as determined by the Board) (“Plan Committee”). Any performance rights, options and shares granted under the LTI Plan may be subject to such vesting conditions (if any) as determined by the Plan Committee. The LTI Plan is part of the Company’s remuneration strategy and is designed to align the interests of management and shareholders and assist the Company to attract, motivate and retain Executives. In particular, the LTI Plan is designed to provide relevant directors and key employees with an incentive to remain with the Group and contribute to the future performance of the Group over the long term. For personal use only 35 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 a. Performance Rights Executives are granted performance rights on an annual basis and vesting will be contingent on the achievement of speciﬁc performance hurdles over a three year period. The ‘at risk’ value of the annual grant over a three year period represents between 20% and 60% of an eligible employees’ total ﬁxed remuneration (exclusive of the required superannuation contribution). The performance hurdle involves an assessment of the Company’s Total Shareholder Return (“TSR”) relative to a comparative group of companies. The actual number of performance rights granted each year is calculated by dividing between 20% and 60% of each eligible employee’s total ﬁxed remuneration (exclusive of the required superannuation contribution) by the closing volume- weighted average price (“VWAP”) of the Company’s shares on ASX in the one month preceding the grant date. Vesting Conditions Vesting of performance rights will be subject to the performance hurdle referred to above, which will be tested over a three year vesting period. If the performance hurdles are not satisﬁed (or become incapable of being satisﬁed), the performance rights will lapse (unless the Plan Committee determines otherwise). The number of performance rights that vest will be determined by assessing the performance of the Company, measured by TSR as at the date that is three years after the grant date (“Performance Date”), relative to a comparative group of companies (the “TSR Hurdle”). The closing VWAP of the Company’s shares on ASX in the month preceding the Performance Date, compared against the closing VWAP of the Company’s shares on ASX in the month preceding the grant date of the performance rights, will be used to calculate TSR over the three year vesting period. The TSR will incorporate capital returns as well as dividends notionally reinvested and, at present, is considered the most appropriate means of measuring Company performance. The following table provides a summary of the TSR Hurdle and the relationship between Company performance and the vesting of performance rights: PERFORMANCE AGAINST TSR TARGET PERCENTAGE OF PERFORMANCE RIGHTS ELIGIBLE TO VEST TSR performance is at or below the median performance of the comparator group 0% TSR performance of between the median and 75th percentile performance of the comparator group Straight line pro-rata between 0% and 100% TSR performance is at or above the 75th percentile performance of the comparator group 100% In the event that a participant in the LTI Plan ceases to be a director or employee of the Group, the treatment of any performance rights held by the participant will depend on the circumstances surrounding the cessation of his/her directorship/employment. In general terms, and subject to the discretion of the Plan Committee, if the participant is a “bad leaver”, any unvested performance rights will immediately lapse; whereas if the participant is not a “bad leaver”, he/she will be entitled to retain a pro-rata amount of unvested performance rights (based on the proportion of the vesting period for which the participant was a director/employee). The Plan Committee also has power to deem that performance rights will lapse in a number of scenarios, including if a participant commits an act of fraud, defalcation or gross misconduct, or materially breaches his or her duties or brings the Group (or any member thereof) into disrepute. In the event of a change of control, all unvested performance rights will vest. In the event that vesting conditions attached to performance rights were (or were deemed to have been) satisﬁed due to a material misstatement in the Company’s ﬁnancial statements in respect of an applicable vesting period (or another event during such vesting period), the holder of those performance rights will cease to be entitled to them and the Plan Committee may, among other things, cancel those performance rights for no consideration. For personal use only DIRECTORS’ REPORT CONTINUED 36 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 TSR Comparative Group Grant for performance rights will be tested against Syrah’s TSR performance relative to the comparative group on the Performance Date. The TSR comparative group as selected by the Board of Directors for the performance rights issued for the year ended 31 December 2015 (for testing as at 31 December 2017) is as follows: > > Alkane Resources Limited (ASX: ALK) > Metals of Africa Limited (ASX: MTA) AMG Advanced Metallurgical Group N.V. (XAMSG: AMG) > Minerals Deposits Limited (ASX: MDL) > Bacanora Minerals Limited (TSX.V: BCN) > Orocobre Limited (ASX: ORE) > > > > > CleanTeQ Holdings Limited (ASX: CLQ) Flinders Resources Limited (TSX.V: FDR) Iluka Resources Limited (ASX: ILU) Imerys SA (NK: FP) > > > SGL Carbon SE (FWB: SGL) Triton Minerals Limited (ASX:TON) Valence Industries Limited (ASX:VXL) > Western Lithium USA Corporation (TSX.V: WLC) Kenmare Resources Plc (LON: KMR) > Wolf Minerals Limited (ASX: WLF) > Mason Graphite Inc. (TSX.V: LLG) The Board reserves the right to adjust the composition and number of the companies in the comparative group from time to time to take into account events including, but not limited to, takeovers, mergers and liquidations that might occur during the performance period. The table below summarises the number and movements in Performance Rights issued during the ﬁnancial period: Balance at the beginning of the period Granted during the period Vested during the period Lapsed/forfeited during the period Balance at the end of the period 6 MONTHS TO 31 DECEMBER 2015 NUMBER - 100,707 - - 100,707 12 MONTHS TO 30 JUNE 2015 NUMBER - - - - - For personal use only b. Share Options Share Option Plan The SOP was established and approved by shareholders at an Annual General Meeting held on 19 November 2013 and enables the Company, at the discretion of the Board of Directors, to oﬀer employees and directors options. As at 31 December 2015, there were 5,947,000 options outstanding (30 June 2015: 6,622,005 options outstanding) under this plan. The table below summarises the number and movements in Options under this plan during the ﬁnancial period: Balance at the beginning of the period Granted during the period Exercised during the period Expired during the period Balance at the end of the period 6 MONTHS TO 31 DECEMBER 2015 12 MONTHS TO 30 JUNE 2015 NUMBER 6,622,005 250,000 (925,001) (4) NUMBER 4,294,467 5,050,000 (2,722,462) - 5,947,000 6,622,005 Long Term Incentive Plan The LTIP was established and approved by shareholders at an Annual General Meeting held on 13 November 2015 and enables the Company, at the discretion of the Board of Directors, to oﬀer employees and directors a number of equity related interests, including options, performance rights and shares. Options issued under this plan are for a speciﬁed period and each option or performance right is convertible into one ordinary share. There are no voting or dividend rights attached to the options. Voting rights will attach to the ordinary shares when the options have been exercised. Unvested options will not be quoted on the ASX. As at 31 December 2015, there were 1,000,000 options outstanding (30 June 2015: nil options outstanding) under this plan. The table below summarises the number and movements in options under this plan during the ﬁnancial period: Balance at the beginning of the period Granted during the period Exercised during the period Expired during the period Balance at the end of the period 6 MONTHS TO 31 DECEMBER 2015 NUMBER - 1,000,000 - - 1,000,000 12 MONTHS TO 30 JUNE 2015 NUMBER - - - - - 37 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only DIRECTORS’ REPORT CONTINUED 38 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 e) Details Of Remuneration Expense The following tables show details of the remuneration expense recognised for the Group’s Non-Executive Directors; Executive Directors and Other Key Management Personnel for the current and previous ﬁnancial periods measured in accordance with the requirements of the Australian Accounting Standards: Table 1: Remuneration for the six month period ended 31 December 2015 FIXED REMUNERATION VARIABLE REMUNERATION SALARY & FEES $ LEAVE(4) $ OTHER $ POST- EMPLOYMENT BENEFITS $ CASH BONUSES(3) $ SHARE-BASED PAYMENTS(5) $ TOTAL $ Non-Executive Directors J Askew (1) S Riggall R Brans J Caldeira Sub-total Non- Executive Directors Executive Director 71,175 45,978 42,443 46,538 206,134 - - - - - 10,000 (2) 10,000 (2) - - - 4,365 4,032 - 20,000 8,397 - - - - - 47,540 31,693 163,563 163,563 128,715 92,036 210,038 210,101 406,359 640,890 T Kumova 90,909 1,158 Sub-total Executive Director Key Management Personnel D Strange D Corr Sub-total Key Management Personnel TOTAL 90,909 1,158 160,000 125,000 4,371 2,021 285,000 582,043 6,392 7,550 - - - - - 20,000 9,091 9,091 - 1,466,814 (6) 1,567,972 - 1,466,814 1,567,972 15,200 11,875 64,000 50,000 571,066 (6) 531,432 (6) 814,637 720,328 27,075 44,563 114,000 1,102,598 1,534,975 114,000 2,975,671 3,743,827 (1) Directors fees paid to J Askew are paid to International Mining and Finance Corp, a company of which he is a Director. (2) Represents consultancy fees paid to J Askew and S Riggall for additional services provided to the Company as members of the Due Diligence Committee for the capital raising during August 2015. These consulting fees were in addition to their fees earned as Non-Executive Chairman and Non-Executive Director respectively. (3) Represents short term incentive payments for the year ended 31 December 2015 as approved by the Remuneration and Nomination Committee. (4) Represents annual leave and long service leave entitlements, measured on an accrual basis and reﬂects the movement in the entitlements over the 6 month period ended 31 December 2015. (5) Represents amounts expensed through the Company’s proﬁt and loss for options, shares and performance rights issued under the Company’s LTIP and SOP. These amounts are recognised in the Company’s proﬁt and loss over the vesting period in accordance with AASB 2 Share-based Payments. (6) Includes a once-oﬀ bonus of 142,745 shares to T Kumova (subject to shareholder approval), 36,056 shares to D Strange and 28,169 shares to D Corr in recognition of the signiﬁcant contribution made to ensure the ﬁnalisation of the feasibility study, the success of the Company’s fundraising activities, the commencement of mine development and the on-going work to establish key sales and marketing targets as the mine moves towards commissioning. For personal use only 39 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Table 2: Remuneration for the year ended 30 June 2015 FIXED REMUNERATION VARIABLE REMUNERATION SALARY & FEES $ LEAVE(10) $ OTHER $ POST- EMPLOYMENT BENEFITS $ CASH BONUSES $ SHARE-BASED PAYMENTS(11) $ TOTAL $ Non-Executive Directors J Askew (1) S Riggall (2) R Brans J Caldeira (3) T Eadie (4) Sub-total Non- Executive Directors Executive Directors T Kumova (5) P Kehoe (6) Sub-total Executive Directors Key Management Personnel D Strange (7) D Corr (8) M Leydin (9) Sub-total Key Management Personnel 109,106 60,046 79,659 82,065 17,787 348,663 - - - - - - 181,818 618 82,068 (24,120) 263,886 (23,502) 174,933 125,000 123,950 15,678 10,911 - 423,883 26,589 TOTAL 1,036,432 3,087 - - - - - - - - - - - - - - - 5,704 7,966 - 1,779 15,449 18,182 6,640 24,822 16,619 11,875 - 28,494 68,765 - - - - - - - - - - - - - - - - 588,037 588,037 - 109,106 65,750 675,662 670,102 19,566 1,176,074 1,540,186 2,790,186 2,990,804 - 64,588 2,790,186 3,055,392 324,192 324,192 - 531,422 471,978 123,950 648,384 1,127,350 4,614,644 5,722,928 (1) J Askew was appointed Non-Executive Chairman of the Company from 2 October 2014. Directors fees paid to J Askew are paid to International Mining and Finance Corp, a company of which he is a Director. (2) S Riggall was appointed Non-Executive Director of the Company from 2 October 2014. (3) (4) (5) J Caldeira was appointed Non-Executive Director of the Company from 22 July 2014. T Eadie resigned as a Non-Executive Chairman of the Company on 2 October 2014. T Kumova was appointed Managing Director of the Company from 2 October 2014 and was previously an Executive Director of the Company. (6) P Kehoe resigned as Managing Director of the Company on 2 October 2014. (7) D Strange commenced employment with the Company on 15 December 2014. (8) D Corr commenced employment with the Company on 5 January 2015. (9) M Leydin ceased to be classiﬁed as Key Management Personnel from 5 January 2015 following the appointment of the Chief Financial Oﬃcer. M Leydin continues in the capacity of Company Secretary as at the date of this report. Fees for Company Secretarial Services and Accounting Services provided by M Leydin are charged to Syrah by Leydin Freyer Corp Pty Ltd, a company in which M Leydin has a beneﬁcial interest. (10) Represents annual leave and long service leave entitlements, measured on an accrual basis and reﬂects the movement in the entitlements over the 12 month period. (11) Represents amounts expensed through the Company’s proﬁt and loss for options, performance rights and shares issued under the Company’s LTIP and SOP. These amounts are recognised in the Company’s proﬁt and loss over the vesting period in accordance with AASB 2 Share-based Payments. For personal use only DIRECTORS’ REPORT CONTINUED 40 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 f) Executive Service Agreements Remuneration and other key terms of employment for Executive Directors and Key Management Personnel as at the date of this report are formalised in Employment Agreements and summarised in the following table: NAME POSITION TERM OF AGREEMENT TOTAL FIXED REMUNERATION NOTICE PERIOD BY EXECUTIVE NOTICE PERIOD BY COMPANY TERMINATION PAYMENT T Kumova (1) Managing Ongoing $492,750(2) 6 months (3) Director D Strange Chief Operating Officer D Corr Chief Financial Officer Ongoing $350,400 (2) 3 months (3) Ongoing $273,750 (2) 3 months (3) 6 months (or payment in lieu of notice) 3 months (or payment in lieu of notice) 3 months (or payment in lieu of notice) 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration (4) 6 months Total Fixed Remuneration (4) (1) T Kumova’s entered into a new employment contract eﬀective from 1 January 2016 and will participate in the Group’s ‘at risk’ remuneration plans for the year ending 31 December 2016. (2) Total ﬁxed remuneration includes superannuation contributions at the speciﬁed statutory rate which is presently 9.5% of base pay per annum. (3) Options will be forfeited upon cessation of employment prior to the conclusion of the vesting period (unless the Board determines otherwise). Any options which the holder is entitled to exercise upon cessation of employment are exercisable within 30 days otherwise the options will lapse. In the event of cessation of employment by reason of death, any options which the holder is entitled to exercise are exercisable within 3 months by a legal representative otherwise the options will lapse. Termination of employment by the Company for serious misconduct or wilful neglect will result in the forfeiture of options . (4) In the event of termination of employment by the Company (except for serious misconduct or wilful neglect), any options which the holder is entitled to exercise are exercisable within 6 months and any options not exercised during this period will lapse. Termination of employment by the Company for serious misconduct or wilful neglect will result in the forfeiture of options. Total ﬁxed remuneration as set out above are as at the date of this report. g) Terms and Conditions of Share-Based Payment Arrangements Options The terms and conditions of each grant of options aﬀecting the remuneration of Directors and Key Management Personnel in the current or a future reporting period are as follows: GRANT DATE VESTING AND EXERCISABLE DATE EXPIRY DATE EXERCISE PRICE NUMBER UNDER OPTION VALUE PER OPTION AT GRANT DATE 2 October 2014 2 October 2015 2 October 2019 28 January 2015 28 January 2016 28 January 2018 $6.26 (1) $4.08 (1) 2,800,000 (2) (5) 1,200,000 (3) 1 December 2015 30 November 2016 30 November 2018 $4.71 1,000,000 (4) (6) $1.88 $1.29 $0.96 (1) (2) (3) (4) (5) (6) Eﬀective from 9 September 2015, the exercise price of these options was reduced by $0.05 (5 cents) per option in accordance with the term of the options, ASX Listing Rule 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the issuance of shares from a 4 for 19 accelerated renounceable entitlement oﬀer. Consists of 2,000,000 unlisted options issued to T Kumova, Managing Director, 400,000 unlisted options issued to R Brans, Non-Executive Director and 400,000 unlisted options issued to J Caldeira, Non-Executive Director. Consists of 600,000 unlisted options issued to D Strange, Chief Operating Oﬃcer and 600,000 unlisted options issued to D Corr, Chief Financial Oﬃcer. Consists of 600,000 unlisted options issued to J Askew, Non-Executive Chairman and 400,000 unlisted options issued to S Riggall, Non- Executive Director. In the event a participant of the SOP ceases to be a Director of the Company prior to the conclusion of the vesting period, the options will lapse (unless the Board determines otherwise). Any options which the Director is entitled to exercise upon cessation are exercisable within 30 days otherwise the options will lapse. In the event of cessation by reason of death, any options which the holder is entitled to exercise are exercisable within 3 months by a legal representative otherwise the options will lapse. Termination for serious misconduct or wilful negligence will result in the forfeiture of options. In the event a participant of the LTIP ceases to be a Director of the Company the treatment of options will be dependent upon the circumstances surrounding the cessation. In general terms (and subject to the discretion of the Plan Committee), if the participant is a “bad leaver” any unvested options will be forfeited. If the participant is not a “bad leaver” they will be entitled to a pro-rata amount of unvested options. Any vested options which the Non-Executive Director is entitled to exercise upon cessation are exercisable within 60 days otherwise the options will lapse. The Plan Committee also has the power to deem that options will lapse in a number of scenarios, including if a participant commits an act of fraud, defalcation or gross misconduct, or materially breaches his or her duties or brings the Group (or any member thereof) into disrepute. For personal use only 14,522,215 (1) 41 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 h) Director and Key Management Personnel Equity Holdings Shareholdings A reconciliation of the number of shares held by Directors and Key Management Personnel, including their personally related parties, in the Company is set out below: BALANCE 1 JULY 2015 OPTIONS EXERCISED ON MARKET PURCHASES ON MARKET DISPOSALS BALANCE 31 DECEMBER 2015 OTHER Director T Kumova 14,522,215 Key Management Personnel D Strange D Corr - - - - - - - - - - - - - - - (2) - (2) (1) The Board of Directors has resolved to issue 142,745 shares to T Kumova in recognition of the signiﬁcant contribution made since becoming Managing Director. As at 31 December 2015 the issuance of these shares remains subject to shareholder approval and is not included in the above reconciliation. (2) The Board of Directors has resolved to issue 36,056 shares to D Strange and 28,169 shares to D Corr in recognition of the signiﬁcant contribution made for the year ended 31 December 2015. These shares were issued on 19 February 2016 and are not included in the above reconciliation. Performance Rights A reconciliation of the number of Performance Rights held by Directors and Key Management Personnel, including their personally related parties, in the Company is set out below: BALANCE 1 JULY 2015 GRANTED DURING THE PERIOD ISSUED ON VESTING BALANCE 31 DECEMBER 2015 VESTED UNVESTED Key Management Personnel D Strange D Corr - - 56,537 44,170 - - 56,537 44,170 - - 56,537 44,170 Details of the Performance Rights Plan and vesting conditions are provided on page 35 of this report. Options A reconciliation of the number of Options held by Directors and Key Management Personnel, including their personally related parties, over unissued ordinary shares in the Company is set out below: BALANCE 1 JULY 2015 GRANTED DURING THE PERIOD OPTIONS EXERCISED NET CHANGE OTHER BALANCE 31 DECEMBER 2015 VESTED UNVESTED Directors J Askew T Kumova S Riggall R Brans J Caldeira - 600,000 2,000,000 - - 400,000 650,000 400,000 - - - - Key Management Personnel D Strange D Corr 600,000 600,000 - - - - - - - - - - - - - - 600,000 - 600,000 2,000,000 (1) 2,000,000 - 400,000 - 400,000 650,000 650,000 400,000 400,000 - - 600,000 600,000 - - 600,000 600,000 (1) The Board of Directors has resolved to issue T Komova with 1,000,000 unlisted options exercisable at $4.58 and expiring three years from the date of grant. As at 31 December 2015 the issuance of these share options remains subject to shareholder approval and is not included in the above reconciliation. For personal use only DIRECTORS’ REPORT CONTINUED i) Other Transactions with Directors and Key Management Personnel Aggregate amounts of other transactions with Directors and Key Management Personnel is set out below: 42 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Amounts recognised as an expense Accounting and company secretarial fees (1) Consultancy fees (2) Office lease charges (3) Amounts recognised as mine, properties and development Legal services (4) Consultancy fees (5) Amounts recognised as exploration and evaluation asset Legal services (4) Consultancy services (5) 6 MONTHS TO 31 DECEMBER 2015 $ 12 MONTHS TO 30 JUNE 2015 $ - - - - 513,547 27,500 541,047 - - - 123,950 99,000 100,184 323,134 - - - 310,142 62,500 372,642 (1) Represents accounting and company secretarial services provided to the Company by Leydin Freyer Pty Ltd. M Leydin, Company Secretary, is a principal and has a beneﬁcial interest in Leydin Freyer Pty Ltd. M Leydin ceased to be classiﬁed as Key Management Personnel from 5 January 2015 following the appointment of the Chief Financial Oﬃcer. M Leydin continues in the capacity of Company Secretary as at the date of this report. (2) Represents consultancy services provide to the Company by T Eadie as part of the demerger of Jacana Minerals Limited. T Eadie was Non- Executive Chairman of the Company until his resignation on 2 October 2014. (3) Represents oﬃce lease charges paid to Copper Strike Limited a shareholder of Syrah Resources Limited. T Eadie who was Non-Executive Chairman of the Company until his resignation on 2 October 2014 is also Non-Executive Chairman of Copper Strike Limited. (4) Represents legal services provided to the Company by Sal & Caldeira Advogados, Lda. J Caldeira was appointed Non-Executive Director of the Company from 22 July 2014 as is a senior partner of Sal & Caldeira Advogados, Lda. (5) Represents consultancy services provided to the Company by Proman Consulting Engineers Pty Ltd. R Brans, Non-Executive Director, provided these services and has a beneﬁcial interest in Proman Consulting Engineers Pty Ltd. These services are provided on normal commercial terms and conditions. The following balances were outstanding at the end of the period in relation to the above transactions: Trade and other payables 31 DECEMBER 2015 $ 82,266 30 JUNE 2015 $ 73,201 For personal use only 43 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 j) Additional Information The Company aims to align executive remuneration to drive short, medium and long term outcomes for the business which create shareholder value. The table below shows the Group’s performance over the past ﬁve years. These performance measures may not necessarily be consistent with the measures used in determining performance based remuneration and accordingly there may not always be a direct correlation between these measures and the variable remuneration awarded. 31 DECEMBER 2015 30 JUNE 2015 Market capitalisation ($’000) 900,946 606,089 Closing share price ($) Loss after income tax for the period ($’000) Basic earnings per share (cents) (1) 3.90 (3,258) (1.51) 3.66 (11,633) (6.99) 30 JUNE 2014 672,753 4.14 (6,751) (4.29) 30 JUNE 2013 301,446 2.04 (4,759) (3.47) 30 JUNE 2012 291,727 2.33 (2,062) (2.48) (1) Basic earnings per share for the 12 months to 30 June 2015 has been adjusted as a result of the pro-rata accelerated renounceable Entitlement Oﬀer as announced on 3 August 2015 where eligible shareholders were able to subscribe for 4 new Syrah shares for every 19 existing shares. Shares options and performance rights Unissued ordinary shares Unissued ordinary shares of Syrah Resources Limited under option and performance rights as at the date of this report are as follows: GRANT DATE SHARE OPTIONS 16 July 2012 VESTING AND EXERCISABLE DATE EXPIRY DATE EXERCISE PRICE 16 July 2013 16 July 2016 $2.12 (1) (3) 12 June 2013 12 June 2014 12 June 2016 $2.81 (1) (3) 19 May 2014 19 May 2015 19 May 2019 $5.41 (1) (3) 2 October 2014 2 October 2015 2 October 2019 $6.26 (1) (3) 28 January 2015 28 January 2016 28 January 2018 $4.08 (3) 27 April 2015 - (2) 7 May 2015 9 June 2015 7 May 2016 9 June 2016 27 April 2017 7 May 2018 9 June 2018 - (2) $5.40 (3) $4.99 (3) 26 October 2015 26 October 2016 26 October 2020 $4.38 1 December 2015 1 December 2016 1 December 2018 $4.71 Total Options PERFORMANCE RIGHTS 1 December 2015 31 December 2017 Total performance rights 1 January 2018 (5) - NUMBER OF SHARES UNDER OPTION / PERFORMANCE RIGHTS VALUE PER OPTION/ PERFORMANCE RIGHT AT GRANT DATE 22,000 250,000 500,000 2,800,000 1,200,000 125,000 500,000 300,000 250,000 1,000,000 6,947,000 100,707 100,707 $1.81 $1.06 $2.24 $1.88 $1.29 $3.80 $1.24 $1.22 $1.18 $0.96 $2.83 (1) (2) (3) (4) On 15 October 2014, the exercise price of the above options were reduced by $0.04 (4 cents) per option in accordance with the terms of the options, ASX Listing Rules 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the demerger of Jacana Minerals Limited and the 3 for 10 Jacana Minerals Limited share distribution. Represents options that were granted to a selected senior employee for nil consideration with exercise conditional on the achievement of certain performance hurdles that are aligned with the creation of shareholder value. Eﬀective from 9 September 2015, the exercise price of options were reduced by $0.05 (5 cents) per option in accordance with the terms of the options, ASX Listing Rule 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the issuance of shares from a 4 for 19 accelerated renounceable entitlement oﬀer. Performance rights granted to selected senior employees following the approval of the LTIP by shareholders at an Annual General Meeting held on 13 November 2015. The performance rights were issued for the year ended 31 December 2015 (for testing as at 31 December 2017). If the performance hurdles are not satisﬁed (or incapable of being satisﬁed), the performance rights will lapse on this date (unless the Plan Committee determines otherwise). No option holder has any right under the options to participate in any share issue of the Company. For personal use only DIRECTORS’ REPORT CONTINUED 44 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Shares issued on exercise of options Ordinary shares of Syrah Resources Limited issued during the six month ﬁnancial period and up to the date of this report on the exercise of options under the Share Option Plan were as follows: GRANT DATE SHARE ISSUANCE DATE EXERCISE PRICE NUMBER OF SHARES ISSUED 15 December 2011 31 July 2015 27 April 2015 15 December 2011 15 December 2011 24 November 2015 1 December 2015 8 December 2015 $0.22 - $0.17 $0.17 375,000 125,000 125,000 300,001 INDEMNIFICATION OF OFFICERS During the ﬁnancial year the Company paid a premium in respect of a contract insuring the Directors of the Company, the company secretaries and all executive oﬃcers of the Company and of any related body corporate against a liability incurred as such a Director, secretary or executive oﬃcer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has entered into a Deed of Indemnity, Insurance and Access with each Director. In summary the Deed provides for: > > > Access to corporate records for each Director for a period after ceasing to hold oﬃce in the Company; The provision of Directors and Oﬃcers Liability Insurance; and Indemnity for legal costs incurred by Directors in carrying out the business aﬀairs of the Company. INDEMNITY OF AUDITORS The Company has entered into an agreement to indemnify its auditor, PricewaterhouseCoopers Australia, against any claims or liabilities (including legal costs) asserted by third parties arising out of their services as auditor of the Company, where the liabilities arise as a direct result of the Company’s breach of its obligations to the Auditors, unless prohibited by the Corporations Act 2001. AUDIT AND NON-AUDIT SERVICES Details of amounts paid or payable to the auditor for audit and non-audit services provided during the period are set out below: The Board of Directors has considered the position and, in accordance with advice received from the Audit, Risk and Compliance Committee, is satisﬁed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisﬁed that the provision of 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, Risk and Compliance Committee to ensure they do not impact the impartiality and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. For personal use only During the period the following fees were paid or payable for services provided by the auditors of the parent entity, its related practices and non-related audit ﬁrms: 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 (a) PricewaterhouseCoopers Australia Audit of group financial statements: PwC Australian firm Network firms of PwC Australian firm Total remuneration for audit services Non-assurance services Taxation compliance services Taxation consulting services Total remuneration for non-assurance services Total remuneration paid to PricewaterhouseCoopers (b) Grant Thornton Audit Pty Ltd Audit and review of financial reports Total remuneration of Grant Thornton 82 43 125 23 308 331 446 - - - - - - - - - 72 72 45 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers expertise and experience with the Group are important. These assignments are principally tax consulting and advice or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the Group’s policy to seek competitive tenders for all major consulting assignments. Group policy also requires the Chairperson of the Audit, Risk and Compliance Committee to approve all individual assignments performed by PricewaterhouseCoopers with total fees of greater than $20,000. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 46. ROUNDING OF AMOUNTS The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding oﬀ” of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded oﬀ in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. AUDITOR PricewaterhouseCoopers continues in oﬃce in accordance with section 327 of the Corporations Act 2001. The report is made in accordance with a resolution of Directors. James Askew A k J Chairman Melbourne, Australia 31 March 2016 Tolga Kumova Managing Director For personal use only AUDITOR’S INDEPENDENCE DECLARATION 46 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 FINANCIAL REPORT 2015 For the 6 month period ended 31 December 2015 These ﬁnancial statements are the consolidated ﬁnancial statements of the consolidated entity consisting of Syrah Resources Limited and its subsidiaries. The ﬁnancial statements are presented in Australian currency. Syrah Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered oﬃce and principal place of business is: Level 9, 356 Collins Street, Melbourne VIC 3000 A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report on pages 24 to 45, which is not part of these ﬁnancial statements. All press releases, ﬁnancial reports and other information are available on our website: www.syrahresources.com.au For personal use only FINANCIAL STATEMENTS 48 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 Revenue from continuing operations Other income Expenses Legal and consulting expenses Administration expenses Employee benefits expense Depreciation and amortisation expense Exploration and evaluation costs written off Impairment of assets Loss before income tax expense from continuing operations Income tax expense 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 NOTES 6 7 8 8 8 9 402 5,995 6,397 (1,234) (1,497) (5,443) (328) (2) (1,151) 296 868 1,164 (1,456) (2,254) (8,594) (653) (151) (132) (3,258) (12,076) - - Loss after income tax expense from continuing operations (3,258) (12,076) Profit/(loss) after income tax (expense)/benefit from discontinued operations 10 - 443 Loss after income tax expense for the period attributable to the owners of Syrah Resources Limited (3,258) (11,633) Other comprehensive income Items that may be reclassified subsequently to the profit or loss Exchange differences on translation of foreign subsidiaries Reserves released to profit on demerger of Jacana Minerals Limited 21 21 Other comprehensive income for the period, net of tax (7,066) - (7,066) 323 (790) (467) Total comprehensive income for the period attributable to the owners of Syrah Resources Limited (10,324) (12,100) Total comprehensive income for the year is attributable to: Continuing operations Discontinued operations (10,324) - (10,324) (11,753) (347) (12,100) The above statement of comprehensive income should be read in conjunction with the accompanying notes. For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONT) FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 6 MONTHS TO 31 DECEMBER 2015 CENTS NOTES 12 MONTHS TO 30 JUNE 2015 (ADJUSTED) CENTS Earnings per share for loss from continuing operations attributable to the owners of Syrah Resources Limited Basic earnings per share Diluted earnings per share Earnings per share for loss from discontinued operations attributable to the owners of Syrah Resources Limited Basic earnings per share Diluted earnings per share Earnings per share for loss attributable to the owners of Syrah Resources Limited Basic earnings per share Diluted earnings per share 30 30 30 30 30 30 The above statement of comprehensive income should be read in conjunction with the accompanying notes. (1.51) (1.51) - - (1.51) (1.51) (7.26) (7.26) 0.27 0.27 (6.99) (6.99) 49 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 NOTES 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 50 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Assets Current assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets Total current assets Non-current assets Property, plant and equipment Mine properties and development Intangibles Exploration and evaluation Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Provisions Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 11 12 13 14 15 16 17 18 19 19 20 21 22 191,594 4,598 163 196,355 3,419 61,679 139 1,218 66,455 8,931 2,323 33 11,287 4,901 41,918 185 811 47,815 262,810 59,102 8,032 182 8,214 1,423 1,423 9,637 2,547 141 2,688 9 9 2,697 253,173 56,405 284,430 1,836 (33,093) 80,910 5,330 (29,835) 253,173 56,405 The above statement of ﬁnancial position should be read in conjunction with the accompanying notes. For personal use only 51 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 CONTRIBUTED EQUITY $’000 ACCUMULATED LOSSES $’000 RESERVES $’000 TOTAL EQUITY $’000 Balance at 1 July 2015 80,910 (29,835) 5,330 56,405 Loss after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive income for the period - - - (3,258) - (3,258) - (3,258) (7,066) (7,066) (7,066) (10,324) Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs 202,915 Share-based payments (note 31) Exercise of options - 605 203,520 - - - - - 4,177 (605) 3,572 202,915 4,177 - 207,092 Balance at 31 December 2015 284,430 (33,093) 1,836 253,173 Balance at 1 July 2014 81,444 (18,670) 1,768 64,542 Loss after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive increase for the period Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Demerger distributions (note 10) Share-based payments (note 31) Exercise of options - - - (11,633) - (11,633) - (11,633) (467) (467) (467) (12,100) 4,313 (6,559) - 1,712 (534) - 468 - - 468 - - 5,741 (1,712) 4,029 4,313 (6,091) 5,741 - 3,963 Balance at 30 June 2015 80,910 (29,835) 5,330 56,405 The above statement of changes in equity should be read in conjunction with the accompanying notes. For personal use only FINANCIAL STATEMENTS CONTINUED 52 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 NOTES Cash flows from operating activities Payments to suppliers and employees (inclusive of goods and services tax) Interest received Net cash inflow / (outflow) from operating activities 29 Cash flows from investing activities Payments for property, plant and equipment Payments for mine properties and development Payments for intangibles Payments for exploration and evaluation Loan recovered from/(provided to) other parties Net cash inflow / (outflow) from investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Net cash inflow / (outflow) from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of the period 11 The above statement of cash ﬂows should be read in conjunction with the accompanying notes. (3,897) 188 (3,709) (95) (15,992) - (407) 300 (16,194) 210,963 (8,714) 202,249 182,346 8,931 317 191,594 (6,436) 331 (6,105) (3,747) - (235) (13,472) (500) (17,954) 4,339 (24) 4,315 (19,744) 28,571 104 8,931 For personal use only 53 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the consolidated ﬁnancial statements are set out below. These policies have been consistently applied for all the periods presented, unless otherwise stated. The ﬁnancial statements are for the consolidated entity consisting of Syrah Resources Limited and its subsidiaries. Syrah Resources Limited and its subsidiaries together are referred to in these ﬁnancial statements as the Group or the ‘consolidated entity’. (a) Basis of preparation This general purpose ﬁnancial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Syrah Resources Limited is a for-proﬁt entity for the purpose of preparing the ﬁnancial statements. Compliance with IFRS The consolidated ﬁnancial statements of the Syrah Resources Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Historical cost convention These ﬁnancial statements have been prepared under the historical cost convention, except for certain assets which, as noted, are at fair value. Critical accounting estimates The preparation of ﬁnancial 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 signiﬁcant to the ﬁnancial statements, are disclosed in Note 4. Parent entity information In accordance with the Corporations Act 2001, these ﬁnancial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 32. (b) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Syrah Resources Limited (‘company’ or ‘parent entity’) as at 31 December 2015 and the results of all subsidiaries for the six months then ended. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Details of subsidiaries are set out in Note 27. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in the profit and loss. Intercompany transactions, balances and unrealised gains on transactions between Group entities 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. Investments in subsidiaries are accounted for at cost in the individual financial statements of Syrah Resources Limited. (c) Segment Reporting Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Maker (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Refer to Note 5 for further information on segment descriptions. (d) Foreign currency translation Functional and presentation currency Items included in the ﬁnancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated ﬁnancial statements are presented in Australian dollars, which is Syrah Resources Limited’s functional and presentation currency. For personal use only FINANCIAL STATEMENTS CONTINUED 54 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Transactions and balances All foreign currency transactions during the ﬁnancial period are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the proﬁt and loss, except when they are deferred in equity as qualifying cash ﬂow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rate as at the date of the initial transaction. Non- monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Foreign exchange gains and losses that relate to borrowings are presented in the statement of comprehensive income within ﬁnance costs. All other foreign exchange gains and losses are presented in the statement of comprehensive income on a net basis within other income or other expenses. Group companies The results and ﬁnancial position of all the Group entities (none of which has the currency of a hyperinﬂationary economy) that have a functional currency diﬀerent from the presentation currency are translated into the presentation currency as follows: > > assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet, income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative eﬀect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and > all resulting exchange diﬀerences are recognised as a separate component of equity. On consolidation, exchange diﬀerences arising from the translation of any net investment in foreign entities, and of borrowings and other ﬁnancial instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange diﬀerences are recognised in the proﬁt and loss, as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate. (e) Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised for the major business transactions as follows: Interest Interest revenue is recognised as interest accrues using the eﬀective interest method. This is a method of calculating the amortised cost of a ﬁnancial asset and allocating the interest income over the relevant period using the eﬀective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁnancial asset to the net carrying amount of the ﬁnancial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax (f) The income tax expense or beneﬁt 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, unused tax losses and the adjustment recognised for prior periods, where applicable. 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 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 ﬁnancial 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 For personal use only 55 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) combination that at the time of the transaction aﬀects neither accounting nor taxable proﬁt or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the 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, including 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 the 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. Tax Consolidation Legislation Syrah Resources Limited (the “head entity”) and its wholly-owned Australian subsidiaries formed an income tax consolidated group on 1 July 2014. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements within the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or beneﬁt of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. (g) Leases Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classiﬁed as ﬁnance leases. 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 ﬁnance charges, are included in current liabilities and non-current liabilities. Each lease payment is allocated between the liability and ﬁnance cost. The ﬁnance cost is charged to the proﬁt and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under ﬁnance leases is depreciated over the asset’s useful life or over the shorter of the assets useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term. Leases in which a signiﬁcant portion of the risks and rewards of ownership are not transferred to the Group, as lessee, are classiﬁed as operating leases. Payment made under operating leases (net of incentives received from the lessor) are charged to the proﬁt and loss on a straight-line basis over the period of the lease. (h) Discontinued operations A discontinued operation is a component of the Group that has been disposed of or is classiﬁed as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co- ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of other comprehensive income. (i) Current and non-current classiﬁcation Assets and liabilities are presented in the balance sheet based on current and non-current classiﬁcation. An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classiﬁed as non-current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer For personal use only FINANCIAL STATEMENTS CONTINUED 56 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classiﬁed as non-current. The assets residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each ﬁnancial period end. Deferred tax assets and liabilities are always classiﬁed as non-current. (j) Cash and cash equivalents For the purpose of presentation in the statement of cash ﬂows, cash and cash equivalents comprises cash on hand, deposits held at call with ﬁnancial institutions, other short- term, highly liquid investments with original maturities of three months or less that are readily convertible to amounts of cash and which are subject to an insigniﬁcant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (k) Trade and other receivables Other receivables are recognised at amortised cost, less any provision for impairment. Property, plant and equipment (l) Plant and equipment is stated at historical cost less, where applicable, any accumulated depreciation, amortisation or impairment in value. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to proﬁt and loss during the reporting period in which they are incurred. Land is not depreciated. Assets under construction are measured at cost and are not depreciated until they are ready and available for use. Depreciation on assets is calculated using either a straight-line or diminishing value method to allocate the cost, net of their residual values, over the estimated useful lives or the life of the mine, whichever is shorter. Leasehold improvements and certain leased plant and equipment are depreciated over the shorter lease term. Other non-mine plant and equipment typically has the following estimated useful lives: Buildings Plant and Equipment Computer Equipment 20 years 2 to 10 years 4 to 5 years An item of property, plant and equipment is derecognised upon disposal or when no further economic beneﬁts are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the diﬀerence between the net disposal proceeds and the carrying amount of the asset) is included in the proﬁt and loss in the period the asset is derecognised. (m) Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indeﬁnite life intangible assets are not amortised and are subsequently measured at cost less any impairment in value. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment in value. The gains or losses recognised in proﬁt and loss arising from the de-recognition of intangible assets are measured as the diﬀerence between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of ﬁnite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Software Signiﬁcant costs associated with software are deferred and amortised on either a straight-line or diminishing value method over the estimated useful life, being a ﬁnite life not exceeding ﬁve years. (n) Mine properties and development Mine properties and development Mine properties and development represents the accumulation of all exploration, evaluation and development expenditure incurred by, or on behalf of, the entity in relation to areas of interest in which construction or development has commenced and/or mining of a mineral resource has commenced. Where further development expenditure is incurred in respect of a production property after the commencement of production, such expenditure is carried as part of the cost of that production property only when substantial future economic beneﬁts arise, otherwise such expenditure is classiﬁed as part of the cost of production. Mine development costs for production properties in which the Group has an interest are amortised over the life of the area of interest to which the costs relates on a units of For personal use only 57 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) production basis over the estimated proved and probable ore reserves and a proportion of other measured and indicated mineral resources where there is a higher degree of conﬁdence that they can be extracted economically. Changes in the life of the area of interest and/or or ore reserves and other mineral resources are accounted for prospectively. Mines under construction Expenditure incurred in constructing a mine is accumulated separately for each area of interest. This expenditure includes all direct costs of construction, borrowing costs capitalised during construction and an appropriate allocation of attributable overheads up to the time of commissioning the project. Upon successful commissioning of the project the aggregated costs of construction are transferred to non- current assets as either mine properties and development or property, plant and equipment as appropriate. The carrying value of mine properties and development for each area of interest is assessed annually for impairment in accordance with Note 1(p). (o) Exploration and evaluation Exploration and evaluation expenditure comprises costs which are directly attributable to: > > > research and analysing exploration data conducting geological studies, exploratory drilling and sampling examining and testing extraction and treatment methods > compiling scoping and feasibility studies Exploration and evaluation expenditure in relation to separate areas of interest for which rights of tenure are current is carried forward as an asset in the balance sheet where it is expected that expenditure will be recovered through the successful development and exploitation of an area or interest, or by its sale; or exploration and evaluation activities are continuing in an area of interest and those activities have not reached a stage which permits a reasonable estimate of the existence or otherwise of economically recoverable reserves. Where a project or an area of interest has been abandoned, the expenditure incurred thereon is written oﬀ to the proﬁt and loss in the ﬁnancial period in which the decision is made. Exploration and evaluation expenditure is reclassiﬁed to mine properties and development in the ﬁnancial period when the technical feasibility and commercial viability of extracting a mineral resource is demonstrated. The carrying value of the exploration and evaluation expenditure is assessed for impairment prior to reclassiﬁcation (Refer to Note 17). (p) Impairment of assets Goodwill and other intangible assets that have an indeﬁnite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. At each reporting date, the Group assesses whether there is any indication that other non-ﬁnancial assets may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in proﬁt and loss. Recoverable amount is the greater of fair value less costs of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash inﬂows which are largely independent of the cash inﬂows from other assets or groups of assets (cash generating units). Where there is no binding sale agreement or active market, fair value less costs of disposal is based on the best information available to reﬂect the amount the Group could receive for the cash generating unit in an arm’s length transaction. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a post-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset. An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the pre-impairment value, adjusted for any depreciation that would have been recognised on the asset had the initial impairment loss not occurred. Such reversal is recognised in proﬁt or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. For personal use only FINANCIAL STATEMENTS CONTINUED 58 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q) Ore Reserves The Company estimates its mineral resources and ore reserves based on information compiled by Competent Persons as deﬁned in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves of December 2012 (the JORC 2012 code). Reserves, and for certain mineral resources, determined in this way are used in the calculation of depreciation, amortisation and impairment charges. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of conﬁdence of economic extraction. Investments and other ﬁnancial assets (r) Classiﬁcation The Group classiﬁes its ﬁnancial assets in the following categories: ﬁnancial assets at fair value through proﬁt and loss, loans and receivables, held-to-maturity ﬁnancial assets and available-for-sale ﬁnancial assets. The classiﬁcation depends on the purpose for which the investments were acquired. Management determines the classiﬁcation of its investments at initial recognition, and in the case of assets classiﬁed as held-to-maturity, re- evaluates this designation at each reporting date. Financial assets at fair value through proﬁt or loss Financial assets classiﬁed as held for trading purposes are included in the category ‘ﬁnancial assets at fair value through proﬁt or loss’. Financial assets are classiﬁed as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classiﬁed as held for trading unless they are designated as eﬀective hedging instruments. Gains or losses on investments held for trading are recognised in proﬁt or loss. Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the eﬀective interest method. Gains and losses are recognised in the proﬁt and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Held-to-maturity investments Bills of exchange and debentures are recorded at amortised cost using the eﬀective interest method less impairment, with revenue recognised on an eﬀective yield basis. The eﬀective interest method is a method of calculating the amortised cost of a ﬁnancial asset and of allocating interest income over the relevant period. The eﬀective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁnancial asset, or, where appropriate, a shorter period. Available-for-sale ﬁnancial assets Financial assets that are available-for-sale are stated at fair value with gains and losses arising from changes in fair value recognised directly in the available-for-sale revaluation reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale revaluation reserve is included in proﬁt and loss for the period. Impairment of ﬁnancial assets The Group assess at the end of each reporting period whether there is objective evidence that a ﬁnancial asset or group of ﬁnancial assets is impaired. A ﬁnancial asset or group of ﬁnancial assets is impaired and an impairment loss is recognised in proﬁt or loss only if there is evidence of a ‘loss event’ after initial recognition that has an impact on the estimated future cash ﬂows of the ﬁnancial asset. In the case of equity instruments classiﬁed as available-for- sale, a signiﬁcant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. Impairment losses on an equity instrument that were recognised in proﬁt or loss are not reversed through proﬁt or loss in subsequent periods. (s) Trade and other payables Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the ﬁnancial period that are unpaid. They arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (t) Provisions Provisions are recognised when the Group has a present obligation, it is probable that there will be a future sacriﬁce of economic beneﬁts and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be recovered from a third party, for example under an insurance contract, the receivable is recognised as a separate asset but only when the reimbursement is virtually certain and it can be measured reliably. The expense relating to any provision is presented in the proﬁt or loss net of any reimbursement. For personal use only 59 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) If the eﬀect of the time value of money is material, provisions are discounted using a pre-tax rate that reﬂects the current market assessment of the time value of money. Where this is the case, its carrying amount is the present value of these estimated future cash ﬂows. When discounting is used, the increase in the provision due to the passage of time is recognised as a ﬁnance cost. Decommissioning and restoration provision Decommissioning and restoration provisions include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. The provision is recognised in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during the mine development or during the production phase, based on the net present value of estimated future costs. The costs are estimated on the basis of a closure plan drawn in accordance with the business plan and environmental regulations. The cost estimates are calculated annually during the life of the operation to reﬂect known developments and are subject to formal review at regular intervals. The amortisation or ‘unwinding’ of the discount applied in establishing the net present value of provisions is charged to the proﬁt or loss in each accounting period as a ﬁnance cost. Any changes in the provision, including those resulting from new disturbances, updated cost estimates, changes to the lives of operations and revisions to discount rates, are accounted for prospectively. On initial recognition of the provision and for prospective changes in estimates, an equivalent amount is capitalised as part of mine properties and development, or the respective asset or area of interest that the restoration obligation relates to. Capitalised decommissioning and restoration provision costs are depreciated over the life of the respective assets. Where future changes in the provision result in a signiﬁcant addition to the cost of the related asset, consideration will be given to whether an indication of impairment exists and the impairment policy will apply. (u) Employee entitlements Short-term employee beneﬁts Liabilities for wages and salaries, including non-monetary beneﬁts, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee beneﬁts The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outﬂows. Deﬁned contribution superannuation expense Contributions to deﬁned contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled and cash-settled share-based compensation beneﬁts are provided to employees. Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is determined using either the Binomial or 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, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to proﬁt and loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in proﬁt and loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. For personal use only FINANCIAL STATEMENTS CONTINUED 60 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to proﬁt or loss until settlement of the liability is calculated as follows: > > during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in proﬁt and loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisﬁed. If equity-settled awards are modiﬁed, as a minimum an expense is recognised as if the modiﬁcation has not been made. An additional expense is recognised, over the remaining vesting period, for any modiﬁcation that increases the total fair value of the share-based compensation beneﬁt as at the date of modiﬁcation. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisﬁed during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award are treated as if they were a modiﬁcation. The dilutive eﬀect, if any, of outstanding options is reﬂected as additional share dilution in the computation of earnings per share. (v) Contributed equity Ordinary shares are classiﬁed as equity and recognised at the fair value of the consideration received by the Company. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, of the share proceeds received. (w) Fair value measurement When an asset or liability, ﬁnancial or non-ﬁnancial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-ﬁnancial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which suﬃcient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. (x) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing: > > the proﬁt attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares; by the weighted average number of ordinary shares outstanding during the ﬁnancial period, adjusted for bonus elements in ordinary shares issued during the period and excluding treasury shares. Diluted earnings per share Diluted earnings per share adjusts the ﬁgures used in the determination of basic earnings per share to take into account: > > the after income tax eﬀect of interest and other ﬁnancing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (y) Goods and services tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of ﬁnancial position. For personal use only 61 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash ﬂows are presented on a gross basis. The GST components of cash ﬂows arising from investing or ﬁnancing activities which are recoverable from, or payable to the tax authority, are presented as operating cash ﬂows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. (z) Comparative ﬁgures Where necessary, comparative ﬁgures have been adjusted to conform to changes in the presentation in the current period. (aa) Rounding of amounts The Company is 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 ﬁnancial report. Amounts in the ﬁnancial report have been rounded oﬀ in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. (ab) New accounting standards and interpretations There were no new or amended accounting standards and interpretations applicable for the ﬁrst time for the reporting period commencing 1 July 2015. Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2015 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below: (i) AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle (eﬀective from 1 January 2016) AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle merely clariﬁes existing requirements and therefore does not aﬀect the Group’s amendments to AASB 101 (ii) AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 (eﬀective from 1 January 2016) AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 merely clariﬁes existing requirements and therefore does not aﬀect the Group’s amendments to AASB 101. (iii) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Eﬀective Date of AASB 9 and Transition Disclosures (eﬀective from 1 January 2018) AASB 9 Financial Instruments addresses the classiﬁcation, measurement and derecognition of ﬁnancial assets and liabilities as well as impairment and hedge accounting. The standard is not applicable until 1 January 2018 but is available for early adoption. The Company intends to apply the standard from 1 January 2018. The Company is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the Company’s preliminary assessment, the standard is not expected to have a material impact on the transactions and balances recognised in the ﬁnancial statement when it is ﬁrst adopted for the year ended 31 December 2018. (iv) AASB 15 Revenue from Contracts with Customers (eﬀective from 1 January 2017) AASB 15 Revenue from Contracts with Customers will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts (and related interpretations). This standard is applicable from 1 January 2018. The Company is yet to undertake a detailed assessment of the impact of AASB 15. However, based on the Company’s preliminary assessment, the standard is not expected to have a material impact on the transactions and balances recognised in the ﬁnancial statements when it is ﬁrst applied. (v) IFRS 16 Leases (eﬀective from 1 January 2019) IFRS 16 Leases will replace the current guidance in IAS 17 and requires all operating leases to be recognised on the balance sheet. The Group is applicable from 1 January 2019. The Company is yet to undertake a detailed assessment of the impact of AASB 15. However, based on the Company’s preliminary assessment, the standard is not expected to have a material impact on the transactions and balances recognised in the ﬁnancial statements when it is ﬁrst applied. There are no other standards that are not yet eﬀective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. For personal use only FINANCIAL STATEMENTS CONTINUED 62 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 2. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of ﬁnancial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of ﬁnancial markets and seeks to minimise potential adverse eﬀects on the ﬁnancial performance of the Group. The Group uses diﬀerent methods to measure diﬀerent types of risks to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk, foreign exchange risk and aging analysis for credit risk. Financial risk management is carried out by Audit, Risk and Compliance Committee under guidelines established by the Board. The policies employed by the Company identify and analyse ﬁnancial risks and establish appropriate procedures and controls to mitigate identiﬁed ﬁnancial risks which includes foreign exchange risk, credit risk, use of derivate ﬁnancial instruments and non-derivative ﬁnancial instruments and investment of surplus cash reserves.The Group holds the following ﬁnancial instruments: Financial Assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets Financial Liabilities Trade and other payables 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 191,594 2,879 163 194,636 8,032 8,032 8,931 2,323 33 11,287 2,547 2,547 (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 United States Dollar (USD). Foreign exchange risk arises from recognised ﬁnancial assets and ﬁnancial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash ﬂow forecasting. At this time the Group does not manage its prospective foreign exchange risk with currency hedges. For personal use only NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED) The Group’s exposure to foreign currency risk at the reporting date, expressed in Australian dollars, was as follows: Assets - US Dollars - Saudi Riyals Liabilities - US Dollars - South African Rand Net (deficit)/surplus position 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 718 (1) - 718 4,008 433 4,441 (3,723) 1,115 3 1,118 - - - 1,118 (1) The Group held an additional $143,7 million in US Dollars (US$105.0 million) as at 31 December 2015 (30 June 2015: Nil), through a subsidiary with a US Dollar functional currency. The US Dollars will be used to fund the development expenditure for the Balama Project. Group sensitivity Based on the ﬁnancial instruments held at 31 December 2015, had the Australian dollar strengthened/weakened by 5% against the above currencies with all other variables held constant, the Group’s post tax loss for the ﬁnancial period would have been $177,323 lower / $195,989 higher (30 June 2015: $100,476 higher / $111,052 lower /). (ii) Cash ﬂow and fair value interest rate risk The Group’s main interest rate risk relates to interest income on cash and cash equivalents. The consolidated entity does not hold any ﬁnancial assets or liabilities whose fair value would be impacted by interest rates. (b) Credit Risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and ﬁnancial institutions. The Group has no receivables past due as at 31 December 2015 (30 June 2015: Nil). (c) Liquidity Risk Prudent liquidity risk management implies maintaining suﬃcient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash ﬂows and matching the maturity proﬁles of ﬁnancial assets and liabilities. The Company is expected to require additional ﬁnancing, in addition to that achieved money raised under the capital raising during August 2015, to meet its project development and working capital requirements, general and administrative expenditure and studies relating to future potential projects. The Company has a number of alternatives to raise the necessary funding which may include both debt and equity sources of funding. 63 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED 64 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED) Maturities of ﬁnancial liabilities The table below analyses the Group’s ﬁnancial liabilities into relevant maturity groupings based on the remaining period as at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash ﬂows. 31 DECEMBER 2015 Non-derivatives Non-interest bearing Trade and other payables Total non-derivatives 30 JUNE 2015 Non-derivatives Non-interest bearing Trade and other payables Total non-derivatives LESS THAN 6 MONTHS $’000 BETWEEN 6 AND 12 MONTHS $’000 BETWEEN 1 AND 2 YEARS $’000 BETWEEN 2 AND 5 YEARS $’000 TOTAL CONTRACT- UAL CASH FLOWS $’000 CARRYING AMOUNT LIABILITIES $’000 OVER 5 YEARS $’000 8,032 8,032 - - - - - - - - 8,032 8,032 8,032 8,032 LESS THAN 6 MONTHS $’000 BETWEEN 6 AND 12 MONTHS $’000 BETWEEN 1 AND 2 YEARS $’000 BETWEEN 2 AND 5 YEARS $’000 TOTAL CONTRACT- UAL CASH FLOWS $’000 CARRYING AMOUNT LIABILITIES $’000 OVER 5 YEARS $’000 2,547 2,547 - - - - - - - - 2,547 2,547 2,547 2,547 (d) Capital Risk Management When managing capital, the Group’s objective is to safeguard the ability to continue as a going concern so that the Group continues to provide returns for shareholders and beneﬁts for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. Management is constantly reviewing and adjusting, where necessary, the capital structure. This involves the use of corporate forecasting models which enable analysis of the Group’s ﬁnancial position including cash ﬂow forecasts to determine future capital management requirements. To ensure suﬃcient funding, a range of assumptions are modeled to determine sensitivities of the Group’s ﬁnancial position and capital requirements under diﬀerent circumstances or potential outcomes. NOTE 3. FAIR VALUE MEASUREMENT In accordance with AASB 13, Fair Value Measurement, the Company has classiﬁed, according to the fair value hierarchy, the Group’s available-for-sale ﬁnancial assets as Level 1 assets. The available-for-sale ﬁnancial assets comprises listed securities whose fair value is based on quoted prices as at 31 December 2015. There are no Level 2 or 3 assets or liabilities as at 31 December 2015. The Group did not transfer any fair value amounts between the fair value hierarchies during the six month period ended 31 December 2015. Due to their short-term nature, the carrying amounts of current receivables and current payables are assumed to approximate their fair value. For personal use only 65 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the ﬁnancial statements requires management to make estimates and judgements that aﬀect the reported amounts in the ﬁnancial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenues and expenses. Management bases judgements, estimates and assumptions on historical experience and other various factors, including expectations of future events which management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a higher degree of risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next ﬁnancial year are discussed below: (i) Impairment of property, plant and equipment and mine properties and development The Group performs an impairment assessment where there is an indication of possible impairment. Impairment assessments are performed using information from the Feasibility Study as well as external sources, including industry analysts and analysis performed by external parties. The recoverable amount of each cash generating unit is considered to be the higher of fair value less costs of disposal or value-in-use. The Group undertakes cash ﬂow calculations based on a number of critical estimates, assumptions and forward estimates including commodity price expectations, foreign exchange rates, discount rates, reserves and resources and expectations regarding future development costs as well as production, sales and operating costs which are subject to risk and uncertainty. Variations to expected future cash ﬂows, and timing thereof, could result in signiﬁcant changes to the impairment test results, which in turn could impact future ﬁnancial results. (ii) Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and ﬁnite life intangible assets. The useful lives could change signiﬁcantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets are abandoned or sold and written oﬀ or written down. (iii) Determination of mineral resources and ore reserves Mineral resources and ore reserves are based on information compiled by a Competent Person as deﬁned in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves of December 2012 (the JORC 2012 code). There are numerous uncertainties inherent in estimating ore reserves and assumptions that are valid at the time of estimation may change signiﬁcantly when new information becomes available. Changes in forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of ore reserves 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 decommissioning and restoration. (iv) The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to develop and exploit an area of interest or, if not, whether it recovers the related exploration and evaluation asset through sale. Impairment of exploration and evaluation expenditure Factors that could impact the future recoverability include; the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes and changes to commodity prices and foreign exchange rates. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, proﬁts and net assets will be reduced in the period this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence, or otherwise, of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written oﬀ, proﬁts and net assets will be reduced in the period in which this determination is made. For personal use only FINANCIAL STATEMENTS CONTINUED 66 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) (v) Taxation The Group’s accounting policy for taxation requires management judgment 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 applicable taxation investigation or audit issues, based on whether tax 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 positions during the period in which the assessment is made. Judgement is required in assessing whether deferred tax assets and liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from temporary diﬀerences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent upon the generation of future assessable income of a nature and of an amount suﬃcient to enable the beneﬁts to be utilised. In addition, the utilisation of taxation losses also depends on the ability of the tax consolidated entities to satisfy certain tests at the time the losses are recouped. The Group’s unrecognised tax losses are disclosed in Note 9. Certain input tax credits in overseas subsidiaries amounting to $1,611,936 (30 June 2015: $895,699) have been recognised at cost in other receivables (Note 12). The Group views these input tax credits as recoverable through a refund or tax credits based on interpretation of the relevant tax and investment laws. Should management determine that some of these input tax credits are not recoverable in future, the Group will reclassify those amounts to the cost base of related assets, or recognise an expense in the proﬁt or loss in the period the determination is made where these costs are in relation to expenses recognised in proﬁt or loss. (vi) Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options granted is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted and based upon the assumptions detailed in Note 31. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact proﬁt or loss and equity. (vii) Provision for decommissioning and restoration costs Decommissioning, dismantling of property, plant and equipment and restoration are a normal consequence of mining, and the majority of this expenditure is incurred at the end of a mine’s life. In determining an appropriate level of provision, consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of inﬂation. The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including progression of construction/development activities, changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates. Changes to any of the estimates could result in signiﬁcant changes to the level of provisioning required, which would in turn impact future ﬁnancial results. These estimates are reviewed annually and adjusted where necessary to ensure that the most up to date data is used. For personal use only NOTE 5. SEGMENT INFORMATION (a) Description of segments Management has determined and presented operating segments based on the reports reviewed by the Executive Management Team, who are the Group’s chief operating decision makers in terms of assessing performance and allocating resources. The Board of Directors reviews the performance of the Group on a similar basis. The Group has one operating segment in Mozambique but primarily monitors performance according to the following two geographical locations: Australia Mozambique - - Investing activities and corporate management Mining, mineral exploration, evaluation and development activities (b) Geographical information provided to the Executive Management Team 6 MONTHS TO 31 DECEMBER 2015 Revenues Interest received / receivable Other income Total revenues AUSTRALIA $’000 MOZAMBIQUE $’000 CONSOLIDATED $’000 402 5,914 6,316 - 81 81 402 5,995 6,397 Loss after income tax expense (1,562) (1,696) (3,258) 67 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Included within geographical results: Legal and consulting expenses Other administration expenses Share-based payments expense Other employee benefits expense Depreciation and amortisation expense Exploration and evaluation costs written off Impairment of assets AS AT 31 DECEMBER 2015 Assets Geographical assets Total assets Liabilities Geographical liabilities Total liabilities (1,103) (1,218) (4,177) (1,249) (54) (2) (70) 236,790 236,790 5,934 5,934 (131) (279) - (17) (274) - (1,081) 26,020 26,020 3,703 3,703 (1,234) (1,497) (4,177) (1,266) (328) (2) (1,151) 262,810 262,810 9,637 9,637 For personal use only FINANCIAL STATEMENTS CONTINUED 68 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 5. SEGMENT INFORMATION (CONTINUED) (b) Geographical information provided to the Executive Management Team (continued) 12 MONTHS TO 30 JUNE 2015 Revenues Interest received / receivable Other income Total revenues Results AUSTRALIA $’000 MOZAMBIQUE $’000 CONSOLIDATED $’000 290 868 1,158 6 - 6 296 868 1,164 Loss after income tax expense (10,397) (1,236) (11,633) Included within geographical results: Legal and consulting expenses Other administration expenses Share-based payments expense Other employee benefits expense Depreciation and amortisation expense Exploration and evaluation costs written off Discontinued operations AS AT 30 JUNE 2015 Assets Geographical assets Total assets Liabilities Geographical liabilities Total liabilities NOTE 6. REVENUE From continuing operations Interest income (1,256) (1,990) (5,741) (2,314) (414) (151) (132) 443 43,241 43,241 2,218 2,218 (200) (264) - (539) (239) - - - 15,861 15,861 479 479 (1,456) (2,254) (5,741) (2,853) (653) (151) (132) 443 59,102 59,102 2,697 2,697 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 402 402 296 296 For personal use only 69 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 7. OTHER INCOME Net foreign exchange gain 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 5,995 5,995 868 868 NOTE 8. EXPENSES Loss before income tax from continuing operations includes the following speciﬁc expenses: 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 Depreciation Land and buildings Computer equipment Plant and equipment Total depreciation Amortisation Software Total depreciation and amortisation Impairment of assets Plant and equipment Available-for-sale financial assets Total impairment charges Employee benefits expense Salaries and wages Share-based payments Employee entitlements Defined contribution superannuation expense Total employee benefits expenses Other expenses Legal expenses Consulting expenses 43 12 236 291 37 328 1,081 70 1,151 1,116 4,177 71 79 5,443 491 743 22 - 562 584 69 653 - 132 132 2,639 5,741 59 155 8,594 573 883 For personal use only FINANCIAL STATEMENTS CONTINUED 70 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 9. INCOME TAX EXPENSE (a) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax expense from continuing operations Profit/(loss) before income tax (expense) / benefit from discontinued operations 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 (3,258) - (3,258) (12,076) 443 (11,633) Tax at the Australian tax rate of 30% (977) (3,490) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: - Share-based payments - Reserves released to proﬁt on demerger of Jacana Minerals Limited - Other non-deductible expenses - Losses incurred by foreign controlled entities - Movement in unrecognised temporary diﬀerences - Under/(Over) provision in the prior period - Current period taxation losses not recognised as deferred tax assets - Utilisation of previously unrecognised taxation losses Income tax expense (b) Taxation losses and temporary differences not recognised Unused taxation losses for which no deferred tax asset has been recognised Potential taxation benefit at 30% Net temporary differences not bought to account 1,253 - 88 513 (659) 55 - (273) - 16,668 5,000 2,305 1,722 (237) 9 302 (130) - 1,824 - - 16,914 5,074 372 The taxation beneﬁts of taxation losses and temporary diﬀerences not brought to account will only be obtained if: > > > the consolidated entity derives future assessable income of a nature and of an amount suﬃcient to enable the beneﬁt from the deductions for the losses to be realised; the consolidated entity continues to comply with the conditions for deductibility imposed by law; and no change in tax legislation adversely aﬀects the consolidated entity in realising the beneﬁts from deducting the losses. For personal use only NOTE 10. DISCONTINUED OPERATIONS (a) Demerger of Jacana Minerals Limited On 15 October 2014, Syrah Resources Limited demerged Jacana Minerals Limited and its wholly owned subsidiary Jacana Resources (Tanzania) Limited. That business is now owned and operated by Jacana Minerals Limited as a separate and independent holding Company, which is unlisted. The demerger of Jacana Minerals Limited and steps to implement the demerger were approved by Syrah shareholders at a general meeting held on 1 October 2014. Following the successful outcome of this shareholder vote, the ﬁnal separation of Jacana Minerals Limited occurred on 15 October 2014. As a consequence of the demerger, Jacana Minerals is presented in discontinued operations in the comparative results for the ﬁnancial year ended 30 June 2015. The demerger was done by way of an in-specie distribution of shares in Jacana Minerals Limited to the shareholders of Syrah Resources Limited. (b) Financial information Financial information for the Group’s discontinued operations for the reporting period is summarised in the tables below. 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 Financial performance information Administration costs Employee benefits expense Legal and consulting expense Depreciation and amortisation expense Total expenses Loss before income tax expense Income tax expense Loss after income tax expense Profit on demerger Income tax expense Profit on demerger after income tax expense Profit/(loss) after income tax expense from discontinued operations Cash flow information Net cash used in operating activities - - - - - - - - - - - - - (50) (108) (185) (4) (347) (347) - (347) 790 - 790 443 (343) 71 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED NOTE 10. DISCONTINUED OPERATIONS (CONTINUED) (b) Financial information (continued) 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 72 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Carrying amounts of assets and liabilities demerged Cash and cash equivalents Trade and other receivables Property, plant and equipment Exploration and evaluation Total assets Net assets Details of the demerger Total amount attributed to demerger distribution Add: Investment retained in Jacana Minerals Limited Sub-total Less: Carrying amount of net assets demerged Add: foreign exchange gains released to profit on demerger Profit on demerger before tax income Income tax expense Profit on demerger after income tax - - - - - - - - - - - - - - 61 13 86 6,096 6,256 6,256 6,091 165 6,256 (6,256) 790 790 - 790 NOTE 11. CASH AND CASH EQUIVALENTS Cash at bank and in hand Deposit at call 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 151,554 40,040 191,594 8,891 40 8,931 Total cash is held in trading accounts or term deposits with major ﬁnancial institutions under normal terms and conditions appropriate to the operation of the accounts. These deposits earn interest at rates set by these institutions. As at 31 December 2015 the weighted average interest rate on the Australian dollar accounts and deposits was 2.7% (30 June 2015: 1.3%) and the weighted average interest rate on the United States dollar accounts was 0.1% (30 June 2015: 0.0%). (a) Risk exposure The Group’s exposure to foreign exchange and interest rate risk is discussed in Note 2. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above. For personal use only NOTE 12. TRADE AND OTHER RECEIVABLES Other receivables Prepayments Security deposits (1) 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 2,792 1,719 87 4,598 2,091 125 107 2,323 (1) Security deposits consists of restricted deposits that are used for monetary backing for performance guarantees. (a) Impairment of receivables The Group has no receivables past due as at 31 December 2015, nor does it consider there to be any potential impairment loss on these receivables. (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 2. (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 2 for more information on the credit quality of the Group’s trade and other receivables. NOTE 13. AVAILABLE-FOR-SALE FINANCIAL ASSETS 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 Listed securities - Australian listed securities Movements in available-for-sale financial assets Movements in available-for-sale financial assets are set out below: Balance at the beginning of year Additions Impairment expense Balance at the end of year 163 163 33 200 (70) 163 33 33 - 165 (132) 33 73 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED 74 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 14. PROPERTY, PLANT AND EQUIPMENT LAND AND BUILDINGS $’000 PLANT AND EQUIPMENT $’000 COMPUTER EQUIPMENT $’000 At 1 July 2015 Cost Accumulated depreciation Net book amount 6 months to 31 December 2015 Balance at beginning of period Additions (see note (a)) Disposals (at net book value) Depreciation charge Impairment charge Exchange differences Balance at end of period At 31 December 2015 Cost Accumulated depreciation and impairment Net book amount At 1 July 2014 Cost Accumulated depreciation Net book amount 12 months to 30 June 2015 Balance at beginning of period Additions Disposals (at net book value) Depreciation charge Transfers (at net book value) Exchange differences Balance at end of period At 30 June 2015 Cost Accumulated depreciation Net book amount 1,690 (21) 1,669 1,669 208 - (43) - (182) 1,652 1,712 (60) 1,652 336 (73) 263 263 1,518 - (22) - (90) 1,669 1,690 (21) 1,669 4,037 (862) 3,175 3,175 - (9) (388) (1,081) (178) 1,519 3,745 (2,226) 1,519 2,040 (385) 1,655 1,655 2,229 (86) (565) (57) (1) 3,175 4,037 (862) 3,175 108 (51) 57 57 215 (3) (12) - (9) 248 284 (36) 248 - - - - - - - 57 - 57 108 (51) 57 TOTAL $’000 5,835 (934) 4,901 4,901 423 (12) (443) (1,081) (369) 3,419 5,741 (2,322) 3,419 2,376 (458) 1,918 1,918 3,747 (86) (587) - (91) 4,901 5,835 (934) 4,901 For personal use only NOTE 14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) (a) Assets under construction Capitalised costs in relation to construction of the Balama Graphite Project at 31 December 2015 are included in mine properties and development. (b) Depreciation charge Of the total depreciation charge for the period ending 31 December 2015, $236,359 was charged to proﬁt or loss, and $152,120 was capitalised to mine properties and development. For the ﬁnancial year ended 30 June 2015 all depreciation was charged to proﬁt or loss. (c) Impairment of assets The impairment expense of $1,081,377 (30 June 2015: NIL) relates to the write-oﬀ of mobile equipment that is no longer expected to be used in the manner and to the extent originally planned. The recoverable value of these assets has been determined by reference to the fair value less costs of disposal. NOTE 15. MINE PROPERTIES AND DEVELOPMENT 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 Mine properties and development (at cost) Mines under construction Total mine properties and development 42,972 18,707 61,679 Movements in mine properties and development are set out below: MINE PROPERTIES AND DEVELOPMENT $’000 MINES UNDER CONSTRUCTION $’000 6 months to 31 December 2015 Balance at beginning of period Current period expenditure capitalised Provision for decommissioning and restoration Exchange differences Balance at end of period 12 months to 30 June 2015 Balance at beginning of period Transfer from exploration and evaluation Balance at end of period 41,918 2,139 - (1,085) 42,972 - 41,918 41,918 - 17,688 1,411 (392) 18,707 - - - 41,918 - 41,918 TOTAL $’000 41,918 19,827 1,411 (1,477) 61,679 - 41,918 41,918 75 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED 76 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 16. INTANGIBLES Software (at cost) Accumulated amortisation Net book amount Movements in intangibles are set out below: Balance at beginning of period Current period expenditure Disposals (at net book value) Amortisation expense Balance at end of period 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 236 (97) 139 185 - (9) (37) 139 310 (125) 185 19 235 - (69) 185 NOTE 17. EXPLORATION AND EVALUATION Exploration & evaluation properties (at cost) Movements in exploration and evaluation expenditure are set out below: Balance at beginning of period Current period expenditure capitalised Transfer to mine properties and development Demerger of Jacana Minerals Limited Expenditure written-off Exchange differences Balance at end of period 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 1,218 1,218 811 407 - - - - 1,218 811 811 33,149 15,104 (41,918) (6,096) (151) 723 811 The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value. The Directors concluded that the technical feasibility and commercial viability of the Balama Graphite Project was demonstrable and accordingly the carried forward capitalised exploration and evaluation expenditures were reclassiﬁed to mine properties and development as at 30 June 2015. The remaining balance of exploration and evaluation relates to the vanadium project at Balama and continues to be carried forward in accordance with the exploration and evaluation accounting policy. For personal use only NOTE 18. TRADE AND OTHER PAYABLES Trade payables and accruals Other payables 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 7,664 368 8,032 2,089 458 2,547 (a) Risk exposure Trade payables are non-interest bearing and are normally settled on repayment terms between 7 and 30 days. Information about the Group’s exposure to foreign exchange risk is provided in Note 2. NOTE 19. PROVISIONS Current Employee benefits Non-current Decommissioning and restoration Employee benefits 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 182 182 1,411 12 1,423 141 141 - 9 9 (a) Information regarding provisions and signiﬁcant estimates Employee beneﬁts Employee beneﬁts provisions relate to employee entitlements such as annual leave and long service leave. Decommissioning and restoration Provision is made for mine site restoration costs, including dismantling and removal of plant and buildings, and environmental rehabilitation costs at the end of mine operations in accordance with the mining permit requirements for the Balama project. The provision is the present value of estimated future expenditure to restore the current level of disturbance during the development phase. These costs have been capitalised as part of mine properties and development and will be amortised over the estimated life of the mine. Additional decommissioning and restoration provisions required as a result of continuing development activities or future operations will be recognised in the future as and when new areas are disturbed or new structures built, and the obligation to remediate the aﬀected areas arises. 77 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED NOTE 19. PROVISIONS (CONTINUED) (b) Movements in provisions 78 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 6 months to 31 December 2015 Balance at beginning of period Additional provisions recognised: - Capitalised to mine properties and development - Net increase in employee benefits charged to profit or loss Balance at end of period 12 months to 30 June 2015 Balance at beginning of period Additional provisions recognised: - Net increase in employee benefits charged to profit or loss Balance at end of period NOTE 20. ISSUED CAPITAL DECOMMISSIONING AND RESTORATION $’000 EMPLOYEE BENEFITS $’000 - 1,411 - 1,411 - - - 150 - 44 194 99 51 150 31 DECEMBER 2015 SHARES 30 JUNE 2015 SHARES 31 DECEMBER 2015 $’000 Issued and fully paid ordinary shares 231,267,154 165,223,076 231,267,154 165,223,076 (a) Movements in ordinary share capital DETAILS DATE 6 months to 31 December 2015 Balance at beginning of period 31 July 2015 13 August 2015 2 September 2015 24 November 2015 1 December 2015 8 December 2015 17 December 2015 Exercise of options Share issue Share issue Exercise of options Exercise of options Exercise of options Share issue Transfers from share based payment reserve on conversion of options Capital raising costs Balance at end of period NUMBER OF SHARES 165,223,076 375,000 50,726,039 14,137,746 125,000 125,000 300,001 255,292 231,267,154 284,430 284,430 ISSUE PRICE - $0.22 $3.25 $3.25 - $0.17 $0.17 $2.61 TOTAL $’000 150 1,411 44 1,605 99 51 150 30 JUNE 2015 $’000 80,910 80,910 $’000 80,910 83 164,860 45,948 - 21 51 666 605 (8,714) 284,430 For personal use only 79 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 20. ISSUED CAPITAL (CONTINUED) (a) Movements in ordinary share capital (continued) DETAILS DATE 12 months to 30 June 2015 Balance at beginning of period 15 July 2014 15 July 2014 18 July 2014 29 July 2014 8 August 2014 1 September 2014 3 October 2014 15 October 2014 27 January 2015 19 March 2015 23 March 2015 Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Demerger distribution Exercise of options Exercise of options Exercise of options Transfers from share-based payments reserve on conversion of options Capital raising costs Balance at end of period NUMBER OF SHARES ISSUE PRICE - $0.26 $2.21 $0.26 $0.26 $0.26 $2.21 $0.26 - $0.22 $2.17 $3.83 162,500,614 75,000 5,000 425,000 10,000 454,462 15,000 650,000 - 75,000 13,000 1,000,000 165,223,076 $’000 81,444 19 11 110 3 118 33 169 (6,559) 16 28 3,830 1,712 (24) 80,910 (b) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held. Ordinary shares entitle their holder to one vote per share, either in person or by proxy, at a meeting of the Company. Ordinary shares have no par value and the Company does not have a limited amount of authorised share capital. (c) Share options The Company has a share-based payment scheme under which options to subscribe for the Company’s shares have been granted to Non-executive Directors, Executives and selected Senior Employees. Information in relation to the Group’s Long Term Incentive Plan and Share Option Plan including details of options issued and exercised during the ﬁnancial period and options outstanding at the end of the ﬁnancial period are set out in Note 31. There are no voting or dividend rights attached to share options. Voting and dividend rights will attach to the ordinary shares when the options have been exercised. (d) Share buy-back There is no current on-market share buy-back. (e) Capital risk management The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may return capital to shareholders, or issue new shares. For personal use only FINANCIAL STATEMENTS CONTINUED 80 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 21. RESERVES Foreign currency reserve Share-based payments reserve (a) Movements in reserves Movements in each class of reserve are set out below: 6 months to 31 December 2015 Balance at beginning of period Foreign currency translation Share-based payments Exercise of options Balance at end of period 12 months to 30 June 2015 Balance at beginning of period Foreign currency translation Share-based payments Exercise of options Recognition of options issued on the Jacana acquisition Balance at end of period 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 (8,041) 9,877 1,836 FOREIGN CURRENCY RESERVE $’000 SHARE-BASED PAYMENTS RESERVE $’000 (975) (7,066) - - (8,041) (508) 323 - - (790) (975) 6,305 - 4,177 (605) 9,877 2,276 - 5,741 (1,712) - 6,305 (975) 6,305 5,330 TOTAL $’000 5,330 (7,066) 4,177 (605) 1,836 1,768 323 5,741 (1,712) (790) 5,330 (b) Nature and purpose of reserves Foreign currency reserve Exchange diﬀerences arising on translation of a foreign controlled entity are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassiﬁed to the proﬁt and loss when the net investment is disposed of. Share-based payments reserve The share-based payments reserve is used to recognise the fair value of equity beneﬁts issued by the Company. NOTE 22. ACCUMULATED LOSSES Movements in accumulated losses are set out below Balance at beginning of period Loss for the period Demerger of Jacana Minerals Limited Balance at the end of period 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 (29,835) (3,258) - (33,093) (18,670) (11,633) 468 (29,835) For personal use only NOTE 23. DIVIDENDS There were no dividends paid, recommended or declared during the current or previous ﬁnancial period. NOTE 24. COMMITMENTS, CONTINGENCIES AND GUARANTEES (a) Capital expenditure commitments Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows: Mine properties and development - Mines under construction Total capital commitments 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 44,657 44,657 - - The above capital expenditure commitments are in relation to the development and construction of the Balama Graphite Project in Mozambique. (b) Operating lease expenditure commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year After one year but not more than five years Minimum lease payments 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 126 59 185 115 2 117 (c) Tenement expenditure commitments The Group has to meet the conditions under which mining and exploration tenements were granted to maintain the right of tenure. The minimum expenditure requirements, including interests in joint venture arrangements, for current tenements held is as follows: Within one year After one year but not more than five years 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 29 157 186 209 691 900 (d) Contingencies The Group did not have any contingent assets or liabilities at the end of the current and previous ﬁnancial periods. 81 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED 82 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 25. RELATED PARTY TRANSACTIONS (a) Ultimate parent Syrah Resources Limited is the ultimate holding company of the Group. (b) Subsidiaries Interests in subsidiaries are set out in Note 27. (c) Key management personnel compensation Short-term employee benefits Post-employment benefits Long term benefits Share-based payments 6 MONTHS TO 31 DECEMBER 2015 $ 12 MONTHS TO 30 JUNE 2015 $ 716,043 44,563 7,550 2,975,671 3,743,827 1,197,932 68,765 3,087 4,614,644 5,884,428 Detailed remuneration disclosures are provided in the remuneration report on pages 31 to 44. (d) Transactions with related parties Transactions with related parties are set out below: Purchases of goods and services Legal services provided by Sal & Caldeira Advogados, Lda (1) Accounting and company secretarial services provided by Leydin Freyer (2) Consultancy services provided by Proman Consulting Engineers Pty Ltd (3) Consultancy services provided by T Eadie (4) Office lease charges paid to Copper Strike Limited (5) 6 MONTHS TO 31 DECEMBER 2015 $ 12 MONTHS TO 30 JUNE 2015 $ 513,547 - 27,500 - - 553,857 310,142 123,950 62,500 99,000 100,184 695,776 (1) (2) (3) (4) (5) Represents legal services provided to the Company by Sal & Caldeira Advogados, Ltd in Mozambique. J Caldeira is a Non-Executive Director of the Company and is a Senior Partner at Sal & Caldeira Advogados, Lda. Represents accounting and company secretarial services provided to the Company by Leydin Freyer Corp Pty Ltd. M Leydin, Company Secretary, is a principal and has a beneﬁcial interest in Leydin Freyer Corp Pty Ltd. M Leydin ceased to be classiﬁed as Key Management Personnel from 5 January 2015. Represents consultancy services provided to the Company by R Brans who is a Non-Executive Director of the Company. Represents consultancy services provided to the Company by T Eadie as part of the demerger of Jacana Minerals Limited. T Eadie was Non-Executive Chairman of the Company until his resignation on 2 October 2014. Represents oﬃce lease charges paid to Copper Strike Limited a shareholder of Syrah Resources Limited. T Eadie who was Non-Executive Chairman of the Company until his resignation on 2 October 2014 is also Non-Executive Chairman of Copper Strike Limited. For personal use only NOTE 25. RELATED PARTY TRANSACTIONS (CONTINUED) (e) Outstanding balances arising from purchases of goods and services Trade and other payables Related parties 31 DECEMBER 2015 $ 30 JUNE 2015 $ 77,266 77,266 73,201 73,201 NOTE 26. REMUNERATION OF AUDITORS During the ﬁnancial period the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit ﬁrms. 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 (a) PricewaterhouseCoopers Australia Audit of group financial statements: PwC Australian firm Network firms of PwC Australian firm Total remuneration for audit services Non-assurance services Tax compliance services Tax consulting services Total remuneration for non-assurance services Total remuneration paid to PricewaterhouseCoopers (b) Grant Thornton Audit Pty Ltd Audit and review of financial reports Total remuneration of Grant Thornton 82 43 125 23 308 331 446 - - - - - - - - - 72 72 83 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED NOTE 27. SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 1. PRINCIPAL PLACE OF BUSINESS / COUNTRY OF INCORPORATION PERCENTAGE OF EQUITY INTEREST HELD BY THE GROUP 31 DECEMBER 2015 % 30 JUNE 2015 % 84 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NAME Jacana Resources Limited Syrah Resources (KSA) Pty Ltd Twigg Exploration and Mining, Limitada Jacana Resources (Zambia) Ltd Syrah Resources Saudi Arabia LLC Syrah Resources Group Holdings Pty Ltd (1) Australia Australia Mozambique Zambia Saudi Arabia Australia Syrah Resources and Trading DMCC (2) United Arab Emirates (1) Syrah Resources Group Holdings Pty Ltd was incorporated on 6 November 2015. (2) Syrah Resources and Trading DMCC was incorporated on 10 September 2015. 100 100 100 100 100 100 100 100 100 100 100 100 - - For personal use only 85 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 28. DEED OF CROSS GUARANTEE The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: Syrah Resources Limited Jacana Resources Limited By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare ﬁnancial statements and a directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’). The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that are controlled by Syrah Resources Limited, they also represent the ‘Extended Closed Group’. (a) Consolidated statement of comprehensive income and summary of movements in consolidated accumulated losses Set out below is a consolidated statement comprehensive income and a summary of movements in consolidated accumulated losses for the current or previous ﬁnancial period for the ‘Closed Group’. Consolidated statement of comprehensive income Revenue from continuing operations Other income Expenses Legal and consulting expense Administration expenses Employee benefits expense Depreciation and amortisation expense Exploration and evaluation costs written off Impairment of available-for-sale financial assets Loss for the period before income tax expense Income tax expense Loss after income tax expense for the period 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 392 5,914 (1,378) (937) (5,431) (44) (2) (70) (1,556) - (1,556) 290 868 (1,256) (2,826) (8,054) (405) (2) (132) (11,517) - (11,517) Total comprehensive income for the period (1,556) (11,517) Summary of movements in consolidated accumulated losses Balance at beginning of period Loss after income tax expense for the period Balance at end of period (27,140) (1,556) (28,696) (15,623) (11,517) (27,140) For personal use only FINANCIAL STATEMENTS CONTINUED NOTE 28. DEED OF CROSS GUARANTEE (CONTINUED) (b) Consolidated statement of ﬁnancial position Set out below is a consolidated statement of ﬁnancial position as at the end of the current and previous ﬁnancial period for the ‘Closed Group’. 31 DECEMBER 2015 $’000 30 JUNE 2015 $’000 86 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Current assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets Total current assets Non-current assets Property, plant and equipment Intangibles Mine properties and development Exploration and evaluation Investments Total non-current assets Total assets Current liabilities Trade and other payables Provisions Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 46,917 921 163 48,001 836 137 42,639 1,218 178,715 223,545 8,891 889 33 9,813 899 182 19,798 811 30,793 52,483 271,546 62,296 5,768 154 5,922 13 13 2,069 141 2,210 9 9 5,935 2,219 265,611 60,077 284,430 9,877 (28,696) 80,911 6,306 (27,140) 265,611 60,077 For personal use only 87 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 29. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES Loss after income tax expense for the year Adjustments for: Depreciation and amortisation Share-based payments Exploration and evaluation costs written off Impairment of assets Net foreign exchange gain Reserves released to profit on demerger of Jacana Minerals Limited Changes in operating assets and liabilities: (Increase) / decrease in trade and other receivables Increase / (decrease) in trade and other payables Increase / (decrease) in provisions Net cash inflow / (outflow) from operating activities NOTE 30. EARNINGS PER SHARE Basic earnings per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations attributable to the ordinary equity holders of the Company Total basic earnings per share attributable to the ordinary equity holders of the Company Diluted earnings per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations attributable to the ordinary equity holders of the Company Total diluted earnings per share attributable to the ordinary equity holders of the Company 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 (3,258) (11,633) 328 4,177 - 1,151 (5,995) - (443) 287 44 (3,709) 656 5,741 151 132 - (790) (271) (133) 42 (6,105) 6 MONTHS TO 31 DECEMBER 2015 CENTS 12 MONTHS TO 30 JUNE 2015 (ADJUSTED) (1) CENTS (1.51) - (1.51) (1.51) - (1.51) (7.26) 0.27 (6.99) (7.26) 0.27 (6.99) (1) Basic earnings per share for the 12 months to 30 June 2015 has been adjusted as a result of the pro-rata accelerated renounceable Entitlement Oﬀer as announced on 3 August 2015 where eligible shareholders were able to subscribe for 4 new Syrah shares for every 19 existing shares. For personal use only FINANCIAL STATEMENTS CONTINUED 88 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 30. EARNINGS PER SHARE (CONTINUED) (a) Reconciliations of earnings used in calculating earnings per share 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 Basic earnings per share Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share from continuing operations Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share from discontinued operations Total profit/(loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share Diluted earnings per share Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share from continuing operations Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share from discontinued operations Total profit/(loss) attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share (b) Weighted average number of shares used as the denominator (3,258) (12,076) - 443 (3,258) (11,633) (3,258) (12,076) - 443 (3,258) (11,633) Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share 6 MONTHS TO 31 DECEMBER 2015 NUMBER 12 MONTHS TO 30 JUNE 2015 (ADJUSTED) (1) NUMBER 215,758,310 166,225,691 215,758,310 166,225,691 (1) The weighted average number of shares for the 12 months to 30 June 2015 has been adjusted as a result of the pro-rata accelerated renounceable Entitlement Oﬀer as announced on 3 August 2015 where eligible shareholders were able to subscribe for 4 new Syrah shares for every 19 existing shares. Options The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 “Earnings per Share”. The rights to options are non-dilutive as the group is loss making. For personal use only 89 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 31. SHARE-BASED PAYMENTS (a) Types of share based payment plans The Group has a Long Term Incentive Plan and a Share Option Plan in existence. These share based payment plans form an important part of a comprehensive remuneration strategy for the Company’s employees and directors, and aligns their interests with those of shareholders by linking rewards to the long term success of the Company and its ﬁnancial performance. (i) Long Term Incentive Plan (LTIP) The LTIP was established and approved by shareholders at an Annual General Meeting held on 13 November 2015 and enables the Company, at the discretion of the Board of Directors, to oﬀer employees and directors a number of equity related interests, including options, performance rights and shares. (ii) Share option plan (SOP) The SOP was established and approved by shareholders at an Annual General Meeting held on 19 November 2013 and enables the Company, at the discretion of the Board of Directors, to oﬀer employees and directors options. No further options will be issued under this plan. (b) Summary and movement of Options on issue The table below summarises the number, weighted average exercise prices and movements in options issued during the ﬁnancial period: 6 MONTHS TO 31 DECEMBER 2015 12 MONTHS TO 30 JUNE 2015 WEIGHTED AVERAGE EXERCISE PRICE PER SHARE OPTION (1) $4.56 $4.64 $0.15 $0.17 $5.17 $5.89 WEIGHTED AVERAGE EXERCISE PRICE PER SHARE OPTION (2) $1.85 $5.32 $1.57 - $4.61 $2.33 NUMBER OF OPTIONS 6,622,005 1,250,000 (925,001) (4) 6,947,000 3,572,000 NUMBER OF OPTIONS 4,294,467 5,050,000 (2,722,462) - 6,622,005 1,572,005 Balance at beginning of the period Granted during the period Exercised during the period (3) Expired during the period Balance at end of the period Vested and exercisable at end of period (1) Eﬀective from 9 September 2015, the exercise price of options were reduced by $0.05 (5 cents) per option in accordance with the terms of the options, ASX Listing Rule 3.11.2 and the formula contained in ASX Listing Rile 7.22.3 as a result of the issuance of shares from the 4 for 19 accelerated renounceable entitlement oﬀer. The weighted average exercise price per share option as at 30 June 2015 does not incorporate this change. (2) On 15 October 2014, the exercise price of options were reduced on $0.04 (4 cents) per option in accordance with the term of the options, ASX Listing Rules 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the demerger of Jacana Minerals Limited and the 3 for 10 Jacana Minerals share distribution. The weighted average exercise prices per share option for the year ended 30 June 2015 incorporates this change. (3) The weighted average share price at the date of exercise of options exercised during the period ended 31 December 2015 was $3.53 (30 June 2015: $4.48) Each option is convertible into one ordinary share. There are no voting or dividend rights attached to the options. Voting and dividend rights will attach to the ordinary shares when the options have been exercised. For personal use only FINANCIAL STATEMENTS CONTINUED 90 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 NOTE 31. SHARE-BASED PAYMENTS (CONTINUED) (b) Summary and movement of Options on issue (continued) The outstanding balance of options as at 31 December 2015 is represented by: Options issued as part of the SOP 5,947,000 options with an exercise price ranging from $nil to $6.26 Options issued as part of the LTIP 1,000,000 options with an exercise price of $4.71 Share options outstanding at the end of the ﬁnancial period have the following expiry date and exercise prices: GRANT DATE EXPIRY DATE 15 December 2011 15 December 2015 16 July 2012 19 May 2014 12 June 2014 16 July 2016 19 May 2019 12 June 2016 2 October 2014 2 October 2019 28 January 2015 28 January 2018 27 April 2015 27 April 2017 7 May 2015 9 June 2015 7 May 2018 9 June 2018 26 October 2015 26 October 2020 1 December 2015 1 December 2018 TOTAL Options EXERCISE PRICE (1) (2) SHARE OPTIONS 31 DECEMBER 2015 SHARE OPTIONS 30 JUNE 2015 $0.17 $2.12 $5.41 $2.81 $6.26 $4.08 - (3) $5.40 $4.99 $4.38 $4.71 - 22,000 500,000 250,000 2,800,000 1,200,000 125,000 500,000 300,000 250,000 1,000,000 6,947,000 800,005 22,000 500,000 250,000 2,800,000 1,200,000 250,000 500,000 300,000 - - 6,622,005 Weighted average remaining contractual life of options outstanding at the end of the period 3.03 years 1.72 years (1) Eﬀective from 9 September 2015, the exercise price of options was reduced by $0.05 (5 cents) per option in accordance with the term of the options, ASX Listing Rule 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the issuance of shares from a 4 for 19 accelerated renounceable entitlement oﬀer. The exercise price included in the above table incorporates this change. (2) On 15 October 2014, the exercise price of options was reduced by $0.04 (4 cents) per option in accordance with the term of the options, ASX Listing Rules 3.11.2 and the formula contained in ASX Listing Rule 7.22.3 as a result of the demerger of Jacana Minerals Limited and the 3 for 10 Jacana Minerals Limited share distribution. The exercise price included in the above table incorporates this change. (3) Represents options that were granted to a selected senior employee for NIL consideration with exercise conditional on the achievement of certain performance hurdles that are aligned with the creation of shareholder value. Fair value of options granted For the options granted during the current ﬁnancial period, the valuation model inputs used to determine the fair value at the grant date are as follows: GRANT DATE EXPIRY DATE 26 October 2015 26 October 2015 1 December 2015 1 December 2018 SHARE PRICE AT GRANT DATE $3.13 $3.48 EXERCISE PRICE EXPECTED VOLATILITY DIVIDEND YIELD RISK-FREE INTEREST RATE FAIR VALUE AT GRANT DATE $4.38 $4.71 52.70% 52.65% - - 1.857% 2.080% $1.18 $0.96 For personal use only NOTE 31. SHARE-BASED PAYMENTS (CONTINUED) (c) Summary and movement of Performance Rights on issue The table below summarises the number and movements in performance rights issued during the ﬁnancial period: Balance at the beginning of the period Granted during the period Vested during the period Lapsed during the period Forfeited during the period Balance at the end of the period 6 MONTHS TO 31 DECEMBER 2015 NUMBER 12 MONTHS TO 30 JUNE 2015 NUMBER - 100,707 - - - 100,707 - - - - - - Performance rights on issue as part of the LTIP have a nil exercise price. During the ﬁnancial period 100,707 performance rights were issued to selected Senior Employees and will be subject to performance testing at 31 December 2017. (d) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the ﬁnancial period as part of employee beneﬁt expense were as follows: Options issued under the LTIP and SOP Performance rights issued under the LTIP Shares to be issued under the LTIP (1) 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 3,315 95 767 4,177 5,741 - - 5,741 (1) Represents amount expensed for a once-oﬀ bonus of 142,745 shares awarded to T. Kumova (subject to shareholder approval) and 75,493 shares awarded to selected senior employees (issued on 19 February 2016) in recognition of the signiﬁcant contribution made to ensure the ﬁnalisation of the feasibility study, the success of the Company’s fundraising activities, the commencement of mine development and the on-going work to establish key sales and marketing targets as the mine moves towards commissioning. 91 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only FINANCIAL STATEMENTS CONTINUED NOTE 32. PARENT ENTITY FINANCIAL INFORMATION Summary ﬁnancial information (a) The individual ﬁnancial statements for the parent entity show the following aggregate amounts: 92 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Share-based payments reserve Accumulated losses Total equity 6 MONTHS TO 31 DECEMBER 2015 $’000 12 MONTHS TO 30 JUNE 2015 $’000 48,001 271,627 5,922 5,934 284,430 9,877 (28,614) 265,693 9,812 62,376 2,209 2,219 80,910 6,305 (27,058) 60,157 Loss after income tax for the year (1,556) (11,465) Total comprehensive income for the year (1,556) (11,465) (b) Contingent liabilities of the parent entity The parent entity has no contingent liabilities as at 31 December 2015 and 30 June 2015. NOTE 33. EVENTS OCCURRING AFTER THE REPORTING PERIOD No event has occurred subsequent to 31 December 2015 that has signiﬁcantly aﬀected, or may signiﬁcantly aﬀect, the Group’s operations, the results of those operations, or the state of aﬀairs in future ﬁnancial periods. For personal use only DIRECTORS’ DECLARATION In the Directors’ opinion: (a) the ﬁnancial statements and notes set out on pages 48 to 92 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 true and fair view of the consolidated entity’s ﬁnancial position as at 31 December 2015 and of its performance for the six month ﬁnancial period 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, and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identiﬁed in Note 28 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 28. Note 1(a) conﬁrms that the ﬁnancial 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 Managing Director and Chief Financial Oﬃcer as required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. 93 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 James Askew Chairman Melbourne, Australia 31 March 2016 Tolga Kumova Managing Director For personal use only INDEPENDENT AUDITOR’S REPORT 94 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only 95 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only SHAREHOLDER INFORMATION 96 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 ADDITIONAL ASX INFORMATION Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The shareholder information set out below was applicable as at 29 March 2016 except where otherwise indicated. EQUITY SECURITY HOLDERS Top 20 largest quoted security holders as at 29 March 2016 The names of the twenty largest security holders of quoted equity securities are listed below: RANK NAME UNITS % OF UNITS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED COPPER STRIKE LIMITED KITARA INVESTMENTS PTY LTD MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED CREDIT SUISSE SECURITIES (EUROPE) LTD MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LTD HARALAMBOS HATZIKYRIAZIS BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD CS FOURTH NOMINEES PTY LIMITED UBS NOMINEES PTY LTD GONDWANA INVESTMENT GROUP PTY LTD BUPRESTID PTY LTD CITICORP NOMINEES PTY LIMITED 18. MR TOLGA KUMOVA 19. 20. FINANCE ASSOCIATES PTY LTD ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL) Total Remaining Holders Balance Unquoted equity securities as at 29 March 2016 Options over ordinary shares Performance rights over ordinary shares 34,039,448 32,168,189 29,532,386 13,780,350 11,000,005 10,213,015 6,930,617 6,350,000 5,988,371 4,223,888 3,592,000 3,329,478 3,300,000 2,818,576 2,777,778 1,895,000 1,743,117 1,530,542 1,400,000 1,360,305 177,973,065 53,369,582 14.71 13.90 12.77 5.96 4.75 4.41 3.00 2.74 2.59 1.83 1.55 1.44 1.43 1.22 1.20 0.82 0.75 0.66 0.61 0.59 76.93 23.07 NUMBER ON ISSUE 6,947,000 100,707 NUMBER OF HOLDERS 13 2 For personal use only DISTRIBUTION OF EQUITABLE SECURITIES Analysis of number of equitable security holders by size of holding: RANGE 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over TOTAL HOLDERS 1,268 1,392 483 632 104 3,879 UNITS 625,469 3,692,101 3,841,002 18,415,455 204,768,620 231,342,647 % OF ISSUED CAPITAL 0.27 1.60 1.66 7.96 88.51 100.00 The number of shareholders holding less than a marketable parcel of Ordinary Shares at 29 March 2016 was 212. VOTING RIGHTS The voting rights attached to ordinary shares are set out below: 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. There are no other classes of equity securities. SUBSTANTIAL SHAREHOLDERS An extract of the Company’s Register of Substantial Shareholders as at 29 March 2016 is set out below: RANK NAME UNITS % OF UNITS 1. 2. 3. 4. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED 34,039,448 32,168,189 29,532,386 13,780,350 14.71 13.90 12.77 5.96 97 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only SHAREHOLDER INFORMATION CONTINUED TENEMENT SCHEDULE as at 31 March 2016 DESCRIPTION Balama Balama (1) Botswana Botswana Botswana Botswana Sasare North TENEMENT NUMBER 6432C 5684L 347/2014 348/2014 349/2014 350/2014 17904-HQ-LPL INTEREST OWNED 100% 100% 100% 100% 100% 100% 100% (1) Syrah has entered into a tenement sale agreement (TSA) for the acquisition of a tenement (Tenement) in Balama from a third party (Seller). Under the TSA, Syrah may be required to issue to the Seller, as part of the contingent consideration for the acquisition of the Tenement, up to US$2.0 million of fully paid ordinary shares (Sale Shares) in various tranches, with the number of Sale Shares under each tranche to be calculated based on the 30 day volume weighted average price of Syrah shares prior to the issue date. The Sale Shares (if issued) will rank equally with Syrah’s existing shares, and will not be issued to an existing class of security holders in Syrah. It is not expected that security holder approval will be required for the issue of Sale Shares. 98 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY 99 S Y R A H R E S O U R C E S > A N N U A L R E P O R T 2 0 1 5 For personal use only SYRAH RESOURCES LIMITED ABN 77 125 242 284 Level 9, 356 Collins Street Melbourne Victoria 3000 t: +61 3 9670 7264 e: enquiries@syrahresources.com.au w: www.syrahresources.com.au For personal use only

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