ANNUAL
REPORT
2018
For personal use only CORPORATE
DIRECTORY
DIRECTORS
SHARE REGISTRY
James Askew Non-Executive Chairman
Shaun Verner Managing Director and Chief Executive Officer
Sam Riggall Non-Executive Director
José Manuel Caldeira Non-Executive Director
Lisa Bahash Non-Executive Director
(appointed 16 July 2018)
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Telephone: 1300 850 505 (within Australia)
+61 3 9415 4000 (overseas)
Email: web.queries@computershare.com.au
Website: www.computershare.com.au
COMPANY SECRETARY
Jennifer Currie
REGISTERED AND CORPORATE
OFFICES
Corporate Head Office - Melbourne
Syrah Resources Limited
Level 28, 360 Collins Street
Melbourne VIC 3000
Telephone: +61 3 9670 7264
Email: enquiries@syrahresources.com.au
Website: www.syrahresources.com.au
Dubai Office
Syrah Global DMCC
Office 22F, Gold Tower, Cluster I,
Jumeirah Lakes Towers
Dubai, United Arab Emirates
Telephone: +971 4244 5955
Email: marketing@syrahresources.com.au
Mozambique Office
Twigg Exploration and Mining Limitada
Millennium Park Building
Avenida Vladimir Lenine
Nr 174, Block B, Level 5
Maputo, Mozambique
Website: www.twigg.co.mz
Louisiana Office
Syrah Technologies LLC
2001 D. A.
Biglane Road, Vidalia
LA, 71373
United States of America
AUDITORS
PricewaterhouseCoopers
2 Riverside Quay
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)
PAGE CONTENTS
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96
Company Profile
2018 Highlights
Chairman’s Letter
Managing Director & CEO’s Letter
Directors' Report
Renumeration Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
102
Additional ASX Information
For personal use only
COMPANY PROFILE
2018 HIGHLIGHTS
OUR VISION
BALAMA GRAPHITE OPERATION
To be the world’s leading supplier of superior
quality graphite products, working closely
with customers and the supply chain to add
value in battery and industrial markets.
> Strong health and safety record further
improved with Total Recordable Injury
Frequency Rate (TRIFR) of 0.3 as at end of
2018
OUR VALUES
Syrah is committed to:
> GOOD HEALTH and WORKING SAFELY
at all times
> PARTNERING with the COMMUNITY and
STAKEHOLDERS for sustainability
> INTEGRITY and FAIRNESS in all our
business dealings
> Being ACCOUNTABLE for our decisions
and actions
> CHALLENGE and SUPPORT our people
to achieve their potential
We will work as a team and act like owners to
deliver shareholder value
> Balama established as the world’s largest
natural graphite producer with >100kt
production in the first year of operations
> Production of high grade, low impurity
products
> Binding Mining Agreement finalised with
Government of Mozambique
SALES AND MARKETING
> UAE Marketing & Logistics hub and China
Representative Sales Office established
> Sales contracts and qualification achieved
in all major regions and end use segments
> First major exporter of flake graphite into
China
BATTERY ANODE MATERIAL PROJECT
("BAM")
> Acquired and developed BAM site in
Louisiana
> Installation of 5ktpa milling capacity
completed, purification installation
underway
> First production of unpurified spherical
graphite using Balama natural flake
graphite achieved
> Testing and benchmarking of Syrah pilot
BAM product demonstrated equivalent
electrochemical performance to tier 1
competitor products
1
For personal use only CHAIRMAN'S LETTER
2018 is best characterised as “the Balama commissioning
year”, where the Balama Graphite Operation (“Balama”)
performance was challenging. As the year progressed
when all indications were that performance was improving
and starting to be predictable, a minor plant fire occurred,
further delaying performance delivery. Once this repair was
completed, Balama resumed the improving performance
trajectory and this has continued into 2019. Your Board
was kept informed of the progress via a well-established
executive reporting protocol and maturity of risk
management systems is now well embedded.
All the above had a negative impact on Syrah’s valuation, and
shareholder wealth has been substantially eroded over the
year. A further equity issue in the third quarter was necessary
to complete Balama commissioning and replace capital
previously allocated to finalising the Battery Anode Material
(“BAM”) plant in Louisiana. Other financing alternatives were
explored for this funding, but the terms were deemed too
egregious to accept this option.
There have been substantial positives from the 2018
achievements. Balama product quality has had excellent
market acceptance, the volume of production sales has
broadly matched market demand and the sales of fines
flake into the major Chinese anode materials manufacturers
uniquely establishes Balama product as a preferred
feedstock for Lithium-ion battery anode manufacture.
We are proud of our safety record which combined with our
environmental programs and community initiatives underpins
our licence to operate.
With the ongoing improvements in Balama, Syrah’s strategy
has driven the leadership position we have established in a
short period of time.
It would be remiss to not mention our continued excellent
experience operating in Mozambique. Our resident
Director, Jose Caldera, has been an invaluable custodian
of our activities and Government relations are solid. The
Mozambique President, His Excellency Mr Filipe Nyusi
officially opened Balama in April 2018. As our business
matures, we have relocated our primary Mozambique
administrative office from Pemba to the capital, Maputo.
Your Board has undergone change during the year, with the
addition of Lisa Bahash who brings a wealth of experience
from the automotive original equipment manufacturer
(“OEM”) industry, and the resignation of Stefano Giorgini
late in the year. In late March 2019, Christina Lampe-
Onnerud resigned from our Board in recognition of the
growing commercial relationship with her advisory group,
Cadenza Innovation Inc, in the technical development of our
downstream BAM Project. Christina will thus continue deep
involvement in Syrah’s Lithium-ion battery quest.
We anticipate at least one additional appointment to the
Board in 2019. These are designed to address the evolution
of Syrah into a vertically integrated battery supply chain
materials provider, with a global market position. The strategic
aspects of this mission demand international experience
across a broad range of skill sets.
The primary focus for 2019 is to continue market penetration
of our graphite products at competitive prices, and the
qualification of our anode materials out of the BAM Louisiana
plant.
We thank you for your continued support and we expect
improvement in the equity value of your stockholding
throughout 2019 and beyond. We are confident that we have
the management team to deliver improved results and we
continue with the vision to deliver Syrah as the leading high
quality graphite producer and downstream anode company
globally.
James Askew
Chairman
2
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only MANAGING DIRECTOR
AND CEO’S LETTER
2018 was another year of milestones for Syrah as we
transitioned the Balama project from construction to
operations. Despite the well documented production ramp
challenges we faced, the team made significant progress
in operating what is now the world’s largest natural graphite
producer, with over 100kt of natural graphite produced in its
first full year of operation.
Our safety record continues to further strengthen with a
Total Recordable Injury Frequency Rate of 0.3 as at the end
of the year versus 0.8 at the end of 2017. Our commitment
to best practice sustainability has been recognised with
Balama achieving ISO certification for Environmental and
Occupation Health, and Safety Management Systems.
The Mining Agreement was finalised by the Government
of Mozambique providing clarity and stability over the
agreements governing Balama’s operation.
Julio Costa, our Chief Operating Officer commenced in
June and has successfully implemented a comprehensive
production improvement plan, focusing on achieving target
graphite recovery and optimising throughput, product mix
and grade. Critical equipment management and product
handling and logistics improvements have also been a key
focus.
Our UAE marketing and logistics hub developed strongly
and established sales contracts in all major regions
and end-use market segments, including the traditional
industrial markets and the high growth battery anode
sector. We sold and shipped over 70kt in 2018, with
significant port throughput achievements made late in the
year.
We also opened a China representative sales office
reflecting our position as the first major exporter of graphite
into China – a significant market development. China is the
largest producer and consumer of natural graphite globally,
and developing our presence in China positions Syrah
well to respond to the major source of demand growth in
coming years.
A mix of term and spot sales agreements were struck for
2019, with a minimum of 74kt of additional sales contracted
into China across a range of natural graphite size fractions.
Our Battery Anode Material ("BAM") strategy continued to
progress. Following acquisition in August of our BAM site
in Louisiana, USA, we made great progress on installation,
and achieved first production of unpurified spherical
graphite for qualification purposes at the end of the year.
We are also well placed to achieve first production of
purified spherical graphite.
Testing and benchmarking work which was completed
early 2018 showed unoptimised Syrah BAM products
demonstrated equivalent electrochemical performance to
tier 1 competitor products. We also completed Phase 1 of
our commercial scale BAM feasibility study, from which we
continue to optimise CAPEX and product options.
An external engineering firm also completed a review of the
2014 Vanadium scoping study, with encouraging outcomes.
In addition to our strong safety performance, our regular
Environmental Monitoring program continued in line with
over 200 licence conditions with no significant incidents
during the year.
We continue to focus on our people and communities.
At Balama 96% of direct employees are Mozambican
nationals with 55% from the local host communities.
During the year we implemented a malaria screening
program to proactively identify individuals who may be
carrying the malaria virus, with results benefitting the health
of our people and extending to local communities with
reduced malaria cases.
I am also pleased to advise that the construction of the
Balama Professional Training Centre has been completed
and we have enrolled and inducted our first intake of
students, providing valuable skill development and long
term benefit to the broader Balama community.
Overcoming the challenges of 2018, our production
and supply chain achievements have shown that the full
planned potential of the Balama asset is available. Thus
our focus in 2019 is for consistency and stability through
methodical continuation of our ramp up, in conjunction
with market development delivering growth in the sales
book and improved price realisation. Increasing production
consistency in graphite recovery, carbon grade, product
mix and logistics will be key enablers for further growth.
The team at Syrah will continue to work relentlessly to
achieve our strategic objectives including driving down unit
costs at Balama, whilst maximising our realised sales price
outcomes to see Balama generate positive cashflow. We
will continue to carefully develop our BAM and Vanadium
options, always focusing on our licence to operate and
growing shareholder value.
Shaun Verner
Managing Director and Chief Executive Officer
3
For personal use only DIRECTORS’ REPORT
DIRECTORS
The following persons were directors of Syrah Resources
Limited during the financial year and up to the date of this
report, unless otherwise stated:
> Member of the Audit and Risk Committee (appointed to
the Committee 12 December 2018)
Length of service: 4 years and 5 months
Interest in shares and options:
James Askew
Non-Executive Chairman
Shaun Verner
Managing Director and Chief Executive Officer
SECURITIES
Ordinary shares
Options over ordinary shares
NUMBER
107,517
Nil
Sam Riggall
Non-Executive Director
José Manuel Caldeira
Non-Executive Director
Lisa Bahash
Non-Executive Director (appointed 16 July 2018)
Christina Lampe-Onnerud
Non-Executive Director (ceased 25 March 2019)
Stefano Giorgini
Non-Executive Director (ceased 6 December 2018)
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 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 been
continuously involved with the African mining industry since
1985.
Other current directorships in listed entities:
> Chairman of OceanaGold Corporation
> Non-Executive Director of Evolution Mining Limited
> Non-Executive Director of Endeavour Mining Corporation
Directorships of listed entities within the past three years:
> Chairman of OceanaGold Corporation (since March
2007, to retire 30 June 2019)
> Non-Executive Director of Evolution Mining Limited (since
November 2011)
> Non-Executive Director of Endeavour Mining Corporation
(since July 2017)
> Chairman of Asia Minerals Resources Limited (January
2015 to March 2017)
> Non-Executive Director of Nevada Copper Corporation
(June 2015 to May 2016)
Special responsibilities:
> Chairman of the Sustainability Committee
> Member of the Remuneration, Nomination and
Governance Committee
Shaun Verner
Managing Director and Chief Executive Officer
Experience and expertise: Mr Verner is a senior resource
industry executive with extensive general management and
cross-functional commercial, operations, supply chain, and
leadership experience. Prior to joining Syrah in October
2016, Mr Verner was at BHP Limited for 20 years in a variety
of executive roles, with extensive international commercial
and operational experience across a range of commodities
including copper and base metals, uranium and thermal and
metallurgical coal.
Other current directorships in listed entities: None
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Managing Director and Chief Executive Officer
Length of service: 2 years and 2 months
Interest in shares and options:
SECURITIES
Ordinary shares
Options over ordinary shares
Performance rights
NUMBER
80,231
1,000,000
215,747
Sam Riggall
Non-Executive Director
Experience and expertise: Mr Riggall is Chief Executive
Officer of CleanTeQ Holdings Limited, an Australian
and Canadian-listed technology company focused on
development of resources for new energy and materials
markets, and director of VRB Energy, one of China’s largest
vanadium redox flow battery manufacturers. Previously
Executive Vice-President of Business Development and
Strategic Planning at Ivanhoe Mines Ltd, and Director of
Oyu Tolgoi LLC, and has over a decade's experience with
Rio Tinto Ltd covering industrial minerals, project generation
and evaluation, business development and capital market
transactions. He brings significant insight to the impact of
disruptive technologies on metals markets with a strong track
record of identifying and building value through innovation.
Other current directorships in listed entities:
> Chief Executive Officer of CleanTeQ Holdings Limited
4
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Directorships of listed entities within the past three years:
> Chief Executive Officer of CleanTeQ Holdings Limited
(since July 2015)
Special responsibilities:
> Chairman of the Remuneration, Nomination and
Governance Committee
> Chairman of the Audit and Risk Committee (appointed as
Committee Chairman on 12 December 2018)
Other current directorships in listed entities: None
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Member of the Remuneration, Nomination and
Governance Committee (appointed to the Committee
28 November 2018)
> Member of the Sustainability Committee (appointed to the
Length of service: 4 years and 5 months
Interest in shares and options:
SECURITIES
Ordinary shares
Options over ordinary shares
Committee 12 December 2018)
Length of service: 9 months
Interest in shares and options:
NUMBER
20,627
Nil
SECURITIES
Ordinary shares
Options over ordinary shares
NUMBER
15,583
Nil
José Manuel Caldeira
Non-Executive Director
Experience and expertise: Mr Caldeira is a prominent and
senior lawyer in Mozambique with over 30 years commercial
and government experience. He is a senior partner at Sal
and Caldeira Advogados, Lda in Mozambique, one of the
leading law firms in Mozambique and a former judge of the
Maputo City Court
Other current directorships in listed entities: None
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Member of the Audit and Risk Committee
> Member of the Sustainability Committee
Length of service: 4 years and 7 months
Interest in shares and options:
SECURITIES
Ordinary shares
Options over ordinary shares
NUMBER
12,082
400,000
Lisa Bahash
Non-Executive Director (appointed 16 July 2018)
Experience and expertise: Ms Bahash has 30 years
experience in the automotive OEM, Tier 1 supplier and
aftermarket sectors. Her prior roles included Senior Vice
President, Automotive and Transportation with Jabil Inc., one
of the world’s leading electronics manufacturing services
company, and Group Vice President and General Manager
of Johnson Control’s Power Solutions business, one of the
world’s largest automotive battery manufacturers leading the
OEM and technology strategies including advanced energy
storage and Lithium-ion technologies.
INFORMATION ON FORMER
DIRECTORS
Christina Lampe-Onnerud
Non-Executive Director (ceased 25 March 2019)
Experience and expertise: Dr Lampe-Onnerud is an
authority on battery system innovation and design. She is
the founder of Cadenza Innovation Inc. and has over 20
years of experience in the research, development and
commercialisation of Lithium-ion battery technologies for
consumer electronics, electric automotive and energy
storage applications. She was also the founder of Boston-
Power, Inc., a developer of high-energy, cost-effective,
longer-lasting and safer battery “building blocks”. She has
also held senior roles at Bridgewater Associates, LP, Arthur D.
Little and Bell Communications Research, Inc.
Other current directorships in listed entities:
> Director of Fuel Cell Energy, Inc.
Directorships of listed entities within the past three years:
> Director of Fuel Cell Energy, Inc. (since November 2018)
Special responsibilities:
> Member of the Remuneration Nomination and
Governance Committee
Length of service: 2 years and 10 months
Interest in shares and options(1):
SECURITIES
Ordinary shares
Options over ordinary shares
NUMBER
Nil
400,000(2)
(1) Information as at the date of cessation as a Non-Executive Director of
the Company.
(2) These options were granted on 24 May 2016 and will expire on
24 May 2019 in accordance with their terms.
5
For personal use only Stefano Giorgini
Non-Executive Director (ceased 6 December 2018)
Experience and expertise: Mr Giorgini is a finance
executive with over 30 years experience in senior finance,
risk and assurance, governance, business development and
commercial roles in the international resource and metals
manufacturing industries. During his career with BHP Billiton
Limited, responsibilities included Vice President Finance/
CFO for the Aluminium, Manganese and Nickel Business and
Head of Group Risk Assessment & Assurance.
Mr Giorgini has held executive director roles for numerous
international resource ventures based in Australia, South
America and Africa including Mozal Aluminium.
Other current directorships in listed entities: None
Directorships of listed entities within the past three
years: None
COMPANY SECRETARY
Jennifer Currie
Chief Legal Officer and Company Secretary
Experience and expertise: Ms Currie is an experienced
ASX listed General Counsel and Company Secretary,
who has worked across a broad range of industries. Her
previous role was General Counsel & Company Secretary
for Capitol Health Limited. She has also held the role of
General Counsel & Company Secretary for the Baker Heart
& Diabetes Institute and PRB Foods Limited, and her other
in-house legal experience includes Medibank Private Limited
and Telstra Corporation Limited.
She is a Chartered Secretary and a Fellow of the Governance
Institute and ICSA and holds a Bachelor of Commerce,
Bachelor of Laws, a Master of Laws and a Graduate Diploma
in Applied Corporate Governance.
Special responsibilities:
> Chairman of the Audit and Risk Committee
> Member of the Sustainability Committee
Length of service: 14 months
Interest in shares and options(1):
SECURITIES
Ordinary shares
Options over ordinary shares
NUMBER
16,727
400,000(2)
(1) Information as at the date of cessation as a Non- Executive Director
of the Company.
(2) These options were granted on 20 October 2018 and expired on
5 February 2019 as a result of his cessation as a Non-Executive
Director.
PRINCIPAL ACTIVITIES
The principal continuing activities of the Group (being Syrah
Resources Limited and its wholly owned subsidiaries) during
the year consisted of:
> Production ramp-up of the Balama Graphite Operation in
Mozambique;
> Sales of natural flake graphite and ongoing development
of logistics, sales and marketing arrangements with
targeted customers;
> Continued development of the use of high quality
graphite from Balama as an input into the production of
battery anode material and industrial products; and
> Development and execution of a downstream, battery
anode material strategy in the USA.
DIVIDENDS
There were no dividends paid, recommended or declared
during the current financial year or previous financial year.
6
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only REVIEW OF OPERATIONS
OPERATING AND FINANCIAL REVIEW
CONSOLIDATED RESULTS
All financial data presented in this report is quoted in United
States Dollars (US$) unless otherwise stated.
Statement of Comprehensive Income
The loss for the consolidated entity after income tax for the
financial year ended 31 December 2018 was $29.0 million
(2017: $12.3 million).
Revenue for the year ended 31 December 2018 comprised
of interest income of $1.2 million (2017: $1.3 million) from
cash reserves placed on term deposits during the year.
Total expenses for the year were $32.0 million (2017: $14.8
million), and included the following:
> Employee benefits expense of $10.2 million (2017: $7.6
million), of which $4.3 million (2017: $2.0 million), were
non-cash share-based payment costs associated with
issuance of shares, options and performance rights to
directors, executives and senior employees;
> Legal and other consulting expense of $2.0 million
(2017: $3.7 million) associated with documentation of key
commercial agreements, consulting services in relation to
consideration of financing options and management of
the Group's corporate and administration functions;
> Depreciation and amortisation of corporate and
administration assets of $0.5 million (2017: $0.3 million);
> Net foreign exchange loss of $1.2 million (2017: Net
foreign exchange gain of $1.5 million); on foreign
currency denominated transactions and balances,
principally the Mozambique Metical (MZN).
> Other expenses of $18.2 million (2017: $3.3 million)
comprising of a $7.4 million write off of certain mining
assets and a proportion of pre-commercial production
costs due to major equipment failures during the year and
a $7.2 million share based payment expense arising from
a contractual obligation to provide a 5% non-controlling,
non-diluting interest in Twigg Exploration and Mining
Limitada to a Mozambique Government entity.
Total comprehensive loss attributable to shareholders of
Syrah Resources Limited for the year was $30.1 million (2017:
$5.7 million loss).
Statement of Financial Position
Total assets of the consolidated entity as at 31 December
2018 were $473.8 million (2017: $418.5 million), with the
increase principally as a result of the successful completion
of a fully underwritten $68 million (A$94 million) institutional
placement and a subsequent Share Purchase Plan to eligible
shareholders raising an additional $6 million (A$9 million)
at A$2.23 per share (refer to ASX announcement dated 4
September 2018).
The consolidated entity’s cash and cash equivalents as at 31
December 2018 were $77.1 million (2017: $111.9 million) and
working capital, being current assets less current liabilities,
was $71.8 million (2017: $101.0 million). The net reduction
in cash and cash equivalents and working capital is a result
of the continuing ramp up of the Balama Graphite Operation
and the development of a Battery Anode Material (“BAM”)
Project.
Mining assets increased to $331.2 million as at 31 December
2018 (2017: $273.5 million) due to the Balama Graphite
Operation remaining in the production ramp up phase
and not achieving commercial production during the year.
Consequently, all production ramp up costs, net of revenues
derived from the sale of graphite and the write off of certain
mining assets and a portion of associated pre-commercial
production operating costs from major equipment failures
during the year, were capitalised against mining assets. On
14 January 2019, the declaration of commercial production
at the Balama Graphite Operation was announced. Effective
from 1 January 2019, all revenues from the sale of graphite
will be recognised as revenue in the period in which they
are earned, and operating costs incurred, net of inventory
movements, will be expensed in the period in which they
are incurred. Depreciation and amortisation of capitalised
project development and construction costs will commence
effective from 1 January 2019.
Property, plant and equipment increased to $31.4 million as
at 31 December 2018 (2017: $9.0 million) due to the BAM
Project development costs and the construction of a purpose
built facility (5kt per annum milling capacity, batch scale
purification capability) in Vidalia, Louisiana, USA.
Non-current trade and other receivables increased to $20.8
million as at 31 December 2018 (2017: $19.6 million) with
the majority relating to outstanding Input Tax Credits in
Mozambique of $16.8 million (2017: $16.4 million). During
the year ended 31 December 2018 cash refunds totaling
$5.6 million were received for input tax credits (2017: Nil).
The Group views the outstanding balance of input tax credits
as ultimately recoverable and continues to work with relevant
authorities in Mozambique to recover these amounts.
The consolidated entity also placed a deposit of $1.2 million
as security for an environmental guarantee in favour of the
Ministry of Mineral Resources and Energy in Mozambique.
The consolidated entity had total liabilities of $28.6 million as
at 31 December 2018 (2017: $25.8 million), which includes
trade and other payables of $15.9 million (2017: $13.9
million); a provision for decommissioning and rehabilitation
for the Balama Graphite Operation of $6.6 million (2017:
$8.3 million); and lease liabilities of $5.6 million (2017: $1.2
million). The lease liabilities are secured against the leased
assets consisting of laboratory equipment at Balama and
a dedicated long-haul trucking fleet for the movement of
graphite from the Balama Graphite Operation to a purpose-
built cross dock facility in Nacala, Mozambique.
Net assets of the consolidated entity increased during the
financial period to $445.2 million as at 31 December 2018
(2017: $392.6 million).
7
For personal use only Statement of Cash Flows
Cash Flows from Operating Activities
Net cash outflow from operating activities for the year ended
31 December 2018 was $10.0 million (2017: $10.7 million),
and principally consisted of employee benefits expenses,
legal and other consulting costs, and general corporate
administration costs. Net cash flows from operating activities
includes interest received during the year of $1.1 million
(2017: $1.2 million).
Cash Flows from Investing Activities
Net cash outflow from investing activities was $94.6 million
for the year (2017: $127.0 million) and principally consisted
of pre-commercial production operating costs for the Balama
Graphite Operation and the development of the BAM Project
in Vidalia, Louisiana, USA.
Cash Flow from Financing Activities
Net cash inflow from financing activities was $70.5 million
during the year ended 31 December 2018 (2017: $85.1
million) and principally consisted of proceeds received
from the capital raising completed during the year, net of
transaction costs.
SEGMENT REVIEW
BALAMA GRAPHITE OPERATION
Financial Summary
The segment result for the Balama Graphite Operation for
the year ended 31 December 2018 was a net loss before
income tax of $20.6 million (2017: net profit before tax of
$0.9 million). This loss was principally due to a $7.4 million
write off of certain mining assets and a proportion of
pre-commercial production operating costs due to major
equipment failures during the year and a $7.2 million share
based payment expense arising from a contractual obligation
to provide a 5% non-controlling, non-diluting interest in
Twigg Exploration and Mining Limitada to a Mozambique
Government entity.
Total segment assets for the Balama Graphite Operation
were $369.5 million as at 31 December 2018 (2017: $299.6
million) and principally comprised of mining assets of
$331.2 million (2017: $273.5 million); and trade and other
receivables of $11.6 million (2017: $4.8 million). The increase
in total segment assets relates to the capitalisation of pre-
commercial production operating costs.
Following are the key activities and achievements at the
Balama Graphite Operation during the financial year.
Sustainability
Syrah’s commitment to sustainability has been recognised
through receiving accreditation in ISO 14001 and OHSAS
18001 at Balama in May 2018, demonstrating alignment with
leading practice in Environmental and Occupation Health &
Safety Management.
Health and Safety
Health and safety is the highest priority for the Company,
in particular given the developing nature of the Company’s
local workforce. Syrah continued its strong health and safety
performance at Balama with a Total Recordable Injury
Frequency Rate ("TRIFR") of 0.3 as at 31 December 2018, a
reduction from 0.8 as at 31 December 2017.
In September 2018, Syrah introduced a mandatory screening
program to supplement existing malaria mitigation efforts,
to proactively identify low parasitemic individuals not yet
presenting with malaria symptoms. As a result of this
screening program, 149 employees were prevented from
falling ill with malaria and minimised employee and local
community transmission rates. This screening program will
continue at Balama.
Environment
In 2018, the Environmental Monitoring Program continued
with over 200 environmental licence conditions met with no
significant incidents or major non-compliances. Monitoring
initiatives including the measurement of surface and ground
water quality, ambient noise, dust levels, geo-hydrology,
background radiation and air quality continued as part of the
Company’s Environmental Monitoring Program.
As at 31 December 2018, the Company has placed in
favour of the Ministry of Mineral Resources and Energy
(“MIREME”) in Mozambique a bank guarantee totaling
$3.7 million in relation to the rehabilitation or removal of
project infrastructure for Balama as per the Mine Closure
Plan commitments. The total amount of this bank guarantee
will increase to $6.2 million.
A Livelihood Development Program ("LDP") commenced
during the year, in collaboration with the Mozambique
Institute of Agricultural Research (Montepuez delegation)
to equip local farmers with new and improved agricultural
techniques, equipment and crop varieties.
The aim of the LDP is to help sustain / generate livelihoods
independent from the mine and protect local food security.
The Balama Nursery was established to cultivate native
tree species for rehabilitation and ecological preservation
purposes with over 4,500 seedlings planted in 2018.
The Balama Nursery compliments livelihood development
efforts via the provision of cashew and other cash crop
seedlings to local farmers.
8
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Community Development
As at the end of 2018, 96% of Balama’s direct employees
were Mozambican nationals with 55% residing in the local
host communities.
Ongoing Government support was demonstrated, with the
President of Mozambique, His Excellency Mr Filipe Nyusi,
officially opening the Balama Graphite Operation at an
onsite inauguration event held in April. The Governor of
Cabo Delgado, His Excellency Mr Júlio José Parruque, the
Minister of Mineral Resources and Energy, His Excellency Mr
Ernesto Tonela, and other dignitaries, and guests from Cabo
Delgado Province, Balama District and local communities
also attended the event.
During the year, Syrah completed the construction of the
Balama Professional Training Centre ("BPTC") in partnership
with the National Institute of Professional Training & Labour
Studies (“IFPELAC”). The BPTC will train at least 500
members from the local host communities in basic artisan
training, work readiness and health promotion over the
next five years. Syrah has prepared all training material in
conjunction with IFPELAC and will continue to develop the
BPTC training curriculum over the coming years in line with
community needs. Training commenced in January 2019.
Mining Agreement
The Mining Agreement was signed by the Minister of
Mineral Resources and Energy, on behalf of Government
of the Republic of Mozambique, and Syrah’s wholly owned
subsidiary, Twigg Exploration and Mining Limitada and was
sanctioned by the Administrative Court in Mozambique in
September 2018. The Mining Agreement is now binding and
enforceable. It consolidates all prior project documents and
approvals and provides the Company with clarity around
the governing laws and contractualises the mining rights
and other obligations for the Balama Graphite Operation in
Mozambique.
Production
The Balama project transitioned to operations on 1 January
2018 with production focused on ramp up and optimisation.
Mining activities performed in line with plan with material
mined >9% Total Graphitic Carbon (above cut off grade) of
1,356kt and total material mined of 2,039kt. Some drill and
blast activities were undertaken to remove sections of hard
rock material.
Balama produced 104kt of natural flake graphite in its first
year of production in line with revised forecasts, following the
October outage. Average fixed carbon grade achieved was
95% with a range of 94% to 98%, and the production ratio of
fines to coarse flake graphite was approximately 80% to 20%.
Balama Graphite Operation Production Summary 2018
Material Mined (>9% TGC(1))
Material Mined (>2% - < 9% TGC(1))
Waste Mined
Total Material Moved
Plant Feed
Plant Feed Grade (TGC(1))
Recovery
Graphite Produced
Average Fixed Carbon
(1) TGC = Total Graphitic Carbon
1,356kt
478kt
205kt
2,039kt
1,120kt
17%
53%
104kt
95%
Average graphite recovery achieved in 2018 was 53% which
was lower than plan. Significant improvement in recovery
was achieved over the course of the year as a result of the
production improvement plan. Recovery was 70% in the
fourth quarter with peak daily recovery of 90% achieved.
Plant peak daily throughput capacity was achieved ~ pro-rata
2Mt per annum feed.
Production ramp up was impacted by damage to the fines
dryer refractory bricks and flame tube in March, which was
repaired in approximately eight weeks. Impact on production
during the repair period was partly mitigated by maximising
throughput in the coarse flake dryer.
In October, a fire to the Primary Classifier Unit rendered
it inoperable and it was replaced over a five week repair
period. During this time, Syrah operated a by-pass and
brought forward planned maintenance and production
optimisation works to reduce subsequent planned downtime
and continue the production improvement plan.
Construction of the attrition cells was completed and
they were operational in August. Combined with process
improvements, Syrah successfully produced 98% fixed
carbon ("FC") grade graphite across all sizes in the coarse
flake circuit using standard flotation processes. Product
value in use advantages for customers include reduced
acid usage, lower impurities and a reduced environmental
footprint.
A comprehensive production improvement plan initiated by
the Chief Operating Officer (appointed in June) continues
with focus areas including maximising recovery and
throughput, optimising product mix and grade, critical
equipment management, and product handling and
logistics.
9
For personal use only Sales and Marketing
Natural Graphite Sales Summary 2018
Graphite Sold and Shipped
Inventory at Nacala as at end of period (sales
orders awaiting shipment)
Inventory at Balama/ USA as at end of period
Total Annual Production
73kt
20kt
11kt
104kt
Sales and qualification product shipments commenced
in January 2018. During the year, shipments were made
to a global customer base across the high growth battery
sector and traditional industrial markets. Customer feedback
on product quality was very positive with carbon grade,
impurities, and particle size distribution meeting customer
specifications. First cash inflow from sales was received in
February.
Syrah also established itself as the first major exporter of
graphite into China, indicating a major change to global trade
flows, given China is currently the major global supplier and
consumer of natural graphite.
For the full year 2018, Syrah sold and shipped 73kt of natural
flake graphite and had an additional 20kt of sales orders
awaiting shipment at Nacala as at the end of the year. Sales
contracts were a mix of term agreements, spot and repeat
spot sales enabling price discovery over the course of the
year.
Syrah’s lower than planned production performance during
the year has impacted fulfilment of existing contracts, with
rollover of remaining 2018 contract volumes and prices into
2019.
Syrah announced the following additional binding term sales
agreements for natural flake graphite which resulted from
successful spot sales:
> Minimum 48kt in 2019 with additional 12kt at Syrah’s
option to Qingdao Langruite Graphite Co. Ltd;
> 6kt coarse flake to Qingdao Freyr Graphite Co., Ltd over
12 months; and
> 20kt by 31 August 2019 to Qingdao Taida-Huarun New
Energy Technology Co. Ltd.
Logistics
Supply chain optimisation and performance improvement
actions continued throughout 2018 as sales and production
volumes increased.
During the year, Balama’s logistics contractor transitioned to
the purpose built Cross Dock Facility and dedicated trucking
fleet.
Cycle times at the Balama warehouse and for customs
processing at the Port of Nacala led to higher than planned
inventory during the year. Improvement actions were
undertaken with Balama site inventory reduced by the end of
the year.
Significant capacity increases were also achieved in road
transport dispatch and container port receipts towards the
end of 2018.
Graphite Pricing
The graphite market exhibits bespoke pricing based on
a bilateral negotiation. The majority of Syrah’s term sales
agreements comprise of quarterly repricing. Syrah also
enters into spot sales agreements. There is currently no
centrally accepted clearing price or price index for natural
graphite and differences are apparent between market
segments and geographic locations.
In 2018, Syrah achieved a range of prices (CIF)
demonstrating the variations driven by grade, flake size,
qualification shipments, product mix, market entry and China
domestic versus ex China pricing.
The current fines price achieved by Syrah continues to
be influenced by China’s domestic market fundamentals
(domestic supply and demand balance relative to the
international balance at any given point in time), as well as
VAT and inland logistic costs.
Current prices for coarse flake material are reflected in both
the China domestic and international markets given these
markets are fairly balanced.
A demonstrated grade premium has been achieved for
higher fixed carbon content.
10
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Graphite Mineral Resources and Ore Reserves Estimate
A 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”
("JORC Code") compliant Mineral Resource estimate using a 3% Total Graphitic Carbon ("TGC") cut-off has been determined
by MPR Geological Consultants Pty Ltd ("MPR") as shown in the following table released by the Company on 29 March 2019.
Resource Competent Person’s Statement
The information in this report related to Mineral Resource estimates is based on information compiled by Mr Jonathon Abbott,
a Competent Person who is a member of the Australian Institute of Geoscientists. Mr Abbott is employed by MPR Geological
Consultants Pty Ltd and is an independent consultant to Twigg Exploration and Mining Limitada. Mr Abbott has sufficient
experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
reporting to qualify as a Competent Person as defined in the JORC Code. Mr Abbott consents to the inclusion in this report of
the matters based on his information in the form and context in which it appears.
Table 1: Mineral Resource estimate at 3% TGC cut-off grade
As at 31 December 2017
As at 31 December 2018
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
TONNES
(Mt)
TGC
(%)
GRAPHITE
(Mt)
645
75
110
460
546
-
76
470
10.5
11
8.1
11
10.6
-
14
10
68.5
8.4
9.1
51
60
-
11
49
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
1,191
11.0
128.5
Total
75
186
930
11
11
11
8.4
20.1
100
Measured
Indicated
Inferred
TONNES
(Mt)
TGC
(%)
GRAPHITE
(Mt)
640
24.3
256
360
783
-
123
660
1,423
24.3
379
1,020
10
17.6
10.2
9.3
11
-
13.4
10.1
10
17.6
11.2
9.8
63.9
4.3
26.1
33.5
83.1
-
16.5
66.7
146.7
4.3
42.4
100.0
Explanation of material changes:
The figures in this table are rounded to reflect the precision of the estimates and include rounding errors. Mineral Resource
estimates are reported inclusive of Ore Reserve estimates (but noting that the Ore Reserves estimates in Table 2 below are
based on Mineral Resource estimates released by the Company on 29 May 2015 and 15 November 2016).
The increase in Mineral Resource arises from additional extrapolation which is warranted by improved representation of
mineralisation continuity, primarily at Balama East.
Reserve Competent Person’s Statement
The information in this report related to Ore Reserve estimates was compiled under the supervision of Mr Jon Hudson who
is an employee of Snowden Mining Industry Consultants Pty Ltd and a Fellow of the South African Institute of Mining and
Metallurgy. Mr Hudson has sufficient experience relevant to the style of miernalisation and type of deposit under consideration
and to the activity that he has undertaken to qualify as a Competent Person as defined in the JORC Code. Mr Hudson
consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.
11
For personal use only Table 2: Ore Reserve estimate
As at 31 December 2017 (9% TGC cut-off grade)
As at 31 December 2018 (7.2% TGC cut-off grade)
TONNES
(Mt)
TGC
(%)
GRAPHITE
(Mt)
CLASSIFICATION
Balama West
Proved
Probable
Mualia (5)
Proved
Probable
Balama East
Proved
Probable
Stockpiles
Proved
Probable
Total
Proved
Probable
22.5
20
2.6
33.1
-
33.1
58.8
-
58.8
-
-
114.5
20
94.5
19
19.2
17.5
17.5
-
17.5
15.1
-
15.1
-
-
16.5
19.2
16.0
CLASSIFICATION
Balama West (1),(2)
Proved
Probable
Mualia (3)
Proved
Probable
Balama East (4)
4.3
3.8
0.4
5.4
-
5.4
8.9
-
Proved
8.9
Probable
Stockpiles
Proved
Probable
Total (4)
Proved
Probable
-
-
18.6
3.8
14.7
TONNES
(Mt)
TGC
(%)
GRAPHITE
(Mt)
22.76
5.15
17.61
33.89
-
33.89
56.41
-
56.41
0.24
0.24
-
113.29
5.39
107.9
17.41
17.20
17.48
18.74
-
18.74
14.51
-
14.51
17.18
17.18
-
16.36
17.20
16.32
4.0
0.9
3.1
6.4
-
6.4
8.2
0.0
8.2
0.04
0.04
-
18.5
0.9
17.6
The Ore Reserve was estimated above using a cut-off of 7.2% TGC. The Ore Reserve estimate includes the 2018 closing
stockpile position and mining ore depletion from the Ativa pit as at 31 December 2018. All Ore Reserves tonnes have been
rounded to the nearest 10,000 tonnes and grade to the nearest 0.01%. The Ore Reserve estimate includes small amounts of
inferred material in the form of mining edge dilution.
The Ore Reserves are based on the Mineral Resource estimates released by the Company on 29 May 2015 (for Ativa in Balama
West and Balama East) and 15 November 2016 (Mualia). The Ore Reserves have not been updated for the revised Mineral
Resource estimate prepared by MPR and released by the Company on 29 March 2019.
Explanation of material changes:
(1) Reclassification of Ore Reserves from Proved to Probable due to changes in assumptions based on production and
recovery performance to September 2018, and weighted average price.
(2) Mining ore depletion of 1.2Mt at 16% TGC from Balama West (Ativa).
(3) The Company’s most recent Ore Reserve update covers Balama West (Ativa), Balama West (Mualia) and Balama East in a
single study.
(4) Addition of 6Mt of marginal economic ore to the total Ore Reserve due to change in cut-off grade. Ore Reserve estimate is
done at 7.2% cut-off to reflect the relative value across the flake size distribution.
(5) 2017 Annual Report, Table 4. In the 2017 Annual Report the Balama West (Mualia) Ore Reserves were reported separately
to the Balama West (Ativa) and Balama East Ore Reserves as the Balama West (Mualia) Ore Reserves were the subject of a
standalone study (reported by the Company on 15 November 2016).
Governance and Controls Statement
The Company engaged independent consultants to prepare the mineral resource and reserve estimates.
The consents by the Competent Persons remain in place for subsequent release 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 complete JORC Code reports, including JORC Code Table 1 documentation, which detail the material assumptions and
technical parameters for each estimate, are available on the Company’s website at www.syrahresources.com.au
The Company confirms that the form and context in which the Competent Persons’ findings are presented have not been
materially modified from the original ASX announcements.
12
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
Research & Development
In conjunction with Cadenza Innovation Inc. ("Cadenza"),
testing and benchmarking of the electrochemical properties
of Syrah’s Battery Anode Materials using Balama material
has established a performance baseline against existing
high-quality BAM products from Japan, Korea and China.
Key variables tested included physical and electrochemical
properties, composition, structure and performance.
Positive results of testing and benchmarking reconfirmed
Syrah’s precursor (uncoated spherical graphite and
uncoated purified spherical graphite) and finished BAM
products (coated purified spherical graphite) have the
essential core properties required by the global battery
industry.
Full cell testing utilising Syrah’s coated spherical product
(using pilot plant production) commenced with a global top
10 battery producer. Initial results indicate good performance
across most key parameters, and positive performance
to similar established products on the Lithium-ion battery
market. Performance optimisation opportunities have been
identified as part of Syrah’s ongoing product development
program.
Combined with the benchmarking and testing, a baseline
of battery performance properties is being established to
facilitate market entry.
BALAMA VANADIUM PROJECT
In addition to Balama’s substantial graphite Ore Reserves,
the deposit also hosts a significant Vanadium Inferred
Resource of 1.15Bt at 0.23% V2O5 (JORC code (2012)) (refer
to ASX announcement titled “Maiden Balama East Resource”
released on 27 May 2013).
A review of the 2014 Vanadium Scoping Study was
completed by an external engineering consultant and
concluded that: Revised project estimates between the
2014 study and 2018 review are likely to result in a higher
capital estimate, but lower operating cost estimate than the
original study (on a like for like power basis, which assumed
grid connection); substituting diesel power generation for
simplicity would lead to higher operating costs than the
original study estimate; and despite the higher capital
and operating estimates, financial assessment using a
conservative long term price forecast provides an attractive
initial financial case, warranting progression to formal Pre
Feasibility Study ("PFS") stage.
A number of potential capital reduction and process flow
sheet optimisation opportunities were identified during the
review, for assessment prior to PFS. Syrah has commenced
sampling of Vanadium content in the Balama processing
plant circuit in preparation for a metallurgical test work
program.
CORPORATE
Financial Summary
The segment result for Corporate for the year ended
31 December 2018 was a net loss before income tax of
$10.3 million (2017: $11.8 million).
Total segment expenses for the year were $11.5 million
(2017: $12.6 million) comprising employee benefits, legal
and consulting costs and general corporate administration
costs. These costs include ‘non-cash’ costs of $4.4 million
(2017: $2.2 million), relating to share based payments and
depreciation and amortisation of corporate assets.
Total segment assets were $104.3 million as at 31 December
2018 (2017: $118.9 million), with the decrease mainly driven
by the cash required for the continued production ramp up of
the Balama Graphite Operation, offset by the equity capital
raising completed during the year.
Corporate segment assets as at 31 December 2018
include $73.4 million of cash and cash equivalents (2017:
$110.7 million) which will be used to fund:
> Ongoing working capital for the Balama Graphite
Operation;
> Progression of the BAM Project and product development
opportunities;
> Progression of Vanadium Project studies; and
> General corporate and administrative activities.
BATTERY ANODE MATERIAL ("BAM") PROJECT
BAM Plant Louisiana
Syrah successfully completed the purchase of its Battery
Anode Material ("BAM") site in Vidalia, Louisiana in August
for $1.2 million. Air and water environmental discharge
requirements for commencement of production have been
met.
The acquisition of the Vidalia site followed the rejection of the
initial identified site at Port Manchac, given the community
view that Port Manchac was not an appropriate location for
further growth in manufacturing activities.
Installation of the total 5kt per annum milling equipment
capacity, and required infrastructure at Vidalia was
completed on schedule. First production of unpurified
spherical graphite from Balama natural graphite was
achieved as planned by the end of the year.
Initial production capacity at Vidalia will focus on customer
qualification which only requires small volumes. First
customer qualification product was dispatched in mid
January 2019.
Installation of purification equipment for batch processing is
continuing for initial production of purified spherical graphite.
Commercial Plant Feasibility Study
Syrah completed Phase 1 of a BAM Commercial Plant
Feasibility study for 10kt and 40kt per annum capacity.
Capital efficiency options will be reviewed for coating,
carbonisation and graphitisation for Phase 2.
Increased customer engagement is underway to provide
input into detailed product specification, and to pursue
customer commitments to underpin development.
13
For personal use only FUTURE OUTLOOK
The likely developments in Group operations for future
financial years include:
Balama Graphite Operation
> Production ramp up and optimisation Balama targeting:
> Natural flake graphite production for 2019 of
~250,000 tonnes(1) with ramp up driven by market
fundamentals, achieving appropriate pricing margins
and ongoing production improvement plan
> Recovery trending towards medium term target of
88%
> Production ratio of fines to coarse flake graphite is
expected to normalise towards medium term target of
70% to 30%
> Product fixed carbon ("FC") grade 95% with targeted
campaigns for 96% - 98% FC during 2019
> Cash operating costs (FOB Port of Nacala) trending
downwards towards $400 per tonne over 2019
> Comprehensive production improvement plan
with focus on maximising recovery and optimising
throughput, optimising product mix and grade, critical
equipment management and, product handling and
logistics
Sales and Logistics
> Medium term natural graphite weighted average price
greater than $600 per tonne enabled by:
> Continued higher selling prices expected from a price
premium reflecting cost differential and value in use
> Demonstration of Syrah’s reliability
> China fines pricing expected to improve as China
transitions from net exporter to net importer in the next
two years
> Supply chain performance improvement actions with third
parties to support increased sales and shipping volumes
Battery Anode Material ("BAM") Project
> Progression of the BAM strategy including ongoing
research and development activities first phase plant in
Louisiana, USA
> Phase 1 commercial scale feasibility capital efficiency
review underway
> Improvement of project’s financial return through aligning
product options with customer development plans
> Continue to assess strategic relationship options in
downstream production (particularly high temperature
treatment)
(1) Refer to ASX announcements titled “Syrah finalises Balama Graphite
study and declares maiden ore reserve” released on 29 May
2015, “Syrah increases Balama Reserves and awards Laboratory
Contract” released on 15 November 2016. All material assumptions
underpinning the production target in these announcements continue
to apply and have not materially changed, other than as updated in
subsequent ASX announcements.
14
> Focus on unpurified and purified spherical graphite
production to achieve customer qualification and further
product development
> Targeting first sale of precursor (unpurified and purified
spherical graphite) in 2H19
Vanadium Project
> Sampling and analysis of Vanadium content within the
graphite processing circuit in preparation for metallurgical
test work
> Assessment of capital reduction and flow sheet
optimisation opportunities prior to pre-feasibility
> Commercial and strategic engagement with Vanadium
industry participants regarding development and
financing options
MATERIAL BUSINESS RISKS
The Group continues to assess and manage various
business risks with the potential to have a material impact
on the Group’s operating and financial performance and its
ability to successfully achieve its corporate objectives. Set out
below are the business risks identified as having the potential
to have a material impact on the Group.
The matters listed below are not listed in order of importance
and are not intended to be an exhaustive list of all the risks
and uncertainties affecting the business.
MARKET RISK
The demand for, and the price of, natural flake and spherical
graphite is highly dependent on a variety of factors,
including international supply and demand of graphite
and substitutes, the price and availability of substitutes,
actions taken by governments, and global economic and
political developments. Syrah’s operational and financial
performance, as well as the ongoing economic viability of
the Balama Graphite Operation, is heavily reliant on the price
of graphite, among other things. In this respect, prospective
investors should note that, at present, there is no transparent
market for graphite pricing; rather, prices are negotiated on a
bilateral basis and therefore subject to factors including those
set out below as well as the preferences and requirements of
customers.
Failure by Syrah to negotiate favourable pricing terms (which
terms may provide for fixed or market-based pricing) may
materially affect the profitability and financial performance of
Syrah. Further, failure by Syrah to negotiate favourable terms
with agents or other third parties engaged to market and/
or sell graphite and/or of Battery Anode Material graphite
products ("Products") on its behalf, or failure by such agents
or third parties to sell Products at favourable prices, may
have a similar effect. Any sustained low price for Products
(or low sale price achieved by Syrah, whether directly or via
agents or other third parties) may adversely affect Syrah’s
business and financial results, its ability to finance, and the
financing arrangements for its future activities or its planned
capital expenditure commitments.
The factors which affect the price for the Products (many
of which are outside the control of Syrah) include, among
many other factors, the quantity of global supply of graphite
as a result of the commissioning of new mines and the
decommissioning of others; political developments in
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only countries which produce and consume material quantities
of Products; the weather in such countries; the price and
availability of substitutes; advancements in technologies
and the uses and potential uses of the Products, and the
demand for the applications for which the Products may be
used (including, for example, in the steel, manufacturing,
construction, and battery industries); the grade, quality and
particle size distribution of the Products produced; and
sentiment or conditions in the countries and sectors in which
Syrah and its business/commercial partners sell or intend to
sell the Products.
Given the range of factors which contribute to the price
of the Products, and the fact that pricing is subject to
negotiation, it is particularly difficult for Syrah to predict with
any certainty the prices at which Syrah will sell its Products.
The effect of changes in assumptions about future prices
may include, amongst other things, changes to Mineral
Resources and Ore Reserves estimates and the assessment
of the recoverable amount of Syrah’s assets.
MINERAL RESOURCES AND ORE RESERVES
Mineral Resources and Ore Reserves are estimates of
mineralisation that have reasonable prospects for eventual
economic extraction in the future, as defined by the 2012
Edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves ("JORC
Code"). JORC Code compliant statements relating to Syrah’s
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.
In addition, by their very nature, Resource estimates are
imprecise and depend to some extent on interpretations,
which may prove to be inaccurate. As further information
becomes available through additional fieldwork and analysis,
the estimates are likely to change and may be updated from
time to time. This may result in alterations to mining plans or
changes to the quality or quantity of Syrah’s Ore Reserves
and Mineral Resources, which may, in turn, adversely affect
Syrah’s operations.
Mineral production involves risks, which even a combination
of experience, knowledge and careful evaluation may not be
able to adequately mitigate.
No assurance can be given that the anticipated tonnages
or grade of minerals will be achieved during production or
that the indicated level of recovery rates will be realised.
Additionally, material price fluctuations, as well as increased
production and operating costs or reduced recovery rates,
may render any potential mineral Resources or Reserves
containing relatively lower grades uneconomic or less
economic than anticipated, and may ultimately result in
a restatement of such Resource or Reserve. This in turn
could impact the life of mine plan and therefore the value
attributable to mineral inventory and/or the assessment of
recoverable amount of Syrah’s assets and/or depreciation
expense.
Moreover, short term operating factors relating to such
potential mineral Resources or Reserves, such as the need
for sequential development of mineral bodies and the
processing of new or different mineral types or grades, may
cause a mining operation to be unprofitable in any particular
period. In any of these events, a loss of revenue or profit
may be caused due to the lower than expected production
or ongoing unplanned capital expenditure in order to meet
production targets, or the higher than expected operating
costs.
OPERATIONAL RISK
During the production ramp up and operational phase of the
Balama Graphite Operation, there is a risk that difficulties
may arise as part of the processing and production of
minerals, including failures in plant and equipment, difficulties
in obtaining and importing replacement equipment, and
difficulties with product liberation, separation, screening,
filtration, drying and bagging.
Other risks during the production ramp up and operational
phase include, and are not limited to, weather, availability
of materials, availability and productivity 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 and IT failures or
disruptions. The production ramp up process may uncover
failures or deficiencies in processes, systems, plant and
equipment required for the Balama Graphite Operation, and
addressing such failures or deficiencies may result in Syrah
incurring unexpected costs and production ramp up delays.
Any of these outcomes could have a material adverse impact
on Syrah’s results of operation and financial performance.
In addition, there is a risk that unforeseen geological or
geotechnical issues may be encountered when developing
and mining ore reserves, such as unusual or unexpected
geological conditions, pit wall failures, tailings storage facility
failures, rock bursts, seismicity and cave‐ins. In any of these
events, a loss of revenue may be caused due to the lower
than expected production and/or higher than anticipated
operation and maintenance costs and/or ongoing unplanned
capital expenditure in order to meet production targets.
Due to the remoteness of the Balama Graphite Operation,
Syrah is subject to an increased number of risks including a
lack of access to key infrastructure, security requirements,
rising fuel costs, unexpected delays and accidents that
could, singularly or collectively, materially negatively impact
upon Syrah’s financial performance and position. Any
prolonged interruption to access to key infrastructure and
logistics processes, including, for example, road access and
integrity, bridge access and integrity, transport of product
to the Port of Nacala, clearing of product through customs
and shipping from the port, including shipping delays and
rescheduling, could have significant adverse effects on the
Company’s ability to produce and sell product and therefore
generate revenue. Further, as Syrah’s primary asset is located
in a remote part of Africa, it is particularly susceptible to
the availability of personnel, specialist services, parts,
equipment and supplies on a timely basis.
Higher than expected inflation rates generally, or specific
to the mining industry in particular, could be expected
to increase operating and capital expenditure costs and
potentially reduce the value of future project developments.
While, in some cases, such cost increases might be offset by
increased selling prices, there is no assurance that this would
be possible. To the extent that such offset is not possible, this
could adversely impact Syrah’s financial performance.
Any inability to resolve any unexpected problems relating to
these operational risks or adjust costs profiles on commercial
terms could adversely impact continuing operations, Mineral
Resources and Ore Reserves estimates and the assessment
of the recoverable amount of Syrah’s assets.
15
For personal use only COUNTERPARTY RISK
The ability of Syrah to achieve its stated objectives will
depend on the performance of contractual counterparties.
Syrah has entered into sales, marketing and distribution
agreements for the Balama Graphite Operation, and will seek
to renew or replace contracts in order to match anticipated
production over time or as those agreements approach
their respective expiry dates. Global demand may fluctuate
(based on steel production, electric vehicle and energy
storage system battery demand in particular) and there is no
guarantee that sales forecasts or timing will be achieved, or
that supply and demand analysis will be accurate.
The agreements are a mix of term agreements and spot sale
agreements. Syrah’s revenue and profitability depends on
counterparties performing on their obligations under such
agreements, and on counterparties with term agreements
continuing to enter into new agreements at the end of the
existing term and spot sale counterparties entering into
new sales.
In addition, the sale of Products by Syrah is subject to
commercial verification and qualification processes to ensure
any Products produced meet the specifications for industrial
supply required by customers (including the industrial
graphite markets and the battery sector). The qualification
process may require approval from multiple parties in the
supply chain and not just those parties with whom Syrah
has contractual arrangements. Failure of Syrah’s Products to
qualify for purchase, or any unanticipated delay in qualifying
Syrah’s Products, may adversely impact Syrah’s financial
performance and position (including by resulting in Syrah
generating less revenue or profit than anticipated and/or
incurring higher costs than anticipated).
Syrah has entered into various agreements for the Balama
Graphite Operation and the Battery Anode Material Project
(including the supply of key goods and services including
diesel fuel supply, logistics, contract mining and other
services). Risks associated with such agreements, some
of which have arisen, include rising contract prices as well
as disputes regarding variations, extensions of time and
costs, all of which may give rise to delays and/or increased
costs. The risk of variations in contract prices is a function
of the inclusion of certain ‘rise and fall’ provisions in some
of Syrah’s operational agreements. Such provisions provide
a mechanism by which prices charged for certain inputs
are periodically adjusted based on movements in certain
indices. Should any of these risks materialise, this could have
a material adverse impact on Syrah’s profitability, financial
performance and position.
If Syrah’s counterparties default on the performance of
their respective obligations, for example if the counterparty
under a sales agreement defaults on payment or a
supplier defaults on delivery, unless Syrah is protected by
a letter of credit (which is often, but not always, the case
in sales agreements), it may be necessary to approach a
Mozambique or other international court to seek enforcement
or some other legal remedy, if no alternative settlement can
be reached. Such legal action can be uncertain, lengthy and
costly. There is a risk that Syrah may not be able to seek the
legal redress that it could expect under Australian law against
a defaulting counterparty, or that a legal remedy will not be
granted on satisfactory terms.
HEALTH, SAFETY, ENVIRONMENT AND
COMMUNITY
Environmental regulations in the jurisdictions in which Syrah
has operations impose significant obligations on companies
that conduct the exploration for and mining of commodities.
These regulations also cover the processing of ores into final
products and subsequent transportation of those produced
minerals as well as the possible effects of such activities
upon the environment and local communities.
Syrah 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 vigorously and consistently
the regulations are administered by the local authorities.
There are inherent environmental risks in conducting
exploration and mining activities, giving rise to potentially
substantial costs for environmental rehabilitation, damage
control and losses. These risks include the occurrence
of incidents such as uncontrolled tailings containment
breaches, subsidence from mining activities, escape
of polluting substances and uncontrolled releases of
hydrocarbons that may lead to material adverse impacts
on Syrah's people, host communities, assets and/ or the
Company's licence to operate.
Changes in environmental laws and regulations or their
interpretation or enforcement may adversely affect Syrah’s
operations, including the potential profitability of its
operations. Further, environmental legislation is evolving
in a manner which may require stricter standards and
enforcement (with associated additional compliance costs)
and expose relevant operators to the risk of increased
fines and penalties for non compliance, more stringent
environmental assessments of proposed projects and a
heightened degree of responsibility for companies and their
officers, directors and employees. There is no assurance that
future changes in environmental regulation, if any, will not
adversely affect Syrah’s operations.
Syrah currently holds an environmental licence for the
Balama Graphite Operation (due to expire in 23 April 2020).
Renewal of the licence is conditional on the update and
resubmission of the environmental management plan and
monitoring program in 2019. A detailed plan has been
implemented to ensure all conditions for the renewal of the
environmental licence are met in the required timeframes.
Syrah’s practices are reflected in the ISO14001 and
OHSAS:18001 certification status. However, there are no
guarantees that environmental issues or concerns will not
arise. If such issues or concerns were to arise, this may have
an adverse effect on Syrah’s ability to operate, reputation
and relationships with key stakeholders, which may in turn
negatively impact its financial and operational performance.
Syrah is also required to close its operations and rehabilitate
the lands that it disturbs in accordance with environmental
licence conditions and applicable laws and regulations.
A closure plan and estimate of closure and rehabilitation
liabilities have been prepared for the Balama Graphite
Operation. These estimates of closure and rehabilitation
liabilities are based on current knowledge and assumptions
however actual costs at the time of closure and rehabilitation
may vary. In accordance with licence conditions Syrah is also
progressively placing a guarantee in favour of the Ministry
of Mineral Resources and Energy in Mozambique, a bank
16
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only guarantee in relation to the rehabilitation or removal of project
infrastructure as per the mine closure plan for the Balama
Graphite Operation.
For the current Battery Anode Material facility in the USA,
all regulatory air and water environmental discharge
requirements have been met based on current qualification
volumes. A commercial scale facility may require additional
permits, authorisation and/or licences in relation to a variety
of matters including air source emissions, water discharge,
and/or hazardous materials. There can be no guarantee that
Syrah will be able to successfully obtain, maintain or renew
relevant authorisations in a timely manner or on acceptable
terms to support its ongoing activities. An inability to obtain
and maintain the necessary titles, authorisations, permits and
licences could have a material adverse effect on the Battery
Anode Material operations and the recoverable amount of
assets.
The impacts of climate change may affect Syrah’s operations
and the markets in which the Company sells its Products
through regulatory changes, technological advances and
other market/economic responses. The use of fossil fuels
for energy is a significant source of greenhouse gases
contributing to climate change; resulting in increasing support
for alternative energy and making fossil fuels susceptible to
changes in regulations, and potentially usage taxes. While
the growth of alternative energy supply and storage options
presents an opportunity for Syrah’s Battery Anode Material
strategy and products; the effects of climate change on
the Company's assets may also include changes in rainfall
patterns, water shortages and an increase the ultimate cost of
fossil fuels used in Syrah's operations for transport and power
generation.
Mining, construction, production and logistics are potentially
hazardous activities. There are numerous occupational health
risks associated with mining and production operations and
associated supporting activities such as logistics. If any
injuries or accidents occur, this could have negative employee,
community and/or financial implications for the Company
including potential delays or stoppages in mining, production
and/or logistics activities. In addition, the location of the
Balama Graphite Operation means Syrah’s employees and
contractors could be affected by mosquito borne diseases
such as malaria which could adversely impact operations.
Changes in health, safety and environmental laws and
regulations or their interpretation or enforcement may
adversely affect Syrah’s obligations and/or operations.
Syrah’s mining activities may cause issues or concerns with
the local community in connection with, among other things,
the potential effect on the environment as well as other social
impacts relating to employment, use of infrastructure and
community development.
In response to such risks, Syrah has signed a Community
Development Agreement with local key stakeholders and
established ongoing engagement and management programs
focused on optimising positive impacts and minimising the
risk of negative impacts on the community. However, these
programs are no guarantee that other issues or concerns will
not arise with the local community. If such issues or concerns
were to arise, this may have an adverse effect on Syrah’s
reputation and relationships with key stakeholders, which
may in turn negatively impact its financial and operational
performance.
SOVEREIGN RISK
Syrah’s operations could be affected by political instability
in Australia, Mozambique, the USA, UAE or China or
other countries or jurisdictions in which it has operations,
investment interests, conducts exploration activities or has
sales into. Syrah is therefore subject to the risk that it may not
be able to carry out its operations as it intends or to ensure
the security of its assets and its people. Syrah is subject to
the risk of, among other things, loss of revenue, property and
equipment as a result of expropriation, war, insurrection, civil
disturbance, acts of terrorism and geopolitical uncertainty
and political/civil unrest and violent criminal acts have
occurred in the north of Mozambique. At this time all such
acts have been at least 300km from the Balama Graphite
Operation, however there is no guarantee that such acts will
not spread closer to the Balama Graphite Operation. Syrah
has strengthened its security measures and protocols in
response to these events, however such security measures
and protocols are no guarantee that such risks will not arise.
As with any mining operation, Syrah is also at risk of natural
disasters, both to the mine site and also to the logistics
chain, which may include among other matters, abnormal or
severe weather conditions, floods, cyclones and other natural
disasters.
The effect of these risks is difficult to predict and any
combination of one or other of the above may have a material
adverse effect on Syrah. Syrah has a limited ability to insure
against some of these risks and other ‘force majeure’ risks
(such as natural disasters).
Syrah’s primary asset is located in Mozambique and so it
is subject to risks associated with operating in that country.
Risks of operations in Mozambique may include economic,
social or political instability or change, hyperinflation,
widespread health emergencies or pandemics, reduced
convertibility of local currency, sovereign loan default or
collapse of the country’s financial system, difficulty in
engaging with the local community, instability and changes
of law affecting foreign ownership, government participation,
taxation, working conditions, rates of exchange, exchange
control, exploration licencing, export duties, repatriation of
income or return of capital, environmental protection, mine
safety, labour relations as well as government control over
mineral properties or government regulations that require
the employment of local staff or contractors or require other
benefits to be provided to local residents.
The occurrence of these various factors and uncertainties
cannot be accurately predicted and could have an adverse
effect on the operations, profitability or the recoverable
amount of the assets of Syrah.
REGULATORY RISK
Syrah’s businesses are subject, in each of the countries
in which it operates, or the countries into which it sells its
Products, to various national and local laws and regulations
relating to, among other things, construction, exploration
and mining activities as well as the import, export, marketing
and sale of goods. A change in the laws which apply to
Syrah’s businesses or the way in which they are regulated, or
changes to the laws affecting the sale of the Products such
as trade sanctions or tariffs could have a material adverse
effect on the carrying value of material assets or otherwise
have a material adverse effect on Syrah’s businesses and
financial condition.
17
For personal use only The Balama Graphite Operation is subject to the laws of
Mozambique. Under those laws, certain rights are granted
in favour of the Mozambique Government and certain
obligations imposed on Syrah.
To manage the impact of this risk, Syrah through its
wholly owned subsidiary, has entered into a binding and
enforceable agreement with the Mozambique Government
(“Mining Agreement”). The Mining Agreement consolidates
all prior project documents and approvals. It also provides
the Company with clarity around the governing laws and
contractualises the mining rights and other obligations for
the Balama Graphite Operation in Mozambique. A summary
of the key commercial terms of the Mining Agreement
can be found in the Company’s ASX Release dated 27
September 2018. Syrah’s operations could be adversely
affected by government actions in Mozambique which alter
the terms or operation of the Mining Agreement in respect
of the Balama Graphite Operation or otherwise impact upon
the manner in which Syrah conducts its operations and/or
Syrah’s relationship with, and obligations to, the Mozambique
Government. Such government action could adversely
impact Syrah’s financial and operational performance and
its financial position, in particular if it results in an increase
in royalty payments, taxes or similar payments that Syrah is
required to make or if it otherwise reduces the proportion
of revenues or profits derived from the Balama Graphite
Operation which Syrah is entitled to retain.
Syrah’s business activities are also subject to obtaining, and
maintaining the necessary titles, authorisations, permits and
licences and associated land access agreements with the
local community and various levels of Government which
authorise those activities under relevant laws and regulations.
There can be no guarantee that Syrah will be able to
successfully obtain, maintain or renew relevant authorisations
in a timely manner or on acceptable terms to support its
ongoing activities. An inability to obtain and maintain the
necessary titles, authorisations, permits and licences could
have a material adverse effect on the carrying value of
material assets or otherwise have a material adverse effect on
Syrah’s businesses and financial condition.
BATTERY ANODE MATERIAL
Relative to the Balama Graphite Operation, Syrah’s Battery
Anode Material Project is at an early stage. Accordingly it is
subject to a range of risks and variables which may impact
upon Syrah’s ability to execute that strategy. These risks and
variables include:
> In relation to the commissioning of the milling equipment,
the risks inherent in any commissioning activities are
present including in relation to performance of the
processing plant and associated infrastructure, product
grade or quality and other production related activities
(including failures or deficiencies in processes, plant or
equipment);
> Market risk associated with Battery Anode Material
including in relation to pricing and demand (see further
details outlined in “Market Risk” section above);
> Construction and the commissioning risk of the
purification equipment for batch processing of purified
spherical graphite;
> Any subsequent expansion including risks relating
to weather, availability of materials, availability and
productivity 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 and IT failures or disruptions.
The commissioning process may uncover failures or
deficiencies in processes, systems, plant and equipment
required for the Battery Anode Material Project and
addressing such failures or deficiencies may result
in Syrah incurring unexpected costs and production
commencing later than anticipated. Any of these
outcomes could have a material adverse impact on
Syrah’s results of operations and financial performance;
> Operational risks including that the performance of the
qualification plant may be below expectations;
> Obtaining all necessary permits, authorisations and
approvals for the intended purified spherical graphite and
anode material operations and any expansion of those
operations beyond the initial plant capacity, including in
relation to the discharge of wastewater, air emissions and
a potential (but unlikely) change in design basis requiring
the utilisation of hazardous materials;
> The costs of developing a commercial scale Battery
Anode Material plant (should this be considered in the
best interests of the Company); and
> The success of any strategic relationships into which
Syrah enters with third parties in connection with the
execution of the Battery Anode Material strategy.
The risks and costs relating to a commercial plant
development will be further assessed in the feasibility study
which is currently underway. If any of these risks or variables
were to materialise, costs were greater than expected or
if there is lower than expected demand for Syrah’s Battery
Anode Material, then Syrah’s Battery Anode Material Project
related activities may not proceed as presently intended,
or (if they do proceed) they may take longer or cost more
than anticipated and/or not generate the expected levels of
revenue or profit. This in turn could have a material adverse
effect on the recoverable amount of assets.
LIQUIDITY AND CAPITAL MANAGEMENT
Syrah's continued ability to operate its business and
effectively implement its business plan over time will depend
in part on its ability to generate free cash flow, to raise funds
for operations and growth activities and to service, repay and
refinance debts as they fall due. The Group has commenced
production of saleable Products from the Balama Graphite
Operation but is not yet cash flow positive. The Company
may require additional financing, in addition to cash reserves,
to meet operation and capital expenditure requirements
for the Balama Graphite Operation, general administrative
expenditures and Battery Anode Material Project activities, as
well as acquisitions and new or existing projects. This includes
Syrah’s Battery Anode Material Project, and any further
optimisation projects (including Vanadium) at the Balama
Graphite Operation for which Syrah may require additional
funding in the future to execute on that strategy.
18
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only While Syrah believes there a number of funding alternatives
(which may include both debt and equity sources of
funding), there can be no guarantee that Syrah will be able
to raise additional funding on acceptable terms or at all. An
inability to obtain finance on acceptable terms or at all may
cause, among other things, substantial delays in, or prevent,
the operation of the Balama Graphite Operation, potential
Vanadium development, the Battery Anode Material plant
and/or the development of Syrah’s Battery Anode Material
strategy.
To the extent that Syrah does require funding for its future
capital needs, the availability and terms of such funding
are uncertain and may be less favourable to Syrah than
anticipated, which may negatively impact Syrah’s future
profitability and financial flexibility. Funding terms may also
place restrictions on the manner in which Syrah conducts its
business and impose limitations on Syrah’s ability to execute
its business plan and growth strategies (including its Battery
Anode Material strategy).
WATER SOURCES
Any restrictions on Syrah’s ability to access water may
adversely impact the costs, production levels and financial
performance of its operations. There is no guarantee that
there will be sufficient future rainfall, or that the water level at
the Chipembe Dam will be sufficient, to support Syrah’s water
demands in relation to its sites and operations or that access
to water will otherwise remain uninterrupted. Likewise, the
availability of water for the Battery Anode Material plant
cannot be guaranteed. Any interruption to water access
could adversely affect production and Syrah’s ability to
develop or expand projects and operations in the future.
In addition, and while there are potential alternative water
sources, there can be no assurance that Syrah will be able
to obtain access to them on commercially reasonable terms
or at all in the event of prolonged drought conditions or other
interruptions to existing water access arrangements.
KEY PERSONNEL AND LABOUR MARKET
RISK
Syrah has a number of key management personnel on
whom it depends to manage and run its business. From
time to time, Syrah will require additional key personnel or
operational staff. In addition, Syrah has certain obligations
regarding employment of local labour. The loss of any key
personnel, coupled with any inability to attract additional or
replacement suitably qualified personnel or to retain current
personnel, could have a material adverse effect on Syrah’s
operational and financial performance. This difficulty may be
exacerbated given the remoteness of facilities, the lack of
infrastructure in the nearby surrounding areas (in respect of
the Balama Graphite Operation), and the shortage of local,
readily available skilled labour. A limited supply of skilled
workers could lead to an increase in labour costs and Syrah
being ultimately unable to attract and retain the employees
it needs. When new workers are hired, it may also take a
considerable period of training and time before they are
equipped with the requisite skills to work effectively and
safely.
CURRENCY AND EXCHANGE RATE RISK
Syrah’s activities may generate revenues, and Syrah may
incur expenses, in a variety of different currencies, meaning
its financial performance and position are impacted by
fluctuations in the value of relevant currencies and exchange
rates. In particular, it is anticipated that Syrah will be required
to make certain payments under contracts for the Balama
Graphite Operation in the local Mozambique currency. A
lack of liquidity or depreciation in the value of the local
Mozambique currency, or the failure of or difficulties in
implementing exchange control mechanisms in Mozambique,
could adversely impact the financial position and
performance of Syrah, including by making it more difficult
or costly to convert the local currency or transfer funds out of
Mozambique.
COMPETITION
Competition from other international graphite producers
and explorers may affect the potential future cash flow and
earnings which Syrah may realise from its operations. This
includes competition from existing production and new
entrants into the market. The introduction of new mining and
processing facilities and any increase in competition and
supply in the global graphite market could lower the price of
this commodity. Syrah may also encounter competition from
other mining and exploration companies for the acquisition
of new projects required to sustain or increase its potential
future production levels. Syrah’s downstream Battery Anode
Material Project may also be impacted by new entrants to
the market, or existing graphite producers, pursuing a similar
strategy aimed at qualifying spherical graphite or other
Battery Anode Material products for battery purposes.
TAX AND CUSTOMS RISK
Syrah is subject to taxation and other imposts in Australia,
Mozambique, the USA and the UAE, as well as other
jurisdictions in which Syrah has activities, sales and
investments. Changes in taxation laws (including transfer
pricing, tariffs and duties), or changes in the interpretation or
application of existing laws by courts or applicable revenue
authorities, may affect the taxation or customs treatment
of Syrah’s business activities and adversely affect Syrah’s
financial condition.
Syrah’s international contractual arrangements, asset, liability,
revenue and expense recognition and taxation administration
requires management judgment in relation to the application
of tax laws in a number of jurisdictions. There are many
transactions and calculations undertaken during the ordinary
course of business where the ultimate tax determination is
uncertain or in relation to which tax authorities or adjudicating
bodies may take a view which is different to the view taken by
Syrah. Syrah 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
in the period in which the assessment is made.
19
For personal use only > Risk tolerance and escalation criteria are specified;
> Accountabilities and responsibilities for overseeing,
managing and monitoring these risks and other identified
risks are clearly defined;
> Key priorities for management of risks are identified on a
regular and ongoing basis; and
> Material or potentially material incidents that arise are
reviewed and appropriate action taken.
The Executive Management team, and the Board, through
its sub-committees; the Audit and Risk Committee, the
Sustainability Committee and the Remuneration, Nomination
and Governance Committee, regularly review the Company’s
risks and the effectiveness of the Company’s management
of those risks. The Board, with Executive Management’s
input, regularly consider the nature and extent of the risks
the organisation is prepared to take to meet the Company’s
objectives.
Other key management mechanisms for the Company
include:
> Health, safety and environmental management systems
across the organisation;
> Crisis and Emergency management and business
continuity systems;
> Anti-Bribery & Corruption Policy and processes, and
other processes to support business integrity and
compliance; and
> Appropriate insurance programs to provide efficient and
effective levels of risk transfer.
SIGNIFICANT CHANGES IN STATE OF
AFFAIRS
There were no significant changes in the nature of activities
or the state of affairs during the current financial year other
than those included in the Review of Operations.
MATTERS SUBSEQUENT TO THE END
OF THE FINANCIAL YEAR
On 14 January 2019, Syrah declared commercial production
at the Balama Graphite Operation with effect from 1 January
2019.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS OF OPERATIONS
Commentary on likely developments and expected results of
operations is set out in the Review of Operations.
Further, there may be delays in processing tax or duty
rebates or refunds for which Syrah has applied. Should
it become unlikely that Syrah will recover such rebates or
refunds, this could also adversely affect Syrah’s financial
condition and require a reclassification of assets or
recognition of expenses in the Company’s accounts.
The revenue and profit from the Balama Graphite Operation
will be subject to certain payments to the Mozambique
Government (including in the form of taxes and royalties) as
provided for in the Mining Agreement (see above).
INSURANCE RISKS
Syrah maintains insurance coverage as determined
appropriate by its Board and management, but no assurance
can be given that Syrah will continue to be able to obtain
such insurance coverage at reasonable rates (or at all)
for certain events, or that any coverage it obtains will be
adequate and available to cover all claims.
LITIGATION
Syrah may be involved in litigation and disputes from time
to time with its contractors, sub-contractors and other
parties. Litigation and disputes can be costly, including
amounts payable in respect of judgments and settlements
made against, or agreed to by, Syrah. They can also take
up significant time and attention from management and
the Board. Accordingly, Syrah’s involvement in litigation
and disputes could have an adverse impact on its financial
performance and position.
GLOBAL ECONOMIC CONDITIONS
Economic conditions, both domestic and global, may
affect the performance of Syrah. Adverse changes in
macroeconomic conditions, including global and country‐
specific growth rates, the cost and availability of credit, the
rate of inflation, interest rates, exchange rates, government
policy and regulations, general consumption and consumer
spending, input costs, employment rates and industrial
disruptions, among others, are variables which while
generally outside Syrah’s control, may result in material
adverse impacts on Syrah’s businesses and its operational
and financial performance, and position.
RISK MANAGEMENT
The Company has developed and implemented a Risk
Management Framework, endorsed by the Board of
Directors and relevant sub-Committees (which is subject to
annual review), within which:
> An over-arching risk management policy, which sets out
its commitment to and the expected behaviours required
of its employees and contractors. This is supported by a
number of other more specific business policies that set
out other key requirements of employees and contractors;
> A risk management process and risk assessment criteria
that defines the key steps required to identify, analyse,
treat, evaluate controls and monitor and report on the
risks listed above and other risks on an ongoing basis;
20
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the financial year
ended 31 December 2018, and the number of meetings attended by each Director was:
DIRECTOR
BOARD
AUDIT AND RISK
COMMITTEE
SUSTAINABILITY
COMMITTEE
J Askew
S Verner
S Riggall
J Caldeira
C Lampe Onnerud(1)
L Bahash(2)
S Giorgini(3)
A
9
9
9
8
8
6
8
B
9
9
9
9
9
6
9
A
-
-
5
5
-
-
5
B
-
-
5
5
-
-
5
A
3
-
-
2
-
-
3
B
3
-
-
3
-
-
3
REMUNERATION,
NOMINATION AND
GOVERNANCE
COMMITTEE
A
4
-
4
-
4
-
-
B
4
-
4
-
4
-
-
(A) Number of meetings attended, during the time the Director held office or was a member of the committee during the year ended 31 December
2018.
(B) Number of meetings held during the time the Director held office or was a member of the committee during the year ended 31 December 2018.
(1) C Lampe-Onnerud ceased as a Non-Executive Director on 25 March 2019.
(2) L Bahash was appointed as a Non-Executive Director on 16 July 2018.
(3) S Giorgini ceased as a Non-Executive Director on 6 December 2018.
21
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 of the Group as well as the remuneration strategy and policies that were applicable in the financial
year ended 31 December 2018. The remuneration report is structured as follows:
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
Remuneration Governance
Director and Key Management Personnel Details
Key Remuneration Outcomes and Updates
Remuneration Strategy and Philosophy
Remuneration Components
Details of Remuneration Expenses
Executive Service Agreements
Terms and Conditions of Share-Based Payment Arrangements
Directors and Key Management Personnel Equity Holdings
Other Transactions with Directors and Key Management Personnel
Additional Information
(A) REMUNERATION GOVERNANCE
REMUNERATION, NOMINATION AND GOVERNANCE COMMITTEE
The Board has established a Remuneration and Nomination Committee (now renamed the Remuneration, Nomination and
Governance Committee) consisting solely of Non-Executive Directors (with a majority being independent Directors) to assist
the Board in achieving its objective in relation to the following:
> having a Board 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;
> communicating the Company’s remuneration policy to shareholders, any proposed changes to that remuneration policy
and the Committee’s work on behalf of the Board; and
> oversight and monitoring of the implementation of the Company’s corporate governance systems and policies.
During the year ended 31 December 2018 the Remuneration, Nomination and Governance Committee comprised of Sam
Riggall (Committee Chair), James Askew and Christina Lampe-Onnerud, with the addition of Lisa Bahash effective from 28
November 2018.
The Charter for the Remuneration, Nomination and Governance Committee is available on the Company’s website.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only (B) DIRECTOR AND KEY MANAGEMENT PERSONNEL DETAILS
DIRECTORS
The following persons were directors of Syrah Resources Limited (“Syrah” or the “Company”) during the financial year ended
31 December 2018 and up to the date of this report, unless otherwise stated:
EXECUTIVE AND NON-EXECUTIVE DIRECTORS
NAME
James Askew
Shaun Verner
Sam Riggall
José Caldeira
POSITION
Non-Executive Chairman
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Christina Lampe-Onnerud
Non-Executive Director (ceased 25 March 2019)
Lisa Bahash
Stefano Giorgini
Non-Executive Director (appointed 16 July 2018)
Non-Executive Director (ceased 6 December 2018)
KEY MANAGEMENT PERSONNEL
The following persons were the Key Management Personnel of Syrah during the year ended 31 December 2018 and up to the
date of this report, unless otherwise stated:
KEY MANAGEMENT PERSONNEL
NAME
Shaun Verner
David Corr
Julio Costa
Jennifer Currie
Jordan Morrissey
Robert Schaefer
POSITION
Managing Director and Chief Executive Officer
Chief Financial Officer
Chief Operating Officer (commenced 4 June 2018)
Chief Legal Officer and Company Secretary
Chief People Officer
Chief Commercial Officer
(C) KEY REMUNERATION OUTCOMES AND UPDATES
(i)
What has changed in relation to remuneration during the year ended 31 December 2018
Non-Executive Director
Remuneration
Executive Remuneration
STI Outcomes
LTI Outcomes
> Non-Executive Directors received no fee increases during the year ended 31 December 2018
> A new Chief Operating Officer, Julio Costa, was employed from 4 June 2018
> Only one member of Syrah’s Key Management Personnel received a remuneration increase
during the year ended 31 December 2018(1)
> The ‘at risk’ variable remuneration components (comprised of a Short-Term Incentive ("STI")
component and a Long-Term Incentive (“LTI”) component) continued to be 75% of Total Fixed
Remuneration (“TFR”) for the Managing Director and 50% of TFR for other executives in 2018
> The average STI outcome for the Managing Director and Chief Executive Officer and Key
Management Personnel was 67% of the maximum opportunity for the year ended 31
December 2018 based on the assessment of corporate and personal performance metrics
> For the Performance Rights awarded during the 2016 financial year and tested as at
31 December 2018, none vested. This reflects the Total Shareholder Return ("TSR")
performance of the Company during the three years to 31 December 2018 relative to the
average TSR performance of the comparator group
(1) Chief People Officer Jordan Morrissey received a salary increase effective 19 June 2018.
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For personal use only (ii) What changes are planned or approved for remuneration for the year commencing 1 January 2019
LTI Performance Hurdles
> The Board of Directors has resolved to adopt the same performance hurdles
for the 2019 LTI Program as were used in 2018, based on 2 measures:
(a) 50% will be based on the TSR performance of the Company over the relevant
vesting period relative to companies in the S&P/ASX300 Index (ASX:XKO)
as at 1 January 2019, classified under the “Materials” (previously “Metals &
Mining") industry under the GICS classification system; and
(b) 50% will be based on the absolute shareholder return performance of the
Company over the relevant vesting period against threshold and maximum
targets as set by the Board. For the year commencing 1 January 2019, the
Board of Directors has determined threshold TSR performance to be 8.6%
compound annualised growth rate ("CAGR") and maximum TSR performance
to be 18.8% CAGR.
(D) REMUNERATION STRATEGY AND PHILOSOPHY
NON-EXECUTIVE DIRECTOR REMUNERATION
The Board policy is to remunerate Non-Executive Directors at market rates commensurate with time, commitment and
responsibilities. The level and structure of the fees paid to Non-Executive Directors is based upon the need to attract and
retain Non-Executive Directors of suitable calibre, the demands of the role and prevailing market conditions. The Board
determines payments to Non-Executive Directors taking into account comparable roles, comparative market data and if
required the advice of independent remuneration consultants. There was no change to Non-Executive Director remuneration
during the year ended 31 December 2018 (or to date).
EXECUTIVE REMUNERATION
The Board in consultation with the Remuneration, Nomination and Governance 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:
> attract and retain talented and high performing executives;
> provide appropriate levels of ‘at risk’ pay to encourage, recognise and reward high performance;
> 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
benchmark the remuneration of Directors and Key Management Personnel, and to assist the Company in ensuring that
its remuneration arrangements remain competitive. During the year ended 31 December 2018, the Company engaged a
specialist remuneration consultant (2018: $41,046 for consultancy assistance provided by Mercer Australia) for remuneration
benchmarking purposes, however this was not a remuneration recommendation for the purposes of the Corporations Act 2001
(Cth) (“Corporations Act”). No remuneration consultants were engaged for the year ended 31 December 2017.
EQUITY INCENTIVE PLAN RULES
The Company has an Equity Incentive Plan established and approved by shareholders at the Annual General Meeting on 17
May 2018 (“Equity Incentive Plan”), which applies to all shares, performance rights and options offered for grant from 17 May
2018 onwards. Under the Equity Incentive Plan, the Company may 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 the Board of Directors. Any performance rights, options and shares granted under the
Equity Incentive Plan may be subject to such vesting conditions (if any) as determined by the Board of Directors.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
The Company also has:
(i) a former Share Option Plan (“SOP”) in existence. The SOP was established and approved by shareholders at an Annual
General Meeting held on 19 November 2013 and enabled the Company, at the discretion of the Board of Directors, to offer
employees and directors options. The SOP is now effectively dormant applying only to options granted prior to November
2015, with no new options issued under this plan.
(ii) a former Long-Term Incentive Plan (“LTIP”) in existence. 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.
The LTIP is now effectively dormant, applying only to performance rights and options granted from 13 November 2015 up
until 16 May 2018. No new performance rights, options or shares will be issued under this LTIP.
(E) REMUNERATION COMPONENTS
NON-EXECUTIVE DIRECTOR FEES
The fee structure for Non-Executive directors provides for Non-Executive Directors to receive a Board fee and additional fees
for chairing and participating on Board Committees. Except for the options set out in Section H of the Remuneration Report,
Non-Executive Directors do not receive performance based pay or retirement allowances.
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. There was no change
to the fee pool during the year ended 31 December 2018 and the maximum currently stands at A$1,000,000 per annum which
was approved by shareholders at an Annual General Meeting on 26 May 2016.
The annual Non-Executive Director fees (inclusive of superannuation contribution amounts where applicable) for being a
member of the Board and participating on its sub committees were as follows:
Table 1: Non-Executive Director Annual Fees
ANNUAL FEES
Board Fees
Sub Committees(2)
Chairperson
Members
Audit and Risk Committee
Chairperson
Members
Sustainability Committee
Chairperson
Remuneration, Nomination and
Governance Committee
Members
Chairperson
Members
2018
2017
A$
160,000
95,000
US$(1)
119,648
71,041
A$
160,000
95,000
US$
122,816
72,922
20,000
10,000
15,000
10,000
15,000
14,956
7,478
11,217
7,478
11,217
20,000
10,000
15,000
10,000
15,000
15,352
7,676
11,514
7,676
11,514
10,000
7,478
10,000
7,676
(1) Annual fees for Non-Executive Directors have been translated from Australian Dollars to US Dollars at the average exchange rate for the year ended
31 December 2018 of 0.7478 (2017: 0.7676).
(2) Effective from 29 November 2018, the Audit Committee was renamed the Audit and Risk Committee, the Sustainability and Risk Committee was
renamed the Sustainability Committee, and the Remuneration and Nomination Committee was renamed the Remuneration, Nomination and
Governance Committee.
In addition to the above fees, Non-Executive Directors are entitled receive a travel stipend of $3,739 (A$5,000) for each
international trip where the travel time is in excess of seven hours of international travel (2017: $3,838 (A$5,000)).
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, Non-Executive Directors are eligible to participate in
the Company’s Equity Incentive Plan (as approved by shareholders), however such participation has been limited to a one-
off grant of options at or around the time of appointment as a Director, as set out in Section H of this Remuneration Report.
Amounts expensed through the Company's profit and loss statement for options issued to Non-Executive Directors are not
included in the calculation of Non-Executive Directors fees for the purposes of determining the aggregate Directors' fee pool
amount.
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EXECUTIVE REMUNERATION
The Company’s remuneration policy for Executives incorporates a Total Fixed Remuneration (“TFR”) component (base salary
plus statutory superannuation) and ‘at risk’ performance components; being a Short-Term Incentive (“STI”) component and
a Long-Term Incentive (“LTI”) component. With the exception of the STI payments made in 2018 being 100% paid in the
Company’s fully paid ordinary shares (“Shares”) (2017: 50% cash and 50% in shares), this policy remains identical to the
remuneration structure for the year ending 31 December 2017. These components for the year ended 31 December 2018 are
summarised below:
Table 2: Remuneration Components
ELEMENT
Total Fixed
Remuneration
DELIVERY
100% Cash
Short-Term
Incentive
100% Shares
PURPOSE
To attract high calibre executives
by offering competitive market
salary including superannuation
and non-monetary benefits
Reward for annual performance
based on the Performance
Metrics. 100% awarded in shares
to encourage executives to hold
shares in the Company
PERFORMANCE METRICS
Nil
POTENTIAL VALUE
Positioned between the
25th and 50th percentile
of a comparative group
of companies
Combination of corporate and
personal performance measures
weighted 50:50
Managing Director
75% of TFR
Long-Term
Incentive
100%
Performance
Rights or
other equity
instruments
Alignment to long-term shareholder
value. Award given in shares to
encourage executives to
hold shares in the Company
3 year Company TSR
performance with 50% relative
to the nominated Comparator
Group and 50% relative to the
nominated Absolute Measure
Performance Metrics.
Other executives
50% of TFR
Managing Director
75% of TFR
Other executives
50% of TFR
The following table sets out the relative mix of fixed remuneration and the total opportunity for performance related
remuneration for Managing Director and Key Management Personnel for the current financial period:
Table 3: Remuneration Components
NAME
Executive Directors
S Verner
Key Management Personnel
D Corr
J Costa(1)
J Currie
J Morrissey
R Schaefer
TOTAL FIXED
REMUNERATION
AT RISK REMUNERATION
STI
LTI
DEC-18
DEC-17
DEC-18
DEC-17
DEC-18
DEC-17
40%
50%
50%
50%
50%
50%
40%
50%
-
50%
50%
50%
30%
25%
25%
25%
25%
25%
30%
25%
-
25%
25%
25%
30%
25%
25%
25%
25%
25%
30%
25%
-
25%
25%
25%
(1) J Costa commenced employment with the Company as Chief Operating Officer on 4 June 2018 and his eligibility to participate in the STI plan was
determined at 75% for the year ended 31 December 2018.
TOTAL FIXED REMUNERATION
The Remuneration, Nomination and Governance Committee 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. The Total
Fixed Remuneration for Executives is currently positioned between the 25th and 50th percentile of a comparative group of
companies (based on remuneration benchmarking in February 2018).
Total Fixed Remuneration for Key Management Personnel for financial year ended 31 December 2018 is set out in section (F).
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only ‘AT RISK’ PERFORMANCE BASED REMUNERATION
Short Term Incentive
The objective of the STI Program is to align reward of Executives with the attainment of Key Performance Indicators (“KPIs”)
which drive short to medium term outcomes for the business incorporating a mixture of business development, operational
and investor relations performance indicators. Corporate and personal performance measures are set and agreed annually by
the Remuneration, Nomination and Governance Committee with oversight from the Board of Directors.
i.
Short Term Incentive Program – 31 December 2018
Table 4: STI Program (31 December 2018)
FEATURE
Maximum
Opportunity
DESCRIPTION
Managing Director and Chief Executive Officer – 75% of Total Fixed Remuneration ("TFR") for target
performance.
Other Executives – 50% of Total Fixed Remuneration ("TFR") for target performance.
The Board of Directors reserves the discretion to reward exceptional achievement for stretch performance
on any particular performance measure.
Group
Performance
Metrics & Award
Outcome
The STI metrics are made up of a combination of corporate (50%) and personal performance measures
(50%).
The table below summarises the corporate performance metrics and target weighting for the year ended 31
December 2018:
METRIC
WEIGHTING REASON FOR SELECTION
Corporate performance
measures:
Health, Safety, Compliance &
Governance
Balama Cashflow & Cost
Battery Anode Material ("BAM")
Progress
Sales Volume & Price
10%
15%
10%
10%
Sustainability & Social Performance
5%
Total corporate performance
measures
Personal performance metrics
Total
50%
50%
100%
Corporate measures are aligned with the annual
strategic priorities for the Group
Promoting a strong culture of safe practices and
corporate governance in all activities
Delivery against operating cost and cashflow targets
Progression of BAM growth strategies
Delivery against volume and weighted average price
targets
Focus on being a good corporate citizen in all
jurisdictions where the Group operates
Targeted metrics relevant to individual roles
The Board assessed an overall attainment of 25% out of 50% for the corporate performance metrics for the
year ended 31 December 2018. This was based on recognition of the Company’s underperformance relative to
plan on production ramp up, sales volumes and weighted average price, whilst also recognising the substantial
progress as well as challenges overcome in these areas. Additionally the determination reflected continued
development and high performance in safety management, with a TRIFR of 0.3; no significant regulatory non-
compliances; lead indicator metrics established and incorporated in all Group HSSE reports; demonstrated
continual improvement of Group corporate governance capability and reporting; completion of BAM Product
roadmap and first production of BAM unpurified spherical graphite from Vidalia, whilst noting the delays during
H1 2018 securing the site lease; finalisation of the Balama Mining Agreement and progress of the Mozambique
Stakeholder Engagement Plan; attainment of ISO Certification (ISO:14001 and OHSAS:18001) for Health, Safety
and Environment, and establishment of the Balama Professional Training Centre.
Determination of
Outcomes
Delivery of STI
The STI outcomes were determined by the Remuneration, Nomination and Governance Committee, with
oversight from the Board of Directors.
100% of the STI award was paid in shares, issued under the Company’s Equity Incentive Plan.
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The following table shows details of the STI opportunity, as a percentage of Total Fixed Remuneration, for each of the Key
Management Personnel and the amounts granted for the year ended 31 December 2018.
Table 5: STI Opportunity (31 December 2018)
NAME
Executive Director
S Verner
Key Management Personnel
D Corr
J Costa(2)
J Currie
J Morrissey
R Schaefer
MAXIMUM OPPORTUNITY
% OFFER
AMOUNT$(1)
75%
50%
50%
50%
50%
50%
$276,359
$132,735
$122,826
$122,826
$122,826
$122,826
AMOUNT
GRANTED
AMOUNT
FORFEITED
%
63%
50%
75%
75%
75%
65%
%
37%
50%
25%
25%
25%
35%
(1) Amounts translated from Australian Dollars to US Dollars using an average exchange rate for the year ended 31 December 2018 of 0.7478.
(2) J Costa commenced employment with the Company as Chief Operating Officer on 4 June 2018 and his eligibility to participate in the STI plan was
determined at 75% for the year ended 31 December 2018.
ii.
Short Term Incentive Program – 31 December 2019
Table 6: STI Program (31 December 2019)
FEATURE
Maximum
Opportunity
DESCRIPTION
Managing Director – 75% of Total Fixed Remuneration ("TFR") for target performance.
Other Executives – 50% of Total Fixed Remuneration ("TFR") for target performance.
The Board of Directors reserves the discretion to reward exceptional achievement for stretch performance
on any particular performance measure.
The STI metrics will be made up of a combination of corporate (50%) and personal performance measures
(50%). The table below summarises the corporate performance metrics for the year ending 31 December 2019:
METRIC
WEIGHTING REASON FOR SELECTION
Group
Performance
Metrics & Award
Outcome
Corporate performance
measures:
Sustainability (HSSEC)/Compliance
& Governance
Balama Production & Cost
Battery Anode Material ("BAM")
Progress
Sales Volume & Price
Capital Management
Total corporate performance
measures
Personal performance metrics
Total
10%
10%
Corporate measures are aligned with the strategic
priorities for the Group
Promoting a strong culture of safe practices, social
licence to operate, and good corporate governance
and compliance in all activities
Delivery against production and operating cost
targets
10%
Progression of BAM growth strategies
Delivery against volume and weighted average basket
price targets
Balance sheet strength for operations and growth
Targeted metrics relevant to individual roles
10%
10%
50%
50%
100%
Determination of
Outcomes
Delivery of STI
The STI outcomes will be determined by the Remuneration, Nomination and Governance Committee, with
oversight from the Board of Directors.
The delivery of the STI for the year ending 31 December 2019 will be determined by the Remuneration,
Nomination and Governance Committee, with oversight from the Board of Directors.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
Long-Term Incentive
The LTI Program 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 Program is designed to
provide relevant directors and key employees with an incentive to remain with Syrah and contribute to the future performance
of the Group over the long term.
Performance Rights
Executives and senior managers within the Group 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. These performance rights are issued
under the Equity Incentive Plan (from 17 May 2018) or the LTIP (prior to 17 May 2018).
The potential maximum value of the annual grant of performance rights over a three year period represents between 20%
and 75% of an eligible employee’s total fixed remuneration. The actual number of performance rights granted is calculated
based on the closing volume weighted average price (“VWAP”) of the Company’s shares on ASX for the 60 trading days (for
the performance rights granted in 2018 and 2019) or one month (for the performance rights granted in 2017) preceding the
commencement and the end of the performance period.
Performance Hurdles
The performance hurdles for 2018 and 2019 are based on the Company’s TSR performance:
(a) 50% will be based on the TSR performance of the Company over the relevant vesting period relative to companies in
the S&P/ASX300 Index (ASX:XKO) as at 1 January 2019, classified under the “Materials” (formally the “Metals & Mining”)
industry under the GICS classification system; and
(b) 50% will be based on the absolute shareholder return performance of the Company over the relevant vesting period
against threshold and maximum targets as set by the Board. For both the 2018 and 2019 years, the Board of Directors
has determined threshold TSR performance to be 8.6% compound annualised growth rate ("CAGR") and maximum TSR
performance to be 18.8% CAGR. These targets have been based upon the median performance of the S&P/ASX300 Index
over a 20-year period.
The performance hurdles for 2017 and prior years involved an assessment of the Company’s TSR relative to a comparative
group of companies specified annually.
Vesting Conditions
Vesting of performance rights will be subject to the relevant performance hurdles 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 Board of Directors determines otherwise).
The number of performance rights that vest will be determined by assessing the performance of the Company, measured
by the relevant performance measure as at the date that is three years after the commencement of the performance period
(“Performance Date”), relative to the relevant performance hurdle(s) (the “TSR Hurdle(s)”).
The following table provides a summary of the TSR Hurdle(s) and the relationship between Company performance and the
percentage vesting of performance rights:
PERFORMANCE AGAINST TSR
COMPATOR GROUP (100% OF
PERFORMANCE RIGHTS FOR 2016
TO 2017 AND 50% OF PERFORMANCE
RIGHTS FROM 2018 ONWARDS)
TSR performance is at or below the
median performance of the comparator
group
PERFORMANCE AGAINST ABSOLUTE
TSR MEASURE
(50% OF PERFORMANCE RIGHTS
FROM 2018 ONWARDS)
TSR performance is at or below threshold
performance (8.6% CAGR)
PERCENTAGE OF PERFORMANCE
RIGHTS ELIGIBLE TO VEST
0%
TSR performance of between the median
and 75th percentile performance of the
comparator group
TSR performance is between threshold
(8.6% CAGR) and maximum performance
(18.8% CAGR)
Straight line pro-rata between
50% and 100%
TSR performance is at or above the
75th percentile performance of the
comparator group
TSR performance is above maximum
performance 18.8% CAGR)
100%
29
For personal use only In the event that a participant in the LTI Program 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/ Board, if the participant is a “bad leaver”
(for reasons such as resignation, dismissal for poor performance or as otherwise determined by the Remuneration, Nomination
and Governance Committee/ Board), 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 that the participant was a director/ employee).
The Board also has power to deem that performance rights will lapse or be deemed to be forfeited 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,
brings the Group (or any member thereof) into disrepute or if the Board determines there has been a material misstatement or
omission in the financial statements.
In the event of a change of control, all unvested performance rights will vest (in the case of performance rights granted up until
16 May 2018) or (in the case of performance rights granted from 17 May 2018 onwards) will vest unless the Board of Directors
exercises its discretion to determine otherwise.
TSR Comparator Groups (2015 to 2018 Grants)
Performance rights will be tested against Syrah’s TSR performance relative to the comparative group on the Performance Date.
Year ended 31 December 2016 Grant
i.
The TSR comparator group as selected by the Board of Directors for the performance rights for the year ended 31 December
2016 for testing as at 31 December 2018 is as follows:
Ferroglobe PLC
HudBay Minerals Inc
Magnis Energy Technologies Ltd(1)
Sandfire Resources NL
Materion Corporation
Talga Resources Limited
Iluka Resources Limited
Metals X Limited
Imperial Metals Corp
Independence Group NL
Ivanhoe Mines Ltd
OZ Minerals Limited
Polymet Mining Corp
Nevsun Resources Ltd
(1) Previously named Magnis Resources Limited
Tokai Carbon Co. Ltd
Vedanta Resources plc
Western Areas Limited
Outcome for 31 December 2016 Grant
None of the performance rights granted for the 2016 financial year and tested as at 31 December 2018 vested, as the TSR
performance of Syrah was below the median TSR performance of the comparator group over the performance period.
Year ended 31 December 2017 Grant
ii.
The TSR comparator group as selected by the Board of Directors for the performance rights for the year ended 31 December
2017 for testing as at 31 December 2019 is as follows:
Ferroglobe PLC
HudBay Minerals Inc
Magnis Energy Technologies Ltd(1)
Sandfire Resources NL
Materion Corporation
Talga Resources Limited
Iluka Resources Limited
Metals X Limited
Imperial Metals Corp
Independence Group NL
Ivanhoe Mines Ltd
OZ Minerals Limited
Polymet Mining Corp
Nevsun Resources Ltd
(1) Previously named Magnis Resources Limited
Tokai Carbon Co. Ltd
Vedanta Resources plc
Western Areas Limited
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
Year ended 31 December 2018 Grant
iii.
The TSR comparator group as selected by the Board of Directors for the performance rights for the year ended 31 December
2018 for testing as at 31 December 2020 are the companies in the S&P/ASX300 Index (ASX:XKO) as at 1 January 2018,
classified under the “Metals & Mining” (now renamed “Materials”) industry under the GICS classification system, being:
Alacer Gold Corp.
Alumina Limited
Ausdrill Limited
Independence Group NL
Regis Resources Limited
Lynas Corporation Limited
Resolute Mining Limited
MACA Limited
Rio Tinto Limited
Beadell Resources Limited
Magnis Energy Technologies Ltd
Sandfire Resources NL
BHP Group Limited
Metals X Limited
Saracen Mineral Holdings Limited
BlueScope Steel Limited
Mineral Resources Limited
Silver Lake Resources Limited
Dacian Gold Limited
Newcrest Mining Limited
Sims Metal Management Limited
Evolution Mining Limited
Northern Star Resources Limited
South32 Limited
Fortescue Metals Group Limited
OceanaGold Corporation
St Barbara Limited
Galaxy Resources Limited
Orocobre Limited
Gold Road Resources Limited
OZ Minerals Limited
Iluka Resources Limited
Imdex Limited
Perseus Mining Limited
Pilbara Minerals Limited
Syrah Resources Limited
Western Areas Limited
Westgold Resources Limited
The Board reserves the right to adjust the composition and number of the companies in the TSR Comparator Groups (2017
and 2018 Grants) 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.
Year ended 31 December 2019 Grant
iv.
The TSR comparator group as selected by the Board of Directors for performance rights for the year ending 31 December
2019 comprise of the companies in the S&P/ASX300 Index (ASX:XKO) as at 1 January 2019, classified under the “Materials”
(formally “Metals & Mining”) industry under the GICS classification system as follows:
Adelaide Brighton Limited
Iluka Resources Limited
Orica Limited
Altura Mining Limited
Alumina Limited
Amcor Limited
IMDEX Limited
Ioneer Limited
OZ Minerals Limited
Pact Group Holdings Limited
Incitec Pivot Limited
Pilbara Minerals Limited
Aurelia Metals Limited
James Hardie Industries Plc
Perseus Mining Limited
Ausdrill Limited
BHP Group Limited
Jupiter Mines Limited
Rio Tinto Limited
Kidman Resources Limited
Regis Resources Limited
BlueScope Steel Limited
Lynas Corporation Limited
Resolute Mining Limited
Boral Limited
Brickworks Limited
CSR Limited
Dacian Gold Limited
DuluxGroup Limited
Mineral Resources Limited
South32 Limited
MACA Limited
Metals X Limited
Newcrest Mining
Saracen Mineral Holdings Limited
St Barbara Limited
Sandfire Resources NL
New Century Resources Limited
Sims Metal Management Limited
Evolution Mining Limited
Northern Star Resources Limited
Syrah Resources Limited
Fletcher Building Limited
Nufarm Limited
Wagners Holding Company Limited
Fortescue Metals Group Limited
OceanaGold Corporation
Westgold Resources Limited
Gold Road Resources Limited
Om Holdings Limited
Western Areas Limited
Galaxy Resources Limited
Orora Limited
Independence Group NL
Orocobre Limited
If at any time during the Vesting Period a company in the Comparator Group suffers an insolvency event, undertakes material
merger or acquisition activity or is delisted from the ASX it will cease to become part of the Comparator Group.
31
For personal use only
The table below summarises the number and movements in Performance Rights issued under the Equity Incentive Plan during
the year:
Table 7: Equity Incentive Plan Performance Rights
Movement for the year ended 31 December 2018:
Balance at the beginning of the year
Granted during the year
Lapsed during the year
Forfeited during the year
Balance at the end of the year
At 31 December 2018:
Vested
Unvested
Total
2018
NUMBER
2017
NUMBER
-
69,205
-
-
69,205
-
69,205(1)
69,205
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) 36,720 of these rights vested in 2019, of which 24,480 were exercised on 31 January 2019.
The table below summarises the number and movements in performance rights issued under the LTIP during the year:
Table 8: LTIP Performance Rights
Movement for the year ended 31 December 2018:
Balance at the beginning of the year
Granted during the year
Lapsed during the year
Forfeited during the year
Exercised during the year
Balance at the end of the year
At 31 December 2018:
Vested
Unvested
Total
2018
NUMBER
2017
NUMBER
710,783
563,511
(175,213)
-
324,754
600,543
-
-
(78,255)
(214,514)
1,020,826(1)
710,783
-
1,020,826(2)
1,020,826
144,170
566,613
710,783
(1) 110,007 of these rights lapsed in 2019 as the performance criteria were not met.
(2) 118,663 of these rights vested in 2019.
The Board of Directors has resolved to grant 217,558 performance rights to S Verner, subject to shareholder approval, and
523,491 performance rights to other Key Management Personnel for the year ending 31 December 2018. The performance
rights granted to S Verner remain subject to shareholder approval. The Board of Directors also resolved to grant 521,490
performance rights to other executives and senior managers for the year ended 31 December 2018 in accordance with the
relevant employment contracts. These performance rights were issued on 21 March 2019 and are not included in the above
table.
32
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Share Options
Former Share Option Plan ("SOP")
As at 31 December 2018, there were 900,000 options outstanding (31 December 2017: 2,450,000) under this plan. The table
below summarises the number and movements in Options under this plan during the year:
Table 9: SOP Options
Movement for the year ended 31 December 2018:
Balance at the beginning of the year
Exercised during the year
Expired during the year
Balance at the end of the year
At 31 December 2018:
Vested
Unvested
TOTAL
2018
NUMBER
2017
NUMBER
2,450,000
5,675,000
-
(600,000)
(1,550,000)
(2,625,000)
900,000
2,450,000
900,000
2,450,000
-
-
900,000
2,450,000
Unvested options issued under the SOP will be forfeited upon cessation of employment prior to the conclusion of the vesting
period.
In the event of cessation of employment by reason of death, any vested options are exercisable within three months by a
legal representative otherwise the options will lapse. All other vested options are exercisable within 30 days of cessation of
employment otherwise the options will lapse.
Former Long Term Incentive Plan ("LTIP")
As at 31 December 2018, there were 3,300,000 options outstanding (31 December 2017: 4,300,000) under the LTIP. The table
below summarises the number and movements in options under this plan during the year:
Table 10: LTIP Options
Movement for the year ended 31 December 2018:
Balance at the beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
Balance at the end of the year
At 31 December 2018:
Vested
Unvested
TOTAL
(1) 400,000 options expired on 5 February 2019.
2018
NUMBER
2017
NUMBER
4,300,000
3,000,000
-
-
2,900,000
(600,000)
(1,000,000)
(1,000,000)
3,300,000
4,300,000
3,300,000(1)
1,400,000
-
2,900,000
3,300,000
4,300,000
In the event that a participant in the LTIP ceases to be a director or employee of the Group, the treatment of any options
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 options
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 options (based on the proportion of the vesting period that the participant was a director/ employee).
33
For personal use only The Plan Committee also has power to deem that options will lapse or be forfeited 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 Syrah Group (or any member thereof) into disrepute or if the Plan Committee determines there has been a material
misstatement or omission in the financial statements which affects those options.
In the event of a change of control, all unvested options will vest.
Current Equity Incentive Plan
As at 31 December 2018, there were 600,000 options outstanding under this plan.
In accordance with the terms of the letter of offer issued to L Bahash on 6 July 2018, L Bahash was granted 400,000 options
in Syrah at an exercise price of $2.89 subject to approval by shareholders at the next Annual General Meeting.
The table below summarises the number and movements in Options under this plan during the year:
Table 11: Equity Incentive Plan Options
Movement for the year ended 31 December 2018:
Balance at the beginning of the year
Granted during the year
Forfeited during the year
Expired during the year`
Balance at the end of the year
At 31 December 2018:
Vested
Unvested
TOTAL
2018
NUMBER
2017
NUMBER
-
600,000
-
-
600,000
-
600,000
600,000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
In the event that a participant in the Equity Incentive Plan ceases to be an employee of the Group, the treatment of any options
held by the participant will depend on the circumstances surrounding the cessation of his/ her employment. In general terms,
and subject to the discretion of the Board of Directors, if the participant is a “bad leaver” (for example resigns or ceases
employment due to poor performance), any unvested options will immediately lapse and any vested options must be exercised
within 60 days of ceasing employment after which time the vested options lapse; whereas if the participant is not a “bad
leaver”, he/ she will be entitled to retain a pro-rata amount of unvested options (based on the proportion of the vesting period
that has elapsed).
In the case of a director who participates in the Equity Incentive Plan and subject to the discretion of the Board of Directors,
if a director ceases to hold office as a director of the Company all unvested options will lapse and all vested but exercised
options will remain on foot and will be exercisable until the last exercise date (after which time they will lapse).
The Board of Directors also has power to deem that options will lapse or be forfeited 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 or if the Board determines there has been a material misstatement or omission
in the financial statements that the Board of Directors considers may require a re-statement of the Group’s financial accounts.
In the event of a change of control, all unvested options will vest unless the Board determines otherwise.
34
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only (F) DETAILS OF REMUNERATION EXPENSES
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 accounting standards:
Table 12: Remuneration for the financial year ended 31 December 2018
FIXED REMUNERATION
VARIABLE REMUNERATION
SALARY
& FEES(1)
LEAVE(2)
SUPER-
ANNUA-
TION
OTHER
STI
CASH(3)
STI
SHARES(3)
LTI
RIGHTS(4)
OPTIONS
(4)
US$
US$
US$
US$
US$
US$
US$
TOTAL
US$
NON-EXECUTIVE DIRECTORS
138,122
J Askew(5)
S Riggall
J Caldeira
82,315
94,098
C Lampe-Onnerud(6)
85,997
41,440
83,304
L Bahash(7)
S Giorgini(8)
Sub-total
Non-Executive
Directors
-
-
-
-
-
-
-
7,820
-
-
-
7,559
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
138,122
90,135
94,098
85,997
41,440
334,741
425,604
-
334,741
875,396
525,276
-
15,379
EXECUTIVE DIRECTOR
S Verner
352,003
4,528
16,481
9,938
-
174,106
179,306
197,817
934,179
Sub-total
Executive
Directors
352,003
4,528
16,481
9,938
-
174,106
179,306
197,817
934,179
KEY MANAGEMENT PERSONNEL
D Corr
242,437
3,388
23,032
-
J Costa(9)
J Currie
J Morrissey
R Schaefer
Sub-total Key
Management
Personnel
172,565
15,203
16,394
37,390
224,340
5,957
21,312
215,914
(4,982)
20,486
224,340
5,011
21,312
-
-
-
1,079,596
24,577
102,536
37,390
TOTAL
1,956,875
29,105
134,396
47,328
-
-
-
-
-
-
-
66,367
427,275
-
762,499
92,120
31,736
133,728
499,136
92,120
61,281
421,751
826,761
92,120
85,914
-
409,452
79,837
75,072
55,344
460,916
422,564
681,278
610,823 2,958,764
596,670
860,584 1,143,381 4,768,339
(1) All amounts translated from Australian Dollars to United States Dollars at an average exchange for the year ended 31 December 2018 of 0.7478.
(2) Represents annual leave and long service leave entitlements, being the movement in the entitlements measured on an accrual basis during the
financial period.
(3) Represents STI payments made in shares on 21 March 2019, in respect of performance for the year ended 31 December 2018 as approved by the
Remuneration, Nomination and Governance Committee.
(4) Represents amounts expensed through the Company’s profit and loss for performance rights and options issued under the Company’s LTIP. These
amounts are recognised in the Company’s profit and loss over the vesting period in accordance with AASB 2 Share-based Payments.
(5) Directors fees paid to J Askew are paid to International Mining and Finance Corp, a company of which he is a Director.
(6) C Lampe-Onnerud ceased as a Non-Executive Director of the Company effective from 25 March 2019.
(7) L Bahash commenced as a Non-Executive Director of the Company effective from 16 July 2018.
(8) S Giorgini ceased as a Non-Executive Director of the Company effective from 6 December 2018.
(9) J Costa commenced employment with the Company as Chief Operating Officer on 4 June 2018.
35
For personal use only
Table 13: Remuneration for the financial year ended 31 December 2017
FIXED REMUNERATION
VARIABLE REMUNERATION
SALARY
& FEES(1)
LEAVE(2)
SUPER-
ANNUA-
TION
OTHER
STI
CASH(3)
STI
SHARES(3)
LTI
RIGHTS(4)
OPTIONS
(4)
US$
US$
US$
US$
US$
US$
US$
TOTAL
US$
NON-EXECUTIVE DIRECTORS
156,715
J Askew(5)
S Riggall
J Caldeira
C Lampe-Onnerud(7)
S Giorgini(8)
R Brans(9)
Sub-total
Non-Executive
Directors
91,169
81,875
99,146
16,832
94,966
540,703
EXECUTIVE DIRECTORS
S Verner(10)
339,475
-
-
-
-
-
-
-
-
42,783(6)
8,661
-
-
1,599
9,022
-
-
-
-
-
19,282
42,783
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
199,498
99,830
81,875
217,217
316,363
84,433
102,864
-
103,988
301,650
904,418
13,825
27,373
2,112
109,213
109,213
89,568
213,902
904,681
Sub-total
Executive
Directors
339,475
13,825
27,373
2,112
109,213
109,213
89,568
213,902
904,681
KEY MANAGEMENT PERSONNEL
D Corr
248,851
J Currie(11)
J Morrissey
R Schaefer(12)
D Strange(13)
Sub-total Key
Management
Personnel
57,569
211,087
191,300
440,391
5,472
2,026
7,429
10,746
-
23,641
5,469
20,053
18,174
-
-
-
-
- 322,384(13)
64,036
24,112
54,317
46,753
45,594
64,036
118,224
-
524,260
24,112
54,317
46,753
-
106,380
219,668
49,689
-
396,892
35,080
288,775
637,581
45,594
-128,506
-
725,457
1,149,198
25,673
67,337
322,384
234,812
234,812
74,487
395,155 2,503,858
TOTAL
2,029,376
39,498
113,992
367,279
344,025
344,025
164,055
910,707 4,312,957
(1) All amounts translated from Australian Dollars to United States Dollars at an average exchange for the year ended 31 December 2017 of 0.7676.
(2) Represents annual leave and long service leave entitlements, being the movement in the entitlements measured on an accrual basis during the
financial period.
(3) Represents STI payments made in cash and shares for the year ended 31 December 2017 as approved by the then Remuneration and Nomination
Committee.
(4) Represents amounts expensed through the Company’s profit and loss for performance rights and options issued under the Company’s LTIP. These
amounts are recognised in the Company’s profit and loss over the vesting period in accordance with AASB 2 Share-base Payments.
(5) Directors fees paid to J Askew are paid to International Mining and Finance Corp, a company of which he is a Director. J Askew acted as Executive
Chairman of the Company from 5 October 2017 to 3 February 2017.
(6) Represents the current year portion of a payment of $148,880 (A$200,000) to J Askew for additional services provided to the Company as Executive
Chairman from 5 October 2017 to 3 February 2017. This amount was paid in shares as approved at the Annual General Meeting held on 19 May
2017.
(7) C Lampe-Onnerud was issued 400,000 unlisted options on 24 May 2016 and are due to expire on 24 May 2019 in accordance with their terms.
(8) S Giorgini commenced as a Non-Executive Director of the Company effective from 16 October 2017. 400,000 unlisted options issued to S Giorgini,
Non-Executive Director expired on 5 February 2019 in accordance with their terms, following Mr Giorgini’s resignation on 6 December 2018.
(9) R Brans ceased as a Non-Executive Director of the Company effective from 31 December 2017.
(10) S Verner was appointed Managing Director and Chief Executive Officer on 3 February 2017.
(11) J Currie commenced employment with the Company on 2 October 2017 as Chief Legal Officer and Company Secretary (with appointment as
Company Secretary on 16 October 2017).
(12) R Schaefer commenced employment with the Company as Chief Commercial Officer on 1 March 2017.
(13) D Strange ceased employment with the Company effective from 30 November 2017. Prior to his resignation, D Strange was seconded to Twigg
Exploration and Mining Limitada ("Twigg"). During this secondment, he was based in Mozambique and entitled to a net monthly salary of US$25,000
from Twigg (gross annual equivalent of US$461,538 inclusive of income taxes paid in Mozambique). During his secondment he remained eligible
to participate in the Group’s STI and LTI programs. D Strange received a net payment of US$216,628 (gross equivalent of US$322,384 inclusive
of income taxes paid in Mozambique) upon ceasing employment with the Company. He remained eligible to participate on a pro-rata basis in the
Group’s STI Program for the year ended 31 December 2017 (subject to an assessment of performance during the period in which he was employed)
and forfeited his entitlement to unvested performance rights as at the date of ceasing employment.
36
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
(G) EXECUTIVE SERVICE AGREEMENTS
Remuneration and other key terms of employment for Executive Directors and Key Management Personnel as of the date of this
report are formalised in Employment Agreements and summarised in the following table:
Table 14: Overview of Executive Service Agreements
TERM OF
AGREEMENT
TOTAL
FIXED
REMUNER-
ATION
ANNUAL STI
OPPORT-
UNITY
ANNUAL LTI
GRANT
NOTICE
PERIOD BY
EXECUTIVE
NOTICE
PERIOD BY
COMPANY
TERMINATION
PAYMENT
Ongoing
A$492,750
75% of TFR
75% of TFR
3 months
3 months
Ongoing
A$355,000
50% of TFR
50% of TFR
3 months
3 months
Ongoing
A$438,000
50% of TFR
50% of TFR
6 months
6 months
Ongoing
A$328,500
50% of TFR
50% of TFR
3 months
3 months
NAME
POSITION
S Verner
Managing Director
and Chief Executive
Officer
D Corr
Chief Financial
Officer
J Costa
Chief Operating
Officer
J Currie
Chief Legal Officer
and Company
Secretary
J Morrissey Chief People
Ongoing
A$328,500
50% of TFR
50% of TFR
3 months
3 months
Officer
R Schaefer Chief Commercial
Officer
Ongoing
A$328,500
50% of TFR
50% of TFR
3 months
3 months
12 months
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
3 months
Total Fixed
Remuneration
3 months
Total Fixed
Remuneration
3 months
Total Fixed
Remuneration
(H) TERMS AND CONDITIONS OF SHARE-BASED PAYMENT ARRANGEMENTS
Performance Rights
The terms and conditions of each grant of performance rights affecting the remuneration of Directors and Key Management
Personnel in the current or a future reporting period are as follows:
Table 15: Overview of Performance Rights
GRANT DATE
17-May-16
VESTING DATE
01-Jan-19
EXERCISE PRICE
-
NUMBER OF RIGHTS
58,543
VALUE PER RIGHT AT
GRANT DATE
A$3.47
21-Mar-17
26-May-17
14-Mar-18
14-Mar-18
21-Mar-19
01-Jan-20
01-Jan-20
01-Jan-20
01-Jan-21
01-Jan-22
-
-
-
-
-
161,691
121,773
14,269
166,954
523,491(1)
A$2.88
A$2.88
A$2.88
A$3.93
A$1.70
(1) 523,491 performance rights were issued to key management personnel pursuant to the LTI program in respect of the year ending 31 December
2018. The Board of Directors has also resolved to grant 217,558 performance rights to S Verner as his LTI, subject to shareholder approval.
The proportion of Performance Rights that vest is determined in accordance with the Vesting Conditions. Any Performance
Rights that do not vest at the end of the Vesting Period will lapse. The LTIP provides that vested Performance Rights that have
not been exercised or automatically exercised (depending on the terms of the relevant offer letter) will expire two years from
the First Exercise Date (unless otherwise stated in the relevant offer letter or certificate). The Equity Incentive Plan provides that
performance rights will lapse on the earlier of the date so nominated in the offer letter (2018: two years from the date of the
vesting notice),15 years after allocation (if no date is specified), in accordance with the rules of the Equity Incentive Plan, upon
a failure to meet a Vesting Condition (or any other applicable condition) or receipt of a notice from the participant electing to
surrender the Right.
37
For personal use only 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:
Table 16: Overview of Options
GRANT DATE
02-Oct-14
VESTING DATE
02-Oct-15
EXPIRY DATE
02-Oct-19
09-Jun-15
01-Dec-15
24-May-16
01-Mar-17
26-May-17
20-Oct-17
20-Oct-17
09-Jun-16
01-Dec-16
24-May-17
01-Mar-18
26-May-18
20-Oct-18
20-Oct-18
09-Jun-18
01-Dec-18
24-May-19
01-Mar-20
26-May-20
20-Oct-20
20-Oct-20
EXERCISE PRICE
NUMBER OF
RIGHTS
A$6.23(1)
A$4.96(1)
A$4.68(1)
A$5.04(1)
A$4.11(1)
A$4.30(1)
A$3.85
A$4.67
400,000(2)
300,000(3)
1,000,000(4)
400,000(5)
600,000(6)
1,000,000(7)
400,000(8)
600,000(9)
VALUE PER RIGHT
AT GRANT DATE
A$1.88
A$1.21
A$0.96
A$1.79
A$0.75
A$0.66
A$1.39
A$1.17
(1) Effective from 2 November 2017, the exercise price of these options was reduced by $0.03 (3 cents) per option in accordance with the terms of the
Long-Term Incentive Plan dated 13 May 2015, ASX Listing Rules 3.11.2 and 6.22 as a result of the issuance of shares from a 1 for 10.5 accelerated
non-renounceable entitlement offer.
(2) 400,000 unlisted options issued to J Caldeira, Non-Executive Director.
(3) 300,000 unlisted options issued to J Morrissey, Chief People Officer that expired during the period.
(4) 600,000 unlisted options issued to J Askew, Non-Executive Chairman and 400,000 unlisted options issued to S Riggall, Non-Executive Director that
expired during the period.
(5) 400,000 unlisted options issued to C Lampe-Onnerud, Non-Executive Director, who ceased as a Non-Executive Director effective 25 March 2019.
These options are due to expire on 24 May 2019 in accordance with their terms.
(6) 600,000 unlisted options issued to R Schaefer, Chief Commercial Officer.
(7) 1,000,000 unlisted options issued to S Verner, Managing Director and Chief Executive Officer on 26 May 2017 in accordance with resolution passed
at the Annual General Meeting on 19 May 2017.
(8) 400,000 unlisted options issued to S Giorgini, Non-Executive Director that expired on 5 February 2019 in accordance with their terms following Mr
Giorgini’s resignation on 6 December 2018.
(9) 600,000 unlisted options issued to J Currie, Chief Legal Officer and Company Secretary.
38
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only (I) DIRECTORS 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:
Table 17: Shares Held by Directors/Key Management Personnel
BALANCE
1 JANUARY
2018
ORDINARY
SHARES
GRANTED
ORDINARY
SHARES
ISSUED ON
EXERCISE OF
OPTIONS
ON MARKET
ACQUISITIONS/
(DISPOSALS)
DIRECTORS
J Askew
S Riggall
J Caldeira
C Lampe-
Onnerud
L Bahash(2)
S Giorgini(3)
100,790
9,627
-
-
-
10,000
-
-
-
-
-
-
EXECUTIVE DIRECTOR
S Verner
6,284
42,220(4),(5)
KEY MANAGEMENT PERSONNEL
46,584
D Corr
J Costa(8)
J Currie
J Morrissey
R Schaefer
-
-
14,514
10,998
28,010(5),(6),(7)
-
9,321(5),(6)
20,998(5),(6)
18,074(5),(6)
-
-
-
-
-
-
-
-
-
-
-
BALANCE
31 DECEMBER
2018
107,517
20,627
12,082
-
15,583
16,727
OTHER
6,727(1)
-
-
-
-
6,727(1)
-
11,000
12,082
-
15,583
-
25,000
6,727(1)
80,231
(15,000)
-
-
(6,000)
-
-
-
-
-
-
59,594
-
9,321
29,512
29,072
(1) Shares acquired through participation in the Share Purchase Plan announced on 4 September 2018.
(2) L Bahash commenced as a Non-Executive Director of the Company on 16 July 2018.
(3) S Giorgini ceased as a Non-Executive Director of the Company effective from 6 December 2018.
(4) Fully paid ordinary shares issued to S Verner pursuant to the 2017 STI Program (50% of the STI for the 2017 year was paid in shares), as approved
by shareholders at the Annual General Meeting on 17 May 2018.
(5) The Board of Directors resolved to issue 180,470 shares to S Verner and 438,009 shares to Key Management Personnel pursuant to the STI
Program for the 2018 year. The shares issued to S Verner remain subject to shareholder approval at the Annual General Meeting. The shares issued
to Key Management Personnel were issued on 21 March 2019 and are not included in the above reconciliation.
(6) Shares issued on 14 March 2018 pursuant to the STI Program in respect of the year ended 31 December 2017.
(7) Shares granted also includes the shares issued on exercise of the performance rights that vested under the 2015 LTI Program.
(8) J Costa commenced as Chief Operating Officer on 4 June 2018.
39
For personal use only
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.
Table 18: Performance Rights Held by Directors/Key Management Personnel
BALANCE
1 JANUARY
2018
GRANT
GRANTED
DURING
THE
PERIOD
LAPSED
DURING
THE
PERIOD
NET
CHANGE
OTHER
BALANCE
31
DECEMBER
2018
VESTED UNVESTED
DIRECTORS
S Verner
2018(1)
2017
Total
-
93,974
121,773
-
121,773
93,974
KEY MANAGEMENT PERSONNEL
D Corr
2018
-
-
45,136
118,663
61,679
45,946
44,170
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(40,915)
(3,225)(4)
2018
2017
2016
2015
Total
2018
Total
2018
2018
Total
2018
2017
2016
Total
2018
2017
Total
J Costa
J Currie
J Morrissey
R Schaefer
151,795
163,799
(40,915)
(3,255)
-
-
-
-
-
-
52,319
12,597
64,916
-
47,693
47,693
32,485
32,485
41,766
14,269
56,035
38,286
-
-
38,286
41,799
-
41,799
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,974
121,773
215,747
45,136
118,663
61,679
45,946
-
271,424
32,485
32,485
41,766
14,269
56,035
38,286
52,319
12,597
103,202
41,799
47,693
89,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,974
121,773
215,747
45,136
118,663(2)
61,679
45,946(3)
-
271,424
32,485
32,485
41,766
14,269(5)
56,035
38,286
52,319
12,597(3)
103,202
41,799
47,693
89,492
(1) The Board of Directors resolved to issue 217,558 performance rights to S Verner, subject to shareholder approval, and 523,491 performance rights
to Key Management Personnel pursuant to the LTI program in respect of the year ending 31 December 2018. The performance rights issued to S
Verner remain subject to shareholder approval. The performance rights issued to Key Management Personnel were issued on 21 March 2019 and
are not included in the above reconciliation.
(2) Additional performance rights issued to D Corr on 14 March 2018 in lieu of options awarded to him in 2015 that were unable to be exercised and
given the significant contribution made to the delivery of the project development and construction activities for the Balama Graphite Project and
associated fundraising activities over the previous three years.
(3) The performance rights issued under the LTI Program in 2016, were subject to testing of vesting conditions in early 2019. All such rights lapsed on
their terms.
(4) 7% of the performance rights granted for the 2015 financial year vested based on the TSR performance of Syrah of 51% in comparison to the
average TSR of the comparator group of 43% over the performance period. 3,225 shares were exercised and issued on 14 March 2018 and the
remaining rights lapsed on their terms.
(5) Performance rights issued on a pro-rata basis in respect of 2017 LTI Program entitlements and were granted on 14 March 2018.
40
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
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:
Table 19: Options Held by Directors/ Key Management Personnel
BALANCE
1 JANUARY
2018
GRANTED
BALANCE
DURING
THE
PERIOD
NET
CHANGE
OTHER (INC
EXPIRY /
LAPSE)
BALANCE
31 DEC-
EMBER
2018
OPTIONS
EXERCISED
VESTED UNVESTED
EXERCISE
PRICE
DIRECTORS
J Askew
S Riggall
J Caldeira
C Lampe-
Onnerud(1)
600,000
400,000
400,000
400,000
S Giorgini(2)
400,000
EXECUTIVE DIRECTOR
S Verner(3)
1,000,000
KEY MANAGEMENT PERSONNEL
D Corr
600,000(4)
-
-
-
-
-
-
-
J Costa(5)
J Currie
J Morrissey
R Schaefer
-
600,000
600,000
300,000
600,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(600,000)
(400,000)
-
-
-
-
-
-
-
-
400,000
400,000
400,000
400,000
400,000
400,000
1,000,000
1,000,000
(600,000)
-
-
-
-
600,000
600,000
600,000
600,000
(300,000)
-
-
-
600,000
600,000
-
-
-
-
-
-
-
-
-
-
-
$4.68
$4.68
$6.23
$5.04
$3.85
$4.30
$4.05
$4.37
$4.67
$4.96
$4.11
(1) 400,000 unlisted options issued to C Lampe-Onnerud, Non-Executive Director are due to expire effective 24 May 2019 in accordance with their
terms.
(2) 400,000 unlisted options issued to S Giorgini, Non-Executive Director expired on 5 February 2019 in accordance with their terms following Mr
Giorgini’s resignation on 6 December 2018.
(3) 600,000 options were issued to S Verner on his appointment as Executive General Manager – Sales and Marketing. S Verner was appointed as
Managing Director and Chief Executive Officer of the Company on 3 February 2017. As a result of this appointment the 600,000 options were
cancelled and replaced with 1,000,000 unlisted options exercisable at A$4.30 and expiring in three years from the date of grant. The issuance of
these options was approved by the shareholders at the Annual General Meeting held on 19 May 2017 and issued on 26 May 2017.
(4) These options were granted in 2015 and expired on 28 January 2018, during a share trading blackout period.
(5) J Costa commenced employment with the Company as Chief Operating Officer on 4 June 2018. 600,000 options were issued to J Costa upon his
appointment and vest one year from that date.
41
For personal use only
(J) OTHER TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT
PERSONNEL
Aggregate amounts of other transactions with Directors and Key Management Personnel is set out below:
Table 20: Transactions with Directors/ Key Management Personnel
Provision of services
Product technology development services provided Cadenza Innovation Inc(1)
Legal services provided by Sal & Caldeira Advogados, Lda(2)
Consultancy services provided by Proman Consulting Engineers Pty Ltd(3)
2018
US$
2017
US$
1,990,282
1,501,800
125,950
-
384,045
26,866
2,116,232
1,912,711
(1) C Lampe-Onnerud who is a Non-Executive Director of the Company is also Founder and Chief Executive Officer of Cadenza Innovation Inc. During
the year, the Company had an exclusive research and development agreement with Cadenza Innovation Inc. to fuel advancements in graphite
anode technology for use in Lithium-ion-based energy storage and support the BAM processing plant in Louisiana. C Lampe-Onnerud ceased as a
Non-Executive Director effective 25 March 2019.
(2) 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.
(3) Represents project development consultancy services provided to the Company by R Brans who was a Non-Executive Director of the Company
until 31 December 2017.
These services are provided on arm’s length commercial terms and conditions. Where any director has a conflict of interest
they do not participate in any decision of the Board or management in relation to that matter.
The following balances were outstanding at the end of the period in relation to the above transactions:
Trade and other payables
2018
US$
1,000
2017
US$
26,275
(K) ADDITIONAL INFORMATION
The Company aims to align executive remuneration to drive short, medium and long-term outcomes for the business which
creates 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.
Market capitalisation (US$’000)
Closing share price (US$)
31-DEC
2018
386,705
1.13
31-DEC
2017
1,045,520
3.52
31-DEC
2016
582,107
2.21
Loss after income tax for the period (US$’000)
(28,970)
(28,970)
(14,491)
Basic earnings per share (US cents)
(9.30)
(4.51)
(5.84)
31-DEC
2015
658,231
2.85
(2,356)
(1.09)
30-JUN
2015
465,476
2.81
(9,751)
(5.86)
42
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
SHARES OPTIONS AND PERFORMANCE RIGHTS
Unissued ordinary shares
(i)
Unissued ordinary shares of Syrah Resources Limited under option and performance rights as at the date of this report are as
follows:
Table 21: Unissued Ordinary Shares under Options and Performance Rights
VESTING AND
EXERCISABLE
DATE
EXPIRY
DATE
EXERCISE
PRICE
NUMBER OF
SHARES UNDER
OPTION /
PERFORMANCE
RIGHTS
VALUE PER
OPTION/
PERFORMANCE
RIGHT AT GRANT
DATE
GRANT DATE
Share Options
Share Option Plan ("SOP")
19-May-14
02-Oct-14
19-May-15
02-Oct-15
Long Term Incentive Plan ("LTIP")
24-May-16
24-May-17
01-Mar-17
26-May-17
20-Oct-17
20-Oct-17
01-Mar-18
26-May-18
20-Oct-18
20-Oct-18
19-May-19
02-Oct-19
24-May-19
01-Mar-20
26-May-20
20-Oct-20
20-Oct-20
A$5.38(1)
A$6.23(1)
A$5.04(1),(2)
A$4.11(1)
A$4.30(1)
A$4.13
A$4.67
Equity Incentive Plan (“EIP”)
25-Jun-18
04-Jun-18
25-Jun-21
A$4.37
Total Options
Performance Rights
LTIP
21-Mar-17
26-May-17
14-Mar-18
14-Mar-18
14-Mar-18
18-May-18
EIP
25-Jun-18
07-Aug-18
21-Mar-19
Total Performance Rights
01-Jan-20
01-Jan-20
01-Jan-20
01-Jan-21
01-Jan-19
31-Dec-20
31-Dec-20
31-Dec-18
01-Jan-22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
400,000
400,000
600,000
1,000,000
300,000
600,000
600,000
4,400,000
247,944
121,773
25,850
302,615
118,663
93,974
32,485
12,240
1,044,981(3)
2,000,525
A$2.24
A$1.88
A$1.79
A$0.75
A$0.66
A$1.31
A$1.17
A$0.518
A$2.88
A$2.88
A$2.88
A$3.93
A$3.37
A$3.93
A$3.93
A$2.92
A$1.70
(1) Effective from 2 November 2017, the exercise price of options was reduced by $0.03 (3 cents) per option in accordance with the terms of the
options, ASX Listing Rule 3.11.2 and 6.22 as a result of the issuance of shares from a 1 for 10.5 accelerated renounceable entitlement offer.
(2) 400,000 unlisted options issued to C Lampe-Onnerud, Non-Executive Director are due to expire effective 24 May 2019 in accordance with their
terms.
(3) The Board of Directors has also resolved to issue 217,558 performance rights to S Verner, subject to shareholder approval.
43
For personal use only
The proportion of Performance Rights that vest is determined
in accordance with the Vesting Conditions. Any Performance
Rights that do not vest at the end of the Vesting Period will
lapse. The LTIP provides that vested Performance Rights
will that have not been exercised or automatically exercised
(depending on the terms of the relevant offer letter) will expire
two year from the First Exercise Date (unless otherwise stated
in the relevant offer letter or certificate). The Equity Incentive
Plan provides that performance rights will lapse on the earlier
of the date so nominated in the offer letter (2018: two years
from the date of the vesting notice),15 years after allocation
(if no date is specified), in accordance with the rules of the
Equity Incentive Plan, upon failure to meet a Vesting Condition
(or any other applicable condition) or receipt of a notice from
the participant electing to surrender the Right.
No option holder has any right under the options to
participate in any share issue of the Company.
(ii)
Shares issued on exercise of options
No options were exercised during the year ended 31
December 2018 and up to the date of this report.
INDEMNIFICATION OF OFFICERS
During the year the Company paid a premium in respect of a
contract insuring the directors of the Company, the company
secretary 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. 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, secretary and
executive officer. In summary the Deed provides for:
> Access to corporate records for each director, secretary
or executive officer 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, secretary
or executive officers 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.
AUDITOR
PricewaterhouseCoopers continues in office in accordance
with section 327 of the Corporations Act.
AUDIT AND NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for audit and
non-audit services provided during the year are set out below:
The Board of Directors has considered the position and,
in accordance with advice received from the Audit and
Risk 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.
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 for the following reasons:
> All non-audit services have been reviewed by the Audit
and Risk 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.
During the financial year the following fees were paid or
payable for services provided by the auditor of the parent
entity, its related practices and non-related audit firms.
2018
US$’000
2017
US$’000
Assurance Services
PwC Australian firm
Network firms of PwC
Australian firm
Total remuneration for audit
services
Non-assurance services
Tax compliance services
Tax consulting services
Other consulting services
Total remuneration for non-
assurance services
Total remuneration paid to
PricewaterhouseCoopers
224
93
317
47
15
-
62
379
150
94
244
29
66
22
117
361
The Group’s policy allows the engagement of
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
and Risk Committee to approve all individual assignments
performed by PricewaterhouseCoopers with total fees of
greater than $20,000.
44
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only AUDITOR’S INDEPENDENCE
DECLARATION
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act is set out on
page 46.
ROUNDING OF AMOUNTS
The amounts contained in this report and in the financial
report have been rounded off to the nearest US$’000 (where
rounding is applicable) under the relief available to the
Company under ASIC Corporations (Rounding in Financial/
Directors Reports) Instrument 2016/191. The Company is an
entity to which the Class Order applies.
The report is made in accordance with a resolution of
Directors.
Shaun Verner
Managing Director and Chief Executive Officer
Melbourne, Australia
29 March 2019
45
For personal use only AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Syrah Resources Limited for the year ended 31 December 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Syrah Resources Limited and the entities it controlled during the
period.
John O'Donoghue
Partner
PricewaterhouseCoopers
Melbourne
29 March 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
46
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only FINANCIAL STATEMENTS
For the financial year ended 31 December 2018
The financial statements are presented
in US Dollars.
CONTENT
PAGE
Syrah Resources Limited is a company
limited by shares, incorporated and
domiciled in Australia. Its registered
office and principal place of business
is:
Level 28, 360 Collins Street
Melbourne VIC 3000 Australia
A description of the nature of the
consolidated entity’s operations and
its principal activities is included in
the Directors’ Report on pages 4 to
45, which is not part of these financial
statements.
The financial statements were
authorised for issue by the directors
on 28 March 2019. The Directors have
the power to amend and reissue the
financial statements.
All press releases, financial reports and
other information are available on our
website: www.syrahresources.com.au
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
NOTE HOW THE NUMBERS ARE CALCULATED
1
2
3
4
5
6
7
8
9
Introduction
Segment information
Revenue
Other income
Expenses
Income tax
Financial assets and financial liabilities
Non-financial assets and non-financial liabilities
Equity
10
Reconciliation of loss after income tax to net cash
outflow from operations
RISK
11
Financial risk management
UNRECOGNISED ITEMS
12
13
14
15
16
17
18
19
20
21
Commitments, contingencies and guarantees
Events occurring after the reporting date
OTHER INFORMATION
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Parent entity financial statements
Subsidiaries
Deed of cross guarantee
Summary of significant accounting policies
Directors’ Declaration
Independent Auditor’s Report
47
48
49
50
51
52
52
53
54
55
55
56
57
58
60
66
69
70
71
74
75
75
76
77
78
81
81
82
83
84
86
95
96
47
For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Revenue from continuing operations
Other income
Expenses
Employee benefits
Legal and consulting
Depreciation and amortisation
Foreign exchange loss – net
Other expenses
Loss from continuing operations before income tax
Income tax (expense)/benefit
NOTES
3
4
5
5
8b
5
6
2018
US$’000
1,207
3
1,210
(10,222)
(1,973)
(513)
(1,155)
(18,184)
(30,837)
1,867
2017
US$’000
1,310
2,640
3,950
(7,552)
(3,718)
(299)
-
(3,273)
(10,892)
(1,415)
Loss after income tax for the year attributable to the owners of
Syrah Resources Limited
(28,970)
(12,307)
Other comprehensive income
Items that may be reclassified subsequently to the profit or loss
Exchange differences on translation of foreign subsidiaries
9b
Other comprehensive income /(loss) for the year, net of tax
(1,128)
(1,128)
6,641
6,641
Total comprehensive loss for the year attributable to the owners of
Syrah Resources Limited
(30,098)
(5,666)
Loss per share attributable to the owners of Syrah Resources
Limited
Basic loss per share
Diluted loss per share
17
17
Cents
(9.30)
(9.30)
Cents
(4.51)
(4.51)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
48
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
NOTES
2018
US$’000
2017
US$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Mining assets
Intangibles
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Finance leases
Provisions
Total current liabilities
Non-current liabilities
Finance leases
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
7a
7b
7b
8b
8a
8c
7c
7d
8d
7d
8d
8c
9a
9b
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
77,149
12,446
82
89,677
20,771
31,442
331,202
225
452
111,912
4,057
91
116,060
19,600
9,013
273,540
250
-
384,092
302,403
473,769
418,463
15,926
1,490
451
17,867
4,102
6,590
-
10,692
13,923
276
895
15,094
1,000
8,318
1,415
10,733
28,559
25,827
445,210
392,636
525,085
(3,009)
(76,866)
452,601
(9,642)
(50,323)
445,210
392,636
49
For personal use only
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Balance at 1 January 2018
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
Share-based payments
Transfers from share-based payments reserve:
-
Issuance of shares
- Expired / lapsed options and performance rights
CONTRIBUTED
EQUITY
ACCUMULATED
LOSSES
RESERVES
US$’000
452,601
-
-
-
71,229
-
1,255
-
72,484
US$’000
(50,323)
(28,970)
-
(28,970)
-
-
-
2,427
2,427
US$’000
(9,642)
-
(1,128)
(1,128)
-
11,443
(1,255)
(2,427)
7,761
TOTAL
EQUITY
US$’000
392,636
(28,970)
(1,128)
(30,098)
71,229
11,443
-
-
82,672
Balance at 31 December 2018
525,085
(76,866)
(3,009)
445,210
Balance at 1 January 2017
366,427
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
(43,817)
(12,307)
-
(12,307)
(11,861)
-
6,641
6,641
310,749
(12,307)
6,641
(5,666)
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
85,278
Share-based payments
Transfers from share-based payments reserve:
-
Issuance of shares
- Exercise of options
- Expired / lapsed options
298
598
-
86,174
-
-
-
5,801
5,801
-
2,275
(298)
(598)
(5,801)
(4,422)
85,278
2,275
-
-
-
87,553
Balance at 31 December 2017
452,601
(50,323)
(9,642)
392,636
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
50
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES
2018
US$’000
2017
US$’000
Cash flows from operating activities
Payments to suppliers and employees (inclusive of goods
and services tax)
Interest received
Net cash outflow from operating activities
10
(11,128)
(11,907)
1,106
(10,022)
1,181
(10,726)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for mining assets
Payments for intangibles
Payments for security deposits
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Payments of finance lease liabilities
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
7a
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
(16,733)
(76,608)
(7)
(1,243)
(94,591)
73,598
(2,369)
(693)
70,536
(34,077)
111,912
(686)
77,149
(5,679)
(118,386)
(224)
(2,694)
(126,983)
88,461
(3,183)
(157)
85,121
(52,588)
163,275
1,225
111,912
51
For personal use only
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
HOW THE NUMBERS ARE CALCULATED
This section provides additional information about those individual line items in the financial
statements that the directors consider most relevant in the context of the operations of the
Group, including:
a.
b.
c.
accounting policies that are relevant for an understanding of the items recognised in
the financial statements. These cover situations where the accounting standards either
allow a choice or do not deal with a particular type of transaction
analysis and sub-totals, including segment information
information about estimates and judgements made in relation to particular items.
NOTE HOW THE NUMBERS ARE CALCULATED
PAGE
1
2
3
4
5
6
7
8
9
Introduction
Segment information
Revenue
Other income
Expenses
Income tax
Financial assets and financial liabilities
Non-financial assets and non-financial liabilities
Equity
10
Reconciliation of loss after income tax to net cash outflow from operations
53
54
55
55
56
57
58
60
66
69
52
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only NOTE 1. INTRODUCTION
Basis of preparation
a)
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 the respective notes.
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 18.
b)
Reporting currency
Functional and presentation currency
The presentation currency of the Group is US Dollars. Each entity in the Group determines its own functional currency and
items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of
the transaction. The subsequent payment or receipt of funds related to a transaction is translated at the rate applicable on
the date of payment or receipt. Monetary assets and liabilities that are denominated in foreign currencies are retranslated
at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate as at the date of the initial transaction. All exchange differences in the
consolidated financial statements are taken to the Income Statement with the exception of exchange differences on certain
US Dollar denominated receivables (held by the parent entity which has a functional currency of Australian Dollars) where the
foreign currency components are deemed to be hedges of a net investment in a foreign operation. These are recognised in
other comprehensive income and accumulated in a reserve until the amounts are settled or the foreign operation is disposed
(for net investment hedges), at which time they are recognised in the Income Statement.
Translation
The assets and liabilities of entities within the group with functional currency other than US Dollars (being the presentation
currency of the Group) are translated into US Dollars at the exchange rate at reporting date (31 December 2018: 0.7058)
(31 December 2017: 0.7800) and the Statement of Profit or loss is translated at the average exchange rate for the financial year
(2018: 0.7478) (2017: 0.7676). On consolidation, exchange differences arising from the translation of these subsidiaries are
recognised in Other Comprehensive Income and accumulated in the foreign currency translation reserve.
53
For personal use only NOTE 2. 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 primarily monitors performance according to the following two segments:
Balama
Mining, mineral exploration, evaluation, development and operating activities associated with the Balama
Graphite Operation in Mozambique.
Corporate Corporate administration and investing activities, which currently includes assessment and development of
downstream opportunities for graphite, including the BAM project.
b)
Segment information
YEAR ENDED 31 DECEMBER 2018
Revenues
Interest income
Other income
Total revenues
BALAMA
CORPORATE CONSOLIDATED
US$’000
US$’000
US$’000
-
3
3
1,207
-
1,207
1,207
3
1,210
Profit/(Loss) before income tax expense
(20,572)
(10,265)
(30,837)
Included within segment results:
Employee benefits expense
Legal and consulting expenses
Depreciation and amortisation expense
Foreign exchange loss - net
Other expenses
Material non-cash items included in segment result:
Share based payments
- Employee benefits
- Non-controlling interests
AS AT 31 DECEMBER 2018
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
(2,014)
(865)
(426)
(1,046)
(16,224)
-
(7,201)
(7,201)
369,452
369,452
(24,430)
(24,430)
(8,208)
(1,108)
(87)
(109)
(1,960)
(4,296)
-
(4,296)
(10,222)
(1,973)
(513)
(1,155)
(18,184)
(4,296)
(7,201)
(11,497)
104,317
104,317
473,769
473,769
(4,129)
(4,129)
(28,559)
(28,559)
Additions to non-current non-financial assets
62,215
17,876
80,091
54
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
YEAR ENDED 31 DECEMBER 2017
Revenues
Interest income
Foreign exchange gain/(loss) – net
Other income
Total revenues
Profit/(Loss) before income tax expense
Included within segment results:
Employee benefits expense
Legal and consulting expenses
Depreciation and amortisation expense
Other expenses
Material non-cash items included in segment result:
Share based payments
- Employee benefits
AS AT 31 DECEMBER 2017
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Additions to non-current non-financial assets
NOTE 3. REVENUE
Interest income
NOTE 4. OTHER INCOME
Net foreign exchange gain
Profit on disposal of assets
BALAMA
CORPORATE CONSOLIDATED
US$’000
US$’000
US$’000
-
1,963
1,158
3,121
873
(834)
(522)
(150)
743
-
-
299,572
299,572
(22,872)
(22,872)
113,992
1,310
(484)
3
829
1,310
1,479
1,161
3,950
(11,765)
(10,892)
(6,718)
(3,196)
(149)
(2,530)
(2,018)
(2,018)
118,891
118,891
(2,955)
(2,955)
(7,552)
(3,718)
(299)
(3,273)
(2,018)
(2,018)
418,463
418,463
(25,827)
(25,827)
6,557
120,549
2018
US$’000
1,207
1,207
2018
US$’000
-
3
3
2017
US$’000
1,310
1,310
2017
US$’000
1,479
1,161
2,640
55
For personal use only
NOTE 5. EXPENSES
Loss before income tax from continuing operations includes the following specific expenses:
Employee benefits:
Salaries and wages
Share-based payments
Employee entitlements
Defined contribution superannuation expense
Total employee benefits expense
Legal and consulting:
Legal expenses
Consulting expenses
Total legal and consulting expenses
Other expenses:
Write-off of certain mining assets and pre-commercial production operating costs(1)
Share based payments – non-controlling interest(2)
2018
US$’000
5,227
4,296
392
307
10,222
318
1,655
1,973
7,433
7,201
2017
US$’000
4,836
2,018
394
304
7,552
1,366
2,352
3,718
-
-
(1) Represents the Write-off of certain mining assets and a proportion of associated pre-commercial production operating costs due to major
equipment failures (fine dryer damage and primary classifier screen fire) during the year.
(2) During the year ended 31 December 2018, Twigg Exploration and Mining Limitada (Twigg) entered into a Mining Agreement with the Ministry
of Mineral Resources and Energy of the Republic of Mozambique creating a contractual obligation to provide a 5% non-controlling non-diluting
interest in Twigg to a Mozambique Government entity. As at 31 December 2018, the issuance of shares to the Mozambique Government entity has
not occurred however an expense has been recognised in the current year with a corresponding increase in the share-based payment reserve to
reflect the contractual obligation to provide an interest in Twigg to a Mozambique Government entity (refer Note 15(d) for further details).
56
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
NOTE 6. INCOME TAX EXPENSE
a)
Income tax expense
Current tax expense
Deferred tax expense
Total tax expense / (benefit)
Deferred income tax
(Increase) / decrease in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Total deferred tax expense / (benefit)
2018
US$’000
-
(1,867)
(1,867)
(452)
(1,415)
(1,867)
b) Numerical reconciliation of income tax for the year to prima facie tax payable
Loss from continuing operations before income tax
Tax at the Australian tax rate of 30% (2017 – 30%)
Tax effect of amounts which are not deductible / (taxable) in calculating taxable
income:
- Share-based payments
- Other non-deductible expenses
- Difference in overseas tax rates
- Movement in unrecognised temporary differences
-
(Under) / over provision in the prior year
- Current year taxation losses not recognised as deferred tax assets
- Sundry items
Income tax expense / (benefit)
c)
Taxation losses and unrecognised temporary differences
Unused taxation losses for which no deferred tax asset has been recognised
in Australia
Potential taxation benefit at 30%
Temporary differences for which no deferred tax asset (net) has been recognised
2018
US$’000
(30,837)
(9,251)
3,450
2,212
578
(1,172)
1,341
410
565
(1,867)
2018
US$’000
33,001
9,900
409
2017
US$’000
-
1,415
1,415
-
1,415
1,415
2017
US$’000
(10,892)
(3,268)
605
1,437
281
(726)
(301)
3,387
-
1,415
2017
US$’000
31,634
9,490
558
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 in the respective jurisdictions and within the allowed timeframes for tax loss utilization.
> 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.
57
For personal use only
NOTE 7. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
a) Cash and cash equivalents
Cash at bank and in hand
Deposits at call
2018
US$’000
8,133
69,016
77,149
2017
US$’000
15,721
96,191
111,912
Total cash is held in current accounts or money market 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 2018 the weighted average interest rate on current accounts and term deposits was 2.05% (2017: 1.21%).
(i)
Risk exposure
The Group’s exposure to foreign exchange and interest rate risk is discussed in Note 11. The maximum exposure to
credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above.
b)
Trade and other receivables
Current
Trade receivables
Prepayments
Other receivables
Input tax credits
Total current trade and other receivables
Non-current
Input tax credits
Security deposits (1)
Other receivables
Total non-current trade and other receivables
2018
US$’000
2017
US$’000
6,799
4,274
1,365
8
12,446
16,768
4,003
-
20,771
-
2,874
1,031
152
4,057
16,374
2,889
337
19,600
(1) Security deposits are restricted deposits that are used for monetary backing for performance guarantees
(i)
(ii)
Classification of trade receivables
Trade receivables are amounts due from customers from the sale of graphite. They are generally due for settlement
within 30 days and therefore are all classified as current.
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 11.
(iii) Fair value measurement 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 11 for more information on the credit quality of the Group’s trade and other receivables.
58
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
Significant estimates and judgements
Input tax credits in Twigg Exploration and Mining Limitada amounting to $16.8 million (31 December 2017: $16.4 million) have
been recognised at cost. The Group views these input tax credits as recoverable through a cash refund or tax credits based
on interpretation of the relevant tax and investment laws. During the year ended 31 December 2018, cash refunds totaling
$5.6 million for inputs tax credits were received. Should management determine that some of these input tax credits are not
recoverable in future, the Group will reclassify those amounts to the cost base of related assets, or recognise an expense in
the profit or loss in the period the determination is made. The outstanding balance for input tax credit are classified as non-
current due to uncertainties on the timing of receipts.
c)
Trade and other payables
Trade payables and accruals
Other payables
2018
US$’000
14,880
1,046
15,926
2017
US$’000
12,441
1,482
13,923
(i)
Risk exposure
Trade payables are non-interest bearing and are normally settled on repayment terms between 7 and 30 days.
Information about the Group’s exposure to foreign exchange risk is provided in Note 11.
(ii)
Fair value measurement
Due to the short-term nature of these payables, their carrying amount is assumed to approximate their fair value.
d)
Finance leases
Current
Finance leases
Non-current
Finance leases
2018
US$’000
1,490
1,490
4,102
4,102
2017
US$’000
276
276
1,000
1,000
Finance leases relate to equipment that is included in Plant and Equipment. The finance lease liability is secured against this
equipment which reverts to the lessor in the event of default.
59
For personal use only
NOTE 8. NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
a) Mining assets
Exploration and evaluation
Mine properties and development
Mines under construction
Total mining assets
2018
US$’000
1,306
33,297
296,599
331,202
2017
US$’000
988
33,297
239,255
273,540
Movements in mine properties and development are set out below:
EXPLORATION
AND EVALUATION
MINE
PROPERTIES AND
DEVELOPMENT
MINES UNDER
CONSTRUCTION
TOTAL
US$’000
US$’000
US$’000
US$’000
For the financial year ended 31 December 2018
Balance at beginning of the year
Current year expenditure capitalised (net)
Change in decommissioning and restoration
provision
Exchange differences
Balance at end of the year
For the financial year ended 31 December 2017
Balance at beginning of the year
Current year expenditure capitalised
Change in decommissioning and restoration
provision
Exchange differences
Balance at end of the year
988
321
-
(3)
1,306
890
39
-
59
988
33,297
239,255
273,540
-
-
-
59,692
(1,795)
60,013
(1,795)
(553)
(556)
33,297
296,599
331,202
31,094
123,328
155,312
-
-
2,203
33,297
108,824
108,863
3,742
3,742
3,361
5,623
239,255
273,540
Exploration and evaluation
The balance of exploration and evaluation relates to the Vanadium project at Balama and continues to be carried forward in
accordance with the exploration and evaluation accounting policy. The ultimate recoupment of exploration and evaluation
expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective
interests at an amount at least equal to book value.
Mines properties and development and Mines under construction
Mines properties and development and Mines under construction mainly relate to the development, construction and pre-
commercial production costs of the Balama Graphite Operation in Mozambique.
60
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
b) Property, plant and equipment
LAND AND
BUILDINGS
PLANT AND
EQUIPMENT
COMPUTER
EQUIPMENT
ASSETS UNDER
CONSTRUCTION
TOTAL
US$’000
US$’000
US$’000
US$’000
US$’000
At 1 January 2018
Cost
Accumulated depreciation and impairment
Net book amount
For the financial year ended 31 December 2018
Balance at beginning of the year
Additions
Disposals (at net book value)
Depreciation charge
Exchange differences
Balance at end of the year
At 31 December 2018
Cost
Accumulated depreciation and impairment
Net book amount
At 1 January 2017
Cost
Accumulated depreciation and impairment
Net book amount
For the financial year ended 31 December 2017
Balance at beginning of the year
Additions
Disposals (at net book value)
Depreciation charge
Exchange differences
Balance at end of the year
797
(112)
685
685
-
-
(46)
-
639
797
(158)
639
797
(67)
730
730
-
-
(45)
-
685
3,056
(1,374)
1,682
1,682
4,719
(21)
(739)
21
5,662
7,753
(2,091)
5,662
2,465
(1,572)
893
893
1,396
(100)
(749)
242
1,682
214
(121)
93
93
12
-
(42)
(4)
59
214
(155)
59
184
(71)
113
113
22
-
(48)
6
93
At 31 December 2017
Cost
Accumulated depreciation and impairment
Net book amount
797
(112)
685
3,056
(1,374)
1,682
214
(121)
93
6,553
-
6,553
6,553
18,715
-
-
(186)
25,082
25,082
-
25,082
-
-
-
-
6,525
-
-
28
6,553
6,553
-
6,553
10,620
(1,607)
9,013
9,013
23,446
(21)
(827)
(169)
31,442
33,846
(2,404)
31,442
3,446
(1,710)
1,736
1,736
7,943
(100)
(842)
276
9,013
10,620
(1,607)
9,013
Assets under construction
Assets Under Construction at 31 December 2018 consists of capitalised project and product development costs for the
downstream Battery Anode Material (BAM) project.
Depreciation charge
Of the total depreciation charge for the financial year ended 31 December 2018, $0.5 million was charged to profit or loss
(2017: $0.3 million), and $0.3 million was capitalised to mine properties and development (2017: $0.6 million).
61
For personal use only
Leased assets
Property, plant and equipment includes equipment of $5.3 million (2017: $1.3 million) that is held through a finance lease
arrangement. The leased equipment is also encumbered as security for the corresponding lease liability of $5.6 million (2017:
$1.3 million).
SIGNIFICANT ESTIMATES AND JUDGEMENTS
Impairment of non-financial assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. The Company
considers the relationship between its market capitalisation and its book value among other factors, when reviewing for
indicators for impairment. As at 31 December 2018, the market capitalisation of the Company was below the book value of net
assets which is considered an indicator of a potential trigger for the impairment of assets.
The Group has conducted a carrying value analysis to determine the recoverable amount of the Balama Graphite Operation
and Battery Anode Material (BAM) Project Cash Generating Units (CGUs) and has not identified any impairment to the
carrying values of non-current assets as at 31 December 2018.
Balama Graphite Operation CGU
(i) Methodology
An impairment loss is recognised for a Cash Generating Unit (CGU) when the recoverable amount is less than the carrying
amount. The recoverable amount of the Balama Graphite Operation CGU was determined by assessing the fair value less
costs of disposal (FVLCOD) of the underlying assets. FVLCOD is estimated based on the net present value of estimated future
cash flows (the valuation is classified as level 3 in the fair value hierarchy due to unobservable inputs in the valuation).
Future cash flows and recoverable amount are based on a number of assumptions, including commodity price expectations,
foreign exchange rates, discount rates, reserves and resources and expectations regarding future operating performance
and capital requirements which are subject to risk and uncertainty. An adverse change in one or more of the assumptions
used to estimate fair value could result in a reduction of the CGU’s fair value. The costs of disposal have been estimated by
management based on standard industry practice.
(ii) Key Assumptions
The net present value of estimated future cash flows for the Balama Graphite Operation CGU as at 31 December 2018 is
based on significant assumptions including:
> Commodity prices – future weighted average product prices are estimated with reference to the Group’s assessment of
short and long-term prices for each key flake and fines graphite product and also based on an estimate of the flake to
fines size distribution ratio that improves to a long-term assumption over a period of 6 years. The short-term prices take
account of existing sales contracts and increases to the Group’s assessment of long-term price over a period of 6 years in
line with industry supply and demand forecasts for the lithium-ion battery industry. The long-term prices for each graphite
product are derived from a combination of management assessments of the marginal costs of current producers and of
the incentive price for future potential producers which management estimates to be consistent with the assumptions that a
market participant would be expected to use on a FVLCOD basis based on available published analyst information. Short
and long-term prices were updated for 31 December 2018 reporting purposes and are reviewed at least annually.
> Foreign exchange rates – future exchange rates for the Mozambique Metical (MZN) compared to the US Dollar are set
based on external forecasts and are kept constant in real terms after five years.
> Reserves and resources – life of mine production mainly based on ore reserves with a portion of the mineral resources
as compiled by a Competent Person in accordance with the Australian code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves of December 2012 (the JORC 2012 code). The extraction, processing and sale of mineral
resources that do not qualify for inclusion as ore reserves is only included when there is a higher degree of confidence that
they are economically recoverable. The additional evaluation required to achieve ore reserves status for mineral resources
has not yet been performed as this would involve incurring evaluation costs earlier than is required for efficient planning
and operation of the mine.
> Operating performance (production, operating costs and capital costs) – life of mine production, operating cost and
capital cost assumptions are based on the Group’s most recent life of mine plan and reflect the progressive ramp-up to
name-plate production capacity in line with industry supply and demand forecasts for the lithium-ion battery industry. In the
longer term, operating margins are assumed to remain constant. No life of mine (including an estimate of the residual value
of unprocessed lower grade stockpiles and unmined mineral resources), operating cost or capital investment improvement
or optimization benefits have been included in the estimated future cash flows. Management continues to progress various
strategic initiatives to further maximise the future free cash flows and the recoverable amount of the CGU as estimated on a
FVLCOD basis.
> Discount rate - estimated future cash flows have been discounted to their present value using a capital asset pricing model
to estimate a post-tax real discount rate that reflects a current market assessment of the time value of money and risks
specific to the CGU.
62
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only (iii) Future changes in assumptions
It is estimated that reasonably possible changes in the following key assumptions within the next financial year would have the
following approximate impact on the recoverable amount of the Balama Graphite Operation CGU as at 31 December 2018:
+/- 5% movement in the graphite price per tonner (CIF Nacala)
1 MZN movement in the USD:MZN exchange rate
+/- 2% increase in estimated operating costs per tonne
0.25% movement in the discount rate
$68 million
$ 4 million
$17 million
$10 million
They key assumptions to which the calculation of the recoverable amount is most sensitive are graphite prices and the
progressive ramp-up to name-plate production capacity noting that a delay in the ramp-up would reduce revenues and impact
unit operating costs. A reasonably possible change in circumstances may affect these key assumptions, and the fair value and
potentially result in a material adjustment to the carrying value of the Balama Graphite Operation. Action is usually taken to
respond to adverse changes in assumptions to mitigate the impact of any such change. If the carrying amount is assessed to
be impaired as a result of any such changes, the impairment charge is recognised in the profit or loss in the period in which
the changes arise.
Battery Anode Material (BAM) CGU
The Group’s Battery Anode Material (BAM) strategy is evolving as the lithium-ion battery market and associated supply
chains develop and is premised upon maintaining strategic optionality to accelerate the Group’s entry into the final BAM
product market by:
1. Rapid development of a qualification plant and production of BAM products (5kt per annum milling capacity, batch scale
purification capability) from a purpose-built facility in Vidalia, Louisiana, USA to capture first mover advantage and establish
a core ex-Asia supply chain position for BAM products
2. Progression of strategic relationship discussions; and
3. Finalisation of studies for a commercial scale BAM development
The accumulated investment of the Group’s BAM investment is presented as an Asset Under Construction and is recorded at
a cost of US$25.1 million as at 31 December 2018. There are no indicators of any adverse changes to the key assumptions
underlying the strategic investment decision which indicate that the accumulated investment in BAM will not be recovered.
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 change in ore reserves and
resources and 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.
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.
Declaration of commercial production
The Balama Graphite Operation achieved first production of saleable Flake graphite in November 2017 and saleable Fines
graphite in December 2017. During the year ended 31 December 2018, the Balama Graphite Operation remained in the
production ramp-up phase and did not achieve commercial production. Consequently, all commissioning and production
ramp-up costs incurred at Balama, net of any revenue derived from the sale of graphite, have been capitalised against project
development costs.
The major criteria considered in terms of declaring commercial production, include, but may not be limited to the following:
1. All major capital expenditures to allow the mine to operate at up to name-plate capacity have been completed.
2. The process plant, and other key areas of infrastructure have been transferred to the control of the Operations team from
the Commissioning team.
3. The plant is capable of continuously operating at or near planned throughput levels.
4. Ore head grades and process plant recoveries are consistently at or near expected levels for a continuous period.
5. Production consistently achieves grades and quality specifications at expected levels for a continuous period and has
satisfied commercial scale verification tests by key customers and end-users.
6. Operating costs are under control and within expectations.
63
For personal use only Subsequent to 31 December 2018, the Company announced the declaration of commercial production at the Balama
Graphite Operation. Effective from 1 January 2019 all revenues from the sale of graphite will be recognised as income in the
period in which they are earned, and operating costs incurred, net of inventory movements, will be expensed in the period in
which they are incurred. Depreciation and amortisation of capitalised project development and construction costs will also
commence effective from 1 January 2019.
Impairment of exploration and evaluation expenditure
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.
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.
c) Deferred tax balances
The balance comprises temporary differences attributable to:
Deferred tax assets
Financial liabilities
Taxation losses
Total deferred tax assets
Deferred tax liabilities:
Mining assets
Financial liabilities
Total deferred tax liabilities
Net deferred tax assets / (liabilities)
Movements in deferred tax balances
31 December 2018
Deferred tax assets
Financial liabilities
Taxation losses
Deferred tax liabilities
Mining assets
Financial liabilities
Net deferred tax assets
64
2018
US$’000
2017
US$’000
333
21,435
21,768
(21,316)
-
(21,316)
452
-
-
-
-
(1,415)
(1,415)
(1,415)
BALANCE AT
1 JANUARY 2018
(CHARGED) /
CREDITED TO
PROFIT OR LOSS
BALANCE AT
31 DECEMBER 2018
-
-
-
-
(1,415)
(1,415)
(1,415)
333
21,435
21,768
(21,316)
1,415
(19,901)
1,867
333
21,435
21,768
(21,316)
-
(21,316)
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
31 December 2017
Deferred tax liabilities
Financial liabilities
BALANCE AT
1 JANUARY 2017
(CHARGED) /
CREDITED TO
PROFIT OR LOSS
BALANCE AT
31 DECEMBER 2017
-
-
(1,415)
(1,415)
(1,415)
(1,415)
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 in 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 deferred tax assets include an amount of MZN 1.3 billion (US$21.4 million) which relates to carried forward tax losses of
Twigg Exploration and Mining Limitada (Twigg). The subsidiary has incurred the tax losses during the ramp-up of production
of the Balama Graphite Operation with the majority incurred during the year ended 31 December 2018. The Group has
concluded that the deferred tax assets will be recoverable based on estimated future cash flows and related forecast tax
payments for Twigg using the significant assumptions described in Note 8 – Impairment of non-current assets. Taxation losses
in Mozambique are able to be deducted from future taxable profits during one or more of the five subsequent years.
d)
Provisions
Current
Employee benefits
Other provisions
Non-current
Employee benefits
Decommissioning and restoration
Movements in decommissioning and restoration provision
Balance at beginning of the year
Additional provisions:
- Capitalised to mines under construction (Note 8a)
- Unwind of discount
Balance at end of the year
2018
US$’000
2017
US$’000
451
-
451
29
6,561
6,590
2018
US$’000
8,285
(1,795)
71
6,561
696
199
895
33
8,285
8,318
2017
US$’000
4,504
3,742
39
8,285
65
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Employee benefits
Employee benefits provisions relate to employee entitlements such as annual leave and long service leave.
Decommissioning and restoration
Decommissioning, dismantling of property, plant and equipment and restoration are normal for the mining industry, and
the majority of this expenditure will be 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), the estimated future level of inflation, and time value of money.
Significant Estimates and Judgements
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 industry 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.
The provision is the present value of estimated future expenditure to restore the current level of disturbance. 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 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.
NOTE 9. EQUITY
a)
Issued capital
Issued and fully paid ordinary shares
2018
SHARES
343,603,692
343,603,692
2017
SHARES
297,022,766
297,022,766
2018
US$’000
525,085
525,085
2017
US$’000
452,601
452,601
66
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
(i) Movements in ordinary share capital
NUMBER OF
SHARES
WEIGHTED
AVERAGE ISSUE
PRICE (A$)
31 December 2018
Balance at beginning of the year
Issue of new shares:
- Institutional placement
- Share purchase plan
- Equity-settled remuneration
Transfers from share-based payment reserve(2)
Capital raising costs
Balance at end of the year
31 December 2017
Balance at beginning of the year
Issue of new shares:
- Institutional placement
- Entitlement offer
- Exercise of options
- Equity-settled remuneration
Transfers from share-based payment reserve(2)
Capital raising costs
Balance at end of the year
297,022,766
42,152,467
4,017,010
411,449
-
-
343,603,692
263,757,392
21,729,775
10,812,001
600,000
123,598
-
-
297,022,766
A$2.23
A$2.23
-(1)
A$3.38
A$3.38
A$4.05
-(1)
TOTAL
US$’000
452,601
67,219
6,379
-
1,255
(2,369)
525,085
366,427
57,450
29,148
1,863
-
896
(3,183)
452,601
(1) The cost associated with issuance of these shares is included in the transfers share-based payments reserve line item.
(2) Represents transfers from the share-based payment reserves on issuance of shares under the Group Short Term Incentive (STI) and Long Term
Incentive (LTI) plans
(ii) 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.
(iii) 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 year and options outstanding at the end of the financial year are set out in Note 15.
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.
(iv) Share buy-back
There is no current on-market share buy-back.
(v) 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.
67
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(vi) Non-controlling interests
A contractual obligation exists to issue a non-controlling non-diluting 5% interest in Twigg Exploration and Mining
Limitada to a Mozambique Government entity. As at 31 December 2018, the issuance of shares to the Mozambique
Government entity has not occurred. A non-controlling interest in Twigg will be recognised after the issuance of shares
to the Mozambique Government entity (Refer to Note 15 (d) for further details).
b) Reserves
Foreign currency translation reserve
Share-based payments reserve
(i) Movements in reserves
Movements in each class of reserve are set out below:
2018
US$’000
(16,992)
13,983
(3,009)
FOREIGN
CURRENCY
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
US$’000
US$’000
31 December 2018
Balance at beginning of the year
Foreign currency translation
Share-based payments
Issuance of shares
Transfer of expired/ lapsed options and performance rights
Balance at end of the year
31 December 2017
Balance at beginning of the year
Foreign currency translation
Share-based payments
Issuance of shares
Exercise of options
Transfer of expired/ lapsed options and performance rights
(15,864)
(1,128)
-
-
-
(16,992)
(22,505)
6,641
-
-
-
-
Balance at end of the year
(15,864)
6,222
-
11,443
(1,255)
(2,427)
13,983
10,644
-
2,275
(298)
(598)
(5,801)
6,222
2017
US$’000
(15,864)
6,222
(9,642)
TOTAL
US$’000
(9,642)
(1,128)
11,443
(1,255)
(2,427)
(3,009)
(11,861)
6,641
2,275
(298)
(598)
(5,801)
(9,642)
(ii) Nature and purpose of reserves
Foreign currency reserve
Exchange differences arising on translation of foreign controlled entities 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.
The Group assesses the functional currency of each entity in the consolidated group when there are changes in
circumstances that could result in a change in the currency that predominantly influences the economic results of each
respective entity. With effect from 1 January 2017, the functional currency of Twigg Exploration and Mining Limitada was
changed from Mozambique Meticals (MZN) to the United States Dollar (USD) on the basis that the USD is the currency that
predominately influences the revenues, expenditures and financing activities of this entity going forward.
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of equity benefits and equity-settled contractual
obligations issued by the Company (Refer Note 15(b) for further details).
68
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
NOTE 10. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH
OUTFLOW FROM OPERATING ACTIVITIES
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation expense
Share-based payments
Write-off of certain mining assets and pre-commerical production operating costs
Unwind of discount on provisions
Gain on fixed assets disposal
Net foreign exchange (gain)/ loss
Changes in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in deferred tax assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in provisions
Increase / (decrease) in deferred tax liabilities
Net cash outflow from operating activities
2018
US$’000
(28,970)
513
11,443
7,415
71
(3)
693
748
(21,768)
(437)
372
19,901
(10,022)
2017
US$’000
(12,307)
299
2,018
-
48
(1,161)
(1,831)
(412)
655
550
1,415
(10,726)
69
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RISK
This section of the notes discusses the group’s exposure to various risk and shows how
these could affect the group’s financial position and performance.
NOTE RISK
11
Financial risk management
PAGE
71
70
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only NOTE 11. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price
risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different
methods to measure different types of risks to which it is exposed. These methods include sensitivity analysis in the case of
interest rate risk, foreign exchange risk and aging analysis for credit risk.
Financial risk management is carried out by the Audit and Risk Committee under guidelines established by the Board. The
Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Financial Liabilities
Trade and other payables
Finance leases
a) Market risk
2018
US$’000
77,149
33,217
82
110,448
15,926
5,592
21,518
2017
US$’000
111,912
23,657
91
135,660
13,923
1,276
15,199
(i)
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the United States Dollar (USD) and Mozambican Meticals (MZN).
Foreign exchange risk arises from recognised financial assets and financial liabilities denominated in a currency
that is not the entity’s functional currency and the impact of exchange rate movements on net investment in foreign
subsidiaries. The risk is measured using sensitivity analysis and cash flow forecasting.
At this time the Group does not manage its prospective foreign exchange risk with currency hedges. The Group’s
exposure to foreign currency risk at the reporting date, expressed in USD, was as follows:
Assets
- US Dollars (1)
- Mozambique Meticals
- Other
Liabilities
- US Dollars
- Mozambique Meticals
- South African Rand
- Australian Dollars
Net surplus/(deficit) position
2018
US$’000
2017
US$’000
1,059
21,735
25
22,819
443
5,350
401
283
6,477
16,342
2,414
19,965
-
22,379
2,194
3,116
495
29
5,834
16,545
(1) Relates to US Dollar denominated financial assets and liabilities held by the parent entity, Syrah Resources Limited, which has an Australian Dollar
functional currency.
71
For personal use only
Group sensitivity
Based on the financial instruments held at 31 December 2018 and the net investments in foreign subsidiaries, had the USD
strengthened/weakened by 5% against the above currencies with all other variables held constant, the impact on consolidated
results for the financial year would have changed as follow:
USD +5%
USD -5%
IMPACT ON LOSS AFTER TAX
(HIGHER)/ LOWER
IMPACT ON
EQUITY HIGHER/ (LOWER)
2018
US$'000
2017
US$'000
2018
US$'000
2017
US$'000
(779)
861
(789)
872
(19,126)
23,057
(17,569)
19,418
(i)
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 entity does not hold
any financial assets or liabilities whose fair value would be impacted by interest rates. A reasonably possible movement
in interest rates would not have a material impact on the consolidated results or equity for the year.
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 as well as amounts owing from the sale of graphite to customers.
The Group limits its counterparty credit risk on liquid funds by dealing only with reputable global banks or financial institutions.
The Group’s cash reserves are also spread amongst financial institutions to reduce concentration of credit risk.
The Group has policies in place to manage exposures to customers from the sale of graphite including credit coverage by the
issuance of letters of credit from high credit quality financial institutions and limits on credit exposures to individual customers
where there is no letter of credit by setting maximum credit exposures for individual customs and the group and not releasing
bills of lading until receipt of the amount outstanding. Credit exposure limits are approved by the Audit and Risk Committee.
At 31 December 2018 the trade receivables balance was $6.8 million (2017: NIL), with $2.7 million covered by letters of credit
and $4.0 million covered within the maximum credit exposures for individual customers and by the non-release of the bill of
lading pending the receipt of the amount owing. There was $0.1 million of trade receivables overdue at 31 December 2018
which was fully recovered in early 2019.
Liquidity risk
c)
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding and
the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and liabilities.
The Group continues to ramp-up the production of saleable graphite products from the Balama Graphite Operation but is
not yet cashflow positive. The Company may require additional financing, in addition to cash reserves, to meet operating
and capital expenditure requirements for the Balama Graphite Operation, general and administrative expenditures and BAM
project activities. The Company is debt free and considers that it has both internal and external options to manage group
liquidity including raising additional funding which may include both debt and equity sources of funding.
72
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
Maturities of Financial Liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period
as at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows.
AS AT
31 DECEMBER 2018
LESS THAN
6 MONTHS
BETWEEN
6-12
MONTHS
BETWEEN
1-2 YEARS
BETWEEN
2-5 YEARS
TOTAL
CONTRAC-
TUAL CASH
FLOWS
CARRYING
AMOUNT
LIABILITIES
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Non-derivatives
Non-interest bearing
- Trade and other payables
15,926
Interest bearing
- Finance lease liability
Total non-derivative
liabilities
745
16,671
-
745
745
-
-
15,926
15,926
1,582
1,582
4,092
7,164
5,592
4,092
23,090
21,518
AS AT
31 DECEMBER 2017
LESS THAN
6 MONTHS
BETWEEN
6-12
MONTHS
BETWEEN
1-2 YEARS
BETWEEN
2-5 YEARS
TOTAL
CONTRAC-
TUAL CASH
FLOWS
CARRYING
AMOUNT
LIABILITIES
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Non-derivatives
Non-interest bearing
- Trade and other payables
13,923
Interest bearing
- Finance lease liability
Total non-derivative
liabilities
138
14,061
-
138
138
-
276
276
-
13,923
13,923
1,002
1,554
1,276
1,002
15,477
15,199
d) Capital risk management
When managing capital, the Group’s objective is to safeguard the ability to continue as a going concern so that the Group
continues to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
Management is constantly reviewing and adjusting, where necessary, the capital structure. This involves the use of corporate
forecasting models which enable analysis of the Group’s financial position including cash flow forecasts to determine
future capital management requirements. To ensure sufficient funding, a range of assumptions are modelled to determine
sensitivities of the Group’s financial position and capital requirements under different circumstances and/ or potential
outcomes.
73
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UNRECOGNISED ITEMS
This section of the notes provides information about items that are not recognised in the
financial statements as they do not (yet) satisfy the recognition criteria.
NOTE UNRECOGNISED ITEMS
12
13
Commitments, contingencies and guarantees
Events occurring after the reporting date
PAGE
75
75
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only NOTE 12. COMMITMENTS, CONTINGENCIES AND GUARANTEES
a) Capital expenditure commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Mine properties and development
Property, plant and equipment
Total capital commitments
2018
US$’000
-
3,010
3,010
2017
US$’000
3,903
5,320
9,223
The above capital expenditure commitments are in relation to the development and construction of the Balama Graphite
Project in Mozambique and the development of the downstream Battery Anode Material (BAM) project.
b) Operating lease expenditure commitments
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
After one year but not more than five years
Minimum lease payments
2018
US$’000
5,333
24,114
29,447
2017
US$’000
316
532
848
c) Contingencies
The Group did not have any contingent assets or liabilities at the end of the current and previous financial years.
d) Guarantees
Bank guarantees have been provided by Twigg Exploration and Mining Limitada, which unconditionally and irrevocably
guarantee in favor of the Ministry of Mineral Resources and Energy (MIREME) in Mozambique, the due and punctual payment
of amounts up to a maximum amount of MZN238 million (US$3.7 million) as at 31 December 2018 (2017: US$2.5 million) in
relation to the rehabilitation or removal of project infrastructure as per the mine closure plan for the Balama Project.
A parent company guarantee is required to be provided by Syrah Resources Limited in favour of the Government of
Mozambique, which unconditionally and irrevocably guarantees amounts up to a maximum of US$22.5 million to cover any
loss or damage or other costs arising out of, or associated with, a breach of the Mining Concession held by Twigg Exploration
and Mining Limitada. This guarantee is required to remain in place for a period of two years after the signing of the Mining
Agreement.
NOTE 13. EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 14 January 2019, the Company announced the declaration of commercial production at the Balama Graphite Operation
with effect from 1 January 2019 following a review of its operating metrics against the criteria discussed in Note 8 of these
financial statements. Effective from 1 January 2019 all revenues from the sale of graphite will be recognised as income in the
period in which they are earned, and operating costs incurred, net of inventory movements, will be expensed in the period in
which they are incurred. Depreciation and amortisation of capitalised project development and construction costs will also
commence effective from 1 January 2019.
No other event has occurred subsequent to 31 December 2018 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.
75
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OTHER INFORMATION
This section of the notes provides information about items that are not recognised in the
financial statements as they do not (yet) satisfy the recognition criteria.
NOTE OTHER INFORMATION
14
15
16
17
18
19
20
21
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Parent entity financial statements
Subsidiaries
Deed of cross guarantee
Summary of significant accounting policies
PAGE
77
78
81
81
82
83
84
86
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only NOTE 14. 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 19.
c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other benefits
Share-based payments
2018
US$
1,985,980
134,396
47,328
2,600,635
4,768,339
2017
US$
2,412,899
113,992
367,279
1,418,787
4,312,957
Detailed remuneration disclosures are provided in the Remuneration Report on pages 22 to 44 of the Annual Report.
Transactions with related parties
d)
Transactions with related parties are set out below:
2018
US$
2017
US$
Purchases of goods and services
Technology and Product Development services provided by Cadenza Innovation Inc.(1)
1,990,282
1,501,800
Legal services provided by Sal & Caldeira Advogados, Lda(2)
Consultancy services provided by Proman Consulting Engineers Pty Ltd (3)
125,950
-
384,045
26,866
2,116,232
1,912,711
(1) C Lampe-Onnerud was a Non-Executive Director of the Company until 25 March 2019 and is also Founder and Chief Executive Officer of
Cadenza Innovation Inc. During the year, the Company had an exclusive research and development agreement with Cadenza Innovation Inc. to fuel
advancements in graphite anode technology for use in lithium-ion-based energy storage and support the BAM processing plant in Louisiana.
(2) 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.
(3) Represents consultancy services provided to the Company by R Brans who was a Non-Executive Director of the Company until 31 December 2017.
e) Outstanding balances arising from purchases of goods and services
Trade and other payables
Related parties
2018
US$
1,000
1,000
2017
US$
26,275
26,275
77
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NOTE 15. SHARE-BASED PAYMENTS
Types of share based payment plans
a)
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 align their interests with those of shareholders by linking rewards to the long term success of the
Company and its financial performance.
(i)
(ii)
Equity Incentive Plan (EIP)
The EIP was established and approved by shareholders at an Annual General Meeting held on 17 May 2018, (“Equity
Incentive Plan”) and applies to all shares, performance rights and options offered for grant from 17 May 2018 onwards.
Under the EIP, the Company may 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 the Board of Directors. Any performance rights, options and shares granted under the EIP may be
subject to such vesting conditions (if any) as determined by the Board of Directors.
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. No further options, performance rights or shares will
be issued under this plan.
(iii) 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.
Measurement
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 the
Black-Scholes model considering the terms and conditions upon which the instruments were granted and based upon the
assumptions detailed above. 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.
b) Summary and movement of options on issue
The table below summarises the number, weighted average exercise prices and movements in Options on issue during the
financial year:
2018
2017
WEIGHTED
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
A$4.70
A$4.37
-
A$4.78
A$4.62
A$4.05
NUMBER OF
OPTIONS
6,750,000
600,000
-
(2,550,000)
4,800,000
4,200,000
WEIGHTED
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
A$5.16
A$4.26
A$4.05
A$5.40
A$4.70
A$5.03
NUMBER OF
OPTIONS
8,675,000
2,900,000
(600,000)
(4,225,000)
6,750,000
3,850,000
Balance at beginning of the year
Granted during the year
Exercised during the year (1)
Expired during the year
Balance at end of the year
Vested and exercisable at end of year
(1) There were no options exercised during the year ended 31 December 2018. The weighted average share price at the date of exercise of options
during the year ended 31 December 2017 was A$4.39.
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.
78
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
The outstanding balance of options as at 31 December 2018 is represented by:
Options issued as part of the EIP
2018
2017
NUMBER OF
OPTIONS
600,000
EXERCISE PRICE
RANGE
$4.37
NUMBER OF
OPTIONS
-
EXERCISE PRICE
RANGE
-
Options issued as part of the LTIP
3,300,000
A$3.85 to A$5.04
4,300,000
A$3.85 to A$5.09
Options issued as part of the SOP
900,000
A$5.38 to A$6.23
2,450,000
A$4.05 to A$6.23
Share options outstanding at the end of the financial year have the following expiry dates and exercise prices:
GRANT DATE
19-May-14
EXPIRY DATE
19-May-19
EXERCISE PRICE
A$5.38
02-Oct-14
28-Jan-15
09-Jun-15
26-Oct-15
01-Dec-15
24-May-16
01-Mar-17
26-May-17
20-Oct-17
20-Oct-17
20-Oct-17
25-Jun-18
02-Oct-19
28-Jan-18
09-Jun-18
26-Oct-20
01-Dec-18
24-May-19
01-Mar-20
26-May-20
20-Oct-20
20-Oct-20
20-Oct-20
25-Jun-21
A$6.23
A$4.05
A$4.96
A$4.35
A$4.68
A$5.04
A$4.11
A$4.30
A$4.13
A$4.67
A$3.85
A$4.37
2018
NUMBER
500,000
400,000
-
-
-
-
400,000
600,000
1,000,000
300,000
600,000
400,000
600,000
2017
NUMBER
500,000
800,000
600,000
300,000
250,000
1,000,000
400,000
600,000
1,000,000
300,000
600,000
400,000
-
TOTAL Options
4,800,000
6,750,000
Weighted average remaining contractual life of options outstanding at the
end of the year
1.37 years
1.75 years
Fair value of options granted
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date are as follows:
GRANT DATE EXPIRY DATE
25-Jun-18
25-Jun-21
SHARE
PRICE AT
GRANT DATE
A$2.73
EXERCISE
PRICE
A$4.37
EXPECTED
VOLATILITY(1)
47.10%
DIVIDEND
YIELD
-
RISK-FREE
INTEREST
RATE
2.09%
FAIR VALUE
AT GRANT
DATE
A$0.52
(1) Expected volatility was calculated based on the historical market share price for the 12-month period prior to the Grant Date.
79
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Summary and movement of performance rights on issue
c)
The table below summarises the number and movements in Performance Rights issued during the financial year:
Balance at the beginning of the year
Granted during the year
Exercised during the period
Lapsed during the year
Forfeited during the year
Balance at the end of the year
At 31 December 2018:
- Vested
- Unvested
Performance testing dates for unvested Performance Rights above are as follows:
- 31 December 2018
- 31 December 2019
- 31 December 2020
2018
NUMBER
710,783
632,716
(78,255)
(175,213)
-
1,090,031
-
1,090,031
1,090,031
265,390
395,567
429,074
2017
NUMBER
324,754
600,543
-
-
(214,514)
710,783
144,170
566,613
710,783
136,437
430,176
-
1,090,031
566,613
Performance rights on issue as part of the LTIP have a nil exercise price.
d) Non-controlling interests
A contractual obligation exists to issue a non-controlling non-diluting 5% interest in Twigg Exploration and Mining Limitada to a
Mozambique Government entity. As at 31 December 2018, the issuance of shares to the Mozambique Government entity has
not occurred however an expense has been recognised in the current year with a corresponding increase in the share-based
payment reserve to reflect the fair value of the equity instruments to be granted. The fair value has been determined based
on the net present value of asset level estimated future cash flows, using the significant assumptions described in Note 8 –
Impairment of non-current assets, and discounted for the lack of control and lack of marketability.
Expenses arising from share-based payment transactions
e)
Total expenses arising from share-based payment transactions recognised during the financial year were as follows:
Recognised in profit and loss:
Employee benefits
- Options issued under the LTIP and SOP
- Performance rights issued under the LTIP
- Equity settled remuneration
Non-controlling interests
Capitalised as mining assets
80
2018
2017
US$’000
US$’000
1,380
1,121
1,795
7,201
11,497
(54)
11,443
1,665
310
43
-
2,018
257
2,275
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
NOTE 16. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non- related audit firms.
Assurance services:
PwC Australian firm
Network firms of PwC Australian firm
Total remuneration for audit services
Non-assurance services:
Tax compliance services
Tax consulting services
Other consulting services
Total remuneration for non-assurance services
Total remuneration paid to PricewaterhouseCoopers
NOTE 17. EARNINGS PER SHARE
Earnings/ (losses) per share
Basic loss per share
Diluted loss per share
a) Reconciliations of earnings used in calculating earnings per share
2018
US$’000
2017
US$’000
224
93
317
47
15
-
62
379
150
94
244
29
66
22
117
361
2018
US Cents
2017
US Cents
(9.30)
(9.30)
(4.51)
(4.51)
2018
US$’000
2017
US$’000
Basic loss
Total profit/(loss) attributable to the ordinary equity holders of the Company
used in calculating basic loss per share
(28,970)
(12,307)
Diluted loss
Total profit/(loss) attributable to the ordinary equity holders of the Company
used in calculating diluted loss per share
(28,970)
(12,307)
b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic loss per share
Weighted average number of ordinary shares used as the denominator in
calculating diluted loss per share
2018
NUMBER
2017
NUMBER
311,589,011
273,133,506
311,589,011
273,133,506
81
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Options
The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the
purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 “Earnings per Share”. The
rights to options are non-dilutive as the group is loss making.
NOTE 18. PARENT ENTITY FINANCIAL INFORMATION
Summary financial information
a)
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Reserves
Accumulated losses
Total equity
Loss after income tax for the year
Other comprehensive income
Total comprehensive income for the year
2018
US$’000
21,950
442,660
1,141
1,170
525,085
(27,175)
(56,421)
441,489
(11,207)
(40,190)
(51,397)
2017
US$’000
22,625
421,394
3,947
3,980
452,601
12,454
(47,641)
417,414
(12,072)
23,864
11,792
b) Contingent liabilities of the parent entity
The parent entity has no contingent liabilities as at 31 December 2018 and 31 December 2017.
c) Guarantees of the parent entity
A parent company guarantee is required to be provided by Syrah Resources Limited in favour of the Government of
Mozambique, which unconditionally and irrevocably guarantees amounts up to a maximum of US$22.5 million to cover any
loss or damage or other costs arising out of, or associated with, a breach of the Mining Concession held by Twigg Exploration
and Mining Limitada. This guarantee is required to remain in place for a period of two years after the signing of the Mining
Agreement.
82
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
NOTE 19. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 21.
NAME
Jacana Resources Pty Ltd(1)
PRINCIPAL PLACE OF BUSINESS /
COUNTRY OF INCORPORATION
Australia
Syrah Resources (KSA) Pty Ltd
Australia
Twigg Exploration and Mining, Limitada
Mozambique
Jacana Resources (Zambia) Ltd
Zambia
Syrah Resources Saudi Arabia LLC
Saudi Arabia
Syrah Resources Group Holdings Pty Ltd
Australia
Syrah Resources and Trading DMCC
United Arab Emirates
Syrah Global DMCC
United Arab Emirates
Syrah US Holdings Pty Ltd(3)
Australia
Syrah Technologies LLC(4)
United States of America
PERCENTAGE OF EQUITY
INTEREST HELD BY THE GROUP
2018 (%)
100
100
100(2)
100
100
100
100
100
100
100
2017 (%)
100
100
100
100
100
100
100
100
100
100
(1) Jacana Resources Pty Ltd (formerly Jacana Resources Limited) changed from company limited by shares to proprietary limited company effective
from 6 April 2018.
(2) Twigg Exploration and Mining Limitada (Twigg) entered into a Mining Agreement with the Ministry of Mineral Resources and Energy of the Republic
of Mozambique creating a contractual obligation to provide a 5% non-controlling non-diluting interest in Twigg to a Mozambique Government entity.
As at 31 December 2018, the issuance of shares to the Mozambique Government entity had not occurred. A non-controlling interest in Twigg will
be recognised after the issuance of shares to the Mozambique Government entity.
(3) Syrah US Holdings Pty Ltd was incorporated on 15 February 2017.
(4) Syrah Technologies LLC was incorporated on 23 February 2017.
83
For personal use only NOTE 20. DEED OF CROSS GUARANTEE
The following entities are party to a deed of cross guarantee (Deed), as defined in ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785 (ASIC Instrument):
Syrah Resources Limited
Jacana Resources Proprietary Limited (formerly Jacana Resources Limited)
The above companies represent a ‘Closed Group’ for the purposes of the ASIC Instrument, and as there are no other parties
to the Deed that are controlled by Syrah Resources Limited, they also represent the ‘Extended Closed Group’. The effect of the
Deed is that each party to the Deed guarantees the debts of the other entities in the Closed Group in the event of winding up.
Pursuant to the ASIC Instrument, the eligible wholly-owned entities within the Closed Group have been relieved from the
requirement to prepare financial statements and a directors’ report under the ASIC Instrument issued by the Australian Securities
and Investments Commission (ASIC).
a) Consolidated statement of comprehensive income and summary of movements in
consolidated accumulated losses
Set out below is a consolidated statement of comprehensive income and a summary of movements in consolidated accumulated
losses for the current or previous financial year for the ‘Closed Group’.
2018
US$’000
194
-
(8,209)
(1,064)
(87)
(97)
(1,944)
(11,207)
-
(11,207)
(39,320)
(50,527)
(48,659)
(11,207)
2,427
(57,439)
2017
US$’000
289
3
(6,495)
(2,937)
(147)
(463)
(2,322)
(12,072)
-
(12,072)
23,203
11,131
(42,388)
(12,072)
5,801
(48,659)
Consolidated statement of comprehensive income
Revenue from continuing operations
Other income
Expenses:
Employee benefits expense
Legal and consulting expense
Depreciation and amortisation expense
Foreign exchange loss - net
Other expenses
Loss for the year before income tax expense
Income tax expense
Loss after income tax expense for the year
Other comprehensive income
Exchange differences on translation of foreign subsidiaries
Total comprehensive income for the year
Summary of movements in consolidated accumulated losses
Balance at beginning of the year
Loss after income tax expense for the year
Transfer from share-based payment reserve
Balance at end of the year
84
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only
b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at the end of the current and previous financial year for the
‘Closed Group’.
Current assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Total current assets
Non-current assets
Mine properties and development
Exploration and evaluation
Property, plant and equipment
Investments in subsidiaries
Intangibles
Other receivables
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
2018
US$’000
13,552
124
82
13,758
16,793
53
2,167
411,853
21
283
2017
US$’000
13,218
263
91
13,572
17,331
-
2,029
389,825
39
-
431,170
409,224
444,928
422,796
929
212
1,141
29
29
3,459
488
3,947
33
33
1,170
3,980
443,758
418,816
525,085
(23,888)
(57,439)
443,758
452,601
14,874
(48,659)
418,816
85
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NOTE 21. 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’.
Principles of consolidation
a)
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Syrah Resources Limited
(‘company’ or ‘parent entity’) as at 31 December 2018 and the results of all subsidiaries for the financial year 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 19.
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.
b) 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 2 for further information on
segment descriptions.
c)
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in United States Dollars (USD).
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.
86
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only 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.
d) 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:
Sales of Graphite
The Group recognises revenue related to the sale of graphite when control of the goods passes to customers and the amount
of revenue can be measured reliably. The majority of the Group’s sales arrangements specify that control passes when the
product is transferred to the vessel on which the product will be shipped. Revenues are generally recognised on the bill of
lading date. Revenue is recognised and measured at the fair value of the consideration received or receivable, net of agency
commissions. Sales arrangements allow for an adjustment to the sales price based on a survey of the goods by the customer
(an assay for mineral content and particle size distribution). If necessary, adjustments to sales revenues arising from a survey
of the goods by the customer are accounted for in the period in which the Group agrees to such adjustments.
The Group sells a significant proportion of its products on CFR and CIF Incoterms. This means that the Group is responsible
for providing shipping services after the date at which control of the goods passes to the customer at the loading port. The
Group treats freight, where applicable, as a separate performance obligation and therefore recognises the revenue and
associated costs over time.
Revenue related to the sale of graphite during the commissioning and production ramp-up phase, prior to the declaration of
commercial production is treated as pre-commercial production income and recognised as a credit against capitalised project
development costs (refer to note 8).
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
e)
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.
87
For personal use only However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income
tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable 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.
Leases
f)
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.
g) 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 the settlement of the
liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
h) 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 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.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Trade and other receivables
i)
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
j)
Inventories are valued at the lower of weighted average cost and estimated net realizable value. Cost is determined primarily
on the basis of weighted average costs and comprises of the purchase price of direct materials and the costs of production
which include:
> labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore;
> depreciation of mining assets, property, plant and equipment used in the extraction and processing of ore; and
> production overheads directly attributable to the extraction and processing of ore.
Stockpiles represent ore that has been extracted and is available for further processing and work-in progress includes partly
processed material. If there is significant uncertainty as to when the stockpiled ore will be processed it is expensed as
mined. If the ore will not be processed within 12 months after the balance sheet date it is included within non-current assets.
Quantities of stockpiled ore are assessed primarily through surveys and assays.
The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale, including royalties.
The cost of inventories (ore stocks, consumable stores and finished products) during the commissioning and production ramp-
up phase, prior to the declaration of commercial production is included in mining assets (refer note 8).
Property, plant and equipment
k)
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
3 to 5 years
The assets residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each financial
period end.
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.
Intangible assets
l)
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 5 years.
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For personal use only
m) 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 relate on a units of 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 8.
n) 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; and
> 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 8).
Impairment of assets
o)
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.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only 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.
p) 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.
q)
Investments and other financial assets
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.
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For personal use only Trade and other payables
r)
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.
Provisions
s)
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.
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.
t)
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.
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SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only 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 the 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.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying the 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.
u) 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.
Fair value measurement
v)
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.
93
For personal use only w) 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.
x) 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.
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.
y) Comparative figures
Where necessary, comparative figures have been adjusted to conform to changes in the presentation in the current period.
z) Rounding of amounts
The amounts contained in the financial report have been rounded off to the nearest $'000 (where rounding is applicable)
under the relief available to the Company under ASIC Corporations (Rounding in Financial Reports) Instrument 2016/191. The
Company is an entity to which the Class Order applies.
aa) New accounting standards and interpretations
New and amended standards adopted by the group The Group has applied the following standards and amendments for the
first time for their annual reporting period commencing 1 January 2018:
> AASB 9 Financial Instruments
> AASB 15 Revenue from Contracts with Customers
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2018
reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new
standards and interpretations is set out below.
AASB16 Leases (effective from 1 January 2019)
Accounting Standard AASB 16 Leases replaces AASB 117 Leases and Interpretation 4 Determining whether an Arrangement
contains a Lease. The new standard sets out a comprehensive model for the identification of lease arrangements and their
treatment in the financial statements of both lessees and lessors. It applies a control model for the identification of leases,
distinguishing between leases and service contracts on the basis of whether there is an identified asset controlled by the
lessee. The new standard removes the distinction between operating and finance leases. Instead, all leases other than
short term or low value asset leases are recognised on the balance sheet as a right of use asset representing the lessee's
entitlement to the benefits of the identified asset over the lease term, and a lease liability representing the lessee's obligation
to make lease payments in future. For leases currently classified and treated under AASB 117 as operating leases, lease
expenses will be replaced with amortisation of the right of use asset and interest expense on the lease liability.
The Group has evaluated the impact of the new accounting standard and determined that the impact on the balance sheet
as at 31 December 2018 is an increase in lease related assets and an increase in lease liabilities of $7.4 million. The impact
on the statement of comprehensive income is not expected to be material. The Group has implemented the new standard
effective from 1 January 2019.
94
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 47 to 94 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 2018 and of its performance
for the year ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable, 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 20 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 20.
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.
Shaun Verner
Managing Director and Chief Executive Officer
Melbourne, Australia
29 March 2019
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For personal use only AUDITOR’S REPORT
Independent auditor’s report
To the members of Syrah Resources Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Syrah Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
96
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
97
For personal use only The Group’s operations consist principally of the Balama Graphite Project located in Mozambique, as
well as the downstream strategy to produce spherical graphite (Battery Anode Material Project).
Materiality
Audit scope
Key audit matters
•
•
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
− Liquidity and capital
management
− Carrying value of assets
These are further described in
the Key audit matters section of
our report.
•
For the purpose of our audit
we used overall Group
materiality of US$4.78 million,
which represents
approximately 1% of the
Group’s total assets.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose the Group's total
assets because, in our view, it
is the benchmark against
which the performance of the
Group is most commonly
measured, given the stage of
development of the Balama
Project and that commercial
production had not yet been
declared at balance date.
• We utilised a 1% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable asset-related
thresholds.
•
•
Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
The Australian engagement
team directed the involvement
of the Mozambique component
audit team, which performed
an audit of the financial
information of Twigg
Exploration & Mining
Limitada given its financial
significance to the Group.
Their procedures included a
visit to the Balama Graphite
Operation.
• We, the Australian Group
engagement team, determined
and undertook an appropriate
level of involvement in the
work performed by the
Mozambique component audit
team, in order for us to be
satisfied that sufficient audit
evidence had been obtained to
support our opinion on the
Group financial report as a
whole. We had regular
communication with the
Mozambique component audit
team throughout the year and
performed a review of their
audit working papers. .
98
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Liquidity and capital management
(Refer to note 11 (C))
To support its basis of preparation of the financial
statements, the Group has prepared a forecast of its
cash flows, which includes a number of assumptions
about the ramp-up of the Balama Graphite Operation
such as production volume, mix and grades, expected
revenues from production, and operating and capital
costs.
There are risks associated with the ramp-up, cash flow
conservation and the ability to obtain a debt facility or
alternative sources of financing. As a result, our
assessment of liquidity and capital management as it
relates to the basis of preparation of the financial
statements is considered a key audit matter.
Carrying value of assets
(Refer to note 8 (B))
Syrah’s Balama Graphite Operation in Mozambique
remained in the development phase throughout the
year ended 31 December 2018. During the year, the
Group capitalised costs of $57.7 million which
increased the carrying value of the mining assets at 31
December 2018 to $331.2 million.
During the year ended 31 December 2018, the Group
prepared a discounted cashflow model (the model) to
determine the recoverable amount of the Balama
Graphite Operation CGU, which requires a number of
assumptions as described in Note 8 (B).
Given the financial significance of the amounts
capitalised and the amount of judgement and
estimation uncertainty involved this has been identified
●
We assessed the main assumptions in the Group’s cash
flow forecast for at least 12 months from the date of
signing the auditor’s report, by performing the
following procedures, amongst others:
• We assessed the reasonableness of the commodity
prices used in the forecast against available information
• We evaluated the risks surrounding the continued
ramp-up of production and timing and volume of sales
forecasts including the Group’s view of future supply
and demand. We also read a sample of the contracts
currently in place with customers
• We compared a sample of significant operational and
capital cash outflows in the model to the budget
approved by the Board, and where appropriate to
relevant contracts
• We compared actual revenue and cost outcomes for
the prior period and the current year to date to Group
forecasts to assess the historical accuracy of the
budgeting processes
We evaluated the Group’s potential opportunities for
cash conservation as well as options for raising
additional funds.
We also considered the appropriateness of the liquidity
risk disclosures included within the financial
statements, in light of the requirements of Australian
Accounting Standards.
We evaluated the cash flow forecasts in the model and
developed our understanding of the process by which
they were prepared. In order to assess the Group’s
historical ability to make reliable forecasts, we
compared current year (2018) actual results with the
figures included in the original budget.
We assessed:
●
The total production profile and the mix between
flake and fines production in the model by
comparing them to the latest published mineral
reserves and resources statement and other
technical reports.
The reasonableness of the continuing production
ramp up schedule and discussed with operational
99
For personal use only Key audit matter
as a key audit matter.
How our audit addressed the key audit matter
●
management as part of our evaluation of the risks
involved;
The short term graphite price in the model by
comparing it to current prices being achieved by
the Group and by developing an understanding of
and evaluating the transition path between the
short and long term price;
The long term graphite price in the model by
developing an understanding of and evaluating
the Group’s supply/demand analysis and also by
comparing it to industry and broker forecasts;
● Whether the operating and capital expenditure
●
●
●
●
forecasts were consistent with the latest approved
Life of Mine plan and budget;
The discount rate used in the model by assessing
the cost of capital for the Group, including
involving PwC valuations experts, and comparing
it to market data and industry research;
The logical integrity and mathematical accuracy of
the model’s calculations
The adequacy of the disclosures made in note 8
(B), including those regarding the key
estimates/assumptions and sensitivities to
changes in such assumptions, in light of the
requirements of Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2018, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
100
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 22 to 44 of the directors’ report for the
year ended 31 December 2018.
In our opinion, the remuneration report of Syrah Resources Limited for the year ended 31 December
2018 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with Australian Auditing Standards.
PricewaterhouseCoopers
John O’Donoghue
Partner
29 March 2019
101
For personal use only 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 21 March 2018 except where otherwise indicated.
EQUITY SECURITY HOLDERS
TOP 20 LARGEST QUOTED SECURITY HOLDERS AS AT 15 MARCH 2019
The names of the twenty largest security holders of quoted equity securities are listed below:
RANK NAME
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
COPPER STRIKE
CS FOURTH NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMS (NZ) LTD
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
12. WARBONT NOMINEES PTY LTD
13. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
14.
15.
16.
17.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BNP PARIBAS NOMINEES PTY LTD
VICTORIA FAIRBANK PROPRIETARY LIMITED
GLENALTA PTY LTD
18. MR DAVID ALLEN PARKER + MRS HELEN THIRZA JANE PARKER
19.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
20. MR ALLAN RUSSELL GRACO + MRS CAROLE JOY GRACO
UNITS
102,062,702
53,276,618
30,835,715
7,552,620
7,182,235
6,815,842
5,168,905
3,336,545
2,748,102
2,354,465
1,950,890
1,228,289
1,206,155
1,190,570
1,185,887
1,184,458
1,000,000
1,000,000
983,402
944,800
% OF UNITS
29.70
15.50
8.97
2.20
2.09
1.98
1.50
0.97
0.80
0.69
0.57
0.36
0.35
0.35
0.35
0.34
0.29
0.29
0.29
0.27
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
Total Remaining Holders Balance
233,208,200
110,419,972
67.87
32.13
UNQUOTED EQUITY SECURITIES AS AT 22 MARCH 2019
Options over ordinary shares
Performance rights over ordinary shares
NUMBER ON
ISSUE
4,400,000
2,000,525
NUMBER OF
HOLDERS
8
24
102
SYRAH RESOURCES > ANNUAL REPORT 2018For personal use only SUBSTANTIAL HOLDERS
An extract of the Company's Register of Substantial Shareholders as at 19 March 2019 is set out below:
RANK
1
NAME
AustralianSuper
2
3
Regal Funds Management Pty Limited
UBS Group AG
UNITS
51,791,561
32,266,647
27,364,999
% OF UNITS
15.07
9.39
7.96
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
TOTAL HOLDERS
2,292
3,621
1,430
1,929
182
UNITS
1,428,962
9,622,500
11,080,046
52,658,416
268,838,248
% OF ISSUED CAPITAL
0.42
2.80
3.22
15.32
78.24
0.00
100.00
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.
TENEMENT SCHEDULE AS AT 19 MARCH 2019
PROJECT
Balama
Balama(1)
Balama(1)
LICENSE NUMBER
6432C
LICENSE TYPE
Mining Concession
5684L
6174L
Exploration
Exploration
COUNTRY
Mozambique
Mozambique
Mozambique
INTEREST OWNED
100%
100%
100%
(1) Syrah has entered into a Tenement Sale Agreement (TSA) for the acquisition of a tenement (Tenement) in Balama currently held on trust by 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. Due to an administrative decision to use district boundaries to define mineral titles, Exploration
Licence 5684L was split into two, with one half retaining the original licence number and the other half being designated Exploration Licence
6174L. There was no change to the total value of the contingent consideration because of this administrative decision. Exploration Licence 5684L is
in the process of renewal.
103
For personal use only Level 28, 360 Collins Street
Melbourne VIC 3000 Australia
p: +61 3 9670 7264
e: enquiries@syrahresources.com.au
www.syrahresources.com.au
106
SYRAH RESOURCES > ANNUAL REPORT 2018
For personal use only