Level 28, 360 Collins Street
Melbourne VIC 3000 Australia
p: +61 3 9670 7264
e: enquiries@syrahresources.com.au
www.syrahresources.com.au
ANNUAL
REPORT
2020
CORPORATE DIRECTORY
DIRECTORS
SHARE REGISTRY
James Askew Non-Executive Chairman
Shaun Verner Managing Director and Chief Executive Officer
José Manuel Caldeira Non-Executive Director
Lisa Bahash Non-Executive Director
Sara Watts Non-Executive Director
John Beevers Non-Executive Director
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
Melanie Leydin
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 Andar
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)
CONTENTS
COMPANY PROFILE
2020 HIGHLIGHTS
CHAIRMAN'S LETTER
MANAGING DIRECTOR AND CEO’S LETTER
DIRECTORS’ REPORT
REMUNERATION REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
AUDITOR’S REPORT
ADDITIONAL ASX INFORMATION
PAGE
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COMPANY PROFILE
2020 HIGHLIGHTS
OUR VISION
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.
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
> Strong health and safety record with
Total Recordable Injury Frequency Rate
("TRIFR") of 0.7 as at end of 2020 and
focus on high internal standards of
COVID-19 protocols and compliance with
government directives
> Progression of strategy to become the
preeminent vertically integrated supplier
of natural graphite Active Anode Material
(“AAM”) to ex-Asia markets, with:
> Bankable Feasibility Study (“BFS”)
confirming robust economics for large-
scale AAM production from Syrah’s
facility in Vidalia, Louisiana, USA
(“Vidalia”)
> Active Anode Material (“AAM”) produced
using Vidalia precursor
> Ongoing qualification of Vidalia product
with potential downstream customers
> Integration with world’s largest natural
graphite mine at Balama Graphite
Operation (“Balama”)
> Production at Balama Graphite Operation
(“Balama”) suspended during 2020 due to
impacts of COVID-19 (travel restrictions,
lower demand). Positioned to preserve
cash during 2020 while retaining operating
and marketing capability to promptly
restart production, as announced post year
end
> Balance sheet strengthened through 2020
and following year-end via institutional and
retail equity capital raisings, and option
to issue 2 Convertible Notes to raise total
gross proceeds of up to A$130 million
1
CHAIRMAN'S LETTER
In my 2019 Chairman’s letter I outlined the focus areas for
2020 of ensuring adaptability of Balama to market conditions,
and the ongoing development of our downstream business.
With 2020 providing ongoing COVID-19 related disruption, it
is pleasing to note that progress was delivered in both areas
of the business despite challenging circumstances.
At Balama, the asset’s adaptability to market conditions
was tested to the limit, with COVID-19 compounding what
was already challenged market conditions going into 2020.
Syrah suspended production at Balama in March 2020
due to impacts of COVID-19, specifically: travel restrictions
limiting the mobility of the Balama workforce; and weak end
user demand due to lockdowns, mobility restrictions and
economic uncertainty negatively impacting Electric Vehicle
("EV") sales.
We maintained readiness and periodically assessed a
potential restart of production at Balama with consideration
of travel restrictions and the evolving natural graphite
market conditions through the year. With an improved
market balance observed in late 2020 and into 2021, we
were pleased to announce a Balama restart subsequent to
year-end in February 2021. Balama was well positioned to
preserve cash during its temporary production suspension
whilst also retaining operating and marketing capability to
recommence production promptly upon a restart decision.
At Vidalia, significant progress was made in the ongoing
development of our downstream business in 2020, with two
major milestones achieved. Firstly, a Bankable Feasibility
Study ("BFS") was completed that confirmed robust
economics for large-scale Active Anode Material ("AAM")
production from Syrah’s facility in Vidalia. Secondly, first
production of finished AAM was achieved via toll treatment of
Vidalia precursor. These two milestones position the company
strongly for ongoing commercial and technical engagement
with potential customers and other stakeholders to progress
our strategy of becoming the pre-eminent vertically
integrated producer of natural graphite AAM to supply ex-
Asia markets.
Despite a year of challenging market conditions and
significant business re-structuring, Syrah continued
its positive experience operating in Mozambique. The
company has not wavered in its commitment to be a
constructive corporate citizen in Mozambique and to the
host communities, with commitment to ongoing community
projects under the Livelihood Development Program and
best practice Environmental, Social and Governance (“ESG”)
practices maintained during the period of suspended
production at Balama.
An equity issue during the year strengthens Syrah’s balance
sheet and positions the Company to progress towards a final
investment decision for expansion of production capacity at
Vidalia during H2 2021 and manage a restart at Balama in an
orderly manner.
I was pleased to welcome John Beevers to your Board
during 2020. John brings 30 years’ experience in the
Mining Resources and Services industries and extensive
functional, operational and leadership experience at both the
General Management and Executive Level. In other Board
movements, Sam Riggall stood down during the year to focus
on other commitments. I’d like to thank Sam for his significant
contribution to the Company as Syrah matured from project
developer to a significant participant in the global graphite
market.
The Board recognise that 2020 was a turbulent year for Syrah
investors and we thank you for your continued support. We
believe the business is well positioned and are confident
we have the management team to capitalise on improved
market conditions through 2021. The company’s focus for the
year ahead remains unchanged, as we continue to further
strengthen Balama’s position in the global flake graphite
market and progress our vision to become the preeminent
vertically integrated supplier of natural graphite AAM to ex-
Asia markets through the development of the Vidalia AAM
operation.
Jim Askew
Chairman
2
SYRAH RESOURCES > ANNUAL REPORT 2020 MANAGING DIRECTOR AND CEO’S LETTER
The team at Syrah will continue to work relentlessly to achieve
our strategic objectives, including the ongoing establishment
of Balama’s position in the global flake graphite market
and progress towards our vision to become the preeminent
vertically integrated supplier of natural graphite AAM to ex-
Asia markets. Syrah’s progress compared to our competitors
with regards to our sunk asset base and our marketing and
operating capability, uniquely positions Syrah to benefit
from USA and EU focus on long-term critical battery
mineral supply. The company will continue commercial and
government engagement to grow shareholder value through
Syrah’s unique position in this rapidly developing global
market.
Shaun Verner
Managing Director and Chief Executive Officer
Syrah’s high standards of international Health, Safety,
Environmental and Community (“HSEC”) standards that
are embedded across our operational, marketing, and
corporate activities served us well through 2020 as we
navigated a challenging year.
Early in the year as the COVID-19 situation emerged in
China, Syrah’s Crisis and Emergency Management Teams
(“C&EMT”) were activated in a pre-emptive manner to
assess, manage and where possible, minimise the impacts
on employees, the business and key stakeholders. By the
time the World Health Organisation subsequently declared
COVID-19 a global pandemic on 11 March 2020, the
Company had implemented strict protocols and mitigation
measures across the Group.
The health, wellbeing and safety of employees and
contractors remains Syrah’s highest priority and the
Company is committed to make decisions in conjunction
with Government advice at a minimum, and further
where we can, in order to mitigate the risk of COVID-19
transmission to our workplaces or the communities in which
we operate.
The Company remained committed to key local
sustainability and community initiatives in Mozambique
through 2020 and our experience operating in Mozambique
continues to be one of positive engagement with key
stakeholders. Our Environmental Monitoring Program
continued through 2020 in-line with over 200 licence
conditions with zero significant environmental incidents to
date, contributing to the successful renewal of our 5-year
Environmental Licence during the year.
Commencement of product qualification from Vidalia and
completion of the BFS during 2020 significantly progressed
the Company’s strategy to become a vertically integrated
producer of natural graphite AAM to service ex-Asia
markets, which are currently 100% reliant on China for
their battery anode supply chains. The progress at Vidalia
and its vertical integration with Balama presents a unique
value proposition to Governments, auto makers and cell
manufacturers. Specifically: scale; independence and
localisation with USA battery production; critical mineral
security; and Environmental, Social and Governance
(“ESG”) auditability back to the graphite source.
The underlying thematic of electrification of the transport
sector via lithium ion powered EVs continues to gain
momentum. Government and commercial recognition
of the strategic importance of battery raw materials
supply – whether that be graphite, lithium, nickel, or cobalt
precursors – has never been stronger. However, ex-China
capacity is grossly lagging in independent development
and China continues to grow and consolidate in the
battery supply chain. Disruption caused by shutdowns in
China during COVID-19 has demonstrated the reliance
of Europe and USA on China for supply of lithium-ion
battery materials. Without short-term action, such as
the progression of projects like Vidalia, Europe and the
USA risk losing independence in their strategic battery
raw materials supply chains. Although market conditions
were challenging through 2020, we are encouraged by
significantly improved downstream market conditions
observed in late 2020 and into 2021.
3
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:
James Askew
Non-Executive Chairman
Shaun Verner
Managing Director and Chief Executive Officer
José Manuel Caldeira
Non-Executive Director
Lisa Bahash
Non-Executive Director
Sara Watts
Non-Executive Director
John Beevers
Non-Executive Director (appointed 22 May 2020)
Sam Riggall
Non-Executive Director (ceased 22 May 2020)
4
SYRAH RESOURCES > ANNUAL REPORT 2020 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:
> Non-Executive Director of Evolution Mining Limited
> Non-Executive Director of Endeavour Mining Corporation
Directorships of listed entities within the past three years:
> Non-Executive Director of Evolution Mining Limited (since
November 2011)
> Chairman of OceanaGold Corporation (March 2007 to
June 2019)
> Non-Executive Director of Endeavour Mining Corporation
(since July 2017)
Special responsibilities:
> Chairman of the Sustainability Committee
> Member of the Remuneration, Nomination and
Governance Committee
Length of service: 6 years and 5 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary shares
Performance rights
NED rights
NUMBER
377,517
Nil
Nil
111,310
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: 4 years and 2 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary shares
Performance rights
NUMBER
547,174
-
4,927,450(1)
(1) The 4,927,450 Performance Rights noted above for S Verner are
current as at the date of the Director’s Report. 93,974 Performance
Rights lapsed on 19 February 2021, and 156,000 5YPRI Performance
Rights lapsed on 2 March 2021 and both are not included in this
number.
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: 6 years and 7 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary shares
Performance rights
NED rights
NUMBER
12,082
Nil
Nil
34,596
Lisa Bahash
Non-Executive Director
Experience and expertise: Ms Bahash has 30 year's
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.
Other current directorships in listed entities:
> Non-Executive Director of Shawcor Ltd (TSX Listed)
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Chair of the Remuneration, Nomination and Governance
Committee
> Member of the Sustainability Committee
5
Length of service: 2 year and 9 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary shares
Performance rights
NED rights
NUMBER
15,583
400,000
Nil
36,100
Sara Watts
Non-Executive Director
Experience and expertise: Ms Watts has been a director
and audit and risk chair for 12 years across a range of
sectors including technology, logistics, arts and disability. She
has over 30 years of financial, operational and international
experience and has been involved in multiple technology
transformation projects. Her executive experience includes
head of Internal Audit for IBM Asia Pacific, Chief Financial
Officer of IBM Australia/New Zealand, Vice-Principal
(Operations) at the University of Sydney, and interim CEO of
City West Housing.
Other current directorships in listed entities: None
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Chair of the Audit and Risk Committee
Length of service: 1 year and 10 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary share
Performance rights
NED rights
NUMBER
41,140
Nil
100,000
6,318
John Beevers
Non-Executive Director (appointed 22 May 2020)
Experience and expertise: Mr Beevers is currently a
Director of Orica Limited. John is a former Director of
QUT Bluebox, the commercialisation arm of Queensland
University of Technology, and former Chief Executive Officer
and Managing Director of GroundProbe. John had a variety
of other roles, including former Executive roles within Orica
Group, including Group General Manager of Chemical
Services and Chief Executive Officer of Orica Mining
Services.
Other current directorships in listed entities:
> Non-Executive Director of Orica Limited
Directorships of listed entities within the past three
years: None
Special responsibilities:
> Member of the Audit and Risk Committee
> Member of the Remuneration, Nomination and
Governance Committee
Length of service: 10 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary share
Performance rights
NED rights
NUMBER
33,000
Nil
Nil
Nil
INFORMATION ON FORMER
DIRECTORS
Sam Riggall
Non-Executive Director (ceased 22 May 2020)
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
Directorships of listed entities within the past three years:
> Managing Director and Chief Executive Officer of
CleanTeQ Holdings Limited (since July 2015)
Special responsibilities:
> Member of the Remuneration, Nomination and
Governance Committee (ceased as Chair 25 July 2019)
> Member of the Audit and Risk Committee (ceased as
Committee Chair 25 July 2019)
Length of service: 5 years and 7 months
Interest in shares, options and performance rights:
SECURITIES
Ordinary shares
Options over ordinary share
Performance rights
NED rights
NUMBER
Nil
Nil
Nil
Nil
6
SYRAH RESOURCES > ANNUAL REPORT 2020 COMPANY SECRETARY
Melanie Leydin
Company Secretary
Experience and expertise: Ms Leydin holds a Bachelor of
Business majoring in Accounting and Corporate Law. She is
a member of the Institute of Chartered Accountants, Fellow
of the Governance Institute of Australia and is a Registered
Company Auditor. She graduated from Swinburne University
in 1997, became a Chartered Accountant in 1999 and since
February 2000 has been the principal of Leydin Freyer. The
practice provides outsourced company secretarial and
accounting services to public and private companies across
a host of industries including but not limited to the resources,
technology, bioscience, biotechnology and health sectors.
Ms Leydin has over 25 years’ experience in the accounting
profession and over 15 years as a Company Secretary. She
has extensive experience in relation to public company
responsibilities, including ASX and ASIC compliance, control
and implementation of corporate governance, statutory
financial reporting, reorganisation of companies and
shareholder relations.
PRINCIPAL ACTIVITIES
The principal continuing activities of the Group (being Syrah
Resources Limited and its wholly owned subsidiaries) during
the year consisted of:
> Production of natural graphite products from the
Balama Graphite Operation in Mozambique (production
suspended through 2020 due to COVID-19 impacts);
> Sales of natural 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
Vidalia and industrial products; and
> Development and execution of a downstream, AAM
strategy in the USA.
DIVIDENDS
There were no dividends paid, recommended or declared
during the current financial year or previous financial year.
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 2020 was $60.9 million
(2019: loss after income tax of $130.5 million).
Revenue for the year ended 31 December 2020 comprised
sales of natural graphite products of $10.8 million (2019:
$72.2 million) and interest income of $0.4 million (2019:
$1.1 million) from cash reserves placed on term deposits
during the year.
Cost of sales reported for the financial period was $49.3
million (2019: $105.5 million), mainly comprised of mining
and production costs of $28.4 million (2019: $79.2 million),
logistics costs of $9.6 million (2019: $14.8 million), and
depreciation and amortisation expense relating to Balama of
$9.8 million (2019: $11.9 million). Total other expenses for the
financial period were $15.3 million (2019: $26.8 million) and
included the following:
> Distribution costs of $3.9 million (2019: $11.2 million),
of which $1.8 million (2019: $8.5 million) were shipping
costs;
> Administrative expenses of $6.6 million (2019: $8.6
million), of which $4.7 million (2019: $5.7 million) related
to employee benefits; and,
> Write-down of inventories due to valuation of inventories
at the lower of cost or net realisable value of $2.6 million
(2019: $6.7 million).
Net finance expense of $4.4 million (2019: net finance
expense of $0.9 million) related to income from investment
in term deposits of $0.4 million (2019: $1.1 million), offset
by interest incurred on the Convertible Note of $3.3 million
(2019: $0.6 million) and Leases of $1.2 million (2019:
$1.3 million).
Total comprehensive loss attributable to shareholders of
Syrah Resources Limited for the year was $61.7 million
(2019: $131.5 million).
Statement of Financial Position
Total assets of the consolidated entity as at 31 December
2020 were $431.9 million (2019: $432.1 million), with the
decrease principally as a result of lower current assets
including Cash and Cash Equivalents, Inventories and Trade
and Other Receivables balances offset by increases in
Property, Plant and Equipment and Mining Assets.
The consolidated entity’s Cash and Cash Equivalents as at
31 December 2020 were $75.0 million (2019: $80.6 million)
and working capital, being Current Assets less Current
Liabilities, was $84.1 million (2019: $89.5 million). The net
decrease in Cash and Cash Equivalents and working capital
is a result of operating cash outflow of the Balama operation
through suspended production and ongoing development of
the Group’s Vidalia Project, offset by net proceeds received
from the Institutional Placement completed in December
2020.
7
SEGMENT REVIEW
BALAMA GRAPHITE OPERATION
Financial Summary
The segment result for Balama for the year ended
31 December 2020 was EBITDA of -$35.2 million (2019:
EBITDA of -$135.2 million).
This loss principally consisted of Cost of Goods Sold of
$39.5 million (2019: $93.6 million), Write-down of Inventories
due to valuation of inventories at the lower of costs or net
realisable value of $2.6 million (2019: $6.7 million), and
Shipping Costs of $1.8 million (2019: $8.5 million), offset
by Revenue of $10.8 million from sales of natural graphite
products (2019: $72.2 million).
Total segment assets for Balama were $295.5 million as at
31 December 2020 (2019: $304.7 million) and principally
comprised of Mining Assets of $134.2 million (2019: $120.7
million); Property, Plant and Equipment and Right of use
Assets of $103.6 million (2019: $114.9 million), Deferred
Tax Assets of $27.0 million (2019: $27.8 million), and Trade
and Other Receivables of $14.9 million (2019: $23.1 million),
The decrease in total segment assets principally relates to
amortisation on Property, Plant and Mining Assets and lower
balance of Trade and Other Receivables offset by Property,
Plant and Equipment and Mining Assets additions.
Following are the key activities and achievements at Balama
during the financial year.
Sustainability
The aim of Syrah’s Sustainability Strategy is to operate safely,
ethically and efficiently to create value for our people and
stakeholders. This strategy is supported by the following key
performance areas – health & safety, people, environment,
community development, stakeholder management and
governance.
Syrah adopts a risk and opportunities based approach to
managing key material sustainability matters across the
business with all relevant information captured under the
Company’s Risk Management Framework, which is reviewed
at least monthly by the Executive Committee.
Asset-level sustainability reporting has been guided by
the Global Reporting Initiative (“GRI”), the United Nations
Sustainable Development Goals, the International Council
on Mining & Metals (“ICMM”) 10 Principles for Sustainable
Development and other internationally recognised standards
to assess and report sustainability performance in line with
industry benchmarks.
Corporate governance frameworks have also been
established across the Syrah Group to enhance the
Company’s overall performance and shareholder value.
Mining Assets increased to $134.2 million as at 31 December
2020 (2019: $120.7 million) mainly due to the capitalisation
of community development expenditure commitments and
change in the estimate for the rehabilitation provision, both of
which are capitalised into Mining Assets.
Property, Plant and Equipment increased to $164.4 million as
at 31 December 2020 (2019: $160.7 million), with the majority
relates to capitalisation of the costs associated with Balama
Tailing Storage Facility 2 and progression of the Vidalia
Project.
Non-Current Trade and Other Receivables decreased to
$13.2 million as at 31 December 2020 (2019: $19.6 million)
with the majority relating to outstanding Input Tax Credits
in Mozambique of $6.8 million (2019: $14.4 million). During
the year ended 31 December 2020 cash refunds totaling
$8.6 million were received for Input Tax Credits (2019: $10.7
million). 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 has a deposit of $6.4 million as
at 31 December 2020 (2019: $5.2 million), placed 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 $99.2 million as
at 31 December 2020 (2019: $80.3 million), which includes
Trade and Other Payables of $7.6 million (2019: $11.5
million); a provision for decommissioning and rehabilitation
for Balama of $13.6 million (2019: $10.0 million); a provision
for Balama community development of $11.3 million (2019:
Nil); Borrowings from issue of Convertible Note including
capitalised interest expense and transaction costs of $47.5
million (2019: $39.7 million) and Lease Liabilities of $16.8
million (2019: $18.6 million).
Net assets of the consolidated entity decreased during the
financial period to $332.8 million as at 31 December 2020
(2019: $351.9 million).
Statement of Cash Flows
Cash Flows from Operating Activities
Net cash outflow from operating activities for the year ended
31 December 2020 was $32.9 million (2019: $33.6 million),
and principally consisted of negative operating cashflow
from the Balama operation due to the production, as well as
corporate office, compliance and other employee benefits
expenses.
Cash Flows from Investing Activities
Net cash outflow from investing activities was $11.8 million
for the year (2019: $36.6 million) and principally consisted of
payments for progression of the downstream Vidalia Project.
Cash Flow from Financing Activities
Net cash inflow from financing activities was $38.5 million
during the year ended 31 December 2020 (2019: $73.6
million) and principally consisted of proceeds received from
the Institutional Placement during the year, net of transaction
costs.
8
SYRAH RESOURCES > ANNUAL REPORT 2020 Health and Safety
The Company considers Health and Safety to be the highest
priority for the Company.
Syrah’s Crisis and Emergency Management Teams
(“C&EMT”) was activated in a pre-emptive manner early in
2020 to assess, manage and where possible, minimise the
impacts of COVID-19 on employees, the business and key
stakeholders and remains active. The Company is committed
to make decisions in conjunction with Government advice at
a minimum, and further where we can, in order to mitigate
the risk of COVID-19 transmission to our workplaces or the
communities in which we operate.
Through a year of significant operational change, Syrah
continued its strong health and safety performance at Balama
with a Total Recordable Injury Frequency Rate ("TRIFR") at
Balama of 0.7 as at 31 December 2020.
Balama’s Malaria Mitigation Program continued through 2020
aimed at reducing lost time due to illness, which includes
mosquito trapping and mapping, hot and cold outdoor
fogging, regular indoor residual spraying, education and
awareness campaigns, a strictly enforced camp dress code
and Ultra-sensitive Rapid Diagnostic Testing of all camp
residents to identify and treat pre-symptomatic cases of
malaria.
Environment
In 2020, the Environmental Monitoring Program (“EMP”)
continued with over 200 environmental license conditions
met and no significant incidents or major non-compliances
reported to date. Monitoring activities, including the
measurement of surface and ground water quality, noise,
dust levels, geo-hydrology, radiation and air quality continued
as part of the Company’s EMP, contributing to the successful
renewal of our 5-year Environmental Licence during the year.
As at 31 December 2020, the Company has placed in
favour of the Ministry of Mineral Resources and Energy
(“MIREME”) in Mozambique a bank guarantee totaling $6.2
million in relation to the rehabilitation or removal of project
infrastructure for Balama as per the Mine Closure Plan
commitments.
Quantifying and benchmarking the carbon footprint of
battery anode material made from Balama natural graphite
versus other raw materials (natural and synthetic) is an
ongoing strategic priority for the Company. The Balama team
continue to assess options to reduce the carbon footprint of
the operation. To this end, Syrah signed a MoU with Solar
Century Africa Limited (“Solarcentury”) during the quarter to
progress a solar and battery storage hybrid power system to
work in conjunction with the existing 15Mw diesel generation
power plant at Balama in Mozambique, which was chosen as
a low risk power generation option for the initial establishment
of operations at Balama.
Community Development
The Company is committed to partnering with the community
and stakeholders for sustainable development and
recognises that maintaining open, productive and inclusive
relationships with our Host Communities and other key
stakeholders will help to ensure business activities generate
mutual benefit and protect the Company’s social license to
operate.
In 2017, Syrah established a Local Development Agreement
(“LDA”) with the Mozambique Government to define how the
Company will contribute to the sustainable development of
the local community for the duration of the Mining Contract
across following three areas:
> Physical Projects
> Employment and Training
> Health Promotion
The signing of the LDA necessitated the formation of a
Local Development Committee (“LDC”) to represent the
best interests of the Company’s eight Host Communities
and to oversee the implementation of all Company
sponsored community development projects in line with the
commitments under the LDA.
To ensure the fair and transparent management of
community projects and associated expenditure across
the Company’s eight Host Communities, LDC membership
includes representatives from each of the Host Communities,
Company representatives and Government (District and
Provincial) representatives. It is the responsibility of the LDC
to collectively decide upon sustainable development priorities
and associated community projects. The LDC meets on a
quarterly basis to discuss potential future community projects
and to review the progress of community projects that have
already been approved and are under implementation. A
Community Projects Evaluation Tool has been developed to
ensure that all community projects put forward by the LDC
are aligned with the commitments under the LDA, provide
mutual benefit for all parties of the LDC, and are aligned with
Syrah’s Values and Community Relations strategy.
Projects progressed via the LDA through 2020 include:
Poultry Farming Program; Wiwanana Orera Sewing
Association; Muapé and Pirira Primary School Constructions,
Maputo Road Rehabilitation; and Ntete Community Building.
Production
Syrah suspended production at Balama in March 2020
due to impacts of COVID-19, specifically: travel restrictions
limiting the mobility of the Balama workforce; and weak
end user demand due to lockdowns, mobility restrictions
and economic uncertainty negatively impacting EV sales.
Production at Balama in 2020 prior to production being
temporarily suspended was 12kt (2019 production: 153kt).
We were pleased to announce a Balama restart subsequent
to year-end in February 2021. Balama was well positioned to
preserve cash during its temporary production suspension
whilst also retaining operating and marketing capability to
promptly recommence production upon a restart decision.
9
Graphite Mineral Resources Estimate
The information in this Annual Statement for the Balama Site that relates to Mineral Resources is based on, and fairly
represents, the ASX announcement dated 31 March 2019 (Annual Report 2019) which was prepared by a Competent Person
(Mr Jonathon Abbot). Mr Abbot is an employee of 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. The Mineral Resource statement has been approved by Mr Abbot and consent provided for inclusion in the report
of the matters based on this information in the form and context in which it appears.
Table 1: Graphite Mineral Resource estimate at 3% Total Graphitic Carbon ("TGC") cut-off grade
As at 31 December 2019
As at 31 December 2020
TONNES
(Mt)
TGC
(%)
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
TONNES
(Mt)
TGC
(%)
639
23.5
255
360
783
-
123
660
1,422
23.5
378
1,020
10
17.5
10.2
9.3
11
-
13.4
10.1
10
17.5
11.2
9.8
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
639
23.5
255
360
783
-
123
660
1,422
23.5
378
1,020
Explanation of material changes:
There has been no material change in the Graphite Mineral Resource estimate since 2019 Annual Report.
Table 2: Vanadium Mineral Resources Estimate
As at 31 December 2019 @ 3% Cut-off
As at 31 December 2020 @ 3% Cut-off
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
TONNES
(Mt)
639
23.5
255
360
783
-
123
660
1,422
23.5
378
1,020
V2O5
(%)
0.2
0.34
0.21
0.2
0.2
-
0.35
0.2
0.2
0.34
0.26
0.2
CLASSIFICATION
Balama West
Measured
Indicated
Inferred
Balama East
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
TONNES
(Mt)
639
23.5
255
360
783
-
123
660
1,422
23.5
378
1,020
Explanation of material changes:
There has been no material change in the Vanadium Mineral Resource estimate since 2019 Annual Report.
10
10
17.5
10.2
9.3
11
-
13.4
10.1
10
17.5
11.2
9.8
V2O5
(%)
0.2
0.34
0.21
0.2
0.2
-
0.35
0.2
0.2
0.34
0.26
0.2
SYRAH RESOURCES > ANNUAL REPORT 2020 Graphite Mineral Reserves Estimate
There has been no material change in the Ore Reserve estimate since 2019 Annual Report.
The information in this Annual Statement for Balama that relates to Ore Reserves is based on, and fairly represents, the ASX
announcement dated 31 March 2019 (Annual Report 2019) which was prepared by Competent Persons (Mr Jon Hudson and
Mr Christopher Hull). The Mineral Resource and Ore Reserve statements has been approved by Mr Jon Hudson, who consents
to the inclusion in the report of the matters based on this information in the form and context in which it appears. Mr Hudson
is an employee of Snowden Mining Industry Consultants Pty Ltd (South Africa) and is a Fellow of the South African Institute of
Mining and Metallurgy.
Table 3: Ore Reserve estimate
As at 31 December 2019 (7.2% TGC cut-off grade)
As at 31 December 2020 (7.2% TGC cut-off grade)
CLASSIFICATION
TONNES
(Mt)
TGC
(%)
GRAPHITE
(MT)
CLASSIFICATION
TONNES
(Mt)
TGC
(%)
GRAPHITE
(MT)
Balama West
59.79
16.86
10.08
Balama West
59.79
16.86
10.08
Proved
Probable
Balama East
Proved
Probable
Stockpiles
Proved
Probable
Total
Proved
Probable
-
59.79
46.98
-
46.98
0.77
-
0.77
107.54
-
-
16.86
14.38
-
14.38
10.84
-
10.84
15.73
-
-
Proved
10.08
Probable
6.76
Balama East
-
Proved
6.76
0.08
Probable
Stockpiles
-
Proved
0.08
Probable
16.92
-
Total
Proved
-
59.79
46.98
-
46.98
0.77
-
0.77
107.54
-
-
16.86
14.38
-
14.38
10.84
-
10.84
15.73
-
-
10.08
6.76
-
6.76
0.08
-
0.08
16.92
-
107.54
15.73
16.92
Probable
107.54
15.73
16.92
Explanation of material changes:
There has been no material change in the Ore Reserve estimate since 2019 Annual Report.
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 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.
Sales and Marketing
Balama was well positioned to preserve cash during its temporary production suspension whilst also retaining operating
and marketing capability to promptly recommence production upon a restart decision. Whilst production was suspended
at Balama through most of 2020, sales were ongoing through the year from available finished product inventories, providing
valuable ongoing market interaction and feedback. Total natural graphite sales for 2020 were 22kt (2019 natural graphite sales:
163kt) at a weighted price of US$474 per tonne (CIF).
EV sales recovered in H2 2020 with growth of 89% YoY, which contrasts with H1 2020 sales which were down 17% YoY.
Significant increases in battery anode production have occurred through H2 2020 and evidence of improved upstream market
balance was noted late in 2020 via improvement in observed natural graphite prices and increased customer enquiry. We were
pleased to announce a Balama restart subsequent to year-end in February 2021.
11
CORPORATE
Financial Summary
The segment result for Corporate for the year ended
31 December 2020 was EBITDA of -$8.4 million (2019:
EBITDA of -$8.5 million).
This loss principally consisted of employee benefits of $4.7
million (2019: $5.7 million), net FX expenses of $2.3 million
(2019: $0.4 million), legal and consulting costs of $1.1 million
(2019: $1.3 million) and general corporate administration
costs of $0.7 million (2019: $1.5 million). These costs include
‘non-cash’ costs of $1.8 million (2019: $1.3 million), relating
to share-based payments.
Total segment assets were $75.8 million as at 31 December
2020 (2019: $82.0 million), with the decrease mainly driven
by the lower Cash and Cash Equivalents closing balance.
Corporate segment assets as at 31 December 2020 include
$75.0 million of Cash and Cash Equivalents (2019: $80.6
million) which will be used to fund:
> Ongoing working capital for Balama;
> Additional capital expenditure relating to Balama;
> Capital expenditure relating to the Vidalia Project; and,
> General corporate and administrative activities.
VIDALIA PROJECT
Financial Summary
The segment result for the Vidalia Project for the year ended
31 December 2020 was EBITDA of -$0.1 million (2019:
EBITDA of -$0.0 million).
Total segment assets for Vidalia Project were $60.6 million as
at 31 December 2020 (2019: $44.9 million) and principally
comprised of capitalised construction costs for Vidalia
Project.
Syrah is on track to become a commercial vertically
integrated producer of natural graphite AAM outside of
China, with plans to serve the growing US and European
markets.
A Bankable Feasibility Study (“BFS”) completed during 2020
confirmed a strong business case for natural graphite AAM
production at Syrah’s Vidalia facility in USA. Completion
of the BFS allows commercial discussions for project
development to progress with potential offtake partners and
financiers. Front End Engineering and Design (“FEED”) for an
initial 10ktpa AAM facility at Vidalia was initiated in 2020 to
progress towards preparedness for a construction investment
decision in H2 2021.
Syrah commenced product qualification activities with
interested customers in 2020, with dispatch of AAM
produced via toll treatment of Vidalia purified spherical
graphite (anode precursor). Syrah utilised tolling in 2020 to
accelerate the provision of material to potential customers
ahead of installation of a furnace at Vidalia in Q1 2021,
which is expected to enable AAM production of equivalent
specification to the toll produced material.
12
BALAMA VANADIUM PROJECT
In addition to Balama’s substantial graphite Ore Reserves,
the deposit also hosts a significant Vanadium Inferred
Resource of 1.4Bt at 0.2% V2O5.
Vanadium (a designated critical mineral) in the processed
Balama graphite ore, which would otherwise report to
tailings, can be refined into a saleable product (V2O5)1 and
presents a medium term, high value opportunity.
Balama contains a globally significant vanadium resource,
with potential for ~5ktpa1 of V2O5 production (vs. 2019
global production of ~73kt2). A review of the 2014 Vanadium
Scoping Study was completed in 2018 and confirmed that
the project warrants progression to formal Pre-Feasibility
Study ("PFS") stage.
Sampling and analysis of Vanadium content within the
graphite processing circuit was completed in 2019, which
confirmed prior understanding of Vanadium concentrations
in key process streams in the Balama graphite circuit
and will be used to inform metallurgical test work as the
project progresses. Syrah plans to progress the Balama
Vanadium Project post successful restart of Balama Graphite
Operation.
FUTURE OUTLOOK
The likely developments in Group operations for future
financial years include:
Balama Graphite Operation
Further strengthen Balama’s position in the natural graphite
market, targeting:
> Natural flake graphite production driven by market
demand;
> Average product fixed carbon (“FC”) grade of 95% with
target range of 95% - 97% FC;
> Cash (C1) operating cost structure (FOB Port of Nacala)
of US$430 to US$460 per tonne at an annualised
production rate of 180,000 tonnes per annum (15,000
tonnes per month), with 50/50 fixed to variable costs.
Sales and Logistics
Balama product differentiators will continue to be strategically
important through 2021. In particular:
> Product quality (fixed carbon grade and impurities);
> Capability as a base load supplier of natural graphite into
the battery raw material supply chain; and,
> Syrah’s best practice ESG credentials.
Vidalia Project
Syrah remains on track to become a vertically integrated
producer of natural graphite AAM to supply ex-Asia markets;
and in 2021, Syrah plans to progress towards a final
investment decision for the construction of a 10ktpa AAM
plant at Vidalia during 2H 2021, subject to end customer
commitments or strategic financial partnerships.
1 Scoping study on potential to refine vanadium as per the ASX
announcement dated 30 July 2014. Production rate assumes Balama
operating at full design capacity
2 https://pubs.usgs.gov/periodicals/mcs2020/mcs2020-vanadium.pdf
SYRAH RESOURCES > ANNUAL REPORT 2020 Vanadium Project
The Vanadium resource at Balama remains an attractive
future growth option for the company.
Investment to progress the evaluation of the project will be
made upon stabilisation of Balama cash flows.
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.
It should be noted that the Group continues to assess and
manage business risks associated with the COVID-19
pandemic.
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 (including, without limitation, global events
such as the COVID-19 pandemic). Syrah’s operational and
financial performance, as well as the ongoing economic
viability of Balama, 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.
Depressed graphite prices and/or the failure by Syrah to
negotiate favourable pricing terms (which 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 Vidalia 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
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. Such sentiment or conditions are
further affected by global trends and/or events such as the
COVID-19 pandemic.
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.
13
OPERATIONAL RISK
During the restarting of production following suspension,
the subsequent ramp-up in production volume and the
operational phase of Balama, 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 any restart, the subsequent 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
IT failures or disruptions, security concerns globally and
in Mozambique, unanticipated changes in government
regulation and risks associated with increased global
uncertainty and/or global events such as the COVID-19
pandemic (including the national or regional governmental
response to such events). The production ramp-up process
may uncover failures or deficiencies in processes, systems,
plant and equipment required for Balama, 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 operations 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 Balama, Syrah is subject to
an increased number of risks including a lack of access
to key infrastructure, security requirements, rising
fuel costs, changes to transport route conditions and
requirements, unexpected delays and accidents that
could, singularly or collectively, materially negatively impact
upon Syrah’s financial performance and position. Any
prolonged interruption or negative changes 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.
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 Balama, 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. Global events and/or trends such as the COVID-19
pandemic may also affect the ability of Syrah’s customers
to carry out their obligations under such agreements and/or
influence renewal or subsequent contracting decisions.
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 Balama and
the Vidalia Project (including the supply of key goods and
services including diesel fuel supply, logistics, equipment
supply, contract mining, engineering 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, and global
events impacting contract performance and liability (such as
the COVID-19 pandemic) all of which may give rise to delays
and/or increased costs. Furthermore, 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 Mozambican or other
14
SYRAH RESOURCES > ANNUAL REPORT 2020 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 Syrah’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 license for Balama
(due to expire on 1 January 2025), having successfully
renewed this license for a further five-year period in January
2020. Renewal of the license is conditional on the update
and resubmission of the environmental management plan
and monitoring program. 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 Balama. 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 guarantee in relation to the
rehabilitation or removal of project infrastructure as per the
mine closure plan for Balama.
For the current Vidalia 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 Vidalia operations and
the recoverable amount of assets.
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 Syrah
including potential delays or stoppages in mining, production
and/or logistics activities. In addition, the location of Balama
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 or
unexpected global health risks and/or events (such as
the COVID-19 pandemic) 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.
15
SOVEREIGN RISK
Syrah’s operations could be affected by political instability
in Australia, Mozambique, the USA, UAE, 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, geopolitical uncertainty,
political/civil unrest, violent criminal acts and displacement of
people that has taken place as a result of this activity in the
north of Mozambique. At this time the majority of such acts
have been at least 300km from Balama and have not directly
impacted Balama or transport routes for Syrah’s products,
however there is no guarantee that such acts will not spread
closer to Balama.
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 or unexpected global trends (such as the
COVID-19 pandemic).
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, security unrest,
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
16
effect on the carrying value of material assets or otherwise
have a material adverse effect on Syrah’s businesses and
financial condition.
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
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
Balama 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 Balama 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 Balama 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.
ACTIVE ANODE MATERIAL
Relative to Balama, Syrah’s Vidalia Project is at an early
stage.
Installation of a furnace in 2021, along with the existing
installed and commissioned plant, is planned to enable
demonstration of AAM production to facilitate ongoing
product qualification activities. 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, but not limited to:
> Ongoing commissioning of the qualification plant, the
risks inherent in any commissioning activities are present
including in relation to performance of the 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 Vidalia including in relation
to pricing and demand (see further details outlined in
“Market Risk” section above);
SYRAH RESOURCES > ANNUAL REPORT 2020 > 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 or availability of labour,
consumables, spare parts, plant and equipment, IT
failures or disruptions and other global trends or events
(such as the COVID-19 pandemic), including the national
or regional governmental response to such events.
A study was undertaken in 2020 to evaluate the feasibility of
larger scale AAM production at Vidalia. Post completion the
Feasibility Study in 2020, Syrah continues to undertake Front
End Engineering and Design ("FEED") and Detailed Design
with intent to progress towards an investment decision to
expand the existing plant. The FEED or Detailed Design
may uncover failures or deficiencies in processes, systems,
plant and equipment required for the Vidalia 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 in relation, but not limited to:
> 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 large scale Vidalia 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 Vidalia strategy.
The risks and costs relating to a larger scale plant
development will be further assessed during FEED and
Detailed Design 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 AAM, then Syrah’s Vidalia 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 Balama but is not yet
cash flow positive. Syrah may require additional financing,
in addition to cash reserves, to meet operation and capital
expenditure requirements for Balama, general administrative
expenditures and Vidalia Project activities, as well as
acquisitions and new or existing projects. This includes
Syrah’s Vidalia Project, and any further optimisation projects
(including Vanadium) at Balama for which Syrah may require
additional funding in the future to execute on that strategy.
While Syrah believes there are 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 Balama, potential Vanadium development,
the Vidalia plant and/or the development of Syrah’s Vidalia
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 Vidalia
strategy).
Under the terms of the Convertible Note issued to
AustralianSuper on 28 October 2019 on the terms
summarised in ASX Release dated 19 June 2019, (which
terms also relate to the issue of Convertible Note Series
2 and Convertible Note Series 3, should Syrah elect to
issue these notes), there is a possibility that the Note may
need to be redeemed (wholly or in part) either at maturity
or earlier in accordance with the terms of the Convertible
Note. Specifically, Syrah may be required to redeem the
Notes for cash, if: (i) AustralianSuper has not elected to
convert the Convertible Note prior to maturity (5 years
from issue); (ii) a third party takeover offer or scheme
of arrangement in respect of all of the shares of Syrah
becomes unconditional, and AustralianSuper does not
elect to convert the Convertible Note into fully paid ordinary
shares of Syrah; or (iii) AustralianSuper elects to redeem
rather than convert the Convertible Note in connection with
an event of default (which includes customary events such
as in relation to failure to repay amounts due, insolvency
events, committing an event of default under any of its
debt financing arrangements over an agreed cap, liabilities
over an agreed cap, fundamental and material changes to
business undertaking, ceasing to be listed on the ASX or any
breach of warranty or representation).
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 Vidalia 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.
17
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
Balama), variability in production profiles and strategies in
response to market conditions, the shortage of local, readily
available skilled labour and global events/trends (such as
the COVID-19 pandemic), including the national or regional
governmental response to such events, which may impact
a number of factors including but not limited to personnel
availability, mobility and health and safety. 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, Syrah is required to make
certain payments under contracts for Balama 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. In addition, to date Syrah has
raised capital in Australian dollars, while development costs
are largely in US Dollars or other currencies. Syrah may also
hold funds on deposit in a number of currencies. Changes
in exchange rates may impact the extent to which Australian
dollar denominated capital is able to fund development
in other currencies. Syrah’s natural graphite products are
denominated in US Dollars, with a significant portion of sales
to customers in China. Fluctuations in the value of the US
Dollar may impact the competitiveness of Syrah’s products
to these customers. Syrah also purchases equipment and
services for Balama and the development of Vidalia from
a number of countries, which may also be impacted by
currency fluctuations against the US Dollar in particular.
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 Vidalia 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 AAM 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, customs or importation
laws (including double taxation treaties, royalties and similar
levies, 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.
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 Syrah’s accounts.
The revenue and profit from Balama 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.
18
SYRAH RESOURCES > ANNUAL REPORT 2020 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, other significant global matters (such as the
COVID-19 pandemic) 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.
CLIMATE CHANGE RISK
Syrah recognises that the physical and transitional impacts
of climate change may affect its assets, productivity, supply
chains, markets and communities. Syrah is likely to benefit
in a number of ways from approaches taken to mitigate
impacts from climate change, most notably from a market
perspective where the supply chain in which we operate is
critical to efforts to electrify the transport sector globally,
while the use of natural graphite in the anode of a Lithium-
Ion battery is typically regarded as the best alternative
from an environmental perspective. Both transport
sector electrification and recognition of natural graphite’s
environmental advantages will likely provide a strong
foundation for demand for our products, with an integrated
Balama and Vidalia supply chain solution providing an
attractive complementary source of supply. There are also
a number of risks relating to climate change which are
discussed in more detail below. Syrah understands that
close monitoring and continued focus on this is important.
Sound risk management practices and strategic planning
are integrated across all areas of our business, leveraging
technology to drive long term value from our projects.
The climate-related physical risks identified as applicable to
our business are as follows:
Energy and emissions:
We keep informed of changing regulations, including policy,
codes and principles to help manage transition risk. We
engage with our community and stakeholders to ensure we
are operating in a manner reflecting broader requirements
and our license to operate. We remain agile in response
to changing markets and explore innovative technology
including renewables to improve our resilience to resource
financial and supply uncertainty, including but not limited to
the recent announcement relating to the intention to use solar
energy to support the energy requirements for our Balama
operation. We contribute positively to local, regional and
national sustainability efforts.
Water security:
Production is reliant on the availability of water. In the
short term, Syrah is adapting to a changing water security
environment by working towards reducing demand and
reusing a greater portion of water, including drinking water. In
the medium to long term, we are assessing alternatives to our
current uses of water, including tailings.
Extreme weather events:
We aim to minimise the impact of extreme weather events
on our operations through business continuity planning. This
includes the consideration of potential climate impacts on the
operation of our existing facilities, as well as the design and
construction of new assets.
Extreme health events:
The events of COVID-19 have impacted globally and have
highlighted the need to act early and collectively to mitigate
these impacts. We have established COVID-19 protocols
across all areas of our business. We also recognise that we
must remain prepared to manage these events and support
the communities in which we operate with their recovery
efforts. We have integrated this into our scenario plans and
financial assessments.
RISK MANAGEMENT
Syrah 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;
> 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.
19
COVID-19 PANDEMIC
The outbreak in late 2019 of a novel strain of coronavirus
(“COVID-19”) has triggered a global downturn and global
economic contraction, causing disruptions in demand and
supply chains.
On 11 March 2020, the World Health Organisation declared
the COVID-19 outbreak a pandemic.
A significant proportion of Syrah’s revenues are generated
by sales of natural graphite products to customers in China,
and Syrah sources a range of supplies and equipment from
companies in China. At the onset of the pandemic COVID-19
impacted a range of sectors of the Chinese economy, and
the global economy, including Syrah’s direct customers and
suppliers, the electric vehicle supply chain including battery
manufacturing, consumer demand for electric vehicles,
people movement, and logistics. All the countries in which
Syrah operates have implemented restrictions on business
activities and people movement, including Mozambique
where measures were implemented which restricted people
movement both internationally and domestically.
The operations of Syrah have therefore been impacted
by the COVID-19 pandemic, most notably resulting in the
suspension of production at the Balama Graphite Operation
from 28 March 2020 due to ongoing impacts of COVID-19,
and the temporary closure of the Vidalia facility from 24
March 2020 to 4 May 2020, specifically due to:
> Ongoing travel restrictions, limiting the mobility of the
Balama workforce, the Vidalia workforce, Management
and Board; and,
> Weak end user demand due to lockdowns, mobility
restrictions and economic uncertainty negatively
impacting EV sales, particularly in the first half of 2020.
The Balama restart was announced in February 2021 (post
year-end 2020). Balama was positioned to preserve cash
during its temporary production suspension period whilst
also retaining operating and marketing capability to promptly
recommence production upon a restart decision.
The COVID-19 pandemic is still ongoing and the actual extent
of the pandemic and its impact on domestic, regional and
the global economy remain uncertain.
The spread of COVID-19 globally may impact the financial
performance and future growth of Syrah due to other
longer term adverse economic impacts. Influencing factors
outside the Group’s control include the level of government
support, restrictions on movement and travel imposed by
governments, the extent of spread of COVID-19 in Syrah’s
specific countries of operation and how well these countries
manage these health and economic impacts.
The ongoing impact of the COVID-19 pandemic on Syrah’s
operations is not currently ascertainable and could continue
to have a detrimental effect on Syrah’s financial performance,
and depending on the extent of the disruption, any such
effect could be material to Syrah.
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
Syrah announced the results of a Share Purchase Plan
("SPP") on 20 January 2021. The SPP provided Eligible
Shareholders with the opportunity to apply for up to A$30,000
worth of new fully paid ordinary shares ("New Shares") in the
Company at the same price (A$0.90 per share) as a A$56
million Placement that was completed on 11 December 2020.
The SPP received valid applications totaling approximately
A$63.7 million, well in excess of the targeted A$12 million. As
a result of the oversubscription, Syrah’s Board of Directors
exercised its discretion under the terms of the SPP to
accept a total of A$18 million in applications for the issue of
approximately 20 million New Shares under the SPP.
Syrah announced the decision to restart production at the
Balama on 22 February 2021. Production was temporarily
suspended at Balama in March 2020 due to impacts of
COVID-19, specifically: travel restrictions, limiting the mobility
of the Balama workforce; and, weak end user demand due
to lockdowns, mobility restrictions and economic uncertainty
negatively impacting EV sales. In July 2020 Syrah announced
a labour restructure at Balama and other actions to preserve
cash during the period of suspended production, whilst
also retaining operating and marketing capability to restart
production. At the time of the restart decision, Syrah deemed
it was able to manage within current travel restrictions, and
market conditions deemed supportive of recommencing
production. At the time of the restart decision on 22
February 2021, Syrah estimated a 2 to 3 months lead time to
recommencement of production.
On 10 December 2020, Syrah announced an equity capital
raising and a proposal to issue A$56 million in 2 convertible
notes, at Syrah’s option, in two equal tranches before 31
March 2021 and 30 June 2021 to AustralianSuper Pty Ltd as
trustee for AustralianSuper (AustralianSuper) (“Convertible
Notes”). Issue of the Notes was subject to certain conditions,
including shareholder approval under ASX Listing Rule 7.1.
A General Meeting was held on 26 February 2021, where
shareholders provided approval to issue the Convertible
Notes to AustralianSuper. Syrah has elected not to issue
the Convertible Note which required notice to be given by
31 March 2021, although retained the option to issue the
Convertible Note issuable by 30 June 2021.
During March 2021, Syrah announced the installation of a
furnace at Vidalia to enable AAM production using natural
graphite from Syrah’s Balama operation. Precursor material
(purified spherical graphite) from Vidalia was toll treated
to AAM in Q4 2020 to accelerate the commencement of
product qualification with potential customers. The furnace at
Vidalia will now be used to produce AAM for ongoing product
qualification, which is an iterative process of product testing
with potential customers.
In accordance with the obligations imposed on its subsidiary
Twigg Exploration and Mining Limitada under the Mining
Agreement with the Mozambique Government, Syrah
completed the transfer of a 5% quotaholding in Twigg
Exploration and Mining Limitada to Empresa Mocambicana
De Exploracao Mineira, S.A..
No other events have occurred subsequent to 31 December
2020 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.
20
SYRAH RESOURCES > ANNUAL REPORT 2020 LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Commentary on likely developments and expected results of operations is set out in the Review of Operations.
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 2020, and the number of meetings attended by each Director was:
DIRECTOR
BOARD
AUDIT AND RISK
COMMITTEE
SUSTAINABILITY
COMMITTEE
J Askew
S Verner
J Caldeira
L Bahash
S Watts
J Beevers(1)
S Riggall(2)
A
9
9
9
9
9
6
3
B
9
9
9
9
9
6
3
A
-
-
4
-
4
2
2
B
-
-
4
-
4
2
2
A
4
-
4
4
-
-
-
B
4
-
4
4
-
-
-
REMUNERATION,
NOMINATION AND
GOVERNANCE
COMMITTEE
A
4
-
-
4
-
2
2
B
4
-
-
4
-
2
2
(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
2020.
(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 2020.
(1) J Beevers was appointed as Non-Executive Director on 22 May 2020.
(2) S Riggall ceased as Non-Executive Director on 22 May 2020. He attended all required meetings prior to his resignation.
21
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
2020. The remuneration report is
structured as follows:
(A)
REMUNERATION GOVERNANCE
(B)
DIRECTOR AND KEY MANAGEMENT PERSONNEL DETAILS
(C)
KEY REMUNERATION OUTCOMES AND UPDATES
(D)
REMUNERATION STRATEGY AND PHILOSOPHY
(E)
REMUNERATION COMPONENTS
(F)
DETAILS OF REMUNERATION EXPENSES
(G)
EXECUTIVE SERVICE AGREEMENTS
(H)
(I)
(J)
TERMS AND CONDITIONS OF SHARE-BASED PAYMENT
ARRANGEMENTS
DIRECTORS AND KEY MANAGEMENT PERSONNEL EQUITY
HOLDINGS
OTHER TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT
PERSONNEL
(K)
ADDITIONAL INFORMATION
22
SYRAH RESOURCES > ANNUAL REPORT 2020 (A) REMUNERATION GOVERNANCE
REMUNERATION, NOMINATION AND GOVERNANCE COMMITTEE
The Board has established a Remuneration, Nomination and Governance Committee consisting solely of independent, Non-
Executive 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 2020 the Remuneration, Nomination and Governance Committee comprised of Lisa
Bahash (Committee Chair), James Askew and John Beevers.
The Charter for the Remuneration, Nomination and Governance Committee is available on the Company’s website.
(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 2020 and up to the date of this report, unless otherwise stated:
EXECUTIVE AND NON-EXECUTIVE DIRECTORS
NAME
James Askew
Shaun Verner
José Caldeira
Lisa Bahash
Sara Watts
John Beevers
Sam Riggall
POSITION
Non-Executive Chairman
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 22 May 2020)
Non-Executive Director (ceased 22 May 2020)
KEY MANAGEMENT PERSONNEL
The following persons were the Key Management Personnel of Syrah during the year ended 31 December 2020 and up to the
date of this report, unless otherwise stated:
KEY MANAGEMENT PERSONNEL
NAME
Shaun Verner
Stephen Wells
Julio Costa
Jennifer Currie
Jordan Morrissey
POSITION
Managing Director and Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Chief Legal Officer and Company Secretary (ceased as Company Secretary 5 September
2019; ceased as Chief Legal Officer 28 January 2020)
Chief People Officer (role restructured to that of a Transition Officer effective 18 October
2019 and ceased employment with Syrah on 31 March 2020)
23
(C) KEY REMUNERATION OUTCOMES AND UPDATES
(i)
What has changed in relation to remuneration during the year ended 31 December 2020
Non-Executive Director
Remuneration
> Non-Executive Directors received no fee increases during the year ended 31 December 2020
> The Board of Directors resolved to implement a new Non-Executive Director Share Rights
Plan (“NEDSP”), which was approved by shareholders at the Annual General Meeting held
on 22 May 2020. The NEDSP will enable Non-Executive Directors to receive a portion of their
remuneration as Performance Rights and operates as follows:
> (a) The NEDSP commenced on 1 February 2020, and was approved by shareholders at last
year’s Annual General Meeting;
> (b) Non-Executive Directors will elect the proportion they would like paid in cash and paid in
share rights on an annual basis;
> (c) The cash and share rights components will be settled at the end of each quarter (March,
June, September and December);
> (d) The amount to be settled in share rights on a quarterly basis will be determined using a
30-day VWAP at the end of the quarter; and,
> (e) The date of grant for the share rights will be the last day of each quarter for the relevant
financial year.
Executive Remuneration
> None of Syrah’s Key Management Personnel received a remuneration increase during the
year ended 31 December 2020
> 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 2020
> The average STI outcome for the Managing Director and Chief Executive Officer and Key
Management Personnel was 97.9% of Target opportunity for the year ended 31 December
2020 based on the assessment of corporate and personal performance metrics. This
outcome reflected recognition of the contribution by the Managing Director and Chief
Executive Officer and Key Management Personnel towards the Company’s achievement of
a number of its performance targets during a challenging year, discussed in more detail in
Table 4 below, and in the context of a reduced Executive team following the restructure at the
end of 2019.
> For the Performance Rights awarded during the 2018 financial year and tested as at 31
December 2020, none vested. This reflects the Total Shareholder Return ("TSR") performance
of the Company during the three years to 31 December 2020 relative to the average TSR
performance of the comparator group
Last year, the Board of Directors implemented a Five Year Performance and Retention Incentive
(“5YPRI”) by way of a proposed one off issue of Performance Rights for selected senior
personnel, designed to take into account the recent operational review and restructure in late
2019, including the recent restructure of the senior executive team. The program is also designed
to align with the maturity date of the Convertible Note and to ensure that selected personnel are
remunerated in a manner which encourages high performance and is aligned with driving growth
in Shareholder value.
A summary of the Five Year Performance and Retention Incentive is outlined below:
(a) The 5YPRI are performance based, incentivising performance each year for selected senior
personnel;
(b) The Performance Rights have a term of 5 years;
(c) At the performance assessment date (occurring annually), the Board will determine the amount
of Performance Rights to vest based on agreed Key Performance Indicators (“KPIs”) set at
the beginning of each financial year, with the applicant being issued with a vesting notice
confirming any vested Rights following the assessment process. The performance assessment
will generally take place around February of each year, in respect of the KPIs for the year just
passed;
(d) The Performance Rights can be exercised from the vesting date for a two-year period;
(e) Each participant must be employed for the full calendar year applicable to the assessment of
the award (the Performance Rights do not partially vest for the year in the event of termination
of employment unless otherwise determined by the Board).
STI Outcomes
LTI Outcomes
Five Year Performance
and Retention Incentive
24
SYRAH RESOURCES > ANNUAL REPORT 2020 Five Year Performance
and Retention Incentive
continued
The general KPIs are structured as follows:
(a) For the first 2 years, the KPIs will be based on operating performance – cash position, sales,
production, and Vidalia project milestones;
(b) For the following 3 years, the KPIs will be based on overall relative corporate performance to be
defined and approved by the Board on an annual basis, concurrent with Board approval of the
annual budget.
In 2020, S Verner was issued 4,000,000 performance rights under the 5YPRI program, following
shareholder approval at the 2020 Annual General Meeting. These 5YPRI vest one-fifth annually,
subject to meeting certain KPI performance hurdles as outlined above.
In February 2021, the Remuneration, Nomination and Governance Committee assessed the Year
1 tranche of these performance rights, and determined that 644,000 Performance Rights vested,
with the balance of 156,000 Performance Rights for Year 1 lapsing.
Other Key management personnel were also issued performance rights under the 5YPRI
program last year, including the CFO, S Wells who received 2,500,000 performance rights and
the COO, J Costa who received 3,250,000 performance rights. Other executives were also issued
performance rights under the 5YPRI program last year totalling 2,250,000. The Remuneration,
Nomination and Governance Committee assessed the Year 1 tranche of these performance rights
to KMP’s and other executives, and determined that a total of 1,288,000 Performance Rights
vested, with the balance of 312,000 Performance Rights for Year 1 lapsing in relation to these
KMP’s and other executives.
(ii) What changes are planned or approved for remuneration for the year commencing 1 January 2021
LTI Performance Hurdles The Board of Directors has resolved to adopt the same performance hurdles for the 2021 LTI
Program as were used in 2020, 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 2021, 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 2021, 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.
Non-Executive Director
Remuneration
The new Non-Executive Director Share Rights Plan (“NEDSP”) is intended to continue, as approved
at last year’s Annual General Meeting. The NEDSP will enable Non-Executive Directors to receive a
portion of their remuneration as Performance Rights and is intended to operate as follows:
(a) The NEDSP commenced on 1 February 2020, and was approved by shareholders at last year’s
Annual General Meeting;
(b) Non-Executive Directors will elect the proportion they would like paid in cash and paid in share
rights on an annual basis;
(c) The cash and share rights components will be settled at the end of each quarter (March, June,
September and December);
(d) The amount to be settled in share rights on a quarterly basis will be determined using a 30-day
VWAP at the end of the quarter; and,
(e) The date of grant for the share rights will be the last day of each quarter for the relevant
financial year.
25
(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. During the year ended 31 December 2020, changes were made
to Non-Executive Director remuneration via the implementation of the NEDSP, that was approved by shareholders at the 2020
Annual General Meeting (refer to Section C for details of the NEDSP).
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. No remuneration consultants were engaged for the year ended 31 December 2020 or 31
December 2019.
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 (“EIP”), which 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.
SHARE OPTION PLAN RULES
The Company has 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.
LONG-TERM INCENTIVE PLAN RULES
The Company has 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.
NON-EXECUTIVE DIRECTOR SHARE RIGHTS PLAN RULES
The Company also has a Non-Executive Director Share Plan ("NEDSP"), which was established and approved by shareholders
at the Annual General Meeting on 22 May 2020. The plan is intended to support NEDs to develop a meaningful shareholding
in the Company and as a means of aligning the interests of NEDs and shareholders generally through the diversion of current
and future cash remuneration to equity. In addition, it will assist the company in implementing its cost reduction strategies and
maintain its cash reserves.
The key element of the NEDSP for NEDs is that it provides the opportunity for NEDs to sacrifice part or all of their cash fees
in favour of Equity Securities under this plan to build their shareholding in the Company. The introduction of the NEDSP is
also intended to remunerate individual NEDs for any material additional efforts that individual NEDs are required to deliver in
progressing the Company’s goals.
The NEDSP does not attach any performance measures to vesting. This is in line with best practice governance standards
which recommend that non-executive directors generally should not receive equity with performance hurdles attached as it
may lead to bias in decision-making and compromise their objectivity and in turn their independence.
26
SYRAH RESOURCES > ANNUAL REPORT 2020 (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 2020 and the maximum currently stands at A$1,000,000 per annum which
was approved by shareholders at an Annual General Meeting on 26 May 2016.
The annual Non-Executive Director fees (inclusive of superannuation contribution amounts where applicable) for being a
member of the Board and participating on its sub committees were as follows:
Table 1: Non-Executive Director Annual Fees
ANNUAL FEES
Board Fees
Sub-Committees
Chairperson
Members
Audit and Risk Committee
Chairperson
Members
Sustainability Committee
Chairperson
Remuneration, Nomination and
Governance Committee
Members
Chairperson
Members
2020
2019
A$
160,000
US$(1)
110,473
A$
160,000
US$(1)
111,198
95,000
65,593
95,000
66,024
20,000
10,000
15,000
10,000
15,000
13,809
6,905
10,357
6,905
10,357
20,000
10,000
15,000
10,000
15,000
13,900
6,950
10,425
6,950
10,425
10,000
6,905
10,000
6,950
(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 2020 of 0.6905 (2019: 0.6950).
In addition to the above fees, Non-Executive Directors are entitled to receive a travel stipend of $3,452 (A$5,000) for each
international trip where the travel time is in excess of seven hours of international travel (2019: $3,475 (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 performance rights 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 performance rights 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.
27
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. The STI payments made in 2020 were between 0% and 50% paid in the Company’s
fully paid ordinary shares (“Shares”) (2019: between 0% and 50% in shares). These components for the year ended
31 December 2020 are summarised below:
Table 2: Remuneration Components
ELEMENT
Total Fixed
Remuneration
DELIVERY
100% Cash
Short-Term
Incentive
Cash and/or
Shares
Long-Term
Incentive
100%
Performance
Rights or
other equity
instruments
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. 50% awarded in shares
to encourage executives to hold
shares in the Company and 50% is
awarded in cash
Alignment to long-term shareholder
value. Award given in shares to
encourage executives to hold
shares in the Company
PERFORMANCE METRICS
Nil
POTENTIAL VALUE (1)
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
Other executives
50% of TFR
Managing Director
75% of TFR
Other executives
50% of TFR
3 year Company TSR
performance with 50% relative
to the nominated Comparator
Group and 50% relative to the
nominated Absolute Measure
Performance Metrics.
(1) The Board of Directors reserves the discretion to reward exceptional achievement for stretch performance on any particular performance measure.
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
S Wells
J Costa
J Currie(1)
J Morrissey(2)
TOTAL FIXED
REMUNERATION
AT RISK REMUNERATION
STI
LTI
DEC-20
DEC-19
DEC-20
DEC-19
DEC-20
DEC-19
40%
50%
50%
50%
50%
40%
50%
50%
50%
50%
30%
30%
30%
30%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
(1) J Currie ceased employment with the Company as Chief Legal Officer on 28 January 2020.
(2) J Morrissey ceased employment with the Company on 31 March 2020.
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 current Key Management Personnel is currently positioned between the 25th and 50th percentile of a
comparative group of companies (based on remuneration benchmarking in February 2021).
Total Fixed Remuneration for Key Management Personnel for financial year ended 31 December 2020 is set out in Section F.
28
SYRAH RESOURCES > ANNUAL REPORT 2020 ‘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 2020
Table 4: STI Program (31 December 2020)
FEATURE
Target
Opportunity
DESCRIPTION
Managing Director – 75% of Total Fixed Remuneration ("TFR") for target performance.
Other Executives – 50% of Total Fixed Remuneration for target performance.
Group
Performance
Metrics & Award
Outcome
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
2020:
METRIC
WEIGHTING REASON FOR SELECTION
Corporate Performance
measures:
Sustainability (HSSEC)/Compliance
& Governance
Balama Production & Cost
Vidalia Progress
Sales Volume & Price
Strategic
Total corporate performance
measures
Personal performance metrics
Total
10%
10%
10%
10%
10%
50%
50%
100%
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
Progression of Vidalia growth strategies
Delivery against volume and weighted average
basket price targets
Balance sheet strength for operations and growth,
and Vidalia strategies
Targeted metrics relevant to individual roles
The Board assessed an overall attainment of 45.3% out of 50% for the corporate performance metrics for the
year ended 31 December 2020. This was based on recognition of the Company’s achievement of a number
of its performance targets(1) during a challenging year including maintaining its strong ESG performance,
significant work in reducing costs across the business in response to a sudden change in operating conditions
(market and COVID-19), progression of Vidalia project through the Bankable Feasibility Study (“BFS”) and
ongoing market interaction and development in preparation for a Balama restart.
(1) Corporate KPIs were revised marginally through the mid-year review process to account for COVID-19 conditions and
temporary suspension of production at Balama.
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.
Between 0% and 50% of the STI for the year ending 31 December 2020 was paid in shares, issued under
the Company’s Equity Incentive Plan.
29
The following table shows details of the STI opportunity, as a percentage of TFR, for each of the Key Management Personnel
and the amounts granted for the year ended 31 December 2020.
Table 5: STI Opportunity (31 December 2020)
NAME
Executive Director
S Verner
Key Management Personnel
S Wells
J Costa
J Currie(2)
J Morrissey(3)
TARGET OPPORTUNITY
% OFFER
AMOUNT$(1)
75%
$255,183
50%
50%
-
-
$141,768
$151,220
-
-
AMOUNT
GRANTED
AMOUNT
FORFEITED
%
85%
103%
105%
-
-
%
15%
0%
0%
-
-
(1) Amounts translated from Australian Dollars to US Dollars using an average exchange rate for the year ended 31 December 2020 of 0.6905.
(2) J Currie ceased employment with the Company as Chief Legal Officer on 28 January 2020.
(3) J Morrissey ceased employment with the Company on 31 March 2020.
(ii)
Short Term Incentive Program – 31 December 2021
Table 6: STI Program (31 December 2021)
FEATURE
Target
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 2021:
METRIC
WEIGHTING REASON FOR SELECTION
Group
Performance
Metrics & Award
Outcome
Corporate performance
measures:
Sustainability (HSSEC)/Compliance
& Governance
Balama Production & Cost
Vidalia Project
Technical Marketing
Strategic
Total corporate performance
measures
Personal performance metrics
Total
10%
10%
16%
9%
5%
50%
50%
100%
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
Delivery of key strategic project milestones
Technical sales & marketing program to drive product
and price differentiation for both Balama and Vidalia
Development of long term strategic growth
opportunities
Targeted metrics relevant to individual roles
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 2021 will be determined by the Remuneration,
Nomination and Governance Committee, with oversight from the Board of Directors.
30
SYRAH RESOURCES > ANNUAL REPORT 2020
Five Year Performance and Retention Incentive
In addition to the LTI Program described below, the Board of Directors will continue to utilize the Five Year Performance and
Retention Incentive for selected senior personnel (see Section C above for details).
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 (Total Shareholder Return measurement) 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 the ASX for the 60 trading days
preceding the commencement of the performance period, being 1 January.
Performance Hurdles
The performance hurdles for 2021 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 2021, 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 the 2018, 2019, 2020 and 2021 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.
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
COMPARATOR 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%
31
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
Performance rights will be tested against Syrah’s TSR performance relative to the comparative group on the Performance Date.
Year ended 31 December 2018 Grant
i.
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
Western Areas Limited
Gold Road Resources Limited
OZ Minerals Limited
Westgold Resources Limited
Iluka Resources Limited
Imdex Limited
Perseus Mining Limited
Pilbara Minerals Limited
The Board reserves the right to adjust the composition and number of the companies in the TSR Comparator Group (2018
Grant) 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.
Outcome for 31 December 2018 Grant
None of the performance rights granted for the 2018 financial year and tested as at 31 December 2020 vested, as the TSR
performance of Syrah was below the median relative TSR performance of the comparator group, and below the threshold of
the absolute TSR measure over the Performance Period.
Year ended 31 December 2019 Grant
ii.
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
32
SYRAH RESOURCES > ANNUAL REPORT 2020 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
Evolution Mining Limited
Fletcher Building 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
Northern Star Resources Limited
Wagners Holding Company Limited
Nufarm Limited
Westgold Resources Limited
Fortescue Metals Group Limited
OceanaGold Corporation
Western Areas Limited
Gold Road Resources Limited
Om Holdings Limited
Galaxy Resources Limited
Independence Group NL
Orora Limited
Orocobre Limited
Year ended 31 December 2020 Grant
iii.
The TSR comparator group as selected by the Board of Directors for performance rights for the year ending 31 December
2022 comprise of the companies in the S&P/ASX300 Index (ASX:XKO) as at 1 January 2020, classified under the “Materials”
(formally “Metals & Mining”) industry under the GICS classification system as follows:
Adelaide Brighton Limited
Alacer Gold Corp
Alumina Limited
Amcor Plc Cdi
Aurelia Metals Limited
Bellevue Gold Limited
BHP Group Limited
IMDEX Limited
Ioneer Limited
Incitec Pivot Limited
James Hardie Indust
Jupiter Mines Limited
Pact Group Holdings Limited
Pilbara Minerals Limited
Perenti Global Limited
Perseus Mining Limited
Rio Tinto Limited
Lynas Corporation Limited
Ramelius Resources
Macmahon Holdings Limited
Regis Resources Limited
Bluescope Steel Limited
Mount Gibson Iron Limited
Resolute Mining Limited
Boral Limited
Brickworks Limited
Mineral Resources Limited
South32 Limited
MACA Limited
Saracen Mineral Holdings Limited
Champion Iron Limited
Newcrest Mining Limited
St Barbara Limited
CSR Limited
Dacian Gold Limited
New Century Resources Limited
Sandfire Resources NL
Nickel Mines Limited
Sims Limited
Evolution Mining Limited
Northern Star Resources Limited
Silver Lake Resources Limited
Fletcher Building Foreign Exempt NZX
Nufarm Limited
Fortescue Metals Group Limited
Oceanagold Corp
West African Resources Limited
Westgold Resources Limited
Gold Road Resources Limited
Orora Limited
Western Areas Limited
Galaxy Resources
IGO Limited
Iluka Resources
Orocobre Limited
Orica Limited
OZ Minerals Limited
33
Year ended 31 December 2021 Grant
iv.
The TSR comparator group as selected by the Board of Directors for performance rights for the year ending 31 December
2023 comprise of the companies in the S&P/ASX300 Index (ASX:XKO) as at 1 January 2021, classified under the “Materials”
(formally “Metals & Mining”) industry under the GICS classification system as follows:
ADBRI Limited
Gold Road Resources Limited
OZ Minerals Limited
Alkane Resources Limited
IGO Limited
Pact Group Holdings Limited
Alumina Limited
Amcor Plc Cdi
Aurelia Metals Limited
Bellevue Gold Limited
BHP Group Limited
Iluka Resources Limited
IMDEX Limited
Incitec Pivot Limited
Ioneer Limited
Perenti Global Limited
Perseus Mining Limited
Pilbara Minerals Limited
Ramelius Resources Limited
James Hardie Industries Plc
Red 5 Limited
Bluescope Steel Limited
Jupiter Mines Limited
Regis Resources Limited
Boral Limited
Brickworks Limited
Capricorn Metals Ltd
Champion Iron Limited
CSR Limited
Dacian Gold Limited
De Grey Mining Limited
Deterra Royalties Ltd
Evolution Mining Limited
Fletcher Building Limited
Lynas Rare Earths Limited
Resolute Mining Limited
MACA Limited
Rio Tinto Limited
Macmahon Holdings Limited
Sandfire Resources Limited
Mineral Resources Limited
Silver Lake Resources Limited
Mount Gibson Iron Limited
Newcrest Mining Limited
Nickel Mines Limited
Sims Limited
South32 Limited
SSR Mining
Northern Star Resources Limited
St Barbara Limited
Nufarm Limited
Orica Limited
West African Resources Limited
Western Areas Limited
Westgold Resources Limited
Fortescue Metals Group Limited
Orocobre Limited
Galaxy Resources Limited
Orora 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.
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 2020:
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 2020:
Vested
Unvested
Total
2020
NUMBER
2019
NUMBER
1,513,470
69,205
16,060,139(2)
1,862,733
-
(297,296)
(191,709)
(12,240)
(96,692)
(24,480)
17,369,660(1)
1,513,470
-
12,240
17,369,660
1,501,230
17,369,660
1,513,470
(1) 32,485 of these performance rights relating to the 2018 LTI lapsed in 2021 as the performance criteria were not met. In addition to this, 1,932,000
5YPRI Performance Rights vested (KMP and others outside of KMP) following assessment at the end of the 31 December 2020 Year 1 performance
period in 2021 and the balance of 468,000 Year 1 5YPRI Performance Rights lapsed in 2021 as the performance criteria were not met. In addition, a
total of 600,194 Performance Rights relating to Retention & Performance Incentives also vested subsequent to 31 December 2020.
(2) Included in the amount granted during the year is 12,000,000 5YPRI Performance Rights issued during FY20.
34
SYRAH RESOURCES > ANNUAL REPORT 2020 The Board of Directors has resolved to grant 467,727 EIP performance rights to S Verner, subject to shareholder approval, and
537,020 performance rights to other Key Management Personnel for the year ending 31 December 2020. The performance
rights granted to S Verner remain subject to shareholder approval. The Board of Directors also resolved to grant 823,508
performance rights to other executives and senior managers for the year ended 31 December 2020 in accordance with the
relevant employment contracts. These performance rights were issued on 17 March 2021 and are not included in the above
table. See also Section C for details of the 5YPRI.
The table below summarises the number and movements in Performance Rights issued under the Non-Executive Director
Share Rights during the year:
Table 8: Non-Executive Director Share Rights
Movement for the year ended 31 December 2020:
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 2020:
Vested
Unvested
Total
2020
NUMBER
2019
NUMBER
-
188,324
-
-
-
188,324(1)
-
188,324
188,324
-
-
-
-
-
-
-
-
-
(1) During the year, the Company received shareholder approval of a Non-Executive Director Share Plan, which is a salary sacrifice plan pursuant
to which NED’s may elect to sacrifice up to 100% of their annual NED’s fees to acquire Non-Executive Director Share Rights (NED Rights). The
Company issued a total of 188,324 NED Rights in relation to the March 2020 quarter, specifically for the months of February 2020 and March
2020 during the year. These securities were issued under ASX Listing Rule 10.14. NED Rights in relation to the June 2020, September 2020, and
December 2020 quarters will be issued subsequent to year end.
(2) A resolution will be included in the 2021 Notice of Annual General Meeting to seek approval to add J. Beevers into the Non-Executive Director Share
Plan as an eligible participant. J. Beevers was appointed as a Non-Executive Director on 22 May 2020.
The table below summarises the number and movements in performance rights issued under the LTIP during the year:
Table 9: LTIP Performance Rights
Movement for the year ended 31 December 2020:
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 2020:
Vested
Unvested
Total
(1) 189,962 of these rights lapsed in 2021 as the performance criteria were not met.
2020
NUMBER
2019
NUMBER
513,504
1,020,826
-
-
(285,256)
(332,624)
(38,286)
(56,035)
-
(118,663)
189,962(1)
513,504
-
189,962
189,962
-
513,504
513,504
35
Share Options
Former Share Option Plan ("SOP")
As at 31 December 2020, there were no options outstanding (31 December 2019: Nil) under this plan. The table below
summarises the number and movements in Options under this plan during the year:
Table 10: SOP Options
Movement for the year ended 31 December 2020:
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 2020:
Vested
Unvested
TOTAL
2020
NUMBER
2019
NUMBER
-
-
-
-
-
-
-
900,000
-
(900,000)
-
-
-
-
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 2020, there were no options outstanding (31 December 2019: 1,000,000) under the LTIP. The table below
summarises the number and movements in options under this plan during the year:
Table 11: LTIP Options
Movement for the year ended 31 December 2020:
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 2020:
Vested
Unvested
TOTAL
2020
NUMBER
2019
NUMBER
1,000,000
3,300,000
-
-
-
(1,500,000)
(1,000,000)
(800,000)
-
-
-
-
1,000,000
1,000,000
-
1,000,000
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).
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.
36
SYRAH RESOURCES > ANNUAL REPORT 2020
Current Equity Incentive Plan
As at 31 December 2020, there were 1,600,000 options outstanding under this plan (31 December 2019: 1,600,000). The table
below summarises the number and movements in Options under this plan during the year:
Table 12: Equity Incentive Plan Options
Movement for the year ended 31 December 2020:
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 2020:
Vested
Unvested
TOTAL
2020
NUMBER
2019
NUMBER
1,600,000
600,000
-
-
-
1,000,000
-
-
1,600,000
1,600,000
1,600,000
1,000,000
-
600,000
1,600,000
1,600,000
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.
37
(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 13: Remuneration for the financial year ended 31 December 2020
FIXED REMUNERATION
CASH
VARIABLE REMUNERATION
SALARY
& FEES(1)
LEAVE(2)
SUPER-
ANNUA-
TION
TERM-
INATION
BENEFITS
NON-
MONETARY
BENEFITS
SHARE
RIGHTS(3)
STI
CASH(4)
STI
SHARES(4)
LTI
RIGHTS(5) OPTIONS(5)
TOTAL
PERFORM-
ANCE
RELATED
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
%
NON-EXECUTIVE DIRECTORS
J Askew(6)
J Caldeira
L Bahash
S Watts
J Beevers(7)
S Riggall(8)
10,645
46,462
48,332
65,867
46,759
28,639
Sub-total
246,704
EXECUTIVE DIRECTOR
-
-
-
-
-
-
-
-
-
-
6,889
1,450
2,870
11,209
S Verner(9)
322,966
20,042
17,261
Sub-total
322,966
20,042
17,261
KEY MANAGEMENT PERSONNEL
J Costa
S Wells
280,668
12,246
21,748
258,921
11,481
24,597
-
-
-
-
-
-
-
-
-
-
-
J Morrissey(10)
51,784
2,363
10,704
97,895
J Currie(11)
15,931
643
6,433
144,730
607,304
26,733
63,482
242,625
Sub-total
TOTAL(12)
-
-
-
-
-
-
-
117,090
36,393
37,975
6,647
-
-
198,105
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,541
-
-
10,541
9,176
9,176
-
-
-
-
-
-
-
-
-
-
-
-
109,020
109,020
367,047
109,020
109,020
367,047
79,612
79,612
247,427
72,864
72,864
135,500
60,750
636,977
-
-
-
-
-
-
-
-
162,746
167,737
152,476
152,476
382,927
60,750 1,688,773
-
-
-
-
-
-
-
-
-
-
127,735
82,855
86,307
89,944
48,209
31,509
466,559
-
-
-
-
-
-
-
954,532
61%
954,532
-
721,313
56%
54%
-
-
-
-
1,176,974 46,775
91,952
242,625
9,176
198,105
261,496
261,496
760,515
60,750 3,109,864
(1) All amounts translated from Australian Dollars to United States Dollars at an average exchange for the year ended 31 December 2020 of 0.6905.
(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) During the year, the Company received shareholder approval of a Non-Executive Director Share Plan, which is a salary sacrifice plan pursuant
to which NED’s may elect to sacrifice up to 100% of their annual NED’s fees to acquire Non-Executive Director Share Rights (NED Rights). The
Company issued a total of 188,324 NED Rights in relation to the March 2020 quarter, specifically for the months of February 2020 and March 2020
during the year. NED Rights in relation to the June 2020, September 2020, and December 2020 quarters will be issued subsequent to year end.
(4) Represents STI payments made in shares on 17 March 2021, and cash on 12 March 2021, in respect of performance for the year ended 31
December 2020 as approved by the Remuneration, Nomination and Governance Committee.
(5) Represents amounts expensed through the Company’s profit and loss for performance rights and options issued under the Company’s LTIP and
EIP. These amounts are recognised in the Company’s profit and loss over the vesting period in accordance with AASB 2 Share-based Payments.
(6) Director’s fees paid to J Askew are paid to International Mining and Finance Corp, a company of which he is a Director.
(7) The Board of Directors has also resolved to grant 100,000 performance rights to J Beevers as part of his Director Contract, subject to shareholder
approval at the 2021 Annual General Meeting.
(8) S Riggall ceased as a Non-Executive Director of the Company effective from 22 May 2020.
(9) The Board of Directors has resolved to grant 467,727 EIP performance rights to S Verner and 537,020 performance rights to other Key Management
Personnel for the year ending 31 December 2020. The performance rights granted to S Verner remain subject to shareholder approval.
(10) J Morrissey ceased employment with the Company on 31 March 2020.
(11) J Currie ceased employment with the Company as Chief Legal Officer on 28 January 2020.
(12) Non-Executive Directors are entitled to receive a travel stipend of $3,452 (A$5,000) for each international trip where the travel time is in excess of
seven hours of international travel.
38
SYRAH RESOURCES > ANNUAL REPORT 2020
Table 14: Remuneration for the financial year ended 31 December 2019
FIXED REMUNERATION
VARIABLE REMUNERATION
CASH
SALARY
& FEES(1)
LEAVE(2)
SUPER-
ANNUA-
TION
TERM-
INATION
BENEFITS
NON-
MONETARY
BENEFITS
STI
CASH(3)
STI
SHARES(3)
LTI
RIGHTS(4) OPTIONS(4)
PERFORM-
ANCE
RELATED
TOTAL
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
%
NON-EXECUTIVE DIRECTORS
J Askew(5)
139,442
S Riggall
J Caldeira
L Bahash
S Watts(6)
C Lampe-
Onnerud(7)
84,707
86,873
91,862
47,988
21,718
Sub-total
472,590
EXECUTIVE DIRECTOR
-
-
-
-
-
-
-
-
8,047
4,559
12,606
S Verner
325,085
21,329
17,375
Sub-total
325,085
21,329
17,375
KEY MANAGEMENT PERSONNEL
J Costa
S Wells(9)
J Currie(10)
277,994
21,176
26,409
102,909
208,495
5,151
7,757
9,776
19,807
J Morrissey(12)
208,495
15,634
19,807
-
-
-
-
-
-
-
-
-
-
-
-
-
D Corr(13)
187,765
10,053
17,837
102,389
R Schaefer(14)
208,495
14,162
21,331
40,095
Sub-total
1,194,153
73,933
114,967
142,484
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
139,442
92,754
86,873
52,819
144,681
-
-
52,547
21,718
52,819
538,015
-
-
-
-
-
-
-
9,236
86,041
86,041
252,256
9,236
86,041
86,041(8)
252,256
-
-
797,363
53%
797,363
-
-
-
-
-
-
-
97,029
21,257
114,151
32,343
80,171
91,733
626,855
21,257
- (9)
18,497
178,847
- (56,953)(11)
-(11)
293,257
82,760
42,807
77,302
-
(512,190)
57,076
57,076
108,030
-
-
-
446,805
(194,146)
506,265
44%
372,273
153,483 (303,640)
110,230
1,857,883
48%
34%
20%
45%
-
TOTAL(15)
1,991,828
95,262
144,948
142,484
9,236
458,314
239,524
(51,384)
163,049
3,193,261
(1) All amounts translated from Australian Dollars to United States Dollars at an average exchange for the year ended 31 December 2019 of 0.6950.
(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 and/or cash on 12 March 2020, in respect of performance for the year ended 31 December 2019 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) The Board of Directors has also resolved to grant 100,000 performance rights to S Watts as part of her Director Contract, subject to shareholder
approval at the 2020 Annual General Meeting.
(7) C Lampe-Onnerud ceased as a Non-Executive Director of the Company effective from 24 March 2019.
(8) The Board of Directors has resolved to grant 865,892 EIP performance rights to S Verner and 994,172 performance rights to other Key Management
Personnel for the year ending 31 December 2019. The performance rights granted to S Verner remain subject to shareholder approval.
(9) S Wells commenced employment with the Company as Chief Financial Officer on 2 September 2019 and he received a pro rata grant of 48,015
performance rights for the 2019 year on 12 March 2020
(10) J Currie ceased employment with the Company as Chief Legal Officer on 28 January 2020.
(11) J Currie relinquished all of her options and performance rights on 16 December 2019.
(12) J Morrissey ceased employment with the Company on 31 March 2020.
(13) D Corr ceased employment with the Company as Chief Financial Officer on 31 October 2019.
(14) R Schaefer ceased employment with the Company on 31 December 2019.
(15) Non-Executive Directors are entitled receive a travel stipend of $3,475 (A$5,000) for each international trip where the travel time is in excess of
seven hours of international travel.
39
(G) EXECUTIVE SERVICE AGREEMENTS
Remuneration and other key terms of employment for Executive Directors and Key Management Personnel for the year ending
31 December 2020 as formalised in Employment Agreements and summarised in the following table:
Table 15: 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 6 months
6 months
Ongoing
A$410,625 50% of TFR
50% of TFR 6 months
6 months
Ongoing
A$438,000 50% of TFR
50% of TFR 6 months
6 months
Ceased(1)
A$328,500 50% of TFR
50% of TFR 3 months
3 months
NAME
POSITION
S Verner
Managing Director
and Chief Executive
Officer
S Wells
Chief Financial
Officer
J Costa
Chief Operating
Officer
J Currie
Chief Legal Officer
and Company
Secretary
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
J Morrissey Chief People
Ceased(2)
A$328,500 50% of TFR
50% of TFR 3 months
3 months
Officer
(1) J Currie ceased employment with the Company as Chief Legal Officer on 28 January 2020.
(2) J Morrissey ceased employment with the Company on 31 March 2020.
40
SYRAH RESOURCES > ANNUAL REPORT 2020 (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 16: Overview of Performance Rights
GRANT DATE
18-May-18
25-Jun-18
21-Mar-19
27-May-19
6-Mar-20
12-Mar-20
22-May-20
22-May-20
22-May-20
2-Jun-20
TOTAL
VESTING
DATE
1-Jan-21
1-Jan-21
1-Jan-22
1-Jan-22
1-Jan-23
1-Jan-22
1-Jan-23
Various
3-Jun-22
Various
EXERCISE
PRICE
-
NUMBER OF
RIGHTS(1)
93,974(2)
VALUE PER RIGHT
AT GRANT DATE
A$3.93
-
-
-
-
-
-
-
-
-
32,485(2)
128,923
217,558
994,172
48,015
865,892
4,000,000(3)
100,000
5,750,000(3)
12,231,019
A$3.93
A$1.70
A$1.70
A$0.30
A$0.04
A$0.18
A$0.29
A$0.29
A$0.30
(1) The Board of Directors has resolved to grant 100,000 performance rights to J. Beevers as part of his Director Contract, subject to shareholder
approval at the 2021 Annual General Meeting. In addition, a total of 537,020 Performance Rights were issued to Key Management Personnel
pursuant to the LTI program in respect of the period commencing 1 January 2021. The Board of Directors has also resolved to grant 467,727
Performance Rights to S. Verner as his LTI, subject to shareholder approval.
(2) These Performance Rights lapsed subsequent to year end as a result of vesting conditions not being met.
(3) A total of 380,250 5YPRI Performance Rights lapsed in relation to Directors and Key Management Personnel subsequent to 31 December 2020.
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 EIP provides that performance rights will lapse
on the earlier of the date so nominated in the offer letter (2020/2019: 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 EIP, 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.
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 17: Overview of Options
GRANT DATE
25-Jun-18
27-May-19
7-Oct-19
VESTING
DATE
4-Jun-19
16-Jul-19
7-Oct-20
EXPIRY
DATE
25-Jun-21
16-Jul-21
7-Oct-22
EXERCISE
PRICE
A$4.34(1)
A$2.86
A$0.70
NUMBER OF
RIGHTS
600,000(2)
400,000(3)
600,000(4)
VALUE PER RIGHT
AT GRANT DATE
A$0.52
A$0.19
A$0.19
(1) Effective from 30 July 2019, 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 5 pro-rata
accelerated non-renounceable entitlement offer.
(2) 600,000 unlisted options issued to J Costa, Chief Operating Officer.
(3) 400,000 unlisted options issued to L Bahash, Non-Executive Director.
(4) 600,000 unlisted options issued to S Wells, Chief Financial Officer.
41
NON-EXECUTIVE DIRECTOR SHARE RIGHTS
The terms and conditions of each grant of Non-Executive Director Share Rights affecting the remuneration of Directors in the
current or a future reporting period are as follows:
Table 18: Overview of Non-Executive Director Share Rights
GRANT DATE
2-Jun-20
5-Jun-20
6-Jun-20
TOTAL
VESTING
DATE
31-Mar-21
31-Mar-21
31-Mar-21
EXERCISE
PRICE
-
-
-
NUMBER OF RIGHTS
70,696
VALUE PER RIGHT
AT GRANT DATE
A$0.29
6,318
111,310
188,324(1)
A$0.41
A$0.41
(1) During the year, the Company received shareholder approval of a Non-Executive Director Share Plan, which is a salary sacrifice plan pursuant
to which NED’s may elect to sacrifice up to 100% of their annual NED’s fees to acquire Non-Executive Director Share Rights (NED Rights). The
Company issued a total of 188,324 NED Rights in relation to the March 2020 quarter, specifically for the months of February 2020 and March
2020 during the year. These securities were issued under ASX Listing Rule 10.14. NED Rights in relation to the June 2020, September 2020, and
December 2020 quarters will be issued subsequent to year end. A resolution will be included in the 2021 Notice of Annual General Meeting to
seek approval to add J. Beevers into the Non-Executive Director Share Plan as an eligible participant. J. Beevers was appointed as a Non-Executive
Director on 22 May 2020.
(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 19: Shares Held by Directors/Key Management Personnel
BALANCE
1 JANUARY
2020
ORDINARY
SHARES
GRANTED
ORDINARY
SHARES
ISSUED ON
EXERCISE OF
OPTIONS
ON MARKET
ACQUISITIONS/
(DISPOSALS)
BALANCE
31 DECEMBER
2020
OTHER
DIRECTORS
J Askew
J Caldeira
L Bahash
S Watts
J Beevers(1)
S Riggall(2)
377,517
12,082
15,583
38,000
-
24,752
-
-
-
-
-
-
EXECUTIVE DIRECTOR
S Verner
260,701
286,473 (3)(4)
KEY MANAGEMENT PERSONNEL
-
S Wells
70,774(4)(5)
J Costa
J Currie(6)
114,584
107,685(4)(5)
-
-
J Morrissey(7)
16,143
142,524(4)
-
-
-
-
-
-
-
-
-
-
-
120,000
-
-
-
33,000
-
-
-
-
-
-
-
-
-
-
-
(24,752)
-
-
-
-
(158,667)
497,517
12,082
15,583
38,000
33,000
-
547,174
70,774
222,269
-
-
(1) J Beevers was appointed as a Non-Executive Director of the Company on 22 May 2020.
(2) S Riggall resigned as a Non-Executive Director of the Company on 22 May 2020.
(3) Fully paid ordinary shares issued to S Verner pursuant to the resolution passed at Annual General Meeting 22 May 2020.
(4) The Board of Directors resolved to issue 126,812 shares to S Verner and 177,361 shares to Key Management Personnel pursuant to the STI
Program for the 2020 year. The shares to be to be issued to S Verner remain subject to shareholder approval at the Annual General Meeting. The
shares issued to Key Management Personnel were issued on 17 March 2021 and are not included in the above reconciliation.
(5) Shares issued on 12 March 2020 pursuant to the STI Program in respect of the year ended 31 December 2019.
(6) J Currie ceased employment with the Company on 28 January 2020.
(7) J Morrissey ceased employment with the Company on 31 March 2020.
42
SYRAH RESOURCES > ANNUAL REPORT 2020
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 20: Performance Rights Held by Directors/Key Management Personnel
BALANCE
1 JANUARY
2020
GRANT
GRANTED
DURING
THE
PERIOD
LAPSED
DURING
THE
PERIOD
NET
CHANGE
OTHER(7)
BALANCE
31 DECEMBER
2020
DIRECTORS
S Verner
S Watts
2020(1)
2019
2018
2017
Total
2020(6)
Total
KEY MANAGEMENT PERSONNEL
J Costa
2020(1)
S Wells(5)
J Morrissey
2019
2018
Total
2020(1)
2019
Total
2020
2019
2018
2017
Total
128,923
32,485
161,408
-
-
-
-
96,692
38,286
52,319
187,297
217,558
93,974
121,773
433,305
-
-
-
-
4,865,892
-
-
-
4,865,892
100,000
100,000
3,763,121
-
-
3,763,121
3,029,066
-
3,029,066
-
-
-
-
-
-
-
(121,773)
(121,773)
-
-
-
-
-
-
-
-
-
-
-
-
(52,319)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(96,692)
(38,286)
-
(52,319)
(134,978)
4,865,892
217,558
93,974
-
5,177,424
100,000
100,000
3,763,121
128,923
32,485
3,924,529
3,029,066
-
3,029,066
-
-
-
-
-
VESTED UNVESTED
- 4,865,892(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
217,558
93,974(3)
-
5,177,424
100,000
100,000
3,763,121(4)
128,923
32,485(3)
3,924,529
3,029,066
-
3,029,066
-
-
-
-
-
(1) The Board of Directors has also resolved to grant 467,727 Performance Rights to S Verner as his LTI, subject to shareholder approval. 1,360,528
Performance Rights were issued to Key Management Personnel and other executives and senior managers pursuant to the LTI program in respect
of the period commencing on 1 January 2021. The performance rights issued to Key Management Personnel were issued on 17 March 2021 and
are not included in the above reconciliation. J Costa and S Wells were granted 277,172 and 259,848 performance rights respectively in relation to
the LTI program in respect of the period commencing on 1 January 2021. S. Wells was also granted 48,015 performance rights in relation to his pro-
rata LTI in respect of the period commencing on 1 January 2019 (this number is included in the table above).
(2) The performance rights issued under the 5YPRI program in 2020 were subject to testing of vesting conditions in early 2021 in relation to Year 1 of
the five-year 5YPRI program. The Board approved that 80.50% of the Year 1 5YPRI program vested following the end of the 31 December 2020
performance period, resulting in 644,000 5YPRI Performance Rights vesting for S. Verner. The balance of Year 1, being 156,000 Performance
Rights, lapsed.
(3) The performance rights issued under the LTI Program in 2018, were subject to testing of vesting conditions in early 2021. All such rights lapsed on
their terms.
(4) The performance rights issued under the 5YPRI program in 2020 were subject to testing of vesting conditions in early 2021 in relation to Year 1 of
the five-year 5YPRI program. The Board approved that 80.50% of the Year 1 5YPRI program vested following the end of the 31 December 2020
performance period, resulting in 523,250 5YPRI Performance Rights vesting for J. Costa. The balance of Year 1, being 126,750 Performance Rights,
lapsed.
(5) The performance rights issued under the 5YPRI program in 2020 were subject to testing of vesting conditions in early 2021 in relation to Year 1 of
the five-year 5YPRI program. The Board approved that 80.50% of the Year 1 5YPRI program vested following the end of the 31 December 2020
performance period, resulting in 402,500 5YPRI Performance Rights vesting for S. Wells. The balance of Year 1, being 97,500 Performance Rights,
lapsed.
(6) 100,000 Performance Rights granted to S Watts following shareholder approval at the Company’s Annual General Meeting held on 22 May 2020.
(7) Performance Rights relinquished during the period.
43
NON-EXECUTIVE DIRECTOR SHARE RIGHTS
A reconciliation of the number of Non-Executive Director Share Rights held by Directors, including their personally related
parties, in the Company is set out below.
Table 21: Non-Executive Director Share Rights Held by Directors
BALANCE
1 JANUARY
2020
GRANT
GRANTED
DURING
THE
PERIOD
LAPSED
DURING
THE
PERIOD
NET
CHANGE
OTHER
BALANCE
31 DECEMBER
2020
VESTED UNVESTED
DIRECTORS
J Askew
2020(1)
J Caldeira
L Bahash
S Watts
J Beevers
Total
2020(1)
Total
2020(1)
Total
2020(1)
Total
2020(2)
Total
-
-
-
-
-
-
-
-
-
-
111,310
111,310
34,596
34,596
36,100
36,100
6,318
6,318
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
111,310
111,310
34,596
34,596
36,100
36,100
6,318
6,318
-
-
-
-
-
-
-
-
-
-
-
-
111,310
111,310
34,596
34,596
36,100
36,100
6,318
6,318
-
-
(1) During the year, the Company received shareholder approval of a Non-Executive Director Share Plan, which is a salary sacrifice plan pursuant
to which NED’s may elect to sacrifice up to 100% of their annual NED’s fees to acquire Non-Executive Director Share Rights (NED Rights). The
Company issued a total of 188,324 NED Rights in relation to the March 2020 quarter, specifically for the months of February 2020 and March
2020 during the year. These securities were issued under ASX Listing Rule 10.14. NED Rights in relation to the June 2020, September 2020, and
December 2020 quarters will be issued subsequent to year end.
(2) A resolution will be included in the 2021 Notice of Annual General Meeting to seek approval to add J. Beevers into the Non-Executive Director Share
Plan as an eligible participant. J. Beevers was appointed as a Non-Executive Director on 22 May 2020.
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 22: Options Held by Directors/ Key Management Personnel
GRANTED
BALANCE
DURING
THE
PERIOD
BALANCE
1 JANUARY
2020
NET
CHANGE
OTHER (INC
EXPIRY /
LAPSE)
OPTIONS
EXERCISED
BALANCE
31 DECEMBER
2020 VESTED UNVESTED
EXERCISE
PRICE
DIRECTORS
L Bahash
400,000
EXECUTIVE DIRECTOR
S Verner(2)
1,000,000
KEY MANAGEMENT PERSONNEL
J Costa
600,000
S Wells
600,000
-
-
-
-
-
-
400,000
400,000
-
$2.86(1)
-
(1,000,000)
-
-
-
$4.27(1)
-
-
-
-
600,000
600,000
600,000
600,000
-
-
$4.34(1)
$0.70
(1) Effective from 30 July 2019, 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 5 pro-rata
accelerated non-renounceable entitlement offer.
(2) 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$4.30 and expiring in three years from the date of grant. The issuance of
these options was approved by the shareholders at the Annual General Meeting held on 19 May 2017 and issued on 26 May 2017. The options
expired unexercised on 26 May 2020.
44
SYRAH RESOURCES > ANNUAL REPORT 2020
(J) OTHER TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT
PERSONNEL
Aggregate amounts of other transactions with Directors and Key Management Personnel is set out below
Table 23: Transactions with Directors/ Key Management Personnel
Provision of services
Legal services provided by Sal & Caldeira Advogados, Lda(1)
Product technology development services provided Cadenza Innovation Inc(2)
2020
US$
2019
US$
79,989
-
79,989
195,343
301,119
496,462
(1) 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.
(2) Represents product technology development services provided to the Company by Cadenza Innovation Inc. C Lampe-Onnerud was a Non-
Executive Director of the Company and is Founder and Chief Executive Officer of Cadenza Innovation Inc. C Lampe-Onnerud ceased as a Non-
Executive Director effective 24 March 2019.
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:
2020
US$
2019
US$
Trade and other payables
Legal Services provided by Sal & Caldeira Advogados, Lda(1)
-
8,508
(1) Represents outstanding balances arising of 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.
(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
2020
352,754
0.74
31-DEC
2019
136,156
0.33
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)
(60,870)
(130,549)
(28,970)
(28,970)
(14,491)
Basic earnings per share (US cents)
(14.59)
(34.56)
(9.30)
(4.51)
(5.84)
45
SHARE OPTIONS AND PERFORMANCE RIGHTS
(i)
Unissued ordinary shares
Unissued ordinary shares of Syrah Resources Limited under option, performance rights and Non-Executive Director Share
Rights as at 31 December 2020 are as follows:
Table 24: Unissued Ordinary Shares under Option, Performance Rights and Non-Executive Director Share 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
Equity Incentive Plan (“EIP”)
25-Jun-18
27-May-19
07-Oct-19
Total Options
Performance Rights
LTIP
14-Mar-18
18-May-18
EIP
25-Jun-18
21-Mar-19
27-May-19
30-Aug-19
6-Mar-20
12-Mar-20
22-May-20
22-May-20
2-Jun-20
22-May-20
4-Jun-19
16-Jul-19
07-Oct-20
1-Jan-21
31-Dec-20
31-Dec-20
1-Jan-22
1-Jan-22
31-Dec-20
1-Jan-23
1-Jan-22
1-Jan-23
Various
Various
3-Jun-22
Total Performance Rights
Non-Executive Director Share Rights
31-Mar-21
2-Jun-20
5-Jun-20
6-Jun-20
31-Mar-21
31-Mar-21
Total Non-Executive Director Share Rights
25-Jun-21
16-Jul-21
07-Oct-22
A$4.34 (1)
A$2.86 (1)
A$0.70
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
400,000
600,000
1,600,000
95,988(2)
93,974(2)
32,485(2)
536,252
217,558
600,194
2,949,992
67,287
865,892
A$0.52
A$0.19
A$0.19
A$3.93
A$3.93
A$3.93
A$1.70
A$1.70
A$0.70
A$0.30
A$0.04
A$0.18
4,000,000(2)
A$0.29
8,000,000(2)
A$0.30
100,000
A$0.29
17,559,622(2)
70,696(3)
6,318(3)
111,310(3)
188,324
A$0.29
A$0.41
A$0.41
(1) Effective from 30 July 2019, 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 5 pro-rata
accelerated non-renounceable entitlement offer.
(2) The Board of Directors has also resolved to grant 100,000 performance rights to J Beevers as part of his Director Contract, subject to shareholder
approval at the 2021 Annual General Meeting. 1,360,528 Performance Rights were issued to Key Management Personnel and other executives
and senior managers pursuant to the LTI program on 17 March 2021 in respect of the period commencing 1 January 2021. In addition, the Board
of Directors has also resolved to grant 467,727 Performance Rights to S Verner as his LTI, subject to shareholder approval. Subsequent to 31
December 2020, a total of 690,447 Performance Rights lapsed unexercised.
(3) During the year, the Company received shareholder approval of a Non-Executive Director Share Plan, which is a salary sacrifice plan pursuant
to which NED’s may elect to sacrifice up to 100% of their annual NED’s fees to acquire Non-Executive Director Share Rights (NED Rights). The
Company issued a total of 188,324 NED Rights in relation to the March 2020 quarter, specifically for the months of February 2020 and March
2020 during the year. These securities were issued under ASX Listing Rule 10.14. NED Rights in relation to the June 2020, September 2020, and
December 2020 quarters will be issued subsequent to year end.
.
46
SYRAH RESOURCES > ANNUAL REPORT 2020
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 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, 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.
Shares issued on exercise of options
(ii)
No options were exercised during the year ended
31 December 2020 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.
47
AUDITOR
PricewaterhouseCoopers continues in office in accordance
with section 327 of the Corporations Act.
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.
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 49.
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
30 March 2021
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.
Assurance Services
PwC Australian firm
Network firms of PwC
Australian firm
Total remuneration for audit
services
Non-assurance services
PwC Australian firm
Tax compliance services
Tax consulting services
Network firms of PwC
Australian firm
Other consulting services
Total remuneration for non-
assurance services
Total remuneration paid to
PricewaterhouseCoopers
2020
US$’000
2019
US$’000
209
65
204
87
274
291
28
73
4
105
379
66
121
5
192
483
The Group’s policy allows the engagement of
PricewaterhouseCoopers on certain assignments additional
to their statutory audit duties where PricewaterhouseCoopers
expertise and experience with the Group are important,
subject to a cap in fees on individual assignments, and a
cap on aggregate fees over the course of a year. Certain
assignments, and assignments in excess of these caps,
require approval from the Audit and Risk Committee.
48
SYRAH RESOURCES > ANNUAL REPORT 2020
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Syrah Resources Limited for the year ended 31 December 2020, 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.
Ben Gargett
Partner
PricewaterhouseCoopers
Melbourne
30 March 2021
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.
49
50
SYRAH RESOURCES > ANNUAL REPORT 2020 CONSOLIDATED FINANCIAL STATEMENTS
For the financial year ended 31 December 2020
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
21, which is not part of these financial
statements.
The financial statements were
authorised for issue by the Directors
on 30 March 2021. 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
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTE HOW THE NUMBERS ARE CALCULATED
1
2
3
4
5
6
7
8
9
10
11
INTRODUCTION
SEGMENT INFORMATION
REVENUE
COST OF SALES
DISTRIBUTION COSTS
ADMINISTRATIVE EXPENSES
INCOME TAX EXPENSE
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
NON-FINANCIAL ASSETS AND NON-FINANCIAL
LIABILITIES
EQUITY
RECONCILIATION OF LOSS AFTER INCOME TAX TO
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
RISK
12
FINANCIAL RISK MANAGEMENT
UNRECOGNISED ITEMS
13
14
15
16
17
18
19
20
21
22
COMMITMENTS, CONTINGENCIES AND GUARANTEES
EVENTS OCCURRING AFTER THE REPORTING PERIOD
OTHER INFORMATION
RELATED PARTY TRANSACTIONS
SHARE-BASED PAYMENTS
REMUNERATION OF AUDITORS
EARNINGS PER SHARE
PARENT ENTITY FINANCIAL INFORMATION
SUBSIDIARIES
DEED OF CROSS GUARANTEE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
52
53
54
55
56
57
58
59
59
59
60
60
61
64
72
74
75
76
79
80
80
81
82
83
86
86
87
88
88
91
51
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue from continuing operations
Revenue
Cost of sales
Gross profit/(loss)
Distribution costs
Administrative expenses
Other income/(expenses)
Write-down of inventories
Total expenses
Impairment of assets
NOTES
3
4
5
6
9
2020
US$’000
10,789
(49,281)
(38,492)
(3,854)
(6,611)
(2,214)
(2,594)
(15,273)
2019
US$’000
72,186
(105,477)
(33,291)
(11,169)
(8,644)
(330)
(6,687)
(26,830)
-
(96,868)
Profit/(loss) before net finance income and income tax
(53,765)
(156,989)
Finance income
Finance expenses
Net finance income/(expenses)
Profit/(loss) before income tax
372
(4,770)
(4,398)
1,145
(2,006)
(861)
(58,163)
(157,850)
Income tax (expense)/benefit
7
(2,707)
27,301
Loss after income tax for the year attributable to the owners of
Syrah Resources Limited
(60,870)
(130,549)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to the profit or loss
Exchange differences on translation of foreign subsidiaries
10b
Other comprehensive income/(loss) for the year, net of tax
(817)
(817)
(924)
(924)
Total comprehensive income/(loss) for the year attributable to the
owners of Syrah Resources Limited
Loss per share attributable to the owners of Syrah Resources Limited
Basic loss per share
Diluted loss per share
(61,687)
(131,473)
Cents
(14.59)
(14.59)
Cents
(34.56)
(34.56)
18
18
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
52
SYRAH RESOURCES > ANNUAL REPORT 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
NOTES
2020
US$’000
2019
US$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Available-for-sale financial assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Mining assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
8a
8b
9a
8b
9c
9b
9d
8c
8d
9e
8c
8e
8d
9d
9e
10a
10b
74,992
1,937
15,737
299
92,965
13,248
164,444
134,208
93
26,984
338,977
431,942
6,588
1,417
841
8,846
985
47,468
15,354
1,938
24,559
90,304
99,150
80,577
4,471
18,023
162
103,233
19,593
160,671
120,731
151
27,753
328,899
432,132
11,464
1,837
481
13,782
-
39,688
16,794
-
10,007
66,489
80,271
332,792
351,861
604,920
(7,994)
(264,134)
332,792
563,694
(7,337)
(204,496)
351,861
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
53
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTRIBUTED
EQUITY
ACCUMULATED
LOSSES
Balance at 1 January 2020
Loss after income tax expense for the year
Other comprehensive income/(loss) for the year, net
of tax
Total comprehensive income/(loss) 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
US$’000
563,694
-
-
-
40,809
-
417
-
41,226
US$’000
(204,496)
(60,870)
-
(60,870)
-
-
-
1,232
1,232
RESERVES
US$’000
(7,337)
-
(817)
(817)
-
1,809
(417)
(1,232)
160
TOTAL
EQUITY
US$’000
351,861
(60,870)
(817)
(61,687)
40,809
1,809
-
-
42,618
Balance at 31 December 2020
604,920
(264,134)
(7,994)
332,792
Balance at 1 January 2019
Change in accounting policy
Restated total equity at 1 January 2019
Loss after income tax expense for the year
Other comprehensive income/(loss) for the year, net
of tax
Total comprehensive income/(loss) 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
525,085
-
525,085
-
-
-
37,507
-
1,102
-
38,609
(77,219)
(628)
(77,847)
(130,549)
-
(2,656)
-
(2,656)
-
(924)
445,210
(628)
444,582
(130,549)
(924)
(130,549)
(924)
(131,473)
-
-
-
3,900
3,900
-
1,245
(1,102)
(3,900)
(3,757)
37,507
1,245
-
-
38,752
Balance at 31 December 2019
563,694
(204,496)
(7,337)
351,861
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
54
SYRAH RESOURCES > ANNUAL REPORT 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows from operating activities
Receipts from customers
NOTES
2020
US$’000
2019
US$’000
12,845
69,519
Payments to suppliers and employees (inclusive of goods and services
tax)
Interest received
Net cash inflow/(outflow) from operating activities
11
Cash flows from investing activities
Payments for property, plant and equipment
Payments for mining assets
Payments for intangibles
Payments for security deposits
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from issue of convertible note
Share issue transaction costs
Payment for interest on lease liabilities
Payments of lease liabilities
Repayment of borrowings
Proceeds from borrowings
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase 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
8a
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
(46,233)
472
(32,916)
(10,537)
-
-
(1,252)
(11,789)
42,363
-
(1,554)
(1,214)
(1,064)
(210)
210
38,531
(6,174)
80,577
589
74,992
(104,417)
1,312
(33,586)
(29,930)
(5,412)
(20)
(1,248)
(36,610)
39,206
39,072
(1,699)
(1,272)
(1,682)
-
-
73,625
3,429
77,149
(1)
80,577
55
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
INTRODUCTION
SEGMENT INFORMATION
REVENUE
COST OF SALES
DISTRIBUTION COSTS
ADMINISTRATIVE EXPENSES
INCOME TAX EXPENSE
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
EQUITY
RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
57
58
59
59
59
60
60
61
64
72
74
1
2
3
4
5
6
7
8
9
10
11
56
SYRAH RESOURCES > ANNUAL REPORT 2020
NOTE 1. INTRODUCTION
a) Basis of preparation
This general purpose financial report has been prepared
in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting
Standards Board and the Corporations Act 2001. Syrah
Resources Limited is a for-profit entity for the purpose of
preparing the financial statements.
Compliance with IFRS
The consolidated financial statements of the Syrah
Resources Limited group also comply with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the
historical cost convention, except for certain assets which, as
noted, are at fair value.
Critical accounting estimates
The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements, are disclosed in the respective notes.
Estimate and assumptions which are material to the financial
report are found in the following notes:
> Impairment of non-current assets – assessment of
indicators of impairment and review of asset carrying
values – note 9(c)
> Close-down restoration and environmental obligations –
estimation costs and the timing of expenditure – note 9(e)
> Recoverability of deferred tax assets for carried forward
tax losses – note 9(d)
> Recoverability of input tax credits – note 8(b)
> Carry forward value of exploration and evaluation – note
9(b)
> Provisions – note 9(e)
> Liquidity – note 12(c)
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 19.
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 Statement
of Comprehensive Income 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 of (for net
investment hedges), at which time they are recognised in the
Statement of Comprehensive Income.
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 2020: 0.7702) (31 December 2019: 0.7006) and
the Statement of Comprehensive Income is translated at the
average exchange rate for the financial year (2020: 0.6905)
(2019: 0.6950). 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.
57
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 three segments:
Balama
Vidalia
Production, distribution and sale of natural flake graphite from the Balama Graphite Operation in
Mozambique.
Ongoing assessment and development of downstream Vidalia AAM opportunities for natural flake graphite
including the development of a processing facility in the USA.
Corporate Corporate administration and investing activities.
b) Segment information
Year ended 31 December 2020
Total segment revenue
Inter-segment revenue
Revenue from external customers
BALAMA
VIDALIA
CORPORATE
CONSOLIDATED
US$’000
US$’000
US$’000
US$’000
10,809
(20)
10,789
-
-
-
-
-
-
10,809
(20)
10,789
Total segment EBITDA
(35,150)
(142)
(8,354)
(43,646)
Year ended 31 December 2019
Total segment revenue
Inter-segment revenue
Revenue from external customers
72,234
(48)
72,186
-
-
-
-
-
-
72,234
(48)
72,186
Total segment EBITDA
(135,206)
(41)
(8,529)
(143,776)
17,387
21,581
1
-
75,577
81,652
278,139
283,123
60,643
45,432
195
344
92,965
103,233
338,977
328,899
(47,285)
(38,381)
(2,374)
(531)
(49,491)
(41,359)
(99,150)
(80,271)
Total segment current assets
31 December 2020
31 December 2019
Total segment non current assets
31 December 2020
31 December 2019
Total segment liabilities
31 December 2020
31 December 2019
58
SYRAH RESOURCES > ANNUAL REPORT 2020
NOTE 3. REVENUE
Revenue from external customers
Timing of revenue recognition
- At a point in time – Product
- Over time – Freight
2020
US$’000
10,789
9,536
1,253
(a) Geographical information
Segment revenues from sales to external customers based on the geographical location of the port of discharge.
China
Europe
India
Asia (excl. China & India)
Americas
Other locations
2020
US$’000
878
5,836
1,884
292
1,887
12
2019
US$’000
72,186
66,303
5,883
2019
US$’000
54,787
8,612
3,919
2,906
1,900
62
(b) Major customer information
Revenue from four major customers in Europe, which individually accounted for approximately 7% or greater of total segment
revenues, amounted to $5.8 million arising from the sale of natural graphite products on a CIF basis.
10,789
72,186
NOTE 4. COST OF SALES
Mining and production costs
Logistics costs
Government royalties
Depreciation and amortisation expense
Changes in inventories
Other costs
NOTE 5. DISTRIBUTION COSTS
Shipping costs
Depreciation and amortisation
Other selling costs
2020
US$’000
28,395
9,634
60
9,772
892
528
2019
US$’000
79,238
14,769
1,269
11,929
(1,728)
-
49,281
105,477
2020
US$’000
1,812
62
1,980
3,854
2019
US$’000
8,523
95
2,551
11,169
59
NOTE 6. ADMINISTRATIVE EXPENSES
Loss before income tax from continuing operations includes the following specific expenses:
Employee benefits:
Salaries and wages
Share-based payments
Employee entitlements
Defined contribution superannuation expense
Total employee benefits expense
Legal and consulting expenses:
Legal expenses
Consulting expenses
Total legal and consulting expenses
Other expenses:
Other expenses
Total other expenses
2020
2019
US$’000
US$’000
2,527
1,809
161
202
4,699
189
879
1,068
844
844
3,965
1,295
228
246
5,734
127
1,131
1,258
1,652
1,652
Total administrative expenses
6,611
8,644
2020
US$’000
-
2,707
2,707
769
1,938
2,707
2019
US$’000
-
(27,301)
(27,301)
(5,985)
(21,316)
(27,301)
NOTE 7. INCOME TAX EXPENSE
a)
Income tax expense
Current tax expense
Deferred tax expense
Total tax expense/(benefit)
Deferred income tax
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Total deferred tax expense/(benefit)
60
SYRAH RESOURCES > ANNUAL REPORT 2020
b) Numerical reconciliation of income tax for the year to prima facie tax payable
Loss from continuing operations before income tax
Tax at the Australian tax rate of 30% (2019 – 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
- Share-based payments
- Other non-deductible expenses
- Difference in overseas tax rates
- Movement in unrecognised temporary differences
-
(Under)/over provision in the prior year
- Current year taxation losses not recognised as deferred tax assets
- Other permanent differences
Income tax expense/(benefit)
c)
Taxation losses and unrecognised temporary differences
Unused taxation losses for which no deferred tax asset has been recognised
Potential taxation benefit at 30%
2020
US$’000
(58,163)
2019
US$’000
(157,850)
(17,449)
(47,355)
543
656
2,371
1,496
130
12,398
2,562
2,707
2020
US$’000
94,215
28,265
388
215
(1,882)
(305)
(2,016)
22,663
991
(27,301)
2019
US$’000
105,811
31,743
Temporary differences for which no deferred tax asset (net) has been recognised
171
590
The taxation benefits of taxation losses and temporary differences not brought to account will only be obtained if:
> the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from
the deductions for the losses to be realised in the respective jurisdictions and within the allowed timeframes for tax loss
utilization
> the consolidated entity continues to comply with the conditions for deductibility imposed by law; and
> no change in tax legislation adversely affects the consolidated entity in realising the benefits from deducting the losses.
NOTE 8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
a) Cash and cash equivalents
Cash at bank and in hand
Deposits at call
2020
US$’000
9,994
64,998
74,992
2019
US$’000
17,700
62,877
80,577
Total cash is held in current accounts or money market deposits with major financial institutions under normal terms and
conditions appropriate to the operation of the accounts. These deposits earn interest at rates set by these institutions. As at 31
December 2020 the weighted average interest rate on current accounts and term deposits was 0.22% (2019: 1.28%).
61
(i) Risk exposure
The Group’s exposure to foreign exchange and interest rate risk is discussed in note 12. The maximum exposure to credit risk at
the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above.
b)
Trade and other receivables
Current
Trade receivables
Prepayments
Other receivables
Input tax credits
Total current trade and other receivables
Non-current
Input tax credits
Security deposits(1)
Total non-current trade and other receivables
2020
2019
US$’000
US$’000
611
500
662
164
1,937
6,784
6,464
13,248
2,667
992
801
11
4,471
14,381
5,212
19,593
(1) Security deposits are restricted deposits that are used for monetary backing for performance guarantees
Classification of Trade Receivables
(i)
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
(ii)
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 12.
(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 12 for more information on the credit quality of the Group’s trade and other receivables. For non-current receivables,
the fair values are also not significantly different from their carrying amounts.
Significant estimates and judgements
Input tax credits in Twigg amounting to $6.8 million (31 December 2019: $14.4 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 2020, cash refunds totaling $8.6 million (31 December 2019:
$10.7 million) for input tax credits were received. Should management determine that some of these input tax credits are not
recoverable in future, the Group will reclassify those amounts to the cost base of related assets, or recognise an expense in the
profit or loss in the period the determination is made. The outstanding balance for input tax credit is classified as non-current
due to uncertainties on the timing of receipts.
c)
Trade and other payables
Current
Trade payables and accruals
Other payables
Total current trade and other payables
Non-current
Trade payables and accruals
Total non-current trade and other payables
62
2020
2019
US$’000
US$’000
5,448
1,140
6,588
985
985
10,318
1,146
11,464
-
-
SYRAH RESOURCES > ANNUAL REPORT 2020
Risk exposure
(i)
Trade payables are non-interest bearing and are normally settled on repayment terms between 7 and 30 days. Information
about the Group’s exposure to foreign exchange risk is provided in note 12.
Fair value measurement
(ii)
Due to the short-term nature of these payables, their carrying amount is assumed to approximate their fair value.
Leases
d)
This note provides information for leases where the Group is a leasee.
(i)
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right of use assets
Properties
Equipment
Lease liabilities
Current
Non-current
2020
2019
US$’000
US$’000
11,163
2,199
13,362
1,417
15,354
16,771
13,523
3,181
16,704
1,837
16,794
18,631
The lease liability is measured at the present value of the fixed and variable lease payments, net of cash lease incentives, that
are not paid at the balance date. Lease payments are apportioned between finance charges and a reduction of the lease
liability using the incremental borrowing rate implicit in the lease where available, or an assumed Group incremental borrowing
rate, to achieve a constant rate of interest on the remaining balance of the liability.
(ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to leases:
2020
2019
US$’000
US$’000
Depreciation charge of Right of use assets
Properties
Equipment
Interest expense (included in finance cost)
Expense relating to short-term leases (included in cost of goods sold and administrative
expenses)
Expense relating to leases of low-value assets that are not shown above as short-term
leases (included in administrative expenses)
The total cash outflow for leases in 2020 was $2.3 million (2019: $3.0 million)
1,574
982
2,556
1,178
44
3
1,672
1,216
2,888
1,296
50
3
63
e) Borrowings
Initial face value of Convertible Note(1) issued
Capitalised to principal outstanding
- Interest expense
- Transaction costs
Deferred transaction costs
Exchange differences
Total Convertible Note
2020
US$’000
39,093
4,234
782
(584)
3,943
2019
US$’000
39,093
569
782
(756)
-
47,468
39,688
(1) In October 2019, Syrah Resources Limited issued a 5-year unsecured A$55.8 million Convertible Note to AustralianSuper Pty Ltd as Trustee
for AustralianSuper. Under the terms of the Convertible Note, the Group elected to accrue interest on the principal outstanding at a rate of 8%
per annum, capitalised quarterly in arrears. Syrah Resources Limited also incurred $0.8 million of transaction costs related to the issuance of
the Convertible Note which were capitalised when the Convertible Note was issued and are amortised to finance expense over the term of the
Convertible Note.
The initial conversion of the Convertible Note is A$1.0036 per ordinary share. The Noteholder may elect to fully convert the Convertible Note into
fully paid ordinary shares of Syrah Resources Limited at any time after 30 months from Date of Completion and prior to maturity or earlier if: a third
party makes a takeover offer for all the Shares in the Company; or the Company announces the execution of a scheme implementation agreement
in respect of acquisition of all the Shares in the Company by scheme of arrangement. In an Event of Default the Noteholder may give notice to the
Company to demand payment of the principal outstanding on the Convertible Note by way of redemption of the Convertible Note, in which case the
principal outstanding shall become immediately due and payable; or, elect to convert the Convertible Note into Shares.
NOTE 9. NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
a)
Inventories
Stores and materials
Finished goods
2020
US$’000
14,149
1,588
15,737
2019
US$’000
12,928
5,095
18,023
Inventory write-down
Write-down of inventories to net realisable value totaled $2.6 million in 2020 (2019: $6.7 million) and were recognised as an
expense in the income statement.
64
SYRAH RESOURCES > ANNUAL REPORT 2020
b) Mining assets
Exploration and evaluation
Mine properties and development
Total mining assets
2020
US$’000
1,311
132,897
134,208
2019
US$’000
1,306
119,425
120,731
Movements in Mine Properties and Development are set out below:
EXPLORATION
AND EVALUATION
MINE
PROPERTIES AND
DEVELOPMENT
MINES UNDER
CONSTRUCTION
TOTAL
US$’000
US$’000
US$’000
US$’000
At 1 January 2020
Cost
Accumulated depreciation and impairment
Net book amount
For the financial year ended 31 December 2020
Balance at beginning of the year
Additions
Change in rehabilitation estimate
Amortisation expenses
Exchange differences
Balance at end of the year
1,306
-
1,306
1,306
-
-
-
5
178,922
(59,497)
119,425
119,425
13,459
3,600
(3,587)
-
1,311
132,897
-
-
-
-
-
-
-
-
-
180,228
(59,497)
120,731
120,731
13,459
3,600
(3,587)
5
134,208
For the financial year ended 31 December 2019
Balance at beginning of the year
1,306
Current year expenditure capitalised (net)
Change in rehabilitation estimate
Transfers(1)
Amortisation expenses
Impairment losses
Balance at end of the year
-
-
-
-
-
1,306
33,297
626
3,253
141,747
(3,274)
(56,224)
119,425
296,599
331,202
-
-
626
3,253
(296,599)
(154,852)
-
-
-
(3,274)
(56,224)
120,731
(1) Following the declaration of commercial production on 1 January 2019, $137.2 million was transferred to Property, Plant and Equipment and $17.7
million to Inventories.
Exploration and evaluation
The balance of Exploration and Evaluation relates to the Vanadium project at Balama and continues to be carried forward
in accordance with the exploration and evaluation accounting policy. The ultimate recoupment of exploration and evaluation
expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective
interests at an amount at least equal to book value.
Mine Properties and Development and Mines Under Construction
Mine Properties and Development and Mines Under Construction mainly relate to the development, construction and pre-
commercial production costs of Balama in Mozambique. Inventories and separately identifiable property, plant and equipment
were transferred to these categories on achievement of commercial production.
65
c)
Property, plant and equipment
LAND AND
BUILDINGS
PLANT AND
EQUIPMENT
COMPUTER
EQUIPMENT
ASSETS UNDER
CONSTRUCTION
RIGHT
OF USE
ASSETS
TOTAL
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
At 1 January 2020
Cost
Accumulated depreciation and
impairment
14,396
(5,084)
116,676
(42,152)
Net book amount
9,312
74,524
For the financial year ended 31 December 2020
Balance at beginning of period
Additions
Lease modifications (at net book value)
Depreciation charge
Exchange differences
9,312
628
-
(306)
-
74,524
2,683
-
(4,207)
2
Balance at end of the year
9,634
73,002
At 31 December 2020
Cost
Accumulated depreciation and
impairment
15,024
(5,390)
119,380
(46,378)
Net book amount
9,634
73,002
At 1 January 2019
Cost
Accumulated depreciation and
impairment
Net book amount
- Change in accounting policy
Restated net book amount
For the financial year ended 31 December 2019
Balance at beginning of period
Additions
Disposals (at net book value)
Transfers from Mines Under Construction
Depreciation charge
Impairment losses
Exchange differences
797
(158)
639
-
639
639
-
-
13,599
(452)
(4,474)
7,753
(2,091)
5,662
(5,393)
269
269
7
(9)
115,963
(5,596)
(36,170)
60
Balance at end of the year
9,312
74,524
At 31 December 2019
Cost
Accumulated depreciation and
impairment
14,396
(5,084)
116,676
(42,152)
Net book amount
9,312
74,524
66
905
(307)
598
598
7
-
(129)
1
477
924
(447)
477
214
(155)
59
-
59
59
13
-
680
(154)
-
-
598
905
(307)
598
59,533
19,599
211,109
-
(2,895)
(50,438)
59,533
16,704
160,671
59,533
16,704
160,671
7,512
-
-
179
(975)
11,009
(975)
(2,556)
(7,198)
924
10
937
67,969
13,362
164,444
67,969
18,680
221,977
-
(5,318)
(57,533)
67,969
13,362
164,444
25,082
-
25,082
-
25,082
-
-
-
12,595
12,595
33,846
(2,404)
31,442
7,202
38,644
25,082
27,543
12,595
8,084
38,644
35,647
-
(1,085)
(1,094)
6,949
-
137,191
-
-
(2,889)
(9,091)
-
(40,644)
(41)
(1)
18
59,533
16,704
160,671
59,533
19,599
211,109
-
(2,895)
(50,438)
59,533
16,704
160,671
SYRAH RESOURCES > ANNUAL REPORT 2020
Assets Under Construction
Assets Under Construction at 31 December 2020 consists of capitalised project and product development costs
for the downstream Vidalia project of $60.7 million (2019: $52.8 million) and capital costs for Balama of $7.3 million
(2019: $6.7 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 Group
conducts a review of the key drivers of the recoverable amount of cash generating units (‘CGUs’) biannually, which is used
as a source of information to determine whether there is an indication of impairment. Other factors, such as changes in
assumptions in future commodity prices, exchange rates, production rates and input costs, are also monitored to assess
for indications of impairment. Where an indicator of impairment exists, a detailed estimate of the recoverable amount is
determined. An impairment loss is recognised for a CGU when the recoverable amount is less than the carrying amount. At
the half year reporting date of 30 June 2020, the market capitalisation of the Company was below the book value of net assets
which was considered an indicator of a potential impairment of the asset. The share price increase has resulted in the market
capitalisation of the Company being above the book value of net assets at the full year reporting date of 31 December 2020,
removing this potential trigger of impairment of asset.
CGUs represent a grouping of assets at the lowest level for which there are separately identifiable cash flows that are largely
independent of the cash inflows from other assets or groups of assets. The Group has identified Balama and Vidalia Project as
CGUs for which impairment testing is undertaken.
As reported at 30 June 2019, Syrah had determined the recoverable amount of Balama was less than the carrying value and
a post-tax impairment of US$65.9 million was recognised at 30 June 2019. The circumstances that led to recognition of an
impairment at 30 June 2019 was primarily due to slower than previously foreshadowed ramp-up of production at Balama,
driven predominately by market demand factors (sales volume and selling prices).
As a result of the indicator of impairment at 30 June 2020, the Group conducted carrying value analysis to determine the
recoverable amount of Balama and Vidalia Project CGUs and has not identified any further impairment to the carrying values
of non-current assets.
At the end of the financial year, the Group determined that the suspension of production at Balama may represent an
indicator of potential impairment of the asset. However an assessment of the events and potential movement in asset value
drivers following the carrying value analysis conducted at 30 June 2020 indicated that a further carrying value analysis at 31
December 2020 was not required.
Balama Graphite Operation CGU
(i) Methodology
An impairment loss is recognised for a CGU when the recoverable amount is less than the carrying amount. The recoverable
amount of Balama 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 Balama CGU is based on a number of assumptions. Those key
assumptions that the recoverable amount is most sensitive to include:
> 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 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 are reviewed at least annually.
> Foreign exchange rates – future exchange rates for the Mozambique Metical (MZN) compared to the US dollar are forecast
based on external information and are kept constant in real terms after five years.
> Reserves and resources – life of mine production is based on Ore Reserves and a portion of the Mineral Resources
(totaling approximately 1% of the total mineral resources excluding ore reserves) 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
67
for inclusion as Ore Reserves is only included when there is a high 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. 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. The Reserves and Resources life extends
beyond the current mining license expiration date, therefore the valuation assumes an extension of the mining agreement
beyond its current tenure.
> 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 timing of recommencement with
consideration of near-term supply and demand market considerations in relation to the timing of recommencement of
operations and the progressive ramp-up to name-plate production. Operating costs are based on existing fixed and
variable cost base, capturing both completed and in-progress reductions to the cost base since the last asset carrying
value assessment, the production capability of the plant at design capacity is informed by the as built design, review
of physical parameters by independent technical experts and production improvement plans and assessments by the
operations team at Balama.
> 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. A discount rate of 12.3% (real post-tax) was applied to 30 June 2020 impairment testing.
(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 Balama CGU:
US$20 per tonne decrease in long-term graphite price (CIF Nacala)
5% increase in estimated operating costs
1% lower long-term graphite recovery rate
10% increase in the discount rate (from 12.30% to 13.53%)
6-month delay in Balama production restart
$18 million
$26 million
$8 million
$40 million
$15 million
A reasonably possible change in circumstances may affect these key assumptions, the fair value and potentially result in a
material adjustment to the carrying value of Balama. 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.
Active Anode Material (Vidalia) CGU
(i) Methodology
An impairment loss is recognised for a CGU when the recoverable amount is less than the carrying amount. The recoverable
amount of the Vidalia CGU was determined by assessing the fair value of the underlying assets and planned investments
outlined in the pre-feasibility study. FVLCOD is estimated based on the net present value of estimated future cash flows.
Future cash flows and recoverable amount of the CGU are based on a number of assumptions, including product selling price
expectations, discount rates 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.
The accumulated investment of the Group’s Vidalia investment is presented as an Asset Under Construction and is recorded
at a cost of US$60.6 million as at 31 December 2020. The assumptions underlying the strategic investment decision continue
to indicate that the accumulated investment in Vidalia will be recovered.
(ii) Key Assumptions
The Group’s Vidalia 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 Active Anode Material (‘AAM’)
product market by:
1. Rapid development of a qualification plant and production of AAM 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 AAM products;
2. Progression of strategic relationship discussions; and
3. Completion of a bankable feasibility study for a commercial scale AAM development
Future assumptions regarding selling prices of finished product from Vidalia are informed by current observed market prices
for equivalent existing products produced by incumbent supply chain participants. Operating costs are informed by studies
undertaken to date and from operating data from the plant at Vidalia as at 31 December 2020.
68
SYRAH RESOURCES > ANNUAL REPORT 2020
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 Mineral Resources, 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.
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.
d) Deferred tax balances
The balance comprises temporary differences attributable to:
Deferred tax assets
Taxation losses(1)
Mining assets
Total deferred tax assets
Deferred tax liabilities
Non-financial assets
Total deferred tax liabilities
Net deferred tax assets/(liabilities)
2020
2019
US$’000
US$’000
2,302
24,682
26,984
(1,938)
(1,938)
25,046
2,302
25,451
27,753
-
-
27,753
(1) Relates to tax losses generated by Twigg in Mozambique, which have a 5 year utilisation requirement under Mozambique tax laws.
Movements in deferred tax balances - 31 December 2020
Deferred tax assets
Financial liabilities
Taxation losses
Mining assets
Total deferred tax assets
Deferred tax liabilities
Non-financial assets
Total deferred tax liabilities
Net deferred tax assets
BALANCE AT
1 JANUARY 2020
(CHARGED) /
CREDITED TO
PROFIT OR LOSS
BALANCE AT
31 DECEMBER 2020
US$'000
US$'000
US$'000
-
2,302
25,451
27,753
-
-
27,753
-
-
(769)
(769)
(1,938)
(1,938)
(2,707)
-
2,302
24,682
26,984
(1,938)
(1,938)
25,046
69
Movements in deferred tax balances - 31 December 2019
Deferred tax assets
Financial liabilities
Taxation losses
Mining assets
Total deferred tax assets
Deferred tax liabilities
Mining assets
Total deferred tax liabilities
Net deferred tax assets
BALANCE AT
1 JANUARY 2019
(CHARGED) /
CREDITED TO
PROFIT OR LOSS
BALANCE AT
31 DECEMBER 2019
US$'000
US$'000
US$'000
333
21,435
-
21,768
(21,316)
(21,316)
452
(333)
(19,133)
25,451
5,985
21,316
21,316
27,301
-
2,302
25,451
27,753
-
-
27,753
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.
For the year ended 31 December 2020, Syrah has assessed whether the carried forward tax losses generating the deferred
tax assets currently recognised on balance sheet will be utilised within the time periods required under Mozambique tax law.
Syrah has determined that there is a sufficient degree of uncertainty in relation to certain tax losses which may not be used
within the required time period and as a result have resolved to write off the Deferred Tax Assets relating to those carried
forward tax losses, while retaining others where there is more certainty around usage of the tax losses.
e)
Provisions
Current
Employee benefits
Other provisions
Non-current
Employee benefits
Decommissioning and restoration
Other provisions
70
2020
2019
US$’000
US$’000
522
319
841
79
13,590
10,890
24,559
481
481
50
9,957
-
10,007
SYRAH RESOURCES > ANNUAL REPORT 2020
Movements in decommissioning and restoration provision
Balance at beginning of the year
Additional provisions:
- Capitalised to Mine Properties and Development (note 9b)
- Unwind of discount
Balance at end of the year
2020
US$’000
9,957
3,600
33
13,590
2019
US$’000
6,561
3,253
143
9,957
Employee benefits
Employee benefits provisions relate to employee entitlements such as annual leave and long service leave.
Other provisions
Other provisions relating to obligation to incur expenditure on Balama community development initiatives. The provision is
capitalised into Mine Properties and Development as shown in Note 9(b).
Significant Estimates and Judgements
The provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre tax rate
that reflects current market assessment of the time value of the money. When discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
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.
71
NOTE 10. EQUITY
a)
Issued capital
Issued and fully paid ordinary shares
(i) Movements in ordinary share capital
31 December 2020
Balance at beginning of the year
Issue of new shares:
- Institutional placement
- Equity-settled remuneration
Transfers from share-based payment reserve(2)
Capital raising costs
Balance at end of the year
31 December 2019
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
2020
2019
SHARES
477,087,059
SHARES
413,493,062
477,087,059
413,493,062
2020
US$’000
604,920
604,920
2019
US$’000
563,694
563,694
NUMBER OF
SHARES
WEIGHTED
AVERAGE ISSUE
PRICE (A$)
TOTAL
US$’000
413,493,062
-
563,694
62,228,746
1,365,251
-
-
477,087,059
343,603,692
31,042,087
37,852,622
994,661
-
-
413,493,062
A$0.90
-(1)
-
-
-
-
A$0.81
A$0.81
-(1)
-
-
-
42,363
-
417
(1,554)
604,920
525,085
17,634
21,573
-
1,102
(1,700)
563,694
(1) The cost associated with issuance of these shares is included in the transfers from share-based payments reserve line item.
(2) Represents transfers from the share-based payment reserves on issuance of shares.
(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 16.
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.
72
SYRAH RESOURCES > ANNUAL REPORT 2020
(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.
(vi) Non-controlling interests
A contractual obligation exists to issue a non-controlling non-diluting 5% interest in Twigg to the Mozambique Government
entity. As at 31 December 2020, 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
16(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:
31 December 2020
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 2019
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
2020
US$’000
(18,380)
10,386
(7,994)
2019
US$’000
(17,563)
10,226
(7,337)
FOREIGN
CURRENCY
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
US$’000
US$’000
(17,563)
(817)
-
-
-
(18,380)
(16,639)
(924)
-
-
-
(17,563)
10,226
-
1,809
(417)
(1,232)
10,386
13,983
-
1,245
(1,102)
(3,900)
10,226
TOTAL
US$’000
(7,337)
(817)
1,809
(417)
(1,232)
(7,994)
(2,656)
(924)
1,245
(1,102)
(3,900)
(7,337)
73
(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 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 16(b) for further details).
NOTE 11. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH
OUTFLOW FROM OPERATING ACTIVITIES
2020
US$’000
(60,870)
2019
US$’000
(130,549)
10,003
-
1,809
(137)
4,733
-
2,036
9,261
(4,324)
(420)
2,286
769
1,938
12,212
96,868
1,295
-
2,006
(188)
355
(2,107)
7,086
50
6,687
(27,301)
-
(32,916)
(33,586)
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation expense
Impairment of mining assets
Share-based payments
Revaluation of asset
Interest expense
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 trade and other payables
Increase/(decrease) in provisions
Increase/(decrease) in inventory
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Net cash outflow from operating activities
74
SYRAH RESOURCES > ANNUAL REPORT 2020
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
12
FINANCIAL RISK MANAGEMENT
PAGE
76
75
NOTE 12. 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.
The Group continues to assess the impacts on its business broadly, and Financial Risk Management specifically, from
COVID-19. These impacts include demand for its products, supply chain and people movement disruptions, and financial
market volatility (including currency markets). Syrah is particularly focused on managing its Liquidity Risk and assessing a
range of production and demand scenarios over the next 12 months.
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
Borrowings
Lease liabilities
a) Market risk
2020
2019
US$’000
US$’000
74,992
15,185
299
90,476
7,573
47,468
16,771
71,812
80,577
24,063
162
104,802
11,464
39,688
18,631
69,783
Foreign exchange risk
(i)
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), Mozambican Meticals (MZN) and Australian Dollars (AUD).
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
2020
2019
US$’000
US$’000
54,604
1,541
33
56,178
352
975
187
103
1,617
54,561
23,677
20,515
25
44,217
363
3,746
837
126
5,072
39,145
(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.
76
SYRAH RESOURCES > ANNUAL REPORT 2020
Group sensitivity
Based on the financial instruments held at 31 December 2020 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)
2020
US$'000
(2,601)
2,875
2019
US$'000
(1,865)
2,061
2020
US$'000
400
(442)
2019
US$'000
(23,855)
26,402
(ii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk relates to interest income on Cash and Cash Equivalents. The 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.
Under the terms of the Convertible Note, the Group can elect each quarter to capitalise interest and add the amount to the
Principal Outstanding at a rate of 8.0% or pay interest in cash at a rate of 7.5%. These interest rates are fixed for the term of
the Convertible Note.
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 customers and not releasing bills of lading
until receipt of the amount outstanding. Credit exposure limits are approved by the Audit and Risk Committee.
As at 31 December 2020, the trade receivables balance was US$0.6 million (2019: US$ 2.7 million) which are mostly 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 were only US$27,000 of trade receivables overdue as at 31 December 2020 which were fully
recovered in early 2021.
Liquidity risk
c)
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding and
the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and liabilities.
The Group has announced commercial production of natural graphite products from Balama but is not yet cashflow positive.
The Company may require additional financing, in addition to cash reserves, to meet operating and capital expenditure
requirements for Balama, general and administrative expenditures and Vidalia Project activities.
Maturities of Financial Liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period as at
the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows.
77
AS AT
31 DECEMBER 2020
LESS THAN
6 MONTHS
BETWEEN
6-12
MONTHS
BETWEEN
1-2 YEARS
BETWEEN
2-5 YEARS
OVER
5 YEARS
TOTAL CON-
TRACTUAL
CASH
FLOWS
CARRYING
AMOUNT
LIABILITIES
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Non-derivatives
Non-interest bearing
- Current Trade and other
payables
Interest bearing
- Non current Trade and
other payables
- Lease liabilities
- Non-current
borrowings(1)
Total non-derivative
liabilities
6,588
-
-
-
-
-
-
-
-
6,588
6,588
1,630
1,630
985
691
1,046
3,349
6,654
10,481
22,221
16,771
-
-
-
65,143
-
65,143
47,468
7,279
1,046
3,349
71,797
12,111
95,582
71,812
(1) Non-current borrowings represent the Convertible Note issued by the Group in October 2019. The Convertible Note has a 5 year term however the
noteholder may elect to convert into fully paid ordinary shares of Syrah Resources Limited any time after 30 months from Date of Completion and
prior to maturity or earlier if: a third party makes a takeover offer for all the Shares in the Company; or, the Company announces the execution of a
scheme implementation agreement in respect of acquisition of all the Shares in the Company by scheme of arrangement. In an Event of Default the
Noteholder may give notice to the Company to demand payment of the Principal Outstanding on the Convertible Note by way of redemption of the
Convertible Note, in which case the Principal Outstanding shall become immediately due and payable; or, elect to Convert the Convertible Note into
Shares.
AS AT
31 DECEMBER 2019
LESS THAN
6 MONTHS
BETWEEN
6-12
MONTHS
BETWEEN
1-2 YEARS
BETWEEN
2-5 YEARS
OVER
5 YEARS
TOTAL CON-
TRACTUAL
CASH
FLOWS
CARRYING
AMOUNT
LIABILITIES
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Non-derivatives
Non-interest bearing
- Trade and other
payables
Interest bearing
- Lease liabilities
- Non-current
borrowings(1)
Total non-derivative
liabilities
11,464
-
-
-
-
11,464
11,464
1,243
1,878
3,199
7,802
10,424
24,546
18,631
-
-
-
59,281
-
59,281
39,688
12,707
1,878
3,199
67,083
10,424
95,291
69,783
(1) Non-current borrowings represent the Convertible Note issued by the Group in October 2019. The Convertible Note has a 5 year term however the
noteholder may elect to convert into fully paid ordinary shares of Syrah Resources Limited any time after 30 months from Date of Completion and
prior to maturity or earlier if: a third party makes a takeover offer for all the Shares in the Company; or, the Company announces the execution of a
scheme implementation agreement in respect of acquisition of all the Shares in the Company by scheme of arrangement. In an Event of Default the
Noteholder may give notice to the Company to demand payment of the Principal Outstanding on the Convertible Note by way of redemption of the
Convertible Note, in which case the Principal Outstanding shall become immediately due and payable; or, elect to Convert the Convertible Note into
Shares.
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.
78
SYRAH RESOURCES > ANNUAL REPORT 2020
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
13
14
COMMITMENTS, CONTINGENCIES AND GUARANTEES
EVENTS OCCURRING AFTER THE REPORTING PERIOD
PAGE
80
80
79
NOTE 13. 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:
Property, plant and equipment
Total capital commitments
2020
US$’000
1,278
1,278
2019
US$’000
1,628
1,628
The above capital expenditure commitments are in relation to the development and construction of Balama in Mozambique
and the development of the downstream Vidalia project.
b) Contingencies
The Group did not have any contingent assets or liabilities at the end of the current and previous financial years.
c) Guarantees
Bank guarantees have been provided by Twigg, 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 MZN466.97 million (US$6.2 million) as at 31 December 2020 (2019: US$5.0 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. This guarantee
was required to remain in place for a period of two years after the signing of the Mining Agreement. This guarantee expired prior
to end of this reporting period, although a formal release of the guarantee by the Government of Mozambique has not yet been
received.
NOTE 14. EVENTS OCCURRING AFTER THE REPORTING PERIOD
Syrah announced the results of a Share Purchase Plan ("SPP") on 20 January 2021. The SPP provided Eligible Shareholders
with the opportunity to apply for up to A$30,000 worth of new fully paid ordinary shares ("New Shares") in the Company at the
same price (A$0.90 per share) as a A$56 million Placement that was completed on 11 December 2020. The SPP received valid
applications totaling approximately A$63.7 million, well in excess of the targeted A$12 million. As a result of the oversubscription,
Syrah’s Board of Directors exercised its discretion under the terms of the SPP to accept a total of A$18 million in applications for
the issue of approximately 20 million New Shares under the SPP.
Syrah announced the decision to restart production at the Balama on 22 February 2021. Production was temporarily suspended
at Balama in March 2020 due to impacts of COVID-19, specifically: travel restrictions, limiting the mobility of the Balama
workforce; and, weak end user demand due to lockdowns, mobility restrictions and economic uncertainty negatively impacting
electric vehicle sales. In July 2020 Syrah announced a labour restructure at Balama and other actions to preserve cash during
the period of suspended production, whilst also retaining operating and marketing capability to restart production. At the time
of the restart decision, Syrah deemed it was able to manage within current travel restrictions, and market conditions deemed
supportive of recommencing production. At the time of the restart decision on 22 February 2021, Syrah estimated a 2 to 3
months lead time to recommencement of production.
On 10 December 2020, Syrah announced an equity capital raising and a proposal to issue A$56 million in 2 convertible
notes, at Syrah’s option, in two equal tranches before 31 March 2021 and 30 June 2021 to AustralianSuper Pty Ltd as trustee
for AustralianSuper (AustralianSuper) (“Convertible Notes”). Issue of the Notes was subject to certain conditions, including
shareholder approval under ASX Listing Rule 7.1. A General Meeting was held on 26 February 2021, where shareholders
provided approval to issue the Convertible Notes to AustralianSuper. Syrah has elected not to issue the Convertible Note
which required notice to be given by 31 March 2021, although retained the option to issue the Convertible Note issuable by
30 June 2021.
During March 2021, Syrah announced the installation of a furnace at Vidalia to enable AAM production using natural graphite
from Syrah’s Balama operation. Precursor material (purified spherical graphite) from Vidalia was toll treated to AAM in Q4 2020
to accelerate the commencement of product qualification with potential customers. The furnace at Vidalia will now be used to
produce AAM for ongoing product qualification, which is an iterative process of product testing with potential customers.
In accordance with the obligations imposed on its subsidiary Twigg Exploration and Mining Limitada under the Mining
Agreement with the Mozambique Government, Syrah completed the transfer of a 5% quotaholding in Twigg Exploration and
Mining Limitada to Empresa Mocambicana De Exploracao Mineira, S.A..
No other events have occurred subsequent to 31 December 2020 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.
80
SYRAH RESOURCES > ANNUAL REPORT 2020
ADDITIONAL OTHER INFORMATION
This section of the notes includes additional other information that must be disclosed
to comply with the accounting standards and other pronouncements, but that is not
immediately related to individual line items in the financial statements.
NOTE ADDITIONAL OTHER INFORMATION
PAGE
15
16
17
18
19
20
21
22
RELATED PARTY TRANSACTIONS
SHARE-BASED PAYMENTS
REMUNERATION OF AUDITORS
EARNINGS PER SHARE
PARENT ENTITY FINANCIAL INFORMATION
SUBSIDIARIES
DEED OF CROSS GUARANTEE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
82
83
86
86
87
88
88
91
81
NOTE 15. 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 20.
c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other benefits
Share-based payments
2020
US$
1,485,245
91,952
251,801
1,280,866
3,109,864
2019
US$
2,545,404
144,948
151,720
351,189
3,193,261
Detailed remuneration disclosures are provided in the Remuneration Report on pages 22 to 47 of the Annual Report.
Transactions with related parties
d)
Transactions with related parties are set out below:
Purchases of goods and services
Technology and Product Development services provided by
Cadenza Innovation Inc.(1)
Legal services provided by Sal & Caldeira Advogados, Lda(2)
2020
US$
2019
US$
-
301,119
79,989
79,989
195,343
496,462
(1) Represents product technology development services provided to the Company by Cadenza Innovation Inc. C Lampe-Onnerud was a Non-
Executive Director of the Company and is Founder and Chief Executive Officer of Cadenza Innovation Inc. C Lampe-Onnerud ceased as a Non-
Executive Director effective 24 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.
e) Outstanding balances arising from purchases of goods and services
Trade and other payables
Legal services provided by Sal & Caldeira Advogados, Lda(1)
2020
US$
-
-
2019
US$
8,508
8,508
(1) Represents outstanding balances arising of 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.
82
SYRAH RESOURCES > ANNUAL REPORT 2020
NOTE 16. SHARE-BASED PAYMENTS
Types of share based payment plans
a)
The Group has a Non-Executive Director Share Rights Plan, Equity Incentive Plan, 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.
Non-Executive Director Share Rights Plan (“NEDSP”)
(i)
The NEDSP was established and approved by shareholders at the Annual General Meeting on 22 May 2020. The plan is
intended to support NEDs to develop a meaningful shareholding in the Company and as a means of aligning the interests of
NEDs and shareholders generally through the diversion of current and future cash remuneration to equity. In addition, it will
assist the company in implementing its cost reduction strategies and maintain its cash reserves.
The key element of the NEDSP for NEDs is that it provides the opportunity for NEDs to sacrifice part or all of their cash fees
in favour of Equity Securities under this plan to build their shareholding in the Company. The introduction of the NEDSP is
also intended to remunerate individual NEDs for any material additional efforts that individual NEDs are required to deliver in
progressing the Company’s goals.
The NEDSP does not attach any performance measures to vesting. This is in line with best practice governance standards
which recommend that non-executive directors generally should not receive equity with performance hurdles attached as it
may lead to bias in decision-making and compromise their objectivity and in turn their independence.
(ii) Equity Incentive Plan (“EIP”)
The EIP was established and approved by shareholders at an Annual General Meeting held on 17 May 2018, 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.
(iii) 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.
(iv) 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.
83
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:
2020
2019
WEIGHTED
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
NUMBER OF
OPTIONS
WEIGHTED
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
Balance at beginning of the year
A$3.25
2,600,000
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
-
-
A$4.27
A$2.61
A$2.61
-
-
(1,000,000)
1,600,000
1,600,000
A$4.62
A$1.56
-
A$4.75
A$3.25
A$4.01
(1) There were no options exercised during the year ended 31 December 2020 and 2019.
NUMBER OF
OPTIONS
4,800,000
1,000,000
-
(3,200,000)
2,600,000
2,000,000
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.
The outstanding balance of options as at 31 December 2020 is represented by:
Options issued as part of the EIP
Options issued as part of the LTIP
2020
2019
NUMBER OF
OPTIONS
1,600,000
EXERCISE PRICE
RANGE
A$0.70 to A$4.34
NUMBER OF
OPTIONS
1,600,000
EXERCISE PRICE
RANGE
A$0.70 to A$4.34
-
-
1,000,000
A$4.27
Share options outstanding at the end of the financial year have the following expiry dates and exercise prices:
GRANT DATE
26-May-2017
25-Jun-2018
27-May-2019
07-Oct-2019
Total Options
EXPIRY DATE
26-May-2020
25-Jun-2021
16-Jul-2021
07-Oct-2022
EXERCISE PRICE
A$4.27
A$4.34
A$2.86
A$0.70
Weighted average remaining contractual life of options outstanding at the
end of the year
2020
NUMBER
-
600,000
400,000
600,000
2019
NUMBER
1,000,000
600,000
400,000
600,000
1,600,000
2,600,000
0.98 years
1.37 years
84
SYRAH RESOURCES > ANNUAL REPORT 2020
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 2020:
- Vested
- Unvested
Performance testing dates for unvested Performance Rights above
are as follows:
- 31 December 2019
- 31 December 2020
- 1 January 2021
- 31 March 2021
- 1 January 2022
- 03 June 2022
- 1 January 2023
- 1 January 2024
- 1 January 2025
2020
NUMBER
2,026,974
16,248,463
(12,240)
(285,256)
(229,995)
2019
NUMBER
1,090,031
1,862,733
(143,143)
(782,647)
-
17,747,946
2,026,974
-
17,747,946
17,747,946
12,240
2,014,734
2,026,974
-
3,126,652
95,988
188,324
3,221,098
100,000
6,215,884
2,400,000
2,400,000
285,256
860,926
-
-
868,552
-
-
-
-
17,747,946
2,014,734
Performance rights on issue as part of the NEDSP, EIP and 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 to the Mozambique Government
entity.
As at 31 December 2020 of this report, the issuance of shares to the Mozambique Government entity has not occurred
however an expense recognised in 2018 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 was determined based on the net present value of asset level
estimated future cash flows 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 EIP
- Performance rights issued under the EIP
- Performance rights issued under the NEDSP
- Equity settled remuneration
2020
2019
US$’000
US$’000
61
1,326
96
326
1,809
163
673
-
459
1,295
85
NOTE 17. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms.
Assurance services:
PwC Australian firm
Network firms of PwC Australian firm
Total remuneration for audit services
Non-assurance services:
PwC Australian firm
Tax compliance services
Tax consulting services
Network firms of PwC Australian firm
Other consulting services
Total remuneration for non-assurance services
Total remuneration paid to PricewaterhouseCoopers
NOTE 18. EARNINGS PER SHARE
Earnings/(losses) per share
Basic loss per share
Diluted loss per share
a) Reconciliations of earnings used in calculating earnings per share
2020
2019
US$’000
US$’000
209
65
274
28
73
4
105
379
204
87
291
66
121
5
192
483
2020
2019
US Cents
US Cents
(14.59)
(14.59)
(34.56)
(34.56)
2020
2019
US$’000
US$’000
Basic loss
Total profit/(loss) attributable to the ordinary equity holders of the Company used in
calculating basic loss per share
(60,870)
(130,549)
Diluted loss
Total profit/(loss) attributable to the ordinary equity holders of the Company used in
calculating diluted loss per share
b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
loss per share
Weighted average number of ordinary shares used as the denominator in calculating
diluted loss per share
(60,870)
(130,549)
2020
2019
NUMBER
NUMBER
417,270,716
377,700,757
417,270,716
377,700,757
86
SYRAH RESOURCES > ANNUAL REPORT 2020
Options
The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the
purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 Earnings per Share. The
rights to options are non-dilutive as the group is loss making.
NOTE 19. PARENT ENTITY FINANCIAL INFORMATION
Summary financial information
a)
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Reserves
Accumulated losses
Total equity
Loss after income tax for the year
Other comprehensive income/ (loss)
Total comprehensive income/ (loss) for the year
2020
2019
US$’000
US$’000
71,560
498,380
2,270
50,476
44,866
413,385
1,820
42,467
604,920
11,924
563,694
(34,309)
(168,940)
(158,467)
447,904
370,918
(11,706)
46,074
34,368
(105,906)
(3,377)
(109,283)
b) Contingent liabilities of the parent entity
The parent entity has no contingent liabilities as at 31 December 2020 and 31 December 2019.
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. This
guarantee was required to remain in place for a period of two years after the signing of the Mining Agreement. This guarantee
expired prior to end of this reporting period, although a formal release of the guarantee by the Government of Mozambique
has not yet been received.
At the commencement of the production suspension at Balama, Syrah Global DMCC and Grindrod Mauritius agreed to
an immediate reduction in monthly cash payments for contracted fixed costs through to December 2021 in exchange for
a commitment to repay the foregone amount of a maximum US$7.2m once volume and price reach certain thresholds on
a consistent basis, or at the end of the contract term if not repaid by then, secured by a parent company guarantee. The
repayment obligation also reduces if Balama resumes production earlier than December 2021 and does not receive the
monthly fixed cost reduction.
87
NOTE 20. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 22.
NAME
Jacana Resources Proprietary Limited
PRINCIPAL PLACE OF BUSINESS /
COUNTRY OF INCORPORATION
Australia
Syrah Resources (KSA) Pty Ltd
Australia
Twigg Exploration and Mining, Limitada
Mozambique
Jacana Resources (Zambia) Ltd
Syrah Resources Saudi Arabia LLC
Zambia
Saudi Arabia
Syrah Resources Group Holdings Pty Ltd
Australia
Syrah Resources and Trading DMCC
United Arab Emirates
Syrah Global DMCC
Syrah US Holdings Pty Ltd
Syrah Technologies LLC
United Arab Emirates
Australia
United States of America
PERCENTAGE OF EQUITY
INTEREST HELD BY THE GROUP
2020 (%)
100
100
100(1)
2019 (%)
100
100
100(1)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(1) 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 the Mozambique Government entity. As at 31 December 2020, the
issuance of shares to the Mozambique Government entity had not occurred.
NOTE 21. 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).
88
SYRAH RESOURCES > ANNUAL REPORT 2020
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’.
Consolidated statement of comprehensive income
Revenue from continuing operations
Expenses:
Employee benefits expense
Legal and consulting expense
Depreciation and amortisation expense
Foreign exchange loss – net
Other expenses
Impairment of assets
Finance expenses
Loss for the year before income tax expense
Income tax expense
Loss after income tax expense for the year
Other comprehensive income/ (loss)
Exchange differences on translation of foreign subsidiaries
Total comprehensive income/ (loss) 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
2020
2019
US$’000
US$’000
283
288
(4,428)
(1,003)
(181)
(2,272)
(667)
-
(3,450)
(11,718)
-
(5,689)
(1,192)
(206)
(355)
(1,315)
(96,868)
(587)
(105,924)
-
(11,718)
(105,924)
45,257
33,539
(3,325)
(109,249)
(159,463)
(11,718)
1,184
(57,439)
(105,924)
3,900
(169,997)
(159,463)
89
b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at the end of the current and previous financial year for the
‘Closed Group’.
Current assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Total current assets
Non-current assets
Other receivables
Property, plant and equipment
Mining assets
Intangibles
Investments in subsidiaries
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
90
2020
2019
US$’000
US$’000
62,124
36,457
285
299
194
162
62,708
36,813
309
10,202
11,584
8
414,388
436,491
320
7,825
11,579
13
358,422
378,159
499,199
414,972
1,826
169
275
2,270
1,446
152
222
1,820
47,468
39,688
-
79
153
50
47,547
39,891
49,817
41,711
449,382
373,261
604,920
14,447
563,694
(30,970)
(169,985)
(159,463)
449,382
373,261
SYRAH RESOURCES > ANNUAL REPORT 2020
NOTE 22. 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 2020 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 20.
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.
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.
91
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the consolidated financial statements.
However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill. Deferred income
tax is also not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business
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.
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
CIF Incoterm. 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.
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.
92
SYRAH RESOURCES > ANNUAL REPORT 2020 Leases
f)
The Group leases various offices, warehouses and
equipment. Rental contracts are typically made for fixed
periods of 1 to 11 years but may have extension options.
Contracts may contain both lease and non-lease
components. The group allocates the consideration in the
contract to the lease and non-lease components based on
their relative stand-alone prices. However, for leases of office
for which the Group is a lessee, it has elected not to separate
lease and non-lease components and instead accounts for
these as a single lease component.
Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The
lease agreements do not impose any covenants, but leased
assets may not be used as security for borrowing purposes.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
> fixed payments (including in-substance fixed payments),
less any lease incentives receivable
> The lease payments are discounted using the Group’s
incremental borrowing rate, being the rate that the Group
would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic
environment with similar terms and conditions
To determine the incremental borrowing rate, the group:
> where possible, uses recent third-party financing
received as a starting point and make adjustments
specific to the lease, eg term, country, currency and
security.
Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss
over the lease period to produce a constant periodic rate
of interest on the remaining balance of the liability for each
period.
Right of use assets are measured at cost comprising the
following:
> the amount of the initial measurement of lease liability
> any lease payments made at or before the
commencement date less any lease incentives received
> any initial direct costs, and
> restoration costs
The Right of use Asset is depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise
of IT equipment and office equipment.
Extension and termination options are included in several
leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used
in the Group’s operations. The majority of extension and
termination options held are exercisable only by the Group
and not by the respective lessor.
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.
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 realisable 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.
93
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
10 to 50 years
Plant and equipment
5 to 50 years
Computer equipment
2 to 6 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.
94
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 estimated
life of mine on a straight-line basis.
n) Exploration and evaluation
Exploration and evaluation expenditure comprise 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 9).
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.
SYRAH RESOURCES > ANNUAL REPORT 2020
Recoverable amount is the greater of fair value less costs of
disposal and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or
groups of assets (cash generating units).
Where there is no binding sale agreement or active market,
fair value less costs of disposal is based on the best
information available to reflect the amount the Group could
receive for the cash generating unit in an arm’s length
transaction. In assessing value in use, the estimated future
cash flows are discounted to their present value using a post-
tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
An assessment is also made at each reporting date as to
whether there is any indication that previously recognised
impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount
is estimated. A previously recognised impairment loss is
reversed only if there has been a change in the estimates
used to determine the asset’s recoverable amount since the
last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the pre-
impairment value, adjusted for any depreciation that would
have been recognised on the asset had the initial impairment
loss not occurred. Such reversal is recognised in profit or
loss.
After such a reversal the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over
its remaining useful life.
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
(i) Classification
The Group classifies its financial assets in the following
measurement categories:
> those to be measured subsequently at fair value (either
through OCI or through profit or loss); and
> those to be measured at amortised cost.
The classification depends on the Group’s business model
for managing the financial assets and the contractual terms
of the cash flows.
For assets measured at fair value, gains and losses will either
be recorded in the Statement of Comprehensive Income or
Other Comprehensive Income.
The Group reclassify debt investments when and only when
its business model for managing those assets changes.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are
recognised on trade-date, the date on which the Group
commit to purchase or sell the asset. Financial assets are
derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and
the Group have transferred substantially all the risks and
rewards of ownership.
(iii) Measurement
At initial recognition, the Group measures financial assets at
its fair value plus, in the case of a financial assets not at fair
value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial assets.
Transaction costs of financial assets carried at FVPL are
expensed in the Statement of Comprehensive Income.
Financial assets with embedded derivatives are considered
in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends
on the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three
measurement categories into which the Group classify its
debt instruments:
Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets
is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is
recognised directly in the statement of comprehensive
income and presented in other gains/(losses) together with
foreign exchange gains and losses. Impairment losses
are presented as separate line item in the Statement of
Comprehensive Income.
Fair value through other comprehensive income (FVOCI):
Assets that are held for collection of contractual cash flows
and for selling the financial assets, where the assets’ cash
flows represent solely payments of principal and interest, are
measured at FVOCI. Movements in the carrying amount are
taken through other comprehensive income (OCI), except
for the recognition of impairment gains or losses, interest
income and foreign exchange gains and losses which are
recognised in the statement of comprehensive income. When
the financial asset is derecognised, the cumulative gain or
loss previously recognised in OCI is reclassified from equity
to the statement of comprehensive income and recognised
in other gains/(losses). Interest income from these financial
assets is included in finance income using the effective
interest rate method. Foreign exchange gains and losses are
presented in other gains/(losses) and impairment expenses
are presented as separate line item in the Statement of
Comprehensive Income.
FVPL: Assets that do not meet the criteria for amortised
cost or FVOCI are measured at FVPL. A gain or loss on a
debt investment that is subsequently measured at FVPL
is recognised in statement of comprehensive income and
presented net within other gains/(losses) in the period in
which it arises.
95
Equity instruments
The Group subsequently measures all equity investments
at fair value. Where the group’s management has elected
to present fair value gains and losses on equity investments
in OCI, there is no subsequent reclassification of fair value
gains and losses to Statement of Comprehensive Income
following the derecognition of the investment. Dividends from
such investments continue to be recognised in Statement of
Comprehensive Income as other income when the group’s
right to receive payments is established.
Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the Statement of
Comprehensive Income as applicable. Impairment losses
(and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other
changes in fair value.
Impairment
(iv)
The Group assess on a forward-looking basis the expected
credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology
applied depends on whether there has been a significant
increase in credit risk.
Expected credit losses for the Group’s trade receivables are
reviewed on an ongoing basis. The Group has policies in
place to manage exposures to customers from the sale of
graphite. These include 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.
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 current trade and
other payables are usually paid within 30 days of recognition.
s) Borrowings
Borrowings are recognised initially at fair value. Borrowings
are subsequently measured at amortised costs, representing
the applicable interest rate on the borrowings, and any value
attributed to the option to convert the Note. The fee paid on
the establishment of loan facilities was capitalised into the
value of the loan, along with interest which can be paid to the
Noteholder at a rate of 7.5% or capitalised at a rate of 8.0%.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Provisions
t)
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.
u) Employee entitlements
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected to be
settled within 12 months of the reporting date are recognised
in current liabilities in respect of employees’ services up
to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
96
SYRAH RESOURCES > ANNUAL REPORT 2020 Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be settled within 12 months of the reporting
date are recognised in non-current liabilities, provided there
is an unconditional right to defer settlement of the liability.
The liability is measured as the present value of expected
future payments to be made in respect of services provided
by employees up to the reporting date using the projected
unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures
and periods of service. Expected future payments are
discounted using market yields at the reporting date on
corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash
outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans
are expensed in the period in which they are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation
benefits are provided to employees.
Equity-settled transactions are awards of shares, rights
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.
v) Contributed equity
Ordinary shares are classified as equity and recognised at
the fair value of the consideration received by the Company.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, of the share proceeds received.
w) Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date; and assumes that the transaction will take place either:
in the principal market; or in the absence of a principal
market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
97
aa) New accounting standards and
interpretations
No new or amended accounting standards and
interpretations became applicable for the current reporting
period which had an impact on the Group’s accounting
policies.
x)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
> the profit attributable to equity holders of the Company,
excluding any costs of servicing equity other than
ordinary shares;
> by the weighted average number of ordinary shares
outstanding during the financial period, adjusted for
bonus elements in ordinary shares issued during the
period and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take into
account:
> the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares;
and
> the weighted average number of additional ordinary
shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
y) Goods and services tax (‘GST’) and other
similar taxes
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised
as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included
in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax
authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the tax
authority.
z) 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.
98
SYRAH RESOURCES > ANNUAL REPORT 2020 DIRECTORS’ DECLARATION
SYRAH RESOURCES LIMITED
ABN 77 125 242 284
Level 28, 360 Collins Street
Melbourne Victoria 3000
t: +61 3 9670 7264
e: enquiries@syrahresources.com.au
w: www.syrahresources.com.au
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 51 to 98 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 2020
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 21.
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
Melbourne, Australia
30 March 2021
99
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 2020 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 2020
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 includes a summary of significant
accounting policies and other explanatory information
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 & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (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.
100
SYRAH RESOURCES > ANNUAL REPORT 2020
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group’s operations consist principally of the Balama Graphite Operation located in Mozambique,
and the Vidalia Active Anode Material production facility, under development located in Louisiana,
USA.
Materiality
● For the purpose of our audit we used overall Group materiality of US$4.3 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 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 suspension of production at the Balama Graphite Operation
and the Vadalia Anode Material project being under development.
● We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● The Australian Group engagement team directed the involvement of the Mozambican 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.
101
● We determined the nature, timing and extent of work that needed to be performed by the Mozambican
component auditor operating under our instruction. We determined the level of involvement we needed to
have in the audit work performed by the component auditor to enable us to conclude whether sufficient
appropriate audit evidence had been obtained. Our involvement included discussions, written instructions
and inspecting a selection of their workpapers.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the following key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Carrying value of non-current assets
(Refer to note 9c)
We performed the following procedures, amongst
others, for both CGUs:
As at 31 December 2020, the Group recognised
US$164.4 million of Property, Plant and Equipment
and US$134.2 million of Mining Assets (together ‘the
mining assets’).
During the year the Group identified indicators of
impairment on both of its Cash Generating Units
(CGUs), being Balama Graphite Operation (Balama)
and the Vidalia Active Anode Material project (Vidalia).
As a result, the Group tested the CGUs for impairment.
The recoverable amounts of the CGUs were assessed
under the fair value less cost of disposal method, using
discounted cash flow models. No impairment charges
were recognised during the year.
The impairment assessment involved significant
judgements, such as:
● Forecasting short and long-term graphite
prices
● Determining reserve and resource estimates
and production and processing volumes
● Determining an appropriate discount rate
● Estimating future operating costs, capital
expenditure, foreign exchange rates, and
● Estimating the timing of recommencement of
mining and processing operations at Balama.
● Assessed whether the composition of each CGU
was consistent with our knowledge of the Group’s
operations and internal reporting.
● Evaluated the Group’s assessment that there were
indicators of impairment during the year ended 31
December 2020 for each CGU, taking into
consideration the requirements of Australian
Accounting Standards.
● Assessed whether each CGU appropriately
included all directly attributable assets and
liabilities.
● Assessed whether the valuation methodology,
which utilised discounted cash flow models to
estimate the recoverable amount of each CGU, was
consistent with Australian Accounting Standards.
● Compared the forecast cash flows used in the
discounted cash flow models to the most recent
budgets and Life of Mine operating plans.
● Assessed whether the forecast in the discounted
cash flow models used in the impairment
assessment were appropriate by performing the
following procedures, amongst others:
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SYRAH RESOURCES > ANNUAL REPORT 2020
This was a key audit matter due to the significant
carrying value of the Group’s property, plant and
equipment and mining assets and the judgements
involved in developing assumptions used in the
discounted cash flow models which determine the
recoverable amounts of the CGUs.
●
●
●
●
●
●
●
compared the short and long-term graphite
pricing data used to current independent
industry forecasts
compared the Group’s forecast graphite
production over the life of mine to the
Group’s most recent reserves and resources
statements
considered the ability of the Group to forecast
accurately by comparing the forecast cash
flows to historical actual cash flows achieved
by each CGU
compared the forecast operating costs and
capital expenditure to the most recent
internal budgets and Life of Mine operating
plans
compared the forecast operating costs to
historical actual expenditures
assessed the foreign exchange rate
assumptions to current external economic
forecasts
together with PwC valuation experts,
assessed the discount rate used for each CGU,
with reference to externally derived data
where possible.
● Performed tests of the mathematical accuracy of
the impairment models on a sample basis,
● Evaluated the reasonableness of the disclosures
made in Note 9c in light of the requirements of
Australian Accounting Standards.
In relation to the Balama CGU, we performed the
following additional procedure, amongst others:
● Evaluated the Group’s judgement in relation to the
likelihood of restart of production and their ability
to execute associated scenarios.
103
Liquidity and Capital Management
(Refer to note 12c)
As described in the financial report, the consolidated
financial statements have been prepared by the Group
on a going concern basis, which contemplates that the
Group will continue to meet its commitments, realise
its assets and settle its liabilities in the normal course of
business.
To support this basis of preparation, the Group has
prepared a forecast of its cash flows, which includes a
number of assumptions about the restart of production
at the Balama Graphite Operation during 2021, as
described in Note 14. The forecast also includes A$18
million from the Share Purchase Plan that closed in
January 2021, and a proposed capital raising of A$56
million in convertible notes issuable at Syrah’s option
in two equal tranches before 31 March 2021 and 30
June 2021.
Assessing the appropriateness of the Group’s liquidity
and capital management position was a key audit
matter due to their importance to the financial report
as a whole and the level of judgement involved.
We assessed the significant 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 evaluated the appropriateness of the Group's
assessment of their ability to continue as a going
concern, including whether the level of analysis is
appropriate given the nature of the Group, the
period covered is at least 12 months from the date
of our auditor’s report and relevant information
has been included as a result of the audit.
● We compared the commodity prices used in the
cash flow forecast against available information.
● We evaluated the risks surrounding the restart of
production at the Balama Graphite Operation and
timing and volume of sales forecasts, including the
Group’s view of future graphite pricing.
● We compared a sample of forecast operational and
capital cash outflows in the model to the budget
approved by the Board, and where appropriate to
relevant contracts or other external information.
● We compared actual revenue and cost outcomes to
the prior period forecasts to assess the historical
accuracy of the budgeting processes.
● We tested the shares issued in the capital raising
and vouched the cash proceeds received during the
year.
● We read the key terms associated with the
executed contract for the new convertible notes.
● We also considered the Group’s potential
opportunities for cash conservation as well as
options for raising additional funds.
● We considered the reasonableness of the liquidity
and capital risk management disclosures included
within the consolidated financial statements, in
light of the requirements of Australian Accounting
Standards.
104
SYRAH RESOURCES > ANNUAL REPORT 2020
Decommissioning and restoration provision
(Refer to Note 9e)
As a result of its mining and processing operations, the
Group is obliged to restore and rehabilitate the land
disturbed by its operations. Rehabilitation activities are
governed by a combination of legislative and operating
licence requirements. As at 31 December 2020 the
consolidated statement of financial position included
non-current provisions for asset retirement obligations
of US$13.6 million.
This was a key audit matter given the determination of
these provisions required judgement by the Group in
the assessment of the nature and extent of future works
to be performed, the future cost of performing the
works, the timing of when the decommissioning and
restoration activities will take place and economic
assumptions, such as the discount rate and inflation
rates, applied to forecast future cash outflows
associated with the decommissioning and restoration
activities to bring them to their present value.
We obtained the Group’s assessment of their
obligations to rehabilitate disturbed areas at the
Balama Graphite Operation and the estimated future
cost of that work, which forms the basis for the
provision for decommissioning and restoration costs
calculations (the model). We evaluated and tested
significant assumptions utilised in the models by
performing the following procedures, amongst others:
● Evaluated the Group’s decommissioning and
restoration cost forecast, including the process by
which they were developed.
● Considered the competence, capabilities and
objectivity of the Group’s external expert who
created the Group’s closure plan and the
assessment of the decommissioning and
restoration costs at the Balama Graphite
Operation.
● Compared on a sample basis movements in the
provision in the year and found them to be
consistent with our understanding of the Group’s
operations and associated rehabilitation plan.
● Compared the Group’s assumptions on the cost of
rehabilitation activities, on a sample basis, to the
cost of other similar activities at the mine site.
● Considered the appropriateness of the discount
rate and inflation rate utilised in calculating the
provision by comparing them to current market
consensus rates.
● Checked the mathematical accuracy of the model
● Checked whether the timing of the cash flows in
the model was consistent with current life of mine
plans and rehabilitation plans submitted to
relevant authorities for the mine site.
● We considered the reasonableness of the
decommissioning and restoration provision
disclosures included within the consolidated
financial statements, in light of the requirements
of Australian Accounting Standards.
105
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 2020, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
106
SYRAH RESOURCES > ANNUAL REPORT 2020
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 22 to 47 of the directors’ report for the
year ended 31 December 2020.
In our opinion, the remuneration report of Syrah Resources Limited for the year ended 31 December
2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Ben Gargett
Partner
Melbourne
30 March 2021
107
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 22 March 2021 except where otherwise indicated.
EQUITY SECURITY HOLDERS
TOP 20 LARGEST QUOTED SECURITY HOLDERS AS AT 22 MARCH 2021
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.
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
NATIONAL NOMINEES LIMITED
COPPER STRIKE
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BRISPOT NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
10.
BNP PARIBAS NOMINEES PTY LTD
11. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
12.
CS THIRD NOMINEES PTY LIMITED
13. MS QIONGQIONG HU
14.
15.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
16. MR ZIDONG CAO + MRS QIONGQIONG HU
17. MR ZIDONG CAO
18.
19.
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
20. MASFEN SECURITIES LIMITED
UNITS
111,664,246
% OF UNITS
22.44
67,940,983
35,952,291
16,491,666
15,592,960
9,141,369
7,367,398
3,851,073
3,736,329
3,377,292
2,960,688
2,890,995
2,620,945
2,435,176
2,144,360
2,130,000
2,087,850
1,762,395
1,708,301
1,603,714
13.65
7.22
3.31
3.13
1.84
1.48
0.77
0.75
0.68
0.59
0.58
0.53
0.49
0.43
0.43
0.42
0.35
0.34
0.32
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
Total Remaining Holders Balance
297,460,031
200,252,413
59.77
40.23
UNQUOTED EQUITY SECURITIES AS AT 22 MARCH 2021
Options over ordinary shares
Performance rights over ordinary shares
Non-Executive Director Share Rights
Unlisted Convertible Note
NUMBER ON
ISSUE
1,600,000
NUMBER OF
HOLDERS
3
17,984,241
188,324
1
57
4
1
SUBSTANTIAL HOLDERS
Substantial holders in the Company, as disclosed in substantial holder notices given to the Company, are set out below:
RANK
1.
NAME
AustralianSuper Pty Ltd
Paradice Investment Management Pty Ltd
Bruce N Gray
2.
3.
108
UNITS
68,292,583
37,714,532
35,943,668
SYRAH RESOURCES > ANNUAL REPORT 2020 DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding as at 22 March 2021:
TOTAL HOLDERS
2,287
3,486
1,659
3,071
368
10,871
924
UNITS
1,223,359
9,662,686
12,926,068
92,588,067
381,312,264
497,712,444
181,064
% OF ISSUED CAPITAL
0.25
1.94
2.60
18.60
76.61
0.00
100.00
0.04
TOTAL HOLDERS
-
UNITS
-
% OF ISSUED CAPITAL
-
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
Holding less than a marketable parcel
UNLISTED OPTIONS
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
-
-
-
3
3
-
Holding less than a marketable parcel
UNLISTED PERFORMANCE RIGHTS
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
Holding less than a marketable parcel
TOTAL HOLDERS
-
1
1
34
21
57
-
NON-EXECUTIVE DIRECTOR SHARE RIGHTS
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
Holding less than a marketable parcel
TOTAL HOLDERS
-
-
1
2
1
4
-
-
-
-
1,600,000
1,600,000
-
UNITS
-
3,404
7,566
1,921,129
16,052,142
17,984,241
-
UNITS
-
-
6,318
70,696
111,310
188,324
-
-
-
-
100.00
0.00
100.00
-
% OF ISSUED CAPITAL
-
0.02
0.04
10.68
89.26
0.00
100.00
-
% OF ISSUED CAPITAL
-
-
3.35
37.54
59.11
0.00
100.00
-
109
CONVERTIBLE NOTES
RANGE
1 – 100
101 – 1,000
1,001 – 10,000
10,001 – 100,000
>100,001
Rounding
Total
Holding less than a marketable parcel
CONVERTIBLE NOTES
AUSTRALIANSUPER PTY LTD AS TRUSTEE FOR
AUSTRALIANSUPER
TOTAL HOLDERS
1
UNITS
1
% OF ISSUED CAPITAL
100.00
-
-
-
-
1
-
-
-
-
-
1
-
-
-
-
-
0.00
100.00
-
NUMBER HELD
1
% OF TOTAL UNLISTED
CONVERTIBLE NOTES
100.00
VOTING RIGHTS
The voting rights attached to each class of equity security are set out below:
Ordinary Shares
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have
one vote.
Unlisted Performance Rights
There are no voting rights attached to unlisted performance rights.
Non-Executive Director Share Rights
There are no voting rights attached to Non-Executive Director Share Rights.
Unlisted Options
There are no voting rights attached to unlisted options.
Convertible Notes
There are no voting rights attached to convertible notes.
There are no other classes of equity securities.
ON MARKET BUY BACK
There is currently no on market buy-back in place.
TENEMENT SCHEDULE AS AT 22 MARCH 2021
PROJECT
Balama
LICENSE NUMBER
6432C
LICENSE TYPE
Mining Concession
COUNTRY
Mozambique
INTEREST OWNED
100%
110
SYRAH RESOURCES > ANNUAL REPORT 2020 111
Level 28, 360 Collins Street
Melbourne VIC 3000 Australia
p: +61 3 9670 7264
e: enquiries@syrahresources.com.au
www.syrahresources.com.au
ANNUAL
REPORT
2020